1
EXHIBIT 99.2
EXECUTION COPY
PERCENTAGE LEASE AGREEMENT
DATED AS OF JANUARY 1, 1998
BY AND BETWEEN
RED LION INNS OPERATING L.P.
AS LESSOR
AND WESTBOY LLC
AS LESSEE
2
TABLE OF CONTENTS
Page
PERCENTAGE LEASE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . (1)
ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1)
1.1 Leased Property; Transferred Property . . . . . . . . . . . . . (1)
1.2 Term; Renewal . . . . . . . . . . . . . . . . . . . . . . . . . (3)
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5)
ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22)
3.1 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22)
3.2 Payment of Percentage Rent . . . . . . . . . . . . . . . . . . (24)
3.3 Confirmation of Percentage Rent . . . . . . . . . . . . . . . . (25)
3.4 Additional Charges . . . . . . . . . . . . . . . . . . . . . . (26)
3.5 Annual Revenue Projections . . . . . . . . . . . . . . . . . . (27)
3.6 Annual Capital Expenditures Budget . . . . . . . . . . . . . . (27)
3.7 Capital Expenditure Reserves . . . . . . . . . . . . . . . . . (28)
3.8 Application of Capital Expenditure Funds . . . . . . . . . . . (30)
3.9 Agent Method for Purchases of Capital Expenditures . . . . . . (31)
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (32)
4.1 Payment of Taxes and Impositions . . . . . . . . . . . . . . . (32)
4.2 Utility Charges . . . . . . . . . . . . . . . . . . . . . . . . (33)
4.3 Insurance Premiums . . . . . . . . . . . . . . . . . . . . . . (33)
ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (34)
No Termination, Abatement, Etc. . . . . . . . . . . . . . . . . . . . (34)
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (34)
6.1 Ownership of the Leased Property . . . . . . . . . . . . . . . (34)
6.2 Lessee's Personal Property . . . . . . . . . . . . . . . . . . (34)
6.3 Lessor's Lien . . . . . . . . . . . . . . . . . . . . . . . . . (35)
ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (36)
7.1 Condition of the Leased Property . . . . . . . . . . . . . . . (36)
7.2 Use of the Leased Property . . . . . . . . . . . . . . . . . . (36)
7.3 Lessor to Grant Easements, Etc . . . . . . . . . . . . . . . . (38)
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (39)
8.1 Compliance with Legal, Insurance Requirements,
Lessor's Insurance and Tax Obligations,
Lessee's Net Worth Obligation . . . . . . . . . . . . . . . (39)
8.2 Legal Requirements Covenants . . . . . . . . . . . . . . . . . (39)
8.3 Environmental Covenants . . . . . . . . . . . . . . . . . . . . (40)
8.4 Net Worth Representations/Covenants . . . . . . . . . . . . . . (42)
ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (43)
9.1 Maintenance and Repair . . . . . . . . . . . . . . . . . . . . (43)
(i)
3
9.2 Encroachments, Restrictions, Etc . . . . . . . . . . . . . . . (44)
ARTICLE X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (45)
10.1 Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . (45)
10.2 Salvage . . . . . . . . . . . . . . . . . . . . . . . . . . . . (46)
10.3 Joint Use Agreements . . . . . . . . . . . . . . . . . . . . . (46)
ARTICLE XI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (46)
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (46)
ARTICLE XII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (47)
Permitted Contests . . . . . . . . . . . . . . . . . . . . . . . . . (47)
ARTICLE XIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (48)
13.1 General Insurance Requirements . . . . . . . . . . . . . . . . (48)
13.2 Parties Insured, Amount of Coverage, Etc. . . . . . . . . . . . (50)
13.3 Evidence of Insurance, Etc. . . . . . . . . . . . . . . . . . . (50)
13.4 Reports by Lessee . . . . . . . . . . . . . . . . . . . . . . . (51)
13.5 Review of Limits . . . . . . . . . . . . . . . . . . . . . . . (51)
13.6 Limitation on Scope of Services . . . . . . . . . . . . . . . . (51)
ARTICLE XIV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (52)
14.1 Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . (52)
14.2 Reconstruction in the Event of Damage or
Destruction Covered by Insurance . . . . . . . . . . . . . . .(52)
14.3 Reconstruction in the Event of Damage or
Destruction Not Covered by Insurance . . . . . . . . . . . . .(53)
14.4 Lessee's Personal Property . . . . . . . . . . . . . . . . . . (53)
14.5 Abatement of Rent . . . . . . . . . . . . . . . . . . . . . . . (54)
14.6 Commencement and Completion of Casualty Restoration . . . . . . (54)
14.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . (54)
ARTICLE XV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (54)
15.1 Parties' Rights and Obligations . . . . . . . . . . . . . . . . (54)
15.2 Permanent Taking . . . . . . . . . . . . . . . . . . . . . . . (54)
15.3 Taking for Temporary Use . . . . . . . . . . . . . . . . . . . (55)
ARTICLE XVI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (56)
16.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . (56)
16.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . (58)
16.3 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (62)
16.4 Application of Funds . . . . . . . . . . . . . . . . . . . . . (62)
16.5 Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . (62)
ARTICLE XVII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (63)
Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (63)
ARTICLE XVIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (63)
18.1 Certain Covenants to Protect REIT and MLP Status . . . . . . . (63)
18.2 Sublease Lessee Limitation . . . . . . . . . . . . . . . . . . (64)
(ii)
4
18.3 Lessee Ownership Limitation . . . . . . . . . . . . . . . . . . (64)
ARTICLE XIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (64)
Holding Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . (64)
ARTICLE XX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (65)
Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . (65)
ARTICLE XXI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (65)
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . (65)
ARTICLE XXII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (66)
22.1 Subletting and Assignment . . . . . . . . . . . . . . . . . . . (66)
22.2 Attornment . . . . . . . . . . . . . . . . . . . . . . . . . . (67)
22.3 Management Agreement . . . . . . . . . . . . . . . . . . . . . (67)
ARTICLE XXIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (68)
23.1 Officers' Certificates; Financial Statements;
Lessor's Estoppel Certificates and Covenants . . . . . . . . . (68)
23.2 Lessee's Financial Covenants . . . . . . . . . . . . . . . . . (69)
ARTICLE XXIV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (69)
Books and Records; Lessor's Right to Inspect . . . . . . . . . . . . (69)
ARTICLE XXV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (70)
No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (70)
ARTICLE XXVI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (70)
Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . (70)
ARTICLE XXVII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (70)
Acceptance of Surrender . . . . . . . . . . . . . . . . . . . . . . . (70)
ARTICLE XXVIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (70)
No Merger of Title . . . . . . . . . . . . . . . . . . . . . . . . . (70)
ARTICLE XXIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (71)
Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . (71)
ARTICLE XXX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (71)
Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . (71)
ARTICLE XXXI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (71)
Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (71)
ARTICLE XXXII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (72)
32.1 Authorization to Mortgage Hotels . . . . . . . . . . . . . . . (72)
32.2 Lessee's Right to Cure . . . . . . . . . . . . . . . . . . . . (75)
32.3 Breach by Lessor . . . . . . . . . . . . . . . . . . . . . . . (75)
32.4 Lessee's Cooperation . . . . . . . . . . . . . . . . . . . . . (75)
(iii)
5
ARTICLE XXXIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(76)
33.1 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . .(76)
33.2 Transition Procedures . . . . . . . . . . . . . . . . . . . . .(76)
33.3 Change of Franchise . . . . . . . . . . . . . . . . . . . . . .(77)
33.4 Waiver of Presentment, Etc. . . . . . . . . . . . . . . . . . .(77)
ARTICLE XXXIV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(78)
Memorandum of Lease . . . . . . . . . . . . . . . . . . . . . . . . .(78)
ARTICLE XXXV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(78)
35.1 Springfield Ground Lease Premises . . . . . . . . . . . . . . .(78)
35.2 Termination of Sublease of Springfield Leased Land . . . . . .(79)
ARTICLE XXXVI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(79)
Lessor's Option to Terminate Lease with
Respect to Hotel upon Sale of a Facility . . . . . . . . . (79)
EXHIBIT A List of Hotels
EXHIBIT B Legal Description of the Land
EXHIBIT C All Space Leases
EXHIBIT D Initial FF&E
EXHIBIT E Description of Each Facility
EXHIBIT F Capital Expenditures
EXHIBIT G Ground Leases
(iv)
6
PERCENTAGE LEASE AGREEMENT
THIS PERCENTAGE LEASE AGREEMENT (this "Lease"), made as of the 1st day
of January, 1998, by and between Red Lion Inns Operating L.P., a Delaware
limited partnership ("Lessor"), and Westboy LLC, an Ohio limited liability
company ("Lessee"), provides as follows:
R E C I T A L S:
A. Lessor is the owner and/or ground lessee of the
"Leased Property" (as hereinafter defined), which property is commonly known as
the hotels listed on Exhibit A, as may be amended from time to time (each, a
"Hotel" and collectively, the "Hotels").
B. Lessee desires to lease the Leased Property, to
operate as hotel facilities.
NOW, THEREFORE, Lessor, in consideration of the payment of rent by
Lessee to Lessor, the covenants and agreements to be performed by Lessee, and
upon the terms and conditions hereinafter stated, does hereby rent and lease
unto Lessee, and Lessee does hereby rent and lease from Lessor, the Leased
Property.
ARTICLE I
1.1 Leased Property; Transferred Property. (a) Subject to the
provisions of Article XXXV, the "Leased Property" is comprised of Lessor's
interest in the following:
(i) the land described in Exhibit B attached hereto and
incorporated herein by reference (the "Land");
(ii) 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, structures and other
improvements presently situated upon the Land (collectively, the "Leased
Improvements"), including the Facilities;
(iii) all easements, rights and appurtenances relating to the
Land and to the Leased Improvements;
(iv) all equipment, machinery, fixtures, and other items
of property required or incidental to the use of the
-1-
7
Leased Improvements as a hotel, including all components thereof, now and
hereafter permanently affixed to or incorporated in the Leased Improvements,
including, without limitation, all 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");
(v) all existing leases of space within the Leased
Property (including any security deposits or collateral held by Lessor pursuant
thereto), which space leases are listed on Exhibit C attached hereto and
incorporated by reference;
(vi) all contract rights, trade names, logos and other
intangible property of Lessor with respect to the operation of the existing
hotel business conducted on the Leased Property; and
(vii) the furniture, fixtures and equipment listed or
referred to on Exhibit D attached hereto and incorporated by reference.
THE LEASED PROPERTY IS DEMISED IN ITS PRESENT CONDITION WITHOUT REPRESENTATION
OR WARRANTY (EXPRESSED OR IMPLIED) BY LESSOR AND SUBJECT TO THE RIGHTS OF
PARTIES IN POSSESSION, AND TO THE EXISTING STATE OF TITLE INCLUDING ALL CURRENT
AND FUTURE COVENANTS, CONDITIONS, RESTRICTIONS, EASEMENTS, THE GROUND LEASES
AND OTHER MATTERS (NOT LIMITED TO ITEMS OF RECORD), INCLUDING ALL APPLICABLE
LEGAL REQUIREMENTS, THE LIENS OF FINANCING INSTRUMENTS, MORTGAGES, DEEDS OF
TRUST AND SECURITY DEEDS, AND INCLUDING OTHER MATTERS WHICH WOULD BE DISCLOSED
BY AN INSPECTION OF THE LEASED PROPERTY OR BY AN ACCURATE SURVEY THEREOF.
(b) Simultaneously with the execution of this Lease,
Lessor shall sell, convey, transfer, assign and deliver to Lessee, for an
amount equal to Lessor's cost, and Lessee shall purchase from Lessor, all
right, title and interest of Lessor in and to all Inventory and Operating
Supplies (collectively, the "Transferred Property"). Lessor shall execute and
deliver such instruments of sale, assignment or transfer, and shall take or
cause to be taken such other or further action as Lessee shall reasonably
request at any time or from time to time, in order to vest, confirm or evidence
in Lessee title to all or part of the Transferred Property
-2-
8
intended to be sold, transferred, assigned and delivered to Lessee under this
Lease.
(c) Effective on not less than 90 days' prior Notice
given at any time within 180 days before the expiration of the Term, but not
later than 90 days prior to such expiration, or upon such shorter Notice period
as shall be appropriate if this Lease is terminated prior to its expiration
date, Lessee shall sell, transfer, assign and deliver to Lessor, for an amount
equal to Lessee's cost, and Lessor shall purchase from Lessee, all right, title
and interest of Lessee in and to the Transferred Property in existence as of
the date of such Notice of Termination. Lessee shall execute and deliver such
instruments of sale, assignment or transfer, and shall take or cause to be
taken such other or further action as Lessee shall reasonably request at any
time or from time to time, in order to vest, confirm or evidence in Lessor
title to all or part of the Transferred Property intended to be sold,
transferred, assigned and delivered to Lessee under this Lease.
1.2 Term; Renewal. The term of this Lease (the "Term") shall
commence on the date hereof (the "Commencement Date") and shall end on the
fifth anniversary of the date hereof (the "Initial Term"), unless sooner
terminated in accordance with the provisions hereof. If this Lease has not
been terminated prior to the expiration of the Initial Term, then, upon the
expiration of the Initial Term, subject to the provisions of Article XXXV,
Lessee shall have the right to extend the Term of this Lease for twelve
additional five year periods (each, an "Additional Term") to follow immediately
upon expiration of the Initial Term or an Additional Term, as the case may be.
The option for each Additional Term shall be exercised by Lessee's giving
written notice to Lessor of Lessee's exercise of such option not less than 270
days prior to the expiration of the Initial Term or an Additional Term, as the
case may be. If this Lease is extended, the word "term" as used herein shall
mean and refer to each Additional Term for which Lessee's option is exercised
and all of the terms, covenants, conditions and provisions of this Lease shall
continue in full force and effect during each Additional Term (other than the
number of Additional Terms which remain); provided, however, that if Lessor
shall, within 30 days after Lessee's exercise of any of its extension options,
notify Lessee that in Lessor's good faith judgment the Base Rent and Percentage
Rent formulas set forth in this Lease do not substantially reflect the then
prevailing rents ("Fair Market REIT Rent") under leases made by REIT's of
similar properties, then Lessor and Lessee shall in good faith mutually
negotiate an agreement on the Base Rent and such formulas for such Additional
Term. If Lessor and Lessee are unable to reach an agreement on the Base
-3-
9
Rent and/or the Percentage Rent formulas within 30 days after the giving of
Lessor's notice, then Lessor and Lessee shall each have the right to hire an
appraiser with at least five years of relevant experience, and such appraisers
shall either agree on the Fair Market REIT Rent or together hire a third
appraiser with relevant experience whose decision shall be final.
Notwithstanding anything to the contrary herein contained, Lessee's right to
extend the Term of this Lease is expressly conditioned upon there being no
Event of Default of Lessee either at the time of the giving of Lessee's
exercise notice or as of the commencement of the Additional Term in question.
Notwithstanding anything in this Lease to the contrary, upon a Disposition,
this Lease shall terminate as to the Hotel which is the subject of such
Disposition and Lessor and Lessee shall negotiate in good faith the Base Rent
and Percentage Rent formulas to be applicable after such Disposition so that
they substantially reflect Fair Market REIT Rent. Notwithstanding the
foregoing provisions of this Section 1.2, if the transactions contemplated by
the Merger Agreement have not been consummated by December 31, 1998 Lessor
shall have the right to direct Lessee to assign all of its rights and
obligations under this Lease to such person as may be designated by Lessor,
effective on the close of business on December 31, 1998, by delivering a
written notice (the "Assignment Notice") to Lessee on or before November 1,
1998, indicating that, in the event such transactions have not been
consummated, Lessor desires that Lessee effectuate such assignment and the
party to whom such rights and obligations are to be assigned. If Lessor shall
not have delivered an Assignment Notice on or before November 1, 1998, or if
Lessor has delivered such notice but such assignment does not close on December
31, 1998, Lessee shall have the right to terminate this Lease effective on the
close of business on December 31, 1998, by delivering a written notice to
Lessor on or before November 15, 1998, indicating that, in either such event,
Lessee desires to terminate this Lease. In the event that Lessor delivers an
Assignment Notice as described herein, (i) such assignment shall be without any
representations or warranties by Lessee, (ii) Lessor shall pay all costs
associated with such assignment, and (iii) Lessor and Lessee shall cooperate
and use their best efforts to effectuate the assignment of this Lease provided
for in such notice. If this Lease is assigned as provided for in the
Assignment Notice, effective upon the effective date of such assignment, Lessee
shall be released of and from any and all actions, causes of action, suits,
debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties,
covenants, contracts, controversies, agreements, promises, variances,
trespasses, damages, judgments, extents, executions, claims, and demands
whatsoever, in law, admiralty, or equity against the Lessee which the Lessor
ever had, now has or hereafter can, shall or
-4-
10
may have, for, upon or by reason of any matter, cause or thing whatsoever
related to this Lease arising or accruing from and after the effective date of
such assignment.
ARTICLE II
Definitions. For all purposes of this Lease, except as otherwise
expressly provided or unless the context otherwise requires, (a) the terms
defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular, (b) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as are at the time applicable, (c) all
references in this Lease to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Lease and (d) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Lease as a whole and not to any particular
Article, Section or other subdivision:
Additional Charges. As defined in Section 3.4.
Adjusted Gross Operating Profit. The Gross Operating Profit less
three percent (3%) of Gross Revenues for FFE Reserves.
Adjustment Date. January 1, 2003, and each fifth anniversary thereof
prior to the expiration or earlier termination of this Lease.
Affiliate. As used in this Lease, the term "Affiliate" of a Person
shall mean (a) any Person that, directly or indirectly, controls or is
controlled by or is under common control with such Person, (b) any other Person
that owns, beneficially, directly or indirectly, five percent (5%) or more of
the outstanding capital stock, shares or equity interests of such Person, or
(c) any officer, director, employee, partner or trustee of such Person or any
Person controlling, controlled by or under common control with such Person
(excluding trustees and persons serving in similar capacities who are not
otherwise an Affiliate of such Person). For the purposes of this definition,
"control" (including the correlative meanings of the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, through the ownership
of voting securities, partnership interests or other equity interests.
After Tax Earnings. As defined in Section 8.4.
-5-
11
Applicable Laws. All laws, rules, regulations, requirements, orders,
notices, determinations and ordinances of any federal, state or municipal
authority applicable to the Hotels, including, without limiting the foregoing,
the state and local liquor authorities, the Board of Fire Underwriters and the
requirements of any insurance companies covering any of the risks against which
the Hotels are insured.
Approved Mortgage. The Existing Mortgages and any other mortgage,
lien or encumbrance approved by Lessee pursuant to Section 32.1 of hereunder.
Approved Mortgagee. The lender making the loan secured by any
Approved Mortgage.
Audited Consolidated Financials. Consolidated Financials audited by a
firm of independent certified public accountants acceptable to Lessor in its
sole discretion.
Award. Compensation, sums or anything of value awarded, paid or
received on a total or partial Condemnation.
Base FFE Reserve. An accrual equal to three percent (3%) of Gross
Revenues for FFE Reserves.
Base Rate. The rate of interest announced publicly by National City
Bank, in Cleveland, Ohio, or its successor, from time to time, as such bank's
base rate. If no such rate is announced or if such rate is discontinued, then
such other rate as Lessor may reasonably designate.
Base Rent. As defined in Section 3.1(a).
Business Day. Each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which national banks in the City of Cleveland, Ohio, or in
the municipality wherein each Hotel is located, are closed.
Capex Threshold Amount. An amount, initially, equal to $5,000,000.
The Capex Threshold Amount shall be adjusted on each Adjustment Date by the
increase, if any, in the Consumer Price Index since the Commencement Date or
the immediately preceding Adjustment Date, as the case may be.
Capital Expenditures. As defined in Section 3.6.
Cash Flow Available for Debt Service. The Adjusted Gross
Operating Profit from operations of the Hotels for the applicable Fiscal Year
determined in accordance with the provisions of this Lease less Lessor Tax,
Insurance and Cap Ex Obligations.
-6-
12
Casualty Termination Fee. The product of (A) five (5), and (B) the
aggregate amount attributable to each Facility with respect to which Lessor has
elected to terminate this Lease of (i) the Incentive Amount for the most recent
Fiscal Year and (ii) three percent (3%) of Gross Revenues for FFE Reserves for
the most recent Fiscal Year.
CERCLA. The Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
Code. The Internal Revenue Code of 1986, as amended.
Commencement Date. As defined in Section 1.2.
Condemnation. A Taking resulting from (1) the exercise of any
governmental power, whether by legal proceedings or otherwise, by a Condemnor,
and (2) a voluntary sale or transfer by Lessor to any Condemnor, either under
threat of condemnation or while legal proceedings for condemnation are pending.
Condemnor. Any public or quasi-public authority, or private
corporation or individual, having the power of Condemnation.
Consolidated Financials. For any fiscal year (or other period for
which such statements are prepared) for Lessee and its consolidated
subsidiaries, a statement of financial position as of such fiscal year (or
other period) end date and statements of operations, cash flows and retained
earnings for the fiscal year (or other period) then ended, all in comparative
form, together with notes thereto, prepared in accordance with generally
accepted accounting principles.
Consolidated Net Worth. The sum of consolidated shareholders' equity
of Lessee and any consolidated subsidiaries as shown on the most recent Audited
Consolidated Financials.
Consumer Price Index. The "U.S. City Average, All Items" Consumer
Price Index for All Urban Consumers published by the Bureau of Labor Statistics
of the United States Department of Labor (Base: 1982-1984=100), or any
successor index thereto. If (i) a significant change is made in the number or
nature (or both) of items used in determining the Consumer Price Index, or (ii)
the Consumer Price Index shall be discontinued for any reason, the Lessor shall
request that the Bureau of Labor Statistics 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 hereunder. If
for any reason the Bureau of
-7-
13
Labor Statistics does not furnish an index and such information, the parties
will instead mutually select, accept and use such other index or comparable
statistic on the cost of living in Seattle, Washington, that is computed and
published by an agency of the United States or a responsible financial
periodical of recognized authority.
Date of Taking. The date the Condemnor has the right to possession of
the property being condemned.
Deemed Debt Service. An assumed annual amount that would be payable
under a hypothetical loan in the Maximum Principal Amount, bearing interest at
an annual rate equal to the then applicable interest rate on the U.S. Treasury
issue (primary issue) with a maturity of ten years plus 180 basis points, and
having an amortization period of twenty five years.
Disposition. The Taking of a Hotel, an election by Lessor not to
restore a Hotel following a casualty, a sale of a Hotel, an expiration or other
termination of a ground lease to Lessor as ground lessee, or any other event
which results in a Hotel no longer being available to Lessor to lease to Lessee
pursuant to this Lease.
Environmental Authority. Any federal, state, local or foreign
department, agency or other body or component of any Government that
administers, oversees or enforces any Environmental Laws.
Environmental Laws. All federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees, injunctions and duties under the common law relating to occupational
health and safety, the protection of human health, and pollution of the indoor
and outdoor environment (including without limitation ambient air, surface
water, ground water, land surface or subsurface strata), including without
limitation laws and regulations relating to emissions, discharges, Releases or
threatened Releases of Hazardous Materials or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials. Environmental Laws include, but
are not limited to, CERCLA, EPCRA, FIFRA, RCRA, XXXX and TSCA.
Environmental Liability. 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 or demand from an Environmental
Authority, the amount of any civil penalty or
-8-
14
fine or criminal fine, and any court costs and reasonable amounts for
attorney's fees, fees for witnesses, consultants and experts, and costs of
investigation and preparation for defense of any claim or any Proceeding,
regardless of whether such Proceeding is threatened, pending or completed, that
may be or have been asserted against or imposed upon Lessor, Lessee, any
Predecessor, the Leased Property or any property used therein and arising out
of:
(a) Failure of Lessee, any Predecessor or the Leased Property
to comply at any time with all Environmental Laws;
(b) Presence of any Hazardous Materials on, in, under, at or in
any way affecting the Leased Property;
(c) A Release at any time of any Hazardous Materials on, in,
at, under or in any way affecting the Leased Property or any off-site
property or facility;
(d) Identification of Lessee, or any Predecessor as a
potentially responsible party under CERCLA or under any Environmental
Law similar to CERCLA;
(e) Presence at any time of any above ground and/or underground
storage tanks as defined in RCRA or in any applicable Environmental Law
on, in, at or under the Leased Property or any off-site property or
facility; or
(f) Any and all claims for injury or damage to persons or
property arising out of exposure to Hazardous Materials originating or
located at the Leased Property or resulting from operation thereof.
EPCRA. The Emergency Planning and Community Right to Know Act, as
amended.
Event of Default. As defined in Section 16.1.
Existing Mortgagee. The holders of the secured obligations under the
Existing Mortgages.
Existing Mortgages. The mortgage, deed of trust, security agreement
or other encumbrance affecting the Leased Property and existing as of the date
of this Lease.
Facility. Each Hotel and/or other facility offering lodging and other
services or amenities being operated or proposed to be operated on the Leased
Property which shall be included in the Leased Improvements. Each Facility is
more
-9-
15
particularly described on Exhibit E, as may be amended from time to time,
attached hereto and incorporated by reference.
Fair Market Value of the Leasehold Estate. An amount equal to the
price that a willing buyer not compelled to buy would pay a willing seller not
compelled to sell for Lessee's leasehold estate (or portion thereof) under this
Lease. In the event Lessor and Lessee are unable to agree upon the Fair Market
Value of the Leasehold Estate, it shall be determined by appraisal using the
appraisal procedure set forth in Section 1.2.
FFE Reserve. As defined in Section 3.7.
FIFRA. The Federal Insecticide, Fungicide, and Rodenticide Act, as
amended.
Fiscal Year. The 12-month period from January 1 to December 31.
Fixtures. As defined in Section 1.1.
Food and Beverage Revenues. Gross revenues, receipts and income of
any kind (whether on a cash or credit basis) paid, collected or accrued and
derived directly or indirectly by Lessee from: (i) the sale, for on-site
consumption at the Leased Property or through off-site catering services, of
food and nonalcoholic beverages, including sales attributable to guest rooms,
banquet rooms, meeting rooms, the restaurant, the lounge, the bar and other
similar rooms; (ii) the sale of wine, beer, liquor or other alcoholic
beverages, including sales attributable to the restaurant, the bar, the lounge,
guest rooms, meeting rooms, banquet rooms, off-site catering or any location at
the Leased Property; (iii) cover charges and audio-visual rental charges
related to banquet, ballroom or meeting room events; and (iv) banquet and
meeting room revenues, including room rental charges from such banquet and
meeting rooms. Such revenues shall not include the following:
(a) Room and Other Revenues as defined below;
(b) Any gratuities or service charges added to a
customer's xxxx or statement in lieu of a gratuity, which gratuity or
charge Lessee is obligated to pay to or which was paid directly to an
employee;
(c) Customary and reasonable credits, rebates, refunds or
negative adjustments to guests;
(d) Sales taxes and any additional taxes imposed on the
sale of alcoholic beverages;
-10-
16
(e) Amounts attributable to customary and reasonable
allowances, give-aways and promotions; and
(f) Sales transactions related to a lounge provided for
the use of guests staying in rooms located on the concierge level of
any Facility.
Furniture, Fixture and Equipment shall mean the furniture,
furnishings, fixtures and equipment installed and used in a Hotel, including
without limitation all necessary furniture and furnishings for guest rooms,
public areas and non-public areas (such as kitchen, laundry and cleaning
facilities, rooms for the use of employees, storage areas, front desk and
administrative offices), floor and window coverings, decorative light fixtures
and equipment, but excluding, however, a Hotel's major mechanical and
electrical equipment and systems (for example, the elevators).
GAAP. As defined in Section 8.4.
Gross Operating Profit. The excess, if any, of Gross Revenues for
FFE Reserves over Operating Expenses.
Gross Revenues for FFE Reserves. In accordance with the Uniform
System, all income and proceeds (whether in cash or on credit, and computed on
an accrual basis) received by Lessee or Manager (if any) for the use, occupancy
or enjoyment of the Facilities, or any part thereof, or received by Lessee or
Manager for the sale of any goods, services or other items sold on or provided
from the Hotels' premises in the ordinary course of the Hotels' operation,
including without limitation: (i) all income and proceeds received from rental
of rooms and commercial and other space within the Hotels including net parking
revenue; (ii) all income and proceeds received from food and beverage
operations and from catering services conducted from the Hotels even though
rendered outside of the Hotels; (iii) all income and proceeds from business
interruption, rental interruption and use and occupancy insurance with respect
to the operation of the Hotels (after deducting therefrom all necessary costs
and expenses incurred in the adjustment or collection thereof); (iv) all awards
for condemnation for temporary use (after deducting therefrom all costs
incurred in the adjustment or collection thereof); and (v) all income and
proceeds from judgments, settlements and other resolutions of disputes with
respect to matters which would be includable in "Gross Revenue" if received in
the ordinary course of the Hotels' operation (after deducting therefrom all
necessary costs and expenses incurred in the adjustment or collection thereof).
Such term shall not include: (1) gross receipts received by lessees, licensees
or concessionaires of the Hotels; (2) consideration received at
-11-
17
the Hotels for hotel accommodations, goods and services to be provided at other
hotels, although arranged by, for or on behalf of Lessee or its Manager (if
any); (3) income and proceeds from the sale or other disposition of goods,
capital assets and other items not in the ordinary course of the Hotels'
operation; (4) federal, state and municipal excise, sales and use taxes
collected directly from patrons or guests of the Hotels as part of or based on
the sales receipts, room, admission, cabaret or equivalent taxes; (5)
condemnation awards (except to the extent provided in clause (iv) of this
paragraph); (6) bad debt reserves, subject to adjustment; (7) gratuities
collected by Hotel employees; (8) the proceeds of any financing; (9) other
income or proceeds resulting other than from the use or occupancy of the
Hotels, or any part thereof, or other than from the sale of goods, services or
other items sold on or provided from the Hotels' premises in the ordinary
course of business; and (10) interest and income on any funds standing from
time to time in the Hotels' agency or reserve accounts.
Government. The United States of America, any state, county,
municipality, local government, district or territory thereof, any foreign
nation, any state, district, department, territory or other political division
thereof, or any administrative agency, board, commission, bureau or political
subdivision of any of the foregoing.
Ground Leases. The ground leases listed on Exhibit G attached hereto
and made a part hereof.
Hazardous Materials. All chemicals, pollutants, contaminants, wastes
and toxic substances, including without limitation:
(a) Solid or hazardous waste, as defined in RCRA or in
any Environmental Law;
(b) Hazardous substances, as defined in CERCLA or in any
Environmental Law;
(c) Toxic substances, as defined in TSCA or in any
Environmental Law;
(d) Insecticides, fungicides, or rodenticides, as defined
in FIFRA or in any Environmental Law; and
(e) Gasoline or any other petroleum product or byproduct,
polychlorinated biphenols, asbestos, radon and urea formaldehyde.
-12-
18
Hotels. As defined in Recital A; provided that in the event of a
Disposition of a Hotel, "Hotels" shall not include the Hotel subject to the
Disposition from and after the occurrence thereof.
Impositions. Collectively, all taxes (including, without limitation,
all personal property, sales and use (including sales, rent or occupancy taxes
on Rent), single business, gross receipts, transaction, privilege, rent or
similar taxes as the same relate to or are imposed upon Lessee, its personal
property or its business conducted upon the Leased Property), assessments
(including, without limitation, all assessments for public improvements or
benefit, whether or not commenced or completed prior to the date hereof and
whether or not to be completed within the Term), water, sewer or other rents
and charges, excises, tax inspection, authorization and similar fees and all
other governmental charges, in each case whether general or special, ordinary
or extraordinary, or foreseen or unforeseen, of every character in respect of
the Leased Property or the business conducted thereon by Lessee (including all
interest and penalties thereon caused by any failure in payment by Lessee),
which at any time prior to, during or with respect to the Term may be assessed
or imposed on or with respect to or be a lien upon (a) Lessor's interest in the
Leased Property, (b) the Leased Property or any part thereof or any rent
therefrom or any estate, right, title or interest therein, or (c) any
occupancy, operation, use or possession of, or sales from, or activity
conducted on or in connection with the Leased Property or any part thereof or
the leasing or use of the Leased Property or any part thereof by Lessee.
Notwithstanding the foregoing, Impositions shall not include (1) any Real
Estate Taxes on the Leased Property, (2) any personal property taxes on
Lessor's personal property, (3) any tax based on net income (whether
denominated as an income, franchise or capital stock or other tax) imposed on
Lessor or any other Person other than Lessee and Affiliates of Lessee, (4) any
net revenue tax of Lessor or any other Person (other than Lessee or an
Affiliate of Lessee), (5) all rent under Ground Leases, (6) any tax imposed
with respect to the sale, exchange or other disposition by Lessor of any Leased
Property or the proceeds thereof, or (7) any single business, gross receipts
(other than a tax on any rent received by Lessor from Lessee), transaction,
privilege or similar taxes as the same relate to or are imposed upon Lessor,
except to the extent that any tax, assessment, tax levy or charge that Lessee
is obligated to pay pursuant to the first sentence of this definition, and that
is in effect any time during the Term hereof, is totally or partially repealed,
and a tax, assessment, tax levy or charge set forth in clauses (1) through (7)
is levied, assessed or imposed expressly in lieu thereof.
-13-
19
Incentive Amount. An annual amount equal to fifteen percent (15%) of
the Adjusted Gross Operating Profit up to the Profit Target and twenty five
percent (25%) of the Adjusted Gross Operating Profit in excess of the Profit
Target.
Indemnified Environmental Liability. As defined in Section 8.3.
Indemnified Party; Indemnitee. Either of a Lessee Indemnified Party
or a Lessor Indemnified Party.
Indemnifying Party. Any party obligated to indemnify an Indemnified
Party pursuant to Section 8.3 or Article XXII.
Insurance Requirements. All terms of any insurance policy required by
this Lease or any Legal Requirement, and all requirements of the issuer of any
such policy as to such policy and/or the Leased Property.
Inventory. All inventories, supplies, guest supplies, food and
beverage inventory, and consumable merchandise used in connection with the
operation of each Facility, but excluding all such items to the extent owned by
concessionaires, tenants, subtenants, licensees or other Persons occupying all
or a portion of the Leased Property as permitted by this Lease.
Land. As defined in Section 1.1(a).
Lease. This Lease.
Leased Improvements; Leased Property. Each as defined in Section 1.1.
Legal Requirements. All federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Leased Property or the
maintenance, construction, use or alteration thereof (whether by Lessee or
otherwise), whether or not hereafter enacted and in force, including (a) all
Environmental Laws, and (b) any laws, rules or regulations that may (1) require
repairs, modifications or alterations in or to the Leased Property or (2) in
any way adversely affect the use and enjoyment thereof; and all permits,
licenses and authorizations and regulations relating thereto and all covenants,
agreements, restrictions and encumbrances contained in any instruments, either
of record or known to Lessee (other than encumbrances hereafter created by
Lessor without the consent of Lessee), at any time in force affecting the
Leased Property.
-14-
20
Lending Institution. Any insurance company, investment banking
company, credit company, federally insured commercial or savings bank, national
banking association, savings and loan association, employees welfare, pension
or retirement fund or system, corporate profit sharing or pension trust,
college or university, or real estate investment trust, including any
corporation qualified to be treated for federal tax purposes as a real estate
investment trust, such trust having a net worth of at least $10,000,000 and
REMIC conduit lenders.
Lessee. The Lessee designated on this Lease and its permitted
successors and assigns.
Lessee Indemnified Party. Lessee and (i) any Affiliate of Lessee,
(ii) any Person against whom any liability may be asserted as a result of a
direct or indirect ownership interest (including a shareholder's interest) in
Lessee; (iii) the officers, directors, shareholders, employees, agents
(including Lessee's Manager (if any)) and representatives of Lessee; and (iv)
the respective heirs, personal representatives, successors and assigns of any
of the foregoing Persons.
Lessee's Personal Property. As defined in Section 6.2.
Lessor. The Lessor designated on this Lease and its successors and
assigns.
Lessor Indemnified Party. Lessor and (i) any Affiliate of Lessor;
(ii) any Person against whom any liability may be asserted as a result of a
direct or indirect ownership interest (including an interest as a partner) in
Lessor; (iii) the employees, agents and representatives of Lessor and its
Affiliates; and (iv) the respective heirs, personal representatives, successors
and assigns of any of the foregoing Persons.
Lessor Tax, Insurance and Cap Ex Obligations. The following:
(i) All items in clauses (1) through (7) of the
definition of "Impositions";
(ii) Insurance premiums relating to the insurance
required under Sections 13.1(a)(iii), (iv), and (v);
(iii) Rentals under any leases of real property and
rentals under any leases of personal property (other than
Lessee's Personal Property); and
-15-
21
(iv) The Base FFE Reserve plus one-half percent of
Gross Revenues for FFE Reserves.
Management Agreement. As defined in Section 22.3.
Manager. The manager under any management agreement entered into by
Lessee Pursuant to Section 22.3.
Maximum Principal Amount. The highest principal amount for a loan
which satisfies the following conditions: (i) the loan to value ratio (i.e. the
ratio of the Maximum Principal Amount to the value of the Hotels) is no greater
than 54%, and (ii) Cash Flow Available for Debt Service for the most recent
full Fiscal Year less the Incentive Amount is at least two hundred percent
(200%) of the Deemed Debt Service.
Merger. The merger defined in the Merger Agreement.
Merger Agreement. The Agreement and Plan of Merger dated as of
December ___, 1997 among Red Lion Inns Limited Partnership, a Delaware limited
partnership, Xxxxxx Lodging Company, an Ohio corporation, and other parties
thereto.
Notice. A notice given pursuant to Article XXXI.
Officer's Certificate. A certificate of Lessee in form and substance
reasonably acceptable to Lessor signed by the chief operating officer and the
chief financial officer or another officer authorized so to sign by the board
of directors or by-laws of Lessee, or any other person whose power and
authority to act has been authorized by delegation in writing by any such
officer.
Operating Expenses. All reasonable costs and expenses of maintaining,
conducting and supervising the operation of the Hotels (which costs and
expenses do not include depreciation and amortization except as otherwise
provided in this Lease, any Rent payable by Lessee or Lessor either in respect
of the Hotels, the Furniture, Fixtures and Equipment, the Operating Supplies,
or any part of the foregoing, except as otherwise provided in this Lease, and
the costs of any other things specified herein to be done or provided at
Lessor's expense) incurred by Lessee (or insurance paid for by Lessor pursuant
to Section 13.1 (b)) directly or at Lessor's request pursuant to this Lease or
as otherwise specifically provided herein which are properly attributable to
the period under consideration under Lessee's system of accounting, including
without limitation:
(i) The cost of all food and beverage sold or
consumed and of all Inventories and Operating Supplies placed
in use. For purposes of this
-16-
22
provision, Inventories and Operating Supplies shall be
considered to have been placed in use when they are
transferred from the storerooms of the Hotels to the
appropriate operating departments;
(ii) Salaries and wages of Hotel personnel,
including costs of payroll taxes and employee benefits (which
benefits may include, without limitation, a pension plan,
medical insurance, life insurance, travel accident insurance
and an executive bonus program) and the costs of moving
executive personnel, their families and their belongings to
the area in which the Hotel is located at the commencement of
their employment at the Hotel and all other expenses not
otherwise specifically referred to in this section which are
referred to as "Administrative and General Expenses" in the
Uniform System. Except as herein otherwise expressly provided
with respect to employees regularly employed at the Hotels,
the salaries or wages of other employees or executives of
Lessee or its Manager (if any) shall in no event be Operating
Expenses, but they shall be entitled to free room and board
and the free use of all Hotel facilities at such times as they
visit the Hotels exclusively in connection with the management
of the Hotels;
(iii) The cost of all other goods and services
obtained by Lessee or its Manager (if any) in connection with
its operation of the Hotels, including, without limitation,
heat and utilities, office supplies and all services performed
by third parties, including leasing expenses in connection
with telephone and data processing equipment and such other
equipment as the parties hereto may agree upon in writing;
(iv) The cost of repairs to and maintenance of the
Hotels;
(v) Insurance premiums for insurance related to
Hotel employees and for insurance required to be maintained
hereunder. Premiums on policies for more than one year will
be prorated over the period of insurance and premiums under
blanket policies will be allocated among properties covered;
(vi) All taxes, assessments and other charges
(other than federal, state or local income taxes and franchise
taxes or the equivalent) payable by
-17-
23
or assessed against Lessee with respect to the operation of
the Hotels, and water and sewer charges. Specifically
excluded from this item are all taxes levied or imposed
against the Hotels or their contents, such as real and
personal property taxes;
(vii) Legal and accounting fees for services directly
related to the operation of the Hotels;
(viii) The costs and expenses of technical
consultants and specialized operational experts for
specialized services in connection with nonrecurring work on
operational, functional, decorating, design or construction
problems and activities; and
(ix) All expenses for advertising the Hotels and
all expenses of sales promotion and public relation activities.
Operating Supplies. All consumable or expendable items for operation
of a Hotel, including without limitation supplies for laundry, housekeeping,
food and beverage service, engineering and accounting uses, together with paper
supplies and miscellaneous general supply items, as defined in the Uniform
System.
Other Revenues: All gross revenues, receipts and income of any kind
(whether on a cash or credit basis) paid, collected or accrued and derived
directly or indirectly by Lessee from: (i) gift shop operations; (ii) fees
collected from telephone, game room and guest laundry services; and (iii)
guaranteed no show reservations, space rentals (excluding banquet and meeting
room space rentals), discounts earned, vending machines, valet services, movie
services, commissions earned, and swim club memberships, and (iv) all other
revenues in connection with the use or operation of the Leased Property and all
services or activities provided thereon, including revenue derived from
subtenants, concessionaires, and licensees, all as determined in accordance
with generally accepted accounting principles. Notwithstanding the previous
sentence, Other Revenues shall not include:
(a) Room Revenues as defined herein;
(b) Food and Beverage Revenues as defined above;
(c) The amount of any credits, rebates, refunds or
adjustments to customers, guests or patrons;
-18-
24
(d) Sales or use taxes;
(e) Interest income;
(f) Gratuities paid or payable to Persons other than
Lessee or its Affiliate; and
(g) Gains from the sale of assets out of the ordinary
course of business.
Overdue Rate. On any date, a rate equal to the Base Rate plus 5% per
annum, but in no event greater than the maximum rate then permitted under
applicable law.
Partial Fiscal Year. Any portion of a Fiscal Year which falls during
the Term hereof.
Payment Date. Any due date for the payment of any installment of
Rent.
Percentage Rent. As defined in Section 3.1(b).
Person. Any individual, corporation, general or limited partnership,
limited liability company, limited liability partnership, stock company or
association, joint venture, association, company, trust, bank, trust company,
land trust, business trust, or other entity and government and agency and
political subdivision thereof.
Predecessor. Any Person whose liabilities arising under any
Environmental Law relating to the Leased Property have or may have been
retained or assumed by Lessee, either contractually or by operation of law.
Primary Intended Use. As defined in Section 7.2(b).
Priority Capital Expenditure. A Capital Expenditure that is compelled
to be made (i) by an imminent threat to the health or safety of guests or
employees of a Hotel, (ii) to comply with and abide by Applicable Laws, (iii)
by the terms of subsection 15.2(d), or (iv) in connection with Casualty
Restoration pursuant to Article XIV. The following sentence shall be in effect
until the earlier of the closing of the merger under the Merger Agreement and
December 31, 1998. For purposes of clause (ii) this definition, a Capital
Expenditure is "compelled" if it is required to be made to prevent (A) the
closing of all or any portion of one or more of the Hotels, (B) the imposition
of criminal penalties on Owner, Westboy or Manager, or (C) by order of a
governmental authority having jurisdiction over the subject Hotel.
-19-
25
Proceeding. Any judicial action, suit or proceeding (whether civil or
criminal), any administrative proceeding (whether formal or informal), any
investigation by a governmental authority or entity (including a grand jury),
and any arbitration, mediation or other non- judicial process for dispute
resolution.
Profit Target. The sum of $36,000,000. Upon the Disposition of a
Hotel or Hotels, the Profit Target shall be adjusted as follows: the Profit
Target existing immediately before such Disposition of a Hotel or Hotels shall
be reduced by an amount equal to the product of (x) the Profit Target existing
immediately before such Disposition and (y) a fraction, the numerator of which
is the Gross Operating Profit less three percent (3%) of Gross Revenues for FFE
Reserves for the immediately preceding three calendar years (or such lesser
period for which results of operation of the Hotels hereunder are available)
for the Hotel or Hotels subject to the Disposition and the denominator of which
is the Gross Operating Profit less three percent (3%) of Gross Revenues for FFE
Reserves of the Hotels managed under this Agreement immediately before such
sale for such period.
RCRA. The Resource Conservation and Recovery Act, as amended.
Real Estate Taxes. All real estate taxes (including any applicable
interest and penalties thereon), including general and special assessments, if
any, and possessory interest taxes which are imposed upon the Land and/or the
Leased Property.
Release. A "Release" as defined in CERCLA or in any Environmental
Law, unless such Release has been properly authorized and permitted in writing
by all applicable Environmental Authorities or is allowed by such Environmental
Law without authorizations or permits.
Rent. Collectively, the Base Rent, Percentage Rent and Additional
Charges.
Room Revenues: Gross revenues of all kinds attributable to or payable
for the rental of guest rooms and suites at the Hotels, from cash, barter, or
credit transactions and computed on an accrual basis (before commissions and
discounts for credit cards, prompt or cash payments), including the proceeds of
any business interruption insurance or other loss of income insurance
attributable to lost revenues for the rental of guest rooms and suites, and
excluding only sales or room taxes.
-20-
26
XXXX: The Superfund Amendments and Reauthorization Act of 1985, as
amended.
Shared Priority Capital Expenditure. A Priority Capital Expenditure
that (i) is compelled to be made to comply with the Americans with Disabilities
Act, as amended, or (ii) arises from installation of a sprinkler system that is
compelled to be made by Applicable Law.
State: The State or Commonwealth of the United States in which a
Facility is located.
Subsidiaries: Corporations in which Lessee owns, directly or
indirectly, more than fifty percent (50%) of the voting stock or control, as
applicable.
Taking: A taking or voluntary conveyance during the Term hereof of
all or part of any Facility or the Leased Property, or any interest therein or
right accruing thereto or use thereof, as the result of, or in settlement of,
any Condemnation or other eminent domain proceeding affecting any Facility or
the Leased Property whether or not the same shall have actually been commenced.
Tax Distribution Amount. As defined in Section 8.4.
Term: As defined in Section 1.2.
TSCA: The Toxic Substances Control Act, as amended.
Unavoidable Delay: A delay due to strikes, lock-outs, labor unrest,
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, unavoidable casualty or
other causes beyond the control of the party responsible for performing an
obligation hereunder, provided that lack of funds shall not be deemed a cause
beyond the control of either party hereto unless such lack of funds is caused
by the failure of the other party hereto to perform any obligations of such
party under this Lease.
Uneconomic for its Primary Intended Use: A state or condition of any
Facility such that in the good faith judgment of Lessor it is uneconomic to
operate that Facility for its Primary Intended Use, taking into account, among
other relevant factors, the number of usable rooms and projected revenues.
Uniform System: The "Uniform System of Accounts" as adopted by the
American Hotel and Motel Association, as the same may hereafter be revised.
-21-
27
Unsuitable for its Primary Intended Use: A state or condition of any
Facility such that, in the good faith judgment of Lessor, due to casualty
damage or loss through Condemnation, that Facility cannot be operated or cannot
function as an integrated hotel facility consistent with standards applicable
to a well maintained and operated hotel.
ARTICLE III
3.1 Rent. Lessee will pay to Lessor in lawful money of the United
States of America which shall be legal tender for the payment of public and
private debts, in immediately available funds, at Lessor's address set forth in
Article XXXI hereof or at such other place or to such other Person, as Lessor
from time to time may designate in a Notice, (A) Base Rent and (B) Percentage
Rent and (C) Additional Charges, during the Term, as follows:
(a) Base Rent: The annual sum of $20,400,000, payable in
arrears in equal, consecutive monthly installments, on or before the tenth day
of each calendar month of the Term ("Base Rent"); provided, however, that the
first monthly payment of Base Rent shall be payable on the Commencement Date
and that the first and last monthly payments of Base Rent shall be prorated as
to any partial month; and provided, further, that Base Rent shall be increased
by increases in CPI as set forth in Subsection (c) below.
(b) Percentage Rent: For each Fiscal Year and Partial
Fiscal Year during the Term commencing with the Fiscal Year or Partial Fiscal
Year ending December 31, 1998, Lessee shall pay percentage rent ("Percentage
Rent"), to the extent that such Percentage Rent is in excess of Base Rent for
such Fiscal Year or Partial Fiscal Year, in an amount calculated by the
following formula:
The amount equal to the sum of (i) the Room Revenues
Computation for such Fiscal Year or Partial Fiscal Year, plus
(ii) the Food and Beverage Revenues Computation for such
Fiscal Year or Partial Fiscal Year, plus (iii) the Other
Revenues Computation for such Fiscal Year or Partial Fiscal
Year (each as defined below and, collectively, the "Revenue
Computations").
For the purpose of this formula:
-22-
28
(1) The Room Revenues Computation for the
applicable Fiscal Year (or Partial Fiscal Year) is equal to
the sum of (A) 31.5% of all amounts above $13,166,000 up to
$45,044,000 in Room Revenues for such Fiscal Year or Partial
Fiscal Year, (B) 67% of all amounts above $45,044,000 up to
$62,367,000 in Room Revenues for such Fiscal Year or Partial
Fiscal Year, and (C) 55% of all Room Revenues in excess of
$62,367,000 for such Fiscal Year or Partial Fiscal Year (the
preceding dollar figures are referred to hereinafter as the
"Threshold Amounts"); and
(2) The Other Revenues Computation for the
applicable Fiscal Year (or Partial Fiscal Year) is equal to
30% of Other Revenues for such Fiscal Year or Partial Fiscal
Year; and
(3) The Food and Beverage Revenues Computation is
equal to 10% of all Food and Beverage Revenues for the
applicable Fiscal Year or portion thereof; provided, however,
that the Food and Beverage Revenues Computation shall not
exceed $3,900,000.
(c) CPI Adjustments to the Threshold Amounts and Base
Rent: For each Fiscal Year of the Term beginning on or after January 1, 1999,
the Threshold Amounts and Base Rent shall be adjusted from time to time as
follows:
If the most recently published Consumer Price Index as of the
last day of the last month (the "Comparison Month") of any
Fiscal Year is different than the average Consumer Price Index
for the 12 month period prior thereto, each of Base Rent and
the Threshold Amounts for the next Fiscal Year shall be
adjusted by the percentage change in the Consumer Price Index
calculated by multiplying the Base Rent and each Threshold
Amount by the quotient obtained by dividing the Consumer Price
Index for the most recent Comparison Month by the Consumer
Price Index for the month which is exactly 12 months prior
thereto.
Adjustments in the Threshold Amounts and Base Rent shall be effective
on the first day of the first calendar month of the Fiscal Year to which such
adjusted Threshold Amounts apply. In the event of casualty and corresponding
payment of
-23-
29
rent out of the proceeds of business interruption insurance provided pursuant
to Section 13.1(a), the Percentage Rent shall be based upon the higher of (i)
actual revenues, (ii) revenues for the same period in the previous Fiscal Year
(whether or not during the Term), or (iii) projected revenues used in computing
the final insurance settlement.
3.2 Payment of Percentage Rent. Percentage Rent shall be due and
payable quarterly on or before the 30th day after the last day of each quarter
during the Term. Additionally, an Officer's Certificate, setting forth the
calculation of such rent payment for such quarter, shall be delivered to Lessor
quarterly, together with such quarterly Percentage Rent payment after each
quarter of each Fiscal Year (or part thereof) during the Term. Such quarterly
payment shall be based on the formula set forth in Section 3.1(b), but, in
calculating the Revenue Computations for each quarter, gross revenues for the
year to date shall be annualized by dividing such sum by the number of months
which have passed year to date (including the current month) and multiplying
the result by 12. The resulting Percentage Rent amount shall be multiplied by
the number of months that have passed year-to-date (including the current
month) and divided by 12. Payments of Base Rent and Percentage Rent for the
year to date shall be subtracted from the result to arrive at the Percentage
Rent payment due for that quarter. The Revenue Computations shall be
appropriately adjusted to calculate Percentage Rent for partial years. There
shall be no reduction in the Base Rent regardless of the result of the Revenue
Computations.
In addition, on or before March 1 of each year, commencing with March
1, 1999, Lessee shall deliver to Lessor an Officer's Certificate reasonably
acceptable to Lessor setting forth the computation (based on audited financial
statements of Lessee) of the actual Percentage Rent that accrued for each
quarter of the Fiscal Year that ended on the immediately preceding December 31
and shall pay to Lessor, with the delivery of the Officer's Certificate, the
amount of Percentage Rent due and payable for the Fiscal Year then ended as
shown in the Officer's Certificate, if any, that exceeds the amount actually
paid as Percentage Rent by Lessee for such Fiscal Year. If the Percentage Rent
actually due and payable for such Fiscal Year is shown by such certificate to
be less than the amount actually paid as Percentage Rent for the applicable
Fiscal Year, Lessor, at its option, shall reimburse such amount to Lessee or
credit such amount against the next quarter's Percentage Rent payments;
provided, however, that no Event of Default exists.
-24-
30
Any difference between the annual Percentage Rent due and payable for
any Fiscal Year (as shown in the applicable Officer's Certificate) and the
total amount of quarterly payments for such Fiscal Year actually paid by Lessee
(i) shall bear interest at the Overdue Rate in the case of an underpayment or
(ii) shall bear interest at the Base Rate in the case of an overpayment, which
interest shall accrue from the close of such Fiscal Year until the amount of
such difference shall be paid by Lessor to Lessee or Lessee to Lessor or
otherwise discharged by credit to Lessee. Any such interest payable to Lessor
shall be deemed to be and shall be payable as Additional Charges.
The obligation to pay Percentage Rent shall survive the expiration or
earlier termination of the Term. A final reconciliation, taking into account,
among other relevant adjustments, any adjustments which are accrued after such
expiration or termination date but which related to Percentage Rent accrued
prior to such termination date and Lessee's computation of Percentage Rent due
and payable, shall be made not later than 90 days after such expiration or
termination date. Within such 90 day period, Lessee shall deliver to Lessor an
Officer's Certificate setting forth the final Percentage Rent amount payable to
Lessor and payment of the amount due, if any.
3.3 Confirmation of Percentage Rent. Lessee shall utilize, or
cause to be utilized, an accounting system for the Leased Property in
accordance with generally accepted accounting principles consistently applied
and the Uniform System, that will accurately record all data necessary to
compute Percentage Rent, and Lessee shall retain for at least four years after
the expiration of each Fiscal Year (and in any event until the reconciliation
described in Section 3.2 for such Fiscal Year has been made), reasonably
adequate records conforming to such accounting system showing all data
necessary to compute Percentage Rent for the applicable Fiscal Years. In the
event of a conflict between generally accepted accounting principles and the
Uniform System, the Uniform System shall prevail. Lessor (or its accountants
or representatives), at its expense (except as provided herein), shall have the
right from time to time to audit the information that formed the basis for the
data set forth in any Officer's Certificate provided under Section 3.2 and, in
connection with such audits, to examine all Lessee's records (including
supporting data and sales and excise tax returns) reasonably required to verify
Percentage Rent, subject to any prohibitions or limitations on disclosure of
any such data under Legal Requirements. If any such audit discloses a
deficiency in the payment of Percentage Rent, and either Lessee agrees with the
result of such audit or the matter is
-25-
31
otherwise determined or compromised, Lessee shall forthwith pay to Lessor the
amount of the deficiency, as finally agreed or determined, together with
interest calculated at the Overdue Rate from the due date for the last
quarterly payment of Percentage Rent for the Fiscal Year to the date of payment
thereof; provided, however, that as to any audit that is commenced more than
two years after the date Percentage Rent for any Fiscal Year is reported by
Lessee to Lessor, the deficiency, if any, with respect to such Percentage Rent,
shall bear interest at the Overdue Rate only from the date such determination
of deficiency is made unless such deficiency is the result of gross negligence
or willful misconduct on the part of Lessee. If any such audit discloses that
the Percentage Rent actually due from Lessee for any Fiscal Year exceeds those
reported by Lessee by more than two percent, Lessee shall pay the cost of such
audit and examination. Any proprietary information obtained by Lessor pursuant
to the provisions of this Section shall be treated as confidential, except that
such information may be used, subject to appropriate confidentiality
safeguards, in any litigation between the parties, and except further that
Lessor may disclose such information to prospective lenders or purchasers,
their respective attorneys, accountants and other representatives, or pursuant
to any Legal Requirements. The obligations of Lessee contained in this Section
shall survive the expiration or earlier termination of this Lease.
3.4 Additional Charges. In addition to the Base Rent and
Percentage Rent, (a) Lessee also will pay and discharge as and when due and
payable all other amounts, liabilities, obligations, costs and expenses which
are provided to be paid by Lessee under this Lease or which are necessary to
perform its obligations hereunder and any Management Agreement with respect to
the Leased Property, and (b) in the event of any failure on the part of Lessee
to timely pay any of those items referred to in clause (a) of this Section 3.4,
Lessee also will promptly pay and discharge every fine, penalty, interest and
cost that may be added for non-payment or late payment of such items (the items
referred to in clauses (a) and (b) of this Section 3.4 being additional rent
hereunder and being referred to herein collectively as the "Additional
Charges"), and Lessor shall have all legal, equitable and contractual rights,
powers and remedies provided either in this Lease or by statute or otherwise in
the case of non-payment of the Additional Charges as in the case of non-payment
of the Base Rent. If any installment of Base Rent, Percentage Rent or
Additional Charges (but only as to those Additional Charges that are payable
directly to Lessor) shall not be paid on its due date, Lessee will pay Lessor
on demand, as Additional Charges, a late charge (to the extent permitted by
law) computed at the Overdue Rate on the amount of such
-26-
32
installment, from the due date of such installment to the date of payment
thereof. To the extent that Lessee pays any Additional Charges to Lessor
pursuant to any requirement of this Lease (which charges are not payable to
Lessor), Lessee shall be relieved of its obligation to pay such Additional
Charges to the entity to which they would otherwise be due and Lessor shall pay
same from monies received from Lessee.
3.5 Annual Revenue Projections. No later than 45 days prior to
the commencement of each Fiscal Year, Lessee shall submit Annual Revenue
Projections for such Fiscal Year to Lessor. The Annual Revenue Projections
shall be subject to Lessor's prior approval as to form and content and shall be
in such form and shall contain such information as Lessee included in its
annual revenue projections in accordance with its past practice, and shall, in
any event, include the following:
(a) Lessee's reasonable estimate of Room and Other
Revenues and Food and Beverage Revenues for the Fiscal Year itemized
on a monthly basis, as such estimates may be revised or replaced from
time to time by Lessee; and
(b) A projection of the Percentage Rent payable for such
Fiscal Year.
3.6 Annual Capital Expenditures Budget. Subject to the provisions
of Sections 8.1, 9.1 and 18.1(a), Lessor, at its sole expense, shall be
responsible for all Capital Expenditures as defined in this Section 3.6 and in
accordance with Exhibit F attached hereto and incorporated herein by reference.
Not later than 45 days prior to the commencement of each Fiscal Year or Partial
Fiscal Year, Lessee shall submit to Lessor, Lessee's proposed Annual Capital
Expenditures Budget. The Annual Capital Expenditures Budget (the "Capital
Expenditures Budget") shall contain the following:
(a) Lessee's estimate of the amounts to be expended
during the upcoming Fiscal Year to renew, replace or refurbish FF&E in
each Hotel, and a reasonably detailed description of the expenses to
be incurred, and Lessee's estimate of the amount that will be expended
during the upcoming Fiscal Year on capital repairs, replacements and
improvements to the Leased Improvements, together with a reasonably
detailed description of the capital repairs, replacements and
improvements that will be undertaken. The expenditures referred to in
this Section 3.6 are referred to in this Lease as "Capital
Expenditures."
-27-
33
(b) A capital renewal program showing the major
anticipated Capital Expenditures that will be incurred over the
ensuing three year and five year periods. If Lessor shall not give
its approval to the Annual Capital Expenditures Budget, Lessee shall
revise the Annual Capital Expenditures Budget, as may be required to
obtain Lessor's consent thereto.
If such Capital Expenditure Budget provides for the
expenditure of funds in addition to (i) all amounts in the FFE Reserve, (ii)
all amounts to be added to the FFE Reserve on a current basis, and (iii) the
Excess Capex Fund (as herein defined), such Capital Expenditure Budget, in
total, shall be subject to Lessor's approval or disapproval within thirty (30)
days after delivery of the Capital Expenditure Budget to Lessor. The sum of
the amounts in clauses (i), (ii) and (iii) above is referred to herein as the
"Discretionary Capex Fund."
3.7 Capital Expenditure Reserves.
(a) Lessor shall reserve, from Rent hereunder, funds in
an amount equal to the Base FFE Reserve (the Base FFE Reserve plus the
other amounts to be added to the Base FFE Reserve pursuant to this
Section 3.7 being referred to herein as the "FFE Reserve") and deposit
such funds in an interest bearing account to pay the cost of additions
to and replacements of Furniture, Fixtures and Equipment. All
proceeds from the sale of Furniture, Fixtures and Equipment owned by
Lessor shall be added to the FFE Reserve and deposited in the interest
bearing account, and all interest that is earned on funds in the FFE
Reserve shall be added to the FFE Reserve. All funds in the FFE
Reserve shall be owned by Lessor. Lessee may waive the actual
depositing of amounts to be added to the FFE Reserve on an annual
basis. Notwithstanding any such waiver, Lessee shall be entitled to
budget and expend, and Lessor shall be liable for the payment of, such
amounts as if they had been deposited.
(b) In addition to the FFE Reserve, from and after June
30, 1998, Lessor shall reserve from rent paid hereunder (but need not,
in either case, deposit) funds in an amount equal to one percent (1%)
of Gross Revenues for FFE Reserves (the "Additional FFE Reserve")
toward the cost of Capital Expenditures. All funds in the Additional
FFE Reserve shall be owned by Lessor. Amounts in the Additional FFE
Reserve up to the Capex Threshold Amount shall be disbursed only to
fund Capital Expenditures that have been approved by Lessor in its
sole discretion. Funds in the Additional FFE Reserve in excess of the
Capex Threshold Amount ("Excess Capex
-28-
34
Funds") shall be deposited in and be subject to the same conditions as
applicable to the FFE Reserve. If, by reason of the adjustment in the
Capex Threshold Amount on any Adjustment Date, the amount of the
Excess Capex Funds which are then held in the FFE Reserve are in
excess of the amount that would thereafter be required, such surplus
shall be disbursed to Lessor to be held by Lessor as a part of the
Additional FFE Reserve.
(c) If Lessor disapproves of the Capital Expenditure
Budget (pursuant to the provisions of Section 3.6), Lessee shall
nonetheless have, and is hereby granted, the right and authority to
make any expenditures set forth on the disapproved Capital Expenditure
Budget and have Lessor pay the cost thereof from the Discretionary
Capex Fund.
(d) In addition to, and without limiting, the provisions
of subsections 3.7(a)-(c), Lessor agrees to spend $10,000,000 prior to
June 30, 2000, on Capital Expenditures. Lessor will consult with
Lessee, but decisions regarding the nature and timing of such Capital
Expenditures and the Hotels involved, whether or not the projects are
contemplated by the Capital Expenditure Budget, shall be entirely
within the discretion of Lessor. Any portion of said $10,000,000
Capital Expenditure payment which is not spent as of June 30, 2000,
shall be deposited in the Discretionary Capex Fund.
(e) In the event that a Priority Capital Expenditure is
required, the cost of such Priority Capital Expenditure shall be
allocated and charged:
(1) if the Priority Capital Expenditure is a
Shared Priority Capital Expenditure, to the
FFE Reserve and the Additional FFE Reserve at
a ratio of three to one. If the FFE Reserve
is exhausted prior to full payment of such
Shared Priority Capital Expenditure, then the
balance of such cost ("Balance of Shared
Priority Capital Cost") shall be paid for
from the Additional FFE Reserve until the
Additional FFE Reserve is exhausted, and
thereafter such cost shall be paid for by
Lessor. Any amounts paid for on account of
the Balance of Shared Priority Capital Cost
from the Additional FFE Reserve, Lessor shall
be reimbursed dollar-for-dollar from future
amounts to be added to
-29-
35
the FFE Reserve, as they accrue, on a monthly
basis;
(2) if the Priority Capital Expenditure is not a
Shared Priority Capital Expenditure, to the
Additional FFE Reserve until the Additional
FFE Reserve is exhausted, and thereafter such
cost shall be paid for by Lessor.
(f) Except as set forth in (a)-(d) above, and in connection
with Priority Capital Expenditures, under no circumstances will (i)
Lessor be required to make expenditures to maintain, repair or improve
any Hotel, or (ii) Lessee be authorized to make any expenditures on
behalf of Lessor to maintain, repair or improve any Hotel.
Notwithstanding anything in this Lease to the contrary, if Lessor is
obligated under this Lease to expend any sums to comply with
Applicable Laws (including without limitation, Environmental Laws),
Lessor shall have the right, at its expense, to contest such
obligation with the appropriate governmental authority or other
affected entity or person, but only provided that such contest would
not result in (i) the closing of all or any portion of one or more of
the Hotels, or (ii) the imposition of criminal penalties on Lessor,
Lessee or Manager (if any).
3.8 Application of Capital Expenditure Funds. Lessee shall be
responsible for the implementation of the Capital Expenditure program. The
cost of any Capital Expenditure made pursuant to this Lease shall be promptly
paid by Lessor within ten days of receipt of a requisition (including
appropriate documentation establishing the amounts to be paid in accordance
with the Capital Expenditure Budget or such supporting documentation as Lessor
may reasonably require) from Lessee from the Discretionary Capex Fund or with
Lessor supplied funds, if applicable. Lessor and Lessee shall cooperate in
good faith to accomplish such implementation as quickly as practicable in
accordance with sound business practices. Except as set forth in Sections 3.6,
3.7 and 3.8 and in connection with Priority Capital Expenditures, under no
circumstances will (i) Lessor be required to make expenditures to maintain,
repair or improve any Hotel, or (ii) Lessee be authorized to make any
expenditures on behalf of Lessor to maintain, repair or improve any Hotel.
-30-
36
3.9 Agent Method for Purchases of Capital Expenditures.
(a) Lessor hereby retains Lessee as an independent contractor
on the terms contained in this Lease to act for and on behalf of
Lessor as Lessor's agent in connection with the implementation of the
Capital Expenditure program for each Facility. Notwithstanding
anything in this Lease to the contrary, Lessee may hire an agent
(including its Manager (if any)) to perform its duties in connection
with the implementation of the Capital Expenditure program for each
Facility. Lessee's cost analysis shall be based upon the plans and
furnishings set forth in the specifications and other written
information agreed to be implemented under the Capital Expenditure
Budget. Lessee will be responsible for negotiating purchases of
Capital Expenditures on Lessor's behalf. All purchases will be based
on Lessee's actual cost, net of trade discounts (including cash
discounts, where applicable).
(b) Lessor acknowledges and agrees that purchase orders
relating to any Capital Expenditure for each Facility will be executed
by Lessee as agent for and on behalf of Lessor. Lessor further
acknowledges and agrees that Lessee shall have no liability under this
Lease or otherwise for payment of the Capital Expenditure or for
freight or storage related to the Capital Expenditure provided that no
expenditures shall be made except in accordance with the Budget and as
provided above. All down payments as well as payment of all vendor
invoices are the responsibility and obligation of Lessor. Lessor
acknowledges that a delay on the part of Lessor relating to any
required deposits or payments can result in delivery delays of the
Capital Expenditure. The timing of the making of all purchase orders
and delivery schedules will be established by mutual agreement of
Lessor and Lessee.
(c) Lessee shall not be obligated under any circumstances
to (but in its discretion may) use its own funds for the purpose of
making down payments (either at the time purchase orders are processed
or otherwise) or making progress or final payments to Capital
Expenditure vendors. Taxes, warehouse, delivery, redelivery,
restocking, installation and similar charge, including but not limited
to delivery and storage costs, shall be obligations of Lessor and
Lessor agrees to perform such obligations in a timely manner. All
vendor invoices shall be addressed to and issued directly to Lessor.
-31-
37
(d) Lessor shall designate a representative authorized to act
on its behalf with respect to the Leased Property.
(e) Lessor agrees to reimburse Lessee for all out-of-pocket
expenses (including long distance and messenger fees) incurred by
Lessee on behalf of or in connection with the Capital Expenditures for
each Facility. All such reimbursements shall be paid monthly as
incurred upon receipt of bills or other evidence reasonably
satisfactory to Lessor.
(f) Lessor shall furnish to Lessee from time to time all
information, take such actions and process such draws as may be
reasonably requested by Lessee or otherwise required under this Lease
in a timely manner as reasonably necessary for the orderly progress of
work under this Lease. Lessee shall have no responsibility or be
liable in any manner whatsoever for any delay caused by information to
be supplied or actions to be taken by Lessor, its agents or other
independent contractors working on or at any Facility or caused by
Lessor's failure to timely pay vendors.
(g) If Lessor desires to change, modify or alter the quantity
or specifications of any Capital Expenditure purchased by Lessee in
writing, Lessee will endeavor to satisfy any such request. Lessor
acknowledges and understands that Lessee's ability to comply with
requested changes, modifications or alterations is subject to
acceptance and performance on the part of the vendors and supplier
with whom Lessee has entered into agreements for and on behalf of
Lessor. Lessee assumes no liability or responsibility for its
inability to comply with Lessor's request for changes, modifications
or alterations under this paragraph.
(h) Lessor shall be responsible for and shall pay all
applicable sales and use taxes arising as a result of the purchase or
use of the Capital Expenditure or Lessor shall deliver appropriate
exemption certificates.
ARTICLE IV
4.1 Payment of Taxes and Impositions. Lessor shall pay the taxes
referenced in clause (i) of the definition of "Lessor Tax, Insurance and Cap Ex
Obligations." Subject to Article XII relating to permitted contests, Lessee
will pay, or cause to be paid, all Impositions 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
-32-
38
feasible, and will promptly furnish to Lessor copies of official receipts or
other satisfactory proof evidencing such payments. Lessor and Lessee shall,
upon request of the other, provide such data as is maintained by the party to
whom the request is made with respect to the Leased Property as may be
necessary to prepare any required returns and reports. Lessee shall file all
personal property tax returns in such jurisdictions where it is legally
required to so file. Lessor, to the extent it possesses the same, and Lessee,
to the extent it possesses the same, will provide the other party, upon
request, with cost and depreciation records necessary for filing returns for
any property so classified as personal property. Where Lessor is legally
required to file personal property tax returns, Lessor shall provide Lessee
with copies of assessment notices in sufficient time for Lessee to file a
protest. Lessee may, upon notice to Lessor, at Lessee's option and at Lessee's
sole expense, protest, appeal, or institute such other proceedings (in its or
Lessor's name) as Lessee may deem appropriate to effect a reduction of real
estate or personal property assessments for those Impositions to be paid by
Lessee, and Lessor, at Lessee's expense as aforesaid, shall fully cooperate
with Lessee in such protest, appeal, or other action. Lessee hereby agrees to
indemnify, defend, and hold harmless Lessor from and against any claims,
obligations, and liabilities against or incurred by Lessor in connection with
such cooperation, although Lessee is not liable for the amount of any (i) Real
Estate Taxes or (ii) personal property taxes attributable to personal property
owned by Lessor. Lessor, however, reserves the right to effect any such
protest, appeal or other action and, upon notice to Lessee, shall control any
such activity, which shall then go forward at Lessor's sole expense. Upon such
notice, Lessee, at Lessor's expense, shall cooperate fully with such
activities.
4.2 Utility Charges. Lessee will be solely responsible for
obtaining utility services to the Leased Property and will pay, or cause to be
paid, all charges for electricity, gas, oil, water, sewer and other utilities
attributable to, or used on, under or in the Leased Property during the Term as
such charges become due.
4.3 Insurance Premiums. Lessee will pay or cause to be paid all
premiums for the insurance coverages required to be maintained by it under
Article XIII. Lessor shall pay or cause to be paid all premiums for the
insurance coverages required to be maintained by it under Article VIII.
-33-
39
ARTICLE V
No Termination, Abatement, Etc. Except as otherwise specifically
provided in this Lease, Lessee, to the extent permitted by law, shall remain
bound by this Lease in accordance with its terms and shall neither take any
action without the written consent of Lessor to modify, surrender or terminate
the same, nor seek nor be entitled to any abatement, deduction, deferment or
reduction of the Rent, or setoff against the Rent, nor shall the obligations of
Lessee be otherwise affected by reason of (a) any damage to, or destruction of,
any Leased Property or any portion thereof from whatever cause or any Taking of
the Leased Property or any portion thereof, (b) any claim which Lessee has or
might have against Lessor by reason of any default or breach of any warranty by
Lessor under this Lease or any other agreement between Lessor and Lessee, or to
which Lessor and Lessee are parties, (c) any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding up
or other proceedings affecting Lessor or any assignee or transferee of Lessor,
(d) any lawful or unlawful prohibition of, or restriction upon, Lessee's use of
Leased Property or any portion thereof, or interference with such use, or (e)
for any other cause whether similar or dissimilar to any of the foregoing
including, without limitation, those referred to in Article XXXVII. Lessee
hereby specifically waives all rights, arising from any occurrence whatsoever,
which may now or hereafter be conferred upon it by law to (1) modify, surrender
or terminate this Lease or quit or surrender the Leased Property or any portion
thereof, or (2) xxxxx, reduce, suspend or defer Rent or other sums payable by
Lessee hereunder, except as otherwise specifically provided in this Lease. The
obligations of Lessee hereunder shall be separate and independent covenants and
agreements and the Rent and all other sums payable by Lessee hereunder shall
continue to be payable in all events unless the obligations to pay the same
shall be terminated pursuant to the express provisions of this Lease or by
termination of this Lease other than by reason of an Event of Default.
ARTICLE VI
6.1 Ownership of the Leased Property. Lessee acknowledges that
the Leased Property is the property of Lessor or the Ground Lessors under the
Ground Leases and that Lessee has only the right to the possession and use of
the Leased Property upon the terms and conditions of this Lease.
6.2 Lessee's Personal Property. Throughout the Term, Lessee will
acquire, own, maintain and replace such personal
-34-
40
property (other than Capital Expenditures) and Inventory as is required to
operate the Leased Property as hotels and, otherwise, in the manner
contemplated by this Lease. At all times during the Term, Lessee shall
maintain an adequate and customary supply of Inventory. Lessee may (and shall
as provided herein below), at its expense, install, affix or assemble or place
on any parcels of the Land or in any of the Leased Improvements, any items of
personal property (including Inventory) owned by Lessee (collectively, the
"Lessee's Personal Property"). Lessee, at the commencement of the Term, and
from time to time thereafter, shall provide Lessor with an accurate list of all
such items of the Lessee's Personal Property. Lessee may, subject to the
conditions set forth in this Section 6.2 and Section 6.3, remove any of
Lessee's Personal Property set forth on such list at any time during the Term
or upon the expiration or any prior termination of the Term. All of Lessee's
Personal Property not removed by Lessee within ten days following the
expiration or earlier termination of the Term shall be considered abandoned by
Lessee and may be appropriated, sold, destroyed or otherwise disposed of by
Lessor without first giving Notice thereof to Lessee, without any payment to
Lessee and without any obligation to account therefor. Lessee will, at its
expense, restore the Leased Property to the condition required by Section
9.1(b), including repair of all damage to the Leased Property caused by the
removal of Lessee's Personal Property, whether effected by Lessee or Lessor.
Lessee may make such financing arrangements, title retention agreements, leases
or other agreements with respect to the Lessee's Personal Property as it sees
fit provided that Lessee first advises Lessor of any such arrangement and such
arrangement expressly provides that in the event of Lessee's default
thereunder, Lessor may assume Lessee's obligations and rights under such
arrangement.
6.3 Lessor's Lien. To the fullest extent permitted by applicable
law, Lessor is granted a lien and security interest on all of Lessee's Personal
Property now or hereinafter placed in or upon the Leased Property, and such
lien and security interest shall remain attached to Lessee's Personal Property
until payment in full of all Rent and satisfaction of all of Lessee's
obligations hereunder; provided, however, Lessor shall subordinate its lien and
security interest to any purchase money security interest of any non-Affiliate
of Lessee which finances such Lessee's Personal Property, the terms and
conditions of such subordination to be satisfactory to Lessor in the exercise
of reasonable discretion. Lessee shall, upon the request of Lessor, execute
such financing statements, estoppel certificates and other documents or
instruments reasonably requested by Lessor to perfect the lien and security
interests herein granted.
-35-
41
ARTICLE VII
7.1 Condition of the Leased Property. Lessee acknowledges receipt
and delivery of possession of the Leased Property. Lessee has examined and
otherwise has knowledge of the condition of the Leased Property and has found
the same to be satisfactory for its purposes hereunder. Lessee is leasing the
Leased Property "as is," "where is" and with "all faults," in its present
condition. Lessee waives any claim or action against Lessor in respect of the
condition of the Leased Property. 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 THE RIGHTS OF THE
GROUND LESSORS UNDER THE GROUND LEASES, AND TO THE EXISTING STATE OF TITLE
INCLUDING ALL CURRENT AND FUTURE COVENANTS, CONDITIONS, RESTRICTIONS,
EASEMENTS, GROUND LEASES AND OTHER MATTERS (NOT LIMITED TO ITEMS OF RECORD)
INCLUDING ALL APPLICABLE LEGAL REQUIREMENTS, THE LIEN OF FINANCING INSTRUMENTS,
MORTGAGES, DEEDS OF TRUST AND SECURITY DEEDS, AND INCLUDING OTHER MATTERS WHICH
WOULD BE DISCLOSED BY AN INSPECTION OF THE LEASED PROPERTY OR BY AN ACCURATE
SURVEY THEREOF. LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, IN RESPECT OF 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, OR AS TO THE TITLE THERETO 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. Notwithstanding the foregoing
but subject to Section 5.18 of the Merger Agreement, however, to the extent
permitted by law, Lessor hereby assigns to Lessee all of Lessor's rights to
proceed against any predecessor in title other than Lessee (or an Affiliate of
Lessee which conveyed the Leased Property to Lessor) for breaches of warranties
or representations or for latent defects in the Leased Property. Lessor shall
fully cooperate with Lessee in the prosecution of any such claim, in Lessor's
or Lessee's name, all at Lessee's sole cost and expense. Lessee hereby agrees
to indemnify, defend and hold harmless Lessor from and against any claims,
obligations and liabilities against or incurred by Lessor in connection with
such cooperation. All amounts recovered that are attributable to the period
after the Term shall belong to Lessor.
7.2 Use of the Leased Property.
(a) Lessee covenants that it will proceed with all due
diligence and will exercise its best efforts to obtain and to maintain all
license, permits and approvals needed to use
-36-
42
and operate the Leased Property and each Facility under applicable local, state
and federal law.
(b) Lessee shall use or cause to be used the Leased
Property only as hotel facilities (including food and beverage operations)
consistent with its present use, and for such other uses as may be necessary or
incidental to such use or such other use as otherwise approved by Lessor (the
"Primary Intended Use"). Lessee shall not use the Leased Property or any
portion thereof for any other use without the prior written consent of Lessor,
which consent may be granted, denied or conditioned in Lessor's sole
discretion. No use shall be made or permitted to be made of the Leased
Property, and no acts shall be done, which will cause the cancellation or
increase the premium of any insurance policy covering the Leased Property or
any part thereof (unless another adequate policy satisfactory to Lessor is
available and Lessee pays any premium increase), nor shall Lessee sell or
permit to be kept, used or sold in or about the Leased Property any article
which may be prohibited by law or fire underwriter's regulations. Lessee
shall, at its sole cost, comply with all of the requirements pertaining to the
Leased Property of any insurance board, association, organization or company
necessary for the maintenance of insurance, as herein provided, covering the
Leased Property or any part thereof and Lessee's Personal Property.
(c) Subject to the provisions of Articles XIV and XV
Lessee covenants and agrees that during the Term it will (1) maintain and
operate continuously each Facility as a hotel, (2) keep in full force and
effect and comply with all the provisions of any Management Agreement, (3) not
terminate or amend any Management Agreement without the consent of Lessor, (4)
maintain appropriate certifications and licenses for such use and otherwise
comply with all Legal Requirements and (5) seek to maximize the gross revenues
generated therefrom consistent with sound business practices.
(d) Lessee shall not commit or suffer to be committed any
waste on the Leased Property, or any 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, subject to Lessor's prior consent.
-37-
43
(f) Lessee shall not use, generate, handle, dispose or store
Hazardous Materials on the Leased Property, except in the normal course of
operations of the Leased Property as hotel facilities and in compliance with all
Environmental Laws.
(g) Lessee shall not enter into any collective bargaining
agreements with respect to any of the employees at the Leased Property without
the prior consent of Lessor, which shall not be unreasonably withheld or
delayed, unless required by law.
(h) Lessee hereby assumes and agrees to perform all of the
obligations of Lessor under all leases in effect at the Leased Property as of
the date of commencement of the Term.
(i) Lessee represents that, as of the date hereof, its sole
business activity consists of, and Lessee covenants that, during the Term
hereof, its sole business activity shall consist of the lease and operation of
the Leased Property.
7.3 Lessor to Grant Easements, Etc. Lessor will, from time to
time, so long as no Event of Default has occurred and is continuing, at the
request of Lessee and at Lessee's cost and expense (but subject to the approval
of Lessor, which approval shall not be unreasonably withheld or delayed), (a)
grant easements and other rights in the nature of easements with respect to the
Leased Property or any part thereof to third parties, (b) release existing
easements or other rights in the nature of easements which are for the benefit
of the Leased Property or any part thereof, (c) dedicate or transfer unimproved
portions of the Leased Property or any part thereof for road, highway or other
public purposes, (d) execute petitions to have the Leased Property or any part
thereof annexed to any municipal corporation or utility district, (e) execute
amendments or additions to any covenants and restrictions affecting the Leased
Property or any part thereof and (f) execute and deliver to any Person any
instrument appropriate to confirm or effect such grants, releases, dedications,
transfers, petitions and amendments (to the extent of its interests in the
Leased Property), but only upon delivery to Lessor of an Officer's Certificate
stating that such grant, release, dedication, transfer, petition or amendment
is beneficial to the proper conduct of the business of Lessee on the Leased
Property and does not materially reduce the value of the Leased Property.
-38-
44
ARTICLE VIII
8.1 Compliance with Legal, Insurance Requirements, Lessor's
Insurance and Tax Obligations, Lessee's Net Worth Obligation. Subject to
Article XII relating to permitted contests, Lessee, at its expense, will
promptly (a) comply and cause the Leased Property to comply with all applicable
Legal Requirements and Insurance Requirements in respect of the use, operation,
maintenance, repair and restoration of the Leased Property; provided, however,
that Lessor shall be responsible for the cost of compliance with Insurance
Requirements presented to Lessor in writing, to the extent set forth in Article
XIII, and shall be responsible for all Capital Expenditures to the extent
provided in Sections 3.6 and 3.7, unless the need for such Capital Expenditure
is the result of Lessee's negligence, misconduct or an Alteration (as defined
in Section 10.1) made by or commenced by Lessee other than Alterations
contained in the Capital Expenditure Budget, and (b) procure, maintain and
comply with all appropriate licenses and other authorizations required for any
use of the Leased Property and Lessee's Personal Property then being made, and
for the proper erection, installation, operation and maintenance of the Leased
Property or any part thereof.
8.2 Legal Requirements Covenants. Lessee covenants and agrees
that the Leased Property and Lessee's Personal Property shall not be used for
any unlawful purpose, and that Lessee shall not permit or suffer to exist any
unlawful use of the Leased Property by others. Lessee shall acquire and
maintain all appropriate licenses, certifications, permits and other
authorizations and approvals needed to operate the Leased Property in its
customary manner for the Primary Intended Use, and any other lawful use
conducted on the Leased Property as may be permitted from time to time
hereunder. Lessee further covenants and agrees that Lessee's use of the Leased
Property and maintenance, alteration, and operation of the same, and all parts
thereof, shall at all times conform to all Legal Requirements, unless the same
are finally determined by a court of competent jurisdiction to be unlawful (and
Lessee shall cause all sub-tenants, invitees or others to so comply with all
Legal Requirements). Lessee may, however, upon prior Notice to Lessor, and
subject to the provisions of Article XII, contest the legality or applicability
of any such Legal Requirement or any licensure or certification decision if
Lessee maintains such action in good faith, with due diligence, without
prejudice to Lessor's rights hereunder, and at Lessee's sole expense. If by
the terms of any such Legal Requirement compliance therewith pending the
prosecution of any such proceeding may legally be delayed without the
incurrence of any lien, charge or liability of any kind against any Facility or
Lessee's leasehold interest therein,
-39-
45
without adversely affecting the continued operation of the Facility and without
subjecting Lessee or Lessor to any liability, civil or criminal, for failure so
to comply therewith, Lessee may delay compliance therewith until the final
determination of such proceeding. If any lien, charge or civil or criminal
liability would be incurred by reason of any such delay, Lessee, with the prior
written consent of Lessor, which consent shall not be unreasonably withheld,
may nonetheless contest as aforesaid and delay as aforesaid provided that such
delay would not subject Lessor to criminal liability and Lessee both (a)
furnishes to Lessor security reasonably satisfactory to Lessor against any loss
or injury to Lessor by reason of such contest or delay and (b) prosecutes the
contest with due diligence and in good faith.
8.3 Environmental Covenants. In addition to, and not in
diminution of, Lessee's covenants and undertakings in Sections 8.1 and 8.2
hereof, Lessee covenants and undertakes with Lessor as follows:
(a) At all times hereafter until such time as all
liabilities, duties or obligations of Lessee to Lessor under the Lease have
been satisfied in full, Lessee shall fully comply with all Environmental Laws
applicable to the Leased Property and the operations thereon, subject to
Lessor's obligation under Section 3.6 and 3.7 to pay for Capital Expenditures
(unless the need for such Capital Expenditure is a result of Lessee's
negligence, misconduct or an Alteration (as defined in Section 10.1) made by or
commenced by Lessee other than Alterations contained in the Capital Expenditure
Budget). Lessee agrees to give Lessor prompt written notice of (1) all
Environmental Liabilities; (2) all pending, threatened or anticipated
Proceedings, and all notices, demands, requests or investigations, relating to
any Environmental Liability or relating to the issuance, revocation or change
in any Environmental Authorization required for operation of the Leased
Property; (3) all Releases at, on, in, under or in any way affecting the Leased
Property, or any Release known by Lessee at, on, in or under any property
adjacent to or near the Leased Property; and (4) all facts, events or
conditions that could reasonably lead to the occurrence of any of the
above-referenced matters.
(b) Lessor hereby agrees to defend, indemnify and save
harmless any and all Lessee Indemnified Parties from and against any and all
Environmental Liabilities, in all cases, which were caused by the acts or
negligent failures to act of Lessor.
(c) Lessee hereby agrees to defend, indemnify and save
harmless any and all Lessor Indemnified Parties from and
-40-
46
against any and all Environmental Liabilities caused by the acts or negligent
failures to act of Lessee. Lessee's responsibility to indemnify Lessor shall
survive the termination of this Lease.
(d) If any Proceeding is brought against any Indemnified
Party in respect of an Environmental Liability with respect to which such
Indemnified Party may claim indemnification under either Section 8.3(b) or (c)
(an "Indemnified Environmental Liability"), the Indemnifying Party 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 such counsel has
been approved by the Indemnifying Party, which approval shall not be
unreasonably withheld. The Indemnifying Party shall not be liable for any
settlement of any such Proceeding made without its consent, which shall not be
unreasonably withheld, but if settled with the consent of the Indemnifying
Party, or if settled without its consent (if its consent shall be unreasonably
withheld), or if there be a final, nonappealable judgment for an adversarial
party in any such Proceeding, the Indemnifying Party shall indemnify and hold
harmless the Indemnified Parties from and against any liabilities incurred by
such Indemnified Parties by reason of such settlement or judgment.
For purposes of this Section 8.3, all amounts for which any
Indemnitee seeks indemnification shall be computed net of (a) any actual income
tax benefit resulting therefrom to such Indemnitee, (b) any insurance proceeds
received (net of tax effects) with respect thereto, and (c) any amounts
recovered (net of tax effects) from any third parties based on claims the
Indemnitee has against such third parties which reduce the damages that would
otherwise be sustained; provided that in all cases, the timing of the receipt
or realization of insurance proceeds or income tax benefits or recoveries from
third parties shall be taken into account in determining the amount of
reduction of damages. Each Indemnitee agrees to use its reasonable efforts to
pursue, or assign to the Indemnifying Party, any claims or rights it may have
against any third party which would materially reduce the amount of damages
otherwise incurred by such Indemnitee.
-41-
47
Notwithstanding anything to the contrary contained in this
Lease, if Lessor shall become entitled to the possession of the Leased Property
by virtue of the termination of this Lease or repossession of the Leased
Property, then Lessor may assign its indemnification rights under this Section
8.3 to any Person to whom Lessor subsequently transfers the Leased Property,
subject to the following conditions and limitations, each of which shall be
deemed to be incorporated into the terms of such assignment, whether or not
specifically referred to therein;
(1) The indemnification rights referred to in
this section may be assigned only if a known Environmental
Liability then exists or if a Proceeding is then pending or,
to the knowledge of Lessee or Lessor, then threatened with
respect to the Leased Property;
(2) Such indemnification rights shall be limited
to Indemnified Environmental Liabilities relating to or
specifically affecting the Leased Property; and
(3) Any assignment of such indemnification rights
shall be limited to the immediate transferee of Lessor, and
shall not extend to any such transferee's successors or
assigns.
(e) At any time any Indemnitee has reason to believe
circumstances exist which could reasonably result in an Indemnified
Environmental Liability, upon reasonable prior written notice to Lessee stating
such Indemnitee's basis for such belief, an Indemnitee shall be given immediate
access to the applicable portion of 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 Legal Requirements and the safety of personnel and
facilities or to protect confidential or privileged information. All
Indemnitees requesting such immediate access and cooperation shall endeavor to
coordinate such efforts so as to minimize interruption of the operation of the
Leased Property as practicable.
8.4 Net Worth Representations/Covenants. Lessee represents and
warrants that as of the date hereof, it has a
-42-
48
Consolidated Net Worth of at least One Million Dollars ($1,000,000) and that
such Consolidated Net Worth includes sufficient working capital for the
efficient operation of the Leased Property. The parties agree that such
Consolidated Net Worth may include that certain One Million Dollar ($1,000,000)
Promissory Note, dated as of December 31, 1997, from Xxxxxx Management Company
Limited Liability Company to Lessee. Lessee shall retain no less than fifty
percent (50%) of Lessee's cumulative After Tax Earnings until Lessee's
Consolidated Net Worth is at least equal to Four Million Dollars ($4,000,000).
Lessee, either itself or together with its subsidiaries, shall thereafter
retain at least such portion of Lessee's After Tax Earnings as is necessary to
cause its Consolidated Net Worth to remain at least equal to Four Million
Dollars ($4,000,000). Lessee represents and warrants that its sole business
purpose shall be to operate as the lessee of the Leased Property.
"After Tax Earnings," for any period, means the consolidated net
income of Lessee and its subsidiaries (determined in accordance with Generally
Accepted Accounting Principles ("GAAP") for that period, less the Tax
Distribution Amount for that period.
The "Tax Distribution Amount," for any period, means the combined
incremental federal, state and local business, income tax liabilities of
Lessee's direct or indirect owners subject to tax (without duplication of
amounts) for that period, as reasonably computed by Lessee by using the
statutory rates applicable to and computed solely upon the taxable income,
gain, loss, deductions and credits of such direct or indirect owners for that
period, but no liability so computed may be less than zero.
ARTICLE IX
9.1 Maintenance and Repair.
(a) Subject to Lessor's obligation to make Capital
Expenditures under Sections 3.6 and 3.7 and performance of Lessor's obligations
under Subsection 9.1(c), Lessee, at its sole expense, shall keep the Leased
Property in good order and repair (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). Except as otherwise provided in
Section 9.1(b), Article XIV or Article XV, and subject to Lessor's obligation
under Sections 3.6 and 3.7 to make Capital Expenditures, Lessee shall, with
reasonable promptness, make all necessary and appropriate repairs,
replacements, and improvements to the Leased Property of every kind and nature,
whether interior or
-43-
49
exterior, ordinary or extraordinary, foreseen or unforeseen, or arising by
reason of a condition existing prior to the commencement of the Term of this
Lease (concealed or otherwise), or required by any governmental agency having
jurisdiction over the Leased Property. Lessee, however, shall be permitted
upon prior written notice to Lessor to prosecute claims against Lessor's
predecessors in title for breach of any representation or warranty or for any
latent defects in the Leased Property to be maintained by Lessee unless Lessor
is already diligently pursuing or elects to diligently pursue such a claim.
All repairs shall, to the extent reasonably achievable, be at least equivalent
in quality to the original work. Lessee will not take or omit to take any
action, the taking or omission of which might materially impair the value or
the usefulness of the Leased Property or any part thereof for its Primary
Intended Use.
(b) Lessee shall, upon the expiration or prior
termination of the Term, vacate and surrender the Leased Property to Lessor in
the condition in which the Leased Property was originally received from Lessor,
except as repaired, rebuilt, restored, altered or added to as permitted or
required by the provisions of the Lease and except for ordinary wear and tear
(subject to the obligation of Lessee to maintain the Leased Property in good
order and repair, as provided in Subsection 9.1(a), damage by casualty or
Condemnation, and Lessor's obligations under Sections 3.6 and 3.7 with respect
to Capital Expenditures.
(c) Lessor shall be responsible for and pay for items of a
capital nature as defined in Exhibit F and to make Capital Expenditures, all as
and to the extent required by and provided in Section 3.6 and 3.7
9.2 Encroachments, Restrictions, Etc. If, as a result of any act
or omission by Lessee, any of the Leased Improvements, at any time, materially
encroach upon any property, street or right-of-way adjacent to the Leased
Property, or violate the agreements or conditions contained in any lawful
restrictive covenant or other agreement affecting the Leased Property, or any
part thereof, or impair the rights of others under any easement or right-of-way
to which the Leased Property is subject (each of the foregoing conditions being
referred to herein as an "Encroachment"), then promptly upon the request of
Lessor or at the behest of any person affected by any such encroachment,
violation or impairment, Lessee shall, at its expense, subject to its right to
contest the existence of any encroachment, violation or impairment and in such
case, in the event of an adverse final determination, either (a) obtain valid
and effective waivers or settlements of all claims, liabilities and damages
resulting from each
-44-
50
such encroachment, violation or impairment, whether the same shall affect
Lessor or Lessee or (b) subject to prior written consent of Lessor, make such
changes in the Leased Improvements, and take such other actions, as Lessee in
the good faith exercise of its judgment deems reasonably practicable to remove
such encroachment, and to end such violation or impairment, including, if
necessary, the alteration of any of the Leased Improvements, and in any event
take all such actions as may be necessary in order to be able to continue the
operation of the Leased Improvements for the Primary Intended Use substantially
in the manner and to the extent that the Leased Improvements were operated
prior to the assertion of such violation, impairment or encroachment. If any
such alteration is required for any reason other than Lessee's willful
misconduct or gross negligence, the cost of such alterations shall be treated
as Capital Expenditures and be performed pursuant to Sections 3.6 and 3.7. Any
such alteration shall be made in conformity with the applicable requirements of
Article X. Nothing contained herein shall be construed as imposing on Lessee
any liability for, or responsibility for remedying the effects of, any
Encroachment occurring other than as a result of any willful misconduct or
gross negligence of Lessee. Lessee's obligations under this Section 9.2 shall
be in addition to and shall in no way discharge or diminish any obligation of
any insurer under any policy of title or other insurance held by Lessor.
ARTICLE X
10.1 Alterations. Lessee shall have the right, but not the
obligation, with the prior approval of Lessor (which approval may not be
unreasonably withheld) to make additions, modifications or improvements to the
Leased Property in connection with the Primary Intended Use (collectively,
"Alterations"), provided that such action shall not significantly alter the
character or purposes or significantly detract from the value or operating
efficiency thereof and shall not impair the revenue-producing capability of the
Leased Property or adversely affect the ability of Lessee to comply with the
provisions of this Lease; provided, further, that Lessee may, without prior
approval of Lessor, make additions, modifications or improvements to the Leased
Property in accordance with Sections 3.7, 3.8 and 3.9 or consistent with its
maintenance and repair obligations set forth in Section 9.1. As a condition of
its approval, Lessor may retain the right to separately approve all plans and
specifications related to any additions, modifications or improvements. Lessor
may further require Lessee to obtain appropriate completion bonds and to
provide for the removal of any improvements upon the termination of this Lease.
The cost
-45-
51
of such Alterations shall, subject to Lessor's obligations to make Capital
Expenditures under this Lease, be paid by Lessee, and all such Alterations
shall be included under the terms of this Lease and upon expiration or earlier
termination of the Lease shall pass to and become the property of Lessor.
10.2 Salvage. All materials which are scrapped or removed in
connection with the making of repairs or alterations required or permitted by
Article IX or X shall be or become the property of Lessor or Lessee depending
on which party is paying for or providing the financing for such work.
10.3 Joint Use Agreements. Subject to Lessor's prior written
approval, Lessee may construct additional improvements that are connected to
the Leased Property or any part thereof or share maintenance facilities,
heating, ventilation and air conditioning systems or similar apparatus,
electrical, plumbing or other systems, utilities, parking or other amenities;
provided, that, the parties shall enter into a mutually agreeable
cross-easement or joint use agreement to make available necessary services and
facilities in connection with such additional improvements, to protect each of
their respective interests in the properties affected, and to provide for
separate ownership, use, and/or financing of such improvements.
ARTICLE XI
Liens. Subject to the provision of Article XII relating to permitted
contests, Lessee will not directly or indirectly create or allow to remain and
will promptly discharge at its expense any lien, encumbrance, attachment, title
retention agreement or claim upon the Leased Property or any attachment, levy,
claim or encumbrance in respect of the Rent, not including, however, (a) this
Lease, (b) the matters, if any, included as exceptions in the title policies
insuring Lessor's interest in the Leased Property, (c) restrictions, liens and
other encumbrances which are consented to in writing by Lessor or any easements
granted pursuant to the provisions of Section 7.3 of this Lease, (d) liens for
those items set forth in clauses (1) through (7) of the definition of
"Impositions" which Lessee is not required to pay hereunder, (e) subleases
permitted by Section 22.1 hereof, (f) liens for Impositions or for sums
resulting from noncompliance with Legal Requirements so long as (1) the same
are not yet payable or are payable without the addition of any fine or penalty
or (2) such liens are in the process of being contested as permitted by Article
XII, (g) liens of mechanics, laborers, materialmen, suppliers or vendors for
sums either disputed or not yet due provided that (1) the payment of such sums
shall not be postponed under
-46-
52
any related contract for more than sixty (60) days after the completion of the
action giving rise to such lien and such reserve or other appropriate
provisions as shall be required by law or generally accepted accounting
principles shall have been made therefor or (2) any such liens are in the
process of being contested as permitted by Article XII hereof, and (h) any
liens which are the responsibility of Lessor pursuant to the provisions of
Article XXXIII of this Lease, or result from Lessor's wrongful failure to pay
for Capital Expenditures which Lessor is obligated to pay under Sections 3.6
and 3.7.
ARTICLE XII
Permitted Contests. Lessee shall have the right to contest the amount
or validity of any Imposition to be paid by Lessee or any Legal Requirement or
Insurance Requirement or any lien, attachment, levy, encumbrance, charge or
claim ("Claims") not otherwise permitted by Article XI, by appropriate legal
proceedings in good faith and with due diligence (but this shall not be deemed
or construed in any way to relieve, modify or extend Lessee's covenants to pay
or its covenants to cause to be paid any such charges at the time and in the
manner as in this Article provided), on condition, however, that such legal
proceedings shall not operate to relieve Lessee from its obligations hereunder
and shall not cause the sale or risk the loss of the Leased Property, or any
part thereof, or cause Lessor or Lessee to be in default under any mortgage,
deed of trust or security deed encumbering the Leased Property or any interest
therein or prevent the normal operation of any of the Facilities. Upon the
request of Lessor, Lessee shall either (a) provide a bond or other assurance
reasonably satisfactory to Lessor that all Claims which may be assessed against
the Leased Property together with interest and penalties, if any, thereon will
be paid, (b) deposit within the time otherwise required for payment with a bank
or trust company as trustee upon terms reasonably satisfactory to Lessor, as
security for the payment of such Claims, money in an amount sufficient to pay
the same, together with interest and penalties in connection therewith, as to
all Claims which may be assessed against or become a Claim on the Leased
Property, or any part thereof, in said legal proceedings, or (c) perform the
necessary alterations or repairs required to have the Leased Property comply
with the applicable Insurance Requirement or Legal Requirements. Lessee shall
furnish Lessor and any lender of Lessor with reasonable evidence of such
deposit within five days of the same. Lessor agrees to join in any such
proceedings if the same be required to legally prosecute such contest of the
validity of such Claims; provided, however, that Lessor shall not thereby be
subjected to any liability for the payment of
-47-
53
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 by Lessee. In
the event that Lessee fails to pay any Claims when due or to provide the
security therefor as provided in this Article and to diligently prosecute any
contest of the same, Lessor may, upon ten days advance Notice to Lessee, (i)
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 or (ii) commence the work set forth in clause (c)
above. Provided, however, that should Lessor reasonably determine that the
giving of such Notice would risk loss to the Leased Property or any part
thereof or cause damage to Lessor, then Lessor shall give such Notice as is
practical under the circumstances. Lessor reserves the right to contest any of
the Claims at its expense not pursued by Lessee or which relate to a
requirement which is Lessor's obligation under this Lease. Lessor and Lessee
agree to cooperate in coordinating the contest of any claims.
ARTICLE XIII
13.1 General Insurance Requirements.
(a) Insurance by Lessee. Subject to Section 13.1(b),
Lessee shall, at all times during the term of this Lease maintain
insurance coverage on the Leased Property and the business conducted
therein substantially similar to that maintained for similar hotels or
as required by the Management Agreement (if any). Lessor shall be
responsible for the cost and expense of premiums for the insurance in
clause (ii) of the definition of "Lessor Tax, Insurance and Cap Ex
Obligations." Lessee shall be responsible for the cost and expense of
premiums for all other insurance required to be maintained by this
Lease. Such insurance, as of the date hereof, shall include:
(i) comprehensive general liability insurance
which has been endorsed to include premises operations,
elevators, independent contractors, blanket contractual,
products liability, personal injury (including contractual),
broad form property damage, fire legal liability, host liquor
liability (including the loss of means of support), liquor
liability, innkeepers' liability (including safety
-48-
54
deposit box liability) and comprehensive automobile liability
including all owned, hired, leased or substituted vehicles,
and garagekeepers' legal liability, against the claims for
personal and bodily injury or death and property damage
occurring upon, in or about any Facility, any adjoining
streets and passageways thereof, or otherwise arising under
the Management Agreement (if any) or this Lease;
(ii) appropriate workers' compensation and
employer's liability insurance as shall be required by and be
in conformance with the laws of any state where a Facility is
located for both Lessee's and Manager's (if any) employees at
the Hotels;
(iii) insurance against "all risks" of loss or
damage, including, to the extent available at reasonable cost,
earthquake and flood, available under commercial property
insurance policies with licensed insurance companies in
amounts not less than the then current full insurable value of
each Facility and its contents. As used herein, the term
"full insurable value" shall mean the actual replacement cost
of each Facility and its contents;
(iv) boiler and machinery insurance on boilers,
pressure vessels and other machinery including power
interruption coverage in amounts equal to or greater than the
coverages agreed to by Lessee and Lessor or required under the
Management Agreement (if any); and
(v) business interruption insurance covering risk
of loss due to an insured peril described in Sections
13.1(a)(iii) and 13.2(a)(iv) hereof, including any loss or
damage to a Facility, its contents, boiler, pressure vessels
or machinery and any resulting damage thereby rendering such
Facility premises untenantable or the services to be provided
by such Facility unmarketable, causing a loss of business.
b. If the insurance referred to in Section 13.1(a)(iii),
(iv) and (v) could be obtained by Lessor at lesser premiums and
otherwise on terms and conditions more advantageous to Lessor, then
Lessor may, upon notice to Lessee, obtain such insurance for its own
account. Such notice must be received by Lessee at least sixty (60)
days prior to the Commencement Date if it is to become effective on
the Commencement Date, or six (6)
-49-
55
months prior to the effective date of said insurance following the
Commencement Date, as the case may be; provided, however, that Lessee
shall in all events, at Lessee's cost and expense, maintain
appropriate worker's compensation and employer's liability insurance
for Lessee's and Manager's (if any) employees at the Hotels as
described in Section 13.1(a)(ii) and provided, further, that if Lessor
elects to provide coverage for Lessor's employees (if any) at the
Hotels, Lessee shall nevertheless provide the coverage described in
Section 13.1(a)(ii) for Lessee's and Manager's (if any) employees at
the Hotels.
13.2 Parties Insured, Amount of Coverage, Etc. All insurance
policies provided for in Section 13.1 shall include:
a. Lessor, Lessee and Lessee's Manager (if any) as
parties insured thereunder, as their interests may appear;
b. except as otherwise expressly stated herein, such
amount of coverage and deductibles as shall be in the greater of
amounts (i) as substantially similar to that maintained for similar
hotels, (ii) as required by the Management Agreement (if any), or
(iii) as Lessor shall require to protect Lessor from material risk of
being a co-insurer;
c. where appropriate, mortgagee endorsements in favor of
Approved Mortgagee(s);
d. where appropriate (including but not limited to the
insurance provided for in Section 13.1(a), the insurer's waiver of
subrogation rights against Lessee and Lessee's Manager (if any) for
all insurance policies procured by Lessor and the insurer's waiver of
subrogation rights against Lessor and Lessee's Manager (if any) for
all insurance policies procured by Lessee or its Manager (if any); and
e. a requirement that the insurer provide at least ten
(10) days' notice of cancellation or material change in the terms and
provisions of the policies.
13.3 Evidence of Insurance, Etc.
a. Prior to the effective date of the applicable
coverages the party obtaining the insurance coverages under Section
13.1 shall provide the other party with certified copies of policies
for such insurance or certificates of insurance. Prior to the
expiration date
-50-
56
of all such policies, the party obtaining said insurance shall provide
the other party with a binder, certified copies of renewal policies,
or certificates of insurance. On the termination of this Lease, there
shall be an apportionment of any prepaid transferrable insurance
premiums in respect of insurance policies obtained by Lessee pursuant
to Section 13.1(a).
b. On request, each party shall furnish the other with a
schedule of insurance obtained by it under Section 13.1, listing the
policy numbers of the insurance obtained, the names of the companies
issuing such policies, the names of the parties insured, the amounts
and expiration date or dates of such policies and the risks covered
thereby.
13.4 Reports by Lessee. Lessee shall, or shall cause its Manager (if
any), to promptly:
a. cause to be investigated all accidents and claims for
damages relating to the operation and maintenance of any Facility as
they become known to Lessee or its Manager (if any), and shall report
to Lessor any such incident which is material;
b. cause to be investigated all damage to or destruction
of any Facility as it becomes known to Lessee or its Manager (if any),
and shall report to Lessor any such incident which is material
together with the estimated cost of repair thereof; and
c. Prepare any and all reports required by any insurance
company as the result of an incident mentioned in Sections 13.4(a) and
13.4(b).
13.5 Review of Limits. All insurance policy limits provided pursuant
to this Article XIII shall be reviewed by the Parties each three (3) years
following the Commencement Date, or sooner if reasonably requested by either
Party, to determine the suitability of such insurance limits in view of
exposures reasonably anticipated over the following three (3) years; provided,
however, that insurance policy limits may not be reduced to an amount lower
than those in effect for similar hotels except by mutual consent of the
Parties.
13.6 Limitation on Scope of Services. Lessee acknowledges that in
arranging for insurance coverages under this Article XIII nothing contained
herein or therein shall be deemed to constitute a representation or warranty by
Lessee or any insurance broker utilized by Lessee with regard to the nature or
extent of the insurance coverages which should be
-51-
57
considered by Lessor for the ownership of the Hotels, and Lessor is to rely
exclusively on its own insurance advisors with regard thereto.
ARTICLE XIV
14.1 Insurance Proceeds. Subject to the rights of the holder of any
Approved Mortgage on the Facilities or any of them, all proceeds payable by
reason of any loss or damage to the Leased Property, or any portion thereof,
and insured under any policy of insurance required by Article XIII of this
Lease shall be paid by the payor to Lessor. If for any reason such proceeds
are paid to any Person other than Lessor, the recipient shall surrender all
proceeds to Lessor to be held in trust by Lessor in an interest-bearing account
(subject to the provisions of Section 14.6 and the rights of holder of such
mortgage). The net proceeds shall be made available for reconstruction or
repair, as the case may be, of any damage to or destruction of the Leased
Property, or any portion thereof, and shall be paid out by Lessor from time to
time for the reasonable costs of such reconstruction or repair upon
satisfaction of reasonable terms and conditions. Any excess proceeds of
insurance remaining after the completion of the restoration or reconstruction
of the Leased Property shall be paid to Lessor. If Lessor is not required to,
and elects not to, repair and restore, and the Lease is terminated as described
in Section 14.2(a), all such insurance proceeds shall be retained by Lessor.
All salvage resulting from any risk covered by insurance shall belong to
Lessor. Notwithstanding anything in this Lease to the contrary, the proceeds
of any business interruption insurance shall be allocated between Lessor,
Lessee and Lessee's Manager (if any).
14.2 Reconstruction in the Event of Damage or Destruction Covered by
Insurance.
(a) Subject to Section 14.2(b), if all or any part of a
Facility shall be damaged or destroyed by a cause for which insurance
coverage was required by this Lease to be maintained by Lessee, then
Lessor shall (or shall cause Lessee to) repair, restore, replace or
rebuild such Facility ("Casualty Restoration") to the extent insurance
proceeds are made available to Lessor for restoration as nearly as is
reasonably possible to the value, condition and character of such
Facility immediately prior to the occurrence of such damage or
destruction. Lessor shall cooperate with Lessee in obtaining all
insurance proceeds payable on account of such damage or destruction so
that the same shall be available to Lessor (subject to the
-52-
58
terms of any Approved Mortgage) as the Casualty Restoration
progresses.
(b) If all or any part of a Facility is damaged or
destroyed to such an extent that the estimated cost of the Casualty
Restoration exceeds fifty percent (50%) of the total replacement cost
(without deduction for depreciation) of such Facility then, if Lessor
reasonably concludes that on the basis of the factors existing at the
time of such casualty it would be uneconomic to repair and restore the
Facility, Lessor shall have the right to terminate this Lease with
respect to such Facility by written notice to Lessee given within
sixty (60) days of such casualty. If Lessor elects to terminate this
Lease with respect to such Facility, Lessor shall pay to Lessee the
Casualty Termination Fee with interest on such amount from the date of
such casualty to the date of such payment at the rate of interest
equal to the Base Rate plus one percent (1%); provided, however, if
Lessor determines in its sole discretion that the value of the
Facility and all insurance proceeds payable with respect to such
casualty will be less than the amount of the termination fee, Lessor
may deliver its duly executed, acknowledged and recordable deed to the
Facility together with all insurance proceeds paid to Lessor in
respect of such casualty (together with an assignment of any unpaid
insurance proceeds with respect to such casualty) in full satisfaction
of Lessor's obligation to pay the Casualty Termination Fee to Lessee.
(c) Lessor must notify Lessee within thirty (30) days of
the occurrence of such damage or destruction if Lessor elects to
terminate this Lease under this Section.
14.3 Reconstruction in the Event of Damage or Destruction Not Covered
by Insurance. If all or any part of a Facility shall be damaged or destroyed
by any cause for which insurance coverage was not required by this Lease to be
maintained by Lessee or Lessor, and the estimated cost of the Casualty
Restoration exceeds thirty percent (30%) of the total replacement cost (without
deduction for depreciation) of such Facility then Lessor may terminate this
Lease with respect to such Facility if it elects to do so by written notice to
Lessee within thirty (30) days after the occurrence of such damage or
destruction.
14.4 Lessee's Personal Property. All insurance proceeds payable by
reason of any loss of or damage to any of Lessee's Personal Property shall be
paid to Lessee.
-53-
59
14.5 Abatement of Rent. In the event of a casualty, except as
otherwise provided herein, this Lease shall remain in full force and effect and
Lessee's obligation to make rental payments and to pay all other charges
required by this Lease (whether through the payment of insurance proceeds to
Lessor or otherwise) shall remain unabated.
14.6 Commencement and Completion of Casualty Restoration. Unless
Lessor shall be entitled to terminate this Lease under Section 14.2(b), Lessor
shall commence the Casualty Restoration promptly after the occurrence of such
damage or destruction and shall complete the same with diligence. If such a
right of termination does exist, then the obligation to commence the Casualty
Restoration shall be delayed until the earlier of the giving of the applicable
notice of termination (in which event the obligation shall not become
operative) or the expiration of the applicable notice period (in which event
the obligation to commence and complete as provided in this Section 14.6 shall
become operative immediately).
14.7 Waiver. Lessee hereby waives any statutory rights of
termination that may arise by reason of any damage or destruction of any
Facility that Lessor is obligated to restore or may restore under any of the
provisions of this Lease.
ARTICLE XV
15.1 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.
15.2 Permanent Taking.
(a) In the event of a Taking of an entire Facility, this
Lease shall terminate as of the date of such Taking with respect to
such Facility.
(b) In the event of a Taking of less than the entire
portion of a Facility, if Lessee or Lessor reasonably determines that
the remaining land and building or buildings, after necessary repairs,
cannot economically and feasibly be operated as a hotel as
contemplated in this Lease, then either Lessor or Lessee may terminate
this Lease with respect to such Facility.
-54-
60
(c) Upon any Taking of a Facility, whether or not this
Lease is terminated with respect to such Facility, Lessee shall, if
applicable law permits, undertake separate proceedings with respect to
the determination of its loss resulting from the Taking. If such
separate proceedings cannot be undertaken, Lessee shall nonetheless be
entitled to a fair and equitable share of the award or other proceeds
of the Taking paid to Lessor to the extent of Lessee's loss; provided,
however, that Lessor shall receive the entire proceeds attributable to
the Taking of all land, the Facility, the Furniture, Fixtures and
Equipment, and Capital Improvements.
(d) If this Lease is not terminated with respect to a
Facility following a partial Taking under this Section 15.2, then this
Lease shall remain in full force and effect with respect to the
remainder of the Facility so taken, and Lessor shall repair, restore,
replace or rebuild the remainder of such Facility to the extent
condemnation proceeds are made available to Lessor for such repair,
restoration, replacement or rebuilding as nearly as possible to its
value, condition and character immediately prior to the Taking.
Lessor shall commence the work promptly after the date of the Taking
and shall complete the same with diligence.
15.3 Taking for Temporary Use. Subject to Section 15.3(b), in the
event of a Taking of all or part of a Facility for temporary use, this Lease
shall remain in full force and effect with respect to such Facility, and the
following shall be applicable:
(a) If the Taking is for a period not extending beyond
the term of this Lease, the awards or other proceeds on account of the
Taking (including any interest included or paid with respect to such
awards or proceeds) other than any portion of such awards or proceeds
specifically identified as compensation for alterations or damages to
such Facility shall be included in Gross Revenue for FFE Reserves for
the Fiscal Year or Years in which received. When and if during the
term of this Lease, the period of temporary use shall terminate,
Lessee shall, to the extent condemnation proceeds are made available
to Lessee for restoration, repair and alterations, make all such
restoration, repairs and alterations as shall be necessary to restore
such Facility to its condition prior to such Taking for temporary use
and shall complete the same with diligence.
(b) If the Taking is for a period extending beyond the
Term of this Lease as it may be extended, the awards
-55-
61
or other proceeds on account of the Taking (including any interest
included or paid with respect to such awards or proceeds) other than
any portion of such awards or proceeds specifically identified as
compensation for alterations or damages to such Facility for the
period of the Taking up to the stated expiration of the term of this
Lease shall be included in determining Gross Revenue for FFE Reserves
for the Fiscal Year or Years in which received, and the remainder of
such awards or other proceeds (including interest as aforesaid) shall
be paid to Lessor.
(c) Notwithstanding the foregoing provisions of this
Section 15.3, if during the last five (5) years of this Lease as the
Term hereof may be extended by Lessee there should be a temporary
taking of all or a part of any Facility which extends for a period of
at least thirty-six (36) months, and Lessee concludes in good faith
that it would not be economically feasible to operate such Facility as
contemplated in this Lease following the temporary taking, then Lessee
may elect to terminate this Lease with respect to such Facility as of
the Date of Taking by giving written notice to Lessor within thirty
(30) days thereof, in which event the provisions of Section 15.3(b)
shall apply with regard to the proceeds.
ARTICLE XVI
16.1 Events of Default. If any one or more of the following events
(individually, an "Event of Default") occurs:
(a) Lessee fails to make payment of the Base Rent when
the same becomes due and payable and such condition continues for a period of
ten (10) days; or
(b) Lessee fails to make payment of Percentage Rent when
the same becomes due and payable and such condition continues for a period of
ten (10) days; or
(c) Lessee fails to observe or perform any other term,
covenant or condition of this Lease and such failure is not cured by Lessee
within a period of thirty (30) days after receipt by Lessee of Notice thereof
from Lessor, unless such failure cannot with due diligence be cured within a
period of thirty (30) days, in which case it shall not be deemed an Event of
Default if Lessee proceeds promptly and with due diligence to cure the failure
and diligently completes the curing thereof; provided, however, in no event
shall such cure period extend beyond 180 days after such Notice or such lesser
-56-
62
period as may be required by applicable law for the curing thereof; or
(d) Lessee shall file a petition in bankruptcy or
reorganization for an arrangement pursuant to any federal or state bankruptcy
law or any similar federal or state law, or shall be adjudicated a bankrupt or
shall make an assignment for the benefit of creditors or shall admit in writing
its inability to pay its debts generally as they become due, or if a petition
or answer proposing the adjudication of Lessee as a bankrupt or its
reorganization pursuant to any federal or state bankruptcy law or any similar
federal or state law shall be filed in any court and Lessee shall be
adjudicated a bankrupt and such adjudication shall not be vacated or set aside
or stayed within sixty (60) days after the entry of an order in respect
thereof, or if a receiver of the Lessee or of the whole or substantially all of
the assets of the Lessee shall be appointed in any proceeding brought by the
Lessee or if any such receiver, trustee or liquidator shall be appointed in any
proceeding brought against the Lessee and shall not be vacated or set aside or
stayed within sixty (60) days after such appointment; or
(e) without Lessor's consent, Lessee is liquidated or
dissolved, or begins proceedings toward such liquidation or dissolution, or, in
any manner, permits the sale or divestiture of substantially all of its assets;
or
(f) 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 an proceeding (unless Lessee is
contesting such lien or attachment in good faith in accordance with Article XII
hereof); or
(g) except as a result of damage, destruction or a
partial or complete Condemnation, Lessee voluntarily ceases operation of the
Leased Property or any part thereof for a period in excess of ten (10) days; or
(h) the Management Agreement with respect to each
Facility on the Leased Premises is terminated by the Manager 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 any Facility; or
(i) after the Merger, an Event of Default shall occur
under any Percentage Lease (other than this Lease) between Lessor and Lessee
(but not including affiliates of Lessee); or
-57-
63
(j) Lessee shall breach the terms of Article 18, Section
22.1, or Section 23.2;
then, and in any such event, Lessor may, so long as such Event of Default
continues, exercise one or more remedies available to it herein or at law or in
equity including, but not limited to, its right to terminate this Lease by
giving Lessee the shortest Notice of such termination permitted by law.
If litigation is commenced with respect to any alleged default under
this Lease, the prevailing party in such litigation shall receive, in addition
to its damages incurred, such sum as the court shall determine as its
reasonable attorneys' fees, and all costs and expenses incurred in connection
therewith.
No Event of Default (other than a failure to make a payment of money)
shall be deemed to exist under clause (c) during any time the curing thereof is
prevented by an Unavoidable Delay, provided that upon the cessation of such
Unavoidable Delay, Lessee remedies such default or Event of Default without
further delay.
16.2 Remedies.
(a) If any one or more Events of Default shall occur and
be continuing, then Lessor shall have the right, in addition to all other
rights or remedies available at law or in equity, at its election:
(i) To give Lessee written notice of Lessor's intention
to terminate this Lease on the earliest date permitted by law or on any later
date specified in such notice, in which case Lessee's right to possession of
the Leased Property shall cease and this Lease will be terminated on such date,
except as to liability of Lessee expressly, stated herein to survive the
termination of this Lease, including, without limitation, liability pursuant to
Section 16.2(d); or
(ii) Without further demand or notice, to reenter and take
possession of the Leased Property or any part of the Leased Property, repossess
the same, expel Lessee and those claiming through or under Lessee, and remove
the effects of both or either, using such force for such purposes as may be
lawful and necessary, without being liable for prosecution, without being
deemed guilty of any manner of trespass, and without prejudice to any remedies
for arrears or future payments of Base Rent, Percentage Rent, Additional
Charges or other amounts payable under this Lease or as a result of any
preceding breach of covenants or conditions; or
-58-
64
(iii) To cure any Event of Default and to charge Lessee for
the cost of effecting such cure, including, without limitation, reasonable
attorneys' fees and interest on the amount so advanced at the Overdue Rate,
provided that Lessor shall have no obligation to cure any such Event of
Default.
(b) Should Lessor elect to reenter as provided in Section
16.2(a)(ii), or should Lessor take possession pursuant to legal proceedings or
pursuant to any notice provided by law while an Event of Default is continuing,
Lessor may, from time to time, without terminating this Lease, relet the Leased
Property or any part of the Leased Property in Lessor's or Lessee's name, but
for the account of Lessee, for such term or terms (which may be greater or less
than the period which would otherwise have constituted the balance of the Term
of this Lease) and on such conditions and upon such other terms (which may
include concessions of free rent and alteration and repair of the Leased
Improvements) as Lessor, in its reasonable discretion, may determine and Lessor
may collect and receive the rent. No such reentry or taking possession of the
Leased Property by Lessor will be construed as an election on Lessor's part to
terminate this Lease unless a written notice of such intention is given to
Lessee. No notice from Lessor under this Article 16 or under a forcible or
unlawful entry and detainer statute or similar law will constitute an election
by Lessor to terminate this Lease unless such notice specifically so states.
Lessor reserves the right, following any such reentry or reletting, to exercise
its right to terminate this Lease by giving Lessee such written notice, in
which event this Lease will terminate as specified in such notice.
(c) In the event that Lessor does not elect to terminate
this Lease as permitted in Section 16.2(a)(i), but elects instead to take
possession as provided in Section 16.2(a)(ii), Lessee shall pay to Lessor Base
Rent, Percentage Rent, Additional Charges and other sums as provided in this
Lease which would be payable under this Lease if such repossession had not
occurred, less the net proceeds, if any, of any reletting of the Leased
Property, after deducting all of Lessor's expenses in connection with such
reletting, including, without limitation, all repossession costs, brokerage
commissions, attorneys' fees, expenses of employees, alteration and repair
costs and expenses of preparation for such reletting. If, in connection with
any reletting, the new lease term extends beyond the existing Term of this
Lease, or the premises covered by such new lease include other premises not
part of the Leased Property, a fair apportionment of the rent received from
such reletting and the expenses incurred in connection with such reletting as
provided in this Paragraph will be made in determining the net proceeds from
such
-59-
65
reletting, and any rent concessions will be equally apportioned over the term
of the new lease. Lessee shall pay such rent and other sums to Lessor monthly
on the date on which the Base Rent and Additional Charges, and, in the case of
Percentage Rent, quarterly on the day on which Percentage Rent would have been
payable under this Lease if possession had not been retaken, and Lessor shall
be entitled to receive such rent and other sums from Lessee on each such day.
(d) If an Event of Default has occurred and this Lease is
terminated by Lessor, Lessee shall remain liable to Lessor for damages in an
amount equal to Base Rent, Percentage Rent, Additional Charges and other
amounts which would have been owing by Lessee for the balance of the Term of
this Lease had this Lease not been terminated, less the net proceeds, if any,
of any reletting of the Leased Property by Lessor subsequent to such
termination, after deducting all of Lessor's expenses in connection with such
reletting, including, but without limitation, the expenses enumerated in
Section 16.2(c) (which expenses, if the reletting is for a term that will
extend beyond the existing Term, will be apportioned as described in Section
16.2(c)). Lessor shall be entitled to collect such damages from Lessee monthly
on the day on which Base Rent or Additional Charges, and quarterly on the day
on which Percentage Rent, would have been payable under this Lease if this
Lease had not been terminated, and Lessor shall be entitled to receive such
Base Rent and other amounts from Lessee on each such day. Alternatively, at
the option of Lessor, in the event this Lease is so terminated, Lessor shall be
entitled to recover against Lessee as damages for loss of the bargain and not
as a penalty:
(i) The worth at the time of award of the unpaid Base
Rent and Percentage Rent which had been earned at the time of termination;
(ii) The worth at the time of award of the amount, if
any, by which the unpaid Base Rent, Percentage Rent and all Additional Charges
which would have been earned after termination until the time of award exceeds
the amount of rental loss that Lessee proves could have been reasonably
avoided;
(iii) The worth at the time of award of the amount, if any,
by which the unpaid Base Rent, Percentage Rent and Additional Charges for the
balance of the Term (had the same not been so terminated by Lessor) after the
time of award exceeds the amount of such rental loss during such period that
Lessee proves could be reasonably avoided; and
-60-
66
(iv) Any other amount necessary to compensate Lessor for
all the detriment proximately caused by Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of events would be
likely to result therefrom.
The "worth at the time of award" of the amounts referred to in clauses (i) and
(ii) above shall be computed by adding interest from the date of termination
until the time of the award computed at the Overdue Rate on the date on which
this Lease is terminated. The worth at the time of award of the amount
referred to in Clause (iii) above shall be computed by using a discount rate of
the Federal Reserve Bank of New York at the time of the award plus one percent
(1%).
(e) Percentage Rent for the purposes of this Section 16.2
shall be a sum equal to (i) the average of the annual amounts of the Percentage
Rent for the three (3) Fiscal Years immediately preceding the Fiscal Year in
which the termination, re-entry or repossession takes place, or (ii) if three
(3) Fiscal Years shall not have elapsed, the average of the Percentage Rent
during the preceding Fiscal Years during which the Lease was in effect, or
(iii) if one (1) Fiscal Year has not elapsed, the amount derived by analyzing
the Percentage Rent from the effective date of this Lease.
(f) Any suit or suits for the recovery of the amounts and
damages set forth in Sections 16.2(c) or (d) may be brought by Lessor, from
time to time, at Lessor's election, and nothing in this Lease will be deemed to
require Lessor to await the date upon which this Lease or the Term of this
Lease would have expired had there occurred no Event of Default. Each right
and remedy provided for in this Lease as a result of the occurrence of a
default is cumulative and is in addition to every other right or remedy
provided for in this Lease or now or after the date of the commencement of the
Term existing at law or in equity or by statute or otherwise, and the exercise
or beginning of the exercise by Lessor of any one or more of the rights or
remedies provided for in this Lease or now or after the date of the
commencement of the Term existing at law or in equity or by statute or
otherwise shall not preclude the simultaneous or later exercise by Lessor of
any or all other rights or remedies provided for in this Lease or now or after
the date of the commencement of the Term existing at law or in equity or by
statute or otherwise. All costs incurred by Lessor in collecting any amounts
and damages owing by Lessee pursuant to the provisions of this Lease or to
enforce any provision of this Lease, including, but not limited to, reasonable
attorneys' fees and related costs, whether or not one or more actions are
commenced by Lessor, shall also be recoverable by Lessor from Lessee.
-61-
67
(g) Lessor shall have no obligation to mitigate damage
following the occurrence of an Event of Default.
16.3 Waiver. Lessee hereby waives, to the extent permitted by
applicable law, (a) any right to a trial by jury in the event of summary or
other proceedings to enforce the remedies set forth in this Article 16; (b) the
benefit of any laws now or hereafter in force exempting property from liability
for rent or for debt; (c) any equity of redemption; and (d) except as provided
herein, any presentations, demands for payment or for performance, or notice of
non-performance. If this Lease is terminated pursuant to Section 16.1, Lessee
waives, to the extent permitted by applicable law, (i) any right to a trial by
jury in the event of summary proceedings to enforce the remedies set forth in
this Article XVI, and (ii) the benefit of any laws now or hereafter in force
exempting property from liability for rent or for debt and Lessor waives any
right to "xxxxxx the corporate veil" (included limited liability resulting from
LLC status) of Lessee other than to the extent funds shall have been
inappropriately paid any Affiliate of Lessee following a default resulting in
an Event of Default.
16.4 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, to the extent permitted by applicable law, be applied
to Lessee's obligations in the order that Lessor may determine, at Lessor's
discretion.
16.5 Surrender. If an Event of Default occurs (and the event giving
rise to such Event of Default has not been cured within the curative period
relating thereto as set forth in Section 16.1) and is continuing, whether or
not this Lease has been terminated pursuant to Section 16.1, Lessee shall, if
requested by Lessor to do so, immediately surrender to Lessor the Leased
Property including, without limitation, any and all books, records, files,
licenses, permits and keys relating thereto, and quit the same and Lessor may
enter upon and repossess the Leased Property by reasonable force, summary
proceedings, ejectment or otherwise, and may remove Lessee and all other
persons and any and all personal property from the Leased Property, subject to
rights of any hotel guests and to any requirement of law. Lessee hereby waives
any and all requirements of applicable law for service of notice to reenter the
Leased Property. Lessor shall be under no obligation to, but may if it so
chooses, relet the Leased Property or any part thereof or otherwise mitigate
Lessor's damages.
-62-
68
ARTICLE XVII
Exculpation. In the event of (a) a sale or transfer of all or any
part of the Leased Property (by operation of law or otherwise), (b) the making
of a lease of all or substantially all of the Leased Property or (c) a sale or
transfer (by operation of law or otherwise) of the leasehold estate under any
such lease, (i) the seller, transferor or lessor, as the case may be, shall be
and hereby is automatically and entirely released and discharged, from and
after the date of such sale, transfer or lease, of all liability in respect of
the performance of any of the terms of this Lease on the part of Lessor
thereafter to be performed and (ii) the term "Lessor" shall thereafter mean
only the purchaser, transferee or lessee, as the case may be, and the covenants
and agreements of Lessor shall thereafter be binding upon such purchaser,
transferee or lessee.
Lessee shall look solely to Lessor's estate and interest in
the Leased Property for the satisfaction of any right of Lessee for the
collection of a judgment or other judicial process or arbitration award
requiring the payment of money by Lessor, and no other property or assets of
Lessor. Lessor's agents, incorporators, subscribers, shareholders, officers,
directors, members, partners, principals (disclosed or undisclosed) and
affiliates, whether directly or through Lessor or through any receiver,
assignee, trustee in bankruptcy or through anyone else, shall not be subject to
levy, lien, execution, attachment, or other enforcement procedure for the
satisfaction of Lessee's rights and remedies under or with respect to or
arising from or in connection with this Lease.
ARTICLE XVIII
18.1 Certain Covenants to Protect REIT and MLP Status. As a material
inducement to Lessor to enter into this Lease, Lessee agrees that:
(a) Personal Property Limitation. Anything contained in this
Lease to the contrary notwithstanding, the average of the adjusted tax bases of
the items of personal property that are leased to Lessee under this Lease at
the beginning and at the end of any Fiscal Year shall not exceed fifteen
percent (15%) of the average of the aggregate adjusted tax bases of the Leased
Property at the beginning and at the end of such Fiscal Year. If such an event
would occur, Lessee shall purchase personal property items from Lessor or from
third parties (instead of Lessor purchasing such items), as appropriate, and
the parties shall arrive at an appropriate
-63-
69
adjustment of Rent by negotiating in good faith or by using arbitrators or
appraisers, if necessary. This Section 18.1(a) is intended to ensure that the
Rent qualifies as "rents from real property," within the meaning of Section
856(d) of the Code, or any similar or successor provisions thereto, and shall
be interpreted in a manner consistent with such intent.
(b) Sublease Rent Limitation. Anything contained in this
Lease to the contrary notwithstanding, Lessee shall not sublet the Leased
Property on any basis such that the rental to be paid by the sublessee
thereunder would be based, in whole or in part, on either (i) the income or
profits derived by the business activities of the sublessee, or (ii) any other
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 provisions thereto.
18.2 Sublease Lessee Limitation. Anything contained in this Lease to
the contrary notwithstanding, Lessee shall not sublease the Leased Property to
any Person in which Lessor or the direct or indirect owner of Lessor owns,
directly or indirectly, a ten percent (10%) or more interest, within the
meaning of Section 856(d)(2)(B) of the Code (or, if applicable, a five percent
(5%) or more interest as set forth in Section 7704 of the Code), or any similar
or successor provisions thereto.
18.3 Lessee Ownership Limitation. Anything contained in this Lease
to the contrary notwithstanding, neither Lessee or an Affiliate of Lessee shall
acquire, directly or indirectly, a ten percent (10%) or more interest in Lessor
or the direct or indirect owner of Lessor, within the meaning of Section
856(d)(2)(B) of the Code (or, if applicable, a five percent (5%) or more
interest as set forth in Section 7704 of the Code), nor any similar or
successor provisions thereto.
ARTICLE XIX
Holding Over. If Lessee for any reason remains in possession of the
Leased Property or any part thereof after the expiration or earlier termination
of the Term, such possession shall be as a tenant at sufferance during which
time Lessee shall pay as rental each month the aggregate of one hundred five
percent (105%) of (a) one-twelfth (1/12th) of the aggregate Base Rent and
Percentage Rent payable with respect to the last Fiscal Year of the Term, (b)
all Additional Charges accruing during the applicable month and (c) all other
sums, if any, payable by Lessee under this Lease with respect to the Leased
Property. During such period,
-64-
70
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 tenants at sufferance, to continued
occupancy and use of the Leased Property. Nothing contained herein shall
constitute the consent, express or implied, of Lessor to the holding over of
Lessee after the expiration or earlier termination of this Lease.
ARTICLE XX
Risk of Loss. During the Term, the risk of loss or of decrease in the
enjoyment and beneficial use of the Leased Property or any part thereof in
consequences of the damage or destruction thereof by fire, the elements,
casualties, thefts, riots, wars or otherwise, or in consequences of
foreclosures, attachments, levies or executions is retained by Lessor, and, in
the absence of negligence, misconduct or breach of this Lease by Lessee, Lessee
shall in no event be answerable or accountable therefor.
ARTICLE XXI
Indemnification. Notwithstanding the existence of any insurance
provided for in Article XIII, and without regard to the policy limits of any
such insurance, Lessee will protect, indemnify, hold harmless and defend any
Lessor Indemnified Party from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses), to the extent permitted
by law, imposed upon or incurred by or asserted against any Lessor Indemnified
Party by reason of: (a) any accident, injury to or death of persons or loss of
or damage to property occurring on or about the Leased Property or adjoining
sidewalks, including without limitation any claims under liquor liability,
"dram shop" or similar laws, (b) any past, present or future use, misuse, non-
use, condition, management, maintenance or repair of the Leased Property or
Lessee's Personal Property or negligence by Lessee, its agents, invitees,
employees or guests, or any other person other than Lessor, or any litigation,
proceeding or claim by governmental entities or other third parties to which
Lessor is made a party or participant related to such use, misuse, non-use,
condition, management, maintenance, or repair thereof by Lessee, including
Lessee's failure to perform obligations (other than Condemnation proceedings),
(c) any Impositions, (d) any failure on the part of Lessee to perform or comply
with any of the terms of this Lease, (e) the nonperformance of any of the terms
and provisions of any and
-65-
71
all existing and future subleases of the Leased Property or any portion thereof
to be performed by the landlord thereunder, (f) the sale of or consumption of
alcoholic beverages on or in the Leased Property, and (g) claims of Manager.
Any amounts that become payable by Lessee under this Article shall be paid
within ten (10) days after demand therefor by Lessor, and if not timely paid,
shall bear a late charge (to the extent permitted by law) at the Overdue Rate
from the expiration of such ten (10) day period to the date of payment.
Lessee, at its expense, shall contest, resist and defend any such claim, action
or proceeding asserted or instituted against any Lessor Indemnified Party or
may compromise or otherwise dispose of the same as Lessee sees fit; provided,
that prior to any compromise or disposition, all Lessor Indemnified Parties
involved therein are Released from all liability. Nothing herein shall be
construed as indemnifying any Lessor Indemnified Party against its own grossly
negligent acts or omissions or willful misconduct.
Lessor shall indemnify and hold any Lessee Indemnified Party
from and against any and all liabilities, losses, interest, damages, costs or
expenses (including, without limitation, reasonable attorneys' fees) assessed
against, levied upon or collected from any Lessee Indemnified Party arising out
of the negligence, misconduct or breach of this Lease by Lessor.
Lessee's and Lessor's liability under the provisions of this
Article shall survive any termination of this Lease.
ARTICLE XXII
22.1 Subletting and Assignment. Except as expressly permitted
herein, Lessee shall not mortgage, assign, sublet, or otherwise transfer its
interest in the Facility and, subject to the provisions of Article XVIII and
Section 22.2 and any other express conditions or limitations set forth herein,
Lessee may, but only with the prior written consent of Lessor, which may be
granted or withheld in Lessor's sole and absolute discretion, assign this
Lease or sublet all or any part of the Leased Property; provided, however,
Lessee may sublet any retail or restaurant portion of the Leased Improvements,
without prior written consent of Lessor, in the normal course of the Primary
Intended Use; provided, further, that any subletting to any party other than an
Affiliate of Lessee shall not individually as to any one such subletting, or in
the aggregate, materially diminish the actual or potential Rent payable under
this Lease. In the case of a subletting, the sublessee shall comply with the
provisions of Section 22.2, and in the case of an assignment, the assignee
-66-
72
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. An
original counterpart of each such sublease and assignment and assumption, duly
executed by Lessee and such sublessee or assignee, as the case may be, in form
and substance satisfactory to Lessor, shall be delivered promptly to Lessor.
In case of either an assignment or subletting made during the Term, Lessee
shall remain primarily liable, as principal rather than as surety, for the
prompt payment of the Rent and for the performance and observance of all of the
covenants and conditions to be performed by Lessee hereunder. Notwithstanding
anything in this Lease to the contrary, Lessee will not enter into any lease
that violates Section 18.1(b).
22.2 Attornment. Lessee shall insert in each sublease that is
entered into after the Commencement Date and permitted under Section 22.1
provisions to the effect that (a) such sublease is subject and subordinate to
all of the terms and provisions of this Lease and to the rights of Lessor
hereunder, (b) if this Lease terminates before the expiration of such sublease,
the sublessee thereunder will attorn to Lessor and waive any right the
sublessee may have to terminate the sublease or to surrender possession
thereunder as a result of the termination of this Lease, and (c) in the event
this Lease terminates, Lessor shall not disturb any sublessee who entered into
a sublease pursuant to this Lease. All rentals received from the sublessee by
Lessor or Lessor's assignees, if any, as the case may be, shall be credited
against the amounts owing by Lessee under this Lease.
22.3 Management Agreement. Notwithstanding anything contained in
this Article XXII to the contrary, Lessee may enter into any agreement
("Management Agreement") with any third party to assign responsibility for the
management and/or operation of all or any part of the Leased Property,
including any retail or restaurant portion of the Leased Improvements;
provided, that the Manager must subordinate payment of all compensation and
other remuneration (including, without limitation, franchise, royalty,
management and other fees and charges) payable under the Management Agreement
or otherwise in connection with the operation of the Leased Property to all
Rent and Additional Charges payable under this Lease for such Fiscal Year or
Partial Fiscal Year, unless otherwise agreed to in writing by Lessor.
Notwithstanding the above, 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.
-67-
73
ARTICLE XXIII
23.1 Officers' Certificates; Financial Statements; Lessor's Estoppel
Certificates and Covenants.
(a) At any time and from time to time upon not less than
twenty (20) 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 or Lessor's lender. Any such certificate furnished
pursuant to this Article may be relied upon by Lessor, any lender and any
prospective purchaser of the Leased Property.
(b) Lessee will furnish the following statements to
Lessor:
(1) on or before the twentieth (20th) day of each
month, a detailed profit and loss statement for the Leased
Property detailed by Facility for the preceding month, a
balance sheet for the Leased Property detailed by Facility as
of the end of the preceding month, and a detailed accounting
of revenues for the Leased Property detailed by Facility for
the preceding month, and such other information as may be
requested by Lessor or required by Lessor's lender, each in
form acceptable to Lessor; and
(2) 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 after such final quarter; and
(3) any financial statements received by Lessee
from Lessee's Manager.
(c) At any time and from time to time upon not less than
twenty (20) 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
-68-
74
Lessee's part hereunder, and such other information as may be reasonably
requested by Lessee.
23.2 Lessee's Financial Covenants. Lessee shall not make any
distributions to its members, except in the amount necessary for such members
or their direct or indirect owners to pay their respective federal, state and
local income taxes to the extent such taxes are allocable to Lessee's taxable
income and reportable as such on such members' tax returns, until such time as
Lessee has fully complied with the terms and provisions of Section 8.4. Lessee
shall not incur any indebtedness (other than ordinary trade payables) unless
required (i) to pay Rent, (ii) to maintain and repair the Leased Property in
accordance with Article IX, or (iii) to make Alterations in accordance with
Article X, provided that Lessee shall thereafter retire such indebtedness prior
to making any dividend payments to its shareholders except to the extent needed
to pay federal, state or local income tax on their respective shares of
Lessee's taxable income.
ARTICLE XXIV
Books and Records; Lessor's Right to Inspect. Lessee shall keep full
and adequate books of account and other records reflecting the results of
operation of each Facility on an accrual basis, all in accordance with the
Uniform System and generally accepted accounting principles. The books of
account and all other records relating to or reflecting the operation of each
Facility shall be kept either at the Facility or at Lessee's offices in
Cleveland, Ohio, and shall be available to Lessor and its representatives and
its auditors or accountants, at all reasonable times for examination, audit,
inspection and transcription, provided that any such examination, audit,
inspection or transcription shall be (i) at Lessor's expense, (ii) performed
during normal business hours, and (iii) limited in scope and content to the
Leased Property. All of such books and records pertaining to each Facility
including, without limitation, books of account, guest records and front office
records, at all times shall be the property of Lessee but shall not be removed
from the Facility or Lessee's offices by Lessee without Lessor approval.
Lessee shall permit Lessor and its authorized representatives
as frequently as reasonably requested by Lessor 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.
-69-
75
ARTICLE XXV
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 XXVI
Remedies Cumulative. To the extent permitted by law, each legal,
equitable or contractual right, power and remedy of Lessor or Lessee now or
hereafter provided either in this Lease or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power
and remedy and the exercise or beginning of the exercise by Lessor or Lessee of
any one or more of such rights, powers and remedies shall not preclude the
simultaneous or subsequent exercise by Lessor or Lessee of any or all of such
other rights, powers and remedies.
ARTICLE XXVII
Acceptance of Surrender. No surrender to Lessor of this Lease or of
the Leased Property or any part thereof, or of any interest therein, shall be
valid or effective unless agreed to and accepted in writing by Lessor and no
act by Lessor or any representative or agent of Lessor, other than such a
written acceptance by Lessor, shall constitute an acceptance of any such
surrender.
ARTICLE XXVIII
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.
-70-
76
ARTICLE XXIX
Intentionally Omitted.
ARTICLE XXX
Quiet Enjoyment. So long as Lessee pays all Rent as the same becomes
due and complies with all of the terms of this Lease and performs its
obligations hereunder, in each case within the applicable grace periods, if
any, Lessee shall peaceably and quietly have, hold and enjoy the Leased
Property for the Term hereof, free of any claim or other action by Lessor or
anyone claiming by, through or under Lessor, but subject to all liens and
encumbrances of record of the date hereof or hereafter consented to by Lessee
or provided for herein and subject to the Ground Leases and Approved Mortgages.
Notwithstanding the foregoing, Lessee shall have the right by separate and
independent action to pursue any claim it may have against Lessor as a result
of a breach by Lessor of the covenant of quiet enjoyment contained in this
Section.
ARTICLE XXXI
Notices. All notices, demands, requests, consents, approvals and
other communications ("Notice" or "Notices") hereunder shall be in writing and
personally served, mailed (by registered or certified mail, return receipt
requested and postage prepaid) or sent by facsimile transmission, addressed to
Lessor at Red Lion Inns Limited Partnership, c/o Red Lion Hotels, Inc., 000
Xxxxx 00xx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000 with a copy to, prior to
March 1, 1998, 00 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxx 00000, Attention:
Xxxxxx X. Xxxxxx, and after March 1, 1998, Guildhall Building, 00 Xxxx Xxxxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxx 00000, Attention: Xxxxxx X. Xxxxxx, and
addressed to Lessee, prior to March 1, 1998, at 00 Xxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxxxx, Xxxx 00000, Attention: Xxxxxx X. Xxxx, and from and after March 1,
1998, Guildhall Building, 00 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxx
00000, Attention: Xxxxxx X. Xxxx, or to such other address or addresses as
either party may hereafter designate. Notice by personal delivery or facsimile
transmission shall be effective upon receipt, and Notice given by mail shall be
complete at the time of deposit in the U.S. Mail system, but any prescribed
period of Notice and any right or duty to do any act or make any response
within any prescribed period or on a date certain after the service of such
Notice given by mail shall be extended five days.
-71-
77
ARTICLE XXXII
32.1 Authorization to Mortgage Hotels. Except as set forth in this
Section 32.1, Lessor shall have no right to place any mortgage, deed of trust,
lien or other encumbrance on the Leased Property.
(a) Approved Mortgages. Lessee hereby consents to and approves the
Existing Indebtedness and the Existing Mortgages. Lessor shall have the right
to grant to any subsequent lender lending funds to Lessor, a lien or
encumbrance on all or any part of the Lessor's right, title and interest in and
to this Agreement (collectively the "Collateral"); provided, however that
either (i) the aggregate principal amount of all loans secured by the
Collateral does not exceed, One Hundred and Twenty Million and No/100 Dollars
($120,000,000.00) and the loans are not cross-defaulted or cross-collateralized
with any other obligations (the parties hereby agree that if any Hotel is sold
by Lessor, such $120,000,000 limitation shall be reduced by the amount of debt
allocated to the Hotel that is sold), (ii) such loan has been approved in
writing by Lessee, which consent shall not be unreasonably withheld provided
that (A) the loan-to-value ratio is no greater than fifty-four percent (54%),
(B) the Cash Flow Available For Debt Service for the most recent Fiscal Year
less the Incentive Amount is at least two hundred percent (200%) of the
scheduled debt service for such new loan, (C) the new loan is otherwise on
ordinary and normal terms for the type of lender making such loan, and (D) the
loan is not cross-defaulted or cross-collateralized with any other obligation
(and the parties hereby agree that if any Hotel is sold by Lessor, the
permissible principal amount of the loan qualifying under this subsection (ii)
shall be reduced by the amount of the debt allocated to the Hotel that is
sold), or (iii) the loan is secured by a lien or encumbrance ("Nondisturbance
Mortgage") and the lender lending funds to Lessor executes a nondisturbance
agreement ("Nondisturbance Agreement"), in form reasonably acceptable to Lessee
and Manager (if any), in favor of Lessee and its Manager (if any) (any
mortgage, deed of trust or other encumbrance securing a loan meeting the
criteria set forth in (i), (ii) or (iii) above is herein referred to as an
"Approved Mortgage"). If Lessor has not delivered to Lessee a commitment for
the refinancing of the loan secured by the Existing Mortgage or any loan
secured by an Approved Mortgage within 60 days of the scheduled maturity of
such loan, Lessee shall have the right, on behalf of Lessor, to seek such a
commitment and to place such a loan, on arms length terms with an institutional
lender regularly making real property secured loans, in an amount equal to the
then outstanding principal balance of the existing loan together with
reasonable closing costs, including any
-72-
78
commitment fee. Lessor shall execute any and all documents reasonably
requested by Lessee in connection with such placement of a new loan. Any
mortgage securing such a loan obtained by Lessee on behalf of Lessor shall be
an Approved Mortgage. Lessee shall have no obligation to place such a loan on
behalf of Lessor.
(b) Debt shall be allocated to the Hotels initially as allocated under
the Existing Mortgages. If, after the Commencement Date, Owner obtains
appraisals (from an independent appraiser which is reputable and experienced in
appraising hotel values) of the value of the Hotels for use in connection with
an Approved Mortgage (other than a Nondisturbance Mortgage), then the debt
shall be allocated according to the values set forth in such appraisals. If,
after the Commencement Date, Owner places any Approved Mortgage (other than a
Nondisturbance Mortgage) on the Hotels and no appraisals are obtained, then the
debt shall be allocated by the ratio of the Gross Operating Profit generated by
such Hotel for the most recently completed full Fiscal Year, to the Gross
Operating Profit generated by all Hotels for such Fiscal Year, multiplied by
the principal amount of the Approved Mortgage(s). If Owner places a
Nondisturbance Mortgage with respect to which appraisals are obtained, then the
debt shall be allocated to the Hotels by allocating the Maximum Principal
Amount according to (or in proportion to, if the debt is in excess of the
Maximum Principal Amount) the values set forth in such appraisals; if
appraisals are not obtained, then the debt shall be allocated to the Hotels by
the ratio of the Gross Operating Profit generated by such Hotel for the most
recently completed full Fiscal Year, to the Gross Operating Profit generated by
all Hotels for such Fiscal Year, multiplied by the Maximum Principal Amount.
(c) Lessee agrees, at the election of the holder of any
interest superior to this Lease pursuant to the terms hereof (Holder") to fully
and completely attorn to, from time to time, and to recognize Holder or any
person, or such person's successors or assigns, who acquires the interest of
Lessor under this Lease as Lessee's lessor under this Lease (collectively,
"Successor Landlord") upon the then executory terms of this Lease. The
foregoing provisions of this paragraph shall inure to the benefit of any such
Successor Landlord, shall apply notwithstanding that, as a matter of law, the
Lease may automatically terminate, shall be self-operative upon any such
demand, and no further instrument shall be required to give effect to said
provisions. Lessee, however, upon demand of any such Successor Landlord agrees
to execute, from time to time, leases or any instruments to evidence and
confirm the provisions of this paragraph, satisfactory to Lessor or any such
Successor Landlord. Upon
-73-
79
such attornment and the acceptance thereof in writing by such Successor
Landlord, this Lease shall continue.
(d) Subordination. Lessee agrees that this Lease shall
be subject and subordinate to any Approved Mortgage.
(e) Rights of Mortgagee. If Lessor or any Approved
Mortgagee shall have furnished to Lessee the name and address of such Approved
Mortgagee, then so long as any Facility, or any part thereof or any interest
therein, shall be subject to the Approved Mortgage, the following shall be
applicable:
1. Lessee shall, simultaneously with the giving to
Lessor of any Notice of default of this Lease, send a copy of such Notice to
such Approved Mortgagee in the manner provided in Article XXXI for the giving
of Notices, and no Notice of default given by Lessee to Lessor shall be
effective unless a copy of such Notice shall have been sent as herein provided.
2. If, under Section 32.3, a default by Lessor shall
have occurred, Lessee shall not be entitled to terminate this Lease so long as
no other default shall have occurred and be continuing (other than those which
are being cured as provided for in this Lease), if within thirty (30) days
after Lessee has given to Approved Mortgagee the Notice of Termination, such
Approved Mortgagee shall cure such default respecting the payment of money, or,
for any other default, shall within such thirty (30) day period, commence and
thereafter proceed with diligence and good faith to cure such other default.
3. Upon reasonable advance notice from such Approved
Mortgagee, Lessee shall accord to it and its agents the right to enter upon any
part of the Leased Property at any reasonable time during the term of this
Lease for the purpose of examining, inspecting or making extracts from the
books and records of any Facility.
4. If such Approved Mortgagee or any person or entity
shall become the owner of any Facility as a result of any foreclosure or a bona
fide conveyance in lieu of foreclosure, Lessee shall have no right or power to
terminate this Lease, and shall recognize such Approved Mortgagee or such other
person or entity as Lessor hereunder to the same extent as though it or they
had been Lessor hereunder as of the execution of this Lease; provided, however,
that such Approved Mortgagee or such other person or entity shall agree in
writing with Lessee to be bound by the terms and provisions of this Lease to
the same extent as if such Approved Mortgagee or such other person or entity
had been an original Party hereto.
-74-
80
(f) Estoppel Certificates. Lessee agrees, at any time
and from time to time, upon not less than fifteen (15) days prior written
notice by Lessor or an Approved Mortgagee, to execute, acknowledge and deliver
to Lessor or such Approved Mortgagee a statement in writing certifying that
this Lease has not been modified and is in full force and effect (or, if there
have been modifications, that the same is in full force and effect as modified
and specifying the modifications) and stating whether or not, to the best
knowledge of Lessee, there exists any default by Lessor under this Lease, and
if so, specifying each such default of which Lessee may have knowledge. Upon
similar notice, Lessee shall be entitled to a similar certificate from Lessor.
32.2 Lessee's Right to Cure. Subject to the provisions of Section
32.3, if Lessor breaches any covenant to be performed by it under this Lease,
Lessee, after Notice to and demand upon Lessor, within waiving or releasing any
obligation hereunder, and in addition to all other remedies available to
Lessee, may (but shall be under no obligation at any time thereafter to) make
such payment or perform such act for the account and at the expense of Lessor.
All sums so paid by Lessee and all costs and expenses (including, without
limitation, reasonable attorneys' fees) so incurred, together with interest
thereon at the Overdue Rate from the date on which such sums or expenses are
paid or incurred by Lessee, shall be paid by Lessor to Lessee on demand or,
following (i) entry of a final, nonappealable judgment against Lessor for such
sums and (ii) all Approved Mortgages are satisfied, may be offset by Lessee
against the Base Rent payments next accruing or coming due. The rights of
Lessee hereunder to cure and to secure payment from Lessor in accordance with
this Section 32.2 shall survive the termination of this Lease with respect to
the Leased Property.
32.3 Breach by Lessor. 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 to continue if Lessor, within such thirty (30) day
period, proceeds promptly and with due diligence to cure the failure and
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.
32.4 Lessee's Cooperation. In connection with the termination of
this Lease due to the expiration of the Term or
-75-
81
otherwise, Lessee shall cooperate with Lessor in transferring possession of the
Leased Property to Lessor or a new tenant, including, without limitation,
cooperating with the transfer of any licenses or permits necessary for the
operation of any Facility.
ARTICLE XXXIII
33.1 Miscellaneous. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, Lessee or Lessor
arising prior to any date of termination of this Lease shall survive such
termination. If any term or provision of this Lease or any application thereof
is invalid or unenforceable, the remainder of this Lease and any other
application of such term or provision 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 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.
33.2 Transition Procedures. Upon the expiration or termination of
the Term of this Lease, for whatever reason, Lessor and Lessee shall do the
following (and the provisions of this Section 33.2 shall survive the expiration
or termination of this Lease until they have been fully performed) and, in
general, shall cooperate in good faith to effect an orderly transition of the
management of each Facility.
(a) Transfer of Licenses. Upon the expiration or earlier
termination of the Term, Lessee shall use its reasonable efforts (i) to
transfer to Lessor or Lessor's nominee, to the extent assignable or
transferable, any liquor licenses, and all other 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 any Facility (collectively, "Licenses"), or (ii) if such transfer
is prohibited by law or Lessor otherwise elects, to cooperate
-76-
82
with Lessor or Lessor's nominee in connection with the processing by Lessor or
Lessor's nominee of any applications for all Licenses; provided, in either
case, except in the case of a termination resulting from an Event of Default by
Lessee, that the costs and expenses of any such transfer or the processing of
any such application shall be paid by Lessor or Lessor's nominee.
(b) Leases and Concessions. Lessee shall assign to Lessor or
Lessor's nominee simultaneously with the termination of this Lease, and the
assignee shall assume any and all subleases and concession agreements in effect
with respect to any Facility.
(c) Books and Records. Any and all books, records files and
keys for any Facility kept by Lessee pursuant to this Lease or otherwise shall
be delivered promptly to Lessor or Lessor's nominee, simultaneously with the
termination of this Agreement, but such books and records shall thereafter be
available to Lessee at all reasonable times at Lessee's expense for inspection,
audit, examination, and transcription for a period of three (3) years and
Lessee may retain (on a confidential basis) copies or computer records thereof.
(d) Transition Adjustments. Lessee shall pay all accounts
payable and accrued expenses relating to the Leased Property as of the date of
termination of this Lease, to the extent such accounts payable and accrued
expenses are required to be paid by Lessee under this Lease, and Lessee shall
be entitled to receive and retain all accounts receivable, and an amount equal
to all prepaid expenses paid by Lessee, as of the date of this termination.
All advance bookings deposits and credits shall be paid to Lessor.
(e) The provisions of this Section 33.2 shall survive the
termination or expiration of this Lease.
33.3 Change of Franchise. Lessee may change the existing franchise
covering each Facility with the prior written consent of Lessor, which consent
may be withheld in the sole and absolute discretion of Lessor.
33.4 Waiver of Presentment, Etc. Lessee waives all presentments,
demands 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.
-77-
83
ARTICLE XXXIV
Memorandum of Lease. Lessor and Lessee shall promptly upon the
request of either enter into a short form memorandum of this Lease, in form
suitable for recording under the laws of the State in which reference to this
Lease, and all options contained herein, shall be made. Lessee shall pay all
costs and expenses of recording such memorandum of this Lease.
ARTICLE XXXV
35.1 Springfield Ground Lease Premises. Lessee understands that
under the Ground Lease dated June 1, 1973 between Xxxxxxx X. Xxxxxx, Xx., as
lessor (the "Springfield Lessor"), and Xxxxx XxXxxxx, as lessee (the
"Springfield Ground Lease"), Lessor leases a parcel of unimproved land (the
"Springfield Leased Land") which abuts on the east the Hotel located in
Springfield, Oregon (the "Springfield Hotel") and which is used primarily as
the main access to the Springfield Hotel from Gateway Street. Lessee further
understands that under the terms of the Springfield Ground Lease, Lessor may
not have the right to sublease the Springfield Leased Land to Lessee without
first obtaining the prior written consent of the Springfield Lessor. Lessor
shall use best efforts from and after the date hereof to obtain the written
consent of the Springfield Lessor to the subletting of Springfield Leased Land
pursuant to the terms of this Lease (the "Consent"). Lessee agrees to
cooperate with Lessor in Lessor's efforts to obtain the Consent and, in
connection therewith, to provide the Springfield Lessor with such information
concerning Lessee as the Springfield Lessor may reasonably require. If on the
date of this Lease Lessor has not obtained the Consent, then the following
provisions shall apply:
(a) Notwithstanding anything to the contrary set forth in
this Lease, including, without limitation, Section 1.1, Exhibit B attached
hereto and Exhibit G attached hereto, until and unless the Consent has been
obtained, the Springfield Leased Land shall not be included in or be part of
the Land or the Leased Property, and shall not be subleased by Lessor to Lessee
pursuant to the terms of this Lease.
(b) If Lessor has not obtained the Consent on or before
February 2, 1998, then Lessor and Lessee shall negotiate in good faith to
determine the reduction, if any, that should be made in the Base Rent and the
Percentage Rent formulas set forth in this Lease so that they constitute Fair
Market REIT Rent after taking into account the fact that the Springfield Leased
Land does not constitute part of the Land or the Leased Premises; and if Lessor
and Lessee have not
-78-
84
agreed upon such reduction on or before February 27, 1998, then the
determination shall be made by appraisal as provided in Section 1.2.
(c) If Lessor obtains the Consent, then from and after
the date of the Consent, and without any further act on the part of Lessor or
Lessee, the Springfield Leased Land shall become part of the Land and the
Leased Premises and shall be subleased by Lessor to Lessee pursuant to the
terms of this Lease. If and when the Consent is obtained by Lessor, (i) any
negotiation or appraisal shall be in progress pursuant to Subsection 35.1(b)
above, such negotiation or appraisal shall be terminated or (ii) any reduction
in the Base Rent and Percentage Rent formulas shall have been agreed to or
determined pursuant to subsection 35.1(c), such reduction shall cease to be
effective as of the date of the Consent.
35.2 Termination of Sublease of Springfield Leased Land. If the
Consent is obtained, so that the Lease constitutes, in part, a sublease of the
Springfield Leased Land, then notwithstanding anything to the contrary set
forth in Section 1.2, the sublease of the Springfield Leased Land effected by
this Lease shall terminate and expire twenty-four (24) hours prior to the date
on which the Springfield Ground Lease terminates. Upon such termination, the
provisions of subsection 35.1(c) shall become applicable, except that Lessor
and Lessee shall commence their negotiations on the date of such termination
and resort shall be had to appraisal If Lessor and Lessee have not reached
agreement within thirty (30) days thereafter.
ARTICLE XXXVI
Lessor's Option to Terminate Lease with Respect to Hotel upon Sale of
a Facility. In the event Lessor enters into a bona fide contract to sell any
Facility, Lessor may terminate this Lease with respect to each such Facility by
giving not less than thirty (30) days prior Notice to Lessee of Lessor's
election to terminate this Lease with respect to each such Facility effective
upon the closing under such contract. In the event a closing under such
contract does not occur, this Lease shall continue to be in full force and
effect as to each such Facility. Effective upon such closing, this Lease shall
terminate and be of no further force and effect as to any obligations of the
parties existing as of such date relating to each such Facility. As
compensation for the early termination of its leasehold estate under this
Article XXXVI, Lessor shall, within ninety (90) days of such closing, pay to
Lessee the Fair Market Value of the Leasehold Estate.
-79-
85
IN WITNESS WHEREOF, the parties have executed this Lease under seal by
their duly authorized officers as of the date first above written.
"LESSOR"
RED LION INNS OPERATING L.P.
By: Red Lion Properties, Inc.,
Its General Partner
By: /s/ Xxxxxx Xxxxxxx
--------------------------------
Xxxxxx Xxxxxxx
Title: VP/Sec/Treas
-----------------------------
"LESSEE"
WESTBOY LLC
By: Xxxxxx Management Company
Limited Liability Company,
Its Sole Member
By: /s/ Xxxxxx X. Xxxx
--------------------------------
Title: President
-----------------------------
-80-
86
STATE OF __________ )
) SS:
COUNTY OF _________ )
The foregoing instrument was acknowledged before me this ___________ day of
________________________, 1997, by _________________________ as
____________________________ of ___________________________, a _____________
_______________________________.
My commission expires: ______________________.
______________________________
Notary Public
STATE OF __________ )
) SS:
COUNTY OF _________ )
The foregoing instrument was acknowledged before me this _____
day of ____________, 1997, by _________________ as _______________ of
___________________________, a _____________ _______________________________.
My commission expires: ______________________.
______________________________
Notary Public
-81-
87
Exhibit A
LIST OF HOTELS
Doubletree Hotel Bellevue Center
000-000xx Xxxxxx XX
Xxxxxxxx, Xxxxxxxxxx
Doubletree Hotel Riverside
29th & Chinden Blvd.
Boise, Idaho
Doubletree Hotel Colorado Springs - World Arena
0000 X. Xxxxxxxx Xxxxxxxx Xxxx.
Xxxxxxxx Xxxxxxx, Xxxxxxxx
Doubletree Hotel Omaha Downtown
0000 Xxxxx Xxxxxx
Xxxxx, Xxxxxxxx
Doubletree Hotel Portland Downtown
000 XX Xxxxxxx
Xxxxxxxx, Xxxxxx
Doubletree Hotel Sacramento
0000 Xxxxx Xxxx Xxx
Xxxxxxxxxx, Xxxxxxxxxx
Doubletree Hotel Spokane Valley
I-90 at Xxxxxxxx Road
Spokane, Washington
Doubletree Hotel Eugene/Springfield
0000 Xxxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxx
Doubletree Hotel Yakima Valley
0000 Xxxxx Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx
Doubletree Hotel Xxxxx Center
0000 X.X. Xxxxxxxxx
Xxxxxxxx, Xxxxxx
-82-
