EXHIBIT 1.4
BASIC LEASE INFORMATION
LEASE AGREEMENT DATED AS OF NOVEMBER 10, 2004
Landlord: MHC TT Leasing Company, Inc., a Delaware corporation,
together with any successor or assign.
Tenant: Thousand Trails Operations Holding Company, L.P., a
Delaware limited partnership, together with any successor
or assign permitted by the Lease.
Commencement Date: November 10, 2004.
Lease Expiration Date: December 31, 2019, which is the last day of the
180th full calendar month following the Commencement Date, unless extended
pursuant to paragraph 4(b) of the Lease.
Primary Term and any Extension Term Fixed Rent: The annual "FIXED RENT"
during the Primary Term and any applicable Extension Term of the Lease shall be
defined as and equal to and shall be payable monthly in advance (unless
specifically set forth to be paid at a different time below) as follows:
(a) From the Commencement Date through the 12th full calendar month after
the Commencement Date (which period is herein referred to as the "FIRST
LEASE YEAR"): at the annual rate of $16,000,000.00, 1/12 of which shall
be payable in advance on the first day of each calendar month,
commencing (i) if the Commencement Date does not occur on the first day
of a calendar month, then on the first day of the calendar month
following the month in which the Commencement Date occurs, and (ii) if
the Commencement Date occurs on the first day of a calendar month, then
on the Commencement Date. Additionally, if the Commencement Date does
not occur on the first day of a calendar month, then on the
Commencement Date, Tenant shall make a payment of an amount equal to
the product of $1,333,333.33 multiplied by a fraction, the numerator of
which is the number of days in the calendar month from and including
the Commencement Date through the end of the calendar month in which
the Commencement Date occurs, and the denominator of which is the total
number of days in the calendar month in which the Commencement Date
occurs.
(b) Beginning with the 13th full calendar month after the Commencement Date
and every 12th full calendar month thereafter (each, an "ADJUSTMENT
MONTH") during the Primary Term and any Extension Term, the annual
Fixed Rent payable during the next twelve (12) full calendar month
period commencing with the Adjustment Month (each such 12 full calendar
month period commencing with an Adjustment Month and the First Lease
Year are singularly herein called a "LEASE YEAR") shall be the Fixed
Rent payable during the twelve (12) full calendar months immediately
preceding the Adjustment Month increased by 3.25%, 1/12th of which
shall be payable in advance on the first day of each
calendar month in such Lease Year, commencing with the Adjustment Month
in such Lease Year.
Landlord Address for payment by wire transfer to:
Bank of America NT & SA
Chicago, IL
ABA# 071000039
MHC Operating L.P.
Account # 7366901095
Notify: Quantaze Watts @ 312-279-1408 upon receipt.
Tenant Address: 3801 Parkwood Boulevard
Suite 100
P.O. Box 2529
Frisco, TX 75034
LEASE AGREEMENT
BETWEEN
MHC TT LEASING COMPANY, INC.,
AS LANDLORD
AND
THOUSAND TRAILS OPERATIONS HOLDING COMPANY, L.P.,
AS TENANT
DATED AS OF NOVEMBER 10, 2004
THIS AGREEMENT CONTAINS A BINDING, IRREVOCABLE AGREEMENT TO ARBITRATE CERTAIN
SPECIFIED MATTERS AND IS SUBJECT TO ARBITRATION WITH RESPECT TO THOSE SPECIFIED
MATTERS.
THIS LEASE AGREEMENT is made and entered into as of the date set forth
in the attached Basic Lease Information (this lease agreement, together with all
amendments and supplements hereto, this "LEASE"), by and between MHC TT Leasing
Company, Inc., a Delaware corporation, having an address at c/o Manufactured
Home Communities, Inc., Two North Riverside Plaza, Suite 800, Chicago, IL 60606
(together with any successor or assign, hereinafter called "LANDLORD") and
Thousand Trails Operations Holding Company, L.P., a Delaware limited
partnership, having an address at 3801 Parkwood Boulevard, Suite 100, P.O. Box
2529, Frisco, TX 75034 (together with any successor or assign permitted by this
Lease, hereinafter collectively called "TENANT").
1. DEFINITIONS
Capitalized terms used herein shall have the following meanings for all
purposes of this Lease and shall be equally applicable to both the singular and
plural forms of the terms herein defined.
"ACCOUNT COLLATERAL" is defined in paragraph 31(k) of this Lease.
"ACCOUNTS" means the Collection Account, the Concentration Account and
the Reserve Accounts.
"ADDITIONAL RENT" means all amounts, liabilities and obligations other
than Fixed Rent which Tenant assumes or agrees to pay under this Lease to
Landlord or others.
"ADJUSTMENT MONTH" is defined and shall have the meaning specified in
the Basic Lease Information.
"AFTER-TAX BASIS" means, with respect to any payment required to be
made to any Person, the amount of such payment after giving effect to any
additional amount or amounts which, after deduction of all Federal, state and
local taxes required to be paid by such Person (determined utilizing an
effective marginal tax rate of 40%), shall be equal to such payment.
"AFFILIATES" means Persons (other than individuals) Controlled by,
Controlling or under Common Control with Tenant.
"ALTERNATIVE CREDIT RATING AGENCY" means if either or both of S & P and
Moody's no longer exist or no longer assign Credit Ratings, such other
nationally recognized statistical credit rating agency designated by Landlord,
acting in its sole discretion.
"ANCILLARY INCOME" means any point of sale income generated by any
direct or indirect Subsidiary of Tenant in connection with the rendering of
services, the rental of trailers, equipment, boats or other items, the sale of
food, supplies or products or the providing of other amenities incidental or
complementary to the operation of the campgrounds, together with any other Gross
Revenue, excluding Membership Dues or Membership Contract Receivables payments.
All income received or revenue generated by any of Tenant's Subsidiaries in
connection with the conduct of business shall be deemed, for purposes of this
Agreement, to be Ancillary Income so long as Tenant or such Subsidiary does not
engage in any other or different business during the Term of this Lease than as
conducted by Tenant or such Subsidiary on the date hereof.
"APPROVED CAPITAL IMPROVEMENTS" is defined in paragraph 34(a) of this
Lease.
"ASSET/EQUITY APPRAISAL START DATE" is defined in paragraph 22(f)(iii)
of this Lease.
"ASSET/EQUITY PURCHASE AGREEMENT" is defined in paragraph 22(f)(iv) of
this Lease.
"ASSET/EQUITY PURCHASE NOTICE" is defined in paragraph 22(f)(iv) of
this Lease.
"ASSET PURCHASE AGREEMENT" is defined in Exhibit R attached hereto.
"ASSET PURCHASE PRICE" is defined in paragraph 16(a)(ii) of this Lease.
"BANK" means Union Bank of California, N.A., a national banking
association, in its capacity as the bank or the securities intermediary (as
defined in the UCC) with respect to any Account and any successor to Union Bank
of California, N.A.
"BASIC LEASE INFORMATION" means the page(s) preceding this Lease which
are hereby incorporated by reference.
"BUDGET" is defined in paragraph 30 of this Lease.
"BUSINESS DAYS" or "BUSINESS DAY" means any day excluding Saturday,
Sunday and any day which is a legal holiday under the laws of the State of
Illinois or is a day on which banking institutions located in such state are
closed.
"CANADIAN ACCOUNTS" means all deposit accounts of Tenant located and
maintained at the Bank of Montreal as more specifically identified on Exhibit I
attached hereto, together with any replacements, substitutions or new accounts
located thereat and which are disclosed to Landlord in writing.
"CAPITAL EXPENDITURE RESERVE" is defined in paragraph 34(a) of this
Lease.
"CAPITAL EXPENDITURE RESERVE ACCOUNT" is defined in paragraph
31(b)(ii)(B) of this Lease.
"CAPITAL EXPENDITURE RESERVE STATEMENT" is defined in paragraph 34(a)
of this Lease.
"CAPITAL IMPROVEMENTS" is defined in paragraph 34(a) of this Lease.
"CASH EBITDA" means (i) the consolidated net income (or loss) for the
applicable period of Tenant and its Subsidiaries on a consolidated basis
determined in accordance with GAAP, but excluding therefrom: (a) the income (or
loss) of any Person (other than Subsidiaries of Tenant) in which Tenant or any
of its Subsidiaries has an ownership interest unless received by Tenant or such
Subsidiary in a cash distribution; and (b) the income (or loss) of any Person
accrued prior to the date it became a Subsidiary of Tenant or is merged into or
consolidated with Tenant, plus (ii) the sum of (a) any provision for (or less
any benefit from) income and franchise taxes included in the determination of
net income, including all Impositions paid in cash, (b) interest expense and
Rent to the extent deducted in the determination of net income, (c) amortization
and depreciation deducted in determining net income, (d) losses (or less gains)
from
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asset dispositions or sales or other non-cash items included in the
determination of net income (excluding sales, expenses or losses related to
current assets), (e) any net increase (or less net decreases) in deferred
revenue from the sale of Membership Contracts, and (f) any non-cash
extraordinary losses (or less gains), as defined under GAAP, net of related tax
effects, minus (iii) any net increase (or plus any net decrease) in deferred
marketing/selling expenses of Tenant and/or its Subsidiaries.
"CASH MANAGEMENT BANK" means Union Bank of California, N.A. or another
financial institution selected by Tenant and approved by Landlord (such approval
not to be unreasonably withheld or delayed).
"CASUALTY" means any damage or destruction caused to any Site by any
reason, including fire.
"CASUALTY REPAIR" is defined in paragraph 10 of this Lease.
"CASUALTY THRESHOLD" is defined in paragraph 10 of this Lease.
"CLAIMS" or "CLAIMS" shall mean Liens (including lien removal and
bonding costs), liabilities, obligations, damages, losses, demands, penalties,
assessments, payments, fees of Mortgagee, fines, claims, actions, suits,
judgments, settlements, costs, expenses and disbursements (including legal fees
incurred and expenses and costs of investigation and environmental remedial
action) of any kind and nature whatsoever.
"COLLECTION ACCOUNT" is defined in paragraph 31(b)(i) of this Lease.
"COMMENCEMENT DATE" is defined and shall have the meaning specified in
the Basic Lease Information.
"CONCENTRATION ACCOUNT" is defined in paragraph 31(b)(ii) of this
Lease.
"CONTINGENT OBLIGATION" means, as applied to any Person, any direct or
indirect liability of that Person: (i) with respect to any indebtedness, lease,
dividend or other obligation of another Person if the purpose or intent of the
Person incurring such liability, or the effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto; (ii) with respect to any letter of credit issued for the
account of that Person or as to which that Person is otherwise liable for
reimbursement of drawings; (iii) under any foreign exchange contract, currency
swap agreement, interest rate swap agreement or other similar agreement or
arrangement designed to alter the risks of that Person arising from fluctuations
in currency values or interest rates; (iv) to make take-or-pay or similar
payments if required regardless of nonperformance by any other party or parties
to an agreement; or (v) pursuant to any agreement to purchase, repurchase or
otherwise acquire any obligation or any property constituting security therefor,
to provide funds for the payment or discharge of such obligation or to maintain
the solvency, financial condition or any balance sheet item or level of income
of another. The amount of any Contingent Obligation shall be equal to the amount
of the obligation so guaranteed or otherwise supported or, if not a fixed and
determined amount, the maximum amount so guaranteed.
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"CONTROL" (including with correlative meanings the terms "Controlling,"
"Controlled by" and "under Common Control with") means the possession directly
or indirectly of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"CORPORATE CONTROL EVENT" means any of the following: (i) a merger or
consolidation of Tenant with another entity which results in a change in Control
of Tenant, (ii) the sale of all or substantially all the assets of Tenant to
another Person, or (iii) any one Person acquiring, directly or indirectly,
either (a) forty-nine percent (49%) or more of the shares of the stock or voting
securities of Tenant, or (b) forty-nine percent (49%) or more of any class of
equity securities of Tenant or other interest entitling such Person to receive
forty-nine percent (49%) or more of the economic benefits (including
distributions) of Tenant.
"CREDIT RATING" means the senior unsecured debt rating issued by S&P
and Moody's or if either or both no longer exist or no longer issue ratings
then, for either or both as so applicable, an Alternative Credit Rating Agency.
All references to specific levels of a Credit Rating mean such rating with a
"stable" or "positive" outlook, but not a "negative" outlook or "on watch"
associated with such rating.
"ELIGIBLE ACCOUNT" means a segregated account maintained at a financial
institution reasonably acceptable to Landlord. An Eligible Account shall not be
evidenced by a certificate of deposit, passbook or other instrument.
"ENVIRONMENTAL LAWS" is defined in paragraph 26(b) of this Lease.
"ENVIRONMENTAL REPORTS" is defined in paragraph 26(c) of this Lease.
"EQUIPMENT" means the equipment generally described on Exhibit B
attached hereto.
"EVENT OF DEFAULT" is defined in paragraph 15 of this Lease.
"EXCESS LAND" means the undeveloped, vacant parcels of land located
adjacent to each corresponding Excess Land Property, as such Excess Land shall
be more particularly described on Exhibit P attached hereto. As of the
Commencement Date, Landlord and Tenant have not agreed upon the final form of
Exhibit P. Exhibit P shall be completed and attached hereto in connection with
the procedures set forth in paragraph 33(b) of this Lease.
"EXCESS LAND AGREEMENT DATE" means June 30, 2005.
"EXCESS LAND OWNER" is defined in paragraph 33(a) of this Lease.
"EXCESS LAND PROPERTIES" means those Sites listed on Exhibit K attached
hereto.
"EXCLUDED TAXES" means (i) any income or franchise taxes based upon,
measured by, or calculated with respect to net income or profits (but not
including any franchise tax or sales tax based upon gross receipts with respect
to the Rent or amounts required to ensure that a payment is made on an After-Tax
Basis), inheritance, estate, succession, transfer or any similar taxes and (ii)
any property taxes attributable to the Excess Land.
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"EXTENSION TERMS" is defined in paragraph 4(b) of this Lease.
"EXTENSION TERM COMMENCEMENT DATE" is defined in paragraph 4(b) of this
Lease.
"FAIR MARKET VALUE" means, with respect to any assets or equity
interests that are the subject of the determination of Fair Market Value, the
amount that would be received by a seller in a cash sale of such assets or
equity interests (free and clear of all Liens) with due regard for the
then-existing facts and circumstances giving rise to the sale.
"FEE SITES" means those Sites listed on Exhibit L attached hereto, each
of which is owned by affiliates of Landlord in fee simple and leased to Landlord
pursuant to the Master Lease.
"FINAL FAIR MARKET VALUE OF TENANT'S ASSETS" is defined in paragraph
22(f)(vi) of this Lease.
"FINAL FAIR MARKET VALUE OF THE UNDERLYING PREMISES" is defined in
paragraph 22(f)(vi) of this Lease.
"FINAL FULL MARKET VALUE" is defined in paragraph 22(f)(vi) of this
Lease.
"FIRST LEASE YEAR" is defined and shall have the meaning specified in
the Basic Lease Information.
"FIXED CHARGE COVERAGE RATIO" means, as of any date, for the
immediately preceding four (4) fiscal quarters, the ratio of (a) Tenant's Cash
EBITDA for the applicable period, to (b) the sum of Tenant's (i) Impositions,
(ii) Rent, (iii) any and all payments due to Working Capital Lender in the
following Lease Year and (iv) other net cash interest expense to the extent
permitted under this Lease.
"FIXED RENT" is defined and shall have the meaning specified in the
Basic Lease Information.
"FRISCO ACCOUNTS" means those certain deposit accounts maintained at
Wells Fargo Bank, N.A. located in Frisco, Texas, as more particularly described
on Exhibit I attached hereto.
"FRISCO LEASE" means that certain Office Lease Agreement dated as of
2002 between Sealy Parkwood, L.P., a Georgia limited partnership and Thousand
Trails.
"GAAP" means generally accepted accounting principles recognized as
such in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board.
"GAUTIER ACCOUNTS" means those certain deposit accounts maintained at
Merchants & Marine Bank in Gautier, Mississippi, as more particularly described
on Exhibit I attached hereto.
"GOVERNMENTAL AUTHORIZATION" means any approval, consent, license,
permit, waiver or other authorization issued, granted, given or otherwise made
available by or under the authority of any governmental body or pursuant to any
Legal Requirement.
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"GROSS REVENUES" means, for the applicable period, without duplication,
all income (including all Ancillary Income), revenues, issues, profits,
deposits, proceeds of insurance (including business interruption insurance),
Membership Dues, Membership Contract Receivables payments, Membership Contract
termination or similar payments and all other payments received by or for the
benefit of Tenant and any direct or indirect Subsidiary of Tenant (including by
Resort Parks International, Inc., a Georgia corporation ("RPI"), and by Thousand
Trails Management Services, Inc., a Nevada corporation ("TTMS")), in cash or
current funds, together with any other consideration from any source whatsoever
in connection with such Person's ownership, operation and management of its
assets and business, including all concession and rental income or income
otherwise realized in connection with the provision of any other service or
conduct of any other business by such Person. For avoidance of doubt, Gross
Revenues shall include all income received in connection with the businesses of
providing third party management services for campgrounds or like facilities
and/or the cross-selling, time share management, brokerage or marketing services
for campground facilities or like businesses by RPI or TTMS, as applicable.
"GUARANTORS" means, collectively, all Persons holding partnership
interests in Tenant, together with any successor or assign permitted by this
Lease, and each such person individually is herein called a "GUARANTOR".
"GUARANTOR PLEDGES" means that certain Pledge Agreement by all
Guarantors in favor of Landlord, dated of even date herewith, pursuant to which
Guarantors pledged one hundred percent (100%) of the ownership interests in
Tenant to Landlord.
"GUARANTY" means that certain Secured Limited Guaranty dated as of the
date of this Lease from all Guarantors to Landlord, pursuant to which, among
other things, Guarantors unconditionally guarantee the payment and performance
of Tenant's obligations under this Lease, jointly and severally, all upon the
terms and subject to the conditions set forth therein, as such Guaranty is
amended, modified or restated from time to time. The Guaranty is secured by the
Guarantor Pledges and Landlord's sole recourse under such Guaranty shall be to
foreclose upon the Guarantor Pledges as further set forth therein.
"HAZARDOUS MATERIALS" is defined in paragraph 26(b) of this Lease.
"IMMEDIATE REPAIRS" means those repairs listed on Exhibit O attached
hereto, each of which must be completed no later than the date listed
immediately opposite such repair on Exhibit O.
"IMPOSITION" means the various taxes and other charges referred to in
paragraph 6 of this Lease and the present and future governmental laws and
regulations more specifically described in paragraph 6(b) of this Lease.
"IMPROVEMENTS" means all of the buildings, structures, improvements,
Equipment, heating, ventilation, air conditioning, plumbing, electrical,
mechanical, utility and life safety systems, and all building fixtures therein
(including parking areas and driveways) now or hereafter located on the Land and
generally described on Exhibit A-2 attached hereto, other than and specifically
excluding Tenant's Trade Fixtures.
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The words "INCLUDE", "INCLUDES", "INCLUDING" and any other derivation
of "include" means "including but not limited to" unless specifically set forth
to the contrary.
"INDEMNIFIED PARTY" is defined in paragraph 26(c) of this Lease.
"INDEBTEDNESS" means, as applied to any Person, without duplication,
(a) any indebtedness of such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of any property or asset of
such Person to another Person subject to an understanding or agreement,
contingent or otherwise, to repurchase such property from such Person), (b) any
obligation under any lease (a "synthetic lease") treated as an operating lease
under GAAP and as a loan or financing for United States income tax purposes or
creditors rights purposes, (c) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money
and any obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments, (d) any obligations of such Person for the deferred
purchase price of property or services, (e) any obligations of such Person
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (f) any obligations of
such Person as lessee under leases that have been or should be, in accordance
with GAAP, recorded as capital leases or that portion of obligations with
respect to capital leases that is properly classified as a liability on a
balance sheet in conformity with GAAP, (g) any obligations of such Person as a
result of any final judgment rendered against such Person or any settlement
agreement entered into by such Person with respect to any litigation unless such
obligations are stayed upon appeal (for so long as such appeal shall be
maintained) or are fully discharged or bonded within thirty (30) days after the
entry of such judgment or execution of such settlement agreement, (h) any
obligations, contingent or otherwise, of such Person in respect of acceptances,
letters of credit or similar extensions of credit, (i) any Contingent
Obligations, (j) any Indebtedness of others referred to in clauses (a) through
(i) above or clause (k) below guaranteed directly or indirectly in any manner by
such Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (1) to pay or purchase such Indebtedness or to advance or
supply funds for the payment or purchase of such Indebtedness, (2) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the holder of such Indebtedness against loss, (3) to
supply funds to or in any other manner invest in the debtor (including any
agreement to pay for property or services irrespective of whether such property
is received or such services are rendered) or (4) otherwise to assure a creditor
against loss, and (k) any Indebtedness referred to in clauses (a) through (j)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property
(including accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness.
"INITIAL APPRAISER" is defined in paragraph 16(a)(ii)(A) of this Lease.
"INITIAL VALUATION" is defined in paragraph 16(a)(ii)(B) of this Lease.
"JAMS" is defined in paragraph 22(f)(i)(B) of this Lease.
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"KTTI" is defined in paragraph 33(b) of this Lease.
"LAND" means the title and interest of Landlord in and to the
fifty-seven (57) locations of real estate described on Exhibit A-1 attached
hereto, and any land lying in the bed of any existing dedicated street, road or
alley adjoining thereto, all strips and gores adjoining thereto, and all rights,
ways, easements, privileges and appurtenances thereunto belonging, including all
of Landlord's right, title and interest in and to all other property rights,
tangible or otherwise, arising out of or connected with Landlord's ownership
thereof, but excluding the Improvements thereon.
"LANDLORD" is defined in the first paragraph of this Lease.
"LANDLORD EQUITY SHARES" is defined on Exhibit W attached hereto.
"LANDLORD PARTIES" is defined in paragraph 6(a) of this Lease.
"LANDLORD TRANSFERORS" is defined on Exhibit W attached hereto
"LANDLORD'S ELECTION NOTICE" is defined in paragraph 36(b) of this
Lease.
"LANDLORD'S NOTICE DATE" is defined in paragraph 36(b) of this Lease.
"LANDLORD'S PURCHASE TERMINATION DATE" is defined in paragraph
22(f)(iv) of this Lease.
"LANDLORD'S REMEDY NOTICE" is defined in paragraph 16(a) of this Lease.
"LANDLORD'S TERMINATION NOTICE" is defined in paragraph 19(g)(i) of
this Lease.
"LEASE" is defined in the first paragraph of this Lease.
"LEASE EXPIRATION DATE" is defined and shall have the meaning specified
in the Basic Lease Information.
"LEASEHOLD MORTGAGE" means a leasehold mortgage, leasehold deed to
secure debt, leasehold deed of trust or other security instrument of like nature
on Tenant's interest under this Lease given by Tenant to a Leasehold Mortgagee.
"LEASEHOLD MORTGAGEE" means any holder of a Leasehold Mortgage with
respect to Tenant's interest under this Lease, which Leasehold Mortgagee must
also hold a lien on and security interest in all directly and indirectly owned
assets of Tenant, including all Membership Contracts (subject to Landlord's
interest in such assets).
"LEASE YEAR" is defined and shall have the meaning specified in the
Basic Lease Information.
"LEGAL REQUIREMENTS" is defined in paragraph 12(a) of this Lease.
"LICENSES" is defined in paragraph 12(a) of this Lease.
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"LIEN" means any lien, mortgage, pledge, charge, security interest or
encumbrance of any kind, or any other type of preferential arrangement that has
the practical effect of creating a security interest, including any arising
under any conditional sale agreement, capital lease or other title retention
agreement.
"LOCAL ACCOUNTS" means (i) those deposit accounts maintained at banks
in close proximity to a campground and into which Ancillary Income derived from
such campground is deposited, as identified and more particularly described in
Exhibit I attached hereto, together with any additions thereto, replacements or
substitutions thereof, which are disclosed to Landlord in writing, (ii) the
Frisco Accounts, (iii) the Gautier Accounts, and (iv) the RPI Accounts. Such
term shall not include the Canadian Accounts.
"LOCKBOXES" is defined in paragraph 31(c)(ii) of this Lease.
"LT ASSETS/EQUITY INITIAL APPRAISER" is defined in paragraph
22(f)(iii)(A) of this Lease.
"LT ASSETS/EQUITY INITIAL VALUATION" is defined in paragraph
22(f)(iii)(B) of this Lease.
"LT ASSETS/EQUITY THIRD APPRAISER" is defined in paragraph
22(f)(iii)(B) of this Lease.
"LT ASSETS/EQUITY THIRD VALUATION" is defined in paragraph
22(f)(iii)(B) of this Lease.
"LT ASSETS/EQUITY VALUATION NOTICE" is defined in paragraph
22(f)(iii)(A) of this Lease.
"LT ASSETS/EQUITY VALUATION PERIOD" is defined in paragraph
22(f)(iii)(A) of this Lease.
"LT UNDERLYING PREMISES INITIAL APPRAISER" is defined in paragraph
22(f)(i)(A) of this Lease.
"LT UNDERLYING PREMISES INITIAL VALUATION" is defined in paragraph
22(f)(i)(B) of this Lease.
"LT UNDERLYING PREMISES THIRD APPRAISER" is defined in paragraph
22(f)(i)(B) of this Lease.
"LT UNDERLYING PREMISES THIRD VALUATION" is defined in paragraph
22(f)(i)(B) of this Lease.
"LT UNDERLYING PREMISES VALUATION NOTICE" is defined in paragraph
22(f)(i)(A) of this Lease.
"LT UNDERLYING PREMISES VALUATION PERIOD" is defined in paragraph
22(f)(i)(A) of this Lease.
"MASTER LEASE" means those certain lease agreements listed on Exhibit Q
attached hereto of even date herewith, pursuant to which Landlord leases or
subleases all the Sites from affiliates of Landlord.
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"MEMBER" or "MEMBERS" means an owner or holder of a Membership as
defined in and pursuant to a Membership Contract.
"MEMBERSHIP" means any "Membership" as such term is defined in any
Membership Contract.
"MEMBERSHIP CONTRACT(S)" means any contract (including a retail
installment contract), agreement or other arrangement of Tenant's Subsidiaries
(whether entered into before, on or after the date of this Lease), as such may
be amended, supplemented or modified from time to time in accordance with the
provisions of this Lease, pursuant to which Tenant's Subsidiaries sell a
Membership to individuals or other consumers, thereby entitling such individual
or other consumer to access and use, or providing for an ownership interest in,
one or more of the campgrounds and associated facilities and amenities included
in the Premises.
"MEMBERSHIP CONTRACT RECEIVABLES" means all of Tenant's accounts and
the proceeds thereof (as defined under the UCC) in which a Member is the account
debtor or obligor and which represent the unpaid portion of the purchase price
of Memberships, as provided in the applicable Membership Contracts, excluding,
however, any Membership Dues or proceeds thereof.
"MEMBERSHIP DUES" means any annual or periodic dues or use fees due and
payable by a Member in accordance with the terms of a Membership Contract, other
than retail installment or lump sum payments made in connection with Membership
Contract Receivables.
"MEMBER USES" means any existing use of Members, including (1) the use
of trails for hiking, horseback riding, cross-country skiing, ATVs and
snowmobiles and (2) the use of waters for fishing, swimming, boating, boat
launching and related activities and (3) the use of open areas for picnicking
and games.
"MERGER AGREEMENT" is defined in paragraph 33(b) of this Lease.
"MERGER PARTIES" is defined in paragraph 33(b) of this Lease.
"MERGER TRANSACTION" is defined in paragraph 33(b) of this Lease.
"MHC TRUST" is defined in paragraph 33(b) of this Lease.
"MOODY'S" means Moody's Investors Services, Inc. and its successors.
"MORTGAGE" means a mortgage, deed to secure debt, deed of trust or
other security instrument of like nature or any ground or underlying lease or
other document of like nature on all or any portion of the Premises or the
Underlying Premises given by Landlord or an affiliate of Landlord to a
Mortgagee.
"MORTGAGEE" means any holder of a Mortgage with respect to the
Premises, Underlying Premises, or any part thereof and which has been identified
as a Mortgagee pursuant to a written notice from Landlord to Tenant, which
notice shall contain an executed copy of the Mortgage.
"NEGOTIATION END DATE" is defined in paragraph 22(f)(v) of this Lease.
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"NET CASUALTY PROCEEDS" means the compensation and/or insurance
payments net of the reasonable expenses of collecting such amounts incurred by
Landlord, any Mortgagee (but only in its capacity as Proceeds Trustee) or
Tenant, and received by any Mortgagee, Landlord or Tenant in respect of any
portion of the Premises by reason of and on account of a fire or other Casualty.
"NET WORTH" means (i) the tangible net worth of a Person computed as
the excess of such Person's tangible assets over its tangible liabilities,
excluding deferred revenue, deferred selling expense deferred tax assets and
liabilities and excluding any obligations associated with this Lease reflected
on the balance sheet of Tenant as a liability, and which amount is (ii) set
forth on the most recent balance sheet of such Person, together with reasonable
back-up information utilized in arriving at such calculation of Net Worth,
certified by the chief financial officer of such Person.
"NEW CONTROL ENTITY" is defined in paragraph 25(b) of this Lease.
"NEW LEASE" is defined in paragraph 19(g)(i) of this Lease.
"NEW TENANT" is defined in paragraph 19(g)(i) of this lease.
"NON-FEE OCCUPANCY AGREEMENTS" means those leases or other occupancy
agreements for Non-Fee Sites described opposite each such Non-Fee Site listed on
Exhibit M attached hereto.
"NON-FEE RENT" means all sums which are due and payable by Landlord, as
subtenant pursuant to the Non-Fee Occupancy Agreements.
"NON-FEE SITES" means those Sites shown on Exhibit M attached hereto,
which Sites are leased by affiliates of Landlord pursuant to the Non-Fee
Occupancy Agreements and leased to Landlord pursuant to the Master Lease.
"NON-SELECTING ASSET/EQUITY PARTY" is defined in paragraph
22(f)(iii)(A) of this Lease.
"NON-SELECTING PARTY" is defined in paragraph 22(f)(i)(A) of this
Lease.
"OAKZANITA SITE" is defined in paragraph 9(a) of this Lease.
"OTHER TAXES" is defined in paragraph 6(b) of this Lease.
"OVERDUE RATE" means the greater of: (i) twelve percent (12%) per annum
or (ii) the sum of five percent (5%) plus the prime interest rate as reported
from time to time in The Wall Street Journal, but in any event, if lower, the
maximum annual interest rate allowed by law for business loans (not primarily
for personal, family or household purposes); provided, however, if The Wall
Street Journal is no longer in existence or ceases to publish such information,
Landlord shall use the prime interest rate as reported in a comparable publicly
available publication selected by Landlord in its sole discretion.
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"PER DIEM LATE CHARGE" means an amount equal to 0.1042% of the
aggregate annual Fixed Rent for the then current Lease Year. By way of example,
the Per Diem Late Charge which would be payable during the First Lease Year
would be $16,672.00 per day.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
trustee(s) of a trust, unincorporated organization, or government or
governmental authority, agency or political subdivision thereof.
"PERMITTED ENCUMBRANCES" means for each Site:
(a) Any of the following, which are not yet due and payable at the time
in question: (i) liens for water, sewer and other utility services and (ii)
taxes, assessments and other governmental charges (whether federal, state, local
or foreign) and Property Taxes;
(b) The easements, rights-of-way, encroachments, encumbrances,
restrictive covenants and other matters affecting the title to the Premises or
any part thereof (i) set forth on Exhibit C attached hereto and (ii) which
Landlord may, from time to time, place against the Premises pursuant to
paragraphs 2(b) and 33 of this Lease;
(c) Any Subordination, Non-Disturbance and Attornment Agreement(s),
recorded or otherwise, which are provided to Tenant pursuant to paragraph 17 of
this Lease or as otherwise entered into by and among Landlord, Tenant and any
Mortgagee;
(d) Liens for taxes (whether federal, state, local or foreign)
attributable to any taxable period whether before, on or after the Commencement
Date which are being contested in good faith in accordance with the terms of
this Lease by Tenant and for which Tenant has established adequate reserves;
(e) This Lease and the rights, privileges and entitlements of Tenant
hereunder;
(f) The Master Lease; and
(g) any Leasehold Mortgage granted in accordance with paragraph 19 of
this Lease.
"PERMITTED INVESTMENTS" means any one or more of the following
obligations or securities: (a) having a predetermined fixed dollar amount of
principal due at maturity that cannot vary or change; (b) bearing interest that
may either be fixed or variable but which is tied to a single interest rate
index plus a single fixed rate spread (if any) and moves proportionately with
that index; and (c) having the required ratings, if any, provided for in this
definition:
(i) direct obligations of, and obligations fully guaranteed as
to timely payment of principal and interest by, the United States of America or
any agency or instrumentality of the United States of America, the obligations
of which are backed by the full faith and credit of the United States of
America, that mature in thirty (30) calendar days or less after the date of
issuance and that do not have a "r" highlighter affixed to its rating;
(ii) time deposits, unsecured certificates of deposit, or
bankers' acceptances that mature in thirty (30) calendar days or less after the
date of issuance and are issued or held by any depository institution or trust
company incorporated or organized under the laws of the
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United States of America or any State thereof and subject to supervision and
examination by federal or state banking authorities, so long as the commercial
paper or other short-term debt obligations of such depository institution or
trust company are rated at least "A1" and "P1" by S&P and Moody's, respectively,
or such other rating as would not result in the downgrading, withdrawal or
qualification of the then-current Credit Rating to pass-through certificates, as
evidenced in writing, and that do not have a "r" highlighter affixed to its
rating;
(iii) repurchase agreements or obligations with respect to any
security described in clause (i) above where such security has a remaining
maturity of thirty (30) calendar days or less and where such agreement or
repurchase obligation has been entered into with a depository institution or
trust company (acting as principal) described in clause (ii) above;
(iv) money market funds that (i) are rated AAA by S&P and Aaa
by Moody's and (ii) have portfolio assets of at least $3,000,000,000;
(v) debt obligations bearing interest or sold at a discount
issued by any corporation incorporated under the laws of the United States of
America or any state thereof which mature in thirty (30) calendar days or less
from the date of issuance, which debt obligations have ratings from Moody's and
S&P in the highest category possible, or such other rating as would not result
in the downgrading, withdrawal or qualification of the then-current Credit
Rating to any pass-through certificate and that do not have a "r" highlighter
affixed to its rating; provided, however, that securities issued by any
particular corporation will not be Permitted Investments to the extent that
investment therein will cause the then-outstanding principal amount of
securities issued by such corporation and held in the accounts established
hereunder to exceed 10% of the sum of the aggregate principal balance and the
aggregate principal amount of all Permitted Investments in such accounts; and
(vi) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations) payable on demand or on a
specified date maturing in thirty (30) days or less after the date of issuance
thereof and which is rated in the highest category possible by Moody's and S&P
and that does not have a "r" highlighter affixed to such rating.
"PERMITTED USE" is defined in paragraph 3 of this Lease.
"PREMISES" is defined in paragraphs 2(a) and 2(b) of this Lease.
"PREMISES CONDITION STANDARD" is defined in paragraph 9(a) of this
Lease.
"PRIMARY TERM" is defined in paragraph 4(a) of this Lease.
"PROCEEDS TRUSTEE" means a federally insured bank or trust company
designated by Landlord, subject to the prior approval of Tenant, such approval
not to be unreasonably withheld, delayed or conditioned; provided, however, if a
Mortgage encumbers the Premises or Underlying Premises, the Mortgagee thereunder
may, at its option, be appointed Proceeds Trustee for so long as such Mortgage
remains outstanding and such Mortgagee does not control Landlord and is not
controlled by or under common control with Landlord.
"PROMOTIONS AND DISCOUNTS RESERVE" is defined in paragraph 39 of this
Lease.
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"PROMOTIONS AND DISCOUNTS RESERVE ACCOUNT" is defined in paragraph
31(b)(ii)(C) of this Lease.
"PROPERTY TAXES" is defined in paragraph 6(a) of this Lease.
"PROPOSED PURCHASER" is defined in paragraph 36(c) of this Lease.
"PURCHASE AGREEMENT" is defined in paragraph 22(f)(ii) of this Lease.
"PUT/CALL" is defined in paragraph 16(a)(ii) of this Lease.
"PUT/CALL DEFAULT" is defined in paragraph 16(a)(ii) of this Lease.
"RENT" is defined in paragraph 5(a)(iii) of this Lease.
"RESERVE ACCOUNTS" is defined in paragraph 31(b)(ii) of this Lease.
"RESTORATION FUND" is defined in paragraph 10 of this Lease.
"RESTRICTED JUNIOR PAYMENT" means: (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
or other equity security of, or ownership interest in, Tenant or any of its
Subsidiaries now or hereafter outstanding, except a dividend payable solely in
shares of that class of stock to the holders of that class; (ii) any redemption,
conversion, exchange, retirement, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any shares of any class of
stock or other equity security of, or ownership interest in, Tenant or any of
its Subsidiaries now or hereafter outstanding; and (iii) any payment made to
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire shares of any class of stock or other equity security
of, or ownership interest in, Tenant or any of its Subsidiaries now or hereafter
outstanding.
"REVISED ROFO PURCHASE AGREEMENT" is defined in paragraph 36(d) of this
Lease.
"ROFO" is defined in paragraph 36(a) of this Lease.
"ROFO MATERIAL PROVISIONS" is defined in paragraph 36(a) of this Lease.
"ROFO NOTICE" is defined in paragraph 36(a) of this Lease.
"ROFO NOTICE DATE" is defined in paragraph 36(a) of this Lease.
"ROFO NOTICE PRICE" is defined in paragraph 36(a) of this Lease.
"ROFO PURCHASE AGREEMENT" is defined in paragraph 36(a) of this Lease.
"RPI ACCOUNTS" means those certain deposit accounts nos. 0042024190,
0042850552 and 153492600157, captioned the "RPI Accounts Payable Account" the
"RPI Credit Card Receipts Account" and the "RPI Receipts Account", respectively,
each maintained at the Bank and all as more particularly described on Exhibit I.
"S&P" means Standard & Poor's Rating Service and its successors or
assigns.
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"SHARES" is defined on Exhibit R attached hereto.
"SITE" is defined in paragraph 2(b) of this Lease.
"SITE ASSESSMENTS" is defined in paragraph 26(d) of this Lease.
"SITE REVIEWERS" is defined in paragraph 26(d) of this Lease.
"STOCK PURCHASE AGREEMENT" is defined on Exhibit R attached hereto.
"SUBLEASED SITES" means those Sites leased to Landlord pursuant to the
Master Lease.
"SUBLEASING SUBSIDIARIES" means those Subsidiaries listed on Exhibit H
attached hereto, which Subsidiaries sublease the Sites or portions thereof from
Tenant pursuant to the Tenant Subleases.
"SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT" is defined in
paragraph 17(a) of this Lease.
"SUBSIDIARIES" means those corporations, partnerships, limited
liability companies, associations or other business entities which are wholly
owned and controlled by Tenant. A true, accurate and complete list of the
Subsidiaries on the date hereof is set forth on Exhibit E attached hereto.
Exhibit E may be amended from time to time in accordance with the terms hereof.
Each of the Subsidiaries is herein individually called a "SUBSIDIARY".
"SUBSIDIARY GUARANTY" means that certain Secured Guaranty dated as of
the date of this Lease from each Subsidiary marked with an asterisk on Exhibit E
hereto, including the Subleasing Subsidiaries, together with any additional
Subsidiaries permitted in paragraph 38(a) of this Lease, to Landlord, pursuant
to which, among other things, each such Subsidiary unconditionally guarantees
the payment and performance of Tenant's obligations under the Lease, all upon
the terms and subject to the conditions set forth therein, as such Subsidiary
Guaranty is amended, modified or restated from time to time. The Subsidiary
Guaranty is secured by a lien on the assets of each Subsidiary, including each
Subsidiary's right, title and interest in and under the Membership Contracts.
"SUBSIDIARY PLEDGE" means all of those certain Pledge Agreements by all
Subsidiaries marked with an asterisk on Exhibit E hereto, including the
Subleasing Subsidiaries, together with any additional Subsidiaries permitted in
paragraph 38(a) of this Lease, in favor of Landlord, dated of even date
herewith, pursuant to which each such Subsidiary has pledged one hundred percent
(100%) of its assets to Landlord, including each such Subsidiary's right, title
and interest in and under the Membership Contracts but excluding any such
Subsidiary's right, title and interest in and to the land, equipment and
improvements relating solely to any membership campground owned by such
Subsidiary but which is not the subject of this Lease.
"TAX RESERVE" is defined in paragraph 6(f) of this Lease.
"TAX RESERVE ACCOUNT" is defined in paragraph 31(b)(ii)(A) of this
Lease.
"TENANT" is defined in the first paragraph of this Lease.
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"TENANT PLEDGE" means that certain Pledge Agreement by Tenant in favor
of Landlord, dated of even date herewith, pursuant to which Tenant pledged to
Landlord one hundred percent (100%) of the ownership interests in each
Subsidiary marked with an asterisk on Exhibit E hereto, including the Subleasing
Subsidiaries, together with any additional Subsidiaries permitted in paragraph
38(a) of this Lease.
"TENANT SUBLEASES" means those sublease agreements of even date
herewith between the Subleasing Subsidiaries and Tenant, the form of such
sublease agreements is attached hereto as Exhibit H.
"TENANT SUCCESSOR" is defined in paragraph 25(b) of this Lease.
"TENANT ASSET PURCHASE AGREEMENT" is defined in Exhibit S attached
hereto.
"TENANT'S ASSETS" is defined in paragraph 22(f)(iii) of this Lease.
"TENANT'S BUSINESS" is defined in paragraph 38(a) of this Lease.
"TENANT'S EQUITY INTEREST" is defined in paragraph 22(f)(iii) of this
Lease.
"TENANT EQUITY PURCHASE AGREEMENT" is defined in Exhibit V attached
hereto.
"TENANT EQUITY SHARES" is defined in Exhibit V attached hereto.
"TENANT SELLER" is defined in paragraph 38(e) of this Lease.
"TENANT'S MAINTENANCE, REPAIR AND REPLACEMENT ITEMS" is defined in
paragraph 9(a) of this Lease.
"TENANT'S MANNER OF OPERATION" is defined in paragraph 39 of this
Lease.
"TENANT'S PURCHASE ELECTION NOTICE" is defined in paragraph 22(f)(iii)
of this Lease.
"TENANT'S PURCHASE TERMINATION DATE" is defined in paragraph 22(f)(ii)
of this Lease.
"TENANT'S REOFFER NOTICE" is defined in paragraph 36(d) of this Lease.
"TENANT'S TRADE FIXTURES" means all personal property of Tenant in or
on the Premises, affixed or not, which is not necessary for the operation of the
Improvements, including tire racks and handling equipment, pallets, fork lift
trucks, lift racks, tools, office computers, and other equipment or machines
owned or leased from/by Tenant, and specifically excludes the Equipment.
"TERM" is defined in paragraph 4(b) of this Lease.
"THIRD APPRAISER" is defined in paragraph 16(a)(ii)(B) of this Lease.
"TRANSFERORS" is defined in Exhibit R attached hereto.
"TRANSFERRED ENTITY" is defined in Exhibit V attached hereto.
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"TREASURY RATE" means the yield to maturity of a debt obligation of the
United States Treasury having a maturity date closest to but not earlier than
the then-existing remaining Term of this Lease (excluding any then-unexercised
options for any Extension Terms) and, if more than one have been issued with
such maturity date, then using the debt obligation first issued on or closest to
the date of any termination by Landlord under this Lease.
"TRUST" is defined in paragraph 16(a)(i) of this Lease.
"TTA" is defined in paragraph 33(b) of this Lease.
"UCC" means the Uniform Commercial Code as in effect in the State of
Illinois.
"UNDERLYING PREMISES" means, collectively, the interest in the Land,
the Equipment and the Improvements, together with any easements, rights and
appurtenances in connection therewith or belonging to said Land and Improvements
which is leased by an affiliate of Landlord to Landlord under the Master Lease.
"UNDERLYING PREMISES PURCHASE NOTICE" is defined in paragraph 22(f)(ii)
of this Lease.
"VALUATION NOTICE" is defined in paragraph 16(a)(ii)(A) of this Lease.
"VALUATION PERIOD" is defined in paragraph 16(a)(ii)(A) of this Lease.
"VARIANCE PROGRAM" is defined in paragraph 39 of this Lease.
"VARIANCE PROGRAM DEPOSIT" is defined in paragraph 39 of this Lease.
"WORKING CAPITAL LENDER" means the lender under the Working Capital
Loan Documents, or any successor lender under the Working Capital Loan
Documents.
"WORKING CAPITAL INDEBTEDNESS" means Indebtedness (including letters of
credit) incurred by Tenant owing to Working Capital Lender pursuant to and in
accordance with the Working Capital Loan Documents or pursuant to any
extensions, amendments, replacements or refinancings of the Indebtedness
evidenced by the Working Capital Loan Documents.
"WORKING CAPITAL LOAN DOCUMENTS" means that certain loan agreement
between Tenant and the Working Capital Lender, and any notes issued in
connection therewith by Tenant or any of its Subsidiaries payable to the Working
Capital Lender relating to a working capital loan facility of Tenant
substantially similar in terms and amount to the working capital loan facility
governed by the Loan Agreement dated as of July 23, 2003 by and between Tenant
and the Working Capital Lender, and all other instruments, documents and
agreements executed and delivered by any Affiliate to, for or in favor of the
Working Capital Lender in connection with the transactions contemplated under
any of the foregoing documents and includes all documents that evidence or
secure extensions, amendments, replacements and refinancings of the Working
Capital Indebtedness.
"YOSEMITE EXCESS LAND AGREEMENT DATE" is defined in paragraph 33(e) of
this Lease.
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2. DEMISE OF PREMISES AND OTHER RIGHTS
(a) Landlord hereby demises and leases to Tenant and Tenant hereby
leases and rents from Landlord the Premises, IN ITS "AS IS" CONDITION, SUBJECT
TO THE EXISTING STATE OF TITLE (WITHOUT EXPRESS OR IMPLIED WARRANTY OF LANDLORD
WITH RESPECT TO THE CONDITION, QUALITY, REPAIR OR FITNESS OF THE PREMISES FOR A
PARTICULAR USE OR TITLE THERETO, ALL SUCH WARRANTIES BEING HEREBY DISCLAIMED BY
LANDLORD AND WAIVED AND RENOUNCED BY TENANT). The "PREMISES" consists of,
collectively, Landlord's interest in the Land, the Equipment and the
Improvements, together with any easements, rights and appurtenances in
connection therewith or belonging to said Land and Improvements. The foregoing
disclaimer in this paragraph 2(a) has been negotiated by Landlord and Tenant,
each being represented by independent counsel, and is intended as a complete
negation of any representation or warranty by Landlord, express or implied, with
respect to the condition, quality, repair, or fitness of the Premises for a
particular use, or title thereto.
(b) The Premises includes the Land, Equipment and Improvements located
at each separate location, each individually is herein called a "SITE," and
together are herein called the "SITES." The parties have legally described the
Land leased hereunder in a manner which excludes the Excess Land.
(c) Landlord may, with Tenant's prior written consent, which shall not
be unreasonably withheld, conditioned or delayed, (1) encumber any Excess Land
Property with such cross easements, reciprocal easements, agreements, covenants,
restrictions and other encumbrances, and (2) at Landlord's expense, connect to
any sewer, water or waste water system currently existing on or servicing the
Premises, in each case as Landlord may deem necessary, desirable or advisable to
facilitate future development of the Excess Land adjacent to such Excess Land
Property, and nothing contained herein shall limit or restrict such right,
provided that such instruments do not diminish Tenant's rights or increase
Tenant's obligations under this Lease in a material and adverse manner and
further provided that with respect to any such connection to any sewer, water or
waste water system then existing on or servicing the Premises that sufficient
capacity exists for such connection and provided that Landlord shall, on demand,
pay Tenant for Landlord's pro rata share of ongoing expenses related to such
utility hook-up. Tenant acknowledges and agrees that this Lease shall be subject
and subordinate to all such instruments and no further instrument of
subordination shall be required for its operation.
(d) Tenant may, from time to time, request that Landlord grant or
obtain easements over the Excess Land for water, electricity, gas and telephone
lines to serve and benefit the Premises on the Excess Land Property, at such
locations and containing such provisions as Landlord may approve, which approval
shall not be unreasonably withheld, conditioned or delayed provided that the
location of any such easements shall not adversely affect the development of the
Excess Land. All costs and expenses for any such utility easements shall be paid
by Tenant.
(e) Tenant may, from time to time, request that Landlord grant or
obtain for Tenant and its employees, invitees and guests of the Excess Land
Property a temporary license to establish, maintain and use any Member Uses on
the Excess Land adjacent thereto, at such locations and subject to such rules
and agreements (including insurance requirements) as
18
Landlord may approve, which approval shall not be unreasonably withheld,
conditioned or delayed, provided that the use and location of such Member Uses
shall not adversely affect the development of the Excess Land. All costs and
expenses for such temporary licenses shall be paid for by Tenant as Additional
Rent. Effective as of the Commencement Date, Landlord hereby grants to Tenant
and its employees, invitees and guests a temporary license to use and maintain
in the locations on the Excess Land used and maintained as of the Commencement
Date, all existing Member Uses in effect as of the Commencement Date. Tenant
agrees to extend the insurance coverage otherwise required by this Lease to
include all uses by Tenant and its employees, invitees and guests of the Excess
Land.
(f) If Landlord and Tenant are unable to agree upon a matter which is
the subject of paragraphs 2(c), 2(d) or 2(e) above, such matter shall be subject
to the arbitration procedures set forth on Exhibit U attached hereto.
3. USE
Tenant shall, subject to applicable zoning restrictions and any
recorded covenants or restrictions in the public records on the Commencement
Date, use and occupy the Premises, including each Site, only (i) predominantly
as a membership campground, together with minimal daily stay campground uses,
(ii) for cabin rentals, (iii) pursuant to Tenant's extended vacation, stay and
storage programs, (iv) in connection with lease arrangements entered into with
farmers prior to the date hereof and (v) for other lawful purposes which are
both associated with and related thereto (including the following ancillary
uses: ATM machines, cafeteria/food service and laundry facilities)
(collectively, the "PERMITTED USE"). Tenant shall not use, suffer or permit the
Premises, or any portion thereof, to be used by Tenant, any third party or the
public, as such, without restriction or in such manner as would be reasonably
likely to materially adversely affect Landlord's title to or interest in the
Premises, or in such manner as would be reasonably likely to make possible a
material claim or claims of adverse possession by the public, as such, or third
parties, or of implied dedication of the Premises, or any portion thereof.
4. TERM
(a) The primary term of this Lease (the "PRIMARY TERM") shall be for a
period of approximately fifteen (15) years, beginning on the Commencement Date
and ending on the Lease Expiration Date.
(b) Tenant shall have the right, at its option, to extend the Primary
Term of this Lease for two (2) consecutive extension terms (the "EXTENSION
TERMS"), each being five (5) years in length. Each Extension Term shall commence
on the day after the expiration of the preceding term (each, the "EXTENSION TERM
COMMENCEMENT DATE") and shall expire on the fifth (5th) anniversary of the Lease
Expiration Date in the case of the first (1st) Extension Term, and on the tenth
(10th) anniversary of the Lease Expiration Date in the case of the second (2nd)
Extension Term. The options to extend the Term of this Lease as described above
shall not be deemed exercised by Tenant unless at least twenty-four (24) months
prior to the Lease Expiration Date for the Primary Term or at least twenty-four
(24) months prior to the expiration of the Extension Term for the first (1st)
Extension Term, Tenant shall have delivered written notice to Landlord of
Tenant's irrevocable election to so extend this Lease at the end of the Primary
Term or the first (1st) Extension Term, as applicable. Tenant's failure to
deliver one (1) such timely notice to
19
Landlord shall terminate all future Extension Terms, if any, following the
Extension Term to which such notice specifically relates. Subject to the
provisions of paragraph 5 of this Lease, the terms and conditions of this Lease
shall apply to each Extension Term with the same force and effect as if such
Extension Term had originally been included in the Primary Term of the Lease.
The right of Tenant to exercise its rights with respect to the Extension Terms
shall be conditioned upon this Lease being in full force and effect and no Event
of Default then existing as of the Lease Expiration Date (for the first (1st)
Extension Term), or expiration of the first (1st) Extension Term (for the second
(2nd) Extension Term). The Primary Term, together with any Extension Term with
respect to which Tenant properly exercises its option, and for which the
conditions related thereto are satisfied, shall constitute the "TERM" of this
Lease.
(c) Notwithstanding the foregoing, the Term of this Lease with respect
to the Non-Fee Sites shall terminate upon the expiration of the applicable
Non-Fee Occupancy Agreements and Tenant shall not be entitled to any abatement
or reduction of Rent, nor shall the obligations of Tenant under this Lease be
affected, by reason of such expiration of the applicable Non-Fee Occupancy
Agreements. Landlord shall not without Tenant's consent amend the Non-Fee
Occupancy Agreements such that Tenant would be materially adversely affected.
5. RENTAL; GUARANTY
(a) Tenant shall pay to Landlord the following amounts as Rent for the
Premises:
(i) During the Term of this Lease, Tenant shall pay to
Landlord, as fixed annual rent, the amount of annual fixed rent specified in the
Basic Lease Information (as defined therein, "FIXED RENT").
(ii) During the Term of this Lease, Tenant shall pay, as
Additional Rent, all sums, including Non-Fee Rent, due and payable by the tenant
under the Non-Fee Occupancy Agreements.
(iii) Throughout the Term of this Lease, Tenant shall pay, as
Additional Rent, all other amounts of money and charges required to be paid by
Tenant under this Lease, whether or not such amounts of money or charges are
designated Additional Rent. As used in this Lease, "RENT" shall mean and include
all Fixed Rent and Additional Rent payable by Tenant in accordance with this
Lease.
(b) It is the intention of Landlord and Tenant that the Fixed Rent
payable by Tenant to Landlord during the entire Term of this Lease shall be
absolutely net of all costs and expenses incurred in connection with the
management, operation, maintenance, repair and replacement of the Premises in
accordance with this Lease. Landlord shall have no obligations or liabilities
whatsoever with respect to the management, operation, maintenance, repair or
replacement of the Premises during the Term of this Lease, and Tenant shall
manage, operate, maintain, repair and replace the Premises in accordance with
this Lease and shall pay all costs and expenses incurred in connection therewith
before such costs or expenses become delinquent. Without limiting the generality
of the foregoing, throughout the entire Term of this Lease, Tenant shall pay, as
Additional Rent, all premiums for all property and liability insurance covering
the Premises required under this Lease, all Property Taxes and all Other Taxes
that accrue during or are
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allocable to the Term of this Lease, and all Property Taxes and Other Taxes
allocable to any period of time prior to the Term of this Lease.
(c) Tenant shall pay all Fixed Rent to Landlord, in advance, on or
before the first Business Day of each and every calendar month during the Term
of this Lease (other than the payment due on the Commencement Date which is due
as set forth in the Basic Lease Information) without notice, demand, deduction
or offset, in lawful money of the United States of America, to the wire transfer
address of Landlord specified in the Basic Lease Information, or to such other
accounts and/or Person or Persons or at such other place or places as Landlord
may from time to time designate in writing (or otherwise so there are collected
funds available to Landlord on the due date). If the Fixed Rent is paid more
than five (5) Business Days after its due date, the Per Diem Late Charge shall
be due and payable for each day thereafter until the Fixed Rent is paid in full.
Tenant shall pay all Additional Rent when due. Tenant shall pay all Fixed Rent
to Landlord without notice.
(d) Tenant acknowledges and agrees that it was a condition precedent to
Landlord entering into this Lease that Landlord receive the Guaranty from
Guarantors and the Subsidiary Guaranty from the Subsidiaries marked with an
asterisk on Exhibit E, which Guaranty and Subsidiary Guaranty are being entered
into contemporaneously with the execution of this Lease. Tenant hereby
represents and warrants to Landlord as of the date hereof and covenants to
Landlord that throughout the Term of this Lease, Guarantors shall be bound by
the terms of the Guaranty to Landlord and the Subsidiaries marked with an
asterisk on Exhibit E shall be bound by the terms of the Subsidiary Guaranty to
Landlord.
6. TAXES
(a) Tenant shall pay, as Additional Rent, all Property Taxes prior to
the assessment of any interest or penalty for late payment and shall indemnify
and hold harmless Landlord, its affiliates, officers, directors, stockholders,
employees, representatives, members, partners and agents, and the successors and
assigns of each of the foregoing (collectively, the "LANDLORD PARTIES"), on an
After-Tax Basis from and against any such Taxes (including any penalties and
interest with respect thereto) (subject to Tenant's rights under this paragraph
6(a) to make payment thereof in installments or under paragraph 6(e) of this
Lease or to protest Property Taxes); provided, however, if and to the extent
Landlord or Mortgagee is holding Tenant's estimated payments thereof pursuant to
paragraph 6(f) of this Lease and provided no Event of Default then exists,
Landlord or Mortgagee shall instead make such payments timely on Tenant's
behalf; provided, further, if any such Property Taxes may legally be paid in
installments, Tenant may, at its option, pay such Property Taxes in such
installments together with any interest due thereon provided that Tenant shall
have paid all such installments, or provided to Landlord or Mortgagee such
amounts as are necessary for the payment of all such installments, prior to the
expiration or earlier termination of this Lease. "PROPERTY TAXES" shall mean all
taxes, assessments, excises, levies, fees and charges (and any tax, assessment,
excise, levy, municipal service fee, fee or charge levied wholly or partly in
lieu thereof or as a substitute therefor or as an addition thereto) of every
kind and description, general or special, ordinary or extraordinary, foreseen or
unforeseen, secured or unsecured, whether or not now customary or within the
contemplation of Landlord and Tenant, that are levied, assessed, charged,
confirmed or imposed by any public or government authority on or against, or
otherwise with respect to, the Premises and Underlying Premises, or any part
thereof or any personal property used in connection with
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the Premises and Underlying Premises, including Landlord's franchise taxes based
upon gross receipts with respect to the receipt of Rent (but not including
Excluded Taxes). Property Taxes shall not include any Other Taxes or Excluded
Taxes arising out of or levied in connection with this Lease, in each case, of
Landlord, unless and only to the extent levied or assessed against Landlord in
whole or in part in lieu of, as a substitute for, or as an addition to any
Property Taxes.
(b) Tenant shall pay, as Additional Rent, all Other Taxes prior to the
assessment of any interest or penalty for late payment and shall indemnify and
hold harmless Landlord and the Landlord Parties on an After-Tax Basis from and
against any such Taxes (including any penalties and interest with respect
thereto) (subject to Tenant's rights under this paragraph 6(b) and paragraph
6(e) of this Lease to make payment in installments or to protest Other Taxes);
provided, however, if Landlord or Mortgagee is holding Tenant's estimated
payments thereof pursuant to paragraph 6(f) of this Lease and provided no Event
of Default then exists, Landlord or Mortgagee shall instead make such payments
timely on Tenant's behalf; provided, further, if any such Other Taxes may
legally be paid in installments, Tenant may, at its option, pay such Other Taxes
in such installments together with any interest due thereon provided that Tenant
shall have paid all such installments, or provided to Landlord or Mortgagee such
amounts as are necessary for the payment of all such installments, prior to the
expiration or earlier termination of this Lease. "OTHER TAXES" shall mean all
taxes, assessments, excises, levies, fees and charges, including all payments
related to the cost or occupation of providing facilities or services, whether
or not now customary or within the contemplation of Landlord and Tenant, that
are levied, assessed, charged, confirmed or imposed by any public or government
authority upon, or measured by, or reasonably attributable to (i) the Premises
and Underlying Premises, (ii) the cost or value of Tenant's equipment,
furniture, fixtures and other personal property located in the Premises or the
cost or value of any leasehold improvements made in or to the Premises by or for
Tenant, regardless of whether title to such improvements is vested in Tenant or
Landlord, (iii) any amount payable under this Lease, including any gross
receipts tax or excise tax levied by any public or government authority with
respect to the receipt of any such amount, (iv) the possession, leasing,
operation, management, maintenance, alteration, repair, use or occupancy by
Tenant of the Premises, or (v) this transaction or any document to which Tenant
is a party creating or transferring an interest or an estate in the Premises or
Underlying Premises. "Other Taxes" shall not include any Property Taxes or any
Excluded Taxes arising out of or levied in connection with this Lease, in each
case, of Landlord, unless and only to the extent levied or assessed against
Landlord in whole or in part in lieu of, as a substitute for, or as an addition
to any Other Taxes.
(c) Except for any Excluded Taxes imposed on or with respect to the
Rent, if at any time during the Term any method of taxation shall be such that
there shall be levied, assessed or imposed on Landlord, or on the Rent, or on
the Premises, Underlying Premises, or any portion thereof, a capital levy, gross
receipts tax on the Rent, occupational license tax or franchise tax, based upon
gross receipts with respect to the Rent, but not including any income or
franchise taxes based upon, measured by or calculated with respect to net income
or profits, Tenant, to the extent permitted by law, covenants to pay and
discharge the same, it being the intention of the parties hereto that the Fixed
Rent to be paid hereunder shall be paid to Landlord absolutely net without
deduction or charge of any nature whatsoever, foreseeable or unforeseeable,
ordinary or extraordinary, or of any nature, kind or description, except for
Excluded Taxes and as otherwise expressly provided in this Lease.
Notwithstanding the foregoing, to the extent Landlord incurs
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any tax liability pursuant to the Trails Reorganization (as defined in the
Merger Agreement) or for a Pre-Closing Taxable Period (as defined in the Merger
Agreement), payment of such tax liabilities, if any, shall not be governed by
this Lease but shall be governed by the Merger Agreement.
(d) Tenant covenants to furnish Landlord, within fifteen (15) calendar
days after written request by Landlord official receipts of the appropriate
taxing authority, if any, or other appropriate proof reasonably satisfactory to
Landlord, evidencing the payment of all Impositions.
(e) Tenant shall have the right to contest the amount or validity, in
whole or in part, of any Property Tax or Other Tax or to seek a reduction in the
valuation of the Premises and/or Underlying Premises, as assessed for real
estate property tax purposes by appropriate proceedings diligently conducted in
good faith (but only after the deposit or payment (whether under protest or
otherwise) of any amounts required by applicable law to stay or prevent
collection activities). Landlord shall not be required to join in any proceeding
referred to in this paragraph 6(e) except to the extent required by law, in
which event Landlord shall, upon written request by Tenant, join in such
proceedings or permit the same to be brought in its name, all at Tenant's
expense. Landlord agrees to provide, at Tenant's expense, whatever assistance
Tenant may reasonably require in connection with any such contest. Tenant
covenants that Landlord shall not suffer or sustain any costs or expenses
(including counsel fees) or any liability in connection with any such
proceeding. No such consent shall subject Landlord to any civil liability or the
risk of any criminal liability or forfeiture.
(f) Tenant acknowledges that Landlord will establish and maintain a
reserve account for the payment of Property Taxes and Other Taxes relating to
the Premises and Underlying Premises which shall become due and payable during
each Lease Year, as reasonably estimated by Landlord on the basis of assessments
and bills and estimates thereof ("TAX RESERVE") in accordance with paragraph 31
of this Lease. Landlord shall apply such amounts paid by Tenant under this
paragraph 6(f) (including any amounts tendered by Tenant which are intended for
interest if Tenant shall have elected to make such payments in installments) as
set forth in paragraph 31 of this Lease. Landlord and Mortgagee shall make no
charge for holding and applying such amounts.
(g) Landlord will, within thirty (30) calendar days after receipt,
reimburse Tenant for any refund of Property Taxes or Other Taxes received by
Landlord or Mortgagee as a result of any tax contest relating to the Term.
(h) In addition to the forgoing (and without duplication), if (x)
Landlord or any affiliate of Landlord incurs any tax, assessment, excise, lien,
fee, charge or liability, including franchise, lease and income taxes, arising
from the Master Lease from MHC TT, Inc., a Delaware corporation, as landlord, to
Landlord, as tenant (the "MHC TT MASTER LEASE") (including the items described
in clause (i) of the definition of Excluded Taxes, but excluding property taxes
attributable to the Excess Land, collectively, the "MASTER LEASE ADDITIONAL
Obligations") and (y) Landlord and its affiliates would not have incurred the
Master Lease Additional Obligations had the Landlord owned the fee interest in
the Fee Sites owned by MHC TT, Inc. and the MHC TT Master Lease not existed,
then the Tenant shall pay the Master Lease Additional Obligations on an
After-Tax Basis, as Additional Rent prior to the assessment of any
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interest or penalty for late payment and shall indemnify and hold harmless
Landlord and the Landlord Parties on an After-Tax Basis from and against any
claims for payment thereof.
7. NET LEASE; NON-TERMINABILITY
(a) This is an absolutely net lease and the Fixed Rent, Additional Rent
and all other sums payable hereunder by Tenant shall be paid without notice
(except as expressly provided herein), demand, set-off, counterclaim, abatement,
suspension, deduction or defense. It is the intention of the parties hereto that
the Fixed Rent shall be an absolutely net return to Landlord throughout the Term
of this Lease. In order that such Rent shall be absolutely net to Landlord,
Tenant shall pay when due, and save and hold harmless Landlord and the Landlord
Parties on an After-Tax Basis from and against, any and all costs, charges and
expenses attributable to the Premises or Underlying Premises, including all
fines, fees, penalties, charges (including governmental charges), assessments,
sewer rents, Impositions, insurance premiums as may be required from time to
time by Landlord or Mortgagee pursuant to this Lease, utility expenses, carrying
charges, costs, expenses and obligations of every kind and nature whatsoever,
general and special, ordinary and extraordinary, foreseen and unforeseen, the
payment for which Landlord or Tenant is, or shall become, liable by reason of
any rights or interest of Landlord or Tenant in, to or under the Premises or
Underlying Premises or this Lease or in any manner relating to the ownership,
leasing, operation, management, maintenance, repair, rebuilding, use or
occupation of the Premises or Underlying Premises, or of any portion thereof;
provided, however, that nothing herein contained shall be construed as imposing
upon Tenant any obligation to pay any Excluded Taxes of Landlord arising out of,
or levied in connection with, this Lease or Landlord's right or interest in the
Premises or the Rent. All fees and expenses incurred in connection with the
negotiation and execution of this Lease, including all legal, accounting,
financial advisory, title insurance, environmental inspection, consulting and
all other fees and expenses of third parties incurred by a Person in connection
with the negotiation of the terms and conditions of this Lease shall be the
obligation of the respective Person incurring such fees and expenses; provided,
however that Tenant, on the one hand, and Landlord, on the other hand, shall
share equally the costs related to preparation of surveys of the Sites listed on
Exhibit F attached hereto.
(b) This Lease shall not terminate, nor shall Tenant have any right to
terminate this Lease, except as expressly provided in paragraphs 14 and 36 of
this Lease, nor shall Tenant be entitled to any abatement or reduction of Rent
hereunder except as required by paragraph 14 of this Lease, nor shall the
obligations of Tenant under this Lease be affected, by reason of (i) any damage
to or destruction of all or any part of the Premises from whatever cause; (ii)
subject to paragraph 14 of this Lease, the taking of the Premises, Underlying
Premises, or any portion thereof by condemnation, requisition or eminent domain
proceedings; (iii) the prohibition, limitation or restriction of Tenant's use of
all or any part of the Premises, or any interference with such use; (iv) any
eviction by paramount title or otherwise; (v) Tenant's acquisition or ownership
of all or any part of the Premises or Underlying Premises otherwise than as
expressly provided herein; (vi) any default on the part of Landlord under this
Lease, or under any other agreement to which Landlord and Tenant may be parties;
(vii) Landlord becoming dispossessed of any portion of the Premises subleased by
Landlord pursuant to the Non-Fee Occupancy Agreements; or (viii) any other cause
whether similar or dissimilar to the foregoing, any present or future law to the
contrary notwithstanding. It is the intention of the parties hereto that the
obligations of Tenant hereunder shall be separate and independent covenants and
agreements,
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that the Fixed Rent, the Additional Rent and all other sums payable by Tenant
hereunder shall continue to be payable in all events and that the obligations of
Tenant hereunder shall continue unaffected unless the requirement to pay or
perform the same shall have been terminated pursuant to any express provision of
this Lease. Tenant agrees that Tenant shall not be relieved of the obligations
to pay the Fixed Rent or any Additional Rent in case of damage to or destruction
of or condemnation (except as expressly provided in paragraph 14 of this Lease)
of the Premises or the Underlying Premises.
(c) Tenant agrees that it shall remain obligated under this Lease in
accordance with its terms, and that it shall not take any action to terminate,
rescind or void this Lease, notwithstanding (i) any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution or
winding-up or other proceeding affecting Landlord or its successor in interest,
or (ii) any action with respect to this Lease which may be taken by any trustee
or receiver of Landlord or its successor in interest or by any court in any such
proceeding.
(d) Tenant waives all rights which may now or hereafter be conferred by
law (i) to quit, terminate or surrender this Lease or the Premises or any part
thereof, or (ii) to any abatement, suspension, deferment or reduction of the
Fixed Rent, Additional Rent or any other sums payable under this Lease, except
as otherwise expressly provided herein.
8. SERVICES
Tenant shall, at Tenant's sole cost and expense, be responsible for
supplying the Premises with electricity, heating, ventilating and air
conditioning, water, natural gas, lighting, replacement for all lights, restroom
supplies, telephone service, window washing, security service, janitor, pest
control and disposal services (including, if applicable, hazardous and
biological waste disposal), and such other services as Tenant determines to
furnish to the Premises. Landlord shall not be in default hereunder or be liable
for any damage or loss directly or indirectly resulting from, nor shall the
Fixed Rent or Additional Rent be abated or a constructive or other eviction be
deemed to have occurred by reason of, the installation, use or interruption of
use of any equipment in connection with the furnishing of any of the foregoing
services, any failure to furnish or delay in furnishing any such services,
whether such failure or delay is caused by accident or any condition beyond the
control of Landlord or Tenant or by the making of repairs or improvements to the
Premises, or any limitation, curtailment, rationing or restriction on use of
water, electricity, gas or any form of energy serving the Premises, whether such
results from mandatory governmental restriction or voluntary compliance with
governmental guidelines. Tenant shall pay the full cost of all of the foregoing
services and all other utilities and services supplied to the Premises as
Additional Rent.
9. REPAIRS AND MAINTENANCE; REPLACEMENT
(a) Tenant shall, at its own sole cost and expense, keep the Premises,
including each Site therein, in substantially the same order and condition as
existed on the Commencement Date, (provided that the order and condition
existing on the Commencement Date shall be deemed to include that all Immediate
Repairs required to be performed pursuant to this Lease and all repairs to the
Site commonly known as Oakzanita Springs in San Diego County, California (the
"OAKZANITA SITE"), have been completed) (the "PREMISES CONDITION STANDARD"), at
all times on and after the Commencement Date to and including the date of the
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termination of the Term, by lapse of time or otherwise. Tenant shall timely and
properly maintain, repair and replace all of the Premises and all of its
component parts (the "TENANT'S MAINTENANCE, REPAIR AND REPLACEMENT ITEMS"),
including parking surfaces and stripes, driveways, roads, private streets,
picnic tables, campground sites and/or pads, pedestals, campground and
recreational vehicle infrastructure, all landscaping, mechanical systems,
electrical and lighting systems, plumbing and sewage systems, wastewater
systems, water plants and related facilities, septic system facilities, fixtures
and appurtenances, interior and exterior walls, roofs, foundations, floor slabs,
columns and structural elements so as to maintain each Site in accordance with
the Premises Condition Standard and to preserve and protect the useful life,
utility and value of such components, and in all events so as to preserve the
effectiveness of any warranty relating thereto. Tenant shall deliver to Landlord
a written statement showing all removals and replacements of such systems or
components with a cost exceeding $100,000.00 during the preceding calendar year.
Landlord may, upon two (2) Business Days' prior notice, cause independent
private inspectors to make inspections of any building and building systems on
the Premises or segments thereof to determine Tenant's compliance under this
paragraph 9. Tenant shall pay the cost of one (1) such inspection at each Site
by or on behalf of Landlord in each calendar year; provided, however, if such
inspection by Landlord reveals that the Premises, or any material portion
thereof, including any equipment thereon, is not substantially in the condition
required by this Lease, then Tenant shall pay for such reasonable additional
inspections performed by Landlord through the inspection approving the condition
of such Premises as being substantially in conformity with this Lease.
(b) Landlord may, but is not required to, after two (2) Business Days
notice to Tenant (except in the case of emergency, in which case Tenant shall be
given notice contemporaneously with entry), enter the Premises and make such
repairs, alterations, improvements, additions, replacements or maintenance as
Landlord deems necessary to cure any Event of Default of Tenant hereunder which
remains uncured after the expiration of any notice and cure period provided
under this Lease, as applicable, in a diligent fashion, and Tenant shall pay
Landlord as Additional Rent forthwith (and in any event within thirty (30) days)
after being billed for same by Landlord the cost thereof plus an administrative
fee of five percent (5%) of such cost, which bill shall be accompanied by
reasonable supporting documentation. Such amounts shall bear interest at the
Overdue Rate from the date of expenditure by Landlord to the date of repayment
by Tenant.
(c) It is intended by Tenant and Landlord that Landlord shall have no
obligation, in any manner whatsoever, to repair or maintain the Premises (or any
fixture or equipment therein), whether structural or nonstructural, all of which
obligations are intended, as between Landlord and Tenant, to be those of Tenant.
Tenant expressly waives the benefit of any statute now or in the future in
effect which would otherwise afford Tenant the right to make repairs at
Landlord's expense or to terminate this Lease because of Landlord's failure to
keep the Premises in good order, condition and repair.
(d) Tenant shall use commercially reasonable efforts to maintain on
each Site, and deliver to Landlord upon expiration or termination of this Lease,
then current operating manuals and original warranties (to the extent
applicable) for the Equipment then located on such Site specifically excluding,
in all cases, Tenant's Trade Fixtures at the Premises which may be and which are
subsequently removed by Tenant upon expiration or earlier termination of this
Lease.
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10. DESTRUCTION OF OR DAMAGE TO PREMISES
If any Site is damaged by fire or other Casualty during the Term of
this Lease, Tenant shall (a) repair such damage and restore such Site to
substantially the same or better condition as existed before the occurrence of
such fire or other Casualty using materials of the same or better grade than
that of the materials being replaced (herein, a "CASUALTY REPAIR") and this
Lease shall remain in full force and effect. Such repair and replacement by
Tenant shall be done in accordance with paragraph 23 of this Lease and the
standards of paragraph 9 of this Lease and Tenant shall, at its expense, obtain
all permits required for such work. An architect or engineer selected by
Landlord shall review (except with respect to the existing damage at the
Oakzanita Site), at Tenant's expense, all plans and specifications for any
Casualty Repair with a cost equal to or greater than $750,000 and all draw
requests related thereto. In no event shall Fixed Rent or Additional Rent abate,
nor shall this Lease terminate by reason of such damage or destruction. Provided
that no Event of Default by Tenant shall then exist under this Lease (and no
event has occurred which, with the passage of time, the giving of notice, or
both, would constitute an Event of Default), and provided Tenant has: (i)
delivered to Landlord plans and specifications and a budget for such Casualty
Repair (all of which Landlord shall have approved), and (ii) deposited with
Landlord or the Proceeds Trustee cash in the sum equal to the excess, if any, of
the total cost set forth in such approved budget over the amount of insurance
proceeds received on account of such Casualty, then to the extent such proceeds
are made available to Landlord from Mortgagee, Landlord shall make available to
Tenant all insurance proceeds actually received by Landlord on account of such
Casualty, for application to the costs of such approved repair and restoration,
as set forth below.
For all Casualty Repairs, the following shall apply:
As used herein the "CASUALTY THRESHOLD" means $750,000; provided,
however that the Casualty Threshold shall not apply to the existing damage at
the Oakzanita Site. If the Net Casualty Proceeds are less than the Casualty
Threshold at the time of the applicable fire or other Casualty, such Net
Casualty Proceeds shall be paid to Tenant to apply to the cost of restoration.
If the Net Casualty Proceeds are equal to or greater than the Casualty Threshold
at the time of the applicable fire or other casualty, such Net Casualty Proceeds
shall be paid to the Proceeds Trustee (herein called the "RESTORATION FUND") for
release to Tenant as restoration progresses, subject to and in accordance with
paragraph 23(c) of this Lease. If Landlord encumbers the Premises or the
Underlying Premises with a Mortgage, the Mortgagee thereunder may, at its
option, be appointed Proceeds Trustee for so long as such Mortgage remains
outstanding and such Mortgagee does not Control Landlord and is not Controlled
by or under Common Control with Landlord. Insurance proceeds shall be deposited
in an interest bearing account and interest shall be distributed to Tenant upon
completion of said installation, repair, replacement or rebuilding, provided no
default has occurred and is continuing hereunder. All checks drawn on said
account shall be signed by the Proceeds Trustee. Insurance proceeds shall be
disbursed to Tenant by the Proceeds Trustee under the following procedure:
(i) No more frequently than once per calendar month, Tenant
may request that Landlord disburse to Tenant such insurance proceeds as are
requested by Tenant to pay for all costs incurred by Tenant for repair and
restoration work of the damaged Site that was performed during the immediately
preceding calendar month. Tenant's request shall certify that all work for which
reimbursement is requested was performed in substantial compliance with the
27
plans and specifications approved by Landlord pursuant to paragraph 23 of this
Lease and all applicable laws, and shall include reasonably satisfactory
evidence of the costs incurred by Tenant and unconditional partial (as to the
amount received compared to percentage of completion) or final lien releases, as
applicable, in form and substance required by applicable law executed by all
mechanics, materialmen, laborers, suppliers and contractors who performed any
portion of the repair and restoration work or supplied materials; and
(ii) Within ten (10) Business Days after receiving Tenant's
request, Landlord shall approve or disapprove Tenant's request, which approval
shall not be unreasonably withheld, delayed or conditioned, by written notice to
Tenant. If Landlord approves all or any portion of a request and Landlord has
received (and not previously disbursed) insurance proceeds for such costs, then
Landlord's approval shall include a check in the amount approved by Landlord. If
Landlord disapproves all or any portion of a request, then Landlord's notice
shall state the reasons for that disapproval. Landlord's failure to deliver a
notice approving or disapproving a request shall be conclusively deemed
Landlord's disapproval of the request.
11. INSURANCE, HOLD HARMLESS AND INDEMNIFICATION
(a) To the fullest extent permitted by law, Landlord and the Landlord
Parties shall not be liable to Tenant or any Affiliate for any damage to or loss
or theft of any property or for any bodily or personal injury, illness or death
of any Person in, on or about the Premises arising at any time and from any
cause whatsoever, unless and to the extent due to the gross negligence or
willful misconduct of the Landlord Parties. Except as provided in this paragraph
11(a), Tenant waives all claims against Landlord and the Landlord Parties
arising from any liability described in this paragraph 11(a).
(b) Tenant hereby agrees to indemnify and defend Landlord and the
Landlord Parties against and hold each such Person harmless on an After-Tax
Basis from all claims, demands, liabilities, damages, losses, costs and
expenses, including attorneys' fees and disbursements, arising from or related
to any use or occupancy of the Premises, or any condition of the Premises, or
any default in the performance of Tenant's obligations hereunder, or any damage
to any property (including property of employees and invitees of Tenant) or any
bodily or personal injury, illness or death of any person (including employees
and invitees of Tenant) occurring in, on or about the Premises or any part
thereof or any part of the buildings or the land constituting a part of the
Premises arising on or after the date hereof from any cause whatsoever, or
occurring outside the Premises when such damage, bodily or personal injury,
illness or death is caused by any act or omission of Tenant or its agents,
officers, employees, contractors, invitees or licensees or any default in the
performance of Tenant's obligations under the Frisco Lease. This paragraph 11(b)
shall survive the termination of this Lease with respect to any damage, bodily
or personal injury, illness or death or any default in the performance of
Tenant's obligations under the Frisco Lease occurring prior to such termination.
(c) Tenant shall at all times provide, maintain and keep in force or
cause to be provided, maintained and kept in force, at no expense to Landlord,
the following policies of insurance with respect to the Premises, Underlying
Premises and Tenant, as applicable (collectively, the "Policies"):
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(i) Property insurance on an "all risk" and "special perils"
basis (special form cause of loss) for one hundred percent (100%) of the
replacement value of each Site, as applicable, with customary deductibles as
approved by Landlord. The policy shall contain the following endorsements: (a)
Replacement Cost (without any deduction made for depreciation); (b) Agreed
Amount (waiving co-insurance penalties); (c) a standard landlord clause
acceptable to Landlord; and (d) a standard mortgagee clause acceptable to
Mortgagee, if any. Each such policy shall also include the following coverage if
applicable: (i) comprehensive boiler and machinery coverage in amounts as
determined by Landlord; (ii) earthquake and earth movement for the full
replacement cost of the subject Site, or the amount as would (in light of the
risks insured and the cost of premiums for such insurance) in Landlord's
judgment be maintained by a prudent operator of property similar in use and
locale; and (iii) flood insurance if the Improvements located on a Site are
located in a special flood hazard area as designated by the Director of the
Federal Emergency Management Agency, in sufficient amounts as reasonably
determined by Landlord provided, that such coverage in such amounts are
generally available at commercially reasonable costs.
(ii) Insurance against rent loss, extra expense or business
interruption, in amounts satisfactory to Landlord. The perils covered by this
policy shall be the same as those accepted on each Site including flood,
earthquake and earth movement.
(iii) Commercial general liability insurance covering bodily
injury and property damage occurring on, in or about each Site and, to the
extent applicable, any adjoining streets, sidewalks, and passageways arising out
of or connected with the possession, use, leasing, operation, or condition of
any Site. Policy limits shall be not less than $1,000,000 per occurrence,
$2,000,000 per location in the aggregate with respect to a Site and $1,000,000
per occurrence, $2,000,000 per location in the aggregate with respect to Tenant.
Such coverage shall include but not be limited to premises/ operations,
products/completed operations, personal injury and liquor liability (if
applicable).
(iv) Umbrella excess liability insurance for not less than
$25,000,000 per occurrence with respect to Tenant, subject to an aggregate cap
of not less than $25,000,000.
(v) Worker's Compensation and other statutory coverage as
required by the state where each Site is located to protect Tenant, Landlord and
any Mortgagee against claims for injuries sustained in the course of employment
at such Site.
(vi) When and to the extent required by Landlord, fidelity
insurance and insurance against loss or damage by any other risk commonly
insured against by Persons (or which would be insured against by a reasonably
prudent Person) occupying or using like properties in the locality or localities
in which a Site is situated.
(d) All insurance policies required pursuant to this Lease shall be
endorsed to provide that: (i) Landlord is named as an additional insured with
respect to the all risk property coverage; as a loss payee with respect to all
rent/business interruption/extra expense coverage; as additional insured on all
liability coverage, with the understanding that any obligation imposed upon the
insureds (including the liability to pay premiums) shall be the sole obligation
of Tenant and not of any other insured (ii) Mortgagee, its successors and/or
assigns, is named as mortgagee with respect to the all risk property coverage;
as a loss payee with respect to all rent/business
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interruption/extra expense coverage; as additional named insured on all
liability coverage, with the understanding that any obligation imposed upon the
insureds (including the liability to pay premiums) shall be the sole obligation
of Tenant and not of any other insured; (iii) the interests of Landlord or any
Mortgagee shall not be invalidated by any action or inaction of Tenant or any
other Person, and such policies shall insure Landlord and any Mortgagee
regardless of any breach or violation by Tenant or any other Person of any
warranties, declaration or conditions in such policies; (iv) the insurer under
each such policy shall waive all rights of subrogation against Landlord or any
Mortgagee, any right to set-off and counterclaim and any other right to
deduction, whether by attachment or otherwise; (v) such insurance shall be
primary and without right of contribution of any other insurance carried by or
on behalf of Landlord or any Mortgagee with respect to its interest in the
Premises or Underlying Premises; (vi) if such insurance is canceled for any
reason whatsoever, including nonpayment of premium or, if any substantial
modification, change or reduction is made in the coverage which affects the
interests of Landlord or any Mortgagee, such cancellation, modification, change
or reduction in coverage shall not be effective as to Landlord or Mortgagee
until thirty (30) days after receipt by Landlord and Mortgagee of written notice
sent by registered mail from such insurer; (vii) any such insurance shall be
endorsed to provide inasmuch as the policy is written to cover more than one
insured, all terms, conditions, insuring agreements and endorsements with the
exception of limits of liability, shall operate in the same manner as if there
were a separate policy covering each insured; and (viii) if required by Landlord
or Mortgagee and available on commercially reasonable terms, such insurance
shall contain "cut-through" endorsements providing Landlord and Mortgagee with
direct access to any re-insurers.
(e) Tenant shall deliver to Landlord and Mortgagee a copy of each
insurance policy with further evidence of such insurance acceptable to Landlord
and Mortgagee, together with a copy of the declaration page for each such
policy. If requested by Landlord or Mortgagee, binders for renewal policies
shall be provided no later than fifteen (15) days prior to the expiration of
each policy and, when available and requested by Landlord or Mortgagee, copies
of such policies. Tenant shall deliver a renewed policy or policies, or
duplicate original or originals thereof, marked "premium paid," or accompanied
by such other evidence of payment satisfactory to Landlord and Mortgagee with
standard non-contributory mortgagee clause in favor of and acceptable to
Landlord and Mortgagee. Upon request of Landlord or Mortgagee, Tenant shall
cause its insurance underwriter or broker to certify to Landlord or Mortgagee in
writing that all the requirements of this Lease applicable to Tenant governing
insurance have been satisfied. Tenant shall comply promptly with and conform, in
all material respects, to (i) all provisions of each such insurance policy and
(ii) all requirements of the insurers applicable to Tenant as respects use,
occupancy, possession, operation, maintenance, alteration or repair of a Site.
Tenant shall not use or permit the use of any Site in any manner that would
permit any insurer to cancel any insurance policy or void coverage required to
be maintained by this Lease. No insurance policy may provide for assessments to
be made against Landlord or Mortgagee. If a policy permits assessments against
others, such policy must waive any right to a Lien upon a Site and no such
assessments may result in a Lien against such Site. The insurance coverage
required under this Article may be effected under a blanket policy or policies
covering the Underlying Premises and other properties and assets not
constituting a part of the Underlying Premises; provided that any such blanket
policy shall specify the portion of the total coverage of such policy that is
allocated to the Underlying Premises, and any sublimits in such blanket policy
applicable to the Underlying Premises, which amounts shall not be less than the
amounts required pursuant to this Article and which shall in any case comply in
all other respects with all
30
of the requirements of this Article. Tenant shall comply in all material
respects with all insurance requirements and shall not bring or keep or permit
to be brought or kept any article upon any Site or cause or permit any condition
to exist thereon (subject to and to the extent within Tenant's control,
exercising commercially reasonable measures consistent with prudent business
practice to ensure compliance herewith by members of the public, including
Members, having access to the Premises) which would be prohibited by any
insurance requirement, or would invalidate insurance coverage required hereunder
to be maintained by Tenant on or with respect to any part of any Site pursuant
to this Article. Notwithstanding anything to the contrary contained herein, it
is expressly understood and agreed that any insurance which Tenant shall cause
any tenant to provide that shall otherwise be in compliance with all of the
terms and conditions of this Article shall satisfy Tenant's obligations with
respect thereto hereunder. Tenant shall not take out separate insurance
contributing in the event of loss with that required to be maintained pursuant
to this Article unless such insurance complies with this Article. All insurance
policies shall be in form, with endorsements, risk coverages, deductibles and
amounts and maintained with companies approved by Landlord and Mortgagee, such
approval not to be unreasonably withheld or delayed. Without limiting Landlord's
and Mortgagee's ability to approve the aforementioned, an insurance company
shall be reasonably satisfactory if such insurance company (a) has a rating of
at least A with financial size of Class X or better as specified in Best's Key
Rating Guide, (b) is licensed or authorized to do business, as required under
applicable law, in the State where the applicable Sites are located and (c) a
claims-paying ability rating by S&P of not less than "AA" and an equivalent
rating by another Rating Agency. Tenant shall not settle or accept any payment
of any claims under any insurance policy insuring against casualty, rent loss
and business interruption without twenty (20) days advance written notice to
Landlord and Mortgagee, if any. Landlord and Mortgagee shall not, by the fact of
approving, disapproving, accepting, preventing, obtaining or failing to obtain
any insurance, incur any liability for or with respect to the amount of
insurance carried, the form or legal sufficiency of insurance contracts,
solvency of insurance companies, or payment or defense of lawsuits, and Tenant
hereby expressly assumes full responsibility therefor and all liability, if any,
with respect thereto. If Tenant fails to provide to Landlord or Mortgagee the
policies of insurance required by this Article, Landlord or Mortgagee may (but
shall have no obligation to), upon written notice to Tenant, procure such
insurance or single-interest insurance for such risks covering Landlord's and
Mortgagee's interest and Tenant shall pay all premiums thereon promptly upon
demand by Landlord and Mortgagee, and until such payment is made by Tenant, the
amount of all such premiums shall bear interest at the Overdue Rate and shall
constitute Additional Rent. Any such insurance purchased by Landlord or
Mortgagee may, but need not, protect Tenant's interests. The coverage purchased
by Landlord or Mortgagee may not pay any claim made by Tenant or any claim that
is made against Tenant in connection with the Premises or Underlying Premises.
Tenant may later cancel any insurance purchased by Landlord or Mortgagee, but
only after providing Landlord and Mortgagee with evidence that Tenant has
obtained insurance as required by this Lease. If Tenant fails to obtain any such
insurance and Landlord or Mortgagee purchase such insurance for the Premises
and/or Underlying Premises, Tenant will be responsible for the costs of that
insurance, including interest and other charges imposed by Landlord or Mortgagee
in connection with the placement of the insurance, until the effective date of
the cancellation or expiration of the insurance. The costs of the insurance may
be added as Additional Rent. The costs of the insurance may be more than the
cost of insurance Tenant is able to obtain on its own.
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(f) Landlord acknowledges that, notwithstanding anything to the
contrary contained herein, Tenant's existing insurance and insurance carriers as
of the Commencement Date meet the requirements set forth in this paragraph 11;
provided each Subleasing Subsidiary is and shall remain a named insured on all
insurance policies. In no event shall Landlord or any Mortgagee require any
additional insurance pursuant to this paragraph 11 that is not commercially
reasonable with respect to similarly situated properties.
12. COMPLIANCE WITH LAWS, COVENANTS AND NON-FEE OCCUPANCY AGREEMENTS
(a) Tenant shall, and shall cause its Subsidiaries to, throughout the
Term promptly comply or cause compliance with or remove or cure any violation of
any and all present and future laws, including the Americans with Disabilities
Act of 1990, as the same may be amended from time to time ("ADA"), ordinances
(zoning or otherwise), orders, rules, regulations and requirements of all
federal, state, municipal and other governmental bodies having jurisdiction over
the Premises and the Membership Contracts and the appropriate departments,
commissions, boards and officers thereof, and the orders, rules and regulations
of each Board of Fire Underwriters where the Premises are situated, or any other
body now or hereafter constituted exercising lawful or valid authority over the
Premises and the Membership Contracts (collectively, "LEGAL REQUIREMENTS"), any
portion thereof, or the sidewalks, curbs, roadways, alleys or entrances adjacent
or appurtenant to the Premises, or exercising lawful authority with respect to
(1) the use or manner of use of the Premises, or such adjacent or appurtenant
facilities, and (2) the sale of and continuing obligations under the Membership
Contracts, and whether the compliance, curing or removal of any such violation
and the costs and expenses necessitated thereby shall have been foreseen or
unforeseen, ordinary or extraordinary, and whether or not the same shall be
presently within the contemplation of Landlord, Tenant any Tenant Subsidiary or
shall involve any change in governmental policy, or require structural or
extraordinary repairs, alterations or additions by Tenant any Tenant Subsidiary
and irrespective of the amount of the costs thereof. Tenant, at its sole cost
and expense, shall comply and shall cause its Subsidiaries to comply with all
agreements, contracts, easements, restrictions, reservations or covenants,
including the Membership Contracts, if any, running with the land or hereafter
created by Tenant any Tenant Subsidiary or consented to by Tenant or any Tenant
Subsidiary or requested by Tenant or any Tenant Subsidiary. Tenant shall also
comply and shall cause its Subsidiaries to comply with, observe and perform all
provisions and requirements of all policies of insurance at any time in force
with respect to the Premises and required to be obtained and maintained by
Tenant or any Tenant Subsidiary under the terms of paragraph 11 of this Lease.
Tenant shall and shall cause its Subsidiaries to comply with all licenses and
permits issued by governmental authorities in connection with the Premises
(including licenses and permits relating to all waste water, storm water, water
processing and other similar facilities, franchise agreements, Membership
Contracts and any conditional use permits (collectively, "LICENSES")); provided,
however, Landlord agrees, upon request of Tenant, to sign promptly and without a
charge therefor (except as provided in the final sentence of this subparagraph)
any applications or filings (1) for such licenses and permits as may be required
by Legal Requirements for the conduct, operation or restoration of the Premises
and the business to be conducted therein in accordance with the terms hereof,
and (2) for the maintenance of the existing zoning for each Site to continue to
permit Tenant's use thereof, in both cases where the signature of Landlord is
required by Legal Requirements in force at the time. All reasonable costs
incurred by Landlord in connection with obtaining any such licenses and permits
and zoning matters shall be borne by
32
Tenant. With respect to the Site commonly known as Pio Pico, Tenant shall use
commercially reasonable efforts to cause the use permit benefiting the north
side of the Site to be renewed or reissued.
(b) If Tenant shall at any time fail to pay any Imposition in
accordance with the provisions of paragraphs 6 or 26 of this Lease, or to take
out, pay for, maintain and deliver any of the insurance policies or certificates
of insurance provided for in paragraph 11 of this Lease, or shall fail to make
any other payment or perform any other act on its part to be made or performed
hereunder, then Landlord, after five (5) Business Days prior written notice to
Tenant (or without notice in situations where Landlord determines that delay is
likely to cause harm to Landlord's interest in the Premises), and without
waiving or releasing Tenant from any obligation of Tenant contained in this
Lease, may (but shall be under no obligation to do so):
(i) pay any Imposition payable by Tenant pursuant to this
Lease; or
(ii) make any other payment or perform any other act on
Tenant's part to be paid or performed hereunder which Tenant shall not have paid
or performed within the time required therefor, except that any time permitted
to Tenant to perform any act required by this paragraph shall be extended for
such reasonable period not to exceed three hundred sixty-five (365) days as may
be necessary to effectuate such performance, provided throughout such time
Tenant is continuously, diligently and in good faith prosecuting such
performance.
(c) Tenant acknowledges that (1) Landlord's interest in the Non-Fee
Sites is that of the subtenant under the Non-Fee Occupancy Agreements, true,
correct and complete copies of which have been delivered to Tenant, (2)
Landlord's interest in all of the Sites is that of the tenant under the Master
Lease, true, correct and complete copies of which have been delivered to Tenant
and (3) pursuant to this Lease, Tenant is effectively subleasing Landlord's
interest as the subtenant under the Non-Fee Occupancy Agreements and the tenant
under the Master Lease. Tenant hereby covenants and agrees to perform and comply
in all material respects with all of the obligations of the tenant under the
Non-Fee Occupancy Agreements during the Term of this Lease.
(d) Landlord hereby grants to Tenant an exclusive license and authority
solely to enforce Landlord's rights as the tenant or subtenant of the Premises,
as applicable, under the terms and conditions of the Non-Fee Occupancy
Agreements and the Licenses. Tenant shall comply with Landlord's obligations as
tenant or subtenant of the Premises, as applicable, under the Non-Fee Occupancy
Agreements and the Licenses; provided, however, Landlord agrees, upon request of
Tenant, to sign promptly and without a charge therefor (except as provided in
the final sentence of this subparagraph) any documents, applications or filings
for the Non-Fee Occupancy Agreements and/or Licenses as may be required from
time to time for the conduct, operation or restoration of the Premises and the
business to be conducted therein in accordance with the terms hereof. All
reasonable costs incurred by Landlord in connection with obtaining any such
documents, licenses and permits shall be borne by Tenant.
(e) Landlord may enter upon the Premises for any such cure purpose set
forth in this paragraph 12 and take all such action in or on the Premises as may
be necessary therefor pursuant to this paragraph 12. All sums, reasonable under
the circumstances, actually paid by Landlord and all costs and expenses,
including attorney's fees, incurred by Landlord in
33
connection with the performance of any such act, together with interest thereon
at the Overdue Rate and an equal to five percent (5%) of all such costs and
expenses, shall be paid by Tenant to Landlord on demand and submission of
reasonable evidence of such expenditures. Landlord shall not be limited in the
proof of any damages which Landlord may claim against Tenant arising out of or
by reason of Tenant's failure to provide and keep in force insurance as
aforesaid, to the amount of the insurance premium or premiums not paid or
incurred by Tenant, and which would have been payable upon such insurance, but
Landlord shall also be entitled to recover, as damages for any such breach, the
uninsured amount of any loss, damages, costs and expenses of suit, including
attorney's fees, suffered or incurred by reason of damage to or destruction of
the Premises or Underlying Premises, or any portion thereof or other damage or
loss which Tenant is required to insure against hereunder, occurring during any
period when Tenant shall have failed or neglected to provide insurance as
aforesaid.
(f) Tenant shall have the right under this Lease to abandon any Site or
Sites subject to this Lease, provided such abandonment does not violate any
Membership Contracts or applicable Legal Requirements, and so long as during
such period of abandonment, (i) Tenant continues to pay Rent and maintain the
Premises at such Sites in accordance with this Lease, (ii) Tenant maintains a
security system and performs regular inspections of such Sites and (iii) Tenant
provides Landlord with the right to inspect such Sites on an annual basis and
Tenant pays for the costs of such inspections.
13. PARTIAL TAKING
If less than substantially all of any Site shall be taken for public or
quasi-public purposes, Tenant shall promptly, at its sole cost and expense,
restore, repair, replace or rebuild the improvements so taken in conformity with
the requirements of paragraph 9 of this Lease as nearly as practicable to the
condition, size, quality of workmanship and market value thereof immediately
prior to such taking, without regard to the adequacy of any condemnation award
for such purpose. There shall be no abatement of Rent during any such period of
restoration. In performing its obligations, Tenant shall be entitled to all
condemnation proceeds made available to Landlord for restoration or repair of
the Premises under the same terms and conditions for disbursement set forth for
casualty proceeds in paragraph 10 of this Lease, including such proceeds being
made available by Mortgagee. Tenant shall, at its sole cost and expense,
negotiate and, if necessary, litigate, the amount of the award, and Landlord
shall have the right to participate in such process, and if Tenant fails to
diligently prosecute such efforts, Landlord may (at its option) take control of
the process. Any condemnation proceeds in excess of the amounts as are made
available to Tenant for restoration or repair of the Premises shall be the sole
and exclusive property of Landlord. Tenant shall have the right to participate
in condemnation proceedings with Landlord, and shall be entitled to receive any
award made by the condemning authority in respect of business loss or, if
available, business relocation and any other claim permitted by law which does
not, in any such case, diminish Landlord's recovery.
14. SUBSTANTIAL TAKING
If an entire Site or a substantial part of a Site, or access thereto,
shall be taken or condemned by any competent authority for any public or
quasi-public use or purpose, or, as a result of such taking, the use of such
Site shall be materially adversely affected, the Term of this Lease (with
respect to such affected Site only) shall end upon and not before the date when
the
34
possession of the part so taken shall be required for such use and, except as
otherwise provided herein, without apportionment of the award to or for the
benefit of Tenant. If this Lease is terminated with respect to any Site pursuant
to this Article, Fixed Rent at the then-current rate shall be apportioned as of
the date of the termination in the notice. Landlord shall be entitled to receive
the entire award or payment in connection therewith, except that Tenant shall
have the right to file any claim available to Tenant under applicable Law for
any taking of leasehold improvements paid for by Tenant and any Tenant's
personal property and fixtures belonging to Tenant and removable by Tenant upon
expiration of the Term and for moving expenses, provided that such separate
award shall not reduce the award or judgment recoverable by Landlord.
If the temporary use or occupancy of all or any part of any Site shall
be taken by condemnation during the Term, this Lease shall be and remain
unaffected by such condemnation, and Tenant shall continue to pay in full the
Rent payable hereunder. In the event of any such temporary taking for use or
occupancy of all or any part of such Site, Tenant shall be entitled to appear,
claim, prove and receive the portion of the award for such taking that
represents compensation for use or occupancy of such Site during the period of
such temporary taking and Landlord shall be entitled to appear, claim, prove and
receive the portion of the award that represents the costs of restoration of
such Site and the use or occupancy of such Site after the end of the period of
such temporary taking.
15. DEFAULT: EVENTS OF DEFAULT
The occurrence of any one or more of the following events ("EVENT OF
DEFAULT") shall constitute a breach of this Lease by Tenant:
(a) Tenant fails to pay any Fixed Rent as and when such Fixed Rent
becomes due, and such failure continues for five (5) Business Days after
Landlord gives written notice thereof to Tenant; or
(b) Tenant fails to pay any Additional Rent as and when such Additional
Rent becomes due and payable and such failure continues for more than five (5)
Business Days after Landlord gives written notice thereof to Tenant; or
(c) The entering of a non-appealable final judgment that Tenant has
breached its indemnification obligations under the Merger Agreement; provided
however, that prior to the appeal by Tenant of any judgment holding that Tenant
has breached an indemnification obligation under the Merger Agreement, Tenant
shall be required to post bond in the amount of such judgment or, at the
election of Tenant, provide a letter of credit in favor of Landlord for such
amount; or
(d) Tenant fails to perform its obligations under or breaches any
agreement or covenant contained in any part of paragraph 25, paragraph 31 and
subparagraphs 38(a) through (e) of this Lease; and, even if not specifically so
provided therein, a breach by any Subsidiary of the aforementioned shall
constitute an Event of Default; or
(e) Tenant or any of Tenant's Subsidiaries fails to perform or breaches
any agreement or covenant of this Lease not separately covered in this paragraph
15 to be performed or observed by Tenant or any of Tenant's Subsidiaries as and
when performance or observance is
35
due and such failure or breach continues for more than thirty (30) calendar days
after Landlord gives written notice thereof to Tenant; provided, however, that
if, by the nature of such agreement or covenant, such failure or breach cannot
reasonably be cured within such period of thirty (30) calendar days, an Event of
Default shall not exist as long as Tenant or such Tenant Subsidiary commences
with due diligence and dispatch the curing of such failure or breach within such
period of thirty (30) calendar days and, having so commenced, thereafter
prosecutes with diligence and dispatch and completes the curing of such failure
or breach within a reasonable time not to exceed one hundred eighty (180)
calendar days, except with respect to regulatory compliance matters, when such
cure must be completed within three hundred sixty-five (365) calendar days; or
(f) Tenant, any Guarantor or any of Tenant's Subsidiaries (i) files, or
consents by answer or otherwise to the filing against Tenant, any Guarantor or
any of Tenant's Subsidiaries of, a petition for relief or reorganization or
arrangement or any other petition in bankruptcy or for liquidation or to take
advantage of any bankruptcy, insolvency or other debtors' relief law of any
jurisdiction, (ii) makes an assignment for the benefit of Tenant's, any
Guarantor's or any of Tenant's Subsidiaries' creditors, (iii) consents to the
appointment of a custodian, receiver, trustee or other officer with similar
powers of Tenant, any Guarantor, any of Tenant's Subsidiaries or of any
substantial part of Tenant's, any Guarantor's or any of Tenant's Subsidiaries'
property, or (iv) takes any action for the purpose of any of the foregoing; or
(g) A court or government authority enters an order, and such order is
not stayed or vacated within sixty (60) calendar days, (i) appointing a
custodian, receiver, trustee or other officer with similar powers with respect
to Tenant, any Guarantor, any Tenant Subsidiary or with respect to any
substantial part of Tenant's or any Tenant Subsidiary's property, or (ii)
constituting an order for relief or approving a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, insolvency or
other debtors' relief law of any jurisdiction, or (iii) ordering the
dissolution, winding-up or liquidation of Tenant, Guarantor or any Tenant
Subsidiary; or
(h) Tenant fails to pay any insurance premiums when due or otherwise
fails to continuously maintain all insurance required to be maintained by Tenant
in accordance with the terms and conditions of this Lease; or
(i) Any Guarantor or Tenant or anyone claiming on behalf of either
party asserts any claim that the Guaranty is not then in full force and effect;
or
(j) An "Event of Default" occurs and is continuing under the Guaranty,
the Subsidiary Guaranty, the Guarantor Pledge, the Subsidiary Pledge or the
Tenant Pledge.
Landlord may treat the occurrence of any one or more of the foregoing
Events of Default as a breach of this Lease. For so long as such Event of
Default continues, Landlord, at its option and with or without notice or demand
of any kind to Tenant or any other Person, shall have only the remedies provided
in paragraph 16 of this Lease.
16. REMEDIES
(a) Upon the occurrence of an Event of Default under paragraph 15(a),
15(b) and/or 15(c) of this Lease, Landlord must first exercise either of the
remedies described in paragraphs
36
(i) or (ii) below before Landlord may exercise the remedies set forth in
paragraph 16(b) below. Upon the occurrence of an Event of Default under
paragraphs 15(a), 15(b) and/or 15(c) of this Lease, Landlord shall have the
right to elect, by giving written notice of such election to Tenant ("LANDLORD'S
REMEDY NOTICE"), either of the remedies set forth in items (i) and (ii) below:
(i) Landlord shall cause the equity interests in MHC T1000
Trust, a Maryland real estate investment trust (the "TRUST"), to be sold to
Tenant, and Tenant shall purchase such equity interests in accordance with the
terms and conditions on Exhibit R attached hereto, for a purchase price payable
in immediately available funds equal to $224,000,000.00 plus any accrued and
unpaid Rent, at a closing to be held on the sixtieth (60th) day following
Tenant's receipt of Landlord's Remedy Notice; provided, however, that Landlord
may sell the Underlying Premises to Tenant pursuant to an asset purchase
transaction in accordance with the terms and conditions on Exhibit R attached
hereto, if such asset purchase transaction does not result in adverse tax or
other consequences to Landlord or any of its affiliates as compared to a sale of
all of the equity interests in the Trust in Landlord's sole discretion; or
(ii) Landlord shall purchase in accordance with the terms and
conditions on Exhibit S attached hereto Tenant's Assets (including the assets of
all direct or indirect Subsidiaries) and Tenant shall sell and convey all such
Tenant's Assets for a purchase price payable in immediately available funds
equal to sixty percent (60%) of the Fair Market Value thereof as of the time of
purchase of such Tenant's Assets being acquired, less any accrued and unpaid
Rent ("ASSET PURCHASE PRICE"), at a closing to be held on the sixtieth (60th)
day following Tenant's receipt of Landlord's Remedy Notice (together, items (i)
and (ii), the "PUT/CALL").
The determination of Fair Market Value of Tenant's Assets being sold
under paragraph 16(a)(ii) shall be made in accordance with the following
procedures:
(A) Fair Market Value of Tenant's Assets shall be determined
by the agreement of two (2) appraisers (each, an "INITIAL APPRAISER"),
one of which shall be selected by Landlord and the other of which shall
be selected by Tenant as set forth in this paragraph 16(a). Landlord
shall identify in writing, as part of Landlord's Remedy Notice, the
Initial Appraiser selected and retained by Landlord and specifically
identify such Initial Appraiser's name, address, phone number and
qualifications as an appraiser. Within five (5) calendar days after
Tenant's receipt of Landlord's Remedy Notice, Tenant shall select its
Initial Appraiser and notify Landlord in writing of the name, address,
phone number and qualifications of such appraiser. Within three (3)
calendar days after Landlord receives from Tenant such notice of
Tenant's Initial Appraiser, each of Landlord and Tenant shall direct,
in writing with a copy to the other party, its Initial Appraiser to
work with the other party's Initial Appraiser to endeavor to determine
and reach agreement upon the Fair Market Value of Tenant's Assets as
required by this Lease, and thereafter to deliver in writing to
Landlord and Tenant within twenty (20) calendar days (such period, the
"VALUATION PERIOD") the agreed-upon Fair Market Value (the "VALUATION
Notice"). The costs and expenses of each Initial Appraiser shall be
paid by the party selecting such Initial Appraiser. If Tenant fails to
identify in writing an Initial Appraiser as required by this paragraph
16(a), Landlord shall identify an Initial Appraiser on behalf of
37
Tenant; provided, however, Tenant shall be liable for the costs and
expenses of such Initial Appraiser identified on Tenant's behalf by
Landlord as if Tenant had selected such Initial Appraiser.
(B) If the Initial Appraisers are not able to reach agreement
upon the Fair Market Value of Tenant's Assets within the Valuation
Period, within two (2) calendar days after the end of the Valuation
Period each Initial Appraiser shall deliver a written notice to
Landlord, Tenant and the other Initial Appraiser setting forth (i) such
Initial Appraiser's valuation of the Fair Market Value of Tenant's
Assets (each, an "INITIAL VALUATION") and (ii) the name, address, phone
number and qualifications of a third appraiser selected jointly by the
Initial Appraisers (the "THIRD APPRAISER"). The Initial Appraisers
shall, in writing with a copy to Landlord and Tenant, direct the Third
Appraiser (or substitute Third Appraiser) to determine a valuation of
the Fair Market Value of Tenant's Assets, as required by this Lease,
and to deliver in writing to Landlord, Tenant and the Initial
Appraisers such valuation (the "Third Valuation") within twenty (20)
calendar days of the date of the written direction retaining such Third
Appraiser. The Fair Market Value of Tenant's Assets shall be the
arithmetic mean of (A) the Third Valuation and (B) the Initial
Valuation closer to the Third Valuation. If the Third Valuation is
exactly between the two Initial Valuations, then the Fair Market Value
of Tenant's Assets shall be the Third Valuation. If the Initial
Appraisers are unable to agree upon the designation of a Third
Appraiser within the requisite time period or if the Third Appraiser
selected does not make a valuation of the Fair Market Value of Tenant's
Assets within twenty (20) calendar days after being directed by the
Initial Appraisers, then such Third Appraiser or a substitute Third
Appraiser, as applicable, shall, at the request of Landlord or Tenant,
be appointed by the President or Chairman of JAMS in the Chicago,
Illinois metropolitan area. The costs and expenses of the Third
Appraiser (and substitute Third Appraiser and JAMS, if applicable)
shall be divided evenly between, and paid for by, Landlord and Tenant.
(C) All appraisers selected or appointed pursuant to this
paragraph 16(a) shall be independent qualified appraisers. Such
appraisers shall have no right, power or authority to alter or modify
the provisions of this Lease, and such appraisers shall determine the
Fair Market Value of Tenant's Assets as required by this Lease.
(D) Notwithstanding the foregoing, if Landlord and Tenant are
able to agree upon the Fair Market Value of Tenant's Assets, prior to
the date on which the Fair Market Value of Tenant's Assets is to be
determined in accordance with this paragraph 16(a)(ii), then Landlord
and Tenant shall execute an agreement setting forth such agreed-upon
Fair Market Value of Tenant's Assets, and waiving each party's right to
have the Fair Market Value of Tenant's Assets determined in accordance
with the other procedures set forth in this paragraph 16(a).
If Landlord causes the sale of the equity interests in the Trust, or
the sale of the Underlying Premises pursuant to an asset purchase transaction as
set forth in paragraph 16(a)(i), above, Landlord or Landlord's affiliate shall
not transfer to Tenant the Excess Land, but shall
38
retain ownership thereof. Tenant's failure to perform its obligations pursuant
to the Put/Call shall constitute a breach of this Lease and shall be referred to
herein as a "PUT/CALL DEFAULT".
(b) Upon the occurrence of a Put/Call Default or an Event of Default
described in paragraphs 15(f) or 15(g) of this Lease, Landlord shall, in
addition to, and not in derogation of, any remedies for any preceding breach,
with or without notice or demand (except as otherwise expressly provided herein)
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have by reason of such Put/Call Default or an Event of Default
described in paragraphs 15(f) or 15(g) of this Lease, have the right to cause
all of Tenant's Assets and the equity interests in Tenant to be transferred and
assigned to Landlord through appropriate judicial remedies, including pursuant
to the following available remedies:
(i) Landlord shall have the right to terminate Tenant's right
to possession of the Premises and repossess the Premises by any lawful means
without terminating this Lease.
(ii) Landlord shall have the right at any time to give a
written termination notice to Tenant and, on the date specified in such notice,
Tenant's right to possession of the Premises shall terminate and this Lease
shall terminate. Upon such termination, Landlord shall have the right to recover
from Tenant:
(A) The worth at the time of determination of all unpaid Rent
which had been earned at the time of termination;
(B) The worth at the time of determination of the amount of
all unpaid Rent for the balance of the then-Term of this Lease after
the time of termination excluding the potential Lease term under any
unexercised options for any Extension Terms, reduced only to the extent
of net rental proceeds actually received from any subsequent
replacement tenant(s) for any Site; provided, however, except to the
extent the state statutes or common law applicable to any Site requires
Landlord to mitigate its damages arising from an Event of Default by
Tenant under this Lease, from and after any such Event of Default,
Landlord shall have no duty to mitigate its damages by re-letting, or
attempting to re-let, any Site to any replacement tenant(s); and
(C) All other amounts necessary to compensate Landlord for all
of the detriment proximately caused by Tenant's failure to perform all
of Tenant's obligations under this Lease or which in the ordinary
course of events would be likely to result therefrom. The "worth at the
time of determination" of the amounts referred to in clause (A) above
shall be computed by allowing interest at the Per Diem Late Charge. The
"worth at the time of determination" of the amount referred to in
clause (B) above shall be computed by discounting such amount to
present value by using the discount rate equal to the then Treasury
Rate. For the purpose of determining unpaid Rent under clauses (A) and
(B) above, the Rent reserved in this Lease shall be deemed to be the
total Rent payable by Tenant under paragraph 5 of this Lease.
(iii) Even if Landlord terminates Tenant's right to possession
under this Lease, this Lease shall continue in effect and Landlord shall have
the right to enforce all its rights and
39
remedies under this Lease, including the right to recover all Rent as it becomes
due under this Lease. Landlord shall be entitled to an administrative fee of
five percent (5%) of all amounts expended under this paragraph 16(b).
(iv) All amounts owed by Tenant to Landlord following a
Put/Call Default or Event of Default described in paragraphs 15(f) or 15(g) of
this Lease can be used by Landlord in pursuing its claims against Guarantors
under the Guaranty and enforcement of all obligations, rights and remedies under
(1) the Guaranty, (2) the Guarantor Pledges, (3) the Subsidiary Guaranties
against the appropriate Subsidiaries, (4) the Subsidiary Pledges, and (5) the
Tenant Pledge, including realizing on all collateral set forth in any such
documents in accordance with the terms of such documents.
(v) If Landlord commences any remedy under this paragraph
16(b), Landlord shall continually prosecute such remedy to the fullest extent
permitted under this Lease, the Guaranty, the Guarantor Pledges, the Subsidiary
Guaranties, the Subsidiary Pledges, the Tenant Pledge and all applicable laws,
such that Landlord or Landlord's affiliate shall become the sole owner of
Tenant's Assets.
(c) Upon the occurrence of an Event of Default under paragraphs 15(d),
(e), (h), (i), or (j) of this Lease, (1) Landlord shall be entitled to receive
and Tenant shall pay the Per Diem Late Charge for each day such Event of Default
remains outstanding, payable promptly, and in any event within three (3)
Business Days following Landlord's written demand to Tenant for payment thereof,
and (2) Landlord shall have all other rights set forth in paragraph 31(g) of
this Lease.
(d) All agreements and covenants to be performed or observed by Tenant
under this Lease shall be at Tenant's sole cost and expense and without any
abatement of Fixed Rent or Additional Rent. If Tenant fails to pay any sum of
money to be paid by Tenant or to perform any other act to be performed by Tenant
under this Lease as and when due or required to be performed, Landlord shall
have the right, but shall not be obligated, and without waiving or releasing
Tenant from any obligations of Tenant, to, upon five (5) Business Days prior
notice to Tenant, make any such payment or to perform any such other act on
behalf of Tenant in accordance with this Lease. All sums so paid by Landlord and
all necessary incidental costs shall be deemed Additional Rent hereunder and
shall be payable by Tenant to Landlord on demand, together with interest on all
such sums from the date of expenditure by Landlord to the date of repayment by
Tenant at the Overdue Rate. Landlord shall have, in addition to all other rights
and remedies of Landlord, the same rights and remedies in the event of the
nonpayment of such sums (plus interest at the Overdue Rate) by Tenant as in the
case of default by Tenant in the payment of Rent.
(e) Landlord shall be entitled to collect from Tenant Landlord's
reasonable costs and expenses, including attorneys' fees and expenses, in
connection with the enforcement of its remedies and/or the defense of any
matter, including during an appeal and whether suit is actually filed or not.
(f) Upon the occurrence of and during the continuance of a Put/Call
Default and/or an Event of Default, Landlord shall have the right to commence an
action in any court of competent jurisdiction located in the State of Illinois
for the purpose of adjudicating the Put/Call
40
Default and/or Event of Default and any or all of Landlord's rights and remedies
under this Lease related to each. Tenant hereby consents to the exercise of
personal jurisdiction over Tenant in any such court in Illinois and consents to
Illinois as the choice of venue. Upon adjudication of Landlord's rights under
this Lease, Landlord, at its option, shall have the right to file additional
actions in any and all States or Canadian Provinces in which the Sites are
located for the purpose of enforcing Landlord's rights under this Lease,
including obtaining orders of possession for the Site or Sites located in such
State or Canadian Provinces.
17. SUBORDINATION
(a) Subordination, Non-Disturbance. Tenant agrees at any time
hereafter, and from time to time within ten (10) Business Days of written
request of Landlord, to execute and deliver to Landlord a subordination,
non-disturbance and attornment agreement substantially in the form attached
hereto as Exhibit D (such instrument, release, document or agreement is herein
called the "SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT"),
subjecting and subordinating this Lease to the lien of any Mortgage which at any
time may be placed upon the Premises or Underlying Premises, or any portion
thereof, by Landlord, and to any replacements, renewals, amendments,
consolidations, modifications, extensions or refinancings thereof. It is agreed,
nevertheless, that so long as there exists no Put/Call Default or Event of
Default under paragraphs 15(f) or 15(g) of this Lease, such Subordination,
Non-Disturbance and Attornment Agreement shall not interfere with, hinder or
reduce the right of Tenant to continue to occupy the Premises, and all portions
thereof, to exercise Tenant's rights pursuant to the Stock Purchase Agreement
and to conduct its business thereon in accordance with the covenants,
conditions, provisions, terms and agreements of this Lease. The costs of
preparing and recording any such document shall be borne by Landlord, but Tenant
shall be responsible for its own counsel fees.
(b) Mortgagee Protection Clause. In the event of any act or omission of
Landlord constituting a default by Landlord hereunder, Tenant shall not exercise
any remedy until Tenant has given Landlord and any Mortgagee of the Premises or
Underlying Premises written notice of such act or omission, and until a
reasonable period of time (not less than ten (10) Business Days) to allow
Landlord or Mortgagee to remedy such act or omission shall have elapsed
following receipt of such notice. However, if such act or omission cannot, with
due diligence and in good faith, be remedied within such period or cannot be
cured simply by the payment of money, Landlord and Mortgagee shall be allowed
such further period of time as may be reasonably necessary provided that either
such party commences remedying the same with due diligence and in good faith and
thereafter diligently prosecutes such cure, provided such cure period shall not
extend beyond two hundred seventy (270) calendar days after the receipt of
notice of such default. Nothing herein contained shall be construed or
interpreted as requiring any Mortgagee receiving such notice to remedy such act
or omission.
(c) Attornment. If any Mortgagee shall succeed to the rights of
Landlord under this Lease or to ownership of the Premises or Underlying
Premises, whether through possession or foreclosure or the delivery of a deed to
the Premises or Underlying Premises in lieu of foreclosure, then such Mortgagee
shall automatically be deemed to have recognized this Lease and to assume the
obligations of Landlord hereunder accruing on and after the date such Mortgagee
acquires title to the Premises or Underlying Premises, and Tenant shall attorn
to and recognize such Mortgagee as Tenant's landlord under this Lease and shall
promptly execute and deliver any instrument consistent with the Subordination,
Non-Disturbance and Attornment
41
Agreement that such Mortgagee may reasonably request to evidence such attornment
(whether before or after the making of the Mortgage). In the event of any other
transfer of Landlord's interest hereunder, such transferee shall automatically
be deemed to have recognized this Lease and to assume the obligations of
Landlord hereunder accruing on and after the date of such transfer, and Tenant
shall attorn to and recognize such transferee as Tenant's landlord under this
Lease and shall promptly execute and deliver any instrument consistent with the
Subordination, Non-Disturbance and Attornment Agreement that such transferee and
Landlord may reasonably request to evidence such attornment.
(d) Acknowledgement. Upon ten (10) calendar days' advance written
notice, Tenant agrees to execute, acknowledge and deliver a document
acknowledging the assignment by Landlord of this Lease to a Mortgagee, in a
commercially reasonable form then approved by institutional lenders, with such
changes therein as may be reasonably requested by the Mortgagee.
18. LANDLORD'S RIGHT OF ENTRY; INDEMNIFICATION
(a) Landlord, Mortgagee, and their respective designees shall have the
right to enter the Premises, and any part thereof, at any time during normal
business hours on two (2) Business Days' advance notice and to inspect the same,
post notices of non-responsibility, monitor construction, perform appraisals,
perform environmental site assessments and engineering studies, and, during the
last twenty-four (24) months of the Term or at any time after an Event of
Default, exhibit the Premises or any Site to prospective purchasers and
mortgagees, and examine Tenant's books and records pertaining to the Premises,
insurance policies, certificates of occupancy and other documents, records and
permits in Tenant's possession with respect to the Premises, all of which shall
be customary and adequate and reasonably satisfactory to Landlord.
(b) Landlord hereby indemnifies and agrees to defend and hold harmless
Tenant and its partners or members, partners or members of such partners and
members, and their respective heirs, executors, administrators, personal or
legal representatives, successors and assigns from and against any and all
claims, expenses, costs, damages, losses and liabilities (including reasonable
attorneys' fees), on an After-Tax Basis, with respect to physical damage or
personal injury to the extent resulting from Landlord's or its agents' or
representatives' action on the Premises, which may at any time be asserted
against or suffered by Tenant as a result of, on account of, or arising from
Landlord or its agents or representatives entering the Premises pursuant to the
terms of this Lease.
19. LEASEHOLD MORTGAGES.
(a) Leasehold Mortgages Permitted; Notice to Landlord. Tenant shall
have the right, without Landlord's consent, to mortgage its interest under this
Lease by means of a Leasehold Mortgage to a Leasehold Mortgagee, for any amounts
and upon any terms, including term of loan, interest rates, payment terms
(including balloon or amortizing loans), prepayment privileges or other
restrictions as may be desired by Tenant, provided that (i) at the time of
making such Leasehold Mortgage, there is no existing or unremedied Put/Call
Default or Event of Default, (ii) the Leasehold Mortgagee satisfies the criteria
for an assignee of the Lease as set forth in paragraph 25(b) of this Lease
(other than and specifically excluding subitems (3) and (4) thereof which do not
have to be satisfied unless and until such Leasehold Mortgagee becomes
42
a successor to Tenant's interest under this Lease) and (iii) within ten (10)
Business Days after the execution and delivery of any such Leasehold Mortgage,
the requirements of paragraph 19(b) are satisfied. Notwithstanding the
foregoing, no Leasehold Mortgage shall extend to or affect all or any portion of
Landlord's interest in the Premises.
(b) Requirements for Effective Notice. Landlord shall not be deemed to
have notice of any Leasehold Mortgage, of any amendment to supplement, modify,
renew, replace or extend the same or of any assignment thereof, nor shall
Landlord have any duty or obligation with respect thereto, unless and until (i)
a copy of the original of such Leasehold Mortgage, amendment or assignment, as
the case may be, and all other material loan documents related to the loan made
by such Leasehold Mortgagee to Tenant, including evidence that all of Tenant's
assets are pledged to such Leasehold Mortgagee (subject to any pledges thereof
to Landlord) certified by the Leasehold Mortgagee as being a true, correct and
complete copy thereof, are delivered to Landlord, and (ii) written notice
containing the name and address of the Leasehold Mortgagee or assignee of such
Leasehold Mortgagee, as the case may be, is given to Landlord in the manner
provided in paragraph 32 of this Lease. If any Leasehold Mortgage is held by
more than one Person, the foregoing provisions of this Lease requiring Landlord
to give notices or copies of notices to the Leasehold Mortgagee shall not be
binding on Landlord unless and until all of the holders thereof shall give
Landlord a written notice executed by all such holders, in a recordable form,
designating one Person to whom all notices for all such holders shall be given,
as agent for all such holders.
(c) Leasehold Mortgagee's Consent to Certain Actions Required. Except
as otherwise provided in paragraph 15 of this Lease and this paragraph 19,
effective upon Landlord's receipt of notice of a Leasehold Mortgage meeting the
requirements of this paragraph 19, Landlord agrees it will not amend or modify
in any material respect this Lease without the prior written consent of the
Leasehold Mortgagee under any Leasehold Mortgage, which consent shall not be
unreasonably withheld, so long as such Leasehold Mortgage shall remain in
effect.
(d) Notices to Leasehold Mortgagees. So long as any Leasehold Mortgage
remains a lien on Tenant's leasehold estate hereunder, Landlord will endeavor to
give a duplicate copy of any notice to Tenant of any Event of Default or notice
of termination pursuant to paragraph 15 of this Lease to the Leasehold Mortgagee
(or agent therefor, as applicable) who shall have given notice of its Leasehold
Mortgage to Landlord pursuant to this paragraph 19, concurrently with the giving
of any notice to Tenant of any Event of Default or Landlord Remedy Notice.
Failure to do so shall not constitute a failure to give notice to Tenant.
However, no such notice to Tenant shall be effective as against such Leasehold
Mortgagee unless and until a copy of such notice is given to such Leasehold
Mortgagee in the manner provided pursuant to paragraph 32 of this Lease with
respect to notices to Landlord and Tenant, except that the address for such
notice to such Leasehold Mortgagee shall be the address provided to Landlord
pursuant to this paragraph 19.
(e) Rights to Perform Tenant's Obligations and Cure Tenant's Defaults.
Leasehold Mortgagee will be afforded the right, but shall not be obligated, to
perform any term, covenant or condition of this Lease to be performed by Tenant,
and in addition, will have the right, but not the obligation, during a period of
time equal to the cure period given Tenant pursuant to paragraph 15 of this
Lease, if any, for remedying the Event of Default or causing the same to be
remedied pursuant to paragraph 15 of this Lease. Landlord shall accept such
performance on the
43
part of such Leasehold Mortgagee as though the same had been done or performed
by Tenant. Notwithstanding the foregoing, if any such Event of Default is
incapable of being cured by such Leasehold Mortgagee by the payment of money,
such Leasehold Mortgagee's rights shall be governed by paragraphs 19(f) and (g)
of this Lease.
(f) Temporary Waiver of Landlord's Right to Terminate Lease and Other
Rights. Landlord shall not exercise its right pursuant to paragraph 16 of this
Lease to terminate this Lease by reason of any Put/Call Default or Event of
Default under paragraphs 15(f) or 15(g) of this Lease that is incapable of being
cured by the payment of money and that by its nature may be cured by a Leasehold
Mortgagee only after obtaining possession of the Premises, or any portion
thereof, or by foreclosing its Leasehold Mortgage and related documents, in any
such case, provided (i) the Leasehold Mortgagee notifies Landlord of its intent
to obtain possession or to foreclose its Leasehold Mortgage, as the case may be,
and other liens and security interests from or related to Tenant within the time
period, if any, afforded under paragraph 19(e) of this Lease to such Leasehold
Mortgagee to cure any such Event of Default to enable such Leasehold Mortgagee
to acquire all of Tenant's Assets; and (ii) thereafter the Leasehold Mortgagee
(w) proceeds promptly and continues with due diligence to prosecute its remedies
under its Leasehold Mortgage and other liens and security interests from or
related to Tenant and to obtain the possession needed to cure such Event of
Default or to foreclose its Leasehold Mortgage and other liens and security
interests from or related to Tenant, (x) complies with paragraph 19(i) below,
(y) pays to Landlord the Rent and all other charges required to be paid by
Tenant under this Lease that have accrued to the date of the notice given by the
Leasehold Mortgagee to Landlord pursuant to this paragraph 19(f) but remain
unpaid, and (z) pays when due all Rent and all other charges thereafter becoming
due and payable by Tenant under this Lease until such time as Tenant no longer
is the owner of Tenant's leasehold estate or Tenant's Assets. In such event,
Landlord shall not be deemed to have failed to use reasonable efforts to, nor
shall Landlord be obligated to attempt, to mitigate its damages as a result of
any such Put/Call Default or Event of Default under paragraphs 15(f) or 15(g) of
this Lease during the period of time such Leasehold Mortgagee is complying with
the foregoing provisions of this paragraph 19(f).
(g) Rights Upon Termination of Lease by Landlord.
(i) Notice of Termination; New Lease. If Landlord elects to
terminate this Lease prior to the stated Lease Expiration Date by reason of any
Put/Call Default or Event of Default pursuant to paragraphs 15(f) or 15(g) of
this Lease, that is incapable of being cured by the payment of money and that is
incapable of being cured by any Leasehold Mortgagee pursuant to the provisions
of paragraph 19(f) of this Lease, Landlord agrees to give prompt notice of such
election to any Leasehold Mortgagee (such notice being herein called "LANDLORD'S
TERMINATION Notice") specifying the nature of the Event of Default. In addition,
at the request of Leasehold Mortgagee made within the time period provided in
clause (A) of paragraph 19(g)(ii) below and subject to the provisions of this
paragraph 19(g), Landlord shall enter into a new lease of the Premises ("NEW
LEASE") with such Leasehold Mortgagee or, at the request of such Leasehold
Mortgagee, with any purchaser at a foreclosure sale or assignee or transferee
pursuant to an assignment or other transfer in lieu of foreclosure. Any such
Leasehold Mortgagee, purchaser, assignee or transferee with whom Landlord enters
into a New Lease is referred to herein as a "NEW TENANT." The New Tenant must be
an entity otherwise meeting the criteria for an assignee of the Lease as set
forth in paragraph 25 of this Lease. Any such New Lease shall commence as of the
Lease Expiration Date as specified in Landlord's Termination
44
Notice, shall expire as of the Lease Expiration Date (as in effect without
regard to the termination of the Lease as to Tenant), and shall require the New
Tenant to pay rent equal to the Fixed Rent and all other types of Rent and other
charges required to be paid by Tenant under this Lease and to perform all of the
conditions, covenants, agreements, terms, provisions and limitations contained
in this Lease.
(ii) New Lease Request. Notwithstanding the foregoing
provisions of this paragraph 19(g), Landlord shall not be obligated to enter
into a New Lease unless and until all of the following events have occurred: (A)
the Leasehold Mortgagee makes a written request ("NEW LEASE REQUEST") to
Landlord for the New Lease within thirty (30) days after Landlord gives such
Leasehold Mortgagee Landlord's Termination Notice; (B) such New Lease Request is
followed by a payment (made to Landlord within ten (10) days after being billed
by Landlord) of all amounts due to Landlord under this Lease at the time of the
New Lease Request; (C) the New Tenant at the time of the New Lease Request cures
the Event of Default upon which such termination was based or, if such Event of
Default cannot be cured by the payment of money, the New Tenant has reasonable
and adequate capital, capital surplus or other financial resources to perform
Tenant's obligations hereunder (as reasonably determined by Landlord) and agrees
with Landlord at the time of the New Lease Request to proceed promptly and with
due diligence to cure such Event of Default and, if possession of the Premises
and Tenant's Assets is necessary to cure such Event of Default, to proceed upon
the execution of the New Lease promptly and with due diligence to obtain the
possession needed to cure such Event of Default or, if such Event of Default by
its nature cannot be cured by the New Tenant with or without possession of the
Premises or Tenant's Assets, the New Tenant agrees in writing to cooperate in
good faith in any legal or other action taken by Landlord to compel Tenant or
others to cure such Event of Default; and (D) the New Tenant pays or causes to
be paid to Landlord at the time of execution and delivery of the New Lease any
and all sums that would be due under this Lease at the time of the execution and
delivery of the New Lease and pays or causes to be paid to Landlord all
expenses, including reasonable attorneys' fees, court costs and disbursements
incurred by Landlord in connection with termination of this Lease as to Tenant
and in connection with the execution and delivery of the New Lease.
(iii) Priority of New Lease. Any New Lease made pursuant to
this paragraph 19(g) shall be prior in right to any Mortgage or other lien,
charge or encumbrance on Landlord's interest in the Premises created by Landlord
after the date of this Lease. Notwithstanding any other provision contained in
this Lease, Landlord shall not be obligated to deliver physical possession of
the Premises to the New Tenant and a failure by the New Tenant to obtain
possession of the same, or any portion thereof, shall not subject Landlord to
any damages, nor shall there be any abatement of Rent by reason thereof.
However, upon the request of the New Tenant (at such New Tenant's sole cost and
expense) Landlord will join and cooperate with such New Tenant in any suit
brought to secure such possession.
(h) Rights Inure to Leasehold Mortgagee. Notwithstanding anything to
the contrary contained in this paragraph 19, this paragraph 19 and all rights
and benefits hereunder shall be solely for the benefit of any Leasehold
Mortgagee hereunder, and its successors and assigns, and no such rights or
benefits shall inure to Tenant or its successors and assigns.
(i) Foreclosure by Leasehold Mortgagee. If Leasehold Mortgagee elects
to foreclose its Leasehold Mortgage following a default or event of default
thereunder, Leasehold Mortgagee
45
must simultaneously foreclose and take control of all of Tenant's Assets,
including all Membership Contracts, and become obligated to Landlord and
Landlord's affiliates and shall enter into such documentation as reasonably
required by Landlord in order to provide Landlord and Landlord's affiliates all
rights, benefits and security interests currently granted under the Lease, the
Guarantor Pledge, the Guaranty, the Tenant Pledge, the Subsidiary Guaranty and
the Subsidiary Pledge.
20. ESTOPPEL CERTIFICATE; FINANCIAL DATA
(a) At any time and from time to time, but no more often than three (3)
times per Lease Year, Tenant shall, within ten (10) Business Days after written
request by Landlord, execute, acknowledge and deliver to Landlord a certificate
certifying: (a) that this Lease is unmodified and in full force and effect (or,
if there have been modifications, that this Lease is in full force and effect as
modified, and stating the date and nature of each modification); (b) the
Commencement Date and the Lease Expiration Date determined in accordance with
paragraph 4 or this Lease and the Basic Lease Information, and the date, if any,
to which all Rent and other sums payable hereunder have been paid; (c) the
amount of Fixed Rent currently payable monthly; (d) that no notice has been
received by Tenant of any default by Tenant hereunder which has not been cured,
except as to defaults specified in such certificate; (e) that to Tenant's actual
knowledge, Landlord is not in default under this Lease, except as to defaults
specified in such certificate; and (f) such other matters as may be reasonably
requested by Landlord or any actual or prospective purchaser or mortgage lender.
Any such certificate may be relied upon by Landlord and any actual or
prospective purchaser or mortgage lender of the Premises, Underlying Premises,
or any part thereof.
(b) Tenant shall deliver to Landlord and to any actual or prospective
purchaser or mortgage lender designated by Landlord the following information
(A) within one hundred twenty (120) days after the end of each fiscal year of
Tenant: an audited consolidated and consolidating balance sheet of Tenant and
Tenant's Subsidiaries as at the end of such fiscal year, an audited consolidated
and consolidating statement of profits and losses of Tenant and Tenant's
Subsidiaries for such fiscal year, and an audited statement of cash flows of
Tenant and Tenant's Subsidiaries for such fiscal year, setting forth in each
case, in comparative form, the corresponding figures for the preceding fiscal
year in reasonable detail and scope and certified by independent certified
public accountants of recognized national standing selected by Tenant; (B)
within forty-five (45) days after the end of each of the first three (3) fiscal
quarters of Tenant a balance sheet of Tenant and Tenant's Subsidiaries as at the
end of such fiscal quarter, statements of profits and losses of Tenant and
Tenant's Subsidiaries for such fiscal quarter and a statement of cash flows of
Tenant and Tenant's Subsidiaries for such fiscal quarter, setting forth in each
case, in comparative form, the corresponding figures for the similar quarter of
the preceding fiscal year (or in the case of an interim balance sheet, to the
end of the prior fiscal year), in reasonable detail and scope, and certified to
be complete and accurate by a senior financial officer of Tenant having
knowledge thereof; and (C) within thirty (30) days after the end of each month,
consolidated balance sheets of Tenant and its Subsidiaries, as of the end of
such month and the related consolidated statements of income and cash flow for
such month and for the period from the beginning of the then current fiscal year
of Tenant to the end of such month, the foregoing financial statements in each
case being prepared in accordance with GAAP. Tenant's obligation to disclose
information to an actual or prospective purchaser or a mortgage lender pursuant
to this paragraph 20(b) is subject to Tenant's receipt of a confidentiality
agreement in
46
form and substance reasonably acceptable to Tenant. Tenant shall deliver to
Landlord (i) together with the annual financial statements described above, an
annual Site operating expense statement for each Site in detail reasonably
satisfactory to Landlord and certified to be complete and accurate by a senior
officer of Tenant or Guarantor, and (ii) together with each quarterly financial
statement described above, a Compliance Certificate duly executed by Tenant, in
form and substance reasonably acceptable to Landlord, demonstrating compliance
with the financial performance covenants contained in paragraph 38 of this Lease
and setting forth the basis for such calculations with reasonable detail and
specificity.
(c) Upon ten (10) Business Days prior written notice, but no more often
than once per Lease Year, Tenant shall permit Landlord and its professional
representatives to visit Tenant's offices, and discuss Tenant's affairs and
finances with Tenant's senior management, and shall make available such
information as Landlord may reasonably request bearing on Tenant, the Premises
or this Lease as Tenant may maintain in the ordinary course of business.
Landlord shall agree to maintain the confidentiality of (i) all nonpublic
information provided to Landlord under this paragraph 20 and (ii) any other
information designated by Tenant or Guarantor as "nonpublic".
21. MECHANICS' LIENS
(a) Except for liens created through the act of Landlord, Tenant shall
not suffer or permit any mechanic's lien or other lien to be filed or recorded
against the Premises or Underlying Premises, equipment or materials supplied or
claimed to have been supplied to the Premises or Underlying Premises at the
request of Tenant, or anyone holding the Premises, Underlying Premises, or any
portion thereof, through or under Tenant. If any such mechanic's lien or other
lien shall at any time be filed or recorded against the Premises or Underlying
Premises, or any portion thereof, Tenant shall cause the same to be discharged
of record or bonded over within thirty (30) calendar days after the date of
filing or recording of the same.
(b) All materialmen, contractors, artisans, engineers, mechanics,
laborers and any other Person now or hereafter furnishing any labor, services,
materials, supplies, skill, machinery, fixtures or equipment to Tenant with
respect to the Premises, or any portion thereof, are hereby charged with notice
that they must look exclusively to Tenant to obtain payment for the same. Notice
is hereby given that Landlord shall not be liable for any labor, services,
materials, supplies, skill, machinery, fixtures or equipment furnished or to be
furnished to Tenant upon credit, and that no mechanic's lien or other lien for
any such labor, services, materials, supplies, skill, machinery, fixtures or
equipment shall attach to or affect the estate or interest of Landlord's
affiliates in and to the Underlying Premises or the estate or interest of
Landlord in and to the Premises, or any portions thereof.
22. END OF TERM
(a) Except as provided in paragraph 22(f), upon the expiration or
earlier termination of the Term of this Lease or upon Landlord's acquisition of
Tenant's Assets, Tenant shall surrender the Premises to Landlord in the Premises
Condition Standard, except as repaired, rebuilt or altered as required or
permitted by this Lease (or, in the case of termination pursuant to paragraph 14
of this Lease, as condemned). Except as otherwise provided herein, Tenant shall
at such time remove all of its personal property (including Tenant's Trade
Fixtures) therefrom and
47
all alterations and improvements placed thereon by Tenant and not consented to
by Landlord. Tenant shall repair any damage to the Premises caused by such
removal, and any and all such property not so removed when required shall, at
Landlord's option, become the exclusive property of Landlord or be disposed of
by Landlord, at Tenant's cost and expense, without further notice to or demand
upon Tenant.
(b) Except as provided in paragraph 22(f), if the Premises are not
surrendered as above set forth, Tenant shall indemnify, defend and hold Landlord
and the Landlord Parties harmless on an After-Tax Basis from and against loss or
liability resulting from the delay by Tenant in so surrendering the Premises,
including any claim made by any succeeding occupant founded on such delay.
Tenant's obligation to observe or perform this covenant shall survive the
expiration or other termination of this Lease for six (6) years. The provisions
of this paragraph 22(b) shall not be deemed to limit or constitute a waiver of
any other rights or remedies of Landlord provided herein.
(c) Except as provided in paragraph 22(f), all property of Tenant not
removed on or before the last day of the Term of this Lease shall be deemed
abandoned. Tenant hereby agrees that Landlord may remove all property of Tenant,
including Tenant's Trade Fixtures, from the Premises upon termination of this
Lease and may cause its transportation and storage, all at the sole cost and
risk of Tenant. Landlord shall not be liable for damage, theft, misappropriation
or loss thereof and Landlord shall not be liable in any manner in respect
thereto, and Landlord shall be entitled to dispose of such property, as Landlord
deems fit, without the requirement of an accounting. Tenant shall pay all
reasonable costs and expenses of such removal, transportation and storage.
Tenant shall reimburse Landlord upon demand for any expenses reasonably and
actually incurred by Landlord with respect to removal, transportation or storage
of any such abandoned property and with respect to restoring the Premises in
accordance with the terms and conditions of this Lease.
(d) Except for surrender upon the expiration or earlier termination of
the Term hereof as expressly provided herein, no surrender to Landlord of this
Lease or of the Premises shall be valid or effective unless agreed to and
accepted in writing by Landlord.
(e) Except as provided in paragraph 22(f), upon the expiration of the
Term or Tenant's right to possession of the Premises or any Site in accordance
with the terms of this Lease or upon Landlord's acquisition of Tenant's Assets,
Tenant agrees to cooperate with Landlord to transfer any and all Licenses to
Landlord, at Landlord's request.
(f) Provided no Event of Default or Put/Call Default exists, at the end
of the term the following provisions shall apply (the parties acknowledge that
the Excess Land shall not be included in the procedures dealt with in this
paragraph 22(f), since in all events, the Excess Land shall be separated from
the Premises and the Underlying Premises as set forth in paragraph 33 of this
Lease):
(i) Commencing on the date which is twenty-four (24) months
prior to the scheduled expiration of the Term, Landlord and Tenant shall
commence negotiations to establish the Fair Market Value for the Underlying
Premises (which does not include the Excess Land) assuming (1) it is
unencumbered by the Membership Contracts, (2) it is appraised in accordance with
the methodology and assumptions used in the appraisal by Hilco Real Estate LLC
attached
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hereto as Exhibit G and (3) it is subject to such other liabilities associated
therewith and not inconsistent with (1) and (2), above. If Landlord and Tenant
have not agreed upon such Fair Market Value by the date which is twenty-two (22)
months prior to the scheduled expiration of the Term, then the following
procedures shall apply:
(A) The Fair Market Value of the Underlying Premises assuming
it is unencumbered by the Membership Contracts shall be determined by
the agreement of two (2) appraisers (each, a "LT UNDERLYING PREMISES
INITIAL APPRAISER"), one of which shall be selected by Landlord and the
other of which shall be selected by Tenant. Such selection shall be
made by the 15th day of such 22nd calendar month prior to the scheduled
expiration of the Term. Each party shall notify the other in writing of
the name, address, phone number and qualifications of the appraiser
selected by such party. Then within five (5) calendar days after the
date both LT Underlying Premises Initial Appraisers have been so
identified in writing, each of Landlord and Tenant shall direct, in
writing with a copy to the other party, its LT Underlying Premises
Initial Appraiser to work with the other party's LT Underlying Premises
Initial Appraiser to endeavor to determine and reach agreement upon the
Fair Market Value of the Underlying Premises as required hereby and
thereafter to deliver in writing to Landlord and Tenant within thirty
(30) calendar days (such 30-day period, the "LT UNDERLYING PREMISES
VALUATION PERIOD") the agreed-upon Fair Market Value of the Underlying
Premises as required hereby (the "LT UNDERLYING PREMISES VALUATION
NOTICE"). The costs and expenses of each LT Underlying Premises Initial
Appraiser shall be paid by the party selecting such LT Underlying
Premises Initial Appraiser. If either party fails to identify in
writing a LT Underlying Premises Initial Appraiser as required hereby
("NON-SELECTING PARTY"), the other party shall identify a LT Underlying
Premises Initial Appraiser on behalf of the Non-Selecting Party;
provided, however, the Non-Selecting Party shall be liable for the
costs and expenses of such LT Underlying Premises Initial Appraiser
identified on the Non-Selecting Party's behalf as if the Non-Selecting
Party had selected such LT Underlying Premises Initial Appraiser.
(B) If the LT Underlying Premises Initial Appraisers are not
able to reach agreement upon the Fair Market Value of the Underlying
Premises as required hereby within the LT Underlying Premises Valuation
Period, then within ten (10) calendar days after the end of the LT
Underlying Premises Valuation Period each LT Underlying Premises
Initial Appraiser shall deliver a written notice to Landlord, Tenant
and the other LT Underlying Premises Initial Appraiser setting forth
(i) such LT Underlying Premises Initial Appraiser's valuation of the
Fair Market Value of the Underlying Premises as required hereby (each,
a "LT UNDERLYING PREMISES INITIAL VALUATION") and (ii) the name,
address, phone number and qualifications of a third appraiser selected
jointly by the LT Underlying Premises Initial Appraisers (the "LT
UNDERLYING PREMISES THIRD Appraiser"). The LT Underlying Premises
Initial Appraisers shall, in writing with a copy to Landlord and
Tenant, direct the LT Underlying Premises Third Appraiser (or
substitute LT Underlying Premises Third Appraiser) to determine a
valuation of the Fair Market Value of the Underlying Premises as
required hereby, and to deliver in writing to Landlord, Tenant and the
LT
49
Underlying Premises Initial Appraisers such valuation (the "LT
UNDERLYING PREMISES THIRD VALUATION") within twenty (20) calendar days
of the date of the written direction retaining such LT Underlying
Premises Third Appraiser. The Fair Market Value of the Underlying
Premises shall be the arithmetic mean of (A) the LT Underlying Premises
Third Valuation and (B) the LT Underlying Premises Initial Valuation
closer to the LT Underlying Premises Third Valuation. If the LT
Underlying Premises Third Valuation is exactly between the two LT
Underlying Premises Initial Valuations, then the Fair Market Value of
the Underlying Premises shall be the LT Underlying Premises Third
Valuation. If the LT Underlying Premises Initial Appraisers are unable
to agree upon the designation of a LT Underlying Premises Third
Appraiser within the requisite time period or if the LT Underlying
Premises Third Appraiser selected does not determine a valuation of the
Fair Market Value of the Underlying Premises within twenty (20)
calendar days after being directed by the LT Underlying Premises
Initial Appraisers, then such LT Underlying Premises Third Appraiser or
a substitute LT Underlying Premises Third Appraiser, as applicable,
shall, at the request of Landlord or Tenant, be appointed by the JAMS
Resolution Center or any successor thereto, or other mutually agreed
upon independent dispute resolution service ("JAMS"). The costs and
expenses of the LT Underlying Premises Third Appraiser (and substitute
LT Underlying Premises Third Appraiser and JAMS, if applicable) shall
be divided evenly between, and paid for by, Landlord and Tenant.
(C) All appraisers selected or appointed pursuant to this
paragraph 22(f)(i) shall be independent qualified appraisers. Such
appraisers shall have no right, power or authority to alter or modify
the provisions of this Lease, and such appraisers shall determine the
Fair Market Value of the Underlying Premises as required by this Lease.
(D) Notwithstanding the foregoing, if Landlord and Tenant are
able to agree upon a Fair Market Value of the Underlying Premises prior
to the date on which the Fair Market Value of the Underlying Premises
is determined in accordance with this paragraph 22(f)(i), Landlord and
Tenant shall execute an agreement setting forth such agreed-upon Fair
Market Value of the Underlying Premises and waiving each party's right
to have the Fair Market Value of the Underlying Premises determined in
accordance with the procedures set forth in this paragraph 22(f)(i).
(ii) Within 60 calendar days of the date the Fair Market Value
of the Underlying Premises is determined in accordance with paragraph 22(f)(i)
above, Tenant shall have the right, but not the obligation, to elect to purchase
on the Lease Expiration Date (A) the equity interests in the Trust or (B) in the
event that an asset purchase transaction does not have any adverse tax or other
consequences to Landlord or any of its affiliates (determined in Landlord's sole
discretion), the Underlying Premises, in either case for a purchase price equal
to the greater of (1) $160,000,000 or (2) 100% of such Fair Market Value of the
Underlying Premises, in accordance with the terms and conditions on Exhibit W
attached hereto, and otherwise in accordance with a customary stock purchase
agreement or asset purchase agreement, as applicable, with terms and conditions
that are commercially reasonable for such
50
agreements at the end of the Term, to be negotiated by the Landlord and Tenant
in good faith (the "PURCHASE AGREEMENT"). Throughout the Term, the Trust shall,
directly or indirectly own no assets other than one hundred percent (100%) of
the ownership interest in Landlord and Landlord shall not own any assets other
than (1) affiliates of Landlord which own certain Sites, (2) directly or
indirectly, the Underlying Premises and (3) the Excess Land (until such time as
the Excess Land may be transferred as permitted by this Lease). The Purchase
Agreement shall provide that the Person that owns the Excess Land, and no other
Person, shall be the sole source of any payments in respect of any
indemnification obligations in the Purchase Agreement. For Tenant's election to
be effective, Tenant must deliver written notice to Landlord stating that Tenant
elects to purchase either (a) the equity interests in the Trust, or (b) purchase
the Underlying Premises (subject to Landlord's sole determination as set forth
above), as permitted by paragraph 22(f)(ii) of this Lease ("UNDERLYING PREMISES
PURCHASE NOTICE") within such 60 calendar day period. Upon Landlord's receipt of
such Underlying Premises Purchase Notice, Landlord and Tenant shall proceed to
promptly negotiate and execute the Purchase Agreement. If Tenant fails to give
the Underlying Premises Purchase Notice within such 60 day period or if the
Purchase Agreement is not executed within 30 days of the date the Underlying
Premises Purchase Notice is received by Landlord (other than based upon
Landlord's failure to execute such Purchase Agreement in accordance with the
requirements hereof), or if at any time Tenant gives written notice to Landlord
that Tenant elects to waive its right to purchase as set forth in this paragraph
22(f)(ii), then Tenant shall have no further right to purchase the equity
interests in the Trust (or the Underlying Premises, if applicable) and the date
of such event is herein called "TENANT'S PURCHASE TERMINATION DATE".
(iii) Commencing on the fifth (5th) calendar day following
Tenant's Purchase Termination Date, Landlord and Tenant shall commence
negotiations to establish the Fair Market Value for all of Tenant's assets,
including the assets of all direct and indirect subsidiaries of Tenant, and all
of Tenant's liabilities, including liabilities of all direct and indirect
subsidiaries of Tenant, other than the Working Capital Indebtedness, Leasehold
Mortgage, or other lines of credit or other similar obligations evidencing
indebtedness of borrowed money of Tenant (collectively, "TENANT'S ASSETS")
unless, prior to the fifth (5th) calendar day following the Tenant's Purchase
Termination Date, Tenant delivers written notice to Landlord ("TENANT'S PURCHASE
ELECTION NOTICE") stating that Tenant desires that the provisions of this
paragraph 22(f)(iii) shall not apply to Tenant's Assets and instead shall apply
to the equity interests in Tenant or an entity owning, directly or indirectly,
Tenant, including all of Tenant's Assets (and specifically setting forth the
exact equity ownership structure of Tenant) ("TENANT'S EQUITY INTEREST"), in
which event, the provisions of this paragraph 22(f)(iii) shall apply to Tenant's
Equity Interests (and not Tenant's Assets) and Landlord and Tenant shall
immediately commence negotiations to establish the Fair Market Value for the
Tenant's Equity Interest. If Landlord and Tenant have not agreed to such Fair
Market Value amount by the date which is two (2) months following the Tenant's
Purchase Termination Date ("ASSET/EQUITY APPRAISAL START DATE"), then the
following procedures shall apply:
(A) The Fair Market Value of either Tenant's Equity Interest
or Tenant's Assets, as applicable, shall be determined by the agreement
of two (2) appraisers (each, a "LT ASSETS/EQUITY INITIAL Appraiser"),
one of which shall be selected by Landlord and the other of which shall
be selected by Tenant. Such selection shall be made by the 15th day
following the Asset/Equity Appraisal Start Date. Each party shall
notify the other in writing of the name, address, phone
51
number and qualifications of the appraiser selected by such party. Then
within five (5) calendar days after the date both LT Assets/Equity
Initial Appraisers have been so identified in writing, each of Landlord
and Tenant shall direct, in writing with a copy to the other party, its
LT Assets/Equity Initial Appraiser to work with the other party's LT
Assets/Equity Initial Appraiser to endeavor to determine and reach
agreement upon the Fair Market Value of either Tenant's Equity Interest
or Tenant's Assets, as applicable, as required hereby and thereafter to
deliver in writing to Landlord and Tenant within thirty (30) calendar
days (such 30-day period, the "LT ASSETS/EQUITY VALUATION PERIOD") the
agreed-upon Fair Market Value of either Tenant's Equity Interest or
Tenant's Assets, as applicable, as required hereby (the "LT
ASSETS/EQUITY VALUATION NOTICE"). The costs and expenses of each LT
Assets/Equity Initial Appraiser shall be paid by the party selecting
such LT Assets/Equity Initial Appraiser. If either party fails to
identify in writing a LT Assets/Equity Initial Appraiser as required
hereby ("NON-SELECTING ASSET/EQUITY PARTY"), the other party shall
identify a LT Assets/Equity Initial Appraiser on behalf of the
Non-Selecting Asset/Equity Party; provided, however, the Non-Selecting
Asset/Equity Party shall be liable for the costs and expenses of such
LT Assets/Equity Initial Appraiser identified on the Non-Selecting
Asset/Equity Party's behalf as if the Non-Selecting Asset/Equity Party
had selected such LT Assets/Equity Initial Appraiser.
(B) If the LT Assets/Equity Initial Appraisers are not able to
reach agreement upon the Fair Market Value of either Tenant's Equity
Interest or Tenant's Assets, as applicable, as required hereby within
the LT Assets/Equity Valuation Period, then within ten (10) calendar
days after the end of the LT Assets/Equity Valuation Period each LT
Assets/Equity Initial Appraiser shall deliver a written notice to
Landlord, Tenant and the other LT Assets/Equity Initial Appraiser
setting forth (i) such LT Assets/Equity Initial Appraiser's valuation
of the Fair Market Value of either Tenant's Equity Interest or Tenant's
Assets, as applicable, as required hereby (each, a "LT ASSETS/EQUITY
INITIAL VALUATION") and (ii) the name, address, phone number and
qualifications of a third appraiser selected jointly by the LT
Assets/Equity Initial Appraisers (the "LT ASSETS/EQUITY THIRD
APPRAISER"). The LT Assets/Equity Initial Appraisers shall, in writing
with a copy to Landlord and Tenant, direct the LT Assets/Equity Third
Appraiser (or substitute LT Assets/Equity Third Appraiser) to determine
a valuation of the Fair Market Value of either Tenant's Equity Interest
or Tenant's Assets, as applicable, as required hereby, and to deliver
in writing to Landlord, Tenant and the LT Assets/Equity Initial
Appraisers such valuation (the "LT ASSETS/EQUITY THIRD VALUATION")
within twenty (20) calendar days of the date of the written direction
retaining such LT Assets/Equity Third Appraiser. The Fair Market Value
of either Tenant's Equity Interest or Tenant's Assets, as applicable,
shall be the arithmetic mean of (A) the LT Assets/Equity Third
Valuation and (B) the LT Assets/Equity Initial Valuation closer to the
LT Assets/Equity Third Valuation. If the LT Assets/Equity Third
Valuation is exactly between the two LT Assets/Equity Initial
Valuations, then the Fair Market Value of either Tenant's Equity
Interest or Tenant's Assets, as applicable, shall be the LT
Assets/Equity Third Valuation. If the LT Assets/Equity Initial
Appraisers are unable to agree upon the designation of a LT
Assets/Equity Third Appraiser within the requisite
52
time period or if the LT Assets/Equity Third Appraiser selected does
not determine a valuation of the Fair Market Value of either Tenant's
Equity Interest or Tenant's Assets, as applicable, within twenty (20)
calendar days after being directed by the LT Assets/Equity Initial
Appraisers, then such LT Assets/Equity Third Appraiser or a substitute
LT Assets/Equity Third Appraiser, as applicable, shall, at the request
of Landlord or Tenant, be appointed by JAMS. The costs and expenses of
the LT Assets/Equity Third Appraiser (and substitute LT Assets/Equity
Third Appraiser and JAMS, if applicable) shall be divided evenly
between, and paid for by, Landlord and Tenant.
(C) All appraisers selected or appointed pursuant to this
paragraph 22(f)(iii) shall be independent qualified appraisers. Such
appraisers shall have no right, power or authority to alter or modify
the provisions of this Lease, and such appraisers shall determine the
Fair Market Value of either Tenant's Equity Interest or Tenant's
Assets, as applicable, as required by this Lease.
(D) Notwithstanding the foregoing, if Landlord and Tenant are
able to agree upon a Fair Market Value of either Tenant's Equity
Interest or Tenant's Assets, as applicable, prior to the date on which
the Fair Market Value of either Tenant's Equity Interest or Tenant's
Assets, as applicable, is determined in accordance with this paragraph
22(f)(iii), Landlord and Tenant shall execute an agreement setting
forth such agreed-upon Fair Market Value of either Tenant's Equity
Interest or Tenant's Assets, as applicable, and waiving each party's
right to have the Fair Market Value of either Tenant's Equity Interest
or Tenant's Assets, as applicable, determined in accordance with the
procedures set forth in this paragraph 22(f)(iii).
(iv) Within 60 calendar days of the date the Fair Market Value
of either Tenant's Equity Interest or Tenant's Assets, as applicable, is
determined in accordance with paragraph 22(f)(iii) above, Landlord shall have
the right, but not the obligation, to elect to purchase on the Lease Expiration
Date either Tenant's Equity Interest or Tenant's Assets, as applicable, in
accordance with the terms and conditions on Exhibit V attached hereto, for a
purchase price equal to 100% of such Fair Market Value of either Tenant's Equity
Interest or Tenant's Assets, as applicable, in accordance with a customary
Asset/Equity Purchase Agreement with terms and conditions that are commercially
reasonable for such agreements at the end of the Term, to be negotiated by the
Landlord and Tenant in good faith (the "ASSET/EQUITY PURCHASE AGREEMENT"). For
Landlord's election to be effective, Landlord must deliver written notice to
Tenant stating Landlord elects to purchase either Tenant's Equity Interest or
Tenant's Assets, as applicable, as permitted by paragraph 22(f)(iv) of this
Lease ("ASSET/EQUITY PURCHASE NOTICE") within such 60 calendar day period. Upon
Tenant's receipt of such Asset/Equity Purchase Notice Landlord and Tenant shall
proceed to promptly negotiate and execute the Asset/Equity Purchase Agreement.
If Landlord fails to give the Asset/Equity Purchase Notice within such 60 day
period or if the Asset/Equity Purchase Agreement is not executed within 30 days
of the date the Asset/Equity Purchase Notice is received by Tenant (other than
based upon Tenant's failure to execute such Asset/Equity Purchase Agreement in
accordance with the requirements hereof), or if at any time Landlord gives
written notice to Tenant that Landlord elects to waive its right to purchase as
set forth in this paragraph 22(f)(iv), then Landlord shall have no further right
to purchase either Tenant's Equity Interest or Tenant's
53
Assets, as applicable, and the date of such event is herein called "LANDLORD'S
PURCHASE TERMINATION DATE".
(v) Following the Landlord's Purchase Termination Date through
the date which is 90 calendar days following the Lease Expiration Date (herein
"NEGOTIATION END DATE"), Landlord and Tenant shall in good faith negotiate an
extension to the Term of this Lease. If the Lease Expiration Date occurs during
such period, this Lease shall continue on a month to month basis thereafter and
Fixed Rent shall continue at the amount previously set for the last Lease Year
and all other terms and provisions of this Lease shall continue.
(vi) If an extension to this Lease has not been executed and
delivered by Landlord and Tenant by the Negotiation End Date, then Landlord and
Tenant shall agree upon the terms and conditions of, and then immediately
commence, the joint marketing of (1) either the stock of the Trust or the
Underlying Premises, as determined by Landlord, in its sole discretion and (2)
either Tenant's Equity Interest or Tenant's Assets, as applicable, previously
valued pursuant to paragraphs 22(f)(i) and (iii), for a sale to occur within 12
months of the Negotiation End Date to an unrelated third party. Landlord and
Tenant shall agree on all required terms, including the form of such transaction
and the type of marketing; provided, however, that each party can elect the type
and structure of the sale of its assets or equity, as applicable, in its
reasonable discretion and without the consent of the other party. Landlord and
Tenant shall also agree on the relative distributions each will receive from
such sale of (1) either the stock of the Trust or the Underlying Premises, as
applicable and (2) either Tenant's Equity Interest or Tenant's Assets, as
applicable, to an unrelated third party. If Landlord and Tenant are unable to
agree upon the terms and conditions related to the foregoing sale (other than
and specifically excluding distributions), such disagreement shall be subject to
arbitration in accordance with the provisions attached hereto as Exhibit U. If
Landlord and Tenant are unable to agree on the relative distributions each will
receive from such sale, then such distribution shall be as follows: (A) for the
holder of the stock of the Trust or Landlord, as the case may be, a percentage
equal to the percentage which the Final Fair Market Value of the Underlying
Premises is of the Final Full Market Value, and (B) for Tenant, a percentage
equal to the percentage which the Final Fair Market Value of either Tenant's
Equity Interest or Tenant's Assets, as applicable, is of the Final Full Market
Value. For purposes of the foregoing, (X) "FINAL FULL MARKET VALUE" means the
sum of the Final Fair Market Value of the Underlying Premises plus the Final
Fair Market Value of either Tenant's Equity Interest or Tenant's Assets, as
applicable, (Y) "FINAL FAIR MARKET VALUE OF THE UNDERLYING PREMISES" means the
greater of (1) $160,000,000 or (2) the Fair Market Values of the Underlying
Premises as determined in accordance with paragraph 22(f)(i) above, provided,
however, that if the Final Fair Market Value of the Underlying Premises was not
previously determined in accordance with paragraph 22(f)(i) above or if either
Landlord or Tenant gives written notice to the other within the 30 calendar days
immediately following the Negotiation End Date that such party desires a new
determination of the Fair Market Value of the Underlying Premises, then Landlord
and Tenant shall apply the procedures set forth in paragraph 22(f)(i) (A)
through (D) above, except that the appointment of each of the LT Underlying
Premises Initial Appraisers shall be made by the 45th calendar day immediately
following the Negotiation End Date, and the Fair Market Value of the Underlying
Premises as determined thereby shall be the "Fair Market Value of the Underlying
Premises," and (Z) "FINAL FAIR MARKET VALUE OF TENANT'S ASSETS" means the Fair
Market Values of either Tenant's Equity Interest or Tenant's Assets, as
applicable, as determined in accordance with paragraph 22(f)(iii) above,
provided, however, that if the Final Fair Market
54
Value of either Tenant's Equity Interest or Tenant's Assets, as applicable, was
not previously determined in accordance with paragraph 22(f)(iii) above or if
either Landlord or Tenant gives written notice to the other within the 30
calendar days immediately following the Negotiation End Date that such party
desires a new determination of the Fair Market Value of either Tenant's Equity
Interest or Tenant's Assets, as applicable, then Landlord and Tenant shall apply
the procedures set forth in paragraph 22(f)(iii) (A) through (D) above, except
that the appointment of each of the LT Assets/Equity Initial Appraisers shall be
made by the 45th calendar day immediately following the Negotiation End Date,
and the Fair Market Value of either Tenant's Equity Interest or Tenant's Assets,
as applicable, as determined thereby shall be the "Fair Market Value of Tenant's
Assets".
23. ALTERATIONS
(a) Tenant may, without Landlord's consent, make, in any fiscal year,
alterations, additions or improvements to any Site (including rental units,
improvements, alterations and additions in the ordinary course of business)
costing less than $1,000,000.00 (provided, however, alterations performed to
repair the existing damage at the Oakzanita Site, are not subject to paragraph
23(a), (b) or (c)) only if (i) such alterations, additions or improvements will
be in compliance with all applicable laws, codes, rules, regulations and
ordinances, (ii) such alterations, additions or improvements will not reduce the
fair market value or utility of such Site in its Permitted Use, considered as
unencumbered by this Lease, and (iii) such alterations, additions or
improvements will not materially and adversely affect in any way the structural,
exterior or roof elements of such Site or mechanical, electrical, plumbing,
waste water systems and facilities, water plants and facilities and septic
facilities, utility or life safety systems of such Site. In all other cases,
Landlord's prior written consent shall be required, which consent shall not be
unreasonably withheld, conditioned or delayed. At Landlord's option, any
improvement requiring Landlord's consent but made without Landlord's consent
shall be removed and the area repaired at Tenant's expense at the termination of
the Term.
(b) In no event shall Tenant be permitted to install underground
storage tanks or fuel systems on the Premises, or any portion thereof, except
that Tenant may replace existing underground storage tanks with above-ground
storage tanks which comply with all applicable Legal Requirements.
(c) All alterations, additions or improvements requiring Landlord's
consent shall be made at Tenant's sole cost and expense as follows:
(i) Tenant shall submit to Landlord, for Landlord's written
approval, complete plans and specifications for all work to be done by or for
Tenant. Such plans and specifications shall be prepared by a licensed
architect(s) and engineer(s) approved in writing by Landlord, shall comply with
all applicable codes, ordinances, rules and regulations, shall not adversely
affect the structural elements of any Site, shall be in a form sufficient to
secure the approval of all government authorities with jurisdiction over such
Site, and shall be otherwise satisfactory to Landlord in Landlord's reasonable
discretion.
(ii) Landlord shall notify Tenant in writing within thirty
(30) calendar days whether Landlord approves, approves on the condition that
Tenant reverse the alteration at Tenant's expense at the termination or
expiration of this Lease, or disapproves such plans and
55
specifications. Tenant may submit to Landlord revised plans and specifications
for Landlord's prior written approval, which approval shall not be withheld or
delayed if (a) the work to be done would not, in Landlord's reasonable judgment,
adversely affect the value, character, rentability or usefulness of any Site or
any part thereof, or (b) the work to be done shall be required by any Legal
Requirement. Tenant shall pay all costs, including the fees and expenses of the
licensed architect(s) and engineer(s), in preparing such plans and
specifications.
(iii) All changes (other than field changes for which no
change order is proposed and which will be reflected in the final "as built"
plans) in the plans and specifications approved by Landlord shall be subject to
Landlord's prior written approval. If Tenant wishes to make any such change in
the approved plans and specifications, Tenant shall have such architect(s) and
engineer(s) prepare plans and specifications for such change and submit them to
Landlord for Landlord's written approval. Landlord shall notify Tenant in
writing whether Landlord approves, approves on the condition that Tenant reverse
the alteration at Tenant's expense at the termination or expiration of this
Lease, or disapproves such change. Tenant may submit to Landlord revised plans
and specifications for any such change for Landlord's written approval. After
Landlord's written approval of such change, such change shall become part of the
plans and specifications approved by Landlord.
(iv) Tenant shall obtain and comply with all building permits
and other government permits and approvals required in connection with the work.
Tenant shall, through Tenant's licensed contractor, perform the work
substantially in accordance with the plans and specifications approved in
writing by Landlord. Tenant shall pay, as Additional Rent, the entire cost of
all work (including the cost of all utilities, permits, fees, taxes, and
property and liability insurance premiums in connection therewith) required to
make the alterations, additions or improvements. Under no circumstances shall
Landlord be liable to Tenant for any damage, loss, cost or expenses incurred by
Tenant on account of any plans and specifications, contractors or
subcontractors, design of any work, construction of any work, or delay in
completion of any work.
(v) Tenant shall give at least ten (10) calendar days prior
written notice to Landlord of the date on which construction of any work to be
done by outside contractors which requires Landlord's consent. Landlord shall
have the right to post and keep posted on any Site any notices that may be
provided by law or which Landlord may deem to be proper for the protection of
Landlord and such Site, or any portion thereof, from Liens, and to take any
other action Landlord deems necessary to remove or discharge Liens, at the
expense of Tenant.
(vi) All alterations, additions, improvements and fixtures,
whether temporary or permanent in character, made in or to any Site by Tenant,
shall become part of such Site and Landlord's property, except those which are
readily removable without causing material damage to such Site (which shall be
and remain the property of Tenant). Upon termination or expiration of this
Lease, Tenant shall, at Tenant's expense, remove all movable furniture,
equipment, trade fixtures, office machines and other personal property
(including Tenant's Trade Fixtures) from each Site (but not the Improvements or
Equipment) and repair all damage caused by such removal. Termination of this
Lease shall not affect the obligations of Tenant pursuant to this paragraph
23(c) to be performed after such termination.
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(vii) Promptly following the completion of any alteration,
addition or improvement to the Premises which costs more than $1,000,000.00 to
complete, Tenant shall furnish Landlord with a copy in electronic form
acceptable to Landlord of the complete plans and specifications for such work
(including, if available, so-called "as-built" plans and specifications).
(d) In connection with the renovations and alterations to the existing
damage at the Oakzanita Site, Tenant shall deliver to Landlord complete plans
and specifications (and any change orders) for all work to be done by or for
Tenant. Such plans and specifications shall be prepared by licensed architect(s)
and engineer(s), shall comply with all applicable codes, ordinances, rules and
regulations, shall not adversely affect the structural elements of the Oakzanita
Site, and shall be in a form sufficient to secure the approval of all government
authorities with jurisdiction over the Oakzanita Site. Tenant shall obtain and
comply with all building permits and other government permits and approvals
required in connection with the work. All alterations, additions, improvements
and fixtures, whether temporary or permanent in character, made in or to the
Oakzanita Site by Tenant, shall become part of the Oakzanita Site and Landlord's
property. Promptly following the completion of any alteration, addition or
improvement to the Oakzanita Site, Tenant shall furnish Landlord with a copy in
electronic form of the complete plans and specifications for such work
(including, if available, so-called "as-built" plans and specifications).
24. MEMORANDUM OF LEASE
The parties agree to promptly execute a Memorandum of Lease with
respect to each Site in recordable form and Landlord shall record each such
Memorandum of Lease. Landlord and Tenant shall execute such customary amendments
and terminations related thereto as may be required or reasonably requested by
Landlord or Tenant within five (5) Business Days of receipt thereof.
25. SUBLETTING/ASSIGNMENT
(a) Except as otherwise permitted in paragraphs 19, 25(b), 25(g) and
25(h) of this Lease, Tenant shall not, directly or indirectly, without the prior
written consent of Landlord and Mortgagee (which consent may be withheld or
conditioned in Landlord's and/or Mortgagee's sole and absolute discretion),
assign this Lease or any interest herein, or any interest in Tenant, or permit
the use or occupancy of the Premises by any Person other than Tenant or the
Members or other persons entitled to occupancy of the Premises pursuant to
arrangements entered into in the ordinary course of Tenant's business (e.g. day
rentals and extended vacation programs). Except as otherwise expressly permitted
in paragraphs 19 and 25 of this Lease, this Lease shall not, nor shall any
interest herein, be assignable as to the interest of Tenant involuntarily or by
operation of law without the prior written consent of Landlord and Mortgagee.
Under no circumstances (but subject to paragraph 25(g) of this Lease), shall
Tenant be permitted to sublease the Premises or any part thereof, except as
expressly permitted in paragraph 25(h) of this Lease.
For purposes of this paragraph 25(a), the occurrence of a Corporate
Control Event, or the public announcement thereof, shall be deemed to be an
assignment of this Lease which is prohibited by the preceding paragraph unless
(i) Tenant obtains Landlord's and Mortgagee's
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prior written consent as set forth above (which consent shall not be
unreasonably withheld, delayed or conditioned, other than as expressly set forth
herein), or (ii) the conditions set forth in paragraph 25(b) of this Lease are
fully satisfied.
Any of the foregoing prohibited acts (including, any purported
assignment, sublease or Corporate Control Event) without the prior written
consent of Landlord and Mortgagee, as required in accordance with the terms
hereof, shall be void ab initio and shall, at the option of Landlord or
Mortgagee, constitute an immediate Event of Default under paragraph 15(d).
(b) Subject to the provisions of paragraph 36 of this Lease, Tenant may
complete a Corporate Control Event subject to the following conditions: (1) the
Person or Persons succeeding to the interests of Tenant as a result of a
Corporate Control Event (such Person, the "TENANT SUCCESSOR") or, on a
consolidated basis, a Tenant Successor and the Person or Persons controlling
such Tenant Successor (the "NEW CONTROL ENTITY") (A) have a Net Worth equal to
or greater than $10,000,000.00 and (B) the Fixed Charge Coverage Ratio shall not
be less than 1.05:1.0, both before and after giving effect to such Corporate
Control Event, (2) such New Control Entity shall have executed a guaranty of
this Lease in favor of Landlord and a pledge of the stock of Tenant or Tenant
Successor substantially in the form of the Guaranty and the Guarantor Pledges,
(3) such New Control Entity and Tenant Successor (I) has not been convicted of a
felony involving material financial wrongdoing or is otherwise not generally
known to have been involved material financial wrongdoing, and (II) has not been
subject to any SEC enforcement proceedings, civil or criminal fraud proceedings
or judgments, or RICO proceedings or judgments, and (4) such Tenant Successor
shall have reaffirmed the Tenant Pledge and caused the Subsidiary Guaranty and
Subsidiary Pledges to be reaffirmed or such Tenant Successor shall execute a new
Tenant Pledge of 100% of the interests in each Subsidiary substantially in the
form of the Tenant Pledge and cause all of its subsidiaries to execute new
guaranties and pledges substantially in the form of the Subsidiary Guaranty and
Subsidiary Pledges, as appropriate. Tenant shall deliver reasonably detailed
information demonstrating that such proposed New Control Entity or Tenant
Successor complies with the requirements set forth in the preceding sentence at
least ten (10) days preceding the date of the proposed Corporate Control Event.
(c) The acceptance of Rent by Landlord from any other Person shall not
be deemed to be a waiver by Landlord of any provision of this Lease. Consent to
one Corporate Control Event shall not be deemed consent to any subsequent
Corporate Control Event.
(d) Except as expressly permitted in paragraph 19 of this Lease, (i)
Tenant (which term shall include any Tenant Successor where the context permits)
shall have no right to mortgage, grant a lien upon, encumber or otherwise
finance its interest under this Lease or record a lien upon its interest in the
Premises under this Lease; (ii) Tenant shall not permit, cause or suffer to be
recorded in the real estate records of any county in which the Premises are
located any mortgage, deed to secure debt, deed of trust, assignment, UCC
financing statement or any other document granting, perfecting or recording a
lien upon Tenant's interest in this Lease or interest in the Premises under this
Lease; (iii) Tenant shall not give any notice, or permit or cause any other
party to give any notice, to Landlord of any existing lien on or security
interest in Tenant's interest in this Lease or interest in the Premises under
this Lease; and (iv) Tenant shall not request that Landlord execute (nor shall
Landlord have any obligation to execute) any non-disturbance, attornment or any
other agreement in favor of any party transacting any business or
58
transaction with or related to Tenant, other than non-disturbance agreements
with Members, as required by law.
(e) Tenant shall pay all of Landlord's and Mortgagee's reasonable
attorneys' fees and costs incurred in connection with any Corporate Control
Event and in connection with any request made by Tenant pursuant to this
paragraph 25.
(f) Tenant agrees to give notice to Mortgagee of any request for
consent to any Corporate Control Event simultaneously with delivery of notice
thereof to Landlord.
(g) Execution of Membership Contracts by any Subleasing Subsidiary
shall not be deemed to constitute an assignment or sublease, as contemplated by
this paragraph 25.
(h) Landlord hereby consents to the Tenant Subleases. Tenant shall
cause each Subleasing Subsidiary to perform all of the covenants to be performed
by Tenant under this Lease (in the case of a partial sublease, only insofar as
such covenants relate to the portion of the Premises subject to such partial
sublease) as and when performance is due after the effective date of the
sublease and that Landlord will have the right, but shall not be obligated, to
enforce such covenants directly against such subtenant and failure of any such
subtenant to perform such covenants shall be deemed a failure of Tenant to
perform such covenants. Tenant shall cause each Subleasing Subsidiary to (1)
comply with the SPE Requirements contained in the Subsidiary Guaranty and (2)
hold the Membership Contracts relating to Tenant's Business assigned to such
Subleasing Subsidiary pursuant to the Merger Transaction or otherwise entered
into by such Subleasing Subsidiary. Tenant shall in any case remain primarily
liable (and not liable merely as a guarantor or surety) for the performance by
any subtenant, including the Subleasing Subsidiaries, of all such covenants, as
if no sublease had been made. No sublease, including the Tenant Subleases, shall
release Tenant from Tenant's obligations and liabilities under this Lease (which
shall continue as the obligations of a principal and not of a guarantor or
surety) or alter the primary liability of Tenant to pay all Rent and to perform
all obligations to be paid and performed by Tenant. Consent to the Tenant
Subleases shall not be deemed consent to any subsequent sublease. If any
subtenant of Tenant, including the Subleasing Subsidiaries, defaults in the
performance of any obligation to be performed by Tenant under this Lease,
Landlord may proceed directly against Tenant without the necessity of pursuing
or exhausting remedies against such subtenant. Tenant shall not amend, terminate
or otherwise modify the Tenant Subleases without Landlord's prior written
consent, which may be withheld in its sole discretion. Tenant and Landlord
hereby agree to execute any additional documents reasonably required to
effectuate the terms, provisions and conditions contained in this paragraph
25(h).
26. HAZARDOUS MATERIAL
(a) Tenant (i) shall comply, and cause the Premises to comply, with all
Environmental Laws applicable to the Premises (including the making of all
submissions to governmental authorities required by Environmental Laws and the
carrying out of any remediation program specified by any such authority), (ii)
shall prohibit the use of the Premises for the generation, manufacture,
refinement, production or processing of any Hazardous Materials or for the
storage, handling, transfer or transportation of any Hazardous Materials (other
than in connection with the operation, business and maintenance of the Premises
and in commercially reasonable quantities in compliance with Environmental
Laws), (iii) shall not
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permit to remain, install or permit the installation on the Premises of any
surface impoundments, underground storage tanks, pcb-containing transformers or
asbestos-containing materials, except in compliance with Environmental Laws and
(iv) shall cause any alterations of the Premises to be done in a way so as to
not expose in an unsafe manner the persons working on or visiting the Premises
to Hazardous Materials and in connection with any such alterations Tenant shall
remove any Hazardous Materials present upon the Premises which are not in
compliance with Environmental Laws or which present a danger to persons working
on or visiting the Premises.
(b) "ENVIRONMENTAL LAWS" means the Resource Conservation and Recovery
Act of 1976, as amended, 42 U.S.C. Sections 6901, et seq. (RCRA), as amended,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42
U.S.C. Sections 9601 et seq. (CERCLA), as amended, the Toxic Substance Control
Act, as amended, 15 U.S.C. Sections 2601 et seq., the Federal Insecticide,
Fungicide and Rodenticide Act, as amended, 7 U.S.C. Sections 136 et seq., and
all applicable federal, state and local environmental laws, ordinances, rules
and regulations, as any of the foregoing may have been or may be from time to
time amended, supplemented or supplanted, and any other federal, state or local
laws, ordinances, rules and regulations now or hereafter existing relating to
regulation or control of Hazardous Materials or materials. The term "HAZARDOUS
MATERIALS" as used in this Lease shall mean substances defined as "hazardous
substances", "hazardous materials", "hazardous wastes" or "toxic substances" in
any applicable federal, state or local statute, rule, regulation or
determination, including the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601, et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801, et seq.; the
Resource, Conservation and Recovery Act of 1976, 42 U.S.C. Sections 6901, et
seq.; and, asbestos, pcb's, radioactive substances, methane, volatile
hydrocarbons, petroleum or petroleum-derived substances or wastes, radon,
industrial solvents or any other material as may be specified in applicable law
or regulations.
(c) Tenant agrees to protect, defend, indemnify and hold harmless
Landlord, its affiliates, members, directors, officers, employees and agents,
and any successors to Landlord's interest in the chain of title to the Premises,
their direct or indirect shareholders, members, partners, directors, officers,
employees and agents (collectively, the "INDEMNIFIED PARTY") on an After-Tax
Basis, from and against any and all liability, including all foreseeable and all
unforeseeable damages including attorney's and consultant's fees, fines,
penalties and civil or criminal damages, directly or indirectly arising out of
the use, generation, storage, treatment, release, threatened release, discharge,
spill, presence or disposal of Hazardous Materials from, on, at, to or under the
Premises during the Term of this Lease, and including for all matters disclosed
in the environmental reports listed on Exhibit J, copies of which have been
delivered to Tenant (collectively, the "ENVIRONMENTAL REPORTS"), and the cost of
any required or necessary repair, response action, remediation, investigation,
cleanup or detoxification and the preparation of any closure or other required
plans in connection therewith, whether such action is required or necessary
prior to or following transfer of title to the Underlying Premises. This
agreement to indemnify and hold harmless shall (i) exclude matters to the extent
caused by an Indemnified Party and (ii) be in addition to any other obligations
or liabilities Tenant may have to Landlord at common law and under all statutes
and ordinances or otherwise, and shall survive following the date of expiration
or earlier termination of this Lease for six (6) years, except where the event
giving rise to the liability for which indemnity is sought arises out of
Tenant's acts, in which case the agreement to indemnify and hold harmless shall
survive the expiration or termination of this
60
Lease without limit of time. Tenant expressly agrees that the representations,
warranties and covenants made and the indemnities stated in this Lease are not
personal to Landlord, and the benefits under this Lease may be assigned to
subsequent parties in interest to the chain of title to the Premises, which
subsequent parties in interest may proceed directly against Tenant to recover
pursuant to this Lease. Tenant, at its expense, may institute appropriate legal
proceedings with respect to environmental matters of the type specified in this
paragraph 26(c) or any lien for such environmental matters, not involving
Landlord or its Mortgagee as a defendant (unless Landlord or its Mortgagee is
the alleged cause of the damage), conducted in good faith and with due
diligence, provided that such proceedings shall not in any way impair the
interests of Landlord or Mortgagee under this Lease or contravene the provisions
of any Mortgage. Counsel to Tenant in such proceedings shall be reasonably
approved by Landlord if Landlord is a defendant in the same proceeding. Landlord
shall have the right to appoint co-counsel, which co-counsel will cooperate with
Tenant's counsel in such proceedings. The fees and expenses of such co-counsel
shall be paid by Landlord, unless such co-counsel is appointed because the
interests of Landlord and Tenant in such proceedings, in such counsel's opinion,
are or have become adverse, or Tenant or Tenant's counsel is not conducting such
proceedings in good faith or with due diligence.
(d) Tenant, upon three (3) Business Days prior notice, shall permit
such Persons as Landlord or any assignee of Landlord may designate and (unless
an Event of Default has occurred and is continuing) approved by Tenant, which
approval shall not be unreasonably withheld or delayed ("SITE REVIEWERS"), to
visit the Premises from time to time and perform environmental site
investigations and assessments ("SITE ASSESSMENTS") on the Premises for the
purpose of determining whether there exists on the Premises any environmental
condition which may result in any liability, cost or expense to Landlord or any
other owner or occupier of the Premises. Such Site Assessments may include both
above and below the ground testing for environmental damage or the presence of
Hazardous Material on the Premises and such other tests on the Premises as may
be necessary to conduct the Site Assessments in the reasonable opinion of the
Site Reviewers. Tenant shall supply to the Site Reviewers such historical and
operational information regarding the Premises as may be reasonably requested by
the Site Reviewers to facilitate the Site Assessments (other than information
previously supplied in writing to Landlord by Tenant) and shall make available
for meetings with the Site Reviewers appropriate personnel having knowledge of
such matters. The cost of performing and reporting all Site Assessments shall be
paid by Landlord unless the Site Reviewers discover a material environmental
condition causing the Premises not to be in compliance with applicable
Environmental Laws, in which event such cost shall be paid by Tenant within ten
(10) calendar days after demand by Landlord with interest to accrue at the
Overdue Rate. Landlord, promptly after written request by Tenant and payment by
Tenant to the extent required as aforesaid, shall deliver to Tenant copies of
reports, summaries or other compilations of the results of such Site
Assessments. Tenant's sole remedy for Landlord's breach of the preceding
sentence shall be a mandatory injunction, and not a termination of this Lease or
a withholding or reduction of Rent.
(e) Tenant shall notify Landlord in writing, promptly upon Tenant's
learning thereof, of any:
(i) notice or claim to the effect that Tenant is or may be
liable to any Person as a result of the release or threatened release of any
Hazardous Materials into the environment from the Premises;
61
(ii) notice that Tenant is subject to investigation by any
governmental authority evaluating whether any remedial action is needed to
respond to the release or threatened release of any Hazardous Materials into the
environment from the Premises;
(iii) notice that the Premises are subject to an environmental
lien; and
(iv) notice of violation to Tenant or awareness by Tenant of a
condition which might reasonably result in a notice of violation of any
applicable Environmental Law that could, in either case, have a material adverse
effect upon the Premises or any portion thereof.
27. FINANCING
(a) Landlord may assign this Lease to any Person, including any
Mortgagee. Tenant shall execute, acknowledge and deliver any documents
reasonably requested by Landlord, any such transferee or Mortgagee relating to
any such assignment of this Lease by Landlord or the Mortgage financing.
(b) If Landlord proposes to finance or refinance any Mortgage, Tenant
shall cooperate in the process, and, during the last twenty-four (24) months of
the term of any Mortgage, Tenant shall, upon Landlord's written request, exhibit
the Premises to prospective mortgagees, and permit such prospective mortgagees
to examine all materials and records which shall be customary for a mortgagee's
inspection, subject at all times to Landlord's indemnity set forth in paragraph
18 of this Lease and the confidentiality requirements set forth in this Lease.
Tenant agrees to execute, acknowledge and deliver documents reasonably requested
by any prospective Mortgagee (such as a consent to the financing (without
encumbering Tenant's Assets), a consent to assignment of lease, and a
subordination, non-disturbance and attornment agreement meeting the standards
set forth in paragraph 17 of this Lease) customary for tenants to sign in
connection with mortgage loans to their landlords, so long as such documents are
in form then customary among institutional lenders (provided the same do not
adversely affect Tenant's rights or obligations in a way not previously affected
by loan documents previously executed by Tenant in connection with an earlier
Mortgage).
(c) Tenant shall permit Landlord and any Mortgagee or prospective
Mortgagee and any representatives or agents of Landlord, any Mortgagee or
prospective Mortgagee, at their expense, to meet with senior management
personnel of Tenant and/or Guarantor at Tenant's and/or Guarantor's offices and
to discuss Tenant's and/or Guarantor's business and finances. On request of
Landlord, Tenant agrees to use commercially reasonable efforts to provide any
Mortgagee or prospective Mortgagee the information to which Landlord is entitled
hereunder. If any such information is non-public, each party requesting such
information shall sign a confidentiality agreement (in a form reasonably
satisfactory to Tenant) prior to such Mortgagee or prospective Mortgagee
receiving such information.
(d) In the event Mortgagee elects to record a Mortgage in connection
with any Mortgage financing, said Mortgage shall contain the language set forth
in Exhibit N attached hereto, or such other language as may be required from
time to time under applicable laws in effect in any state (1) in which a Site is
located or (2) in which Memberships are offered for sale.
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28. MISCELLANEOUS PROVISIONS
(a) This Lease and all of the covenants and provisions hereof shall
inure to the benefit of, and be binding upon, the parties hereto and the heirs,
personal representatives, successors and permitted assigns of the parties.
(b) The titles and headings appearing in this Lease are for reference
only and shall not be considered a part of this Lease or in any way to modify,
amend or affect the provisions thereof.
(c) This Lease, the documents and agreements referenced herein and any
intercreditor or tri-party agreement among Landlord, Tenant and Working Capital
Lender (as such agreement may be amended or replaced from time to time) contain
the complete agreement of the parties with reference to the leasing of the
Premises, and may not be amended except by an instrument in writing signed by
Landlord and Tenant.
(d) Any provision or provisions of this Lease which shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any other
provision hereof, and the remaining provisions hereof shall nevertheless remain
in full force and effect.
(e) This Lease may be executed in one or more counterparts, and may be
signed by each party on a separate counterpart, each of which, taken together,
shall be an original, and all of which shall constitute one and same instrument.
(f) The term "Landlord" as used in this Lease shall mean only the
tenant or subtenant under the Master Lease at the time in question, and in the
event of any transfer of such title or interest, the Landlord named in this
Lease (and in case of any subsequent transfers, then the grantor) shall be
relieved from and after the date of such transfer of all liability as respects
Landlord's obligations thereafter to be performed hereunder, provided that any
funds in the hands of Landlord or the then grantor at the time of such transfer,
in which Tenant has an interest, shall be delivered to the grantee. The
obligations contained in this Lease to be performed by Landlord shall, subject
as aforesaid, be binding on Landlord's successors and assigns only during their
respective periods of ownership.
(g) For all issues which are Site-specific, this Lease shall be
governed by and construed and enforced in accordance with and subject to the
laws of the state where the applicable Site is located, and for all issues which
are not Site-specific, the internal laws, without regard to conflicts of laws
principles of the State of Illinois shall govern.
(h) Any claim based on or in respect of any liability of Landlord under
this Lease shall be enforced only against the Premises and Landlord's insurance
covering the Premises and not against any other assets, properties or funds of
(1) Landlord or any Landlord Parties, or (2) any predecessor or successor
partnership, corporation or limited liability company (or other entity) of
Landlord or any of its members, either directly or through Landlord or its
predecessor or successor partnership, corporation or limited liability company
(or other Person) of Landlord or its members, stockholders or partners, or (3)
any other Person.
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(i) Without the written approval of Landlord and Tenant, no Person
other than Landlord (including any Landlord Parties), Mortgagee, Tenant,
Leasehold Mortgagee, and their respective permitted successors and assigns shall
have any rights under this Lease.
(j) There shall be no merger of the leasehold estate created hereby by
reason of the fact that the same Person may own, directly or indirectly, (1) the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (2) the fee estate in the Premises. Notwithstanding any such combined
ownership, this Lease shall continue in full force and effect until terminated
by an instrument executed by both Landlord and Tenant.
(k) Whenever in this Lease either party is required to take an action
within a particular time period, delays caused by acts of God, war, major
casualty, strike, labor shortage or other cause beyond the reasonable control of
such party shall not be counted in determining the time in which such
performance must be completed (except in the case of the obligation to pay
money) so long as such party, promptly after becoming aware of the commencement
of such delay, shall give the other party notice thereof and estimating the
duration thereof.
(l) If at any time a dispute shall arise as to any amount to be paid by
one party to the other hereunder, the obligor may make payment "under protest",
and such payment shall not be deemed a voluntary payment, and the right of the
obligor to contest its liability for such payment shall survive such payment
without prejudice to the obligor's position.
(m) Landlord and Tenant each represent that they have dealt with no
broker, finder or other Person who could legally charge a commission in
connection with this Lease and the documents and agreements referenced herein.
(n) Intentionally Omitted.
(o) The parties hereto specifically acknowledge and agree that,
notwithstanding any other provision contained in this Lease, it is the intent of
the parties that their relationship hereunder is and shall at all times be that
of landlord and tenant, and not that of partners, joint venturers, lender and
borrower, or any other relationship other than that of a landlord and tenant.
The parties specifically acknowledge and agree that this Lease shall be treated
as a "true lease," and that Landlord's affiliates shall be considered the owner
of the Underlying Premises for US federal, state and local income and franchise
tax purposes, and any Canadian tax purposes and each party agrees not to take
any position on any US federal, state, local or Canadian income or franchise tax
return inconsistent with such treatment.
(p) The parties hereto specifically acknowledge and agree that time is
of the essence with regard to all obligations under this Lease.
(q) TO THE EXTENT PERMITTED BY APPLICABLE LAW, LANDLORD AND TENANT
HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING, AND WITH RESPECT TO ANY
CLAIM ASSERTED IN ANY SUCH ACTION OR PROCEEDING, BROUGHT BY EITHER OF THE
PARTIES AGAINST THE OTHER ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE
OR OCCUPANCY OF THE PREMISES, ANY CLAIM OF
64
INJURY OR DAMAGE, OR ANY EMERGENCY OR OTHER STATUTORY REMEDY WITH RESPECT
THERETO.
29. INTENTIONALLY OMITTED
30. BUDGET
Tenant's budget for the First Lease Year is attached hereto as Exhibit
T. Not later than two (2) months prior to the end of each fiscal year, Tenant
shall deliver a budget and a capital plan for the following fiscal year for
Tenant's Business to Landlord substantially in the same form as the budget
attached hereto as Exhibit T. Such budget from time to time in effect is herein
called the "BUDGET".
31. ACCOUNTS AND CASH MANAGEMENT
(a) Establishment of Lockbox and Cash Management System. Tenant shall
maintain in effect at all times during the Term a system of accounts and
procedures reasonably satisfactory to Landlord for the collection and deposit of
payments in respect to Tenant's Gross Revenues, and the transfer of amounts so
deposited or collected to the Collection Account and/or the Concentration
Account. Without limiting the generality of the foregoing, but subject to the
provisions of paragraph 31(c) of this Lease, Tenant shall maintain one or more
lockboxes pursuant to arrangements reasonably satisfactory to Landlord and shall
deliver notices to all Members and all other debtors of Tenant, directing such
Persons to make all payments with respect to Membership Dues, Membership
Contract Receivables or other amounts directly to such lockboxes or directly to
the Collection Account, if such payment is made by wire transfer or other
electronic means.
(b) Establishment of Accounts.
(i) Collection Account. Tenant hereby confirms that Tenant has
established, and agrees that Tenant shall maintain, at Bank, a segregated
collection account with the account number 0042084673 (the "COLLECTION
ACCOUNT"). The Collection Account shall be and hereby is pledged to Landlord as
additional security for the payment, performance and observance of Tenant's
obligations under this Lease and Landlord shall have sole and exclusive dominion
and control over the Collection Account, to be administered in accordance with
this Lease. Funds on deposit in the Collection Account shall be automatically
transferred each day to the Concentration Account described below.
(ii) Other Accounts. Tenant hereby confirms that Tenant has
established, and agrees that Tenant shall maintain at Cash Management Bank, the
following segregated securities accounts or deposit accounts, as the case may be
(each, a "RESERVE ACCOUNT", and collectively, the "RESERVE ACCOUNTS"):
(A) Account No. 4770001590 captioned "Tax Reserve"
for the retention of collateral for the payment of Property Taxes and Other
Taxes for the Underlying Premises and the Premises as provided in paragraph 6 of
this Lease (the "TAX RESERVE ACCOUNT");
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(B) Account No. 4770001604, captioned "Capital
Expenditures" for the retention of collateral in respect of Capital Improvements
as provided in paragraph 34 of this Lease (the "CAPITAL EXPENDITURE RESERVE
ACCOUNT");
(C) Account No. 4770001612, captioned "Promotions and
Discounts Reserve" for the retention of collateral in respect of any promotions
and discounts as provided in paragraph 39 of this Lease ("PROMOTIONS AND
DISCOUNTS RESERVE ACCOUNT").
In addition to the foregoing, Landlord and Tenant have established, and
Tenant and Landlord shall maintain at Cash Management Bank, the "CONCENTRATION
ACCOUNT", namely Account No. 4770001582 captioned "Concentration".
The Tax Reserve Account, Capital Expenditure Reserve Account,
Promotions and Discounts Reserve Account and Concentration Account each shall be
pledged to Landlord as additional security for the payment, performance and
observance of Tenant's obligations under this Lease, and Landlord shall have
sole and exclusive dominion and control over said Accounts to be administered in
accordance with this Lease.
The Frisco Accounts and the Gautier Accounts shall each be pledged to
Landlord as additional security for the payment, performance and observance of
Tenant's obligations under this Lease, and Landlord shall have control (as
defined in Sections 9-104 or 8-106 of the UCC) over said Accounts for purposes
of perfecting Landlord's security interests therein.
On or prior to December 31, 2004, Tenant shall use commercially
reasonable efforts to cause Merrick Bank Corporation to enter into a tri-party
deposit account control and intercreditor agreement (the "Replacement Merrick
Control Agreement") among Merrick Bank Corporation, Landlord, and Tenant and/or
one or more of its Subsidiaries, as applicable, which agreement shall be in
substantially in the form of the existing deposit account control and
intercreditor agreement among Merrick Bank Corporation, iStar Finance Sub 1000T
LLC and certain predecessors in interest of Tenant and shall cover the
accounts(the "EXISTING MERRICK ACCOUNTS") currently subject thereto (or accounts
newly established in lieu thereof). Until such time as the Replacement Merrick
Control Agreement has been executed and delivered by Merrick Bank Corporation,
Landlord and each of the other parties thereto, Tenant shall cause all Account
Collateral in the Existing Merrick Accounts to be automatically transferred on
each day to the Concentration Account.
(iii) Type and Control of Accounts. Tenant represents,
warrants, covenants and agrees that (i) each of the Accounts is and shall be
maintained either as a "deposit account" (as defined in Section 9-102(a)(29) of
the UCC) or as a "securities account" (as defined in Section 8-501(a) of the
UCC); (ii) Tenant is entitled to exercise the rights that comprise any financial
asset credited to any such Accounts constituting a securities account; (iii)
Tenant shall have no right to give entitlement orders with respect to the
Collection Account, the Concentration Account or any Reserve Account and, except
as expressly provided in this Agreement, no Account Collateral shall be released
to Tenant from any Accounts or Local Accounts; and (iv) all securities or other
property underlying any financial assets credited to the Accounts shall be
registered in the name of Bank or indorsed to Bank or in blank and in no case
will any financial asset credited to the Accounts be registered in the name of
Tenant, payable to the order of Tenant or specially indorsed to Tenant.
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(iv) Eligible Accounts. Each of the Accounts and each of the
Local Accounts shall be an Eligible Account.
(v) Account Control Agreements. Tenant agrees that: (i) the
Accounts and the Local Accounts shall be maintained in accordance with the terms
hereof; (ii) Landlord and Tenant (for itself or on behalf of Tenant's
Subsidiaries) shall enter into such cash management agreements and tri-party
account control agreements with applicable banks and/or depositories as
necessary to effectuate the terms and conditions of this paragraph 31; and (iii)
prior to the Lease Expiration Date (provided no Event of Default shall have
occurred), no tri-party account control agreement entered into in connection
with any Account (or, to the extent applicable, any Local Account) shall be
amended, supplemented or modified without the prior written consent of Landlord,
which consent Landlord may grant or withhold in its sole and absolute
discretion.
(vi) No Other Accounts. Tenant represents and warrants that
Exhibit I attached hereto lists all deposit, securities or other similar
accounts owned or maintained by Tenant and its Subsidiaries and that other than
(a) the Accounts maintained by Tenant with respect to the collection of
Membership Contract Receivables or Membership Dues, (b) the Local Accounts with
respect to Ancillary Income and (c) the Canadian Accounts, there are no accounts
into which any Gross Revenue (including payments of Membership Contract
Receivables or Membership Dues or any material Ancillary Income) is or shall be
deposited, collected or held. Tenant agrees that, until the Lease Expiration
Date, neither Tenant nor any other Person shall open any accounts for the
collection or holding of Membership Dues or Membership Contract Receivable
proceeds, other than the Accounts (and the Local Accounts and the Canadian
Accounts, to the extent expressly permitted hereunder). Tenant represents and
covenants to Landlord that Tenant shall not direct any Membership Dues or
payments with respect to Membership Contract Receivables to be made by any
Member in any manner other than as set forth in paragraph 31(c)(ii) of this
Lease and that Tenant shall use commercially reasonable efforts to prevent,
discourage and minimize payment of Membership Dues at campgrounds and, except
for de minimis amounts consistent with past practices, Tenant shall not deposit
any Membership Dues into the Local Accounts (other than the Gautier Accounts
with respect to collection of delinquent payments).
(vii) Miscellaneous Account Provisions. The Accounts shall be
subject to such applicable laws, and such applicable regulations of the Board of
Governors of the Federal Reserve System and of any other banking or governmental
authority, as may now or hereafter be in effect. Interest accruing on the
Accounts, if any, shall be periodically added to the principal amount of the
applicable Account and shall be held, disbursed and applied in accordance with
the provisions of this Agreement. All statements relating to the Accounts shall
be issued simultaneously by Bank to Landlord and Tenant. Tenant shall be the
beneficial owner of the Accounts and the Local Accounts for federal and state
income tax purposes and shall report all income on the Accounts and the Local
Accounts. Returned items in the Collection Account will be charged against
Tenant in the succeeding month or, if later, when actually returned.
(c) Deposits into Accounts.
(i) Initial Deposits. On the Commencement Date, Tenant agrees,
represents and warrants that it has deposited or caused to be deposited the
following amounts into the following Accounts: (i) $520,566.11 into the Tax
Reserve Account, representing Tax and Other
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Tax payments payable during the period from the Commencement Date through and
including December 31, 2004; and (ii) $0.00 into the Promotions and Discounts
Reserve Account.
(ii) Payments Under Membership Contracts. Tenant represents
and warrants that it has now or heretofore instructed, with respect to all
Membership Contracts in effect on the date hereof, and hereby agrees that with
respect to all future Membership Contracts it shall, irrevocably instruct and
direct all Members to send or otherwise remit all Membership Dues and proceeds
from Membership Contract Receivables (i) directly into the Collection Account by
ACH or wire transfer, (ii) by check sent to the Lockboxes, (iii) in person by
check or by credit card (including telephonic charge authorizations) at Tenant's
offices located either at Gautier, MS or Frisco, TX, or (iv) in the case of
Members with respect to campgrounds located in or near Canada, for deposit into
designated Canadian Accounts. Tenant shall not permit payments pursuant to
Membership Contracts to be paid to any other Person or direct or cause any
Members to pay in any manner other than as specifically provided herein. Nothing
herein is intended or shall be construed to prohibit Tenant or Tenant's
Subsidiaries from accepting payment of Membership Dues or Membership Contract
Receivables, as and when tendered by a Member at a campground, consistent with
past practice. For purposes of this paragraph, "LOCKBOXES" shall mean those
certain lockbox accounts maintained by Tenant and Tenant's Subsidiaries at the
Bank, captioned "Thousand Trails Operations Holding Company, L.P. Lockbox" and
"National American Corporation Lockbox" and bearing the designations P.O. Box
45142 and P.O. Box 45145, respectively, or such other replacement lockbox
accounts as consented to by Landlord in writing.
(iii) Continuing Deposits. Without limiting or qualifying the
provisions of paragraph 31(c)(ii) of this Lease, Tenant agrees that all
Membership Dues, proceeds from Membership Contract Receivables and any other
Gross Revenue (excluding interest and other earnings on deposits and other
income on accounts other than the Accounts) shall be deposited into the
Collection Account within five (5) Business Days after receipt thereof by
Tenant. Until so deposited, any such Gross Revenues (including all Membership
Dues, Membership Contract Receivables payments or proceeds from any property
disposition) that are held by Tenant shall be deemed to be Account Collateral
and shall be held in trust by Tenant for the benefit of Landlord, as secured
party, and shall not be commingled with any other funds or property of Tenant.
Without limiting or qualifying any other provision of this Agreement, Tenant
hereby agrees to transfer to the Collection Account, not less frequently than
once per week, funds from time to time on deposit in any Canadian Account.
(d) Transfers From the Concentration Account; Funding of Reserve
Accounts.
(i) Authorization (Reserve Accounts). Subject to paragraph
31(d)(ii) below, Tenant hereby irrevocably authorizes and directs Landlord, from
time to time and at any time during the period beginning on January 1st through
and including December 31st of each year, commencing on January 1, 2005, to
transfer (to the extent of available funds on deposit), and Landlord shall,
commencing on such date, transfer, from the Concentration Account on the 15th
and on the 30th day of each month (and if such dates are not Business Days, on
the next following Business Day), funds in the following amounts and in the
following order of priority:
(A) funds into the Tax Reserve Account in an amount equal to
the aggregate Property Taxes and Other Taxes for the Underlying
Premises and the
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Premises (as reasonably estimated by Landlord), which shall become due
and payable from July 1 of the then current year through December 31 of
such year; and
(B) funds into the Capital Expenditures Reserve Account in an
amount equal to the total Capital Expenditures to be made during the
period commencing on July 1 of the then current year through December
31 of such year, as set forth in the applicable Budget;
(C) funds into the Promotions and Discounts Reserve Account in
an amount specified in paragraph 39 of this Lease; and
(D) the balance, if any, of all funds remaining in the
Concentration Account to such deposit or securities account designated
by Tenant, which accounts need not be Permitted Investments.
(ii) Sweeps. At any time when the Reserve Accounts are fully
funded so that distributions pursuant to paragraph 31(d)(i)(D) would be made,
Tenant may request (in writing) that Landlord direct Cash Management Bank to
automatically on each Business Day transfer all available funds in the
Concentration Account to Tenant or as Tenant may direct, provided that no Event
of Default or Put/Call Default then exists.
(iii) Intentionally Omitted.
(iv) Tax Payments. Tenant hereby irrevocably authorizes
Landlord to pay any Property Taxes and Other Taxes levied against or in
connection with any Site using any funds on deposit in any of the Reserve
Accounts, and upon Tenant's written request and provided no Event of Default or
Put/Call Default then exists Landlord shall pay such Taxes due and payable from
July 1 through December 31 of such year (to the extent of funds available in the
Tax Reserve Account) by at least three (3) Business Days (assuming Tenant's
written request precedes such day by at least 15 days) prior to the date on
which payment thereof shall first become delinquent.
(e) Payments and Disbursements from Accounts.
(i) No Event of Default. Tenant hereby irrevocably authorizes
and directs Landlord to withdraw and/or transfer and apply, and Landlord shall
withdraw and/or transfer and apply, the following payments from the applicable
Accounts to the extent of the monies on deposit in the applicable Account if no
Event of Default or Put/Call Default exists:
(A) funds from the Tax Reserve Account sufficient to
pay or to permit Tenant to pay Property Taxes and Other Taxes for each Site due
and payable from July 1 through December 31 of such year on the due date
therefor, and pay such funds to the governmental authority having the right to
receive such funds, provided, that if Tenant shall have paid Property Taxes and
Other Taxes for each Site directly, the funds will be paid to Tenant in
reimbursement thereof provided no Event of Default or Put/Call Default then
exists and Tenant provides evidence reasonably satisfactory to Landlord of
payment of the item in question;
(B) Intentionally Omitted; and
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(C) funds from the Capital Expenditure Reserve
Account to pay or to permit Tenant to pay, as the case may be, Capital
Expenditures pursuant to and in accordance with the provisions of paragraph 34
of this Lease.
(ii) Event of Default or Put/Call Default Exists. If an Event
of Default or Put/Call Default exists, Tenant hereby irrevocably authorizes
Landlord to make any and all withdrawals from, and transfers between, any
Account as Landlord shall determine in Landlord's sole and absolute discretion.
(f) Accounts. Tenant shall not, without the prior written consent of
Landlord, change the account location of any Account and, as a condition
precedent to any such change, the bank to which Tenant proposes to relocate any
such Account shall have executed an appropriate account control agreement, in
accordance with the provisions set forth above. Tenant shall not, without giving
prior written notice to Landlord, change the account location of any Local
Account. With respect to the Account Collateral, Landlord shall not be liable
for any acts, omissions, errors in judgment or mistakes of fact or law, except
for those arising as a result of Landlord's investment of such Account
Collateral in other than Permitted Investments or from gross negligence or
willful misconduct.
(g) Certain Matters Regarding Landlord following an Event of Default.
Tenant agrees that the Bank and Cash Management Bank, as applicable, shall pay
over to Landlord all amounts deposited in the Accounts and the Local Accounts on
demand, without notice to Tenant, if, in making such demand, Landlord shall give
notice, in writing, signed by Landlord or an authorized agent thereof, that an
Event of Default or Put/Call Default exists. Landlord may exercise in respect of
the Account Collateral all rights and remedies available to Landlord hereunder,
or otherwise available at law or in equity. If an Event of Default or Put/Call
Default exists, Landlord may exercise in respect of the Account Collateral, in
addition to any other rights and remedies provided for herein or otherwise
available to it, all of the rights and remedies of a secured party upon default
under the UCC then in effect in the applicable jurisdiction. Without limiting
the generality of the foregoing, Tenant agrees that, upon the occurrence and
during the continuance of an Event of Default or Put/Call Default, it will have
no further right to request or otherwise require Landlord to disburse funds from
any Account in accordance with the terms of this Lease, it being agreed that
Landlord may, at its option, (i) direct the Bank or Cash Management Bank, as
applicable, to continue to hold the funds in the Accounts, (ii) continue, from
time to time, to apply all or any portion of the funds held in the Accounts to
any payment(s) which such funds could have been applied to prior to such Event
of Default (or to pay expenses directly), to the extent and in such order and
manner as Landlord in its sole discretion may determine, and/or (iii) direct the
Bank or Cash Management Bank, as applicable, to disburse all or any portion of
the funds held in the Reserve Accounts or other Account Collateral then or
thereafter held by the Bank or Cash Management Bank to Landlord, in which event
Landlord may apply the funds held in the Accounts, the Local Accounts (to the
extent not yet transferred to the Accounts) or other Account Collateral to
Tenant's obligations under this Lease, in any order and in such manner as
Landlord may determine in its sole discretion. If an Event of Default or
Put/Call Default exists, Landlord may, at any time or from time to time: (1)
collect, appropriate, redeem, realize upon or otherwise enforce its rights with
respect to the Account Collateral, or any part thereof, without notice to Tenant
and without the need to institute any legal action, make demand to or upon
Tenant or any other Person, exhaust any other remedies or otherwise proceed to
enforce its rights; (2) execute (in the name, place and stead of Tenant) any
70
endorsements, assignments or other instruments of conveyance which may be
required for the withdrawal and negotiation of the Account Collateral; and/or
(3) exercise all other rights and remedies available to Landlord hereunder.
Notwithstanding anything to the contrary contained herein: (x) the exercise by
Landlord of any of its rights hereunder shall not release Tenant from its
obligations under this Lease, nor shall it constitute an election of remedies by
Landlord or a waiver by Landlord of any of its rights and remedies under this
Lease; (y) except as expressly set forth in this Lease, Landlord shall not have
any obligation or liability by reason of this Lease, nor shall Landlord be
obligated to perform any of the obligations or duties of Tenant hereunder or to
take any action, in each case, to collect or enforce any claim for payment
assigned hereunder; and (z) Landlord shall not have to resort to using the
Account Collateral before making demand upon or bringing an action against
Tenant under any guaranty given in connection with this Lease. No failure on the
part of Landlord to exercise, and no delay in exercising, any right under this
Lease shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right under this Lease. The remedies provided in this
Lease are cumulative and not exclusive of any remedies provided at law or in
equity.
(h) Representations and Warranties Regarding Account Collateral. In
addition to any other representations or warranties contained in this Lease,
Tenant represents and warrants as follows: (a) Tenant is the legal and
beneficial owner of the Account Collateral, free and clear of any Liens, except
for the Liens in favor of Landlord created by this Lease and Liens on the
Membership Contract Receivables arising under the Working Capital Loan
Documents; (b) upon execution by Tenant of this Lease, the pledge and assignment
of the Account Collateral pursuant to this Lease will create a valid, first
priority security interest in the Account Collateral (subject to the Liens on
the Membership Contract Receivables arising under the Working Capital Loan
Documents), securing the payment and performance of Tenant's obligations under
this Lease; and (c) Tenant is not a party to any credit agreement or other
borrowing facility including, but not limited to, a line of credit or overdraft
line, with the Bank (other than with respect to the Working Capital
Indebtedness).
(i) Covenants Regarding Account Collateral. Tenant shall not, without
the prior written consent of Landlord, (a) sell, assign (by operation of law or
otherwise), pledge or grant any option with respect to, any of the Gross
Revenues or any interest in the Account Collateral or (b) create or permit to
exist any assignment, lien, security interest, option or other charge or
encumbrance upon or with respect to any of the Gross Revenues or any Account
Collateral, except for the Liens in favor of Landlord under this Lease and Liens
on Membership Contract Receivables under the Working Capital Loan Documents.
Tenant shall give Landlord not less than fifteen (15) days' prior written notice
of any change in the address of the chief executive office or principal office
of Tenant. Tenant agrees that all records of Tenant with respect to the Account
Collateral shall be kept at the principal office of Tenant and shall not be
removed therefrom without the prior written consent of Landlord, which consent
shall not be unreasonably withheld. Tenant shall not make or consent to any
amendment or other modification or waiver with respect to any Account
Collateral, or enter into any agreement, or permit to exist any restriction,
with respect to any Account Collateral. Tenant shall, at its expense, defend
Landlord's right, title and security interest in and to the Account Collateral
against the claims of any Person. Tenant shall not take any action which would
impair the enforceability of this Lease or the security interests created
hereby. Tenant shall not enter into any credit agreement or other borrowing
facility including a line of credit or overdraft line, with Bank or with Cash
71
Management Bank unless the priority of Landlord's security interests in the
Accounts is not adversely affected. Nothing contained in this paragraph shall
impair or otherwise limit Tenant's obligations to timely make the payments
required by this Lease, it being understood that such payments shall be so
timely made in accordance with this Lease, regardless of the amounts on deposit
in any Account. Landlord may, from time to time, at its sole option, perform any
act which Tenant agrees hereunder to perform which Tenant shall fail to perform
after being requested in writing to so perform, and Landlord may from time to
time take any other action which Landlord deems necessary for the maintenance,
preservation or protection of any of the rights granted to Landlord hereunder.
With respect to the powers conferred on Landlord hereunder, Landlord shall not
have any duty as to the Accounts or the other Account Collateral, or any
responsibility for (i) ascertaining or taking action with respect to any matters
relative to the Accounts or the other Account Collateral, whether or not
Landlord has or is deemed to have knowledge of such matters (except with respect
to Landlord's obligations relating to the payment of Property Taxes and Other
Taxes as expressly provided herein) or (ii) taking any necessary steps to
preserve rights against prior parties or any other rights pertaining to the
Accounts or the other Account Collateral.
(j) Cash Management Fees. All reasonable third party fees, costs and
expenses associated with the Account Collateral shall be paid by Tenant when
due.
(k) Security Interest. Tenant hereby pledges, transfers and assigns to
Landlord, and grants to Landlord, as additional security for Tenant's
obligations under this Lease, a continuing perfected first priority security
interest in and to, and a first lien upon: (i) the Accounts and Local Accounts
owned by it and all amounts which may from time to time be on deposit in each of
the Accounts and Local Accounts (such first lien is subject to the Lien on
Membership Contract Receivables arising under the Working Capital Loan
Documents); (ii) all of Tenant's right, title and interest in and to all cash,
property or rights transferred to or deposited in each Account and each Local
Account from time to time; (iii) all certificates and instruments, if any, from
time to time representing or evidencing the Accounts or Local Accounts or any
amount on deposit in any thereof, or any value received as a consequence of
possession thereof, including all interest, dividends, cash, instruments and
other property from time to time received or otherwise distributed in respect
of, or in exchange for, any or all of such Accounts or Local Accounts; (iv) all
monies, chattel paper, checks, notes, bills of exchange, negotiable instruments,
documents of title, money orders, commercial paper, and other security
instruments, documents, deposits and credits from time to time in the possession
of Landlord representing or evidencing such Accounts or Local Accounts; (v) all
other property, held in, credited to or constituting part of any of the Accounts
or Local Accounts; (vi) all earnings and investments held in any Account or
Local Account in accordance with this Lease; and (vii) to the extent not
described above, any and all proceeds of the foregoing (collectively, the
"ACCOUNT COLLATERAL"). This Lease and the pledge, assignment and grant of
security interest made hereby secures payment of all of Tenant's obligations
under this Lease in accordance with the provisions set forth herein. This Lease
shall be deemed a security agreement within the meaning of the UCC.
(l) Bank Accounts. Tenant shall not establish any new bank accounts
without prior written notice to Landlord and, except with respect to Local
Accounts (other than the Frisco Accounts and the Gautier Accounts), unless
Landlord, such Tenant and the bank at which the account is to be opened enter
into a tri-party agreement regarding such bank account pursuant to which such
bank, among other things, acknowledges the security interest of Landlord in such
72
bank account, agrees to comply with instructions originated by Landlord
directing disposition of the funds in the bank account without further consent
from Tenant, and agrees to subordinate and limit any security interest the bank
may have in the bank account on terms satisfactory to Landlord.
(m) As part of Tenant's cooperation with Landlord's financing set forth
in paragraph 27 of this Lease and the granting of any Mortgage to any Mortgagee,
Tenant agrees that the Accounts and each management system in place under this
Lease may be assigned to and controlled by Mortgagee so long as Tenant's rights
under this paragraph 31 are not diminished or obligations increased and Tenant
shall cooperate with such efforts and execute such documents as are required
thereby.
32. NOTICES
Notices, statements, demands or other communications required or
permitted to be given, rendered or made by either party to the other pursuant to
this Lease or pursuant to any applicable law or requirement of public authority,
shall be in writing (whether or not so stated elsewhere in this Lease) and shall
be deemed to have been properly given, rendered or made when received by
personal delivery or overnight delivery or overnight courier delivery (or, if
such delivery is refused, upon the date that delivery would have occurred but
for such refusal) or facsimile transmission (with electronic confirmation
therefor) with a confirmation copy of the entire original transmittal sent by
overnight delivery or by overnight courier delivery addressed to the other
parties as follows:
To Landlord: MHC TT Leasing Company, Inc.
c/o Manufactured Home Communities, Inc.
Two North Riverside Plaza, Suite 800
Chicago, IL 60606
Attention: General Counsel
Telephone: (312) 279-1400
Facsimile: (312) 279-1715
With a copy to: Manufactured Home Communities, Inc.
Two North Riverside Plaza, Suite 800
Chicago, IL 60606
Attention: Chief Executive Officer
Telephone: (312) 279-1400
Facsimile: (312) 279-1710
With a copy to: Katten Muchin Zavis Rosenman
525 West Monroe, Suite 1600
Chicago, IL 60661
Attention: Daniel J. Perlman, Esq.
Telephone: (312) 902-5532
Facsimile: (312) 577-8668
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To Tenant: Thousand Trails Operations Holding Company, L.P.
3801 Parkwood Boulevard, Suite 100
Frisco, TX 75034
Attention: General Counsel
Telephone: (214) 618-7200
Facsimile: (214) 618-7230
With a copy to: KTTI GP, LLC
258 High Street, Suite 100
Palo Alto, California, 94301-1040
Attention: John Eastburn
Telephone: (650) 463-1480
Facsimile: (650) 463-1481
With a copy to: Ropes & Gray LLP
One International Place
Boston, MA 02110
Attention: Daniel S. Evans, Esq.
Telephone: (617) 951-7315
Facsimile: (617) 951-7050
Any party listed in this paragraph 32 may, by notices as aforesaid, designate a
different address for notices, statements, demands or other communications
intended for it.
33. EXCESS LAND
(a) Landlord and Tenant acknowledge and agree that Landlord, or an
affiliate of Landlord (the "EXCESS LAND OWNER") is the owner of the Excess Land.
Landlord has advised Tenant that Excess Land Owner may, in its sole and absolute
discretion, develop any or all of such Excess Land in one or more phases for
non-membership products; provided, however, Excess Land Owner's development of
any such Excess Land (A) shall not diminish Tenant's rights under this Lease in
a materially adverse manner and (B) shall not be for use as a membership
campground similar to Tenant's operations. Tenant hereby acknowledges and agrees
that development of the Excess Land as a manufactured home community or a
recreational vehicle resort shall not violate the terms of clause (B) of the
immediately preceding sentence.
(b) Prior to Landlord's and Tenant's execution of this Lease, MHC
Thousand Trails Trust, a Maryland real estate investment trust, now known as MHC
1000T Trust, a Maryland real estate investment trust, Thousand Trails
Acquisition, Inc. ("TTA"), KTTI Holding Company, Inc. ("KTTI") and Tenant
(collectively, Landlord, TTA, KTTI and Tenant, the "MERGER PARTIES") entered
into that certain Agreement and Plan of Merger ("MERGER AGREEMENT") pursuant to
which TTA merged into KTTI ("MERGER TRANSACTION"). The Merger Parties entered
into the Merger Transaction with the understanding that an integral part of the
Merger Transaction was that Landlord (or an affiliate of Landlord) would acquire
and develop the Excess Land. Tenant (whose parent benefited from the Merger
Transaction) agrees and acknowledges that it has a good faith obligation to
cooperate with Landlord (or Landlord's affiliate) in Landlord's (or Landlord's
affiliate's) development of the Excess Land including
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participation and cooperation in any zoning or other land use petitions. Tenant
hereby agrees and acknowledges that Landlord or Landlord's affiliate may
transfer or sell the Excess Land or any portion thereof at any time to another
affiliate of Landlord without Tenant's consent. All other transfers of the
Excess Land shall require the prior written consent of Tenant; Tenant shall
consider any such proposed transfer in good faith. For purposes of this
paragraph 33(b), a Corporate Control Event (substituting Landlord or Landlord's
affiliate, as the case may be, for Tenant) shall be deemed a transfer of the
Excess Land; provided, however, in no event shall the merger of or sale of
ownership interests in Manufactured Home Communities, Inc., a Maryland
corporation, MHC Trust, a Maryland real estate investment trust or MHC Operating
Limited Partnership, an Illinois limited partnership, or a sale of substantially
all of the assets of any such entity, at any time be deemed to be a Corporate
Control Event.
(c) Within thirty (30) days following the Commencement Date, Landlord
will record, with the appropriate land records offices, notice of the use and
transfer restrictions set forth in this paragraph 33, which notice shall expire
by its terms on the date which is the earlier of (i) the fifth (5th) anniversary
of the Lease Expiration Date and (ii) such date on which this Lease or Tenant's
right to possession of the Premises is terminated following a Put/Call Default
or an event of default under paragraphs 15(f) or 15(g) of this Lease and which
recorded document shall otherwise be in form and substance reasonably
satisfactory to Tenant.
(d) As of the Commencement Date, Landlord and Tenant have agreed that
each of the Excess Land Properties contains Excess Land. However, Landlord and
Tenant have not agreed upon which portions of the Excess Land Properties
constitute Excess Land. Landlord and Tenant agree in principle that Excess Land
is land which is subject to being separately developed in accordance with
paragraphs 33(a) and (b) hereof, and Exhibit Y, attached to this Lease, contains
an approximate description of the acreage of the Excess Land contained in the
Excess Land Properties set forth on Exhibit Y, other than those set forth in
clauses (i) through (vii), inclusive, of this paragraph 33(d). On or before the
Excess Land Agreement Date, Landlord and Tenant shall use commercially
reasonable efforts to agree upon and designate the size and location of the
Excess Land located at each Excess Land Property. For the Sites listed below,
such agreement shall be based on the following general provisions:
(i) With respect to the Site commonly known as Medina Lake,
certain portions of the Site shall be considered Excess Land. Landlord's (or its
Affiliate's) development of the Excess Land at the Medina Lake Site shall be
surrounded by a buffer to the extent it abuts Tenant's existing membership
campground.
(ii) With respect to the Site commonly known as Rancho Oso,
multiple portions of the Site, currently used as pasture/ranch land, shall be
considered Excess Land. Landlord shall update Tenant on any progress made with
respect to the applicable regulatory processes in California or evaluations
performed relating to the development of the Excess Land at the Rancho Oso Site.
(iii) With respect to the Site commonly known as Yosemite, in
the event that Tenant does not, within a commercially reasonable period of time
(taking into account market conditions at the Yosemite Site and in the
surrounding campground market area; and in any event, such time period shall not
exceed ten (10) years following the Commencement Date) (the "TT YOSEMITE
DEVELOPMENT DEADLINE"), commence development of the vacant portion of the
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Yosemite Site for the use of "Getaway units" and expand the existing membership
campground into said area, that portion of the Yosemite Site shall be, in
accordance with paragraph 33(e) of this Lease, considered Excess Land.
(iv) With respect to the Site commonly known as Lake Conroe,
(a) the area to the north of the lake, (b) the area in which the sales center is
currently located and (c) the land between the sales center and the lake, shall
be considered Excess Land. Landlord and Tenant shall agree upon a reasonable
buffer area to surround the sales center or shall relocate the sales center in
connection with Landlord's development of the Excess Land at this Site. In the
event Landlord undertakes development of the Excess Land located at the Lake
Conroe Site, Landlord shall, at its sole cost and expense, improve the existing
water and sewer facilities serving the Lake Conroe Site. In such event,
following Landlord's development of the Excess Land at the Lake Conroe Site,
Tenant's Members shall have reasonable access to the lake pursuant to the terms
of paragraph 2(e) hereof.
(v) With respect to the Site commonly known as Bend, a portion
of the Site located on the western portion of the property shall be considered
Excess Land. Landlord and Tenant shall consider the feasibility of creating a
separate entrance for access to such Excess Land.
(vi) With respect to the Site commonly known as LaConner, a
portion of the LaConner Site, shall be considered Excess Land. In the event
Landlord undertakes development of the Excess Land located at the LaConner Site,
Landlord shall, at its sole cost and expense, improve the existing water and
sewer facilities relating to the LaConner Site.
(vii) With respect to the Site commonly known as Idyllwild, a
portion of the Site located at the westerly side of the property shall be
considered Excess Land.
Promptly following Landlord's and Tenant's agreement regarding the size and
location of the Excess Land, Landlord and Tenant shall enter into an amendment
to this Lease to reflect such agreements, including (1) causing legal
descriptions of the Excess Land to be prepared, (2) attaching revised legal
descriptions of the Premises, reflecting the exclusion of the Excess Land and
(3) attaching said legal descriptions of the Excess Land as Exhibit P to this
Lease. Landlord shall be responsible for all costs associated with clauses (1),
(2) and (3) of the foregoing sentence, with the exception of Tenant's legal
fees. In addition, Tenant shall cause any and all liens relating to any
Leasehold Mortgage encumbering the Excess Land to be released. Notwithstanding
anything contained herein to the contrary, until such time as this Lease is
amended pursuant to this paragraph 33(d), Tenant shall bear all burdens
associated with the Excess Land. If Landlord and Tenant are unable to agree on
or before the Excess Land Agreement Date, upon a matter which is the subject of
this paragraph 33(d), such matter shall be subject to the arbitration procedures
set forth on Exhibit U attached hereto.
(e) If Tenant undertakes development of the Yosemite Site for the use
of "Getaway Units" prior to the TT Yosemite Development Deadline, the Yosemite
Site shall no longer be an Excess Land Property and no Excess Land shall be
considered to be located thereon. To the extent that Tenant has not undertaken
development and expansion of the Yosemite Site for the use of "Getaway Units" on
or before the TT Yosemite Development Deadline and Landlord has delivered notice
to Tenant that the TT Yosemite Development Deadline has occurred (the "TT
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YOSEMITE DEVELOPMENT DEADLINE NOTICE"), Landlord and Tenant shall, on or before
the date which is six months following Landlord's delivery of the TT Yosemite
Development Deadline Notice ("YOSEMITE EXCESS LAND AGREEMENT Date"), use
commercially reasonable efforts to agree upon and designate the size and
location of the Excess Land located at the Yosemite Site in accordance with the
general provisions contained in paragraph 33(d) of this Lease. Promptly
following Landlord's and Tenant's agreement regarding the size and location of
the Excess Land at the Yosemite Site, Landlord and Tenant shall enter into an
amendment to this Lease to reflect such agreements, including (1) causing legal
descriptions of such Excess Land to be prepared, (2) attaching revised legal
descriptions of the Premises, reflecting the exclusion of such Excess Land and
(3) attaching said legal descriptions of such Excess Land as Exhibit P to this
Lease. Landlord shall be responsible for all costs associated with the clauses
(1), (2) and (3) of foregoing sentence, with the exception of Tenant's legal
fees. In addition, Tenant shall cause any and all liens relating to any
Leasehold Mortgage encumbering the Excess Land at the Yosemite Site to be
released. Notwithstanding anything contained herein to the contrary, until such
time as this Lease is amended pursuant to this paragraph 33(e), Tenant shall
bear all burdens associated with such Excess Land located at the Yosemite Site.
If Landlord and Tenant are unable to agree on or before the Yosemite Excess Land
Agreement Date, upon a matter which is the subject of this paragraph 33(e), such
matter shall be subject to the arbitration procedures set forth on Exhibit U
attached hereto.
34. CAPITAL EXPENDITURE RESERVE / IMMEDIATE REPAIRS
(a) Capital Expenditure Reserve. Deposits into the Capital Expenditure
Reserve Account, other than the deposits for Immediate Repairs, shall be made
for the purpose of establishing and maintaining a reserve (the "CAPITAL
EXPENDITURE RESERVE") for the completion of such capital improvement items and
for equipment for use at the Sites ("CAPITAL IMPROVEMENTS") to the extent set
forth in the Budget or as are otherwise approved in advance by Landlord
("APPROVED CAPITAL IMPROVEMENTS"). The funds contained in the Capital
Expenditure Reserve shall be utilized by Tenant solely for Approved Capital
Improvements.
So long as no Event of Default or Put/Call Default exists at the time
of any requested distribution of funds from the Capital Expenditure Reserve,
Landlord shall make funds in the Capital Expenditure Reserve available to Tenant
subject to satisfaction of each of the following terms and conditions: (a) all
Capital Expenditure Reserve funds released by Landlord to Tenant shall be used
to pay for or to reimburse Tenant for the reasonable expenses actually incurred
and paid by Tenant for Approved Capital Improvements; (b) Tenant shall have
delivered to Landlord a Request for Release satisfactory to Landlord together
with a summary of all Capital Improvements to be made with such requested funds;
(c) disbursements from the Capital Expenditure Reserve shall not be made more
frequently than once per month; (d) each request for a disbursement shall be in
an amount of not less than $10,000.00; and (e) upon request of Landlord, Tenant
shall also provide Landlord with additional evidence satisfactory to Landlord
that Tenant is the owner or lessee of any Capital Improvements or equipment for
which reimbursement is sought, free of any Liens (other than the first priority
security interest in favor of Landlord). Landlord shall make each disbursement
of the Capital Expenditure Reserve funds within three (3) Business Days after
satisfaction of all the conditions to that disbursement. Notwithstanding the
foregoing, at Landlord's election, if any disbursement of Capital Expenditure
Reserve Funds is made to Tenant to pay a capital expenditure then due and owing
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(as opposed to a reimbursement for amounts paid by Tenant), then Tenant shall
provide evidence to Landlord within three (3) Business Days of such disbursement
that such capital expenditure was in fact paid as and when due. If an Event of
Default exists, Landlord may apply the Capital Expenditure Reserve funds,
together with any interest accrued thereon, to Tenant's obligations under this
Lease in such order and priority as Landlord may determine. Notwithstanding the
foregoing, to the extent that in any calendar year Tenant has expended sums on
Capital Improvements and equipment (or otherwise approved, in writing, by
Landlord) in excess of the sums required to be deposited into the Capital
Expenditure Reserve hereunder for such period, Tenant may request that Landlord
approve (which approval shall be in Landlord's sole but good faith discretion) a
reduction in the amount Tenant shall be required to deposit in the Capital
Expenditure Reserve for the remaining portion of the calendar year to reflect
the amount of such excess expenditures. Tenant shall furnish to Landlord on or
prior to the thirtieth (30th) day following the end of each calendar quarter a
statement ("CAPITAL EXPENDITURE RESERVE STATEMENT") setting forth (a) all
deposits into and disbursements from the Capital Expenditure Reserve, and (b) a
schedule of Capital Improvements and related expenses to which disbursements
from the Capital Expenditure Reserve were applied during the applicable fiscal
quarter, including, to the extent not previously provided to, and approved by,
Landlord, invoices, receipts, lien waivers and other documentation as Landlord
shall request. Landlord shall not make any disbursements from the Capital
Expenditure Reserve until (i) Landlord has approved the expenditures proposed by
Tenant, (ii) all conditions to such disbursement have been satisfied and (iii)
if requested by Landlord, Tenant has provided Landlord with all invoices,
receipts, lien waivers and other documentation reasonably requested by Landlord.
(b) Immediate Repairs. Tenant shall complete those improvements and
repairs highlighted with an asterisk on Exhibit O attached hereto no later than
December 31, 2005. Tenant shall use commercially reasonable efforts to complete
the balance of the improvements and repairs on Exhibit O attached hereto within
timeframes during which a prudent owner/operator of membership campgrounds would
make such improvements and repairs. Tenant shall perform each Immediate Repair
in accordance with the terms and provisions of paragraph 23 of this Lease and
upon completion of such Immediate Repair, Tenant shall provide Landlord with
final lien waivers for all trades and materials and evidence satisfactory to
Landlord that such Immediate Repair has been fully completed. Landlord shall
have no obligation to pay any costs for such Immediate Repairs and Tenant shall
pay all costs of such Immediate Repairs in full. If Tenant fails to complete any
Immediate Repair within the time frame specified in this paragraph 34(b), then
upon ten (10) Business Days prior written notice to Tenant, Landlord may
complete such Immediate Repair and Tenant shall pay Landlord as Additional Rent
forthwith (and in any event within thirty (30) days) after being billed for same
by Landlord the cost thereof plus an administrative fee of five percent (5%) of
such cost, which bill shall be accompanied by reasonable supporting
documentation. Such amounts shall bear interest at the Overdue Rate from the
date of expenditure by Landlord to the date of repayment by Tenant. Tenant shall
remain responsible for any increased costs to repair such Immediate Repair in
excess of the amount set forth on Exhibit O and such increased amount shall bear
interest at the Overdue Rate.
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35. INTENTIONALLY OMITTED.
36. RIGHT OF FIRST OFFER
(a) During the Term, if Tenant desires to sell Tenant's Business
through a sale of all or substantially all of its assets, stock or otherwise,
Tenant shall notify ("ROFO NOTICE") Landlord in writing of such event. The date
such ROFO Notice is given is herein called the "ROFO NOTICE DATE". The ROFO
Notice shall (1) state the specified price for which Tenant will sell Tenant's
Business ("ROFO NOTICE PRICE") (2) contain all material terms pursuant to which
Tenant will sell Tenant's Business, including (A) any caps on funds for which
Tenant will be liable pursuant to indemnification provisions, (B) any floors or
baskets pertaining to funds for which Tenant will be liable pursuant to
indemnification provisions and (C) the survivability of any indemnification
provisions (collectively, (A) through (C), (the "ROFO MATERIAL PROVISIONS") and
include a copy of the stock purchase agreement, asset purchase agreement or
other purchase agreement, as applicable (the "ROFO PURCHASE AGREEMENT") pursuant
to which Tenant intends to sell Tenant's Business and (3) shall contain the same
type of information as is contained in Schedules 4.4 and 4.12 of the Merger
Agreement (it being agreed, that if Tenant intends to circulate or cause to be
circulated any offering materials, prospectus or information package, then
Landlord shall receive a copy of such items pursuant to this paragraph
36(a)(3)). Landlord shall have the right, at its option, to purchase Tenant's
Business ("ROFO") for the ROFO Notice Price on substantially the same terms
contained in the ROFO Purchase Agreement.
(b) Landlord shall exercise its ROFO, if at all, by delivering written
notice ("LANDLORD'S ELECTION NOTICE") to Tenant on or before the date which is
thirty (30) days following the ROFO Notice Date ("LANDLORD'S NOTICE Date"). If
Landlord delivers such Landlord's Election Notice within such thirty (30) day
period, Tenant and Landlord shall execute the ROFO Purchase Agreement within ten
(10) days after the date on which Landlord delivers its Landlord's Election
Notice and shall close the purchase of Tenant's Business sixty (60) days after
the date on which Landlord delivers its Landlord's Election Notice on
substantially the same terms contained in the ROFO Purchase Agreement.
(c) In the event Landlord does not timely deliver Landlord's Election
Notice or does not elect to exercise its ROFO, Tenant shall have one hundred
twenty (120) days following Landlord's Notice Date in which to sell Tenant's
Business to a Person or group of Persons ("PROPOSED PURCHASER") for a purchase
price equal to or greater than one hundred five percent (105%) of the ROFO
Notice Price, and on ROFO Material Provisions no more favorable to the Proposed
Purchaser than those contained in the ROFO Purchase Agreement. Tenant shall
deliver to Landlord an executed copy of the ROFO Purchase Agreement, which ROFO
Purchase Agreement shall contain a purchase price equal to or greater than 105%
of the ROFO Purchase Price. Notwithstanding anything contained herein to the
contrary, Tenant's sale of Tenant's Business to the Proposed Purchaser shall
constitute a Corporate Control Event which may only be completed in accordance
with paragraph 25(b) of this Lease. If no closing of such sale of Tenant's
Business to the Proposed Purchaser occurs within such one hundred twenty (120)
day period, Landlord's rights to receive a ROFO Notice and to purchase Tenant's
Business at the ROFO Notice Price, as set forth in this paragraph, shall be
reinstated.
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(d) Should Tenant desire to enter into a stock purchase agreement,
asset purchase agreement or other purchase agreement or amendment thereto
("REVISED ROFO PURCHASE AGREEMENT") with the Proposed Purchaser having either
(1) a purchase price for Tenant's Business that is less than one hundred five
percent (105%) of the ROFO Notice Price or (2) containing ROFO Material
Provisions more favorable to the Proposed Purchaser than those disclosed to
Landlord in the ROFO Notice and in the ROFO Purchase Agreement, then prior to
entering into such Revised ROFO Purchase Agreement (or such Revised ROFO
Purchase Agreement may be entered into so long as it remains subject to
Landlord's rights hereunder) Tenant shall first permit Landlord to match the
Proposed Purchaser's offer by submitting such offer and Revised ROFO Purchase
Agreement to Landlord in writing ("TENANT'S REOFFER NOTICE"). Within ten (10)
calendar days of receipt of Tenant's Reoffer Notice, Landlord shall
affirmatively accept or reject such offer in writing. If Landlord rejects the
terms of such Tenant's Reoffer Notice, Tenant shall be free to proceed with
selling Tenant's Business to the Proposed Purchaser pursuant to the terms and
conditions of its offer and Revised ROFO Purchase Agreement. Landlord's failure
to respond shall be deemed a rejection of Tenant's Reoffer Notice. If Landlord
accepts the terms of such Tenant's Reoffer Notice, Landlord and Tenant shall
execute the Revised ROFO Purchase Agreement within ten (10) days after the date
on which Landlord delivers its acceptance to Tenant of Tenant's Reoffer Notice
and shall close the purchase of Tenant's Business on substantially the same
terms contained in the Revised ROFO Purchase Agreement.
(e) Tenant shall not enter into a binding agreement to sell Tenant's
Business without first complying with the provisions of this paragraph.
(f) In the event of a sale to a Proposed Purchaser in accordance with
the terms of this paragraph 36, Landlord's rights to purchase Tenant's Business
(as such term shall apply to the Tenant Successor) pursuant to this paragraph 36
shall continue in full force and effect and be binding upon any Tenant Successor
hereunder.
37. TRADEMARK LICENSE AGREEMENT
On the Commencement Date, Landlord and Tenant shall enter into a
mutually acceptable Trademark License Agreement pursuant to which Landlord shall
be granted a royalty-free license during the Term of this Lease to use certain
trademarks of Tenant pursuant to the terms and conditions thereof.
38. AFFIRMATIVE, NEGATIVE AND FINANCIAL COVENANTS OF TENANT
(a) During the Term of this Lease, all of the business and operations
of Tenant and its Subsidiaries as conducted prior to the date hereof by such
entities and their predecessors ("TENANT'S BUSINESS") shall continue to be
operated by Tenant and its Subsidiaries after the date hereof, and Tenant and
Tenant's Subsidiaries, as applicable, shall not engage in any business other
than Tenant's Business. Tenant's Business is the operation and management of (i)
membership campgrounds, (ii) reciprocal use and affiliation programs for use of
campgrounds, (iii) management of campgrounds for third parties, including the
United States Forest Service and (iv) other business related and ancillary to
the businesses described in clauses (i), (ii) and (iii), above. Without limiting
the generality of the foregoing, Tenant shall not operate any portion of
Tenant's Business other than directly itself or through its Subsidiaries. In
furtherance
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thereof, except as otherwise expressly provided herein, Tenant shall not permit
its Subsidiaries to authorize, issue or enter into any agreement providing for
the issuance (contingent or otherwise) of (x) any notes or debt securities
containing equity features, including, any notes or debt securities convertible
into or exchangeable for equity securities, issued in connection with the
issuance of equity securities or containing profit participation features, (y)
any equity securities (or any securities convertible into or exchangeable for
any equity securities), or (z) any capital appreciation or profit participation
rights. Subject to the provisions of paragraphs 25 and 36 of this Lease, at no
time shall Tenant (1) cease to, directly or indirectly, own and control one
hundred percent (100%) of each class of the outstanding equity interests of each
Subsidiary or (2) own any asset, directly or indirectly, other than its
ownership interests in the Subsidiaries. Tenant may not acquire or form any
corporations, partnerships, limited liability companies, associations or other
business entities unless such entities are wholly owned and controlled by Tenant
and Landlord shall have received (x) a Subsidiary Pledge, by which such new
Subsidiary pledges one hundred percent (100%) of its assets to Landlord, (y) a
joinder to the Subsidiary Guaranty, in the form attached thereto and (z) a
replacement Tenant Pledge, by which Tenant shall pledge to Landlord one hundred
percent (100%) of the ownership interest in each Subsidiary, including the new
Subsidiary or Subsidiaries contemplated by this paragraph 38(a).
(b) Tenant shall not directly or indirectly create, incur, assume or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness except for (i) the obligations of Tenant under this Lease, (ii) the
Working Capital Indebtedness, and (iii) any other Indebtedness, if after giving
effect to such Indebtedness, Tenant has (1) a Net Worth of not less than
$16,000,000.00 and (2) a Fixed Charge Coverage Ratio of not less than 1.05:1.0.
(c) Tenant shall not permit any of its Subsidiaries directly or
indirectly, to create, incur or otherwise become or remain, directly or
indirectly, liable with respect to any Indebtedness except for (i) ordinary and
customary trade payables which are incurred in the ordinary course of its
business provided that not more than $1,000,000 of which, in the aggregate at
any time outstanding, are more than ninety (90) days overdue, (ii) the
obligations of the Subleasing Subsidiaries under the Tenant Subleases, and (iii)
any other Indebtedness incurred as a co-borrower with or guarantor of Tenant
(provided such other Indebtedness is permitted by paragraph 38(b), above).
(d) Except as provided in paragraph 36 of this Lease, Tenant shall not
nor shall it permit any of its Subsidiaries directly or indirectly to convey,
sell, lease, sublease, transfer or otherwise dispose of, or grant to any Person
an option to acquire, in one transaction or a series of related transactions,
any of its property, business or assets, or the capital stock of or other equity
interests in any of its Subsidiaries, whether now owned or hereafter acquired,
except for sales of inventory in good faith to customers for fair value in the
ordinary course of business and dispositions of obsolete assets not used or
useful in Tenant's Business.
(e) Tenant shall not nor shall Tenant permit any of its Subsidiaries
directly or indirectly to declare, order, pay, make or set apart any sum for any
Restricted Junior Payment, except that:
(A) Subsidiaries of Tenant may make Restricted Junior Payments
to Tenant as the parent thereof and Tenant may make Restricted Junior Payments
to Subsidiaries of Tenant; and
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(B) Tenant may make Restricted Junior Payments, provided that
each of the following conditions are fully satisfied:
(i) both before and after giving effect to such
Restricted Junior Payment, the Fixed Charge Coverage Ratio is no less
than 1.05:1.0.
(ii) both before and after giving effect to such
Restricted Junior Payment, Tenant has a minimum Net Worth of not less
than $16,000,000.00.
(f) Guarantor shall at all times continue to, directly or indirectly,
own and control at least one hundred percent (100%) of the outstanding equity
interests of Tenant. Additionally, Guarantor shall cause (1) the Person proposed
by Tenant to sell Tenant's Equity Shares to Landlord pursuant to paragraph 22(f)
hereof ("TENANT Seller") to have owned no assets other than Tenant's Equity
Shares and (2) Tenant to not own any assets, directly or indirectly, other than
the assets in existence on the date of this Lease or otherwise acquired in
accordance with this Lease and Tenant's Business.
39. PROMOTIONS AND DISCOUNTS RESERVE ACCOUNT
Tenant recognizes Landlord's interest in continued annual dues payable
under Membership Contracts in order for proceeds to be available for the
maintenance and delivery of services at the Premises for the benefit of the
holders of all Membership Contracts. As a result, Tenant agrees to endeavor to
continue to operate and to cause Tenant's Subsidiaries to continue to operate
Tenant's Business in a manner which remains consistent with the relationship
between usage benefits and annual membership dues currently in existence as of
the date of this Lease (such manner of operation being referenced to herein as
"TENANT'S MANNER OF OPERATION"). If Tenant or any of Tenant's Subsidiaries
pursue any marketing effort that would cause Tenant to materially and adversely
deviate from Tenant's Manner of Operation, taking into account Tenant's business
as a whole (such deviation shall be referred to herein as a "VARIANCE PROGRAM"),
then Tenant shall, within five (5) Business Days after instituting such
marketing effort, notify Landlord of such Variance Program. Promptly thereafter,
Landlord and Tenant shall use good faith efforts to determine whether or not and
to what extent Tenant shall be obligated to make a deposit into the Promotions
and Discount Reserve in connection with such Variance Program ("VARIANCE PROGRAM
DEPOSIT") and upon such agreement, Tenant shall make such Variance Program
Deposit into the Promotions and Discount Reserve Account. Within ninety (90)
days following the expiration of each fiscal year of Tenant, Tenant shall
furnish to Landlord a certificate of Tenant's Chief Financial Officer stating
that in such officer's good faith judgment, Tenant has not commenced and has not
permitted any of Tenant's Subsidiaries to commence any Variance Programs during
the preceding fiscal year of Tenant other than those which Tenant has disclosed
to Landlord. Variance Program Deposits made into the Promotions and Discounts
Reserve Account shall be made for the purposes of establishing and maintaining a
reserve (the "PROMOTIONS AND DISCOUNTS RESERVE") for the payment of any
deficiencies in Tenant's payment of Rent under this Lease. If Tenant or Tenant's
Subsidiaries revise its marketing efforts in a manner that reinstitutes Tenant's
Manner of Operation (or otherwise positively affects the relationship between
usage benefits and annual membership dues), then Tenant shall be entitled to
withdraw funds from the Promotions and Discount Reserve, in amounts and at times
approved by Landlord, such approval not to be unreasonably withheld, delayed or
conditioned.
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40. LANDLORD SUBORDINATION AND NON-DISTURBANCE
(a) Notwithstanding anything in this Lease to the contrary, Landlord
hereby covenants and agrees that:
(i) Its rights in each Resort (as hereinafter defined) shall
be subordinate to the rights of Purchasers (as hereinafter defined) from and
after the date of this instrument;
(ii) In the event of the termination of this Lease or of
Tenant's possession of the Premises, Landlord shall take each Resort subject to
the use rights of Purchasers;
(iii) In the event of termination of this Lease or of Tenant's
possession of the Premises, Landlord shall fully honor all rights of Purchasers
to occupy and use any Resort as provided in the Purchasers' Camping Resort
Contracts (as hereinafter defined);
(iv) In the event of termination of this Lease or of Tenant's
possession of the Premises, Landlord shall fully honor all rights of Purchasers
to cancel their Camping Resort Contracts and receive appropriate refunds; and
(v) In the event of the termination of this Lease or of
Tenant's possession of the Premises, Landlord shall not discontinue use of any
Resort or cause or permit any Resort to be used in a manner which would prevent
or materially prevent or interfere with Purchasers from using or occupying the
Resort in the manner contemplated by the Purchasers' Camping Resort Contracts.
However, except as required by applicable law, Landlord shall have no obligation
or liability to assume the responsibilities or obligations of Tenant or any of
its Affiliates under the Camping Resort Contracts.
(b) In the event of the termination of this Lease or of Tenant's
possession of the Premises and Landlord does not continue to operate the Resort
upon conditions no less favorable to Purchasers than existed prior to the change
of title or possession, Landlord and its successors and assigns shall either:
(i) Offer the title to or possession of the Resort to an
association of Purchasers to operate the Resort; or
(ii) Obtain a commitment from another entity (which obtains
title or possession to the Resort) to undertake the responsibility of operating
the Resort.
(c) The covenants contained herein may be enforced by each Purchaser of
a Camping Resort Contract, provided that the Purchaser is not in default under
the terms of the Purchaser's Camping Resort Contract.
(d) The covenants contained herein shall be effective as between each
Purchaser and Landlord despite any rejection or cancellation of the Purchaser's
Camping Resort Contract during any bankruptcy proceedings of Tenant or any of
its present or future Affiliates.
(e) The covenants and agreements contained herein shall inure to the
benefit of and be binding upon the successors and assigns of Tenant and
Landlord.
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(f) When used in this Section, each of the following terms shall be
defined as set forth below:
(i) "Purchaser" shall mean a person who enters into a Camping
Resort Contract, whether before or after the date hereof, and thereby obtains
title to, an estate or interest in, or license or the right to use the Resort.
(ii) "Camping Resort Contract" shall mean an agreement between
(1) Tenant or any of its present or future Affiliates or any predecessor in
interest to Tenant or such Affiliates and (2) a Purchaser evidencing the
Purchaser's title to, estate or interest in, or right or license to use the
Resort.
(iii) "Resort" means any campground located on or forming a
part of the Premises.
The covenant of non-disturbance contained herein is made for the benefit of
Tenant and Landlord and each Purchaser and shall be binding upon and inure to
the benefit of Tenant and Landlord and their respective successors and permitted
assigns and shall be binding upon and inure to the benefit of each Purchaser and
his or her respective successors and permitted assigns.
41. STATE SPECIFIC PROVISIONS
(a) The following provisions shall apply with respect to any Site(s)
located in the State of Arizona:
(i) The following language is added to the definition of
"Land" in paragraph 1 of this Lease, following the phrase "all other property
rights":
"water rights"
(ii) The word "for" is hereby inserted in the Lease as
follows:
(A) In Paragraphs 6(a), 6(b) of this Lease after the
phrase "on an After-Tax Basis" and before the phrase "from and
against any such Taxes".
(B) In Paragraph 6(h) of this Lease, after the phrase
"on an After-Tax Basis" and before the phrase "from and
against any claims for payment thereof".
(C) In Paragraph 7(a) of this Lease, after the phrase
"on an After-Tax Basis" and before the phrase "from and
against, any and all costs, charges and expenses attributable
to the Premises or Underlying Premises".
(D) In Paragraph 18(b) of this Lease, after the
phrase "successors and assigns" and before the phrase "from
and against any and all claims".
(E) In Paragraph 22(b) of this Lease, after the
phrase "on an After-Tax Basis" and before the phrase "from and
against loss or liability".
84
(F) In Paragraph 26(c) of this Lease, after the
phrase "on an After-Tax Basis" and before the phrase "from and
against any and all liability".
(iii) The following language is added to paragraph
16(b)(ii)(B), following the phrase "from and after any such Event of Default":
"and to the extent such statute or common law can be
waived,"
(iv) With regard to any Site located in the State of Arizona,
Tenant expressly waives the benefit of any statute now or in the future in
effect which would otherwise afford Tenant the right to terminate this Lease due
to the casualty or damage to the Site including, without limitation, Arizona
Revised Statutes Section 33-343.
(b) The following provisions shall apply with respect to any Site(s)
located in the State of California:
(i) The following language is added at the end of paragraph
6(a) of this Lease:
"In addition, "Property Taxes" shall include any
taxes as a result in any change in ownership with
respect to the Premises pursuant to Proposition 13 as
adopted by the voters of the State of California in
the June 1978 election, and the costs of any transit
impact development fees, housing and child care
contributions or other similar or dissimilar
impositions required of Landlord with respect to the
Premises or otherwise imposed by the local
governmental or quasi-governmental instrumentalities.
In no event shall Tenant be responsible for any taxes
relating to Landlord's sale of the Premises."
(ii) Except to the extent specifically provided in this Lease,
Tenant hereby waives, to the maximum extent permitted by applicable laws, any
rights that it may now or in the future have to quit or surrender or vacate the
Premises, to terminate this Lease, or to any abatement, diminution, offset,
reduction or suspension of Rent on account of Landlord's failure to timely or in
a satisfactory manner deliver possession of the Premises to Tenant or on account
of any other event or circumstance, including, any rights it might otherwise
have under the provisions of sections 1932, 1933, 1941 and/or 1942 of the
California Civil Code, it being the express intention of the parties, and
therefore it being agreed by the parties, that the terms of this paragraph shall
control under any circumstances in which said statutes might otherwise apply,
and govern and replace any rights covered by said statutes.
(iii) The following language is added at the end of the first
grammatical paragraph of paragraph 10 of this Lease:
"The provisions of Sections 1932(2) and 1933(4) of
the California Civil Code are hereby waived by
Tenant, it being the intention of the parties that
the express terms of this Lease shall control under
any circumstances in which those provisions might
otherwise be applicable."
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(iv) The following language is added to the first sentence of
paragraph 12 of this Lease, following the defined term "ADA":
"and California Civil Code Section 3110.5,"
The following language is added to paragraph 12 of this Lease,
following the phrase "with respect to the use or manner of use" and before the
phrase "of the Premises, or such adjacent or appurtenant facilities":
"maintenance, operation, repair, alteration or
construction"
(v) The following language is added at the end of paragraphs
13 and 14 of this Lease:
"The provisions of Sections 1265.110, 1265.120,
1265.130 and 1265.140 of the California Code of Civil
Procedure are hereby waived by Tenant, it being the
intention of the parties that the express terms of
this Lease shall control under any circumstances in
which those provisions might otherwise be
applicable."
(vi) The following language is added at the end of paragraph
16(b) of this Lease:
"(vi) With respect to any Site(s) located in
the State of California, terminate Tenant's right to
possession of the Premises by any lawful means, in
which case this Lease shall terminate and Tenant
immediately shall surrender possession of the
Premises to Landlord. In such event Landlord shall be
entitled to recover from Tenant all damages incurred
by Landlord by reason of Tenant's default including
(i) the cost of recovering possession of the
Premises; (ii) the worth at the time of the award of
any unpaid Rent which had been earned at the time of
termination; (iii) the worth at the time of the award
of the amount by which the unpaid Rent which would
have been earned after the termination until the time
of the award exceeds the amount of such rental loss
that Tenant proves could reasonably have been
avoided; (iv) reasonable expenses of placing the
Premises in good order, condition and repair; (v)
reasonable expenses of reletting, including necessary
renovation and alteration of the Premises; (vi)
reasonable and actual attorneys' fees; (vii) the
worth at the time of award of the amount by which the
unpaid Rent required to be paid by Tenant pursuant to
this Lease for the balance of the term after the time
of such award exceeds the amount of such rental loss
for the same period that Tenant proves reasonably
could be avoided; (viii) that portion of any leasing
commission paid by Landlord and applicable to the
unexpired term of this Lease; and (ix) any other
amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to
perform its obligations
86
under this Lease or which in the ordinary course of
things would be likely to result therefrom, including
damages for diminution in the value of the Project.
As used in subparagraphs (ii) and (iii), above, the
"worth at the time of award" is computed by allowing
interest at the Overdue Rate. As used in subparagraph
(vii), above, the "worth at the time of award" is
computed by discounting such amount at the discount
rate of the Federal Reserve Bank of San Francisco at
the time of award plus one percent (1%). Unpaid
installments of rent or other sums shall bear
interest from the date due at the Overdue Rate;
(vii) With respect to any Site(s) located in
the State of California, maintain Tenant's right to
possession, in which case this Lease shall continue
in full force and effect whether or not Tenant shall
have abandoned the Premises. In such event Landlord
shall be entitled to enforce all of Landlord's rights
and remedies under this Lease, including the right to
recover the Rent as may become due hereunder, for
which purposes Landlord may exercise the remedy
described in California Civil Code section 1951.4
(lessor may continue Lease in effect after lessee's
breach and abandonment and recover rent as it becomes
due, if lessee has the right to sublet or assign,
subject only to reasonable limitations);
(viii) With respect to any Site(s) located
in the State of California, seek specific performance
by Tenant, in the case of breach by Tenant of one or
more of its covenants herein, below;
(ix) With respect to any Site(s) located in
the State of California, exercise the remedy
described in California Civil Code section 1954 (and
for such purposes, Tenant hereby waives any rights or
benefits that may be available to it under said
California Civil Code section 1954); and/or
(x) With respect to any Site(s) located in
the State of California, pursue every and any other
remedy or right now or hereafter available to
Landlord under the laws or judicial decisions of the
State of California."
(vii) The following is added to paragraph 23(c)(i) of this
Lease, following the phrase "rules and regulations" and before the phrase "shall
not adversely affect the structural elements":
", including, to the extent applicable, California
Civil Code Section 3110.5, and shall otherwise comply
with paragraph 12 hereof"
(viii) The following is added to the definition of
"Environmental Laws" in paragraph 26(b) of this Lease:
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"to the extent applicable, (i) the Porter-Cologne
Water Quality Control Act (California Water Code
Section 13000 et seq.), (ii) the California Hazardous
Waste Control Law (Division 20, Chapter 6.5 of the
California Health and Safety Code), (iii) The
Carpenter-Presley-Tanner Hazardous Substance Account
Act (California Health and Safety Code Section 25300
et seq.), (iv) Division 20, Chapter 6.95 (Hazardous
Materials Release Response Plans and Inventory) of
the California Health and Safety Code, (v) the Safe
Drinking Water and Toxic Enforcement Act of 1986
(California Health and Safety Code Section 25249.5 et
seq.), (vi) the Resource Conservation and Recovery
Act (42 U.S.C. Section 6901 et seq.), (vii) the
Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. Section 9601 et seq.),
and (viii) the Hazardous Materials Transportation Act
(49 U.S.C. Section 1801 et seq.)"
(c) The following provisions shall apply with respect to the Site(s)
located in the State of Florida:
(i) The following language is added at the end of
Paragraph 6(c) of this Lease:
"Without limiting the foregoing, Tenant shall pay to
the Landlord, any sales, excise and other tax
(excluding, however Landlord's income taxes) levied,
imposed or assessed by the State of Florida or any
political subdivision thereof or other taxing
authority upon any rent payable hereunder, including
Fixed Rent or Additional Rent."
(ii) The following language is hereby added at the end of
paragraph 16(b) of this Lease:
"(vi) Landlord shall have all remedies available
under Florida law including the following:
(a) Landlord shall have the right to recover the
Premises and repossess the Premises by any
lawful means without terminating the Lease.
(b) Landlord shall have the right at any time to
give a written termination notice to Tenant
and, on the date specified in such notice,
Tenant's right to possession shall terminate
and this Lease shall terminate. Upon such
termination, Landlord shall have the right
to recover from Tenant all unpaid Rent and
other charges due under this Lease which had
been earned at the time of termination."
(c) "In addition and without limiting the
foregoing, Landlord shall have the right to
accelerate and declare immediately
88
due and payable all rents and other charges
to be paid by Tenant hereunder. Acts of
maintenance or preservation or efforts to
relet the Premises or the appointment of a
receiver upon initiative of Landlord to
protect Landlord's interest under this Lease
shall not constitute a termination of this
Lease unless written notice of such
termination is given by Landlord to Tenant."
(iii) The following language is substituted for the first
sentence of paragraph 21(b) of the Lease:
"Landlord's interest in the Premises shall not be
subject to liens for improvements made by the Tenant,
and Tenant shall have no power or authority to create
any lien or permit any lien to attach to the Premises
or to the present estate, reversion or other estate
of Landlord in the Premises herein demised or on the
Improvements or the Property or other improvements
thereon as a result of improvements made by Tenant or
for any other cause or reason. All materialmen,
contractors, artisans, mechanics and laborers and
other persons contracting with Tenant with respect to
the Premises or any part hereof, or any such party
who may avail himself of any lien against realty
(whether same shall proceed in law or in equity), are
hereby charged with notice that such liens are
expressly prohibited and that they must look solely
to Tenant to secure payment for any work done or
material furnished for improvements by Tenant or for
any other purpose during the term of this Lease.
Tenant shall indemnify Landlord again any loss or
expenses incurred as a result of the assertion of any
such lien."
(iv) The following provision is added at the end of paragraph
28 of this Lease:
"(r) Wherein this Lease requires the Tenant to pay
any of landlord's legal or attorney fees, such fees
shall include any and all reasonable legal fees and
expenses of Landlord, including any and all such fees
and expenses incurred in connection with litigation,
mediation, arbitration, other alternative dispute
processes, administrative proceedings and bankruptcy
proceedings, and any and all appeals from any of the
foregoing."
"(s) As required by Section 404.056, Florida
Statutes, Landlord notes the following disclosure:
RADON GAS: Radon is a naturally occurring radioactive
gas that, when it has accumulated in a building in
sufficient quantities may present health risks 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
89
radon and radon testing may be obtained from your
county health department."
"(t) ENERGY: Tenant may have the energy efficiency
rating of any building determined. A copy of the
State brochure is attached as Exhibit X."
(v) The following language is substituted for the first
sentence of paragraph 21(b) of the Lease:
"Landlord's interest in the Premises shall not be
subject to liens for improvements made by the Tenant,
and Tenant shall have no power or authority to create
any lien or permit any lien to attach to the Premises
or to the present estate, reversion or other estate
of Landlord in the Premises herein demised or on the
Improvements or the Property or other improvements
thereon as a result of improvements made by Tenant or
for any other cause or reason. All materialmen,
contractors, artisans, mechanics and laborers and
other persons contracting with Tenant with respect to
the Premises or any part hereof, or any such party
who may avail himself of any lien against realty
(whether same shall proceed in law or in equity), are
hereby charged with notice that such liens are
expressly prohibited and that they must look solely
to Tenant to secure payment for any work done or
material furnished for improvements by Tenant or for
any other purpose during the term of this Lease.
Tenant shall indemnify Landlord again any loss or
expenses incurred as a result of the assertion of any
such lien."
(d) The following provisions shall apply with respect to the Site(s)
located in the State of Indiana:
(i) Where any provision of this Lease is inconsistent with any
provision of Indiana statutory or case law that may not be waived ("Applicable
Law"), the provisions of Applicable Law shall take precedence over the
provisions of this Lease, but shall not invalidate or render unenforceable any
other provisions of this Lease that can be construed in a manner consistent with
Applicable Law. Should Applicable Law confer any rights or impose any duties
inconsistent with or in addition to any of the provisions of this Lease, the
affected provisions of this Lease shall be considered amended to conform to such
Applicable Law, but all other provisions hereof shall remain in full force and
effect without modification.
(ii) To the extent that Applicable Law limits (i) the
availability of the exercise of any of the remedies set forth in the Lease, and
the right of Landlord to exercise self-help in connection with the enforcement
of the terms of this Lease, or (ii) the enforcement of waivers and indemnities
made by Tenant, such remedies, waivers, or indemnities shall be exercisable or
enforceable, any provisions in this Lease to the contrary notwithstanding, if,
and to the extent, permitted by Applicable Law in force at the time of the
exercise of such remedies or the enforcement of such waivers or indemnities
without regard to the enforceability of such remedies, waivers or indemnities at
the time of the execution and delivery of this Lease.
90
(iii) The following language is added at the end of paragraph
16(b) of this Lease:
"(vi) With respect to any site located in the State of
Indiana, Tenant covenants and agrees with Landlord that if
Landlord, upon a Put/Call Default by Tenant, elects to file a
suit to enforce this Lease and protect Landlord's rights
thereunder, Landlord may in such suit apply to any court
having jurisdiction, for the appointment of a receiver of the
Premises and Tenant hereby consents to such appointment, and
thereupon it is expressly covenanted and agreed that the court
shall, without notice forthwith, appoint a receiver with the
usual powers and duties of receivers in like cases pursuant to
Ind. Code 32-30-5, and such appointment shall be made by such
court as a matter of strict right to Landlord and without
reference to the adequacy or inadequacy of the value of the
Premises that is subject this Lease, or to the solvency or
insolvency of Tenant, and without reference to the commission
of waste."
(iv) Tenant waives, to the fullest extent permitted by
Applicable Law, any notice to quit as a condition precedent to Landlord's
remedies under paragraph 16 of this Lease, for and on behalf of itself and all
persons claiming through or under Tenant and Tenant further waives any and all
right of redemption or re-entry or repossession in case Tenant shall be
dispossessed by a judgment or by warrant of any court or judge, or in case of
re-entry or repossession by Landlord or in case of any expiration or termination
of this Lease.
(v) Environmental Laws, as defined in this Lease, includes, to
the extent applicable, all of the Environmental Management Laws, as defined in
Ind. Code 13-11-2-71.
(vi) Tenant hereby waives, to the fullest extent permitted by
Applicable Law, relief from valuation and appraisement laws and Tenant covenants
and agrees that any judgment obtained by Landlord against Tenant may be executed
in the State without relief from such valuation and appraisement laws.
(vii) To the fullest extent permitted by Applicable Law,
Tenant hereby waives and surrenders, for itself and all those claiming under it,
including creditors of all kinds, (i) any right and privilege which it or any of
them may have under any present or future Applicable Law to redeem any of the
Premises or to have a continuance of this Lease after termination of this Lease
or of Tenant's right of occupancy or possession pursuant to any court order or
any provision hereof, and (ii) the benefits of any present or future Applicable
Law which exempts property from liability for debt or for distress for rents.
(viii) Landlord and Tenant agree to execute and record a
memorandum of lease satisfying the requirements of Ind. Code 36-2-11-20, in the
office of the County Recorder in which the Premises is located.
(e) The following provisions shall apply with respect to the Site(s)
located in the State of Michigan:
(i) the words "single business tax" is hereby inserted between
the phrases "gross receipts tax" and "excise tax" in paragraph 6(b)(iii).
91
(ii) The following language is added to the definition of
Environmental Laws in paragraph 26(b), immediately following the phrase "the
Federal Insecticide, Fungicide and Rodenticide Act, as amended, 7 U.S.C.
Sections 136 et seq.":
"the State of Michigan Natural Resources and
Environmental Protection Act, MCL 324.101 et seq.,
and any rules and regulations promulgated
thereunder,"
(iii) The following language is added to the definition of
Hazardous Materials in paragraph 26(b), immediately following the phrase "the
Resource, Conservation and Recovery Act of 1976, 42 U.S.C. Sections 6901, et
seq.":
"the State of Michigan Natural Resources and
Environmental Protection Act, MCL 324.101 et seq.,
and any rules and regulations promulgated
thereunder,"
(iv) The following parenthetical should be inserted after the
words "a special or limited warranty deed" in section B(i) of Exhibits R and W:
"(or covenant deed for any Land located in the state
of Michigan)"
(f) The following provisions shall apply with respect to the Site(s)
located in the State of Nevada.
(i) The following language is added to paragraph 15 of this
Lease:
"All time periods set forth in this paragraph 15
shall run concurrently with any and all applicable
statutory time periods."
(ii) The following language is added to paragraph 21 of this
Lease:
"Tenant shall not commence any permitted work of
improvement within the Site that is reasonably
expected to cost more than $250,000 without having
first given Landlord prior written notice at least
three (3) days prior to the commencement of work to
enable Landlord to record a Notice of
Nonresponsibility pursuant to Section 108.234 of the
Nevada Revised Statutes ("NRS"). Such notification of
the commencement of work shall not be deemed given
until actually received by Landlord."
(iii) The following is added to the definition of
"Environmental Laws" in paragraph 26 of this Lease:
"The applicable provisions of NRS Chapters 444, 445A,
445B, 445C. 459, 477, 590 and 618; and the Uniform
Fire Code (1988 Edition), each as hereafter amended
from time to time, and the present and future rules,
regulations and guidance documents promulgated under
any of the foregoing."
92
(g) The following provisions shall apply with respect to the Site(s)
located in the State of New Jersey:
(i) The following shall supplement and, to the extent of any
inconsistency, specifically amends paragraph 26 of this Lease:
"(a) For purposes of this Lease,
Environmental Laws shall include, but not be limited
to, the New Jersey Industrial Site Remediation Act
(N.J.S.A. 13:1K-6 et seq.) ("ISRA"). Tenant shall not
generate, store, manufacture, refine, transport,
treat, dispose of, or otherwise permit to be present
on or about the Premises any "hazardous chemical,"
"hazardous substance" or similar material or
substance as defined in any Environmental Laws or in
any rules or regulations promulgated thereunder, or
in any other applicable federal, state or local law,
rule or regulation dealing with environmental
protection (other than in connection with the
operation, business and maintenance of the Premises
and in commercially reasonable quantities in
compliance with Environmental Laws). Tenant
represents to Landlord that it does not and shall not
conduct any activity in the Premises located in New
Jersey which shall cause it to be considered an
"industrial establishment" under ISRA, or otherwise
subject the Premises to the requirements of
compliance with ISRA and Tenant does not and shall
not conduct any operations that shall subject the
Premises located in New Jersey to ISRA.
(b) If at any time during the Term or any
Extension Term, the Premises shall be determined to
be an industrial establishment under ISRA, Tenant
shall comply with the provisions of ISRA, or other
similar applicable laws, prior to its termination of
any activities in the Premises or the expiration of
the term of this Lease, or the occurrence of a
"triggering event" under ISRA, whichever is earlier.
(c) If in connection with a sale, transfer,
or mortgage of the Premises permitted in accordance
with the terms of this Lease, by Landlord or other
transaction by the Landlord where Landlord is
required to comply with ISRA, Tenant will cooperate
with Landlord and provide any information reasonably
requested by Landlord for Landlord to comply with
ISRA or to obtain a Letter of Non-applicability, at
Landlord's sole cost and expense. Tenant shall
execute such documents as Landlord reasonably deems
necessary and to make such applications as Landlord
reasonably requires to assure compliance with ISRA;
and without limiting the generality of the foregoing
will provide Landlord within ten (10) business days
of Landlord's request for the same, an affidavit in
support of a request for a non-applicability letter
by Landlord in the form required under ISRA.
Notwithstanding the foregoing,
93
that if, at the time that Landlord is required to
comply with ISRA, an Event of Default hereunder has
occurred and is continuing after applicable notice
and cure periods, all reasonable costs and expenses
incurred by Landlord to comply with ISRA shall be the
obligation of and recoverable against and from
Tenant.
(d) Tenant shall bear all reasonable costs
and expenses incurred by Landlord associated with any
required ISRA compliance resulting from Tenant's
occupancy or use of the Premises, including state
agency fees, engineering fees, cleanup costs, filing
fees, and suretyship expenses. The foregoing
undertaking shall survive the termination or sooner
expiration of the Lease and surrender of the Premises
and shall also survive sale, or lease or assignment
of the Premises by Landlord. Tenant shall as soon as
practicable provide Landlord with copies of all
written correspondence, reports, notices, orders,
findings, declarations and other materials pertinent
to Tenant's compliance with the NJDEP requirements
under ISRA as they are issued or received by the
Tenant."
(ii) If at any time prior to commencement of the Term or at
anytime during the Term or any Extension Term, the municipality in which a Site
is located requires any permit, approval, license or certificate for the
occupancy, operation or use of the Premises and/or Tenant's business at the
Premises, Tenant, at Tenant's sole cost and expense, shall obtain such permit,
approval, license or certificate before any fine, penalty or right of the
municipality to legally preclude the use and occupancy of the applicable
Premises attaches and is effective, even if the applicable law, statute,
ordinance, rule or regulation provides that the obligation to obtain such
permit, approval, license or certificate is that of the property owner or
landlord, including the Landlord. In no event shall the failure of Tenant to
obtain or the failure of the municipality to issue any required permit,
approval, license or certificate nor the imposition of any fine or penalty or
the legal closure of the Premise for use and occupancy by the municipality
relieve Tenant from its obligation to pay Rent or otherwise perform its
obligations under this Lease. Tenant shall indemnify, defend, save and hold
harmless Landlord of, from and against any and all liability, cost (including
any and all attorneys' fees, costs and expenses), damages, expenses, suits or
other legal actions or proceedings suffered, incurred by or imposed upon
Landlord as a result of the failure of Tenant to obtain such permits, approvals,
licenses or certificates or the failure of the municipality to issue any
required permit, approval, license or certificate.
(iii) Paragraph 21(a) of the Lease is deleted and replaced
with the following:
"(a) Except for liens created through the
act of Landlord, Tenant shall not suffer or permit
any construction lien, notice of construction lien,
or other lien to be filed or recorded against the
Premises, equipment or material supplied or claimed
to have been supplied to the Premises at the request
of Tenant, or anyone holding the Premises, or any
portion thereof, through or under Tenant. If any such
construction lien, notice of construction lien or
other lien shall at any time be filed or recorded
against the
94
Premises, or any portion thereof, Tenant shall cause
the same to be discharged of record or bonded over
within thirty (30) calendar days after the date of
filing or recording of the same."
(h) The following provisions shall apply with respect to any Site(s)
located in the State of Ohio:
(i) With respect to any agreement by Tenant in this Lease to
pay Landlord's attorneys' fees and disbursements incurred in connection with the
enforcement therewith, Tenant agrees that this Lease is a "contract of
indebtedness" and that the attorneys' fees and disbursements referenced are
those which are a reasonable amount, all as contemplated by Ohio Revised Code
Section 1301.21, as the same may hereafter be amended. Tenant further agrees
that the indebtedness incurred in connection with this Lease is not incurred for
purposes that are primarily personal, family or household and confirms that the
total amount owed under this Lease exceeds One Hundred Thousand and No/100
Dollars ($100,000.00).
(ii) Prior to commencement of any work or labor at the
Premises or the furnishing of any materials to the Premises, which could result
in a lien against the Premises under Chapter 1311 of the Ohio Revised Code,
Tenant shall cause a timely notice of commencement to be filed in accordance
with the provisions of Section 1311.04 of the Ohio Revised Code and shall
therein describe the Tenant's interest in the Premises as limited to Tenant's
leasehold estate under this Lease.
(iii) Tenant hereby expressly waives, and Landlord expressly
disclaims, Landlord's duty to mitigate Tenant's damages by re-letting, or
attempting to re-let, any Site in Ohio to any replacement tenant(s) from and
after any Event of Default.
(i) Notwithstanding anything contained in this Lease to the
contrary, the following provisions shall apply with respect to any Site(s)
located in the State of Oregon:
(i) The following language is hereby added to the definition
of Environmental Laws in paragraph 25(b) of this Lease:
"Oregon State Hazardous Waste and Hazardous Materials
I-II as codified at ORS Chapters 465-466."
(j) The following provisions shall apply with respect to any Site(s)
located in the State of Pennsylvania:
(i) The following language is hereby added at the end of
paragraph 16(b) of this Lease:
"(vi) At its option, upon notice to Tenant,
to take possession of the Premises and its contents,
either directly or by means of a receiver, without
terminating the Lease, and to operate the Premises
directly or be means of a designee in such a manner
as Landlord may deem appropriate under the
circumstances, including as a membership campground,
for cabin rentals, pursuant to Tenant's extended
vacation, stay and storage programs, in
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connection with lease arrangements entered into with
farmers prior to the date hereof, and for any other
lawful purpose which are both associated with and
related thereto;
(vii) To accelerate Rent through the balance
of the term, provided that Landlord shall refund to
Tenant, and Tenant shall not be liable for, rent
collected by Landlord from any replacement tenant or
tenants at the Premises, after deducting the expenses
incurred in reletting, including real estate
commissions, attorney's fees and the costs of
reletting; and
(viii) At its option, following the
expiration of five (5) Business Days after Landlord
gives written notice thereof to Tenant, to make such
payments, do such work and take such actions as may
be necessary to cure such default, including entry
upon the Premises, and the prosecution or defense of
any legal action which may have been commenced or
threatened against Landlord, Tenant, or the Premises
in violation of this Lease; and all sums so expended
by Landlord shall be paid by Tenant upon demand."
(ii) The following shall supplement and, to the extent of any
inconsistency, specifically amend paragraph 26 of this Lease:
For purposes of this Lease, Hazardous Materials shall
include, but not be limited to, "hazardous
substances" or "contaminants" as defined pursuant to
Pennsylvania Hazardous Sites Cleanup Act, Pa. Stat.
Ann. Tit. 35 Sections 6020.101 to 1305 (Purdon Supp.
1989), or any other substances which may be the
subject of liability pursuant to Sections 316 or 401
of the Pennsylvania Clean Streams Law, Pa. Stat. Ann.
Tit. 35,Sections 691.1 to .1001 (Purdon 1977 and
Supp. 1989), and asbestos, urea formaldehyde,
polychlorinated biphenyls and petroleum products.
(iii) The following provision is added as new paragraph 21(c)
of this Lease:
Tenant acknowledges that any construction
work at the Premises is not being undertaken at the
request of or for the benefit of Landlord and any
mechanic's liens that may be filed against the
Premises shall not affect Landlord's fee interest in
the Premises.
(k) The following provisions shall apply with respect to any Site(s)
located in the State of Texas.
(i) Waiver of Certain Rights. Tenant hereby waives any and all
liens (whether statutory, contractual or constitutional) it may have or acquire
as a result of a breach by Landlord under this Lease. Tenant also waives and
releases any statutory lien and offset rights it may have against Landlord,
including the rights conferred upon Tenant pursuant to Section 91.004 of the
Texas Property Code, or other applicable law.
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(ii) NOTICES. TO THE FULLEST EXTENT PERMITTED BY LAW, TENANT
WAIVES ALL NOTICES AND DEMANDS (INCLUDING NOTICE OF BREACH OR DEFAULT, NOTICE OF
NON-PAYMENT OR NON-PERFORMANCE, DEMAND FOR PAYMENT OR PERFORMANCE, DEMAND FOR
POSSESSION, NOTICE OF ANY CHANGE IN LOCKS OR ACCESS CONTROL DEVICES, REENTRY, OR
REPOSSESSION, AND NOTICE TO VACATE), EXCEPT FOR THOSE NOTICES AND DEMANDS
EXPRESSLY REQUIRED IN THIS LEASE.
(iii) DTPA. AFTER CONSULTING WITH AN ATTORNEY OF TENANT'S OWN
SELECTION, TENANT VOLUNTARILY WAIVES ITS RIGHTS AGAINST LANDLORD PARTIES UNDER
THE DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ.,
TEXAS BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
PROTECTIONS. TENANT REPRESENTS AND WARRANTS THAT ITS ATTORNEY WAS NOT, DIRECTLY
OR INDIRECTLY, IDENTIFIED, SUGGESTED, OR SELECTED BY ANY LANDLORD PARTY.
(l) The following provisions shall apply with respect to any Site(s)
located in the State of Virginia:
(i) The following provision is added at the end of paragraph
2(a) of this Lease:
"With respect to the sixty-two lots located at the
Site commonly known as Virginia Landing subject to
the association known as the Oceanside Conservation
Co., Inc., Landlord grants to Tenant a temporary
license to exercise all of Landlord's rights with
respect to the association known as the Oceanside
Conservation Co., Inc., including, but not limited
to, voting rights in such association. All costs and
expenses, if any, associated with Landlord's grant of
said temporary license shall be paid by Tenant."
(m) The following provisions shall apply with respect to any Site(s)
located in the State of Washington:
(i) The following language is added as new paragraph 11(g) of
this Lease:
"Solely for the purpose of effectuating Tenant's
indemnification obligations under this Lease, and not
for the benefit of any third parties (including
employees of Tenant), Tenant specifically and
expressly waives any immunity that may be granted it
under the Washington State Industrial Insurance Act,
Title 51 RCW. Furthermore, the indemnification
obligations under this Lease shall not be limited in
any way by any limitation on the amount or type of
damages, compensation or benefits payable to or for
any third party under Worker Compensation Acts,
Disability Benefit Acts or other employee benefit
acts. The parties acknowledge that the
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foregoing provisions of this paragraph have been
specifically and mutually negotiated between the
parties."
(ii) The following language is added at the end of paragraph
16(b)(i) of this Lease:
"Should Landlord have reentered the Premises under
the provisions of this paragraph 16, Landlord shall
not be deemed to have terminated this Lease, or the
liability of Tenant to pay the Rent thereafter
accruing, or to have terminated Tenant's liability
for damages under any of the provisions of this
Lease, by any such reentry or by any action, in
unlawful detainer or otherwise, to obtain possession
of the Premises, unless Landlord shall have notified
Tenant in writing that Landlord had elected to
terminate this Lease. Tenant further covenants that
the service by Landlord of any notice pursuant to the
unlawful detainer statutes of the State of Washington
and the surrender of possession pursuant to such
notice shall not (unless Landlord elects to the
contrary at the time of or at any time subsequent to
the serving of such notices and such election is
evidenced by a written notice to Tenant) be deemed to
be a termination of this Lease."
(iii) The following language is added after the end of
paragraph 21(b) of this Lease:
"Tenant shall have no right or authority to cause or
allow the Premises or Landlord's estate or interest
therein or in and to this Lease to be subjected to
any such lien."
(iv) The following language is added to the definition of
"Environmental Laws" in paragraph 25(b) of this Lease:
"... the State of Washington Model Toxics Control
Act, codified at Chapter 70.105D, RCW; ..."
(n) The following provisions shall apply with respect to the Site
located in the Province of British Columbia, Canada:
(i) the word ", provincial" is added after the word "state" in
the third line of the definition of "After-Tax Basis" in paragraph 1 of this
Lease;
(ii) the phrase "or the province of British Columbia" is added
after the phrase "State of Illinois" in the second line of the definition of
"Business Days" in paragraph 1 of this Lease and the phrase "or province" is
added after the word "state" in the third line of such definition;
(iii) the following paragraphs are added to the definition of
"Permitted Encumbrances" in paragraph 1 of this Lease:
98
"(g) statutory liens incurred in the ordinary course
of business in connection with workers compensation,
employment insurance and similar Legal Requirements;
(h) any discrepancies or encroachments that an
up-to-date survey of the Site might reveal; and
(i) the subsisting conditions, provisos,
restrictions, exceptions and reservations, including
royalties, contained in the original grant or
contained in any other grant or disposition from the
crown.";
(iv) the word "provincial," is added after the word "state,"
in the third line of paragraph (a) of the definition of "Permitted Encumbrances"
in paragraph 1 of this Lease;
(v) the phrase "or charges" is added after the word "taxes" in
the first line of paragraph (d) of the definition of "Permitted Encumbrances" in
paragraph 1 of this Lease and the word "provincial," is added after the word
"state," in the first line of such paragraph;
(vi) the word "and" at the end of paragraph (e) of the
definition of "Permitted Encumbrances" is deleted;
(vii) the "." at the end of paragraph (f) of the definition of
"Permitted Encumbrances" is replaced with ";";
(viii) the phrase ", goods and services tax" is added after
the phrase "gross receipts tax" in the twenty-first line of paragraph 6(b) of
this Lease;
(ix) the phrase "or other applicable governmental authority"
is added after the phrase "Director of the Federal Emergency Management Agency"
in the thirteenth line of sub-paragraph 11(c)(i) of this Lease;
(x) the phrase "or province" is added after the word "state"
in the second line of subparagraph 11(c)(v) of this Lease;
(xi) the word "provincial," is added after the word "state,"
in the fifth line of paragraph 12(a) of this Lease;
(xii) the phrase "or provincial" is added after the word
"state" in the sixth line of subparagraph 16(b)(ii)(B) of this Lease;
(xiii) the following paragraph is added as new paragraph 21(c)
of this Lease:
"The Tenant acknowledges that the Landlord has or
will file a notice pursuant to the Builders' Lien Act
(British Columbia) against title to the Site located
in British Columbia in order to give effect to the
provisions of paragraph 21(b) of this Lease.";
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(xiv) the phrase "or similar proceedings or judgments
applicable to the Site located in British Columbia" is added after the phrase
"RICO proceedings or judgments" in the fourteenth line of paragraph 25(b) of
this Lease;
(xv) the phrase "or province" is added after the word "county"
in the fifth line of paragraph 25(d) of this Lease;
(xvi) the phrase "financing statement under the Personal
Property Security Act (British Columbia)" is added after the phrase "UCC
financing statement" in the sixth line of paragraph 25(d) of this Lease;
(xvii) the definitions of "Environmental Laws" and "Hazardous
Materials" in paragraph 26(b) are deleted and replaced by the following:
"Environmental Laws" means all applicable federal,
provincial and local environmental laws, ordinances,
rules, regulations, orders, bylaws, standards,
guidelines, permits, and other lawful requirements,
as any of the foregoing may have been or may be from
time to time amended, supplemented or supplanted and
any other federal, provincial or local laws,
ordinances, rules, regulations, orders, bylaws,
standards, guidelines, permits and other lawful
requirements now or hereafter existing relating to
regulation or control of Hazardous Materials or
materials. The term "Hazardous Materials" as used in
this Lease shall mean hazardous substances, hazardous
materials, hazardous wastes, toxic substances,
radioactive materials, asbestos, urea formaldehyde,
pollutants, contaminants, deleterious substances,
dangerous substances or goods, hazardous, corrosive,
or toxic substances, special waste or wastes, PCBs,
methane, volatile hydrocarbons, petroleum or
petroleum derived substances or wastes, radon,
industrial solvents or any other material or
substances the storage, manufacture, disposal,
treatment, generation, use, transport, remediation or
release into the environment of which is now or
hereafter regulated, controlled or prohibited under
Environmental Laws.";
(xviii) the phrase "or province" is added after the word
"state" in the fourth line of paragraph 27(d) of this Lease;
(xix) the phrase "or province" is added after the word "state"
in the second line of paragraph 28(g) of this Lease;
(xx) the phrase "or PPSA" is added after the phrase "the UCC"
in the tenth line of paragraph 31(g) of this Lease; and
(xxi) the phrase "or PPSA" is added after the phrase "the UCC"
in the last line of paragraph 31(k) of this Lease.
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[SIGNATURE PAGE FOLLOWS]
101
IN WITNESS WHEREOF, the parties have hereunto set their hands under
seal on the day and year first above written.
LANDLORD:
WITNESS: MHC TT LEASING COMPANY, INC., a Delaware
corporation
By: ________________________________________
___________________________ Name: David W. Fell
Name:______________________ Title: Vice President, Associate General
Counsel and Secretary
___________________________
Name:______________________
TENANT:
THOUSAND TRAILS OPERATIONS HOLDING COMPANY,
L.P., a Delaware limited partnership
WITNESS:
By: ________________________________________
___________________________ Name: Walter Jaccard
Name:______________________ Title: Vice President
___________________________
Name:______________________
102
Solely with respect to paragraphs 36 and 38(e) of this Lease, Guarantors hereby
acknowledge, agree with and consent to the terms and provisions contained in
paragraphs 36 and 38(e) of this Lease
KTTI GP, LLC, a Delaware limited liability
company
WITNESS:
___________________________ By: ________________________________________
Name:______________________ Name:Walter Jaccard
Title: Vice President
___________________________
Name:______________________
KTTI HOLDING COMPANY, LLC, a Delaware
WITNESS: limited liability company
___________________________ By: ________________________________________
Name: _____________________ Name:Walter Jaccard
Title: Vice President
___________________________
Name:______________________
103
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, ________________________________, a Notary Public in and for said
County, in the State aforesaid, do hereby certify that David W. Fell, personally
known to me to be the same person whose name is subscribed to the foregoing
instrument as the Vice President, Associate General Counsel and Secretary of MHC
TT Leasing Company, Inc., a Delaware corporation, appeared before me this day in
person and acknowledged that he/she signed, sealed and delivered the same
instrument as his/her free and voluntary act, for the uses and purposes therein
set forth.
GIVEN under my hand and notarial seal this ____ day of November, 2004.
___________________________
Notary Public
My Commission expires:
___________________________
104
STATE OF _________________)
) SS
COUNTY OF _________________)
I, __________________________________________, a Notary Public in and
for said County, in the State aforesaid, do hereby certify that ______________,
personally known to me to be the same person whose name is subscribed to the
foregoing instrument as the ______________________________________ of Thousand
Trails Operations Holding Company, L.P., a Delaware limited partnership,
appeared before me this day in person and acknowledged that he/she signed,
sealed and delivered the same instrument as his/her free and voluntary act, for
the uses and purposes therein set forth.
GIVEN under my hand and notarial seal this ____ day of _______________,
2004.
___________________________
Notary Public
My Commission expires:
___________________________
105
STATE OF __________________)
) SS
COUNTY OF _________________)
I, __________________________________________, a Notary Public in and
for said County, in the State aforesaid, do hereby certify that ______________,
personally known to me to be the same person whose name is subscribed to the
foregoing instrument as the ______________________________________ of KTTI GP,
LLC, a Delaware limited liability company, appeared before me this day in person
and acknowledged that he/she signed, sealed and delivered the same instrument as
his/her free and voluntary act, for the uses and purposes therein set forth.
GIVEN under my hand and notarial seal this ____ day of _______________,
2004.
___________________________
Notary Public
My Commission expires:
___________________________
106
STATE OF __________________)
) SS
COUNTY OF _________________)
I, __________________________________________, a Notary Public in and
for said County, in the State aforesaid, do hereby certify that ______________,
personally known to me to be the same person whose name is subscribed to the
foregoing instrument as the ______________________________________ of KTTI
Holding Company, LLC, a Delaware limited liability company, appeared before me
this day in person and acknowledged that he/she signed, sealed and delivered the
same instrument as his/her free and voluntary act, for the uses and purposes
therein set forth.
GIVEN under my hand and notarial seal this ____ day of _______________,
2004.
___________________________
Notary Public
My Commission expires:
___________________________
This instrument was prepared by:
__________________________, Esq.
107