EXHIBIT 10.26
LEASE AGREEMENT
DATED AS OF _____________, 199___
BY AND BETWEEN
-----------------------------------------
AS LANDLORD,
AND
------------------------------------------
AS TENANT
TABLE OF CONTENTS
-----------------
ARTICLE 1 DEFINITIONS.............................................................................................1
ARTICLE 2 COLLECTIVE LEASED PROPERTIES AND TERM..................................................................25
2.1 Leased Property........................................................................................25
2.2 Assignment and Assumption of Contracts; Initial Transaction............................................26
2.3 Condition of Leased Property...........................................................................27
2.4 Term...................................................................................................28
ARTICLE 3 RENT...................................................................................................28
3.1 Rent...................................................................................................28
3.1.1 Payment of Rent.............................................................................28
3.1.2 Revenues Computation........................................................................29
3.1.3 Confirmation of Percentage Rent.............................................................31
3.1.4 Annual Adjustments..........................................................................32
3.1.5 Additional Charges..........................................................................33
3.1.6 Adjustments to/Abatements of Rent...........................................................35
3.2 Late Payment of Rent...................................................................................37
3.3 Net Lease..............................................................................................38
3.4 No Termination, Abatement, Etc.........................................................................38
3.5 Lockbox Procedures.....................................................................................39
ARTICLE 4 USE OF THE LEASED PROPERTY.............................................................................41
4.1 Permitted Use..........................................................................................41
4.1.1 Primary Intended Use........................................................................41
4.1.2 Necessary Approvals.........................................................................41
4.1.3 Lawful Use, Etc.............................................................................41
4.2 Compliance with Legal and Insurance Requirements, Etc..................................................42
4.3 Environmental Matters..................................................................................42
4.3.1 Restriction on Use, Etc.....................................................................42
4.3.2 Environmental Indemnification of Tenant by Landlord.........................................43
4.3.3 Environmental Indemnification of Landlord by Tenant.........................................44
4.3.4 Survival....................................................................................44
4.4 FF&E Reserve...........................................................................................44
4.5 Working Capital........................................................................................45
ARTICLE 5 MAINTENANCE AND REPAIRS; SURRENDER.....................................................................46
5.1 Maintenance and Repair.................................................................................46
5.1.1 Tenant's Obligations........................................................................46
5.1.2 Landlord Obligations........................................................................47
5.2 Tenant's Personal Property.............................................................................48
5.3 Surrender..............................................................................................48
5.4 Encroachments, Restrictions, Etc.......................................................................50
5.5 Landlord to Grant Easements, Etc.......................................................................51
ARTICLE 6 CAPITAL EXPENDITURES, ETC..............................................................................51
6.1 Capital Expenditures...................................................................................51
6.2 [Intentionally Omitted]................................................................................52
6.3 Cooperation by Tenant..................................................................................52
6.4 Alterations............................................................................................52
6.5 Salvage................................................................................................53
ARTICLE 7 LIENS..................................................................................................53
7.1 Prohibition on Liens...................................................................................53
7.2 Landlord Lien..........................................................................................54
-ii-
ARTICLE 8 PERMITTED CONTESTS.....................................................................................54
ARTICLE 9 INSURANCE AND INDEMNIFICATION..........................................................................55
9.1 General Insurance Requirements.........................................................................55
9.2 Responsibility for Insurance...........................................................................57
9.3 Replacement Cost.......................................................................................57
9.4 Waiver of Subrogation..................................................................................58
9.5 Form Satisfactory, Etc.................................................................................58
9.6 Blanket Policy.........................................................................................59
9.7 No Separate Insurance..................................................................................59
9.8 General Indemnification of Landlord by Tenant..........................................................59
9.9 General Indemnification of Tenant by Landlord..........................................................60
9.10 Independent Contractor................................................................................62
ARTICLE 10 CASUALTY..............................................................................................62
10.1 Insurance Proceeds....................................................................................62
10.2 Reconstruction in the Event of Casualty...............................................................63
10.3 Reconstruction in the Event of Damage or Destruction Not Covered by Insurance.........................64
10.4 Tenant's Property and Business Interruption Insurance.................................................65
10.5 Abatement of Rent.....................................................................................65
ARTICLE 11 CONDEMNATION..........................................................................................65
11.1 Total Condemnation, Etc...............................................................................65
11.2 Partial Condemnation..................................................................................66
11.3 Abatement of Rent.....................................................................................67
11.4 Allocation of Award...................................................................................67
ARTICLE 12 TENANT DEFAULTS; REMEDIES.............................................................................67
12.1 Event of Default......................................................................................67
-iii-
12.2 Remedies..............................................................................................70
12.3 Waivers...............................................................................................72
12.4 Application of Funds..................................................................................72
12.5 Landlord's Right to Cure Tenant's Default.............................................................72
ARTICLE 13 HOLDING OVER..........................................................................................73
ARTICLE 14 LANDLORD NOTICE OBLIGATION; LANDLORD DEFAULT..........................................................73
14.1 Landlord Notice Obligation............................................................................73
14.2 Landlord Default......................................................................................73
ARTICLE 15 ARBITRATION...........................................................................................75
15.1 Arbitration...........................................................................................75
15.2 Arbitration Procedures................................................................................75
ARTICLE 16 SUBLETTING AND ASSIGNMENT.............................................................................76
16.1 Subletting and Assignment.............................................................................76
16.2 Required Sublease Provisions..........................................................................77
16.3 No Right of Tenant to Mortgage Its Leasehold..........................................................78
ARTICLE 17 ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS........................................................78
17.1 Estoppel Certificates.................................................................................78
17.2 Financial Statements..................................................................................79
17.3 Annual Budget.........................................................................................80
ARTICLE 18 LANDLORD'S RIGHT TO INSPECT...........................................................................82
ARTICLE 19 APPRAISAL.............................................................................................82
ARTICLE 20 FACILITY MORTGAGES....................................................................................84
20.1 Landlord May Grant Liens..............................................................................84
20.2 Subordination of Lease................................................................................84
20.3 Notice to Mortgagee and Ground Landlord...............................................................87
-iv-
20.4 Transfer of Leased Property...........................................................................87
ARTICLE 21 ADDITIONAL COVENANTS OF TENANT........................................................................87
21.1 Conduct of Business...................................................................................87
21.2 Maintenance of Accounts and Records...................................................................88
21.3 Management of Leased Property.........................................................................88
21.3.1 Management Agreement, Consent and Assignment, Etc..........................................88
21.3.2 Reversion upon Termination.................................................................88
21.3.3 Abatement of Rent..........................................................................89
21.3.4 Consent Required for Certain Actions.......................................................89
21.3.5 Replacement of Manager.....................................................................90
21.4 Facility Mortgagee Agreement..........................................................................91
21.5 [Intentionally Omitted]...............................................................................92
21.6 Single Purpose Entity Covenants.......................................................................92
21.6.1 Separate Existence.........................................................................92
21.6.2 Independent Member.........................................................................92
21.6.3 Limitation on Indebtedness and Guarantees..................................................92
21.6.4 Distributions..............................................................................93
21.6.5 Single Purpose.............................................................................93
21.6.6 Certain Fundamental Changes................................................................93
21.6.7 Amendments to Organizational Documents.....................................................94
21.6.8 Qualified Affiliate........................................................................94
ARTICLE 22 LIMITATIONS...........................................................................................94
22.1 REIT Compliance.......................................................................................94
22.2 FF&E Limitation.......................................................................................95
22.3 Sublease Rent Limitation..............................................................................95
-v-
22.4 Sublease Tenant Limitation............................................................................95
22.5 Tenant Ownership Limitation...........................................................................95
ARTICLE 23 MISCELLANEOUS.........................................................................................95
23.1 No Waiver.............................................................................................96
23.2 Remedies Cumulative...................................................................................96
23.3 Severability..........................................................................................96
23.4 Acceptance of Surrender...............................................................................96
23.5 No Merger of Title....................................................................................96
23.6 Release of Landlord Following Conveyance..............................................................97
23.7 Quiet Enjoyment.......................................................................................97
23.8 Landlord's Consent....................................................................................97
23.9 Memorandum of Agreement...............................................................................98
23.10 Notices..............................................................................................98
23.11 Construction.........................................................................................99
23.12 Counterparts; Headings...............................................................................99
23.13 Governing Law; Jurisdiction.........................................................................100
23.14 No Broker...........................................................................................100
23.15 Related Agreements..................................................................................100
23.16 Legal Fees and Costs of Litigation..................................................................101
23.17 Force Majeure.......................................................................................101
23.18 Conflicts with Related Agreements...................................................................101
23.19 Operating Lease.....................................................................................101
ARTICLE 24 TERMINATION RIGHTS...................................................................................101
24.1 Landlord's Right to Terminate Lease upon Sale or Tax Law Change......................................101
24.2 Tenant's Right to Terminate Lease upon Certain Events................................................104
-vi-
24.3 Termination of Lease Following Notice of Termination of Guarantee....................................104
-vii-
EXHIBITS
--------
EXHIBIT A The Land
EXHIBIT B Preliminary Statement of Cash and Working Capital
EXHIBIT C EBITDA Performance Requirements
EXHIBIT D Guarantee
EXHIBIT E Working Capital Note
SCHEDULES
---------
Schedule 2.2(a)(vi) Excluded Leases
Schedule 3.1.1 Minimum Rent
Schedule 3.1.2 Revenue Percentage and Break Points
Schedule 3.1.3(b) Items of Gross Revenues
Schedule 3.1.5 Prepaid Expenses
Schedule 5.1.1 Existing Conditions Relating to Hazardous Materials
Schedule 17.2(f) Period Report Format
Schedule 20.3 Superior Mortgagee(s) and Superior Landlord(s)
Schedule 21.5 Form of Facility Mortgagee Agreement
Schedule 22.2 Provisions Relating to Excess FF&E
Schedule 22.2-A Form of Excess FF&E Lease
Schedule 22.2-B Market Leasing Factor
Schedule 23.8 Deemed Consents or Approvals
-viii-
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "LEASE") is entered into this _____ day of
___________, 1998, but effective for all purposes as of the Commencement Date,
by and between ____________________, a Delaware limited liability company,
having its principal office at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("LANDLORD"), and ______________________, a Delaware limited liability company,
having its principal office at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("TENANT").
WITNESSETH:
WHEREAS, Landlord owns [fee simple/leasehold] title to the Leased Property
(this and other capitalized terms used and not otherwise defined herein having
the meanings ascribed to such terms in Article 1);
WHEREAS, Landlord wishes to lease the Leased Property to Tenant and Tenant
wishes to lease the Leased Property from Landlord, all subject to and upon the
terms and conditions herein set forth; and
WHEREAS, as a condition to entering into this Lease, Landlord and Tenant
have entered into that "Consent and Assignment" (as that term is defined
hereafter), and have agreed that Tenant shall assume certain obligations of
Landlord under the "Assigned Agreements" (as that term is defined hereafter);
and
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the mutual receipt and legal
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree
as follows:
ARTICLE 1
DEFINITIONS
For all purposes of this Lease, except as otherwise expressly provided or
unless the context otherwise requires, (i) the terms defined in this Article
shall have the meanings assigned to them in this Article and include the plural
as well as the singular, (ii) all accounting terms not otherwise defined herein
shall have the meanings assigned to them in accordance with GAAP, (iii) 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 (iv) the words "herein," "hereof," "hereunder" and other words
of similar import refer to this Lease as a whole and not to any particular
Article, Section or other subdivision.
1.1. "AAA" shall have the meaning given such term in Section 15.1.
1.2. "ACCOUNTING PERIOD" shall mean (i) for so long as the Management
Agreement is in effect each of the four (4) week accounting periods that are
used in Manager's accounting system, except that an Accounting Period may
occasionally contain five (5) weeks when necessary to conform Manager's
accounting system to the calendar and (ii) during any period when the Management
Agreement is not in effect, each calendar month during the Term.
1.3. "ACCOUNTING PERIOD STATEMENT" shall have the meaning given such term
in Section 17.2(d).
1.4. "ADDITIONAL CHARGES" shall have the meaning given such term in
Section 3.1.5.
1.5. "ADVERSE PARTY" shall mean any Person (i) who is engaged in the Hotel
Business or is an Affiliate (other than an Affiliate who is a lessee under a
lease of a hotel from a real estate investment trust or other passive owner
which is managed on behalf of such Affiliate by an unaffiliated third party
manager) of any Person engaged in the Hotel Business, (ii) who is, or is an
Affiliate of, a Person who has been convicted of, or has pleaded nolo contendere
to, a felony, (iii) who does not have a Tangible Net Worth of at least (a) two
and one-half (2.5) times the amount of Guarantor's then maximum liability under
the Guarantee or (b) $50,000,000, whichever is greater, (iv) whose ownership of
a direct or indirect interest in Tenant would violate the Management Agreement
or (v) who, prior to the effective time of a Change in Control, fails to enter
into a written agreement reasonably satisfactory in form and substance to Host
REIT (1) to the effect that neither (A) such Person nor (B) any Person who would
be considered to constructively own either any interest in such Person or any
interest in Tenant owned directly or indirectly by such Person (as determined
under Section 318(a) of the Code, as modified by Section 856(d) of the Code)
(referred to as "CONSTRUCTIVE OWNERSHIP") would own (or have Constructive
Ownership of) any interest in Host REIT or Host O.P. that would cause either
Host REIT or Host O.P. to be considered to Constructively Own any interest in
either Tenant or any other tenant of either Host REIT or Host O.P. that is
described in Section 856(d)(2)(B) of the Code for purposes of applying either
Section 856(c) of the Code or Section 7704(d) of the Code, or any similar or
successor provisions thereto and (2) with respect to such other matters
reasonably required to protect the status of Host REIT as a "real estate
investment trust" for federal income tax purposes.
1.6. "AFFILIATE" shall mean any individual or entity directly or
indirectly through one or more intermediaries controlling, controlled by or
under common control with a party. The term "control," as used in the
immediately preceding sentence, means, with respect to a corporation, the right
to exercise, directly or indirectly, fifty percent (50%) or more of the voting
rights of any class of the shares of the controlled corporation, and, with
respect to an entity that is not a corporation, the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of the controlled entity. Notwithstanding the foregoing, Manager shall
not be deemed an Affiliate of either Landlord or Tenant.
1.7. "ALTERATIONS" shall have the meaning given such term in Section 6.4.
1.8. "ANNUAL ADJUSTMENT" shall mean (a) with respect to Minimum Rent, the
product of (i) the amount of the Minimum Rent then in effect and (ii) ____
percent (____%) of any Percentage Increase in CPI; (b) with respect to each of
the Annual Room Revenues First Break Point, the Annual Food and Beverages Sales
First Break Point, and the Annual Other Income Break Point, the product of (i)
the amount of each such break point then in effect and (ii) the weighted average
resulting from the sum of _____ percent (_____%) of any Percentage Increase in
CPI plus ____ percent (___%) of any Percentage
-2-
Increase in the Labor Index; and (c) with respect to the Annual Food and
Beverages Sales Second Break Point and the Annual Room Revenues Second Break
Point, the product of (i) the amount of each such break point then in effect and
(ii) _____% of the figure calculated in subsection (b)(ii) above.
1.9. "ANNUAL BUDGET" shall have the meaning given such term in Section
17.3.
1.10. "ANNUAL FOOD AND BEVERAGES SALES FIRST BREAK POINT" shall have the
meaning given such term in Section 3.1.2(b)(3).
1.11. "ANNUAL FOOD AND BEVERAGES SALES SECOND BREAK POINT" shall have the
meaning given such term in Section 3.1.2(b)(3).
1.12. "ANNUAL OPERATING STATEMENT" shall have the meaning given such term
in Section 17.2(c).
1.13. "ANNUAL OTHER INCOME BREAK POINT" shall have the meaning given such
term in Section 3.1.2(b)(3).
1.14. "ANNUAL ROOM REVENUES FIRST BREAK POINT" shall have the meaning
given such term in Section 3.1.2(b)(3).
1.15. "ANNUAL ROOM REVENUES SECOND BREAK POINT" shall have the meaning
given such term in Section 3.1.2(b)(3).
1.16. "APPLICABLE EXPECTED LIFE" shall have the meaning given such term in
paragraph (e)(i) of Schedule 22.2.
-------------
1.17. "ASSET MANAGEMENT AGREEMENT" shall mean that certain agreement dated
as of even date herewith as amended or restated from time to time, between CCC
and Host O.P. relating to the provision of asset management services by CCC or a
wholly owned Subsidiary thereof with respect to the Facility and the hotel
facilities covered by the other Pool Leases or the Other Leases.
1.18. "ASSIGNED AGREEMENTS" shall have the meaning given such term in
Section 2.2(a).
1.19. "AWARD" shall mean all compensation, sums or other value awarded,
paid or received by virtue of a total or partial Condemnation of the Leased
Property (after deduction of all reasonable legal fees and other reasonable
costs and expenses, including, without limitation, expert witness fees, incurred
by Landlord in connection with obtaining any such award).
1.20. "BANKRUPTCY CODE" shall have the meaning given such term in
Section 16.1.
1.21. "BUDGET SPREAD" shall have the meaning given such term in
Section 17.3.
-3-
1.22. "BUSINESS DAY" shall mean any day other than Saturday, Sunday, or
any other day on which banking institutions in the State are authorized by law
or executive action to close.
1.23. "CAPITAL BUDGET" shall have the meaning given such term in
Section 17.3.
1.24. "CAPITAL EXPENDITURE" shall mean any expenditure for repairs,
alterations, improvements, renewals or replacements to the structure or exterior
facade of the Facility, or to the mechanical, electrical, heating, ventilating,
air conditioning, plumbing, or vertical transportation elements of the Facility
(together with all other repair and maintenance expenditures which are
classified as capital expenditures under GAAP), or, during any period when the
Management Agreement is in effect, to the extent in conflict with the foregoing,
"Capital Expenditure" as defined in the Management Agreement. To the extent
applicable as used herein, Capital Expenditure shall also refer to the actual
repair, alteration, improvement, renewal or replacement to which the Capital
Expenditure relates.
1.25. "CAPITAL PORTION" shall have the meaning given such term in
Section 17.3.
1.26. "CAPITALIZED INTEREST" shall mean interest that is capitalized and
is not counted as interest expense in accordance with GAAP.
1.27. "CAPITALIZED LEASE OBLIGATIONS" of any Person shall mean all rental
obligations which, under GAAP, are or will be required to be capitalized on the
books of such Person, in each case taken at the amount thereof accounted for as
indebtedness in accordance with such principles.
1.28. "CASE GOODS" shall mean furniture and furnishings used in the
Facility, including, without limitation, chairs, beds, chests, headboards,
desks, lamps, tables, television sets, mirrors, pictures, wall decorations and
similar items.
1.29. "CASUALTY" shall have the meaning given such term in Section 10.1.
1.30. "CCC" shall mean Crestline Capital Corporation, a Maryland
corporation.
1.31. "CCC CONSOLIDATED FINANCIAL STATEMENTS" shall mean for any Fiscal
Year or quarter thereof, consolidated statements of operations, retained
earnings and cash flow for such period and for the period from the beginning of
the respective Fiscal Year to the end of such period and the related balance
sheet as at the end of such period, together with the notes to any such
statement, all in such detail as may be required by the SEC with respect to
filings relating to periods within the Term made by Landlord, Host REIT or Host
O.P., and, after the first full Fiscal Year of Tenant, setting forth in
comparative form the corresponding figures for the corresponding period in the
preceding Fiscal Year, and prepared in accordance with GAAP and (in the case of
annual financial statements) audited by a "Big Five" firm of independent
certified public accountants or such other firm of independent certified public
accountants as may be reasonably approved by Landlord. CCC Consolidated
Financial Statements shall be prepared on the basis of the Fiscal Year or
quarter thereof, as applicable. Except as otherwise provided herein, the cost
for one (1) consolidated audit with respect to CCC per Fiscal Year and one (1)
quarterly unaudited
-4-
statement with respect to CCC for each of the first three fiscal quarters in the
Fiscal Year as may be required by the SEC for regular reporting requirements of
Landlord, Host REIT or Host O.P. under the Securities and Exchange Act of 1934
shall be borne by Tenant. Except as otherwise provided herein, the cost of any
other audits or financial statements requested by Landlord shall be borne by
Landlord. CCC Consolidated Financial Statements shall be accepted by Landlord if
prepared on a combined basis along with all of the other hotels leased from
Landlord or any of its Affiliates by Tenant, OpCo, CCC, or a wholly owned
Subsidiary of Tenant, OpCo or CCC.
1.32. "CHANGE IN CONTROL" shall mean the (i) acquisition (after a
registered offering of shares or otherwise) by any Person, or two or more
Persons acting in concert, in a single or series of transactions (whether or not
related), of:
(a) with respect to Tenant or OpCo, beneficial ownership (within the
meaning of Rule 13d-3 of the SEC) of, or rights (including conversion rights),
options or warrants to acquire (whether absolute or conditional), all or any
portion of the outstanding voting or economic interests in Tenant or OpCo (other
than voting rights held by an Independent Member of Tenant as set forth in the
Limited Liability Company Operating Agreement of Tenant as in effect on the date
hereof); or
(b) with respect to CCC, beneficial ownership of, or rights
(including conversion rights), options or warrants to acquire, thirty-five
percent (35%) or more of the outstanding shares of voting stock of CCC;
or (ii) the merger or consolidation of Tenant, OpCo or CCC with or into any
other Person (other than any one or more Qualified Affiliates) if, in the case
of CCC, immediately following the effectiveness of such merger or consolidation,
more than thirty-five percent (35%) of the beneficial ownership of the
outstanding voting shares of the surviving entity of such merger or
consolidation (including for such purpose in both the numerator and the
denominator, shares of voting stock issuable upon the exercise of then
outstanding rights (including conversion rights), options or warrants) is held
by one or more Persons who were not holders of the outstanding voting shares of
CCC (or outstanding rights (including conversion rights), options or warrants to
acquire voting shares of CCC) immediately prior to the effectiveness of such
merger or consolidation; or
(iii) any one or a series of related sales or conveyances to any Person
(other than any one or more Qualified Affiliates) of all or substantially all of
the assets of Tenant, OpCo or CCC; or
(iv) a change in the majority of the board of directors or similar managing
body of CCC during the longer of (A) any twelve (12) month period and (B) the
period during which two consecutive annual meetings of the equity holders of CCC
at which directors or similar managers are elected have been held;
provided, however, that the acquisition by any one or more Qualified Affiliates
of beneficial ownership of, or rights (including conversion rights),options or
warrants to acquire, all or any portion of Tenant or OpCo shall not be a "Change
in Control" hereunder.
-5-
1.33. "CLAIMS" shall have the meaning given such term in Article 8.
1.34. "CODE" shall mean the Internal Revenue Code of 1986 and, to the
extent applicable, the Treasury Regulations promulgated thereunder, each as from
time to time amended.
1.35. "COMMENCEMENT DATE" shall mean January 1, 1999.
1.36. "COMPARABLE LEASE" shall have the meaning given such term in Section
24.1(b).
1.37. "CONDEMNATION" shall mean, with respect to the Leased Property, (a)
the exercise of any governmental power with respect to all or part of the Leased
Property, whether by legal proceedings or otherwise, by a Condemnor of its power
of condemnation, (b) a voluntary sale or transfer of all or part of the Leased
Property by Landlord to any Condemnor, either under threat of condemnation or
while legal proceedings for condemnation are pending, or (c) a taking or
voluntary conveyance of all or part of the Leased Property, or any interest
therein, or right accruing thereto or use thereof, as the result 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.
1.38. "CONDEMNOR" shall mean any public or quasi-public authority, or
private corporation or individual, having the power of Condemnation.
1.39. "CONSENT AND ASSIGNMENT" shall have the meaning given such term in
Section 21.3.1.
1.40. "CONSOLIDATED COVERAGE RATIO" of any Person shall mean, for any
period, the ratio of (x) Consolidated EBITDA of such Person for such period to
(y) the sum of (i) Consolidated Interest Expense of such Person for such period,
and (ii) the amount of all scheduled principal amortization payments (other than
balloon payments at maturity of such Indebtedness) on all Indebtedness of such
Person and its Subsidiaries made during such period.
1.41. "CONSOLIDATED EBITDA" of any Person shall mean, for any period, the
Consolidated Net Income of such Person for such period adjusted (A) to add
thereto (to the extent deducted in determining Consolidated Net Income for such
period), without duplication, the sum of the amounts for such period of (i)
Consolidated Interest Expense, (ii) provisions for taxes based on income, (iii)
depreciation and amortization expense (provided that the depreciation and
amortization expense of a non-wholly owned Subsidiary shall be included only to
the extent of the equity interest of such Person in such non-wholly owned
Subsidiary), (iv) any other noncash items reducing Consolidated Net Income of
such Person for such period (except to the extent that such noncash items relate
to the write-off or write-down of any item included in Consolidated Net Income
in a prior period) and (v) any cash receipts of such Person or a Subsidiary
thereof during such period that represent items included in Consolidated Net
Income of such Person for a prior period which were excluded from Consolidated
EBITDA in such prior period by virtue of clause (B) of this definition, and (B)
to subtract therefrom, without duplication, the sum of the
-6-
amounts for such period of (i) all noncash items increasing Consolidated Net
Income of such Person for such period and (ii) any cash expenditures of such
Person and its Subsidiaries during such period to the extent that such cash
expenditures (x) did not reduce Consolidated Net Income of such Person for such
period and (y) were applied against reserves or accruals that constituted
noncash items reducing Consolidated Net Income of such Person when reserved or
accrued for in a prior period; provided, that Consolidated EBITDA shall be
determined without giving effect to any extraordinary gains or losses (including
any taxes attributable to any such extraordinary gains or losses) or gains or
losses from sales of assets other than from sales of inventory in the ordinary
course of business.
1.42. "CONSOLIDATED INTEREST EXPENSE" of any Person shall mean, for any
period, the total consolidated cash interest expense of such Person and its
Subsidiaries for such period (calculated without regard to any limitations on
the payment thereof) plus, without duplication, that portion of the Capitalized
Lease Obligations of such Person and its Subsidiaries representing the interest
factor for such period, but excluding (i) any Capitalized Lease Obligations that
relate to leases of FF&E, (ii) the interest factor (if any) in such period under
[the Initial FF&E Lease,] any Excess FF&E Leases or this Lease with respect to
the FF&E subject to this Lease, and (iii) the Working Capital Note.
Notwithstanding anything to the contrary contained in the requirements of GAAP,
the amount of Capitalized Interest incurred during any period shall be added as
a component of Consolidated Interest Expense.
1.43. "CONSOLIDATED NET INCOME" of any Person shall mean, for any period,
the net income (or loss) of such Person and its Subsidiaries for such period,
determined on a consolidated basis; provided that (i) net income (or loss) of
(x) any other Person that is accounted for by such specified Person by the
equity method of accounting or (y) any Subsidiary of such Person that is
restricted from declaring or paying dividends or other distributions, directly
or indirectly, by operation of the terms of its charter, any applicable
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation or otherwise shall (in each case) be included only to the extent of
the amount of cash dividends or distributions paid to the specified Person or a
wholly owned Subsidiary of such Person, (ii) the net income (or loss) of any
other Person acquired by such specified Person or a Subsidiary of such Person in
a pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iii) to the extent Consolidated Net Income
reflects amounts attributable to minority interests in Subsidiaries that are not
wholly owned Subsidiaries of such Person, Consolidated Net Income shall be
reduced by the amounts attributable to such minority interests and (iv) any
income, rental credit or expense associated with leases of Excess FF&E by Tenant
or any Other Tenant shall not be taken into account in determining Consolidated
Net Income.
1.44. "CONSTRUCTIVE OWNERSHIP" shall have the meaning given such term in
Section 1.5.
1.45. "CONSUMER PRICE INDEX" shall mean the "Consumer Price Index"
published by the Bureau of Labor Statistics of the United States Department of
Labor, All Items for Urban Wage Earners and Clerical Workers (1982-1984 = 100).
-7-
1.46. "CONTINUING OBLIGATIONS" shall have the meaning given such term in
Section 21.3.1.
1.47. "CONTRACTOR" shall have the meaning given such term in Section 9.10.
1.48. "CONTRACTOR'S INSURANCE CERTIFICATE" shall have the meaning given
such term in Section 9.10.
1.49. "CONTRACTOR'S LIABILITY COVERAGE" shall have the meaning given such
term in Section 9.10 .
1.50. "CUMULATIVE PORTION" shall have the meaning given such term in
Section 3.1.2(b)(1).
1.51. "DEFAULT" shall mean any event, act or condition that with the
giving of notice or lapse of time, or both, would constitute an Event of
Default.
1.52. "EMERGENCY SITUATIONS" shall mean fire, any other Casualty, or any
other events, circumstances or conditions that threaten the safety or physical
well-being of the Facility's guests or employees or that involve the risk of
material property damage or loss.
1.53. "ENTITY" shall mean any corporation, general or limited partnership,
limited liability company or partnership, stock company or association, joint
venture, association, company, trust, bank, trust company, land trust, business
trust, cooperative, any government or agency or political subdivision thereof or
any other entity.
1.54. "ENVIRONMENT" shall mean soil, surface water, groundwater, land,
stream, sediment, surface or subsurface strata, ambient air, physical structures
and equipment, and where radon gas is present, the interior air of buildings.
1.55. "ENVIRONMENTAL LAWS" shall mean any federal, state or local law,
rule or regulation (both present and future) dealing with the use, generation,
treatment, storage, disposal, or abatement of Hazardous Materials, including,
but not limited to, (i) the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Section 9601 et seq., as amended and (ii) the
regulations promulgated thereunder, from time to time.
1.56. "ENVIRONMENTAL LIABILITIES" shall have the meaning given such term
in Section 4.3.2.
1.57. "ENVIRONMENTAL NOTICE" shall have the meaning given such term in
Section 4.3.1.
1.58. "ENVIRONMENTAL OBLIGATION" shall have the meaning given such term in
Section 4.3.1.
1.59. "EVENT OF DEFAULT" shall have the meaning given such term in
Section 12.1.
-8-
1.60. "EXCESS FF&E" shall have the meaning given such term in paragraph
(b) of Schedule 22.2.
-------------
1.61. "EXCESS FF&E COST" shall have the meaning given such term in
paragraph (e) of Schedule 22.2.
-------------
1.62. "EXCESS FF&E LEASE" shall have the meaning given such term in
paragraph (b) of Schedule 22.2.
-------------
1.63. "EXCESS FF&E LEASEHOLD INTEREST" shall have the meaning given such
term in paragraph (h) of Schedule 22.2.
-------------
1.64. "EXCESS FF&E LEASEHOLD INTEREST TRANSFER" shall have the meaning
given such term in paragraph (h) of Schedule 22.2.
-------------
1.65. "EXCESS FF&E LEASEHOLD INTEREST TRANSFER PRICE" shall have the
meaning given such term in paragraph (h) of Schedule 22.2.
-------------
1.66. "EXCESS FF&E NOTICE" shall have the meaning given such term in
paragraph (b) of Schedule 22.2.
-------------
1.67. "EXCESS FF&E REIMBURSEMENT AMOUNT" shall have the meaning given
such term in paragraph (i) of Schedule 22.2.
-------------
1.68. "EXCESS FF&E REPURCHASE" shall have the meaning given such term in
paragraph (g) of Schedule 22.2.
-------------
1.69. "EXCESS FF&E REPURCHASE PRICE" shall have the meaning given such
term in paragraph (g) of Schedule 22.2.
-------------
1.70. "EXCESS FF&E VALUE" shall have the meaning given such term in
paragraph (e) of Schedule 22.2.
-------------
1.71. "EXISTING CONDITION" shall mean any physical condition existing at
the Leased Property as of the Commencement Date.
1.72. "FACILITY" shall have the meaning given such term in Section 2.1(b).
1.73. "FACILITY MORTGAGE" shall mean, with respect to the Leased Property,
any Lien placed by Landlord upon the Leased Property in accordance with Article
20.
1.74. "FACILITY MORTGAGEE" shall mean the holder of a Facility Mortgage.
1.75. "FACILITY MORTGAGEE AGREEMENT" shall have the meaning given such
term in Section 21.4.
1.76. "FACILITY TRADE NAME" shall mean, with respect to the Facility, any
name under which Tenant has conducted the business of operating the Facility at
any time during the Term.
-9-
1.77. "FAIR MARKET RENTAL" shall mean, with respect to the Leased Property,
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 the Leased Property
on the terms and conditions of this Lease for the term in question, assuming
Tenant is not in default hereunder and determined by agreement between Landlord
and Tenant or, failing agreement, in accordance with the appraisal procedures
set forth in Article 19.
1.78. "FAIR MARKET VALUE" shall mean, with respect to the leasehold estate
hereunder, the price that a willing transferee not compelled to accept a
transfer would pay a willing transferor not compelled to transfer for the
leasehold estate hereunder (without taking into account any reduction in value
resulting from any indebtedness to which the Leased Property is subject),
determined by agreement between Landlord and Tenant or, failing agreement, in
accordance with the appraisal procedures set forth in Article 19.
1.79. "FF&E" shall mean furniture, furnishings, fixtures, Soft Goods, Case
Goods, signage and equipment at the Facility (including, without limitation,
facsimile machines, communication systems, audio visual equipment, and all
computer and other equipment needed for the reservation system and the property
management system, and all other electronic systems needed for the Facility,
from time to time, as well as similar systems based on other technologies which
may be developed in the future), or, during any period when the Management
Agreement is in effect, to the extent in conflict with the foregoing, "FF&E" as
defined in the Management Agreement; provided, however, that FF&E shall not
include Tenant's Personal Property.
1.80. "FF&E ADJUSTMENT" shall have the meaning given such term in paragraph
(e) of Schedule 22.2.
-------------
1.81. "FF&E ESTIMATE" shall have the meaning given such term in Section
17.3(c).
1.82. "FF&E LIMITATION" shall have the meaning given such term in paragraph
(a) of Schedule 22.2.
-------------
1.83. "FF&E RESERVE" shall have the meaning given such term in Section 4.4.
1.84. "FINANCIAL OFFICER'S CERTIFICATE" shall mean, as to any Person, a
certificate of the chief financial officer, controller, chief accounting officer
or treasurer of such Person (or, in the case of any financial statements other
than the CCC Consolidated Financial Statements, the designee of any such
officer, duly authorized (including by providing Notice of such designee to the
other party)), accompanying the financial statements required to be delivered by
such Person pursuant to Section 17.2, in which such officer shall certify (a)
that such statements have been properly prepared in accordance with GAAP and
fairly present, in all material respects, the financial condition of such Person
as of the dates thereof, and the results of its operations for the periods
covered thereby (except that, in the case of financial statements delivered
pursuant to Sections 17.2(a) and 17.2(c), the certificate shall state the extent
to which such financial statements are not in accordance with GAAP), (b) that
such officer has no knowledge of any monetary Default or Event of Default
hereunder, and (c) the then-current Minimum Net Worth,
-10-
Consolidated Coverage Ratio, and the maximum amount of liability of the
Guarantors under the Guarantee.
1.85. "FIRST CLASS OPERATING STANDARDS" shall mean both the operational
standards (for example, staffing, amenities offered to guests, advertising,
etc.) and the physical standards (for example, the quality, condition, utility
and age of the personal property, etc.) of comparable full-service hotels in the
hotel system of which the Facility is a part (e.g., the Marriott hotel system or
the ▇▇▇▇-▇▇▇▇▇▇▇ hotel system), as such operational and physical standards may
change from time to time (provided, however, that First Class Operating
Standards shall in no event be lower than the operational and physical
standards, as of the date in question, of comparable "quality segment" (as such
term was being used as of the effective date of the Management Agreement) full-
service hotels in other full-service hotel systems), or, during any period when
the Management Agreement is in effect, to the extent in conflict with the
foregoing, the operating standards required pursuant to the Management
Agreement.
1.86. "FIRST TIER FOOD AND BEVERAGES SALES PERCENTAGE" shall have the
meaning given such term in Section 3.1.2(b)(2).
1.87. "FIRST TIER OTHER INCOME PERCENTAGE" shall have the meaning given
such term in Section 3.1.2(b)(2).
1.88. "FIRST TIER ROOM REVENUE PERCENTAGE" shall have the meaning given
such term in Section 3.1.2(b)(2).
1.89. "FIRST YEAR FF&E ADJUSTMENT" shall have the meaning given such term in
paragraph (e)(i) of Schedule 22.2.
-------------
1.90. "FISCAL YEAR" shall mean the fiscal year used by Manager, which now
ends at midnight on the Friday closest to December 31 in each calendar year and
begins on the Saturday immediately following said Friday. If the fiscal year
used by Manager is changed in the future by Manager or if the Management
Agreement is no longer in effect, appropriate adjustment to this Lease's
reporting and accounting procedures shall be made; provided, however, that no
such change or adjustment shall alter the Term of this Lease, or in any way
reduce the amount of Rent or other payments due to or by Landlord hereunder, or
otherwise adversely affect Landlord's or Tenant's rights or obligations under
this Lease.
1.91. "FIXED ASSET SUPPLIES" shall mean supply items included within
"Property and Equipment" under the Uniform System, including linen, china,
glassware, silver, uniforms and similar items.
1.92. "FIXTURES" shall have the meaning given such term in Section 2.1(d).
1.93. "FOOD AND BEVERAGES SALES" shall mean (a) gross revenue from the sale
of food and beverages that are prepared at the Facility and sold or delivered on
or off the Facility by or on behalf of Tenant (including, without limitation,
revenues from mini-bars), whether for cash or for credit, including in respect
of guest rooms, banquet rooms, meeting rooms and other similar rooms and (b)
gross revenue from the rental of banquet, meeting
-11-
and other similar rooms. Food and Beverages Sales shall be determined in a
manner consistent with the Uniform System. Food and Beverages Sales shall not
include the following:
(i) sales by Tenant's subtenants, licensees and concessionaires,
the rent, license fees or concession payments from which are included in Gross
Revenues, and any rent, license fees, concession payments or other amounts paid
to Tenant by any such subtenants, licensees and concessionaires;
(ii) vending machine sales;
(iii) any gratuities or service charges added to a customer's ▇▇▇▇ or
statement in lieu of a gratuity that is paid directly to Facility employees, to
the extent actually paid to such employees;
(iv) credits, rebates or refunds; or
(v) sales taxes or taxes of any other kind imposed on the sale of
food or beverages.
1.94. "GAAP" shall mean generally accepted accounting principles
consistently applied.
1.95. "GOVERNMENT AGENCIES" shall mean any court, agency, authority, board
(including, without limitation, environmental protection, planning and zoning),
bureau, commission, department, office or instrumentality of any nature
whatsoever of any governmental unit of the United States, the State, any county,
or any political subdivision of any of the foregoing, whether now or hereafter
in existence, having jurisdiction over Tenant or the Leased Property or any
portion thereof.
1.96. "GROSS REVENUES" shall mean Room Revenues, Food and Beverages Sales,
and Other Income, and all revenues and receipts of every kind derived from
operating the Facility and parts thereof, including, but not limited to:
(i) revenues and receipts from both cash and credit transactions,
before commissions and discounts for prompt or cash payments, from rental of
stores, offices, meeting, exhibit or sales space of every kind;
(ii) license, lease and concession fees and rentals (not including
gross receipts of the licensees, lessees and concessionaires under licenses,
leases and concessionaire agreements);
(iii) revenues and receipts from vending machines;
(iv) health club membership fees;
(v) sales of merchandise (other than proceeds from the sale of FF&E
no longer necessary to the operation of the Facility);
-12-
(vi) service charges, to the extent not paid to the employees at the
Facility as, or in lieu of, gratuities; and
(vii) proceeds, if any, from business interruption or other loss of
income insurance;
provided, however, that Gross Revenues shall not include the following:
(i) banquet service charges to the extent actually paid to
employees;
(ii) gratuities to Facility employees to the extent actually paid to
employees;
(iii) federal, state or municipal excise, sales, use or similar taxes
collected directly from patrons or guests or included as part of the sales price
of any goods or services;
(iv) insurance proceeds (other than proceeds from business
interruption or other loss of income insurance);
(v) condemnation proceeds (other than for a temporary taking);
(vi) any proceeds from any sale of the Facility or from the
refinancing of any debt encumbering the Facility;
(vii) proceeds from the disposition of FF&E no longer necessary for
the operation of the Facility; or
(viii) interest which accrues on amounts deposited in either the FF&E
Reserve or any escrow accounts that are established for real estate and personal
property taxes, levies, assessments and similar charges in accordance with the
terms of the Management Agreement.
1.97. "GUARANTEE" shall have the meaning given such term in Section 21.3.4
(A).
1.98. "GUARANTORS" shall have the meaning given such term in Section
21.3.4(A).
1.99. "HAZARDOUS MATERIALS" shall mean any substance or material containing
one or more of any of the following: "hazardous material," "hazardous waste,"
"regulated substance," "petroleum," "pollutant," "contaminant," or "asbestos,"
as such terms are defined in any applicable Environmental Law, in such
concentration(s) or amount(s) as may impose cleanup, removal, monitoring or
other responsibility under any applicable Environmental Law, or which may
present a significant risk of harm to guests, invitees or employees of the
Facility.
1.100. "HOST O.P." shall mean Host Marriott, L.P., a Delaware limited
partnership and the operating partnership of Host REIT.
-13-
1.101. "HOST REIT" shall mean either Host Marriott Corporation, a Delaware
corporation, or Host Marriott Corporation, a Maryland corporation, which is
intended to be the successor by merger to Host Marriott Corporation, a Delaware
corporation, or their successors or assigns.
1.102. "HOTEL BUSINESS" means the business of owning, developing,
constructing, leasing, operating, managing or franchising, either directly or
through a contractual arrangement with a third party, hotels having, in the
aggregate, five thousand (5,000) or more rooms, but excluding hotels leased, as
a lessee, from a real estate investment trust or other passive owner and
operated on behalf of such lessee by an unaffiliated third party manager.
1.103. "IMPOSITIONS" shall mean, 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 Tenant or the business conducted upon the Leased Property) not
included in Landlord Obligations, water, sewer or other rents and charges,
excises, tax levies, fees (including, without limitation, license, permit,
inspection, authorization and similar fees) and all other governmental charges
not included in Landlord Obligations, in each case whether general or special,
ordinary or extraordinary, foreseen or unforeseen, of every character in respect
of the Leased Property or the business conducted thereon by Tenant (including
all interest and penalties thereon due to any failure in payment by Tenant),
which at any time during or in respect of the Term hereof may be assessed or
imposed on or in respect of or be a lien upon (a) Landlord's interest in the
Leased Property; (b) the Leased Property, any part thereof, 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 Tenant.
1.104. "INDEBTEDNESS" shall mean all obligations, contingent or otherwise,
which in accordance with GAAP should be reflected on the obligor's balance sheet
as debt.
1.105. "INDEPENDENT MEMBER" means a Person who is not, and has not within
the past five (5) years been, (i) an officer, director, employee, partner,
member, manager, stockholder or beneficial-interest holder of Tenant; (ii) an
officer, director, employee, partner, member, beneficial-interest holder, or
stockholder of any "Affiliate" (as defined below) of Tenant; or (iii) a spouse,
parent, sibling, or child of any Person described in (i) or (ii) of this
section; provided, however, that a Person shall not be deemed to be a director
or member of an Affiliate solely by reason of such Person being a director,
manager, or member of a single-purpose entity that would otherwise be deemed to
be an Affiliate because they are under common control. For the purpose of this
definition alone, "Affiliate" means any Person (x) which owns beneficially,
directly or indirectly, more than ten percent (10%) of the outstanding equity
interest in Tenant or which is otherwise in control of Tenant; (y) of which more
than ten percent (10%) of the outstanding voting securities are owned
beneficially, directly or indirectly, by any Person described in clause (x)
above; or (z) which is controlled by, or under common control with, any Person
or entity described in
-14-
clause (x) above; the terms "control" and "controlled by" shall have the
meanings assigned to them in Rule 405 under the Securities Act of 1933.
1.106. ["INITIAL FF&E LEASE" shall have the meaning given such term in
paragraph (a) of Schedule 22.2.]
-------------
1.107. "INSURANCE REQUIREMENTS" shall mean all terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
1.108. "INTANGIBLE ASSET" shall mean, with respect to any Person, a
long-lived asset that is useful in the operations of such Person, that is not
directly used in revenue generation and that is not held for sale, and is
without physical qualities, including but not limited to patents, copyrights and
goodwill, but excluding capitalized costs associated with the acquisition of
brand names, franchises and trademarks, franchise agreements and management
agreements.
1.109. "INVENTORIES" shall have the definition given it in the Uniform
System, such as provisions in storerooms, refrigerators, pantries and kitchens;
beverages in wine cellars and bars; other merchandise intended for sale; fuel;
mechanical supplies; stationery; and other expensed supplies and similar items.
1.110. "LABOR INDEX" shall mean Employment Cost Index, Compensation, Private
Industry, Services Industries, Not Seasonally Adjusted as published by the U.S.
Department of Labor, Bureau of Labor Statistics.
1.111. "LAND" shall have the meaning given such term in Section 2.1(a).
1.112. "LANDLORD" shall have the meaning given such term in the preamble to
this Lease.
1.113. "LANDLORD DEFAULT" shall have the meaning given such term in Section
14.2.
1.114. "LANDLORD INDEMNITEE" shall have the meaning set forth in Section
4.3.3.
1.115. "LANDLORD LIEN" shall have the meaning set forth in Section 7.2.
1.116. "LANDLORD OBLIGATIONS" shall mean (i) Real Estate Taxes, (ii) any
tax based on net income imposed on Landlord, (iii) any net revenue tax of
Landlord, (iv) any transfer fee or other tax imposed with respect to the sale,
exchange, financing, mortgaging, or other disposition by Landlord of the Leased
Property or the proceeds thereof, (v) any sales, use, gross receipts or other
similar tax relating to the leasing of the FF&E by Landlord to Tenant pursuant
to this Lease, (vi) any single business tax, gross receipts tax, transaction,
privilege, rent or similar taxes as the same relate to or are imposed upon
Landlord, including, without limitation, any tax imposed on Landlord as a result
of this Lease, (vii) any interest or penalties imposed on Landlord as a result
of the failure of Landlord to file any return or report timely and in the form
prescribed by law or to pay any tax or imposition, except to the extent such
failure is a result of a breach by Tenant of its obligations pursuant to Section
3.1.3, (viii) any taxes or fees imposed on Landlord that are
-15-
a result of Landlord not being considered a "United States person" as defined in
Section 7701(a)(30) of the Code, (ix) any taxes or fees that are enacted or
adopted as a substitute for any tax that would not have been payable by Tenant
pursuant to the terms of this Lease, (x) any taxes, fees or amounts required to
be paid to discharge Liens (a) imposed as a result of a breach of covenant or
representation by Landlord in any agreement with Tenant governing Landlord's
conduct or operation or (b) as a result of the gross negligence or willful
misconduct of Landlord in connection with its ownership of the Leased Property
or the performance of its obligations hereunder, or (c) securing any
indebtedness or obligations of Landlord, or (d) imposed in connection with any
other Landlord Obligations, (xi) any sales, use, occupancy or other similar tax
imposed in connection with payments made pursuant to this Lease, (xii) all rent
and other sums due from Landlord pursuant to any ground lease affecting the
Leased Property or any portion thereof, (xiii) all premiums for insurance for
which Landlord is responsible pursuant to Article 9 hereof, (xiv) all amounts
payable by Landlord under or pursuant to the Management Agreement with respect
to the Retained Obligations and/or the Continuing Obligations, (xv) any interest
and/or penalties incurred by Tenant as a result of Landlord's failure to forward
any invoices, assessment notices or other bills relating to Impositions to
Tenant, and (xvi) equipment rental costs that are treated as a "Deduction" under
the Management Agreement. "Landlord Obligations" shall not include any sales,
use, gross receipts, occupancy, single business, transaction, privilege, rent,
ad valorem or other tax not specifically enumerated herein.
1.117. "LEASE YEAR" shall mean any consecutive annual period starting on the
Commencement Date and ending on the day prior to the anniversary thereof;
provided that if the Commencement Date is not the first (1st) day of a calendar
month, then the first (1st) Lease Year shall end on the last day of the calendar
month in which the Commencement Date occurs.
1.118. "LEASED PROPERTY" shall have the meaning given such term in Article
2.
1.119. "LEGAL REQUIREMENTS" shall mean all applicable federal, state,
county, municipal and other governmental statutes, laws, rules, orders,
regulations, and ordinances, and all applicable judicial, administrative and
regulatory judgments, decrees and injunctions, affecting Tenant or the Leased
Property or the maintenance, construction, alteration or operation thereof,
whether now or hereafter enacted or in existence, including, without limitation,
(a) all permits, licenses, certificates of need, authorizations and regulations
necessary to operate the Leased Property for its Primary Intended Use and (b)
all covenants, agreements, restrictions and encumbrances contained in any
instruments either of record or actually known to Tenant (other than
encumbrances hereafter created by Landlord without the consent of Tenant) at any
time in force affecting the Leased Property, including those which may (i)
require material repairs, modifications or alterations in or to the Leased
Property or (ii) in any way materially adversely affect the use and enjoyment
thereof, but excluding any requirements arising as a result of Landlord's status
as a real estate investment trust other than those set forth in Article 22
hereof.
1.120. "LENDING INSTITUTION" shall mean any insurance company, federally
insured commercial or savings bank, national banking association, savings and
loan
-16-
association, investment banking firm, employees' welfare, pension or retirement
fund or system, syndicated lenders' group, commercial finance company, leasing
company, 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
Tangible Net Worth of at least $100,000,000.
1.121. "LICENSES" shall have the meaning given such term in Section 5.3(d)
(i).
1.122. "LIEN" shall mean any mortgage, security interest, pledge, collateral
assignment, or other encumbrance, lien or charge of any kind (including, without
limitation, any easements, covenants, conditions and restrictions), or any
transfer of any property or assets for the purpose of subjecting the same to an
encumbrance, lien or charge securing the payment of Indebtedness or performance
of any other obligation in priority to payment of any Person's general
creditors.
1.123. "LOCKBOX ACCOUNT" shall have the meaning given such term in Section
3.5(b).
1.124. "LOCKBOX NOTICE DATE" shall have the meaning given such term in
Section 3.5(a).
1.125. "LOCKBOX PERIOD" shall have the meaning given such term in Section
3.5(a).
1.126. "MAJOR CAPITAL EXPENDITURE" shall mean (a) any Capital Expenditure
expected to result in a significant change in the use of any portion of the
Facility intended to materially alter or enhance an existing use (including, by
way of example and not limitation, the conversion of a typical hotel dining
facility to a nationally-known, premium-quality restaurant); (b) any and all
Capital Expenditures with respect to one or more new revenue-generating
buildings, rooms, facilities, amenities, or structures constituting any portion
of the Facility (including, by way of example and not limitation, the
construction of a new wing or new story), or the renovation, material expansion,
construction, or conversion of existing improvements of the Facility in order to
increase the room capacity of the Facility, or to provide a functionally new
facility needed to provide services not previously offered; or (c) any and all
Capital Expenditures which, individually or in a series of related expenditures,
have a total cost of completion in excess of the lesser of (i) seven and one-
half percent (7.5%) of Gross Revenues for the Fiscal Year ending immediately
prior to such expenditure, or (ii) $5,000,000. Notwithstanding the foregoing, in
no event shall Major Capital Expenditures include any room, lobby, or ballroom
refurbishments in the ordinary course or any other Routine Capital Expenditures.
1.127. "MANAGEMENT AGREEMENT" shall mean the Management Agreement described
in Section 21.3.1.
1.128. "MANAGER" shall have the meaning given such term in Section 21.3.1.
1.129. "MARKET LEASING FACTOR" shall have the meaning given such term in
paragraph (e) of Schedule 22.2.
-------------
-17-
1.130. "MEASUREMENT DATE" shall mean September 30th of each year during the
Term.
1.131. "MINIMUM NET WORTH" means, with respect to the last day of any
Accounting Period, a Tangible Net Worth (calculated on a book value basis),
excluding amounts held in any lockbox or cash collateral account under this
Lease, any other Pool Lease, or any Other Lease, the Pooling Agreement or any
pooling and security agreement relating to Other Leases, immediately after the
"Distribution Date" (as defined in the Pooling Agreement) for such Accounting
Period, equal to one hundred fifty percent (150%) of the aggregate of the "CCC
Limits of Liability" (as defined in the Guarantee) under the Guarantee and the
"Other Guarantees" (as defined in the Pooling Agreement) from time to time;
provided that the Minimum Net Worth shall be reduced by one hundred fifty
percent (150%) of the total amount of cash held in any lockbox or cash
collateral account under this Lease, any other Pool Lease, or any Other Lease,
the Pooling Agreement or any pooling and security agreement relating to Other
Leases, immediately after the Distribution Date for such Accounting Period.
1.132. "MINIMUM RENT" shall mean for each Fiscal Year the amount set forth
on Schedule 3.1.1.
--------------
1.133. "NONCOMPETITION AGREEMENT" shall have the meaning given such term in
Section 23.15.
1.134. "NON-CONTROLLED SUBSIDIARY" shall mean any Person (other than a
Subsidiary of Host O.P.) in which Host O.P. owns, directly or indirectly, at
least 90% of the economic interest.
1.135. "NOTICE" shall mean a notice given in accordance with Section 23.10.
1.136. "OFFICER'S CERTIFICATE" shall mean a certificate signed by an
authorized officer of Tenant.
1.137. "OPCO" shall mean any wholly owned subsidiary of CCC that owns,
directly or through one or more wholly owned subsidiaries, the entire
beneficial equity interest in Tenant.
1.138. "OPERATING BUDGET" shall have the meaning given such term in Section
17.3.
1.139. "OPERATING BUDGET SUMMARY" shall have the meaning given such term in
Section 17.3.
1.140. "OTHER INCOME" shall mean all revenues, receipts, and income of any
kind derived directly or indirectly by Tenant from or in connection with the
Facility and included in Gross Revenues other than Room Revenues and Food and
Beverages Sales (including, without limitation, gross revenue from rental
income, license fees, concession payments, or other amounts received from
subtenants, licensees and concessionaires, but excluding all exclusions from
Gross Revenues set forth in the definition thereof.
-18-
1.141. "OTHER LEASES" shall mean any lease of a full service hotel, other
than this Lease or any other Pool Lease, under which Host O.P. or a Subsidiary
of Host O.P. is the lessor and a Subsidiary of CCC is lessee and that is the
subject of a guarantee by CCC and a pooling and security agreement in effect on
the date hereof substantially similar to the Guarantee and the Pooling
Agreement.
1.142. "OTHER TENANTS" shall mean the tenants under the Pool Leases (other
than this Lease) and the Other Leases.
1.143. "OVERDUE RATE" shall mean, on any date, a per annum rate of interest
equal to the lesser of the Prime Rate plus two (2) percentage points and the
maximum rate then permitted under applicable law.
1.144. "OWNER" shall have the meaning given such term in Section 21.3.1.
1.145. "PERCENTAGE INCREASE IN CPI" shall mean, measured as of each
Measurement Date, the percentage increase, if any, in the Consumer Price Index
over the twelve (12) months preceding the Measurement Date.
1.146. "PERCENTAGE INCREASE IN THE LABOR INDEX" shall mean, measured as of
each Measurement Date, the percentage increase, if any, in the Labor Index over
the twelve (12) months preceding the Measurement Date.
1.147. "PERCENTAGE RENT" shall mean the amount of Rent (excluding Additional
Charges) payable pursuant to Section 3.1.1 with respect to one or more
Accounting Periods or a Fiscal Year, as the case may be, in excess of Minimum
Rent payable for such period.
1.148. "PERCENTAGE RENT SCHEDULE" shall have the meaning given such term in
Section 3.1.3(a).
1.149. "PERIOD REPORT" shall have the meaning given such term in Section
17.2(f).
1.150. "PERMITTED DEBT" shall have the meaning given such term in Section
21.6.3.
1.151. "PERMITTED LIENS" shall mean (a) this Lease; (b) all rights,
restrictions, and easements of record as of the Commencement Date; (c) the
lessor's interest in any Excess FF&E leased to Tenant pursuant to [the Initial
FF&E Lease or] an Excess FF&E Lease and the lessor's interest in any other
furniture, fixtures or equipment leased to Tenant under any of the equipment
leases included in the Assigned Agreements or entered into by Tenant during the
Term; (d) security interests securing the purchase price of equipment or
personal property acquired by Tenant before or after the Commencement Date
(including, but not limited to, Excess FF&E owned by Tenant); provided, however,
that (i) any such Lien described in this clause (d) shall at all times be
confined solely to the asset in question, and (ii) the aggregate principal
amount of Indebtedness secured by any such Lien described in this clause (d)
shall not exceed the cost of acquisition of the property subject thereto; and
(e) any other Liens as may have been consented to in writing by Landlord, and,
if required pursuant to the Management Agreement, Manager, from time to time,
including, without limitation, those granted in accordance with Section 5.5
hereof.
-19-
1.152. "PERSON" shall mean any individual or Entity, and the heirs,
executors, administrators, legal representatives, successors and assigns of such
Person where the context so requires.
1.153. "POOLING AGREEMENT" shall have the meaning given such term in
Section 23.15.
1.154. "POOL LEASE" shall mean any lease subject to the Pooling Agreement.
1.155. "PREPAID EXPENSES" shall have the meaning given such term in
Schedule 3.1.5.
---------------
1.156. "PRIMARY INTENDED USE" shall have the meaning given such term in
Section 4.1.1.
1.157. "PRIME RATE" shall mean the "prime rate" as published in the "Money
Rates" section of The Wall Street Journal; however, if such rate is, at any time
during the Term, no longer so published, the term "Prime Rate" shall mean the
average of the prime interest rates that are announced, from time to time, by
the three (3) largest banks (by assets) headquartered in the United States which
publish a "prime rate."
1.158. "QUALIFIED AFFILIATE" shall mean any Person directly or indirectly
wholly owned and controlled by CCC or OpCo.
1.159. "QUALIFIED APPRAISER" shall mean an appraiser who is not in control
of, controlled by or under common control with either Landlord or Tenant or any
Affiliate of Landlord or Tenant and has not been an employee of Landlord or
Tenant or any Affiliate of Landlord or Tenant within the past two (2) years, who
is qualified to appraise commercial real estate in the State and is a member of
the American Institute of Real Estate Appraisers (or any successor association
or body of comparable standing if such institute is not then in existence).
1.160. "REAL ESTATE TAXES" shall mean all real estate taxes, including
general and special assessments and impact fees, if any, which are imposed upon
or relate to the Land and any improvements thereon, including, without
limitation, the following :
(a) any franchise, corporate, estate, inheritance, succession, or
capital levy imposed on Landlord;
(b) special assessments (regardless of when due or whether they are
paid as a lump sum or in installments over time) imposed because of facilities
that are constructed by or on behalf of the assessing jurisdiction (i.e., roads,
sidewalks, sewers, culverts, etc.), which directly benefit the Facility
(regardless of whether or not they also benefit other buildings);
(c) impact fees (regardless of when due or whether they are paid as
a lump sum or in installments over time) that are required of Landlord as a
condition to the issuance of site plan approval, zoning variances or building
permits; and
-20-
(d) tax-increment financing or similar financing whereby the
municipality or other taxing authority has assisted in financing the
construction of the Facility by temporarily reducing or abating normal
impositions in return for substantially higher levels of impositions at later
dates.
1.161. "RELATED AGREEMENTS" shall have the meaning given such term in
Section 23.15.
1.162. "RENT" shall mean, collectively, Minimum Rent, Percentage Rent, and
Additional Charges attributable to the Term of this Lease.
1.163. "REPLACEMENT COST" shall have the meaning given such term in
Section 9.3.
1.164. "RETAINED OBLIGATIONS" shall have the meaning given such term in
Section 21.3.1.
1.165. "REVENUE DATA PUBLICATION" shall mean ▇▇▇▇▇'▇ STAR Report, a
monthly publication distributed by ▇▇▇▇▇ Travel Research, Inc., of Gallatin,
Tennessee, or an alternative source, reasonably satisfactory to both parties, of
data regarding the REVPAR of hotels in the general trade area of the Facility.
If such ▇▇▇▇▇'▇ STAR Report is discontinued in the future, or ceases to be a
satisfactory source of data regarding the REVPAR of various hotels in the
general trade area of the Facility (as provided in the Management Agreement),
Tenant shall select, or shall cause Manager to select, an alternative source in
accordance with the Management Agreement.
1.166. "REVENUES COMPUTATION" shall have the meaning given such term in
Section 3.1.2(a).
1.167. "REVPAR" shall mean (i) the term "revenue per room" as defined by
the Revenue Data Publication or (ii) if the Revenue Data Publication is no
longer being used (as more particularly set forth in the definition of "Revenue
Data Publication"), the aggregate gross room revenues of the hotel in question
for a given period of time divided by the total room nights of such hotel for
such period. If clause (ii) of the preceding sentence is being used, a "room"
shall be a hotel guestroom which is keyed as a single unit and shall include
rooms that are temporarily unavailable due to maintenance or ongoing renovation
work.
1.168. "ROOM REVENUES" shall mean gross revenues from the rental of guest
rooms, whether to individuals, groups, or transients at the Facility, determined
in a manner consistent with GAAP, excluding the following:
(a) the amount of all credits, rebates or refunds to customers,
guests or patrons;
(b) all sales taxes or any other taxes imposed on the rental of
such guest rooms;
(c) any fees collected for amenities including, but not limited to,
telephone, room service, laundry, movies or concessions.
-21-
1.169. "ROUTINE CAPITAL EXPENDITURES" shall mean exterior and interior
repainting, resurfacing of building walls, floors, roof and parking areas,
replacing folding walls, and other on-going routine Capital Expenditures the
cost of which is to be paid for by the Manager out of the FF&E Reserve pursuant
to the Management Agreement.
1.170. "SEC" shall mean the Securities and Exchange Commission.
1.171. "SECOND TIER FOOD AND BEVERAGES SALES PERCENTAGE" shall have the
meaning given such term in Section 3.1.2(b)(2).
1.172. "SECOND TIER OTHER INCOME PERCENTAGE" shall have the meaning given
such term in Section 3.1.2(b)(2).
1.173. "SECOND TIER ROOM REVENUE PERCENTAGE" shall have the meaning given
such term in Section 3.1.2(b)(2).
1.174. "SECURITY AGREEMENT" shall have the meaning given such term in
Section 7.2.
1.175. "SINGLE PURPOSE" means, with respect to a Person, that such Person,
(A) at all times since its formation, except as otherwise permitted in or
contemplated by this Agreement (i) has been a duly formed and existing limited
partnership, limited liability company, or corporation, as the case may be; (ii)
has observed all customary formalities regarding its partnership, limited
liability company or corporate existence; (iii) has maintained financial
statements, accounting records, and other partnership, limited liability
company, or corporate documents separate from those of any other Person
(provided that nothing shall prohibit such Person from being included in the
consolidated financial statements or tax group of another Person); (iv) has not
commingled its assets with those of any other Person; (v) has paid its own
liabilities out of its own funds, including funds contributed to its capital by
its equity holders, and all such capital contributions have been reflected
properly in its books and records; (vi) has allocated fairly and reasonably any
overhead for shared office expenses; (vii) has identified itself in all dealings
with the public, under its own name and as a separate and distinct entity
(provided that nothing shall prohibit such Person from engaging an agent to
represent such Person with respect to tenants, vendors, and other parties, in
accordance with standard industry practice); (viii) has not identified itself as
being a division or part of any other Person; (ix) has not identified any other
Person as being a division or part of such Person; (x) has corrected any known
misunderstanding regarding its separate identity; (xi) has been adequately
capitalized in light of the nature of its business; (xii) has not assumed or
guaranteed the obligations of any other Person (other than by virtue of being a
general partner of such other Person but only if such other Person is Tenant and
provided that this clause shall not be deemed to be violated by reason of joint
and several liabilities arising as a matter of law); and (xiii) has not engaged
in any other business other than as permitted by this Lease (provided that
nothing shall prohibit a general partner from acquiring, owning, and disposing
of limited partner interests in any limited partnership, non-managing membership
interests in a limited liability company, or debt securities issued by any
Person, or the stock of a corporation that is not engaged in any activities
other than such activities, provided that no liabilities or other obligations on
the part of the
-22-
holder of such investments will arise as a result of such investments and the
only rights of the holder of such investment are the right to receive payments
and the right to vote); (B) such Person agrees to covenants substantially to the
effect of Sections 7.1 and 21.6 hereof; and (C) such Person's organizational
documents contain restrictions similar to those contained in Sections 5.4 (only
paragraphs a, b, c, d and g thereof), 5.5, 5.6, and 5.7 of the Limited Liability
Company Operating Agreement of Tenant as in effect on the date hereof.
1.176. "SOFT GOODS" shall mean all fabric, textile and flexible plastic
products (not including items that are classified as "Fixed Asset Supplies"
under the Uniform System), which are used in furnishing the Facility, including,
without limitation, carpeting, drapes, bedspreads, wall and floor coverings,
mats, shower curtains and similar items.
1.177. "SPECIAL FORM" shall have the meaning given such term in
Section 9.1(b).
1.178. "STATE" shall mean the state, commonwealth, district, or, if the
Leased Property is not located in the United States, the country, in which the
Leased Property is located.
1.179. "SUBSIDIARY" shall mean, as to any Person, (i) any corporation more
than fifty percent (50%) of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time owned by such Person or one or
more Subsidiaries of such Person and (ii) any partnership, limited liability
company, association, joint venture or other entity in which such Person or one
or more Subsidiaries of such Person has more than a fifty percent (50%) equity
interest at the time.
1.180. "SUCCESSOR LANDLORD" shall have the meaning given such term in
Section 20.2.
1.181. "SUPERIOR LANDLORD" shall have the meaning given such term in
Section 20.2.
1.182. "SUPERIOR LEASE" shall have the meaning given such term in
Section 20.2.
1.183. "SUPERIOR MORTGAGE" shall have the meaning given such term in
Section 20.2.
1.184. "SUPERIOR MORTGAGEE" shall have the meaning given such term in
Section 20.2.
1.185. "TANGIBLE NET WORTH" of any Person shall mean, on any date, without
duplication, (a) the sum of the shareholders' equity of such Person on a
consolidated basis in accordance with GAAP minus (b) the sum of all Intangible
Assets (net of accumulated amortization) of such Person and its Subsidiaries,
each as shown on the consolidated balance sheets of such Person.
1.186. "TAX LAW CHANGE" shall have the meaning given such term in
Section 24.1.
-23-
1.187. "TENANT" shall have the meaning given such term in the preamble to
this Lease.
1.188. "TENANT INDEMNITEE" shall have the meaning given such term in
Section 4.3.2.
1.189. "TENANT'S OPERATING PROFIT" shall equal for any Fiscal Year the
amount equal to revenues due to Tenant from the Leased Property after the
payment of all expenses relating to the operation or leasing of the Leased
Property less Rent paid to Landlord, but in any event not less than $1.00.
1.190. "TENANT'S PERSONAL PROPERTY" shall mean all tangible and intangible
personal property now owned, leased or hereafter acquired by Tenant on or after
the date hereof, including, without limitation, Working Capital, Excess FF&E
owned by Tenant, Excess FF&E Leasehold Interests, and all contracts and
agreements to which Tenant is a party used in the operation of the Facility, but
expressly excluding (a) FF&E leased hereunder, (b) Excess FF&E leased during the
Term hereof by Tenant [and (c) FF&E leased pursuant to the Initial FF&E Lease,
if any.]
1.191. "TERM" shall have the meaning given such term in Section 2.4,
unless sooner terminated pursuant to the terms of this Lease.
1.192. "THIRD-PARTY PURCHASER" shall have the meaning given such term in
paragraph (b) of Schedule 22.2.
-------------
1.193. "THIRD TIER FOOD AND BEVERAGES SALES PERCENTAGE" shall have the
meaning given such term in Section 3.1.2(b)(2).
1.194. "THIRD TIER ROOM REVENUE PERCENTAGE" shall have the meaning given
such term in Section 3.1.2(b)(2).
1.195. "TRUSTEE" shall have the meaning given such term in Section 16.1.
1.196. "UNAVOIDABLE DELAY" shall mean delay due to strikes, acts of God,
force majeure, governmental restrictions or actions (including the revocation or
refusal to grant Licenses or permits, where such revocation or refusal is not
due to the fault of the party whose performance is excused by reason of such
Unavoidable Delay), enemy action, civil commotion, fire, unavoidable Casualty,
condemnation or other comparable causes beyond the reasonable control of
Landlord or Tenant; provided, however, that lack of funds shall not be deemed a
cause beyond the reasonable control of a party, unless such lack of funds is
caused by the breach of the other party's obligations under this Lease.
1.197. "UNIFORM SYSTEM" shall mean the Uniform System of Accounts for
Hotels (9th Revised Edition 1996) as published by the Hotel Association of New
York City, Inc., as the same may hereafter be revised.
1.198. "UNSUITABLE FOR ITS PRIMARY INTENDED USE" shall mean a state or
condition of the Facility such that (a) following any damage or destruction
involving the Leased Property, the Leased Property cannot reasonably be expected
to be restored within
-24-
twelve (12) months following such damage or destruction to substantially the
same condition as existed immediately before such damage or destruction or (b)
as the result of a partial taking by Condemnation, the Facility cannot be
operated on a commercially practicable basis for its Primary Intended Use taking
into account, among other relevant factors, the number of usable rooms, the
amount of square footage, or the revenues affected by such damage, destruction,
or partial taking.
1.199. "WORKING CAPITAL" shall have the meaning given such term in
Section 4.5.
1.200. "WORKING CAPITAL NOTE" shall have the meaning given such term in
Section 4.5.
1.201. "YEAR END PERCENTAGE RENT SCHEDULE" shall mean the Percentage
Rent Schedule covering the immediately preceding full Fiscal Year delivered in
accordance with Section 17.2(e).
ARTICLE 2
COLLECTIVE LEASED PROPERTIES AND TERM
2.1 Leased Property.
Upon and subject to the terms and conditions hereinafter set forth,
including, but not limited to, the execution, delivery and performance of the
terms and conditions of the Consent and Assignment, and subject to the rights of
any Facility Mortgagee and any Superior Landlord, Landlord leases to Tenant and
Tenant leases from Landlord, effective as of the Commencement Date, all of
Landlord's right, title, and interest in and to the following (collectively, the
"LEASED PROPERTY"):
(a) those certain tracts, pieces and parcels of land that are more
particularly described in Exhibit A attached hereto (together with all and
---------
singular the rights and appurtenances pertaining to such tracts and parcels,
including any right, title and interest of Landlord in and to any easements
benefiting the Leased Property, adjacent strips or gores, streets, alleys or
rights-of-way, and all rights of ingress and egress thereto) (the foregoing are
hereinafter referred to collectively as the "LAND");
(b) all buildings, structures, and other improvements of every kind
situated upon the Land, including, but not limited to, all Capital Expenditures,
alleyways and connecting tunnels, sidewalks, utility pipes, conduits and lines
(onsite and offsite), parking areas and appurtenant roadways, all luxury
apartments, all swimming pools, restaurants, hotel rooms, lounges, and various
other guest and spa facilities (collectively, the "FACILITY");
(c) all easements, rights and appurtenances relating to the Land
and the Facility;
(d) all equipment, machinery, and other items of property, now or
hereafter permanently affixed to or incorporated into the Facility, including,
without limitation, all lift systems, furnaces, boilers, heaters, electrical
equipment, heating, plumbing, lighting, ventilating, refrigerating,
incineration, air and water pollution control,
-25-
waste disposal, air-cooling and air-conditioning systems and apparatus,
sprinkler systems, and fire and theft protection equipment, all of which, to the
maximum extent permitted by law, are hereby deemed by the parties hereto to
constitute real estate, together with all replacements, modifications,
alterations and additions thereto, but specifically excluding Tenant's Personal
Property (collectively, the "FIXTURES"); and
(e) the FF&E owned by Landlord located in or on the Facility or
stored offsite and designated for use in connection with any present or future
occupation or operation of the Facility, together with all replacements,
modifications, alterations and additions thereto, but specifically excluding any
Excess FF&E not owned by Landlord and Tenant's Personal Property.
2.2 Assignment and Assumption of Contracts; Initial Transaction.
(a) Effective upon the Commencement Date, Landlord hereby transfers
and assigns to Tenant and Tenant assumes and covenants to perform all of
Landlord's obligations under, the following agreements and contracts to which
the Leased Property remains subject on the Commencement Date, to the maximum
extent assignable pursuant to applicable law (the "ASSIGNED AGREEMENTS"):
(i) All contracts for the use or occupancy of guest rooms
and/or the meeting, dining, banquet, and spa and health facilities of the
Facility;
(ii) All service and maintenance contracts, equipment leases,
purchase orders and other contracts pertaining to the ownership, maintenance,
operation, provisioning or equipping of the Facility, including warranties and
guaranties relating thereto;
(iii) All Licenses and permits used in or relating to the
ownership, occupancy or operation of any part of the Facility;
(iv) Any developer's, declarant's, or owner's interests under
any operating agreements or reciprocal easement agreements or other similar
agreements affecting and/or benefiting the Facility;
(v) Landlord's interest as owner under the Management Agreement
as and to the extent provided in the Consent and Assignment; and
(vi) All leases of space (including any security deposits held
by Landlord pursuant thereto, which will be paid over to Tenant by check on the
Commencement Date, or credited to Tenant against the cost of the Working Capital
sold to Tenant pursuant to Section 4.5) in the Facility to tenants thereof,
excluding those leases set forth on Schedule 2.2(a)(vi) attached hereto.
-------------------
This Lease is executed by Landlord and accepted by Tenant on the
understanding that Tenant will and does hereby assume and agree to perform all
of Landlord's obligations arising from and after the Commencement Date under all
of the Assigned Agreements (except to the extent otherwise provided with respect
to the Management Agreement in the Consent and Assignment). In connection with
the Licenses
-26-
and permits described in clause (iii) above and the Management Agreement
referred to in clause (v) above, Landlord shall be obligated (a) to take any
action that can legally or contractually be taken only by it and not Tenant, (b)
not to take any action that is not permitted by, or is contrary to the terms of,
such Licenses or permits or the Management Agreement, and (c) to cooperate with
Tenant as to actions that must be taken in Landlord's name. Notwithstanding the
foregoing but subject to Section 5.3(d)(ii) hereof, such Assigned Agreements
shall, without the necessity of further documentation, be deemed reassigned to
(and reassumed by) Landlord upon the expiration or earlier termination of the
Term. In connection with any reassignment thereof occurring following the
expiration or earlier termination of the Term, such reassignment shall not
release Tenant from any liability thereunder with respect to the period
beginning on the Commencement Date and ending on the date of expiration or
earlier termination of the Term.
(b) As between Landlord and Tenant, Landlord shall be entitled to all
income and shall be responsible for the payment or settlement of all expenses of
the Leased Property accruing prior to the Commencement Date and after the
expiration or earlier termination of the Term. Tenant shall act as Landlord's
agent for the collection of all such income and shall remit the same to Landlord
promptly upon Tenant's receipt thereof. Tenant shall notify Landlord of all
such expenses and shall act as Landlord's payment agent for such expenses using
funds provided by Landlord from time to time.
2.3 Condition of Leased Property.
Tenant acknowledges receipt and delivery of possession of the Leased
Property. Subject to the warranty of title hereinafter set forth and the
indemnifications by Landlord set forth in Sections 4.3.2, 9.9 and 21.3.3 hereof,
Tenant accepts the Leased Property in its "as is" condition, subject to the
rights of all occupants and parties in possession, the existing state of title,
including all covenants, conditions, restrictions, reservations, mineral leases,
easements and other matters of record or that are visible or apparent on the
Leased Property, all applicable Legal Requirements, the lien of financing
instruments, mortgages and deeds of trust, and such other matters which would be
disclosed by an inspection of the Leased Property and the record title thereto
or by an accurate survey thereof, and all other Permitted Liens. TENANT
REPRESENTS THAT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS LEASE, IT IS NOT
RELYING ON ANY REPRESENTATION OR WARRANTY OF LANDLORD OR LANDLORD'S AGENTS OR
EMPLOYEES WITH RESPECT TO THE CONDITION OF THE LEASED PROPERTY, AND EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED IN THIS LEASE TENANT WAIVES ANY CLAIM OR ACTION
AGAINST LANDLORD IN RESPECT THEREOF. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
THIS LEASE, LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN
RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR
USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, OR AS
TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT
BEING AGREED THAT EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS LEASE, ALL SUCH
RISKS ARE TO BE BORNE BY TENANT. NOTWITHSTANDING THE FOREGOING, LANDLORD HEREBY
WARRANTS ITS [FEE/LEASEHOLD] TITLE TO THE LEASED PROPERTY TO TENANT, SUBJECT TO
THE PERMITTED LIENS; PROVIDED,
-27-
HOWEVER, THAT IN NO EVENT SHALL THE AMOUNT RECOVERABLE BY TENANT FOR ANY BREACH
OF SUCH WARRANTY EXCEED TENANT'S PROPORTIONATE SHARE OF THE NET AMOUNT ACTUALLY
COLLECTED BY LANDLORD UNDER LANDLORD'S EXISTING TITLE INSURANCE POLICIES, AFTER
TAKING INTO ACCOUNT THE AMOUNTS EXPENDED BY LANDLORD TO RECOVER THE AMOUNT
COLLECTED AND THE AMOUNT OF ANY FEES OWED TO MANAGER RESULTING FROM BREACH OF
SUCH WARRANTY. TENANT'S PROPORTIONATE SHARE FOR THE PURPOSES OF THE PRECEDING
SENTENCE SHALL BE EQUAL TO THE FRACTION, EXPRESSED AS A PERCENTAGE, OBTAINED BY
DIVIDING THE FAIR MARKET VALUE OF TENANT'S LEASEHOLD ESTATE AS DETERMINED IN
ACCORDANCE WITH SECTION 24.1(b) BELOW BY THE FAIR MARKET VALUE OF THE LEASED
PROPERTY AS DETERMINED BY ARTICLE 19. LANDLORD AGREES TO DILIGENTLY PURSUE THE
TITLE COMPANY OR COMPANIES PROVIDING THE EXISTING TITLE INSURANCE IN THE EVENT
IT IS DETERMINED THAT THERE IS A DEFECT IN LANDLORD'S TITLE TO THE LEASED
PROPERTY. TENANT SHALL FULLY COOPERATE WITH LANDLORD IN THE PROSECUTION OF ANY
SUCH CLAIMS, IN LANDLORD'S OR TENANT'S NAME, ALL AT LANDLORD'S SOLE COST AND
EXPENSE.
2.4 Term.
The term of this Lease (the "TERM") shall commence at 12:01 a.m. on
the Commencement Date and shall expire at 11:59 p.m. on the last day of the
[tenth (10th)] Lease Year, unless sooner terminated pursuant to the terms of
this Lease; provided that, subject to the terms of Article 13, the Term shall
also include any period of holding over by Tenant.
ARTICLE 3
RENT
3.1 Rent.
Tenant shall pay to Landlord, in lawful money of the United States
of America which shall be legal tender for the payment of public and private
debts, without offset, abatement, demand or deduction, Minimum Rent, Percentage
Rent and Additional Charges, during the Term, except as hereinafter expressly
provided. All payments to Landlord shall be made by wire transfer of immediately
available federal funds or by other means reasonably acceptable to Landlord in
its sole discretion.
3.1.1 Payment of Rent.
On or before the second (2nd) Business Day after the required
payment date under the Management Agreement for amounts due from Manager
thereunder relating to each Accounting Period (whether or not such payment under
the Management Agreement is made on the required payment date), Tenant shall pay
to Landlord an amount of Rent equal to the excess, if any, of (A) the greater of
(i) the product of (x) the Minimum Rent for the current Fiscal Year (as set
forth on Schedule 3.1.1) times (y) a fraction, the numerator of which is the
--------------
number of elapsed Accounting Periods in such Fiscal Year (including the
-28-
Accounting Period with respect to which payment of Rent is being made) and the
denominator of which is 13 (or 12, if the Accounting Periods are then calendar
months) or (ii) the Revenues Computation for such Fiscal Year (determined in
accordance with Section 3.1.2), over (B) the aggregate amount of Rent previously
paid pursuant to this Section 3.1.1 during such Fiscal Year (less the aggregate
amount previously paid by Landlord to Tenant pursuant to the next sentence in
this Section 3.1.1 during such Fiscal Year). In the event that the amount
specified in clause (A) is less than the amount specified in clause (B) as of
any payment date, then Landlord will promptly pay to Tenant the difference in
cash. In the event of a change in the Accounting Period during the Term which
results in payment dates (and/or number of payments) different from the payment
dates (and/or number of payments) reflected on Schedule 3.1.1, the amount of
--------------
subsequent installments of Minimum Rent shall be appropriately adjusted in a
fair and equitable manner. In the absence of agreement between Landlord and
Tenant on the appropriate adjustments, the matter may be submitted by either
party to arbitration under Article 15 for resolution.
3.1.2 Revenues Computation.
(a) The "REVENUES COMPUTATION" for the applicable Fiscal Year shall
be the sum of the following amounts:
(1) an amount equal to the product of (a) the First Tier Room
Revenue Percentage times (b) all year-to-date Room Revenues
up to (but not exceeding) the Cumulative Portion of the
Annual Room Revenues First Break Point,
(2) an amount equal to the product of (a) the Second Tier Room
Revenue Percentage times (b) all year-to-date Room Revenues
in excess of the Cumulative Portion of the Annual Room
Revenues First Break Point up to (but not exceeding) the
Cumulative Portion of the Annual Room Revenues Second Break
Point,
(3) an amount equal to the product of (a) the Third Tier Room
Revenue Percentage times (b) all year-to-date Room Revenues
in excess of the Cumulative Portion of the Annual Room
Revenues Second Break Point,
(4) an amount equal to the product of (a) the First Tier Food
and Beverages Sales Percentage times (b) all year-to-date
Food and Beverages Sales up to (but not exceeding) the
Cumulative Portion of the Annual Food and Beverages Sales
First Break Point,
(5) an amount equal to the product of (a) the Second Tier Food
and Beverages Sales Percentage times (b) all year-to-date
Food and Beverages Sales in excess of the Cumulative
Portion of the Annual Food and Beverages Sales First Break
Point up to (but
-29-
not exceeding) the Cumulative Portion of the Annual Food and
Beverages Sales Second Break Point,
(6) an amount equal to the product of (a) the Third Tier Food
and Beverages Sales Percentage times (b) all year-to-date
Food and Beverages Sales in excess of the Cumulative Portion
of the Annual Food and Beverages Sales Second Break Point,
(7) an amount equal to the product of (a) the First Tier Other
Income Percentage times (b) all year-to-date Other Income up
to (but not exceeding) the Cumulative Portion of the Annual
Other Income Break Point, and
(8) an amount equal to the product of (a) the Second Tier Other
Income Percentage times (b) all year-to-date Other Income in
excess of the Cumulative Portion of the Annual Other Income
Break Point.
(b) The Revenues Computation shall be computed utilizing the
following definitions:
(1) "CUMULATIVE PORTION" shall mean a fraction having as its
numerator the total number of days in the Fiscal Year which
have elapsed through the last day of the Accounting Period
with respect to which a payment of Minimum Rent or
Percentage Rent is due, and having as its denominator the
total number of days in the Fiscal Year.
(2) "FIRST TIER ROOM REVENUE PERCENTAGE," "SECOND TIER ROOM
REVENUE PERCENTAGE," "THIRD TIER ROOM REVENUE PERCENTAGE,"
"FIRST TIER FOOD AND BEVERAGES SALES PERCENTAGE," "SECOND
TIER FOOD AND BEVERAGES SALES PERCENTAGE," "THIRD TIER FOOD
AND BEVERAGES SALES PERCENTAGE," "FIRST TIER OTHER INCOME
PERCENTAGE," AND "SECOND TIER OTHER INCOME PERCENTAGE" shall
mean the percentages set forth on Schedule 3.1.2.
---------------
(3) "ANNUAL ROOM REVENUES FIRST BREAK POINT," "ANNUAL ROOM
REVENUES SECOND BREAK POINT," "ANNUAL FOOD AND BEVERAGES
SALES FIRST BREAK POINT," "ANNUAL FOOD AND BEVERAGES SALES
SECOND BREAK POINT," AND "ANNUAL OTHER INCOME BREAK POINT"
shall mean the amounts set forth on Schedule 3.1.2.
--------------
3.1.3 Confirmation of Percentage Rent.
(a) Tenant shall submit to Landlord on each rental payment date
pursuant to Section 3.1.1 a reasonably detailed schedule (the "PERCENTAGE
-30-
RENT SCHEDULE"), signed and certified by Tenant to be correct, showing the
Revenues Computation with respect to the Facility for the preceding Accounting
Period and the calculation of the amount of Rent owed on such date (other than
Additional Charges) by Tenant or the amount Landlord is required to pay to
Tenant for such Accounting Period. Tenant's Percentage Rent Schedule shall
clearly indicate how much of the Gross Revenues is comprised by Room Revenues,
Food and Beverages Sales and Other Income, and shall contain such detail and
breakdown as Landlord may reasonably require. If, after notice from Landlord and
the expiration of the cure period provided for in Section 12.1(c) of this Lease,
Tenant fails to submit the Percentage Rent Schedule to Landlord when due,
Landlord, in addition to any other remedies Landlord has, shall have the right
(subject to compliance with the Management Agreement and the Consent and
Assignment) to retain an independent certified public accountant, at Tenant's
sole expense, to prepare such Percentage Rent Schedule and to perform all
inspections and audits related thereto.
(b) Tenant shall maintain in accordance with the usual and customary
practices of Tenant and in accordance with GAAP during the Term, for the current
Fiscal Year and for the immediately preceding Fiscal Year, (i) complete and
accurate general books of account, which shall reflect Gross Revenues and which
shall include, without limitation, those items set forth and described on
Schedule 3.1.3(b) hereof, and (ii) all other original records and other
-----------------
pertinent papers that will enable Landlord to determine the Gross Revenues
derived by Tenant during the relevant Fiscal Year from Room Revenues, Food and
Beverages Sales and Other Income. Such records for the current and most recent
Fiscal Year shall be maintained at Tenant's corporate headquarters. The
provisions of this Section 3.1.3(b) shall survive the expiration or earlier
termination of this Lease for a period of three (3) years thereafter, subject to
extension upon Notice from Landlord, provided that all storage and related
expenses of maintaining records beyond such three-year period shall be at
Landlord's sole cost and expense. In addition to the audit rights set forth in
Section 3.1.3(c) below, in the event Landlord, any Lending Institution, any
Facility Mortgagee, or any potential purchaser of the Leased Property, or any of
their respective representatives, desires to audit Tenant's financial records
described in clauses (i) and (ii) above, Tenant shall, at Landlord's sole cost
and expense, cooperate with such audit by making such records available at
Tenant's corporate headquarters during normal business hours upon reasonable
prior Notice.
(c) Landlord shall have fifty (50) days after the receipt of the Year
End Percentage Rent Schedule to have an independent certified public accountant
examine Tenant's records, during regular business hours upon reasonable prior
Notice by Landlord, of Room Revenues, Food and Beverages Sales, and/or Other
Income for the related Fiscal Year and all other relevant financial information.
The acceptance by Landlord of each periodic payment of Percentage Rent shall not
prejudice Landlord's right to proceed with such examination as described in the
immediately preceding sentence. If Landlord raises no objections within such
fifty (50)-day period, the Year End Percentage Rent Schedule shall be deemed to
have been accepted by Landlord as true and correct, and Landlord shall have no
further right to question its accuracy. If Landlord does raise such an
objection, by Notice to Tenant, Landlord shall arrange for an independent
certified public accountant to commence such examination within fifty (50) days
after the date of such objection and shall cause such audit to be completed no
later than one hundred eighty (180) days after
-31-
Landlord's receipt of the Year End Percentage Rent Schedule. Landlord shall pay
all costs and expenses of such audit; provided, however:
(i) if such audit discloses that the amount of Percentage
Rent was underreported by Tenant by five percent (5%) or more for
such Fiscal Year, Tenant shall pay to Landlord, within fifteen (15)
days of its receipt of Notice from Landlord, the cost of the audit,
as Additional Charges, in addition to any deficiency in Percentage
Rent that may be due to Landlord; or
(ii) if the audit discloses that the amount of Percentage
Rent either was not underreported or was underreported by Tenant by
less than five percent (5%), Landlord shall be responsible for all
costs associated with the audit and Tenant shall pay, within fifteen
(15) days of its receipt of Notice from Landlord, any deficiency in
Percentage Rent that may be due to Landlord; or
(iii) if the audit discloses that the Percentage Rent was
overreported by Tenant for the related Fiscal Year, Landlord shall
be responsible for all costs associated with the audit, shall give
Tenant Notice of such overreporting within fifteen (15) days of
Landlord's receipt of audit results, and shall reimburse the amount
of such overpayment to Tenant in cash along with delivery of such
Notice to Tenant. The provisions of this Section shall survive the
expiration or the earlier termination of this Lease for a period of
one (1) year thereafter.
3.1.4 Annual Adjustments.
Upon the commencement of each Fiscal Year during the Term beginning
with the second Fiscal Year, each of the Minimum Rent, the Annual Room Revenues
First Break Point, the Annual Food and Beverages Sales First Break Point, the
Annual Other Income Break Point, the Annual Food and Beverages Sales Second
Break Point and the Annual Room Revenues Second Break Point shall be increased
by the amount of the applicable Annual Adjustment.
In no event shall the Minimum Rent, the Annual Room Revenues First
Break Point, Annual Food and Beverages Sales First Break Point, the Annual Room
Revenues Second Break Point, the Annual Food and Beverages Sales Second Break
Point, and the Annual Other Income Break Point be reduced as a result of the
Annual Adjustment. The Annual Adjustment described above shall be effective on
the first day of the new Fiscal Year. If Rent for the new Fiscal Year is paid
prior to the determination of the amount of the Annual Adjustment, whether
because of a delay in the publication of the Consumer Price Index or the Labor
Index applicable for the Measurement Date or because of any other reason,
payment adjustments for any shortfall in Rent paid shall be made with the first
Minimum Rent and Percentage Rent payments due after the Annual Adjustment is
determined.
If (1) a significant change is made in the number or nature (or
both) of items used in determining the Consumer Price Index or the Labor Index
or (2) the Consumer
-32-
Price Index or Labor 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 or Labor Index, together with information that will make
possible a conversion to the new index in computing the Annual Adjustment. If
for any reason the Bureau of Labor Statistics does not furnish such an index and
information, the parties will instead mutually select, accept and use such other
indexes or comparable statistics on the cost of living and cost of labor in
various United States cities that is computed and published by an agency of the
United States or a responsible financial periodical of recognized authority.
3.1.5 Additional Charges.
In addition to the Minimum Rent and Percentage Rent payable
hereunder, Tenant shall pay and discharge as and when due and payable the
following (collectively, "ADDITIONAL CHARGES"):
(a) Impositions. Subject to Article 8 relating to Permitted
-----------
Contests and the right of any Facility Mortgagee to require tax escrows as
described in the last sentence of this paragraph of subsection (a), Tenant shall
pay or cause to be paid all Impositions attributable to any period during the
Term before any fine, penalty, interest or cost (other than any opportunity cost
as a result of a failure to take advantage of any discount for early payment)
may be added for nonpayment, such payments to be made directly to the taxing
authorities where feasible, and shall promptly, upon request, furnish to
Landlord copies of official receipts or other satisfactory proof evidencing such
payments. 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), Tenant 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 as the same become
due and before any fine, penalty, premium, further interest or cost may be added
thereto. Landlord, at its expense, shall, to the extent required or permitted by
Legal Requirements, prepare and file all tax returns required to be filed by
Landlord, including, without limitation, returns in respect of Landlord's net
income, gross receipts, sales and use, single business, transaction, privilege,
rent, ad valorem, franchise taxes, Real Estate Taxes and other Landlord
Obligations, and taxes on its capital stock, and Tenant, at its expense, shall,
to the extent required or permitted by Legal Requirements, prepare and file all
tax returns and reports required to be filed by Tenant in respect of any
Imposition as may be required by any Government Agency. Provided no monetary
Default or Event of Default shall have occurred and be continuing, if any refund
shall be due from any taxing authority in respect of any Imposition paid by
Tenant, the same shall be paid over to or retained by Tenant. Landlord and
Tenant shall each, 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. In the event
Government Agencies classify any property covered by this Lease as personal
property, Tenant shall file all personal property tax returns in such
jurisdictions where it may legally be required to so file. Each party shall, to
the extent it possesses the same, provide the other, upon request, with cost and
depreciation records necessary for filing returns for any property so classified
as personal property. Where Landlord is legally required to file personal
property tax returns, Landlord shall provide Tenant with copies of assessment
notices in sufficient time for Tenant to file a protest. All
-33-
Impositions assessed against such personal property that comprises FF&E shall be
(irrespective of whether Landlord or Tenant shall file the relevant return) paid
by the party that owns the FF&E not later than the last date on which the same
may be made without interest or penalty. All Impositions assessed against such
personal property that comprises Tenant's Personal Property shall be
(irrespective of whether Landlord or Tenant shall file the relevant return) paid
by Tenant not later than the last date on which the same may be made without
interest or penalty. If the provisions of any Facility Mortgage require deposits
on account of Impositions to be made with the Facility Mortgagee, provided the
Facility Mortgagee has not elected to waive such provision, Tenant shall either
pay Landlord the monthly amounts required with respect to any such Impositions
at the time and place that payments of Minimum Rent are required and Landlord
shall transfer such amounts to the Facility Mortgagee or, pursuant to written
direction by Landlord, Tenant shall make such deposits directly with the
Facility Mortgagee, and such payment to Landlord or Facility Mortgagee shall be
deemed to satisfy Tenant's obligation hereunder to pay the Impositions.
Landlord shall give prompt Notice to Tenant of all Impositions payable
by Tenant hereunder of which Landlord at any time has knowledge; provided,
however, that Landlord's failure to give any such Notice shall in no way
diminish Tenant's obligation hereunder to pay such Impositions, except that
Landlord shall be responsible for any interest and/or penalties incurred by
Tenant as a result of Landlord's failure to forward any invoices, assessment
notices or other bills to Tenant and no Default or Event of Default shall be
deemed to have occurred hereunder if Tenant's failure to pay timely any
Impositions is due to Landlord's failure to give Tenant such Notice at least ten
(10) days before the amounts therein are due.
Tenant shall give prompt Notice to Landlord of all taxes included in
Landlord Obligations payable by Landlord hereunder of which Tenant at any time
has knowledge; provided, however, that Tenant's failure to give any such Notice
shall in no way diminish Landlord's obligation hereunder to pay such Landlord
Obligations, except that Tenant shall be responsible for any interest and/or
penalties incurred by Landlord as a result of Tenant's failure to forward any
invoices, assessment notices or other bills to Landlord and no Landlord Default
shall be deemed to have occurred hereunder if Landlord's failure to pay timely
any taxes included in Landlord Obligations is due to Tenant's failure to give
Landlord such Notice at least ten (10) days before the amounts therein are due.
(b) Utility Charges. Tenant shall pay or cause to be paid all charges
---------------
for electricity, power, gas, oil, water and other utilities used in connection
with the Leased Property.
(c) Insurance Premiums. Except as otherwise provided in Section 9.2,
------------------
Tenant shall pay or cause to be paid all premiums for the insurance coverage
required to be maintained by it pursuant to Article 9.
(d) Other Charges. Tenant shall pay or cause to be paid all other
-------------
amounts, liabilities and obligations that Tenant assumes or agrees to pay under
this Lease,
-34-
including, without limitation, all agreements to indemnify Landlord under
Sections 4.3.3 and 9.8.
(e) Reimbursements for Prepaid Expenses. On the Commencement Date,
-----------------------------------
Tenant shall reimburse Landlord for all amounts described as Prepaid Expenses as
set forth on Schedule 3.1.5 hereto.
--------------
(f) Reimbursement for Additional Charges. If Tenant (as opposed to
------------------------------------
Manager) pays or causes to be paid Additional Charges attributable to periods
before the Commencement Date, Tenant shall provide Notice to Landlord of such
amounts and, within fifteen (15) days thereafter, Landlord shall remit to Tenant
the amount of such Additional Charges paid. If Tenant pays or causes to be paid
Additional Charges attributable to periods after the end of the Term, Tenant
may, within sixty (60) days after the end of the Term, provide Notice to
Landlord of such amounts. Provided no uncured monetary Default or Event of
Default then exists, Landlord shall reimburse Tenant for all payments of such
Additional Charges that are attributable to any period after the expiration or
earlier termination of the Term of this Lease within fifteen (15) days after its
receipt of such Notice. Notwithstanding the foregoing, Tenant shall only be
reimbursed to the extent such Additional Charges are not taken into account in
the calculation and settlement of Working Capital accounts as set forth in
Section 4.5. In the event Manager pays for Additional Charges attributable to
periods before the Commencement Date, Tenant shall receive a payment as set
forth in Section 3.1.6(g) below. Tenant shall reimburse Landlord within fifteen
(15) days after receipt of Notice (which shall be given within sixty (60) days
after the end of the Term) for any Additional Charges paid by Landlord
attributable to periods during the Term for which Tenant received a credit in
the settlement of Working Capital.
3.1.6 Adjustments to/Abatements of Rent.
(a) FF&E Adjustment to Rent. Pursuant to the terms of
-----------------------
Schedule 22.2, Rent shall be reduced by the amount of the FF&E Adjustments
-------------
then in effect. In the event there is an FF&E Adjustment which commences on a
day other than the first day of an Accounting Period in which such FF&E
Adjustment occurs, Landlord shall reimburse Tenant in cash, within fifteen (15)
days after such FF&E Adjustment, an amount equal to the amount by which Rent
paid for the Accounting Period in which the FF&E Adjustment commenced exceeded
the amount of Rent (as reduced by the FF&E Adjustment) owed for such Accounting
Period.
(b) Adjustments of Rent Following Owner-Funded Capital Expenditures
---------------------------------------------------------------
Under Management Agreement. Except as otherwise provided in Section 3.1.6(c) or
--------------------------
(e), effective on the date of any "Owner"-funded Capital Expenditures (as the
term "Owner" is defined in the Management Agreement) paid by Landlord (other
than Capital Expenditures paid out of the FF&E Reserve), the Rent due for each
Fiscal Year thereafter in which Room Revenues for such Fiscal Year exceed the
Annual Room Revenues Second Break Point shall be increased by an amount equal to
[2%] of the amount of such contributions or expenditures.
-35-
(c) Adjustment of Rent for Major Capital Expenditures. In the event
-------------------------------------------------
of either a reduction or increase in Gross Revenues or an adverse or beneficial
impact on the Facility's operations, in either case resulting from any Major
Capital Expenditure, Landlord and Tenant shall, in good faith, negotiate
possible modifications to the Minimum Rent and Percentage Rent to determine an
appropriate temporary or permanent adjustment of Rent and the effective date of
such adjustment. If Landlord and Tenant are unable to agree that a reduction or
increase in Gross Revenues or an adverse or beneficial impact on Facility
operations, in either case resulting from any Major Capital Expenditure, has
occurred, within thirty (30) days after the date of Notice from either party to
the other that such event has occurred (accompanied by reasonably detailed
computations and documentation to support such assertion), the matter may be
submitted by either party to arbitration under Article 15 for resolution and for
determination of the amount of the adjustment to Minimum Rent and Percentage
Rent contemplated hereby. Tenant shall continue to pay Minimum Rent and
Percentage Rent as required under Sections 3.1.1 through 3.1.5 of this Lease
until such time as any adjustments to Percentage Rent and/or Minimum Rent are
agreed upon or determined as set forth above.
(d) Adjustment of Rent for Increases or Decreases in the FF&E Reserve
-----------------------------------------------------------------
Percentage. In the event that there is an increase or decrease, as the case may
----------
be, in the percentage of Gross Revenues from the Leased Property required to be
deposited by Landlord in the FF&E Reserve (the "FF&E RESERVE PERCENTAGE"), the
Rent due for each Fiscal Year thereafter in which Room Revenues for such Fiscal
Year exceed the Annual Room Revenues Second Break Point shall be increased (in
the case of an increase in the FF&E Reserve Percentage) by an amount equal to
the product of (i) the aggregate of the Room Revenues, the Food and Beverages
Sales and the Other Income for such Fiscal Year times (ii) [19]% times (iii) the
percentage point increase in the FF&E Reserve Percentage, or decreased (in the
case of a decrease in the FF&E Reserve Percentage) by an amount equal to the
product of (i) the aggregate of the Room Revenues, the Food and Beverages Sales
and the Other Income for such Fiscal Year times (ii) [21]% times (iii) the
percentage point decrease in the FF&E Reserve Percentage, in each case for the
period during which the adjusted FF&E Reserve Percentage remains in effect.
(e) Adjustment of Rent for Landlord Funded Increase in FF&E Reserve.
---------------------------------------------------------------
In the event that Landlord is required by Manager to fund an increase in the
FF&E Reserve (other than by reason of an increase in the FF&E Reserve
Percentage), the Rent due for each of the five full Fiscal Years following the
Fiscal Year in which the funding of such increase occurred shall be increased,
for each Fiscal Year during such five (5)-year period that the Room Revenues for
such Fiscal Year exceed the Annual Room Revenues Second Break Point, by an
amount equal to [4.75]% of the dollar amount increase in the FF&E Reserve
resulting from such funding.
(f) Tenant Reimbursement for Landlord Obligations Paid by Manager or
----------------------------------------------------------------
Tenant. Landlord shall reimburse Tenant in cash for the amount of any Landlord
------
Obligations either (i) paid by Manager and deducted by Manager out of amounts
owed to Tenant in accordance with the Management Agreement or (ii) paid by
Tenant, such reimbursement to be paid within fifteen (15) days after receiving
Notice thereof, provided no uncured monetary Default or Event of Default then
exists.
-36-
(g) Tenant Reimbursement for Additional Charges Attributable to
-----------------------------------------------------------
Periods prior to the Commencement Date and Paid by Manager. In the event
----------------------------------------------------------
Manager pays Additional Charges attributable to the period before the
Commencement Date, and deducts the same from "Gross Revenues" (as defined in the
Management Agreement) in accordance with the Management Agreement, and such
Additional Charges were not taken into account in the calculation and settlement
of Working Capital accounts as set forth in Section 4.5, such Additional Charges
shall be the responsibility of Landlord, and Landlord shall remit to Tenant in
cash within fifteen (15) days after receiving Notice thereof the amount of such
Additional Charges paid, provided no uncured monetary Default or Event of
Default then exists. In the event any item of Gross Revenues attributable to
periods prior to the Commencement Date is not properly reflected in the initial
calculation of Working Capital pursuant to Section 4.5, Tenant shall remit to
Landlord in cash within fifteen (15) days after receiving Notice thereof the
amount of such item not properly reflected.
(h) Abatement of Rent for Casualty. If and to the extent that any
------------------------------
Casualty results in a reduction of Gross Revenues as provided in Section 10.5,
then Rent shall be abated to the extent provided in Section 10.5.
(i) Abatement of Rent for Partial Condemnation. In the event of a
------------------------------------------
partial Condemnation as described in Section 11.2 which does not result in a
termination of this Lease by Landlord pursuant to Section 11.2, the Rent shall
be abated in the manner and to the extent provided in Section 11.3.
3.2 Late Payment of Rent.
If any installment of (i) Minimum Rent, (ii) Percentage Rent, or (iii)
Additional Charges (but only as to those Additional Charges that are payable
directly to Landlord) shall not be paid on its due date, Tenant shall pay
Landlord, 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 Tenant pays any Additional Charges directly to
Landlord or the Facility Mortgagee pursuant to any requirement of this Lease,
Tenant shall be relieved of its obligation to pay such Additional Charges to the
Entity to which they would otherwise be due.
In the event of any failure by Tenant to pay any Additional Charges
when due to any Entity other than Landlord, Tenant shall promptly pay and
discharge, as Additional Charges, every fine, penalty, interest and cost that
may be added by the Entity to which such Additional Charges are due (other than
Landlord) for nonpayment or late payment of such items (subject to Landlord's
obligation to pay or reimburse as provided in Section 3.1.5(a)).
3.3 Net Lease.
The Rent shall be absolutely net to Landlord so that this Lease shall
yield to Landlord the full amount of the installments or amounts of Rent
throughout the Term, subject to any other provisions of this Lease which
expressly provide for adjustment or
-37-
abatement of such Rent or expressly provide that certain Landlord Obligations
and Capital Expenditures are to be paid and/or performed by Landlord.
3.4 No Termination, Abatement, Etc.
Except as otherwise specifically provided in this Lease, Tenant, to
the maximum extent permitted by law, shall remain bound by this Lease in
accordance with its terms and shall neither take any action without the consent
of Landlord to modify, surrender or terminate this Lease, nor seek, nor be
entitled to, any abatement, deduction, deferment or reduction of the Rent, or
set-off against the Rent, nor shall the respective obligations of Landlord and
Tenant be otherwise affected by reason of (a) any damage to or destruction of
the Leased Property or any portion thereof from whatever cause or any
Condemnation; (b) the lawful or unlawful prohibition of, or restriction upon,
Tenant's use of the Leased Property, or any portion thereof, or the interference
with such use by any Person, except to the extent that a court of competent
jurisdiction has issued a final, nonappealable order determining that Tenant was
constructively evicted from the Leased Property; (c) any claim that Tenant may
have against Landlord by reason of any default or breach of any warranty by
Landlord under this Lease or any other agreement between Landlord and Tenant, or
to which Landlord and Tenant are parties (except for the Consent and
Assignment); (d) any bankruptcy, insolvency, reorganization, composition,
readjustment liquidation, dissolution, winding up or other proceedings affecting
Landlord or any assignee or transferee of Landlord; or (e) any other cause
whether similar or dissimilar to any of the foregoing, other than a discharge of
Tenant from any such obligations as a matter of law; provided, however, that the
foregoing shall not apply or be construed to restrict any other rights Tenant
may have as a result of any act or omission by Landlord constituting gross
negligence or willful misconduct. Tenant hereby waives all rights arising from
any occurrence whatsoever, which may now or hereafter be conferred upon it by
law, to (i) modify, surrender or terminate this Lease or quit or surrender the
Leased Property or any portion thereof, or (ii) entitle Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable or other
obligations to be performed by Tenant hereunder, except as otherwise
specifically provided in this Lease and except to the extent that a court of
competent jurisdiction has issued a final, nonappealable order determining that
Tenant was constructively evicted from the Leased Property. The obligations of
Tenant hereunder shall be separate and independent covenants and agreements, and
the Rent and all other sums payable by Tenant 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 this Lease shall be
terminated. Notwithstanding anything set forth in this Lease to the contrary,
in any instance where, after the occurrence of a Default or an Event of Default,
this Lease expressly permits Landlord to retain funds which, but for the Default
or Event of Default, would be payable to Tenant, Landlord shall refund such
funds to Tenant to the extent the amount exceeds the amount estimated by
Landlord in good faith to be necessary to compensate Landlord for any cost,
loss, or damage incurred or reasonably expected to be incurred in connection
with such Default or Event of Default.
-38-
3.5 Lockbox Procedures.
(a) In the event that either (i) the Tangible Net Worth of CCC is less
than two hundred percent (200%) of the amount of the maximum liability under the
Guarantee from time to time as of the end of each of three (3) consecutive
Accounting Periods, or (ii) the Consolidated Coverage Ratio of CCC is less than
2.3 to 1.0 for each of three (3) consecutive Accounting Periods, or (iii) there
is an Event of Default under Section 12.1(a)(i), 12.1(c) (by reason of a breach
of Section 7.1 or 21.6.3), 12.1(f), 12.1(g), 12.1(h), 12.1(i), 12.1(k), or
12.1(m) of this Lease, or (iv) there is a default continuing beyond any
applicable cure period under Section 12.1(a)(i) or Section 12.1(c) (by reason of
a breach of Section 7.1 or 21.6.3) of any Pool Lease (other than this Lease) or
any Other Lease with respect to which CCC Limit of Liability under any CCC
guarantee applicable to such Other Lease is greater than zero, then, at
Landlord's option and upon Notice to Manager and Tenant (the date of such
notice, the "LOCKBOX NOTICE DATE"), the procedures set forth in this Section 3.5
shall apply during the period beginning no later than two (2) weeks after the
Lockbox Notice Date and continuing thereafter until the first (1st) day of the
first (1st) full Accounting Period after (w) the Tangible Net Worth of CCC is at
least equal two hundred percent (200%) of the maximum liability under the
Guarantee from time to time as of the end of each of three (3) consecutive
Accounting Periods, (x) the Consolidated Coverage Ratio of CCC is at least 2.3
to 1.0 for each of three (3) consecutive Accounting Periods, (y) no Event of
Default under Section 12.1(a)(i), 12.1(c) (by reason of a breach of Section 7.1
or 21.6.3), 12.1(f), 12.1(g), 12.1(h), 12.1(i), 12.1(k), or 12.1(m) of this
Lease has been in effect as of the end of each of three (3) consecutive
Accounting Periods, or (z) there has been no default continuing beyond any
applicable cure period under Section 12.1(a)(i) or Section 12.1(c) (by reason of
a breach of Section 7.1 or 21.6.3) of any Pool Lease (other than this Lease) or
any Other Lease with respect to which CCC Limit of Liability under any CCC
guarantee applicable to such Other Lease is greater than zero, as of the end of
each of three (3) consecutive Accounting Periods (such period, a "LOCKBOX
PERIOD"). At any time after the termination of the Guarantee pursuant to Section
10 thereof, a Lockbox Period shall commence pursuant to this subsection (a) only
if there is an Event of Default under Section 12.1(a)(i), 12.1(c) (by reason of
a breach of Section 7.1 or 21.6.3), 12.1(f), 12.1(g), 12.1(h), 12.1(i), or
12.1(k) of this Lease.
(b) Following the Lockbox Notice Date and prior to commencement of the
Lockbox Period, Landlord (or, if required by the terms of any Facility Mortgage,
any Facility Mortgagee or its agent) shall establish and maintain a cash
collateral account at a financial institution mutually acceptable to Landlord
and Tenant (the "LOCKBOX ACCOUNT"), as a segregated account in the name of
Landlord (or, if applicable, the Facility Mortgagee or its agent), into which
all revenues of Tenant due from Manager to Tenant or paid by Landlord to Tenant
hereunder that are to be held as security for Tenant's obligations under this
Lease shall be deposited.
(c) During the Lockbox Period, Manager shall, in accordance with the
Consent and Assignment, deposit into the Lockbox Account all amounts required to
be paid to Tenant under the Management Agreement and Landlord shall deposit any
funds that it is required to pay to Tenant under this Lease directly into the
Lockbox Account. During the Lockbox Period, any funds received directly by
Tenant and not yet deposited into the Lockbox Account shall irrevocably be
deemed to be held in trust pursuant to the terms of this Section 3.5 and shall,
immediately upon receipt and identification as belonging to Tenant (and in no
event later than one full Business Day after receipt and identification as
belonging to Tenant), be deposited by Tenant into the Lockbox Account.
-39-
(d) During the Lockbox Period, all funds that are received in cash in
the Lockbox Account in any Accounting Period shall be disbursed in the following
order of priority on the next date on which a scheduled payment of Rent is due:
First: for the account of Tenant, to pay to Landlord all Rent
(including Additional Charges) due and payable by Tenant as of such
payment date; and
Second: provided that no Event of Default under Section
12.1(a)(i) has occurred and is then continuing, all Distributable Cash
(as defined in the Pooling Agreement) shall be remitted to the
Collateral Agent under the Pooling Agreement for deposit in the Pool
Cash Collateral Account (as defined in the Pooling Agreement); and
Third: provided that no Event of Default under Section 12.1(a)(i)
or 12.1(c) (by reason of a breach of Section 7.1 or 21.6.3) hereof has
occurred and is then continuing, any remaining balance will be
transferred from the Lockbox Account to Tenant.
(e) The funds on deposit in the Lockbox Account shall be the property
of Tenant but shall be pledged to Landlord as further security for Tenant's
obligations under this Lease pursuant to the Security Agreement.
(f) Upon termination of the Lockbox Period, provided the Guarantors
are not then in monetary default under the Guarantee, and unless otherwise
specified in the Pooling Agreement, all amounts in the Lockbox Account shall be
paid to Tenant.
(g) Notwithstanding the foregoing, a Lockbox Period shall commence
upon the giving of any notice of termination of the Guarantee pursuant to
Section 10(a) of the Guarantee. Any Lockbox Period that commences under this
subsection (g) shall continue until the earlier of (i) the date 12 months after
the date on which the six-month period specified in Section 10(a)(iii) of the
Guarantee commences or (ii) if no such six-month period commences, the date on
which such notice is deemed to be void pursuant to Section 10(a)(ii)(F) of the
Guarantee. During the portion (if any) of such Lockbox Period that commences on
the day after the expiration of such six-month period, the Collateral Agent
shall retain all funds not applied to payment of Rent under the Lease and, (x)
on the "Distribution Date" (as such term is defined in the Pooling Agreement)
relating to the third Accounting Period beginning after the commencement of such
portion of the Lockbox Period and (y) at the termination of such Lockbox Period,
distribute all funds held in the Lockbox Account to Tenant, provided that there
are not then any unpaid Rents that are due under the Lease or that no other
Event of Default under Section 7.1 or 21.6.3 of the Lease has occurred and is
continuing (in which event such funds will only be disbursed in accordance with
the provisions of Section 3.5(d) above).
-40-
ARTICLE 4
USE OF THE LEASED PROPERTY
4.1 Permitted Use.
4.1.1 Primary Intended Use.
Tenant shall, at all times during the Term and at any other
time that Tenant shall be in possession of any Leased Property, continuously use
the Leased Property for the operation of a first class, full-service hotel and
for such other uses as may be incidental or necessary thereto (such use being
hereinafter referred to as the Leased Property's "PRIMARY INTENDED USE"). Tenant
covenants and agrees to use its best efforts to operate the Facility according
to First Class Operating Standards (which, during any period when the Management
Agreement is in effect, Tenant shall be deemed to have done so long as Tenant
uses its best efforts to cause the Manager to operate the Facility in accordance
with the terms of the Management Agreement) and, except as otherwise expressly
provided herein, agrees to pay all costs related thereto. Tenant shall not use
the Leased Property or any portion thereof for any use inconsistent with the
Primary Intended Use without the prior written consent of Landlord. Tenant shall
not take or omit to take any action, the taking or omission of which materially
impairs the value or the usefulness of the Leased Property or any part thereof
for its Primary Intended Use.
4.1.2 Necessary Approvals.
Tenant shall proceed with all due diligence and exercise best
efforts to obtain and maintain (or to cause Manager to procure and maintain) all
Licenses necessary to use and operate, for its Primary Intended Use, the Leased
Property and Facility located thereon under Legal Requirements and Landlord
shall cooperate with respect to obtaining any such License, including joining in
any application for Licenses to the extent required by Legal Requirements.
4.1.3 Lawful Use, Etc.
Tenant shall not use, and shall use commercially reasonable
efforts to prohibit third parties from using, the Leased Property or Tenant's
Personal Property for any unlawful purpose. Tenant shall not commit, and shall
use commercially reasonable efforts not to suffer to be committed, any waste on
the Leased Property, or in the Facility, nor shall Tenant cause or permit any
nuisance thereon or therein. Tenant shall not use, and shall use commercially
reasonable efforts to prohibit third parties from using, the Leased Property or
any portion thereof, including Tenant's Personal Property, in such a manner as
(i) might reasonably tend to impair Landlord's (or Tenant's, as the case may be)
title thereto or to any portion thereof or (ii) may reasonably make possible a
claim or claims for adverse usage or adverse possession by the public, or of
implied dedication of the Leased Property or any portion thereof. Tenant shall
not use, and shall use commercially reasonable efforts to prohibit third parties
from using, the Leased Property in any manner that will cause the cancellation
of any insurance policy covering the Leased Property or any part thereof (unless
another adequate policy is available), nor shall Tenant sell or otherwise
provide to guests or residents therein, and shall use commercially reasonable
-41-
efforts to prohibit third parties from keeping, using or selling in or about the
Leased Property, any article which may be prohibited by law or by the standard
form of fire insurance policies, or any other insurance policies required to be
carried hereunder, or fire underwriter's regulations.
4.2 Compliance with Legal and Insurance Requirements, Etc.
Subject to the provisions of the Management Agreement and Article 8
hereof, and subject to compliance by Landlord with its obligations hereunder,
Tenant, at its sole expense, shall (i) comply in all material respects with
Legal Requirements and Insurance Requirements in respect of the use, operation,
maintenance, repair, alteration and restoration of the Leased Property,
including Legal Requirements regarding labor relations with respect to Manager's
employees as required pursuant to the Management Agreement, and (ii) procure,
maintain and comply in all material respects with all appropriate licenses,
permits, and other authorizations and agreements required for any use of the
Leased Property and Tenant's Personal Property then being made, and for the
proper erection, installation, operation and maintenance of the Leased Property
or any part thereof. Landlord shall comply in all material respects with Legal
Requirements pertaining to Landlord regarding labor relations with respect to
Manager's employees.
4.3 Environmental Matters.
4.3.1 Restriction on Use, Etc.
Tenant shall not store, spill upon, dispose of or transfer to
or from the Leased Property any Hazardous Materials, except that Tenant may
store, transfer and dispose of Hazardous Materials in compliance with all
Environmental Laws. Tenant shall use commercially reasonable efforts to cause
Manager to maintain the Leased Property at all times free of any Hazardous
Materials (except such Hazardous Materials as are maintained in compliance with
all Environmental Laws). Tenant shall promptly (a) notify Landlord in writing of
any material change in the nature or extent of Hazardous Materials at the Leased
Property of which Tenant has notice or actual knowledge, (b) transmit to
Landlord a copy of any Community Right to Know report which is required to be
filed by Tenant with respect to the Leased Property pursuant to ▇▇▇▇ Title III
or any other Environmental Law, (c) transmit to Landlord copies of any demand
letters, complaints or other documents initiating legal action, citations,
orders, notices or other material communications asserting claims by private
parties or government agencies with respect to Hazardous Materials received by
Tenant or its agents or representatives (collectively, "ENVIRONMENTAL NOTICE"),
which Environmental Notice requires a written response or any action to be taken
and/or if such Environmental Notice gives notice of and/or could give rise to a
material violation of any Environmental Law and/or could give rise to any
material cost, expense, loss or damage (an "ENVIRONMENTAL OBLIGATION"), (d) use
commercially reasonable efforts to cause Manager to observe and comply with all
Environmental Laws relating to the use, maintenance and disposal of Hazardous
Materials and all orders or directives from any official, court or agency of
competent jurisdiction relating to the use or maintenance thereof or requiring
the removal, treatment, containment or other disposition thereof, and (e)
subject to Section 4.3.2, pay or otherwise dispose of any fine, charge or
imposition related thereto, unless Tenant shall contest the
-42-
same in good faith and by appropriate proceedings and the right to use, and the
value of, the Leased Property is not adversely affected thereby in any
substantial manner.
If at any time Hazardous Materials are discovered in violation
of Environmental Laws on the Leased Property, subject to Section 4.3.2 Tenant
shall exercise commercially reasonable efforts to cause Manager to take all
actions and incur any and all expenses (which actions and expenses shall be
subject to Landlord's prior approval, not to be unreasonably withheld,
conditioned or delayed except in Emergency Situations, in which case Landlord's
prior approval shall not be required) as may be necessary or as may be required
by any Government Agency (i) to clean up and remove from and about the Leased
Property all Hazardous Materials thereon, (ii) to contain and prevent any
further release or threat of release of Hazardous Materials on or about the
Leased Property and (iii) to use good faith efforts to eliminate any further
release or threat of release of Hazardous Materials on or about the Leased
Property.
4.3.2 Environmental Indemnification of Tenant by Landlord.
Landlord shall protect, indemnify and hold harmless Tenant, its
Affiliates and their respective members, shareholders or other equity owners,
directors, management committee, or similar persons, trustees, officers, and
employees and any of their respective successors or assigns (hereafter the
"TENANT INDEMNITEES," and when referred to singly, a "TENANT INDEMNITEE") for,
from and against any and all debts, liens, claims, causes of action,
administrative orders or notices, costs, fines, penalties or expenses
(including, without limitation, reasonable attorneys' fees and expenses) imposed
upon, incurred by or asserted against any Tenant Indemnitee resulting from,
either directly or indirectly, the presence during the Term in the Environment
of the Leased Property or any properties surrounding the Leased Property of any
Hazardous Materials (collectively, "ENVIRONMENTAL LIABILITIES"), except to the
extent that the same arise by reason of the negligence or willful misconduct of
Tenant, any other Tenant Indemnitee, or their respective agents (including
during the Term, the Manager). Landlord's duty herein includes, but is not
limited to, indemnification for costs associated with personal injury or
property damage claims as a result of the presence of Hazardous Materials in,
upon or under the soil or ground water of the Leased Property in violation of
any Environmental Law. Upon Notice from Tenant, Landlord shall undertake the
defense, at Landlord's sole cost and expense, of any indemnification duties set
forth herein, in which event Landlord shall not be responsible for any
duplicative attorneys' fees incurred by any Tenant Indemnitee.
Landlord shall, upon demand, pay to Tenant any cost, expense,
loss or damage (including, without limitation, reasonable attorneys' fees)
incurred by Tenant in asserting any right under this Section 4.3.2, including,
without limitation, any right of indemnity under this Section 4.3.2 or otherwise
arising from a failure of Landlord strictly to observe and perform the foregoing
requirements, which amounts shall bear interest from the date upon which demand
is made therefor until paid by Landlord to Tenant at the Overdue Rate. Landlord
agrees to waive any and all rights of contribution from Tenant which might arise
under applicable law for any liability imposed upon Landlord pursuant to this
Section 4.3.2.
-43-
4.3.3 Environmental Indemnification of Landlord by Tenant.
Tenant shall protect, indemnify and hold harmless Landlord and
each Facility Mortgagee, their Affiliates and their respective members,
shareholders or other equity owners, directors, management committee, or similar
persons, trustees, officers, and employees, and any of their respective
successors or assigns (hereafter the "LANDLORD INDEMNITEES," and when referred
to singly, a "LANDLORD INDEMNITEE") for, from and against any and all
Environmental Liabilities to the extent that the same arise by reason of
Tenant's, any other Tenant Indemnitee's, or their respective agents' (including
the Manager's) gross negligence or willful misconduct. Upon Notice from
Landlord, Tenant shall undertake the defense, at Tenant's sole cost and expense,
of any indemnification duties set forth herein, in which event Tenant shall not
be responsible for payment of any duplicative attorneys' fees incurred by any
Landlord Indemnitee.
Tenant shall, upon demand, pay to Landlord, as an Additional
Charge, any cost, expense, loss or damage (including, without limitation,
reasonable attorneys' fees) incurred by Landlord in asserting any right under
this Section 4.3.3, including, without limitation, any right of indemnity under
this Section 4.3.3 or otherwise arising from a failure of Tenant strictly to
observe and perform the foregoing requirements, which amounts shall bear
interest from the date upon which demand is made therefor until paid by Tenant
to Landlord at the Overdue Rate. The foregoing notwithstanding, with respect to
Tenant's indemnification of Landlord for the acts or failure to act of Manager,
Tenant shall only become obligated to pay any sums upon a final, non-appealable
determination, in a judicial proceeding in which Manager is a party (or a
binding written acknowledgment of Manager to such effect), that Manager is
liable to Tenant for Environmental Liabilities in accordance with the terms of
the Management Agreement.
4.3.4 Survival.
The provisions of this Section 4.3 shall survive the expiration
or sooner termination of this Lease.
4.4 FF&E Reserve.
Tenant shall cause Manager to establish and maintain a reserve
account (the "FF&E RESERVE") in accordance with the terms of the Management
Agreement and to deposit into such account during each Fiscal Year monies for
the account of Landlord (which amounts shall be funds of Landlord for all
purposes and shall be credited against the Rent obligation of Tenant pursuant to
Section 3.1.6(f)) in the amount required to be maintained pursuant to the
Management Agreement and in accordance with established custom of Manager prior
to the Commencement Date. Landlord shall be responsible for the payment of all
amounts required to be paid by "Owner" (as defined in the Management Agreement)
pursuant to the Management Agreement to fund the FF&E Reserve, including,
without limitation, any deficits therein, and for paying for all FF&E necessary
for the continued operation of the Facility in accordance with First Class
Operating Standards, subject to the provisions of Schedule 22.2. Tenant shall
-------------
make no expenditure for replacement of FF&E in excess of the amounts
in the FF&E Reserve without first obtaining the written approval of Landlord
(unless Tenant makes such
-44-
expenditures from its own funds without any right to reimbursement hereunder).
In the event Tenant funds any amounts required to be funded by Landlord for FF&E
pursuant hereto or by "Owner" pursuant to the Management Agreement which
Landlord has approved, Tenant shall receive a reimbursement in accordance with
Section 3.1.6(f) hereof. Any additions to or replacements of furniture,
fixtures, and equipment located at the Leased Property shall become part of the
FF&E which is owned by Landlord, subject to the limitations set forth in
Schedule 22.2 hereof. Throughout the Term of this Lease, Tenant shall, at its
-------------
sole cost and expense but subject to the terms hereof and of the Management
Agreement, cause all of the items of FF&E to be in proper working order and in
good condition (ordinary wear and tear excepted).
4.5 Working Capital.
Subject to the provisions of the Management Agreement, Landlord agrees
to sell the existing working capital (including (a) Inventories, Fixed Asset
Supplies, and net receivables due from Manager, and (b) accounts payable,
accrued payroll expenses and other accrued expenses related to the Facility)
(the "WORKING CAPITAL") to Tenant on the Commencement Date at a purchase price
equal to the fair market value of such assets (which Landlord and Tenant agree
is equal to the book value of such assets on the Commencement Date after taking
into account any depreciation as of the Commencement Date). Except as provided
in the next sentence, title to the Working Capital so assigned, transferred and
delivered shall be free and clear of any Liens of any nature whatsoever created
by Landlord or arising in respect of any obligation of Landlord or arising by
reason of any act or omission of Landlord. Such sale shall be made expressly
subject to the Facility Mortgagee's first-priority lien, if any, on some or all
of such Working Capital, and Tenant shall acknowledge same in writing to Lender
and sign UCC-1 financing statements confirming same (at Landlord's expense) in
accordance with the Facility Mortgagee Agreement, which financing statements
shall be prepared and filed by Landlord at Landlord's sole cost and expense.
The purchase price for the Working Capital shall be paid by Tenant by the
issuance to Landlord of a promissory note in the form set forth on Exhibit E
hereto (the "WORKING CAPITAL NOTE"). The Working Capital Note shall be in the
principal amount of said purchase price and shall provide for accrual of
interest on such principal amount from the Commencement Date until payment in
full thereof at the rate per annum equal to the "long-term applicable federal
rate" (as defined in Section 1274 of the Code) in effect on the Commencement
Date. The Working Capital Note shall provide that such interest will be payable
from time to time at such time as each payment of Rent is due under Section
3.1.1, and the amount of interest paid under the Working Capital Note on any
interest payment date also shall be credited against Rent payable on such date.
The Working Capital Note shall further provide that the principal amount thereof
will be payable in full, together with accrued and unpaid interest thereon, upon
the expiration or earlier termination of this Lease for any reason (including,
without limitation, a termination by the Facility Mortgagee in accordance with
Section 20.2 hereof) as follows: Upon such expiration or termination, Tenant
will transfer to Landlord, in payment of the principal amount of the Working
Capital Note and accrued and unpaid interest thereon, title to all Working
Capital then owned by Tenant. To the extent that the fair market value of the
Working Capital at such time (which Landlord and Tenant agree shall be equal to
the book value of such assets at such time after taking into account any
depreciation as of such date) exceeds the principal amount of the Working
Capital Note
-45-
plus accrued and unpaid interest thereon, Landlord shall pay to Tenant an amount
in cash equal to such excess; to the extent that such fair market value is less
than the principal amount of the Working Capital Note plus accrued and unpaid
interest thereon, Tenant shall pay to Landlord an amount in cash equal to such
deficiency.
In the event that this Lease is terminated by the Facility Mortgagee
pursuant to the terms of Section 20.2 hereof, Tenant agrees that it shall
transfer title to the Working Capital then owned by it (and pay in cash any
deficiency due to Landlord pursuant to the Working Capital Note) directly to the
Facility Mortgagee or its designee and that it shall look only to Host O.P. for
payment of the amount (if any) by which such payment exceeds the principal
amount of the Working Capital Note, all in accordance with the terms of the
Facility Mortgagee Agreement, and Host O.P. agrees to pay such amount.
Landlord and Tenant agree that, following the sale of the Working
Capital on the Commencement Date as provided for above, all Working Capital
during the Term of this Lease shall be the property of Tenant (and not Landlord)
for all purposes (subject, however, to the Liens hereinafter referred to in this
paragraph), and neither Landlord nor Tenant shall at any time take a position
(in its books and records or otherwise) or make an assertion inconsistent
therewith. Tenant has granted Landlord a security interest in all such Working
Capital pursuant to Section 7.2 hereof. Tenant acknowledges that Landlord has
pledged and assigned to the Facility Mortgagee, as additional security for
Landlord's obligations under the loan secured by the Facility Mortgage, the
Working Capital Note and Landlord's rights and interest in respect of this
Lease, including all Landlord Liens with respect to any and all Tenant's
Personal Property, including, without limitation, all Working Capital owned by
Tenant during the Term of this Lease, securing Tenant's obligations hereunder.
ARTICLE 5
MAINTENANCE AND REPAIRS; SURRENDER
5.1 Maintenance and Repair.
5.1.1 Tenant's Obligations.
Except as otherwise expressly provided in this Lease, and
except for conditions caused by the gross negligence or willful misconduct of
Landlord, its employees, agents or independent contractors (which terms shall
not be deemed to include Manager with respect to actions or inactions of Manager
during the Term of this Lease), Tenant shall, at its sole cost and expense, keep
the Leased Property and all private roadways, sidewalks and curbs appurtenant
thereto (and Tenant's Personal Property) in good order and repair, ordinary wear
and tear excepted (whether or not the need for such repairs occurs as a result
of Tenant's use, any prior use, the elements or the age of the Leased Property
or Tenant's Personal Property, or any portion thereof), and shall promptly make
all necessary and appropriate repairs and replacements thereto of every kind and
nature (excluding Capital Expenditures), whether interior or exterior,
structural or nonstructural, ordinary or extraordinary, foreseen or unforeseen,
necessary for the Primary Intended Use (concealed or otherwise). Notwithstanding
anything set forth herein to the contrary, unless the need for compliance with
this Section 5.1.1 is caused by Tenant's negligence or
-46-
willful misconduct or that of its employees or agents (including Manager, but
only to the extent that Tenant is obligated to indemnify Landlord and Landlord
Indemnitees for Manager's acts or omissions pursuant to Section 4.3.3) and is
not otherwise covered by insurance, Tenant shall not be responsible for any
necessary repair of Existing Conditions relating to Hazardous Materials,
including, without limitation, those set forth and described on Schedule 5.1.1
--------------
hereto, which are Landlord Obligations. All repairs shall be made in a good,
workmanlike and first-class manner, in accordance with all Legal Requirements.
Tenant shall not take or omit to take any action, the taking or omission of
which materially impairs the value or the usefulness of the Leased Property or
any part thereof for the Primary Intended Use. Tenant's obligations under this
Section 5.1.1 shall be limited, in the event of any Casualty or Condemnation
involving the Leased Property, as set forth in Articles 10 and 11. Tenant's
obligations under this Section 5.1.1 with respect to FF&E are subject to the
provisions of Section 4.4 hereof. Tenant shall have the non-exclusive right to
prosecute claims against Landlord's predecessors-in-interest (other than any
Affiliates of Landlord), contractors, subcontractors and suppliers for breach of
any representation or warranty or for any latent defects in the Leased Property,
unless Landlord is already diligently pursuing such claims.
5.1.2 Landlord Obligations.
(a) Landlord shall be obligated to pay the actual costs of any
items that are classified as Capital Expenditures and are approved by Landlord
as well as the actual costs of any necessary repairs (i) of Existing Conditions
relating to Hazardous Materials or (ii) resulting from the gross negligence or
willful misconduct of Landlord, its employees, agents or independent contractors
(which terms shall not be deemed to include Manager with respect to acts or
omissions of Manager during the Term of this Lease). Landlord shall not,
however, except as expressly set forth herein or otherwise required under the
Management Agreement or the Consent and Assignment (including, without
limitation, as set forth in this Section 5.1.2 and in Sections 4.3.2, 4.4,
5.1.1, 9.9 and 21.3.3 and in Article 6 hereof), be required to build or rebuild
any improvement on the Leased Property, or to make any repairs, replacements,
alterations, restorations, or renewals of any nature or description to the
Leased Property, whether ordinary or extraordinary, structural or nonstructural,
foreseen or unforeseen, or to make any expenditure whatsoever with respect
thereto, or to maintain the Leased Property in any way. Landlord 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) If, at any time or from time to time, the Management
Agreement requires that funds be disbursed for repairs, maintenance, renovations
or replacements at or to the Leased Property, or, pursuant to the terms of this
Lease (including, without limitation, Section 4.4 hereof), Tenant is required to
make any expenditures in connection with any repair, maintenance or renovation
with respect to the Leased Property which constitute Landlord Obligations, and
the amount of such disbursements or expenditures exceeds the amount on deposit
in the FF&E Reserve, Tenant shall furnish Landlord with reasonable detail
regarding the nature of the required repair, renovation or replacement, the
estimated cost thereof and such other information with respect thereto as
Landlord may reasonably require. Landlord shall, within ten (10) Business Days
after such Notice, subject to and in accordance with the applicable
-47-
provisions of Article 6, disburse such required funds to Tenant (or, if Tenant
shall so elect, or if an Event of Default shall then exist hereunder, directly
to Manager or any other Person performing the required work).
5.2 Tenant's Personal Property.
Tenant may (and shall as provided hereinbelow), at its expense,
install, affix or assemble or place on the Facility any items of Tenant's
Personal Property, and Tenant may, subject to Section 7.2 and the conditions set
forth below, remove and replace the same at any time in the ordinary course of
business. Tenant shall provide and maintain throughout the Term all such
Tenant's Personal Property as shall be necessary in order to operate the
Facility in compliance in all material respects with applicable Legal
Requirements and Insurance Requirements and otherwise in accordance with
customary practice in the industry for such Primary Intended Use.
Subject to Section 4.5 hereof, all Tenant's Personal Property (except
that removed and replaced in the ordinary course of business as permitted above,
but including supplies and inventory that are equivalent, on an aggregate basis,
in amount and value similar to that reasonably established for use by the
Facility in the immediately preceding Lease Year) shall remain at the Leased
Property at the expiration or earlier termination of this Lease without the
necessity of any payment by Landlord to Tenant and without any obligation to
account therefor.
If Tenant acquires an interest in any material item of Tenant's
Personal Property (other than motor vehicles) on, or in connection with, the
Leased Property that belongs to anyone other than Tenant, Tenant shall use its
commercially reasonable efforts to require the agreement permitting such use to
provide that Landlord or its designee may assume Tenant's rights under such
agreement upon management or operation of the applicable Facility by Landlord or
its designee.
5.3 Surrender.
(a) Condition of Leased Property Upon Surrender. Upon the expiration
-------------------------------------------
or sooner termination of this Lease, Tenant shall vacate and surrender the
Leased Property to Landlord in the condition in which the Leased Property was on
the Commencement Date, ordinary wear and tear excepted, except as repaired,
rebuilt, restored, altered or added to as permitted or required by the
provisions of this Lease, ordinary wear and tear excepted. Together therewith
Tenant shall surrender to Landlord any and all records and documents related to
the Leased Property and Tenant's Personal Property (but not, subject to Section
5.3(d) hereof, documents primarily related to Tenant's business operated
therein).
(b) [Intentionally omitted]
(c) Membership Contracts. Upon expiration or earlier termination of
--------------------
this Lease, Tenant shall assign to Landlord any membership contracts relating to
golf courses, spas or other facilities in which there are nonequity interests
entered into by Tenant during the Term, and Landlord agrees to assume the
obligations of Tenant under any such
-48-
membership contracts arising from and after the date of expiration or earlier
termination of this Lease.
(d) Transition Procedures. Tenant shall cooperate in good faith
---------------------
to provide access and information to any prospective purchaser or tenant of the
Leased Property that may acquire the Leased Property or lease it upon the
expiration or earlier termination of the Term, provided that Landlord shall use
its reasonable efforts to cause such prospective purchaser or tenant to enter
into a confidentiality agreement with respect thereto reasonably acceptable to
Tenant. Upon any expiration or earlier termination of the Term, Landlord and
Tenant shall do the following and, in general, shall cooperate in good faith to
effect an orderly transition of the management or lease of the Facility (and the
provisions of this Section 5.3(d) shall survive the expiration or earlier
termination of this Lease until they have been fully performed, up to a maximum
period of one (1) year after such expiration or termination, and nothing
contained herein shall limit Landlord's rights and remedies under this Lease if
such termination occurs as the result of an Event of Default):
(i) Upon the expiration or earlier termination of the Term,
Tenant shall use its commercially reasonable efforts (A) to transfer
to Landlord or Landlord's designee all licenses, operating permits and
other governmental authorizations and all contracts with governmental
or quasi-governmental entities, that may be necessary for the
operation of the Facility (collectively, "LICENSES"), to the extent
transferable or (B) if such transfer is prohibited by law or Landlord
otherwise elects, to cooperate with Landlord or Landlord's designee in
connection with the processing by Landlord or Landlord's designee 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 Landlord or Landlord's designee.
(ii) Tenant shall assign or cause to be assigned to Landlord or
Landlord's designee simultaneously with the termination of this Lease,
and the assignee shall assume, all leases, contracts, concession
agreements and other agreements in effect with respect to the Facility
then in Tenant's name; provided, however, that any leases of Excess
FF&E shall be subject to the provisions of Schedule 22.2 hereof, and
-------------
provided further, that Landlord shall not be obligated to assume and
may reject any such contracts or agreements requiring the "Owner's"
approval under the Management Agreement which were entered into
subsequent to the date hereof and were not previously approved or
deemed approved by Landlord. In the event Landlord declines to assume
or reject any such contracts, agreements and/or leases, the contracts,
agreements and/or leases so rejected shall not be assigned or shall be
deemed reassigned and shall remain the property and responsibility of
Tenant. In no event shall Landlord (or its designee) have any
liability under such contracts for obligations or liabilities accruing
under such contracts after the Commencement Date and prior to the date
of such assumption by such party.
-49-
(iii) To the extent that Landlord has not already received
copies thereof, copies of all books and records (including computer
records) for the Facility kept by (or available to) Tenant shall be
promptly delivered or made available for inspection and copying to
Landlord or Landlord's designee.
(iv) Subject to Section 4.5 hereof, Tenant shall be entitled to
retain all cash, bank accounts and house banks, and to collect all
Gross Revenues and accounts receivable accrued through the termination
date of this Lease. Tenant shall be responsible for the payment of
Rent, all operating expenses of the Facility as provided in this Lease
and all other obligations of Tenant accrued under this Lease as of the
termination date, and Landlord shall be responsible for all operating
expenses of the Facility accruing after the termination date.
(v) So long as termination is not the result of an Event of
Default, Landlord shall reimburse Tenant for its reasonable expenses
in connection with any cooperation with a prospective purchaser or
tenant hereunder.
5.4 Encroachments, Restrictions, Etc.
If any portion of the Facility shall, at any time, encroach upon any
property, street or right-of-way adjacent to the Leased Property, or shall
violate the agreements or conditions contained in any lawful restrictive
covenant or other agreement affecting the Leased Property, or any part thereof,
or shall impair the rights of others under any easement or right-of-way to which
the Leased Property is subject, upon the request of Landlord (but only as to any
encroachment, violation or impairment that is not a Permitted Lien) or of any
Person affected by any such encroachment, violation or impairment, Tenant shall,
at Tenant's sole cost and expense (except to the extent that the encroachment,
violation or impairment existed prior to the Commencement Date or was the result
of the act or omission of Landlord or its employees, agents (excluding Manager
except for Manager's acts or omissions in respect of Landlord Obligations) or
independent contractors), subject to its right to contest the existence of any
encroachment, violation or impairment in accordance with the provisions of
Article 8, 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 Landlord or Tenant or (b), subject
to Section 6.1, make such changes in the Facility and take such other actions as
are reasonably practicable to remove such encroachment and to end such violation
or impairment, including, if necessary, the alteration of the Facility and, in
any event, take all such actions as may be necessary in order to enable the
continued operation of the Facility for its Primary Intended Use substantially
in the manner and to the extent the Facility was operated prior to the assertion
of such violation, impairment or encroachment. Any such alteration shall be
made in conformity with the applicable requirements of this Article 5. Tenant's
obligations under this Section 5.4 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.
-50-
5.5 Landlord to Grant Easements, Etc.
Landlord shall from time to time, at the request of Tenant and at
Landlord's sole cost and expense, (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, release,
dedications, transfers, petitions and amendments (to the extent of its interests
in the Leased Property); provided, however, that Landlord shall have first
determined, in its reasonable discretion, that such grant, release, dedication,
transfer, petition or amendment is not detrimental to the operation of the
Leased Property for its Primary Intended Use and is beneficial to the value of
the Leased Property and is not in violation of the Management Agreement, and
Landlord shall have received within five (5) Business Days of its request an
Officer's Certificate confirming such determination, together with such
additional information as Landlord may request. Landlord agrees to obtain
Tenant's prior written approval, which shall not be unreasonably withheld,
conditioned or delayed, as to any recorded covenants, conditions and
restrictions which would affect the use or operation of the Leased Property as
it is then being used or operated by Tenant in accordance with this Lease (it
being agreed that the provisions of a Facility Mortgage or a ground lease shall
not be deemed to constitute covenants, conditions and restrictions subject to
this sentence).
ARTICLE 6
CAPITAL EXPENDITURES, ETC.
6.1 Capital Expenditures.
It shall be Landlord's obligation (and a Retained Obligation) to
approve and fund the cost of any Capital Expenditures, including, without
limitation, any Capital Expenditures required under the Management Agreement, in
accordance with the terms of the Management Agreement. Except as otherwise
hereinafter provided, Tenant shall not construct or install Capital Expenditures
on the Leased Property without obtaining Landlord's prior written consent.
Landlord's approval of the Capital Portion of the Annual Budget shall constitute
approval of the Capital Expenditures described therein. If Owner's consent is
required under the Management Agreement with respect to any Capital Expenditure
not covered in the Capital Portion of the Annual Budget, prior to commencing
construction of any Capital Expenditure Tenant shall submit to Landlord, in
writing, a proposal setting forth, in reasonable detail, any proposed Capital
Expenditure and shall provide to Landlord such plans and specifications,
permits, licenses, contracts and other information concerning the proposed
Capital Expenditure as Landlord may reasonably request. Without limiting the
generality of the foregoing, such proposal shall indicate the approximate
projected cost of constructing such Capital Expenditure and the use or uses to
which it will be put. Tenant shall not fund or otherwise finance the cost of
any construction of any Capital Expenditure without the prior written consent of
Landlord, which consent may be withheld by Landlord in Landlord's sole
discretion (unless Landlord
-51-
has declined to fund such Capital Expenditure, Manager has consented to such
Capital Expenditure and Tenant's financing of such Capital Expenditure would not
result in the imposition of a Lien on any portion of the Leased Property or the
Capital Expenditure, in which event Landlord shall not unreasonably withhold its
consent). Any Capital Expenditures funded or financed by Tenant shall, upon the
expiration or sooner termination of this Lease, pass to and become the property
of Landlord, free and clear of all encumbrances other than Permitted Liens.
Notwithstanding the foregoing, Landlord's consent shall not be required in
connection with any Capital Expenditures (i) with respect to which immediate
action is required in order to comply with Legal Requirements or to prevent or
remedy Emergency Situations or (ii) not requiring the "Owner's" consent under
the Management Agreement; it being the intention hereof that the consent
requirements hereunder shall be consistent with the "Owner" consent requirements
with respect to Capital Expenditures under the Management Agreement.
6.2 [Intentionally Omitted.]
6.3 Cooperation by Tenant.
If Landlord shall, in Landlord's sole discretion, elect to finance any
proposed Capital Expenditure, or if Landlord is otherwise required to do so
pursuant to the terms of the Management Agreement and the Retained Obligations,
Tenant shall provide Landlord with such information as Landlord may from time to
time reasonably request.
6.4 Alterations.
Subject to the provisions of the Management Agreement, Tenant shall
have the right, at Tenant's sole cost and expense, to make additions,
modifications or improvements to the Leased Property which are not Capital
Expenditures ("ALTERATIONS") and which have a total cost of completion of less
than or equal to (a) $10,000, as to any individual Alteration, or (b) $50,000,
as to all Alterations, in the aggregate, over a twelve-month period, from time
to time as Tenant, in its discretion, may deem desirable for the Primary
Intended Use, provided that any such Alteration will not materially alter the
character or purpose or materially detract from the value, operating efficiency
or revenue-producing capability of the Leased Property or adversely affect the
ability of Tenant to comply with the provisions of this Lease, and, without
limiting the foregoing, will not violate any Legal Requirement or Insurance
Requirement applicable to the Leased Property. Any Alteration estimated to
exceed the applicable limits set forth above shall be subject to Landlord's
prior approval and the terms set forth in Section 6.1. All such Alterations
shall, upon expiration or earlier termination of this Lease, pass to and become
the property of Landlord, free and clear of all liens and encumbrances, other
than Permitted Liens.
6.5 Salvage.
All materials which are scrapped or removed in connection with the
making of either Capital Expenditures, Alterations, or repairs required by
Article 5 shall be the property of the party that paid for such work.
-52-
ARTICLE 7
LIENS
7.1 Prohibition on Liens.
Tenant shall not, directly or indirectly, create or allow to remain
and shall promptly discharge, at its expense, any Lien on the Leased Property,
Tenant's leasehold interest therein, any Tenant's Personal Property now or
hereafter owned, any Excess FF&E owned by Tenant, any Excess FF&E Leasehold
Interest, Working Capital, or the Rent, other than (a) Permitted Liens, (b)
liens for Real Estate Taxes and other Landlord Obligations, (c) subleases
permitted by Article 16, (d) liens for Impositions or for sums arising from the
application of Legal Requirements so long as the same (i) are not yet delinquent
or (ii) are being contested in accordance with Article 8, (e) liens of
mechanics, laborers, materialmen, suppliers or vendors incurred in the ordinary
course of business that are not yet delinquent or are for sums that are being
contested in accordance with Article 8, (f) any Facility Mortgage or other liens
which are the responsibility of Landlord pursuant to the provisions of Article
20, (g) liens first arising prior to the Commencement Date, and (h) Landlord
Liens. Notwithstanding the foregoing, but subject to all other applicable terms
and conditions of this Lease, including without limitation the provisions hereof
regarding a Change in Control, a pledge of the ownership interests in CCC or
OpCo to secure bona fide Indebtedness shall not be deemed a violation of this
Section 7.1, provided that a subsequent foreclosure or other realization upon
such pledge shall be subject to the Change in Control provisions of this Lease.
All materialmen, contractors, artisans, mechanics and laborers and
other persons contracting with Tenant with respect to the Leased Property, or
any part thereof, are hereby charged with notice that Liens are expressly
prohibited and that they must look solely to Tenant to secure payment for any
work done or material furnished for Alterations or Capital Expenditures by
Tenant or for any other purpose during the Term.
Tenant hereby acknowledges and agrees that, at all times while a
Facility Mortgage is in effect, all Excess FF&E acquired by Tenant, directly or
indirectly, from Landlord or leased by Tenant in accordance with Schedule 22.2
-------------
hereof shall be and remain subject to a first priority Lien in favor of the
Facility Mortgagee. Tenant further acknowledges that Landlord has assigned and
pledged (or may assign or pledge in the future) to the Facility Mortgagee, as
additional security for Landlord's obligations under the loan secured by the
Facility Mortgage, Landlord's rights and interests under the Landlord Liens with
respect to any and all Tenant's Personal Property, Working Capital and Excess
FF&E Leasehold Interest now owned or hereafter acquired by Tenant at any time
while the Facility Mortgage remains in effect.
7.2 Landlord Lien.
In addition to any statutory landlord's lien and in order to secure
(a) payment of the Rent and all other sums payable to Landlord hereunder by
Tenant, (b) payment of the amounts owed under the Working Capital Note, (c)
payment of any loss, cost or damage that Landlord may suffer by reason of
Tenant's breach of this Lease, and (d) the performance of all of Tenant's other
obligations hereunder and under the Working
-53-
Capital Note, Tenant and Landlord have, simultaneously with the execution of
this Lease, entered into a Security Agreement (the "SECURITY AGREEMENT") whereby
Tenant grants unto Landlord a security interest in, and an express contractual
lien upon, (i) Tenant's Personal Property (other than Working Capital), and all
proceeds therefrom (subject to any Permitted Liens), (ii) any Excess FF&E owned
by Tenant, (iii) any Excess FF&E Leasehold Interest of Tenant, and (iv) any
Working Capital of Tenant (collectively, together with any statutory lien
rights, "LANDLORD LIENS"). Tenant's Personal Property shall not be removed from
the Leased Property by Tenant at any time when a Default (with respect to any
monetary obligation of Tenant to Landlord hereunder and under the Working
Capital Note) or an Event of Default has occurred and is continuing except as
otherwise permitted pursuant to Section 5.2. In addition, Tenant hereby grants
unto Landlord a security interest in those contracts described in Section
5.3(d)(ii) hereof.
Upon Landlord's request, Tenant shall execute and deliver to Landlord
financing statements in form sufficient to perfect the security interest of
Landlord in (subject to the Facility Mortgagee's first-priority Lien thereon)
(x) Tenant's Personal Property and the proceeds thereof, (y) the contracts
described in Section 5.3(d)(ii) hereof, in accordance with the provisions of the
applicable laws of the State, and (z) any and all Working Capital, Excess FF&E
and Excess FF&E Leasehold Interests, in each case owned by Tenant from time to
time during the Term of this Lease.
ARTICLE 8
PERMITTED CONTESTS
Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, Environmental Obligation,
lien, attachment, levy, encumbrance, charge or claim (collectively, "CLAIMS") as
to the Leased Property, by appropriate legal proceedings, conducted in good
faith and with due diligence, provided that (a) the foregoing shall in no way be
construed as relieving, modifying or extending any obligation of Tenant provided
for in this Lease to pay any Claims as finally determined, (b) such contest, or
the maintenance of any Lien during such contest, shall not cause Landlord or
Tenant to be in default under any mortgage, deed of trust or other agreement
encumbering the Leased Property or any interest therein or result in a Lien
attaching to the Leased Property unless Tenant shall within ten (10) days
thereafter, have such Lien released of record or deliver to Landlord a bond or
other security reasonably satisfactory to Landlord, which shall be in form,
amount, and issued by a surety reasonably satisfactory to Landlord, indemnifying
Landlord against all costs and liabilities resulting from such Lien and the
foreclosure or attempted foreclosure thereof, (c) no part of the Leased Property
nor any Rent therefrom shall be in any immediate danger of sale, forfeiture,
attachment or loss, and (d) Tenant shall indemnify and hold harmless Landlord
from and against any cost, claim, damage, penalty or reasonable expense,
including reasonable attorneys' fees, incurred by Landlord in connection
therewith or as a result thereof. Tenant shall be entitled to any refund of any
Claims and such charges and penalties or interest thereon which have been paid
by Tenant or paid by Landlord and for which Landlord has been fully reimbursed
by Tenant. If Tenant shall fail (x) to pay any Claims when finally determined,
(y) to provide reasonable security therefor, or (z) to prosecute any such
contest diligently and in good faith, Landlord may, upon reasonable notice to
Tenant (which notice may be oral and shall not be required if Landlord shall
-54-
reasonably determine that the same is not practicable), pay such charges,
together with interest and penalties due with respect thereto, and Tenant shall
reimburse Landlord therefor, upon demand, as Additional Charges. Landlord
agrees to join in any such proceedings if required legally to prosecute such
contest, provided that Landlord shall not thereby be subjected to any liability
or cost therefor (including, without limitation, for the payment of any costs or
expenses in connection therewith).
ARTICLE 9
INSURANCE AND INDEMNIFICATION
9.1 General Insurance Requirements.
At all times during the Term and at any other time Tenant shall be in
possession of the Leased Property, the Leased Property shall be insured against
the risks and in the amounts described below. This insurance shall be written
by companies authorized to issue insurance in the State. The policies must name
the party obtaining the policy as the insured and the other party, the Manager
and any Facility Mortgagee(s) as additional named insureds and/or (in the case
of any Facility Mortgagees) as loss payees. Losses shall be payable to Landlord
or Tenant as provided in Article 10 of this Lease. Any loss adjustment for
coverages insuring both parties shall require the written consent of Landlord
and Tenant, each acting reasonably and in good faith. The policies on the
Leased Property (including the Facility, Fixtures and FF&E owned by Landlord),
and on Tenant's Personal Property, shall, subject to Section 9.1(k), satisfy the
requirements of any ground lease, mortgage, security agreement or other
financing lien affecting the Leased Property (provided, however, that any
insurance coverage maintained with respect to the Leased Property by Manager or
Landlord in accordance with the Management Agreement shall be deemed to satisfy
such requirements so long as the Management Agreement is in effect) and at a
minimum shall include:
(a) "All Risk" property insurance, including insurance against loss or
damage by fire, vandalism and malicious mischief, explosion of steamboilers,
pressure vessels or other similar apparatus, now or hereafter installed in the
Facility, extended coverage perils, earthquake (if available at commercially
reasonable rates) and all physical loss perils insurance, including, but not
limited to, sprinkler leakage, in an amount equal to one hundred percent (100%)
of the then full Replacement Cost thereof (as defined in Section 9.2), with the
usual extended coverage endorsements, including a Replacement Cost Endorsement
and Builder's Risk Coverage during the continuance of any construction at the
Leased Property;
(b) Loss of rent insurance (on the "SPECIAL FORM") in the minimum
amount of one (1) year of Minimum Rent and Percentage Rent (based on the last
twelve (12) months in which the Facility was operated for its Primary Intended
Use) for the benefit of Landlord, and business interruption insurance on the
"Special Form" in the amount of one year of projected net profit of Tenant from
the Facility (exclusive of collection costs and any operating expenses that are
considered by the applicable insurance company to be non-continuing as a result
of any Casualty), for the benefit of Tenant;
-55-
(c) Flood (if the Facility is located in whole or in part within an
area identified as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of
1968, as amended, or the Flood Disaster Protection Act of 1973, as amended (or
any successor acts thereto)) and such other hazards and in such amounts as may
be customary for comparable properties in the area, said coverage to be in an
amount equal to the lesser of the full Replacement Cost of the Facility or the
maximum amount available;
(d) Comprehensive general liability insurance, including bodily
injury, property damage, and innkeeper's liability (including broad form
contractual liability, fire legal liability and completed operations coverage)
having policy limits as to claims with respect to the Leased Property of at
least One Million Dollars ($1,000,000) per occurrence, Two Million Dollars
($2,000,000) aggregate per location, provided that such limits shall be modified
to conform to any required underlying statutory coverage, and Umbrella coverage
shall be provided having limits of One Hundred Million Dollars ($100,000,000)
per occurrence and in the aggregate, and attaching in excess of policy limits as
to general liability, where applicable, and employer's liability coverage,
covering each of the following: bodily injury, death, or property damage
liability per occurrence, personal injury, general aggregate, products and
completed operations, and "all risk legal liability" (including liquor law or
"dram shop" liability, if liquor or alcoholic beverages are served on the Leased
Property) with respect to Landlord and Tenant;
(e) To the extent applicable at the Facility, comprehensive form
automobile liability insurance for owned, non-owned and hired vehicles in the
amount of $1,000,000;
(f) Fidelity bonds or blanket crime policies with limits and
deductibles as may be reasonably determined by Landlord, covering Tenant's
employees in job classifications normally bonded under prudent hotel management
practices in the United States or otherwise required by law;
(g) To the extent applicable at the Facility, garagekeeper's legal
liability insurance covering both comprehensive and collision-type losses with a
limit of liability of $1,000,000 for any one occurrence;
(h) Insurance coverage for claims by employees of Manager for wrongful
termination, discrimination or sexual harassment;
(i) Worker's compensation insurance coverage for all persons employed
by Tenant on the Leased Property with statutory limits and otherwise with limits
of and provisions in accordance with Legal Requirements, and employer's
liability insurance having a limit of $500,000;
(j) To the extent applicable at the Facility, safe deposit box legal
liability insurance covering property or guests while in a safe deposit box on
the Leased Property for which Tenant is legally responsible with a limit of not
less than $100,000 in any one occurrence; and
-56-
(k) Such additional insurance and endorsements (and/or increased
amounts of insurance hereinabove required) as may be reasonably required, from
time to time, by Landlord, any Facility Mortgagee or any rating agency, or any
existing or future ground lessor, provided that any incremental cost incurred as
a result of such additional coverage shall be borne by Landlord.
9.2 Responsibility for Insurance.
Tenant shall obtain or cause to be obtained the insurance and pay the
premiums for the coverages described in Sections 9.1(d) through (j) and for that
portion of the premium for the coverage described in Section 9.1(b) that is
attributable to business interruption insurance, and Landlord shall obtain the
insurance and pay the premiums for the coverages described in Sections 9(a)
through (c) and (k) (excluding that portion of the premium for the coverage
described in Section 9.1(b) that is attributable to business interruption
insurance that is for the benefit of Tenant). The party responsible for the
premium for any insurance coverage shall also be responsible for any and all
deductibles and self-insured retentions in connection with such coverages. In
the event that either party can obtain comparable insurance coverage required to
be carried by the other party from comparable insurers and at a cost
significantly less than that at which such other party can obtain such coverage,
the parties shall cooperate in good faith to obtain such coverage at the lower
cost and shall allocate the premiums therefor in accordance with the provisions
of the first sentence of this Section 9.2.
Notwithstanding anything in this Article 9 to the contrary, so long as
the Management Agreement is in full force and effect and Manager is maintaining
the insurance required thereunder, Landlord's and Tenant's obligations to
maintain the insurance required under this Article 9 shall be deemed to have
been met (provided, that the costs therefor shall be allocated between Landlord
and Tenant in the manner contemplated by the first sentence of this Section
9.2).
9.3 Replacement Cost.
"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 less exclusions provided in the standard form of fire insurance
policy. In the event either party believes that the then full Replacement Cost
has increased or decreased at any time during the Term, such party, at its own
cost, shall have the right to have such full Replacement Cost redetermined by an
independent accredited appraiser approved by the other, which approval shall not
be unreasonably withheld or delayed. The party desiring to have the full
Replacement Cost so redetermined shall forthwith, on receipt of such
determination by such appraiser, give written notice thereof to the other. The
determination of such appraiser shall be final and binding on the parties
hereto, and Landlord shall forthwith conform the amount of the insurance carried
to the amount so determined by the appraiser.
-57-
9.4 Waiver of Subrogation.
Landlord and Tenant agree that (insofar as and to the extent that such
agreement may be effective without invalidating or making it impossible to
secure insurance coverage from responsible insurance companies doing business in
the State) with respect to any loss covered by insurance then being carried by
Landlord or Tenant, respectively, the party carrying such insurance and
suffering said loss releases the other of and from any and all claims with
respect to such loss; and they further agree that their respective insurance
companies shall have no right of subrogation against the other on account
thereof, even though extra premium may result therefrom.
9.5 Form Satisfactory, Etc.
Subject to the second paragraph of Section 9.2, all insurance policies
and endorsements required pursuant to this Article 9 shall be fully paid for,
nonassessable and, except for umbrella and flood coverage, shall contain such
provisions and expiration dates and be in such form and amounts and issued by
insurance carriers authorized to do business in the State, having a general
policy holder's rating of A/VI in Best's latest rating guide (or such other
higher rating or such other customarily used rating agency as may be required by
the Facility Mortgagee, provided that any additional expense associated with
such higher ratings shall be borne by Landlord), and otherwise satisfactory to
Landlord and Tenant. Without limiting the foregoing, such policies shall
include only deductibles reasonably approved by Landlord. The party responsible
for obtaining any policy shall deliver policies or certificates thereof to the
other party prior to their effective date (and, with respect to any renewal
policy, thirty (30) days prior to the expiration of the existing policy), and,
in the event either party shall fail to effect such insurance as herein
required, to pay the premiums therefor or to deliver such policies or
certificates to the other party or the Facility Mortgagee at the times required,
the other party shall have the right, but not the obligation, after ten (10)
days' written notice to the responsible party, to acquire such insurance and pay
the premiums therefor, which amounts shall be reimbursed by the responsible
party, together with interest accrued thereon at the Overdue Rate from the date
such payment is made until the date repaid. All such policies shall provide the
non-responsible party (and the Facility Mortgagee and Manager, if required by
the same) thirty (30) days' prior written notice of any material modification,
expiration or cancellation of such policy.
9.6 Blanket Policy.
Notwithstanding anything to the contrary contained in this Article 9,
Tenant's and Landlord's obligations to maintain the insurance herein required
may be brought within the coverage of a so-called blanket policy or policies of
insurance, provided that, except as otherwise approved by the other party in
writing, (a) the coverage thereby afforded will not be reduced or diminished
from that which would exist under a separate policy meeting all other
requirements of this Lease, and (b) the requirements of this Article 9
(including an appropriate allocation of the costs for such blanket policy
between Landlord and Tenant in a manner consistent with the first sentence of
Section 9.2) are otherwise satisfied.
-58-
9.7 No Separate Insurance.
Neither Landlord nor Tenant shall take out separate insurance
concurrent in form or contributing in the event of loss with that required by
this Article 9, or increase the amount of any existing insurance by securing an
additional policy or additional policies, unless all parties having an insurable
interest in the subject matter of such insurance are included therein as
additional insureds and the loss is payable under such insurance in the same
manner as losses are payable under the insurance required to be carried pursuant
to this Lease. In the event either shall take out any such separate insurance
or increase any of the amounts of the then existing insurance, it shall give the
other party prompt Notice thereof.
9.8 General Indemnification of Landlord by Tenant.
Except as otherwise provided in Sections 4.3.2, 5.1, 9.9, 14.1 and
21.3.3, and except for liabilities, obligations, claims, damages, penalties,
causes of action, costs and expenses (including, without limitation, attorneys'
fees) arising from Landlord's or any other Landlord Indemnitee's or their
respective agents' (including Manager, but only with respect to Manager's acts
or omissions with respect to Landlord Obligations) willful misconduct or gross
negligence, Tenant shall protect, indemnify and hold harmless Landlord and each
Landlord Indemnitee for, from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and reasonable expenses (including,
without limitation, reasonable attorneys' fees), to the maximum extent permitted
by law, and notwithstanding the existence of any insurance provided for herein,
but subject to Section 9.4 hereof, and without regard to the policy limits of
any such insurance, imposed upon or incurred by or asserted against Landlord or
any Landlord Indemnitee by reason of:
(i) liabilities arising after the Commencement Date and during the
Term under any leases, contracts, concession agreements or other agreements
either (A) entered into by Tenant or any Tenant Indemnitee, or their respective
agents (including Manager, except with respect to Manager's acts or omissions
with respect to Landlord Obligations), with respect to the Facility, or (B)
assigned to Tenant pursuant to Section 2.2(a) (except liabilities arising out of
agreements described in this clause (B) for any employee claims by employees of
Manager for wrongful termination, discrimination or sexual harassment,
(ii) the gross negligence or willful misconduct of Tenant or any
other Tenant Indemnitee, or their respective agents (including Manager, except
with respect to Manager's acts or omissions with respect to Landlord
Obligations), including any such gross negligence or willful misconduct giving
rise to any employee claims by employees of Manager for wrongful termination,
discrimination or sexual harassment,
(iii) 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 or rights of way on or after the Commencement Date and during the
Term, including, without limitation, any claims under liquor liability, "dram
shop" or similar laws,
(iv) any litigation, proceeding (other than Condemnation
proceedings) or claim by governmental entities or other third parties to which
Landlord or any Landlord
-59-
Indemnitee is made a party or participant or which is otherwise asserted against
Landlord or any Landlord Indemnitee, relating to the Leased Property or Tenant's
Personal Property or any use, misuse, non-use, condition, management,
maintenance, or repair thereof, the occurrence giving rise to which litigation,
proceeding or claim occurs on or after the Commencement Date and during the
Term,
(v) any Impositions that are the obligations of Tenant to pay
pursuant to the applicable provisions of this Lease, and
(vi) any failure on the part of Tenant or anyone claiming under Tenant
to perform or comply with any of the terms of this Lease.
Tenant shall pay all amounts payable under this Section 9.8 within ten
(10) days after demand therefor and, if not timely paid, such amounts shall bear
interest at the Overdue Rate from the date of determination to the date of
payment. Tenant, at its expense, shall contest, resist and defend any such
claim, action or proceeding asserted or instituted against Landlord and shall
not be responsible for any duplicate attorneys' fees incurred by Landlord or may
compromise or otherwise dispose of the same, with Landlord's prior written
consent (which consent may not be unreasonably withheld or delayed). In the
event Landlord shall unreasonably withhold or delay its consent, Tenant shall
not be liable pursuant to this Section 9.8 for any incremental increase in costs
or expenses resulting therefrom. The obligations of Tenant under this Section
9.8 are in addition to the obligations set forth in Section 4.3.3 and 21.3.3 and
shall survive the termination or expiration of this Lease.
Nothing in this Section 9.8 is intended to limit Tenant's right to
assert a claim or defense against Landlord based upon the obligations imposed
upon Landlord pursuant to Sections 4.3, 5.1, 9.9, 14.1 and 21.3.3.
9.9 General Indemnification of Tenant by Landlord.
Except for liabilities arising from Tenant's or any other Tenant
Indemnitee's, or their respective agents' (including Manager, except with
respect to Manager's acts or omissions with respect to Landlord Obligations)
willful misconduct or gross negligence, Landlord shall protect, indemnify and
hold harmless Tenant and each Tenant Indemnitee for, from and against all
liabilities, obligations, claims, damages, penalties, causes of action, costs
and reasonable expenses (including, without limitation, reasonable attorneys'
fees), to the maximum extent permitted by law, and notwithstanding the existence
of any insurance provided for herein, but subject to Section 9.4 hereof, and
without regard to the policy limits of any such insurance, imposed upon or
incurred by or asserted against Tenant or any Tenant Indemnitee by reason of:
(i) liabilities arising at any time under any leases, contracts,
concession agreements or other agreements with respect to the Facility, except
liabilities arising after the Commencement Date and during the Term under any
leases, contracts, concession agreements or other agreements either (a) entered
into during the Term by Tenant or any other Tenant Indemnitee, or their
respective agents (including Manager, except with
-60-
respect to Manager's acts or omissions with respect to Landlord Obligations)
with respect to the Facility, or (b) assigned to Tenant pursuant to Section
2.2(a),
(ii) the gross negligence or willful misconduct of Landlord or any
other Landlord Indemnitee, or their respective agents (including Manager, but
only with respect to Manager's acts or omissions with respect to Landlord
Obligations),
(iii) 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 or rights of way prior to the Commencement Date or after expiration or
earlier termination of the Term, including, without limitation any claims under
liquor liability, "dram shop" or similar laws,
(iv) any litigation, proceeding (other than Condemnation
proceedings) or claim by governmental entities or other third parties to which
Tenant or any Tenant Indemnitee is made a party or participant or which is
otherwise asserted against Tenant or any Tenant Indemnitee, relating to the
Leased Property or any use, misuse, non-use, condition, management, maintenance,
or repair thereof, the occurrence giving rise to which litigation, proceeding or
claim occurs prior to the Commencement Date or after the expiration or earlier
termination of the Term,
(v) any Landlord Obligations, and
(vi) any failure on the part of Landlord or anyone claiming under
Landlord (including Manager, but only with respect to Manager's acts or
omissions with respect to Landlord Obligations) to perform or comply with any of
the terms of this Lease.
Landlord shall pay all amounts payable under this Section 9.9 within
ten (10) days after demand therefor and, if not timely paid, such amounts shall
bear interest at the Overdue Rate from the date of determination to the date of
payment. Landlord, at its expense, shall contest, resist and defend any such
claim, action or proceeding asserted or instituted against Tenant and shall not
be responsible for any duplicate attorneys' fees incurred by Tenant, or may
compromise or otherwise dispose of the same with Tenant's prior written consent
(which consent may not be unreasonably withheld or delayed). In the event
Tenant shall unreasonably withhold or delay its consent, Landlord shall not be
liable pursuant to this Section 9.9 for any incremental increase in costs or
expenses resulting therefrom. The obligations of Landlord under this Section
9.9 are in addition to the obligations set forth in Section 4.3.2 and 21.3.3 and
shall survive the termination of this Lease.
Nothing in this Section 9.8 is intended to limit Landlord's right to
assert a claim or defense against Tenant based upon the obligations imposed upon
Tenant pursuant to Sections 4.3, 5.1, 9.8 and 21.3.3.
9.10 Independent Contractor.
Except as otherwise approved by Landlord in writing, Tenant shall
cause any person or company entering upon the Leased Property to provide any
installation, construction or repair (each a "CONTRACTOR"), which (x)
constitutes a Capital Expenditure
-61-
or (y) has an anticipated cost in excess of [$_______________] to (a) have in
full force and effect Contractor's Liability Coverage (hereafter defined)
effective throughout the period said Contractor is upon the Leased Property and
for one year thereafter and (b) deliver within five (5) Business Days of
Landlord's request a certificate ("CONTRACTOR'S INSURANCE CERTIFICATE")
evidencing compliance with subpart (a) to Tenant prior to the Contractor's first
entry upon the Leased Property. As used herein, the term "CONTRACTOR'S LIABILITY
COVERAGE" means a comprehensive general liability insurance policy meeting the
requirements of this Article 9 (as if required to be provided by Tenant) except
the minimum policy limit shall be $1,000,000 per occurrence and $3,000,000 in
the aggregate. Within thirty (30) days after delivery of Landlord's written
request, Tenant shall deliver copies of all Contractor's Insurance Certificates
to Landlord.
ARTICLE 10
CASUALTY
10.1 Insurance Proceeds.
All proceeds of the insurance contemplated by Section 9.1(a)-(c)
payable by reason of any loss, damage or destruction to the Leased Property, or
any portion thereof ("CASUALTY"), and insured under any policy of property or
casualty insurance required by Article 9 (other than proceeds of business
interruption insurance and any insurance proceeds paid with respect to Tenant's
Personal Property, which shall be paid to Tenant) shall be paid directly to
Landlord, and paid out by Landlord from time to time for the reasonable costs of
reconstruction or repair of the Leased Property necessitated by such Casualty,
if and to the extent required by the provisions of Section 10.2; provided,
however, that so long as no Event of Default shall have occurred and be
continuing, all such proceeds less than or equal to $1,000,000 shall be paid
directly to Tenant and applied to the reasonable costs of restoration and repair
of the Leased Property necessitated by such Casualty, and such losses may be
adjusted without Landlord's consent. Any excess proceeds of insurance remaining
after the completion of the restoration shall be paid to Landlord. All salvage
resulting from any risk covered by insurance shall belong to Landlord, except
for any amount thereof paid with respect to Tenant's Personal Property. If
Landlord is not required and elects not to repair and restore as permitted under
this Lease, and this Lease is terminated pursuant to Section 10.2, all such
insurance proceeds shall be retained by Landlord, except for any amount thereof
paid with respect to Tenant's Personal Property and any amount attributable to
business interruption insurance.
10.2 Reconstruction in the Event of Casualty.
10.2.1 Facility Rendered Unsuitable for Its Primary Intended Use. If
---------------------------------------------------------
during the Term the Leased Property is totally or partially destroyed by a
Casualty and the Facility is thereby rendered Unsuitable for Its Primary
Intended Use, as reasonably determined by Landlord, this Lease shall terminate
as of the date of the Casualty and neither Landlord nor Tenant shall have any
further liability hereunder except for any liabilities which have arisen or
occurred prior to such termination, and those which expressly survive
termination of this Lease, and Landlord shall be entitled to retain all Casualty
insurance proceeds (except for any amount thereof paid with respect to Tenant's
Personal Property and any amount attributable to business interruption
insurance). If the
-62-
Lease is terminated in accordance with this Section 10.2.1, Landlord shall not
be permitted to commence restoration of the Leased Property for a period of one
(1) year after the date of the Casualty.
10.2.2 Facility Not Rendered Unsuitable for Its Primary Intended Use.
-------------------------------------------------------------
If during the Term the Leased Property is totally or partially destroyed by a
Casualty, but the Facility is not thereby rendered Unsuitable for Its Primary
Intended Use, as reasonably determined by Landlord, Landlord or, at Landlord's
election, Tenant shall, subject to Section 10.2.3, promptly restore the Facility
as provided in Section 10.2.4. Except as provided in Section 10.2.3, such
damage or destruction shall not terminate this Lease.
10.2.3 Deficiency in Insurance Proceeds. If the cost of the repair
--------------------------------
or restoration exceeds the amount of proceeds received by Landlord from the
insurance required under Article 9 and Tenant is obligated to restore pursuant
to Section 10.2.2 hereof, Landlord agrees, subject to this Section 10.2.3, to
contribute any excess amounts needed to restore the Facility prior to requiring
Tenant to commence such work. Such difference shall be made available by
Landlord, together with any insurance proceeds, for application to the cost of
repair and restoration in accordance with the provisions of Section 10.2.4. In
the event the sum of (a) the insurance proceeds released to Landlord, and (b)
that portion of the deductible, if any, which is greater than five percent (5%)
of the cost of the repair, is equal to at least ninety-five percent (95%) of the
cost of the repair or restoration, Landlord shall fund the deficiency. In the
event the sum of (y) the insurance proceeds, and (z) that portion of the
deductible, if any, which is greater than five percent (5%) of the cost of the
repair, is less than ninety-five percent (95%) of the cost of the repair or
restoration, Landlord shall fund such deficiency in its sole discretion;
provided, however, that in the event Landlord does not agree to make such
deficiency available for restoration, either Landlord or Tenant may terminate
this Lease by written notice to the other, whereupon this Lease shall terminate
as provided in Section 10.2.1 and Landlord shall pay to Tenant a termination fee
equal to Tenant's Operating Profit for the immediately preceding Fiscal Year.
If Landlord or Tenant elects to terminate this Lease in accordance with this
Section 10.2.3, Landlord shall not be permitted to commence restoration of the
Leased Property for a period of one (1) year after the date of the Casualty.
10.2.4 Disbursement of Proceeds. In the event Tenant is required to
------------------------
restore the Leased Property pursuant to Section 10.2.2, Tenant shall (or shall
direct Manager to) commence promptly and continue diligently to perform the
repair and restoration of the Leased Property, so as to restore the Leased
Property in compliance with all Legal Requirements to substantially the same
condition, to the extent reasonably practicable, as existed immediately before
the damage or destruction and otherwise in accordance with this Lease. Landlord
shall advance the insurance proceeds and, subject to the terms hereof, any
additional amounts payable by Landlord pursuant to Section 10.2.3 to Tenant
regularly during the repair and restoration period so as to permit payment for
the cost of any such restoration and repair. Any such advances shall be made
not more frequently than monthly within ten (10) Business Days after Tenant
submits to Landlord a written requisition and substantiation therefor on AIA
Forms G702 and G703 (or on such other form or forms as may be reasonably
acceptable to Landlord). Landlord may, at its option, condition advancement of
said insurance proceeds and other amounts on (i) the absence of
-63-
any uncured Event of Default, (ii) its approval of plans and specifications of
an architect reasonably satisfactory to Landlord (which approval shall not be
unreasonably withheld or delayed), (iii) general contractor's estimates, (iv)
architect's certificates, (v) unconditional lien waivers of general contractors
(if available), (vi) evidence of approval by all governmental authorities and
other regulatory bodies whose approval is required and (vii) such other
certificates as Landlord may, from time to time, reasonably require.
Landlord's obligation to disburse insurance proceeds under this
Article 10 shall be subject to the release of such proceeds by any Facility
Mortgagee to Landlord, and Tenant's obligation to restore the Leased Property
pursuant to this Article 10 shall be subject to the release of available
insurance proceeds by any Facility Mortgagee to Landlord or directly to Tenant
or Manager and, in the event such proceeds are insufficient, Landlord electing
to make such deficiency available therefor (and disbursement of such
deficiency); provided, however, that Landlord and Tenant shall each have the
same termination rights in the event of any Facility Mortgagee's failure or
refusal to disburse insurance proceeds as they have with respect to Landlord's
failure to disburse any deficiency in insurance proceeds, as provided in Section
10.2.3. If Landlord elects to terminate this Lease in accordance with this
Section 10.2.4, Landlord shall not be permitted to commence restoration of the
Leased Property for a period of one (1) year after the date of the Casualty.
10.3 Reconstruction in the Event of Damage or Destruction Not Covered by
Insurance.
If during the Term the Facility is totally or materially damaged or
destroyed by a risk not covered by the insurance described in Article 9, or if
the proceeds of such insurance are not available to Landlord for restoration of
the Facility, whether or not in either event such damage or destruction renders
the Facility Unsuitable for Its Primary Intended Use, Landlord at its option
shall either, (a) direct Tenant to restore the Facility at Landlord's sole cost
and expense to substantially the same condition it was in immediately before
such damage or destruction, in which case such damage or destruction shall not
terminate this Lease, or (b) terminate this Lease and neither Landlord nor
Tenant shall have any further liability thereunder, except for any liabilities
which have arisen or occurred prior to such termination and those which
expressly survive termination of this Lease. If Landlord elects to terminate
this Lease in accordance with this Section 10.3, Landlord shall not be permitted
to commence restoration of the Leased Property for a period of one (1) year
after the date of the Casualty.
10.4 Tenant's Property and Business Interruption Insurance.
All insurance proceeds payable by reason of any loss of or damage to
any of Tenant's Personal Property and the business interruption insurance
maintained for the benefit of Tenant shall be paid to Tenant.
10.5 Abatement of Rent.
Any damage or destruction due to Casualty notwithstanding, this Lease
shall remain in full force and effect (except as otherwise expressly provided in
this Article 10)
-64-
and Tenant's obligation to pay Rent required by this Lease shall remain unabated
by any Casualty which does not result in a reduction of Gross Revenues. If and
to the extent that any Casualty results in a reduction of Gross Revenues
(including proceeds of any business interruption insurance actually received by
Tenant or that would have been received by Tenant if Tenant were in full
compliance with the insurance requirements of Article 9) which would otherwise
be realizable from the operation of the Facility, then Landlord shall receive
all loss of rental income insurance and Tenant shall have no obligation to pay
Rent with respect to any Accounting Period during the continuation of such
Casualty in excess of the greater of (i) one-thirteenth (or one-twelfth, if
Accounting Periods are then the same as calendar months) of the aggregate amount
of Rent (excluding Additional Charges) paid to Landlord with respect to the last
full Fiscal Year prior to such Casualty or (ii) the amount of Rent calculated
with respect to such Accounting Period under Section 3.1.1 without regard to
clause (A)(i) of such Section (which relates to Minimum Rent); provided,
however, that if such damage or destruction was caused by Tenant's gross
negligence or willful misconduct, Tenant shall remain liable for the amount of
Rent which would have been payable hereunder at a rate equal to the average Rent
during the last three (3) preceding Lease Years (or if three (3) Lease Years
shall not have elapsed, the average during the preceding Lease Years), as if
such Casualty had not occurred.
ARTICLE 11
CONDEMNATION
11.1 Total Condemnation, Etc.
If either (i) the whole of the Leased Property shall be taken by
Condemnation or (ii) a Condemnation of less than the whole of the Leased
Property renders the Leased Property Unsuitable for Its Primary Intended Use, as
reasonably determined by Landlord, this Lease shall terminate as of the day of
the Condemnation, and Tenant and Landlord shall seek the Award for their
respective interests in the Leased Property as provided in Section 11.4.
11.2 Partial Condemnation.
In the event of a Condemnation of less than the whole of the Leased
Property such that the Leased Property is still suitable for its Primary
Intended Use, as reasonably determined by Landlord, Tenant shall, to the extent
that the Award and additional amounts disbursed by Landlord are sufficient
therefor, commence promptly and continue diligently to restore the untaken
portion of the Facility so that the Facility shall constitute a complete
architectural unit of the same general character and condition (as nearly as may
be possible under the circumstances) as the Facility existing immediately prior
to such Condemnation, in full compliance with all Legal Requirements. Subject
to the terms hereof, Landlord shall contribute to the cost of restoration that
part of the Award necessary to complete such repair or restoration, together
with severance and other damages awarded for the taken portion of the Facility
(provided, however, that the amount of such contribution shall not exceed such
cost), and such amounts shall be advanced to Tenant regularly during the
restoration period so as to permit payment for the cost of such repair or
restoration. Landlord may, at its option, condition advancement of such Award
and other amounts on (i) the absence of any continuing Event of Default, (ii)
its approval of
-65-
plans and specifications of an architect reasonably satisfactory to Landlord
(which approval shall not be unreasonably withheld or delayed), (iii) general
contractors' estimates, (iv) architect's certificates, (v) unconditional lien
waivers of general contractors (if available), (vi) evidence of approval by all
governmental authorities and other regulatory bodies whose approval is required
and (vii) such other certificates as Landlord may, from time to time, reasonably
require. Landlord's obligation under this Section 11.2 to disburse the Award and
such other amounts shall be subject to (x) the collection of the Award by
Landlord and (y) the satisfaction of any applicable requirements of the Facility
Mortgage, and the release of such Award by the Facility Mortgagee. Tenant's
obligation to restore the Leased Property shall be subject to the release of the
Award and any additional funds to be disbursed by Landlord pursuant hereto
required for restoration. Subject to Section 21.3.3, if Landlord has received
the Award, but elects not to make the Award available to Tenant for restoration,
then Tenant shall have the right to terminate this Lease and Landlord shall pay
to Tenant a termination fee equal to the amount of Tenant's Operating Profit for
the immediately preceding Fiscal Year. Subject to Section 21.3.3, if Landlord
has not received the Award, or the Award is insufficient to restore the untaken
portion of the Facility as provided above, then Landlord, in its sole
discretion, shall have the right to terminate this Lease and neither Landlord
nor Tenant shall have any further liability hereunder, except for any
liabilities which have arisen or occurred prior to such termination and those
which expressly survive termination of this Lease, and Landlord shall be
entitled to retain the entire Award; provided that Tenant shall be permitted to
seek a separate award for the value of Tenant's Personal Property that was taken
in such Condemnation; and provided further that if Landlord elects to terminate
this Lease in accordance with this Section 11.2, then Landlord shall not be
permitted to commence restoration of the untaken portion of the Leased Property
for a period of one (1) year after the date of the Condemnation.
11.3 Abatement of Rent.
In the event of a partial Condemnation as described in Section 11.2
which does not result in a termination of this Lease by Landlord, the Rent shall
be abated in the manner and to the extent that is fair, just, and equitable to
both Tenant and Landlord, taking into consideration, among other relevant
factors, the number of usable rooms, the amount of square footage, or the effect
upon revenues of such partial Condemnation. If Landlord and Tenant are unable
to agree upon the amount of such abatement within thirty (30) days after such
partial Condemnation, the matter shall be submitted to appraisal as provided for
in Article 19 hereof.
11.4 Allocation of Award.
Except as provided in the second sentence of this Section 11.4, the
total Award shall be solely the property of and payable to Landlord. Any
portion of the Award made for the taking of Tenant's leasehold interest in the
Leased Property (valued without regard to any right of termination in Landlord
that otherwise exists under this Article 11), loss of business during the
remainder of the Term (determined without regard to any provision for
termination that might otherwise arise under this Article 11), the taking of
Tenant's Personal Property or Tenant's removal and relocation expenses shall be
the sole property of and payable to Tenant (subject to the provisions of Section
11.2). Subject to the
-66-
rights of the Manager under the Management Agreement and the rights of any
Facility Mortgagee under a Facility Mortgage, in any Condemnation proceedings,
Landlord and Tenant shall each seek its own Award in conformity herewith, at its
own expense.
ARTICLE 12
TENANT DEFAULTS; REMEDIES
12.1 Event of Default.
The occurrence of any one or more of the following events shall
constitute an "EVENT OF DEFAULT" hereunder:
(a) Tenant fails (i) to make any payment of the Minimum Rent or
Percentage Rent payable hereunder when due and such failure continues for a
period of ten (10) days after the date due, or (ii) subject to the right to
contest same pursuant to Article 8 hereof, to make any required payments of
Additional Charges within ten (10) days following Notice from Landlord that such
payment is due and owing and unpaid.
(b) Tenant fails to maintain the insurance coverages that it is
required to maintain under Article 9.
(c) Except as otherwise expressly provided herein, Tenant defaults in
the due observance or performance of any of the terms, covenants or agreements
contained herein to be performed or observed by it (other than as specified in
clauses (a) and (b) above), and, in either case, such default continues for a
period of thirty (30) days after Notice thereof from Landlord to Tenant;
provided, however, that if such default is curable but such cure cannot be
accomplished with due diligence within such period of time and if, in addition,
Tenant commences to cure such default within thirty (30) days after Notice
thereof from Landlord and thereafter prosecutes the curing of such default with
all due diligence, such period of time shall be extended to such period of time
(not to exceed one hundred twenty (120) days in the aggregate, subject to
Unavoidable Delay) as may be necessary to cure such default, provided further
that the cure rights shall not apply to any breach of a Tenant covenant under
Section 22.1, 22.3, 22.4, or 22.5.
(d) Any obligation of Tenant in respect of any Indebtedness (other
than Tenant's obligations under any Excess FF&E Lease that constitutes
Indebtedness) in a principal amount in excess of ($1,000,000) for money borrowed
or for the deferred purchase price of any material property or services, is
declared to be, or as a result of acceleration becomes, due and payable prior to
the stated maturity thereof.
(e) There occurs a final unappealable determination by applicable
federal or State authorities of the revocation or limitation of any material
license (including, but not limited to, any gaming license), permit,
certification, or approval required for the material lawful operation of the
Facility in accordance with its Primary Intended Use or the loss or limitation
of any material license (including but not limited to any gaming license),
permit, certification, or approval under any other circumstances under which
Tenant is required to cease its operation of the Facility in accordance with its
Primary Intended Use at the time of such loss or limitation, which revocation,
limitation or loss is
-67-
not caused by actions of Landlord or its Affiliates or which is not beyond the
reasonable control of Tenant.
(f) Tenant is generally not paying its debts as they become due, or
Tenant makes a general assignment for the benefit of creditors.
(g) Any petition is filed by or against Tenant under the Federal
bankruptcy laws, or any other proceeding is instituted by or against Tenant
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
reorganization, arrangement, adjustment or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for Tenant or for any
substantial part of the property of Tenant, and, in the case of any involuntary
petition filed or proceeding instituted against Tenant only, such proceeding is
not dismissed within sixty (60) days after institution thereof, or Tenant takes
any action to authorize or effect any of the actions set forth above in this
paragraph.
(h) Tenant causes or institutes any proceeding for its dissolution or
termination.
(i) Tenant ceases operation of the Leased Property for its Primary
Intended Use for a period in excess of thirty (30) consecutive days, except as a
result of a Casualty, other Emergency Situations, the matters set forth in
Section 23.17 or partial or complete Condemnation of or to the Facility or of or
to the immediate surroundings so as to prohibit reasonable access by patrons to
the Facility.
(j) The estate or interest of Tenant in the Leased Property or any
part thereof is levied upon or attached in any proceeding and the same is not
vacated or discharged within the later of (i) one hundred and twenty (120) days
after commencement thereof, unless the amount in dispute is less than $250,000,
in which case Tenant shall give Notice to Landlord of the dispute but Tenant may
defend in any suitable way, and (ii) thirty (30) days after receipt by Tenant of
Notice thereof from Landlord (unless Tenant shall be contesting such lien or
attachment in good faith in accordance with Article 8).
(k) Any Change in Control occurs.
(l) Tenant, OpCo or CCC defaults under the terms of any of the Related
Agreements beyond the expiration of any applicable notice and cure periods.
(m) CCC fails to maintain for three (3) consecutive Accounting Periods
either (i) a Tangible Net Worth equal to or greater than (x) the maximum
liability under the Guarantee from time to time less (y) amounts held in any
lockbox or cash collateral account under this Lease, any other Pool Lease, any
Other Lease, the Pooling Agreement or any pooling and security agreement
relating to Other Leases immediately after payment of Rent under Section 3.1.1
with respect to the preceding Accounting Period, or (ii) a Consolidated Coverage
Ratio of at least 1.4 to 1.0.
-68-
(n) For so long as this Lease is subject to the Pooling Agreement,
there is a default that remains uncured beyond the expiration of applicable
notice and cure periods by any of the Other Tenants under Section 12.1(a)(i) or
Section 12.1(c) (by reason of a breach of Section 7.1 or Section 21.6.3) of any
Pool Lease (other than this Lease); provided that, if a notice of termination
has been given pursuant to Section 10(a) of the Guarantee and the six-month
period specified in Section 10(a)(iii) of the Guarantee has commenced, then a
default that remains uncured beyond the expiration of applicable notice and cure
periods occurring under Section 12.1(a)(i) or 12.1(c) (by reason of a breach of
Section 7.1 or 21.6.3) of any Pool Lease (other than this Lease) after
commencement of such period shall not be a default under this paragraph (n).
In any such event, Landlord, in addition to all other remedies
available to it, may terminate this Lease by giving Notice thereof to Tenant,
and upon the expiration of the time, if any, fixed in such Notice, this Lease
shall terminate and all rights of Tenant under this Lease shall cease. Subject
to Section 23.11, Landlord shall have, and may exercise in its sole and absolute
discretion, all, or none of the, rights and remedies available at law and in
equity to Landlord as a result of Tenant's breach of this Lease; provided,
however, that notwithstanding anything set forth herein to the contrary, (A)
Landlord's sole remedy for an Event of Default under Section 12.1(k) and (m)
shall be to terminate this Lease, and (B) Landlord's actual damages in the event
of a breach by Tenant of any of its obligations pursuant to Article 22 and a
resulting loss of REIT status by Host REIT shall include, without limitation,
amounts equal to income taxes paid by Host REIT and (without duplication) loss
of value of Host REIT, both to the extent attributable to the loss of REIT
status; provided that any termination as a result of an Event of Default under
Section 12.1(k) shall occur no later than 450 days after the applicable Change
in Control (or such shorter period as may be expressly provided in the
Management Agreement or Consent and Assignment) and upon not less than 30 days'
Notice to Tenant. If Landlord terminates this Lease because of an Event of
Default under Section 12.1(k) above, and the Change in Control does not involve
an Adverse Party, then Landlord shall pay to Tenant a termination fee equal to
Tenant's Operating Profit for the immediately preceding Fiscal Year.
Upon the occurrence of an Event of Default, Landlord may, in addition
to any other remedies provided herein, enter upon the Leased Property and take
possession thereof, and either (i) retain any and all of Tenant's Personal
Property on the Leased Property, without liability for trespass or conversion
(Tenant hereby waiving any right to Notice or hearing prior to such taking of
possession by Landlord) or (ii) sell the same at public or private sale, after
giving Tenant reasonable Notice of the time and place of any public or private
sale, at which sale Tenant or its assigns may purchase all or any portion of
Tenant's Personal Property. Unless otherwise provided by law and without
intending to exclude any other manner of giving Tenant reasonable notice, the
requirement of reasonable Notice shall be met if such Notice is given at least
ten (10) Business Days before the date of sale. The proceeds from any such
disposition, less all expenses incurred in connection with the taking of
possession, holding and selling of such property (including reasonable
attorneys' fees) shall belong to Landlord and shall be applied as a credit
against the indebtedness which is secured by the security interest granted in
Section 7.2. Any surplus shall be paid to Tenant or as otherwise required by
law, and Tenant shall pay any deficiency to Landlord, as Additional Charges,
upon demand.
-69-
The foregoing provisions of this Section 12.1 notwithstanding, in the
event that Landlord exercises its right to terminate this Lease as the result of
an Event of Default that first occurs after a notice of termination has been
given pursuant to Section 10(a) of the Guarantee and the six-month period
specified in Section 10(a)(iii) of the Guarantee has commenced, Landlord shall
be entitled to all accrued Rent remaining unpaid as of the date of termination
but shall not be entitled to an award based on lost future Rents under this
Lease, Landlord's sole remedy in such event being termination of the Lease and
payment of all accrued but unpaid Rent.
The foregoing provisions hereof notwithstanding, Landlord shall have
no right to assert any remedy hereunder in respect of an Event of Default, and
an Event of Default shall be deemed to no longer exist, if Tenant (or Guarantor,
or its Affiliate, pursuant to the Guarantee or otherwise) cures an Event of
Default (A) under Section 12.1(a) prior to the earlier of (x) the commencement
by Landlord of the exercise of any remedy under this Lease by Landlord or (y)
Landlord's Notice to Tenant stating that an Event of Default exists and further
stating Landlord's intention to assert one or more remedies hereunder, and (B)
under any of Section 12.1(b)-(m), prior to the commencement by Landlord of the
exercise of any remedy under this Lease by Landlord.
12.2 Remedies.
None of (a) the termination of this Lease pursuant to Section 12.1,
(b) the repossession of the Leased Property, (c) the failure of Landlord to re-
let the Leased Property, or (d) the reletting of the Leased Property, shall
relieve Tenant of its liability and obligations hereunder, all of which shall
survive any such termination, repossession or re-letting. In the event of any
such termination, Tenant shall forthwith pay to Landlord all Rent due and
payable with respect to the Leased Property through and including the date of
such termination. Thereafter, Tenant, until the earlier of what would have been
the end of the Term of this Lease in the absence of such termination, or the
date on which Tenant pays Landlord the liquidated final damages described in the
next paragraph of this Section 12.2, and whether or not the Leased Property or
any portion thereof shall have been re-let, shall be liable to Landlord for, and
shall pay to Landlord, as current damages, the Rent and other charges which
would be payable hereunder for the remainder of the Term had such termination
not occurred, less the net proceeds, if any, of any re-letting or other
operation by or on behalf of Landlord of the Leased Property, after deducting
all expenses in connection with such reletting, including, without limitation,
all repossession costs, brokerage commissions, legal expenses, attorneys' fees,
advertising, expenses of employees, alteration costs and expenses of preparation
for such reletting. Tenant shall pay such current damages to Landlord monthly
on the days on which the Minimum Rent would have been payable hereunder if this
Lease had not been so terminated.
At any time after such termination, at Landlord's election, whether or
not Landlord shall have previously collected any such current damages, as
liquidated final damages beyond the date of such termination, Tenant shall pay
to Landlord an amount equal to the present value (discounted at a rate of twelve
percent (12%) per annum) of the excess, if any, of the Rent and other charges
which would be payable hereunder from the date of such termination (assuming
that, for the purposes of this paragraph, annual payments by Tenant on account
of Impositions would be the same as payments required for
-70-
the immediately preceding twelve calendar months, or if less than twelve
calendar months have expired since the Commencement Date, the payments required
for such lesser period projected to an annual amount) for what would be the then
unexpired Term of this Lease if the same remained in effect, over the Fair
Market Rental for the same period. Nothing contained in this Lease shall,
however, limit or prejudice the right of Landlord to prove and obtain in
proceedings for bankruptcy or insolvency an amount equal to the maximum allowed
by any statute or rule of law in effect at the time when, and governing the
proceedings in which, the damages are to be proved, whether or not the amount be
greater than, equal to, or less than the amount of the loss or damages referred
to above.
Percentage Rent for the purposes of this Section 12.2 shall be a sum
equal to (i) the average of the annual amounts of Percentage Rent for the three
(3) Fiscal Years immediately preceding the Fiscal Year in which the termination,
re-entry or repossession takes place, or (ii) if three (3) Fiscal Years shall
not have elapsed, the Percentage Rent during the preceding Fiscal Year during
which this Lease was in effect, or (iii) if one (1) Fiscal Year has not elapsed,
the amount derived by annualizing the Percentage Rent from the Commencement Date
of this Lease.
In case of any Event of Default, re-entry, expiration and
dispossession by summary proceedings or otherwise, Landlord may, subject to the
rights of Manager under the Management Agreement, (a) relet the Leased Property
or any part or parts thereof, either in the name of Landlord or otherwise, for a
term or terms which may, at Landlord's option, be equal to, less than or exceed
the period which would otherwise have constituted the balance of the Term and
may grant concessions or free rent to the extent that Landlord considers
advisable and necessary to relet the same, and (b) make such reasonable
alterations, repairs and decorations in the Leased Property or any portion
thereof as Landlord, in its sole and absolute discretion, considers advisable
and necessary for the purpose of reletting the Leased Property; and the making
of such alterations, repairs and decorations shall not operate or be construed
to release Tenant from liability hereunder as aforesaid. Subject to the last
sentence of this paragraph, Landlord shall in no event be liable in any way
whatsoever for any failure to relet all or any portion of the Leased Property,
or, in the event that the Leased Property is relet, for failure to collect the
rent under such reletting. To the maximum extent permitted by law, Tenant
hereby expressly waives any and all rights of redemption granted under any
present or future laws in the event of Tenant being evicted or dispossessed, or
in the event of Landlord obtaining possession of the Leased Property, by reason
of the occurrence and during the continuation of an Event of Default hereunder.
Landlord covenants and agrees in the event of any termination of this Lease as a
result of an Event of Default to use commercially reasonable efforts to mitigate
its damages.
12.3 Waivers.
LANDLORD AND TENANT WAIVE, TO THE EXTENT PERMITTED BY LAW, ANY RIGHT
TO A TRIAL BY JURY IN CONNECTION WITH ANY MATTER ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT AND/OR
TENANT'S USE OR OCCUPANCY OF THE LEASED PROPERTY. TENANT WAIVES, TO THE EXTENT
-71-
PERMITTED BY LAW, THE BENEFIT OF ANY LAWS NOW OR HEREAFTER IN FORCE EXEMPTING
PROPERTY FROM LIABILITY FOR RENT OR FOR DEBT.
12.4 Application of Funds.
Any payments received by Landlord under any of the provisions of this
Lease during the existence or continuance of any Event of Default (and any
payment made to Landlord rather than Tenant due to the existence of any Event of
Default) shall be applied to Tenant's obligations under this Lease in such order
as Landlord may determine or as may be prescribed by the laws of the State.
12.5 Landlord's Right to Cure Tenant's Default.
If (i) a Default shall have occurred and is continuing which in the
reasonable judgment of Landlord requires immediate action on the part of
Landlord or (ii) an Event of Default shall have occurred and is continuing,
Landlord, after Notice to Tenant (which Notice need not precede such action if
Landlord shall reasonably determine immediate action is necessary to protect
person or property), without waiving or releasing any obligation of Tenant and
without waiving or releasing any Event of Default, may (but shall not be
obligated to), at any time thereafter, make such payment or perform such act for
the account and at the expense of Tenant, and may, to the maximum extent
permitted by law, enter upon the Leased Property or any portion thereof for such
purpose and take all such action thereon as, in Landlord's sole and absolute
discretion, may be necessary or appropriate therefor, including the management
of the Facility by Landlord or its designee, and Tenant hereby irrevocably
appoints, in the event of such election by Landlord, Landlord or its designee as
the operator of the Facility and its attorney in fact for such purpose,
irrevocably and coupled with an interest, in the name, place and stead of
Tenant. No such entry shall be deemed an eviction of Tenant. All reasonable
costs and expenses (including, without limitation, reasonable attorneys' fees)
incurred by Landlord in connection therewith, together with interest thereon (to
the extent permitted by law) at the Overdue Rate from the date such sums are
paid by Landlord until repaid, shall be paid by Tenant to Landlord, on demand.
ARTICLE 13
HOLDING OVER
Any holding over by Tenant after the expiration or sooner termination of
this Lease (other than with the express written consent of Landlord) shall be
treated as a tenancy at sufferance at a rate equal to (a) one and one-half (1.5)
times one-twelfth of the aggregate Minimum Rent and Percentage Rent payable with
respect to the last Fiscal Year of the Term, (b) all Additional Charges accruing
during the applicable Accounting Period, and (c) all other sums, if any, payable
by Tenant under this Lease with respect to the Leased Property during the
applicable Accounting Period. Tenant shall also pay to Landlord all damages
(direct or indirect) sustained by reason of any such holding over. Otherwise,
such holding over shall be on the terms and conditions set forth in this Lease,
to the extent applicable. Nothing contained herein shall constitute the
consent, express or implied, of Landlord to the holding over of Tenant after the
expiration or earlier termination of this Lease.
-72-
ARTICLE 14
LANDLORD NOTICE OBLIGATION; LANDLORD DEFAULT
14.1 Landlord Notice Obligation.
Landlord shall give prompt Notice to Tenant and Manager of any matters
materially affecting the Leased Property of which Landlord receives written
notice or actual knowledge and, to the extent Tenant otherwise has no notice or
actual knowledge thereof, Landlord shall be liable for any liabilities arising
from the failure to deliver such Notice to Tenant. Except as expressly set
forth herein or in the Consent and Assignment, Landlord shall not amend the
Management Agreement without Tenant's prior written consent, which consent shall
not be unreasonably withheld, conditioned or delayed.
14.2 Landlord Default.
The occurrence of the following events shall constitute a "LANDLORD
DEFAULT":
(a) Landlord fails to make any payment due hereunder when due and such
failure continues for a period of ten (10) days following Notice from Tenant
that such payment is due and owing and unpaid.
(b) Landlord fails to maintain the insurance coverages that it is
required to maintain under Article 9.
(c) Landlord defaults in the due observance or performance of any of
the terms, covenants or agreements contained herein to be performed or observed
by it (other than as specified in clauses (a) and (b) above), and, in either
case, such default continues for a period of thirty (30) days after Notice
thereof from Tenant to Landlord; provided, however, that if such default is
curable but such cure cannot be accomplished with due diligence within such
period of time and if, in addition, Landlord commences to cure such default
within thirty (30) days after Notice thereof from Tenant and thereafter
prosecutes the curing of such default with all due diligence, such period of
time shall be extended to such period of time (not to exceed one hundred twenty
(120) days in the aggregate, subject to Unavoidable Delay) as may be necessary
to cure such default.
(d) Landlord is generally not paying its debts as they become due, or
Landlord makes a general assignment for the benefit of creditors.
(e) Any petition is filed by or against Landlord under the Federal
bankruptcy laws, or any other proceeding is instituted by or against Landlord
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
reorganization, arrangement, adjustment or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for Landlord or for any
substantial part of the property of Landlord and, in the case of any involuntary
petition filed or proceeding instituted against Landlord only, such proceeding
is not
-73-
dismissed within sixty (60) days after institution thereof, or Landlord takes
any action to authorize or effect any of the actions set forth above in this
paragraph.
(f) Landlord causes or institutes any proceeding for its dissolution
or termination.
(g) Landlord or Host O.P. defaults under the terms of any of the
Related Agreements beyond the expiration of any applicable notice and cure
periods.
Subject to Section 23.11, in the event of a Landlord Default, Tenant
shall have and may exercise all rights and remedies available at law and in
equity, including, without limitation, the right to pursue an action for damages
against Landlord; provided, however, that except as otherwise expressly provided
in this Lease, Tenant shall have no right to terminate this Lease for any
Landlord Default hereunder and no right to offset or counterclaim against any
Rent or other charges due hereunder. If Landlord shall in good faith dispute
the occurrence of any Landlord Default and Landlord shall give Notice thereof to
Tenant, setting forth, in reasonable detail, the basis therefor, and Tenant and
Landlord shall fail, in good faith, to resolve any such dispute within ten (10)
days after Landlord's Notice of dispute, then either may submit the matter to
arbitration under Article 15 for resolution, and no Landlord Default shall be
deemed to have occurred and Landlord shall have no obligation with respect
thereto until final adverse determination thereof in such arbitration. In the
event of any such adverse determination, Landlord shall pay to Tenant interest
on any disputed funds at the Overdue Rate, from the date demand was made until
paid, and in the event Landlord fails to make such payment within fifteen (15)
days after such adverse determination, Tenant shall be entitled to offset such
amount against the payment or, if necessary, payments of Rent next coming due
hereunder. If Tenant reasonably determines that immediate action is necessary
to protect person or property or to comply with Legal Requirements, Tenant may
forthwith cure the Landlord Default and invoice Landlord for costs and expenses
(including reasonable attorneys' fees and court costs) incurred by Tenant in
curing the same, together with interest thereon from the date Landlord receives
Tenant's Notice, at the Overdue Rate.
ARTICLE 15
ARBITRATION
15.1 Arbitration.
In each case specified in this Lease in which it shall become
necessary to resort to arbitration, such arbitration shall be determined as
provided in this Article 15. The party desiring such arbitration shall give
Notice to that effect to the other party, specifying the nature of the dispute,
the amount involved (if any), and the remedy sought. An arbitrator shall be
selected by mutual agreement of the parties, or if they cannot agree within
thirty (30) days of such Notice, by appointment made by the American Arbitration
Association ("AAA") from among the members of its panels who are qualified and
who have experience in resolving matters of a nature similar to the matter to be
resolved by arbitration.
-74-
15.2 Arbitration Procedures.
Any arbitration commenced pursuant to Section 15.1 shall be conducted
in accordance with the AAA's Rules of Commercial Arbitration in business
disputes. A single arbitrator shall be designated and shall resolve the
dispute. The arbitrator's decision shall be binding on all parties, shall not
be subject to further review or appeal except as otherwise allowed by applicable
law and may be filed in and enforced by a court of competent jurisdiction. The
arbitrator shall award to the prevailing party, if any, as determined by the
arbitrator, all of its costs and expenses, including attorneys' fees,
arbitrator's fees, and reasonable out-of-pocket expenses of any kind, except as
otherwise specified below in this Section 15.2. The term "prevailing party," as
used in the preceding sentence, shall mean the party whose position is most
nearly upheld in arbitration. Upon the failure of either party (the "non-
complying party") to comply with the arbitrator's decision, the arbitrator shall
be empowered, at the request of the other party, to order such compliance by the
non-complying party and to supervise or arrange for the supervision of the non-
complying party's obligation to comply with the arbitrator's decision, all at
the expense of the non-complying party. To the maximum extent practicable, the
arbitrator and the parties, and the AAA, if applicable, shall take any action
necessary to insure that the arbitration shall be concluded within ninety (90)
days of the filing of such dispute. Unless otherwise agreed in writing by the
parties or required by the arbitrator or the AAA, if applicable, arbitration
proceedings hereunder shall be conducted in the Washington, DC, metropolitan
area. Notwithstanding formal rules of evidence, each party may submit such
evidence as each party deems appropriate to support its position, and the
arbitrator shall have access to and the right to examine all books and records
of Landlord and Tenant and, subject to the Management Agreement, the Manager
regarding the Leased Property during the arbitration The consideration of the
parties to be bound by arbitration is not only the waiver of trial by jury but
also the waiver of any rights to appeal the arbitration finding.
ARTICLE 16
SUBLETTING AND ASSIGNMENT
16.1 Subletting and Assignment.
Except as otherwise expressly provided in this Section 16.1, Tenant
shall not, without the prior written consent of Landlord (which consent may be
withheld in Landlord's sole and absolute discretion), assign, mortgage, pledge,
hypothecate, encumber or otherwise transfer this Lease or sublease (which term
shall be deemed to include the granting of concessions, licenses and the like)
all or any part of the Leased Property, or suffer or permit this Lease or the
leasehold estate created hereby or any other rights arising under this Lease to
be assigned, transferred, mortgaged, pledged, hypothecated or encumbered, in
whole or in part, whether voluntarily, involuntarily or by operation of law, or
permit the use or occupancy of the Leased Property by anyone other than Tenant
or Manager (except in accordance with Section 21.3.4), or permit the Leased
Property to be offered or advertised for assignment or subletting.
Notwithstanding the foregoing, (i) any sublease to a subtenant, licensee or
concessionaire made in the ordinary course of operating the Facility (a) shall
not require Landlord's consent if it is for a term of not more than five (5)
years and involves not more than one thousand (1,000) square feet of rentable
space, or (b) shall require Landlord's consent, but such consent shall not be
unreasonably
-75-
withheld, conditioned or delayed, if it is for a term of more than five (5)
years or involves more than one thousand (1,000) square feet of rentable space
and (ii) Tenant may, in each instance, after Notice to Landlord, assign this
Lease to any Qualified Affiliate in accordance with Section 21.6.6, so long as
such assignment will not violate or affect any applicable Legal Requirements or
Insurance Requirements. For purposes of this Section 16.1, an assignment of this
Lease (other than to a Qualified Affiliate in accordance with Section 21.6.6)
shall be deemed to constitute a Change in Control.
If this Lease is assigned or if the Leased Property or any part
thereof is sublet in contravention of this Lease, Landlord may collect the rents
from such assignee, subtenant or occupant, as the case may be, and apply the net
amount collected to the Rent herein reserved, but no such collection shall be
deemed (i) a waiver of the provisions set forth in the first paragraph of this
Section 16.1, (ii) the acceptance by Landlord of such assignee, subtenant or
occupant, as the case may be, as a tenant, or (iii) a release of Tenant from the
future performance by Tenant of its covenants, agreements or obligations
contained in this Lease.
Tenant, as the debtor in possession, or the trustee for Tenant
(collectively, the "TRUSTEE") in any proceeding under Title 11 of the United
States Bankruptcy Code relating to Bankruptcy, as amended (the "BANKRUPTCY
CODE"), shall not have the right to assign this Lease or sublet the Leased
Property to an assignee or sublessee that (i) is a competitor of Landlord or
(ii) is not a capable, reliable, qualified Person of good reputation and
character with the financial capacity to satisfy Tenant's obligations under this
Lease. The Trustee shall not have the right to assign this Lease or sublet the
Leased Property to a real estate investment trust that is, or intends to be,
publicly traded.
In the event that Tenant becomes the subject of any proceeding under
Title 11 of the Bankruptcy Code, Tenant covenants and agrees that: (i) it shall
promptly upon demand therefor from Landlord, but in no event later than sixty
(60) days (as such time may be extended by a bankruptcy court in such
proceeding) after the commencement of such proceeding (a "TENANT BANKRUPTCY"),
announce its decision whether to assume or reject this Lease and Tenant's
obligations under the Consent and Assignment and the Assigned Agreements, and
promptly take and diligently pursue such actions as may be necessary to
authorize and implement such decision; and (ii) it shall either assume this
Lease and all of Tenant's obligations under the Consent and Assignment and the
Assigned Agreements to the extent such Assigned Agreements have not expired or
terminated in accordance with their respective terms, or it shall reject this
Lease and all of Tenant's obligations under the Consent and Assignment and the
Assigned Agreements. In a Tenant Bankruptcy, Tenant covenants and agrees that
it cannot cure any defaults under this Lease and cannot provide adequate
assurances of future performance of this Lease without curing any and all
monetary and non-monetary defaults of Tenant's obligations under the Consent and
Assignment and the Assigned Agreements and providing adequate assurances of
Tenant's future performance of its obligations under the Consent and Assignment
and the Assigned Agreements.
No subletting or assignment shall in any way impair the continuing
primary liability of Tenant hereunder, and no consent to any subletting or
assignment in a
-76-
particular instance shall be deemed to be a waiver of the prohibition set forth
in this Section 16.1. No assignment, subletting or occupancy shall affect any
Primary Intended Use. Any subletting, assignment or other transfer of Tenant's
interest under this Lease in contravention of this Section 16.1 shall be
voidable at Landlord's option.
16.2 Required Sublease Provisions.
Any sublease of all or any portion of the Leased Property entered into
on or subsequent to the Commencement Date shall provide (a) that it is subject
and subordinate to this Lease and to the matters to which this Lease is or shall
be subject or subordinate; (b) that in the event of termination of this Lease or
reentry or dispossession of Tenant by Landlord under this Lease, Landlord may,
at its option, terminate such sublease or take over all of the right, title and
interest of Tenant, as sublessor under such sublease, and such subtenant shall,
at Landlord's option, attorn to Landlord pursuant to the then executory
provisions of such sublease, except that neither Landlord nor the Facility
Mortgagee, as holder of a mortgage or as Landlord under this Lease, if such
mortgagee succeeds to that position, shall (i) be liable for any act or omission
of Tenant under such sublease, (ii) be subject to any credit, counterclaim,
offset or defense which theretofore accrued to such subtenant against Tenant,
(iii) be bound by any previous modification of such sublease requiring
Landlord's consent hereunder and not consented to in writing by Landlord or by
any previous prepayment of more than one (1) month's rent, (iv) be bound by any
covenant of Tenant to undertake or complete any construction of the Leased
Property or any portion thereof, (v) be required to account for any security
deposit of the subtenant other than any security deposit actually delivered to
Landlord by Tenant, (vi) be bound by any obligation to make any payment to such
subtenant or grant any credits, except for services, repairs, maintenance and
restoration provided for under the sublease that are to be performed after the
date of such attornment, (vii) be responsible for any monies owing by Tenant
prior to the date of attornment to the credit of such subtenant, or (viii) be
required to remove any Person occupying any portion of the Leased Property; and
(c) in the event that such subtenant receives a written Notice from Landlord or
the Facility Mortgagee stating that an Event of Default has occurred and is
continuing, such subtenant shall thereafter be obligated to pay all rentals
accruing under such sublease directly to the party giving such Notice or as such
party may direct. All rentals received from such subtenant by Landlord or the
Facility Mortgagee, as the case may be, shall be credited against the amounts
owing by Tenant under this Lease, and such sublease shall provide that the
subtenant thereunder shall, at the request of Landlord, execute a suitable
instrument in confirmation of such agreement to attorn. An original counterpart
of each such sublease and assignment and assumption, duly executed by Tenant and
such subtenant or assignee, as the case may be, in form and substance reasonably
satisfactory to Landlord, shall be delivered promptly to Landlord upon request
and (a) 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 Tenant
to be kept and performed and shall be, and become, jointly and severally liable
with Tenant for the performance thereof and (b) in case of either an assignment
or subletting, Tenant 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 Tenant
hereunder.
-77-
The provisions of this Section 16.2 shall not be deemed a waiver of
the provisions set forth in the first paragraph of Section 16.1.
16.3 No Right of Tenant to Mortgage Its Leasehold.
Notwithstanding any other provision of this Lease to the contrary,
Tenant shall not assign its interest in this Lease as collateral for
Indebtedness.
ARTICLE 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
17.1 Estoppel Certificates.
At any time and from time to time, upon not less than ten (10)
Business Days prior Notice by either party, the non-requesting party shall
furnish to the requesting party, or a designee thereof, 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, that to the knowledge
of the certifying party, no Default or an Event of Default has occurred and is
continuing or, if a Default or an Event of Default shall exist, specifying in
reasonable detail the nature thereof and the steps being taken to remedy the
same, and such additional information as the requesting party may reasonably
request. Any such certificate furnished pursuant to this Section 17.1 may be
relied upon by the requesting party, its lender, and any prospective purchaser
or mortgagee of the Leased Property or the leasehold estate conveyed hereby.
17.2 Financial Statements.
Tenant shall furnish the following statements to Landlord:
(a) within forty (40) days after each of the first three (3) quarters
of any Fiscal Year, the most recent unaudited CCC Consolidated Financial
Statements accompanied by the Financial Officer's Certificate;
(b) within eighty (80) days after the end of each Fiscal Year, the CCC
Consolidated Financial Statements for such Fiscal Year, certified by an
independent certified public accountant reasonably satisfactory to Landlord and
accompanied by a Financial Officer's Certificate;
(c) within [ ] days after the end of each Fiscal Year, the results of
operations of the Facility for the preceding Fiscal Year (the "ANNUAL OPERATING
STATEMENT"), in the form received by Tenant from Manager in accordance with the
Management Agreement, accompanied by a Financial Officer's Certificate;
(d) simultaneously with the payment of Rent under Section 3.1.1, the
results of operations of the Facility for the preceding Accounting Period (the
"ACCOUNTING PERIOD STATEMENT"), in the form received by Tenant from Manager in
accordance with the Management Agreement;
-78-
(e) simultaneously with the payment of Rent under Section 3.1.1, the
Percentage Rent Schedule and, simultaneously with the payment of Rent with
respect to the final Accounting Period of each Fiscal Year, the Year End
Percentage Rent Schedule, accompanied by a Financial Officer's Certificate;
(f) to the extent such information has been provided by Manager to
Tenant, not later than twenty-eight (28) days after the end of each Accounting
Period, except as described below, the summary of operating results of the
Facility (the "PERIOD REPORT"). The Period Report will provide REVPAR and
EBITDA substantially in the format of the period report attached hereto as
Schedule 17.2(f). Notwithstanding the foregoing, for the first Accounting
----------------
Period of each Fiscal Year, the Period Report will be provided to Landlord not
later than thirty-five (35) days after the end of the prior Fiscal Year;
(g) to the extent such information has been provided by Manager to
Tenant, not later than twenty-eight (28) days after each of the first three (3)
quarters of any Fiscal Year, Tenant will provide the forecast Gross Revenues,
Room Revenues and EBITDA for the Facility. In addition, to the extent such
information is available from Manager, Tenant will provide forecast Gross
Revenues by department by Accounting Period and for the Fiscal Year;
(h) promptly after the sending or filing thereof, copies of all
periodic reports which CCC, OpCo or Tenant files with the SEC or any stock
exchange on which any of their shares are listed or traded;
(i) promptly after the delivery thereof to Tenant, a copy of any
management letter or written report prepared by the independent certified public
accountants with respect to the financial condition, operations, business or
prospects of Tenant, as the case may be; and
(j) at the expense of Landlord, at any time and from time to time upon
not less than forty-five (45) days Notice from Landlord, any financial reporting
information required to be filed by Landlord with any securities or exchange
commission, the SEC or any successor agency, or any other governmental
authority, or required pursuant to any order issued by any court, governmental
authority or arbitrator in any litigation to which Landlord is a party, for
purposes of compliance therewith.
Landlord may at any time, and from time to time, provide the Facility
Mortgagee with copies of any of the foregoing statements, provided that Landlord
has used commercially reasonable efforts to cause the Facility Mortgagee to
execute and deliver a confidentiality agreement reasonably satisfactory to
Tenant. Upon reasonable Notice from Landlord, Tenant agrees to cooperate with
Landlord to provide to Landlord the data, forecasts, and reports used in the
preparation of the foregoing statements within a reasonable time frame after
such data and reports become available to Tenant, provided, however, that Tenant
makes no representation as to the accuracy of the data, forecasts and reports
provided.
-79-
17.3 Annual Budget.
Not later than twenty-eight (28) days prior to the commencement of
each Fiscal Year except for the first Fiscal Year, Tenant shall prepare and
submit to Landlord a schedule of Tenant's reasonable estimate of Gross Revenues
by department (the "OPERATING BUDGET SUMMARY"). Not later than fifteen (15)
days prior to the commencement of each Fiscal Year except for the first Fiscal
Year, Tenant shall prepare and submit to Landlord an operating budget (the
"OPERATING BUDGET") and a capital budget (the "CAPITAL BUDGET") prepared in
accordance with the requirements of this Section 17.3. The Operating Budget and
the Capital Budget (together, the "ANNUAL BUDGET") shall be consistent with the
format provided by Manager and show the following for the year as a whole:
(a) Tenant's reasonable estimate of Gross Revenues (including room
rates and anticipated Room Revenues) for the forthcoming Fiscal Year, together
with a summary of the estimated operating results provided by the Manager;
(b) An estimate of any amounts Landlord will be requested to provide
for Capital Expenditures during the Fiscal Year;
(c) An estimate of the expenditures necessary for replacements and
renewals of FF&E (the "FF&E ESTIMATE"); and
(d) Tenant's reasonable estimate of Percentage Rent payable with
respect to Room Revenues, Food and Beverages Sales, and Other Income.
Upon reasonable Notice from Landlord, Tenant agrees to cooperate with
Landlord to provide to Landlord the data, forecasts, and reports used in the
preparation of the Capital Budget and the Operating Budget within a reasonable
time frame after such data and reports become available to Tenant, provided,
however, that Tenant makes no representation as to the accuracy of the data,
forecasts and reports provided. Landlord shall have twenty-five (25) days after
the date on which it receives the Annual Budget to review, disapprove or change
the entries and information appearing in the Annual Budget relating to the
Capital Budget or the FF&E Estimate, but with regard to the FF&E Estimate, but
only to the extent the FF&E Estimate indicates amounts in excess of the FF&E
Reserve (the Capital Budget and the FF&E Estimate, to the extent it proposes
expenditures in excess of the FF&E Reserve, are collectively referred to herein
as the "CAPITAL PORTION"). If the parties are not able to reach agreement on
the Capital Portion for any Fiscal Year during Landlord's twenty-five (25)-day
review period, the parties shall attempt in good faith during the subsequent
twenty-five (25)-day period to resolve any disputes, which attempt shall
include, if requested by either party, at least one (1) meeting of executive
level officers of Landlord and Tenant. In the event the parties are still not
able to reach agreement on the Capital Portion of the Annual Budget for any
particular Fiscal Year after complying with the foregoing requirements of this
Section 17.3.2, no Capital Expenditures or FF&E expenditures in excess of the
FF&E Reserve shall be made unless the same are set forth in a previously
approved Capital Budget or are specifically approved by Landlord or are
otherwise required to comply with Legal
-80-
Requirements or to make emergency expenditures in connection with Emergency
Situations or otherwise required pursuant to the Management Agreement.
Tenant shall operate the Leased Property consistent with the Annual
Budget and shall promptly report to Landlord in writing any actual or
anticipated deviation from the Operating Budget or Capital Budget of any
material or long-term consequence. To the extent the budget estimates for the
categories of revenues identified in (d) above are not made available on an
Accounting Period or Fiscal Year basis from Manager, Tenant shall cooperate with
Landlord, at Landlord's sole cost, in its efforts to obtain such budget
information from Manager.
Not later than seventy-five (75) days after the beginning of the
Fiscal Year, Tenant shall provide Landlord with itemized schedules on an
Accounting Period basis detailing the Operating Budget and the anticipated
Percentage Rent (collectively, the "BUDGET SPREAD").
ARTICLE 18
LANDLORD'S RIGHT TO INSPECT
Tenant shall permit Landlord and its authorized representatives to inspect
the Leased Property during normal business hours upon not less than twenty-four
(24) hours Notice, and to make such repairs as are required by Legal
Requirements and Insurance Requirements which Tenant fails to make and as
Landlord is permitted or required to make pursuant to the terms of this Lease,
provided that any inspection or repair by Landlord or its representatives will
not unreasonably interfere with Tenant's use and operation of the Leased
Property and provided further that in the event of an emergency, as determined
by Landlord in its reasonable discretion, prior Notice shall not be necessary.
ARTICLE 19
APPRAISAL
In the event that it becomes necessary to determine the Fair Market Value
or Fair Market Rental for any purpose of this Lease, or the amount of any
adjustment to or abatement of Minimum Rent and Percentage Rent hereunder, and
the parties cannot agree thereon, such Fair Market Value or Fair Market Rental,
or reduction, adjustment or abatement, as the case may be, shall be determined
upon the written request of either party in accordance with the following
procedure.
The party requesting an appraisal, by Notice given to the other, shall
propose and unilaterally appoint a Qualified Appraiser. The other party, by
Notice given within fifteen (15) days after receipt of such Notice appointing
the first Qualified Appraiser, may appoint a second Qualified Appraiser. If the
other party fails to appoint the second Qualified Appraiser within such fifteen
(15)-day period, such party shall have waived its right to appoint a Qualified
Appraiser, the first Qualified Appraiser shall appoint a second Qualified
Appraiser within fifteen (15) days thereafter, and the Fair Market Value or Fair
Market Rental, or reduction, adjustment or abatement, as the case may be, shall
be determined by the Qualified Appraisers as set forth below.
-81-
The two Qualified Appraisers shall thereupon endeavor to agree upon the
Fair Market Value or Fair Market Rental, or reduction, adjustment or abatement,
as the case may be. If the two Qualified Appraisers so named cannot agree upon
such value or rental, or reduction, adjustment or abatement, as the case may be,
within thirty (30) days after the designation of the second such appraiser, each
such appraiser shall, within five (5) days after the expiration of such thirty
(30)-day period, submit his appraisal to the other appraiser in writing, and if
the Fair Market Values or Fair Market Rentals, or amounts of reduction,
adjustment or abatement, as the case may be, set forth in such appraisals vary
by five percent (5%) or less of the greater value, the Fair Market Value or Fair
Market Rental, or reduction, adjustment or abatement, as the case may be, shall
be determined by calculating the average of the two determinations of the two
appraisers.
If the Fair Market Values or Fair Market Rentals, or amounts of reduction,
adjustment or abatement, as the case may be, set forth in the two appraisals
vary by more than five percent (5%) of the greater value, the two Qualified
Appraisers shall select a third Qualified Appraiser within an additional fifteen
(15) days following the expiration of the aforesaid five (5)-day period. If the
two appraisers are unable to agree upon the appointment of a third appraiser
within such fifteen (15)-day period, either party may, upon written notice to
the other, request that such appointment be made by the then President (or
equivalent officer) of the State's Chapter of the American Institute of Real
Estate Appraisers, or his or her designee, or, if there is no such organization
or if such individual declines to make such appointment, by any state or Federal
court of competent jurisdiction for the State.
In the event that all three of the appraisers cannot agree upon Fair Market
Value or Fair Market Rental, or reduction, adjustment or abatement, as the case
may be, within twenty (20) days following the selection of the third appraiser,
each appraiser shall, within ten (10) days thereafter, submit his appraisal to
the other two appraisers in writing, and the Fair Market Value or Fair Market
Rental, or reduction, adjustment or abatement, as the case may be, shall be
determined by calculating the average of the two numerically closest values (or,
if the values are equidistant, the average of all three values) determined by
the three appraisers.
In the event that any appraiser appointed hereunder does not or is unable
to perform his or her obligation hereunder, then the party or the appraiser(s)
appointing such appraiser shall have the right to propose and approve
unilaterally a substitute Qualified Appraiser, but if the party or the
appraiser(s) who have the right to appoint a substitute Qualified Appraiser fail
to do so within ten (10) days after written Notice from the other party (or
either party in the event such appraiser was appointed by the other appraisers),
either party may, upon written Notice to the party having the right to appoint a
substitute Qualified Appraiser, request that such appointment be made by such
officer of the American Institute of Real Estate Appraisers or court of
competent jurisdiction as described above; provided, however, that a party who
has the right to appoint an appraiser or a substitute appraiser shall have the
right to make such appointment only up until the time such appointment is made
by such officer or court.
In connection with the appraisal process, so long as Tenant receives
reasonable prior Notice, Tenant shall provide the appraisers full access during
normal business hours
-82-
to examine the Leased Property, the books, records and files of Tenant and all
agreements, leases and other operating agreements relating to the Leased
Property.
The costs of each such appraisal shall be borne by the party selecting the
appraiser, provided the cost of the third appraiser shall be split equally
between Landlord and Tenant. Upon determining such Fair Market Value or Fair
Market Rental, or reduction, adjustment or abatement, as the case may be, the
appraisers shall promptly notify Landlord and Tenant in writing of such
determination. If any party shall fail to appear at the hearings appointed by
the appraisers, the appraisers may act in the absence of such party.
The determination of the Qualified Appraisers made in accordance with the
foregoing provisions shall be final and binding upon the parties, such
determination may be entered as an award in arbitration in a court of competent
jurisdiction, and judgment thereon may be entered.
ARTICLE 20
FACILITY MORTGAGES
20.1 Landlord May Grant Liens.
(a) Without the consent of Tenant, Landlord may, subject to the terms
and conditions set forth in this Section 20.1, from time to time, directly or
indirectly, create or otherwise cause to exist any Lien or ground lease upon its
interest in the Leased Property, or any portion thereof or interest therein,
whether to secure any borrowing or other means of financing or refinancing,
provided that any such Lien or ground lease shall be consistent with the
requirements of the Management Agreement or otherwise approved by Manager, and
shall not modify the terms of this Lease, except as expressly set forth in
Section 20.2. Landlord agrees to provide to Tenant copies of all existing and
future ground leases, and amendments thereto, which affect the Leased Property.
(b) Tenant shall, upon the request of Landlord or any existing,
potential or future Facility Mortgagee, and to the extent in Tenant's possession
or obtainable from Manager pursuant to the Management Agreement, (i) provide
Landlord or the Facility Mortgagee with copies of all licenses, permits,
occupancy agreements, operating agreements, leases, contracts, inspection
reports, studies, appraisals, assessments, default or other notices and similar
materials reasonably requested in connection with any existing or proposed
financing of the Leased Property, and (ii) execute such estoppel certificates
and collateral assignments with respect to the Facility's licenses and any of
the other aforementioned agreements as the Facility Mortgagee may reasonably
request in connection with any such financing, provided that no such estoppel
certificate or collateral assignment shall, except as expressly set forth in
Section 20.2, modify the terms of this Lease.
20.2 Subordination of Lease.
Subject to Section 20.1 and the terms of Section 7.1, this Lease, and
any and all rights of Tenant hereunder, are and shall be subject and subordinate
to any Facility
-83-
Mortgage, any ground or master lease, and all renewals, extensions,
modifications, consolidations and replacements thereof, and to each and every
advance made or hereafter to be made under any such Facility Mortgage. This
section shall be self-operative and no further instrument of subordination shall
be required. In confirmation of such subordination, Tenant shall promptly
execute, acknowledge and deliver any instrument that Landlord, the landlord
under any such lease or the holder of any such mortgage or the trustee or
beneficiary of any deed of trust or any of their respective successors in
interest may reasonably request to evidence such subordination. Tenant shall not
unreasonably withhold its consent to any amendment to this Lease reasonably
required by such lender or ground lessor, provided that such amendment does not
(i) increase Tenant's rental obligations or other financial obligations
hereunder, or (ii) have a material adverse effect upon Tenant's rights
hereunder, or (iii) materially increase Tenant's non-economic obligations
hereunder, or (iv) decrease Landlord's obligations hereunder. Landlord shall
exercise commercially reasonable efforts to require any future Facility
Mortgagee or landlord under a ground lease affecting the Leased Property to
provide Tenant with notice and an opportunity to cure Landlord defaults under
the respective Facility Mortgage or ground lease.
Any lease to which this Lease is, at the time referred to, subject and
subordinate is herein called a "SUPERIOR LEASE," and the landlord of a Superior
Lease or its successor in interest at the time referred to is herein called
"SUPERIOR LANDLORD"; the Facility Mortgage and any other mortgage or deed of
trust to which this Lease is, at the time referred to, subject and subordinate,
is herein called a "SUPERIOR MORTGAGE," and the Facility Mortgagee and any other
holder, trustee or beneficiary of a Superior Mortgage is herein called "SUPERIOR
MORTGAGEE." Tenant shall have no obligations under any Superior Lease or
Superior Mortgage other than those expressly set forth in this Section 20.2.
Notwithstanding the obligations of Tenant hereunder, neither any
Superior Mortgagee nor any Superior Landlord shall have an obligation to provide
a non-disturbance agreement to Tenant. Any Superior Mortgagee or Superior
Landlord shall have the right to terminate this Lease upon the foreclosure, deed
in lieu of foreclosure or exercise of the power of sale with respect to the
Leased Property; provided that, if such right is exercised because of (a) a non-
monetary default by Landlord under the terms of the relevant loan agreement or
ground lease not caused by an Event of Default hereunder or (b) a monetary
default by Landlord (including a misapplication of Rent paid by Tenant) where
Tenant is not in Default in the payment of Rent hereunder beyond the expiration
of applicable notice and cure periods, then Landlord shall pay to Tenant the
Fair Market Value of Tenant's leasehold estate as of the termination date in
accordance with Section 24.1(b); provided further that (i) such fee shall be
paid first by offsetting any amounts owed by Tenant to Landlord at such time and
the balance (if any) shall be paid to Tenant in cash, and (ii) Tenant agrees to
seek payment of such cash balance (if any) solely from Host O.P. (which, by its
execution of this Lease, agrees to be primarily liable for Landlord's obligation
under this subparagraph of Section 20.2) pursuant to the terms of the Facility
Mortgagee Agreement, and shall not make any demand or claim therefor against
Landlord, the Facility Mortgagee, any purchaser in foreclosure or transferee by
deed in lieu of foreclosure or other party claiming under any of the foregoing.
-84-
In the event a cash flow sweep structure is implemented by any
Superior Mortgagee, and such structure remains in place for twelve (12)
consecutive months, Tenant, at its election, upon not less than thirty (30) days
Notice, may terminate this Lease effective as of the end of such twelve (12)
month period. For any period prior to such termination date, (i) Tenant's
obligation to pay Rent or any other amounts payable hereunder shall be reduced
by any amounts received by any Superior Mortgagee and (ii) Landlord shall
compensate Tenant on an Accounting Period basis for any Tenant Operating Profit
not received because of the cash flow sweep structure (i.e., any amount swept in
excess of the Rent and other amounts otherwise payable by Tenant under this
Lease) and any other costs incurred or advanced by Tenant pursuant to this
Lease, and Host O.P. agrees to be primarily liable for Landlord's obligation
under this clause (ii). Likewise, for any period during which cash management
procedures are implemented by or on behalf of any Superior Mortgagee, (a)
Tenant's obligation to pay Rent or any other amounts payable hereunder shall be
reduced by any amounts received by any Superior Mortgagee and (b) Landlord shall
compensate Tenant on an Accounting Period basis for any Tenant Operating Profit
not received because of the cash management procedures (i.e., any amount swept
in excess of the Rent and other amounts otherwise payable by Tenant under this
Lease) and any other costs incurred or advanced by Tenant pursuant to this
Lease, and Host O.P. agrees to be primarily liable for Landlord's obligation
under this clause (b). If Tenant elects to terminate this Lease pursuant to the
termination right granted in the first sentence of this paragraph, Landlord
shall pay to Tenant the Fair Market Value of Tenant's leasehold estate as of the
termination date calculated in accordance with Section 24.1(b); provided,
however, (x) such fee shall be paid first by offsetting any amounts owed by
Tenant to Landlord at such time and the balance (if any) shall be paid to Tenant
in cash, and (y) Tenant agrees to seek payment of such cash balance (if any)
solely from Host O.P. (which, by its execution of this Lease, agrees to be
primarily liable for Landlord's obligation to pay the cash balance referenced in
this clause (y)) pursuant to the terms of the Facility Mortgagee Agreement, and
shall not make any demand or claim therefor against Landlord, the Facility
Mortgagee, any purchaser in foreclosure or transferee by deed in lieu of
foreclosure or other party claiming under any of the foregoing.
Subject to the termination rights of any Superior Landlord or Superior
Mortgagee, if any, in the event that any Superior Landlord or Superior Mortgagee
or the nominee or designee of any Superior Landlord or Superior Mortgagee shall
succeed to the rights of Landlord under this Lease (any such person, "SUCCESSOR
LANDLORD"), whether through possession or foreclosure action or delivery of a
new lease or deed, or otherwise, such Successor Landlord shall recognize
Tenant's rights under this Lease as herein provided and Tenant shall attorn to
and recognize the Successor Landlord as Tenant's landlord under this Lease and
Tenant shall promptly execute and deliver any instrument that such Successor
Landlord may reasonably request to evidence such attornment (provided that such
instrument does not alter the terms of this Lease), whereupon, this Lease shall
continue in full force and effect as a direct lease between the Successor
Landlord and Tenant upon all of the terms, conditions and covenants as are set
forth in this Lease, except that the Successor Landlord (unless formerly the
landlord under this Lease or its nominee or designee) shall not be (a) liable in
any way to Tenant for any act or omission, neglect or default on the party of
any prior Landlord under this Lease, (b) responsible for any monies owing by or
on deposit with any prior Landlord to the credit of
-85-
Tenant (except to the extent actually paid or delivered to the Successor
Landlord), (c) subject to any counterclaim or setoff which theretofore accrued
to Tenant against any prior Landlord, (d) bound by any modification of this
Lease subsequent to such Superior Lease or Superior Mortgage, or by any previous
prepayment of Minimum Rent or Additional Rent for more than one (1) month in
advance of the date due hereunder, which was not approved in writing by the
Superior Landlord or the Superior Mortgagee, (e) liable to Tenant beyond the
Successor Landlord's interest in the Leased Property and the rents, income,
receipts, revenues, issues and profits issuing from the Leased Property, (f)
responsible for the performance of any work to be done by Landlord under this
Lease to render the Leased Property ready for occupancy by Tenant (subject to
Landlord's obligations under Section 5.1.2(b) or with respect to any insurance
or Condemnation proceeds), or (g) required to remove any Person occupying the
Leased Property or any part thereof, except if such Person claims by, through or
under the Successor Landlord. Tenant agrees at any time and from time to time to
execute a suitable instrument in confirmation of Tenant's agreement to attorn,
as aforesaid.
20.3 Notice to Mortgagee and Ground Landlord.
Attached hereto as Schedule 20.3 is a list of the Superior
-------------
Mortgagee(s) and Superior Landlord(s) as of the date hereof, including their
addresses for notices. No default Notice from Tenant to Landlord as to the
Leased Property shall be effective unless and until a copy of the same is given
to such Superior Mortgagee(s) and Superior Landlord(s), and subsequent to the
receipt by Tenant of Notice from Landlord as to the identity of any future
Facility Mortgagee or ground landlord under a lease with Landlord, as ground
tenant, which includes the Leased Property as part of the demised premises and
which complies with Sections 20.1 and 20.2 (which Notice shall include a copy of
the applicable mortgage or lease), no default Notice from Tenant to Landlord
hereunder shall be effective unless and until a copy of the same is given to the
Facility Mortgagee or ground landlord at the address set forth in such Notice.
The curing of any Landlord Default by any Superior Mortgagee(s) or Superior
Landlord(s) listed on Schedule 20.3, or by any Facility Mortgagee or ground
---------------
landlord of which Tenant receives Notice after the date hereof as provided
above, shall be treated as performance by Landlord, provided any such cure shall
be made within the time periods set forth herein.
20.4 Transfer of Leased Property.
Notwithstanding anything set forth herein to the contrary, but subject
to the rights of a Facility Mortgagee as set forth herein, Landlord shall not,
without the consent of Tenant, transfer the Leased Property, or any interest
therein, to any Person (i) which does not have sufficient financial resources
and liquidity to fulfill the Landlord's Retained Obligations and Continuing
Obligations under the Management Agreement and Landlord's obligations under this
Lease, or (ii) which has been, or is in control of or controlled by Persons who
have been, convicted of felonies involving moral turpitude in any state or
federal court, or otherwise would cause a breach of the Management Agreement.
ARTICLE 21
ADDITIONAL COVENANTS OF TENANT
-86-
21.1 Conduct of Business.
Tenant shall do or cause to be done all things necessary to preserve,
renew and keep in full force and effect and in good standing its existence and
its rights and licenses necessary to conduct such business.
21.2 Maintenance of Accounts and Records.
Tenant shall keep records and books of account in which full, true and
correct entries in all material respects will be made of dealings and
transactions in relation to the business and affairs of Tenant.
21.3 Management of Leased Property.
21.3.1 Management Agreement, Consent and Assignment, Etc.
For and during the Term of this Lease, but not thereafter,
Landlord has assigned unto Tenant Landlord's interest as "Owner" under that
certain Management Agreement dated ______________, _____, by and between
Landlord and ___________________ (the "MANAGER"), as amended prior to the date
hereof and subsequently modified and amended pursuant to that certain [Consent,
Assignment and Assumption and Amendment of Management Agreement] dated as of
even date herewith by and among Landlord, Tenant and Manager (the "CONSENT AND
ASSIGNMENT") (together with all past and future modifications and amendments
thereto, the "MANAGEMENT AGREEMENT"). Pursuant to the Consent and Assignment,
Tenant has accepted such assignment and assumed and agreed to perform all of
Landlord's obligations as "Owner" under the Management Agreement (including
certain obligations of "Owner" that the Consent and Assignment expressly
provides shall both apply to and be binding upon Tenant, and continue to apply
to and be binding upon Landlord (as, but only to the extent, such obligations
apply to Landlord, the "CONTINUING OBLIGATIONS")), except for certain
obligations of "Owner" that the Consent and Assignment expressly provides shall
remain the sole obligations of Landlord (the "RETAINED OBLIGATIONS"). Landlord
hereby covenants to perform the Retained Obligations and the Continuing
Obligations. In addition, Landlord shall be entitled, together with Tenant, to
exercise the "Continuing Rights," as defined in the Consent and Assignment, and
Tenant shall not be entitled to exercise any of the "Reserved Rights," as
defined in the Consent and Assignment, which are reserved exclusively to
Landlord.
21.3.2 Reversion upon Termination.
All of Landlord's rights, benefits and privileges with respect
to the Management Agreement shall be vested in Tenant throughout the Term of
this Lease; provided, however, that upon termination of this Lease, for whatever
reason, all of Landlord's rights, benefits and privileges under the Management
Agreement shall automatically revert to Landlord without the necessity of any
action on the part of Landlord hereunder.
-87-
21.3.3 Compliance with Management Agreement and Indemnification.
To the extent that any of the provisions of the Management
Agreement impose a greater obligation on Tenant than the corresponding
provisions of this Lease, then Tenant shall be obligated to comply with, and to
take all reasonable actions necessary to prevent breaches or defaults under, the
provisions of the Management Agreement. Notwithstanding anything contained
herein to the contrary, Tenant shall perform and comply in every respect with
the provisions of the Management Agreement, except for the Retained Obligations
and Continuing Obligations, which shall remain the sole responsibility of
Landlord, so as to avoid any default thereunder during the Term of this Lease.
Tenant shall, at all times, direct and require Manager to perform all of
Manager's obligations under the Management Agreement. Tenant shall protect,
indemnify and hold harmless Landlord for, from and against all liabilities,
obligations, claims, damages, penalties, causes of action, costs and reasonable
expenses (including, without limitation, reasonable attorneys' fees), to the
maximum permitted by law, imposed upon, incurred by, or asserted against
Landlord by reason of a default by Tenant under the Management Agreement,
including, without limitation, any default by Tenant under the Management
Agreement attributable to a failure by Tenant to perform its obligations under
this Lease. Likewise, Landlord shall protect, indemnify and hold harmless Tenant
for, from and against all liabilities, obligations, claims, damages, penalties,
causes of action, costs and reasonable expenses (including, without limitation,
reasonable attorneys' fees), to the maximum permitted by law, imposed upon,
incurred by, or asserted against Tenant by reason of a default by Landlord under
the Management Agreement, including, without limitation, any default by Landlord
under the Management Agreement attributable to a failure by Landlord to perform
its obligations under this Lease. The obligations of Landlord and Tenant set
forth in this Section 21.3.3 shall survive the termination of this Lease.
21.3.4 Consent Required for Certain Actions.
Without at least thirty (30) days prior written Notice to
Landlord in the case of subsections (1), (2), (5), and (6) below, and without at
least fifteen (15) days prior written Notice in the case of subsections (3) and
(4) below, Tenant shall not take any of the following actions:
(1) terminate the Management Agreement prior to the expiration
of the term thereof;
(2) amend, modify or assign its interest in (except in
connection with an assignment permitted pursuant to Section 16.1 hereof) the
Management Agreement;
(3) waive (or fail to enforce) any right of "Owner" under the
Management Agreement;
(4) waive any breach or default by Manager under the
Management Agreement (or fail to enforce any right of "Owner" in connection
therewith);
-88-
(5) agree to any change in Manager or consent to any
assignment by Manager; or
(6) take any other action which reasonably could be expected
to materially adversely affect Landlord's rights or obligations under the
Management Agreement for periods following termination of this Lease (whether
upon the expiration of its term or upon earlier termination as provided for
herein).
Notwithstanding the foregoing, Tenant shall not take any of the
actions listed in clauses (1) through (6) above without Landlord's prior written
consent if such action:
(A) would materially impair the ability of Tenant to
perform Tenant's obligations under this Lease (including, without limitation,
make all payments of Rent as and when due under this Lease) (determined taking
into account the guarantee attached hereto as Exhibit F (the "GUARANTEE") of CCC
and OpCo (together, the "GUARANTORS") of Tenant's payment and performance of all
of its obligations under this Lease);
(B) would cause Tenant not to comply with the obligations
of Tenant set forth in Section 4.1;
(C) would materially adversely affect the economic value
of the Leased Property to Landlord following the termination of this Lease
(whether upon the expiration of the Term or upon earlier termination as provided
for herein); or
(D) would materially increase the legal exposure of
Landlord to Manager under the Management Agreement during the Term, either by
reason of Landlord's continuing liability to Manager pursuant to the Consent and
Assignment (determined taking into account the Guarantee), or with respect to
the Retained Obligations or the Continuing Obligations.
21.3.5 Replacement of Manager.
Notwithstanding Section 21.3.4 above, Tenant shall not agree
to change the management or the brand affiliation of the Facility without the
prior approval of Landlord, which approval shall not be unreasonably withheld,
conditioned or delayed. In addition, the proposed replacement manager shall be
nationally recognized and shall have substantial experience managing hotels of
comparable quality. No such replacement or change in brand affiliation shall
continue beyond the Term hereof without the prior written approval of Landlord,
which approval may be granted or withheld in Landlord's sole discretion.
21.4 Facility Mortgagee Agreement.
Tenant agrees to enter into an agreement with Landlord, any Facility
Mortgagee and Host O.P. (the "FACILITY MORTGAGEE AGREEMENT") pursuant to which,
in consideration of Facility Mortgagee's consent to this Lease and the
transactions contemplated hereby: (i) Tenant acknowledges to the Facility
Mortgagee that the Working
-89-
Capital purchased by Tenant with the Working Capital Note and all Excess FF&E
acquired by Tenant from Landlord while the Facility Mortgage is in effect is
subject to the Facility Mortgagee's first priority Lien (without Tenant assuming
any liability for Landlord's obligations that are secured by or arise under any
Facility Mortgage) and that the Facility Mortgagee's rights and remedies with
respect to such Working Capital and Excess FF&E shall survive and be enforceable
with respect thereto; (ii) Tenant covenants to the Facility Mortgagee to sign,
provided Landlord shall prepare and file at its sole cost, UCC-1 financing
statements confirming the foregoing for notice purposes; (iii) Tenant covenants
not to sell, lease, transfer or otherwise dispose of such Working Capital or
Excess FF&E or any interest therein (other than in the ordinary course of
business or other than to Landlord in accordance with the terms of this Lease
upon the expiration or earlier termination of the Term), or grant or cause or
permit to exist any lien, charge or encumbrance with respect thereto, other than
the aforesaid Lien in favor of the Facility Mortgagee and any other Liens
securing obligations which are the responsibility of Landlord; (iv) Landlord
agrees that this Lease and the Working Capital Note will not be modified or
amended in any manner that would adversely affect the Facility Mortgagee's
collateral under the Facility Mortgage without the Facility Mortgagee's prior
written consent; (v) Landlord and Tenant agree to confirm to the Facility
Mortgagee that the Facility Mortgagee shall have the right to terminate this
Lease in the event of a foreclosure by the Facility Mortgagee under the Facility
Mortgage, pursuant to Article 20 hereof; (vi) Tenant agrees that, in the event
of a foreclosure by the Facility Mortgagee under the Facility Mortgage, the
Facility Mortgagee shall have the right to continue this Lease as lessor and
succeed to all Landlord's rights hereunder and under the Security Agreement,
provided that in such event the Facility Mortgagee recognizes Tenant's rights
hereunder; (vii) if the Facility Mortgagee terminates this Lease in accordance
with Article [20] [24] hereof, (A) Tenant agrees, at the Facility Mortgagee's
request, to convey all Working Capital existing at such time directly to the
Facility Mortgagee or its designee in payment of the Working Capital Note
(together with any cash balance due from Tenant in respect thereto), (B) Tenant
agrees to look solely to Host O.P. for payment of any cash balance payable to
Tenant for Working Capital to the extent such Working Capital exceeds the
balance due under the Working Capital Note, and (C) Host O.P. agrees to pay such
cash balance directly to Tenant, without the necessity of notice or demand on
Landlord; and (viii) Tenant agrees that if the amount specified in Section
24.1(b) of this Lease and/or the Excess FF&E Reimbursement Amount become payable
in connection with a foreclosure by the Facility Mortgagee under the Facility
Mortgage, then (A) such amount(s) shall be paid first by offsetting any amounts
owed by Tenant to Landlord, and the balance (if any) shall be paid by Host O.P.
to Tenant in cash, (B) Host O.P. agrees to pay such cash balance (if any)
directly to Tenant without the need for notice or demand on Landlord, and (C)
Tenant agrees to look only to Host O.P. for payment of such cash balance.
21.5 [Intentionally Omitted.]
21.6 Single Purpose Entity Covenants.
21.6.1 Separate Existence
Tenant shall (i) maintain its books and records and bank
accounts separate from any other person or entity (except that, for accounting
and reporting
-90-
purposes, Tenant may be included in the CCC Consolidated Financial Statements
in accordance with GAAP); (ii) maintain an arm's length relationship
with its members, Affiliates and any other party furnishing services to it;
(iii) maintain its books, records, resolutions and agreements as official
records; (iv) conduct its business in its own name and through its own
authorized officers and agents; (v) maintain its financial statements,
accounting records and other limited liability company documents separate from
those of any other Person (except for inclusion in the CCC Consolidated
Financial Statements); (vi) pay its own liabilities out of its own funds and
other assets, including funds contributed to its capital by its equity holders,
and all such capital contributions shall be reflected properly in its books and
records; (vii) observe all limited liability company formalities, as applicable,
necessary to maintain its identity as an entity separate and distinct from its
members, CCC, and all other Affiliates; (viii) participate in the fair and
reasonable allocation of any and all overhead expenses and other common expenses
for facilities, goods or services provided to multiple entities; (ix) use its
own stationery, invoices and checks (except when acting in a representative
capacity); (x) hold and identify itself as a separate and distinct entity under
its own name and not as a division or part of any other Person (except for
inclusion in the CCC Consolidated Financial Statements); and (xi) hold its
assets in its own name.
21.6.2 Independent Member
Upon Notice from Landlord, Tenant shall have an Independent
Member (who shall be a non-equity member) at all times, or if the Independent
Member has withdrawn, Tenant shall not take any action which may not be taken
pursuant to the organizational documents of Tenant without the consent of the
Independent Member until such time as a replacement Independent Member has been
admitted to Tenant.
21.6.3 Limitation on Indebtedness and Guarantees
Except pursuant to the Consent and Assignment or as otherwise
expressly provided herein, Tenant shall not (i) incur, create or assume any
Indebtedness of any kind; or (ii) guarantee or have any consensual contingent
obligation for the obligations of any other Person; provided that, so long as no
Event of Default has occurred and is continuing, Tenant may incur, create or
assume any Permitted Debt (as defined below). As used herein, "PERMITTED DEBT"
shall mean:
(i) if no Default or Event of Default has occurred and is
continuing, purchase money Indebtedness and capitalized lease
obligations for the purchase or lease of FF&E in the ordinary course
of business (and not inconsistent with customary industry practices),
which Indebtedness may be secured by a first priority lien on the
goods and equipment that have been so purchased or leased;
(ii) if no Event of Default has occurred and is continuing,
unsecured Indebtedness owing to CCC or any wholly owned Subsidiary
thereof, with respect to which the lender shall have agreed in
writing, in form and substance satisfactory to Landlord, that payment
of such Indebtedness shall be subordinated in all respects to
performance of Tenant's
-91-
obligations under this Lease and that no
remedies may be exercised with respect to enforcement or collection of
such Indebtedness until such time as this Lease shall have terminated
and all obligations owed by Tenant hereunder shall have been
discharged in full; and
(iii) if no Event of Default has occurred and is continuing,
Indebtedness solely in respect of surety and appeal bonds, performance
bonds and other obligations of a like nature (to the extent that such
incurrence does not result in the incurrence of any obligation to
repay any obligation relating to borrowed money of others), all in the
ordinary course of business in accordance with customary industry
practices.
21.6.4 Distributions
Tenant shall make no distributions of cash or other assets to
any of its members if an Event of Default has occurred and is continuing under
Section 12.1(a) hereof.
21.6.5 Single Purpose
Tenant shall not have or create any Subsidiaries or hold any
equity interest in any other Person. Tenant shall at all times be a Single
Purpose entity.
Tenant shall not (i) engage in any business activity or
operate for any purpose other than as stated in its Limited Liability Company
Operating Agreement as in effect on the date hereof; (ii) without the consent of
all its members, including the consent of an Independent Member, file a
bankruptcy or insolvency petition or otherwise institute bankruptcy proceedings;
or (iii) acquire any assets not reasonably related to the business and operation
of the Facility.
21.6.6 Certain Fundamental Changes
Without the consent of Landlord and any Facility Mortgagee (if
required), Tenant shall not (i) be a party to any merger or consolidation with
any Person, or (ii) assign its rights under this Lease, or assign, transfer, or
sell all or any substantial portion of its assets to any Person, in each case
other than a Qualified Affiliate that is a Single Purpose entity, has no
outstanding Indebtedness (other than Permitted Debt) and no Liens on any of its
assets (other than Permitted Liens) at the time of such assignment, and assumes
all of the obligations of Tenant hereunder. Without the consent of Landlord and
any Facility Mortgagee, Tenant shall not adopt a plan of dissolution or
liquidation or dissolve, wind up or liquidate. Without the approval of the
Independent Member, Tenant shall not take any action for which the approval of
the Independent Member is required under its organizational documents.
21.6.7 Amendments to Organizational Documents
Tenant shall not, in any manner, without the consent of
Landlord and any Facility Mortgagee (if required), amend, modify or alter the
terms of Sections 2.2, 2.3,
-92-
2.4, 5.4 (only paragraphs a, b, c, d and g thereof), 5.5, 5.6, 5.7, and 8.1 of
the Limited Liability Company Operating Agreement of Tenant, as in effect on the
date hereof.
21.6.8 Qualified Affiliate
Tenant shall, at all times during the Term of this Lease, be a
Qualified Affiliate.
ARTICLE 22
LIMITATIONS
22.1 REIT Compliance.
Tenant acknowledges that Host REIT intends to qualify as a real estate
investment trust under the Code. Tenant agrees that it will not knowingly or
intentionally take or omit to take any action, or permit any status or condition
to exist at the Leased Property, which Tenant actually knows (acting in good
faith) would or could result in (i) the Rent payable under this Lease not
qualifying as "rents from real property" as defined in Section 856(d) of the
Code or (ii) Host REIT being disqualified from treatment as a real estate
investment trust under the Code as the provisions exist on the date hereof;
provided, however, that notwithstanding anything herein to the contrary, (i)
Tenant shall not be responsible for any act or omission of Landlord or Manager
(unless Manager's action was with the express written consent or at the
direction of Tenant), and (ii) any action by Tenant taken in compliance with the
express terms of this Lease, the Consent and Assignment, or the Management
Agreement shall not be deemed to create a Default or Event of Default under this
Section 22.1.
22.2 FF&E Limitation.
This Section 22.2 is intended to insure that all of the rent payable
under this Lease qualifies as "rents from real property" within the meaning of
Section 856(d) of the Code or any similar or successor provisions thereto. In
furtherance of such purpose, the parties have agreed to the terms set forth in
Schedule 22.2 attached hereto.
-------------
22.3 Sublease Rent Limitation.
Anything contained in this Lease to the contrary notwithstanding, from
and after the Commencement Date, Tenant shall not knowingly or intentionally
(acting in good faith) enter into any sublease with respect to the Leased
Property or any part thereof on any basis such that the rental to be paid by the
sublessee thereunder would be based (or considered to 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
payable hereunder would or could, to Tenant's actual knowledge (acting in good
faith), fail to qualify as "rents from real property" within the meaning of
Section 856(d) of the Code, or any similar or successor provisions thereto.
-93-
22.4 Sublease Tenant Limitation.
Anything contained in this Lease to the contrary notwithstanding,
Tenant shall not knowingly or intentionally (acting in good faith) sublease any
Leased Property or any part thereof to any Person or Entity in which Landlord,
Host O.P., or Host REIT owns, directly or indirectly, a ten percent (10%) or
greater interest, within the meaning of Section 856(d)(2)(B) of the Code, or any
similar or successor provisions thereto. Tenant shall take reasonable
precautions in connection with each sublease (including providing Landlord with
prompt Notice of the same) to ensure that such sublease will not result in a
violation of this Section 22.4.
22.5 Tenant Ownership Limitation.
Anything contained in this Lease to the contrary notwithstanding,
Tenant shall not knowingly or intentionally (acting in good faith), and shall
use commercially reasonable efforts to cause its Affiliates not to knowingly or
intentionally (acting in good faith), acquire, directly or indirectly, (a) a
nine and 80/100 percent (9.8%) or greater interest in Landlord or Host REIT, or
(b) a four and 90/100 percent (4.9%) or greater interest in Host O.P., within
the meaning of Section 856(d)(2)(B) of the Code, or any similar or successor
provisions thereto.
ARTICLE 23
MISCELLANEOUS
23.1 No Waiver.
No failure by either Landlord or Tenant 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 maximum 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.
23.2 Remedies Cumulative.
To the maximum extent permitted by law, each legal, equitable or
contractual right, power and remedy of either party 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 either party of any one or more of
such rights, powers and remedies shall not preclude the simultaneous or
subsequent exercise by such party of any or all of such other rights, powers and
remedies.
23.3 Severability.
Any clause, sentence, paragraph, section or provision of this Lease
held by a court of competent jurisdiction to be invalid, illegal or ineffective
shall not impair, invalidate or nullify the remainder of this Lease, but rather
the effect thereof shall be
-94-
confined to the clause, sentence, paragraph, section or provision so held to be
invalid, illegal or ineffective, and this Lease shall be construed as if such
invalid, illegal or ineffective provisions had never been contained herein.
23.4 Acceptance of Surrender.
No surrender to Landlord 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 Landlord, and no act by Landlord or any
representative or agent of Landlord, other than such a written acceptance by
Landlord, shall constitute an acceptance of any such surrender.
23.5 No Merger of Title.
It is expressly acknowledged and agreed that it is the intent of the
parties that there shall be no merger of this Lease or of the leasehold estate
created hereby by reason of the fact that the same Person may acquire, own or
hold, directly or indirectly, this Lease or the leasehold estate created hereby
and the fee estate or ground landlord's interest in the Leased Property.
23.6 Release of Landlord Following Conveyance.
If Landlord or any successor owner of all or any portion of the Leased
Property shall convey all or any portion of 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 shall expressly assume all obligations of
Landlord hereunder arising or accruing from and after the date of such
conveyance or transfer, Landlord or such successor owner, as the case may be,
shall thereupon be released from all future liabilities and obligations of
Landlord under this Lease with respect to such of the Leased Property arising or
accruing from and after the date of such conveyance or other transfer, all such
future liabilities and obligations shall thereupon be binding upon the new
owner, and all references herein to Landlord thereafter shall be deemed to refer
to the new owner.
23.7 Quiet Enjoyment.
Provided that no Event of Default shall have occurred and be
continuing, Tenant shall peaceably and quietly have, hold and enjoy the Leased
Property for the Term, free of hindrance or molestation by Landlord or anyone
claiming by, through or under Landlord, but subject to (a) all Permitted Liens,
(b) Liens as to obligations of Landlord that are either not yet due or which are
being contested in good faith and by proper proceedings, provided the same do
not materially interfere with Tenant's ability to operate the Facility, (c)
Liens that have been consented to in writing by Tenant, and (d) Landlord's
option to terminate this Lease pursuant to Article 24. Except as otherwise
provided in this Lease, no failure by Landlord to comply with the foregoing
covenant shall give Tenant any right to cancel or terminate this Lease or ▇▇▇▇▇,
reduce or make a deduction from or offset against the Rent or any other sum
payable under this Lease, or to fail to perform any other obligation of Tenant
hereunder.
-95-
23.8 Landlord's Consent.
Where provision is made in this Lease for Landlord's consent and
Landlord shall fail or refuse to give such consent, except to the extent
expressly provided herein to the contrary Tenant shall not be entitled to any
damages for any withholding by Landlord of its consent, it being intended that
Tenant's sole remedy shall be an action for specific performance or injunction
and that such remedy shall be available only in those cases where Landlord has
expressly agreed in writing not unreasonably to withhold its consent. Whenever
in this Lease the consent or approval of Landlord or Tenant is required, such
consent or approval shall (except to the extent that such consent or approval is
specifically designated as being "within the discretion" of a party, or words to
that effect, in the applicable provision) not be unreasonably withheld,
conditioned or delayed, shall be in writing and shall be executed by a duly
authorized officer or agent of the party granting such consent or approval;
provided, however, that Landlord shall be deemed to have reasonably withheld its
consent in the event any Facility Mortgagee withholds its consent or otherwise
objects to any proposed consent or approval. With respect only to the matters
set forth on Schedule 23.8, if either Tenant or Landlord fails to respond within
-------------
fifteen (15) days (or such shorter or longer period of time as may be expressly
specified in this Lease) to a request in the form of a Notice by the other party
for a consent or approval, such consent or approval shall be deemed to have been
given.
23.9 Memorandum of Lease.
Unless required by Legal Requirements, neither Landlord nor Tenant
shall record this Lease. However, Landlord and Tenant shall promptly, upon the
request of the other, 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. The requesting party
shall bear the costs and expenses of recording such memorandum. If a memorandum
of this Lease is required by Legal Requirements to be recorded, the parties
shall share equally the costs and expenses of recording such memorandum.
23.10 Notices.
(a) Any and all notices, demands, consents, approvals, offers,
elections and other communications required or permitted under this Lease shall
be deemed adequately given if in writing and the same shall be delivered either
in hand, by telecopier with computer generated acknowledgment of receipt, or by
mail or Federal Express or similar expedited commercial carrier, addressed to
the recipient of the notice, postpaid and certified with return receipt
requested (if by mail), or with all freight charges prepaid (if by Federal
Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall
be deemed to have been given for all purposes of this Lease upon the date of
acknowledged receipt, in the case of a notice by telecopier, and, in all other
cases, upon the date of receipt or refusal, except that whenever under this
Lease a notice is either received on a day which is not a Business Day or is
required to be delivered on or before a specific day which is not
-96-
a Business Day, the day of receipt or required delivery shall automatically be
extended to the next Business Day.
(c) All such notices shall be addressed:
if to Landlord to:
--------------------------------------------------
c/o Host Marriott Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
with a copy (which shall not constitute notice) to:
Host Marriott Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
If to Tenant to:
--------------------------------------------------
c/o Crestline Capital Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
with a copy (which shall not constitute notice) to:
Crestline Capital Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
(d) By notice given as herein provided, the parties hereto and
their respective successors and assigns shall have the right from time to time
and at any time during the Term of this Lease to change their respective
addresses effective upon receipt by the other parties of such notice and each
shall have the right to specify as its address any other address within the
United States of America.
23.11 Construction.
Anything contained in this Lease to the contrary notwithstanding, all
claims against, and liabilities of, Tenant or Landlord arising prior to any date
of termination or expiration of this Lease shall survive such termination or
expiration. In no event shall either party be liable for any punitive or
consequential damages as the result of a breach of this Lease by such other
party. Neither this Lease nor any provision hereof may be changed, waived,
discharged or terminated except by an instrument in writing signed by
-97-
the party to be charged. All the terms and provisions of this Lease shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Each term or provision of this Lease to be performed by
Tenant or Landlord shall be construed as an independent covenant and condition.
Time is of the essence with respect to the exercise of any rights of, and
performance of any obligations by, Tenant or Landlord under this Lease. Except
as otherwise set forth in this Lease, any obligations of Tenant and Landlord
(including, without limitation, any monetary, repair and indemnification
obligations) shall survive the expiration or sooner termination of this Lease.
23.12 Counterparts; Headings.
This Lease may be executed in two or more counterparts, each of
which shall constitute an original, but which, when taken together, shall
constitute but one instrument and shall become effective as of the date hereof
when copies hereof, which, when taken together, bear the signatures of each of
the parties hereto shall have been signed. Headings in this Lease are for
purposes of reference only and shall not limit or affect the meaning of the
provisions hereof.
23.13 Governing Law; Jurisdiction.
(a) This Lease shall be interpreted, construed, applied and
enforced in accordance with the laws of the State applicable to contracts
between residents of the State, which are to be performed entirely within the
State, and the laws of the State shall apply to the perfection and priority of
liens upon and the disposition of and disposition with respect to the Leased
Property and in any case regardless of (i) where this Lease is executed or
delivered; or (ii) where any payment or other performance required by this Lease
is made or required to be made; or (iii) where any breach of any provision of
this Lease occurs, or any cause of action otherwise accrues; or (iv) where any
action or other proceeding is instituted or pending; or (v) the nationality,
citizenship, domicile, principal place of business, or jurisdiction of
organization or domestication of any party; or (vi) whether the laws of the
forum jurisdiction otherwise would apply the laws of a jurisdiction other than
the State; or (vii) any combination of the foregoing.
(b) To the maximum extent permitted by applicable law, any action
to enforce, arising out of, or relating in any way to, any of the provisions of
this Lease may be brought and prosecuted only in the court or courts located in
the State of Maryland; and the parties consent to the jurisdiction of said court
or courts located in the State and to service of process by certified mail,
return receipt requested, or by any other manner provided by law.
23.14 No Broker.
Each party hereby represents and warrants to the other that it has
not engaged, dealt with or otherwise discussed this transaction with any broker,
agent or finder. Each party agrees to indemnify and hold the other harmless from
and against any claim arising out of a breach of the foregoing agreement and
representation and warranty.
-98-
23.15 Related Agreements.
[(a)] Anything herein to the contrary notwithstanding, neither
Landlord nor Tenant shall take any action, or fail to take any action, which
would constitute a breach or default under (i) that certain Noncompetition
Agreement dated as of even date herewith by and between CCC and Host O.P., as
the same may be subsequently amended or restated (the "NONCOMPETITION
AGREEMENT"), (ii) that certain Pooling and Security Agreement dated as of even
date herewith by and between CCC, OpCo, the Tenants and Landlords named therein
and Host O.P., as the same may be subsequently amended or restated (the "POOLING
AGREEMENT"), [(iii) that certain Facility Mortgagee Agreement dated as of even
date herewith by and between Tenant Landlord, and [Landlord's lender], as the
same may be amended or restated,] (iv) the Security Agreement, (v) the Consent
and Assignment, or (vi) the Guarantee (collectively, the Noncompetition
Agreement, the Pooling Agreement, the Facility Mortgagee Agreement, the Security
Agreement, the Consent and Assignment and the Guarantee are sometimes referred
to herein as the "RELATED AGREEMENTS."
[(b) Anything herein to the contrary notwithstanding, Tenant shall
not take any action or fail to take any action authorized or required to be
taken hereunder that would constitute a breach or default of the Landlord under
that certain ground lease dated as of ____________________ by and between
_____________ and _____________ as the same may have been or may subsequently be
amended or restated.]
23.16 Legal Fees and Costs of Litigation.
In the event either party to this Lease commences legal action of any
kind to enforce the terms and conditions of this Lease, the prevailing party in
such litigation will be entitled to collect from the other party all reasonable
costs, expenses and attorneys' fees incurred in connection with such action.
23.17 Force Majeure.
If Landlord or Tenant is in any way delayed or prevented from
performing any obligation, except any monetary obligation, hereunder due to acts
of God, acts of war, civil disturbance, action of any Governmental Agency
(including the revocation or refusal to grant licenses or permits, where such
revocation or refusal is not due to the fault of the party whose performance is
to be excused for reasons of force majeure), strikes, fire or other Casualty, or
any other cause beyond the reasonable control of either party (as applicable),
then the time for performance of such obligation shall be excused for the period
of such delay or prevention and extended for a period equal to the period of
such delay, interruption or prevention.
23.18 Conflicts with Related Agreements.
In the event of any conflict or inconsistency between this Lease and
any of the Related Agreements or the Asset Management Agreement, the terms of
any of the Related Agreements or the Asset Management Agreement shall govern.
Notwithstanding the foregoing, in the event of any conflict or inconsistency
between this Lease and the Consent and Assignment, as they relate to the
respective rights and obligations of Landlord and Tenant, the terms of this
Lease shall govern.
23.19 Operating Lease.
The parties hereto intend that this Lease shall be deemed for all
purposes to be an operating lease and not a capital lease.
-99-
ARTICLE 24
TERMINATION RIGHTS
24.1 Landlord's Right to Terminate Lease upon Sale or Tax Law Change.
(a) In the event (i) Landlord enters into a bona fide contract to sell
the Leased Property to a non-Affiliate, or (ii) of a Tax Law Change resulting in
Landlord's determination to terminate this Lease, then in either such event
Landlord may terminate this Lease by giving not less than sixty (60) days prior
Notice to Tenant of Landlord's election to terminate this Lease upon the closing
under such contract or upon a date specified by Landlord which is on or after
the effective date of the Tax Law Change. Landlord shall be entitled to
terminate this Lease by reason of a Tax Law Change only if all other Pool Leases
and Other Leases are concurrently terminated, other than any other Pool Lease or
Other Lease that relates to a property that Host REIT, Host O.P. or any wholly
owned Subsidiary thereof cannot own, following such Tax Law Change, without
incurring potential adverse effects for Host REIT, Host O.P. or such Subsidiary,
unless such property is subject to a lease. Effective upon such date, this
Lease shall terminate and be of no further force and effect except as to any
obligations of the parties existing as of such date that survive termination of
this Lease, and all Rent, including Percentage Rent and Additional Charges,
shall be adjusted as of the termination date. (The term "TAX LAW CHANGE" shall
mean any change in the Code (including, without limitation, a change in the
Treasury regulations promulgated thereunder), or in the judicial or
administrative interpretations of the Code, which in Landlord's determination
will permit Landlord, Host REIT, Host O.P. or another entity in which Host REIT
or Host O.P. owns substantially all of the economic interests to operate the
Facility as a hotel without adversely affecting Host REIT's qualification for
taxation as a real estate investment trust under applicable Code provisions).
Landlord, in the event it enters into a bona fide contract to sell the Leased
Property to a non-Affiliate, and subject to the restrictions set forth in
Section 20.4, shall be permitted to transfer the Leased Property subject to the
Lease, provided, however, that the parties shall make such reasonable
modifications, if any, hereto as shall be necessary or appropriate in connection
with such transfer, including, without limitation, termination or modification
of the Related Agreements and/or the Asset Management Agreement as they relate
to this Lease, but no amendment hereto shall (i) increase Tenant's rental
obligations or other financial obligations hereunder, (ii) have a material
adverse effect upon Tenant's rights hereunder, (iii) materially increase
Tenant's non-economic obligations hereunder, or (iv) decrease Landlord's
obligations hereunder; and provided further that in such event Landlord shall
not, without the consent of Tenant, transfer the Leased Property or any interest
therein to any Person which (A) does not have sufficient financial resources and
liquidity to fulfill "Owner's" obligations under the Management Agreement and
Landlord's obligations under this Lease, or (B) who has been, or is in control
of, controlled by or under common control with Persons who have been, convicted
of felonies involving moral turpitude in any state or federal court.
(b) As compensation for the early termination of its leasehold estate
under this Article 24 because of a sale of the Leased Property (or as otherwise
expressly provided in this Lease), and as a condition precedent to Landlord's
right to terminate this Lease upon such a sale, Landlord shall, not more than
one (1) year prior to the anticipated termination date of this Lease and in any
event within sixty (60) days prior to the closing
-100-
of such sale, either (i) pay to Tenant the Fair Market Value of Tenant's
leasehold estate hereunder as of the termination date of the Lease or (ii) offer
to lease to Tenant, pursuant to one or more leases, one or more substitute hotel
facilities (a "COMPARABLE LEASE") that (A) are comparable, in Tenant's
commercially reasonable judgment, to the average quality of the properties
leased pursuant to the other Pool Leases and the Other Leases, taking into
consideration the age, physical condition, location and other relevant factors,
and (B) would create for Tenant leasehold estates having an aggregate Fair
Market Value as to that portion of its term equal to the remaining Term
hereunder of no less than the Fair Market Value of the remaining Term hereunder,
both such values to be determined as of the closing of the sale of the Leased
Property. It is the intent of the parties that the Comparable Lease shall result
in substantially the same ratio between Tenant's Operating Profit and Rent as
then exists under this Lease for the Fiscal Year immediately preceding the sale.
For the purposes of determining the Fair Market Value for purposes of this
Section 24.1 or pursuant to any other Section of this Lease providing for such
compensation of Tenant upon a Lease termination, a discount rate of twelve
percent (12%) per annum will be used, and the annual income for the remainder of
the Term will be assumed to be equal to the average Tenant Operating Profit
generated during the three (3) Fiscal Years immediately preceding the
termination date, or if three (3) Fiscal Years have not elapsed since the
Commencement Date, the average during the preceding Fiscal Years that have
elapsed (with the annual income for each of such Fiscal Years escalated from the
end of each such Fiscal Year to the date of determination at the rate of
inflation before such average is determined), provided that this amount shall be
determined on a pro forma basis if the Leased Property has not operated as a
hotel for at least the preceding twelve (12) months. In the event Landlord and
Tenant are unable to agree upon the Fair Market Value of the original leasehold
estate or the proposed Comparable Lease leasehold estate, it shall be determined
by arbitration pursuant to the procedure set forth in Article 15. The parties
agree that, if Landlord elects to offer enter into a Comparable Lease, to the
extent that the Fair Market Value of the Comparable Lease is less than the Fair
Market Value of the original leasehold estate, calculated as set forth above,
then Landlord shall compensate Tenant in cash for the deficiency prior to the
effective date of the termination.
(c) Notwithstanding the provisions of Section 24.1(b), Landlord shall
be entitled to terminate this Lease in connection with a sale or other transfer
of the Leased Property to an unrelated Person or a Person in which Host O.P.
owns, directly or indirectly, less than two-thirds of the equity interests,
without payment of any termination fee, by giving not less than sixty (60) days
prior written Notice to Tenant, provided that the landlords under the Other
Leases and the other Pool Leases (excluding this Lease) relating to an aggregate
of fewer than twelve (12) hotels have elected to terminate such Other Leases or
other Pool Leases (excluding this Lease) without payment of a termination fee.
(d) Host O.P. agrees to guarantee Landlord's obligation to pay to
Tenant the compensation for (i) termination by a Superior Mortgagee or Superior
Landlord under Section 20.2, (ii) termination of this Lease following a Casualty
pursuant to Section 10.2.3, or (iii) termination of this Lease by Tenant by
reason of Landlord's election not to make an Award available to Tenant for
restoration following a Condemnation pursuant to Section 11.2; provided that at
the time of any such termination Landlord is a wholly owned direct or indirect
subsidiary of Host O.P., and if Landlord is then partially owned, directly or
indirectly, by Host O.P., Host O.P. shall guaranty that portion of such
compensation
-101-
that represents the same percentage of the total compensation payable as Host
O.P.'s direct or indirect percentage ownership interest in Landlord. Landlord
agrees to be exclusively responsible for (and shall reimburse Tenant for any
payment Tenant otherwise might be required to make) the Manager's termination
fee (if any) payable to Manager because of the termination of the Management
Agreement in connection with the sale of the Leased Property.
(e) As compensation for the early termination of its leasehold estate
under this Article 24 because of a Tax Law Change, Landlord shall, not more than
one (1) year prior to the anticipated termination date of this Lease and in any
event within sixty (60) days of such termination, pay to Tenant the Fair Market
Value of Tenant's leasehold estate hereunder as of the termination date of this
Lease, as determined under Section 24.1(b). The amount determined to be the
Fair Market Value of Tenant's leasehold estate shall be payable, at the option
of Landlord, in cash or in the form of stock in Host REIT.
24.2 Tenant's Right to Terminate Lease upon Certain Events.
Notwithstanding any provision of this Lease to the contrary, Tenant
shall be entitled to terminate this Lease by giving not less than 180 days'
prior Notice to Landlord, without penalty, provided that the Other Tenants have
theretofore elected to terminate Other Leases and other Pool Leases (excluding
this Lease) relating to an aggregate of fewer than twelve (12) hotels without
penalty pursuant to a similar provision contained in such Other Leases or other
Pool Leases (excluding this Lease).
24.3 Termination of Lease Following Notice of Termination of
Guarantee.
At any time after a notice of termination has been given pursuant to
Section 10(a) of the Guarantee and the six-month period specified in Section
10(a)(iii) of the Guarantee has commenced, Landlord shall be entitled to
terminate this Lease by giving Notice thereof to Tenant, and upon expiration of
the time, if any, fixed in such Notice, this Lease shall terminate and except as
otherwise expressly provided herein the rights and obligations of the parties
under this Lease shall cease, subject to compliance with the provisions of this
Section 24.3. Landlord shall not be required to pay any termination fee under
this Article 24 if such termination pursuant to this Section 24.3 occurs no
later than 12 months after the date on which the six-month period specified in
Section 10(a)(iii) of the Guarantee commenced; provided, however, that if the
termination occurs after such 12-month period, then Landlord shall be required
to pay Tenant a termination fee calculated in accordance with Section 24.1(b).
Notwithstanding the foregoing, in the event any other Pool Lease under which
there does not then exist a default by the Other Tenant thereunder beyond the
applicable notice and cure period, is terminated pursuant to a provision similar
to the foregoing, Landlord's right to terminate this Lease under this Section
24.3 without payment of a termination fee shall be conditioned upon termination
of this Lease and all other Pool Leases no later than 4 months after the
earliest date on which termination of this Lease or any other Pool Lease
pursuant to this Section 24.3 becomes effective. The provisions of this 24.3
shall be in addition to, and not in lieu of, the right of Landlord to terminate
this Lease by reason of the occurrence of an Event of Default hereunder pursuant
to the provisions of Article 12, without regard to the time limits or other
provisions of this Section 24.3.
-102-
IN WITNESS WHEREOF, the parties have executed this Lease as a sealed
instrument as of the date above first written.
LANDLORD:
Attest:
By:
-----------------------------------
Name: Name:
------------------------------ ---------------------------------
Title: Title:
----------------------------- --------------------------------
TENANT:
Attest:
By:
-----------------------------------
Name: Name:
------------------------------ ---------------------------------
Title: Title:
----------------------------- --------------------------------
Not as a party, but solely to acknowledge and agree to the obligations
imposed upon it by Sections 4.5, 20.2, 21.4 and 24.1(d) and Schedule 22.2.
-------------
HOST MARRIOTT, L.P., a Delaware limited
partnership
Attest:
By:
-----------------------------------
Name: Name:
------------------------------ -------------------------------
Title: Title:
----------------------------- ------------------------------
-103-
SCHEDULE 22.2
PROVISIONS RELATING TO EXCESS FF&E
(a) This Schedule 22.2 is intended to insure that all of the rent
-------------
payable under this Lease qualifies as "rents from real property" within the
meaning of Section 856(d) of the Code or any similar or successor provisions
thereto. In furtherance of such purpose, the parties have agreed to the terms
set forth in the following paragraphs of this Schedule 22.2 with the objective
-------------
that, anything contained in this Lease to the contrary notwithstanding, the
average of the adjusted tax basis of the items of "personal property" (within
the meaning of Section 856(d)(i)(C) of the Code) that are leased to Tenant under
this Lease at the beginning and at the end of any calendar year shall not exceed
fifteen percent (15%) of the average of the aggregate adjusted tax bases of the
Leased Property at the beginning and at the end of each such calendar year (the
"FF&E LIMITATION"). The provisions contained in the following paragraphs shall
be interpreted in a manner consistent with the intent and objective described
above (it being understood that this paragraph constitutes a statement of the
parties' mutual intent only and that the failure to achieve such objective,
absent any Default or Event of Default under the other paragraphs of this
Schedule 22.2 or any other provisions of this Lease, shall not constitute a
-------------
Default or an Event of Default hereunder). [In order to avoid exceeding the
FF&E Limitation at the commencement of this Lease, Tenant has entered into an
Excess FF&E Lease (as defined below) with Non-Controlled Subsidiary for certain
Excess FF&E (as defined below) more specifically described therein that Landlord
has sold to Non-Controlled Subsidiary and that is now owned by Non-Controlled
Subsidiary (the "INITIAL FF&E LEASE").]
(b) If Landlord reasonably anticipates and gives Notice (an "EXCESS
FF&E NOTICE") and reasonably satisfactory evidence to Tenant that the FF&E
Limitation might be exceeded with respect to the Leased Property for any Fiscal
Year, Tenant shall, in accordance with the provisions set forth below and within
sixty (60) days following the delivery of such Excess FF&E Notice, either (a)
purchase from Landlord those items or categories of FF&E to be acquired by
Landlord during such Fiscal Year which are designated in such Excess FF&E Notice
as anticipated to cause Landlord to exceed the FF&E Limitation ("EXCESS FF&E")
or (b) arrange for Non-Controlled Subsidiary or another third party (in either
case, a "THIRD-PARTY PURCHASER") to purchase such Excess FF&E from Landlord and
to lease it to Tenant pursuant to a written lease agreement between such Third-
Party Purchaser and Tenant (an "EXCESS FF&E LEASE") that shall include the terms
specified for an Excess FF&E Lease in this Schedule 22.2 and in Schedule 22.2-A
------------- ---------------
hereto (it being understood that, without limiting the foregoing, Landlord and
Tenant intend that each Excess FF&E Lease be structured in a manner intended to
avoid the classification of Tenant's obligations thereunder as Capitalized Lease
Obligations).
(c) Upon receiving an Excess FF&E Notice, Tenant shall first offer to
Non-Controlled Subsidiary the opportunity to purchase from Landlord the Excess
FF&E designated therein and to lease same to Tenant pursuant to an Excess FF&E
Lease. Each Excess FF&E Lease with Non-Controlled Subsidiary shall provide for
an annual rental in an amount equal to the mathematical product of (i) the
applicable Market Leasing Factor (as defined below) for all Excess FF&E subject
to such Excess FF&E Lease multiplied by (ii) the Excess FF&E Value (as defined
below) of the Excess FF&E subject to such Excess FF&E Lease.
(d) If Non-Controlled Subsidiary does not agree to purchase and lease
all the Excess FF&E which is the subject of an Excess FF&E Notice within fifteen
(15) days after the date it receives Tenant's offer with respect thereto, then
Tenant shall either purchase such Excess FF&E from Landlord for Tenant's own
account or shall arrange for another Third-Party Purchaser that has satisfied
the requirements of paragraph (j) of this Schedule 22.2 to purchase such Excess
-------------
FF&E from Landlord and lease it to Tenant pursuant to an Excess FF&E Lease. If
a Third-Party Purchaser that has satisfied the requirements of paragraph (j) of
this Schedule 22.2 shall not have purchased such Excess FF&E from Landlord and
-------------
leased it to Tenant under an Excess FF&E Lease within forty-five (45) days after
Landlord's delivery of the Excess FF&E Notice relating thereto, then Tenant
shall itself purchase such Excess FF&E from Landlord as and when (but only
after) Landlord takes title to such Excess FF&E. Tenant shall purchase, or
shall cause each Third-Party Purchaser to purchase, Excess FF&E with the
purchaser's own funds.
(e) With respect to any Excess FF&E first leased or purchased by
Tenant pursuant to the terms of this Schedule 22.2 during a particular calendar
-------------
year, Tenant's annual Rent obligations shall be reduced in the following manner
(the "FF&E ADJUSTMENT"):
(i) For the calendar year in which such Excess FF&E is first
placed in service by either Tenant or a Third-Party Purchaser, such
reduction shall be in an amount (the "FIRST YEAR FF&E ADJUSTMENT") equal to
the mathematical product of (A) the Market Leasing Factor (as defined
below) for personal property with an average expected useful life
corresponding to the weighted average expected useful life (as determined
in accordance with GAAP and rounded to the nearest whole year) of all
Excess FF&E first placed in service by Tenant or a Third-Party Purchaser
during such calendar year (such weighted average, the "APPLICABLE EXPECTED
LIFE") times (B) the Excess FF&E Cost (as defined below) of all Excess FF&E
first placed in service by Tenant or a Third-Party Purchaser during such
calendar year times (C) either (x) 100% if Tenant leases such Excess FF&E
from Non-Controlled Subsidiary or (y) 110% if Tenant purchases such Excess
FF&E or leases such Excess FF&E from a Third-Party Purchaser other than
Non-Controlled Subsidiary times (D) 50%;
(ii) For each subsequent calendar year prior to the calendar year
in which the Applicable Expected Life for such Excess FF&E expires, such
reduction shall be in an amount equal to twice the First Year FF&E
Adjustment; and
(iii) For the calendar year in which the Applicable Expected
Life for such Excess FF&E expires, such reduction shall be in an amount
equal to the First Year FF&E Adjustment.
It is contemplated that there would be a separate FF&E Adjustment for all Excess
FF&E first placed in service during a single calendar year (with such FF&E
Adjustment extending for a period equal to the lesser of the remaining Term or
the Applicable Expected Life of the Excess FF&E acquired during such calendar
year). The Rent payable by Tenant
-2-
for each Accounting Period in a calendar year to which one or more FF&E
Adjustments apply shall be reduced by an amount equal to the mathematical
product of (i) the amount of such applicable FF&E Adjustment (or if more than
one FF&E Adjustment apply in such calendar year, the sum of such applicable FF&E
Adjustments) times (ii) a fraction, the numerator of which is one and the
denominator of which is the number of Accounting Periods in such calendar year.
The "EXCESS FF&E VALUE" of any Excess FF&E shall be the fair market value of
such Excess FF&E (which shall be the purchase price paid by the purchaser
thereof from Landlord, whether such purchaser is Non-Controlled Subsidiary,
another Third Party Purchaser or Tenant) plus the aggregate amount of out-of-
pocket transactional costs (including, without limitation, reasonable attorneys'
fees and any ad valorem, sales, transfer, transaction or similar tax, levy or
other governmental charge) incurred by such purchaser in connection with its
purchase of such Excess FF&E. The "MARKET LEASING FACTOR" for the first two (2)
Lease Years shall be the amounts set forth in Schedule 22.2-B* (with there to be
----------------
a separate Market Leasing Factor for each whole number of years of expected
useful life of Excess FF&E). Thereafter the Market Leasing Factors shall be
determined by an independent valuation expert, acceptable to both Landlord and
Tenant, who shall determine the Market Leasing Factors based on the median of
the leasing rates of at least three nationally recognized companies engaged in
the business of leasing similar FF&E or personal property and equipment with
average expected useful lives equal to the weighted average of the expected
useful lives set forth on Schedule 22.2-B. The cost of such expert shall be
---------------
borne by Landlord. The Market Leasing Factors shall take into account any use
taxes and similar Impositions payable by Tenant in connection with its leasing
of Excess FF&E under the relevant Excess FF&E Leases, as well as the reasonably
estimated anticipated out-of-pocket cost (including reasonable attorneys' and
accountants' fees) to Tenant of administering such Excess FF&E Leases during the
Term, so that the economic burden of such Impositions and administration costs
will be borne by Landlord. The "EXCESS FF&E COST" of any Excess FF&E shall be
the Excess FF&E Value of such Excess FF&E plus, if Tenant leases such Excess
FF&E from a Third-Party Purchaser, the aggregate amount of out-of-pocket
transactional costs (including, without limitation, reasonable attorneys' fees
and any ad valorem, sales, transfer, transaction or similar tax, levy or other
governmental charge) incurred by Tenant in connection with its entry into an
Excess FF&E Lease of such Excess FF&E in accordance with this Schedule 22.2.
-------------
(f) Landlord and Tenant agree to cause Manager to purchase all Excess
FF&E for Landlord's account with funds from the FF&E Reserve (or with funds
otherwise made available by Landlord). The parties specifically intend (and
Tenant hereby agrees to take such reasonable steps at Landlord's expense as
Landlord may request to insure) that
--------------------------
* As provided below with respect to the Market Leasing Factors for subsequent
-
years, the Market Leasing Factor for the first two years will take into
account any use taxes and similar Impositions payable by Tenant in
connection with its leasing of Excess FF&E under the relevant Excess FF&E
Leases, as well as the reasonably estimated anticipated out-of-pocket cost
(including reasonable attorneys' and accountants' fees) to Tenant of
administering such Excess FF&E Leases during the Term, so that the economic
burden of such Impositions will be borne by Landlord.
-3-
Landlord shall own all Excess FF&E for a period of time sufficient to permit
such Excess FF&E to become subject to any then existing Liens in favor of the
Facility Mortgagee that encumber FF&E acquired by Landlord; provided, however,
that in no event shall Landlord own any Excess FF&E (i) for more than five (5)
Business Days, or (ii) so long that the FF&E Limitation would be exceeded at the
beginning or end of any calendar year. Without limiting Tenant's obligation
under the immediately preceding sentence to take reasonable steps requested by
Landlord (at Landlord's expense) to achieve the objective set forth therein, it
is understood and agreed that the failure to achieve such objective, absent any
Default or Event of Default under the other provisions of this Schedule 22.2 or
-------------
any other provisions of this Lease, shall not constitute a Default or an Event
of Default hereunder. Every purchase of Excess FF&E from Landlord, whether by
Tenant or a Third-Party Purchaser, shall be made expressly subject to any and
all Liens encumbering such Excess FF&E in favor of any Facility Mortgagee.
Following the purchase of any Excess FF&E by Tenant or a Third-Party Purchaser
as contemplated by this Schedule 22.2, Landlord shall not be considered to own
-------------
or be the lessor of any of such Excess FF&E during the Term of this Lease for
any purpose, nor shall any of such Excess FF&E be considered part of the Leased
Property, and neither Landlord nor Tenant shall at any time take a position (in
its books and records or otherwise) or make an assertion inconsistent therewith.
(g) In the event that Tenant owns any Excess FF&E at the expiration or
earlier termination of this Lease (including, without limitation, a termination
in connection with a transfer of ownership of the Leased Property), Landlord
shall purchase from Tenant and Tenant shall sell to Landlord (the "EXCESS FF&E
REPURCHASE"), on the effective date of such expiration or termination, all such
Excess FF&E (except for any Excess FF&E to which the terms of paragraph (i) of
this Schedule 22.2 apply) for a purchase price equal to the fair market value
-------------
(which the parties hereby agree shall not be less than the adjusted book value)
of such Excess FF&E at such time (the "EXCESS FF&E REPURCHASE PRICE"). The
Excess FF&E Repurchase Price shall be payable first by offset against any Rent
owed by Tenant to Landlord as of such time and any amounts owed by Tenant to
Landlord as of such time under the Working Capital Note, and the remainder (if
any) shall be paid by Landlord to Tenant in cash within ten (10) days after the
expiration or termination of this Lease.
(h) In the event that Tenant is leasing any Excess FF&E from a Third-
Party Purchaser at the expiration or earlier termination of this Lease
(including, without limitation, a termination resulting in connection with a
transfer of ownership of the Leased Property), Landlord shall purchase and
assume from Tenant, and Tenant shall sell, assign and delegate to Landlord, on
the effective date of such expiration or termination all Tenant's right, title
and interest in and its obligations under each Excess FF&E Lease between Tenant
and such Third-Party Purchaser (an "EXCESS FF&E LEASEHOLD INTEREST"). In the
aforesaid transaction (an "EXCESS FF&E LEASEHOLD INTEREST TRANSFER"), the
transfer price for such Excess FF&E Leasehold Interest (the "EXCESS FF&E
LEASEHOLD INTEREST TRANSFER PRICE") shall be an amount equal to the fair market
value of such Excess FF&E Leasehold Interest at such time (as determined in
accordance with the procedure provided below) and shall be payable (i) by
Landlord if such fair market value is a positive number or (ii) by Tenant if
such fair market value is a negative number. The fair market value of the
Excess FF&E Leasehold Interest shall be
-4-
determined taking into account all relevant factors, including the remaining
term thereof, the remaining expected useful life of the Excess FF&E (as
determined in accordance with GAAP) subject to such leasehold, and the leasing
rate that would apply, under market conditions at that time, if a new lease for
such Excess FF&E were to be entered into with an unrelated party for a term
equal to the term remaining for such Excess FF&E Leasehold Interest; provided,
however, that in no event shall such fair market value be less than the adjusted
book value of such Excess FF&E Leasehold Interest. Any amount payable pursuant
to this paragraph shall be paid within ten (10) days after the expiration or
termination of this Lease and, if due from Landlord, shall be paid first by
offset against any Rent owed by Tenant to Landlord as of such time and any
amounts owed by Tenant to Landlord as of such time under the Working Capital
Note, and the remainder (if any) shall be paid in cash.
(i) In the event that the Facility Mortgagee forecloses on its Lien on
any Excess FF&E owned by Tenant in connection with, but not separate from, a
foreclosure of the Leased Property, Landlord shall reimburse Tenant for the loss
of such Excess FF&E in an amount equal to the Excess FF&E Repurchase Price plus
any reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees) incurred by Tenant in complying with (but not contesting) such
foreclosure (the "EXCESS FF&E REIMBURSEMENT AMOUNT"). In the event that the
Excess FF&E Reimbursement Amount becomes payable to Tenant pursuant to the
immediately preceding sentence, (i) it shall be paid first by offsetting any
amounts owed by Tenant to Landlord as of such time and the balance (if any)
shall be paid in cash, (ii) Tenant agrees to seek payment of such cash balance
(if any) solely from Host O.P. pursuant to the terms of the Facility Mortgagee
Agreement and shall not make any demand or claim therefor against Landlord, the
Facility Mortgagee, any purchaser in foreclosure or transferee by deed in lieu
of foreclosure or other party claiming under any of the foregoing, and (iii)
Host O.P. agrees to pay any such cash balance.
(j) No Third-Party Purchaser shall purchase any Excess FF&E from
Landlord unless and until such Third-Party Purchaser shall have (i) agreed to
purchase such Excess FF&E with cash from such Third-Party Purchaser's own funds;
(ii) agreed to lease such Excess FF&E to Tenant under an Excess FF&E Lease; and
(iii) entered into an agreement with Landlord, the Facility Mortgagee and Host
O.P. pursuant to which (A) the Third-Party Purchaser acknowledges to the
Facility Mortgagee that all Excess FF&E purchased by such Third-Party Purchaser
while the Facility Mortgage is in effect is subject to the Facility Mortgagee's
first-priority Lien (without Third-Party Purchaser assuming any liability for
Landlord's obligations that are secured by or arise under any Facility Mortgage)
and that the Facility Mortgagee's rights and remedies with respect to such
Excess FF&E shall survive and be enforceable with respect thereto; (B) the
Third-Party Purchaser covenants to the Facility Mortgagee to execute and deliver
UCC-1 financing statements prepared by Landlord or any Facility Mortgagee
confirming the foregoing for notice purposes, which UCC-1 financing statements
may then be filed by Landlord or the Facility Mortgagee at Landlord's sole
expense; (C) the Third-Party Purchaser covenants not to sell, lease, transfer or
otherwise dispose of such Excess FF&E or any interest therein, or grant or cause
or permit there to exist any lien, charge or encumbrance with respect thereto,
other than the Lien in favor of the Facility Mortgagee, any other Liens which
are the responsibility of Landlord and any Lien arising pursuant to such
agreement
-5-
or the Excess FF&E Lease, (D) in the event that this Lease expires or is
terminated prior to the expiration or termination of the Excess FF&E Lease,
Landlord agrees to purchase from the Third-Party Purchaser, and the Third-Party
Purchaser agrees to sell to Landlord, all Excess FF&E owned by the Third-Party
Purchaser at that time (other than any Excess FF&E to which clause (E) below
applies) on the same terms as those applicable to the Excess FF&E Repurchase;
and (E) if the Facility Mortgagee forecloses on its Lien with respect to Excess
FF&E owned by the Third-Party Purchaser: (x) Landlord and Host O.P. agree to
reimburse the Third-Party Purchaser for the loss of such Excess FF&E (such
reimbursement to be paid first by offsetting any amounts owed by the Third-Party
Purchaser to Landlord and the balance (if any) to be paid in cash); (y) Host
O.P. agrees to pay the cash balance (if any) of such reimbursement amount
directly to the Third-Party Purchaser without the need for notice or demand on
Landlord; and (z) the Third-Party Purchaser agrees to look only to Host O.P. for
payment of such cash balance.
(k) It is the intent of Landlord and Tenant that the leases of FF&E
pursuant to the [Initial FF&E Lease,] any Excess FF&E Lease[,] and this Lease
shall be treated as operating leases and not Capitalized Lease Obligations under
GAAP. Landlord and Tenant agree to cooperate to the extent feasible and
consistent with the terms of this Lease to provide terms for such leases of FF&E
that are so treated.
-6-
SCHEDULE 23.8
DEEMED CONSENTS
. Section 4.3.1 - If Hazardous materials are discovered in violation of
Environmental Laws on the Leased Property, Tenant will exercise all
commercially reasonable efforts to cause Manager to take all actions and incur
all expenses (which actions and expenses will be subject to Landlord's prior
approval, except in Emergency Situations) as may be necessary or required by
any Government Agency.
. Section 9.5 - All insurance policies shall include only deductibles reasonably
approved by Landlord.
. Section 10.2.4 - Landlord may, at its option, condition advancement of
insurance proceeds and other amounts on, among other things, its approval of
plans and specifications of an architect reasonably satisfactory to Landlord.
. Section 11.2 - Landlord may, at its option, condition advancement of an Award
and other amounts on, among other things, its approval of plans and
specifications of an architect reasonably satisfactory to Landlord.
. Section 16.1 - For subleases made in the ordinary course of operating the
Facility which are for a term of more than five years and involve more than
1,000 square feet, Landlord's consent is required, but such consent may not be
unreasonably withheld.