Exhibit 10.31
LEASE AGREEMENT
DATED AS OF DECEMBER 23, 1996
BETWEEN
XXXXXXXX HOSPITALITY LIMITED PARTNERSHIP
AS LESSOR
AND
XXXXXXXX HOSPITALITY MANAGEMENT, INC.
(COMFORT SUITES-DOVER DELAWARE)
TABLE OF CONTENTS
SECTION PAGE
ARTICLE I.............................................................................................. 1
1.1 Leased Property...................................................................... 1
1.2 Term................................................................................. 2
ARTICLE II............................................................................................. 2
Definitions................................................................................... 2
ARTICLE III............................................................................................ 14
3.1 Rent................................................................................. 14
3.2 Additional Charges................................................................... 14
3.3 Lease Provision...................................................................... 15
3.4 Conversion of Property............................................................... 15
3.5 Annual Budget........................................................................ 15
3.6 Books and Records.................................................................... 16
ARTICLE IV............................................................................................. 16
4.1 Payment of Impositions............................................................... 16
4.2 Notice of Impositions................................................................ 18
4.3 Adjustment of Impositions............................................................ 18
4.5 Insurance Premiums................................................................... 18
ARTICLE V.............................................................................................. 18
5.1 No Termination, Abatement, etc....................................................... 18
5.2 Abatement Procedures................................................................. 19
ARTICLE VI............................................................................................. 19
6.1 Ownership of the Leased Property..................................................... 19
6.2 Lessee's Personal Property........................................................... 19
6.3 Lessor's Lien........................................................................ 20
ARTICLE VII............................................................................................ 20
7.1 Condition of the Leased Property..................................................... 20
7.2 Use of the Leased Property........................................................... 21
7.3 Lessor to Grant Easements, etc....................................................... 22
ARTICLE VIII........................................................................................... 23
8.1 Compliance with Legal and Insurance Requirements,
etc........................................................................................... 23
8.2 Legal Requirement Covenants.......................................................... 23
8.3 Environmental Covenants.............................................................. 24
ARTICLE IX............................................................................................. 26
9.1 Capital Improvements, Maintenance and Repair......................................... 26
9.2 Encroachments, Restrictions, Etc..................................................... 28
ARTICLE X.............................................................................................. 29
10.1 Alterations.......................................................................... 29
10.2 Salvage.............................................................................. 29
10.3 Joint Use Agreements................................................................. 29
ARTICLE XI............................................................................................. 29
Liens......................................................................................... 29
ARTICLE XII............................................................................................ 30
Permitted Contests............................................................................ 30
ARTICLE XIII........................................................................................... 31
13.1 General Insurance Requirements....................................................... 31
13.2 Replacement Cost..................................................................... 33
13.3 Worker's Compensation................................................................ 33
13.4 Waiver of Subrogation................................................................ 33
13.5 Form Satisfactory, etc............................................................... 33
13.6 Change in Limits..................................................................... 34
13.7 Blanket Policy....................................................................... 34
13.9 Reports On Insurance Claims.......................................................... 35
ARTICLE XIV............................................................................................ 35
14.1 Insurance Proceeds................................................................... 35
14.2 Reconstruction in the Event of Damage or
Destruction Covered by Insurance.............................................................. 35
14.3 Reconstruction in the Event of Damage or
Destruction Not Covered by Insurance.......................................................... 37
14.4 Lessee's Property.................................................................... 37
14.5 Damage Near End of Term.............................................................. 37
14.6 Waiver............................................................................... 38
ARTICLE XV............................................................................................. 38
15.1 Definitions.......................................................................... 38
15.2 Parties' Rights and Obligations...................................................... 38
15.3 Total Taking......................................................................... 38
15.4 Allocation of Award.................................................................. 39
15.5 Partial Taking....................................................................... 39
15.6 Temporary Taking..................................................................... 39
15.7 Lessee's Offer....................................................................... 40
ARTICLE XVI............................................................................................ 40
16.1 Events of Default.................................................................... 40
16.2 Surrender............................................................................ 42
16.3 Damages.............................................................................. 42
16.4 Waiver............................................................................... 43
16.5 Application of Funds................................................................. 43
ARTICLE XVII........................................................................................... 43
Lessor's Right to Cure Lessee's Default....................................................... 43
ARTICLE XVIII.......................................................................................... 44
Provisions Relating to Purchase of the Leased Property........................................ 44
ARTICLE XIX............................................................................................ 45
19.1 Personal Property Limitation......................................................... 45
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19.2 Sublease Rent Limitation............................................................. 45
19.3 Sublease Tenant Limitation........................................................... 45
19.4 Lessee Ownership Limitation.......................................................... 45
19.5 Lessee Officer and Employee Limitation............................................... 45
ARTICLE XX............................................................................................. 46
Holding Over.................................................................................. 46
ARTICLE XXI............................................................................................ 46
Risk of Loss.................................................................................. 46
ARTICLE XXII........................................................................................... 47
Indemnification............................................................................... 47
ARTICLE XXIII.......................................................................................... 48
23.1 Subletting and Assignment............................................................ 48
23.2 Attornment........................................................................... 49
ARTICLE XXIV........................................................................................... 49
Officer's Certificates; Financial Statements; Lessor's
Estoppel Certificates and Covenants........................................................... 49
ARTICLE XXV............................................................................................ 50
Lessor's Right to Inspect..................................................................... 50
ARTICLE XXVI........................................................................................... 50
No Waiver..................................................................................... 50
ARTICLE XXVII.......................................................................................... 51
Remedies Cumulative........................................................................... 51
ARTICLE XXVIII......................................................................................... 51
Acceptance of Surrender....................................................................... 51
ARTICLE XXIX........................................................................................... 51
No Merger of Title............................................................................ 51
ARTICLE XXX............................................................................................ 51
Conveyance by Lessor.......................................................................... 51
Other Interests............................................................................... 52
ARTICLE XXXI........................................................................................... 52
Quiet Enjoyment............................................................................... 52
ARTICLE XXXII.......................................................................................... 52
Notices....................................................................................... 52
ARTICLE XXXIII......................................................................................... 53
Appraisers.................................................................................... 53
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ARTICLE XXXIV.......................................................................................... 54
34.1 Lessor May Grant Liens............................................................... 54
34.2 Lessee's Right to Cure............................................................... 54
34.3 Breach by Lessor..................................................................... 55
ARTICLE XXXV........................................................................................... 55
35.1 Miscellaneous........................................................................ 55
35.2 Transition Procedures................................................................ 56
35.3 Waiver of Presentment, etc........................................................... 57
ARTICLE XXXVI.......................................................................................... 57
Memorandum of Lease........................................................................... 57
ARTICLE XXXVII......................................................................................... 57
Lessor's Option to Purchase Assets of Lessee.................................................. 57
ARTICLE XXXVIII........................................................................................ 57
Lessor's Option to Terminate Lease............................................................ 57
ARTICLE XXXIX.......................................................................................... 58
Compliance with Franchise Agreement........................................................... 58
ARTICLE XL............................................................................................. 58
40.1 Room Set-Aside....................................................................... 58
40.2 Capital Expenditures................................................................. 59
40.3 Prohibited Expenditures.............................................................. 59
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LEASE AGREEMENT
THIS LEASE AGREEMENT (hereinafter called "Lease"), made as of the 23rd
day of December 1996, by and between XXXXXXXX HOSPITALITY LIMITED PARTNERSHIP, a
Virginia limited partnership (hereinafter called "Lessor"), and XXXXXXXX
HOSPITALITY MANAGEMENT, INC., a Maryland corporation (hereinafter called
"Lessee"), provides as follows.
W I T N E S S E T H:
Contemporaneously with the execution hereof, Lessor acquired the
"Leased Property".
In furtherance of the consummation of such transaction, Lessor and
Lessee wish to enter into this Lease.
NOW, THEREFORE, Lessor, in consideration of the payment of rent by
Lessee to Lessor, the covenants and agreements to be performed by Lessee, and
upon the terms and conditions hereinafter stated, does hereby rent and lease
unto Lessee, and Lessee does hereby rent and lease from Lessor, the Leased
Property.
ARTICLE I
1.1 Leased Property. The leased property (the "Leased
Property") is comprised of Lessor's interest in the following:
(a) the land described in Exhibit "A" attached hereto
and by reference incorporated herein (the "Land");
(b) all buildings, structures and other improvements of every
kind including, but not limited to, alleyways and connecting tunnels, sidewalks,
utility pipes, conduits and lines (on-site and offsite), parking areas and
roadways appurtenant to such buildings and structures presently situated upon
the Land (collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances relating to
the Land or the Leased Improvements;
(d) all equipment, machinery, fixtures, and other items of
property required for or incidental to the use of the Leased Improvements as a
hotel, including all components thereof, now and hereafter permanently affixed
to or incorporated into the Leased Improvements, including, without limitation,
all furnaces, boilers, heaters, electrical equipment, heating, plumbing,
lighting, ventilating, refrigerating, incineration, air and water pollution
control, waste disposal, air-cooling and air-conditioning systems and apparatus,
sprinkler systems and fire and theft protection
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equipment, all of which to the greatest extent permitted by law are hereby
deemed by the parties hereto to constitute real estate, together with all
replacements, modifications, alterations and additions thereto (collectively,
the "Fixtures");
(e) all furniture and furnishings and all other items of
personal property (excluding Inventory and personal property owned by Lessee)
located on, and used in connection with, the operation of the Leased
Improvements as a hotel, together with all replacements, modifications,
alterations and additions thereto; and
(f) all existing leases of space within the Leased Property
(including any security deposits or collateral held by Lessor pursuant thereto).
THE LEASED PROPERTY IS DEMISED IN ITS PRESENT CONDITION WITHOUT REPRESENTATION
OR WARRANTY (EXPRESSED OR IMPLIED) BY LESSOR AND SUBJECT TO THE RIGHTS OF
PARTIES IN POSSESSION, AND TO THE EXISTING STATE OF TITLE INCLUDING ALL
COVENANTS, CONDITIONS, RESTRICTIONS, EASEMENTS AND OTHER MATTERS OF RECORD
INCLUDING ALL APPLICABLE LEGAL REQUIREMENTS, THE LIEN OF FINANCING INSTRUMENTS,
MORTGAGES, DEEDS OF TRUST AND SECURITY DEEDS, AND INCLUDING OTHER MATTERS WHICH
WOULD BE DISCLOSED BY AN INSPECTION OF THE LEASED PROPERTY OR BY AN ACCURATE
SURVEY THEREOF.
1.2 Term. The term of the Lease (the "Term") shall commence on the date
hereof (the "Commencement Date") and shall end on the tenth anniversary of the
last day of the month in which the Commencement Date occurs unless the Lessee
chooses to renew the Lease for an additional five years, unless sooner
terminated in accordance with the provisions hereof.
ARTICLE II
Definitions. For all purposes of this Lease, except as otherwise
expressly provided or unless the context otherwise requires, (a) the terms
defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular, (b) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as are at the time applicable, (c) all
references in this Lease to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Lease and (d) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Lease as a whole and not to any particular
Article, Section or other subdivision:
Additional Charges: As defined in Section 3.3.
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Affiliate: As used in this Lease the term "Affiliate" of a person shall
mean (a) any person that, directly or indirectly, controls or is controlled by
or is under common control with such person, (b) any other person that owns,
beneficially, directly or indirectly, five percent or more of the outstanding
capital stock, shares or equity interests of such person, or (c) any officer,
director, employee, partner or trustee of such person or any person controlling,
controlled by or under common control with such person (excluding trustees and
persons serving in similar capacities who are not otherwise an Affiliate of such
person). The term "person" means and includes individuals, corporations, general
and limited partnerships, limited liability companies, stock companies or
associations, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, or other entities and governments and
agencies and political subdivisions thereof. For the purposes of this
definition, "control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such person,
through the ownership of voting securities, partnership interests or other
equity interests.
Annual Budget: As used in this Lease, the term "Annual Budget" shall
mean an operating and capital budget prepared by Lessee and delivered to Lessor
in accordance with Section 3.5.
Award: As defined in Section 15.1(c).
Base Rate: The rate of interest announced publicly by Citibank, N.A.,
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 Section 3.1(a).
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which national banks in the City of New York, New York, or in
the municipality wherein the Leased Property is located, are closed.
CERCLA: The Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: As defined in Section of the Lease.
Condemnation, Condemnor: As defined in Section 15.1.
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Consolidated Financials: For any fiscal year or other accounting period
for Lessee and its consolidated subsidiaries, statements of earnings and
retained earnings and of changes in financial position 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 thereto, all in reasonable detail and setting forth in comparative
form the corresponding figures for the corresponding period in the preceding
fiscal year, and prepared in accordance with generally accepted accounting
principles and audited by independent certified public accountants acceptable to
Lessor in its sole discretion.
Consolidated Net Worth: At any time, the sum of the following for
Lessee and any consolidated subsidiaries, on a consolidated basis determined in
accordance with generally accepted accounting principles:
(a) the amount of capital or stated capital (after deducting
the cost of any shares held in its treasury), plus
(b) the amount of capital surplus and retained earnings (or, in the
case of a capital or retained earnings deficit, minus the amount of such
deficit), minus
(c) the sum of the following (without duplication of deductions with
respect to items already deducted in arriving at surplus and retained earnings):
(1) unamortized debt discount and expense; and (2) any write-up in the book
value of assets resulting from a revaluation thereof subsequent to the date of
the most recent Consolidated Financials prior to the date thereof, except any
net write-up in value of foreign currency in accordance with generally accepted
accounting principles.
Consumer Price Index: The "Consumer Price Index" published by
the Bureau of Labor Statistics of the United States Department of
Labor, U.S. City Average, All Items for Urban Wage Earners and
Clerical Workers (1982-1984=100).
Date of Taking: As defined in Section 15.2(b).
Encumbrance: As defined in Section 34.1.
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.
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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 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:
(a) Failure of Lessee, Lessor, any Predecessor or the Leased
Property to comply at any time with all Environmental Laws;
(b) Presence of any Hazardous Materials on, in, under, at or
in any way affecting the Leased Property;
(c) A Release at any time of any Hazardous Materials on, in, at, under
or in any way affecting the Leased Property;
(d) Identification of Lessee, Lessor or any Predecessor as a
potentially responsible party under CERCLA or under any Environmental Law
similar to CERCLA;
(e) Presence at any time of any above-ground and/or underground storage
tanks, as defined in RCRA or in any applicable Environmental Law on, in, at or
under the Leased Property or any adjacent site or facility; or
(f) Any and all claims for injury or damage to persons or property
arising out of exposure to Hazardous Materials originating or located at the
Leased Property, or resulting from operation thereof or any adjoining property.
Event of Default: As defined in Section
5
Facility: The hotel and/or other facility offering lodging and
other services or amenities being operated or proposed to be
operated on the Leased Property.
Fair Market Rental: The fair market rental of the Leased Property means
the rental which a willing tenant not compelled to rent would pay a willing
landlord not compelled to lease for the use and occupancy of such Leased
Property pursuant to the Lease for the term in question, (a) assuming that
Lessee is not in default thereunder and (b) determined in accordance with the
appraisal procedures set forth in Article XX or in such other manner as shall be
mutually acceptable to Lessor and Lessee.
Fair Market Value: The fair market value of the Leased Property means
an amount equal to the price that a willing buyer not compelled to buy would pay
a willing seller not compelled to sell for such Leased Property, (a) assuming
the same is unencumbered by this Lease, (b) determined in accordance with the
appraisal procedures set forth in Article XXXIII or in such other manner as
shall be mutually acceptable to Lessor and Lessee, (c) assuming that such seller
must pay customary closing costs and title premiums, and (d) taking into account
the positive or negative effect on the value of the Leased Property attributable
to the interest rate, amortization schedule, maturity date, prepayment penalty
and other terms and conditions of any encumbrance that is assumed by the
transferee. In addition, in determining the Fair Market Value with respect to
damaged or destroyed Leased Property such value shall be determined as if such
Leased Property had not been so damaged or destroyed.
FIFRA: The Federal Insecticide, Fungicide, and Rodenticide
Act, as amended.
Fiscal Year: The 12-month period from January 1 to
December 31.
Fixtures: As defined in Section 1.1.
Franchise Agreement: Any franchise agreement or license
agreement with a franchisor under which the Facility is operated.
Furniture and Equipment: For purposes of this Lease, the terms
"furniture and equipment" shall mean collectively all carpet, furniture,
furnishings, wall coverings, fixtures and hotel equipment and systems located
at, or used in connection with, the Facility, together with all replacements
therefor and additions thereto, including, without limitation, (i) all equipment
and systems required for the operation of kitchens, bars, if any, restaurants,
if any, and laundry and dry cleaning facilities, (ii) dining room wagons,
materials handling equipment, cleaning and
6
engineering equipment, (iii) telephone and computerized accounting
systems, and (iv) vehicles.
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 political subdivision of
any of the foregoing.
Gross Operating Expenses: For purposes of this Lease, the term "Gross
Operating Expenses" shall mean all of the following with respect to the
Facility: reasonable and customary salaries and employee expense and payroll
taxes (including salaries, wages, bonuses and other compensation of all
employees at the Facility, and benefits including life, medical and disability
insurance and retirement benefits), expenditures described in Section 9.1,
operational supplies, utilities, insurance to be provided by Lessee under the
terms of this Agreement, governmental fees and assessments, food, beverages,
laundry service expense, the cost of Inventories and fixed asset supplies,
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 Facility 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 under Article XIII, (iii)
expenditures by Lessor pursuant to Article XIII and (iv) payments on any
Mortgage or other mortgage or security instrument on the Facility); all
determined in accordance with generally accepted accounting principles and the
Uniform System. No part of Lessee's central office overhead or general or
administrative expense (as opposed to that of the Facility) shall be deemed to
be a part of Gross Operating Expenses, as herein provided. Reasonable
out-of-pocket expenses of Lessee incurred for the account of or in connection
with the Facility operations, including but not limited to postage, telephone
charges and reasonable travel expenses of employees, officers and other
representatives and consultants of Lessee and its Affiliates, shall be deemed to
be a part of Gross Operating Expenses and such persons shall be afforded
reasonable accommodations, food, beverages, laundry, valet and other such
services by and at the Facility without charge to such persons or Lessee.
Gross Operating Profit shall mean, for any Fiscal Year, the
excess of Gross Revenues for such Fiscal Year over Gross Operating
Expenses for such Fiscal Year.
7
Gross Revenues: All revenues, receipts, and income of any kind derived
directly or indirectly by Lessee from or in connection with the Facility
(including rentals or other payments from tenants, lessees, licensees or
concessionaires but not including their gross receipts unless such party is an
Affiliate of the Lessee in which case the gross receipts shall be included)
whether on a cash basis or credit, paid or collected, determined in accordance
with generally accepted accounting principles and 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) gratuities, (iv) proceeds of
insurance and condemnation, (v) proceeds from sales other than sales in the
ordinary course of business, (vi) all loan proceeds from financing or
refinancings of the Facility or interests therein or components thereof, (vii)
judgments and awards, except any portion thereof arising from normal business
operations of the hotel, and (viii) items constituting "allowances" under the
Uniform System.
Hazardous Materials: All chemicals, pollutants, contaminants,
wastes and toxic substances, including without limitation:
(a) Solid or hazardous waste, as defined in RCRA or in any
Environmental Law;
(b) Hazardous substances, as defined in CERCLA or in any
Environmental Law;
(c) Toxic substances, as defined in TSCA or in any
Environmental Law;
(d) Insecticides, fungicides, or rodenticides, as defined in
FIFRA or in any Environmental Law; and
(e) Gasoline or any other petroleum product or byproduct,
polychlorinated biphenols, asbestos and urea formaldehyde.
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 relate to or are imposed upon
Lessee or its business conducted upon the Leased Property) other than Real
Estate Taxes and Personal Property Taxes, assessments (including, without
limitation, all assessments for public improvements or benefit, whether or not
commenced or completed prior to the date hereof and whether or not to be
completed within the Term), ground rents, water, sewer or other rents and
charges, excises, tax inspection, authorization and
8
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
(a) Lessor's interest in the Leased Property, (b) the Leased Property, or any
part thereof or any rent therefrom or any estate, right, title or interest
therein, or (c) any occupancy, operation, use or possession of, or sales from,
or activity conducted on or in connection with the Leased Property, or the
leasing or use of the Leased Property or any part thereof by Lessee. Nothing
contained in this definition of Impositions shall be construed to require Lessee
to pay (1) any tax based on net income (whether denominated as a franchise or
capital stock or other tax) imposed on Lessor or any other person, or (2) any
net revenue tax of Lessor or any other person, or (3) any tax imposed with
respect to the sale, exchange or other disposition by Lessor of any Leased
Property or the proceeds thereof, 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.
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 Section 8.3 or Article XXII.
Insurance Requirements: All terms of any insurance policy
required by this Lease and all requirements of the issuer of any
such policy.
Inventory: All "Inventories of Merchandise" and "Inventories
of Supplies" as defined in the Uniform System, including, but not
limited to, linens and other non-depreciable personal property.
Land: As defined in Article I.
Lease: This Lease.
Leased Improvements; Leased Property: Each as defined in
Article I.
9
Legal Requirements: All federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Leased Property or the maintenance,
construction, use or alteration thereof (whether by Lessee or otherwise),
whether or not hereafter enacted and in force, including (a) all laws, rules or
regulations pertaining to the environment, occupational health and safety and
public health, safety or welfare, and (b) any laws, rules or regulations that
may (1) require repairs, modifications or alterations in or to the Leased
Property or (2) in any way adversely affect the use and enjoyment thereof; and
all permits, licenses and authorizations and regulations relating thereto and
all covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Lessee (other than encumbrances
created by Lessor without the consent of Lessee), at any time in force affecting
the Leased Property.
Lending Institution: Any insurance company, credit company, federally
insured commercial or savings bank, national banking association, savings and
loan association, employees welfare, pension or retirement fund or system,
corporate profit sharing or pension trust, college or university, or real estate
investment trust, including any corporation qualified to be treated for federal
tax purposes as a real estate investment trust, such trust having a net worth of
at least $10,000,000.
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 stockholder's
interest) in Lessee, the officers, directors, stockholders, employees, agents
and representatives of Lessee and any corporate stockholder, agent, or
representative of Lessee, and the respective heirs, personal representatives,
successors and assigns of any such officer, director, stockholder, employee,
agent or representative.
Lessee's Personal Property: As defined in Section 6.2.
Lessor: The Lessor designated on this Lease and its
respective successors and assigns.
Lessor 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 stockholder's or
partnership interest) in Lessor, the officers, directors, stockholders,
employees, agents and representatives of the general partner of Lessor and any
10
partner, agent, or representative of Lessor, and the respective heirs, personal
representatives, successors and assigns of any such officer, director, partner,
stockholder, employee, agent or representative.
Minimum Price: The sum of (a) the equity in the Leased Property at the
time of acquisition of the Leased Property by Lessor (i.e., that portion of the
purchase price of the Leased Property paid by Lessor in cash or exchange for
partnership interests in the Lessor) plus (b) other capital expenditures on the
Leased Property made by Lessor after the date hereof plus (c) the unpaid
principal balance of all encumbrances against the Leased Property at the time of
purchase of the Leased Property by Lessee, less (x) all proceeds received by
Lessor from any financing or refinancing of the Leased Property after the date
hereof (after payment of any debt refinanced and net of any costs and expenses
incurred in connection with such financing or refinancing, including, without
limitation, loan points, commitment fees and commissions and legal fees) and (y)
the net amount (after deduction of all reasonable legal fees and other costs and
expenses, including without limitation expert witness fees, incurred by Lessor
in connection with obtaining any such proceeds or award) of all insurance
proceeds received by Lessor and awards received by Lessor from any partial
Taking of the Leased Property that are not applied to restoration.
Notice: A notice given pursuant to Article XXXII.
Officer's Certificate: A certificate of Lessee reasonably acceptable to
Lessor, signed by the chief financial officer or another officer authorized so
to sign by the board of directors or by-laws of Lessee, or any other person
whose power and authority to act has been authorized by delegation in writing by
any such officer.
Overdue Rate: On any date, a rate equal to the Base Rate plus 5% per
annum, but in no event greater than the maximum rate then permitted under
applicable law.
Other Revenues: Gross revenue from the operation of the
Facility excluding:
(a) Room Revenues;
(b) the amount of all credit, rebates or refunds to
customers, guests or patrons;
(c) all sales taxes or any other taxes imposed on such revenues.
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Payment Date: Any due date for the payment of any installment
of Base Rent.
Person: Any Government, natural person, corporation,
partnership or other legal entity.
Personal Property Taxes: All personal property taxes imposed on the
furniture, furnishings or other items of personal property located on, and used
in connection with, the operation of the Leased Improvements as a hotel (other
than Inventory and other personal property owned by the Lessee), together with
all replacement, modifications, alterations and additions thereto.
Predecessor: Any Person whose liabilities arising under any
Environmental Law have or may have been retained or assumed by Lessee, either
contractually or by operation of law, relating to the Leased Property.
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.
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 any improvements
thereon.
Rejectable Offer Price: An amount equal to the greater of
(a) the Fair Market Value, determined as of the applicable purchase
date, or (b) the Minimum Price.
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, and Additional Charges.
Room Revenues: Gross revenue from the rental of guest rooms,
whether to individuals, groups or transients, at the Facility,
excluding the following:
(a) the amount of all credits, rebates or refunds to
customers, guests or patrons;
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(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.
State: The State or Commonwealth of the United States in
which the Leased Property is located.
Subsidiaries: Corporations in which Lessee owns, directly or
indirectly, more than 50% of the voting stock or 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
the same shall have actually been commenced.
Term: As defined in Section 1.2.
TSCA: The Toxic Substances Control Act, as amended.
Unavoidable Delays: Delays due to strikes, lock-outs, labor unrest,
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, unavoidable casualty or other
causes beyond the control of the party responsible for performing an obligation
hereunder, provided that lack of funds shall not be deemed a cause beyond the
control of either party hereto unless such lack of funds is caused by the
failure of the other party hereto to perform any obligations of such party under
this Lease or any guaranty of this Lease.
Uneconomic for its Primary Intended Use: A state or condition of the
Facility (after the application of any insurance proceeds if any) 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, the
Facility cannot be operated on a commercially practicable basis for its Primary
Intended Use, taking into account, among other relevant factors, the number of
usable rooms and projected revenues, such that Lessee intends to, and shall,
complete the cessation of operations from the Facility.
Uniform System: Shall mean the Uniform System of Accounts for
Hotels (8th Revised Edition, 1986) as published by the Hotel
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Association of New York City, Inc., as same may hereafter be revised.
Unsuitable for its Primary Intended Use: A state or condition of the
Facility (after the application of insurance proceeds if any) 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, due to
casualty damage or loss through Condemnation, the Facility cannot function as an
integrated hotel facility consistent with standards applicable to a well
maintained and operated hotel.
ARTICLE III
3.1 Rent. Lessee covenants and agrees to pay to Lessor in lawful money
of the United States of America which shall be legal tender for the payment of
public and private debts, in immediately available funds without deduction or
offset, at Lessor's address set forth in Article 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, and Additional Charges, during the Term, as follows:
(a) Base Rent: Prorated for any partial month at the
beginning of the term of this Lease, and for the subsequent months
base rent shall be the monthly sum of $31,570.
3.2 Additional Charges. In addition to the Base Rent, (b) 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 (c) 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. The Lessee's obligations regarding the payment of Impositions are set out
in Section 4.2. If any installment of Base 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
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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.
3.3 Lease Provision. The Rent shall be paid so that this Lease shall
yield to Lessor the full amount of the installments of Base Rent and Additional
Charges throughout the Term, all as more fully set forth in Article , 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 expenses or maintenance shall be paid or performed by Lessor.
3.4 Conversion of Property. If, during the Term, Lessee desires to
provide food and beverage operations at the Facility (other than complimentary
continental breakfast), Lessee shall give notice of such desire to Lessor.
Lessor and Lessee shall then commence negotiations to adjust Rent to reflect the
proposed change to the operation of the Facility, each acting reasonably and in
good faith. All other terms of this Lease will remain substantially the same.
During negotiations, which shall not extend beyond 60 days, Lessee shall not
"convert" the Facility and shall continue fulfilling its obligations under the
existing terms of this Lease. If no agreement is reached after such 60-day
period, Lessee shall withdraw such notice and this Lease shall continue in full
force. Once the "conversion" is approved or the Lessor has approved such
operations, the Lessee may lease such converted facilities. If the Lessee
desires to relet such facilities, the Lessor shall approve the terms of such
lease unless its terms are the same or more advantageous to the Lessor than
those of the prior lease.
3.5 Annual Budget. Not later than fifteen (15) days prior to the
commencement of each Fiscal Year beginning with the Fiscal Year commencing
January 1, 1997, Lessee shall submit the Annual Budget to Lessor. The Annual
Budget shall be subject to the approval of the Lessor unless Net Operating
Income for such Fiscal Year, as of December 1, exceeds Net Operating Income for
the prior Fiscal Year by an amount greater than the amount change of the
Consumer Price Index during such period. The Annual budget shall contain the
following:
(a) Lessee's reasonable estimate of Gross Revenues (including
room rates and Room Revenues), Gross Operating Expenses, and Gross Operating
Profits for the forthcoming Fiscal Year itemized on schedules on a quarterly
basis as approved by Lessor and Lessee, as same may be revised or replaced from
time to time by Lessee and Approved by Lessor, together with the assumptions, in
narrative form, forming the basis of such schedules.
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(b) An estimate of the amounts to be spent for the repair,
replacement, or refurbishment of Furniture and Equipment.
(c) An estimate of any amounts Lessor will be required to
provide in the forthcoming Fiscal Year for required or desirable items that
would be classified as capital items by generally accepted accounting
principles, and projections of the amounts that may be required in the two
succeeding Fiscal Years for such items.
(d) A cash flow projection.
(e) A narrative description of the program for advertising and
marketing the Facility for the forthcoming Fiscal Year containing a detailed
budget itemization of the proposed advertising expenditures by category and the
assumptions, in narrative form, forming the basis of such budget itemization.
3.6 Books and Records. Lessee shall keep full and adequate books of
account and other records reflecting the results of operation of the Facility on
an accrual basis, all in accordance with the Uniform System and generally
accepted accounting principles and the obligations of Lessee under this Lease.
The books of account and all other records relating to or reflecting the
operation of the Facility shall be kept either at the Facility or at Lessee's
offices in Silver Springs, Maryland, and shall be available to Lessor and its
representatives and its auditors or accountants, at all reasonable times for
examination, audit, inspection, and transcription. All of such books and records
pertaining to the Facility including, without limitation, books of account,
guest records and front office records, at all times shall be the property of
Lessor and shall not be removed from the Facility or Lessee's offices without
the approval of Lessor.
ARTICLE IV
4.1 Payment of Impositions. Subject to Article XII relating to
permitted contests, Lessee will pay, or cause to be paid, all Impositions (other
than Real Estate Taxes and Personal Property Taxes, 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
16
any accrued interest on the unpaid balance of such Imposition) in installments
and in such event, shall pay such installments during the Term hereof (subject
to Lessee's right of contest pursuant to the provisions of Article XII) as the
same respectively become due and before any fine, penalty, premium, further
interest or cost may be added thereto. 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 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 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 XVI. Lessor and Lessee shall, upon
request of the other, provide such data as is maintained by the party to whom
the request is made with respect to the Leased Property as may be necessary to
prepare any required returns and reports. Lessee shall file all Personal
Property Tax returns in such jurisdictions where it is legally required to so
file. Lessor, to the extent it possesses the same, and Lessee, to the extent it
possesses the same, will provide the other party, upon request, with cost and
depreciation records necessary for filing returns for any property classified as
personal property. Where Lessor is legally required to file Personal Property
Tax returns, Lessee shall provide Lessor with copies of assessment notices in
sufficient time for Lessor to file a protest. Lessor may, upon notice to Lessee,
at Lessor's option and at Lessor's sole expense, protest, appeal, or institute
such other proceedings (in its or Lessee's name) as Lessor may deem appropriate
to effect a reduction of real estate or personal property assessments for those
Impositions to be paid by Lessor, and Lessee, at Lessor's expense as 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. Xxxxxxxx for 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
17
forward at Lessor's sole expense. Upon such notice, Lessee, at Lessor's expense,
shall cooperate fully with such activities.
4.2 Notice of Impositions. Lessor shall give prompt Notice to Lessee of
all Impositions payable by Lessee hereunder of which Lessor at any time has
knowledge, provided that Lessor's failure to give any such Notice shall in no
way diminish Lessee's obligations hereunder to pay such Impositions, but such
failure shall obviate any default hereunder for a reasonable time after Lessee
receives Notice or has otherwise acquired knowledge of any Imposition which it
is obligated to pay during the first taxing period applicable thereto.
4.3 Adjustment of Impositions. Impositions 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 Maintenance. 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. To the extent provided in Section 13.1(b),
Lessee will pay or cause to be paid all premiums for the insurance coverages
required to be maintained by it under Article XIII.
ARTICLE V
5.1 No Termination, Abatement, etc. Except as otherwise specifically
provided in this Lease, and except for loss of the 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 setoff against the Rent, nor
shall the obligations of Lessee be otherwise affected by reason of (a) any
damage to, or destruction of, any Leased Property or any portion thereof from
whatever cause or any Taking of the Leased Property or any portion thereof, (b)
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, corporation, partnership or other entity, or by reason of eviction
by paramount title,
18
(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, 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. 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.
5.2 Abatement Procedures. In the event of a partial Taking as described
in Section , the Lease shall not terminate, but 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, or the revenues affected by such
partial Taking. If Lessor and Lessee are unable to agree upon the amount of such
abatement within 30 days after such partial Taking, the matter may be submitted
by either party to a court of competent jurisdiction for resolution.
ARTICLE VI
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 as is required to operate the Leased Property
in the manner contemplated by this Lease. Lessee may (and shall as provided
hereinbelow), at its expense, install, affix or assemble or place on any parcels
of the Land or in any of the Leased Improvements, any items of personal property
(including Inventory) owned by Lessee. Lessee, at the commencement of the Term,
and from time to time thereafter, shall
19
provide Lessor with an accurate list of all such items of Lessee's personal
property (collectively, 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 set forth on such list at any time
during the Term or upon the expiration or any prior termination of the Term. All
of Lessee's Personal Property, other than Inventory, not removed by Lessee
within ten days following the expiration or earlier termination of the Term
shall be considered abandoned by Lessee and may be appropriated, sold, destroyed
or otherwise disposed of by Lessor without first giving Notice thereof to
Lessee, without any payment to Lessee and without any obligation to account
therefor. Lessee will, at its expense, restore the Leased Property to the
condition required by Section , including repair of all damage to the Leased
Property caused by the removal of Lessee's Personal Property, whether effected
by Lessee or 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 the fair market value of such Inventory. Lessee may make such
financing arrangements, title retention agreements, leases or other agreements
with respect to the Lessee's Personal Property as it sees fit provided that
Lessee first advises Lessor of any such arrangement and such arrangement
expressly provides that in the event of Lessee's default thereunder, Lessor (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 satisfaction of all of Lessee's obligations
hereunder; provided, however, Lessor shall subordinate its lien and security
interest 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, the terms and conditions of such subordination to be
satisfactory to Lessor in the exercise of reasonable discretion. Lessee shall,
upon the request of Lessor, execute such financing statements or other documents
or instruments reasonably requested by Lessor to perfect the lien and security
interests herein granted.
ARTICLE VII
7.1 Condition of the Leased Property. Lessee acknowledges receipt and
delivery of possession of the Leased Property. Lessee has examined and otherwise
has knowledge of the condition of the
20
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. Lessee waives any claim or action against Lessor in respect of the
condition of the Leased Property. LESSOR MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY, OR ANY PART THEREOF,
EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR
PURPOSE OR OTHERWISE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN,
LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY LESSEE.
LESSEE ACKNOWLEDGES THAT THE LEASED PROPERTY HAS BEEN INSPECTED BY LESSEE AND IS
SATISFACTORY TO IT. Provided, however, to the extent permitted by law, Lessor
shall allow Lessee the benefit of 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 Lessor) for breaches of warranties or representations or for
latent defects in the Leased Property. Lessor shall fully cooperate with Lessee
in the prosecution of any such claim, in Lessor's or Lessee's name, all at
Lessee's sole cost and expense. Lessee hereby agrees to indemnify, defend and
hold harmless Lessor from and against any claims, obligations and liabilities
against or incurred by Lessor in connection with such cooperation.
7.2 Use of the Leased Property.
(a) Lessee covenants that it will obtain and to maintain all
approvals needed to use and operate the Leased Property and the Facility under
applicable local, state and federal law.
(b) Lessee shall use or cause to be used the Leased Property
only as a hotel facility, and for such other uses as may be necessary or
incidental to such use (the "Primary Intended Use"). Lessee shall not use the
Leased Property or any portion thereof for any other use without the prior
written consent of Lessor, which consent may be granted, denied or conditioned
in Lessor's sole discretion. No use shall be made or permitted to be made of the
Leased Property, and no acts shall be done, which will cause the cancellation or
increase the premium of any insurance policy covering the Leased Property or any
part thereof (unless another adequate policy satisfactory to Lessor is available
and Lessee pays any premium increase), nor shall Lessee sell or permit to be
kept, used or sold in or about the Leased Property any article which may be
prohibited by law or fire underwriter's regulations. Lessee shall, at its sole
cost, comply with all of the requirements pertaining to the Leased Property of
any insurance board, association, organization or company necessary for the
maintenance of insurance, as herein provided, covering the Leased Property and
Lessee's Personal Property.
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(c) Subject to the provisions of Articles XIV and XV, Lessee
covenants and agrees that during the Term it will (1) operate continuously the
Leased Property as a hotel facility, (2) keep in full force and effect and
comply with all the provisions of the Franchise Agreement (except that Lessee
shall have no obligation to complete any improvements to the Leased Property
required by the franchisor unless the Lessor funds the cost thereof), (3) not
terminate or amend the Franchise Agreement without the consent of Lessor, (4)
maintain appropriate certifications and licenses for such use and (5) will seek
to maximize the Gross Revenues generated therefrom consistent with sound
business practices.
(d) Lessee shall not commit or suffer to be committed any
waste on the Leased Property, or in the Facility, nor shall Lessee cause or
permit any nuisance thereon.
(e) Lessee shall neither suffer nor permit the Leased Property
or any portion thereof, or Lessee's Personal Property, to be used in such a
manner as (1) might reasonably tend to impair Lessor's (or Lessee's, as the case
may be) title thereto or to any portion thereof, or (2) may reasonably make
possible a claim or claims of adverse usage or adverse possession by the public,
as such, or of implied dedication of the Leased Property or any portion thereof,
except as necessary in the ordinary and prudent operation of the Facility 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 or delayed), (a) grant
easements and other rights in the nature of easements with respect to the Leased
Property to third parties, (b) release existing easements or other rights in the
nature of easements which are for the benefit of the Leased Property, (c)
dedicate or transfer unimproved portions of the Leased Property for road,
highway or other public purposes, (d) execute petitions to have the Leased
Property annexed to any municipal corporation or utility 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 does not interfere with the proper
conduct of the business of Lessee on the Leased Property and does not materially
reduce the value of the Leased Property.
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ARTICLE VIII
8.1 Compliance with Legal and Insurance Requirements, etc. Subject to
Section 8.3(b) below and Article relating to permitted contests, Lessee, at its
expense, will promptly (a) comply with all applicable Legal Requirements and
Insurance Requirements in respect of the use, operation, maintenance, repair and
restoration of the Leased Property, and (b) procure, maintain and comply with
all appropriate licenses and other authorizations required for any use of the
Leased Property and Lessee's Personal Property then being made, and for the
proper erection, installation, operation and maintenance of the Leased Property
or any part thereof.
8.2 Legal Requirement Covenants. 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, and any other
lawful use conducted on the Leased Property as may be permitted from time to
time hereunder. Lessee further covenants and agrees that Lessee's use of the
Leased Property and maintenance, alteration, and operation of the same, and all
parts thereof, shall at all times conform to all Legal Requirements, unless the
same are finally determined by a court of competent jurisdiction to be unlawful
(and Lessee shall cause all 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 Facility or Lessee's leasehold interest therein and without
subjecting Lessee or Lessor to any liability, civil or criminal, for failure so
to comply therewith, Lessee may delay compliance therewith until the final
determination of such proceeding. If any lien, charge or civil or criminal
liability would be incurred by reason of any such delay, Lessee, on the prior
written consent of Lessor, which consent shall not be unreasonably withheld, may
nonetheless contest as aforesaid and delay as aforesaid provided that such delay
would not subject Lessor to criminal liability and Lessee both (a) furnishes to
Lessor security reasonably satisfactory to Lessor against any loss or injury by
23
reason of such contest or delay and (b) prosecutes the contest with due
diligence and in good faith.
8.3 Environmental Covenants. Lessor and Lessee (in addition to, and not
in diminution of, Lessee's covenants and undertakings in Sections 8.1 and 8.2
hereof) covenant and agree as follows:
(a) At all times hereafter until the later of (i) such time as
all liabilities, duties or obligations of Lessee to the Lessor under the Lease
have been satisfied in full and (ii) such time as Lessee completely vacates the
Leased Property and surrenders possession of the same to Lessor, Lessee shall
fully comply with all Environmental Laws applicable to the Leased Property and
the operations thereon. Lessee agrees to give Lessor prompt written notice of
(1) all Environmental Liabilities; (2) all pending, threatened or anticipated
Proceedings, and all notices, demands, requests or investigations, relating to
any Environmental Liability or relating to the issuance, revocation or change in
any Environmental Authorization required for operation of the Leased Property;
(3) all Releases at, on, in, under or in any way affecting the Leased Property,
or any Release known by Lessee at, on, in or under any property adjacent to 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 other than Environmental Liabilities which were caused
by the acts or grossly negligent failures to act of Lessee.
(c) Lessee hereby agrees to defend, indemnify and save
harmless any and all Lessor Indemnified Parties from and against any and all
Environmental Liabilities which were caused by the acts or grossly negligent
failures to act of Lessee.
(d) If any Proceeding is brought against any Indemnified Party
in respect of an Environmental Liability with respect to which such Indemnified
Party may claim indemnification under either Section 8.3(b) or (c), the
Indemnifying Party, upon request, shall at its sole expense resist and defend
such Proceeding, or cause the same to be resisted and defended by counsel
designated by the 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
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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.
(e) At any time any Indemnified Party has reason to believe
circumstances exist which could reasonably result in an Environmental Liability,
upon reasonable prior written notice to Lessee stating such Indemnified Party's
basis for such belief, an Indemnified Party shall be given immediate access to
the Leased Property (including, but not limited to, the right to enter upon,
investigate, drill xxxxx, take soil borings, excavate, monitor, test, cap and
use available land for the testing of remedial technologies), Lessee's
employees, and to all relevant documents and records regarding the matter as to
which a responsibility, liability or obligation is asserted or which is the
subject of any Proceeding; provided that such access may be conditioned or
restricted as may be reasonably necessary to ensure compliance with law and the
safety of personnel and facilities or to protect confidential or privileged
information. All Indemnified Parties requesting such immediate access and
cooperation shall endeavor to coordinate such efforts to result in as minimal
interruption of the operation of the Leased Property as practicable.
(f) The indemnification rights and obligations provided for in
this Article VIII shall be in addition to any indemnification rights and
obligations provided for elsewhere in this Lease.
(g) The indemnification rights and obligations provided for in
this Article VIII shall survive the termination of this Agreement.
For purposes of this Section 8.3, all amounts for which any
Indemnified Party seeks indemnification shall be computed net of (a) any actual
income tax benefit resulting therefrom to such Indemnified Party, (b) any
insurance proceeds received (net of tax effects) with respect thereto, and (c)
any amounts recovered (net of tax effects) from any third parties based on
claims the Indemnified Party has against such third parties which reduce the
damages that would otherwise be sustained; provided that in all cases, the
timing of the receipt or realization of insurance
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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.
Notwithstanding anything to the contrary contained in this
Agreement, if Lessor shall become entitled to the possession of the Leased
Property by virtue of the termination of the Lease or repossession of the Leased
Property, then Lessor may assign its indemnification rights under Section 8.3 of
this Agreement (but not any other rights hereunder) to any Person to whom the
Lessor subsequently transfers the Leased Property, subject to the following
conditions and limitations, each of which shall be deemed to be incorporated
into the terms of such assignment, whether or not specifically referred to
therein:
(1) The indemnification rights referred to in this
section may be assigned only if a known Environmental
Liability then exists or if a Proceeding is then pending or,
to the knowledge of Lessee or Lessor, then threatened with
respect to the Leased Property;
(2) Such indemnification rights shall be limited to
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 IX
9.1 Capital Improvements, Maintenance and Repair.
(a) Subject to Section 9.1(b), Lessee 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, parking lots,
mechanical, electrical and plumbing systems and equipment (including conduit and
ductware), and non-load bearing interior walls, in good order and repair, except
for ordinary wear and tear (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, except as otherwise provided in Articles
or , with reasonable promptness, make all necessary and appropriate
26
repairs 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, except as to the structural elements of the Leased Improvements
and underground utilities.
(b) Notwithstanding any other provision of this Lease, unless
the need for compliance with Section 9.1(a) is caused by Lessee's negligence or
willful misconduct or that of its employees or agents, Lessee shall not be
required to bear the costs of complying with Section 9.1(a) with respect to
items classified as either (i) capital items under U.S. generally accepted
accounting principles or (ii) Fixtures or Furniture and Equipment in, on, or
under the Facility or its components, except to the extent (X) that amounts are
available therefor from Lessor under Article XL or otherwise or (Y) required
under Articles XIV and XV on the conditions set forth therein.
(c) Article sets forth the only obligations of Lessor to fund
the cost of 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 nonresponsibility
under any mechanic's lien laws now or hereafter existing.
(d) Lessee shall be permitted to prosecute claims against
Lessor's predecessors in title for breach of any representation or warranty or
for any latent defects in the Leased Property to be maintained by Lessee unless
Lessor is already diligently pursuing 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.
(e) 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,
27
addition, repair or demolition of or to the Leased Property or any part thereof,
or (2) 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 without the express approval of the Lessor, provided however that the
Lessee may impose a lien on the leasehold interest without the approval of the
Lessor.
(f) 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 accordance with Section
9.1(a) above during the entire Term of the Lease), or damage by casualty or
Condemnation (subject to the obligations of Lessee to restore or repair as set
forth in the Lease).
9.2 Encroachments, Restrictions, Etc. If any of the Leased
Improvements, at any time, materially encroach upon any property, street or
right-of-way adjacent to the Leased Property, or violate the agreements or
conditions contained in any lawful restrictive covenant or other agreement
affecting the Leased Property, or any part thereof, or impair the rights of
others under any easement or right-of-way to which the Leased Property is
subject, then promptly upon the request of Lessor or at the behest of any person
affected by any such encroachment, violation or impairment, Lessee shall, at its
expense, subject to its right to contest the existence of any encroachment,
violation or impairment and, in such case, in the event of an adverse final
determination, either (a) obtain valid and effective waivers or settlements of
all claims, liabilities and damages resulting from each such encroachment,
violation or impairment, whether the same shall affect Lessor or Lessee or (b)
make such changes in the Leased Improvements, and take such other actions, as
Lessee in the good faith exercise of its judgment deems reasonably practicable
to remove such encroachment, and to end such violation or impairment, including,
if necessary, the alteration of any of the Leased Improvements, and in any event
take all such actions as may be necessary in order to be able to continue the
operation of the Leased Improvements for the Primary Intended Use substantially
in the manner and to the extent the Leased 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
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Article . Lessee's obligations under this Section shall be in addition to and
shall in no way discharge or diminish any obligation of any insurer under any
policy of title or other insurance held by Lessor.
ARTICLE X
10.1 Alterations. After receiving approval of Lessor, which approval
shall not be unreasonably withheld, Lessee shall have the right to make such
additions, modifications or improvements to the Leased Property from time to
time as Lessee deems desirable for its permitted uses and purposes, provided
that such action will not significantly alter the character or purposes or
significantly detract from the value or operating efficiency thereof and will
not significantly impair the revenue-producing capability of the Leased Property
or adversely affect the ability of the Lessee to comply with the provisions of
this Lease. The cost of such additions, modifications or improvements to the
Leased Property shall be paid by Lessee, and all such additions, modifications
and improvements shall, without payment by Lessor at any time, be included under
the terms of this Lease and upon expiration or earlier termination of this Lease
shall pass to and become the property of Lessor.
10.2 Salvage. All materials which are scrapped or removed in connection
with the making of repairs required by Articles or shall be or become the
property of Lessor or Lessee depending on which party is paying for or providing
the financing for such work.
10.3 Joint Use Agreements. If Lessee constructs additional improvements
that are connected to the Leased Property or share maintenance facilities, HVAC,
electrical, plumbing or other systems, utilities, parking or other amenities,
the parties shall enter into a mutually agreeable cross-easement or joint use
agreement, the form of which has been approved in advance by Lessor, to make
available necessary services and facilities in connection with such additional
improvements, to protect each of their respective interests in the properties
affected, and to provide for separate ownership, use, and/or financing of such
improvements.
ARTICLE XI
Liens. Subject to the provision of Article relating to permitted
contests, Lessee will not directly or indirectly create or allow to remain and
will promptly discharge at its expense any lien, encumbrance, attachment, title
retention agreement or claim upon the Leased Property or any attachment, levy,
claim or encumbrance in respect of the Rent, not including, however,
29
(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 consented to in writing by Lessor or any
easements granted pursuant to the provisions of Section of this Lease, (d) liens
for those taxes upon Lessor which Lessee is not required to pay hereunder, (e)
subleases permitted by Article 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 ,
(g) liens of mechanics, laborers, materialmen, suppliers or vendors for sums
either disputed or not yet due provided that (1) the payment of such sums shall
not be postponed under any related contract for more than 60 days after the
completion of the action giving rise to such lien and such reserve or other
appropriate provisions as shall be required by law or generally accepted
accounting principles shall have been made therefor and (2) any such liens are
in the process of being contested as permitted by Article hereof, (h) any liens
which are the responsibility of Lessor pursuant to the provisions of Article of
this Lease.
ARTICLE XII
Permitted Contests. Lessee shall have the right to contest the amount
or validity of any Imposition to be paid by Lessee or any Legal Requirement or
Insurance Requirement or any lien, attachment, levy, encumbrance, charge or
claim ("Claims") not otherwise permitted by Article , by appropriate legal
proceedings in good faith and with due diligence (but this shall not be deemed
or construed in any way to relieve, modify or extend Lessee's covenants to pay
or its covenants to cause to be paid any such charges at the time and in the
manner as in this Article provided), on condition, however, that such legal
proceedings shall not operate to relieve Lessee from its obligations hereunder
and shall not cause the sale or risk the loss of any portion of the Leased
Property, or any part thereof, or cause Lessor or Lessee to be in default under
any mortgage, deed of trust, security deed or other agreement encumbering the
Leased Property or any interest therein. Upon the request of Lessor, Lessee
shall either (a) provide a bond or other assurance reasonably satisfactory to
Lessor that all Claims which may be assessed against the Leased Property
together with interest and penalties, if any, thereon will be paid, or (b)
deposit within the time otherwise required for payment with a bank or trust
company as trustee upon terms reasonably satisfactory to Lessor, as security for
the payment of such Claims, money in an amount sufficient to pay the same,
together with interest and penalties in connection therewith, as to all Claims
which may be
30
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 days of the same. Lessor
agrees to join in any such proceedings at Lessee's expense if the same be
required to legally prosecute such contest of the validity of such Claims;
provided, however, that Lessor shall not thereby be subjected to any liability
for the payment of any costs or expenses in connection with any proceedings
brought by Lessee; and Lessee covenants to indemnify and save harmless Lessor
from any such costs or expenses. Lessee shall be entitled to any refund of any
Claims and such charges and penalties or interest thereon which have been paid
by Lessee or paid by Lessor and for which Lessor has been fully reimbursed. In
the event that Lessee fails to pay any Claims when due or to provide the
security therefor as provided in this paragraph and to diligently prosecute any
contest of the same, Lessor may, upon ten days advance Notice to Lessee, pay
such charges together with any interest and penalties and the same shall be
repayable by Lessee to Lessor as Additional Charges at the next Payment Date
provided for in this Lease. Provided, however, that should Lessor reasonably
determine that the giving of such Notice would risk loss to the Leased Property
or cause damage to Lessor, then Lessor shall give such Notice as is practical
under the circumstances. Lessor reserves the right to contest any of the Claims
at its expense not pursued by Lessee. Lessor and Lessee agree to cooperate in
coordinating the contest of any claims.
ARTICLE XIII
13.1 General Insurance Requirements.
(a) Coverages. During the Term of this Lease, Lessee shall at all times
keep the Leased Property insured with the kinds and amounts of insurance
described below provided, however, that the Lessor shall be responsible for
payment of any insurance requested by it pursuant to paragraph (IX) of Section
13.1(a) of this Lease if not of a type customarily arrived by similar business
and properties. This insurance shall be written by companies licensed and
authorized to issue insurance in the State. The policies must name Lessor as the
insured or as an additional named insured, as the case may be. Losses shall be
payable to Lessor or Lessee as provided in this Lease. Any loss adjustment shall
require the written consent of Lessor and Lessee, each acting reasonably and in
good faith. Evidence of insurance shall be deposited with Lessor. The policies
on the Leased Property, including the Leased Improvements, Fixtures and Lessee's
Personal Property, shall include:
31
(i) Building insurance on the "Special Form" (formerly "All
Risk" form) (which may include earthquake and flood in reasonable amounts as
determined by Lessor) in an amount not less than 100% of the then full
replacement cost thereof (as defined in Section 13.2) or such other amount which
is acceptable to Lessor, and personal property insurance on the "Special Form"
in the full amount of the replacement cost thereof;
(ii) Insurance for loss or damage (direct and indirect) from
steam boilers, pressure vessels or similar apparatus, now or hereafter installed
in the Facility, in the minimum amount of $5,000,000 or in such lesser or
greater amounts as are then customary or as may be reasonably requested by
Lessor from time to time;
(iii) Loss of income insurance on the "Special Form", in the
amount of one year of Base Rent for the benefit of Lessor, and business
interruption insurance on the "Special Form" in the amount of one year of gross
profit, for the benefit of Lessor or Lessee;
(iv) Commercial general liability insurance, with amounts not
less than $10,000,000 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 Lessor and Lessee;
(v) Insurance covering such other hazards 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 requested by
Lessor;
(vi) Fidelity bonds with limits and deductibles as may be
reasonably requested by Lessor, covering Lessee's employees in job
classifications normally bonded under prudent hotel management practices in the
United States or otherwise required by law;
(vii) Workmen's compensation insurance to the extent necessary
to protect Lessor and the Leased Property against Lessee's xxxxxxx'x
compensation claims;
(viii) Vehicle liability insurance for owned, non-owned, and
hired vehicles, in the amount of $1,000,000; and
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(ix) Such other insurance as Lessor may reasonably request for
facilities such as the Leased Property and the operation thereof.
(b) Responsibility for Premiums. Lessee shall keep in force the
foregoing insurance coverages at its expense; provided, however, that Lessor
shall reimburse Lessee for any premium or premiums paid by Lessee for the
coverages required under Sections 13.1(a)(i), except to the extent that the
premium or premiums relate to coverages for property owned by the Lessee, and
13.1(a)(ii), as well as any other casualty coverages required by Lessor.
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 Lease Term, it
shall have the right to have such full replacement cost re-determined.
13.3 Worker's Compensation. Lessee, at its sole cost, shall at all
times maintain adequate worker's compensation insurance coverage for all persons
employed by Lessee on the Leased Property. Such worker's compensation insurance
shall be in accordance with the requirements of applicable local, state and
federal law.
13.4 Waiver of Subrogation. All insurance policies carried by Lessor or
Lessee covering the Leased Property, the Fixtures, the Facility or Lessee's
Personal Property, including, without limitation, contents, fire and casualty
insurance, 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. Each party agrees to seek recovery from any applicable insurance coverage
available to such party prior to seeking recovery against the other.
13.5 Form Satisfactory, etc. All of the policies of insurance referred
to in this Article shall be written in a form, with deductibles and by insurance
companies satisfactory to Lessor and also shall meet and satisfy the
requirements of any ground lessor, lender or franchisor having any interest in
the Leased Premises. Subject to the right to reimbursement or credit specified
in Section 13.1, Lessee shall pay all of the premiums therefor, and deliver such
policies or certificates thereof to Lessor prior to
33
their effective date (and, with respect to any renewal policy, 30 days prior to
the expiration of the existing policy), and in the event of the failure of
Lessee either to effect such insurance as herein called for or to pay the
premiums therefor, or to deliver such policies or binding 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 this Section (other than the premiums required to be
paid or reimbursed to Lessee by Lessor in accordance with Section 13.1(b)) upon
written demand therefor, and Lessee's failure to repay the same within 30 days
after Notice of such failure from Lessor shall constitute an Event of Default
within the meaning of Section 16.1(d). Each insurer mentioned in this Article
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 30 days'
written notice before the policy or policies in question shall be materially
altered, allowed to expire or canceled.
13.6 Change 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
and Lessee shall endeavor in good faith to agree on the proper and reasonable
limits for such insurance to be carried and such insurance shall thereafter be
carried with the limits thus agreed on until further change pursuant to the
provisions of this Section.
13.7 Blanket Policy. Notwithstanding anything to the contrary contained
in this Article XIII, Lessee or Lessor may bring the insurance provided for
herein within the coverage of a so-called blanket policy or policies of
insurance carried and maintained by Lessee or Lessor; provided, however, that
the coverage afforded to Lessor and Lessee will not be reduced or diminished or
otherwise be different from that which would exist under a separate policy
meeting all other requirements of this Lease by reason of the use of such
blanket policy of insurance, and provided further that the requirements of this
Article XIII are otherwise satisfied.
13.8 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
insureds, and the loss is payable under such additional separate insurance in
the same manner as
34
losses are payable under this Lease. Lessee shall immediately notify Lessor that
Lessee has obtained any such separate insurance or of the increasing of any of
the amounts of the then existing insurance.
13.9 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 Facility, any damage or destruction to the Facility and the
estimated cost of repair thereof and shall prepare any and all reports required
by any insurance company in connection therewith. All such reports shall be
timely filed with the insurance company as required under the terms of the
insurance policy involved, and a final copy of such report shall be furnished to
Lessor. Lessee shall be authorized to adjust, settle, or compromise any
insurance loss, or to execute proofs of such loss, in the aggregate amount of
$5,000 or less, with respect to any single casualty or other event.
ARTICLE XIV
14.1 Insurance Proceeds. Subject to the provisions of Section 14.6, and
the senior rights of any lender, 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 of this Lease shall be paid to Lessor
and held in trust 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 Lessee. If neither Lessor nor Lessee is
required or elects to repair and restore, and the Lease is terminated without
purchase by Lessee as described in Section 14.2, all such insurance proceeds
shall be retained by Lessor. All salvage resulting from any risk covered by
insurance shall belong to Lessor.
14.2 Reconstruction in the Event of Damage or Destruction
Covered by Insurance.
(a) Except as provided in Section 14.5, if during the Term the
Leased Property is totally or partially destroyed by a risk covered by the
insurance described in Article and the Facility thereby is rendered Unsuitable
for its Primary Intended Use, Lessee shall, at Lessee's option, either (1)
restore the
35
Facility to substantially the same condition as existed immediately before the
damage or destruction and otherwise in accordance with the terms of the Lease,
or (2) offer to acquire the Leased Property from Lessor for a purchase price
equal to the Rejectable Offer Price of the Leased Property. If Lessee restores
the Facility, the insurance proceeds 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 paid to Lessee. If Lessee acquires the Leased Property,
Lessee shall receive the insurance proceeds. If Lessor does not accept Lessee's
offer so to purchase the Leased Property within 90 days, Lessee may withdraw its
offer to purchase the Leased Property and, if so withdrawn, Lessee may terminate
the Lease with respect to the Leased Property without further liability
hereunder and Lessor shall be entitled to retain all insurance proceeds.
(b) Except as provided in Section 14.5, if during the Term the
Leased Property is partially destroyed by a risk covered by the insurance
described in Article , but the Facility is not thereby rendered Unsuitable for
its Primary Intended Use, Lessee shall restore the Facility to substantially the
same condition as existed immediately before the damage or destruction and
otherwise in accordance with the terms of the Lease. Such damage or destruction
shall not terminate this Lease; provided, however, that if Lessee 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 to operate the Facility
for its Primary Intended Use in substantially the same manner as that existing
immediately prior to such damage or destruction and otherwise in accordance with
the terms of the Lease, Lessee may make a written offer to Lessor to purchase
the Leased Property for a purchase price equal to the Rejectable Offer Price of
the Leased Property determined without regard to such damage or destruction. If
Lessee makes such offer and Lessor does not accept the same within 30 days after
Lessee delivers its offer to Lessor, Lessee shall withdraw such offer, in which
event this Lease shall remain in full force and effect and Lessee shall
immediately proceed to restore the Facility to substantially the same condition
as existed immediately before such damage or destruction and otherwise in
accordance with the terms of the Lease. If Lessee restores the Facility, the
insurance proceeds shall be paid out by Lessor from time to time for the
reasonable costs of such restoration upon satisfaction of reasonable terms and
conditions specified by Lessor, and any excess proceeds remaining after such
restoration shall be paid to Lessee.
(c) If the cost of the repair or restoration exceeds the
amount of proceeds received by Lessor from the insurance required
36
under Article , Lessee shall be obligated to contribute any excess amounts
needed to restore the Facility prior to commencing work thereon. Such difference
shall be paid by Lessee to Lessor promptly after Lessee receives Lessor's
written invoice therefor, to be held in trust, together with any other insurance
proceeds, for application to the cost of repair and restoration.
(d) If Lessor accepts Lessee's offer to purchase the Leased
Property under this Article, this Lease shall terminate as to the Leased
Property upon payment of the purchase price, and Lessor shall remit to Lessee
all insurance proceeds pertaining to the Leased Property being held in trust by
Lessor.
14.3 Reconstruction in the Event of Damage or Destruction Not
Covered by Insurance.
Except as provided in Section 14.5, if during the Term the Facility is totally
or materially destroyed by a risk not covered by the insurance described in
Article XIII, whether or not such damage or destruction renders the Facility
Unsuitable for its Primary Intended Use, Lessee at its option shall either, (a)
at Lessee's sole cost and expense, restore the Facility to substantially the
same condition it was in immediately before such damage or destruction and such
damage or destruction shall not terminate this Lease, or (b) make a written
offer to purchase the Leased Property for a purchase price equal to the
Rejectable Offer Price of the Leased Property without regard to such damage or
destruction. If Lessor does not accept Lessee's offer so to purchase the Leased
Property within 90 days after Lessee delivers its offer to Lessor, Lessee may
withdraw its offer to purchase the Leased Property and, if so withdrawn, Lessee
may terminate the Lease with respect to the Leased Property without further
liability hereunder. If such damage or destruction is not material, Lessee
shall, at Lessee's sole cost and expense, restore the Facility to substantially
the same condition as existed immediately before the damage or destruction and
otherwise in accordance with the terms of the Lease, and such damage or
destruction shall not terminate the Lease.
14.4 Lessee's Property. All insurance proceeds payable by reason of any
loss of or damage to any of Lessee's Personal Property shall be paid to Lessee;
provided, however, no such payments shall diminish or reduce the insurance
payments otherwise payable to or for the benefit of Lessor hereunder.
14.5 Damage Near End of Term. Notwithstanding any provisions of Section
or appearing to the contrary, if damage to or destruction of the Facility
rendering it unsuitable for its Primary Intended Use occurs during the last 24
months of the Term, then either party shall have the right to terminate this
Lease by giving
37
written notice to the other within 30 days after the date of damage or
destruction, whereupon all accrued Rent shall be paid immediately, and this
Lease shall automatically terminate five days after the date of such notice.
14.6 Waiver. Lessee hereby waives any statutory rights of termination
that may arise by reason of any damage or destruction of the Facility that
Lessor is obligated to restore or may restore under any of the provisions of
this Lease.
ARTICLE XV
15.1 Definitions.
(a) "Condemnation" means a Taking resulting from (1) the
exercise of any governmental power, whether by legal proceedings or otherwise,
by a Condemnor, and (2) a voluntary sale or transfer by Lessor to any Condemnor,
either under threat of condemnation or while legal proceedings for condemnation
are pending.
(b) "Date of Taking" means the date the Condemnor has the
right to possession of the property being condemned.
(c) "Award" means all compensation, sums or anything of value
awarded, paid or received on a total or partial Condemnation.
(d) "Condemnor" means any public or quasi-public authority, or
private corporation or individual, having the power of Condemnation.
15.2 Parties' Rights and Obligations. If during the Term there is any
Condemnation of all or any part of the Leased Property or any interest in this
Lease, the rights and obligations of Lessor and Lessee shall be determined by
this Article XV.
15.3 Total Taking. If title to the fee of the whole of the Leased
Property is condemned by any Condemnor, subject to the provisions of Section
15.7, this Lease shall cease and terminate as of the Date of Taking by the
Condemnor. If title to the fee of less than the whole of the Leased Property is
so taken or condemned, which nevertheless renders the Leased Property Unsuitable
or Uneconomic for its Primary Intended Use, Lessee and Lessor shall each have
the option, by notice to the other, at any time prior to the Date 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
and Additional Charges paid or payable by Lessee hereunder shall be apportioned
as of the Date of Taking, and Lessee shall promptly pay
38
Lessor such amounts. In the event of any such termination, the provisions of
Section shall apply.
15.4 Allocation of Award. The total Award made with respect to the
Leased Property or for loss of rent, or for Lessor's loss of business beyond the
Term, shall be solely the property of and payable to Lessor. Any Award made for
loss of Lessee's business during the remaining Term, if any, for the taking of
Lessee's Personal Property, or for removal and relocation expenses of Lessee in
any such proceedings shall be the sole property of and payable to Lessee. In any
Condemnation proceedings Lessor and Lessee shall each seek its Award in
conformity herewith, at its respective expense; provided, however, Lessee shall
not initiate, prosecute or acquiesce in any proceedings that may result in a
diminution of any Award payable to Lessor.
15.5 Partial Taking. If title to less than the whole of the Leased
Property is condemned, and the Leased Property is still suitable for its Primary
Intended Use, and not Uneconomic for its Primary Intended Use, or if Lessee or
Lessor is entitled but neither elects to terminate this Lease as provided in
Section , Lessee at the expense of the Lessor shall with all reasonable dispatch
restore the untaken portion of any Leased Improvements so that such Leased
Improvements constitute a complete architectural unit of the same general
character and condition (as nearly as may be possible under the circumstances)
as the Leased Improvements existing immediately prior to the Condemnation. In
the event of any Condemnation as described in this Section 15.5, the entire
amount of the Award shall be paid to the Lessor.
15.6 Temporary Taking. If the whole or any part of the Leased Property
or of Lessee's interest under this Lease is condemned by any Condemnor for its
temporary use or occupancy, this Lease shall not terminate by reason thereof,
Lessee, however, shall be released from its obligations to pay, in the manner
and at the terms herein specified, the pro rata amounts of Base Rent based on
the number of rooms affected by such Condemnation and the total rooms in the
Leased Property and Additional Charges. Except only to the extent that Lessee
may be prevented from so doing pursuant to the terms of the order of the
Condemnor, Lessee shall continue to perform and observe all of the other terms,
covenants, conditions and obligations hereof on the part of the Lessee to be
performed and observed, as though such Condemnation had not occurred. In the
event of any Condemnation as described this Section 15.6, 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 Lessor.
Lessor covenants that upon the termination of any such period of temporary use
or occupancy it will, at its sole cost and expense, restore the Leased Property
as nearly as may be reasonably possible to the condition in which the
39
same was immediately prior to such Condemnation, unless such period of temporary
use or occupancy extends beyond the expiration of the Term, in which case Lessor
shall not be required to make such restoration.
15.7 Lessee's Offer. In the event of the termination of this Lease as
provided in Section 15.3, Lessee shall offer to acquire the Leased Property from
Lessor for a purchase price equal to the Rejectable Offer Price of the Leased
Property without regard to such taking and, if accepted, Lessee shall receive
the entire Award. If Lessor does not accept Lessee's offer to purchase the
Leased Property, Lessee shall withdraw its offer to purchase the Leased Property
and, if so withdrawn, Lessee may terminate the Lease with respect to the Leased
Property without further liability hereunder, except for payment of Rent as
provided in the penultimate sentence of Section 15.3 or for matters which by
their express terms survive termination of this Lease, and Lessor shall be
entitled to retain the Award except as provided in Section 15.4.
ARTICLE XVI
16.1 Events of Default. If any one or more of the following events
(individually, an "Event of Default") occurs:
(a) if an Event of Default occurs under any other lease
between Lessor and Lessee, any Affiliate of Lessee or Solomons Beacon Inn
Limited Partnership; or
(b) if Lessee fails to make payment of the Base Rent or
Additional Charges within ten days after the same becomes due and payable;
(c) if Lessee fails to observe or perform any other term,
covenant or condition of this Lease and such failure is not cured by Lessee
within a period of 30 days after receipt by the Lessee of Notice thereof from
Lessor, unless such failure cannot with due diligence be cured within a period
of 30 days, in which case it shall not be deemed an Event of Default if Lessee
proceeds promptly and with due diligence to cure the failure and diligently
completes the curing thereof provided, however, in no event shall such cure
period extend beyond 90 days after such Notice; or
(d) if the 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 the Lessee as a bankrupt or its
40
reorganization pursuant to any federal or state bankruptcy law or any similar
federal or state law shall be filed in any court and the Lessee shall be
adjudicated a bankrupt and such adjudication shall not be vacated or set aside
or stayed within 60 days after the entry of an order in respect thereof, or if a
receiver of the Lessee or of the whole or substantially all of the assets of the
Lessee shall be appointed in any proceeding brought by the Lessee or if any such
receiver, trustee or liquidator shall be appointed in any proceeding brought
against the Lessee and shall not be vacated or set aside or stayed within 120
days after such appointment; or
(e) 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; or
(f) if the estate or interest of Lessee in the Leased Property
or any part thereof is voluntarily or involuntarily transferred, assigned,
conveyed, levied upon or attached in any proceeding (unless Lessee is contesting
such lien or attachment in good faith in accordance with Article hereof); or
(g) if, except as a result of damage, destruction or a partial
or complete Condemnation, Lessee voluntarily ceases operations on the Leased
Property; or
(h) if an event of default has been declared by the franchisor
under the Franchise Agreement with respect to the Facility on the Leased
Premises or such Franchise Agreement has been terminated as a result of any
action or failure to act by the Lessee;
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
days' Notice of such termination except in the case of a default under Sections
16.1(e),(f), or (g), in which case notice shall not be required.
If litigation is commenced with respect to any alleged default
under this Lease, the prevailing party in such litigation shall receive, in
addition to its damages incurred, such sum as the court shall determine as its
reasonable attorneys' fees, and all costs and expenses incurred in connection
therewith.
No Event of Default (other than a failure to make a payment of
money) shall be deemed to exist under clause (d) during any time for up to one
year the curing thereof is prevented by an Unavoidable Delay, provided that upon
the cessation of such
41
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 and assign to Lessor or
Lessor's designee the Leased Property including, without limitation, any and all
books, records, files, licenses, permits and keys relating thereto, and quit the
same and Lessor may enter upon and repossess the Leased Property by reasonable
force, summary proceedings, ejectment or otherwise, and may remove Lessee and
all other persons and any and all personal property from the Leased Property,
subject to rights of any hotel guests and to any requirement of law. Lessee
hereby waives any and all requirements of applicable laws for service of notice
to re-enter the Leased Property. Lessor shall be under no obligation to, but may
if it so chooses, relet the Leased Property or otherwise mitigate Lessor's
damages.
16.3 Damages. 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.
Lessee shall forthwith pay to Lessor, at Lessor's option, as
and for liquidated and 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 the 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
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the unpaid Rent for the balance of the Term after the
time of termination, repossession or reletting,
exceeds the amount of such rental loss that Lessee
proves could be reasonably avoided and as reduced for
rentals received after the time of termination,
repossession or reletting, if and to the extent
required by applicable law, the worth at the time of
termination, repossession or reletting of the amount
referred to in this subparagraph (B) is computed by
discounting such amount at the discount rate of the
Federal Reserve Bank of New York at the time of award
plus 1%, 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.
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 XVI, 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 other than to the extent
funds shall have been inappropriately paid any Affiliate of Lessee following a
default resulting in an Event of Default.
16.5 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 XVII
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 other than a failure to complete improvements required by
the franchisor because the Lessor has not provided Lessee with the funds
therefor, and fails to cure the same within the relevant time periods provided
in Section , 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
43
permitted by law, enter upon the Leased Property for such purpose and, subject
to Section , take all such action thereon as, in Lessor's opinion, may be
necessary or appropriate therefor. Before entering the Leased Property for the
purposes provided in this Article XVII, Lessor shall notify the Lessee of its
intention to enter the Leased Property unless such Notice would be impractical.
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 Lessors, 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 XVIII
Provisions Relating to Purchase of the Leased Property. If Lessee
purchases the Leased Property from Lessor pursuant to any of the terms of this
Lease, the closing of the purchase shall occur 90 days after Lessor accepts
Lessee's offer to purchase the Leased Property, unless the provision of the
Lease under which such offer was made specifies a different closing date, in
which case the date set forth in such provision shall be the closing date. At
such closing, Lessor shall, upon receipt from Lessee of the applicable purchase
price, together with full payment of any unpaid Rent due and payable with
respect to any period ending on or before the date of the purchase, deliver to
Lessee an appropriate limited or special warranty deed or other conveyance
conveying the entire interest of Lessor in and to the Leased Property to Lessee
free and clear of all encumbrances other than (a) those that Lessee has agreed
hereunder to pay or discharge, (b) those mortgage liens, if any, that Lessee has
agreed in writing to accept and to take title subject to, (c) those liens and
encumbrances subject to which the Leased Property was conveyed to Lessor, (d)
encumbrances, easements, licenses or rights of way required to be imposed on the
Leased Property under Section 7.3, (e) any other encumbrances permitted to be
imposed on the Leased Property under the provisions of Section that are
assumable at no cost to Lessee or to which Lessee may take subject without cost
to Lessee and (f) any taxes not yet due and payable; and (g) those encumbrances
created, requested or consented to by Lessee. The difference between the
applicable purchase price and the total of the encumbrances assumed or taken
subject to shall be paid in cash to Lessor or as Lessor may direct, in federal
or other immediately available funds, except as otherwise mutually agreed by
Lessor and Lessee. All expenses of such conveyance, including, without
limitation, the cost of title
44
examination or title insurance, if desired by Lessee, Lessee's attorneys' fees
incurred in connection with such conveyance and release, and transfer taxes and
recording fees, shall be paid by Lessee. Lessor shall pay its attorney's fees.
This Article XVIII is subject to the prior rights of any lender whose lien is
secured by the Leased Premises.
ARTICLE XIX
19.1 Personal Property Limitation. Anything contained in this Lease to
the contrary notwithstanding, the average of the adjusted tax bases of the items
of personal property that are leased to the Lessee under this Lease at the
beginning and at the end of any Fiscal Year shall not exceed 15% of the average
of the aggregate adjusted tax bases of the Leased Property at the beginning and
at the end of such Fiscal Year. This Section 19.1 is intended to ensure that the
Rent qualifies as "rents from real property," within the meaning of Section
856(d) of the Code, or any similar or successor provisions thereto, and shall be
interpreted in a manner consistent with such intent.
19.2 Sublease Rent Limitation. Anything contained in this Lease to the
contrary notwithstanding, Lessee shall not sublet the Leased Property on any
basis such that the rental to be paid by the sublessee thereunder would be
based, in whole or in part, on either (a) the income or profits derived by the
business activities of the sublessee, or (b) any other formula such that any
portion of the Rent would fail to qualify as "rents from real property" within
the meaning of Section 856(d) of the Code, or any similar or successor provision
thereto.
19.3 Sublease Tenant Limitation. Anything contained in this Lease to
the contrary notwithstanding, Lessee shall not sublease the Leased Property or
any portions thereof to any Person in which Xxxxxxxx Hospitality Trust, Inc.
owns, directly or indirectly, a 10% or more interest, within the meaning of
Section 856(d)(2)(B) of the Code, or any similar or successor provisions
thereto.
19.4 Lessee Ownership Limitation. Anything contained in this Lease to
the contrary notwithstanding, neither Lessee or an Affiliate of the Lessee shall
acquire, directly or indirectly, a 10% or more interest in Xxxxxxxx Hospitality
Trust, Inc. within the meaning of Section 856(d)(2)(B) of the Code, or any
similar or successor provision thereto.
19.5 Lessee Officer and Employee Limitation. Anything contained in
this Lease to the contrary notwithstanding, none of the officers or employees of
the Lessee (or any Person who furnishes or renders services to the tenants of
the Leased
45
Property, or manages or operates the Leased Property) shall be officers or
employees of Xxxxxxxx Hospitality Trust, Inc. In addition, if a Person serves as
both (a) a director of the 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 trustee and officer (or employee) of Xxxxxxxx
Hospitality Trust, Inc. that Person shall not receive any compensation for
serving as a director of the Lessee (or any Person who furnishes or renders
services to the tenants of the Leased Property, or manages or operates the
Leased Property). Furthermore, if a Person serves as both (a) a trustee of
Xxxxxxxx Hospitality Trust, Inc. and (b) a director and officer (or employee) of
the Lessee (or any Person who furnishes or renders services to the tenants of
the Leased Property, or manages or operates the Leased Property), that Person
shall not receive any compensation for serving as a trustee of Xxxxxxxx
Hospitality Trust, Inc.
ARTICLE XX
Holding Over. If Lessee for any reason remains in possession of the
Leased Property after the expiration or earlier termination of the Term, such
possession shall be as a tenant at sufferance during which time Lessee shall pay
as rental each month two times the aggregate of (a) one-twelfth of the aggregate
Base Rent payable with respect to the last Fiscal Year of the Term, (b) all
Additional Charges accruing during the applicable month and (c) all other sums,
if any, payable by Lessee under this Lease with respect to the Leased Property.
During such period, 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 XXI
Risk of Loss. During the Term, the risk of loss or of decrease in the
enjoyment and beneficial use of the Leased Property in consequence of the damage
or destruction thereof by fire, the elements, casualties, thefts, riots, wars or
otherwise, or in consequence of foreclosures, attachments, levies or executions
(other than those caused by Lessor and those claiming from, through or under
Lessor) is assumed by Lessee, and, in the absence of gross negligence, willful
misconduct or breach of this Lease by Lessor pursuant to Section , Lessor shall
in no event be answerable or accountable therefor, nor shall any of the events
mentioned in this
46
Section entitle Lessee to any abatement of Rent except as specifically provided
in this Lease.
ARTICLE XXII
Indemnification. Notwithstanding the existence of any insurance, and
without regard to the policy limits of any such insurance or self-insurance, but
subject to the last sentence of Section 13.4 if any insurance coverage is
applicable, Section and Article VIII, Lessee will protect, indemnify, hold
harmless and defend Lessor Indemnified Parties from and against all liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses), to the
extent permitted by law, imposed upon or incurred by or asserted against Lessor
Indemnified Parties by reason of: (a) any accident, injury to or death of
persons or loss of or damage to property occurring on or about the Leased
Property or adjoining sidewalks, including without limitation any claims under
liquor liability, "dram shop" or similar laws, (b) any past, present or future
use, misuse, non-use, condition, management, maintenance or repair by Lessee or
any of its agents, employees or invitees of the Leased Property or Lessee's
Personal Property or any litigation, proceeding or claim by governmental
entities or other third parties to which a Lessor Indemnified Party is made a
party or participant related to such use, misuse, non-use, condition,
management, maintenance, or repair thereof by Lessee or any of its agents,
employees or invitees, including any failure of Lessee or any of its agents,
employees or invitees to perform any obligations under this Lease or imposed by
applicable law (other than arising out of Condemnation proceedings), (c) any
Impositions that are the obligations of Lessee pursuant to the applicable
provisions of this Lease, (d) any failure on the part of Lessee to perform or
comply with any of the terms of this Lease, and (e) the non-performance of any
of the terms and provisions of any and all existing and future subleases of the
Leased Property to be performed by the landlord thereunder and (f) the gross
negligent acts and omissions and wilful misconduct of Lessee.
Lessor shall indemnify, save harmless and defend Lessee Indemnified
Parties from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses imposed upon or incurred by or
asserted against Lessee Indemnified Parties as a result of the gross negligence
or willful misconduct of Lessor arising in connection with this Lease. The
Lessor's obligations to indemnify Lessee Indemnified Parties shall be limited to
the value of Lessor's equity interest in the Facilities. Nothing herein shall be
construed as requiring Lessor to indemnify a Lessee Indemnified Party against
its own grossly negligent acts and omissions and wilful misconduct.
47
Any amounts that become payable by an Indemnifying Party under this
Section shall be paid within ten 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. An
Indemnifying Party, at its expense, shall contest, resist and defend any such
claim, action or proceeding asserted or instituted against the Indemnified
Party. The Indemnified Party, at its expense, shall be entitled to participate
in any such claim, action, or proceeding, and neither the Indemnifying Party nor
the Indemnified Party may compromise or otherwise dispose of the same without
the consent of the Indemnified Party or the Indemnifying Party, which may not be
unreasonably withheld. Nothing herein shall be construed as indemnifying a
Lessor 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.
ARTICLE XXIII
23.1 Subletting and Assignment. Subject to the provisions of Article
and Section and any other express conditions or limitations set forth herein,
Lessee may not without the consent of Lessor, which consent may be withheld in
Lessor's sole discretion, (a) assign this Lease or sublet all or any part of the
Leased Property or (b) sublet any retail or restaurant portion of the Leased
Improvements in the normal course of the Primary Intended Use; provided that any
subletting to any party other than an Affiliate of Lessee shall not individually
as to any one such subletting, or in the aggregate, materially diminish the Rent
payable under this Lease. In the case of a subletting, the sublessee shall
comply with the provisions of Section 23.2, and in the case of an 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 the Lease to Xxxxxxxx
Hotels, Inc. without the consent of Lessor; provided that any such assignee
assumes in writing and agrees to keep and perform all of the terms of the Lease
on the part of the 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. An original counterpart of each
such sublease and
48
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 Attornment. Lessee shall insert in each sublease permitted under
Section 23.1 provisions to the effect that (a) such sublease is subject and
subordinate to all of the terms and provisions of this Lease and to the rights
of Lessor hereunder, (b) if this Lease terminates before the expiration of such
sublease, the sublessee thereunder will, at Lessor's option, 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 written Notice from Lessor or Lessor's
assignees, if any, stating that an uncured Event of Default exists under this
Lease, the sublessee shall thereafter be obligated to pay all rentals accruing
under said sublease directly to the party giving such Notice, or as such party
may direct. All rentals received from the sublessee by Lessor or Lessor's
assignees, if any, as the case may be, shall be credited against the amounts
owing by Lessee under this Lease.
ARTICLE XXIV
Officer's Certificates; Financial Statements; Lessor's
Estoppel Certificates and Covenants.
(a) At any time and from time to time upon not less than 30
days Notice by Lessor, Lessee will furnish to Lessor an Officer's Certificate
certifying that this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications), the date to which the Rent has been paid, whether to the
knowledge of Lessee there is any existing default or Event of Default hereunder
by Lessor or Lessee, and such other information as may be reasonably requested
by Lessor. Any such certificate furnished pursuant to this Section may be relied
upon by Lessor, any lender and any prospective purchaser of the Leased Property.
(b) Lessee will furnish the following statements to Lessor:
(1) with reasonable promptness, such
information respecting the financial condition and
affairs of Lessee, including audited financial
statements prepared by the same certified independent
accounting firm that prepares the returns for Lessor
or such other accounting firm as may be approved by
Lessor, as Lessor may request from time to time; and
49
(2) the most recent Consolidated Financials
of Lessee within 45 days after each quarter of any
Fiscal Year (or, in the case of the final quarter in
any Fiscal Year, the most recent audited Consolidated
Financials of Lessee within 90 days); and
(3) on or about the 15th day of each month,
a detailed profit and loss statement for the Leased
Property for the preceding month, a balance sheet for
the Leased Property as of the end of the preceding
month, and a detailed accounting of revenues for the
Leased Property for the preceding month, each in form
acceptable to Lessor.
(c) At any time and from time to time upon not less than 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.
(d) Lessee covenants that during the Term it will maintain a
ratio of total debt-to-Consolidated Net Worth of 25% or less, exclusive of
capitalized leases on an annual basis as of June 30, 1997.
ARTICLE XXV
Lessor's Right to Inspect. Lessee shall permit Lessor and its
authorized representatives as frequently as reasonably requested by Lessor to
inspect the Leased Property and Lessee's accounts and records pertaining thereto
and make copies thereof, during usual business hours upon reasonable advance
notice, subject only to any business confidentiality requirements reasonably
requested by Lessee.
ARTICLE XXVI
No Waiver. No failure by Lessor or Lessee to insist upon the strict
performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the extent permitted by law, no waiver
of any breach
50
shall affect or alter this Lease, which shall continue in full force and effect
with respect to any other then existing or subsequent breach.
ARTICLE XXVII
Remedies Cumulative. To the extent permitted by law, each legal,
equitable or contractual right, power and remedy of Lessor or Lessee now or
hereafter provided either in this Lease or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power
and remedy and the exercise or beginning of the exercise by Lessor or Lessee of
any one or more of such rights, powers and remedies shall not preclude the
simultaneous or subsequent exercise by Lessor or Lessee of any or all of such
other rights, powers and remedies.
ARTICLE XXVIII
Acceptance of Surrender. No surrender to Lessor of this Lease or of the
Leased Property or any part thereof, or of any interest therein, shall be valid
or effective unless agreed to and accepted in writing by Lessor and no act by
Lessor or any representative or agent of Lessor, other than such a written
acceptance by Lessor, shall constitute an acceptance of any such surrender.
ARTICLE XXIX
No Merger of Title. There shall be no merger of this Lease or of the
leasehold estate created hereby by reason of the fact that the same person or
entity may acquire, own or hold, directly or indirectly: (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (b) the fee estate in the Leased Property.
ARTICLE XXX
Conveyance by Lessor. If Lessor or any successor owner of the Leased
Property conveys the Leased Property in accordance with the terms hereof other
than as security for a debt, and the grantee or transferee of the Leased
Property expressly assumes all obligations of Lessor hereunder arising or
accruing from and after the date of such conveyance or transfer, Lessor or such
successor owner, as the case may be, shall thereupon be released from all future
liabilities and obligations of Lessor under this Lease arising or accruing from
and after the date of such conveyance or other
51
transfer as to the Leased Property and all such future liabilities and
obligations shall thereupon be binding upon the new owner.
Other Interests. This Lease and Lessee's interest hereunder shall at
all times be subject and subordinate to the lien and security title of any deeds
to secure debt, deeds of trust, mortgages, or other interests heretofore or
hereafter granted by Lessor or which otherwise encumber or affect the Leased
Property and to any and all advances to be made thereunder and to all renewals,
modifications, consolidations, replacements, substitutions, and extensions
thereof (all of which are herein called the "Mortgage"). In confirmation of such
subordination, however, Lessee shall, at Lessor's request, promptly execute,
acknowledge and deliver any instrument which may be required to evidence
subordination to any Mortgage and attornment to the holder thereof, conditioned
upon receipt of a nondisturbance clause. In the event of Lessee's failure to
deliver such subordination and if the Mortgage does not change any term of the
Lease, Lessor may, in addition to any other remedies for breach of covenant
hereunder, execute, acknowledge, and deliver the instrument as the agent or
attorney-in-fact of Lessee, and Lessee hereby irrevocably constitutes Lessor its
attorney-in-fact for such purpose, Lessee acknowledging that the appointment is
coupled with an interest and is irrevocable. Lessee hereby waives and releases
any claim it might have against Lessor or any other party for any actions
lawfully taken by the holder of any Mortgage.
ARTICLE XXXI
Quiet Enjoyment. So long as Lessee pays all Rent as the same becomes
due and complies with all of the terms of this Lease and performs its
obligations hereunder, in each case within the applicable grace periods, if any,
Lessee shall peaceably and quietly have, hold and enjoy the Leased Property for
the 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. Notwithstanding the foregoing, Lessee shall have
the right by separate and independent action to pursue any claim it may have
against Lessor as a result of a breach by Lessor of the covenant of quiet
enjoyment contained in this Section.
ARTICLE XXXII
Notices. All notices, demands, requests, consents approvals and other
communications ("Notice" or "Notices") hereunder shall be in writing and
personally served or mailed (by registered or certified mail, return receipt
requested and postage prepaid), if
52
to Lessor at 00000 Xxx Xxxxxxxx Xxxx, Xxxxxx Xxxxxx, Xxxxxxxx 00000, and if to
Lessee at 00000 Xxx Xxxxxxxx Xxxx, Xxxxxx Xxxxxx, Xxxxxxxx 00000, or to such
other address or addresses as either party may hereafter designate. Personally
delivered Notice shall be effective upon receipt, and Notice given by mail shall
be complete at the time of deposit in the U.S. Mail system, but any prescribed
period of Notice and any right or duty to do any act or make any response within
any prescribed period or on a date certain after the service of such Notice
given by mail shall be extended five days.
ARTICLE XXXIII
Appraisers. If it becomes necessary to determine the Fair Market Value
or Fair Market Rental of the Leased 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 20 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 years experience in the State
appraising property similar to the Leased Property, shall, within 45 days after
the date of the Notice appointing the first appraiser, proceed to appraise the
Leased Property to determine the Fair Market Value or Fair Market Rental thereof
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. To the extent consistent
with sound appraisal practice as then existing at the time of any such
appraisal, such appraisal shall be made on a basis consistent with the basis on
which the Leased Property was appraised for purposes of determining its Fair
Market Value at the time the Leased Property was acquired by Lessor. If two
appraisers are appointed and if the difference between the amounts so determined
does not exceed 5% of the lesser of such amounts, then the Fair Market Value or
Fair Market Rental shall be an amount equal to 50% of the sum of the amounts so
determined. If the difference between the amounts so determined exceeds 5% of
the lesser of such amounts, then such two appraisers shall have 20 days to
appoint a third appraiser. If no such appraiser shall have been appointed within
such 20 days or within 90 days of the original request for a determination of
Fair Market Value or Fair Market Rental, 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
53
original appraisers or by such court shall be instructed to determine the Fair
Market Value or Fair Market Rental within 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 appraisers shall be
excluded, and 50% of the sum of the remaining two determinations shall be final
and binding upon Lessor and Lessee as the Fair Market Value or Fair Market
Rental of the Leased 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 each shall pay one-half of the fees and expenses of the
third appraiser and one-half of all other costs and expenses incurred in
connection with each appraisal.
ARTICLE XXXIV
34.1 Lessor May Grant Liens. Without the consent of Lessee, Lessor may,
subject to the terms and conditions set forth below in this Section , from time
to time, directly or indirectly, create or otherwise cause to exist 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. Any such Encumbrance shall
(a) contain the right to prepay (whether or not subject to a prepayment
penalty); (b) provide that it is subject to the rights of Lessee under this
Lease and (c) contain the Agreement by the holder of the Encumbrance that it
will (1) give Lessee the same notice, if any, given to Lessor of any default or
acceleration of any obligation underlying any such Encumbrance or any sale in
foreclosure under such Encumbrance, (2) permit Lessee to cure any such default
on Lessor's behalf within any applicable cure period, and Lessee shall be
reimbursed by Lessor for any and all costs incurred in effecting such cure,
including without limitation out-of-pocket costs incurred to effect any such
cure (including reasonable attorneys' fees) and (3) permit Lessee to appear by
its representative and to bid at any sale in foreclosure made with respect to
any such Encumbrance. Upon the request of Lessor, Lessee shall subordinate this
Lease to the lien of a new mortgage on the Leased Property and agree to attorn
to the new mortgagee, on the condition that the proposed mortgagee executes a
non-disturbance agreement recognizing this Lease, and agreeing, for itself and
its successors and assigns, to comply with the provisions of this Article XXXIV.
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
54
under this Lease, Lessee, after Notice to and demand upon Lessor, without
waiving or releasing any obligation hereunder, and in addition to all other
remedies available to Lessee, may (but shall be under no obligation at any time
thereafter to) make such payment or perform such act for the account and at the
expense of Lessor. All sums so paid by Lessee and all costs and expenses
(including, without 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 such sums, may be offset by Lessee against the 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 shall survive the
termination of this Lease with respect to the Leased Property.
34.3 Breach by Lessor. It shall be a breach of this Lease if Lessor
fails to observe or perform any term, covenant or condition of this Lease on its
part to be performed and such failure continues for a period of 30 days after
Notice thereof from Lessee, unless such failure cannot with due diligence be
cured within a period of 30 days, in which case such failure shall not be deemed
to continue if Lessor, within such 30-day period, proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof. 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.
ARTICLE XXXV
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
55
by and construed in accordance with the laws of the State, but not
including its conflicts of laws rules.
35.2 Transition Procedures. Upon the expiration or termination of the
Term of this Lease, for whatever reason, Lessor and Lessee shall do the
following (and the provisions of this Section 35.2 shall survive the expiration
or termination of this Agreement until they have been fully performed) and, in
general, shall cooperate in good faith to effect an orderly transition of the
management lease or of the Facility.
(a) Transfer of Licenses. Upon the expiration or earlier
termination of the Term, Lessee shall use its best efforts (i) to transfer to
Lessor or Lessor's nominee all licenses, operating permits and other
governmental authorizations and all contracts, including contracts with
governmental or quasi-governmental entities, that may be necessary for the
operation of the Facility, including any Franchise Agreement (collectively,
"Licenses"), or (ii) if such transfer is prohibited by law or Lessor otherwise
elects, to cooperate with Lessor or Lessor's nominee in connection with the
processing by Lessor or Lessor's nominee of any applications for, all Licenses;
provided, in either case, that the costs and expenses of any such transfer or
the processing of any such application shall be paid by Lessor or Lessor's
nominee.
(b) Leases and Concessions. Lessee shall assign to Lessor or
Lessor's nominee simultaneously with the termination of this Agreement, and the
assignee shall assume all leases and concession agreements in effect with
respect to the Facility then in Lessee's name.
(c) Books and Records. All books and records for the Facility
kept by Lessee pursuant to Section 3.7 shall be delivered promptly to Lessor or
Lessor's nominee, simultaneously with the termination of this Agreement, but
such books and records shall thereafter be available to Lessee at all reasonable
times for inspection, audit, examination, and transcription for a period of one
(1) year and Lessee may retain (on a confidential basis) copies or computer
records thereof.
(d) Remittance. Lessee shall remit to Lessor or Lessor's
nominee, simultaneously with the termination of this Lease, all funds remaining,
if any, after payment of all accrued Gross Operating Expenses, and other amounts
due Lessee and after deducting the costs of any scheduled repair, replacement,
or refurbishment of Furniture and Equipment with respect to which deposits have
been made.
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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.
ARTICLE XXXVI
Memorandum of Lease. Lessor and Lessee shall promptly upon the request
of either enter into a short form memorandum of this Lease, in form suitable for
recording under the laws of the State in which reference to this Lease, and all
options contained herein, shall be made. Lessee shall pay all costs and expenses
of recording such memorandum of this Lease.
ARTICLE XXXVII
Lessor's Option to Purchase Assets of Lessee. Effective on not less
than 90 days prior Notice given at any time within 180 days before the
expiration of the Term, but not later than 90 days prior to such expiration, or
upon such shorter Notice period as shall be appropriate if this Lease is
terminated prior to its expiration date, Lessor shall have the option to
purchase all (but not less than all) of the assets of Lessee, tangible and
intangible, relating to the Leased Property (other than 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 the fair market value thereof as
appraised in conformity with Article , except that the appraisers need not be
members of the American Institute of Real Estate Appraisers, but rather shall be
appraisers having at least ten years experience in valuing similar assets.
Notwithstanding any such purchase, Lessor shall obtain no rights to any trade
name or logo used in connection with the Franchise Agreement unless separate
agreement as to such use is reached with the applicable franchisor.
ARTICLE XXXVIII
Lessor's Option to Terminate Lease. In the event Lessor enters into a
bona fide contract to sell the Leased Property to a non-Affiliate, Lessor may
terminate the Lease by giving not less than 30 days prior Notice to Lessee of
Lessor's election to terminate the Lease effective upon the closing under such
contract or Lessor may convey the Lease pursuant to Article XXX. Effective upon
such closing, this Lease shall terminate and be of no further force and effect
except as to any obligations of the parties
57
existing as of such date that survive termination of this Lease. As compensation
for the early termination of its leasehold estate under this Article XXXVIII,
Lessor shall within six months of such closing either (a) pay to Lessee the fair
market value of Lessee's leasehold estate hereunder or (b) offer to lease to
Lessee one or more substitute hotel facilities pursuant to one or more leases
that would create for the Lessee leasehold estates that have an aggregate fair
market value of no less than the fair market value of Lessee's leasehold estate
hereunder, with the fair market value of Lessee's leasehold estate hereunder
determined as of the closing of the sale of the Leased Property. If Lessor
elects and complies with the option described in (b) above, regardless of
whether Lessee enters into the lease(s) described therein, Lessor shall have no
further obligations to Lessee with respect to compensation for the early
termination of this Lease. In the event Lessor and Lessee are unable to agree
upon the fair market value of an original or replacement leasehold estate within
30 days, it shall be determined by appraisal using the appraisal procedure set
forth in Article XXXIII.
For the purposes of this Section, fair market value of the leasehold
estate means, as applicable, an amount equal to the price that a willing buyer
not compelled to buy would pay a willing seller not compelled to sell for
Lessee's leasehold estate under this Lease or an offered replacement leasehold
estate.
ARTICLE XXXIX
Compliance with Franchise Agreement. To the extent any of the
provisions of the Franchise Agreement impose a greater obligation on Lessee than
the corresponding provisions of the Lease, then Lessee shall be obligated to
comply with, and to take all reasonable actions necessary to prevent breaches or
defaults under, the provisions of the Franchise Agreement. It is the intent of
the parties hereto that, except as otherwise specifically provided by this
Lease, Lessee 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.
Lessor and Lessee agree to cooperate fully with each other in the event it
becomes necessary to obtain a franchise extension or modification or a new
franchise for the Leased Property.
ARTICLE XL
40.1 Room Set-Aside. Lessee is obligated to repair or replace in any
Fiscal Year Fixtures and Furniture and Equipment (i) as required by the terms of
any Franchise Agreement, (ii) as required by Article IX and Article XXXIX and
(iii) otherwise when and in a manner it deems fit, to the extent funds are
available therefor
58
from amounts the Lessor is obligated to make available to Lessee under this
Section 40.1 or otherwise makes available to Lessee. During the Term Lessor
shall be obligated to make available to Lessee for repairing or replacing
Fixtures and Furniture and Equipment an amount equal to 4% of Room Revenues from
the Facility for the period ending December 31, 1994 and 4% of Room Revenues
from the Facility for each twelve month period thereafter. Lessor shall be
required to make such amounts available to Lessee on a quarterly basis. Upon
written request by Lessee to Lessor stating the specific use to be made and the
reasonable approval thereof by Lessor, such funds shall be made available by
Lessor for use by Lessee for periodic repairing or replacement of Fixtures and
Furniture and Equipment that constitute Leased Property in connection with the
Primary Intended Use. 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 be obligated to return any funds forwarded by Lessor
pursuant to this Section 40.1, but not spent for (i) repair or replacement of
Fixtures and Furniture and Equipment that constitute Leased Property in
connection with the Primary Intended Use or (ii) Capital Expenditures pursuant
to Section 40.2. Other than as specifically set forth above in this Section
40.1, Lessee shall have no interest in any accrued obligation of Lessor
hereunder and Lessor shall have no obligation to segregate or separate any such
funds for the benefit of Lessee.
40.2 Capital Expenditures. Lessor shall be obligated to pay the
actual costs of any items that are classified as capital items under U.S.
generally accepted accounting principles which are necessary for the continued
operation of the Facility and otherwise approved by Lessor. To the extent that
at the end of a Fiscal Year the amount set aside exceeds the amount spent on
repair or replacement of Fixtures and Furniture and Equipment, the Lessee may
apply such excess amount towards Lessor's obligations under Section 40.2.
40.3 Prohibited Expenditures. No amounts made available under this
Article shall be used to purchase property (other than "real property" within
the meaning of Treasury Regulations Section 1.856- 3(d)), to the extent that
doing so would cause the Lessor to recognize income other than "rents from real
property" as defined in Section 856(d) of the Code.
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IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
XXXXXXXX HOSPITALITY LIMITED PARTNERSHIP
By: Xxxxxxxx Hospitality Trust, Inc.
----------------------------------------
Its: General Partner
By: /s / Xxxxx X. Xxxxxxxx, Xx.
----------------------------------------
Xxxxx X. Xxxxxxxx, Xx.
Title: President
XXXXXXXX HOSPITALITY MANAGEMENT, INC.
By: /s / Xxxxx Xxxxx
----------------------------------------
Xxxxx Xxxxx
Title: President
Exhibit A
PROPERTY DESCRIPTION
