Exhibit 10.30
PROPERTY _______
FORM
----
AMENDED AND RESTATED LEASE AGREEMENT
DATED AS OF JANUARY __, 2001
BY AND BETWEEN
-----------------------------------------
AS LANDLORD,
AND
------------------------------------------
AS TENANT
TABLE OF CONTENTS
-----------------
ARTICLE 1 DEFINITIONS.....................................................1
ARTICLE 2 COLLECTIVE LEASED PROPERTY AND TERM............................24
2.1 Leased Property.....................................................24
2.2 Assignment and Assumption of Contracts; Initial Transaction.........24
2.3 Condition of Leased Property........................................26
2.4 Term................................................................27
2.4.1 Term.........................................................27
2.4.2 Renewal Option...............................................27
ARTICLE 3 RENT...........................................................28
3.1 Rent................................................................28
3.1.1 Payment of Rent...............................................28
3.1.2 Revenues Computation..........................................29
3.1.3 Confirmation of Percentage Rent...............................30
3.1.4 Annual Adjustments............................................32
3.1.5 Additional Charges............................................33
3.1.6 Adjustments to/Abatements of Rent.............................35
3.2 Late Payment of Rent................................................37
3.3 Net Lease...........................................................38
3.4 No Termination, Abatement, Etc......................................38
3.5 [Intentionally Omitted].............................................39
ARTICLE 4 USE OF THE LEASED PROPERTY.....................................39
4.1 Permitted Use.......................................................39
4.1.1 Primary Intended Use..........................................39
4.1.2 Necessary Approvals..........................................39
4.1.3 Lawful Use, Etc..............................................39
4.2 Compliance with Legal and Insurance Requirements, Etc..............40
4.3 Environmental Matters..............................................40
4.3.1 Restriction on Use, Etc......................................40
4.3.2 Environmental Indemnification of Tenant by Landlord..........41
4.3.3 Environmental Indemnification of Landlord by Tenant..........42
4.3.4 Survival.....................................................42
4.4 FF&E Reserve.......................................................42
4.5 Working Capital....................................................43
ARTICLE 5 MAINTENANCE AND REPAIRS; SURRENDER............................44
5.1 Maintenance and Repair.............................................44
5.1.1 Tenant's Obligations.........................................44
5.1.2 Landlord Obligations.........................................45
5.2 Tenant's Personal Property.........................................46
5.3 Surrender..........................................................46
5.4 Encroachments, Restrictions, Etc...................................48
5.5 Landlord to Grant Easements, Etc...................................49
ARTICLE 6 CAPITAL EXPENDITURES, ETC.....................................49
6.1 Capital Expenditures...............................................49
6.2 [Intentionally Omitted]............................................50
6.3 Cooperation by Tenant..............................................50
6.4 Alterations........................................................50
6.5 Salvage............................................................51
ARTICLE 7 LIENS.........................................................51
-ii-
7.1 Prohibition on Liens...............................................51
7.2 Landlord Lien......................................................52
ARTICLE 8 PERMITTED CONTESTS............................................52
ARTICLE 9 INSURANCE AND INDEMNIFICATION.................................53
9.1 General Insurance Requirements.....................................53
9.2 Responsibility for Insurance.......................................55
9.3 Replacement Cost...................................................55
9.4 Waiver of Subrogation..............................................56
9.5 Form Satisfactory, Etc.............................................56
9.6 Blanket Policy.....................................................56
9.7 No Separate Insurance..............................................57
9.8 General Indemnification of Landlord by Tenant......................57
9.9 General Indemnification of Tenant by Landlord......................58
9.10 Independent Contractor.............................................59
ARTICLE 10 CASUALTY......................................................60
10.1 Insurance Proceeds.................................................60
10.2 Reconstruction in the Event of Casualty............................60
10.2.1 Facility Rendered Unsuitable for Its Primary Intended Use..60
10.2.2 Facility Not Rendered Unsuitable for Its Primary Intended
Use........................................................61
10.2.3 Deficiency in Insurance Proceeds...........................61
10.2.4 Disbursement of Proceeds...................................61
10.3 Reconstruction in the Event of Damage or Destruction Not
Covered by Insurance...............................................62
10.4 Tenant's Property and Business Interruption Insurance..............62
10.5 Abatement of Rent..................................................62
-iii-
ARTICLE 11 CONDEMNATION..................................................63
11.1 Total Condemnation, Etc............................................63
11.2 Partial Condemnation...............................................63
11.3 Abatement of Rent..................................................64
11.4 Allocation of Award................................................64
ARTICLE 12 TENANT DEFAULTS; REMEDIES.....................................64
12.1 Event of Default...................................................64
12.2 Remedies...........................................................67
12.3 Waivers............................................................69
12.4 Application of Funds...............................................69
12.5 Landlord's Right to Cure Tenant's Default..........................69
ARTICLE 13 HOLDING OVER..................................................69
ARTICLE 14 LANDLORD NOTICE OBLIGATION; LANDLORD DEFAULT..................70
14.1 Landlord Notice Obligation.........................................70
14.2 Landlord Default...................................................70
ARTICLE 15 ARBITRATION...................................................71
15.1 Arbitration........................................................71
15.2 Arbitration Procedures.............................................72
ARTICLE 16 SUBLETTING AND ASSIGNMENT.....................................72
16.1 Subletting and Assignment..........................................72
16.2 Required Sublease Provisions.......................................74
16.3 No Right of Tenant to Mortgage Its Leasehold.......................75
ARTICLE 17 ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS................75
17.1 Estoppel Certificates..............................................75
-iv-
17.2 Financial Statements...............................................75
17.3 Annual Budget......................................................76
ARTICLE 18 LANDLORD'S RIGHT TO INSPECT...................................78
ARTICLE 19 APPRAISAL.....................................................78
ARTICLE 20 FACILITY MORTGAGES............................................80
20.1 Landlord May Grant Liens...........................................80
20.2 Subordination of Lease.............................................80
20.3 Notice to Mortgagee and Superior Landlord..........................82
20.4 Transfer of Leased Property........................................83
20.5 Consent of Lender..................................................83
ARTICLE 21 ADDITIONAL COVENANTS OF TENANT................................83
21.1 Conduct of Business................................................83
21.2 Maintenance of Accounts and Records................................84
21.3 Management of Leased Property......................................84
21.3.1 Management Agreement, Consent and Assignment, Etc..........84
21.3.2 Reversion upon Termination.................................84
21.3.3 Compliance with Management Agreement and
Indemnification............................................84
21.3.4 Consent Required for Certain Actions.......................85
21.3.5 Replacement of Manager.....................................86
21.4 Facility Mortgagee Agreement.......................................86
21.5 [Intentionally Omitted]............................................87
21.6 Single Purpose Entity Covenants....................................87
21.6.1 Separate Existence.........................................87
21.6.2 Independent Member.........................................88
21.6.3 Limitation on Indebtedness and Guarantees..................88
-v-
21.6.4 Distributions..............................................89
21.6.5 Single Purpose.............................................89
21.6.6 Certain Fundamental Changes................................89
21.6.7 Amendments to Organizational Documents.....................89
21.6.8 Qualified Affiliate........................................89
ARTICLE 22 LIMITATIONS...................................................90
22.1 REIT Compliance....................................................90
22.2 FF&E Limitation....................................................90
22.3 Sublease Rent Limitation...........................................90
22.4 Sublease Tenant Limitation.........................................90
22.5 Tenant Ownership Limitation........................................91
ARTICLE 23 MISCELLANEOUS.................................................91
23.1 No Waiver..........................................................91
23.2 Remedies Cumulative................................................91
23.3 Severability.......................................................91
23.4 Acceptance of Surrender............................................91
23.5 No Merger of Title.................................................92
23.6 Release of Landlord Following Conveyance...........................92
23.7 Quiet Enjoyment....................................................92
23.8 Landlord's Consent.................................................92
23.9 Memorandum of Lease................................................93
23.10 Notices............................................................93
23.11 Construction.......................................................94
23.12 Counterparts; Headings.............................................95
23.13 Governing Law; Jurisdiction........................................95
-vi-
23.14 No Broker..........................................................95
23.15 Related Agreements.................................................95
23.16 Legal Fees and Costs of Litigation.................................96
23.17 Force Majeure......................................................96
23.18 Conflicts with Related Agreements..................................96
23.19 Operating Lease....................................................96
23.20 Limitation of Liability............................................97
23.21 Joinder of Host O.P................................................97
ARTICLE 24 LEASEHOLD INTEREST PURCHASE RIGHTS; EFFECT OF
TERMINATION..............................................................97
24.1 Landlord's Right to Purchase or Cause an Affiliate to Purchase
Tenant's Leasehold Interest upon Sale..............................97
24.2 [Intentionally Omitted]............................................99
24.3 [Intentionally Omitted]............................................99
24.4 Effect of Termination..............................................99
-vii-
EXHIBITS
--------
EXHIBIT A The Land
EXHIBIT B [Intentionally Omitted.]
EXHIBIT C [Intentionally Omitted.]
EXHIBIT D [Intentionally Omitted.]
EXHIBIT E Working Capital Note and Agreement
SCHEDULES
---------
Schedule 2.2(a)(vi) Excluded Leases
Schedule 3.1.1 Minimum Rent
Schedule 3.1.2 Revenue Percentage and Break Points
Schedule 3.1.3(b) Items of Gross Revenues
Schedule 3.1.5(e) Prepaid Expenses
Schedule 5.1.1 Existing Conditions Relating to Hazardous Materials
Schedule 17.2(f) Period Report Format
Schedule 20.3 Superior Mortgagee(s) and Superior Landlord(s)
Schedule 22.2 Provisions Relating to Excess FF&E
Schedule 22.2-A Form of Excess FF&E Lease
Schedule 23.8 Deemed Consent or Approval
-viii-
AMENDED AND RESTATED LEASE AGREEMENT
THIS AMENDED AND RESTATED LEASE AGREEMENT (this "Lease") is entered
into as of the __ day of January, 2001, by and between ____________________, a
Delaware limited liability company, having its principal office at 10400
Fernwood Road, Bethesda, Maryland 20817 ("Landlord"), and
______________________, a Delaware limited liability company, having its
principal office at 10400 Fernwood Road, Bethesda, Maryland 20817 ("Tenant").
WITNESSETH:
WHEREAS, Landlord owns [fee simple/leasehold] title to the Leased
Property (this and other capitalized terms used and not otherwise defined herein
having the meanings ascribed to such terms in Article 1);
WHEREAS, Landlord leased the Leased Property to Tenant and Tenant
leased the Leased Property from Landlord pursuant to a Lease Agreement dated as
of December 31, 1998, as amended (the "Original Lease"), all subject to and upon
the terms and conditions set forth in the Original Lease;
WHEREAS, as a condition to entering into the Original Lease, Landlord
and Tenant entered into that "Consent and Assignment" (as that term is defined
hereafter), and agreed that Tenant would assume certain obligations of Landlord
under the "Assigned Agreements" (as that term is defined hereafter); and
WHEREAS, Landlord and Tenant desire to amend and restate the Original
Lease in its entirety to reflect certain changes that Landlord and Tenant have
agreed shall be mutually beneficial to both parties.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree as follows:
ARTICLE 1
DEFINITIONS
For all purposes of this Lease, except as otherwise expressly provided
or unless the context otherwise requires, (i) the terms defined in this Article
shall have the meanings assigned to them in this Article and include the plural
as well as the singular, (ii) all accounting terms not otherwise defined herein
shall have the meanings assigned to them in accordance with GAAP, (iii) 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 (iv) the words "herein," "hereof," "hereunder" and other words
of similar import refer to this Lease as a whole and not to any particular
Article, Section or other subdivision.
1.1. "AAA" shall have the meaning given such term in Section 15.1.
1.2. "Accounting Period" shall mean (i) for so long as the Management
Agreement is in effect each of the four (4) week accounting periods that are
used in Manager's accounting system, except that an Accounting Period may
occasionally contain five (5) weeks when necessary to conform Manager's
accounting system to the calendar and (ii) during any period when the Management
Agreement is not in effect, each calendar month during the Term.
1.3. "Accounting Period Statement" shall have the meaning given such
term in Section 17.2(d).
1.4. "Additional Charges" shall have the meaning given such term in
Section 3.1.5.
1.5. "Adverse Party" shall mean any Person (i) who is engaged in the
Hotel Business or is an Affiliate (other than an Affiliate who is a lessee under
a lease of a hotel from a real estate investment trust or other passive owner
which is managed on behalf of such Affiliate by an unaffiliated third party
manager) of any Person engaged in the Hotel Business, (ii) who is, or is an
Affiliate of, a Person who has been convicted of, or has pleaded nolo contendere
to, a felony, (iii) whose ownership of a direct or indirect interest in Tenant
would violate the Management Agreement or (iv) who, prior to the effective time
of a Change in Control, fails to enter into a written agreement reasonably
satisfactory in form and substance to Host REIT (1) to the effect that neither
(A) such Person nor (B) any Person who would be considered to constructively own
either any interest in such Person or any interest in Tenant owned directly or
indirectly by such Person (as determined under Section 318(a) of the Code, as
modified by Section 856(d) of the Code) (referred to as "Constructive
Ownership") would own (or have Constructive Ownership of) any interest in Host
REIT or Host O.P. that would cause either Host REIT or Host O.P. to be
considered to Constructively Own any interest in either Tenant or any other
tenant of either Host REIT or Host O.P. that is described in Section
856(d)(2)(B) of the Code for purposes of applying either Section 856(c) of the
Code or Section 7704(d) of the Code, or any similar or successor provisions
thereto and (2) with respect to such other matters reasonably required to
protect the status of Host REIT as a "real estate investment trust" for federal
income tax purposes.
1.6. "Affiliate" shall mean any individual or entity directly or
indirectly through one or more intermediaries controlling, controlled by or
under common control with a party. The term "control," as used in the
immediately preceding sentence, means the possession, direct or indirect, of the
power to direct or cause the direction of the management policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Notwithstanding the foregoing, Manager shall not be deemed an Affiliate of
either Landlord or Tenant.
1.7. "Alterations" shall have the meaning given such term in
Section 6.4.
1.8. "Annual Adjustment" shall mean (a) with respect to Minimum Rent,
the product of (i) the amount of the Minimum Rent then in effect and (ii) ____
percent (____%) of any Percentage Increase in CPI; (b) with respect to each of
the Annual Room Revenues First Break Point, the Annual Food and Beverages Sales
First Break Point, and
-2-
the Annual Other Income Break Point, the product of (i) the amount of each such
break point then in effect and (ii) the weighted average resulting from the sum
of _____ percent (_____%) of any Percentage Increase in CPI plus ____ percent
(___%) of any Percentage Increase in the Labor Index; and (c) with respect to
the Annual Food and Beverages Sales Second Break Point and the Annual Room
Revenues Second Break Point, the product of (i) the amount of each such break
point then in effect and (ii) _____% of the figure calculated in subsection
(b)(ii) above.
1.9. "Annual Budget" shall have the meaning given such term in
Section 17.3.
1.10. "Annual Food and Beverages Sales First Break Point" shall have
the meaning given such term in Section 3.1.2(b)(3).
1.11. "Annual Food and Beverages Sales Second Break Point" shall have
the meaning given such term in Section 3.1.2(b)(3).
1.12. "Annual Operating Statement" shall have the meaning given such
term in Section 17.2(c).
1.13. "Annual Other Income Break Point" shall have the meaning given
such term in Section 3.1.2(b)(3).
1.14. "Annual Room Revenues First Break Point" shall have the meaning
given such term in Section 3.1.2(b)(3).
1.15. "Annual Room Revenues Second Break Point" shall have the meaning
given such term in Section 3.1.2(b)(3).
1.16. "Applicable Expected Life" shall have the meaning given such
term in paragraph (e)(i) of Schedule 22.2.
-------------
1.17. "Asset Management Agreement" shall mean that certain agreement
dated as of even date herewith as amended or restated from time to time, between
TRS and Host O.P. relating to the provision of asset management services by or
on behalf of TRS. with respect to the Facility and the hotel facilities covered
by the Other Leases.
1.18. "Assigned Agreements" shall have the meaning given such term in
Section 2.2(a).
1.19. "Award" shall mean all compensation, sums or other value
awarded, paid or received by virtue of a total or partial Condemnation of the
Leased Property (after deduction of all reasonable legal fees and other
reasonable costs and expenses, including, without limitation, expert witness
fees, incurred by Landlord in connection with obtaining any such award).
1.20. "Bankruptcy Code" shall have the meaning given such term in
Section 16.1.
-3-
1.21. "Budget Spread" shall have the meaning given such term in
Section 17.3.
1.22. "Business Day" shall mean any day other than Saturday, Sunday,
or any other day on which banking institutions in the State are authorized by
law or executive action to close.
1.23. "Capital Budget" shall have the meaning given such term in
Section 17.3.
1.24. "Capital Expenditure" shall mean any expenditure for capital
repairs, alterations, improvements, renewals or replacements to the structure or
exterior facade of the Facility, or to the mechanical, electrical, heating,
ventilating, air conditioning, plumbing, or vertical transportation elements of
the Facility (together with all other repair and maintenance expenditures which
are classified as capital expenditures under GAAP), or, during any period when
the Management Agreement is in effect, to the extent in conflict with the
foregoing, the definition or description of "capital expenditures" (or other
expenditures of a capital nature) used in the Management Agreement. To the
extent applicable as used herein, Capital Expenditure shall also refer to the
actual capital repair, alteration, improvement, renewal or replacement to which
the Capital Expenditure relates.
1.25. "Capital Portion" shall have the meaning given such term in
Section 17.3.
1.26. "Capitalized Interest" shall mean interest that is capitalized
and is not counted as interest expense in accordance with GAAP.
1.27. "Capitalized Lease Obligations" of any Person shall mean all
rental obligations which, under GAAP, are or will be required to be capitalized
on the books of such Person, in each case taken at the amount thereof accounted
for as indebtedness in accordance with such principles.
1.28. "Case Goods" shall mean furniture and furnishings used in the
Facility, including, without limitation, chairs, beds, chests, headboards,
desks, lamps, tables, television sets, mirrors, pictures, wall decorations and
similar items.
1.29. "Casualty" shall have the meaning given such term in Section
10.1.
1.30. [Intentionally Omitted.]
1.31. [Intentionally Omitted.]
-4-
1.32. "Change in Control" shall mean the:
(i) acquisition (after a registered offering of shares, by a merger
contemplated by subparagraph (ii) below or otherwise) by any Person, or two or
more Persons acting in concert, in a single or series of transactions (whether
or not related), of:
(a) with respect to Tenant or TRS, beneficial ownership (within the
meaning of Rule 13d-3 of the SEC) of, or rights (including conversion rights),
options or warrants to acquire (whether absolute or conditional), all or any
portion of the outstanding voting or economic interests in Tenant or TRS (other
than voting rights held by any non-equity member of Tenant as set forth in the
Limited Liability Company Operating Agreement of Tenant as in effect on the date
hereof); or
(b) [Intentionally Omitted.]
(ii) the merger or consolidation of Tenant or TRS with or into any
other Person (other than any one or more Qualified Affiliates); or
(iii) any one or a series of related sales or conveyances to any
Person (other than any one or more Qualified Affiliates) of all or substantially
all of the assets of Tenant; or
(iv) [Intentionally Omitted.]
Notwithstanding the foregoing, in no event shall (i) the acquisition
by Host O.P. or an Affiliate of Host O.P., or a transfer between Host O.P. and
an Affiliate of Host O.P. or between Affiliates of Host O.P. of all or part of
the direct or indirect legal or beneficial ownership interest in Tenant or TRS
or of rights (including conversion rights), options or warrants to acquire
(whether absolute or conditional) any such ownership interest be deemed a Change
in Control, so long as such acquisition or transfer is to a Qualified Affiliate,
or (ii) any change in the direct or indirect legal or beneficial ownership of,
or any acquisition or exercise by any Person of any rights (including conversion
rights), options or warrants to acquire (whether absolute or conditional) any
direct or indirect legal or beneficial ownership interest in, Host O.P. or Host
REIT be deemed a Change in Control.
1.33. "Claims" shall have the meaning given such term in Article 8.
1.34. "Code" shall mean the Internal Revenue Code of 1986 and, to the
extent applicable, the Treasury Regulations promulgated thereunder, each as from
time to time amended.
1.35. "Commencement Date" shall mean 11:59 p.m. on December 31, 1998.
1.36. "Comparable Lease" shall have the meaning given such term in
Section 24.1(b).
-5-
1.37. "Condemnation" shall mean, with respect to the Leased Property,
(a) the exercise of any governmental power with respect to all or part of the
Leased Property, whether by legal proceedings or otherwise, by a Condemnor of
its power of condemnation, (b) a voluntary sale or transfer of all or part of
the Leased Property by Landlord to any Condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending, or (c) a
taking or voluntary conveyance of all or part of the Leased Property, or any
interest therein, or right accruing thereto or use thereof, as the result 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.
1.38. "Condemnor" shall mean any public or quasi-public authority, or
private corporation or individual, having the power of Condemnation.
1.39. "Consent and Assignment" shall have the meaning given such term
in Section 21.3.1.
1.40. [Intentionally Omitted.]
1.41. [Intentionally Omitted.]
1.42. [Intentionally Omitted.]
1.43. [Intentionally Omitted.]
1.44. "Constructive Ownership" shall have the meaning given such term
in Section 1.5.
1.45. "Consumer Price Index" shall mean the "Consumer Price Index"
published by the Bureau of Labor Statistics of the United States Department of
Labor, All Items for Urban Wage Earners and Clerical Workers (1982-1984 = 100).
1.46. "Continuing Obligations" shall have the meaning given such term
in Section 21.3.1.
1.47. "Contractor" shall have the meaning given such term in Section
9.10.
1.48. "Contractor's Insurance Certificate" shall have the meaning
given such term in Section 9.10.
1.49. "Contractor's Liability Coverage" shall have the meaning given
such term in Section 9.10.
1.50. "Cumulative Portion" shall have the meaning given such term in
Section 3.1.2(b)(1).
1.51. "Default" shall mean any event, act or condition that with the
giving of notice or lapse of time, or both, would constitute an Event of
Default.
-6-
1.52. "Emergency Situations" shall mean fire, any other Casualty, or
any other events, circumstances or conditions that threaten the safety or
physical well-being of the Facility's guests or employees or that involve the
risk of material property damage or loss.
1.53. "Entity" shall mean any corporation, general or limited
partnership, limited liability company or partnership, stock company or
association, joint venture, association, company, trust, bank, trust company,
land trust, business trust, cooperative, any government or agency or political
subdivision thereof or any other entity.
1.54. "Environment" shall mean soil, surface water, groundwater, land,
stream, sediment, surface or subsurface strata, ambient air, physical structures
and equipment, and where radon gas is present, the interior air of buildings.
1.55. "Environmental Laws" shall mean any federal, state or local law,
rule or regulation (both present and future) dealing with the use, generation,
treatment, storage, disposal, or abatement of Hazardous Materials, including,
but not limited to, (i) the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Section 9601 et seq., as amended and (ii) the
regulations promulgated thereunder, from time to time.
1.56. "Environmental Liabilities" shall have the meaning given such
term in Section 4.3.2.
1.57. "Environmental Notice" shall have the meaning given such term in
Section 4.3.1.
1.58. "Environmental Obligation" shall have the meaning given such
term in Section 4.3.1.
1.59. "Event of Default" shall have the meaning given such term in
Section 12.1.
1.60. "Excess FF&E" shall have the meaning given such term in
paragraph (b) of Schedule 22.2.
-------------
1.61. "Excess FF&E Cost" shall have the meaning given such term in
paragraph (e) of Schedule 22.2.
-------------
1.62. "Excess FF&E Lease" shall have the meaning given such term in
paragraph (b) of Schedule 22.2.
-------------
1.63. "Excess FF&E Leasehold Interest" shall have the meaning given
such term in paragraph (h) of Schedule 22.2.
-------------
1.64. "Excess FF&E Leasehold Interest Transfer" shall have the meaning
given such term in paragraph (h) of Schedule 22.2.
-------------
-7-
1.65. "Excess FF&E Leasehold Interest Transfer Price" shall have the
meaning given such term in paragraph (h) of Schedule 22.2.
-------------
1.66. "Excess FF&E Notice" shall have the meaning given such term in
paragraph (b) of Schedule 22.2.
-------------
1.67. "Excess FF&E Reimbursement Amount" shall have the meaning given
such term in paragraph (i) of Schedule 22.2.
-------------
1.68. "Excess FF&E Repurchase" shall have the meaning given such term
in paragraph (g) of Schedule 22.2.
-------------
1.69. "Excess FF&E Repurchase Price" shall have the meaning given such
term in paragraph (g) of Schedule 22.2.
-------------
1.70. "Excess FF&E Value" shall have the meaning given such term in
paragraph (e) of Schedule 22.2.
-------------
1.71. "Existing Condition" shall mean any physical condition existing
at the Leased Property as of the Commencement Date.
1.72. "Facility" shall have the meaning given such term in Section
2.1(b).
1.73. "Facility Mortgage" shall mean, with respect to the Leased
Property, any Lien placed by Landlord upon the Leased Property in accordance
with Article 20.
1.74. "Facility Mortgagee" shall mean the holder of a Facility
Mortgage.
1.75. "Facility Mortgagee Agreement" shall have the meaning given such
term in Section 21.4.
1.76. "Facility Trade Name" shall mean, with respect to the Facility,
any name under which Tenant has conducted the business of operating the Facility
at any time during the Term.
1.77. "Fair Market Rental" shall mean, with respect to the Leased
Property, 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 the Leased
Property on the terms and conditions of this Lease for the term in question
(taking into account the Management Agreement), assuming Tenant is not in
default hereunder and determined by agreement between Landlord and Tenant or,
failing agreement, in accordance with the appraisal procedures set forth in
Article 19.
1.78. "Fair Market Value" shall be deemed to equal, with respect to
the leasehold estate hereunder, the present value of the annual income to Tenant
for the remainder of the Term, determined in accordance with Section 24.1(b).
-8-
1.79. "FF&E" shall mean furniture, furnishings, fixtures, Soft Goods,
Case Goods, signage and equipment at the Facility (including, without
limitation, facsimile machines, communication systems, audio visual equipment,
and all computer and other equipment needed for the reservation system and the
property management system, and all other electronic systems needed for the
Facility, from time to time, as well as similar systems based on other
technologies which may be developed in the future), or, during any period when
the Management Agreement is in effect, to the extent in conflict with the
foregoing, "FF&E" as defined in the Management Agreement; provided, however,
that FF&E shall not include Tenant's Personal Property.
1.80. "FF&E Adjustment" shall have the meaning given such term in
paragraph (e) of Schedule 22.2.
-------------
1.81. "FF&E Estimate" shall have the meaning given such term in
Section 17.3(c).
1.82. "FF&E Limitation" shall have the meaning given such term in
paragraph (a) of Schedule 22.2.
-------------
1.83. "FF&E Reserve" shall have the meaning given such term in Section
4.4.
1.84. "Final Working Capital" shall have the meaning given such term
in Section 4.5.
1.85. [Intentionally Omitted.]
1.86. "First Class Operating Standards" shall mean both the
operational standards (for example, staffing, amenities offered to guests,
advertising, etc.) and the physical standards (for example, the quality,
condition, utility and age of the personal property, etc.) of comparable
full-service hotels in the hotel system of which the Facility is a part (e.g.,
the Marriott hotel system or the Ritz-Carlton hotel system), as such operational
and physical standards may change from time to time (provided, however, that
First Class Operating Standards shall in no event be lower than the operational
and physical standards, as of the date in question, of comparable "quality
segment" (as such term was being used as of the effective date of the Management
Agreement) full-service hotels in other full-service hotel systems), or, during
any period when the Management Agreement is in effect, to the extent in conflict
with the foregoing, the operating standards required pursuant to the Management
Agreement.
1.87. "First Tier Food and Beverages Sales Percentage" shall have the
meaning given such term in Section 3.1.2(b)(2).
1.88. "First Tier Other Income Percentage" shall have the meaning
given such term in Section 3.1.2(b)(2).
1.89. "First Tier Room Revenue Percentage" shall have the meaning
given such term in Section 3.1.2(b)(2).
-9-
1.90. "First Year FF&E Adjustment" shall have the meaning given such
term in paragraph (e)(i) of Schedule 22.2.
-------------
1.91. "Fiscal Year" shall mean the fiscal year used by Manager, which
now ends at midnight on the Friday closest to December 31 in each calendar year
and begins on the Saturday immediately following said Friday. If the fiscal year
used by Manager is changed in the future by Manager or if the Management
Agreement is no longer in effect, appropriate adjustment to this Lease's
reporting and accounting procedures shall be made; provided, however, that no
such change or adjustment shall alter the Term of this Lease, or in any way
reduce the amount of Rent or other payments due to or by Landlord hereunder, or
otherwise adversely affect Landlord's or Tenant's rights or obligations under
this Lease.
1.92. "Fixed Asset Supplies" shall mean supply items included within
"Property and Equipment" under the Uniform System, including linen, china,
glassware, silver, uniforms and similar items.
1.93. "Fixtures" shall have the meaning given such term in Section
2.1(d).
1.94. "Food and Beverages Sales" shall mean (a) gross revenue from the
sale of food and beverages that are prepared at the Facility and sold or
delivered on or off the Facility by or on behalf of Tenant (including, without
limitation, revenues from mini-bars), whether for cash or for credit, including
in respect of guest rooms, banquet rooms, meeting rooms and other similar rooms
and (b) gross revenue from the rental of banquet, meeting and other similar
rooms. Food and Beverages Sales shall be determined in a manner consistent with
the Uniform System. Food and Beverages Sales shall not include the following:
(i) sales by Tenant's subtenants, licensees and concessionaires, the
rent, license fees or concession payments from which are included in Gross
Revenues, and any rent, license fees, concession payments or other amounts
paid to Tenant by any such subtenants, licensees and concessionaires;
(ii) vending machine sales;
(iii) any gratuities or service charges added to a customer's bill or
statement in lieu of a gratuity that is paid directly to Facility employees,
to the extent actually paid to such employees;
(iv) credits, rebates or refunds; or
(v) sales taxes or taxes of any other kind imposed on the sale of
food or beverages.
1.95. "GAAP" shall mean generally accepted accounting principles
consistently applied.
1.96. "Government Agencies" shall mean any court, agency, authority,
board (including, without limitation, environmental protection, planning and
zoning), bureau, commission, department, office or instrumentality of any nature
whatsoever of any
-10-
governmental unit of the United States, the State, any county, or any political
subdivision of any of the foregoing, whether now or hereafter in existence,
having jurisdiction over Tenant or the Leased Property or any portion thereof.
1.97. "Gross Revenues" shall mean Room Revenues, Food and Beverages
Sales, and Other Income, and all revenues and receipts of every kind derived
from operating the Facility and parts thereof, including, but not limited to:
(i) revenues and receipts from both cash and credit transactions,
before commissions and discounts for prompt or cash payments, from rental of
stores, offices, meeting, exhibit or sales space of every kind;
(ii) license, lease and concession fees and rentals (not including
gross receipts of the licensees, lessees and concessionaires under licenses,
leases and concessionaire agreements);
(iii) revenues and receipts from vending machines;
(iv) health club membership fees;
(v) sales of merchandise (other than proceeds from the sale of FF&E
no longer necessary to the operation of the Facility);
(vi) service charges, to the extent not paid to the employees at the
Facility as, or in lieu of, gratuities; and
(vii) proceeds, if any, from business interruption or other loss of
income insurance;
provided, however, that Gross Revenues shall not include the following:
(i) banquet service charges to the extent actually paid to
employees;
(ii) gratuities to Facility employees to the extent actually paid to
employees;
(iii) federal, state or municipal excise, sales, use or similar taxes
collected directly from patrons or guests or included as part of the sales price
of any goods or services;
(iv) insurance proceeds (other than proceeds from business
interruption or other loss of income insurance);
(v) condemnation proceeds (other than for a temporary taking);
(vi) any proceeds from any sale of the Facility or from the
refinancing of any debt encumbering the Facility;
-11-
(vii) proceeds from the disposition of FF&E no longer necessary for
the operation of the Facility; or
(viii) interest which accrues on amounts deposited in either the FF&E
Reserve or any escrow accounts that are established for real estate and personal
property taxes, levies, assessments and similar charges in accordance with the
terms of the Management Agreement.
1.98. [Intentionally Omitted.]
1.99. [Intentionally Omitted.]
1.100. "Hazardous Materials" shall mean any substance or material
containing one or more of any of the following: "hazardous material," "hazardous
waste," "regulated substance," "petroleum," "pollutant," "contaminant," or
"asbestos," as such terms are defined in any applicable Environmental Law, in
such concentration(s) or amount(s) as may impose cleanup, removal, monitoring or
other responsibility under any applicable Environmental Law, or which may
present a significant risk of harm to guests, invitees or employees of the
Facility.
1.101. "Host O.P." shall mean Host Marriott, L.P., a Delaware limited
partnership and the operating partnership of Host REIT.
1.102. "Host REIT" shall mean either Host Marriott Corporation, a
Delaware corporation, or Host Marriott Corporation, a Maryland corporation,
which is intended to be the successor by merger to Host Marriott Corporation, a
Delaware corporation, or their successors or assigns.
1.102A. "Host Subsidiary" shall mean (i) any Person (other than a
Subsidiary of Host O.P.) in which Host O.P. owns, directly or indirectly, at
least 90% of the economic interest, or (ii) any Person which is or may become,
subsequent to the date on which this Lease is entered into, an Affiliate or
Subsidiary of Host O.P.
1.103. "Hotel Business" means the business of owning, developing,
constructing, leasing, operating, managing or franchising, either directly or
through a contractual arrangement with a third party, hotels having, in the
aggregate, five thousand (5,000) or more rooms, but excluding hotels leased, as
a lessee, from a real estate investment trust or other passive owner and
operated on behalf of such lessee by an unaffiliated third party manager.
1.104. "Impositions" shall mean, 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 Tenant or the business conducted upon the Leased Property) not
included in Landlord Obligations, water, sewer or other rents and charges,
excises, tax levies, fees (including, without limitation, license, permit,
inspection, authorization and similar fees) and all other governmental charges
not included in Landlord Obligations, in each case whether general or special,
ordinary or extraordinary, foreseen or unforeseen, of every character in respect
of the
-12-
Leased Property or the business conducted thereon by Tenant (including all
interest and penalties thereon due to any failure in payment by Tenant), which
at any time during or in respect of the Term hereof may be assessed or imposed
on or in respect of or be a lien upon (a) Landlord's interest in the Leased
Property; (b) the Leased Property, any part thereof, 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 Tenant.
1.105. "Indebtedness" shall mean all obligations, contingent or
otherwise, which in accordance with GAAP should be reflected on the obligor's
balance sheet as debt.
1.106. "Independent Member" means a Person who is not, and has not
within the past five (5) years been, (i) an officer, director, employee,
partner, member, manager, stockholder or beneficial-interest holder of Tenant;
(ii) an officer, director, employee, partner, member, beneficial-interest
holder, or stockholder of any "Affiliate" (as defined below) of Tenant; or (iii)
a spouse, parent, sibling, or child of any Person described in (i) or (ii) of
this section; provided, however, that a Person shall not be deemed to be a
director or member of an Affiliate solely by reason of such Person being a
director, manager, or member of a single-purpose entity that would otherwise be
deemed to be an Affiliate because they are under common control. For the purpose
of this definition alone, "Affiliate" means any Person (x) which owns
beneficially, directly or indirectly, more than ten percent (10%) of the
outstanding equity interest in Tenant or which is otherwise in control of
Tenant; (y) of which more than ten percent (10%) of the outstanding voting
securities are owned beneficially, directly or indirectly, by any Person
described in clause (x) above; or (z) which is controlled by, or under common
control with, any Person or entity described in clause (x) above; the terms
"control" and "controlled by" shall have the meanings assigned to them in Rule
405 under the Securities Act of 1933.
1.107. ["Initial FF&E Lease" shall have the meaning given such term in
paragraph (a) of Schedule 22.2.]
-------------
1.108. "Initial Working Capital" shall have the meaning given such term
in Section 4.5.
1.109. "Insurance Requirements" shall mean all terms of any insurance
policy required by this Lease and all requirements of the issuer of any such
policy.
1.110. "Intangible Asset" shall mean, with respect to any Person, a
long-lived asset that is useful in the operations of such Person, that is not
directly used in revenue generation and that is not held for sale, and is
without physical qualities, including but not limited to patents, copyrights and
goodwill, but excluding capitalized costs associated with the acquisition of
brand names, franchises and trademarks, franchise agreements and management
agreements.
1.111. "Inventories" shall have the definition given it in the Uniform
System, such as provisions in storerooms, refrigerators, pantries and kitchens;
beverages
-13-
in wine cellars and bars; other merchandise intended for sale; fuel; mechanical
supplies; stationery; and other expensed supplies and similar items.
1.112. "Labor Index" shall mean Employment Cost Index, Compensation,
Private Industry, Services Industries, Not Seasonally Adjusted as published by
the U.S. Department of Labor, Bureau of Labor Statistics.
1.113. "Land" shall have the meaning given such term in Section 2.1(a).
1.114. "Landlord" shall have the meaning given such term in the
preamble to this Lease.
1.115. "Landlord Default" shall have the meaning given such term in
Section 14.2.
1.116. "Landlord Indemnitee" shall have the meaning set forth in
Section 4.3.3.
1.117. "Landlord Lien" shall have the meaning set forth in Section 7.2.
1.118. "Landlord Obligations" shall mean (i) Real Estate Taxes, (ii)
any tax based on net income imposed on Landlord, (iii) any net revenue tax of
Landlord, (iv) any transfer fee or other tax imposed with respect to the sale,
exchange, financing, mortgaging, or other disposition by Landlord of the Leased
Property or the proceeds thereof, (v) any sales, use, gross receipts or other
similar tax relating to the leasing of the FF&E by Landlord to Tenant pursuant
to this Lease, (vi) any single business tax, gross receipts tax, transaction,
privilege, rent or similar taxes as the same relate to or are imposed upon
Landlord, including, without limitation, any tax imposed on Landlord as a result
of this Lease, (vii) any interest or penalties imposed on Landlord as a result
of the failure of Landlord to file any return or report timely and in the form
prescribed by law or to pay any tax or imposition, except to the extent such
failure is a result of a breach by Tenant of its obligations pursuant to Section
3.1.3, (viii) any taxes or fees imposed on Landlord that are a result of
Landlord not being considered a "United States person" as defined in Section
7701(a)(30) of the Code, (ix) any taxes or fees that are enacted or adopted as a
substitute for any tax that would not have been payable by Tenant pursuant to
the terms of this Lease, (x) any taxes, fees or amounts required to be paid to
discharge Liens (a) imposed as a result of a breach of covenant or
representation by Landlord in any agreement with Tenant governing Landlord's
conduct or operation or (b) as a result of the gross negligence or willful
misconduct of Landlord in connection with its ownership of the Leased Property
or the performance of its obligations hereunder, or (c) securing any
indebtedness or obligations of Landlord, or (d) imposed in connection with any
other Landlord Obligations, (xi) any sales, use, occupancy or other similar tax
imposed in connection with payments made pursuant to this Lease, (xii) all rent
and other sums due from Landlord pursuant to any ground lease affecting the
Leased Property or any portion thereof, (xiii) all premiums for insurance for
which Landlord is responsible pursuant to Article 9 hereof, (xiv) all amounts
payable by Landlord under or pursuant to the Management Agreement with respect
to the Retained Obligations and/or the Continuing Obligations, (xv) any interest
and/or penalties incurred by Tenant as a result of Landlord's
-14-
failure to forward any invoices, assessment notices or other bills relating to
Impositions to Tenant, and (xvi) equipment rental costs that are treated as a
"Deduction" under the Management Agreement. "Landlord Obligations" shall not
include any sales, use, gross receipts, occupancy, single business, transaction,
privilege, rent, ad valorem or other tax not specifically enumerated herein.
1.119. "Lease Year" shall mean any consecutive annual period starting
on the Commencement Date and ending on the day prior to the anniversary thereof;
provided that if the Commencement Date is not the first (1st) day of a calendar
month, then the first (1st) Lease Year shall end on the last day of the calendar
month in which the Commencement Date occurs.
1.120. "Leased Property" shall have the meaning given such term in
Article 2.
1.121. "Legal Requirements" shall mean all applicable federal, state,
county, municipal and other governmental statutes, laws, rules, orders,
regulations, and ordinances, and all applicable judicial, administrative and
regulatory judgments, decrees and injunctions, affecting Tenant or the Leased
Property or the maintenance, construction, alteration or operation thereof,
whether now or hereafter enacted or in existence, including, without limitation,
(a) all permits, licenses, certificates of need, authorizations and regulations
necessary to operate the Leased Property for its Primary Intended Use and (b)
all covenants, agreements, restrictions and encumbrances contained in any
instruments either of record or actually known to Tenant (other than
encumbrances hereafter created by Landlord without the consent of Tenant) at any
time in force affecting the Leased Property, including those which may (i)
require material repairs, modifications or alterations in or to the Leased
Property or (ii) in any way materially adversely affect the use and enjoyment
thereof, but excluding any requirements arising as a result of Host REIT's
status as a real estate investment trust other than those set forth in Article
22 hereof.
1.122. "Lending Institution" shall mean any insurance company,
federally insured commercial or savings bank, national banking association,
savings and loan association, investment banking firm, employees' welfare,
pension or retirement fund or system, syndicated lenders' group, commercial
finance company, leasing company, 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 Tangible Net Worth of at least
$100,000,000.
1.123. "Licenses" shall have the meaning given such term in Section
5.3(d)(i).
1.124. "Lien" shall mean any mortgage, security interest, pledge,
collateral assignment, or other encumbrance, lien or charge of any kind
(including, without limitation, any easements, covenants, conditions and
restrictions), or any transfer of any property or assets for the purpose of
subjecting the same to an encumbrance, lien or charge securing the payment of
Indebtedness or performance of any other obligation in priority to payment of
any Person's general creditors.
-15-
1.125. [Intentionally Omitted.]
1.126. [Intentionally Omitted.]
1.127. [Intentionally Omitted.]
1.128. "Major Capital Expenditure" shall mean (a) any Capital
Expenditure expected to result in a significant change in the use of any portion
of the Facility intended to materially alter or enhance an existing use
(including, by way of example and not limitation, the conversion of a typical
hotel dining facility to a nationally-known, premium-quality restaurant); (b)
any and all Capital Expenditures with respect to one or more new
revenue-generating buildings, rooms, facilities, amenities, or structures
constituting any portion of the Facility (including, by way of example and not
limitation, the construction of a new wing or new story), or the renovation,
material expansion, construction, or conversion of existing improvements of the
Facility in order to increase the room capacity of the Facility, or to provide a
functionally new facility needed to provide services not previously offered; or
(c) any and all Capital Expenditures which, individually or in a series of
related expenditures, have a total cost of completion in excess of the lesser of
(i) seven and one-half percent (7.5%) of Gross Revenues for the Fiscal Year
ending immediately prior to such expenditure, or (ii) $5,000,000.
Notwithstanding the foregoing, in no event shall Major Capital Expenditures
include any room, lobby, or ballroom refurbishments in the ordinary course or
any other Routine Capital Expenditures.
1.129. "Management Agreement" shall mean the Management Agreement
described in Section 21.3.1.
1.130. "Manager" shall have the meaning given such term in Section
21.3.1.
1.131. "Market Leasing Factor" shall have the meaning given such term
in paragraph (e) of Schedule 22.2.
-------------
1.132. "Measurement Date" shall mean September 30th of each year during
the Term.
1.133. [Intentionally Omitted.]
1.134. "Minimum Rent" shall mean for each Fiscal Year the amount set
forth on Schedule 3.1.1, as may have been adjusted under the Original Lease
--------------
pursuant to Section 3.1.4 and/or Section 3.1.6 thereof, and as escalated
pursuant to Section 3.1.4 and/or 3.1.6 hereof.
1.135. [Intentionally Omitted.]
1.136. [Intentionally Omitted.]
1.137. "Notice" shall mean a notice given in accordance with Section
23.10.
1.138. "Officer's Certificate" shall mean a certificate signed by an
authorized officer of Tenant.
-16-
1.139. [Intentionally Omitted.]
1.140. "Operating Budget" shall have the meaning given such term in
Section 17.3.
1.141. "Operating Budget Summary" shall have the meaning given such
term in Section 17.3.
1.142. "Other Income" shall mean all revenues, receipts, and income of
any kind derived directly or indirectly by Tenant from or in connection with the
Facility and included in Gross Revenues other than Room Revenues and Food and
Beverages Sales (including, without limitation, gross revenue from rental
income, license fees, concession payments, or other amounts received from
subtenants, licensees and concessionaires, but excluding all exclusions from
Gross Revenues set forth in the definition thereof).
1.143. "Other Leases" shall mean any lease of a full service hotel,
other than this Lease, under which Host O.P. or a Host Subsidiary is the
lessor and a Host Subsidiary is the lessee.
1.144. "Other Tenants" shall mean the tenants under the Other Leases.
1.145. "Overdue Rate" shall mean, on any date, a per annum rate of
interest equal to the lesser of the Prime Rate plus two (2) percentage points
and the maximum rate then permitted under applicable law.
1.146. "Owner" shall have the meaning given such term in Section
21.3.1.
1.147. "Percentage Increase in CPI" shall mean, measured as of each
Measurement Date, the percentage increase, if any, in the Consumer Price Index
over the twelve (12) months preceding the Measurement Date.
1.148. "Percentage Increase in the Labor Index" shall mean, measured as
of each Measurement Date, the percentage increase, if any, in the Labor Index
over the twelve (12) months preceding the Measurement Date.
1.149. "Percentage Rent" shall mean the amount of Rent (excluding
Additional Charges) payable pursuant to Section 3.1.1 with respect to one or
more Accounting Periods or a Fiscal Year, as the case may be, in excess of
Minimum Rent payable for such period.
1.150. "Percentage Rent Schedule" shall have the meaning given such
term in Section 3.1.3(a).
1.151. "Period Report" shall have the meaning given such term in
Section 17.2(f).
1.152. "Permitted Debt" shall have the meaning given such term in
Section 21.6.3.
-17-
1.153. "Permitted Liens" shall mean (a) this Lease; (b) all rights,
restrictions, and easements of record as of the Commencement Date; (c) the
lessor's interest in any Excess FF&E leased to Tenant pursuant to [the Initial
FF&E Lease or] an Excess FF&E Lease and the lessor's interest in any other
furniture, fixtures or equipment leased to Tenant under any of the equipment
leases included in the Assigned Agreements or entered into by Tenant during the
Term; (d) security interests securing the purchase price of equipment or
personal property acquired by Tenant before or after the Commencement Date
(including, but not limited to, Excess FF&E owned by Tenant); provided, however,
that (i) any such Lien described in this clause (d) shall at all times be
confined solely to the asset in question, and (ii) the aggregate principal
amount of Indebtedness secured by any such Lien described in this clause (d)
shall not exceed the cost of acquisition of the property subject thereto; and
(e) any other Liens as may have been consented to in writing by Landlord, and,
if required pursuant to the Management Agreement, Manager, from time to time,
including, without limitation, those granted in accordance with Section 5.5
hereof.
1.154. "Person" shall mean any individual or Entity, and the heirs,
executors, administrators, legal representatives, successors and assigns of such
Person where the context so requires.
1.155. [Intentionally Omitted.]
1.156. [Intentionally Omitted.]
1.157. "Prepaid Expenses" shall have the meaning given such term in
Schedule 3.1.5(e).
- -----------------
1.158. "Primary Intended Use" shall have the meaning given such term in
Section 4.1.1.
1.159. "Prime Rate" shall mean the "prime rate" as published in the
"Money Rates" section of The Wall Street Journal; however, if such rate is, at
any time during the Term, no longer so published, the term "Prime Rate" shall
mean the average of the prime interest rates that are announced, from time to
time, by the three (3) largest banks (by assets) headquartered in the United
States which publish a "prime rate."
1.160. "Qualified Affiliate" shall mean (i) Host O.P., (ii) any Person
directly or indirectly wholly-owned by Host O.P. or (iii) if approved in writing
by Manager prior to the consummation of any transaction as to which this
definition is relevant, which approval may be granted or withheld by Manager in
its sole discretion, any Person directly or indirectly controlled by Host O.P.,
where "control" means the possession, direct or indirect, of the power to direct
or cause the direction of the management policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
1.161. "Qualified Appraiser" shall mean an appraiser who is not in
control of, controlled by or under common control with either Landlord or Tenant
or any Affiliate of Landlord or Tenant and has not been an employee of Landlord
or Tenant or any Affiliate of Landlord or Tenant within the past two (2) years,
who is qualified to appraise
-18-
commercial real estate in the State and is a member of the American Institute of
Real Estate Appraisers (or any successor association or body of comparable
standing if such institute is not then in existence).
1.162. "Real Estate Taxes" shall mean all real estate taxes, including
general and special assessments and impact fees, if any, which are imposed upon
or relate to the Land and any improvements thereon, including, without
limitation, the following:
(a) any franchise, corporate, estate, inheritance, succession, or
capital levy imposed on Landlord;
(b) special assessments (regardless of when due or whether they are
paid as a lump sum or in installments over time) imposed because of facilities
that are constructed by or on behalf of the assessing jurisdiction (i.e., roads,
sidewalks, sewers, culverts, etc.), which directly benefit the Facility
(regardless of whether or not they also benefit other buildings);
(c) impact fees (regardless of when due or whether they are paid as
a lump sum or in installments over time) that are required of Landlord as a
condition to the issuance of site plan approval, zoning variances or building
permits; and
(d) tax-increment financing or similar financing whereby the
municipality or other taxing authority has assisted in financing the
construction of the Facility by temporarily reducing or abating normal
impositions in return for substantially higher levels of impositions at later
dates.
1.163. "Related Agreements" shall have the meaning given such term in
Section 23.15.
1.164. "Rent" shall mean, collectively, Minimum Rent, Percentage Rent,
and Additional Charges attributable to the Term of this Lease.
1.165. "Replacement Cost" shall have the meaning given such term in
Section 9.3.
1.166. "Retained Obligations" shall have the meaning given such term in
Section 21.3.1.
1.167. "Revenue Data Publication" shall mean Smith's STAR Report, a
monthly publication distributed by Smith Travel Research, Inc., of Gallatin,
Tennessee, or an alternative source, reasonably satisfactory to both parties, of
data regarding the REVPAR of hotels in the general trade area of the Facility.
If such Smith's STAR Report is discontinued in the future, or ceases to be a
satisfactory source of data regarding the REVPAR of various hotels in the
general trade area of the Facility (as provided in the Management Agreement),
Tenant shall select, or shall cause Manager to select, an alternative source in
accordance with the Management Agreement.
1.168. "Revenues Computation" shall have the meaning given such term in
Section 3.1.2(a).
-19-
1.169. "REVPAR" shall mean (i) the term "revenue per room" as defined
by the Revenue Data Publication or (ii) if the Revenue Data Publication is no
longer being used (as more particularly set forth in the definition of "Revenue
Data Publication"), the aggregate gross room revenues of the hotel in question
for a given period of time divided by the total room nights of such hotel for
such period. If clause (ii) of the preceding sentence is being used, a "room"
shall be a hotel guestroom which is keyed as a single unit and shall include
rooms that are temporarily unavailable due to maintenance or ongoing renovation
work.
1.170. "Room Revenues" shall mean gross revenues from the rental of
guest rooms, whether to individuals, groups, or transients at the Facility,
determined in a manner consistent with GAAP, excluding the following:
(a) the amount of all credits, rebates or refunds to customers,
guests or patrons;
(b) all sales taxes or any other taxes imposed on the rental of such
guest rooms;
(c) any fees collected for amenities including, but not limited to,
telephone, room service, laundry, movies or concessions.
1.171. "Routine Capital Expenditures" shall mean exterior and interior
repainting, resurfacing of building walls, floors, roof and parking areas,
replacing folding walls, and other on-going routine Capital Expenditures the
cost of which is to be paid for by the Manager out of the FF&E Reserve.
1.172. "SEC" shall mean the Securities and Exchange Commission.
1.173. "Second Tier Food and Beverages Sales Percentage" shall have the
meaning given such term in Section 3.1.2(b)(2).
1.174. "Second Tier Other Income Percentage" shall have the meaning
given such term in Section 3.1.2(b)(2).
1.175. "Second Tier Room Revenue Percentage" shall have the meaning
given such term in Section 3.1.2(b)(2).
1.176. "Security Agreement" shall have the meaning given such term in
Section 7.2.
1.177. "Single Purpose" means, with respect to a Person, that such
Person, (A) at all times since its formation, except as otherwise permitted in
or contemplated by this Agreement (i) has been a duly formed and existing
limited partnership, limited liability company, or corporation, as the case may
be; (ii) has observed all customary formalities regarding its partnership,
limited liability company or corporate existence; (iii) has maintained financial
statements, accounting records, and other partnership, limited liability
company, or corporate documents separate from those of any other Person
(provided that nothing shall prohibit such Person from being included in the
consolidated
-20-
financial statements or tax group of another Person); (iv) has not commingled
its assets with those of any other Person; (v) has paid its own liabilities out
of its own funds, including funds contributed to its capital by its equity
holders, and all such capital contributions have been reflected properly in its
books and records; (vi) has allocated fairly and reasonably any overhead for
shared office expenses; (vii) has identified itself in all dealings with the
public, under its own name and as a separate and distinct entity (provided that
nothing shall prohibit such Person from engaging an agent to represent such
Person with respect to tenants, vendors, and other parties, in accordance with
standard industry practice); (viii) has not identified itself as being a
division or part of any other Person; (ix) has not identified any other Person
as being a division or part of such Person; (x) has corrected any known
misunderstanding regarding its separate identity; (xi) has been adequately
capitalized in light of the nature of its business; (xii) has not assumed or
guaranteed the obligations of any other Person (other than by virtue of being a
general partner of such other Person but only if such other Person is Tenant and
provided that this clause shall not be deemed to be violated by reason of joint
and several liabilities arising as a matter of law); and (xiii) has not engaged
in any other business other than as permitted by this Lease (provided that
nothing shall prohibit a general partner from acquiring, owning, and disposing
of limited partner interests in any limited partnership, non-managing membership
interests in a limited liability company, or debt securities issued by any
Person, or the stock of a corporation that is not engaged in any activities
other than such activities, provided that no liabilities or other obligations on
the part of the holder of such investments will arise as a result of such
investments and the only rights of the holder of such investment are the right
to receive payments and the right to vote); (B) such Person agrees to covenants
substantially to the effect of Sections 7.1 and 21.6 hereof; and (C) such
Person's organizational documents contain restrictions similar to those
contained in Sections 5.14 (only paragraphs a, b, c, d and g thereof), 10.01,
10.02, and 10.03 of the Limited Liability Company Operating Agreement of Tenant
as in effect on the date hereof.
1.178. "Soft Goods" shall mean all fabric, textile and flexible plastic
products (not including items that are classified as "Fixed Asset Supplies"
under the Uniform System), which are used in furnishing the Facility, including,
without limitation, carpeting, drapes, bedspreads, wall and floor coverings,
mats, shower curtains and similar items.
1.179. "Special Form" shall have the meaning given such term in Section
9.1(b).
1.180. "State" shall mean the state, commonwealth, district, or, if the
Leased Property is not located in the United States, the country, in which the
Leased Property is located.
1.181. "Subsidiary" shall mean, as to any Person, (i) any corporation
more than fifty percent (50%) of whose stock of any class or classes having by
the terms thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the time stock of any class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time owned by such Person or one
or more Subsidiaries of such Person and (ii) any partnership,
-21-
limited liability company, association, joint venture or other entity in which
such Person or one or more Subsidiaries of such Person has more than a fifty
percent (50%) equity interest at the time.
1.182. "Successor Landlord" shall have the meaning given such term in
Section 20.2.
1.183. "Superior Landlord" shall have the meaning given such term in
Section 20.2.
1.184. "Superior Lease" shall have the meaning given such term in
Section 20.2.
1.185. "Superior Mortgage" shall have the meaning given such term in
Section 20.2.
1.186. "Superior Mortgagee" shall have the meaning given such term in
Section 20.2.
1.187. "Tangible Net Worth" of any Person shall mean, on any date,
without duplication, (a) the sum of the shareholders' equity of such Person on a
consolidated basis in accordance with GAAP minus (b) the sum of all Intangible
Assets (net of accumulated amortization) of such Person and its Subsidiaries,
each as shown on the consolidated balance sheets of such Person.
1.188. [Intentionally Omitted.]
1.189. "Tenant" shall have the meaning given such term in the preamble
to this Lease.
1.190. "Tenant Indemnitee" shall have the meaning given such term in
Section 4.3.2.
1.191. "Tenant's Operating Profit" shall equal for any Fiscal Year the
amount equal to revenues due to Tenant from the Leased Property after the
payment of all expenses relating to the operation or leasing of the Leased
Property less Rent paid to Landlord, but in any event not less than $1.00.
1.192. "Tenant's Personal Property" shall mean all tangible and
intangible personal property now owned, leased or hereafter acquired by Tenant
on or after the date hereof, including, without limitation, Working Capital,
Excess FF&E owned by Tenant, Excess FF&E Leasehold Interests, and all contracts
and agreements to which Tenant is a party used in the operation of the Facility,
but expressly excluding (a) FF&E leased hereunder, (b) Excess FF&E leased during
the Term hereof by Tenant [and (c) FF&E leased pursuant to the Initial FF&E
Lease, if any.]
1.193. "Term" shall have the meaning given such term in Section 2.4,
unless sooner terminated pursuant to the terms of this Lease.
-22-
1.194. "Third-Party Purchaser" shall have the meaning given such term
in paragraph (b) of Schedule 22.2.
1.195. "Third Tier Food and Beverages Sales Percentage" shall have the
meaning given such term in Section 3.1.2(b)(2).
1.196. "Third Tier Room Revenue Percentage" shall have the meaning
given such term in Section 3.1.2(b)(2).
1.196A "TRS" shall mean (i) HMT Lessee LLC, a Delaware limited
liability company, and (ii) any Qualified Affiliate that is a direct or indirect
successor to HMT Lessee LLC as the direct or indirect owner of the membership
interest in Tenant.
1.197. "Trustee" shall have the meaning given such term in Section
16.1.
1.198. "Unavoidable Delay" shall mean delay due to strikes, acts of
God, force majeure, governmental restrictions or actions (including the
revocation or refusal to grant Licenses or permits, where such revocation or
refusal is not due to the fault of the party whose performance is excused by
reason of such Unavoidable Delay), enemy action, civil commotion, fire,
unavoidable Casualty, condemnation or other comparable causes beyond the
reasonable control of Landlord or Tenant; provided, however, that lack of funds
shall not be deemed a cause beyond the reasonable control of a party, unless
such lack of funds is caused by the breach of the other party's obligations
under this Lease.
1.199. "Uniform System" shall mean the Uniform System of Accounts for
the Lodging Industry (9th Revised Edition 1996) as published by the Hotel
Association of New York City, Inc., as the same may hereafter be revised.
1.200. "Unsuitable for Its Primary Intended Use" shall mean a state or
condition of the Facility such that (a) following any damage or destruction
involving the Leased Property, the Leased Property cannot reasonably be expected
to be restored within twelve (12) months following such damage or destruction to
substantially the same condition as existed immediately before such damage or
destruction or (b) as the result of a partial taking by Condemnation, 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, the amount of square footage, or the revenues affected by such
damage, destruction, or partial taking.
1.201. "Working Capital" shall have the meaning given such term in
Section 4.5.
1.202. "Working Capital Note" shall have the meaning given such term in
Section 4.5.
1.203. "Year End Percentage Rent Schedule" shall mean the Percentage
Rent Schedule covering the immediately preceding full Fiscal Year delivered in
accordance with Section 17.2(e).
-23-
ARTICLE 2
COLLECTIVE LEASED PROPERTY AND TERM
2.1 Leased Property.
Upon and subject to the terms and conditions hereinafter set
forth, including, but not limited to, the execution, delivery and performance of
the terms and conditions of the Consent and Assignment, and subject to the
rights of any Facility Mortgagee and any Superior Landlord, Landlord leases to
Tenant and Tenant leases from Landlord, effective as of the Commencement Date,
all of Landlord's right, title, and interest in and to the following
(collectively, the "Leased Property"):
(a) those certain tracts, pieces and parcels of land that are
more particularly described in Exhibit A attached hereto (together with all and
singular the rights and appurtenances pertaining to such tracts and parcels,
including any right, title and interest of Landlord in and to any easements
benefiting the Leased Property, adjacent strips or gores, streets, alleys or
rights-of-way, and all rights of ingress and egress thereto) (the foregoing are
hereinafter referred to collectively as the "Land");
(b) all buildings, structures, and other improvements of every
kind situated upon the Land, including, but not limited to, all Capital
Expenditures, alleyways and connecting tunnels, sidewalks, utility pipes,
conduits and lines (onsite and offsite), parking areas and appurtenant roadways,
all luxury apartments, all swimming pools, restaurants, hotel rooms, lounges,
and various other guest and spa facilities (collectively, the "Facility");
(c) all easements, rights and appurtenances relating to the Land
and the Facility;
(d) all equipment, machinery, and other items of property, now
or hereafter permanently affixed to or incorporated into the Facility,
including, without limitation, all lift systems, furnaces, boilers, heaters,
electrical equipment, heating, plumbing, lighting, ventilating, refrigerating,
incineration, air and water pollution control, waste disposal, air-cooling and
air-conditioning systems and apparatus, sprinkler systems, and fire and theft
protection equipment, all of which, to the maximum extent permitted by law, are
hereby deemed by the parties hereto to constitute real estate, together with all
replacements, modifications, alterations and additions thereto, but specifically
excluding Tenant's Personal Property (collectively, the "Fixtures"); and
(e) the FF&E owned by Landlord located in or on the Facility or
stored offsite and designated for use in connection with any present or future
occupation or operation of the Facility, together with all replacements,
modifications, alterations and additions thereto, but specifically excluding any
Excess FF&E not owned by Landlord and Tenant's Personal Property.
-24-
2.2 Assignment and Assumption of Contracts; Initial Transaction.
(a) Effective upon the Commencement Date, Landlord
transferred and assigned to Tenant and Tenant assumed and covenanted to perform
all of Landlord's obligations under the following agreements and contracts to
which the Leased Property was subject on the Commencement Date, to the maximum
extent assignable pursuant to applicable law (the "Assigned Agreements"):
(i) All contracts for the use or occupancy of guest
rooms and/or the meeting, dining, banquet, and spa and health facilities of the
Facility;
(ii) All service and maintenance contracts, equipment
leases, purchase orders and other contracts pertaining to the ownership,
maintenance, operation, provisioning or equipping of the Facility, including
warranties and guaranties relating thereto;
(iii) All Licenses and permits used in or relating to
the ownership, occupancy or operation of any part of the Facility;
(iv) Any developer's, declarant's, or owner's
interests under any operating agreements or reciprocal easement agreements or
other similar agreements affecting and/or benefiting the Facility;
(v) Landlord's interest as owner under the
Management Agreement as and to the extent provided in the Consent and
Assignment; and
(vi) All leases of space (including any security
deposits held by Landlord pursuant thereto, which were paid over to Tenant by
check on the Commencement Date, or credited to Tenant against the cost of the
Working Capital sold to Tenant pursuant to Section 4.5) in the Facility to
tenants thereof, excluding those leases set forth on Schedule 2.2(a)(vi)
-------------------
attached hereto.
This Lease is executed by Landlord and accepted by
Tenant on the understanding that Tenant will and does hereby assume and agree to
perform all of Landlord's obligations arising from and after the Commencement
Date under all of the Assigned Agreements (except to the extent otherwise
provided with respect to the Management Agreement in the Consent and
Assignment). With respect to the Management Agreement referred to in clause (v)
above, Landlord shall be responsible for any deferred management fees that
accrued prior to the Commencement Date, whenever they become payable; and Tenant
shall be responsible for any deferred management fees that accrue during the
Term; and, upon the expiration or earlier termination of the Term, Tenant shall
pay to Landlord or to Landlord's designee the amount of any deferred management
fees that accrue and remain unpaid during the Term. In connection with the
Licenses and permits described in clause (iii) above and the Management
Agreement referred to in clause (v) above, Landlord shall be obligated (a) to
take any action that can legally or contractually be taken only by it and not
Tenant, (b) not to take any action that is not permitted by, or is contrary to
the terms of, such Licenses or permits or the Management Agreement, and (c) to
cooperate with Tenant as to actions that must be taken
-25-
in Landlord's name. Notwithstanding the foregoing but subject to Section
5.3(d)(ii) hereof, such Assigned Agreements shall, without the necessity of
further documentation, be deemed reassigned to (and reassumed by) Landlord upon
the expiration or earlier termination of the Term. In connection with any
reassignment thereof occurring following the expiration or earlier termination
of the Term, such reassignment shall not release Tenant from any liability
thereunder with respect to the period beginning on the Commencement Date and
ending on the date of expiration or earlier termination of the Term.
(b) As between Landlord and Tenant, Landlord shall be
entitled to all income and shall be responsible for the payment or settlement of
all expenses of the Leased Property accruing prior to the Commencement Date and
after the expiration or earlier termination of the Term. Tenant shall act as
Landlord's agent for the collection of all such income and shall remit the same
to Landlord promptly upon Tenant's receipt thereof. Tenant shall notify Landlord
of all such expenses and shall act as Landlord's payment agent for such expenses
using funds provided by Landlord from time to time.
2.3 Condition of Leased Property.
Tenant acknowledges receipt and delivery of possession of the
Leased Property. Subject to the warranty of title hereinafter set forth and the
indemnifications by Landlord set forth in Sections 4.3.2, 9.9 and 21.3.3 hereof,
Tenant accepts the Leased Property in its "as is" condition, subject to the
rights of all occupants and parties in possession, the existing state of title,
including all covenants, conditions, restrictions, reservations, mineral leases,
easements and other matters of record or that are visible or apparent on the
Leased Property, all applicable Legal Requirements, the lien of financing
instruments, mortgages and deeds of trust, and such other matters which would be
disclosed by an inspection of the Leased Property and the record title thereto
or by an accurate survey thereof, and all other Permitted Liens. TENANT
REPRESENTS THAT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS LEASE, IT IS NOT
RELYING ON ANY REPRESENTATION OR WARRANTY OF LANDLORD OR LANDLORD'S AGENTS OR
EMPLOYEES WITH RESPECT TO THE CONDITION OF THE LEASED PROPERTY, AND EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED IN THIS LEASE TENANT WAIVES ANY CLAIM OR ACTION
AGAINST LANDLORD IN RESPECT THEREOF. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
THIS LEASE, LANDLORD 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, OR AS
TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT
BEING AGREED THAT EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS LEASE, ALL SUCH
RISKS ARE TO BE BORNE BY TENANT. NOTWITHSTANDING THE FOREGOING, LANDLORD HEREBY
WARRANTS ITS [FEE/LEASEHOLD] TITLE TO THE LEASED PROPERTY TO TENANT, SUBJECT TO
THE PERMITTED LIENS; PROVIDED, HOWEVER, THAT IN NO EVENT SHALL THE AMOUNT
RECOVERABLE BY TENANT FOR ANY BREACH OF SUCH WARRANTY EXCEED TENANT'S
PROPORTIONATE SHARE OF THE NET AMOUNT ACTUALLY COLLECTED BY LANDLORD UNDER
LANDLORD'S EXISTING TITLE INSURANCE POLICIES, AFTER TAKING INTO
-26-
ACCOUNT THE AMOUNTS EXPENDED BY LANDLORD TO RECOVER THE AMOUNT COLLECTED AND THE
AMOUNT OF ANY FEES OWED TO MANAGER RESULTING FROM BREACH OF SUCH WARRANTY.
TENANT'S PROPORTIONATE SHARE FOR THE PURPOSES OF THE PRECEDING SENTENCE SHALL BE
EQUAL TO THE FRACTION, EXPRESSED AS A PERCENTAGE, OBTAINED BY DIVIDING THE FAIR
MARKET VALUE OF TENANT'S LEASEHOLD ESTATE AS DETERMINED IN ACCORDANCE WITH
SECTION 24.1(b) BELOW BY THE FAIR MARKET VALUE OF THE LEASED PROPERTY AS
DETERMINED BY ARTICLE 19. LANDLORD AGREES TO DILIGENTLY PURSUE THE TITLE COMPANY
OR COMPANIES PROVIDING THE EXISTING TITLE INSURANCE IN THE EVENT IT IS
DETERMINED THAT THERE IS A DEFECT IN LANDLORD'S TITLE TO THE LEASED PROPERTY.
TENANT SHALL FULLY COOPERATE WITH LANDLORD IN THE PROSECUTION OF ANY SUCH
CLAIMS, IN LANDLORD'S OR TENANT'S NAME, ALL AT LANDLORD'S SOLE COST AND EXPENSE.
2.4 Term.
2.4.1 Term. The term of this Lease (the "Term") shall commence
on the Commencement Date and shall expire at 11:59 p.m. on the last day of the
[tenth (10th)] Lease Year, unless sooner terminated pursuant to the terms of
this Lease; provided that, subject to the terms of Article 13, the Term shall
also include any period of holding over by Tenant and any Renewal Term.
2.4.2 Renewal Option. Landlord hereby grants to Tenant the
right, exercisable at Tenant's option, subject to Section 20.5(c) (a "Tenant
Renewal Option"), to renew the term of this Lease for _____ additional terms of
seven (7) years each (each a "Renewal Term") at the Fair Market Rental as of the
commencement of each such Renewal Term. If exercised, and if the conditions
applicable thereto have been satisfied, the first Renewal Term shall commence
immediately upon the expiration of the initial term hereof, and each succeeding
Renewal Term shall commence immediately upon the expiration of the preceding
term. The rights of renewal herein granted to Tenant shall be subject to, and
shall be exercised in accordance with, the following terms and conditions:
(a) Tenant shall exercise its right with respect to each
Renewal Term by giving Landlord Notice thereof during the month of April of the
year immediately preceding the scheduled commencement of such Renewal Term (the
"Renewal Notice").
(b) If the Renewal Notice is not timely given with respect
to any Renewal Term, then Tenant's rights of renewal pursuant to this Section
2.4.2 shall lapse and be of no further force or effect with respect to all
remaining Renewal Terms.
(c) Landlord shall be entitled to terminate all unexercised
Tenant Renewal Options by providing Notice to Tenant thereof at any time during
the calendar month of March of the year immediately preceding a year in which a
Renewal Term is scheduled to commence.
(d) Landlord and Tenant shall use commercially reasonable
efforts to negotiate and jointly determine the Fair Market Rental to be
effective during any Renewal
-27-
Term by no later than March 31st of the year immediately preceding such Renewal
Term. In the event Landlord and Tenant are unable to agree on the Fair Market
Rental for a Renewal Term prior to Tenant's exercise of its Tenant Renewal
Option, the Fair Market Rental shall be determined in accordance with the
appraisal procedures set forth in Article 19 by no later than August 1st of the
year immediately preceding the applicable Renewal Term.
(e) The components of Fair Market Rental, including Minimum
Rent and Revenue Percentages and Break Points, determined as set forth in
subparagraph (d), shall be set forth in revised Schedules 3.1.1 and 3.1.2, which
Schedules shall, upon commencement of the applicable Renewal Term, be attached
to the Lease and shall supersede such Schedules as were effective prior thereto.
(f) In order for Tenant to exercise the Tenant Renewal
Option, at the time Tenant exercises such option, Tenant must meet the criteria
for being an "Approved Tenant" as defined in the Consent and Assignment, and any
exercise in violation of this Section 2.4.2(f) shall be null and void and of no
force or effect, at law or equity.
ARTICLE 3
RENT
3.1 Rent.
Tenant shall pay to Landlord, in lawful money of the United
States of America which shall be legal tender for the payment of public and
private debts, without offset, abatement, demand or deduction, Minimum Rent,
Percentage Rent and Additional Charges, during the Term, except as hereinafter
expressly provided. All payments to Landlord shall be made by wire transfer of
immediately available federal funds or by other means reasonably acceptable to
Landlord in its sole discretion.
3.1.1 Payment of Rent.
On or before the second (2nd) Business Day after the
required payment date under the Management Agreement for amounts due from
Manager thereunder relating to each Accounting Period (whether or not such
payment under the Management Agreement is made on the required payment date),
Tenant shall pay to Landlord an amount of Rent equal to the excess, if any, of
(A) the greater of (i) the product of (x) the Minimum Rent for the current
Fiscal Year times (y) a fraction, the numerator of which is the number of
elapsed Accounting Periods in such Fiscal Year (including the Accounting Period
with respect to which payment of Rent is being made) and the denominator of
which is 13 (or 12, if the Accounting Periods are then calendar months) or (ii)
the Revenues Computation for such Fiscal Year (determined in accordance with
Section 3.1.2), over (B) the aggregate amount of Rent previously paid pursuant
to this Section 3.1.1 during such Fiscal Year (less the aggregate amount
previously paid by Landlord to Tenant pursuant to the next sentence in this
Section 3.1.1 during such Fiscal Year). In the event that the amount specified
in clause (A) is less than the amount specified in clause (B) as of any payment
date, then Landlord will promptly pay to Tenant the difference in cash. In the
event of a change in the Accounting Period during the Term
-28-
which results in payment dates (and/or number of payments) different from the
payment dates (and/or number of payments) provided for herein, the amount of
subsequent installments of Minimum Rent shall be appropriately adjusted in a
fair and equitable manner. In the absence of agreement between Landlord and
Tenant on the appropriate adjustments, the matter may be submitted by either
party to arbitration under Article 15 for resolution.
3.1.2 Revenues Computation.
(a) The "Revenues Computation" for the applicable
Fiscal Year shall be the sum of the following amounts:
(1) an amount equal to the product of (a) the
First Tier Room Revenue Percentage times
(b) all year-to-date Room Revenues up to
(but not exceeding) the Cumulative Portion
of the Annual Room Revenues First Break
Point,
(2) an amount equal to the product of (a) the
Second Tier Room Revenue Percentage times
(b) all year-to-date Room Revenues in
excess of the Cumulative Portion of the
Annual Room Revenues First Break Point up
to (but not exceeding) the Cumulative
Portion of the Annual Room Revenues Second
Break Point,
(3) an amount equal to the product of (a) the
Third Tier Room Revenue Percentage times
(b) all year-to-date Room Revenues in
excess of the Cumulative Portion of the
Annual Room Revenues Second Break Point,
(4) an amount equal to the product of (a) the
First Tier Food and Beverages Sales
Percentage times (b) all year-to-date Food
and Beverages Sales up to (but not
exceeding) the Cumulative Portion of the
Annual Food and Beverages Sales First Break
Point,
(5) an amount equal to the product of (a) the
Second Tier Food and Beverages Sales
Percentage times (b) all year-to-date Food
and Beverages Sales in excess of the
Cumulative Portion of the Annual Food and
Beverages Sales First Break Point up to
(but not exceeding) the Cumulative Portion
of the Annual Food and Beverages Sales
Second Break Point,
(6) an amount equal to the product of (a) the
Third Tier Food and Beverages Sales
Percentage times (b) all year-to-date Food
and Beverages Sales in excess of the
Cumulative Portion of the Annual Food and
Beverages Sales Second Break Point,
-29-
(7) an amount equal to the product of (a) the
First Tier Other Income Percentage times
(b) all year-to-date Other Income up to
(but not exceeding) the Cumulative Portion
of the Annual Other Income Break Point, and
(8) an amount equal to the product of (a) the
Second Tier Other Income Percentage times
(b) all year-to-date Other Income in excess
of the Cumulative Portion of the Annual
Other Income Break Point.
(b) The Revenues Computation shall be computed
utilizing the following definitions:
(1) "Cumulative Portion" shall mean a fraction
having as its numerator the total number of
days in the Fiscal Year which have elapsed
through the last day of the Accounting
Period with respect to which a payment of
Minimum Rent or Percentage Rent is due, and
having as its denominator the total number
of days in the Fiscal Year.
(2) "First Tier Room Revenue Percentage,"
"Second Tier Room Revenue Percentage,"
"Third Tier Room Revenue Percentage,"
"First Tier Food and Beverages Sales
Percentage," "Second Tier Food and
Beverages Sales Percentage," "Third Tier
Food and Beverages Sales Percentage,"
"First Tier Other Income Percentage," and
"Second Tier Other Income Percentage" shall
mean the percentages set forth on Schedule
--------
3.1.2.
-----
(3) "Annual Room Revenues First Break Point,"
"Annual Room Revenues Second Break Point,"
"Annual Food and Beverages Sales First
Break Point," "Annual Food and Beverages
Sales Second Break Point," and "Annual
Other Income Break Point" shall mean the
amounts set forth on Schedule 3.1.2, as may
--------------
have been adjusted under the Original Lease
pursuant to Section 3.1.4 and/or Section
3.1.6 thereof, and as escalated pursuant to
Section 3.1.4 and/or 3.1.6 hereof.
3.1.3 Confirmation of Percentage Rent.
(a) Tenant shall submit to Landlord on each rental
payment date pursuant to Section 3.1.1 a reasonably detailed schedule (the
"Percentage Rent Schedule"), signed and certified by Tenant to be correct,
showing the Revenues Computation with respect to the Facility for the preceding
Accounting Period and the calculation of the amount of Rent owed on such date
(other than Additional Charges) by Tenant or the amount Landlord is required to
pay to Tenant for such Accounting Period.
-30-
Tenant's Percentage Rent Schedule shall clearly indicate how much of the Gross
Revenues is comprised by Room Revenues, Food and Beverages Sales and Other
Income, and shall contain such detail and breakdown as Landlord may reasonably
require. If, after notice from Landlord and the expiration of the cure period
provided for in Section 12.1(c) of this Lease, Tenant fails to submit the
Percentage Rent Schedule to Landlord when due, Landlord, in addition to any
other remedies Landlord has, shall have the right (subject to compliance with
the Management Agreement and the Consent and Assignment) to retain an
independent certified public accountant, at Tenant's sole expense, to prepare
such Percentage Rent Schedule and to perform all inspections and audits related
thereto.
(b) Tenant shall maintain in accordance with the
usual and customary practices of Tenant and in accordance with GAAP during the
Term, for the current Fiscal Year and for the immediately preceding Fiscal Year,
(i) complete and accurate general books of account, which shall reflect Gross
Revenues and which shall include, without limitation, those items set forth and
described on Schedule 3.1.3(b) hereof, and (ii) all other original records and
-----------------
other pertinent papers that will enable Landlord to determine the Gross Revenues
derived by Tenant during the relevant Fiscal Year from Room Revenues, Food and
Beverages Sales and Other Income. Such records for the current and most recent
Fiscal Year shall be maintained at Tenant's corporate headquarters. The
provisions of this Section 3.1.3(b) shall survive the expiration or earlier
termination of this Lease for a period of three (3) years thereafter, subject to
extension upon Notice from Landlord, provided that all storage and related
expenses of maintaining records beyond such three-year period shall be at
Landlord's sole cost and expense. In addition to the audit rights set forth in
Section 3.1.3(c) below, in the event Landlord, any Lending Institution, any
Facility Mortgagee, or any potential purchaser of the Leased Property, or any of
their respective representatives, desires to audit Tenant's financial records
described in clauses (i) and (ii) above, Tenant shall, at Landlord's sole cost
and expense, cooperate with such audit by making such records available at
Tenant's corporate headquarters during normal business hours upon reasonable
prior Notice.
(c) Landlord shall have fifty (50) days after the
receipt of the Year End Percentage Rent Schedule to have an independent
certified public accountant examine Tenant's records, during regular business
hours upon reasonable prior Notice by Landlord, of Room Revenues, Food and
Beverages Sales, and/or Other Income for the related Fiscal Year and all other
relevant financial information. The acceptance by Landlord of each periodic
payment of Percentage Rent shall not prejudice Landlord's right to proceed with
such examination as described in the immediately preceding sentence. If Landlord
raises no objections within such fifty (50)-day period, the Year End Percentage
Rent Schedule shall be deemed to have been accepted by Landlord as true and
correct, and Landlord shall have no further right to question its accuracy.
Notwithstanding the foregoing, if the Owner (as defined in the Management
Agreement) has less than sixty (60) days to review the annual operating
statement under the Management Agreement, the fifty (50) day period set forth
above shall be reduced to a number of days equal to (i) the number of days Owner
has to review the annual operating statement under the Management Agreement,
less (ii) five (5) days. If Landlord does raise such an objection, by Notice to
Tenant, Landlord shall arrange for an independent certified public accountant to
commence such examination within fifty (50) days after the date of such
objection and shall cause such audit to be completed no later than one hundred
eighty (180) days after Landlord's receipt
-31-
of the Year End Percentage Rent Schedule. Landlord shall pay all costs and
expenses of such audit; provided, however:
(i) if such audit discloses that the amount of Percentage
Rent was underreported by Tenant by five percent (5%) or more for such
Fiscal Year, Tenant shall pay to Landlord, within fifteen (15) days of
its receipt of Notice from Landlord, the cost of the audit, as
Additional Charges, in addition to any deficiency in Percentage Rent
that may be due to Landlord; or
(ii) if the audit discloses that the amount of Percentage
Rent either was not underreported or was underreported by Tenant by less
than five percent (5%), Landlord shall be responsible for all costs
associated with the audit and Tenant shall pay, within fifteen (15) days
of its receipt of Notice from Landlord, any deficiency in Percentage
Rent that may be due to Landlord; or
(iii) if the audit discloses that the Percentage Rent was
overreported by Tenant for the related Fiscal Year, Landlord shall be
responsible for all costs associated with the audit, shall give Tenant
Notice of such overreporting within fifteen (15) days of Landlord's
receipt of audit results, and shall reimburse the amount of such
overpayment to Tenant in cash along with delivery of such Notice to
Tenant.
(iv) The provisions of this Section 3.1.3(c) shall survive
the expiration or the earlier termination of this Lease for a period of
one (1) year thereafter.
3.1.4 Annual Adjustments.
Upon the commencement of each Fiscal Year during the Term
beginning with the second Fiscal Year, each of the Minimum Rent, the Annual Room
Revenues First Break Point, the Annual Food and Beverages Sales First Break
Point, the Annual Other Income Break Point, the Annual Food and Beverages Sales
Second Break Point and the Annual Room Revenues Second Break Point shall be
increased by the amount of the applicable Annual Adjustment.
In no event shall the Minimum Rent, the Annual Room Revenues
First Break Point, Annual Food and Beverages Sales First Break Point, the Annual
Room Revenues Second Break Point, the Annual Food and Beverages Sales Second
Break Point, or the Annual Other Income Break Point be reduced as a result of
the Annual Adjustment. The Annual Adjustment described above shall be effective
on the first day of the new Fiscal Year. If Rent for the new Fiscal Year is paid
prior to the determination of the amount of the Annual Adjustment, whether
because of a delay in the publication of the Consumer Price Index or the Labor
Index applicable for the Measurement Date or because of any other reason,
payment adjustments for any shortfall in Rent paid shall be made with the first
Minimum Rent and Percentage Rent payments due after the Annual Adjustment is
determined.
-32-
If (1) a significant change is made in the number or nature (or
both) of items used in determining the Consumer Price Index or the Labor Index
or (2) the Consumer Price Index or Labor Index shall be discontinued for any
reason, the Bureau of Labor Statistics shall be requested to furnish a new index
comparable to the Consumer Price Index or Labor Index, together with information
that will make possible a conversion to the new index in computing the Annual
Adjustment. If for any reason the Bureau of Labor Statistics does not furnish
such an index and information, the parties will instead mutually select, accept
and use such other indexes or comparable statistics on the cost of living and
cost of labor in various United States cities that is computed and published by
an agency of the United States or a responsible financial periodical of
recognized authority.
3.1.5 Additional Charges.
In addition to the Minimum Rent and Percentage Rent payable
hereunder, Tenant shall pay and discharge as and when due and payable the
following (collectively, "Additional Charges"):
(a) Impositions. Subject to Article 8 relating to Permitted
-----------
Contests and the right of any Facility Mortgagee to require tax escrows as
described in the last sentence of this paragraph of subsection (a), Tenant shall
pay or cause to be paid all Impositions attributable to any period during the
Term before any fine, penalty, interest or cost (other than any opportunity cost
as a result of a failure to take advantage of any discount for early payment)
may be added for nonpayment, such payments to be made directly to the taxing
authorities where feasible, and shall promptly, upon request, furnish to
Landlord copies of official receipts or other satisfactory proof evidencing such
payments. 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), Tenant may exercise the option to pay the same (and any
accrued interest on the unpaid balance of such Imposition) in installments and,
in such event, shall pay such installments during the Term as the same become
due and before any fine, penalty, premium, further interest or cost may be added
thereto. Landlord, at its expense, shall, to the extent required or permitted by
Legal Requirements, prepare and file all tax returns required to be filed by
Landlord, including, without limitation, returns in respect of Landlord's net
income, gross receipts, sales and use, single business, transaction, privilege,
rent, ad valorem, franchise taxes, Real Estate Taxes and other Landlord
Obligations, and taxes on its capital stock, and Tenant, at its expense, shall,
to the extent required or permitted by Legal Requirements, prepare and file all
tax returns and reports required to be filed by Tenant in respect of any
Imposition as may be required by any Government Agency. Provided no monetary
Default or Event of Default shall have occurred and be continuing, if any refund
shall be due from any taxing authority in respect of any Imposition paid by
Tenant, the same shall be paid over to or retained by Tenant. Landlord and
Tenant shall each, 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. In the event
Government Agencies classify any property covered by this Lease as personal
property, Tenant shall file all personal property tax returns in such
jurisdictions where it may legally be required to so file. Each party shall, to
the extent it possesses the same, provide the other, upon request, with cost and
depreciation records necessary for filing returns for any property so classified
as personal property. Where
-33-
Landlord is legally required to file personal property tax returns, Landlord
shall provide Tenant with copies of assessment notices in sufficient time for
Tenant to file a protest. All Impositions assessed against such personal
property that comprises FF&E shall be (irrespective of whether Landlord or
Tenant shall file the relevant return) paid by the party that owns the FF&E not
later than the last date on which the same may be made without interest or
penalty. All Impositions assessed against such personal property that comprises
Tenant's Personal Property shall be (irrespective of whether Landlord or Tenant
shall file the relevant return) paid by Tenant not later than the last date on
which the same may be made without interest or penalty. If the provisions of any
Facility Mortgage require deposits on account of Impositions to be made with the
Facility Mortgagee, provided the Facility Mortgagee has not elected to waive
such provision, Tenant shall either pay Landlord the monthly amounts required
with respect to any such Impositions at the time and place that payments of
Minimum Rent are required and Landlord shall transfer such amounts to the
Facility Mortgagee or, pursuant to written direction by Landlord, Tenant shall
make such deposits directly with the Facility Mortgagee, and such payment to
Landlord or Facility Mortgagee shall be deemed to satisfy Tenant's obligation
hereunder to pay the Impositions.
Landlord shall give prompt Notice to Tenant of all Impositions
payable by Tenant hereunder of which Landlord at any time has knowledge;
provided, however, that Landlord's failure to give any such Notice shall in no
way diminish Tenant's obligation hereunder to pay such Impositions, except that
Landlord shall be responsible for any interest and/or penalties incurred by
Tenant as a result of Landlord's failure to forward any invoices, assessment
notices or other bills to Tenant and no Default or Event of Default shall be
deemed to have occurred hereunder if Tenant's failure to pay timely any
Impositions is due to Landlord's failure to give Tenant such Notice at least ten
(10) days before the amounts therein are due.
Tenant shall give prompt Notice to Landlord of all taxes
included in Landlord Obligations payable by Landlord hereunder of which Tenant
at any time has knowledge; provided, however, that Tenant's failure to give any
such Notice shall in no way diminish Landlord's obligation hereunder to pay such
Landlord Obligations, except that Tenant shall be responsible for any interest
and/or penalties incurred by Landlord as a result of Tenant's failure to forward
any invoices, assessment notices or other bills to Landlord and no Landlord
Default shall be deemed to have occurred hereunder if Landlord's failure to pay
timely any taxes included in Landlord Obligations is due to Tenant's failure to
give Landlord such Notice at least ten (10) days before the amounts therein are
due.
(b) Utility Charges. Tenant shall pay or cause to be paid
---------------
all charges for electricity, power, gas, oil, water and other utilities used in
connection with the Leased Property.
(c) Insurance Premiums. Except as otherwise provided in
------------------
Section 9.2, Tenant shall pay or cause to be paid all premiums for the insurance
coverage required to be maintained by it pursuant to Article 9.
-34-
(d) Other Charges. Tenant shall pay or cause to be paid all
-------------
other amounts, liabilities and obligations that Tenant assumes or agrees to pay
under this Lease, including, without limitation, all agreements to indemnify
Landlord under Sections 4.3.3 and 9.8.
(e) [Intentionally Omitted.]
(f) Reimbursement for Additional Charges. If Tenant (as
------------------------------------
opposed to Manager) pays or causes to be paid Additional Charges attributable to
periods before the Commencement Date, Tenant shall provide Notice to Landlord of
such amounts and, within fifteen (15) days thereafter, Landlord shall remit to
Tenant the amount of such Additional Charges paid. If Tenant pays or causes to
be paid Additional Charges attributable to periods after the end of the Term,
Tenant may, within sixty (60) days after the end of the Term, provide Notice to
Landlord of such amounts. Provided no uncured monetary Default or Event of
Default then exists, Landlord shall reimburse Tenant for all payments of such
Additional Charges that are attributable to any period after the expiration or
earlier termination of the Term of this Lease within fifteen (15) days after its
receipt of such Notice. Notwithstanding the foregoing, Tenant shall only be
reimbursed to the extent such Additional Charges are not taken into account in
the calculation and settlement of Working Capital accounts as set forth in
Section 4.5. In the event Manager pays for Additional Charges attributable to
periods before the Commencement Date, Tenant shall receive a payment as set
forth in Section 3.1.6(g) below. Tenant shall reimburse Landlord within fifteen
(15) days after receipt of Notice (which shall be given within sixty (60) days
after the end of the Term) for any Additional Charges paid by Landlord
attributable to periods during the Term for which Tenant received a credit in
the settlement of Working Capital.
3.1.6 Adjustments to/Abatements of Rent.
(a) FF&E Adjustment to Rent. Pursuant to the terms of
-----------------------
Schedule 22.2, Rent shall be reduced by the amount of the FF&E Adjustments then
- -------------
in effect. In the event there is an FF&E Adjustment which commences on a day
other than the first day of an Accounting Period in which such FF&E Adjustment
occurs, Landlord shall reimburse Tenant in cash, within fifteen (15) days after
such FF&E Adjustment, an amount equal to the amount by which Rent paid for the
Accounting Period in which the FF&E Adjustment commenced exceeded the amount of
Rent (as reduced by the FF&E Adjustment) owed for such Accounting Period.
[Insert the following for Leases with an Initial FF&E Lease on the Commencement
Date.] [For the initial five years of the term of this Lease, there shall be an
FF&E Adjustment in effect of $_________ per Fiscal Year (which amount represents
the product of (i) the agreed upon value of $__________ for the Excess FF&E
covered by the Initial FF&E Lease, and (ii) an agreed upon Market Leasing Factor
for such Excess FF&E of [36%] per annum.]
(b) Adjustments of Rent Following Owner-Funded Capital
--------------------------------------------------
Expenditures Under Management Agreement. Except as otherwise provided in Section
- ---------------------------------------
3.1.6(c) or (e), effective on the date of any "Owner"-funded Capital
Expenditures (as the term "Owner" is defined in the Management Agreement) paid
by Landlord (other than Capital Expenditures paid out of the FF&E Reserve), the
Rent due for each Fiscal Year
-35-
thereafter in which Room Revenues for such Fiscal Year exceed the Annual Room
Revenues Second Break Point shall be increased by an amount equal to [2%] of the
amount of such contributions or expenditures.
(c) Adjustment of Rent for Major Capital Expenditures. In
-------------------------------------------------
the event of either a reduction or increase in Gross Revenues or an adverse or
beneficial impact on the Facility's operations, in either case resulting from
any Major Capital Expenditure, Landlord and Tenant shall, in good faith,
negotiate possible modifications to the Minimum Rent and Percentage Rent to
determine an appropriate temporary or permanent adjustment of Rent and the
effective date of such adjustment. If Landlord and Tenant are unable to agree
that a reduction or increase in Gross Revenues or an adverse or beneficial
impact on Facility operations, in either case resulting from any Major Capital
Expenditure, has occurred, within thirty (30) days after the date of Notice from
either party to the other that such event has occurred (accompanied by
reasonably detailed computations and documentation to support such assertion),
the matter may be submitted by either party to arbitration under Article 15 for
resolution and for determination of the amount of the adjustment to Minimum Rent
and Percentage Rent contemplated hereby. For purposes of any such arbitration,
the arbitrator shall assume that, except with respect to the proposed rent
adjustment relating to a Major Capital Expenditure, Landlord and Tenant regard
the then-existing economic relationship between them as being fair and equitable
and reflecting an arms-length transaction. Accordingly, the arbitrator shall not
use such proposed rent adjustment as a basis for modifying in any material way
the then-existing economic provisions and other material terms of the Lease,
other than in respect of such proposed rent adjustment. The rent adjustment
contemplated hereby shall reflect a fair market rent adjustment with respect to
the reduction or increase in Gross Revenues or an adverse or beneficial impact
on Facility operations, in either case resulting from any Major Capital
Expenditure. Tenant shall continue to pay Minimum Rent and Percentage Rent as
required under Sections 3.1.1 through 3.1.5 of this Lease until such time as any
adjustments to Percentage Rent and/or Minimum Rent are agreed upon or determined
as set forth above.
(d) Adjustment of Rent for Increases or Decreases in the
----------------------------------------------------
FF&E Reserve Percentage. In the event that, in any Fiscal Year after Fiscal Year
- -----------------------
1999, there is an increase or decrease, as the case may be, in the percentage of
Gross Revenues from the Leased Property required to be deposited by Landlord in
the FF&E Reserve (the "FF&E Reserve Percentage"), the Rent due for each Fiscal
Year thereafter in which Room Revenues for such Fiscal Year exceed the Annual
Room Revenues Second Break Point shall be increased (in the case of an increase
in the FF&E Reserve Percentage) by an amount equal to the product of (i) the
aggregate of the Room Revenues, the Food and Beverages Sales and the Other
Income for such Fiscal Year times (ii) [19]% times (iii) the percentage point
increase in the FF&E Reserve Percentage, or decreased (in the case of a decrease
in the FF&E Reserve Percentage) by an amount equal to the product of (i) the
aggregate of the Room Revenues, the Food and Beverages Sales and the Other
Income for such Fiscal Year times (ii) [21]% times (iii) the percentage point
decrease in the FF&E Reserve Percentage, in each case for the period during
which the adjusted FF&E Reserve Percentage remains in effect.
-36-
(e) Adjustment of Rent for Landlord Funded Increase in FF&E
-------------------------------------------------------
Reserve. In the event that Landlord is required by Manager to fund an increase
- -------
in the FF&E Reserve (other than by reason of an increase in the FF&E Reserve
Percentage), the Rent due for each of the five full Fiscal Years following the
Fiscal Year in which the funding of such increase occurred shall be increased,
for each Fiscal Year during such five (5)-year period that the Room Revenues for
such Fiscal Year exceed the Annual Room Revenues Second Break Point, by an
amount equal to [4.75]% of the dollar amount increase in the FF&E Reserve
resulting from such funding.
(f) Tenant Reimbursement for Landlord Obligations Paid by
-----------------------------------------------------
Manager or Tenant. Landlord shall reimburse Tenant in cash for the amount of any
- -----------------
Landlord Obligations either (i) paid by Manager and deducted by Manager out of
amounts owed to Tenant in accordance with the Management Agreement or (ii) paid
by Tenant, such reimbursement to be paid within fifteen (15) days after
receiving Notice thereof, provided no uncured monetary Default or Event of
Default then exists.
(g) Tenant Reimbursement for Additional Charges Attributable to
-----------------------------------------------------------
Periods prior to the Commencement Date and Paid by Manager. In the event Manager
- ----------------------------------------------------------
pays Additional Charges attributable to the period before the Commencement Date,
and deducts the same from "Gross Revenues" (as defined in the Management
Agreement) in accordance with the Management Agreement, and such Additional
Charges were not taken into account in the calculation and settlement of Working
Capital accounts as set forth in Section 4.5, such Additional Charges shall be
the responsibility of Landlord, and Landlord shall remit to Tenant in cash
within fifteen (15) days after receiving Notice thereof the amount of such
Additional Charges paid, provided no uncured monetary Default or Event of
Default then exists. In the event any item of Gross Revenues attributable to
periods prior to the Commencement Date is not properly reflected in the initial
calculation of Working Capital pursuant to Section 4.5, Tenant shall remit to
Landlord in cash within fifteen (15) days after receiving Notice thereof the
amount of such item not properly reflected.
(h) Abatement of Rent for Casualty. If and to the extent that any
------------------------------
Casualty results in a reduction of Gross Revenues as provided in Section 10.5,
then Rent shall be abated to the extent provided in Section 10.5.
(i) Abatement of Rent for Partial Condemnation. In the event of a
------------------------------------------
partial Condemnation as described in Section 11.2 which does not result in a
termination of this Lease by Landlord pursuant to Section 11.2, the Rent shall
be abated in the manner and to the extent provided in Section 11.3.
3.2 Late Payment of Rent.
If any installment of (i) Minimum Rent, (ii) Percentage Rent, or (iii)
Additional Charges (but only as to those Additional Charges that are payable
directly to Landlord) shall not be paid on its due date, Tenant shall pay
Landlord, 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 Tenant pays any Additional Charges
-37-
directly to Landlord or the Facility Mortgagee pursuant to any requirement of
this Lease, Tenant shall be relieved of its obligation to pay such Additional
Charges to the Entity to which they would otherwise be due.
In the event of any failure by Tenant to pay any Additional
Charges when due to any Entity other than Landlord, Tenant shall promptly pay
and discharge, as Additional Charges, every fine, penalty, interest and cost
that may be added by the Entity to which such Additional Charges are due (other
than Landlord) for nonpayment or late payment of such items (subject to
Landlord's obligation to pay or reimburse as provided in Section 3.1.5(a)).
3.3 Net Lease.
The Rent shall be absolutely net to Landlord so that this Lease
shall yield to Landlord the full amount of the installments or amounts of Rent
throughout the Term, subject to any other provisions of this Lease which
expressly provide for adjustment or abatement of such Rent or expressly provide
that certain Landlord Obligations and Capital Expenditures are to be paid and/or
performed by Landlord; provided, that no adjustment to Rent under this Section
shall have the effect of basing Rent, in whole or in part, on the income or
profits of any Person.
3.4 No Termination, Abatement, Etc.
Except as otherwise specifically provided in this Lease, Tenant,
to the maximum extent permitted by law, shall remain bound by this Lease in
accordance with its terms and shall neither take any action without the consent
of Landlord to modify, surrender or terminate this Lease, nor seek, nor be
entitled to, any abatement, deduction, deferment or reduction of the Rent, or
set-off against the Rent, nor shall the respective obligations of Landlord and
Tenant be otherwise affected by reason of (a) any damage to or destruction of
the Leased Property or any portion thereof from whatever cause or any
Condemnation; (b) the lawful or unlawful prohibition of, or restriction upon,
Tenant's use of the Leased Property, or any portion thereof, or the interference
with such use by any Person, except to the extent that a court of competent
jurisdiction has issued a final, nonappealable order determining that Tenant was
constructively evicted from the Leased Property; (c) any claim that Tenant may
have against Landlord by reason of any default or breach of any warranty by
Landlord under this Lease or any other agreement between Landlord and Tenant, or
to which Landlord and Tenant are parties (except for the Consent and
Assignment); (d) any bankruptcy, insolvency, reorganization, composition,
readjustment liquidation, dissolution, winding up or other proceedings affecting
Landlord or any assignee or transferee of Landlord; or (e) any other cause
whether similar or dissimilar to any of the foregoing, other than a discharge of
Tenant from any such obligations as a matter of law; provided, however, that the
foregoing shall not apply or be construed to restrict any other rights Tenant
may have as a result of any act or omission by Landlord constituting gross
negligence or willful misconduct. Tenant hereby waives all rights arising from
any occurrence whatsoever, which may now or hereafter be conferred upon it by
law, to (i) modify, surrender or terminate this Lease or quit or surrender the
Leased Property or any portion thereof, or (ii) entitle Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable or other
obligations to be
-38-
performed by Tenant hereunder, except as otherwise specifically provided in this
Lease and except to the extent that a court of competent jurisdiction has issued
a final, nonappealable order determining that Tenant was constructively evicted
from the Leased Property. The obligations of Tenant hereunder shall be separate
and independent covenants and agreements, and the Rent and all other sums
payable by Tenant 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 this Lease shall be terminated. Notwithstanding
anything set forth in this Lease to the contrary, in any instance where, after
the occurrence of a Default or an Event of Default, this Lease expressly permits
Landlord to retain funds which, but for the Default or Event of Default, would
be payable to Tenant, Landlord shall refund such funds to Tenant to the extent
the amount exceeds the amount estimated by Landlord in good faith to be
necessary to compensate Landlord for any cost, loss, or damage incurred or
reasonably expected to be incurred in connection with such Default or Event of
Default.
3.5 [Intentionally Omitted.]
ARTICLE 4
USE OF THE LEASED PROPERTY
4.1 Permitted Use.
4.1.1 Primary Intended Use.
Tenant shall, at all times during the Term and at any
other time that Tenant shall be in possession of any Leased Property,
continuously use the Leased Property for the operation of a first class,
full-service hotel and for such other uses as may be incidental or necessary
thereto (such use being hereinafter referred to as the Leased Property's
"Primary Intended Use"). Tenant covenants and agrees to use its best efforts to
operate the Facility according to First Class Operating Standards (which, during
any period when the Management Agreement is in effect, Tenant shall be deemed to
have done so long as Tenant uses its best efforts to cause the Manager to
operate the Facility in accordance with the terms of the Management Agreement)
and, except as otherwise expressly provided herein, agrees to pay all costs
related thereto. Tenant shall not use the Leased Property or any portion thereof
for any use inconsistent with the Primary Intended Use without the prior written
consent of Landlord. Tenant shall not take or omit to take any action, the
taking or omission of which materially impairs the value or the usefulness of
the Leased Property or any part thereof for its Primary Intended Use.
4.1.2 Necessary Approvals.
Tenant shall proceed with all due diligence and exercise
best efforts to obtain and maintain (or to cause Manager to procure and
maintain) all Licenses necessary to use and operate, for its Primary Intended
Use, the Leased Property and Facility located thereon under Legal Requirements
and Landlord shall cooperate with respect to obtaining any such License,
including joining in any application for Licenses to the extent required by
Legal Requirements.
-39-
4.1.3 Lawful Use, Etc.
Tenant shall not use, and shall use commercially
reasonable efforts to prohibit third parties from using, the Leased Property or
Tenant's Personal Property for any unlawful purpose. Tenant shall not commit,
and shall use commercially reasonable efforts not to suffer to be committed, any
waste on the Leased Property, or in the Facility, nor shall Tenant cause or
permit any nuisance thereon or therein. Tenant shall not use, and shall use
commercially reasonable efforts to prohibit third parties from using, the Leased
Property or any portion thereof, including Tenant's Personal Property, in such a
manner as (i) might reasonably tend to impair Landlord's (or Tenant's, as the
case may be) title thereto or to any portion thereof or (ii) may reasonably make
possible a claim or claims for adverse usage or adverse possession by the
public, or of implied dedication of the Leased Property or any portion thereof.
Tenant shall not use, and shall use commercially reasonable efforts to prohibit
third parties from using, the Leased Property in any manner that will cause the
cancellation of any insurance policy covering the Leased Property or any part
thereof (unless another adequate policy is available), nor shall Tenant sell or
otherwise provide to guests or residents therein, and shall use commercially
reasonable efforts to prohibit third parties from keeping, using or selling in
or about the Leased Property, any article which may be prohibited by law or by
the standard form of fire insurance policies, or any other insurance policies
required to be carried hereunder, or fire underwriter's regulations.
4.2 Compliance with Legal and Insurance Requirements, Etc.
Subject to the provisions of the Management Agreement and
Article 8 hereof, and subject to compliance by Landlord with its obligations
hereunder, Tenant, at its sole expense, shall (i) comply in all material
respects with Legal Requirements and Insurance Requirements in respect of the
use, operation, maintenance, repair, alteration and restoration of the Leased
Property, including Legal Requirements regarding labor relations with respect to
Manager's employees as required pursuant to the Management Agreement, and (ii)
procure, maintain and comply in all material respects with all appropriate
licenses, permits, and other authorizations and agreements required for any use
of the Leased Property and Tenant's Personal Property then being made, and for
the proper erection, installation, operation and maintenance of the Leased
Property or any part thereof. Landlord shall comply in all material respects
with Legal Requirements pertaining to Landlord regarding labor relations with
respect to Manager's employees.
4.3 Environmental Matters.
4.3.1 Restriction on Use, Etc.
Tenant shall not store, spill upon, dispose of or
transfer to or from the Leased Property any Hazardous Materials, except that
Tenant may store, transfer and dispose of Hazardous Materials in compliance with
all Environmental Laws. Tenant shall use commercially reasonable efforts to
cause Manager to maintain the Leased Property at all times free of any Hazardous
Materials (except such Hazardous Materials as are maintained in compliance with
all Environmental Laws). Tenant shall promptly (a) notify Landlord in writing of
any material change in the nature or extent of Hazardous Materials
-40-
at the Leased Property of which Tenant has notice or actual knowledge, (b)
transmit to Landlord a copy of any Community Right to Know report which is
required to be filed by Tenant with respect to the Leased Property pursuant to
SARA Title III or any other Environmental Law, (c) transmit to Landlord copies
of any demand letters, complaints or other documents initiating legal action,
citations, orders, notices or other material communications asserting claims by
private parties or government agencies with respect to Hazardous Materials
received by Tenant or its agents or representatives (collectively,
"Environmental Notice"), which Environmental Notice requires a written response
or any action to be taken and/or if such Environmental Notice gives notice of
and/or could give rise to a material violation of any Environmental Law and/or
could give rise to any material cost, expense, loss or damage (an "Environmental
Obligation"), (d) use commercially reasonable efforts to cause Manager to
observe and comply with all Environmental Laws relating to the use, maintenance
and disposal of Hazardous Materials and all orders or directives from any
official, court or agency of competent jurisdiction relating to the use or
maintenance thereof or requiring the removal, treatment, containment or other
disposition thereof, and (e) subject to Section 4.3.2, pay or otherwise dispose
of any fine, charge or imposition related thereto, unless Tenant shall contest
the same in good faith and by appropriate proceedings and the right to use, and
the value of, the Leased Property is not adversely affected thereby in any
substantial manner.
If at any time Hazardous Materials are discovered in
violation of Environmental Laws on the Leased Property, subject to Section 4.3.2
Tenant shall exercise commercially reasonable efforts to cause Manager to take
all actions and incur any and all expenses (which actions and expenses shall be
subject to Landlord's prior approval, not to be unreasonably withheld,
conditioned or delayed except in Emergency Situations, in which case Landlord's
prior approval shall not be required) as may be necessary or as may be required
by any Government Agency (i) to clean up and remove from and about the Leased
Property all Hazardous Materials thereon, (ii) to contain and prevent any
further release or threat of release of Hazardous Materials on or about the
Leased Property and (iii) to use good faith efforts to eliminate any further
release or threat of release of Hazardous Materials on or about the Leased
Property.
4.3.2 Environmental Indemnification of Tenant by Landlord.
Landlord shall protect, indemnify and hold harmless
Tenant, its Affiliates and their respective members, shareholders or other
equity owners, directors, management committee, or similar persons, trustees,
officers, and employees and any of their respective successors or assigns
(hereafter the "Tenant Indemnitees," and when referred to singly, a "Tenant
Indemnitee") for, from and against any and all debts, liens, claims, causes of
action, administrative orders or notices, costs, fines, penalties or expenses
(including, without limitation, reasonable attorneys' fees and expenses) imposed
upon, incurred by or asserted against any Tenant Indemnitee resulting from,
either directly or indirectly, the presence during the Term in the Environment
of the Leased Property or any properties surrounding the Leased Property of any
Hazardous Materials (collectively, "Environmental Liabilities"), except to the
extent that the same arise by reason of the negligence or willful misconduct of
Tenant, any other Tenant Indemnitee, or their respective agents (including
during the Term, the Manager). Landlord's duty herein includes, but is not
limited to, indemnification for costs associated with personal injury or
-41-
property damage claims as a result of the presence of Hazardous Materials in,
upon or under the soil or ground water of the Leased Property in violation of
any Environmental Law. Upon Notice from Tenant, Landlord shall undertake the
defense, at Landlord's sole cost and expense, of any indemnification duties set
forth herein, in which event Landlord shall not be responsible for any
duplicative attorneys' fees incurred by any Tenant Indemnitee.
Landlord shall, upon demand, pay to Tenant any cost,
expense, loss or damage (including, without limitation, reasonable attorneys'
fees) incurred by Tenant in asserting any right under this Section 4.3.2,
including, without limitation, any right of indemnity under this Section 4.3.2
or otherwise arising from a failure of Landlord strictly to observe and perform
the foregoing requirements, which amounts shall bear interest from the date upon
which demand is made therefor until paid by Landlord to Tenant at the Overdue
Rate. Landlord agrees to waive any and all rights of contribution from Tenant
which might arise under applicable law for any liability imposed upon Landlord
pursuant to this Section 4.3.2.
4.3.3 Environmental Indemnification of Landlord by Tenant.
Tenant shall protect, indemnify and hold harmless
Landlord and each Facility Mortgagee, their Affiliates and their respective
members, shareholders or other equity owners, directors, management committee,
or similar persons, trustees, officers, and employees, and any of their
respective successors or assigns (hereafter the "Landlord Indemnitees," and when
referred to singly, a "Landlord Indemnitee") for, from and against any and all
Environmental Liabilities to the extent that the same arise by reason of
Tenant's, any other Tenant Indemnitee's, or their respective agents' (including
the Manager's) gross negligence or willful misconduct. Upon Notice from
Landlord, Tenant shall undertake the defense, at Tenant's sole cost and expense,
of any indemnification duties set forth herein, in which event Tenant shall not
be responsible for payment of any duplicative attorneys' fees incurred by any
Landlord Indemnitee.
Tenant shall, upon demand, pay to Landlord, as an
Additional Charge, any cost, expense, loss or damage (including, without
limitation, reasonable attorneys' fees) incurred by Landlord in asserting any
right under this Section 4.3.3, including, without limitation, any right of
indemnity under this Section 4.3.3 or otherwise arising from a failure of Tenant
strictly to observe and perform the foregoing requirements, which amounts shall
bear interest from the date upon which demand is made therefor until paid by
Tenant to Landlord at the Overdue Rate. The foregoing notwithstanding, with
respect to Tenant's indemnification of Landlord for the acts or failure to act
of Manager, Tenant shall only become obligated to pay any sums upon and to the
extent of a final, non-appealable determination, in a judicial proceeding in
which Manager is a party (or a binding written acknowledgment of Manager to such
effect), that Manager is liable to Tenant for Environmental Liabilities in
accordance with the terms of the Management Agreement.
-42-
4.3.4 Survival.
The provisions of this Section 4.3 shall survive the
expiration or sooner termination of this Lease.
4.4 FF&E Reserve.
Tenant shall cause Manager to establish and maintain a reserve
account (the "FF&E Reserve") in accordance with the terms of the Management
Agreement and to deposit into such account during each Fiscal Year monies for
the account of Landlord (which amounts shall be funds of Landlord for all
purposes and shall be reimbursed to Tenant in accordance with Section 3.1.6(f))
in the amount required to be maintained pursuant to the Management Agreement and
in accordance with established custom of Manager prior to the Commencement Date.
Landlord shall be responsible for the payment of all amounts required to be paid
by "Owner" (as defined in the Management Agreement) pursuant to the Management
Agreement to fund the FF&E Reserve, including, without limitation, any deficits
therein, and for paying for all FF&E necessary for the continued operation of
the Facility in accordance with First Class Operating Standards, subject to the
provisions of Schedule 22.2. Tenant shall make no expenditure for replacement of
-------------
FF&E in excess of the amounts in the FF&E Reserve without first obtaining the
written approval of Landlord (unless Tenant makes such expenditures from its own
funds without any right to reimbursement hereunder). In the event Tenant funds
any amounts required to be funded by Landlord for FF&E pursuant hereto or by
"Owner" pursuant to the Management Agreement which Landlord has approved, Tenant
shall receive a reimbursement in accordance with Section 3.1.6(f) hereof. Any
additions to or replacements of furniture, fixtures, and equipment located at
the Leased Property shall become part of the FF&E which is owned by Landlord,
subject to the limitations set forth in Schedule 22.2 hereof. Throughout the
-------------
Term of this Lease, Tenant shall, at its sole cost and expense but subject to
the terms hereof and of the Management Agreement, cause all of the items of FF&E
to be in proper working order and in good condition (ordinary wear and tear
excepted).
4.5 Working Capital.
Landlord hereby conveys, transfers, assigns, sells and delivers
to Tenant, effective as of the Commencement Date, all Working Capital (as
defined below) existing on the Commencement Date (the "Initial Working Capital")
at a purchase price equal to the fair market value of such assets (which
Landlord and Tenant agree is equal to the book value of such assets on the
Commencement Date after taking into account any depreciation as of the
Commencement Date). The term "Working Capital" shall mean (a) funds held for use
in the day-to-day operation of the Facility's business, including, without
limitation, amounts held in change or petty cash funds, deposits, operating bank
accounts, pooled concentration or disbursement accounts and payroll accounts,
(b) prepaid expenses, (c) Inventories and Fixed Asset Supplies, (d) net
receivables due from Manager, less (e) accounts payable, accrued payroll
expenses and other accrued expenses and current liabilities related to the
Facility. Except as provided in the next sentence, title to the Initial Working
Capital so conveyed, transferred, assigned, sold and delivered by Landlord shall
be free and clear of any Liens of any nature whatsoever created by Landlord or
arising in respect of any obligation of Landlord or arising by reason of any act
or omission
-43-
of Landlord. Tenant hereby purchases and accepts delivery of the Initial Working
Capital and accepts and assumes all obligations with respect thereto, effective
as of the Commencement Date, and expressly acknowledges and agrees that (i) it
is acquiring the Initial Working Capital subject to the Facility Mortgagee's
first-priority lien, if any, on some or all of such Initial Working Capital, and
shall acknowledge same in writing to the Facility Mortgagee and execute UCC-1
financing statements confirming same (at Landlord's expense) in accordance with
the Facility Mortgagee Agreement, which financing statements shall be prepared
and filed by Landlord at Landlord's sole cost and expense, and (ii) the Initial
Working Capital shall remain subject to the provisions of the Management
Agreement. The purchase price for the Initial Working Capital was paid by
Tenant's execution and delivery to Landlord, as of the Commencement Date, of a
Working Capital Note and Agreement in the form set forth on Exhibit E hereto
(the "Working Capital Note"), in the principal amount of said purchase price.
The Working Capital Note provides that such interest is payable from time to
time at such time as each payment of Rent is due under Section 3.1.1, and the
amount of interest paid under the Working Capital Note on any interest payment
date also shall be credited against Rent payable on such date. The Working
Capital Note further provides that the principal amount thereof will be payable
in full, together with accrued and unpaid interest thereon, upon the expiration
or earlier termination of this Lease for any reason (including, without
limitation, a termination by the Facility Mortgagee in accordance with Section
20.2 hereof) as follows: Upon such expiration or termination, Tenant will
transfer to Landlord, in payment of the principal amount of the Working Capital
Note and accrued and unpaid interest thereon, title to all Working Capital then
owned by Tenant (the "Final Working Capital"). To the extent that the fair
market value of the Final Working Capital (which Landlord and Tenant agree shall
be equal to the book value of such assets at such time after taking into account
any depreciation as of such date) exceeds the principal amount of the Working
Capital Note plus accrued and unpaid interest thereon, Landlord shall pay to
Tenant an amount in cash equal to such excess; to the extent that such fair
market value is less than the principal amount of the Working Capital Note plus
accrued and unpaid interest thereon, Tenant shall pay to Landlord an amount in
cash equal to such deficiency.
In the event that this Lease is terminated by the Facility
Mortgagee pursuant to the terms of Section 20.2 hereof, Tenant agrees that it
shall transfer title to the Final Working Capital (and pay in cash any
deficiency due to Landlord pursuant to the Working Capital Note) directly to the
Facility Mortgagee or its designee and that it shall look only to Host O.P. for
payment of the amount (if any) by which such payment exceeds the principal
amount of the Working Capital Note, all in accordance with the terms of the
Facility Mortgagee Agreement, and Host O.P. agrees to pay such amount.
Landlord and Tenant agree that, following the sale of the
Initial Working Capital, all Working Capital during the Term of this Lease shall
be the property of Tenant (and not Landlord) for all purposes (subject, however,
to the Liens hereinafter referred to in this paragraph), and neither Landlord
nor Tenant shall at any time take a position (in its books and records or
otherwise) or make an assertion inconsistent therewith. Tenant has granted
Landlord a security interest in all such Working Capital pursuant to Section 7.2
hereof. Tenant acknowledges that Landlord has pledged and assigned to the
Facility Mortgagee, as additional security
-44-
for Landlord's obligations under the loan secured by the Facility Mortgage, (or
will pledge and assign to a Facility Mortgagee, as additional security for
Landlord's obligations under a loan to be secured by a Facility Mortgage), the
Working Capital Note and Landlord's rights and interest in respect of this
Lease, including all Landlord Liens with respect to any and all Tenant's
Personal Property, including, without limitation, all Working Capital owned by
Tenant during the Term of this Lease, securing Tenant's obligations hereunder.
ARTICLE 5
MAINTENANCE AND REPAIRS; SURRENDER
5.1 Maintenance and Repair.
5.1.1 Tenant's Obligations.
Except as otherwise expressly provided in this Lease,
and except for conditions caused by the gross negligence or willful misconduct
of Landlord, its employees, agents or independent contractors (which terms shall
not be deemed to include Manager with respect to actions or inactions of Manager
during the Term of this Lease), Tenant shall, at its sole cost and expense, keep
the Leased Property and all private roadways, sidewalks and curbs appurtenant
thereto (and Tenant's Personal Property) in good order and repair, ordinary wear
and tear excepted (whether or not the need for such repairs occurs as a result
of Tenant's use, any prior use, the elements or the age of the Leased Property
or Tenant's Personal Property, or any portion thereof), and shall promptly make
all necessary and appropriate repairs and replacements thereto of every kind and
nature (excluding Capital Expenditures), whether interior or exterior,
structural or nonstructural, ordinary or extraordinary, foreseen or unforeseen,
necessary for the Primary Intended Use (concealed or otherwise). Notwithstanding
anything set forth herein to the contrary, unless the need for compliance with
this Section 5.1.1 is caused by Tenant's negligence or willful misconduct or
that of its employees or agents (including Manager, but only to the extent that
Tenant is obligated to indemnify Landlord and Landlord Indemnitees for Manager's
acts or omissions pursuant to Section 4.3.3) and is not otherwise covered by
insurance, Tenant shall not be responsible for any necessary repair of Existing
Conditions relating to Hazardous Materials, including, without limitation, those
set forth and described on Schedule 5.1.1 hereto, which are Landlord
--------------
Obligations. All repairs shall be made in a good, workmanlike and first-class
manner, in accordance with all Legal Requirements. Tenant shall not take or omit
to take any action, the taking or omission of which materially impairs the value
or the usefulness of the Leased Property or any part thereof for the Primary
Intended Use. Tenant's obligations under this Section 5.1.1 shall be limited, in
the event of any Casualty or Condemnation involving the Leased Property, as set
forth in Articles 10 and 11. Tenant's obligations under this Section 5.1.1 with
respect to FF&E are subject to the provisions of Section 4.4 hereof. Tenant
shall have the non-exclusive right to prosecute claims against Landlord's
predecessors-in-interest (other than any Affiliates of Landlord), contractors,
subcontractors and suppliers for breach of any representation or warranty or for
any latent defects in the Leased Property, unless Landlord is already diligently
pursuing such claims.
-45-
5.1.2 Landlord Obligations.
(a) Landlord shall be obligated to pay the actual
costs of any items that are classified as Capital Expenditures and are approved
by Landlord as well as the actual costs of any necessary repairs (i) of Existing
Conditions relating to Hazardous Materials or (ii) resulting from the gross
negligence or willful misconduct of Landlord, its employees, agents or
independent contractors (which terms shall not be deemed to include Manager with
respect to acts or omissions of Manager during the Term of this Lease). Landlord
shall not, however, except as expressly set forth herein or otherwise required
under the Management Agreement or the Consent and Assignment (including, without
limitation, as set forth in this Section 5.1.2 and in Sections 4.3.2, 4.4,
5.1.1, 9.9 and 21.3.3 and in Article 6 hereof), be required to build or rebuild
any improvement on the Leased Property, or to make any repairs, replacements,
alterations, restorations, or renewals of any nature or description to the
Leased Property, whether ordinary or extraordinary, structural or nonstructural,
foreseen or unforeseen, or to make any expenditure whatsoever with respect
thereto, or to maintain the Leased Property in any way. Landlord shall have the
right to give, record and post, as appropriate, notices of nonresponsibility
under any mechanic's lien laws now or hereafter existing.
(b) If, at any time or from time to time, the
Management Agreement requires that funds be disbursed for repairs, maintenance,
renovations or replacements at or to the Leased Property, or, pursuant to the
terms of this Lease (including, without limitation, Section 4.4 hereof), Tenant
is required to make any expenditures in connection with any repair, maintenance
or renovation with respect to the Leased Property which constitute Landlord
Obligations, and the amount of such disbursements or expenditures exceeds the
amount on deposit in the FF&E Reserve, Tenant shall furnish Landlord with
reasonable detail regarding the nature of the required repair, renovation or
replacement, the estimated cost thereof and such other information with respect
thereto as Landlord may reasonably require. Landlord shall, within ten (10)
Business Days after such Notice, subject to and in accordance with the
applicable provisions of Article 6, disburse such required funds to Tenant (or,
if Tenant shall so elect, or if an Event of Default shall then exist hereunder,
directly to Manager or any other Person performing the required work).
5.2 Tenant's Personal Property.
Tenant may (and shall as provided hereinbelow), at its expense,
install, affix or assemble or place on the Facility any items of Tenant's
Personal Property, and Tenant may, subject to Section 7.2 and the conditions set
forth below, remove and replace the same at any time in the ordinary course of
business. Tenant shall provide and maintain throughout the Term all such
Tenant's Personal Property as shall be necessary in order to operate the
Facility in compliance in all material respects with applicable Legal
Requirements and Insurance Requirements and otherwise in accordance with
customary practice in the industry for such Primary Intended Use.
Subject to Section 4.5 hereof, all Tenant's Personal Property
(except that removed and replaced in the ordinary course of business as
permitted above, but including supplies and inventory that are equivalent, on an
aggregate basis, in amount and value
-46-
similar to that reasonably established for use by the Facility in the
immediately preceding Lease Year) shall remain at the Leased Property at the
expiration or earlier termination of this Lease without the necessity of any
payment by Landlord to Tenant and without any obligation to account therefor.
If Tenant acquires an interest in any material item of Tenant's
Personal Property (other than motor vehicles) on, or in connection with, the
Leased Property that belongs to anyone other than Tenant, Tenant shall use its
commercially reasonable efforts to require the agreement permitting such use to
provide that Landlord or its designee may assume Tenant's rights under such
agreement upon management or operation of the applicable Facility by Landlord or
its designee.
5.3 Surrender.
(a) Condition of Leased Property Upon Surrender. Upon the
-------------------------------------------
expiration or sooner termination of this Lease, Tenant shall vacate and
surrender the Leased Property to Landlord in the condition in which the Leased
Property was on the Commencement Date, ordinary wear and tear excepted, except
as repaired, rebuilt, restored, altered or added to as permitted or required by
the provisions of this Lease, ordinary wear and tear excepted. Together
therewith Tenant shall surrender to Landlord any and all records and documents
related to the Leased Property and Tenant's Personal Property (but not, subject
to Section 5.3(d) hereof, documents primarily related to Tenant's business
operated therein).
(b) [Intentionally Omitted.]
(c) Membership Contracts. Upon expiration or earlier
--------------------
termination of this Lease, Tenant shall assign to Landlord any membership
contracts relating to golf courses, spas or other facilities in which there are
nonequity interests entered into by Tenant during the Term, and Landlord agrees
to assume the obligations of Tenant under any such membership contracts arising
from and after the date of expiration or earlier termination of this Lease.
(d) Transition Procedures. Tenant shall cooperate in good
---------------------
faith to provide access and information to any prospective purchaser or tenant
of the Leased Property that may acquire the Leased Property or lease it upon the
expiration or earlier termination of the Term, provided that Landlord shall use
its reasonable efforts to cause such prospective purchaser or tenant to enter
into a confidentiality agreement with respect thereto reasonably acceptable to
Tenant. Upon any expiration or earlier termination of the Term, Landlord and
Tenant shall do the following and, in general, shall cooperate in good faith to
effect an orderly transition of the management or lease of the Facility (and the
provisions of this Section 5.3(d) shall survive the expiration or earlier
termination of this Lease until they have been fully performed, up to a maximum
period of one (1) year after such expiration or termination, and nothing
contained herein shall limit Landlord's rights and remedies under this Lease if
such termination occurs as the result of an Event of Default):
-47-
(i) Upon the expiration or earlier termination of
the Term, Tenant shall use its commercially reasonable efforts
(A) to transfer to Landlord or Landlord's designee all licenses,
operating permits and other governmental authorizations and all
contracts with governmental or quasi-governmental entities, that
may be necessary for the operation of the Facility
(collectively, "Licenses"), to the extent transferable or (B) if
such transfer is prohibited by law or Landlord otherwise elects,
to cooperate with Landlord or Landlord's designee in connection
with the processing by Landlord or Landlord's designee 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 Landlord or Landlord's
designee.
(ii) Tenant shall assign or cause to be assigned to
Landlord or Landlord's designee simultaneously with the
termination of this Lease, and the assignee shall assume, all
leases, contracts, concession agreements and other agreements in
effect with respect to the Facility then in Tenant's name;
provided, however, that any leases of Excess FF&E shall be
subject to the provisions of Schedule 22.2 hereof, and provided
-------------
further, that Landlord shall not be obligated to assume and may
reject any such contracts or agreements requiring the "Owner's"
approval under the Management Agreement which were entered into
subsequent to the date hereof and were not previously approved
or deemed approved by Landlord. In the event Landlord declines
to assume or reject any such contracts, agreements and/or
leases, the contracts, agreements and/or leases so rejected
shall not be assigned or shall be deemed reassigned and shall
remain the property and responsibility of Tenant. In no event
shall Landlord (or its designee) have any liability under such
contracts for obligations or liabilities accruing under such
contracts after the Commencement Date and prior to the date of
such assumption by such party.
(iii) To the extent that Landlord has not already
received copies thereof, copies of all books and records
(including computer records) for the Facility kept by (or
available to) Tenant shall be promptly delivered or made
available for inspection and copying to Landlord or Landlord's
designee.
(iv) Subject to Section 4.5 hereof, Tenant shall be
entitled to retain all cash, bank accounts and house banks, and
to collect all Gross Revenues and accounts receivable accrued
through the termination date of this Lease. Tenant shall be
responsible for the payment of Rent, all operating expenses of
the Facility as provided in this Lease and all other obligations
of Tenant accrued under this Lease as of the termination date,
and Landlord shall be responsible for all operating expenses of
the Facility accruing after the termination date.
(v) So long as termination is not the result of an
Event of Default, Landlord shall reimburse Tenant for its
reasonable expenses in connection with any cooperation with a
prospective purchaser or tenant hereunder.
-48-
5.4 Encroachments, Restrictions, Etc.
If any portion of the Facility shall, at any time, encroach upon
any property, street or right-of-way adjacent to the Leased Property, or shall
violate the agreements or conditions contained in any lawful restrictive
covenant or other agreement affecting the Leased Property, or any part thereof,
or shall impair the rights of others under any easement or right-of-way to which
the Leased Property is subject, upon the request of Landlord (but only as to any
encroachment, violation or impairment that is not a Permitted Lien) or of any
Person affected by any such encroachment, violation or impairment, Tenant shall,
at Tenant's sole cost and expense (except to the extent that the encroachment,
violation or impairment existed prior to the Commencement Date or was the result
of the act or omission of Landlord or its employees, agents (excluding Manager
except for Manager's acts or omissions in respect of Landlord Obligations) or
independent contractors), subject to its right to contest the existence of any
encroachment, violation or impairment in accordance with the provisions of
Article 8, 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 Landlord or Tenant or (b), subject
to Section 6.1, make such changes in the Facility and take such other actions as
are reasonably practicable to remove such encroachment and to end such violation
or impairment, including, if necessary, the alteration of the Facility and, in
any event, take all such actions as may be necessary in order to enable the
continued operation of the Facility for its Primary Intended Use substantially
in the manner and to the extent the Facility was operated prior to the assertion
of such violation, impairment or encroachment. Any such alteration shall be made
in conformity with the applicable requirements of this Article 5. Tenant's
obligations under this Section 5.4 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.
5.5 Landlord to Grant Easements, Etc.
Landlord shall from time to time, at the request of Tenant and
at Landlord's sole cost and expense, (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, release,
dedications, transfers, petitions and amendments (to the extent of its interests
in the Leased Property); provided, however, that Landlord shall have first
determined, in its reasonable discretion, that such grant, release, dedication,
transfer, petition or amendment is not detrimental to the operation of the
Leased Property for its Primary Intended Use and is beneficial to the value of
the Leased Property and is not in violation of the Management Agreement, any
Superior Lease or any Superior Mortgage, and Landlord shall have received within
five (5) Business Days of its request an Officer's Certificate confirming such
determination, together with such additional information as Landlord may
request. Landlord agrees to obtain Tenant's prior written approval, which shall
not be unreasonably withheld,
-49-
conditioned or delayed, as to any recorded covenants, conditions and
restrictions which would affect the use or operation of the Leased Property as
it is then being used or operated by Tenant in accordance with this Lease (it
being agreed that the provisions of a Facility Mortgage or a ground lease shall
not be deemed to constitute covenants, conditions and restrictions subject to
this sentence).
ARTICLE 6
CAPITAL EXPENDITURES, ETC.
6.1 Capital Expenditures.
It shall be Landlord's obligation (and a Retained Obligation) to
approve and fund the cost of any Capital Expenditures, including, without
limitation, any Capital Expenditures required under the Management Agreement, in
accordance with the terms of the Management Agreement. Except as otherwise
hereinafter provided, Tenant shall not construct or install Capital Expenditures
on the Leased Property without obtaining Landlord's prior written consent.
Landlord's approval of the Capital Portion of the Annual Budget shall constitute
approval of the Capital Expenditures described therein. If Owner's consent is
required under the Management Agreement with respect to any Capital Expenditure
not covered in the Capital Portion of the Annual Budget, prior to commencing
construction of any Capital Expenditure Tenant shall submit to Landlord, in
writing, a proposal setting forth, in reasonable detail, any proposed Capital
Expenditure and shall provide to Landlord such plans and specifications,
permits, licenses, contracts and other information concerning the proposed
Capital Expenditure as Landlord may reasonably request. Without limiting the
generality of the foregoing, such proposal shall indicate the approximate
projected cost of constructing such Capital Expenditure and the use or uses to
which it will be put. Tenant shall not fund or otherwise finance the cost of any
construction of any Capital Expenditure without the prior written consent of
Landlord, which consent may be withheld by Landlord in Landlord's sole
discretion (unless Landlord has declined to fund such Capital Expenditure,
Manager has consented to such Capital Expenditure and Tenant's financing of such
Capital Expenditure would not result in the imposition of a Lien on any portion
of the Leased Property or the Capital Expenditure, in which event Landlord shall
not unreasonably withhold its consent). Any Capital Expenditures funded or
financed by Tenant shall, upon the expiration or sooner termination of this
Lease, pass to and become the property of Landlord, free and clear of all
encumbrances other than Permitted Liens. Notwithstanding the foregoing,
Landlord's consent shall not be required in connection with any Capital
Expenditures (i) with respect to which immediate action is required in order to
comply with Legal Requirements or to prevent or remedy Emergency Situations or
(ii) not requiring the "Owner's" consent under the Management Agreement; it
being the intention hereof that the consent requirements hereunder shall be
consistent with the "Owner" consent requirements with respect to Capital
Expenditures under the Management Agreement.
-50-
6.2 [Intentionally Omitted.]
6.3 Cooperation by Tenant.
If Landlord shall, in Landlord's sole discretion, elect to
finance any proposed Capital Expenditure, or if Landlord is otherwise required
to do so pursuant to the terms of the Management Agreement and the Retained
Obligations, Tenant shall provide Landlord with such information as Landlord may
from time to time reasonably request.
6.4 Alterations.
Subject to the provisions of the Management Agreement, Tenant
shall have the right, at Tenant's sole cost and expense, to make additions,
modifications or improvements to the Leased Property which are not Capital
Expenditures ("Alterations") and which have a total cost of completion of less
than or equal to (a) $10,000, as to any individual Alteration, or (b) $50,000,
as to all Alterations, in the aggregate, over a twelve-month period, from time
to time as Tenant, in its discretion, may deem desirable for the Primary
Intended Use, provided that any such Alteration will not materially alter the
character or purpose or materially detract from the value, operating efficiency
or revenue-producing capability of the Leased Property or adversely affect the
ability of Tenant to comply with the provisions of this Lease, and, without
limiting the foregoing, will not violate any Legal Requirement or Insurance
Requirement applicable to the Leased Property. Any Alteration estimated to
exceed the applicable limits set forth above shall be subject to Landlord's
prior approval and the terms set forth in Section 6.1. All such Alterations
shall, upon expiration or earlier termination of this Lease, pass to and become
the property of Landlord, free and clear of all liens and encumbrances, other
than Permitted Liens.
6.5 Salvage.
All materials which are scrapped or removed in connection with
the making of either Capital Expenditures, Alterations, or repairs required by
Article 5 shall be the property of the party that paid for such work.
ARTICLE 7
LIENS
7.1 Prohibition on Liens.
Tenant shall not, directly or indirectly, create or allow to
remain and shall promptly discharge, at its expense, any Lien on the Leased
Property, Tenant's leasehold interest therein, any Tenant's Personal Property
now or hereafter owned, any Excess FF&E owned by Tenant, any Excess FF&E
Leasehold Interest, Working Capital, or the Rent, other than (a) Permitted
Liens, (b) liens for Real Estate Taxes and other Landlord Obligations, (c)
subleases permitted by Article 16, (d) liens for Impositions or for sums arising
from the application of Legal Requirements so long as the same (i) are not yet
delinquent or (ii) are being contested in accordance with Article 8, (e) liens
of mechanics, laborers, materialmen, suppliers or vendors incurred in the
ordinary course of business
-51-
that are not yet delinquent or are for sums that are being contested in
accordance with Article 8, (f) any Facility Mortgage or other liens which are
the responsibility of Landlord pursuant to the provisions of Article 20, (g)
liens first arising prior to the Commencement Date, and (h) Landlord Liens.
Notwithstanding the foregoing, but subject to all other applicable terms and
conditions of this Lease, including without limitation the provisions hereof
regarding a Change in Control, a pledge of the ownership interests in TRS or
Host O.P. to secure bona fide Indebtedness shall not be deemed a violation of
this Section 7.1, provided that a subsequent foreclosure or other realization
upon such pledge shall be subject to the Change in Control provisions of this
Lease.
All materialmen, contractors, artisans, mechanics and laborers
and other persons contracting with Tenant with respect to the Leased Property,
or any part thereof, are hereby charged with notice that Liens are expressly
prohibited and that they must look solely to Tenant to secure payment for any
work done or material furnished for Alterations or Capital Expenditures by
Tenant or for any other purpose during the Term.
Tenant hereby acknowledges and agrees that, at all times while a
Facility Mortgage is in effect, all Excess FF&E acquired by Tenant, directly or
indirectly, from Landlord or leased by Tenant in accordance with Schedule 22.2
-------------
hereof shall be and remain subject to a first priority Lien in favor of the
Facility Mortgagee. Tenant further acknowledges that Landlord has assigned and
pledged (or may assign or pledge in the future) to the Facility Mortgagee, as
additional security for Landlord's obligations under the loan secured by the
Facility Mortgage, Landlord's rights and interests under the Landlord Liens with
respect to any and all Tenant's Personal Property, Working Capital and Excess
FF&E Leasehold Interest now owned or hereafter acquired by Tenant at any time
while the Facility Mortgage remains in effect.
7.2 Landlord Lien.
In addition to any statutory landlord's lien and in order to
secure (a) payment of the Rent and all other sums payable to Landlord hereunder
by Tenant, (b) payment of the amounts owed under the Working Capital Note, (c)
payment of any loss, cost or damage that Landlord may suffer by reason of
Tenant's breach of this Lease, and (d) the performance of all of Tenant's other
obligations hereunder and under the Working Capital Note, Tenant and Landlord,
simultaneously with the execution of the Original Lease, entered into a Security
Agreement (the "Security Agreement") whereby Tenant granted unto Landlord a
security interest in, and an express contractual lien upon, which grant Tenant
hereby reaffirms, as to (i) Tenant's Personal Property (other than Working
Capital), and all proceeds therefrom (subject to any Permitted Liens), (ii) any
Excess FF&E owned by Tenant, (iii) any Excess FF&E Leasehold Interest of Tenant,
and (iv) any Working Capital of Tenant (collectively, together with any
statutory lien rights, "Landlord Liens"). Tenant's Personal Property shall not
be removed from the Leased Property by Tenant at any time when a Default (with
respect to any monetary obligation of Tenant to Landlord hereunder and under the
Working Capital Note) or an Event of Default has occurred and is continuing
except as otherwise permitted pursuant to Section 5.2. In addition, Tenant
granted unto Landlord at the time of the Original Lease and hereby reaffirms its
grant of a security interest in those contracts described in Section 5.3(d)(ii)
hereof.
-52-
Upon Landlord's request, Tenant shall execute and deliver to
Landlord financing statements in form sufficient to perfect the security
interest of Landlord in (subject to the Facility Mortgagee's first-priority Lien
thereon) (x) Tenant's Personal Property and the proceeds thereof, (y) the
contracts described in Section 5.3(d)(ii) hereof, in accordance with the
provisions of the applicable laws of the State, and (z) any and all Working
Capital, Excess FF&E and Excess FF&E Leasehold Interests, in each case owned by
Tenant from time to time during the Term of this Lease.
ARTICLE 8
PERMITTED CONTESTS
Tenant shall have the right to contest the amount or validity of
any Imposition, Legal Requirement, Insurance Requirement, Environmental
Obligation, lien, attachment, levy, encumbrance, charge or claim (collectively,
"Claims") as to the Leased Property, by appropriate legal proceedings, conducted
in good faith and with due diligence, provided that (a) the foregoing shall in
no way be construed as relieving, modifying or extending any obligation of
Tenant provided for in this Lease to pay any Claims as finally determined, (b)
such contest, or the maintenance of any Lien during such contest, shall not
cause Landlord or Tenant to be in default under any mortgage, deed of trust or
other agreement encumbering the Leased Property or any interest therein or
result in a Lien attaching to the Leased Property unless Tenant shall within ten
(10) days thereafter, have such Lien released of record or deliver to Landlord a
bond or other security reasonably satisfactory to Landlord, which shall be in
form, amount, and issued by a surety reasonably satisfactory to Landlord,
indemnifying Landlord against all costs and liabilities resulting from such Lien
and the foreclosure or attempted foreclosure thereof, (c) no part of the Leased
Property nor any Rent therefrom shall be in any immediate danger of sale,
forfeiture, attachment or loss, and (d) Tenant shall indemnify and hold harmless
Landlord from and against any cost, claim, damage, penalty or reasonable
expense, including reasonable attorneys' fees, incurred by Landlord in
connection therewith or as a result thereof. Tenant shall be entitled to any
refund of any Claims and such charges and penalties or interest thereon which
have been paid by Tenant or paid by Landlord and for which Landlord has been
fully reimbursed by Tenant. If Tenant shall fail (x) to pay any Claims when
finally determined, (y) to provide reasonable security therefor, or (z) to
prosecute any such contest diligently and in good faith, Landlord may, upon
reasonable notice to Tenant (which notice may be oral and shall not be required
if Landlord shall reasonably determine that the same is not practicable), pay
such charges, together with interest and penalties due with respect thereto, and
Tenant shall reimburse Landlord therefor, upon demand, as Additional Charges.
Landlord agrees to join in any such proceedings if required legally to prosecute
such contest, provided that Landlord shall not thereby be subjected to any
liability or cost therefor (including, without limitation, for the payment of
any costs or expenses in connection therewith).
-53-
ARTICLE 9
INSURANCE AND INDEMNIFICATION
9.1 General Insurance Requirements.
At all times during the Term and at any other time Tenant shall
be in possession of the Leased Property, the Leased Property shall be insured
against the risks and in the amounts described below. This insurance shall be
written by companies authorized to issue insurance in the State. The policies
must name the party obtaining the policy as the insured and the other party, the
Manager and any Facility Mortgagee(s) as additional named insureds and/or (in
the case of any Facility Mortgagees) as loss payees. Losses shall be payable to
Landlord or Tenant as provided in Article 10 of this Lease. Any loss adjustment
for coverages insuring both parties shall require the written consent of
Landlord and Tenant, each acting reasonably and in good faith. The policies on
the Leased Property (including the Facility, Fixtures and FF&E owned by
Landlord), and on Tenant's Personal Property, shall, subject to Section 9.1(k),
satisfy the requirements of any ground lease, mortgage, security agreement or
other financing lien affecting the Leased Property (provided, however, that any
insurance coverage maintained with respect to the Leased Property by Manager or
Landlord in accordance with the Management Agreement shall be deemed to satisfy
such requirements so long as the Management Agreement is in effect) and at a
minimum shall include:
(a) "All Risk" property insurance, including insurance against loss
or damage by fire, vandalism and malicious mischief, explosion of steamboilers,
pressure vessels or other similar apparatus, now or hereafter installed in the
Facility, extended coverage perils, earthquake (if available at commercially
reasonable rates) and all physical loss perils insurance, including, but not
limited to, sprinkler leakage, in an amount equal to one hundred percent (100%)
of the then full Replacement Cost thereof (as defined in Section 9.2), with the
usual extended coverage endorsements, including a Replacement Cost Endorsement
and Builder's Risk Coverage during the continuance of any construction at the
Leased Property;
(b) Loss of rent insurance (on the "Special Form") in the minimum
amount of one (1) year of Minimum Rent and Percentage Rent (based on the last
twelve (12) months in which the Facility was operated for its Primary Intended
Use) for the benefit of Landlord, and business interruption insurance on the
"Special Form" in the amount of one year of projected net profit of Tenant from
the Facility (exclusive of collection costs and any operating expenses that are
considered by the applicable insurance company to be non-continuing as a result
of any Casualty), for the benefit of Tenant;
(c) Flood (if the Facility is located in whole or in part within an
area identified as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of
1968, as amended, or the Flood Disaster Protection Act of 1973, as amended (or
any successor acts thereto)) and such other hazards and in such amounts as may
be customary for comparable properties in the area, said coverage to be in an
amount equal to the lesser of the full Replacement Cost of the Facility or the
maximum amount available;
-54-
(d) Comprehensive general liability insurance, including
bodily injury, property damage, and innkeeper's liability (including broad form
contractual liability, fire legal liability and completed operations coverage)
having policy limits as to claims with respect to the Leased Property of at
least One Million Dollars ($1,000,000) per occurrence, Two Million Dollars
($2,000,000) aggregate per location, provided that such limits shall be modified
to conform to any required underlying statutory coverage, and Umbrella coverage
shall be provided having limits of One Hundred Million Dollars ($100,000,000)
per occurrence and in the aggregate, and attaching in excess of policy limits as
to general liability, where applicable, and employer's liability coverage,
covering each of the following: bodily injury, death, or property damage
liability per occurrence, personal injury, general aggregate, products and
completed operations, 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 Landlord and Tenant;
(e) To the extent applicable at the Facility, comprehensive
form automobile liability insurance for owned, non-owned and hired vehicles in
the amount of $1,000,000;
(f) Fidelity bonds or blanket crime policies with limits and
deductibles as may be reasonably determined by Landlord, covering Tenant's
employees in job classifications normally bonded under prudent hotel management
practices in the United States or otherwise required by law;
(g) To the extent applicable at the Facility, garagekeeper's
legal liability insurance covering both comprehensive and collision-type losses
with a limit of liability of $1,000,000 for any one occurrence;
(h) Insurance coverage for claims by employees of Manager
for wrongful termination, discrimination or sexual harassment;
(i) Worker's compensation insurance coverage for all persons
employed by Tenant on the Leased Property with statutory limits and otherwise
with limits of and provisions in accordance with Legal Requirements, and
employer's liability insurance having a limit of $500,000;
(j) To the extent applicable at the Facility, safe deposit
box legal liability insurance covering property or guests while in a safe
deposit box on the Leased Property for which Tenant is legally responsible with
a limit of not less than $100,000 in any one occurrence; and
(k) Such additional insurance and endorsements (and/or
increased amounts of insurance hereinabove required) as may be reasonably
required, from time to time, by Landlord, any Facility Mortgagee or any rating
agency, or any existing or future ground lessor, provided that any incremental
cost incurred as a result of such additional coverage shall be borne by
Landlord.
-55-
9.2 Responsibility for Insurance.
Tenant shall obtain or cause to be obtained the insurance and
pay the premiums for the coverages described in Sections 9.1(d) through (j) and
for that portion of the premium for the coverage described in Section 9.1(b)
that is attributable to business interruption insurance, and Landlord shall
obtain the insurance and pay the premiums for the coverages described in
Sections 9.1(a) through (c) and (k) (excluding that portion of the premium for
the coverage described in Section 9.1(b) that is attributable to business
interruption insurance that is for the benefit of Tenant). The party responsible
for the premium for any insurance coverage shall also be responsible for any and
all deductibles and self-insured retentions in connection with such coverages.
In the event that either party can obtain comparable insurance coverage required
to be carried by the other party from comparable insurers and at a cost
significantly less than that at which such other party can obtain such coverage,
the parties shall cooperate in good faith to obtain such coverage at the lower
cost and shall allocate the premiums therefor in accordance with the provisions
of the first sentence of this Section 9.2.
Notwithstanding anything in this Article 9 to the contrary, so
long as the Management Agreement is in full force and effect and Manager is
maintaining the insurance required thereunder, Landlord's and Tenant's
obligations to maintain the insurance required under this Article 9 shall be
deemed to have been met (provided, that the costs therefor shall be allocated
between Landlord and Tenant in the manner contemplated by the first sentence of
this Section 9.2).
9.3 Replacement Cost.
"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 less exclusions provided in the standard form of fire
insurance policy. In the event either party believes that the then full
Replacement Cost has increased or decreased at any time during the Term, such
party, at its own cost, shall have the right to have such full Replacement Cost
redetermined by an independent accredited appraiser approved by the other, which
approval shall not be unreasonably withheld or delayed. The party desiring to
have the full Replacement Cost so redetermined shall forthwith, on receipt of
such determination by such appraiser, give written notice thereof to the other.
The determination of such appraiser shall be final and binding on the parties
hereto, and Landlord shall forthwith conform the amount of the insurance carried
to the amount so determined by the appraiser.
9.4 Waiver of Subrogation.
Landlord and Tenant agree that (insofar as and to the extent
that such agreement may be effective without invalidating or making it
impossible to secure insurance coverage from responsible insurance companies
doing business in the State) with respect to any loss covered by insurance then
being carried by Landlord or Tenant, respectively, the party carrying such
insurance and suffering said loss releases the other of and from any and all
claims with respect to such loss; and they further agree that their
-56-
respective insurance companies shall have no right of subrogation against the
other on account thereof, even though extra premium may result therefrom.
9.5 Form Satisfactory, Etc.
Subject to the second paragraph of Section 9.2, all insurance
policies and endorsements required pursuant to this Article 9 shall be fully
paid for, nonassessable and, except for umbrella and flood coverage, shall
contain such provisions and expiration dates and be in such form and amounts and
issued by insurance carriers authorized to do business in the State, having a
general policy holder's rating of A/VI in Best's latest rating guide (or such
other higher rating or such other customarily used rating agency as may be
required by the Facility Mortgagee, provided that any additional expense
associated with such higher ratings shall be borne by Landlord), and otherwise
satisfactory to Landlord and Tenant. Without limiting the foregoing, such
policies shall include only deductibles reasonably approved by Landlord. The
party responsible for obtaining any policy shall deliver policies or
certificates thereof to the other party prior to their effective date (and, with
respect to any renewal policy, thirty (30) days prior to the expiration of the
existing policy), and, in the event either party shall fail to effect such
insurance as herein required, to pay the premiums therefor or to deliver such
policies or certificates to the other party or the Facility Mortgagee at the
times required, the other party shall have the right, but not the obligation,
after ten (10) days' written notice to the responsible party, to acquire such
insurance and pay the premiums therefor, which amounts shall be reimbursed by
the responsible party, together with interest accrued thereon at the Overdue
Rate from the date such payment is made until the date repaid. All such policies
shall provide the non-responsible party (and the Facility Mortgagee and Manager,
if required by the same) thirty (30) days' prior written notice of any material
modification, expiration or cancellation of such policy.
9.6 Blanket Policy.
Notwithstanding anything to the contrary contained in this
Article 9, Tenant's and Landlord's obligations to maintain the insurance herein
required may be brought within the coverage of a so-called blanket policy or
policies of insurance, provided that, except as otherwise approved by the other
party in writing, (a) the coverage thereby afforded will not be reduced or
diminished from that which would exist under a separate policy meeting all other
requirements of this Lease, and (b) the requirements of this Article 9
(including an appropriate allocation of the costs for such blanket policy
between Landlord and Tenant in a manner consistent with the first sentence of
Section 9.2) are otherwise satisfied.
9.7 No Separate Insurance.
Neither Landlord nor Tenant shall take out separate insurance
concurrent in form or contributing in the event of loss with that required by
this Article 9, or increase the amount of any existing insurance by securing an
additional policy or additional policies, unless all parties having an insurable
interest in the subject matter of such insurance are included therein as
additional insureds and the loss is payable under such insurance in the same
manner as losses are payable under the insurance required to be carried pursuant
to
-57-
this Lease. In the event either shall take out any such separate insurance or
increase any of the amounts of the then existing insurance, it shall give the
other party prompt Notice thereof.
9.8 General Indemnification of Landlord by Tenant.
Except as otherwise provided in Sections 4.3.2, 5.1, 9.9, 14.1
and 21.3.3, and except for liabilities, obligations, claims, damages, penalties,
causes of action, costs and expenses (including, without limitation, attorneys'
fees) arising from Landlord's or any other Landlord Indemnitee's or their
respective agents' (including Manager, but only with respect to Manager's acts
or omissions with respect to Landlord Obligations) willful misconduct or gross
negligence, Tenant shall protect, indemnify and hold harmless Landlord and each
Landlord Indemnitee for, from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and reasonable expenses (including,
without limitation, reasonable attorneys' fees), to the maximum extent permitted
by law, and notwithstanding the existence of any insurance provided for herein,
but subject to Section 9.4 hereof, and without regard to the policy limits of
any such insurance, imposed upon or incurred by or asserted against Landlord or
any Landlord Indemnitee by reason of:
(i) liabilities arising after the Commencement Date and
during the Term under any leases, contracts, concession agreements or other
agreements either (A) entered into by Tenant or any Tenant Indemnitee, or their
respective agents (including Manager, except with respect to Manager's acts or
omissions with respect to Landlord Obligations), with respect to the Facility,
or (B) assigned to Tenant pursuant to Section 2.2(a) (except liabilities arising
out of agreements described in this clause (B) for any employee claims by
employees of Manager for wrongful termination, discrimination or sexual
harassment,
(ii) the gross negligence or willful misconduct of Tenant or
any other Tenant Indemnitee, or their respective agents (including Manager,
except with respect to Manager's acts or omissions with respect to Landlord
Obligations), including any such gross negligence or willful misconduct giving
rise to any employee claims by employees of Manager for wrongful termination,
discrimination or sexual harassment,
(iii) 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 or rights of way on or after the Commencement Date and during the
Term, including, without limitation, any claims under liquor liability, "dram
shop" or similar laws,
(iv) any litigation, proceeding (other than Condemnation
proceedings) or claim by governmental entities or other third parties to which
Landlord or any Landlord Indemnitee is made a party or participant or which is
otherwise asserted against Landlord or any Landlord Indemnitee, relating to the
Leased Property or Tenant's Personal Property or any use, misuse, non-use,
condition, management, maintenance, or repair thereof, the occurrence giving
rise to which litigation, proceeding or claim occurs on or after the
Commencement Date and during the Term,
(v) any Impositions that are the obligations of Tenant to
pay pursuant to the applicable provisions of this Lease, and
-58-
(vi) any failure on the part of Tenant or anyone claiming
under Tenant to perform or comply with any of the terms of this Lease.
Tenant shall pay all amounts payable under this Section 9.8
within ten (10) days after demand therefor and, if not timely paid, such amounts
shall bear interest at the Overdue Rate from the date of determination to the
date of payment. Tenant, at its expense, shall contest, resist and defend any
such claim, action or proceeding asserted or instituted against Landlord and
shall not be responsible for any duplicate attorneys' fees incurred by Landlord
or may compromise or otherwise dispose of the same, with Landlord's prior
written consent (which consent may not be unreasonably withheld or delayed). In
the event Landlord shall unreasonably withhold or delay its consent, Tenant
shall not be liable pursuant to this Section 9.8 for any incremental increase in
costs or expenses resulting therefrom. The obligations of Tenant under this
Section 9.8 are in addition to the obligations set forth in Section 4.3.3 and
21.3.3 and shall survive the termination or expiration of this Lease.
Nothing in this Section 9.8 is intended to limit Tenant's right
to assert a claim or defense against Landlord based upon the obligations imposed
upon Landlord pursuant to Sections 4.3, 5.1, 9.9, 14.1 and 21.3.3.
9.9 General Indemnification of Tenant by Landlord.
Except for liabilities arising from Tenant's or any other Tenant
Indemnitee's, or their respective agents' (including Manager, except with
respect to Manager's acts or omissions with respect to Landlord Obligations)
willful misconduct or gross negligence, Landlord shall protect, indemnify and
hold harmless Tenant and each Tenant Indemnitee for, from and against all
liabilities, obligations, claims, damages, penalties, causes of action, costs
and reasonable expenses (including, without limitation, reasonable attorneys'
fees), to the maximum extent permitted by law, and notwithstanding the existence
of any insurance provided for herein, but subject to Section 9.4 hereof, and
without regard to the policy limits of any such insurance, imposed upon or
incurred by or asserted against Tenant or any Tenant Indemnitee by reason of:
(i) liabilities arising at any time under any leases,
contracts, concession agreements or other agreements with respect to the
Facility, except liabilities arising after the Commencement Date and during the
Term under any leases, contracts, concession agreements or other agreements
either (a) entered into during the Term by Tenant or any other Tenant
Indemnitee, or their respective agents (including Manager, except with respect
to Manager's acts or omissions with respect to Landlord Obligations) with
respect to the Facility, or (b) assigned to Tenant pursuant to Section 2.2(a),
(ii) the gross negligence or willful misconduct of Landlord
or any other Landlord Indemnitee, or their respective agents (including Manager,
but only with respect to Manager's acts or omissions with respect to Landlord
Obligations),
(iii) 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 or rights of way
-59-
prior to the Commencement Date or after expiration or earlier termination of the
Term, including, without limitation any claims under liquor liability, "dram
shop" or similar laws,
(iv) any litigation, proceeding (other than Condemnation
proceedings) or claim by governmental entities or other third parties to which
Tenant or any Tenant Indemnitee is made a party or participant or which is
otherwise asserted against Tenant or any Tenant Indemnitee, relating to the
Leased Property or any use, misuse, non-use, condition, management, maintenance,
or repair thereof, the occurrence giving rise to which litigation, proceeding or
claim occurs prior to the Commencement Date or after the expiration or earlier
termination of the Term,
(v) any Landlord Obligations, and
(vi) any failure on the part of Landlord or anyone claiming
under Landlord (including Manager, but only with respect to Manager's acts or
omissions with respect to Landlord Obligations) to perform or comply with any of
the terms of this Lease.
Landlord shall pay all amounts payable under this Section 9.9
within ten (10) days after demand therefor and, if not timely paid, such amounts
shall bear interest at the Overdue Rate from the date of determination to the
date of payment. Landlord, at its expense, shall contest, resist and defend any
such claim, action or proceeding asserted or instituted against Tenant and shall
not be responsible for any duplicate attorneys' fees incurred by Tenant, or may
compromise or otherwise dispose of the same with Tenant's prior written consent
(which consent may not be unreasonably withheld or delayed). In the event Tenant
shall unreasonably withhold or delay its consent, Landlord shall not be liable
pursuant to this Section 9.9 for any incremental increase in costs or expenses
resulting therefrom. The obligations of Landlord under this Section 9.9 are in
addition to the obligations set forth in Section 4.3.2 and 21.3.3 and shall
survive the termination of this Lease.
Nothing in this Section 9.9 is intended to limit Landlord's
right to assert a claim or defense against Tenant based upon the obligations
imposed upon Tenant pursuant to Sections 4.3, 5.1, 9.8 and 21.3.3.
9.10 Independent Contractor.
Except as otherwise approved by Landlord in writing, Tenant
shall cause any person or company entering upon the Leased Property to provide
any installation, construction or repair (each a "Contractor"), which (x)
constitutes a Capital Expenditure or (y) has an anticipated cost in excess of
$100,000 to (a) have in full force and effect Contractor's Liability Coverage
(hereafter defined) effective throughout the period said Contractor is upon the
Leased Property and for one year thereafter and (b) deliver within five (5)
Business Days of Landlord's request a certificate ("Contractor's Insurance
Certificate") evidencing compliance with subpart (a) to Tenant prior to the
Contractor's first entry upon the Leased Property. As used herein, the term
"Contractor's Liability Coverage" means a comprehensive general liability
insurance policy meeting the requirements of this Article 9 (as if required to
be provided by Tenant) except the minimum policy limit shall be $1,000,000 per
occurrence and $3,000,000 in the aggregate.
-60-
Within thirty (30) days after delivery of Landlord's written request, Tenant
shall deliver copies of all Contractor's Insurance Certificates to Landlord.
ARTICLE 10
CASUALTY
10.1 Insurance Proceeds.
All proceeds of the insurance contemplated by Section 9.1(a)-(c)
payable by reason of any loss, damage or destruction to the Leased Property, or
any portion thereof ("Casualty"), and insured under any policy of property or
casualty insurance required by Article 9 (other than proceeds of business
interruption insurance and any insurance proceeds paid with respect to Tenant's
Personal Property, which shall be paid to Tenant) shall be paid directly to
Landlord, and paid out by Landlord from time to time for the reasonable costs of
reconstruction or repair of the Leased Property necessitated by such Casualty,
if and to the extent required by the provisions of Section 10.2; provided,
however, that so long as no Event of Default shall have occurred and be
continuing, all such proceeds less than or equal to $1,000,000 shall be paid
directly to Tenant and applied to the reasonable costs of restoration and repair
of the Leased Property necessitated by such Casualty, and such losses may be
adjusted without Landlord's consent. Any excess proceeds of insurance remaining
after the completion of the restoration shall be paid to Landlord. All salvage
resulting from any risk covered by insurance shall belong to Landlord, except
for any amount thereof paid with respect to Tenant's Personal Property. If
Landlord is not required and elects not to repair and restore as permitted under
this Lease, and this Lease is terminated pursuant to Section 10.2, all such
insurance proceeds shall be retained by Landlord, except for any amount thereof
paid with respect to Tenant's Personal Property and any amount attributable to
business interruption insurance.
10.2 Reconstruction in the Event of Casualty.
10.2.1 Facility Rendered Unsuitable for Its Primary Intended
Use.
If during the Term the Leased Property is totally or
partially destroyed by a Casualty and the Facility is thereby rendered
Unsuitable for Its Primary Intended Use, as reasonably determined by Landlord,
this Lease shall terminate as of the date of the Casualty and neither Landlord
nor Tenant shall have any further liability hereunder except for any liabilities
which have arisen or occurred prior to such termination, and those which
expressly survive termination of this Lease, and Landlord shall be entitled to
retain all Casualty insurance proceeds (except for any amount thereof paid with
respect to Tenant's Personal Property and any amount attributable to business
interruption insurance).
10.2.2 Facility Not Rendered Unsuitable for Its Primary
Intended Use.
If during the Term the Leased Property is totally or
partially destroyed by a Casualty, but the Facility is not thereby rendered
Unsuitable for Its Primary Intended Use, as reasonably determined by Landlord,
Landlord or, at Landlord's election, Tenant shall, subject to Section 10.2.3,
promptly restore the Facility as provided
-61-
in Section 10.2.4. Except as provided in Section 10.2.3, such damage or
destruction shall not terminate this Lease.
10.2.3 Deficiency in Insurance Proceeds.
If the cost of the repair or restoration exceeds the
amount of proceeds received by Landlord from the insurance required under
Article 9 and Tenant is obligated to restore pursuant to Section 10.2.2 hereof,
Landlord agrees, subject to this Section 10.2.3, to contribute any excess
amounts needed to restore the Facility prior to requiring Tenant to commence
such work. Such difference shall be made available by Landlord, together with
any insurance proceeds, for application to the cost of repair and restoration in
accordance with the provisions of Section 10.2.4. In the event the sum of (a)
the insurance proceeds released to Landlord, and (b) that portion of the
deductible, if any, which is greater than five percent (5%) of the cost of the
repair, is equal to at least ninety-five percent (95%) of the cost of the repair
or restoration, Landlord shall fund the deficiency. In the event the sum of (y)
the insurance proceeds, and (z) that portion of the deductible, if any, which is
greater than five percent (5%) of the cost of the repair, is less than
ninety-five percent (95%) of the cost of the repair or restoration, Landlord
shall fund such deficiency in its sole discretion; provided, however, that in
the event Landlord does not agree to make such deficiency available for
restoration, either Landlord or Tenant may terminate this Lease by written
notice to the other, whereupon this Lease shall terminate as provided in Section
10.2.1 and Landlord shall pay to Tenant a termination fee equal to Tenant's
Operating Profit for the immediately preceding Fiscal Year.
10.2.4 Disbursement of Proceeds.
In the event Tenant is required to restore the Leased
Property pursuant to Section 10.2.2, Tenant shall (or shall direct Manager to)
commence promptly and continue diligently to perform the repair and restoration
of the Leased Property, so as to restore the Leased Property in compliance with
all Legal Requirements to substantially the same condition, to the extent
reasonably practicable, as existed immediately before the damage or destruction
and otherwise in accordance with this Lease. Landlord shall advance the
insurance proceeds and, subject to the terms hereof, any additional amounts
payable by Landlord pursuant to Section 10.2.3 to Tenant regularly during the
repair and restoration period so as to permit payment for the cost of any such
restoration and repair. Any such advances shall be made not more frequently than
monthly within ten (10) Business Days after Tenant submits to Landlord a written
requisition and substantiation therefor on AIA Forms G702 and G703 (or on such
other form or forms as may be reasonably acceptable to Landlord). Landlord may,
at its option, condition advancement of said insurance proceeds and other
amounts on (i) the absence of any uncured Event of Default, (ii) its approval of
plans and specifications of an architect reasonably satisfactory to Landlord
(which approval shall not be unreasonably withheld or delayed), (iii) general
contractor's estimates, (iv) architect's certificates, (v) unconditional lien
waivers of general contractors (if available), (vi) evidence of approval by all
governmental authorities and other regulatory bodies whose approval is required,
and (vii) such other certificates as Landlord may, from time to time, reasonably
require.
-62-
Landlord's obligation to disburse insurance proceeds
under this Article 10 shall be subject to the release of such proceeds by any
Facility Mortgagee to Landlord, and Tenant's obligation to restore the Leased
Property pursuant to this Article 10 shall be subject to the release of
available insurance proceeds by any Facility Mortgagee to Landlord or directly
to Tenant or Manager and, in the event such proceeds are insufficient, Landlord
electing to make such deficiency available therefor (and disbursement of such
deficiency); provided, however, that Landlord and Tenant shall each have the
same termination rights in the event of any Facility Mortgagee's failure or
refusal to disburse insurance proceeds as they have with respect to Landlord's
failure to disburse any deficiency in insurance proceeds, as provided in Section
10.2.3.
10.3 Reconstruction in the Event of Damage or Destruction Not Covered
by Insurance.
If during the Term the Facility is totally or materially damaged
or destroyed by a risk not covered by the insurance described in Article 9, or
if the proceeds of such insurance are not available to Landlord for restoration
of the Facility, whether or not in either event such damage or destruction
renders the Facility Unsuitable for Its Primary Intended Use, Landlord at its
option shall either, (a) direct Tenant to restore the Facility at Landlord's
sole cost and expense to substantially the same condition it was in immediately
before such damage or destruction, in which case such damage or destruction
shall not terminate this Lease, or (b) terminate this Lease and neither Landlord
nor Tenant shall have any further liability thereunder, except for any
liabilities which have arisen or occurred prior to such termination and those
which expressly survive termination of this Lease.
10.4 Tenant's Property and Business Interruption Insurance.
All insurance proceeds payable by reason of any loss of or
damage to any of Tenant's Personal Property and the business interruption
insurance maintained for the benefit of Tenant shall be paid to Tenant.
10.5 Abatement of Rent.
Any damage or destruction due to Casualty notwithstanding, this
Lease shall remain in full force and effect (except as otherwise expressly
provided in this Article 10) and Tenant's obligation to pay Rent required by
this Lease shall remain unabated by any Casualty which does not result in a
reduction of Gross Revenues. If and to the extent that any Casualty results in a
reduction of Gross Revenues (including proceeds of any business interruption
insurance actually received by Tenant or that would have been received by Tenant
if Tenant were in full compliance with the insurance requirements of Article 9)
which would otherwise be realizable from the operation of the Facility, then
Landlord shall receive all loss of rental income insurance and Tenant shall have
no obligation to pay Rent with respect to any Accounting Period during the
continuation of such Casualty in excess of the greater of (i) one-thirteenth (or
one-twelfth, if Accounting Periods are then the same as calendar months) of the
aggregate amount of Rent (excluding Additional Charges) paid to Landlord with
respect to the last full Fiscal Year prior to such Casualty or (ii) the amount
of Rent calculated with respect to such Accounting Period under Section 3.1.1
without
-63-
regard to clause (A)(i) of such Section (which relates to Minimum Rent);
provided, however, that if such damage or destruction was caused by Tenant's
gross negligence or willful misconduct, Tenant shall remain liable for the
amount of Rent which would have been payable hereunder at a rate equal to the
average Rent during the last three (3) preceding Lease Years (or if three (3)
Lease Years shall not have elapsed, the average during the preceding Lease
Years), as if such Casualty had not occurred.
ARTICLE 11
CONDEMNATION
11.1 Total Condemnation, Etc.
If either (i) the whole of the Leased Property shall be taken by
Condemnation or (ii) a Condemnation of less than the whole of the Leased
Property renders the Leased Property Unsuitable for Its Primary Intended Use, as
reasonably determined by Landlord, this Lease shall terminate as of the day of
the Condemnation, and Tenant and Landlord shall seek the Award for their
respective interests in the Leased Property as provided in Section 11.4.
11.2 Partial Condemnation.
In the event of a Condemnation of less than the whole of the
Leased Property such that the Leased Property is still suitable for its Primary
Intended Use, as reasonably determined by Landlord, Tenant shall, to the extent
that the Award and additional amounts disbursed by Landlord are sufficient
therefor, commence promptly and continue diligently to restore the untaken
portion of the Facility so that the Facility shall constitute a complete
architectural unit of the same general character and condition (as nearly as may
be possible under the circumstances) as the Facility existing immediately prior
to such Condemnation, in full compliance with all Legal Requirements. Subject to
the terms hereof, Landlord shall contribute to the cost of restoration that part
of the Award necessary to complete such repair or restoration, together with
severance and other damages awarded for the taken portion of the Facility
(provided, however, that the amount of such contribution shall not exceed such
cost), and such amounts shall be advanced to Tenant regularly during the
restoration period so as to permit payment for the cost of such repair or
restoration. Landlord may, at its option, condition advancement of such Award
and other amounts on (i) the absence of any continuing Event of Default, (ii)
its approval of plans and specifications of an architect reasonably satisfactory
to Landlord (which approval shall not be unreasonably withheld or delayed),
(iii) general contractors' estimates, (iv) architect's certificates, (v)
unconditional lien waivers of general contractors (if available), (vi) evidence
of approval by all governmental authorities and other regulatory bodies whose
approval is required and (vii) such other certificates as Landlord may, from
time to time, reasonably require. Landlord's obligation under this Section 11.2
to disburse the Award and such other amounts shall be subject to (x) the
collection of the Award by Landlord and (y) the satisfaction of any applicable
requirements of the Facility Mortgage, and the release of such Award by the
Facility Mortgagee. Tenant's obligation to restore the Leased Property shall be
subject to the release of the Award and any additional funds to be disbursed by
Landlord pursuant hereto required for restoration. Subject to Section 21.3.3, if
Landlord has received the Award, but elects not to make the Award available to
Tenant
-64-
for restoration, then Tenant shall have the right to terminate this Lease and
Landlord shall pay to Tenant a termination fee equal to the amount of Tenant's
Operating Profit for the immediately preceding Fiscal Year. Subject to Section
21.3.3, if Landlord has not received the Award, or the Award is insufficient to
restore the untaken portion of the Facility as provided above, then Landlord, in
its sole discretion, shall have the right to terminate this Lease and neither
Landlord nor Tenant shall have any further liability hereunder, except for any
liabilities which have arisen or occurred prior to such termination and those
which expressly survive termination of this Lease, and Landlord shall be
entitled to retain the entire Award; provided that Tenant shall be permitted to
seek a separate award for the value of Tenant's Personal Property that was taken
in such Condemnation.
11.3 Abatement of Rent.
In the event of a partial Condemnation as described in Section
11.2 which does not result in a termination of this Lease by Landlord, the Rent
shall be abated in the manner and to the extent that is fair, just, and
equitable to both Tenant and Landlord, taking into consideration, among other
relevant factors, the number of usable rooms, the amount of square footage, or
the effect upon revenues of such partial Condemnation. If Landlord and Tenant
are unable to agree upon the amount of such abatement within thirty (30) days
after such partial Condemnation, the matter shall be submitted to appraisal as
provided for in Article 19 hereof.
11.4 Allocation of Award.
Except as provided in the second sentence of this Section 11.4,
the total Award shall be solely the property of and payable to Landlord. Any
portion of the Award made for the taking of Tenant's leasehold interest in the
Leased Property (valued without regard to any right of termination in Landlord
that otherwise exists under this Article 11), loss of business during the
remainder of the Term (determined without regard to any provision for
termination that might otherwise arise under this Article 11), the taking of
Tenant's Personal Property or Tenant's removal and relocation expenses shall be
the sole property of and payable to Tenant (subject to the provisions of Section
11.2). Subject to the rights of the Manager under the Management Agreement and
the rights of any Facility Mortgagee under a Facility Mortgage, in any
Condemnation proceedings, Landlord and Tenant shall each seek its own Award in
conformity herewith, at its own expense.
ARTICLE 12
TENANT DEFAULTS; REMEDIES
12.1 Event of Default.
The occurrence of any one or more of the following events shall
constitute an "Event of Default" hereunder:
(a) Tenant fails (i) to make any payment of the Minimum Rent
or Percentage Rent payable hereunder when due and such failure continues for a
period of ten (10) days after the date due, or (ii) subject to the right to
contest same pursuant to Article 8
-65-
hereof, to make any required payments of Additional Charges within ten (10) days
following Notice from Landlord that such payment is due and owing and unpaid.
(b) Tenant fails to maintain the insurance coverages that it
is required to maintain under Article 9.
(c) Except as otherwise expressly provided herein, Tenant
defaults in the due observance or performance of any of the terms, covenants or
agreements contained herein to be performed or observed by it (other than as
specified in clauses (a) and (b) above), and, in either case, such default
continues for a period of thirty (30) days after Notice thereof from Landlord to
Tenant; provided, however, that if such default is curable but such cure cannot
be accomplished with due diligence within such period of time and if, in
addition, Tenant commences to cure such default within thirty (30) days after
Notice thereof from Landlord and thereafter prosecutes the curing of such
default with all due diligence, such period of time shall be extended to such
period of time (not to exceed one hundred twenty (120) days in the aggregate,
subject to Unavoidable Delay) as may be necessary to cure such default, provided
further that the cure rights shall not apply to any breach of a Tenant covenant
under Section 22.1, 22.3, 22.4, or 22.5.
(d) Any obligation of Tenant in respect of any Indebtedness
(other than Tenant's obligations under any Excess FF&E Lease that constitutes
Indebtedness) in a principal amount in excess of ($1,000,000) for money borrowed
or for the deferred purchase price of any material property or services, is
declared to be, or as a result of acceleration becomes, due and payable prior to
the stated maturity thereof.
(e) There occurs a final unappealable determination by
applicable federal or State authorities of the revocation or limitation of any
material license (including, but not limited to, any gaming license), permit,
certification, or approval required for the material lawful operation of the
Facility in accordance with its Primary Intended Use or the loss or limitation
of any material license (including but not limited to any gaming license),
permit, certification, or approval under any other circumstances under which
Tenant is required to cease its operation of the Facility in accordance with its
Primary Intended Use at the time of such loss or limitation, which revocation,
limitation or loss is not caused by actions of Landlord or its Affiliates or
which is not beyond the reasonable control of Tenant.
(f) Tenant is generally not paying its debts as they become
due, or Tenant makes a general assignment for the benefit of creditors.
(g) Any petition is filed by or against Tenant under the
Federal bankruptcy laws, or any other proceeding is instituted by or against
Tenant seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
reorganization, arrangement, adjustment or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for Tenant or for any
substantial part of the property of Tenant, and, in the case of any involuntary
petition filed or proceeding instituted against Tenant only, such proceeding is
not
-66-
dismissed within sixty (60) days after institution thereof, or Tenant takes any
action to authorize or effect any of the actions set forth above in this
paragraph.
(h) Tenant causes or institutes any proceeding for its
dissolution or termination.
(i) Tenant ceases operation of the Leased Property for its
Primary Intended Use for a period in excess of thirty (30) consecutive days,
except as a result of a Casualty, other Emergency Situations, the matters set
forth in Section 23.17 or partial or complete Condemnation of or to the Facility
or of or to the immediate surroundings so as to prohibit reasonable access by
patrons to the Facility.
(j) The estate or interest of Tenant in the Leased Property
or any part thereof is levied upon or attached in any proceeding and the same is
not vacated or discharged within the later of (i) one hundred and twenty (120)
days after commencement thereof, unless the amount in dispute is less than
$250,000, in which case Tenant shall give Notice to Landlord of the dispute but
Tenant may defend in any suitable way and (ii) thirty (30) days after receipt by
Tenant of Notice thereof from Landlord (unless Tenant shall be contesting such
lien or attachment in good faith in accordance with Article 8).
(k) Any Change in Control occurs.
(l) Tenant or TRS defaults under the terms of any of the
Related Agreements beyond the expiration of any applicable notice and cure
periods.
(m) [Intentionally Omitted.]
(n) [Intentionally Omitted.]
In any such event, Landlord, in addition to all other remedies
available to it, may terminate this Lease by giving Notice thereof to Tenant,
and upon the expiration of the time, if any, fixed in such Notice, this Lease
shall terminate and all rights of Tenant under this Lease shall cease. Subject
to Section 23.11, Landlord shall have, and may exercise in its sole and absolute
discretion, all, or none of the, rights and remedies available at law and in
equity to Landlord as a result of Tenant's breach of this Lease; provided,
however, that notwithstanding anything set forth herein to the contrary, (A)
Landlord's sole remedy for an Event of Default under Section 12.1(k) shall be to
terminate this Lease, and (B) Landlord's actual damages in the event of a breach
by Tenant of any of its obligations pursuant to Article 22 and a resulting loss
of REIT status by Host REIT shall include, without limitation, amounts equal to
income taxes paid by Host REIT and (without duplication) loss of value of Host
REIT, both to the extent attributable to the loss of REIT status; provided that
any termination as a result of an Event of Default under Section 12.1(k) shall
occur no later than 450 days after the applicable Change in Control (or such
shorter period as may be expressly provided in the Management Agreement or
Consent and Assignment) and upon not less than 30 days' Notice to Tenant. If
Landlord terminates this Lease because of an Event of Default under Section
12.1(k) above, and the Change in Control does not involve an Adverse Party, then
-67-
Landlord shall pay to Tenant a termination fee equal to Tenant's Operating
Profit for the immediately preceding Fiscal Year.
Upon the occurrence of an Event of Default, Landlord may, in
addition to any other remedies provided herein, enter upon the Leased Property
and take possession thereof, and either (i) retain any and all of Tenant's
Personal Property on the Leased Property, without liability for trespass or
conversion (Tenant hereby waiving any right to Notice or hearing prior to such
taking of possession by Landlord) or (ii) sell the same at public or private
sale, after giving Tenant reasonable Notice of the time and place of any public
or private sale, at which sale Tenant or its assigns may purchase all or any
portion of Tenant's Personal Property. Unless otherwise provided by law and
without intending to exclude any other manner of giving Tenant reasonable
notice, the requirement of reasonable Notice shall be met if such Notice is
given at least ten (10) Business Days before the date of sale. The proceeds from
any such disposition, less all expenses incurred in connection with the taking
of possession, holding and selling of such property (including reasonable
attorneys' fees) shall belong to Landlord and shall be applied as a credit
against the indebtedness which is secured by the security interest granted in
Section 7.2. Any surplus shall be paid to Tenant or as otherwise required by
law, and Tenant shall pay any deficiency to Landlord, as Additional Charges,
upon demand.
The foregoing provisions hereof notwithstanding, Landlord shall
have no right to assert any remedy hereunder in respect of an Event of Default,
and an Event of Default shall be deemed to no longer exist, if Tenant cures an
Event of Default (A) under Section 12.1(a) prior to the earlier of (x) the
commencement by Landlord of the exercise of any remedy under this Lease by
Landlord or (y) Landlord's Notice to Tenant stating that an Event of Default
exists and further stating Landlord's intention to assert one or more remedies
hereunder, and (B) under any of Section 12.1(b)-(l), prior to the commencement
by Landlord of the exercise of any remedy under this Lease by Landlord.
12.2 Remedies.
None of (a) the termination of this Lease pursuant to Section
12.1, (b) the repossession of the Leased Property, (c) the failure of Landlord
to re-let the Leased Property, or (d) the reletting of the Leased Property,
shall relieve Tenant of its liability and obligations hereunder, all of which
shall survive any such termination, repossession or re-letting. In the event of
any such termination, Tenant shall forthwith pay to Landlord all Rent due and
payable with respect to the Leased Property through and including the date of
such termination. Thereafter, Tenant, until the earlier of what would have been
the end of the Term of this Lease in the absence of such termination, or the
date on which Tenant pays Landlord the liquidated final damages described in the
next paragraph of this Section 12.2, and whether or not the Leased Property or
any portion thereof shall have been re-let, shall be liable to Landlord for, and
shall pay to Landlord, as current damages, the Rent and other charges which
would be payable hereunder for the remainder of the Term had such termination
not occurred, less the net proceeds, if any, of any re-letting or other
operation by or on behalf of Landlord of the Leased Property, after deducting
all expenses in connection with such reletting, including, without limitation,
all repossession costs, brokerage commissions, legal expenses, attorneys' fees,
advertising, expenses of employees, alteration costs and expenses of preparation
for such reletting. Tenant shall
-68-
pay such current damages to Landlord monthly on the days on which the Minimum
Rent would have been payable hereunder if this Lease had not been so terminated.
At any time after such termination, at Landlord's election,
whether or not Landlord shall have previously collected any such current
damages, as liquidated final damages beyond the date of such termination, Tenant
shall pay to Landlord an amount equal to the present value (discounted at a rate
of twelve percent (12%) per annum) of the excess, if any, of the Rent and other
charges which would be payable hereunder from the date of such termination
(assuming that, for the purposes of this paragraph, annual payments by Tenant on
account of Impositions would be the same as payments required for the
immediately preceding twelve calendar months) for what would be the then
unexpired Term of this Lease if the same remained in effect, over the Fair
Market Rental for the same period. Nothing contained in this Lease shall,
however, limit or prejudice the right of Landlord to prove and obtain in
proceedings for bankruptcy or insolvency an amount equal to the maximum allowed
by any statute or rule of law in effect at the time when, and governing the
proceedings in which, the damages are to be proved, whether or not the amount be
greater than, equal to, or less than the amount of the loss or damages referred
to above.
Percentage Rent for the purposes of this Section 12.2 shall be a
sum equal to (i) the average of the annual amounts of Percentage Rent for the
three (3) Fiscal Years immediately preceding the Fiscal Year in which the
termination, re-entry or repossession takes place, or (ii) if three (3) Fiscal
Years shall not have elapsed, the Percentage Rent during the preceding Fiscal
Year during which this Lease was in effect.
In case of any Event of Default, re-entry, expiration and
dispossession by summary proceedings or otherwise, Landlord may, subject to the
rights of Manager under the Management Agreement, (a) relet the Leased Property
or any part or parts thereof, either in the name of Landlord or otherwise, for a
term or terms which may, at Landlord's option, be equal to, less than or exceed
the period which would otherwise have constituted the balance of the Term and
may grant concessions or free rent to the extent that Landlord considers
advisable and necessary to relet the same, and (b) make such reasonable
alterations, repairs and decorations in the Leased Property or any portion
thereof as Landlord, in its sole and absolute discretion, considers advisable
and necessary for the purpose of reletting the Leased Property; and the making
of such alterations, repairs and decorations shall not operate or be construed
to release Tenant from liability hereunder as aforesaid. Subject to the last
sentence of this paragraph, Landlord shall in no event be liable in any way
whatsoever for any failure to relet all or any portion of the Leased Property,
or, in the event that the Leased Property is relet, for failure to collect the
rent under such reletting. To the maximum extent permitted by law, Tenant hereby
expressly waives any and all rights of redemption granted under any present or
future laws in the event of Tenant being evicted or dispossessed, or in the
event of Landlord obtaining possession of the Leased Property, by reason of the
occurrence and during the continuation of an Event of Default hereunder.
Landlord covenants and agrees in the event of any termination of this Lease as a
result of an Event of Default to use commercially reasonable efforts to mitigate
its damages.
-69-
12.3 Waivers.
LANDLORD AND TENANT WAIVE, TO THE EXTENT PERMITTED BY LAW, ANY
RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY MATTER ARISING OUT OF OR IN ANY
WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT AND/OR
TENANT'S USE OR OCCUPANCY OF THE LEASED PROPERTY. TENANT WAIVES, TO THE EXTENT
PERMITTED BY LAW, THE BENEFIT OF ANY LAWS NOW OR HEREAFTER IN FORCE EXEMPTING
PROPERTY FROM LIABILITY FOR RENT OR FOR DEBT.
12.4 Application of Funds.
Any payments received by Landlord under any of the provisions of
this Lease during the existence or continuance of any Event of Default (and any
payment made to Landlord rather than Tenant due to the existence of any Event of
Default) shall be applied to Tenant's obligations under this Lease in such order
as Landlord may determine or as may be prescribed by the laws of the State.
12.5 Landlord's Right to Cure Tenant's Default.
If (i) a Default shall have occurred and is continuing which in
the reasonable judgment of Landlord requires immediate action on the part of
Landlord or (ii) an Event of Default shall have occurred and is continuing,
Landlord, after Notice to Tenant (which Notice need not precede such action if
Landlord shall reasonably determine immediate action is necessary to protect
person or property), without waiving or releasing any obligation of Tenant and
without waiving or releasing any Event of Default, may (but shall not be
obligated to), at any time thereafter, make such payment or perform such act for
the account and at the expense of Tenant, and may, to the maximum extent
permitted by law, enter upon the Leased Property or any portion thereof for such
purpose and take all such action thereon as, in Landlord's sole and absolute
discretion, may be necessary or appropriate therefor, including the management
of the Facility by Landlord or its designee, and Tenant hereby irrevocably
appoints, in the event of such election by Landlord, Landlord or its designee as
the operator of the Facility and its attorney in fact for such purpose,
irrevocably and coupled with an interest, in the name, place and stead of
Tenant. No such entry shall be deemed an eviction of Tenant. All reasonable
costs and expenses (including, without limitation, reasonable attorneys' fees)
incurred by Landlord in connection therewith, together with interest thereon (to
the extent permitted by law) at the Overdue Rate from the date such sums are
paid by Landlord until repaid, shall be paid by Tenant to Landlord, on demand.
ARTICLE 13
HOLDING OVER
Any holding over by Tenant after the expiration or sooner
termination of this Lease (other than with the express written consent of
Landlord) shall be treated as a tenancy at sufferance at a rate equal to (a) one
and one-half (1.5) times one-twelfth of the aggregate Minimum Rent and
Percentage Rent payable with respect to the last Fiscal Year of the Term, (b)
all Additional Charges accruing during the applicable Accounting Period, and
-70-
(c) all other sums, if any, payable by Tenant under this Lease with respect to
the Leased Property during the applicable Accounting Period. Tenant shall also
pay to Landlord all damages (direct or indirect) sustained by reason of any such
holding over. Otherwise, such holding over shall be on the terms and conditions
set forth in this Lease, to the extent applicable. Nothing contained herein
shall constitute the consent, express or implied, of Landlord to the holding
over of Tenant after the expiration or earlier termination of this Lease.
ARTICLE 14
LANDLORD NOTICE OBLIGATION; LANDLORD DEFAULT
14.1 Landlord Notice Obligation.
Landlord shall give prompt Notice to Tenant and Manager of any
matters materially affecting the Leased Property of which Landlord receives
written notice or actual knowledge and, to the extent Tenant otherwise has no
notice or actual knowledge thereof, Landlord shall be liable for any liabilities
arising from the failure to deliver such Notice to Tenant. Except as expressly
set forth herein or in the Consent and Assignment, Landlord shall not amend the
Management Agreement without Tenant's prior written consent, which consent shall
not be unreasonably withheld, conditioned or delayed.
14.2 Landlord Default.
The occurrence of the following events shall constitute a
"Landlord Default":
(a) Landlord fails to make any payment due hereunder when
due and such failure continues for a period of ten (10) days following Notice
from Tenant that such payment is due and owing and unpaid.
(b) Landlord fails to maintain the insurance coverages that
it is required to maintain under Article 9.
(c) Landlord defaults in the due observance or performance
of any of the terms, covenants or agreements contained herein to be performed or
observed by it (other than as specified in clauses (a) and (b) above), and, in
either case, such default continues for a period of thirty (30) days after
Notice thereof from Tenant to Landlord; provided, however, that if such default
is curable but such cure cannot be accomplished with due diligence within such
period of time and if, in addition, Landlord commences to cure such default
within thirty (30) days after Notice thereof from Tenant and thereafter
prosecutes the curing of such default with all due diligence, such period of
time shall be extended to such period of time (not to exceed one hundred twenty
(120) days in the aggregate, subject to Unavoidable Delay) as may be necessary
to cure such default.
(d) Landlord is generally not paying its debts as they
become due, or Landlord makes a general assignment for the benefit of creditors.
(e) Any petition is filed by or against Landlord under the
Federal bankruptcy laws, or any other proceeding is instituted by or against
Landlord seeking to
-71-
adjudicate it a bankrupt or insolvent, or seeking liquidation, reorganization,
arrangement, adjustment or composition of it or its debts under any law relating
to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for Landlord or for any substantial part of
the property of Landlord and, in the case of any involuntary petition filed or
proceeding instituted against Landlord only, such proceeding is not dismissed
within sixty (60) days after institution thereof, or Landlord takes any action
to authorize or effect any of the actions set forth above in this paragraph.
(f) Landlord causes or institutes any proceeding for its
dissolution or termination.
(g) Landlord or Host O.P. defaults under the terms of any of
the Related Agreements beyond the expiration of any applicable notice and cure
periods.
Subject to Section 23.11, in the event of a Landlord Default,
Tenant shall have and may exercise all rights and remedies available at law and
in equity, including, without limitation, the right to pursue an action for
damages against Landlord; provided, however, that except as otherwise expressly
provided in this Lease, Tenant shall have no right to terminate this Lease for
any Landlord Default hereunder and no right to offset or counterclaim against
any Rent or other charges due hereunder. If Landlord shall in good faith dispute
the occurrence of any Landlord Default and Landlord shall give Notice thereof to
Tenant, setting forth, in reasonable detail, the basis therefor, and Tenant and
Landlord shall fail, in good faith, to resolve any such dispute within ten (10)
days after Landlord's Notice of dispute, then either may submit the matter to
arbitration under Article 15 for resolution, and no Landlord Default shall be
deemed to have occurred and Landlord shall have no obligation with respect
thereto until final adverse determination thereof in such arbitration. In the
event of any such adverse determination, Landlord shall pay to Tenant interest
on any disputed funds at the Overdue Rate, from the date demand was made until
paid, and in the event Landlord fails to make such payment within fifteen (15)
days after such adverse determination, Tenant shall be entitled to offset such
amount against the payment or, if necessary, payments of Rent next coming due
hereunder. If Tenant reasonably determines that immediate action is necessary to
protect person or property or to comply with Legal Requirements, Tenant may
forthwith cure the Landlord Default and invoice Landlord for costs and expenses
(including reasonable attorneys' fees and court costs) incurred by Tenant in
curing the same, together with interest thereon from the date Landlord receives
Tenant's Notice, at the Overdue Rate.
ARTICLE 15
ARBITRATION
15.1 Arbitration.
In each case specified in this Lease in which it shall become
necessary to resort to arbitration, such arbitration shall be determined as
provided in this Article 15. The party desiring such arbitration shall give
Notice to that effect to the other party, specifying the nature of the dispute,
the amount involved (if any), and the remedy sought. An arbitrator shall be
selected by mutual agreement of the parties, or if they cannot agree
-72-
within thirty (30) days of such Notice, by appointment made by the American
Arbitration Association ("AAA") from among the members of its panels who are
qualified and who have experience in resolving matters of a nature similar to
the matter to be resolved by arbitration.
15.2 Arbitration Procedures.
Any arbitration commenced pursuant to Section 15.1 shall be
conducted in accordance with the AAA's Rules of Commercial Arbitration in
business disputes. A single arbitrator shall be designated and shall resolve the
dispute. The arbitrator's decision shall be binding on all parties, shall not be
subject to further review or appeal except as otherwise allowed by applicable
law and may be filed in and enforced by a court of competent jurisdiction. The
arbitrator shall award to the prevailing party, if any, as determined by the
arbitrator, all of its costs and expenses, including attorneys' fees,
arbitrator's fees, and reasonable out-of-pocket expenses of any kind, except as
otherwise specified below in this Section 15.2. The term "prevailing party," as
used in the preceding sentence, shall mean the party whose position is most
nearly upheld in arbitration. Upon the failure of either party (the
"non-complying party") to comply with the arbitrator's decision, the arbitrator
shall be empowered, at the request of the other party, to order such compliance
by the non-complying party and to supervise or arrange for the supervision of
the non-complying party's obligation to comply with the arbitrator's decision,
all at the expense of the non-complying party. To the maximum extent
practicable, the arbitrator and the parties, and the AAA, if applicable, shall
take any action necessary to insure that the arbitration shall be concluded
within ninety (90) days of the filing of such dispute. Unless otherwise agreed
in writing by the parties or required by the arbitrator or the AAA, if
applicable, arbitration proceedings hereunder shall be conducted in the
Washington, DC, metropolitan area. Notwithstanding formal rules of evidence,
each party may submit such evidence as each party deems appropriate to support
its position, and the arbitrator shall have access to and the right to examine
all books and records of Landlord and Tenant and, subject to the Management
Agreement, the Manager regarding the Leased Property during the arbitration The
consideration of the parties to be bound by arbitration is not only the waiver
of trial by jury but also the waiver of any rights to appeal the arbitration
finding.
ARTICLE 16
SUBLETTING AND ASSIGNMENT
16.1 Subletting and Assignment.
Except as otherwise expressly provided in this Section 16.1,
Tenant shall not, without the prior written consent of Landlord (which consent
may be withheld in Landlord's sole and absolute discretion), assign, mortgage,
pledge, hypothecate, encumber or otherwise transfer this Lease or sublease
(which term shall be deemed to include the granting of concessions, licenses and
the like) all or any part of the Leased Property, or suffer or permit this Lease
or the leasehold estate created hereby or any other rights arising under this
Lease to be assigned, transferred, mortgaged, pledged, hypothecated or
encumbered, in whole or in part, whether voluntarily, involuntarily or by
operation of law, or permit the use or occupancy of the Leased Property by
anyone other than Tenant or Manager (except in accordance with Section 21.3.4),
or permit the Leased Property to be
-73-
offered or advertised for assignment or subletting. Tenant may, in each
instance, after Notice to Landlord, assign this Lease to any Qualified Affiliate
in accordance with Section 21.6.6, so long as such assignment will not violate
or affect any applicable Legal Requirements or Insurance Requirements. For
purposes of this Section 16.1, an assignment of this Lease (other than to a
Qualified Affiliate in accordance with Section 21.6.6) shall be deemed to
constitute a Change in Control.
If this Lease is assigned or if the Leased Property or any part
thereof is sublet in contravention of this Lease, Landlord may collect the rents
from such assignee, subtenant or occupant, as the case may be, and apply the net
amount collected to the Rent herein reserved, but no such collection shall be
deemed (i) a waiver of the provisions set forth in the first paragraph of this
Section 16.1, (ii) the acceptance by Landlord of such assignee, subtenant or
occupant, as the case may be, as a tenant, or (iii) a release of Tenant from the
future performance by Tenant of its covenants, agreements or obligations
contained in this Lease.
Tenant, as the debtor in possession, or the trustee for Tenant
(collectively, the "Trustee") in any proceeding under Title 11 of the United
States Bankruptcy Code relating to Bankruptcy, as amended (the "Bankruptcy
Code"), shall not have the right to assign this Lease or sublet the Leased
Property to an assignee or sublessee that (i) is a competitor of Landlord or
(ii) is not a capable, reliable, qualified Person of good reputation and
character with the financial capacity to satisfy Tenant's obligations under this
Lease. The Trustee shall not have the right to assign this Lease or sublet the
Leased Property to a real estate investment trust that is, or intends to be,
publicly traded.
In the event that Tenant becomes the subject of any proceeding
under Title 11 of the Bankruptcy Code, Tenant covenants and agrees that: (i) it
shall promptly upon demand therefor from Landlord, but in no event later than
sixty (60) days (as such time may be extended by a bankruptcy court in such
proceeding) after the commencement of such proceeding (a "Tenant Bankruptcy"),
announce its decision whether to assume or reject this Lease and Tenant's
obligations under the Consent and Assignment and the Assigned Agreements, and
promptly take and diligently pursue such actions as may be necessary to
authorize and implement such decision; and (ii) it shall either assume this
Lease and all of Tenant's obligations under the Consent and Assignment and the
Assigned Agreements to the extent such Assigned Agreements have not expired or
terminated in accordance with their respective terms, or it shall reject this
Lease and all of Tenant's obligations under the Consent and Assignment and the
Assigned Agreements. In a Tenant Bankruptcy, Tenant covenants and agrees that it
cannot cure any defaults under this Lease and cannot provide adequate assurances
of future performance of this Lease without curing any and all monetary and
non-monetary defaults of Tenant's obligations under the Consent and Assignment
and the Assigned Agreements and providing adequate assurances of Tenant's future
performance of its obligations under the Consent and Assignment and the Assigned
Agreements.
No subletting or assignment shall in any way impair the
continuing primary liability of Tenant hereunder, and no consent to any
subletting or assignment in a particular instance shall be deemed to be a waiver
of the prohibition set forth in this Section 16.1. No assignment, subletting or
occupancy shall affect any Primary Intended
-74-
Use. Any subletting, assignment or other transfer of Tenant's interest under
this Lease in contravention of this Section 16.1 shall be voidable at Landlord's
option.
16.2 Required Sublease Provisions.
Any sublease of all or any portion of the Leased Property
entered into on or subsequent to the Commencement Date shall provide (a) that it
is subject and subordinate to this Lease and to the matters to which this Lease
is or shall be subject or subordinate; (b) that in the event of termination of
this Lease or reentry or dispossession of Tenant by Landlord under this Lease,
Landlord may, at its option, terminate such sublease or take over all of the
right, title and interest of Tenant, as sublessor under such sublease, and such
subtenant shall, at Landlord's option, attorn to Landlord pursuant to the then
executory provisions of such sublease, except that neither Landlord nor the
Facility Mortgagee, as holder of a mortgage or as Landlord under this Lease, if
such mortgagee succeeds to that position, shall (i) be liable for any act or
omission of Tenant under such sublease, (ii) be subject to any credit,
counterclaim, offset or defense which theretofore accrued to such subtenant
against Tenant, (iii) be bound by any previous modification of such sublease
requiring Landlord's consent hereunder and not consented to in writing by
Landlord or by any previous prepayment of more than one (1) month's rent, (iv)
be bound by any covenant of Tenant to undertake or complete any construction of
the Leased Property or any portion thereof, (v) be required to account for any
security deposit of the subtenant other than any security deposit actually
delivered to Landlord by Tenant, (vi) be bound by any obligation to make any
payment to such subtenant or grant any credits, except for services, repairs,
maintenance and restoration provided for under the sublease that are to be
performed after the date of such attornment, (vii) be responsible for any monies
owing by Tenant prior to the date of attornment to the credit of such subtenant,
or (viii) be required to remove any Person occupying any portion of the Leased
Property; and (c) in the event that such subtenant receives a written Notice
from Landlord or the Facility Mortgagee stating that an Event of Default has
occurred and is continuing, such subtenant shall thereafter be obligated to pay
all rentals accruing under such sublease directly to the party giving such
Notice or as such party may direct. All rentals received from such subtenant by
Landlord or the Facility Mortgagee, as the case may be, shall be credited
against the amounts owing by Tenant under this Lease, and such sublease shall
provide that the subtenant thereunder shall, at the request of Landlord, execute
a suitable instrument in confirmation of such agreement to attorn. An original
counterpart of each such sublease and assignment and assumption, duly executed
by Tenant and such subtenant or assignee, as the case may be, in form and
substance reasonably satisfactory to Landlord, shall be delivered promptly to
Landlord upon request and (a) 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 Tenant to be kept and performed and shall be, and become, jointly
and severally liable with Tenant for the performance thereof and (b) in case of
either an assignment or subletting, Tenant 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 Tenant hereunder.
The provisions of this Section 16.2 shall not be deemed a waiver
of the provisions set forth in the first paragraph of Section 16.1.
-75-
16.3 No Right of Tenant to Mortgage Its Leasehold.
Notwithstanding any other provision of this Lease to the
contrary, Tenant shall not assign its interest in this Lease as collateral for
Indebtedness.
ARTICLE 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
17.1 Estoppel Certificates.
At any time and from time to time, upon not less than ten (10)
Business Days prior Notice by either party, the non-requesting party shall
furnish to the requesting party, or a designee thereof, 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, that to the knowledge
of the certifying party, no Default or an Event of Default has occurred and is
continuing or, if a Default or an Event of Default shall exist, specifying in
reasonable detail the nature thereof and the steps being taken to remedy the
same, and such additional information as the requesting party may reasonably
request. Any such certificate furnished pursuant to this Section 17.1 may be
relied upon by the requesting party, its lender, and any prospective purchaser
or mortgagee of the Leased Property or the leasehold estate conveyed hereby.
17.2 Financial Statements.
Tenant shall furnish the following statements to Landlord:
(a) [Intentionally Omitted.];
(b) [Intentionally Omitted.];
(c) within [ ] days after the end of each Fiscal Year, the
results of operations of the Facility for the preceding Fiscal Year (the "Annual
Operating Statement"), in the form received by Tenant from Manager in accordance
with the Management Agreement;
(d) simultaneously with the payment of Rent under Section
3.1.1, the results of operations of the Facility for the preceding Accounting
Period (the "Accounting Period Statement"), in the form received by Tenant from
Manager in accordance with the Management Agreement;
(e) simultaneously with the payment of Rent under Section
3.1.1, the Percentage Rent Schedule and, simultaneously with the payment of Rent
with respect to the final Accounting Period of each Fiscal Year, the Year End
Percentage Rent Schedule;
(f) to the extent such information has been provided by
Manager to Tenant, not later than twenty-eight (28) days after the end of each
Accounting Period, except as described below, the summary of operating results
of the Facility (the "Period Report"). The Period Report will provide REVPAR and
EBITDA substantially in the
-76-
format of the period report attached hereto as Schedule 17.2(f). Notwithstanding
----------------
the foregoing, for the first Accounting Period of each Fiscal Year, the Period
Report will be provided to Landlord not later than thirty-five (35) days after
the end of the prior Fiscal Year;
(g) to the extent such information has been provided by
Manager to Tenant, not later than twenty-eight (28) days after each of the first
three (3) quarters of any Fiscal Year, Tenant will provide the forecast Gross
Revenues, Room Revenues and EBITDA for the Facility. In addition, to the extent
such information is available from Manager, Tenant will provide forecast Gross
Revenues by department by Accounting Period and for the Fiscal Year;
(h) [Intentionally Omitted.];
(i) promptly after the delivery thereof to Tenant, a copy of
any management letter or written report prepared by the independent certified
public accountants with respect to the financial condition, operations, business
or prospects of Tenant, as the case may be; and
(j) at the expense of Landlord, at any time and from time to
time upon not less than forty-five (45) days Notice from Landlord, any financial
reporting information required to be filed by Landlord with any securities or
exchange commission, the SEC or any successor agency, or any other governmental
authority, or required pursuant to any order issued by any court, governmental
authority or arbitrator in any litigation to which Landlord is a party, for
purposes of compliance therewith.
Landlord may at any time, and from time to time, provide
the Facility Mortgagee with copies of any of the foregoing statements, provided
that Landlord has used commercially reasonable efforts to cause the Facility
Mortgagee to execute and deliver a confidentiality agreement reasonably
satisfactory to Tenant. Upon reasonable Notice from Landlord, Tenant agrees to
cooperate with Landlord to provide to Landlord the data, forecasts, and reports
used in the preparation of the foregoing statements within a reasonable time
frame after such data and reports become available to Tenant, provided, however,
that Tenant makes no representation as to the accuracy of the data, forecasts
and reports provided.
17.3 Annual Budget.
Not later than twenty-eight (28) days prior to the commencement
of each Fiscal Year, Tenant shall prepare and submit to Landlord a schedule of
Tenant's reasonable estimate of Gross Revenues by department (the "Operating
Budget Summary"). Not later than fifteen (15) days prior to the commencement of
each Fiscal Year, Tenant shall prepare and submit to Landlord an operating
budget (the "Operating Budget") and a capital budget (the "Capital Budget")
prepared in accordance with the requirements of this Section 17.3. The Operating
Budget and the Capital Budget (together, the "Annual Budget") shall be
consistent with the format provided by Manager and show the following for the
year as a whole:
-77-
(a) Tenant's reasonable estimate of Gross Revenues
(including room rates and anticipated Room Revenues) for the forthcoming Fiscal
Year, together with a summary of the estimated operating results provided by the
Manager;
(b) An estimate of any amounts Landlord will be requested to
provide for Capital Expenditures during the Fiscal Year;
(c) An estimate of the expenditures necessary for
replacements and renewals of FF&E (the "FF&E Estimate"); and
(d) Tenant's reasonable estimate of Percentage Rent payable
with respect to Room Revenues, Food and Beverages Sales, and Other Income.
Upon reasonable Notice from Landlord, Tenant agrees to
cooperate with Landlord to provide to Landlord the data, forecasts, and reports
used in the preparation of the Capital Budget and the Operating Budget within a
reasonable time frame after such data and reports become available to Tenant,
provided, however, that Tenant makes no representation as to the accuracy of the
data, forecasts and reports provided. Landlord shall have twenty-five (25) days
after the date on which it receives the Annual Budget to review, disapprove or
change the entries and information appearing in the Annual Budget relating to
the Capital Budget or the FF&E Estimate, but with regard to the FF&E Estimate,
only to the extent the FF&E Estimate indicates amounts in excess of the FF&E
Reserve (the Capital Budget and the FF&E Estimate, to the extent it proposes
expenditures in excess of the FF&E Reserve, are collectively referred to herein
as the "Capital Portion"). If the parties are not able to reach agreement on the
Capital Portion for any Fiscal Year during Landlord's twenty-five (25)-day
review period, the parties shall attempt in good faith during the subsequent
twenty-five (25)-day period to resolve any disputes, which attempt shall
include, if requested by either party, at least one (1) meeting of executive
level officers of Landlord and Tenant. In the event the parties are still not
able to reach agreement on the Capital Portion of the Annual Budget for any
particular Fiscal Year after complying with the foregoing requirements of this
Section 17.3.2, no Capital Expenditures or FF&E expenditures in excess of the
FF&E Reserve shall be made unless the same are set forth in a previously
approved Capital Budget or are specifically approved by Landlord or are
otherwise required to comply with Legal Requirements or to make emergency
expenditures in connection with Emergency Situations or otherwise required
pursuant to the Management Agreement.
Tenant shall operate the Leased Property consistent with
the Annual Budget and shall promptly report to Landlord in writing any actual or
anticipated deviation from the Operating Budget or Capital Budget of any
material or long-term consequence. To the extent the budget estimates for the
categories of revenues identified in (d) above are not made available on an
Accounting Period or Fiscal Year basis from Manager, Tenant shall cooperate with
Landlord, at Landlord's sole cost, in its efforts to obtain such budget
information from Manager.
Not later than seventy-five (75) days after the
beginning of the Fiscal Year, Tenant shall provide Landlord with itemized
schedules on an Accounting Period
-78-
basis detailing the Operating Budget and the anticipated Percentage Rent
(collectively, the "Budget Spread").
ARTICLE 18
LANDLORD'S RIGHT TO INSPECT
Tenant shall permit Landlord and its authorized representatives to
inspect the Leased Property during normal business hours upon not less than
twenty-four (24) hours Notice, and to make such repairs as are required by Legal
Requirements and Insurance Requirements which Tenant fails to make and as
Landlord is permitted or required to make pursuant to the terms of this Lease,
provided that any inspection or repair by Landlord or its representatives will
not unreasonably interfere with Tenant's use and operation of the Leased
Property and provided further that in the event of an emergency, as determined
by Landlord in its reasonable discretion, prior Notice shall not be necessary.
ARTICLE 19
APPRAISAL
In the event that it becomes necessary to determine the Fair Market
Rental for any purpose of this Lease, or the amount of any adjustment to or
abatement of Minimum Rent and Percentage Rent pursuant to Section 3.1.6(i),
Section 11.3 or Section 12.2 hereof, and the parties cannot agree thereon, such
Fair Market Rental, or reduction, adjustment or abatement, as the case may be,
shall be determined upon the written request of either party in accordance with
the following procedure.
The party requesting an appraisal, by Notice given to the other, shall
propose and unilaterally appoint a Qualified Appraiser. The other party, by
Notice given within fifteen (15) days after receipt of such Notice appointing
the first Qualified Appraiser, may appoint a second Qualified Appraiser. If the
other party fails to appoint the second Qualified Appraiser within such fifteen
(15)-day period, such party shall have waived its right to appoint a Qualified
Appraiser, the first Qualified Appraiser shall appoint a second Qualified
Appraiser within fifteen (15) days thereafter, and the Fair Market Rental, or
reduction, adjustment or abatement, as the case may be, shall be determined by
the Qualified Appraisers as set forth below.
The two Qualified Appraisers shall thereupon endeavor to agree upon the
Fair Market Rental, or reduction, adjustment or abatement, as the case may be.
If the two Qualified Appraisers so named cannot agree upon such value or rental,
or reduction, adjustment or abatement, as the case may be, within thirty (30)
days after the designation of the second such appraiser, each such appraiser
shall, within five (5) days after the expiration of such thirty (30)-day period,
submit his appraisal to the other appraiser in writing, and if the Fair Market
Rentals, or amounts of reduction, adjustment or abatement, as the case may be,
set forth in such appraisals vary by five percent (5%) or less of the greater
value, the Fair Market Rental, or reduction, adjustment or abatement, as the
case may be, shall be determined by calculating the average of the two
determinations of the two appraisers.
-79-
If the Fair Market Rentals, or amounts of reduction, adjustment or
abatement, as the case may be, set forth in the two appraisals vary by more than
five percent (5%) of the greater value, the two Qualified Appraisers shall
select a third Qualified Appraiser within an additional fifteen (15) days
following the expiration of the aforesaid five (5)-day period. If the two
appraisers are unable to agree upon the appointment of a third appraiser within
such fifteen (15)-day period, either party may, upon written notice to the
other, request that such appointment be made by the then President (or
equivalent officer) of the State's Chapter of the American Institute of Real
Estate Appraisers, or his or her designee, or, if there is no such organization
or if such individual declines to make such appointment, by any state or Federal
court of competent jurisdiction for the State.
In the event that all three of the appraisers cannot agree upon the Fair
Market Rental, or reduction, adjustment or abatement, as the case may be, within
twenty (20) days following the selection of the third appraiser, each appraiser
shall, within ten (10) days thereafter, submit his appraisal to the other two
appraisers in writing, and the Fair Market Rental, or reduction, adjustment or
abatement, as the case may be, shall be determined by calculating the average of
the two numerically closest values (or, if the values are equidistant, the
average of all three values) determined by the three appraisers.
In the event that any appraiser appointed hereunder does not or is
unable to perform his or her obligation hereunder, then the party or the
appraiser(s) appointing such appraiser shall have the right to propose and
approve unilaterally a substitute Qualified Appraiser, but if the party or the
appraiser(s) who have the right to appoint a substitute Qualified Appraiser fail
to do so within ten (10) days after written Notice from the other party (or
either party in the event such appraiser was appointed by the other appraisers),
either party may, upon written Notice to the party having the right to appoint a
substitute Qualified Appraiser, request that such appointment be made by such
officer of the American Institute of Real Estate Appraisers or court of
competent jurisdiction as described above; provided, however, that a party who
has the right to appoint an appraiser or a substitute appraiser shall have the
right to make such appointment only up until the time such appointment is made
by such officer or court.
In connection with the appraisal process, so long as Tenant receives
reasonable prior Notice, Tenant shall provide the appraisers full access during
normal business hours to examine the Leased Property, the books, records and
files of Tenant and all agreements, leases and other operating agreements
relating to the Leased Property.
The costs of each such appraisal shall be borne by the party selecting
the appraiser, provided the cost of the third appraiser shall be split equally
between Landlord and Tenant. Upon determining such Fair Market Rental, or
reduction, adjustment or abatement, as the case may be, the appraisers shall
promptly notify Landlord and Tenant in writing of such determination. If any
party shall fail to appear at the hearings appointed by the appraisers, the
appraisers may act in the absence of such party.
The determination of the Qualified Appraisers made in accordance with
the foregoing provisions shall be final and binding upon the parties, such
determination may be entered as an award in arbitration in a court of competent
jurisdiction, and judgment thereon may be entered.
-80-
ARTICLE 20
FACILITY MORTGAGES
20.1 Landlord May Grant Liens.
(a) Without the consent of Tenant, Landlord may, subject to
the terms and conditions set forth in this Section 20.1, from time to time,
directly or indirectly, create or otherwise cause to exist any Lien or ground
lease upon its interest in the Leased Property, or any portion thereof or
interest therein, whether to secure any borrowing or other means of financing or
refinancing, provided that any such Lien or ground lease shall be consistent
with the requirements of the Management Agreement or otherwise approved by
Manager, and shall not modify the terms of this Lease, except as expressly set
forth in Section 20.2. Landlord agrees to provide to Tenant copies of all
existing and future ground leases, and amendments thereto, which affect the
Leased Property.
(b) Tenant shall, upon the request of Landlord or any
existing, potential or future Facility Mortgagee, and to the extent in Tenant's
possession or obtainable from Manager pursuant to the Management Agreement, (i)
provide Landlord or the Facility Mortgagee with copies of all licenses, permits,
occupancy agreements, operating agreements, leases, contracts, inspection
reports, studies, appraisals, assessments, default or other notices and similar
materials reasonably requested in connection with any existing or proposed
financing of the Leased Property, and (ii) execute such estoppel certificates
and collateral assignments with respect to the Facility's licenses and any of
the other aforementioned agreements as the Facility Mortgagee may reasonably
request in connection with any such financing, provided that no such estoppel
certificate or collateral assignment shall, except as expressly set forth in
Section 20.2, modify the terms of this Lease.
20.2 Subordination of Lease.
Subject to Section 20.1 and the terms of Section 7.1, this
Lease, and any and all rights of Tenant hereunder, are and shall be subject and
subordinate to any Facility Mortgage, any ground or master lease, and all
renewals, extensions, modifications, consolidations and replacements thereof,
and to each and every advance made or hereafter to be made under any such
Facility Mortgage. This section shall be self-operative and no further
instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly execute, acknowledge and deliver any
instrument that Landlord, the landlord under any such lease or the holder of any
such mortgage or the trustee or beneficiary of any deed of trust or any of their
respective successors in interest may reasonably request to evidence such
subordination. Tenant shall not unreasonably withhold its consent to any
amendment to this Lease reasonably required by such lender or ground lessor,
provided that such amendment does not (i) increase Tenant's rental obligations
or other financial obligations hereunder, or (ii) have a material adverse effect
upon Tenant's rights hereunder, or (iii) materially increase Tenant's
non-economic obligations hereunder, or (iv) decrease Landlord's obligations
hereunder. Landlord shall exercise commercially reasonable efforts to require
any future Facility Mortgagee or landlord under a ground lease affecting the
Leased Property to provide Tenant with notice
-81-
and an opportunity to cure Landlord defaults under the respective Facility
Mortgage or ground lease.
Any lease to which this Lease is, at the time referred to, subject and
subordinate is herein called a "Superior Lease," and the landlord of a Superior
Lease or its successor in interest at the time referred to is herein called
"Superior Landlord"; the Facility Mortgage and any other mortgage or deed of
trust to which this Lease is, at the time referred to, subject and subordinate,
is herein called a "Superior Mortgage," and the Facility Mortgagee and any other
holder, trustee or beneficiary of a Superior Mortgage is herein called "Superior
Mortgagee." Tenant shall have no obligations under any Superior Lease or
Superior Mortgage other than those expressly set forth in this Section 20.2.
Notwithstanding the obligations of Tenant hereunder, neither any
Superior Mortgagee nor any Superior Landlord shall have an obligation to provide
a non-disturbance agreement to Tenant. Any Superior Mortgagee or Superior
Landlord shall have the right to terminate this Lease upon the foreclosure, deed
in lieu of foreclosure or exercise of the power of sale with respect to the
Leased Property; provided that, if such right is exercised because of (a) a
non-monetary default by Landlord under the terms of the relevant loan agreement
or ground lease not caused by an Event of Default hereunder or (b) a monetary
default by Landlord (including a misapplication of Rent paid by Tenant) where
Tenant is not in Default in the payment of Rent hereunder beyond the expiration
of applicable notice and cure periods, then Landlord shall pay to Tenant the
Fair Market Value of Tenant's leasehold estate as of the termination date in
accordance with Section 24.1(b); provided further that (i) such fee shall be
paid first by offsetting any amounts owed by Tenant to Landlord at such time and
the balance (if any) shall be paid to Tenant in cash and (ii) Tenant agrees to
seek payment of such cash balance (if any) solely from Host O.P. (which, by its
execution of this Lease, agrees to be primarily liable for Landlord's obligation
under this subparagraph of Section 20.2) pursuant to the terms of the Facility
Mortgagee Agreement, and shall not make any demand or claim therefor against
Landlord, the Facility Mortgagee, any purchaser in foreclosure or transferee by
deed in lieu of foreclosure or other party claiming under any of the foregoing.
In the event a cash flow sweep structure is implemented by any Superior
Mortgagee for any period during the continued implementation of such structure,
(i) Tenant's obligation to pay Rent or any other amounts payable hereunder shall
be reduced by any amounts received by any Superior Mortgagee and (ii) Landlord
shall compensate Tenant on an Accounting Period basis for any Tenant Operating
Profit not received because of the cash flow sweep structure (i.e., any amount
swept in excess of the Rent and other amounts otherwise payable by Tenant under
this Lease) and any other costs incurred or advanced by Tenant pursuant to this
Lease, and Host O.P. agrees to be primarily liable for Landlord's obligation
under this clause (ii). Likewise, for any period during which cash management
procedures are implemented by or on behalf of any Superior Mortgagee, (a)
Tenant's obligation to pay Rent or any other amounts payable hereunder shall be
reduced by any amounts received by any Superior Mortgagee and (b) Landlord shall
compensate Tenant on an Accounting Period basis for any Tenant Operating Profit
not received because of the cash management procedures (i.e., any amount swept
in excess of the Rent and other amounts otherwise payable by Tenant under
-82-
this Lease) and any other costs incurred or advanced by Tenant pursuant to this
Lease, and Host O.P. agrees to be primarily liable for Landlord's obligation
under this clause (b).
Subject to the termination rights of any Superior Landlord or
Superior Mortgagee, if any, in the event that any Superior Landlord or Superior
Mortgagee or the nominee or designee of any Superior Landlord or Superior
Mortgagee shall succeed to the rights of Landlord under this Lease (any such
person, "Successor Landlord"), whether through possession or foreclosure action
or delivery of a new lease or deed, or otherwise, such Successor Landlord shall
recognize Tenant's rights under this Lease as herein provided and Tenant shall
attorn to and recognize the Successor Landlord as Tenant's landlord under this
Lease and Tenant shall promptly execute and deliver any instrument that such
Successor Landlord may reasonably request to evidence such attornment (provided
that such instrument does not alter the terms of this Lease), whereupon, this
Lease shall continue in full force and effect as a direct lease between the
Successor Landlord and Tenant upon all of the terms, conditions and covenants as
are set forth in this Lease, except that the Successor Landlord (unless formerly
the landlord under this Lease or its nominee or designee) shall not be (a)
liable in any way to Tenant for any act or omission, neglect or default on the
part of any prior Landlord under this Lease, (b) responsible for any monies
owing by or on deposit with any prior Landlord to the credit of Tenant (except
to the extent actually paid or delivered to the Successor Landlord), (c) subject
to any counterclaim or setoff which theretofore accrued to Tenant against any
prior Landlord, (d) bound by any modification of this Lease subsequent to such
Superior Lease or Superior Mortgage, or by any previous prepayment of Minimum
Rent or Additional Rent for more than one (1) month in advance of the date due
hereunder, which was not approved in writing by the Superior Landlord or the
Superior Mortgagee, (e) liable to Tenant beyond the Successor Landlord's
interest in the Leased Property and the rents, income, receipts, revenues,
issues and profits issuing from the Leased Property, (f) responsible for the
performance of any work to be done by Landlord under this Lease to render the
Leased Property ready for occupancy by Tenant (subject to Landlord's obligations
under Section 5.1.2(b) or with respect to any insurance or Condemnation
proceeds), or (g) required to remove any Person occupying the Leased Property or
any part thereof, except if such Person claims by, through or under the
Successor Landlord. Tenant agrees at any time and from time to time to execute a
suitable instrument in confirmation of Tenant's agreement to attorn, as
aforesaid.
20.3 Notice to Mortgagee and Superior Landlord.
Attached hereto as Schedule 20.3 is a list of the Superior
-------------
Mortgagee(s) and Superior Landlord(s) as of the Commencement Date, including
their addresses for notices. No default Notice from Tenant to Landlord as to the
Leased Property shall be effective unless and until a copy of the same is given
to such Superior Mortgagee(s) and Superior Landlord(s), and subsequent to the
receipt by Tenant of Notice from Landlord as to the identity of any future
Facility Mortgagee or Superior Landlord under a lease with Landlord, as ground
tenant, which includes the Leased Property as part of the demised premises and
which complies with Sections 20.1 and 20.2 (which Notice shall include a copy of
the applicable mortgage or lease), no default Notice from Tenant to Landlord
hereunder shall be effective unless and until a copy of the same is given to the
Facility Mortgagee or Superior Landlord at the address set forth in such Notice.
The curing of any
-83-
Landlord Default by any Superior Mortgagee(s) or Superior Landlord(s) listed on
Schedule 20.3, or by any Facility Mortgagee or Superior Landlord of which Tenant
- -------------
receives Notice after the Commencement Date as provided above, shall be treated
as performance by Landlord, provided any such cure shall be made within the time
periods set forth herein.
20.4 Transfer of Leased Property.
Notwithstanding anything set forth herein to the contrary, but
subject to the rights of a Facility Mortgagee as set forth herein, Landlord
shall not, without the consent of Tenant, transfer the Leased Property, or any
interest therein, to any Person (i) which does not have sufficient financial
resources and liquidity to fulfill the Landlord's Retained Obligations and
Continuing Obligations under the Management Agreement and Landlord's obligations
under this Lease, or (ii) which has been, or is in control of or controlled by
Persons who have been, convicted of felonies involving moral turpitude in any
state or federal court, or otherwise would cause a breach of the Management
Agreement.
20.5 Consent of Lender.
(a) Landlord shall, upon the request of Tenant at any time
during the year immediately preceding the year in which a Renewal Term is to
commence, exercise commercially reasonable efforts to obtain the consent of any
and all Facility Mortgagees, ground lessors, partners or other third parties
("Consent Party") to the exercise of Tenant Renewal Options, and to the change
in the Rent for any Renewal Period, if any, provided hereunder, to the extent
such consent is reasonably determined by Landlord to be required pursuant to the
terms of any Facility Mortgage, ground lease, partnership or joint venture
agreement or any other third party agreement ("Third Party Agreement").
(b) Landlord shall exercise commercially reasonable efforts
to cause any and all Third Party Agreements hereafter entered into, as well as
all other documents or agreements hereafter entered into in connection with any
such Third Party Agreements to permit the exercise of Tenant Renewal Options
without any Consent Party's consent.
(c) In the event that Landlord reasonably concludes and
notifies Tenant prior to the scheduled commencement of a Renewal Term that,
despite Landlord's commercially reasonable efforts to obtain the consent of any
Consent Party pursuant to this Section 20.5, the exercise by Tenant of a Tenant
Renewal Option or the change in the Rent for any Renewal Period will cause
Landlord to be in default under the terms of the applicable Third Party
Agreement, Tenant agrees that it shall not elect to exercise a Tenant Renewal
Option (and any prior exercises shall be null and void).
ARTICLE 21
ADDITIONAL COVENANTS OF TENANT
21.1 Conduct of Business.
Tenant shall do or cause to be done all things necessary to
preserve, renew and keep in full force and effect and in good standing its
existence and its rights and licenses necessary to conduct such business.
-84-
21.2 Maintenance of Accounts and Records.
Tenant shall keep records and books of account in which full,
true and correct entries in all material respects will be made of dealings and
transactions in relation to the business and affairs of Tenant.
21.3 Management of Leased Property.
21.3.1 Management Agreement, Consent and Assignment, Etc.
For and during the Term of this Lease, but not
thereafter, Landlord has assigned unto Tenant Landlord's interest as "Owner"
under that certain Management Agreement dated ______________, _____, by and
between Landlord, or Landlord's predecessor in interest, and ___________________
(the "Manager"), as amended prior to the date hereof and subsequently modified
and amended pursuant to that certain Consent, Assignment and Assumption and
Amendment of Management Agreement dated as of the Commencement Date, as modified
and amended from time to time, by and among Landlord, Tenant and Manager (the
"Consent and Assignment") (together with all past and future modifications and
amendments thereto, the "Management Agreement"). Pursuant to the Consent and
Assignment, Tenant has accepted such assignment and assumed and agreed to
perform all of Landlord's obligations as "Owner" under the Management Agreement
(including certain obligations of "Owner" that the Consent and Assignment
expressly provides shall both apply to and be binding upon Tenant, and continue
to apply to and be binding upon Landlord (as, but only to the extent, such
obligations apply to Landlord, the "Continuing Obligations")), except for
certain obligations of "Owner" that the Consent and Assignment expressly
provides shall remain the sole obligations of Landlord (the "Retained
Obligations"). Landlord hereby covenants to perform the Retained Obligations and
the Continuing Obligations. In addition, Landlord shall be entitled, together
with Tenant, to exercise the "Continuing Rights," as defined in the Consent and
Assignment, and Tenant shall not be entitled to exercise any of the "Reserved
Rights," as defined in the Consent and Assignment, which are reserved
exclusively to Landlord.
21.3.2 Reversion upon Termination.
All of Landlord's rights, benefits and privileges with
respect to the Management Agreement shall be vested in Tenant throughout the
Term of this Lease; provided, however, that upon termination of this Lease, for
whatever reason, all of Landlord's rights, benefits and privileges under the
Management Agreement shall automatically revert to Landlord without the
necessity of any action on the part of Landlord hereunder.
21.3.3 Compliance with Management Agreement and
Indemnification.
To the extent that any of the provisions of the
Management Agreement impose a greater obligation on Tenant than the
corresponding provisions of this Lease, then Tenant shall be obligated to comply
with, and to take all reasonable actions necessary to prevent breaches or
defaults under, the provisions of the Management Agreement. Notwithstanding
anything contained herein to the contrary, Tenant shall perform and comply in
every respect with the provisions of the Management
-85-
Agreement. Notwithstanding anything contained herein to the contrary, Tenant
shall perform and comply in every respect with the provisions of the Management
Agreement, except for the Retained Obligations and Continuing Obligations, which
shall remain the sole responsibility of Landlord, so as to avoid any default
thereunder during the Term of this Lease. Tenant shall, at all times, direct and
require Manager to perform all of Manager's obligations under the Management
Agreement. Tenant shall protect, indemnify and hold harmless Landlord for, from
and against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and reasonable expenses (including, without limitation, reasonable
attorneys' fees), to the maximum extent permitted by law, imposed upon, incurred
by, or asserted against Landlord by reason of a default by Tenant under the
Management Agreement, including, without limitation, any default by Tenant under
the Management Agreement attributable to a failure by Tenant to perform its
obligations under this Lease. Likewise, Landlord shall protect, indemnify and
hold harmless Tenant for, from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and reasonable expenses (including,
without limitation, reasonable attorneys' fees), to the maximum extent permitted
by law, imposed upon, incurred by, or asserted against Tenant by reason of a
default by Landlord under the Management Agreement, including, without
limitation, any default by Landlord under the Management Agreement attributable
to a failure by Landlord to perform its obligations under this Lease. The
obligations of Landlord and Tenant set forth in this Section 21.3.3 shall
survive the termination of this Lease.
21.3.4 Consent Required for Certain Actions.
Without at least thirty (30) days prior written Notice
to Landlord in the case of subsections (1), (2), (5), and (6) below, and without
at least fifteen (15) days prior written Notice in the case of subsections (3)
and (4) below, Tenant shall not take any of the following actions:
(1) terminate the Management Agreement prior to the
expiration of the term thereof;
(2) amend, modify or assign its interest in (except
in connection with an assignment permitted pursuant to Section 16.1 hereof) the
Management Agreement;
(3) waive (or fail to enforce) any right of "Owner"
under the Management Agreement;
(4) waive any breach or default by Manager under the
Management Agreement (or fail to enforce any right of "Owner" in connection
therewith);
(5) agree to any change in Manager or consent to any
assignment by Manager; or
(6) take any other action which reasonably could be
expected to materially adversely affect Landlord's rights or obligations under
the Management
-86-
Agreement for periods following termination of this Lease (whether upon the
expiration of its term or upon earlier termination as provided for herein).
Notwithstanding the foregoing, Tenant shall not take any
of the actions listed in clauses (1) through (6) above without Landlord's prior
written consent if such action:
(A) would materially impair the ability of
Tenant to perform Tenant's obligations under this Lease (including, without
limitation, make all payments of Rent as and when due under this Lease);
(B) would cause Tenant not to comply with
the obligations of Tenant set forth in Section 4.1;
(C) would materially adversely affect the
economic value of the Leased Property to Landlord;
(D) would waive, modify, eliminate or fail
to enforce any territoriality or similar restriction or limitation; or
(E) would materially increase the legal
exposure of Landlord to Manager under the Management Agreement during the Term,
either by reason of Landlord's continuing liability to Manager pursuant to the
Consent and Assignment, or with respect to the Retained Obligations or the
Continuing Obligations.
21.3.5 Replacement of Manager.
Notwithstanding Section 21.3.4 above, Tenant shall not
agree to change the management or the brand affiliation of the Facility without
the prior approval of Landlord, which approval shall not be unreasonably
withheld, conditioned or delayed. In addition, the proposed replacement manager
shall be nationally recognized and shall have substantial experience managing
hotels of comparable quality. No such replacement or change in brand affiliation
shall continue beyond the Term hereof without the prior written approval of
Landlord, which approval may be granted or withheld in Landlord's sole
discretion.
21.4 Facility Mortgagee Agreement.
Tenant agrees to enter into an agreement with Landlord, any
Facility Mortgagee and Host O.P. (the "Facility Mortgagee Agreement") pursuant
to which, in consideration of Facility Mortgagee's consent to this Lease and the
transactions contemplated hereby: (i) Tenant acknowledges to the Facility
Mortgagee that the Working Capital purchased by Tenant with the Working Capital
Note and all Excess FF&E acquired by Tenant from Landlord while the Facility
Mortgage is in effect is subject to the Facility Mortgagee's first priority Lien
(without Tenant assuming any liability for Landlord's obligations that are
secured by or arise under any Facility Mortgage) and that the Facility
Mortgagee's rights and remedies with respect to such Working Capital and Excess
FF&E shall survive and be enforceable with respect thereto; (ii) Tenant
covenants to the Facility Mortgagee to sign, provided Landlord shall prepare and
file at its sole cost,
-87-
UCC-1 financing statements confirming the foregoing for notice purposes; (iii)
Tenant covenants not to sell, lease, transfer or otherwise dispose of such
Working Capital or Excess FF&E or any interest therein (other than in the
ordinary course of business or other than to Landlord in accordance with the
terms of this Lease upon the expiration or earlier termination of the Term), or
grant or cause or permit to exist any lien, charge or encumbrance with respect
thereto, other than the aforesaid Lien in favor of the Facility Mortgagee and
any other Liens securing obligations which are the responsibility of Landlord;
(iv) Landlord agrees that this Lease and the Working Capital Note will not be
modified or amended in any manner that would adversely affect the Facility
Mortgagee's collateral under the Facility Mortgage without the Facility
Mortgagee's prior written consent; (v) Landlord and Tenant agree to confirm to
the Facility Mortgagee that the Facility Mortgagee shall have the right to
terminate this Lease in the event of a foreclosure by the Facility Mortgagee
under the Facility Mortgage, pursuant to Article 20 hereof; (vi) Tenant agrees
that, in the event of a foreclosure by the Facility Mortgagee under the Facility
Mortgage, the Facility Mortgagee shall have the right to continue this Lease as
lessor and succeed to all Landlord's rights hereunder and under the Security
Agreement, provided that in such event the Facility Mortgagee recognizes
Tenant's rights hereunder; (vii) if the Facility Mortgagee terminates this Lease
in accordance with Article 20 hereof, (A) Tenant agrees, at the Facility
Mortgagee's request, to convey all Working Capital existing at such time
directly to the Facility Mortgagee or its designee in payment of the Working
Capital Note (together with any cash balance due from Tenant in respect
thereto), (B) Tenant agrees to look solely to Host O.P. for payment of any cash
balance payable to Tenant for Working Capital to the extent such Working Capital
exceeds the balance due under the Working Capital Note, and (C) Host O.P. agrees
to pay such cash balance directly to Tenant, without the necessity of notice or
demand on Landlord; and (viii) Tenant agrees that if the amount specified in
Section 24.1(b) of this Lease and/or the Excess FF&E Reimbursement Amount become
payable in connection with a foreclosure by the Facility Mortgagee under the
Facility Mortgage, then (A) such amount(s) shall be paid first by offsetting any
amounts owed by Tenant to Landlord, and the balance (if any) shall be paid by
Host O.P. to Tenant in cash, (B) Host O.P. agrees to pay such cash balance (if
any) directly to Tenant without the need for notice or demand on Landlord, and
(C) Tenant agrees to look only to Host O.P. for payment of such cash balance.
21.5 [Intentionally Omitted.]
21.6 Single Purpose Entity Covenants.
21.6.1 Separate Existence
Tenant shall (i) maintain its books and records and bank
accounts separate from any other person or entity (except that, for accounting
and reporting purposes, Tenant may be included in the consolidated financial
statements of any direct or indirect parent entity in accordance with GAAP);
(ii) maintain an arm's length relationship with its members, Affiliates and any
other party furnishing services to it; (iii) maintain its books, records,
resolutions and agreements as official records; (iv) conduct its business in its
own name and through its own authorized officers and agents; (v) maintain its
financial statements, accounting records and other limited liability company
documents separate from those of any other Person (except as provided in (i)
above); (vi) pay its own liabilities
-88-
out of its own funds and other assets, including funds contributed to its
capital by its equity holders, and all such capital contributions shall be
reflected properly in its books and records; (vii) observe all limited liability
company formalities, as applicable, necessary to maintain its identity as an
entity separate and distinct from its members, Host O.P., and all other
Affiliates; (viii) participate in the fair and reasonable allocation of any and
all overhead expenses and other common expenses for facilities, goods or
services provided to multiple entities; (ix) use its own stationery, invoices
and checks (except when acting in a representative capacity); (x) hold and
identify itself as a separate and distinct entity under its own name and not as
a division or part of any other Person (except as provided in (i) above); and
(xi) hold its assets in its own name.
21.6.2 Independent Member
Upon Notice from Landlord, Tenant shall have an
Independent Member (who shall be a non-equity member) at all times, or if the
Independent Member has withdrawn, Tenant shall not take any action which may not
be taken pursuant to the organizational documents of Tenant without the consent
of the Independent Member until such time as a replacement Independent Member
has been admitted to Tenant.
21.6.3 Limitation on Indebtedness and Guarantees
Except pursuant to the Consent and Assignment or as
otherwise expressly provided herein, Tenant shall not (i) incur, create or
assume any Indebtedness of any kind; or (ii) guarantee or have any consensual
contingent obligation for the obligations of any other Person; provided that, so
long as no Event of Default has occurred and is continuing, Tenant may incur,
create or assume any Permitted Debt (as defined below). As used herein,
"Permitted Debt" shall mean:
(i) if no Default or Event of Default has occurred
and is continuing, purchase money Indebtedness and capitalized
lease obligations for the purchase or lease of FF&E in the
ordinary course of business (and not inconsistent with customary
industry practices), which Indebtedness may be secured by a
first priority lien on the goods and equipment that have been so
purchased or leased;
(ii) if no Event of Default has occurred and is
continuing, unsecured Indebtedness owing to TRS or any wholly
owned Subsidiary thereof, with respect to which the lender shall
have agreed in writing, in form and substance satisfactory to
Landlord, that payment of such Indebtedness shall be
subordinated in all respects to performance of Tenant's
obligations under this Lease and that no remedies may be
exercised with respect to enforcement or collection of such
Indebtedness until such time as this Lease shall have terminated
and all obligations owed by Tenant hereunder shall have been
discharged in full; and
(iii) if no Event of Default has occurred and is
continuing, Indebtedness solely in respect of surety and appeal
bonds, performance bonds and other obligations of a like nature
(to the extent that such
-89-
incurrence does not result in the incurrence of any obligation
to repay any obligation relating to borrowed money of others),
all in the ordinary course of business in accordance with
customary industry practices.
21.6.4 Distributions
Tenant shall make no distributions of cash or other
assets to any of its members if an Event of Default has occurred and is
continuing under Section 12.1(a) hereof.
21.6.5 Single Purpose
Tenant shall not have or create any Subsidiaries or hold
any equity interest in any other Person. Tenant shall at all times be a Single
Purpose entity.
Tenant shall not (i) engage in any business activity or
operate for any purpose other than as stated in its Limited Liability Company
Operating Agreement as in effect on the date hereof; (ii) without the consent of
all its members, including the consent of an Independent Member, file a
bankruptcy or insolvency petition or otherwise institute bankruptcy proceedings;
or (iii) acquire any assets not reasonably related to the business and operation
of the Facility.
21.6.6 Certain Fundamental Changes
Without the consent of Landlord and any Facility
Mortgagee (if required), Tenant shall not (i) be a party to any merger or
consolidation with any Person, or (ii) assign its rights under this Lease, or
assign, transfer, or sell all or any substantial portion of its assets to any
Person, in each case other than a Qualified Affiliate that is a Single Purpose
entity, has no outstanding Indebtedness (other than Permitted Debt) and no Liens
on any of its assets (other than Permitted Liens) at the time of such
assignment, and assumes all of the obligations of Tenant hereunder. Without the
consent of Landlord and any Facility Mortgagee, Tenant shall not adopt a plan of
dissolution or liquidation or dissolve, wind up or liquidate. Without the
approval of the Independent Member, Tenant shall not take any action for which
the approval of the Independent Member is required under its organizational
documents.
21.6.7 Amendments to Organizational Documents
Tenant shall not, in any manner, without the consent of
Landlord and any Facility Mortgagee (if required), amend, modify or alter the
terms of Sections 2.01, 2.02, 3.01, 5.14 (only paragraphs a, b, c, d and g
thereof), 8.01, 10.01, 10.02 and 10.03 of the Limited Liability Company
Operating Agreement of Tenant, as in effect on the date hereof.
21.6.8 Qualified Affiliate
Tenant shall, at all times during the Term of this
Lease, be a Qualified Affiliate.
-90-
ARTICLE 22
LIMITATIONS
22.1 REIT Compliance.
Tenant acknowledges that Host REIT intends to qualify as a real
estate investment trust under the Code. Tenant agrees that it will not knowingly
or intentionally take or omit to take any action, or permit any status or
condition to exist at the Leased Property, which Tenant actually knows (acting
in good faith) would or could result in (i) the Rent payable under this Lease
not qualifying as "rents from real property" as defined in Section 856(d) of the
Code or (ii) Host REIT being disqualified from treatment as a real estate
investment trust under the Code as the provisions exist on the date hereof;
provided, however, that notwithstanding anything herein to the contrary, (i)
Tenant shall not be responsible for any act or omission of Landlord or Manager
(unless Manager's action was with the express written consent or at the
direction of Tenant), and (ii) any action by Tenant taken in compliance with the
express terms of this Lease, the Consent and Assignment, or the Management
Agreement shall not be deemed to create a Default or Event of Default under this
Section 22.1.
22.2 FF&E Limitation.
This Section 22.2 is intended to insure that all of the rent
payable under this Lease qualifies as "rents from real property" within the
meaning of Section 856(d) of the Code or any similar or successor provisions
thereto. In furtherance of such purpose, the parties have agreed to the terms
set forth in Schedule 22.2 attached hereto.
-------------
22.3 Sublease Rent Limitation.
Anything contained in this Lease to the contrary
notwithstanding, from and after the Commencement Date, Tenant shall not
knowingly or intentionally (acting in good faith) enter into any sublease with
respect to the Leased Property or any part thereof on any basis such that the
rental to be paid by the sublessee thereunder would be based (or considered to
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 payable hereunder would or could, to Tenant's actual
knowledge (acting in good faith), fail to qualify as "rents from real property"
within the meaning of Section 856(d) of the Code, or any similar or successor
provisions thereto.
22.4 Sublease Tenant Limitation.
Anything contained in this Lease to the contrary
notwithstanding, Tenant shall not knowingly or intentionally (acting in good
faith) sublease any Leased Property or any part thereof to any Person or Entity
in which Landlord, Host O.P., or Host REIT owns, directly or indirectly, a ten
percent (10%) or greater interest, within the meaning of Section 856(d)(2)(B) of
the Code, or any similar or successor provisions thereto. Tenant shall take
reasonable precautions in connection with each sublease (including providing
Landlord with prompt Notice of the same) to ensure that such sublease will not
result in a violation of this Section 22.4.
-91-
22.5 Tenant Ownership Limitation.
Anything contained in this Lease to the contrary
notwithstanding, Tenant shall not knowingly or intentionally (acting in good
faith), and shall use commercially reasonable efforts to cause its Affiliates
not to knowingly or intentionally (acting in good faith), acquire, directly or
indirectly, (a) a nine and 80/100 percent (9.8%) or greater interest in Landlord
or Host REIT, or (b) a four and 90/100 percent (4.9%) or greater interest in
Host O.P., within the meaning of Section 856(d)(2)(B) of the Code, or any
similar or successor provisions thereto.
ARTICLE 23
MISCELLANEOUS
23.1 No Waiver.
No failure by either Landlord or Tenant 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 maximum extent permitted by law, no
waiver of any breach shall affect or alter this Lease, which shall continue in
full force and effect with respect to any other then existing or subsequent
breach.
23.2 Remedies Cumulative.
To the maximum extent permitted by law, each legal, equitable or
contractual right, power and remedy of either party 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 either party of any one or more of
such rights, powers and remedies shall not preclude the simultaneous or
subsequent exercise by such party of any or all of such other rights, powers and
remedies.
23.3 Severability.
Any clause, sentence, paragraph, section or provision of this
Lease held by a court of competent jurisdiction to be invalid, illegal or
ineffective shall not impair, invalidate or nullify the remainder of this Lease,
but rather the effect thereof shall be confined to the clause, sentence,
paragraph, section or provision so held to be invalid, illegal or ineffective,
and this Lease shall be construed as if such invalid, illegal or ineffective
provisions had never been contained herein.
23.4 Acceptance of Surrender.
No surrender to Landlord 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 Landlord, and no act by Landlord or
any representative or agent of Landlord, other than such a written acceptance by
Landlord, shall constitute an acceptance of any such surrender.
-92-
23.5 No Merger of Title.
It is expressly acknowledged and agreed that it is the intent of
the parties that there shall be no merger of this Lease or of the leasehold
estate created hereby by reason of the fact that the same Person may acquire,
own or hold, directly or indirectly, this Lease or the leasehold estate created
hereby and the fee estate or Superior Landlord's interest in the Leased
Property.
23.6 Release of Landlord Following Conveyance.
If Landlord or any successor owner of all or any portion of the
Leased Property shall convey all or any portion of 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 shall expressly assume all
obligations of Landlord hereunder arising or accruing from and after the date of
such conveyance or transfer, Landlord or such successor owner, as the case may
be, shall thereupon be released from all future liabilities and obligations of
Landlord under this Lease with respect to such of the Leased Property arising or
accruing from and after the date of such conveyance or other transfer, all such
future liabilities and obligations shall thereupon be binding upon the new
owner, and all references herein to Landlord thereafter shall be deemed to refer
to the new owner.
23.7 Quiet Enjoyment.
Provided that no Event of Default shall have occurred and be
continuing, Tenant shall peaceably and quietly have, hold and enjoy the Leased
Property for the Term, free of hindrance or molestation by Landlord or anyone
claiming by, through or under Landlord, but subject to (a) all Permitted Liens,
(b) Liens as to obligations of Landlord that are either not yet due or which are
being contested in good faith and by proper proceedings, provided the same do
not materially interfere with Tenant's ability to operate the Facility, (c)
Liens that have been consented to in writing by Tenant, and (d) Landlord's
option to terminate this Lease pursuant to Article 24. Except as otherwise
provided in this Lease, no failure by Landlord to comply with the foregoing
covenant shall give Tenant any right to cancel or terminate this Lease or abate,
reduce or make a deduction from or offset against the Rent or any other sum
payable under this Lease, or to fail to perform any other obligation of Tenant
hereunder.
23.8 Landlord's Consent.
Where provision is made in this Lease for Landlord's consent and
Landlord shall fail or refuse to give such consent, except to the extent
expressly provided herein to the contrary Tenant shall not be entitled to any
damages for any withholding by Landlord of its consent, it being intended that
Tenant's sole remedy shall be an action for specific performance or injunction
and that such remedy shall be available only in those cases where Landlord has
expressly agreed in writing not unreasonably to withhold its consent. Whenever
in this Lease the consent or approval of Landlord or Tenant is required, such
consent or approval shall (except to the extent that such consent or approval is
specifically designated as being "within the discretion" of a party, or words to
that effect, in the applicable provision) not be unreasonably withheld,
conditioned or delayed, shall be in
-93-
writing and shall be executed by a duly authorized officer or agent of the party
granting such consent or approval; provided, however, that Landlord shall be
deemed to have reasonably withheld its consent in the event any Facility
Mortgagee withholds its consent or otherwise objects to any proposed consent or
approval. With respect only to the matters set forth on Schedule 23.8, if either
-------------
Tenant or Landlord fails to respond within fifteen (15) days (or such shorter or
longer period of time as may be expressly specified in this Lease) to a request
in the form of a Notice by the other party for a consent or approval, such
consent or approval shall be deemed to have been given.
23.9 Memorandum of Lease.
Unless required by Legal Requirements, neither Landlord nor
Tenant shall record this Lease. However, Landlord and Tenant shall promptly,
upon the request of the other, 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. The requesting
party shall bear the costs and expenses of recording such memorandum. If a
memorandum of this Lease is required by Legal Requirements to be recorded, the
parties shall share equally the costs and expenses of recording such memorandum.
23.10 Notices.
(a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under this
Lease shall be deemed adequately given if in writing and the same shall be
delivered either in hand, by telecopier with computer generated acknowledgment
of receipt, or by mail or Federal Express or similar expedited commercial
carrier, addressed to the recipient of the notice, postpaid and certified with
return receipt requested (if by mail), or with all freight charges prepaid (if
by Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Lease upon the date
of acknowledged receipt, in the case of a notice by telecopier, and, in all
other cases, upon the date of receipt or refusal, except that whenever under
this Lease a notice is either received on a day which is not a Business Day or
is required to be delivered on or before a specific day which is not a Business
Day, the day of receipt or required delivery shall automatically be extended to
the next Business Day.
(c) All such notices shall be addressed:
If to Landlord to:
---------------------------------------------
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Attn: W. Edward Walter
Fax: (301) 380-6533
-94-
with a copy (which shall not constitute notice) to:
---------------------------------------------
Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Attn: General Counsel
Fax: (301) 380-6332
If to Tenant to:
---------------------------------------------
c/o HMT Lessee LLC
c/o Host Marriott, L.P.
10400 Fernwood Road
Bethesda, Maryland 20817
Attn: General Counsel
Fax: (301) 380-6332
with a copy (which shall not constitute notice) to:
---------------------------------------------
Host Marriott, L.P.
10400 Fernwood Road
Bethesda, Maryland 20817
Attn: Executive Vice President and Treasurer
Fax: (301) 380-6533
(d) By notice given as herein provided, the parties hereto
and their respective successors and assigns shall have the right from time to
time and at any time during the Term of this Lease to change their respective
addresses effective upon receipt by the other parties of such notice and each
shall have the right to specify as its address any other address within the
United States of America.
23.11 Construction.
Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, Tenant or Landlord
arising prior to any date of termination or expiration of this Lease shall
survive such termination or expiration. In no event shall either party be liable
for any punitive or consequential damages as the result of a breach of this
Lease by such other party. Neither this Lease nor any provision hereof may be
changed, waived, discharged or terminated except by an instrument in writing
signed by the party to be charged. 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. Each term or provision of this Lease to be
performed by Tenant or Landlord shall be construed as an independent covenant
and condition. Time is of the essence with respect to the exercise of any rights
of, and performance of any obligations by, Tenant or Landlord under this Lease.
Except as otherwise set forth in this Lease, any obligations of Tenant and
Landlord (including, without limitation, any monetary, repair and
indemnification obligations) shall survive the expiration or sooner termination
of this Lease.
-95-
23.12 Counterparts; Headings.
This Lease may be executed in two or more counterparts, each of
which shall constitute an original, but which, when taken together, shall
constitute but one instrument and shall become effective as of the date hereof
when copies hereof, which, when taken together, bear the signatures of each of
the parties hereto shall have been signed. Headings in this Lease are for
purposes of reference only and shall not limit or affect the meaning of the
provisions hereof.
23.13 Governing Law; Jurisdiction.
(a) This Lease shall be interpreted, construed, applied and
enforced in accordance with the laws of the State applicable to contracts
between residents of the State, which are to be performed entirely within the
State, and the laws of the State shall apply to the perfection and priority of
liens upon and the disposition of and disposition with respect to the Leased
Property and in any case regardless of (i) where this Lease is executed or
delivered; or (ii) where any payment or other performance required by this Lease
is made or required to be made; or (iii) where any breach of any provision of
this Lease occurs, or any cause of action otherwise accrues; or (iv) where any
action or other proceeding is instituted or pending; or (v) the nationality,
citizenship, domicile, principal place of business, or jurisdiction of
organization or domestication of any party; or (vi) whether the laws of the
forum jurisdiction otherwise would apply the laws of a jurisdiction other than
the State; or (vii) any combination of the foregoing.
(b) To the maximum extent permitted by applicable law, any
action to enforce, arising out of, or relating in any way to, any of the
provisions of this Lease may be brought and prosecuted only in the court or
courts located in the State of Maryland; and the parties consent to the
jurisdiction of said court or courts located in the State of Maryland and to
service of process by certified mail, return receipt requested, or by any other
manner provided by law.
23.14 No Broker.
Each party hereby represents and warrants to the other that it
has not engaged, dealt with or otherwise discussed this transaction with any
broker, agent or finder. Each party agrees to indemnify and hold the other
harmless from and against any claim arising out of a breach of the foregoing
agreement and representation and warranty.
23.15 Related Agreements.
[(a)] Anything herein to the contrary notwithstanding, neither
Landlord nor Tenant shall take any action, or fail to take any action, which
would constitute a breach or default under (i) any Facility Mortgagee Agreement,
(ii) the Security Agreement, or (iii) the Consent and Assignment (collectively,
any Facility Mortgagee Agreement, the Security Agreement, and the Consent and
Assignment are sometimes referred to herein as the "Related Agreements").
-96-
[(b) Anything herein to the contrary notwithstanding, Tenant
shall not take any action that would constitute a breach or default of the
Landlord under any Superior Lease listed on Schedule 20.3.]
23.16 Legal Fees and Costs of Litigation.
In the event either party to this Lease commences legal action
of any kind to enforce the terms and conditions of this Lease, the prevailing
party in such litigation will be entitled to collect from the other party all
reasonable costs, expenses and attorneys' fees incurred in connection with such
action.
23.17 Force Majeure.
If Landlord or Tenant is in any way delayed or prevented from
performing any obligation, except any monetary obligation, hereunder due to acts
of God, acts of war, civil disturbance, action of any Governmental Agency
(including the revocation or refusal to grant licenses or permits, where such
revocation or refusal is not due to the fault of the party whose performance is
to be excused for reasons of force majeure), strikes, fire or other Casualty, or
any other cause beyond the reasonable control of either party (as applicable),
then the time for performance of such obligation shall be excused for the period
of such delay or prevention and extended for a period equal to the period of
such delay, interruption or prevention.
23.18 Conflicts with Related Agreements.
In the event of any conflict or inconsistency between this Lease
and any of the Related Agreements or the Asset Management Agreement, the terms
of any of the Related Agreements or the Asset Management Agreement shall govern.
Notwithstanding the foregoing, in the event of any conflict or inconsistency
between this Lease and the Consent and Assignment, as they relate to the
respective rights and obligations of Landlord and Tenant, the terms of this
Lease shall govern.
23.19 Operating Lease.
The parties hereto intend that this Lease shall be deemed for
all purposes to be an operating lease and not a capital lease.
-97-
23.20 Limitation of Liability.
Any liability of Landlord under this Lease shall be limited
solely to its interest in the Leased Property, including without limitation any
net sales proceeds, and in no event shall any personal liability be asserted
against Landlord, any of its partners, shareholders or members, as the case may
be, in connection with this Lease nor shall any recourse be had to any other
property or assets of Landlord.
23.21 Joinder of Host O.P.
Landlord hereby acknowledges that, notwithstanding the joinder
of Host O.P. for the specified purpose set forth above its signature below,
Landlord shall remain liable for all obligations, covenants and conditions of
the Landlord under this Lease.
ARTICLE 24
LEASEHOLD INTEREST PURCHASE RIGHTS; EFFECT OF TERMINATION
24.1 Landlord's Right to Purchase or Cause an Affiliate to Purchase
Tenant's Leasehold Interest upon Sale.
(a) In the event Landlord enters into a bona fide contract to
sell the Leased Property to a non-Affiliate, Landlord may purchase or cause an
Affiliate to purchase Tenant's interest in this Lease by giving not less than
sixty (60) days prior Notice to Tenant of Landlord's election to purchase or to
cause an Affiliate to purchase Tenant's interest in this Lease concurrently with
or immediately prior to the closing under such contract. Landlord, in the event
it enters into a bona fide contract to sell the Leased Property to a
non-Affiliate, and subject to the restrictions set forth in Section 20.4, shall
alternatively be permitted to transfer the Leased Property subject to the Lease,
provided, however, that the parties shall make such reasonable modifications, if
any, hereto as shall be necessary or appropriate in connection with such
transfer, including, without limitation, termination or modification of the
Related Agreements and/or the Asset Management Agreement as they relate to this
Lease, but no amendment hereto shall (i) increase Tenant's rental obligations or
other financial obligations hereunder, (ii) have a material adverse effect upon
Tenant's rights hereunder, (iii) materially increase Tenant's non-economic
obligations hereunder, or (iv) decrease Landlord's obligations hereunder; and
provided further that in such event Landlord shall not, without the consent of
Tenant, transfer the Leased Property or any interest therein to any Person which
(A) does not have sufficient financial resources and liquidity to fulfill
"Owner's" obligations under the Management Agreement and Landlord's obligations
under this Lease, or (B) who has been, or is in control of, controlled by or
under common control with Persons who have been, convicted of felonies involving
moral turpitude in any state or federal court.
(b) The purchase price for Landlord's (or Landlord's
Affiliate's) purchase of Tenant's leasehold estate under this Article 24 shall
be payable at closing in cash and shall be an amount equal to the lesser of (A)
the Fair Market Value of Tenant's leasehold estate hereunder (excluding any
Renewal Term, exercised or unexercised) as of such closing or (B) the purchase
price, reduced by all amounts reflected as deductions for federal income tax
purposes for such purchase price, as of such closing, allocated to the purchase
-98-
by TRS of the direct or indirect ownership interest in Tenant (as derived from
the original purchase price for the ownership interest in Tenant set forth on
Schedule C of that certain Acquisition and Exchange Agreement, entered into
among Crestline Capital Corporation, a Delaware corporation, TRS and various
Affiliates of such parties, and dated as of November 13, 2000). Alternatively,
in lieu of payment of the purchase price at such closing, at Landlord's
election, Landlord shall have the right, exercisable not more than one (1) year
prior to the anticipated closing date and in any event not later than sixty (60)
days prior to the closing of such sale, to offer to lease to Tenant, pursuant to
one or more leases, one or more substitute hotel facilities (a "Comparable
Lease") that (A) are comparable, in Tenant's commercially reasonable judgment,
to the average quality of the properties leased pursuant to the Other Leases,
taking into consideration the age, physical condition, location and other
relevant factors, and (B) would create for Tenant leasehold estates having an
aggregate Fair Market Value as to that portion of its term equal to the
remaining Term (excluding any Renewal Term, whether exercised or unexercised)
hereunder of no less than the Fair Market Value of the remaining Term hereunder
(excluding any Renewal Term, whether exercised or unexercised), both such values
to be determined as of the closing of the sale of the Leased Property. It is the
intent of the parties that the Comparable Lease shall result in substantially
the same ratio between Tenant's Operating Profit and Rent as then exists under
this Lease for the Fiscal Year immediately preceding the sale. For the purposes
of determining the Fair Market Value for purposes of this Section 24.1 or
pursuant to any other Section of this Lease providing for such compensation of
Tenant upon a Lease termination or purchase of Tenant's leasehold estate, a
discount rate of twelve percent (12%) per annum will be used, and the annual
income for the remainder of the Term (excluding any Renewal Term, whether
exercised or unexercised) will be assumed to be equal to the average Tenant
Operating Profit generated during the three (3) Fiscal Years immediately
preceding the termination date or date of the transfer of Tenant's leasehold
estate, as applicable, or if three (3) Fiscal Years have not elapsed since the
Commencement Date, the average during the preceding Fiscal Years that have
elapsed (with the annual income for each of such Fiscal Years escalated from the
end of each such Fiscal Year to the date of determination at the rate of
inflation before such average is determined), provided that this amount shall be
determined on a pro forma basis if the Leased Property has not operated as a
hotel for at least the preceding twelve (12) months. In the event Landlord and
Tenant are unable to agree upon the Fair Market Value of the original leasehold
estate (excluding any Renewal Term, whether exercised or unexercised) or the
proposed Comparable Lease leasehold estate, it shall be determined by
arbitration pursuant to the procedure set forth in Article 15. The parties agree
that, if Landlord elects to offer to enter into a Comparable Lease, to the
extent that the Fair Market Value of the Comparable Lease is less than the Fair
Market Value of the original leasehold estate, calculated as set forth above,
then Landlord shall compensate Tenant in cash for the deficiency prior to the
effective date of the transfer of Tenant's leasehold estate.
(c) Notwithstanding the provisions of Section 24.1(b), Landlord
shall be entitled to terminate this Lease in connection with a sale or other
transfer of the Leased Property to an unrelated Person or a Person in which Host
O.P. owns, directly or indirectly, less than two thirds of the equity interests,
without payment of any termination fee, by giving not less than sixty (60) days
prior written Notice to Tenant, provided that the landlords under the Other
Leases (excluding this Lease and the leases applicable to
-99-
properties commonly known as Minneapolis, MN (Airport/Bloomington), Denver, CO
(Southeast), and Saddle Brook, NJ) relating to an aggregate of fewer than twelve
(12) hotels have elected to terminate such Other Leases (excluding this Lease
and the leases applicable to properties commonly known as Minneapolis, MN
(Airport/Bloomington) Denver, CO (Southeast), and Saddle Brook, NJ) without
payment of a termination fee.
(d) Host O.P. agrees to guarantee Landlord's obligation to
pay to Tenant the compensation for (i) termination by a Superior Mortgagee or
Superior Landlord under Section 20.2, (ii) termination of this Lease following a
Casualty pursuant to Section 10.2.3, or (iii) termination of this Lease by
Tenant by reason of Landlord's election not to make an Award available to Tenant
for restoration following a Condemnation pursuant to Section 11.2; provided that
at the time of any such termination Landlord is a wholly owned direct or
indirect subsidiary of Host O.P., and if Landlord is then partially owned,
directly or indirectly, by Host O.P., Host O.P. shall guaranty that portion of
such compensation that represents the same percentage of the total compensation
payable as Host O.P.'s direct or indirect percentage ownership interest in
Landlord.
24.2 [Intentionally Omitted.]
24.3 [Intentionally Omitted.]
24.4 Effect of Termination.
Effective upon the date of closing of the sale of Tenant's
interest in this Lease or upon the termination date as set forth in any Notice
provided by the terminating party, Tenant's rights and obligations under this
Lease shall terminate and be of no further force and effect (and, if this Lease
is terminated, Landlord's rights and obligations hereunder shall likewise
terminate) except as to any obligations of the parties existing as of such date
that survive termination of this Lease or transfer of Tenant's leasehold
interest under this Lease, and all Rent, including Percentage Rent and
Additional Charges, shall be adjusted as of the closing or termination date.
-100-
IN WITNESS WHEREOF, the parties have executed this Lease as a sealed
instrument as of the date above first written.
LANDLORD:
Attest:
By:
-------------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
---------------------------- -----------------------------
TENANT:
Attest:
By:
-------------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
---------------------------- ----------------------------
Not as a party, but solely to acknowledge and agree to the obligations
imposed upon it by Sections 4.5, 20.2, 21.4 and 24.1(d) and Schedule 22.2[If
-------------
Host L.P. is also Landlord-add ", which obligations are binding on Host
Marriott, L.P., in its individual capacity without regard to its status now or
in the future as "Landlord" under this Lease"].
HOST MARRIOTT, L.P.,
a Delaware limited partnership
Attest:
By:
-------------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
---------------------------- ----------------------------
-101-
EXHIBIT A
THE LAND
[See Attached]
EXHIBIT B
[INTENTIONALLY OMITTED]
EXHIBIT C
[INTENTIONALLY OMITTED]
EXHIBIT D
[INTENTIONALLY OMITTED]
EXHIBIT E
FORM OF
WORKING CAPITAL NOTE AND AGREEMENT
This Working Capital Note and Agreement (this "Note and
Agreement") is made as of the ____ day of _____, 199___, by __________________,
a _____________________ (the "Maker"), and _______________________, a
__________________ (the "Holder").
WHEREAS, the Maker and the Holder are parties to that certain
Lease Agreement, dated as of _______________, 1998 (as the same may be amended,
supplemented or otherwise modified from time to time, the "Lease");
WHEREAS, pursuant to the Lease, the Holder is selling to the
Maker on the date hereof the Working Capital (as defined in the Lease) existing
as of the Commencement Date (as defined in the Lease) of the Lease (the "Initial
Working Capital");
WHEREAS, the parties desire to enter into this Note and
Agreement for the purpose, among others, of evidencing the obligation of the
Maker to pay to the Holder the purchase price of the Initial Working Capital,
together with interest thereon, as more fully hereinafter set forth;
NOW THEREFORE, in consideration of the foregoing and the
agreements hereinafter set forth, the parties hereto hereby agree as follows:
1. FOR VALUE RECEIVED, the Maker promises to pay to the order
of the Holder, at the address specified on Schedule A attached hereto ("Schedule
---------- --------
A"), or at such other place as the Holder of this Note and Agreement may from
- -
time to time designate, the principal amount specified on Schedule A (the
----------
"Principal Amount"), together with interest on the Principal Amount from the
date hereof until paid in full.
Such interest shall accrue at the rate, be calculated in the
manner, and be due and payable at the times, provided in Schedule A. All
----------
interest payments shall be in cash, except as otherwise provided in the next
paragraph.
The Principal Amount and all accrued and unpaid interest
thereon shall be due and payable in full, in the manner set forth hereinbelow,
upon the expiration or earlier termination of the Lease for any reason
(including, without limitation, a termination of the Lease by the Facility
Mortgagee (as defined in the Lease) in accordance with the terms of the Lease or
this Note and Agreement). The date on which such expiration or termination
occurs is sometimes hereinafter referred to as the "Maturity Date." Payment of
the Principal Amount and all accrued and unpaid interest thereon shall be made
as follows: (i) the Maker shall assign, transfer and deliver to the Holder title
to all Working Capital owned by the Maker on the Maturity Date by means of one
or more written instruments reasonably satisfactory in form and content to the
Holder; and (ii) to the extent that the Principal Amount and all accrued and
unpaid interest thereon exceeds the fair market value of such Working Capital so
assigned, transferred and delivered by the Maker to the Holder (which the Maker
and the Holder agree shall be equal to the book value of such
Working Capital, after taking into account any depreciation as of the Maturity
Date) (the "Fair Market Value"), the Maker shall pay to the Holder on the
Maturity Date an amount in cash equal to the amount of such excess (the "Maker
True-Up Amount"). Title to the Working Capital so assigned, transferred and
delivered to the Holder shall be free and clear of any security interests, liens
and other encumbrances of any nature whatsoever created by the Maker or arising
in respect of any obligation of the Maker or arising by reason of any act or
omission of the Maker.
All payments of cash hereunder shall be made in lawful money
of the United States of America and, except as otherwise provided in a written
agreement between the Maker and the Holder, without offset.
This Note and Agreement may not be prepaid in whole or in
part.
The occurrence of one or more of the following events shall
constitute an event of default ("Event of Default") hereunder: (i) the failure
to make any payment in cash of interest hereunder when due on any interest
payment date (other than the Maturity Date) if such failure continues for a
period of 10 days after the due date therefor, or (ii) the failure to make any
payment (in cash or in kind, as applicable) of all or any portion of the
Principal Amount and all accrued and unpaid interest thereon on the Maturity
Date.
Upon the occurrence of an Event of Default, the Holder shall
have the option to terminate the Lease. In addition, the interest rate otherwise
applicable pursuant to Schedule A shall be increased by two hundred basis points
----------
(two (2) percentage points (2%)) per annum from the date of the Event of Default
until the date on which all obligations of the Maker pursuant to this Note and
Agreement are paid (in cash or in kind, as applicable) in full. The rights and
remedies provided in this paragraph are in addition to, and not in limitation
of, any other rights and remedies that the Holder may have with respect to an
Event of Default; it being agreed that all such rights and remedies shall be
cumulative.
The Maker promises to pay all reasonable costs and expenses
(including without limitation reasonable attorneys' fees and disbursements)
incurred by Holder in connection with the collection or enforcement hereof.
The Maker hereby waives presentment, protest, demand, notice
of dishonor and all other notices, and all defenses and pleas on the grounds of
any extension or extensions of the time of payments or the due date of this Note
and Agreement, before or after maturity, with or without notice. No renewal or
extension of this Note and Agreement, and no delay in enforcement of this Note
and Agreement or in exercising any right or power hereunder, shall affect the
liability of the Maker.
Whenever used herein, the words "Maker" and "Holder" shall be
deemed to include their respective successors and assigns.
2. In the event the Maker has satisfied all of its obligations
pursuant to Section 1 hereof and the Fair Market Value exceeds the Principal
Amount and all accrued and unpaid interest thereon, the Holder shall pay to the
Maker on the Maturity Date an amount in cash equal to the amount of such excess
(the "Holder True-Up Amount").
-2-
3. Notwithstanding anything to the contrary set forth above,
in the event that the Lease is terminated by the Facility Mortgagee pursuant to
the terms thereof, the Maker agrees that it shall transfer title to the Working
Capital owned by it on the Maturity Date (and pay any Maker True-Up Amount
payable by it under Section 1 hereof) directly to the Facility Mortgagee or its
designee and that it shall look only to Host Marriott, L.P., a Delaware limited
partnership, for payment of any Holder True-Up Amount payable pursuant to
Section 2 hereof.
4. This Note and Agreement shall be governed by and construed
under and in accordance with the laws of the State of Maryland (but not
including the choice of law rules of such jurisdiction).
IN WITNESS WHEREOF, each of the parties hereto has caused this
Note and Agreement to be duly executed on its behalf by its duly authorized
representative on the date first set forth above.
[MAKER]
--------------------------
[HOLDER]
--------------------------
-3-
Schedule A to Working Capital
Note and Agreement
1. Address at which payments and deliveries are to be made by
the Maker pursuant to Section 1:
-------------------------------
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Attention: Corporate Accounting
2. Principal amount:1
-
--------------------------------------------------------------
3. Interest rate: 5.12% per annum
4. Interest shall be computed on the basis of a 365/6 day
year and applied to the actual number of days elapsed.
5. Accrued interest shall be due and payable on the date on
which payment of Rent (as defined in the Lease) is due and payable under the
Lease with respect to each Accounting Period (as defined in the Lease) pursuant
to Section 3.1.1 of the Lease, whether or not any Rent is paid on such due date.
- --------------------------
1 The fair market value (which the parties agree will be the book value) of the
Working Capital transferred by the Holder to the Maker at the commencement of
the Lease.
-4-
SCHEDULE 2.2(a)(vi)
EXCLUDED LEASES
[INTENTIONALLY LEFT BLANK]
SCHEDULE 3.1.1
MINIMUM RENT
Minimum Rent for the first Fiscal Year shall be $_____________.
SCHEDULE 3.1.2
REVENUE PERCENTAGE AND BREAK POINTS
First Tier Room Revenue Percentage
Annual Room Revenues First Break Point
Second Tier Room Revenue Percentage
Annual Room Revenues Second Break Point
Third Tier Room Revenue Percentage
First Tier Food and Beverage Sales Percentage
Annual Food and Beverage Sales First Break Point
Second Tier Food and Beverage Sales Percentage
Annual Food and Beverage Sales Second Break Point
Third Tier Food and Beverage Sales Percentage
First Tier Telephone Income Percentage
Annual Telephone Income Break Point
Second Tier Telephone Income Percentage
First Tier Gift Shop Income Percentage
Annual Gift Shop Income Break Point
Second Tier Gift Shop Income Percentage
First Tier Other Income Percentage
Annual Other Income Break Point
Second Tier Other Income Percentage
Schedule 3.1.3(b)
ITEMS OF GROSS REVENUES
[INTENTIONALLY LEFT BLANK]
SCHEDULE 3.1.5(e)
PREPAID EXPENSES
[INTENTIONALLY LEFT BLANK]
SCHEDULE 5.1.1
EXISTING CONDITIONS RELATING TO HAZARDOUS MATERIALS
SCHEDULE 17.2(f)
PERIOD REPORT FORMAT
[SEE ATTACHED]
SCHEDULE 20.3
SUPERIOR MORTGAGEE(S) AND SUPERIOR LANDLORD(S)
-2-
SCHEDULE 22.2
PROVISIONS RELATING TO EXCESS FF&E
(a) This Schedule 22.2 is intended to insure that all of the
-------------
rent payable under this Lease qualifies as "rents from real property" within the
meaning of Section 856(d) of the Code or any similar or successor provisions
thereto. In furtherance of such purpose, the parties have agreed to the terms
set forth in the following paragraphs of this Schedule 22.2 with the objective
-------------
that, anything contained in this Lease to the contrary notwithstanding, the
average of the adjusted tax basis of the items of "personal property" (within
the meaning of Section 856(d)(i)(C) of the Code) that are leased to Tenant under
this Lease at the beginning and at the end of any calendar year shall not exceed
fifteen percent (15%) of the average of the aggregate adjusted tax bases of the
Leased Property at the beginning and at the end of each such calendar year (the
"FF&E Limitation"). The provisions contained in the following paragraphs shall
be interpreted in a manner consistent with the intent and objective described
above (it being understood that this paragraph constitutes a statement of the
parties' mutual intent only and that the failure to achieve such objective,
absent any Default or Event of Default under the other paragraphs of this
Schedule 22.2 or any other provisions of this Lease, shall not constitute a
- -------------
Default or an Event of Default hereunder). [In order to avoid exceeding the FF&E
Limitation at the commencement of this Lease, Tenant has entered into an Excess
FF&E Lease (as defined below) with Host Subsidiary for certain Excess FF&E (as
defined below) more specifically described therein that Landlord has sold to
Host Subsidiary and that is now owned by Host Subsidiary (the "Initial FF&E
Lease").]
(b) If Landlord reasonably anticipates and gives Notice (an
"Excess FF&E Notice") and reasonably satisfactory evidence to Tenant that the
FF&E Limitation might be exceeded with respect to the Leased Property for any
Fiscal Year, Tenant shall, in accordance with the provisions set forth below and
within sixty (60) days following the delivery of such Excess FF&E Notice, either
(a) purchase from Landlord those items or categories of FF&E to be acquired by
Landlord during such Fiscal Year which are designated in such Excess FF&E Notice
as anticipated to cause Landlord to exceed the FF&E Limitation ("Excess FF&E")
or (b) arrange for Host Subsidiary or another third party (in either case, a
"Third-Party Purchaser") to purchase such Excess FF&E from Landlord and to lease
it to Tenant pursuant to a written lease agreement between such Third-Party
Purchaser and Tenant (an "Excess FF&E Lease") that shall include the terms
specified for an Excess FF&E Lease in this Schedule 22.2 and in Schedule 22.2-A
------------- ---------------
hereto (it being understood that, without limiting the foregoing, Landlord and
Tenant intend that each Excess FF&E Lease be structured in a manner intended to
avoid the classification of Tenant's obligations thereunder as Capitalized Lease
Obligations).
(c) Upon receiving an Excess FF&E Notice, Tenant shall first
offer to Host Subsidiary the opportunity to purchase from Landlord the Excess
FF&E designated therein and to lease same to Tenant pursuant to an Excess FF&E
Lease. Each Excess FF&E Lease with Host Subsidiary shall provide for an annual
rental in an amount equal to the mathematical product of (i) the applicable
Market Leasing Factor (as defined below) for all Excess FF&E subject to such
Excess FF&E Lease multiplied by (ii) the Excess FF&E Value (as defined below) of
the Excess FF&E subject to such Excess FF&E Lease.
(d) If Host Subsidiary does not agree to purchase and lease
all the Excess FF&E which is the subject of an Excess FF&E Notice within fifteen
(15) days after the date it receives Tenant's offer with respect thereto, then
Tenant shall either purchase such Excess FF&E from Landlord for Tenant's own
account or shall arrange for another Third-Party Purchaser that has satisfied
the requirements of paragraph (j) of this Schedule 22.2 to purchase such Excess
-------------
FF&E from Landlord and lease it to Tenant pursuant to an Excess FF&E Lease. If a
Third-Party Purchaser that has satisfied the requirements of paragraph (j) of
this Schedule 22.2 shall not have purchased such Excess FF&E from Landlord and
-------------
leased it to Tenant under an Excess FF&E Lease within forty-five (45) days after
Landlord's delivery of the Excess FF&E Notice relating thereto, then Tenant
shall itself purchase such Excess FF&E from Landlord as and when (but only
after) Landlord takes title to such Excess FF&E. Tenant shall purchase, or shall
cause each Third-Party Purchaser to purchase, Excess FF&E with the purchaser's
own funds.
(e) With respect to any Excess FF&E first leased or
purchased by Tenant pursuant to the terms of this Schedule 22.2 during a
-------------
particular calendar year, Tenant's annual Rent obligations shall be reduced in
the following manner (the "FF&E Adjustment"):
(i) For the calendar year in which such Excess FF&E
is first placed in service by either Tenant or a Third-Party Purchaser,
such reduction shall be in an amount (the "First Year FF&E Adjustment")
equal to the mathematical product of (A) the Market Leasing Factor (as
defined below) for personal property with an average expected useful
life corresponding to the weighted average expected useful life (as
determined in accordance with GAAP and rounded to the nearest whole
year) of all Excess FF&E first placed in service by Tenant or a
Third-Party Purchaser during such calendar year (such weighted average,
the "Applicable Expected Life") times (B) the Excess FF&E Cost (as
defined below) of all Excess FF&E first placed in service by Tenant or a
Third-Party Purchaser during such calendar year times (C) either (x)
100% if Tenant leases such Excess FF&E from Host Subsidiary or (y) 110%
if Tenant purchases such Excess FF&E or leases such Excess FF&E from a
Third-Party Purchaser other than Host Subsidiary times (D) 50%;
(ii) For each subsequent calendar year prior to the
calendar year in which the Applicable Expected Life for such Excess FF&E
expires, such reduction shall be in an amount equal to twice the First
Year FF&E Adjustment; and
(iii) For the calendar year in which the Applicable
Expected Life for such Excess FF&E expires, such reduction shall be in
an amount equal to the First Year FF&E Adjustment.
It is contemplated that there would be a separate FF&E Adjustment for all Excess
FF&E first placed in service during a single calendar year (with such FF&E
Adjustment extending for a period equal to the lesser of the remaining Term or
the Applicable Expected Life of the Excess FF&E acquired during such calendar
year). The Rent payable by Tenant
-2-
for each Accounting Period in a calendar year to which one or more FF&E
Adjustments apply shall be reduced by an amount equal to the mathematical
product of (i) the amount of such applicable FF&E Adjustment (or if more than
one FF&E Adjustment apply in such calendar year, the sum of such applicable FF&E
Adjustments) times (ii) a fraction, the numerator of which is one and the
denominator of which is the number of Accounting Periods in such calendar year.
The "Excess FF&E Value" of any Excess FF&E shall be the fair market value of
such Excess FF&E (which shall be the purchase price paid by the purchaser
thereof from Landlord, whether such purchaser is Host Subsidiary, another Third
Party Purchaser or Tenant) plus the aggregate amount of out-of-pocket
transactional costs (including, without limitation, reasonable attorneys' fees
and any ad valorem, sales, transfer, transaction or similar tax, levy or other
governmental charge) incurred by such purchaser in connection with its purchase
of such Excess FF&E. The "Market Leasing Factor" (with there to be a separate
Market Leasing Factor for each whole number of years of expected useful life of
Excess FF&E) shall be determined by an independent valuation expert, acceptable
to both Landlord and Tenant, who shall determine the Market Leasing Factors
based on the median of the leasing rates of at least three nationally recognized
companies engaged in the business of leasing similar FF&E or personal property
and equipment with average expected useful lives equal to the weighted average
of the expected useful lives set forth on Schedule 22.2-B. The cost of such
---------------
expert shall be borne by Landlord. The Market Leasing Factors shall take into
account any use taxes and similar Impositions payable by Tenant in connection
with its leasing of Excess FF&E under the relevant Excess FF&E Leases, as well
as the reasonably estimated anticipated out-of-pocket cost (including reasonable
attorneys' and accountants' fees) to Tenant of administering such Excess FF&E
Leases during the Term, so that the economic burden of such Impositions and
administration costs will be borne by Landlord. The "Excess FF&E Cost" of any
Excess FF&E shall be the Excess FF&E Value of such Excess FF&E plus, if Tenant
leases such Excess FF&E from a Third-Party Purchaser, the aggregate amount of
out-of-pocket transactional costs (including, without limitation, reasonable
attorneys' fees and any ad valorem, sales, transfer, transaction or similar tax,
levy or other governmental charge) incurred by Tenant in connection with its
entry into an Excess FF&E Lease of such Excess FF&E in accordance with this
Schedule 22.2.
- -------------
(f) Landlord and Tenant agree to cause Manager to purchase all
Excess FF&E for Landlord's account with funds from the FF&E Reserve (or with
funds otherwise made available by Landlord). The parties specifically intend
(and Tenant hereby agrees to take such reasonable steps at Landlord's expense as
Landlord may request to insure) that Landlord shall own all Excess FF&E for a
period of time sufficient to permit such Excess FF&E to become subject to any
then existing Liens in favor of the Facility Mortgagee that encumber FF&E
acquired by Landlord; provided, however, that in no event shall Landlord own any
Excess FF&E (i) for more than five (5) Business Days, or (ii) so long that the
FF&E Limitation would be exceeded at the beginning or end of any calendar year.
Without limiting Tenant's obligation under the immediately preceding sentence to
take reasonable steps requested by Landlord (at Landlord's expense) to achieve
the objective set forth therein, it is understood and agreed that the failure to
achieve such objective, absent any Default or Event of Default under the other
provisions of this Schedule 22.2 or any other provisions of this Lease, shall
-------------
not constitute a Default or an Event of Default hereunder. Every purchase of
Excess FF&E from Landlord, whether by Tenant or a Third-Party Purchaser, shall
be made expressly subject to any and all Liens encumbering such Excess
-3-
FF&E in favor of any Facility Mortgagee. Following the purchase of any Excess
FF&E by Tenant or a Third-Party Purchaser as contemplated by this Schedule 22.2,
-------------
Landlord shall not be considered to own or be the lessor of any of such Excess
FF&E during the Term of this Lease for any purpose, nor shall any of such Excess
FF&E be considered part of the Leased Property, and neither Landlord nor Tenant
shall at any time take a position (in its books and records or otherwise) or
make an assertion inconsistent therewith.
(g) In the event that Tenant owns any Excess FF&E at the
expiration or earlier termination of this Lease (including, without limitation,
a termination in connection with a transfer of ownership of the Leased
Property), Landlord shall purchase from Tenant and Tenant shall sell to Landlord
(the "Excess FF&E Repurchase"), on the effective date of such expiration or
termination, all such Excess FF&E (except for any Excess FF&E to which the terms
of paragraph (i) of this Schedule 22.2 apply) for a purchase price equal to the
-------------
fair market value (which the parties hereby agree shall not be less than the
adjusted book value) of such Excess FF&E at such time (the "Excess FF&E
Repurchase Price"). The Excess FF&E Repurchase Price shall be payable first by
offset against any Rent owed by Tenant to Landlord as of such time and any
amounts owed by Tenant to Landlord as of such time under the Working Capital
Note, and the remainder (if any) shall be paid by Landlord to Tenant in cash
within ten (10) days after the expiration or termination of this Lease.
(h) In the event that Tenant is leasing any Excess FF&E from a
Third-Party Purchaser at the expiration or earlier termination of this Lease
(including, without limitation, a termination resulting in connection with a
transfer of ownership of the Leased Property), Landlord shall purchase and
assume from Tenant, and Tenant shall sell, assign and delegate to Landlord, on
the effective date of such expiration or termination all Tenant's right, title
and interest in and its obligations under each Excess FF&E Lease between Tenant
and such Third-Party Purchaser (an "Excess FF&E Leasehold Interest"). In the
aforesaid transaction (an "Excess FF&E Leasehold Interest Transfer"), the
transfer price for such Excess FF&E Leasehold Interest (the "Excess FF&E
Leasehold Interest Transfer Price") shall be an amount equal to the fair market
value of such Excess FF&E Leasehold Interest at such time (as determined in
accordance with the procedure provided below) and shall be payable (i) by
Landlord if such fair market value is a positive number or (ii) by Tenant if
such fair market value is a negative number. The fair market value of the Excess
FF&E Leasehold Interest shall be determined taking into account all relevant
factors, including the remaining term thereof, the remaining expected useful
life of the Excess FF&E (as determined in accordance with GAAP) subject to such
leasehold, and the leasing rate that would apply, under market conditions at
that time, if a new lease for such Excess FF&E were to be entered into with an
unrelated party for a term equal to the term remaining for such Excess FF&E
Leasehold Interest; provided, however, that in no event shall such fair market
value be less than the adjusted book value of such Excess FF&E Leasehold
Interest. Any amount payable pursuant to this paragraph shall be paid within ten
(10) days after the expiration or termination of this Lease and, if due from
Landlord, shall be paid first by offset against any Rent owed by Tenant to
Landlord as of such time and any amounts owed by Tenant to Landlord as of such
time under the Working Capital Note, and the remainder (if any) shall be paid in
cash.
-4-
(i) In the event that the Facility Mortgagee forecloses on its
Lien on any Excess FF&E owned by Tenant in connection with, but not separate
from, a foreclosure of the Leased Property, Landlord shall reimburse Tenant for
the loss of such Excess FF&E in an amount equal to the Excess FF&E Repurchase
Price plus any reasonable costs and expenses (including, without limitation,
reasonable attorneys' fees) incurred by Tenant in complying with (but not
contesting) such foreclosure (the "Excess FF&E Reimbursement Amount"). In the
event that the Excess FF&E Reimbursement Amount becomes payable to Tenant
pursuant to the immediately preceding sentence, (i) it shall be paid first by
offsetting any amounts owed by Tenant to Landlord as of such time and the
balance (if any) shall be paid in cash, (ii) Tenant agrees to seek payment of
such cash balance (if any) solely from Host O.P. pursuant to the terms of the
Facility Mortgagee Agreement and shall not make any demand or claim therefor
against Landlord, the Facility Mortgagee, any purchaser in foreclosure or
transferee by deed in lieu of foreclosure or other party claiming under any of
the foregoing, and (iii) Host O.P. agrees to pay any such cash balance.
(j) No Third-Party Purchaser shall purchase any Excess FF&E
from Landlord unless and until such Third-Party Purchaser shall have (i) agreed
to purchase such Excess FF&E with cash from such Third-Party Purchaser's own
funds; (ii) agreed to lease such Excess FF&E to Tenant under an Excess FF&E
Lease; and (iii) entered into an agreement with Landlord, the Facility Mortgagee
and Host O.P. pursuant to which (A) the Third-Party Purchaser acknowledges to
the Facility Mortgagee that all Excess FF&E purchased by such Third-Party
Purchaser while the Facility Mortgage is in effect is subject to the Facility
Mortgagee's first-priority Lien (without Third-Party Purchaser assuming any
liability for Landlord's obligations that are secured by or arise under any
Facility Mortgage) and that the Facility Mortgagee's rights and remedies with
respect to such Excess FF&E shall survive and be enforceable with respect
thereto; (B) the Third-Party Purchaser covenants to the Facility Mortgagee to
execute and deliver UCC-1 financing statements prepared by Landlord or any
Facility Mortgagee confirming the foregoing for notice purposes, which UCC-1
financing statements may then be filed by Landlord or the Facility Mortgagee at
Landlord's sole expense; (C) the Third-Party Purchaser covenants not to sell,
lease, transfer or otherwise dispose of such Excess FF&E or any interest
therein, or grant or cause or permit there to exist any lien, charge or
encumbrance with respect thereto, other than the Lien in favor of the Facility
Mortgagee, any other Liens which are the responsibility of Landlord and any Lien
arising pursuant to such agreement or the Excess FF&E Lease, (D) in the event
that this Lease expires or is terminated prior to the expiration or termination
of the Excess FF&E Lease, Landlord agrees to purchase from the Third-Party
Purchaser, and the Third-Party Purchaser agrees to sell to Landlord, all Excess
FF&E owned by the Third-Party Purchaser at that time (other than any Excess FF&E
to which clause (E) below applies) on the same terms as those applicable to the
Excess FF&E Repurchase; and (E) if the Facility Mortgagee forecloses on its Lien
with respect to Excess FF&E owned by the Third-Party Purchaser: (x) Landlord and
Host O.P. agree to reimburse the Third-Party Purchaser for the loss of such
Excess FF&E (such reimbursement to be paid first by offsetting any amounts owed
by the Third-Party Purchaser to Landlord and the balance (if any) to be paid in
cash); (y) Host O.P. agrees to pay the cash balance (if any) of such
reimbursement amount directly to the Third-Party Purchaser without the need for
notice or demand on Landlord; and (z) the Third-Party Purchaser agrees to look
only to Host O.P. for payment of such cash balance.
-5-
(k) It is the intent of Landlord and Tenant that the leases of
FF&E pursuant to the [Initial FF&E Lease,] any Excess FF&E Lease and this Lease
shall be treated as operating leases and not Capitalized Lease Obligations under
GAAP. Landlord and Tenant agree to cooperate to the extent feasible and
consistent with the terms of this Lease to provide terms for such leases of FF&E
that are so treated.
-6-
SCHEDULE 22.2-A
FORM OF EXCESS FF&E LEASE
[SEE ATTACHED]
SCHEDULE 23.8
DEEMED CONSENT OR APPROVAL
. Section 4.3.1 - If Hazardous materials are discovered in violation of
Environmental Laws on the Leased Property, Tenant will exercise all
commercially reasonable efforts to cause Manager to take all actions and
incur all expenses (which actions and expenses will be subject to
Landlord's prior approval, except in Emergency Situations) as may be
necessary or required by any Government Agency.
. Section 9.5 - All insurance policies shall include only deductibles
reasonably approved by Landlord.
. Section 10.2.4 - Landlord may, at its option, condition advancement of
insurance proceeds and other amounts on, among other things, its
approval of plans and specifications of an architect reasonably
satisfactory to Landlord.
. Section 11.2 - Landlord may, at its option, condition advancement of an
Award and other amounts on, among other things, its approval of plans
and specifications of an architect reasonably satisfactory to Landlord.