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EXHIBIT 99.10
MASTER HOTEL AGREEMENT
THIS MASTER HOTEL AGREEMENT ("Agreement") is made as of May 29, 1998,
among Bristol Hotels & Resorts, Inc., a Delaware corporation ("BHR"), FelCor
Suite Hotels, Inc., a Maryland corporation ("FelCor") and FelCor Suites Limited
Partnership, a Delaware limited partnership ("FSLP").
RECITALS:
A. Bristol Hotel Company, a Delaware corporation ("Bristol Hotel
Company"), and FelCor have entered into an Agreement and Plan of Merger dated
as of March 23, 1998, (the "Merger Agreement") pursuant to which, inter alia,
BHR will be spun-off to the shareholders of Bristol Hotel Company, Bristol
Hotel Company will merge with and into FelCor (the "Merger") and, as a
condition to such Merger, the Lessors (as hereinafter defined) shall have
leased such Hotels to Lessees (as hereinafter defined).
B. Bristol Hotel Company currently directly or indirectly owns in
excess of 100 hotel properties, as described or anticipated in the Merger
Agreement, and may directly or indirectly acquire additional hotels to be
covered by this Agreement prior to the Merger.
C. The parties desire to set forth the terms and conditions on
which Lessor will lease the hotels identified as Existing Hotels on Exhibit A
attached hereto or hereafter identified as Existing Hotels by FelCor and BHR
("Existing Hotels") to Lessee, and to make certain other agreements as set
forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the
following terms have the meanings set forth in this Section or in the Section
indicated. Unless the context otherwise requires, (a) references to the
singular shall include the plural and vice versa, (b) references to gender
shall include all genders, (c) references to designated "Sections" or other
subdivisions are references to the designated Sections or other subdivisions of
this Agreement, (d) all accounting terms not
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otherwise defined herein shall have the meanings assigned to them in accordance
with GAAP and, if applicable, the Uniform System (as defined in the Percentage
Leases), and (e) the words "herein," "hereof," and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any particular
Section or other subdivision. CAPITALIZED TERMS USED AND NOT DEFINED HEREIN
SHALL HAVE THE RESPECTIVE MEANINGS, IF ANY, SET FORTH IN THE PERCENTAGE LEASES.
Affiliate--shall mean, with respect to any Person, any Person that,
directly or indirectly, controls or is controlled by or is under common control
with such Person, or any other Person that owns, beneficially, directly or
indirectly, fifty percent (50%) or more of the outstanding capital stock,
shares or equity interests 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
entity shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such entity,
through the ownership of voting securities, partnership interests or other
equity interests.
Affiliated Manager--shall mean an entity that is a manager of one of
the Hotels and an Affiliate of BHR or a Lessee.
Agreement--shall have the meaning set forth in the Preamble.
Closing Date--shall mean the effective date of the Merger.
Code--shall mean the Internal Revenue Code of 1986, as amended.
Credit Enhancement--shall mean an unconditional letter of credit in
form reasonably acceptable to FelCor, provided by Bankers Trust Company or any
other financial institution reasonably acceptable to Lessor for the benefit of
Lessor and/or FelCor, or a guaranty in the form of the Form Guaranty provided
by BHR (or, if permitted by Lessor, other Affiliates of Lessee), or other form
of credit enhancement with respect to the Percentage Leases that is reasonably
acceptable to Lessor. The form of any Credit Enhancement shall be subject to
the reasonable approval of Lessor, and any Credit Enhancement shall be subject
to the reasonable approval of FelCor's REIT tax counsel.
Credit Enhancement Amount--shall mean the aggregate amount that is
currently available, (without material restriction) under all forms of Credit
Enhancement obtained by a Lessee, to make payments due under the Percentage
Leases to which it is a party.
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Default by Lessee--shall have the meaning set forth in Section 10(a).
Form Guaranty--shall mean a Guaranty of a Percentage Lease
substantially in the form attached hereto as Exhibit C.
Form Percentage Lease--shall mean a Percentage Lease substantially in
the form attached hereto as Exhibit B.
GAAP--shall mean, as of any date of determination, accounting
principles (a) set forth as generally accepted in then currently effective
Opinions of the Accounting Principles Board of the American Institute of
Certified Public Accountants, (b) set forth as generally accepted in then
currently effective Statements of the Financial Accounting Standards Board or
(c) that are then approved by such other entity as may be approved by a
significant segment of the accounting profession in the United States of
America. The term "consistently applied," as used in connection therewith,
means that the accounting principles applied are consistent in all material
respects to those applied at prior dates or for prior periods.
Hostile Change of Control--shall mean, at the relevant time, (i) any
event resulting in any "person" or "group" (within the meaning of Sections
13(d) and 14(d) of the 1934 Act), other than United/Xxxxxx Holdings, L.P. or
any Affiliate thereof, becoming the beneficial owner (as defined in Rules 13d-3
and 13d-5 under the 0000 Xxx) directly or indirectly, of more than fifty
percent (50%) of the total voting power of all classes of capital stock of BHR
or, if applicable, the ultimate parent ("Parent"), at the relevant time, of BHR
or a Lessee or an Affiliated Manager then outstanding and entitled to vote
generally in elections of directors ("Voting Stock") and such beneficial
ownership was acquired within a period of two (2) years following a tender
offer by such person (or any of its Affiliates) for shares of Voting Stock of
such Parent or a solicitation of proxies with respect to Voting Stock of such
Parent by such person, if, in either case, such tender offer or solicitation of
proxies was not approved by a majority of the Board of Directors of such Parent
in office at the time such tender offer or proxy solicitation was commenced, or
(ii) a majority of the Board of Directors of the Parent, at the relevant time,
being constituted of individuals who were elected pursuant to a solicitation of
proxies with respect to Voting Stock of such Parent, if such solicitation of
proxies was not approved by a majority of the Board of Directors of such Parent
in office at the time such solicitation of proxies was commenced.
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Hotels--shall mean, with respect to any pertinent date, the Existing
Hotels and any New Hotels which are then currently leased by a Lessor to a
Lessee and, with respect to any pertinent period, the Existing Hotels and any
New Hotels that are leased by a Lessor to a Lessee at any time during such
period.
Lessee--shall mean each of the direct or indirect subsidiaries of BHR
that enter into the Percentage Leases on the Closing Date. The number of
initial Lessees shall be agreed to by BHR and FelCor prior to the Closing Date
based on such criteria (including, without limitation, tax, environmental,
joint venture and financing criteria) as are reasonably agreed to by the
parties.
Lessee Income Before Corporate Overhead--shall mean, for any period,
the amount (not less than zero) by which the Gross Revenues of a Hotel for such
period exceed the sum of (i) the Gross Operating Expenses for such period for
which Lessee is responsible under the Percentage Lease covering such Hotel
(other than management fees payable to any Affiliated Manager) and (ii) the
Rent payable to Lessor for such period under such Percentage Lease.
Lessor--shall mean any one of the owners of the Hotels that is an
Affiliate of FelCor from and after the Closing Date.
Liquid Assets Amount--shall mean, for any Person, the sum of (i) the
Person's and the proportionate share of its Subsidiaries' Working Capital and
(ii) the lesser of the aggregate GAAP book value and the aggregate current fair
market value of such Person's assets, and the proportionate share of its
Subsidiaries' assets, of the following types: (A) any contracts to lease or
manage hotels or other hospitality properties owned by Persons other than
Lessor, Lessee and their Affiliates, (B) any hotels, hospitality properties or
other marketable real property owned by such Person and its Subsidiaries, and
(C) to the extent reasonably acceptable to Lessor, any other income-producing
or readily marketable tangible property, equity interests, securities or other
investments owned by such Person and its Subsidiaries. In the case of assets
described in clause (ii) of the preceding sentence, both the GAAP book value
and the current market value of any such assets shall be determined net of any
indebtedness or liabilities (including such Person's liability under any Form
Guaranty) not expressly or structurally subordinated to the payment of Rent on
terms reasonably acceptable to Lessor. Any disputes regarding the fair market
value of an asset will be resolved in accordance with the appraisal procedures
set forth in Article 33 of the Percentage Leases.
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Liquid Net Worth--shall mean the lesser of (i) the sum of (A) the Net
Worth of a Lessee and (B) the Lessee's Credit Enhancement Amount, and (ii) the
sum of (C) the Lessee's Liquid Assets
Amount and (D) the Lessee's Credit Enhancement Amount, which is expected to be
not less than BHR's Net Worth on the Closing Date, as reasonably approved by
FelCor's REIT tax counsel.
Merger--shall have the meaning set forth in the Preamble.
Merger Agreement--shall have the meaning set forth in the Preamble.
Minimum Liquid Net Worth--shall mean, as of any pertinent date,
aggregate Liquid Net Worth for Lessees equal to fifteen percent (15%) of the
Percentage Rent budgeted to be paid by all Lessees under approved Revenue
Budgets prepared in conformity with the Percentage Leases during the then
current calendar year (annualized in the case of 1998 and pro- rated for the
final year of the Term), as adjusted from time to time as set forth below. To
the extent that Lessees lease New Hotels from Lessor, the Minimum Liquid Net
Worth requirement for the respective Lessee (for the remainder of the then
current calendar year or until another adjustment is required hereunder,
whichever first occurs) will be increased as a result of each such New Hotel by
an amount equal to fifteen percent (15%) of the Percentage Rent projected to be
paid during the first twelve (12) months of the Percentage Lease for such New
Hotel. In addition, to the extent that the Percentage Lease for any Hotel is
terminated or expires, the Minimum Liquid Net Worth requirement with respect to
the respective Lessee will be reduced (for the remainder of the then current
calendar year or until another adjustment is required hereunder, whichever
first occurs) by the amount of its Minimum Liquid Net Worth requirement
attributable to such Hotel. Each Lessee's allocable Minimum Liquid Net Worth
shall be determined as set forth in Section 5(b) below.
Net Worth--shall mean the excess of total assets over total
liabilities, total assets and total liabilities each to be determined in
accordance with GAAP, excluding, however, from the determination of total
assets: (a) unamortized goodwill, organizational expenses, research and
development expenses, trademarks, trade names, copyrights, patents, patent
applications, and other similar intangibles; (b) all deferred charges that are
required to be capitalized in accordance with GAAP or unamortized debt
discounts and expense; (c) treasury stock; (d) securities which are not readily
marketable, (e) any write-up in the book value of any asset resulting from a
revaluation thereof, other than as recognized pursuant to the terms of this
Agreement; (f) the Percentage Leases;
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and (g) any items (other than assets included in Liquid Assets Amount) that are
not included in clauses (a) through (f) above that are treated as intangibles
in conformity with GAAP.
New Hotels--shall mean the hotels (if any) other than the Existing
Hotels that, as of any pertinent date, are then currently leased by a Lessor to
a Lessee and have not been excluded from treatment as a New Hotel under this
Agreement as provided in Section 4 below.
1933 Act--shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
1934 Act--shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
Percentage Lease--shall mean, with respect to a Existing Hotel, a
lease in the form of the Form Percentage Lease, as entered into between Lessor
and Lessee or assumed by Lessor upon the Closing Date with respect to such
Hotel and, with respect to each New Hotel, any lease as entered into between
Lessor and Lessee pursuant to Section 4 hereof.
Percentage Rent--shall mean the rent payable under each Percentage
Lease based on a percentage of Lessee's Gross Revenues from the Hotel that is
the subject of the Percentage Lease.
Post-Default Operating Expenses--shall mean the Gross Operating
Expenses of continuing to operate a Hotel under a Percentage Lease as to which
an Event of Default has occurred and is continuing, to the extent incurred
prior to the effective date of termination of such Percentage Lease by the
Lessor, other than amounts (including management fees) payable to Affiliates of
Lessee; provided, however, that Post-Default Operating Expenses may include (i)
reasonable out- of-pocket Gross Operating Expenses reimbursable to such
Affiliate and (ii) the portion of any monthly management fee due by Lessee to
an Affiliated Manager in an amount not in excess of one and one-half percent
(1.5%) of the then current monthly amount of Gross Revenues of the Hotel.
Recognition Agreement--shall mean any agreement entered into between
FelCor and/or the Lessors, on the one hand, and any senior lender to BHR and/or
the Lessees, on the other hand, providing such senior lender with notice of and
an opportunity to cure defaults by Lessee and other commercially reasonable
provisions reasonably acceptable to FelCor designed to protect the interests of
such senior lender.
REIT Restrictions--shall have the meaning set forth in Section 8 below
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Sale Hotel(s)--Any Existing Hotel heretofore identified by BHR and
FelCor as likely to be sold within a reasonable time following closing rather
than renovated by Lessor.
SEC--shall mean the U.S. Securities and Exchange Commission.
Termination Fee--shall mean all amounts paid or credited under Section
3(d) below.
Termination Fee Base Amount--shall mean (i) an amount equal to
seventy-five percent (75%) of the Lessee Income Before Corporate Overhead for
an Existing Hotel for the twelve (12) full calendar months prior to the
effective date of the Termination Fee Payment Event with respect to such
Existing Hotel, and (ii) an amount equal to one hundred percent (100%) of the
Lessee Income Before Corporate Overhead for a New Hotel for the twelve (12)
full calendar months prior to the effective date of the Termination Fee Payment
Event with respect to such New Hotel.
Termination Fee Payment Event--shall mean a sale or other transfer by
Lessor of a Hotel as to which (i) the Percentage Lease covering such Hotel is
to be terminated by Lessor solely as a result of such sale or other transfer as
permitted by the Percentage Lease, and (ii) neither any Lessee nor any
Affiliated Manager shall continue to be the lessee or manager of such Hotel or,
with respect to the Sale Hotels, another hotel offered by FelCor in
substitution therefor and accepted by a Lessee or an Affiliated Manager in
their sole discretion pursuant to a replacement lease and/or management
agreement, in either case that, as compared to the terminated Percentage Lease,
(a) has an equal or greater term (including all renewal terms), (b) is expected
to generate equal or greater Lessee Income Before Corporate Overhead to such
Lessee or Affiliated Manager throughout such term, and (iii) is otherwise of
equal or greater value to such Lessee or Affiliated Manager.
Transfer--(i) any merger, sale of the stock of any Transferor, or
sale, transfer or conveyance of all or substantially all of the assets of any
Transferor if, as a result thereof, Transferor or any surviving entity or
purchaser of the assets of Transferor (each, the "Transferee") would cease to
be controlled by BHR or (ii) any event resulting in a "person" or "group"
(within the meaning of Sections 13(d) and 14(d) of the 1934 Act), other than
United/Xxxxxx Holdings, L.P. or any Affiliate thereof, becoming the beneficial
owner (as defined in Rules 13d-3 and 13d- 5 under the 0000 Xxx) directly or
indirectly, of more than fifty percent (50%) of the Voting Stock of BHR or, if
applicable, the Parent of BHR, or a Lessee or an Affiliated Manager, or (iii)
any sale or assignment of the leasehold interest in any of the Percentage
Leases to any third party that is not an Affiliate of BHR.
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Transferor--shall mean any one or more of BHR, the Parent of BHR, a
Lessee, or an Affiliated Manager involved in a transaction that will constitute
a Transfer.
Working Capital--shall mean the excess of a Lessee's current assets
over such Lessee's current liabilities, both as determined in accordance with
GAAP.
2. Effective Date. All of the terms and conditions of this
Agreement shall become effective upon the Closing Date. The effectiveness of
this Agreement is conditioned upon (i) the occurrence of Closing under the
Merger Agreement and (ii) the execution and delivery of an amended and restated
Agreement among FSLP and each Lessor, on the one hand, and BHR and Lessee, on
the other hand, assuming the obligations of Lessors and Lessees pursuant to
this Agreement. If the conditions to the effectiveness of this Agreement
described above has not been satisfied on or before the date six (6) months
after the date of this Agreement, this Agreement shall be null and void,
subject to the rights of the parties at law or in equity if the failure of such
conditions to occur is the result of the default of any party hereto.
3. Execution of Percentage Leases; Computation of Rent;
Contemplated Renovations; SPE Financings; Termination Payments.
(a) Execution of Percentage Leases. Upon the Closing
Date, Lessors and Lessees shall execute and deliver the Percentage Leases,
pursuant to which the Existing Hotels shall be leased by a Lessor to a Lessee.
The terms of Exhibit C to the Percentage Leases shall be as set forth on
Exhibit B attached hereto or (to the extent not set forth therein) as
negotiated in good faith between FelCor and BHR prior to the Closing Date. The
terms of Exhibit D to the Percentage Leases shall be as set forth on Exhibit D
attached hereto or (to the extent not set forth therein) as negotiated in good
faith between FelCor and BHR prior to the Closing Date. Except with respect to
the Percentage Leases of the Sale Hotels, each Percentage Lease will have a
primary term of from five (5) to fifteen (15) years, with options for Lessee to
renew the term (i) for a period equal to the number of years by which fifteen
(15) exceeds the number of years in the primary term at the same Rent as in
effect during the Last Year of the primary term, and (ii) for a second 5-year
period at then current market rent for hotel REIT leases for similar
properties.
(b) Computation of Rent. The Base Rent and Percentage
Rent for each Percentage Lease of an Existing Hotel shall be reasonably agreed
to by Lessors and Lessees in good
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faith prior to the Merger and shall be calculated as percentages of various
sub-categories of Gross Revenues of such Existing Hotel, with the aggregate of
such Rent for all Existing Hotels for the years 1998, 1999 and 2000 being
approximately equal to 95% of the forecast (utilized by FelCor and Bristol
Hotel Company as the basis for negotiating the Merger) of aggregate Splitable
Income (as hereinafter defined) of Lessees from such Existing Hotels; provided,
however, that to the extent that the actual performance of the Existing Hotels
for such period(s) deviates from such forecasted Splitable Income, the terms of
the Percentage Leases as written will prevail and no adjustment will be made to
the Rent as a result of any such deviation. Although the economics of
individual Percentage Leases may vary based upon anticipated individual Hotel
performance, the economics to FelCor and BHR from the Existing Hotels, in the
aggregate, contemplate the following three-step formula: (1) hotel level
operating income, excluding management fees, depreciation and interest, plus
hotel ownership expenses such as property taxes, insurance and ground lease
expenses, equals Lessee income before percentage lease expense and Lessee
corporate overhead; (2) Lessee income before percentage lease expense and
Lessee corporate overhead, minus Lessee corporate overhead, equals Lessee
income after corporate overhead and before percentage lease expense ("Splitable
Income"); and (3) FelCor receives Rent equal to 95% of Splitable Income and BHR
retains all remaining Splitable Income.
(c) Contemplated Renovations; Land Use Flexibility. The
Percentage Leases will require Lessors to be responsible for the completion of
certain contemplated renovations to Existing Hotels as generally set forth in
the budgets on Schedule 1 hereto, with the nature and timing of such
renovations to be agreed to between the parties in good faith. The parties
agree that such budgets are preliminary only and may be reasonably adjusted
upwards or downwards following further review and analysis. In addition,
however, FelCor and BHR agree to cause Lessors and Lessees to negotiate in good
faith with respect to the exclusion (before or after the execution of the
Percentage Leases for the Existing Hotels) from the Leased Property under any
Percentage Lease of Land or Improvements not reasonably necessary for, and
directly related to, the operation of the Hotel at the time of such
determination ("Excess Realty"), which FelCor proposes to put to more
profitable use, redevelopment or disposition (such as, by example, but without
limitation, by the construction of a parking structure on Land used for surface
parking for a Hotel, in connection with which a portion
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of the Land may be sold by Lessor as no longer reasonably necessary to the
operation of the Hotel following construction of such parking structure) as
long as Lessee is reasonably compensated for any detrimental effect upon Hotel
operations or its Lessee Income Before Corporate Overhead as a result of such
use, redevelopment or disposition by Lessor, including, without limitation, by
an appropriate reduction in the Rent under such Percentage Lease and/or the
payment of a fee to Lessee.
(d) SPE Financings. If requested by FelCor or a Lessor,
BHR and each Lessee agree that it will cooperate, and will cause any New
Financing Lessees (defined below) to cooperate, in good faith to promptly form
one or more new entities which are wholly-owned by such Lessee and/or the
general partner and/or the parent of the general partnership of such Lessee
(each, a "New Financing Lessee"), to serve as the lessee for one or more Hotels
designated by FelCor, and will assign to the New Financing Lessee, and cause
the New Financing Lessee to assume, the Percentage Leases with respect to such
Hotels, except with respect to obligations accrued through the date of such
assignment assumption.
Lessee and any New Financing Lessee will (a) include in its
and/or its general partner's organizational documents, or promptly amend its
and/or its general partner's existing organizational documents to include,
provisions sufficient to qualify such entity as a single-purpose,
bankruptcy-remote entity (or a similar entity) as determined by Lessor's lender
with reference to rating agency requirements, (b) operate in accordance with
such provisions so as to qualify or continue to qualify as such a single
purpose, bankruptcy-remote entity (or a similar entity) and (c) reasonably
cooperate with FelCor and Lessor and the Lessor's lender in connection with the
foregoing, and with the Lessor's counsel, including with respect to such
counsel's legal opinion regarding the bankruptcy-remoteness and/or
non-consolidation of the Lessee or New Financing Lessee and/or its general
partner with any other persons or entities and other customary matters. Such
Lessor will pay Lessee's reasonable out-of-pocket costs incurred in connection
with this Section 3(d), including, without limitation, organizing or amending
the organizational documents of the New Financing Lessees and in obtaining such
legal opinions.
(d) Termination Fee Payments. In the event of the
occurrence of a Termination Fee Payment Event with respect to a Percentage
Lease (the "Terminated Lease"), all or any portion of the Termination Fee Base
Amount with respect to such Percentage Lease shall, at Lessor's option,
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be applied as a Termination Fee first to past due Rent under the Terminated
Lease or other Percentage Leases, without curing any Event of Default that has
occurred and is continuing thereunder, and the Monthly Termination Payment (as
defined below) then shall be applied as a Termination Fee first to Rent due or
to become due (as it becomes due) under other Percentage Leases (with such
Lessee or any other Lessee) for the number of months remaining following the
date of termination of the Terminated Lease and prior to the end of both the
Primary Term and any First Extension Term (for a total of 15 years) of such
Terminated Lease (other than for Sale Hotels), regardless of whether Lessee has
then exercised its option with respect to such First Extension Term, or prior
to the end of the Second Extension Term thereto if Lessee has properly
exercised its option with respect to such Second Extension Term prior to the
date Lessor provides notice to Lessee of an anticipated Termination Fee Payment
Event. The "Monthly Termination Payment" shall be an amount equal to
one-twelfth (1/12) of the amount of the Termination Fee Base Amount remaining
after any application of a portion thereof to past-due Rent as provided above.
Notwithstanding the foregoing, in the event of the termination
(in the same transaction or series of transactions) of a sufficient number of
Percentage Leases that the aggregate monthly amount owed to Lessee(s) for
Monthly Termination Payments is greater than the aggregate monthly amount of
Rent payable to Lessor(s) under the remaining Percentage Leases, the aggregate
amount of Monthly Termination Payments that would have been paid over the
remaining term(s) of the Terminated Leases shall be discounted to net present
value at an agreed reasonable discount rate and such amount shall be paid to
BHR or Lessee(s) in a lump sum in satisfaction of all of Lessor(s) obligations
with respect to such aggregate Termination Fees, and Lessee(s) shall continue
to pay Rent on all remaining Percentage Leases, if any, as set forth therein.
4. Future Percentage Leases. FelCor and BHR hereby agree
that, unless otherwise agreed by FelCor and BHR in their sole discretion in
connection with the acquisition of a New Hotel, the form of Percentage Lease
between Lessor and Lessee with respect to each New Hotel shall be in
substantially the form of the Form Percentage Lease; provided, however, that
all economic terms of such new Percentage Lease for a New Hotel shall be
negotiated in good faith by the parties at the time. In the event that FelCor
or an Affiliate acquires the "Bristol House" hotel in Dallas, Texas, it will
offer a Lessee the opportunity to enter into a Percentage Lease for such Hotel
upon terms
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negotiated in good faith by the parties at the time; provided, however, that
FelCor and its Affiliates shall have no obligation to offer any other hotels to
BHR or its Affiliates.
5. Minimum Liquid Net Worth Requirements; Lessee Reporting
Obligations; Limitations on Distributions.
(a) Liquid Net Worth. At all times during the Terms of
the Percentage Leases, Lessees shall maintain an aggregate Liquid Net Worth in
an amount at least equal to the Minimum Liquid Net Worth. FelCor and BHR agree
to negotiate in good faith in order to determine the portion of such Liquid Net
Worth to be allocated to each Lessee to be formed prior to the Closing Date,
which allocation shall be subject to the reasonable approval of FelCor's REIT
tax counsel.
(b) Lessee Reporting Obligations. Concurrently with (i)
the delivery of all financial statements to FelCor and Lessors pursuant to
Section 7(a)(i) hereof, and (ii) the execution of any Percentage Lease for any
New Hotel (and, at Lessee's option, in connection with the termination of any
then existing Percentage Lease), each Lessee shall certify to FelCor and its
REIT tax counsel as to the amount of its Liquid Net Worth and its
then-applicable Minimum Liquid Net Worth in a certificate signed by the chief
financial officer, chief accounting officer or treasurer of BHR and by such
Lessee (a "Compliance Certificate"). Each Lessee's Liquid Net Worth and
Minimum Liquid Net Worth shall be determined from time to time (x) from the
most recent Compliance Certificate delivered by BHR and such Lessee, or (y) in
the absence of a timely Compliance Certificate when required hereunder, as
reasonably determined (or estimated) by FelCor pending receipt of such
Compliance Certificate.
(c) Obligation of BHR to Supplement Liquid Net Worth.
If, upon any determination of Liquid Net Worth, the Liquid Net Worth of any
Lessee is less than the Minimum Liquid Net Worth, but Lessors are prohibited by
any Lessor's mortgage financing from exercising their rights under Section
10(b) to terminate all Percentage Leases, BHR shall have the obligation, to the
extent of cash, cash equivalents and other liquid assets reasonably available
to BHR (as certified in writing by BHR to FelCor), to contribute (or cause to
be contributed) to such Lessee, promptly after written notice from Lessor,
additional cash, marketable securities or other assets that qualify for the
Liquid Assets Amount with a current fair market value (as of the date of such
contribution), or to provide additional Credit Enhancement, at least equal to
such deficiency in the
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Liquid Net Worth of such Lessee. Except as expressly set forth in this Section
5(c), or in a Form Guaranty, BHR shall have no obligation to make or cause to
be made any other capital contributions to any Lessee.
(d) Limitation on Distributions. No dividends or
other distributions (other than distributions in the form of additional equity
interests in Lessee) shall, for any period, be declared, paid or set apart for
payment on any equity interest in any Lessee (the "Lessee's Capital"), and no
Lessee Capital shall be redeemed, purchased or otherwise acquired by Lessee for
any consideration (except by conversion into or exchange for other equity
interests in Lessee), unless, after giving effect to such proposed
distribution, (i) the Liquid Net Worth of each Lessee equals or exceeds the
Minimum Liquid Net Worth then applicable to such Lessee, and (ii) no uncured
monetary default of any Lessee exists under this Agreement nor any uncured
default in the payment of Rent (including, without limitation, estimated or
actual monthly payments of Percentage Rent) under any Percentage Lease (unless
such dividend or other distribution will be used to cure such default).
(e) Payments to Affiliates. Except for Post-Default
Operating Expenses and distributions to holders of equity interests permitted
under Section 5(d) above, no Lessee shall make, directly or indirectly, any
payments (for services or otherwise) to Affiliates of Lessee unless, after
giving effect to such proposed payment, (i) the Liquid Net Worth of each Lessee
shall equal or exceed the Minimum Liquid Net Worth then applicable to such
Lessee, and (ii) no uncured monetary default of any Lessee exists under this
Agreement nor any uncured default in the payment of Rent (including, without
limitation, estimated or actual monthly payments of Percentage Rent) under any
Percentage Lease.
6. Changes of Control and Activities of Lessee.
(a) Voluntary Transfers or Changes in Structure. BHR
represents that, except with respect to the Percentage Lease for, and Lessee
of, the Chateau LeMoyne Hotel (to the extent included in the Existing Hotels),
on the Closing Date, each Lessee will be a wholly-owned subsidiary of BHR and
BHR will have sole economic and voting interest in each Lessee. During the
Term of the Percentage Leases, BHR and Lessees may, but shall not be obligated
to, seek the prior written consent of FelCor (following not less than sixty
(60) days prior written notice to FelCor), which consent shall not be
unreasonably withheld, to a Transfer. If requested, FelCor shall not have the
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right to withhold its consent to any Transfer if (i) the Transferee (or its
parent) has Liquid Net Worth at least equal to that of, and otherwise is as
creditworthy as, BHR as of the end of the Fiscal Year preceding such Transfer,
and (ii) the Transferee (A) has a good reputation in the U.S. hospitality
industry and (B) either (x) has substantial expertise in the management of
hotels comparable to the Hotels or (y) will retain a substantial number of
hotel management employees, including executive management, of Transferor. In
the event of a Transfer to which FelCor does not consent, (i) the percentage
hurdle for purposes of a Revenue Performance Shortfall under the Percentage
Leases affected by such Transfer shall increase from eighty percent (80%) to
ninety percent (90%), (ii) the Overall Shortfall Cure Percentage shall be
increased from ninety percent (90%) to one hundred percent (100%), (iii) the
Revenue Performance Shortfall test period shall be reduced from three (3) years
to one (1) year, and (iv) the respective Lessee shall have no opportunity to
cure any Revenue Performance Shortfall thereafter (including but not limited to
the first full Fiscal Year following the effective date of any such Transfer).
(b) Hostile Change of Control. In the event of a
Hostile Change of Control, Lessors shall have the absolute right and option (in
its sole, unreviewable discretion) to terminate any or all of the Percentage
Leases upon not less than thirty (30) days prior written notice to the
respective Lessee, without payment of any Termination Fee.
(c) Other Business Activities. After the
occurrence and during the continuance of a Default by Lessee, without the prior
written consent of FelCor, no Lessee shall engage in or incur any expenses or
liabilities related to any business or activity in which it is not engaged at
the time of such Default.
7. Financial Statements; Indemnification; Due Diligence;
Confidentiality.
(a) Financial Disclosure.
(i) During the term of any Percentage Lease, BHR and Lessees
agree:
(A) to deliver, and otherwise make available, to
FelCor, FSLP and Lessors,
(1) not more than forty-five (45) days
following the end of each calendar quarter of each year during the
Terms of the Percentage Leases, quarterly unaudited financial
statements, including balance sheet, statement of operations,
statement of
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shareholders' equity, statement of cash flows for Lessee for the most
recently ended calendar quarter and the comparable prior year period
prepared in conformity with GAAP;
(2) not more than ninety (90) days after
the end of each calendar year during the Terms of the Percentage
Leases, (A) a hotel-by-hotel breakdown of revenue by source, occupied
and available rooms, and maintenance and repair expenses, and (B)
audited annual financial statements and schedules for the most
recently ended calendar year prepared in accordance with GAAP, audited
by a nationally recognized certified public accounting firm reasonably
acceptable to FelCor, FSLP and Lessors;
(3) any historical financial information
reasonably necessary to re-state historical financial information to
conform to the presentation of FelCor's, FSLP's or Lessor's audited
and unaudited financial statements at any future time; and
(4) on a timely basis, any other
information reasonably requested by FelCor, FSLP and Lessors to permit
FelCor, FSLP and Lessors to meet their filing and reporting
requirements under the 1934 Act and to file and have declared
effective registration statements under the 1933 Act, including
providing information necessary to complete the "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" section of FelCor's 1934 Act reports and 1933 Act
registration statements as it may relate to BHR, Lessees or the
Hotels; and
(B) that BHR or Lessees shall bear the cost of
obtaining, preparing and providing all information required to be furnished to
FelCor, FSLP and Lessors under this Section 7(a)(i), including the cost and
related expenses of the annual audit of Lessees' financial statements.
(ii) During the term of any Percentage Lease, FelCor and Lessor
agree to make available to BHR and Lessees on a timely basis, any information
reasonably requested by BHR and Lessees to permit BHR to meet its filing and
reporting requirements under the 1934 Act and to file and have declared
effective registration statements under the 1933 Act, including providing
information necessary to complete the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section of BHR's 1934 Act
reports and 1933 Act registration statements as it may relate to Lessors or the
Hotels.
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(b) Indemnification.
(i) FelCor, FSLP and each Lessor agree, jointly
and severally, to indemnify, defend (with counsel reasonably acceptable to BHR
and Lessees), and hold harmless BHR, each Lessee and each Affiliated Manager,
and their stockholders, partners, limited liability company members, officers,
directors and controlling persons (collectively, "Lessee Indemnified Parties")
from and against any losses, claims, damages, expenses or liabilities (or
actions in respect thereof) to which the Lessee Indemnified Parties may become
subject under the 1933 Act, the 1934 Act or otherwise, insofar as such losses,
claims, damages, expenses or liabilities or actions in respect thereof arise
out of or are based upon the 1934 Act reports or 1933 Act registration
statements of FelCor, FSLP or Lessors, except to the extent any such claims,
liabilities, losses, damages, expenses, or liabilities (or actions in respect
thereof) result from any untrue statement of a material fact or omission of any
material fact in the information provided by (or on behalf of) a Lessee
Indemnified Party to FelCor, FSLP or Lessor pursuant to Section 7(a)(i) above.
(ii) BHR and each Lessee agree, jointly and
severally, to indemnify, defend (with counsel reasonably acceptable to FelCor,
FSLP and Lessors) and hold harmless FelCor, FSLP and Lessors, and their
respective stockholders, partners, limited liability company members, officers,
directors and controlling persons (collectively, "Lessor Indemnified Parties")
from and against any losses, claims, damages, expenses or liabilities (or
actions in respect thereof) to which the Lessor Indemnified Parties may become
subject under the 1933 Act, the 1934 Act or otherwise, insofar as such losses,
claims, damages, expenses or liabilities or actions in respect thereof arise
out of or are based upon the 1934 Act reports or 1933 Act registration
statements of BHR or Lessees, except to the extent any such claims,
liabilities, losses, damages, expenses, or liabilities (or actions in respect
thereof) result from any untrue statement of a material fact or omission of any
material fact in the information provided by (or on behalf of) a Lessor
Indemnified Party to BHR or Lessees pursuant to Section 7(a)(ii) above.
(c) Due Diligence. During the term of each Percentage
Lease, BHR and Lessees agree:
(i) to permit FelCor, FSLP and Lessees, together
with their independent public accountants, counsel, financial advisors,
underwriters, underwriters' counsel, rating agencies,
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lenders and others having a legitimate interest in Lessees' or the Hotels'
financial condition and results of operations, during regular business hours,
upon reasonable notice and at the sole cost of FelCor, FSLP or Lessors
(provided there shall be no charge by Lessees or BHR to FelCor, FSLP or Lessors
for the reasonable time of Lessees' and BHR's officers or employees), to
interview officers and employees of Lessees or BHR and to have access to and
review:
(A) the general accounting records of
Lessees or any Hotel for purposes of performing an audit of FelCor,
FSLP, Lessors or any Hotel in accordance with generally accepted
auditing standards and to conduct reasonable due diligence with
respect to Lessees and their business activities and the Hotels; and
(B) Lessees' entity records, minute
books, contracts and other information, documents, agreements or items
relating to the operation of the Hotels and Lessees' financial
condition.
(ii) to cooperate promptly and fully with FelCor,
FSLP and Lessors upon request and at the cost of FelCor, FSLP or Lessors
(except with respect to the cost of obtaining, preparing and providing the
information required to be furnished to FelCor, FSLP and Lessors under Section
7(a)(i) above and any costs relating to the reasonable time of employees or
officers of Lessees or BHR), in making available such information with respect
to Lessees or the Hotels as may be then required by any regulatory agency,
including the SEC or any stock exchange on which FelCor's, FSLP's or Lessors'
securities may be registered, listed or traded.
(iii) to use their reasonable best efforts to cause
the independent public accountants preparing audits of BHR and Lessees to
provide FelCor, FSLP and Lessors, at the sole cost of FelCor, FSLP or Lessors
with all consents and comfort letters of such accountants required for FelCor's
or Lessors' filings under the 1933 Act or the 1934 Act or to have FelCor's or
Lessors' registration statements be declared effective under the 1933 Act.
During the term of each Percentage Lease, FelCor, FSLP and
Lessors agree:
(i) to permit BHR and Lessees, together with
their independent public accountants, counsel, financial advisors,
underwriters, underwriters' counsel, rating agencies, lenders and others having
a legitimate interest in Lessors' or the Hotels' financial condition and
results of operations, during regular business hours, upon reasonable notice
and at the sole cost of BHR and
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Lessees (provided there shall be no charge by FelCor, FSLP or Lessors to
Lessees or BHR for the reasonable time of FelCor's, FSLP's or Lessors' officers
or employees), to interview officers and employees of FelCor, FSLP and Lessors)
and to have access to and review:
(A) the general accounting records of
Lessors or any Hotel for purposes of performing an audit of BHR,
Lessees or any Hotel in accordance with generally accepted auditing
standards and to conduct reasonable due diligence with respect to
Lessors and their business activities and the Hotels; and
(B) Lessors' entity records, minute
books, contracts and other information, documents, agreements or items
relating to the operation of the Hotels and Lessors' financial
condition.
(ii) to cooperate promptly and fully with Lessees
and BHR, upon request and at the cost of Lessees, in making available such
information with respect to FelCor, FSLP or Lessors as may be then required by
any regulatory agency, including the SEC or any stock exchange on which BHR's
or Lessees' securities may be registered, listed or traded.
(iii) to use their reasonable best efforts to cause
the independent public accountants preparing audits of FelCor, FSLP or Lessors
to provide BHR and Lessees, at the sole cost of Lessees and BHR, with all
consents and comfort letters of such accountants required for BHR's or Lessees'
filings under the 1933 Act or the 1934 Act or to have BHR's or Lessees'
registration statements be declared effective under the 1933 Act.
(d) Confidentiality. To the extent Lessors or
FelCor on the one hand, or Lessees or BHR on the other, obtains information or
becomes aware of material information concerning the other that is not
disclosed in a public announcement or filing under the 1933 Act or the 1934 Act
by BHR or FelCor, each party agrees that it shall not improperly disclose or
unlawfully utilize such information or otherwise act unlawfully with respect
thereto.
8. REIT Requirements.
(a) BHR has been advised by FelCor and understands that,
in order for FelCor to qualify as a real estate investment trust under the Code
("REIT"), the following requirements (the "REIT Requirements") must be
satisfied:
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(i) The average of the adjusted tax bases of
Lessor's personal property that is leased to Lessee under a Percentage Lease at
the beginning and end of a calendar year cannot exceed fifteen percent (15%) of
the average of the aggregate adjusted tax bases of Lessor's real and personal
property that is leased to Lessee under such Percentage Lease at the beginning
and end of such calendar year.
(ii) Lessee cannot sublet the Hotels and related
property that is leased to it by Lessor, or enter into any similar arrangement,
on any basis such that the rental or other amounts paid by the sublessee
thereunder would be based, on whole or in part, on either (i) the net income or
profits derived by the business activities of the sublessee or (ii) any other
formula such that any portion of the Percentage Rent or other rent paid by
Lessee to Lessor would fail to qualify as "rents from real property" within the
meaning of Section 856(d) of the Code.
(iii) Lessee cannot sublease the Hotels and related
property leased to it by Lessor to, or enter into any similar arrangement with,
any person in which FelCor owns, directly or indirectly, a ten percent (10%) or
greater ownership interest, within the meaning of Section 856(d)(2)(B) of the
Code.
(iv) FelCor cannot own, directly or indirectly, a
ten percent (10%) or greater ownership interest in BHR or Lessee, within the
meaning of Section 856(d)(2)(B) of the Code.
(v) Unless specifically permitted by the Board of
Directors of FelCor, no person can own, directly or indirectly, capital stock
of FelCor that exceeds the limit set forth in FelCor's Charter.
(b) BHR and Lessees agree, and agree to use reasonable
efforts to cause their Affiliates, to use their reasonable best efforts to
permit the REIT Requirements to be satisfied. BHR and Lessees agree, and agree
to use their reasonable best efforts to cause their Affiliates, to cooperate in
good faith with FelCor, FSLP and Lessors to ensure that the REIT Requirements
are satisfied, including but not limited to, providing FelCor with information
about the ownership of BHR, Lessees, and their Affiliates to the extent that
such information is reasonably available, and complying with the related
obligations of Lessees under each Percentage Lease. BHR and Lessees agree, and
agree to use their reasonable best efforts to cause their Affiliates, upon
request by FelCor
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(and, where appropriate action not already required by the terms hereof or of
the Percentage Leases is required by this Section 8(b), at FelCor's expense),
to take reasonable action necessary to ensure compliance with the REIT
Requirements. Immediately after becoming aware that any REIT Requirement is
not, or will not be, satisfied, BHR or Lessees shall notify, or use reasonable
efforts to cause their Affiliates to notify, FelCor of such noncompliance.
9. Cross Default. From and after the Closing Date, a Financial
Default (as hereinafter defined) by any Lessee under the Percentage Lease with
respect to any Hotel will constitute and continue to create an Event of Default
(until cured, if curable) under the Percentage Leases with respect to all other
Hotels, except to the extent prohibited by Lessors' mortgage financing secured
by a lien upon any such other Hotel. A "Financial Default" shall mean and
refer to any Event of Default under a Percentage Lease consisting of one or
more of the following:
(i) if Lessee fails to pay Base Rent or Percentage Rent to
Lessor as and when due (following any applicable grace or cure
period);
(ii) if Lessee (A) 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 Lessee or of the whole or substantially
all of the assets of Lessee shall be appointed in any proceeding
brought by Lessee or if any such receiver, trustee or liquidator shall
be appointed in any proceeding brought against Lessee and shall not be
vacated or set aside or stayed within sixty (60) days after such
appointment, or (B) 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, except as
permitted hereunder; or
(iii) if a material Event of Default (including, without
limitation, any of those listed above) occurs under any Percentage
Lease at any time during any period of twelve (12) consecutive months
in which any material Events of Default have occurred under at least
four (4) other Percentage Leases.
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10. Default by Lessee.
(a) A "Default by Lessee" shall exist under this
Agreement if any one or more of the following occur:
(i) Liquid Net Worth Covenants. During the term
of any Percentage Lease, a Lessee fails to maintain its Minimum Liquid Net
Worth as required in, or makes distributions or payments prohibited by,
Sections 5 hereof (each, a "LNW Deficiency"), and fails to cure such LNW
Deficiency within thirty (30) days following notice thereof from FelCor to BHR;
provided, however that if BHR is required to raise debt or equity capital in
order to supply cash, marketable securities or other assets that qualify for
the Liquid Assets Amount or Credit Enhancement to cure such LNW Deficiency, and
in good faith commences and continues to raise such debt or equity capital
within thirty (30) days after such determination of Liquid Net Worth, BHR shall
have a reasonable period not to exceed ninety (90) days to raise such debt or
equity capital and to cause such required cash, marketable securities or other
assets that qualify for the Liquid Assets Amount or Credit Enhancement to be
included in such Lessee's Liquid Net Worth in order to eliminate any LNW
Deficiency.
(ii) Default Under Percentage Leases. A Financial
Default occurs under any of the Percentage Leases to which such Lessee is a
party.
(iii) Other Breaches. BHR or any Lessee fails to
comply with any other provision of this Agreement for a period of thirty (30)
days after being notified by FelCor in writing of the provisions of this
Agreement with which such Lessee has failed to comply; provided that if such
default (other than if Lessee fails to pay any Base Rent or Percentage Rent
under any Percentage Lease, when due after any applicable cure period, which
failure shall be subject to the provisions set forth in the Percentage Leases,
or if Lessee fails to maintain its Minimum Liquid Net Worth as required in, or
makes distributions or payments prohibited by, Section 5 hereof) cannot with
due diligence be cured within a thirty (30) day period, such period shall be
extended for such reasonable time as BHR or such Lessee promptly and with due
diligence commences and continues the cure thereof but in no event for a period
of more than ninety (90) days following the date of notice from FelCor to BHR.
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(b) In the event of a Default by Lessee, and without
prejudice to the rights and remedies of any Lessor under any Percentage Lease,
Lessors may, subject to its compliance with the terms of any Recognition
Agreement and Article 21 of each Percentage Lease, elect to terminate all of
the Percentage Leases (or all of the Percentage Leases to which the Lessee in
default is a party), except to the extent expressly prohibited by mortgage
financing of Lessors that is secured by a lien upon the Hotel covered by such
Percentage Lease. In no event shall Lessors have the option to terminate less
than all Percentage Leases (or all Percentage Leases to which the Lessee in
default is a party) as to which they have both the contractual and legal right
so to terminate.
11. Recognition Agreement. FelCor and Lessor agree to negotiate
in good faith and enter into a Recognition Agreement with Bankers Trust Company
prior to the Closing Date and with any other lender to BHR and/or any Lessees
subsequent to the Closing Date.
12. Miscellaneous.
(a) Entire Agreement; Modification, Amendments and
Waivers. This Agreement, together with the Percentage Leases and instruments
and agreements referenced herein and therein, constitutes the entire agreement
among the parties hereto with respect to the subject matter of this Agreement
and supersedes that certain Agreement Regarding Master Hotel Agreement dated as
of March 23, 1998 among the parties hereto, and any prior oral agreements among
the parties hereto. No modification, amendment or waiver of any provision of
this Agreement shall be effective unless the same is in a writing signed by all
parties to this Agreement.
(b) Notices. All notices, demands, requests, consents
approvals and other communications ("Notice") hereunder shall be in writing and
personally served, mailed (by registered or certified mail, return receipt
requested and postage prepaid), sent by FedEx or other nationally recognized
overnight courier, or sent by facsimile to the parties as set forth below:
If to BHR or any Lessee:
Bristol Hotels & Resorts, Inc.
00000 Xxxxxx Xxxx
Xxxxxx, Xxxxx 000000
Facsimile: 972/391-3497
Attention: President (with a copy to
Attention: General Counsel)
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If to FelCor, FSLP or any Lessor:
FelCor Suite Hotels, Inc.
000 X. Xxxx Xxxxxxxxx Xxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile: 972/444-4949
Attention: President (with a copy to
Attention: General Counsel)
or to such other address or addresses as either party may hereafter designate.
Personally delivered Notice (including any confirmed facsimile transmission or
delivery by nationally recognized overnight courier) shall be effective upon
receipt at the specified address. 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 (5) days.
(c) Successors and Assigns. The provisions of this
Agreement shall be binding upon the parties hereto and all of their permitted
successors and assigns and inure to the benefit of the parties hereto and their
permitted successors and assigns.
(d) Termination. This Agreement (other than the parties'
indemnification rights and obligations hereunder) shall terminate (without
prejudice to any accrued claims hereunder) at such time as all of the
Percentage Leases have terminated.
(e) Governing Law. This Agreement shall be governed by
the laws of the State of Texas.
(f) Counterparts. This Agreement may be signed in one or
more counterparts, each of which shall be an original once all parties have
signed a counterpart hereof, with the same force and effect as if the
signatures thereto and hereto were upon the same instrument.
(g) WAIVERS. EACH PARTY WAIVES, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY PROCEEDINGS BROUGHT BY
EITHER PARTY TO ENFORCE THE PROVISIONS OF THIS AGREEMENT. IN ANY SUIT OR OTHER
CLAIM BROUGHT BY EITHER PARTY SEEKING DAMAGES AGAINST THE OTHER PARTY FOR
BREACH OF ITS OBLIGATIONS UNDER THIS AGREEMENT, THE PARTY AGAINST WHOM SUCH
CLAIM IS MADE SHALL BE
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LIABLE TO THE OTHER PARTY ONLY FOR ACTUAL DAMAGES AND NOT FOR CONSEQUENTIAL,
PUNITIVE OR EXEMPLARY DAMAGES.
(h) Time of the Essence. Time is of the essence of this
Agreement.
(i) Conflict. In the event of any actual conflict or
inconsistency between the terms of this Agreement and the terms of any
Percentage Lease, the terms of this Agreement shall take precedence.
(j) Further Assurances. From time to time, as when
requested by a party hereto, the other parties will execute and deliver, or
cause to be executed and delivered, all such other documents and instruments as
may be reasonably required to further or better evidence the agreements herein.
(k) Interpretation; Arbitration. No provision of this
Agreement will be interpreted in favor of, or against, any of the parties
hereto by reason of the extent to which any such party or its counsel
participated in the drafting hereof or by reason of the extent to which any
such provision is inconsistent with any prior draft hereof. Any disputes
arising under this Agreement will be resolved in accordance with the
arbitration procedures set forth in Section 42.1 of the Percentage Leases.
(l) Future Affiliates. Any currently existing or
future Affiliate of FelCor or the Lessors that is or in the future may be a
Lessor under a Percentage Lease shall become a party to this Agreement,
entitled to the same rights, benefits and remedies to which FelCor and the
Lessors are entitled hereunder by execution of an addendum to this Agreement.
Any currently existing or future Affiliate of BHR or the Lessees that is or in
the future may be a Lessee under a Percentage Lease shall become a party to
this Agreement, entitled to the same rights, benefits and remedies to which BHR
and the other Lessees are entitled hereunder by execution of an addendum to
this Agreement. Upon the request of any party, such future Lessors and Lessees
shall execute any documents, instruments or amendments hereto reasonably
requested by a party hereto to further evidence any such Affiliate's rights,
benefits and remedies hereunder.
(m) Representatives. This Agreement provides the
Lessors certain rights, benefits and remedies. FelCor is hereby designated and
appointed the representative of the Lessors, and the Lessees and BHR shall be
permitted to rely upon any written or oral communication or
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notification from FelCor as being from the respective Lessor. Any notice
required to be given hereunder shall be given to FelCor as representative for
any and all of the Lessors.
This Agreement provides the Lessees certain rights,
benefits and remedies. BHR is hereby designated and appointed the
representative of the Lessees, and the Lessors and FelCor shall be permitted to
rely upon any written or oral communication or notification from BHR as being
from the respective Lessee. Any notice required to be given hereunder shall be
given to BHR as representative for any or all of the Lessees.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
Bristol Hotels & Resorts, Inc.
By: /s/ XXXX X. XXXXXXX
----------------------------------------
Name: Xxxx X. Xxxxxxx
--------------------------------------
Title: Vice President
-------------------------------------
FelCor Suite Hotels, Inc.
By: /s/ XXXXXXXX X. XXXXXXXX
----------------------------------------
Name: Xxxxxxxx X. Xxxxxxxx
--------------------------------------
Title: Senior Vice President
and General Counsel
-------------------------------------
FelCor Suites Limited Partnership
By: FelCor Suite Hotels, Inc.
its general partner
By: /s/ XXXXXXXX X. XXXXXXXX
----------------------------------------
Name: Xxxxxxxx X. Xxxxxxxx
--------------------------------------
Title: Senior Vice President
and General Counsel
-------------------------------------
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Exhibit A - Existing Hotels
Exhibit B-1 - Form Percentage Lease
Exhibit B-2 - Capital Expenditure Policy
Exhibit C - Form of Guaranty
Exhibit D - Percentage Rent Computations
Schedule 1 - Contemplated Renovations
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EXHIBIT A
Existing Hotels
28
EXHIBIT B-1
Form Percentage Lease
29
LEASE AGREEMENT
DATED AS OF _______________, 1998
BETWEEN
[OLD BRISTOL/FELCOR AFFILIATE]
AS LESSOR
AND
[NEW BRISTOL AFFILIATE]
AS LESSEE
30
TABLE OF CONTENTS
SECTION PAGE
------- ----
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Leased Property . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Second Extension of the Term . . . . . . . . . . . . . . . . . 3
ARTICLE 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.1 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.2 Confirmation of Percentage Rent . . . . . . . . . . . . . . . 21
3.3 Additional Charges . . . . . . . . . . . . . . . . . . . . . . 21
3.4 Net Lease Provision . . . . . . . . . . . . . . . . . . . . . 22
3.5 Material Changes in Economic Climate . . . . . . . . . . . . . 22
3.6 Performance Failure . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.1 Payment of Impositions . . . . . . . . . . . . . . . . . . . . 24
4.2 Notice of Impositions . . . . . . . . . . . . . . . . . . . . 26
4.3 Adjustment of Impositions . . . . . . . . . . . . . . . . . . 26
4.4 Utility Charges . . . . . . . . . . . . . . . . . . . . . . . 26
4.5 Insurance Premiums . . . . . . . . . . . . . . . . . . . . . . 26
4.6 Franchise Fees . . . . . . . . . . . . . . . . . . . . . . . . 27
4.7 Ground Rent. . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.1 No Termination, Abatement, etc. . . . . . . . . . . . . . . . 27
ARTICLE 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.1 Ownership of the Leased Property . . . . . . . . . . . . . . . 28
6.2 Lessee's Personal Property . . . . . . . . . . . . . . . . . . 28
6.3 Lessor's Lien . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.1 Condition of the Leased Property . . . . . . . . . . . . . . . 29
7.2 Use of the Leased Property . . . . . . . . . . . . . . . . . . 29
7.3 Lessor to Grant Easements, etc. . . . . . . . . . . . . . . . 31
31
ARTICLE 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.1 Compliance with Legal and Insurance Requirements, etc. . . . . 31
8.2 Legal Requirement Covenants . . . . . . . . . . . . . . . . . 31
8.3 Environmental Covenants . . . . . . . . . . . . . . . . . . . 33
ARTICLE 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.1 Maintenance and Repair . . . . . . . . . . . . . . . . . . . . 35
9.2 Encroachments, Restrictions, Etc. . . . . . . . . . . . . . . 36
ARTICLE 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.1 Alterations . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.2 Salvage . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.3 Initial Upgrade of Improvements . . . . . . . . . . . . . . . 38
ARTICLE 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Permitted Contests . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13.1 General Insurance Requirements . . . . . . . . . . . . . . . . 40
13.2 Replacement Cost . . . . . . . . . . . . . . . . . . . . . . . 41
13.3 Waiver of Claims and Subrogation . . . . . . . . . . . . . . . 42
13.4 Form Satisfactory, etc. . . . . . . . . . . . . . . . . . . . 42
13.5 Increase in Limits . . . . . . . . . . . . . . . . . . . . . . 42
13.6 Blanket Policy . . . . . . . . . . . . . . . . . . . . . . . . 43
13.7 No Separate Insurance . . . . . . . . . . . . . . . . . . . . 43
13.8 Reports On Insurance Claims . . . . . . . . . . . . . . . . . 43
ARTICLE 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
14.1 Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . 43
14.2 Reconstruction in the Event of Damage or Destruction Covered
by Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 44
14.3 Reconstruction in the Event of Damage or Destruction Not
Covered by Insurance . . . . . . . . . . . . . . . . . . . . . 45
14.4 Lessee's Personal Property and Business Interruption
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
14.5 Abatement of Rent Upon Casualty . . . . . . . . . . . . . . . 45
14.6 Damage Near End of Term . . . . . . . . . . . . . . . . . . . 45
14.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
15.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 46
15.2 Parties' Rights and Obligations . . . . . . . . . . . . . . . 46
15.3 Total Taking . . . . . . . . . . . . . . . . . . . . . . . . . 46
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15.4 Partial Taking . . . . . . . . . . . . . . . . . . . . . . . . 46
15.5 Allocation of Award . . . . . . . . . . . . . . . . . . . . . 47
15.6 Temporary Taking . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
16.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . 48
16.2 Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . 50
16.3 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
16.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
16.5 Application of Funds . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Lessor's Right to Cure Lessee's Default . . . . . . . . . . . . . . . 52
ARTICLE 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
18.1 Revenue Budgets . . . . . . . . . . . . . . . . . . . . . . . 52
18.2 Operating Budgets . . . . . . . . . . . . . . . . . . . . . . 53
18.3 Capital Budget . . . . . . . . . . . . . . . . . . . . . . . . 53
18.4 Annual Budget Approval; Budget Disputes . . . . . . . . . . . 54
ARTICLE 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
19.1 REIT Requirements; Management Agreements; Affiliate Payments . 55
19.3 Management Agreement . . . . . . . . . . . . . . . . . . . . . 57
19.4 Payments to Affiliates of Lessee . . . . . . . . . . . . . . . 57
ARTICLE 20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Holding Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
22.1 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 60
22.2 Indemnification Procedure . . . . . . . . . . . . . . . . . . 61
ARTICLE 23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
23.1 Subletting and Assignment . . . . . . . . . . . . . . . . . . 61
23.2 Subordination and Attornment . . . . . . . . . . . . . . . . . 62
ARTICLE 24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Officer's Certificates; Estoppel Certificates; Financial and
Portfolio Information . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE 25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Lessor's Right to Inspect . . . . . . . . . . . . . . . . . . . . . . 65
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ARTICLE 26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE 27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Acceptance of Surrender . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE 29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
No Merger of Title . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Conveyance by Lessor . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE 32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE 33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Appraisers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE 34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
34.1 Lessor May Grant Liens . . . . . . . . . . . . . . . . . . . . 68
34.2 Lessee's Right to Cure . . . . . . . . . . . . . . . . . . . . 70
34.3 Breach by Lessor . . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE 35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
35.1 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 71
35.2 Transition Procedures . . . . . . . . . . . . . . . . . . . . 71
35.3 Waiver of Presentment, etc. . . . . . . . . . . . . . . . . . 73
35.4 Standard of Discretion. . . . . . . . . . . . . . . . . . . . 73
35.5 Action for Damages. . . . . . . . . . . . . . . . . . . . . . 73
35.6 Lease Assumption in Bankruptcy Proceeding. . . . . . . . . . . 73
35.7 Intra-Family Transfers. . . . . . . . . . . . . . . . . . . . 73
ARTICLE 36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Memorandum of Lease . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE 37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
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Lessor's Option to Purchase Lessee's Personal Property . . . . . . . 74
ARTICLE 38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Lessor's Option to Terminate Lease upon Sale . . . . . . . . . . . . 74
ARTICLE 39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Compliance with Franchise Agreement by Lessee . . . . . . . . . . . . 76
ARTICLE 40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Lessor Approval of Capital Expenditures; Capital Reserve. . . . . . . 77
ARTICLE 41 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
41.1 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . 78
41.2 Alternative Arbitration. . . . . . . . . . . . . . . . . . . . 78
41.3 Arbitration Procedures. . . . . . . . . . . . . . . . . . . . 78
The Ground Lease . . . . . . . . . . . . . . . . . . . . . . . . . . 79
ARTICLE 43 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
EXHIBIT A-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
EXHIBIT A-2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
EXHIBIT B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
EXHIBIT C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
EXHIBIT D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
EXHIBIT E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
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LEASE AGREEMENT
THIS LEASE AGREEMENT (hereinafter called "Lease"), made as of the ____
day of _______________, 1998, by and between [Bristol subsidiary or successor
that currently owns the hotel] (hereinafter called "Lessor"), and [Bristol
Hotel Tenant Company], a Delaware corporation (hereinafter called "Lessee"),
provides as follows.
RECITALS:
A. In connection with the transactions contemplated by that certain
Agreement and Plan of Merger dated as of March 23, 1998 (the "Merger
Agreement"), Bristol Hotel Company, a Delaware corporation and the ultimate
parent of Lessor ("Bristol") is to be merged with and into FelCor. Prior to
such merger (i) Lessor and certain other direct or indirect subsidiaries of
Bristol (collectively, including Lessor, the "Existing Lessors") that own hotel
properties have agreed to lease to Lessee, and Lessee has agreed to lease from
such Existing Lessors the hotels listed on Exhibit "A-1" attached hereto
(including this Lease, the "Existing Leases"), and (ii) all of the shares of
capital stock of Bristol Hotels and Resorts, Inc. ("BHR"), the immediate parent
of Lessee, will be distributed to the shareholders of Bristol. Following the
merger, the Existing Lessors will be direct or indirect subsidiaries of FelCor.
X. Xxxxxx and Lessee desire to provide for the general terms and
conditions upon which the Hotel covered by this Lease will be leased to and
operated by Lessee.
NOW, THEREFORE, intending to be legally bound, Lessor and Lessee agree
as follows:
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 1
1.1 Leased Property. The "Leased Property" is comprised of Lessor's
interest in the following:
(a) the land or ground leasehold interest described in Exhibit
"B" attached hereto and by reference incorporated herein.
(b) all buildings, structures and other improvements of every
kind including, but not limited to, alleyways and connecting tunnels,
sidewalks, utility pipes, conduits and lines (on-site and offsite), parking
areas and roadways appurtenant to, and any leasehold interest of
36
Lessor as a tenant in, such buildings and structures presently situated upon
the Land (collectively, the "Improvements");
(c) all easements, rights and appurtenances relating to the
Land and the Improvements;
(d) all equipment, machinery, fixtures, and other items of
property required or incidental to the use of the Improvements as a hotel,
including all components thereof, now and hereafter permanently affixed to or
incorporated into the 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, wall coverings all
of which to the greatest extent permitted by law are hereby deemed by the
parties hereto to constitute real estate, together with all replacements,
modifications, alterations and additions thereto (collectively, the
"Fixtures");
(e) all equipment, machinery and other items of property
incidental to the use of the Improvements as a hotel, including all components
thereof, now or hereafter located at the Improvements or used exclusively in
connection therewith, including, without limitation, all computer and front
desk equipment, such as reservations systems, accounting systems, printers and
other office equipment, all equipment and systems required for the operation of
kitchens, bars and Restaurants, if any, and laundry and dry cleaning
facilities, dining room wagons, materials, handling equipment, cleaning and
engineering equipment, and vehicles, but excluding the Fixtures, Furniture and
Inventory (collectively, the "Equipment");
(f) all furniture and furnishings and all other items of
personal property (excluding Inventory and personal property owned by Lessee)
located on, and used in connection with, the operation of the Improvements as a
hotel, together with all replacements, modifications, alterations and additions
thereto (collectively, "Furniture); and
(g) the lessor's interest in, to and under all existing leases
of space within the Leased Property (including any security deposits or
collateral held by Lessor pursuant thereto), which interests shall be
conditionally assigned to Lessee if required by applicable law or the terms and
conditions of such leases.
EXCEPT AS EXPRESSLY SET FORTH HEREIN, THE LEASED PROPERTY IS DEMISED IN ITS
PRESENT CONDITION WITHOUT REPRESENTATION OR WARRANTY (EXPRESSED OR IMPLIED) BY
LESSOR AND SUBJECT TO THE RIGHTS OF HOTEL GUESTS AND TENANTS IN POSSESSION, AND
TO THE EXISTING STATE OF TITLE INCLUDING ALL COVENANTS, CONDITIONS,
RESTRICTIONS, EASEMENTS AND OTHER MATTERS OF RECORD INCLUDING ALL APPLICABLE
LEGAL REQUIREMENTS, THE LIEN OF FINANCING INSTRUMENTS, MORTGAGES, DEEDS OF
TRUST AND SECURITY DEEDS, AND INCLUDING OTHER MATTERS WHICH
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37
WOULD BE DISCLOSED BY AN INSPECTION OF THE LEASED PROPERTY OR BY AN ACCURATE
SURVEY THEREOF.
1.2 Term. The term of this Lease (the "Term") shall commence on the
Commencement Date and shall end on the Expiration Date, unless sooner
terminated in accordance with the provisions hereof.
1.3 First Extension of the Term. [ADD LESSEE'S FIRST OPTION TO
EXTEND TERM TO A TOTAL OF 15 YEARS ON SAME ECONOMIC TERMS AS IN EFFECT ON LAST
DAY OF INITIAL TERM IF INITIAL TERM IS LESS THAN 15 YEARS. RENEWAL AUTOMATIC
UNLESS LESSEE DELIVERS NOTICE OF NON-RENEWAL].
1.3 Second Extension of the Term. At least one hundred twenty (120)
days prior to the expiration of the First Extension Term, Lessor and Lessee
shall negotiate in good faith modifications to the Rent for an extension of
five (5) years (the "Second Extension") of the Term to adjust such Rent to
market rates for hotel REIT leases for similar hotel properties at that time.
In the event Lessor and Lessee are unable to agree upon Rent terms for the
Second Extension, at least ninety (90) days prior to the expiration of the
Term, the Rent terms for the Second Extension shall be determined by a panel of
three (3) persons having generally recognized expertise in evaluating hotel
REIT leases. Lessee and the Lessor each shall have the right to designate one
panel member and the two (2) panel members so designated will designate the
third panel member. Rent terms approved by at least two (2) of the three (3)
panel members will be binding on Lessee and Lessor for the Second Extension,
which shall be otherwise on the terms set forth herein. In determining the
market rates for the Second Extension, the panel members shall be instructed to
consider hotel REIT lease terms with respect to similar hotel property types.
[ADD MECHANICS OF LESSEE'S EXERCISE OF EXTENSION OPTION(S)]
ARTICLE 2
Definitions. For all purposes of this Lease, except as otherwise
expressly provided or unless the context otherwise requires, (a) the terms
defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular, (b) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
GAAP, (c) all references in this Lease to designated "Articles," "Sections" and
other subdivisions are to the designated Articles, Sections and other
subdivisions of this Lease and (d) the words "herein," "hereof" and "hereunder"
and other words of similar import refer to this Lease as a whole and not to any
particular Article, Section or other subdivision:
Additional Charges: As defined in Section 3.3.
Affiliate: As used in this Lease the term "Affiliate" of a Person shall
mean (1) any Person that, directly or indirectly, controls or is controlled by
or is under common control with such Person, (2) any other Person that owns,
beneficially, directly or indirectly, fifty percent (50%) or
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38
more of the outstanding capital stock, shares or equity interests of such
Person, or (3) 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.
Annual Budget: As defined in Section 18.3.
Annual Revenues Computation: As defined on Exhibit "D" attached hereto.
Average Daily Rate: Total Room Revenues divided by occupied rooms at
the Hotel.
Award: As defined in Section 15.1.
Base Rate: The rate of interest announced publicly by The Chase
Manhattan Bank in New York, New York, from time to time, as such bank's base
rate. If no such rate is announced or becomes discontinued, then such other
rate as Lessor may reasonably designate.
Base Rent: As defined in Article 3.
Beverage Sale Revenues: Shall mean Gross Revenue from (i) the sale of
wine, beer, liquor or other alcoholic beverages, whether sold in the bar or
lounge, delivered to a guest room, sold at meetings or banquets or at any other
location at the Leased Property or (ii) non-alcoholic beverages sold in the bar
or lounge. Such revenues shall not include Sublease Rent or the following:
(1) Any gratuity or service charge added to a customer's xxxx
or statement in lieu of a gratuity which is paid to an employee;
(2) Any revenues that are subsequently credited, rebated or
refunded in the ordinary course of business; and
(3) Sales taxes or taxes of any other kind imposed on the sale
of alcoholic or other beverages.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which national banks in the City of New York, New York, or in
the municipality wherein the Leased Property is located are closed.
Capital Budget: As defined in Section 18.3.
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39
Capital Expenditures: Amounts advanced to pay the costs of Capital
Improvements.
Capital Impositions: Taxes, assessments or similar charges imposed upon
or levied against the Leased Property for the costs of public improvements,
including, without limitation, roads, sidewalks, public lighting fixtures,
utility lines, storm sewers, drainage facilities and similar improvements.
Capital Improvements: Improvements to the Leased Property and repair
replacement or refurbishing of the Improvements, Fixtures, Equipment and
Furniture and of equipment and systems that constitute portions of the Leased
Property in connection with its Primary Intended Use, and the cost of all
approvals, licenses, permits and other authorizations necessary to complete
such improvements, replacements and refurbishing, all as, and to the extent,
(i) designated as capital improvements by and determined in accordance with
GAAP and (ii) of the types described in the capital improvements policy set
forth on Exhibit " C" attached hereto as "capital".
Capital Reserve: As defined in Section 40.1(b).
CERCLA: The Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
Claim: As defined in Section 12.1.
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: The date set forth on Exhibit "D" attached hereto as
the commencement date with respect to the Hotel.
Competitive Set: As defined in the STR Reports. Lessor and Lessee
shall work in good faith to determine any additions and deletions to the
Hotel's Competitive Set, on or before November 15th of each Lease Year, with
such changes to be applicable for the following Lease Year. In the event
Lessor and Lessee cannot agree to the Hotel's Competitive Set by November 15th
of any Lease Year, such unagreed items shall be determined by Xxxxx Travel
Research (or, if it refuses or is unable to do so, by arbitration pursuant to
Section 41.2). The costs of resetting the Hotel's Competitive Set shall be
borne equally by the parties.
Condemnation, Condemnor: As defined in Section 15.1.
Consolidated Financials: For any Fiscal Year or other accounting period
for Lessee and BHR's consolidated Subsidiaries, if any, that lease hotel
properties from Lessor or any of FelCors Subsidiaries, statements of
operations, retained earnings and cash flow (or, in the case of a partnership,
statements of operations, partners' capital and cash flow) for such period and
for the period from the beginning of the respective Fiscal Year to the end of
such period, and the related balance sheet as at the end of such period,
together with the notes to any such yearly
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40
statements, all in such detail as may be required by the SEC with respect to
filings made by FelCor, FSLP or Lessor, and setting forth in comparative form
the corresponding figures for the corresponding period in the preceding Fiscal
Year, and prepared in accordance with GAAP and audited annually (and quarterly
if required by the SEC) by nationally recognized independent certified public
accountants.
Construction Services Agreement: As defined in Section 10.3(c).
Consumer Price Index: Consumer Price Index, U.S. City Average, All
Items for all Urban Consumers, published by the Bureau of Labor Statistics of
the United States Department of Labor, as reported in the Wall Street Journal.
Contemplated Renovations: As defined in Section 10.3(b).
Date of Taking: As defined in Section 15.1.
Emergency Capital Expenditures: Capital Expenditures required to take
necessary or appropriate actions to respond to Emergency Situations.
Emergency Situations: Fire, flood, earthquake or any other casualty, or
any other events, circumstances or conditions, which threaten the safety or
physical well-being of the Hotel's guests or employees or which involve the
risk of material property damage or material loss to the Hotel.
Encumbrance: As defined in Article 34.
Environmental Authority: Any department, agency or other body or
component of any Government that exercises any form of jurisdiction or
authority under any Environmental Law.
Environmental Authorization: Any license, permit, order, approval,
consent, notice, registration, filing or other form of permission or
authorization required under any Environmental Law.
Environmental Laws: All applicable federal, state, local and foreign
laws and regulations relating to pollution of the environment (including
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata), including without limitation laws and regulations relating
to emissions, discharges, Releases or threatened Releases of Hazardous
Materials or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Materials. Environmental Laws include but are not limited to CERCLA, FIFRA,
RCRA, XXXX and TSCA.
Environmental Liabilities: Any and all obligations to pay the amount of
any judgment or settlement, the cost of complying with any settlement, judgment
or order for injunctive or other equitable relief, the cost of compliance or
corrective action in response to any notice, demand or
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41
request from an Environmental Authority, the amount of any civil penalty or
criminal fine, and any court costs and reasonable amounts for attorney's fees,
fees for witnesses and experts, and costs of investigation and preparation for
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:
(1) Failure of Lessee, Lessor, any Predecessor or the Leased
Property to comply at any time with all Environmental Laws;
(2) Presence of any Hazardous Materials on, in, under, at or
in any way affecting the Leased Property;
(3) A Release at any time of any Hazardous Materials on, in,
at, under or in any way affecting the Leased Property;
(4) Identification of Lessee, Lessor or any Predecessor as a
potentially responsible party under CERCLA or under any Environmental Law
similar to CERCLA;
(5) Presence at any time of any above-ground and/or
underground storage tanks, as defined in RCRA or in any applicable
Environmental Law on, in, at or under the Leased Property or any adjacent site
or facility; or
(6) 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 any adjoining property, or resulting from the
operation thereof.
Equipment: As defined in Section 1.1.
Event of Default: As defined in Section 16.1.
Excluded Lease Year: As defined in Section 3.6(a).
Excess Capital Expenditures: As defined in Section 18.4.
Existing Leases: As defined in Recital A.
Existing Lessors: As defined in Recital A.
Expiration Date: The date set forth on Exhibit "D" attached hereto as
the expiration date with respect to the Hotel.
FSLP: FelCor Suites Limited Partnership, a Delaware limited
partnership, of which FelCor is the general partner.
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42
FelCor: FelCor Suite Hotels, Inc., a Maryland corporation, and its
successors and assigns.
FIFRA: The Federal Insecticide, Fungicide, and Rodenticide Act, as
amended.
Fiscal Year: The 12-month period from January 1 to December 31.
Fixtures and Equipment: As defined in Section 1.1.
Food Sale Revenues: Shall mean Gross Revenue from the sale, for on-site
consumption, of food and non-alcoholic beverages sold at the Leased Property,
including in respect to guest rooms, banquet rooms, ballrooms, meeting rooms
and other similar rooms, including the rentals with respect to banquets,
meetings and other functions held in such banquet rooms, ballrooms, meeting
rooms and other similar rooms. Such revenues shall not include Sublease Rent
or the following:
(1) Vending machine sales;
(2) Any gratuities or service charges added to a customer's
xxxx or statement in lieu of a gratuity which is paid to an employee;
(3) Non-alcoholic beverages sold from the bar or lounge;
(4) Sales taxes or taxes of any other kind imposed on the sale
of food or non-alcoholic beverages; and
(5) Any revenues that are subsequently credited, refunded or
rebated in the ordinary course of business.
Force Majeure: An Unavoidable Occurrence, generally affecting travel
and/or the hotel or lodging business in the market and/or submarket in which
the Hotel is located.
Franchise Agreement: Any franchise or license agreement with a
Franchisor under which the Hotel is operated as a hotel facility under a
registered service xxxx or other brand name or "flag" approved by Lessor (not
to be unreasonably withheld).
Franchise Event of Default: As defined in Section 16.1(g).
Franchisor: The franchisor or licensor under any Franchise Agreement.
Furniture: As defined in Section 1.1.
GAAP: GAAP shall mean, as of any date of determination, accounting
principles (a) set forth as generally accepted in then currently effective
Opinions of the Accounting Principles
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43
Board of the American Institute of Certified Public Accountants, (b) set forth
as generally accepted in then currently effective Statements of the Financial
Accounting Standards Board or (c) that are then approved by such other entity
as may be approved by a significant segment of the accounting profession in the
United States of America. The term "consistently applied," as used in
connection therewith, means that the accounting principles applied are
consistent in all material respects to those applied at prior dates or for
prior periods.
Government: The United States of America, any state, district or
territory thereof, any foreign nation, any state, district, department,
territory or other political division thereof, or any agency or political
subdivision of any of the foregoing.
Gross Operating Expenses: The term "Gross Operating Expenses" shall
include (i) all costs and expenses of operating the Hotel included within the
meaning of the term "Total Costs and Expenses" contained in the Uniform System
and, (ii) without duplication, the following: all salaries and employee
expenses and payroll taxes (including salaries, wages, bonuses and other
compensation of all employees of the Hotel, and benefits including life,
medical and disability insurance and retirement benefits), expenditures
described in Section 9.1 (other than Capital Expenditures required to be paid
for by Lessor), operating lease payments for Office Machines acquired after the
Transition Date operational supplies, utilities, governmental fees and
assessments, common area assessments, costs of food and beverages, laundry
service expense, the cost of Inventory, license fees, advertising, marketing,
reservation systems and any and all other operating expenses as are reasonably
necessary for the proper and efficient operation of the Hotel incurred by
Lessee in accordance with the provisions hereof (excluding, however, (i)
federal, state and municipal excise, sales and use taxes collected directly
from patrons and guests or as a part of the sales price of any goods, services
or displays, such as gross receipts, admissions, cabaret or similar or
equivalent taxes paid over to federal, state or municipal governments, (ii) the
cost of insurance to be provided by Lessor under Section 13.1(a), (iii) Real
Estate Taxes, Capital Impositions and Personal Property Taxes, (iv) payments on
any Ground Lease, Mortgage or other Encumbrance on, the Land or Improvements
approved by Lessor, and (v) depreciation and amortization; all determined in
accordance with the Uniform System).
Gross Revenues: All revenues, receipts, and income of any kind derived
directly or indirectly by Lessee from or in connection with the Hotel
(including rentals or other payments from tenants, lessees, licensees or
concessionaires but not including their gross receipts) whether on a cash basis
or credit, paid or collected, determined in accordance with the Uniform System,
excluding, however: (i) funds furnished by Lessor, (ii) federal, state and
municipal excise, sales, and use taxes collected directly from patrons and
guests or as a part of the sales price of any goods, services or displays, such
as gross receipts, admissions, cabaret or similar or equivalent taxes and paid
over to federal, state or municipal governments, (iii) the amount of all
credits, rebates or refunds to customers, guests or patrons in the ordinary
course of business, and all service charges, finance charges, interest and
discounts attributable to charge accounts and credit cards, to the extent same
are paid to Lessee by its customers, guests or patrons, or to the extent the
same are paid for by Lessee to, or charged to Lessee by, credit card companies,
(iv) gratuities paid to employees, (v) proceeds of insurance (including
business interruption insurance payable
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44
to Lessee) and condemnation, (vi) proceeds from sales other than sales in the
ordinary course of business, (vii) complimentary meals and rooms to Lessee's
and Manager's employees, and charitable, promotional and other complimentary
meals and rooms given by Lessee in the ordinary course of business and in
accordance with its normal policies for giving such meals and rooms, as is
customary for similar operations, (viii) receipts for returns to shippers,
manufacturers or suppliers, (ix) all loan proceeds from financing or
refinancing of its leasehold interest in the Hotel, or interests therein or
components thereof, including the Leased Property and Lessee's Personal
Property, (x) judgments and awards, except any portion thereof arising from
normal business operations of the Hotel, and (xi) items constituting
"allowances" under the Uniform System.
Ground Lease: As defined in Section 42.1.
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 rodenticide, as defined in
FIFRA or in any Environmental Law; and
(E) Gasoline or any other petroleum product or byproduct,
polychlorinated biphenols, asbestos, urea formaldehyde and radon gas.
Hotel: The hotel and/or other facility offering lodging and other
services or amenities being operated or proposed to be operated on the Leased
Property.
Hotel Market Decline: A period of six (6) consecutive calendar months
during which there is (i) a twenty percent (20%) decline in average hotel
occupancy for the Hotel from the average hotel occupancy levels for same period
during the prior calendar year and (ii) a twenty percent (20%) decline in
average hotel occupancy for the Hotel's Competitive Set from the average hotel
occupancy levels for the same period during the prior calendar year, as
published in the applicable STR Reports.
Hotel Shortfall Cure Percentage: As defined in Section 3.6(c)
Impositions: Collectively, all taxes (including, without limitation,
all ad valorem, sales and use, single business, gross receipts, transaction
privilege, rent or similar taxes as the same
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45
relate to or are imposed upon Lessee or its business conducted upon the Leased
Property), assessments (including, without limitation, all Capital Impositions,
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 utility rents and
charges, excises, tax inspection, authorization and similar fees and all other
governmental charges, in each case whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, of every character in respect of the
Leased Property or the business conducted thereon by Lessee (including all
interest and penalties thereon caused by any failure in payment by Lessee),
which at any time prior to, during or with respect to the Term hereof may be
assessed or imposed on or with respect to or be a lien upon Lessor's interest
in the Leased Property, the Leased Property, or any part thereof or any rent
therefrom or any estate, right, title or interest therein, or any occupancy,
operation, use or possession of, or sales from, or activity conducted on or in
connection with the Leased Property, or the leasing or use of the Leased
Property or any part thereof by Lessee. Nothing contained in this definition
of Impositions shall be construed to require Lessee to pay (1) any tax based on
net income (whether denominated as a franchise or capital stock or other tax)
imposed on Lessor or any other Person, or (2) any net revenue tax of Lessor or
any other Person, or (3) any tax imposed with respect to the sale, exchange or
other disposition by Lessor of any Leased Property or the proceeds thereof, or
(4) any single business, gross receipts (other than a tax on any rent received
by Lessor from Lessee), transaction, privilege or similar taxes as the same
relate to or are imposed upon Lessor, except to the extent that any tax,
assessment, tax levy or charge that Lessee is obligated to pay pursuant to the
first sentence of this definition and that is in effect at any time during the
Term hereof is totally or partially repealed, and a tax, assessment, tax levy
or charge set forth in clause (1) or (2) is levied, assessed or imposed
expressly in lieu thereof.
Improvements: As defined in Section 1.1.
Indemnified Party: Either of a Lessee Indemnified Party or a Lessor
Indemnified Party.
Indemnifying Party: Any party obligated to indemnify an Indemnified
Party pursuant to Sections 8.3 or 22.1.
Insurance Requirements: All terms of any insurance policy required by
this Lease and all requirements of the issuer of any such policy.
Inventory: All "Inventories of Merchandise" and "Inventories of
Supplies" as defined in the Uniform System, as same may hereafter be revised,
including without limitation linens, china, silver, glassware and other non-
depreciable personal property, and including any property of the type described
in Section 1221(1) of the Code.
Land: As defined in Section 1.1.
Lease Year: Any 12-month period from January 1 through December 31
during the Term, or any shorter period at the beginning or end of the Term.
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46
Leased Property: 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 now in force or hereafter enacted and in force, including
all laws, rules or regulations pertaining to the environment, occupational
health and safety and public health, safety or welfare, and any laws, rules or
regulations that may (1) require repairs, modifications or alterations in or to
the Leased Property or (2) in any way adversely affect the use and enjoyment
thereof; and all permits, licenses and authorizations and regulations relating
thereto and all covenants, agreements, restrictions and encumbrances contained
in any instruments, either of record or known to Lessee (other than
encumbrances created by Lessor without the consent of Lessee), at any time in
force affecting the Leased Property.
Lessee: The Lessee designated on this Lease and its respective
permitted successors and assigns.
Lessee Indemnified Party: Lessee, any Affiliate of Lessee, any other
Person against whom any claim for indemnification may be asserted hereunder as
a result of a direct or indirect ownership interest (including a partner's,
limited liability company member's or stockholder's interest) in Lessee, the
officers, directors, stockholders, employees, agents and representatives of
Lessee (and any general partner of Lessee) and any stockholder, partner,
limited liability company member or manager of Lessee, and the respective
heirs, personal representatives, successors and assigns of any such officer,
director, stockholder, partner, limited liability company member or manager,
employee, agent or representative.
Lessee's Personal Property: As defined in Section 6.2.
Lessor: The Lessor designated on this Lease and its respective
successors and assigns.
Lessor Indemnified Party: Lessor, any Affiliate of Lessor, any other
Person against whom any claim for indemnification may be asserted hereunder as
a result of a direct or indirect ownership interest (including a partner's,
limited liability company member's or stockholder's interest) in Lessor, the
officers, directors, stockholders, employees, agents and representatives of
Lessor (and any general partner of Lessor), and any partner, limited liability
company member or manager of Lessor, and the respective heirs, personal
representatives, successors and assigns of any such officer, director, partner,
stockholder, partner, limited liability company member or manager, employee,
agent or representative.
Major Sublease. Any sublease of a portion of the Leased Property which
(i) is a Restaurant sublease or other retail sublease important to the
successful operation of the Hotel (other than leases of gift shop space or to a
service provider, such as a lease to an airline ticket agent or to an overnight
courier), (ii), individually (or in the aggregate with all other such non-
Restaurant subleases) generates two percent (2%) or more of the Gross Revenues
of the Hotel, or
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47
(iii) the loss of which could reasonably be expected to cause a material
adverse change in the Hotel or Lessee's business at the Hotel.
Management Agreement: As defined in Section 19.3.
Manager: The manager of the Hotel, from time to time, as permitted
under this Lease.
Master Hotel Agreement: The [Amended and Restated] Master Hotel
Agreement dated as of [__________, 1998], among Bristol, BHR, Lessor, Lessee,
FelCor and certain Affiliates of each.
Mortgage: Any deeds to secure debt, deeds of trust, mortgages, or other
interests heretofore or hereafter granted by Lessor or which otherwise encumber
or affect the Leased Property and any and all renewals, modifications,
consolidations, replacements, substitutions, and extensions thereof.
National Economic Decline: A period of six (6) consecutive calendar
months during which there occurs or continues (i) a ten percent (10%) decline
in average hotel occupancy, from average hotel occupancy levels for the same
period during the prior calendar year, for all open and operating hotels in the
United States as determined from the applicable STR Reports or, if the STR
Reports are no longer published, other national economic data regarding the
hospitality industry.
New Lease: Any Lease Agreement hereafter entered into between Lessor
(or another Subsidiary of FelCor) and Lessee (or another Subsidiary of BHR)
pursuant to, and to be governed by, the Master Hotel Agreement.
Notice: A notice given pursuant to Article 32.
Notice Period: As defined in Section 3.6(b).
Office Machines: As defined in Section 6.2.
Officer's Certificate: A certificate of Lessee, in form reasonably
acceptable to Lessor, signed by the chief financial officer, treasurer, chief
accounting officer, or another officer authorized so to sign such certificates
by the board of directors or bylaws of Lessee, or any other Person whose power
and authority to act has been authorized by delegation in writing by any such
officer.
Operating Budget: As defined in Section 18.2.
Other Hotels: The hotel properties covered by the Existing Leases (other
than this Lease) and the New Leases.
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Other Leases: The Existing Leases (other than tis Lease) and the New
Leases.
Other Leassors: The Lessors under the Other Leases.
Other Revenues. All revenues, receipts, and income of any kind derived
directly or indirectly from or in connection with the Hotel and included in
Gross Revenues (other than Room Revenues, Food Sale Revenues and Beverage Sale
Revenues), including, without limitation, all revenues, receipts and income
derived from the Hotel's and Leased Property's telephones, TV and movie rentals
check room, washroom, laundry, valet, and vending machines and all other
services not expressly specified herein as Room Revenues, Food Revenues and
Beverage Sales Revenues.
Overdue Rate: On any date, a rate equal to the Base Rate plus two
percent (2%) per annum, but in no event greater than the maximum rate then
permitted under applicable law.
Payment Date: Any due date for the payment of any installment of Base
Rent.
Percentage Rent: As defined in Section 3.1(b).
Performance Failure: A Revenue Performance Shortfall that has not been
cured in accordance with Section. 3.7 of this Lease.
Person: The term "Person" means and includes individuals, corporations,
general and limited partnerships, stock companies or associations, joint
ventures, associations, companies, trusts, banks, trust companies, land trusts,
business trusts, or other entities and governments and agencies and political
subdivisions thereof.
Personal Property Taxes. All personal property taxes imposed on the
Furniture, Fixtures and Equipment and other items of personal property owned by
Lessor, located on, and used in connection with, the operation of the
Improvements as a Hotel (other than Inventory and the other Lessee's Personal
Property), together with all replacements, modifications, alterations and
additions thereto.
PIP: As defined in Section 10.3.
Primary Intended Use: As defined in Section 7.2(b).
Proceeding: Any judicial action, suit or proceeding (whether civil or
criminal), any administrative proceeding (whether formal or informal), any
investigation by a governmental authority or entity (including a grand jury),
and any arbitration, mediation or other non-judicial process for dispute
resolution.
Quarterly Revenues Computation: As defined on Exhibit "D" attached
hereto.
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RCRA: The Resource Conservation and Recovery Act, as amended.
Real Estate Taxes: All real estate taxes, including general and special
assessments, if any, which are imposed upon the Land and the Improvements.
REIT Requirements: As defined in Section 19.1.
Regional Market Decline: A period of six (6) consecutive calendar
months during which there is a twenty percent (20%) decline in average hotel
occupancy from hotel occupancy levels for the same period during the then prior
calendar year, for all open and operating hotels in the Xxxxx Travel Research
Region in which the Hotel is located, as determined from applicable STR Reports
or, if the STR Reports are no longer published, other regional economic data
regarding the hospitality industry..
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.
Restaurant: Any restaurant or cocktail lounge, together with a kitchen
for those facilities, which may be located in the Hotel at any time and from
time to time.
Revenue Budget: As defined in Section 18.1.
Revenue Performance Shortfall: As defined in Section 3.6(a).
RevPAR: As defined in the STR Reports.
Room Revenue Breakpoint: As defined on Exhibit "D" hereto.
Room Revenues: Shall mean Gross Revenue from the rental of guest rooms
or suites, whether to individuals, groups or transients, but excluding Beverage
Sale Revenues, Food Sale Revenues and the following:
(a) The amount of all credits, rebates or refunds to customers,
guests or patrons;
(b) All sales taxes or any other taxes imposed on the rental of such
guest rooms; and
(c) Any fees collected for amenities including, but not limited to
telephone, laundry, movies or concessions.
XXXX: The Superfund Amendments and Reauthorization Act of 1986, as
amended.
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50
State: The State or Commonwealth of the United States or Province of
Canada in which the Leased Property is located.
SEC: The U.S. Securities and Exchange Commission or any successor
agency.
STR Reports: Reports compiled by Xxxxx Travel Research which contain
historical supply and demand, occupancy, and average rate information for the
Hotel and hotels with which it competes.
Sublease Rent: The entire net amount of rentals (including base rent
and percentage rent, but not including pre-paid rent (until earned) security or
other deposits and expense pass-through amounts), if any, received by Lessee
under any sublease (or similar agreement), and with any unaffiliated third
party (i) to which the Leased Property is subject on the date of this Lease, or
(ii) of a Restaurant or other retail space in the Hotel which may be entered
into from time to time.
Subsidiaries: Persons in which another Person owns, directly or
indirectly, more than 50% of the voting stock and control, as applicable
(individually, a "Subsidiary").
Taking: A taking or voluntary conveyance during the Term hereof of all
or part of the Leased Property, or any interest therein or right accruing
thereto or use thereof, as the result of, or in settlement of, any Condemnation
or other eminent domain Proceeding affecting the Leased Property whether or not
such Condemnation or other eminent domain Proceeding shall have actually been
commenced.
Term: As defined in Section 1.2.
Termination Fee: An amount with respect to the termination of this
Lease, if any, determined as set forth in the Master Hotel Agreement.
Transition Date: The effective date of this Lease.
TSCA: The Toxic Substances Control Act, as amended.
Unavoidable Delays: Delays due to strikes, lock-outs, labor unrest,
inability to procure materials, power or other utility failure, acts of God
(such as hurricanes, tornados, earthquakes, floods and mud slides) governmental
restrictions, war or other enemy action, civil commotion, fire, casualty,
condemnation or other similar 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 reasonable control of either party
hereto unless such lack of funds is caused by the failure of the other party
hereto to perform any obligations of such party under this Lease or any
guaranty of this Lease.
Unavoidable Occurrence: shall mean the occurrence of strikes, lockouts,
labor unrest, gasoline and other energy shortages, widespread disruption of
air, auto or other travel, inability to
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51
procure materials, power or other utility failure, acts of God (such as
hurricanes, tornados, earthquakes, floods and mud slides), governmental
restrictions, war or other enemy or terrorist action, civil commotion, fire,
casualty, condemnation or other similar causes beyond the reasonable control of
Lessee; provided that any such occurrence is an extraordinary, as opposed to a
routine or cyclical, material event that was not reasonably foreseeable when
the then-applicable Annual Budget was prepared.
Uneconomic for its Primary Intended Use: A state or condition of the
Hotel such that, in the good faith judgment of Lessee, reasonably exercised and
evidenced by the resolution of the board of directors or other governing body
of Lessee (or its general partner), the Hotel cannot be operated on a
commercially practicable basis for its Primary Intended Use, taking into
account, among other relevant factors, the number of usable rooms and projected
revenues, such that Lessee intends to, and shall, complete the cessation of
operations at the Hotel.
Uniform System: Shall mean the Uniform System of Accounts for Hotels
(9th Revised Edition, 1996) as published by the Hotel Association of New York
City, Inc., with such later revisions as may be agreed to by both Lessor and
Lessee.
Unsuitable for its Primary Intended Use: A state or condition of the
Hotel such that, in the good faith judgment of Lessor, reasonably exercised and
evidenced by the resolution of the board of directors or other governing body
of Lessor, due to casualty damage or loss through Condemnation, the Hotel
cannot function as an integrated hotel facility consistent with standards
applicable to a well maintained and operated hotel of the same type as the
Hotel.
ARTICLE 3
3.1 Rent. Lessee will pay to Lessor in lawful money in the State
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 32 hereof
or at such other place or to such other Person, as Lessor from time to time may
designate in a Notice, all Base Rent, Percentage Rent and Additional Charges,
during the Term, as follows:
(a) Base Rent: An annual sum in the amount set forth on
Exhibit "D" hereto as the "Base Rent" for the Leased Property, payable in
advance in equal, consecutive monthly installments, on or before the last day
of the prior calendar month for each calendar month of the Term ("Base Rent");
provided, however, that the first monthly payment of Base Rent shall be payable
on the last day of the first full calendar month following the Commencement
Date, in addition to the second monthly payment of Base Rent then due, and that
the first and last monthly payments of Base Rent shall be pro rated as to any
partial month (subject to adjustment as provided in Sections 5.2, 14.5, 15.3,
15.5, and 15.4); and
(b) Percentage Rent: For each Lease Year during the Term
commencing with the Lease Year in which the Commencement Date occurs, Lessee
shall pay percentage rent ("Percentage Rent") as follows:
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52
(i) monthly (on or before the last day of the month) in an amount
equal to seventy-five percent (75%) of the amount of Lessee's budgeted
Percentage Rent payable with respect to the then current month; and
(ii) to the extent not paid as estimated Percentage Rent,
quarterly in arrears, on or before the 15th day of the calendar month
following the end of each calendar quarter in each Fiscal Year, and on
or before January 15th of the next year with respect to the fourth
quarter of each Fiscal Year, in an amount calculated by the following
formula:
The amount equal to the Quarterly Revenues Computation
less
an amount equal to the Base Rent paid year to date for the
applicable Lease Year
less
an amount equal to Percentage Rent paid year to date for
the applicable Lease Year
equals
Percentage Rent for the applicable quarter.
Notwithstanding the amounts of Percentage Rent paid quarterly
pursuant to the formula set forth above, for any Lease Year during the Term
commencing with the Lease Year in which the Commencement Date occurs, the
Percentage Rent payable under this Lease shall be no less than or greater than
the amount calculated by the following formula:
The amount equal to the Annual Revenues Computation
less
an amount equal to the Base Rent paid year to date for the
applicable Lease Year
equals
Percentage Rent for the applicable Lease Year.
Set forth on Exhibit "E" attached hereto is an example of the
calculation of Percentage Rent. In no event will Percentage Rent be less than
zero, and there shall be no
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53
reduction in the Base Rent regardless of the result of the Quarterly Revenues
Computation or Annual Revenues Computation.
(c) Officer's Certificates. An Officer's Certificate shall be
delivered to Lessor, together with such monthly estimated Percentage Rent
payment and quarterly Percentage Rent payment, setting forth the calculation of
such estimated or adjusted rent payment for such month or quarter.
In addition, on or before January 20th of each year, commencing with the
January 20th first following the end of the Lease Year in which the
Commencement Date occurs, Lessee shall deliver to Lessor an Officer's
Certificate setting forth the computation of the actual Percentage Rent that
accrued for the last quarter of the Lease Year that ended on the immediately
preceding December 31 and together with Lessee's payment to Lessor of
Percentage Rent, if due and payable, for the last quarter of the applicable
Lease Year. The Officer's Certificate shall also set forth the computation of
the actual and estimated Percentage Rent accrued and paid during the Lease Year
that ended on the immediately preceding December 31. If the annual Percentage
Rent due and payable for any Lease Year (as shown in the applicable Officer's
Certificate) exceeds the amount actually paid as Percentage Rent by Lessee for
such year, Lessee also shall pay such excess to Lessor at the time such
certificate is delivered. If the Percentage Rent actually due and payable for
such Lease Year is shown by such certificate to be less than the amount
actually paid as Percentage Rent for the applicable Lease Year, Lessor will
reimburse such amount to Lessee within five (5) Business Days thereafter.
Any difference between the annual Percentage Rent due and payable for
any Lease Year (as shown in the applicable Officer's Certificate or as adjusted
pursuant to Section 3.2) and the total amount of monthly and quarterly payments
for such Lease Year actually paid by Lessee as Percentage Rent, whether in
favor of Lessor or Lessee, shall bear interest at the Overdue Rate, which
interest shall accrue from the January 20 after the close of such Lease Year
until the amount of such difference shall be paid or otherwise discharged. Any
such interest payable to Lessor shall be deemed to be and shall be payable as
Additional Charges.
The obligation to pay Percentage Rent shall survive the expiration or
earlier termination of the Term, and a final reconciliation (taking into
account, among other relevant adjustments, any adjustments which are accrued
after such expiration or termination date but which related to Percentage Rent
accrued prior to such expiration or termination date, and Lessee's good faith
best estimate of the amount of any unresolved contractual allowances) shall be
made not later than two (2) years after such expiration or termination date,
but Lessee shall advise Lessor within 60 days after such expiration or
termination date of Lessee's best estimate at that time of the approximate
amount of such adjustments, which estimate shall not be binding on Lessee or
have any legal effect whatsoever.
(d) CPI Adjustments to Rent. If Exhibit "D" hereto
designates a CPI Adjustment for the Leased Property, then, for each Lease Year
of the Term beginning on or after the CPI Adjustment Year (as defined on said
Exhibit "D"), the Base Rent then in effect, and the
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Room Revenue Breakpoint then included in the Monthly and Annual Revenues
Computations set forth in Section 3.1(b) shall be adjusted from time to time
beginning in the CPI Adjustment Year as follows:
(1) The average Consumer Price Index for the most recently
ended Lease Year shall be divided by the average Consumer Price Index for the
immediately preceding Lease Year.
(2) The new Base Rent for the then current Lease Year shall
be the adjusted amount obtained by multiplying the Base Rent for the
immediately preceding Lease Year by the quotient obtained in subparagraph
(d)(1) above.
(3) The new Room Revenue Breakpoint in the Monthly and Annual
Revenues Computations described in Section 3.1(b) above for the then current
Lease Year shall be the product of the Room Revenue Breakpoint in effect in the
most recently ended Lease Year and the quotient obtained in subparagraph (d)(1)
above.
(4) By way of example, if the CPI Adjustment Year were 1997,
the amount of Base Rent and the Room Revenue Breakpoint amounts (and Food Sales
and Beverage Sales amounts, if applicable) for purposes of the Quarterly and
Annual Revenues Computations for the Lease Year commencing January 1, 1997
would be adjusted to reflect any change in the Average Consumer Price Index
from the Lease Year ended December 31, 1995 as compared to the Lease Year ended
December 31, 1996. Base Rent and Room Revenue Breakpoint amounts (and Food
Sales and Beverage Sales amounts, if applicable) for purposes of the Quarterly
and Annual Revenues Computations for the Lease Year commencing January 1, 1998
would be the Base Rent and Room Revenue Breakpoint amounts (and Food Sales and
Beverage Sales amounts, if applicable) applicable for the fiscal year ended
December 31, 1997 as further adjusted to reflect any change in the Consumer
Price Index from December 31, 1996 as compared to December 31, 1997.
(5) Lessor shall calculate the annual adjustments as soon as
reasonably possible after the Consumer Price Index becomes available and shall
notify Lessee in writing of the amount of the annual adjustment, together with
a copy of the computation showing the adjustment amount. Adjustments
calculated as set forth above in the Base Rent and Room Revenue Breakpoint
amounts (and Food Sales and Beverage Sales amounts, if applicable) shall be
effective on January 1 of the Lease Year to which such adjusted amounts apply.
If rent is paid in any Lease Year prior to the determination of the amount of
any adjustment to Base Rent or Room Revenue Breakpoint amounts (and Food Sales
and Beverage Sales amounts, if applicable) applicable for such Lease Year,
payment adjustments for any shortfall in or overpayment of rent paid shall be
made with the first Base Rent payment due after the amount of the adjustments
are determined.
(6) The "Average Consumer Price Index" for any period shall be
the average of the Consumer Price Index for each month during the period.
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(7) 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 Bureau of
Labor Statistics shall be requested to furnish a new index comparable to the
Consumer Price Index, together with information which will make possible a
conversion to the new index in computing the adjusted Base Rent hereunder. If
for any reason the Bureau of Labor Statistics does not furnish such an index
and such information, the parties will instead mutually select, accept and use
such other index or comparable statistics on the cost of living that is
computed and published by an agency of the United States or a responsible
financial periodical of recognized authority.
3.2 Confirmation of Percentage Rent. Lessee shall utilize, or cause
to be utilized, an accounting system for the Leased Property in accordance with
its usual and customary practices, and in accordance with GAAP and the Uniform
System, that will accurately record all data necessary to compute Percentage
Rent, and Lessee shall retain, for at least four (4) years after the expiration
of each Lease Year (and in any event until the reconciliation described in
Section 3.1(c) for such Lease Year has been made), reasonably adequate records
conforming to such accounting system showing all data necessary to compute
Percentage Rent for the applicable Lease Years. Lessor, at its expense (except
as provided hereinbelow), shall have the right from time to time by its
accountants or representatives to audit the information that formed the basis
for the data set forth in any Officer's Certificate provided under Section
3.1(c) and, in connection with such audits, to examine all Lessee's records
(including supporting data, Franchisor reports and sales and excise tax
returns) reasonably required to verify Percentage Rent (and for no other
purpose), subject to any prohibitions or limitations on disclosure of any such
data under applicable law. If any such audit discloses a deficiency in the
payment of Percentage Rent, and either Lessee agrees with the result of such
audit or the matter is otherwise determined or compromised, Lessee shall
forthwith pay to Lessor the amount of the deficiency, as finally agreed or
determined, together with interest at the Overdue Rate from the date when said
payment should have been made to the date of payment thereof; provided,
however, that as to any audit that is commenced more than two (2) years after
the date Percentage Rent for any Lease Year is reported by Lessee to Lessor,
the deficiency, if any, with respect to such Percentage Rent shall bear
interest at the Overdue Rate only from the date such determination of
deficiency is made unless such deficiency is the result of gross negligence or
willful misconduct on the part of Lessee, in which case interest at the Overdue
Rate will accrue from the date such payment should have been made to the date
of payment thereof. If any such audit discloses that the Percentage Rent
actually due from Lessee for any Lease Year exceeds that reported and paid by
Lessee by more than three percent (3%), Lessee shall pay the cost of such audit
and examination. In no event shall lessor undertake an audit more than four
(4) years after the last day of the Lease Year for which such audit is
requested. 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, investors, and underwriters who have a
need to know such information and to other Persons to whom disclosure is
required by applicable law if such persons are advised of and agree to maintain
the confidentiality of such information. The obligations of Lessee contained in
this Section shall
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survive the expiration or earlier termination of this Lease. Any dispute as to
the existence or amount of any deficiency in the payment of Percentage Rent as
disclosed by such audit shall, if not otherwise settled by the parties, be
submitted to arbitration pursuant to the provisions of Section 41.2.
3.3 Additional Charges. In addition to the Base Rent and Percentage
Rent, (a) Lessee also will pay and discharge as and when due and payable all
other amounts, liabilities, obligations and Impositions that Lessee assumes or
agrees to pay under this Lease, and (b) in the event of any failure on the part
of Lessee to pay any of those items referred to in clause (a) of this Section
3.3, Lessee also will promptly pay and discharge every fine, penalty, interest
and cost that may be added for non-payment or late payment of such items (the
items referred to in clauses (a) and (b) of this Section 3.3 being additional
rent hereunder and being referred to herein collectively as the "Additional
Charges"), and Lessor shall have all legal, equitable and contractual rights,
powers and remedies provided either in this Lease or by statute or otherwise in
the case of non-payment of the Additional Charges as in the case of non-payment
of the Base Rent, including, but not limited to, the right, but not the
obligation to pay such Additional Changes on behalf of Lessee and to require
reimbursement thereof by Lessee, together with interest thereon at the Overdue
Rate. If any installment of Base Rent, Percentage Rent or Additional Charges
(but only as to those Additional Charges that are payable directly to Lessor)
shall not be paid on its due date, Lessee will pay Lessor on demand, as
Additional Charges, a late charge (to the extent permitted by law) computed at
the Overdue Rate on the amount of such installment, from the due date of such
installment to the date of payment thereof. To the extent that Lessee pays any
Additional Charges to Lessor pursuant to any requirement of this Lease, Lessee
shall be relieved of its obligation to pay such Additional Charges to the
entity to which they would otherwise be due and Lessor shall pay same from
monies received from Lessee.
3.4 Net Lease Provision. The Rent shall be paid absolutely net to
Lessor, so that this Lease shall yield to Lessor the full amount of the
installments of Base Rent, Percentage Rent and Additional Charges throughout
the Term, all as more fully set forth in Article 5, but subject to any other
provisions of this Lease that expressly provide for adjustment or abatement of
Rent or other charges or expressly provide that certain Impositions (including
without limitation Real Estate Taxes, Capital Impositions and Personal Property
Taxes), Capital Expenditures and other expenses or maintenance shall be paid or
performed by Lessor.
3.5 Material Changes in Economic Climate.
(a) In the event of the occurrence of a Force Majeure and a
Hotel Market Decline, Lessor and Lessee shall, in good faith, negotiate
possible modifications to the Base Rent and Percentage Rent to reduce such
Base Rent and Percentage Rent to recent market rates for hotel REIT leases for
similar hotel properties in the Hotel's Competitive Set, retroactively
effective as of the first calendar month of the Term following the last day of
the six-month period during which such Hotel Market Decline has occurred with
the excess of Base Rent and Percentage Rent actually paid for such period over
the reduced Base Rent and Percentage Rent, plus interest thereon at the Base
Rate, to be credited to the next payments of Rent due and owing
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hereunder. If Lessor and Lessee are unable to agree that a Force Majeure or a
Hotel Market Decline has occurred, within thirty (30) days after the date of
written certification from Lessee to Lessor that a Force Majeure and Hotel
Market Decline has occurred (accompanied by reasonably detailed computations
and documentation to support such assertion), the matter may be submitted by
either party to arbitration under Section 41.2 hereof for resolution (during
which period Lessee shall continue to pay Base Rent and Percentage Rent as
required under Section 3.1 of this Lease). If, within ninety (90) days (during
which period Lessee shall continue to pay Base Rent and Percentage Rent as
required under Section 3.1 of this Lease) following the date of such written
certification from Lessee (or the date of a decision of an arbitrator if
required hereunder to determine that a Force Majeure and Hotel Market Decline
has occurred), Lessor and Lessee are unable to agree upon the amount of
reduction in Base Rent and Percentage Rent contemplated hereby, Lessee shall
have the option to terminate this Lease upon not less than thirty (30) days
prior written notice to Lessor.
(b) In the event of the occurrence of a National Economic
Decline and a Regional Market Decline, Lessor and Lessee shall, in good faith,
negotiate (i) possible modifications to the Base Rent and Percentage Rent to
reduce such Base Rent and Percentage Rent to recent market rates for hotel REIT
leases for similar hotel properties in the Hotel's Competitive Set, and (ii)
possible modifications to the Base and Percentage Rent payable under each of
the Other Leases for Other Hotels in the same Region (as defined in the STR
Reports) as the Hotel to reduce such Base Rent and Percentage Rent to recent
market rates for hotel REIT leases for similar hotel properties in the Hotel's
Competitive Set, in each case retroactively effective as of the first calendar
month of the Term following the last day of the six-month period during which
such Regional Market Decline has occurred with the excess of Base Rent and
Percentage Rent actually paid for such period over the reduced Base Rent and
Percentage Rent, plus interest thereon at the Base Rate, to be credited to the
next payments of Rent due and owing hereunder. If, within thirty (30) days
after the date of written certification from Lessee to Lessor that a National
Economic Decline and Regional Market Decline has occurred (accompanied by
reasonably detailed computations and documentation to support such assertion),
Lessor and Lessee are unable to agree that a National Economic Decline or
Regional Market Decline has occurred, the matter may be submitted by either
party to arbitration under Section 41.2 hereof for resolution (during which
period Lessee shall continue to pay Base Rent and Percentage Rent as required
under Section 3.1 of this Lease). If, within ninety (90) days (during which
period Lessee shall continue to pay Base Rent and Percentage Rent as required
under Section 3.1 of this Lease) following the date of such initial written
certification from Lessee (or the date of a decision of an arbitrator if
required hereunder to determine that a National Economic Decline and Regional
Market Decline has occurred), Lessor and Lessee are unable to agree upon the
amount of reduction in Base Rent and Percentage Rent contemplated hereby,
Lessee shall have the option, upon not less than sixty (60) days prior written
notice to Lessor, to terminate all (but not less than all) of the Existing
Leases of hotels in the same Region as the Hotel, including this Lease.
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3.6 Performance Failure.
(a) If, with respect to any three (3) consecutive Lease Years
during the Term commencing on or after January 1, 1998, Lessee shall fail to
realize from the operation of the Hotel an amount equal to at least eighty
percent (80%) of Room Revenues as set forth in the Revenue Budget for such
Lease Year, such failure shall constitute a "Revenue Performance Shortfall"
under this Lease, except to the extent such failure is caused by an Unavoidable
Occurrence. In determining whether Lease Years are consecutive for such
purpose, Excluded Lease Years will be ignored. The existence of a Revenue
Performance Shortfall for any Lease Year shall be determined by Lessor on the
basis of the first Officer's Certificate delivered by Lessee to Lessor in the
subsequent Lease Year pursuant to the requirements of Section 3.1(c) and shall
be subject to confirmation pursuant to Section 3.2. Notwithstanding the
foregoing, no Lease Year that would otherwise be included in the period of a
Revenue Performance Shortfall shall be so included if Lessor and the Other
Lessors receive Rent payments from Lessee and the other Lessees under this
Lease and the Other Leases which, in the aggregate, amount equal to at least
ninety percent (90%) (the "Overall Shortfall Cure Percentage") of the aggregate
Rent budgeted for such Lease Year in the Revenue Budgets for the Hotel and the
Other Hotels leased under the Other Leases (each such Lease Year, an "Excluded
Lease Year"). Lessee may rely on the foregoing for a total of three (3)
Excluded Lease Years and, thereafter, the Overall Shortfall Cure Percentage
shall increase to one hundred percent (100%).
(b) Upon the occurrence of a Revenue Performance Shortfall,
Lessor shall have the right, subject to subsection (c) of this Section 3.6, at
Lessor's option, to terminate this Lease upon thirty (30) days' notice (the
"Notice Period") to Lessee, in which event Lessee shall immediately surrender
the Leased Property to Lessor, and, if Lessee fails to so surrender, Lessor
shall have the right, without notice, to enter upon and take possession of the
Leased Property and to expel or remove Lessee and its effects without being
liable for prosecution or any claim for damages therefor; and Lessee shall, and
hereby agrees to, pay (or, as the case may be, indemnify) Lessor for the total
amount of (i) in the event that Lessee does not promptly surrender the Leased
Property, the reasonable costs of recovering the Leased Property and all other
losses, liabilities and reasonable expenses incurred by Lessor in connection
with Lessee's failure to surrender; (ii) the unpaid Rent earned as of the date
of termination (and for any period following the termination date during which
Lessee retains possession and control of the Leased Property), plus interest at
the Overdue Rate accruing after the earlier of the due date or such termination
date; and (iii) all other sums of money then owing by Lessee to Lessor. Except
as provided in the Master Hotel Agreement, termination of this Lease and
recovery of the Rent and other amounts as aforesaid shall constitute Lessor's
sole remedy for the Revenue Performance Shortfall, and Lessee shall not be
liable to Lessor for damages arising therefrom.
(c) Lessor's right to terminate this Lease pursuant to
subsection (b) above, following any Lease Year, shall be subject to Lessee's
right to cure the Revenue Performance Shortfall occurring thereunder with
respect to such Lease Year by making a cash payment to Lessor during the Notice
Period equal to the difference between the Percentage Rent actually paid for
the Lease Year and eighty percent (80%) (the "Hotel Shortfall Cure Percentage")
of the
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Percentage Rent budgeted for the Lease Year in the Revenue Budget for the Lease
Year. Any payment made by Lessee under this subsection (c) shall be deemed
Rent paid with respect to the Lease Year. Lessor shall have no obligation to
repay any amount advanced by Lessee to cure a Revenue Performance Shortfall.
Lessee may only cure two Revenue Performance Shortfalls, occurring under
subsection (a) by paying Lessor based on a eighty percent (80%) Hotel Shortfall
Cure Percentage. Thereafter, the Hotel Shortfall Cure Percentage shall be
ninety percent (90%).
ARTICLE 4
4.1 Payment of Impositions.
(a) Subject to the right of Lessor to contest same and
subsection 4.1 (f) below, Lessor shall pay all Real Estate Taxes, Personal
Property Taxes and Capital Impositions before the fine, penalty, interest or
cost may be added for non-payment, to the extent the failure to do so could
materially and adversely affect the rights of the Lessee under this Lease, such
payments to be made directly to the taxing or other authorities where feasible.
(b) Subject to Article 12 relating to permitted contests and
subsection 4.1 (f) below, Lessee will pay, or cause to be paid, all Impositions
(other than Real Estate Taxes, Personal Property Taxes and Capital Impositions,
which shall be paid by Lessor) before any fine, penalty, interest or cost may
be added for non-payment, such payments to be made directly to the taxing or
other authorities where feasible, and will promptly furnish to Lessor copies of
official receipts or other satisfactory proof evidencing such payments.
Lessee's obligation to pay such Impositions shall be deemed absolutely fixed
upon the date such Impositions become a lien upon the Leased Property or any
part thereof. If any such Imposition may, at the option of the taxpayer,
lawfully be paid in installments (whether or not interest shall accrue on the
unpaid balance of such Imposition), Lessee may exercise the option to pay the
same (and any accrued interest on the unpaid balance of such Imposition) in
installments and in such event, shall pay such installments occurring during
the Term hereof (subject to Lessee's right of contest pursuant to the
provisions of Article 12) as the same respectively become due and before any
fine, penalty, premium, further interest or cost may be added thereto.
(c) Lessor, at its expense, shall, to the extent required or
permitted by applicable law, prepare and file all tax returns in respect of
Lessor's net income, gross receipts, sales and use, single business,
transaction privilege, rent, ad valorem, franchise taxes, Real Estate Taxes,
Personal Property Taxes, Capital Impositions and taxes on its capital stock,
and Lessee, at its expense, shall, to the extent required or permitted by
applicable laws and regulations, prepare and file all other tax returns and
reports in respect of any other, Imposition as may be required by governmental
authorities. If any refund shall be due from any taxing authority in respect
of any Imposition paid by Lessee, the same shall be paid over to or retained by
Lessee if no Event of Default shall have occurred hereunder and be continuing.
If an Event of Default shall have occurred and be continuing, any such refund
shall be paid over to or retained by Lessor. Any such funds retained by Lessor
due to an Event of Default shall be applied as provided in Article 16. Lessor
and Lessee shall, upon request of the other, provide such data as is maintained
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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 with respect to Lessee's Personal
Property 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.
(d) Lessor may, upon notice to Lessee, at Lessor's option and
at Lessor's sole expense, protest, appeal, or institute such other proceedings
(in its or Lessee's name) as Lessor may deem appropriate to effect a reduction
of Real Estate Taxes or Personal Property Taxes or Capital Impositions to be
paid by Lessor, and Lessee (at Lessor's expense as aforesaid) shall fully
cooperate with Lessor in such protest, appeal, or other action. Lessor hereby
agrees to indemnify, defend, and hold harmless Lessee from and against any
claims, obligations, and liabilities against or incurred by Lessee in
connection with such cooperation. 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 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.
(e) Xxxxxxxx for any reimbursement of Personal Property Taxes
by Lessee to Lessor shall be accompanied by copies of a xxxx therefor and
payments thereof which identify the personal property with respect to which
such payments are made. Lessor, however, reserves the right to effect any such
protest, appeal or other action and, upon notice to Lessee, shall control any
such activity, which shall then go forward at Lessor's sole expense. Upon such
notice, Lessee, at Lessor's expense, shall cooperate fully with such
activities.
(f) Subject to the rights of Lessor and Lessee to contest same
as provided herein, Lessee shall pay 13% and lessor shall pay 87% of any sales
or use taxes imposed by the State of Florida on any of the payments of Rent by
Lessee under this Lease. Lessee shall be solely responsible for such sales or
use taxes in any other State.
4.2 Notice of Impositions. To the extent Lessor is notified of any
Impositions, Lessor shall give prompt Notice to Lessee of such Impositions
payable by Lessee hereunder, provided that Lessor's failure to give any such
Notice shall in no way diminish Lessee's obligations hereunder to pay any such
Impositions that are Lessee's responsibility hereunder, but such failure shall
obviate any default hereunder for a reasonable time after Lessee receives
Notice of any Imposition which it is obligated to pay during the first taxing
period applicable thereto. To the extent received by it, Lessee shall give
prompt notice to Lessor and furnish Lessor with copies of all assessment
notices for Real Estate Taxes, Personal Property Taxes and Capital
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Impositions in sufficient time for Lessor to file a protest and pay such taxes
without penalty. Lessor shall furnish Lessee with evidence of payment of Real
Estate Taxes, Personal Property Taxes and Capital Impositions upon request.
4.3 Adjustment of Impositions. Impositions payable by Lessee that
are imposed in respect of the tax-fiscal period during which the Term
terminates shall be adjusted and prorated between Lessor and Lessee, whether or
not such Imposition is imposed before or after such termination, and Lessee's
obligation to pay its prorated share thereof after termination shall survive
such termination.
4.4 Utility Charges. Lessee will be solely responsible for obtaining
and maintaining utility services to the Leased Property and will pay or cause
to be paid all charges for electricity, gas, oil, water, sewer and other
utilities used in the Leased Property during the Term.
4.5 Insurance Premiums. Each of Lessor and Lessee will pay or cause
to be paid all premiums for the insurance coverages required to be maintained
by it under Article 13.
4.6 Franchise Fees. Lessee will maintain in full force and effect,
and pay or cause to be paid all fees and other charges payable pursuant to, any
Franchise Agreement with respect to the Hotel (unless same constitute Capital
Expenditures or are otherwise Lessor's responsibility hereunder).
4.7 Ground Rent. In the event that Lessor's interest in the Land is
pursuant to a Ground Lease or sublease, Lessor shall be solely responsible for
the payment of any ground rent, building rent or subrent, as the case may be,
due with respect to the Lease Property.
ARTICLE 5
5.1 No Termination, Abatement, etc. Except as otherwise specifically
provided in this Lease, and except for loss of any Franchise Agreement solely
by reason of any action or inaction by Lessor, Lessee, to the extent permitted
by law, shall remain bound by this Lease in accordance with its terms and shall
neither take any action without the written consent of Lessor to modify,
surrender or terminate the same, nor seek nor be entitled to any abatement,
deduction, deferment or reduction of the Rent, or set off against the Rent, nor
shall the obligations of Lessee be otherwise affected by reason of (a) any
damage to, or destruction of, any Leased Property or any portion thereof from
whatever cause or any Taking of the Leased Property or any portion thereof, (b)
the lawful or unlawful prohibition of, or restriction upon, Lessee's use of the
Leased Property, or any portion thereof, or the interference with such use by
any Person or by reason of eviction other than by paramount title except as
otherwise specifically provided in this Lease and except to the extent that a
court of competent jurisdiction has issued a final, nonappealable order
determining that Lessee was constructively evicted from the Leased Property,
(c) any claim which Lessee has or might have against Lessor by reason of any
default or breach of any warranty by Lessor under this Lease or any other
agreement between Lessor and Lessee, or to which Lessor and Lessee are parties,
(d) any bankruptcy, insolvency, reorganization,
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composition, readjustment, liquidation, dissolution, winding up or other
proceedings affecting Lessor or any assignee or transferee of Lessor, or (e)
for any other cause whether similar or dissimilar to any of the foregoing other
than a discharge of Lessee from any such obligations as a matter of law.
Lessee hereby specifically waives all rights, arising from any occurrence
whatsoever, which may now or hereafter be conferred upon it by law to (1)
modify, surrender or terminate this Lease or quit or surrender the Leased
Property or any portion thereof, or (2) entitle Lessee to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by Lessee
hereunder, except as otherwise specifically provided in this Lease and except
to the extent that a court of competent jurisdiction has issued a final,
nonappealable order determining that Lessee was constructively evicted from the
Leased Property. 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 6
6.1 Ownership of the Leased Property. Lessee acknowledges that the
Leased Property is the property of Lessor and that Lessee has only the right to
the possession and use of the Leased Property upon the terms and conditions of
this Lease.
6.2 Lessee's Personal Property. Lessee will acquire and maintain
throughout the Term such Inventory and replacement photocopy, fax machines and
postage machines (collectively, "Office Machines") as is required to operate
the Leased Property in the manner contemplated by this Lease. The Inventory,
including any additions thereto and/or replacements thereof, will be supplied
by, and remain the property of, Lessee. Lessee may (and shall as provided
hereinbelow), at its expense, install, affix or assemble or place on any
parcels of the Land or in any of the Improvements, any items of personal
property (including Inventory and Office Machines) owned by Lessee. Lessee, at
the commencement of the Term, and from time to time thereafter, shall provide
Lessor with an accurate list of all such items of Lessee's personal property
(collectively, including the Inventory and Office Machines, the "Lessee's
Personal Property"). Lessee may, subject to the first sentence of this Section
6.2 and the conditions set forth below, remove any of Lessee's Personal
Property at any time during the Term or upon the expiration or any prior
termination of the Term. All of Lessee's Personal Property, other than
Inventory, not removed by Lessee within thirty (30) days following the
expiration or earlier termination of the Term shall be considered abandoned by
Lessee and may be appropriated, sold, destroyed or otherwise disposed of by
Lessor without first giving Notice thereof to Lessee, without any payment to
Lessee and without any obligation to account therefor. Lessee will, at its
expense, repair and restore the Leased Property to the condition required by
Section 9.1(d), including repair of all damage to the Leased Property caused by
the removal of Lessee's Personal Property, whether effected by Lessee or if
permitted hereunder by Lessor. Upon the expiration or earlier termination of
the Term, Lessor, or its designee, shall have the option to purchase all
Inventory on hand at the Leased Property at the time of such expiration or
termination for a sale price equal to Lessee's actual cost of such Inventory,
as evidenced by invoices, receipts, or other
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reasonable documentation or as reasonably estimated by Lessor in the absence of
such documentation. Lessee may make such financing arrangements, title
retention agreements, leases or other agreements with respect to Lessee's
Personal Property as it sees fit provided that Lessee first advises Lessor of
any such arrangement and such arrangement expressly provides that in the event
of Lessee's default thereunder, Lessor (or its designee) may assume Lessee's
obligations and rights under such arrangement.
6.3 Lessor's Lien. To the fullest extent permitted by applicable
law, Lessor is granted a lien and security interest on all Lessee's Personal
Property now or hereinafter placed in or upon the Leased Property, and such
lien and security interest shall remain attached to such Lessee's Personal
Property until payment in full of all Rent and other amounts due to Lessor
hereunder; provided, however, Lessor's lien and security interest shall be
subordinate to that of any non-Affiliate of Lessee which finances such Lessee's
Personal Property or any non-Affiliate conditional seller of such Lessee's
Personal Property. Upon request, Lessor will execute a subordination agreement
containing terms and conditions satisfactory to Lessor in the exercise of
reasonable discretion. Lessee shall, upon the request of Lessor and to the
extent such action does not breach any of Lessee's financing, execute such
financing statements or other documents or instruments reasonably requested by
Lessor to perfect the lien and security interests herein granted.
ARTICLE 7
7.1 Condition of the Leased Property. Lessee acknowledges receipt
and delivery of possession of the Leased Property. Lessee has examined and
otherwise has knowledge of the condition of the Leased Property and has found
the same to be satisfactory for its purposes hereunder. Lessee is leasing the
Leased Property "as is" in its present condition. Except as otherwise
expressly provided herein, Lessee waives any claim or action against Lessor in
respect of the condition of the Leased Property. LESSOR MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY, OR ANY
PART THEREOF, EITHER AS TO ITS MERCHANTABILITY OR FITNESS FOR USE, DESIGN OR
CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT
LESSEE TAKES THE LEASED PROPERTY SUBJECT TO ALL SUCH RISKS. LESSEE
ACKNOWLEDGES THAT THE LEASED PROPERTY HAS BEEN INSPECTED BY LESSEE AND IS
SATISFACTORY TO IT. Provided, 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 Property to, or was the predecessor-by-merger to, Lessor or an
Affiliate thereof) 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.
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7.2 Use of the Leased Property.
(a) Lessee covenants that it will proceed with all due
diligence and will exercise its reasonable best efforts to obtain and to
maintain all approvals needed to use and operate the Leased Property and the
Hotel under applicable local, state and federal law. Lessor covenants that it
will cooperate in good faith in all respects, at Lessee's expense, in
connection with Lessee's efforts to obtain and maintain such approvals.
(b) Lessee shall use or cause to be used the Leased Property
only as a hotel facility of the class and quality at least equal to that of the
Hotel as of the Transition Date, and for such other uses as may be necessary or
incidental to such hotel facility use or such other or additional use as
otherwise approved in writing 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, other than the Primary Intended
Use, 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 Legal Requirements
or fire underwriter's regulations. Lessee shall, at its sole cost, comply with
all of the requirements pertaining to the Leased Property of any insurance
board, association, organization or company necessary for the maintenance of
insurance, as herein provided, covering the Leased Property and Lessee's
Personal Property, unless such compliance requires the performance of a Capital
Improvement or the payment of a Capital Imposition, in which case Lessor shall
pay the cost of such Capital Improvement or Capital Imposition in order for
Lessee so to comply.
(c) Subject to any provisions of this Lease to the contrary,
Lessee covenants and agrees that during the Term it will (i) continuously
operate the Leased Property for the Primary Intended Use (subject to closures
of all or part of the Hotel during Unavoidable Occurrences and by prior
agreement with Lessor during the construction of PIP improvements and
Contemplated Renovations), (ii) keep in full force and effect and comply with
all the provisions of any Franchise Agreement (other than requirements with
respect to Capital Improvements and other obligations of Lessor hereunder),
(iii) not terminate or amend any Franchise Agreement without the consent of
Lessor (which consent shall not be unreasonably withheld), (iv) maintain
appropriate certifications and licenses for such use, (v) seek to maximize the
Gross Revenues generated therefrom consistent with sound business practices and
Lessee's concurrent goal of maximizing its net operating income therefrom and
(vi) upon request, keep Lessor advised of the status of any material or
uninsured litigation affecting the Leased Property.
(d) Lessor covenants and agrees that during the Term it will
(1) not take or allow any Affiliate to take or fail to take any action that
would interfere with, restrict or prohibit Lessee's operation of the Leased
Property as the Primary Intended Use, including, without limitation, modifying,
amending or terminating any Franchise Agreement or any licenses,
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Franchises, permits, easements, leases, undertakings or agreements held by
Lessor or such Affiliate and pertaining to the Leased Property, and (2) comply
with all the provisions of any Franchise Agreement relating to Capital
Improvements, the payment of Real Estate Taxes, Personal Property Taxes,
Capital Impositions and other requirements thereof that are not the
responsibility of Lessee hereunder.
(e) Lessee shall not commit or suffer to be committed any
waste on the Leased Property, or in the Hotel, nor shall Lessee cause or permit
any nuisance thereon. 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, except as necessary in the ordinary and prudent operation of the Hotel
(or other Primary Intended Use) on 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), (a) grant easements
and other rights in the nature of easements with respect to the Leased Property
to third parties, (b) release existing easements or other rights in the nature
of easements which are for the benefit of the Leased Property, (c) dedicate or
transfer unimproved portions of the Leased Property for road, highway or other
public purposes, (d) execute petitions to have the Leased Property annexed to
any municipal corporation or utility district, (e) execute amendments to any
covenants and restrictions affecting the Leased Property and (f) execute and
deliver to any Person any instrument appropriate to confirm or effect such
grants, releases, dedications, transfers, petitions and amendments (to the
extent of its interests in the Leased Property), but only upon delivery to
Lessor of an Officer's Certificate stating that such grant, release,
dedication, transfer, petition or amendment is not detrimental to the proper
conduct of the business of Lessee on the Leased Property and (unless Lessor is
otherwise receiving fair value for any reduction in value of the Leased
Property) does not materially reduce the value of the Leased Property.
ARTICLE 8
8.1 Compliance with Legal and Insurance Requirements, etc. Subject
to Sections 8.2(b) and 8.3(b) below and Article 12 relating to permitted
contests, and subject further to the obligations of Lessor with respect to
Capital Improvements as set forth in Section 9.1(b), Lessee, at its expense,
will promptly (a) comply with all applicable Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair and, to the
extent of its obligations hereunder, restoration of the Leased Property, and
(b) procure, maintain and comply with all appropriate permits, licenses and
other authorizations required for any use of the Leased
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Property and Lessee's Personal Property then being made, and for the proper
operation, maintenance and repair of the Leased Property or any part thereof.
8.2 Legal Requirement Covenants.
(a) Subject to Section 8.3(b) below, Lessee covenants and
agrees that the Leased Property and Lessee's Personal Property shall not be
used for any unlawful purpose, and that Lessee shall not permit or suffer to
exist any unlawful use of the Leased Property by others. Lessee shall acquire
and maintain all appropriate licenses, certifications, permits and other
authorizations and approvals needed to operate the Leased Property in its
customary manner for the Primary Intended Use. 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 use its reasonable best
efforts to cause all such sub-tenants, invitees or others to so comply with all
Legal Requirements). Lessee may, however, upon prior Notice to Lessor, contest
the legality or applicability of any such Legal Requirement or any licensure or
certification decision if Lessee maintains such action in good faith, with due
diligence, without prejudice to Lessor's rights hereunder, and at Lessee's sole
expense. If by the terms of any such Legal Requirement compliance therewith
pending the prosecution of any such proceeding may legally be delayed without
the incurrence of any lien, charge or liability of any kind against the Hotel
or Lessee's leasehold interest therein and without subjecting Lessee or Lessor
to any liability, civil or criminal, for failure so to comply therewith, Lessee
may delay compliance therewith until the final determination of such
proceeding. If any lien, charge or civil or criminal liability would be
incurred by reason of any such delay, Lessee, 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 by reason
of such contest or delay and (b) prosecutes the contest with due diligence and
in good faith.
(b) As between Lessor and Lessee, Lessee is solely responsible
for all liabilities or obligations of any kind with respect to employees at the
Leased Property during the Term, except to the extent such compliance requires,
and Lessor fails to pay the cost of, the performance of a Capital Improvement,
or remediation or other action with respect to an Environmental Liability for
which Lessee is indemnified under Section 8.3(b) or the payment of a Capital
Imposition. Without limiting the generality of the foregoing sentence, Lessee
is solely responsible for any required compliance with the Worker Adjustment,
Retraining and Notification Act of 1988 (the "WARN Act") or any similar state
law applicable to the Leased Property; any required compliance with the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA");
and all alleged and actual obligations and claims arising from or relating to
any employment agreement, collective bargaining agreement or employee benefit
plans, any grievances, arbitrations, or unfair labor practice charges, and
relating to compliance with any applicable state or federal labor employment
law, including but not limited to all laws pertaining to discrimination,
workers' compensation, unemployment compensation, occupational
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safety and health, unfair labor practices, family and medical leave, and wages,
hours or employee benefits. Lessee agrees to indemnify and defend and hold
harmless Lessor from and against any claims relating to any of the foregoing
matters. Lessee further agrees to reimburse Lessor for any and all losses,
damages, costs, expenses, liabilities and obligations of any kind, including
without limitation reasonable attorneys' fees and other legal costs and
expenses, incurred by Lessor in connection with any of the foregoing matters.
Notwithstanding the Lessee's obligations under Section 8.1 to
obtain and maintain all permits and licenses required for the use of the Leased
Property, and without limiting any obligations of Lessee hereunder, if (i)
applicable law requires that the owner (rather than a lessee) of a hotel be the
licensee under the required liquor license for the Hotel or (ii) the former
owner of the Hotel is holding the liquor license and continuing to exercise
management and supervision of the liquor services at the Hotel pending transfer
of the license to Lessor or Lessee, the Lessee shall indemnify and hold Lessor
harmless from any liability, damages or claims (a) arising in connection with
liquor operations at the Hotel during such period of time following the
Transition Date, except to the extent caused by Lessor's gross negligence or
willful misconduct or (b) made by or through the former owner with respect to
liquor operations at the Hotel following the Transition Date.
8.3 Environmental Covenants. Lessor and Lessee (in addition to, and
not in diminution of, Lessor's and Lessee's covenants and undertakings in
Sections 8.1 and 8.2 hereof) covenant and agree as follows:
(a) At all times hereafter until such time as all liabilities,
duties or obligations of Lessee to Lessor under this Lease have been satisfied
in full, Lessee shall fully comply with all Environmental Laws applicable to
the Leased Property and the operations thereon, except to the extent that
compliance would require Lessee to incur an obligation for a Capital
Improvement or for remediation of Environmental Liabilities for which Lessee is
indemnified under this Section 8.3. Lessee agrees to give Lessor Notice of the
following, promptly after Lessee receives knowledge thereof: (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 at, on, in or under any property adjacent to the
Leased Property; and (4) all facts, events or conditions that could reasonably
lead to the occurrence of any of the above-referenced matters.
(b) Lessor hereby agrees to defend, indemnify and save
harmless any and all Lessee Indemnified Parties from and against any and all
Environmental Liabilities (including, without limitation, Environmental
Liabilities to the extent resulting from conditions existing at the Leased
Property at the Transition Date or from Releases or other violations of
Environmental Laws (without fault on the part of Lessee) originating on other
property but affecting the Leased Property) other than Environmental
Liabilities to the extent caused by the grossly negligent acts
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or failures to act or wilful misconduct of Lessee, Manager or subtenants of
Lessee or Manager, and their respective employees, agents or independent
contractors.
(c) Lessee hereby agrees to defend, indemnify and save harmless
any and all Lessor Indemnified Parties from and against any and all
Environmental Liabilities to the extent caused by the grossly negligent acts or
failures to act or wilful misconduct of Lessee, Manager or subtenants of Lessee
or Manager, and their respective employees, agents or independent contractors.
(d) At any time any Indemnified Party has reason to believe
circumstances exist which could reasonably result in an Environmental Liability
(or in the event Lessor or its lender requires such access in connection with a
sale or financing of the Leased Property), upon reasonable prior written notice
to Lessee stating such Indemnified Party's basis for such belief, an
Indemnified Party shall be given immediate access to the Leased Property
(including, but not limited to, the right to enter upon, investigate, drill
xxxxx, take soil borings, excavate, monitor, test, cap and use available land
for the testing of remedial technologies), Lessee's employees, and to all
relevant documents and records regarding the matter as to which a
responsibility, liability or obligation is asserted or which is the subject of
any Proceeding; provided that such access may be conditioned or restricted as
may be reasonably necessary to ensure compliance with law and the safety of
personnel and facilities or to protect confidential or privileged information.
All Indemnified Parties requesting such immediate access and cooperation shall
endeavor to coordinate such efforts to result in as minimal interruption of the
operation of the Leased Property as practicable. Lessor agrees to indemnify
and hold harmless Lessee from and against any and all liabilities, costs,
damages, charges, fees or expenses arising in connection with, and to the
extent caused by a Lessor Indemnified Party, the access to or use of the Leased
Property by a Lessor Indemnified Party pursuant to this subsection (d).
(e) The indemnification rights and obligations provided for in
this Article 8 (1) shall be in addition to any indemnification rights and
obligations provided for elsewhere in this Lease, and (2) shall survive the
termination of this Lease.
(f) For purposes of this Section 8.3, all amounts for which
any Indemnified Party seeks indemnification shall be computed net of any
actual income tax benefit resulting therefrom to such Indemnified Party, any
insurance proceeds received (net of tax effects) with respect thereto, and any
amounts recovered (net of tax effects) from any third parties based on claims
the Indemnified Party has against such third parties which reduce the damages
that would otherwise be sustained; provided, that in all cases, the timing of
the receipt or realization of insurance proceeds or income tax benefits or
recoveries from third parties shall be taken into account in determining the
amount of reduction of damages. Each Indemnified Party agrees to use its
reasonable efforts to pursue, or assign to Lessee or Lessor, as the case may
be, any claims or rights it may have against any third party which would
materially reduce the amount of damages otherwise incurred by such Indemnified
Party.
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(g) Notwithstanding anything to the contrary contained in this
Lease, if Lessor shall become entitled to the possession of the Leased Property
by virtue of the termination of this Lease or repossession of the Leased
Property, then Lessor may assign its indemnification rights under Section 8.3
of this Lease 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
Environmental Liabilities relating to or specifically affecting
the Leased Property; and
(3) Any assignment of such indemnification rights shall
be limited to the immediate transferee of Lessor, and shall not
extend to any such transferee's successors or assigns.
ARTICLE 9
9.1 Maintenance and Repair.
(a) Except as otherwise expressly provided in this Lease, and
except for conditions caused by Lessor's gross negligence or willful misconduct
(or that of its employees, agents or independent contractors), Lessee, at its
sole expense, will keep the Leased Property, and all private roadways,
sidewalks and curbs appurtenant thereto that are under Lessee's control,
including windows and plate glass, mechanical, electrical and plumbing systems
and equipment (including conduit and ductware), and non-load bearing interior
walls, and parking lot surfaces, 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), and, with
reasonable promptness, make all necessary and appropriate repairs,
replacements, and improvements thereto of every kind and nature, whether
interior or exterior, ordinary or extraordinary, foreseen or unforeseen or
arising by reason of a condition existing prior to the commencement of the Term
of this Lease (concealed or otherwise), or required by any governmental agency
having jurisdiction over the Leased Property. Lessee, however, shall be
permitted to prosecute claims against Lessor's predecessors in title (other
than Lessor or an Affiliate of Lessor which conveyed the Property to, or was
the predecessor-by-merger to, Lessor or an Affiliate thereof) for breach of any
representation or warranty or for any latent defects in the Leased Property to
be maintained by Lessee unless Lessor is already diligently pursuing such a
claim. All repairs shall, to the extent reasonably achievable, be at least
equivalent in quality to the original work. Lessee will not take or omit to
take any action, the taking or omission of which might materially impair the
value or the usefulness of the Leased Property or any part thereof for its
Primary Intended Use.
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(b) Notwithstanding Lessee's obligations under Section 9.1(a)
above or elsewhere in this Lease, unless caused by the gross negligence or
willful misconduct of Lessee, Manager or subtenants of Lessee or Manager, and
their respective employees, agents or independent contractors, Lessee shall not
be responsible for any Capital Improvements, including (without limitation)
Capital Improvements required by the Franchisor under the Franchise Agreement.
Lessor shall be responsible for all such Capital Improvements, including,
without limitation, Capital Improvements required to comply with all Legal
Requirements (including, without limitation, all Environmental Laws, the
Americans with Disabilities Act and any state or local handicap access laws and
regulations and all zoning and land use laws and regulations) and Capital
Improvements required to comply with any Franchise Agreement; subject to
Lessor's right to approve the Capital Budget pursuant to Article 38; provided,
however, that notwithstanding the foregoing or any other obligation of Lessor
hereunder for the cost of Capital Improvements required by a Franchise
Agreement, Lessor shall have the right, its sole (unreviewable) discretion, to
refuse to make any Capital Expenditure required by any Franchisor; provided,
further, that if such refusal directly results in a default under or
termination of such Franchise Agreement, Lessor shall be responsible for all of
Lessee's damages caused thereby, termination payments payable by Lessee under
the terms of such Franchise Agreement, application fees for a new franchise
license reasonably approved by Lessor, increased royalty fees and other costs
arising out of such refusal or out of the resulting need to apply for and enter
into a substitute franchise license agreement. Except as set forth in the
preceding sentence or elsewhere in this Lease, Lessor shall not under any
circumstances be required to build or rebuild any improvement on the Leased
Property, or to make any repairs, replacements, alterations, restorations or
renewals of any nature or description to the Leased Property, whether ordinary
or extraordinary, foreseen or unforeseen, or to make any expenditure whatsoever
with respect thereto, in connection with this Lease, or to maintain the Leased
Property in any way. Lessee hereby waives, to the extent permitted by law, the
right to make repairs at the expense of Lessor pursuant to any law in effect at
the time of the execution of this Lease or hereafter enacted. Lessor shall
have the right to give, record and post, as appropriate, notices of non-
responsibility under any mechanic's lien laws now or hereafter existing.
(c) If Lessor fails to make any Capital Expenditure required
to comply with Legal Requirements, after the expiration of all the applicable
notice and cure periods set forth in Section 34.3, or if Lessor fails to make
any Emergency Capital Expenditures promptly following notice from Lessee of an
Emergency Situation, or if an Emergency Capital Expenditure must be made
immediately (without allowing the time necessary to notify Lessor thereof) then
Lessee will have the right, but not the obligation, to make such Capital
Expenditures on behalf of and for the account of Lessor, whereupon Lessor shall
reimburse Lessee for the reasonable cost thereof, with interest thereon at the
Base Rate, within ten (10) days after receipt of documentation (with reasonable
detail as to the breakdown of costs incurred) evidencing such Capital
Expenditure.
(d) Nothing contained in this Lease and no action or inaction
by Lessor shall be construed as (1) constituting the request of Lessor,
expressed or implied, to any contractor, subcontractor, laborer, materialman or
vendor to or for the performance of any labor or services or the furnishing of
any materials or other property for the construction, alteration, addition,
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repair or demolition of or to the Leased Property or any part thereof, or (2)
except as otherwise expressly provided herein, giving Lessee any right, power
or permission to contract for or permit the performance of any labor or
services or the furnishing of any materials or other property in such fashion
as would permit the making of any claim against Lessor in respect thereof or to
make any agreement that may create, or in any way be the basis for any right,
title, interest, lien, claim or other encumbrance upon the estate of Lessor in
the Leased Property, or any portion thereof.
(e) Lessee will, upon the expiration or prior termination of
the Term, vacate and surrender the Leased Property to Lessor in the condition
in which the Leased Property was originally received from Lessor, except as
repaired, rebuilt, restored, altered or added to as permitted or required by
the provisions of this Lease and except for ordinary wear and tear (subject to
the obligation of Lessee to maintain the Leased Property in good order and
repair, as would a prudent owner, during the entire Term of the Lease, to the
extent required in Section 9.1(a)), or damage by casualty or Condemnation
(subject to any obligations of Lessee to restore or repair as set forth in this
Lease).
9.2 Encroachments, Restrictions, Etc. If any of the Improvements, at
any time, materially encroach upon any property, street or right-of-way
adjacent to the Leased Property, or violate the agreements or conditions
contained in any lawful restrictive covenant or other agreement affecting the
Leased Property, or any part thereof, or impair the rights of others under any
easement or right-of-way to which the Leased Property is subject, then promptly
upon the request of Lessor or at the behest of any Person affected by any such
encroachment, violation or impairment (in which case Lessee will immediately
notify Lessor thereof), Lessee shall, at Lessor's expense (except to the extent
that the encroachment or violation was the result of the gross negligence or
willful misconduct of Lessee, Manager or subtenants of Lessee or Manager, and
their respective employees, agents or independent contractors, in which case
Lessee shall bear such 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 such
encroachment, violation or impairment, whether the same shall affect Lessor or
Lessee or (b) make such changes in the Improvements, and take such other
actions, as Lessor 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 Improvements,
and in any event take all such actions as may be necessary in order to be able
to continue the operation of the Improvements for the Primary Intended Use
substantially in the manner and to the extent the Improvements were operated
prior to the assertion of such violation, impairment or encroachment. Any such
alteration shall be made in conformity with the applicable requirements of
Article 10. 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 or Lessee.
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ARTICLE 10
10.1 Alterations. Without Lessor's prior written consent, which
consent shall not be unreasonably withheld, Lessee shall not have the right to
make any additions, modifications or improvements to the Leased Property;
provided, however, that Lessor may withheld its consent unless such additions,
modifications or improvements will not significantly alter the character or
purposes or detract from the value or operating efficiency of, and will not
impair the revenue-producing capability of, the Hotel and the Leased Property,
or adversely affect the ability of Lessee to comply with the provisions of this
Lease. The cost of any such permitted additions, modifications or improvements
to the Leased Property shall be paid by Lessee unless otherwise provided herein
or agreed by Lessor in writing, and all such additions, modifications and
improvements shall, without payment by Lessor at any time, be included under
the terms of this Lease and upon expiration or earlier termination of this
Lease shall pass to and become the property of Lessor.
10.2 Salvage. All materials which are scrapped or removed in
connection with the making of repairs required by Articles 9 or 10 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 Initial Upgrades.
(a) Upgrades Required by Franchisor. Lessor agrees to pay the
cost to install, construct and complete the improvements, alterations, upgrades
and refurbishments in and to the Improvements and acquisitions of Furniture,
Fixtures and Equipment required under any product improvement plan or other
upgrade program or requirement (collectively, a "PIP") necessary to qualify the
Hotel to initially operate or continue to operate under any Franchise
Agreement, but only to the extent so agreed under the Master Hotel Agreement or
hereafter approved by Lessor.
(b) Contemplated Renovations. Schedule 1 to the Master Hotel
Agreement sets forth a preliminary budget for certain improvements,
alterations, upgrades and/or refurbishments of and to various hotels (including
acquisitions of Furniture, Fixtures and Equipment) that are contemplated by BHR
and FelCor (the "Contemplated Renovations"). In the event any Contemplated
Renovations apply to the Hotel, Lessor and Lessee agree to work diligently and
in good faith to refine and finalize the plans and specifications, budgets and
time schedules for the Contemplated Renovations and Lessor agrees to pay the
budgeted cost of the Contemplated Renovations or such higher amount as may be
approved by Lessor, such approval not to be unreasonably withheld. The
Contemplated Renovations may include some or all of the items required by the
PIP.
(c) Construction Services Agreement. In the event of a PIP, a
Contemplated Renovation or other previously unbudgeted Capital Improvement
(including a reconstruction of the Improvements following a casualty or
Condemnation), Lessor and Lessee may, in their sole discretion, enter into an
agreement (a "Construction Services Agreement") whereby Lessee,
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Manager or another Subidiary of BHR will perform construction advisory and
supervisory services described therein for the fees and other compensation
described therein. Lessee has no obligation to provide such services under
this Lease other than pursuant to a Construction Services Agreement.
ARTICLE 11
11.1 Liens. Subject to the provision of Article 12 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 first arising or
accrued from and after the Transition date, not including, however, (a) this
Lease, (b) the matters, if any, included as exceptions in the title policy
insuring Lessor's interest in the Leased Property, (c) restrictions, liens and
other encumbrances which are either created or incurred by lessor or its
employees, agents or independent contractors or consented to in writing by
Lessor or any easements granted pursuant to the provisions of Section 7.3 of
this Lease, (d) liens for those taxes upon Lessor which Lessee is not required
to pay hereunder, (e) subleases permitted by Article 23 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 12; or (3) the same are Lessor's responsibility hereunder,
(g) liens of mechanics, laborers, materialmen, suppliers or vendors for sums
either disputed or not yet due provided that (1) the payment of such sums shall
not be postponed under any related contract for more than 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 GAAP shall have been made
therefor or (2) any such liens are in the process of being contested as
permitted by Article 12 hereof, and (h) any liens which are the responsibility
of Lessor pursuant to the provisions of Article 34 of this Lease.
ARTICLE 12
12.1 Permitted Contests. Lessee shall have the right to contest the
amount or validity of any Imposition to be paid by Lessee or any Legal
Requirement or Insurance Requirement or any lien, attachment, levy,
encumbrance, charge or claim ("Claims") not otherwise permitted by Article 11,
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 imminent
loss of the Leased Property, or any part thereof, or cause Lessor or Lessee to
be in default under any mortgage, deed of trust, security deed or other
agreement encumbering the Leased Property or any interest therein. Upon the
request of Lessor, Lessee shall either (a) provide a bond or other assurance
reasonably satisfactory to Lessor that all Claims which may be assessed against
the Leased
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Property together with interest and penalties, if any, thereon will be paid, or
(b) deposit within the time otherwise required for payment with a bank or trust
company as trustee upon terms reasonably satisfactory to Lessor, as security
for the payment of such Claims, money in an amount sufficient to pay the same,
together with interest and penalties in connection therewith, as to all Claims
which may be assessed against or become a Claim on the Leased Property, or any
part thereof, in said legal proceedings. Lessee shall furnish Lessor and any
lender of Lessor with reasonable evidence of such deposit within five (5) days
of the same. Lessor agrees to join in any such proceedings if the same be
required legally to prosecute such contest of the validity of such Claims;
provided, however, that Lessor shall not thereby be subjected to any liability
for the payment of any costs or expenses in connection with any proceedings
brought by Lessee; and Lessee covenants to indemnify and save harmless Lessor
from any such costs or expenses. Lessee shall be entitled to any refund of any
Claims and such charges and penalties or interest thereon which have been paid
by Lessee or paid by Lessor and for which Lessor has been fully reimbursed. In
the event that Lessee fails to pay any Claims when due or to provide the
security therefor as provided in this Article and to diligently prosecute any
contest of the same, Lessor may, upon ten (10) days advance Notice to Lessee,
and Lessee's failure to correct the same within such 10-day period, 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 Rent payment
date provided for in this Lease. Provided, however, that should Lessor
reasonably determine that the giving of such Notice would risk loss to the
Leased Property or cause damage to Lessor, then Lessor shall give such Notice
as is practical under the circumstances. Lessor reserves the right to contest
any of the Claims at its expense not pursued by Lessee. Lessor and Lessee
agree to cooperate in coordinating the contest of any Claims.
ARTICLE 13
13.1 General Insurance Requirements. During the Term of this Lease,
the Leased Property shall at all times be insured with the kinds and amounts of
insurance described below. This insurance shall be written by companies
authorized to issue insurance in the State. The policies (except crime, workers
compensation, and safe deposit box legal liability) must name Lessor as an
additional insured, and the Manager, if any, shall also be named as an
additional insured, under the coverages described in Sections 13.1(b). Losses
shall be payable to Lessor or Lessee as provided in this Lease. Any loss
adjustment for coverages insuring both parties shall require the written
consent of Lessor and Lessee, each acting reasonably and in good faith.
Evidence of insurance shall be deposited with Lessor. The policies on the
Leased Property, including the Improvements, Furniture, Fixtures and Equipment
and Lessee's Personal Property, shall satisfy the requirements of the Franchise
Agreement and of any ground lease, mortgage, security agreement or other
financing lien affecting the Leased Property and at a minimum shall include the
following:
(a) Lessor shall obtain and maintain, at its own expense:
(i) Building insurance on the "Special Form" (formerly
"All Risk" form) (including earthquake and flood in reasonable amounts (not to
exceed $100,000,000 per
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occurrence and in the aggregate for the Existing Hotels) if and as determined
by Lessor, in the exercise of its reasonable discretion, or Lessor's
underwriters or lenders) in an amount not less than 100% of the then full
replacement cost thereof (as defined in Section 13.2) or such other amount
which is acceptable to Lessor, and personal property insurance on the "Special
Form" in the full amount of the replacement cost thereof;
(ii) Insurance for loss or damage (direct and indirect)
from steam boilers, pressure vessels or similar apparatus, air conditioning
systems, piping and machinery, and sprinklers, if any, now or hereafter
installed in the Hotel, in the minimum amount of $5,000,000 or in such greater
amounts as are then customary or as may be reasonably requested by Lessor from
time to time; and
(iii) Loss of income insurance on the "Special Form", in
the amount of twelve (12) months of the sum of Base Rent plus Percentage Rent
(based on the last Lease Year of operation or, to the extent the Leased
Property has not been operated for an entire 12-month Lease Year, based on
prorated Percentage Rent) for the benefit of Lessor.
(b) Lessee shall obtain and maintain, at its own expense:
(i) Commercial general liability insurance, with
amounts not less than $10,000,000 combined single limit for each occurrence and
in the aggregate, as well as excess liability (umbrella) insurance with limits
of at least $50,000,000 per occurrence and in the aggregate, covering each of
the following: bodily injury, death, or property damage liability per
occurrence, personal and advertising injury, general aggregate, products and
completed operations, with respect to Lessor, and "all risk legal liability"
(including liquor law or "dram shop" liability, if liquor or alcoholic
beverages are served on the Leased Property) with respect to Lessee;
(ii) Fidelity bonds or blanket crime policies with
limits and deductibles as may be reasonably determined by Lessor, covering
Lessee's and/or Manager's employees in job classifications normally bonded
under prudent hotel management practices in the United States or otherwise
required by law;
(iii) Workers' compensation insurance (or its substantial
equivalent as a non-subscribing employer in the State of Texas) to the extent
necessary to protect Lessee against Lessee's and/or Manager's workers'
compensation claims to the extent required by applicable state laws;
(iv) Comprehensive form vehicle liability insurance for
owned, non-owned, and hired vehicles, in the amount of $5,000,000;
(v) Garage keeper's legal liability insurance covering
both comprehensive and collision-type losses with a limit of liability of
$1,000,000 for any one occurrence;
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(vi) Innkeeper's legal liability insurance covering
property of guests while on the Leased Property for which Lessor is legally
responsible with a limit of not less than $2,000 per guest and $50,000 in any
one occurrence or $100,000 annual aggregate;
(vii) Safe deposit box legal liability insurance covering
property of guests while in a safe deposit box on the Leased Property for which
Lessor is legally responsible with a limit of not less than $5,000 in any one
occurrence;
(viii) Insurance covering such other hazards (such as
plate glass or other common risks) and in such amounts as may be customary for
comparable properties in the area of the Leased Property and is available from
insurance companies, insurance pools or other appropriate companies authorized
to do business in the State at rates which are economically practicable in
relation to the risks covered as may be reasonably determined by Lessor; and
(ix) Business interruption insurance on the "Special
Form" in the amount of twelve (12) months of gross profit, for the benefit of
Lessee.
13.2 Replacement Cost. The term "full replacement cost" as used
herein shall mean the actual replacement cost of the Leased Property requiring
replacement from time to time including an increased cost of construction
endorsement, if available, and the cost of debris removal. In the event either
party believes that full replacement cost (the then-replacement cost less such
exclusions) has increased or decreased at any time during the Term, it shall
have the right to have such full replacement cost re-determined.
13.3 Waiver of Claims and Subrogation. Each of Lessor and Lessee do
hereby remise, release and discharge the other party and any officer, agent,
employee, representative or contractor of such party, of and from any liability
whatsoever hereafter arising from loss, damage or injury caused by fire or
other casualty for which insurance (permitting waiver of liability and
containing a waiver of subrogation) shall be carried as required by this Lease
by the injured party at the time of such loss, damage or injury to the extent
of any recovery by the injured party under such insurance. All insurance
policies carried by Lessor or Lessee (except fidelity bonds, blanket crime
insurance or workers compensation where contrary to public policy or law),
shall expressly waive any right of subrogation on the part of the insurer
against the other party. The parties hereto agree that their policies will
include such waiver clause or endorsement so long as the same are obtainable
without extra cost, and in the event of such an extra charge the other party,
at its election, may pay the same, but shall not be obligated to do so.
13.4 Form Satisfactory, etc. All of the policies of insurance
referred to in this Article 13 shall be written in a form, with deductibles and
exclusions from coverage and by insurance companies reasonably satisfactory to
Lessor. Subject to the right to reimbursement or credit for coverages
specified in Section 13.1(a) and any other "casualty coverages" required by
Lessor, Lessee shall pay all of the premiums therefor, and deliver such
policies or certificates thereof to Lessor prior to their effective date (and,
with respect to any renewal policy, thirty (30) days prior to the expiration of
the existing policy), and in the event of the failure of Lessee either
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to effect such insurance as herein called for or to pay the premiums therefor,
or to deliver such policies or certificates thereof to Lessor at the times
required, Lessor shall be entitled, but shall have no obligation, to effect
such insurance and pay the premiums therefor, and Lessee shall reimburse Lessor
for any premium or premiums paid by Lessor for the coverages required under
Section 13.1(b) upon written demand therefor, and Lessee's failure to repay the
same within thirty (30) days after Notice of such failure from Lessor shall
constitute an Event of Default within the meaning of Section 16.1(c). Each
insurer mentioned in this Article 13 shall agree, by endorsement to the policy
or policies issued by it, or by independent instrument furnished to Lessor,
that it will give to Lessor thirty (30) days' written notice before the policy
or policies in question shall be materially altered, allowed to expire or
canceled.
13.5 Increase in Limits. If either Lessor or Lessee at any time deems
the limits of the personal injury or property damage under the comprehensive
public liability insurance then carried to be either excessive or insufficient,
Lessor or Lessee shall endeavor in good faith to agree on the proper and
reasonable limits for such insurance to be carried and such insurance shall
thereafter be carried with the limits thus agreed on until further change
pursuant to the provisions of this Section.
13.6 Blanket Policy. Notwithstanding anything to the contrary
contained in this Article 13, Lessor (or Lessee at Lessor's request) may bring
the insurance provided for herein within the coverage of a so-called blanket
policy or policies of insurance carried and maintained by Lessor or Lessee, as
the case may be; provided, however, that the coverage afforded to Lessor and
Lessee will not be reduced or diminished or otherwise be different from that
which would exist under a separate policy meeting all other requirements of
this Lease by reason of the use of such blanket policy of insurance, and
provided further that the requirements of this Article 13 are otherwise
satisfied.
13.7 No Separate Insurance. Lessee shall not on Lessee's own
initiative or pursuant to the request or requirement of any third party, take
out separate insurance concurrent in form or contributing in the event of loss
with that required in this Article to be furnished, or increase the amount of
any then existing insurance by securing an additional policy or additional
policies, unless all parties having an insurable interest in the subject matter
of the insurance, including in all cases Lessor, are included therein as
additional insured, and the loss is payable under such additional separate
insurance in the same manner as losses are payable under this Lease. Lessee
shall immediately notify Lessor of any such separate insurance that Lessee has
obtained or of the increase of any of the amounts of the then existing
insurance.
13.8 Reports On Insurance Claims. Lessee shall promptly investigate
and make a complete and timely written report to the appropriate insurance
company as to all accidents, claims for damage relating to the ownership,
operation, and maintenance of the Hotel, any damage or destruction to the Hotel
and the estimated cost of repair thereof and shall prepare any and all reports
required by any insurance company in connection therewith. All such reports
shall be timely filed with the insurance company as required under the terms of
the insurance policy involved, and a final copy of such report shall be
furnished to Lessor. Lessee shall be
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authorized to adjust, settle, or compromise any insurance loss, or to execute
proofs of such loss, in the aggregate amount of $25,000 or less, with respect
to any single casualty or other event.
ARTICLE 14
14.1 Insurance Proceeds. Subject to the provisions of Section 14.6
and the terms of any Mortgage or Ground Lease, 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 13 of this Lease
shall be paid to Lessor and held by Lessor in an interest-bearing account,
shall be made available, if applicable, for reconstruction or repair, as the
case may be, of any damage to or destruction of the Leased Property, or any
portion thereof, and, if applicable, shall be paid out by Lessor from time to
time for the reasonable costs of such reconstruction or repair upon
satisfaction of reasonable terms and conditions specified by Lessor. Any
excess proceeds of insurance remaining after the completion of the restoration
or reconstruction of the Leased Property shall be paid to Lessor. If neither
Lessor nor Lessee is required or elects to repair and restore as set forth
herein, all insurance proceeds shall be retained by Lessor. All salvage of any
Leased Property resulting from any risk covered by insurance shall belong to
Lessor and all salvage of any of Lessee's Personal Property resulting from any
risk covered by insurance shall belong to Lessee.
14.2 Reconstruction in the Event of Damage or Destruction Covered by
Insurance.
(a) Except as provided in Section 14.6, if during the Term the
Leased Property is totally or partially destroyed by a risk covered by the
insurance described in Article 13, whether or not such damage or destruction
renders the Hotel Unsuitable for its Primary Intended Use, Lessee shall be
obligated, but only to the extent of any insurance proceeds made available to
Lessee and any other sums advanced by Lessor pursuant to the next sentence, to
restore the Hotel to substantially the same condition as existed immediately
before the damage or destruction and otherwise in accordance with the terms of
the Lease and a Construction Services Agreement to be entered into in
connection herewith. If the insurance proceeds are not adequate to restore the
Hotel to that condition, each of Lessor (if Lessor has fulfilled its
obligations under Section 13.1(a)) and Lessee shall have the right to terminate
this Lease, without in any way affecting any of the Other Leases in effect, by
giving Notice to the other and all insurance proceeds shall be retained by
Lessor; provided, however that, if such termination is by Lessee, Lessor shall
have the right, in its sole discretion, to nullify the termination and keep
this Lease in full force by providing, within thirty (30) days after Lessee's
Notice of termination, a Notice to Lessee of Lessor's unconditional, legally
binding obligation to be responsible for all restoration costs in excess of the
insurance proceeds.
If this Lease is terminated by either party as aforesaid (and such
termination is not nullified by Lessor) and if the inadequacy of insurance
proceeds was the result of Lessor's failure to maintain the proper insurance
coverages as required pursuant to Article 13, Lessor shall, at its option,
within one hundred eighty (180) days after such termination, either (i) commit
in writing to pay (and thereafter pay) to Lessee the Termination Fee in
accordance with the terms of the
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Master Hotel Agreement or (ii) offer to lease to Lessee one or more hotel
facilities reasonably acceptable to Lessee pursuant to one or more Other Leases
that would create for Lessee leasehold estates having an aggregate fair market
value no less than the fair market value of the leasehold estate hereunder, as
of the date of termination. If this Lease is not terminated and Lessee
restores the Hotel, the insurance proceeds, and any other sums made available
by Lessor as aforesaid, shall be paid out by Lessor from time to time for the
reasonable costs of such restoration upon satisfaction of reasonable terms and
conditions, and any excess proceeds remaining after such restoration shall be
retained by Lessor.
(b) Notwithstanding the provisions of Section 14.2(a) above,
if Lessee reasonably estimates that it cannot within a reasonable time obtain
all necessary government approvals, including building permits, licenses and
conditional use permits, after diligent efforts to do so, to perform all
required repair and restoration work (and complete such work not later than the
earlier of (i) two years prior to the end of the final extension Term or of the
initial Term, if there are no extension Terms, and (ii) one year after the
casualty) and to operate the Hotel for its Primary Intended Use in
substantially the same manner as that existing immediately prior to such damage
or destruction and otherwise in accordance with the terms of the Lease, either
Lessor or Lessee may terminate this Lease by providing Notice to the other
party, without in any way affecting any of the Other Leases then in effect
between Lessor and Lessee.
14.3 Reconstruction in the Event of Damage or Destruction Not Covered
by Insurance. Except as provided in Section 14.6, if during the Term the Hotel
is totally or materially destroyed by a risk not covered by the insurance
described in Article 13, whether or not such damage or destruction renders the
Hotel Unsuitable for its Primary Intended Use, the provisions of Section 14.2
applicable to casualties for which insurance proceeds are inadequate shall
govern.
14.4 Lessee's Personal Property and Business Interruption Insurance.
All insurance proceeds payable by reason of any loss of or damage to any of
Lessee's Personal Property and the business interruption insurance maintained
for the benefit of Lessee shall be paid to Lessee; provided, however, no such
payments shall diminish or reduce the insurance payments otherwise payable to
or for the benefit of Lessor hereunder.
14.5 Abatement of Rent Upon Casualty. Any damage or destruction due
to casualty notwithstanding, this Lease shall remain in full force and effect,
but Lessee's obligation to make rental payments and to pay all other charges
required by this Lease shall be equitably abated during any period required for
the applicable repair and restoration to the extent the Hotel or any part
thereof is Unsuitable for its Primary Intended Use. If Lessor and Lessee are
unable to agree upon the amount of such abatement within thirty (30) days after
such damage or destruction, the matter may be submitted by either party to
arbitration under Section 41.2 hereof for resolution.
14.6 Damage Near End of Term. Notwithstanding any provisions of
Section 14.2 or 14.3 appearing to the contrary, if damage to or destruction of
the Hotel rendering it Unsuitable for its Primary Intended Use occurs (i)
during the last twenty-four (24) months of the initial Term or any extension
Term, then Lessee shall have the right to terminate this Lease by giving Notice
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to Lessor, within thirty (30) days after the date of damage or destruction,
and (ii) during the last twenty-four (24) months of the final extension Term
(or of the initial Term, if there are no extension Terms), then Lessor shall
have the right to terminate this Lease by giving Notice to Lessee, within
thirty (30) days after the date of damage or destruction. In the event of a
termination under this Section 14.6, all accrued unabated Rent shall be paid
immediately, and this Lease shall automatically terminate five (5) days after
the date of such Notice.
14.7 Waiver. Unless Lessor is in material default hereunder, Lessee
hereby waives any statutory rights of termination that may arise by reason of
any damage or destruction of the Hotel that Lessor is obligated to restore or
may restore under any of the provisions of this Lease.
ARTICLE 15
15.1 Definitions.
(a) "Award(s)" means all compensation, sums or anything of
value awarded, paid or received on a total or partial Condemnation.
(b) "Condemnor" means any public or quasi-public authority, or
private corporation or individual, having the power of Condemnation.
(c) "Condemnation" means a Taking resulting from (1) the
exercise of any governmental power, whether by legal proceedings or otherwise,
by a Condemnor, and (2) a voluntary sale or transfer by Lessor to any
Condemnor, either under threat of condemnation or while legal proceedings for
condemnation are pending.
(d) "Date of Taking" means the date the Condemnor has the
right to possession of the property being condemned.
15.2 Parties' Rights and Obligations. If during the Term there is any
Condemnation of all or any part of the Leased Property or any interest in this
Lease, the rights and obligations of Lessor and Lessee shall be determined by
this Article 15 subject to the terms of any Mortgage or Ground Lease.
15.3 Total Taking. If title to the fee (or leasehold under a Ground
Lease) of the whole of the Leased Property is condemned by any Condemnor, this
Lease shall cease and terminate as of the Date of Taking by the Condemnor,
without in any way affecting any of the Other Leases then in effect between
Lessor and Lessee. If title to the fee (or leasehold under a Ground Lease) of
less than the whole of the Leased Property is so taken or condemned, which
nevertheless renders the Leased Property Unsuitable or Uneconomic for its
Primary Intended Use, Lessee and Lessor shall each have the option, by notice
to the other, at any time prior to the Date of Taking, to terminate this Lease
as of the Date of Taking. Upon such date, if such Notice has been given, this
Lease shall thereupon cease and terminate. All Base Rent, Percentage Rent and
Additional
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Charges paid or payable by Lessee hereunder shall be apportioned as of the Date
of Taking, and Lessee shall promptly pay Lessor such amounts.
15.4 Partial Taking. If title to less than the whole of the Leased
Property is condemned, and the Leased Property is not Unsuitable for its
Primary Intended Use, and not Uneconomic for its Primary Intended Use, or if
Lessee or Lessor is entitled but neither elects to terminate this Lease as
provided in Section 15.3, Lessee at its cost and in accordance with the terms
of this Lease and any Construction Services Agreement entered into in
connection herewith, shall with all reasonable dispatch, but only to the extent
of any Award funds made available to Lessee and any other sums advanced by
Lessor pursuant to this Section, restore the untaken portion of any
Improvements so that such Improvements constitute a complete architectural unit
of the same general character and condition (as nearly as may be possible under
the circumstances) as the Improvements existing immediately prior to the
Condemnation. Lessor shall in good faith seek a fair and equitable allocation
of any Award among restoration, taken Improvements and other elements. Lessor
will contribute to the cost of restoration that part of its Award specifically
allocated to such restoration, together with severance and other damages
awarded for the Improvements; provided, however, the amount of such
contribution will not exceed such cost. If the Awards are not adequate to
restore the Hotel to that condition, each of Lessor and Lessee shall have the
right to terminate this Lease, without in any way affecting any of the Other
Leases in effect, by giving Notice to the other; provided, however that, if
such termination is by Lessee, Lessor shall have the right, in its sole
discretion, to nullify the termination and keep this Lease in full force by
providing, within thirty (30) days after Lessee's Notice of termination, a
Notice to Lessee of Lessor's unconditional, legally binding obligation to be
responsible for all restoration costs in excess of the Awards. If this Lease
is not terminated and Lessee restores the Hotel, the Award funds, and any other
sums made available by Lessor as aforesaid, shall (subject to the requirements
of any ground or building lease or Mortgage) be held by Lessor and paid out by
Lessor from time to time for the reasonable costs of such restoration upon
satisfaction of reasonable terms and conditions, and any excess Award funds
remaining after such restoration, and reimbursement of Lessor for any sums
advanced by Lessor hereunder, shall be retained by Lessor. In the event of a
partial Taking that does not result in a termination of this Lease, the Base
Rent shall be abated in the manner and to the extent that is fair, just and
equitable to both Lessee and Lessor, taking into consideration, among other
relevant factors, the number of usable rooms, the amount of square footage, the
revenues affected by such partial Taking and changes in the Hotel's projected
net operating income following such partial Taking. If Lessor and Lessee are
unable to agree upon the amount of such abatement within thirty (30) days after
such partial Taking, the matter may be submitted by either party to arbitration
under Section 41.2 hereof for resolution.
15.5 Allocation of Award. The total Award made in connection with a
Total Taking, or a partial Taking that results in a termination of this Lease
with respect to the Leased Property, or for loss of Rent, or for Lessor's loss
of business beyond the Term, shall be solely the property of and payable to
Lessor. Any Award made for loss of Lessee's business during the remaining
Term, if any, or for the taking of Lessee's Personal Property or for removal
and relocation expenses of Lessee in any such proceedings shall be the sole
property of and payable to Lessee.
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Any other Award not separately allocated to Lessor or Lessee shall be equitably
apportioned between Lessor and Lessee in proportion to the then fair market
value of the leasehold estate of Lessee hereunder and the then fair market
value of the Leased Property.
15.6 Temporary Taking. If the whole or any part of the Leased
Property (other than the fee or leasehold under a Ground Lease) or of Lessee's
interest under this Lease is condemned by any Condemnor for its temporary use
or occupancy (which shall mean a period not to exceed the lesser of twelve (12)
months or the remainder of the Term), this Lease shall not terminate by reason
thereof, and Lessee shall continue to pay, in the manner and at the terms
herein specified, the full amounts of Base Rent and Additional Charges. In
addition, the entire amount of any Award made for such Condemnation allocable
to the Term of this Lease, whether paid by way of damages, rent or otherwise,
shall be paid to Lessee and, except for any portion thereof utilized for
restoration, shall be deemed to be Room Revenues for the purpose of calculating
the Percentage Rent payable hereunder during such temporary taking. Except
only to the extent that Lessee may be prevented from so doing pursuant to the
terms of the order of the Condemnor, Lessee shall continue to perform and
observe all of the other terms, covenants, conditions and obligations hereof on
the part of Lessee to be performed and observed, as though such Condemnation
had not occurred. Lessee covenants that upon the termination of any such
period of temporary use or occupancy it will, at its sole cost and expense
(subject to Lessor's contribution as set forth below), restore the Leased
Property as nearly as may be reasonably possible to the condition in which the
same was immediately prior to such Condemnation, unless (a) such period of
temporary use or occupancy extends beyond the expiration of the Term, in which
case Lessee shall not be required to make such restoration, or (b) the
condemnation award is inadequate to cover the costs of such restoration, in
which case the provisions of Section 15.4 applicable to inadequate awards shall
govern. If restoration is required in connection with such temporary taking
and the condemnation award (together with any other sums Lessor elects, in its
sole discretion, to advance) is adequate to pay the costs thereof, the
provisions of Section 15.4 shall govern the disbursement of the awards (and
other sums, if applicable) and the disposition of any awards in excess of
restoration costs. If restoration is required hereunder, Lessor shall
contribute to the cost of such restoration that portion of its entire Award
that is specifically allocated to such restoration in the judgment or order of
the court, if any, and Lessee shall fund the balance of such costs in advance
of restoration in a manner reasonably satisfactory to Lessor.
ARTICLE 16
16.1 Events of Default. If any one or more of the following events
(individually, an "Event of Default") occurs:
(a) if Lessee fails to make payment of Base Rent, estimated
monthly Percentage Rent or quarterly Percentage Rent, or any Additional
Charges, when the same becomes due and payable and, if not more than two
failures to make such payment have occurred under all the Percentage Leases
within the prior twelve (12) month period, such condition
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continues for a period of two (2) Business Days after receipt by Lessee of
Notice from Lessor thereof; or
(b) if Lessee fails to observe or perform any term, covenant
or condition of this Lease, other than the payment of Rent, and such failure is
not cured by Lessee within a period of 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 one hundred fifty (150) days
after such Notice; or
(c) if 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 Lessee or of the whole or substantially all of the
assets of Lessee shall be appointed in any proceeding brought by Lessee or if
any such receiver, trustee or liquidator shall be appointed in any proceeding
brought against Lessee and shall not be vacated or set aside or stayed within
sixty (60) days after such appointment; or
(d) if 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, except as permitted
under the Master Hotel Agreement; or
(e) except as permitted under the Master Hotel Agreement, if
the estate or interest of Lessee in the Leased Property or any part thereof is
(contrary to the terms of this Lease) voluntarily or involuntarily transferred,
assigned, conveyed, levied upon or attached in any proceeding (unless Lessee is
contesting such lien or attachment in good faith in accordance with Article 12
hereof); or
(f) if, except (A) as a result of Unavoidable Occurrence,
damage, destruction or a partial or complete Condemnation or otherwise as
contemplated by this Lease, or (B) as authorized by Lessor in connection with a
PIP or Contemplated Renovation, Lessee voluntarily ceases operations on the
Leased Property for a period in excess of thirty (30) days; or
(g) the Hotel is operated under a Franchise Agreement and if:
(A) an event of default has been declared by the Franchisor under the Franchise
Agreement with respect to the Hotel on the Leased Premises as a result of any
action or failure to act by Lessee or any Person with whom Lessee contracts for
management services at the Hotel, other than as a result of Lessor's default
hereunder or hereunder (including, without limitation, a failure to complete a
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Capital Improvement required by the Franchisor resulting from Lessor's failure
to fund the Capital Expenditure therefor pursuant to Section 9.1(b), or a
failure to pay Real Estate Taxes, Personal Property Taxes or Capital
Impositions) or Lessor's gross negligence or wilful misconduct, and (B) Lessee
has failed, within thirty (30) days thereafter (or any earlier deadline for
termination set forth in the Franchise Agreement), to cure such default by
either (1) curing the underlying default under the Franchise Agreement and
paying all costs and expenses associated therewith, or (2) obtaining at
Lessee's sole cost and expense a substitute franchise or license agreement
reasonably acceptable to Lessor with a substitute Franchisor reasonably
acceptable to Lessor, on terms and conditions reasonably acceptable to Lessor;
provided, however, that if Lessee is in good faith disputing an assertion of
default by the Franchisor or is proceeding diligently to cure such default, the
30-day period shall be extended for such period of time as Lessee continues to
dispute such default in good faith or diligently proceeds to cure such default,
so long as there is no period during which the Hotel is not operated pursuant
to a Franchise Agreement approved by Lessor (a Franchise Event of Default");
or
(h) if there occurs a Default by Lessee, as that term is
defined in the Master Agreement;
then, and in any such event, Lessor may exercise one or more
remedies available to it herein or at law or in equity, including but not
limited to its right to terminate this Lease by giving Lessee not less than ten
(10) days' Notice of such termination.
If a Proceeding is commenced with respect to any alleged default
under this Lease, the prevailing party in such Proceeding shall receive, in
addition to its damages incurred, such sum as the court or arbitrator 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
Rent) shall be deemed to exist under clause (d) during any time the curing
thereof is prevented by an Unavoidable Delay, provided that upon the cessation
of such Unavoidable Delay, Lessee remedies such default or Event of Default
without further delay.
16.2 Surrender. If an Event of Default occurs (and the event giving
rise to such Event of Default has not been cured within the curative period
relating thereto as set forth in Section 16.1) and is continuing, whether or
not this Lease has been terminated pursuant to Section 16.1, Lessee shall, if
requested by Lessor so to do, immediately surrender 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 self-help repossession, summary
proceedings, ejectment or otherwise, and may remove Lessee and all other
persons and any and all personal property from the Leased Property, subject to
rights of any hotel guests and to any requirement of law. Lessee hereby waives
any and all requirements of applicable laws for service of notice to re-enter
the Leased Property. Except as otherwise required by applicable law, Lessor
shall be under no obligation to, but may if it so chooses, relet the Leased
Property or otherwise mitigate Lessor's damages.
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16.3 Damages. Except as otherwise required by applicable law, neither
(a) the termination of this Lease, (b) the repossession of the Leased Property,
(c) the failure of Lessor to relet the Leased Property, nor (d) the reletting
of all or any portion thereof, shall relieve Lessee of its liability and
obligations hereunder, all of which shall survive any such termination,
repossession or reletting. In the event of any such termination, Lessee shall
forthwith pay to Lessor all Rent due and payable with respect to the Leased
Property to and including the date of such termination. In addition, upon the
occurrence of an Event of Default, Lessee shall forthwith pay to Lessor, at
Lessor's option, as and for agreed current damages for Lessee's default,
either:
(1) Without termination of Lessee's right to possession of the
Leased Property, each installment of Rent and other sums payable by Lessee to
Lessor under this Lease as the same becomes due and payable, which Rent and
other sums shall bear interest at the Overdue Rate, and Lessor may enforce, by
action or otherwise, any other term or covenant of this Lease; or
(2) the sum of:
(A) the unpaid Rent which had been earned at the
time of termination, repossession or reletting, and
(B) the worth at the time of termination,
repossession or reletting of the amount by which the
unpaid Rent for the balance of the Term after the time of
termination, repossession or reletting, exceeds the amount
of rentals that Lessee proves Lessor reasonably can be
expected to receive after the time of termination,
repossession and reletting, and
(C) any other amount necessary to compensate
Lessor for all the detriment proximately caused by
Lessee's failure to perform its obligations under this
Lease or which in the ordinary course of things, would be
likely to result therefrom, including without limitation,
if such termination results in a default under or
termination of the Franchise Agreement, Lessee shall be
solely responsible for all damages and termination
payments under the terms of the Franchise Agreement,
application fees for a new franchise license, increased
royalty fees and other costs arising out of such
termination or out of the resulting need to apply for and
enter into a substitute franchise license agreement for
the Leased Property.
The worth at the time of termination, repossession or reletting of the amount
referred to in subparagraph (B) is computed by discounting such amount to then
present value at a rate equal to the Base Rate. Rent for the purposes of this
Section 16.3 shall be a sum equal to (i) the average of the annual amounts of
the Percentage Rent for the three (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
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preceding Fiscal Year(s) during which this Lease was in effect, or (iii) if one
Fiscal Year has not elapsed, the amount derived by annualizing the Percentage
Rent from the Transition Date.
16.4 Waiver. If this Lease is terminated pursuant to Section 16.1,
Lessee waives, to the extent permitted by applicable law, (a) any right to a
trial by jury in the event of summary proceedings to enforce the remedies set
forth in this Article 16, and (b) the benefit of any laws now or hereafter in
force exempting property from liability for rent or for debt and Lessor waives
any right to "xxxxxx the corporate veil" of Lessee or otherwise bring any claim
against any Affiliate of Lessee not obligated hereunder or on a guaranty
hereof, other than to the extent funds shall have been inappropriately paid to
any Affiliate of Lessee following a default resulting in an Event of Default.
16.5 Application of Funds. Any payments received by Lessor under any
of the provisions of this Lease during the existence or continuance of any
Event of Default shall be applied to Lessee's obligations in the order that
Lessor may determine or as may be prescribed by the laws of the State.
ARTICLE 17
Lessor's Right to Cure Lessee's Default. If Lessee fails to make any
payment or to perform any act required to be made or performed under this Lease
including, without limitation, Lessee's failure to comply with the terms of any
Franchise Agreement, and fails to cure the same within the relevant time
periods provided in Section 16.1, Lessor, without waiving or releasing any
obligation of Lessee, and without waiving or releasing any obligation or
default, may (but shall be under no obligation to) at any time thereafter make
such payment or perform such act for the account and at the expense of Lessee,
and may, to the extent permitted by law, enter upon the Leased Property for
such purpose and, subject to Section 16.4, take all such action thereon as, in
Lessor's opinion, may be necessary or appropriate therefor. No such entry
shall be deemed an eviction of Lessee. All sums so paid by Lessor and all
costs and expenses (including, without limitation, reasonable attorneys' fees
and expenses, in each case to the extent permitted by law) so incurred,
together with a late charge thereon (to the extent permitted by law) at the
Overdue Rate from the date on which such sums or expenses are paid or incurred
by Lessor, shall be paid by Lessee to Lessor on demand. The obligations of
Lessee and rights of Lessor contained in this Article shall survive the
expiration or earlier termination of this Lease.
ARTICLE 18
18.1 Revenue Budgets. Not later than ninety (90) days prior to the
commencement of each Lease Year, Lessee shall prepare and submit to Lessor a
proposed Gross Revenue target for the following Lease Year. Not later than
sixty (60) days prior to the commencement of each Lease Year, Lessee shall
prepare and submit to Lessor for its review a proposed Gross Revenue budget for
the following Lease Year (the "Revenue Budget"), prepared in accordance with
the requirements of this Section 18.1. The Revenue Budget shall be prepared in
accordance with the
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Uniform System to the extent applicable and show by month and quarter and for
the Lease Year to date the degree of detail specified by the Uniform System for
monthly statements, and in accordance with the detail level of monthly
financial statements, the following:
(a) Lessee's good faith reasonable estimate of Gross Revenues,
Room Revenues (including room rates), Food Sales Revenues, Beverage Sales
Revenues and Other Revenues for the Hotel for the forthcoming Lease Year
itemized on schedules on a monthly and quarterly basis, as approved by Lessor
and Lessee, together with the assumptions, in narrative form, forming the basis
of such schedules and a cash flow projection;
(b) A narrative description of the program for advertising and
marketing the Hotel for the forthcoming Lease Year, including a narrative
description of the program for marketing and managing the Hotel for the
forthcoming Lease Year, including, among other things, details as to
significant accounts and customers, competitor performance (to the extent
available), existing, new and projected supply analysis, demand analysis,
estimated market penetration by market segment (to the extent available),
target accounts, marketing and advertising budgets, changes in personnel
policies, staffing levels, major events plans, franchise issues and other
matters affecting the performance and operation of the Hotel and containing a
detailed budget itemization of proposed expenditures by category and the
assumptions, in narrative form, forming the basis of such budget itemization;
and
(c) Lessee's good faith reasonable estimate of Percentage Rent
for each month of the Lease Year.
18.2 Operating Budgets. Not later than the commencement of each Lease
Year, Lessee shall have prepared and submitted to Lessor the operating budget
in substantially the form attached hereto as Exhibit "F" (the "Operating
Budget") for that Lease Year prepared in accordance with the Uniform System to
the extent applicable and that includes, without limitation, an amount equal to
not less than four and one-half percent (4.5%) of estimated Gross Revenues
allocated for estimated cost ("M&R Expense") of maintenance and repairs (other
than Capital Improvements) to the Hotel during such Lease Year. Unless
required by the terms of any Franchise Agreement, Lessee shall not make any
changes to the current methods or categories by which Gross Revenues are
budgeted or accounted for by Lessee or its Manager in its Revenue Budget for
calendar year 1998 without the prior written consent of Lessor, which consent
shall not be unreasonably withheld. In the event that the amount actually
incurred by Lessee for M&R Expense for the Hotel for any Lease Year (the "M&R
Shortfall Year") is less than four and one-half percent (4.5%) of Gross
Revenues for such Lease Year ("Minimum M&R"), notwithstanding the foregoing
provisions of this Section 18.2, Lessee shall be obligated (i) to prepare and
submit to Lessor for its approval the Operating Budget for the Lease Year
following the Shortfall Year (the "M&R Cure Year"), at the same time as, and
according to the procedure herein provided for, review and approval of the
Annual Budget for such subsequent Lease Year, and (ii) without limiting the
generality of the foregoing, to include in such Operating Budget Lessee's good
faith reasonable estimate of Gross Operating Expenses for the Hotel for such
M&R Cure Year, itemized on schedules on a monthly and quarterly basis, in
accordance with the
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Uniform System and as approved by Lessor and Lessee, including without
limitation an amount, allocated for M&R Expense equal to not less than the sum
of (A) four and one-half percent (4.5%) of estimated Gross Revenues, plus (B)
the amount by which Lessee failed to incur Hotel M&R Expense at least equal to
the Minimum M&R for the M&R Shortfall Year, together with the assumptions, in
narrative form, forming the basis of such schedules (unless Lessor agrees to a
lesser amount in the exercise of its reasonable discretion).
18.3 Capital Budget. Not later than sixty (60) days prior to the
commencement of each Lease Year, Lessee shall prepare and submit to Lessor a
capital budget (the "Capital Budget") prepared in accordance with this Section
18.3. The Capital Budget shall be prepared in accordance with the Uniform
System to the extent applicable and shall set forth proposed Capital
Expenditures for the ensuing Lease Year, including without limitation an
emergency fund in the amount of approximately fifteen percent (15%) of the
Capital Reserve for such Lease Year, together with an estimate of the amounts
to be spent for the repair, replacement, or refurbishment of Furniture,
Fixtures and Equipment and an estimate of the amounts to be spent on Capital
Improvements during the current and the next three (3) Lease Years, including a
project-by-project schedule of estimated start and completion dates. The
Capital Budget will include, without limitation, all Capital Expenditures that
Lessor is required to make hereunder, including expenditures for compliance
with any PIP or Contemplated Renovations.
18.4 Annual Budget Approval; Budget Disputes.
(a) Lessor shall have thirty (30) days after the date on which
it receives the Revenue Budget and the Capital Budget (collectively, the
"Annual Budget") to review, approve, disapprove or change the entries and
information appearing in the Annual Budget. If the parties are not able to
reach agreement on the Annual Budget for any Lease Year during Lessor's thirty
(30) day review period, the parties shall attempt during the subsequent fifteen
(15) day period to resolve any disputes, which attempt shall include, if
requested by either party, at least one (1) meeting of executive-level officers
of Lessor and Lessee. Lessor and Lessee shall act promptly, reasonably and in
good faith in seeking to resolve such disputes and in arriving at a mutually
acceptable Annual Budget on or before December 15th prior to the respective
Lease Year. In the event the parties are still not able to reach agreement on
the Annual Budget for any particular Lease Year after complying with the
foregoing requirements of this Section 18.4, the parties shall adopt such
portions of the Revenue Budget and the Capital Budget as they may have agreed
upon, and any matters not agreed upon shall be referred to arbitration as
provided for in Section 41.2 hereof. Pending the results of such arbitration
or the earlier agreement of the parties, (i) if the Revenue Budget has not been
agreed upon, for the first ninety (90) days of the new Lease Year the Leased
Property will be operated in a manner reflecting the prior Fiscal Year's actual
Gross Revenues, and thereafter the Leased Property will be operated for the
full Lease Year (including the first 90 days thereof) in a manner consistent
with the prior Lease Year's Operating Budget, in each case adjusted pursuant to
Section 3.1(d) hereof until a new Revenue Budget is adopted, and (ii) if the
Capital Budget has not been agreed upon, no Capital Expenditures shall be made
unless the same are set forth in a previously approved Capital Budget or are
specifically
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required by Lessor or are otherwise required to comply with this Lease, ground
or building leases, Mortgages or Legal Requirements or are Emergency Capital
Expenditures.
(b) The Capital Budget, once approved and as approved, shall
form the basis on which Capital Expenditures for the Leased Property shall be
made. Unless such Capital Expenditures are otherwise permitted in writing by
Lessor or are otherwise required to comply with Legal Requirements or are
Emergency Capital Expenditures, Lessee agrees to use reasonable best efforts
not to cause or permit any Capital Expenditures for a Lease Year in excess of
those set forth in the Capital Budget ("Excess Capital Expenditures"). If,
notwithstanding Lessee's reasonable best efforts, Excess Capital Expenditures
are contemplated, Lessee shall provide Lessor a written explanation of such
expenditures, which shall include (a) estimates of the Excess Capital
Expenditures, (b) the basis upon which such estimates were made, (c) the
reasons for such variances from the budgeted Capital Expenditures for such
items and (d) the Lessee's plan, if any, to reduce such Capital Expenditures in
the future or avoid Capital Expenditures on such items which are in excess of
the amounts budgeted for such items in the future. Lessee shall provide Lessor
any additional information regarding Excess Capital Expenditures, and from
time to time provide Lessor with status reports on the Excess Capital
Expenditures and the implementation of any plan to reduce or avoid such Excess
Capital Expenditures, each as reasonably requested by Lessor or its
representatives. Notwithstanding the foregoing, expenditures in excess of 105%
of the amount budgeted for an item in a Capital Budget may be made by Lessee
(i) for Real Estate Taxes, Personal Property Taxes, Capital Impositions and
insurance and utility expenses resulting from unanticipated rate changes, and
(ii) if such expenditures are Emergency Capital Expenditures. Lessee shall
promptly report to Lessor in writing any actual or anticipated deviation from
the Capital Budget resulting from the application of the preceding sentence.
In the event that Lessee fails to provide the Notices, information or reports
required under this Section 18.4, then Lessor, in addition to its other rights
and remedies under this Lease and under applicable law, shall have the right to
submit the matter to arbitration under Section 41.2 hereof.
(c) Lessee will, upon request from time to time, provide information
regarding the Hotel's status with respect to the Operating Budget, the Revenue
Budget and the Capital Budget and will make available its financial officers
for personal or telephone meetings to discuss such matters.
ARTICLE 19
19.1 REIT Requirements; Management Agreements; Affiliate Payments.
(a) Lessor has informed Lessee, and Lessee understands, that,
in order for FelCor to qualify as a REIT, the following requirements (the "REIT
Requirements") must be satisfied:
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(i) The average of the adjusted tax bases of Lessor's
personal property that is leased to Lessee under this Lease at the beginning
and end of a calendar year cannot exceed fifteen percent (15%) of the average
of the aggregate adjusted tax bases of all of Lessor's property that is leased
to Lessee under this Lease at the beginning and end of such calendar year (the
"Personal Property Limitation").
(ii) Lessee cannot sublet the property that is leased to
it by Lessor, or enter into any similar arrangement, on any basis such that the
rental or other amounts paid by the sublessee thereunder would be based, in
whole or in part, on either (i) the net income or profits derived by the
business activities of the sublessee or (ii) any other formula such that any
portion of the rent paid by Lessee to Lessor would fail to qualify as "rents
from real property" within the meaning of Section 856(d) of the Code.
(iii) Lessee cannot sublease the property leased to it by
Lessor to, or enter into any similar arrangement with, any Person in which
FelCor owns, directly or indirectly, a ten percent (10%) or greater interest,
within the meaning of Section 856(d)(2)(B) of the Code.
(iv) FelCor (or any Person that owns a ten percent (10%)
or greater interest in FelCor) cannot own, directly or indirectly, a ten
percent (10%) or greater interest in Lessee, within the meaning of Section
856(d)(2)(B) of the Code.
(v) No Person can own, directly or directly, capital
stock of FelCor that exceeds the limitations set forth in FelCor's Charter, as
amended and restated.
(b) Lessee agrees, and agrees to use reasonable efforts to
cause its Affiliates, to use their reasonable best efforts to permit the REIT
Requirements to be satisfied. Lessee agrees, and agrees to use reasonable
efforts to cause its Affiliates, to cooperate in good faith with FelCor and
Lessor to ensure that the REIT Requirements are satisfied, including but not
limited to, providing FelCor with information about the ownership of Lessee,
and its Affiliates to the extent that such information is reasonably available.
Lessee agrees, and agrees to use reasonable efforts to cause its Affiliates,
upon request by FelCor and, where appropriate, at FelCor's expense, to take
reasonable action necessary to ensure compliance with the REIT Requirements.
Immediately after becoming aware that the REIT Requirements are not, or will
not be, satisfied, Lessee shall notify, or use reasonable efforts to cause its
Affiliates to notify, FelCor of such noncompliance.
(c) If Lessor reasonably anticipates that the Personal
Property Limitation will be exceeded with respect to the Leased Property for
any Lease Year, Lessor shall notify Lessee, and Lessee shall purchase, either
from Lessor or a third party, items of personal property anticipated by
Lessor to be in excess of the Personal Property Limitation ("Excess Personal
Property Items") on such terms as may be negotiated in good faith between
Lessor and Lessee. If the Excess Personal Property Items are purchased from
Lessor, the purchase prices of such Excess Personal Property Items shall be
equal to the adjusted tax bases of such Excess Personal Property Items in the
hands of Lessor as of the closing of the purchase.
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19.2 Lessee Officer and Employee Limitation. Anything contained in
this Lease to the contrary notwithstanding, none of the officers or employees
of Lessee (or any Person who furnishes or renders services to the tenants of
the Leased Property, or manages or operates the Leased Property) shall be
officers or employees of FelCor or Lessor (or any Person who serves as an
advisor of FelCor). In addition, if a Person serves as both (a) a director of
Lessee (or any Person who furnishes or renders services to the tenants of the
Leased Property, or manages or operates the Leased Property) and (b) a director
and officer (or employee) of FelCor (or any Person who serves as an advisor of
FelCor) that Person shall not receive any compensation for serving as a
director of Lessee (or any Person who furnishes or renders services to the
tenants of the Leased Property, or manages or operates the Leased Property).
Finally, if a Person serves as both (a) a director and officer of Lessee (or
any Person who furnishes or renders services to the tenants of the Leased
Property, or manages or operates the Leased Property), and (b) a director of
FelCor (or any Person who serves as an advisor to FelCor), that Person shall
not receive any compensation for serving as a director of FelCor (or any Person
who serves as an advisor to FelCor).
19.3 Management Agreement.
(a) Lessee agrees to obtain Lessor's prior consent (which
shall not be unreasonably withheld) to the terms of any management or agency
agreement relating to the management or operation of the Hotel (a "Management
Agreement"), or any material amendment or modification thereto, under which the
payment of management fees is not expressly subordinate to the payment of Rent
hereunder on terms reasonably acceptable to Lessor (provided, however,
management fees and other amounts may be paid to the Manager so long as no
Event of Default has occurred hereunder). Lessee shall, upon request, provide
Lessor with a copy of any proposed Management Agreement. Lessee also shall
provide Lessor with copies of any and all amendments or modifications of a
Management Agreement which are entered into from time to time. Without
limiting the generality of the foregoing, any Management Agreement shall
provide that (i) upon termination of this Lease or termination of Lessee's
right to possession of the Leased Property for any reason other than a
termination by Lessor pursuant to Article 38, the Management Agreement may be
terminated by Lessor without liability for any payment due or to become due to
the Hotel Manager, and (ii) except as provided in the Master Hotel Agreement,
any management fees payable to any Affiliate of Lessee shall be expressly
subordinated to the payments of Rent to Lessor hereunder (provided, however,
management fees and other amounts may be paid to the Manager so long as no
Event of Default has occured hereunder), and no fees or other amounts payable
by Lessee to the Manager shall excuse Lessee from its obligations to pay Rent
and other amounts payable by Lessee to Lessor hereunder. Lessor shall have the
right to approve in advance any Manager who is not an Affiliate of Lessee.
(b) In the event that Lessor in good faith has concerns
regarding the character, conduct or performance of the General Manager of the
Hotel, Lessee and Manager will consult with Lessor to discuss Lessor's concerns
and attempt to address any deficiencies in character, conduct or performance.
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19.4 Payments to Affiliates of Lessee. Notwithstanding anything to
the contrary contained in this Lease, Lessee shall make no payments to
Affiliates as Gross Operating Expenses unless expressly set forth in the
Operating Budget or an approved Capital Budget, allowed by the Master Hotel
Agreement or otherwise expressly agreed to in writing by Lessor, in either
case, after full written disclosure (including information regarding
competitive pricing) by Lessee to Lessor of the affiliation and any other
related information reasonably requested by Lessor.
ARTICLE 20
20.1 Holding Over. If Lessee for any reason remains in possession of
the Leased Property after the expiration or earlier termination of the Term,
such possession shall be as a tenant at sufferance during which time Lessee
shall pay as rental each month one hundred fifty percent of the aggregate of
(a) one-twelfth (1/12) of the aggregate Base Rent and Percentage Rent payable
with respect to the last full 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, Lessee shall be obligated to perform and observe all of the terms,
covenants and conditions of this Lease, but shall have no rights hereunder
other than the right, to the extent given by law to tenancies at sufferance, to
continue its occupancy and use of the Leased Property. Nothing contained
herein shall constitute the consent, express or implied, of Lessor to the
holding over of Lessee after the expiration or earlier termination of this
Lease.
ARTICLE 21
21.1 Lessee May Grant Leasehold Mortgages. [THIS SECTION IS SUBJECT
TO FURTHER DISCUSSION AND REVISION]. Following written Notice to Lessor but
without the consent of Lessor, Lessee may, subject to the terms and conditions
set forth herein, from time to time, directly or indirectly, create or
otherwise cause to exist any mortgage or any lien, encumbrance or title
retention agreement upon Lessee's leasehold interest in this Lease, or any
portion thereof or interest therein, whether to secure any borrowing or other
means of financing or refinancing.
Lessor shall deliver to any lender who gives Lessor written notice of
its status as a lender to Lessee ("Lessee's Lender"), at such Lessee's Lender's
address stated in such Lessee's lender's written notice or at such other
address as such Lessee's lender may designate by later written notice to
Lessor, a duplicate copy of any and all Notices regarding any default which
Lessor may from time to time give or serve upon Lessee pursuant to the
provisions of this Lease. Copies of such Notices given by Lessor to Lessee
shall be delivered to Lessee's Lender simultaneously with delivery to Lessee;
provided, however, that, notwithstanding the foregoing, Lessor's failure to
provide copies of such Notices to Lessee's Lender shall not invalidate
otherwise sufficient Notices to Lessee sent hereunder. [No such Notice by
Lessor to Lessee hereunder shall be
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deemed to have been given unless and until a copy thereof also has been sent to
Lessee's Lender.]
Lessor shall, upon the request of Lessee or Lessee's Lender, (i) provide
Lessee's Lender with copies of all ground leases, Mortgages and similar
agreements to which Lessor is a party reasonably requested in connection with
any existing or proposed financing of Lessee's leasehold interest, and (ii)
execute such estoppel agreements and confirmations as such Lessee's Lender may
reasonably request in connection with any such financing, provided that no such
estoppel agreement or collateral assignment shall in any way affect the Term or
affect adversely in any respect any rights of Lessor under this Lease. No act
or failure to act on the part of Lessee which would entitle Lessor under the
terms of this Lease, or by law, to terminate this Lease or be relieved of any
of Lessor's obligations hereunder shall result in a release or termination of
such obligations of Lessor or a termination of this Lease unless: (i) Lessor
shall have first given written notice of Lessee's act or failure to act to
Lessee's Lender specifying the act or failure to act on the part of Lessee
which would give basis to Lessor's rights; and (ii) Lessee's Lender shall have
failed or refused to correct or cure the condition complained of within a
reasonable time thereafter, in no event more than thirty (30) days, or such
longer period of time as is provided to Lessee under this Lease.
[If Lessee's Lender is prohibited by any process or injunction issued by
any court or by reason of any action by any court having jurisdiction or any
bankruptcy, debtor rehabilitation or insolvency proceedings involving Lessee
from commencing or prosecuting foreclosure or other appropriate proceedings in
the nature thereof, the times for commencing or prosecuting such foreclosure or
other proceedings shall be extended for the period of such prohibition, [but in
no event shall such cure period be extended for longer than a total one hundred
eighty (180) days,] and the Lease shall continue to be in full force and effect
if Lessor is continuing to receive all Rent payable hereunder (despite such
prohibition) and Lessee is not otherwise in default of its material obligations
hereunder. In the event of a foreclosure or deed in lieu of foreclosure of the
leasehold interest of Lessee hereunder, Lessor will (i) negotiate in good faith
with the purchaser at such sale ("Purchaser") with respect to Purchaser
becoming the Lessee hereunder and (ii) in the event that Lessor grants its
consent to such transfer, cooperate in all reasonable respects with any
transfer of the leasehold interest to a Purchaser that succeeds to the interest
of Lessee in the leasehold interest (including, without limitation, in
connection with the transfer of any franchise, license, lease, permit,
contract, agreement, or similar item to such lender or such lender's designee
necessary or appropriate to operate the Leased Property). Lessor shall not
unreasonably withhold, delay or condition its consent to a transfer of this
Lease to a Purchaser, but Lessor may (without limiting the generality of the
foregoing) reasonably withhold its consent in the event that (i) Franchisor
refuses to acknowledge Purchaser as the permitted transferee of the Franchise
Agreement and refuses to enter into a new Franchise Agreement with Purchaser,
or (ii) Purchaser fails to satisfy the REIT Requirements to the reasonable
satisfaction of FelCor's REIT tax counsel, or (iii) Purchaser does not have, or
is not affiliated with an Affiliate that has, a good reputation and significant
experience in the hospitality industry in the United States, or (iv) Purchaser
is otherwise unacceptable to FelCor, as evidenced by resolution of the
Executive
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Committee or Investment Committee of its Board of Directors, [AND/OR OTHER
LIMITATIONS ON PERMITTED FORECLOSURE PURCHASERS?].]
Lessor and Lessee shall cooperate in (i) including in this Lease by
suitable amendment from time to time any provision which may be reasonably
requested by any proposed Lessee's Lender, or that may otherwise be reasonably
necessary, to implement the provisions of this Section and (ii) entering into
any further agreement with or at the request of Lessee's Lender which may be
reasonably requested or required by Lessee's Lender in furtherance or
confirmation of the provisions of this Section; provided, however, that any
such amendment or agreement shall not in any way affect the Term nor affect
adversely in any respect any rights of Lessor or Lessee under this Lease.
ARTICLE 22
22.1 Indemnification.
(a) Notwithstanding the existence of any insurance, and
without regard to the policy limits of any such insurance or self-insurance,
but subject to Section 16.4 and Article 8, Lessee will protect, indemnify, hold
harmless and defend Lessor Indemnified Parties from and against all
liabilities, losses, obligations, claims, damages, penalties, causes of action,
costs and expenses (including, without limitation, reasonable attorneys' fees
and expenses), to the extent (but excluding those for which Lessor agrees to
indemnify Lessee under Section 22.1(b) below) resulting from, imposed upon or
incurred by or asserted against Lessor Indemnified Parties by reason of: (a)
any accident, injury to or death of persons or loss of or damage to property
occurring on or about the Hotel, the Leased Property or adjoining roadways,
curbs or sidewalks during the Term, including without limitation any claims
under liquor liability, "dram shop" or similar laws, (b) any use, misuse,
non-use, condition, management, maintenance or repair during the Term by Lessee
or any of its agents, employees or invitees of the Hotel, the Leased Property
or Lessee's Personal Property or any Proceeding or claim by governmental
entities or other third parties to which a Lessor Indemnified Party is made a
party or participant related to such use, misuse, non-use, condition,
management, maintenance, or repair thereof by Lessee or any of its agents,
employees, independent contractors or invitees (including without limitation
matters arising out of any negligent acts or failures to act or wilful
misconduct of Lessee, Manager or subtenants of Lessee or Manager, and their
respective employees, agents or independent contractors), including any failure
of Lessee or any of its agents, employees, independent contractors or invitees
to perform any obligations under this Lease or imposed by applicable law (other
than requirements with respect to Capital Improvements for which Lessor is
responsible under this Lease and other obligations of Lessor hereunder), (c)
any Impositions that are the obligations of Lessee pursuant to the applicable
provisions of this Lease, (d) any failure on the part of Lessee to perform or
comply with any of the terms of this Lease, and (e) the non-performance during
the Term of any of the terms and provisions of any and all existing and future
subleases of the Leased Property to be performed by the landlord thereunder.
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(b) Lessor shall indemnify, save harmless and defend Lessee
Indemnified Parties from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses), to the extent (but
excluding those for which Lessee agrees to indemnify Lessor under Section
22.1(a) above) resulting from, imposed upon or incurred by or asserted against
Lessee Indemnified Parties as a result of (a) the gross negligence or willful
misconduct of Lessor arising in connection with this Lease, (b) any failure on
the part of Lessor to perform or comply with any of the terms of this Lease,
(c) any condition existing at the Leased Property on the Transition Date
(unless such condition was not remedied or was aggravated by the gross
negligence or wilful misconduct of Lessee, Manager or subtenants of Lessee or
Manager, and their respective employees, agents or independent contractors, or
(d) the operation of the Hotel (other than by Lessee or its Manager) subsequent
to the expiration or earlier termination of this Lease (unless otherwise
provided in Article 16).
(c) Any amounts that become payable by an Indemnifying Party
under this Section shall be paid within ten (10) days after liability therefor
on the part of the Indemnifying Party is determined by litigation or otherwise,
and if not timely paid, shall bear a late charge (to the extent permitted by
law) at the Overdue Rate from the date of such determination to the date of
payment. Nothing herein shall be construed as indemnifying a Lessor
Indemnified Party or Lessee Indemnified Party against its own grossly negligent
acts or omissions or willful misconduct.
Lessee's or Lessor's liability for a breach of the provisions of this
Article shall survive any termination of this Lease.
22.2 Indemnification Procedure. If any Proceeding is brought against
any Indemnified Party in respect of any claim or liability with respect to
which such Indemnified Party may claim indemnification under this Lease, the
Indemnifying Party, upon request, shall at its sole expense resist and defend
such Proceeding, or cause the same to be resisted and defended by counsel
designated by the Indemnified Party and approved by the Indemnifying Party,
which approval shall not be unreasonably withheld; provided, however, that such
approval shall not be required in the case of defense by counsel designated by
any insurance company undertaking such defense pursuant to any applicable
policy of insurance. Each Indemnified Party shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel will be at the sole expense
of such Indemnified Party unless such counsel has been approved by the
Indemnifying Party, which approval shall not be unreasonably withheld. The
Indemnifying Party shall not be liable for any settlement of any such
Proceeding made without its consent, which shall not be unreasonably withheld,
but if settled with the consent of the Indemnifying Party, or if settled
without its consent (if its consent shall be unreasonably withheld), or if
there be a final, nonappealable judgment for an adversary party in any such
Proceeding, the Indemnifying Party shall indemnify and hold harmless the
Indemnified Parties from and against any liabilities incurred by such
Indemnified Parties by reason of such settlement or judgement.
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ARTICLE 23
23.1 Subletting and Assignment. Except as otherwise expressly
provided herein, or in the Master Hotel Agreement Lessee shall not sell,
assign, sublet, transfer, convey or hypothecate, whether by operation of law or
otherwise, its leasehold interest in the Leased Property, or any interest
therein, to any other Person without the prior written consent of Lessor not to
be unreasonably withheld. Subject to the provisions of Article 19 and Section
23.2 and any other express conditions or limitations set forth herein, Lessee
may (a) on the terms and conditions set forth below, assign this Lease or
sublet all or any part of the Leased Property to a Subsidiary of BHR, or (b)
unless a Major Sublease is involved, sublet any retail or Restaurant portion of
the Improvements in the normal course of the Primary Intended Use; provided
that any subletting shall not individually as to any one such subletting, or in
the aggregate be executed by Lessee for the sole or primary purpose of
diminishing in any material respect the actual or potential Percentage Rent
payable under this Lease. Lessor shall have the right to approve in advance
any Major Sublease. In the case of a subletting, the sublessee shall comply
with the provisions of Section 23.2, and in the case of an assignment, the
assignee shall assume in writing and agree to keep and perform all of the terms
of this Lease on the part of Lessee to be kept and performed and shall be, and
become, jointly and severally liable with Lessee for the performance thereof.
Notwithstanding the above, Lessee may assign this Lease to an Affiliate
without the consent of Lessor; provided that any such assignee assumes in
writing and agrees 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. 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 unless Lessor otherwise consents in writing
(which consent will not be unreasonably withheld but may be conditioned upon
the assignee's or transferee's satisfaction of criteria similar to those
described in Section 21.1 hereof. An original counterpart of each such
sublease or 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.
23.2 Subordination and Attornment. Lessee shall insert in each
sublease executed during the Term that is permitted under Section 23.1
provisions to the effect that (a) such sublease is subject and subordinate to
all of the terms and provisions of this Lease and to the rights of Lessor
hereunder if Lessor executes a non-disturbance agreement with respect to such
sublease (otherwise, Lessee only need use reasonable efforts to obtain such
subordination agreement), (b) if this Lease terminates before the expiration of
such sublease, the sublessee thereunder will, at Lessor's option, attorn to
Lessor and waive any right the sublessee may have to terminate the sublease or
to surrender possession thereunder as a result of the termination of this
Lease, and (c) if the sublessee receives a Notice from Lessor or Lessor's
assignees, if any, stating that an uncured Event of Default exists under this
Lease, the sublessee shall thereafter be obligated to pay all rentals accruing
under said sublease directly to the party giving such Notice, or as such party
may direct. All rentals received from the sublessee by Lessor or Lessor's
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assignees, if any, as the case may be, shall be credited against the amounts
owing by Lessee under this Lease.
ARTICLE 24
24.1 Officer's Certificates; Estoppel Certificates; Financial and
Portfolio Information.
(a) At any time and from time to time upon not less than ten
(10) days Notice by Lessor, Lessee will furnish to Lessor or any Person
designated by Lessor an Officer's Certificate certifying that this Lease is
unmodified and in full force and effect (or that this Lease is in full force
and effect as modified and setting forth the modifications), the date to which
the Rent has been paid, whether to the knowledge of Lessee there is any
existing default or Event of Default hereunder by Lessor or Lessee, and such
other information as may be reasonably requested by Lessor. Any such
certificate furnished pursuant to this Section may be relied upon by Lessor,
any underwriter, lender, investor and prospective purchaser of the Leased
Property.
(b) At any time and from time to time upon not less than ten
(10) days notice by Lessee, Lessor will furnish to Lessee or to any Person
designated by Lessee an estoppel certificate certifying that this Lease is
unmodified and in full force and effect (or that this Lease is in full force
and effect as modified and setting forth the modifications), the date to which
Rent has been paid, whether to the knowledge of Lessor there is any existing
default or Event of Default on Lessee's part hereunder, and such other
information as may be reasonably requested by Lessee. Any such certificate
furnished pursuant to this Section may be relied upon by Lessee, any
underwriter, lender, investor and prospective purchaser of the assets of
Lessee.
(c) Throughout the Term, Lessee will furnish to Lessor all
financial statements and financial information, and access to Lessee's books
and records as, when and to the extent required pursuant to Section 7 of the
Master Agreement. Lessee agrees to notify Lessor, from time to time at the
request of Lessor, of the location of any hotel or motel property Lessee or any
Subsidiary thereof owns, leases, operates, manages or has an interest in.
(d) Lessee will furnish, at Lessee's cost and expense, the
following statements and operating information to Lessor, each in a form
reasonably satisfactory to Lessor:
(i) to the extent available electronically to Lessee,
each Monday, a statement showing Gross Revenues by category, occupancy and
revenue per available room for (a) the Hotel and (b) the Hotel and any Other
Hotels, for both (i) each day in the seven (7) day period ended the immediately
preceding Friday, (ii) such seven (7) day period in the aggregate, and (iii)
Lease Year to date;
(ii) on or before the 30th day of each calendar month,
average daily rate, occupancy and RevPAR for the Hotel for such preceding month
(including a comparison to the Operating Budget);
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(iii) on or before the 30th day of each calendar quarter,
detailed profit and loss and cash flow statements showing the results of
operation of the Hotel for such preceding quarter and the Lease Year to date
(including a comparison to the Operating Budget);
(iv) upon reasonably request, a written critique by the
general manager of the Hotel's revenue performance by category, setting forth
in narrative form any variations during the prededing month from the current
Annual Budget amount for such month (and the prior year's Annual Budget amount
for the same month) and including a preview of the Hotel's financial operations
during the current month;
(v) on or before the 15th day of each April, July and
October during the Term, an updated estimate for each calendar quarter
remaining in the Lease Year of the information required by Sections 18.1(a) and
18.3 hereof;
(vi) monthly STR Reports within five (5) days of
Lessee's receipt thereof;
(vii) within fifteen (15) days of Lessee's receipt
thereof, any inspection reports received from the Franchisor under any
Franchise Agreement;
(viii) with reasonable promptness, such financial and
other information (subject to a confidentiality agreement if required because
of the confidential or proprietary nature of the information) respecting the
financial condition and affairs of BHR and Lessee (A) as Lessor, FelCor or
FSLP may reasonably require or deem desirable in its discretion to file with or
provide to the SEC or any other governmental agency or any other Person, all in
the form, and either audited or unaudited, as Lessor may request in Lessor's
reasonable discretion, and (B) as may be reasonably necessary to confirm
compliance by Lessee and its Affiliates with the requirements of this Lease;
and
(ix) such other information related to this Lease or the
Hotel as Lessor may reasonably request and that Lessee can provide without
unreasonable expense.
(e) If FelCor, FSLP or Lessor proposes to include in any
submission or filing with its lender, stock exchange or the SEC, Consolidated
Financials of Lessee delivered or required to be delivered hereunder and the
consent of Lessee's auditor is required for such inclusion, Lessee shall use
commercially reasonable efforts to cause its auditor to deliver promptly to
Lessor the auditor's consent, in the form required, to the inclusion in the
submission or filing of the Consolidated Financials (including the report of
the auditor, if the Consolidated Financials to be included are audited).
Lessee shall reasonably cooperate with Lessor regarding Lessee's auditor's
compliance with such requests with the purpose of minimizing costs and delays.
Lessee shall reasonably cooperate with all requests made by its auditor,
Lessor, FelCor, FSLP or the SEC to promptly provide to the auditor, Lessor,
FelCor, FSLP or the SEC such information or documents, including consents and
representation letters, as may be reasonably necessary or desirable in
connection with the preparation, delivery, audit or inclusion in SEC
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filings, submissions or other public documents, of information, including
financial information, related to the Leased Property, the operation and
financial results of the Leased Property, and the financial results and
condition of the Lessee. Without limiting the foregoing, the information shall
be sufficient to permit the preparation of a Management's Discussion and
Analysis of Results of Operations and Financial Condition with respect to the
Lessee as may be required to be included in reports and documents filed by
FelCor or FSLP with the SEC. Lessee shall not be obligated to incur material,
additional, unreimbursed expense to prepare any reports or information not
specifically provided for herein that Lessor, FelCor or FSLP may be required or
elect to file with the SEC, and such material additional third-party costs
shall be paid or reimbursed by Lessor.
(f) If BHR or Lessee proposes to include in any submission or
filing with its lender, stock exchange or the SEC, Consolidated Financials of
Lessor delivered or required to be delivered hereunder and the consent of
Lessor's auditor is required for such inclusion, Lessor shall use commercially
reasonable efforts to cause its auditor to deliver promptly to Lessee the
auditor's consent, in the form required, to the inclusion in the submission or
filing of the Consolidated Financials (including the report of the auditor, if
the Consolidated Financials to be included are audited). Lessor shall
reasonably cooperate with Lessee regarding Lessor's auditor's compliance with
such requests with the purpose of minimizing costs and delays. Lessor shall
reasonably cooperate with all requests made by its auditor, Lessee, BHR or the
SEC to promptly provide to the auditor, BHR or the SEC such information or
documents, including consents and representation letters, as may be reasonably
necessary or desirable in connection with the preparation, delivery, audit or
inclusion in SEC filings, submissions or other public documents, of
information, including financial information, related to the Leased Property,
the operation and financial results of the Leased Property, and the financial
results and condition of the Lessor. Without limiting the foregoing, the
information shall be sufficient to permit the preparation of a Management's
Discussion and Analysis of Results of Operations and Financial Condition with
respect to the Lessor as may be required to be included in reports and
documents filed by BHR with the SEC. Lessor shall not be obligated to incur
material, additional, unreimbursed expense to prepare any reports or
information not specifically provided for herein that Lessee or BHR may be
required or elect to file with the SEC, and such material additional
third-party costs shall be paid or reimbursed by Lessee.
(g) Confidentiality. Lessor and Lessee agree to, and agrees
to use reasonable efforts to cause their Affiliates to, keep any non-public or
proprietary information delivered or made available to any other party or their
Affiliates pursuant to this Article 24 or otherwise in connection with the
Lease or the Hotel confidential from any Person other than (1) Persons employed
by or retained by Lessor, Lessee or their Affiliates, (2) , subject to an
appropriate confidentiality agreement, current or prospective underwriters,
lenders, investors and, prospective investors or purchasers of the Hotel
(provided, however, that any such non-public or proprietary information
delivered or made available to any such prospective investor or purchaser of
the Hotel may only consist of operational and performance information about the
Hotel and the Lease unless BHR and Lessee otherwise consent, not to be
unreasonably withheld) and (3) other Persons who are expressly authorized in
this Lease to receive such information (in each
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case, each of whom shall be advised of, and shall agree to maintain, the
confidentiality of such information); provided, however, nothing herein shall
prevent any such Person from disclosing such information after prior notice to
Lessee or Lessor, as the case may be, as and to the extent required or
requested by applicable law, any Government or pursuant to legal process or in
connection with the exercise of any remedy under this Lease.
ARTICLE 25
25.1 Lessor's Right to Inspect. Lessee shall permit Lessor and its
authorized agents and 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 the terms of this Agreement.
ARTICLE 26
26.1 No Waiver. No failure by Lessor or Lessee to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the extent permitted by law, no waiver
of any breach shall affect or alter this Lease, which shall continue in full
force and effect with respect to any other then existing or subsequent breach.
ARTICLE 27
27.1 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 28
28.1 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.
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ARTICLE 29
29.1 No Merger of Title. There shall be no merger of this Lease or of
the leasehold estate created hereby by reason of the fact that the same Person
may acquire, own or hold, directly or indirectly: (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (b) the fee estate in the Leased Property.
ARTICLE 30
30.1 Conveyance by Lessor. If Lessor or any successor owner of the
Leased Property conveys the Leased Property to a Person other than an Affiliate
of Lessor in accordance with the terms hereof other than as security for a
debt, and the grantee or transferee of the Leased Property expressly assumes
all obligations of Lessor hereunder arising or accruing from and after the date
of such conveyance or transfer, Lessor or such successor owner, as the case may
be, shall thereupon be released from all future liabilities and obligations of
Lessor under this Lease arising or accruing from and after the date of such
conveyance or other transfer as to the Leased Property and all such future
liabilities and obligations shall thereupon be binding upon the new owner.
ARTICLE 31
31.1 Quiet Enjoyment. So long as Lessee pays all Rent as the same
becomes due and complies with all of the terms of this Lease and performs its
obligations hereunder, in each case within the applicable grace periods, if
any, Lessee shall peaceably and quietly have, hold and enjoy the Leased
Property for the Term hereof, free of any claim or other action by Lessor or
anyone claiming by, through or under Lessor, but subject to all liens and
encumbrances subject to which the Leased Property was conveyed to Lessor or
hereafter consented to by Lessee or provided for herein prior to the
foreclosure thereof. 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 Article.
ARTICLE 32
32.1 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), sent by FedEx or other nationally recognized
overnight courier, or sent by facsimile, addressed to Lessor at 000 X. Xxxx
Xxxxxxxxx Xxxx, Xxxxx 0000, Xxxxxx, Xxxxx, Facsimile No. (000) 000-0000,
Attention: President (with a copy to Attention: General Counsel), and
addressed to Lessee at 00000 Xxxxxx Xxxx, Xxxxxx, Xxxxx 00000, Attention:
President (with a copy to Attention: General Counsel), Facsimile No. (972) 391-
3497, or to such other address or addresses as either party may hereafter
designate. Personally delivered Notice (including any confirmed facsimile
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transmission or delivery by nationally recognized overnight courier) shall be
effective upon receipt at the specified address. 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 (5) days.
ARTICLE 33
33.1 Appraisers. If it becomes necessary to determine the fair market
value of the leasehold estate hereunder (or the fair market value of any other
property) for any purpose of this Lease, the party required or permitted to
give Notice of such required determination shall include in the Notice the name
of a person selected to act as appraiser on its behalf. Within ten (10) days
after Notice, Lessor (or Lessee, as the case may be) shall by Notice to Lessee
(or Lessor, as the case may be) appoint a second person as appraiser on its
behalf. The appraisers thus appointed, each of whom must be a member of the
American Institute of Real Estate Appraisers (or any successor organization
thereto) with at least five (5) years experience in the State appraising
property similar to the Leased Property, shall, within forty-five (45) days
after the date of the Notice appointing the first appraiser, proceed to
determine the fair market value of the leasehold estate hereunder (or the fair
market value of any other property, as the case may be) as of the relevant date
(giving effect to the impact, if any, of inflation from the date of their
decision to the relevant date); provided, however, that if only one appraiser
shall have been so appointed, then the determination of such appraiser shall be
final and binding upon the parties. If two (2) appraisers are appointed and if
the difference between the amounts so determined does not exceed five percent
(5%) of the lesser of such amounts, then the fair market value of the leasehold
estate hereunder (or fair market value of any other property, as the case may
be) shall be an amount equal to fifty percent (50%) of the sum of the amounts
so determined. If the difference between the amounts so determined exceeds
five percent (5%) of the lesser of such amounts, then such two (2) appraisers
shall have twenty (20) days to appoint a third appraiser. If no such third
appraiser shall have been appointed within such twenty (20) days or within
ninety (90) days of the original request for a determination of fair market
value, whichever is earlier, either Lessor or Lessee may apply to any court
having jurisdiction to have such appointment made by such court. Any appraiser
appointed by the original appraisers or by such court shall be instructed to
determine the fair market value of the leasehold estate hereunder (or the fair
market value of any other property) within forty-five (45) days after
appointment of such appraiser. The determination of the appraiser which
differs most in the terms of dollar amount from the determinations of the other
two (2) appraisers shall be excluded, and fifty percent (50%) of the sum of the
remaining two (2) determinations shall be final and binding upon Lessor and
Lessee as the fair market value of the leasehold estate hereunder (or fair
market value of any other property, as the case may be). This provision for
determining by appraisal shall be specifically enforceable to the extent such
remedy is available under applicable law, and any determination hereunder shall
be final and binding upon the parties except as otherwise provided by
applicable law. Lessor and Lessee shall each pay the fees and expenses of the
appraiser appointed by it and
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each shall pay one-half ( 1/2) of the fees and expenses of the third appraiser
and one-half ( 1/2) of all other costs and expenses incurred in connection with
each appraisal.
ARTICLE 34
34.1 Lessor May Grant Liens.
(a) Without the consent of Lessee, Lessor may, subject to the
terms and conditions set forth below in this Section 34.1, from time to time,
directly or indirectly, create or otherwise cause to exist any Mortgage or any
lien, encumbrance or title retention agreement ("Encumbrance") upon the Leased
Property, or any portion thereof or interest therein, whether to secure any
borrowing or other means of financing or refinancing. Upon the request of
Lessor or the holder of the Encumbrance (the "Holder") , Lessee shall
subordinate this Lease to the lien of a new Mortgage on the Leased Property, on
the condition that Lessor has obtained from the proposed mortgagee a in form
and substance reasonably satisfactory to Lessee and Holder (provided, however,
if the loan to value ratio of the fairly allocated indebtedness secured by the
Mortgage is 60% or less, then Lessor need only use reasonable good faith
efforts to obtain such agreement). Any such subordination, non-disturbance and
attornment agreement shall provide, among other things, that, provided no
default has occurred and is then continuing under this Lease, Lessee (i) shall
be entitled to receive all the Gross Revenues of the Hotel subject to the terms
of this Lease, and (ii) shall not be disturbed in its possession of the Leased
Property following a transfer by foreclosure or deed in lieu of foreclosure
under such Mortgage if Lessee attorns to the transferee by foreclosure or deed
in lieu of foreclosure.
(b) Lessee shall, upon the request of Lessor or any existing
or future Holder, (i) provide Holder with copies of all licenses, permits,
occupancy agreements, operating agreements, leases, contracts and similar
agreements reasonably requested in connection with any existing or proposed
financing of the Leased Property, and (ii) execute, or cause the Manager or any
relevant Affiliate to execute, such estoppel agreements with respect to the
Hotel's liquor license and any of the other aforementioned agreements as Holder
may reasonably request in connection with any such financing, provided that no
such estoppel agreement shall in any way affect the Term or affect adversely in
any material respect any rights of Lessee under this Lease.
(c) No act or failure to act on the part of Lessor which would
entitle Lessee under the terms of this Lease, or by law, to be relieved of any
of Lessee's obligations hereunder (including, without limitation, its
obligation to pay Rent) or to terminate this Lease, shall result in a release
or termination of such obligations of Lessee or a termination of this Lease
unless: (i) Lessee shall have first given written notice of Lessor's act or
failure to act to the Holder, specifying the act or failure to act on the part
of Lessor which would give basis to Lessee's rights; and (ii) the Holder, after
receipt of such notice, shall have failed or refused to correct or cure the
condition complained of within a reasonable time thereafter (in no event less
than thirty (30) days nor more than sixty (60) days), which shall include a
reasonable time for such Holder to obtain possession of the Leased Property, if
possession is reasonably necessary for the Holder to correct
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or cure the condition, or to foreclose such Mortgage, and if the Holder
notifies the Lessee of its intention to take possession of the Leased Property
or to foreclose such Mortgage, commences foreclosure actions within said sixty
(60) days, unconditionally commits to correct or cure such condition and
diligently pursues such cure to completion. If such Holder is prohibited by
any process or injunction issued by any court or by reason of any action by any
court having jurisdiction or any bankruptcy, debtor rehabilitation or
insolvency proceedings involving Lessor from commencing or prosecuting
foreclosure or other appropriate proceedings in the nature thereof, the times
for commencing or prosecuting such foreclosure or other proceedings shall be
extended for the period of such prohibition, provided, however, that the Lease
shall continue to be in full force and effect if Lessee is not constructively
evicted from the Leased Property and is not otherwise prevented from operating
the Hotel as a result thereof.
(d) Lessee shall deliver to any Holder who gives Lessee
written notice of its status as a Holder, at such Holder's address stated in
the Holder's written notice or at such other address as the Holder may
designate by later written notice to Lessee, a duplicate copy of any and all
Notices regarding any default which Lessee may from time to time give or serve
upon Lessor pursuant to the provisions of this Lease. Copies of such Notices
given by Lessee to Lessor shall be delivered to such Holder simultaneously with
delivery to Lessor. No such Notice by Lessee to Lessor hereunder shall be
deemed to have been given unless and until a copy thereof has been mailed to
such Holder.
(e) Lessee shall cooperate in all reasonable respects, and as
generally described in Section 35.2 of this Lease, with any transfer of the
Leased Property to a Holder that succeeds to the interest of Lessor in the
Leased Property (including, without limitation, in connection with the transfer
of any franchise, license, lease, permit, contract, agreement, or similar item
to such Holder or such Holder's designee necessary or appropriate to operate
the Leased Property). Lessor and Lessee shall cooperate in (i) including in
this Lease by suitable amendment from time to time any provision which may be
requested by any proposed Holder, or may otherwise be reasonably necessary, to
implement the provisions of this Article and (ii) entering into any further
agreement with or at the request of any Holder which may be reasonably
requested or required by such Holder in furtherance or confirmation of the
provisions of this Article; provided, however, that any such amendment or
agreement shall not in any way affect the Term nor affect adversely in any
material respect any rights of Lessor or Lessee under this Lease.
34.2 Lessee's Right to Cure. Subject to the provisions of Section
34.3, if Lessor breaches any covenant to be performed by it under this Lease or
any Mortgage, Lessee, after Notice to and demand upon Lessor, without waiving
or releasing any obligation hereunder, and in addition to all other remedies
available to Lessee, may (but shall be under no obligation at any time
thereafter to) make such payment or perform such act for the account and at the
expense of Lessor. All sums so paid by Lessee and all costs and expenses
(including, without limitation, reasonable attorneys' fees) so incurred,
together with interest thereon at the Overdue Rate from the date on which such
sums or expenses are paid or incurred by Lessee, shall be paid by Lessor to
Lessee on demand or, following entry of a final, nonappealable judgment against
Lessor for
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such sums, may be offset by Lessee against the Base Rent payments next accruing
or coming due. The rights of Lessee hereunder to cure and to secure payment
from Lessor in accordance with this Section 34.2 shall survive the termination
of this Lease with respect to the Leased Property.
34.3 Breach by Lessor.
(a) It shall be a breach of this Lease if Lessor fails to
observe or perform any term, covenant or condition of this Lease on its part to
be performed and such failure continues for a period of thirty (30) days after
Notice thereof from Lessee, unless such failure cannot with due diligence be
cured within a period of thirty (30) days, in which case such failure shall not
be deemed a breach if Lessor proceeds within such 30-day period, with due
diligence, to cure the failure and thereafter diligently completes the curing
thereof within one hundred eighty (180) days after such Notice, or such longer
period as is required to complete any Capital Improvements necessary to effect
such cure. The time within which Lessor shall be obligated to cure any such
failure also shall be subject to extension of time due to the occurrence of any
Unavoidable Delay. If Lessor does not cure any such failure within the
applicable time period as aforesaid, Lessee may declare the existence of a
"Lessor Default" by a second Notice to Lessor. Thereafter, Lessee may
forthwith cure the same in accordance with the provisions of Section 34.2,
subject to the provisions of the following paragraph and exercise any other
rights and remedies that Lessee may have as a result of such breach; provided,
however, Lessee shall have no right to terminate this Lease for any Lessor
Default and no right, for any such Lessor Default, to offset or counterclaim
against any Rent or other charges due hereunder except as expressly provided
herein.
(b) If Lessor shall in good faith dispute the occurrence of
any Lessor Default and Lessor, before the expiration of the applicable cure
period, shall give Notice thereof to Lessee, setting forth, in reasonable
detail, the basis therefor, no Lessor Default shall be deemed to have occurred
and Lessor shall have no obligation with respect thereto until final adverse
determination thereof, whether through arbitration or otherwise; provided,
however, that in the event of any such adverse determination, Lessor shall pay
to Lessee interest on any disputed funds at the Base Rate, from the date demand
for such funds was made by Lessee until the date of final adverse determination
and, thereafter, at the Overdue Rate until paid. If Lessee and Lessor shall
fail, in good faith, to resolve any such dispute within ten (10) days after
Lessor's Notice of dispute, either may submit the matter for determination by
arbitration, but only if such matter is required to be submitted to arbitration
pursuant to Article 41, or otherwise by a court of competent jurisdiction.
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ARTICLE 35
35.1 Miscellaneous. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, Lessee or Lessor
arising prior to any date of termination of this Lease shall survive such
termination. If any term or provision of this Lease or any application thereof
is invalid or unenforceable, the remainder of this Lease and any other
application of such term or provisions shall not be affected thereby. If any
late charges or any interest rate provided for in any provision of this Lease
are based upon a rate in excess of the maximum rate permitted by applicable
law, the parties agree that such charges shall be fixed at 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.
LESSOR AND LESSEE EACH WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT TO A TRIAL BY JURY IN THE EVENT OF A PROCEEDING WITH RESPECT TO
THIS LEASE, INCLUDING, WITHOUT LIMITATION, SUMMARY PROCEEDINGS TO ENFORCE THE
REMEDIES SET FORTH IN ARTICLE 16.
35.2 Transition Procedures. Upon any expiration or termination of the
Term, Lessor and Lessee shall do the following and, in general, shall cooperate
in good faith to effect an orderly transition of the management or lease of the
Hotel:
(a) Transfer of Licenses. Upon the expiration or earlier
termination of the Term, Lessee shall use its reasonable best efforts (i) to
transfer to Lessor or Lessor's designee any Franchise Agreement, all licenses,
operating permits and other governmental authorizations and all contracts,
including contracts with governmental or quasi-governmental entities, that may
be necessary for the operation of the Hotel (collectively, "Licenses"), or (ii)
if such transfer is prohibited by law or Lessor otherwise elects, to cooperate
with Lessor or Lessor's designee in connection with the processing by Lessor or
Lessor's designee of any applications for all Licenses, including Lessee (or
its Affiliate) continuing to operate the liquor operations under its licenses
with Lessor agreeing to indemnify and hold Lessee (or its Affiliate) harmless
as a result thereof (except for the gross negligence or willful misconduct of
Lessee); provided, in either case, that the costs and expenses of any such
transfer or the processing of any such application shall be paid by Lessor or
Lessor's designee.
(c) Leases and Concessions. Lessee shall assign to Lessor or
Lessor's designee simultaneously with the termination of this Agreement, and
the assignee shall assume, all leases, contracts, concession agreements and
agreements in effect with respect to the Hotel then in Lessee's name which are
designated by Lessor.
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(d) Books and Records. To the extent that Lessor has not
already received copies thereof, all books and records (including computer and
computer-generated records) for the Hotel kept by Lessee pursuant to Article 24
hereof or Section 7 of the Master Hotel Agreement (or copies thereof) shall be
delivered to Lessor or Lessor's designee simultaneously with the termination of
this Lease, but such books and records shall thereafter be available at all
reasonable times for inspection, audit, examination and transcription for a
period of one (1) year and Lessee may retain (on a confidential basis) copies
of computer records thereof.
(e) Receivables and Payables, etc. Lessee shall be entitled
to retain all cash, bank accounts and house banks, and to collect all Gross
Revenues and accounts receivable accrued through the termination date. Lessee
shall be responsible for the payment of Rent, all Gross Operating Expenses and
all other obligations of Lessee accrued under this Lease as of the termination
date, and Lessor shall be responsible for all Gross Operating Expenses of the
Hotel accruing after the termination date.
(f) Final Accounting. Lessee shall, within forty five (45)
days after the expiration or termination of the Term, prepare and deliver to
Lessor a final accounting statement, dated as of the date of the expiration or
termination, as more particularly described in Article 24, along with a
statement of any sums due from Lessee to Lessor pursuant hereto and payment of
such funds.
(g) Inventory. Lessee shall insure that the Leased Property,
at the date of such termination or expiration, has Inventory of a substantially
equivalent nature and amount as exists at the Leased Property on the
Commencement Date, and Lessor shall acquire such Inventory from Lessee at
Lessee's cost.
(h) Surrender. Lessee shall peacefully and immediately vacate
and surrender the Leased Property to Lessor or Lessor's designee, shall turn
over all keys to Lessor and Lessor's designee and shall not interfere with
Lessor or any new Lessee or Manager.
The provisions of this Section 35.2 shall survive the expiration or
termination of this Lease until they have been fully performed. Nothing
contained herein shall limit Lessor's rights and remedies under this Lease if
such termination occurs as the result of an Event of Default.
35.3 Waiver of Presentment, etc. Lessee waives all presentments,
demands for payment and for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, and notices of acceptance and waives
all notices of the existence, creation, or incurring of new or additional
obligations, except as expressly granted herein.
35.4 Standard of Discretion.
In any provision of this Lease requiring or permitting the
exercise by Lessor or Lessee of such party's approval, election, decision,
consent, judgment, determination or words of similar import (collectively, an
"Approval"), such Approval may, unless otherwise expressly
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specified in such provision, be given or withheld in such party's sole,
absolute and unreviewable discretion. Any Approval which by the terms of this
Lease may not be unreasonably withheld shall also not be unreasonably
conditioned or delayed.
35.5 Action for Damages.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, IN ANY SUIT OR
OTHER CLAIM BROUGHT BY EITHER PARTY SEEKING DAMAGES AGAINST THE OTHER PARTY FOR
BREACH OF ITS OBLIGATIONS UNDER THIS LEASE, THE PARTY AGAINST WHOM SUCH CLAIM
IS MADE SHALL BE LIABLE TO THE OTHER PARTY ONLY FOR ACTUAL DAMAGES AND NOT FOR
CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES.
35.6 Lease Assumption in Bankruptcy Proceeding.
If an Event of Default occurs and Lessee has filed or has had
filed against it a petition in bankruptcy or for reorganization or other relief
pursuant to the federal bankruptcy code, Lessee shall promptly move the court
presiding over the proceeding to assume this Lease pursuant to 11 U.S.C.
Section .365, without seeking an extension of the time to file said motion.
35.7 Intra-Family Transfers.
Lessee acknowledges that Lessor may transfer legal title to the
Leased Property one or more times to Subsidiaries of FelCor (each, an
"Affiliated Lessor"). Lessee hereby consents to such transfers provided that,
in each case, this Lease is assumed by the Affiliated Lessor in its entirety
and without modification, except to the extent that Lessor, or the Affiliated
Lessor that then owns the Leased Property, specifically retains any obligations
accrued through the date of transfer hereunder. Lessee covenants that in
connection with such transfers, Lessee will execute and deliver to Lessor, the
Affiliated Lessor and/or their representatives appropriate estoppels and other
documentation reasonably requested by them, including an amendment to this
Lease, for the purposes of reflecting and acknowledging the Affiliated Lessor's
interests as lessor hereunder.
ARTICLE 36
36.1 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.
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ARTICLE 37
37.1 Lessor's Option to Purchase Lessee's Personal Property.
Effective on not less than thirty (30) days prior Notice given at any time
within ninety (90) days before the scheduled expiration of the Term, or upon at
least ten (10) days Notice if this Lease is terminated prior to the expiration
date of the final extension Term (or of the initial Term, if there are no
extension Terms), Lessor or its designee shall have the option to purchase all
(but not less than all) of Lessee's Personal Property relating to the Leased
Property (other than its interest under this Lease), at the expiration or
termination of this Lease for an amount (payable in cash on the expiration date
of this Lease) equal to (i) the Lessee's cost of the Inventory and (ii) the
lesser of Lessee's cost, or the fair market value, of all other of Lessee's
Personal Property. Notwithstanding any such purchase, Lessor shall obtain no
rights to any service xxxx, trade name, logo or other intellectual property
used in connection with the operation of the Hotel or the franchise system
under the Franchise Agreement unless separate agreement as to such use is
reached with the Lessee and/or applicable Franchisor or other owner of such
franchise system as applicable.
ARTICLE 38
38.1 Lessor's Option to Terminate Lease upon Sale.
(a) In the event Lessor enters into a bona fide contract to
sell all or substantially all of the Leased Property to a non-Affiliate or
Lessor or Lessee, then Lessor may terminate this Lease by giving not less than
thirty (30) days prior Notice to Lessee of Lessor's election to terminate this
Lease upon the closing under such sale contract (the "Termination Date");
provided, however, for purposes of this Section 38.1 only, the percentage in
the definition of "Affiliate" herein shall be deemed to be 10% rather than 50%.
Effective upon the Termination Date, this Lease shall terminate and be of no
further force and effect except as to any obligations of the parties existing
as of such date that survive termination of this Lease, and all Rent including
Percentage Rent and Additional Charges shall be adjusted as of the Termination
Date. For purposes of this Article, Lessor will be deemed to have "sold" the
Leased Property if it (i) sells, or transfers by long-term ground lease, the
Leased Property for cash, a promissory note or other consideration, (ii)
contributes the Leased Property to a Person in exchange for stock, partnership
interests, membership interests or other equity interests, provided that after
such transaction the Person who will own the Leased Property is not and will
not thereby become an Affiliate of FelCor, FSLP, Lessor or any of their
Subsidiaries, or (iii) merges (except a merger involving FelCor or FSLP) or
combines with any Person, provided that after such transaction the Person who
will own the Leased Property is not and will not thereby become an Affiliate of
FelCor, FSLP, Lessor or any of their Subsidiaries.
(b) As compensation for the early termination of its leasehold
estate under this Article 38 because of a sale of the Leased Property, Lessor
shall pay to Lessee the Termination
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Fee, as and when provided in the Master Hotel Agreement, unless the Lessee
accepts a New Lease or a substitute for this Lease as provided in the Master
Hotel Agreement.
(c) In the event that Lessor terminates this Lease upon less
than sixty (60) days written notice pursuant to the provisions of this Article
38 or pursuant to any other provisions of this Lease except for the provisions
allowing Lessor to terminate this Lease under Article 14 or Article 15 or upon
the occurrence of an Event of Default, the parties agree that on and after the
effective date of such termination, Hotel personnel employed by Lessee
immediately prior to the effective date of termination will either be employed
by Lessor's Manager or designee, or Lessor or its designee will take such other
action with respect to their employment, which may include notification of the
prospective termination of their employment, so as, in any case, to attempt to
prevent any liability pursuant to the WARN Act. In that event, Lessor hereby
agrees to defend, indemnify and hold harmless Lessee from and against any and
all manner of claims, actions, liabilities, costs and expenses (including,
without limitation, reasonable attorneys' fees and disbursements) relating to
or arising from Lessor's breach of this covenant, including, without
limitation, any liability, costs and expenses arising out of asserted or actual
violation of the requirements of the WARN Act. Further, Lessor's Manager or
designee shall assume all COBRA liabilities and COBRA obligations to the
Hotel's personnel, which Lessee shall or may incur in connection with such
termination of this Lease, and Lessor hereby agrees to defend, indemnify and
hold harmless Lessee from and against any and all manner of claims, actions,
liabilities, costs and expenses (including, without limitation, reasonable
attorneys' fees and disbursements) relating to or resulting from Lessor's
breach of the foregoing covenant with respect to COBRA matters, including,
without limitation, any liability, costs and expenses arising out of any
asserted or actual violation of the requirements of the COBRA any legislation.
Upon Lessor's written request to Lessee, Lessee shall take all action that is
reasonable to notify, advise and cooperate with Lessor in order to assist
Lessor in complying with the WARN Act or COBRA legislation and to mitigate
Lessor's expense or liability with respect to the WARN Act and COBRA
legislation.
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ARTICLE 39
39.1 Assignment or Execution of Franchise Agreement or Guaranty of
Franchise Agreement by Lessor. At Lessor's sole expense (limited, in the case
of all Holiday Inn Franchising, Inc. licenses, to the administrative cost of
processing such franchise assignments or agreements), on or about the
Transition Date the Franchise Agreement will be assigned to Lessee or, if
required by the Franchisor, Lessee will execute a new Franchise Agreement for
the Hotel. If the Franchisor requires as a condition to granting or allowing
the transfer, assignment or renewal of any Franchise Agreement approved by
Lessor that Lessor, as the owner of the Leased Property, become contingently
liable (as guarantor or indemnitor) with respect to the Franchise Agreement,
Lessor will take such actions and execute such documents as Lessee shall
reasonably request in order to become such a guarantor or indemnitor in order
to secure such transfer, assignment or renewal.
39.2 Compliance with Franchise Agreement by Lessee. To the extent any
of the provisions of the Franchise Agreement impose a greater obligation on
Lessee than the corresponding provisions of this Lease, then Lessee shall be
obligated to comply with the provisions of the Franchise Agreement (other than
requirements with respect to Capital Improvements for which Lessor is
responsible under this Lease and other obligations of Lessor hereunder). It is
the intent of the parties hereto that Lessee shall comply in every respect with
such provisions of the Franchise Agreement so as to avoid any default
thereunder during the term of this Lease. Lessee shall not terminate, extend
or enter into any material modification of the Franchise Agreement without in
each instance first obtaining Lessor's prior written consent, which shall not
be unreasonably withheld. Lessor and Lessee agree to cooperate with each other
in the event it becomes necessary to obtain a franchise extension or
modification or a new franchise for the Leased Property, and in any transfer of
the Franchise Agreement to Lessor or, any designee of Lessor or any successor
to Lessee upon the termination of this Lease. In the event of expiration or
termination of a Franchise Agreement, for whatever reason, Lessor will have the
right, in the exercise of its reasonable discretion, to approve any new
Franchise Agreement for the Hotel. If, upon any expiration or earlier
termination of this Lease (other than upon an Event of Default by Lessee), a
Franchise Agreement remains in effect, or would but for such expiration or
termination remain in effect, Lessor shall indemnify, defend and hold Lessee
and its Affiliates harmless with respect to the obligations and liabilities
arising thereunder after the date of expiration or termination of this Lease.
39.3 Compliance with Franchise Agreement by Lessor. To the extent any
of the provisions of the Franchise Agreement impose a greater obligation on
Lessor than the corresponding provisions of this Lease, then Lessor shall be
obligated to comply with the provisions of the Franchise Agreement (other than
requirements with respect to operational matters and other obligations of the
Lessee hereunder). It is the intent of the parties hereto that lessor shall
comply in every respect with the provisions of the Franchise Agreement so as to
avoid any default thereunder during the term of this Lease. To the extent
Lessor is a party thereto, Lessor shall not terminate, extend or enter into any
material modification of the
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Franchise Agreement without in each instance first obtaining Lessee's prior
written consent, not to be unreasonably withheld.
39.4 Changes in Franchise. Lessor and Lessee agree to cooperate with
each other in the event it becomes necessary to obtain a franchise extension or
modification or a new franchise for the Leased Property, and in any transfer of
any Franchise Agreement to any designee of Lessor or, with Lessor's prior
written consent, any successor to Lessee upon the termination of this Lease.
In the event of expiration or termination of a Franchise Agreement, for
whatever reason, Lessor will have the right, in its reasonable discretion, to
approve any new Franchise Agreement for the Hotel. If, upon any expiration or
earlier termination of this Lease (other than upon an Event of Default by
Lessee), a Franchise Agreement remains in effect in favor of Lessor's designee
or Affiliate, Lessor shall indemnify, defend and hold Lessee harmless with
respect to the obligations and liabilities arising thereunder after the date of
expiration or termination of this Lease.
ARTICLE 40
40.1 Lessor Approval of Capital Expenditures; Capital Reserve.
(a) All Capital Expenditures individually or in the aggregate
whether pursuant to the Capital Budget or otherwise, shall be subject to the
approval of Lessor. Such approval may be conditional upon review and approval
by Lessor of the plans and specifications (including matters of design and
decor) and the contracting and purchasing of all labor, services and materials.
Lessor shall have the right to require competitive bidding of contracts for
Capital Improvements, review all bids and monitor costs, time, quality and
performance. The foregoing restrictions shall not apply to Emergency Capital
Expenditures made by Lessee in amounts not to exceed $25,000 and with prior
notice to Lessor (if possible under the circumstances).
(b) Lessor shall be obligated to make available to Lessee an
amount equal to three percent (3%) of Gross Revenues from the Hotel during each
Lease Year ("Capital Reserve") for Capital Improvements, the allocation for
expenditure of which shall be governed by the Capital Budget for such Lease
Year. Upon written request by Lessee to Lessor (stating the specific use to be
made and subject to the approval thereof by Lessor, which approval shall not be
unreasonably withheld and my be evidenced by Lessor's approval of the Capital
Budget (if such Capital Budget specifically describes such Capital
Improvement), such funds shall be made available by Lessor for Capital
Expenditures set forth in the Capital Budget; provided, however, that no
Capital Expenditures shall be made to purchase property (other than "real
property" within the meaning of Treasury Regulations Section 1.856-3(d)), to
the extent that doing so would cause Lessor to recognize income other than
"rents from real property" as defined in Section 856(d) of the Code. Lessor's
obligation shall be cumulative, but not compounded, and any amounts that have
accrued hereunder shall be payable in future periods for such uses and in
accordance with the procedure set forth herein. Lessee shall have no interest
in any accrued obligation of Lessor hereunder after the termination of this
Lease. All Capital Improvements shall be owned by Lessor subject to the
provisions of this Lease.
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(c) Lessor's obligation with respect to Capital Expenditures
shall not be limited to amounts from time to time available in the Capital
Reserve, but Lessor may require that such Capital Reserve amounts be expended
prior to Lessor incurring any obligation to pay for Capital Improvements with
other funds.
ARTICLE 41
41.1 Arbitration.
Except as set forth in Section 41.2, in each case specified in
this Lease in which it shall become necessary to resort to arbitration, such
arbitration shall be determined as provided in this Section 41.1. The party
desiring such arbitration shall give Notice to that effect to the other party,
and an arbitrator shall be selected by mutual agreement of the parties, or if
they cannot agree within thirty (30) days of such notice, by appointment made
by the American Arbitration Association ("AAA") from among the members of its
panels who are qualified and who have experience in resolving matters of a
nature similar to the matter to be resolved by arbitration.
41.2 Alternative Arbitration.
In each case specified in this Lease for a matter to be submitted
to arbitration pursuant to the provisions of this Section 41.2, Lessor and
Lessee will agree upon nationally recognized accounting firm with a hospitality
division of which neither party nor their Affiliates of Lessor is a
significant client to serve as arbitrator of such dispute within fifteen (15)
days after written demand for arbitration is received or sent by either party.
In the event the parties fail to make such designation within such fifteen
(15) day period, Lessor shall be entitled to designate any nationally
recognized accounting firm with a hospitality division of which Lessor or an
Affiliate of Lessor is not a significant client to serve as arbitrator of such
dispute within fifteen (15) days after the parties fail to timely make such
designation. In the event Lessor fails to make such designation within such
fifteen (15) day period, Lessee shall be entitled to designate any nationally
recognized accounting firm with a hospitality division of which Lessee or an
Affiliate of Lessee is not a significant client to serve as arbitrator of such
dispute within fifteen (15) days after the parties fail to timely make such
designation. In the event no nationally recognized accounting firm satisfying
such qualifications is available and willing to serve as arbitrator, the
arbitration shall instead be administered as set forth in Section 41.1.
41.3 Arbitration Procedures.
In any arbitration commenced pursuant to Sections 41.1 or 41.2, a
single arbitrator shall be designated and shall resolve the dispute. The
arbitrator's decision shall be binding on all parties, shall not be subject to
further review or appeal except as otherwise allowed by applicable law and may
be filed in and enforced by a court of competent jurisdiction.. Upon the
failure of either party (the "non-complying party") to comply with his
decision, the arbitrator shall be empowered, at the request of the other party,
to order such compliance by the non-complying
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party and to supervise or arrange for the supervision of the non-complying
party's obligation to comply with the arbitrator's decision, all at the expense
of the non-complying party. To the maximum extent practicable, the arbitrator
and the parties, and the AAA if applicable, shall take any action necessary to
insure that the arbitration shall be concluded within ninety (90) days of the
filing of such dispute. The fees and expenses of the arbitrator shall be
shared equally by Lessor and Lessee except as otherwise specified above in this
Section 41.3. Unless otherwise agreed in writing by the parties or required by
the arbitrator or AAA, if applicable, arbitration proceedings hereunder shall
be conducted in the State. Notwithstanding formal rules of evidence, each
party may submit such evidence as each party deems appropriate to support its
position and the arbitrator shall have access to and right to examine all books
and records of Lessee and Lessor regarding the Hotel during the arbitration.
ARTICLE 42
42.1 The Ground Lease. The provisions of this Article 42 shall apply
and be controlling notwithstanding anything to the contrary contained herein if
Lessor owns its interest in the Land or Improvements through a ground or
building lease. All of the terms of the lease or leases described in Exhibit
"B" attached hereto (collectively referred to herein as the "Ground Lease") are
hereby incorporated into and made a part of this Lease as if stated at length
herein. The parties hereto agree that wherever the words "Land" appear in this
Lease, the same shall be deemed to mean the premises demised by the Ground
Lease.
Lessee shall have the benefit of each and every covenant and agreement
made by the lessor under the Ground Lease ("Ground Lessor"), to Lessor under
the Ground Lease and Lessee accepts this Lease subject to, all of the terms,
covenants, conditions and agreements contained in the Ground Lease.
Lessor shall pay directly to Ground Lessor all rent due from Lessor to
Ground Lessor under the terms of the Ground Lease when due.
Lessee and Lessor covenant and agree with each other that neither shall
do anything which shall have the effect of creating a breach on the part of
Lessor, its successors and assigns, of any of the terms, covenants and
conditions of the Ground Lease. Notwithstanding the foregoing, in the event
that Ground Lessor shall fail or refuse to comply with any of the respective
provisions of the Ground Lease despite Lessor's good faith reasonable efforts
to obtain such compliance and Lessor is not in default under the Ground Lease,
Lessor shall have no liability on account of any such failure or refusal,
provided that Lessee shall have the option to request that Lessor assign to
Lessee, and Lessee shall have, the right to exercise in its own name (and not
that of Lessor) all of the rights to enforce compliance on the part of Ground
Lessor as are available to Lessor. Lessor hereby agrees to cooperate with and
execute and deliver, all at Lessee's expense, all instruments and information
required by Lessee in order to enforce such compliance.
- 80 -
115
ARTICLE 43
43.1 Notification Regarding Asbestos. LESSEE ACKNOWLEDGES THAT LESSOR
HAS ADVISED LESSEE OF THE LIKELIHOOD OF THE EXISTENCE OF ASBESTOS CONTAINING
MATERIALS USED DURING THE INITIAL CONSTRUCTION OF THE HOTEL AND OTHER LEASED
PROPERTY. IF AND TO THE EXTENT REQUIRED BY LAW, AN OPERATION AND MAINTENANCE
PLAN HAS BEEN ESTABLISHED TO MONITOR SUCH MATERIALS AND HAS BEEN MADE AVAILABLE
TO LESSEE.
43.2 Notification Regarding Radon Gas. Radon is a naturally occurring
radioactive gas that, when it has accumulated in a building in sufficient
quantities, may present a health risk to persons who are exposed to it over
time. Levels of radon that exceed Federal and State guidelines have been found
in buildings in Florida. Additional information regarding radon and radon
testing may be obtained from the appropriate county public health unit.
IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
"LESSOR"
-----------------------------------
By:
--------------------------------
Title:
-----------------------------
"LESSEE"
-----------------------------------
By:
--------------------------------
Title:
-----------------------------
- 81 -
116
EXHIBIT A
LIST OF EXISTING HOTELS
117
EXHIBIT B
PROPERTY DESCRIPTION
118
EXHIBIT C
CAPITAL EXPENDITURES POLICY
119
EXHIBIT D
SCHEDULE OF LEASE TERMS
Commencement Date: _______________, 1998
Expiration Date: _______________ [5-15 years, with one renewal
option on the terms in effect
on the last day of the initial
Term to a total of 15 years
and a second 5-year renewal
option, at fair market rental,
for an aggregate possible Term
of no more than 20 years]
Lease Year: 1998 1999 2000
Base Rent: $__________ $__________ $__________
Room Revenue Breakpoint: $__________ $__________ $__________
Percentage Rent:
The "Quarterly Revenues Computation" is equal to the amount obtained by
adding, for the applicable Lease Year, an amount equal to the sum of (i)
___________ percent (___.0%) of year to date Room Revenues up to an
amount (the "Room Revenue Breakpoint Interim Amount") equal to the
product of (A) the first $____________.00 (prorated for Lease Year
______) in year to date Room Revenues ("Room Revenue Breakpoint") and
(B) a fraction, the numerator of which is equal to the number of days in
the applicable Lease Year through the last day of the quarter for which
the Quarterly Revenues Computation is made and the denominator of which
is equal to the actual number of calendar days in such Lease Year , plus
(ii) ____________ percent (___.0%) of all year to date Room Revenues in
excess of the then Room Revenue Breakpoint Interim Amount, plus (iii)
_______ percent (___.0%) of year to date Food Sales and Beverage Sales
plus (iv) __________ percent (___.0%) of any Sublease Rent received by
Lessee year to date.
The "Annual Revenues Computation" is equal to the amount obtained by
adding, for the applicable Lease Year, an amount equal to the sum of (i)
___________ percent (___.0%) of the first $____________.00 (prorated for
Lease Year _______) in year to date Room Revenues ("Room Revenue
Breakpoint") and ____________ percent (___.0%) of all year to date Room
Revenues in excess of the Room Revenue Breakpoint, plus (ii) _____
percent (___.0%) of year to date Food Sales and Beverage Sales plus
(iii) __________ percent (___.0%) of any Sublease Rent received by
Lessee year to date; each year the Room Revenue Breakpoint shall be
adjusted by the same percentage that the Base Rent is adjusted pursuant
to Section 3.1(d) of the Master Lease Terms.
CPI Adjustment Year: ________
120
EXHIBIT E
EXAMPLE OF CALCULATION OF PERCENTAGE RENT
[TO FOLLOW]
[NEED TO DISCUSS: hotels budgeted (scheduled) to be closed for renovations:
Rent shall be reduced to $0 as long as the hotel is budgeted (scheduled) to be
closed, meaning 80% or more rooms out of service; Rent shall be prorated if the
hotel is open but less than 80% of rooms are budgeted (scheduled) to be out of
service. If less than 80% of rooms are out of service, Rent shall be reduced
by the percentage of rooms out of service.]
121
EXHIBIT B-2
Capital Expenditures Policy
[To be agreed upon by FelCor and BHR prior to the Closing Date]
122
EXHIBIT C
Form Guaranty
GUARANTY
In order to induce Lessors to lease the Leased Property covered by the
Percentage Leases to Lessees, the undersigned ("Guarantor") hereby guarantees
to Lessor, and Lessor's successors and assigns, the full and timely payment of
Rent payable under the Percentage Leases; provided, however, that Guarantor's
liability hereunder shall be limited to any deficiency amount by which Lessee
fails to satisfy the Minimum Liquid Net Worth requirements under Section 5 of
that certain Master Hotel Agreement dated as of May 29, 1998, between
affiliates of Lessors and Lessees ("Master Hotel Agreement"). This Guaranty
is a primary obligation of Guarantor, joint and several with that of Lessee,
and Guarantor acknowledges that this Guaranty and its obligations under this
Guaranty are and shall at all times be absolute and unconditional in all
respects, and is and shall at all times be valid and enforceable, irrespective
of any other agreements or circumstances of any nature whatsoever which might
otherwise constitute a defense to this Guaranty and the obligations of the
undersigned under this Guaranty or the obligations of Lessee relating to this
Guaranty or otherwise with respect to the Lessee's Obligations. Guarantor
agrees that, with or without notice or demand; provided that if and to the
extent any such notice is required under the applicable provision of the Lease
Lessor agrees to provide the same, Guarantor will promptly reimburse Lessor for
all costs and expenses (including, without limitation, reasonable attorneys'
fees and disbursements) incurred by Lessor in connection with any action or
proceeding brought by Lessor to enforce the obligations of the undersigned
under this Guaranty. The undersigned hereby irrevocably and unconditionally
waives any and all right to trial by jury in any action, suit or counterclaim
arising in connection with, out of or otherwise relating to this Guaranty.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Master Hotel Agreement.
In Witness Whereof, this Guaranty has been duly executed as of this
____ day of __________, 1998.
Bristol Hotels & Resorts, Inc.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
123
Schedule 1
Contemplated Renovations
