1
EXHIBIT 10.3
LEASE AGREEMENT
DATED AS OF ____________, 1999
BETWEEN
------------------------------
AS LESSOR
AND
------------------------------
AS LESSEE
FOR
---------------------------------------
2
TABLE OF CONTENTS
HEADING OR SECTION PAGE
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SCHEDULE OF BASIC TERMS...........................................................................................1
RECITALS .........................................................................................................1
ARTICLE 1 LEASED PROPERTY AND OTHER DEFINITIONS...........................................................1
1.1 Leased Property.................................................................................1
1.2 Other Definitions...............................................................................3
ARTICLE 2 TERM, EXTENSION AND TERMINATION................................................................18
2.1 Term...........................................................................................18
2.2 First Extension of the Term....................................................................18
2.3 Second Extension of the Term...................................................................18
2.4 Performance Failure............................................................................19
2.5 Lessor's Option to Terminate Lease upon Sale...................................................20
2.6 Transition Procedures..........................................................................21
2.7 Holding Over...................................................................................22
ARTICLE 3 RENT, RENT ADJUSTMENTS AND PERFORMANCE STANDARDS...............................................23
3.1 Rent...........................................................................................23
3.2 Confirmation of Percentage Rent................................................................26
3.3 Additional Charges.............................................................................27
3.4 Net Lease Provision............................................................................28
3.5 Material Changes in Economic Climate...........................................................29
3.6 Rent Adjustment: Basic Assumptions Incorrect...................................................30
3.7 Allocation of Rent.............................................................................31
ARTICLE 4 BUDGETS AND FINANCIAL REPORTING................................................................31
4.1 Revenue Budgets................................................................................31
4.2 Operating Budgets..............................................................................32
4.3 Capital Budget.................................................................................33
4.4 Annual Budget Approval; Budget Disputes........................................................33
4.5 Disclosure of Financial and Portfolio Information..............................................34
4.6 Confidentiality................................................................................37
ARTICLE 5 IMPOSITIONS AND OTHER HOTEL COSTS..............................................................37
5.1 Payment of Impositions.........................................................................37
5.2 Notice of Impositions..........................................................................39
5.3 Adjustment of Impositions......................................................................39
5.4 Utility Charges................................................................................39
5.5 Insurance Premiums.............................................................................39
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5.6 Franchise Fees.................................................................................40
5.7 Ground Rent....................................................................................40
ARTICLE 6 OWNERSHIP OF LEASED PROPERTY; LESSEE'S
PERSONAL PROPERTY..............................................................................40
6.1 Ownership of the Leased Property...............................................................40
6.2 Lessee's Personal Property.....................................................................40
6.3 Lessor's Lien..................................................................................41
6.4 Lessor's Option to Purchase Lessee's Personal Property.........................................41
ARTICLE 7 CONDITION AND USE OF LEASED PROPERTY...........................................................41
7.1 Condition of the Leased Property...............................................................41
7.2 Use of the Leased Property.....................................................................42
7.3 Lessor to Grant Easements, etc.................................................................43
ARTICLE 8 LESSEE'S COMPLIANCE WITH LAW; ENVIRONMENTAL
COVENANTS......................................................................................44
8.1 Compliance with Legal and Insurance Requirements, etc..........................................44
8.2 Legal Requirement Covenants....................................................................44
8.3 Environmental Covenants........................................................................45
ARTICLE 9 MAINTENANCE, REPAIRS AND CAPITAL EXPENDITURES..................................................47
9.1 Maintenance, Repairs and Capital Expenditures..................................................47
9.2 Encroachments, Restrictions, Etc...............................................................49
ARTICLE 10 ALTERATIONS AND IMPROVEMENTS; LESSOR'S CAPITAL
RESERVE........................................................................................50
10.1 Alterations and Improvements...................................................................50
10.2 Salvage........................................................................................50
10.3 Initial Upgrades...............................................................................50
10.4 Lessor Approval of Capital Expenditures........................................................51
10.5 Lessor's Capital Reserve.......................................................................51
ARTICLE 11 FRANCHISE SYSTEM COMPLIANCE....................................................................52
11.1 Assignment or Execution of Franchise Agreement or Guaranty of
Franchise Agreement by Lessor..................................................................52
11.2 Compliance with Franchise Agreement by Lessee..................................................52
11.3 Compliance with Franchise Agreement by Lessor..................................................53
11.4 Changes in Franchise...........................................................................53
ARTICLE 12 PERMITTED LIENS AND CONTESTS...................................................................53
12.1 Liens..........................................................................................53
12.2 Permitted Contests.............................................................................54
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ARTICLE 13 INSURANCE REQUIREMENTS.........................................................................55
13.1 General Insurance Requirements.................................................................55
13.2 Replacement Cost...............................................................................56
13.3 Waiver of Claims and Subrogation...............................................................57
13.4 Form Satisfactory, etc.........................................................................57
13.5 Increase in Limits.............................................................................57
13.6 Blanket Policy.................................................................................57
13.7 No Separate Insurance..........................................................................58
13.8 Reports On Insurance Claims....................................................................58
ARTICLE 14 CASUALTY INSURANCE PROCEEDS; RECONSTRUCTION....................................................58
14.1 Insurance Proceeds.............................................................................58
14.2 Reconstruction in the Event of Damage or Destruction Covered
by Insurance...................................................................................59
14.3 Reconstruction in the Event of Damage or Destruction Not Covered
by Insurance...................................................................................60
14.4 Lessee's Personal Property and Business Interruption Insurance.................................60
14.5 Abatement of Rent Upon Casualty................................................................60
14.6 Damage Near End of Term........................................................................60
14.7 Waiver.........................................................................................60
ARTICLE 15 CONDEMNATION; AWARD ALLOCATION.................................................................60
15.1 Definitions....................................................................................60
15.2 Parties' Rights and Obligations................................................................61
15.3 Total Taking...................................................................................61
15.4 Partial Taking.................................................................................61
15.5 Allocation of Award............................................................................62
15.6 Temporary Taking...............................................................................62
ARTICLE 16 DEFAULT BY LESSEE; LESSOR'S REMEDIES...........................................................63
16.1 Events of Default..............................................................................63
16.2 Surrender......................................................................................65
16.3 Damages........................................................................................65
16.4 Waiver.........................................................................................66
16.5 Application of Funds...........................................................................66
16.6 Lessor's Right to Cure Lessee's Default........................................................67
ARTICLE 17 DEFAULT BY LESSOR; LESSEE'S REMEDIES...........................................................67
17.1 Breach by Lessor...............................................................................67
ARTICLE 18 INDEMNIFICATION................................................................................68
18.1 Indemnification................................................................................68
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18.2 Indemnification Procedure......................................................................69
ARTICLE 19 REIT REQUIREMENTS AND RESTRICTIONS.............................................................70
19.1 REIT Requirements..............................................................................70
19.2 Lessee Officer and Employee Limitation.........................................................71
19.3 Management Agreement...........................................................................71
19.4 Payments to Affiliates of Lessee...............................................................72
ARTICLE 20 SUBLETTING AND ASSIGNMENT BY LESSEE............................................................72
20.1 Subletting and Assignment......................................................................72
20.2 Subordination and Attornment...................................................................73
ARTICLE 21 LEASEHOLD MORTGAGES............................................................................73
21.1 Lessee May Grant Leasehold Mortgages...........................................................73
ARTICLE 22 ARBITRATION....................................................................................74
22.1 Arbitration....................................................................................74
22.2 Alternative Arbitration........................................................................74
22.3 Arbitration Procedures.........................................................................74
ARTICLE 23 APPRAISAL......................................................................................75
23.1 Appraisers; Appraisal Procedure................................................................75
ARTICLE 24 LESSOR MORTGAGES...............................................................................76
24.1 Lessor May Grant Liens.........................................................................76
24.2 Lessee's Right to Cure.........................................................................77
ARTICLE 25 QUIET ENJOYMENT................................................................................78
25.1 Quiet Enjoyment................................................................................78
ARTICLE 26 CERTIFICATES; INSPECTION RIGHTS................................................................78
26.1 Lessee Estoppel Certificates...................................................................78
26.2 Lessor Estoppel Certificates...................................................................78
26.3 Inspection Rights..............................................................................78
ARTICLE 27 NOTICES........................................................................................79
27.1 Notices........................................................................................79
ARTICLE 28 GROUND LEASE...................................................................................79
28.1 The Ground Lease...............................................................................79
ARTICLE 29 MISCELLANEOUS..................................................................................80
29.1 Enforceability.................................................................................80
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29.2 Waiver of Trial by Jury........................................................................81
29.3 No Waiver......................................................................................81
29.4 Remedies Cumulative............................................................................81
29.5 Acceptance of Surrender .......................................................................81
29.6 No Merger of Title.............................................................................81
29.7 Conveyance by Lessor...........................................................................81
29.8 Waiver of Presentment, etc.....................................................................82
29.9 Standard of Discretion.........................................................................82
29.10 Action for Damages.............................................................................82
29.11 Lease Assumption in Bankruptcy Proceeding......................................................82
29.12 FelCor Intra-Family Transfers..................................................................82
29.13 Memorandum of Lease............................................................................82
ARTICLE 30 NOTIFICATION OF PROPERTY HAZARDS...............................................................83
30.1 Notification Regarding Asbestos................................................................83
30.2 Notification Regarding Radon Gas...............................................................83
EXHIBIT A
LEASED PROPERTY DESCRIPTION
EXHIBIT B
EXCLUDED PROPERTY
EXHIBIT C
CAPITAL EXPENDITURES POLICY
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LEASE AGREEMENT
SCHEDULE OF BASIC TERMS:
HOTEL: _____________________________ , as more fully
described below.
Property #_____ (_____ Rooms)
LESSOR:
-----------------------------
c/o FelCor Lodging Trust
545 E. John Carpenter Frwy, Suite 1300
Irving, Texas 75062
Facsimile: 972/444-4949
LESSEE:
-----------------------------
c/o Bristol Hotels & Resorts
14295 Midway Road
Dallas, Texas 75244
Facsimile: 972/391-3497
COMMENCEMENT DATE: July 27, 1998
EXPIRATION DATE: _______________, 20___ Original Term: ____
years
RENEWAL OPTIONS:
First Extension: __________ years, to _______________, 20___
Second Extension: Five (5) years, to _______________, 20___
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Lease Year: 2000 and
1998 1999 thereafter
---- ---- ----------
BASE RENT: $ * $ $
--------- --------- ---------
ROOM REVENUE BREAKPOINT: $ * $ $
--------- --------- ---------
(*For the period from July 27, 1998 through December 31, 1998)
PERCENTAGE RENT:
FIRST TIER ROOM REVENUE PERCENTAGE: %
----
SECOND TIER ROOM REVENUE PERCENTAGE: %
----
OTHER PERCENTAGES:
2000 and
Lease Year: 1998 1999 thereafter
---------- ---- ---- ----------
Food Sale Revenues: % % %
---- ---- ----
Beverage Sale Revenues: % % %
---- ---- ----
Telephone Revenues: % % %
---- ---- ----
Other Revenues: % % %
---- ---- ----
CPI ADJUSTMENT YEAR: 2001
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THIS LEASE AGREEMENT (hereinafter called "LEASE"), made as of 3:00
p.m. Central Time on the Commencement Date set forth on the Schedule of Basic
Terms attached hereto, by and between the Lessor, as landlord, and the Lessee,
as tenant, each as designated in the Schedule of Basic Terms attached hereto,
provides as follows.
RECITALS:
A. In connection with the transactions contemplated by that certain
Agreement and Plan of Merger dated as of March 23, 1998 (the "MERGER
AGREEMENT"), Bristol Hotel Company, a Delaware corporation and the ultimate
parent of Lessor ("BRISTOL") is to be merged with and into FelCor. Prior to
such merger (i) Lessor and certain other direct or indirect subsidiaries of
Bristol (collectively, including Lessor, the "EXISTING LESSORS") that own hotel
properties have agreed to lease to Lessees (as defined in the Master Hotel
Agreement), and Lessees have agreed to lease from such Existing Lessors hereto
(including this Lease, the "EXISTING LEASES") the Existing Hotels listed on
Exhibit "A" attached to the Master Hotel Agreement, and (ii) all of the shares
of capital stock of Bristol Hotels & Resorts, Inc., a Delaware corporation that
intends to change its name to Bristol Hotels & Resorts ("BHR"), the immediate
parent of Lessee, will be distributed to the shareholders of Bristol. Following
the merger, the Existing Lessors will be direct or indirect subsidiaries of
FelCor.
B. Lessor and Lessee desire to provide for the general terms and
conditions upon which the Hotel covered by this Lease will be leased to and
operated by Lessee.
NOW, THEREFORE, intending to be legally bound, Lessor and Lessee agree
as follows:
Lessor, in consideration of the payment of rent by Lessee to Lessor,
the covenants and agreements to be performed by Lessee, and upon the other
terms and conditions hereinafter stated, does hereby rent and lease unto
Lessee, and Lessee does hereby rent and lease from Lessor, the Leased Property.
Attached hereto above as the Schedule of Basic Terms is a summary of
the basic economic and certain other fundamental terms and provisions of this
Lease, which Schedule of Basic Terms is hereby incorporated herein by reference
to the same extent as if fully set out in the text hereof. In the event of
actual conflict between the Schedule of Basic Terms and the remainder of this
Lease, the Schedule of Basic Terms shall prevail.
ARTICLE 1
LEASED PROPERTY AND OTHER DEFINITIONS
1.1 Leased Property. The "LEASED PROPERTY" is comprised of Lessor's
interest in the following (other than any Excluded Property):
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(a) the land or ground leasehold interest
described in Exhibit "A" attached hereto and by reference incorporated herein
("LAND").
(b) all buildings, structures and other
improvements of every kind including, but not limited to, alleyways and
connecting tunnels, sidewalks, utility pipes, conduits and lines (on-site and
offsite), parking areas and roadways appurtenant to, and any leasehold interest
of Lessor as a tenant in, such buildings and structures presently situated upon
the Land (collectively, the "IMPROVEMENTS");
(c) all easements, rights and appurtenances
relating to the Land and the Improvements;
(d) all equipment, machinery, fixtures, and
other items of property required or incidental to the use of the Improvements
as a hotel, including all components thereof, now and hereafter permanently
affixed to or incorporated into the Improvements, including, without
limitation, all furnaces, boilers, heaters, electrical equipment, heating,
plumbing, lighting, ventilating, refrigerating, incineration, air and water
pollution control, waste disposal, air-cooling and air-conditioning systems and
apparatus, sprinkler systems and fire and theft protection equipment, wall
coverings all of which to the greatest extent permitted by law are hereby
deemed by the parties hereto to constitute real estate, together with all
replacements, modifications, alterations and additions thereto (collectively,
the "FIXTURES");
(e) all equipment, machinery and other
items of property incidental to the use of the Improvements as a hotel,
including all components thereof, now or hereafter located at the Improvements
or used exclusively in connection therewith, including, without limitation, all
computer and front desk equipment, such as reservations systems, accounting
systems, printers and other office equipment, all equipment and systems
required for the operation of kitchens, bars and Restaurants, if any, and
laundry and dry cleaning facilities, dining room wagons, materials, handling
equipment, cleaning and engineering equipment, and vehicles, but excluding the
Fixtures, Furniture and Inventory (collectively, the "EQUIPMENT");
(f) all furniture and furnishings and all
other items of personal property (excluding Inventory and personal property
owned by Lessee) located on, and used in connection with, the operation of the
Improvements as a hotel, together with all replacements, modifications,
alterations and additions thereto (collectively, "FURNITURE"); and
(g) the lessor's interest in, to and under
all existing leases of space within the Leased Property (including any security
deposits or collateral held by Lessor pursuant thereto), which interests shall
be conditionally assigned to Lessee if required by applicable law or the terms
and conditions of such leases.
EXCEPT AS EXPRESSLY SET FORTH HEREIN, THE LEASED PROPERTY IS DEMISED IN ITS
PRESENT CONDITION WITHOUT REPRESENTATION OR WARRANTY
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(EXPRESSED OR IMPLIED) BY LESSOR AND SUBJECT TO THE RIGHTS OF HOTEL GUESTS AND
TENANTS IN POSSESSION, AND TO THE EXISTING STATE OF TITLE INCLUDING ALL
COVENANTS, CONDITIONS, RESTRICTIONS, EASEMENTS AND OTHER MATTERS OF RECORD
INCLUDING ALL APPLICABLE LEGAL REQUIREMENTS, THE LIEN OF FINANCING INSTRUMENTS,
MORTGAGES, DEEDS OF TRUST AND SECURITY DEEDS, AND INCLUDING OTHER MATTERS WHICH
WOULD BE DISCLOSED BY AN INSPECTION OF THE LEASED PROPERTY OR BY AN ACCURATE
SURVEY THEREOF.
1.2 Other Definitions. For all purposes of this Lease, except as
otherwise expressly provided or unless the context otherwise requires, (1) the
terms defined in this Article have the meanings assigned to them in this
Article and include the plural as well as the singular, (2) all accounting
terms not otherwise defined herein have the meanings assigned to them in
accordance with GAAP, (3) all references in this Lease to designated
"ARTICLES," "SECTIONS" and other subdivisions are to the designated Articles,
Sections and other subdivisions of this Lease and (4) the words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this Lease
as a whole and not to any particular Article, Section or other subdivision:
Additional Charges: As defined in Section 3.3.
Affiliate: As used in this Lease the term "Affiliate" of a Person
shall mean (1) any Person that, directly or indirectly, controls or is
controlled by or is under common control with such Person, (2) any other Person
that owns, beneficially, directly or indirectly, fifty percent (50%) or more of
the outstanding capital stock, shares or equity interests of such Person, or
(3) any officer, director, employee, partner or trustee of such Person (or any
Person controlling, controlled by or under common control with such Person),
excluding trustees and Persons serving in similar capacities who are not
otherwise an Affiliate of such Person). For the purposes of this definition,
"control" (including the correlative meanings of the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, through the ownership
of voting securities, partnership interests or other equity interests.
Annual Budget: As defined in Subsection 4.4(a).
Average Daily Rate: Total Room Revenues divided by occupied rooms at
the Hotel.
Award: As defined in Section 15.1.
Base Rate: The rate of interest announced publicly by The Chase
Manhattan Bank in New York, New York, from time to time, as such bank's base
rate. If no such rate is announced or becomes discontinued, then such other
rate as Lessor may reasonably designate.
Base Rent: As defined in Article 3.
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Beverage Sale Revenues: Shall mean Gross Revenue from (i) the sale of
wine, beer, liquor or other alcoholic beverages, whether sold in the bar or
lounge, delivered to a guest room, sold at meetings or banquets or at any other
location at the Leased Property or (ii) non-alcoholic beverages sold in the bar
or lounge. Such revenues shall not include Sublease Rent or the following:
(1) Any gratuity or service charge added to
a customer's bill or statement in lieu of a gratuity which is paid to an
employee;
(2) Any revenues that are subsequently
credited, rebated or refunded in the ordinary course of business; and
(3) Sales taxes or taxes of any other kind
imposed on the sale of alcoholic or other beverages.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which national banks in the City of New York, New York, or
in the municipality wherein the Leased Property is located are closed.
Capital Budget: As defined in Section 4.3.
Capital Expenditures: Amounts advanced to pay the costs of Capital
Improvements.
Capital Impositions: Taxes, assessments or similar charges imposed
upon or levied against the Leased Property for the costs of public
improvements, including, without limitation, roads, sidewalks, public lighting
fixtures, utility lines, storm sewers, drainage facilities and similar
improvements.
Capital Improvements: Improvements to the Leased Property and repair,
replacement or refurbishing of the Improvements, Fixtures, Equipment and
Furniture and of equipment and systems that constitute portions of the Leased
Property in connection with its Primary Intended Use, and the cost of all
approvals, licenses, permits and other authorizations necessary to complete
such improvements, repairs, replacements and refurbishing, all as, and to the
extent, (i) designated as capital improvements by and determined in accordance
with GAAP and (ii) of the types described in the capital improvements policy
set forth on Exhibit "C" attached hereto as "capital".
Capital Reserve: As defined in Subsection 10.5(a).
CERCLA: The Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
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Claim: As defined in Section 12.2.
COBRA: As defined in Subsection 8.2(b).
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: The date set forth on the Schedule of Basic Terms
attached hereto as the commencement date with respect to the Hotel.
Competitive Set: As defined in the STR Reports. Lessor and Lessee
shall work in good faith to determine any additions and deletions to the
Hotel's Competitive Set, on or before November 15th of each Lease Year, with
such changes to be applicable for the following Lease Year. In the event Lessor
and Lessee cannot agree to the Hotel's Competitive Set by November 15th of any
Lease Year, such unagreed items shall be determined by Smith Travel Research
(or, if it refuses or is unable to do so, by arbitration pursuant to Section
22.2). The costs of resetting the Hotel's Competitive Set shall be borne
equally by the parties.
Condemnation, Condemnor: As defined in Section 15.1.
Consolidated Financials: For any Fiscal Year or other accounting
period for Lessee and BHR's consolidated Subsidiaries, if any, that lease hotel
properties from Lessor or any of FelCor's Subsidiaries, statements of
operations, retained earnings and cash flow (or, in the case of a partnership,
statements of operations, partners' capital and cash flow) for such period and
for the period from the beginning of the respective Fiscal Year to the end of
such period, and the related balance sheet as at the end of such period,
together with the notes to any such yearly statements, all in such detail as
may be required by the SEC with respect to filings made by FelCor, FSLP or
Lessor, and setting forth in comparative form the corresponding figures for the
corresponding period in the preceding Fiscal Year, and prepared in accordance
with GAAP and audited annually (and quarterly if required by the SEC) by
nationally recognized independent certified public accountants.
Construction Services Agreement: As defined in Subsection 10.3(c).
Consumer Price Index: Consumer Price Index, U.S. City Average, All
Items for all Urban Consumers, published by the Bureau of Labor Statistics of
the United States Department of Labor, as reported in the Wall Street Journal.
Contemplated Renovations: As defined in Subsection 10.3(b).
Cumulative Monthly Portion: As defined in Subsection 3.1(b).
Date of Taking: As defined in Section 15.1.
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Emergency Capital Expenditures: Capital Expenditures required to take
necessary or appropriate actions to respond to Emergency Situations.
Emergency Situations: Fire, flood, earthquake or any other casualty,
or any other events, circumstances or conditions, which threaten the safety or
physical well-being of the Hotel's guests or employees or which involve the
risk of material property damage or material loss to the Hotel.
Encumbrance: As defined in Section 24.1.
Environmental Authority: Any department, agency or other body or
component of any Government that exercises any form of jurisdiction or
authority under any Environmental Law.
Environmental Authorization: Any license, permit, order, approval,
consent, notice, registration, filing or other form of permission or
authorization required under any Environmental Law.
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, regardless of whether such Proceeding is
threatened, pending or completed, that may be or have been asserted against or
imposed upon Lessor, Lessee, any Predecessor, the Leased Property or any
property used therein and arising out of:
(1) Failure of Lessee, Lessor, any
Predecessor or the Leased Property to comply at any time with all Environmental
Laws;
(2) Presence of any Hazardous Materials on,
in, under, at or in any way affecting the Leased Property;
(3) A Release at any time of any Hazardous
Materials on, in, at, under or in any way affecting the Leased Property;
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(4) Identification of Lessee, Lessor or any
Predecessor as a potentially responsible party under CERCLA or under any
Environmental Law similar to CERCLA;
(5) Presence at any time of any
above-ground and/or underground storage tanks, as defined in RCRA or in any
applicable Environmental Law on, in, at or under the Leased Property or any
adjacent site or facility; or
(6) Any and all claims for injury or damage
to persons or property arising out of exposure to Hazardous Materials
originating or located at the Leased Property or any adjoining property, or
resulting from the operation thereof.
Equipment: As defined in Section 1.1.
Event of Default: As defined in Section 16.1.
Excluded Lease Year: As defined in Subsection 2.4(a).
Excess Capital Expenditures: As defined in Subsection 4.4(b).
Excluded Property: Any and all of the rights, titles, and interests
in, to and under any real property, buildings and other improvements (or the
respective portion thereof) listed or described on Exhibit B attached hereto,
together with any and all leases or other contract rights related thereto and
personalty appurtenant thereto.
Existing Leases: As defined in Recital A.
Existing Lessors: As defined in Recital A.
Expiration Date: The date set forth on the Schedule of Basic Terms
attached hereto as the expiration date of the original Term with respect to the
Hotel.
FelCor: FelCor Suite Hotels, Inc., a Maryland corporation, and its
successors and assigns. FelCor had advised Lessor and Lessee that FelCor will
change its name to "FelCor Lodging Trust Incorporated" effective on July 28,
1998.
FIFRA: The Federal Insecticide, Fungicide, and Rodenticide Act, as
amended.
First Extension: As defined in Section 2.2.
First Tier Room Revenue Percentage: As defined in Section 3.1(b).
Fiscal Year: The 12-month period from January 1 to December 31.
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Fixtures: As defined in Section 1.1.
Food Sale Revenues: Shall mean Gross Revenue from the sale, for
on-site consumption, of food and non-alcoholic beverages sold at the Leased
Property, including in respect to guest rooms, banquet rooms, ballrooms,
meeting rooms and other similar rooms, including the rentals with respect to
banquets, meetings and other functions held in such banquet rooms, ballrooms,
meeting rooms and other similar rooms. Such revenues shall not include Sublease
Rent or the following:
(1) Vending machine sales;
(2) Any gratuities or service charges added
to a customer's bill or statement in lieu of a gratuity which is paid to an
employee;
(3) Non-alcoholic beverages sold from the
bar or lounge;
(4) Sales taxes or taxes of any other kind
imposed on the sale of food or non-alcoholic beverages; and
(5) Any revenues that are subsequently
credited, refunded or rebated in the ordinary course of business.
Force Majeure: An Unavoidable Occurrence, generally affecting travel
and/or the hotel or lodging business in the market and/or submarket in which
the Hotel is located.
Franchise Agreement: Any franchise or license agreement with a
Franchisor under which the Hotel is operated as a hotel facility under a
registered service mark or other brand name or "flag" approved by Lessor (not
to be unreasonably withheld).
Franchise Event of Default: As defined in Subsection 16.1(g).
Franchisor: The franchisor or licensor under any Franchise Agreement.
FSLP: FelCor Suites Limited Partnership, a Delaware limited
partnership, of which FelCor is the general partner. FSLP had advised Lessor
and Lessee that FSLP will change its name to "FelCor Lodging Limited
Partnership" effective on July 28, 1998.
Furniture: As defined in Section 1.1.
GAAP: GAAP shall mean, as of any date of determination, accounting
principles (a) set forth as generally accepted in then currently effective
Opinions of the Accounting Principles Board of the American Institute of
Certified Public Accountants, (b) set forth as generally accepted in then
currently effective Statements of the Financial Accounting Standards Board or
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(c) that are then approved by such other entity as may be approved by a
significant segment of the accounting profession in the United States of
America. The term "consistently applied," as used in connection therewith,
means that the accounting principles applied are consistent in all material
respects to those applied at prior dates or for prior periods.
Government: The United States of America, any state, district or
territory thereof, any foreign nation, any state, district, department,
territory or other political division thereof, or any agency or political
subdivision of any of the foregoing.
Gross Operating Expenses: The term "Gross Operating Expenses" shall
include (i) all costs and expenses of operating the Hotel included within the
meaning of the term "Total Costs and Expenses" contained in the Uniform System
and, (ii) without duplication, the following: all salaries and employee
expenses and payroll taxes (including salaries, wages, bonuses and other
compensation of all employees of the Hotel, and benefits including life,
medical and disability insurance and retirement benefits), expenditures
described in Section 9.1 (other than Capital Expenditures required to be paid
for by Lessor), operating lease payments for Office Machines acquired after the
Commencement Date operational supplies, utilities, governmental fees and
assessments, common area assessments, costs of food and beverages, laundry
service expense, the cost of Inventory, license fees, advertising, marketing,
reservation systems and any and all other operating expenses as are reasonably
necessary for the proper and efficient operation of the Hotel incurred by
Lessee in accordance with the provisions hereof (excluding, however, (i)
federal, state and municipal excise, sales and use taxes collected directly
from patrons and guests or as a part of the sales price of any goods, services
or displays, such as gross receipts, admissions, cabaret or similar or
equivalent taxes paid over to federal, state or municipal governments, (ii) the
cost of insurance to be provided by Lessor under Subsection 13.1(a), (iii) Real
Estate Taxes, Capital Impositions and Personal Property Taxes, (iv) payments on
any Ground Lease, Mortgage or other Encumbrance on, the Land or Improvements
approved by Lessor, and (v) depreciation and amortization; all determined in
accordance with the Uniform System).
Gross Revenues: All revenues, receipts, and income of any kind derived
directly or indirectly by Lessee from or in connection with the Hotel
(including rentals or other payments from tenants, lessees, licensees or
concessionaires but not including their gross receipts) whether on a cash basis
or credit, paid or collected, determined in accordance with the Uniform System,
excluding, however: (i) funds furnished by Lessor, (ii) federal, state and
municipal excise, sales, and use taxes collected directly from patrons and
guests or as a part of the sales price of any goods, services or displays, such
as gross receipts, admissions, cabaret or similar or equivalent taxes and paid
over to federal, state or municipal governments, (iii) the amount of all
credits, rebates or refunds to customers, guests or patrons in the ordinary
course of business, and all service charges, finance charges, interest and
discounts attributable to charge accounts and credit cards, to the extent same
are paid to Lessee by its customers, guests or patrons, or to the extent the
same are paid for by Lessee to, or charged to Lessee by, credit card companies,
(iv) gratuities paid to employees, (v) proceeds of insurance (including
business interruption insurance payable to Lessee) and condemnation, (vi)
proceeds from sales other than sales in the ordinary course of
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business, (vii) complimentary meals and rooms to Lessee's and Manager's
employees, and charitable, promotional and other complimentary meals and rooms
given by Lessee in the ordinary course of business and in accordance with its
normal policies for giving such meals and rooms, as is customary for similar
operations, (viii) receipts for returns to shippers, manufacturers or
suppliers, (ix) all loan proceeds from financing or refinancing of its
leasehold interest in the Hotel, or interests therein or components thereof,
including the Leased Property and Lessee's Personal Property, (x) judgments and
awards, except any portion thereof arising from normal business operations of
the Hotel, and (xi) items constituting "allowances" under the Uniform System.
Ground Lease: As defined in Section 28.1.
Hazardous Materials: All chemicals, pollutants, contaminants, wastes
and toxic substances, including without limitation:
(a) Solid or hazardous waste, as defined in
RCRA or in any Environmental Law;
(b) Hazardous substances, as defined in
CERCLA or in any Environmental Law;
(c) Toxic substances, as defined in TSCA or
in any Environmental Law;
(d) Insecticides, fungicides, or
rodenticide, as defined in FIFRA or in any Environmental Law; and
(e) Gasoline or any other petroleum product
or byproduct, polychlorinated biphenols, asbestos, urea formaldehyde and radon
gas.
Hotel: The hotel and/or other facility offering lodging and other
services or amenities being operated or proposed to be operated on the Leased
Property.
Hotel Market Decline: A period of six (6) consecutive calendar months
during which there is (i) a twenty percent (20%) decline in average hotel
occupancy for the Hotel from the average hotel occupancy levels for same period
during the prior calendar year and (ii) a twenty percent (20%) decline in
average hotel occupancy for the Hotel's Competitive Set from the average hotel
occupancy levels for the same period during the prior calendar year, as
published in the applicable STR Reports.
Hotel Shortfall Cure Percentage: As defined in Subsection 2.4(c).
Impositions: Collectively, all taxes (including, without limitation,
all ad valorem, sales and use, single business, gross receipts, transaction
privilege, rent or similar taxes as the same relate to
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or are imposed upon Lessee or its business conducted upon the Leased Property),
assessments (including, without limitation, all Capital Impositions, whether or
not commenced or completed prior to the date hereof and whether or not to be
completed within the Term), water, sewer or other utility rents and charges,
excises, tax inspection, authorization and similar fees and all other
governmental charges, in each case whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, of every character in respect of the
Leased Property or the business conducted thereon by Lessee (including all
interest and penalties thereon caused by any failure in payment by Lessee),
which at any time prior to, during or with respect to the Term hereof may be
assessed or imposed on or with respect to or be a lien upon Lessor's interest
in the Leased Property, the Leased Property, or any part thereof or any rent
therefrom or any estate, right, title or interest therein, or any occupancy,
operation, use or possession of, or sales from, or activity conducted on or in
connection with the Leased Property, or the leasing or use of the Leased
Property or any part thereof by Lessee. Nothing contained in this definition of
Impositions shall be construed to require Lessee to pay (1) any tax based on
net income (whether denominated as a franchise or capital stock or other tax)
imposed on Lessor or any other Person, or (2) any net revenue tax of Lessor or
any other Person, or (3) any tax imposed with respect to the sale, exchange or
other disposition by Lessor of any Leased Property or the proceeds thereof, or
(4) any single business, gross receipts (other than a tax on any rent received
by Lessor from Lessee), transaction, privilege or similar taxes as the same
relate to or are imposed upon Lessor, except to the extent that any tax,
assessment, tax levy or charge that Lessee is obligated to pay pursuant to the
first sentence of this definition and that is in effect at any time during the
Term hereof is totally or partially repealed, and a tax, assessment, tax levy
or charge set forth in clause (1) or (2) is levied, assessed or imposed
expressly in lieu thereof.
Improvements: As defined in Section 1.1.
Indemnified Party: Either of a Lessee Indemnified Party or a Lessor
Indemnified Party.
Indemnifying Party: Any party obligated to indemnify an Indemnified
Party pursuant to Sections 8.3 or 18.1.
Insurance Requirements: All terms of any insurance policy required by
this Lease and all requirements of the issuer of any such policy.
Inventory: All "Inventories of Merchandise" and "Inventories of
Supplies" as defined in the Uniform System, as same may hereafter be revised,
including without limitation linens, china, silver, glassware and other
non-depreciable personal property, and including any property of the type
described in Section 1221(1) of the Code.
Land: As defined in Section 1.1 above.
Lease Year: Any 12-month period from January 1 through December 31
during the Term, or any shorter period at the beginning or end of the Term.
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Leased Property: As defined in Section 1.1.
Leasehold Mortgage: As defined in Section 21.1.
Legal Requirements: All federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Leased Property or the
maintenance, construction, use or alteration thereof (whether by Lessee or
otherwise), whether now in force or hereafter enacted and in force, including
all laws, rules or regulations pertaining to the environment, occupational
health and safety and public health, safety or welfare, and any laws, rules or
regulations that may (1) require repairs, modifications or alterations in or to
the Leased Property or (2) in any way adversely affect the use and enjoyment
thereof; and all permits, licenses and authorizations and regulations relating
thereto and all covenants, agreements, restrictions and encumbrances contained
in any instruments, either of record or known to Lessee (other than
encumbrances created by Lessor without the consent of Lessee), at any time in
force affecting the Leased Property.
Lessee: The Lessee designated on this Lease and its respective
permitted successors and assigns.
Lessee Indemnified Party: Lessee, any Affiliate of Lessee, any other
Person against whom any claim for indemnification may be asserted hereunder as
a result of a direct or indirect ownership interest (including a partner's,
limited liability company member's or stockholder's interest) in Lessee, the
officers, directors, stockholders, employees, agents and representatives of
Lessee (and any general partner of Lessee) and any stockholder, partner,
limited liability company member or manager of Lessee, and the respective
heirs, personal representatives, successors and assigns of any such officer,
director, stockholder, partner, limited liability company member or manager,
employee, agent or representative.
Lessee's Personal Property: As defined in Section 6.2.
Lessor: The Lessor designated on this Lease and its respective
successors and assigns.
Lessor Indemnified Party: Lessor, any Affiliate of Lessor, any other
Person against whom any claim for indemnification may be asserted hereunder as
a result of a direct or indirect ownership interest (including a partner's,
limited liability company member's or stockholder's interest) in Lessor, the
officers, directors, stockholders, employees, agents and representatives of
Lessor (and any general partner of Lessor), and any partner, limited liability
company member or manager of Lessor, and the respective heirs, personal
representatives, successors and assigns of any such officer, director, partner,
stockholder, partner, limited liability company member or manager, employee,
agent or representative.
Major Sublease. Any sublease of a portion of the Leased Property which
(i) is a Restaurant sublease or other retail sublease important to the
successful operation of the Hotel
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(other than leases of gift shop space or to a service provider, such as a lease
to an airline ticket agent or to an overnight courier), (ii), individually (or
in the aggregate with all other such non-Restaurant subleases) generates two
percent (2%) or more of the Gross Revenues of the Hotel, or (iii) the loss of
which could reasonably be expected to cause a material adverse change in the
Hotel or Lessee's business at the Hotel.
Management Agreement: As defined in Section 19.3.
Manager: The manager of the Hotel, from time to time, as permitted
under this Lease.
Master Hotel Agreement: The Amended and Restated Master Hotel
Agreement dated as of July 27, 1998, among BHR, FelCor and FSLP, and certain of
their respective affiliates, as the same may be hereafter amended, restated,
supplemented or modified.
Mortgage: Any deeds to secure debt, deeds of trust, mortgages, or
other interests heretofore or hereafter granted by Lessor or which otherwise
encumber or affect the Leased Property and any and all renewals, modifications,
consolidations, replacements, substitutions, and extensions thereof.
National Economic Decline: A period of six (6) consecutive calendar
months during which there occurs or continues (i) a ten percent (10%) decline
in average hotel occupancy, from average hotel occupancy levels for the same
period during the prior calendar year, for all open and operating hotels in the
United States as determined from the applicable STR Reports or, if the STR
Reports are no longer published, other reputable national economic data
regarding the hospitality industry.
New Lease: Any Lease Agreement hereafter entered into between Lessor
(or another Subsidiary of FelCor) and Lessee (or another Subsidiary of BHR)
pursuant to, and to be governed by, the Master Hotel Agreement.
Notice: A notice given pursuant to Article 27.
Notice Period: As defined in Subsection 2.4(b).
Office Machines: As defined in Section 6.2.
Officer's Certificate: A certificate of Lessee, in form reasonably
acceptable to Lessor, signed by the chief financial officer, treasurer, chief
accounting officer, or another officer authorized so to sign such certificates
by the board of directors or bylaws of Lessee, or any other Person whose power
and authority to act has been authorized by delegation in writing by any such
officer.
Operating Budget: As defined in Section 4.2.
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Other Hotels: The hotel properties covered by the Existing Leases
(other than this Lease) and the New Leases.
Other Leases: The Existing Leases (other than this Lease) and the New
Leases.
Other Lessors: The Lessors under the Other Leases.
Other Percentages: As defined in Subsection 3.1(b).
Other Revenues. All revenues, receipts, and income of any kind derived
directly or indirectly from or in connection with the Hotel and included in
Gross Revenues (other than Room Revenues, Food Sale Revenues, Beverage Sale
Revenues and Telephone Revenues), including, without limitation, all Sublease
Rent, revenues, receipts and income derived from the Hotel's and Leased
Property's telephones, TV and movie rentals check room, washroom, laundry,
valet, and vending machines and all other services not expressly specified
herein as Room Revenues, Food Sale Revenues, Beverage Sale Revenues and
Telephone Revenues.
Overdue Rate: On any date, a rate equal to the Base Rate plus two
percent (2%) per annum, but in no event greater than the maximum rate then
permitted under applicable law.
Payment Date: Any due date for the payment of any installment of Base
Rent.
Percentage Rent: As defined in Subsection 3.1(b).
Performance Failure: A Revenue Performance Shortfall that has not been
cured in accordance with Section 2.4 of this Lease.
Person: The term "Person" means and includes individuals,
corporations, general and limited partnerships, stock companies or
associations, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, or other entities and governments and
agencies and political subdivisions thereof.
Personal Property Taxes. All personal property taxes imposed on the
Furniture, Fixtures and Equipment and other items of personal property owned by
Lessor, located on, and used in connection with, the operation of the
Improvements as a Hotel (other than Inventory and the other Lessee's Personal
Property), together with all replacements, modifications, alterations and
additions thereto.
PIP: As defined in Section 10.3.
Primary Intended Use: As defined in Subsection 7.2(b).
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Proceeding: Any judicial action, suit or proceeding (whether civil or
criminal), any administrative proceeding (whether formal or informal), any
investigation by a governmental authority or entity (including a grand jury),
and any arbitration, mediation or other non-judicial process for dispute
resolution.
Quarterly Percentage Rent Computation: As defined in Subsection
3.1(b).
RCRA: The Resource Conservation and Recovery Act, as amended.
Real Estate Taxes: All real estate taxes, including general and
special assessments, if any, which are imposed upon the Land and the
Improvements.
REIT Requirements: As defined in Section 19.1.
Regional Market Decline: A period of six (6) consecutive calendar
months during which there is a twenty percent (20%) decline in average hotel
occupancy from hotel occupancy levels for the same period during the then prior
calendar year, for all open and operating hotels in the Smith Travel Research
Region in which the Hotel is located, as determined from applicable STR Reports
or, if the STR Reports are no longer published, other reputable regional
economic data regarding the hospitality industry.
Release: A "Release" as defined in CERCLA or in any Environmental Law,
unless such Release has been properly authorized and permitted in writing by
all applicable Environmental Authorities or is allowed by such Environmental
Law without authorizations or permits.
Rent: Collectively, the Base Rent, Percentage Rent, and Additional
Charges.
Repositioning: As defined in Section 3.6.
Restaurant: Any restaurant or cocktail lounge, together with a kitchen
for those facilities, which may be located in the Hotel at any time and from
time to time.
Revenue Budget: As defined in Section 4.1.
Revenue Performance Shortfall: As defined in Subsection 2.4(a).
RevPAR: As defined in the STR Reports.
Room Revenue Breakpoint: As defined in Subsection 3.1(b).
Room Revenues: Shall mean Gross Revenue from the rental of guest rooms
or suites, whether to individuals, groups or transients, but excluding Beverage
Sale Revenues, Food Sale Revenues and the following:
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(a) The amount of all credits, rebates or refunds to customers, guests
or patrons;
(b) All sales taxes or any other taxes imposed on the rental of such
guest rooms; and
(c) Any fees collected for amenities including, but not limited to
telephone, laundry, movies or concessions.
SARA: The Superfund Amendments and Reauthorization Act of 1986, as
amended.
Second Tier Room Revenue Percentage: As defined in Section 3.1(b).
State: The State or Commonwealth of the United States or Province of
Canada in which the Leased Property is located.
SEC: The U.S. Securities and Exchange Commission or any successor
agency.
Second Extension: As defined in Section 2.3.
STR Reports: Reports compiled by Smith Travel Research, or its
successor, which contain historical supply and demand, occupancy, and average
rate information for the Hotel and hotels with which it competes (or, in the
event that Smith Travel Research discontinues providing such information,
reports of similar nature compiled by an authority recognized nationally in the
hospitality industry).
Sublease Rent: The entire net amount of rentals (including base rent
and percentage rent, but not including pre-paid rent (until earned) security or
other deposits and expense pass-through amounts), if any, received by Lessee
under any sublease (or similar agreement), and with any unaffiliated third
party (i) to which the Leased Property is subject on the date of this Lease, or
(ii) of a Restaurant or other retail space in the Hotel which may be entered
into from time to time.
Subsidiaries: Persons in which another Person owns, directly or
indirectly, more than 50% of the voting stock and control, as applicable
(individually, a "Subsidiary").
Taking: A taking or voluntary conveyance during the Term hereof of all
or part of the Leased Property, or any interest therein or right accruing
thereto or use thereof, as the result of, or in settlement of, any Condemnation
or other eminent domain Proceeding affecting the Leased Property whether or not
such Condemnation or other eminent domain Proceeding shall have actually been
commenced.
Telephone Revenues. All revenues, receipts and income derived directly
from the Hotel's and Leased Property's telephones.
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Term: As defined in Section 2.1.
Termination Fee: An amount with respect to the termination of this
Lease, if any, determined as set forth in the Master Hotel Agreement.
TSCA: The Toxic Substances Control Act, as amended.
Unavoidable Delays: Delays due to strikes, lock-outs, labor unrest,
inability to procure materials, power or other utility failure, acts of God
(such as hurricanes, tornados, earthquakes, floods and mud slides) governmental
restrictions, war or other enemy action, civil commotion, fire, casualty,
condemnation, the Year 2000 Problem or other similar causes, in each case, if
such cause is beyond the control of the party responsible for performing an
obligation hereunder, provided that lack of funds shall not be deemed a cause
beyond the reasonable control of either party hereto unless such lack of funds
is caused by the failure of the other party hereto to perform any obligations
of such party under this Lease or any guaranty of this Lease.
Unavoidable Occurrence: shall mean the occurrence of strikes,
lockouts, labor unrest, gasoline and other energy shortages, widespread
disruption of air, auto or other travel, inability to procure materials or
services, power or other utility failure, acts of God (such as hurricanes,
tornados, earthquakes, floods and mud slides), governmental restrictions, war
or other enemy or terrorist action, civil commotion, fire, casualty,
condemnation, the Year 2000 Problem or other similar causes, in each case, if
such cause is beyond the reasonable control of Lessee; provided that (i) lack
of funds shall not be deemed a cause beyond the reasonable control of either
party hereto unless such lack of funds is caused by the failure of the other
party hereto to perform any obligations of such party under this Lease or any
guaranty of this Lease, and (ii) any such occurrence is an extraordinary, as
opposed to a routine or cyclical, material event that was not reasonably
foreseeable when the then-applicable Annual Budget was prepared.
Uneconomic for its Primary Intended Use: A state or condition of the
Hotel such that, in the good faith judgment of Lessee, reasonably exercised and
evidenced by the resolution of the board of directors or other governing body
of Lessee (or its general partner), the Hotel cannot be operated on a
commercially practicable basis for its Primary Intended Use, taking into
account, among other relevant factors, the number of usable rooms and projected
revenues, such that Lessee intends to, and shall, complete the cessation of
operations at the Hotel.
Uniform System: Shall mean the Uniform System of Accounts for Hotels
(9th Revised Edition, 1996) as published by the Hotel Association of New York
City, Inc., with such later revisions as may be agreed to by both Lessor and
Lessee.
Unsuitable for its Primary Intended Use: A state or condition of the
Hotel such that, in the good faith judgment of Lessor, reasonably exercised and
evidenced by the resolution of the board of directors or other governing body
of Lessor, due to casualty damage, loss through
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Condemnation or a Year 2000 Problem, the Hotel cannot function as an integrated
hotel facility consistent with standards applicable to a well maintained and
operated hotel of the same type as the Hotel.
WARN Act: As defined in Subsection 8.2(b).
Year 2000 Problem: Shall mean the malfunction of software, hardware or
an embedded technological system due to the failure to properly process any
date or input which includes an indication of or reference to a date, including
specifically but not limited to dates that represent or reference different
centuries or more than one century, if either (i) Lessor had previously refused
to make or approve a Capital Expenditure reasonably proposed by Lessee to avoid
such Year 2000 Problem, or (ii) such Year 2000 Problem results from a
governmental or other third party failure to be year 2000 compliant and Lessee
has not failed to take reasonable steps to seek assurances that such parties
will be year 2000 compliant.
ARTICLE 2
TERM, EXTENSION AND TERMINATION
2.1 Term. The term of this Lease (the "TERM") shall commence on the
Commencement Date and shall end on the Expiration Date, unless sooner
terminated in accordance with the provisions hereof or extended to an
anniversary of the Expiration Date pursuant to this Article 2.
2.2 First Extension of the Term. If so provided in the Schedule of
Basic Terms attached hereto, Lessee is granted the option to extend the Term of
this Lease for the period of years set forth in the Schedule of Basic Terms
attached hereto and designated as the First Extension (if applicable, the
"FIRST EXTENSION"), provided that Lessee is not in default hereunder either at
the time of deemed exercise of the option or at the end of the original Term,
which option shall be deemed exercised if Lessee fails to give written notice
to Lessor of its desire not to exercise the First Extension option at least one
hundred twenty (120) days prior to the expiration of the original Term. Lessee
shall be deemed to have exercised its First Extension option as of the date
that is one hundred twenty (120) days prior to the expiration of the original
Term in the event that no such written notice of non-exercise is received by
Lessor by such time. The First Extension shall be upon the same terms,
conditions and rentals as set forth herein for the original Term.
2.3 Second Extension of the Term. If so provided in the Schedule of
Basic Terms attached hereto, Lessee is granted an option to extend the Term for
a period of five (5) years following the end of the First Extension (if
applicable, the "SECOND EXTENSION"), provided that Lessee is not in default
hereunder either at the time of exercise of the option or at the end of the
First Extension, which option must be exercised by written notice to Lessor at
least one hundred twenty (120) days prior to the expiration of the First
Extension. If such option is
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exercised, Lessor and Lessee shall negotiate in good faith modifications to the
Rent for the Second Extension to adjust such Rent to market rates for
arms-length hotel REIT leases between unrelated parties for similar hotel
properties at that time. In the event Lessor and Lessee are unable to agree
upon Rent terms for the Second Extension at least ninety (90) days prior to the
expiration of the Term, the Rent terms for the Second Extension shall be
determined by a panel of three (3) persons who have generally recognized
expertise in evaluating hotel REIT leases and who are not Affiliates of Lessor
or Lessee. Lessee and the Lessor each shall have the right to designate one
panel member and the two (2) panel members so designated will designate the
third panel member. Rent terms approved by at least two (2) of the three (3)
panel members will be binding on Lessee and Lessor for the Second Extension,
which shall be otherwise on the terms set forth herein. In determining the
market rates for the Second Extension, the panel members shall be instructed to
consider hotel REIT lease terms with respect to similar hotel property types.
The Second Extension shall be otherwise upon the same terms and conditions as
set forth herein for the original Term.
2.4 Performance Failure.
(a) If, with respect to any three (3)
consecutive Lease Years during the Term commencing on or after January 1, 1998,
Lessee shall fail to realize from the operation of the Hotel an amount equal to
at least eighty percent (80%) of Room Revenues as set forth in the Revenue
Budget for such Lease Year, such failure shall constitute a "REVENUE
PERFORMANCE SHORTFALL" under this Lease, except to the extent such failure is
caused by an Unavoidable Occurrence. In determining whether Lease Years are
consecutive for such purpose, Excluded Lease Years will be ignored. The
existence of a Revenue Performance Shortfall for any Lease Year shall be
determined by Lessor on the basis of the first Officer's Certificate delivered
by Lessee to Lessor in the subsequent Lease Year pursuant to the requirements
of Subsection 3.1(c) and shall be subject to confirmation pursuant to Section
3.2. Notwithstanding the foregoing, no Lease Year that would otherwise be
included in the period of a Revenue Performance Shortfall shall be so included
if Lessor and the Other Lessors receive Rent payments from Lessee and the other
Lessees under this Lease and the Other Leases which, in the aggregate, amount
equal to at least ninety percent (90%) (the "OVERALL SHORTFALL CURE
PERCENTAGE") of the aggregate Rent budgeted for such Lease Year in the Revenue
Budgets for the Hotel and the Other Hotels leased under the Other Leases (each
such Lease Year, an "EXCLUDED LEASE YEAR"). Lessee may rely on the foregoing
for a total of three (3) Excluded Lease Years and, thereafter, the Overall
Shortfall Cure Percentage shall increase to one hundred percent (100%).
(b) Upon the occurrence of a Revenue
Performance Shortfall, Lessor shall have the right, subject to subsection (c)
of this Section 2.4, at Lessor's option, to terminate this Lease upon thirty
(30) days' notice (the "NOTICE PERIOD") to Lessee, in which event Lessee shall
immediately surrender the Leased Property to Lessor, and, if Lessee fails to so
surrender, Lessor shall have the right, without notice, to enter upon and take
possession of the Leased Property and to expel or remove Lessee and its effects
without being liable for prosecution or any claim for damages therefor; and
Lessee shall, and hereby agrees to, pay (or, as
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the case may be, indemnify) Lessor for the total amount of (i) in the event
that Lessee does not promptly surrender the Leased Property, the reasonable
costs of recovering the Leased Property and all other losses, liabilities and
reasonable expenses incurred by Lessor in connection with Lessee's failure to
surrender; (ii) the unpaid Rent earned as of the date of termination (and for
any period following the termination date during which Lessee retains
possession and control of the Leased Property), plus interest at the Overdue
Rate accruing after the earlier of the due date or such termination date; and
(iii) all other sums of money then owing by Lessee to Lessor. Except as
provided in the Master Hotel Agreement, termination of this Lease and recovery
of the Rent and other amounts as aforesaid shall constitute Lessor's sole
remedy for the Revenue Performance Shortfall, and Lessee shall not be liable to
Lessor for damages arising therefrom.
(c) Lessor's right to terminate this Lease
pursuant to subsection (b) above, following any Lease Year, shall be subject to
Lessee's right to cure the Revenue Performance Shortfall occurring thereunder
with respect to such Lease Year by making a cash payment to Lessor during the
Notice Period equal to the difference between the Percentage Rent actually paid
for the Lease Year and eighty percent (80%) (the "HOTEL SHORTFALL CURE
PERCENTAGE") of the Percentage Rent budgeted for the Lease Year in the Revenue
Budget for the Lease Year. Any payment made by Lessee under this subsection (c)
shall be deemed Rent paid with respect to the Lease Year. Lessor shall have no
obligation to repay any amount advanced by Lessee to cure a Revenue Performance
Shortfall. Lessee may only cure two Revenue Performance Shortfalls, occurring
under subsection (a) by paying Lessor based on a eighty percent (80%) Hotel
Shortfall Cure Percentage. Thereafter, the Hotel Shortfall Cure Percentage
shall be ninety percent (90%).
2.5 Lessor's Option to Terminate Lease upon Sale.
(a) In the event Lessor enters into a bona
fide contract to sell all or substantially all of the Leased Property to a
non-Affiliate of Lessor or Lessee, then Lessor may terminate this Lease by
giving not less than thirty (30) days prior Notice to Lessee of Lessor's
election to terminate this Lease upon the closing under such sale contract (the
"TERMINATION DATE"); provided, however, for purposes of this Section 2.5 only,
the percentage in the definition of "AFFILIATE" herein shall be deemed to be
ten percent (10%) rather than fifty percent (50%). Effective upon the
Termination Date, this Lease shall terminate and be of no further force and
effect except as to any obligations of the parties existing as of such date
that survive termination of this Lease, and all Rent including Percentage Rent
and Additional Charges shall be adjusted as of the Termination Date. For
purposes of this Article, Lessor will be deemed to have "sold" the Leased
Property if it (i) sells, or transfers by long-term ground lease, the Leased
Property for cash, a promissory note or other consideration, (ii) contributes
the Leased Property to a Person in exchange for stock, partnership interests,
membership interests or other equity interests, provided that after such
transaction the Person who will own the Leased Property is not and will not
thereby become an Affiliate of FelCor, FSLP, Lessor or any of their
Subsidiaries, or (iii) merges (except a merger involving FelCor or FSLP) or
combines with any Person, provided that after
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such transaction the Person who will own the Leased Property is not and will
not thereby become an Affiliate of FelCor, FSLP, Lessor or any of their
Subsidiaries.
(b) As compensation for the early
termination of its leasehold estate under this Section 2.5 because of a sale of
the Leased Property, Lessor shall pay to Lessee the Termination Fee, as and
when provided in the Master Hotel Agreement, unless the Lessee accepts a New
Lease or a substitute for this Lease as provided in the Master Hotel Agreement.
(c) In the event that Lessor terminates
this Lease upon less than sixty (60) days written notice pursuant to the
provisions of this Section 2.5 (or pursuant to any other provisions of this
Lease except for the provisions allowing Lessor to terminate this Lease under
Article 14 or Article 15 and except upon the occurrence of an Event of
Default), the parties agree that on and after the effective date of such
termination, Hotel personnel employed by Lessee immediately prior to the
effective date of termination will either be employed by Lessor's Manager or
designee, or Lessor or its designee will take such other action with respect to
their employment, which may include notification of the prospective termination
of their employment, so as, in any case, to attempt to prevent any liability
pursuant to the WARN Act. In that event, Lessor hereby agrees to defend,
indemnify and hold harmless Lessee from and against any and all manner of
claims, actions, liabilities, costs and expenses (including, without
limitation, reasonable attorneys' fees and disbursements) relating to or
arising from Lessor's breach of this covenant, including, without limitation,
any liability, costs and expenses arising out of asserted or actual violation
of the requirements of the WARN Act. Further, Lessor's Manager or designee
shall assume all COBRA liabilities and COBRA obligations to the Hotel's
personnel, which Lessee shall or may incur in connection with such termination
of this Lease, and Lessor hereby agrees to defend, indemnify and hold harmless
Lessee from and against any and all manner of claims, actions, liabilities,
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements) relating to or resulting from Lessor's breach of the
foregoing covenant with respect to COBRA matters, including, without
limitation, any liability, costs and expenses arising out of any asserted or
actual violation of the requirements of the COBRA any legislation. Upon
Lessor's written request to Lessee, Lessee shall take all action that is
reasonable to notify, advise and cooperate with Lessor in order to assist
Lessor in complying with the WARN Act or COBRA legislation and to mitigate
Lessor's expense or liability with respect to the WARN Act and COBRA
legislation.
2.6 Transition Procedures. Upon any expiration or termination of the
Term, but without prejudice to Lessor's remedies upon the occurrence of an
Event of Default, Lessor and Lessee shall do the following and, in general,
shall cooperate in good faith to effect an orderly transition of the management
or lease of the Hotel:
(a) Transfer of Licenses. Lessee shall use
its reasonable best efforts (i) to transfer to Lessor or Lessor's designee any
Franchise Agreement, all licenses, operating permits and other governmental
authorizations and all contracts, including contracts with governmental or
quasi-governmental entities, that may be necessary for the operation of the
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Hotel (collectively, "LICENSES"), or (ii) if such transfer is prohibited by law
or Lessor otherwise elects, to cooperate with Lessor or Lessor's designee in
connection with the processing by Lessor or Lessor's designee of any
applications for all Licenses, including Lessee (or its Affiliate) continuing
to operate the liquor operations under its licenses with Lessor agreeing to
indemnify and hold Lessee (or its Affiliate) harmless as a result thereof
(except for the gross negligence or willful misconduct of Lessee); provided, in
either case, that the costs and expenses of any such transfer or the processing
of any such application shall be paid by Lessor or Lessor's designee.
(b) Leases and Concessions. Lessee shall
assign to Lessor or Lessor's designee simultaneously with the termination of
this Agreement, and the assignee shall assume, all leases, contracts,
concession agreements and agreements in effect with respect to the Hotel then
in Lessee's name which are designated by Lessor.
(c) Books and Records. To the extent that
Lessor has not already received copies thereof, all books and records
(including computer and computer-generated records) for the Hotel kept by
Lessee pursuant to Article 4 hereof or Section 7 of the Master Hotel Agreement
(or copies thereof) shall be delivered to Lessor or Lessor's designee
simultaneously with the termination of this Lease, but such books and records
shall thereafter be available at all reasonable times for inspection, audit,
examination and transcription for a period of one (1) year and Lessee may
retain (on a confidential basis) copies of computer records thereof.
(d) Receivables and Payables, etc. Lessee
shall be entitled to retain all cash, bank accounts and house banks, and to
collect all Gross Revenues and accounts receivable accrued through the
termination date. Lessee shall be responsible for the payment of Rent, all
Gross Operating Expenses and all other obligations of Lessee accrued under this
Lease as of the termination date, and Lessor shall be responsible for all Gross
Operating Expenses of the Hotel accruing after the termination date.
(e) Final Accounting. Lessee shall, within
forty five (45) days after the expiration or termination of the Term, prepare
and deliver to Lessor a final accounting statement, dated as of the date of the
expiration or termination, as more particularly described in Article 4, along
with a statement of any sums due from Lessee to Lessor pursuant hereto and
payment of such funds.
(f) Inventory. Lessee shall insure that the
Leased Property, at the date of such termination or expiration, has Inventory
of a substantially equivalent nature and amount as exists at the Leased
Property on the Commencement Date, and Lessor shall acquire such Inventory from
Lessee at Lessee's cost.
(g) Surrender. Lessee shall peacefully and
immediately vacate and surrender the Leased Property to Lessor or Lessor's
designee, shall turn over all keys to Lessor and Lessor's designee and shall
not interfere with Lessor or any new Lessee or Manager.
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The provisions of this Section 2.6 shall survive the expiration or
termination of this Lease until they have been fully performed. Nothing
contained herein shall limit Lessor's rights and remedies under this Lease if
such termination occurs as the result of an Event of Default.
2.7 Holding Over. If Lessee for any reason remains in possession of
the Leased Property after the expiration or earlier termination of the Term,
such possession shall be as a tenant at sufferance during which time Lessee
shall pay as rental each month one hundred fifty percent of the aggregate of
(a) one-twelfth (1/12) of the aggregate Base Rent and Percentage Rent payable
with respect to the last full Fiscal Year of the Term, (b) all Additional
Charges accruing during the applicable month and (c) all other sums, if any,
payable by Lessee under this Lease with respect to the Leased Property. During
such period, Lessee shall be obligated to perform and observe all of the terms,
covenants and conditions of this Lease, but shall have no rights hereunder
other than the right, to the extent given by law to tenancies at sufferance, to
continue its occupancy and use of the Leased Property. Nothing contained herein
shall constitute the consent, express or implied, of Lessor to the holding over
of Lessee after the expiration or earlier termination of this Lease.
ARTICLE 3
RENT, RENT ADJUSTMENTS AND PERFORMANCE STANDARDS
3.1 Rent. Lessee will pay to Lessor in lawful money of the United
States which shall be legal tender for the payment of public and private debts,
in immediately available funds, at Lessor's address set forth in the Schedule
of Basic Terms attached hereto or at such other place or to such other Person
as Lessor from time to time may designate in a Notice, all Base Rent,
Percentage Rent and Additional Charges, during the Term, as follows:
(a) Payment of Rent.
(i) Monthly Payments in Respect of Base
Rent: With respect to each calendar month during the Term, Lessee shall pay to
Lessor, in advance, on or before the last day of the calendar month immediately
preceding the calendar month to which such payment relates (except as otherwise
expressly provided in the Master Hotel Agreement), an amount equal to the
portion of the annual sum (except for 1998) set forth on the Schedule of Basic
Terms attached hereto as the "BASE RENT" for the Leased Property ("BASE RENT")
included in the Annual Budget for such calendar month (which amount shall be
fully earned by Lessor and shall not be subject to adjustment or reduction,
except as expressly set forth in this Article III, during any subsequent month,
quarter or Fiscal Year); provided, however, that the first and last monthly
payments in respect of Base Rent shall be pro rated as to any partial month
(subject to adjustment as provided in Sections 5.3, 14.5, 15.3, 15.5, and
15.6); and
(ii) Monthly Payments in Respect of
Budgeted Percentage Rent: With respect to each calendar month during the Term,
commencing with the
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calendar month in which the Commencement Date occurs, Lessee shall pay to
Lessor (on or before the last day of the month) an amount equal to the excess,
if any, of (i) seventy-five percent (75%) of the amount of Lessee's budgeted
Percentage Rent payable with respect to the then current calendar month (which
budgeted amount shall be equal to one-third (1/3) of the quarterly estimate of
Percentage Rent included in the Annual Budget for the calendar quarter in which
such calendar month occurs) over (ii) Base Rent for such calendar month; and
(iii) Quarterly Payments in Respect of
Percentage Rent: With respect to each calendar quarter of each Lease Year
during the Term (on or before the fifteenth (15th) day following the end of the
first three (3) calendar quarters and on or before the twentieth (20th) day
following the end of the final calendar quarter), Lessee shall pay to Lessor an
amount equal to the amount, if any, by which the aggregate of all payments in
respect of Base Rent and Percentage Rent for such calendar quarter shall be
less than the amount determined pursuant to the Quarterly Percentage Rent
Computation for such calendar quarter.
(b) Quarterly Computation of Percentage
Rent. For each calendar quarter of each Lease Year of the Term, the aggregate
amount of Percentage Rent that shall be fully earned by Lessor, which amount
shall not be subject to adjustment or reduction (except as expressly set forth
in this Article III) during any subsequent quarter or Lease Year, shall be the
amount determined by the following calculation ("QUARTERLY PERCENTAGE RENT
COMPUTATION"):
An amount equal to the sum of: (i) the
product of the First Tier Room Revenue
Percentage, set forth for the applicable
Lease Year in the Schedule of Basic Terms
attached hereto, times the aggregate Room
Revenues during such calendar quarter up to
and including that portion of the Room
Revenue Breakpoint allocated to such
calendar quarter in the Annual Budget (the
"QUARTERLY ROOM REVENUE BREAKPOINT"); plus
(ii) the product of the Second Tier Room
Revenue Percentage, set forth for the
applicable Lease Year in the Schedule of
Basic Terms attached hereto, times the
aggregate Room Revenues during such
calendar quarter in excess of the Quarterly
Room Revenue Breakpoint; plus
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(iii) the product of each of the Other
Percentages, set forth for the applicable
Lease Year in the Schedule of Basic Terms
attached hereto, times (as applicable) the
Food Sale Revenues, Beverage Sale Revenues,
Telephone Revenues and Other Revenues during
such calendar quarter.
For the purpose of defining the Quarterly Percentage Rent Computation:
(i) "FIRST TIER ROOM REVENUE PERCENTAGE,"
"SECOND TIER ROOM REVENUE PERCENTAGE" and "OTHER PERCENTAGES"
shall mean the then applicable percentages corresponding to
each of such terms as set forth in the Schedule of Basic
Terms attached hereto; and
(ii) "ROOM REVENUE BREAKPOINT" shall mean
the amount of Room Revenues for the applicable Lease Year
corresponding to such term as set forth in Schedule of Basic
Terms attached hereto (which amount shall always be equal to
the sum of the Quarterly Room Revenue Breakpoint amounts for
each calendar quarter during such Lease Year); except that
for each Lease Year from and after the CPI Adjustment Year,
the Room Revenue Breakpoint shall be adjusted by the same
percentage that the Base Rent is adjusted pursuant to
Subsection 3.1(d) of this Lease.
In no event will the amount of Rent payable for any calendar quarter or the
result of any Quarterly Percentage Rent Computation be less than zero, and
there shall be no reduction in the Base Rent regardless of the result of any
Quarterly Percentage Rent Computation.
(c) Officer's Certificates. An Officer's
Certificate shall be delivered to Lessor, together with each such quarterly
payment based upon the Quarterly Percentage Rent Computation, which Officer's
Certificate shall set forth the calculation of the Quarterly Percentage Rent
Computation and all prior payments of Rent in respect of such calendar quarter.
If the Percentage Rent earned by Lessor for such calendar quarter (as
shown in the applicable Officer's Certificate) exceeds the amount actually paid
as Percentage Rent by Lessee for such calendar quarter, Lessee also shall pay
such excess to Lessor at the time such Officer's Certificate is delivered. If
the aggregate Percentage Rent earned by Lessor for such calendar quarter (as
shown by such Officer's Certificate) is less than the amount actually paid as
Percentage Rent for the applicable calendar quarter, Lessor will reimburse such
amount to Lessee within five (5) Business Days after such Officer's Certificate
is delivered to Lessor.
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Any amount to be paid or reimbursed as provided above that is not paid
when due, whether in favor of Lessor or Lessee, shall bear interest at the
Overdue Rate, which interest shall accrue from the twentieth (20th) day after
the end of the respective calendar quarter of such Lease Year for which such
Percentage Rent is due until the amount of such difference shall be paid or
otherwise discharged. Any such interest payable to Lessor shall be deemed to be
and shall be payable as Additional Charges.
The obligation to pay Percentage Rent shall survive the expiration or
earlier termination of the Term, and a final reconciliation (taking into
account, among other relevant adjustments, any adjustments which are accrued
after such expiration or termination date but which related to Percentage Rent
accrued prior to such expiration or termination date, and adjustments required
as a result of mathematical error, mistake, the use of preliminary, rather than
final, revenue figures in performing earlier computations, or other similar
factor) shall be made not later than two (2) years after such expiration or
termination date, but Lessee shall advise Lessor within sixty (60) days after
such expiration or termination date of Lessee's best estimate at that time of
the approximate amount of such adjustments, which estimate shall not be binding
on Lessee or have any legal effect whatsoever.
(d) CPI Adjustments to Rent. If the
Schedule of Basic Terms attached hereto designates a CPI Adjustment for the
Leased Property, then, for each Lease Year of the Term beginning on or after
the CPI Adjustment Year (as defined in said Schedule of Basic Terms), the Base
Rent then in effect, and the Room Revenue Breakpoint then applicable shall be
adjusted from time to time beginning in the CPI Adjustment Year as follows:
(1) The average Consumer Price Index for
the most recently ended Lease Year shall be divided by the average Consumer
Price Index for the immediately preceding Lease Year.
(2) The new Base Rent for the then current
Lease Year shall be the adjusted amount obtained by multiplying the Base Rent
for the immediately preceding Lease Year by the quotient obtained in
subparagraph (d)(1) above.
(3) The new Room Revenue Breakpoint for the
then current Lease Year shall be the product of the Room Revenue Breakpoint in
effect in the most recently ended Lease Year and the quotient obtained in
subparagraph (d)(1) above.
(4) By way of example, if the CPI
Adjustment Year were 2001, the amount of Base Rent and the Room Revenue
Breakpoint amounts (and Food Sale Revenue and Beverage Sale Revenue amounts, if
applicable) for purposes of the computation of Rent for the Lease Year
commencing January 1, 2001 would be adjusted to reflect any change in the
Average Consumer Price Index from the Lease Year ended December 31, 1999 as
compared to the Lease Year ended December 31, 2000. Base Rent and Room Revenue
Breakpoint amounts (and Food Sale Revenue and Beverage Sale Revenue amounts, if
applicable) for purposes of the
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computation of Rent for the Lease Year commencing January 1, 2002 would be the
Base Rent and Room Revenue Breakpoint amounts (and Food Sale Revenue and
Beverage Sale Revenue amounts, if applicable) applicable for the fiscal year
ended December 31, 2001 as further adjusted to reflect any change in the
Consumer Price Index from December 31, 2000 as compared to December 31, 2001.
(5) Lessor shall calculate the annual
adjustments as soon as reasonably possible after the Consumer Price Index
becomes available and shall notify Lessee in writing of the amount of the
annual adjustment, together with a copy of the computation showing the
adjustment amount. Adjustments calculated as set forth above in the Base Rent
and Room Revenue Breakpoint amounts (and Food Sale Revenue and Beverage Sale
Revenue amounts, if applicable) shall be effective on January 1 of the Lease
Year to which such adjusted amounts apply. If rent is paid in any Lease Year
prior to the determination of the amount of any adjustment to Base Rent or Room
Revenue Breakpoint amounts applicable for such Lease Year, payment adjustments
for any shortfall in or overpayment of rent paid shall be made with the first
Base Rent payment due after the amount of the adjustments are determined.
(6) The "AVERAGE CONSUMER PRICE INDEX" for
any period shall be the average of the Consumer Price Index for each month
during the period.
(7) If (i) a significant change is made in
the number or nature (or both) of items used in determining the Consumer Price
Index, or (ii) the Consumer Price Index shall be discontinued for any reason,
the Bureau of Labor Statistics shall be requested to furnish a new index
comparable to the Consumer Price Index, together with information which will
make possible a conversion to the new index in computing the adjusted Base Rent
hereunder. If for any reason the Bureau of Labor Statistics does not furnish
such an index and such information, the parties will instead mutually select,
accept and use such other index or comparable statistics on the cost of living
that is computed and published by an agency of the United States or a
responsible financial periodical of recognized authority.
3.2 Confirmation of Percentage Rent. Lessee shall utilize, or cause to
be utilized, an accounting system for the Leased Property in accordance with
its usual and customary practices, and in accordance with GAAP and the Uniform
System, that will accurately record all data necessary to compute Percentage
Rent, and Lessee shall retain, for at least four (4) years after the expiration
of each Lease Year (and in any event until the reconciliation described in
Subsection 3.1(c) for each calendar quarter of such Lease Year has been made),
reasonably adequate records conforming to such accounting system showing all
data necessary to compute Percentage Rent for each calendar quarter of the
applicable Lease Years. Lessor, at its expense (except as provided
hereinbelow), shall have the right from time to time by its accountants or
representatives to audit the information that formed the basis for the data set
forth in any Officer's Certificate provided under Subsection 3.1(c) and, in
connection with such audits, to examine all Lessee's records (including
supporting data, Franchisor reports and sales and excise tax returns)
reasonably required to verify Percentage Rent (and for no other purpose),
subject to any
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prohibitions or limitations on disclosure of any such data under applicable
law. If any such audit discloses an overpayment of Percentage Rent, and either
Lessor agrees with the result of such audit or the matter is otherwise
determined or compromised, Lessor shall forthwith pay to Lessee the amount of
the deficiency, as finally agreed or determined. If any such audit discloses a
deficiency in the payment of Percentage Rent, and either Lessee agrees with the
result of such audit or the matter is otherwise determined or compromised,
Lessee shall forthwith pay to Lessor the amount of the deficiency, as finally
agreed or determined, together with interest at the Overdue Rate from the date
when said payment should have been made to the date of payment thereof;
provided, however, that as to any audit that is commenced more than two (2)
years after the date Percentage Rent for the final quarter of any Lease Year is
reported by Lessee to Lessor, the deficiency, if any, with respect to such
Percentage Rent shall bear interest at the Overdue Rate only from the date such
determination of deficiency is made unless such deficiency is the result of
gross negligence or willful misconduct on the part of Lessee, in which case
interest at the Overdue Rate will accrue from the date such payment should have
been made to the date of payment thereof. If any such audit discloses that the
Percentage Rent actually due from Lessee for any Lease Year exceeds that
reported and paid by Lessee by more than three percent (3%), Lessee shall pay
the cost of such audit and examination. In no event shall Lessor undertake an
audit more than four (4) years after the last day of the Lease Year for which
such audit is requested. Any proprietary information obtained by Lessor
pursuant to the provisions of this Section shall be treated as confidential,
except that such information may be used, subject to appropriate
confidentiality safeguards, in any litigation between the parties and except
further that Lessor may disclose such information to prospective lenders,
investors, and underwriters who have a need to know such information and to
other Persons to whom disclosure is required by applicable law if such persons
are advised of and agree to maintain the confidentiality of such information.
The obligations of Lessee contained in this Section shall survive the
expiration or earlier termination of this Lease. Any dispute as to the
existence or amount of any deficiency in the payment of Percentage Rent as
disclosed by such audit shall, if not otherwise settled by the parties, be
submitted to arbitration pursuant to the provisions of Section 22.2.
3.3 Additional Charges. In addition to the Base Rent and Percentage
Rent, (a) Lessee also will pay and discharge as and when due and payable all
other amounts, liabilities, obligations and Impositions that Lessee assumes or
agrees to pay under this Lease, and (b) in the event of any failure on the part
of Lessee to pay any of those items referred to in clause (a) of this Section
3.3, Lessee also will promptly pay and discharge every fine, penalty, interest
and cost that may be added for non-payment or late payment of such items (the
items referred to in clauses (a) and (b) of this Section 3.3 being additional
rent hereunder and being referred to herein collectively as the "ADDITIONAL
CHARGES"), and Lessor shall have all legal, equitable and contractual rights,
powers and remedies provided either in this Lease or by statute or otherwise in
the case of non-payment of the Additional Charges as in the case of non-payment
of the Base Rent, including, but not limited to, the right, but not the
obligation to pay such Additional Charges on behalf of Lessee and to require
reimbursement thereof by Lessee, together with interest thereon at the Overdue
Rate. If any installment of Base Rent, Percentage Rent or Additional Charges
(but only as to those Additional Charges that are payable directly to Lessor)
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shall not be paid on its due date, Lessee will pay Lessor on demand, as
Additional Charges, a late charge (to the extent permitted by law) computed at
the Overdue Rate on the amount of such installment, from the due date of such
installment to the date of payment thereof. To the extent that Lessee pays any
Additional Charges to Lessor pursuant to any requirement of this Lease, Lessee
shall be relieved of its obligation to pay such Additional Charges to the
entity to which they would otherwise be due and Lessor shall pay same from
monies received from Lessee.
3.4 Net Lease Provision.
(a) The Rent shall be paid absolutely net to Lessor, so that this
Lease shall yield to Lessor the full amount of the installments of Base Rent,
Percentage Rent and Additional Charges throughout the Term, all as more fully
set forth below, but subject to any other provisions of this Lease that
expressly provide for adjustment or abatement of Rent or other charges or
expressly provide that certain Impositions (including without limitation Real
Estate Taxes, Capital Impositions and Personal Property Taxes), Capital
Expenditures and other expenses or maintenance shall be paid or performed by
Lessor.
(b) Except as otherwise specifically provided in this Lease, and
except for loss of any Franchise Agreement solely by reason of any action or
inaction by Lessor, Lessee, to the extent permitted by law, shall remain bound
by this Lease in accordance with its terms and shall neither take any action
without the written consent of Lessor to modify, surrender or terminate the
same, nor seek nor be entitled to any abatement, deduction, deferment or
reduction of the Rent, or set off against the Rent, nor shall the obligations
of Lessee be otherwise affected by reason of (a) any damage to, or destruction
of, any Leased Property or any portion thereof from whatever cause or any
Taking of the Leased Property or any portion thereof, (b) the lawful or
unlawful prohibition of, or restriction upon, Lessee's use of the Leased
Property, or any portion thereof, or the interference with such use by any
Person or by reason of eviction other than by paramount title except as
otherwise specifically provided in this Lease and except to the extent that a
court of competent jurisdiction has issued a final, nonappealable order
determining that Lessee was constructively evicted from the Leased Property,
(c) any claim which Lessee has or might have against Lessor by reason of any
default or breach of any warranty by Lessor under this Lease or any other
agreement between Lessor and Lessee, or to which Lessor and Lessee are parties,
(d) any bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding up or other proceedings affecting Lessor or
any assignee or transferee of Lessor, or (e) for any other cause whether
similar or dissimilar to any of the foregoing other than a discharge of Lessee
from any such obligations as a matter of law. Lessee hereby specifically waives
all rights, arising from any occurrence whatsoever, which may now or hereafter
be conferred upon it by law to (1) modify, surrender or terminate this Lease or
quit or surrender the Leased Property or any portion thereof, or (2) entitle
Lessee to any abatement, reduction, suspension or deferment of the Rent or
other sums payable by Lessee hereunder, except as otherwise specifically
provided in this Lease and except to the extent that a court of competent
jurisdiction has issued a final, nonappealable order determining that Lessee
was constructively evicted from the Leased Property. The obligations of Lessee
hereunder shall be separate and
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independent covenants and agreements and the Rent and all other sums payable by
Lessee hereunder shall continue to be payable in all events unless the
obligations to pay the same shall be terminated pursuant to the express
provisions of this Lease or by termination of this Lease other than by reason
of an Event of Default.
3.5 Material Changes in Economic Climate.
(a) In the event of the occurrence of a
Force Majeure and a Hotel Market Decline, Lessor and Lessee shall, in good
faith, negotiate possible modifications to the Base Rent and Percentage Rent to
reduce such Base Rent and Percentage Rent to recent market rates for hotel REIT
leases for similar hotel properties in the Hotel's Competitive Set,
retroactively effective as of the first calendar month of the Term following
the last day of the six-month period during which such Hotel Market Decline has
occurred with the excess of Base Rent and Percentage Rent actually paid for
such period over the reduced Base Rent and Percentage Rent, plus interest
thereon at the Base Rate, to be credited to the next payments of Rent due and
owing hereunder. If Lessor and Lessee are unable to agree that a Force Majeure
or a Hotel Market Decline has occurred, within thirty (30) days after the date
of written certification from Lessee to Lessor that a Force Majeure and Hotel
Market Decline has occurred (accompanied by reasonably detailed computations
and documentation to support such assertion), the matter may be submitted by
either party to arbitration under Section 22.2 hereof for resolution (during
which period Lessee shall continue to pay Base Rent and Percentage Rent as
required under Section 3.1 of this Lease). If, within ninety (90) days (during
which period Lessee shall continue to pay Base Rent and Percentage Rent as
required under Section 3.1 of this Lease) following the date of such written
certification from Lessee (or the date of a decision of an arbitrator if
required hereunder to determine that a Force Majeure and Hotel Market Decline
has occurred), Lessor and Lessee are unable to agree upon the amount of
reduction in Base Rent and Percentage Rent contemplated hereby, Lessee shall
have the option to terminate this Lease upon not less than thirty (30) days
prior written notice to Lessor.
(b) In the event of the occurrence of a
National Economic Decline and a Regional Market Decline, Lessor and Lessee
shall, in good faith, negotiate (i) possible modifications to the Base Rent and
Percentage Rent to reduce such Base Rent and Percentage Rent to recent market
rates for hotel REIT leases for similar hotel properties in the Hotel's
Competitive Set, and (ii) possible modifications to the Base and Percentage
Rent payable under each of the Other Leases for Other Hotels in the same Region
(as defined in the STR Reports) as the Hotel to reducesuch Base Rent and
Percentage Rent to recent market rates for hotel REIT leases for similar hotel
properties in the Hotel's Competitive Set, in each case retroactively effective
as of the first calendar month of the Term following the last day of the
six-month period during which such Regional Market Decline has occurred with
the excess of Base Rent and Percentage Rent actually paid for such period over
the reduced Base Rent and Percentage Rent, plus interest thereon at the Base
Rate, to be credited to the next payments of Rent due and owing hereunder. If,
within thirty (30) days after the date of written certification from Lessee to
Lessor that a National Economic Decline and Regional Market Decline has
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occurred (accompanied by reasonably detailed computations and documentation to
support such assertion), Lessor and Lessee are unable to agree that a National
Economic Decline or Regional Market Decline has occurred, the matter may be
submitted by either party to arbitration under Section 22.2 hereof for
resolution (during which period Lessee shall continue to pay Base Rent and
Percentage Rent as required under Section 3.1 of this Lease). If, within ninety
(90) days (during which period Lessee shall continue to pay Base Rent and
Percentage Rent as required under Section 3.1 of this Lease) following the date
of such initial written certification from Lessee (or the date of a decision of
an arbitrator if required hereunder to determine that a National Economic
Decline and Regional Market Decline has occurred), Lessor and Lessee are unable
to agree upon the amount of reduction in Base Rent and Percentage Rent
contemplated hereby, Lessee shall have the option, upon not less than sixty
(60) days prior written notice to Lessor, to terminate all (but not less than
all) of the Existing Leases of hotels in the same Region as the Hotel,
including this Lease.
3.6 Rent Adjustment: Basic Assumptions Incorrect. Except to the extent
that doing so would cause Lessor to recognize income other than "rents from
real property" as defined in Section 856(d) of the Code, notwithstanding
anything herein (other than Article 19) to the contrary, if (i) the facts and
circumstances underlying the documented, basic assumptions (as set forth in the
Master Hotel Agreement or the schedules thereto) upon which both Lessor and
Lessee have relied in determining the Base Rent, Room Revenue Breakpoint and
Percentage Rent payable hereunder become materially incorrect solely as a
result of (A) a material change occurring after the Commencement Date in the
timing (whether as to the commencement, duration and/or completion date) of any
Contemplated Renovations that were planned as of the Commencement Date, (B) a
decision to re-brand the Hotel that is made after the Commencement Date, (C)
the scope or cost of substantial renovations or other capital improvements
(other than Contemplated Renovations that were planned as of the Commencement
Date) to the Hotel, or (D) the implementation of any other hotel repositioning
strategies (that were not planned as of the Commencement Date) resulting in
significant disruption of the operations of the Hotel (collectively, a
"REPOSITIONING"), and (ii) Lessor and Lessee so agree in writing (or, with
respect to Repositionings (i) during the years 1999 and 2000 or (ii) that are
approved by both Lessor and Lessee, are directed to do so by an arbitrator, as
set forth below), then Lessor and Lessee shall, in good faith, negotiate
modifications to the Base Rent, Room Revenue Breakpoint and Percentage Rent to
adjust (i.e., increase, decrease or reallocate among revenue categories) such
Base Rent, Room Revenue Breakpoint and Percentage Rent to reflect such change
in basic assumptions for the affected periods, using the same methodology and
other basic assumptions as were initially utilized in determining the Base
Rent, Room Revenue Breakpoint and Percentage Rent hereunder. If Lessor and
Lessee are unable to agree, within thirty (30) days after the date of written
certification from either Lessee or Lessor to the other party that a good faith
dispute exists as to the existence of the occurrence of a Repositioning during
1999 or 2000, or the adjustments to be made to the amounts or percentages for
the Base Rent, Room Revenue Breakpoint and Percentage Rent hereunder as a
result of any Repositioning, the dispute may be submitted by either party to
arbitration under Section 22.2 hereof for resolution (during which period
Lessee shall continue to pay Base Rent and Percentage Rent as required under
Section 3.1 of this Lease);
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provided, however, that for purposes of applying the procedures in Section 22.3
to such arbitration, the target deadline therein for concluding the arbitration
shall be shortened from ninety (90) days to thirty (30) days.
3.7 Allocation of Rent. The parties hereto acknowledge and agree that
the Base Rent paid or payable by Lessee to Lessor hereunder shall, to the
extent relevant, be allocated between the personal property and real property
constituting Leased Property hereunder in direct proportion to the then
recognizable fair market value of such personal property and real property.
Percentage Rent in excess of Base Rent shall be allocated solely to real
property.
ARTICLE 4
BUDGETS AND FINANCIAL REPORTING
4.1 Revenue Budgets. Not later than ninety (90) days prior to the
commencement of each Lease Year, Lessee shall prepare and submit to Lessor a
proposed Gross Revenue target for the following Lease Year. Not later than
sixty (60) days prior to the commencement of each Lease Year, Lessee shall
prepare and submit to Lessor for its review a proposed Gross Revenue budget for
the following Lease Year (the "REVENUE BUDGET"), prepared in accordance with
the requirements of this Section 4.1. The Revenue Budget shall be prepared in
accordance with the Uniform System to the extent applicable and show by month
and quarter and for the Lease Year to date the degree of detail specified by
the Uniform System for monthly statements, and in accordance with the detail
level of monthly financial statements, the following:
(a) Lessee's good faith reasonable estimate
of Gross Revenues, Room Revenues (including room rates), Food Sales Revenues,
Beverage Sale Revenues, Telephone Revenues and Other Revenues for the Hotel for
the forthcoming Lease Year itemized on schedules on a monthly and quarterly
basis, as approved by Lessor and Lessee, together with the assumptions, in
narrative form, forming the basis of such schedules and a cash flow projection;
(b) A narrative description of the program
for advertising and marketing the Hotel for the forthcoming Lease Year,
including a narrative description of the program for marketing and managing the
Hotel for the forthcoming Lease Year, including, among other things, details as
to significant accounts and customers, competitor performance (to the extent
available), existing, new and projected supply analysis, demand analysis,
estimated market penetration by market segment (to the extent available),
target accounts, marketing and advertising budgets, changes in personnel
policies, staffing levels, major events plans, franchise issues and other
matters affecting the performance and operation of the Hotel and containing a
detailed budget itemization of proposed expenditures by category and the
assumptions, in narrative form, forming the basis of such budget itemization;
and
(c) Lessee's good faith proposal for (i)
the apportionment of Base Rent to be included in the Annual Budget for each
calendar quarter (and for each calendar
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month during such quarter) of such Lease Year, (ii) the apportionment of the
Room Revenue Breakpoint to be included in the Annual Budget as the Quarterly
Room Revenue Breakpoint for each calendar quarter of such Lease Year, and (iii)
the resulting computation of Percentage Rent payable for each calendar quarter
of such Lease Year. (In apportioning Base Rent for each month and in setting
the Quarterly Room Revenue Breakpoint for each quarter, Lessor and Lessee will
attempt to ensure, to as great a degree as is possible during the preparation
of the Annual Budget, that the sum of the Rent projected to be paid for each
calendar quarter will equal the amount of projected Rent that would have been
paid had the amount of projected Rent been calculated on an annual basis rather
than on a quarterly basis. Without limiting the generality of the foregoing:
(1) the amount of Base Rent apportioned to each month will be the amount, based
on the agreed projections that form the basis for the Annual Budget, that is
least likely to result in the Base Rent apportioned to any month exceeding
one-third of the Quarterly Percentage Rent Computation for the quarter in which
such month falls, and (2) the Quarterly Room Revenue Breakpoint will be the
amount that is expected, based on such projections, to maximize the amount of
any Percentage Rent projected to be paid based on the First Tier Room Revenue
Percentage during any Lease Year and to minimize the amount of any Percentage
Rent projected to be paid based on the Second Tier Room Revenue Percentage in
any Lease Year. The parties anticipate that their compliance with the foregoing
objectives will typically result in Base Rent for each month and the Quarterly
Room Revenue Breakpoint for each quarter being generally based upon the
proportion of projected Room Revenues for such month or quarter, respectively,
compared to projected Room Revenues for the applicable Lease Year. This
Subsection 4.1(c) is intended to express the parties' mutual intent as to the
agreed objective with respect to the apportionment of the then applicable
amount of the annual Base Rent and the Room Revenue Breakpoint for purposes of
preparation of the Annual Budget for each Lease Year, and shall not constitute
a modification of any provision of this Lease regarding the accrual or payment
of Rent hereunder.)
4.2 Operating Budgets. Not later than the commencement of each Lease
Year, Lessee shall have prepared and submitted to Lessor an operating budget in
form reasonably acceptable to Lessor (the "OPERATING BUDGET") for that Lease
Year prepared in accordance with the Uniform System to the extent applicable
and that includes, without limitation, an amount equal to not less than four
and one-half percent (4.5%) of estimated Gross Revenues allocated for estimated
cost ("M&R EXPENSE") of maintenance and repairs (other than Capital
Improvements) to the Hotel during such Lease Year. Unless required by the terms
of any Franchise Agreement, Lessee shall not make any changes to the current
methods or categories by which Gross Revenues are budgeted or accounted for by
Lessee or its Manager in its Revenue Budget for calendar year 1998 without the
prior written consent of Lessor, which consent shall not be unreasonably
withheld. In the event that the amount actually incurred by Lessee for M&R
Expense for the Hotel for any Lease Year (the "M&R SHORTFALL YEAR") is less
than four and one-half percent (4.5%) of Gross Revenues for such Lease Year
("MINIMUM M&R"), notwithstanding the foregoing provisions of this Section 4.2,
Lessee shall be obligated (i) to prepare and submit to Lessor for its approval
the Operating Budget for the Lease Year following the Shortfall Year (the "M&R
CURE YEAR"), at the same time as, and according to the procedure herein
provided for, review and approval of the Annual Budget for such subsequent
Lease Year,
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and (ii) without limiting the generality of the foregoing, to include in such
Operating Budget Lessee's good faith reasonable estimate of Gross Operating
Expenses for the Hotel for such M&R Cure Year, itemized on schedules on a
monthly and quarterly basis, in accordance with the Uniform System and as
approved by Lessor and Lessee, including without limitation an amount,
allocated for M&R Expense equal to not less than the sum of (A) four and
one-half percent (4.5%) of estimated Gross Revenues, plus (B) the amount by
which Lessee failed to incur Hotel M&R Expense at least equal to the Minimum
M&R for the M&R Shortfall Year, together with the assumptions, in narrative
form, forming the basis of such schedules (unless Lessor agrees to a lesser
amount in the exercise of its reasonable discretion).
4.3 Capital Budget. Not later than sixty (60) days prior to the
commencement of each Lease Year, Lessee shall prepare and submit to Lessor a
capital budget (the "CAPITAL BUDGET") prepared in accordance with this Section
4.3. The Capital Budget shall be prepared in accordance with the Uniform System
to the extent applicable and shall set forth proposed Capital Expenditures for
the ensuing Lease Year, including without limitation an emergency fund in the
amount of approximately fifteen percent (15%) of the Capital Reserve for such
Lease Year, together with an estimate of the amounts to be spent for the
repair, replacement, or refurbishment of Furniture, Fixtures and Equipment and
an estimate of the amounts to be spent on Capital Improvements during the
current and the next three (3) Lease Years, including a project-by-project
schedule of estimated start and completion dates. The Capital Budget will
include, without limitation, all Capital Expenditures that Lessor is required
to make hereunder, including expenditures for compliance with any PIP or
Contemplated Renovations.
4.4 Annual Budget Approval; Budget Disputes.
(a) Lessor shall have thirty (30) days
after the date on which it receives the Revenue Budget and the Capital Budget
(collectively, the "ANNUAL BUDGET") to review, approve, disapprove or change
the entries and information appearing in the Annual Budget. If the parties are
not able to reach agreement on the Annual Budget for any Lease Year during
Lessor's thirty (30) day review period, the parties shall attempt during the
subsequent fifteen (15) day period to resolve any disputes, which attempt shall
include, if requested by either party, at least one (1) meeting of
executive-level officers of Lessor and Lessee. Lessor and Lessee shall act
promptly, reasonably and in good faith in seeking to resolve such disputes and
in arriving at a mutually acceptable Annual Budget on or before December 15th
prior to the respective Lease Year. In the event the parties are still not able
to reach agreement on the Annual Budget for any particular Lease Year after
complying with the foregoing requirements of this Section 4.4, the parties
shall adopt such portions of the Revenue Budget and the Capital Budget as they
may have agreed upon, and any matters not agreed upon shall be referred to
arbitration as provided for in Section 22.2 hereof. Pending the results of such
arbitration or the earlier agreement of the parties, (i) if the Revenue Budget
has not been agreed upon, for the first ninety (90) days of the new Lease Year
the Leased Property will be operated in a manner reflecting the prior Fiscal
Year's actual Gross Revenues, and thereafter the Leased Property will be
operated for the full Lease Year (including the first 90 days thereof) in a
manner consistent with the prior
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Lease Year's Operating Budget, in each case adjusted pursuant to Subsection
3.1(d) hereof until a new Revenue Budget is adopted, and (ii) if the Capital
Budget has not been agreed upon, no Capital Expenditures shall be made unless
the same are set forth in a previously approved Capital Budget or are
specifically required by Lessor or are otherwise required to comply with this
Lease, ground or building leases, Mortgages or Legal Requirements or are
Emergency Capital Expenditures.
(b) The Capital Budget, once approved and
as approved, shall form the basis on which Capital Expenditures for the Leased
Property shall be made. Unless such Capital Expenditures are otherwise
permitted in writing by Lessor or are otherwise required to comply with Legal
Requirements or are Emergency Capital Expenditures, Lessee agrees to use
reasonable best efforts not to cause or permit any Capital Expenditures for a
Lease Year in excess of those set forth in the Capital Budget ("EXCESS CAPITAL
EXPENDITURES"). If, notwithstanding Lessee's reasonable best efforts, Excess
Capital Expenditures are contemplated, Lessee shall provide Lessor a written
explanation of such expenditures, which shall include (a) estimates of the
Excess Capital Expenditures, (b) the basis upon which such estimates were made,
(c) the reasons for such variances from the budgeted Capital Expenditures for
such items and (d) the Lessee's plan, if any, to reduce such Capital
Expenditures in the future or avoid Capital Expenditures on such items which
are in excess of the amounts budgeted for such items in the future. Lessee
shall provide Lessor any additional information regarding Excess Capital
Expenditures, and from time to time provide Lessor with status reports on the
Excess Capital Expenditures and the implementation of any plan to reduce or
avoid such Excess Capital Expenditures, each as reasonably requested by Lessor
or its representatives. Notwithstanding the foregoing, expenditures in excess
of 105% of the amount budgeted for an item in a Capital Budget may be made by
Lessee (i) for Real Estate Taxes, Personal Property Taxes, Capital Impositions
and insurance and utility expenses resulting from unanticipated rate changes,
and (ii) if such expenditures are Emergency Capital Expenditures. Lessee shall
promptly report to Lessor in writing any actual or anticipated deviation from
the Capital Budget resulting from the application of the preceding sentence. In
the event that Lessee fails to provide the Notices, information or reports
required under this Section 4.4, then Lessor, in addition to its other rights
and remedies under this Lease and under applicable law, shall have the right to
submit the matter to arbitration under Section 22.2 hereof.
(c) Lessee will, upon request from time to
time, provide information regarding the Hotel's status with respect to the
Operating Budget, the Revenue Budget and the Capital Budget and will make
available its financial officers for personal or telephone meetings to discuss
such matters.
4.5 Disclosure of Financial and Portfolio Information.
(a) At any time and from time to time upon
not less than ten (10) days Notice by Lessor, Lessee will furnish to Lessor or
any Person designated by Lessor an Officer's Certificate certifying that this
Lease is unmodified and in full force and effect (or that this
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Lease is in full force and effect as modified and setting forth the
modifications), the date to which the Rent has been paid, whether to the
knowledge of Lessee there is any existing default or Event of Default hereunder
by Lessor or Lessee, and such other information as may be reasonably requested
by Lessor. Any such certificate furnished pursuant to this Section may be
relied upon by Lessor, any underwriter, lender, investor and prospective
purchaser of the Leased Property.
(b) At any time and from time to time upon
not less than ten (10) days notice by Lessee, Lessor will furnish to Lessee or
to any Person designated by Lessee an estoppel certificate certifying that this
Lease is unmodified and in full force and effect (or that this Lease is in full
force and effect as modified and setting forth the modifications), the date to
which Rent has been paid, whether to the knowledge of Lessor there is any
existing default or Event of Default on Lessee's part hereunder, and such other
information as may be reasonably requested by Lessee. Any such certificate
furnished pursuant to this Section may be relied upon by Lessee, any
underwriter, lender, investor and prospective purchaser of the assets of
Lessee.
(c) Throughout the Term, Lessee will
furnish to Lessor all financial statements and financial information, and
access to Lessee's books and records as, when and to the extent required
pursuant to Section 7 of the Master Agreement. Lessee agrees to notify Lessor,
from time to time at the request of Lessor, of the location of any hotel or
motel property Lessee or any Subsidiary thereof owns, leases, operates, manages
or has an interest in.
(d) Lessee will furnish, at Lessee's cost
and expense, the following statements and operating information to Lessor, each
in a form reasonably satisfactory to Lessor:
(i) to the extent available
electronically to Lessee, each Monday, a statement showing Gross Revenues by
category, occupancy and revenue per available room for (a) the Hotel and (b)
the Hotel and any Other Hotels, for both (i) each day in the seven (7) day
period ended the immediately preceding Friday, (ii) such seven (7) day period
in the aggregate, and (iii) Lease Year to date;
(ii) on or before the 30th day of each
calendar month, average daily rate, occupancy and RevPAR for the Hotel for such
preceding month (including a comparison to the Operating Budget);
(iii) on or before the 30th day of each
calendar quarter, detailed profit and loss and cash flow statements showing the
results of operation of the Hotel for such preceding quarter and the Lease Year
to date (including a comparison to the Operating Budget);
(iv) upon reasonable request, a written
critique by the general manager of the Hotel's revenue performance by category,
setting forth in narrative form any variations during the preceding month from
the current Annual Budget amount for such
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month (and the prior year's Annual Budget amount for the same month) and
including a preview of the Hotel's financial operations during the current
month;
(v) on or before the 15th day of each
April, July and October during the Term, an updated estimate for each calendar
quarter remaining in the Lease Year of the information required by Sections
4.1(a) and 4.3 hereof;
(vi) monthly STR Reports within five
(5) days of Lessee's receipt thereof;
(vii) within fifteen (15) days of
Lessee's receipt thereof, any inspection reports received from the Franchisor
under any Franchise Agreement;
(viii) with reasonable promptness, such
financial and other information (subject to a confidentiality agreement if
required because of the confidential or proprietary nature of the information)
respecting the financial condition and affairs of BHR and Lessee (A) as Lessor,
FelCor or FSLP may reasonably require or deem desirable in its discretion to
file with or provide to the SEC or any other governmental agency or any other
Person, all in the form, and either audited or unaudited, as Lessor may request
in Lessor's reasonable discretion, and (B) as may be reasonably necessary to
confirm compliance by Lessee and its Affiliates with the requirements of this
Lease; and
(ix) such other information related to
this Lease or the Hotel as Lessor may reasonably request and that Lessee can
provide without unreasonable expense.
(e) If FelCor, FSLP or Lessor proposes to
include in any submission or filing with its lender, stock exchange or the SEC,
Consolidated Financials of Lessee delivered or required to be delivered
hereunder and the consent of Lessee's auditor is required for such inclusion,
Lessee shall use commercially reasonable efforts to cause its auditor to
deliver promptly to Lessor the auditor's consent, in the form required, to the
inclusion in the submission or filing of the Consolidated Financials (including
the report of the auditor, if the Consolidated Financials to be included are
audited). Lessee shall reasonably cooperate with Lessor regarding Lessee's
auditor's compliance with such requests with the purpose of minimizing costs
and delays. Lessee shall reasonably cooperate with all requests made by its
auditor, Lessor, FelCor, FSLP or the SEC to promptly provide to the auditor,
Lessor, FelCor, FSLP or the SEC such information or documents, including
consents and representation letters, as may be reasonably necessary or
desirable in connection with the preparation, delivery, audit or inclusion in
SEC filings, submissions or other public documents, of information, including
financial information, related to the Leased Property, the operation and
financial results of the Leased Property, and the financial results and
condition of the Lessee. Without limiting the foregoing, the information shall
be sufficient to permit the preparation of a Management's Discussion and
Analysis of Results of Operations and Financial Condition with respect to the
Lessee as may be required to be included
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in reports and documents filed by FelCor or FSLP with the SEC. Lessee shall not
be obligated to incur material, additional, unreimbursed expense to prepare any
reports or information not specifically provided for herein that Lessor, FelCor
or FSLP may be required or elect to file with the SEC, and such material
additional third-party costs shall be paid or reimbursed by Lessor.
(f) If BHR or Lessee proposes to include in
any submission or filing with its lender, stock exchange or the SEC,
Consolidated Financials of Lessor delivered or required to be delivered
hereunder and the consent of Lessor's auditor is required for such inclusion,
Lessor shall use commercially reasonable efforts to cause its auditor to
deliver promptly to Lessee the auditor's consent, in the form required, to the
inclusion in the submission or filing of the Consolidated Financials (including
the report of the auditor, if the Consolidated Financials to be included are
audited). Lessor shall reasonably cooperate with Lessee regarding Lessor's
auditor's compliance with such requests with the purpose of minimizing costs
and delays. Lessor shall reasonably cooperate with all requests made by its
auditor, Lessee, BHR or the SEC to promptly provide to the auditor, BHR or the
SEC such information or documents, including consents and representation
letters, as may be reasonably necessary or desirable in connection with the
preparation, delivery, audit or inclusion in SEC filings, submissions or other
public documents, of information, including financial information, related to
the Leased Property, the operation and financial results of the Leased
Property, and the financial results and condition of the Lessor. Without
limiting the foregoing, the information shall be sufficient to permit the
preparation of a Management's Discussion and Analysis of Results of Operations
and Financial Condition with respect to the Lessor as may be required to be
included in reports and documents filed by BHR with the SEC. Lessor shall not
be obligated to incur material, additional, unreimbursed expense to prepare any
reports or information not specifically provided for herein that Lessee or BHR
may be required or elect to file with the SEC, and such material additional
third-party costs shall be paid or reimbursed by Lessee.
4.6 Confidentiality. Lessor and Lessee agree to, and agree to use
reasonable efforts to cause their Affiliates to, keep any non-public or
proprietary information delivered or made available to any other party or their
Affiliates pursuant to this Article 4 or otherwise in connection with the Lease
or the Hotel confidential from any Person other than (1) Persons employed by or
retained by Lessor, Lessee or their Affiliates, (2) , subject to an appropriate
confidentiality agreement, current or prospective underwriters, lenders,
investors and, prospective investors or purchasers of the Hotel (provided,
however, that any such non-public or proprietary information delivered or made
available to any such prospective investor or purchaser of the Hotel may only
consist of operational and performance information about the Hotel and the
Lease unless BHR and Lessee otherwise consent, not to be unreasonably withheld)
and (3) other Persons who are expressly authorized in this Lease to receive
such information (in each case, each of whom shall be advised of, and shall
agree to maintain, the confidentiality of such information); provided, however,
nothing herein shall prevent any such Person from disclosing such information
after prior notice to Lessee or Lessor, as the case may be, as and to the
extent required or requested by applicable law, any Government or pursuant to
legal process or in connection with the exercise of any remedy under this
Lease.
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ARTICLE 5
IMPOSITIONS AND OTHER HOTEL COSTS
5.1 Payment of Impositions.
(a) Subject to the right of Lessor to
contest same and Subsection 5.1 (f) below, Lessor shall pay all Real Estate
Taxes, Personal Property Taxes and Capital Impositions before the fine,
penalty, interest or cost may be added for non-payment, to the extent the
failure to do so could materially and adversely affect the rights of the Lessee
under this Lease, such payments to be made directly to the taxing or other
authorities where feasible.
(b) Subject to Article 12 relating to
permitted contests and Subsection 5.1 (f) below, Lessee will pay, or cause to
be paid, all Impositions (other than Real Estate Taxes, Personal Property Taxes
and Capital Impositions, which shall be paid by Lessor) before any fine,
penalty, interest or cost may be added for non-payment, such payments to be
made directly to the taxing or other authorities where feasible, and will
promptly furnish to Lessor copies of official receipts or other satisfactory
proof evidencing such payments. Lessee's obligation to pay such Impositions
shall be deemed absolutely fixed upon the date such Impositions become a lien
upon the Leased Property or any part thereof. If any such Imposition may, at
the option of the taxpayer, lawfully be paid in installments (whether or not
interest shall accrue on the unpaid balance of such Imposition), Lessee may
exercise the option to pay the same (and any accrued interest on the unpaid
balance of such Imposition) in installments and in such event, shall pay such
installments occurring during the Term hereof (subject to Lessee's right of
contest pursuant to the provisions of Article 12 as the same respectively
become due and before any fine, penalty, premium, further interest or cost may
be added thereto.
(c) Lessor, at its expense, shall, to the
extent required or permitted by applicable law, prepare and file all tax
returns in respect of Lessor's net income, gross receipts, sales and use,
single business, transaction privilege, rent, ad valorem, franchise taxes, Real
Estate Taxes, Personal Property Taxes, Capital Impositions and taxes on its
capital stock, and Lessee, at its expense, shall, to the extent required or
permitted by applicable laws and regulations, prepare and file all other tax
returns and reports in respect of any other, Imposition as may be required by
governmental authorities. If any refund shall be due from any taxing authority
in respect of any Imposition paid by Lessee, the same shall be paid over to or
retained by Lessee if no Event of Default shall have occurred hereunder and be
continuing. If an Event of Default shall have occurred and be continuing, any
such refund shall be paid over to or retained by Lessor. Any such funds
retained by Lessor due to an Event of Default shall be applied as provided in
Article 16. Lessor and Lessee shall, upon request of the other, provide such
data as is maintained by the party to whom the request is made with respect to
the Leased Property as may be necessary to prepare any required returns and
reports. Lessee shall file all personal property tax returns with respect to
Lessee's Personal Property in such jurisdictions where it is legally required
to so file. Lessor, to the extent it possesses the same, and Lessee, to the
extent it possesses the
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same, will provide the other party, upon request, with cost and depreciation
records necessary for filing returns for any property so classified as personal
property. Where Lessor is legally required to file personal property tax
returns, Lessor shall provide Lessee with copies of assessment notices in
sufficient time for Lessee to file a protest.
(d) Lessor may, upon notice to Lessee, at
Lessor's option and at Lessor's sole expense, protest, appeal, or institute
such other proceedings (in its or Lessee's name) as Lessor may deem appropriate
to effect a reduction of Real Estate Taxes or Personal Property Taxes or
Capital Impositions to be paid by Lessor, and Lessee (at Lessor's expense as
aforesaid) shall fully cooperate with Lessor in such protest, appeal, or other
action. Lessor hereby agrees to indemnify, defend, and hold harmless Lessee
from and against any claims, obligations, and liabilities against or incurred
by Lessee in connection with such cooperation. Lessee may, upon notice to
Lessor, at Lessee's option and at Lessee's sole expense, protest, appeal, or
institute such other proceedings (in its or Lessor's name) as Lessee may deem
appropriate to effect a reduction of those Impositions to be paid by Lessee,
and Lessor (at Lessee's expense as aforesaid) shall fully cooperate with Lessee
in such protest, appeal, or other action. Lessee hereby agrees to indemnify,
defend, and hold harmless Lessor from and against any claims, obligations, and
liabilities against or incurred by Lessor in connection with such cooperation.
(e) Billings for any reimbursement of
Personal Property Taxes by Lessee to Lessor shall be accompanied by copies of a
bill therefor and payments thereof which identify the personal property with
respect to which such payments are made. Lessor, however, reserves the right to
effect any such protest, appeal or other action and, upon notice to Lessee,
shall control any such activity, which shall then go forward at Lessor's sole
expense. Upon such notice, Lessee, at Lessor's expense, shall cooperate fully
with such activities.
(f) Subject to the rights of Lessor and
Lessee to contest same as provided herein, Lessee shall pay thirteen percent
(13%) and Lessor shall pay eighty-seven (87%) of any sales or use taxes imposed
by the State of Florida on any of the payments of Rent by Lessee under this
Lease. Lessee shall be solely responsible for all sales or use taxes in imposed
by any other State or taxing jurisdiction upon the payments of Rent by Lessee
under this Lease.
5.2 Notice of Impositions. To the extent Lessor is notified of any
Impositions, Lessor shall give prompt Notice to Lessee of such Impositions
payable by Lessee hereunder, provided that Lessor's failure to give any such
Notice shall in no way diminish Lessee's obligations hereunder to pay any such
Impositions that are Lessee's responsibility hereunder, but such failure shall
obviate any default hereunder for a reasonable time after Lessee receives
Notice of any Imposition which it is obligated to pay during the first taxing
period applicable thereto. To the extent received by it, Lessee shall give
prompt notice to Lessor and furnish Lessor with copies of all assessment
notices for Real Estate Taxes, Personal Property Taxes and Capital Impositions
in sufficient time for Lessor to file a protest and pay such taxes without
penalty. Lessor shall furnish Lessee with evidence of payment of Real Estate
Taxes, Personal Property Taxes and Capital Impositions upon request.
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5.3 Adjustment of Impositions. Impositions payable by Lessee that are
imposed in respect of the tax-fiscal period during which the Term terminates
shall be adjusted and prorated between Lessor and Lessee, whether or not such
Imposition is imposed before or after such termination, and Lessee's obligation
to pay its prorated share thereof after termination shall survive such
termination.
5.4 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.
5.5 Insurance Premiums. Each of Lessor and Lessee will pay or cause to
be paid all premiums for the insurance coverages required to be maintained by
it under Article 13.
5.6 Franchise Fees. Lessee will maintain in full force and effect, and
pay or cause to be paid all fees and other charges payable pursuant to, any
Franchise Agreement with respect to the Hotel (unless same constitute Capital
Expenditures or are otherwise Lessor's responsibility hereunder).
5.7 Ground Rent. In the event that Lessor's interest in the Land is
pursuant to a Ground Lease or sublease, Lessor shall be solely responsible for
the payment of any ground rent, building rent or subrent, as the case may be,
due with respect to the Leased Property.
ARTICLE 6
OWNERSHIP OF LEASED PROPERTY; LESSEE'S PERSONAL PROPERTY
6.1 Ownership of the Leased Property. Lessee acknowledges that the
Leased Property is the property of Lessor and that Lessee has only the right to
the possession and use of the Leased Property upon the terms and conditions of
this Lease.
6.2 Lessee's Personal Property. Lessee will acquire and maintain
throughout the Term such Inventory and replacement photocopy, fax machines and
postage machines (collectively, "OFFICE MACHINES") as is required to operate
the Leased Property in the manner contemplated by this Lease. The Inventory,
including any additions thereto and/or replacements thereof, will be supplied
by, and remain the property of, Lessee. Lessee may (and shall as provided
hereinbelow), at its expense, install, affix or assemble or place on any
parcels of the Land or in any of the Improvements, any items of personal
property (including Inventory and Office Machines) owned by Lessee. Lessee, at
the commencement of the Term, and from time to time thereafter, shall provide
Lessor with an accurate list of all such items of Lessee's personal property
(collectively, including the Inventory and Office Machines, the "LESSEE'S
PERSONAL PROPERTY"). Lessee may, subject to the first sentence of this Section
6.2 and the conditions set forth below, remove any of Lessee's Personal
Property at any time during the Term or upon
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the expiration or any prior termination of the Term. All of Lessee's Personal
Property, other than Inventory, not removed by Lessee within thirty (30) days
following the expiration or earlier termination of the Term shall be considered
abandoned by Lessee and may be appropriated, sold, destroyed or otherwise
disposed of by Lessor without first giving Notice thereof to Lessee, without
any payment to Lessee and without any obligation to account therefor. Lessee
will, at its expense, repair and restore the Leased Property to the condition
required by Subsection 9.1(d), including repair of all damage to the Leased
Property caused by the removal of Lessee's Personal Property, whether effected
by Lessee or if permitted hereunder by Lessor. Upon the expiration or earlier
termination of the Term, Lessor, or its designee, shall have the option to
purchase all Inventory on hand at the Leased Property at the time of such
expiration or termination for a sale price equal to Lessee's actual cost of
such Inventory, as evidenced by invoices, receipts, or other reasonable
documentation or as reasonably estimated by Lessor in the absence of such
documentation. Lessee may make such financing arrangements, title retention
agreements, leases or other agreements with respect to Lessee's Personal
Property as it sees fit provided that Lessee first advises Lessor of any such
arrangement and such arrangement expressly provides that in the event of
Lessee's default thereunder, Lessor (or its designee) may assume Lessee's
obligations and rights under such arrangement.
6.3 Lessor's Lien. To the fullest extent permitted by applicable law,
Lessor is granted a lien and security interest on all Lessee's Personal
Property now or hereinafter placed in or upon the Leased Property, and such
lien and security interest shall remain attached to such Lessee's Personal
Property until payment in full of all Rent and other amounts due to Lessor
hereunder; provided, however, Lessor's lien and security interest shall be
subordinate to that of any non-Affiliate of Lessee which finances such Lessee's
Personal Property or any non-Affiliate conditional seller of such Lessee's
Personal Property. Upon request, Lessor will execute a subordination agreement
containing terms and conditions satisfactory to Lessor in the exercise of
reasonable discretion. Lessee shall, upon the request of Lessor and to the
extent such action does not breach any of Lessee's financing, execute such
financing statements or other documents or instruments reasonably requested by
Lessor to perfect the lien and security interests herein granted.
6.4 Lessor's Option to Purchase Lessee's Personal Property. Effective
on not less than thirty (30) days prior Notice given at any time within ninety
(90) days before the scheduled expiration of the Term, or upon at least ten
(10) days Notice if this Lease is terminated prior to the expiration date of
the final extension Term (or of the initial Term, if there are no extension
Terms), Lessor or its designee shall have the option to purchase all (but not
less than all) of Lessee's Personal Property relating to the Leased Property
(other than its interest under this Lease), at the expiration or termination of
this Lease for an amount (payable in cash on the expiration date of this Lease)
equal to (i) the Lessee's cost of the Inventory and (ii) the lesser of Lessee's
cost, or the fair market value, of all other of Lessee's Personal Property.
Notwithstanding any such purchase, Lessor shall obtain no rights to any service
mark, trade name, logo or other intellectual property used in connection with
the operation of the Hotel or the franchise system under the Franchise
Agreement unless separate agreement as to such use is
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reached with the Lessee and/or applicable Franchisor or other owner of such
franchise system as applicable.
ARTICLE 7
CONDITION AND USE OF LEASED PROPERTY
7.1 Condition of the Leased Property. Lessee acknowledges receipt and
delivery of possession of the Leased Property. Lessee has examined and
otherwise has knowledge of the condition of the Leased Property and has found
the same to be satisfactory for its purposes hereunder. Lessee is leasing the
Leased Property "as is" in its present condition. Except as otherwise expressly
provided herein, Lessee waives any claim or action against Lessor in respect of
the condition of the Leased Property. LESSOR MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY, OR ANY
PART THEREOF, EITHER AS TO ITS MERCHANTABILITY OR FITNESS FOR USE, DESIGN OR
CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT
LESSEE TAKES THE LEASED PROPERTY SUBJECT TO ALL SUCH RISKS. LESSEE ACKNOWLEDGES
THAT THE LEASED PROPERTY HAS BEEN INSPECTED BY LESSEE AND IS SATISFACTORY TO
IT. Provided, however, to the extent permitted by law, Lessor hereby assigns to
Lessee all of Lessor's rights to proceed against any predecessor in title other
than Lessee (or an Affiliate of Lessee which conveyed the Property to, or was
the predecessor-by-merger to, Lessor or an Affiliate thereof) for breaches of
warranties or representations or for latent defects in the Leased Property.
Lessor shall fully cooperate with Lessee in the prosecution of any such claim,
in Lessor's or Lessee's name, all at Lessee's sole cost and expense. Lessee
hereby agrees to indemnify, defend and hold harmless Lessor from and against
any claims, obligations and liabilities against or incurred by Lessor in
connection with such cooperation.
7.2 Use of the Leased Property.
(a) Lessee covenants that it will proceed
with all due diligence and will exercise its reasonable best efforts to obtain
and to maintain all approvals needed to use and operate the Leased Property and
the Hotel under applicable local, state and federal law. Lessor covenants that
it will cooperate in good faith in all respects, at Lessee's expense, in
connection with Lessee's efforts to obtain and maintain such approvals.
(b) Lessee shall use or cause to be used
the Leased Property only as a hotel facility of the class and quality at least
equal to that of the Hotel as of the Commencement Date, and for such other uses
as may be necessary or incidental to such hotel facility use or such other or
additional use as otherwise approved in writing by Lessor (the "PRIMARY
INTENDED USE"). Lessee shall not use the Leased Property or any portion thereof
for
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any other use without the prior written consent of Lessor, which consent may be
granted, denied or conditioned in Lessor's sole discretion. No use shall be
made or permitted to be made of the Leased Property, other than the Primary
Intended Use, which will cause the cancellation or increase the premium of any
insurance policy covering the Leased Property or any part thereof (unless
another adequate policy satisfactory to Lessor is available and Lessee pays any
premium increase), nor shall Lessee sell or permit to be kept, used or sold in
or about the Leased Property any article which may be prohibited by Legal
Requirements or fire underwriter's regulations. Lessee shall, at its sole cost,
comply with all of the requirements pertaining to the Leased Property of any
insurance board, association, organization or company necessary for the
maintenance of insurance, as herein provided, covering the Leased Property and
Lessee's Personal Property, unless such compliance requires the performance of
a Capital Improvement or the payment of a Capital Imposition, in which case
Lessor shall pay the cost of such Capital Improvement or Capital Imposition in
order for Lessee so to comply.
(c) Subject to any provisions of this Lease
to the contrary, Lessee covenants and agrees that during the Term it will (i)
continuously operate the Leased Property for the Primary Intended Use (subject
to closures of all or part of the Hotel during Unavoidable Occurrences and by
prior agreement with Lessor during the construction of PIP improvements and
Contemplated Renovations), (ii) keep in full force and effect and comply with
all the provisions of any Franchise Agreement (other than requirements with
respect to Capital Improvements and other obligations of Lessor hereunder),
(iii) not terminate or amend any Franchise Agreement without the consent of
Lessor (which consent shall not be unreasonably withheld), (iv) maintain
appropriate certifications and licenses for such use, (v) seek to maximize the
Gross Revenues generated therefrom consistent with sound business practices and
Lessee's concurrent goal of maximizing its net operating income therefrom and
(vi) upon request, keep Lessor advised of the status of any material or
uninsured litigation affecting the Leased Property.
(d) Lessor covenants and agrees that during
the Term it will (1) not take or allow any Affiliate to take or fail to take
any action that would interfere with, restrict or prohibit Lessee's operation
of the Leased Property as the Primary Intended Use, including, without
limitation, modifying, amending or terminating any Franchise Agreement or any
licenses, Franchises, permits, easements, leases, undertakings or agreements
held by Lessor or such Affiliate and pertaining to the Leased Property, and (2)
comply with all the provisions of any Franchise Agreement relating to Capital
Improvements, the payment of Real Estate Taxes, Personal Property Taxes,
Capital Impositions and other requirements thereof that are not the
responsibility of Lessee hereunder.
(e) Lessee shall not commit or suffer to be
committed any waste on the Leased Property, or in the Hotel, nor shall Lessee
cause or permit any nuisance thereon. Lessee shall neither suffer nor permit
the Leased Property or any portion thereof, or Lessee's Personal Property, to
be used in such a manner as (1) might reasonably tend to impair Lessor's (or
Lessee's, as the case may be) title thereto or to any portion thereof, or (2)
may reasonably make possible a claim or claims of adverse usage or adverse
possession by the public,
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as such, or of implied dedication of the Leased Property or any portion
thereof, except as necessary in the ordinary and prudent operation of the Hotel
(or other Primary Intended Use) on the Leased Property.
7.3 Lessor to Grant Easements, etc. Lessor will, from time to time, so
long as no Event of Default has occurred and is continuing, at the request of
Lessee and at Lessee's cost and expense (but subject to the approval of Lessor,
which approval shall not be unreasonably withheld), (a) grant easements and
other rights in the nature of easements with respect to the Leased Property to
third parties, (b) release existing easements or other rights in the nature of
easements which are for the benefit of the Leased Property, (c) dedicate or
transfer unimproved portions of the Leased Property for road, highway or other
public purposes, (d) execute petitions to have the Leased Property annexed to
any municipal corporation or utility district, (e) execute amendments to any
covenants and restrictions affecting the Leased Property and (f) execute and
deliver to any Person any instrument appropriate to confirm or effect such
grants, releases, dedications, transfers, petitions and amendments (to the
extent of its interests in the Leased Property), but only upon delivery to
Lessor of an Officer's Certificate stating that such grant, release,
dedication, transfer, petition or amendment is not detrimental to the proper
conduct of the business of Lessee on the Leased Property and (unless Lessor is
otherwise receiving fair value for any reduction in value of the Leased
Property) does not materially reduce the value of the Leased Property.
ARTICLE 8
LESSEE'S COMPLIANCE WITH LAW; ENVIRONMENTAL COVENANTS
8.1 Compliance with Legal and Insurance Requirements, etc. Subject to
Subsections 8.2(b) and 8.3(b) below and Article 12 relating to permitted
contests, and subject further to the obligations of Lessor with respect to
Capital Improvements as set forth in Subsection 9.1(b), Lessee, at its expense,
will promptly (a) comply with all applicable Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair and, to the
extent of its obligations hereunder, restoration of the Leased Property, and
(b) procure, maintain and comply with all appropriate permits, licenses and
other authorizations required for any use of the Leased Property and Lessee's
Personal Property then being made, and for the proper operation, maintenance
and repair of the Leased Property or any part thereof.
8.2 Legal Requirement Covenants.
(a) Subject to Subsection 8.3(b) below,
Lessee covenants and agrees that the Leased Property and Lessee's Personal
Property shall not be used for any unlawful purpose, and that Lessee shall not
permit or suffer to exist any unlawful use of the Leased Property by others.
Lessee shall acquire and maintain all appropriate licenses, certifications,
permits and other authorizations and approvals needed to operate the Leased
Property in its customary manner for the Primary Intended Use. Lessee further
covenants and agrees that
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Lessee's use of the Leased Property and maintenance, alteration, and operation
of the same, and all parts thereof, shall at all times conform to all Legal
Requirements, unless the same are finally determined by a court of competent
jurisdiction to be unlawful (and Lessee shall use its reasonable best efforts
to cause all such sub-tenants, invitees or others to so comply with all Legal
Requirements). Lessee may, however, upon prior Notice to Lessor, contest the
legality or applicability of any such Legal Requirement or any licensure or
certification decision if Lessee maintains such action in good faith, with due
diligence, without prejudice to Lessor's rights hereunder, and at Lessee's sole
expense. If by the terms of any such Legal Requirement compliance therewith
pending the prosecution of any such proceeding may legally be delayed without
the incurrence of any lien, charge or liability of any kind against the Hotel
or Lessee's leasehold interest therein and without subjecting Lessee or Lessor
to any liability, civil or criminal, for failure so to comply therewith, Lessee
may delay compliance therewith until the final determination of such
proceeding. If any lien, charge or civil or criminal liability would be
incurred by reason of any such delay, Lessee, with the prior written consent of
Lessor, which consent shall not be unreasonably withheld, may nonetheless
contest as aforesaid and delay as aforesaid provided that such delay would not
subject Lessor to criminal liability and Lessee both (a) furnishes to Lessor
security reasonably satisfactory to Lessor against any loss or injury by reason
of such contest or delay and (b) prosecutes the contest with due diligence and
in good faith.
(b) As between Lessor and Lessee, Lessee is
solely responsible for all liabilities or obligations of any kind with respect
to employees at the Leased Property during the Term, except to the extent such
compliance requires, and Lessor fails to pay the cost of, the performance of a
Capital Improvement, or remediation or other action with respect to an
Environmental Liability for which Lessee is indemnified under Subsection 8.3(b)
or the payment of a Capital Imposition. Without limiting the generality of the
foregoing sentence, and except as otherwise provided in Section 2.5(c) hereof,
Lessee is solely responsible for any required compliance with the Worker
Adjustment, Retraining and Notification Act of 1988 (the "WARN ACT") or any
similar state law applicable to the Leased Property; any required compliance
with the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"); and all alleged and actual obligations and claims arising from or
relating to any employment agreement, collective bargaining agreement or
employee benefit plans, any grievances, arbitrations, or unfair labor practice
charges, and relating to compliance with any applicable state or federal labor
employment law, including but not limited to all laws pertaining to
discrimination, workers' compensation, unemployment compensation, occupational
safety and health, unfair labor practices, family and medical leave, and wages,
hours or employee benefits. Lessee agrees to indemnify and defend and hold
harmless Lessor from and against any claims relating to any of the foregoing
matters. Lessee further agrees to reimburse Lessor for any and all losses,
damages, costs, expenses, liabilities and obligations of any kind, including
without limitation reasonable attorneys' fees and other legal costs and
expenses, incurred by Lessor in connection with any of the foregoing matters.
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Notwithstanding the Lessee's obligations
under Section 8.1 to obtain and maintain all permits and licenses required for
the use of the Leased Property, and without limiting any obligations of Lessee
hereunder, if (i) applicable law requires that the owner (rather than a lessee)
of a hotel be the licensee under the required liquor license for the Hotel or
(ii) the former owner of the Hotel is holding the liquor license and continuing
to exercise management and supervision of the liquor services at the Hotel
pending transfer of the license to Lessor or Lessee, the Lessee shall indemnify
and hold Lessor harmless from any liability, damages or claims (a) arising in
connection with liquor operations at the Hotel during such period of time
following the Commencement Date, except to the extent caused by Lessor's gross
negligence or willful misconduct or (b) made by or through the former owner
with respect to liquor operations at the Hotel following the Commencement Date.
8.3 Environmental Covenants. Lessor and Lessee (in addition to, and
not in diminution of, Lessor's and Lessee's covenants and undertakings in
Sections 8.1 and 8.2 hereof) covenant and agree as follows:
(a) At all times hereafter until such time
as all liabilities, duties or obligations of Lessee to Lessor under this Lease
have been satisfied in full, Lessee shall fully comply with all Environmental
Laws applicable to the Leased Property and the operations thereon, except to
the extent that compliance would require Lessee to incur an obligation for a
Capital Improvement or for remediation of Environmental Liabilities for which
Lessee is indemnified under this Section 8.3. Lessee agrees to give Lessor
Notice of the following, promptly after Lessee receives knowledge thereof: (1)
all Environmental Liabilities; (2) all pending, threatened or anticipated
Proceedings, and all notices, demands, requests or investigations, relating to
any Environmental Liability or relating to the issuance, revocation or change
in any Environmental Authorization required for operation of the Leased
Property; (3) all Releases at, on, in, under or in any way affecting the Leased
Property, or any Release at, on, in or under any property adjacent to the
Leased Property; and (4) all facts, events or conditions that could reasonably
lead to the occurrence of any of the above-referenced matters.
(b) Lessor hereby agrees to defend,
indemnify and save harmless any and all Lessee Indemnified Parties from and
against any and all Environmental Liabilities (including, without limitation,
Environmental Liabilities to the extent resulting from conditions existing at
the Leased Property at the Commencement Date or from Releases or other
violations of Environmental Laws (without fault on the part of Lessee)
originating on other property but affecting the Leased Property) other than
Environmental Liabilities to the extent caused by the grossly negligent acts or
failures to act or wilful misconduct of Lessee, Manager or subtenants of Lessee
or Manager, and their respective employees, agents or independent contractors.
(c) Lessee hereby agrees to defend,
indemnify and save harmless any and all Lessor Indemnified Parties from and
against any and all Environmental Liabilities to the extent caused by the
grossly negligent acts or failures to act or wilful misconduct of Lessee,
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Manager or subtenants of Lessee or Manager, and their respective employees,
agents or independent contractors.
(d) At any time any Indemnified Party has
reason to believe circumstances exist which could reasonably result in an
Environmental Liability (or in the event Lessor or its lender requires such
access in connection with a sale or financing of the Leased Property), upon
reasonable prior written notice to Lessee stating such Indemnified Party's
basis for such belief, an Indemnified Party shall be given immediate access to
the Leased Property (including, but not limited to, the right to enter upon,
investigate, drill wells, take soil borings, excavate, monitor, test, cap and
use available land for the testing of remedial technologies), Lessee's
employees, and to all relevant documents and records regarding the matter as to
which a responsibility, liability or obligation is asserted or which is the
subject of any Proceeding; provided that such access may be conditioned or
restricted as may be reasonably necessary to ensure compliance with law and the
safety of personnel and facilities or to protect confidential or privileged
information. All Indemnified Parties requesting such immediate access and
cooperation shall endeavor to coordinate such efforts to result in as minimal
interruption of the operation of the Leased Property as practicable. Lessor
agrees to indemnify and hold harmless Lessee from and against any and all
liabilities, costs, damages, charges, fees or expenses arising in connection
with, and to the extent caused by a Lessor Indemnified Party, the access to or
use of the Leased Property by a Lessor Indemnified Party pursuant to this
subsection (d).
(e) The indemnification rights and
obligations provided for in this Article 8 (1) shall be in addition to any
indemnification rights and obligations provided for elsewhere in this Lease,
and (2) shall survive the termination of this Lease.
(f) For purposes of this Section 8.3, all
amounts for which any Indemnified Party seeks indemnification shall be computed
net of any actual income tax benefit resulting therefrom to such Indemnified
Party, any insurance proceeds received (net of tax effects) with respect
thereto, and any amounts recovered (net of tax effects) from any third parties
based on claims the Indemnified Party has against such third parties which
reduce the damages that would otherwise be sustained; provided, that in all
cases, the timing of the receipt or realization of insurance proceeds or income
tax benefits or recoveries from third parties shall be taken into account in
determining the amount of reduction of damages. Each Indemnified Party agrees
to use its reasonable efforts to pursue, or assign to Lessee or Lessor, as the
case may be, any claims or rights it may have against any third party which
would materially reduce the amount of damages otherwise incurred by such
Indemnified Party.
(g) Notwithstanding anything to the
contrary contained in this Lease, if Lessor shall become entitled to the
possession of the Leased Property by virtue of the termination of this Lease or
repossession of the Leased Property, then Lessor may assign its indemnification
rights under Section 8.3 of this Lease to any Person to whom Lessor
subsequently transfers the Leased Property, subject to the following conditions
and limitations, each of
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which shall be deemed to be incorporated into the terms of such assignment,
whether or not specifically referred to therein:
(1) The indemnification rights
referred to in this section may be assigned
only if a known Environmental Liability
then exists or if a Proceeding is then
pending or, to the knowledge of Lessee or
Lessor, then threatened with respect to the
Leased Property;
(2) Such indemnification rights
shall be limited to Environmental
Liabilities relating to or specifically
affecting the Leased Property; and
(3) Any assignment of such
indemnification rights shall be limited to
the immediate transferee of Lessor, and
shall not extend to any such transferee's
successors or assigns.
ARTICLE 9
MAINTENANCE, REPAIRS AND CAPITAL EXPENDITURES
9.1 Maintenance, Repairs and Capital Expenditures.
(a) Except as otherwise expressly provided
in this Lease, and except for conditions caused by Lessor's gross negligence or
willful misconduct (or that of its employees, agents or independent
contractors), Lessee, at its sole expense, will keep the Leased Property, and
all private roadways, sidewalks and curbs appurtenant thereto that are under
Lessee's control, including windows and plate glass, mechanical, electrical and
plumbing systems and equipment (including conduit and ductware), and non-load
bearing interior walls, and parking lot surfaces, in good order and repair
(whether or not the need for such repairs occurred as a result of Lessee's use,
any prior use, the elements or the age of the Leased Property, or any portion
thereof), and, with reasonable promptness, make all necessary and appropriate
repairs, replacements, and improvements thereto of every kind and nature,
whether interior or exterior, ordinary or extraordinary, foreseen or unforeseen
or arising by reason of a condition existing prior to the commencement of the
Term of this Lease (concealed or otherwise), or required by any governmental
agency having jurisdiction over the Leased Property. Lessee, however, shall be
permitted to prosecute claims against Lessor's predecessors in title (other
than Lessor or an Affiliate of Lessor which conveyed the Property to, or was
the predecessor-by-merger to, Lessor or an Affiliate thereof) for breach of any
representation or warranty or for any latent defects in the Leased Property to
be maintained by Lessee unless Lessor is already diligently pursuing such a
claim. All repairs shall, to the extent reasonably achievable, be at least
equivalent in quality to the original work. Lessee will not take or omit to
take any action, the taking or omission of which might materially impair the
value or the usefulness of the Leased Property or any part thereof for its
Primary Intended Use.
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(b) Notwithstanding Lessee's obligations
under Subsection 9.1(a) above or elsewhere in this Lease, unless caused by the
gross negligence or willful misconduct of Lessee, Manager or subtenants of
Lessee or Manager, and their respective employees, agents or independent
contractors, Lessee shall not be responsible for any Capital Improvements,
including (without limitation) Capital Improvements required by the Franchisor
under the Franchise Agreement. Lessor shall be responsible for all such Capital
Improvements, including, without limitation, Capital Improvements required to
comply with all Legal Requirements (including, without limitation, all
Environmental Laws, the Americans with Disabilities Act and any state or local
handicap access laws and regulations and all zoning and land use laws and
regulations) and Capital Improvements required to comply with any Franchise
Agreement; subject to Lessor's right to approve the Capital Budget pursuant to
Article 4; provided, however, that notwithstanding the foregoing or any other
obligation of Lessor hereunder for the cost of Capital Improvements required by
a Franchise Agreement, Lessor shall have the right, its sole (unreviewable)
discretion, to refuse to make any Capital Expenditure required by any
Franchisor; provided, further, that if such refusal directly results in a
default under or termination of such Franchise Agreement, Lessor shall be
responsible for all of Lessee's damages caused thereby, termination payments
payable by Lessee under the terms of such Franchise Agreement, application fees
for a new franchise license reasonably approved by Lessor, increased royalty
fees and other costs arising out of such refusal or out of the resulting need
to apply for and enter into a substitute franchise license agreement. Except as
set forth in the preceding sentence or elsewhere in this Lease, Lessor shall
not under any circumstances be required to build or rebuild any improvement on
the Leased Property, or to make any repairs, replacements, alterations,
restorations or renewals of any nature or description to the Leased Property,
whether ordinary or extraordinary, foreseen or unforeseen, or to make any
expenditure whatsoever with respect thereto, in connection with this Lease, or
to maintain the Leased Property in any way. Lessee hereby waives, to the extent
permitted by law, the right to make repairs at the expense of Lessor pursuant
to any law in effect at the time of the execution of this Lease or hereafter
enacted. Lessor shall have the right to give, record and post, as appropriate,
notices of non- responsibility under any mechanic's lien laws now or hereafter
existing.
(c) If Lessor fails to make any Capital
Expenditure required to comply with Legal Requirements, after the expiration of
all the applicable notice and cure periods set forth in Section 24.3, or if
Lessor fails to make any Emergency Capital Expenditures promptly following
notice from Lessee of an Emergency Situation, or if an Emergency Capital
Expenditure must be made immediately (without allowing the time necessary to
notify Lessor thereof) then Lessee will have the right, but not the obligation,
to make such Capital Expenditures on behalf of and for the account of Lessor,
whereupon Lessor shall reimburse Lessee for the reasonable cost thereof, with
interest thereon at the Base Rate, within ten (10) days after receipt of
documentation (with reasonable detail as to the breakdown of costs incurred)
evidencing such Capital Expenditure.
(d) Nothing contained in this Lease and no
action or inaction by Lessor shall be construed as (1) constituting the request
of Lessor, expressed or implied, to any
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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 (2) except as otherwise
expressly provided herein, giving Lessee any right, power or permission to
contract for or permit the performance of any labor or services or the
furnishing of any materials or other property in such fashion as would permit
the making of any claim against Lessor in respect thereof or to make any
agreement that may create, or in any way be the basis for any right, title,
interest, lien, claim or other encumbrance upon the estate of Lessor in the
Leased Property, or any portion thereof.
(e) Lessee will, upon the expiration or
prior termination of the Term, vacate and surrender the Leased Property to
Lessor in the condition in which the Leased Property was originally received
from Lessor, except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Lease and except for ordinary
wear and tear (subject to the obligation of Lessee to maintain the Leased
Property in good order and repair, as would a prudent owner, during the entire
Term of the Lease, to the extent required in Section 9.1(a)), or damage by
casualty or Condemnation (subject to any obligations of Lessee to restore or
repair as set forth in this Lease).
9.2 Encroachments, Restrictions, Etc. If any of the Improvements, at
any time, materially encroach upon any property, street or right-of-way
adjacent to the Leased Property, or violate the agreements or conditions
contained in any lawful restrictive covenant or other agreement affecting the
Leased Property, or any part thereof, or impair the rights of others under any
easement or right-of-way to which the Leased Property is subject, then promptly
upon the request of Lessor or at the behest of any Person affected by any such
encroachment, violation or impairment (in which case Lessee will immediately
notify Lessor thereof), Lessee shall, at Lessor's expense (except to the extent
that the encroachment or violation was the result of the gross negligence or
willful misconduct of Lessee, Manager or subtenants of Lessee or Manager, and
their respective employees, agents or independent contractors, in which case
Lessee shall bear such expense), subject to its right to contest the existence
of any encroachment, violation or impairment and in such case, in the event of
an adverse final determination, either (a) obtain valid and effective waivers
or settlements of all claims, liabilities and damages resulting from each such
encroachment, violation or impairment, whether the same shall affect Lessor or
Lessee or (b) make such changes in the Improvements, and take such other
actions, as Lessor in the good faith exercise of its judgment deems reasonably
practicable to remove such encroachment, and to end such violation or
impairment, including, if necessary, the alteration of any of the Improvements,
and in any event take all such actions as may be necessary in order to be able
to continue the operation of the Improvements for the Primary Intended Use
substantially in the manner and to the extent the Improvements were operated
prior to the assertion of such violation, impairment or encroachment. Any such
alteration shall be made in conformity with the applicable requirements of
Article 10. Lessee's obligations under this Section 9.2 shall be in addition to
and shall in no way discharge or diminish any obligation of any insurer under
any policy of title or other insurance held by Lessor or Lessee.
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ARTICLE 10
ALTERATIONS AND IMPROVEMENTS; LESSOR'S CAPITAL RESERVE
10.1 Alterations and Improvements. Without Lessor's prior written
consent, which consent shall not be unreasonably withheld, Lessee shall not
have the right to make any additions, modifications or improvements to the
Leased Property; provided, however, that Lessor may not withhold its consent if
such additions, modifications or improvements will not significantly alter the
character or purposes or detract from the value or operating efficiency of, and
will not impair the revenue-producing capability of, the Hotel and the Leased
Property, or adversely affect the ability of Lessee to comply with the
provisions of this Lease. The cost of any such
permitted additions, modifications or improvements to the Leased Property shall
be paid by Lessee unless otherwise provided herein or agreed by Lessor in
writing, and all such additions, modifications and improvements shall, without
payment by Lessor at any time, be included under the terms of this Lease and
upon expiration or earlier termination of this Lease shall pass to and become
the property of Lessor.
10.2 Salvage. All materials which are scrapped or removed in
connection with the making of repairs required by Articles 9 or 10 shall be or
become the property of Lessor or Lessee depending on which party is paying for
or providing the financing for such work.
10.3 Initial Upgrades.
(a) Upgrades Required by Franchisor. Lessor
agrees to pay the cost to install, construct and complete the improvements,
alterations, upgrades and refurbishments in and to the Improvements and
acquisitions of Furniture, Fixtures and Equipment required under any product
improvement plan or other upgrade program or requirement (collectively, a
"PIP") necessary to qualify the Hotel to initially operate or continue to
operate under any Franchise Agreement, but only to the extent so agreed under
the Master Hotel Agreement or hereafter approved by Lessor.
(b) Contemplated Renovations. Schedule 1 to
the Master Hotel Agreement sets forth a preliminary budget for certain
improvements, alterations, upgrades and/or refurbishments of and to various
hotels (including acquisitions of Furniture, Fixtures and Equipment) that are
contemplated by BHR and FelCor (the "CONTEMPLATED RENOVATIONS"). In the event
any Contemplated Renovations apply to the Hotel, Lessor and Lessee agree to
work diligently and in good faith to refine and finalize the plans and
specifications, budgets and time schedules for the Contemplated Renovations and
Lessor agrees to pay the budgeted cost of the Contemplated Renovations or such
higher amount as may be approved by Lessor, such approval not to be
unreasonably withheld. The Contemplated Renovations may include some or all of
the items required by the PIP.
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(c) Construction Services Agreement. In the
event of a PIP, a Contemplated Renovation or other previously unbudgeted
Capital Improvement (including a reconstruction of the Improvements following a
casualty or Condemnation), Lessor and Lessee may, in their sole discretion,
enter into an agreement (a "CONSTRUCTION SERVICES AGREEMENT") whereby Lessee,
Manager or another Subsidiary of BHR will perform construction advisory and
supervisory services described therein for the fees and other compensation
described therein. Lessee has no obligation to provide such services under this
Lease other than pursuant to a Construction Services Agreement.
10.4 Lessor Approval of Capital Expenditures. All Capital Expenditures
(individually or in the aggregate) whether pursuant to the Capital Budget or
otherwise, shall be subject to the approval of Lessor. Such approval may be
conditioned upon review and approval by Lessor of the plans and specifications
(including matters of design and decor) and the contracting and purchasing of
all labor, services and materials. Lessor or its representatives shall have the
right to require competitive bidding of contracts for Capital Improvements,
review all bids and monitor costs, time, quality and performance. The foregoing
restrictions shall not apply to Emergency Capital Expenditures made by Lessee
in amounts not to exceed $25,000 and with prior notice to Lessor (if possible
under the circumstances).
10.5 Lessor's Capital Reserve.
(a) Lessor shall be obligated to make
available to Lessee (which may be through an escrow required by a Holder) an
amount equal to three percent (3%) of Gross Revenues from the Hotel during each
Lease Year ("CAPITAL RESERVE") for Capital Improvements, the allocation for
expenditure of which shall be governed by the Capital Budget for such Lease
Year. Upon written request by Lessee to Lessor (stating the specific use to be
made and subject to the approval thereof by Lessor, which approval shall not be
unreasonably withheld and may be evidenced by Lessor's approval of the Capital
Budget (if such Capital Budget specifically describes such Capital
Improvement), such funds shall be made available by Lessor for Capital
Expenditures set forth in the Capital Budget; provided, however, that no
Capital Expenditures shall be made to purchase property (other than "real
property" within the meaning of Treasury Regulations Section 1.856-3(d)), to
the extent that doing so would cause Lessor to recognize income other than
"rents from real property" as defined in Section 856(d) of the Code. Lessor's
obligation shall be cumulative, but not compounded, and any amounts that have
accrued hereunder shall be payable in future periods for such uses and in
accordance with the procedure set forth herein. Lessee shall have no interest
in any accrued obligation of Lessor hereunder after the termination of this
Lease. All Capital Improvements shall be owned by Lessor subject to the
provisions of this Lease.
(b) Lessor's obligation with respect to
Capital Expenditures shall not be limited to amounts from time to time
available in the Capital Reserve, but Lessor may require that such Capital
Reserve amounts be expended prior to Lessor incurring any obligation to pay for
Capital Improvements with other funds.
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ARTICLE 11
FRANCHISE SYSTEM COMPLIANCE
11.1 Assignment or Execution of Franchise Agreement or Guaranty of
Franchise Agreement by Lessor. At Lessor's sole expense (limited, in the case
of all Holiday Inn Franchising, Inc. licenses, to the administrative cost of
processing such franchise assignments or agreements), on or about the
Commencement Date, the Franchise Agreement will be assigned to Lessee or, if
required by the Franchisor, Lessee will execute a new Franchise Agreement for
the Hotel. If the Franchisor requires as a condition to granting or allowing
the transfer, assignment or renewal of any Franchise Agreement approved by
Lessor that Lessor, as the owner of the Leased Property, become contingently
liable (as guarantor or indemnitor) with respect to the Franchise Agreement,
Lessor will take such actions and execute such documents as Lessee shall
reasonably request in order to become such a guarantor or indemnitor in order
to secure such transfer, assignment or renewal.
11.2 Compliance with Franchise Agreement by Lessee. To the extent any
of the provisions of the Franchise Agreement impose a greater obligation on
Lessee than the corresponding provisions of this Lease, then Lessee shall be
obligated to comply with the provisions of the Franchise Agreement (other than
requirements with respect to Capital Improvements for which Lessor is
responsible under this Lease and other obligations of Lessor hereunder). It is
the intent of the parties hereto that Lessee shall comply in every respect with
such provisions of the Franchise Agreement so as to avoid any default
thereunder during the term of this Lease. Lessee shall not terminate, extend or
enter into any material modification of the Franchise Agreement without in each
instance first obtaining Lessor's prior written consent, which shall not be
unreasonably withheld. Lessor and Lessee agree to cooperate with each other in
the event it becomes necessary to obtain a franchise extension or modification
or a new franchise for the Leased Property, and in any transfer of the
Franchise Agreement to Lessor or, any designee of Lessor or any successor to
Lessee upon the termination of this Lease. In the event of expiration or
termination of a Franchise Agreement, for whatever reason, Lessor will have the
right, in the exercise of its reasonable discretion, to approve any new
Franchise Agreement for the Hotel. If, upon any expiration or earlier
termination of this Lease (other than upon an Event of Default by Lessee), a
Franchise Agreement remains in effect, or would but for such expiration or
termination remain in effect, Lessor shall indemnify, defend and hold Lessee
and its Affiliates harmless with respect to the obligations and liabilities
arising thereunder after the date of expiration or termination of this Lease.
11.3 Compliance with Franchise Agreement by Lessor. To the extent any
of the provisions of the Franchise Agreement impose a greater obligation on
Lessor than the corresponding provisions of this Lease, then Lessor shall be
obligated to comply with the provisions of the Franchise Agreement (other than
requirements with respect to operational matters and other obligations of
Lessee hereunder). It is the intent of the parties hereto that Lessor, to the
extent of its obligations hereunder, shall comply in every respect with the
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provisions of the Franchise Agreement so as to avoid any default thereunder
during the term of this Lease. To the extent Lessor is a party thereto, Lessor
shall not terminate, extend or enter into any material modification of the
Franchise Agreement without in each instance first obtaining Lessee's prior
written consent, not to be unreasonably withheld.
11.4 Changes in Franchise. Lessor and Lessee agree to cooperate with
each other in the event it becomes necessary to obtain a franchise extension or
modification or a new franchise for the Leased Property, and in any transfer of
any Franchise Agreement to any designee of Lessor or, with Lessor's prior
written consent, any successor to Lessee upon the termination of this Lease. In
the event of expiration or termination of a Franchise Agreement, for whatever
reason, Lessor will have the right, in its reasonable discretion, to approve
any new Franchise Agreement for the Hotel. If, upon any expiration or earlier
termination of this Lease (other than upon an Event of Default by Lessee), a
Franchise Agreement remains in effect in favor of Lessor's designee or
Affiliate, Lessor shall indemnify, defend and hold Lessee harmless with respect
to the obligations and liabilities arising thereunder after the date of
expiration or termination of this Lease.
ARTICLE 12
PERMITTED LIENS AND CONTESTS
12.1 Liens. Subject to the provision of Section 12.2, relating to
permitted contests, Lessee will not directly or indirectly create or allow to
remain and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Leased Property or any
attachment, levy, claim or encumbrance in respect of the Rent first arising or
accrued from and after the Commencement Date, not including, however, (a) this
Lease, (b) the matters, if any, included as exceptions in the title policy
insuring Lessor's interest in the Leased Property, (c) restrictions, liens and
other encumbrances which are either created or incurred by Lessor or its
employees, agents or independent contractors or consented to in writing by
Lessor or any easements granted pursuant to the provisions of Section 7.3 of
this Lease, (d) liens for those taxes upon Lessor which Lessee is not required
to pay hereunder, (e) subleases permitted by Article 20 hereof, (f) liens for
Impositions or for sums resulting from noncompliance with Legal Requirements so
long as (1) the same are not yet payable or are payable without the addition of
any fine or penalty or (2) such liens are in the process of being contested as
permitted by Article 12; or (3) the same are Lessor's responsibility hereunder,
(g) liens of mechanics, laborers, materialmen, suppliers or vendors for sums
either disputed or not yet due provided that (1) the payment of such sums shall
not be postponed under any related contract for more than sixty (60) days after
the completion of the action giving rise to such lien and such reserve or other
appropriate provisions as shall be required by law or GAAP shall have been made
therefor or (2) any such liens are in the process of being contested as
permitted by Article 12 hereof, and (h) any liens which are the responsibility
of Lessor pursuant to the provisions of Article 24 of this Lease.
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12.2 Permitted Contests. Lessee shall have the right to contest the
amount or validity of any Imposition to be paid by Lessee or any Legal
Requirement or Insurance Requirement or any lien, attachment, levy,
encumbrance, charge or claim ("CLAIMS") not otherwise permitted by Article 11,
by appropriate legal proceedings in good faith and with due diligence (but this
shall not be deemed or construed in any way to relieve, modify or extend
Lessee's covenants to pay or its covenants to cause to be paid any such charges
at the time and in the manner as in this Article provided), on condition,
however, that such legal proceedings shall not operate to relieve Lessee from
its obligations hereunder and shall not cause the sale or risk the imminent
loss of the Leased Property, or any part thereof, or cause Lessor or Lessee to
be in default under any mortgage, deed of trust, security deed or other
agreement encumbering the Leased Property or any interest therein. Upon the
request of Lessor, Lessee shall either (a) provide a bond or other assurance
reasonably satisfactory to Lessor that all Claims which may be assessed against
the Leased Property together with interest and penalties, if any, thereon will
be paid, or (b) deposit within the time otherwise required for payment with a
bank or trust company as trustee upon terms reasonably satisfactory to Lessor,
as security for the payment of such Claims, money in an amount sufficient to
pay the same, together with interest and penalties in connection therewith, as
to all Claims which may be assessed against or become a Claim on the Leased
Property, or any part thereof, in said legal proceedings. Lessee shall furnish
Lessor and any lender of Lessor with reasonable evidence of such deposit within
five (5) days of the same. Lessor agrees to join in any such proceedings if the
same be required legally to prosecute such contest of the validity of such
Claims; provided, however, that Lessor shall not thereby be subjected to any
liability for the payment of any costs or expenses in connection with any
proceedings brought by Lessee; and Lessee covenants to indemnify and save
harmless Lessor from any such costs or expenses. Lessee shall be entitled to
any refund of any Claims and such charges and penalties or interest thereon
which have been paid by Lessee or paid by Lessor and for which Lessor has been
fully reimbursed. In the event that Lessee fails to pay any Claims when due or
to provide the security therefor as provided in this Article and to diligently
prosecute any contest of the same, Lessor may, upon ten (10) days advance
Notice to Lessee, and Lessee's failure to correct the same within such 10-day
period, pay such charges together with any interest and penalties and the same
shall be repayable by Lessee to Lessor as Additional Charges at the next Rent
payment date provided for in this Lease. Provided, however, that should Lessor
reasonably determine that the giving of such Notice would risk loss to the
Leased Property or cause damage to Lessor, then Lessor shall give such Notice
as is practical under the circumstances. Lessor reserves the right to contest
any of the Claims at its expense not pursued by Lessee. Lessor and Lessee agree
to cooperate in coordinating the contest of any Claims.
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ARTICLE 13
INSURANCE REQUIREMENTS
13.1 General Insurance Requirements. During the Term of this Lease,
the Leased Property shall at all times be insured with the kinds and amounts of
insurance described below. This insurance shall be written by companies
authorized to issue insurance in the State. The policies (except crime, workers
compensation, and safe deposit box legal liability) must name Lessor as an
additional insured, and the Manager, if any, shall also be named as an
additional insured, under the coverages described in Subsection 13.1(b). Losses
shall be payable to Lessor or Lessee as provided in this Lease. Any loss
adjustment for coverages insuring both parties shall require the written
consent of Lessor and Lessee, each acting reasonably and in good faith.
Evidence of insurance shall be deposited with Lessor. The policies on the
Leased Property, including the Improvements, Furniture, Fixtures and Equipment
and Lessee's Personal Property, shall satisfy the requirements of the Franchise
Agreement and of any ground lease, mortgage, security agreement or other
financing lien affecting the Leased Property and at a minimum shall include the
following:
(a) Lessor shall obtain and maintain, at
its own expense:
(i) Building insurance on the "SPECIAL
FORM" (formerly "ALL RISK" form) (including earthquake and flood in reasonable
amounts (not to exceed $100,000,000 per occurrence and in the aggregate for the
Existing Hotels) if and as determined by Lessor, in the exercise of its
reasonable discretion, or Lessor's underwriters or lenders) in an amount not
less than 100% of the then full replacement cost thereof (as defined in Section
13.2) or such other amount which is acceptable to Lessor, and personal property
insurance on the "SPECIAL FORM" in the full amount of the replacement cost
thereof;
(ii) Insurance for loss or damage
(direct and indirect) from steam boilers, pressure vessels or similar
apparatus, air conditioning systems, piping and machinery, and sprinklers, if
any, now or hereafter installed in the Hotel, in the minimum amount of
$5,000,000 or in such greater amounts as are then customary or as may be
reasonably requested by Lessor from time to time; and
(iii) Loss of income insurance on the
"SPECIAL FORM", in the amount of twelve (12) months of the sum of Base Rent
plus Percentage Rent (based on the last Lease Year of operation or, to the
extent the Leased Property has not been operated for an entire 12-month Lease
Year, based on prorated Percentage Rent) for the benefit of Lessor.
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(b) Lessee shall obtain and maintain, at
its own expense:
(i) Commercial general liability
insurance, with amounts not less than $10,000,000 combined single limit for
each occurrence and in the aggregate, as well as excess liability (umbrella)
insurance with limits of at least $50,000,000 per occurrence and in the
aggregate, covering each of the following: bodily injury, death, or property
damage liability per occurrence, personal and advertising injury, general
aggregate, products and completed operations, with respect to Lessor, and "all
risk legal liability" (including liquor law or "dram shop" liability, if liquor
or alcoholic beverages are served on the Leased Property) with respect to
Lessee;
(ii) Fidelity bonds or blanket crime
policies with limits and deductibles as may be reasonably determined by Lessor,
covering Lessee's and/or Manager's employees in job classifications normally
bonded under prudent hotel management practices in the United States or
otherwise required by law;
(iii) Workers' compensation insurance
(or its substantial equivalent as a non-subscribing employer in the State of
Texas) to the extent necessary to protect Lessee against Lessee's and/or
Manager's workers' compensation claims to the extent required by applicable
state laws;
(iv) Comprehensive form vehicle
liability insurance for owned, non-owned, and hired vehicles, in the amount of
$5,000,000;
(v) Garage keeper's legal liability
insurance covering both comprehensive and collision-type losses with a limit of
liability of $1,000,000 for any one occurrence;
(vi) Innkeeper's legal liability
insurance covering property of guests while on the Leased Property for which
Lessor is legally responsible with a limit of not less than $2,000 per guest
and $50,000 in any one occurrence or $100,000 annual aggregate;
(vii) Safe deposit box legal liability
insurance covering property of guests while in a safe deposit box on the Leased
Property for which Lessor is legally responsible with a limit of not less than
$5,000 in any one occurrence;
(viii) Insurance covering such other
hazards (such as plate glass or other common risks) and in such amounts as may
be customary for comparable properties in the area of the Leased Property and
is available from insurance companies, insurance pools or other appropriate
companies authorized to do business in the State at rates which are
economically practicable in relation to the risks covered as may be reasonably
determined by Lessor; and
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(ix) Business interruption insurance on
the "SPECIAL FORM" in the amount of twelve (12) months of gross profit, for the
benefit of Lessee.
13.2 Replacement Cost. The term "full replacement cost" as used herein
shall mean the actual replacement cost of the Leased Property requiring
replacement from time to time including an increased cost of construction
endorsement, if available, and the cost of debris removal. In the event either
party believes that full replacement cost (the then-replacement cost less such
exclusions) has increased or decreased at any time during the Term, it shall
have the right to have such full replacement cost re-determined.
13.3 Waiver of Claims and Subrogation. Each of Lessor and Lessee do
hereby remise, release and discharge the other party and any officer, agent,
employee, representative or contractor of such party, of and from any liability
whatsoever hereafter arising from loss, damage or injury caused by fire or
other casualty for which insurance (permitting waiver of liability and
containing a waiver of subrogation) shall be carried as required by this Lease
by the injured party at the time of such loss, damage or injury to the extent
of any recovery by the injured party under such insurance. All insurance
policies carried by Lessor or Lessee (except fidelity bonds, blanket crime
insurance or workers compensation where contrary to public policy or law),
shall expressly waive any right of subrogation on the part of the insurer
against the other party. The parties hereto agree that their policies will
include such waiver clause or endorsement so long as the same are obtainable
without extra cost, and in the event of such an extra charge the other party,
at its election, may pay the same, but shall not be obligated to do so.
13.4 Form Satisfactory, etc. All of the policies of insurance referred
to in this Article 13 shall be written in a form, with deductibles and
exclusions from coverage and by insurance companies reasonably satisfactory to
Lessor. Subject to the right to reimbursement or credit for coverages specified
in Subsection 13.1(a) and any other "casualty coverages" required by Lessor,
Lessee shall pay all of the premiums therefor, and deliver such policies or
certificates thereof to Lessor prior to their effective date (and, with respect
to any renewal policy, thirty (30) days prior to the expiration of the existing
policy), and in the event of the failure of Lessee either to effect such
insurance as herein called for or to pay the premiums therefor, or to deliver
such policies or certificates thereof to Lessor at the times required, Lessor
shall be entitled, but shall have no obligation, to effect such insurance and
pay the premiums therefor, and Lessee shall reimburse Lessor for any premium or
premiums paid by Lessor for the coverages required under Subsection 13.1(b)
upon written demand therefor, and Lessee's failure to repay the same within
thirty (30) days after Notice of such failure from Lessor shall constitute an
Event of Default within the meaning of Subsection 16.1(c). Each insurer
mentioned in this Article 13 shall agree, by endorsement to the policy or
policies issued by it, or by independent instrument furnished to Lessor, that
it will give to Lessor thirty (30) days' written notice before the policy or
policies in question shall be materially altered, allowed to expire or
canceled.
13.5 Increase in Limits. If either Lessor or Lessee at any time deems
the limits of the personal injury or property damage under the comprehensive
public liability insurance
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then carried to be either excessive or insufficient, Lessor or Lessee shall
endeavor in good faith to agree on the proper and reasonable limits for such
insurance to be carried and such insurance shall thereafter be carried with the
limits thus agreed on until further change pursuant to the provisions of this
Section.
13.6 Blanket Policy. Notwithstanding anything to the contrary
contained in this Article 13, Lessor (or Lessee at Lessor's request) may bring
the insurance provided for herein within the coverage of a so-called blanket
policy or policies of insurance carried and maintained by Lessor or Lessee, as
the case may be; provided, however, that the coverage afforded to Lessor and
Lessee will not be reduced or diminished or otherwise be different from that
which would exist under a separate policy meeting all other requirements of
this Lease by reason of the use of such blanket policy of insurance, and
provided further that the requirements of this Article 13 are otherwise
satisfied.
13.7 No Separate Insurance. Lessee shall not on Lessee's own
initiative or pursuant to the request or requirement of any third party, take
out separate insurance concurrent in form or contributing in the event of loss
with that required in this Article to be furnished, or increase the amount of
any then existing insurance by securing an additional policy or additional
policies, unless all parties having an insurable interest in the subject matter
of the insurance, including in all cases Lessor, are included therein as
additional insured, and the loss is payable under such additional separate
insurance in the same manner as losses are payable under this Lease. Lessee
shall immediately notify Lessor of any such separate insurance that Lessee has
obtained or of the increase of any of the amounts of the then existing
insurance.
13.8 Reports On Insurance Claims. Lessee shall promptly investigate
and make a complete and timely written report to the appropriate insurance
company as to all accidents, claims for damage relating to the ownership,
operation, and maintenance of the Hotel, any damage or destruction to the Hotel
and the estimated cost of repair thereof and shall prepare any and all reports
required by any insurance company in connection therewith. All such reports
shall be timely filed with the insurance company as required under the terms of
the insurance policy involved, and a final copy of such report shall be
furnished to Lessor. Lessee shall be authorized to adjust, settle, or
compromise any insurance loss, or to execute proofs of such loss, in the
aggregate amount of $25,000 or less, with respect to any single casualty or
other event.
ARTICLE 14
CASUALTY INSURANCE PROCEEDS; RECONSTRUCTION
14.1 Insurance Proceeds. Subject to the provisions of Section 14.6 and
the terms of any Mortgage or Ground Lease, all proceeds payable by reason of
any loss or damage to the Leased Property, or any portion thereof, and insured
under any policy of insurance required by Article 13 of this Lease shall be
paid to Lessor and held by Lessor in an interest-bearing account, shall be made
available, if applicable, for reconstruction or repair, as the case may be, of
any damage to or destruction of the Leased Property, or any portion thereof,
and, if applicable,
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shall be paid out by Lessor from time to time for the reasonable costs of such
reconstruction or repair upon satisfaction of reasonable terms and conditions
specified by Lessor. Any excess proceeds of insurance remaining after the
completion of the restoration or reconstruction of the Leased Property shall be
paid to Lessor. If neither Lessor nor Lessee is required or elects to repair
and restore as set forth herein, all insurance proceeds shall be retained by
Lessor. All salvage of any Leased Property resulting from any risk covered by
insurance shall belong to Lessor and all salvage of any of Lessee's Personal
Property resulting from any risk covered by insurance shall belong to Lessee.
14.2 Reconstruction in the Event of Damage or Destruction Covered by
Insurance.
(a) Except as provided in Section 14.6, if
during the Term the Leased Property is totally or partially destroyed by a risk
covered by the insurance described in Article 13, whether or not such damage or
destruction renders the Hotel Unsuitable for its Primary Intended Use, Lessee
shall be obligated, but only to the extent of any insurance proceeds made
available to Lessee and any other sums advanced by Lessor pursuant to the next
sentence, to restore the Hotel to substantially the same condition as existed
immediately before the damage or destruction and otherwise in accordance with
the terms of the Lease and a Construction Services Agreement to be entered into
in connection herewith. If the insurance proceeds are not adequate to restore
the Hotel to that condition, each of Lessor (if Lessor has fulfilled its
obligations under Subsection 13.1(a)) and Lessee shall have the right to
terminate this Lease, without in any way affecting any of the Other Leases in
effect, by giving Notice to the other and all insurance proceeds shall be
retained by Lessor; provided, however that, if such termination is by Lessee,
Lessor shall have the right, in its sole discretion, to nullify the termination
and keep this Lease in full force by providing, within thirty (30) days after
Lessee's Notice of termination, a Notice to Lessee of Lessor's unconditional,
legally binding obligation to be responsible for all restoration costs in
excess of the insurance proceeds.
If this Lease is terminated by either party as aforesaid (and such
termination is not nullified by Lessor) and if the inadequacy of insurance
proceeds was the result of Lessor's failure to maintain the proper insurance
coverages as required pursuant to Article 13, Lessor shall, at its option,
within one hundred eighty (180) days after such termination, either (i) commit
in writing to pay (and thereafter pay) to Lessee the Termination Fee in
accordance with the terms of the Master Hotel Agreement or (ii) offer to lease
to Lessee one or more hotel facilities reasonably acceptable to Lessee pursuant
to one or more Other Leases that would create for Lessee leasehold estates
having an aggregate fair market value no less than the fair market value of the
leasehold estate hereunder, as of the date of termination. If this Lease is not
terminated and Lessee restores the Hotel, the insurance proceeds, and any other
sums made available by Lessor as aforesaid, shall be paid out by Lessor from
time to time for the reasonable costs of such restoration upon satisfaction of
reasonable terms and conditions, and any excess proceeds remaining after such
restoration shall be retained by Lessor.
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(b) Notwithstanding the provisions of
Subsection 14.2(a) above, if Lessee reasonably estimates that it cannot within
a reasonable time obtain all necessary government approvals, including building
permits, licenses and conditional use permits, after diligent efforts to do so,
to perform all required repair and restoration work (and complete such work not
later than the earlier of (i) two years prior to the end of the final extension
Term or of the initial Term, if there are no extension Terms, and (ii) one year
after the casualty) and to operate the Hotel for its Primary Intended Use in
substantially the same manner as that existing immediately prior to such damage
or destruction and otherwise in accordance with the terms of the Lease, either
Lessor or Lessee may terminate this Lease by providing Notice to the other
party, without in any way affecting any of the Other Leases then in effect
between Lessor and Lessee.
14.3 Reconstruction in the Event of Damage or Destruction Not Covered
by Insurance. Except as provided in Section 14.6, if during the Term the Hotel
is totally or materially destroyed by a risk not covered by the insurance
described in Article 13, whether or not such damage or destruction renders the
Hotel Unsuitable for its Primary Intended Use, the provisions of Section 14.2
applicable to casualties for which insurance proceeds are inadequate shall
govern.
14.4 Lessee's Personal Property and Business Interruption Insurance.
All insurance proceeds payable by reason of any loss of or damage to any of
Lessee's Personal Property and the business interruption insurance maintained
for the benefit of Lessee shall be paid to Lessee; provided, however, no such
payments shall diminish or reduce the insurance payments otherwise payable to
or for the benefit of Lessor hereunder.
14.5 Abatement of Rent Upon Casualty. Any damage or destruction due to
casualty notwithstanding, this Lease shall remain in full force and effect, but
Lessee's obligation to make rental payments and to pay all other charges
required by this Lease shall be equitably abated during any period required for
the applicable repair and restoration to the extent the Hotel or any part
thereof is Unsuitable for its Primary Intended Use. If Lessor and Lessee are
unable to agree upon the amount of such abatement within thirty (30) days after
such damage or destruction, the matter may be submitted by either party to
arbitration under Section 22.2 hereof for resolution.
14.6 Damage Near End of Term. Notwithstanding any provisions of
Section 14.2 or 14.3 appearing to the contrary, if damage to or destruction of
the Hotel rendering it Unsuitable for its Primary Intended Use occurs (i)
during the last twenty-four (24) months of the initial Term or any extension
Term, then Lessee shall have the right to terminate this Lease by giving Notice
to Lessor, within thirty (30) days after the date of damage or destruction, and
(ii) during the last twenty-four (24) months of the final extension Term (or of
the initial Term, if there are no extension Terms), then Lessor shall have the
right to terminate this Lease by giving Notice to Lessee, within thirty (30)
days after the date of damage or destruction. In the event of a
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termination under this Section 14.6, all accrued unabated Rent shall be paid
immediately, and this Lease shall automatically terminate five (5) days after
the date of such Notice.
14.7 Waiver. Unless Lessor is in material default hereunder, Lessee
hereby waives any statutory rights of termination that may arise by reason of
any damage or destruction of the Hotel that Lessor is obligated to restore or
may restore under any of the provisions of this Lease.
ARTICLE 15
CONDEMNATION; AWARD ALLOCATION
15.1 Definitions.
(a) "AWARD(S)" means all compensation, sums
or anything of value awarded, paid or received on a total or partial
Condemnation.
(b) "CONDEMNOR" means any public or
quasi-public authority, or private corporation or individual, having the power
of Condemnation.
(c) "CONDEMNATION" means a Taking resulting
from (1) the exercise of any governmental power, whether by legal proceedings
or otherwise, by a Condemnor, and (2) a voluntary sale or transfer by Lessor to
any Condemnor, either under threat of condemnation or while legal proceedings
for condemnation are pending.
(d) "DATE OF TAKING" means the date the
Condemnor has the right to possession of the property being condemned.
15.2 Parties' Rights and Obligations. If during the Term there is any
Condemnation of all or any part of the Leased Property or any interest in this
Lease, the rights and obligations of Lessor and Lessee shall be determined by
this Article 15 subject to the terms of any Mortgage or Ground Lease.
15.3 Total Taking. If title to the fee (or leasehold under a Ground
Lease) of the whole of the Leased Property is condemned by any Condemnor, this
Lease shall cease and terminate as of the Date of Taking by the Condemnor,
without in any way affecting any of the Other Leases then in effect between
Lessor and Lessee. If title to the fee (or leasehold under a Ground Lease) of
less than the whole of the Leased Property is so taken or condemned, which
nevertheless renders the Leased Property Unsuitable or Uneconomic for its
Primary Intended Use, Lessee and Lessor shall each have the option, by notice
to the other, at any time prior to the Date of Taking, to terminate this Lease
as of the Date of Taking. Upon such date, if such Notice has been given, this
Lease shall thereupon cease and terminate. All Base Rent, Percentage Rent and
Additional Charges paid or payable by Lessee hereunder shall be apportioned as
of the Date of Taking, and Lessee shall promptly pay Lessor such amounts.
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15.4 Partial Taking. If title to less than the whole of the Leased
Property is condemned, and the Leased Property is not Unsuitable for its
Primary Intended Use, and not Uneconomic for its Primary Intended Use, or if
Lessee or Lessor is entitled but neither elects to terminate this Lease as
provided in Section 15.3, Lessee at its cost and in accordance with the terms
of this Lease and any Construction Services Agreement entered into in
connection herewith, shall with all reasonable dispatch, but only to the extent
of any Award funds made available to Lessee and any other sums advanced by
Lessor pursuant to this Section, restore the untaken portion of any
Improvements so that such Improvements constitute a complete architectural unit
of the same general character and condition (as nearly as may be possible under
the circumstances) as the Improvements existing immediately prior to the
Condemnation. Lessor shall in good faith seek a fair and equitable allocation
of any Award among restoration, taken Improvements and other elements. Lessor
will contribute to the cost of restoration that part of its Award specifically
allocated to such restoration, together with severance and other damages
awarded for the Improvements; provided, however, the amount of such
contribution will not exceed such cost. If the Awards are not adequate to
restore the Hotel to that condition, each of Lessor and Lessee shall have the
right to terminate this Lease, without in any way affecting any of the Other
Leases in effect, by giving Notice to the other; provided, however that, if
such termination is by Lessee, Lessor shall have the right, in its sole
discretion, to nullify the termination and keep this Lease in full force by
providing, within thirty (30) days after Lessee's Notice of termination, a
Notice to Lessee of Lessor's unconditional, legally binding obligation to be
responsible for all restoration costs in excess of the Awards. If this Lease is
not terminated and Lessee restores the Hotel, the Award funds, and any other
sums made available by Lessor as aforesaid, shall (subject to the requirements
of any ground or building lease or Mortgage) be held by Lessor and paid out by
Lessor from time to time for the reasonable costs of such restoration upon
satisfaction of reasonable terms and conditions, and any excess Award funds
remaining after such restoration, and reimbursement of Lessor for any sums
advanced by Lessor hereunder, shall be retained by Lessor. In the event of a
partial Taking that does not result in a termination of this Lease, the Base
Rent shall be abated in the manner and to the extent that is fair, just and
equitable to both Lessee and Lessor, taking into consideration, among other
relevant factors, the number of usable rooms, the amount of square footage, the
revenues affected by such partial Taking and changes in the Hotel's projected
net operating income following such partial Taking. If Lessor and Lessee are
unable to agree upon the amount of such abatement within thirty (30) days after
such partial Taking, the matter may be submitted by either party to arbitration
under Section 22.2 hereof for resolution.
15.5 Allocation of Award. The total Award made in connection with a
Total Taking, or a partial Taking that results in a termination of this Lease
with respect to the Leased Property, or for loss of Rent, or for Lessor's loss
of business beyond the Term, shall be solely the property of and payable to
Lessor. Any Award made for loss of Lessee's business during the remaining Term,
if any, or for the taking of Lessee's Personal Property or for removal and
relocation expenses of Lessee in any such proceedings shall be the sole
property of and payable to Lessee. Any other Award not separately allocated to
Lessor or Lessee shall be
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equitably apportioned between Lessor and Lessee in proportion to the then fair
market value of the leasehold estate of Lessee hereunder and the then fair
market value of the Leased Property.
15.6 Temporary Taking. If the whole or any part of the Leased Property
(other than the fee or leasehold under a Ground Lease) or of Lessee's interest
under this Lease is condemned by any Condemnor for its temporary use or
occupancy (which shall mean a period not to exceed the lesser of twelve (12)
months or the remainder of the Term), this Lease shall not terminate by reason
thereof, and Lessee shall continue to pay, in the manner and at the terms
herein specified, the full amounts of Base Rent and Additional Charges. In
addition, the entire amount of any Award made for such Condemnation allocable
to the Term of this Lease, whether paid by way of damages, rent or otherwise,
shall be paid to Lessee and, except for any portion thereof utilized for
restoration, shall be deemed to be Room Revenues for the purpose of calculating
the Percentage Rent payable hereunder during such temporary taking. Except only
to the extent that Lessee may be prevented from so doing pursuant to the terms
of the order of the Condemnor, Lessee shall continue to perform and observe all
of the other terms, covenants, conditions and obligations hereof on the part of
Lessee to be performed and observed, as though such Condemnation had not
occurred. Lessee covenants that upon the termination of any such period of
temporary use or occupancy it will, at its sole cost and expense (subject to
Lessor's contribution as set forth below), restore the Leased Property as
nearly as may be reasonably possible to the condition in which the same was
immediately prior to such Condemnation, unless (a) such period of temporary use
or occupancy extends beyond the expiration of the Term, in which case Lessee
shall not be required to make such restoration, or (b) the condemnation award
is inadequate to cover the costs of such restoration, in which case the
provisions of Section 15.4 applicable to inadequate awards shall govern. If
restoration is required in connection with such temporary taking and the
condemnation award (together with any other sums Lessor elects, in its sole
discretion, to advance) is adequate to pay the costs thereof, the provisions of
Section 15.4 shall govern the disbursement of the awards (and other sums, if
applicable) and the disposition of any awards in excess of restoration costs.
If restoration is required hereunder, Lessor shall contribute to the cost of
such restoration that portion of its entire Award that is specifically
allocated to such restoration in the judgment or order of the court, if any,
and Lessee shall fund the balance of such costs in advance of restoration in a
manner reasonably satisfactory to Lessor.
ARTICLE 16
DEFAULT BY LESSEE; LESSOR'S REMEDIES
16.1 Events of Default. If any one or more of the following events
(individually, an "EVENT OF DEFAULT") occurs:
(a) if Lessee fails to make any payment of
Base Rent, estimated monthly Percentage Rent or quarterly Percentage Rent, or
any Additional Charges, when the same becomes due and payable and, if not more
than two failures to make such payment have occurred under all the Percentage
Leases within the prior twelve (12) month period, such
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condition continues for a period of two (2) Business Days after receipt by
Lessee of Notice from Lessor thereof; or
(b) if Lessee fails to observe or perform
any term, covenant or condition of this Lease, other than the payment of Rent,
and such failure is not cured by Lessee within a period of 30 days after
receipt by Lessee of Notice thereof from Lessor, unless such failure cannot
with due diligence be cured within a period of thirty (30) days, in which case
it shall not be deemed an Event of Default if Lessee proceeds promptly and with
due diligence to cure the failure and diligently completes the curing thereof
provided, however, in no event shall such cure period extend beyond one hundred
fifty (150) days after such Notice; or
(c) if Lessee shall file a petition in
bankruptcy or reorganization for an arrangement pursuant to any federal or
state bankruptcy law or any similar federal or state law, or shall be
adjudicated a bankrupt or shall make an assignment for the benefit of creditors
or shall admit in writing its inability to pay its debts generally as they
become due, or if a petition or answer proposing the adjudication of Lessee as
a bankrupt or its reorganization pursuant to any federal or state bankruptcy
law or any similar federal or state law shall be filed in any court and Lessee
shall be adjudicated a bankrupt and such adjudication shall not be vacated or
set aside or stayed within sixty (60) days after the entry of an order in
respect thereof, or if a receiver of Lessee or of the whole or substantially
all of the assets of Lessee shall be appointed in any proceeding brought by
Lessee or if any such receiver, trustee or liquidator shall be appointed in any
proceeding brought against Lessee and shall not be vacated or set aside or
stayed within sixty (60) days after such appointment; or
(d) if Lessee is liquidated or dissolved,
or begins proceedings toward such liquidation or dissolution, or, in any
manner, permits the sale or divestiture of substantially all of its assets,
except as permitted under the Master Hotel Agreement; or
(e) except as permitted under the Master
Hotel Agreement, if the estate or interest of Lessee in the Leased Property or
any part thereof is (contrary to the terms of this Lease) voluntarily or
involuntarily transferred, assigned, conveyed, levied upon or attached in any
proceeding (unless Lessee is contesting such lien or attachment in good faith
in accordance with Article 12 hereof); or
(f) if, except (A) as a result of
Unavoidable Occurrence, damage, destruction or a partial or complete
Condemnation or otherwise as contemplated by this Lease, or (B) as authorized
by Lessor in connection with a PIP, Contemplated Renovations or other
Repositioning approved in writing by Lessor, Lessee voluntarily ceases
operations on the Leased Property for a period in excess of thirty (30) days;
or
(g) the Hotel is operated under a Franchise
Agreement and if: (A) an event of default has been declared by the Franchisor
under the Franchise Agreement with respect to the Hotel on the Leased Premises
as a result of any action or failure to act by Lessee or
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any Person with whom Lessee contracts for management services at the Hotel,
other than as a result of Lessor's default hereunder or hereunder (including,
without limitation, a failure to complete a Capital Improvement required by the
Franchisor resulting from Lessor's failure to fund the Capital Expenditure
therefor pursuant to Subsection 9.1(b), or a failure to pay Real Estate Taxes,
Personal Property Taxes or Capital Impositions) or Lessor's gross negligence or
wilful misconduct, and (B) Lessee has failed, within thirty (30) days
thereafter (or any earlier deadline for termination set forth in the Franchise
Agreement), to cure such default by either (1) curing the underlying default
under the Franchise Agreement and paying all costs and expenses associated
therewith, or (2) obtaining at Lessee's sole cost and expense a substitute
franchise or license agreement reasonably acceptable to Lessor with a
substitute Franchisor reasonably acceptable to Lessor, on terms and conditions
reasonably acceptable to Lessor; provided, however, that if Lessee is in good
faith disputing an assertion of default by the Franchisor or is proceeding
diligently to cure such default, the 30-day period shall be extended for such
period of time as Lessee continues to dispute such default in good faith or
diligently proceeds to cure such default, so long as there is no period during
which the Hotel is not operated pursuant to a Franchise Agreement approved by
Lessor (a "FRANCHISE EVENT OF DEFAULT"); or
(h) if there occurs a Default by Lessee, as
that term is defined in the Master Agreement;
then, and in any such event, Lessor may
exercise one or more remedies available to it herein or at law or in equity,
including but not limited to its right to terminate this Lease by giving Lessee
not less than ten (10) days' Notice of such termination.
If a Proceeding is commenced with respect
to any alleged default under this Lease, the prevailing party in such
Proceeding shall receive, in addition to its damages incurred, such sum as the
court or arbitrator shall determine as its reasonable attorneys' fees, and all
costs and expenses incurred in connection therewith.
No Event of Default (other than a failure
to make a payment of Rent) shall be deemed to exist under clause (d) during any
time the curing thereof is prevented by an Unavoidable Delay, provided that
upon the cessation of such Unavoidable Delay, Lessee remedies such default or
Event of Default without further delay. No Event of Default shall be deemed to
exist under clause (a) during any period of time that the payment of Rent is
delayed or rendered impossible solely by the Year 2000 Problem, provided that
Lessee diligently seeks alternative methods of payment and pays such Rent as
soon as reasonably possible.
16.2 Surrender. If an Event of Default occurs (and the event giving
rise to such Event of Default has not been cured within the curative period
relating thereto as set forth in Section 16.1) and is continuing, whether or
not this Lease has been terminated pursuant to Section 16.1, Lessee shall, if
requested by Lessor so to do, immediately surrender to Lessor the Leased
Property including, without limitation, any and all books, records, files,
licenses, permits and keys relating thereto, and quit the same and Lessor may
enter upon and repossess the Leased
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Property by self-help repossession, summary proceedings, ejectment or
otherwise, and may remove Lessee and all other persons and any and all personal
property from the Leased Property, subject to rights of any hotel guests and to
any requirement of law. Lessee hereby waives any and all requirements of
applicable laws for service of notice to re-enter the Leased Property. Except
as otherwise required by applicable law, Lessor shall be under no obligation
to, but may if it so chooses, relet the Leased Property or otherwise mitigate
Lessor's damages.
16.3 Damages. Except as otherwise required by applicable law, neither
(a) the termination of this Lease, (b) the repossession of the Leased Property,
(c) the failure of Lessor to relet the Leased Property, nor (d) the reletting
of all or any portion thereof, shall relieve Lessee of its liability and
obligations hereunder, all of which shall survive any such termination,
repossession or reletting. In the event of any such termination, Lessee shall
forthwith pay to Lessor all Rent due and payable with respect to the Leased
Property to and including the date of such termination. In addition, upon the
occurrence of an Event of Default, Lessee shall forthwith pay to Lessor, at
Lessor's option, as and for agreed current damages for Lessee's default,
either:
(1) Without termination of Lessee's right
to possession of the Leased Property, each installment of Rent and other sums
payable by Lessee to Lessor under this Lease as the same becomes due and
payable, which Rent and other sums shall bear interest at the Overdue Rate, and
Lessor may enforce, by action or otherwise, any other term or covenant of this
Lease; or
(2) the sum of:
(A) the unpaid Rent which
had been earned at the time of
termination, repossession or
reletting, and
(B) the worth at the time
of termination, repossession or
reletting of the amount by which
the unpaid Rent for the balance of
the Term after the time of
termination, repossession or
reletting, exceeds the amount of
rentals that Lessee proves Lessor
reasonably can be expected to
receive after the time of
termination, repossession and
reletting, and
(C) any other amount
necessary to compensate Lessor for
all the detriment proximately
caused by Lessee's failure to
perform its obligations under this
Lease or which in the ordinary
course of things, would be likely
to result therefrom, including
without limitation, if such
termination results in a default
under or termination of the
Franchise Agreement, Lessee shall
be solely responsible for all
damages and termination payments
under the terms of the
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Franchise Agreement, application
fees for a new franchise license,
increased royalty fees and other
costs arising out of such
termination or out of the resulting
need to apply for and enter into a
substitute franchise license
agreement for the Leased Property.
The worth at the time of termination, repossession or reletting of the amount
referred to in subparagraph (B) is computed by discounting such amount to then
present value at a rate equal to the Base Rate. Rent for the purposes of this
Section 16.3 shall be a sum equal to (i) the average of the annual amounts of
the Percentage Rent for the three (3) Fiscal Years immediately preceding the
Fiscal Year in which the termination, re-entry or repossession takes place, or
(ii) if three (3) Fiscal Years shall not have elapsed, the average of the
Percentage Rent during the preceding Fiscal Year(s) during which this Lease was
in effect, or (iii) if one Fiscal Year has not elapsed, the amount derived by
annualizing the Percentage Rent from the Commencement Date.
16.4 Waiver. If this Lease is terminated pursuant to Section 16.1,
Lessee waives, to the extent permitted by applicable law, (a) any right to a
trial by jury in the event of summary proceedings to enforce the remedies set
forth in this Article 16, and (b) the benefit of any laws now or hereafter in
force exempting property from liability for rent or for debt and Lessor waives
any right to "pierce the corporate veil" of Lessee or otherwise bring any claim
against any Affiliate of Lessee not obligated hereunder or on a guaranty
hereof, other than to the extent funds shall have been inappropriately paid to
any Affiliate of Lessee following a default resulting in an Event of Default.
16.5 Application of Funds. Any payments received by Lessor under any
of the provisions of this Lease during the existence or continuance of any
Event of Default shall be applied to Lessee's obligations in the order that
Lessor may determine or as may be prescribed by the laws of the State.
16.6 Lessor's Right to Cure Lessee's Default. If Lessee fails to make
any payment or to perform any act required to be made or performed under this
Lease including, without limitation, Lessee's failure to comply with the terms
of any Franchise Agreement, and fails to cure the same within the relevant time
periods provided in Section 16.1, Lessor, without waiving or releasing any
obligation of Lessee, and without waiving or releasing any obligation or
default, may (but shall be under no obligation to) at any time thereafter make
such payment or perform such act for the account and at the expense of Lessee,
and may, to the extent permitted by law, enter upon the Leased Property for
such purpose and, subject to Section 16.4, take all such action thereon as, in
Lessor's opinion, may be necessary or appropriate therefor. No such entry shall
be deemed an eviction of Lessee. All sums so paid by Lessor and all costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses, in each case to the extent permitted by law) so incurred, together
with a late charge thereon (to the extent permitted by law) at the Overdue Rate
from the date on which such sums or expenses are paid or incurred by Lessor,
shall be paid by Lessee to Lessor on demand. The obligations of Lessee and
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rights of Lessor contained in this Article shall survive the expiration or
earlier termination of this Lease.
ARTICLE 17
DEFAULT BY LESSOR; LESSEE'S REMEDIES
17.1 Breach by Lessor.
(a) It shall be a breach of this Lease if
Lessor fails to observe or perform any term, covenant or condition of this
Lease on its part to be performed and such failure continues for a period of
thirty (30) days after Notice thereof from Lessee, unless such failure cannot
with due diligence be cured within a period of thirty (30) days, in which case
such failure shall not be deemed a breach if Lessor proceeds within such 30-day
period, with due diligence, to cure the failure and thereafter diligently
completes the curing thereof within one hundred eighty (180) days after such
Notice, or such longer period as is required to complete any Capital
Improvements necessary to effect such cure. The time within which Lessor shall
be obligated to cure any such failure also shall be subject to extension of
time due to the occurrence of any Unavoidable Delay. If Lessor does not cure
any such failure within the applicable time period as aforesaid, Lessee may
declare the existence of a "LESSOR DEFAULT" by a second Notice to Lessor.
Thereafter, Lessee may forthwith cure the same in accordance with the
provisions of Section 24.2, subject to the provisions of the following
paragraph and exercise any other rights and remedies that Lessee may have as a
result of such breach; provided, however, Lessee shall have no right to
terminate this Lease for any Lessor Default and no right, for any such Lessor
Default, to offset or counterclaim against any Rent or other charges due
hereunder except as expressly provided herein.
(b) If Lessor shall in good faith dispute
the occurrence of any Lessor Default and Lessor, before the expiration of the
applicable cure period, shall give Notice thereof to Lessee, setting forth, in
reasonable detail, the basis therefor, no Lessor Default shall be deemed to
have occurred and Lessor shall have no obligation with respect thereto until
final adverse determination thereof, whether through arbitration or otherwise;
provided, however, that in the event of any such adverse determination, Lessor
shall pay to Lessee interest on any disputed funds at the Base Rate, from the
date demand for such funds was made by Lessee until the date of final adverse
determination and, thereafter, at the Overdue Rate until paid. If Lessee and
Lessor shall fail, in good faith, to resolve any such dispute within ten (10)
days after Lessor's Notice of dispute, either may submit the matter for
determination by arbitration, but only if such matter is required to be
submitted to arbitration pursuant to Article 22, or otherwise by a court of
competent jurisdiction.
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ARTICLE 18
INDEMNIFICATION
18.1 Indemnification.
(a) Notwithstanding the existence of any
insurance, and without regard to the policy limits of any such insurance or
self-insurance, but subject to Article 8 and Section 13.3, Lessee will protect,
indemnify, hold harmless and defend Lessor Indemnified Parties from and against
all liabilities, losses, obligations, claims, damages, penalties, causes of
action, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses), to the extent (but excluding those for which
Lessor agrees to indemnify Lessee under Subsection 22.1(b) below) resulting
from, imposed upon or incurred by or asserted against Lessor Indemnified
Parties by reason of: (a) any accident, injury to or death of persons or loss
of or damage to property occurring on or about the Hotel, the Leased Property
or adjoining roadways, curbs or sidewalks during the Term, including without
limitation any claims under liquor liability, "dram shop" or similar laws, (b)
any use, misuse, non-use, condition, management, maintenance or repair during
the Term by Lessee or any of its agents, employees or invitees of the Hotel,
the Leased Property or Lessee's Personal Property or any Proceeding or claim by
governmental entities or other third parties to which a Lessor Indemnified
Party is made a party or participant related to such use, misuse, non-use,
condition, management, maintenance, or repair thereof by Lessee or any of its
agents, employees, independent contractors or invitees (including without
limitation matters arising out of any negligent acts or failures to act or
wilful misconduct of Lessee, Manager or subtenants of Lessee or Manager, and
their respective employees, agents or independent contractors), including any
failure of Lessee or any of its agents, employees, independent contractors or
invitees to perform any obligations under this Lease or imposed by applicable
law (other than requirements with respect to Capital Improvements for which
Lessor is responsible under this Lease and other obligations of Lessor
hereunder), (c) any Impositions that are the obligations of Lessee pursuant to
the applicable provisions of this Lease, (d) any failure on the part of Lessee
to perform or comply with any of the terms of this Lease, and (e) the
non-performance during the Term of any of the terms and provisions of any and
all existing and future subleases of the Leased Property to be performed by the
landlord thereunder.
(b) Notwithstanding the existence of any
insurance, and without regard to the policy limits of any such insurance or
self-insurance, but subject to Article 8 and Section 13.3, Lessor shall
indemnify, save harmless and defend Lessee Indemnified Parties from and against
all liabilities, obligations, claims, damages, penalties, causes of action,
costs and expenses (including, without limitation, reasonable attorneys' fees
and expenses), to the extent (but excluding those for which Lessee agrees to
indemnify Lessor under Subsection 22.1(a) above) resulting from, imposed upon
or incurred by or asserted against Lessee Indemnified Parties as a result of
(a) the gross negligence or willful misconduct of Lessor arising in connection
with this Lease, (b) any failure on the part of Lessor to perform or comply
with any of the terms of this Lease, (c) any condition existing at the Leased
Property on the Commencement Date (unless such condition was not remedied or
was aggravated by the gross negligence or wilful misconduct of
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Lessee, Manager or subtenants of Lessee or Manager, and their respective
employees, agents or independent contractors, or (d) the operation of the Hotel
(other than by Lessee or its Manager) subsequent to the expiration or earlier
termination of this Lease (unless otherwise provided in Article 16).
(c) Any amounts that become payable by an
Indemnifying Party under this Section shall be paid within ten (10) days after
liability therefor on the part of the Indemnifying Party is determined by
litigation or otherwise, and if not timely paid, shall bear a late charge (to
the extent permitted by law) at the Overdue Rate from the date of such
determination to the date of payment. Nothing herein shall be construed as
indemnifying a Lessor Indemnified Party or Lessee Indemnified Party against its
own grossly negligent acts or omissions or willful misconduct.
Lessee's or Lessor's liability for a breach of the provisions of this
Article shall survive any termination of this Lease.
18.2 Indemnification Procedure. If any Proceeding is brought against
any Indemnified Party in respect of any claim or liability with respect to
which such Indemnified Party may claim indemnification under this Lease, the
Indemnifying Party, upon request, shall at its sole expense resist and defend
such Proceeding, or cause the same to be resisted and defended by counsel
designated by the Indemnified Party and approved by the Indemnifying Party,
which approval shall not be unreasonably withheld; provided, however, that such
approval shall not be required in the case of defense by counsel designated by
any insurance company undertaking such defense pursuant to any applicable
policy of insurance. Each Indemnified Party shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel will be at the sole expense
of such Indemnified Party unless such counsel has been approved by the
Indemnifying Party, which approval shall not be unreasonably withheld. The
Indemnifying Party shall not be liable for any settlement of any such
Proceeding made without its consent, which shall not be unreasonably withheld,
but if settled with the consent of the Indemnifying Party, or if settled
without its consent (if its consent shall be unreasonably withheld), or if
there be a final, nonappealable judgment for an adversary party in any such
Proceeding, the Indemnifying Party shall indemnify and hold harmless the
Indemnified Parties from and against any liabilities incurred by such
Indemnified Parties by reason of such settlement or judgement.
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ARTICLE 19
REIT REQUIREMENTS AND RESTRICTIONS
19.1 REIT Requirements.
(a) Lessor has informed Lessee, and Lessee
understands, that, in order for FelCor to qualify as a REIT, the following
requirements (the "REIT REQUIREMENTS") must be satisfied:
(i) The average of the adjusted tax
bases of Lessor's personal property that is leased to Lessee under this Lease
at the beginning and end of a calendar year cannot exceed fifteen percent (15%)
of the average of the aggregate adjusted tax bases of all of Lessor's property
that is leased to Lessee under this Lease at the beginning and end of such
calendar year (the "PERSONAL PROPERTY LIMITATION").
(ii) Lessee cannot sublet the property
that is leased to it by Lessor, or enter into any similar arrangement, on any
basis such that the rental or other amounts paid by the sublessee thereunder
would be based, in whole or in part, on either (i) the net income or profits
derived by the business activities of the sublessee or (ii) any other formula
such that any portion of the rent paid by Lessee to Lessor would fail to
qualify as "rents from real property" within the meaning of Section 856(d) of
the Code.
(iii) Lessee cannot sublease the
property leased to it by Lessor to, or enter into any similar arrangement with,
any Person in which FelCor owns, directly or indirectly, a ten percent (10%) or
greater interest, within the meaning of Section 856(d)(2)(B) of the Code.
(iv) FelCor (or any Person that owns a
ten percent (10%) or greater interest in FelCor) cannot own, directly or
indirectly, a ten percent (10%) or greater interest in Lessee, within the
meaning of Section 856(d)(2)(B) of the Code.
(v) No Person can own, directly or
directly, capital stock of FelCor that exceeds the limitations set forth in
FelCor's Charter, as amended and restated.
(b) Lessee agrees, and agrees to use
reasonable efforts to cause its Affiliates, to use their reasonable best
efforts to permit the REIT Requirements to be satisfied. Lessee agrees, and
agrees to use reasonable efforts to cause its Affiliates, to cooperate in good
faith with FelCor and Lessor to ensure that the REIT Requirements are
satisfied, including but not limited to, providing FelCor with information
about the ownership of Lessee, and its Affiliates to the extent that such
information is reasonably available. Lessee agrees, and agrees to use
reasonable efforts to cause its Affiliates, upon request by FelCor and, where
appropriate, at FelCor's expense, to takereasonable action necessary to ensure
compliance with the REIT
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Requirements. Immediately after becoming aware that the REIT Requirements are
not, or will not be, satisfied, Lessee shall notify, or use reasonable efforts
to cause its Affiliates to notify, FelCor of such noncompliance.
(c) If Lessor reasonably anticipates that
the Personal Property Limitation will be exceeded with respect to the Leased
Property for any Lease Year, Lessor shall notify Lessee, and Lessee shall
purchase, either from Lessor or a third party, items of personal property
anticipated by Lessor to be in excess of the Personal Property Limitation
("EXCESS PERSONAL PROPERTY ITEMS") on such terms as may be negotiated in good
faith between Lessor and Lessee. If the Excess Personal Property Items are
purchased from Lessor, the purchase prices of such Excess Personal Property
Items shall be equal to the adjusted tax bases of such Excess Personal Property
Items in the hands of Lessor as of the closing of the purchase.
19.2 Lessee Officer and Employee Limitation. Anything contained in
this Lease to the contrary notwithstanding, none of the officers or employees
of Lessee (or any Person who furnishes or renders services to the tenants of
the Leased Property, or manages or operates the Leased Property) shall be
officers or employees of FelCor or Lessor (or any Person who serves as an
advisor of FelCor). In addition, if a Person serves as both (a) a director of
Lessee (or any Person who furnishes or renders services to the tenants of the
Leased Property, or manages or operates the Leased Property) and (b) a director
and officer (or employee) of FelCor (or any Person who serves as an advisor of
FelCor) that Person shall not receive any compensation for serving as a
director of Lessee (or any Person who furnishes or renders services to the
tenants of the Leased Property, or manages or operates the Leased Property).
Finally, if a Person serves as both (a) a director and officer of Lessee (or
any Person who furnishes or renders services to the tenants of the Leased
Property, or manages or operates the Leased Property), and (b) a director of
FelCor (or any Person who serves as an advisor to FelCor), that Person shall
not receive any compensation for serving as a director of FelCor (or any Person
who serves as an advisor to FelCor).
19.3 Management Agreement.
(a) Lessee agrees to obtain Lessor's prior
consent (which shall not be unreasonably withheld) to the terms of any
management or agency agreement relating to the management or operation of the
Hotel (a "MANAGEMENT AGREEMENT"), or any material amendment or modification
thereto, under which the payment of management fees is not expressly
subordinate to the payment of Rent hereunder on terms reasonably acceptable to
Lessor (provided, however, management fees and other amounts may be paid to the
Manager so long as no Event of Default has occurred hereunder). Lessee shall,
upon request, provide Lessor with a copy of any proposed Management Agreement.
Lessee also shall provide Lessor with copies of any and all amendments or
modifications of a Management Agreement which are entered into from time to
time. Without limiting the generality of the foregoing, any Management
Agreement shall provide that (i) upon termination of this Lease or termination
of Lessee's right to possession of the Leased Property for any reason other
than a termination by Lessor pursuant to Section 2.5,
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the Management Agreement may be terminated by Lessor without liability for any
payment due or to become due to the Hotel Manager, and (ii) except as provided
in the Master Hotel Agreement, any management fees payable to any Affiliate of
Lessee shall be expressly subordinated to the payments of Rent to Lessor
hereunder (provided, however, management fees and other amounts may be paid to
the Manager so long as no Event of Default has occurred hereunder), and no fees
or other amounts payable by Lessee to the Manager shall excuse Lessee from its
obligations to pay Rent and other amounts payable by Lessee to Lessor
hereunder. Lessor shall have the right to approve in advance any Manager who is
not an Affiliate of Lessee.
(b) In the event that Lessor in good faith
has concerns regarding the character, conduct or performance of the General
Manager of the Hotel, Lessee and Manager will consult with Lessor to discuss
Lessor's concerns and attempt to address any deficiencies in character, conduct
or performance.
19.4 Payments to Affiliates of Lessee. Notwithstanding anything to the
contrary contained in this Lease, Lessee shall make no payments to Affiliates
as Gross Operating Expenses unless expressly set forth in the Operating Budget
or an approved Capital Budget, allowed by the Master Hotel Agreement or
otherwise expressly agreed to in writing by Lessor, in either case, after full
written disclosure (including information regarding competitive pricing) by
Lessee to Lessor of the affiliation and any other related information
reasonably requested by Lessor.
ARTICLE 20
SUBLETTING AND ASSIGNMENT BY LESSEE
20.1 Subletting and Assignment. Except as otherwise expressly provided
herein, or in the Master Hotel Agreement, Lessee shall not sell, assign,
sublet, transfer, convey or hypothecate, whether by operation of law or
otherwise, its leasehold interest in the Leased Property, or any interest
therein, to any other Person without the prior written consent of Lessor not to
be unreasonably withheld. Subject to the provisions of Article 19 and Section
20.2 and any other express conditions or limitations set forth herein, Lessee
may (a) on the terms and conditions set forth below, assign this Lease or
sublet all or any part of the Leased Property to a Subsidiary of BHR, or (b)
unless a Major Sublease is involved, sublet any retail or Restaurant portion of
the Improvements in the normal course of the Primary Intended Use; provided
that any subletting shall not individually as to any one such subletting, or in
the aggregate be executed by Lessee for the sole or primary purpose of
diminishing in any material respect the actual or potential Percentage Rent
payable under this Lease. Lessor shall have the right to approve in advance any
Major Sublease. In the case of a subletting, the sublessee shall comply with
the provisions of Section 20.2, and in the case of an assignment, the assignee
shall assume in writing and agree to keep and perform all of the terms of this
Lease on the part of Lessee to be kept and performed and shall be, and become,
jointly and severally liable with Lessee for the performance thereof.
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Notwithstanding the above, Lessee may assign this Lease to an
Affiliate without the consent of Lessor; provided that any such assignee
assumes in writing and agrees to keep and perform all of the terms of this
Lease on the part of Lessee to be kept and performed and shall be and become
jointly and severally liable with Lessee for the performance thereof. In case
of either an assignment or subletting made during the Term, Lessee shall remain
primarily liable, as principal rather than as surety, for the prompt payment of
the Rent and for the performance and observance of all of the covenants and
conditions to be performed by Lessee hereunder unless, in the case of an
assignment, Lessor otherwise consents in writing (which consent will not be
unreasonably withheld but may be conditioned upon the assignee's or
transferee's satisfaction of criteria similar to those for a Qualified Assignee
as described in Section 21.1 hereof). An original counterpart of each such
sublease or assignment and assumption, duly executed by Lessee and such
sublessee or assignee, as the case may be, in form and substance satisfactory
to Lessor, shall be delivered promptly to Lessor.
20.2 Subordination and Attornment. Lessee shall insert in each
sublease executed during the Term that is permitted under Section 20.1
provisions to the effect that (a) such sublease is subject and subordinate to
all of the terms and provisions of this Lease and to the rights of Lessor
hereunder if Lessor executes a non-disturbance agreement with respect to such
sublease (otherwise, Lessee only need use reasonable efforts to obtain such
subordination agreement), (b) if this Lease terminates before the expiration of
such sublease, the sublessee thereunder will, at Lessor's option, attorn to
Lessor and waive any right the sublessee may have to terminate the sublease or
to surrender possession thereunder as a result of the termination of this
Lease, and (c) if the sublessee receives a Notice from Lessor or Lessor's
assignees, if any, stating that an uncured Event of Default exists under this
Lease, the sublessee shall thereafter be obligated to pay all rentals accruing
under said sublease directly to the party giving such Notice, or as such party
may direct. All rentals received from the sublessee by Lessor or Lessor's
assignees, if any, as the case may be, shall be credited against the amounts
owing by Lessee under this Lease.
ARTICLE 21
LEASEHOLD MORTGAGES
21.1 Lessee May Grant Leasehold Mortgages. Notwithstanding anything to
the contrary set forth in this Lease, Lessee shall have the right at any time
and from time to time during the term of this Lease, without Lessor's prior
consent but with the prior written consent of (i) any Holder under any existing
Mortgage or any ground lessor under any existing Ground Lease (if such consent
is required thereunder), or (ii) if Lessor has given Lessee written Notice of a
future Mortgage or Ground Lease, and consent is required thereunder (in which
case Lessor agrees to use reasonable efforts to obtain such consent), of any
Holder under any such future Mortgage or ground lessor under such future Ground
Lease, to encumber Lessee's leasehold interest hereunder and Lessee's Personal
Property with a mortgage, deed of trust, assignment or similar security
instrument (a "LEASEHOLD MORTGAGE") (that may include an
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assignment of revenues from the Leased Property, including an assignment of
rents from subleases of Lessee) to an institutional lender or other reputable
national mortgage lender as leasehold mortgagee ("LEASEHOLD MORTGAGEE"). No
Leasehold Mortgage shall create a lien upon the Lessor's fee title to, or other
interest in, the Leased Property.
ARTICLE 22
ARBITRATION AND DISPUTE RESOLUTION PROCEDURES
22.1 Arbitration. Except as set forth in Section 22.2, in each case
specified in this Lease in which it shall become necessary to resort to
arbitration, such arbitration shall be determined as provided in this Section
22.1. 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.
22.2 Alternative Arbitration. In each case specified in this Lease for
a matter to be submitted to arbitration pursuant to the provisions of this
Section 22.2, Lessor and Lessee will agree upon a nationally recognized
accounting firm with a hospitality division of which neither party nor their
Affiliates of Lessor is a significant client to serve as arbitrator of such
dispute within fifteen (15) days after written demand for arbitration is
received or sent by either party. In the event the parties fail to make such
designation within such fifteen (15) day period, Lessor shall be entitled to
designate any nationally recognized accounting firm with a hospitality division
of which Lessor or an Affiliate of Lessor is not a significant client to serve
as arbitrator of such dispute within fifteen (15) days after the parties fail
to timely make such designation. In the event Lessor fails to make such
designation within such fifteen (15) day period, Lessee shall be entitled to
designate any nationally recognized accounting firm with a hospitality division
of which Lessee or an Affiliate of Lessee is not a significant client to serve
as arbitrator of such dispute within fifteen (15) days after the parties fail
to timely make such designation. In the event no nationally recognized
accounting firm satisfying such qualifications is available and willing to
serve as arbitrator, the arbitration shall instead be administered as set forth
in Section 22.1.
22.3 Arbitration Procedures. In any arbitration commenced pursuant to
Sections 22.1 or 22.2, a single arbitrator shall be designated and shall
resolve the dispute. The arbitrator's decision shall be binding on all parties,
shall not be subject to further review or appeal except as otherwise allowed by
applicable law and may be filed in and enforced by a court of competent
jurisdiction.. Upon the failure of either party (the "non-complying party") to
comply with his decision, the arbitrator shall be empowered, at the request of
the other party, to order such compliance by the non-complying party and to
supervise or arrange for the supervision of the non-complying party's
obligation to comply with the arbitrator's decision, all at the expense of
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the non-complying party. To the maximum extent practicable, the arbitrator and
the parties, and the AAA if applicable, shall take any action necessary to
insure that the arbitration shall be concluded within ninety (90) days of the
filing of such dispute. The fees and expenses of the arbitrator shall be shared
equally by Lessor and Lessee except as otherwise specified above in this
Section 22.3. Unless otherwise agreed in writing by the parties or required by
the arbitrator or AAA, if applicable, arbitration proceedings hereunder shall
be conducted in the State. Notwithstanding formal rules of evidence, each party
may submit such evidence as each party deems appropriate to support its
position and the arbitrator shall have access to and right to examine all books
and records of Lessee and Lessor regarding the Hotel during the arbitration.
ARTICLE 23
APPRAISAL
23.1 Appraisers; Appraisal Procedure. If it becomes necessary to
determine the fair market value of the leasehold estate hereunder (or the fair
market value of any other property) for any purpose of this Lease, the party
required or permitted to give Notice of such required determination shall
include in the Notice the name of a person selected to act as appraiser on its
behalf. Within ten (10) days after Notice, Lessor (or Lessee, as the case may
be) shall by Notice to Lessee (or Lessor, as the case may be) appoint a second
person as appraiser on its behalf. The appraisers thus appointed, each of whom
must be a member of the American Institute of Real Estate Appraisers (or any
successor organization thereto) with at least five (5) years experience in the
State appraising property similar to the Leased Property, shall, within
forty-five (45) days after the date of the Notice appointing the first
appraiser, proceed to determine the fair market value of the leasehold estate
hereunder (or the fair market value of any other property, as the case may be)
as of the relevant date (giving effect to the impact, if any, of inflation from
the date of their decision to the relevant date); provided, however, that if
only one appraiser shall have been so appointed, then the determination of such
appraiser shall be final and binding upon the parties. If two (2) appraisers
are appointed and if the difference between the amounts so determined does not
exceed five percent (5%) of the lesser of such amounts, then the fair market
value of the leasehold estate hereunder (or fair market value of any other
property, as the case may be) shall be an amount equal to fifty percent (50%)
of the sum of the amounts so determined. If the difference between the amounts
so determined exceeds five percent (5%) of the lesser of such amounts, then
such two (2) appraisers shall have twenty (20) days to appoint a third
appraiser. If no such third appraiser shall have been appointed within such
twenty (20) days or within ninety (90) days of the original request for a
determination of fair market value, whichever is earlier, either Lessor or
Lessee may apply to any court having jurisdiction to have such appointment made
by such court. Any appraiser appointed by the original appraisers or by such
court shall be instructed to determine the fair market value of the leasehold
estate hereunder (or the fair market value of any other property) within
forty-five (45) days after appointment of such appraiser. The determination of
the appraiser which differs most in the terms of dollar amount from the
determinations of the other two (2) appraisers shall be excluded, and fifty
percent (50%) of the sum of the remaining two (2) determinations shall be final
and binding upon
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Lessor and Lessee as the fair market value of the leasehold estate hereunder
(or fair market value of any other property, as the case may be). This
provision for determining by appraisal shall be specifically enforceable to the
extent such remedy is available under applicable law, and any determination
hereunder shall be final and binding upon the parties except as otherwise
provided by applicable law. Lessor and Lessee shall each pay the fees and
expenses of the appraiser appointed by it and each shall pay one-half (1/2) of
the fees and expenses of the third appraiser and one-half (1/2) of all other
costs and expenses incurred in connection with each appraisal.
ARTICLE 24
LESSOR MORTGAGES
24.1 Lessor May Grant Liens.
(a) Without the consent of Lessee, Lessor
may, subject to the terms and conditions set forth below in this Section 24.1,
from time to time, directly or indirectly, create or otherwise cause to exist
any Mortgage or any lien, encumbrance or title retention agreement
("ENCUMBRANCE") upon the Leased Property, or any portion thereof or interest
therein, whether to secure any borrowing or other means of financing or
refinancing. Upon the request of Lessor or the holder of the Encumbrance (the
"HOLDER") , Lessee shall subordinate this Lease to the lien of a new Mortgage
on the Leased Property, on the condition that Lessor has obtained from the
proposed mortgagee a subordination, non-disturbance and attornment agreement in
form and substance reasonably satisfactory to Lessee and Holder (provided,
however, if the loan to value ratio of the fairly allocated indebtedness
secured by the Mortgage is 60% or less, then Lessor need only use reasonable
good faith efforts to obtain such agreement). Any such subordination,
non-disturbance and attornment agreement shall provide, among other things,
that, provided no default has occurred and is then continuing under this Lease,
Lessee (i) shall be entitled to receive all the Gross Revenues of the Hotel
subject to the terms of this Lease, and (ii) shall not be disturbed in its
possession of the Leased Property following a transfer by foreclosure or deed
in lieu of foreclosure under such Mortgage if Lessee attorns to the transferee
by foreclosure or deed in lieu of foreclosure.
(b) Lessee shall, upon the request of
Lessor or any existing or future Holder, (i) provide Holder with copies of all
licenses, permits, occupancy agreements, operating agreements, leases,
contracts and similar agreements reasonably requested in connection with any
existing or proposed financing of the Leased Property, and (ii) execute, or
cause the Manager or any relevant Affiliate to execute, such estoppel
agreements with respect to the Hotel's liquor license and any of the other
aforementioned agreements as Holder may reasonably request in connection with
any such financing, provided that no such estoppel agreement shall in any way
affect the Term or affect adversely in any material respect any rights of
Lessee under this Lease.
(c) No act or failure to act on the part of
Lessor which would entitle Lessee under the terms of this Lease, or by law, to
be relieved of any of Lessee's
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obligations hereunder (including, without limitation, its obligation to pay
Rent) or to terminate this Lease, shall result in a release or termination of
such obligations of Lessee or a termination of this Lease unless: (i) Lessee
shall have first given written notice of Lessor's act or failure to act to the
Holder, specifying the act or failure to act on the part of Lessor which would
give basis to Lessee's rights; and (ii) the Holder, after receipt of such
notice, shall have failed or refused to correct or cure the condition
complained of within a reasonable time thereafter (in no event less than thirty
(30) days nor more than sixty (60) days), which shall include a reasonable time
for such Holder to obtain possession of the Leased Property, if possession is
reasonably necessary for the Holder to correct or cure the condition, or to
foreclose such Mortgage, and if the Holder notifies the Lessee of its intention
to take possession of the Leased Property or to foreclose such Mortgage,
commences foreclosure actions within said sixty (60) days, unconditionally
commits to correct or cure such condition and diligently pursues such cure to
completion. If such Holder is prohibited by any process or injunction issued by
any court or by reason of any action by any court having jurisdiction or any
bankruptcy, debtor rehabilitation or insolvency proceedings involving Lessor
from commencing or prosecuting foreclosure or other appropriate proceedings in
the nature thereof, the times for commencing or prosecuting such foreclosure or
other proceedings shall be extended for the period of such prohibition,
provided, however, that the Lease shall continue to be in full force and effect
if Lessee is not constructively evicted from the Leased Property and is not
otherwise prevented from operating the Hotel as a result thereof.
(d) Lessee shall deliver to any Holder who
gives Lessee written notice of its status as a Holder, at such Holder's address
stated in the Holder's written notice or at such other address as the Holder
may designate by later written notice to Lessee, a duplicate copy of any and
all Notices regarding any default which Lessee may from time to time give or
serve upon Lessor pursuant to the provisions of this Lease. Copies of such
Notices given by Lessee to Lessor shall be delivered to such Holder
simultaneously with delivery to Lessor. No such Notice by Lessee to Lessor
hereunder shall be deemed to have been given unless and until a copy thereof
has been mailed to such Holder.
(e) Lessee shall cooperate in all
reasonable respects, and as generally described in Section 2.6 of this Lease,
with any transfer of the Leased Property to a Holder that succeeds to the
interest of Lessor in the Leased Property (including, without limitation, in
connection with the transfer of any franchise, license, lease, permit,
contract, agreement, or similar item to such Holder or such Holder's designee
necessary or appropriate to operate the Leased Property). Lessor and Lessee
shall cooperate in (i) including in this Lease by suitable amendment from time
to time any provision which may be requested by any proposed Holder, or may
otherwise be reasonably necessary, to implement the provisions of this Article
and (ii) entering into any further agreement with or at the request of any
Holder which may be reasonably requested or required by such Holder in
furtherance or confirmation of the provisions of this Article; provided,
however, that any such amendment or agreement shall not in any way affect the
Term nor affect adversely in any material respect any rights of Lessor or
Lessee under this Lease.
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24.2 Lessee's Right to Cure. Subject to the provisions of Section
17.1, if Lessor breaches any covenant to be performed by it under this Lease or
any Mortgage, Lessee, after Notice to and demand upon Lessor, without waiving
or releasing any obligation hereunder, and in addition to all other remedies
available to Lessee, may (but shall be under no obligation at any time
thereafter to) make such payment or perform such act for the account and at the
expense of Lessor. All sums so paid by Lessee and all costs and expenses
(including, without limitation, reasonable attorneys' fees) so incurred,
together with interest thereon at the Overdue Rate from the date on which such
sums or expenses are paid or incurred by Lessee, shall be paid by Lessor to
Lessee on demand or, following entry of a final, nonappealable judgment against
Lessor for such sums, may be offset by Lessee against the Base Rent payments
next accruing or coming due. The rights of Lessee hereunder to cure and to
secure payment from Lessor in accordance with this Section 24.2 shall survive
the termination of this Lease with respect to the Leased Property.
ARTICLE 25
QUIET ENJOYMENT
25.1 Quiet Enjoyment. So long as Lessee pays all Rent as the same
becomes due and complies with all of the terms of this Lease and performs its
obligations hereunder, in each case within the applicable grace periods, if
any, Lessee shall peaceably and quietly have, hold and enjoy the Leased
Property for the Term hereof, free of any claim or other action by Lessor or
anyone claiming by, through or under Lessor, but subject to all liens and
encumbrances subject to which the Leased Property was conveyed to Lessor or
hereafter consented to by Lessee or provided for herein prior to the
foreclosure thereof. Notwithstanding the foregoing, Lessee shall have the right
by separate and independent action to pursue any claim it may have against
Lessor as a result of a breach by Lessor of the covenant of quiet enjoyment
contained in this Article.
ARTICLE 26
CERTIFICATES; INSPECTION RIGHTS
26.1 Lessee Estoppel Certificates. At any time and from time to time
upon not less than ten (10) days Notice by Lessor, Lessee will furnish to
Lessor or any Person designated by Lessor an Officer's Certificate certifying
that this Lease is unmodified and in full force and effect (or that this Lease
is in full force and effect as modified and setting forth the modifications),
the date to which the Rent has been paid, whether to the knowledge of Lessee
there is any existing default or Event of Default hereunder by Lessor or
Lessee, and such other information as may be reasonably requested by Lessor.
Any such certificate furnished pursuant to this Section may be relied upon by
Lessor, any underwriter, lender, investor and prospective purchaser of the
Leased Property.
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26.2 Lessor Estoppel Certificates. At any time and from time to time
upon not less than ten (10) days notice by Lessee, Lessor will furnish to
Lessee or to any Person designated by Lessee an estoppel certificate certifying
that this Lease is unmodified and in full force and effect (or that this Lease
is in full force and effect as modified and setting forth the modifications),
the date to which Rent has been paid, whether to the knowledge of Lessor there
is any existing default or Event of Default on Lessee's part hereunder, and
such other information as may be reasonably requested by Lessee. Any such
certificate furnished pursuant to this Section may be relied upon by Lessee,
any underwriter, lender, investor and prospective purchaser of the assets of
Lessee.
26.3 Inspection Rights. Lessee shall permit Lessor and its authorized
agents and representatives as frequently as reasonably requested by Lessor to
inspect the Leased Property and Lessee's accounts and records pertaining
thereto and make copies thereof, during usual business hours upon reasonable
advance notice, subject only to the terms of this Agreement.
ARTICLE 27
NOTICES
27.1 Notices. All notices, demands, requests, consents, approvals and
other communications ("NOTICE" or "NOTICES") hereunder shall be in writing and
personally served, mailed (by registered or certified mail, return receipt
requested and postage prepaid), sent by FedEx or other nationally recognized
overnight courier, or sent by facsimile, addressed to Lessor at its address set
forth in the Schedule of Basic Terms attached hereto, Attention: President
(with a copy to Attention: General Counsel), and addressed to Lessee at its
address set forth in the Schedule of Basic Terms attached hereto, Attention:
President (with a copy to Attention: General Counsel), or to such other address
or addresses as either party may hereafter designate. Personally delivered
Notice (including any confirmed facsimile transmission or delivery by
nationally recognized overnight courier) shall be effective upon receipt at the
specified address. Notice given by mail shall be complete at the time of
deposit in the U.S. Mail system, but any prescribed period of Notice and any
right or duty to do any act or make any response within any prescribed period
or on a date certain after the service of such Notice given by mail shall be
extended five (5) days.
ARTICLE 28
GROUND LEASE
28.1 The Ground Lease. The provisions of this Article 28 shall apply
and be controlling notwithstanding anything to the contrary contained herein if
Lessor owns its interest in the Land or Improvements through a ground or
building lease. All of the terms of the lease or leases (if any) described in
Exhibit "A" attached hereto (collectively referred to herein as the "GROUND
LEASE") are hereby incorporated into and made a part of this Lease as if stated
at
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length herein. The parties hereto agree that wherever the word "LAND" appears
in this Lease, the same shall be deemed to mean the premises demised by the
Ground Lease.
Lessee shall have the benefit of each and every covenant and agreement
made by the lessor under the Ground Lease ("GROUND LESSOR"), to Lessor under
the Ground Lease and Lessee accepts this Lease subject to, all of the terms,
covenants, conditions and agreements contained in the Ground Lease. In the
event that the consent of the Ground Lessor is required in connection with the
transactions contemplated by the Master Hotel Agreement and/or this Lease, and
such consent has not been obtained effective as of the Commencement Date, then
Lessor shall have the option to terminate this Lease, without payment of a
Termination Fee or other premium or penalty, immediately (and effective as of
the earliest date required to avoid any default under the Ground Lease by
Lessor) upon (i) notice to Lessee that the Ground Lessor has declared Lessor to
be in default under the Ground Lease and (ii) execution of a management
agreement with Lessee (or its Manager, at Lessee's request) upon such terms as
are required to provide Lessee (or Manager, as the case may be) with the same
Net Economic Benefit (as defined in the Master Hotel Agreement) as would have
this Lease in accordance with its terms, other than this sentence.
Lessor shall pay directly to Ground Lessor all rent due from Lessor to
Ground Lessor under the terms of the Ground Lease when due.
In the event of conflicts between the terms of this Lease and the
terms of the Ground Lease, the terms of the Ground Lease shall control. To the
extent any of the provisions of the Ground Lease impose a greater obligation on
Lessor than the corresponding provisions of this Lease, then Lessor shall be
obligated to comply with the provisions of the Ground Lease (other than
obligations for which Lessee is specifically responsible hereunder). To the
extent any of the provisions of the Ground Lease impose a greater obligation on
Lessee than the corresponding provisions of this Lease, then Lessee shall be
obligated to comply with the provisions of the Ground Lease (other than
obligations for which Lessor is specifically responsible hereunder). Any
obligations set forth in the Ground Lease not specifically allocated by this
Lease shall be apportioned according to the relative responsibilities of Lessor
and Lessee hereunder. Notwithstanding the generality of the foregoing, Lessor
and Lessee agree that nothing in this Lease shall be deemed to affect or modify
any requirements of the Ground Lease with regard to (i) necessary consents and
approvals of the Ground Lessor or (ii) requirements of records retention as set
forth in the Ground Lease.
Lessee and Lessor covenant and agree with each other that neither
shall do anything which shall have the effect of creating a breach on the part
of Lessor, its successors and assigns, of any of the terms, covenants and
conditions of the Ground Lease. Notwithstanding the foregoing, in the event
that Ground Lessor shall fail or refuse to comply with any of the respective
provisions of the Ground Lease despite Lessor's good faith reasonable efforts
to obtain such compliance and Lessor is not in default under the Ground Lease,
Lessor shall have no liability on account of any such failure or refusal,
provided that Lessee shall have the option to request that Lessor assign to
Lessee, and Lessee shall have, the right to exercise in its own name (and not
that of Lessor) all of
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the rights to enforce compliance on the part of Ground Lessor as are available
to Lessor. Lessor hereby agrees to cooperate with and execute and deliver, all
at Lessee's expense, all instruments and information reasonably required by
Lessee in order to enforce such compliance.
ARTICLE 29
MISCELLANEOUS
29.1 Enforceability. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, Lessee or Lessor
arising prior to any date of termination of this Lease shall survive such
termination. If any term or provision of this Lease or any application thereof
is invalid or unenforceable, the remainder of this Lease and any other
application of such term or provisions shall not be affected thereby. If any
late charges or any interest rate provided for in any provision of this Lease
are based upon a rate in excess of the maximum rate permitted by applicable
law, the parties agree that such charges shall be fixed at the maximum
permissible rate. Neither this Lease nor any provision hereof may be changed,
waived, discharged or terminated except by a written instrument in recordable
form signed by Lessor and Lessee. All the terms and provisions of this Lease
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. The headings in this Lease are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Lease shall be governed by and construed in accordance
with the laws of the State, but not including its conflicts of laws rules.
29.2 Waiver of Trial by Jury. LESSOR AND LESSEE EACH WAIVE, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN THE
EVENT OF A PROCEEDING WITH RESPECT TO THIS LEASE, INCLUDING, WITHOUT
LIMITATION, SUMMARY PROCEEDINGS TO ENFORCE THE REMEDIES SET FORTH IN ARTICLE
16.
29.3 No Waiver. No failure by Lessor or Lessee to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the extent permitted by law, no waiver
of any breach shall affect or alter this Lease, which shall continue in full
force and effect with respect to any other then existing or subsequent breach.
29.4 Remedies Cumulative. To the extent permitted by law, each legal,
equitable or contractual right, power and remedy of Lessor or Lessee now or
hereafter provided either in this Lease or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power
and remedy and the exercise or beginning of the exercise by Lessor or Lessee of
any one or more of such rights, powers and remedies shall not preclude the
simultaneous or subsequent exercise by Lessor or Lessee of any or all of such
other rights, powers and remedies.
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29.5 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.
29.6 No Merger of Title. There shall be no merger of this Lease or of
the leasehold estate created hereby by reason of the fact that the same Person
may acquire, own or hold, directly or indirectly: (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (b) the fee estate in the Leased Property.
29.7 Conveyance by Lessor. If Lessor or any successor owner of the
Leased Property conveys the Leased Property to a Person other than an Affiliate
of Lessor in accordance with the terms hereof other than as security for a
debt, and the grantee or transferee of the Leased Property expressly assumes
all obligations of Lessor hereunder arising or accruing from and after the date
of such conveyance or transfer, Lessor or such successor owner, as the case may
be, shall thereupon be released from all future liabilities and obligations of
Lessor under this Lease arising or accruing from and after the date of such
conveyance or other transfer as to the Leased Property and all such future
liabilities and obligations shall thereupon be binding upon the new owner.
29.8 Waiver of Presentment, etc. Lessee waives all presentments,
demands for payment and for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, and notices of acceptance and waives
all notices of the existence, creation, or incurring of new or additional
obligations, except as expressly granted herein.
29.9 Standard of Discretion. In any provision of this Lease requiring
or permitting the exercise by Lessor or Lessee of such party's approval,
election, decision, consent, judgment, determination or words of similar import
(collectively, an "APPROVAL"), such Approval may, unless otherwise expressly
specified in such provision, be given or withheld in such party's sole,
absolute and unreviewable discretion. Any Approval which by the terms of this
Lease may not be unreasonably withheld shall also not be unreasonably
conditioned or delayed.
29.10 Action for Damages. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
HEREIN, IN ANY SUIT OR OTHER CLAIM BROUGHT BY EITHER PARTY SEEKING DAMAGES
AGAINST THE OTHER PARTY FOR BREACH OF ITS OBLIGATIONS UNDER THIS LEASE, THE
PARTY AGAINST WHOM SUCH CLAIM IS MADE SHALL BE LIABLE TO THE OTHER PARTY ONLY
FOR ACTUAL DAMAGES AND NOT FOR CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES.
29.11 Lease Assumption in Bankruptcy Proceeding. If an Event of
Default occurs and Lessee has filed or has had filed against it a petition in
bankruptcy or for reorganization or other relief pursuant to the federal
bankruptcy code, Lessee shall promptly
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move the court presiding over the proceeding to assume this Lease pursuant to
11 U.S.C. ss.365, without seeking an extension of the time to file said motion.
29.12 FelCor Intra-Family Transfers. Lessee acknowledges that Lessor
may transfer legal title to the Leased Property one or more times to
Subsidiaries of FelCor (each, an "AFFILIATED LESSOR"). Lessee hereby consents
to such transfers provided that, in each case, this Lease is assumed by the
Affiliated Lessor in its entirety and without modification, except to the
extent that Lessor, or the Affiliated Lessor that then owns the Leased
Property, specifically retains any obligations accrued through the date of
transfer hereunder. Lessee covenants that in connection with such transfers,
Lessee will execute and deliver to Lessor, the Affiliated Lessor and/or their
representatives appropriate estoppels and other documentation reasonably
requested by them, including an amendment to this Lease, for the purposes of
reflecting and acknowledging the Affiliated Lessor's interests as lessor
hereunder.
29.13 Memorandum of Lease. Lessor and Lessee shall promptly upon the
request of either enter into a short form memorandum of this Lease, in form
suitable for recording under the laws of the State, in which reference to this
Lease, and all options contained herein, shall be made. Lessee shall pay all
costs and expenses of recording such memorandum of this Lease.
ARTICLE 30
NOTIFICATION OF PROPERTY HAZARDS
30.1 NOTIFICATION REGARDING ASBESTOS. LESSEE ACKNOWLEDGES THAT LESSOR
HAS ADVISED LESSEE OF THE LIKELIHOOD OF THE EXISTENCE OF ASBESTOS CONTAINING
MATERIALS USED DURING THE INITIAL CONSTRUCTION OF THE HOTEL AND OTHER LEASED
PROPERTY. IF AND TO THE EXTENT REQUIRED BY LAW, AN OPERATION AND MAINTENANCE
PLAN HAS BEEN ESTABLISHED TO MONITOR SUCH MATERIALS AND HAS BEEN MADE AVAILABLE
TO LESSEE.
30.2 NOTIFICATION REGARDING RADON GAS. RADON IS A NATURALLY OCCURRING
RADIOACTIVE GAS THAT, WHEN IT HAS ACCUMULATED IN A BUILDING IN SUFFICIENT
QUANTITIES, MAY PRESENT A HEALTH RISK TO PERSONS WHO ARE EXPOSED TO IT OVER
TIME. LEVELS OF RADON THAT EXCEED FEDERAL AND STATE GUIDELINES HAVE BEEN FOUND
IN BUILDINGS IN FLORIDA. ADDITIONAL INFORMATION REGARDING RADON AND RADON
TESTING MAY BE OBTAINED FROM THE APPROPRIATE COUNTY PUBLIC HEALTH UNIT.
[SIGNATURES ON FOLLOWING PAGE]
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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"
- ------------------------------------
By: --------------------------------
Title: ------------------------------
LESSEE"
- ------------------------------------
By: --------------------------------
Title: ------------------------------
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EXHIBIT A
LEASED PROPERTY DESCRIPTION
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EXHIBIT B
EXCLUDED PROPERTY
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EXHIBIT C
CAPITAL EXPENDITURES POLICY
CAPITAL EXPENDITURES
A capital expenditure is defined as an investment in a readily identifiable
facility which (l) is held for use or income rather than for sale or conversion
into goods or cash and (2) has a useful service life in excess of one year.
Nonrecurring expenses directly associated with the investment should be
included as part of the total expenditure for evaluation purposes. Capital
expenditures may include, without limitation, expenditures for computer
hardware and software to solve the "Year 2000 Problem."
Capitalization Policy
If the cost of the capital expenditure is $1,500 or greater and the items
acquired have an expected service life of more than one year, the expenditure
is capitalized. See "MAINTENANCE AND REPAIRS" for those expenditures which are
expensed without regard to the $1,500 guideline. If the item(s) acquired meet
the more than one-year life criterion, but the total invoice cost is less than
$1,500, the expenditure is considered an expense item.
Replacement - Component Parts
If the estimated job or total invoice cost (including parts and labor) of any
particular item or series of items acquired with respect to one particular job
for replacement of the following major building components is under $1,500, the
expenditure is to be expensed to maintenance and repairs:
Heating Equipment - Pumps, boilers, heat exchangers, thermostats,
pressure gauges, alarm devices, piping.
Plumbing Equipment - Pumps, meters, sprinkler and fire alarm system,
piping.
Air Conditioning Equipment - Compressors, condensers, motors, cooling
towers, evaporative coolers, piping.
Fire Prevention Equipment - Major fire system sprinklers, smoke
detectors.
Power - Transformer, conduits and boxes, panel boards, switches and
outlets.
Elevators - Motors, hydraulics, cables.
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Betterments and Redevelopments
If the estimated job or total invoice cost is $1,500 or above, and the
expenditure(s) will extend the useful life of an asset previously capitalized,
then the expenditure should be capitalized. All invoices, regardless of amount,
that are included in a hotel redevelopment budget will be capitalized.
Maintenance and Repairs
The following replacement expenditures are considered maintenance and repairs
and are not subject to the total invoice cost guideline of $1,500 unless they
are included in a hotel redevelopment budget:
Repainting of Buildings, Pools, Park Areas (1) (6)
Refinishing of Furniture (2)
Glass Replacement
Maintenance Service Contracts, such- Yard, Television, Elevator,
Swimming Pool
Wall Paper Vinyl (2)
Reupholstery of Furniture (2)
Replastering (2)
Replacement of Chain Locks, Key Blanks, Keys, Locks, Locksets. Locks
and locksets installed in new doors or offering substantial security
improvements should be capitalized if the invoice is over $1,500.
Patching Parking Lot (3)
Roof Repairs (4)
Waterproofing of Lamp Globes & Lightbulbs
Section Replacement for Neon Signs
Caulking and Sealing (1)
Chrome Fittings such as Faucets, Towel Bars, etc. (2)
Toilet and Toilet Seats (7)
Stolen or Damaged Television (7)
Small Parts for Equipment
Landscaping/Plants (5)
Clocks, Clock-Radios or Similar Small Items (7)
1. If the complete exterior of the building is repainted, including
caulking and sealing of the building, those costs will be capitalized.
2. Expenditures for interior painting, wall paper, refinishing of
furniture, replastering, or reupholstering may be capitalized if:
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A) these expenditures are part of a hotel
addition or major refurbishment project
(including newly instituted franchise
requirements), or
B) the cost of these expenditures exceed
$5,000 with respect to any particular item
or series of items related to one
particular job and extend the useful life
of the asset.
3. Repairing of parking lots, including resealing and resurfacing, will
be capitalized if the expenditure exceeds $5,000.
Replacements/Major overhauls
4. Replacement of the complete roof or complete section of the roof
(including laying a roof over an existing roof) will be capitalized if
the total expenditure exceeds $5,000.
5. If the landscaping is new or replacement of existing interior or
exterior landscaping and exceeds $5,000, the cost of the landscaping
can be capitalized.
6. Major overhauls to the pool which exceed $5,000 in cost and extend the
useful life of the asset will be capitalized.
7. When an entire floor or a significant portion of a hotel replaces a
series of mattresses, bed spreads, window treatments, televisions,
irons and boards, in-room coffee makers or similar type items, these
items will be capitalized.
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