LEASE AGREEMENT
DATED AS OF _________, 2001
BETWEEN
HHLP VALLEY FORGE ASSOCIATES
AS LESSOR
AND
HERSHA HOSPITALITY MANAGEMENT, L.P.
AS LESSEE
IN CONNECTION WITH THE
SLEEP INN MAINSTAY SUITES, VALLEY FORGE, PENNSYLVANIA
TABLE OF CONTENTS
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ARTICLE 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Leased Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Term.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3. Initial Transition.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1. Rent.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.2. Confirmation of Percentage Rent. . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.3. Additional Charges.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.4. No Set Off.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.5. Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.6. Changes in Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.1. Payment of Impositions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2. Notice of Impositions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.3. Adjustment of Impositions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.4. Utility Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.1. No Termination, Abatement, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.1. Ownership of the Leased Property.. . . . . . . . . . . . . . . . . . . . . . . . . 18
6.2. Lessee's Personal Property.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.3. Lessor's Lien. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.1. Condition of the Leased Property.. . . . . . . . . . . . . . . . . . . . . . . . . 19
7.2. Use of the Leased Property.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.1. Compliance with Legal and Insurance Requirements, etc. . . . . . . . . . . . . . 21
8.2. Legal Requirement Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.3. Environmental Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.1. Maintenance and Repair; Capital Expenditures.. . . . . . . . . . . . . . . . . . . 24
9.2. Encroachments, Restrictions, Etc.. . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.1. Alterations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.2. Salvage.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.3. Lessor Alterations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.1. Liens.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
12.1. Permitted Contests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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13.1. General Insurance Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . 28
13.2. Replacement Cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.3. (Intentionally omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.4. Waiver of Subrogation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.5. Form Satisfactory, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
13.6. Increase in Limits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
13.7. Blanket Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
13.8. Separate Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
13.9. Reports On Insurance Claims.. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
14.1. Insurance Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
14.2. Reconstruction in the Event of Damage or Destruction Covered by Insurance . . . . 32
14.3. Reconstruction in the Event of Damage or Destruction Not Covered by Insurance
or When Holder Will Not Release Insurance Proceeds. . . . . . . . . . . . . . . . 33
14.4. Lessee's Property and Business Interruption Insurance . . . . . . . . . . . . . . 33
14.5. Abatement of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.1. Definition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.2. Parties' Rights and Obligations.. . . . . . . . . . . . . . . . . . . . . . . . . 34
15.3. Total Taking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.4. Allocation of Award.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.5. Partial Taking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.6. Temporary Taking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
16.1. Events of Default.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
16.2. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
16.3. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
16.4. Application of Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
17.1. Lessor's Right to Cure Lessee's Default.. . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
18.1. Personal Property Limitation. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
18.2. Sublease Rent Limitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
18.3. Sublease Lessee Limitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
18.4. Lessee Ownership Limitation.. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
18.5. Director, Officer and Employee Limitation.. . . . . . . . . . . . . . . . . . . . 41
ARTICLE 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
19.1. Holding Over. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
20.1. Indemnification.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
21.1. Subletting and Assignment.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
21.2. Attornment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
21.3. Management Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ii
22.1. Officer's Certificates; Financial Statements; Lessor's Estoppel Certificates and
Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
23.1. Regular Meetings; Lessor's Right to Inspect.. . . . . . . . . . . . . . . . . . . 46
ARTICLE 24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
24.1. No Waiver.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
25.1. Remedies Cumulative.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
26.1. Acceptance of Surrender.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
27.1. No Merger of Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
28.1. Conveyance by Lessor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
28.2. Lessor May Grant Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
29.1. Quiet Enjoyment.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
30.1. Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
31.1. Appraisers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
32.1. Lessee's Right to Cure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
33.1. Miscellaneous.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
33.2. Transition Procedures.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
33.3. Waiver of Presentment, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
33.4. Standard of Discretion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
33.5. Action for Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
33.6. Lease Assumption in Bankruptcy Proceeding.. . . . . . . . . . . . . . . . . . . . 54
33.7. Intra-Family Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE 34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
34.1. Memorandum of Lease.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
36.1. Lessor's Option to Terminate Lease. . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
37.1. Compliance with Franchise Agreement.. . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
38.1. Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
39.1. Lessor's Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 40.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
40.1. Arbitration.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
40.2. Alternative Arbitration.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
iii
40.3. Arbitration Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
iv
LIST OF EXHIBITS
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Exhibit A - Property Description
Exhibit B - Other Properties
Exhibit C - Percentage Rent Provisions
v
LEASE AGREEMENT
THIS LEASE AGREEMENT (hereinafter called "Lease"), made as of the ___ day
of ___________, 2001, by and between HHLP VALLEY FORGE ASSOCIATES, a
Pennsylvania limited partnership (hereinafter called "Lessor"), and HERSHA
HOSPITALITY MANAGEMENT, L.P., a Pennsylvania limited partnership (hereinafter
called "Lessee"), provides as follows.
W I T N E S S E T H:
-----------------------------
Contemporaneously with the execution hereof, Lessor acquired (i) the Leased
Property (as hereinafter defined) and certain Other Properties, and (ii) Lessor
is entering with Lessee into the Other Leases; and
Lessor and Lessee now wish to enter into this Lease.
NOW, THEREFORE, Lessor, in consideration of the payment of rent by Lessee
to Lessor, the covenants and agreements to be performed by Lessee, and upon the
terms and conditions hereinafter stated, does hereby rent and lease unto Lessee,
and Lessee does hereby rent and lease from Lessor, the Leased Property.
ARTICLE
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1
1.1. Leased Property.
----------------
The leased property (the "Leased Property") is comprised of Lessor's
interest in the following:
(a) the land described in Exhibit "A" attached hereto and by
------------
reference incorporated herein (the "Land");
(b) all buildings, structures and other improvements of every kind
including, but not limited to, alleyways and connecting tunnels, sidewalks,
utility pipes, conduits and lines (on-site and off-site), parking areas and
roadways appurtenant to such buildings and structures presently situated upon
the Land (collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances relating to the Land
and the Leased Improvements;
(d) all equipment, machinery, fixtures, and other items of
property required for or incidental to the use of the Leased Improvements as a
hotel, including all components thereof, now and hereafter permanently affixed
to or incorporated into the Leased Improvements, including, without limitation,
all furnaces, boilers, heaters, electrical equipment, heating, plumbing,
lighting, ventilating, refrigerating, incineration, air and water pollution
control, waste disposal, air-cooling and air-conditioning systems and apparatus,
sprinkler systems and fire and theft protection equipment, all of which to the
greatest extent permitted by law are hereby deemed by the parties hereto to
constitute real estate, together with all replacements, modifications,
alterations and additions thereto (collectively, the "Fixtures");
(e) all furniture and furnishings and all other items of personal
property (excluding Inventory and personal property owned by Lessee) located on,
and used in connection with, the operation of the Leased Improvements as a
hotel, together with all replacements, modifications, alterations and additions
thereto; and
(f) all existing leases of the Leased Property (including any
security deposits or collateral held by Lessor pursuant thereto).
THE LEASED PROPERTY IS DEMISED IN ITS PRESENT CONDITION WITHOUT REPRESENTATION
OR WARRANTY (EXPRESSED OR IMPLIED) BY LESSOR AND SUBJECT TO THE RIGHTS OF
PARTIES IN POSSESSION, AND TO THE EXISTING STATE OF TITLE INCLUDING ALL
COVENANTS, CONDITIONS, RESTRICTIONS, EASEMENTS AND OTHER MATTERS OF RECORD
INCLUDING ALL APPLICABLE LEGAL REQUIREMENTS, THE LIEN OF FINANCING INSTRUMENTS,
MORTGAGES, DEEDS OF TRUST AND SECURITY DEEDS, AND INCLUDING OTHER MATTERS WHICH
WOULD BE DISCLOSED BY AN INSPECTION OF THE LEASED PROPERTY OR BY AN ACCURATE
SURVEY THEREOF.
1.2. Term.
-----
(a) The term of the Lease (the "Term") shall commence on the date
hereof (the "Commencement Date") and shall end on the fifth anniversary of the
last day of the month in which the Commencement Date occurs, unless sooner
terminated in accordance with the provisions hereof. Lessor and Lessee
acknowledge that the Commencement Date is the date of Lessor's acquisition of
the Leased Property.
(b) Lessee may elect to extend this Lease and all of the Other
Leases for an additional five-year term and, at the end of the first extended
term, may elect to extend this Lease for an additional five-year term (each such
extension, a "Renewal Term") by providing written Notice (a "Renewal Notice") to
Lessor no sooner than 30 months and no later than 6 months prior to the end of
the Term or Renewal Term, as applicable. A Renewal Notice, if given, shall be
irrevocable, but it shall not preclude Lessor from exercising any of its rights
to terminate this Lease in accordance with the provisions hereof. Lessee
acknowledges that Lessor will rely on any Renewal Notice received from Lessee
and not pursue opportunities to select another lessee for the Facility and will
be materially damaged if Lessee fails subsequently to act as lessee for the
Renewal Term for any reason other than Lessor's termination of the Lease in
accordance herewith. No Renewal Notice may be given or shall be effective if an
Event of Default shall have occurred and, if curable hereunder, shall not have
been cured. The terms of the Lease during a Renewal Term shall be the same as
the terms hereof.
2
1.3. Initial Transition.
--------------------
Simultaneously with the execution of this Lease, Lessee shall acquire
for fair market value from the contributor of the Leased Property to Lessor all
deposits, prepaid revenue and similar accounts, and Inventory existing at or
with respect to the Leased Property as of the Commencement Date.
ARTICLE
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2
2.1. Definitions.
-----------
For all purposes of this Lease, except as otherwise expressly provided
or unless the context otherwise requires, (a) the terms defined in this Lease
have the meanings assigned to them in this Article and include the plural as
well as the singular, (b) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with GAAP, (c) all references in
this Lease to designated "Articles", "Sections" and other subdivisions are to
the designated Articles, Sections and other subdivisions of this Lease and (d)
the words "herein," "hereof" and "hereunder" and other words of similar import
refer to this Lease as a whole and not to any particular Article, Section or
other subdivision:
Additional Charge(s): As defined in Section 3.3.
---------------------
Affiliate: The term "Affiliate" of a Person shall mean (a) any Person that,
---------
directly or indirectly, controls or is controlled by or is under common control
with such Person, (b) any other Person that owns, beneficially, directly or
indirectly, ten percent or more of the outstanding capital stock, shares or
equity interests of such Person, or (c) any officer, director, employee,
partner, manager, member or trustee of such Person or any Person controlling,
controlled by or under common control with such Person (excluding trustees and
Persons serving in similar capacities who are not otherwise an Affiliate of such
Person). For the purposes of this definition, "control" (including the
correlative meanings of the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, through the ownership of voting securities,
partnership interests or other equity interests, by contract or otherwise.
Award: As defined in Section 15.1(c).
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Base Rate: The prime rate (or base rate) reported in the Money Rates
----------
column or comparable section of The Wall Street Journal, Eastern Edition, as the
----------------------------------------
rate then in effect for corporate loans at large U.S. money center commercial
banks, whether or not such rate has actually been charged by any such bank. If
no such rate is reported in The Wall Street Journal, Eastern Edition or if such
----------------------------------------
rate is discontinued, then Base Rate shall mean such other successor or
comparable rate as Lessor may reasonably designate.
3
Base Rent: As defined in Article 3.
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Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that is
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not a day on which national banks in the Township of Upper Merion, Pennsylvania,
or in the municipality wherein the Leased Property is located are closed.
Capital Expenditures: Amounts advanced to pay the costs of Capital
---------------------
Improvements.
Capital Expenditures Allowance: As defined in Article 38.
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Capital Impositions: Taxes, assessments or similar charges imposed upon or
-------------------
levied against the Leased Property for the costs of public improvements,
including, without limitation, roads, sidewalks, public lighting fixtures,
utility lines, storm sewers drainage facilities, and similar improvements.
Capital Improvements: Improvements to the Leased Property and replacement
---------------------
or refurbishing of Fixtures and of Furniture and Equipment, all as designated as
capital improvements by and determined in accordance with GAAP.
CERCLA: The Comprehensive Environmental Response, Compensation and
------
Liability Act of 1980, as amended.
Change of Control: (i) The issuance or sale by the Lessee or the sale by
-------------------
any partner of the Lessee of a Controlling interest in Lessee; (ii) the sale,
conveyance or other transfer of all or substantially all of the assets of the
Lessee (whether by operation of law or otherwise); (iii) any transaction, or
series of transactions, pursuant to which the Lessee is merged with or
consolidated into another entity and either (A) the Lessee is not the surviving
entity or (B) the Lessee is the surviving entity but the previous partners of
the Lessee do not maintain a Controlling interest in the Lessee.
Code: The Internal Revenue Code of 1986, as amended.
----
Commencement Date: As defined in Section 1.2.
------------------
Company: Hersha Hospitality Trust, a Maryland real estate investment trust.
-------
Condemnation, Condemnor: As defined in Section 15.1.
------------------------
Consolidated Financials: For any fiscal year or other accounting period
------------------------
for (i) Lessee and (ii) Lessee and Lessee's Affiliates, if any, that lease hotel
properties from Lessor or its Affiliates, a balance sheet and statements of
operations, partners' capital and cash flow (or, in the case of a corporation,
statements of operations, retained earnings and cash flow) for such period and
for the period from the beginning of the respective fiscal year to the end of
such period and the related balance sheet as at the end of such period, together
with the notes to any such yearly statement, all in such detail as may be
4
required by the SEC with respect to filings made by the Company or Lessor, and
setting forth in comparative form the corresponding figures for the
corresponding period in the preceding fiscal year, and prepared in accordance
with GAAP and audited annually (and quarterly if required by the SEC) by a firm
of independent certified public accountants selected by Lessor. Consolidated
Financials shall be prepared on the basis of a fiscal year ending on December
31.
Control: As applied to any Person, the possession, directly or indirectly,
-------
of the power to direct or cause the direction of the management and policies of
that Person, whether through the ownership or voting securities, by contract or
otherwise. The terms "Controlling" and "Controlled by" shall have correlative
meanings.
Date of Taking: As defined in Section 15.1(b).
----------------
Emergency Expenditures: Expenditures required to take necessary or
-----------------------
appropriate actions to respond to Emergency Situations.
Emergency Situations: Fire, any other casualty, or any other events,
---------------------
circumstances or conditions which threaten the safety or physical well-being of
the Facility's guests or employees or which involve the risk of material
property damage or material loss to the Facility.
Environmental Authority: Any department, agency or other body or component
-----------------------
of any Government that exercises any form of jurisdiction or authority under any
Environmental Law.
Environmental Authorization: Any license, permit, order, approval,
----------------------------
consent, notice, registration, filing or other form of permission or
authorization required under any Environmental Law.
Environmental Laws: All applicable federal, state, local and foreign laws
-------------------
and regulations relating to pollution of the environment (including without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata), including without limitation laws and regulations relating to
emissions, discharges, Releases or threatened Releases of Hazardous Materials or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials. Environmental
Laws include but are not limited to CERCLA, FIFRA, RCRA, SARA and TSCA.
Environmental Liabilities: Any and all actual or potential obligations to
--------------------------
pay the amount of any judgment or settlement, the cost of complying with any
settlement, judgment or order for injunctive or other equitable relief, the cost
of compliance or corrective action in response to any notice, demand or request
from an Environmental Authority, the amount of any civil penalty or criminal
fine, and any court costs and reasonable amounts for attorney's fees, fees for
witnesses and experts, and costs of investigation and preparation for defense of
any claim or any Proceeding, regardless of whether such Proceeding is
threatened, pending or completed, that may be or have been asserted against or
imposed upon Lessor, Lessee, any Predecessor, the Leased Property or any
property used therein and arising out of:
5
(a) the failure to comply at any time with all Environmental Laws
applicable to the Leased Property;
(b) the presence of any Hazardous Materials on, in, under, at or
in any way affecting the Leased Property;
(c) a Release or threatened Release of any Hazardous Materials on,
in, at, under or in any way affecting the Leased Property;
(d) the identification of Lessee, Lessor or any Predecessor as a
potentially responsible party under CERCLA or under any other Environmental Law;
(e) the presence at any time of any above-ground and/or
underground storage tanks, as defined in RCRA or in any applicable Environmental
Law on, in, at or under the Leased Property or any adjacent site or facility; or
(f) any and all claims for injury or damage to persons or property
arising out of exposure to Hazardous Materials originating or located at the
Leased Property, or resulting from operation thereof or any adjoining property.
Event of Default: As defined in Section 16.1.
------------------
Facility: The hotel and/or other facility offering lodging and other
--------
services or amenities being operated or proposed to be operated on the Leased
Property.
FIFRA: The Federal Insecticide, Fungicide, and Rodenticide Act, as
-----
amended.
First Annual Room Revenues Break Point: The amount of Room Revenues for
-----------------------------------------
the applicable Lease Year corresponding to such term as set forth on Exhibit C.
---------
First Tier Room Revenue Percentage: The percentage corresponding to such
------------------------------------
term as set forth on Exhibit C.
----------
Fixtures: As defined in Section 1.1.
--------
Franchise Agreement: The franchise agreement or license agreement with Best
-------------------
Western or any other franchisor under which the Facility is operated.
Furniture and Equipment: The terms "furniture and equipment" shall mean
-------------------------
collectively all furniture, furnishings, wall coverings, Fixtures and hotel
equipment and systems located at, or used in connection with, the Facility,
together with all replacements therefor and additions thereto, including,
without limitation, (i) all equipment and systems required for the operation of
kitchens, bars and restaurants, and laundry and dry cleaning facilities, (ii)
office equipment (excluding any office equipment used by the Lessee for its own
operations, rather than hotel operations), (iii) dining room wagons, materials
6
handling equipment, and cleaning and engineering equipment, (iv) telephone and
computerized accounting systems, and (v) vehicles (excluding any vehicles used
by the Lessee for its own operations, rather than hotel operations).
GAAP: Generally accepted accounting principles as are at the time
----
applicable and otherwise consistently applied.
Government: The United States of America, any city, county, state,
----------
district or territory thereof, any foreign nation, any city, county, state,
district, department, territory or other political division thereof, or any
political subdivision of any of the foregoing.
Gross Revenues: The sum of Room Revenues and Other Revenues.
---------------
Hazardous Materials: All chemicals, pollutants, contaminants, wastes and
--------------------
toxic substances, including without limitation:
(a) Solid or hazardous waste, as defined in RCRA or in any
Environmental Law;
(b) Hazardous substances, as defined in CERCLA or in any
Environmental Law;
(c) Toxic substances, as defined in TSCA or in any Environmental
Law;
(d) Insecticides, fungicides, or rodenticides, as defined in FIFRA
or in any Environmental Law;
(e) Gasoline or any other petroleum product or byproduct,
polychlorinated biphenols, asbestos and urea formaldehyde;
(f) Asbestos or asbestos containing materials;
(g) Urea Formaldehyde foam insulation; and
(h) Radon gas.
Holder: Any holder of a Mortgage, any purchaser of the Leased Property or
------
any portion thereof at a foreclosure sale or any sale in lieu thereof, or any
designee of any of the foregoing.
Impositions: Collectively, all taxes (including, without limitation, all
-----------
ad valorem, sales and use, occupancy, single business, gross receipts,
transaction privilege, rent or similar taxes as the same relate to or are
imposed upon Lessee or Lessor or Lessee's business conducted upon the Leased
Property), assessments (including, without limitation, all private property
association assessments and all assessments for public improvements or benefit,
whether or not commenced or completed prior to the date hereof and whether or
not to be completed within the Term), ground rents, water, sewer or other rents
and charges, excises, tax inspection, authorization and similar fees and all
7
other governmental charges, in each case whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, of every character in respect of the
Leased Property or the business conducted thereon by Lessee (including all
interest and penalties thereon caused by any failure in payment by Lessee),
which at any time prior to, during or with respect to the Term hereof may be
assessed or imposed on or with respect to or be a lien upon (a) Lessor's
interest in the Leased Property, (b) the Leased Property, or any part thereof or
any rent therefrom or any estate, right, title or interest therein, or (c) any
occupancy, operation, use or possession of, or sales from, or activity conducted
on or in connection with the Leased Property, or the leasing or use of the
Leased Property or any part thereof by Lessee. Nothing contained in this
definition of Impositions shall be construed to require Lessee to pay (1) any
tax based on net income (whether denominated as a franchise or capital stock or
other tax) imposed on Lessor or any other person, or (2) any net or gross
revenue tax of Lessor or any other person, or (3) any tax imposed with respect
to the sale, exchange or other disposition by Lessor of any Leased Property or
the proceeds thereof.
Indemnified Party: Either of a Lessee Indemnified Party or a Lessor
------------------
Indemnified Party.
Indemnifying Party: Any party obligated to indemnify an Indemnified Party
-------------------
pursuant to any provision of this Lease.
Insurance Requirements: All terms of any insurance policy required by this
----------------------
Lease and all requirements of the issuer of any such policy.
Inventory: All "Inventories of Merchandise" and "Inventories of Supplies"
---------
as defined in the Uniform System, including, but not limited to, linens, china,
silver, glassware and other non-depreciable personal property, and any property
of the type described in Section 1221(1) of the Code.
Land: As defined in Article 1.
----
Lease: This Lease.
-----
Lease Year: Any 12-month period from January 1 through December 31 during
-----------
the Term, or any shorter period at the beginning or the end of the Term.
Leased Improvements: As defined in Article 1.
--------------------
Leased Property: As defined in Section 1.1.
----------------
Legal Requirements: All federal, state, county, municipal and other
-------------------
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Leased Property or the maintenance,
construction, use, operation or alteration thereof (whether by Lessee or
otherwise), whether or not hereafter enacted and in force, including (a) all
laws, rules or regulations pertaining to the environment, occupational health
and safety and public health, safety or welfare, and (b) any laws, rules or
regulations that may (1) require repairs, modifications or alterations in or to
8
the Leased Property or (2) in any way adversely affect the use and enjoyment
thereof; and all permits, licenses and authorizations necessary or appropriate
to operate the Leased Property for its Primary Intended Use and all covenants,
agreements, restrictions and encumbrances contained in any instruments, either
of record or known to Lessee (other than encumbrances hereafter created by
Lessor without the consent of Lessee), at any time in force affecting the Leased
Property.
Lessee: The Lessee designated on this Lease and its permitted successors
------
and assigns.
Lessee Indemnified Party: Lessee, any Affiliate of Lessee, any other
--------------------------
Person against whom any claim for indemnification may be asserted hereunder as a
result of a direct or indirect ownership interest in Lessee, the officers,
directors, stockholders, partners, members, employees, agents and
representatives of any of the foregoing Persons and any corporate stockholder,
agent, or representative of any of the foregoing Persons, and the respective
heirs, personal representatives, successors and assigns of any such officer,
director, partner, member, stockholder, employee, agent or representative.
Lessee's Personal Property: As defined in Section 6.2.
----------------------------
Lessor: The Lessor designated on this Lease and its respective successors
------
and assigns.
Lessor Indemnified Party: Lessor, any Affiliate of Lessor, including the
--------------------------
Company, any other Person against whom any claim for indemnification may be
asserted hereunder as a result of a direct or indirect ownership interest in
Lessor, the officers, trustees, directors, stockholders, partners, members,
employees, agents and representatives of any of the foregoing Persons and of any
stockholder, partner, member, agent, or representative of any of the foregoing
Persons, and the respective heirs, personal representatives, successors and
assigns of any such officer, trustee, director, partner, member, stockholder,
employee, agent or representative.
Lessor's Audit: An audit by Lessor's independent certified public
---------------
accountants of the operation of the Leased Property during any Lease Year, which
audit may, at Lessor's election, be either a complete audit of the Leased
Property's operations or an audit of Room Revenues realized from the operation
of the Leased Property during such Lease Year.
Management Agreement: As defined in Section 21.3.
---------------------
Manager: As defined in Section 21.3.
-------
Mortgage: As defined in Section 28.2.
--------
Notice: A notice given pursuant to Article 30.
------
Officer's Certificate: A certificate of Lessee reasonably acceptable to
----------------------
Lessor, signed by the chief financial officer or another officer duly authorized
so to sign by Lessee or a general partner of Lessee, or any other person whose
9
power and authority to act has been authorized by delegation in writing by any
such officer.
Other Leases: The leases of the Other Properties.
-------------
Other Properties: The properties described on Exhibit B attached
----------------- ----------
hereto.
-
Other Revenues: All revenues, receipts and income of any kind derived
---------------
directly or indirectly from or in connection with the Facility other than Room
Revenues.
Other Revenue Percentage: The percentage corresponding to such term as set
------------------------
forth on Exhibit C.
----------
Overdue Rate: On any date, a rate equal to the Base Rate plus 5% per
-------------
annum, but in no event greater than the maximum rate then permitted under
applicable law.
Payment Date: Any due date for the payment of any installment of Rent.
-------------
Percentage Rent: As defined in Article 3.
----------------
Person: The term "Person" means and includes individuals, corporations,
------
general and limited partnerships, limited liability companies, stock companies
or associations, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, or other entities and any Government
and agencies and political subdivisions thereof.
Personal Property Taxes: All personal property taxes imposed on the
-------------------------
furniture, furnishings or other items of personal property located on, and used
in connection with, the operation of the Leased Improvements as a hotel (other
than Inventory and other personal property owned by the Lessee), together with
all replacements, modifications, alterations and additions thereto.
Predecessor: Any Person whose liabilities arising under any Environmental
-----------
Law have or may have been retained or assumed by Lessor or Lessee pursuant to
the provisions of this Lease.
Primary Intended Use: As defined in Section 7.2(b).
----------------------
Proceeding: Any judicial action, suit or proceeding (whether civil or
----------
criminal), any administrative proceeding (whether formal or informal), any
investigation by a governmental authority or entity (including a grand jury),
and any arbitration, mediation or other non-judicial process for dispute
resolution.
RCRA: The Resource Conservation and Recovery Act, as amended.
----
Real Estate Taxes: All real estate taxes, including general and special
-------------------
assessments, if any, which are imposed upon the Land and any improvements
thereon.
10
Release: A "Release" as defined in CERCLA or in any Environmental Law,
-------
unless such Release has been properly authorized and permitted in writing by all
applicable Environmental Authorities or is allowed by such Environmental Law
without authorizations or permits.
Rent: Collectively, the Base Rent or Percentage Rent, and Additional
----
Charges.
Room Revenues: Gross revenue from the rental of guest rooms, whether to
--------------
individuals, groups or transients, at the Facility, determined in a manner
consistent with the Uniform System and excluding the following:
(a) The amount of all credits, bad debt write-off rebates or
refunds to customers, guests or patrons; and
(b) All sales taxes or any other taxes imposed on the rental of
such guest rooms; and
(c) any fees collected for amenities including, but not limited
to, telephone, laundry, movies or concessions.
SARA: The Superfund Amendments and Reauthorization Act of 1986, as
----
amended.
SEC: The U.S. Securities and Exchange Commission or any successor agency.
---
Second Annual Room Revenues Break Point: The amount of Room Revenues for
------------------------------------------
the applicable Lease Year corresponding to such term as set forth on Exhibit C.
----------
Second Tier Room Revenue Percentage: The percentage corresponding to such
------------------------------------
term as set forth on Exhibit C.
----------
State: The State or Commonwealth of the United States in which the Leased
-----
Property is located.
Subsidiaries: Corporations or other entities in which Lessee owns,
------------
directly or indirectly, 50% or more of the voting rights or control, as
applicable (individually, a "Subsidiary").
Taking: A permanent or temporary taking or voluntary conveyance during the
------
Term hereof of all or part of the Leased Property, or any interest therein or
right accruing thereto or use thereof, as the result of, or in settlement of,
any Condemnation or other eminent domain proceeding affecting the Leased
Property whether or not the same shall have actually been commenced.
Term: As defined in Section 1.2.
----
Termination Fee: As defined in Section 36.1(c).
----------------
11
Third Tier Room Revenue Percentage: The percentage corresponding to such
------------------------------------
term as set forth on Exhibit C.
----------
TSCA: The Toxic Substances Control Act, as amended.
----
Unavoidable Delay: Delay due to strikes, lock-outs, labor unrest,
------------------
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, unavoidable casualty,
condemnation or other similar causes beyond the reasonable control of the party
responsible for performing an obligation hereunder, provided that lack of funds
shall not be deemed a cause beyond the reasonable control of either party hereto
unless such lack of funds is caused by the breach of the other party's
obligation to perform any obligations of such other party under this Lease.
Uneconomic for its Primary Intended Use: A state or condition of the
--------------------------------------------
Facility such that in the reasonable judgment of Lessor the Facility cannot be
operated on a commercially practicable basis for its Primary Intended Use, such
that Lessor intends to, and shall, cease operation of the Facility.
Uniform System: Shall mean the Uniform System of Accounts for Hotels (9th
---------------
Revised Edition, 1996) as published by the Hotel Association of New York City,
Inc., as the same may hereafter be revised, and as the same is interpreted and
applied by the Lessor's independent certified public accountants in connection
with any audit.
Unsuitable for its Primary Intended Use: A state or condition of the
--------------------------------------------
Facility such that in the reasonable judgment of Lessor the Facility (i) cannot
function as an integrated hotel facility consistent with standards applicable to
a well maintained and operated hotel comparable in quality and function to that
of the Facility prior to the damage or loss and, (ii) notwithstanding the
application of insurance proceeds that may occur under Section 14.1, will remain
unsuitable for its Primary Intended Use for a period of 90 days or more.
ARTICLE
-------
3
3.1. Rent.
-----
Lessee will pay to Lessor, by wire transfer, in lawful money of the
United States of America which shall be legal tender for the payment of public
and private debts, at Lessor's address set forth in Article 30 hereof or at such
other place or to such other Person as Lessor from time to time may designate in
a Notice, all Initial Fixed Rent, Base Rent, Percentage Rent and Additional
Charges, during the Term, as follows:
(a) The Rent payable from the Commencement Date until the calendar
quarter ending December 31, 2001 shall equal the annual amount of Initial Fixed
12
Rent set forth on Exhibit C and shall be payable quarterly in arrears on or
----------
before the first business day of the subsequent calendar quarter; provided,
however, that Initial Fixed Rent shall be prorated as to any Lease Year which is
less than four calendar quarters and as to any partial calendar quarter;
(b) The Rent payable in each calendar quarter from January 1, 2002
until the end of the Lease Term shall equal the greater of :
(i) the annual amount of Base Rent set forth on Exhibit C,
----------
which shall be payable quarterly in arrears on or before the first business day
of the subsequent calendar quarter; provided, however, that Base Rent shall be
prorated as to any Lease Year which is less than four calendar quarters and as
to any partial calendar quarter; plus
(ii) an amount of percentage rent ("Percentage Rent"),
calculated for each calendar quarter, equal to the Period Revenues Computation
through the end of such calendar quarter for the applicable Lease Year, which
amount shall be payable on or before the fifteenth (15th) day of the following
calendar quarter.
The Period Revenues Computation shall be an amount equal to the sum
of, for the applicable Lease Year, (i) an amount equal to the First Tier Room
Revenue Percentage of all Lease Year to date Room Revenues up to (but not
exceeding) the First Annual Room Revenues Break Point, (ii) an amount equal to
the Second Tier Room Revenue Percentage of all Lease Year to date Room Revenues
in excess of the First Annual Room Revenues Break Point but not exceeding the
Second Annual Room Revenues Break Point, (iii) an amount equal to the Third Tier
Room Revenue Percentage of all Lease Year to date Room Revenues in excess of the
Second Annual Room Revenues Break Point, and (iv) an amount equal to the Other
Revenue Percentage of all Lease Year to date Other Revenues.
The Initial Fixed Rent and the Base Rent shall accrue pro rata during
each calendar quarter of a Lease Year. However, the amount of Initial Fixed Rent
or Base Rent payable for the first three calendar quarters of a Lease Year shall
equal the annual amount of Initial Fixed Rent or Base Rent multiplied by a
fraction, the numerator of which is the amount of the Lessee's budgeted Gross
Revenues for such calendar quarter and the denominator of which is the amount of
the Lessee's budgeted Gross Revenues for such Lease Year. The amount of Initial
Fixed Rent or Base Rent payable for the fourth calendar quarter of such Lease
Year shall equal the annual amount of Initial Fixed Rent or Base Rent, less the
aggregate amount of Initial Fixed Rent or Base Rent payments made by the Lessee
for the first three calendar quarters of such Lease Year. There shall be no
reduction in Base Rent regardless of the result of the Period Revenues
Computation.
If the Term begins or ends in the middle of a calendar year, then the
number of calendar quarters falling within the Term during such calendar year
shall constitute a separate Lease Year. In that event, the First Annual Room
Revenues Break Point and the Second Annual Room Revenues Break Point shall be
multiplied by a fraction equal to (x) the number of calendar quarters (including
partial calendar quarters) in the Lease Year divided by (y) four.
-----------
13
(c) Officer's Certificates. An Officer's Certificate shall be
-----------------------
delivered to Lessor with each Percentage Rent payment setting forth the
calculation of the Percentage Rent payment for the most recently completed
calendar quarter of each Lease Year in the Term. Percentage Rent shall be
subject to confirmation and adjustment, if applicable, as set forth in Section
3.2.
The obligation to pay Percentage Rent shall survive the expiration or
earlier termination of the Term, and a final reconciliation, taking into
account, among other relevant adjustments, any adjustments which are accrued
after such expiration or termination date but which related to Percentage Rent
accrued prior to such termination date, shall be made not later than 60 days
after such expiration or termination date.
3.2. Confirmation of Percentage Rent.
-----------------------------------
Lessee shall utilize, or cause to be utilized, an accounting system
for the Leased Property in accordance with its usual and customary practices,
and in accordance with GAAP and the Uniform System, that will accurately record
all data necessary to compute Percentage Rent, and Lessee shall retain, for at
least five years after the expiration of each Lease Year, reasonably adequate
records conforming to such accounting system showing all data necessary to
conduct Lessor's Audit and to compute Percentage Rent for the applicable Lease
Years. Lessor shall have the right, for a period of two years following each
Lease Year, from time to time, by its accountants or representatives, to audit
such information in connection with Lessor's Audit, and to examine all Lessee's
records (including supporting data and sales and excise tax returns) reasonably
required to complete Lessor's Audit and to verify Percentage Rent, subject to
any prohibitions or limitations on disclosure of any such data under Legal
Requirements. If any Lessor's Audit discloses a deficiency in the payment of
Percentage Rent, and either Lessee agrees with the result of Lessor's Audit or
the matter is otherwise determined or compromised, Lessee shall forthwith pay to
Lessor the amount of the deficiency, as finally agreed or determined, together
with interest at the Overdue Rate from the date when said payment should have
been made to the date of payment thereof. If any Lessor's Audit discloses a
deficiency in the determination or reporting of Room Revenue which, as finally
agreed or determined, exceeds 3%, Lessee shall pay the costs of the portion of
Lessor's Audit allocable to the determination of Room Revenues (the "Revenue
Audit"). Any proprietary information obtained by Lessor pursuant to the
provisions of this Section shall be treated as confidential, except that such
information may be used, subject to appropriate confidentiality safeguards, in
any litigation or arbitration between the parties and except further that Lessor
may disclose such information to prospective lenders, investors and underwriters
and to any other persons to whom disclosure is necessary to comply with
applicable laws, regulations and government requirements. The obligations of
Lessee contained in this Section shall survive the expiration or earlier
termination of this Lease. Any dispute as to the existence or amount of any
deficiency in the payment of Percentage Rent as disclosed by Lessor's Audit
shall, if not otherwise settled by the parties, be submitted to arbitration
pursuant to the provisions of Section 40.2.
14
3.3. Additional Charges.
--------------------
In addition to the Base Rent and Percentage Rent, (a) Lessee also will
pay and discharge as and when due and payable all other amounts, liabilities,
obligations and Impositions that Lessee assumes or agrees to pay under this
Lease, and (b) in the event of any failure on the part of Lessee to pay any of
those items referred to in clause (a) of this Section 3.3, Lessee also will
promptly pay and discharge every fine, penalty, interest and cost that may be
added for non-payment or late payment of such items (the items referred to in
clauses (a) and (b) of this Section 3.3 being additional rent hereunder and
being referred to herein collectively as the "Additional Charge(s)"), and Lessor
shall have all legal, equitable and contractual rights, powers and remedies
provided either in this Lease or by statute or otherwise in the case of
non-payment of the Additional Charges as in the case of non-payment of the Base
Rent. If any installment of Base Rent, Percentage Rent or Additional Charges
(but only as to those Additional Charges that are payable directly to Lessor)
shall not be paid on its due date, Lessee will pay Lessor within ten days of
demand, as Additional Charges, an amount equal to the interest computed at the
Overdue Rate on the amount of such installment, from the due date of such
installment to the date of payment thereof. To the extent that Lessee pays any
Additional Charges to Lessor pursuant to any requirement of this Lease, Lessee
shall be relieved of its obligation to pay such Additional Charges to the entity
to which they would otherwise be due and Lessor shall pay the same from monies
received from Lessee.
3.4. No Set Off.
-------------
Rent shall be paid to Lessor without set off, deduction or
counterclaim, subject to Lessee's right to assert any claim or mandatory
counterclaim in any action brought by either party under this Lease.
3.5. Books and Records.
--------------------
Lessee shall keep full and adequate books of account and other records
reflecting the results of operation of the Facility on an accrual basis, all in
accordance with the Uniform System and GAAP and the obligations of Lessee under
this Lease. Lessee agrees that bad-debt expenses will be recorded in a manner,
which is consistent with the past practice of the current operator of the
Facility for bad debt writeoffs. The books of account and all other records
relating to or reflecting the operation of the Facility (whether maintained by
Lessee or Manager) shall be kept either at the Facility or at 148 Sheraton
Drive, New Cumberland, Pennsylvania 17070, and shall be available to Lessor and
its representatives and its auditors or accountants, at all reasonable times for
examination, audit, inspection, and transcription. All of such books and
records pertaining to the Facility (whether maintained by Lessee or Manager)
including, without limitation, books of account, guest records and front office
records, at all times shall be the property of Lessor and shall not be removed
from the Facility or Lessee's offices without Lessor's prior written approval.
Lessee shall be entitled to make copies of any or all such books and records for
its own files. Lessee's obligations under this Section 3.5 shall survive
termination of this Lease for any reason.
15
3.6. Changes in Operations.
------------------------
Without Lessor's prior written consent, which shall not be
unreasonably withheld, Lessee shall not (i) provide food and/or beverage
operations at the Facility if not presently provided, (ii) discontinue any food
and/or beverage operations which are presently provided, or (iii) convert a
subtenant, licensee or concessionaire to an operating department of the Facility
or vice-versa.
ARTICLE
-------
4
4.1. Payment of Impositions.
------------------------
Lessor shall pay, or cause to be paid, all Real Estate Taxes and
Personal Property Taxes. Subject to Article 12 relating to permitted contests,
Lessee will pay, or cause to be paid, all Impositions (other than Real Estate
Taxes and Personal Property Taxes) before any fine, penalty, interest or cost
may be added for nonpayment, such payments to be made directly to the taxing or
other authorities where feasible, and will promptly furnish to Lessor copies of
official receipts or other satisfactory proof evidencing such payments.
Lessee's obligation to pay such Impositions shall be deemed absolutely fixed
upon the date such Impositions become a lien upon the Leased Property or any
part thereof. If any such Imposition may, at the option of the taxpayer,
lawfully be paid in installments (whether or not interest shall accrue on the
unpaid balance of such Imposition), Lessee may exercise the option to pay the
same (and any accrued interest on the unpaid balance of such Imposition) in
installments and in such event, shall pay such installments (subject to Lessee's
right of contest pursuant to the provisions of Article 12) as the same
respectively become due and before any fine, penalty, premium, further interest
or cost may be added thereto. If an Imposition becomes fixed during the Term
hereof and the Lessee elects to pay such Imposition in installments that
continue after the Term hereof, the Lessee's obligation to pay such
installments shall survive the termination of this Lease. Lessor, at its
expense, shall, to the extent required or permitted by applicable law, prepare
and file all tax returns in respect of Lessor's net income, gross receipts,
sales and use, single business, transaction privilege, rent, ad valorem,
franchise taxes, and taxes on its capital stock, and Lessee, at its expense,
shall, to the extent required or permitted by applicable laws and regulations,
prepare and file all other tax returns and reports in respect of any Imposition
as may be required by governmental authorities. Lessee shall submit copies of
Real Estate Taxes and Personal Property Tax invoices to Lessor promptly upon
Lessee's receipt of such invoices. If any refund shall be due from any taxing
authority in respect of any Imposition paid by Lessee, the same shall be paid
over to or retained by Lessee if no Event of Default shall have occurred
hereunder and be continuing. If an Event of Default shall have been declared by
Lessor and be continuing, any such refund shall be paid over to or retained by
Lessor. Any such funds retained by Lessor due to an Event of Default shall be
applied as provided in Article 16. Any refund for Real Estate Taxes and
Personal Property Taxes shall be promptly remitted to Lessor. Lessor and Lessee
shall, upon request of the other, cooperate with the other party and otherwise
provide such data as is maintained by the party to whom the request is made with
respect to the Leased Property as may be necessary to prepare any required
returns and reports. Lessor, to the extent it possesses the same, and Lessee,
16
to the extent it possesses the same, will provide the other party, upon request,
with cost and depreciation records necessary for filing returns for any property
classified as personal property. Lessor may, upon notice to Lessee, at Lessor's
option and at Lessor's sole expense, protest, appeal, or institute such other
proceedings (in its or Lessee's name) as Lessor may deem appropriate to effect a
reduction of real estate assessments, and Lessee, at Lessor's expense as
aforesaid, shall fully cooperate with Lessor in such protest, appeal, or other
action. Lessor hereby agrees to indemnify, defend, and hold harmless Lessee
from and against any claims, obligations, and liabilities against or incurred by
Lessee in connection with such cooperation. Lessor, however, reserves the right
to effect any such protest, appeal or other action and, upon notice to Lessee,
shall control any such activity, which shall then proceed at Lessor's sole
expense. Upon such notice, Lessee, at Lessor's expense, shall cooperate fully
with such activities. To the extent received by it, Lessee shall furnish Lessor
with copies of all assessment notices for Real Estate Taxes in sufficient time
for Lessor to file any protest with respect to such tax must be made and pay
such taxes without penalty.
4.2. Notice of Impositions.
------------------------
Lessor shall give prompt Notice to Lessee of all Impositions payable
by Lessee hereunder of which Lessor at any time has knowledge, provided that
Lessor's failure to give any such Notice shall in no way diminish Lessee's
obligations hereunder to pay such Impositions, but if Lessee did not otherwise
have knowledge of such Imposition sufficient to permit it to pay same, such
failure shall obviate any default hereunder for a reasonable time after Lessee
receives Notice of any Imposition which it is obligated to pay during the first
taxing period applicable thereto.
4.3. Adjustment of Impositions.
----------------------------
Impositions payable by Lessee which are imposed in respect of the
tax-fiscal period during which the Term terminates shall be adjusted and
prorated between Lessor and Lessee, whether or not such Imposition is imposed
before or after such termination, and Lessee's obligation to pay its prorated
share thereof after termination shall survive such termination.
4.4. Utility Charges.
-----------------
Lessee will be solely responsible for obtaining and maintaining
utility services to the Leased Property and will pay or cause to be paid all
charges for electricity, gas, oil, water, sewer and other utilities used in the
Leased Property during the Term.
ARTICLE
-------
5
5.1. No Termination, Abatement, etc.
----------------------------------
Except as otherwise specifically provided in this Lease, Lessee, to
the extent permitted by law, shall remain bound by this Lease in accordance with
its terms and shall neither take any action without the written consent of
17
Lessor to modify, surrender or terminate the same, nor seek nor be entitled to
any abatement, deduction, deferment or reduction of the Rent, or setoff against
the Rent, nor shall the obligations of Lessee be otherwise affected by reason of
(a) any damage to, or destruction of, any Leased Property or any portion thereof
from whatever cause or any Taking of the Leased Property or any portion thereof,
(b) any bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding up or other proceedings affecting Lessor or
any assignee or transferee of Lessor, or (c) for any other cause whether similar
or dissimilar to any of the foregoing other than a discharge of Lessee from any
such obligations as a matter of law. Lessee hereby specifically waives all
rights, arising from any default under this Lease by Lessor, which may now or
hereafter be conferred upon it by law to (1) modify, surrender or terminate this
Lease or quit or surrender the Leased Property or any portion thereof, or (2)
entitle Lessee to any abatement, reduction, suspension or deferment of or set
off against the Rent or other sums payable by Lessee hereunder, except as
otherwise specifically provided in this Lease. The obligations of Lessee
hereunder shall be separate and independent covenants and agreements and the
Rent and all other sums payable by Lessee hereunder shall continue to be payable
in all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Lease or by termination of this Lease
other than by reason of an Event of Default.
ARTICLE
-------
6
6.1. Ownership of the Leased Property.
-------------------------------------
Lessee acknowledges that the Leased Property is the property of Lessor
and that Lessee has only the right to the possession and use of the Leased
Property upon the terms and conditions of this Lease.
6.2. Lessee's Personal Property.
-----------------------------
At commencement of the Term, Lessee shall purchase for fair market
value from Lessor or the Contributor of the Leased Property to Lessor all
Inventory at the Leased Property. At all times during the Term, Lessee shall
maintain Inventory consistent with the amount of inventory which is customarily
maintained in a hotel of the type and character of the Facility and is otherwise
required to operate the Leased Property in the manner contemplated by this Lease
and in compliance with the Franchise Agreement and all Legal Requirements. All
Inventory shall be the property of Lessee. Lessee may (and shall as provided
hereinbelow), at its expense, install, affix or assemble or place on any parcels
of the Land or in any of the Leased Improvements, any items of personal property
(including Inventory) owned by Lessee (collectively, the "Lessee's Personal
Property"). Lessee may, subject to the following sentence of this Section 6.2,
remove any of Lessee's Personal Property at any time during the Term or upon the
expiration or any prior termination of the Term. All of Lessee's Personal
Property not removed by Lessee within 30 days following the expiration or
earlier termination of the Term shall be considered abandoned by Lessee and may
be appropriated, sold, destroyed or otherwise disposed of by Lessor without
first giving Notice thereof to Lessee, without any payment to Lessee and without
18
any obligation to account therefor. Lessee will, at its expense, restore the
Leased Property to the condition required by Section 9.1(d), including repair of
all damage to the Leased Property caused by the removal of Lessee's Personal
Property, whether effected by Lessee or Lessor.
6.3. Lessor's Lien.
---------------
To the fullest extent permitted by applicable law, Lessor is granted a
lien and security interest on all Lessee's Personal Property now or hereinafter
placed in or upon the Leased Property, and such lien and security interest shall
remain attached to such Lessee's Personal Property until payment in full of all
Rent and satisfaction of all of Lessee's obligations hereunder; provided,
however, Lessor shall subordinate its lien and security interest only to that of
any non-Affiliate of Lessee which finances such Lessee's Personal Property or
any non-Affiliate conditional seller of such Lessee's Personal Property, the
terms and conditions of such subordination to be satisfactory to Lessor in the
exercise of reasonable discretion. Lessee shall, upon the request of Lessor,
execute such financing statements or other documents or instruments reasonably
requested by Lessor to perfect the lien and security interests herein granted.
ARTICLE
-------
7
7.1. Condition of the Leased Property.
-------------------------------------
Lessee acknowledges receipt and delivery of possession of the Leased
Property. Lessee has examined and otherwise has knowledge of the condition of
the Leased Property and has found the same to be satisfactory for its purposes
hereunder. Lessee is leasing the Leased Property "as is", "with all faults",
and in its present condition. Except as otherwise specifically provided herein,
Lessee waives any claim or action against Lessor in respect of the condition of
the Leased Property. LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, IN RESPECT OF THE LEASED PROPERTY, OR ANY PART THEREOF, EITHER AS TO
ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR
OTHERWISE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR
PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY LESSEE. LESSEE
ACKNOWLEDGES THAT THE LEASED PROPERTY HAS BEEN INSPECTED BY LESSEE AND IS
SATISFACTORY TO IT. Lessee shall have the right to proceed against any
predecessor in title for breaches of warranties or representations or for latent
defects in the Leased Property, and Lessor shall, if requested by Lessee, assign
any such right to Lessee (other than claims against Affiliates of Lessee). If
either party determines to exercise such right, the other party shall fully
cooperate in the prosecution of any such claim, in Lessor's or Lessee's name,
all at the cost and expense of the prosecuting party, who hereby agrees to
indemnify, defend and hold harmless the other party from and against any claims,
obligations and liabilities against or incurred by such other party in
connection with such cooperation, and who further agrees to apply all amounts
realized from the prosecution of such claim, less its expenses in connection
therewith, to remedy such breach or cure such defect.
19
7.2. Use of the Leased Property.
-------------------------------
(a) Lessee covenants that it will proceed with all due diligence
and will exercise its best efforts to obtain and to maintain all approvals
needed to use and operate the Leased Property and the Facility under applicable
local, state and federal law.
(b) Lessee shall use or cause to be used the Leased Property only
as a hotel facility, and for such other uses as may be necessary or incidental
to such use, or such other use as otherwise approved by Lessor (the "Primary
Intended Use"). Lessee shall not use the Leased Property or any portion thereof
for any other use without the prior written consent of Lessor. No use other
than the Primary Intended Use shall be made or permitted to be made of the
Leased Property, and no acts shall be done other than the Primary Intended Use,
which will cause the cancellation or increase the premium of any insurance
policy covering the Leased Property or any part thereof (unless another adequate
policy satisfactory to Lessor is available and Lessee pays any premium
increase), nor shall Lessee sell or permit to be kept, used or sold in or about
the Leased Property any article which is prohibited by law or fire underwriter's
regulations. Lessee shall comply with all of the requirements pertaining to the
Leased Property of any insurance board, association, organization or company
necessary for the maintenance of insurance, as herein provided, covering the
Leased Property and Lessee's Personal Property, which compliance shall be
performed at Lessee's sole cost.
(c) Subject to the provisions of Articles 14 and 15, Lessee
covenants and agrees that during the Term it will either directly or through an
approved Manager (1) operate continuously the Leased Property as a hotel
facility, (2) keep in full force and effect and comply in all material respects
with all the provisions of the Franchise Agreement, (3) not terminate or amend
in any respect the Franchise Agreement without the consent of Lessor, (4)
maintain appropriate certifications and licenses for such use and (5) keep
Lessor advised of the status of any material litigation affecting the Leased
Property.
(d) Lessee shall not commit or suffer to be committed any waste on
the Leased Property, or in the Facility, nor shall Lessee cause or permit any
nuisance thereon.
(e) Lessee shall neither suffer nor permit the Leased Property or
any portion thereof, or Lessee's Personal Property, to be used in such a manner
as (1) might reasonably tend to impair Lessor's (or Lessee's, as the case may
be) title thereto or to any portion thereof, or (2) may reasonably make possible
a claim or claims of adverse usage or adverse possession by the public, as such,
or of implied dedication of the Leased Property or any portion thereof.
(f) Lessee shall comply with all of the Lessor's covenants, in any
loan agreement or other financing arrangement, applicable to this Lease or the
operation of the Leased Property. Notwithstanding the foregoing, Lessee shall
not be obligated to comply with Lessor's covenants in any loan agreements which
(A) (i) are not customary, (ii) are not otherwise contemplated by this Lease
Agreement or any agreement or instrument executed by Lessee in connection
herewith for the benefit of Lessor, and (iii)(x) materially and adversely affect
20
the operations at the Facility or (y) materially increase Lessee's costs of
doing business or decrease revenues, unless in cases where Subsection (iii)(y)
is relied upon by Lessee the additional cost thereof is borne by Lessor, or (B)
obligate Lessee to guarantee repayment of any debt of Lessor, or (C) require any
indemnification undertakings other than customary undertakings with respect to
servicing agents or similar administrative agents which administer escrow
accounts into which Lessee may deposit Rent payments as required by Lessor's
lenders or other servicing agents. Lessor will provide Lessee with not less
than 15, and will attempt in good faith to provide not less than 30, days prior
written notice of the terms of such covenants, and if Lessee is relying upon
Subsection (iii)(y), Lessee shall within five days of receipt of such notice,
notify Lessor in writing of any anticipated material additional costs which
Lessee may incur. Lessor shall then notify Lessee in writing whether it agrees
to pay or reimburse Lessee for the material additional cost thereof as incurred
by Lessee, and Lessee's receipt of such notice shall be a condition precedent to
Lessee's obligation to comply with such covenants. Lessor shall have the right
to dispute Lessee's reliance on Subsections (A)-(C) or Lessee's estimates of
additional costs pursuant to Subsection (A)(iii)(y), and either party may submit
any such disputes to arbitration under the provisions of Section 40.2.
ARTICLE
-------
8
8.1. Compliance with Legal and Insurance Requirements, etc.
------------------------------------------------------------
Subject to Section 8.2, 8.3(b) below and Article 12 relating to
permitted contests, Lessee, at its expense, will promptly (a) comply with all
applicable Legal Requirements and Insurance Requirements in respect of the use,
operation, maintenance, repair and restoration of the Leased Property, and (b)
procure, maintain and comply with all appropriate licenses and other
authorizations required for any use of the Leased Property and Lessee's Personal
Property then being made, and for the proper erection, installation, operation
and maintenance of the Leased Property or any part thereof.
8.2. Legal Requirement Covenants.
------------------------------
(a) Subject to Section 8.3(b) below, Lessee covenants and agrees
that the Leased Property and Lessee's Personal Property shall not be used by
anyone other than Lessor for any unlawful purpose, and that Lessee shall use all
commercially reasonable efforts not to permit or suffer to exist any unlawful
use of the Leased Property by others. Lessee shall acquire and maintain all
licenses, certifications, permits and other authorizations and approvals
required to operate the Leased Property in its customary manner for the Primary
Intended Use, and any other lawful use conducted on the Leased Property as may
be permitted from time to time hereunder. Lessee further covenants and agrees
that Lessee's use of the Leased Property and maintenance, alteration, and
operation of the same, and all parts thereof, shall at all times conform to all
Legal Requirements, unless the same are finally determined by a court of
competent jurisdiction to be unlawful (and Lessee shall cause all its
sub-tenants, invitees or others to so comply with all Legal Requirements).
21
(b) As between Lessor and Lessee, Lessee is solely responsible for
all liabilities or obligations of any kind with respect to employees at the
Leased Property during the Term. Without limiting the generality of the
foregoing sentence, Lessee is solely responsible for any required compliance
with the Worker Adjustment, Retraining and Notification Act of 1988 (WARN) or
any similar state law applicable to the Leased Property; any required compliance
with the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(COBRA); and all alleged and actual obligations and claims arising from or
relating to any employment agreement, collective bargaining agreement or
employee benefit plans, any grievances, arbitrations, or unfair labor practice
charges, and relating to compliance with any applicable state or federal labor
employment law, including but not limited to all laws pertaining to
discrimination, workers' compensation, unemployment compensation, occupational
safety and health, unfair labor practices, family and medical leave, and wages,
hours or employee benefits. Lessee agrees to indemnify and defend and hold
harmless Lessor from and against any claims relating to any of the foregoing
matters. Lessee further agrees to reimburse Lessor for any and all losses,
damages, costs, expenses, liabilities and obligations of any kind, including
without limitation reasonable attorney's fees and other legal costs and
expenses, incurred by Lessor in connection with any of the foregoing matters.
Notwithstanding the Lessee's obligations under Section 8.1 to obtain and
maintain all permits and licenses required for the use of the Leased Property,
and without limiting any obligations of Lessee hereunder, if (i) applicable law
requires that the owner (rather than a lessee) of a hotel be the licensee under
the required liquor license for the Facility or (ii) the former owner of the
Facility is holding the liquor license and continuing to exercise management and
supervision of the liquor services at the Facility pending transfer of the
license to Lessor or Lessee, the Lessee shall indemnify and hold the Lessor
harmless from any liability, damages or claims (a) arising in connection with
liquor operations at the Facility during such period of time, except for the
Lessor's gross negligence or willful misconduct or (b) made by or through the
former owner with respect to liquor operations at the Facility.
8.3. Environmental Covenants.
-------------------------
Lessor and Lessee (in addition to, and not in diminution of, Lessee's
covenants and undertakings in Sections 8.1 and 8.2 hereof) covenant and agree as
follows:
(a) At all times hereafter until Lessee completely vacates the
Leased Property and surrenders possession of the same to Lessor, Lessee shall
fully comply with all Environmental Laws applicable to the Leased Property and
the operations thereon, except to the extent that such compliance would require
the remediation of Environmental Liabilities for which Lessee has no indemnity
obligations under Section 8.3(b). Lessee agrees to give Lessor prompt written
notice of (1) all Environmental Liabilities; (2) all pending, threatened or
anticipated Proceedings, and all notices, demands, requests or investigations,
relating to any Environmental Liability or relating to the issuance, revocation
or change in any Environmental Authorization required for operation of the
Leased Property; and (3) all Releases at, on, in, under or in any way affecting
the Leased Property, or any Release known by Lessee at, on, in or under any
property adjacent to the Leased Property; in each case as to which it has actual
knowledge.
22
(b) Lessee hereby agrees to defend, indemnify and save harmless
any and all Lessor Indemnified Parties from and against any and all
Environmental Liabilities except to the extent that the same (i) are caused by
the intentionally wrongful acts or grossly negligent failures to act of Lessor,
or (ii) result from Releases or other violations of Environmental Laws
originating on adjacent property but affecting the Leased Property (a
"Migration"), provided that such exclusions shall not apply to the extent that
the Migration has been exacerbated by Lessee's act or negligent failure to act.
(c) Lessor hereby agrees to defend, indemnify and save harmless
any and all Lessee Indemnified Parties from and against any and all
Environmental Liabilities to the extent that the same were caused by the
intentionally wrongful acts or grossly negligent failures to act of Lessor.
(d) If any Proceeding is brought against any Indemnified Party in
respect of an Environmental Liability with respect to which such Indemnified
Party may claim indemnification under either Section 8.3(b) or (c), the
Indemnifying Party, upon request, shall at its sole expense resist and defend
such Proceeding, or cause the same to be resisted and defended by counsel
designated by the Indemnifying Party and approved by the Indemnified Party,
which approval shall not be unreasonably withheld; provided, however, that such
approval shall not be required in the case of defense by counsel designated by
any insurance company undertaking such defense pursuant to any applicable policy
of insurance. Each Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel will be at the sole expense of such
Indemnified Party unless a conflict of interest prevents representation of such
Indemnified Party by the counsel selected by the Indemnifying Party and such
separate counsel has been approved by the Indemnifying Party, which approval
shall not be unreasonably withheld. The Indemnifying Party shall not be liable
for any settlement of any such Proceeding made without its consent, which shall
not be unreasonably withheld, but if settled with the consent of the
Indemnifying Party, or if settled without its consent (if its consent shall be
unreasonably withheld), or if there be a final, nonappealable judgment for an
adversary party in any such Proceeding, the Indemnifying Party shall indemnify
and hold harmless the Indemnified Parties from and against any liabilities
incurred by such Indemnified Parties by reason of such settlement or judgment.
(e) At any time any Indemnified Party has reason to believe
circumstances exist which could reasonably result in an Environmental Liability,
upon reasonable prior written notice to the Lessee and the Lessor stating such
Indemnified Party's basis for such belief, an Indemnified Party shall be given
immediate access to the Leased Property (including, but not limited to, the
right to enter upon, investigate, drill wells, take soil borings, excavate,
monitor, test, cap and use available land for the testing of remedial
technologies), Manager and Lessee's or Manager's employees, and to all relevant
documents and records regarding the matter as to which a responsibility,
liability or obligation is asserted or which is the subject of any Proceeding;
provided that such access may be conditioned or restricted as may be reasonably
necessary to ensure compliance with law and the safety of personnel and
facilities or to protect confidential or privileged information. All
Indemnified Parties requesting such immediate access and cooperation shall
23
endeavor to coordinate such efforts to result in as minimal interruption of the
operation of the Leased Property as practicable.
(f) The indemnification rights and obligations provided for in
this Article 8 shall be in addition to any indemnification rights and
obligations provided for elsewhere in this Lease, provided that in the event of
a conflict between the provisions of this Section 8.3 and Article 20, the
provisions of this Section 8.3 shall control.
(g) The indemnification rights and obligations provided for in
this Article 8 shall survive the termination of this Lease.
For purposes of this Section 8.3, all amounts for which any
Indemnified Party seeks indemnification shall be computed net of (a) any actual
income tax benefit resulting therefrom to such Indemnified Party, (b) any
insurance proceeds received (net of tax effects) with respect thereto, and (c)
any amounts recovered (net of tax effects) from any third parties based on
claims the Indemnified Party has against such third parties which reduce the
damages that would otherwise be sustained; provided that in all cases, the
timing of the receipt or realization of insurance proceeds or income tax
benefits or recoveries from third parties shall be taken into account in
determining the amount of reduction of damages. Each Indemnified Party agrees
to use its reasonable efforts to pursue, or assign to Lessee or Lessor, as the
case may be, any claims or rights it may have against any third party which
would materially reduce the amount of damages otherwise incurred by such
Indemnified Party.
ARTICLE
-------
9
9.1. Maintenance and Repair; Capital Expenditures.
-------------------------------------------------
(a) Lessee will keep the Leased Property and all private roadways,
sidewalks and curbs appurtenant thereto that are under Lessee's control,
including windows and plate glass, parking lots, HVAC, mechanical, electrical
and plumbing systems and equipment (including conduit and ductwork), and
non-load bearing interior walls, in good order and repair, except for ordinary
wear and tear (whether or not the need for such repairs occurred as a result of
Lessee's use, any prior use, the elements or the age of the Leased Property, or
any portion thereof but subject to the obligation to make necessary and
appropriate repairs and replacements as provided in this Section 9.1(a)), and,
except as otherwise provided in Article 14 or Article 15, with reasonable
promptness, make all necessary and appropriate repairs, replacements and
improvements thereto of every kind and nature, whether interior or exterior,
ordinary or extraordinary, foreseen or unforeseen or arising by reason of a
condition existing prior to the commencement of the Term of this Lease
(concealed or otherwise), or required by any governmental agency having
jurisdiction over the Leased Property. Lessee, however, shall be permitted to
prosecute claims against Lessor's predecessors in title for breach of any
representation or warranty or for any latent defects in the Leased Property to
be maintained by Lessee unless Lessor is already diligently pursuing such a
claim. All repairs shall, to the extent reasonably achievable, be at least
equivalent in quality to the original work. Lessee will not take or omit to
24
take any action, the taking or omission of which might materially impair the
value or the usefulness of the Leased Property or any part thereof for its
Primary Intended UseIf Lessee fails to make any required repairs or replacements
after 30 days notice from Lessor, or after such longer period as may be
reasonably required provided that Lessee at all times diligently proceeds with
such repair or replacement, then Lessor shall have the right, but shall not be
obligated, to make such repairs or replacements on behalf of and for the account
of Lessee. In such event, such work shall be paid for in full by Lessee as
Additional Charges.
(b) Subject to Lessor's obligation to make available to the Lessee
amounts for Capital Expenditures as set forth in Article 38, Lessee shall be
required to make all Capital Expenditures required in connection with (i)
Emergency Situations, (ii) Legal Requirements, (iii) maintenance of the
Franchise Agreement, (iv) the performance by Lessee of its obligations under
this Lease, and (v) other additions to the Leased Property as it may reasonably
deem appropriate and that are permitted hereunder during the Term. Lessee
hereby waives, to the extent permitted by law, the right to make repairs at the
expense of Lessor pursuant to any law in effect at the time of the execution of
this Lease or hereafter enacted. Lessor shall have the right to give, record
and post, as appropriate, notices of non-responsibility under any mechanic's
lien laws now or hereafter existing.
(c) Nothing contained in this Lease and no action or inaction by
Lessor shall be construed as (1) constituting the request of Lessor, expressed
or implied, to any contractor, subcontractor, laborer, materialman or vendor to
or for the performance of any labor or services or the furnishing of any
materials or other property for the construction, alteration, addition, repair
or demolition of or to the Leased Property or any part thereof, or (2) giving
Lessee any right, power or permission to contract for or permit the performance
of any labor or services or the furnishing of any materials or other property in
such fashion as would permit the making of any claim against Lessor in respect
thereof or to make any agreement that may create, or in any way be the basis for
any right, title, interest, lien, claim or other encumbrance upon the estate of
Lessor in the Leased Property, or any portion thereof.
(d) Lessee will, upon the expiration or prior termination of the
Term, vacate and surrender the Leased Property to Lessor in the condition in
which the Leased Property was originally received from Lessor, except as
repaired, rebuilt, restored, altered or added to as permitted or required by the
provisions of this Lease and except for ordinary wear and tear (subject to the
obligation of Lessee to maintain the Leased Property in good order and repair in
accordance with Section 9.1(a) above, as would a prudent owner of comparable
property, during the entire Term) or damage by casualty or Condemnation (subject
to the obligation of Lessee to restore or repair as set forth in this Lease.)
9.2. Encroachments, Restrictions, Etc.
-----------------------------------
If any of the Leased Improvements, at any time, materially encroach
upon any property, street or right of way adjacent to a Leased Property, or
violate the agreements or conditions contained in any lawful restrictive
covenant or other agreement affecting a Leased Property, or any part thereof, or
impair the rights of others under any easement or right of way to which said
25
Leased Property is subject, then promptly upon the request of Lessor or at the
behest of any person affected by any such encroachment, violation or impairment,
Lessee shall, at its expense, subject to its right to contest the existence of
any encroachment, violation or impairment and, in such case, in the event of an
adverse final determination, either (a) obtain valid and effective waivers or
settlements of all claims, liabilities and damages resulting from each such
encroachment, violation or impairment, whether the same shall affect Lessor or
Lessee or (b) make such changes in the Leased Improvements, and take such other
actions, as Lessee in the good faith exercise of its judgment deems reasonably
practicable to remove such encroachment, and to end such violation or
impairment, including, if necessary, the alteration of any of the Leased
Improvements, and in any event take all such actions as may be necessary in
order to be able to continue the operation of the Leased Improvements for the
Primary Intended Use substantially in the manner and to the extent the Leased
Improvements were operated prior to the assertion of such violation, impairment
or encroachment. Any such alteration shall be made in conformity with the
applicable requirements of Article 10. Lessee's obligations under this Section
9.2 shall be in addition to and shall in no way discharge or diminish any
obligation of any insurer under any policy of title or other insurance held by
Lessor.
ARTICLE
-------
10
10.1. Alterations.
------------
After first obtaining the written approval of Lessor, which shall not
be unreasonably withheld, Lessee shall have the right, but not the obligation,
to make such additions, modifications or improvements to the Leased Property
from time to time as Lessee deems desirable for its permitted uses and purposes,
provided that such action will not alter the character or purposes of the Leased
Property or detract from the value or operating efficiency thereof and will not
impair the revenue-producing capability of the Leased Property or adversely
affect the ability of the Lessee to comply with the provisions of this Lease.
All such work shall be performed in a first class manner in accordance with all
applicable governmental rules and regulations and after receipt of all required
permits and licenses. The cost of such additions, modifications or improvements
to the Leased Property shall be paid by Lessee, and all such additions,
modifications and improvements shall, without payment by Lessor at any time, be
included under the terms of this Lease and upon expiration or earlier
termination of this Lease shall pass to and become the property of Lessor.
10.2. Salvage.
-------
All materials which are scrapped or removed in connection with the
making of repairs required by Articles 9 or 10 shall be or become the property
of Lessor or Lessee depending on which party is paying for or providing the
financing for such work.
26
10.3. Lessor Alterations.
--------------------
Lessor shall have the right, but not the obligation, to make such
other additions to the Leased Property as it may reasonably deem appropriate
during the Term, subject to the Lessee's approval which shall not be
unreasonably withheld. All such work shall be done after reasonable notice to
and coordination with Lessee, so as to minimize any disruptions or interference
with the operation of the Facility.
ARTICLE
-------
11
11.1. Liens.
-----
Subject to the provision of Article 12 relating to permitted contests,
Lessee will not directly or indirectly create or allow to remain and will
promptly discharge at its expense any lien, encumbrance, attachment, title
retention agreement or claim upon the Leased Property resulting from the action
or inaction of Lessee, or any attachment, levy, claim or encumbrance in respect
of the Rent, excluding, however, (a) this Lease, (b) the matters, if any,
included as exceptions or insured against in the title policy insuring Lessor's
interest in the Leased Property,(c) restrictions, liens and other encumbrances
which are consented to in writing by Lessor, (d) liens for those taxes which
Lessee is not required to pay hereunder, (e) subleases permitted by Article 21
hereof, (f) liens for Impositions or for sums resulting from noncompliance with
Legal Requirements so long as (1) the same are not yet delinquent or (2) such
liens are in the process of being contested as permitted by Article 12, (g)
liens of mechanics, laborers, suppliers or vendors for sums either disputed or
not yet due provided that any such liens for disputed sums are in the process of
being contested as permitted by Article 12 hereof, and (h) any liens which are
the responsibility of Lessor pursuant to the provisions of Article 32 of this
Lease.
ARTICLE
-------
12
12.1. Permitted Contests.
--------------------
Lessee shall have the right to contest the amount or validity of any
Imposition to be paid by Lessee or any Legal Requirement or any lien,
attachment, levy, encumbrance, charge or claim (any such Imposition, Legal
Requirement, lien, attachment, levy, encumbrance, charge or claim herein
referred to as "Claims") not otherwise permitted by Article 11, by appropriate
legal proceedings in good faith and with due diligence (but this shall not be
deemed or construed in any way to relieve, modify or extend Lessee's covenants
to pay or its covenants to cause to be paid any such charges at the time and in
the manner as in this Article provided), on condition, however, that such legal
proceedings shall not operate to relieve Lessee from its obligations hereunder
and shall not cause the sale or risk the loss of any portion of the Leased
Property, or any part thereof, or cause Lessor or Lessee to be in default under
any mortgage, deed of trust, security deed or other agreement encumbering the
Leased Property or any interest therein. Upon the request of Lessor, Lessee
27
shall either (a) provide a bond or other assurance reasonably satisfactory to
Lessor that all Claims which may be assessed against the Leased Property
together with interest and penalties, if any, thereon and legal fees anticipated
to be incurred in connection therewith will be paid, or (b) deposit within the
time otherwise required for payment with a bank or trust company as trustee upon
terms reasonably satisfactory to Lessor, as security for the payment of such
Claims, money in an amount sufficient to pay the same, together with interest
and penalties thereon and legal fees anticipated to be incurred in connection
therewith, as to all Claims which may be assessed against or become a Claim on
the Leased Property, or any part thereof, in said legal proceedings. Lessee
shall furnish Lessor and any lender of Lessor with reasonable evidence of such
deposit within five days of the same. Lessor agrees to join in any such
proceedings if the same be required to legally prosecute such contest of the
validity of such Claims; provided, however, that Lessor shall not thereby be
subjected to any liability for the payment of any costs or expenses in
connection with any proceedings brought by Lessee; and Lessee covenants to
indemnify and save harmless Lessor from any such costs or expenses. Lessee
shall be entitled to any refund of any Claims and such charges and penalties or
interest thereon which have been paid by Lessee or paid by Lessor and for which
Lessor has been fully reimbursed. In the event that Lessee fails to pay any
Claims when due or to provide the security therefor as provided in this
paragraph and to diligently prosecute any contest of the same, Lessor may, upon
ten days advance Notice to Lessee, pay such charges together with any interest
and penalties and the same shall be repayable by Lessee to Lessor as Additional
Charges at the next Payment Date provided for in this Lease. Provided, however,
that should Lessor reasonably determine that the giving of such Notice would
risk loss to the Leased Property or cause damage to Lessor, then Lessor shall
only give such Notice as is practical under the circumstances. Lessor reserves
the right to contest any of the Claims at its expense not pursued by Lessee.
Lessor and Lessee agree to cooperate in coordinating the contest of any Claims.
ARTICLE
-------
13
13.1. General Insurance Requirements.
---------------------------------
(a) Coverages. During the Term of this Lease, the Leased Property
---------
shall at all times be insured with the kinds and amounts of insurance described
below. This insurance shall be written by companies authorized to issue
insurance in the State. The policies must name the Lessor as an additional
named insured, and the Manager shall also be named as an additional insured
under the coverages described in Sections 13.1(a) (iv) through (xi). Losses
shall be payable to Lessor or Lessee as provided in this Lease. Any loss
adjustment for coverages insuring both parties shall require the written consent
of Lessor and Lessee, each acting reasonably and in good faith. Evidence of
insurance shall be deposited with Lessor. The policies on the Leased Property,
including the Leased Improvements, Fixtures and Lessee's Personal Property,
shall satisfy the requirements of the Franchise Agreement and of any ground
lease, mortgage, security agreement or other financing lien affecting the Leased
Property and at a minimum shall include:
28
(i) Building insurance on the "Special Form" (formerly "All
Risk" form) (including earthquake and flood in reasonable amounts if and as
determined by Lessor, in the exercise of its reasonable discretion, or
Lessor's underwriters or lenders) in an amount not less than 100% of the
then full replacement cost thereof (as defined in Section 13.2) or such
other amount which is acceptable to Lessor, and personal property insurance
on the "Special Form" in the full amount of the replacement cost thereof;
(ii) Insurance for loss or damage (direct and indirect) from
steam boilers, pressure vessels or similar apparatus, air conditioning
systems, piping and machinery, and sprinklers, if any, now or hereafter
installed in the Facility, in the minimum amount of $5,000,000 or in such
greater amounts as are then customary or as may be reasonably requested by
Lessor from time to time;
(iii) Loss of income insurance on the "Special Form", in the
amount of 18 months of the sum of Initial Fixed Rent or Base Rent plus
Percentage Rent (based on the last Lease Year of operation or, to the
extent the Leased Property has not been operated for an entire 18-month
Lease Year, based on prorated Percentage Rent) for the benefit of Lessor,
and business interruption insurance on the "Special Form" in the amount of
18 months of gross profit, for the benefit of Lessee;
(iv) Commercial general liability insurance, with amounts not
less than $1,000,000 combined single limit for each occurrence and
$2,000,000 for the aggregate of all occurrences within each policy year, as
well as excess liability (umbrella) insurance with limits of at least
$25,000,000 per occurrence, covering each of the following: bodily injury,
death, or property damage liability per occurrence, personal and
advertising injury, general aggregate, products and completed operations,
with respect to Lessor, and "all risk legal liability" (including liquor
law or "dram shop" liability, if liquor or alcoholic beverages are served
on the Leased Property) with respect to Lessor and Lessee;
(v) Fidelity bonds or blanket crime policies with limits and
deductibles as may be reasonably determined by Lessor, covering Lessee's
and/or Manager's employees in job classifications normally bonded under
prudent hotel management practices in the United States or otherwise
required by law;
(vi) Workers' compensation insurance to the extent necessary
to protect Lessor, Lessee and the Leased Property against Lessee's and/or
Manager's workman's compensation claims to the extent required by
applicable state laws;
(vii) Comprehensive form vehicle liability insurance for
owned, non-owned, and hired vehicles, in the amount of $1,000,000;
(viii) Garagekeeper's legal liability insurance covering both
comprehensive and collision-type losses with a limit of liability of
$3,000,000 for any one occurrence, of which coverage in excess of
$1,000,000 may be provided by way of an excess liability policy;
29
(ix) Innkeeper's legal liability insurance covering property
of guests while on the Leased Property for which Lessor is legally
responsible with a limit of not less than $2,000 per guest and $50,000 in
any one occurrence or $25,000 annual aggregate;
(x) Safe deposit box legal liability insurance covering
property of guests while in a safe deposit box on the Leased Property for
which Lessor is legally responsible with a limit of not less than $50,000
in any one occurrence; and
(xi) Insurance covering such other hazards (such as plate
glass or other common risks) and in such amounts as may be (A) required by
a Holder, or (B) customary for comparable properties in the area of the
Leased Property and is available from insurance companies, insurance pools
or other appropriate companies authorized to do business in the State at
rates which are economically practicable in relation to the risks covered
as may be reasonably determined by Lessor.
(b) Responsibility for Insurance. Lessor shall obtain the
------------------------------
insurance and pay the premiums for the coverages described in Section 13.1(a)(i)
- - (iii) above (excluding the business interruption insurance for the benefit of
the Lessee in Section 13.1(a)(iii)). Lessee shall obtain the insurance and pay
the premiums for the coverages described in Section 13.1(a)(iii) - (xi) above
(excluding the loss of income insurance for the benefit of the Lessor in Section
13.1(a)(iii)). The Lessee shall also be responsible for any and all deductibles
in connection with such coverages. In the event that Lessor can obtain
comparable insurance coverage required to be carried by Lessee from comparable
insurers and at a cost significantly less than that at which Lessee can obtain
such coverage, the parties shall cooperate in good faith to obtain such coverage
at the lower cost and the Lessee shall pay the premiums therefor.
13.2. Replacement Cost.
------------------
The term "full replacement cost" as used herein shall mean the actual
replacement cost of the Leased Property requiring replacement from time to time
including an increased cost of construction endorsement, if available, and the
cost of debris removal. In the event either party believes that full
replacement cost has increased or decreased at any time during the Term, it
shall have the right to have such full replacement cost redetermined.
13.3. (Intentionally omitted)
------------------------
13.4. Waiver of Subrogation.
------------------------
All insurance policies covering the Leased Property, the Fixtures, the
Facility or Lessee's Personal Property, including, without limitation, contents,
fire and casualty insurance, shall expressly waive any right of subrogation on
the part of the insurer against the other party. Each party agrees to seek
recovery from any applicable insurance coverage prior to seeking recovery
against the other party.
30
13.5. Form Satisfactory, etc.
-------------------------
All of the policies of insurance referred to in this Article 13 that
are the responsibility of the Lessee shall be written in a form, with
deductibles and by insurance companies satisfactory to Lessor and shall satisfy
the requirements of any ground lease, mortgage, security agreement or other
financing lien on the Leased Property and of the Franchise Agreement. The
Lessee shall pay all of the premiums therefor, and deliver copies of such
policies or certificates thereof to the Lessor prior to their effective date
(and, with respect to any renewal policy, 30 days prior to the expiration of the
existing policy), and in the event of the failure of the Lessee either to effect
such insurance as herein called for or to pay the premiums therefor, or to
deliver such policies or certificates thereof to the Lessor at the times
required, the Lessor shall be entitled, but shall have no obligation, after 10
days' Notice to Lessee (or after less than 10 days' Notice if required to
prevent the expiration of any existing policy), to effect such insurance and pay
the premiums therefor, and to be reimbursed by Lessee for any such premiums upon
written demand therefor. Each insurer mentioned in this Article 13 shall agree,
by endorsement to the policy or policies issued by it, or by independent
instrument furnished to the Lessor that it will give to Lessor 30 days' written
notice before the policy or policies in question shall be materially altered,
allowed to expire or canceled.
13.6. Increase in Limits.
---------------------
If either Lessor or Lessee at any time deems the limits of the
personal injury or property damage under the comprehensive public liability
insurance then carried to be either excessive or insufficient, Lessor and Lessee
shall endeavor in good faith to agree on the proper and reasonable limits for
such insurance to be carried and such insurance shall thereafter be carried with
the limits thus agreed on until further change pursuant to the provisions of
this Section. If the parties fail to agree on such limits, the matter shall be
referred to arbitration as provided for in Section 40.2.
13.7. Blanket Policy.
----------------
Notwithstanding anything to the contrary contained in this Article 13,
Lessee may bring the insurance provided for herein within the coverage of a
so-called blanket policy or policies of insurance carried and maintained by
Lessee; provided, however, that the coverage afforded to Lessor and Lessee will
not be reduced or diminished or otherwise be different from that which would
exist under a separate policy meeting all other requirements of this Lease by
reason of the use of such blanket policy of insurance, and provided further that
the requirements of this Article 13 are otherwise satisfied.
13.8. Separate Insurance.
-------------------
Neither Lessor nor Lessee shall on its own initiative or pursuant to
the request or requirement of any third party, take out separate insurance
concurrent in form or contributing in the event of loss with that required in
this Article to be furnished, or increase the amount of any then existing
31
insurance by securing an additional policy or additional policies, unless all
parties having an insurable interest in the subject matter of the insurance,
including in all cases Lessor, are included therein as additional insureds, and
the loss is payable under such additional separate insurance in the same manner
as losses are payable under this Lease. Each party shall immediately notify the
other party that it has obtained any such separate insurance or of the
increasing of any of the amounts of the then existing insurance.
13.9. Reports On Insurance Claims.
-------------------------------
Lessee shall promptly investigate and make a complete and timely
written report to the appropriate insurance company as to all accidents, all
claims for damage relating to the ownership, operation, and maintenance of the
Facility, and any damage or destruction to the Facility and the estimated cost
of repair thereof and shall prepare any and all reports required by any
insurance company in connection therewith. All such reports shall be timely
filed with the insurance company as required under the terms of the insurance
policy involved, and a copy of all such reports shall be furnished to Lessor.
Lessee shall be authorized to adjust, settle or compromise any insurable loss,
or to execute proofs of such losses, in the aggregate, of $10,000 or less, with
respect to any single casualty or other event.
ARTICLE
-------
14
14.1. Insurance Proceeds.
--------------------
Subject to the provision of Section 13.9, all proceeds of the
insurance contemplated by Sections 13.1(a) (i) and (ii) payable by reason of any
loss or damage to the Leased Property, or any portion thereof, and insured under
any policy of insurance required by Article 13 of this Lease shall be paid to
Lessor and held in trust in an interest bearing account and made available, if
applicable, for reconstruction or repair, as the case may be, of any damage to
or destruction of the Leased Property or any portion thereof, and, if
applicable, shall be paid out by Lessor from time to time for the reasonable
costs of such reconstruction or repair upon satisfaction of reasonable terms and
conditions specified by Lessor. Any excess proceeds of insurance remaining
after the completion of the restoration or reconstruction of the Leased Property
shall be paid to Lessor. If neither Lessor nor Lessee is required or elects to
repair and restore, and the Lease is terminated as described in Section 14.2,
all such insurance proceeds shall be retained by Lessor except for any amount
thereof paid with respect to Lessee's Personal Property. All salvage resulting
from any risk covered by insurance shall belong to Lessor, except to the extent
of salvage relating to Lessee's Personal Property.
14.2. Reconstruction in the Event of Damage or Destruction Covered by
--------------------------------------------------------------------
Insurance.
----------
(a) If during the Term the Leased Property is totally or partially
destroyed by a risk covered by the insurance described in Article 13 and the
Facility thereby is rendered Unsuitable for its Primary Intended Use, the Lease
shall terminate as of the date of the casualty and neither Lessor nor Lessee
shall have any further liability hereunder except for any liabilities which have
32
arisen prior to or which survive such termination, and Lessor shall be entitled
to retain all insurance proceeds except for any amount thereof paid with respect
to Lessee's Personal Property.
(b) If during the Term the Leased Property is partially destroyed
by a risk covered by the insurance described in Article 13, but the Facility is
not thereby rendered Unsuitable for its Primary Intended Use, Lessor or, at the
election of Lessor, Lessee shall restore the Facility to substantially the same
condition as existed immediately before the damage or destruction and otherwise
in accordance with the terms of the Lease. Such damage or destruction shall not
terminate this Lease. If Lessee restores the Facility, the insurance proceeds
shall be paid out by Lessor from time to time for the reasonable costs of such
restoration upon satisfaction of terms and conditions specified by Lessor, and
any excess proceeds remaining after such restoration shall be paid to Lessor
except for any amount thereof paid with respect to Lessee's Personal Property.
(c) If the cost of the repair or restoration exceeds the amount of
proceeds received by Lessor from the insurance required under Article 13, Lessor
shall agree to contribute any excess amounts needed to restore the Facility
prior to requiring Lessee to commence such work. Such difference shall be made
available by Lessor, together with any other insurance proceeds, for application
to the cost of repair and restoration in accordance with the provisions of
Section 14.2(b).
14.3. Reconstruction in the Event of Damage or Destruction Not Covered by
--------------------------------------------------------------------
Insurance or When Holder Will Not Release Insurance Proceeds.
------------------------------------------------------------------
If during the Term the Facility is totally or materially damaged or
destroyed by a risk not covered by the insurance described in Article 13, or,
notwithstanding the provisions of Section 14.2(b), if the Holder will not make
the proceeds of such insurance available to Lessor for restoration of the
Facility, whether or not in either event such damage or destruction renders the
Facility Unsuitable for its Primary Intended Use, Lessor, at its option, shall
either, (a) at Lessor's sole cost and expense, restore the Facility to
substantially the same condition it was in immediately before such damage or
destruction and such damage or destruction shall not terminate this Lease, or
(b) terminate the Lease and neither Lessor nor Lessee shall have any further
liability thereunder except for any liabilities which have arisen or occurred
prior to such termination and those which expressly survive termination of this
Lease. If such damage or destruction is determined by Lessor not to be
material, Lessor may, at Lessor's sole cost and expense, restore the Facility to
substantially the same condition as existed immediately before the damage or
destruction and otherwise in accordance with the terms of the Lease, and such
damage or destruction shall not terminate the Lease.
14.4. Lessee's Property and Business Interruption Insurance.
-----------------------------------------------------------
All insurance proceeds payable by reason of any loss of or damage to
any of Lessee's Personal Property and the business interruption insurance
33
maintained for the benefit of Lessee shall be paid to Lessee; provided, however,
no such payments shall diminish or reduce the insurance payments otherwise
payable to or for the benefit of Lessor hereunder.
14.5. Abatement of Rent.
Any damage or destruction due to casualty notwithstanding, and
provided the Lease has not otherwise been terminated, this Lease shall remain in
full force and effect and Lessee's obligation to pay Rent required by this Lease
shall remain unabated by any damage or destruction which does not result in a
reduction of Gross Revenues. If and to the extent that any damage or
destruction results in a reduction of Gross Revenues which would otherwise be
realizable from the operation of the Facility, then Lessor shall receive all
loss of income insurance and Lessee shall have no obligation to pay Rent in
excess of the amount of Percentage Rent, if any, realizable from Gross Revenues
generated by the operation of the Leased Property during the existence of such
damage or destruction.
ARTICLE
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15
15.1. Definition.
-----------
(a) "Condemnation" means a Taking resulting from (1) the exercise
of any governmental power, whether by legal proceedings or otherwise, by a
Condemnor, and (2) a voluntary sale or transfer by Lessor to any Condemnor,
either under threat of condemnation or while legal proceedings for condemnation
are pending.
(b) "Date of Taking" means the date the Condemnor has the right to
possession of the property being condemned.
(c) "Award" means all compensation, sums or anything of value
awarded, paid or received on a total or partial Condemnation.
(d) "Condemnor" means any public or quasi-public authority, or
private corporation or individual, having the power of Condemnation.
15.2. Parties' Rights and Obligations.
-----------------------------------
If during the Term there is any Condemnation of all or any part of the
Leased Property or any interest in this Lease, the rights and obligations of
Lessor and Lessee shall be determined by this Article 15.
15.3. Total Taking.
--------------
If title to the fee of the whole of the Leased Property is condemned
by any Condemnor, this Lease shall cease and terminate as of the Date of Taking
by the Condemnor. If title to the fee of less than the whole of the Leased
Property is so taken or condemned, which nevertheless renders the Leased
34
Property Unsuitable for its Primary Intended Use or Uneconomic for its Primary
Intended Use, then either Lessee or Lessor shall have the option, by notice to
the other, at any time prior to the Date of Taking, to terminate this Lease as
of the Date of Taking. Upon such date, if such Notice has been given, this
Lease shall thereupon cease and terminate. All Base Rent, Percentage Rent and
Additional Charges paid or payable by Lessee hereunder shall be apportioned as
of the Date of Taking, and Lessee shall promptly pay Lessor such amounts.
15.4. Allocation of Award.
----------------------
The total Award made with respect to the Leased Property or for loss
of rent, or for Lessor's loss of business beyond the Term, shall be solely the
property of and payable to Lessor. Any Award made for loss of Lessee's business
during the remaining Term, if any, for the taking of Lessee's Personal Property,
or for removal and relocation expenses of Lessee in any such proceedings shall
be the sole property of and payable to Lessee. In any Condemnation proceedings
Lessor and Lessee shall each seek its Award in conformity herewith, at its
respective expense; provided, however, neither Lessor nor Lessee shall initiate,
prosecute or acquiesce in any proceedings that may result in a diminution of any
Award payable to the other.
15.5. Partial Taking.
----------------
(a) If title to less than the whole of the Leased Property is
condemned, and the Leased Property is not Unsuitable for its Primary Intended
Use or Uneconomic for its Primary Intended Use, or if Lessor is entitled but
elects not to terminate this Lease as provided in Section 15.3, then Lessor or,
at Lessor's election, Lessee shall, with all reasonable dispatch and to the
extent that the Holder permits the application of the Award therefor and the
Award is sufficient therefor, restore the untaken portion of any Leased
Improvements so that such Leased Improvements constitute a complete
architectural unit of the same general character and condition (as nearly as may
be possible under the circumstances) as the Leased Improvements existing
immediately prior to the Condemnation. Lessor and Lessee shall each contribute
to the cost of restoration that part of its Award specifically allocated to such
restoration, if any, together with severance and other damages awarded for the
taken Leased Improvements; provided, however, that the amount of such
contribution shall not exceed such cost.
(b) In the event of a partial Taking as described in Section 15.5(a),
which does not result in a termination of this Lease by Lessor, the Base Rent
shall be abated in the manner and to the extent that is fair, just and equitable
to both Lessee and Lessor, taking into consideration, among other relevant
factors, the number of usable rooms, the amount of square footage, or the
revenues affected by such partial Taking. If Lessor and Lessee are unable to
agree upon the amount of such abatement within 30 days after such partial
Taking, the matter shall be submitted to Arbitration as provided for in Section
40.2 hereof.
35
15.6. Temporary Taking.
------------------
If the whole or any part of the Leased Property or of Lessee's
interest under this Lease is condemned by any Condemnor for its temporary use or
occupancy, this Lease shall not terminate by reason thereof, and Lessee shall
continue to pay, in the manner and at the times herein specified, the full
amounts of Base Rent and Additional Charges, but only to the extent of the Award
made to Lessee for such Condemnation allocable to the Term. In addition, to the
extent of the remaining balance, if any, of the Award made for such Condemnation
allocable to the Term (after payment of Base Rent and Additional Charges),
Lessee shall pay Percentage Rent at a rate equal to the average Percentage Rent
during the last three preceding full Lease Years (or if three full Lease Years
shall not have elapsed, the average during the preceding full Lease Years).
Except only to the extent that Lessee may be prevented from so doing pursuant to
the terms of the order of the Condemnor, Lessee shall continue to perform and
observe all of the other terms, covenants, conditions and obligations hereof on
the part of the Lessee to be performed and observed, as though such Condemnation
had not occurred. In the event of any Condemnation as in this Section 15.6
described, the entire amount of any Award made for such Condemnation allocable
to the Term of this Lease, whether paid by way of damages, rent or otherwise,
shall be paid to Lessee. Lessee covenants that upon the termination of any such
period of temporary use or occupancy it will, to the extent that its Award is
sufficient therefor and subject to Lessor's contribution as set forth below,
restore the Leased Property as nearly as may be reasonably possible to the
condition in which the same was immediately prior to such Condemnation, unless
such period of temporary use or occupancy extends beyond the expiration of the
Term, in which case Lessee shall not be required to make such restoration. If
restoration is required hereunder, Lessor shall contribute to the cost of such
restoration that portion of its entire Award that is specifically allocated to
such restoration in the judgment or order of the court, if any.
ARTICLE
-------
16
16.1. Events of Default.
--------------------
Any one or more of the following events shall constitute an Event of
Default hereunder:
(a) if Lessee fails to make any payment of Intial Fixed Rent, Base
Rent or Percentage Rent or Additional Charges within ten days after receipt by
Lessee of Notice from Lessor that the same has become due and payable, provided
that Lessor shall not be required to give any such Notice more than twice in any
Lease Year and that any third or subsequent failure by Lessee during such Lease
Year to make any payment of Intial Fixed Rent, Base Rent or Percentage Rent on
the date the same becomes due and payable shall constitute an immediate Event of
Default; or
(b) if Lessee fails to observe or perform any other term, covenant
or condition of this Lease and such failure is not curable, or if curable is not
cured by Lessee within a period of 30 days after receipt by the Lessee of Notice
36
thereof from Lessor, unless such failure is curable but cannot with due
diligence be cured within a period of 30 days, in which case it shall not be
deemed an Event of Default if (i) Lessee, within such 30 day period, proceeds
with due diligence to cure the failure and thereafter diligently completes the
curing thereof within 120 days of Lessor's Notice to Lessee, which 120-day
period shall cease to run during any period that a cure of such failure is
prevented by an Unavoidable Delay and shall resume running upon the cessation of
such Unavoidable Delay, and (ii) the failure does not result in a notice or
declaration of default under any material contract or agreement to which Lessor,
the Company, or any Affiliate of either of them is a party or by which any of
their assets are bound; or
(c) if Lessee or Manager shall (i) be generally not paying its
debts as they become due, (ii) file, or consent by answer or otherwise to the
filing against it of, a petition for relief or reorganization or arrangement or
any other petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, (iii) make an assignment for
the benefit of its creditors, (iv) consent to the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect to it or
with respect to any substantial part of its assets, (v) be adjudicated insolvent
or (vi) take corporate action for the purpose of any of the foregoing; or if a
court or governmental authority of competent jurisdiction shall enter an order
appointing, without consent by Lessee, a custodian, receiver, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of its assets, or if an order for relief shall be entered in
any case or proceeding for liquidation or reorganization or otherwise to take
advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of Lessee, or if any petition for any
such relief shall be filed against Lessee and such petition shall not be
dismissed within 60 days; or
(d) if Lessee or Manager is liquidated or dissolved, or begins
proceedings toward such liquidation or dissolution, or, in any manner, ceases to
do business or permits the sale or divestiture of substantially all of its
assets; or
(e) if the estate or interest of Lessee in the Leased Property or
any part thereof is voluntarily or involuntarily transferred, assigned,
conveyed, levied upon or attached in any Proceeding (for purposes of this
Section 16.1(e), a Change of Control shall constitute an assignment of this
Lease); or
(f) if, except as a result of and to the extent required by
damage, destruction, Condemnation, Lessee ceases operations on the Leased
Property; or
(g) if the Franchise Agreement with respect to the Facility on the
Leased Property is terminated by the franchisor as a result of any action or
failure to act by the Lessee or its agents, other than the failure to complete
improvements required by the franchisor because the Lessor fails to pay the
costs of such improvements; or
(h) if an Event of Default occurs under any of the Other Leases.
37
If litigation or arbitration is commenced with respect to any alleged
default under this Lease, the prevailing party in such litigation shall receive,
in addition to its damages incurred, such sum as the court shall determine as
its reasonable attorneys' fees, and all costs and expenses incurred in
connection therewith.
16.2. Remedies.
---------
Upon the occurrence of an Event of Default, Lessor shall have the right, at
Lessor's option, to elect to do any one or more of the following without further
notice or demand to Lessee: (a) terminate this Lease, in which event Lessee
shall immediately surrender the Leased Property to Lessor, and, if Lessee fails
to so surrender, Lessor shall have the right, without notice, to enter upon and
take possession of the Leased Property and to expel or remove Lessee and its
effects without being liable for prosecution or any claim for damages therefor;
and Lessee shall, and hereby agrees to, indemnify Lessor for all loss and damage
which Lessor suffers by reason of such termination, including without
limitation, damages in an amount equal to the total of (1) the reasonable costs
of recovering the Leased Property in the event that Lessee does not promptly
surrender the Leased Property, and all other reasonable expenses incurred by
Lessor in connection with Lessee's default; and (2) the unpaid Rent earned as of
the date of termination, plus interest at the Overdue Rate accruing after the
due date; (3) the total Rent (including Percentage Rent as determined below)
which Lessor would have received under this Lease for the remainder of the Term,
but discounted to the then present value at a rate of 12% per annum, less the
fair market rental value of the balance of the Term as of the time of such
default discounted to the then present value at a rate of 12% per annum; and (4)
all other sums of money and damages owing by Lessee to Lessor; or (b) enter upon
and take possession of the Leased Property without terminating this Lease and
without being liable to prosecution or any claim for damages therefor, and, if
Lessor elects, relet the Leased Property on such terms as Lessor deems
advisable, in which event Lessee shall pay to Lessor on demand the reasonable
cost of repossessing the Leased Property and any deficiency between the Rent
payable hereunder (including Percentage Rent as determined below) and the rent
paid under such reletting; provided, however, that Lessee shall not be entitled
to any excess payments received by Lessor from such reletting (Lessor's failure
to relet the Leased Property shall not release or affect Lessee's liability for
Rent or for damages); or (c) enter the Leased Property without terminating this
Lease and without being liable for prosecution or any claim for damages therefor
and maintain the Leased Property and repair or replace any damage thereto or do
anything for which Lessee is responsible hereunder. Lessee shall reimburse
Lessor immediately upon demand for any expense which Lessor incurs in thus
effecting Lessee's compliance under this Lease, and Lessor shall not be liable
to Lessee for any damages with respect thereto. Notwithstanding anything herein
to the contrary, Lessee shall not be liable to Lessor for consequential,
punitive or exemplary damages.
The rights granted to Lessor in this Section 16.2 shall be cumulative
of every other right or remedy provided in this Lease or which Lessor may
otherwise have at law or in equity or by statute, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies or constitute a forfeiture or
38
waiver of Rent or damages accruing to Lessor by reason of any Event of Default
under this Lease.
Percentage Rent for the purposes of this Section 16.2 shall be a sum
equal to (i) the average of the annual amounts of the Percentage Rent for the
three full Lease Years immediately preceding the Lease Year in which the
termination, re-entry or repossession takes place, or (ii) if three full Lease
Years shall not have elapsed, the average of the Percentage Rent during the
preceding full Lease Years during which the Lease was in effect, or (iii) if one
full Lease Year has not elapsed, the amount derived by annualizing the
Percentage Rent from the effective date of this Lease.
16.3. Waiver.
-------
Each party waives, to the extent permitted by applicable law, any
right to a trial by jury in any proceedings brought by either party to enforce
the provisions of this Lease, including, without limitation, proceedings to
enforce the remedies set forth in this Article 16, and Lessee waives the benefit
of any laws now or hereafter in force exempting property from liability for rent
or for debt. Lessor waives any right to "pierce the corporate veil" of Lessee
other than to the extent funds shall have been paid to any Affiliate of Lessee
following a default leading to any Event of Default, and then only to the extent
of such payments.
16.4. Application of Funds.
-----------------------
Any payments received by Lessor under any of the provisions of this
Lease during the existence or continuance of any Event of Default shall be
applied to Lessee's obligations in the order that Lessor may determine or as may
be prescribed by the laws of the State.
ARTICLE
-------
17
17.1. Lessor's Right to Cure Lessee's Default.
---------------------------------------------
If Lessee fails to make any payment or to perform any act required to
be made or performed under this Lease including, without limitation, Lessee's
failure to comply with the terms of any Franchise Agreement, and fails to cure
the same within the relevant time periods provided in Section 16.1, Lessor,
without waiving or releasing any obligation of Lessee, and without waiving or
releasing any obligation or default, may (but shall be under no obligation to)
at any time thereafter upon Notice to Lessee make such payment or perform such
act for the account and at the expense of Lessee, and may, to the extent
permitted by law, enter upon the Leased Property for such purpose and, subject
to Section 16.2, take all such action thereon as, in Lessor's opinion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction of
Lessee. All sums so paid by Lessor and all costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses, in each case to the
extent permitted by law) so incurred, together with a late charge thereon (to
the extent permitted by law) at the Overdue Rate from the date on which such
sums or expenses are paid or incurred by Lessor, shall be paid by Lessee to
39
Lessor on demand. The obligations of Lessee and rights of Lessor contained in
this Article shall survive the expiration or earlier termination of this Lease.
ARTICLE
-------
18
18.1. Personal Property Limitation.
--------------------------------
(a) Anything contained in this Lease to the contrary
notwithstanding, the average of the adjusted tax bases of the items of Lessor's
personal property that are leased to Lessee under this Lease at the beginning
and at the end of any Lease Year shall not exceed 15% of the average of the
aggregate adjusted tax bases of the real and personal property contained in the
Leased Property at the beginning and at the end of such Lease Year (the
"Personal Property Limitation"). If Lessor reasonably anticipates that the
Personal Property Limitation will be exceeded with respect to the Leased
Property for any Lease Year, Lessor shall notify Lessee, and Lessee shall
purchase items of personal property anticipated by Lessor to be in excess of the
Personal Property Limitation ("Excess Personal Property Items") either from
Lessor or a third party. If the Excess Personal Property Items are purchased
from Lessor, the purchase prices of such Excess Personal Property Items shall be
equal to the adjusted tax bases of such Excess Personal Property Items in the
hands of Lessor as of the closing of the purchase.
(b) If Lessee purchases Excess Personal Property Items, the Rent
shall be reduced for the calendar quarter in which such purchase occurs and each
of four succeeding calendar quarters by an amount each calendar quarter equal to
20% of the aggregate purchase prices of such Excess Personal Property Items.
(c) If Lessee purchases Excess Personal Property Items, the amount
required by Lessor to be deposited in the Capital Expenditure Reserve pursuant
to Article 38 hereof shall be reduced for the Lease Year during which such
purchase occurs by an amount equal to the aggregate purchase prices of such
Excess Personal Property Items.
18.2. Sublease Rent Limitation.
---------------------------
Anything contained in this Lease to the contrary notwithstanding,
Lessee shall not sublet the Leased Property or enter into any similar
arrangement on any basis such that the rental or other amounts to be paid by the
sublessee thereunder would be based, in whole or in part, on either (a) the net
income or profits derived by the business activities of the sublessee, or (b)any
other formula such that any portion of the Rent would fail to qualify as "rents
from real property" within the meaning of Section 856(d) of the Code, or any
similar or successor provision thereto.
18.3. Sublease Lessee Limitation.
-----------------------------
Anything contained in this Lease to the contrary notwithstanding,
Lessee shall not sublease the Leased Property to, or enter into any similar
arrangement with, any Person in which the Company owns, directly or indirectly,
40
a 10% or greater interest, within the meaning of Section 856(d) (2) (B) of the
Code, or any similar or successor provisions thereto.
18.4. Lessee Ownership Limitation.
------------------------------
Anything contained in this Lease to the contrary notwithstanding,
neither party shall take, or permit to take, any action that would cause the
Company to own, directly or indirectly, a 10% or greater interest in the Lessee
within the meaning of Section 856(d) (2) (B) of the Code, or any similar or
successor provision thereto.
18.5. Director, Officer and Employee Limitation.
----------------------------------------------
Anything contained in this Lease to the contrary notwithstanding,
Lessor and Lessee shall cooperate to ensure that (i) no officers or employees of
Lessor or the Company shall be officers or employees of, or own any ownership
interest in, any Person who furnishes or renders services to the tenants of the
Leased Property, or manages or operates the Leased Property, other than the
Lessee and (ii) no officers or employees of any Person who furnishes or renders
services to the tenants of the Leased Property, or manages or operates the
Leased Property, other than the Lessee shall be officers or employees of Lessor
or the Company. Furthermore, if a Person serves as both (a) a director or
trustee of Lessor, the Company or any other Affiliate of Lessor and (b) a
director and officer (or employee) of the any Person who furnishes or renders
services to the tenants of the Leased Property, or manages or operates the
Leased Property, other than the Lessee, that Person shall not receive any
compensation (excluding reimbursement for expenses) for serving as a trustee of
the Lessor, the Company or the other Affiliate of Lessor.
ARTICLE
-------
19
19.1. Holding Over.
--------------
If Lessee for any reason remains in possession of the Leased Property
after the expiration or earlier termination of the Term, such possession shall
be as a tenant at sufferance during which time Lessee shall pay as rental each
month the aggregate of (a) one-twelfth of the aggregate Base Rent and Percentage
Rent payable with respect to the last Lease Year of the Term, (b)all Additional
Charges accruing during the applicable month and (c) all other sums, if any,
payable by Lessee under this Lease with respect to the Leased Property. During
such period, Lessee shall be obligated to perform and observe all of the terms,
covenants and conditions of this Lease, but shall have no rights hereunder other
than the right, to the extent given by law to tenancies at sufferance, to
continue its occupancy and use of the Leased Property. Nothing contained herein
shall constitute the consent, express or implied, of Lessor to the holding over
of Lessee after the expiration or earlier termination of this Lease.
41
ARTICLE
-------
20
20.1. Indemnification.
----------------
Subject to the last sentence of Section 13.4, Lessee will protect,
indemnify, hold harmless and defend Lessor Indemnified Parties from and against
all liabilities, obligations, claims, damages, penalties, causes of action,
costs and expenses (including, without limitation, reasonable attorneys' fees
and expenses), to the extent permitted by law, including those resulting from a
Lessor Indemnified Party's own negligence but excluding those resulting from a
Lessor Indemnified Party's gross negligence or willful misconduct, imposed upon
or incurred by or asserted against Lessor Indemnified Parties by reason of: (a)
any accident, injury to or death of persons or loss of or damage to property
occurring on or about the Leased Property or adjoining sidewalks, including
without limitation any claims under liquor liability, "dram shop" or similar
laws, (b) any past, present or future use, misuse, non-use, condition,
management, maintenance or repair by Lessee or any of its agents, employees or
invitees of the Leased Property or Lessee's Personal Property or any litigation,
proceeding or claim by governmental entities or other third parties to which a
Lessor Indemnified Party is made a party or participant related to such use,
misuse, non-use, condition, management, maintenance, or repair thereof by Lessee
or any of its agents, employees or invitees, including any failure of Lessee or
any of its agents, employees or invitees to perform any obligations under this
Lease or imposed by applicable law (other than arising out of Condemnation
proceedings), (c) any Impositions, other than any portion of Real Estate Taxes
that the Lessor is obligated to pay under this Lease, (d) any failure on the
part of Lessee to perform or comply with any of the terms of this Lease, and (e)
the nonperformance of any of the terms and provisions of any and all existing
and future subleases of the Leased Property to be performed by the landlord
thereunder.
Subject to the last sentence of Section 13.4, Lessor shall indemnify,
save harmless and defend Lessee Indemnified Parties from and against all
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses imposed upon or incurred by or asserted against Lessee Indemnified
Parties as a result of (a) the gross negligence or willful misconduct of Lessor
arising in connection with this Lease or (b) any failure on the part of Lessor
to perform or comply with any of the terms of this Lease.
Any amounts that become payable by an Indemnifying Party under this
Section shall be paid within ten days after liability therefor on the part of
the Indemnifying Party is determined by litigation or otherwise, and if not
timely paid, shall bear a late charge (to the extent permitted by law) at the
Overdue Rate from the date of such determination to the date of payment. Any
such amounts shall be reduced by insurance proceeds received and any other
recovery (net of costs) obtained by the Indemnified Party. An Indemnifying
Party, at its expense, shall contest, resist and defend any such claim, action
or proceeding asserted or instituted against the Indemnified Party. The
Indemnified Party, at its expense, shall be entitled to participate in any such
claim, action, or proceeding, and the Indemnifying Party may not compromise or
otherwise dispose of the same without the consent of the Indemnified Party,
which may not be unreasonably withheld. Nothing herein shall be construed as
indemnifying a Lessor Indemnified Party against its own grossly negligent acts
or omissions or willful misconduct.
42
Lessee's or Lessor's liability for a breach of the provisions of this
Article shall survive any termination of this Lease.
ARTICLE
-------
21
21.1. Subletting and Assignment.
----------------------------
In addition to the provisions of Article 18 and Sections 21.2, 21.3
and any other express consents, conditions, limitations or other provisions set
forth herein and in the Lease Master Agreement, Lessee shall not assign this
Lease or hereafter sublease all or any part of the Leased Property without first
obtaining the written consent of Lessor. In the case of a permitted subletting,
the sublessee shall comply with the provisions of Section 21.2 and 21.3, and in
the case of a permitted assignment, the assignee shall assume in writing and
agree to keep and perform all of the terms of this Lease on the part of Lessee
to be kept and performed and shall be, and become, jointly and severally liable
with Lessee for the performance thereof. In case of either an assignment or
subletting made during the Term, Lessee shall remain primarily liable, as
principal rather than as surety, for the prompt payment of the Rent and for the
performance and observance of all of the covenants and conditions to be
performed by Lessee hereunder. An original counterpart of each such sublease
and assignment and assumption, duly executed by Lessee and such sublessee or
assignee, as the case may be, in form and substance satisfactory to Lessor,
shall be delivered promptly to Lessor.
21.2. Attornment.
----------
Lessee shall insert in each future sublease permitted under Section
21.1 provisions to the effect that (a) such sublease is subject and subordinate
to all of the terms and provisions of this Lease and to the rights of Lessor
hereunder, (b) if this Lease terminates before the expiration of such sublease,
the sublessee thereunder will, at Lessor's option, attorn to Lessor and waive
any right the sublessee may have to terminate the sublease or to surrender
possession thereunder as a result of the termination of this Lease, and (c) if
the sublessee receives a written Notice from Lessor or Lessor's assignees, if
any, stating that an uncured Event of Default exists under this Lease, the
sublessee shall thereafter be obligated to pay all rentals accruing under said
sublease directly to the party giving such Notice, or as such party may direct.
All rentals received from the sublessee by Lessor or Lessor's assignees, if any,
as the case may be, shall be credited against the amounts owing by Lessee under
this Lease.
21.3. Management Agreement.
----------------------
If the Lessee decides to enter into a management or agency agreement
relating to the management or operation of the Facility (collectively, the
"Management Agreement"), Lessor shall have the right to approve the Management
Agreement , any modifications to the Management Agreement affecting the fees,
costs or expenses payable or collectible thereunder, and any other material
modification to the Management Agreement. Lessor's approval shall not be
43
unreasonably withheld. The Management Agreement shall provide, among other
things, that (i) upon termination of this Lease or termination of Lessee's right
to possession of the Leased Property for any reason whatsoever, the Management
Agreement may be terminated by Lessor without liability for any payment due or
to become due to the manager of the Facility (the "Manager"), and (ii) all fees
and other amounts payable by Lessee to the Manager shall be subordinate on a
month to month basis to Rent and other amounts payable by Lessee to Lessor
hereunder prior to the existence of an Event of Default, and shall be at all
times subordinate to Rent and such other amounts after the occurrence of an
Event of Default
ARTICLE
-------
22
22.1. Officer's Certificates; Financial Statements; Lessor's Estoppel
--------------------------------------------------------------------
Certificates and Covenants.
-----------------------------
(a) At any time and from time to time upon not less than 10 days
Notice by Lessor, Lessee will furnish to Lessor an Officer's Certificate
certifying that this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications), the date to which the Rent has been paid, whether to the
knowledge of Lessee there is any existing default or Event of Default hereunder
by Lessor or Lessee, and such other information as may be reasonably requested
by Lessor. Any such certificate furnished pursuant to this Section may be
relied upon by Lessor, any lender, any underwriter and any prospective purchaser
of the Leased Property.
(b) Lessee will furnish, at Lessee's cost and expense, the
following statements and operating information to Lessor, each in a form
satisfactory to Lessor:
(i) Consolidated Financials of Lessee for each calendar
quarter of each Lease Year, and for each calendar quarter in the Lease
Year-to-date, within 20 days after the end of such calendar quarter;
(ii) Consolidated Financials of Lessee and each Affiliate of
Lessee, if any, that leases hotel properties from Lessor or its Affiliates,
for each calendar quarter of each Lease Year, and for each calendar quarter
in the Lease Year to date, within 20 days after the end of such calendar
quarter;
(iii) audited Consolidated Financials of Lessee for each
Lease Year, including the auditor's report thereon, within 60 days after
the end of such year;
(iv) audited Consolidated Financials of Lessee and each
Affiliate of Lessee that leases hotel properties from Lessor or its
Affiliates, if any, for each Lease Year, including the auditor's report
thereon, within 60 days after the end of such year. The fees and expenses
of the auditor incurred in connection with conducting such audits and
delivering such reports shall be paid by Lessor;
44
(v) with reasonable promptness, such other information
respecting the financial condition and affairs of Lessee (A) as Lessor or
the Company may require or may deem desirable in its discretion to file
with or provide to the SEC or any other governmental agency or any other
Person, all in the form, and either audited or unaudited, as Lessor may
request in Lessor's reasonable discretion, and (B) as may be reasonably
necessary to confirm compliance by Lessee and its Affiliates with the
requirements of this Lease;
(vi) on or before the 20th day of each calendar quarter, a
balance sheet, and detailed profit and loss and cash flow statements
showing the financial position of the Facility as at the end of the
preceding calendar quarter, the results of operation of the Facility for
such preceding calendar quarter and the Lease Year-to-date and the average
daily rate, occupancy and revenue-per-available room of the Facility in
such preceding calendar quarter;
(vii) within five (5) days of Lessee's receipt thereof, any
inspection reports received from the franchisor under the Franchise
Agreement; and
(viii) such other information as Lessor may reasonably
request and that Lessee can provide without unreasonable expense.
(c) At any time and from time to time upon not less than 10 days
notice by Lessee, Lessor will furnish to Lessee or to any person designated by
Lessee an estoppel certificate certifying that this Lease is unmodified and in
full force and effect (or that this Lease is in full force and effect as
modified and setting forth the modifications), the date to which Rent has been
paid, whether to the knowledge of Lessor there is any existing default or Event
of Default on Lessee's part hereunder, and such other information as may be
reasonably requested by Lessee. Any such certificate furnished pursuant to this
Section may be relied upon by Lessee, any lender, any underwriter and any
purchaser of the assets of Lessee.
(d) If Company or Lessor proposes to include in any submission or
filing with its lender, stock exchange or the SEC, Consolidated Financials of
Lessee delivered or required to be delivered hereunder and the consent of
Lessee's auditor is required for such inclusion, Lessee shall use commercially
reasonable efforts to cause its auditor to deliver promptly to Lessor the
auditor's consent, in the form required, to the inclusion in the submission or
filing of the Consolidated Financials (including the report of the auditor, if
the Consolidated Financials to be included are audited). Lessee shall
reasonably cooperate with Lessor regarding Lessee's auditor's compliance with
such requests with the purpose of minimizing costs and delays. Lessee shall
reasonably cooperate with all requests made by its auditor, Lessor or the SEC to
promptly provide to the auditor, Lessor or SEC such information or documents,
including consents and representation letters, as may be necessary or desirable
in connection with the preparation, delivery, audit or inclusion in SEC filings,
submissions or other public documents, of information, including financial
information, related to the Leased Property, the operation and financial results
of the Leased Property, and the financial results and condition of the Lessee.
Without limiting the foregoing, the information shall be sufficient to permit
45
the preparation of a Management's Discussion and Analysis of Results of
Operations and Financial Condition with respect to the Lessee as may be required
to be included in reports and documents filed by the Company with the SEC.
Lessee shall not be obligated to incur material additional expense to prepare
any reports or information not specifically provided for herein that Lessor or
Company may be required or elect to file with the SEC, and such material
additional third-party costs shall be paid or reimbursed by Lessor.
ARTICLE
-------
23
23.1. Regular Meetings; Lessor's Right to Inspect.
-------------------------------------------------
(a) Lessee agrees that the regional manager, the general manager,
the director of marketing/sales, and the chief engineer for the Facility will
meet with Lessor and its representatives on a monthly basis at the Facility
throughout each Lease Year in order to discuss all aspects of the management,
maintenance and operation of the Facility. If agreed upon by Lessor and Lessee,
such meetings may be held by conference call.
(b) Lessee shall permit Lessor and its authorized representatives,
which may include auditors, underwriters and rating agencies, as frequently as
reasonably requested by Lessor to (i) inspect the Leased Property and Lessee's
accounts and records pertaining thereto, including general accounting records,
corporate records and agreements relating to the operations of the Leased
Property and Lessee's financial condition, and make copies thereof, and (ii)
conduct audits, all during usual business hours upon reasonable advance notice,
subject only to any business confidentiality requirements reasonably requested
by Lessee. In conducting such inspections Lessor shall not unreasonably
interfere with the conduct of Lessee's business at the Leased Property.
(c) Lessee will, on a space available basis, provide customary
gratuitous accommodations to Lessor and its representatives in connection with
all such meetings and inspections.
ARTICLE
-------
24
24.1. No Waiver.
-----------
No failure by Lessor or Lessee to insist upon the strict performance
of any term hereof or to exercise any right, power or remedy consequent upon a
breach thereof, and no acceptance of full or partial payment of Rent during the
continuance of any such breach, shall constitute a waiver of any such breach or
of any such term. To the extent permitted by law, no waiver of any breach shall
affect or alter this Lease, which shall continue in full force and effect with
respect to any other then existing or subsequent breach.
46
ARTICLE
-------
25
25.1. Remedies Cumulative.
---------------------
To the extent permitted by law but subject to Article 39 and any other
provisions of this Lease expressly limiting the rights, powers and remedies of
either Lessor or Lessee, each legal, equitable or contractual right, power and
remedy of Lessor or Lessee now or hereafter provided either in this Lease or by
statute or otherwise shall be cumulative and concurrent and shall be in addition
to every other right, power and remedy, and the exercise or beginning of the
exercise by Lessor or Lessee of any one or more of such rights, powers and
remedies shall not preclude the simultaneous or subsequent exercise by Lessor or
Lessee of any or all of such other rights, powers and remedies.
ARTICLE
-------
26
26.1. Acceptance of Surrender.
--------------------------
No surrender to Lessor of this Lease or of the Leased Property or any
part thereof, or of any interest therein, shall be valid or effective unless
agreed to and accepted in writing by Lessor and no act by Lessor or any
representative or agent of Lessor, other than such a written acceptance by
Lessor, shall constitute an acceptance of any such surrender.
ARTICLE
-------
27
27.1. No Merger of Title.
-----------------------
There shall be no merger of this Lease or of the leasehold estate
created hereby by reason of the fact that the same person or entity may acquire,
own or hold, directly or indirectly: (a) this Lease or the leasehold estate
created hereby or any interest in this Lease or such leasehold estate and (b)
the fee estate in the Leased Property.
ARTICLE
-------
28
28.1. Conveyance by Lessor.
-----------------------
Lessor shall have the unrestricted right to mortgage or otherwise
convey the Leased Property to a Holder. If Lessor conveys the Leased Property
in accordance with the terms hereof other than to a Holder, and the grantee or
transferee of the Leased Property expressly assumes in writing all obligations
of Lessor hereunder arising or accruing from and after the date of such
47
conveyance or transfer, Lessor shall thereupon be released from all future
liabilities and obligations of Lessor under this Lease arising or accruing from
and after the date of such conveyance or other transfer as to the Leased
Property and all such future liabilities and obligations shall thereupon be
binding upon the new owner. If Lessee is not reasonably satisfied that the new
owner is a capable, reliable and qualified Person of good reputation and
character, Lessee may terminate this Lease upon 60-days Notice to Lessor given
within 30 days after Lessee receives Notice of such conveyance.
28.2. Lessor May Grant Liens.
--------------------------
(a) Subject to Section 7.2, without the consent of Lessee, Lessor may
from time to time, directly or indirectly, create or otherwise cause to exist
any lien, encumbrance or title retention agreement upon the Leased Property, or
any portion thereof or interest therein, or upon Lessor's interest in this
Lease, whether to secure any borrowing or other means of financing or
refinancing. This Lease and Lessee's interest hereunder shall at all times be
subject and subordinate to the lien and security title of any deeds to secure
debt, deeds of trust, mortgages, or other interests heretofore or hereafter
granted by Lessor or which otherwise encumber or affect the Leased Property and
to any and all advances to be made thereunder and to all renewals,
modifications, consolidations, replacements, substitutions, and extensions
thereof (all of which are herein called the "Mortgage"), provided that the
Mortgage and all security agreements delivered by Lessor in connection therewith
shall be subject to Lessee's rights under this Lease to receive all Gross
Revenues of the Facility prior to the earlier of the occurrence of an Event of
Default or the date that this Lease is terminated by the Holder of the Mortgage
in the exercise of its remedies thereunder. In confirmation of such
subordination, Lessee shall, at Lessor's request, promptly execute, acknowledge
and deliver any instrument which may be required to evidence subordination to
any Mortgage and attornment to the Holder thereof and its successors and
assigns, provided Lessee receives customary and reasonable non-disturbance
protection while it is not in default hereunder. The Lessee shall comply with
any material covenants with respect to the Lessee contained in such instrument
of subordination. In the event of Lessee's failure to deliver such
subordination and if the Mortgage does not change any term of the Lease, Lessor
may, in addition to any other remedies for breach of covenant hereunder,
execute, acknowledge, and deliver the instrument as the agent or
attorney-in-fact of Lessee, and Lessee hereby irrevocably constitutes Lessor its
attorney-in-fact for such purpose, Lessee acknowledging that the appointment is
coupled with an interest and is irrevocable.
(b) Lessee shall, upon the request of Lessor or any existing or
future Holder, (i) provide Holder with copies of all licenses, permits,
occupancy agreements, operating agreements, leases, contracts and similar
agreements reasonably requested in connection with any existing or proposed
financing of the Leased Property, and (ii) execute, or cause the Manager or any
relevant Affiliate to execute, such estoppel agreements and collateral
assignments with respect to the Facility's liquor license and any of the other
aforementioned agreements as Holder may reasonably request in connection with
any such financing, provided that no such estoppel agreement or collateral
assignment shall in any way affect the Term or affect adversely in any material
respect any rights of Lessee under this Lease.
(c) No act or failure to act on the part of Lessor which would
entitle Lessee under the terms of this Lease, or by law, to be relieved of any
of Lessee's obligations hereunder (including, without limitation, its obligation
48
to pay Rent) or to terminate this Lease, shall result in a release or
termination of such obligations of Lessee or a termination of this Lease unless:
(i) Lessee shall have first given written notice of Lessor's act or failure to
act to the Holder, specifying the act or failure to act on the part of Lessor
which would give basis to Lessee's rights; and (ii) the Holder, after receipt of
such notice, shall have failed or refused to correct or cure the condition
complained of within a reasonable time thereafter (in no event less than 60
days), which shall include a reasonable time for such Holder to obtain
possession of the Leased Property, if possession is reasonably necessary for the
Holder to correct or cure the condition, or to foreclose such Mortgage, and if
the Holder notifies the Lessee of its intention to take possession of the Leased
Property or to foreclosure such Mortgage, and correct or cure such condition.
If such Holder is prohibited by any process or injunction issued by any court or
by reason of any action by any court having jurisdiction or any bankruptcy,
debtor rehabilitation or insolvency proceedings involving Lessor from commencing
or prosecuting foreclosure or other appropriate proceedings in the nature
thereof, provided, however, that the Lease shall continue to be in full force
and effect, the times for commencing or prosecuting such foreclosure or other
proceedings shall be extended for the period of such prohibition.
(d) Lessee shall deliver by notice delivered in the manner
provided in Article 30 to any Holder who gives Lessee written notice of its
status as a Holder, at such Holder's address stated in the Holder's written
notice or at such other address as the Holder may designate by later written
notice to Lessee, a duplicate copy of any and all notices regarding any default
which Lessee may from time to time give or serve upon Lessor pursuant to the
provisions of this Lease. Copies of such notices given by Lessee to Lessor
shall be delivered to such Holder simultaneously with delivery to Lessor. No
such notice by Lessee to Lessor hereunder shall be deemed to have been given
unless and until a copy thereof has been mailed to such Holder.
(e) At any time, and from time to time, upon not less than ten
(10) days' notice by a Holder to Lessee, Lessee shall deliver to such Holder an
estoppel certificate certifying as to the information required in paragraph (c)
of Article 22, and such other information as may be reasonably requested by such
Holder. Any such certificate may be relied upon by such Holder.
(f) Lessee shall cooperate in all reasonable respects, and as
generally described in Section 33.2 of this Lease, with any transfer of the
Leased Property to a Holder that succeeds to the interest of Lessor in the
Leased Property (including, without limitation, in connection with the transfer
of any franchise, license, lease, permit, contract, agreement, or similar item
to such Holder or such Holder's designee necessary or appropriate to operate the
Leased Property). Lessor and Lessee shall cooperate in (i) including in this
Lease by suitable amendment from time to time any provision which may be
requested by any proposed Holder, or may otherwise be reasonably necessary, to
implement the provisions of this Article and (ii) entering into any further
agreement with or at the request of any Holder which may be reasonably requested
or required by such Holder in furtherance or confirmation of the provisions of
this Article; provided, however, that any such amendment or agreement shall not
in any way affect the Term nor affect adversely in any material respect any
rights of Lessor or Lessee under this Lease.
49
ARTICLE
-------
29
29.1. Quiet Enjoyment.
----------------
So long as Lessee pays all Rent as the same becomes due and complies
with all of the terms of this Lease and performs its obligations hereunder, in
each case within the applicable grace and/or cure periods, if any, Lessee shall
peaceably and quietly have, hold and enjoy the Leased Property for the Term
hereof, free of any claim or other action by Lessor or anyone claiming by,
through or under Lessor and not claiming by, through or under Lessee, but
subject to all liens and encumbrances subject to which the Leased Property was
conveyed to Lessor or hereafter consented to by Lessee in writing or provided
for herein. Lessee shall have the right by separate and independent action to
pursue any claim it may have against Lessor as a result of a breach by Lessor of
the covenant of quiet enjoyment contained in this Section.
ARTICLE
-------
30
30.1. Notices.
--------
All notices, demands, requests, consents, approvals and other
communications ("Notice" or "Notices") hereunder shall be in writing and
personally served or mailed (by express or overnight mail, courier, or
registered or certified mail, return receipt requested and postage prepaid), (i)
if to Lessor at 148 Sheraton Drive, Box A, New Cumberland, Pennsylvania 17070,
Attention: Hasu P. Shah, and (ii) if to Lessee at 148 Sheraton Drive, Box A, New
Cumberland, Pennsylvania 17070, Attention: K.D. Patel, or to such other address
or addresses as either party may hereafter designate. Personally delivered
Notices shall be effective upon receipt, and Notice given by mail shall be
deemed received at the time of deposit in the U.S. Mail system or with a
recognized overnight mail courier, but any prescribed period of Notice and any
right or duty to do any act or make any response within any prescribed period or
on a date certain after the service of such Notice given by mail shall be
extended five days.
ARTICLE
-------
31
31.1. Appraisers.
----------
If it becomes necessary to determine the fair market value or fair
market rental of the Leased Property for any purpose of this Lease, then, except
as otherwise expressly provided in this Lease, the party required or permitted
to give Notice of such required determination shall include in the Notice the
name of a person selected to act as appraiser on its behalf. Within 10 days
after Notice, Lessor (or Lessee, as the case may be) shall by Notice to Lessee
(or Lessor, as the case may be) appoint a second person as appraiser on its
behalf. The appraisers thus appointed, each of whom must be a member of the
American Institute of Real Estate Appraisers (or any successor organization
thereto) with at least five years experience in the State appraising property
50
similar to the Leased Property, shall, within 10 days after the date of the
Notice appointing the second appraiser, proceed to appraise the Leased Property
to determine the fair market value or fair market rental thereof as of the
relevant date (giving effect to the impact, if any, of inflation from the date
of their decision to the relevant date); provided, however, that if only one
appraiser shall have been so appointed, then the determination of such appraiser
shall be final and binding upon the parties. If two appraisers are appointed
and if the difference between the amounts so determined does not exceed 5% of
the lesser of such amounts, then the fair market value or fair market rental
shall be an amount equal to 50% of the sum of the amounts so determined. If the
difference between the amounts so determined exceeds 5% of the lesser of such
amounts, then such two appraisers shall have 10 days to appoint a third
appraiser. If no such appraiser shall have been appointed within such 10 days
or within 60 days of the original request for a determination of fair market
value or fair market rental, whichever is earlier, either Lessor or Lessee may
apply to any court having jurisdiction to have such appointment made by such
court. Any appraiser appointed by the original appraisers or by such court
shall be instructed to determine the fair market value or fair market rental
within 30 days after appointment of such appraiser. The determination of the
appraiser which differs most in terms of dollar amount from the determinations
of the other two appraisers shall be excluded, and 50% of the sum of the
remaining two determinations shall be final and binding upon Lessor and Lessee
as the fair market value or fair market rental of the Leased Property, as the
case may be. This provision for determining by appraisal shall be specifically
enforceable to the extent such remedy is available under applicable law, and any
determination hereunder shall be final and binding upon the parties except as
otherwise provided by applicable law. Lessor and Lessee shall each pay the fees
and expenses of the appraiser appointed by it and each shall pay one-half of the
fees and expenses of the third appraiser and one-half of all other costs and
expenses incurred in connection with each appraisal.
ARTICLE
-------
32
32.1. Lessee's Right to Cure.
--------------------------
Subject to the provisions of Article 39, if Lessor breaches any
covenant to be performed by it under this Lease, Lessee, after Notice to and
demand upon Lessor as provided in Article 39, without waiving or releasing any
obligation hereunder, may (but shall be under no obligation at any time
thereafter to) make such payment or perform such act for the account and at the
expense of Lessor. All sums so paid by Lessee and all costs and expenses
(including, without limitation, reasonable attorneys' fees) so incurred,
together with interest thereon at the Overdue Rate from the date on which such
sums or expenses are paid or incurred by Lessee, shall be paid by Lessor to
Lessee on demand. The rights of Lessee hereunder to cure and to secure payment
from Lessor in accordance with this Article 32 shall survive the termination of
this Lease with respect to the Leased Property.
51
ARTICLE
-------
33
33.1. Miscellaneous.
--------------
Anything contained in this Lease to the contrary notwithstanding, all
claims against, and liabilities of, Lessee or Lessor arising prior to any date
of termination of this Lease shall survive such termination. If any term or
provision of this Lease or any application thereof is invalid or unenforceable,
the remainder of this Lease and any other application of such term or provisions
shall not be affected thereby. If any late charges or any interest rate
provided for in any provision of this Lease is based upon a rate in excess of
the maximum rate permitted by applicable law, the parties agree that such
charges shall be fixed at and limited to the maximum permissible rate. Neither
this Lease nor any provision hereof may be changed, waived, discharged or
terminated except by a written instrument in recordable form signed by Lessor
and Lessee. All the terms and provisions of this Lease shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. The headings in this Lease are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof. This Lease shall be
governed by and construed in accordance with the laws of the State, but not
including its conflicts of laws rules.
33.2. Transition Procedures.
-----------------------
Upon any expiration or termination of the Term, Lessor and Lessee
shall do the following and, in general, shall cooperate in good faith to effect
an orderly transition of the management or lease of the Facility. The provisions
of this Section 33.2 shall survive the expiration or termination of this Lease
until they have been fully performed. Nothing contained herein shall limit
Lessor's rights and remedies under this Lease if such termination occurs as the
result of an Event of Default.
(a) Transfer of Franchise Agreement. The Franchise Agreement
----------------------------------
shall be assigned, at Lessor's option, effective on the termination date,
without fee, cost, or penalty payable to the Lessee, and without the imposition
by Lessee of a product improvement (or similar) plan, to (i) Lessor, or (ii) a
designee of Lessor of good reputation and with experience in operating hotels.
(b) Transfer of Licenses. Upon the expiration or earlier
----------------------
termination of the Term, Lessee shall use its best efforts (i) to transfer to
Lessor or Lessor's nominee all licenses, operating permits and other
governmental authorizations and all contracts, including contracts with
governmental or quasi-governmental entities, that may be necessary for the
operation of the Facility (collectively, "Licenses"), or (ii) if such transfer
is prohibited by law or Lessor otherwise elects, to cooperate with Lessor or
Lessor's nominee in connection with the processing by Lessor or Lessor's nominee
of any applications for all Licenses, including Lessee (or its Affiliate)
continuing to operate the liquor operations under its licenses with Lessor
agreeing to indemnify and hold Lessee (or its Affiliate) harmless as a result
52
thereof except for the gross negligence or willful misconduct of Lessee;
provided, in either case, that the costs and expenses of any such transfer or
the processing of any such application shall be paid by Lessor or Lessor's
nominee.
(c) Leases and Concessions. Lessee shall assign to Lessor or
------------------------
Lessor's nominee simultaneously with the termination of this Agreement, and the
assignee shall assume, all leases, contracts, concession agreements and
agreements in effect with respect to the Facility then in Lessee's name which
are designated by Lessor.
(d) Books and Records. To the extent that Lessor has not already
------------------
received copies thereof, all books and records (including computer and
computer-generated records) for the Facility kept by Lessee pursuant to Section
3.6 (or copies thereof) shall be delivered simultaneously with the termination
of this Agreement to Lessor or Lessor's nominee.
(e) Receivables and Payables, etc. Lessee shall be entitled to
---------------------------------
retain all cash, bank accounts and house banks, and to collect all Gross
Revenues and accounts receivable accrued through the termination date. Lessee
shall be responsible for the payment of Rent, all operating expenses of the
Facility and all other obligations of Lessee accrued under this Lease as of the
termination date, and Lessor shall be responsible for all operating expenses of
the Facility accruing after the termination date.
(f) Final Accounting. Lessee shall, within forty five (45) days
-----------------
after the expiration or termination of the Term, prepare and deliver to Lessor a
final accounting statement, dated as of the date of the expiration or
termination, as more particularly described in Article 22, along with a
statement of any sums due from Lessee to Lessor pursuant hereto and payment of
such funds.
(g) Inventory. Lessee shall insure that the Leased Property, at
---------
the date of such termination or expiration, has Inventory of a substantially
equivalent nature and amount as exists at the Leased Property on the
Commencement Date, and Lessor shall acquire such Inventory from Lessee by paying
Lessee the fair market value thereof, calculated on the same basis as the
parties determined the fair market value of the Inventory purchased by Lessee on
the Commencement Date.
(i) Option to Purchase Lessee's Personal Property. Upon the
--------------------------------------------------
expiration or termination of the Term, Lessor shall have the option to purchase
Lessee's Personal Property related to the Leased Property at fair market value.
(h) Surrender. Lessee shall peacefully and immediately vacate and
---------
surrender the Leased Property to Lessor or Lessor's designee, shall turn over
all keys to Lessor and Lessor's designee and shall not interfere with Lessor or
any new Lessee or Manager.
33.3. Waiver of Presentment, etc.
------------------------------
Lessee waives all presentments, demands for payment and for
performance, notices of nonperformance, protests, notices of protest, notices of
53
dishonor, and notices of acceptance and waives all notices of the existence,
creation, or incurring of new or additional obligations, except as expressly
granted herein.
33.4. Standard of Discretion.
-------------------------
In any provision of this Lease requiring or permitting the exercise by
Lessor or Lessee of such party's approval, election, decision, consent,
judgment, determination or words of similar import (collectively, an
"Approval"), such Approval may, unless otherwise expressly specified in such
provision, be given or withheld in such party's sole, absolute and unreviewable
discretion. Any Approval which by the terms of this Lease may not be
unreasonably withheld shall also not be unreasonably delayed.
33.5. Action for Damages.
---------------------
In any suit or other claim brought by either party seeking damages
against the other party for breach of its obligations under this Lease, the
party against whom such claim is made shall be liable to the other party only
for actual damages and not for consequential, punitive or exemplary damages.
33.6. Lease Assumption in Bankruptcy Proceeding.
----------------------------------------------
If an Event of Default occurs and Lessee has filed or has had filed
against it a petition in bankruptcy or for reorganization or other relief
pursuant to the federal bankruptcy code, Lessee shall promptly move the court
presiding over the proceeding to assume the Lease pursuant to 11 U.S.C. Sec.365,
without seeking an extension of the time to file said motion.
33.7. Intra-Family Transfers.
------------------------
Lessee acknowledges that Lessor may transfer legal title to the Leased
Property one or more times to Affiliates of the Lessor in which Lessor or the
Company owns a majority interest (each, an "Affiliated Lessor"). Lessee hereby
consents to such transfers provided that, in each case, this Lease is assumed by
the Affiliated Lessor in its entirety and without modification, except to the
extent that Lessor, or the Affiliated Lessor that then owns the Leased Property,
specifically retains any obligations accrued through the date of transfer
hereunder. Lessee covenants that in connection with such transfers, Lessee will
execute and deliver to Lessor, the Affiliated Lessor and/or their
representatives appropriate estoppels and other documentation requested by them,
including an amendment to this Lease, for the purposes of reflecting and
acknowledging the Affiliated Lessor's interests as lessor hereunder.
54
ARTICLE
-------
34
34.1. Memorandum of Lease.
----------------------
Lessor and Lessee shall promptly upon the request of either enter into
a short form memorandum of this Lease, in form suitable for recording under the
laws of the State in which reference to this Lease, and all options contained
herein, shall be made. Lessee shall pay all costs and expenses of recording
such memorandum of this Lease.
ARTICLE
-------
35
(Intentionally Omitted)
ARTICLE
-------
36
36.1. Lessor's Option to Terminate.
--------------------------------
(a) In the event Lessor enters into a bona fide contract to sell
the Leased Property to a non-Affiliate other than Lessee or an Affiliate of
Lessee, Lessor may terminate the Lease by giving not less than 60-days prior
Notice to Lessee of Lessor's election to terminate the Lease upon the closing
under such contract. Effective upon such date, this Lease shall terminate and
be of no further force and effect except as to any obligations of the parties
existing as of such date that survive termination of this Lease and all Rent
including Percentage Rent and Additional Charges shall be adjusted as of the
termination date.
(b) As compensation for the early termination of its leasehold
estate under this Article 36 because of a sale of the Leased Property, Lessor
shall within six months after of the closing of such sale, either (i) pay to
Lessee the "Termination Fee" (as defined below) or (ii) offer to lease to Lessee
one or more substitute suite hotel facilities pursuant to one or more leases
that would create for the Lessee leasehold estates that have an aggregate fair
market value of no less than the fair market value of the original leasehold
estate (a "Comparable Lease"), such value to be determined as of the closing of
the sale of the Leased Property. Lessee's acceptance of the Comparable Lease
shall not be unreasonably withheld. If Lessee rejects the Comparable Lease,
Lessor shall pay the Termination Fee to Lessee. In the event Lessor and Lessee
are unable to agree upon the fair market value of an original or replacement
leasehold estate, it shall be determined by appraisal using the appraisal
procedure set forth in Article 31.
(c) (i) For the purposes of this Section, fair market value of the
leasehold estate means, as applicable, an amount equal to the price that a
willing buyer not compelled to buy would pay a willing seller not compelled to
sell for Lessee's leasehold estate under this Lease or an offered replacement
55
leasehold estate. In computing fair market value of a leasehold estate, the
appraiser shall discount all future income and fees to the then present value at
a rate equal to the Prime Rate plus 2% per annum.
(ii) The Termination Fee shall equal the "Net Present Value" (as
defined below) of the "Lessee Leakage" (as defined below) for (a) the remaining
Lease Years of the Term or, (b) if the termination occurs less than five Lease
Years from the end of the Term, the remaining Lease Years in the Term plus one
year (the "Determination Period"). "Lessee Leakage" for any Lease Year is
defined as the net operating income of the Facility, determined in accordance
with GAAP and as if no Management Agreement existed, less Rent paid and payable
hereunder. The "Net Present Value" of the Lessee Leakage for the Determination
Period shall be determined by (A) averaging the Lessee Leakage actually realized
by Lessee for the three most recently ended Lease Years (or all full Lease Years
if less than three full Lease Years have elapsed since the Commencement Date)
(the "Valuation Period"), (B) assuming that Lessee Leakage in the first Lease
Year of the Determination Period is the average Lessee Leakage (as determined
under subsection (A) above) and that the Lessee Leakage in each subsequent Lease
Year in the Determination Period is the deemed Lessee Leakage for the previous
Lease Year, (C) discounting the deemed Lessee Leakage in each Lease Year of the
Determination Period to then-present value at a rate of twelve percent (12%) per
annum and (D) aggregating the sum of such present values.
(d) In the event that Lessor terminates this Lease upon less than
60-days written notice pursuant to the provisions of this Article 36 or pursuant
to any other provisions of this Lease except for the provisions allowing Lessor
to terminate this Lease under Articles 14 or 15 or upon the occurrence of an
Event of Default, the parties agree that on and after the effective date of such
termination, hotel personnel employed by Lessee immediately prior to the
effective date of termination will either be employed by Lessor or its designee,
or Lessor or its designee will take such other action with respect to their
employment, which may include notification of the prospective termination of
their employment, so as, in any case, to insure that Lessee does not incur any
liability pursuant to the WARN Act. In that event, Lessor hereby agrees to
defend, indemnify and hold harmless Lessee from and against any and all manner
of claims, actions, liabilities, costs and expenses (including, without
limitation, reasonable attorneys' fees and disbursements) relating to or arising
from Lessor's breach of this covenant, including, without limitation, any
liability, costs and expenses arising out of asserted or actual violation of the
requirements of the WARN Act. Further, Lessor or its designee shall assume all
COBRA liabilities and COBRA obligations to the Facility's personnel, which
Lessee shall or may incur in connection with such termination of this Lease, and
Lessor hereby agrees to defend, indemnify and hold harmless Lessee from and
against any and all manner of claims, actions, liabilities, costs and expenses
(including, without limitation, reasonable attorneys' fees and disbursements)
relating to or resulting from Lessor's breach of the foregoing covenant with
respect to COBRA matters, including, without limitation, any liability, costs
and expenses arising out of any asserted or actual violation of the requirements
of the COBRA any legislation. Upon Lessor's written request to Lessee, Lessee
shall take all action that is reasonable to notify, advise and cooperate with
Lessor in order to assist Lessor in complying with the WARN Act or COBRA
legislation and to mitigate Lessor's expense or liability with respect to the
WARN Act and COBRA legislation.
56
ARTICLE
-------
37
37.1. Compliance with Franchise Agreement.
--------------------------------------
To the extent any of the provisions of the Franchise Agreement impose
a greater obligation on Lessee than the corresponding provisions of the Lease,
then Lessee shall be obligated to comply with, and to take all reasonable
actions necessary to prevent breaches or defaults under, the provisions of the
Franchise Agreement, except to the extent that Lessee is prevented from
complying with the Franchise Agreement because of Lessor's breach of its
obligations to comply with Article 38. It is the intent of the parties hereto
that Lessee shall comply in every respect with the provisions of the Franchise
Agreement so as to avoid any default thereunder during the Term. Lessee shall
not terminate or enter into any modification of the Franchise Agreement without
in each instance first obtaining Lessor's written consent. Lessor and Lessee
agree to cooperate fully with each other in the event it becomes necessary to
obtain a franchise extension or modification or a new franchise for the Leased
Property, and in any transfer of the Franchise Agreement to Lessor or any
designee thereof or any other successor to Lessee upon the termination of this
Lease.
ARTICLE
-------
38
38.1. Capital Expenditures.
---------------------
(a) Lessor shall be obligated to make available to Lessee an
amount equal to [4][6]% of Room Revenues from the Facility during each Lease
Year ("Capital Expenditures Allowance"). Upon written request by Lessee to
Lessor stating the specific use to be made and subject to the approval thereof
by Lessor, which approval shall not be unreasonably withheld, such funds shall
be made available by Lessor for Capital Expenditures; provided, however, that no
Capital Expenditures shall be made to purchase property (other than "real
property" within the meaning of Treasury Regulations Section 1.856-3(d)), to the
extent that doing so would cause the Lessor to recognize income other than
"rents from real property" as defined in Section 856(d) of the Code. Lessor's
obligation shall be cumulative, but not compounded, and any amounts that have
accrued hereunder shall be payable in future periods for such uses and in
accordance with the procedure set forth herein. Lessee shall have no interest
in any accrued obligation of Lessor hereunder after the termination of this
Lease. All Capital Improvements shall be owned by Lessor subject to the
provisions of this Lease.
(b) Lessor's obligation with respect to Capital Expenditures shall
be limited to amounts available in the Capital Expenditures Allowance.
57
ARTICLE
-------
39
39.1. Lessor's Default.
------------------
It shall be a breach of this Lease if Lessor fails to observe or
perform any term, covenant or condition of this Lease on its part to be
performed and such failure continues for a period of 30 days after Notice
thereof from Lessee, unless such failure cannot with due diligence be cured
within a period of 30 days, in which case such failure shall not be deemed a
breach if Lessor proceeds within such 30-day period, with due diligence, to cure
the failure and thereafter diligently completes the curing thereof. The time
within which Lessor shall be obligated to cure any such failure also shall be
subject to extension of time due to the occurrence of any Unavoidable Delay. If
Lessor does not cure any such failure within the applicable time period as
aforesaid, Lessee may declare the existence of a "Lessor Default" by a second
Notice to Lessor. Thereafter, Lessee may forthwith cure the same in accordance
with the provisions of Article 32, subject to the provisions of the following
paragraph. Lessee shall have no right to terminate this Lease for any Lessor
Default and no right, for any such Lessor Default, to offset or counterclaim
against any Rent or other charges due hereunder.
If Lessor shall in good faith dispute the occurrence of any Lessor
Default and Lessor, before the expiration of the applicable cure period, shall
give Notice thereof to Lessee, setting forth, in reasonable detail, the basis
therefor, no Lessor Default shall be deemed to have occurred and Lessor shall
have no obligation with respect thereto until final adverse determination
thereof, whether through arbitration or otherwise; provided, however, that in
-----------------
the event of any such adverse determination, Lessor shall pay to Lessee interest
on any disputed funds at the Base Rate, from the date demand for such funds was
made by Lessee until the date of final adverse determination and, thereafter, at
the Overdue Rate until paid. If Lessee and Lessor shall fail, in good faith, to
resolve any such dispute within ten (10) days after Lessor's Notice of dispute,
either may submit the matter for determination by arbitration, but only if such
matter is required to be submitted to arbitration pursuant to any provision of
this Lease, or otherwise by a court of competent jurisdiction.
ARTICLE
-------
40
40.1. Arbitration.
------------
Except as set forth in Section 40.2, in each case specified in this
Lease in which it shall become necessary to resort to arbitration, such
arbitration shall be determined as provided in this Section 40.1. The party
desiring such arbitration shall give Notice to that effect to the other party,
and an arbitrator shall be selected by mutual agreement of the parties, or if
they cannot agree within 30 days of such notice, by appointment made by the
American Arbitration Association ("AAA") from among the members of its panels
who are qualified and who have experience in resolving matters of a nature
similar to the matter to be resolved by arbitration.
58
40.2. Alternative Arbitration.
-------------------------
In each case specified in this Lease for a matter to be submitted to
arbitration pursuant to the provisions of this Section 40.2, Lessor shall be
entitled to designate any nationally recognized accounting firm with a
hospitality division of which Lessor or an Affiliate of Lessor is not a
significant client to serve as arbitrator of such dispute within 15 days after
written demand for arbitration is received or sent by Lessor. In the event
Lessor fails to make such designation within such 15-day period, Lessee shall be
entitled to designate any nationally recognized accounting firm with a
hospitality division of which Lessee or an Affiliate of Lessee is not a
significant client to serve as arbitrator of such dispute within 15 days after
Lessor fails to timely make such designation. In the event no nationally
recognized accounting firm satisfying such qualifications is available and
willing to serve as arbitrator, the arbitration shall instead be administered as
set forth in Section 40.1.
40.3. Arbitration Procedures.
------------------------
In any arbitration commenced pursuant to Sections 40.1 or 40.2, a
single arbitrator shall be designated and shall resolve the dispute. The
arbitrator's decision shall be binding on all parties and shall not be subject
to further review or appeal except as otherwise allowed by applicable law. Upon
the failure of either party (the "non-complying party") to comply with his
decision, the arbitrator shall be empowered, at the request of the other party,
to order such compliance by the non-complying party and to supervise or arrange
for the supervision of the non-complying party's obligation to comply with the
arbitrator's decision, all at the expense of the non-complying party. To the
maximum extent practicable, the arbitrator and the parties, and the AAA if
applicable, shall take any action necessary to insure that the arbitration shall
be concluded within 90 days of the filing of such dispute. The fees and
expenses of the arbitrator shall be shared equally by Lessor and Lessee except
as otherwise specified above in this Section 40.3. Unless otherwise agreed in
writing by the parties or required by the arbitrator or AAA, if applicable,
arbitration proceedings hereunder shall be conducted in the State.
Notwithstanding formal rules of evidence, each party may submit such evidence as
each party deems appropriate to support its position and the arbitrator shall
have access to and right to examine all books and records of Lessee and Lessor
regarding the Facility during the arbitration.
[Signature Page follows]
59
IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized representatives as of the date first above written.
LESSOR:
------
HHLP VALLEY FORGE ASSOCIATES, a
Pennsylvania limited partnership
By: HERSHA HOSPITALITY, LLC, a Virginia limited
liability company, its sole General Partner
By: HERSHA HOSPITALITY LIMITED
PARTNERSHIP, a Virginia limited partnership,
its sole member
By: HERSHA HOSPITALITY TRUST, a
Maryland real estate investment trust, its
General Partner
By:
----------------------------------
Hasu P. Shah, President
LESSOR:
------
HERSHA HOSPITALITY MANAGEMENT, L.P., a
Pennsylvania limited partnership
By: HERSHA HOSPITALITY MANAGEMENT CO., a
Pennsylvania corporation, its General
Partner
By:
------------------------------------
K.D. Patel, President
60
EXHIBIT A
PROPERTY DESCRIPTION
A-1
EXHIBIT B
OTHER PROPERTIES
The following hotels (excluding the Leased Property):
B-1
EXHIBIT C
PERCENTAGE RENT PROVISIONS
Sleep Inn Mainstay Suites, Valley Forge, Pennsylvania
INITIAL FIXED RENT: $1,352,010
BASE RENT: $ 613,798
PERCENTAGE RENT:
FIRST TIER
ROOM REVENUE PERCENTAGE: 43.7 %
FIRST ANNUAL ROOM
REVENUES BREAK POINT: $2,434,590
SECOND TIER
ROOM REVENUE PERCENTAGE: 65.0%
SECOND ANNUAL ROOM
REVENUES BREAK POINT: $2,864,224
THIRD TIER
ROOM REVENUE PERCENTAGE: 29.0%
OTHER REVENUE PERCENTAGE: 8.0%
C-1