1
Exhibit 10.5
FORM OF
LEASE AGREEMENT
DATED AS OF _____________________
BETWEEN
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AS LESSOR
AND
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AS LESSEE
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TABLE OF CONTENTS
Page
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ARTICLE I
LEASE....................................................................................................1
1.1 Leased Property........................................................................1
1.2 Term...................................................................................2
1.3 Initial Transition.....................................................................3
ARTICLE II
DEFINITIONS..............................................................................................3
2.1 Definitions............................................................................3
ARTICLE III
RENT....................................................................................................16
3.1 Rent..................................................................................16
3.2 Confirmation of Percentage Rent.......................................................22
3.3 Additional Charges....................................................................23
3.4 No Set Off............................................................................23
3.5 Annual Budget.........................................................................23
3.6 Books and Records.....................................................................25
3.7 Changes in Operations.................................................................25
3.8 Allocation of Revenues................................................................26
ARTICLE IV
IMPOSITIONS.............................................................................................26
4.1 Payment of Impositions................................................................26
4.2 Notice of Impositions.................................................................27
4.3 Adjustment of Impositions.............................................................27
4.4 Utility Charges.......................................................................27
ARTICLE V
NO TERMINATION, ABATEMENT...............................................................................28
5.1 No Termination, Abatement.............................................................28
ARTICLE VI
PROPERTY OWNERSHIP......................................................................................28
6.1 Ownership of the Leased Property......................................................28
6.2 Lessee's Personal Property............................................................28
6.3 Equipment Lease Property..............................................................29
ARTICLE VII
CONDITION, USE..........................................................................................29
7.1 Condition of the Leased Property......................................................29
7.2 Use of the Leased Property............................................................30
ARTICLE VIII
LEGAL REQUIREMENTS......................................................................................32
8.1 Compliance with Legal and Insurance Requirements......................................32
8.2 Legal Requirement Covenants...........................................................32
8.3 Environmental Covenants...............................................................32
ARTICLE IX
MAINTENANCE AND REPAIRS.................................................................................35
9.1 Maintenance and Repair................................................................35
(i)
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ARTICLE X
ALTERATIONS.............................................................................................37
10.1 Alterations...........................................................................37
10.2 Salvage...............................................................................37
10.3 Lessor Alterations....................................................................37
ARTICLE XI
LIENS...................................................................................................38
11.1 Liens.................................................................................38
ARTICLE XII
PERMITTED CONTESTS......................................................................................38
12.1 Permitted Contests....................................................................38
ARTICLE XIII
INSURANCE...............................................................................................39
13.1 General Insurance Requirements........................................................39
13.2 Replacement Cost......................................................................42
13.3 Waiver of Subrogation.................................................................42
13.4 Form Satisfactory, etc................................................................42
13.5 Increase in Limits....................................................................43
13.6 Blanket Policy........................................................................43
13.7 Separate Insurance....................................................................43
13.8 Reports On Insurance Claims...........................................................43
13.9 Alternate Provisions for Insurance....................................................44
ARTICLE XIV
DAMAGE AND RECONSTRUCTION...............................................................................44
14.1 Insurance Proceeds....................................................................44
14.2 Reconstruction in the Event of Damage or Destruction Covered by
Insurance.............................................................................44
14.3 Reconstruction in the Event of Damage or Destruction Not Covered by
Insurance.............................................................................45
14.4 Lessee's Property and Business Interruption Insurance.................................46
14.5 Abatement of Rent.....................................................................46
ARTICLE XV
CONDEMNATION............................................................................................46
15.1 Definitions...........................................................................46
15.2 Parties' Rights and Obligations.......................................................47
15.3 Total Taking..........................................................................47
15.4 Allocation of Award...................................................................47
15.5 Partial Taking........................................................................47
15.6 Temporary Taking......................................................................48
ARTICLE XVI
DEFAULTS................................................................................................49
16.1 Events of Default.....................................................................49
16.2 Remedies..............................................................................51
16.3 Waiver................................................................................52
16.4 Application of Funds..................................................................52
(ii)
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ARTICLE XVII
LESSOR'S RIGHT TO CURE..................................................................................52
17.1 Lessor's Right to Cure Lessee's Default...............................................52
ARTICLE XVIII
LIMITATIONS.............................................................................................52
18.1 Personal Property Limitation..........................................................52
18.2 Sublease Rent Limitation..............................................................53
18.3 Sublease Lessee Limitation............................................................53
18.4 Lessee Ownership Limitation...........................................................53
ARTICLE XIX
HOLDING OVER............................................................................................54
19.1 Holding Over..........................................................................54
ARTICLE XX
INDEMNITIES.............................................................................................54
20.1 Indemnification.......................................................................54
ARTICLE XXI
SUBLETTING AND ASSIGNMENT...............................................................................56
21.1 Subletting and Assignment.............................................................56
21.2 Management Agreement..................................................................56
21.3 Primary Manager and Submanager........................................................56
ARTICLE XXII
ESTOPPEL CERTIFICATES...................................................................................57
22.1 Officer's Certificates; Financial Statements; Lessor's Estoppel Certificates
and Covenants.........................................................................57
ARTICLE XXIII
INSPECTIONS.............................................................................................59
23.1 Regular Meetings; Lessor's Right to Inspect...........................................59
ARTICLE XXIV
NO WAIVER...............................................................................................59
24.1 No Waiver.............................................................................59
ARTICLE XXV
CUMULATIVE REMEDIES.....................................................................................60
25.1 Remedies Cumulative...................................................................60
ARTICLE XXVI
SURRENDER...............................................................................................60
26.1 Acceptance of Surrender...............................................................60
ARTICLE XXVII
NO MERGER...............................................................................................60
27.1 No Merger of Title....................................................................60
ARTICLE XXVIII
CONVEYANCE BY LESSOR....................................................................................60
28.1 Conveyance by Lessor..................................................................60
28.2 Lessor May Grant Liens................................................................61
ARTICLE XXIX
QUIET ENJOYMENT.........................................................................................62
29.1 Quiet Enjoyment.......................................................................62
ARTICLE XXX
NOTICES.................................................................................................62
30.1 Notices...............................................................................62
(iii)
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ARTICLE XXXI
INTENTIONALLY DELETED...................................................................................63
ARTICLE XXXII
LESSEE CAPITALIZATION REQUIREMENTS......................................................................63
32.1 Lessee's Net Worth....................................................................63
32.2 Verification of Net Worth.............................................................63
ARTICLE XXXIII
TERMINATION OF LEASE DUE TO SALE OF LEASED PROPERTY.....................................................63
33.1 Termination of Lease Due to Sale of Leased Property...................................63
ARTICLE XXXIV
FRANCHISE AGREEMENT, BRAND STANDARDS, AND GROUND LEASES.................................................64
34.1 Compliance............................................................................64
ARTICLE XXXV
CAPITAL EXPENDITURES....................................................................................65
35.1 Capital Expenditures..................................................................65
ARTICLE XXXVI
LESSOR'S DEFAULT........................................................................................66
36.1 Lessor's Default......................................................................66
ARTICLE XXXVII
ARBITRATION.............................................................................................67
37.1 Arbitration...........................................................................67
37.2 Alternative Arbitration...............................................................67
37.3 Arbitration Procedures................................................................67
ARTICLE XXXVIII
TRADE-OUTS..............................................................................................68
ARTICLE XXXIX
MISCELLANEOUS...........................................................................................68
39.1 Miscellaneous.........................................................................68
39.2 Transition Procedures.................................................................69
39.3 Waiver of Presentment, etc............................................................70
39.4 Standard of Discretion................................................................70
39.5 Action for Damages....................................................................70
(iv)
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Exhibits:
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Exhibit A - Property Description
Exhibit B - Base Rent Revenue Percentages and Breakdowns
Exhibit C - Capital Expenditures Policy
Exhibit D - Additional Provisions
(v)
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LEASE AGREEMENT
THIS LEASE AGREEMENT (hereinafter called "LEASE") is made as of the
_____ day of __________________, 1998, by and between
____________________________, a ___________________ (hereinafter called
"LESSOR"), and ____________________________________________________, a
__________________________ (hereinafter called "LESSEE"):
R E C I T A L S
A. The Leased Property is presently operated as a Marriott Hotel
pursuant to a franchise agreement (the "Franchise Agreement") between Marriott
International, Inc., or one or its Affiliates, as franchisor and Interstate
Hotels Corporation, or one of its Affiliates, as franchisee, which franchisee
interest will be assumed by IHC II, LLC ("Primary Manager") in connection with
the execution of this Lease pursuant to an agreement by and between Lessee and
Primary Manager (the "Primary Management Agreement").
B. Patriot American Hospitality Partnership, L.P. ("REIT OP"), Lessee,
Marriott International, Inc. and Interstate Hotel Company have previously
entered into a settlement agreement (the "Settlement Agreement") concerning the
resolution of disputes among the parties, pursuant to which this Agreement is
being executed.
C. REIT OP, Lessee, Primary Manager and [Marriott Hotel Services, Inc.
or Marriott International, Inc.] ("Submanager"), simultaneously with the
execution of this Agreement and effective as of the date on which Submanager
will assume management of the Leased Property (as hereinafter defined), have
entered into an Owner's Agreement (the "Owner's Agreement") which sets forth
certain rights and responsibilities among REIT OP, Lessee and Submanager.
X. Xxxxxx desires to lease the Leased Property to Lessee and approve
the terms on which the Leased Property will be managed by Primary Manager and
Submanager, and Lessee desires to lease the Leased Property from Lessor and
engage the Primary Manager and Submanager to manage the Leased Property.
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
LEASE
1.1 Leased Property. The Leased Property (herein so called) is
comprised of Lessor's interest in the following:
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(a) the land described in EXHIBIT A attached hereto and by
reference incorporated herein (the "LAND");
(b) all buildings, structures and other improvements of every
kind including, but not limited to, alleyways and connecting tunnels, sidewalks,
utility pipes, conduits and lines (on-site and off-site), parking areas and
roadways appurtenant to such buildings and structures presently or hereafter
situated upon the Land (collectively, the "LEASED IMPROVEMENTS");
(c) all easements, rights and appurtenances relating to the
Land and the Leased Improvements;
(d) all equipment, machinery, fixtures, and other items of
property required for or incidental to the use of the Leased Improvements as a
hotel, including all components thereof, now and hereafter permanently affixed
to or incorporated into the Leased Improvements, including, without limitation,
all furnaces, boilers, heaters, electrical equipment, heating, plumbing,
lighting, ventilating, refrigerating, incineration, air and water pollution
control, waste disposal, air-cooling and air-conditioning systems and apparatus,
sprinkler systems and fire and theft protection equipment, all of which to the
greatest extent permitted by law are hereby deemed by the parties hereto to
constitute real estate, together with all replacements, modifications,
alterations and additions thereto (collectively, the "FIXTURES");
(e) all furniture and furnishings and all other items of
personal property (excluding Inventory and personal property owned by Lessee)
located on, and used in connection with, the operation of the Leased
Improvements as a hotel, together with all replacements, modifications,
alterations and additions thereto; and
(f) all existing occupancy leases of the Leased Property
(including any security deposits or collateral held by Lessor pursuant thereto).
THE LEASED PROPERTY IS DEMISED IN ITS PRESENT CONDITION WITHOUT REPRESENTATION
OR WARRANTY (EXPRESSED OR IMPLIED) BY LESSOR AND SUBJECT TO THE RIGHTS OF
PARTIES IN POSSESSION, AND TO THE EXISTING STATE OF TITLE INCLUDING ALL
COVENANTS, CONDITIONS, RESTRICTIONS, EASEMENTS AND OTHER MATTERS OF RECORD
INCLUDING ALL APPLICABLE LEGAL REQUIREMENTS AND MATTERS WHICH WOULD BE DISCLOSED
BY AN INSPECTION OF THE LEASED PROPERTY OR BY AN ACCURATE SURVEY THEREOF.
1.2 Term. The term of this Lease (the "TERM") shall commence on
________________________ (the "Commencement Date") and shall end on the day
which is three (3) years thereafter, unless sooner terminated in accordance with
the provisions hereof.
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1.3 Initial Transition.
(a) Lessee has assumed or shall assume all occupancy
agreements and operating agreements to which the Leased Property remains subject
on the Commencement Date.
(b) All Inventory is or shall be owned by Lessee, Primary
Manager or Submanager. SCHEDULE 1.3 contains provisions relating to the terms on
which any Inventory transferred to Lessee by Lessor was acquired by Lessee and
certain other accounting issues with respect thereto.
(c) Rights and obligations with respect to accrued revenues,
expenses, cash on hand and similar items have been allocated between Lessor and
Lessee as of the Commencement Date, as agreed to by, and reflected in the books
and records of, Lessor and Lessee.
(d) Lessor shall lend to Lessee an amount of cash equal to the
Initial Working Capital. Such loan shall bear interest at the [Base Rate], shall
amortize over the [Term], and shall in any event be due and payable in full upon
the termination of the Lease for any reason. Interest shall accrue, and payments
of interest and principal shall be payable as an Additional Charge, on each date
on which Base Rent is due and payable hereunder.
(e) Lessor shall also provide to Lessee, as an additional
capital expenditure obligation of Lessor, any amounts required to be paid by
Lessee for computer systems as provided in SECTION 1.02B of the Primary
Management Agreement and for additional Fixed Asset Supplies as provided in
SECTION 4.07 of the Primary Management Agreement.
ARTICLE II
DEFINITIONS
2.1 Definitions. For all purposes of this Lease, except as otherwise
expressly provided or unless the context otherwise requires, (a) the terms
defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular, (b) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
GAAP, (c) all references in this Lease to designated "Articles", "Sections" and
other subdivisions are to the designated Articles, Sections and other
subdivisions of this Lease and (d) the words "herein," "hereof" and "hereunder"
and other words of similar import refer to this Lease as a whole and not to any
particular Article, Section or other subdivision:
Additional Charges: As defined in SECTION 3.3.
Affiliate: As used in this Lease the term "Affiliate" of a person shall
mean (a) any person that, directly or indirectly, controls or is controlled by
or is under common control with such person, (b) any other person that owns,
beneficially, directly or indirectly, ten percent or more of the outstanding
capital stock, shares or equity interests of such person, or
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(c) any officer, director, employee, partner or trustee of such person or any
person controlling, controlled by or under common control with such person
(excluding trustees and persons serving in similar capacities who are not
otherwise an Affiliate of such person). The term "person" means and includes
individuals, corporations, general and limited partnerships, limited liability
companies, stock companies or associations, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts, or
other entities and governments and agencies and political subdivisions thereof.
For the purposes of this definition, "control" (including the correlative
meanings of the terms "controlled by" and "under common control with"), as used
with respect to any person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such person, through the ownership of voting securities, partnership interests
or other equity interests, by contract or otherwise.
Annual Budget: As used in this Lease, the term "Annual Budget" shall
mean an operating budget and a capital budget prepared by or on behalf of Lessee
and approved by Lessor in accordance with SECTION 3.5(a). For purposes of
Section 22.1, Annual Budget shall also mean the Business Plan, the FF&E Estimate
and the Building Estimate to the extent that such items substitute for an Annual
Budget pursuant to SECTION 3.5(b).
Annual Food Sales Break Point: As defined in SECTION 3.1(b)(ii) and
EXHIBIT B.
Annual Room Revenues Break Point(s): As defined in SECTION 3.1(b)(ii)
and EXHIBIT B.
Annual Room Revenues First Break Point: As defined in SECTION
3.1(b)(ii) and EXHIBIT B.
Annual Room Revenues Second Break Point: As defined in SECTION
3.1(b)(ii) and EXHIBIT B.
Approval: As defined in SECTION 39.4.
Award: As defined in SECTION 15.1(c).
Base Rent: As defined in SECTION 3.1.
Base Rate: The "base rate" of interest announced from time to time by
Bankers Trust Company, New York, New York or any successor thereto.
Beverage Sales: Shall mean gross revenue from the sale of (i) wine,
beer, liquor or other alcoholic beverages, whether sold in a bar or lounge,
delivered to or available in a guest room, sold at meetings or banquets or at
any other location at the Leased Property and (ii) nonalcoholic beverages sold
in a bar or lounge. Such gross revenue constituting Beverage Sales shall include
sales by Lessee and its permitted subtenants, licensees and concessionaires, but
revenues from subleases, licenses or similar arrangements for alcoholic beverage
sales
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which are entered into by Lessor, by any prior owner of the Leased Property, or
by Lessee (but as to Lessee, only such subleases, licenses or similar
arrangements entered into in compliance, but only in compliance, with SECTION
21.1 with parties who are not Affiliates of Lessee) shall be classified as Other
Income and shall only include rents received by Lessee under such existing
subleases, licenses or similar arrangements, which must comply with SECTION 18.2
hereof. Such revenue shall be determined in a manner consistent with the Uniform
System and shall not include the following:
(a) Any gratuity or service charge added to a customer's xxxx
or statement in lieu of a gratuity which is paid directly to an employee;
(b) Credits, rebates or refunds; and
(c) Sales taxes or taxes of any other kind imposed on the sale
of alcoholic or other beverages.
Brand Standards: Shall mean either (or both, as the context requires)
of the following two (2) categories of standards: (i) the operational standards
(for example, services offered to guests, quality of food and beverages,
cleanliness, staffing and employee compensation and benefits, Chain Services,
the Marriott Rewards Program and other similar programs, etc.); and (ii) the
physical standards (for example, quality of the Leased Improvements, Fixtures,
Furniture and Equipment, Fixed Asset Supplies and frequency of replacements of
Fixtures, Furniture and Equipment, etc.); each of such standards shall be the
standard which is generally prevailing or in the process of being implemented at
other hotels in the Marriott System, including all services and facilities in
connection therewith that are customary and usual at comparable hotels in the
Marriott System.
Break Points: As defined in SECTION 3.1(b).
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which national banks in the City of Dallas, Texas or in the
municipality wherein the Leased Property is located are closed.
Capital Budget: As defined in SECTION 3.5.
Capital Expenditures: Amounts advanced to pay the costs of Capital
Improvements.
Capital Expenditures Reserve: An amount equal to 4% of Gross Revenues
for each Lease Year, to be accrued by Lessor in accordance with the provisions
of ARTICLE XXXV hereof.
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Capital Impositions: Taxes, assessments or similar charges imposed upon
or levied against the Leased Property for the costs of public improvements,
including, without limitation, roads, sidewalks, public lighting fixtures,
utility lines, storm sewers drainage facilities, and similar improvements; and
assessments or charges in the nature of rent for the use of any easement or
facility. Notwithstanding the foregoing, while the Submanagement Agreement is in
effect, Capital Impositions shall also include each of the items referenced in
SECTIONS 7.01 B(2), (3) AND (4) of the Submanagement Agreement.
Capital Improvements: Subject to EXHIBIT C attached hereto,
improvements to (a) the external walls and internal load bearing walls (other
than windows and plate glass), (b) the roof of the Facility, (c) private
roadways, parking areas, sidewalks and curbs appurtenant thereto that are under
Lessee's control (other than cleaning, patching and striping), (d) mechanical,
electrical and plumbing systems that service common areas, entire wings of the
Facility or the entire Facility, including conduit and ductware connected
thereto, and (e) items of the types described on EXHIBIT C attached hereto as
"capital". Any dispute as to whether an improvement is a capital or non-capital
improvement shall be resolved by arbitration pursuant to SECTION 37.2.
CERCLA: The Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
Chain Services: Services that are furnished generally on a central,
regional or other group basis to other hotels in the Marriott System and which
benefit such hotels.
CPI Factor: As defined in SECTION 3.5.
Claims: As defined in SECTION 12.1.
COBRA: The Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: As defined in SECTION 1.2.
Company: Patriot American Hospitality, Inc., a Delaware corporation.
Condemnation, Condemnor: As defined in SECTION 15.1.
Consolidated Financials: For any fiscal year or other accounting period
for Lessee and its consolidated Subsidiaries, statements of operations,
partners' capital and cash flow (or, in the case of a corporation, statements of
operations, retained earnings and cash flow) for such period and for the period
from the beginning of the respective fiscal year to the end of such period and
the related balance sheet as at the end of such period, together with the notes
to any such yearly statement, all in such detail as may be required by the SEC
with respect to filings made by the Company, and setting forth in comparative
form the corresponding figures for the
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corresponding period in the preceding fiscal year, and prepared in accordance
with GAAP and audited annually (and quarterly if required by the SEC with
respect to filings made by the Company) by Ernst & Young or another so called
"Big Six" firm of independent certified public accountants designated by Lessee
and approved by Lessor, such approval not to be unreasonably withheld or
delayed. Consolidated Financials shall be prepared on the basis of a December 31
fiscal year of Lessee.
Consumable Supplies: Office supplies, cleaning supplies, uniforms,
laundry and valet supplies, engineering supplies, fuel, stationery, soap,
matches, toilet and facial tissues, and such other supplies as are consumed
customarily on a recurring basis in the operation of the Facility, together with
food and beverages that are to be offered for sale to guests and to the public.
Consumer Price Index: The "Consumer Price Index" published by the
Bureau of Labor Statistics of the United States Department of Labor, U.S. City
Average, All Item for Urban Wage Earners and Clerical Workers (1982-1984=100).
Cumulative Monthly Portion: As defined in SECTION 3.1(b)(ii).
Date of Taking: As defined in SECTION 15.1(b).
Emergency Expenditures: Expenditures required to take necessary or
appropriate actions to respond to Emergency Situations.
Emergency Situations: An emergency threatening the Facility, its
guests, invitees or employees or any other circumstances or conditions
(including, without limitation, those involving Hazardous Materials) which, if
continued, would subject Lessor, Lessee, Primary Manager and/or Submanager to
civil or criminal liability.
Environmental Authority: Any department, agency or other body or
component of any Government that exercises any form of jurisdiction or authority
under any Environmental Law.
Environmental Authorization: Any license, permit, order, approval,
consent, notice, registration, filing or other form of permission or
authorization required under any Environmental Law.
Environmental Laws: (1) CERCLA; (2) the regulations promulgated
thereunder, from time to time; (3) all federal, state and local laws, rules and
regulations (now or hereafter in effect) dealing with the use, generation,
treatment, storage, disposal or abatement of Hazardous Materials; and (4) the
regulations promulgated thereunder from time to time.
Environmental Liabilities: Any and all obligations to pay the amount of
any judgment or settlement, the cost of complying with any settlement, judgment
or order for injunctive or other equitable relief, the cost of compliance or
corrective action in response to any notice, demand or request from an
Environmental Authority, the amount of any civil penalty or
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criminal fine, and any court costs and reasonable amounts for attorney's fees,
fees for witnesses and experts, and costs of investigation and preparation for
defense of any claim or any Proceeding, regardless of whether such Proceeding is
threatened, pending or completed, that may be or have been asserted against or
imposed upon Lessor, Lessee, any Predecessor, the Leased Property or any
property used therein and arising out of:
(a) the failure to comply at any time with all Environmental
Laws applicable to the Leased Property;
(b) the presence of any Hazardous Materials on, in, under, at
or in any way affecting the Leased Property;
(c) a Release or threatened Release of any Hazardous Materials
on, in, at, under or in any way affecting the Leased Property;
(d) the identification of Lessee, Lessor or any Predecessor as
a potentially responsible party under CERCLA or under any other Environmental
Law;
(e) the presence at any time of any above-ground and/or
underground storage tanks, as defined in RCRA or in any applicable Environmental
Law on, in, at or under the Leased Property or any adjacent site or facility; or
(f) any and all claims for injury or damage to persons or
property arising out of exposure to Hazardous Materials originating or located
at the Leased Property, or resulting from operation thereof or any adjoining
property.
Event of Default: As defined in SECTION 16.1.
Executive Committee: Shall mean the general manager, resident manager,
director of marketing, controller, food and beverage director, human resources
director and chief engineer, or similar titled positions.
Executive Person and/or Executive Personnel: Shall mean a member of the
Executive Committee or a supervisory or executive member of the home office or
regional staff of Manager.
Facility: The hotel and/or other facility offering lodging and other
services or amenities being operated or proposed to be operated on the Leased
Property.
First Tier Food Sales Percentage: As defined in SECTION 3.1(b)(ii) and
EXHIBIT B.
First Tier Room Revenue Percentage: As defined in SECTION 3.1(b)(ii)
and EXHIBIT B.
Fixed Asset Supplies: Shall mean items included within "Property and
Equipment" under the Uniform System including, but not limited to, linen, china,
glassware, tableware, uniforms, and similar items, whether used in connection
with public space or guest rooms.
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Fixtures: As defined in SECTION 1.1.
Food Sales: Shall mean (i) gross revenue from the sale of food and
non-alcoholic beverages that are prepared at the Facility and sold or delivered
on or off the Facility by Lessee, its permitted subtenants, licensees, or
concessionaires whether for cash or for credit, including in respect of guest
rooms, banquet rooms, meeting rooms and other similar rooms, and (ii) gross
revenue from the rental of banquet, meeting and other similar rooms. Such gross
revenue constituting Food Sales shall include sales by Lessee and its permitted
subtenants, licensees and concessionaires, but revenues from subleases, licenses
or similar arrangements for food and non-alcoholic beverage sales which are
entered into by Lessor, by any prior owner of the Leased Property, or by Lessee,
(but as to Lessee, only such subleases, licenses or similar arrangements entered
into in compliance, but only in compliance with SECTION 21.1 with parties who
are not Affiliates of Lessee) shall be classified as Other Income and shall only
include rents received by Lessee under such existing subleases, licenses or
similar arrangements, which must comply with SECTION 18.2 hereof. Such revenue
shall be determined in a manner consistent with the Uniform System and shall not
include the following:
(a) Vending machine sales;
(b) Any gratuities or service charges added to a customer's
xxxx or statement in lieu of a gratuity which is paid directly to an employee;
(c) Non-alcoholic beverages sold from a bar or lounge;
(d) Credits, rebates or refunds; and
(e) Sales taxes or taxes of any other kind imposed on the sale
of food or non-alcoholic beverages.
Franchise Agreement: Any franchise agreement, license agreement or
other agreement pursuant to which the Facility is operated under, or entitled to
use a brand or other name, identifying trademarks and/or tradenames and
reservations system (including those portions of the Primary Management
Agreement and Submanagement Agreement relating thereto).
Furniture and Equipment: For purposes of this Lease, the terms
"furniture and equipment" shall mean collectively all furniture, furnishings,
wall coverings, fixtures and hotel equipment and systems owned by Lessor and
located at, or used in connection with, the Facility, together with all
replacements therefor and additions thereto, including, without limitation, (i)
all equipment and systems required for the operation of kitchens, bars and
restaurants, and laundry and dry cleaning facilities, (ii) office equipment,
(iii) dining room wagons, materials handling equipment, and cleaning and
engineering equipment, (iv) telephone and computerized accounting systems, and
(v) vehicles.
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GAAP: Generally accepted accounting principles as are at the time
applicable and otherwise consistently applied.
GDP Deflator: As defined in the Submanagement Agreement.
Government: The United States of America, any city, county, state,
district or territory thereof, any foreign nation, any city, county, state,
province, dominion, district, department, territory or other political division
thereof, or any political subdivision of any of the foregoing, in any case
having jurisdiction over the Facility, the Leased Property, Lessor or Lessee.
Gross Revenues: All revenues, receipts, and income of any kind derived
directly or indirectly by Lessee from or in connection with the Facility whether
on a cash basis or credit, paid or collected, determined in accordance with GAAP
and the Uniform System, including but not limited to golf course membership
fees, greens fees and other revenues arising out of the operation of any golf
courses on the Facility, but excluding, however: (i) funds furnished by Lessor,
(ii) federal, state and municipal excise, sales, and use taxes collected
directly from patrons and guests or as a part of the sales price of any goods,
services or displays, such as gross receipts, admissions, cabaret or similar or
equivalent taxes and paid over to federal, state or municipal governments, (iii)
gratuities, (iv) proceeds of insurance and condemnation, (v) proceeds from sales
other than sales in the ordinary course of business, (vi) all loan proceeds from
financing or refinancings of the Facility or interests therein or components
thereof, (vii) judgments and awards, except any portion thereof arising from
normal business operations of the Facility, and (viii) items constituting
"allowances" under the Uniform System.
Hazardous Materials: Any substance or material containing one or more
of any of the following: "hazardous material", "hazardous waste", "hazardous
substance", "regulated substance", "petroleum", "pollutant", "contaminant",
"polychlorinated biphenyls", "lead or lead-based paint" or "asbestos" as such
terms are defined in any applicable Environmental Law in such concentration(s)
or amount(s) as may impose clean-up, removal, monitoring or other responsibility
under the Environmental Laws, as the same may be amended from time to time, or
which may present a significant risk of harm to guests, invitees or employees of
the Facility.
Holder: Any holder of any indebtedness of the Lessor, or of the
Company, the REIT OP or any of their Affiliates, any holder of a Mortgage, any
purchaser of the Leased Property or any portion thereof at a foreclosure sale or
any sale in lieu thereof, or any designee of any of the foregoing.
Impositions: Collectively, all taxes (including, without limitation,
all ad valorem, sales and use, occupancy, single business, gross receipts,
transaction privilege, rent or similar taxes as the same relate to or are
imposed upon Lessee or Lessor or Lessee's business conducted upon the Leased
Property), assessments (including, without limitation, all assessments for
public improvements or benefit, whether or not commenced or completed prior to
the date
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hereof and whether or not to be completed within the Term), ground rents, water,
sewer or other rents and charges, excises, tax inspection, authorization and
similar fees and all other governmental charges, as well as financial
obligations with respect to any covenants, conditions or restrictions, including
reciprocal easement agreements or cost-sharing arrangements affecting the Leased
Property, in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of the Leased Property or
the business conducted thereon by Lessee (including all interest and penalties
thereon caused by any failure in payment by Lessee), which at any time prior to,
during or with respect to the Term hereof may be assessed or imposed on or with
respect to or be a lien upon (a) Lessor's interest in the Leased Property, (b)
the Leased Property, or any part thereof or any rent therefrom or any estate,
right, title or interest therein, or (c) any occupancy, operation, use or
possession of, or sales from, or activity conducted on or in connection with the
Leased Property, or the leasing or use of the Leased Property or any part
thereof by Lessee. Nothing contained in this definition of Impositions shall be
construed to require Lessee to pay (1) any tax based on net income (whether
denominated as a franchise or capital stock or other tax) imposed on Lessor or
any other person, or (2) any net revenue tax of Lessor or any other person, or
(3) any tax imposed with respect to the sale, exchange or other disposition by
Lessor of any Leased Property or the proceeds thereof.
Indemnified Party: Either of a Lessee Indemnified Party or a Lessor
Indemnified Party.
Indemnifying Party: Any party obligated to indemnify an Indemnified
Party pursuant to any provision of this Lease.
Initial Working Capital: An amount equal to One Thousand Two Hundred
Fifty Dollars ($1,250) per guest room, adjusted by the GDP Deflator, less cash
on hand at the Facility as of the Take-Over Date (and as defined Primary
Agreement), plus the Initial FF&E Reserve Balance (as that term is defined in
the Primary Management Agreement).
Insurance Requirements: All terms of any insurance policy required by
this Lease and all requirements of the issuer of any such policy.
Inventory: All "Inventories of Merchandise" and "Inventories of
Supplies" as defined in the Uniform System, including, but not limited to,
linens, china, silver, glassware and other non-depreciable personal property,
and any property of the type described in Section 1221(1) of the Code.
Land: As defined in ARTICLE I.
Lease: This Lease.
Lease Year: Any twelve-month period from January 1 to December 31
during the Term; provided that the initial Lease Year shall be the period
beginning on the Commencement Date and ending on December 31st of the calendar
year which includes the Commencement Date, and the last Lease Year shall be the
period beginning on January 1 of
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the calendar year in which the Term expires or terminates and ending on the
expiration or termination date (to the extent any computation or other provision
hereof provides for an action to be taken on a Lease Year basis, an appropriate
proration or other adjustment shall be made in respect of the initial and final
Lease Years to reflect that such periods are less than full calendar year
periods).
Leased Improvements; Leased Property: Each as defined in ARTICLE I.
Legal Requirements: Any federal, state or local law, code, rule,
ordinance, regulation or order of any governmental authority or agency having
jurisdiction over the business or operation of the Facility or the matters which
are the subject of this Agreement, including, without limitation, the following:
(i) any building, zoning or use laws, ordinances, regulations or orders; and
(ii) Environmental Laws.
Lessee: The Lessee designated on this Lease and its permitted
successors and assigns.
Lessee Indemnified Party: Lessee, any Affiliate of Lessee (other than
the Company and its direct and indirect subsidiaries, including Lessor), any
other Person against whom any claim for indemnification may be asserted
hereunder as a result of a direct or indirect ownership interest in Lessee, the
officers, directors, stockholders, partners, members, employees, agents and
representatives of any of the foregoing Persons and any corporate stockholder,
agent, or representative of any of the foregoing Persons, and the respective
heirs, personal representatives, successors and assigns of any such officer,
director, stockholder, employee, agent or representative.
Lessee's Personal Property: As defined in SECTION 6.2.
Lessor: The Lessor designated on this Lease and its respective
successors and assigns.
Lessor Impositions: With respect to each Lease Year, an amount equal to
the aggregate amount of ground rents, if any, Capital Impositions, Real Estate
Taxes and Personal Property Taxes due and payable for such Lease Year.
Lessor Indemnified Party: The Company and its direct and indirect
subsidiaries, including Lessor, and any other Person against whom any claim for
indemnification may be asserted hereunder as a result of a direct or indirect
ownership interest in Lessor, the officers, directors, stockholders, partners,
members, employees, agents and representatives of any of the foregoing Persons
and of any stockholder, partner, member, agent, or representative of any of the
foregoing Persons, and the respective heirs, personal representatives,
successors and assigns of any such officer, director, partner, stockholder,
employee, agent or representative.
Lessor Insurance Costs: The costs to be borne by Lessor for insurance
coverages contemplated by ARTICLE XIII hereof.
Lessor's Audit: An audit by Lessor's independent certified public
accountants of the operation of the Leased Property during any Lease Year, which
audit may, at Lessor's
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election, be either a complete audit of the Leased Property's operations or an
audit of Room Revenues, Food Sales, Beverage Sales and Other Income realized
from the operation of the Leased Property during such Lease Year.
Management Agreement: The Primary Management Agreement and the
Submanagement Agreement, taken together, or, following the termination of the
Primary Management Agreement and the Submanagement Agreement, shall have the
meaning set forth in SECTION 21.2.
Manager: Primary Manager, as defined in the recitals hereto, or the
Submanager, to the extent that the rights and obligations of Primary Manager
with respect to this Lease have been assigned to and/or assumed by Submanager
pursuant to the Submanagement Agreement. Following termination of the Primary
Management Agreement and the Submanagement Agreement for any reason, Manager
shall have the meaning set forth in SECTION 21.2.
Marriott System: The chain of full-service hotels in the United States
which are operated by Submanager (or one of its Affiliates) under the Trade Name
of "Marriott".
Measurement Date: As defined in SECTION 3.1(d).
Minimum Net Worth: As defined in SECTION 32.1.
Monthly Revenues Computation: As defined in SECTION 3.1(b).
Mortgage: As defined in SECTION 28.2.
Net Worth: As defined in SECTION 32.1.
Notice: A notice given pursuant to ARTICLE XXX.
Officer's Certificate: A certificate of Lessee reasonably acceptable to
Lessor, signed by the chief financial officer or another officer duly authorized
so to sign by Lessee or a general partner of Lessee, or any other person whose
power and authority to act has been authorized by delegation in writing by any
such officer.
Operating Budget: As defined in SECTION 3.5.
Other Income: All revenues, receipts, and income of any kind derived
directly or indirectly from or in connection with the Facility and included in
Gross Revenues other than Room Revenues, Food Sales or Beverage Sales.
Other Income Percentage: As defined in SECTION 3.1(b)(ii) and EXHIBIT
B.
Overdue Rate: On any date, a rate equal to the Base Rate plus 4% per
annum, but in no event greater than the maximum rate then permitted under
applicable law.
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Payment Date: Any due date for the payment of any installment of Rent.
Percentage Rent: As defined in SECTION 3.1(b).
Person: Any Government, natural person, corporation, partnership or
other legal entity.
Personal Property Limitation: As defined in SECTION 18.1.
Personal Property Taxes: All personal property taxes imposed on the
furniture, furnishings or other items of personal property located on, and used
in connection with, the operation of the Leased Improvements as a hotel (other
than Inventory and other personal property owned by the Lessee and/or its
tenants, licensees, concessionaires, agents or contractors), together with all
replacements, modifications, alterations and additions thereto.
Predecessor: Any Person whose liabilities arising under any
Environmental Law have or may have been retained or assumed by Lessor or Lessee
pursuant to the provisions of this Lease.
Primary Intended Use: As defined in SECTION 7.2(b).
Primary Manager and Primary Management Agreement: As defined in the
recitals hereto.
Proceeding: Any judicial action, suit or proceeding (whether civil or
criminal), any administrative proceeding (whether formal or informal), any
investigation by a governmental authority or entity (including a grand jury),
and any arbitration, mediation or other non-judicial process for dispute
resolution.
RCRA: The Resource Conservation and Recovery Act, as amended.
Real Estate Taxes: All real estate and other ad valorem taxes,
including general and special assessments (including, without limitation, all
assessments for public improvements or benefits, whether or not commenced or
completed prior to the date hereof and whether or not completed within the
Term), if any, which are imposed upon the Land, the Leased Improvements, the
Fixtures and Lessor's and Lessee's estates in any easements, rights and
appurtenances relating to the Land and the Leased Improvements, in each case
whether general or special, ordinary or extraordinary, or foreseen or
unforeseen, in every character (including all interest and penalties thereon
caused by any failure in payment by Lessor). Real Estate Taxes shall also
include all other taxes imposed in lieu of real estate taxes as described in the
preceding sentence. Real Estate Taxes shall not include taxes on the property of
Lessee or its tenants, licensees, concessionaires, agents or contractors,
including, without limitation, on Inventory.
REIT OP: Patriot American Hospitality Partnership, L.P., a Virginia
limited partnership.
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Reasonable Amount of Working Capital: As defined in the Submanagement
Agreement.
Release: A "Release" as defined in CERCLA or in any Environmental Law,
unless such Release has been properly authorized and permitted in writing by all
applicable Environmental Authorities or is allowed by such Environmental Law
without authorizations or permits.
Rent: Collectively, the Base Rent, Percentage Rent and Additional
Charges.
Revenues Computation: As defined in SECTION 3.1(b).
Room Revenues: Gross revenue from the rental of guest rooms, whether to
individuals, groups or transients, at the Facility, determined in a manner
consistent with the Uniform System, excluding the following:
(a) The amount of all credits, rebates or refunds to
customers, guests or patrons; and
(b) All sales taxes or any other taxes imposed on the rental
of such guest rooms; and
(c) any fees collected for amenities including, but not
limited to, telephone, laundry, movies or concessions.
SEC: The U.S. Securities and Exchange Commission or any successor
agency.
Second Tier Food Sales Percentage: As defined in SECTION 3.1(b)(ii)
and EXHIBIT B.
Second Tier Room Revenue Percentage: As defined in SECTION 3.1(b)(ii)
and EXHIBIT B.
State: The State or Commonwealth of the United States in which the
Leased Property is located, or, if the Leased Property is located outside of the
United States, the state, province, dominion or other similar jurisdiction in
which the Leased Property is located.
Submanager and Submanagement Agreement: As defined in the recitals
hereto.
Subsidiaries: Corporations or other entities in which Lessee owns,
directly or indirectly, 50% or more of the voting rights or control, as
applicable (individually, a "SUBSIDIARY").
Taking: A permanent or temporary taking or voluntary conveyance during
the Term hereof of all or part of the Leased Property, or any interest therein
or right accruing thereto or use thereof, as the result of, or in settlement of,
any Condemnation or other eminent domain
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proceeding affecting the Leased Property whether or not the same shall have
actually been commenced.
Term: As defined in SECTION 1.2.
Termination Fee: As defined in SECTION 33.1(c).
Third Tier Room Revenue Percentage: As defined in SECTION 3.1(b)(ii)
and EXHIBIT B.
Unavoidable Delay: Delay due to strikes, lock-outs, labor unrest,
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, unavoidable casualty,
condemnation or other similar causes beyond the reasonable control of the party
responsible for performing an obligation hereunder, provided that lack of funds
shall not be deemed a cause beyond the reasonable control of either party hereto
unless such lack of funds is caused by the breach of the other party's
obligation to perform any obligations of such other party under this Lease.
Unavoidable Occurrence: The occurrence of strikes, lockouts, labor
unrest, inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, casualty, condemnation or
other similar causes beyond the reasonable control of Lessee, provided, that any
such occurrence is an extraordinary (as opposed to a routine or cyclical)
material event.
Uneconomic for its Primary Intended Use: A state or condition of the
Facility such that in the good faith judgment of Lessee or Lessor, exercised
reasonably, the Facility cannot be reconstructed or repaired within a reasonable
period of time after the damage or loss, so as to be capable of being operated
on a commercially practicable basis for its Primary Intended Use.
Uniform System: The Uniform System of Accounts for the Lodging Industry
(9th Revised Edition, 1996) as published by the Hotel Association of New York
City, Inc.
Unsuitable for its Primary Intended Use: A state or condition of the
Facility such that in the good faith judgment of Lessee or Lessor, exercised
reasonably, the Facility cannot be reconstructed or repaired within a reasonable
period of time after the damage or loss, so as to be capable of functioning as
an integrated hotel facility consistent with standards applicable to a well
maintained and operated hotel comparable in quality and function to that of the
Facility prior to the damage or loss.
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ARTICLE III
RENT
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, at Lessor's address set forth in ARTICLE XXX hereof or at such
other place or to such other Person, as Lessor from time to time may designate
in a Notice, all Rent contemplated hereby during the Term on the basis
hereinafter set forth. If there is a dispute as to the amount of Rent to be paid
by Lessee, either party may submit the dispute to arbitration pursuant to
SECTION 37.2. However, Lessee shall be required to pay, as and when Rent is due
and payable hereunder, the amount of Rent calculated by Lessor to be due and
payable until such time as the dispute is resolved by agreement between the
parties or by arbitration pursuant to SECTION 37.2:
(a) Base Rent: During the Term, Lessee shall pay to Lessor as
Base Rent (herein so called) the annual sum set forth on EXHIBIT B attached
hereto, which shall be payable in arrears in equal monthly installments in the
amount set forth on EXHIBIT B attached hereto on or before the first day of the
calendar month following the calendar month in which the Commencement Date
occurs and on or before the first day of each calendar month thereafter;
provided, however, the monthly payment of Base Rent shall be prorated as to any
partial month.
(b) Percentage Rent: In addition to the sums payable pursuant
to subparagraph (a) above, Lessee shall, within ten (10) days after the last day
of each month during the Term hereof, pay to Lessor an amount equal to the
Percentage Rent (herein so called) payable in accordance with the provisions of
this subparagraph (b). Percentage Rent shall be calculated by the following
formula (the "REVENUES COMPUTATION"):
(i) For any calendar month, Percentage Rent shall
equal:
(1) An amount equal to the Monthly
Revenues Computation (defined
below), for the Lease Year in
question
less
(2) An amount equal to the Base Rent
paid by Lessee to Lessor for the
Lease Year to date
less
(3) An amount equal to the Percentage
Rent theretofore paid for the Lease
Year in question to date.
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(ii) "MONTHLY REVENUES COMPUTATION" shall be computed
utilizing the following definitions:
(1) "CUMULATIVE MONTHLY PORTION" shall mean
a fraction having as its numerator the total number
of calendar months (including partial months) in a
Lease Year which have elapsed prior to the month in
which a monthly payment of Percentage Rent is due,
and having as its denominator the total number of
calendar months (including partial months) in the
Lease Year. For example, the Cumulative Monthly
Portion in a 12-month Lease Year for the January
Percentage Rent payment due February 10 will be 1/12
and for the February Percentage Rent payment due
March 10 will be 2/12, and such progression shall
continue for each successive calendar month so that
the Cumulative Monthly Portion for the December
Percentage Rent payment due January 10 of the next
Lease Year will be 12/12 or 100%.
(2) "FIRST TIER ROOM REVENUE PERCENTAGE,"
"SECOND TIER ROOM REVENUE PERCENTAGE," "THIRD TIER
ROOM REVENUE PERCENTAGE," "FIRST TIER FOOD SALES
PERCENTAGE," "SECOND TIER FOOD SALES PERCENTAGE" and
"OTHER INCOME PERCENTAGE" shall mean the percentages
corresponding to each of such terms as set forth on
EXHIBIT B.
(3) "ANNUAL ROOM REVENUES FIRST BREAK POINT"
and "ANNUAL ROOM REVENUES SECOND BREAK POINT" shall
mean the amount of annual Room Revenues corresponding
to each of such terms as set forth on EXHIBIT B.
(4) "ANNUAL FOOD SALES BREAK POINT" shall
mean the amount of annual Food Sales and Beverage
Sales corresponding to such term as set forth on
EXHIBIT B.
(iii) The Monthly Revenues Computation shall be the
amount obtained by adding, for the applicable Lease Year the
following sums:
(1) an amount equal to the First Tier Room
Revenue Percentage of all year to date Room Revenues
up to (but not exceeding) the Cumulative Monthly
Portion of the Annual Room Revenues First Break
Point,
(2) an amount equal to the Second Tier Room
Revenue Percentage of all year to date Room Revenues
in excess of the Cumulative Monthly Portion of the
Annual Room Revenues First Break Point up to (but not
exceeding) the Cumulative Monthly Portion of the
Annual Room Revenues Second Break Point,
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(3) an amount equal to the Third Tier Room
Revenue Percentage of all year to date Room Revenues
in excess of the Cumulative Monthly Portion of the
Annual Room Revenues Second Break Point,
(4) an amount equal to the First Tier Food
Sales Percentage of the Cumulative Monthly Portion of
all year to date Food Sales and Beverage Sales up to
(but not exceeding) the Cumulative Monthly Portion of
the Annual Food Sales Break Point,
(5) an amount equal to the Second Tier Food
Sales Percentage of all year to date Food Sales and
Beverage Sales in excess of the Cumulative Monthly
Portion of the Annual Food Sales Break Point, and
(6) an amount equal to the Other Income
Percentage of year to date revenues from Other
Income.
(iv) If the Term begins or ends in the middle of a
calendar year, then the number of months falling within the
Term during such calendar year shall constitute a separate
Lease Year. In that event, the Annual Room Revenues First
Break Point, the Annual Room Revenues Second Break Point, and
the Annual Food Sales Break Point (collectively, the "BREAK
POINTS") shall each be multiplied by a fraction equal to (A)
the number of months (including partial months) in the Lease
Year divided by (B) twelve (12), and the Cumulative Monthly
Portion for each of the months in such Lease Year shall be
determined as set forth in the definition of Cumulative
Monthly Portion above.
(v) The obligation to pay Percentage Rent accrued
through the expiration or earlier termination of the Term
shall survive such expiration or termination, and a final
reconciliation, taking into account, among other relevant
adjustments, any adjustments which are accrued after such
expiration or termination date but which related to Percentage
Rent accrued prior to such termination date, shall be made not
later than sixty (60) days after such expiration or
termination date.
(c) Officer's Certificates. An Officer's Certificate shall be
delivered to Lessor monthly setting forth the calculation of the
Percentage Rent payment for the most recently completed month within 10
days after each month of each Lease Year during the Term. There shall
be no reduction in Base Rent regardless of the results of the Monthly
or Annual Revenues Computation. Percentage Rent shall be subject to
confirmation and adjustment, if applicable, as set forth in SECTION
3.2. Notwithstanding the amounts of Percentage Rent paid monthly
pursuant to the formula set forth above, for each Lease Year during the
Term commencing with the Lease Year in which the Commencement Date
occurs, the Percentage Rent payable under this Lease shall be equal to
the amount determined by the following formula:
The amount equal to the Annual Revenues Computation
(as defined below) for the Lease Year in question
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less
An amount equal to the Base Rent paid for the
applicable Lease Year
equals
Percentage Rent for the applicable Lease Year.
The Annual Revenues Computation (herein so called) shall be the amount obtained
by adding, for the applicable Lease Year, the following sums:
(1) an amount equal to the First Tier Room Revenue
Percentage of Room Revenues for the applicable Lease Year up
to (but not exceeding) the Annual Room Revenues First Break
Point,
(2) an amount equal to the Second Tier Room Revenue
Percentage of Room Revenues for the applicable Lease Year in
excess of the Annual Room Revenues First Break Point up to
(but not exceeding) the Annual Room Revenues Second Break
Point,
(3) an amount equal to the Third Tier Room Revenue
Percentage of Room Revenues for the applicable Lease Year in
excess of the Annual Room Revenues Second Break Point,
(4) an amount equal to the First Tier Food Sales
Percentage of Food Sales and Beverage Sales for the applicable
Lease Year up to (but not exceeding) the Annual Food Sales
Break Point,
(5) an amount equal to the Second Tier Food Sales
Percentage of Food Sales and Beverage Sales for the applicable
Lease Year in excess of the Annual Food Sales Break Point, and
(6) an amount equal to the Other Income Percentage of
revenues from Other Income for the applicable Lease Year.
If the annual Percentage Rent due and payable for any Lease Year (as shown in
the applicable Officer's Certificate) exceeds the amount actually paid as
Percentage Rent by Lessee for such year, Lessee also shall pay such excess to
Lessor within sixty (60) days after the end of the applicable Lease Year. If the
Percentage Rent actually due and payable for such Lease Year is shown by such
certificate to be less than the amount actually paid as Percentage Rent for the
applicable Lease Year, Lessee shall be entitled to a credit in the amount of
such overpayment against the next ensuing payment of Base Rent and/or Percentage
Rent, provided, however, if such overpayment is greater than a monthly payment
of Base Rent, Lessor shall pay the amount which is over and above the monthly
payment of Base Rent to Lessee within thirty (30) days of such determination.
Notwithstanding the foregoing, if the Annual Revenues
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Computation is less than the Base Rent for the applicable Lease Year, Lessee
shall not be entitled to any credit or refund.
(d) CPI Adjustments.
(i) For the Lease Year commencing January 1, 1999,
and for each Lease Year thereafter during the Term, the Base Rent then in effect
shall be increased in the following manner:
(a) The Base Rent for the Lease Year in
question shall be an amount equal to (1) the prior year's Base Rent, plus (2)
the product of (aa) an amount equal to (x) the prior year's Base Rent multiplied
by the CPI Factor, less (y) the prior year's Base Rent, times (bb) the Fixed
Rent Factor.
(b) The term "CPI Factor" shall mean a
percentage computed by dividing the Consumer Price Index for the day before the
day that the new Lease Year commences ("Measurement Date") by the Consumer Price
Index for the day that is twelve months preceding the Measurement Date.
(c) The term "Fixed Rent Factor" shall mean
a percentage computed by dividing the actual Lessor Impositions (on an
annualized basis) plus the Lessor Insurance Costs (on an annualized basis) for
Lease Year 1998 by the Base Rent for Lease Year 1999.
(d) For example, if the prior years' Base
Rent was $500,000.00, the CPI Factor was 1.03 and the Fixed Rent Factor is .20,
then the Base Rent for the Lease Year in question would be $503,000.00: $500,000
+ [($500,000 X 1.03 - $500,000) X .2)].
(ii) For each Lease Year during the Term beginning
with the Lease Year commencing January 1, 1999, the Annual Room Revenues First
Break Point and the Annual Room Revenues Second Break Point (together, the
"Annual Room Revenues Break Points"), and the Annual Food Sales Break Point then
included in the Revenues Computation set forth above, shall be increased as
follows:
(a) The new Annual Room Revenues Break
Points in the Revenues Computation described above for the Lease Year commencing
January 1, 1999, and for each Lease Year thereafter shall be the product of (i)
the Annual Room Revenues Break Points in effect in the most recently ended Lease
Year times (ii) the CPI Factor plus the percentage amount set forth on EXHIBIT
B; and
(b) The new Annual Food Sales Break Point in
the Revenues Computation described above for the Lease Year commencing January
1, 1999, and for each Lease Year thereafter during the Term, shall be the
product of (i) the Annual Food Sales Break Point in effect in the most recently
ended Lease Year times (ii) the CPI Factor plus the percentage amount set forth
on EXHIBIT B.
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(iii) In no event shall the Base Rent, the Annual
Room Revenues Break Points or the Annual Food Sales Break Point then in effect
be reduced as a result of any changes in the Consumer Price Index or any
calculations made pursuant to this Subparagraph (d).
(iv) Adjustments calculated as set forth above in the
Base Rent, Annual Room Revenues Break Points and the Annual Food Sales Break
Point shall be effective on the first day of each calendar Lease Year to which
such adjusted amounts apply. If Base Rent or Percentage Rent is paid prior to
the determination of the amount of any adjustment to Base Rent, Percentage Rent,
the Annual Room Revenues Break Points or the Annual Food Sales Break Point
applicable for such period, whether because of a delay in the publication of the
Consumer Price Index for the Measurement Date or because of any other reason,
payment adjustments for any shortfall in or overpayment of Percentage Rent paid
shall be made with first Base Rent and Percentage Rent payments due after the
amount of the adjustments are determined.
(v) If (a) a significant change is made in the number
or nature (or both) of items used in determining the Consumer Price Index, or
(b) the Consumer Price Index shall be discontinued for any reason, the Bureau of
Labor Statistics shall be requested to furnish a new index comparable to the
Consumer Price Index, together with information which will make possible a
conversion to the new index in computing the adjusted Base Rent, Annual Room
Revenues Break Points and Annual Food Sales Break Point hereunder. If for any
reason the Bureau of Labor Statistics does not furnish such an index and such
information, the parties will instead mutually select, accept and use such other
index or comparable statistics on the cost of living in various U.S. cities that
is computed and published by an agency of the United States or a responsible
financial periodical of recognized authority.
(vi) To the extent that, at the end of any Lease
Year, Percentage Rent has been overpaid, Lessee shall be entitled to a credit
against the next ensuing payments of Base Rent and/or Percentage Rent.
3.2 Confirmation of Percentage Rent.
(a) Lessee shall utilize, or cause to be utilized, an
accounting system for the Leased Property in accordance with its usual and
customary practices, and in accordance with GAAP and the Uniform System, that
will accurately record all data necessary to compute Percentage Rent, and Lessee
shall retain, for at least three (3) years after the expiration of each Lease
Year, reasonably adequate records conforming to such accounting system showing
all data necessary to conduct Lessor's Audit and to compute Percentage Rent for
the applicable Lease Years.
(b) Lessor shall have the right from time to time by its
accountants or representatives to audit such information in connection with
Lessor's Audit, and to examine all Lessee's records (including supporting data
and sales and excise tax returns) reasonably required to complete Lessor's Audit
and to verify Percentage Rent, subject to any prohibitions
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or limitations on disclosure of any such data under Legal Requirements. For this
purpose, Lessee's records shall include all records maintained with respect to
the Leased Property on Lessee's behalf by Manager. If any Lessor's Audit
discloses a deficiency in the payment of Percentage Rent, and either Lessee
agrees with the result of Lessor's Audit or the matter is otherwise determined
or compromised, Lessee shall forthwith pay to Lessor the amount of the
deficiency, as finally agreed or determined, together with interest at the
Overdue Rate from the date when said payment should have been made to the date
of payment thereof; provided, however, that as to any Lessor's Audit that is
commenced more than one (1) year after the end of any Lease Year, 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 the gross negligence or willful
misconduct of the Lessee, in which case interest at the Overdue Rate will accrue
from the date such payment should have been made to the date of payment thereof.
In the event the Revenue Audit discloses an overpayment by Lessee, Lessee shall
be entitled to a credit in the amount of such overpayment against the next
ensuing payment of Percentage Rent. In no event shall Lessor undertake a
Lessor's Audit more than three (3) years after the last day of the Lease Year
for which such audit is requested.
(c) Any proprietary information obtained by Lessor pursuant to
the provisions of this Section shall be treated as confidential, except that
such information may be used, subject to appropriate confidentiality safeguards,
in any litigation between the parties and except further that Lessor may
disclose such information to prospective lenders and investors and to any other
persons to whom disclosure is necessary to comply with applicable laws,
regulations and government requirements.
(d) The obligations of Lessee and Lessor contained in this
Section shall survive the expiration or earlier termination of this Lease. Any
dispute as to the existence or amount of any deficiency in the payment of
Percentage Rent as disclosed by Lessor's Audit shall, if not otherwise settled
by the parties, be submitted to arbitration pursuant to the provisions of
SECTION 37.2.
3.3 Additional Charges. In addition to the Base Rent and Percentage
Rent, Lessee also will pay and discharge as and when due and payable the
following: (a) all other amounts, liabilities, obligations and Impositions that
Lessee assumes or agrees to pay under this Lease, and (b) in the event of any
failure on the part of Lessee to pay any of those items referred to in clause
(a) of this SECTION 3.3, Lessee also will promptly pay and discharge every fine,
penalty, interest and cost that may be added for non-payment or late payment of
such items. The items referred to in clauses (a) and (b) of this SECTION 3.3
shall be additional rent hereunder and shall be referred to herein collectively
as the "ADDITIONAL CHARGES". Lessor shall have all legal, equitable and
contractual rights, powers and remedies provided either in this Lease or by
statute or otherwise in the case of non-payment of the Additional Charges as in
the case of non-payment of the Base Rent. If any installment of Base Rent,
Percentage Rent or Additional Charges (but only as to those Additional Charges
that are payable directly to Lessor) shall not be paid on its due date, Lessee
will pay Lessor within ten (10) days of demand, as Additional Charges, a late
charge (to the extent permitted by law) equal to the greater of (i) interest
computed at the Overdue Rate on the amount of such installment, from the due
date of such
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installment to the date of payment thereof, or, (ii) in the event Lessee has
failed to pay the amount of such installment, within ten (10) days after receipt
by the Lessee of Notice from Lessor (provided, however, that after Lessor has
given one (1) such Notice in a Lease Year, the ten (10) days' Notice and cure
period shall not be required for the remainder of such Lease Year), five percent
(5%) of such amount. To the extent that Lessee pays any Additional Charges to
Lessor pursuant to any requirement of this Lease, Lessee shall be relieved of
its obligation to pay such Additional Charges to the entity to which they would
otherwise be due and Lessor shall pay the same from monies received from Lessee.
3.4 No Set Off. Rent shall be paid to Lessor without set off, deduction
or counterclaim; provided, however, that Lessee shall have the right of offset
to the extent specifically provided in SECTION 36.1 and the right to assert any
claim or counterclaim in a separate action brought by Lessee under this Lease or
to assert any mandatory counterclaim in any action brought by Lessor under this
Lease.
3.5 Annual Budget.
(a) Not later than sixty (60) days prior to the commencement
of each Lease Year, Lessee shall prepare and submit to Lessor an operating
budget (the "OPERATING BUDGET") and a capital budget (the "CAPITAL BUDGET")
prepared in accordance with the requirements of this SECTION 3.5. The Operating
Budget and the Capital Budget (together, the "ANNUAL BUDGET") shall be prepared
in accordance with the Uniform System to the extent applicable and show by month
and quarter and for the year as a whole in the degree of detail specified by the
Uniform System for monthly statements, and in accordance with the detail level
of monthly financial statements, the following:
(i) Lessee's reasonable estimate of Gross Revenues
(including room rates and Room Revenues) for the forthcoming Lease Year itemized
on schedules on a monthly and quarterly basis as approved by Lessor and Lessee,
together with the assumptions, in narrative form, forming the basis of such
schedules.
(ii) An estimate of any amounts Lessor will be
requested to provide for Capital Improvements during the current and the next
four (4) Lease Years, subject to the limitations set forth in ARTICLE XXXV.
(iii) A cash flow projection.
(iv) A narrative description of the program for
marketing and managing the Facility for the forthcoming Lease Year and
containing a detailed budget itemization of proposed expenditures by category.
(v) Lessee's reasonable estimate for each month of
the Lease Year of Percentage Rent, including Room Revenues, Food Sales, Beverage
Sales and Other Income.
Lessor shall have thirty (30) days after the date on which it
receives the Annual Budget to review, approve, disapprove or request changes to
the Annual Budget. If the parties
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are not able to reach agreement on the Annual Budget for any Lease Year during
Lessor's thirty (30) day review period, the parties shall attempt in good faith
during the subsequent thirty (30) day period to resolve any disputes, which
attempt shall include, if requested by either party, at least one (1) meeting of
executive-level officers of Lessor and Lessee. In the event the parties are
still not able to reach agreement on the Annual Budget for any particular Lease
Year after complying with the foregoing requirements of this SECTION 3.5, the
parties shall adopt such portions of the Operating Budget and the Capital Budget
as they may have agreed upon and any matters not agreed upon shall be referred
to arbitration as provided for in SECTION 37.2 hereof.. Pending the results of
such arbitration or the agreement of the parties, (i) if the Operating Budget
has not been agreed upon, the Leased Property will be operated in a manner
consistent with the prior Lease Year's Operating Budget without adjustment until
a new Operating Budget is adopted, and (ii) if the Capital Budget has not been
agreed upon, no Capital Expenditures shall be made unless the same are set forth
in a previously approved Capital Budget or are agreed to by Lessor and Lessee or
are otherwise required to comply with Legal Requirements, the Franchise
Agreement or Brand Standards, as applicable, or to make Emergency Expenditures.
Lessee shall operate the Leased Property consistent with the
Annual Budget and shall promptly report to Lessor in writing any actual or
anticipated deviation from the Operating Budget or Capital Budget of any
material or long-term consequence.
(b) Notwithstanding the foregoing, while the Submanagement
Agreement is in effect, Lessor agrees that the provisions for the preparation,
approval and implementation of a Business Plan, an FF&E Estimate (including the
Five-Year Plan) and a Building Estimate and compliance therewith pursuant to
SECTIONS 4.05, 5.02 AND 5.03 of the Primary Management Agreement and the
Submanagement Agreement (including by reference the related provisions of the
Primary Management Agreement and the Submanagement Agreement regarding approval
of excess expenditures, dispute resolution, choice of law and similar
provisions) shall substitute for the foregoing provisions regarding the
preparation and approval of the Annual Budget, reading such Sections, mutatis
mutandis, so that Lessor shall have all of the rights and obligations of Lessee
under such Sections, and Lessee shall have all of the rights and obligations of
Primary Manager under such Sections. Lessor agrees and acknowledges that Lessee
may delegate such rights and obligations to Primary Manager, which Primary
Manager may delegate to Submanager.
(c) Lessee agrees that it shall consult with Lessor prior to
hiring, or consenting to the hiring of, any General Manager of the Facility.
3.6 Books and Records. Lessee shall keep full and adequate books of
account and other records reflecting the results of operation of the Facility on
an accrual basis, all in accordance with the Uniform System and GAAP and the
obligations of Lessee under this Lease. The books of account and all other
records relating to or reflecting the operation of the Facility shall be kept
either at the Facility or at Lessee's offices in Dallas, Texas or Pittsburgh,
Pennsylvania and shall be available to Lessor and its representatives and its
auditors or accountants, at all reasonable times for examination, audit,
inspection, and transcription. All of such books and records pertaining to the
Facility including, without limitation, books of
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account, guest records and front office records, at all times shall be the
property of Lessee and shall not be removed from the Facility or Lessee's
offices without Lessee's prior written approval, provided, however, Lessor shall
be entitled to make copies of any or all such books and records for its own
files. The obligations under this SECTION 3.6 shall survive termination of this
Lease for any reason. Lessor acknowledges that while the Primary Management
Agreement and Submanagement Agreement are in effect, Lessee's ability to provide
access to books of account and records may be limited by the provisions of such
agreements.
3.7 Changes in Operations. Without Lessor's prior written consent,
Lessee shall not (i) provide food and/or beverage operations at the Facility if
not presently provided, (ii) discontinue any food and/or beverage operations
which are presently provided, or (iii) convert a subtenant, licensee or
concessionaire to an operating department of the Facility or vice-versa.
Notwithstanding the foregoing, while the Submanagement Agreement is in effect,
Lessor acknowledges that Primary Manager and/or Submanager may have the
authority to make such changes in operations without Lessee's consent. Lessee
agrees that it will not exercise any consent, approval or consultation rights it
may have under such agreements with respect to such matters without Lessor's
consent. [The parties agree that in the event of one or more changes in
operations that are (separately or together) reasonably likely to change the
amount of rent payable hereunder by more than [5%], the calculation of
Percentage Rent shall be equitably amended to leave the parties in approximately
the same economic position as they would have been in the absence of such
change(s).]
3.8 Allocation of Revenues. In the event that individuals or groups
purchase rooms, food and beverage and/or the use of other hotel facilities or
services together or as part of a package, Lessee agrees that revenues shall be
allocated among Room Revenues, Food Sales, Beverage Sales and/or other revenue
categories, as applicable, in a reasonable manner consistent with the historical
allocation of such revenues.
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ARTICLE IV
IMPOSITIONS
4.1 Payment of Impositions.
(a) Subject to ARTICLE XII relating to permitted contests,
Lessee will pay, or cause to be paid, all Impositions (other than Lessor
Impositions, which shall be paid by Lessor) before any fine, penalty, interest
or cost may be added for non-payment, such payments to be made directly to the
taxing or other authorities where feasible, and will promptly furnish to Lessor
copies of official receipts or other satisfactory proof evidencing such
payments. Lessee's obligation to pay such Impositions shall be deemed absolutely
fixed upon the date such Impositions become a lien upon the Leased Property or
any part thereof, subject to Lessee's right of contest pursuant to the
provisions of ARTICLE XII. If any such Imposition may, at the option of the
taxpayer, lawfully be paid in installments (whether or not interest shall accrue
on the unpaid balance of such Imposition), Lessee may exercise the option to pay
the same (and any accrued interest on the unpaid balance of such Imposition) in
installments payable during the Term and in such event, shall pay such
installments and any unpaid balance of such Impositions prior to the expiration
or earlier termination of the Term hereof and before any fine, penalty, premium,
further interest or cost may be added thereto.
(b) Lessor, at its expense, shall, to the extent required or
permitted by applicable law, prepare and file all tax returns in respect of
Lessor's net income, gross receipts, sales and use, single business, transaction
privilege, rent, ad valorem, franchise taxes, Real Estate Taxes, Personal
Property Taxes, taxes on its capital stock and Lessor Impositions, and Lessee,
at its expense, shall, to the extent required or permitted by applicable laws
and regulations, prepare and file all other tax returns and reports in respect
of any Imposition as may be required by governmental authorities.
(c) If any refund shall be due from any taxing authority in
respect of any Imposition paid by Lessee, the same shall be paid over to or
retained by Lessee if no Event of Default shall have occurred hereunder and be
continuing. If an Event of Default shall have been declared by Lessor and be
continuing, any such refund shall be paid over to or retained by Lessor. Any
such funds retained by Lessor due to an Event of Default shall be applied as
provided in ARTICLE XVI.
(d) Lessor and Lessee shall, upon request of the other,
cooperate with the other party and otherwise provide such data as is maintained
by the party to whom the request is made with respect to the Leased Property as
may be necessary to prepare any required returns and reports. Lessor, to the
extent it possesses the same, and Lessee, to the extent it possesses the same,
will provide the other party, upon request, with cost and depreciation records
necessary for filing returns for any property classified as personal property.
(e) Lessor may, upon notice to Lessee, at Lessor's option and
at Lessor's sole expense, protest, appeal, or institute such other proceedings
(in its or Lessee's name) as Lessor may deem appropriate to effect a reduction
of real estate or personal property assessments for those Impositions to be paid
by Lessor, and Lessee, at Lessor's expense as
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aforesaid, shall fully cooperate with Lessor in such protest, appeal, or other
action. Lessor hereby agrees to indemnify, defend, and hold harmless Lessee from
and against any claims, obligations, and liabilities against or incurred by
Lessee in connection with such cooperation. Lessor, however, reserves the right
to effect any such protest, appeal or other action and, upon notice to Lessee,
shall control any such activity, which shall then proceed at Lessor's sole
expense. Upon such notice, Lessee, at Lessor's expense, shall cooperate fully
with such activities.
(f) To the extent received by it, Lessee shall furnish Lessor
with copies of all assessment notices for Real Estate Taxes and Personal
Property Taxes in sufficient time for Lessor to file a protest and pay such
taxes without penalty. Lessor shall within thirty (30) days after making such
payment furnish Lessee with evidence of payment of Capital Impositions, Real
Estate Taxes and Personal Property Taxes.
4.2 Notice of Impositions. Lessor shall give prompt Notice to Lessee of
all Impositions payable by Lessee hereunder of which Lessor at any time has
knowledge, provided that Lessor's failure to give any such Notice shall in no
way diminish Lessee's obligations hereunder to pay such Impositions, but if
Lessee did not otherwise have knowledge of such Imposition sufficient to permit
it to pay same, such failure shall obviate any default hereunder for a
reasonable time after Lessee receives Notice of any Imposition which it is
obligated to pay during the first taxing period applicable thereto.
4.3 Adjustment of Impositions. Impositions payable by Lessee which are
imposed in respect of the tax-fiscal period during which the Term terminates
shall be adjusted and prorated between Lessor and Lessee, whether or not such
Imposition is imposed before or after such termination, and the parties'
obligations to pay their respective prorated share thereof after termination
shall survive such termination.
4.4 Utility Charges. Lessee will be solely responsible for obtaining
and maintaining utility services to the Leased Property and will pay or cause to
be paid all charges for electricity, gas, oil, water, sewer and other utilities
used in the Leased Property during the Term.
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ARTICLE V
NO TERMINATION, ABATEMENT
5.1 No Termination, Abatement. Except as otherwise specifically
provided in this Lease, Lessee, to the extent permitted by law, shall remain
bound by this Lease in accordance with its terms and shall neither take any
action without the written consent of Lessor to modify, surrender or terminate
the same, nor seek nor be entitled to any abatement, deduction, deferment or
reduction of the Rent, or setoff against the Rent, nor shall the obligations of
Lessee be otherwise affected by reason of (a) any damage to, or destruction of,
any Leased Property or any portion thereof from whatever cause or any Taking of
the Leased Property or any portion thereof, (b) any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding up
or other proceedings affecting Lessor or any assignee or transferee of Lessor,
or (c) for any other cause whether similar or dissimilar to any of the foregoing
other than a discharge of Lessee from any such obligations as a matter of law.
Lessee hereby specifically waives all rights, arising from any default under
this Lease by Lessor which may now or hereafter be conferred upon it by law to
(1) modify, surrender or terminate this Lease or quit or surrender the Leased
Property or any portion thereof, or (2) entitle Lessee to any abatement,
reduction, suspension or deferment of or set off against the Rent or other sums
payable by Lessee hereunder, except as otherwise specifically provided in this
Lease. The obligations of Lessee hereunder shall be separate and independent
covenants and agreements and the Rent and all other sums payable by Lessee
hereunder shall continue to be payable in all events unless the obligations to
pay the same shall be terminated pursuant to the express provisions of this
Lease or by termination of this Lease other than by reason of an Event of
Default provided, however, nothing in this SECTION 5.1 shall preclude Lessee
from exercising its remedies pursuant to SECTION 36.1.
ARTICLE VI
PROPERTY OWNERSHIP
6.1 Ownership of the Leased Property. Lessee acknowledges that the
Leased Property is the property of Lessor and that Lessee has only the right to
the possession and use of the Leased Property upon the terms and conditions of
this Lease.
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6.2 Lessee's Personal Property. At all times during the Term, Lessee,
Manager or Submanager shall maintain Inventory consistent with the amount of
inventory which is customarily maintained in a hotel of the type and character
of the Facility and is otherwise required to operate the Leased Property in the
manner contemplated by this Lease and in compliance with the Franchise Agreement
and all Legal Requirements. All Inventory shall be the property of Lessee,
Manager or Submanager, as the case may be. Lessee may (and shall as provided
hereinbelow), at its expense, install, affix or assemble or place on any parcels
of the Land or in any of the Leased Improvements, any items of personal property
(including Inventory) owned by Lessee (collectively, the "LESSEE'S PERSONAL
PROPERTY"). Lessee may, subject to the first sentence of this SECTION 6.2,
remove any of Lessee's Personal Property at any time during the Term or upon the
expiration or any prior termination of the Term. All of Lessee's Personal
Property, other than Inventory, not removed by Lessee within thirty (30) days
following the expiration or earlier termination of the Term shall be considered
abandoned by Lessee and may be appropriated, sold, destroyed or otherwise
disposed of by Lessor without first giving Notice thereof to Lessee, without any
payment to Lessee and without any obligation to account therefor. Lessee will,
at its expense, restore the Leased Property to the condition required by SECTION
9.1(D), including repair of all damage to the Leased Property caused by the
removal of Lessee's Personal Property, whether effected by Lessee or Lessor.
6.3 Equipment Lease Property. Personal property utilized at the
Facility which is leased pursuant to equipment leases in effect on the
Commencement Date and which expire on or before the termination of this Lease
shall, at the option of Lessor, become the property of Lessor without the
payment of additional consideration by Lessor except for any consideration which
must be paid to the equipment lessor on expiration of the equipment lease to
acquire title thereto. Lessee shall cooperate with Lessor to effect the transfer
of title to such leased property to Lessor and shall give Notice to Lessor of
any such leases and of the expiration dates thereof. Lessor shall, at Lessor's
cost, acquire title to or replace such leased property with funds other than the
Capital Expenditures Reserve when the leases for such leased property expire and
make such property or replacement property available to Lessee hereunder during
the Term of this Lease.
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ARTICLE VII
CONDITION, USE
7.1 Condition of the Leased Property. Lessee acknowledges receipt and
delivery of possession of the Leased Property. Lessee has examined and otherwise
has knowledge of the condition of the Leased Property and has found the same to
be satisfactory for its purposes hereunder. Lessee is leasing the Leased
Property "as is", "with all faults", and in its present condition. Except as
otherwise specifically provided herein, Lessee waives any claim or action
against Lessor in respect of the condition of the Leased Property. LESSOR MAKES
NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED
PROPERTY, OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR
CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL
SUCH RISKS ARE TO BE BORNE BY LESSEE. LESSEE ACKNOWLEDGES THAT THE LEASED
PROPERTY HAS BEEN INSPECTED BY LESSEE AND IS SATISFACTORY TO IT. Lessor shall
have the right to proceed against any predecessor in title for breaches of
warranties or representations or for latent defects in the Leased Property, and
Lessor shall, if requested by Lessee, assign any such right to Lessee if and to
the extent Lessor determines not to exercise such right. If either party
determines to exercise such right, the other party shall fully cooperate in the
prosecution of any such claim, in Lessor's or Lessee's name, all at the cost and
expense of the prosecuting party, who hereby agrees to indemnify, defend and
hold harmless the other party from and against any claims, obligations and
liabilities against or incurred by such other party in connection with such
cooperation, and who further agrees to apply all amounts realized from the
prosecution of such claim, less its expenses in connection therewith, to remedy
such breach or cure such defect. Lessor agrees to use its reasonable efforts to
cooperate with Lessee in Lessee's obtaining and maintaining such permits,
licenses and approvals.
7.2 Use of the Leased Property.
(a) Lessee covenants that it will proceed with all due
diligence to obtain, and will obtain and maintain, all permits, licenses and
approvals, including, without limitation, liquor licenses, needed to use and
operate the Leased Property and the Facility under applicable Legal
Requirements.
(b) Lessee shall use or cause to be used the Leased Property
only as a hotel facility, and for such other uses as may be necessary or
incidental to such use, including but not limited to golf course or casino use,
if applicable, or such other use as otherwise approved by Lessor (the "PRIMARY
INTENDED USE"). Lessee shall not use the Leased Property or any portion thereof
for any other use without the prior written consent of Lessor. No use shall be
made or permitted to be made of the Leased Property, and no acts shall be done,
which will cause the cancellation of any insurance policy covering the Leased
Property or any part thereof (unless another adequate policy satisfactory to
Lessor is available and Lessee pays any premium increase), nor shall Lessee sell
or permit to be kept, used or sold in or about the Leased Property any article
which is prohibited by law or fire underwriter's regulations. Lessee shall
comply with all of the requirements pertaining to the Leased Property of any
insurance board, association, organization or company necessary for the
maintenance of insurance, as herein provided, covering the Leased Property and
Lessee's Personal Property,
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which compliance shall be performed at Lessee's sole cost except to the extent
that such compliance requires the performance of a Capital Improvement or the
payment of a Capital Imposition.
(c) Subject to the provisions of ARTICLES XIV and XV, Lessee
covenants and agrees that during the Term it will either directly or through an
approved manager (1) operate continuously the Leased Property as a hotel
facility, (2) keep in full force and effect and comply in all material respects
with all the provisions of the Franchise Agreement, (3) not enter into,
terminate or amend in any respect any Franchise Agreement without the consent of
Lessor, (4) maintain appropriate certifications and licenses for such use and
(5) keep Lessor advised of the status of any material litigation affecting the
Leased Property.
(d) Subject to Lessor's obligations hereunder with respect to
Capital Improvements and Capital Expenditures, Lessee shall not commit or suffer
to be committed any waste on the Leased Property, or in the Facility, nor shall
Lessee cause or permit any nuisance thereon.
(e) Lessee shall neither suffer nor permit the Leased Property
or any portion thereof, or Lessee's Personal Property, to be used in such a
manner as (1) might reasonably tend to impair Lessor's (or Lessee's, as the case
may be) title thereto or to any portion thereof, or (2) may reasonably make
possible a claim or claims of adverse usage or adverse possession by the public,
as such, or of implied dedication of the Leased Property or any portion thereof.
(f) Lessee acknowledges and agrees that as long Submanagement
Agreement is in effect all employees involved in the operation of Leased
Property shall be employees of Submanager, and in any event all employees
involved in the use and operation of the Leased Property shall be employees of
Lessee, Manager, or one of their direct or indirect subsidiaries and not of
Lessor, the Company or any of the Company's direct or indirect subsidiaries.
Lessee, Manager, and their applicable Affiliates shall (subject to Lessor's
obligations with respect to Capital Improvements and Capital Expenditures)
comply in all material respects with all Legal Requirements and all collective
bargaining and other agreements applicable to such employees. Upon the
expiration or earlier termination of this Lease, or upon any termination of this
Lease due to an Event of Default by Lessee or an election by Lessee to terminate
for reasons other than Lessor's default, all such employees shall be terminated
or retained by Lessee, Manager or their Affiliate, as applicable, and Lessee,
Manager or their Affiliate, as applicable, shall (i) provide any required
notices to such employees, including WARN Act and COBRA Notices; and (ii) pay
costs and expenses associated with accrued but unpaid salary, earned but unpaid
vacation pay, accrued but unearned vacation pay, pension and welfare benefits,
COBRA benefits, employee fringe benefits, employee termination payments or any
other employee benefits due to such employees. Except as otherwise provided
herein, Lessee shall indemnify, defend and hold harmless Lessor from and against
any and all claims, causes of action, proceedings, judgments, damages,
penalties, liabilities, costs and expenses (including reasonable attorney's fees
and disbursements) arising out of the employment or termination of employment of
or failure to offer employment to any employee or prospective employee by
Lessee, Manager or their Affiliates, including, without limitation, claims of
discrimination, sexual harassment, breaches of employment or collective
bargaining agreements, or (ii) the failure of Lessee, Manager or any of their
Affiliates to comply with the
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provisions of this section dealing with the obligations of Lessee under this
Section upon the expiration or termination of this Lease. Upon the early
termination of this Lease by Lessor (other than for an Event of Default by
Lessee or by Lessee due to a Lessor Default), Lessor shall, as an additional
Termination Fee and obligation on account of such early termination, fully
comply with all Legal Requirements and all collective bargaining and other
agreements applicable to such employees, including, without limitation,
providing all required notices, paying (or reimbursing Lessee for) all costs and
expenses associated with accrued but unpaid salary, earned but unpaid vacation
pay, accrued but unearned vacation pay, pension and welfare benefits, COBRA
benefits, employee fringe benefits, employee termination payments or any other
employee benefits due to such employees (to the extent not delinquent or past
due, all delinquent or past due salaries and benefits being the obligation of
Lessee, Manager or their Affiliates, as applicable). Lessor shall indemnify,
defend and hold harmless Lessee, any Lessee Indemnified Parties and Manager,
from and against any and all claims, causes of action, proceedings, judgments,
damages, penalties, liabilities, costs and expenses (including reasonable
attorneys' fees and expenses) arising out of the failure of Lessor to comply
with the provisions of this Section. Lessee, Lessor and Manager and their
applicable Affiliates shall cooperate reasonably to permit each to comply with
their obligations under this Section upon expiration of the stated Term of this
Lease or the early termination of this Lease. The indemnification rights and
obligations provided for in this section shall survive the termination of this
Lease.
(g) If the Facility includes a golf course, tennis courts, spa
and/or other facilities in which nonequity memberships representing rights of
use of such facilities have been granted, the existing membership contracts have
been or shall be assigned to and assumed by Lessee; and during the Term, Lessee
may enter into new membership contracts on terms and conditions approved by
Lessor for the use of the golf course and other facilities presently covered by
the existing membership contracts. Upon termination of this Lease, Lessee shall
assign to Lessor any such membership contracts entered into by Lessee during the
Term, and Lessor agrees to assume the obligations of Lessee under any such
membership contracts arising from and after the date of termination of this
Lease.
ARTICLE VIII
LEGAL REQUIREMENTS
8.1 Compliance with Legal and Insurance Requirements. Subject to
SECTIONS 8.2 AND 8.3 and ARTICLE XII relating to permitted contests, and
Lessor's obligations with respect to Capital Improvements and Capital
Expenditures, Lessee, at its expense, will promptly (a) comply with all
applicable Legal Requirements and Insurance Requirements in respect of the use,
operation, maintenance, repair and restoration of the Leased Property, and (b)
procure, maintain and comply with all appropriate licenses and other
authorizations required for any use of the Leased Property and Lessee's Personal
Property then being made, and for the proper erection, installation, operation
and maintenance of the Leased Property or any part thereof.
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8.2 Legal Requirement Covenants. Subject to SECTION 8.3, Lessee
covenants and agrees that (i) 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, (ii) 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
and (iii) Lessee's use of the Leased Property and maintenance, alteration, and
operation of the same, and all parts thereof, shall at all times, subject to
Lessor providing the necessary Capital Expenditures, conform in all material
respects to all Legal Requirements, unless the same are finally determined by a
court of competent jurisdiction to be unlawful (and Lessee shall cause all such
sub-tenants, invitees or others to so comply with all Legal Requirements).
8.3 Environmental Covenants. Lessor and Lessee (in addition to, and not
in diminution of, Lessee's covenants and undertakings in SECTIONS 8.1 AND 8.2
hereof) covenant and agree as follows:
(a) At all times hereafter until Lessee completely vacates the
Leased Property and surrenders possession of the same to Lessor and subject to
Lessor's obligations regarding Capital Expenditures, Lessee shall fully comply
with all Environmental Laws applicable to the Leased Property and the operations
thereon, except to the extent that such compliance would require the remediation
of Environmental Liabilities for which Lessee has no indemnity obligations under
SECTION 8.3(b). Lessee agrees to give Lessor prompt written notice of (1) all
Environmental Liabilities of which Lessee has been notified in writing or of
which an Executive Person is aware; (2) all pending or overtly threatened
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 of
which Lessee has been notified in writing or of which an Executive Person is
aware; (3) all Releases of which Lessee has been notified in writing or of which
an Executive Person is aware, in amounts required to be reported or remediated
under Environmental Laws at, on, in, under or in any way affecting the Leased
Property, or any Release at, on, in or under any property adjacent to the Leased
Property of which Lessee has been notified in writing or of which an Executive
Person is aware; and (4) all facts, events or conditions of which Lessee has
been notified in writing or of which an Executive Person is aware, which notice
indicates or which an Executive Person is aware could reasonably lead to the
occurrence of any of the above-referenced matters.
(b) LESSEE WILL PROTECT, INDEMNIFY, HOLD HARMLESS AND DEFEND
LESSOR INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL ENVIRONMENTAL
LIABILITIES TO THE EXTENT PERMITTED BY LAW WHICH RESULT FROM THE WRONGFUL ACTS
OR NEGLIGENT ACTS OR FAILURES TO ACT OF LESSEE OR ITS AGENTS, INCLUDING ANY
MANAGER OR SUBMANAGER OF THE FACILITY, AND WHICH ARISE OR ACCRUE DURING THE
PERIOD BETWEEN THE COMMENCEMENT DATE AND THE DATE LESSEE COMPLETELY VACATES THE
LEASED PROPERTY.
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(c) Lessor hereby agrees to defend, indemnify and save
harmless any and all Lessee Indemnified Parties from and against any and all
Environmental Liabilities to the extent permitted by law, except to the extent
that the same are caused by wrongful acts or negligent acts or failures to act
of Lessee.
(d) If any Proceeding is brought against any Indemnified Party
in respect of an Environmental Liability with respect to which such Indemnified
Party may claim indemnification under either SECTION 8.3(b) or (c), the
Indemnifying Party, upon request, shall at its sole expense resist and defend
such Proceeding, or cause the same to be resisted and defended by counsel
designated by the Indemnifying Party and approved by the Indemnified Party,
which approval shall not be unreasonably withheld; provided, however, that such
approval shall not be required in the case of defense by counsel designated by
any insurance company undertaking such defense pursuant to any applicable policy
of insurance. Each Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel will be at the sole expense of such
Indemnified Party unless a conflict of interest prevents representation of such
Indemnified Party by the counsel selected by the Indemnifying Party and such
separate counsel has been approved by the Indemnifying Party, which approval
shall not be unreasonably withheld. The Indemnifying Party shall not be liable
for any settlement of any such Proceeding made without its consent, which shall
not be unreasonably withheld, but if settled with the consent of the
Indemnifying Party, or if settled without its consent (if its consent shall be
unreasonably withheld), or if there be a final, nonappealable judgment for an
adversary party in any such Proceeding, the Indemnifying Party shall indemnify
and hold harmless the Indemnified Parties from and against any liabilities
incurred by such Indemnified Parties by reason of such settlement or judgement.
(e) At any time any Indemnified Party has reason to believe
circumstances exist which could reasonably result in an Environmental Liability,
upon reasonable prior written notice to Lessee stating such Indemnified Party's
basis for such belief, an Indemnified Party shall be given immediate access to
the Leased Property (including, but not limited to, the right to enter upon,
investigate, drill xxxxx, take soil borings, excavate, monitor, test, cap and
use available land for the testing of remedial technologies), Lessee's
employees, and to all relevant documents and records regarding the matter as to
which a responsibility, liability or obligation is asserted or which is the
subject of any Proceeding; provided that such access may be conditioned or
restricted as may be reasonably necessary to ensure compliance with law and the
safety of personnel and facilities or to protect confidential or privileged
information. All Indemnified Parties requesting such immediate access and
cooperation shall endeavor to coordinate such efforts to result in as minimal
interruption of the operation of the Leased Property as practicable.
(f) The indemnification rights and obligations provided for in
this ARTICLE VIII shall be in addition to any indemnification rights and
obligations provided for elsewhere in this Lease.
(g) The indemnification rights and obligations provided for in
this ARTICLE VIII shall survive the termination of this Lease.
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For purposes of this SECTION 8.3, all amounts for which any
Indemnified Party seeks indemnification shall be computed net of (a) any actual
income tax benefit resulting therefrom to such Indemnified Party, (b) any
insurance proceeds received (net of tax effects) with respect thereto, and (c)
any amounts recovered (net of tax effects) from any third parties based on
claims the Indemnified Party has against such third parties which reduce the
damages that would otherwise be sustained; provided that in all cases, the
timing of the receipt or realization of insurance proceeds or income tax
benefits or recoveries from third parties shall be taken into account in
determining the amount of reduction of damages. Each Indemnified Party agrees to
use its reasonable efforts to pursue, or assign to Lessee or Lessor, as the case
may be, any claims or rights it may have against any third party which would
materially reduce the amount of damages otherwise incurred by such Indemnified
Party.
8.4 Special Environmental Representations, Covenants and Indemnities.
The following provisions of this Section 8.4 shall be in effect only during such
period as the Submanagement Agreement is in effect:
(a) Lessor hereby represents and warrants to Lessee that, to the best
of its knowledge except as set forth in any environmental assessment reports
provided by Lessor to Lessee, as of the Commencement Date, there are no
Hazardous Materials on any portion of the Land or the Facility, nor have any
Hazardous Materials been released or discharged on any portion of the Land or
the Facility. In addition, Lessor hereby represents and warrants that it has
previously delivered to Lessee copies of all reports concerning environmental
conditions which have been received by Lessor or any of its Affiliates.
(b) In the event of the discovery of Hazardous Materials (as defined
below) on any portion of the Land or in the Facility during the Term, Lessor
shall (except as otherwise set forth to the contrary in paragraph (c) below)
promptly remove such Hazardous Materials, together with all contaminated soil
and containers, and shall otherwise remedy the problem in accordance with
Environmental Laws. Lessor shall (except as otherwise set forth to the contrary
in paragraph (c) below) indemnify, defend and hold Lessee, Primary Manager and
Submanager harmless from and against all loss, costs, liability and damage
(including, without limitation, engineers' and attorneys' fees and expenses, and
the cost of litigation) arising from the presence of Hazardous Materials on the
Land or in the Facility; and this obligation of Lessor shall survive termination
of this Lease.
(c) In the event that Hazardous Materials are released on any portion
of the Land or in the Facility during the Term as a result of the actions of
Lessee's, Manager's, Primary Manager's or Submanager's employees or agents, then
Lessee shall promptly remove such Hazardous Materials, together with all
contaminated soil and containers, and shall otherwise remedy the problem in
accordance with all Environmental Laws. All costs and expenses of the removal by
Lessee (pursuant to this paragraph (c)) of Hazardous Materials, and of the
aforesaid compliance with Environmental Laws shall be paid from Lessee's own
funds, and Lessee shall indemnify, defend and hold Lessor and any Mortgagee
harmless from and against all loss, costs, liability and damage (including,
without limitation, engineers' and attorneys' fees and expenses, and the cost of
litigation) arising from the actions described in this
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paragraph (c). Lessee shall be able to retain in the Facility reasonable
quantities of cleansers, solvents and other materials used in the ordinary
course of Facility operations, notwithstanding that such materials may contain
or be Hazardous Materials, provided that Lessee complies with all Environmental
Laws with regard to the storage, use and disposal thereof.
(d) Except as otherwise set forth to the contrary in paragraph (c)
above, all costs and expenses of the aforesaid removal of Hazardous Materials
from the Land or the Facility, and of the aforesaid compliance with all
Environmental Laws, and any amounts paid to Lessee pursuant to the indemnity set
forth in paragraph (b) above, shall be paid by Lessor, and shall not be subject
to the limitation on Capital Expenditures set forth in ARTICLE XXXV.
ARTICLE IX
MAINTENANCE AND REPAIRS
9.1 Maintenance and Repair.
(a) Except as provided in SECTION 9.1(b), Lessee will keep the
Leased Property and all parts thereof, including without limitation, all private
roadways, sidewalks, curbs and other appurtenances thereto that are under
Lessee's control, and including without limitation windows and plate glass,
parking lots, HVAC, mechanical, electrical and plumbing systems and equipment
(including conduit and ductware), in good order and repair and in compliance
with the standards of the Franchise Agreement (whether or not the need for such
repairs occurred as a result of Lessee's use, any prior use, the elements or the
age of the Leased Property or any portion thereof) ordinary wear and tear
excepted except for the obligation to make necessary and appropriate repairs,
replacements and improvements as provided in this SECTION 9.1(a), and, except as
otherwise provided in SECTION 9.1(b), ARTICLE XIV or ARTICLE XV, with reasonable
promptness, make all necessary and appropriate repairs, replacements and
improvements thereto of every kind and nature, whether interior or exterior
ordinary or extraordinary, foreseen or unforeseen or arising by reason of a
condition 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. All repairs shall, to the extent
reasonably achievable, be at least equivalent in quality to the original work.
Lessee will not take or omit to take any action, the taking or omission of which
might materially impair the value or the usefulness of the Leased Property or
any part thereof for its Primary Intended Use. If Lessee fails to make any
required repairs or replacements after fifteen (15) days notice from Lessor, or
after such longer period as may be reasonably required provided that Lessee at
all times diligently proceeds with such repair or replacement, then Lessor shall
have the right, but shall not be obligated, to make such repairs or replacements
on behalf of and for the account of Lessee. In such event, such work shall be
paid for in full by Lessee as Additional Charges.
(b) Notwithstanding Lessee's obligations under SECTION 9.1(a)
above, but subject to the limitations on Lessor's obligations for Capital
Expenditures set forth in ARTICLE XXXV, except to the extent such Capital
Expenditures are caused by the gross
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negligence or willful misconduct of Executive Personnel (but subject to Section
13.4), Lessor shall be required to make all Capital Expenditures. Lessor's
obligations under SECTION 35.1(d) shall not, however, be affected by the gross
negligence or willful misconduct of Executive Personnel. Lessee hereby waives,
to the extent permitted by law, the right to make repairs at the expense of
Lessor pursuant to any law in effect at the time of the execution of this Lease
or hereafter enacted; but Lessee does not waive any of its rights under ARTICLE
XXXVI hereof, and such waiver shall not relieve Lessor of its obligations under
this SECTION 9.1(b) and ARTICLE XXXV hereof.
(c) Lessee will, upon the expiration or prior termination of
the Term, vacate and surrender the Leased Property to Lessor in the condition in
which the Leased Property was originally received from Lessor, except as
repaired, rebuilt, restored, altered or added to as permitted or required by the
provisions of this Lease and except for ordinary wear and tear (subject to the
obligation of Lessee to maintain the Leased Property in good order and repair in
accordance with SECTION 9.1(a) above, as would a prudent owner of comparable
property, during the entire Term) or damage by casualty or Condemnation.
ARTICLE X
ALTERATIONS
10.1 Alterations. Subject to first obtaining the written approval of
Lessor, which approval shall not be unreasonably withheld, and to first
obtaining any required written approval from a Holder, Lessee may, but shall not
be obligated to, make such additions, modifications or improvements to the
Leased Property from time to time as Lessee deems desirable for its permitted
uses and purposes, provided that such action will not alter the character or
purposes of the Leased Property or detract from the value or operating
efficiency thereof and will not impair the revenue-producing capability of the
Leased Property or adversely affect the ability of the Lessee or Lessor to
comply with the provisions of this Lease or of any mortgage, ground lease or
other material agreement affecting the Leased Property. All such work shall be
performed in a first class manner in accordance with all applicable governmental
rules and regulations and after receipt of all required permits and licenses. If
reasonably required by Lessor all such work shall be covered by performance
bonds issued by bonding companies reasonably acceptable to Lessor. The cost of
such additions, modifications or improvements to the Leased Property shall be
paid by Lessee, and all such additions, modifications and improvements shall,
without payment by Lessor at any time, be included under the terms of this Lease
and upon expiration or earlier termination of this Lease shall pass to and
become the property of Lessor.
10.2 Salvage. All materials which are scrapped or removed in connection
with the making of repairs required by ARTICLES IX or X shall be or become the
property of Lessor or Lessee depending on which party is paying for or providing
the financing for such work.
10.3 Lessor Alterations. Lessor shall have the right, without Lessee's
consent, to make or cause to be made alterations and additions to the Leased
Property required in connection with (i) Emergency Situations, (ii) Legal
Requirements, (iii) maintenance of the
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Franchise Agreement and compliance with the standards established thereby, or
with Brand Standards, as applicable, and (iv) the performance by Lessor of its
obligations under this Lease. Lessor shall further have the right, but not the
obligation, to make such other additions to the Leased Property as it may
reasonably deem appropriate during the Term of this Lease, subject to Lessee's
consent, but such consent shall not be withheld if such alterations or additions
will not violate Legal Requirements, or the Franchise Agreement or Brand
Standards, as applicable, and will not materially and adversely impair the
operating efficiency or revenue producing capability of the Leased Property or
the ability of Lessee to comply with the provisions of this Lease. All such
work, unless otherwise required to be performed by Lessee under this Lease (in
which event work shall be paid for by Lessee) shall be performed at Lessor's
expense, in compliance with all Legal Requirements, in a good and workmanlike
manner and shall be done after reasonable notice to and coordination with
Lessee, so as to minimize any disruptions or interference with the operation of
the Facility.
ARTICLE XI
LIENS
11.1 Liens. Subject to the provision of ARTICLE XII relating to
permitted contests, Lessee will not directly or indirectly create or allow to
remain and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Leased Property
resulting from the action or inaction of Lessee, or any attachment, levy, claim
or encumbrance in respect of the Rent resulting from the action or inaction of
Lessee, excluding, however, (a) this Lease, (b) the matters, if any, included as
exceptions or insured against in the title policy insuring Lessor's interest in
the Leased Property, (c) restrictions, liens and other encumbrances resulting
from the action or inaction of Lessor or which are consented to in writing by
Lessor, (d) liens for those taxes which Lessee is not required to pay hereunder,
(e) subleases permitted by ARTICLE XXI hereof, (f) liens for Impositions or for
sums resulting from noncompliance with Legal Requirements to the extent Lessee
is responsible hereunder for such compliance so long as (l) the same are not yet
delinquent or (2) such liens are in the process of being contested as permitted
by ARTICLE XII, (g) liens of mechanics, laborers, suppliers or vendors for sums
either disputed or not yet due provided that any such liens for disputed sums
are in the process of being contested as permitted by ARTICLE XII hereof, and
(h) any liens which are the responsibility of Lessor pursuant to the provisions
of this Lease.
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ARTICLE XII
PERMITTED CONTESTS
12.1 Permitted Contests. Lessee shall have the right to contest the
amount or validity of any Imposition to be paid by Lessee or any Legal
Requirement to be satisfied by Lessee hereunder or any lien, attachment, levy,
encumbrance, charge or claim (any such Imposition, Legal Requirement, lien,
attachment, levy, encumbrance, charge or claim herein referred to as "CLAIMS")
not otherwise permitted by ARTICLE XI, by appropriate legal proceedings in good
faith and with due diligence (but this shall not be deemed or construed in any
way to relieve, modify or extend Lessee's covenants to pay or its covenants to
cause to be paid any such charges at the time and in the manner as in this
Article provided), on condition, however, that such legal proceedings shall not
operate to relieve Lessee from its obligations hereunder and shall not cause the
sale or risk the loss of any portion of the Leased Property, or any part
thereof, or cause Lessor or Lessee to be in default under any mortgage, deed of
trust, security deed or other agreement encumbering the Leased Property or any
interest therein. Upon the request of Lessor, as security for the payment of
such Claims, Lessee shall either (a) provide a bond or other assurance
reasonably satisfactory to Lessor (and satisfactory to any Holder, if approval
thereof is required by such Holder's Mortgage) that all Claims which may be
assessed against the Leased Property together with interest and penalties, if
any, thereon and legal fees anticipated to be incurred in connection therewith
will be paid, or (b) deposit within the time otherwise required for payment with
a bank or trust company designated by Lessor as trustee upon terms reasonably
satisfactory to Lessor, or with any Holder upon terms satisfactory to such
Holder, money in an amount sufficient to pay the same, together with interest
and penalties thereon and legal fees anticipated to be incurred in connection
therewith, as to all Claims which may be assessed against or become a Claim on
the Leased Property, or any part thereof, in said legal proceedings. Lessee
shall furnish Lessor and any Holder with reasonable evidence of such deposit
within five days of the same. Lessor agrees to join in any such proceedings if
the same be required to legally prosecute such contest of the validity of such
Claims; provided, however, that Lessor shall not thereby be subjected to any
liability for the payment of any costs or expenses in connection with any
proceedings brought by Lessee; and Lessee covenants to indemnify and save
harmless Lessor from any such costs or expenses. Lessee shall be entitled to any
refund of any Claims and such charges and penalties or interest thereon which
have been paid by Lessee or paid by Lessor and for which Lessor has been fully
reimbursed. In the event that Lessee fails to pay any Claims when due or to
provide the security therefor as provided in this paragraph and to diligently
prosecute any contest of the same, Lessor may, upon ten days advance Notice to
Lessee, pay such charges together with any interest and penalties and the same
shall be repayable by Lessee to Lessor as Additional Charges at the next Payment
Date provided for in this Lease; provided, however, that should Lessor
reasonably determine that the giving of such Notice would risk loss to the
Leased Property or cause damage to Lessor, then Lessor shall only give such
Notice as is practical under the circumstances. Lessor reserves the right to
contest any of the Claims at its expense not pursued by Lessee. Lessor and
Lessee agree to cooperate in coordinating the contest of any Claims.
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ARTICLE XIII
INSURANCE
13.1 General Insurance Requirements.
(a) Coverages. During the Term of this Lease, the Leased
Property shall at all times be insured with the kinds and amounts of insurance
described below. This insurance shall be written by companies authorized to
issue insurance in the State. The policies must name the party obtaining the
policy as the insured and the other party as an additional named insured, and
the Manager (including the Submanager) shall also be named as an additional
insured under the coverages described in SECTIONS 13.1(a)(iv) through (xi).
Losses shall be payable to Lessor or Lessee as provided in this Lease. Any loss
adjustment for coverages insuring both parties shall require the written consent
of Lessor and Lessee, each acting reasonably and in good faith. Evidence of
insurance shall be deposited with Lessor. The policies on the Leased Property,
including the Leased Improvements, Fixtures and Lessee's Personal Property,
shall at all times satisfy the requirements of the Franchise Agreement and of
any ground lease, mortgage, security agreement or other financing lien affecting
the Leased Property (provided, however, Lessee shall not be required to obtain
insurance to satisfy such requirements except to the extent such insurance is
reasonably obtainable, and Lessor shall pay the costs of any insurance required
thereby which exceeds that required pursuant to (iv) through (xi) below), and at
a minimum shall include:
(i) Building insurance on the "Special Form"
(formerly "All Risk" form) (including earthquake and flood in
reasonable amounts if and as determined by Lessor) in an
amount not less than 100% of the then full replacement cost
thereof (as defined in SECTION 13.2) or such other amount
which is acceptable to Lessor, and personal property insurance
on the "Special Form" in the full amount of the replacement
cost thereof;
(ii) Insurance for loss or damage (direct and
indirect) from steam boilers, pressure vessels or similar
apparatus, air conditioning systems, piping and machinery, and
sprinklers, if any, now or hereafter installed in the
Facility, in the minimum amount of $5,000,000 or in such
greater amounts as are then customary or as may be reasonably
requested by Lessor from time to time;
(iii) Loss of income insurance on the "Special Form",
in the amount of one year of the greater of (a) Base Rent, or
(b) Percentage Rent (based on the last Lease Year of operation
or, to the extent the Leased Property has not been operated
for an entire 12-month Lease Year, based on prorated
Percentage Rent) for the benefit of Lessor, and business
interruption insurance on the "Special Form" in the amount of
one year of gross profit, for the benefit of Lessee;
(iv) Commercial general liability insurance, with
contractual indemnity endorsement, with amounts not less than
$1,000,000 combined single
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limit for each occurrence and $2,000,000 for the aggregate of
all occurrences within each policy year, as well as excess
liability (umbrella) insurance with limits of at least
$50,000,000 per occurrence, covering each of the following:
bodily injury, death, or property damage liability per
occurrence, personal injury, general aggregate, products and
completed operations with respect to Lessee, and "all risk
legal liability" (including liquor law or "dram shop"
liability, if liquor or alcoholic beverages are served on the
Leased Property) with respect to Lessor and Lessee;
(v) Fidelity bonds or blanket crime policies with
limits and deductibles as may be reasonably determined by
Lessor, covering Lessee's employees in job classifications
normally bonded under prudent hotel management practices in
the United States or otherwise required by law;
(vi) Workers' compensation insurance to the extent
necessary to protect Lessor, Lessee and the Leased Property
against Lessee's xxxxxxx'x compensation claims to the extent
required by applicable state laws and employee's liability
insurance in an amount not less than $500,000 covering against
liability in respect of employees, agents and servants not
covered by workers' compensation insurance and against
occupational disease benefits;
(vii) Comprehensive form vehicle liability insurance
for owned, non-owned, and hired vehicles, in the amount of
$1,000,000;
(viii) Garagekeeper's legal liability insurance
covering both comprehensive and collision-type losses with a
limit of liability of $3,000,000 for any one occurrence, of
which coverage in excess of $1,000,000 may be provided by way
of an excess liability policy;
(ix) Innkeeper's legal liability insurance covering
property of guests while on the Leased Property for which
Lessor is legally responsible with a limit of not less than
$5,000 in any one occurrence or $25,000 annual aggregate;
(x) Safe deposit box legal liability insurance
covering property of guests while in a safe deposit box on the
Leased Property for which Lessor is legally responsible with a
limit of not less than $100,000 in any one occurrence; and
(xi) Insurance covering such other hazards (such as
plate glass or other common risks) and in such amounts as may
be customary for comparable properties in the area of the
Leased Property and is available from insurance companies,
insurance pools or other appropriate companies authorized to
do business in the State at rates which are economically
practicable in relation to the risks covered.
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(b) Responsibility for Insurance. Lessee shall obtain the
insurance and pay the premiums for the coverages described in SECTIONS
13.1(a)(iv) through (x), and Lessor shall obtain the insurance and pay the
premiums for the coverages described in SECTIONS 13.1(a)(i) through (iii),
provided that Lessee shall reimburse Lessor immediately after demand therefor
for any premiums paid by Lessor for the coverages required under SECTION
13.1(a)(i) to the extent that the premiums relate to coverages for property
owned by Lessee or coverages which benefit Lessee. Insurance required by SECTION
13.1(a)(xi) shall be obtained and paid for by Lessor to the extent that it
relates to risks of the type covered by the insurance obtained pursuant to
SECTIONS 13.1(a)(i) through (iii), and obtained and paid for by Lessee if it
relates to risks of the type covered by the insurance obtained pursuant to
SECTIONS 13.1(a)(iv) through (x). The party responsible for the premium for any
insurance coverage shall also be responsible for any and all deductibles and
self-insured retentions in connection with such coverages. In the event that
either party can obtain comparable insurance coverage required to be carried by
the other party from comparable insurers and at a cost significantly less than
that at which such other party can obtain such coverage, the parties shall
cooperate in good faith to obtain such coverage at the lower cost and shall
allocate the premiums therefor in accordance with the provisions of the first
sentence of this SECTION 13.1(b). In addition to the rights set forth in
SECTIONS 17.1 AND 36.1, if any party responsible for obtaining and maintaining
the insurance required under this Lease fails to do so or fails to obtain
renewals or substitutions therefor at least fifteen (15) days before such
insurance will lapse, the other party may obtain such insurance and the
defaulting party shall reimburse the party obtaining such insurance for the cost
thereof promptly upon demand, together with interest thereon at the Overdue Rate
until such cost is repaid by the defaulting party.
13.2 Replacement Cost. The term "FULL REPLACEMENT COST" as used herein
shall mean the actual replacement cost of the Leased Property requiring
replacement from time to time including an increased cost of construction
endorsement, if available, and the cost of debris removal. In the event either
party believes that full replacement cost has increased or decreased at any time
during the Term, it shall have the right to have such full replacement cost
redetermined.
13.3 Waiver of Subrogation. Lessor and Lessee each waive any and all
rights of recovery against the other (and against the partners, officers,
employees and agents of the other party) for loss of or damage to such waiving
party or its property or the property of others under its control, to the extent
such loss or damage is covered by, or in the event the responsible party fails
to maintain the required insurance hereunder, would have been covered by, the
insurance required to be obtained by such waiving party under SECTIONS 13.1(a)
through (iii); provided, however, that this waiver does not apply to any rights
that either party may have to insurance proceeds from their respective insurance
policies at the time of such loss or damage. In obtaining policies of property
insurance on their respective interests in the personal property and
improvements located in the Leased Property, Lessor and Lessee shall give notice
to their respective insurance carriers that the foregoing mutual waiver of
subrogation is contained in this Lease; and Lessor and Lessee shall each obtain
from their insurance carriers a consent to such waiver.
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13.4 Form Satisfactory, etc. All of the policies of insurance referred
to in this ARTICLE XIII shall be written in a form, with deductibles and by
insurance companies reasonably satisfactory to Lessor and shall satisfy the
requirements of any ground lease, mortgage, security agreement or other
financing lien on the Leased Property and of the Franchise Agreement; (provided,
however, Lessee shall not be required to obtain insurance to satisfy such
requirements except to the extent such insurance is reasonably obtainable, and
Lessor shall pay the costs of any insurance required thereby which exceeds that
required pursuant to (iv) through (xi) above). The party responsible for
obtaining any policy shall pay all of the premiums therefor, and deliver copies
of such policies or certificates thereof to the other party prior to their
effective date (and, with respect to any renewal policy, thirty (30) days prior
to the expiration of the existing policy), and in the event of the failure of
the responsible party either to effect such insurance as herein called for or to
pay the premiums therefor, or to deliver such policies or certificates thereof
to the other party at the times required, such other party shall be entitled,
but shall have no obligation, after ten (10) days' Notice to the responsible
party (or after less than ten (10) days' Notice if required to prevent the
expiration of any existing policy), to effect such insurance and pay the
premiums therefor, and to be reimbursed for any such premiums 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
furnished to the party not responsible hereunder for obtaining such policy, that
it will give to such party thirty (30) days' written notice before the policy or
policies in question shall be materially altered, allowed to expire or canceled.
13.5 Increase in Limits. If either Lessor or Lessee at any time
reasonably deems the limits of the personal injury or property damage under the
comprehensive public liability insurance then carried to be either excessive or
insufficient, Lessor and Lessee shall endeavor in good faith to agree on the
proper and reasonable limits for such insurance to be carried and such insurance
shall thereafter be carried with the limits thus agreed on until further change
pursuant to the provisions of this Section. If the parties fail to agree on such
limits, the matter shall be referred to arbitration as provided for in SECTION
37.1. In no event shall such limits fail to satisfy the requirements of the
Franchise Agreement and of any ground lease, Mortgage, security agreement or
other financing lien affecting the Leased Property, provided, however, Lessee
shall not be required to obtain insurance to satisfy such requirements except to
the extent such insurance is reasonably obtainable, and Lessor shall pay the
costs of any insurance required thereby which exceeds that required pursuant to
(iv) through (xi) above.
13.6 Blanket Policy. Notwithstanding anything to the contrary contained
in this ARTICLE XIII, Lessee or Lessor may bring the insurance provided for
herein within the coverage of a so-called blanket policy or policies of
insurance carried and maintained by Lessee, Lessor, Manager or Submanager;
provided, however, that the coverage afforded to Lessor and Lessee will not be
reduced or diminished or otherwise be different from that which would exist
under a separate policy meeting all other requirements of this Lease by reason
of the use of such blanket policy of insurance, and provided further that the
requirements of this ARTICLE XIII are otherwise satisfied.
13.7 Separate Insurance. Neither Lessor nor Lessee shall on its own
initiative or pursuant to the request or requirement of any third party, take
out separate insurance
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concurrent in form or contributing in the event of loss with that required in
this Article to be furnished, or increase the amount of any then existing
insurance by securing an additional policy or additional policies, unless all
parties having an insurable interest in the subject matter of the insurance,
including in all cases Lessor, are included therein as additional insureds, and
the loss is payable under such additional separate insurance in the same manner
as losses are payable under this Lease. Each party shall immediately notify the
other party that it has obtained any such separate insurance or of the
increasing of any of the amounts of the then existing insurance.
13.8 Reports On Insurance Claims. Lessee shall promptly investigate and
make a complete and timely written report to the appropriate insurance company
as to all accidents, all claims for damage relating to the ownership, operation,
and maintenance of the Facility, and any damage or destruction to the Facility
and the estimated cost of repair thereof and shall prepare any and all reports
required by any insurance company in connection therewith. All such reports
shall be timely filed with the insurance company as required under the terms of
the insurance policy involved, and a copy of all such reports shall be furnished
to Lessor.
13.9 Alternate Provisions for Insurance. Notwithstanding the foregoing
provisions of this ARTICLE XIII, Lessor and Lessee agree that the amounts and
types of insurance procured by the Manager in compliance with SECTION 6.01 of
the Submanagement Agreement, or by Lessor or Lessee as contemplated by SECTION
6.02 of the Submanagement Agreement, shall satisfy the minimum obligations of
Lessor and Lessee to provide insurance under SECTION 13.1(a); provided that
Lessee shall not approve the selection of any insurance company under the
Primary Management Agreement without Lessor's consent. SECTIONS 13.1(a) and 13.5
shall continue to apply to the extent that additional insurance is required to
satisfy the requirements of any ground lease, mortgage, security agreement or
other financing lien affecting the Leased Property and to the extent that
additional insurance is agreed to be desirable under SECTION 13.5. The costs of
insurance procured under this SECTION 13.9 shall be borne by Lessee and Lessor
in accordance with the principles of SECTIONS 13.1(a), (b) and 13.5 (so that,
for example, Lessor shall bear the cost of the insurance coverage called for by
SECTIONS 6.01 A(2) and A(3) of the Primary Management Agreement and an
appropriate portion of the cost of insurance coverage called for by SECTIONS
6.01 A(1), A(8) and 6.02 of the Primary Management Agreement).
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ARTICLE XIV
DAMAGE AND RECONSTRUCTION
14.1 Insurance Proceeds. All proceeds of the insurance contemplated by
SECTIONS 13.1(a)(i) and (ii) payable by reason of any loss or damage to the
Leased Property, or any portion thereof, and insured under any policy of
insurance required by ARTICLE XIII of this Lease shall be paid to Lessor and
made available, if applicable, for reconstruction or repair, as the case may be,
of any damage to or destruction of the Leased Property or any portion thereof,
and, if applicable, shall be paid out by Lessor from time to time for the
reasonable costs of such reconstruction or repair upon satisfaction of
reasonable terms and conditions specified by Lessor. Any excess proceeds of
insurance remaining after the completion of the restoration or reconstruction of
the Leased Property shall be paid to Lessor. If neither Lessor nor Lessee is
required or elects to repair and restore, and the Lease is terminated as
described in SECTION 14.2, all such insurance proceeds shall be retained by
Lessor except for any amount thereof paid with respect to Lessee's Personal
Property and Lessor shall pay to Lessee a Termination Fee determined in
accordance with SECTION 33.1(c) as of the date immediately prior to such damage
or destruction; provided that there shall be credited against such Termination
Fee an amount equal to any business interruption proceeds received by Lessee.
The Termination Fee shall be paid on the later of the date the Lease is
terminated or the date the Termination Fee is determined pursuant to SECTION
33.1(c). All salvage resulting from any risk covered by insurance shall belong
to Lessor, except to the extent of salvage relating to Lessee's Personal
Property. The provisions of this SECTION 14.1 shall survive the expiration or
earlier termination of this Lease.
14.2 Reconstruction in the Event of Damage or Destruction Covered by
Insurance.
(a) If during the Term the Leased Property is totally or
partially destroyed by a risk covered by the insurance described in ARTICLE XIII
and the Facility thereby is rendered Unsuitable or Uneconomic for its Primary
Intended Use, this Lease shall terminate as of the date of the casualty and
neither Lessor nor Lessee shall have any further liability hereunder except for
any liabilities which have arisen prior to or which survive such termination;
provided, however, that the Lease shall not terminate pursuant to this SECTION
14.2(a) while the Submanagement Agreement is in effect unless the Facility
suffers a Total Casualty (as that term is defined in the Submanagement
Agreement) and pursuant thereto the Primary Management Agreement and
Submanagement Agreement are terminated. Upon termination of the Lease pursuant
to this SECTION 14.2(a), Lessor shall be entitled to retain all insurance
proceeds except for any amount thereof paid with respect to Lessee's Personal
Property and Lessor shall pay to Lessee a Termination Fee determined in
accordance with SECTION 33.1(c) as of the date immediately prior to the
destruction; provided that there shall be credited against such Termination Fee
an amount equal to any business interruption proceeds received by Lessee. The
Termination Fee shall be paid on the later of the date the Lease is terminated
or the date the Termination Fee is determined pursuant to SECTION 33.1(c). The
provisions of this SECTION 14.2(a) shall survive the expiration or earlier
termination of this Lease.
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(b) If during the Term the Leased Property is partially
destroyed by a risk covered by the insurance described in ARTICLE XIII, but the
Facility is not thereby rendered Unsuitable or Uneconomic for its Primary
Intended Use or, so long as the Submanagement Agreement is in effect, the
Facility does not suffer a Total Casualty. Lessor shall with all reasonable
dispatch, following payment of the insurance proceeds, restore the Leased
Property to substantially the same condition as existed immediately before the
damage or destruction and otherwise in accordance with the terms of the Lease,
and this Lease shall not terminate as a result of such damage or destruction.
Not withstanding anything of the contrary contained in this Section 14.2, if the
Facility suffers a minor Casualty (as defined in the Submanagement Agreement),
then Submanager shall process the applicable claim and restore the Leased
Property pursuant Section 6.03.A of the Submanagement Agreement.
(c) If the Facility is to be restored in accordance with the
provisions of SECTION 14.2(b) and if the cost of the repair or restoration
exceeds the amount of proceeds received by Lessor from the insurance required
under ARTICLE XIII, Lessor shall pay any excess amounts needed to restore the
Leased Property.
14.3 Reconstruction in the Event of Damage or Destruction Not Covered
by Insurance. If during the Term the Facility is totally or materially damaged
or destroyed by a risk not covered by the insurance described in ARTICLE XIII,
or if the Holder or any ground lessor(s) will not make the proceeds of such
insurance available to Lessor for restoration of the Facility, unless in either
event such damage or destruction renders the Facility Unsuitable or Uneconomic
for its Primary Intended Use, Lessor at its option shall either, (a) at Lessor's
sole cost and expense, restore the Facility to substantially the same condition
it was in immediately before such damage or destruction and this Lease shall not
terminate as a result of such damage or destruction, or (b) terminate this
Lease; provided, however, that while the Submanagement Agreement is in effect
Lessor shall proceed under clause (a) above unless the Facility suffers a Total
Casualty (as that term is defined in the Submanagement Agreement) and as a
result thereof the Primary Management Agreement and Submanagement Agreement are
terminated. Upon termination of the Lease under this SECTION 14.3, neither
Lessor nor Lessee shall have any further liability thereunder except for any
liabilities which have arisen or occurred prior to such termination and those
which expressly survive termination of this Lease and Lessor shall pay to Lessee
a Termination Fee determined in accordance with SECTION 33.1(c) as of the date
immediately prior to the damage or destruction. The Termination Fee shall be
paid on the later of the date the Lease is terminated or the date the
Termination Fee is determined pursuant to SECTION 33.1(c). If such damage or
destruction is determined by Lessor not to be material, Lessor shall, at
Lessor's sole cost and expense, restore the Facility to substantially the same
condition as existed immediately before the damage or destruction and otherwise
in accordance with the terms of the Lease, and this Lease shall not terminate as
a result of such damage or destruction. The provisions of this SECTION 14.3
shall survive the expiration or earlier termination of this Lease.
14.4 Lessee's Property and Business Interruption Insurance. All
insurance proceeds payable by reason of any loss of or damage to any of Lessee's
Personal Property and the
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business interruption insurance maintained for the benefit of Lessee shall be
paid to Lessee. If Lessor restores the Facility as provided in this Lease,
Lessee shall replace and restore any of Lessee's Personal Property to the same
condition as existed immediately before the damage or destruction and otherwise
in accordance with the terms of this Lease, to the extent of the insurance
proceeds received by Lessee therefor.
14.5 Abatement of Rent. Any damage or destruction due to casualty
notwithstanding, this Lease shall remain in full force and effect; Lessee's Base
Rent shall be abated until the damage or destruction is fully repaired and
restored; and Lessee's obligation to pay Percentage Rent required by this Lease
shall remain unabated by any damage or destruction which does not result in a
reduction of Gross Revenues. If and to the extent that any damage or destruction
results in a loss of Rent or reduction of Gross Revenues which would otherwise
be realizable from the operation of the Facility, then Lessor shall receive all
loss of income insurance and Lessee shall receive all business interruption
insurance and Lessee shall have no obligation to pay Rent in excess of the
amount of Percentage Rent, if any, realizable from Gross Revenues generated by
the operation of the Leased Property during the existence of such damage or
destruction.
ARTICLE XV
CONDEMNATION
15.1 Definitions.
(a) "CONDEMNATION" means a Taking resulting from (1) the
exercise of any governmental power, whether by legal proceedings or otherwise,
by a Condemnor, and (2) a voluntary sale or transfer by Lessor to any Condemnor,
either under threat of condemnation or while legal proceedings for condemnation
are pending.
(b) "DATE OF TAKING" means the date the Condemnor has the
right to possession of the property being condemned.
(c) "AWARD" means all compensation, sums or anything of value
awarded, paid or received on a total or partial Condemnation.
(d) "CONDEMNOR" means any public or quasi-public authority, or
private corporation or individual, having the power of Condemnation.
15.2 Parties' Rights and Obligations. If during the Term there is any
Condemnation of all or any part of the Leased Property or any interest in this
Lease, the rights and obligations of Lessor and Lessee shall be determined by
this ARTICLE XV.
15.3 Total Taking. If title to the fee of the whole of the Leased
Property is condemned by any Condemnor, this Lease shall cease and terminate as
of the Date of Taking by the Condemnor and Lessor shall pay to Lessee a
Termination Fee determined as of the date of the taking in accordance with
SECTION 33.1(c). If title to the fee of less than the whole of the Leased
Property is so taken or condemned, which nevertheless renders the Leased
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Property Unsuitable or Uneconomic for its Primary Intended Use, then either
Lessee or Lessor shall have the option to terminate this Lease as of the Date of
Taking; provided that while the Submanagement Agreement is in effect, neither
Lessor nor Lessee shall have the option to terminate the Lease unless it is
unreasonable to continue to operate the Leased Property in accordance with Brand
Standards. Upon termination of the Lease pursuant to this SECTION 15.3, if such
Notice has been given, this Lease shall thereupon cease and terminate as of the
Date of Taking and Lessor shall pay to Lessee a Termination Fee determined as of
the date of the taking in accordance with SECTION 33.1(c). All Base Rent,
Percentage Rent and Additional Charges paid or payable by Lessee hereunder shall
be apportioned as of the Date of Taking, and Lessee shall promptly pay Lessor
such amounts. The Termination Fee shall be paid on the later of the date the
Lease is terminated or the date the Termination Fee is determined pursuant to
SECTION 33.1(c). The provisions of this SECTION 15.3 shall survive the
expiration or earlier termination of this Lease.
15.4 Allocation of Award. The total Award made with respect to the
Leased Property or for loss of rent, or for Lessor's loss of business beyond the
Term, shall be solely the property of and payable to Lessor. Any Award made for
loss of Lessee's business during the remaining Term, if any, for the taking of
Lessee's Personal Property or for removal and relocation expenses of Lessee in
any such proceedings shall be the sole property of and payable to Lessee. In any
Condemnation proceedings Lessor and Lessee shall each seek its Award in
conformity herewith, at its respective expense; provided, however, neither
Lessor nor Lessee shall initiate, prosecute or acquiesce in any proceedings that
may result in a diminution of any Award payable to the other. Any Award made for
loss of Lessee's business during the remaining Term in any such proceedings
shall be credited against the Termination Fee payable by Lessor to Lessee under
SECTION 15.3.
15.5 Partial Taking.
(a) If title to less than the whole of the Leased Property is
condemned, and the Leased Property is not Unsuitable or Uneconomic for its
Primary Intended Use, or if Lessor and Lessee are entitled but elect not to
terminate this Lease as provided in SECTION 15.3, then Lessor or, at Lessor's
election, Lessee shall, with all reasonable dispatch and to the extent that the
Holder permits the application of the Award therefor and the Award is sufficient
therefor, restore the untaken portion of any Leased Improvements so that such
Leased Improvements constitute a complete architectural unit of the same general
character and condition (as nearly as may be possible under the circumstances)
as the Leased Improvements existing immediately prior to the Condemnation.
Lessor and Lessee shall each contribute to the cost of restoration that part of
its Award specifically allocated to such restoration, if any, together with
severance and other damages awarded for the taken Leased Improvements; provided,
however, that the amount of such contribution shall not exceed such cost.
(b) In the event of a partial Taking as described in SECTION
15.5(a) which does not result in a termination of this Lease by Lessor, the Base
Rent shall be abated in the manner and to the extent that is fair, just and
equitable to both Lessee and Lessor, taking into consideration, among other
relevant factors, the number of usable rooms, the amount of square
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footage, or the revenues affected by such partial Taking. If Lessor and Lessee
are unable to agree upon the amount of such abatement within thirty (30) days
after such partial Taking, the matter shall be submitted to Arbitration as
provided for in SECTION 37.2 hereof. If the Award is insufficient to complete
any required restoration, then Lessor shall pay any excess amounts required to
restore the Leased property.
(c) Notwithstanding anything to the contrary contained in this
SECTION 15.5, Lessor and Lessee agree that as long as the Submanagement
Agreement is in effect any conflict between the provisions of this SECTION 15.5
and SECTION 6.04 of the Submanagement Agreement shall be controlled by the
provisions of such SECTION 6.04 of the Submanagement Agreement.
15.6 Temporary Taking. If the whole or any part of the Leased Property
or of Lessee's interest under this Lease is condemned by any Condemnor for its
temporary use or occupancy, this Lease shall not terminate by reason thereof,
but Base Rent shall be abated (unless required to be paid pursuant to the second
sentence of this SECTION 15.6) and Lessee shall pay Additional Charges and
Percentage Rent in the manner and at the times specified herein, and the Award
payable to Lessee on a monthly basis as hereinafter provided shall constitute
Gross Revenues as long as doing so would not cause the Rent paid to Lessor
hereunder to 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. If
doing so would cause the Rent to fail to qualify then Lessee will pay Base Rent
and Additional Charges to the extent of the Award to Lessee and Percentage Rent
(after payment of Base Rent and Additional Charges and only to the extent of the
balance of the Award made to Lessee) at a rate equal to the average Percentage
Rent during the last three preceding 12 month Lease Years (or, if three 12 month
Lease Years have not elapsed, the average during the preceding 12 month Lease
Year. Except only to the extent that Lessee may be prevented from so doing as a
result of the condemnation, Lessee shall continue to perform and observe all of
the other terms, covenants, conditions and obligations hereof on the part of the
Lessee to be performed and observed, as though such Condemnation had not
occurred. In the event of any Condemnation as in this SECTION 15.6 described,
the entire amount of any Award made for such Condemnation allocable to the Term
of this Lease, whether paid by way of damages, rent or otherwise, except such
portion as is specifically allocable to restoration or Capital Expenditures
which are obligations of Lessor under this Lease, shall be paid (a) directly to
Lessee if the Award is payable by the Condemnor on a monthly basis, or (b) if
payable by the Condemnor less frequently than on a monthly basis, the Award
shall be paid to an institutional trustee designated by Lessor or to an
institutional Holder of a Mortgage and made available to Lessee on a monthly
basis for application pursuant to the provisions of this SECTION 15.6. Lessor
covenants that upon the termination of any such period of temporary use or
occupancy it will, to the extent of the portion of the Award specifically
allocable to restoration or Capital Expenditures which are the obligations of
Lessor under this Lease and subject to Lessee's contribution as set forth below,
restore the Leased Property as nearly as may be reasonably possible to the
condition in which the same was immediately prior to such Condemnation, unless
such period of temporary use or occupancy extends beyond the expiration of the
Term, in which case Lessor shall not be required to make such restoration. If
restoration is required hereunder, Lessee shall contribute
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to the cost of such restoration that portion of its entire Award that is
specifically allocable to such restoration, if any.
ARTICLE XVI
DEFAULTS
16.1 Events of Default. Any one or more of the following events shall
constitute an Event of Default (herein so called) hereunder:
(a) if Lessee fails to make any payment of Base Rent or
Percentage Rent within ten (10) days after receipt by the Lessee of Notice from
Lessor that the same has become due and payable, provided that Lessor shall not
be required to give any such Notice more than once in any Lease Year and that
any second or subsequent failure by Lessee during such Lease Year to make any
payment of Base Rent or Percentage Rent on the date the same becomes due and
payable shall constitute an immediate Event of Default; or
(b) if Lessee fails to make any payment of Additional Charges
within ten (10) days after receipt by Lessee of Notice from Lessor that the same
has become due and payable; or
(c) if Lessee fails to observe or perform any other term,
covenant or condition of this Lease and such failure is not curable, or if
curable is not cured by Lessee within a period of thirty (30) days after receipt
by the Lessee of Notice thereof from Lessor, unless such failure is curable but
cannot with due diligence be cured within a period of thirty (30) days, in which
case it shall not be deemed an Event of Default if Lessee, within such thirty
(30) day period, proceeds with due diligence to cure the failure and thereafter
diligently completes the curing thereof within 120 days of Lessor's Notice to
Lessee, which 120-day period shall cease to run during any period that a cure of
such failure is prevented by an Unavoidable Delay and shall resume running upon
the cessation of such Unavoidable Delay; or
(d) if Lessee or any Manager which is an Affiliate of Lessee
shall (i) be generally not paying its debts as they become due, (ii) file, or
consent by answer or otherwise to the filing against it of, a petition for
relief or reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy or insolvency law of any
jurisdiction, (iii) make an assignment for the benefit of its creditors, (iv)
consent to the appointment of a custodian, receiver, trustee or other officer
with similar powers with respect to it or with respect to any substantial part
of its assets, (v) be adjudicated insolvent, or (vi) take corporate action for
the purpose of any of the foregoing; or if a court or governmental authority of
competent jurisdiction shall enter an order appointing, without consent by
Lessee, a custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its assets, or if an
order for relief shall be entered in any case or proceeding for liquidation or
reorganization or otherwise to take advantage of any bankruptcy or insolvency
law of any jurisdiction, or ordering the dissolution,
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winding-up or liquidation of Lessee, or if any petition for any such relief
shall be filed against Lessee and such petition shall not be dismissed within
sixty (60) days; or
(e) if the estate or interest of Lessee in the Leased Property
or any part thereof is voluntarily or involuntarily transferred, assigned,
conveyed, levied upon or attached in any Proceeding; or
(f) if, except as a result of and to the extent required by
damage, destruction, Condemnation or Unavoidable Delay, Lessee ceases operations
on the Leased Property; or
(g) if notice of a default or an event of default has been
given by the franchisor or licensor under the Franchise Agreement or any ground
lessor(s) with respect to the Facility on the Leased Property as a result of any
action or failure to act by the Lessee or any Person with whom the Lessee
contracts for management services at the Facility, which default or event of
default is not cured within applicable cure periods and does not arise from
Lessor's breach of any of its obligations under this Lease which are required to
maintain the Franchise Agreement or any ground lease in effect; or
(h) if Lessee breaches the provisions of SECTION 32.1 and such
default continues for a period of thirty (30) days after Notice thereof from
Lessor.
Notwithstanding anything to the contrary contained in SECTION
16.1(c), the cure periods set forth in SECTION 16.1(c) shall not apply to any
failure by Lessee to perform any term, covenant or condition for which a
different grace or cure period is expressly set forth in any other provision of
this Lease, and such failure shall, after the expiration of any other grace or
cure period expressly set forth elsewhere herein, constitute an immediate Event
of Default.
If litigation is commenced with respect to any alleged default
under this Lease, the prevailing party in such litigation shall receive, in
addition to its damages incurred, such sum as the court shall determine as its
reasonable attorneys' fees, and all costs and expenses incurred in connection
therewith.
16.2 Remedies. Upon the occurrence of an Event of Default, Lessor shall
have the right, at Lessor's option, to elect to do any one or more of the
following without further notice or demand to Lessee: (a) terminate this Lease,
in which event Lessee shall immediately surrender the Leased Property to Lessor,
and, if Lessee fails to so surrender, Lessor shall have the right, without
notice, to enter upon and take possession of the Leased Property and to expel or
remove Lessee and its effects without being liable for prosecution or any claim
for damages therefor; and Lessee shall, and hereby agrees to, indemnify Lessor
for all loss and damage which Lessor suffers by reason of such termination,
including without limitation, damages in an amount equal to the total of (1) the
reasonable costs of recovering the Leased Property in the event that Lessee does
not promptly surrender the Leased Property, and all other reasonable expenses
incurred by Lessor in connection with Lessee's default; (2) the unpaid Rent
earned as of the date of termination, plus interest at the Overdue Rate accruing
after the due date until such sums are paid by Lessee to Lessor; (3) the total
Rent (including
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Percentage Rent as determined below) which Lessor would have received under this
Lease for the remainder of the Term, but discounted to the then present value at
a rate of fifteen percent (15%) per annum, less the fair market rental value of
the balance of the Term as of the time of such default discounted to the then
present value at a rate of fifteen percent (15%) per annum; and (4) all other
sums of money and damages owing by Lessee to Lessor; or (b) enter upon and take
possession of the Leased Property without terminating this Lease and without
being liable for prosecution or any claim for damages therefor, and, if Lessor
elects, relet the Leased Property on such terms as Lessor deems advisable, in
which event Lessee shall pay to Lessor on demand the reasonable costs of
repossessing and reletting the Leased Property and any deficiency between the
Rent payable hereunder (including Percentage Rent as determined below) and the
rent paid under such reletting; provided, however, that Lessee shall not be
entitled to any excess payments received by Lessor from such reletting and
Lessor's failure to relet the Leased Property shall not release or affect
Lessee's liability for Rent or for damages; or (c) enter the Leased Property
without terminating this Lease and without being liable for prosecution or any
claim for damages therefor and maintain the Leased Property and repair or
replace any damage thereto or do anything for which Lessee is responsible
hereunder. Lessee shall reimburse Lessor immediately upon demand for any expense
which Lessor incurs in thus effecting Lessee's compliance under this Lease, and
Lessor shall not be liable to Lessee for any damages with respect thereto.
Notwithstanding anything herein to the contrary, Lessee shall not be liable to
Lessor for consequential, punitive or exemplary damages.
The rights granted to Lessor in this SECTION 16.2 shall be cumulative
of every other right or remedy provided in this Lease or which Lessor may
otherwise have at law or in equity or by statute, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies or constitute a forfeiture or
waiver of Rent or damages accruing to Lessor by reason of any Event of Default
under this Lease.
Percentage Rent for the purposes of this SECTION 16.2 shall be a sum
equal to (i) the average of the annual amounts of the Percentage Rent for the
three 12-month Lease Years immediately preceding the Lease Year in which the
termination, re-entry or repossession takes place, or (ii) if three 12-month
Lease Years shall not have elapsed, the average of the Percentage Rent during
the preceding 12-month Lease Year during which the Lease was in effect, or (iii)
if one Lease Year has not elapsed, the amount derived by annualizing the
Percentage Rent from the effective date of this Lease.
16.3 Waiver. Each party waives, to the extent permitted by applicable
law, any right to a trial by jury in any proceedings brought by either party to
enforce the provisions of this Lease, including, without limitation, proceedings
to enforce the remedies set forth in this ARTICLE XVI, and Lessee waives the
benefit of any laws now or hereafter in force exempting property from liability
for rent or for debt.
16.4 Application of Funds. Any payments received by Lessor under any of
the provisions of this Lease during the existence or continuance of any Event of
Default shall be applied to Lessee's obligations in the order that Lessor may
determine or as may be prescribed by the laws of the State.
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ARTICLE XVII
LESSOR'S RIGHT TO CURE
17.1 Lessor's Right to Cure Lessee's Default. If Lessee fails to make
any payment or to perform any act required to be made or performed under this
Lease including, without limitation, Lessee's failure to comply with the terms
of any Franchise Agreement or any ground lease, and fails to cure the same
within the relevant time periods, if any, provided in SECTION 16.1 or elsewhere
in this Lease, Lessor, without waiving or releasing any obligation of Lessee,
and without waiving or releasing any obligation or default, may (but shall be
under no obligation to) at any time thereafter upon Notice to Lessee make such
payment or perform such act for the account and at the expense of Lessee, and
may, to the extent permitted by law, enter upon the Leased Property for such
purpose and, subject to SECTION 16.2, take all such action thereon as, in
Lessor's opinion, may be necessary or appropriate therefor. No such entry shall
be deemed an eviction of Lessee. All sums so paid by Lessor and all costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses, in each case to the extent permitted by law) so incurred, together
with a late charge thereon (to the extent permitted by law) at the Overdue Rate
from the date on which such sums or expenses are paid or incurred by Lessor
until such sums or expenses are paid by Lessee to Lessor, shall constitute
Additional Charges and shall be paid by Lessee to Lessor on demand. The
obligations of Lessee and rights of Lessor contained in this Article shall
survive the expiration or earlier termination of this Lease.
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ARTICLE XVIII
LIMITATIONS
18.1 Personal Property Limitation. Lessee acknowledges that the Company
is a real estate investment trust and in order for all the Rent to constitute
qualifying "rent from real property" under Section 856 of the Code the average
of the adjusted tax bases of the items of Lessor's personal property that are
leased to the Lessee under this Lease at the beginning and at the end of any
Lease Year shall not exceed 15% of the average of the aggregate adjusted tax
bases of the Leased Property at the beginning and at the end of such Lease Year
(the limitation being referred to herein as the "PERSONAL PROPERTY LIMITATION").
Lessor and Lessee shall at all times cooperate in good faith and use their best
efforts to permit Lessor to comply with the Personal Property Limitation, which
compliance may include, by way of example only and not by way of limitation or
obligation, the purchase by Lessee at fair market value of personal property in
excess of the Personal Property Limitation. All such compliance shall be
effected in a manner which has no material net economic detriment to Lessee and
will not jeopardize the Company's status as a real estate investment trust under
the applicable provisions of the Code. Notwithstanding the foregoing, to the
extent that Lessor is required, under SECTION 35.1(d), to fund expenditures that
do not constitute Capital Expenditures, and such expenditures would cause the
personal property leased to Lessee to exceed the Personal Property Limitation,
Lessee shall be obliged to acquire such excess personal property from Lessor at
its fair market value. This SECTION 18.1 is intended to ensure that the Rent
qualifies as "rents from real property," within the meaning of Section 856(d) of
the Code, or any similar or successor provisions thereto.
18.2 Sublease Rent Limitation. Anything contained in this Lease to the
contrary notwithstanding, Lessee shall not sublet the Leased Property or enter
into any licenses or concessions or enter into any similar arrangement on any
basis such that the rental or other amounts to be paid by the sublessee
thereunder would be based, in whole or in part, on either (a) the net income or
profits derived by the business activities of the sublessee, licensee, or
concessionaire, or (b) any other formula such that any portion of the Rent would
fail to qualify as "rents from real property" within the meaning of Section
856(d) of the Code, or any similar or successor provision thereto.
18.3 Sublease Lessee Limitation. Anything contained in this Lease to
the contrary notwithstanding, Lessee shall not sublease the Leased Property to,
or enter into any license, concession or similar arrangement with, any Person in
which the Company owns, directly or indirectly, a 10% or more interest, within
the meaning of Section 856(d)(2)(B) of the Code.
18.4 Lessee Ownership Limitation. Anything contained in this Lease to
the contrary notwithstanding, Lessor shall not take, or permit an Affiliate of
Lessor to take, any action that would cause the Company to own, directly or
indirectly, a 10% or more interest in the Lessee within the meaning of Section
856(d)(2)(B) of the Code, or any similar or successor provisions thereto.
Anything contained in this Lease to the contrary notwithstanding, Lessee shall
not take, or permit an Affiliate of Lessee to take, any action that would cause
the Company to own, directly or indirectly, a 10% or more interest in the Lessee
within the meaning of Section 856(d)(2)(B) of the Code, or any similar or
successor provisions thereto. Any transfer of interests in the Lessee pursuant
to SECTION 35.4 shall be deemed to be an action of Lessee for purposes of this
SECTION 18.4.
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ARTICLE XIX
HOLDING OVER
19.1 Holding Over. If Lessee for any reason remains in possession of
the Leased Property after the expiration or earlier termination of the Term,
such possession shall be as a tenant at sufferance during which time Lessee
shall pay as rental each month two times the aggregate of (a) one-twelfth of the
aggregate Base Rent and Percentage Rent payable with respect to the last Lease
Year of the Term, (b) all Additional Charges accruing during the applicable
month and (c) all other sums, if any, payable by Lessee under this Lease with
respect to the Leased Property. During such period, Lessee shall be obligated to
perform and observe all of the terms, covenants and conditions of this Lease,
but shall have no rights hereunder other than the right, to the extent given by
law to tenancies at sufferance, to continue its occupancy and use of the Leased
Property. Nothing contained herein shall constitute the consent, express or
implied, of Lessor to the holding over of Lessee after the expiration or earlier
termination of this Lease.
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ARTICLE XX
INDEMNITIES
20.1 Indemnification.
(a) EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN OTHER SECTIONS
OF THIS LEASE, LESSEE WILL PROTECT, INDEMNIFY, HOLD HARMLESS AND DEFEND LESSOR
INDEMNIFIED PARTIES FROM AND AGAINST ALL LIABILITIES, OBLIGATIONS, CLAIMS,
DAMAGES, PENALTIES, CAUSES OF ACTION, COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, REASONABLE ATTORNEYS' FEES AND EXPENSES), TO THE EXTENT PERMITTED BY
LAW, excluding those resulting from a Lessor Indemnified Party's negligence or
misconduct or from Lessor's failure to perform or comply with any of the terms
of this Lease, imposed upon or incurred by or asserted against Lessor
Indemnified Parties by reason of: (a) any accident, injury to or death of
persons or loss of or damage to property occurring on or about the Leased
Property or adjoining sidewalks, during the Term or while the Leased Property is
in the possession or control of Lessee including without limitation any claims
under liquor liability, "dram shop" or similar laws, (b) any use, misuse,
management, operation, maintenance or repair by Lessee or any of its agents,
employees, contractors or invitees of the Leased Property or Lessee's Personal
Property during the Term or while the Leased Property is in the possession or
control of Lessee, or any litigation, proceeding or claim by governmental
entities or other third parties to which a Lessor Indemnified Party is made a
party or participant related to such use, misuse, management, operation,
maintenance, or repair thereof by Lessee or any of its agents, employees,
contractors or invitees, (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 during the Term or while the Leased Property is
in the possession or control of Lessee with any of the terms of this Lease, and
(e) the nonperformance by Lessee or any of its agents, employees or contractors
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.
(b) Lessor shall indemnify, save harmless and defend Lessee
Indemnified Parties from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses imposed upon or
incurred by or asserted against Lessee Indemnified Parties as a result of (i)
the negligence or misconduct of Lessor arising in connection with this Lease or
(ii) any failure on the part of Lessor to perform or comply with any of the
terms of this Lease. Lessor also agrees to pay to Lessee any damages incurred by
Lessee to Primary Manager pursuant to SECTION 9.03 of the Primary Management
Agreement as a result of Lessor's failure to perform or comply with any of the
terms of this Lease.
(c) Any amounts that become payable by an Indemnifying Party
under this Section or any other indemnity in this Lease shall be paid within ten
(10) days after liability therefor on the part of the Indemnifying Party is
determined by litigation or otherwise, and if not timely paid, shall bear a late
charge (to the extent permitted by law) at the Overdue Rate from the date of
such determination to the date of payment. Any such amounts shall be reduced by
insurance proceeds received and any other recovery (net of costs) obtained by
the Indemnified Party. An Indemnifying Party, upon request, shall at its sole
expense resist and defend any Proceeding, claim or action, or cause the same to
be resisted and defended by counsel designated by the Indemnifying Party and
approved by the Indemnified Party, which approval shall not be unreasonably
withheld; provided, however, that such approval shall not be required in the
case of defense by counsel designated by any insurance company
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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, claim or action and to participate in the defense thereof, but the
fees and expenses of such counsel will be at the sole expense of such
Indemnified Party unless a conflict of interest prevents representation of such
Indemnified Party by the counsel selected by the Indemnified Party and such
separate counsel has been approved by the Indemnifying Party, which approval
shall not be unreasonably withheld. The Indemnifying Party shall not be liable
for any settlement of any such Proceeding, claim or action made without its
consent, which consent 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, non-appealable
judgment for an adversary party in any such Proceeding, claim or action, the
Indemnifying Party shall indemnify and hold harmless the Indemnified Party from
and against any liabilities incurred by such Indemnified Party by reason of such
settlement or judgement. Nothing herein shall be construed as indemnifying a
Lessor Indemnified Party against its own grossly negligent acts or omissions or
willful misconduct.
(d) Lessee's and Lessor's obligations under the provisions of
this Article shall survive any termination of this Lease.
ARTICLE XXI
SUBLETTING AND ASSIGNMENT
21.1 Subletting and Assignment. Subject to the provisions of ARTICLE
XVIII and SECTIONS 21.1 AND 21.2 and any other express consents, conditions,
limitations or other provisions set forth herein, Lessee shall not assign this
Lease or hereafter sublease all or any part of the Leased Property without first
obtaining the written consent of Lessor. Notwithstanding the foregoing, Lessor's
consent shall not be withheld with respect to occupancy leases which (i) are for
less than 1,000 square feet, (ii) do not require Capital Expenditures by Lessor,
(iii) do not affect the classification of Gross Revenues among Room Revenues,
Food Sales, Beverage Sales or Other Income, (iv) do not extend beyond the stated
Term of this Lease, and (v) do not have provisions which could adversely affect
the Company's status as a real estate investment trust. In the case of a
permitted subletting, the sublessee shall comply with the provisions of this
Section and SECTIONS 18.2, 18.3, 18.4 and 21.2, and in the case of a permitted
assignment, the assignee shall assume in writing and agree to keep and perform
all of the terms of this Lease on the part of Lessee to be kept and performed
and shall be, and become, jointly and severally liable with Lessee for the
performance thereof. No assignment or subletting shall release Lessee from, and
Lessee shall remain primarily liable as principal rather than as surety for, the
prompt payment of the Rent and for the performance and observance of all of the
covenants and conditions to be performed by Lessee hereunder. An original
counterpart of each such sublease and assignment and assumption, duly executed
by Lessee and such sublessee or assignee, as the case may be, in form and
substance satisfactory to Lessor, shall be delivered promptly to Lessor. While
the Submanagement Agreement is in effect, subleases entered into on Lessee's
behalf by Primary Manager or Submanager that do not require Lessee's consent
under the terms of the Primary Management Agreement shall not be deemed to
violate the provisions of this Section.
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21.2 Management Agreement. Lessee shall not enter into any management
or agency agreement relating to the management or operation of the Facility or
any modifications to such management or agency agreement (collectively, the
"MANAGEMENT AGREEMENT") without Lessor's prior written approval of the terms and
conditions thereof and of the identity of any manager of the Facility (the
"MANAGER") which is not an Affiliate of Lessee.
21.3 Primary Manager and Submanager.
(a) Lessor acknowledges that Lessee will enter into the
Primary Management Agreement with Primary Manager and that Primary Manager
intends to enter into the Submanagement Agreement. Lessor hereby approves the
terms and conditions thereof as in effect on the date hereof and of the identity
of the Primary Manager and Submanager. Lessor acknowledges that Lessee has
delegated all of Lessee's approval rights under this Lease to Primary Manager
pursuant to SECTION 8 of the Owner Agreement. Lessor's approval rights under
SECTION 21.2 shall apply to any assignment or transfer of the interests of
Primary Manager under the Primary Management Agreement or of Submanager under
the Submanagement Agreement unless such assignment or transfer is permitted to
occur under such agreements without the consent of either Lessee or Primary
Manager.
(b) Lessor further acknowledges that, pursuant to SECTION
5.17.2 of the Settlement Agreement, Primary Manager and Submanager are third
party beneficiaries of certain funding and payment obligations of Lessor under
this Lease, as follows:
(i) Sections 1.3(d) and (e), regarding funding of
initial balances.
(ii) Section 4.1, regarding payment of Lessor
Impositions.
(iii) Section 8.4, regarding indemnification and
remedial action for certain environmental conditions.
(iv) Sections 14.2 and 14.3, regarding restoration of
the Leased Property.
(v) Section 20.1(b)(ii), regarding reimbursement for
damages caused by Lessor's failure to perform or comply with
the terms of this Lease, but only to the extent of any
monetary remedies to which Primary Manager or Submanager may
be entitled under Section 9.03 of the Primary Management
Agreement and Submanagement Agreement, respectively, that are
occasioned by Lessor's failure so to perform or comply.
(vi) Section 33.1(c)(ii), regarding the payment of
certain amounts owed under the Primary Management Agreement
upon termination.
(vii) Sections 35.1(d) and (e), regarding the funding
of certain expenditures.
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ARTICLE XXII
ESTOPPEL CERTIFICATES
22.1 Officer's Certificates; Financial Statements; Lessor's Estoppel
Certificates and Covenants.
(a) At any time and from time to time upon not less than ten
(10) days Notice by Lessor, Lessee will furnish to Lessor an Officer's
Certificate certifying that this Lease is unmodified and in full force and
effect (or that this Lease is in full force and effect as modified and setting
forth the modifications), the date to which the Rent has been paid, whether to
the knowledge of Lessee there is any existing default or Event of Default
hereunder by Lessor or Lessee, and such other information as may be reasonably
requested by Lessor. Any such certificate furnished pursuant to this Section may
be relied upon by Lessor, any lender, any underwriter and any prospective
purchaser of the Leased Property.
(b) Lessee will furnish the following statements and operating
information to Lessor:
(i) the most recent Consolidated Financials of Lessee
within thirty (30) days after each quarter of any fiscal year
(or, in the case of the final quarter in any fiscal year, the
most recent audited Consolidated Financials of Lessee within
sixty (60) days);
(ii) with reasonable promptness, such other
reasonable information respecting the financial condition,
operations and affairs of Lessee or the Leased Property (A) as
the Company may be required or may deem desirable in its
reasonable discretion to file with or provide to the SEC or
any other governmental agency or any other Person, all in the
form, and either audited or unaudited, as the Company may
request in its reasonable discretion, (B) as may be reasonably
necessary to confirm compliance by Lessee and its Affiliates
with the requirements of this Lease, and (C) as may be
reasonably required or requested by any existing, potential or
future Holder;
(iii) on or before the 15th day of each month, a
balance sheet, and detailed profit and loss and cash flow
statements showing the financial position of the Facility as
at the end of the preceding month and the results of operation
of the Facility for such preceding month and the Lease Year to
date (including a comparison to the Operating Budget as
approved);
(iv) on or before the 15th day of each month, the
general manager's written critique of the financial report
submitted pursuant to subsection (3) immediately above,
setting forth in narrative form any variations during the
preceding month from the Annual Budget and including a preview
of the Facility's financial operations during the current
month;
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(v) on or before the 15th day of each April, July and
October during the Term, an updated estimate for each calendar
quarter remaining in the Lease Year of the information
required by SECTIONS 3.5(a) and (e) hereof;
(vi) upon request by Lessor, copies of all licenses,
permits, occupancy agreements, operating agreements, leases,
contracts, inspection reports, studies, appraisals,
assessments, default or other notices and similar materials
and information existing with respect to the Leased Property;
(vii) within five (5) days of Lessee's receipt
thereof, any inspection reports received from the franchisor
under the Franchise Agreement.
(c) At any time and from time to time upon not less than ten
(10) days notice by Lessee, Lessor will furnish to Lessee or to any person
designated by Lessee an estoppel certificate certifying that this Lease is
unmodified and in full force and effect (or that this Lease is in full force and
effect as modified and setting forth the modifications), the date to which Rent
has been paid, whether to the knowledge of Lessor there is any existing default
or Event of Default on Lessee's or Lessor's part hereunder, and such other
information as may be reasonably requested by Lessee. Any such certificate
furnished pursuant to this Section may be relied upon by Lessee, any lender, any
underwriter and any purchaser of the assets of Lessee.
(d) Lessee covenants to cause its officers and employees, its
Manager and its auditors to cooperate reasonably and promptly with the Company
and with the auditors for the Company in connection with the timely preparation
and filing of the Company's filings, reports and returns under applicable
federal, state and other governmental securities, blue sky and tax laws and
regulations.
ARTICLE XXIII
INSPECTIONS
23.1 Regular Meetings; Lessor's Right to Inspect.
(a) Lessee agrees that if requested by Lessor, the general
manager, the controller, the director of marketing, the asset manager and, if
specifically requested by Lessor, the director of food and beverage and the
chief engineer for the Facility will meet at the Facility with Lessor and its
representatives on a monthly basis throughout each Lease Year in order to
discuss all aspects of the management, maintenance and operation of the
Facility.
(b) Lessee shall permit Lessor and its representatives as
frequently as reasonably requested by Lessor to inspect the Leased Property and
Lessee's accounts and records pertaining thereto and make copies thereof, during
usual business hours upon reasonable advance notice, subject only to any
business confidentiality requirements reasonably requested by Lessee. In
conducting such inspections Lessor shall not unreasonably interfere with the
conduct of Lessee's business at the Leased Property.
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[ (c) Subject to availability, Lessee will provide reasonable
gratuitous accommodations, food and beverage, and other services and amenities
to Lessor and its representatives in connection with all such meetings and
inspections.]
ARTICLE XXIV
NO WAIVER
24.1 No Waiver. No failure by Lessor or Lessee to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the extent permitted by law, no waiver
of any breach shall affect or alter this Lease, which shall continue in full
force and effect with respect to any other then existing or subsequent breach.
ARTICLE XXV
CUMULATIVE REMEDIES
25.1 Remedies Cumulative. To the extent permitted by law but subject to
ARTICLE XXXVI and any other provisions of this Lease expressly limiting the
rights, powers and remedies of either Lessor or Lessee, each legal, equitable or
contractual right, power and remedy of Lessor or Lessee now or hereafter
provided either in this Lease or by statute or otherwise shall be cumulative and
concurrent and shall be in addition to every other right, power and remedy and
the exercise or beginning of the exercise by Lessor or Lessee of any one or more
of such rights, powers and remedies shall not preclude the simultaneous or
subsequent exercise by Lessor or Lessee of any or all of such other rights,
powers and remedies.
ARTICLE XXVI
SURRENDER
26.1 Acceptance of Surrender. Other than upon expiration of the Term,
no surrender to Lessor of this Lease or of the Leased Property or any part
thereof, or of any interest therein, shall be valid or effective unless agreed
to and accepted in writing by Lessor and no act by Lessor or any representative
or agent of Lessor, other than such a written acceptance by Lessor, shall
constitute an acceptance of any such surrender.
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ARTICLE XXVII
NO MERGER
27.1 No Merger of Title. There shall be no merger of this Lease or of
the leasehold estate created hereby by reason of the fact that the same person
or entity may acquire, own or hold, directly or indirectly: (a) this Lease or
the leasehold estate created hereby or any interest in this Lease or such
leasehold estate and (b) the fee estate in the Leased Property.
ARTICLE XXVIII
CONVEYANCE BY LESSOR
28.1 Conveyance by Lessor. If Lessor transfers or conveys the Leased
Property other than to an Affiliate of the Company, Lessor shall give Lessee
Notice thereof and Lessee may terminate this Lease upon Notice to Lessor given
within ninety (90) days after the later of the date of such conveyance or
transfer and the date Lessee receives Notice of such transfer or conveyance, in
which event, Lessor shall pay to Lessee a Termination Fee determined in
accordance with SECTION 33.1(c) as of the date of such transfer or conveyance.
Any change in the ownership of Lessor that results in the Company (or its wholly
owned subsidiaries) no longer exercising ultimate managerial authority over
Lessor shall be deemed a conveyance for purposes of this SECTION 28.1 AND
SECTION 33.1, in which event, Lessor shall pay to Lessee a Termination Fee
determined in accordance with SECTION 33.1(c) as of the date of such change. The
Termination Fee shall be paid on the later of the date the Lease is terminated
or the date the Termination Fee is determined pursuant to SECTION 33.1(c). The
provisions of this SECTION 28.1 shall survive the expiration or earlier
termination of this Lease.
28.2 Lessor May Grant Liens.
(a) Without the consent of Lessee, Lessor may from time to
time create or otherwise cause to exist any Mortgage (as hereinafter defined)
upon the Leased Property, or any portion thereof or interest therein, or upon
Lessor's interest in this Lease, whether to secure any borrowing or other means
of financing or refinancing or otherwise. This Lease and Lessee's interest
hereunder shall at all times be subject and subordinate to the lien and security
title of any deeds to secure debt, deeds of trust, mortgages, or other interests
heretofore or hereafter granted by Lessor or which otherwise encumber or affect
the Leased Property and to any and all advances to be made thereunder and to all
renewals, modifications, consolidations, replacements, substitutions, and
extensions thereof, and to all security agreements delivered in connection
therewith (all of which are herein called the "MORTGAGE"), provided that the
Mortgage shall be subject to Lessee's rights under this Lease to receive all
Gross Revenues of the Facility prior to the earlier of the occurrence of an
Event of Default hereunder or the date that this Lease is terminated by the
Holder of the Mortgage in the exercise of its remedies thereunder. In
confirmation of such subordination, however, Lessee shall, at Lessor's request,
promptly execute, acknowledge and deliver any instruments which may be
reasonably required to evidence subordination to any Mortgage and to the Holder
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thereof. A foreclosure, transfer in lieu of foreclosure, or other disposition of
the Leased Property pursuant to a Mortgage or collateral assignment shall
constitute a conveyance for purposes of SECTIONS 28.1 AND 33.1 requiring payment
of the Termination Fee by Lessor (but the Holder at a foreclosure sale or the
transferee in lieu of foreclosure shall not be liable for the payment of such
Termination Fee, such payment being the obligation of Lessor). The provisions of
this SECTION 28.2(a) shall survive the expiration or earlier termination of this
Lease.
(b) Lessee shall, upon the request of Lessor or any existing,
potential or future Holder, (i) provide Lessor or such Holder with copies of all
licenses, permits, occupancy agreements, operating agreements, leases,
contracts, inspection reports, studies, appraisals, assessments, default or
other notices and similar materials reasonably requested in connection with any
existing or proposed financing of the Leased Property, and (ii) execute and/or
cause the Manager to execute, as applicable, such estoppel agreements and
collateral assignments with respect to the Facility's liquor license, the
Management Agreement and any of the other aforementioned agreements as Holder
may reasonably request in connection with any such financing, provided that no
such estoppel agreement or collateral assignment shall in any way affect the
Term or affect adversely in any material respect any rights of Lessee under this
Lease or of Manager under the Management Agreement.
(c) Lessee shall deliver by notice delivered in the manner
provided in ARTICLE XXX to any Holder who gives Lessee written notice of its
status as a Holder, at such Holder's address stated in the Holder's written
notice or at such other address as the Holder may designate by later written
notice to Lessee, a duplicate copy of any and all notices regarding any default
which Lessee may from time to time give or serve upon Lessor pursuant to the
provisions of this Lease. Copies of such notices given by Lessee to Lessor shall
be delivered to such Holder simultaneously with delivery to Lessor. No such
notice by Lessee to Lessor hereunder shall be deemed to have been given unless
and until a copy thereof has been mailed to such Holder as provided above.
(d) At any time, and from time to time, upon not less than ten
(10) days' notice by a Holder to Lessee, Lessee shall deliver to such Holder an
estoppel certificate certifying as to the information required in SECTION
22.1(c), and such other information as may be reasonably requested by such
Holder. Any such certificate may be relied upon by such Holder.
(e) Notwithstanding the foregoing provisions of this SECTION
28.2, while the Submanagement Agreement is in effect Lessor shall not encumber
the Facility with any mortgage, deed of trust, or security document, encumbering
the Leased Property or the interest of Lessor therein unless such encumbrance is
a Qualified Mortgage as that term is defined in SECTION 8.02 of the
Submanagement Agreement.
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ARTICLE XXIX
QUIET ENJOYMENT
29.1 Quiet Enjoyment. So long as Lessee pays all Rent as the same
becomes due and complies with all of the terms of this Lease and performs its
obligations hereunder, in each case within the applicable grace and/or cure
periods, if any, Lessee shall peaceably and quietly have, hold and enjoy the
Leased Property for the Term hereof, free of any claim or other action by Lessor
or anyone claiming by, through or under Lessor and not claiming by, through or
under Lessee, but subject to all liens and encumbrances subject to which the
Leased Property was conveyed to Lessor or hereafter consented to by Lessee.
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 XXX
NOTICES
30.1 Notices. All notices, demands, requests, consents approvals and
other communications ("Notice" or "Notices") hereunder shall be in writing and
personally served or mailed (by express mail, courier, or registered or
certified mail, return receipt requested and postage prepaid), (i) if to Lessor
at 0000 Xxxxxxxx Xxxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000, Attention: Chief
Financial Officer, with a copy to General Counsel and (ii) if to Lessee at 0000
Xxxxxxxx Xxxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000, Attention: Chief Financial
Officer, with a copy to General Counsel, or to such other address or addresses
as either party may hereafter designate. Personally delivered Notice shall be
effective upon receipt, and Notice given by mail shall be complete at the time
of deposit in the U.S. Mail system, but any prescribed period of Notice and any
right or duty to do any act or make any response within any prescribed period or
on a date certain after the service of such Notice given by mail shall be
extended five days.
ARTICLE XXXI
INTENTIONALLY DELETED
ARTICLE XXXII
LESSEE CAPITALIZATION REQUIREMENTS
32.1 Lessee's Net Worth. Lessee shall be obligated to maintain at all
times during the Term a Net Worth in an amount at least equal to twenty percent
(20%) of the aggregate projected Base Rent and Percentage Rent for the Leased
Property (the "MINIMUM NET WORTH"). As used herein, "Net Worth" shall mean the
excess of total assets over total liabilities, total assets and total
liabilities each to be determined in accordance with GAAP but shall also include
the amount of any guaranty of Lessee's obligations issued by any person
reasonably acceptable to Lessor who agrees to comply with the requirements of
SECTION 32.2.
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32.2 Verification of Net Worth. In addition to the Consolidated
Financials of Lessee to be delivered to Lessor pursuant to SECTION 22.1, Lessee
shall deliver to Lessor, together with such Consolidated Financials of Lessee, a
certificate of Lessee's chief financial officer in form reasonably required by
Lessor (the "FINANCIAL OFFICER'S CERTIFICATE"), certifying the Net Worth and
Cash of Lessee as of the date of the Consolidated Financials of Lessee being
delivered concurrently therewith and stating that Lessee is in compliance with
its obligations under SECTION 32.1 of this Lease, or if not, so stating and
including the reasons therefor. Lessor shall have the right from time to time
and at any time to have an independent certified public accountant selected by
Lessor perform at Lessor's expense an audit or other review of the books and
records of Lessee (or of any guarantor of Lessee's obligations) to verify the
amount of Lessee's Net Worth, and Lessee (or such guarantor) shall cooperate
with Lessor in connection therewith.
ARTICLE XXXIII
TERMINATION OF LEASE DUE TO SALE OF LEASED PROPERTY
33.1 Termination of Lease Due to Sale of Leased Property.
(a) In the event Lessor consummates a sale or other conveyance
of the Leased Property to a bona fide third party, then Lessor may terminate
this Lease by Notice to Lessee (and Lessee may terminate this Lease pursuant to
SECTION 28.1), in which event this Lease shall terminate except as to any
obligations of the parties existing as of such date that survive termination of
this Lease, and all Rent, including Percentage Rent and Additional Charges,
shall be prorated and calculated as of the termination date.
(b) As compensation for the early termination of Lessee's
leasehold estate under this ARTICLE XXXIII, Lessor shall, upon such termination,
pay to Lessee the Termination Fee (herein so called) determined in accordance
with SECTION 33.1(c). In the event Lessor and Lessee are unable to agree upon
the fair market value of Lessee's leasehold estate as defined in (c) below, it
shall be determined by arbitration pursuant to SECTION 37.2.
(c) For the purposes of this Lease, the Termination Fee means
(i) the fair market value of the Lessee's leasehold estate under this Lease plus
(ii) all amounts required to be paid by Lessee to Primary Manager as a result of
such termination if such termination also results in the termination of the
Primary Management Agreement, including, without limitation, any termination
fees payable to the Primary Manager under the Primary Management Agreement and
costs imposed on Lessee pursuant to SECTION 11.12 A of the Primary Management
Agreement, but not costs imposed under SECTION 11.11 thereof. The fair market
value of the Lessee's leasehold estate shall mean the present value, discounted
at the discount rate provided below, of Lessee's projected "profit" or "net cash
flow" for the remaining stated Term of this Lease, i.e., the amount by which
projected Gross Revenues to be collected by Lessee exceed projected Rent and
ordinary operating expenses (including, without limitation, the management fees
under the Management Agreement) to be paid by
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Lessee. In computing fair market value of the leasehold estate, the appraiser
shall discount all future revenues, expenses and fees to the then present value
at a discount rate of fifteen percent (15%) per annum.
(d) Other than the payment of rent and other sums which are
payable under any ground leases, which will be paid by Lessor pursuant to
SECTION 4.1 hereof, Lessee shall comply with all of the terms of any ground
lease.
ARTICLE XXXIV
FRANCHISE AGREEMENT, BRAND STANDARDS, AND GROUND LEASES
34.1 Compliance.
(a) Lessee shall not terminate or enter into any modification
of the Franchise Agreement which could adversely affect Lessor in any material
respect without in each instance first obtaining Lessor's written consent.
Lessor and Lessee agree to cooperate fully with each other in the event it
becomes necessary to obtain a franchise extension or modification or a new
franchise for the Leased Property, and in any transfer of the Franchise
Agreement to Lessor or any Affiliate thereof or any other successor to Lessee
upon the termination of the Lease.
(b) Pursuant to the Management Agreement, Lessee shall, and
shall be entitled to, operate the Facility in accordance with Brand Standards.
(c) Lessor shall promptly furnish to Lessee any default
notices received by Lessor under any ground leases. Without the prior written
consent of Lessee, Lessor shall not modify any ground leases in a manner which
materially increases Lessee's obligations or which materially and adversely
affect Lessee's rights under this Lease.
ARTICLE XXXV
CAPITAL EXPENDITURES
35.1 Capital Expenditures.
(a) Commencing upon the Commencement Date, Lessor shall be
obligated to accrue the Capital Expenditures Reserve: provided, however, that as
long as the Submanagement Agreement is in effect, Lessor shall have no
obligation to accrue the Capital Expenditures Reserve based on the funding of
the F&E Reserve (as defined in the Submanagement Agreement) pursuant to Section
5.02 of the Submanagement Agreement. Upon written request by Lessee to Lessor
stating the specific use to be made and subject to the reasonable approval
thereof by Lessor, such funds shall be made available by Lessor to Lessee for
Capital Expenditures set forth in the Capital Budget; provided, however, that no
Capital Expenditures shall be used to purchase property (other than "real
property" within the meaning of Treasury Regulations Section 1.856-3(d)), to the
extent that doing so would cause the
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Lessor to recognize income other than "rents from real property" as defined in
Section 856(d) of the Code. Lessor's obligation shall be cumulative, but not
compounded, and any amounts that have accrued hereunder shall be payable in
future periods for such uses and in accordance with the procedures set forth
herein. Lessee shall have no interest in any accrued obligation of Lessor under
this SECTION 35.1(a) after the termination of this Lease. All Capital
Improvements shall be owned by Lessor subject to the provisions of this Lease.
(b) Except as specifically provided otherwise in SECTION
8.3(b), Lessor's obligation to make Capital Expenditures in respect to Capital
Improvements and to comply with the provisions of this Lease which may require
the availability of funds for Capital Improvements shall be limited to amounts
available in the Capital Expenditures Reserve and such additional amounts, if
any, as are set forth in the Approved Budget or as Lessor may agree to make
available in Lessor's sole discretion; provided, however, that if additional
Capital Expenditures are required to meet Emergency Situations, to comply with
Legal Requirements, or to comply with the Franchise Agreement or Brand
Standards, as applicable, Lessor shall make such amounts available. No
arbitration resulting from the failure of Lessor and Lessee to agree on the
Capital Budget shall increase Lessor's obligation for Capital Expenditures
beyond the amounts set forth in the immediately preceding sentence. Without
limiting Lessor's obligations under SECTION 35.1(a) with respect to amounts
accrued in the Capital Expenditures Reserve and whether or not reference is made
to this ARTICLE XXXV, to the extent that Lessee's obligations under this Lease
(including, without limitation, the obligations set forth in SECTIONS 7.2, 8.1,
8.2, 8.3 and 9.1 and in ARTICLE XXXV) are dependent upon the availability of
amounts for Capital Expenditures and Lessor fails to make such amounts available
therefor, such obligations of Lessee shall be correspondingly diminished.
(c) Lessor shall have sole authority with respect to the
implementation of all Capital Improvements made pursuant to the requirements of
the Capital Budget. Such authority shall extend both to the plans and
specifications (including matters of design and decor) and to the contracting
and purchasing of all labor, services and materials.
(d) Lessor and Lessee further agree that, while the
Submanagement Agreement is in effect, Lessor shall also be responsible for
funding: (i) to the extent required to be funded from sources other than the
FF&E Reserve, (as defined in the Submanagement Agreement) all expenditures
required to be funded under Section 5.02 of the Primary Management Agreement,
including, without limitation, the items set forth as Exhibit B-1 to the Primary
Management Agreement; and (ii) all expenditures authorized by SECTION 5.03 of
the Primary Management Agreement, including without limitation the items set
forth as Exhibit B-2 to the Primary Management Agreement.
(e) To secure Lessor's obligation to fund certain of the
expenditures referenced in SECTION 35.1(d)(i) above, Lessor agrees to fund a
separate escrow account, at the Commencement Date, as provided in SECTION 3.2.8
of the Settlement Agreement.
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ARTICLE XXXVI
LESSOR'S DEFAULT
36.1 Lessor's Default.
(a) It shall be a breach of this Lease if Lessor fails to
observe or perform any term, covenant or condition of this Lease on its part to
be performed and such failure continues for a period of thirty (30) days after
Notice thereof from Lessee, unless such failure cannot with due diligence be
cured within a period of thirty (30) days, in which case such failure shall not
be deemed a breach if Lessor proceeds within such thirty (30)-day period, with
due diligence, to cure the failure and thereafter diligently completes the
curing thereof. The time within which Lessor shall be obligated to cure any such
failure also shall be subject to extension of time due to the occurrence of any
Unavoidable Delay. If Lessor does not cure any such failure within the
applicable time period as aforesaid, Lessee may declare the existence of a
"LESSOR DEFAULT" by a second Notice to Lessor. Thereafter, subject to the
provisions of the following paragraph, Lessee may (but shall be under no
obligation at any time thereafter to (i) make such payment or perform such act
for the account and at the expense of Lessor or (ii) terminate this Lease and
recover its damages for such early termination. All sums so paid by Lessee and
all costs and expenses (including, without limitation, reasonable attorneys'
fees and court costs) 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
until the date paid by Lessor or offset by Lessee as expressly provided herein,
shall be paid by Lessor to Lessee on demand or Lessee may offset or counterclaim
such sums actually paid by Lessee against Rents or Other Charges due hereunder.
Except as expressly provided in this ARTICLE XXXVI or elsewhere in this Lease,
Lessee shall have no right to terminate this Lease for any Lessor Default and no
right, for any such Lessor Default, to offset or counterclaim against any rent
or other Charges due hereunder.
(b) Notwithstanding anything to the contrary contained in this
Lease, for the enforcement of any judgment (or other judicial decree) requiring
the payment of money by Lessor to Lessee by reason of any default by Lessor
under this Lease or otherwise, Lessee shall look solely to the estate and
property of Lessor in the Leased Property and to any proceeds on account of the
disposition thereof, including, without limitation, any sales or condemnation
proceeds, and to any insurance proceeds under any policies of insurance
maintained in accordance with this Lease which are paid on account of the same
circumstances as led to Lessee's judgment, it being intended that no other
assets of Lessor or any of Lessor's Affiliates shall be subject to levy,
execution, attachment or any other legal process for the enforcement or
satisfaction of any judgment (or other judicial decree) obtained by Lessee
against Lessor, except in the following cases: (i) any liability of Lessor for
its own gross negligence, willful misconduct or Environmental Liabilities caused
by affirmative actions of Lessor, (ii) any liability of Lessor for repayment to
Lessee upon the termination of this Lease of any excess payments of Percentage
Rent or Additional Charges for the last Lease Year or part thereof and (iii) any
liability of Lessor for the payment of a Termination Fee.
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ARTICLE XXXVII
ARBITRATION
37.1 Arbitration. Except as set forth in SECTION 37.2, in each case
specified in this Lease in which it shall become necessary to resort to
arbitration, such arbitration shall be determined as provided in this SECTION
37.1. The party desiring such arbitration shall give Notice to that effect to
the other party, and an arbitrator shall be selected by mutual agreement of the
parties, or if they cannot agree within thirty (30) days of such notice, by
appointment made by the American Arbitration Association ("AAA") from among the
members of its panels who are qualified and who have experience in resolving
matters of a nature similar to the matter to be resolved by arbitration.
37.2 Alternative Arbitration. In each case specified in this Lease for
a matter to be submitted to arbitration pursuant to the provisions of this
SECTION 37.2, Lessor shall be entitled to designate any nationally recognized
accounting firm with a hospitality division of which Lessor or an Affiliate of
Lessor is not a significant client to serve as arbitrator of such dispute within
fifteen (15) days after written demand for arbitration is received or sent by
Lessor. In the event Lessor fails to make such designation within such fifteen
(15) day period, Lessee shall be entitled to designate any nationally recognized
accounting firm with a hospitality division of which Lessor or an Affiliate of
Lessor is not a significant client to serve as arbitrator of such dispute within
fifteen (15) days after Lessor fails to timely make such designation. In the
event no nationally recognized accounting firm satisfying such qualifications is
available and willing to serve as arbitrator, and unless Lessor and Lessee
otherwise agree, the arbitration shall instead be administered as set forth in
SECTION 37.1.
37.3 Arbitration Procedures. In any arbitration commenced pursuant to
SECTIONS 37.1 or 37.2, a single arbitrator shall be designated and shall resolve
the dispute. The arbitrator's decision shall be binding on all parties and shall
not be subject to further review or appeal except as otherwise allowed by
applicable law. Upon the failure of either party (the "NON-COMPLYING PARTY") to
comply with his decision, the arbitrator shall be empowered, at the request of
the other party, to order such compliance by the non-complying party and to
supervise or arrange for the supervision of the non-complying party's obligation
to comply with the arbitrator's decision, all at the expense of the
non-complying party. To the maximum extent practicable, the arbitrator and the
parties, and the AAA if applicable, shall take any action necessary to insure
that the arbitration shall be concluded within ninety (90) days of the filing of
such dispute. The fees and expenses of the arbitrator shall be shared equally by
Lessor and Lessee except as otherwise specified above in this SECTION 37.3.
Unless otherwise agreed in writing by the parties or required by the arbitrator
or AAA, if applicable, arbitration proceedings hereunder shall be conducted in
the State. Notwithstanding formal rules of evidence, each party may submit such
evidence as each party deems appropriate to support its position and the
arbitrator shall have access to and right to examine all books and records of
Lessee and Lessor regarding the Facility during the arbitration.
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ARTICLE XXXVIII
TRADE-OUTS
38.1 Trade-outs. Lessee or Manager may arrange for and make trades of
goods or services (including, but not limited to, suite occupancy, food,
beverages, incidental charge items and taxes relating to any of the above)
furnished or to be furnished to others at the Hotel, for other goods or services
(including, but not limited to, advertising, air and ground transportation,
rental vehicles and taxes relating to any thereof) furnished or to be furnished
to or for the benefit of the Hotel. If the goods or services received in a
particular trade are exclusively for the use or benefit of the Hotel (and not
for any other use or benefit of Lessee or Manager or any other hotel or
activity), the usual charges for the goods or services given to the Hotel in
such trade shall be included in Gross Revenues and the same amount shall be
deemed contemporaneously expended as Expenses of the Hotel for such goods or
services received. If the goods or services received in a particular trade are,
to any extent, for the use or benefit of Lessee or the Manager or any other
hotel or activity (and not exclusively for the benefit of the Hotel), the usual
charges for the goods or services given by the Hotel in such trade by Lessee or
Manager shall be included in Gross Revenues, and to the extent the goods or
services so received by Lessee or Manager are used by or for the benefit of the
Hotel, the amount thereof shall be fairly and equitably allocated among the
Hotel and all other hotels or activities benefitting therefrom and the portion
thereof fairly and equitably allocable to the Hotel shall be an expense of the
Hotel. Notwithstanding the foregoing, the goods or services of the Hotel
furnished pursuant to this SECTION 38.1 must not extend beyond the term of this
Lease.
ARTICLE XXXIX
MISCELLANEOUS
39.1 Miscellaneous. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, Lessee or Lessor
arising prior to any date of termination of this Lease shall survive such
termination. If any term or provision of this Lease or any application thereof
is invalid or unenforceable, the remainder of this Lease and any other
application of such term or provisions shall not be affected thereby. If any
late charges or any interest rate provided for in any provision of this Lease
are based upon a rate in excess of the maximum rate permitted by applicable law,
the parties agree that such charges shall be fixed at and limited to the maximum
permissible rate. Neither this Lease nor any provision hereof may be changed,
waived, discharged or terminated except by a written instrument in recordable
form signed by Lessor and Lessee. All the terms and provisions of this Lease
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. The headings in this Lease are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Lease shall be governed by and construed in accordance with
the laws of the State, but not including its conflicts of laws rules. If any
payment required to be made pursuant to this Lease shall become due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day.
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39.2 Transition Procedures. Lessee shall, and shall cause Manager to,
cooperate in good faith to provide access and information to any prospective
purchaser or lessee of the Leased Property which may acquire the Leased Property
or lease it upon the expiration or termination of the Term. Upon any expiration
or termination of the Term, Lessor and Lessee shall do the following and, in
general, shall cooperate in good faith to effect an orderly transition of the
management or lease of the Facility. The provisions of this SECTION 39.2 shall
survive the expiration or termination of this Lease until they have been fully
performed. Nothing contained herein shall limit Lessor's or Lessee's (as
applicable) rights and remedies under this Lease if such termination occurs as
the result of an Event of Default or Lessor's Default.
(a) Transfer of Licenses. Upon the expiration or earlier
termination of the Term, Lessee shall use its best efforts to transfer to Lessor
or Lessor's designee all licenses, operating permits and other governmental
authorizations and all contracts, including contracts with governmental or
quasi-governmental entities, that may be necessary for the operation of the
Facility; provided, however, that the costs and expenses of any such transfer or
the processing of any such application shall be paid by Lessor or Lessor's
designee.
(b) Leases and Concessions. Lessee shall assign to Lessor or
Lessor's designee simultaneously with the termination of this Agreement, and the
assignee shall assume all leases, contracts, concession agreements and
agreements in effect with respect to the Facility then in Lessee's name. Lessee
shall assign any membership contracts to Lessor or its designee as provided in
SECTION 7.2(g).
(c) Books and Records. To the extent that Lessor has not
already received copies thereof, a copy of all books and records (including
computer records) for the Facility kept by Lessee pursuant to SECTION 3.6 shall
be promptly delivered to Lessor or Lessor's designee.
(d) Receivables and Payables, etc. Lessee shall be entitled to
retain all cash, bank accounts and house banks, and to collect all Gross
Revenues and accounts receivable accrued through the termination date. Lessee
shall be responsible for the payment of Rent, all operating expenses of the
Facility and all other obligations of Lessee accrued under this Lease as of the
termination date, and Lessor shall be responsible for all operating expenses of
the Facility accruing after the termination date. Lessor, at its option, may
purchase the Inventory from Lessee for its fair market value upon termination of
this Lease.
39.3 Waiver of Presentment, etc. Lessee waives all presentments,
demands for payment and for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, and notices of acceptance and waives
all notices of the existence, creation, or incurring of new or additional
obligations, except as expressly granted herein.
39.4 Standard of Discretion. In any provision of this Lease requiring
or permitting the exercise by Lessor or Lessee of such party's approval,
election, decision, consent, judgment, determination or words of similar import
(collectively, an "APPROVAL"),
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such Approval may, unless otherwise expressly specified in such provision, be
given or withheld in such party's sole, absolute and unreviewable discretion;
provided, however, that as long as the Submanagement Agreement is in effect and
an Approval relates to a matter which Lessee is required to approve under the
Primary Management Agreement, then such Approval shall not be unreasonably
withheld, delayed or conditioned. Any Approval which by the terms of this Lease
may not be unreasonably withheld shall also not be unreasonably delayed.
39.5 Action for Damages. In any suit or other claim brought by either
party seeking damages against the other party for breach of its obligations
under this Lease, the party against whom such claim is made shall be liable to
the other party only for actual direct damages and not for consequential,
punitive or exemplary damages.
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IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized representatives as of the date first above written.
LESSOR:
By: PATRIOT AMERICAN HOSPITALITY
PARTNERSHIP, L.P., a Delaware limited
partnership
By: PAH GP, Inc., its General Partner
By: ____________________________
Name: __________________________
Title: _________________________
LESSEE:
By: PATRIOT AMERICAN HOSPITALITY
OPERATING PARTNERSHIP, L.P., a Delaware
limited partnership
By: Wyndham International, Inc., a Delaware
corporation, its general partner
By: ____________________________
Name: __________________________
Title: _________________________
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Exhibit A
PROPERTY DESCRIPTION
EXHIBIT A - Page Solo
82
Exhibit B
BASE RENT
$___________________ PER ANNUM
$___________________ PER MONTH
CPI: ________%
REVENUE PERCENTAGES AND BREAKDOWNS
FIRST TIER ROOM REVENUE PERCENTAGE: _________%
ANNUAL ROOM REVENUES FIRST BREAK POINT: $_________
SECOND TIER ROOM REVENUE PERCENTAGE: _________%
ANNUAL ROOM REVENUES SECOND BREAK POINT: $_________ (i.e., $_________
plus the Annual Room Revenues
First Break Point)
THIRD TIER ROOM REVENUE PERCENTAGE: _________%
FIRST TIER FOOD SALES PERCENTAGE: _________%
ANNUAL FOOD SALES BREAK POINT: $_________
SECOND TIER FOOD SALES PERCENTAGE: _________%
OTHER INCOME PERCENTAGE: _________%
EXHIBIT B - Page Solo
83
Exhibit C
CAPITAL EXPENDITURES POLICY
A Capital Improvement for which an expenditure is a Capital Expenditure is an
investment in a readily identifiable facility which (1) is held for use or
income rather than for sale or conversion into goods or cash and (2) has a
useful service life in excess of three (3) years.
Capitalization Policy
If the cost of the capital addition is $2,500 or greater and the items acquired
have an expected service life of more than three (3) years, the expenditure is
capitalized. See "Maintenance and Repairs" for those expenditures which are
expenses without regard to the $2,500 guideline. If the item(s) acquired meet
the more than three (3)-year life criterion, but the total invoice cost is less
than $2,500, the expenditure is considered an expense item.
Replacement - Component Parts
If the estimated job or total invoice cost (including parts and labor) of any
particular item or series of items acquired with respect to one particular job
for replacement of the following major building components is under $2,500, the
expenditure is to be expensed to maintenance and repairs:
Heating Equipment - Pumps, boilers, heat exchangers, thermostats,
pressure gauges, alarm devices piping.
Plumbing Equipment - Pumps, meters, sprinkler and fire alarm system,
piping.
Air Conditioning Equipment - Compressors, condensors, motors, cooling
towers, evaporative coolers, piping.
Fire Prevention Equipment - Major fire system sprinklers, smoke
detectors.
Power - Transformer, conduits and boxes, panel boards, switches and
outlets.
Betterments
If the estimated job or total invoice cost is $2,500 or above, and the
expenditure(s) will enhance the value of and extend by at least three (3) years
the useful life of an asset previously capitalized, then the expenditure should
be capitalized.
Maintenance and Repairs
The following replacement expenditures are considered maintenance and repairs
and are not subject to the total invoice cost guideline of $2,500.
Repainting of Buildings, Pools, Park Areas (1)(5)
EXHIBIT C - Page 1 of 2
84
Refinishing of Furniture (1)
Glass Replacement
Maintenance Service Contracts, such as Yard, Television, Elevator,
Swimming Pool
Wall Paper Vinyl (1)
Reupholstery of Furniture (1)
Replastering (1)
Replacement of Chain Locks, Key Blanks, Keys, Locks, Locksets. Locks
and locksets installed in new doors or offering substantial security
improvements should be capitalized if the invoice is over $2,500
Patching Parking Lot (2)
Roof Repairs (3)
Waterproofing of Lamp Globes and Lightbulbs
Section Replacement for Neon Signs
Caulking and Sealing
Chrome Fittings such as Faucets, Towel Bars, etc. (1)
Toilet and Toilet Seats
Stolen or Damaged Television
Small Parts for Equipment
Landscaping/Plants (4)
Clocks, Clock-Radios or Similar Small Items
1. Expenditures for exterior and interior painting, including caulking
and sealing of the building, wall paper, refinishing of furniture, replastering,
or reupholstering may be capitalized if:
(a) these expenditures are part of a major refurbishment
project, or
(b) the cost of these expenditures exceed $5,000 with
respect to any particular item or series of items
related to one particular job and enhance the value
of and extend the useful life of the asset by at
least three (3) years.
2. Repairing of parking lots, including resealing and resurfacing, will
be capitalized if the expenditure exceeds $5,000.
3. Replacement of the complete roof or complete section of the roof
(including laying a roof over an existing roof) will be capitalized if total
expenditure exceed $5,000 and it extends the useful life of the roof by at least
three (3) years.
4. If the landscaping is new or replacement of existing interior or
exterior landscaping, exceeds $5,000, is not seasonal landscaping (such as
seasonal flowers) and has a useful life of greater than one (1) year, the cost
of the landscaping can be capitalized.
5. Major overhauls to the pool which exceed $5,000 in cost and extend
the useful life of the asset by at least three (3) years.
All expense items will be expensed to M&R expense line items above GOP.
EXHIBIT C - Page 2 of 2
