PERCENTAGE LEASE AGREEMENT
DATED AS OF FEBRUARY 19, 1998
AMONG
▇▇▇▇▇▇ HOTEL PROPERTIES, L.P.
AS LESSOR
SOUTH SEAS ESTERO ISLAND, LTD.
AS LESSEE
AND SOUTH SEAS PROPERTIES COMPANY LIMITED PARTNERSIEP
AS GUARANTOR
TABLE OF CONTENTS
Page
PERCENTAGE LEASE AGREEMENT
ARTICLE I 1
1.1 Leased Property 1
1.2 Term 2
1.3 Development Projects 3
1.4 Condominium Lease Agreements 3
ARTICLE
11........................................................
................ 4
ARTICLE III 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11
3.12 3.13
.............................................................
......... 13
Rent 13
Payment of Percentage Rent 16
Confirmation of Percentage Rent 17
Additional Charges 17
Security Deposit 18
Conversion of Property 18
Annual Revenue Projections 18
Annual Capital Expenditures Budget 18
Capital Expenditure Reserve 19
Application of Capital Expenditure Reserve 19
Unbudgeted Capital Expenditures 19
Agent Method for Purchases of Capital Expenditures 20
Lessor's Obligation to Make Capital Expenditures 20
ARTICLE IV 21
4.1 Payment of Taxes and Impositions 21
4.2 Utility Charges 21
4.3 Insurance Premiums 21
ARTICLE
V.........................................................
.............. 2 1
No Termination, Abatement,
Etc................................................. 2 1
ARTICLE VI 22
6.1 Ownership of the Leased Property 22
6.2 Lessee's Personal Property 23
6.3 Lessor's Lien 23
6.4 Initial FF&E 23
ARTICLE VII 23
7.1 Condition of the Leased Property 23
7.2 Use of the Leased Property 24
7.3 Lessor to Grant Easements, Etc 25
▇▇▇▇
e
ARTICLE VIII 25
8.1 Compliance witli Legal, Insurance Requirements,
Lessor's Insurance and Tax
Obligations 25
8.2 Legal Requirements Covenants 26
8.3 Environmental Covenants 26
8.4 Asset Management Covenants 28
8.5 Net Worth Representations/Covenants 28
8.6 Room Rate Covenant 29
ARTICLE IX 29
9.1 Maintenance and Repair 29
9.2 Encroachments, Restrictions, Etc 30
ARTICLE X 31
10.1 Alterations 31
10.2 Salvage 31
10.3 Joint Use Agreements 31
ARTICLE)U.................................................
..................... 31
Liens.....................................................
................. 31
ARTICLE
XII.......................................................
.............. 32
Permitted
Contests..................................................
......... 32
ARTICLE XIII 32
13.1 General Insurance Requirements 32
13.2 Increase in Limits 33
13.3 Blanket Policy 34
13.4 No Separate Insurance 34
13.5 Reports of Insurance Claims 34
13.6 Waiver of Subrogation 34
13.6 Form Satisfactory, Etc 34
13.7 Failure to Obtain Insurance 35
13.8 Failure to Obtain Insurance 35
13.9 Self-Insured Deductible 35
ARTICLE XIV 35
14.1 Insurance Proceeds 35
14.2 Reconstruction in the Event of Damage or
Destruction Covered by Insurance 36
14.3 Reconstruction in the Event of Dwnage or
Destruction Not Covered by
Insurance 37
14.4 Lessee's Personal Property 37
14.5 Abatement of Rent 37
14.6 Damage Near End of Term 37
14.7 Waiver 37
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ARTICLE XV 37
15.1 Parties' Rights and Obligations 37
15.2 Total Taking 37
15.3 Allocation of Award 38
15.4 Partial Taking 38
15.5 Temporary Taking 38
ARTICLE XVI 38
16.1 Events of Default 38
16.2 Remedies 41
16.3 Waiver 43
16.4 Application of Funds 43
16.5 Surrender 43
16.6 Waiver 43
16.7 Notice to Guarantor Lender 44
ARTICLE XVII
44
AR'NCLE XVIII 44
ARTICLE XIX 45
19.1 REIT Compliance 45
19.2 Sublease Lessee Limitation 45
19.3 Lessee Ownership Limitation 45
19.4 Lessee Officer and Employee Limitation 45
19.5 Payments to Affiliates of Lessee 46
19.6 Third-Party Management Activities 46
ARTICLE
XX........................................................
............. 46
Holding
Over......................................................
......... 46
ARTICLE
XXI.......................................................
.............. 46
Risk of
Loss......................................................
.......... 46
ARTICLE
XYdl......................................................
.............. 46
Indemnification...........................................
................... 46
ARTICLE XXIII 47
23.1 Subletting and Assignment 47
23.2 Attomment 47
23.3 Management Agreement 48
23.4 Change of Control of Guarantor or Lessee; Sale of
Substantially All of
the Assets of Guarantor or Lessee 48
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ARTICLE XXIV 49
24.1 Officers' Certificates; Filiancial Statements;
Lessor's Estoppel Certifi . ▇▇▇▇▇ and
Covenants 49
24.2 Lessee's Financial Covenants 49
ARTICLE
XXV.......................................................
............. 50
Books and Records; Lessor's Riglit to
Inspect...................................... 50
ARTICLE
XXVI......................................................
............. 50
No
Waiver....................................................
.............. 50
ARTICLE
XXVII.....................................................
............. 50
Remedies
Cumulative................................................
......... 50
ARTICLE
XXVIII....................................................
.............. 5 1
Acceptance of
Surrender.................................................
...... 5 1
ARTICLE
XXIX......................................................
............. 5 1
No Merger of
Title.....................................................
...... 5 1
ARTICLE
XXX.......................................................
............. 5 1
Conveyance by
Lessor....................................................
.... 5 1
ARTICLE
XXXI......................................................
............. 5 1
Quiet
Enjoyment.................................................
............ 5 I
ARTICLE
XXXII.....................................................
............. 5 1
Notices...................................................
................. 5 1
ARTICLE XXXIII 52
33.1 Lessor May Grant Liens , Subordination 52
33.2 Lessee's Right to Cure 53
33.3 Breach by Lessor 54
33.4 Lessee's Cooperation 54
ARTICLE XXXIV 54
34.1 Miscellaneous 54
34.2 Transition Procedures 54
34.3 Change of Franchise 55
34.4 Waiver of Presentment, Etc 55
ARTICLE
XXXV......................................................
............ 55
Memorandum of
Lease.....................................................
... 55
ARTICLE
XXXVI.....................................................
............. 55
Lessor's Option to Purchase Assets of
Lessee...................................... 55
-iv-
ARTICLE XXXVII 56
37.1 Lessor's Option to Terminate Lease 56
37.2 Early Termination Payments 56
ARTICLE
XXXVIII...................................................
............. 57
Compliance with Franchise
Agreement........................................... 57
ARTICLE
XXXIX.....................................................
............. 57
Guaranty
Agreement.................................................
......... 57
EXFHBIT A Property Description
EXIIIBIT B All Space Leases
EXIUBIT C FF&E Included in Lease Property Initial
FF&E
EXFHBIT D Inventory
EXIEBIT E Condominium Lease Agreements
EXFHBIT F Form of Renewal Lease
EXFHBIT G Competitive Set
EXMBIT H Description of Facility
EX141BIT I Capital Expenditures
EXIUBIT J Security Agreement
EXIEBIT K Insurance Requirements
EXIBBIT K- I Market Value Clause
EXIEBIT L Guaranty Agreement
EXIEBIT M Nondisturbance Agreement
EXHIBIT N Operational Agreement Budget
PERCENTAGE LEASE AGREEMENT
THIS PERCENTAGE LEASE AGREEMENT (this "Lease"), made
as of the,46 Away of February, 1998, by and between ▇▇▇▇▇▇
Hotel Properties, L.P., an Ohio limited partnership
("Lessor"), and South Seas Estero Island, Ltd., a Florida
limited partnership ("Lessee"), provides as follows:
WITNESSETH:
Lessor owns property the "Leased Property" (as hereinafter
defined) located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇.
Lessee desires to lease or sublease, as the case may be,
the Leased Property, to operate as a hotel
facility.
NOW, THEREFORE, Lessor, in consideration of the
payment of rent by Lessee to Lessor, the covenants and
agreements to be performed by Lessee, and upon the terms
and conditions hereinafter stated, does hereby rent and
lease unto Lessee, and Lessee does hereby rent and lease
from Lessor, the Leased Property.
ARTICLE I
1.1 Leased Pr@. The "Leased Property" is comprised
of Lessoes interest in the following, but expressly
excludes Lessoes interest in any mineral rights, timber,
or building antennae related to the Land (defined below):
(a) the land described in Exhibit A attached hereto
and incorporated herein by reference
(the "Land");
(b) all buildings, structures and other
improvements of every kind including, but not limited to,
alleyways and connecting tunnels, sidewalks, utility
pipes, conduits and lines (on-site and offsite), parking
areas and roadways appurtenant to such buildings,
structures and other improvements presently situated upon
the Land (collectively, the "Leased Improvements"),
including the Facility;
(c) all easements, rights and appurtenances relating
to the Land and to the Leased
Improvements;
(d) all equipment, machinery, fixtures, and
other items of property required or incidental to the use
of the Leased Improvements as a hotel, including all
components thereof, now and hereafter permanently affixed
to or incorporated in the Leased Improvements, including,
without limitation, all furnace ' s, boilers, heaters,
electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water
pollution control, waste disposal, air-cooling and air-
conditioning systems and apparatus, sprinkler systems and
fire and theft protection equipment, all of which to the
greatest extent permitted by law are hereby deemed by the
parties hereto to constitute real estate, together with
all replacements, modifications, alterations and additions
thereto (collectively, the "Fixtures");
(e) all existing leases of space within the
Leased Property (including any security deposits or
collateral held by Lessor pursuant thereto), which space
leases are listed on Exhibit B attached hereto and
incorporated by reference;
(f) all contract rights, trade names, logos
and other intangible property of Lessor with respect to
the operation of the existing hotel business conducted on
the Leased Property, including without limitation, all
rights, if any, relating to the Franchise Agreement;
(g) the furniture, fixtures and equipment listed or
referred to on Exhibit C attached hereto
and incorporated by reference; and
(h) the Inventory listed on or referred to on Exhibit D
attached hereto and incorporated by
reference; and
4
(i) all lease agreements, rental agreements,
flex lease agreements and other similar agreements between
Lessor and owners of individual condominium units or
private residences for the rental of such units or
residences to third parties on behalf of such owners,
including, without limitation the 42 Lease Option Program
Agreements (the "Guaranteed Leases") and the 9 Rental
Program Agreements (the "Flex Leases"), which agreements
are listed on Exhibit E attached hereto and incorporated
by reference (collectively, the "Condominium Lease
Agreements").
THE LEASED PROPERTY SHALL NOT INCLUDE THE ▇▇▇▇▇▇ FF&E.
THE LEASED PROPERTY IS DEMISED IN ITS PRESENT CONDITION
WITHOUT REPRESENTATION OR WARRANTY (EXPRESSED OR IMPLIED)
BY LESSOR AND SUBJECT TO THE RIGHTS OF PARTIES IN
POSSESSION, AND TO THE EXISTING STATE OF TITLE INCLUDING
ALL CURRENT AND FUTURE COVENANTS, CONDITIONS,
RESTRICTIONS, EASEMENTS AND OTHER MATTERS (NOT LINETED TO
ITEMS OF RECORD) INCLUDING ALL APPLICABLE LEGAL
REQUIREMENTS, THE LIEN OF FINANCING INSTRUMENTS,
MORTGAGES, DEEDS OF TRUST AND SECURITY DEEDS, AND
INCLUDING OTHER MATTERS ▇▇▇▇▇ WOULD BE DISCLOSED BY AN
INSPECTION OF THE LEASED PROPERTY OR BY AN ACCURATE SURVEY
THEREOF.
1.2 Tenn. The term of the Lease (the "Tenn")
shall commence as of the date and time (i) the
Lessor acquires the Leased Property from Florida Income
Fund 111, Limited Partnership, and (ii) Lessee
pays
Lessor for the Initial FF&E (the "Commencement Date") and
shall end on the tenth anniversary of the
Commencement Date, unless sooner terminated in accordance
with the provisions hereof. Lessee is hereby given two
separate options to extend the Tenn of this Lease for two
separate, successive periods (individually, the "First
Renewal Term" and the "Second Renewal Term" and
collectively, the "Additional Terms"). The First Renewal
Term shall be for a period of three years to follow
consecutively upon the expiration of the initial Term of
this Lease. The Second Renewal Term shall be for a period
of three years to follow consecutively upon the expiration
of the First Renewal Term of this Lease. The option for
the First Renewal Term may be exercised by the Lessee
giving notice to the Lessor of Lessee's exercise of this
option not less than 270 days prior to the expiration of
the initial Term of this Lease. The option for the Second
Renewal Tenn may be exercised by the Lessee giving notice
to the Lessor of Lessee's exercise of this option not less
than 270 days prior to the expiration of the First Renewal
Term of this Lease. If this Lease is extended as provided
above, the word "Term" as used herein shall mean and refer
to the First Renewal Term or the Second Renewal Tenn, as
the case may be, and all of the terms, covenants,
conditions and provisions of this Lease shall, continue in
full force and effect during the Additional Terms, except
that the Base Rent and the Percentage Rent formulas for
each Additional Tenn shall be adjusted as Lessor and
Lessee may mutually agree no later than 45 days after
Lessee's exercise of its option to renew. If Lessor and
Lessee are
unable to agree on adjusted Base Rent and Percentage Rent
formulas within such 45-day period, then Lessor shall have
the right to solicit offers from any Person to lease the
Leased Property upon such terms and conditions as Lessor
may determine. If the Lessor receives an offer from any
Person to lease the Leased Property (an "Offer"), the
Lessee shall have the option to lease the Leased Property
upon the same terms and conditions set forth in the Offer
(the "Option"). The Option shall be exercisable by Lessee
by written notice delivered to Lessor no later than IO
Business Days after Lessee receives written notice of the
Offer from the Lessor. If the Lessee fails to exercise
the Option granted to it hereunder within such I 0-day
period, then this Lease and the Lessee's rights under this
Lease (including, without limitation, its rights to renew
under this Section 1.2) shall immediately terminate and
the Lessor shall be free to lease the Leased Property to
such other Person in accordance with the terms and
conditions of the Offer.
1.3 Development Projects. Notwithstanding anything
contained in this Lease to the contrary, Lessor shall be
permitted to undertake the development, redevelopment or
expansion of the Leased Property (each a "Development
Project"). Lessor shall provide Lessee with 120 days'
advance written notice of the commencement of a
Development Project. Within 1 0 days of Lessee's receipt
of such notice, if either Lessor or Lessee reasonably
determine and provide notice to the other party that the
Development Project to be undertaken by Lessor will likely
have an impact on the Room and Other Revenues from the
Leased Property in excess of 5% more or less than the
trailing twelve months Room and Other Revenues, then this
Lease shall terminate (including, without limitation, its
rights to renew under this Section 1.2) upon the final day
of such 120 day period. Lessor and Lessee agree, during
the first 45 days following Lessee's receipt of the 120
day notice, to negotiate in good faith a revised
percentage lease agreement which shall be on the same
terms as this Lease except that (i) the Base Rent and the
Percentage Rent formulas shall be adjusted to take into
account both temporary and permanent projected changes in
the Gross Revenue derived from the Leased Property due to
the Development Project and (ii) the term of the lease
shall be for the remaining Term hereunder. If Lessor and
Lessee are unable to agree on adjusted Base Rent and
Percentage Rent formulas within such 45-day period, then
Lessor shall have the right to solicit offers from any
Person to lease the Leased Property upon such terms and
conditions as Lessor may determine. If the Lessor
receives an offer from any Person to lease the Leased
Property (a "Development Offer"), the Lessee shall have
the option to lease the Leased Property upon the same
terms and conditions set forth in the Development Offer
(the "Development Option"). The Lessee's right to
exercise the Development Option shall survive termination
of this Lease. The Development Option shall be
exercisable by Lessee by written notice delivered to
Lessor no later than 10 Business Days after Lessee
receives written notice of the Development Offer from the
Lessor. If the Lessee fails to exercise the Development
Option granted to it hereunder within such 10-day period,
then this Lease and the Lessee's rights under this Lease
(including, without limitation, its rights to renew under
this Section 1.2) shall, subject to the terms of Article
XXXVII, immediately terminate and the Lessor shall be free
to lease the Leased Property to such other Person in
accordance with the terms and conditions of the
Development Offer.
1.4 Condominium Lease Agreements. Lessor and Lessee
acknowledge that each Condominium Lease Agreement will, by
its terms, expire prior to the expiration of the Term of
this Lease. Lessor agrees that Lessee may, as Lessor's
agent and on Lessor's behalf in Lessor's name: (i) renew
each Condominium Lease Agreement upon expiration of the
stated term of such Condominium Lease Agreement (a
"Renewal . Lease") or (ii) enter into new lease agreements
with owners of individual condominium units or private
residences for the rental of such units or residences to
third parties on behalf of such owners (the "New Leases");
provided, however, that each Renewal Lease and each New
Lease shall be in the form of Exhibit E, or, if different,
on a form approved in writing by Lessor. Upon execution,
each Renewal Lease and each New Lease shall become a part
of the Leased Property hereunder.
ARTICLE II
Definitions. For all purposes of this Lease, except
as otherwise expressly provided or unless the context
otherwise requires, (a) the terms defined in this Article
have the meanings assigned to them in this Article and
include the plural as well as the singular, (b) all
accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally
accepted accounting principles as are at the time
applicable, (c) all references in this Lease to designated
"Articles," "Sections" and other subdivisions are to the
designated Articles, Sections and other subdivisions of
this Lease, and (d) the words "herein," "hereof'and
"hereunder" and other words of similar import refer to
this Lease as a whole and not to any particular Article,
Section or other subdivision:
@. American Automobile Association.
Additional C . As defined in Section 3.4.
Affiliate. As used in this Lease the term "Affiliate"
of a Person shall mean (a) any Person that, directly or
indirectly, controls or is controlled by or is under
common control with such Person, (b) any other Person that
owns, beneficially, directly or indirectly, five percent
or more of the outstanding capital stock, shares or equity
interests of such Person, or (c) any officer, director,
employee, partner or trustee of such Person or any Person
controlling, controlled by or under common control with
such Person (excluding trustees and persons serving in
similar capacities who are not otherwise an Affiliate of
such Person). For the purposes of this definition,
"control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used
with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause
the direction of the management and policies of such
Person, through the ownership of voting securities,
partnership interests or other equity interests.
After Tax Earnings. As defined in Section 8.5.
Averap-c Daily Rate. The average daily rate charged for
all rooms in the Facility determined over
a thirty day period.
Audited Consolidated Financials. Financials audited by a
firm of independent certified public
accountants acceptable to Lessor in its reasonable
discretion.
Award. Compensation, sums or anything of value awarded,
paid or received on a total or partial
Condemnation.
Base Rate. The rate of interest announced publicly
by National City Bank, in Cleveland, Ohio, from time to
time, as such ▇▇▇▇▇▇ base rate. If no such rate is
announced or if such rate is discontinued, then such other
rate as Lessor may reasonably designate.
Base Rent. The annual sum set forth in Section
3.1(a), payable in advance in equal, consecutive monthly
installments, on or before the tenth day of each calendar
month of the Term; provided however, that the first
monthly payment of Base Rent shall be payable on the
Commencement Date and that the first and last monthly
payments of Base Rent shall be prorated as to any partial
month (subject to adjustment as provided in Sections 14.5,
15.2, 15.4, and 15.5).
Beach Refurbishment Iml2ositions. Any new special
charge or assessment levied against the Leased Property by
a governmental agency or taxing district for the
renourishment or replacement of the public beach seaward
of the erosion control line, which adjoins the Leased
Property.
Business D@. Each Monday, Tuesday, Wednesday,
Thursday and Friday that is a day on which national banks
in the City of Cleveland, Ohio, or in the municipality
wherein the Leased Property is located, are open.
Ca,pital Expenditures. As defined in Section 3.8.
CERCLA. The Comprehensive Environmental Response,
Compensation and Liability Act of 1980,
as amended.
Code. The Internal Revenue Code of 1986, as amended.
Commencement Date. As defined in Section 1.2.
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇. Those hotels listed on Exhibit G, as
supplemented and amended from time to time
by Lessor and Lessee.
Coml2limentaiy Rooms. Shall mean a maximum of 440
rooms per Fiscal Year allocated as follows: 240 rooms for
sales and marketinc,, promotion, disgruntled guests and
employees and 200 rooms for 0
charitable donations and community service. A maximum of
20 Complimentary Rooms may be used in each of the
following months, January, February, March, April, July
and August. Notwithstanding the foregoing, no room for
charitable donation or community service shall be deemed a
Complimentary Room to the extent such room displaces any
revenue.
Condemnatian-. A Taking resulting from (1) the
exercise of any governmental power, whether by legal
proceedings or otherwise, by a Condemnor, and (2) a
voluntary sale or transfer by Lessor to any Condemnor,
either under threat of condemnation or while legal
proceedings for condemnation are pending.
Condemnor. Any public or quasi-public authority, or
private corporation or individual, having the
power of Condemnation.
Condominium Lease Aizreements. As defined in Section
1. I (i).
Consolidated Financials. For any fiscal year (or
other period for which such statements are prepared) for
Lessee and its consolidated subsidiaries, a statement of
fuiancial position as of such fiscal year (or other
period) end date and statements of operations, cash flows
and retained earnings for the fiscal year (or other
period) then ended, all in comparative form, together with
notes thereto, prepared in accordance with generally
accepted accounting principles.
1 Consolidated Net Worth. The sum of consolidated
shareholders' equity of Lessee and any consolidated
subsidiaries as shown on the most recent Audited (if
required hereunder) Consolidated Financials, as adjusted
in accordance with Section 8.5 hereof.
Consumer Price Index. The "U.S. City Average, All
Items" Consumer Price Index for All Urban Consumers
published by the Bureau of Labor. Statistics of the
United States Department of Labor (Base: 1982-1984=100),
or any successor index thereto. If (i) a significant
change is made in the number or nature
(or both) of items used in determining the Consumer Price
Index, or (ii) the Consumer Price Index shall be
discontinued for any reason, the Lessor shall request that
the Bureau of Labor Statistics fumish a new index
comparable to the Consumer Price Index, together with
information which will make possible a conversion to the
new index in computing the adjusted Base Rent hereunder.
If for any reason the Bureau of Labor Statistics does not
fumish an index and such information, the parties will
instead mutually selec@ accept and use such other index or
comparable statistic on the cost of living in Washington,
D.C. that is computed and
published by an acency of the United States or a
responsible financial periodical of recognized authority.
4D
Customer Riti-o. The ratio of a customer type (transient;
contract business; social, military,
educational, religious and fraternal; or group) to the
Facility's total customer base.
Date of Taking. The date the Condemnor has the right to
possession of the property being
condemned.
Encumbrance. As defined in Section 33. 1.
Environmental Authoriiy. Any federal, state, local or
foreign department, agency or other body or
component of any Government that administers, oversees or
enforces any Environmental Laws.
Environmental Laws. All federal, state, county,
municipal and other governmental statutes, laws, rules,
orders, regulations, ordinances, judgments, decrees,
injunctions and duties under the common law relating to
occupational health and safety, the protection of human
health, and pollution of the indoor and outdoor
environment (including without limitation, ambient air,
surface water, ground water, land surface or subsurface
strata), including without limitation laws and regulations
relating to emissions, discharges, Releases or threatened
Releases of Hazardous Materials or otherwise relating to
the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous
Materials. Environmental Laws include, but are not
limited to, CERCLA, EPCRA, FIFRA, RCRA, ▇▇▇▇ and TSCA.
Environmental Liabiliiy. Either of an Identified
Environmental Liability or an Unidentified
Environmental Liability.
EPCRA. The Emergency Planning and Community Right to
Know Act, as amended.
Event of Default. As defined in Section 16. 1.
Faciliiy. The hotel and/or other facility offering
lodging and other services or amenities being operated or
proposed to be operated using the Leased Property which
shall be included in the Leased Improvements. The
Facility is more particularly described on Exhibit H
attached hereto and incorporated by reference.
FIFRA. The Federal Insecticide, Fungicide, and
Rodenticide Act, as amended.
,, Fiscal Year. The 12-month period from January I to
December 3 I.
Fixtures. As defmed in Section 1. I (d).
Food and Beverage Revenues. Gross revenues, receipts
and income of any kind (whether on a cash or credit basis)
paid, collected or accrued and derived directly or
indirectly by Lessee from: (i) the sale, for on-site
consumption at the Leased Property or through off-site
catering services, of food and nonalcoholic
beverages, including sales attributable to guest rooms,
banquet rooms, meeting rooms, the restaurant, the lounge,
the bar and other similar rooms; (ii) the sale of wine,
beer, liquor or other alcoholic beverages, including sales
attributable to the restaurant, the bar, the lounge, guest
rooms, meeting rooms, banquet rooms, off-site catering or
any location at the Leased Property; (iii) cover charges
and audio-visual rental charges related to banque@
ballroom or meeting room events; and (iv) banquet and
meeting room revenues, including room rental charges from
such banquet and meeting rooms. Such revenues shall not
include the following:
(a) Room and Other Revenues as defined below;
(b) Any gratuities or service charges added to a
customer's ▇▇▇▇ or statement in lieu of a gratuity, which
gratuity or charge Lessee is obligated to pay to or which
was paid directly to an employee;
(c) Customary and reasonable credits, rebates, refunds
or negative adjustments to
guests;
(d) Sales taxes and any additional taxes imposed on
the sale of alcoholic beverages;
(e) Amounts attributable to customary and reasonable
allowances, give aways and
promotions; and
(f) Sales transactions related to a lounge provided
for the use of guests staying in rooms
located on the concierge level of the Facility.
Franchise Aizreement. The franchise agreement or
license agreement currently in effect with Franchisor, and
any amendments, replacements or extensions thereof
hereafter implemented with the prior approval of Lessor,
which approval or disapproval shall not be unreasonably
delayed, under which the Facility is operated.
Franchise Rated Hotels. Those hotels rated monthly
by the Franchisor.
Franchisor. Best Western or such other national hotel
franchiser or association approved by Lessor
in accordance with Section 34.3.
GAAP. As defined in Section 8.5.
Government. The United States of America, any state,
county, municipality, local government, district or
territory thereof, any foreign nation, any state,
district, department, territory or other political
division thereof, or any administrative agency, board,
commission, bureau or political subdivision of any of the
foregoing.
! Gross Revenue. The sum of (i) the Room and Other
Revenues plus (ii) the Food and Beverage
Revenues for the Facility.
Guarantor. South Seas Properties Company Limited
Partnership, an Ohio Limited Partnership.
Guarantor Lender. As defined in Section 16.7.
-7-
Guaraniy Aiareement. As defined in Article XXXIX.
Hazardous Materials. All chemicals, pollutants,
contaminants, wastes and toxic substances,
including without limitation:
(a) Solid or hazardous waste, as defined in
RCRA or in any Environmental Law;
(b) Hazardous substances, as defined in CERCLA
or in any Environmental Law;
(c) Toxic substances, as defined in TSCA or in
any Environmental Law;
(d) Insecticides, fungicides, or rodenticides, as
defined in FIFRA or in any
Environmental Law; and
(e) Gasoline or any other petroleum product or
byproduct, polychlorinated biphenols, asbestos, radon and
urea formaldehyde.
HVAC. The heating, ventilation and air conditioning
system in use at the Facility.
Identified Environmental Liabilities. Any and all
obligations to pay the amount of anyjudgment or
settlement, the cost of complying with any settlement,
judgment or order for injunctive or other equitable
relief, the cost of compliance or corrective action in
response to any notice, demand or request frorh an
Environmental Authority, the amount of any civil penalty
or criminal fine, and any court costs and reasonable
amounts for attomey's fees, fees for witnesses,
consultants and experts, and costs of investigation and
preparation for defense of any claim or any Proceeding,
regardless of whether such Proceeding,is threatened,
pending or completed, that may be or have been asserted
against or imposed upon Lessor, Lessee, any Predecessor,
the Leased Property or any property used therein.
lm= tio@n . Collectively, all taxes (including,
without limitation, all personal property, sales and use
(including sales, rent or occupancy taxes on Rent), single
business, gross receipts, transaction, privilege, rent or
similar taxes as the same relate to or are imposed upon
Lessee, its personal property or its business conducted
upon the Leased Property), assessments (including, without
limitation, all assessments for public improvements or
benefit, whether or not commenced or completed prior to
the date hereof and whether or not to be completed within
the Term), water, sewer or other rents and charges,
excises, tax inspection, authorization and similar fees
and all other governmental charges, in each case whether
general or special, ordinary or extraordinary, or foreseen
or unforeseen, of every character in respect of the Leased
Property, the FF&E or the business conducted thereon by
Lessee (including all interest and penalties thereon
caused by any failure in payment by Lessee), which at any
time prior to, during or with respect to the Term may be
assessed or imposed on or with respect to or be a lien
upon (a) Lessor's interest in the Leased Property, (b) the
Leased Property, or any part thereof or any rent therefrom
or any estate, right, title or interest therein, or (c)
any occupancy, operation, use or possession of, or sales
from, or activity conducted on or in connection with the
Leased Property, or the leasing or use of the Leased
Property or any part thereof by Lessee. Notwithstanding
the foregoing, Impositions shall not included) any tax
based on net income (whether denominated as an income,
franchise or capital stock or other tax) imposed on Lessor
or any other Person other than Lessee and Affiliates of
Lessee, (2) any net revenue tax of Lessor or any other
Person (other than Lessee or an Affiliate of Lessee), (3)
any tax imposed with respect to the sale, exchange or
other disposition by Lessor of any Leased Property or the
proceeds thereof, or (4) any single business, gross
receipts (other than a tax on any rent received by Lessor
from Lessee), transaction, privilege or similar taxes as
the same relate to or are imposed upon Lessor, except to
the extent that any tax, assessment, tax levy or charge
that
Lessee is obligated to pay pursuant to the first sentence
of this definition, and that is in effect any time during
the Term hereof, is totally or partially repealed, and a
tax, assessment, tax levy or charge set forth in clause
(1) through (4) is levied, assessed or imposed expressly
in lieu thereof.
Indemnified Environmental Liabiliiy. As defined in
Section 8.3(d).
Indemnified Paa: Indemnitee. Either of a Lessee
Indemnified Party or a Lessor Indemnified Party.
Indemnifying PAIU. Any party obligated to indemnify an
Indemnified Party pursuant to Section 8.3
or Article XXII.
Initial FF&E. The furniture, fixtures and equipment
listed or referred to on Exhibit C attached hereto
and incorporated by reference.
Insurance Requirements. All ten-ns of any insurance
policy required by this Lease, any Franchisor or any Legal
Requirement, and all requirements of the issuer of any
such policy as to such policy and/or the Leased Property.
In to . All inventories, supplies, guest supplies,
food and beverage inventory, and consumable merchandise
used in connection with the operation of the Facility, but
excludingall such items to the extent owned by
concessionaires, tenants, subtenants, licensees or other
Persons occupying all or a portion of the Leased Property
as permitted by this Lease.
Land. As defined in Section 1. I (a).
Lease. This Lease.
Leased Imi2rovements. As defined in Section 1. I
(b).
Leased Prol2g=. As defined in Section 1. I -
Legal Requirements. All federal, state, county,
municipal and other governmental statutes, laws, rules,
orders, regulations, ordinances, judgments, decrees and
injunctions affecting either the Leased Property or the
maintenance, construction, use or alteration thereof
(whether by Lessee or otherwise), whether or not hereafter
enacted and in force, including (a) all Environinental
Laws, and (b) any laws, rules or regulations that may (1)
require repairs, modifications or alterations in or to the
Leased Property or (2) in any way adversely affect the use
and enjoyment thereof; and all perinits, licenses and
authorizations and regulations relating thereto and all
covenants, agreements, restrictions and encumbrances
contained in any instruments, either of record or known to
Lessee (other than encumbrances hereafter created by
Lessor without the consent of Lessee), at any time in
force affecting the Leased Property.
Lendin2 Institution. Any insurance company,
investment banking company, credit company, federally
insured commercial or savings bank, national banking
association, savings and loan association, employ . ees
welfare, pension or retirement fund or system, corporate
profit sharing or pension trust, college or university,
corporation qualified to be treated for federal tax
purposes as a real estate investment trust having a net
worth of at least $ 1 0,000,000, and RENUC conduit lender.
Lessee. The Lessee designated on this Lease and its
permitted successors and assigns.
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Lessee Indemnified Paa. Lessee and (i) any Affiliate
of Lessee, (ii) any Person against whom any liability may
be asserted as a result of a direct or indirect ownership
interest (including a shareholder's interest) in Lessee;
(iii) the officers, directors, shareholders, employees,
agents and representatives of Lessee; and (iv) the
respective heirs, personal representatives, successors and
assigns of any of the foregoing Persons.
Lessee's Personal Prol2ea. As defined in Section
6.2.
Lessor. The Lessor designated on this Lease and its
successors and assigns.
Lessor Indemnified PAIU. Lessor and (i) any Affiliate
of Lessor; (ii) any Person against whom any liability may
be asserted as a result of a direct or indirect ownership
interest (including an interest as a partner) in Lessor;
(iii) the employees, agents and representatives of Lessor;
(iv) ▇▇▇▇▇▇ Lodging Company, its officers, directors,
shareholders, employees and agents; and (v) the respective
heirs, personal representatives, successors and assigns of
any of the foregoing Persons.
. Mobile Travel Guide or a successor'publication
thereto.
Notice. A notice given pursuant to Article XXXII.
Officees Certificate. A certificate of Lessee in fon-
n and substance reasonably acceptable to Lessor signed by
the chief operating officer and the chief financial
officer or another officer Authorized so to sign by the
board of directors or by-laws of Lessee, or any other
person whose power and authority to act has been
authorized by delegation in writing by any such officer.
Overdue Rate. On any date, a rate equal to the Base Rate
plus 5% per annum, but in no event greater
than the maximum rate then permitted under applicable law.
Partial Fiscal Year. Any portion of a Fiscal Year
which falls during the Term hereof
Payment Date. Any due date for the payment of any
installment of Rent.
Percenta2e Rent. As defined in Section 3. l(b).
Person. Any individual, corporation, general or
limited partnership, limited liability company, limited
liability partnership, stock company or association, joint
venture, association, company, trust, bank, trust company,
land trust, business trust, or other entity and government
and agency and political subdivision thereof.
Poor Standing. Operating the Facility for any consecutive
three month period within the group of
hotels in the lowest one-third of the Franchise Rated
Hotels.
,,Predecessor. Any Person whose liabilities arising
under any Environmental Law relating to the Leased
Property have or may have been retained or assumed by
Lessee, either contractually or by operation of law
Primary Intended Use. As defined in Section 7.2(b).
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ErQceediniz. Anyjudicial action, suit or proceeding
(whether civil or criminal), any administrative proceeding
(whether forrnal or informal), any investigation by a
govenunental authority or entity (including a grand jury),
and any arbitration, mediation or other non-judicial
process for dispute resolution.
RCRA. The Resource Conservation and Recovery Act, as
amended.
Real Estate Taxes. All real estate taxes (including
any applicable interest and penalties thereon), including
general and special assessments, if any, and possessory
interest taxes which are imposed upon the Land and/or the
Leased Property.
Release. A "Release" as defined in CERCLA or in any
Environmental Law, unless such Release has been properly
authorized and permitted in writing by all applicable
Environmental Authorities or is allowed by such
Environmental Law without authorizations or permits.
Renewal Lease. As defined in Section 1.4.
e@. Collectively, the Base Rent, Percentage Rent and
Additional Charges.
Rental Amount. As defined in Section 8.5.
REVPAR. Room Revenues (as defined in the Uniform System)
per available room in the Facility.
Room and Other Revenues. All gross revenues,
receipts and income of any kind (whether on a cash or
credit basis) paid, collected or accrued and derived
directly or indirectly by Lessee from: (i) the rental of
guest rooms; (ii) gift shop operations; (iii) fees
collected from telephone, game room and guest laundry
services; and (iv) guaranteed no show reservations, space
rentals (excluding banquet and meeting room space
rentals), discounts eamed, vending machines, valet
services, movie services, commissions eamed, and swim club
memberships; (v) any Condominium Lease Agreement Renewal
Lease or New Lease; and (vi) all other revenues eamed or
retained by Lessee in connection with the use or operation
of the Leased Property and all services or activities
provided thereon, including the gross revenues of Lessee
from subtenants, concessionaires, and licensees, all as
determined in accordance with generally accepted
accounting principles. Notwithstanding the previous
sentence, Room and Other Revenues shall not include:
(a) Food and Beverage Revenues;
(b) The amount of any credits, rebates, refunds or
adjustments to customers, guests or patrons;
(c) Sales or use taxes;
(d) Interest income;
(e) Gratuities paid or payable to Persons
other than Lessee or its Affiliate; and
(f) Gains from the sale of assets out of the
ordinary course of business.
Gross revenues will be adjusted as follows: (1)
rooms offered on a Complimentary basis (exclusive of
employees, independent contractors or consultants of
Lessee engaged in business operations relating to the
Facility) in excess of the Complimentary Rooms will be
imputed a revenue equal to the
-II-
Average Daily Rate for that calendar month; (2) rooms
offered on a "package basis" will allocate a reasonable
portion of the gross revenues to the Room and Other
Revenues; any such rooms for which Lessee has allocated to
Rooms and Other Revenues less than 50% of the Average
Daily Rate will be imputed an amount of revenue such that
at least 50% of the Average Daily Rate is allocated to
Rooms and Other Revenues; (3) bartered or traded rooms
shall be included at the fair market value of the goods
and services so bartered or traded or, if such value is
not readily determinable, at the Average Daily Rate for
that calendar month; and (4) rooms used by Lessor or its
Affiliates on a complimentary basis will not be included
in Room and Other Revenues.
▇▇▇▇. The Superfund Amendments and Reauthorization Act of
1985, as amended.
@ate. The State or Commonwealth of the United States in
which the Leased Property is located.
Subsidiaries. Corporations in which Lessee owns, directly
or indirectly, more than fifty percent
(50%) of the voting stock or control, as applicable.
Taking. A taking or voluntary conveyance during the
Term hereof of all or part of the Leased Property, or any
interest therein or right accruing thereto or use thereof,
as the result of, or in settlement of, any Condemnation or
other eminent domain proceeding affecting the Leased
Property whether or not the same shall have actually been
commenced.
Tax Distribution Amount. As defined in Section 8.5.
Tenn. As defined in Section 1.2.
TSCA. The Toxic Substances Control Act, as amended.
Unavoidable Delay. A delay due to strikes, lock-outs,
labor unrest, inability to procure materials, power
failure, acts of God, governmental restrictions, enemy
action, civil commotion, fire, unavoidable casualty or
other causes beyond the control of the party responsible
for performing an obligation hereunder, provided that lack
of funds shall not be deemed a cause beyond the control of
either party hereto unless such lack of funds is caused by
the failure of the other party hereto to perfonn any
obligations of such party under this Lease.
Uneconomic for its Primary Intended ULe_. A state or
condition of the Facility such that in the good faith
judgment of Lessor it is uneconomic to operate the
Facility for its Primary Intended Use, taking into
account, among.other relevant factors, the number of
usable rooms and projected revenues.
Unidentified Environmental Liabilities. Any and all
obligations to pay the amount of anyjudgment or
settlement, the cost of complying with any settlement,
judgment or order for injunctive or other equitable
relief, the cost of compliance or corrective action in
response to any notice, demand or request from an
Environinental Authority, the amount of any civil penalty
or fine or criminal fine, and any court costs and
reasonable amounts for attomeys fees, fees for witnesses,
consultants and experts, and costs of investigation and
preparation for defense of any claim or any Proceeding,
regardless of whether such Proceeding is threatened,
pending or completed, that may be or have been asserted
against or imposed upon Lessor, Lessee, any Predecessor,
the Leased Property or any property used therein and
arising out of.
(a) Failure of Lessee, any Predecessor or the Leased
Property to comply at any time
with all Environmental Laws;
-12-
(b) Presence of any Hazardous Materials on, in, under,
at or in any way affecting the
Leased Property;
(c) A Release at any time of any Hazardous Materials
on, in, at, under or in any way
affecting the Leased Property or any off-site property or
facility;
(d) Identification of Lessee, or any Predecessor as a
potentially responsible party under
CERCLA or under any Enviromnental Law similar to CERCLA;
(e) Presence at any time of any above ground
and/or underground storage tanks as defmed in RCRA or in
any applicable Environmental Law on, in, at or under the
Leased Property or any offsite property or facility; or
(f) Any and all claims for injury or
damage to persons or property arising out
of
exposure to Hazardous Materials originating or located at
the Leased Property, or resulting from
operation
thereof; but excluding those arising out of-
(g) Identified Environmental Liabilities.
Uniform System. The Unifonn System of Accounts for Hotels
(8th Revised Edition, 1986) as
published by the Hotel Association of New York City, Inc.
as same may hereafter be revised.
Unsuitable for its Primary Intended Use. A state or
condition of the Facility such that, in the good faith
judgment of Lessor, due to casualty damage or loss through
Condemnation, the Facility cannot be operated or cannot
ftinction as an integrated hotel facility consistent with
standards applicable to a well maintained and operated
hotel.
ARTICLE III
3.1 Rent. Lessee will pay to Lessor in lawful money
of the United States of America which shall be legal
tender for the payment of public and private debts, in
immediately available funds, at Lessor's address set forth
in Article XXXII hereof or at such other place or to such
other Person, as Lessor from time to time may designate in
a Notice, (A) the higher of (i) Base Rent or (ii)
Percentage Rent, and (B) Additional Charges, during the
Term, as follows:
(a) 1998 Rent: The monthly sum of $211,523
payable in advance in consecutive monthly installments, on
or before the tenth day of each calendar month commencing
on the Commencement Date and continuing through Fiscal
Year 1998 (" 1998 Rent"); provided, however, that the
first monthly payment of 1998 Rent shall be payable on the
Commencement Date and that the first monthly payment of
1998 Rent shall be prorated as to the then current partial
month, if applicable.
(b) Base Rent: Commencing on January 1, 1999,
the annual sum of $2,200,000 (as increased by CPI in
accordance with subsection (d) below, the "Base Rent"),
payable in advance in consecutive monthly installments, on
or before the tenth day of each calendar month of the
TerTn as follows:
(i) one-twelfth of the Base Rent on the tenth day of each
January, February, March, April, May and June and
(ii) on the tenth of each July, August, September, October
November and December, the greater of (a) $50,000 or (b)
the quotient of the Base Rent for the then current Fiscal
Year divided by 12; multiplied by the number of months
elapsed year-to-date (including the then current month);
less the sum of the total Base Rent VILis Percentage Rent
paid year-to-date; provided, however, that the last
monthly payment of Base Rent
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shall be prorated as to the then current partial month, if
applicable (subject to adjustment as provided in Sections
14.5, 15.2, 15.4, and 15.5); and provided, @er, that Base
Rent for Fiscal Year 1999 and each Fiscal Year thereafter,
shall be increased by increases in CPI as set forth in
Subsection (d) below and as set forth in Subsection (e)
below.
(c) Percentap-e Rent: Commencing on January 1,
1999, for each Fiscal Year and Partial Fiscal Year during
the Term commencing with the Fiscal Year or Partial Fiscal
Year ending December 3 1, 1999, Lessee shall pay
percentage rent ("Percentage Rent"), if such Percentage
Rent is in excess of Base Rent for such Fiscal Year or
Partial Fiscal Year, in an amount calculated by the
following formula:
The amount equal to the sum of (i) the Room and Other
Revenues Computation for such Fiscal Year or Partial
Fiscal Year plus (ii) the Food and Beverage Revenues
Computation for such Fiscal Year or Partial Fiscal Year
(each as defined below and collectively, the "Revenue
Computations").
For the purpose of this formula:
(1) The Room and Other Revenues Computation
for the applicable Fiscal Year (or Partial Fiscal
Year) is equal to the sum of (A) 23% of all amounts
above $3,318,000 up to $6,315,000 in Room and Other
Revenues for such Fiscal Year or Partial Fiscal Year,
(B) 50% of all amounts above $6,315,000 up to
$9,426,000 in Room and Other Revenues for such Fiscal
Year or Partial Fiscal Year, and (C) 8 1 % of all
Room and Other Revenues in excess of $9,426,000 for
such Fiscal Year or Partial Fiscal Year (the
preceding dollar figures being referred to
hereinafter as the "Threshold Amounts", such
Threshold Amounts to be prorated on a per them basis
for any Partial Fiscal Year and increased by the
Consumer Price Index for Fiscal Year 1999 and each
Fiscal Year thereafter); and
(2) The Food and Beverage Revenues Computation is
equal to 10% of all Food
and Beverage Revenues for the applicable Fiscal Year or
portion thereof.
Commencing on January 1, 1999, Percentage Rent payable
with respect to the difference (the "Flex Rent Excess"),
if any, of (i) the portion of Room and Other Revenues
comprised of the gross rental revenue (excluding any
management or administrative fees) attributable to the
Flex Leases (including any Renewal Lease or New Lease
which is a Flex Lease) (the "Flex Lease Revenue") for the
then cuffent Fiscal Year less (ii) $376,646 (the "Flex
Lease Base Amount"), shall be payable in accordance with
the Flex Lease Formula. The Flex Lease Formula is equal
to 42.5% of the Flex Rent Excess. For each Fiscal year of
the. Term commencing on or after January 1, 1999, the
Flex Lease Base Amount shall be increased by a percentage
equal to the greater of (i) the percentage increase in
Gross Revenues in the most recently completed Fiscal Year
compared to the prior Fiscal Year or (ii) increases in the
CPI Index in accordance with Section 3. 1 (d) hereof
Commencing on January 1, 2004, Percentage Rent payable
with respect to the difference (the "Condo Rent Excess'),
if any, of (i) the portion of Room and Other Revenues
comprised of the gross rental revenue (excluding any
management or administrative fees) attributable to the
Guaranteed Leases or any Renewal Lease with respect
thereto (the 'Guaranteed Lease Revenue") for the then
current Fiscal Year less (ii) the sum of (a) the
Guaranteed Lease Revenue for Fiscal Year 2002 or 2003
(whichever is higher, the "Condo Base Amount") l@u (b) any
decrease in the Gross Revenues, excluding the Guaranteed
Lease Revenue, in
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the iiiost recently completed Fiscal Year compared to the
prior Fiscal Year, sliall be payable in ali aiiiouiit
equal to the Guaraiiteed Lease Foriiiula. The Guaraiiteed
Lease Foriiiula is equal to 42.5% of the Condo Reiit
Excess. F-OF eae4t- Fisee. ef tit@ Tef:itt e
lit
C4ross IR
-@▇▇▇▇▇▇ ▇▇▇
afed te tire pp.-. - setti 3ieai
---Of:daiiee will
(d) CPI Ad*ustmeilts to the Tliresilold
Aiiiouiits aiid Base.Reiit: For eacli Fiscal Year of the
Term begiiuiing oii or after January 1, 1999, the
Tiiresliold Aiiiouiits aiid Base Rent sliall be adjusted
from time to time as follows:
If the niost feceiitly published Coiisuiiier Price Iiidex
as of the last day of the last moiitli (tlie "Coniparisoii
Moiitli") of aiiy Fiscal Year is different than the
average Coiisuiiier Price Iiidex for the 12 iiioiltli
period prior tliefeto, eacli of Base Reiit aild the
'Fliresliold Aiiiouiit for tiie iiext Fiscal Year sliall
be adjusted by the pei-ceiitage cliaiige ill tIlC
COIISLliiier Price Iiidex calculated b), IIILIltiplyillg
the Base Iteiit aiid eacii 'I'Iii-esliold Aiiiotiiit by
the quotient obtained by dividiiity the Coiisuiiier Price
Iiidex for the iiiost feceiit Coinparisoii Moiitli by the
Coiisunier Price Iiidex for the iiiontli wliicii is
exactly 12 nioiitlis prior tliereto.
Adjustnients iii the Tiiresliold Aiiiouiits aiid Base
l@eiit sliall be effective oii the first day of the first
calendar montli of flie Fiscal Year to wliicli sucli
adjusted Thresliold Aiiiouiits apply. lii the event of
casualty and corresponding payiuent of rent out of the
proceeds of rental interruption insurance provided
pursuant to Section 13. 1 (a), the Perceiitage Rent sliall
be based upoti the lliglier of (i) actual revenues, (ii)
revenues for the same period iii the previous Fiscal Year
(wliettier or iiot during the 'fet-iii), or (iii)
projected revenues used iii computing the final insurance
settleiiieiit.
Not,,vitlistaiidiiig the foregoing if the percentage
cliaiige iii the Coiisuiiier Price Iiidex, as set fortli
above, is (i) less tliaii 3% or greater diaii 7%, the
adjustiiieiit to the Base Reiit sliall be 3% or 7%,
respectively aiid (ii) greater tliati 7%, the
adjustiiieiit to the Tliresliold AiiiOLIIItS sliall be 7%.
(e) For eacii Fiscal Year of the Teriii begiiiiiiiig
oii or al'ter Jaiiuary 1, 1999, the Base
Reiit sliall be adjusted from tiiiie to tiiiie as follows:
Followiiig eacii full or I)ai-tial Fiscal Year of this
Lease, (eacii a "Base Reiit AdjusLmeiit Date"), Lessor
aiid Lessee sliall calculate the aggregate Capital
Expenditures (including, witliout Iiiiiitation, any
Capital Expeiiditures niade in connection with any
Developiiient Project)spent by Lessor from the
Comniencement Date tlirougli Deceiiiber 31 of the Fiscal
Year just coiupleted. If Lessor lias speiit itioi-e
tliaii $1.6 iiiillioit iii excess of four perceiit (4%) of
tile Gross Reveitues (tlie "Capital Expeiiditure
Maxilliulii Aiiiouiit") over sucli tiiiie period, tlieii
the Base Reiit sliall be $2,300,000 (plus increases iii
the Coiisuiiier Price Iiidex iii accordance witli the
terms liereof) until the iiext Base lteiit Adjustiiieiit
Date. If, oii aiiy Base Reiit Adjustiiiciit Date, the
Lessor ▇▇▇▇ ▇▇)ciit lcss tliaii the Capital Expeiiditure
Maxiiiiuiii Aiiiouiit, tlieii the Base Iteiit sliall be
adjusted to eclual $2,200,000 (plus hicreases iii the
Coiisuiiier Price Iiidex iii accordance witli
-15-
the terms hereof) plus $1.00 for each $16.00 of Capital
Expenditures made
above four percent (4%) of Gross Revenues.
Adjustments in the Base Rent for increases provided for in
this Subsection (e) shall be effective on January
I of each year.
3.2 Payment of Percentaize Rent. Percentage Rent
shall be due and payable quarterly on or before the 30th
day after the last day of each quarter during the Term.
Additionally, an Officer's Certificate, setting forth the
calculation of such rent payment for such quarter, shall
be delivered to Lessor quarterly, together with such
quarterly Percentage Rent payment after each quarter of
each Fiscal Year (or part thereof) during the Term. Such
quarterly payment shall be based on the formula set forth
in Section 3. 1 (c), but, in calculating the Revenue
Computations for each quarter, gross revenues for the year
to date shall be annualized by dividing such sum by the
number of months which have passed year to date (including
the current month) and multiplying the result by 12. The
resulting Percentage Rent amount shall be multiplied by
the number of months that have passed year-to-date
(including the current month) and divided by 12. Payments
of Base Rent and Percentage Rent for the year to date
shall be subtracted from the result to arrive at the
Percentage Rent payment due for that quarter. The Revenue
Computations sfiall be appropriately adjusted to calculate
Percentage Rent for partial years. There shall be no
reduction in the Base Rent regardless of the result of the
Revenue Computations.
In addition, on or before February I and November I of
each year, commencing with November 1, 1998, Lessee shall
deliver to Lessor an Officer's Certificate reasonably
acceptable to Lessor setting forth the computation (based
on, in the case of the February I Officer's Certificate,
audited financial statements of Lessee, if required
hereunder) of the actual Percentage Rent that accrued for
each quarter of the Fiscal Year that ended on the
immediately preceding December 31 (in the case of the
February I Officer's Certificate) and for each of the
first three calendar quarters of the then current Fiscal
Year (for the November I Officer's Certificate) and shall
pay to Lessor, with the delivery of the Officees
Certificate, the amount of Percentage Rent due and payable
for the Fiscal Year or the portion of the Fiscal Year then
ended as shown in the Officer's Certificate, if any, that
exceeds the amount actually paid as Percentage Rent by
Lessee for such Fiscal Year or portion thereof, as the
case may be. If the Percentage Rent actually due and
payable for such Fiscal Year or portion thereof is shown
by such certificate to be less than the amount actually
paid as Percentage Rent for the applicable Fiscal Year or
portion thereof, Lessor, at its optio n, shall reimburse
such amount to Lessee or credit such arnount against the
next quarter's Percentage Rent or Base Rent payments;
provided, however, that no Event of Default exists.
Any difference between the annual Percentage Rent due
and payable for any Fiscal Year or portion thereof, as the
case may be (as shown in the applicable Officees
Certificate) and the total amount of quarterly payments
for such Fiscal Year or portion thereof, as the case may
be, actually paid by Lessee shall bear interest at the
Overdue Rate. The interest payable under this paragraph
shall accrue from (i) the delivery date the Officer's
Certificate for such Fiscal Year or portion thereof was
due, in the case of an underpayment and (ii) the date
Lessor fails to credit any due and payable Rent against
such overpayment, until the amount of such difference
shall be paid or otherwise discharged by credit to Lessee.
Any such interest payable to Lessor shall be deemed to be
and shall be payable as Additional Charges.
The obligation to pay Percentage Rent shall survive
the expiration or earlier termination of the Ten-n. A
final reconciliation, taking into account, among other
relevant adjustments, any adjustments which are accrued
after such expiration or termination date but which
related to Percentage Rent accrued prior to such
termination date and Lessee's computation of Percentage
Rent due and payable, shall be made not later than 90 days
after such expiration or termination date. Within such 90
day period, Lessee shall deliver to Lessor
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an Officer's Certificate setting forth the final
Percentage Rent amount payable to Lessor and payment of
the amount due, if any. If the final reconciliation
provides that Lessor owes Lessee a credit due to an
overpayment of Percentage Rent, Lessor shall reimburse
Lessee for-such overpayment within 30 days following
delivery of the Officer's Certificate.
3.3 Confirmation of Percentage Rent. Lessee shall
utilize, or cause to be utilized, an accounting system for
the Leased Property in accordance with generally accepted
accounting principles consistently applied and the Unifon-
n System, that will accurately record all data necessary
to compute Percentage Rent, and Lessee shall retain for at
least four years after the expiration of each Fiscal Year
(and in any event until the reconciliation described in
Section 3.2 for such Fiscal Year has been made),
reasonably adequate records conforming to such accounting
system showing all data necessary to compute Percentage
Rent for the applicable Fiscal Years. In the event of a
conflict between generally accepted accounting principles
and the Uniform System, the Uniform System shall prevail.
Lessor (or its accountants or representatives), at its
expense (except as provided herein), shall have the right
from time to time to audit the information that formed the
basis for the data set forth in any Officer's Certificate
provided under Section 3.2 and, in connection with such
audits, to examine all Lessee's records (including
supporting data and sales and excise tax returns)
reasonably required to verify Percentage Rent, subject to
any prohibitions or limitations on disclosure of any such
data under Legal Requirements. If any such audit
discloses a deficiency in the payment of Percentage Ren@
and either Lessee agrees with the result of such audit or
the matter is otherwise determined or compromised, Lessee
shall forthwith pay to Lessor the amount of the
deficiency, as finally agreed or determined, together with
interest calculated at the Overdue Rate from the due date
for the last quarterly payment of Percentage Rent for the
Fiscal Year to the date of payment thereof; provided,
howdver, that as to any audit that is commenced more than
two years after the date Percentage Rent for any Fiscal
Year is reported by Lessee to Lessor, the deficiency, if
any, with respect to such Percentage Rent, shall bear
interest at the Overdue Rate only from the date such
determination of deficiency is made unless such deficiency
is the result of gross negligence or willful misconduct on
the part of Lessee. If any such audit discloses that the
aggregate Percentage Rent actually due from Lessee for any
Fiscal Year exceed those reported by Lessee by more than
two percent, Lessee shall pay the cost of such audit and
examination. Any proprietary infon-nation obtained by
Lessor pursuant to the provisions of this Section 3.3
shall be treated as confidential, except that such
information may be used, subject to appropriate
confidentiality safeguards, in any litigation between the
parties, and except further that Lessor may disclose such
information to prospective lenders or purchasers, their
respective attorneys, accountants and other
representatives, or pursuant to any Legal Requirements.
The obligations of Lessee contained in this Section 3.3
shall survive the expiration or earlier termination of
this Lease. The obligations of Lessor set forth in this
Section 3.3 to maintain any proprietary information as
confidential shall survive the expiration or earlier
termination of this Lease.
3.4 Additional Chary-es. In addition to the Base
Rent and Percentage Rent, (a) Lessee also will pay and
discharge as and when due and payable all other amounts,
liabilities, obligations, costs and expenses necessary to
perform its obligations hereunder and under the Franchise
Agreement, and (b) in the event of any failure on the part
of Lessee to timely pay any of those items referred to in
clause (a) of this Section 3.4, Lessee also will promptly
pay and discharge every fine, penalty, interest and cost
that may be added for nonpayment or late payment of such
items (the items refeffed to in clauses (a) and (b) of
this Section 3.4 being additional rent hereunder and being
referred to herein collectively as the "Additional
Charges"), and Lessor shall have all legal, equitable and
contractual rights, powers and remedies provided either in
this Lease or by statute or otherwise in the case of non-
payment of the Additional Charges as in the case of non-
payment of the Base Rent. If any installment of Base
Rent, Percentage Rent or Additional Charges (but only
as,to those Additional Charges that are payable directly
to Lessor) shall not be paid on its due date, Lessee will
pay Lessor on demand, as Additional Charges, a late charge
(to the extent permitted by law) computed at
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the Overdue Rate on the amount of such installment, from
the due date of such installment to the date of payment
thereof. To the extent that Lessee pays any Additional
Charges to Lessor pursuant to any requirement of this
Lease (which charges are not payable to Lessor), Lessee
shall be relieved of its obligation to pay such Additional
Charges to the entity to which they would otherwise be due
and Lessor shall pay same from monies received from
Lessee.
3.5 Security Deposit. Lessee shall pay to Lessor a
security deposit in the amount of $O; 12rovided, however.
in the event the obligations of Lessee or Guarantor are
assigned or transferred pursuant to a change of control
permitted under Section 23.4 hereof, such transferee shall
pay Lessor a Security deposit in the arnount of $200,000
(the "Security Deposit"). The total outstanding principal
balance under the Guaranty Agreement shall be reduced by
$200,000, or such lesser amount then outstanding under the
Guaranty Agreement, upon payment of the Security Deposit.
Lessor shall have the right to offset any amounts owing to
Lessor under this Lease against the security deposit.
Subject to this right, upon the termination of this Lease,
Lessor shall refund the security deposit to Lessee,
without interest.
3.6 Conversion of Propea. If, during the Term,
Lessee wishes to cease food and beverage operations at the
Facility, Lessee shall give notice of such desire to
Lessor, which shall require the approval of Lessor which
Lessor may grant or withhold in its sole and absolute
discretion. Lessor and Lessee shall, if such cessation is
to occur, commence negotiations to adjust Rent to reflect
the proposed change to the operation of the Facility, each
acting reasonably and in good faith; provided, however,
that any such adjustment shall confon-n with norrnal
business practice and shall not result in the creation of
a Rent formula based on the income or profits of Lessee.
All other terms of this Lease will remain substantially
the same. During negotiations, which shall not extend
beyond 60 days, Lessee shall not "convert" the Facility
and shall continue fulfilling its obligations under the
existing terms of this Lease. If no agreement is reached
after such 60-day period, Lessee shall withdraw such
notice and this Lease shall continue in full force.
3.7 Annual Revenue Pr!Qje . No later than 30 days
prior to the commencement of each Fiscal Year, Lessee
shall submit Annual Revenue Projections for such Fiscal
Year to Lessor. The Annual Revenue Projections shall be
subject to Lessor's prior approval as to form and content
and shall be in such fonn and shall contain such
information as Lessee included in its annual revenue
projections in accordance with its past practice, and
shall, in any event, include the following:
(a) Lessee's reasonable estimate of Room and
Other Revenues and Food and Beverage
Revenues for the Fiscal Year itemized on a monthly
basis; and
(b) A projection of the Percentage Rent
payable for such Fiscal Year.
Lessee will prepare, for Lessor's approval, quarterly
revisions to such projections, as necessary, to be
delivered to Lessor within 15 days after the end of the
first three calendar quarters of a Fiscal Year.
3.8 Annual Capital Expenditures Budget. Subject to
the provisions of Sections 8.1, 9.2 and
19. 1 (a), Lessor, at its sole expense, shall be
responsible for all Capital Expenditures as defmed in
this Section
3.8 and in accordance with Exhibit I attached hereto and
incorporated herein by reference, provided,
however, Lessor shall not be obligated to make any Capital
Expenditure the need for which Lessor disputes or objects
to in good faith. Not later than 60 days prior to the
commencement of each Fiscal Year or Partial Fiscal Year,
Lessee shall submit to Lessor for Lessoes approval,
Lessee's proposed Annual Capital Expenditures Budget. The
Annual Capital Expenditures Budget (the "Capital
Expenditures Budget") shall be subject to Lessoes approval
and shall contain the following:
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(a) Lessee's estimate of the amounts to be
expended during the upcoming Fiscal Year to renew, replace
or refurbish fixtures, fiimiture and equipment and a
reasonably detailed description of the expenses to be
incurred, and Lessee's estimate of the amount that will be
expended during the upcoming Fiscal Year on capital
repairs, replacements and improvements to the Leased
Improvements, including, but not limited to, the building
envelope, exterior skin and landscaping of the Facility,
together with a reasonably detailed description of the
capital repairs, replacements and improvements that will
be undertaken. The expenditures referred to in this
Section 3.8 are referred to in this Lease as "Capital
Expenditures."
(b) A capital renewal program showing the
major anticipated Capital Expenditures and that will be
incurred over the ensuing three year and five year
periods. Lessor shall have the right to comment on or
approve the Capital Expenditures Budget, which approval
shall not be unreasonably withheld. If Lessor shall not
give its approval to the Capital Expenditures Budget,
Lessee shall revise the Capital Expenditures Budget, as
may be required to obtain Lessor's consent thereto.
The Capital Expenditures Budget shall be consistent with
Lessee's policies as to Capital Expenditures as set
forth on Exhibit I.
3.9 Cal2itat Exl2enditure Reserve. Lessor shall
establish and maintain a reserve to provide for the
Capital Expenditures costs at the Facility. In addition,
Lessor shall reserve a quarterly amount equal to 4%
percent of the Gross Revenue. Subject to the provisions
of Section 19. 1 (a), such reserve shall be used to defer
the costs of Capital Expenditures at the Facility;
provided that Lessor, in its reasonable discretion, shall
be entitled to use such funds for other purposes if
adequate reserves remain for the purpose of Capital
Expenditures at the Facility.
3.10 A1212lication of Capital Exl2enditure Reserve.
When amounts are budgeted and agreed to be spent for
Capital Expenditures, Lessee shall be responsible for the
implementation of the Capital Expenditure program and
shall make periodic draws on the Capital Expenditure
Reserve by the presentation to Lessor of appropriate
documentation, as described below, establishing the
amounts to be paid in accordance with the Capital
Expenditure Budget, and including such other supporting
documentation as Lessor may reasonably require. Without
limiting the foregoing, Lessee shall submit monthly a
request for payment accompanied by waivers and releases of
liens for all subcontractors and materialmen, and a
certification by an authorized officer of Lessee that the
amount requested is within the Capital Expenditures Budget
for the item or items for which payment is being requested
and that the work and payment are strictly in accordance
with Exhibit I (the "Request"). Within five days of
Lessor's receipt of such documentation, Lessor either
shall approve or deny the Request, such approval shall not
be unreasonably withh@ld and shall not be withheld so long
as the work was performed in a workmanlike manner in
accordance with the Capital Expenditures Budget. If
Lessor approves the Request, Lessor will make the
requested payment from the Capital Expenditure Reserve
within ten days of invoice. Lessor and Lessee shall
cooperate in good faith to accomplish such implementation
as quickly as practicable in accordance with sound
business practices.
3.11 Unbudgeted Capital Expenditures. No
disbursements shall be made from the Capital Expenditure
Reserve which are not in accordance with the Capital
Expenditure Budget. However, Lessor and Lessee recognize
tha@ in certain circumstances, Capital Expenditures which
were not budgeted may be necessary. In the following
circumstances, disbursements shall be made for Capital
Expenditures from the Capital Expenditures Reserve even
though such expenditures were not included in the Capital
Expenditure Budget:
(i) When Lessor and Lessee agree to an addition to the
Capital Expenditure Budget; and
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(ii) When the Capital Expenditure is necessary on an
emergency basis for any reason
including the comfort and safety of guests or employees.
3.12 AP-ent Method for Purchases of Cal2ital
Expenditum.
(a) Lessor hereby retains Lessee as an
independent contractor on the terms contained in this
Lease to act for and on behalf of Lessor as Lessoes agent
in connection with the implementation of the Capital
Expenditure program (not to include any Development
Project as contemplated in Section 1.3 hereof) for the
Facility. Lessee's cost analysis shall be based upon the
plans and furnishings set forth in the specifications and
other written information agreed to be implemented under
the Capital Expenditure Budget. Lessee will be
responsible for negotiating purchases of Capital
Expenditures on Lessor's behalf. Lessee agrees to solicit
competitive bids for any Capital Expenditure project in
excess of $7500 and to provide copies of the bids to
Lessor, unless waived in writing by Lessor in advance.
Lessee shall obtain the Lessor's approval, which approval
may be given in its sole and absolute discretion, prior to
engaging any architect, designer, product specifier or
purchasing entity. All purchases will be based on
Lessee's or any Affiliate of Lessee's actual cost, net of
trade discounts (including cash discounts, where
applicable), absent any markup or other profit for Lessee.
Lessor shall have the right to audit documents and
accounts in connection with any Capital Expenditure.
(b) Lessor acknowledges and agrees that
purchase orders relating to any Capital Expenditure for
the Project will be executed by Lessee as agent for and on
behalf of Lessor. Lessor further acknowledges and agrees
that Lessee shall have no liability under this Lease or
otherwise for payment of the Capital Expenditure or for
freight or storage related to the Capital Expenditure
provided that no expenditures shall be made except in
accordance with the Budget and as provided above.
(c) LESSOR ACKNOWLEDGES AND AGREES THAT LESSEE
MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY,
RELATING TO QUALITY, FITNESS OR CAPACITY OF THE WORK DONE
PURSUANT TO CAPITAL EXPENDITURES. Lessor, as purchaser of
the Capital Expenditure, shall have the benefit of any
guarantees and warranties, either express or implied, from
vendors and suppliers of the Capital Expenditure, but
Lessee shall have no liability for any such third party
guarantees or warranties. Lessee will use commercially
reasonable efforts on Lessoes behalf to obtain proper
service for the replacement or coffection of
unsatisfactory Capital Expenditure, but Lessee does not
warrant its ability to obtain such service and Lessee
shall have no obligation or responsibility to replace or
correct any such unsatisfactory Capital Expenditure.
3.13 Lessor's Obligation to Make Cal2ital
Expenditures. Lessor commits to fund aggregate Capital
Expenditures (which amounts shall include the 4% reserve
set forth in Section 3.9 above), as follows: (i) $750,000
during the first 16 months following the Commencement Date
and (ii) $1,500,000 during the first 36 months following
the Commencement Date. During months 37 through 48 of the
Term, Lessor commits to fund Capital Expenditures in an
amount equal to 3% of the Gross Revenues for such time
period less the amount by which the Capital Expenditures
made by Lessor during the first 36 months following the
Commencement Date exceeded 4% of the Gross Revenues over
such 3 6 month period. In addition, Lessor commits to
make aggregate Capital Expenditures (which amounts shall
include the 4% reserve set forth in Section 3.9 above)
over the four years of the Term of this Lease commencing
on the fourth anniversary of the Commencement Date and
ending on the eighth anniversary of the Commencement Date,
in an amount which is equal to or greater than 3% of the
Gross Revenues eamed over such four year period. The Base
Rent shall be increased as set forth in Section 3. 1 (e)
to the extent any such Capital Expenditures exceed the 4%
reserve described in Section 3.9 above. Capital
Expenditures shall include, without limitation, any
Capital
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Expenditures made in connection with any Development
Project. Except as specifically set forth in this
Lease, Lessor is under no obligation to make Capital
Expenditures except as specifically set forth herein.
ARTICLE IV
4.1 Pament of Taxes and Impositions. Lessee shall
pay all property taxes (except for the items in clauses
(1) through (4) of the definition of "Impositions" set
forth in Article 11 and except for Beach Refurbishment
Impositions). On an annual (Fiscal Year) basis, Lessee
shall be responsible for the first $25,000 of Beach
Refurbishment Impositions, Lessor shall be responsible for
the next $25,000 ($25,000 to $50,000), Lessee shall be
responsible for the next $25,000 ($50,000 to $75,000) and
Lessor shall be responsible for all annual Beach
Refurbishment Impositions in excess of $75,000. Subject
to Article XII relating to permitted contests, each party
will pay, or cause to be paid, all Impositions imposed on
each of them, respectively, before any fme, penalty,
interest or cost may be added for non-payment, such
payments to be made directly to the taxing or other
authorities where feasible, and will promptly fumish to
the other party copies of official receipts or other
satisfactory proof evidencing such payments; provided,
however, Lessee shall pay all Impositions in respect of
the Initial FF&E and the Leased Property and this Lease
(other than fees, property taxes and taxes imposed on
Lessoes income from the Leased Property). Lessor and
Lessee shall, upon request of the other, provide such data
as is maintained by the party to whom the request is made
with respect to the Leased Property as may be necessary to
prepare any required retums and reports. Lessee shall
file all personal property tax retums in such
jurisdictions where it is legally required to so file.
Lessor, to the extent it possesses the same, and Lessee,
to the extent it possesses the same, will provide the
other party, upon reques@ with cost and depreciation
records necessary for filing retums for any property so
classified as personal property. Where Lessor is legally
required to file personal property tax retums, Lessor
shall provide Lessee with copies of assessment notices in
sufficient time for Lessee to file a protest. Lessee may,
upon notice to Lessor, at Lessee's option and at Lessee's
sole expense, protest, appeal, or institute such other
proceedings (in its or Lessoes name) as Lessee may deem
appropriate to effect a reduction of real estate or
personal property assessments for those Impositions to be
paid by Lessee, and Lessor, at Lessee's expense as
aforesaid, shall fully cooperate with Lessee in such
protest, appeal, or other action. Lessee hereby agrees to
indemnify, defend, and hold harmless Lessor from and
against any claims, obligations, and liabilities against
or incurred by Lessor in connection with such cooperation,
although Lessee is not liable for the amount of any (i)
Real Estate Taxes or (ii) personal property taxes
attributable to personal property owned by Lessor.
Lessor, however, reserves the right to effect any such
protest, appeal or other action and, upon notice to
Lessee, shall control any such activity, which shall then
go forward at Lessoes sole expense. Upon such notice,
Lessee, at Lessoes expense, shall cooperate fully with
such activities.
4.2 Utiliiy Charges. Lessee will be solely
responsible for obtaining utility services to the Leased
Property and will pay, or cause to be paid, all charges
for electricity, gas, oil, water, sewer and other
utilities attributable to, or used on, under or in the
Leased Property during the Term as such charges become
due.
4.3 Insurance Premiums. Lessee will pay or cause to
be paid all premiums for the insurance coverages required
to be maintained by it under Article Xiii. Lessor shall
pay or cause to be paid all premiupis for the insurance
coverages required to be maintained by it under Article
VIII.
I
ARTICLE V
No Termination, Abatement,Etc. Except as otherwise
specifically provided in this Lease, Lessee,
to the extent permifted by law, shall remain bound by this
Lease in accordance with its terms and shall
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neither take any action without the written consent of
Lessor to modify, surrender or terminate the ▇▇▇▇▇, nor
seek nor be entitled to any abatement, deduction,
deferment or reduction of the Rent, or setoff against the
Ren@ nor shall the obligations of Lessee be otherwise
affected by reason of (a) any damage to, or destruction
of, any Leased Property or any portion thereof from
whatever cause or any Taking of the Leased Property or any
portion thereof, (b) any claim which Lessee has or might
have against Lessor by reason of any default or breach of
any warranty by Lessor under this Lease or any other
agreement between Lessor and Lessee, or to which Lessor
and Lessee are parties, (c) any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceedings affecting
Lessor or any assignee or transferee of Lessor, (d) any
lawful or unlawful prohibition of, or restriction upon,
Lessee's use of Leased Property, or interference with such
use, or (e) for any other cause whether similar or
dissimilar to any of the foregoing. Except as otherwise
specifically provided in this Lease, Lessee hereby
specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be
conferred upon it by law to (1) modify, surrender or
terminate this Lease or quit or surrender the Leased
Property or any portion thereof, or (2) ▇▇▇▇▇, reduce,
suspend or defer Rent or other sums payable by Lessee
hereunder, except as otherwise specifically provided in
this Lease. The obligations of Lessee hereunder shall be
separate and independent covenants and agreements and the
Rent and all other sums payable by Lessee hereunder shall
continue to be payable in all events unless the
obligations to pay the same shall be terminated pursuant
to the express provisions of this Lease or by termination
of this Lease other than by reason of an Event of Default.
ARTICLE VI
6.1 Ownershil2 of the Leased Propea. Lessee
acknowledges that the Leased Property is the propert7y of
Lessor and that Lessee has only the right to the
possession and use of the Leased Property upon the terms
and conditions of this Lease.
6.2 Lessee's Personal Propegy. Throughout the Term,
Lessee will acquire, own, maintain and replace such
personal property (other than Capital Expenditures) and
Inventory as is required to operate the Leased Property as
a hotel and, otherwise, in the manner contemplated by this
Lease. At all times during the Term, Lessee shall
maintain an adequate and customary supply of Inventory
consistent with historical practices and Franchisor
requirements, if any. Lessee may (and shall as provided
herein below), at its expense, install, affix or assemble
or place on any parcels of the Land or in any of the
Leased Improvements, any items of personal property
(including Inventory) owned by Lessee (collectively, the
"Lessee's Personal Property"). Lessee, at the
commencement of the Term, and from time to time
thereafter, shall provide Lessor with an accurate list of
all such items of the Lessee's Personal Property. Lessee
may, subject to the conditions set forth in this Section
6.2, Section 6.3, Section 6.4 and Section 36, remove any
of Lessee's Personal Property set forth on such list
(other than any items of Initial FF&E) at any time during
the Term or upon the expiration or any prior termination
of the Term; provided, however, that any fixtures,
fumiture, equipment or capital improvement purchased by
Lessee as Capital Expenditures or in replacement of any
item of Initial FF&E shall be a part of the Facility and
the Leased Propert7y upon the acquisition, installation or
construction thereof and shall be and remain the property
of Lessor upon expiration of the Terin or earlier
termination of this Lease. All of Lessee's Personal
Property not removed by Lessee within ten days following
the expiration or earlier termination of the Term shall be
considered abandoned by Lessee and may be appropriated,
sold, destroyed or otherwise disposed of by Lessor without
first giving Notice thereof to Lessee, without any payment
to Lessee and without any obligation to account therefor.
Lessee will, at its expense, restore the Leased Property
to the condition required by Section 9.l(b), including
repair of all damage to the Leased Property caused by the
removal of Lessee's Personal Property, whether effected by
Lessee or Lessor. Lessee may make such financing
arrangements, title retention agreements, leases or other
agreements with respect to the Lessee's Personal
Property'as it sees fit provided that Lessee first advises
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Lessor of any such arrangement and such arrangement
expressly provides that in the event of Lessee's default
thereunder, Lessor may assume Lessee's obligations and
rights under such arrangement.
6.3 Lessoes Lien. To the fullest extent permitted
by applicable law, Lessor is granted a lien and security
interest on all of Lessee's Personal Property (including,
without limitation, the Initial FF&E) now or hereinafter
placed in or upon the Leased Property, and such lien and
security interest shall remain attached to Lessee's
Personal Property until payment in fWl of all Rent and
satisfaction of all of Lessee's obligations hereunder;
provided, however, Lessor shall subordinate its lien and
security interest to any purchase money security interest
of any non-Affiliate of Lessee which finances the purchase
of such Personal Property, the terms and conditions of
such subordination to be satisfactory to Lessor in the
exercise of reasonable discretion. Lessee shall, upon the
request of Lessor, execute such financing statements,
estoppel certificates and other documents or instruments
reasonably requested by Lessor to perfect the lien and
security interests herein granted. The lien and security
interest granted hereunder shall be evidenced by a
Security Agreement executed by Lessee in favor of Lessor
in the forrn of Exhibit J attached hereto and incorporated
by reference.
6.4 Initial FF&E. Lessor acknowledges that Lessee
is the owner of the Initial FF&E. Notwithstanding the
immediately preceding sentence, for purposes of the
following provisions of this Lease, the terrn "Leased
Property," when used in such provisions shall include the
Initial FF&E: 8.1, 8.2, 8.3, 9.1, Article XI, 13.1, 13.6,
14. 1, and 14.2. Upon termination of this Lease on the
basis of a default by Lessee hereunder, Lessor shall
retain an appraiser to appraise the value, on a
liquidation basis, of any remaining Initial FF&E used in
the operation of the Leased Property (the "Appraised
Value"). Upon any such termination, Lessee shall convey
to Lessor by ▇▇▇▇ of sale and other appropriate
instruments of conveyance any Initial FF&E used in the
operation of the Leased Property (the "Conveyance"). In
consideration of the Conveyance, any damages suffered by
Lessor by reason of Lessee's default shall be offset and
reduced by the amount of the Appraised Value.
ARTICLE VII
7.1 Condition of the Leased Prope!iy. Lessee
acknowledges receipt and delivery of possession of the
Leased Property. Lessee has examined and otherwise has
knowledge of the condition of the Leased Property and has
found the same to be satisfactory for its purposes
hereunder. Lessee is leasing the Leased Property "as is,"
"where is" and with "all faults," in its present
condition. Lessee waives any claim or action against
Lessor in respect of the condition of the Leased Property
existing as of the Commencement Date.
THE LEASED PROPERTY IS DEMISED IN ITS PRESENT
CONDITION WIT'HOUT REPRESENTATION OR WARRANTY (EXPRESSED
OR IMPLIED) BY LESSOR AND SUBJECT TO THE RIGHTS OF PARTIES
IN POSSESSION, AND TO THE EMSTFNG STATE OF TLTLE INCLUDING
ALL CURRENT AND FUTURE COVENANTS, CONDITIONS,
RESTRICTIONS, EASEMENTS AND OTHER MATTERS (NOT LINHTED TO
ITEMS OF RECORD) INCLUDING ALL APPLICABLE LEGAL
REQUIREMENTS, TBE LIEN OF FINANCING INSTRUMENTS,
MORTGAGES, DEEDS OF TRUST AND SECURITY DEEDS, AND
INCLUDING OTHER MAT-RERS WHICH WOULD BE DISCLOSED BY AN
INSPECTION OF THE LEASED PROPERTY OR BY AN ACCURATE SURVEY
THEREOF. LESSOR MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, IN RESPECT OF nt LEASED PROPERTY, OR
ANY PART THEREOF, EITHER AS TO ITS FIT'NESS FOR USE,
DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR
OTHERWISE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSI-
HP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL
SUCH RISKS ARE TO BE BORNE BY LESSEE. LESSEE ACKNOWLEDGES
THAT TBE LEASED PROPERTY HAS BEEN INSPECTED BY LESSEE AND
IS SATISFACTORY TO IT. Notwithstanding the foregoing,
however, to the extent permitted by law, Lessor hereby
assigns to Lessee
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all of Lessor's rights to proceed against any predecessor
in title other than Lessee (or an Affiliate of Lessee
which conveyed the Leased Property to Lessor) for breaches
of warranties or representations or for latent defects in
the Leased Property. Lessor shall fully cooperate with
Lessee in the prosecution of any such claim, in Lessor's
or Lessee's naine, all at Lessee's sole cost and expense.
Lessee hereby agrees to indemnify, defend and hold
harinless Lessor from and against any claims, obligations
and liabilities against or incurred by Lessor in
connection with such cooperation. All amounts recovered
that are attributable to the period after the Terin shall
belong to Lessor.
7.2 Use of the Leased Pro@.
(a) Lessee covenants that it will
proceed with all due diligence and will
exercise its best
efforts (excluding the making of any extraordinary
payments) to obtain and to maintain all
approvals needed
to use and operate the Leased Property and the Facility
under applicable local, state and federal
law.
(b) Lessee shall use or cause to be used the
Leased Property only as a hotel facility (including food
and beverage operations) of a caliber consistent with its
present use, and for such other uses as may be necessary
or incidental to such use or such other use as otherwise
app@oved by Lessor (the "Primary Intended Use"). Lessee
shall not use the Leased Property or any portion thereof
for any other use without the prior written consent of
Lessor, which consent may be granted, denied or
conditioned in Lessoes sole discretion. No use shall be
made or permitted to be made of the Leased Property, and
no acts shall be done, which will cause the cancellation
or increase the premium of any insurance policy covering
the Leased Property or any part thereof (unless another
adequate policy satisfactory to Lessor is available and
Lessee pays any premium increase), nor shall Lessee sell
or permit to be kept, used or sold in or about the Leased
Property any article which may be prohibited by law or
fire undenvriter's regulations. Lessee shall, at its sole
cost, comply with all of the requirements pertaining to
the Leased Property of any insurance board, association,
organization or company necessary for the maintenance of
insurance, as herein provided, covering the Leased
Property and Lessee's Personal Property.
(c) Subject to the provisions of
Articles MV and XV Lessee covenants and
agrees that
during the Tenn it will (1) maintain, at a minimum, the
current ratings for the Facility by AAA
and Mobil,
if so rated, (2) operate continuously the Leased Property
as a hotel facility of the class
currently operated at
the Leased Property, (3) keep in full force and effect and
comply with all the provisions of the Franchise Agreemen@
(4) not terminate or amend the Franchise Agreement without
the consent of Lessor, (5) maintain appropriate
certifications and licenses for such use and otherwise
comply with all Legal Requirements (subject to Lessor's
obligations under Section 9.1(c)), (6) seek to maximize
the gross revenues generated therefrom consistent with
sound business practices and (7) not allow the Facility to
become in Poor Standing under a Franchisor guest
satisfaction rating system.
(d) Lessee shall not commit or suffer to be committed
any waste on the Leased Property,
or in the Facility, nor shall Lessee cause or permit any
nuisance thereon.
(e) Lessee shall neither suffer nor permit the
Leased Property or any portion thereof, or Lesspe's
Personal Property, to be used in such a manner as (1)
might reasonably tend to impair Lessor's
I
(or Lessee's, as the case may be) title thereto or to any
portion thereof, or (2) may reasonably make possible a
clairn or claims of adverse usage or adverse possession by
the public, as such, or of implied dedication of the
Leased Property or any portion thereof, subject to
Lessor's prior consent.
(f) Neither Lessee nor an Affiliate of Lessee, nor any
of their successors or assigns shall
operate or manage any hotel, motel, resort or other
lodging facility that is within a three mile radius of the
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Hotel, other than (i) pursuant to this Lease or another
lease, agreement or arrangement with Lessor or an
Affiliate of Lessor, (ii) any hotel, motel, resort or
other lodging facility operated or managed by Lessee or an
Affiliate of Lessee on the date hereof and (iii) the
Sanibel Harbor Resort & Spa, the Outrigger Beach Resort
and Diamond Head Beach Resort.
(g) Lessee shall not use, generate, handle,
dispose or store Hazardous Materials on the Leased
Property, except in the nonnal course of operations of the
Leased Property as a hotel and in compliance with all
Environmental Laws.
(h) Lessee shall not enter into any
collective bargaining agreements with
respect to any of
the employees at the Leased Property without the prior
consent of Lessor, which shall not be
unreasonably
withheld or delayed, unless required by law.
(i) Lessee hereby assumes and agrees to perforin all of
the obligations of Lessor under all
leases in effect at the Leased Property as of the date of
commencement of the Term.
0) Lessee represents that, as of the date
hereof, its sole business activity consists of, and Lessee
covenants that, during the Tenn hereof, its sole business
activity shall consist of the lease and operation of the
Leased Property.
7.3 Lessor to Grant Easements, Etc. Lessor will,
from time to time, so long as no Event of Default has
occuffed and is continuing, at the request of Lessee and
at Lessee's cost and expense (but subject to the approval
of Lessor, which approval shall not be unreasonably
withheld or delayed), (a) grant easements and other rights
in the nature of easements with respect to the Leased
Property to third parties, (b) release existing easements
or other rights in the nature of easements which are for
the benefit of the Leased Property, (c) dedicate or
transfer unimproved portions of the Leased Property for
road, highway or other public purposes, (d) execute
petitions to have the Leased Property annexed to any
municipal corporation or utility distric@ (e) execute
amendments or additions to any covenants and restrictions
affecting the Leased Property and (f) execute and deliver
to any Person any instrument appropriate to confinn or
effect such grants, releases, dedications, transfers,
petitions and amendments (to the extent of its interests
in the Leased Property), but only upon delivery to Lessor
of an Officer's Certificate stating that such grant
release, dedication, transfer, petition or amendment is
beneficial to the proper conduct of the business of Lessee
on the Leased Property and does not materially reduce the
value of the Leased Property.
ARTICLE VIII
8.1 Coml2liance with Legal, Insurance Requirements,
Lessoes Ins@rance and Tax Obligations, Subject to Article
XII relating to permitted contests, Lessee, at its
expense, will promptly (a) comply and cause the Leased
Property to comply with all applicable Legal Requirements
and Insurance Requirements in respect of the use,
operation, maintenance, repair and restoration of the
Leased Property; provided, however, that Lessor shall be
responsible for all Capital Expenditures and the items in
clauses (1) through (4) of the definition of "Impositions"
set forth in Article H, unless the need for such Capital
Expenditure is the result of Lessee's negligence (except
to the extent waived pursuant to Section 13.6), misconduct
or an Alteration (defined herein) made by or commenced by
Lessee other than Alterations contained in the Capital
Expenditure Budget, and (b) procure, maintain and comply
with all appropriate licenses and other authorizations
required for any use of the Leased Property and Lessee's
Personal Property then being made, and for the proper
erection, installation, operation and maintenance of the
Leased Property or any part thereof.
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8.2 Legal Requirements Covenants. Lessee covenants
and agrees that the Leased Property and Lessee's Personal
Property shall not be used for any unlawful purpose, and
that Lessee shall not permit or suffer to exist any
unlawful use of the Leased Property by others. Lessee
shall acquire and maintain all appropriate licenses,
certifications, permits and other authorizations and
approvals needed to operate the Leased Property in its
customary manner for the Primary Intended Use, and any
other lawful use conducted on the Leased Property as may
be permitted from time to time hereunder. Lessee further
covenants and agrees that Lessee's use of the Leased
Property and maintenance, alteration, and operation of the
same, and all parts thereof, shall at all times conform to
all Legal Requirements, unless the same are finally deten-
nined by a court of competentjurisdiction to be unlawful
(and Lessee shall cause all such sub-tenants, invitees or
others to so comply with all Legal Requirements). Lessee
may, however, upon prior Notice to Lessor, and subject to
the provisions of Article XI[I, contest the legality or
applicability of any such Legal Requirement or any
licensure or certification decision if Lessee maintains
such action in good faith, with due diligence, without
prejudice to Lessor's rights hereunder, and at Lessee's
sole expense. If by the terms of any such Legal
Requirement compliance therewith pending the prosecution
of any such proceeding may legally be delayed without the
incurrence of any lien, charge or liability of any kind
against the Facility or Lessee's leasehold interest
therein and without subjecting Lessee or Lessor to any
liability, civil or criminal, for failure so to comply
therewith, Lessee may delay compliance therewith until the
final determination of such proceeding. If any lien,
charge or civil or criminal liability would be incurred by
reason of any such delay, Lessee, on the prior written
consent of Lessor, which consent shall not be unreasonably
withheld, may nonetheless contest as aforesaid and delay
as aforesaid provided that such delay would not subject
Lessor to criminal liability and Lessee both (a) fumishes
to Lessor security reasonably satisfactory to Lessor
against any loss or injury to Lessor by reason of such
contest or delay and (b) prosecutes the contest with due
diligence and in good faith.
8.3 Environmental Covenants. In addition to, and not
in diminution of, Lessee's covenants and
undertakings in Sections 8.1 and 8.2 hereof, Lessee
covenants and undertakes with Lessor as follows:
(a) At all times hereafter until such time as
all liabilities, duties or obligations of Lessee to the
Lessor under the Lease have been satisfied in full, Lessee
shall fully comply with all Environmental Laws applicable
to the Leased Property and the operations thereon, enforce
any O&M program adopted by Lessor relating to the
Facility, and treat encapsulated products properly during
renovations or otherwise, subject to Lessoes obligation to
pay for Capital Expenditures. Lessee agrees to give
Lessor prompt written notice of (1) all Environmental
Liabilities; (2) all pending, threatened or anticipated
Proceedings, and all notices, demands, requests or
investigations, relating to any Environmental Liability or
relating to the issuance, revocation or change in any
Environmental Authorization required for operation of the
Leased Property; (3) all Releases at, on, in, under or in
any way affecting the Leased Property, or any Release
known by Lessee at, on, in or under any property adjacent
to or near the Leased Property; and (4) all facts, events
or conditions that could reasonably lead to the occurrence
of any of the above-referenced matters.
(b) Lessor hereby agrees to defend, indemnify
and save harmless any and all Lessee Indemnified Parties
from and against a:ny and all Identified Environmental
Liabilities and Unidentified Enviromnental Liabilities, in
all cases, which were caused by the acts or negligent
failures to act of Lessor. Lessor' ' s responsibility to
indemnify Lessee under this subsection (b) shall survive
th.e termination of this Lease.
(c) Lessee hereby agrees to defend, indemnify
and save harmless any and all Lessor Indemnified Parties
from and against any and all Unidentified Envirom-nental
Liabilities caused by the acts or negligent failures to
act of Lessee. Notwithstanding the foregoing, to the
extent any such Environmental Liability was caused by the
acts or negligent failure to act of Lessee prior to the
Commencement Date,
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Lessee shall defend, indemnify, and save Lessor hannless
only to the extent Messrs. ▇▇▇▇▇▇ or ▇▇▇▇▇▇, or ▇▇.
▇▇▇▇▇▇▇▇▇ knew or should have known in their capacities as
employees or officers of Lessee, Guarantor or any
Affiliate of Lessee or Guarantor, of any such act or
failure to act. Lessee's responsibility to indemnify
Lessor under this subsection (c.) shall survive the
termination of this Lease.
(d) If any Proceeding is brought against any
Indemnified Party in respect of an Environmental Liability
with respect to which such Indemnified Party may claim
indemnification under either Section 8.3(b) or (c) (an
"Indemnified Environmental Liability"), the Indemnifying
Party, upon request, shall at its sole expense resist and
defend such Proceeding, or cause the same to be resisted
and defended by counsel designated by the Indemnified
Party and approved by the Indemnifying Party, which
approval shall not be unreasonably withheld; provided,
however, that such approval shall not be required in the
case of defense by counsel designated by any insurance
company undertaking such defense pursuant to any
applicable policy of insurance. Each Indemnified Party
shall have the right to employ separate counsel in any
such Proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel will be at the
sole expense of such Indemnified Party unless such counsel
has been approved by the Indemnifying Party, which
approval shall not be unreasonably withheld. The
Indemnifying Party shall not be liable for any settlement
of any such Proceeding made without its consent, which
shall not be unreasonably withheld, but if settled with
the consent of the Indemnifying Party, or if settled
without its consent (if its consent shall be unreasonably
withheld), or if there be a final, nonappealable judgment
for an adversarial party in any such Proceeding, the
Indemnifying Party shall indemnify and hold harmless the
Indemnified Parties from and against any liabilities
incurred by such Indemnified Parties by reason of such
settlement or judgment.
For purposes of this Section 8.3, all amounts for
which any Indemnitee seeks indemnification shall be
computed net of (a) any actual income tax benefit
resulting therefrom to such Indemnitee, (b) any insurance
proceeds received (net of tax effects) with respect
thereto, and (c) any amounts recovered (net of tax
effects) from any third parties based on claims the
Indemnitee has against such third parties which reduce the
damages that would otherwise be sustained; provided that
in all cases, the timing of the receipt or realization of
insurance proceeds or income tax benefits or recoveries
from third parties shall be taken into account in
determining the amount of reduction of damages. Each
Indemnitee agrees to use its reasonable efforts to pursue,
or assign to Lessee, any claims or rights it may have
against any third party which would materially reduce the
amount of damages otherwise incurred by such Indemnitee.
Notwithstanding anything to the contrary
contained in this Lease, if Lessor shall become entitled
to the possession of the Leased Property by virtue of the
termination of this Lease or repossession of the Leased
Property, then Lessor may assign its indemnification
rights under Section 8.3 of this Lease (but not any other
rights hereunder) to any Person to whom the Lessor
subsequently transfers the Leased Property, subject to the
following conditions and limitations, each of which shall
be deemed to be incorporated into the terms of such
assignment, whether or not specifically referred to
therein;
(1) The indemnification rights referred to in this
section may be assigned only if a known Environmental
Liability then exists or if a Proceeding is then pending
or, to the knowledge of Lessee or Lessor, then threatened
with respect to the Leased Property;
(2) Such indemnification rights shall be limited to
Indemnified Environmental
Liabilities relating to or specifically affecting the
Leased Property; and
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(3) Any assignment of such indemnification rights
shall be limited to the
immediate transferee of Lessor, and shall not extend to
any such transferee's successors or
assigns.
(e) At any time any Indemnitee has reason to
believe circumstances exist which could reasonably result
in an Indemnified Enviromnental Liability, upon reasonable
prior written notice to Lessee stating such Indemnitee's
basis for such belief, an Indemnitee shall be given
immediate access to the Leased Property (including, but
not limited to, the right to enter upon, investigate,
drill ▇▇▇▇▇, take soil borings, excavate, monitor, test,
cap and use available land for the testing of remedial
technologies), Lessee's employees, and to all relevant
documents and records regarding the matter as to which a
responsibility, liability or obligation is asserted or
which is the subject of any Proceeding; provided that such
access may be conditioned or restricted as may be
reasonably necessary to ensure compliance with Legal
Requirements and the safety of personnel and facilities or
to protect confidential or privileged information. All
Indemnitees requesting such immediate access and
cooperation shall endeavor to coordinate such efforts to
result in as minimal interruption of the operation of the
Leased Property as practicable.
8.4 Asset Management Covenants.
(a) Lessee covenants and agrees to maintain a
REVPAR of at least 122.4% of the REVPAR of the Competitive
Set for each calendar year or similar comparative period.
Lessee will not reposition the mix of customers
historically serviced by the Facility such that a Customer
Ratio increases or decreases over a Fiscal Year by more or
less than 50% of the prior year's Customer R@tio.
Notwithstanding the foregoing, Lessee shall not be in
breach of this covenant and shall not be in default
pursuant to Section 16. 1 (n) unless Lessor is in
compliance with Section 3.13 hereof
(b) Lessee shall permit Lessor, upon
reasonable notice, access to the Hotel's General Manager,
executive committee and other key personnel as Lessor may
elect to interview, to obtain information regarding the
programs and policies in effect at the Hotel, including,
without limitation, any programs or policies directly or
indirectly relating the Lessee's compliance with Section
8.4(a). Upon request by Lessor, Lessee shall promptly
fumish Lessor with any and all reports, policies or
programs in effect at the Hotel.
(c) Upon request by Lessor, Lessee will
provide Lessor with regular "flash" reports or other
reports reasonably requested by Lessor to allow Lessor to
remained informed about changing conditions at the Hotel
and in the market in which the Hotel operates.
(d) Within 20 days following the end of each
calendar month, lessee shall fumish Lessor with a
statement (in such form and detail as Lessor may require
from time to time) reflecting the computation of each rent
calculation set forth in Section 3 hereof, including any
month-end adjustments, write-offs or other items which
would impact the rent calculations.
8.5 Net Wortb Rel2resentations/Covenants.
I
(a) Lessee represents and warrants that as of
the date hereof, Lessee has a Consolidated Net Worth of at
least $2,000,000 (Consolidated Net Worth for this Section
8.5 shall exclude any Consolidated Net Worth attributable
to Lessee's $2,000,000 payment made to obtain the Initial
FF&E). Lessee shall retain such portion of the Lessee's
After Tax Eamings as is necessary to cause its
Consolidated Net Worth to remain at least equal to
$2,000,000. Lessee shall also be prohibited from paying,
or entering in to any agreement obligating it to pay, any
fee, salary or other compensation or stim to an Affiliate
of
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Lessee which would, or could, result in a reduction of the
Net Worth of the Lessee below $2,000,000 except
to the extent such payment is made pursuant to an
Operational Agreement as defined in Section 23.3 hereof.
Except as provided herein,(a) Lessee's assets
shall consist solely of cash, marketable securities,
accounts receivable relating to hotel revenues,
inventories and other assets customarily associated with
the operation of a hotel, and (b) no portion of the assets
of Lessee shall be comprised of (i) advances, accounts
receivable, or other claims against an Affiliate of the
Lessee, or (ii) any long term or illiquid asset as defined
under GAAP. Notwithstanding the preceding sentence, up to
$1,900,000 of the assets may be comprised of the Guaranty
Agreement and up to $2,000,000 of the assets may be
comprised of any asset relating to Lessee's $2,000,000
payment made to purchase the Initial FF&E (which
$2,000,000 amount will be excluded from Net Worth in any
case).
"After Tax Eamings," for any period, means the
consolidated net income of Lessee and its subsidiaries
(determined in accordance with Generally Accepted
Accounting Principles ("GAAP") for that period, less the
Tax Distribution Amount for that period.
The "Tax Distribution Amount," for any period,
means the hypothetical combined incremental federal, state
and local business, income tax liabilities of Lessee's
members and their shareholders (without duplication of
amounts) for that period, as reasonably computed by Lessee
by using the statutory rates applicable to and computed
solely upon the taxable income, gain, loss, deductions and
credits of Lessee for that period, but no liability so
computed may be less than zero. -
8.6 Room Rate Covenant. Lessee covenants and agrees
that, for any 30 day period, revenue attributable to rooms
sold at a rent below 50% of the Average Daily Rate, will
not exceed five percent of the Rooms and Other Revenues.
ARTICLE 12i
9.1 Maintenance and Rel2air.
(a) Subject to Lessor's obligation to make
Capital Expenditures and performance of Lessoes
obligations under Subsection 9. 1 (c), Lessee, at its sole
expense, shall keep the Leased Property in good order and
repair, consistent with standards for a first class,
upscale, full service hotel. Not later than 3 0 days
prior to the commencement of each Fiscal Year or Partial
Fiscal Year, Lessee shall submit to Lessor a detailed
maintenance and repair plan (the "M&R Plan") and budget.
Lessor shall have the right to require reasonable
increases to the M&R Plan in order to maintain the
Facility as a first class, upscale, full service hotel.
Lessee shall permit Lessor and its authorized
representatives, as frequently as reasonably requested by
Lessor, to inspect the Leased Property and to require
Lessee to take such reasonable actions necessary to keep
the Leased Property in good order and repair, consistent
with standards for a first class, upscale, full service
hotel and consistent with Franchisor requirements.
Except as otherwise provided in Section 9. 1
(b), Article XIV or Article X'V, and subject to Lessor's
obligation to make Capital Expenditures, Lessee shall,
with reasonable promptness, make all necessary and
appropriate repairs, replacements, and improvements
thereto of every kind and nature, whether interior or
exterior ordinary or extraordinary, foreseen or
unforeseen, or arising by reason of a condition existing
prior to the commencement of the Term of this Lease
(concealed or otherwise), or required by any governmental
agency having jurisdiction over the Leased Property or by
Franchisor, or by Lessor, or by any company maintaining
insurance with respect to the Leased Property. Lessee,
however, shall be permitted
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upoii prior written notice to Lessor to prosecute claii-ns
against Lessor's predecessors in title for breach of any
representation or warranty or for any latent defects in
the Leased Property to be maintained by Lessee unless
Lessor is already diligently pursuing or elects to
diligently pursue such a claim. All repairs shall, to the
extent reasonably achievable, be at least equivalent in
quality to the original work. Lessee will not take or
omit to take any action, the taking or omission of which
might materially impair the value or the usefulness of the
Leased Property or any part thereof for its Primary
Intended Use.
(b) Lessee shall, upon the expiration or prior
termination of the Term, vacate and surrender the Leased
Property to Lessor in the condition in which the Leased
Property was originally received from Lessor, except as
repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of the Lease and
except for ordinary wear and tear (subject to the
obligation of Lessee to iiiaiiitaiii the Leased Property
iii good order and repair, as provided in Subsectioii 9. 1
(a)), dainage by casualty or Coiideiiinatioii, aiid
Lessor's obligations with respect to Capital Expenditures.
Lessee shall, upon expiration or prior termination of the
Term, restore the Inventory to the levels at or in excess
of those in existence upon the Comi-nencement Date.
(c) Lessor shall be responsible for and pay for items
of a capital nature as defined in
Exliibit I and to make Capital Expenditures, all as
required by and provided in Section 3.8
9.2 Encroachments, Restrictions, Etc. If, as a
result of any act or omission by Lessee, any of
the Leased Improvements, at any time, materially encroach
upon any property, street or right-of-way
adjacent to the Leased Property, or violate the
agreements or conditions contained in any lawful
restrictive
covenant or other agreement affecting the Leased
Property, or any part thereof, or impair the
rights of others
under any easement or riglit-of-way to which the Leased
Property is subject (each of the foregoing conditions
being referred to herein as an "Encroachment"), then
promptly upon the request of Lessor or at the beliest of
atiy persoii affected by any SLIcii encroachment,
violation or impairment, Lessee shall, at its expense,
subject to its right to coiitest the existence of any
encroachment, violation or impairment and in such case, in
the event of an adverse final determination, eitlier (a)
obtain valid and effective waivers or settlements of all
claims, liabilities and damages resulting from each such
encroachment, violation or impairment, whether the same
shall affect Lessor or Lessee or (b) make such changes in
the Leased Improvements, and take such other actions, as
Lessee in the good faith exercise of its judgment deems
reasonably practicable to remove such encroachment, and to
end such violation or impairment, including, if necessary,
the alteration of any of the Leased Improvements, and in
any event take all such actions as may be necessary in
order to be able to continue the operation of the Leased
Improvements for the Primary Intended Use substantially in
the manner and to the extent of the Leased Improvements
were operated prior to tile assertion of such violation,
impairment or encroachment. If any such alteration is
required for any reason other than Lessee's willful
misconduct or gross negligence and such alteration
satisfies the definition of "Capital Expenditure" set
forth iii Sectioii 3.8, tile cost of such alteration shall
be treated as Capital Expenditures and be performed
pursuant to Section 3.8. Any such alteration shall be made
in conformity with the applicable requirements of Article
X. Nothing contained lierein shall be construed as
imposing on Lessee any liability for, or responsibility
for remedying the effects of, any Encroaciii-nent occuff
ing other than as a result of any willful iiiiscoiiduct or
gross iiegligeiice of Lessee, unless sucli liability is an
operating or maintenance aiid repair expetise. Lessee's
obligations under this Section 9.2 shall be in addition to
and shall in no way discharge or diminish any obligation
of any insurer under any policy of title or other
insurance held Lessor.
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ARTICLE X
10.1 Alterations. Lessee shall have the right, with
the prior approval of Lessor to make additions,
modifications or improvements to the Leased Property in
connection with the Primary Intended Use (collectively,
"Alterations"), provided that such action shall not
significantly alter the character or purposes or
significantly detract from the value or operating
efficiency thereof and will not impair the
revenueproducing capability of the Leased Property or
adversely affect the ability of Lessee to comply with the
provisions of this Lease. As a condition of its approval,
Lessor may retain the right to separately approve all
plans and specifications related to any additions,
modifications or improvements. Lessor may @er require
Lessee to obtain appropriate completion bonds and to
provide for the removal of any improvements upon the
termination of this Lease. The cost of such Alterations
shall, subject to Lessoes obligations to make Capital
Expenditures, be paid by Lessee, and all such Alterations
shall be included under the terms of this Lease and upon
expiration or earlier termination of the Lease shall pass
to and become the property of Lessor.
10.2 Salvage. All materials which are scrapped or
removed in connection with the making of repairs or
alterations required or permitted by Article IX or X shall
be or become the property of Lessor or Lessee depending on
which party is paying for or providing the financing for
such work.
10.3 Joint Use AP-reements. If Lessee constructs
additional improvements that are connected to the Leased
Property or share maintenance facilities, HVAC,
electrical, plumbing or other systems, utilities, parking
or other amenities, the parties shall enter into a
mutually agreeable cross-easement or joint use agreement
to make available necessary services and facilities in
connection with such additional improvements, to protect
each of their respective interests in the properties
affected, and to provide for separate ownership, use,
and/or financing of such improvements.
ARTICLE XI
Liens. Subject to the provision of Article XII
relating to permitted contests, Lessee will not directly
or indirectly create or allow to remain and will promptly
discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the
Leased Property or any attachment, levy, claim or
encumbrance in respect of the Rent, not including,
however, (a) this Lease, (b) the matters, if any, included
as exceptions in the title policy insuring Lessoes
interest in the Leased Property, (c) restrictions, liens
and other encumbrances which are consented to in writing
by Lessor or any easements granted pursuant to the
provisions of Section 7.3 of this Lease, (d) liens for
those Impositions upon Lessor which Lessee is not required
to pay hereunder, (e) subleases pen-nitted by Article
XXIII hereof, (f) liens for Impositions or for sums
resulting from noncompliance with Legal Requirements so
long as (1) the same are not yet payable or are payable
without the addition of any fine or penalty or (2) such
liens are in the process of being contested as permitted
by Article XII, (g) liens of mechanics, laborers,
materialmen, suppliers or vendors for sums either disputed
or not yet due provided that (1) the payment of such sums
shall not be postponed under any related contract for more
than 60 days after the completion of the action giving
rise to such lie@ and such reserve or other appropriate
provisions as shall be required by law or generally
accepted accounting principles shall have been made
therefor or (2) any such liens are in the process of being
contested as permitted by Article XII hereof, and (h) any
liens which are the responsibility of Lessor pursuant to
the provisions of Article XXXIII of this Lease, or result
from Lessoes wrongful failure to pay for Capital
Expenditures.
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ARTICLE XII
Pennitted Contests. Lessee shall have the right
to contest the amount or validity of any Imposition to be
paid by Lessee or any Legal Requirement or Insurance
Requirement or any lien, attachment levy, encumbrance,
charge or claim ("Claims") not otherwise permitted by
Article XI, by appropriate legal proceedings in good faith
and with due diligence (but this shall not be deemed or
construed in any way to relieve, modify or extend Lessee's
covenants to pay or its covenants to cause to be paid any
such charges at the titne and in the manner as in this
Article provided), on condition, however, that such legal
proceedings shall not operate to relieve Lessee from its
obligations hereunder and shall not cause the sale or risk
the loss of the Leased Property, or any part thereof, or
cause Lessor or Lessee to be in default under any
mortgage, deed of trust or security deed encumbering the
Leased Propert7y or any interest therein. Upon the
request of Lessor, Lessee shall either (a) provide a bond
or other assurance reasonably satisfactory to Lessor that
all Claims which may be assessed against the Leased
Property together with interest and penalties, if any,
thereon will be paid, or (b) deposit within the time
otherwise required for payment with a bank or trust
company as trustee upon terms reasonably satisfactory to
Lessor, as security for the payment of such ClAims, money
in an arnount sufficient to pay the same, together with
interest and penalties in connection therewith, as to all
Claims which may be assessed against or become a Claim on
the Leased Property, or any part thereof, in said legal
proceedings. Lessee shall fumish Lessor and any lender of
Lessor with reasonable evidence of such deposit within
five days of the same. Lessor agrees tojoin in any such
proceedings if the same be required to legally prosecute
such contest of the validity of such Claims; provided,
however, that Lessor shall not thereby be subjected to any
liability for the payment of any costs or expenses in
connection with any proceedings brought by Lessee; and
Lessee covenants to indemnify and save harmless Lessor
from any such costs or expenses. Lessee shall be entitled
to any refund of any Claims and such charges and penalties
or interest thereon which have been paid by Lessee or paid
by Lessor and for which Lessor has been fully reimbursed.
In the event that Lessee fails to pay any Claims when due
or to provide the security therefor as provided in this
paragraph and to diligently prosecute any contest of the
same, Lessor may, upon ten days advance Notice to Lessee,
pay such charges together with any interest and penalties
and the same shall be repayable by Lessee to Lessor as
Additional Charges at the next Payment Date provided for
in this Lease. Provided, however, that should Lessor
reasonably determine that the giving of such Notice would
risk loss to the Leased Property or cause damage to
Lessor, then Lessor shall give such Notice as is practical
under the circumstances. Lessor reserves the right to
contest any of the Claims at its expense not pursued by
Lessee. Lessor and Lessee agree to cooperate in
coordinating the contest of any claims.
ARTICLE XIII
13.1 General Insurance Requirements. Lessee, at its
sole cost and ex ense, shall at all times keep
. p the
Leased Property and the Facility (including all personal
property) insured with the kinds and amounts of insurance
described below and as more specifically described on
Exhibit K hereto and in compliance with
any Franchise requirements; provided, however, that as to
both Lessoi's and Lessee's insurance requirements,
the kinds and amounts of insurance required are reasonably
available for purchase from insurance companies
(i) authorized to write insurance in the State and (ii)
with a minimum financial stability rating (A.M. Best
Rating) of "A- VII" (or as otherwise reasonably acceptable
to Lessor). The insurance shall be maintained in the
amounts set forth ' below with deductibles in amounts
reasonably acceptable to Lessor. Losses shall be payable
to Lessor and/or its lenders. Any loss adjustment shall
require the written mutual consent of Lessor and Lessee,
each acting reasonably and in good faith. Evidence of
insurance shall be provided to Lessor on the date hereof,
and evidence of renewal shall be provided, through a
binder of insurance, prior to expiration of any policy
required hereunder. Copies of all insurance policies
shall be delivered to Lessor as soon as they
are.available.
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(a) Lessee shall provide personal propert7y coverage
on Lessee's and Lessor's personal
property, including, without limitation, the Initial FF&E.
(b) Lessee shall provide loss of income/business
interruption insurance on the "special
form" with proceeds to be in the amount specified in
Exhibit K.
(c) Lessee shall provide commercial general
liability insurance, with limits of not less than
$10,000,000 per occurrence, together with excess liability
coverage with limits of not less than $50,000,000 per
occurrence covering the following: bodily injury, death or
property damage, personal and advertising injury, products
and completed operations liability, and all risk legal
liabili . ty including, but not limited to liquor law and
dram shop liability all insuring both Lessor and Lessee.
All requirements shall be in conformance with Exhibit K,
incorporated by attachment to this document. Lessee shall
add Lessor as "Additional Insured" to Lessee's policy of
insurance.
(d) Lessee shall provide insurance covering
such other hazards and in such ainounts that may be
customary for comparable properties in the vicinity of the
Leased Property and reasonably acceptable to Lessor and
available from insurance companies, authorized to do
business in the state, and each with a minirnum financial
stability rating (A.M. Best Rating) of at rates "A-Vll,"
at rates which are economically practicable in relation to
the risks covered as may be reasonably required by Lessor.
(e) Lessee shall provide fidelity bonds with
limits and deductibles which may be reasonably requested
by Lessor, covering Lessee's employees and crime and other
insurance as may be reasonably required by Lessor.
(f) Lessee shall provide Worker's Compensation
Insurance and Employees Liability
Insurance with limits of not less than $1,000,000 per
Exhibit K.
(g) Lessee shall provide automobile liability
insurance for owned, non-owned, and hired vehicles with
limits of not less than $10,000,000 per accident. In
addition, physical damage insurance on owned vehicles will
be carried.
(h) Lessee shall provide for such other
insurance as Lessor may reasonably request for facilities,
such as the Leased Property and the operation thereof,
consistent with Lessee's or Lessoes obligation hereunder.
(i) Lessee shall provide building insurance on the
"Special Fonn" (formerly "All Risk"
fonn) in an amount and covering such risks as Lessor may,
in its sole and absolute discretion, require from
time to time.
0) Lessee shall provide insurance on the
"Comprehensive Coverage Form" for loss or dainage (direct
or indirect) from steatn boilers, pressure vessels,
electrical and mechanical systems, heating, ventilation
and air conditioning ("HVAC") systems or similar
apparatus, now or hereafter installed in the Facili@, in
an amount and covering such risks as Lessor may, in its
sole and absolute discretion, require from time to time.
13.2 Increase in Limits. If either Lessor or Lessee
at any time deems the limits of bodily injury or property
damage liability under the commercial general liability
insurance then carried to be either excessive or
insufficient, Lessor and Lessee shall endeavor in good
faith to agree on the proper and reasonable limits for
such insurance to be carried; provided, however, that such
limits shall not be reduced
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below a minimum limit of $10,000,000 per occurrence.
Thereafter, such insurance shall be carried with the
limits thus agreed on until ftirther change pursuant to
the provisions of this Section 13.2.
13.3 Blanket P li@c . Notwithstanding anything to the
contrary contained in this Article XIII, Lessee's
obligations to carry the insurance provided for herein may
be brought within the coverage of a socalled blanket
policy or policies of insurance; provided, however, that
the coverage afforded will not be reduced or diminished or
otherwise be different from that which would exist under a
separate policy meeting all other requirements of this
Lease by reason of the use of such blanket policy . of
insurance, and provided, further, that the requirements of
this Article XIII are otherwise satisfied.
13.4 No Sel2arate Insurance. Lessee on its own
initiative, or pursuant to the request or requirement of
any third party, shall not (i) take out separate insurance
concuffent in form or contributing in the event of loss,
with that required in this Article XIII, or (ii) increase
the amount of any then-existing insurance by securing an
additional policy or additional policies, unless all
parties having an insurable interest in the subject matter
of the insurance, are included therein as additional
insureds, and the loss is payable under such additional
separate insurance in the same manner as losses are
payable under this Lease. The party obtaining such
separate insurance shall notify the other party of the
obtaining of any such separate insurance or of the
increasing of any of the amounts of the then-existing
insurance. Notwithstanding the foregoing, Lessee may
obtain insurance with respect to its leasehold interest
hereunder so long as such insurance will not, under any
circumstances, reduce the amount of insurance payable to
Lessor pursuant to insurance policies obtained in
accordance with Article XIII.
13.5 Rel2orts of Insurance Claims. Lessee shall
immediately investigate and make a written report to the
appropriate insurance company as to all accidents; claims
for damage relating to the ownership, operation, and
maintenance of the building and Leased Improvements; any
damage or destruction to the building and Leased
Improvements and the estimated cost of repair thereof; and
shall prepare any and all reports required by any
insurance company in connection therewith. A Proof of
Loss shall be provided to the Lessor for approval prior to
payment of above property claims. All settlements and
compromises shall be made only with the prior written
consent of Lessor.
13.6 Waiver of Subroization.
(a) All insurance policies covering the Leased
Property, the Fixtures, the Facility or any personal
property, including, without limitation, contents, fire,
property and "special perils" insurance, shall expressly
waive any right of subrogation on the part of the insurer
against the other party and each party agrees to release
the other party for any and all liability and
responsibility to the other party, or anyone claiming
through or under them by way of subrogation or otherwise,
for any loss or damage to Property caused by fire or other
casualty included in the extended coverage, even if such
casualty shall have been caused by the negligence of the
other party, or anyone for whom such party may be
responsible, but only to the extent such releasing party
is reimbursed from applicable insurance. Such policies
will include such waiver clause or endorsement so long as
the same are obtainable without unreasonable extra cost,
and in the event of such an extra charge, the other party,
at its election, may pay the same but shall not be
obligated to do so.
(b) All insurance policies covering loss of
income and business interruption shall expressly waive any
coinsurance penalty and resulting reduction in insurance
proceeds; provided that a waiver of coinsurance is
available with respect to a given insurance policy.
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13.7 Fonn Satisfactoiy. Etc. . All of the policies
of insurance referred to in this Article XIII shall be
written in a form satisfactory to Lessor. Each party
agrees that it will not unreasonably withhold its approval
as to the form of the policies of insurance or as to the
insurance companies selected. All premiums therefor shall
be paid and such policies or binders delivered and
followed with duplicate policies as issued thereof to the
other party prior to their effective date (and, with
respect to any renewal policy, 30 days prior to the
expiration of the existing policy), and in the event of
the failure of the party required to provide such
insurance either to effect such insurance as herein called
for or to pay the premiums therefor, or to deliver such
policies or certificates thereof at the times required,
the other party shall be entitled, but shall have no
obligation, to effect such insurance and pay the premiums
therefor, which premiums shall be repayable upon written
demand therefor. Each insurer mentioned in this Article
XIII shall agree, by endorsement to the policy or policies
issued by it or by independent instrument, that it will
give 30 days'written notice before the policy or policies
in question shall be materially altered, not renewed or
canceled.
13.8 - Failure to Obtain Insurance. In-the event
that Lessee shall fail to obtain or maintain any such
insurance, Lessor shall have the right but not the
obligation, to obtain such insurance and to charge the
premium cost of such to Lessee as Additional Charges.
13.9 Self-Insured Deductible. The Lessee shall
maintain or cause the Mariner Group or Guarantor to
maintain a "self-insured fund" to cover 100% of the
highest per occurrence deductible or selfinsured retention
in Lessee's insurance program. Lessee shall keep any
self-insured deductible fund fully funded at all times,
and shall replenish said fund on a regular basis if it is
depleted due to a peril insured against. The fund shall
be available to Lessee and Lessor to pay any insurance
deductible.
Lessor shall be notified immediately of any change in
deductible amount or funding amount
of any self insurance deductible fund.
Lessee agrees to contribute to said fund based
on the value of the Leased Property to the total insured
values of all properties in the insurance program;
provided, however, in the event that any of the other
contributors to the fund fail to make their respective
contributions, Lessee shall immediately contribute such
amounts necessary to replenish the fund in ftill and shall
take immediate action to recover the additional
contributions from the noncontributing parties. Any
contributions made to replenish fund on behalf of
noncontributing parties shall not reduce the Guarantor's
obligations under the Guaranty. The Mariner Group agrees
to indemnify and hold Guarantor and Lessee harmless for
any cost, expense, payment or liability incurred by
Guarantor or Lessee in connection with the payment of any
amounts into said fund on behalf of a noncontributing
party.
ARTICLE XIV
14.1 Insurance Proceeds. All proceeds payable by
reason of any loss or damage to the Leased Property, or
any portion thereof, and insured under any policy of
insurance required by Article XIII of this Lease shall be
paid by the payor to Lessor. If for any reason such
proceeds are paid to any Person other than Lessor,lthe
recipient shall suffender all proceeds to Lessor to be
held in trust by Lessor in an interest-bearing account
(subject to the provisions of Section 14.6). The net
proceeds shall be made available for reconstruction or
repair, as the case may be, of any damage to or
destruction of the Leased Property, or any portion
thereof, and shall be paid out by Lessor from time to time
for the reasonable costs of such reconstruction or repair
upon satisfaction of reasonable terms and conditions. Any
excess proceeds of insurance remaining after the
completion of the restoration or reconstruction of the
Leased Property shall
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be paid to Lessor. If Lessor is not required to, and
elects not to, repair and restore, and the Lease is
terminated as described in Section 14.2(a), all such
insurance proceeds shall be retained by Lessor.
14.2 Reconstruction in the Event of Damaize or
Destruction Covered by Insurance.
(a) If during the Term the Leased Property is
totally or partially damaged or destroyed by a risk
covered by the insurance described in Article XIII and the
Facility thereby is -rendered Unsuitable for its Primary
Intended Use or following such casualty the Facility is
Uneconomic for its Primary Intended Use, Lessor shall, at
Lessor's option, either (1) restore the Facility to
substantially the same condition as existed immediately
before the damage or destruction and otherwise in
accordance with the terms of the Lease, or (2) terminate
this Lease by Notice to Lessee given within 90 days of the
date of such damage or destruction. If Lessor determines
to terminate this Lease, the Lease will terminate as of
the date specified in Lessor's notice not later than 60
days after such notice without further liability hereunder
(other than liability stated to survive the expiration or
termination hereof) and Lessor shall be entitled to retain
all insurance proceeds. If Lessor determines to restore
the Facility, Lessor shall notify Lessee prior to 270 days
following the occurrence of the event rendering the
Facility Unsuitable for its Primary Intended Use (the
"Casualty Event") if the Facility will be substantially
restored prior to 365 days following the Casualty Event.
If Lessor fails to notify Lessee within such 270 day
period or notifies Lessee that Lessor will be unable to
substantially restore the Facility within such 365 day
period, then Lessee may elec@ by providing Lessor with
written notice within 30 days of the expiration of the 270
day period, to terminate this Lease upon expiration of the
365 day period. Notwithstanding the foregoing, Lessee
shall not have the option to terminate this Lease if
Lessor agrees, within ten days following its receipt of
Lessee's election to terminate under this subsection, to
▇▇▇▇▇ Lessee's Rent in a manner that Lessor and Lessee
agree is fair, just and equitable to both Lessor and
Lessee taking into consideration, among other relevant
factors, the number of usable rooms, the amount of square
footage, and the Gross Revenues affected by such Casualty
Event.
(b) Except as provided in Section 14.6, if
during the Term the Leased Property is partially damaged
or destroyed by a risk covered by the insurance described
in Article XIII, but the Facility is not thereby rendered
Unsuitable for its Primary Intended Use, provided the
Facility is not Unecomonic for its Primary Intended Use,
Lessor shall restore the Facility to substantially the
same condition as existed immediately before the damage or
destruction and otherwise in accordance with the ten-ns of
this Lease to the extent it can reasonably do so with the
net insurance proceeds actually received in respect to
such damage or destruction. Such damage or destruction
shall not terminate this Lease; provided, however, that if
Lessor cannot within a reasonable time, obtain all
necessary govemm@nt approvals, including building permits,
licenses and conditional use permits (which time period
shall not be less than 180 days), after diligent efforts
to do so, in order to be able to perform all required
repair and restoration work and to operate the Facility
for its Primary Intended Use in substantially the same
manner as that existing immediately prior to such damage
or destruction and otherwise in accordance with the terms
of this Lease, this Lease shall terminate on the date
which is 30 days after Lessor shall have notified the
Lessee of the passage in such Lessor's reasonable
determination of such reasonable period of time.
1. (c) If Lessor elects to repair or restore the
Leased Property pursuant to Section 14.2(a),
and thd cost of the repair or restoration exceeds the net
amount of proceeds received by Lessor from the
insurance required under Article XIII, Lessor shall be
obligated to contribute any excess amounts needed
to restore the Leased Property.
(d) If Lessor elects to repair or restore the
Facility pursuant to Section 14.2(a) or is required to
restore the Facility'pursuant to Section 14.2(b) and the
Facility cannot be-repaired or replaced to the original
specifications due to local ordinances or building laws,
then Lessor shall have the option to
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rebuild the Facility to the specifications permitted by
such ordinances or laws and Lessor shall ▇▇▇▇▇ Lessee's
Rent in a manner that Lessor and Lessee agree is fair,
just and equitable to both Lessor and Lessee taking into
consideration, among other relevant factors, the number of
usable rooms, the amount of square footage, and the Gross
Revenues affected by such Casualty Event.
14.3 , Reconstruction in the Event of Damage or
Destruction Not Covered by Insurance. Except as provided
in Section 14.6 below, if during the Tenn the Facility is
totally or materially destroyed by a risk not covered by
the insurance described in Article XIII (whether or not
actually obtained or in full force), whether or not such
damage or destruction renders the Facility Unsuitable for
its Primary Intended Use, Lessor at its option shall
either (a) repair, rebuild or restore the Facility at
Lessor's sole expense to substantially the same condition
it was in immediately before such damage or destruction
and such damage or destruction shall not terminate this
Lease, or (b) terminate this Lease by Notice to Lessee
given within 90 days of the date of such destruction and
this Lease will terminate as of the date specified in
Lessoes notice not later than 60 days after such notice.
If such damage or destruction is not material, Lessor
shall restore the Facility to substantially the same
condition as existed immediately before the damage or
destruction and otherwise in accordance with the terms of
the Lease.
14.4 Lessee's Personal Propedy. Notwithstanding the
foregoing, all insurance proceeds payable by reason of any
loss of or damage to any of Lessee's Personal Property
shall be paid to Lessee, except insurance proceeds payable
by reason of any loss of or damage to any of the Initial
FF&E, which shall be paid to Lessor.
14.5 Abatement of Rent. In the event of a casualty,
except as otherwise provided herein, this Lease shall
remain in full force and effect and Lessee's obligation to
make rental payments and to pay all other charges required
by this Lease (whether through the payment of insurance
proceeds to Lessor or other%vise) shall remain unabated.
14.6 Damatze Near End of Term. Notwithstanding any
provisions of Section 14.2 or 14.3 to the contrary, if
dwnage to or destruction of the Facility occurs during the
last 24 months of the Term, and such damage or destruction
cannot be repaired or restored within the earlier of (i)
12 months, or (ii) the expiration of the Terin, then
Lessee shall have the right to terminate this Lease by
giving written notice to Lessor within 60 days after the
date of damage or destruction, whereupon all accrued Rent
shall be paid immediately.
14.7 Waiver. Lessee hereby waives any statutory
rights of termination that may arise by reason of any
damage or destruction of the Facility that Lessor is
obligated to restore or may restore under any of the
provisions of this Lease.
ARTICLE XV
15.1 Parties'Ri2hts and Obligations. If during the
Term there is any Condemnation of all or any part of the
Leased Property or any interest in this Lease, the rights
and obligations of Lessor and Lessee shall be determined
by this Article XV.
15.2 Total Takinp-. If title to the fee of the whole
of the Leased Property is condemned by any Condemnor, this
Lease shall cease and terminate as of the Date of Taking
by the Condemnor. If title to the fee of less than the
whole of the Leased Property is so taken or condemned,
which nevertheless renders the Leased Property Unsuitable
or Uneconomic for its Primary Intended Use, Lessee and
Lessor shall each have the option, by notice to the other,
at any time prior to the date that is 30 days after the
Date of Taking, to
-37-
terminate this Lease as of the Date of Taking. Upon such
date, if such Notice has been given, this Lease shall
thereupon cease and terminate. All Rent paid or payable
by Lessee hereunder shall be apportioned as of the Date of
Taking, and Lessee shall promptly pay Lessor such amounts.
15.3 Allocation of Award. The total Award made with
respect to the Leased Property or for loss of rent, or for
Lessoes loss of business beyond the Term of this Lease,
shall be solely the property of and payable to Lessor.
Any Award made for the taking of Lessee's Personal
Property, or for removal and relocation expenses of Lessee
in any such proceedings shall be the sole property of and
payable to Lessee. In any Condemnation proceedings,
Lessor and Lessee shall each seek its Award in conformity
herewith, at its respective expense; provided, however,
Lessee shall not initiate, prosecute or acquiesce in any
proceedings that may result in a diminution of any Award
payable to Lessor.
15.4 Partial T If title to less than the whole of the
Leased Property is condemned, and the Leased Property is
still suitable for its Primary Intended Use, and not
Uneconomic for its Primary Intended Use, or if Lessee or
Lessor is entitled but each fails to timely elect to
terminate this Lease as provided in Section 15.2 hereof,
Lessor at its cost (not to exceed the net Condemnation
Award) shall with all reasonable dispatch after the
payment of such award to Lessor restore the untaken
portion of any Leased Improvements so that such Leased
Improvements constitute a complete architectural unit of
the same general character and condition (as nearly as may
be possible under the circumstances) as the Leased
Improvements existing immediately prior to the
Condemnation. During and after the restoration of the
untaken portion of the Leased Property, Base Rent shall be
abated in the manner and to the extent that is fair, just
and equitable to both Lessee and Lessor, taking into
consideration, among other relevant factors, the number of
usable rooms, the amount of square footage, and the
revenues affected by such partial Taking. In the event
Base Rent is abated, the Threshold Amounts shall also be
reduced accordingly. If Lessor and Lessee are unable to
agree upon the amount of such abatement and for reduction
within 30 days after such partial Taking, the matter may
be submitted by either party to a court of competent
jurisdiction for resolution.
15.5 Teml2orary Takin2. If the whole or any part of
the Leased Property or of Lessee's interest under this
Lease is condemned by any Condemnor for its temporary use
or occupancy, this Lease shall not terminate by reason
thereof, and Lessee shall continue to pay, in the manner
and at the terms herein specified, the full amounts of
Rent and Additional Charges, but, if the entire Leased
Property is so condemned, only to the extent of net
proceeds of condemnation awards. Except only to the
extent that Lessee may be prevented from so doing pursuant
to the terms of the order of the Condemnor, Lessee shall
continue to perform and observe all of the other terms,
covenants, conditions and obligations hereof on the part
of the Lessee to be performed and observed, as though such
Condemnation had not occurred. In the event of any
Condemnation as in this Section 15.5 described, the entire
amount of any Award made for such Condemnation allocable
to the Term, whether paid by way of damages, rent or
otherwise, shall be paid to Lessee. Lessor covenants that
upon the termination of any such period of temporary use
or occupancy it will, at its sole expense, restore the
Leased Property as nearly as may be reasonably possible to
the condition in which the same was immediately prior to
such Condemnation, unless such period of temporary use or
occupancy extends beyond the expiration of the Term, in
which case Lessor shall not be required to make such
restoration.
ARTICLE XVI
16.1 Events of Default. If any one or more of the
following events (individually, an "Event of
Default") occurs:
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(a) Lessee fails to make payment of the Base Rent when
the same becomes due and
payable and such condition continues for a period of five
days following receipt of written notice; or
(b) Lessee fails to make payment of Percentage Rent
when the same becomes due and
payable and such condition continues for a period of five
days following receipt of written notice; or
(c) Lessee fails to maintain, the current
rating for the Facility by AAA or Mobil, if so rated, or
allows the Facility to become in Poor Standing, without
limiting Subsection (o) below; provided, however, no Event
of Default shall occur if such failure results solely from
Lessee's noncompliance with additional or more stringent
terms or conditions imposed by Mobile or AAA after the
Commencement Date in order to maintain the current ranking
or avoid becoming in Poor Standing;
(d) Lessee fails to observe or perfonn any
other term, covenant or condition of this Lease and such
failure is not cured by Lessee within a period of 30 days
after receipt by the Lessee of Notice thereof from Lessor,
unless such failure cannot with due diligence be cured
within a period of 30 days, in which case it shall not be
deemed an Event of Default if Lessee proceeds promptly and
with due diligence to cure the failure and diligently
completes the curing thereof; provided, however, in no
event shall such cure period extend beyond 180 days after
such Notice; or
(e) Lessee or Guarantor shall file a petition
in bankruptcy or reorganization for an arrangement
pursuant to any federal or state bankruptcy law or any
similar federal or state law, or shall be adjudicated a
bankrupt or shall make an assignment for the benefit of
creditors or shall admit in writing its inability to pay
its debts generally as they become due, or if a petition
or answer proposing the adjudication of the Lessee or
Guarantor as a bankrupt or its reorganization pursuant to
any federal or state bankruptcy law or any similar federal
or state law shall be filed in any court and the Lessee or
Guarantor shall be adjudicated a bankrupt and such
adjudication shall not be vacated or set aside or stayed
within 60 days after the entry of an order in respect
thereof, or if a receiver of the Lessee or Guarantor or of
the whole or substantially all of the assets of the Lessee
or Guarantor shall be @ppointed in any proceeding brought
by the Lessee or Guarantor or if any such receiver,
trustee or liquidator shall be appointed in any proceeding
brought against the Lessee or Guarantor and shall not be
vacated or set aside or stayed within 60 days after such
appointment; or
(f) without Lessor's consent, Lessee is
liquidated or dissolved, or begins proceedings toward such
liquidation or dissolution, or, in any manner, permits the
sale or divestiture of substantially all of its assets; or
(g) the estate or interest of Lessee in the
Leased Property (or any part thereof) or the Initial FF&E
is voluntarily or involuntarily transferred, assigned,
conveyed, levied upon or attached in an proceeding (unless
Lessee is contesting such lien or attachment in good faith
in accordance with Article XII hereof); or
(h) except as a result of damage, destruction or a
partial or complete Condemnation,
Lessee voluntarily ceases operation of the Leased Property
for a period in excess of ten days; or
(i) the Franchise Agreement with respect to
the Facility on the Leased Premises is
terminated by the Franchisor as a result of any action
or failure to act by the Lessee or any Person
with whom
1
4
the Lessee contracts for management services at the
Facility unless such termination is due directly to
Lessor's failure to ftind the Capital Expenditure
requirements of Franchisor; or
-39-
0) aii Eveiit of Default sliall occur uiider
aiiy lease (otlier tliaii this Lease)
betweeli
Lessor aiid Lessee; or
-
(k) Except as specifically permitted iii
Sectioii 23, a transfer of the owiiersliip or coiitrol
(in one traiisactioii or as a result of the iiiost
receiit traiisactioii iii a series of traiisactioiis) of
(i) such iiuinber of voting securities (or otlier
owiiersliip interests) of Lessee or Guaraiitor that
possesses, directly or
indirectly, the power to direct or cause the direction
of the iiiaiiageiiieiit or policies of Lessee or
Guaraiitor wlietlier dirougli owiiersliip of stock, by
contract or otlier,,vise a majority, or (ii) witli
respect to any company ,A,Iiose stock is publicly traded
oii a securities excliaiige, the solicitation for
proxies iii coiiiiectioli witli the election of the
board -of directors at a iiieetiiig of sliareliolders-,
or
I
irec o
/a,
it
tioii 7.2(f), Ai-ticle XIX,
@ 'g. 1 3 ,
C" @
24.2; or
(ni) Lessee's failure to adliere to the M&R Plaii, if
aiiy, iii aiiy material respect; or
(11) Lessee's faillire to iiiaiiitaiii a L@VI)AR of at
least 122.4% of the L@VPAR of the
Competitive Set for eacii calendar year or similar
comparative period; or
(o) Fraiiciiisor property evaluation scoi-es
drop below 800 (or, iii the event of a revision of the
scale for sucli scores, the fuiictioiial equivalent of
800) for two consecutive reporting periods; provided,
liowever, iio Eveiit of Defatilt sliall occur if Lessee's
faillire to iiiaiiitaiii aii 800 score results solely
froni Lessors failure to iiiake Capital Expeiiditures
required by the Fraiiciiisor or the Fraiiciiise
Agreeiiieiit; or
(p) Guaraiitor defaults uiider the Guaraiity
Agreeiiieiit; or
(q) Except as specifically permitted iii Sectioii 23,
a sale, assigiimeiit or transfer of
(i)substantially all of the assets of Lessee or Guaraiitor
or (ii) Lessee's interest in tlle Lease; or
(r) Lessee's removal of tile
Iiiitial FF&E fi-oiii the operation of
tite Leased Property or
Lessee graiits aiiy lieii or security interest iii or to
the Iiiitial Fl--&E (otlier tliaii to
Lessor) or otilei-wise
eiicuinbers the liiitial FF&E;
tlieii, atid iii aiiy sucli eveiit, Lessor iiiay, so loiig
as sucli Eveiit of Default coiitiiiucs, exercise one or
iiiore remedies available to it liereiii or at law oi- iii
c(luity iiicludiiig, but iiot Iiiiiited to, its riglit to
terilliliate tiiis Lease by giviiig Lessee the shortest
Notice of sucli tei-iiiiiiatioii pei-iiiitted by law.
If litigation is coniiiieiiced witli respect to
aiiy alleged default uiider tiiis Lease, the prevailing
party iii sucli litigation sliall receive, iii addition to
its damages incurred, sucli suiii as the court sliall
deteriiiiiie as its reasonable attorneys' fees, aiid all
costs aiid expenses incurred iii coiiiiection tlierewitli.
No Event of Default (otlier tliaii a failure to
iiiake a payiiieiit of iiioiiey) sliall be deeiiied to
exist under clause (c) during any tiiiie the curing
tliereof is prevented by aii Uiiavoidable Delay, provided
that upon the cessation of sucli Uiiavoidable Delay,
Lessee remedies SLIcli default or Eveiit of Default
without furtlier delay.
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16.2 Remedies.
(a) If any one or more Events of Default shall occur
and be continuing, then Lessor shall
have the right, in addition to all other rights or
remedies available at law or in equity, at its election:
(i) To give Lessee written notice of
Lessor's intention to terminate this Lease on the earliest
date permitted by law or on any later date specified in
such notice, in which case Lessee's right to possession of
the Leased Property shall cease and this Lease will be
terminated on such date, except as to liability of Lessee
expressly stated herein to survive the termination of this
Lease, including, without limitation, liability pursuant
to Section 16.2(d) and liability of Lessor expressly
stated herein to survive the termination of this Lease; or
(ii) Without further demand or notice, to
reenter and take possession of the Leased Property or any
part of the Leased Property, repossess the same, expel
Lessee and those claiming through or under Lessee, and
remove the effects of both or either, using such force for
such purposes as may be lawful and necessary, without
being liable for prosecution, without being deemed guilty
of any manner of trespass, and without prejudice to any
remedies for arrears or future payments of Base Rent,
Percentage Rent, Additional Charges or other amounts
payable under this Lease or as a result of any preceding
breach of covenants or conditions; or
(iii) To cure any Event of Default and to
charge Lessee for the cost of
effecting
such cure, including, without limitation, reasonable
attomeys, fees and interest on the amount so advanced
at the Overdue Rate, provided that Lessor shall have no
obligation to cure any such Event of Default.
(b) Should Lessor elect to reenter as provided
in Section 16.2(a)(ii), or should Lessor take possession
pursuant to legal proceedings or pursuant to any notice
provided by law while an Event of Default is continuing,
Lessor may, from time to time, without terminating this
Lease, relet the Leased Property or any part of the Leased
Property in Lessor's or Lessee's name, but for the account
of Lessee, for such term or terms (which may be greater or
less than the period which would otherwise have
constituted the balance of the Term of this Lease) and on
such conditions and upon such other terms (which may
include concessions of free rent and alteration and repair
of the Leased Improvements) as Les@or, in its reasonable
discretion, may determine and Lessor may collect and
receive the rent; provided, however, that in the event
Lessor relets the Leased Property in Lessor's or Lessee's
name, but for the account of Lessee, Lessee shall not be
responsible for any liability under the Lease pursuant to
the reletting to the extent such liability is greater than
Lessee's liability under the tenns of this Lease. No such
reentry or taking possession of the Leased Property by
Lessor will be construed as an election on Lessor's part
to terminate this Lease unless a written notice of such
intention is given to Lessee. No notice from Lessor under
this Article XVI or under a forcible or unlawful entry and
detainer statute or similar law will constitute an
election by Lessor to ten-ninate this Lease unless such
notice specifically so states. Lessor reserves the right
following any such reentry or reletting to exercise its
right to terminate this Lease by giving Lessee such
written notice, in which event this Lease will terminate
as specified in such notice.
(c) In the event that Lessor does
not elect to terminate this Lease as
permitted in Section
16.2(a)(i), but elects instead to take possession as
provided in Section 16.2(a)(ii), Lessee
shall pay to Lessor
Base Ren@ Percentage Rent, Additional Charges and other
sums as provided in this Lease which would
be
payable under this Lease if such repossession had not
occurred, less the net proceeds, if any, of any reletting
of the Leased Property, after deducting all of Lessoes
expenses in connection with such reletting, including,
without limitation, all repossession costs, brokerage
commissions, attomeys, fees, expenses of employees, repair
costs and expenses of preparation for such reletting. If,
in connection with any reletting, the new lease
-41-
tenn extends beyond the existing Tenn of this Lease, or
the premises covered by such new lease include other
premises not part of the Leased Property, a fair
apportiorunent of the rent received from such reletting
and the expenses incurred in connection with such
reletting as provided in this Paragraph will be made in
determining the net proceeds from such reletting, and any
rent concessions will be equally apportioned over the term
of the new lease. Lessee shall pay such rent and other
sums to Lessor monthly on the date on which the Base Rent
and Additional Charges, and, in the case of Percentage
Rent, quarterly on the day on which Percentage Rent, would
have been payable under this Lease if possession had not
been retaken, and Lessor shall be entitled to receive such
rent and other sums from Lessee on each such day.
(d) If an Event of Default has occuited and
this Lease is terminated by Lessor, Lessee shall remain
liable to Lessor for damages in an amount equal to Base
Rent, Percentage Rent, Additional Charges and other
amounts which would have been owing by Lessee for the
balance of the Term of this Lease had this Lease not been
terminated, less the net proceeds, if any, of any
reletting of the Leased Property by Lessor subsequent to
such termination, after deducting all of Lessor's expenses
in connection with such reletting, including, but without
limitation, the expenses enumerated in Section 16.2(c)
(which expenses, if the reletting is for a term that will
extend beyond the existing Term, will be apportioned as
described in Section 16.2(c)). Lessor shall be entitled to
collect such damages from Lessee monthly on the day on
which Base Rent or Additional Changes, and quarterly on
the day on which Percentage Rent, would have been payable
under this Lease if this Lease had not been terminated,
and Lessor shall be entitled to receive such Base Rent and
other amounts from Lessee on each such day. Altematively,
at the option of Lessor, in the event this Lease is so
terminated, Lessor shall be entitled to recover against
Lessee as damages for loss of the bargain and not as a
penalty:
(i) The worth at the time of award of the
unpaid Base Rent and Percentage Rent which had been eamed
at the time of ten-nination;
(ii) The worth at the time of award of the
amount, if any, by which the unpaid Base Rent, Percentage
Rent and all Additional Charges which would have been
eamed after termination until the time of award exceeds
the amount of rental loss that Lessee proves could have
been reasonably avoided;
(iii) The worth at the time of award of the
amount, if any, by which the unpaid Base Rent, Percentage
Rent and Additional Charges for the balance of the Term
(had the same not been so terminated by Lessor) after the
time of award exceeds the amount of such rental loss
during such period that Lessee proves
could be reasonably avoided; and
(iv) Any other amount necessary to
compensate Lessor for all the detriment proximately caused
by Lessee's failure to perform its obligations under this
Lease or which in the ordinary course of events would be
likely to result therefrom.
The "worth at the time of award" of the amounts referred
to in clauses (i) and (ii) above shall be computed by
adding interest from the date of termination until the
time of the award computed at the Overdue Rate on the date
on which this Lease is terminated. The worth at the time
of award of the amount refeffed to in clause (iii) above
shall be computed by using a discount rate of the Federal
Reserve Bank of New York at the time of the award plus one
percent.
(e) Percentage Rent for the purposes of this Section
16.2 shall be a sum equal to (i) the
average of the annual amounts of the Percentage Rent for
the three Fiscal Years immediately preceding the
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Fiscal Year in which the termination, re-entry or
repossession takes place, or (ii) if three Fiscal Years
shall not have elapsed, the average of the Percentage Rent
during the preceding Fiscal Years during which the Lease
was in effect, or (iii) if one Fiscal Year has not
elapsed, the amount derived by analyzing the Percentage
Rent from the effective date of this Lease.
(f) Any suit or suits for the recovery of the
amounts and damages set forth in Sections 16.2(c) or (d)
may be brought by, Lessor, from time to time, at Lessor's
election, and nothing in this Lease will be deemed to
require Lessor to await the date upon which this Lease or
the Term of this Lease would have expired had there
occurred no Event of Default. Each right and remedy
provided for in this Lease as a result of the occurrence
of a default is cumulative and is in addition to every
other right or remedy provided for in this Lease or now or
after the date of the commencement of the Term existing at
law or in equity or by statute or otherwise, and the
exercise or beginning of the exercise by Lessor of any one
or more of the rights or remedies provided for in this
Lease or now or after the date of the commencement of the
Term existing at law or in equity or by statute or
otherwise shall not preclude the simultaneous or later
exercise by Lessor of any or all other rights or remedies
provided for in this Lease or now or. after the date of
the commencement of the Term existing at law or in equity
or by statute or otherwise. All costs incurred by Lessor
in collecting any amounts and damages owing by Lessee
pursuant to the provisions of this Lease or to enforce any
provision of this Lease, including, but not limited to,
reasonable attomeys' fees and related costs, whether or
not one or more actions are commenced by Lessor, shall
also be recoverable by Lessor from Lessee.
(g) Except as required by applicable law, Lessor shall
have no obligation to mitigate
damage following the occurrence of an Event of Default.
16.3 Waiver. Lessee hereby waives, to the extent
permitted by applicable law, (a) any right to a trial
byjury in the event of summary proceedings to enforce the
remedies set forth in this Article XVI; (b)
the benefit of any laws now or hereafter in any force
exempting property from liability for rent or for
debt;
(c) any equity of redemption; and (d) except as provided
herein, any presentations, demands for payment or
for performance, or notice of non-performance.
16.4 A1212tication of Funds. Any payments received
by Lessor under any of the provisions of this Lease during
the existence or continuance of any Event of Default
shall, to the extent permitted by applicable la%v, be
applied to Lessee's obligations in the order that Lessor
may determine, in Lessor's discretion.
16.5 Surrender. If an Event of Default occurs (and
the event giving rise to such Event of Default has not
been cured within the curative period relating thereto as
set forth in Section 16.1) and is continuing, whether or
not this Lease has been terminated pursuant to Section
16.1, Lessee shall, if requested by Lessor to do so,
immediately uffender to Lessor the Leased Property
including, without limitation, any and all books, records,
files, licenses, permits and keys relating thereto, and
quit the same and Lessor may enter upon and repossess the
Leased Property by such force permitted by law, summary
proceedings, ejectment or otherwise, and may remove Lessee
and all other persons and any and all personal property
from the Leased Property, subject to rights of any hotel
guests and to any requirement of law. Lessee hereby
waives any and all requirements of applicable law for
service of notice to reenter the Leased Property. Lessor
shall be under no obligation ' to, but may if it so
chooses, relet the Leased Property or otherwise mitigate,
except as required by applicable law, Lessor's damages.
16.6 Waiver. If this Lease is terminated pursuant to
Section 16. 1, Lessee waives, to the extent permitted by
applicable law, (a) any right to a trial by jury in the
event of summary proceedings to enforce the remedies set
forth in this Article XVI, and (B) the benefit of any laws
now or hereafter in force
-43-
exempting property from liability for rent or for debt and
Lessor waives any right to "▇▇▇▇▇▇ the corporate veil"
(including limited liability resulting from LLC status) of
Lessee other than to the extent funds shall have been
inappropriately paid any Affiliate of Lessee following a
default resulting in an Event of Default.
16.7 Notice to Guarantor Lender. Lessor shall, upon
serving Lessee with any Notice required under this Lease
with respect to a default or an Event of Default,
simultaneously provide a copy of such Notice to Guarantor
Lender in the same manner as provided to Lessee, with a
copy to English, ▇▇▇▇▇▇▇▇▇ & ▇'▇▇▇▇▇, Fort Lauderdale
Office, I ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇ I 00, ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇.
Guarantor Lender shall have the right, but shall not be
required, prior to the expiration of the applicable cure
period under this Lease, if any, after receipt of Notice,
to cure any such default or Event of Default and Lessor
shall accept such performance (or payment as is
applicable) by or at the instigation of Guarantor Lender
as if the same has been performed (or paid as applicable)
by Lessee. For purposes of this section, the term
Guarantor Lender shall mean one lender of Guarantor, or
one agent on behalf of a lender to Guarantor, as
designated by Guarantor in writing to Lessor (Guarantor
hereby designates Credit Lyonnais New York Branch, Credit
Lyonnais Building, 1301 Avenue of the Americas, New York,
New York 10019-6022, Attention: Rodrich ▇. ▇▇▇▇▇▇▇▇);
provided, however, that Lessee may not change the identity
of the Guarantor Lender without the express written
consent of such Guarantor Lender.
ARTICLE XVII
Lessoes Rip-ht to Cure Lessee's Default. If Lessee
fails to make any payment or to perform any act required
to be made or performed under this Lease including,
without limitation, Lessee's failure to comply with the
terms of the Franchise Agreement, and fails to cure the
same within the relevant time periods provided in Section
16. 1, Lessor, without waiving or releasing any obligation
of Lessee, and without waiving or releasing any obligation
or default, may (but shall be under no obligation to) at
any time thereafter make such payment or perform such act
for the account and at the expense of Lessee, and may, to
the extent permitted by law, enter upon the Leased
Property for such purpose and, subject to Secti'on 16.2,
take all such action thereon as, in Lessor's opinion, may
be necessary or appropriate therefor. No such entry shall
be deemed an eviction of Lessee. All sums so paid by
Lessor and all costs and expenses (including, without
limitation, reasonable attomey's fees and expenses, in
each case to the extent permitted by law) so incurred,
together with a late charge thereon (to the extent
permitted by law) at the Overdue Rate from the date on
which such sums or expenses are paid or incurred by
Lessor, shall be paid by Lessee to Lessor on demand. 'Me
obligations of Lessee and rights of Lessor contained in
this Article shall survive the expiration or earlier
termination of this Lease.
ARTICLE XVIII
Exculpation. In the event of (a) a sale or transfer
of all or any part of the Leased Property (by operation of
law or otherwise), (b) the making of a lease of all or
substantially all of the Leased Property or (c) a sa le or
transfer (by operation of law or otherwise) of the
leasehold estate under any such lease, (i) the. seller,
transferor or lessor, as the case may be, shall be and
hereby is automatically and entirely released and
discharged, from and after the date of such sale, transfer
or lease, of all liability in respect of the performance
of any of the tenns of this Lease on the part of Lessor
thereafter to be performed and (ii) the term "Lessor"
shall thereafter mean only the purchaser, transferee or
lessee, as the case may be, and the covenants and
agreements of Lessor shall thereafter be binding upon such
purchaser, transferee or lessee.
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Lessee shall look solely to Lessor's estate and
interest in the Leased Property for the satisfaction of
any right of Lessee for the collection of a judgment or
other judicial process or arbitration award requiring the
payment of money by Lessor, and no other propert7y or
assets of Lessor. Lessoes agents, incorporators,
subscribers, shareholders, officers, directors, members,
partners, principals (disclosed or undisclosed) an
affiliates, whether directly or through Lessor or through
any receiver, assignee, trustee in bankruptcy or through
anyone else, shall not be subject to levy, lien,
execution, attachment, or other enforcement procedure for
the satisfaction of Lessee's rights and remedies under of
with respect to or arising from or in connection with this
Lease.
ARTICLE XIX
19.1 REIT Compliance. Lessee acknowledges that the
general partner of Lessor intends to qualify as a real
estate investment trust under the Code, and that pursuant
to Lessor's limited partnership agreement, Lessor may not
take or omit to take any action, or engage in any business
or business transaction or relationship, that would or
could result in the REIT being disqualified from treatment
as a real estate investment trust. As a material
inducement to Lessor to enter into this Lease, Lessee
hereby agrees that it shall not knowingly take or omit to
take any action, or engage in any business or business
transaction or relationship, that would or could result in
the REIT being disqualified from treatment as a real
estate investment trust under the Code. Without limiting
the generality of the foregoing, Lessee agrees that:
(a) Personal Prol2ea Limitation. Anything
contained in this Lease to the contrary notwithstanding,
the average of the adjusted tax bases of the items of
personal property that are leased to Lessee under this
Lease at the beginning and at the end of any Fiscal Year
shall not exceed 15% of the average of the aggregate
adjusted tax bases of the Leased Property at the beginning
and at the end of such Fiscal Year. This Section 19.1(a)
is intended to ensure that the Rent qualifies as "rents
from real property," within the meaning of Section 856(d)
of the Code, or any similar or successor provisions
thereto, and shall be interpreted in a manner consistent
with such intent.
(b) Sublease Rent Limitation. Anything
contained in this Lease to the contrary notwithstanding,
Lessee shall not sublet the Leased Property on any basis
such that the rental to be paid by the sublessee
thereunder would be based, in whole or in part, on either
(i) the income or profits derived by the business
activities of the sublessee, or (ii) any other fonnula
such that any portion of the Rent would fail to qualify as
"rents from real property" within the meaning of Section
856(d) of the Code, or any similar or successor provision
thereto.
19.2 Sublease Lessee Limitation. Anything contained
in this Lease to the contrary notwithstanding, Lessee
shall not sublease the Leased Property to any Person in
which ▇▇▇▇▇▇ Lodging Company, owns, directly or indirectly
a ten percent or more interest, within the meaning of
Section 856(d)(2)(B) of the Code, or any similar or
successor provisions thereto.
19.3 Lessee Ownership Limitation. Anything contained
in this Ledse to the contrary
notwithstanding, neither Lessee or an Affiliate of Lessee
shall acquire, directly or in irect a ten percent or more
interest in ▇▇▇▇▇▇ Lodging Company, within the meaning of
Section 856(d)(2)(B) of the Code, or any similar or
successor provision thereto.
19.4 Lessee Officer and Empiovee Limitation. Anything
contained in this Lease to the contrary
notwithstanding, without the prior written consent of
Lessor, no officer or employee of Lessee (or any Person
-45-
who fumishes or renders services to the tenants of the
Leased Property, or manages or operates the Leased
Property) shall at the same time be an officer of Lessor.
19.5 Payments to Affiliates of Lessee. Except for
payments as permitted in Section 8.5 hereof, Lessee shall
not pay any amount to any Affiliate of Lessee for any
purpose during the Tenn in connection with the Facility.
19.6 Third-PajU Manaizement Activities. Neither
Lessee nor an Affiliate of Lessee, or their respective
successors or assigns, may provide management services
with respect to any hotel, motel, resort or other lodging
facility located within a three mile radius of the Hotel
except for (i) any hotel, motel, resort or other lodging
facility managed by Lessee or an Affiliate of Lessee as of
the date of this Lease and (ii) the Sanibel Harbor Resort
& Spa, the Outrigger Beach Resort and Diamond Head Beach
Resort.
ARTICLE XX
Holding Over. If Lessee for any reason remains in
possession of the Leased Property after the expiration or
earlier termination of the Term, such possession shall be
as a tenant at sufferance during which time Lessee shall
pay as rental each month the agoregate of 105% of (a) one-
t-vvelfth of the aggregate Base Rent and Percentage Rent
payable with respect to the last Fiscal Year of the Tenn,
(b) all Additional Charges accruing during the applicable
month and (c) all other sums, if any, payable by Lessee
under this Lease with respect to the Leased Property.
During such period, Lessee shall be obligated to perform
and observe all of the terms, covenants and conditions of
this Lease, but shall have no rights hereunder other than
the right, to the extent given by la,,v to tenants at
sufferance, to continued occupancy and use of the Leased
Property. Nothing contained herein shall constitute the
consent, express or implied, of Lessor to the holding over
of Lessee after the expiration or earlier termination of
this Lease.
ARTICLE XXI
Risk of Loss. During the Term, the risk of loss or
of decrease in the enjoyment and beneficial use of the
Leased Property in consequences of the damage or
destruction thereof by fire, the elements, casualties,
thefts, riots, wars or othenvise, or in consequences of
foreclosures, attachments, levies or executions is
retained by Lessor, and, in the absence of negligence,
misconduct or breach of this Lease by Lessee, Lessee shall
in no event be answerable or accountable therefore.
ARTICLE XXII
Indemnification. Notwithstanding the existence of
any insurance provided for in Article XIII, and without
regard to the policy limits of any such insurance, Lessee
will, except to the extent waived pursuant to waiver the
subrogation set forth in Section 13.6 hereof, protec@
indemnify, hold hannless and defend any Lessor indemnified
Party from and against all liabilities, obligations,
claims, damages, penalties, causes of action, costs and
expenses (including, without limitation, reasonable
attorneys' fees and expenses), to the extent permitted by
law, imposed upon or incurred by or asserted against any
Lessor Indemnified Party by reason of.- (a) any accident,
injury to or death of persons or loss of or damage to
property occurring on or about the Leased Property or
adjoining sidewalks, including without limitation any
claims under liquor liability, "dram shop" or similar
laws, (b) any past, present or future use, misuse, non-
use, condition, management, maintenance or repair or
negligence by Lessee, its agents, invitees, employees or
guests, of
-46-
the Leased Property or Lessee's Personal Property or any
litigation, proceeding or claim by governmental entities
or other third parties to which Lessor is made a party or
participant related to such use, misuse, nonuse,
condition, management maintenance, or repair thereof by
Lessee, including Lessee's failure to perform obligations
(other than Condemnation proceedings), (c) any Impositions
that are the obligations of Lessee pursuant to the
applicable provisions of this Lease, (d) any failure on
the part of Lessee to perform or comply with any of the
terms of this Lease, (e) the nonperformance of any of the
terms and provisions of any and all existing and future
subleases of the Leased Property to be performed by the
landlord thereunder, and (f) the sale of or consumption of
alcoholic beverages on or in the Leased Property, (g)
claims of Franchisor and Managers. Any amounts that
become payable by Lessee under this Article shall be paid
within ten days after demand therefor by Lessor, and if
not timely paid, shall bear a late charge (to the extent
permifted by law) at the Overdue Rate from the expiration
of such ten day period date of such determination to the
date of payment. Lessee, at its expense, shall contest,
resist and defend any such claim, action or proceeding
asserted or instituted against any Lessor Indemnified
Party or may compromise or otherwise dispose of the same
as Lessee sees fit. Nothing herein shall be construed as
indemnifying any Lessor Indemnified Party against its own
grossly negligent acts or omissions or willful misconduct.
Lessor shall indemnify and hold any Lessee
Indemnified Party from and against any and all
liabilities, losses, interest, damages, costs or expenses
(including, without limitation, reasonable attomeys' fees)
assessed against, levied upon or collected from any Lessee
Indemnified Party arising out of the negligence,
misconduct or breach of this Lease by Lessor, its agents
or employees.
Lessee's and Lessoes liability under the provisions of
this Article shall survive any
termination of this Lease.
ARTICLE XXIII
23.1 Subletting and Assiiznment. Except as expressly
permitted herein, Lessee shall not mortgage, assign,
sublet, or otherwise transfer its interest in the Facility
and, subject to the provisions of Article XIX and Section
23.2 and any other express conditions or limitations set
forth herein, Lessee may, but only with the prior written
consent of Lessor, which may be granted or withheld in
Lessor's sole and absolute discretion, (a) assign this
Lease, (b) sublet all or any part of the Leased Property,
or (c) sublet any retail or restaurant portion of the
Leased Improvements in the normal course of the Primary
Intended Use; provided that any subletting to any party
other than an Affiliate of Lessee shall not individually
as to any one such subletting, or in the aggregate,
materially diminish the actual or potential Rent payable
under this Lease. In the case of a subletting, the
sublessee shall comply with the provisions of Section
23.2, and in the case of an assigm-nent, the assignee
shall assume in writing and agree to keep and perform all
of the terins of this Lease on the part of Lessee to be
kept and performed and shall be, and become, jointly and
severally liable with Lessee for the performance thereof.
An original counterpart of each such sublease and
assignment and assumption, duly executed by Lessee and
such sublessee or assignee, as the case may be, in form
and substance satisfactory to Lessor, shall be delivered
promptly to Lessor. In case of either an assignment or
subletting made during the Term, Lessee shall remain
primarily liable, as principal rather than as surety, for
the prqmpt payment of the Rent and for the performance and
observance of all of the covenants and conditions to be
performed by Lessee hereunder.
23.2 Attomment. Lessee shall insert in each sublease
permitted under Section 23.1 provisions to the effect that
(a) such sublease is subject and subordinate to all of the
terms and provisions of this Lease and to the rights of
Lessor hereunder, (b) if this Lease terminates before the
expiration of such sublease, the sublessee thereunder
will, at Lessor's option, attom to Lessor and waive any
right the sublessee may have
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to terminate the sublease or to surrender possession
thereunder as a result of the termination of this Lease,
and (c) if the sublessee receives a written Notice from
Lessor or Lessor's assignees, if any, stating that an
uncured Event of Default exists under this Lease, the
sublessee shall thereafter be obligated to pay all rentals
accruing under said sublease directly to the party giving
such Notice, or as such party may direct. All rentals
received from the sublessee by Lessor or Lessor's
assignees, if any, as the case may be, shall be credited
against the amounts owing by Lessee under this Lease.
23.3 Manatzement Atzreement. Notwithstanding
anything contained in this Article XXIII to the contrary,
Lessee may not, without the prior written consent of
Lessor (which consent may be withheld in the sole and
absolute discretion of Lessor), enter into an agreement (a
"Management Agreement") with any Affiliate or third party,
to assign responsibility for the management and/or
operation of all or any part of the Leased Property,
including any retail or restaurant portion of the Leased
Improvements. In addition, Lessee may not without the
prior written consent of Lessor (which consent may be
withheld in the sole and absolute discretion of Lessor),
enter into any agreement with any Affiliate in connection
with the provision of any goods or services in connection
with any or all of the Leased Property and the operation
thereof (each, a "Service Agreement," and together with
the Management Agreement, the "Operational Agreements").
Notwithstanding the foregoing, Lessee may enter into an
Operational Agreement with an Affiliate or third party to
the extent that the services provided pursuant to such
Operational Agreement are provided at the lesser of (x)
the actual cost to Lessee or Lessee's Affiliate (whichever
is lower) of such providing such services and (y) the cost
charged by third-party providers for comparable services.
All payments, under such Operational Agreement are (a)
subordinate to all payments owing to Lessor under this
Lease, and (b) are payable only out of After Tax Eamings
of Lessee and the Maximum Amount (as defined in the
Guaranty);
ided however, that the Maximum Amount shall not be
reduced to the extent that the aggregate payments for all
services rendered pursuant to Operating Agreements exceeds
the aggregate budget for such services as set forth on
Exhibit N hereto, which amounts shall be adjusted for
increases in the CPI Index (with a maximum adjustment of
7% for each Fiscal Year) in accordance with Section 3. 1
(d) hereof and may be further adjusted with the prior
approval of Lessor, which approval shall be in Lessor's
sole discretion.
23.4 Chanize of Control of Guarantor or Lessee: Sale of
Substantially All of the Assets of
Guarantor or Lessee.
Notwithstanding anything contained in this Lease
to the contrary, including, without limitation, the Events
of Default set forth in Subsections 16. 1 (k) and (q)
hereof and the restrictions set forth in this Section 23,
Guarantor may (i) sell, assign or transfer all or any part
of its assets and (ii) enter into a change of control
transaction as described in Subsection 16. 1 (k) so long
as (x) no default or Event of Default exists under the
Lease or would result from such sale, assignment or
transfer, (y) Lessor approves such sale, assignment or
transfer (which approval is required only if such sale,
assignment or transfer would be an Event of Default
pursuant to Subsections 16. 1 (k) or (q) hereof), which
approval shall not be unreasonably withheld or delayed and
(z) if the sale, assignment or transfer includes the sale
of Le ' ssee's interest in the Lease, the buyer, assignee
or transferee assumes all of Lessee's obligations under
this Lease. Lessor agrees that it, if its approval is
required under this Section 23.4, will not withhold its
approval if the buyer, assignee or transferee (1) has a
minimum net worth not less than $250,000,000, (2) is a
public company listed on NYSE ' @ NASDAQ or AMEX or is
wholly owned by such an entity, (3) in Lessor's judgment,
has resort management, capability, systems, and experience
comparable to Guarantor,(4) has no prior history of
bankruptcy or of litigation pertaining to criminal or
financial misconduct, (5) has no material direct conflicts
of interest with Lessor which could reasonably be expected
to limit it from fulfilling its obligations under the
Lease or which could reasonably be expected to cause
Lessor or its Affiliates financial harm, and (6) in
Lessor's judgment, is not of bad character or reputation.
-48-
ARTICLE XXIV
24.1 Officers'Certificates: Financial Statements: Lessor's
Estopl2el Certificates and Covenants.
(a) At any time and from time to time upon '
not less than 20 days Notice by Lessor, Lessee will fumish
to Lessor an Officees Certificate certifying that this
Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and
setting forth the modifications), the date to which the
Rent has been paid, whether to the knowledge of Lessee
there is any existing default or Event of Default
thereunder by Lessor or Lessee, and such other information
as may be reasonably requested by Lessor or Lessoes
lender. Any such certificate furnished pursuant to this
Article may be relied upon by Lessor, any lender and any
prospective purchaser of the Leased Property.
(b) Lessee will furnish the following statements to
Lessor:
(1) on or before the 20th day of each month, a
detailed profit and loss statement for the Leased Property
for the preceding month, a balance sheet for the Leased
Property as of the end of the preceding month, a detailed
accounting of revenues for the Leased Property for the
preceding month, detailed statistical information
regarding accounting by segment, F&B information, average
daily revenue by segment, STAR reports, profit and loss
variance reports, Capital Expenditures report comparison
to budget, profit and loss comparison to budoet,
forecasting information for balance of Fiscal Year and
next 12 month forecast, and such other information as may
be requested by Lessor.or required by Lessoes lender, each
in fonn acceptable to Lessor; and
(2) the most recent Consolidated Financials of
Lessee within 30 days after each quarter of any Fiscal
Year (or, in the case of the final quarter in any Fiscal
Year, the most recent Consolidated Financials of Lessee
within 60 days) after such final quarter; provided,
however, in the event the Lessor notifies Lessee that
Lessor requires Audited Consolidated Financials from
Lessee in order to comply with the requirements of the
Securities and Exchange Commission, any lender of Lessor
or by law, Lessee shall deliver Audited Consolidated
Financials to Lessor within 60 days of the end of the then
current Fiscal Year; and
(3) the most recent audited Consolidated Financials of
Guarantor within 75
days after the final quarter of each Fiscal Year; and
(4) with reasonable promptness, such information
respecting the financial
condition and affairs of Lessee or Guarantor as may be
requested by Lessor.
(c) At any time and from time to time upon not
less than 20 days notice by Lessee, Lessor will fumish to
Lessee or to any person designated by Lessee an estoppel
certificate certifying that this Lease is unmodified and
in full force and effect (or that this Lease is in full
force and effect as modified and setting forth the
modifications), the date to which Rent has been paid,
whether to the knowledge of Lessor there is any existing
default or Event of Default on Lessee's part hereunder,
and such other information as may be reasonably requested
by Lessee.
24.2 Lessee's Financial Covenants. Lessee shall not
mortgage, pledge, hypothecate, assign, encumber, or grant
a preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever
in the legal or beneficial ownership (including without
limitation, the right to
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distributions) in the Leased Property or the Initial FF&E.
Lessee shall not pay any dividends to its shareholders,
except in the amount necessary for such shareholders to
pay their respective federal, state and local income taxes
to the extent such taxes are allocable to Lessee's taxable
income and reportable as such on such shareholders' tax
retums, until such time as Lessee has fully complied with
the terms and provisions of Section 8.5. Lessee shall not
incur any indebtedness (other than ordinary trade
payables) unless required (i) to pay ren@ (ii) to maintain
and repair the Leased Property in accordance with Article
IX, or (iii) to make Alterations in accordance with
Axticle X, provided that Lessee shall thereafter retire
such indebtedness prior to making any dividend payments to
its shareholders except to the extent needed to pay
federal, state or local income tax on their respective
shares of Lessee's taxable income.
ARTICLE XXV
Books and Records: Lessoes Right to InWect. Lessee
shall keep full and adequate books of account and other
records reflecting the results of operation of the
Facility on an accrual basis, all in accordance with the
Uniform System and generally accepted accounting
principles. The books of account and all other records
relating to or reflecting the operation of the Facility
shall be kept either at the Facility or at Lessee's
offices in Ft ▇▇▇▇▇, Florida, and shall be available to
Lessor and its representatives and its auditors or
accountants, at all reasonable times, upon forty-eight
hours notice, for examination, audit, inspection and
transcription. All of such books and records pertaining
to the Facility including, without limitation, books of
account, guest records and front office records, at all
times shall be the property of Lessee (subject to the
terms of Section 34.2), but shall not be removed from the
Facility or Lessee's offices by Lessee without Lessor
approval.
Lessee shall permit Lessor and its authorized
representatives as frequently as reasonably requested by
Lessor and upon termination of this Lease to inspect the
Leased Propert7y and Lessee's accounts and records
pertaining thereto and make copies thereof, during usual
business hours upon reasonable advance notice, subject
only to any business confidentiality requirements
reasonably requested by Lessee. Lessee shall provide
accommodations to Lessor for such periodic inspections at
no cost to Lessor.
ARTICLE XXVI
No Waiver. No failure by Lessor or Lessee to insist
upon the strict performance of any term hereof or to
exercise any right, power or remedy consequent upon a
breach thereof, and no acceptance of full or partial
payment of Rent during the continuance of any such breach,
shall constitute a waiver of any such breach or of any
such term. To the extent permitted by law, no waiver of
any breach shall affect or alter this Lease, which shall
continue in full force and effect with respect to any
other then existing or subsequent breach.
ARTICLE XXVII
Remedies Cumulative. To the extent permitted by law,
each legal, equitable or contractual right, power and
remedy of Lessor or Lessee now or hereafter provided
either in this Lease or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to
every other right, power and remedy and the exercise or
beginning of the exercise by Lessor or Lessee of any one
or more of such rights, powers and remedies shall not
preclude the simultaneous or subsequent exercise by Lessor
or Lessee of any or all of such other rights, powers and
remedies.
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ARTICLE XXVIII
Accel2tance of Surrender. No surrender to Lessor of
this Lease or of the Leased Property or any part thereof,
or of any interest therein, shall be valid or effective
unless agreed to and accepted in writing by Lessor and no
act by Lessor or any representative or agent of Lessor,
other than such a written acceptance by Lessor, shall
constitute an acceptance of any such surrender.
ARTICLE XXIX
No Merger of Title. There shall be no merger of this
Lease or of the leasehold estate created hereby
by reason of the fact that the same person or entity may
acquire, own or hold, directly or indirectly: (a) this
Lease or the leasehold estate created hereby or any
interest in this Lease or such leasehold estate and (b)
the
fee estate in the Leased Property.
ARTICLE XXX
Conveyance by Lessor. If Lessor or any successor
owner of the Leased Property conveys the Leased Property
in accordance with the terms hereof other than as security
for a debt, and the grantee or transferee of the Leased
Property expressly assumes all obligations of Lessor
hereunder arising or accruing from and after the date of
such conveyance or transfer, Lessor or such successor
owner, as the case may be, shall thereupon be released
from all future liabilities and obligations of Lessor
under this Lease arising or accruing from and after the
date of such conveyance or other transfer as to the Leased
Property and all such future liabilities and obligations
shall thereupon be binding upon the new owner.
ARTICLE XXXI
Quiet Enjoyment. So long as Lessee pays all Rent as
the same becomes due and complies with all of the terms of
this Lease and performs its obligations hereunder, in each
case within the applicable grace periods, if any, Lessee
shall peaceably and quietly have, hold and enjoy the
Leased Property for the Tenn hereof, free of any claim or
other action by Lessor or anyone claiming by, through or
under Lessor, but subject to all liens and encumbrances
subject to which the Leased Property was conveyed to
Lessor or hereafter consented to by Lessee or provided for
herein. Notwithstanding the foregoing, Lessee shall have
the right by separate and independent action to pursue any
claim it may have against Lessor as a result of a breach
by Lessor of the covenant of quiet enjoyment contained in
this Section.
ARTICLE XXXII
Notim. All notices, demands, requests, consents,
approvals and other communications ("Notice" or "Noiices")
hereunder shall be in writing and personally served,
mailed (by registered or certified mail, return receipt
requested and postage prepaid) or sent by facsimile
transmission, addressed to Lessor at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ through February 28, 1998 and at Guildhall
Building, ▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ on and after March 1,
1998, and addressed to Lessee at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇
▇▇▇▇▇▇ with a copy to ▇▇▇▇▇▇, Halter & ▇▇▇▇▇▇▇▇, 1400
▇▇▇▇▇▇▇▇ Investment Center, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇ or to
such other
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address or addresses as either party may hereafter
designate. Notice by personal delivery or facsimile
transmission shall be effective upon receipt, and Notice
given by mail shall be complete at the time of deposit in
the U.S. Mail system, but any prescribed period of Notice
and any right or duty to do any act or make any response
within any prescribed period or on a date certain after
the service of such Notice given by mail shall be extended
five days.
ARTICLE XXXIII
33.1 Lessor May Grant Liens, Subordination. Without
the consent of Lessee (but with prior notice to Lessee),
Lessor may, from time to time, directly or indirectly,
create or otherwise cause to exist, modify or extend any
lien, encumbrance, superior lease or title retention
agreement ("Encumbrance") upon the Leased Property, or any
portion thereof or interest therein, whether to secure any
borrowing or other means of financing or refinancing.
This Lease and Lessee's interest herein shall be
subordinate to each and every Encumbrance unless the
holder thereof elects otherwise provided Lessor causes
such holder to execute a nondisturbance agreement
substantially in the forin of Exhibit M attached hereto.
(a) The subordination provisions herein
contained shall be self-operative and no further
instrument of subordination shall be required. In
confirmation of such subordination, Lessee shall execute
and deliver promptly any certificate that Lessor or its
successors in interest may request which does not affect
in any material respect, Lessee's rights or obligations
under this Lease. Lessee hereby constitutes and appoints
Lessor or its successors in interest as Lessee's attorney-
in-fact to execute and deliver any such certificate or
certificates for and on behalf of Lessee. Notwithstanding
any provision in this Lease or any separate agreement with
Lessee, Lessee covenants and agrees that Lessee shall not
do any act, or refrain from doing any act, if doing such
act, or refraining from doing such act, would constitute a
default or breach of any Encumbrance.
(b) This Lease has been, or may be, assigned
as collateral security. After Lessee receives notice of
such assignment and so long as the obligations secured by
such assignment remain outstanding, Lessee (i) will not
pay any Rent under this Lease more than 30 days in advance
of its due date without the prior written consent of the
holder of any such assignment (the "Assignee"), (ii) will
not surrender or consent to the modification of any of the
terms of the Lease nor to the termination hereof by Lessor
without the Assignee's prior written consent, (iii) will
continue to pay Rent under this Lease to the Lessor or as
directed by Lessor in accordance with the terms of this
Lease (unless and until notified otherwise in writing by
the Assignee in case of an event of default under the
Assignee's mortgage or other Encumbrance, in which event
Lessee will pay the rent due under this Lease directly to
the Assignee or the Assignee's designee) and (iv) will not
seek to terminate this Lease or seek or assert any set-off
or counterclaim against Rent by reason of any act or
omission of the Lessor, until Lessee shall have given
written notice of such act or omission to the Assignee (at
the Assignee's last address fumished to Lessee) and until
a reasonable period of time shall have elapsed following
the giving of such notice, during which period the
Assignee shall have the right, but shall not be obligated,
to remedy such act or omission. Any payments made to the
Assignee by Lessee shall not affect or impair the other
rights and remedies the Assignde may have under said
mortgage or Encumbrance or otherwise against the Lessor.
(c) Lessee agrees, at the election of the
holder of any interest superior to this
Lease
pursuant to the terms hereof ("Holder") to fully and
completely attom to, from time to time, and to recognize
Holder or any person, or such person's successors or
assigns, who acquires the interest of Lessor under the
Lease as Lessee's lessor under this Lease (collectively,
"Successor Landlord") upon the then executory terms of
this Lease. The foregoing provisions of this paragraph
shall inure to the benefit of any such Successor
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Landlord shall be self-operative upon any such demand, and
no further instrument shall be required to give effect to
said provisions. Lessee however, upon demand of any such
Successor Landlord agrees to execute, from time to time,
any reasonable instruments to evidence and confirm the
provisions of this paragraph, satisfactory to Lessor or
any such Successor Landlord. Upon such attornment and the
acceptance thereof in writing by such Successor Landlord '
this Lease shall continue in full force and effect as a
direct lease between such Successor Landlord and Lessee
upon all of the then executory tenns of the Lease, except
that such Successor Landlord shall not be:
(i) liable for any act or omission of any prior lessor
(including Lessor); or
(ii) liable for the return of any security deposit (unless
actually received by such Successor
Lessor); or
(iii) bound by any waiver or forbearance of any prior
lessor (including Lessor); or
(iv) liable for any damages or other relief attributable
to any latent or patent defects in
construction; or
(v) bound by any covenant to perform or
complete any construction or to pay any sum to Lessee
except for Lessor's obligations with respect to Capital
Expenditures and payment of the early termination payments
set forth in Section 37.2 hereof); or
(vi) subject to any offsets or defenses which might have
against any prior Lessor (including
Lessor); or
(vii) bound by any Rent which Lessee might have
paid for more than the current q . uarter to any prior
lessor (including Lessor), except for any overpayment of
Percentage Rent which shall be paid or credited to Lessee
in accordance with Section 3.2; or
(viii) bound by any amendment or modification of the Lease
made without its consent.
(d) If a lender or prospective lender shall
request modifications to this Lease, Lessee shall not
unreasonably withhold, delay or defer Lessee consent
thereto unless such modification would affect, in any
material respect, Lessee's rights or obligations under
this Lease.
(e) To the extent the terms of this Article
XXXIII conflict with the terins contained in any
nondisturbance agreement with the holder of an Encumbrance
on the Leased Property, the terms contained in such
nondisturbance agreement shall govem.
33.2 Lessee's Right to Cure. Subject to the
provisions of Section 33.3, if Lessor breaches any
covenant to be performed by it under this Lease, Lessee,
after Notice to and demand upon Lessor, without waiving or
releasing any obligation hereunder, and in addition to all
other remedies available to Lessee, may (but shall be
under no obligation at any time thereafter to) make such
payment or perform such act for the account and at the
expense of Lessor. All sums so paid by Lessee and all
costs and expenses (including, without fimitation,
reasonable attomeys' fees) so incurred, together with
interest thereon at the Overdue Rate from the date on
which such sums or expenses are paid or incurred by
Lessee, shall be paid by Lessor to Lessee on demand or,
following entry of a fmal, nonappealable judgment against
Lessor for such sums, may be offset by Lessee against the
Base Rent payments next accruing or coming due. The
rights of Lessee
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hereunder to cure and to secure payment from Lessor in
accordance with this Section 33.2 shall survive the
termination of this Lease with respect to the Leased
Property.
33.3 Breach by Lessor. It shall be a breach of this
Lease if Lessor fails to observe or perforrn any terin,
covenant or condition of this Lease on its part to be
performed and such failure continues for a period of 30
days after Notice thereof from Lessee, unless such failure
cannot with due diligence be cured within a period of 30
days, in which case such failure shall not be deemed to
continue if Lessor, within such 30 day period, proceeds
promptly and with due diligence to cure the failure and
diligently completes the curing thereof.
33.4 Lessee's Cooperation. In connection with the
termination of this Lease due to the expiration of the
Term or otherwise, Lessee shall cooperate with Lessor in
transfeff ing possession of the Leased Property to a new
tenant, including, without limitation, cooperating with
the transfer of any licenses or perinits necessary for the
operation of the Facility.
ARTICLE XXXIV
34.1 Miscellaneous. Anvthin contained in this Lease
to the contrary notwithstanding, all claims
9
against, and liabilities of, Lessee or Lessor arising
prior to any date of termination of this Lease shall
survive such termination. If any ten-n or provision of
this Lease or any application thereof is invalid or
unenforceable, the remainder of this Lease and any other
application of such term or provisions shall not be
affected thereby. If any late charges or any interest
rate provided for in any provision of this Lease are based
upon a rate in excess of the maximum rate permitted by
applicable law, tile parties agree that such charges shall
be fixed at the maximum permissible rate. Neither this
Lease nor any provision hereof may be changed, waived,
discharged or terminated except by a written instrument in
recordable form signed by Lessor and Lessee. All the
terrns and provisions of this Lease shall be binding upon
and inure to the benefit of the parties hereto and their
respective successors and assigns. The headings in this
Lease are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof. This Lease
shall be govemed by and construed in accordance with the
laws of the State, but not including its conflicts of laws
rules.
34.2 Transition Procedures. Upon the expiration or
termination of the Term of this Lease, for whatever
reason, Lessor and Lessee shall do the following (and the
provisions of this Section 34.2 shall survive the
expiration or termination of this Lease until they have
been fully performed) and, in general, shall cooperate in
good faith to effect an orderly transition of the
management of the Facility.
(a) Transfer of Licenses. Upon the expiration
or earlier termination of the Term, Lessee shall use its
reasonable efforts (i) to transfer to Lessor or Lessoes
nominee, to the extent assignable or ftwsferable, the
Franchise Agreement, any liquor licenses, and all other
licenses, operating pennits and other govenunental
authorizations and all contracts, including contracts with
governmental or quasi-govenunental entities, that may be
necessary for the operation of the Facility (collectively,
"Licenses"), or (ii) if such transfer'is prohibited by law
or Lessor otherwise elects, to cooperate with Lessor or
Lessor's nominee in connection with the processing by
Lessor of Lessoes nominee of any applications for, all
Licenses; provided, in either case, except in the case of
a termination resulting from an Event of Default by
Lessee, that the costs and expenses of any such transfer
or the processing of any such application shall be paid by
Lessor or Lessor's nominee.
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(b) Leases and Concessions. Lessee shall
assign to Lessor or Lessol's nominee simultaneously with
the termination of this Lease, and the assignee shall
assume any and all subleases and concession agreements in
effect with respect to the Facility which Lessor elects to
have assigned and to assume.
(c) Books and Records. Any and all books,
records files and keys for the Facility kept by Lessee
pursuant to this Lease or otherwise shall be delivered
promptly to Lessor or Lessor's nominee, simultaneously
with the termination of this Lease, but such books and
records shall thereafter be available to Lessee at all
reasonable times for inspection, audit, examination, and
transcription for a period of three years and Lessee may
retain (on a confidential basis) copies or computer
records thereof.
(d) Transition Adjustments. Lessee shall pay
all accounts payable and accrued expenses relating to the
Leased Property as of the date of termination of this
Lease, to the extent such accounts payable and accrued
expenses are required to be paid by Lessee under this
Lease, and Lessee shall be entitled to receive and retain
all accounts receivable, and an amount equal to all
prepaid expenses paid by Lessee, as of the date of this
termination. All advance bookings deposits and credits
shall be paid to Lessor.
(e) The provisions of this Section 34.2 shall survive
the termination or expiration of this
Lease.
34.3 Chanize of Franchise. Lessee may change the
existing franchise covering the Leased Property with the
prior written consent of Lessor, which consent may be
withheld in sole and absolute discretion of Lessor.
34.4 Waiver of Presentment, tc. Lessee waives all
presentments, demands for performance,
E
notices of nonperformance, protests, notices of protest,
notices of dishonor, and notices of acceptance and waives
all notices of the existence, creation or incurring of new
or additional obligations, except as expressly granted
herein.
ARTICLE XXXV
Memorandum of Lease. Lessor and Lessee shall promptly
upon the request of either enter into a
short form memorandum of this Lease, in form suitable for
recording under the laws of the State in which
reference to this Lease, and all options contained herein,
shall be made. Lessee shall pay all costs and
expenses of recording such memorandum of this Lease.
ARTICLE XXXVI
Lessor's 012tion to Purchase Assets of Lessee.
Subject to Section 6.4 hereof, effective on not less than
60 days' prior Notice given at any time within 90 days
before the expiration of the Term, or upon such shorter
Notice period as shall be appropriate if this Lease is
terminated prior to its expiration date, Lessor shall have
the option to purchase some or all of the assets of
Lessee, tangible and intangible, relating to the Leased
Property (other than this Lease and those matters covered
by Section 6.4 and Section 34.2), at the expiration or
earlier termination of this Lease for an amount (payable
in cash on the expiration or earlier termination date of
this Lease) equal to the lower of fair market value or the
then book value thereof. Notwithstanding any such
purchase, Lessor shall obtain no rights to any trade name
or logo used in
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connection with the Franchise Agreement unless separate
agreement as to such use is reached with the
applicable franchisor.
ARTICLE XXXVII
37.1 Lessor's 012tion to Terminate Lease. Except as
specifically provided in this Lease, Lessor
may not terminate this Lease.
37.2 Early Termination Payments.
(a) Sale of Leased Propeit. In the event
Lessor enters into a bona fide contract to
sell
the Leased Property, Lessor may terminate this Lease by
giving not less than thirty (30) days' prior notice to
Lessee of Lessor's election to terminate this Lease
effective upon closing of the sale contemplated by such
contract. If Lessor sells the Leased Property to a
purchaser and Lessee is not retained, within one calendar
year of such sale, to either lease or manage the Leased
Property after the sale, Lessor shall pay, subject to
Section 6.4 hereof, the Lessee, upon closing of such sale,
an amount (the "Ten-nination Amount") determined as
follows:
Year of Lease Amount of Payment Mo
1
2
3
4
5
6
7
8
9
10
I I and thereafter (including any renewal term)
In the event Lessee is retained to either lease
or manage the Leased Property within one year following
the sale of the Leased Property, Lessee shall pay Lessor
the Tennination Amount paid to Lessee upon closing of the
sale immediately upon commencement of the lease or
management contract, as the case may be. This provision
shall survive termination of this Lease.
The above-listed percentages refer to the percentage of
the immed ' iately precedin g Fiscal
Year's gross revenues for the Leased Property.
I
in addition, if this Lease is terminated due to
the circumstances described in Articles XIV or XV hereof,
Lessor shall pay Lessee the Termination Amount within 30
days of Lessor's receipt of the proceeds from the event
causing such termination.
(b) Casualiy or Condemnation. In the event the Lease
is terminated by reason of the
circumstances described in Articles XIV or XV hereof,
Lessee shall only be entitled to the early termination
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payment described above to the extent that the insurance
proceeds or the condemnation proceeds, as the case may be,
arising from such circumstances exceed the total cost of
the Leased Property on Lessor's books calculated in
accordance with GAAP, adding thereto any and all
accumulated depreciation and amortization. In addition,
Lessee shall only be entitled to an early termination
payment arising from such circumstances to the extent it
fails to recover condemnation proceeds after diligently
pursuing the recovery thereof through all levels of
appeal, for the losses and damages suffered by it due to
the early termination.
(c) Default. Lessee shall not be entitled to any
payments, fees or damages for
termination of this Lease due to Lessee's Event of Default
hereunder.
(d) Development. In the event Lessor
pursues a Development Project in
accordance
with Section 1.3 hereof and Lessee and Lessor fail to
agree upon the terms of a revised
percentage lease
agreement in accordance with Section 1.3 hereof, then
Lessor may terminate the lease in
accordance with
Section 1.3. Upon such termination, Lessor shall pay,
s4bject to Section 6.4 hereof, the Lessee, within 90 days
of the closing of the percentage lease with another party,
one-half of the Termination Amount; provided, however, if
the percentage lease entered into by Lessor with respect
to the Leased Property is with an Affiliate of Lessor or
is with Capstar Hotel Company or an Affiliate of Capstar
Hotel Company, Lessor shall pay Lessee the entire
Tennination Amount then payable.
Any amount payable by Lessor to Lessee under
this Section 37.2 shall be reduced and offset by any
amount payable by Lessee to Lessor under this Lease,
including, without limitation, any amount payable under
Section 6.4 hereof.
ARTICLE XXXVIII
Compliance with Franchise Agreement. To the extent
any of the provisions of the Franchise Agreement impose a
greater obligation on Lessee than the coffesponding
provisions of this Lease, then Lessee shall be obligated
to comply with, and the provisions of this Lease are
deemed modified to the extent necessary to comply with,
the provisions of the Franchise Acreement, it being the
intent of the parties hereto that Lessee comply in every
respect with the provisions of the Franchise Agreement so
as to avoid any default thereunder.
AR'NCLE XXXIX
Guaraniy AP-reement. Lessee shall cause the Guarantor
to,execute and deliver the Guaranty
Agreement in the form of Exhibit L.
[Signature Pages to Follow]
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IN WITNESS WHEREOF, the parties have executed this Lease
under seal by their duly
authorized officers as of the date first above written.
"LESSOR"
▇▇▇▇▇▇ HOTEL PROPERTIES, L.P.
/@@ 4, d
By:
I
Title: @,@
"LESSEE"
SOUTH SEAS ESTERO ISLAND, LTD.
By: South Seas Estero, L.L.C.,
an Ohio Limited Liability Company, its General Partner
(?,D w 10&', y
By: South Seas Properties@i@▇▇▇ Partnership, its Sole
Member
By: T&T
its
@rts, L.C.,
nerli Partner
▇▇▇▇▇▇
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman and Manager
"GUARANTOR"
SOUTH SEAS @SE)R ERTIES
COMPANY LIMITED PARTNERSIUP
By: T&T
&T
its G
By: ▇▇▇▇▇▇ ▇. ▇▇▇ I r
Title: Chairman and Manger
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[CORPORATE SEAL]
The Mariner Group's execution below isfor the sole purpose
ofmaking representations and warranties and
being obligated with respect to the covenants contained in
4rticle XIII hereof.
STATE OF OIRO
) SS:
By- I I . -T/7,
Its: @l Yrol) t ->
COUNTY OF CUYAHOGA )
The fore rument was a before me this 19 day of
1998, by
,@oing inst cknowledged
M4@-) @ [-. t@ttccl as 'I @ of ▇▇▇▇▇▇ Hotel
Properties, L.P., an
Ohio Limited Partnership ("Lessee").
Mycommissionexpires: M@@ 2L@ 2C@-Z--
Notary Public
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
D , v/ NotarY Public-State ol
Ohio, Cuya. Cty.
.c w- C, r., @-Z my
commission Expires 0 2-c@@
STATE OF
V ) SS:
COUNTY &)eC GA
The foregoing instrument was acknowledged before me
this.U Way of @ r@ r!i, 1998, by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as
Chairinan and Manager of T&T Resorts, L.C. which is the
General Partner of South Seas Properties Limited
Partnership, the Sole Member of South Seas Estero, L.L.C.,
an Ohio Limited Liability Company, the General Partner of
South Seas Estero Island, Ltd., ("Lessee").
My commission expires: 4S.4 Lt 5 t )-2, -2
O'o Z -
i I
EDMNA L. VEILLETRE
MY COMMISSION # CC 670150
EXPIRES: August ▇▇, ▇▇▇▇
-▇▇-
@, ▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇ OFGM 4 , lo f i d @ )
) SS:
COUNTY CFI
The foregoing instrument was acknowledged before me
this o@ay of @ ▇▇▇▇▇ ir %/, 1998, by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as
Chainnan and Manager of T&T Reso rts, L.C., the General
Partner of SouthSeas Resorts Properties Company Limited
Partnership ("Guarantor").
My commission expires: Ak c ks t /.? 0
u
....... . ▇▇▇▇▇▇ ▇. VEILLETRE
-1@ ., I MY COMMISSION # CC 670160
@-i
EXPIRES: August 12, 2DOI
, B=W Thru NOW Pubk Underwftm
@,IV
STATE OF @
@. I
Notary Public
STATE OF
. I)ey SS:
COUNTY OF C GA )
The foregoing instrument was acknowledged before me
thisIMMay of iCe- @ r " CL r @, 1998 by
0 b ec @A o r as -
P VKA- @ -of The Mariner Group.
My commission expires: Lt-S f 1.2. -P po@
MISSION # CC 670150
▇▇▇▇▇: August 12, 2001
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Notary Public