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EXHIBIT 10.1
MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT (this "Agreement" or this "Lease") is made
and entered into as of this 3rd day of June, 1998, by and between PMC Commercial
Trust (the "Lessor"), and Norfolk Hospitality Management Co. (the "Lessee") to
become operative and effective as of the Commencement Date, defined herein.
RECITALS
WHEREAS, Lessor has acquired, or as of the Commencement Date, will have
acquired, the sixty-two (62) hotels (the "Initial Hotels") listed on Exhibit A
attached hereto;
WHEREAS, effective on the Commencement Date, Lessor has leased the
Initial Hotels to Lessee and, hereafter, Lessor may from time to time lease
additional hotels to Lessee by mutual agreement; and
WHEREAS, The parties hereto desire to enter this Agreement to set forth
certain agreements relating to the matters set forth herein.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties and covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms have the meanings set
forth in this Section or in the Section indicated. Unless the context otherwise
requires, (a) all capitalized terms not otherwise defined herein shall have the
meanings set forth in the Participating Leases, (b) references to the singular
shall include the plural and vice versa, (c) references to gender shall include
all genders, (d) references to designated "Sections" or other subdivisions are
references to the designated Sections or other subdivisions of this Agreement,
(e) all accounting terms not otherwise defined herein shall have the meanings
assigned to them in accordance with GAAP and (f) the words "herein," "hereof,"
and "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular Section or other subdivision.
Additional Hotels: The hotels (if any) other than the Initial
Hotels that have been or, as of any pertinent date, are then currently
leased by the Lessor to the Lessee by mutual agreement of Lessor and
Lessee.
Agreement: The meaning set forth in the Preamble.
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Base Rent Amount: Initially, the sum of Fourteen Million Four
Hundred Thousand Dollars ($14,400,000.00), as adjusted pursuant to the
terms of this Agreement allocated among the Hotels as set forth on Exhibit
C, as such Exhibit C shall be amended from time to time pursuant to the
terms hereof.
Commencement Date: The date of commencement of this Lease as stated
in Section 3.1 hereof.
Competitive Activity: The ownership or lease of any hotel within the
Competitive Area.
Competitive Area: The area lying within a twenty-five (25) mile
radius of any of the Initial Hotels or of any Additional Hotel.
FF&E: Furniture, fixtures and equipment used or usable in the
operation of the Hotels, including but not limited to room furniture,
exercise fixtures and equipment, office equipment, restaurant and bar
equipment, business center equipment, all operating systems (e.g. HVAC,
electrical, plumbing and Fixtures), beds, lamps, window and wall coverings
and attachments of all kinds, carpets, painting, laundry equipment, water
softeners, on site property management systems, material handling
equipment, cleaning and engineering equipment, on-site computer hardware
and software replacements and upgrades, on-site telephones and
communication equipment, on-site computerized accounting systems and
on-site vehicles.
FF&E Reserve: The reserve account to repair, as applicable,
refurbish, replace and improve FF&E and other items as provided in Section
6.1.
Fair Market Rental: The fair market rental of the Leased Property
means the rental which a willing tenant not compelled to rent would pay a
willing landlord not compelled to lease for the use and occupancy of such
Leased Property pursuant to the Participating Lease for the term in
question, (a) assuming that Lessee is not in default thereunder and (b)
determined in accordance with the appraisal procedures set forth in the
Participating Lease or in such other manner as shall be mutually
acceptable to Lessor and Lessee.
Form Participating Lease: The meaning set forth in Article II.
GAAP: Generally accepted accounting principles, consistently
applied.
Gross Revenues: All revenues, receipts and income of any kind
received by Lessee and derived directly from the operation of a Hotel
(including rentals or other payments from tenants, lessees, licensees or
concessionaires but not including their gross receipts), including,
without limitation, Room Revenues, Food and Beverage Revenues and Sundry
Revenues, whether on a cash basis or credit, paid and collected,
determined in accordance with GAAP, excluding or deleting, however: (a)
funds furnished by Lessor or by Lessee, (b) federal, state and municipal
excise, sales, use or other taxes collected directly from
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patrons and guests or as a part of the sales price of any goods, services
or displays, such as gross receipts, admissions, cabaret or similar or
equivalent taxes and paid over to federal, state or municipal governments,
(c) the amount of all credits, rebates or refunds to customers, guests or
patrons, and all service charges, finance charges, interest and discounts
attributable to charge accounts and credit cards, to the extent the same
are paid to Lessee by its customers, guests or patrons, or to the extent
the same are paid for by Lessee to, or charged to Lessee by, credit card
companies, (d) gratuities or service charges actually paid to employees,
(e) proceeds of insurance and condemnation, (f) proceeds from sales other
than sales in the ordinary course of business, (g) all loan proceeds from
financing or refinancings of Hotel any or interests therein or components
thereof, (h) judgments and awards, except any portion thereof arising from
normal business operations of any Hotel, (i) items constituting
"allowances" under the Uniform System, (j) all write-offs for failure of
collection, except if any such written-off receivable is ultimately
collected it shall be added back to Gross Revenues to the extent so
collected (less all costs, fees and expenses of collection), and (k) all
fees and amounts paid to or on behalf of Lessee or its Affiliate by
Lessor.
Hotels: As of any pertinent date or for any pertinent period, those
Initial Hotels and those Additional Hotels, if any, which are then
currently leased by the Lessor to the Lessee and included in this Master
Lease.
Initial Hotels: The meaning set forth in the Recitals hereof.
Initial Participating Lease(s): Those Participating Leases covering
the Initial Hotels entered into between the Lessor and the Lessee as of
the date hereof.
Lease Term: The original five (5) year term of this Lease described
in Article III, together with all extensions, automatic or otherwise, and
renewals thereof.
Lease Quarter: Any one of the four consecutive three month periods,
commencing with the Commencement Date, during any Lease Year.
Lease Year: The twelve (12) month period beginning with the
Commencement Date and ending on the day of the month immediately preceding
the day of the month of the Commencement Date one (1) year from the
Commencement Date and each 12-month period thereafter.
Lessee: The meaning set forth in the Preamble.
Lessor: The meaning set forth in the Preamble hereof.
Operating Inventory: The Operating Inventory is defined in Section
6.4 hereof.
Opportunity Period: The meaning set forth in Section 7.1.
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Overdue Rate: A rate of interest equal to the Prime Rate as
published in The Wall Street Journal, Midwest Edition (or the lower of any
two or more of such rates), plus five percent (5%) per annum.
Participating Lease: The meaning set forth in Article II.
Personalty: All FF&E, except for operating systems (e.g. HVAC,
electrical, plumbing and Fixtures) or improvements which cannot be removed
from a Leased Property without material damage to such Leased Property.
Personalty Reserve: Funds available for the purchase of Personalty,
which funds shall be provided by, and under the control of, Lessee through
the payment by Lessee of $50,000 per month (which payment shall be due and
payable on the same date as the Base Rent payments set forth in Section
4.1 hereof) during the term of this Agreement into an account established
by Lessee.
Rent: The total aggregate amount of (a) the Base Rent and (b) the
Percentage Rent paid by the Lessee to the Lessor in accord herewith for
the applicable Lease Year.
Reserves: Collectively, the FF&E Reserve and the Personalty Reserve.
Right of First Opportunity to Lease: The meaning set forth in
Section 7.1.
Termination Value: The meaning set forth in Section 12.2.
ARTICLE II
LEASING OF HOTELS
Section 2.1 Initial Hotels. Lessor and Lessee hereby agree that on or
prior to the Commencement Date they will enter into an individual lease in the
form attached hereto as Exhibit B (the "Form Participating Lease") for each of
the Initial Hotels at the Base Rents specified on Exhibit C attached hereto.
Section 2.2 Additional Hotels. Lessor and Lessee may also from time to
time agree to the lease of Additional Hotels to Lessee. The lease of Additional
Hotels shall be by mutual agreement of Lessor and Lessee upon such terms and
conditions as are agreed upon at the time of the lease. Additional Hotels shall
be leased outside of this Agreement unless the parties agree specifically in
writing to include the respective Additional Hotel under this Agreement. Leases
of the Initial Hotels and of any Additional Hotels which are included within
this Agreement are hereinafter referred to as "Participating Leases."
Section 2.3 Transfer of Hotel. Lessor shall have the right to sell or
otherwise transfer any Hotel, subject to the terms of the applicable
Participating Lease. In the event of the transfer of a Hotel pursuant to the
terms of the applicable Participating Lease, except if such transfer is made
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following the termination of such Participating Lease by Lessor as a result of
an Event of Default by Lessee thereunder or such transfer is made by Lessor in
connection with a structured finance transaction, the Rent shall be adjusted as
provided in Section 2.4. If Lessor transfers any Hotel, other than in connection
with a structured finance transaction, to a Person with a net worth less than
$50,000,000.00, Lessor shall cause such acquiror, pursuant to the terms of the
contract of sale, to fund into escrow for the benefit of Lessee, and to be used
in accordance with the terms of the applicable Participating Lease, an amount
equal to the Allocable Portion of the Reserves (as defined below) for the
Transfer Year (as defined below) plus an amount equal to five percent (5%), of
the greater of (a) the Gross Revenues of such Hotel for the Lease Year preceding
the Transfer Year, or (b) the annualized gross revenues of such Hotel for the
Transfer Year, multiplied by the number of Lease Years (not including the
Transfer Year) remaining in the term of the Participating Lease, less any
amounts paid or payable by Lessee into the Personalty Reserve with respect to
such Hotel. "Allocable Portion of the Reserves" means the difference between
dollar amount set forth in the Annual Budget for such Hotel for the Transfer
Year to be paid out of or reimbursed from, as applicable, the Reserves, plus
$15,000.00, less any amounts already spent or reimbursed with respect to such
Hotel from the Reserves for the Transfer Year. In the event of a forced or
involuntary transfer or termination of a Hotel by condemnation, casualty loss,
or otherwise, the Rent shall be adjusted as provided in Section 2.4. If
additional hotels become subject to the terms of this Agreement, the Rent shall
be adjusted to equitably reflect the increase in the number of hotels.
Section 2.4 Adjustment of Rent.
(a) By mutual agreement, Lessor and Lessee shall adjust the Base
Rent allocated to each Hotel (as then set forth on Exhibit C hereto) at
the commencement of each Lease Year, commencing on the first anniversary
of the Commencement Date, which adjustment shall be based upon market
factors affecting, and the financial performances of, the Hotels,
including, without limitation, gross revenues, gross operating profits,
occupancy rates and room rates, and which amount shall be reflected by an
amendment to Exhibit C hereto. If Lessor and Lessee cannot agree as to
such adjustment by the 20th day following such anniversary date, the
parties hereby agree to submit such adjustment to arbitration in
accordance with Article XXXVIII of the Form Participating Lease. Upon the
transfer by Lessor of a Hotel as provided herein, other than in connection
with a structured finance transaction, the Base Rent payable by Lessee
pursuant to this Agreement will be reduced for all Lease Years following
the Lease Year in which such transfer took place (the "Transfer Year") by
the amount of Base Rent allocated to such Hotel (the "Allocable Amount")
and the Base Rent payable for the remainder of the Transfer Year shall be
reduced by an amount equal to the product of the Allocable Amount
multiplied by the quotient of the number of full months (not including the
month in which such transfer occurred) remaining in the Transfer Year
divided by 12.
(b) (i) If a Hotel is transferred by Lessor pursuant to the terms of
this Agreement, other than in connection with a structured finance
transaction, the Percentage Rent thresholds shall be reduced in the same
proportion as the Gross Revenues of the transferred Hotel bear to the
Gross Revenues of all Hotels (including the transferred Hotel) under this
Agreement. Gross Revenues for purposes of this Section 2.4(b) shall be
equal to
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(A) the average of the Gross Revenues for all Hotels under this Agreement
for the two Lease Years immediately preceding the Transfer Year, or (B) if
two Lease Years shall not have elapsed, the average of such Gross Revenues
for the preceding Lease Year and the annualized Gross Revenues for the
Transfer Year, or (C) if one Lease Year has not elapsed, the annualized
Gross Revenues for the Transfer Year.
(ii) If, during the term of this Agreement, any of the Hotels is
totally or partially destroyed by a risk covered by the insurance
described in the applicable Participating Lease, and Lessor decides to
restore the Hotel pursuant to the terms of such Participating Lease and,
further, as a result of such total or partial destruction of such Hotel,
Lessee files, and receives payment on, a claim with its insurance carrier
under Lessee's business interruption insurance policy with respect to such
total or partial destruction of such Hotel, then the Percentage Rent
thresholds shall be reduced as provided in Section 2.4(b)(i) hereof,
provided that such reduction shall only be in effect for a period
commencing on the date the event, for which insurance proceeds are
received under Lessee's business interruption insurance policy, occurred
and the date restoration of the Hotel is completed pursuant to the terms
of the applicable Participating Lease (the "Restoration Date"). From and
after the Restoration Date, the Percentage Rent thresholds shall revert
back to the applicable amounts for the Lease Year in question, based on
the number of Hotels owned by Lessor as of the Restoration Date. Increases
and decreases, as applicable, in the amount of Percentage Rent payable by
Lessee as a result of such initial reduction in the Percentage Rent
thresholds and the subsequent increase of such thresholds, shall be
calculated as of the end of each Lease Year.
ARTICLE III
LEASE TERM
Section 3.1 Term. The term of this Lease shall commence on the effective
date of the merging of Supertel Hospitality, Inc. with Lessor (the "Commencement
Date") and shall end on the day before the fifth anniversary of the Commencement
Date, unless sooner terminated or extended in accordance with the provisions
hereof.
Section 3.2 Extension Option. Provided that Lessee is not then in default
under the terms of this Lease, Lessee shall have the option, in its sole
discretion, to extend this Lease for one (1) successive term of two (2) years
(the "Option Period") upon the same terms and conditions contained herein and in
the Participating Leases, except for the payment of Base Rent which total amount
shall increase (subject to adjustments from condemnation, casualty, sale, or
otherwise provided herein and in the Participating Leases) from Fourteen Million
Four Hundred Thousand Dollars ($14,400,000.00) to Fifteen Million Dollars
($15,000,000.00) for each of the two (2) years in the Option Period. Upon
exercise of the option, the renewal term shall commence at midnight on the last
day of the original five (5) year term of this Lease. Notice of the exercise of
the option to extend shall be given in writing to Lessor not less than one (1)
year prior to the end of the original five (5) year term of this Lease.
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Section 3.3 Automatic Lease Term Extensions. After the original five (5)
year term of this Lease and after the Option Period, if any, the term of this
Lease shall be automatically extended for an additional two (2) year term,
unless either Lessee or Lessor gives notice in writing to the other at least
eleven (11) months prior to the end of the then current term that it elects not
to allow the automatic extension of the term of this Lease, in which case this
Lease shall terminate at the end of the then current term. In the event this
Lease is extended for an additional two (2) year term, then this Lease shall be
further automatically extended on a continuing basis beyond the then current
term of this Lease by additional successive two (2) year periods unless either
Lessee or Lessor gives written notice to the other at least one (1) year before
the end of the then current term that it elects not to allow the automatic
extension to occur beyond the then current term. It is the intent of the parties
that each will have a minimum of one (1) year notice prior to the end of the
term of this Lease. This shall not preclude the parties from renegotiating this
Lease from time to time.
ARTICLE IV
RENT
So long as this Lease remains in force and effect with respect to all of
the Initial Hotels, Lessee promises to pay to Lessor, in lawful money of the
United States of America, in immediately available funds, rents, in the manner,
at the time, and in the amounts specified below:
Section 4.1 Base Rent. The base rent (the "Base Rent") payable during the
term of this Lease shall initially be Fourteen Million Four Hundred Thousand
Dollars ($14,400,000.00)
Base Rent
Month Amount
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January $ 950,000
February $ 950,000
March $ 1,150,000
April $ 1,350,000
May $ 1,300,000
June $ 1,350,000
July $ 1,450,000
August $ 1,350,000
September $ 1,325,000
October $ 1,325,000
November $ 950,000
December $ 950,000
TOTAL LEASE YEAR
BASE RENT $14,400,000
If the Base Rent is adjusted pursuant to the terms of this Agreement
in the event of a voluntary or involuntary transfer of a Hotel or as
provided in Article III hereof, the new
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amount of annual Base Rent shall be allocated to each month in the same
proportion as provided above. Base Rent shall be payable in monthly
installments in arrears due and payable on the first business day of the
month immediately following the month for which such rent accrues, with
the first installment of Base Rent due and payable on the first business
day of the month following the month in which the Commencement Date
occurs, and a monthly installment to be due and payable on the first day
of each and every month thereafter as long as this Lease remains in
effect. Base Rent for any period during the term of this Lease which is
less than one (1) month shall be a pro-rata portion of the applicable
monthly installment.
Section 4.2 Percentage Rent.
(a) Subject to adjustment as provided herein, the term "Percentage
Rent," as used herein, for any Lease Year shall initially mean the amount
determined by multiplying (i) the amount, if any, by which the Gross
Revenue from the Initial Hotels exceeds Forty-Two Million Dollars
($42,000,000.00) for such Lease Year but is less than Fifty Million
Dollars ($50,000,000.00) for such Lease Year (ii) by twenty percent (20%)
and adding thereto an amount determined by multiplying (iii) the amount,
if any, by which Gross Revenue for the Initial Hotels exceeds Fifty
Million Dollars ($50,000,000.00) for the Lease Year (iv) by 25%.
(b) Percentage Rent shall be paid by Lessee on a quarterly basis for
each quarter of the Lease Year. Percentage Rent shall be payable in
arrears on the first day of second Lease Quarter following the end of each
Lease Quarter. The first such payment of Percentage Rent shall be due on
the first day of the second Lease Quarter following the Lease Quarter in
which the Commencement Date occurs. In the first Lease Year, Percentage
Rent shall be paid over the first three (3) Lease Quarters of the Lease
Year on the assumption that Gross Revenue is accruing at the rate of
Forty-Eight Million Dollars ($48,000,000.00) evenly over the Lease Year.
Each Lease Quarter, Lessee shall pay one-fourth (1/4th) of such assumed
Percentage Rent amount. At the end of the fourth quarter, the amount of
Percentage Rent due for the Lease Year shall be calculated and (i) in the
event that an amount is still due to Lessor, then Lessee shall pay such
amount on or before the first day of the second Lease Quarter immediately
after the end of the Lease Year and (ii) in the event that Lessee has
overpaid the Percentage Rent and an amount is due to Lessee from Lessor,
then Lessor shall pay such amount to Lessee on or before the tenth (10th)
day after receipt of the Officer's Certificate provided pursuant to
Section 4.2(c). The same procedure shall be followed for each subsequent
Lease Year except that Gross Revenues for each subsequent year shall be
assumed for the first three (3) Lease Quarters to be equal to ninety-five
percent (95%) of the Gross Revenues for the immediately prior Lease Year.
(c) On or before first day of the second Lease Quarter immediately
after the end of Lease Year, Lessee shall deliver to Lessor an Officer's
Certificate reasonably acceptable to Lessor setting forth the computation
of the actual Percentage Rent that accrued for the Lease Year that ended
on the immediately preceding Lease Year. If the annual Percentage Rent due
and payable for the Lease Year (as shown in the applicable Officer's
Certificate) exceeds the amount actually paid as Percentage Rent by Lessee
for such year, Lessee also
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shall pay such excess to Lessor at the time such certificate is delivered.
If the Percentage Rent actually due and payable for such Lease Year is
shown by such certificate to be less than the amount actually paid as
Percentage Rent for the applicable Lease Year, Lessor shall pay to Lessee,
within ten (10) days of receipt of such certificate the amount by which
Lessee overpaid the Percentage Rent failing which the amount to be
reimbursed shall bear interest at a rate per annum equal to the Overdue
Rate from the end of such 10-day period until date of payment.
The obligation to pay or to reimburse Percentage Rent shall survive
the expiration or earlier termination of the Lease Term for a period of
one (1) year. A final reconciliation, taking into account, among other
relevant adjustments, any adjustments which are accrued after such
expiration or termination date but which related to Percentage Rent
accrued prior to such termination date, and Lessee's good faith best
estimate of the amount of any unresolved contractual allowances, shall be
made not later than one year after such expiration or termination date,
but Lessee shall advise Lessor within 60 days after such expiration or
termination date of Lessee's best estimate at that time of the approximate
amount of such adjustments, which estimate shall not be binding on Lessee
or have an legal effect whatsoever.
Section 4.3 Payment of Rent. Lessee shall not be in default with respect
to any payment of Rent if such Rent payment is received by Lessor on or before
the tenth (10) calendar day of the month in which such Rent was due, provided
that if any Rent payment is not paid on or before the third business day after
such Rent payment was due, Lessee shall pay to Lessor a late fee on such Rent
payment in an amount equal to 1-1/2% of such Rent due.
Section 4.4 Payment on Business Days. Any Rent that falls due on a
Saturday or Sunday or a bank holiday in either Dallas, Texas or Norfolk,
Nebraska shall be deemed due on the next succeeding business day. Payment of
Rent shall be made by wire transfer unless otherwise agreed by the parties.
Section 4.5 O'Neill Addition. Lessor and Lessee acknowledge that one of
the Initial Hotels which is located in O'Neill, Nebraska, may be expanded during
the period from the negotiation and/or the execution of this Lease to the
Commencement Date. In the event of the completion of the expansion prior to the
Commencement Date, the Base Rent for the Hotel shall be increased by and Lessee
shall pay this additional yearly Base Rent which shall be determined by
multiplying 0.115 times the cost of construction of the Hotel expansion. This
additional yearly Base Rent shall be paid on a monthly basis in the same
proportion each month as the original yearly Base Rent to be paid.
Section 4.6 Additional Payments. During the term of this Lease, if Lessee
takes, or fails to take, any action hereunder or under any of the Participating
Leases which causes the debt payable to Hotel Franchising Limited Partnership,
as described on Schedule 4.6 hereto (the "Wingate Debt") to become due and
payable, Lessee shall be assigned and be required to pay the Wingate Debt in
accordance with the terms thereof, unless such action or failure to act was
caused by the negligence
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or willful misconduct of Lessor or is otherwise the obligation of Lessor
hereunder or under the Participating Lease, which obligation shall survive
any termination of this Agreement.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND ADDITIONAL COVENANTS
Lessor and Lessee hereby represent, warrant and agree with each other as
follows, each of which representations and warranties to become effective only
as of the Commencement Date.
Section 5.1 Authority; Compliance with Law. Except as provided in Section
5.2, Lessor will use its best efforts to obtain, at its sole expense, and
thereafter Lessee will use its best efforts to maintain, all licenses, permits,
contract rights, and other authorizations and to have taken all actions required
by applicable law, governmental regulations or otherwise in connection with
leasing and operating the Hotels and as otherwise required in connection with
the operation of its business. Lessor and Lessee each represent to the other
that it is not in violation of any order of any court, governmental authority or
arbitration board or tribunal, or any law, ordinance, governmental rule or
regulation to which it, or any other of its properties or assets are subject.
Section 5.2 Provision of Franchise Rights. Lessor has obtained and will
provide by full and proper assignment or other transfer to Lessee the franchise
rights for each of the Initial Hotels and all Additional Hotels sufficient to
enable the operation of each of the Hotels under the relevant franchise for the
Lease Term. Lessor shall be responsible for all transfer fees and the like for
all Initial Hotels and all Additional Hotels and Lessee shall be responsible for
the payment of the periodic franchise fees. At the termination of the Lease
Term, Lessee agrees to transfer the franchise rights to Lessor, or at Lessor's
option, to any third party. Lessor and Lessee acknowledge, however, that the
Hotel in Bullhead City, Nevada does not operate under a franchise.
Section 5.3 Representations of Lessor. Lessor represents that Lessor has
good marketable title to each of the Initial Hotels and has the full right and
authority to enter into this Lease and each of the Participating Leases. There
are no outstanding leases with respect to any of the Initial Hotels other than
the Participating Leases. Each of the Initial Hotels is able to be operated
after the execution of this Lease in a manner consistent with the manner in
which it is being operated immediately prior to the execution of this Lease
without extraordinary expenditures, which, if incurred, will be the
responsibility of Lessor, including but not limited to, requirements to meet the
Americans with Disability Act Standards and zoning or building standards. None
of the Initial Hotels has suffered any casualty loss which is not fully covered
by insurance both for the purpose of covering all Rent during replacement and
for the purpose of covering full and complete replacement of all loss nor are
any of the Initial Hotels being condemned or being threatened with condemnation.
Section 5.4 Maintenance of Franchise Agreement. Except as otherwise agreed
to in writing by the Lessor, the Lessee shall take all steps necessary,
including the payment of any renewal fees and ongoing expenses associated
therewith, including the periodic franchise fees, to maintain
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all franchise agreements relating to the operation of the Hotels. In addition,
except as otherwise agreed to in writing by the Lessor, the Lessee shall use its
best efforts to maintain the franchise rating at each Hotel with respect to
improvement standards (as established by the franchisor pursuant to the
applicable Franchise Agreement) at a level at least equal to the rating in
existence on the date hereof, provided, however, that the cost of improvements
to meet new or ongoing improvement standards shall be paid by Lessor. Upon the
termination of the Lease, Lessor agrees to pay to Lessee or credit against any
Rent then due, the unused portion of all renewal fees for franchises for which
Lessee has paid the renewal fees. The unused portion of each renewal fee shall
be determined by amortizing the renewal fee on a straightline basis over the
life of the franchise renewal period. Any change from the franchise under which
the Hotel operates to a new franchise shall be by mutual agreement of the
parties. Upon a change in the franchise under which a Hotel operates, capital
costs associated with the change including, but not limited to sign changes and
improvement standard upgrades, shall be paid from the Reserves.
Section 5.5 Financial Statements. Within 45 days after the end of each of
the first three Lease Quarters of each Lease Year, Lessee shall deliver to the
Lessor a copy of its internally prepared quarterly financial statements. Within
120 days after the end of each Lease Year beginning with the Lease Year ending
in the first anniversary of the Commencement Date, Lessee shall deliver to
Lessor a copy of its annual audited financial statements which have been audited
by a nationally recognized firm of independent public accountants. For purposes
of this Section 5.5, such financial statements shall include a balance sheet,
income statement, statement of retained earnings, statement of stockholder's
equity, statement of cash flows and all related notes and schedules and shall be
in comparative form.
ARTICLE VI
RESERVES / OPERATING INVENTORY
Section 6.1 Reserves.
(a) Throughout the Lease Term, Lessor shall establish and maintain a
reserve account (the "FF&E Reserve") for the replacement, improvement,
enhancement and refurbishment of the Leased Property and FF&E used in
conjunction therewith, excluding Personalty to the extent acquired with
funds from the Personalty Reserve as provided below. Each Lease Year,
Lessor shall set aside into the FF&E Reserve an amount equal to five
percent (5%) of the Gross Revenues for the Hotels for such Lease Year
under this Lease, less $600,000, which amount shall accumulate from year
to year. The FF&E Reserve shall be used to refurbish, replace, enhance and
improve from time to time as necessary or desirable under the
circumstances the FF&E, excluding Personalty. The FF&E Reserve may also be
used to the extent available to replace, enhance and improve or perform
any capitalized repair to the structural and roof elements of the Hotels
and the exterior of the Hotel (including but not limited to parking lot,
lawn and landscaping elements).
(b) Lessee shall pay into the Personalty Reserve account $50,000 per
month for each month during the term of this Lease on the same date as the
Base Rent payments.
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Lessee shall also provide to Lessor written evidence of such payment. Upon
written request of Lessor, Lessee shall provide information on the
Personalty Reserve status and usage. The funds in the Personalty Reserve
shall be used by Lessee to repair and replace Personalty. If the funds in
the Personalty Reserve for any Lease Year are insufficient to pay for all
Personalty acquired during such Lease Year, Lessee shall be entitled to
reimbursement for such excess expenditures from the FF&E Reserve in
accordance with the terms and conditions of Section 6.3 hereof. Upon
expiration or termination of this Agreement, any amounts which remain in
the Personalty Reserve shall be expended by Lessee for FF&E, as directed
by Lessor. Any amounts which remain in the Personalty Reserve after any
such expenditures shall be the property of Lessor.
Section 6.2 Use of Reserves. Lessee is authorized to commit and to spend,
and thereafter, if applicable, be reimbursed from, the Reserves for all (a)
items and matters contained in the budget submitted by Lessee and approved by
Lessor pursuant to the Participating Lease; (b) reasonable expenditures in
emergency situations at any hotel when necessary, in the Lessee's opinion, to
maintain the hotel property and to provide for its continued operation and for
the safety and welfare of the hotel guests; and (c) up to Fifteen Thousand
Dollars ($15,000.00) per Hotel for replacement and improvements on a routine
basis. In any case, however, Lessee shall provide invoices and, when requested
by Lessor, explanation of the circumstances and need for non-budgeted
expenditures from the Reserves. Lessee shall, except as provided in (a), (b) and
(c) above, obtain the prior written approval of Lessor for all expenditures in
any Lease Year for which Lessee is entitled to seek reimbursement from Lessor
pursuant to the terms of this Agreement which exceed the amount in the Reserves
for that Lease Year. Any amount of the Reserves not actually expended in any
Lease Year shall accumulate in the respective Reserve for use in succeeding
Lease Years.
Section 6.3 FF&E Reimbursements. To the extent set forth in the Annual
Budget, within the $15,000 per hotel limit or the result of an emergency
situation, Lessor shall reimburse Lessee the expenditures payable from the FF&E
Reserve within ten (10) days of the receipt from Lessee of written
documentation, including invoices and/or purchase orders, setting forth the
amount due. If Lessor's prior approval of such expenditures is required,
following receipt of such approval, Lessee shall send to Lessor the invoices or
purchase orders, as applicable, with respect to such expenditures and Lessor
shall reimburse Lessee or pay the vendor directly. If Lessor fails to reimburse
Lessee for amounts to be reimbursed pursuant to the provisions of the first
sentence of this Section 6.3, the amount to be reimbursed shall bear interest at
a rate per annum equal to the Overdue Rate from date of receipt of the requisite
documentation until date of payment. Lessee shall provide additional reasonable
detail of the amount due and the goods and services provided when requested by
Lessor.
Section 6.4 Operating Inventory. On the Commencement Date, all Operating
Inventory shall be transferred from Lessor to Lessee so that it accompanies the
Leased Property. During the term of this Lease, Lessee, at its sole cost and
expense, shall furnish and maintain at the Leased Property all Operating
Inventory necessary or desirable for the operation of the Leased Property in
accordance with the provisions of this Lease. Lessee, at its sole cost and
expense, shall maintain and replace the Operating Inventory so that
substantially the same quantities of such items that existed on the Commencement
Date shall be available to Lessor on the termination of this Lease. As
additional Rent, upon the termination of this Lease, (a) the Operating Inventory
and (b) any
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Personalty acquired by use of funds from the Personalty Reserve shall be
transferred from Lessee to Lessor so that it accompanies the Leased Property
shall be transferred from Lessee to Lessor so that it accompanies the Leased
Property. The term "Operating Inventory," as used herein, shall mean all food,
beverages (alcoholic and non-alcoholic) and other consumable items used in the
operation of the Hotel such as linens and terry, blankets and spreads, fuel,
engineering, maintenance and housekeeping supplies, soap, cleaning materials,
matches, stationery and printing, brochures, literature, folios and all other
similar items, together with all substitutions and replacements thereto.
Section 6.5 Construction Profit. Lessor authorizes a construction profit
to Lessee, or an affiliate of Lessee, in the amount of seven and one-half
percent (7.5%) of all costs, including, but not limited to, in-house costs
directly related to the construction project, for the construction of a new
hotel, for any additions or improvements to an existing Hotel, or for the
repair, maintenance or renovation of any existing Hotel that Lessee's
construction division or Lessee's construction affiliate oversees or manages.
The parties may, by mutual agreement, agree to a different construction
management fee.
ARTICLE VII
RIGHT OF FIRST OPPORTUNITY TO LEASE
Section 7.1 Hotel Acquisitions. Except as provided in Section 7.6, Lessee
shall have the right of first opportunity ("Right of First Opportunity to
Lease") to lease from Lessor any hotel acquired by Lessor within a Competitive
Area during the Lease Term (the "Opportunity Period") if, and only if, Lessor is
not contractually obligated to retain existing management at any such acquired
hotel.
Section 7.2 Notice. In the event that Lessor proposes to acquire ownership
of any hotel within a Competitive Area during the Opportunity Period, Lessor
shall promptly notify Lessee in writing. If Lessee is to be granted a Right of
First Opportunity with respect to such hotel, (a) the notice shall specify the
material economic terms upon which Lessor would be willing to lease such hotel
to Lessee and (b) Lessor shall provide Lessee with certain due diligence rights
with respect to such hotel as set forth in Section 7.3.
Section 7.3 Due Diligence. Lessor shall arrange for Lessee and its
consultants, at Lessee's sole cost and expense, to have the right, opportunity
and access to conduct physical, financial and legal reviews of the hotel
proposed to be acquired by Lessor, in the manner, to the extent and during the
periods, that Lessor has the right, opportunity and access to do so (whether
pursuant to a purchase agreement or otherwise), with the objective of according
Lessee the same right, opportunity and access to conduct its due diligence with
respect to such hotel as is available to Lessor (as may exist before and during
the term of any related purchase agreement). As a condition to availing itself
of such right, upon request by Lessor, Lessee will agree, in an appropriate
writing or writings, (a) to be bound by such confidentiality agreements
regarding such hotel as to which Lessor shall agree to be bound, (b) to
indemnify the owner of such hotel, Lessor and such other parties as reasonably
are appropriate, against damage to property or injuries to persons occurring as
the result of a negligent or willful act or omission of Lessee's employees,
agents or consultants while conducting
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diligence activities at such hotel (to the same extent as Lessor indemnifies the
owner of such hotel and/or other reasonably appropriate parties), and(c) to
agree to be bound by such other agreements, conditions and limitations regarding
such hotel as Lessor is bound as a condition of it conducting due diligence on
such hotel. Each of Lessor and Lessee agrees, from time to time upon the request
of the other, to deliver or make available (without warranty) to the other,
copies of all due diligence materials regarding such hotel received from third
parties.
Section 7.4 Exercise of Right of First Opportunity. If a Right of First
Opportunity is granted to Lessee with respect to any such hotel within a
Competitive Area to be acquired by Lessor, Lessee shall have a period of
twenty-one (21) days from the date of written notice thereof in which to elect
to lease such hotel from Lessor in substantial conformity with the material
terms and conditions specified in the notice. Lessee may elect to exercise a
Right of First Opportunity only by delivering a written notice of its election
to do so to Lessor within such twenty-one (21) day period. In the event that
Lessee exercises a Right of First Opportunity, Lessor shall lease such hotel to
Lessee as soon thereafter as is practical pursuant to a Participating Lease on
the Form Participating Lease and in substantial conformity with the material
terms and conditions specified in the notice of Right of First Opportunity which
are not materially inconsistent with the Form Participating Lease.
Section 7.5 Failure to Exercise Right of First Opportunity. If Lessee
elects not to exercise a Right of First Opportunity or fails to make an election
within the twenty-one (21) day period following notice of a Right of First
Opportunity, Lessor shall be free to lease such hotel to any third party on
terms and conditions that are not in the aggregate economically less favorable
to Lessor than those offered to Lessee in the related notice of Right of First
Opportunity and only in the form of the Form Participating Lease.
Section 7.6 When Lessee is the Procuring Cause. In the event that Lessee
is the procuring cause of the acquisition of any hotel by Lessor, Lessee shall
have the exclusive right to lease such hotel from Lessor and Lessor shall, at
the option of Lessee, lease such hotel to Lessee on economic terms to be
mutually agreed to between Lessor and Lessee pursuant to the general format of
Form Participating Lease. If the parties are unable to agree on the lease terms,
an independent third party agreeable to both Lessee and Lessor shall establish
the Fair Market Rental. If Lessee, upon receipt of the terms established by the
independent third party, chooses not to lease the hotel at the Fair Market
Rental established, Lessor may rent to any third party but only at a rental rate
at least equal to the Fair Market Rental established and only according to the
terms of the Form Participating Lease. If Lessor is unable to do so within
forty-five (45) days, Lessee's right to lease contained herein shall be
re-established.
Section 7.7 Remedies. If Lessor breaches this Article VII, Lessee shall
have all remedies available at law or in equity. Notwithstanding the foregoing,
Lessee shall be deemed to have waived its right to pursue any of its rights and
remedies with respect to Lessor's failure to comply with Section 7.2 with
respect to any individual hotel acquired by Lessor, if it does not notify Lessor
of its claim with reasonable specificity and in writing within one hundred
eighty (180) days of receiving the notice specified in Section 7.2.
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ARTICLE VIII
HOTEL ACQUISITIONS
Section 8.1 Hotel Acquisition. In the event that Lessee locates an
existing hotel to acquire within a Competitive Area, Lessee shall first offer
the acquisition of the Hotel to Lessor on terms and conditions which are
acceptable to Lessee. Lessor shall have twenty-one (21) days within which to
decide whether to acquire the Hotel on such terms and conditions. (In the
alternative, Lessee may execute a contract for purchase of a hotel within that
Competitive Area which is assignable to Lessor if Lessor, within the twenty-one
(21) day period, decides to acquire the hotel in which case Lessor shall
reimburse Lessee for its direct costs and expenses related to the contract.) In
the event Lessor determines not to acquire the hotel, Lessee may acquire the
Hotel on the same terms and conditions as offered to Lessor. In the event Lessor
decides to purchase the Hotel, Lessee shall be entitled to a reasonable fee for
its work in the preliminary acquisition process in no event to be less than two
percent (2%) no more than six percent (6%) of the total purchase price of the
hotel (which shall include all fees for consulting, non-competition, and similar
amounts payable in conjunction with the purchase of the hotel). Upon failure of
agreement on the percentage of the fee, the matter of the correct percentage
shall be submitted to arbitration as provided in Article XXXVIII of the Form
Participating Lease.
ARTICLE IX
CHANGE IN CONTROL
Section 9.1 Initial Ownership Structure. Lessee represents that on the
date hereof Lessee is a corporation organized and existing under the laws of the
State of Nebraska.
Section 9.2 Transfer of Lease. Without the consent of Lessor, which Lessor
may not unreasonably withhold, the Lessee shall not voluntarily transfer, sell
or convey any direct or indirect interest in this Agreement or in any of the
Participating Leases.
Section 9.3 Change in Management. In the event that neither (a) Steve
Borgmann or Richard Herink nor (b) a person or entity proposed by Lessee and
consented to by Lessor (which consent shall not be unreasonably withheld) is
involved in the management of Lessee, then Lessor shall have the right, as its
sole remedy, to terminate all, but not fewer than all, of the Participating
Leases and Lessee shall pay to Lessor, as a result of such termination, the
Termination Value, provided that if Messrs. Borgmann and Herink are no longer
involved in the management of Lessee due to death or disability Lessor shall
have no right to terminate this Lease pursuant to this Section 9.3. Lessee
hereby agrees to notify Lessor in writing within ten (10) days of the occurrence
of any event which causes Lessee to be in violation of the terms of this Section
9.3. The right granted to Lessor pursuant to this Section 9.3 must be exercised
within ninety (90) days of the date of notice to Lessor of Lessee's failure to
comply with this Section 9.3.
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Section 9.4 Other Business Activities. Neither Lessee, nor any Affiliate
of Lessee, shall engage in any business or activity which relates to the owning,
leasing or managing hotels in a Competitive Area except as provided in this
Agreement.
ARTICLE X
SPECIAL TERMINATION RIGHTS
In the event that Lessee during the term of this Agreement engages in any
Competitive Activity without first complying with the provisions of Articles VII
and VIII, Lessor shall have the right, as its sole and exclusive remedy,
provided Lessee has not ceased such Competitive Activity within a period of 60
days from receipt of a written notice from Lessor identifying such Competitive
Activity, to terminate all, but not fewer than all, of the Participating Leases
and upon such termination, Lessee shall pay to Lessor the Termination Value. The
right to terminate shall not be exercised by Lessor after a period of one
hundred eighty (180) days after Lessor has been given written notice of the
Competitive Activity by Lessee.
ARTICLE XI
AUDIT RIGHTS
Lessor shall have the rights to audit Lessee's books and records with
respect to the Hotels leased to Lessee. If, in any calendar year, the aggregate
deficiency in the payment of Percentage Rent under the Participating Lease on
all of the Hotels, as determined pursuant to Lessor's audit and finally agreed
to by Lessee or determined by a Court of law or by arbitration, exceeds three
percent (3%) of the amount of Percentage Rent payable on all of the Hotels for
such Lease Year, then the Lessee shall immediately pay to the Lessor the cost of
the audit.
ARTICLE XII
DEFAULT
Section 12.1 Default. A "Default by Lessee" shall exist under this
Agreement if any of the following occur:
(a) Rent Payment. Lessee breaches any of its obligations as provided
in Section 4.1 and 4.2(b).
(b) Personalty Reserve Payment. A breach by Lessee of its obligation
to create and fund the Personalty Reserve provided in Section 4.2(b)
within ten (10) days of written notice of failure thereof.
Section 12.2 Remedies. Upon the occurrence of a Default by Lessee as
defined herein, Lessor shall have the right, as Lessor's sole remedy, to
terminate this Agreement upon fourteen (14) days written notice to Lessee, in
which event Lessee shall thereupon surrender all of the Leased
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Properties to Lessor, and, if Lessee fails to so surrender, Lessor shall have
the right, without notice, to enter upon and take possession of the Leased
Properties and to expel or remove Lessee and its effects without being liable
for prosecution or any claim for damages therefor; and Lessee shall, and hereby
agrees to, indemnify Lessor for the loss and damage which Lessor suffers by
reason of such termination in the amount equal to the total of (a) the
reasonable costs of recovering the Leased Properties in the event that Lessee
does not promptly surrender the Leased Properties, and all other reasonable
expenses incurred by Lessor in connection with the Default by Lessee; (b) the
unpaid Base Rent earned as of the date of termination, plus interest at the
Overdue Rate accruing after the due date; and (c) a sum equal to the present
value (using a factor for such purpose equal to the interest payable on ten (10)
year treasury notes plus four percent (4%) per annum) of the total Base Rent
which Lessor would have received under this Agreement for the remainder of the
term of this Agreement then in effect, less Base Rent which Lessee is able to
prove Lessor could have received from the balance of the term of this Agreement
thus in effect (collectively, the "Termination Value"). Lessor acknowledges that
it has a duty to mitigate its losses and damages by using its best efforts to
relet the Hotels at or above the Base Rent herein.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Modification, Amendments and Waivers. No modification,
amendment or waiver of any provision of this Agreement shall be effective unless
the same is in a writing signed by all parties to this Agreement.
Section 13.2 Notices. All notices and other communications pursuant to
this Agreement shall be in writing and personally served or mailed as provided
in Article XXXI of the Form Participating Lease.
Section 13.3 Successors and Assigns. The provisions of this Agreement
shall be binding upon the parties hereto and all of their successors and assigns
and inure to the benefit of the parties hereto and their permitted successors
and assigns.
Section 13.4 Governing Law. This Agreement shall be governed by the laws
of the State of Texas, without giving effect to the principles of conflicts of
law thereof.
Section 13.5 Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall be an original, with the same force and effect
as if the signatures thereto and hereto were upon the same instrument.
Section 13.6 Waiver. Each party waives, to the extent permitted by
applicable law, any right to a trial by jury in any proceedings brought by
either party to enforce the provisions of this Agreement, and Lessee and its
Affiliates waive the benefit of any laws now or hereafter in force exempting
property from liability for rent or debt, and Lessor waives any right to assert
an "alter ego" of the Lessee and its Affiliates or to "pierce the corporate
veil" of Lessee and its Affiliates other than to the extent funds shall have
been inappropriately paid following a Default by Lessee and its
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Affiliates under this Agreement to any person directly or indirectly having an
ownership interest in Lessee and its Affiliates.
Section 13.7 Time of the Essence. Time is of the essence of this
Agreement.
Section 13.8 Names and Marks. Lessor hereby assigns, at no cost, to Lessee
the right to use the name "Supertel" and to use the mark associated therewith,
the red S, and on the tenth anniversary of this Agreement, provided that no
Default by Lessee exists on such tenth anniversary Lessor agrees to the
transfer, without any additional consideration, all of the right in and to the
"Supertel" name and in and to the mark associated therewith.
Section 13.9 Confidential Information. Lessor agrees to keep and maintain
all information about Lessee and the Hotels confidential and agrees to take all
steps reasonably necessary to maintain the confidentiality of all such
information. No third party, unless required by law, shall be provided access to
or provided information about the Hotels or Lessee.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
LESSOR
PMC COMMERCIAL TRUST
By: /s/ Lance B. Rosemore
-------------------------------------
Lance B. Rosemore
President and Chief Executive Officer
LESSEE
NORFOLK HOSPITALITY
MANAGEMENT, CO.
By: /s/ Steve Borgmann
-------------------------------------
Steve Borgmann
President
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EXHIBIT A
INITIAL HOTELS
(PAGE 1 OF 3)
Antigo Super 8 Motel Creston Super 8 Motel Irving Super 8 Motel
535 Century Avenue 804 West Taylor 4245 W. Airport Freeway
Antigo, WI 54409 Creston, IA 50801 Irving, TX 75062
(715) 623-4188 (515) 782-6541 (972) 257-1810
Batesville Super 8 Motel Denton Super 8 Motel Las Colinas Wingate Inn
1287 N. St. Louis Street 620 S. I-35 East 850 West Walnut Hill Lane
Batesville, AR 72501 Denton, TX 76205 Irving, TX 75038
(870) 793-5888 (940) 380-8888 (972) 751-1031
Bedford Super 8 Motel El Dorado Super 8 Motel Jacksonville Super 8 Motel
1800 Airport Freeway 2530 West Central 1003 West Morton Road
Bedford, TX 76022 El Dorado, KS 67042 Jacksonville, IL 62650
(817) 545-8108 (316) 321-4888 (217) 479-0303
River Valley Suites Fayetteville Super 8 Motel Jefferson City Super 8 Motel
320 Lee Streets 1075 S. Shiloh Drive 1710 Jefferson Street
Bullhead City, AZ 86429 Fayetteville, AR 72701 Jefferson City, MO 65110
(520) 754-4651 (501) 521-8866 (573) 636-5456
Burlington Super 8 Motel Ft. Madison Super 8 Motel Keokuk Super 8 Motel
3001 Kirkwood 5107 Avenue O - Hwy 61 West 3511 Main
Burlington, IA 52601 Ft. Madison, IA 52627 Keokuk, IA 52632
(319) 752-9806 (319) 372-8500 (319) 524-3888
Clinton Super 8 Motel Garden City Super 8 Motel Kingdom City Super 8 Motel
1711 Lincoln Way 2808 North Taylor Hwy 54 - P.O. Box 139
Clinton, IA 52732 Garden City, KS 67846 Kingdom City, MO 65262
(319) 242-8870 (316) 275-9625 (573) 642-2888
College Station Super 8 Motel Grapevine Super 8 Motel Kirksville Super 8 Motel
301 Texas Avenue 250 East Highway 114 1101 Country Club Drive
College Station, TX 77840 Grapevine, TX 76051 Kirksville, MO 63501
(409) 846-8800 (817) 329-7222 (816) 665-8826
Columbus Super 8 Motel Hays Super 8 Motel Lenexa Super 8 Motel
3324 20th Street 3730 Vine Street 9601 Westgate
Columbus, NE 68601 Hays, KS 67601 Lenexa, KS 66215
(402) 563-3456 (785) 625-8048 (913) 888-8899
Iowa City Super 8 Motel Houston Wingate Inn Cornhusker Super 8 Motel
611 First Avenue 15615 JFK Blvd. 2545 Cornhusker Highway
Coralville, IA 52241 Houston, TX 77032 Lincoln, NE 68521
(319) 337-8388 (281) 987-8777 (402) 467-4488
21
EXHIBIT A
INITIAL HOTELS
(PAGE 2 OF 3)
West "O" Super 8 Motel Muscatine Super 8 Motel Pittsburg Super 8 Motel
2635 West "O" Street 2900 North Hwy 61 3108 North Broadway
Lincoln, NE 68528 Muscatine, IA 52761 Pittsburg, KS 66762
(402) 476-8887 (319) 263-9100 (316) 232-1881
Macomb Super 8 Motel Norfolk Super 8 Motel (Motel) Plano Super 8 Motel
313 University Avenue 1223 Omaha Avenue 1704 N. Central Expressway
Macomb, IL 61455 Norfolk, NE 68701 Plano, TX 75074-5729
(309) 836-8888 (402) 379-2220 (972) 423-8300
Manhattan Super 8 Motel O'Neill Super 8 Motel Portage Super 8 Motel
200 Tuttle Creek Blvd. East Highway 20 3000 New Pinery Road
Manhattan, KS 66502 O'Neill, NE 68763 Portage, WI 53901
(785) 537-8468 (402) 336-3100 (608) 742-8330
Marshall Super 8 Motel Aksarben Super 8 Motel Russellville Super 8 Motel
1355 West College Drive 7111 Spring Street 2404 North Arkansas Ave.
Marshall, MO 65340 Omaha, NE 68106 Russellville, AR 72801
(816) 886-3359 (402) 390-0700 (501) 968-8898
McKinney Super 8 Motel Omaha Super 8 Motel Sedalia Super 8 Motel
910 N. Central Expressway 10829 "M" Street 3402 West Broadway
McKinney, TX 75070 Omaha, NE 68137 Sedalia, MO 65301
(972) 548-8880 (402) 339-2250 (816) 827-5890
Menomonie Super 8 Motel West Dodge Super 8 Motel Shawano Super 8 Motel
1622 North Broadway 11610 West Dodge Road 211 Waukechon Street
Menomonie, WI 54751 Omaha, NE 68154 Shawano, WI 54166
(715) 235-8889 (402) 492-8845 (715) 526-6688
Minocqua Comfort Inn Oskaloosa Super 8 Motel Sheboygan Comfort Inn
8729 US 51 North 306 South 17th 4332 North 40th Street
Minocqua, WI 54548 Oskaloosa, IA 52577 Sheboygan, WI 53083
(715) 358-2588 (515) 673-8481 (920) 457-7724
Moberly Super 8 Motel Wichita North Super 8 Motel Storm Lake Super 8 Motel
North 300-Highway 24 East 6075 Air Cap Drive 101 West Milwaukee Avenue
Moberly, MO 65270 Park City, KS 67219 Storm Lake, IA 50588
(816) 263-8862 (316) 744-2071 (712) 732-3063
Mountain Home Super 8 Motel Parsons Super 8 Motel Tomah Super 8 Motel
865 Hwy 62 East 229 East Main 1008 E. McCoy Blvd.
Mountain Home, AR 72653 Parsons, KS 67357 Tomah, WI 54660
(870) 424-5600 (316) 421-8000 (608) 372-3901
Mt. Pleasant Super 8 Motel Pella Super 8 Motel Waco Super 8 Motel
Rt. 2, Box 227B 105 East Oskaloosa 1320 S. Jack Kultgen Way
Mt. Pleasant, IA 52641 Pella, IA 50219 Waco, TX 76706
(319) 385-8888 (515) 628-8181 (254) 754-1023
22
Watertown Super 8 Motel
503 14th Avenue S.E.
Watertown, SD 57201
(605) 882-1900
Wayne Super 8 Motel
610 Tomar Drive
Wayne, NE 68787
(402) 375-4898
West Plains Super 8 Motel
1210 Porter Wagoner Blvd.
West Plains, MO 65775
(417) 256-8088
Wichita Super 8 Motel
527 South Webb Road
Wichita, KS 67207
(316) 686-3888
Wichita Falls Super 8 Motel
1307 Kenley Avenue
Wichita Falls, TX 76305
(940) 322-8880
23
LEASE AGREEMENT
DATED AS OF _______________, 1998
BETWEEN
------------------------------
AS LESSOR
AND
-------------------------------
AS LESSEE
24
TABLE OF CONTENTS
ARTICLE I............................................................................ 1
1.1 Leased Property................................................ 1
1.2 Term........................................................... 2
1.3 Extension Option............................................... 2
ARTICLE II........................................................................... 2
2.1 Definitions.................................................... 2
ARTICLE III......................................................................... 12
3.1 Rent.......................................................... 12
3.2 Confirmation of Percentage Rent............................... 13
3.3 Additional Charges............................................ 13
3.4 Net Lease Provision........................................... 14
3.5 Annual Budget................................................. 14
3.6 Books and Records............................................. 15
ARTICLE IV.......................................................................... 15
4.1 Payment of Impositions........................................ 15
4.2 Notice of Impositions......................................... 16
4.3 Adjustment of Impositions..................................... 16
4.4 Utility Charges............................................... 16
4.5 Insurance Premiums............................................ 16
ARTICLE V........................................................................... 16
5.1 No Termination, Abatement, etc................................ 16
ARTICLE VI.......................................................................... 17
6.1 Lessor Representations and Warranties......................... 17
6.2 Deliverables.................................................. 20
6.3 Property Reports.............................................. 21
6.4 Ownership of the Leased Property.............................. 22
6.5 Lessee's Personal Property.................................... 22
ARTICLE VII......................................................................... 22
7.1 RESERVED...................................................... 22
7.2 Use of the Leased Property.................................... 23
7.3 Lessor to Grant Easements, etc................................ 23
ARTICLE VIII........................................................................ 24
8.1 Compliance with Legal and Insurance Requirements, etc......... 24
8.2 Legal Requirement Covenants................................... 24
8.3 Environmental Covenants....................................... 25
25
ARTICLE IX........................................................................... 27
9.1 Maintenance, Repair and Improvements........................... 27
9.2 Encroachments, Restrictions, etc............................... 28
9.3 Reimbursements................................................. 28
ARTICLE X............................................................................ 29
10.1 Alterations.................................................... 29
10.2 Salvage........................................................ 29
10.3 Lessor Alterations............................................. 29
10.4 Joint Use Agreements........................................... 29
10.5 Construction Affiliates........................................ 30
ARTICLE XI........................................................................... 30
11.1 Liens.......................................................... 30
ARTICLE XII.......................................................................... 30
12.1 Permitted Contests............................................. 30
ARTICLE XIII......................................................................... 31
13.1 General Insurance Requirements................................. 31
13.2 Replacement Cost............................................... 32
13.3 Worker's Compensation.......................................... 32
13.4 Waiver of Subrogation.......................................... 33
13.5 Form Satisfactory, etc......................................... 33
13.6 Increase in Limits............................................. 33
13.7 Blanket Policy................................................. 33
13.8 Reports On Insurance Claims.................................... 33
ARTICLE XIV.......................................................................... 34
14.1 Insurance Proceeds............................................. 34
14.2 Reconstruction in the Event of Damage or Destruction
Covered by Insurance........................................... 34
14.3 Reconstruction in the Event of Damage or Destruction
Not Covered by Insurance....................................... 35
14.4 Lessee's Property.............................................. 35
14.5 Abatement of Rent.............................................. 36
14.6 Construction by Lessee or its Affiliate........................ 36
ARTICLE XV........................................................................... 36
15.1 Definitions.................................................... 36
15.2 Parties' Rights and Obligations................................ 36
15.3 Total Taking................................................... 36
15.4 Allocation of Award............................................ 37
15.5 Partial Taking................................................. 37
15.6 Temporary Taking............................................... 37
26
15.7 Lessee's Construction............................................. 38
ARTICLE XVI............................................................................. 38
16.1 Event of Default.................................................. 38
16.2 Remedies.......................................................... 39
16.3 Damages........................................................... 40
16.4 Application of Funds.............................................. 40
ARTICLE XVII............................................................................ 40
17.1 Lessor's Right to Cure Lessee's Default........................... 40
ARTICLE XVIII........................................................................... 40
18.1 Personal Property Limitation...................................... 40
18.2 Sublease Rent Limitation.......................................... 41
18.3 Sublease Tenant Limitation........................................ 41
18.4 Lessee Ownership Limitations...................................... 41
18.5 Lessee Officer and Employee Limitation............................ 41
ARTICLE XIX............................................................................. 42
19.1 Holding Over...................................................... 42
ARTICLE XX.............................................................................. 42
20.1 RESERVED.......................................................... 42
ARTICLE XXI............................................................................. 42
21.1 Indemnification................................................... 42
ARTICLE XXII............................................................................ 43
22.1 Subletting and Assignment......................................... 43
22.2 Attornment........................................................ 43
22.3 Management Agreement.............................................. 44
ARTICLE XXIII........................................................................... 44
23.1 Officer's Certificates: Financial Statements; Lessor's
Estoppel Certificates and Covenants............................... 44
ARTICLE XXIV............................................................................ 45
24.1 Lessor's Right to Inspect......................................... 45
ARTICLE XXV............................................................................. 45
25.1 No Waiver......................................................... 45
ARTICLE XXVI............................................................................ 45
26.1 Remedies Cumulative............................................... 45
ARTICLE XXVII........................................................................... 46
27
27.1 Acceptance of Surrender.......................................... 46
ARTICLE XXVIII.............................................................................. 46
28.1 No Merger of Title............................................... 46
ARTICLE XXIX................................................................................ 46
29.1 Conveyance by Lessor............................................. 46
29.2 Amendment Upon Conveyance. ...................................... 46
29.3 Other Interests.................................................. 47
ARTICLE XXX................................................................................. 48
30.1 Quiet Enjoyment.................................................. 48
ARTICLE XXXI................................................................................ 48
31.1 Notices.......................................................... 48
ARTICLE XXXII............................................................................... 48
32.1 Appraisers....................................................... 48
ARTICLE XXXIII.............................................................................. 49
33.1 Lessor May Grant Liens........................................... 49
33.2 Lessee's Right to Cure........................................... 49
33.3 Breach by Lessor................................................. 50
ARTICLE XXXIV............................................................................... 50
34.1 Miscellaneous.................................................... 50
34.2 Transition Procedures............................................ 51
34.3 Waiver of Presentment, etc....................................... 52
ARTICLE XXXV................................................................................ 52
35.1 Memorandum of Lease.............................................. 52
ARTICLE XXXVI............................................................................... 52
36.1 Lessor's Option to Purchase Assets of Lessee..................... 52
ARTICLE XXXVII.............................................................................. 52
37.1 Compliance with Franchise Agreement and Management Agreement..... 52
ARTICLE XXXVIII............................................................................. 53
38.1 Arbitration...................................................... 53
38.2 Alternative Arbitration.......................................... 53
38.3 Arbitration Procedures........................................... 53
28
LEASE AGREEMENT
THIS LEASE AGREEMENT (hereinafter called "Lease"), is made and entered
into as of the _______ day of _________________, 1998, by and between PMC
Commercial Trust, a Texas real estate investment trust ("Lessor"), and Norfolk
Hospitality Management Co., a Nebraska corporation ("Lessee").
AGREEMENT:
Lessor, for and in consideration of the payment of rent by Lessee to
Lessor, the covenants and agreements to be performed by Lessee, and upon the
terms and conditions hereinafter stated, does hereby rent and lease unto Lessee,
and Lessee does hereby rent and lease from Lessor, the Leased Property.
ARTICLE I
1.1 Leased Property. The Leased Property is comprised of Lessor's interest
in the following:
(a) the land described in Exhibit A attached hereto and by reference
incorporated herein (the "Land");
(b) all buildings, structures and other improvements of every kind
including, without limitation, alleyways and connecting tunnels,
sidewalks, utility pipes, conduits and lines (on-site and offsite),
parking areas and roadways appurtenant to such buildings and structures
presently situated upon the Land (collectively, the "Leased
Improvements");
(c) all easements, rights and appurtenances relating to the Land and
the Leased Improvements;
(d) all equipment, machinery, fixtures and other items of property
required for or incidental to the use of the Leased Improvements as a
hotel, including all components thereof now and hereafter permanently
affixed to or incorporated into the Leased Improvements, including,
without limitation, all furnaces, boilers, heaters, electrical equipment,
heating, plumbing, lighting, ventilating, refrigerating, incineration, air
and water pollution control, waste disposal, air-cooling and
air-conditioning systems and apparatus, sprinkler systems and fire and
theft protection equipment, all of which to the greatest extent permitted
by law are hereby deemed by the parties hereto to constitute real estate,
together with all replacements, modifications, alterations and additions
thereof (collectively, the "Fixtures");
(e) all furniture and furnishings and all other items of personal
property (excluding Inventory and the Lessee's Personal Property) located
on, and used in connection with, the operation of the Leased Improvements
as a hotel, together with all replacements, modifications, alterations and
additions thereto; and
29
(f) all existing leases of space within the Leased Property
(including any security deposits or collateral held by Lessor pursuant
thereto).
1.2 Term. Unless earlier terminated in accordance with the provisions
hereof, the term of the Lease (the "Term") shall commence on the effective date
of the merger between Lessor and Supertel Hospitality, Inc. (the "Commencement
Date") and shall end on the fifth anniversary of the last day of the month in
which the Commencement Date occurs; provided, however, that the term hereof will
be automatically extended from time to time hereafter as provided in Section 3.3
of the Master Lease Agreement.
1.3 Extension Option. Provided that Lessee is not then in default under
the terms of this Lease, Lessee shall have the option, in its sole discretion,
to extend this Lease for one (1) successive term of two (2) years (the "Option
Period") upon the same terms and conditions contained herein and in the
Participating Leases, except for the payment of Base Rent which total amount
shall increase (subject to adjustments from condemnation, casualty, sale, or
otherwise provided herein and in the Participating Leases) from Fourteen Million
Four Hundred Thousand Dollars ($14,400,000.00) to Fifteen Million Dollars
($15,000,000.00) for each of the two (2) years in the Option Period. Upon
exercise of the option, the renewal term shall commence at midnight on the last
day of the original five (5) year term of this Lease. Notice of the exercise of
the option to extend shall be given in writing to Lessor not less than one (1)
year prior to the end of the original five (5) year term of this Lease.
1.4 Automatic Lease Term Extensions. After the original five (5) year term
of this Lease and after the Option Period, if any, the term of this Lease shall
be automatically extended for an additional two (2) year term, unless either
Lessee or Lessor gives notice in writing to the other at least eleven (11)
months prior to the end of the then current term that it elects not to allow the
automatic extension of the term of this Lease, in which case this Lease shall
terminate at the end of the then current term. In the event this Lease is
extended for an additional two (2) year term, then this Lease shall be further
automatically extended on a continuing basis beyond the then current term of
this Lease by additional successive two (2) year periods unless either Lessee or
Lessor gives written notice to the other at least one (1) year before the end of
the then current term that it elects not to allow the automatic extension to
occur beyond the then current term. It is the intent of the parties that each
will have a minimum of one (1) year notice prior to the end of the term of this
Lease. This shall not preclude the parties from renegotiating this Lease from
time to time.
ARTICLE II
2.1 Definitions. For all purposes of this Lease, except as otherwise
expressly provided or unless the context otherwise requires, (a) the terms
defined in this Article II have the meanings assigned to them in this Article II
and include the plural as well as the singular, (b) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as are at the time applicable, (c) all
references in this Lease to designated "Articles," "Sections" and other
subdivisions are to the designated Articles,
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Sections and other subdivisions of this Lease and (d) the words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this Lease
as a whole and not to any particular Article, Section or other subdivision:
Additional Charges: As defined in Section 3.3.
Affiliate: As used in this Lease the term "Affiliate" of a person shall
mean (a) any person that, directly or indirectly, controls or is controlled by
or is under common control with such person, (b) any other person that owns,
beneficially, directly or indirectly, 5% or more of the outstanding capital
stock, shares or equity interests of such person, or (c) any officer, director,
employee, partner or trustee of such person or any person controlling,
controlled by or under common control with such person (excluding trustees and
persons serving in similar capacities who are not otherwise an Affiliate of such
person). The term "person" means and includes individuals, corporations, general
and limited partnerships, limited liability companies, stock companies or
associations, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, or other entities and governments and
agencies and political subdivisions thereof. For the purposes of this
definition, "control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such person,
through the ownership of voting securities, partnership interests or other
equity interests.
Annual Budget: As used in this Lease, the term "Annual Budget" shall mean
an operating and capital budget for the Hotel prepared by Lessee and delivered
to Lessor in accordance with Section 3.5.
Applicable Laws means any applicable federal, state, county or municipal
law, statute, ordinance, rule, regulation, order or determination of any
governmental authority or any board of fire underwriters (or other body
exercising similar functions), or any restrictive covenant or deed restriction
or zoning ordinance or classification affecting any of the Hotels, including
without limitation, all applicable codes, flood disaster laws and health and
Environmental Laws, rule and regulations.
Architectural Barriers Legislation means the Americans With Disabilities
Act of 1990, P.L. 101-336, as amended.
Award: As defined in Section 15.1(a).
Base Rate: The rate of interest published in The Wall Street Journal,
Midwest Edition as the Prime Rate (or the lower of any two or more of such
rates), as it changes. If no such rate is announced or becomes discontinued,
then such other rate as Lessor and Lessee shall reasonably designate by mutual
agreement.
Base Rent: As defined in the Master Lease Agreement.
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Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that is
not a day on which national banks in the City of New York, New York, or in the
municipality wherein the Leased Property is located are closed.
CERCLA: The Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: As defined in Section 1.2.
Condemnation; Condemnor: Each as defined in Section 15.1.
Date of Taking: As defined in Section 15.1(d).
Encumbrance: As defined in Section 33.1.
Environmental Authority: Any department, agency or other body or component
of any Government that exercises any form of jurisdiction or authority under
Environmental Law.
Environmental Authorization: Any license, permit, order, approval,
consent, notice, registration, filing or other form of permission or
authorization required under any Environmental Law.
Environmental Laws: All applicable federal, state, local and foreign laws
and regulations relating to pollution of the environment (including without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata), including without limitation laws and regulations relating to
emissions, discharges, Releases or threatened Releases of Hazardous Materials or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials. Environmental
Laws include but are not limited to CERCLA, FIFRA, RCRA, SARA and TSCA.
Environmental Liabilities: Any and all obligations to pay the amount of
any judgment or settlement, the cost of complying with any settlement, judgment
or order for injunctive or other equitable relief, the cost of compliance or
corrective action in response to any notice, demand or request from an
Environmental Authority, the amount of any civil penalty or criminal fine, and
any court costs and reasonable amounts for attorney's fees, fees for witnesses
and experts, and costs of investigation and preparation for defense of any claim
or any Proceeding that may hereafter be asserted against or imposed upon Lessor,
Lessee, the Leased Property or any property used therein, and which, when
applicable to Lessee, arise out of any act or omission of Lessee during the
Lease Term which causes a failure of the Leased Property to comply with
Environmental Laws; or claims for injury or damage to persons or property
arising out of exposure to Hazardous Materials originating on the Leased
Property, which, when applicable to Lessee, originated on the Leased Property
during the Term.
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Event of Default: As defined in Section 16.1.
Fair Market Rental Value: The fair market rental of the Leased Property
means the rental which a willing tenant not compelled to rent would pay a
willing landlord not compelled to lease for the use and occupancy of such Leased
Property pursuant to the Participating Lease for the term in question, (a)
assuming that Lessee is not in default thereunder and (b) determined in
accordance with the appraisal procedures set forth in the Participating Lease or
in such other manner as shall be mutually acceptable to Lessor and Lessee.
Fair Market Value: The fair market value of the Leased Property means an
amount equal to the price that a willing buyer not compelled to buy would pay a
willing seller not compelled to sell for such Leased Property, (a) assuming the
same is unencumbered by this Lease, (b) determined in accordance with the
appraisal procedures set forth in Article XXXIII or in such other manner as
shall be mutually acceptable to Lessor and Lessee, (c) assuming that such seller
must pay customary closing costs and title premiums, and (d) taking into account
the positive or negative effect on the value of the Leased Property attributable
to the interest rate, amortization schedule, maturity date, prepayment penalty
and other terms and conditions of any encumbrance that is assumed by the
transferee. In addition, in determining the Fair Market Value with respect to
damaged or destroyed Leased Property such value shall be determined as if such
Leased Property had not been so damaged or destroyed.
FF&E Reserve: The reserve account to refurbish, replace, and improve FF&E
provided in Section 6.1 of the Master Lease Agreement and to repair, refurbish,
replace, and improve the Leased Improvements and the Fixtures.
FIFRA: The Federal Insecticide, Fungicide, and Rodenticide Act, as
amended.
Fixtures: As defined in Section 1.1.
Food and Beverage Revenues: All revenues, receipts and income of any kind
received by Lessee and derived directly from the sale of food, alcoholic and
non-alcoholic beverages, merchandise, services and entertainment from or in a
Restaurant or otherwise in the Hotel (other than any Restaurant Sublease Rent),
whether on a cash basis or credit, paid or collected, determined in accordance
with generally accepted accounting principles, excluding, however: (a) federal,
state and municipal excise, sales and use taxes collected directly from patrons
and guests or as a part of the sales price of any goods, services or displays,
such as gross receipts, admissions, cabaret or similar or equivalent taxes and
paid over to federal, state or municipal governments, (b) the amount of all
credits, rebates or refunds to customers, guests or patrons, and all service
charges, finance charges, interest and discounts attributable to charge accounts
and credit cards, to the extent the same are paid to Lessee by its customers,
guests or patrons, or to the extent the same are paid for by Lessee to, or
charged to Lessee by, credit card companies, (c) gratuities or service charges
actually paid to employees, (d) sales other than sales in the ordinary course of
business, (e) the cost of meals to Lessee's employees, and the cost of
charitable, promotional or other complimentary meals given by Lessee in the
ordinary course of
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business and in accordance with its normal policies for giving such meals, as is
customary for similar operations, (f) revenues derived from vending machines
operated by Lessee for the convenience of its employees, (g) receipts for
returns to shippers, manufacturers or suppliers, (h) proceeds of business
interruption or other insurance, and (i) items constituting "allowances" under
the Uniform System.
Franchise Agreement: Any franchise agreement or license agreement with a
franchisor (such as Super 8) under which the Hotel is operated.
Furniture, Fixtures and Equipment: Furniture, fixtures, and equipment used
or usable in the operation of the Hotel, including but not limited to room
furniture, exercise fixtures and equipment, office equipment, restaurant and bar
equipment, business center equipment, all operating systems (e.g. HVAC,
electrical, plumbing, and Fixtures), beds, lamps, window and wall coverings and
attachments of all kinds, carpets, painting, laundry equipment, water softeners,
on site property management systems, material handling equipment, cleaning and
engineering equipment, on-site computer hardware and software replacements and
upgrades, on-site telephones and communication equipment, on-site computerized
accounting systems and on-site vehicles.
Government: The United States of America, any state, district or territory
thereof, any foreign nation, any state, district, department, territory or other
political division thereof, or any political subdivision of any of the
foregoing.
Gross Operating Expenses: All salaries and employee expense and payroll
taxes (including salaries, wages, bonuses and other compensation of all
employees of the Hotel, and benefits including life, medical and disability
insurance and retirement benefits), expenditures described in Section 9.1,
operational supplies, utilities, insurance to be provided by Lessee under the
terms of this Lease, Government fees and assessments, food, beverages, laundry
service expense, the cost of Inventories, license fees, advertising, marketing,
reservation systems and any and all other operating expenses as are reasonably
necessary for the proper and efficient operation of the Hotel incurred by Lessee
in accordance with the provisions hereof (excluding, however, (a) federal, state
and municipal excise, sales and use taxes collected directly from patrons and
guests or as a part of the sales price of any goods, services or displays, such
as gross receipts, admissions, cabaret or similar or equivalent taxes paid over
to federal, state or municipal governments, (b) the costs of insurance to be
provided under Article XIII, (c) expenditures by Lessor pursuant to Article XIV,
and (d) payments on any Mortgage or other mortgage or security instrument on the
Hotel); all determined in accordance with generally accepted accounting
principles. No part of Lessee's central office or corporate overhead or general
or administrative expense (as opposed to that of the Hotel) shall be deemed to
be a part of Gross Operating Expenses, except as herein provided. Reasonable
out-of-pocket expenses of Lessee incurred for the account of or in connection
with the on-site Hotel operations, including, without limitation, postage,
telephone charges and reasonable travel expenses of employees, officers and
other representatives and consultants of Lessee and its Affiliates (but
specifically excluding all salary and benefit expenses of such employees,
officers and other representatives and consultants), shall be deemed to be a
part of Gross Operating Expenses and such persons shall be afforded reasonable
accommodations,
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food, beverages, laundry, valet and other such services by and at the Hotel
without charge to such persons or Lessee.
Gross Operating Profit shall mean, for any Lease Year, the excess of Gross
Revenues for such Lease Year over Gross Operating Expenses for such Lease Year.
Gross Revenues: All revenues, receipts and income of any kind received by
Lessee and derived directly from the operation of the Hotel (including rentals
or other payments from tenants, lessees, licensees or concessionaires but not
including their gross receipts), including, without limitation, Room Revenues,
Food and Beverage Revenues and Sundry Revenues, whether on a cash basis or
credit, paid and collected, determined in accordance with generally accepted
accounting principles, excluding, however: (a) funds furnished by Lessor or by
Lessee, (b) federal, state and municipal excise, sales, use or other taxes
collected directly from patrons and guests or as a part of the sales price of
any goods, services or displays, such as gross receipts, admissions, cabaret or
similar or equivalent taxes and paid over to federal, state or municipal
governments, (c) the amount of all credits, rebates or refunds to customers,
guests or patrons, and all service charges, finance charges, interest and
discounts attributable to charge accounts and credit cards, to the extent the
same are paid to Lessee by its customers, guests or patrons, or to the extent
the same are paid for by Lessee to, or charged to Lessee by, credit card
companies, (d) gratuities or service charges actually paid to employees, (e)
proceeds of insurance and condemnation, (f) proceeds from sales other than sales
in the ordinary course of business, (g) all loan proceeds from financing or
refinancings of the Hotel or interests therein or components thereof, (h)
judgments and awards, except any portion thereof arising from normal business
operations of the Hotel, (i) items constituting "allowances" under the Uniform
System, (j) all write-offs for failure of collection, except if any such
written-off receivable is ultimately collected it shall be added back to Gross
Revenues to the extent collected (less all costs, fees, and expenses of
collection), and (k) all fees and amounts paid to or on behalf of Lessee or its
Affiliate by Lessor.
Hazardous Materials: All chemicals, pollutants, contaminants, wastes and
toxic substances, including, without limitation:
(a) Solid or hazardous waste, as defined in RCRA or any other
Environmental Law;
(b) Hazardous substances, as defined in CERCLA or any other
Environmental law;
(c) Toxic substances, as defined in TSCA or any other Environmental
law;
(d) Insecticides, fungicides or rodenticides, as defined in FIFRA or
any other Environmental Law; and
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(e) Gasoline or any other petroleum product or byproduct,
polychlorinated biphenyl, asbestos and urea formaldehyde.
Holder: As defined in Section 29.3.
Hotel: The hotel and/or other facility offering lodging or other services
or amenities being operated or proposed to be operated on the Leased Property.
Impositions: Collectively, all taxes (including, without limitation, all
ad valorem, sales and use, single business, gross receipts, transaction
privilege, rent or similar taxes as the same relate to or are imposed upon
Lessee or its business conducted upon the Leased Property), assessments
(including, without limitation, all assessments for public improvements or
benefit, whether or not commenced or completed prior to the date hereof and
whether or not to be completed within the Term), ground rents, water, sewer or
other rents and charges, excises, tax inspection, authorization and similar fees
and all other Government charges, in each case whether general or special,
ordinary or extraordinary, or foreseen or unforeseen, of every character in
respect of the Leased Property or the business conducted thereon by Lessee
(including all interest and penalties thereon caused by any failure in payment
by Lessee), which at any time prior to, during or with respect to the Term
hereof may be assessed or imposed on or with respect to or be a lien upon (a)
Lessor's interest in the Leased Property, (b) the Leased Property, or any part
thereof or any rent therefrom or any estate, right, title or interest therein,
or (c) any occupancy, operation, use or possession of, or sales from, or
activity conducted on or in connection with the Leased Property, or the leasing
or use of the Leased Property or any part thereof by Lessee. Nothing contained
in this definition of Impositions shall be construed to require Lessee to pay
(i) any tax based on net income (whether denominated as a franchise or capital
stock or other tax) imposed on Lessor or any other person, or (ii) any net
revenue tax of Lessor or any other person, or (iii) any tax imposed with respect
to the sale, exchange or other disposition by Lessor of any Leased Property or
the proceeds thereof, or (iv) any single business, gross receipts (other than a
tax on any rent received by Lessor from Lessee), transaction, privilege or
similar taxes as the same relate to or are imposed upon Lessor, except to the
extent that any tax, assessment, tax levy or charge that Lessee is obligated to
pay pursuant to the first sentence of this definition and that is in effect at
any time during the Term hereof is totally or partially repealed, and a tax,
assessment, tax levy or charge set forth in clause (i) or (ii) is levied,
assessed or imposed expressly in lieu thereof.
Indemnified Party: Either a Lessee Indemnified Party or a Lessor
Indemnified Party.
Indemnifying Party: Any party obligated to indemnify an Indemnified Party
pursuant to Section 8.3 or Article XXI.
Insurance Requirements: All terms of any insurance policy required by this
Lease and all requirements of the issuer of any such policy.
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Inventory: All "Inventories of Merchandise" and "Inventories of Supplies"
as defined in the Uniform System.
Land: As defined in Section 1.1.
Lease: This Lease.
Leased Improvements; Leased Property: Each as defined in Section 1.1.
Lease Year: The 12-month period beginning with the Commencement Date and
ending on the day of the month immediately preceding the day of the month of the
Commencement Date one (1) year from the Commencement Date and each 12-month
period thereafter.
Legal Requirements: All federal, state, county, municipal and other
Government statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Leased Property or the maintenance,
construction, use or alteration thereof (whether by Lessee or otherwise),
whether now in force or hereafter enacted and in force, including (a) all laws,
rules or regulations pertaining to the environment, occupational health and
safety and public health, safety or welfare, and (b) any laws, rules or
regulations that may (i) require repairs, modifications or alterations in or to
the Leased Property or (ii) in any way adversely affect the use and enjoyment
thereof; and all permits, licenses and authorizations and regulations relating
thereto and all covenants, agreements, restrictions and encumbrances contained
in any instruments, either of record or known to Lessee (other than encumbrances
created by Lessor without the consent of Lessee), at any time in force affecting
the Leased Property.
Lessee: The Lessee designated on this Lease and its permitted successors
and assigns.
Lessee Indemnified Party: Lessee, any Affiliate of Lessee, any other
Person against whom any claim for indemnification may be asserted hereunder as a
result of a direct or indirect ownership interest (including a stockholder's
interest) in Lessee, the officers, directors, stockholders, employees, agents
and representatives of Lessee and the respective heirs, personal
representatives, successors and assigns of any such officer, director,
stockholder, employee, agent or representative.
Lessee's Personal Property: As defined in Section 6.5.
Lessor: The Lessor designated on this Lease and its successors and
assigns.
Lessor Indemnified Party: Lessor, any Affiliate of Lessor, any other
Person against whom any claim for indemnification may be asserted hereunder as a
result of a direct or indirect ownership interest (including a stockholder's or
partnership interest) in Lessor, the officers, directors, stockholders,
employees, agents and representatives of the of Lessor and the respective heirs,
personal representatives, successors and assigns of any such officer, director,
stockholder, employee, agent or representative.
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Management Agreement: As defined in Section 22.3.
Manager: The Lessee or any successor manager that is retained by Lessee to
operate the Hotel pursuant to this Lease, any Management Agreement and the
Franchise Agreement.
Master Lease Agreement: That certain Master Lease Agreement, dated as of
the date hereof, by and between Lessee and Lessor, relating to this Lease and
the Other Leases.
Notice: As defined in Article XXXI.
Officer's Certificate: A certificate of Lessee reasonably acceptable to
Lessor, signed by the chief financial officer or another officer authorized so
to sign by the board of directors or by-laws of Lessee, or any other person
whose power and authority to act has been authorized by delegation in writing by
any such officer.
Other Leases: The leases of the Other Properties.
Other Properties: The properties described on Exhibit B hereto, excluding
the property described on Exhibit A hereto, as the same may be amended from time
to time pursuant to and which become subject to the terms of the Master Lease
Agreement.
Overdue Rate: On any date, a rate equal to the Base Rate plus 5% per
annum, but in no event greater than the maximum rate then permitted under
applicable law.
Payment Date: Any due date for the payment of any installment of Base
Rent.
Percentage Rent: As defined in the Master Lease Agreement.
Person: Any Government, natural person, corporation, partnership or other
legal entity.
Personal Property Taxes: All personal property taxes imposed on the
furniture, furnishings or other items of personal property located on, and used
in connection with, the operation of the Leased Improvements as a hotel (other
than Inventory and the Lessee's Personal Property), together with all
replacement, modifications, alterations and additions thereto.
Personalty: All FF&E, except for operating systems (e.g. HVAC, electrical,
plumbing and Fixtures) and improvements or fixtures which cannot be removed from
a Leased Property without material damage to such Leased Property.
Personalty Reserve: Funds available for the purchase of Personalty, which
funds shall be provided by, and under the control of, Lessee through the payment
of $50,000 per month (which payment shall be due and payable on the same date as
the Base Rent payments during the term of this Lease into an account to be
established by Lessee.
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Primary Intended Use: As defined in Section 7.2(b).
Proceeding: Any judicial action, suit or proceeding (whether civil or
criminal), any administrative proceeding (whether formal or informal), any
investigation by a Government authority or entity (including a grand jury), and
any arbitration, mediation or other non-judicial process for dispute resolution.
RCRA: The Resource Conservation and Recovery Act, as amended.
Real Estate Taxes: All real estate taxes, including general and special
assessments, if any, which are imposed upon the Land, and any improvements
thereon.
Release: A "Release" as defined in CERCLA or in any Environmental Law,
unless such Release has been properly authorized and permitted in writing by all
applicable Environmental Authorities or is allowed by such Environmental Law
without authorizations or permits.
Rent: Collectively, the Base Rent and Percentage Rent.
Reserves: Collectively, the FF&E Reserve and the Personalty Reserve.
Restaurant: Any restaurant or cocktail lounge, together with a kitchen for
those facilities, which may be located in the Hotel at any time and from time to
time.
Restaurant Sublease Rent: The entire net amount of rentals (including base
rent and percentage rent) and other amounts, if any, received by Lessee under
any sublease (or similar agreement) of a Restaurant which may be entered into
from time to time between Lessee and any unaffiliated third party, net of
management fees, if any, payable to the Manager, if any, under any Management
Agreement with respect to such rentals.
Room Revenues: All revenues, receipts, and income of any kind received by
Lessee and derived directly from or in connection with the rental of guest rooms
or suites, whether to individuals, groups or transients, at the Hotel, whether
on a cash basis or credit, paid and collected, determined in accordance with
generally accepted accounting principles, excluding the following:
(a) The amount of all credits, rebates or refunds to customers,
guests or patrons, and all service charges, finance charges, interest and
discounts attributable to charge accounts and credit cards, to the extent
the same are paid to Lessee by its customers, guests or patrons, or to the
extent the same are paid for by Lessee to, or charged to Lessee by, credit
card companies;
(b) All sales taxes or any other taxes imposed on the rental of such
guest rooms or suites;
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(c) Gratuities or service charges actually paid to employees;
(d) Proceeds of business interruption and other insurance; and
(e) Food and Beverage Revenues or Sundry Revenues.
SARA: The Superfund Amendments and Reauthorization Act of 1986, as
amended.
State: The State or Commonwealth of the United States in which the Leased
Property is located.
Subsidiaries: Persons in which Lessee owns more than 50% of the voting
equity securities or control, as applicable (individually, a "Subsidiary").
Sundry Revenues: All revenues, receipts, and income received by Lessee and
derived from the Hotel's meeting rooms, telephones, TV and movie rentals, check
room, washroom, laundry, valet, vending machines, and other similar sources not
specified herein as Room Revenues.
Taking: A taking or voluntary conveyance during the Term hereof of all or
part of the Leased Property, or any interest therein or right accruing thereto
or use thereof, as the result of, or in settlement of, any Condemnation or other
eminent domain Proceeding affecting the Leased Property whether or not the same
shall have actually been commenced.
Term: As defined in Section 1.2.
TSCA: The Toxic Substances Control Act, as amended.
Unavoidable Delays: Delays due to strikes, lock-outs, labor unrest,
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, unavoidable casualty or other
causes beyond the control of the party responsible for performing an obligation
hereunder, provided that lack of funds shall not be deemed a cause beyond the
control of either party hereto unless such lack of funds is caused by the
failure of the other party hereto to perform any obligations of such party under
this Lease or any guaranty of this Lease.
Uneconomic for its Primary Intended Use: A state or condition of the Hotel
such that, in the good faith judgment of Lessee, reasonably exercised and
evidenced by the resolution of the board of directors or other governing body of
Lessee, the Hotel cannot be operated on a commercially practicable basis for its
Primary Intended Use, taking into account, among other relevant factors, the
number of usable rooms and projected revenues, such that Lessee intends to, and
shall, complete the cessation of operations from the Leased Hotel.
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Uniform System: Shall mean the Uniform System of Accounts for Hotels (8th
Revised Edition, 1986), as published by the Hotel Association of New York City,
Inc., as same may hereafter be revised.
Unsuitable for its Primary Intended Use: A state or condition of the Hotel
such that, in the good faith judgment of Lessee, reasonably exercised and
evidenced by the resolution of the board of directors or other governing body of
Lessee, due to casualty damage or loss through Condemnation, the Hotel cannot
function as an integrated hotel facility consistent with standards applicable to
a well maintained and operated hotel.
ARTICLE III
3.1 Rent. Lessee will pay to Lessor in lawful money of the United States
of America which shall be legal tender for the payment of public and private
debts, in immediately available funds, at Lessor's address set forth in Article
XXXI hereof or at such other place or to such other Person as Lessor from time
to time may designate in a Notice, all Base Rent and Percentage Rent, during the
Term, as provided in this Lease and the Master Lease Agreement. If this Lease is
no longer subject to the Master Lease Agreement, Rent shall be paid according to
Schedule 3.1, which will be attached hereto at that time.
3.2 Confirmation of Percentage Rent. Lessee shall utilize, or cause to be
utilized, the present accounting system or such other system reasonably
agreeable to Lessor, and in accordance with generally accepted accounting
principles, that will accurately record all data necessary to compute Percentage
Rent. Lessee shall retain, for at least four years after the expiration of each
Lease Year, reasonably adequate records conforming to such accounting system
showing all data necessary to compute Percentage Rent for the applicable Lease
Years. Lessor, at its expense (except as provided below), shall have the right
from time to time, upon prior written notice to Lessee and Manager, if any, by
Lessor's accountants or representatives to audit the information that formed the
basis for the data set forth in any Officer's Certificate provided pursuant to
the Master Lease Agreement and, in connection with such audits, to examine all
Lessee's records (including supporting data and sales and excise tax returns)
reasonably required to verify Percentage Rent, subject to any prohibitions or
limitations on disclosure of any such data under Legal Requirements or as
otherwise reasonably required by Lessee. If any such audit discloses a
deficiency in the payment of Percentage Rent, and either Lessee agrees with the
result of such audit or the matter is otherwise determined or compromised,
Lessee shall forthwith pay to Lessor the amount of the deficiency, as finally
agreed or determined, together with interest at the Overdue Rate from the date
when said payment should have been made to the date of payment thereof. If
Lessee has prepaid or overpaid any Percentage Rent, Lessor shall immediately pay
to Lessee the amount by which Lessee prepaid or overpaid the Percentage Rent in
the manner set forth in the Master Lease Agreement. If any such audit discloses
that the Percentage Rent actually due from Lessee for any Lease Year exceeds
that reported by Lessee by more than 3%, Lessee shall pay the cost of such audit
and examination. Any proprietary information obtained by Lessor pursuant to the
provisions of this Section 3.2 or otherwise by this Lease shall be treated as
confidential, except that such information may be used, subject to appropriate
confidentiality safeguards, in any litigation between the parties and except
further that Lessor may disclose such information to
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prospective lenders. The obligations of Lessee and Lessor contained in this
Section 3.2 shall survive the expiration or earlier termination of this Lease.
3.3 Additional Charges. In addition to the Base Rent and
Percentage Rent, (a) Lessee also will pay and discharge as and when due and
payable all other amounts, liabilities, obligations and Impositions that Lessee
assumes or agrees to pay under this Lease, and (b) in the event of any failure
on the part of Lessee to pay any of those items referred to in clause (a) of
this Section 3.3, Lessee also will promptly pay and discharge every fine,
penalty, interest and cost that may be added for non-payment or late payment of
such items (the items referred to in clauses (a) and (b) of this Section 3.3
being referred to herein collectively as the "Additional Charges"). To the
extent that Lessee pays any Additional Charges to Lessor pursuant to this Lease
or the Master Lease Agreement rather than to the entity to which they would
otherwise be due, Lessor shall timely pay same from monies received from Lessee
and shall hold harmless Lessee from any claims, damages and expenses related
thereto and all fines, penalties, interests, and costs for non-payment or late
payment thereof.
3.4 Net Lease Provision. The Rent shall be paid to Lessor without
set off, deduction or counterclaim, subject only to the provisions of the Master
Lease Agreement or of this Lease set forth in Sections 14.2, 14.3, 15.3, 15.5
and 15.6 and further subject to Lessee's right to assert any claim or mandatory
counterclaim in any action brought under this Lease.
3.5 Annual Budget.
(a) Not later than thirty (30) days prior to the commencement
of each Calendar Year, Lessee shall submit the proposed Annual Budget
to Lessor, provided that for that portion of the Term in 1998 and for
calendar year 1999, a budget shall be submitted on or before November
30, 1998. Lessor shall not unreasonably withhold its consent to the
Annual Budget submitted by Lessee. Lessor shall have twenty (20) days
from the date of receipt of the Annual Budget to review and comment on
the Annual Budget and Lessor and Lessee shall negotiate in good faith
the terms of the Annual Budget. If Lessor fails to object or otherwise
respond to the proposed Annual Budget within such 20-day period, Lessor
shall be deemed to have accepted the Annual Budget as so proposed. The
Annual Budget shall contain the following:
(i) Lessee's reasonable estimate of Gross Revenues
(including average room rates and Room Revenues), Gross
Operating Expenses, and Gross Operating Profits for the
forthcoming Lease Year on a monthly basis, as same may be
revised or updated from time to time by Lessee.
(ii) An estimate of the amounts to be dedicated to
the capitalized repair, replacement or refurbishment of
Furniture, Fixture and Equipment from the FF&E Reserve and
from the Personalty Reserve, as applicable, and to the
capitalized repair, refurbishment, replacement, and
improvement of the Leased Improvements and the Fixtures.
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(iii) An estimate of any amounts Lessor will be
required to provide for required or desirable capital
improvements to the Hotel or any of its components in excess
of the FF&E Reserve.
(iv) A cash flow projection.
(v) A marketing plan.
(b) Not later than thirty (30) days following the end of any
month during a Lease Year, Lessee shall submit to Lessor statements
setting forth the actual (i) Gross Revenues, Gross Operating Expenses
and Gross Profits, (ii) amounts for which reimbursement was sought or
will be sought from the FF&E Reserve for such month and (iii) dollar
amount of capital improvements made to the Hotel for such month and a
comparison of such amounts to the estimates set forth in the Annual
Budget.
3.6 Books and Records. Lessee shall keep full and adequate books
of account and other records reflecting the results of operation of the Hotel on
an accrual basis, all in accordance with generally accepted accounting
principles and the obligations of Lessee under this Lease Agreement. The books
of account and all other records relating to or reflecting the operation of the
Hotel shall be kept either at the Hotel or at Lessee's offices in Norfolk,
Nebraska, and shall be available to Lessor and its representatives and its
auditors or accountants, at all reasonable times, upon reasonable prior written
notice to Lessee, for examination, audit, inspection and transcription. All of
such books and records pertaining to the Hotel including, without limitation,
books of account, guest records and front office records, at all times shall be
the property of Lessee and shall be available to Lessor for its review and
audit. Lessee shall be entitled to make a copy of all such books and records for
its tax and accounting purposes, at all times and after the termination of this
Lease.
ARTICLE IV
4.1 Payment of Impositions. Subject to Article XII (relating to
permitted contests), Lessee will pay, or cause to be paid, all Impositions which
are assessed with respect to the Term. Lessor shall pay all Impositions which
are assessed for periods before and after the Term. Such payments to be made
directly to the taxing or other authorities where feasible, and will promptly
furnish to Lessor copies of official receipts or other satisfactory proof
evidencing such payments. If any such Imposition may lawfully be paid in
installments (whether or not interest shall accrue on the unpaid balance of such
Imposition), Lessee may exercise the option to pay the same (and any accrued
interest on the unpaid balance of such Imposition) in equal, fully amortizing
installments and in such event, shall pay such installments which become
delinquent during the Term hereof (subject to Lessee's right of contest pursuant
to the provisions of Article XII). Lessee shall not be required to pay any
installment which comes due after the Term or before the Commencement Date.
Lessor, at its expense, shall, to the extent required or permitted by applicable
law, prepare and file all tax returns in respect of Lessor's net income, gross
receipts, sales and use, single business, transaction privilege, rent, ad
valorem, franchise taxes and taxes
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on its capital stock, and Lessee, at its expense, shall, to the extent required
or permitted by applicable laws and regulations, prepare and file all other tax
returns and reports in respect of any Imposition as may be required by
Government authorities. If any refund shall be due from any taxing authority in
respect of any Imposition paid by Lessee, the same shall be paid over to or
retained by Lessee if no Event of Default shall have occurred hereunder and be
continuing. If an Event of Default shall have occurred and be continuing, any
such refund shall be paid over to or retained by Lessor for application on any
amounts due Lessor by Lessee. Any such funds retained by Lessor due to an Event
of Default shall be applied as provided in Article XVI. Any balance shall be
paid to Lessee. Lessor and Lessee shall, upon request of the other, provide such
data as is maintained by the party to whom the request is made with respect to
the Leased Property as may be necessary to prepare any required returns and
reports. Lessee shall file all Personal Property Tax returns in such
jurisdictions where it is legally required so to file. Lessor, to the extent it
possesses the same, and Lessee, to the extent it possesses the same, will
provide the other party, upon request, with cost and depreciation records
necessary for filing returns for any property classified as personal property.
Lessor may, upon Notice to Lessee, at Lessor's option and at Lessor's sole
expense, protest, appeal or institute such other proceedings (in its or Lessee's
name) as Lessor may deem appropriate to effect a reduction of real estate or
personal property assessments for those Impositions to be paid by Lessor, and
Lessee, at Lessor's expense as aforesaid, shall fully cooperate with Lessor in
such protest, appeal, or other action. Lessor hereby agrees to indemnify,
defend, and hold harmless Lessee from and against any claims, obligations, and
liabilities against or incurred by Lessee in connection with such cooperation.
Lessor, however, reserves the right to effect any such protest, appeal or other
action and, upon Notice to Lessee, shall control any such activity, which shall
then go forward at Lessor's sole expense. Upon such Notice, Lessee, at Lessor's
expense, shall cooperate fully with such activities.
4.2 Notice of Impositions. Lessor shall give prompt Notice to
Lessee of all Impositions payable by Lessee hereunder of which Lessor at any
time has knowledge, provided that Lessor's failure to give any such Notice shall
in no way diminish Lessee's obligations hereunder to pay such Impositions, but
such failure shall obviate any default hereunder for a reasonable time after
Lessee receives Notice of any Imposition which it is obligated to pay during the
first taxing period applicable thereto.
4.3 Adjustment of Impositions. Impositions imposed in respect of
the tax-fiscal period during which the Term terminates shall be adjusted and
prorated between Lessor and Lessee, whether or not such Imposition is imposed
before or after such termination, and Lessee's obligation to pay its prorated
share thereof after termination shall survive such termination.
4.4 Utility Charges. Lessee will be solely responsible for
obtaining and maintaining utility services to the Leased Property and will pay
or cause to be paid all charges for electricity, gas, oil, water, sewer and
other utilities used in the Leased Property during the Term.
4.5 Insurance Premiums. Lessee will pay or cause to be paid all
premiums for the insurance coverages required to be maintained by it under
Article XIII.
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ARTICLE V
5.1 No Termination, Abatement, etc. Except as otherwise
specifically provided in this Lease, except for default by Lessor, and except
for loss of the Franchise Agreement by reason of any action or inaction by
Lessor, Lessee, to the extent permitted by law, shall remain bound by this Lease
in accordance with its terms and shall neither take any action without the
written consent of Lessor (which shall not be unreasonably withheld or delayed)
to modify, surrender or terminate the same, nor seek nor be entitled to any
abatement, deduction, deferment or reduction of the Rent, or setoff against the
Rent, nor shall the obligations of Lessee be otherwise affected by reason of any
claim which Lessee has or might have against Lessor by reason of any default or
breach of any warranty by Lessor under this Lease or any other agreement between
Lessor and Lessee, or to which Lessor and Lessee are parties. The Rent and all
other sums payable by Lessee hereunder shall continue to be payable unless the
obligations to pay the same shall be terminated pursuant to the express
provisions of this Lease or by termination of this Lease.
ARTICLE VI
ADDITIONAL REPRESENTATIONS AND WARRANTIES
AND COVENANTS RELATING TO HOTELS AND REAL PROPERTY
6.1 Lessor Representations and Warranties. Lessor represents and
warrants to Lessee, effective as of the Commencement Date, as set forth below:
(a) Title to Hotel. Except as set forth on Schedule 6.1(a)
hereto, Lessor has good and indefeasible fee simple title to the Hotel,
free and clear of all conditions, exceptions, or reservations.
(b) No Consents Required. No consent, waiver, approval, or
authorization of, or filing, registration, or qualification with, or
notice to, any Government authority or any other entity or person
(including, without limitation, Lessor's trust managers) is required to
be made, obtained, or given in connection with the execution, delivery,
and performance of this Lease, except such consent, waiver, approval,
authorization, filing, registration or qualification which has been
made, obtained or given.
(c) Reserved.
(d) Operating Agreements. Except as set forth on Schedule
6.1(d) hereto, no portion of any Hotel is subject to the burdens or
obligations of any Operating Agreement and all Operating Agreements are
current and not in default other than defaults that will not,
individually or in the aggregate, have a material adverse effect on
Lessee.
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(e) Tenant Leases. Except as may be specifically noted to the
contrary on Schedule 6.1(e) hereto.
(i) Lessor is the sole owner of the Lessor's interest
in all of the leases of any portion of the Leased Premises
("Tenant Leases") and all Tenant Leases are in full force and
effect without current default by either Lessor or the
respective tenants;
(ii) none of the Tenant Leases that are material to
Lessor have been modified in a material way, except as
reflected in amendments to which Lessee has had access;
(iii) all obligations of the Lessor under the Tenant
Leases with respect to the performance of work or the
installation of equipment or materials required to have been
performed at or prior to the Commencement Date have been fully
observed and performed except for such failures that,
individually or in the aggregate, will not have a material
adverse effect on Lessee.
(iv) no tenant is or shall become entitled to any
material concession, rebate, allowance, or free rent for any
period subsequent to the Commencement Date, without the prior
written consent of Lessee, except as set forth in the Tenant
Lease with respect to such tenant;
(v) no tenant has any purchase option or other
interest (other than its leasehold tenancy for a specified
term) in the Land and/or the Leased Improvements; and
(vi) no tenant has given Lessor notice of its
intention to vacate its demised premises prior to the end of
the term of its lease.
(f) No Condemnation. There is no pending condemnation or
similar proceeding affecting any of the Land, the Leased Improvements,
or the Hotel personal property or any portion thereof, and Lessor has
received no written notice and has no knowledge that any such
proceeding is contemplated.
(g) No Violations of Applicable Law. To the knowledge of
Lessor, except as set forth on Schedule 6.1(g) hereto, the current
location, ownership, operation, use, and occupancy of all of the Land
and Leased Improvements thereon do not violate any Applicable Law,
including, without limitation, all Environmental Laws and the
Architectural Barriers Legislation. To the knowledge of Lessor, except
as set forth on Schedule 6.1(g) hereto, there are no violations of any
Applicable Law affecting any portion of any of the Land, the Leased
Improvements or the Hotel personal property, and no written notice of
any such violation has been issued by any Government authority.
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(h) Changes in Applicable Laws. Lessor has no information or
knowledge of any change contemplated in any of the Applicable Laws or
any judicial or administrative action, or any action by adjacent
landowners, or any fact or condition relating to the Hotel which is
reasonably likely to materially adversely affect, prevent or limit the
use of any of the Hotels as hotels of the size and nature currently
being operated.
(i) No Administrative Action. To Lessor's knowledge, except as
set forth on Schedule 6.1(i) hereto, the Hotel is not now, the subject
of any administrative investigation, action or judicial proceeding in
regard to sex, age, or racially discriminatory practices initiated by
any Government authority, or any private citizen, and no such
investigation, administrative action, or judicial proceeding is now
pending, nor is the Hotel presently operating under any court order or
administrative agreement in regard to alleged sex, age, or racially
discriminatory practices.
(j) Zoning. To Lessor's knowledge, except as set forth on
Schedule 6.1(j) hereto, there are no pending or threatened requests,
applications or proceedings to alter or restrict the zoning or other
use restrictions applicable to the Hotel; Lessor has not received any
notice from any Government authority of zoning, building, fire, water,
use, health, environmental or other violations of applicable law issued
in respect of the Hotel that have not been heretofore corrected, and no
such violations exist; all of the Leased improvements and the present
uses thereof are permitted, conforming structures and Leased uses under
all applicable zoning and building laws and ordinances.
(k) Parties in Possession. There are no adverse parties in
possession of the Hotel or of any part hereof and no parties in
possession thereof except the tenants under the Tenant Leases, except
as otherwise expressly disclosed herein, and no party has been granted
any license, lease, or other right relating to the use or possession of
any of the Hotels except the tenants under the Leases, or except as
otherwise expressly disclosed herein.
(l) No Other Contracts. There are no contracts or other
obligations outstanding for the sale, exchange or transfer of the Hotel
or any portion thereof or the business operated thereon.
(m) Utilities. All utilities required by applicable laws for
the operation of all of the Leased improvements including, but not
limited to, water, sewer, gas and electric, enter each parcel of land
through adjoining public streets or if they pass through adjoining
private land, do so in accordance with valid public or private
easements which inure to the benefit of Lessor. All of said utilities
are installed and operating and all installation and connection charges
have been paid in full and no fact, condition, or proceeding exists
which would result in the termination or impairment of the furnishing
of or an increase in rates or services to the Hotels of the foregoing
utility services.
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(n) Access to Land. There are adequate means of ingress and
egress for vehicular and pedestrian traffic to and from the land and
each adjoining street, road or highway. All routes of ingress and
egress to and from each parcel of land, to the extent they pass through
adjoining land do so in accordance with valid public or private
easements which inure to the benefit of Lessor. To Lessor's knowledge,
the land and the Leased Improvements do not violate any restriction,
condition or agreement contained in any easement, reciprocal easement,
restrictive covenant, or similar instrument or agreement affecting such
land or improvements or any part thereof.
(o) Maintenance and No Defects. To Lessor's knowledge, the
roofs of the buildings comprising the Leased improvements are free of
material leaks; the foundations and all mechanical systems including
air-conditioning, plumbing, heating, sewage drainage and electrical
have been maintained in all material respects in accordance with
industry practices.
(p) Insurance. Lessor has not received, and has no other
knowledge or information of, any written notice from any insurance
company or board of fire underwriters requesting the performance of any
material work or alteration with respect to any of the Hotels, or
requiring an increase in the insurance rates applicable to any of the
Hotels. To the knowledge of Lessor, the Hotel complies with the
requirements of all insurance carriers providing insurance therefor.
(q) Property Not in Flood Area. Except as described in
Schedule 6.1(q) hereto, no portion of any parcel of land is situated in
an area designated by the Secretary of the United States Department of
Housing and Urban Development (or by any other federal, state,
municipal, or other governmental instrumentality) as having special
flood or mudslide hazards.
(r) Compliance with Architectural Barriers Legislation. To
Lessor's knowledge, except as set forth on Schedule 6.1(r) hereto, all
of the improvements were built and continue to be in full compliance
with all legal requirements relative to architectural, barriers or
accommodations of disabled persons, including, without limitation,
applicable Architectural Barriers Legislation.
(s) Environmental. To Lessor's knowledge, except as set forth
on Schedule 6.1(s) hereto, there are no Environmental Conditions and
there is no Environmental Noncompliance with respect to the Hotel. All
material permits have been obtained, are valid and in good standing. To
Lessor's knowledge, all operations on or at each Hotel are and have
been conducted in material compliance with all applicable Environmental
Laws. Lessor has not received any Notification from any governmental
instrumentality seeking any information or alleging any violation of
any applicable law or Environmental Law. Lessor has not caused or
permitted the Hotel to be used to generate, manufacture, refine,
transport, treat, recycle, store, handle, dispose of, transfer,
produce, or process any Hazardous Materials or solid waste, except in
small quantities utilized in connection with
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routine maintenance or repair of the Hotel, all of which have been and
will be stored, used, handled, and disposed of in full compliance with
all Environmental Laws other than such noncompliance that, individually
or in the aggregate, will not have a material adverse effect on Lessee.
Lessor has not caused or permitted, and has no knowledge of, any
Release of any such Hazardous Materials on-site or off-site of any
Hotel other than such releases that, individually or in the aggregate,
will not have a material adverse effect on Lessee.
6.2 Deliverables. Prior to the Commencement Date, Lessor will
deliver to Lessee, or provide to Lessee, access to, true and correct copies of
each of the following to the extent not otherwise in the possession of Lessee
and to the extent provided to Lessor pursuant to the terms of the Agreement and
Plan of Merger by and between Lessor and Supertel Hospitality, Inc. dated as of
the date hereof.
(a) Leases. Each Lease covering or relating to the Hotel,
together with any amendments thereto or other documents creating
further obligations or agreements in connection therewith.
(b) Operating Statements. Operating statements covering the
Hotel for the fiscal year ended December 31, 1997.
(c) Tax Statements. Copies of the most recent ad valorem and
personal property tax statements with respect to the Hotel received.
(d) Plans and Specifications. A full set of "as-built" plans,
specifications and architectural floor plans for all of the
improvements to the extent available, and the name and address of the
project architects, if known.
(e) Operating Agreements. A list of all operating agreements
for the Hotel together with a copy of each operating agreement.
(f) List of Defects. A list of all defects or malfunctions
affecting any part of the Hotel and of which Lessor has knowledge with
respect to foundations, walls, roofs, heating, electrical, plumbing or
air conditioning equipment or systems, and drainage or sewage equipment
or systems other than such defects or malfunctions that, individually
or in the aggregate, will not result in a material adverse effect in
the operation of the Hotel.
(g) Insurance Policies. Copies of all of Lessor's fire, hazard
liability and other insurance policies currently in force with respect
to the Hotel.
(h) Commission Agreements. All leasing or other commission
agreements with respect to the Hotel and a list of all unpaid
commissions which identifies the payee, amount and date or event upon
which such commission will become due and payable.
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(i) Updates to the "Phase 1" environmental site assessment for
the Hotel.
(j) Any available written architectural review of the Hotel
(an "Architectural Review") prepared to determine the Hotel's
compliance with Architectural Barriers Legislation by an architect
certified as to such matters and reasonably acceptable to Lessee. Such
Architectural Review shall contain an estimate of the cost, if any, to
bring the Hotel into compliance with all Architectural Barriers
Legislation.
6.3 Property Reports. Lessor shall, as soon as possible but in
no event later than the Commencement Date, cause to be furnished to Lessee:
(a) Copies of the current Title Policies held by Lessor as
to the Hotel;
(b) Any Title Updates as to the Hotel where there is existing
title insurance and, at Lessor's option, title reports or updates to
legal opinions where there are legal opinions, in all cases dated as of
a date following the date hereof. At such time as Lessor causes the
Title Updates or such reports or opinions to be furnished to Lessee,
Lessor shall further cause to be furnished to Lessee true, correct, and
legible copies of all instruments referred to in each Title Update as
conditions or exceptions to title to the Hotel, including liens, which
have not previously been provided pursuant to Section 6.3(a), and a
certificate stating that a search has been made of the state and county
records wherein financing statements and security agreements are filed
pursuant to the Uniform Commercial Code of the state in which the Hotel
is located and that such search indicates all security interests or
liens of any kind or nature, including, but not limited to, any
equipment financing or leasing arrangements, that are claimed by any
person against the Hotel, or any part thereof; and
(c) A copy of any available Survey of each parcel of Land and
the Leased improvements located thereon, prepared by the Surveyor.
6.4 Ownership of the Leased Property. Lessee acknowledges that the
Leased Property is the property of Lessor and that Lessee has only the right to
the possession and use of the Leased Property upon the terms and conditions of
this Lease.
6.5 Lessee's Personal Property. On Commencement Date, all
Inventory will be transferred without consideration from Lessor to Lessee for
use on the Leased Property and Lessee will acquire and maintain throughout the
Term such Inventory as is required to operate the Leased Property in the manner
contemplated by this Lease. Lessee may (and shall as provided below), at its
expense, install, affix or assemble or place on any parcels of the Land or in
any of the Lease Improvements, any items of personal property (including
Inventory) owned by Lessee. Lessee, at the commencement of the Term, and from
time to time thereafter, shall provide Lessor with an accurate list of all such
items of Lessee's personal property (collectively, the "Lessee's Personal
Property"). Lessee may, subject to the first sentence of this Section 6.5 and
the conditions set forth below, remove any of Lessee's Personal Property set
forth on such list at any time during
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the Term or upon the expiration or any prior termination of the Term. All of
Lessee's Personal Property, other than Inventory, not removed by Lessee within
thirty (30) days following the expiration or earlier termination of the Term
shall be considered abandoned by Lessee and may be appropriated, sold, destroyed
or otherwise disposed of by Lessor without first giving Notice thereof to
Lessee, without any payment to Lessee and without any obligation to account
therefor. Lessee will, at its expense, restore the Leased Property to the
condition required by Section 9.1(c), including repair of all damage to the
Leased Property caused by the removal of Lessee's Personal Property by Lessee.
Upon Commencement Date, Lessee received all Inventory on hand at the Leased
Premises; upon the expiration or earlier termination of the Term, Lessee shall
leave all Inventory on hand at the Leased Property in amounts and condition
similar to the amounts and condition of the Inventory on hand upon Commencement
Date. Lessee may make such financing arrangements, title retention agreements,
leases or other agreements with respect to Lessee's Personal Property as it sees
fit provided that Lessee first advises Lessor of any such arrangement and such
arrangement expressly provides that in the event of Lessee's default thereunder,
Lessor (or its designee) may assume Lessee's obligations and rights under such
arrangement.
ARTICLE VII
7.1 RESERVED.
7.2 Use of the Leased Property.
(a) Lessor covenants that it will proceed with all due
diligence and will exercise reasonable efforts to obtain and deliver,
at Lessor's cost, to Lessee and thereafter Lessee will use its best
efforts to maintain all approvals needed to use and operate the Leased
Property and the Hotel under applicable local, state and federal law.
(b) Lessee shall use or cause to be used the Leased Property
as a hotel facility, and for such other uses as may be necessary or
incidental to such use or such other use as otherwise approved by
Lessor (the "Primary Intended Use"), which approval shall not be
unreasonably withheld. No use shall be made or permitted to be made of
the Leased Property, and no acts shall be done, which will cause the
cancellation or increase the premium of any insurance policy covering
the Leased Property or any part thereof (unless another adequate policy
satisfactory to Lessor is available and Lessee pays any premium
increase), nor shall Lessee sell or permit to be kept, used or sold in
or about the Leased Property any article which may be prohibited by law
or fire underwriter's regulations. Lessee shall cause compliance with
all of the requirements pertaining to the Leased Property of any
insurance board, association, organization or company necessary for the
maintenance of insurance, as herein provided, covering the Leased
Property and Lessee's Personal Property. The cost of compliance will be
as otherwise set forth in this Lease and the Master Lease Agreement.
(c) Subject to the terms of this Lease and the Master Lease
Agreement, Lessee covenants and agrees that during the Term it will,
unless prohibited by Applicable Law,
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(i) operate continuously the Leased Property as a hotel facility, (ii)
comply with the operational provisions of the Franchise Agreement,
(iii) not terminate or amend the Franchise Agreement without the
consent of Lessor (which shall not be unreasonably withheld or
delayed), (iv) use its best efforts to maintain appropriate
certifications and licenses for such use, and (v) seek to maximize the
Gross Revenues generated therefrom consistent with sound business
practices.
(d) Lessee shall not commit or suffer to be committed any
waste on the Leased Property, or in the Hotel, nor shall Lessee cause
or permit any nuisance thereon.
(e) Lessee shall neither suffer nor permit the Leased Property
or any portion thereof, or Lessee's Personal Property, to be used in
such a manner as (i) might reasonably tend to impair Lessor's (or
Lessee's, as the case may be) title thereto or to any portion thereof,
or (ii) may reasonably make possible a claim or claims of adverse usage
or adverse possession by the public, as such, or of implied dedication
of the Leased Property or any portion thereof, except as necessary in
the ordinary and prudent operation of the Hotel on the Leased Property.
7.3 Lessor to Grant Easements, etc. Lessor will, from time to
time, so long as no Event of Default has occurred and is continuing, at the
request of Lessee (but subject to the approval of Lessor, which approval shall
not be unreasonably withheld or delayed), (a) grant easements and other rights
in the nature of easements with respect to the Leased Property to third parties,
(b) release existing easements or other rights in the nature of easements which
are for the benefit of the Leased Property, (c) dedicate or transfer unimproved
portions of the Leased Property for road, highway or other public purposes, (d)
execute petitions to have the Leased Property annexed to any municipal
corporation or utility district, (e) execute amendments to any covenants and
restrictions affecting the Leased Property, and (f) execute and deliver to any
person any instrument appropriate to confirm or effect such grants, releases,
dedications, transfers, petitions and amendments (to the extent of its interests
in the Leased Property), but only upon delivery to Lessor of an Officer's
Certificate stating, in the opinion of such officer, that such grant, release,
dedication, transfer, petition or amendment does not interfere with the proper
conduct of the business of Lessee on the Leased Property and does not materially
reduce the value of the Leased Property.
ARTICLE VIII
8.1 Compliance with Legal and Insurance Requirements, etc. Except
as otherwise provided in this Lease or the Master Lease Agreement, Lessee will
promptly pay from the Personalty Reserve or cause to be paid or reimbursed from
FF&E Reserve, as applicable, amounts necessary to (a) comply with all applicable
Legal Requirements and Insurance Requirements in respect of the use, operation,
maintenance, repair and restoration of the Leased Property, and (b) prepare,
maintain and comply with all appropriate licenses and other authorizations
required for any use of the Leased Property and Lessee's Personal Property then
being made, and for the proper erection, installation, operation and maintenance
of the Leased Property or any part
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thereof. Reimbursement from FF&E Reserve shall be made within ten (10) days of
the date invoices or receipts for the amount of reimbursement are delivered to
Lessor.
8.2 Legal Requirement Covenants. Subject to Section 8.3(b),
Lessee covenants and agrees that the Leased Property and Lessee's Personal
Property shall not be used for any unlawful purpose, and that Lessee shall not
permit or suffer to exist any unlawful use of the Leased Property by others.
Lessee shall use its best efforts to acquire and maintain all appropriate
licenses, certifications, permits and other authorizations and approvals need to
operate the Leased Property in its customary manner for the Primary Intended
Use, and any other lawful use conducted on the Leased Property as may be
permitted from time to time hereunder. Lessee further covenants and agrees that
Lessee's use of the Leased Property and maintenance, alteration and operation of
the same, and all parts thereof, shall conform to all Legal Requirements, unless
the same are finally determined by a court of competent jurisdiction to be
unlawful (and Lessee shall require all sub-tenants, invitees or others within
its control so to comply with all Legal Requirements). Lessee may, however, upon
prior Notice to Lessor, contest the legality or applicability of any such Legal
Requirement or any licensure or certification decision if Lessee maintains such
action in good faith, with due diligence, without prejudice to Lessor's rights
hereunder, and at Lessee's sole expense. If by the terms of any such Legal
Requirement compliance therewith pending the prosecution of any such proceeding
may legally be delayed without the incurrence of any charge or liability of any
kind, or the filing of any lien, against the Hotel or Lessee's leasehold
interest therein and without subjecting Lessee or Lessor to any liability, civil
or criminal, for failure so to comply therewith, Lessee may delay compliance
therewith until the final determination of such proceeding. If any lien, charge
or civil or criminal liability would be incurred by reason of any such delay,
Lessee, on the prior written consent of Lessor, which consent shall not be
unreasonably withheld or delayed, may nonetheless contest as aforesaid and delay
as aforesaid provided that such delay would not subject Lessor to criminal
liability and Lessee both (a) furnishes to Lessor security reasonably
satisfactory to Lessor against any loss or injury by reason of such contest or
delay and (b) prosecutes the contest with due diligence and in good faith.
8.3 Environmental Covenants. Lessor and Lessee (in addition to,
and not in definition of, Lessee's covenants and undertakings in Sections 8.1
and 8.2 hereof) covenant and agree as follows:
(a) At all times during the Term and until such time as Lessee
vacates the Leased Property and surrenders possession of the same to
Lessor, Lessee shall comply in all material respects with all
Environmental Laws applicable to the Leased Property and the operations
thereon during such time. Lessee agrees to give Lessor and Lessor
agrees to give Lessee prompt Notice of each of the following of which
it has actual knowledge, to-wit: (A) all Environmental Liabilities, (B)
all pending, threatened or anticipated Proceedings, and all notices,
demands, requests or investigations, relating to any Environmental
Liability or relating to the issuance, revocation or change in any
Environmental Authorization required for operation of the Leased
Property; and (C) all Releases at, on, in, under or in any way
affecting the Leased Property.
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(b) Lessor hereby agrees to defend, indemnify and save
harmless any and all Lessee Indemnified Parties from and against any
and all Environmental Liabilities other than Environmental Liabilities
which were caused by the acts or grossly negligent failures to act of
Lessee.
(c) Lessee hereby agrees to defend, indemnify and save
harmless any and all Lessor Indemnified Parties from and against any
and all Environmental Liabilities which were caused by the acts or
grossly negligence failures to act of Lessee.
(d) If any Proceeding is brought against any Indemnified Party
in respect of an Environmental Liability with respect to which such
Indemnified Party may claim indemnification under either Section 8.3(b)
or (c), the Indemnifying Party, upon request, shall at its sole expense
resist and defend such Proceeding, or cause the same to be resisted and
defended by counsel designated by the Indemnified Party and approved by
the Indemnifying Party, which approval shall not be unreasonably
withheld or delayed; provided, however, that such approval shall not be
required in the case of defense by counsel designated by any insurance
company undertaking such defense pursuant to any applicable policy of
insurance. Each Indemnified Party shall have the right to employ
separate counsel in any such Proceeding and to participate in the
defense thereof, but the fees and expenses of such counsel will be at
the sole expense of such Indemnified Party unless such counsel has been
approved by the Indemnifying Party, which approval shall not be
unreasonably withheld or delayed. The Indemnifying Party shall not be
liable for any settlement of any such Proceeding made without its
consent, which shall not be unreasonably withheld or delayed, but if
settled with the consent of the Indemnifying Party, or if settled
without its consent (if its consent shall be unreasonably withheld or
delayed), or if there be a final, nonappealable judgment for an
adversary party in any such Proceeding, the Indemnifying Party shall
indemnify and hold harmless the Indemnified Parties from and against
any liabilities incurred by such Indemnified Parties by reason of such
settlement or judgement.
(e) At any time any Indemnified Party has reason to believe
circumstances exist which could reasonably result in an Environmental
Liability, upon reasonable prior Notice to Lessee stating such
Indemnified Party's basis for such belief, an Indemnified Party shall
be given immediate access to the Leased Property (including, without
limitation, the right to enter upon, investigate, drill wells, take
soil borings, excavate, monitor, test, cap and use available land for
the testing of remedial technologies), Lessee's employees and all
relevant documents and records regarding the matter as to which a
responsibility, liability or obligation is asserted or which is the
subject of any Proceeding; provided that such access may be conditioned
or restricted as may be reasonably necessary to ensure compliance with
law and the safety of personnel and facilities or to protect
confidential or privileged information. All Indemnified Parties
requesting such immediate access and cooperation shall endeavor to
coordinate such efforts to result in as minimal interruption of the
operation of the Leased Property as practicable.
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(f) The indemnification rights and obligations provided for in
this Article VIII shall be in addition to any indemnification rights
and obligations provided for elsewhere in this Lease.
(g) The indemnification rights and obligations provided for in
this Article VIII shall survive the termination of this Lease.
For purposes of this Section 8.3, all amounts for which any
Indemnified Party seeks indemnification shall be computed net of (i)
any actual income tax benefit resulting therefrom to such Indemnified
Party, (ii) any insurance proceeds received (net of tax effects) with
respect thereto, and (iii) any amounts recovered (net of tax effects)
from any third parties based on claims the Indemnified Party has
against such third parties which reduce the damages that would
otherwise be sustained; provided that in all cases, the timing of the
receipt or realization of insurance proceeds or income tax benefits or
recoveries from third parties shall be taken into account in
determining the amount of reduction of damages. Each Indemnified Party
agrees to use its reasonable efforts to pursue, or assign to Lessee or
Lessor, as the case may be, any claims or rights it may have against
any third party which would materially reduce the amount of damages
otherwise incurred by such Indemnified Party.
Notwithstanding anything to the contrary contained in this
Lease, if Lessor shall become entitled to the possession of the Leased
Property by virtue of the termination of the Lease or repossession of
the Leased Property, then Lessor may assign its indemnification rights
under Section 8.3 of this Lease (but not any other rights hereunder) to
any Person to whom Lessor subsequently transfers the Leased Property,
subject to the following conditions and limitations, each of which
shall be deemed to be incorporated into the terms of such assignment,
whether or not specifically referred to therein:
(A) The indemnification rights referred to in this
Section 8.3 may be assigned only if a known Environmental
Liability then exists or if a Proceeding is then pending or,
to the knowledge of Lessee or Lessor, then threatened with
respect to the Leased Property;
(B) Such indemnification rights shall be limited to
Environmental Liabilities relating to or specifically
affecting the Leased Property during the Term; and
(C) Any assignment of such indemnification rights
shall be limited to the immediate transferee of Lessor, and
shall not extend to any such transferee's successors or
assigns.
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ARTICLE IX
9.1 Maintenance, Repair and Improvements.
(a) Lessee will cause the Leased Property to be in good order
and repair, except for ordinary wear and tear (whether or not the need
for such repairs occurred as a result of Lessee's use, any prior use,
the elements or the age of the Leased Property, or any portion
thereof), and, in accord with the terms of the Master Lease Agreement
and except as otherwise provided in Section 9.1(b), Article XIV or
Article XV with reasonable promptness, will arrange for all necessary
and appropriate repairs, replacements and improvements thereto of every
kind and nature, whether interior or exterior, ordinary or
extraordinary, foreseen or unforeseen or arising by reason of a
condition existing prior to the commencement of the Term of this Lease
(concealed or otherwise), or required by any law, ordinance or rule or
regulation established by any Government agency having jurisdiction
over the Leased Property. All repairs shall, to the extent reasonably
achievable, be at least equivalent in quality to the original work.
Lessee will not take or omit to take any action, the taking or omission
of which might materially impair the value or the usefulness of the
Leased Property or any part thereof for its Primary Intended Use. The
FF&E Reserve established under the Master Lease Agreement shall be used
for all replacement, refurbishment, enhancement, and improvements of
the Furniture, Fixtures, and Equipment and for the capitalized repair,
refurbishment, replacement, and improvement of the Fixtures and of the
Leased Improvements. Lessor shall reimburse Lessee from the FF&E
Reserve for all such expenditures within ten (10) days of the date of
receipt by Lessor from Lessee of an invoice or receipt evidencing the
same as provided in the Master Lease Agreement. Lessee shall bear the
cost of repair of the Furniture, Fixtures and Equipment to the extent
the costs and expenses associated therewith are not capitalized
repairs.
(b) Notwithstanding Lessee's obligations under Section 9.1(a),
except to the extent of damage caused by Lessee's negligence or willful
misconduct or that of its employees or agents, Lessor shall be required
to bear the cost of maintaining any underground utilities and the
structural elements of the Leased Improvements, including exterior
walls and the roof of the Hotel. Lessor shall have the right to give,
record and post, as appropriate, notices of nonresponsibility under any
mechanic's lien laws now or hereafter existing.
(c) Nothing contained in this Lease and no action or inaction
by Lessor shall be construed as (i) constituting the request of Lessor,
expressed or implied, to any contractor, subcontractor, laborer,
materialman or vendor to or for the performance of any labor or
services or the furnishing of any materials or other property for the
construction, alteration, addition, repair or demolition of or to the
Leased Property or any part thereof, or (ii) giving Lessee any right,
power or permission to contract for or permit the performance of any
labor or services or the furnishing of any materials or other property
in such fashion as would permit the making of any claim against Lessor
in respect thereof
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or to make any agreement that may create, or in any way be the basis
for any right, title, interest, lien, claim or other encumbrance upon
the estate of Lessor in the Leased Property, or any portion thereof.
(d) Lessee will, upon the expiration or prior termination of
the Term, vacate and surrender the Leased Property to Lessor in the
condition in which the Leased Property was originally received from
Lessor, except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Lease or the Master
Lease Agreement and except for ordinary wear and tear (subject to the
obligation of Lessee to maintain the Leased Property in good order and
repair during the entire Term), or damage by casualty or condemnation.
9.2 Encroachments, Restrictions, etc. If any of the Leased
Improvements, at any time hereafter, materially encroach upon any property,
street or right-of-way adjacent to the Leased Property, or violate the
agreements or conditions contained in any lawful restrictive covenant or other
agreement affecting the Leased Property, or any part thereof, or impair the
rights of others under any easement or right-of-way to which the Leased Property
is subject, then promptly upon the request of Lessor or at the behest of any
person affected by any such encroachment, violation or impairment, Lessee shall
notify Lessor and Lessor shall, at Lessor's expense, either (a) obtain valid and
effective waivers or settlements of all claims, liabilities and damages
resulting from each such encroachment, violation or impairment, whether the same
shall affect Lessor or Lessee or (b) make such changes in the Leased
Improvements, and take such other actions, as Lessor in the good faith exercise
of its judgment deems reasonably practicable to remove such encroachment, and to
end such violation or impairment, including, if necessary, the alteration of any
of the Leased Improvements, and in any event take all such actions as may be
necessary in order to be able to continue the operation of the Leased
Improvements for the Primary Intended Use substantially in the manner and to the
extent the Leased Improvements were operated prior to the assertion of such
violation, impairment or encroachment. Any such alteration shall be made in
conformity with the applicable requirements of Article X.
9.3 Reimbursements. Lessor shall reimburse the Lessee for all
costs, fees and expenses incurred under Section 9.1 for which Lessor or the FF&
E Reserve are responsible within ten (10) days of the receipt from Lessee of
written notice of the amount due, as provided in the Master Lease Agreement,
failing which the amount due shall bear interest at the Overdue Rate. Lessee
shall have the remedy provided in the Master Lease Agreement.
ARTICLE X
10.1 Alterations. After receiving written approval of Lessor,
which approval shall not be unreasonably withheld or delayed, Lessee shall have
the right to make such additions, modifications or improvements to the Leased
Property from time to time as Lessee deems desirable for its permitted uses and
purposes, provided that such action will not significantly alter the character
or purposes or significantly detract from the value or operating efficiency
thereof and will not significantly impair the revenue-producing capability of
the Leased Property or adversely
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affect the ability of Lessee to comply with the provisions of this Lease. The
cost of such additions, modifications or improvements to the Leased Property
shall be reimbursed to Lessee from the FF&E Reserve within ten (10) days, and
all such additions, modifications and improvements shall be included under the
terms of this Lease and upon expiration or earlier termination of this Lease
shall pass to and become the property of Lessor. To the extent such alteration
is required in order for the Leased Premises to remain in compliance with the
Franchise Agreement, the cost of such alteration shall be paid out of the FF&E
Reserve to the extent available, and otherwise shall be paid by Lessor.
10.2 Salvage. Subject to the rights of any third parties, (e.g.
insurance companies), all materials which are scrapped or removed in connection
with the making of repairs required by Article IX or X shall be or become the
property of Lessee unless, within ten (10) days of receipt of Notice with
respect to the existence of such salvaged items, Lessor notifies Lessee prior to
removal that Lessor wants the items removed or scrapped in which case Lessor
shall arrange for their timely retrieval from the Premises.
10.3 Lessor Alterations. Lessor shall have the right, upon prior
written notice to Lessee, to make or cause to be made alterations to the Leased
Property required in connection with (a) Legal Requirements, (b) maintenance of
the Franchise Agreement, and (c) the performance by Lessor of its obligations
under this Lease. Lessor shall further have the right, but not the obligation,
to make such other additions to the Leased Property as it may reasonably deem
appropriate during the term of the Lease, subject to Lessee's approval which
shall not be unreasonably withheld. All such work unless necessitated by
Lessee's acts or omissions (in which event work shall be paid for by Lessee)
shall be performed at Lessor's expense and shall be done after reasonable notice
to and coordination with Lessee, so as to minimize any disruptions or
interference with the operation of the Facility. If Lessee withholds its consent
to any additions or other work which Lessor has the right, but not the
obligation, to make pursuant to the foregoing provisions of this Section 10.3,
the matter shall be referred to arbitration pursuant to the provisions of
Section 38.1.
10.4 Joint Use Agreements. If Lessee constructs additional
improvements that are connected to the Leased Property or share maintenance
facilities, HVAC, electrical, plumbing or other systems, utilities, parking or
other amenities, the parties shall enter into a mutually agreeable
cross-easement or joint use agreement, the form of which has been approved in
advance by Lessor, to make available necessary services and facilities in
connection with such additional improvements, to protect each of their
respective interests in the properties affected, and to provide for separate
ownership, use, and/or financing of such improvements.
10.5 Construction Affiliates. Lessor authorizes Lessee or an
affiliate of Lessee to perform repair, renovation, maintenance, improvement, and
construction work on the Leased Property. Lessor authorizes separate payment of
a construction profit to Lessee, or an affiliate of Lessee, in the amount equal
to seven and one-half percent (7.5%) of all costs of the work, including, but
not limited to, in-house costs directly related to the construction project, for
the construction of a new hotel, for any additions or improvements to the hotel,
or for the repair,
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maintenance or renovation of any of the Leased Property that Lessee's
construction division or Lessee's construction affiliate oversees or manages.
The parties may, by mutual agreement, agree to a different construction
management fee.
ARTICLE XI
11.1 Liens. Subject to the provisions of Article XII relating to
permitted contests, Lessee will not directly or indirectly create or allow to
remain and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Leased Property or any
attachment, levy, claim or encumbrance in respect of the Rent, not including,
however, (a) this Lease, (b) the matters included as exceptions in the title
policy insuring Lessor's interest in the Leased Property, (c) restrictions,
liens and other encumbrances which are consented to in writing by Lessor or any
easements granted pursuant to the provisions of Section 7.3 of this Lease, (d)
liens for those taxes upon Lessor or the Leased Property which Lessee is not
required to pay hereunder, (e) subleases permitted by Article XXII hereof, (f)
liens for Impositions or for sums resulting from noncompliance with Legal
Requirements so long as (i) the same are not yet payable or are payable without
the addition of any fine or penalty or (ii) such liens are in the process of
being contested as permitted by Article XII, (g) liens of mechanics, laborers,
materialmen, suppliers or vendors for sums either disputed or not yet due
provided that (i) the payment of such sums shall not be postponed under any
related contract for more than 60 days after the completion of the action giving
rise to such lien and such reserve or other appropriate provisions as shall be
required by law or generally accepted accounting principles shall have been made
therefor or (ii) any such liens are in the process of being contested as
permitted by Article XII hereof, and (h) any liens which arise from items the
costs for which are the responsibility of Lessor pursuant to this Lease.
ARTICLE XII
12.1 Permitted Contests. Lessee shall have the right to contest the
amount or validity of any Imposition to be paid by Lessee or any Legal
Requirement or Insurance Requirement or any lien, attachment, levy, encumbrance,
charge or claim ("Claims") not otherwise permitted by Article XI, by appropriate
legal proceedings in good faith and with due diligence (but this shall not be
deemed or construed in any way to relieve, modify or extend Lessee's covenants
to pay or its covenants to cause to be paid any such charges at the time and in
the manner as in this Article XII provided), on condition, however, that such
legal proceedings shall not operate to relieve Lessee from its obligations
hereunder and shall not cause the sale or risk the loss of any portion of the
Leased Property, or any part thereof, or cause Lessor or Lessee to be in default
under any mortgage, deed of trust, security deed or other agreement encumbering
the Leased Property or any interest therein. Upon the request of Lessor, Lessee
shall either (a) provide a bond or other assurance reasonably satisfactory to
Lessor that all Claims which may be assessed against the Leased Property
together with interest and penalties, if any, thereon will be paid, or (b)
deposit within the time otherwise required for payment with a bank or trust
company as trustee upon terms reasonably satisfactory to Lessor, as security for
the payment of such claims, money in an amount sufficient to pay the same,
together with interest and penalties in connection therewith, as to all
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Claims which may be assessed against or become a Claim on the Leased Property,
or any part thereof, in said legal proceedings. Lessee shall furnish Lessor and
any lender of Lessor with reasonable evidence of such deposit within five days
of the same. Lessor agrees to join in any such proceedings if the same be
required legally to prosecute such contest of the validity of such Claims;
provided, however, that Lessor shall not thereby be subjected to any liability
for the payment of any costs or expenses in connection with any proceedings
brought by Lessee; and Lessee covenants to indemnify and save harmless Lessor
from any such costs or expenses. Lessee shall be entitled to any refund of any
Claims and such charges and penalties or interest thereon which have been paid
by Lessee or paid by Lessor and for which Lessor has been fully reimbursed. In
the event that Lessee fails to pay any Claims when due or to provide the
security therefor as provided in this Article XII and diligently to prosecute
any contest of the same, Lessor may, upon ten days advance Notice to Lessee, pay
such charges together with any interest and penalties and the same shall be
repayable by Lessee as Additional Charges at the next Payment Date provided for
in this Lease; provided, however, that should the giving of such Notice risk
loss to the Leased Property or cause damage to Lessor, then Lessor shall give
such Notice as is practical under the circumstances. Lessor reserves the right
to contest any of the Claims at its expense not pursued by Lessee. Lessor and
Lessee agree to cooperate in coordinating the contest of any Claims.
ARTICLE XIII
13.1 General Insurance Requirements. During the Term of this Lease,
Lessee shall at all times keep the Leased Property insured in conjunction with
all Other Properties with the kinds and amounts of insurance described below, or
such other insurance coverage(s) as may be required by the Franchise Agreement.
This insurance shall be written by companies authorized to issue insurance in
the State. Each policy required to be carried by Lessee shall also provide,
subject to proper notice, that any loss otherwise payable thereunder shall be
payable notwithstanding (i) the occupation or use of any of the Leased Property
for purposes more hazardous than permitted by the provisions of such policy;
(ii) any foreclosure or other action or proceeding taken by any mortgagee of
Landlord pursuant to any provision of the mortgage held by such mortgagee upon
the happening of an event of default therein, or (iii) any change in title or
ownership of any of the Leased Property. The applicable policies must name
Lessor as additional insured and loss payee as their interest may appear. Lessee
shall be the named insured on all applicable policies. Losses shall be payable
to Lessor or Lessee as provided in this Lease. Evidence of insurance shall be
deposited with Lessor. The policies on the Leased Property, including the Leased
Improvements, Furniture, Fixtures and Equipment, and Personal Property, shall
include the following:
(a) Building insurance on the "Special Form" (formerly "All
Risk" form) (including earthquake and flood in reasonable amounts as
determined by Lessor) in an amount not less than the then full
replacement cost (as defined in Section 13.2), if rebuilt, thereof or
such other amount which is acceptable to Lessor and Lessee, and
personal property insurance (on other than Lessee's Personal Property)
on the "Special Form" in the amount of the full replacement cost
thereof;
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(b) Insurance for loss or damage (direct and indirect) from
steam boilers, pressure vessels or similar apparatus, air conditioning
systems, piping and machinery and sprinklers;
(c) Commercial General Liability insurance, with amounts not
less than $1,000,000 each occurrence and $2,000,000 in the aggregate
inclusive of the following: bodily injury, death, property damage,
personal and advertising injury, fire legal liability and Products and
Completed Operations; $1,000,000 per occurrence and aggregate for
liquor law or "dram shop" liability, if liquor or alcoholic beverages
are served or sold on the Leased Property;
(d) Fidelity bonds or blanket crime policies with limits and
deductibles as may be reasonably determined by Lessor, covering
Lessee's employees in job classifications normally bonded under prudent
hotel management practices in the United States or otherwise required
by law;
(e) Vehicle liability insurance for owned, non-owned, and
hired vehicles, in the amount of $1,000,000 per accident;
(f) Guest's property insurance covering personal property of
others while on the Leased Property for which Lessor or Lessee is
legally responsible with a limit of not less than $5,000 in any one
occurrence or $25,000 annual aggregate;
(g) Excess liability insurance limits with amounts not less
than $10,000,000 and scheduling both general liability and vehicle
liability as underlying policies.
13.2 Replacement Cost. The term "full replacement cost" as used
herein shall mean the actual replacement cost of the Leased Property requiring
replacement, which is based on an agreed value, if replaced, including an
increased cost of construction endorsement, if available, and the cost of debris
removal. Lessee agrees to carry a limit of insurance equal to or greater than
the replacement cost. In the event either party believes that full replacement
cost (the then-replacement cost less such exclusions) has increased or decreased
at any time during the Lease Term, it shall have the right to have such full
replacement cost re-determined.
13.3 Worker's Compensation. Lessee, at its sole cost, shall at all
times maintain adequate worker's compensation insurance coverage for all
persons, if any, employed by Lessee on the Leased Property. Such worker's
compensation insurance shall be in accordance with the requirements of
applicable local, state and federal law.
13.4 Waiver of Subrogation. All insurance policies carried by
Lessee and by Lessor, if any, covering the Lease, the Leased Property, the
Furniture, Fixtures and Equipment, the Hotel or Lessee's Personal Property,
including, without limitation, contents, fire and casualty insurance, shall, if
allowed by the relevant insurance companies, expressly waive any right of
subrogation on the part of the insurer against Lessor or Lessee, as the case may
be. The parties hereto agree that their
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policies will include such waiver clause or endorsement so long as the same are
obtainable with reasonable additional cost, and in the event of such an extra
charge the other party, at its election, may pay the same, but shall not be
obligated to do so.
13.5 Form Satisfactory, etc. All of the policies of insurance
referred to in this Article XIII to be maintained by Lessee shall be written in
a form with deductibles and by insurance companies satisfactory to Lessor.
Lessee shall pay all of the premiums therefor, and deliver certificates of
insurance to Lessor fifteen (15) days prior to the anniversary or effective
date, and in the event of the failure of Lessee either to effect such insurance
as herein called for or to pay the premiums therefor, or to deliver such
policies or certificates thereof to Lessor at the times required, Lessor shall
be entitled, but shall have no obligation, to effect such insurance and pay the
premiums therefor, and Lessee shall reimburse Lessor for any premium or premiums
paid by Lessor for the coverages required of Lessee under this Article XIII upon
written demand therefor, and Lessee's failure to repay the same within 30 days
after the Notice of such failure from Lessor shall constitute an Event of
Default within the meaning of Section 16.1. Each insurer mentioned in this
Article XIII shall agree, by endorsement to the policy or policies issued by it,
or by independent instrument furnished to Lessor, that it will give to Lessor 30
days' written notice before the policy or policies in question shall be
materially altered, allowed to expire or canceled. A copy of insurance policies
will be provided by Lessee to Lessor within a reasonable amount of time.
13.6 Increase in Limits. If Lessor at any time deems the limits
of the personal injury or property damage under the comprehensive public
liability insurance then carried to be either excessive or insufficient, Lessee
shall endeavor in good faith to agree on the proper and reasonable limits for
such insurance to be carried and such insurance shall thereafter be carried with
the limits thus agreed on until further change pursuant to the provisions of
this Article XIII.
13.7 Blanket Policy. Notwithstanding anything to the contrary
contained in this Article XIII, Lessee may bring the insurance provided for
herein within the coverage of a so-called blanket policy or policies of
insurance carried and maintained by Lessee; provided, however, that the coverage
afforded to Lessor will not be reduced or diminished or otherwise be different
from that which would exist under a separate policy meeting all other
requirements of this Lease by reason of the use of such blanket policy of
insurance, and provided further that the requirements of this Article XIII are
otherwise satisfied.
13.8 Reports On Insurance Claims. Lessee shall promptly
investigate and make a complete and timely written report to the appropriate
insurance company as to all accidents, claims for damage relating to the
ownership, operation and maintenance of the Hotel, any damage or destruction to
the Hotel and the estimated cost of repair thereof and shall prepare any and
all reports required by any insurance company in connection therewith. Lessee
shall provide Lessor notice of any such accident, claim, damage, or destruction
promptly after the occurrence thereof and at least on a quarterly basis. All
such reports shall be timely filed with the insurance company as required under
the terms of the insurance policy involved, and a final copy of such report
shall be furnished to Lessor. Lessee shall be authorized to adjust, settle or
compromise any insurance loss, or to execute proofs of such loss, in the per
occurrence amount of $25,000.
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ARTICLE XIV
14.1 nsurance Proceeds. All proceeds payable by reason of any loss
or damage to the Leased Property, or any portion thereof, and insured under any
policy of insurance required by Article XIII of this Lease shall be paid to
Lessor or to any other person designated by Lessor, provided such person agrees
to apply such proceeds in accordance with the terms of this Lease, and held in
trust by Lessor, or such other person in an interest-bearing account, shall be
made available, if applicable, for the purpose of reconstruction, replacement,
or repair, as the case may be, of any damage to or destruction of the Leased
Property, or any portion thereof, and, if applicable, shall be paid out to
Lessee by Lessor from time to time for the reasonable costs of such
reconstruction, replacement, or repair upon satisfaction of reasonable terms and
conditions specified by Lessor. Lessor, or its designee, shall reimburse Lessee
the costs of reconstruction, replacement, and repair incurred by Lessee,
together with any construction allowed to Lessee or its Affiliate by Section
10.5 within ten (10) days of the date of receipt by Lessor of invoices or
receipts for the work performed and goods and services provided. Any excess
proceeds of insurance (and accrued interest) remaining after the completion of
the restoration or reconstruction of the Leased Property, as hereinafter set
forth, shall be paid to Lessor. If neither Lessor nor Lessee is required or
elects to repair and restore, and the Lease is terminated as described in
Section 14.2, all such insurance proceeds shall be retained by Lessor. All
salvage resulting from any risk covered by insurance shall be handled in the
manner provided in Section 10.2.
14.2 Reconstruction in the Event of Damage or Destruction Covered
by Insurance.
(a) If during the Term the Leased Property is totally or
partially destroyed by a risk covered by the insurance described in
Article XIII and the Hotel thereby is rendered Unsuitable for its
Primary Intended Use, Lessor, at its sole option shall either (i)
restore the Hotel within a nine (9) month period from date of damage to
substantially the same quality and condition as existed immediately
prior to the damage and so that it is no longer Unsuitable for its
Primary Intended Use and such destruction shall not terminate this
Lease and all obligations of Lessee hereunder shall remain unabated
during such restoration period or (ii) terminate this Lease as of the
date of the casualty and neither Lessor nor Lessee shall have any
further liability hereunder, except for any liabilities which have
arisen prior to or which survive such termination, and Lessor shall be
entitled to retain all insurance proceeds except for any amount thereof
paid with respect to Lessee's Personal Property. Lessor shall give
Lessee notice of its decision within thirty (30) days of the event of
destruction. Regardless of whether Lessor terminates this Lease
pursuant to the provisions of this Section 14.2, the Base Rent under
the Master Lease Agreement shall be reduced as provided in the Master
Lease Agreement. If Lessor terminates this Lease pursuant to the
provisions of this Section 14.2, the Percentage Rent thresholds under
the Master Lease Agreement shall be adjusted as provided in the Master
Lease Agreement.
(b) If during the Term the Leased Property is partially
destroyed by a risk covered by the insurance described in Article XIII,
but the Hotel is not thereby rendered Unsuitable for its Primary
Intended Use, Lessor shall, or Lessee, at the request of and at the
expense of
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Lessor, shall restore the Hotel to substantially the same condition as
existed immediately before the damage or destruction and otherwise in
accordance with this terms of the Lease. Such damage or destruction
shall not terminate this Lease; provided, however, that if Lessee
cannot within a reasonable time obtain all necessary government
approvals, including building permits, licenses and conditional use
permits, after diligent efforts to do so, to perform all required
repair and restoration work and to operate the Hotel for its Primary
Intended Use in substantially the same manner as that existing
immediately prior to such damage or destruction and otherwise in
accordance with the terms of the Lease either Lessor or Lessee may
terminate this Lease upon notice to the other. If Lessor or Lessee
restores the Hotel, the insurance proceeds shall be paid for the
reasonable costs of such restoration. Except for any amounts thereof
paid with respect to Lessee's Personal Property which shall be paid to
Lessee, any excess proceeds remaining after such restoration shall be
paid to the party undertaking the restoration.
(c) If the cost of the repair or restoration exceeds the
amount of proceeds received from the insurance maintained as required
under Article XIII, Lessor shall be obligated to contribute any excess
amounts needed to restore the Hotel. Such difference shall be paid by
Lessor, together with any other insurance proceeds, for application to
the cost of repair, replacement, and restoration in accord with Article
XIV.
14.3 Reconstruction in the Event of Damage or Destruction Not
Covered by Insurance. If during the Term the Hotel is totally or materially
destroyed by a risk not covered by the insurance described in Article XIII,
whether or not such damage or destruction renders the Hotel Unsuitable for its
Primary intended Use, Lessor at its option shall either (a) at Lessor's sole
cost and expense, restore the Hotel to substantially the same condition it was
in immediately before such damage or destruction and such damage or destruction
shall not terminate this Lease, or (b) terminate this Lease and neither Lessor
nor Lessee shall have any further liability hereunder except for liabilities
which have arisen or occurred prior to such termination and those which
expressly survive termination of this Lease. In the event of termination of this
Lease as provided here, the Base Rent and the Percentage Rent thresholds under
the Master Lease Agreement shall be reduced as provided in the Master Lease
Agreement. If such damage or destruction is not material, Lessor shall, at
Lessor's cost, restore the Hotel to substantially the same condition as existed
immediately before the damage or destruction and otherwise in accordance with
the terms of this Lease.
14.4 Lessee's Property. All insurance proceeds payable by reason
of any loss of or damage to any of Lessee's Personal Property and the business
interruption insurance maintained for the benefit of Lessee shall be paid to
Lessee.
14.5 Abatement of Rent. Except as specifically provided herein, any
damage or destruction due to casualty notwithstanding, this Lease shall remain
in full force and effect and Lessee's obligation to pay Rent required by this
Lease shall remain unabated by any damage or destruction. If this Lease has not
been terminated by Lessor and if and to the extent that any damage or
destruction results in a reduction of Gross Revenues, which would otherwise be
realizable from the operation of the Hotel, then Lessee shall continue to pay
Base Rent as under this Lease and shall
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be entitled to receive all proceeds from loss of income or business interruption
insurance during the period of restoration.
14.6 Construction by Lessee or its Affiliate. Lessee shall be
entitled to the construction profit described in Section 10.5 for any
restoration, replacement, and repair work after casualty loss.
ARTICLE XV
15.1 Definitions.
(a) "Award" means all compensation, sums or anything of value
awarded, paid or received on a total or partial Condemnation.
(b) "Condemnation" means a taking resulting from (i) the
exercise of any Government power, whether by legal proceedings or
otherwise, by a Condemnor, and (ii) a voluntary sale or transfer by
Lessor to any Condemnor, either under threat of condemnation or while
legal proceedings for condemnation are pending.
(c) "Condemnor" means any public or quasi-public authority, or
private corporation or individual, having the power of Condemnation.
(d) "Date of Taking" means the date the Condemnor has the
right to possession of the property being condemned.
15.2 Parties' Rights and Obligations. If during the Term there is
any Condemnation of all or any part of the Leased Property or any interest in
this Lease, the rights and obligations of Lessor and Lessee shall be determined
by this Article XV.
15.3 Total Taking. If title to the fee of the whole of the Leased
Property is condemned by any Condemnor, this Lease shall cease and terminate as
of the Date of Taking by the Condemnor. If title to the fee of less than the
whole of the Leased Property is so taken or condemned, which nevertheless
renders the Leased Property Unsuitable or Uneconomic for its Primary Intended
Use, Lessee and Lessor shall each have the option, by notice to the other, at
any time prior to the Date of Taking, to terminate this Lease as of the Date of
Taking. Upon such date, if such Notice has been given, this Lease shall
thereupon cease and terminate. All Base Rent, Percentage Rent and Additional
Charges paid or payable by Lessee, with respect to this Hotel shall be
apportioned as of the Date of Taking, and Lessee shall promptly pay Lessor such
amounts. Base Rent attributable to this property and the Percentage Rent
threshold as affected by this Hotel shall be determined in accord with the
Master Lease Agreement and shall reduce Base Rent due under the Master Lease
Agreement.
15.4 Allocation of Award. In any Condemnation proceedings Lessor
and Lessee shall each seek its own Award based upon its own respective interest,
at its respective expense.
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15.5 Partial Taking.
(a) If title to less than the whole of the Leased Property is
condemned, and the Leased Property is still suitable for its Primary
Intended Use, and not Uneconomic for its Primary Intended Use, or if
Lessor is entitled but elects not to terminate this Lease as provided
in Section 15.3, then Lessor or, at Lessor's cost and election, Lessee
shall, with all reasonable dispatch and to the extent that the Award,
together with any amount provided by Lessor at its discretion, is
sufficient therefor and is made available to Lessee without any
contribution from Lessee, restore the untaken portion of any Leased
Improvements so that such Leased Improvements constitute a complete
architectural unit of the same general character, quality, and
condition (as nearly as may be possible under the circumstances) as the
Leased Improvements existing immediately prior to the Condemnation.
Lessor shall contribute to the cost of restoration that part of its
Award specifically allocated to such restoration, if any, together with
severance and other damages awarded for the taken Leased Improvements;
provided, however, that the amount of such contribution shall not
exceed such cost.
(b) In the event of a partial Taking as described in Section
15.5(a), which does not result in a termination of this Lease by
Lessor, the Base Rent, as applicable, shall be abated in the manner and
to the extent that is fair, just and equitable to both Lessee and
Lessor, taking into consideration, among other relevant factors, the
number of usable rooms, the amount of square footage, or the revenues
affected by such partial Taking. If Lessor and Lessee are unable to
agree upon the amount of such abatement within thirty (30) days after
such partial Taking, the matter shall be submitted to Arbitration as
provided for in Article XXXVIII hereof.
15.6 Temporary Taking. If the whole or any part of the Leased
property (other than the fee) or of Lessee's interest under this Lease is
condemned by any Condemnor for its temporary use or occupancy, this Lease shall
not terminate by reason thereof, and Lessee shall continue to pay, in the manner
and at the terms herein specified, the full amounts of Base Rent and Additional
Charges. Except only to the extent that Lessee may be prevented from so doing
pursuant to the terms of the order of the Condemnor, Lessee shall continue to
perform and observe all of the other terms, covenants, conditions and
obligations hereof on the part of Lessee to be performed and observed, as though
such Condemnation had not occurred. In the event of any Condemnation as in this
Section 15.6 described, the entire amount of any Award made for such
Condemnation allocable to the Term, whether paid by way of damages, rent or
otherwise, shall be paid to Lessee. Lessee covenants that upon the termination
of any such period of temporary use or occupancy it will, to the extent that its
Award made specifically with respect to restoration, repair, and replacement of
the Leased Premises is sufficient therefor and subject to Lessor's contribution
as set forth below, restore the Leased Property as nearly as may be reasonably
possible to the condition in which the same was immediately prior to such
Condemnation, unless such period of temporary use or occupancy extends beyond
the expiration of the Term, in which case Lessee shall not be required to make
such restoration. If restoration is required hereunder, Lessor shall contribute
to the cost of such
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restoration that portion of its entire Award that is specifically allocated to
such restoration in the judgment or order of the court, if any.
15.7 Lessee's Construction. Lessee or its construction affiliate
shall be entitled to construction profit provided in Section 10.5 hereof for any
construction work performed or managed hereunder.
ARTICLE XVI
16.1 Event of Default. if any one or more the following events
(individually, an "Event of Default" ) occurs:
(a) if Lessee fails to make payment of the Base Rent or
Percentage Rent within ten days after the same becomes due and payable;
(b) if Lessee fails to observe or perform any other term,
covenant or condition of this Lease which is not cured by Lessee within
a period of 30 days after receipt by Lessee of written Notice thereof
from Lessor specifying the default, unless such failure is curable but
cannot with due diligence be cured within a period of 30 days, in which
case it shall not be deemed an Event of Default if Lessee proceeds
promptly and with due diligence to cure the failure and diligently
completes the curing thereof; provided, however, in no event shall such
cure period extend beyond 120 days after such Notice.
(c) if Lessee shall, subject to cure, deferral, and objection
periods, (i) be unable to pay its debts as they become due, (ii) file,
or consent by answer or otherwise to the filing against it of, a
petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, (iii) make an
assignment for the benefit of its creditors, (iv) consent to the
appointment of a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial
part of its assets, (v) be adjudicated insolvent, or (vi) take
corporate action for the purpose of any of the foregoing; or if a court
or governmental authority of competent jurisdiction shall enter an
order appointing, without consent by Lessee, a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its assets, or if an order for
relief shall be entered in any case or proceeding for liquidation or
reorganization or otherwise to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of Lessee, or if any petition for any such
relief shall be filed against Lessee and such petition shall not be
dismissed within 120 days;
(d) if Lessee is liquidated or dissolved, or begins
proceedings toward such liquidation or dissolution, or, in any manner,
permits the sale or divestiture of substantially all of its assets;
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(e) except as otherwise provided herein or in the Master Lease
Agreement, if the estate or interest of Lessee in the Leased Property
or any part thereof is voluntarily or involuntarily transferred,
assigned, conveyed, levied upon or attached in any Proceeding (unless
Lessee is contesting such lien or attachment in good faith in
accordance with Article XII hereof);
(f) if, except as a result of damage, destruction or a partial
or complete Condemnation, Lessee voluntarily ceases operations on the
Leased Property for a period in excess of 30 consecutive days; or
(g) if an event of default has been declared by the franchisor
under the Franchise Agreement with respect to the Hotel as a result of
any action or failure to act by Lessee or any Person with whom Lessee
contracts for management services at the Hotel, and such default is not
cured by the later of (i) forty-five (45) days following Notice from
Lessor unless the cure of such default takes a longer period of time
when diligently pursued by Lessee, then such date upon which the cure
can be reasonably completed or (ii) such later date as is allowed for
Lessee under the Franchise Agreement to avoid termination of the
Franchise Agreement by the franchisor;
then, and in any such event, Lessor may exercise one or more remedies available
to it herein or at law or in equity, including, without limitation, its right to
terminate this Lease by giving Lessee not less than ten days' Notice of such
termination.
An Event of Default under clauses (c) or (d) above shall constitute an
Event of Default hereunder and under all Other Leases. All other Events of
Default set forth in this Section 16.1 shall be Events of Default only under
this Lease.
If litigation is commenced with respect to any alleged default under
this Lease, the prevailing party in such litigation shall receive, in addition
to its damages incurred, such sum as the court shall determine as its reasonable
attorneys' fees, and all costs and expenses incurred in connection therewith.
No Event of Default (other than a failure to make a payment of money)
shall be deemed to exist under clauses (b), (f) or (g) during any time the
curing thereof is prevented by an Unavoidable Delay, provided that upon the
cessation of such Unavoidable Delay, Lessee remedies such default or Event of
Default without further delay.
16.2 Remedies. Upon the occurrence of an Event of Default, Lessor
shall have the right, at Lessor's option, to elect upon fourteen (14) days
Notice to Lessee to terminate this Lease, in which event Lessee shall thereupon
surrender the Leased Property to Lessor, and, if Lessee fails to so surrender,
Lessor shall have the right, without further notice, to enter upon and take
possession of the Leased Property and to expel or remove Lessee and its effects
without being liable for prosecution or any claim for damages therefor; and
Lessee shall, and hereby agrees to, indemnify Lessor the loss and damage which
Lessor suffers by reason of such termination in an amount equal
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to the total of (i) the reasonable costs of recovering the Leased Property in
the event that Lessee does not promptly surrender the Leased Property, and all
other reasonable expenses incurred by Lessor in connection with Lessee's
default; and (ii) the unpaid Base Rent earned as of the date of termination,
plus interest at the Overdue Rate accruing after the due date; and (iii) a sum
equal to the present value (using a factor for such purpose equal to the
interest payable at the time on ten (10) year treasury notes, plus four percent
(4%) per annum) of the Base Rent for the Leased Premises which Lessor would have
received under this Lease for the remainder of the Term then in effect, less
Base Rent which Lessee is able to prove Lessor could have received from the
balance of the Term then in effect (the "Termination Value"). Lessor
acknowledges that it has a duty to mitigate its damages by using its best
efforts to relet the Hotel at or above the Base Rent applicable to this Hotel;
16.3 Damages. In the event of any such termination, Lessee shall
forthwith pay to Lessor all Rent due and payable with respect to the Leased
Property to and including the date of such termination.
16.4 Application of Funds. Subject to Lessee's first right, if
any, to designate the application of funds, any payments received by Lessor
under any of the provisions of this Lease during the existence or continuance
of any Event of Default shall be applied to Lessee's obligations in the order
that Lessor may determine or as may be prescribed by the laws of the State.
ARTICLE XVII
17.1 Lessor's Right to Cure Lessee's Default. If Lessee fails to
make any payment or to perform any act required to be made or performed under
this Lease, including, without limitation, Lessee's failure to comply with the
terms of any Franchise Agreement, and fails to cure the same within the relevant
time periods provided in Section 16.1, Lessor, without waiving or releasing any
obligation of Lessee, and without waiving or releasing any obligation or default
may (but shall be under no obligation to) at any time thereafter make such
payment or perform such act for the account and at the expense of Lessee, and
may, to the extent permitted by law, enter upon the Leased Property for such
purpose and, subject to Section 16.4, take all such action thereon as, in
Lessor's opinion, may be necessary or appropriate therefor. No such entry shall
be deemed an eviction of Lessee. All sums so paid by Lessor and all costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses, in each case to the extent permitted by law) so incurred, together
with a late charge thereon (to the extent permitted by law) at the Overdue Rate
from the date on which such sums or expenses are paid or incurred by Lessors,
shall be paid by Lessee to Lessor on demand. The obligations of Lessee and
rights of Lessor contained in this Article shall survive the expiration of
earlier termination of this Lease.
ARTICLE XVIII
18.1 Personal Property Limitation. Anything contained in this
Lease to the contrary notwithstanding, the average of the adjusted tax bases
of the items of Lessor's personal property that are leased to Lessee under this
Lease at the beginning and at the end of any Lease Year shall not exceed 15% of
the average of the aggregate adjusted tax bases of the Leased Property at the
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beginning and at the end of such Lease Year (the "Personal Property
Limitation"). Lessor and Lessee shall at all times cooperate in good faith and
use their best efforts to permit Lessor to comply with the Personal Property
Limitation, which compliance may include, by way of example only and not by way
of limitation or obligation, the purchase by Lessee at fair market value of
personal property in excess of the Personal Property Limitation. All such
compliance shall be effected in a manner which has no net economic detriment to
Lessee and will not jeopardize Lessor's status as a real estate investment trust
under the applicable provisions of the Code. This Section 18.1 is intended to
ensure that the Rent qualifies as "rents from real property," within the meaning
of Section 856(d) of the Code, or any similar or successor provisions thereto,
and shall be interpreted in a manner consistent with such intent.
18.2 Sublease Rent Limitation. Anything contained in this Lease to
the contrary notwithstanding, Lessee shall not sublet the Leased Property on any
basis such that the rental to be paid by the sublessee thereunder would be
based, in whole or in part, on either (a) the income or profits derived by the
business activities of the sublessee, or (b) any other formula such that any
portion of the Rent would fail to qualify as "rents from real property" within
the meaning of Section 856(d) of the Code, or any similar or successor provision
thereto.
18.3 Sublease Tenant Limitation. Anything contained in this Lease
to contrary notwithstanding, Lessee shall not sublease the Leased Property to,
or enter into any similar arrangement with, any Person in which Lessor owns,
directly or indirectly, a 10% or more interest, within the meaning of Section
856(d)(2)(B) of the Code, or any similar or successor provisions thereto.
18.4 Lessee Ownership Limitations. Anything contained in this
Lease to the contrary notwithstanding Lessor shall not take, or permit an
Affiliate of Lessor to take, any action that would cause Lessor to own,
directly or indirectly, a 10% or more interest in the Lessee within the meaning
of Section 856(d)(2)(B) of the Code, or any similar or successor provision
thereto. Anything contained in this Lease to the contrary notwithstanding,
Lessee shall not take, or permit an Affiliate of Lessee to take, any action
that would cause Lessor to own, directly or indirectly, a 10% or more interest
in the Lessee within the meaning of Section 856(d)(2)(B) of the Code, or any
similar or successor provision thereto.
18.5 Lessee Officer and Employee Limitation. If a Person serves as
both (a) a director of Lessee (or any Person who furnishes or renders services
to the tenants of the Leased Property, or manages or operates the Leased
Property) and (b) a trust manager and officer (or employee) of Lessor, that
Person shall not receive any compensation for serving as a director of Lessee
(or any Person who furnishes or renders services to the tenants of the Leased
Property, or manages or operates the Leased Property). Furthermore, if a Person
serves as both (a) a trust manager of Lessor and (b) a director and officer (or
employee) of Lessee (or any Person who furnishes or renders services to the
tenants of the Leased Property, or manages or operates the Leased Property),
that Person shall not receive any compensation for serving as a director of
Lessee (or any Person who furnishes or renders services to the tenants of the
Leased Property, or manages or operates the Leased Property).
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ARTICLE XIX
19.1 Holding Over. If Lessee for any reason remains in possession
of the Leased Property after the expiration or earlier termination of the Term,
such possession shall be as a tenant at sufferance during which time Lessee
shall pay Rent as set forth herein. During such period, Lessee shall be
obligated to perform and observe all of the terms, covenants and conditions of
this Lease, but shall have no rights hereunder other than the right, to the
extent given by law to tenancies at sufferance, to continue its occupancy and
use of the Leased Property. Nothing contained herein shall constitute the
consent, express or implied, of Lessor to the holding over of Lessee after the
expiration or earlier termination of this Lease.
ARTICLE XX
20.1 RESERVED.
ARTICLE XXI
21.1 Indemnification. Notwithstanding the existence of any
insurance, and without regard to the policy limits of any such insurance or
self-insurance, but subject to Section 16.4 and Article VIII, Lessee will
protect, indemnify, hold harmless and defend Lessor from and against all
liabilities, obligations, claims, damages, penalties causes of action, costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses), to the extent permitted by law, imposed upon or incurred by or
asserted against Lessor Indemnified Parties by reason of: (a) any accident,
injury to or death of persons or loss of damage to property occurring during the
Term on or about the Leased Property or Lessee's Personal Property or adjoining
sidewalks, including, without limitation, any claims under any liquor liability,
"dram shop" or similar laws, (b) any litigation, proceeding or claim by
governmental entities or other third parties to which a Lessor Indemnified Party
is made a party or participant related to such use, misuse, non-use, management,
maintenance, or repair thereof during the Term by Lessee or any of its agents,
employees or invitees, including any failure of lessee or any of its agents,
employees or invitees to perform any obligations under this Lease or imposed by
applicable law (other than arising out of Condemnation proceedings), (c) any
Impositions that are the obligations of Lessee pursuant to the applicable
provisions of this Lease, (d) any failure on the part of Lessee to perform or
comply with any of the terms of this Lease, and (e) the non-performance of any
of the terms and provisions of any and all existing and future subleases of the
Leased Property to be performed by the Landlord thereunder.
Lessor shall indemnify, save harmless and defend Lessee Indemnified
Parties from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses imposed upon or incurred by or
asserted against Lessee Indemnified Parties as a result of (a) the gross
negligence or willful misconduct of Lessor arising in connection with this Lease
or (b) any failure on the part of Lessor to perform or comply with any of the
terms of this Lease or (c) any matters arising either before the Commencement
Date or after the end of the Term.
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Any amounts that become payable by an Indemnifying Party if determined
by litigation or otherwise, and if not timely paid, shall bear a late charge (to
the extent permitted by law) at the Overdue Rate from the date of such
determination to the date of payment. An Indemnifying Party, at its expense,
shall contest, resist and defend any such claim, action or proceeding asserted
or instituted against the Indemnified Party. The Indemnified Party, at its
expense, shall be entitled to participate in any such claim, action, or
proceeding, and the Indemnifying Party may not compromise or otherwise dispose
of the same without the consent of the Indemnified Party, which may not be
unreasonably withheld or delayed. Nothing herein shall be construed as
indemnifying a Lessor Indemnified Party against its own (or Lessor's) grossly
negligent acts or omissions or willful misconduct.
Lessee's or Lessor's liability for a breach of the provisions of this
Article XXI shall survive any termination of this Lease.
ARTICLE XXII
22.1 Subletting and Assignment. Subject to the provisions of
Article XIX and Sections 22.2 and 22.3 and any other express conditions or
limitations set forth herein, Lessee may, but only with the consent of Lessor
(which shall not be unreasonably withheld or delayed), (a) transfer, sell,
convey, or assign this Lease or sublet all or any part of the Leased Property,
or (b) sublet any retail or restaurant portion of the Leased Improvements in the
normal course of the Primary Intended Use; provided that any subletting to any
party other than an Affiliate of Lessee shall not individually as to any one
such subletting, or in the aggregate, materially diminish the actual or
potential Percentage Rent payable under this Lease. In the case of a subletting,
the sublessee shall comply with the provisions of Sections 22.2 and 22.3, and in
the case of an assignment, the assignee shall assume in writing and agree to
keep and perform all of the terms of this Lease on the part of Lessee to be kept
and performed and shall be, and become, jointly and severally liable with Lessee
for the performance thereof. In case of either an assignment or subletting made
during the Term, Lessee shall remain liable for the prompt payment of the Rent
and for the performance and observance of all of the covenants and conditions to
be performed by Lessee hereunder. An original counterpart of each such sublease
and assignment and assumption, duly executed by Lessee and such sublessee or
assignee, as the case may be, in form and substance satisfactory to Lessor,
shall be delivered promptly to Lessor.
22.2 Attornment. Lessee shall insert in each sublease permitted
under Section 22.1 provisions to the effect that (a) such sublease is subject
and subordinate to all of the terms and provisions of this Lease and to the
rights of Lessor hereunder, (b) if this Lease terminates before the expiration
of such sublease, the sublessee thereunder will, at Lessor's option, attorn to
Lessor and waive any right the sublessee may have to terminate the sublease or
to surrender possession thereunder as a result of the termination of this Lease,
and (c) if the sublessee receives a Notice from Lessor or Lessor's assignees, if
any, stating that an uncured Event of Default exists under this Lease, the
sublessee shall thereafter be obligated to pay all rentals accruing under said
sublease directly to the party giving such Notice, or as such party may direct.
All rentals received from the sublessee
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by Lessor or Lessor's assignees, if any, as the case may be, shall be credited
against the amounts owing by Lessee under this Lease or the Master Lease
Agreement.
22.3 Management Agreement. Lessee agrees that immediately upon
entering into any management or agency agreement relating to the management or
operation of the Hotel (the "Management Agreement"), Lessee shall provide Lessor
with a copy thereof. Lessee shall also provide Lessor with copies of any
amendments or modifications of the Management Agreement which are entered into
from time to time. The Management Agreement shall provide that (a) upon
termination of this Lease or termination of Lessee's right to possession of the
Leased Property for any reason whatsoever, the Management Agreement may be
terminated by Lessor without liability for any payment due or to become due to
the manager of the Hotel (the "Manager"), and (b) all fees and other amounts
payable by Lessee to the Manager shall be subordinate on a month to month basis
to Rent and other amounts payable by Lessee to Lessor hereunder prior to the
existence of an Event of Default, and shall be at all times subordinate to Rent
and such other amounts after the occurrence of an Event of Default. Lessor shall
have the right to approve any Manager who is not an Affiliate of Lessee.
ARTICLE XXIII
23.1 Officer's Certificates: Financial Statements; Lessor's
Estoppel Certificates and Covenants.
(a) At any time and from time to time upon not less than 10 days'
Notice by Lessor, Lessee will furnish to Lessor an Officer's Certificate
certifying that this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications), the date to which the Rent has been paid, whether to the
knowledge of Lessee there is any existing default or Event of Default hereunder
by Lessor and such other information as may be reasonably requested by Lessor.
Any such certificate furnished pursuant to this Section 23.1 may be relied upon
by Lessor, any lender and any prospective purchaser of the Leased property.
(b) Lessee will furnish the following statements and operating
information to Lessor:
(i) within 120 days after Lessee's fiscal year end, a copy of
the year end audit prepared by nationally recognized independent
certified public accountants, designated by Lessee which are acceptable
to Lessor, which acceptance shall not be unreasonably withheld, of
Lessee respecting the affairs of Lessee with respect to and the
financial condition of the Leased Property to confirm compliance by
Lessee and its Affiliates; and
(ii) internally prepared financial statements of Lessee within
45 days after each quarter of any Lease Year of Lessee with respect to
the affairs of Lessee with respect to and the financial condition of
the Leased Property; and
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(iii) upon written request of Lessor, on or after the 20th day
of each month, a detailed profit and loss statement for the Leased
Property for the preceding month, and a detailed accounting of revenues
for the Leased Property for the preceding month.
(c) At any time and from time to time upon not less than 10 days'
Notice by Lessee, Lessor will furnish to Lessee or to any Person designated by
Lessee an estoppel certificate certifying that this Lease is unmodified and in
full force and effect (or that this Lease is in full force and effect as
modified and setting forth the modifications), the date to which Rent has been
paid, whether to be knowledge of Lessor there is any existing default or Event
of Default on Lessee's part hereunder, and such other information as may be
reasonably requested by Lessee.
ARTICLE XXIV
24.1 Lessor's Right to Inspect. Lessee shall permit Lessor and its
authorized representatives as frequently as reasonably requested by Lessor to
inspect the Leased Property and Lessee's accounts and records pertaining thereto
and make copies thereof, during usual business hours upon reasonable advance
Notice, subject only to any business confidentiality requirements reasonably
requested by Lessee. Lessee will provide customary gratuitous accommodations to
Lessor and its authorized representatives in connection with such inspections to
the extent such accommodations are available.
ARTICLE XXV
25.1 No Waiver. No failure by Lessor or Lessee to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the extent permitted by law, no waiver
of any breach shall affect or alter this Lease, which shall continue in full
force and effect with respect to any other than existing or subsequent breach.
ARTICLE XXVI
26.1 Remedies Cumulative. To the extent permitted by law but
subject to any provisions of this Lease expressly limiting the rights, powers
and remedies of either Lessor or Lessee, (e.g. the limitation of damages upon
Termination) each legal, equitable or contractual right, power and remedy of
Lessor or Lessee now or hereafter provided either in this Lease or by statute or
otherwise shall be cumulative and concurrent and shall be in addition to every
other right, power and remedy and the exercise or beginning of the exercise by
Lessor or Lessee of any one or more of such rights, powers and remedies shall
not preclude the simultaneous or subsequent exercise by Lessor or Lessee of any
or all of such other rights, powers and remedies.
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ARTICLE XXVII
27.1 Acceptance of Surrender. No surrender to Lessor of this Lease
or of the Leased Property or any part thereof, or of any interest therein, shall
be valid or effective unless agreed to and accepted in writing by Lessor, and no
act by Lessor or any representative or agent of Lessor, other than such a
written acceptance by Lessor, shall constitute an acceptance of any such
surrender.
ARTICLE XXVIII
28.1 No Merger of Title. There shall be no merger of this Lease or
of the leasehold estate created hereby by reason of the fact that the same
person or entity may acquire, own or hold, directly or indirectly: (a) this
Lease or the leasehold estate created hereby or any interest in this Lease or
such leasehold estate and (b) the fee estate in the Leased Property.
ARTICLE XXIX
29.1 Conveyance by Lessor. Subject to Lessee's rights to quiet
enjoyment and to non-disturbance in its use and possession of the Leased
Premises and subject to any terms and restrictions on transfer in the Master
Lease Agreement, Lessor shall have the unrestricted right to mortgage or
otherwise sell, transfer, convey, pledge or hypothecate the Leased Property,
provided that, if no Event of Default shall have occurred and be continuing at
the time of such transfer, Lessor shall only transfer the Leased Property
expressly subject to the continued existence of this Lease which shall be
acknowledged in writing by the transferee. If Lessor transfers the Leased
Premises after an Event of Default, such transfer shall constitute a termination
of this Lease and shall limit any damages of Lessor to those Rents due prior to
termination of this Lease. If Lessor or any successor owner of the Leased
Property conveys the Leased Property in accordance with the terms hereof other
than as security for a debt, and the grantee or transferee of the Leased
Property has a net worth of $50,000,000 or more and expressly assumes all
obligations of Lessor hereunder arising or accruing from and after the date of
such conveyance or transfer, Lessor or such successor owner, as the case may be,
shall thereupon be released from all future liabilities and obligations of
Lessor under this Lease arising or accruing from and after the date of such
conveyance or other transfer as to the Leased Property and all such future
liabilities and obligations shall thereupon be binding upon the new owner, if,
but only if, Lessee shall have been given in writing right to control the FF&E
Reserve amounts established herein.
29.2 Amendment Upon Conveyance. Lessor and Lessee acknowledge this
Lease is to be read in conjunction with the Master Lease Agreement. Anything to
the contrary herein notwithstanding, Lessor shall not transfer the Leased
Premises to any party unless and until the Lessor and the Lessee shall have
revised and modified this Lease to incorporate the provisions of the Master
Lease Agreement referred to expressly or by implication herein or therein to
make this Lease able to stand alone and apart from the Master Lease Agreement
which maintaining for and providing to Lessee the same rights and opportunities
as currently provided under this Lease in conjunction with the Master Lease
Agreement. Any such transfer in contravention of this provision shall be void.
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29.3 Other Interests.
(a) This Lease and Lessee's interest hereunder shall at all
times be subject and subordinate to the lien and security title of any
deeds to secure debt, deeds of trust, mortgages or other interests,
including any interests created by Lessor in connection with
collateralizing the Leased Property or the Base Rent payments,
heretofore or hereafter granted by Lessor or which otherwise encumber
or affect the Leased Property and to any and all advances to be made
thereunder and to all renewals, modifications, consolidations,
replacements, substitutions, and extensions thereof (all of which are
herein called the "Mortgage"), provided that the Mortgage and all
security agreements delivered by Lessor in connection therewith shall
be subject to Lessee's rights under this Lease to the full and complete
quiet enjoyment of the Leased Property and to Lessee's rights to
receive all Gross Revenues of the Hotel prior to the earlier of the
occurrence of an Event of Default hereunder or the date that this Lease
is terminated and provided further that the holder of the Mortgage
shall execute a non-disturbance agreement in favor of and in form and
content reasonably agreeable to Lessee.
(b) Lessee shall, upon the written request of Lessor or any
existing or future Holder, (i) provide the Holder at the cost of the
Lessor or the Holder with copies of all licenses, permits, occupancy
agreements, operating agreements, leases, contracts and similar
agreements reasonably requested in connection with any existing or
proposed financing of the Leased Property and (ii) execute such
estoppel agreements and collateral assignments with respect to any of
the aforementioned agreements as may be reasonably requested by Holder
in connection with any such financing, provided that no such estoppel
agreement or collateral assignment shall in any way affect the terms or
affect adversely in any material respects any rights of Lessee under
this Lease.
(c) Lessee shall deliver, by Notice delivered in the manner
provided in Article XXXI to any Holder who gives Lessee written notice
of its status as a Holder at such Holder's address stated in the
Holder's written notice or at such other address as the Holder may
designate by later written notice to Lessee, a duplicate copy of any
and all Notices regarding any default which Lessee may from time to
time give or serve upon Lessor pursuant to the provisions of this
Lease. Copies of such Notices given by Lessee to Lessor shall be
delivered to such Holder simultaneously with delivery to Lessor. No
such Notice by Lessee to Lessor hereunder shall be deemed to have been
given unless and until a copy thereof has been mailed to such Holder.
The failure of Lessee to give notice to any Holder as provided herein
shall not limit Lessee in the exercise of any of its remedies upon
default by Lessor.
(d) At any time, and from time to time, upon not less than ten
(10) days' notice by a Holder to Lessee, Lessee shall deliver to such
Holder an estoppel certificate certifying as to the information
required in paragraph (c) of Article XXIII, and such other information
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as may be reasonably requested by such Holder. Any such certificate
may be relied upon by such Holder.
(e) Subject to Lessee's right to full and complete quiet
enjoyment of the Leased Premises, Lessee shall cooperate in all
reasonable respects, as generally described in Section 29.2, with any
transfer of the Leased Property to a Holder that succeeds to the
interest of Lessor in the Leased Property (including, without
limitation, in connection with the transfer of any franchise, license,
lease, permit, contract, agreement or similar item to such Holder or
such Holder's designee necessary or appropriate to operate the Leased
Property); provided, however, that any such cooperation shall not in
any way affect the Term nor affect adversely in any material respect
any rights of Lessor or Lessee under this Lease.
ARTICLE XXX
30.1 Quiet Enjoyment. So long as Lessee pays all Rent as the same
becomes due and complies with all of the terms of this Lease and performs its
obligations hereunder, in each case within the applicable grace and/or cure
periods, provided herein and in the Master Lease Agreement, Lessee shall
peaceably and quietly have, hold and enjoy the Leased Property for the Term
hereof, free of any claim or other action by Lessor or anyone claiming by,
through or under Lessor. Lessor shall pay and perform all obligations of Lessor
under or with respect to any and all liens and encumbrances to which the Leased
Property is subjected at the Commencement Date and under or with respect to any
and all other liens, encumbrances, or mortgages placed upon the Leased Property
by Lessor. Notwithstanding the foregoing, Lessee shall have the right by
separate and independent action to pursue any claim it may have against Lessor
as a result of a breach by Lessor of the covenant of quiet enjoyment contained
in this Section 30.1.
ARTICLE XXXI
31.1 Notices. All notices, demands, requests, consents, approvals
and other communications ("Notice" or "Notices") hereunder shall be in writing
and personally served or mailed (by registered or certified mail, return receipt
requested and postage prepaid), (a) if to Lessor c/o PMC Commercial Trust, 17290
Preston Road, Third Floor, Department 101, Dallas, Texas 75252, Attn: Lance B.
Rosemore and (b) if to Lessee, Norfolk Hospitality, Management Co., 309 North
5th Street, P.O. Box 1448, Norfolk, Nebraska 68702-1448, Attention: Richard L.
Herink, or to such other address or addresses as either party may hereafter
designate. Personally delivered Notice shall be effective upon receipt, and
Notice given by mail shall be complete at the time of deposit in the U.S. Mail
system, but any prescribed period of Notice and any right or duty to do any act
or make any response within any prescribed period or on a date certain after the
service of such Notice given by mail shall be extended five days.
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ARTICLE XXXII
32.1 Appraisers. If it becomes necessary to determine the Fair
Market Value or Fair Market Rental Value of the Leased Property for any purpose
of this Lease, the party required or permitted to give Notice of such required
determination shall include in the Notice the name of a person selected to act
as appraiser on its behalf. Within 10 days after Notice, Lessor (or Lessee, as
the case may be) shall by Notice to Lessee (or Lessor, as the case may be)
appoint a second person as appraiser on its behalf. The appraisers thus
appointed, each of whom must be a member of the American Institute of Real
Estate Appraisers (or any successor organization thereto) with at least five
years experience in the State appraising property similar to the Leased
Property, shall, within 45 days after the date of the Notice appointing the
first appraiser, proceed to appraise the Leased Property to determine the Fair
Market Value or Fair Market Rental Value thereof as of the relevant date (giving
effect to the impact, if any, of inflation from the date of their decision to
the relevant date); provided, however, that if only one appraiser shall have
been so appointed, then the determination of such appraiser shall be final and
binding upon the parties. If two appraisers are appointed and if the difference
between the amounts so determined does not exceed 5% of the lesser of such
amounts, then the Fair Market Value or Fair Market Rental Value shall be an
amount equal to 50% of the sum of the amounts so determined. If the difference
between the amounts so determined exceeds 5% of the lesser of such amounts, then
such two appraisers shall have 10 days to appoint a third appraiser. If no such
appraiser shall have been appointed within such 10 days or within 90 days of the
original request for a determination of Fair Market Value or Fair Market Rental
Value, whichever is earlier, either Lessor or Lessee may apply to any court
having jurisdiction to have such appointment made by such court. Any appraiser
appointed by the original appraisers or by such court shall be instructed to
determine the Fair Market Value or Fair Market Rental Value within 30 days after
appointment of such appraiser. The determination of the appraiser which differs
most in the terms of dollar amount from the determinations of the other two
appraisers shall be excluded, and 50% of the sum of the remaining two
determinations shall be final and binding upon Lessor and Lessee as the Fair
Market Value or Fair Market Rental Value of the Leased Property, as the case may
be. This provision for determining by appraisal shall be specifically
enforceable to the extent such remedy is available under applicable law, and any
determination hereunder shall be final and binding upon the parties except as
otherwise provided by applicable law. Lessor and Lessee shall each pay the fees
and expenses of the appraiser appointed by it and each shall pay one-half of the
fees and expenses of the third appraiser and one-half of all other costs and
expenses incurred in connection with each appraisal.
ARTICLE XXXIII
33.1 Lessor May Grant Liens. Without the consent of Lessee, Lessor
may, subject to the terms and conditions set forth below in this Section XXXIII,
from time to time, directly or indirectly, create or otherwise cause to exist
any lien, encumbrance or title retention agreement ("Encumbrance") upon the
Leased Property, or any portion thereof or interest therein, whether to secure
any borrowing or other means of financing or refinancing, provided that, at all
times, each such lien is either subordinate to the terms of this Lease or the
holder of such lien has executed a non-disturbance agreement in form and content
reasonably agreeable to Lessee.
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33.2 Lessee's Right to Cure. Subject to the provisions of Section
33.3, if Lessor breaches any covenant to be performed by it under this Lease,
Lessee, after Notice to and demand upon Lessor, without waiving or releasing any
obligation hereunder, and in addition to all other remedies available to Lessee,
may (but shall be under no obligation at any time thereafter to) make such
payment or perform such act for the account and at the expense of Lessor. All
sums so paid by Lessee and all costs and expenses (including, without
limitation, reasonable attorneys' fees) so incurred, together with interest
thereon at the Overdue Rate from the date on which such sums or expenses are
paid or incurred by Lessee, shall be paid by Lessor to Lessee on demand. The
rights of Lessee hereunder to cure and to secure payment from Lessor in
accordance with this Section 33.2 shall survive the termination of this Lease
with respect to the Leased Property.
33.3 Breach by Lessor.
(a) It shall be a breach of this Lease if Lessor fails to
observe or perform any term, covenant or condition of this Lease on its
part to be performed and such failure continues for a period of 30 days
after Notice thereof from Lessee except in the case of payment of
reimbursements from the FF&E Reserve or otherwise herein which shall be
made within ten (10) days, unless such failure cannot with due
diligence be cured within a period of 30 days, in which case such
failure shall not be deemed to continue if Lessor, within such 30-day
period, proceeds promptly and with due diligence to cure the failure
and diligently completes the curing thereof or unless such failure is
such that it interrupts operation of the Leased Property for its
Primary Intended Use making observance or performance due sooner than
thirty (30) days in which case Lessee may cure the default immediately
at the cost of Lessor. The time within which Lessor shall be obligated
to cure any such failure also shall be subject to extension of time due
to the occurrence of any Unavoidable Delay. If Lessor does not cure any
such failure within the applicable time period as aforesaid, Lessee may
declare the existence of a "Lessor Default" by a second Notice to
Lessor. Thereafter, Lessee may but shall not be obligated to forthwith
cure the same and, subject to the provisions of the following
paragraph, invoice Lessor for costs and expenses (including reasonable
attorneys' fees and court costs) incurred by Lessee in curing the same,
together with interest thereon from the date Lessor receives Lessee's
invoice, at the Overdue Rate.
(b) If Lessor shall in good faith dispute the occurrence of
any Lessor Default and Lessor, before the expiration of the applicable
cure period, shall give Notice thereof to Lessee, setting forth, in
reasonable detail, the basis therefor, no Lessor Default shall be
deemed to have occurred and Lessor shall have no obligation with
respect thereto until final adverse determination thereof, whether
through arbitration or otherwise; provided, however, that in the event
of any such adverse determination, Lessor shall pay to Lessee interest
at the Overdue Rate, from the date demand for such funds was made by
Lessee until paid.
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ARTICLE XXXIV
34.1 Miscellaneous. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Lessee or
Lessor arising prior to any date of termination of this Lease shall survive such
termination. If any term or provision of this Lease or any application thereof
is invalid or unenforceable, the remainder of this Lease and any other
application of such term or provisions shall not be affected thereby. If any
late charges or any interest rate provided for in any provision of this Lease
are based upon a rate in excess of the maximum rate permitted by applicable law,
the parties agree that such charges shall be fixed at the maximum rate permitted
by applicable law, the parties agree that such charges shall be fixed at the
maximum permissible rate. Neither this Lease nor any provision hereof may be
changed, waived, discharged or terminated except by a written instrument in
recordable form signed by Lessor and Lessee. All the terms and provisions of
this Lease shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. The headings in this Lease are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Lease shall be governed by and construed in accordance with
the laws of the State, but not including its conflicts of laws rules.
34.2 Transition Procedures. Upon the expiration or termination of
the Term of this Lease, for whatever reason (other than a purchase of the Leased
Property by Lessee), Lessor and Lessee shall do the following (and the
provisions of this Section 34.2 shall survive the expiration or termination of
this Lease until they have been fully performed) and, in general, shall
cooperate in good faith to effect an orderly transition of the management lease
or of the Hotel. Nothing contained herein shall limit Lessor's rights and
remedies under this Lease if such termination occurs as the result of an Event
of Default.
(a) Transfer of Licenses. Lessee shall use reasonable efforts
(i) to transfer to Lessor or Lessor's nominee all licenses, operating
permits and other governmental authorizations and all contracts,
including the Franchise Agreement and all contracts with governmental
or quasi-governmental entities, that may be necessary for the operation
of the Hotel (collectively, "Licenses"), or (ii) if such transfer is
prohibited by law or Lessor otherwise elects, to cooperate with Lessor
or Lessor's nominee in connection with the processing by Lessor or
Lessor's nominee of any applications for, all Licenses; provided, in
either case, that the costs and expenses of any such transfer or the
processing of any such application shall be paid by Lessor or Lessor's
nominee.
(b) Leases and Concessions. Lessee shall assign to Lessor or
Lessor's nominee simultaneously with the termination of this Lease, and
the assignee shall assume and indemnify Lessee for, all leases and
concession agreements in effect with respect to the Hotel then in
Lessee's name, all of the costs, fees, and expenses of which shall be
paid by the assignee.
(c) Books and Records. Copies of all books and records for the
Hotel kept by Lessee pursuant to Section 3.6 shall be delivered, at
Lessor's expense and request, promptly to Lessor or Lessor's nominee,
simultaneously with the termination of this Lease, but such
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books and records shall thereafter be available to Lessee at all
reasonable times for inspection, audit, examination, and transcription
for a period of one (1) year and Lessee may retain (on a confidential
basis) copies or computer records thereof.
(d) Remittance. Lessee shall remit to Lessor or Lessor's
nominee, simultaneously with the termination of this Lease, all funds
remaining, if any, after payment of all accrued Gross Operating
Expenses, and other amounts due Lessee and after deducting the costs of
any scheduled repair, replacement, or refurbishment of Furniture,
Fixtures and Equipment and of the Leased Premises and Fixtures, with
respect to which deposits have been made with Lessee from the FF&E
Reserve or other funds of Lessor.
34.3 Waiver of Presentment, etc. Lessee and Lessor each waive all
presentments, demands for payment and for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, and notices
of acceptance and waive all notices of the existence, creation, or incurring of
new or additional obligations, except as expressly granted herein.
ARTICLE XXXV
35.1 Memorandum of Lease. Lessor and Lessee shall promptly, upon
the request of either party, enter into a short form memorandum of this Lease,
in form suitable for recording under the laws of the State in which reference to
this Lease, and all options contained herein, shall be made. Lessee shall pay
all costs and expenses of recording such memorandum of this Lease.
ARTICLE XXXVI
36.1 Lessor's Option to Purchase Assets of Lessee. Effective on not
less than 90 days prior Notice given at any time within 180 days before the
expiration of the Term, but not later than 90 days prior to such expiration, or
upon such shorter Notice period as shall be appropriate if this Lease is
terminated prior to its expiration date, Lessor shall have the option to
purchase all (but not less than all) of the assets of Lessee, tangible and
intangible, located and used on and relating to the Leased Property (other than
this Lease), at the expiration or termination of this Lease for an amount
(payable in cash on the expiration date of this Lease) equal to the fair market
value thereof as appraised in conformity with Article XXXII, except that the
appraisers need not be members of the American Institute of Real Estate
Appraisers, but rather shall be appraisers having at least ten years experience
in valuing similar assets.
ARTICLE XXXVII
37.1 Compliance with Franchise Agreement and Management Agreement.
To the extent any of the provisions of the Franchise Agreement or Management
Agreement, if any, impose a greater obligation on Lessee than the corresponding
provisions of this Lease, then Lessee shall operate in compliance with, and to
take all reasonable actions necessary to maintain, the Franchise Agreement,
including, without limitation, any territorial arrangements contained therein or
associated therewith, and any Management Agreement and to prevent breaches or
defaults under the
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provisions of the Franchise Agreement and any Management Agreement. It is the
intent of the parties hereto that Lessee shall comply in every respect with the
provisions of the Franchise Agreement and any Management Agreement so as to
avoid any material default thereunder during the term of this Lease. The cost of
compliance with the Franchise Agreement shall be borne by Lessee and Lessor as
otherwise set forth in this Lease and in the Master Lease Agreement. Lessee and
Lessor shall not terminate or enter into any modification of the Franchise
Agreement without in each such instance first obtaining the other's written
consent. Lessor and Lessee agree to cooperate fully with each other in the event
it becomes necessary to obtain a franchise extension or modification or a new
franchise for the Leased Property and in any transfer of the Franchise Agreement
to Lessor or any Affiliate thereof or any successor to Lessee upon the
termination of this Lease.
ARTICLE XXXVIII
38.1 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 Section 38.1. The party desiring such arbitration
shall give Notice to that effect to the other party, and an arbitrator shall be
selected by mutual agreement of the parties, or if they cannot agree within
thirty (30) days of such notice, by appointment made by the American Arbitration
Association ("AAA") from among the members of its panels who are qualified and
who have experience in resolving matters of a nature similar to the matter to be
resolved by arbitration.
38.2 Alternative Arbitration. In each case specified in this Lease
for a matter to be submitted to arbitration pursuant to the provisions of this
Section 38.2, Lessor and Lessee shall select by mutual agreement any nationally
recognized accounting firm with a hospitality division of which neither Lessor
nor an Affiliate of Lessor nor Lessee or an Affiliate of Lessee is a significant
client to serve as arbitrator of such dispute within fifteen (15) days after
written demand for arbitration is received. In the event no nationally
recognized accounting firm satisfying such qualification is available and
willing to serve as arbitrator, the arbitration shall instead be administered as
set forth in Section 38.1.
38.3 Arbitration Procedures. In any arbitration commenced, a single
arbitrator shall be designated and shall resolve the dispute. The arbitrator's
decision shall be binding on all parties and shall not be subject to further
review or appeal except as otherwise allowed by applicable law. To the maximum
extent practicable, the arbitrator and the parties, and the AAA if applicable,
shall take any action necessary to insure that the arbitration shall be
concluded within ninety (90) days of the filing of such dispute. The fees and
expenses of the arbitrator shall be shared equally by Lessor and Lessee. Unless
otherwise agreed in writing by the parties or required by the arbitrator or AAA,
if applicable, arbitration proceedings hereunder shall be conducted in the
State. Notwithstanding formal rules of evidence, each party may submit such
evidence as each party deems appropriate to support its position and the
arbitrator shall have access to and right to examine all books and records of
Lessee and Lessor regarding the Hotel during the arbitration.
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IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
"LESSOR"
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By:
------------------------------------
"LESSEE"
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By:
------------------------------------
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IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
"LESSOR"
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By:
------------------------------------
"LESSEE"
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By:
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SCHEDULE 4.6
Wingate Debt
1. $215,000 Promissory Note, dated December 29, 1995, payable to Hotel
Franchising Partnership d/b/a Wingate Inns, L.P. ("Wingate") for Las
Colinas.
2. $215,000 Promissory Note, dated December 29, 1995, payable to Wingate
for Houston Intercontential Airport.