UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): June 1, 1998
LASALLE HOTEL PROPERTIES
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(Exact name of registrant as specified in its charter)
Maryland 1-14045 36-4219376
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(State or other juris- (Commission File (IRS Employer
diction of incorporation Number) Identification
or organization) No.)
220 East 42nd Street, New York, New York 10017
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 212/661-6161
Not Applicable
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(Former name or former address, if changed since last report)
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This Form 8-K is being filed to report the acquisition of the San Diego
Princess Resort.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 1, 1998, LaSalle Hotel Properties (the "Company") acquired an
interest in the San Diego Princess Resort (the "Property") through an
indirect, majority owned subsidiary, LHO Mission Bay Hotel, L.P. (the
"Purchaser"). The Purchaser is a limited partnership organized under the
laws of the state of California, of which LaSalle Hotel Operating
Partnership, L.P. (the "Operating Partnership") holds an approximate 95.1%
general partnership interest and WestGroup San Diego Associates, Ltd.
("WestGroup") holds an approximate 4.9% limited partnership interest. The
Property was acquired from VVH Resorts, Ltd. for an aggregate purchase
price of $73 million (the "Purchase Price") pursuant to a Purchase and Sale
Agreement with Joint Escrow Instructions. The Property was renamed the San
Diego Paradise Point Resort and the Company expects to invest up to $8
million in capital improvements over the next two years to renovate and
reposition the Property.
On April 30, 1998, the Board of Trustees of the Company, including all
of the Independent Trustees (i.e., the Trustees of the Company who are
neither officers of the Company nor affiliated with the Company), acting in
the Company's capacity as sole general partner of the Operating
Partnership, authorized the Operating Partnership to purchase an interest
in the Property.
The Property is 51-acres and has nearly one mile of beachfront and 462
guestrooms in 129 single-story villas. The Property is subject to a 50-year
ground lease from the City of San Diego with 46 years currently remaining
on the term. The Property is located in the heart of Mission Bay on
Vacation Island, a 4,600-acre aquatic park in southwest San Diego County.
The Property is minutes away from the San Diego International Airport and
convenient to many major San Diego tourist attractions including Sea World,
Old Town, Downtown San Diego, the San Diego Convention Center, Qualcomm
Stadium and the San Diego Zoo.
The Purchase Price was funded with proceeds from a borrowing under the
Company's $200 million senior unsecured revolving credit facility from
Societe Generale, Southwest Agency, The Bank of Montreal, Chicago Branch,
and the other banks party thereto and from the proceeds of the sale of
112,458 common shares of beneficial interest, $.01 par value (the "Common
Shares"), for $17.78438 per share to WestGroup, an affiliate of Noble House
Hotels & Resorts ("Noble House"), which will operate the Property pursuant
to the terms of a participating lease (the "Participating Lease").
The Company based its determination of the Purchase Price on the
expected cash flow, physical condition, location, competitive advantages
and potential of improved revenues. The Company did not obtain an
independent appraisal on the Property. The Property was operated prior to
the acquisition as a resort hotel, and the Company expects to continue to
operate it as a resort hotel.
ITEM 5. OTHER EVENTS
In connection with the purchase of the Property, and as discussed in
Item 2, WestGroup, an affiliate of Noble House, acquired 112,458 Common
Shares from the Company at a per share price of $17.78438. The purchase by
WestGroup was a condition to the selection of Noble House as operator of
the Property, and the Common Shares have been pledged to the Operating
Partnership to secure Noble House's obligations under the Participating
Lease. Such sale was made in reliance on an exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) and (b) Financial Statements of Property Acquired and Pro Forma
Financial Information
The financial statements and pro forma financial information required
by Item 7(a) and 7(b) are currently being prepared and it is therefor
impracticable to provide this information on the date hereof. The Company
will file the required financial statements and information under cover of
Form 8-K/A as soon as practicable but in no event later than 60 days after
the date on which the Form 8-K was required to be filed.
(c) Exhibits
A list of exhibits is set forth in the Exhibit Index which immediately
precedes the exhibits and which is incorporated by reference herein.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
LASALLE HOTEL PROPERTIES
Date: June 15, 1998 By: /S/ JON E. BORTZ
Jon E. Bortz
President and
Chief Executive Officer
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EXHIBIT INDEX
Exhibit
Number Description
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Exhibit 10.1 Purchase and Sale Agreement with Joint Escrow
Instructions, dated as of June 1, 1998, by and between VVH Resorts, Ltd.
and LHO Mission Bay Hotel, L.P.
Exhibit 10.2 Subscription Agreement (with registration rights), dated
as of May 28, 1998, by WestGroup San Diego Associates, Ltd.
Exhibit 10.3 Agreement of Limited Partnership, dated as of June 1,
1998, of LHO Mission Bay Hotel, L.P.
Exhibit 10.4 Lease Agreement, dated as of June 1, 1998, by and between
LHO Mission Bay Hotel, L.P. and WestGroup San Diego Associates, Ltd.
EXHIBIT 10.1
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PURCHASE AND SALE AGREEMENT WITH JOINT ESCROW INSTRUCTIONS
between
VVH RESORTS, LTD.,
a Delaware limited partnership
as Seller
and
LHO MISSION BAY HOTEL, L.P.,
a California limited partnership
as Buyer
<PAGE>
PURCHASE AND SALE AGREEMENT WITH JOINT ESCROW INSTRUCTIONS
THIS PURCHASE AND SALE AGREEMENT WITH JOINT ESCROW INSTRUCTIONS
("Agreement") dated as of the 1st day of June, 1998 is by and between VVH
RESORTS, LTD., a Delaware limited partnership ("Seller"), and LHO MISSION
BAY HOTEL, L.P., a California limited partnership ("Buyer"). Capitalized
terms used in the RECITALS below, not otherwise defined therein, shall have
the meanings ascribed to them in SECTION 1 of this Agreement.
R E C I T A L S
WHEREAS, this Agreement is made and entered into with reference to
the following facts:
WHEREAS, Seller is the lessee pursuant to the Ground Lease (as
defined below) of the Land which is improved with, among other things, the
hotel commonly known as The San Diego Princess Resort located at 1404 West
Vacation Road, San Diego, California, 92109.
WHEREAS, Buyer desires to purchase, and Seller desires to sell, the
Property on the terms and conditions set forth in this Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing recitals, and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Buyer and Seller agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following
terms shall have the following meanings:
1.1 "Accounts Receivable" means all accounts receivable of
the Hotel and the Property, including the Tray Ledger, receivables from
Room Revenues, Other Revenues and Leases.
1.2 "Assignment of Capital Leases" means the Assignment of
Capital Leases assigning to Buyer all of Seller's right, title and interest
in and to those Capital Leases which by their terms are assignable or
assignable with the other party's consent. The Assignment of Capital
Leases shall be in the form of, and upon the terms contained in, EXHIBIT
"A".
1.3 "ASSIGNMENT OF GROUND LEASE" means the Assignment and
Assumption of Ground Lease assigning to Buyer all of Seller's right, title
and interest in, to and under the Ground Lease. The Assignment of Ground
Lease shall be in the form of, and upon the terms contained in,
EXHIBIT "B".
1.4 "ASSIGNMENT OF INTANGIBLE PROPERTY" means the Assignment
of Intangible Property assigning to Buyer all of Seller's right, title and
interest in and to the Intangible Property. The Assignment of Intangible
Property shall be in the form of, and upon the terms contained in,
EXHIBIT "C".
1.5 "ASSIGNMENT OF LEASES" means the Assignment of Leases,
assigning to Buyer all of Seller's right, title and interest in and to the
Leases. The Assignment of Leases shall be in the form of, and upon the
terms contained in, EXHIBIT "D".
1.6 "ASSIGNMENT OF SERVICE CONTRACTS" means the Assignment of
Service Contracts assigning to Buyer all of Seller's right, title and
interest in and to those Service Contracts which Buyer will assume pursuant
to SECTION 5.2.6 below. The Assignment of Service Contracts shall be in
the form of, and upon the terms contained in, EXHIBIT "E".
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1.7 "ASSIGNMENT FEE" means the fee payable to the City upon
an assignment of the Ground Lease pursuant to Section 8.5 of the Ground
Lease.
1.8 "BILL OF SALE" means the Bill of Sale conveying to Buyer
the Personal Property. The Bill of Sale shall be in the form of, and on
the terms contained in EXHIBIT "F ".
1.9 "BUYER INDEMNITEES" has the meaning ascribed to it in
SECTION 12 of this Agreement.
1.10 "CAPITAL LEASES" means the leases of equipment used in
the operation of the Hotel, which are set forth on EXHIBIT "G ".
1.11 "CITY" means the City of San Diego, a municipal
corporation.
1.12 "CLOSING" means the consummation of the conveyances of
the Property to Buyer.
1.13 "CLOSING CERTIFICATES" mean (a) as to Seller, a
certificate of Seller stating that the warranties and representations of
Seller contained in this Agreement are true and correct in all material
respects as of the Closing Date, except as set forth in such certificate,
and (b) as to Buyer, a certificate of Buyer stating that the warranties and
representations of Buyer contained in this Agreement are true and correct
in all material respects as of the Closing Date, except as set forth in
such certificate.
1.14 "CLOSING DATE" means May 28, 1998 unless otherwise
mutually agreed to in writing by Buyer and Seller or extended pursuant to
the terms of this Agreement, but in no event later than the Outside Closing
Date (as defined below).
1.15 "CODE" means the United States Internal Revenue Code of
1986, as amended.
1.16 "DEPOSIT" means a deposit by Buyer in cash or immediately
available funds in Escrow of an amount equal to Five Hundred Thousand and
No/100 Dollars ($500,000.00) to be delivered by Buyer to Escrow Holder
within two (2) business days after the date of this Agreement.
1.17 "EELGRASS MITIGATION PLAN" means the eelgrass mitigation
plan set forth in the Ground Lease.
1.18 "EMPLOYMENT CONTRACTS" means all employment contracts,
except for any management contracts, consulting agreements, union
contracts, labor agreements, collective bargaining agreements, pension
plans, profit sharing plans and employee benefit plans, together with all
supplements, amendments and modifications thereto, which affect the
Property, and which are set forth on EXHIBIT "H".
1.19 "ESCROW" means the escrow established with Escrow Holder
for the consummation of the purchase and sale of the Property in accordance
with this Agreement.
1.20 "ESCROW HOLDER" means Chicago Title Insurance Company.
1.21 "EXCLUDED PERSONAL PROPERTY" means (a) all personal
property depicting the name "Princess" or any logo or trademark, of the
"Princess Resort" and (b) the personal property described on EXHIBIT "I".
1.22 "GOVERNMENTAL REGULATIONS" means any local, state, and
federal laws, ordinances, rules, requirements, resolutions, policy
statements and regulations (including, without limitation, those relating
to land use, subdivision, zoning, environmental, labor relations,
notification of sale to employees, Hazardous Materials, occupational health
<PAGE>
and safety, water, earthquake hazard reduction and building and fire codes)
bearing on the construction, development, alteration, rehabilitation,
maintenance, use, operation, or sale of the Property.
1.23 "GROUND LEASE" means the City of San Diego Percentage
Lease dated December 30, 1994 between the City, as lessor, and Seller, as
Lessee.
1.24 "GROUND LESSOR ESTOPPEL" means a written statement
executed by the City dated within thirty (30) days prior to the Closing in
substantially the form and content of EXHIBIT "J " attached hereto.
1.25 "HAZARDOUS MATERIALS" means any hazardous or toxic
substance, material or waste which is or becomes regulated by any local
governmental authority, any agency of the State of California or any agency
of the United States Government. The term "Hazardous Materials" includes,
without limitation, any material or substance which (a) contains petroleum
or any petroleum by-products, (b) contains asbestos, (c) contains urea
formaldehyde foam insulation, (d) is designated as a "hazardous substance"
pursuant to Section 311 of the Federal Water Pollution Control Act (33
U.S.C. ' 1317), (e) is defined as a "hazardous waste" pursuant to Section
1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C.
' 6901 (42 U.S.C. ' 6903), or (f) is defined as a "hazardous substance"
pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ' 9601 (42 U.S.C. ' 9601). Each
reference to a statute or law in this definition shall be deemed to include
any amendments thereto which are enacted from time to time.
1.26 "HOTEL" means the real property and the improvements
comprising The San Diego Princess Resort located on the Land.
1.27 "HOUSE FUNDS" means cash on hand at the Hotel as of the
Transfer Time. At Closing, Buyer shall pay to Seller an amount equal to
the aggregate amount of such House Funds in readily available funds in
addition to, and not as part of, the Purchase Price.
1.28 "INTANGIBLE PROPERTY" means all of Seller's right, title
and interest in and to any and all intangible personal property owned by
Seller and used in connection with the ownership, construction, development
(including, without limitation, the benefit of future development rights,
plans, models and specifications, which include plans for the Marina
Construction (as defined below) and the "Master Plan 2000"), use and/or
operation of the Property, including, without limitation, the toll-free
telephone numbers for the Property, the Licenses and Permits, the Records
and Plans, and the Warranties. Notwithstanding the foregoing, in no event
shall the Intangible Property include any trade names, trademarks, service
marks or logos including, without limitation, the name "Princess" or any
mark or trade name that includes the word "Princess" as an element, which
property shall remain the property of Seller.
1.29 "LAND" means the leasehold estate in real property
located in the City of San Diego, County of San Diego, State of California,
as legally described in EXHIBIT "K".
1.30 "LEASES" means all existing leases, rental and occupancy
agreements and lease commitments relating to the Real Property, which
Leases are set forth on Exhibit "L", together with any and all leases which
are entered into after the date of this Agreement in accordance with
Section 5.1 of this Agreement.
1.31 "LICENSES AND PERMITS" means all of Seller's right,
title, interests, privileges, benefits and remedies in, to and under all
authorizations, approvals, permits, licenses, agreements, variances,
tentative maps, final maps, plans and specifications and land use
entitlements held by Seller and/or relating to the construction,
reconstruction, occupancy, operation or use of any part of the Property
(other than the Liquor License), including, without limitation, the Marina
Permits.
<PAGE>
1.32 "LIQUOR ACT" means the Alcoholic Beverage Control Act, as
the same may be amended from time to time.
1.33 "LIQUOR ESCROW AGREEMENT" means the Agreement for
Purchase and Sale of Liquor Inventory and Liquor License and Escrow
Instructions to be executed and delivered by the holder of the Liquor
Licenses and Buyer (or Buyer's designee) within five (5) business days
after the execution of this Agreement for the acquisition of the Liquor
Licenses and the Liquor Inventory by Buyer (or Buyer's designee) from the
holder thereof. The Liquor Escrow Agreement shall be in substantially the
form of, and upon the terms contained in, EXHIBIT "M".
1.34 "LIQUOR INVENTORY" means all wine, beer and other
alcoholic beverages on hand at the Hotel as of the Transfer Time.
1.35 "LIQUOR LICENSES" means collectively the On Site General
Liquor License Number 47-208932, 47-208932-1, and 47-208932-2, the Caterer
Permit No. 58-208932-1 and the Controlled Access Cabinet Permit No. 66-
208932-1.
1.36 "MARINA CONSTRUCTION" means the construction of the
marina as contemplated by the Ground Lease and in accordance with the plans
and specifications previously submitted to the City, as the same may be
amended prior to the Closing.
1.37 "MARINA PERMITS" means collectively (a) Permit No. 6-97-
64 to be issued by the California Coastal Commission upon the satisfaction
of all special conditions contained therein (the "Coastal Development
Permit") and (b) Permit No. 96-20054-DZ issued by the United States Army
Corps of Engineers (the "Army Corps Permit") relating to the Marina
Construction.
1.38 "OTHER REVENUES" means all revenues earned from the
operation of the Property, other than Room Revenues, including, without
limitation, revenues from the sale of food, the sale of alcoholic and non-
alcoholic beverages, rental of meeting and banquet rooms, telephone sales,
pay television sales, valet and parking services, gift shop revenue, golf
and tennis revenues, marina, boat and boat slip rental revenues, and other
similar revenues, together with any sales tax or other taxes thereon.
1.39 "OUTSIDE CLOSING DATE" means Friday, June 5, 1998. In
the event the Closing does not occur for any reason prior to the Outside
Closing Date, then either party may terminate this Agreement upon written
notice to the other, and this Agreement shall thereupon terminate and be of
no further force or effect, and the parties shall have no further liability
or obligation thereunder, except for those provisions which survive the
termination of this Agreement; provided, however, that in the event the
Closing does not occur prior to the Outside Closing Date due to a breach of
this Agreement by Seller, then Seller shall not be entitled to terminate
this Agreement pursuant to this SECTION 1.39. In the event of a
termination of this Agreement by either party pursuant to this Section, the
other party shall provide written acknowledgment of such termination in
form and substance reasonably satisfactory to the party terminating the
Agreement. In the event the Seller terminates this Agreement pursuant to
this SECTION, and such termination is not due to a breach of this Agreement
by Buyer, then the Deposit shall be returned to Buyer within two (2)
business days after the date of such termination.
1.40 "PERMITTED EXCEPTIONS" means collectively (a) matters of
title respecting the Real Property approved or deemed approved by Buyer in
accordance with this Agreement; and (b) matters affecting the condition of
title to the Real Property created by or with the written consent of Buyer.
1.41 "PERSONAL PROPERTY" means all personal property of Seller
located on or in or used in connection with the Real Property (other than
(i) the Excluded Personal Property and (ii) the Liquor Licenses and the
Liquor Inventory, which shall be transferred pursuant to the Liquor Escrow
Agreement).
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1.42 "PRO FORMA TITLE POLICY" means the pro forma owner's
policy of title insurance issued by the Title Company attached to this
Agreement as EXHIBIT "N".
1.43 "PROPERTY" means the Real Property, the Personal
Property, the Service Contracts, the Leases, and the Intangible Property
and the Liquor Inventory and the Liquor Licenses (which shall be
transferred in accordance with the terms and conditions of the Liquor
Escrow Agreement).
1.44 "PURCHASE PRICE" means the sum of Seventy-Three Million
Dollars ($73,000,000).
1.45 "REAL PROPERTY" means the Land, all rights, privileges
and easements appurtenant to the Land, and all improvements and fixtures
situated on the Land.
1.46 "RECORDS AND PLANS" means (a) all books and records
maintained by Seller in connection with the operation of the Property,
(b) "as-built" plans and specifications respecting the Real Property, and
(c) all structural reviews, architectural drawings, and engineering, soil,
seismic, geologic and architectural reports, studies and certificates and
other documents pertaining to the Real Property which are within the
possession of, under the control of, or reasonably available to, Seller.
1.47 "RENOVATION WORK means the renovation of the Hotel guest
rooms as contemplated by the Ground Lease and the Electrical Work.
1.48 "RESERVATION AGREEMENTS AND DEPOSITS" means all guest,
banquet room and meeting room and restaurant reservation agreements
executed by Seller and all deposits made thereunder for periods after the
Closing.
1.49 "ROOM REVENUES" means all revenues from the rental of
guest rooms of the Real Property (but excluding any items included in the
definition of Other Revenues), together with any sales or other taxes
thereon collected by Seller.
1.50 "SELLER INDEMNITEES" has the meaning ascribed to it in
Section 12 of this Agreement.
1.51 "SELLER'S PAYABLES" means the accounts payable with
respect to which Seller agrees to be fully responsible for the payment
after the Closing Date.
1.52 "SERVICE CONTRACTS" means the maintenance contracts,
warranties, guarantees, management contracts and bonds, and any other
similar obligations, commitments or arrangements, together with all supple-
ments, amendments and modifications thereto, relating to the construction,
development, marketing, operation, maintenance or enjoyment of the
Property, which are set forth on EXHIBIT "O" attached to this Agreement.
1.53 "SHORELINE RESTORATION WORK" means the improvements
specified by the "Shoreline Restoration and Stabilization Plan" as
described in Sections 6.5 and 10.7 of the Ground Lease.
1.54 "SURVEY" means an ALTA "as built" survey of the Real
Property prepared by Southland Surveying of San Diego.
1.55 "TITLE COMPANY" means Chicago Title Insurance Company.
1.56 "TITLE POLICY" means the standard form of owner's title
policy issued by the Title Company (together with such re-insurance
carriers as Buyer may require) for property located in the State of
California to be issued for the benefit of Buyer, which Title Policy shall
be (a) without charges in excess of regular premiums, (b) in the same form
as the Pro Forma Title Policy, and (c) shall show only those matters as set
forth on the Pro Forma Title Policy and the Permitted Exceptions (defined
below).
<PAGE>
1.57 "TRANSFER DOCUMENTS" means the Assignment of Ground
Lease, the Bill of Sale, the Assignment of Leases, the Assignment of
Capital Leases, the Assignment of Service Contracts, the Assignment of
Intangible Property and the Liquor Escrow Agreement.
1.58 "TRANSFER TIME" means 12:01 a.m. on the Closing Date in
the Pacific time zone.
1.59 "TRANSFEROR'S CERTIFICATE" means the certificate, to be
duly executed and delivered by Seller in accordance with SECTION 3.1 of
this Agreement, certifying that Seller is not a "foreign person" in
accordance with the provisions of Section 1445 of the Code and any similar
provisions of applicable state law. The Transferor's Certificate shall be
in the form of, and upon the terms contained in, EXHIBIT "P".
1.60 "TRAY LEDGER" means any accounts receivable of registered
guests who have not checked out and who are occupying rooms at the Real
Property as of the Transfer Time.
1.61 "WARRANTIES" means all third party warranties and
guarantees relating to the Property.
1.62 "WARN Act" means (a) the Worker Adjustment Retraining
Notification Act, 29 U.S.C. 2102, et seq. and/or (b) any other similar
state or local statute or ordinance.
2. PURCHASE PRICE. Seller agrees to sell to Buyer, and Buyer
agrees to purchase from Seller, the Property in accordance with the terms,
and subject to the conditions, of this Agreement. The Purchase Price for
the Property will be paid as follows:
2.1 Deposit. Buyer shall deliver the Deposit in accordance
with SECTION 1.16. Escrow Holder shall invest the Deposit in an interest
bearing account with a responsible institutional lender approved by Buyer
and Seller, and the interest will become part of the Deposit. Buyer's tax
identification number is ________________ and Seller's tax identification
number is 33-0338932. Buyer's failure to deliver the Deposit in accordance
with SECTION 1.16 shall, at Seller's election, render this Agreement void.
2.2 BALANCE OF PURCHASE PRICE. On or before the Closing
Date, Buyer shall deposit, in cash or by wire transfer (a) into the Escrow
the Purchase Price less the Deposit and less the purchase price for the
Liquor Inventory and the Liquor Licenses as established pursuant to SECTION
2.3 below, as adjusted for prorations and adjustments in accordance with
SECTION 9 and Buyer's share of Escrow closing costs in accordance with
SECTION 10, and (b) into the escrow established under the Liquor Escrow
Agreement, the portion of the Purchase Price allocable to the Liquor
Licenses and the Liquor Inventory as provided in SECTION 2.3 below, as
adjusted for prorations and adjustments in accordance with the terms and
conditions of the Liquor Escrow Agreement.
3. ESCROW; CLOSING.
3.1 OPENING OF ESCROW. As soon as reasonably practicable
following the mutual execution and delivery of this Agreement, the parties
shall open the Escrow with Escrow Holder in order to consummate the
purchase and sale in accordance with the terms and provisions of this
Agreement by depositing a fully executed counterpart of this Agreement with
Escrow Holder. This Agreement shall constitute joint escrow instructions
to Escrow Holder; provided, however, that the parties shall execute such
additional instructions as may be reasonably requested by Escrow Holder not
inconsistent with the provisions of this Agreement. The Closing will take
place on the Closing Date at the offices of the Escrow Holder.
3.2 BY SELLER. At the Closing, Seller shall deliver or cause
to be delivered to Escrow Holder the following items, duly executed and,
where appropriate, acknowledged by Seller.
<PAGE>
3.2.1 The Assignment of Ground Lease.
3.2.2 The Bill of Sale.
3.2.3 The Assignment of Capital Leases.
3.2.4 The Assignment of Intangible Property.
3.2.5 The Assignment of Leases.
3.2.6 The Assignment of Service Contracts.
3.2.7 The Transferor's Certificate.
3.2.8 The Seller's Closing Certificate.
3.2.9 The Liquor Lease Agreement, if applicable.
3.2.10 Such resolutions, authorizations,
certificates of good standing and/or other corporate and partnership
documents relating to Seller as are reasonably required by Buyer in
connection with the transactions contemplated under this Agreement.
3.3 BY BUYER. At the Closing, Buyer will deliver or cause to
be delivered to Escrow Holder the following items, duly executed and, where
appropriate, acknowledged by Buyer:
3.3.1 The net balance of the Purchase Price, to be paid
in accordance with SECTIONS 2.2 of this Agreement, after deducting the
Deposit and after taking into account the adjustments and cost allocations
in accordance with SECTIONS 9 and 10.
3.3.2 The Assignment of Capital Leases.
3.3.3 The Assignment of Intangible Property.
3.3.4 The Assignment of Leases.
3.3.5 The Assignment of Service Contracts.
3.3.6 The Buyer's Closing Certificate.
3.3.7 The "As Is" certificate described in SECTION 4.6
below.
3.3.8 The Liquor Lease Agreement, if applicable.
3.3.9 Such corporate resolutions, certificates of good
standing and/or other corporate and partnership documents relating to Buyer
as are reasonably required by Seller in connection with the transactions
contemplated under this Agreement.
3.4 BY BUYER AND SELLER. Buyer and Seller will each deposit
into the Escrow such other documents and instruments consistent with this
Agreement as are reasonably required to effectuate the transactions
contemplated under this Agreement.
3.5 CLOSE OF ESCROW. When (a) each party has deposited in
Escrow all of the funds and documents required to be deposited in Escrow by
it pursuant to this SECTION 3 or any other provision of this Agreement, and
(b) each of the parties has approved or waived each of the conditions in
its favor set forth in SECTION 7 of this Agreement, and (c) Escrow Holder
is otherwise in a position to close Escrow, Escrow Holder shall close
Escrow by:
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3.5.1 RECORDATION. Recording in the Official Records of
the County of San Diego State of California the Assignment of Ground Lease,
the Ground Lessor Estoppel and any other documents deposited in Escrow
which are in recordable form;
3.5.2 FUNDS. Delivering to Seller the Purchase Price, as
adjusted for Seller's share of prorations and Closing costs;
3.5.3 DOCUMENTS TO SELLER. Delivering to Seller the
documents described in Section 3.3 above and any other documents (or copies
thereof) delivered into Escrow by Buyer; and
3.5.4 DOCUMENTS TO BUYER. Delivering to Buyer the
documents described in Section 3.2 above and any other documents (or copies
thereof) delivered into Escrow by Seller.
3.6 DELIVERIES OUTSIDE OF ESCROW. On the Closing, Seller
shall deliver to Buyer the following:
3.6.1 Revised and updated schedules and exhibits as
required pursuant to SECTION 7.1.4 below, prepared as of the Closing Date;
and
3.6.2 Possession of the Property, subject to the rights
of parties claiming under the Leases and the provisions of the Ground
Lease.
4. REPRESENTATIONS AND WARRANTIES.
4.1 SELLER'S REPRESENTATIONS AND WARRANTIES. Seller makes
the following representations and warranties to Buyer all of which are true
as of the date of this Agreement and will be true and correct in all
material respects as of the Closing.
4.1.1 ORGANIZATION. Seller is duly organized, validly
existing and in good standing under the laws of the State of Delaware and
is duly qualified to do business in the State of California. The execution
and delivery of this Agreement and the other documents contemplated in this
Agreement by Seller, and the performance by Seller of the obligations under
this Agreement and the other documents contemplated in this Agreement
(i) are within the power of Seller; (ii) have been duly authorized by all
requisite partnership action and (iii) will not violate any provision of
law, any order of any court or agency of government, the charter documents
of Seller or any indenture, agreement or any other instrument to which
Seller is a party. This Agreement and each of the other documents
described in this Agreement when executed and delivered to Buyer, will
constitute legal, valid and binding obligations enforceable against Seller
in accordance with the terms of such documents.
4.1.2 PERSONAL PROPERTY OWNER. Seller is the sole owner
of all personal property situated on the Real Property (other than the
Excluded Personal Property, the personal property subject to the Capital
Leases, and the personal property owned by Hotel guests and tenants under
the Leases) free of any adverse claim of any kind whatsoever.
4.1.3 NO PRIOR TRANSFERS - PROPERTY. Seller has not
transferred, by sale, assignment or otherwise, to any person, partnership,
corporation or other entity, all or any portion of any right, title or
interest which it may have in and to the Property other than (a)
encumbrances which are to be removed at the Closing and (b) the Permitted
Exceptions.
<PAGE>
4.1.4 AGREEMENTS.
4.1.4.1 Except as set forth on SCHEDULE
4.1.4.1, to Seller's knowledge, there are no contracts for deed, land
contracts or any oral or written agreements or other executory agreements
whatsoever for the assignment or transfer of any portion(s) of the Property
in effect or in existence with respect to the Property, except those set
forth on the Pro Forma Title Policy.
4.1.4.2 Except as set forth on SCHEDULE
4.1.4.2, to Seller's knowledge, the Leases are in full force and effect.
To Seller's knowledge, there are no defaults, or events which with the
passage of time or notice or both, could constitute a default by Seller or
by the tenant under any of the Leases.
4.1.4.3 Except as set forth on SCHEDULE
4.1.4.3, Seller has received no written notice from the City that Seller is
in default under the Ground Lease, and, to the best of Seller's knowledge,
there is no default or event which with the passage of time or notice or
both, could constitute a default by the City or Seller under the Ground
Lease.
4.1.4.4 Except as set forth on SCHEDULE
4.1.4.4, there are no management, service, maintenance, advance booking,
employment or brokerage agreements, with respect to the Real Property which
Seller has entered into which would be binding on Buyer following the
Closing, except for the Employment Contracts, the Leases, the Service
Contracts which Buyer will assume pursuant to SECTION 5.2.6 below, and the
Reservation Agreements and Deposits.
4.1.5 NO LITIGATION. Except as set forth on SCHEDULE
4.1.5,, (a) to Seller's knowledge, there is no actual suit, action or
legal, administrative, arbitration or other proceeding or governmental
investigation involving or affecting the Property, (b) Seller has not been
served with written notice of any such proceeding, and (c) to Seller's
knowledge, there are no judgments, decrees, or orders affecting the
Property.
4.1.6 NOTICE OF VIOLATIONS. Except as set forth on
SCHEDULE 4.1.6, Seller has not received any written notice of any
outstanding violations, past or present, of any Governmental Regulations.
4.1.7 COMPLIANCE WITH AGREEMENTS. To Seller's knowledge,
the execution and delivery of, and performance under, this Agreement has
not and will not constitute a breach or default under any other agreement,
law or court order under which Seller is a party or may be bound.
4.1.8 FINANCIAL POSITION. To Seller's knowledge, the
financial statements and all financial data delivered to Buyer by Seller
are true, correct and complete in all material respects as of the date
thereof. To Seller's knowledge, no material adverse change has occurred in
such financial position subsequent to the date such statements are
delivered to Buyer.
4.1.9 INSOLVENCY. There are no attachments, execution
proceedings, assignments for the benefit of creditors, insolvency,
bankruptcy, reorganization or other proceedings pending or, to Seller's
knowledge, threatened against Seller, nor are any such proceedings
contemplated by Seller.
4.1.10 EELGRASS MITIGATION PLAN. Seller has
undertaken the implementation of the Eelgrass Mitigation Plan by completing
the planting of the eelgrass and instituting the requisite monitoring
program. To the best of Seller's knowledge, Seller is in compliance with
the terms of the Eelgrass Plan. All work necessary to comply with the
Eelgrass Plan as of the Closing shall be fully paid for as of the Closing,
or Buyer shall receive a credit at Closing for such unpaid amount.
<PAGE>
4.1.11 SHORELINE RESTORATION WORK. To the best of
Seller's knowledge, Seller has paid for its share of the Shoreline
Restoration Work in accordance with the terms of the Ground Lease. In the
event that, pursuant to the terms of the GROUND Lease, Seller is required
to pay additional monies for such work, Seller shall pay for the same.
4.1.12 MARINA PERMITS. To the best of Seller's
knowledge, the Army Corps Permit is in full force and effect and Seller has
satisfied all conditions to the issuance of the Coastal Development Permit
other than Special Condition No. 4 set forth therein.
4.2 SELLER'S KNOWLEDGE. The phrase "to Seller's
knowledge," as used in this Agreement, refers to the actual current
knowledge of Ned S. Holmes and Thomas C. Vincent, without duty of inquiry
or investigation.
4.3 SELLER'S CLOSING CERTIFICATE. In the event that Seller's
Closing Certificate expressly states that any representation and warranty
made by Seller in SECTION 4.1 is not true and correct as of the date of
Closing, then such shall not be a default by Seller under this Agreement;
provided, however that such shall be treated as a failure of a condition in
favor of Buyer, and Buyer shall have, as Buyer's sole and exclusive remedy,
the right to terminate this Agreement upon written notice to Seller if such
condition is of such a nature that in Buyer's reasonable judgment such
failure of a condition would materially and adversely affect the
acquisition, financing or use of the Property for Buyer's intended purpose.
Upon such termination, Seller shall immediately return, or cause the Title
Company to return, to Buyer any and all documents and funds theretofore
deposited or paid by Buyer. Alternatively, notwithstanding such failure of
condition, Buyer may elect to waive one or more of the specific
representations and warranties which are set forth in Seller's Closing
Certificate as not being true and correct as of the Closing, and proceed
with the purchase of the Property without reduction in the Purchase Price.
4.4 BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer makes the
following representations and warranties to Seller upon which warranties
and representations Seller has relied and will continue to rely, all of
which are true as of the date of this Agreement and will be true and
correct as of the Closing:
4.4.1 ORGANIZATION. Buyer is duly organized, validly
existing and in good standing under the laws of the State of California.
The execution and delivery of this Agreement and the other documents
contemplated in this Agreement by Buyer, and the performance by Buyer of
the obligations under this Agreement and the other documents contemplated
in this Agreement (i) are within the power of Buyer; (ii) have been duly
authorized by all requisite action on the part of Buyer and all of its
constituent corporate partners; and (iii) will not violate any provision of
law, any order of any court or agency of government, the charter documents
of Buyer or its general partners, or any indenture, agreement or any other
instrument to which Buyer is a party. This Agreement and each of the other
documents described in this Agreement when executed and delivered to Buyer,
will constitute legal, valid and binding obligations enforceable against
Buyer in accordance with the terms of such documents.
4.4.2 INSOLVENCY. There are no attachments, execution
proceedings, assignments for the benefit of creditors, insolvency,
bankruptcy, reorganization or other proceedings pending or threatened
against Buyer, nor are any such proceedings contemplated by Buyer.
4.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained in this SECTION 4 shall survive
the Closing for a period of twelve (12) months.
4.6 AS IS. BUYER ACKNOWLEDGES AND AGREES THAT (A) BUYER IS
EXPERIENCED IN THE ACQUISITION, DEVELOPMENT, OWNERSHIP AND OPERATION OF
PROPERTIES SIMILAR TO THE PROPERTY AND BUYER WAS GIVEN THE OPPORTUNITY TO
<PAGE>
PERFORM, AND BUYER HAS PERFORMED AND COMPLETED, ALL INSPECTIONS AND
INVESTIGATIONS CONCERNING THE PROPERTY TO ITS SATISFACTION AND IS QUALIFIED
TO MAKE SUCH INSPECTIONS AND INVESTIGATIONS. BUYER ACKNOWLEDGES THAT IT IS
FULLY RELYING ON BUYER'S (OR BUYER'S REPRESENTATIVES') INSPECTIONS OF THE
PROPERTY AND NOT UPON ANY STATEMENTS (ORAL OR WRITTEN) WHICH MAY HAVE BEEN
MADE OR MAY BE MADE (OR PURPORTEDLY MADE) BY SELLER OR ANY OF ITS
REPRESENTATIVES, INCLUDING, WITHOUT LIMITATION, ANY STATEMENTS OR
INFORMATION CONTAINED IN THAT CERTAIN INFORMATION BOOK PREPARED BY HOTEL
PARTNERS INCORPORATED RELATING TO THE PROPERTY. BUYER ACKNOWLEDGES THAT
BUYER HAS (OR BUYER'S REPRESENTATIVES HAVE), OR PRIOR TO THE CLOSING DATE
WILL HAVE, THOROUGHLY INSPECTED AND EXAMINED THE PROPERTY TO THE EXTENT
DEEMED NECESSARY BY BUYER IN ORDER TO ENABLE BUYER TO EVALUATE THE
CONDITION OF THE PROPERTY AND ALL OTHER ASPECTS OF THE PROPERTY (INCLUDING,
BUT NOT LIMITED TO, THE ENVIRONMENTAL CONDITION OF THE PROPERTY), AND BUYER
ACKNOWLEDGES THAT BUYER IS RELYING SOLELY UPON ITS OWN (OR ITS
REPRESENTATIVES') INSPECTION, EXAMINATION AND EVALUATION OF THE PROPERTY.
AS A MATERIAL PART OF THE CONSIDERATION OF THIS CONTRACT AND THE PURCHASE,
BUYER HEREBY AGREES TO ACCEPT THE PROPERTY ON THE CLOSING DATE IN ITS "AS-
IS, WHERE IS" CONDITION, WITH ALL FAULTS, AND WITHOUT REPRESENTATIONS AND
WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW,
EXCEPT ONLY THE TITLE WARRANTIES EXPRESSLY SET FORTH IN THE DEED DATED ON
THE CLOSING DATE. WITHOUT IN ANY WAY LIMITING THE GENERALITY OF THE
FOREGOING, IN CONNECTION WITH THE SALE OF THE PROPERTY TO BUYER, THE SALE
OF THE PROPERTY IS WITHOUT ANY WARRANTY, AND SELLER AND SELLER'S OFFICERS,
AGENTS, DIRECTORS, EMPLOYEES, ATTORNEYS, CONTRACTORS AND AFFILIATES
(COLLECTIVELY, "SELLER'S RELATED PARTIES") HAVE MADE NO, AND EXPRESSLY AND
SPECIFICALLY DISCLAIM, AND BUYER ACCEPTS THAT SELLER AND SELLER'S RELATED
PARTIES HAVE DISCLAIMED, ANY AND ALL REPRESENTATIONS, GUARANTIES OR
WARRANTIES, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW OR RELATING
TO THE PROPERTY, INCLUDING WITHOUT LIMITATION, OF OR RELATING TO: (I) THE
OWNERSHIP, USE, INCOME POTENTIAL, EXPENSES, OPERATION, CHARACTERISTICS OR
CONDITION OF THE PROPERTY OR ANY PORTION THEREOF, INCLUDING WITHOUT
LIMITATION, WARRANTIES OF SUITABILITY, HABITABILITY, MERCHANTABILITY,
DESIGN OR FITNESS FOR ANY SPECIFIC PURPOSE OR A PARTICULAR PURPOSE, OR GOOD
AND WORKMANLIKE CONSTRUCTION; (II) THE NATURE, MANNER, OR CONDITION OF THE
PROPERTY, ON THE SURFACE OR SUBSURFACE THEREOF, WHETHER OR NOT OBVIOUS,
VISIBLE OR APPARENT; (III) THE ENVIRONMENTAL CONDITION OF THE PROPERTY AND
THE PRESENCE OR ABSENCE OF OR CONTAMINATION BY HAZARDOUS MATERIALS, OR THE
COMPLIANCE OF THE PROPERTY WITH ALL REGULATIONS OR LAWS PERTAINING TO
HEALTH OR THE ENVIRONMENT, INCLUDING, BUT NOT LIMITED TO, THE COMPREHENSIVE
ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT, THE RESOURCE
CONSERVATION AND RECOVERY ACT, AND ALL SIMILAR LOCAL AND STATE LAWS, EACH
AS MAY BE AMENDED FROM TIME TO TIME, AND INCLUDING ANY AND ALL REGULATIONS,
RULES OR POLICIES PROMULGATED THEREUNDER ("ENVIRONMENTAL LAWS"); AND
(IV) THE SOIL CONDITIONS, DRAINAGE, FLOODING CHARACTERISTICS UTILITIES OR
OTHER CONDITIONS EXISTING IN, ON OR UNDER THE PROPERTY. BUYER HEREBY
EXPRESSLY ASSUMES ALL RISKS, LIABILITIES, CLAIMS, DAMAGES AND COSTS,
INCLUDING ANY LIABILITY WITH RESPECT TO ENVIRONMENTAL LAWS (AND AGREES THAT
SELLER SHALL NOT BE LIABLE FOR ANY SPECIAL, DIRECT, INDIRECT, CONSEQUENTIAL
OR OTHER DAMAGES) RESULTING OR ARISING FROM OR RELATED TO THE PROPERTY OR
THE ACQUISITION, DEVELOPMENT, OWNERSHIP, USE, CONDITION, LOCATION,
MAINTENANCE, REPAIR OR OPERATION THEREOF. IN CONSUMMATING THE PURCHASE OF
THE PROPERTY, BUYER IS NOT RELYING ON ANY REPRESENTATIONS OR STATEMENTS
(ORAL OR WRITTEN) WHICH MAY HAVE BEEN MADE OR MAY BE MADE BY SELLER OR
SELLER'S RELATED PARTIES, AND IS RELYING SOLELY UPON BUYER'S OR ITS
REPRESENTATIVES' OWN PHYSICAL INSPECTION OF THE PROPERTY. BUYER
ACKNOWLEDGES THAT ANY CONDITION OF THE PROPERTY WHICH BUYER DISCOVERS OR
DESIRES TO CORRECT OR IMPROVE PRIOR TO OR AFTER THE CLOSING DATE SHALL BE
AT BUYER'S SOLE EXPENSE. BUYER EXPRESSLY WAIVES (TO THE EXTENT ALLOWED BY
APPLICABLE LAW) ANY CLAIMS UNDER FEDERAL, STATE OR OTHER LAW (INCLUDING,
BUT NOT LIMITED TO COMMON LAW, WHETHER SOUNDING IN CONTRACT OR TORT, AND
ANY AND ALL ENVIRONMENTAL LAWS) THAT BUYER MIGHT OTHERWISE HAVE AGAINST
SELLER RELATING TO THE ACQUISITION, DEVELOPMENT, USE, CHARACTERISTICS OR
CONDITION OF THE PROPERTY. THE PROVISIONS OF THIS PARAGRAPH SHALL SURVIVE
THE CLOSING AND AT CLOSING BUYER SHALL DELIVER TO SELLER A CERTIFICATE ("AS
IS CERTIFICATE") CONFIRMING THE PROVISIONS HEREOF.
<PAGE>
4.7 GENERAL RELEASE. Except as otherwise expressly provided
in SECTIONS 4.1, 12.1 and 13, Buyer waives its right to recover from Seller
and its affiliates, partners, shareholders, officers, directors, employees,
agents, representatives and attorneys (collectively, "Released Parties")
any and all damages, losses, liabilities, costs or expenses whatsoever
(including attorneys' fees, court costs and litigation expenses) and claims
therefor, whether direct or indirect, known or unknown, foreseen or
unforeseen, which may arise on account of or in any way growing out of or
connected with the physical or environmental condition of the Property
(including the improvements thereon) or any law or regulation relating to
Hazardous Materials
BUYER EXPRESSLY WAIVES THE BENEFITS OF SECTION 1542 OF THE CALIFORNIA
CIVIL CODE, WHICH PROVIDES AS FOLLOWS:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH
THE CREDITOR DOES NOT KNOW OR EXPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN TO HIM MUST HAVE MATERIALLY AFFECTED
THE SETTLEMENT WITH THE DEBTOR."
5. COVENANTS OF SELLER AND BUYER
5.1 SELLER'S COVENANTS. From the date of this Agreement
through and including the Closing Date, Seller covenants and agrees that:
5.1.1 FURTHER LIENS AND ENCUMBRANCES. Seller will not
voluntarily subject the Property to any additional liens, encumbrances,
covenants, conditions, easements, rights of way or similar matters after
the date of this Agreement that will not be released at Closing. Seller
will not hereafter materially change any of the terms, covenants or
conditions of any of such existing documents, or enter into any new
material agreements affecting the Property that cannot be terminated at
Closing without cost or penalty without the prior written consent of Buyer,
which consent shall not be unreasonably withheld.
5.1.2 LEASES; OTHER CONTRACTS. Seller will not hereafter
materially amend any of the Leases, the Service Contracts or existing
contracts or enter into new leases or contracts affecting the Property
except (a) in the ordinary course of business, (b) in connection with the
Marina Construction or the Renovation Work pursuant to the Ground Lease, or
(c) with the prior written consent of Buyer. Without the prior written
consent of Buyer, Seller shall not terminate any of the Leases or existing
material contracts relating to the Property.
5.1.2.1 CONTRACTS RELATING TO MARINA
CONSTRUCTION AND RENOVATION WORK. Notwithstanding the provisions of
SECTION 5.1.2 to the contrary, Seller shall not enter into any material
agreements in connection with the Marina Construction or the Renovation
Work without Buyer's prior written approval, which approval shall not be
unreasonably withheld. Buyer shall grant or deny its written approval
within three (3) days after Seller's written request therefor (which
request shall be accompanied by either a copy of the proposed agreement (if
available) or a description of the material terms thereof). Buyer's
failure to respond to Seller in writing within such three (3) day period
shall be conclusively deemed to be Buyer's approval of such request. For
purposes of this SECTION 5.1.2.1, a "material" agreement shall be any
agreement which involves the expenditure of more than $25,000 pursuant to
the terms thereof. Notwithstanding the provisions of this SECTION 5.1.2.1,
Buyer's consent shall not be required for those material agreements which
are necessitated due to an emergency condition at the Property. In the
event that an agreement to which Buyer's approval is required pursuant to
the provisions of this Section is necessary in order for Seller to avoid
being in default under the Ground Lease, and Seller informs Buyer of such
fact concurrently with Seller's request for Buyer's approval of the same,
then, if Buyer disapproves such agreement, Seller shall have the right to
terminate this Agreement upon written notice to Buyer, in which event this
Agreement shall terminate, the Deposit shall be refunded to Buyer, and all
<PAGE>
rights and obligations of the parties existing hereunder shall terminate
and be of no further force or effect, except any rights and obligations
which survive the termination of this Agreement. Subject to Seller's
obligation to comply with Governmental Regulations and the Ground Lease,
Seller covenants and agrees that it shall take no action which would result
in the revocation or termination of the Marina Permits.
5.1.3 PROPERTY MANAGEMENT AND OPERATION. Subject to
Seller's right to remove the Excluded Property at Closing pursuant to
SECTION 5.2.2, Seller shall maintain the operation of the Property in a
manner and maintain inventory levels consistent with its historical
practice. Seller shall promptly notify Buyer in writing of any casualty or
condemnation of which Seller receives notice following the date of this
Agreement.
5.1.4 PREPAYMENTS. Seller shall not accept (a) any
prepaid rents, security deposits or other deposits under any of the Leases,
or (b) any deposits made with respect to reservations for guest rooms,
meeting rooms, restaurants and banquet facilities for dates after the
Closing Date, unless the same shall be credited to Buyer on the Closing
Date.
5.1.5 COOPERATION WITH REPRESENTATIVES. Subject to the
provisions of SECTION 8, Seller shall cooperate with Buyer and its
accountants, counsel and/or other representatives in providing information
and materials pertaining to the operation and marketing of the Property,
including access to the Property; provided, however, that Seller shall not
be obligated to provide any information or materials which is subject to
the attorney-client privilege or which is proprietary in nature. From and
after the execution and delivery of this Agreement, and subject to Section
8, Seller shall allow a representative or representatives of Buyer access
to the Property at reasonable times and upon the notice provided for in
SECTION 8.1.2, for the purpose of (a) monitoring the operation of the
Property and (b) performing such investigations and analyses of the
Property as Buyer may reasonably require.
5.1.6 LIQUOR LICENSES AND LIQUOR INVENTORY. At Closing,
and subject to approval by Department of Alcoholic Beverage Control, Seller
shall cause the holder of the Liquor Licenses to transfer the Liquor
Licenses and the Liquor Inventory to Buyer (or Buyer's designee) in
accordance with the terms and conditions of the Liquor Escrow Agreement.
Seller shall, at no cost or expense to Seller (except as provided in the
Liquor Escrow Agreement), cooperate with Buyer or Buyer's designee (and
shall cause the holder of the Liquor Licenses to cooperate with Buyer or
Buyer's designee) in effectuating a transfer of the Liquor Licenses.
If Buyer, after diligently pursuing the same, does not
obtain the Liquor Licenses by the Closing Date, Buyer shall, and Seller
shall cause the holder of the Liquor Licenses to cooperate in good faith to
enter into a short-term lease agreement (the "Liquor Lease Agreement")
pursuant to which such holder will continue to operate the liquor
facilities at the Hotel until a temporary liquor license is issued to
Buyer. Such agreement shall be upon terms and conditions mutually
satisfactory to Buyer and Seller and such holder.
5.1.7 ACCRUED VACATION, SICK LEAVE, ETC. At Closing,
Seller will (a) pay all accrued sick leave, vacation pay and pension or
retirement benefits as required under applicable law and any Employment
Contract including any collective bargaining agreement, and (b) fulfill any
and all bargaining obligations of Seller with any labor organizations.
5.1.8 SELLER'S PAYABLES. Seller shall pay, in the
ordinary course of business, Seller's Payables.
5.1.9 OBTAINING GROUND LESSOR ESTOPPEL. Seller shall use
its reasonable efforts (at no cost or expense to Seller) to obtain the
Ground Lessor Estoppel.
<PAGE>
5.1.10 ELECTRICAL WORK. Buyer acknowledges that
Seller is currently undertaking certain electrical distribution work (the
"Electrical Work"). To the extent that such Electrical Work is not
completed by Closing, the Buyer shall receive a credit at Closing
representing the cost of the uncompleted Electrical Work (the "Electrical
Work Credit"), which credit shall be in full satisfaction of Seller's
obligations to Buyer regarding the Electrical Work. It is agreed that the
current estimate of the amount needed to complete the Electrical Work as of
the date hereof is $ 108,000.
5.1.11 FINANCIAL AUDIT. For a period of sixty (60)
days after closing, upon Buyer's request, Seller shall, at no cost or
expense to Seller, make available to Buyer all financial information for
the Hotel for the three most recent fiscal years for the purpose of an
audit to be performed by KPMG Peat Marwick LLP ("KPMG") in accordance with
Rule 3.05 of Regulation S-X of the Securities and Exchange Commission Rules
and Regulations. Such financial information will be made available to
Buyer and KPMG at reasonable times and in a location mutually agreeable to
Buyer and Seller and will include, but not be limited to, the following
information pertaining to the Hotel: general ledgers, city ledgers, guest
ledgers, financial statements and management letters, policies and
procedures manuals, room contracts, labor contracts, loan agreements,
compensation agreements and any other agreements, invoices for all
expenditures made, sales and marketing plans, fixed assets registers,
budgets and variance explanations, personnel files, payroll registers, bank
statements, bank account reconciliations, check registers (including the
period following the most recent fiscal year) and descriptions of benefit
plans, related party transactions, insurance coverage, litigation, vacation
accruals and taxes paid. In addition, in conjunction with such audit,
Seller will provide to KPMG a letter substantially in the form of EXHIBIT
"Q" attached hereto.
5.2 BUYER'S COVENANTS. From the date of this Agreement
through and including the Closing Date (and, to the extent such covenants
cannot reasonably be performed prior to the Closing, after the Closing
Date), Buyer covenants and agrees that :
5.2.1 LIQUOR LICENSE. Buyer shall diligently pursue the
issuance at Closing of a temporary liquor license for the Hotel.
5.2.2 REMOVAL OF PROPERTY. Prior to Closing, Seller
shall have the right to remove from the Property (including, without
limitation, the gift shop) the Excluded Personal Property. As soon as
practicable after Closing (but in no event later than thirty (30) days)
Seller shall cover or remove all signs, labels and personal property that
contain the name "Princess" or any derivative thereof, and/or the Princess
mark, and Buyer shall cooperate with Seller (including, without limitation,
by providing Seller with reasonable access to the Property) in doing the
same. The provisions of this SECTION 5.2.2 shall survive the Closing.
5.2.3 INTENTIONALLY OMITTED
5.2.4 MARINA CONSTRUCTION, RENOVATION AND
ELECTRICAL WORK. At Closing, Buyer shall assume all obligations of Seller
relating to the Marina Construction, the Renovation Work and the Electrical
Work, including, without limitation, any construction, architects and/or
consulting contracts entered into by Seller relating thereto and all permit
fees and license obligations relating thereto.
5.2.5 ACCESS TO BOOKS AND RECORDS. From and after
the Closing, Buyer shall allow Seller reasonable access upon three (3) days
prior written notice to the books and records relating to Seller's
operation of the Hotel in order to allow Seller to prepare its final sales,
occupancy and employee withholding tax returns. In addition to the
foregoing, for a period of ninety (90) days after the Closing, Buyer shall
allow Seller's designated representative(s) to occupy without charge a
secure room or office at the Hotel (which room or office will contain a
desk or table and telephone) for the purpose of winding up the affairs of
Seller relating to Seller's operation of the Hotel.
<PAGE>
5.2.6 ASSUMPTION OF SERVICE CONTRACTS. Within five
(5) days after the date of this Agreement, Buyer shall notify Seller in
writing of which Service Contracts, if any, it intends to assume at
Closing. Buyer's failure to so notify Seller shall be conclusively deemed
to be Buyer's election to assume all Service Contracts. Notwithstanding
the foregoing, Buyer shall assume all Service Contracts which (a) cannot be
terminated upon thirty days' or less notice or (b) cannot be terminated
without penalty. Seller shall cause all Service Contracts which Buyer has
elected not to assume in accordance with this Section (other than those
Service Contracts described in the immediately preceding sentence) to be
terminated as of the Closing; provided, however, that in the event such
Service Contracts cannot be terminated at Closing, then the amounts due
thereunder shall be prorated as of the Closing.
6. TITLE TO REAL PROPERTY. At Closing, title to the Real Property
will be conveyed to Buyer by Seller by the Assignment of Ground Lease,
subject only to the matters contained in the Pro Forma Title Policy and the
Permitted Exceptions.
7. CONDITIONS PRECEDENT/CONCURRENT TO CLOSING; CLOSING DATE.
7.1 BUYER'S CONDITIONS. Buyer shall not be required to close
the transaction provided for under this Agreement, unless and until Buyer
deems that each and every one of the following conditions has been
fulfilled:
7.1.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF
SELLER. Seller shall have duly and timely performed each and every
covenant to be performed by Seller under this Agreement prior to the
Closing Date and the representations and warranties set forth in this
Agreement shall be true and correct as of the Closing in all material
respects.
7.1.2 SELLER'S DELIVERIES. Seller shall have duly and
timely delivered to Buyer all of the items described in SECTION 3.2 of this
Agreement.
7.1.3 TITLE INSURANCE. The Title Company will have
issued or have unconditionally and irrevocably committed to issue the Title
Policy to Buyer, subject only to the Permitted Exceptions.
7.1.4 EXHIBITS AND SCHEDULES. On the Closing Date,
Seller shall have updated each of the Exhibits and Schedules attached
hereto, so that, the same are true and accurate as of the Closing Date, and
there shall have been no material adverse change in the information
contained in the Schedules delivered at Closing from those attached to this
Agreement which have not been approved (such approval not to be
unreasonably withheld) or deemed approved by Buyer.
7.1.5 APPROVAL OF CITY; GROUND LESSOR ESTOPPEL. The City
shall have (a) approved in writing the assignment of the Ground Lease to
Buyer, (b) executed and delivered to the Escrow Holder the Assignment of
Ground Lease and (c) executed and delivered to the Escrow Holder the Ground
Lessor Estoppel.
7.1.6 MANAGEMENT, LICENSE AND RESERVATION
AGREEMENTS. Seller shall have terminated (a) any and all management
agreements affecting the Property in effect prior to the Closing, (b) that
certain Agreement dated January 29, 1988 between Princess Cruises Resorts
and Hotels, Inc. ("Princess") and Parkway Investments/California, Inc., and
(c) that certain Memorandum Agreement dated January 29, 1988 between
Princess and San Diego Princess Management Corporation.
7.2 SELLER'S CONDITIONS. Seller shall not be required to close the
transaction provided for under this Agreement, unless and until Seller
deems that each and every one of the following conditions has been
fulfilled:
<PAGE>
7.2.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER.
Buyer shall have duly and timely performed each and every covenant to be
performed by Buyer under this Agreement prior to the Closing Date and the
representations and warranties set forth in this Agreement shall be true
and correct as of the Closing in all respects.
7.2.2 APPROVAL OF CITY. The City shall have approved in
writing the assignment of the Ground Lease to Buyer and the release of
Seller from all further obligations and liabilities with respect thereto,
and shall have executed and delivered to the Escrow Holder the Assignment
of Ground Lease.
7.2.3 BUYER'S DELIVERIES. Buyer shall have duly and timely
delivered to Seller all of the items described in SECTION 3.3 of this
Agreement.
8. INTENTIONALLY OMITTED
9. PRORATIONS AND ADJUSTMENTS. The following prorations and
adjustments shall be made as of the Transfer Time:
9.1 INVENTORY. Buyer is acquiring all of the inventory as
of the Transfer Time, and there shall be no adjustment or proration
therefor.
9.2 ROOM REVENUES; OTHER REVENUES. Buyer shall be entitled
to all Other Revenues from and after the Transfer Time, and Seller shall
pay to Buyer on the Closing Date an amount equal to the sum of the
following items: (i) one-half (1/2) of the Room Revenues for the night
immediately preceding the Closing Date, (ii) the value of any complimentary
rooms (based upon the "rack" rate for each room), and any complimentary
food or beverages (based upon the advertised rate for each food and
beverage) provided by Seller to officers, directors or shareholder of the
partners of Seller for periods after the Transfer Time, (iii) all prepaid
deposits under the Reservation Agreements and Deposits made to Seller for
dates after the Transfer Time, (iv) the value of any gift certificates for
which Seller has been paid in cash and which have not been redeemed as of
the Closing, and (v) any other amounts received by Seller for the provision
of rooms, goods, facilities or services after the Transfer Time.
9.3 UTILITIES. Prior to the Closing Date, Seller shall
notify all utility companies servicing the Property of the anticipated
change in ownership of the Property and request that all billings after the
Transfer Time be made to Buyer at the Hotel address. Utility meters will
be read, to the extent that the utility company will do so, during the
daylight hours on the Closing Date, with charges to that time paid by
Seller and charges thereafter paid by Buyer. Charges for utilities which
are unmetered, or charges for the meters which have not been read on the
Closing Date, will be prorated between Buyer and Seller as of the Transfer
Time based upon utility billings for the prior month with an adjustment
between the parties being made after Closing, and payment for such shall be
made within seven (7) days from the date of any request for the same. All
utility deposits made by Seller shall be assigned to Buyer, and Seller
shall receive a credit at Closing for such amounts.
9.4 LEASES. Buyer shall have the right to collect any
delinquent rentals payable by tenants under the Leases. Delinquent rentals
shall be applied first to current rents due, and Buyer shall pay to Seller
any remaining amounts as and when received. Seller shall pay to Buyer on
the Closing Date the amount of any prepaid rents made to Seller with
respect to periods after the Closing Date, security deposits or other
deposits under any of the Leases.
9.5 GROUND LEASE RENTAL PAYMENTS. Rent and all other
payments due under the Ground Lease shall, to the extent possible, be
prorated as of the Closing Date. Seller shall receive a credit at Closing
equal to the amount of the security deposit, if any, paid by Seller under
the Ground Lease.
<PAGE>
9.6 CAPITAL LEASES. Amounts due under all Capital Leases
shall be prorated as of the Closing Date.
9.7 RESERVATIONS. Buyer will honor, for its account, all
Reservation Agreements and Deposits for dates after the Closing Date that
are (a) made by Seller in accordance with the provisions of this Agreement
or (b) approved by Buyer. Buyer authorizes Seller to continue to accept
reservations for guest rooms, meeting rooms, restaurant and banquet
facilities for periods after the Closing Date provided the terms and
conditions of which are at current fair market value and are in the
ordinary course of Seller's business, and Buyer agrees to honor all such
reservations in accordance with their terms. Buyer further acknowledges
that it is Seller's practice to offer guest rooms at the Property to
employees of Seller at reduced room rates, and, provided the same are
booked in a manner that is consistent with Seller's practice, Buyer agrees
to honor all room reservations and rates which are booked and used by such
employees prior to May 31, 1998.
9.8 ACCOUNTS PAYABLE AND EXPENSES. All accounts payable and
expenses related to operations of the Property which have accrued before
the Transfer Time shall be paid by Seller. All accounts payable and
expenses arising after the Transfer Time or which are incurred by or at the
direction of Buyer outside of this Agreement shall be paid by Buyer. In
addition, Seller shall be responsible for paying the Seller's Payables.
9.9 TAXES. Seller shall pay general real estate and ad
valorem personal property taxes and assessments for all periods prior to
the Transfer Time and all special taxes or assessments becoming a lien
against the Property and relating to the period prior to the Transfer Time,
and any such taxes for the period in which the Closing Dates falls shall be
prorated as of the Closing Date.
9.10 SERVICE CONTRACTS. All amounts due under Service
Contract which are not terminated as of the Closing shall be prorated as of
the Closing Date.
9.11 PRELIMINARY STATEMENT OF PRORATIONS AND ADJUSTMENTS.
Seller and Buyer shall cooperate with each other in examining the books and
records of the Hotel as necessary to make the adjustments and prorations
required under this SECTION 9, or under any other provision of this
Agreement. Based upon such examination, Buyer and Seller will jointly
prepare, no later than two (2) business days prior to the Closing, a
preliminary closing statement (the "Preliminary Statement"). The
Preliminary Statement shall contain the parties' best estimate of the
amounts of the items to be prorated and adjusted pursuant to this
Agreement, the allocation thereof between the parties and the basis for
such allocation. The amounts set forth on the Preliminary Statement shall
be adjusted as of the Transfer Time.
9.12 FINAL ADJUSTMENTS. If any supplemental billing is issued
or new information learned with respect to any of the foregoing prorations
or credits, the same shall be adjusted and prorated between Seller and
Buyer as soon as reasonably possible after the Closing. In any event, to
the fullest extent possible Seller and Buyer shall jointly prepare a final
schedule of adjustments (the "Final Statement") within sixty (60) days
after Closing and either party owing the other a sum of money shall pay
such sum within ten (10) days after such Final Statement is prepared.
Notwithstanding the foregoing, any real property, personal property or
other taxes assessed against any portion of the Property shall be subject
to a final adjustment between the parties on or before one hundred and
eighty (180) days after the Closing, and either party owing the other a sum
of money shall pay such sum within ten (10) days after such final
adjustment. If any dispute arises between Buyer and Seller in connection
with such Final Statement or final adjustment for taxes, the parties shall
diligently and in good faith attempt to resolve any such dispute. If such
dispute is not resolved within forty-five (45) days after the date such
dispute arose, then the parties shall submit such dispute to an independent
accountant reasonably acceptable to the parties, and the determination of
<PAGE>
such independent accountant shall be conclusive. The fees and expenses of
such independent accountant shall be paid equally by Buyer and Seller. The
provisions of this SECTION 9.11 shall survive the Closing.
9.13 METHOD OF PRORATION. All prorations will be made as of
the Closing Date based on a 365-day year.
9.14 ACCRUED VACATION AND SICK PAY. Seller shall pay any
accrued vacation and sick pay owing to employees of the Hotel as of the
Closing Date.
9.15 ACCOUNTS RECEIVABLE. Buyer shall not acquire the
Accounts Receivable from Seller, and there shall be no adjustments or
prorations therefor; provided, however, that Buyer shall use reasonable
efforts (excluding litigation) to collect on behalf of Seller all Accounts
Receivable outstanding as of the Closing, and shall remit all amounts
collected therefor to Seller upon Buyer's receipt of same. Sellers shall
have the right, upon reasonable advance notice, to examine Buyer's books
and records after the Closing to verify the status if the collection of
such accounts. The provisions of this SECTION 9.12 shall survive the
Closing.
10. COSTS AND EXPENSES. The closing costs shall be allocated as
follows:
10.1 SELLER. Seller shall pay all premiums for the standard
coverage (e.g. CLTA Coverage) of the Title Policy (not to exceed $0.43 per
thousand dollars of insurance), Seller's share of prorations, all state and
county transfer taxes, all general excise and occupancy taxes, any other
tax or assessment imposed as a result of the transactions contemplated
under this Agreement (other than sales taxes on the transfer of the
Personal Property, which shall be the responsibility of Buyer), and any
document recording charges and notary fees, including, without limitation,
any recording fees and notary charges with respect to the Assignment of
Ground Lease.
10.2 BUYER. Buyer shall pay all premiums for the Title Policy
except for the CLTA portion of the Title Policy, the cost of the Survey,
and Buyer's share of prorations as provided in this Agreement. In
addition, Buyer shall pay, at Closing, all sales taxes due as a result of
the transfer of the Personal Property to Buyer. Further, Buyer shall pay
to Seller (i.e. Seller shall receive a credit at Closing) in an amount
equal to $16,500, which amount represents the cost of an appraisal of the
Property performed by Lipman, Stevens, Marshall & Thene Incorporated in
connection with the City's approval of the Ground Lessor Estoppel.
10.3 LIQUOR LICENSE. Buyer shall pay all costs associated
with the transfer of the Liquor Licenses to Buyer, including, without
limitation, any escrow fees and charges
10.4 ASSIGNMENT FEE. Seller shall pay the Assignment Fee.
10.5 OTHER CLOSING COSTS. Except as provided in SECTIONS
8.1.2, 12, 14 AND 16.20, Buyer and Seller will each pay their own legal and
professional fees and fees of other consultants incurred by Buyer and
Seller, respectively. All other closing costs and expenses will be
allocated between Buyer and Seller in accordance with the customary
practice in the county in which the Property is located.
11. CLOSING AND POSSESSION.
11.1 DELIVERY OF POSSESSION. Simultaneously with the delivery
of the fully executed Transfer Documents, Seller shall deliver possession
and enjoyment of the Property to Buyer and Buyer shall thereupon have the
immediate right to possess, develop, use, sell, encumber and/or transfer
the Property, or any part thereof for its own account to the total
exclusion of Seller, and subject to the provisions of the Ground Lease, the
Leases and the Permitted Exceptions.
<PAGE>
12. GENERAL INDEMNIFICATION.
12.1 BY SELLER. Subject to SECTION 4.6 and the procedures
set forth in SECTION 12.1.1 below, Seller will defend, indemnify and hold
the Buyer and each of its respective officers, directors, agents,
shareholders, representatives, employees, attorneys, affiliates,
beneficiaries, subsidiaries, successors and assigns (collectively, the
"Buyer Indemnitees") harmless from and against any and all claims, demands,
liabilities, liens, costs, expenses, penalties, damages and losses
(including, but not limited to, reasonable attorneys' fees and costs) which
accrue in or relate to the period prior to the Closing Date and which (a)
are based in tort, or (b) relate to the employment of a Hotel employee, or
(c) relate to the obligations of Seller as tenant under the Ground Lease.
12.1.1 GENERAL PROVISIONS RELATING TO SELLER'S INDEMNITY.
The following provisions shall be applicable to the indemnification
obligations of Seller set forth in SECTION 12.1.
12.1.1.1 NOTICE OF CLAIMS. Buyer shall deliver
notice (the "Indemnification Notice") to Seller of the assertion of any
claim, or the commencement of any suit, action or proceeding by any party
for which indemnification is sought hereunder as soon as reasonably
possible after Buyer receives notice thereof, but in no event later than
ten (10) days in the event Buyer is served with notice of any suit, action
or proceeding, and in no event later than thirty (30) days for all other
matters. In the Indemnification Notice, Buyer shall (a) specify with
reasonable particularity the basis for seeking indemnity and (b) provide
Seller with such information with respect to the claim, suit, action or
proceeding as may be known to Buyer at the time (and shall continue to
provide Seller with any additional information as and when the same becomes
known to Buyer). Buyer's failure to timely deliver the Indemnification
Notice (and to provide such additional information as provided herein)
pursuant to this Section shall relieve Seller of its indemnification
obligation with respect to such claims, suit, action or proceeding.
12.1.1.2 ASSUMPTION OF DEFENSE. Seller shall
have the right, in its sole and absolute discretion, to elect, upon written
given to Buyer within fifteen (15) days after Seller's receipt of the
Indemnification Notice, to investigate and/or defend such claim, suit,
action or proceeding with counsel selected by Seller; provided that Seller
shall thereafter consult with Buyer upon Buyer's reasonable request for
such consultation from time to time with respect to such claim, suit,
action or proceeding. If Seller assumes the defense, Buyer shall have the
right (but not the duty) to participate in the defense thereof and to
employ (at Buyer's sole cost and expense) counsel separate from the counsel
employed by Seller, but Seller shall nonetheless have control over the
defense. If Seller elects not to undertake the investigation and/or
defense of such claim, suit, action or proceeding, Buyer shall defend such
claim, suit, action or proceeding with counsel selected by Buyer and
reasonably approved by Seller. Buyer shall thereafter consult with Seller
and keep Seller informed with respect to such claim, suit, action or
proceeding. If Seller elects to cause Buyer to assume the defense, the
Seller shall have the right (but not the duty) to participate in the
defense thereof and to employ (at Seller's sole cost and expense) counsel
separate from the counsel employed by Buyer. Whether or not Seller elects
to defend any such claim, suit, action or proceeding, Buyer and Seller
shall cooperate in the defense thereof.
12.1.1.3 BUYER'S ACTIONS. Subject to Seller's
right to control the investigation and defense of any claim, suit, action
or proceeding pursuant to SECTION 12.1.1.2, Buyer shall take all
commercially reasonable actions necessary or advisable to mitigate the
amount of damages suffered by Buyer or any third party claiming against
Buyer in connection with such claim, suit, action or proceeding. Any
failure by Buyer to take such action, or any action which Buyer undertakes
pursuant to this Section but which Buyer performs in a negligent manner,
shall relieve Seller of its indemnification obligation with respect to such
claims, suit, action or proceeding.
<PAGE>
12.1.1.4 SETTLEMENT OR COMPROMISE. Seller may
settle or compromise any claim, suit, action or proceeding without the
approval of Buyer, provided that the settlement or compromise includes a
release of Buyer from the claims asserted, and if Buyer fails to cooperate
in the consummation of such settlement or compromise, Seller shall be
relieved of its indemnification obligation with respect to the claims,
suit, action or proceeding proposed to be so settled or compromised. If
Buyer settles or compromises any claim, suit, action or proceeding for
which indemnification has been sought without the prior approval of Seller,
which approval may be granted or withheld in Seller's sole and absolute
discretion, then unless Seller has elected to provide the defense and has
failed to do so, Seller shall be relieved of its indemnification
obligations with respect to such claim, suit, action or proceeding.
12.2 BY BUYER. Buyer will defend, indemnify and hold Seller
and its officers, directors, agents, shareholders, representatives,
employees, attorneys, affiliates, beneficiaries, subsidiaries, successors
and assigns (collectively, the "Seller Indemnitees") harmless from and
against any and all claims, demands, liabilities, liens, costs, expenses,
penalties, damages and losses (including, but not limited to, attorneys'
fees and costs) of every kind and nature incurred or accrued from and after
the Closing Date with respect to the Property, whether arising from acts or
omissions of Buyer, its agents or employees or otherwise;
The indemnifications contained in this Section 12 shall survive the
Closing for a period of twelve (12) months.
13. REMEDIES:
13.1 BUYER'S REMEDIES GENERALLY. IN THE EVENT THAT SELLER
SHALL FAIL TO CONSUMMATE THIS AGREEMENT FOR ANY REASON OTHER THAN BUYER'S
DEFAULT OR A TERMINATION OF THIS AGREEMENT BY BUYER OR SELLER PURSUANT TO A
RIGHT TO DO SO UNDER THE PROVISIONS HEREOF, BUYER SHALL HAVE THE FOLLOWING
REMEDIES, WHICH SHALL BE BUYER'S SOLE AND EXCLUSIVE REMEDIES BASED UPON A
DEFAULT BY SELLER. SUCH REMEDIES SHALL NOT BE CUMULATIVE, MEANING BUYER
MAY EXERCISE ONE (1) BUT NOT BOTH OF SUCH REMEDIES. BUYER SHALL DELIVER TO
SELLER AND ESCROW HOLDER NOTICE OF ITS ELECTION OF REMEDIES WITHIN FIVE (5)
BUSINESS DAYS AFTER BUYER HAS NOTICE OF SELLER'S DEFAULT. THE SOLE
REMEDIES AVAILABLE TO BUYER ARE AS FOLLOWS:
13.1.1 BUYER MAY TERMINATE THIS AGREEMENT, IN WHICH
CASE SELLER SHALL IMMEDIATELY RETURN THE DEPOSIT, TOGETHER WITH ANY
INTEREST EARNED THEREON, TO BUYER, UPON EXECUTION OF CANCELLATION
INSTRUCTIONS BY BUYER, AND SELLER SHALL PAY ANY ESCROW CANCELLATION CHARGES
OR
13.1.2 BUYER MAY BRING AN ACTION FOR SPECIFIC
PERFORMANCE AGAINST SELLER TO COMPEL THE DELIVERY OF THE TRANSFER DOCUMENTS
TO BUYER (IN WHICH CASE BUYER SHALL BE DEEMED TO HAVE ACCEPTED THE TRANSFER
SUBJECT TO ALL MATTERS OF RECORD AFFECTING THE LAND), BUT ONLY UNDER THE
FOLLOWING CONDITIONS AND CIRCUMSTANCES:
13.1.2.1 BUYER SHALL HAVE FULLY PERFORMED ALL
OBLIGATIONS OF BUYER UNDER THIS AGREEMENT, EXCEPT THAT WITH RESPECT TO
DEPOSITING THE BALANCE OF THE PURCHASE PRICE, BUYER SHALL HAVE EVIDENCED TO
SELLER'S REASONABLE SATISFACTION THAT BUYER IS READY, WILLING AND ABLE TO
TIMELY DEPOSIT SAID FUNDS IN ESCROW AT THE TIME REQUIRED BY THIS AGREEMENT.
13.1.2.2 THE ACTION SHALL BE COMMENCED, AND
SERVICE OF PROCESS UPON SELLER MADE, NOT LATER THAN THIRTY (30) DAYS AFTER
BUYER HAS NOTICE OF SELLER'S DEFAULT; AND
<PAGE>
13.1.2.3 ALL OF THE ISSUES IN SUCH ACTION,
WHETHER OF FACT OR LAW, SHALL BE HEARD BY A REFERENCE PROCEEDING PURSUANT
TO CALIFORNIA CODE OF CIVIL PROCEDURE, SECTION 638, ET. SEQ. WITHIN TEN
(10) DAYS FOLLOWING THE COMMENCEMENT OF ANY SUCH ACTION, THE PARTIES SHALL
MAKE APPLICATION TO THE COURT IN WHICH THE ACTION IS PENDING FOR THE
APPOINTMENT OF A RETIRED SUPERIOR COURT JUDGE OR COURT OF APPEAL JUSTICE
FROM THE THEN CURRENT LIST OF RETIRED JUDGES AVAILABLE TO SERVE AS REFEREES
IN THE COUNTY IN WHICH SUCH ACTION IS COMMENCED TO SERVE AS THE REFEREE.
THE REFEREE CHOSEN SHALL BE DEEMED QUALIFIED ONLY IF HE IS WILLING TO AGREE
TO HEAR THE SUBJECT ACTION WITHIN TWENTY (20) DAYS FOLLOWING THE DATE OF
APPLICATION TO THE COURT, TO HEAR THE SUBJECT ACTION ON CONSECUTIVE DAYS
AND TO RENDER A DECISION WITHIN A FURTHER FIFTEEN (15) DAY PERIOD. THE
PARTIES SHALL ADVANCE, IN EQUAL SHARES, THE FEES AND EXPENSES OF THE
REFEREE SELECTED PURSUANT TO TIES PROVISION, BUT THE LOSING PARTY IN ANY
SUCH ACTION SHALL REIMBURSE THE PREVAILING PARTY FOR ANY AND ALL FEES AND
EXPENSES PREVIOUSLY ADVANCED BY SUCH PREVAILING PARTY FOR THE REFEREE.
ALTERNATIVELY, BUYER MAY ELECT TO WAIVE SUCH BREACH, IN WHICH EVENT
THE PARTIES SHALL PROCEED TO CLOSING AS PROVIDED IN THIS AGREEMENT, WITHOUT
ANY ADJUSTMENT IN THE PURCHASE PRICE FOR SUCH BREACH.
13.2 BUYER'S REMEDIES FOR BREACH OF REPRESENTATIONS AND
WARRANTIES. Notwithstanding anything contained in SECTION 13.1 to the
contrary, if Buyer discovers after the Closing that one or more of the
representations and warranties of Seller contained in this Agreement was
not true and correct in all material respects as of the Closing, and such
inaccuracy was not known to or reasonably discoverable by Buyer prior to
Closing, Buyer may bring an action against Seller for damages proximately
caused by such inaccuracy; provided, however, that such action shall be
initiated, if at all, within one (1) year after the Closing Date.
Notwithstanding anything contained in this SECTION 13.2 to the contrary, in
no event shall Seller's liability under this Section exceed Three Million
Five Hundred Thousand Dollars ($3,500,000).
13.3 SELLER'S REMEDIES. IF BUYER SHOULD FAIL TO CONSUMMATE
THIS AGREEMENT AS A RESULT OF BUYER'S DEFAULT UNDER THE TERMS OF THIS
AGREEMENT, THEN SELLER, AS ITS SOLE AND EXCLUSIVE REMEDY, MAY TERMINATE
THIS AGREEMENT BY NOTIFYING BUYER THEREOF AND RECEIVE OR RETAIN THE DEPOSIT
AS LIQUIDATED DAMAGES. THE PARTIES AGREE THAT SELLER WILL SUFFER DAMAGES
IN THE EVENT OF BUYER'S DEFAULT ON ITS OBLIGATIONS. ALTHOUGH THE AMOUNT OF
SUCH DAMAGES IS DIFFICULT OR IMPOSSIBLE TO DETERMINE, THE PARTIES AGREE
THAT THE AMOUNT OF THE DEPOSIT IS A REASONABLE ESTIMATE OF SELLER'S LOSS IN
THE EVENT OF BUYER'S DEFAULT. THUS, SELLER SHALL ACCEPT AND RETAIN THE
DEPOSIT AS LIQUIDATED DAMAGES BUT NOT AS A PENALTY. SUCH LIQUIDATED
DAMAGES SHALL CONSTITUTE SELLER'S SOLE AND EXCLUSIVE REMEDY.
<PAGE>
SELLER AND BUYER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THE
PROVISIONS OF THE FOREGOING PROVISION AND BY THEIR SIGNATURES IMMEDIATELY
BELOW AGREE TO BE BOUND BY ITS TERMS.
"BUYER" "SELLER"
LHO MISSION BAY HOTEL, L.P., a VVH RESORTS, LTD., a Delaware
California limited partnership limited partnership
By: LASALLE HOTEL OPERATING By: SAN DIEGO PRINCESS
PARTNERSHIP, L.P., a Delaware MANAGEMENT OPERATION
limited partnership Its: Sole General Partner
Its: General Partner
By: LASALLE HOTEL By: /s/ Ned S. Holmes
PROPERTIES, a Maryland trust Name: Ned S. Holmes
Its: General Partner Its: President
By: /s/ Michael Barnello
Name: Michael Barnello
Its: Chief Operating Officer
By: ______________________
Name:______________________
Its: ______________________
14. HOTEL EMPLOYEES: On or before the Closing Date, Seller shall
terminate the services of the Hotel employees. Buyer shall rehire a
sufficient number of such employees upon such terms and conditions
(including, without limitation, pension benefits and COBRA plans) in order
that the actions of the parties pursuant to this Agreement will not trigger
the application of the WARN Act. Buyer further agrees that it shall not
terminate any such employees without cause for at least ninety (90) days
following the Closing. Buyer shall indemnify, defend and hold Seller and
the Seller Indemnitees harmless from and against any and all liability
incurred by Seller under the WARN Act. as a consequence of Buyer's breach
of its obligations under this Section 14. The provisions of this SECTION
14 shall survive the closing.
15. NOTICE. All notices, requests, demands or documents which are
required or permitted to be given or served hereunder shall be in writing
and (a) delivered personally, (b) delivered by a national overnight courier
(e.g., FedEx), or (c) transmitted by facsimile, addressed as follows:
To Seller at:
Parkway Investment
55 Waugh Drive, Suite 1111
Houston, Texas 77007
Attn: John C. Kinsella, Esq.
Facsimile: (713) 864-8887
with a copy to:
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, 10th Floor
Los Angeles, California 90067
Attn: James R. Butler, Jr.
Facsimile: (310) 203-0567
<PAGE>
with a copy to:
Hotel Partners, Inc.
1401 Dove Street, Suite 350
Newport Beach, California 92660
Attn: Mr. Russell D. Urban
Facsimile: (714) 553-0606
To Buyer at:
LHO MISSION BAY HOTEL, L.P
c/o LaSalle Hotel Operating Partnership, L.P.
LaSalle Partners Limited
220 East 42nd Street
New York, New York 10017
Attn: Mr. Michael Barnello
Facsimile: (212) 687-8170
with a copy to:
Brown & Wood LLP
One World Trade Center
New York, New York 10048-0557
Attn: Hedwig O'Hara, Esq.
Facsimile: (212) 839-5599
Notice shall be deemed to have been delivered only upon actual delivery to
the intended addressee in the case of either personal, courier, or
facsimile delivery. The addresses for purposes of this paragraph may be
changed by giving written notice of such change in the manner provided
herein for giving notices. Unless and until such written notice is
delivered, the latest information stated by written notice, or provided
herein if no written notice of change has been delivered, shall be deemed
to continue in effect for all purposes hereunder.
16. MISCELLANEOUS:
16.1 SURVIVAL. The recitals set forth at the beginning of
this Agreement are deemed incorporated herein, and the parties to this
Agreement warrant and represent that they do not omit to state any material
fact necessary to make the statements or Exhibits, as the case may be,
materially misleading. The representations, warranties, covenants,
acknowledgments, agreements and indemnities contained in this Agreement and
the Exhibits, or in any of the documents or agreements executed and/or
delivered and/or exchanged pursuant to the terms of this Agreement, shall
survive the Closing Date for the periods provided in this Agreement (or, if
no period is provided, indefinitely) and shall not be deemed to have merged
or terminated upon the Closing Date.
16.2 PARTIES IN INTEREST. As and when used herein, the terms,
"Seller" and, subject to SECTION 16.14 below, "Buyer", mean and include,
and this Agreement their respective successor and assigns and shall be
binding upon and inure to the benefit of, the above-named Seller and Buyer
and their respective successors and permitted assigns.
16.3 SECTION HEADINGS. The headings of sections are inserted
only for convenience and shall in no way define, describe or limit the
scope or intent of any provision of this Agreement.
16.4 NO ORAL MODIFICATIONS. This Agreement may not be amended
or modified except in writing executed by all parties hereto.
16.5 FULL INTEGRATION. Buyer and Seller each acknowledge
that, other than that certain letter understanding dated as of May 15, 1998
between Buyer and Seller, there are no other agreements or representations,
either oral or written, express or implied, that are not embodied in this
Agreement, and this Agreement, the Exhibits attached to this Agreement, and
the Transfer Documents, represent a complete integration of all the prior
and contemporaneous agreements and understandings and documents.
<PAGE>
16.6 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto, and their respective successors
and assigns, and no other party shall be a beneficiary hereunder.
16.7 BUYER'S ADVICE OF COUNSEL. Buyer acknowledges that
(a) Seller has not made any representation as to the Federal or State tax
implications relating to the transactions contemplated herein, (b) Buyer
has thoroughly read and reviewed the terms and provisions of this Agreement
and the Exhibits attached hereto and is familiar with the terms of this
Agreement, (c) the terms and provisions contained in this Agreement are
clearly understood by Buyer and have been fully and unconditionally
consented to by it, (d) Buyer has had full benefit and advice of counsel of
its own selection, in regard to understanding the terms, meaning and effect
of this Agreement, (e) the execution of this Agreement and of the Transfer
Documents is done freely, voluntarily, with full knowledge, and without
duress, (f) in executing this Agreement, Buyer is relying on no other
representations, either written or oral, express or implied, made to it by
any other party to this Agreement, and the consideration received by it
under this Agreement has been actual and adequate.
16.8 ATTORNEYS' FEES. If an action is commenced by a party
hereto resulting from a dispute with respect to the transactions
contemplated herein, the prevailing party shall be entitled to recover its
reasonable attorneys' fees and costs from the other party in such action.
As used herein, the term "attorneys' fees" means attorneys' fees whether or
not litigation ensues and if litigation ensues whether incurred at trial,
on appeal, on discretionary review or otherwise.
16.9 GOVERNING LAW. This Agreement will be governed by,
interpreted under, and construed and enforced in accordance with the laws
of the State of California with venue in the city and County of San Diego,
California. Each of the parties hereto acknowledge and agree that the laws
of the State of California and the selection of venue in the city and
County of San Diego were freely chosen by Buyer and Seller.
16.10 CONFIDENTIALITY. Unless otherwise agreed to in writing
by Seller and Buyer:
16.10.1 Each party will use reasonable efforts to
keep confidential the specific economic terms of this Agreement.
16.10.2 Prior to the Closing, and except as required
by applicable securities laws, Buyer will not: disclose to any person
other than persons who agree to be bound by this confidentiality covenant,
and are acting as its advisors, lenders or proposed assignees, any
information concerning financial data pertaining to the Hotel which may be
delivered by Seller or its agents to Buyer, including but not limited to,
the Hotel's average daily rate, average occupancy rate, management and all
fees and expenses, provided this restriction shall not apply after the
Closing Date and does not apply to information which is or becomes
generally available to the public other than as a result of a disclosure by
the Buyer (or persons to whom it makes disclosure of such information), or
becomes available to the Buyer on a nonconfidential basis from a source
other than the Seller, and the source is not under an obligation of
confidentiality with respect to that information.
16.10.3 Neither Buyer nor Seller shall issue any
public announcement or press release without first giving the other party a
reasonable opportunity to comment on the timing and terms of the
announcement or release.
16.11 SEVERABILITY. The invalidity, illegality or
unenforceability of any provision of this Agreement shall not affect the
enforceability of any other provision of this Agreement, all of which shall
remain in full force and effect.
16.12 TIME OF THE ESSENCE. Time is of the essence of this
Agreement and of the obligations required hereunder.
<PAGE>
16.13 NON-WAIVER. No delay or failure by any party to exercise
any right hereunder, and no partial or single exercise of any such right,
shall constitute a waiver of that or any other right, unless otherwise
expressly provided herein.
16.14 ASSIGNMENT. Buyer may not assign this Agreement without
the prior written consent of Seller, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, Buyer shall have the
one-time right to assign this Agreement to an entity which controls, or is
controlled by, or under common control with, Buyer provided that (a) such
assignment shall occur concurrently with the Closing, (b) such assignee
assumes each and all of the obligations of Buyer under this Agreement, and
(c) such assignee will have, at the time of Closing a net worth of at least
$10,000,000. Provided that the conditions of clauses (a) through (b) above
are satisfied, any assignment pursuant to this SECTION 16.14 shall relieve
Buyer of its obligations under this Agreement as of the date of such
Assignment. The provisions of this Section shall survive the Closing.
16.15 FACSIMILE. The parties hereto and their respective
successors and assigns are hereby authorized to rely upon the signatures of
each person and entity on this Agreement which are delivered by facsimile
as constituting a duly authorized, irrevocable, actual, current delivery of
this Agreement with original ink signatures of each person and entity.
16.16 FURTHER ASSURANCES. Buyer and Seller agree to execute
all documents and instruments reasonably required in order to consummate
the purchase and sale contemplated in this Agreement.
16.17 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each such counterpart shall be deemed to be an
original, but all of which, when taken together, shall constitute one
Agreement.
16.18 1031 EXCHANGE. Buyer hereby agrees that, if requested
by Seller, and provided that Seller delivers written notice to Buyer at
least five (5) days prior to the Closing Date of its intention to
participate in a tax deferred exchange of the Property (the "1031
Exchange"), Buyer shall cooperate with Seller in effectuating the 1031
Exchange; provided, however, that notwithstanding such an assignment,
Seller's liability to Buyer for a breach of any of Seller's
representations, warranties and covenants, and Seller's indemnity
obligations to Buyer Indemnities shall remain unmodified and in full force
and effect as if Seller had not assigned its interest to a third party
accommodator.
16.19 ESCROW HOLDER. In performing its duties hereunder,
Escrow Holder shall not incur any liability to anyone for any damages,
losses or expenses, except for its negligence or intentional misconduct,
and it shall accordingly not incur any such liability with respect (a) to
any action taken or omitted in good faith upon advice of its counsel or
(b) to any action taken or omitted in reliance upon any instrument,
including any written notice or instruction provided for in this Agreement,
not only as to its due execution and the validity and effectiveness of its
provision, but also as to the truth and accuracy of any information
contained therein, that Escrow Holder shall in good faith believe to be
genuine, to have been signed or presented by a proper person,, and to
conform to the provisions of this Agreement. Seller and Buyer hereby agree
to indemnify and hold harmless Escrow Holder against any and all losses,
claims, damages, liabilities and expenses, including reasonable costs of
investigation and legal fees and disbursements, that may be imposed upon
Escrow Holder or incurred by Escrow Holder in connection with its
acceptance or performance of its duties hereunder, including any litigation
arising out of this Agreement or involving the subject matter hereof,
unless resulting from Escrow Holder's negligence or intentional misconduct.
If any dispute shall arise between Seller and Buyer sufficient in the
discretion of Escrow Holder to justify its doing so, upon five (5) days
prior written notice to Buyer and Seller, Escrow Holder shall be entitled
<PAGE>
to tender into the registry or custody of the clerk of any state court of
general jurisdiction located in the county in which the Land is located or
the clerk for the United States District Court, having jurisdiction over
the county in which the Land is located, any or all money, property or
documents in its hands relating to this Agreement, together with such
pleadings as it shall deem appropriate, and thereupon be discharged from
all further duties and liabilities under this Agreement. Seller and Buyer
shall bear all costs and expenses of any such legal proceedings equally.
16.20 BROKERS. Other than Hotel Partners Incorporated (for
whose commission Seller agrees to be responsible pursuant to the terms and
conditions of the Exclusive Sales Listing Agreement dated May 22, 1997
between Seller and Hotel Partners Incorporated), Buyer and Seller each
represents and warrants to the other that it has dealt with no broker,
agent or other person in connection with this transaction and that no
broker, agent or other person brought about this transaction, and Buyer and
Seller shall indemnify, defend, protect and hold the other harmless from
and against any claims, losses, liabilities, demands, costs, expenses or
causes of action by any other broker, agent or other person claiming a
commission or other form of compensation by virtue of having dealt with
Seller or Buyer, respectively, with regard to this transaction. The
provisions of this Section shall survive the Closing or termination of this
Agreement.
Buyer and Seller have executed this Agreement as of the date written
above.
"BUYER" "SELLER"
LHO MISSION BAY HOTEL, L.P., a VVH RESORTS, LTD., a Delaware
California limited partnership limited partnership
By: LASALLE HOTEL OPERATING By: SAN DIEGO PRINCESS
PARTNERSHIP, L.P., a Delaware MANAGEMENT CORPORATION
limited partnership Its: Sole General Partner
Its: General Partner
By: LASALLE HOTEL PROPERTIES, By: /s/ NED S. HOLMES
a Maryland trust Name: Ned S. Holmes
Its: General Partner Its: President
By: /s/MICHAEL D. BARNELLO
Name: Michael D. Barnello
Its: Chief Operating Officer
By: ________________________
Name:______________________
Its: _______________________
Subject to the provisions of Section 13.2 of the Purchase Agreement,
and provided that Buyer has complied with the provisions of Section 12.1.1
of the Purchase Agreement, the undersigned guaranties the obligations of
Seller pursuant to Sections 4.1 and 12.1 of the Purchase Agreement.
Dated: May _____, 1998
PARKWAY INVESTMENTS/TEXAS, INC.,
a Delaware corporation
By: /s/NED S. HOLMES
Name: Ned S. Homes
Its: President and CEO
<PAGE>
Escrow Holder acknowledges that it has read this Agreement and agrees
to be bound by the provisions thereof.
DATED: May ____, 1998
"ESCROW HOLDER"
CHICAGO TITLE COMPANY
By: /s/ SHELVA J. MOLNI
------------------------------
Name: Shelva J. Molni
------------------------------
Its: Sr. Escrow Officer
------------------------------
<PAGE>
LIST OF EXHIBITS
Exhibit "A" Assignment of Capital Leases
Exhibit "B" Assignment of Ground Lease
Exhibit "C" Assignment of Intangible Property
Exhibit "D" Assignment of Leases
Exhibit "E" Assignment of Service Contracts
Exhibit "F" Bill of Sale
Exhibit "G" Capital Leases
Exhibit "H" Employment Contracts
Exhibit "I" Excluded Personal Property
Exhibit "J" Ground Lessor Estoppel
Exhibit "K" Land
Exhibit "L" Leases
Exhibit "M" Liquor Escrow Agreement
Exhibit "N" Pro Forma Title Policy
Exhibit "O" Service Contracts
Exhibit "P" Transferor's Certificate
Exhibit "Q" Audit Representation Letter
<PAGE>
LIST OF SCHEDULES
Schedule 4.1.4.1 Contracts for the Transfer of the Property
Schedule 4.1.4.2 Defaults Under Leases
Schedule 4.1.4.3 Agreement Binding on Buyer After Closing
Schedule 4.1.4.4 Defaults Under the Ground Lease
Schedule 4.1.5, Litigation
Schedule 4.1.6 Notice of Violations
EXHIBIT 10.2
- ------------
Name of Subscriber: Westgroup San Diego Associates, Ltd.
Number of Shares Purchased 112,458
LASALLE HOTEL PROPERTIES
(a Maryland Real Estate Investment Trust)
SUBSCRIPTION AGREEMENT
LaSalle Hotel Properties
220 East 42nd Street
New York, New York 10017
1. SUBSCRIPTION AND ACCEPTANCE.
1.1. SUBSCRIPTION. Subject to the terms and conditions hereof,
and in reliance upon the representations and warranties of the respective
parties contained herein, the undersigned irrevocably subscribes for and
agrees to purchase Common Shares of Beneficial Interest (the "Shares") of
LaSalle Hotel Properties, a real estate investment trust formed under the
laws of the State of Maryland (the "Trust"), and to make payment therefor
as provided herein. The Trust has been organized pursuant to an Agreement
of Trust and will be continued pursuant to Articles of Amendment and
Restatement of Declaration of Trust dated as of April 27, 1998, as
supplemented and amended from time to time (the "Declaration of Trust").
An amount of Shares with an aggregate value of Two Million Dollars
($2,000,000) which value per Share shall be determined based upon a
purchase price equal to the average of the daily closing prices of the
Shares on the New York Stock Exchange, as reported in the New York Stock
Exchange composite tape, for the twenty (20) trading days immediately
preceding the day which is five (5) business days prior to the Closing Date
(hereinafter defined). Unless the context otherwise requires, capitalized
terms used herein without definition have the meanings set forth in the
Declaration of Trust and the Prospectus.
1.2. PURCHASE. The undersigned subscriber (a "Subscriber")
hereby agrees to make payment for its Shares on the Closing Date.
2. CLOSING AND CONDITIONS TO CLOSING.
2.1. CLOSING. The closing of the sale of the Shares (the
"Closing") shall take place at such time and place as are determined by the
Trust and as shall be notified to the undersigned subscriber (the "Closing
Date").
2.2. CONDITIONS TO CLOSING. The obligation of the undersigned
subscriber at Closing is subject to the condition (or waiver by the
undersigned subscriber), prior to or at the Closing Date that the
representations and warranties of the Trust contained in this Agreement
shall be true and correct in all material respects when made and on such
Closing Date.
<PAGE>
2.3. CONDITIONS TO OBLIGATIONS OF THE TRUST. The obligations
of the Trust to issue and sell to the undersigned subscriber the Shares to
be purchased by it on the Closing Date shall be subject to the fulfillment
(or waiver by the Trust), prior to or on the Closing Date, of the following
conditions:
(a) SUBSCRIPTION AGREEMENT. This Agreement shall each have
been duly authorized, executed and delivered by the undersigned subscriber
or on its behalf.
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the undersigned subscriber in this Agreement and
otherwise made in writing in connection with this Agreement shall be true
and correct in all material respects when made and on such Closing Date.
(c) PERFORMANCE. The undersigned subscriber shall have duly
performed and complied in all material respects with all agreements and
conditions contained in this Agreement required to be performed or complied
with by the undersigned subscriber prior to such Closing Date.
(d) SUBSCRIPTION PRICE. The undersigned subscriber shall have
made payment on the Closing Date as provided in Section 1.2 of the
appropriate amount for the number of Shares set forth on the signature page
hereof.
(e) NONFULFILLMENT OF CONDITIONS. Without limitation of the
authority of the Trust pursuant to Section 1.3 hereof, if on such Closing
Date any of the conditions to the obligations of the Trust specified in
this Section 2.3 shall not have been fulfilled with respect to the
undersigned subscriber, the Trust may, at their election, be relieved of
all further obligations to the undersigned subscriber under this Agreement
and this Agreement shall be null and void as to the Trust.
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
3.1. REPRESENTATIONS AND WARRANTIES OF THE TRUST. The Trust
represents and warrants as follows:
(a) ORGANIZATION AND STANDING. The Trust is a real estate
investment trust duly organized and validly existing under the laws of the
State of Maryland and has all requisite power and authority to carry on its
business as now conducted and as proposed to be conducted as described in
the Declaration of Trust and the Prospectus.
(b) AUTHORIZATION OF AGREEMENT, ETC. The acceptance of this
Agreement by the Trust with respect to the undersigned subscriber as
evidenced by its signature on the last page of this Agreement, will have
been duly authorized by all necessary action on behalf of the Trust, and
this Agreement, by virtue of such acceptance, will be a legal, valid and
binding agreement of the Trust, enforceable against the Trust in accordance
with its terms, except as enforcement thereof may be limited by bankruptcy,
insolvency or other laws related to or affecting the enforcement of
creditors' rights generally or by equitable principles.
(c) OFFER OF SHARES. Neither the Trust nor anyone acting on
their behalf has taken or will take any action that would subject the
issuance and sale of the Shares to the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act").
<PAGE>
3.2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE SUBSCRIBER.
The undersigned subscriber hereby represents and warrants to the Trust and
each other subscriber who acquires any of the Shares as follows, and the
undersigned subscriber acknowledges that it has full knowledge that the
Trust and each of such other subscribers intends to rely on such
representations, warranties and agreements:
(a) AUTHORIZATION OF PURCHASE, ETC. The undersigned has the
full power and authority to execute and deliver this Agreement and to
subscribe for and purchase the Shares. The purchase of such Shares and the
execution and delivery of this Agreement, as evidenced by the signature of
its duly authorized representative on the next to last page of this
Agreement, respectively, have been authorized by all necessary corporate or
other action on behalf of the undersigned subscriber, and each of this
Agreement, upon execution and delivery by the undersigned subscriber, or on
its behalf, will be its legal, valid and binding obligation, enforceable in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency or other laws related to or affecting the
enforcement of creditors' rights generally or by equitable principles.
(b) COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. The
undersigned subscriber's execution and delivery of this Agreement (i) will
not conflict with or result in any violation of, or default under, any
provision of any agreement or other instrument to which the undersigned
subscriber is a party or by which it or any of its properties are bound,
which violation or default would have a material adverse effect upon such
subscriber's performance under this Agreement, and (ii) is not prohibited
by any statute, regulation, case law, judicial, executive or
administrative, order or decree, or policy statement or governmental
license or permit or other communication or any interpretation thereof by
any governmental or regulatory authority or court of competent
jurisdiction, applicable to the undersigned subscriber.
(c) PROSPECTUS. The undersigned subscriber acknowledges
receipt of the Prospectus of the Trust dated April 23, 1998 (the
"Prospectus").
(d) SUITABILITY OF INVESTMENT. The undersigned subscriber
has read carefully and understands the Prospectus and such other
information it has requested from the Trust and has consulted its own
attorney, accountant or investment adviser to the extent necessary or in
its opinion, desirable, with respect to the investment contemplated hereby
and its suitability. Any specific acknowledgment set forth below with
respect to any statement contained in the Prospectus shall not be deemed to
limit the generality of this representation and warranty.
(e) RISKS OF INVESTMENT. The undersigned subscriber
understands the risks inherent in an investment of this nature and has the
financial ability to bear the economic risk of its investment in the Shares
(including possible loss), and has adequate means for providing for its
current needs from assets other than those invested in the Shares. The
undersigned subscriber understands that its Shares are non-transferable and
that redemption of Shares may be subject to certain limitations. The
undersigned subscriber has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Shares and has obtained, in its judgment, sufficient
information from the Trust to evaluate the merits and risks of an
investment in the Shares.
<PAGE>
(f) PURCHASE FOR INVESTMENT. The undersigned subscriber
understands that the Shares may not be sold, transferred or assigned and
that any attempt to do so will not be recognized for any purpose other than
as a pledge of such Shares to LaSalle Hotel Operating Partnership, L.P.
The undersigned further understands and acknowledges that the Shares have
not been registered under the Securities Act and, therefore, cannot be
resold unless they are subsequently registered under the Securities Act or
unless an exemption from such registration is available; that it is
purchasing the Shares for investment for its own account and not with any
present view toward resale or other distribution thereof; that it will not
resell or otherwise dispose of all or any part of the Shares it purchases,
except as permitted by law and any regulations under the Securities Act;
that the Trust does not have any intention of registering the Shares under
the Securities Act.
(h) TAX CONSEQUENCES. The undersigned subscriber accepts
responsibility for consulting with its own tax adviser regarding federal,
state, and local tax consequences particular to it prior to making an
investment in Shares.
4. LIMITED REGISTRATION RIGHTS
A. PIGGYBACK REGISTRATION RIGHTS. If at any time while any
Shares are outstanding, the Trust (without any obligation to do so)
proposes to file a registration statement under the Securities Act on Form
S-3 for the offer and sale of Shares by shareholders other than the Trust
(a "Piggyback Registration Statement"), the Trust shall give prompt written
notice of such proposed filing to the Subscribers. The notice referred to
in the preceding sentence shall offer Subscribers the opportunity to
register such amount of Shares as each Subscriber may request (a "Piggyback
Registration"). The sale of such Shares shall be subject to such
reasonable limitations and "blackout periods" as the Trust shall impose.
5. MISCELLANEOUS.
5.1. AMENDMENTS AND WAIVERS. This Agreement may be amended
and the observance of any provision hereof may be waived (either generally
or in a particular instance and either retroactively or prospectively) only
with the written consent of the Trust.
5.2. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
All representations, warranties and agreements contained herein, or made in
writing by or on behalf of the undersigned subscriber or by or on behalf of
the Trust in connection with the transactions contemplated by this
Agreement, shall survive the execution and delivery of this Agreement, any
investigation at any time made by or on behalf of the Trust, or the
undersigned subscriber, the issue and sale of Shares and the withdrawal of
the undersigned as a beneficial owner of the Shares.
5.3. NOTICES. All notices, requests, demands and other
communications (together a "notice") hereunder shall be in writing and
shall be deemed to have been duly given to any party when delivered to the
same by hand or by sending the same by prepaid first class mail or by
telegram, cable, telex or telecopier, (a) if to the undersigned subscriber,
at or to the address set forth opposite its signature, or to such other
address as it shall have furnished to the Trust in writing, and (b) if to
the Trust, at the following address:
LaSalle Hotel Properties
220 East 42nd Street
New York, New York 10017
Attn: Jon E. Bortz, President
Telecopier: (212) 687-8170
<PAGE>
or to such other address as the Trust shall have furnished to the
undersigned subscriber in writing. Any notice delivered by hand shall be
deemed to have been given on receipt, any notice sent by mail shall be
deemed to have been given five calendar days after dispatch and any notice
sent by telegram, cable, telex or telecopier shall be deemed to have been
given on the date sent.
5.4. EXPENSES. Each party hereto will pay its own expenses
relating to this Agreement and the purchase of the Shares of the Trust
hereunder.
5.5. DESCRIPTIVE HEADINGS. The descriptive headings in this
Agreement are for convenience of reference only and shall not be deemed to
alter or affect the meaning or interpretation of any provision of this
Agreement.
5.6. ENTIRE AGREEMENT. This Agreement contains the entire
agreement of the parties with respect to the subject matter of this
Agreement, and there are no representations, covenants or other agreements
except as stated or referred to herein.
5.7. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall constitute one and the same
instrument.
5.8. GENERAL. This Agreement (i) shall be binding upon the
undersigned subscriber and its legal representatives, successors and
assigns, (ii) shall be governed, construed and enforced in accordance with
the internal laws of the State of Maryland, (iii) shall survive the
admission of the undersigned subscriber as beneficial owner of the Shares,
and (iv) shall, if the undersigned consists of more than one person, be the
joint and several obligation of all such persons.
<PAGE>
IN WITNESS WHEREOF, the undersigned subscriber has executed this
Agreement on this 28th day of May 1998.
112,458 WestGroup San Diego Associates, Ltd.
- ---------------- ------------------------------------
Number of Shares Print or Type Name of Subscriber
25 Central Way, Suite 400
- ------------------------------ ------------------------------------
Taxpayer Identification Number Street Address of Principal
Executive Office
Kirkland, WA 98053
------------------------------------
City State
Mailing Address (if different):
------------------------------------
------------------------------------
Street Address
____________________________________
City State
By: /s/ PATRICK R. COLEE
Signature of Authorized Person
signing on behalf of Subscriber
Patrick R. Colee
--------------------------------
Name and Position of Authorized
Person Signing on behalf of
Subscriber
Accepted June 1, 1998
at New York, New York:
LASALLE HOTEL PROPERTIES
By: /s/ Michael D. Barnello
Title: Chief Operating Officer
EXHIBIT 10.3
- ------------
LHO MISSION BAY HOTEL, L.P.
AGREEMENT OF LIMITED PARTNERSHIP
This Agreement of Limited Partnership is entered into as of the 1st
day of June, 1998, by and between LASALLE HOTEL OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership, as the General Partner (the "General
Partner"), and WESTGROUP SAN DIEGO ASSOCIATES, LTD, a California limited
partnership, as the Limited Partner (the "Limited Partner"); (the General
Partner and Limited Partner are sometimes herein collectively referred to
as the "Partners").
WHEREAS, the Limited Partner has agreed to provide its expertise and
advice with respect to the San Diego Paradise Point Resort (f/k/a the San
Diego Princess Resort) in San Diego, California (the "Hotel"), including,
without limitation, with respect to strategic planning, renovation and
repositioning of the Hotel; and
WHEREAS, in consideration thereof, the Partners desire to form a
limited partnership pursuant to the terms hereof for the purpose of owning
the Hotel;
NOW, THEREFORE, the Partners hereby agree as follows:
ARTICLE I
FORMATION OF LIMITED PARTNERSHIP
SECTION 1.1 FORMATION OF PARTNERSHIP AND BUSINESS PURPOSES. The
General Partner and the Limited Partner hereby form the Partnership
pursuant to the California Revised Uniform Limited Partnership Act for the
sole purpose of owning and operating the Hotel, and to do all things
incident thereto.
SECTION 1.2 NAME AND LOCATION. The name of the Partnership is LHO
MISSION BAY HOTEL, L.P. The registered office for service of process in the
State of California and the principal office of the Partnership shall be at
the Hotel. The Partnership may also maintain an office at such other places
as the General Partner may determine.
SECTION 1.3 AGENT FOR SERVICE OF PROCESS. Process may be served upon
the General Partner at the Partnership's principal office.
SECTION 1.4 TERM OF THE PARTNERSHIP. The Partnership shall continue
in existence until December 31, 2096, unless sooner terminated as
hereinafter set forth in Article IX.
SECTION 1.5 NAME AND ADDRESS OF PARTNER; PERCENTAGE INTERESTS. The
names and addresses of the Partners and their respective Percentage
Interests are specified in Exhibit A, attached hereto.
<PAGE>
ARTICLE II
DEFINITIONS
As used herein, the following definitions have the meanings ascribed:
SECTION 2.1 "AFFILIATE". "Affiliate" of a Partner shall mean (i) any
corporation, partnership, trust or other entity controlling, controlled by
or under common control with a Partner; and (ii) any officer, director,
trustee or holder of 10% or more of the outstanding voting securities of a
Partner or of any corporation, partnership, trust or other entity
controlling, controlled by or under common control with a Partner.
SECTION 2.2 "BANKRUPTCY OR INSOLVENCY". "Bankruptcy or Insolvency"
shall be deemed to have occurred with respect to any Partner if such
Partner shall file in any court pursuant to any statute of the United
States or of any state a petition in bankruptcy or insolvency, or shall
file for reorganization or for the appointment of a receiver or a trustee
of all or a material portion of such Partner's property, or if any such
Partner shall make an assignment for the benefit of creditors, admit in
writing its inability to pay its debts as they fall due or seek, consent to
or acquiesce in the appointment of a trustee, receiver or liquidator of any
material portion of its property. If there shall be filed against any
Partner in any court pursuant to any statute of the United States or of any
state, a petition in bankruptcy or insolvency, or for reorganization, or
for the appointment of a receiver or trustee of all or a substantial
portion of such Partner's property, and within sixty days after the
commencement of any such proceeding, such petition shall not have been
dismissed, then such Partner against whom such petition has been filed
shall be bankrupt or insolvent for purposes of this Agreement. In addition,
if the whole or any portion of the interest of any Partner in the
Partnership is subject to levy or attachment, and such levy or attachment
is not released or discharged within sixty days, such Partner shall be
deemed bankrupt or insolvent for purposes of this Agreement.
SECTION 2.3 "CAPITAL ACCOUNT". "Capital Account" shall mean the
account maintained for each Partner in accordance with tax accounting
principles, which account (i) is increased by the amount of cash and the
fair market value of property contributed to the Partnership as shown on
the books of the Partnership upon such contribution (net of liabilities
assumed by the Partnership and liabilities to which such contributed
property is subject) by such Partner and such Partner's share of
Partnership Profits (including income exempt from tax), and (ii) is
decreased by the amount of cash and the fair market value of property
distributed to such Partner as shown on the books of the Partnership (net
of liabilities assumed by such Partner and liabilities to which such
distributed property is subject) and such Partner's share of Partnership
Losses.
SECTION 2.4 "CAPITAL CONTRIBUTIONS". "Capital Contributions" shall
mean in the case of each Partner, any cash contributed to the capital of
the Partnership by such Partner, including any Initial Capital
Contributions and any Additional Contributions.
SECTION 2.5 "CAPITAL CONTRIBUTION ACCOUNT". "Capital Contribution
Account" shall mean each Partner's total Capital Contributions, as adjusted
by Section 3.2.
SECTION 2.6 "DISSOLUTION OR TERMINATION". "Dissolution or
Termination" shall be deemed to have occurred (i) in the case of a
corporate Partner upon the earlier of the adoption of a plan of liquidation
by such Partner or the effective date of dissolution in accordance with
applicable statutory law and (ii) in the case of a partnership Partner,
upon the date of dissolution or termination of such partnership in
accordance with the provisions of the governing partnership agreement or
applicable statutory law.
<PAGE>
SECTION 2.7 "INTEREST". "Interest" shall mean the entire ownership
interest of a Partner in the Partnership at any particular time, including
the right of such Partner to any and all benefits to which such Partner may
be entitled as provided in this Agreement, together with the obligations of
such Partner to comply with all terms and provisions of this Agreement.
SECTION 2.8 "NET CASH FLOW". "Net Cash Flow" shall mean, with respect
to any fiscal period, all cash revenue and funds received by the
Partnership from operations or rent loss insurance (excluding funds
received as capital contributions and funds received from the sale or
refinancing of the Hotel) in such period, less the sum of the following (to
the extent not made from funds received as capital contributions): (i) all
interest and principal amortization paid to lenders in such period, (ii)
all cash expenditures (including capital expenditures) made by or on behalf
of the Partnership in such period, and (iii) cash reserves deemed
appropriate by the General Partner.
SECTION 2.9 "NET OPERATING INCOME". "Net Operating Income" shall
mean the Rent (as defined in the lease agreement between the Partnership
and the Limited Partner for the Hotel) less all expenses for which the
Partnership is responsible pursuant to the terms of such lease agreement
which are directly attributable to the operation, repair and/or maintenance
of the Hotel, including, without limitation, real estate taxes, ground
lease payments, insurance premiums, capital leases and capital repairs.
SECTION 2.10 "NET SALE AND REFINANCING PROCEEDS". "Net Sale and
Refinancing Proceeds" shall mean all cash proceeds received by the
Partnership from the sale or refinancing of the Hotel and all insurance and
condemnation proceeds (excluding rent loss insurance), less the sum of the
following: (i) the principal amount of any loans repaid in connection with
such sale or refinancing, (ii) all costs incurred in the sale or
refinancing of the Hotel, including the transfer fee payable to the City of
San Diego, financing fees, mortgage taxes, transfer taxes, title insurance
premiums, attorneys' fees and other costs typically paid by borrowers or
sellers of similar properties in the San Diego metropolitan region, (iii)
any fee paid to terminate any lease of the Hotel, (iv) a market brokerage
fee for the sale of the Hotel, regardless of whether a fee is actually
paid, and (v) cash reserves deemed appropriate by the General Partner.
SECTION 2.11 "PARTNERSHIP". "Partnership" means the limited
partnership formed hereunder pursuant to the Revised Uniform Limited
Partnership Act of the State of California.
SECTION 2.12 "PARTNERSHIP PROPERTY". "Partnership Property" shall
mean all the property, real and personal, at any time owned by the
Partnership.
SECTION 2.13 "PERCENTAGE INTERESTS". "Percentage Interests" shall
mean the interest of a Partner as set forth in Exhibit A, as such
percentage interest may be adjusted pursuant to Section 3.2 below.
SECTION 2.14 "PROFITS" OR "LOSSES". "Profits" or "Losses" shall mean
the profits or losses of the Partnership for Federal income tax purposes
including, without limitation, each item of Partnership income, gain, loss
or deduction.
ARTICLE III
CAPITAL
SECTION 3.1 CONTRIBUTIONS OF GENERAL PARTNER AND LIMITED PARTNER. The
General Partner and Limited Partner have contributed to the capital of the
Partnership the amounts set forth in Exhibit A (the "Initial Capital
Contributions").
<PAGE>
SECTION 3.2 ADDITIONAL CAPITAL CONTRIBUTIONS. No Partner shall be
obligated to make any additional capital contribution ("Additional Capital
Contributions") to the Partnership. If a Partner (the "Non Contributing
Partner") fails to make the full amount of its pro rata share of any
Additional Capital Contributions, however, the Partners (each, a
"Contributing Partner") who have made all of their prorata share of any
Additional Capital Contributions in connection with the outstanding call
may, but shall not be required to:
(i) make all or part of the Additional Capital Contribution
(for its own Capital Account and Capital Contribution Account) which the
Non-Contributing Partner has elected not to make and cause the Capital
Account and Capital Contribution Account of the Non-Contributing Partner to
be reduced (in addition to the adjustments that shall automatically occur
by virtue of such Contributions) by twenty-five percent (25%) of the
Additional Capital Contributions funded by such Contributing Partner on
behalf of such Non-Contributing Partner. The corresponding Capital Account
and Capital Contribution Account of each Contributing Partner shall be
increased (in addition to the adjustments that shall automatically occur by
virtue of such Contributions) in the amount that the corresponding Capital
Account and Capital Contribution Account of the Non-Contributing Partner is
so reduced or a prorata share of such amount if there is more than one
Contributing Partner. There shall be corresponding adjustments in the
Percentage Contribution Accounts;
or
(ii) make a loan to the Non-Contributing Partner (the proceeds
of which shall be paid to the Partnership as a contribution by the
Non-Contributing Partner) for all or part of the amount of the Additional
Capital Contribution the Non-Contributing Partner elected not to make and
have such loan secured by the security interest in the Non-Contributing
Partner's Partnership interest granted pursuant to this Agreement (or
pro-rata portion thereof in the event there is more than one Contributing
Partner). The Partnership, in such circumstances, shall use the first
distributions otherwise payable or distributable to such Non-Contributing
Partner hereunder to repay any such borrowings. Such loan shall be
non-recourse and shall have an interest rate equal to two percent (2%) over
the corporate base rate of Citibank, N.A. in effect from time to time.
To the extent more than one Partner wishes either to contribute or to
loan funds in the amount not contributed by a Non-Contributing Partner in
accordance with this Section, each Partner may lend or contribute funds pro
rata in proportion to its Percentage Interest; provided however, no such
Partner will be permitted to contribute capital or make a loan pursuant to
this Section hereof unless it has already contributed the full amount of
its Additional Capital Contribution called for at such time. In the event
the Partners are unwilling to contribute or lend funds to the Partnership
in the total amount not so contributed by the Non-Contributing Partner, the
General Partner may obtain capital contributions from non-partners (in
which case such persons shall become limited partners in the Partnership)
or obtain loans from non-partners, in either case on the same basis as the
Partners may make contributions or loans as provided
above.
<PAGE>
ARTICLE IV
DISTRIBUTIONS
SECTION 4.1 DISTRIBUTIONS OF NET CASH FLOW. The Net Cash Flow of the
Partnership for each calendar year shall be distributed at such times and
in such amounts as determined by the General Partner in its sole discretion
in the following order and priority:
(a) First, to the General Partner until the General Partner
has received a cumulative return equal to fifteen percent (15%) per annum
on the total capital contributions which have been made by the General
Partner and which would have been made by the General Partner to the
Partnership assuming the Partnership had no debt; and
(b) Second, 95.1% to the General Partner and 4.9% to the
Limited Partner.
SECTION 4.2 DISTRIBUTIONS OF NET SALE AND REFINANCING PROCEEDS. Any
Net Sale and Refinancing Proceeds of the Partnership shall be distributed
at such times and in such amounts as determined by the General Partner in
its sole discretion in the following order and priority:
(a) First, to the Limited Partner until the Limited Partner
has received a return of its Initial Capital Contribution;
(b) Second, to the General Partner until the General Partner
has received a fifteen percent (15%) internal rate of return on the total
capital contributions which have been made by the General Partner and which
would have been made by the General Partner to the Partnership assuming the
Partnership had no debt; and
(c) Third, eighty-five percent (85%) to the General Partner
and fifteen percent (15%) to the Limited Partner.
ARTICLE V
ALLOCATION OF PROFITS OR LOSSES AND CREDITS
SECTION 5.1 PROFITS OR LOSSES OR CREDITS FROM OPERATIONS. The
Profits and Losses and tax credits of the Partnership shall be allocated to
the Partners in the same proportion as Net Cash Flow and Net Sale and
Refinancing Proceeds are distributed for the year in question; provided
that if there are no distributions of Net Cash Flow or Net Sale and
Refinancing Proceeds, all Profits and Losses and tax credits shall be
allocated solely to the General Partner. All Profits or Losses and tax
credits from the Partnership for a fiscal year allocable with respect to
any Interests which may have been assigned during such fiscal year shall be
allocated between the assignor and assignee based upon the number of days
in the year that each was recognized (pursuant to Section 8.2) as the owner
of the Interest, without regard to results of the operations of the
Partnership during such fiscal year and without regard to whether cash
distributions were made to the assignor or assignee.
ARTICLE VI
CONDUCT OF OPERATIONS
SECTION 6.1 MANAGEMENT. The General Partner shall have full and
exclusive management and control of the business of the Partnership. The
General Partner shall devote such time to the business of the Partnership
as it deems necessary. In addition to other rights and powers, the General
Partner is expressly authorized to (a) employ, engage or contract with
entities, including its Affiliates, in the operation and management of the
Partnership; (b) borrow money for Partnership purposes; (c) purchase, sell,
pledge, hypothecate and mortgage Partnership property; (d) cause the
Partnership to take any actions which the General Partner deems appropriate
as the owner of the Hotel; and (e) make calls to the Partners for
Additional Capital Contributions.
<PAGE>
SECTION 6.2 ACCOUNTING AND TAX MATTERS. The General Partner shall
keep proper and usual books and records pertaining to the Partnership's
business in accordance with generally accepted accounting principles. The
books and records and all files of the Partnership shall be kept at its
principal office. The General Partner shall prepare and furnish to the
Limited Partner promptly after the close of each fiscal year an unaudited
statement, certified by the General Partner, showing the operations of the
Partnership for such fiscal year, including a balance sheet and statement
of income or loss and changes in financial position for such fiscal year,
the balance of the Limited Partner's capital account, the unpaid balance
due under all obligations of the Partnership and all other information
reasonably requested by any partner. The Limited Partner, and the
authorized agents thereof, shall have the right at all reasonable times to
audit, examine and make copies or extracts from the Partnership books of
account. Federal, state and local income tax returns of the Partnership
shall be prepared and timely filed by the General Partner. Copies of the
tax returns shall be furnished to the Limited Partner prior to filing
thereof. The General Partner is hereby designated the tax matters partner
of the Partnership.
SECTION 6.3 OTHER PERMISSIBLE ACTIVITIES. Neither the General Partner
nor the Limited Partner are prevented hereby from engaging in other
activities for profit whether similar to the purpose of the Partnership or
otherwise and whether or not competitive with the business of the
Partnership.
ARTICLE VII
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNER
SECTION 7.1 LIMITED LIABILITY. The Limited Partner shall not be
personally liable for any of the debts of the Partnership or any of the
losses thereof beyond the amount contributed or contracted to be
contributed by the Limited Partner to the capital of the Partnership.
SECTION 7.2 MANAGEMENT RESPONSIBILITY. The Limited Partner, as such,
shall not take part in the management of the business or transact any
business for the Partnership, nor shall the Limited Partner have the right
to approve or disapprove any actions taken by the Partnership.
SECTION 7.3 NO AUTHORITY TO ACT. The Limited Partner shall not have
the power to act on behalf of or bind the Partnership.
SECTION 7.4 SINGLE-PURPOSE ENTITY. The Limited Partner shall at all
times remain a single-purpose entity whose sole asset shall be its interest
in the Partnership. In no event shall the Limited Partner incur any
liabilities or debts without the prior written consent of the General
Partner.
SECTION 7.5 AMENDMENTS TO PARTNERSHIP AGREEMENT. Amendments to the
Partnership Agreement, including the admission of new partners to the
Partnership, shall be approved solely by the General Partner, provided that
no amendment which materially adversely affects the Limited Partner shall
be adopted without the written approval of the Limited Partner.
ARTICLE VIII
TRANSFERABILITY OF PARTNERS' INTERESTS
SECTION 8.1 TRANSFERABILITY OF GENERAL PARTNER'S INTEREST. The
General Partner may sell, transfer, assign, pledge or otherwise alienate
its Interest in the Partnership without the prior written consent of the
Limited Partner.
<PAGE>
SECTION 8.2 TRANSFERABILITY OF LIMITED PARTNER'S INTEREST. The
Limited Partner may not sell, transfer, assign, pledge or otherwise
alienate the whole or any portion of its Interest in the Partnership
without the prior written consent of the General Partner; provided,
however, the General Partner shall not unreasonably withhold its consent to
any assignment or transfer of the Limited Partner's interest in the
Partnership to an Affiliate of the Limited Partner. No transferee of all or
any part of the Limited Partner's interest in the Partnership shall become
a substituted Limited Partner unless the transferee consents in writing, in
a form prepared by or reasonably satisfactory to the General Partner, to be
bound by the terms and conditions of this Agreement in the place and stead
of the transferor Limited Partner.
SECTION 8.3 OPTIONS TO PURCHASE AND SELL THE LIMITED PARTNERSHIP
INTEREST. At any time during the sixth (6th) year following the acquisition
of the Hotel by the Partnership, the Limited Partner can elect to put its
Interest in the Partnership to the General Partner provided the Limited
Partner gives the General Partner notice of such election (the "Put
Notice") at least thirty (30) days prior to the date on which it has
elected to put its interest. The price at which the Limited Partner puts
its Interest in the Partnership to the General Partner (the "Put Price")
will equal the amount the Limited Partner would have received if the Hotel
was sold and the proceeds distributed in accordance with the terms of this
Agreement, including Sections 2.9 and 4.2, calculated as if there was no
debt on the Project; and the Put Price shall be paid on the date the
Limited Partner puts its Interest to the General Partner. For purposes of
this Section, the Hotel shall be deemed to have been sold for a price equal
to ten (10) times the Net Operating Income from the Hotel for the twelve
(12) months immediately preceding the put. The Net Operating Income shall
be determined after adjustment for any operating and fixed costs for the
Hotel and after deduction of four percent (4%) of revenue for addition to
the FF&E reserve, whether or not any money is actually deposited into the
FF&E reserve; and the sales price shall be determined after deduction for
costs typically incurred in the sale of similar properties as set forth in
Section 2.9 above. In determining the Put Price, however, no credit shall
be given for any reserves being held by the Partnership, including any
capital expenditure reserves.
The General Partner shall have the right to acquire the Interest of
the Limited Partner in the Partnership either (a) within sixty (60) days
after the lease for the Hotel being entered into concurrently herewith
between the Partnership and the Limited Partner's Affiliate is terminated,
or (b) at any time during the period from six and one-half (6-1/2) years
following the purchase of the Hotel by the Partnership until the end of the
tenth (10th) year following the purchase of the Hotel by the Partnership if
the Limited Partner does not exercise the foregoing right to put its
Interest to the General Partner by the end of the sixth (6th) year set
forth above; provided, however, the General Partner shall give the Limited
Partner notice of such election (the "Call Notice") at least thirty (30)
days prior to the date on which it has elected to purchase such Interest.
The price for the purchase of the Limited Partner's Interest (the "Call
Price") shall be calculated using the same formula for calculating the Put
Price and shall be paid on the date the General Partner acquires the
Limited Partner's Interest.
The Put Price or the Call Price, as the case may be, shall, at the
General Partner's election, be made either in cash or in limited
partnership units in the General Partner ("OP Units"). If the General
Partner elects to make the payment in OP Units, the Limited Partner shall
receive the number of OP Units, rounded to the nearest whole, equal to the
Put Price or the Call Price, as the case may be, divided by the average
closing price for shares in LaSalle Hotel Properties on the New York Stock
Exchange on the first fifteen trading days of the thirty (30) day period
immediately preceding the payment. The Limited Partner shall have the right
<PAGE>
to convert the OP Units into shares of LaSalle Hotel Properties (the "LHO
Shares") on the terms set forth in the General Partner's Partnership
Agreement. The Limited Partner shall also have the right to have the LHO
Shares registered on the terms set forth in the Registration Rights
Agreement attached hereto Exhibit A. Notwithstanding the foregoing, the
General Partner shall be required to pay the Put Price or the Call Price in
cash, and not in OP Units, if, at the time the Put Notice or Call Notice is
given, either (a) LHO Shares are not trading on the New York Stock
Exchange, (b) there are any restrictions (other than general securities
laws restrictions) on the trading of LHO Shares or (c) any bankruptcy,
insolvency or similar action has been filed by or against LaSalle Hotel
Properties and, in the case of any such action filed against LaSalle Hotel
Properties, such action is not dismissed within sixty (60) days of the
filing thereof.
ARTICLE IX
DISSOLUTION AND LIQUIDATION
SECTION 9.1 DISSOLUTION. The Partnership shall be dissolved upon the
occurrence of any of the following events:
(a) The expiration of the term of the Partnership;
(b) The withdrawal, Bankruptcy or Insolvency, or Dissolution
or Termination, of the General Partner, if no substituted General Partner
is elected by the Limited Partner; or
(c) The sale of the Hotel by the Partnership.
SECTION 9.2 WINDING UP AND LIQUIDATION OF THE PARTNERSHIP. Upon the
dissolution of the Partnership, the General Partner, or if it is not
available, a liquidator selected by the Limited Partner, shall proceed to
wind up the Partnership business. The General Partner or such liquidator,
as the case may be, shall apply the Partnership assets, after payment of
Partnership debts and liabilities, and the creation of such reserves as the
liquidator deems appropriate, to the Partners in accordance with Article
IV.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1 NOTICES. Any notices or communications hereunder shall
be sent by mail to the Partners at their addresses set forth in Exhibit A,
as amended from time to time. Notices shall be considered given, and any
applicable time shall run, from the date such notice is mailed.
SECTION 10.2 APPLICABLE LAW. Notwithstanding the place where this
Agreement may be executed by any party, all the terms and provisions of
this Agreement and the validity hereof shall be interpreted under the laws
of the State of California.
SECTION 10.3 COUNTERPARTS. This Agreement may be executed in any
number of counterparts with the same effect as if all the Partners had
signed the same document. All counterparts shall be construed together and
shall constitute one instrument.
SECTION 10.4 EFFECT OF AGREEMENT. This Agreement shall be binding
upon and inure to the benefit of each of the parties, their heirs,
devisees, personal representatives, successors and assigns.
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed and sworn to by the
parties whose signatures appear below.
GENERAL PARTNER:
LASALLE HOTEL OPERATING
PARTNERSHIP, L.P., a Delaware
limited partnership
By: LaSalle Hotel Properties, its
general partner
By /s/ Michael D. Barnello
Its Chief Operating Officer
LIMITED PARTNER:
WESTGROUP SAN DIEGO ASSOCIATES,
LTD.,a California limited
partnership
By: Westgroup Partners, Inc., its
general partner
By /s/ PHILIP BROWN
Its Vice President
<PAGE>
EXHIBIT A
---------
Capital Percentage
Name and Address Contribution Interest
- ---------------- ------------ ----------
General Partner:
LASALLE HOTEL OPERATING $73,000,000 95.1%
PARTNERSHIP, L.P.
200 East Randolph Drive
Chicago, Illinois 60601
Limited Partner:
WESTGROUP SAN DIEGO ASSOCIATES, $10,000 4.9%
LTD.
600 Stewart Street
Suite 300
Seattle, Washington 98101
EXHIBIT 10.4
- ------------
LEASE AGREEMENT
DATED AS OF JUNE 1, 1998
BY AND BETWEEN
LHO MISSION BAY HOTEL, L.P.
AS LANDLORD,
AND
WESTGROUP SAN DIEGO ASSOCIATES, LTD.
AS TENANT
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT is entered into as of this 1st day of June by
and between LHO MISSION BAY HOTEL, L.P., a California limited partnership
as landlord ("Landlord"), and WESTGROUP SAN DIEGO ASSOCIATES, LTD. as
tenant ("Tenant").
W I T N E S S E T H :
--------------------
WHEREAS, Landlord owns leasehold title to the Leased Property (this
and other capitalized terms used and not otherwise defined herein having
the meanings ascribed to such terms in Article 1); and
WHEREAS, Landlord wishes to lease the Leased Property to Tenant and
Tenant wishes to lease the Leased Property from Landlord, all subject to
and upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, Landlord and Tenant
hereby agree as follows:
ARTICLE 1
---------
DEFINITIONS
-----------
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, (i) the terms defined in
this Article shall have the meanings assigned to them in this Article and
include the plural as well as the singular, (ii) all accounting terms not
otherwise defined herein shall have the meanings assigned to them in
accordance with GAAP and the Uniform System of Accounts, (iii) all
references in this Agreement to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other
subdivisions of this Agreement, (iv) all cites to specific laws, rules,
statutes, regulations, ordinances or codes shall be cites to the applicable
laws, rules, statutes, regulations, ordinances or codes of the United
States of America, and (v) the words "herein," "hereof," "hereunder" and
other words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision.
1.1 "AAA" shall have the meaning given such term in Section 23.1.
1.2 "Accounting Period" shall mean each calendar month.
1.3 "Additional Charges" shall have the meaning given such term in
Section 3.1.3.
1.4 "Advisors" shall mean LaSalle Hotel Advisors.
1.5 "Affiliate" shall mean, with respect to any Person, (a) in
the case of any such Person which is a partnership, any partner in such
partnership, (b) in the case of any such Person which is a limited
liability company, any member of such company, (c) any other Person or
company which is a Parent, a Subsidiary, or a Subsidiary of a Parent with
respect to such Person or company or to one or more of the Persons referred
to in the preceding clauses (a) and (b), (d) any other Person who is an
officer, director, trustee or employee of, or partner in, such Person or
any Person referred to in the preceding clauses (a), (b) and (c), and (e)
any other Person who is a member of the Immediate Family of such Person or
of any Person referred to in the preceding clauses (a) through (d).
<PAGE>
1.6 "Agreement" shall mean this Lease Agreement, including all
exhibits hereto, as it and they may be amended from time to time as herein
provided.
1.7 "Annual Budget" shall have the meaning given such term in
Section 17.3.
1.8 "Annual Food and Beverage Sales Break Points" shall have the
meaning given such term in Section 3.1.4.
1.9 Intentionally Omitted.
1.10 "Annual Other Income Break Point" shall have the meaning given
such term in Section 3.1.4.
1.11 Intentionally Omitted.
1.12 "Annual Retail and Marina Sales Break Points" shall have the
meaning given such term in Section 3.1.4.
1.13 "Annual Room Revenues Break Points" and "Annual Telephone
Revenues Break Points" shall have the meanings given such terms in
Section 3.1.4.
1.14 "Applicable Laws" shall mean all applicable laws, statutes,
regulations, rules, ordinances, codes, licenses, international treaties,
permits and orders, from time to time in existence, of all courts of
competent jurisdiction and Government Agencies, and all applicable judicial
and administrative and regulatory decrees, judgments and orders, including
common law rulings and determinations, relating to injury to, or the
protection of, real or personal property or human health (except those
requirements which, by definition, are solely the responsibility of
employers) or the Environment, including, without limitation, all valid and
lawful requirements of courts and other Government Agencies pertaining to
reporting, licensing, permitting, investigation, remediation and removal of
underground improvements (including, without limitation, treatment or
storage tanks, or water, gas or oil wells), or emissions, discharges,
releases or threatened releases of Hazardous Substances, chemical
substances, pesticides, petroleum or petroleum products, pollutants,
contaminants or hazardous or toxic substances, materials or waste whether
solid, liquid or gaseous in nature, into the Environment, or relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances, underground
improvements (including, without limitation, treatment or storage tanks, or
water, gas or oil wells), or pollutants, contaminants or hazardous or toxic
substances, material or wastes, whether solid, liquid or gaseous in nature.
1.15 "Approved Financial Institution" shall mean (a) any United
States of America commercial bank which is FDIC insured and has a
consolidated net worth, as of any pertinent date under the terms of this
Agreement, of not less than $250,000,000 (as adjusted by CPI) and is
otherwise reasonably satisfactory to Landlord or (b) any other substantial
United States of America financial institution that is satisfactory to
Landlord in its sole and absolute discretion.
1.16 "Award" shall mean all compensation, sums or other value
awarded, paid or received by virtue of a total or partial Condemnation of
the Leased Property (after deduction of all reasonable legal fees and other
reasonable costs and expenses, including, without limitation, expert
witness fees, incurred by Landlord, in connection with obtaining any such
award).
<PAGE>
1.17 "Beverage Sales" shall mean Gross Revenues from (a) the sale of
wine, beer, liquor or other alcoholic beverages, whether sold in a bar or
lounge, delivered to or available in a guest room, sold at meetings or
banquets or at any other location at the Hotel and (b) non-alcoholic
beverages sold in a bar or lounge. Such revenue shall include sales by
Tenant and its permitted subtenants, licensees and concessionaires if such
permitted subtenant, licensees or concessionaires are Affiliates of Tenant.
Such revenue shall be determined in a manner consistent with GAAP and the
Uniform System of Accounts and shall include (a) the fair market value of
goods or services which have been provided in exchange for beverages under
bartering or trade arrangements, (b) the fair market value of beverages
provided under frequent traveler programs, gift certificate programs or any
other similar programs, and (c) the fair market value of any other
allowances deducted from beverage revenues (items (a)-(c) being allocated
to the respective revenues categories in accordance with the Uniform System
of Accounts). Such revenue shall not include: (a) any gratuity or service
charge added to a customer's bill or statement in lieu of gratuity which is
paid directly to an employee; or (b) sales taxes or taxes of any other kind
imposed on the sale of alcoholic or other beverages; or (c) the value of
any beverages provided to employees of Landlord, Tenant, any franchisor
under the Franchise Agreement or any guest on a complimentary basis. All
credits, rebates, refunds and credit card chargebacks relating to Beverage
Sales shall be deducted from Beverage Sales.
1.18 "Business Day" shall mean any day other than Saturday, Sunday,
or any other day on which banking institutions in the State of New York,
the State of Delaware, the State of Illinois, or the State are authorized
by law or executive order to close.
1.19 "Capital Budget" shall have the meaning given such term in
Section 17.3.
1.20 "Capital Expenditure" shall mean any expenditure treated as
capital in nature in accordance with GAAP.
1.21 "Capital Repair" shall mean any renovation, replacement,
repair or improvement to the Leased Property (or portion thereof) the cost
of which constitutes a Capital Expenditure and any renovation, replacement,
repair or improvement set forth and approved in the Capital Budget.
1.22 "Cash" shall mean cash or other immediately available funds.
1.23 "Cash Equivalents" shall mean (a) any debt instrument with a
term of up to twelve (12) months that is issued by or backed by the full
faith and credit of the United States of America, (b) any certificate of
deposit with a term of up to twelve (12) months that is issued by an issuer
that, on the date of issuance and on each date of any renewal or reissuance
thereof, is an Approved Financial Institution, and which instrument and any
applicable assignment thereof is in form and substance reasonably
satisfactory to the Landlord and (c) any irrevocable, "clean" letter of
credit issued by an issuer that, on the date of issuance and on each date
of any renewal or reissuance thereof, is an Approved Financial Institution,
and which instrument is in form and substance reasonably satisfactory to
the Landlord.
1.24 "Change of Control" shall mean the sale, conveyance,
assignment, encumbering, pledging, hypothecation, granting a security
interest in, granting of options with respect to, or other disposition of
(directly or indirectly, voluntarily or involuntarily, by operation of law
or otherwise, and whether or not for consideration) of any class of
partnership interests, stock or other equity interests in a Person (other
than among existing holders of interests in such Person on the Commencement
Date and/or family members of such holders and/or trusts for the benefit of
any of the foregoing) that, upon a transfer of any portion thereof, will
create in the transferee thereof, directly or indirectly, a majority of any
class of partnership interest, stock or other equity interests of such
Person.
<PAGE>
1.25 "Change in Operations" shall have the meaning given such term
in Section 21.12.
1.26 "Claim" shall have the meaning given such term in Section 8.1.
1.27 "Code" shall mean the Internal Revenue Code of 1986 and, to
the extent applicable, the Treasury Regulations promulgated thereunder,
each as from time to time amended.
1.28 "Commencement Date" shall mean the date of this Agreement.
1.29 "Competitive Set" shall mean a determination made by Landlord
and Tenant annually, at the time of preparation and approval of the Annual
Budget, of an appropriate reference group of hotels which are considered
competitive with the Leased Property and which Tenant and Landlord shall
agree shall constitute the Competitive Set for such Fiscal Year. If
Landlord or Tenant fail to agree upon the Competitive Set, the matter shall
be referred to arbitration as provided for in Article 23.
1.30 "Condemnation" shall mean (a) the exercise with respect to the
Leased Property, whether by legal proceedings or otherwise, by a Condemnor
of any power of condemnation, (b) a voluntary sale or transfer of the
Leased Property by Landlord to a Condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending, or
(c) a taking or voluntary conveyance of all or part of the Leased Property,
or any interest therein, or right accruing thereto or use thereof, as the
result or in settlement of any Condemnation or other eminent domain
proceeding affecting the Leased Property, whether or not the same shall
have actually been commenced.
1.31 "Condemnor" shall mean any public or quasipublic authority, or
private corporation or individual, having the power of Condemnation.
1.32 Intentionally Omitted.
1.33 Intentionally Omitted.
1.34 Intentionally Omitted.
1.35 "CPI" shall mean the "Consumer Price Index" published by the
Bureau of Labor Statistics of the United States of America Department of
Labor, U.S. City Average, All Items for Urban Wage Earners and Clerical
Workers (1982-1984=100).
1.36 "Current Market Value" shall mean, as of any pertinent date:
(a) as to Cash and Cash Equivalents, the face amount thereof;
(b) as to co-investments in hotels by Tenant and Landlord,
the value of such co-investment, based on the value placed on the
corresponding investment by Landlord or the REIT in the most recent version
of its own financial statements; and
(c) as to Marketable Securities, the closing price of such
securities, as reported in The Wall Street Journal for the trade date next
preceding such pertinent date.
1.37 "Date of Taking" shall mean the date the Condemnor has the
right to possession of the Leased Property, or any portion thereof, in
connection with a Condemnation.
1.38 "Default" shall mean any event or condition which with the
giving of notice and/or lapse of time may ripen into an Event of Default.
1.39 "Distribution" shall mean (a) any declaration or payment of
any dividend (except dividends payable in common stock of Tenant) on or in
respect of any shares of any class of capital stock of Tenant, (b) any
purchase, redemption, retirement or other acquisition of any shares of any
class of capital stock of a corporation, (c) any other distribution on or
in respect of any shares of any class of capital stock of a corporation, or
(d) any return of capital to shareholders.
<PAGE>
1.40 "Dollars" or "$" shall mean lawful money of the United States
of America which shall be legal tender for the payment of public and
private debts in the United States of America.
1.41 "Emergency Repairs" shall have the meaning given such term in
Section 5.1.2(b).
1.42 "Encumbrance" shall have the meaning given such term in
Section 20.1.
1.43 "Entity" shall mean any corporation, general or limited
partnership, limited liability company or partnership, stock company or
association, joint venture, association, company, trust, bank, trust
company, land trust, business trust, cooperative, any government or agency
or political subdivision thereof or any other entity.
1.44 "Environment" shall mean soil, surface waters, ground waters,
land, stream, sediments, surface or subsurface strata and ambient air.
1.45 "Environmental Obligation" shall have the meaning given such
term in Section 4.3.1.
1.46 "Environmental Notice" shall have the meaning given such term
in Section 4.3.1.
1.47 "Event of Default" shall have the meaning given such term in
Section 12.1.
1.48 "Expiration Date" shall mean the date set forth on Exhibit A
attached hereto.
1.49 "FF&E" shall mean all furniture, furnishings and equipment
(except equipment and fixtures attached to and forming a part of the Leased
Improvements) required for the operation of the Leased Improvements as a
hotel, including, without limitation, (a) office furnishings and equipment,
(b) specialized hotel equipment necessary for the operation of any portion
of the Leased Improvements as a hotel, including equipment for kitchens,
laundries, dry cleaning facilities, bars, restaurants, public rooms,
commercial and parking spaces, and recreational facilities, (c) all other
furnishings and equipment as necessary or desirable in the operation of the
Leased Property in accordance with the terms and conditions set forth in
this Agreement, and (d) all replacements, substitutions and additions of
and to all of the foregoing.
1.50 "Fair Market Value" shall mean, as to a specific valuable
asset, the purchase price which a seller would be able to obtain for such
asset in an arms-length transaction with a buyer which is not an Affiliate
of the seller, and taking into consideration all factors which might
reasonably affect the sales price of the asset in question, including,
without limitation, if and as appropriate, the existence of a control block
or minority interest, the anticipated impact on current market prices of
immediate sale, the lack of a market for such asset, and the impact on
present value of factors such as length of time before any such sales may
become possible and the cost and complexity of any such sales.
1.51 "Financial Officer's Certificate" shall mean, as to any
Person, a certificate of the chief financial officer or chief accounting
officer (or such officer's authorized designee) of such Person, duly
authorized, accompanying the financial statements required to be delivered
by such Person pursuant to Section 17.2, in which such officer shall
certify on behalf of such Person (a) that such statements have been
properly prepared in accordance with GAAP and the Uniform System of
Accounts and are true, correct and complete in all material respects and
fairly present the financial condition of such Person at and as of the
dates thereof and the results of its and their operations for the periods
covered thereby, and (b) certify that such officer has reviewed this
Agreement and has no knowledge of any Default or Event of Default
hereunder.
<PAGE>
1.52 "Financials" shall mean, for any Fiscal Year or other
accounting period of Tenant, 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 of the end of such period, together with the
notes to any such yearly statement, all in such detail as may be required
by the SEC with respect to filings made by the REIT or Landlord or as may
be reasonably required by Landlord, 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 the Uniform System of
Accounts and audited annually (and quarterly if required by the SEC or if
reasonably required by Landlord) by a nationally recognized firm of
independent certified public accountants proposed by Tenant and approved by
Landlord, which approval shall not be unreasonably withheld or delayed.
Financials shall be prepared on the basis of a December 31 fiscal year of
Tenant.
1.53 "Fiscal Quarter" shall mean each fiscal quarter of the Fiscal
Year.
1.54 "Fiscal Year" shall mean each calendar year.
1.55 "Fixed Term" shall have the meaning given such term in Section
2.3.
1.56 "Fixtures" shall have the meaning given such term in Section
2.l(d).
1.57 "Food Sales" shall mean (a) Gross Revenues from the sale of
food and non-alcoholic beverages that are prepared at the Hotel and sold or
delivered on or off the Hotel by Tenant whether for cash or for credit,
including in respect of guest rooms, banquet rooms, meeting rooms and other
similar rooms, and (b) Gross Revenues from the rental of banquet, meeting
and other similar rooms. Such revenue shall include sales by Tenant and
its permitted subtenants, licensees and concessionaires, but as to
subleases, licenses or similar arrangements for food and non-alcoholic
beverage sales which were entered into by Landlord or any prior owner of
the Leased Property with parties who are not Affiliates of Tenant and which
are existing as of the date of this Agreement, such revenue shall only
include rents received under such existing subleases, licenses or similar
arrangements. Such revenue shall be determined in a manner consistent with
GAAP and the Uniform System of Accounts and shall include (a) the fair
market value of goods or services which have been provided in exchange for
food under bartering or trade arrangements, (b) the fair market value of
food provided under frequent traveler programs, gift certificate programs
or any other similar programs and (c) the fair market value of any other
allowances deducted from food revenues (items (a)-(c) being allocated to
the respective revenues categories in accordance with the Uniform System of
Accounts). Such revenue shall not include: (a) vending machine sales; (b)
any gratuities or service charges added to a customer's bill or statement
in lieu of gratuity which is paid directly to an employee; (c)
non-alcoholic beverages sold from a bar or lounge; or (d) sales taxes or
taxes of any other kind imposed on the sale of food or non-alcoholic
beverages; or (e) the value of food or non-alcoholic beverages provided to
employees of Landlord, Tenant, the franchisor under the Franchise Agreement
or any other guests on a complimentary basis. All credits, rebates,
refunds and credit card chargebacks relating to Food Sales shall be
deducted from Food Sales.
1.58 "Force Majeure Event" shall mean an interruption of the
operation of the Hotel resulting from, or caused by, general strikes, wars
(declared or undeclared), natural disasters such as fires, storms, floods
or earthquakes, or other material extraordinary economic events not
reasonably foreseeable by the parties hereto, and which such interruption
causes a delay in the performance of any material obligation hereunder.
<PAGE>
1.59 "Franchise Agreement" shall mean any franchise agreement or
license agreement with a franchisor under which the Hotel is operated.
1.60 "GAAP" shall mean generally accepted accounting principles of
the United States of America, consistently applied.
1.61 Intentionally Omitted.
1.62 "Government Agencies" shall mean any court, agency, authority,
board (including, without limitation, environmental protection, planning
and zoning), bureau, commission, department, office or instrumentality of
any nature whatsoever of any governmental or quasigovernmental unit of the
country in which the Leased Property is located or the State or any county
or any political subdivision of any of the foregoing, whether now or
hereafter in existence, having jurisdiction over Tenant or the Leased
Property or any portion thereof or the Hotel operated thereon.
1.63 "Gross Operating Expenses" shall mean all salaries and
employee expense and payroll taxes (including salaries, wages, bonuses and
other compensation of all employees of the Hotel, and benefits including
life, medical and disability insurance and retirement benefits),
operational supplies, utilities, insurance to be provided by Tenant under
the terms of this Lease, governmental fees and assessments, food,
beverages, laundry service expense, the costs of Inventory, license fees,
advertising, marketing, reservation systems and any and all other operating
expenses as are reasonably necessary for the proper and efficient operation
of the Hotel incurred by Tenant in accordance with the provisions hereof
(excluding, however, (i) federal, state and municipal excise, sales and use
taxes collected directly from patrons and guests or as a part of the sales
price of any goods, services or displays, such as gross receipts,
admissions, cabaret or similar or equivalent taxes paid over to federal,
state or municipal governments, (ii) the cost of insurance to be provided
by Landlord under Article 9, (iii) expenditures by Landlord, and (iv)
payments on any Hotel Mortgage or other mortgage or security instrument on
the Hotel); all determined in accordance with GAAP. No part of Tenant's
central office overhead or general or administrative expenses (as opposed
to that of the Hotel) shall be deemed to be a part of Gross Operating
Expenses, as herein provided.
1.64 "Gross Revenues" shall mean all revenues, receipts, and income
of any kind derived directly or indirectly by Tenant from or in connection
with the Hotel (including rentals or other payments from their tenants,
lessees, licensees or concessionaires but not including their gross
receipts) whether on a cash basis or credit, paid or collected, determined
in accordance with GAAP and the Uniform System of Accounts, excluding,
however: (a) funds furnished by Landlord, (b) federal, state and municipal
excise, sales, and use taxes collected directly from patrons and guests or
as a part of the sales price of any goods, services or displays, such as
gross receipts, admissions, cabaret or similar or equivalent taxes and paid
over to federal, state or municipal governments, (c) gratuities, (d)
proceeds of insurance and Awards, (e) proceeds from sales of furnishings,
fixtures and equipment which are permitted pursuant to the terms of this
Agreement, (f) all loan proceeds from financing or refinancings of the
Hotel or interests therein or components thereof, (g) interest earned on
funds deposited into the Reserve Fund and (h) judgments and awards, except
any portion thereof arising from normal business operations of the Hotel.
1.65 "Ground Lease" shall mean that certain City of San Diego
Percentage Lease, dated December 30, 1994, between the City of San Diego,
California, and VVH Resorts, LTD., as amended or assigned.
1.66 "Ground Lease Payments" shall mean any and all fees, costs and
expenses, including without limitation, ground rent payable under the
Ground Lease.
<PAGE>
1.67 "Hazardous Substances" shall mean any substance: (a) the
presence of which requires or may hereafter require notification,
investigation or remediation under any federal, state or local statute,
regulation, rule, ordinance, order, action or policy; or (b) which is or
becomes defined as a "hazardous waste", "hazardous material" or "hazardous
substance" or "pollutant" or "contaminant" under any present or future
federal, state or local statute, regulation, rule, ordinance or
international treaty or amendment thereto including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act
(42 U.S.C. et seq.) and the Resource Conservation and Recovery Act (42
U.S.C. section 6901 et seq.); or (c) which is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise
hazardous and is or becomes regulated by any governmental authority,
agency, department, commission, board, agency or instrumentality of the
country in which the Leased Property is located, any state of the country
in which the Leased Property is located, or any political subdivision
thereof; or (d) the presence of which on the Leased Property causes or
materially threatens to cause an unlawful nuisance upon the Leased Property
or to adjacent properties or poses or materially threatens to pose a hazard
to the Leased Property or to the health or safety of persons on or about
the Leased Property; or (e) without limitation, which contains gasoline,
diesel fuel or other petroleum hydrocarbons or volatile organic compounds;
or (f) without limitation, which contains polychlorinated biphenyls (PCBs)
or asbestos or urea formaldehyde foam insulation; or (g) without
limitation, which contains or emits radioactive particles, waves or
material; or (h) without limitation, constitutes materials which are now
or may hereafter be subject to regulation pursuant to the Material Waste
Tracking Act of 1988, or any Applicable Laws promulgated by any Government
Agencies.
1.68 "Hotel" shall mean the hotel being operated on the Leased
Property.
1.69 "Hotel Mortgage" shall mean any Encumbrance placed upon the
Leased Property in accordance with Article 20.
1.70 "Hotel Mortgagee" shall mean the holder of any Hotel Mortgage.
1.71 "Hotel Standard" shall mean both the operational standards
(for example, staffing, amenities offered to guests, advertising, etc.) and
the physical standards (for example, the quality, condition and utility of
the Fixtures and Leased Personal Property, etc.) such that the Hotel and
all of its facilities and activities are operated in the same manner as is
customary and usual in the operating of a first class hotel, and, in any
event, such that will provided such facilities and services at the Hotel as
are normally provided by operators of hotels of comparable class and
standing consistent with the Hotel's facilities.
1.72 "Immediate Family" shall mean, with respect to any individual,
such individual's spouse, parents, brothers, sisters, children (natural or
adopted), stepchildren, grandchildren, grandparents, parentsinlaw,
brothersinlaw, sistersinlaw, nephews and nieces.
1.73 "Impositions" shall mean collectively, all taxes (including,
without limitation, all taxes imposed under the laws of the State, as such
laws may be amended from time to time, and all ad valorem, sales and use,
value added, single business, gross receipts, transaction privilege, rent
or similar taxes as the same relate to or are imposed upon Landlord, Tenant
or the business conducted upon the Leased Property), sewer or other rents
and charges, excises, tax levies, fees (including, without limitation,
license, permit, inspection, authorization and similar fees), and all other
governmental charges, 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 Tenant (including
all interest and penalties thereon due to any failure in payment by
Tenant), which at any time prior to, during or in respect of the Term
hereof may be assessed or imposed on or in respect of or be a lien upon (a)
Landlord's interest in the Leased Property, (b) the Leased Property or any
<PAGE>
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 Tenant;
provided, however, that nothing contained herein shall be construed to
require Tenant to pay (i) any real estate taxes with respect to the Leased
Property, (ii) any Ground Lease Payments, (iii) any tax based on income
imposed on Landlord, (iv) any revenue tax of Landlord, (v) any transfer fee
or other tax imposed with respect to the sale, exchange or other
disposition by Landlord of the Leased Property or the proceeds thereof
(other than in connection with the sale, exchange or other disposition to,
or in connection with a transaction involving, Tenant), (vi) any single
business, gross receipts tax (other than a tax on any rent received by
Landlord from Tenant unless such gross receipts tax on such rent is in lieu
of any other tax, assessment, levy or charge otherwise excluded from this
definition of Impositions), transaction privilege, rent or similar taxes as
the same relate to or are imposed upon Landlord, except to the extent that
any tax, assessment, tax levy or charge which is in effect at any time
during the Term hereof is totally or partially repealed, and a tax,
assessment, tax levy or charge set forth in clause (iii) or (iv) preceding
is levied, assessed or imposed expressly in lieu thereof, (vii) any
interest or penalties imposed on Landlord as a result of the failure of
Landlord to file any return or report timely and in the form prescribed by
law or to pay any tax or imposition, except to the extent such failure is a
result of a breach by Tenant of its obligations pursuant to Section 3.1.3,
(viii) any Impositions that are enacted or adopted by their express terms
as a substitute for any tax that would not have been payable by Tenant
pursuant to the terms of this Agreement or (ix) any Impositions imposed as
a result of a breach of covenant or representation by Landlord in any
agreement governing Landlord's conduct or operation or as a result of the
gross negligence or willful misconduct of Landlord.
1.74 "Incidental Documents" shall mean all of the documents or
agreements entered into in connection with this Agreement.
1.75 "Indebtedness" shall mean all obligations, contingent or
otherwise, which in accordance with GAAP should be reflected on the
obligor's balance sheet as liabilities.
1.76 "Initial Reserve Fund Payment" shall mean the sum set forth on
Exhibit A attached hereto.
1.77 "Insurance Requirements" shall mean all terms of any insurance
policy required by this Agreement, any Hotel Mortgage, or under any Ground
Lease and all requirements of the issuer of any such policy and all orders,
rules and regulations and any other requirements of the National Board of
Fire Underwriters (or any other body exercising similar functions) binding
upon Landlord, Tenant or the Leased Property.
1.78 "Insured Casualty" shall have the meaning given such term in
Section 10.2.1.
1.79 "Interest Rate" shall mean on any date, a per annum rate of
interest equal to the lesser of (a) the rate of interest announced by
Citibank, N.A. from time to time in New York City as its "prime" or "base"
rate, as such "prime" or "base" rate may change from time to time plus
three percent (3%) per annum and (b) the maximum rate then permitted under
applicable law.
1.80 "Inventory" shall mean all food, beverages and other
consumable items used in the operation of a hotel, such as fuel, soap,
cleaning materials, matches, stationery, brochures, folios and all other
similar items, together with unused reserve stock (as opposed to in-use
operating supplies) of linens, towels, paper goods, china, glassware,
silverware and miscellaneous guest supplies including but not limited to
the items set forth in Exhibit C attached hereto, together with all
substitutions and replacements thereof.
<PAGE>
1.81 "Key Employee" shall have the meaning given such term in
Section 22.17.
1.82 "Land" shall have the meaning given such term in Section
2.1(a).
1.83 "Landlord" shall have the meaning given such term in the
preambles to this Agreement.
1.84 "Landlord Liens" shall mean liens on or against the Leased
Property or any payment of Rent (a) which result from any act of, or any
claim against, Landlord or any owner of a direct or indirect interest in
the Leased Property, or which result from any violation by Landlord of any
terms of this Agreement, or (b) which result from liens in favor of any
taxing authority by reason of any tax owed by Landlord or any fee owner of
a direct or indirect interest in the Leased Property; provided, however,
that "Landlord Lien" shall not include any lien resulting from any tax for
which Tenant is obligated to pay or indemnify Landlord against until such
time as Tenant shall have already paid to or on behalf of Landlord the tax
or the required indemnity with respect to the same.
1.85 "Lease Year" shall mean any Fiscal Year or portion hereof,
commencing with the 1998 Fiscal Year, during the Term.
1.86 "Leased Improvements" shall have the meaning given such term
in Section 2.1(b).
1.87 "Leased Intangible Property" shall mean all hotel licensing
agreements and other service contracts, equipment leases, booking
agreements and other arrangements or agreements affecting the ownership,
repair, maintenance, management, leasing or operation of the Leased
Property to which Landlord is a party; all books, records and files
relating to the leasing, maintenance, management or operation of the Leased
Property belonging to Landlord; all transferable or assignable permits,
certificates of occupancy, operating permits, sign permits, development
rights and approvals, certificates, licenses, warranties and guarantees,
rights to deposits, trade names, service marks, telephone exchange numbers
identified with the Leased Property, and all other transferable intangible
property, miscellaneous rights, benefits and privileges of any kind or
character belonging to Landlord with respect to the Leased Property.
1.88 "Leased Personal Property" shall have the meaning given such
term in Section 2.1(e).
1.89 "Leased Property" shall have the meaning given such term in
Section 2.1.
1.90 "Legal Requirements" shall mean all federal, state, county,
municipal and other governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions affecting the
Leased Property or the maintenance, construction, alteration or operation
thereof, whether now or hereafter enacted or in existence, including,
without limitation, (a) all permits, licenses, authorizations, certificates
and regulations necessary to operate the Leased Property for its Permitted
Use, and (b) all covenants, agreements, restrictions and encumbrances
contained in any instruments at any time in force affecting the Leased
Property, including those which may (i) require material repairs,
modifications or alterations in or to the Leased Property or (ii) in any
way materially and adversely affect the use and enjoyment thereof, but
excluding any requirements arising as a result of Landlord's or Landlord's
Affiliates', as applicable, status as a real estate investment trust.
1.91 "Licenses" shall have the meaning given such term in Section
22.15.
<PAGE>
1.92 "Lien" shall mean any mortgage, security interest, pledge,
collateral assignment, or other encumbrance, lien or charge of any kind, or
any transfer of property or assets for the purpose of subjecting the same
to the payment of Indebtedness or performance of any other obligation in
priority to payment of its general creditors.
1.93 "Management Agreement" shall mean the Management Agreement
between Tenant and the Manager with respect to the Leased Premises,
together with all amendments, modifications and supplements thereto.
1.94 "Manager" shall have the meaning set forth on Exhibit A.
1.95 "Material Franchise Change" shall mean that the franchisor
under the Franchise Agreement, if any, or the name of the franchisor, is
purchased, rebranded, repositioned, terminated, or otherwise subjected to a
change in ownership or control.
1.96 "Measurement Date" shall have the meaning given such term in
Section 3.1.4.
1.97 "Minimum Inventory" shall have the meaning given such term in
Section 5.6.
1.98 "Minimum Operating Standards" shall mean the standards of
operation of the Hotel by which Tenant shall operate the Hotel in
conformance with a commercially practicable manner as a first class hotel
and in such a fashion that Landlord's valuable interest in the Hotel shall
not decrease through such operations and such that the Hotel shall at no
time be operated pursuant to a lower standard (i.e., quality and
reputation) than exists at the Commencement Date.
1.99 "Minimum Rent" shall mean, with respect to each Accounting
Period, the sum set forth on Exhibit A attached hereto as increased (but in
no event decreased) by CPI pursuant to Section 3.1.4; provided, however,
that Minimum Rent shall be adjusted if, as a result of a partial
Condemnation or a casualty which, in each instance and in the reasonable
judgment of Landlord, after consultation with Tenant, makes it impossible
to restore a portion of the Leased Improvements, by a fraction (i) the
numerator of which is the number of rooms which cannot be restored, and
(ii) the denominator of which is the total number of hotel rooms located in
the Hotel prior to such casualty or partial Condemnation.
1.100 "Minimum Working Capital" shall mean the sum set forth on
Exhibit D attached hereto.
1.101 "Notice" shall mean a notice given in accordance with Section
22.10.
1.102 "Officer's Certificate" shall mean a certificate signed by an
officer of the certifying Entity duly authorized by the board of directors
of the certifying Entity.
1.103 "Operating Budget" shall have the meaning given such term in
Section 17.3.
1.104 "OP Units" shall mean limited partnership interests in
Landlord.
1.105 "Other Income" shall mean all revenue, receipts and income,
including, but not limited to, interest income of any kind derived directly
or indirectly from or in connection with the Hotel and included in Gross
Revenues other than Room Revenues, Food Sales, Beverage Sales, Telephone
Revenues, and Retail and Marina Sales.
1.106 "Overdue Rate" shall mean, on any date, a per annum rate of
interest equal to the lesser of the Interest Rate plus three percent (3%)
per annum and the maximum rate then permitted under applicable law.
<PAGE>
1.107 "Parent" shall mean, with respect to Tenant, any Person which
owns directly, or indirectly through one or more Subsidiaries or
Affiliates, five percent (5%) or more of the voting or beneficial interest
in, or otherwise has the right or power (whether by contract, through
ownership of securities or otherwise) to control, Tenant.
1.108 Intentionally Omitted.
1.109 "Participating Leases" shall mean any and all other leases
executed at any time prior to or during the Term between Tenant, or
Affiliates of Tenant, and Landlord with regard to the operation and/or
management of hotel properties owned by Landlord.
1.110 "Permitted Encumbrances" shall mean all rights, restrictions,
and easements of record set forth on the applicable owner's or leasehold
title insurance policy issued to Landlord on the date hereof, plus any
other such encumbrances as may have been consented to in writing by
Landlord from time to time.
1.111 "Permitted Liens" shall mean any Liens granted in accordance
with Section 21.8(a).
1.112 "Permitted Transfer" shall have the meaning given such term in
Section 22.22.
1.113 "Permitted Use" shall mean any use of the Leased Property
permitted pursuant to Section 4.1.1.
1.114 "Prohibited Casualty" shall have the meaning given such term
in Section 10.2.1.
1.115 "Person" shall mean any individual or Entity, and the heirs,
executors, administrators, legal representatives, successors and assigns of
such Person where the context so admits.
1.116 "Personal Property Limitation" shall have the meaning given
such term in Section 19.1.
1.117 "Prohibited Taking" shall have the meaning given such term in
Section 11.1.
1.118 "Purchase" shall have the meaning given such term in Section
22.22.
1.119 "Purchase Notice" shall have the meaning given such term in
Section 22.22.
1.120 "Records" shall have the meaning given such term in Section
7.2.
1.121 "REIT" shall mean LaSalle Hotel Properties.
1.122 "REIT Shares" shall mean shares of common stock issued by the
REIT.
1.123 "Rent" shall mean, collectively, the Minimum Rent,
Participating Rent and Additional Charges.
1.124 "Replacement Cost" shall have the meaning given such term in
Section 9.2.
1.125 "Required Minimum Net Worth" shall have the meaning given such
term in Section 21.15.
<PAGE>
1.126 "Required Purchase" shall have the meaning given such term is
Section 22.22.
1.127 "Reserve Fund" shall have the meaning set forth in Section
6.3.
1.128 "Retail and Marina Sales" shall mean the Gross Revenues
derived from the operation of any retail space or any marina within the
Leased Property, including, but not limited to sales, leases or any other
type of income participation. Such revenue shall be determined in a manner
consistent with GAAP and the Uniform System of Accounts and shall include
(a) the fair market value of goods or services which have been provided in
exchange for goods under bartering or trade arrangements, (b) the fair
market value of goods which has been provided under frequent traveler
programs, gift certificate programs or any other similar programs and (c)
the fair market value of any other allowances deducted from retail revenues
(items (a)-(c) being allocated to the respective revenues categories in
accordance with the Uniform System of Accounts). Retail and Marina Sales
shall not include: (a) all sales taxes, and (b) the value of goods or
services provided to employees of Landlord, Tenant, the franchisor under
the Franchise Agreement or any other guests on a complimentary basis.
1.129 "Revenue Computation" shall have the meaning given such term
in Exhibit A.
1.130 "Rent Performance Shortfall" shall have the meaning given such
term in Section 21.11.
1.131 "Room Revenues" shall mean Gross Revenues determined in a
manner consistent with GAAP and the Uniform System of Accounts, from the
rental of guest rooms whether to individuals, groups or transients, at the
Hotel, including, but not limited to (a) the fair market value of goods or
services which have been provided in exchange for rooms under bartering or
trade arrangements, (b) the fair market value of rooms provided under
frequent traveler programs, gift certificate programs or any other similar
programs, (c) the fair market value of any other allowances or commissions
deducted from room rates, including, but not limited to, discounts and
travel agent commissions (items (a)-(c) being allocated to the respective
revenues categories in accordance with the Uniform System of Accounts), and
(d) other Gross Revenues received from cancellation of room reservations,
retained deposits, and other income derived from reservation changes. Room
Revenues shall not include: (a) all sales taxes or any other taxes imposed
on the rental of such guest rooms, and (b) any fees collected for amenities
including, but not limited to, telephone, laundry, movies or concessions
and (c) the value of rooms provided to employees of Landlord, Tenant, the
franchisor under the Franchise Agreement or guests on a complimentary basis
("Complimentary Rooms"); provided, however, to the extent the Complimentary
Rooms exceed two (2%) percent of the aggregate room rentals for a Fiscal
Year, the fair market value of such excess shall not be excluded from Room
Revenues, and such amounts shall be added to Gross Revenues for the last
Fiscal Quarter of the preceding Fiscal Year. All credits, rebates, refunds
and credit card chargebacks, except to the extent that such Room Revenues
were originally collected prior to the Commencement Date, shall be deducted
from Room Revenues.
1.132 "SEC" shall mean the United States of America Securities and
Exchange Commission or any successor agency.
1.133 "Sale Notice" shall have the meaning given such term in
Section 22.22.
1.134 "Security Deposit" shall have the meaning given such term in
Section 15.1.
<PAGE>
1.135 "Solvent" shall mean, as to any Person, that (a) the sum of
the assets of such Person, at a fair valuation, exceeds its liabilities,
including contingent liabilities, (b) such Person has sufficient capital
with which to conduct its business as presently conducted and as proposed
to be conducted and (c) such Person has not incurred debts, and does not
intend to incur debts, beyond its ability to pay such debts as they mature.
For purposes of this definition, "debt" means any liability on a claim, and
"claim" means (a) a right to payment, whether or not such right is reduced
to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured, or
(b) a right to an equitable remedy for breach of performance if such breach
gives rise to a payment, whether or not such right to an equitable remedy
is reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured, or unsecured. With respect to any such contingent
liabilities, such liabilities shall be computed in accordance with GAAP and
the Uniform System of Accounts at the amount which, in light of all the
facts and circumstances existing at the time, represents the amount which
can reasonably be expected to become an actual or matured liability.
1.136 "State" shall mean the state or district in which the Leased
Property is located.
1.137 "Subordinated Creditor" shall mean any creditor of Tenant
which is a party to a Subordination Agreement in favor of Landlord.
1.138 "Subordination Agreement" shall mean any agreement executed by
a Subordinated Creditor pursuant to which the payment and performance of
Tenant's obligations to such Subordinated Creditor are subordinated to the
payment and performance of Tenant's obligations to Landlord under this
Agreement.
1.139 "Subsidiary" shall mean, with respect to any Person, any
Entity (a) in which such Person owns directly, or indirectly through one or
more Subsidiaries, fiftyone percent (51%) or more of the voting or
beneficial interest or (b) which such Person otherwise has the right or
power to control (whether by contract, through ownership of securities or
otherwise).
1.140 "Successor Landlord" shall have the meaning given such term in
Section 20.2.
1.141 "Superior Landlord" shall have the meaning given such term in
Section 20.2.
1.142 "Superior Lease" shall have the meaning given such term in
Section 20.2.
1.143 "Superior Mortgage" shall have the meaning given such term in
Section 20.2.
1.144 "Superior Mortgagee" shall have the meaning given such term in
Section 20.2.
1.145 "Tax Law Change" shall mean a change in the Code (including,
without limitation, a change in the Treasury regulations promulgated
thereunder) or in the judicial or administrative interpretations of the
Code, which in the opinion of Landlord's counsel will permit Landlord or an
Affiliate thereof to operate the Hotel as a hotel without adversely
affecting the REIT's qualification for taxation as a real estate investment
trust under the applicable provisions of the Code.
1.146 "Telephone Revenues" shall mean all revenues, receipts and
income of any kind derived from the use of telephone facilities by guests
of the hotel, including, without limitation, revenues from local and long
distance calls, service charges and commissions received from pay stations.
1.147 "Tenant" shall have the meaning given such term in the
preambles to this Agreement.
<PAGE>
1.148 "Tenant's Assets" shall mean, when calculating Tenant's "net
worth" hereunder, the following items owned by Tenant free and clear of all
liens, encumbrances, security interests and restrictions, except any
security interest granted to Landlord pursuant to the terms of this
Agreement, (a) working capital available for the day to day operations of
the Hotel; (b) investment grade marketable securities; (c) REIT Shares; (d)
OP Units; and (e) coinvestments made by the Tenant with the Landlord in
other hotel projects.
1.149 "Tenant's Personal Property" shall mean (a) all consumables
located at the Hotel and (b) all personal property of Tenant, if any, owned
by Tenant and located at the Leased Property or used in Tenant's business
at the Leased Property and all modifications, replacements, alterations and
additions to such personal property acquired at the expense of Tenant,
other than any items included within the definition of Fixtures or Leased
Personal Property.
1.150 "Term" shall mean the Fixed Term.
1.151 "Third Party" shall have the meaning given such term in Section
1.155.
1.152 "Third Party Notice" shall have the meaning given such term in
Section 22.22.
1.153 "Transferor" shall have the meaning given such term in Section
22.22.
1.154 "Uniform System of Accounts" shall mean A Uniform System of
Accounts for Hotels, Ninth Revised Edition, 1996, as published by the Hotel
Association of New York City, as same may be revised, amended or
supplemented.
1.155 "Unsuitable for Its Permitted Use" shall mean a state or
condition of the Hotel such that (a) following any damage or destruction
involving the Hotel, the Hotel cannot be operated in the good faith
judgment of Tenant or the Manager on a commercially practicable basis for
its Permitted Use and it cannot reasonably be expected to be restored to
substantially the same condition as existed immediately before such damage
or destruction, and as otherwise required by Section 10.2.4, within six (6)
months following such damage or destruction or such shorter period of time
as to which business interruption insurance is available to cover Rent and
other costs related to the Leased Property following such damage or
destruction, or (b) as the result of a partial taking by Condemnation, the
Hotel cannot be operated, in the good faith judgment of Tenant or the
Manager on a commercially practicable basis for its Permitted Use.
1.156 "Work" shall have the meaning given such term in Section
10.2.2.
ARTICLE 2
---------
LEASED PROPERTY AND TERM
------------------------
2.1 LEASED PROPERTY. Upon and subject to the terms and conditions
hereinafter set forth, Landlord leases to Tenant and Tenant leases from
Landlord all of Landlord's right, title and interest to use all of the
following (collectively, the "Leased Property"):
(a) those certain tracts, pieces and parcels of land, as more
particularly described in Exhibit E, attached hereto and made a part hereof
(the "Land");
<PAGE>
(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 (onsite and offsite), parking garages,
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,
now or 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, aircooling and air-conditioning systems and apparatus, sprinkler
systems and fire and theft protection equipment, all of which, to the
maximum extent permitted by law, are hereby deemed by the parties hereto to
constitute real estate, together with all replacements, modifications,
alterations and additions thereto, but specifically excluding all items
included within the category of Tenant's Personal Property (collectively,
the "Fixtures");
(e) all machinery, equipment, furniture, furnishings, moveable walls
or partitions, trade fixtures or other personal property of any kind or
description used or useful in Tenant's business on or in the Leased
Improvements, and located on or in the Leased Improvements, (including, but
not limited to, computers, beds, bureaus, chiffonniers, chests, chairs,
desks, lamps, mirrors, bookcases, tables, rugs, bedspreads, shower
curtains, linens, towels, facecloths, bathmats, napkins, tablecloths,
chinaware, glassware, flatware, uniforms, carpeting, drapes, draperies,
curtains, shades, venetian blinds, screens, paintings, hangings, pictures,
divans, couches, luggage carts, luggage racks, stools, sofas, pillows,
blankets, foodcarts, cookware, dry cleaning facilities, dining room wagons,
keys or other entry systems, bars, bar fixtures, liquor and other drink
dispensers, icemakers, radios, television sets, video machines, intercom
and paging equipment, electric and electronic equipment, dictating
equipment, private telephone systems, communication equipment, medical
equipment, umbrellas and other shade equipment, barbecues, potted plants,
plants, laundry machines, tools, machinery, switchboards, vacuum cleaning
systems, floor brackets, electrical signs, bulbs, bells, cabinets, lockers,
shelving, spotlighting equipment, dishwashers, garbage disposals, washers
and dryers, boats, motor scooters, bicycles, vehicles, exercise machines,
sporting goods and other recreational equipment, other customary hotel
equipment and other tangible property of every kind and nature whatsoever)
and all modifications, replacements, alterations and additions to such
personal property, except items, if any, included within the category of
Fixtures together with any interests Landlord may have in leases with
respect to all of the foregoing (collectively, the "Leased Personal
Property");
(f) all of the Leased Intangible Property; and
(g) any and all leases of space (including any security deposits
held by Tenant or the Manager pursuant thereto) in the Leased Improvements
to tenants thereof.
<PAGE>
2.1 CONDITION OF LEASED PROPERTY. Tenant acknowledges receipt and
delivery of possession of the Leased Property and Tenant accepts the Leased
Property in its "as is" condition, subject to the rights of parties in
possession, the existing state of title, including all covenants,
conditions, restrictions, reservations, mineral leases, concessions,
easements and other matters of record or that are visible or apparent on
the Leased Property, all applicable Legal Requirements, the lien of any
financing instruments, mortgages and deeds of trust existing prior to the
Commencement Date or permitted by the terms of this Agreement, and such
other matters which would be disclosed by an inspection of the Leased
Property and the record title thereto or by an accurate survey thereof.
TENANT REPRESENTS THAT IT HAS INSPECTED THE LEASED PROPERTY AND ALL OF THE
FOREGOING AND HAS FOUND THE CONDITION THEREOF SATISFACTORY AND IS NOT
RELYING ON ANY REPRESENTATION OR WARRANTY OF LANDLORD OR LANDLORD'S AGENTS
OR EMPLOYEES WITH RESPECT THERETO AND TENANT WAIVES ANY CLAIM OR ACTION
AGAINST LANDLORD IN RESPECT OF THE CONDITION OF THE LEASED PROPERTY.
LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN
RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS
FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR
OTHERWISE, 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 TENANT.
2.2 FIXED TERM. The term of this Agreement (the "Fixed Term")
shall commence on the Commencement Date and shall expire on the Expiration
Date.
<PAGE>
ARTICLE 3
---------
RENT
----
3.1 Rent. Tenant shall pay, in Dollars without offset, abatement,
demand or deduction (unless otherwise expressly provided in this
Agreement), Minimum Rent and Participating Rent to Landlord and Additional
Charges to the party to whom such Additional Charges are payable, during
the Term. All payments to Landlord shall be made by wire transfer of
immediately available federal funds or by other means acceptable to
Landlord in its sole discretion. Rent for any partial Accounting Period
shall be prorated on a per diem basis. Minimum Rent and Participating Rent
shall be adjusted (by amendment to this Agreement) as a result of (i) the
expansion of the number of rooms operated at the Hotel, (ii) the increase
in area of any meeting rooms or similar facilities located at the Hotel,
(iii) a material increase in the facilities or services available at the
Hotel, (iv) a significant renovation of the Hotel, (v) a Material Franchise
Change, (vi) a significant repositioning of the Hotel, (vii) a material
contraction in the number of rooms or services available at the Hotel as a
result of construction or development at the Hotel, or (viii) a material
negative impact on operation at the Hotel as a result of development at the
Hotel. The parties agree to undertake good faith negotiations to agree
upon the adjustment of Minimum Rent and Participating Rent provided for in
this Section 3.1. If, within three (3) months of commencing good faith
negotiations for the determination of any applicable adjustment to Minimum
Rent and Participating Rent pursuant to the terms of this Section 3.1, the
parties fail to agree upon such adjustment, then either party may, upon
thirty (30) days notice to the other party, terminate this Agreement;
provided, however, if Landlord initiates the request for an adjustment of
Minimum Rent and Participating Rent pursuant to this Section 3.1, and this
Agreement is terminated by either party pursuant to this Section 3.1,
Tenant shall be entitled to the Termination Fee as calculated pursuant to
Section 22.20; provided, further, however, if Tenant initiates the request
for an adjustment of Minimum Rent and Participating Rent pursuant to this
Section 3.1, and this Agreement is terminated by either party pursuant to
this Section 3.1, Tenant shall not be entitled to any Termination Fee which
may otherwise be payable pursuant to Section 22.20.
3.1.1 Minimum Rent. For each Accounting Period or portion
thereof, Tenant shall pay Minimum Rent in arrears prior to 11:00 a.m. New
York time on the first Business Day of the next Accounting Period.
3.1.2 Participating Rent.
(a) Amount. For each Fiscal Quarter or portion thereof,
Tenant shall pay in arrears prior to 11:00 a.m. New York time on or
before the twentieth (20th) day of each Fiscal Quarter additional rent
("Participating Rent") with respect to such prior Fiscal Quarter or
portion thereof, pursuant to this Agreement, in an amount, not less
than zero, as set forth on Exhibit A. In calculating Participating
Rent, Gross Revenues attributable to hotel packages or certificates
including, but not limited to, frequent traveler programs, gift
certificate programs, all inclusive packages or certificates, or other
similar programs or packages, shall be allocated to the respective
revenues categories in accordance with the Uniform System of Accounts.
The obligation to pay Participating 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 Participating Rent accrued prior to such
termination date, shall be made not later than sixty (60) days after
such expiration or termination date.
<PAGE>
(b) Officers Certificate. An Officer's Certificate, in form
and substance reasonably acceptable to Landlord, setting forth the
calculation of Participating Rent due and payable for the applicable Fiscal
Quarter shall be delivered to Landlord with each payment of Participating
Rent.
(c) Reconciliation of Participating Rent. On or before March
2 of each year, commencing March 2, 1999, Tenant shall deliver to Landlord
an Officer's Certificate, in form and substance reasonably acceptable to
Landlord, setting forth the Gross Revenues for the Leased Property for such
preceding Lease Year, together with an audit of Tenant's revenues for the
preceding Lease Year, conducted by a nationally recognized firm of
independent certified public accountants proposed by Tenant and approved by
Landlord, which approval shall not be unreasonably withheld or delayed. If
the annual Participating Rent for such preceding Lease Year as shown in the
Officer's Certificate exceeds the amount previously paid with respect
thereto by Tenant, Tenant shall pay such excess to Landlord at such time as
the Officer's Certificate is delivered, together with interest at the
Interest Rate, which interest shall accrue from the date that such payment
was due until the date that such certificate is required to be delivered
and, thereafter, such interest shall accrue at the Overdue Rate, until the
amount of such difference shall be paid or otherwise discharged. If the
annual Participating Rent for such preceding Lease Year as shown in the
Officer's Certificate is less than the amount previously paid with respect
thereto by Tenant, provided that no Event of Default shall have occurred
and be continuing, Landlord shall grant Tenant a credit against
Participating Rent next coming due in the amount of such difference. If
such credit cannot be made because the Term has expired prior to
application in full thereof, provided no Event of Default has occurred and
is continuing, Landlord shall pay, within fifteen (15) Business Days of the
date of determination that such credit is due to Tenant, the unapplied
balance of such credit to Tenant.
(d) Confirmation of Participating Rent. Tenant 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 of Accounts, which will
accurately record all Gross Revenues and revenue categories specified in
Exhibit A and Tenant shall retain, for at least seven (7) years after the
expiration of each Lease Year, or such longer period as may be required by
Applicable Laws, reasonably adequate records conforming to such accounting
system showing all Gross Revenues for such Lease Year. Landlord, at its own
expense except as provided hereinbelow, shall have the right, exercisable
by Notice to Tenant within seven (7) years after receipt of the applicable
Officer's Certificate, by its accountants or representatives to audit the
information set forth in the Officer's Certificate referred to in
subparagraph (c) above and, in connection with such audits, to examine
Tenant's and the Manager's books and records with respect thereto
(including supporting data and sales and excise tax returns). If any such
audit discloses a deficiency in the payment of Participating Rent, Tenant
shall forthwith pay to Landlord the amount of the deficiency, together with
interest at the Interest Rate, from the date such payment should have been
made to the date of payment thereof. If Landlord did not receive at least
ninety-five percent (95%) of the Participating Rent payable with respect to
such Lease Year, Tenant shall pay the reasonable cost of such audit and
examination. If any such audit discloses that Tenant paid more
Participating Rent for any Lease Year than was due hereunder, provided no
Event of Default has occurred and is continuing, Landlord shall grant
Tenant a credit as provided in subparagraph (c) above. Any proprietary
information obtained by Landlord with respect to Tenant or the Manager
pursuant to the provisions of this Agreement shall be treated as
confidential, except that such information may be
<PAGE>
used, subject to appropriate confidentiality safeguards, in any
litigation between the parties and except further that Landlord may
disclose such information to its prospective lenders, provided that
Landlord shall direct and obtain the agreement of such lenders to maintain
such information as confidential. The obligations of Tenant and Landlord
contained in this Section 3.1.2 shall survive the expiration or earlier
termination of this Agreement.
3.1.3 Additional Charges. In addition to the Minimum Rent and
Participating Rent payable hereunder, Tenant shall pay to the appropriate
parties and discharge as and when due and payable the following
(collectively, "Additional Charges"):
(a) Impositions. Subject to Article 8 relating to
permitted contests, Tenant shall pay, or cause to be paid, all Impositions
before any fine, penalty, interest or cost (other than any opportunity cost
as a result of a failure to take advantage of any discount for early
payment) may be added for nonpayment, such payments to be made directly to
the taxing authorities where feasible, and shall promptly, upon request,
furnish to Landlord copies of official receipts or other reasonably
satisfactory proof evidencing such payments. If any such Imposition may,
at the option of the taxpayer, lawfully be paid in installments (whether or
not interest shall accrue on the unpaid balance of such Imposition), Tenant
may exercise the option to pay the same (and any accrued interest on the
unpaid balance of such Imposition) in installments and, in such event,
shall pay such installments during the Term as the same become due and
before any fine, penalty, premium, further interest or cost may be added
thereto. Landlord, at its expense, shall, to the extent required or
permitted by Applicable Law, prepare and file all tax returns and pay all
taxes due in respect of real estate taxes on the Leased Property, and all
taxes due in respect of Landlord's income, gross receipts, sales and use,
single business, transaction privilege, rent, ad valorem, franchise taxes
and taxes on its capital stock, and Tenant, at its expense, shall, to the
extent required or permitted by Applicable Laws and regulations, prepare
and file all other tax returns and reports in respect of any Imposition as
may be required by Government Agencies. Provided no Event of Default shall
have occurred and be continuing, if any refund shall be due from any taxing
authority in respect of any Imposition paid by Tenant, the same shall be
paid over to or retained by Tenant. Landlord and Tenant shall, upon
request of the other, provide such data as is maintained by the party to
whom the request is made with respect to the Leased Property as may be
necessary to prepare any required returns and reports. In the event
Government Agencies classify any property covered by this Agreement as
personal property, Tenant shall file all personal property tax returns in
such jurisdictions where it may legally so file. Each party shall, to the
extent it possesses the same, provide the other, upon request, with cost
and depreciation records necessary for filing returns for any property so
classified as personal property. Where Landlord is legally required to
file personal property tax returns for property covered by this Agreement,
Landlord shall provide Tenant with copies of assessment notices in
sufficient time for Tenant to file a protest. All Impositions assessed
against such personal property shall be (irrespective of whether Landlord
or Tenant shall file the relevant return) paid by Tenant not later than the
last date on which the same may be made without interest or penalty.
Landlord shall give prompt Notice to Tenant of all Impositions payable by
Tenant hereunder of which Landlord at any time has knowledge; provided,
however, that Landlord's failure to give any such notice shall in no way
diminish Tenant's obligation hereunder to pay such Impositions (except that
Landlord shall be responsible for any interest or penalties incurred as a
result of Landlord's failure promptly to forward the same).
<PAGE>
(b) Utility Charges. Tenant shall pay or cause to be paid
all charges for electricity, power, gas, oil, water and other utilities
used in connection with the Leased Property.
(c) Insurance Premiums. Tenant shall pay or cause to be paid
all premiums for the insurance coverage required to be maintained pursuant
to Article 9.
(d) Other Charges. Tenant shall pay or cause to be paid all
other amounts, liabilities and obligations and all amounts payable under or
with respect to the Management Agreement and all agreements to indemnify
Landlord under Sections 4.3.2 and 9.7.
(e) Gross Operating Expenses. Tenant shall pay or cause to
be paid all Gross Operating Expenses in connection with the Leased
Property.
If Tenant shall fail to pay any of the amounts payable under
paragraphs (a) through (e), above, Landlord may, upon ten (10) days written
notice to Tenant, pay such charges, together with interest and penalties
due with respect thereto, and Tenant shall reimburse Landlord therefor
together with interest at the Interest Rate, upon demand, as Additional
Charges.
3.1.4 CPI Adjustments. For each Lease Year during the Term,
beginning with the Lease Year commencing in January 2004, the Minimum Rent
then in effect, the Annual Room Revenues First Break Point, the Annual Room
Revenues Second Break Point (each as defined in Exhibit A and together, the
"Annual Room Revenues Break Points"), the Annual Food and Beverage Sales
First Break Point, the Annual Food and Beverage Sales Second Break Point
(each as defined in Exhibit A and together, the "Annual Food and Beverage
Sales Break Points"), the Annual Telephone Revenues First Break Point, the
Annual Telephone Revenues Second Break Point (each as defined in Exhibit A
and together, the "Annual Telephone Revenues Break Points"), the Annual
Retail and Marina Sales First Break Point, the Annual Retail and Marina
Sales Second Break Point (each as defined in Exhibit A and together, the
"Annual Retail and Marina Sales Break Points"), the Annual Other Income
First Break Point, the Annual Other Income Second Break Point (each as
defined in Exhibit A and together, the "Annual Other Income Break Points"),
then included in the Revenues Computation shall be increased as follows:
(a) For the Lease Year commencing January 1, 2004, and for
each Lease Year thereafter during the Term, the CPI in effect for the month
of December immediately preceding the new Lease Year (the "Measurement
Date") shall be divided by the CPI in effect for the month of December in
the prior Fiscal Year;
(b) The new Minimum Rent for the Lease Year commencing
January 1, 2004 and for each Lease Year thereafter shall be the product of
the Minimum Rent in effect in the most recently ended Lease Year and the
quotient obtained under subparagraph (a) above;
(c) The new Annual Room Revenues Break Points in the Revenues
Computation for the Lease Year commencing January 1, 2004 and for each
Lease Year thereafter shall be the product of the Annual Room Revenues
Break Points in effect in the most recently ended Lease Year and the
quotient obtained in subparagraph (a) above;
(d) The new Annual Food and Beverage Sales Break Points in the
Revenues Computation for the Lease Year commencing January 1, 2004 and for
each Lease Year thereafter shall be the product of the Annual Food and
Beverage Sales Break Points in effect in the most recently ended Lease Year
and the quotient obtained in subparagraph (a) above;
<PAGE>
(e) The new Annual Telephone Revenues Break Points in the
Revenues Computation for the Lease Year commencing January 1, 2004 shall be
the product of the Annual Telephone Revenues Break Points in effect for the
most recently ended Lease Year and the quotient obtained in subparagraph
(a) above;
(f) The new Annual Retail and Marina Sales Break Points in the
Revenues Computation for the Lease Year commencing January 1, 2004 and for
each Lease Year thereafter shall be the product of the Annual Retail and
Marina Sales Break Points in effect in the most recently ended Lease Year
and the quotient obtained in subparagraph (a) above;
(g) Intentionally Omitted.
(h) The new Annual Other Income Break Points in the Revenues
Computation for the Lease Year commencing January 1, 2004 and for each
Lease Year thereafter shall be the product of the Annual Other Income Break
Points in effect in the most recently ended Lease Year and the quotient
obtained in subparagraph (a) above.
Adjustments calculated as set forth above in the Minimum Rent, the
Annual Room Revenues Break Points, the Annual Food and Beverage Sales Break
Points, the Annual Telephone Revenues Break Points, the Annual Retail and
Marina Sales Break Points, and the Annual Other Income Break Points, shall
be effective on the first day of each Lease Year to which such adjusted
amounts apply. If Rent is paid prior to the determination of the amount of
any adjustment to Minimum Rent, the Annual Room Revenues Break Points, the
Annual Food and Beverage Sales Break Points, the Annual Telephone Revenues
Break Points, the Annual Retail and Marina Sales Break Points, or the
Annual Other Income Break Points applicable for such period, whether
because of a delay in the publication of the CPI for the Measurement Date
or because of any other reason, payment adjustments for any shortfall in or
overpayment of Rent paid shall be made with the first Minimum Rent and
Participating Rent payments due after the amount of the adjustments are
determined. If (1) a significant change is made in the number or nature
(or both) of items used in determining the CPI, or (2) the CPI shall be
discontinued for any reason, the Bureau of Labor Statistics shall be
requested to furnish a new index comparable to the CPI, together with
information which will make possible a conversion to the new index in
computing the adjusted Minimum Rent, the Annual Room Revenues Break Points,
the Annual Food and Beverage Sales Break Points, the Annual Telephone
Revenues Break Points, the Annual Retail and Marina Sales Break Points, and
the Annual Other Income Break Points hereunder. If for any reason the
Bureau of Labor Statistics does not furnish such an index and such
information, the parties will instead mutually select, accept and use such
other index or comparable statistics on the cost of living in various
cities that is computed and published by an agency of the United States of
America or a responsible financial periodical of recognized authority. In
no event shall the Minimum Rent, the Annual Room Revenues Break Points, the
Annual Food and Beverage Sales Break Points, the Annual Telephone Revenues
Break Points, the Annual Retail and Marina Sales Break Points, or the
Annual Other Income Break Points be reduced as a result of any changes in
the CPI or changes to the calculation of CPI.
3.2 Late Payment of Rent, Etc. If any installment of Minimum Rent,
Participating Rent or Additional Charges (but only as to those Additional
Charges which are payable directly to Landlord) shall not be paid within
ten (10) days after its due date, Tenant shall pay Landlord, on demand, as
Additional Charges, a late charge (to the extent permitted by law) computed
at the Overdue Rate on the amount of such installment, from the due date of
such installment to the date of payment thereof. To the extent that Tenant
pays any Additional Charges directly to Landlord or any Hotel Mortgagee
pursuant to any requirement of this Agreement, Tenant shall be relieved of
its obligation to pay such Additional Charges to the Entity to which they
would otherwise be due.
<PAGE>
In the event of any failure by Tenant to pay any Additional Charges
when due, except as expressly provided in Section 3.1.3(a), Tenant shall
promptly pay and discharge, as Additional Charges, every fine, penalty,
interest and cost which may be added for nonpayment or late payment of such
items. Landlord shall have all legal, equitable and contractual rights,
powers and remedies provided either in this Agreement or by statute or
otherwise in the case of nonpayment of the Additional Charges as in the
case of nonpayment of the Minimum Rent and Participating Rent.
3.3 Net Lease. The Rent shall be absolutely net to Landlord so that
this Agreement shall yield to Landlord the full amount of the installments
or amounts of the Rent throughout the Term, subject to any other provisions
of this Agreement which expressly provide otherwise, including those
provisions for adjustment or abatement of such Rent.
3.3.1 No Termination, Abatement, Etc. Except as otherwise
specifically provided in this Agreement, each of Landlord and Tenant, to
the maximum extent permitted by law, shall remain bound by this Agreement
in accordance with its terms and shall not take any action without the
consent of the other to modify, surrender or terminate this Agreement. In
addition, except as otherwise expressly provided in this Agreement, Tenant
shall not seek, or be entitled to, any abatement, deduction, deferment or
reduction of the Rent, or setoff against the Rent, nor shall the respective
obligations of Landlord and Tenant be otherwise affected by reason of (a)
any damage to or destruction of the Leased Property or any portion thereof
from whatever cause or any Condemnation; (b) any claim which Tenant may
have against Landlord by reason of any default (other than a monetary
default) or breach of any warranty by Landlord under this Agreement or any
other agreement between Landlord and Tenant, or to which Landlord and
Tenant are parties; (c) any bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding up or other
proceedings affecting Landlord or any assignee or transferee of Landlord;
or (d) for any other cause whether similar or dissimilar to any of the
foregoing (other than a monetary default by Landlord). Except as otherwise
specifically provided in this Agreement, Tenant hereby waives all rights
arising from any occurrence whatsoever, which may now or hereafter be
conferred upon it by law, to (a) modify, surrender or terminate this
Agreement or quit or surrender the Leased Property or any portion thereof
or (b) entitle Tenant to any abatement, reduction, suspension or deferment
of the Rent or other sums payable or other obligations to be performed by
Tenant hereunder. The obligations of each party hereunder shall be
separate and independent covenants and agreements, and the Rent and all
other sums payable by Tenant hereunder shall continue to be payable in all
events unless the obligations to pay the same shall be terminated pursuant
to the express provisions of this Agreement. In any instance where, after
the occurrence of an Event of Default, Landlord retains funds which, but
for the occurrence of such Event of Default, would be payable to Tenant,
Landlord shall refund such funds to Tenant to the extent the amount thereof
exceeds the amount necessary to compensate Landlord for any cost, loss or
damage incurred in connection with such Event of Default.
<PAGE>
ARTICLE 4
---------
USE OF THE LEASED PROPERTY
--------------------------
4.1 Permitted Use.
4.1.1 Permitted Use. Tenant shall, at all times during the term
and at any other time that Tenant shall be in possession of the Leased
Property, continuously use and operate, and cause the Manager to use and
operate, the Leased Property as a commercial hotel which meets or exceeds
the Hotel Standard and any uses incidental thereto. Subject to Section
16.3, Tenant shall not use (and shall cause the Manager not to use) the
Leased Property or any portion thereof for any other use without the prior
written consent of Landlord which may be withheld or granted in Landlord's
sole and absolute discretion. No use shall be made or permitted to be made
of the Leased Property and no acts shall be done thereon which will cause
the cancellation of any insurance policy covering the Leased Property or
any part thereof (unless another adequate policy is available), nor shall
Tenant sell or otherwise provide or permit to be kept, used or sold in or
about the Leased Property any article which may be prohibited by law or by
the standard form of fire insurance policies, or any other insurance
policies required to be carried hereunder, or fire underwriters'
regulations. Tenant shall, at its sole cost, comply (or cause the Manager
to comply) with all Insurance Requirements for which Tenant is responsible
pursuant to Article 9 hereof. Tenant shall not take or omit to take (and
Tenant shall cause the Manager not to take or omit to take) any action, the
taking or omission of which materially impairs the value or the usefulness
of the Leased Property or any part thereof for its Permitted Use in
accordance with the Franchise Agreement and the Hotel Standard.
4.1.2 Necessary Approvals. Tenant shall proceed with all due
diligence and exercise best efforts to obtain and maintain, and shall cause
the Manager to obtain and maintain, all approvals and Licenses necessary to
use and operate, for its Permitted Use, the Leased Property and the Hotel
located thereon under applicable law, and, if requested by Landlord, shall
obtain, in Tenant's name, any liquor licenses required for the use and
operation of the Hotel.
4.1.3 Lawful Use, Etc. Tenant shall not, and shall cause the
Manager not to, use or suffer or permit the use of the Leased Property or
Tenant's Personal Property, if any, for any unlawful purpose. Tenant shall
not, and shall cause the Manager not to, commit or suffer to be committed
any waste on the Leased Property, or in the Hotel, nor shall Tenant cause
or permit any unlawful nuisance thereon or therein. Tenant shall not, and
shall cause the Manager not to, suffer nor permit the Leased Property, or
any portion thereof, to be used in such a manner as (a) might reasonably
impair Landlord's title thereto or to any portion thereof, or (b) may
reasonably allow a claim or claims for adverse usage or adverse possession
by the public, as such, or of implied dedication of the Leased Property or
any portion thereof.
4.2 Compliance with Legal/Insurance Requirements, Etc. Subject to
the provisions of Article 9, Tenant, at its sole expense, shall (or shall
cause the Manager to) comply with Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair,
alteration and restoration of the Leased Property and with the terms and
conditions of any ground lease affecting the Leased Property, and procure,
maintain and comply with all appropriate licenses, and other authorizations
and agreements required for any use of the Leased Property and Tenant's
Personal Property, if any, then being made, and for the proper erection,
installation, operation and maintenance of the Leased Property or any part
thereof.
4.3 Environmental Matters .
<PAGE>
4.3.1 Restriction on Use, Etc. During the Term and any other
time that Tenant shall be in possession of the Leased Property, Tenant
shall not (and shall cause the Manager not to) store, spill upon, dispose
of or transfer to or from the Leased Property any Hazardous Substance,
except in compliance with all Applicable Laws. During the Term and any
other time that Tenant shall be in possession of the Leased Property,
Tenant shall maintain (and shall cause the Manager to maintain) the Leased
Property at all times free of any Hazardous Substance (except in compliance
with all Applicable Laws). Tenant shall promptly: (a) upon receipt of
notice or knowledge and shall cause the Manager upon receipt of notice or
knowledge promptly to, notify Landlord in writing of any material change in
the nature or extent of Hazardous Substances at the Leased Property, (b)
transmit to Landlord a copy of any "Community Right to Know" report which
is required to be filed by Tenant or the Manager with respect to the Leased
Property pursuant to any Applicable Law, (c) transmit to Landlord copies of
any citations, orders, notices or other governmental communications
received by Tenant or the Manager or their respective agents or
representatives with respect thereto (collectively, "Environmental
Notice"), which Environmental Notice requires a written response or any
action to be taken and/or if such Environmental Notice gives notice of
and/or presents a material risk of any material violation of any Applicable
Law and/or presents a material risk of any material cost, expense, loss or
damage (an "Environmental Obligation"), (d) observe and comply (and cause
the Manager to observe and comply) with all Applicable Laws relating to the
use, maintenance and disposal of Hazardous Substances and all orders or
directives from any official, court or agency of competent jurisdiction
relating to the use or maintenance or requiring the removal, treatment,
containment or other disposition thereof, and (e) pay or otherwise dispose
of any fine, charge or Imposition related thereto, unless Tenant or the
Manager shall contest the same in good faith and by appropriate proceedings
and the right to use and the value of the Leased Property is not materially
and adversely affected thereby. If, at any time prior to the termination
of this Agreement, Hazardous Substances (other than those maintained in
accordance with Applicable Laws) are discovered on the Leased Property,
subject to Tenant's and the Manager's right to contest any Claim with
respect to the same in accordance with Article 8, Tenant shall take (and
shall cause the Manager to take) all actions and incur any and all
expenses, as may be reasonably necessary and as may be required by any
Government Agency, (i) to clean up and remove from and about the Leased
Property all Hazardous Substances thereon, (ii) to contain and prevent any
further release or threat of release of Hazardous Substances on or about
the Leased Property and (iii) to use good faith efforts to eliminate any
further release or threat of release of Hazardous Substances on or about
the Leased Property.
4.3.2 Indemnification of Landlord. Tenant shall protect,
indemnify and hold harmless Landlord, the REIT, Advisors, and each Hotel
Mortgagee, their trustees, officers, agents, employees and beneficiaries,
and any of their respective successors or assigns with respect to this
Agreement (collectively, the "Indemnitees" and, individually, an
"Indemnitee") for, from and against any and all debts, liens, claims,
causes of action, administrative orders or notices, costs, fines, penalties
or expenses (including, without limitation, reasonable attorney's fees and
expenses) imposed upon, incurred by or asserted against any Indemnitee
resulting from, either directly or indirectly, the presence during the Term
(or any other time Tenant shall be in possession of the Leased Property)
in, upon or under the soil or ground water of the Leased Property or any
properties surrounding the Leased Property of any Hazardous Substances in
violation of any Applicable Law or otherwise except to the extent the same
arise (i) from the gross negligence or willful misconduct of Landlord or
any other Indemnitee or (ii) the existence thereof on the Leased Property
prior to the Commencement Date. Tenant's duty herein includes, but is not
limited to, costs associated with personal injury or property damage claims
as a result of the presence prior to the expiration or sooner termination
of the Term and the surrender of the Leased Property to Landlord in
accordance with the terms of this Agreement of Hazardous Substances in,
upon or under the soil or ground water of the Leased Property in violation
<PAGE>
of any Applicable Law. Upon Notice from Landlord and any other of the
Indemnitees, Tenant shall undertake the defense (with counsel reasonably
acceptable to Landlord), at Tenant's sole cost and expense, of any
indemnification duties set forth herein. Tenant shall, upon demand, pay to
Landlord, as an Additional Charge, any cost, expense, loss or damage
(including, without limitation, reasonable attorneys' fees) incurred by
Landlord and arising from a failure of Tenant strictly to observe and
perform the requirements of this Section 4.3, which amounts shall bear
interest from the date ten (10) days after written demand therefor is given
to Tenant until paid by Tenant to Landlord at the Overdue Rate.
4.3 Survival. The provisions of this Section 4.3 shall survive
the expiration or sooner termination of this Agreement.
<PAGE>
ARTICLE 5
---------
MAINTENANCE AND REPAIRS
-----------------------
5.1 Maintenance and Repair.
5.1.1 Tenant's Obligations. Tenant shall, at its sole cost and
expense, or shall cause the Manager to, keep the Leased Property and all
private roadways, sidewalks and curbs appurtenant thereto (and Tenant's
Personal Property, if any) in good order and repair, subject to ordinary
wear and tear (whether or not the need for such repairs occurs as a result
of Tenant's or the Manager's use, any prior use, the elements or the age of
the Leased Property or Tenant's Personal Property, if any, or any portion
thereof), and shall promptly make (or cause the Manager to make) all
necessary and appropriate repairs and replacements 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 (concealed or otherwise); provided,
however, Tenant shall not be obligated to make Capital Expenditures with
respect to the Leased Property. All repairs shall be made in a good,
workmanlike manner, consistent with the Manager's and industry standards
for like hotels in like locales, in accordance with all Applicable Laws
relating to any such work. Tenant shall not take or omit to take (and
shall cause the Manager not to take or omit to take) any action, the taking
or omission of which would materially and adversely impair the value or the
usefulness of the Leased Property or any part thereof for its Permitted Use
in accordance with the Franchise Agreement, the Hotel Standard, and the
Ground Lease. Tenant's obligations under this Section 5.1.1 shall be
limited in the event of any casualty or Condemnation as set forth in
Sections 10.2 and 11.2 and Tenant's obligations with respect to Hazardous
Substances are as set forth in Section 4.3.
5.1.2 Landlord's Obligations.
(a) Except as otherwise expressly provided in Sections
5.1.2(b) and 10.2.1, or as otherwise required under the Ground Lease,
Landlord shall not, under any circumstances, be required to build or
rebuild any improvement on the Leased Property, or to make any repairs
(except for structural repairs), replacements, alterations, restorations or
renewals of any nature or description to the Leased Property, whether
ordinary or extraordinary, foreseen or unforeseen, or to make any
expenditure whatsoever with respect thereto, or to maintain the Leased
Property in any way. Tenant hereby waives, to the maximum extent permitted
by law, the right to make repairs at the expense of Landlord pursuant to
any law in effect on the date hereof or hereafter enacted. Landlord shall
have the right to give, record and post, as appropriate, notices of
nonresponsibility under any mechanic's lien laws now or hereafter existing.
(b) If Tenant is required to make any expenditure in
connection with any Capital Repair which is required as a result of a fire,
any other casualty or any other events, circumstances or conditions which
threaten the safety or physical well-being of the Hotel's guests or
employees or which involve the risk of material property damage or material
loss to the Hotel or which are required to prevent a material and
detrimental economic loss to the Hotel (collectively, "Emergency Repairs")
and the amount of such expenditures exceeds the amount on deposit in the
Reserve Fund, Tenant may, at its election, give Landlord Notice thereof,
which Notice shall set forth, in reasonable detail, the nature of the
required Emergency Repair, the estimated cost thereof and such
<PAGE>
other information with respect thereto as Landlord may
reasonably require. Provided that no Event of Default shall have occurred
and be continuing and Tenant shall otherwise comply with the applicable
provisions of Article 6, Landlord shall, within five (5) Business Days
after such Notice, subject to and in accordance with the applicable
provisions of Article 6, disburse or, if costs for Emergency Repairs have
already been incurred by Tenant, reimburse any funds necessary to complete
Emergency Repairs which are in excess of the amount on deposit in the
Reserve Fund to Tenant (or, if Tenant shall so elect, directly to the
Manager or any other Person performing the required work).
5.1.3 Nonresponsibility of Landlord, Etc. All materialmen,
contractors, artisans, mechanics and laborers and other persons contracting
with Tenant with respect to the Leased Property, or any part thereof, are
hereby charged with notice that liens on the Leased Property or on
Landlord's interest therein are expressly prohibited and that they must
look solely to Tenant to secure payment for any work done or material
furnished by Tenant, the Manager or for any other purpose during the term
of this Agreement. Nothing contained in this Agreement shall be deemed or
construed in any way as constituting the consent or request of Landlord,
express or implied, by inference or otherwise, to any contractor,
subcontractor, laborer or materialmen for the performance of any labor or
the furnishing of any materials for any alteration, addition, improvement
or repair to the Leased Property or any part thereof or as giving Tenant
any right, power or authority to contract for or permit the rendering of
any services or the furnishing of any materials that would give rise to the
filing of any lien against the Leased Property or any part thereof nor to
subject Landlord's estate in the Leased Property or any part thereof to
liability under any mechanic's lien law in any way, it being expressly
understood that Landlord's estate shall not be subject to any such
liability.
5.2 Tenant's Personal Property. Tenant shall provide and maintain
throughout the Term all such Tenant's Personal Property as shall be
necessary in order to operate in compliance with applicable Legal
Requirements and Insurance Requirements and otherwise in accordance with
customary practice in the industry for the Permitted Use and all of such
Personal Property shall, upon the expiration or earlier termination of this
Agreement, become the property of Landlord. If, from and after the
Commencement Date, Tenant acquires an interest in any item of tangible
personal property on, or in connection with, the Leased Property which
belongs to any Person other than Tenant, Tenant shall require the
agreements, permitting such use to provide that Landlord or its designee
may assume Tenant's rights and obligations under such agreement upon the
termination of this Agreement and the assumption of management or operation
of the Hotel by Landlord or its designee. Upon termination of the Term,
Tenant shall deliver all of Tenant's Personal Property free of all liens
and/or encumbrances to Landlord.
5.3 Surrender. Upon the expiration or sooner termination of this
Agreement, Tenant shall vacate, surrender, and deliver to Landlord the
following: (i) the Leased Property, (ii) the Tenant's Personal Property,
(iii) the Leased Personal Property, (iv) the Minimum Inventory, and (v) the
Minimum Working Capital. Items (i) through (iv) shall be delivered in
substantially the same condition as such items were in on the Commencement
Date, subject to ordinary wear and tear and except as repaired, rebuilt,
restored, altered or added to as permitted or required by the provisions of
this Agreement (and casualty and Condemnation, in the event that this
Agreement is terminated following a casualty or total Condemnation in
accordance with Article 10 or Article 11). In addition, upon the
expiration or earlier termination of this Agreement, Tenant shall, at
Landlord's sole cost and expense, use its good faith efforts to transfer to
and cooperate with Landlord or Landlord's nominee in connection with the
processing of all applications for licenses, operating permits and other
governmental authorizations and all contracts, including contracts with
governmental or quasigovernmental Entities which may be necessary for the
use and operation of the Hotel as then operated. After the Expiration Date
<PAGE>
or the earlier termination of this Agreement, Landlord agrees to honor all
reservations and bookings made by Tenant in accordance with the Hotel
Standard and reasonable commercial practice.
5.4 Management Agreement. Landlord shall have the right to approve
the initial Manager and the form of the Management Agreement, in its sole
and absolute discretion. Tenant shall, at its sole cost and expense,
perform all of the obligations of "Owner" under the Management Agreement.
Tenant or Manager shall be the employer with respect to any and all
employees located at the Leased Property. Tenant shall, at all times,
direct the Manager to perform all of the Manager's obligations under the
Management Agreement. Tenant shall not amend or modify the Management
Agreement without Landlord's prior written consent, which consent shall not
unreasonably be withheld, delayed or conditioned. Tenant shall not take
any action, grant any consent, or, except as provided in the Management
Agreement, permit any action under the Management Agreement without the
prior written consent of Landlord, which consent will not be unreasonably
withheld. Except as provided in the Management Agreement, Tenant shall
not, without the Landlord's written approval, which approval may be
withheld or granted in Landlord's sole and absolute discretion, agree to:
(i) any change in the Manager; (ii) any change in the Management Agreement;
(iii) terminate the Management Agreement; or (iv) permit the Manager to
assign the Management Agreement. If Landlord shall perform any obligations
of "Owner" under the Management Agreement (which Landlord may do subject to
Section 12.5), the cost of such performance shall be payable, upon demand,
by Tenant to Landlord with interest accruing from the date which is ten
(10) days after the demand date at the Overdue Rate and Landlord shall have
the same rights and remedies for failure to pay such costs on demand as for
Tenant's failure to pay Minimum Rent.
5.5 Management Fees. Each Management Agreement shall provide that
all management fees payable thereunder shall (i) not exceed two (2%)
percent of Gross Revenues and (ii) shall be subordinate to Tenant's
obligation to pay Rent hereunder.
5.6 Minimum Inventory. On the Commencement Date Landlord shall
deliver the Inventory currently maintained at the Hotel to Tenant as
replace and/or supplemented, the "Minimum Inventory") and thereafter during
the Term, Tenant shall, at its sole cost and expense, furnish and maintain
at the Leased Property all Inventory necessary or desirable for the
operation of the Leased Property in accordance with the provisions of this
Agreement, the Franchise Agreement, the Hotel Standard and reasonable
commercial practice. On the Commencement Date and at the commencement of
each calendar year, Tenant shall submit to Landlord a detailed list of all
Inventory. Tenant, at its sole cost and expense, shall repair, maintain
and replace the Inventory so that the greater of (x) the Minimum Inventory,
or (y) the remaining Inventory, is delivered to Landlord on the date of
expiration or the earlier termination of this Agreement.
<PAGE>
ARTICLE 6
---------
IMPROVEMENTS, ETC.
------------------
6.1 Improvements to the Leased Property. Tenant shall not make,
construct or install (and shall cause the Manager not to construct or
install) any Capital Repairs without, in each instance, obtaining
Landlord's prior written consent, which consent shall not be unreasonably
withheld, delayed or conditioned provided that (a) construction or
installation of the same would not adversely affect or violate any Legal
Requirement, Insurance Requirement, the Franchise Agreement, or the Ground
Lease applicable to the Leased Property; (b) such Capital Repairs will not
affect the structural integrity of the Leased Improvements or adversely
affect any of the mechanical or electrical systems of the Leased
Improvements; (c) such Capital Repairs are to be completed prior to the
expiration of the Term in a good and workmanlike manner; (d) such Capital
Repairs do not reduce the value of the Leased Improvements; (e) no Event of
Default has occurred and is existing; and (f) Landlord shall have received
an Officer's Certificate certifying as to the satisfaction of the
conditions set out in clauses (a) through (g) above; provided, however,
that no such consent shall be required in the event an Emergency Repair is
required. Prior to commencing construction of any Capital Repair, Tenant
shall submit, or shall cause the Manager to submit, to Landlord, in
writing, a proposal setting forth, in reasonable detail, any such proposed
improvement (including a detailed cost analysis of such proposed
improvements) and shall provide to Landlord such plans and specifications,
and such permits, licenses, contracts and such other information concerning
the same as Landlord may reasonably request. Landlord shall have thirty
(30) days to review all materials submitted to Landlord in connection with
any such proposal including, without limitation, necessary bids for such
Capital Repairs. Landlord shall have the right to approve any contracts
with Tenant's Parents or Affiliates in its sole and absolute discretion.
Without limiting the generality of the foregoing, such proposal shall
indicate (a) the approximate projected cost of constructing such proposed
improvement and the use or uses to which it will be put and (b) the
financial feasibility of such proposed improvement (including, without
limitation, the projected return of such proposed improvements and the
schedule for development of such proposed improvements). No Capital Repair
shall be made which would tie in or connect any Leased Improvement with any
other improvements on property adjacent to the Leased Property (and not
part of the Land) including, without limitation, tieins of buildings or
other structures or utilities without Landlord's prior written consent,
which consent may be withheld or granted in Landlord's sole and absolute
discretion. Tenant shall not finance, and shall cause the Manager not to
finance, the cost of any construction of such improvement by the granting
of a lien on or security interest in the Leased Property or such
improvement, or Tenant's interest therein, without the prior written
consent of Landlord, which consent may be withheld by Landlord in
Landlord's sole and absolute discretion. Any such improvements shall, upon
the expiration or sooner termination of this Agreement, remain or pass to
and become the property of Landlord, free and clear of all encumbrances
other than Permitted Encumbrances.
6.2 Salvage. Any sums received from the sale of any and all
materials or property, real or personal (collectively "Salvage"), shall be
deposited into the Reserve Fund.
<PAGE>
6.3 Reserve Fund. Landlord shall establish and maintain a reserve
account (the "Reserve Fund"). Landlord shall credit an amount equal to the
Initial Reserve Fund Payment to the Reserve Fund on the Commencement Date.
The Initial Reserve Fund Payment shall be equal to (x) the remaining
balance in any FF&E reserve fund existing at the Commencement Date plus (y)
any sums held by a prior Hotel Mortgagee for any Capital Repairs at the
Leased Property, as such amount is set forth on Exhibit A. Thereafter,
Landlord, after receipt of the Rent from Tenant, shall credit to the
Reserve Fund an amount equal to four (4%) percent (the "Reserve Payment")
of Gross Revenues for each Accounting Period. Interest, if any, payable on
account of the Reserve Fund, plus the amount of any Salvage, shall be
credited against the Reserve Payment due for the next succeeding Accounting
Period. Not more than two times per Accounting Period, upon the written
request by Tenant to Landlord stating the specific use to be made and
subject to the reasonable approval thereof by Landlord, such funds shall be
made available by Landlord for Capital Expenditures set forth in the Annual
Budget, Emergency Repairs, to fund the replacement or refurbishment of
FF&E, and to fund any deductible amounts under insurance policies providing
all-risk property insurance up to the maximum permitted deductible amounts
set forth in Section 9.4; provided, however, that Tenant shall not use any
sums in the Reserve Fund 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 Landlord to recognize income other
than "rents from real property" as defined in Section 856(d) of the Code.
Tenant shall, upon the request of Landlord, promptly deliver to Landlord
plans and specifications and such other materials and information as
Landlord may reasonably request regarding any proposed Capital Expenditures
or Capital Repairs. Tenant's obligations 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. All Capital Repairs shall be located on the Land and shall be
owned by Landlord subject to the provisions of this Agreement. Tenant may
not make any Capital Repair which will increase the gross square footage of
the Leased Improvements without the prior written consent of Landlord,
which consent may be withheld or granted in Landlord's sole and absolute
discretion. The implementation of all Capital Repairs shall be subject to
the approval of Landlord and Tenant. Such approval shall extend both to
the plans and specifications (including matters of design and decor) and to
the contracting and purchasing of all labor, services and materials. In the
event that Landlord and Tenant are unable to agree on any aspect of the
implementation of Capital Repairs to be made pursuant to the Annual Budget,
such matter shall be referred to arbitration as provided in Article 23.
Upon the Expiration Date or earlier termination of this Agreement, any
funds remaining in the Reserve shall remain the property of Landlord.
<PAGE>
ARTICLE 7
---------
LIENS
-----
7.1 Liens. Subject to Article 8, Tenant shall not, directly or
indirectly, create or allow to remain and shall promptly discharge, at its
expense, any lien, encumbrance, attachment, title retention agreement or
claim upon the Leased Property or Tenant's leasehold interest therein or
any attachment, levy, claim or encumbrance in respect of the Rent, other
than (a) Permitted Encumbrances, (b) restrictions, liens and other
encumbrances which are consented to in writing by Landlord, (c) liens for
those taxes of Landlord which Tenant is not required to pay hereunder, (d)
subleases permitted by Article 16, (e) liens for Impositions or for sums
resulting from noncompliance with Legal Requirements so long as (i) the
same are not yet due and payable, or (ii) are being contested in accordance
with Article 8, (f) liens of mechanics, laborers, materialmen, suppliers or
vendors incurred in the ordinary course of business that are not yet due
and payable or are for sums that are being contested in accordance with
Article 8, and (g) Landlord Liens.
7.2 Landlord's Lien. In addition to any statutory landlord's lien
and in order to secure payment of the Rent and all other sums payable
hereunder by Tenant, and to secure payment of any loss, cost or damage
which Landlord may suffer by reason of Tenant's breach of this Agreement,
Tenant hereby grants unto Landlord a security interest in and an express
contractual lien upon Tenant's Personal Property, and all ledger sheets,
files, records, documents and instruments (including, without limitation,
computer programs, tapes and related electronic data processing) relating
to the operation of the Leased Property (the "Records") and all proceeds
therefrom, subject to any Permitted Encumbrances; and such Tenant's
Personal Property shall not be removed from the Leased Property at any time
when a Default or an Event of Default has occurred and is continuing. Upon
Landlord's request, Tenant shall execute and deliver to Landlord financing
statements in form sufficient to perfect the security interest of Landlord
in Tenant's Personal Property and the proceeds thereof in accordance with
the provisions of the applicable laws. Tenant hereby grants Landlord an
irrevocable limited power of attorney, coupled with an interest, to execute
all such financing statements in Tenant's name, place and stead. The
security interest herein granted is in addition to any statutory lien for
the Rent.
<PAGE>
ARTICLE 8
---------
PERMITTED CONTESTS
-------------------
8.1 Permitted Contests. Subject to and in accordance with the
requirements of any Hotel Mortgage, Tenant shall have the right to contest
the amount or validity of any Imposition, Legal Requirement, Insurance
Requirement, Environmental Obligation, lien, attachment, levy, encumbrance,
charge or claim (collectively, "Claims") as to the Leased Property, by
appropriate legal proceedings, conducted in good faith and with due
diligence, provided that (a) the foregoing shall in no way be construed as
relieving, modifying or extending Tenant's obligation to pay any Claims as
finally determined, (b) such contest shall not cause Landlord or Tenant to
be in default under any mortgage, deed of trust, or Ground Lease,
encumbering the Leased Property or any interest therein or result in or
reasonably be expected to result in a lien attaching to the Leased
Property, (c) no part of the Leased Property nor any Rent therefrom shall
be in any immediate danger of sale, forfeiture, attachment or loss, and (d)
Tenant shall indemnify and hold harmless Landlord from and against any
cost, claim, damage, penalty or reasonable expense, including, without
limitation, reasonable attorneys' fees, incurred by Landlord in connection
therewith) or as a result thereof. Landlord agrees to join in any such
proceedings if required legally to prosecute such contest, provided that
Landlord shall not thereby be subjected to any liability therefor
(including, without limitation, for the payment of any costs or expenses in
connection therewith) unless Tenant agrees by agreement in form and
substance reasonably satisfactory to Landlord, to assume and indemnify
Landlord with respect to the same. Tenant shall be entitled to any refund
of any Claims and such charges and penalties or interest thereon which have
been paid by Tenant or paid by Landlord to the extent that Landlord has
been fully reimbursed by Tenant. If Tenant shall fail (x) to pay or cause
to be paid any Claims when finally determined, (y) to provide reasonable
security therefor, or (z) to prosecute or cause to be prosecuted any such
contest diligently and in good faith, Landlord may, upon reasonable notice
to Tenant (which notice may be oral), pay such charges, together with
interest and penalties due with respect thereto, and Tenant shall reimburse
Landlord therefor, upon demand, as Additional Charges.
<PAGE>
ARTICLE 9
---------
INSURANCE AND INDEMNIFICATION
-----------------------------
9.1 General Insurance Requirements. (i) Landlord, or Tenant, with
Landlord's prior written consent, shall, at Tenant's sole cost and expense,
at all times during the Term keep the Leased Property and all property
located therein or thereon, insured against the risks and in the amounts as
follows and shall maintain the following insurance:
(a) Commercial general liability insurance, including bodily injury
and property damage (on an occurrence basis and on a 1993 1SO CGL form or
on a form otherwise maintained by similarly situated tenants, including,
without limitation, broad form contractual liability, liquor liability
exposure, independent contractor's hazard and completed operations
coverage) in an amount not less than Fifty Million Dollars ($50,000,000.00)
per occurrence which limit can be obtained through a combination of primary
and umbrella coverage;
(b) Such additional insurance as may be reasonably required, from
time to time, by Landlord, any Hotel Mortgagee, or under the Ground Lease,
and which is customarily carried by comparable lodging properties in the
area; (c) Innkeeper's legal liability insurance covering property of
guests while on the Leased Property for which Landlord is legally
responsible with a limit of not less than $1,000 in any one occurrence or
$25,000 annual aggregate; and (d) Safe deposit box legal liability
insurance covering property of guests while in a safe deposit box on the
Leased Property for which Landlord is legally responsible with a limit of
not less than $25,000 in any one occurrence.
(ii) Landlord shall, at Landlord's sole cost and expense, at all times
during the Term keep the Leased Property and all
property located therein or thereon, insured against the risks and in the
amounts as follows and shall maintain the following insurance:
(a) "Allrisk" property insurance, including insurance against loss
or damage by fire, vandalism and malicious mischief, explosion of
steamboilers, earthquake and hurricane damage, pressure vessels or other
similar apparatus, now or hereafter installed in the Hotel located at the
Leased Property, with equivalent coverage as that provided by the usual
extended coverage endorsements, in an amount equal to one hundred (100%)
percent of the then full Replacement Cost thereof;
(b) Business interruption and blanket earnings plus extra expense
under a rental value insurance policy or endorsement covering risk of loss
by reason of any hazard covered under the insurance required under this
Section 9.1 in such amounts as may be customary for comparable properties
in the area and in an amount sufficient to prevent Landlord or Tenant from
becoming a coinsurer but in any event for not less than twelve (12) months
of Gross Revenues; and
(c) Flood (if the Leased Property is located in a federally
designated flood zone) and such other hazards and in such amounts as may be
customary for comparable properties in the area.
(iii) Tenant shall, at Tenant's sole cost and expense, at all
times during the Term keep (a) comprehensive form vehicle liability
insurance for owned, non-owned, and hired vehicles, in the amount of
$10,000,000.00, and (b) worker's compensation insurance or other similar
insurance which may be required by Government Agencies or Legal
Requirements.
<PAGE>
9.2 Replacement Cost. "Replacement Cost" as used herein, shall mean
the actual replacement cost of the property requiring replacement from time
to time, including an increased cost of construction endorsement, less
exclusions provided in the standard form of fire insurance policy.
9.3 Waiver of Subrogation. Landlord and Tenant agree that (insofar
as and to the extent that such agreement may be effective without
invalidating or making it impossible to secure insurance coverage from
responsible insurance companies doing business in the State) with respect
to any property loss which is covered by insurance then being carried by
Landlord or Tenant, respectively, the party carrying such insurance and
suffering said loss releases the other of and from any and all claims with
respect to such loss; and they further agree that their respective
insurance companies shall have no right of subrogation against the other on
account thereof, even though extra premium may result therefrom. In the
event that any extra premium is payable by Tenant as a result of this
provision, Landlord shall not be liable for reimbursement to Tenant for
such extra premium.
9.4 Form Satisfactory, Etc. All insurance policies and
endorsements required pursuant to this Article 9 shall be fully paid for,
nonassessable and, except for umbrella and flood coverage, be issued by
insurance carriers authorized to do business in the State, having a rating
of no less than A:XI in Best's latest rating guide and otherwise
satisfactory under any Hotel Mortgage, or Ground Lease. No policy
described in Sections 9.1(i)(a), (ii)(a)-(c) and (iii) shall include a
deductible in excess of One Thousand Dollars ($1,000) (provided, however,
that insurance for earthquake and hurricane damage may include such
reasonable deductibles as are consistent with normal industry practice and
which are otherwise acceptable to Landlord) and, with the exception of the
insurance described in Section 9.1(i)(b), shall name Landlord and any Hotel
Mortgagee as additional insureds, as their interests may appear. All loss
adjustments shall be payable as provided in Article 10. Tenant
shall cause all insurance premiums to be paid and shall deliver policies or
certificates thereof to Landlord prior to their effective date (and, with
respect to any renewal policy, prior to the expiration of the existing
policy). All such policies shall provide Landlord (and any Hotel Mortgagee
if required by the same) thirty (30) days prior written notice of any
material change or cancellation of such policy. In the event Tenant shall
fail to effect such insurance as herein required, to pay the premiums
therefor or to deliver such policies or certificates to Landlord or any
Hotel Mortgagee at the times required, Landlord shall have the right, but
not the obligation, subject to the provisions of Section 12.5, to acquire
such insurance and pay the premiums therefor, which amounts shall be
payable to Landlord, upon demand, as Additional Charges, together with
interest accrued thereon at the Overdue Rate from the date such payment is
made until (but excluding) the date repaid.
9.5 Blanket Policy. Notwithstanding anything to the contrary
contained in this Article 9, Landlord's, or Tenant's, obligation to
maintain the insurance herein required may be brought within the coverage
of a so called blanket policy or policies of insurance carried and
maintained by Landlord, Tenant or the Manager, as applicable, provided that
(a) the coverage thereby afforded will not be reduced or diminished from
that which would exist under a separate policy meeting all other
requirements of this Agreement, and (b) the requirements of this Article 9
are otherwise satisfied.
9.6 No Separate Insurance. Tenant shall not take out separate
insurance, concurrent in form or contributing in the event of loss with
that required by this Article 9, or increase the amount of any existing
insurance by securing an additional policy or additional policies, unless
all parties having an insurable interest in the subject matter of such
insurance, including Landlord and all Hotel Mortgagees, are included
therein as additional insureds and the loss
<PAGE>
is payable under such insurance in the same manner as losses are
payable under this Agreement. In the event Tenant shall take out any such
separate insurance or increase any of the amounts of the then existing
insurance, Tenant shall give Landlord prompt Notice thereof.
9.7 Indemnification of Landlord. Notwithstanding the existence of
any insurance provided for herein and without regard to the
policy limits of any such insurance, Tenant, or Tenant's Parent or
Affiliate pursuant to the Guaranty, shall protect, indemnify and hold
harmless Landlord, the REIT and Advisors, for, from and against all
liabilities, obligations, claims, damages, penalties, causes of action,
costs and reasonable expenses (including, without limitation, reasonable
attorneys' fees), to the maximum extent permitted by law, imposed upon or
incurred by or asserted against Landlord, the REIT or Advisors, 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
or rights of way; (b) any past, present or future use, misuse, nonuse,
condition, management, maintenance or repair by Tenant or anyone claiming
under Tenant of the Leased Property or Tenant's Personal Property or any
litigation, proceeding or claim by governmental entities or other third
parties to which Landlord, the REIT or Advisors, is made a party or
participant relating to the Leased Property, or Tenant's Personal Property
or such use, misuse, nonuse, condition, management, maintenance, or repair
thereof including failure to perform obligations (other than Condemnation
proceedings) to which Landlord, the REIT or Advisors, is made a party; (c)
any Impositions that are the obligations of Tenant to pay pursuant to the
applicable provisions of this Agreement; (d) the imposition of any "dram
act" or similar law relating to liability resulting from the service of
wine, beer, liquor or other alcoholic beverages; and (e) any failure on the
part of Tenant or anyone claiming under Tenant to perform or comply with
any of the terms of this Agreement or the Participating Leases unless any
such liability, obligation, claim, damage, penalty, cause of action, cost
or reasonable attorneys' fees were incurred as a result of Landlord's, the
REIT's or Advisors', gross negligence or willful misconduct. Tenant, at
its expense, shall contest, resist and defend any such claim, action or
proceeding asserted or instituted against Landlord, the REIT or Advisors,
with counsel reasonably acceptable to Landlord, the REIT or Advisors, or
may compromise or otherwise dispose of the same, with Landlord's, the
REIT's or Advisors', prior written consent (which consent shall not be
unreasonably withheld, delayed or conditioned). The obligations of Tenant
under this Section 9.7 are in addition to the obligations set forth in
Section 4.3 and shall survive the termination of this Agreement.
9.8 Increase in Limits. If Landlord at any time reasonably deems
the limits of the personal injury or property damage under the commercial
public liability insurance then carried by Tenant to be insufficient,
Landlord and Tenant 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 9.8. If the parties fail to
agree on such limits, the matter shall be referred to arbitration as
provided for in Article 23.
<PAGE>
ARTICLE 10
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CASUALTY
--------
10.1 Insurance Proceeds. Except as provided in the last clause of
this sentence, all proceeds payable by reason of any loss or damage to the
Leased Property, or any portion thereof, and insured under any policy of
insurance required by Article 9 shall be paid directly to Landlord. If
Tenant is required to reconstruct or repair the Leased Property as provided
herein, such proceeds as are made available by any Hotel Mortgagee shall
be paid out by Landlord from time to time for the costs of reconstruction
or repair of the Leased Property necessitated by such damage or
destruction, subject to and in accordance with the provisions of Section
10.2.2. In the event that the provisions of Section 10.2.1 are applicable,
the insurance proceeds shall be retained by the party entitled thereto
pursuant to Section 10.2.1. All salvage resulting from any risk covered by
insurance shall belong to Landlord, provided any rights to the same have
been waived by the insurer.
10.2 Damage or Destruction.
10.2.1 Damage or Destruction of Leased Property. In the event (a) the
Leased Property is damaged by fire, explosion or other casualty insured
under the fire and extended coverage insurance policy required hereunder
(an "Insured Casualty") to the extent of twenty-five percent (25%) or more
of the insurable value thereof immediately preceding the casualty, (b) the
Leased Property is damaged by a casualty or occurrence other than an
Insured Casualty, (c) such damage occurs at anytime within the last six (6)
months of the Term, (d) the Leased Property or any portion thereof is
damaged by fire, explosion or other casualty and the Leased Property cannot
be repaired, rebuilt or restored to the same condition under the terms of
the Franchise Agreement, under any Legal Requirements or other governmental
order or under any other agreement to which the Leased Property is subject
or (e) a casualty occurs to a portion of the Hotel which renders the Hotel
Unsuitable for Its Permitted Use (a "Prohibited Casualty"), then in such
event Landlord may terminate this Agreement by giving Tenant written notice
of termination within thirty (30) days after the happening of the event
causing the damage. In the event the damage is not extensive enough to
give rise to Landlord's option to terminate this Agreement, a Prohibited
Casualty has not occurred, or Landlord does not elect to terminate this
Agreement, Landlord, at Landlord's sole cost and expense shall promptly
repair and replace the Leased Property to the condition existing
immediately preceding such fire, explosion or other casualty. During any
period of reconstruction or repair of the Leased Property, (i) Landlord
shall make any business interruption insurance proceeds available to Tenant
to pay necessary operating expenses and Rent with respect to the Leased
Property, (ii) Tenant shall operate its business in the Leased Property to
the extent practicable, and (iii) Minimum Rent payable under this Agreement
by Tenant shall be abated during the period of such repair and restoration
to the extent the Leased Property is not tenantable.
10.2.2 Disbursement of Proceeds. In the event Tenant undertakes to
restore the Leased Property after an Insured Casualty or, if this Agreement
has not been terminated, a Prohibited Casualty, Tenant shall (or shall
cause the Manager to) commence promptly and continue diligently to perform
the repair and restoration of the Leased Property (hereinafter called the
"Work"), so as to restore the Leased Property in compliance with all Legal
Requirements and so that the Leased Property shall be, to the extent
practicable, substantially equivalent in value and general utility to its
general utility and value immediately prior to such damage or destruction.
Subject to the terms hereof, Landlord shall advance the insurance proceeds
to Tenant regularly during the repair and restoration period so as to
permit payment for the cost of any such restoration and repair. Any such
advances shall be made not more than monthly within ten (10) Business Days
<PAGE>
after Tenant submits to Landlord a written requisition and substantiation
therefor containing such information and in such form as may be reasonably
required by Landlord. Landlord may, at its option, condition advancement
of said insurance proceeds and other amounts on (a) the absence of any
Event of Default, (b) its approval of plans and specifications of an
architect satisfactory to Landlord (which approval shall not be
unreasonably withheld or delayed), (c) general contractors' estimates, (d)
architect's certificates, (e) unconditional lien waivers of general
contractors, if available, (f) evidence of approval by all governmental
authorities and other regulatory bodies whose approval is required and (g)
such other certificates as Landlord may, from time to time, reasonably
require. Landlord's obligation to disburse insurance proceeds under this
Article 10 shall be subject to the release of such proceeds by any Hotel
Mortgagee to Landlord. Notwithstanding anything contained in this
Agreement, in the event that any Hotel Mortgagee does not release insurance
proceeds to Landlord, unless Landlord determines, in its sole and absolute
discretion, to make monies in the amount of such proceeds available to
Tenant for repair or restoration of the Leased Property, Tenant shall have
no obligation to repair or restore the Leased Property. If a Hotel
Mortgagee or Landlord releases only a portion of insurance proceeds to
Tenant and Landlord does not, in its sole and absolute discretion, make any
shortfall in the amount of insurance proceeds released by a Hotel Mortgagee
available to Tenant for repair or restoration of the Leased Property,
Tenant shall only be obligated to repair and restore the Leased Property to
the extent of moneys released by Hotel Mortgagee or Landlord, plus any sums
made available by Landlord for repairs and restoration.
10.3. Damage Near End of Term. Notwithstanding any provisions of
Section 10.1 or 10.2 to the contrary, if damage to or destruction of the
Leased Property occurs during the last twelve (12) months of the Term and
if such damage or destruction cannot reasonably be expected to be fully
repaired and restored prior to the date that is six (6) months prior to the
end of the Term, the provisions of Section 10.2.1 shall apply as if the
Leased Property had been totally or partially destroyed and the Hotel
rendered Unsuitable for its Permitted Use.
10.4 Tenant's Property. All insurance proceeds payable by reason
of any loss of or damage to any of Tenant's Personal Property shall be paid
to Tenant and, to the extent necessary to repair or replace Tenant's
Personal Property in accordance with Section 10.5, Tenant shall hold such
proceeds to pay the cost of repairing or replacing damaged Tenant's
Personal Property.
10.5 Restoration of Tenant's Property. If Tenant is required to
restore the Leased Property as hereinabove provided, Tenant shall either
(a) restore all alterations and improvements made by Tenant and Tenant's
Personal Property, if any, or (b) replace such alterations and improvements
and Tenant's Personal Property, if any, with improvements or items of the
same or better quality and utility to the operation of the Leased Property.
10.6 Waiver. Tenant hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction of the
Leased Property.
10.7 Casualty -- Conflicting Terms. Notwithstanding any provision
of this Article 10 to the contrary, if any Hotel Mortgage or Ground Lease
contains provisions which apply in the event of a casualty and which are in
conflict with the terms of this Article 10, then such Hotel Mortgage or
Ground Lease shall control to the extent of such conflict.
<PAGE>
ARTICLE 11
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CONDEMNATION
------------
11.1 Total Condemnation, Etc. In the event (a) the whole of the
Leased Property shall be taken or condemned for a public or quasi-public
use or purpose by a Condemnor or sold by Landlord in lieu thereof, (b) such
a portion of the Leased Property shall be taken, condemned or sold in lieu
thereof so that the balance cannot be used for the same purpose and with
substantially the same utility to Tenant as immediately prior to such
taking, or (c) the Leased Property or any portion thereof shall be taken or
condemned for a pubic or quasi-public use or purpose by a Condemnor or sold
by Landlord in lieu thereof and Landlord is unable to repair, rebuild or
restore the same under the terms of any agreement to which it is a party,
under the Franchise Agreement or under any Legal Requirements or other
governmental order to which Landlord or the Leased Property is subject (a
"Prohibited Taking"), this Agreement shall terminate upon delivery of
possession to the Condemnor or its assignee, and any Award shall be paid to
and be the sole property of Landlord whether the Award shall be made as
compensation for diminution of the value of the leasehold estate or the fee
of the Land or otherwise, and Tenant hereby assigns to Landlord all of
Tenant's right, title and interest in and to any and all of the Award.
Tenant shall have no claim against Landlord by reason of such taking or
termination and shall not have any claim or right to any portion of the
Award to be paid to Landlord. Tenant shall continue to pay Rent and other
charges hereunder until the Agreement is terminated.
11.2 Partial Taking. In the event (a) only a part of the Leased
Property is taken or condemned but the Leased Property or the part
remaining can still be used for the same purpose and with substantially the
same utility to Tenant as immediately prior to such taking, or (b) a
Prohibited Taking has not occurred, this Agreement shall not terminate and
Landlord, at Landlord's sole cost and expense, shall repair and restore the
remaining Leased Improvements provided the cost and expense of such repair
and restoration does not exceed the amount of the Award. If the cost of
such repair and restoration exceeds the amount of the Award, Landlord may
terminate this Agreement by giving written notice of termination to Tenant
within thirty (30) days of the delivery of possession to the Condemnor. If
Landlord is obligated to repair and restore the remaining Leased
Improvements as herein provided, there shall be no abatement or reduction
in any Rent or other charges payable by Tenant under this Agreement because
of such taking or condemnation; provided, however, Minimum Rent shall be
abated (i) during the period of such restoration, to the extent the Leased
Property is not tenantable by Tenant, or (ii) following the completion of
the restoration, to the extent the Leased Improvements are not tenantable.
11.3 Tenant's Award. Tenant shall have no right to claim and
recover from the Condemnor or from Landlord such compensation as may
otherwise be separately awarded to Tenant for any damage to Tenant's
business by reason of such condemnation and for any cost or loss incurred
by Tenant in removing or relocating Tenant's merchandise, fixtures and
furnishings.
11.4 Condemnation -- Conflicting Terms. Notwithstanding any
provision of this Article 11 to the contrary, if any Hotel Mortgage or
Ground Lease contains provisions which apply in the event of a condemnation
and which are in conflict with the Terms of this Article 11, then such
Hotel Mortgage or Ground Lease shall control to the extent of such
conflict.
<PAGE>
ARTICLE 12
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DEFAULTS AND REMEDIES
---------------------
12.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default"
hereunder:
(a) should Tenant fail to make any payment of the Rent or any other
sum when due and such failure shall continue for a period of ten (10) days;
or (b) should Tenant or the Manager fail to reimburse Landlord for the
costs of insurance maintained under Article 9, or should Tenant or the
Manager fail to maintain any insurance coverages required under Article 9,
and such failure shall continue for ten (10) days after Notice thereof
(except that no Notice shall be required if any such insurance coverages
shall have lapsed); or
(c) should Tenant default in the due observance or performance of
any of the terms, covenants or agreements contained herein to be performed
or observed by it (other than as specified in clauses (a) and (b) above and
(d) through (s) below) such default shall continue for a period of thirty
(30) days after Notice thereof from Landlord to Tenant; provided, however,
that if such default is susceptible of cure but such cure cannot be
accomplished with due diligence within such period of time and if, in
addition, Tenant commences to cure or cause to be cured such default within
fifteen (15) days after Notice thereof from Landlord and thereafter
prosecutes the curing of such default with all due diligence, such period
of time shall be extended to such period of time as may be reasonably and
commercially necessary to cure such default with all due diligence; or
(d) Intentionally Omitted.
(e) should an event of default occur and be continuing beyond the
expiration of any applicable cure period under any of the Incidental
Documents; or
(f) should there occur a final unappealable determination by a
Government Agency of the revocation or limitation of any material license,
permit, certification or approval required for the lawful operation of the
Hotel in accordance with its Permitted Use or the loss or material
limitation of any material license, permit, certification or approval under
any other circumstances under which Tenant or the Manager is required to
cease its operation of the Hotel in accordance with its Permitted Use at
the time of such loss or limitation if such revocation or limitation was a
result of any act or failure to act by Manager or Tenant; or
(g) should Tenant or Manager generally not be paying its debts as
they become due or should Tenant make a general assignment for the benefit
of creditors; or
<PAGE>
(h) should Tenant or Manager file 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, or consent to the appointment of a custodian, receiver,
trustee or other similar office with respect to it or any substantial part
of its assets, or 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 the Tenant
or Manager, a custodian, receiver, trustee or other similar officer with
respect to Tenant or Manager or 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 Tenant or Manager, or if any
petition for any such relief shall be filed against Tenant or Manager and
such petition shall not be dismissed within one hundred twenty (120) days;
or
(i) should Tenant or Manager cause or institute any proceeding for
its dissolution or termination; or
(j) should Tenant or Manager be, or cause Landlord to be, in default
under the Hotel Mortgage, the Ground Lease, or any mortgage or deed of
trust or other similar security document which is secured by Tenant's
leasehold interest hereunder or should the mortgagee or beneficiary, as
applicable, under any such mortgage or deed of trust or other similar
security document accelerate the indebtedness secured thereby or commence a
foreclosure action in connection with said mortgage; or
(k) should the estate or interest of Tenant in the Leased Property
or any part thereof be levied upon or attached in any proceeding and the
same shall not be vacated or discharged within the later of (i) one hundred
twenty (120) days after commencement thereof, unless the amount in dispute
is less than $50,000.00, in which case Tenant shall give notice to Landlord
of the dispute but Tenant may defend in any suitable way, and (ii) thirty
(30) days after receipt by Tenant of Notice thereof from Landlord (unless
Tenant shall be contesting such lien or attachment in good faith in
accordance with Article 8); or
(l) should any default by Tenant as "Owner" under the Management
Agreement occur and be continuing beyond the expiration of any applicable
cure period under the Management Agreement; or
(m) should a Change of Control of Tenant or Manager occur other than
as provided in Sections 22.22 or 5.4, respectively; or
(n) should Tenant or Manager be, or cause Landlord to be, in default
beyond applicable grace periods, if any, under any Franchise Agreement
relating to the Leased Property including any Termination of the Franchise
Agreement without Landlord's prior written consent; or
(o) should Tenant or Manager voluntarily cease operations of the
Leased Property for more than three (3) days other than by reason of
casualty, Condemnation or Force Majeure; or
(p) should the estate or interest of Tenant in this Agreement
voluntarily or involuntarily, be transferred, assigned, conveyed, levied
upon or attached; or
<PAGE>
(q) should Tenant fail to observe or perform any other term of any
Participating Leases and the continuation of such failure for a period of
thirty (30) days after receipt by Tenant of notice from the Landlord
thereof, unless Tenant is diligently proceeding to cure, in which case the
cure period will be extended to one hundred eighty (180) days; provided,
however, if such failure cannot be cured within the one hundred eighty
(180) day period and the Tenant continues to act, with diligence, to
correct such failure within said one hundred eighty (180) days, then Tenant
will be afforded up to an additional ninety (90) days to cure such failure;
or
(r) should an Event of Default occur under a Participating Lease; or
(s) should Tenant or Manager be, or cause Landlord to be, in default
beyond applicable grace periods, if any, under any ground lease affecting
the Leased Property; or
(t) Intentionally Omitted.
(u) Should Tenant fail to comply with the Minimum Operating
Standards for a period of thirty (30) days; or
(v) Should Tenant or Manager no longer be majority owned or
controlled by Noble House Hotel & Resorts; or
(w) Should there be a Change in Operation without Landlord's prior
written consent; or
(x) Should Tenant incur any Indebtedness except as expressly
provided in Section 21.4; then, and in any such event, Landlord, in
addition to all other remedies available to it, may terminate this
Agreement by giving Notice thereof to Tenant and upon the expiration of the
time, if any, fixed in such Notice, this Agreement shall terminate and all
rights of Tenant under this Agreement shall cease. Landlord shall have and
may exercise all rights and remedies available at law and in equity to
Landlord as a result of Tenant's breach of this Agreement.
12.2. Remedies. None of (a) the termination of this Agreement
pursuant to Section 12.1, (b) the repossession of the Leased Property or
any portion thereof, (c) the failure of Landlord to relet the Leased
Property or any portion thereof, nor (d) the re-letting of all or any
portion of the Leased Property, shall relieve Tenant of its liability and
obligations hereunder, all of which shall survive any such termination,
repossession or reletting. In the event of any such termination, Tenant
shall forthwith pay to Landlord all Rent due and payable with respect to
the Leased Property through and including the date of such termination.
Thereafter, Tenant, until the end of what would have been the Term of this
Agreement in the absence of such termination, and whether or not the Leased
Property or any portion thereof shall have been relet, shall be liable to
Landlord for, and shall pay to Landlord, as current damages, the Rent and
other charges which would be payable hereunder for the remainder of the
Term had such termination not occurred, less the net proceeds, if any, of
any reletting of the Leased Property, after deducting all reasonable
expenses in connection with such re-letting, including, without limitation,
all repossession costs, brokerage commissions, legal expenses, attorneys'
fees, advertising, expenses of employees, alteration costs and expenses of
preparation for such re-letting. Tenant shall pay such current damages to
Landlord monthly on the days on which the Minimum Rent would have been
payable hereunder if this Agreement had not been so terminated. At any
time after such termination, as liquidated final damages beyond the date of
such termination, at Landlord's election, Tenant shall pay to Landlord an
amount equal to the present value (discounted at the Interest Rate) of the
excess, if any, of the Rent and other charges which would be payable
hereunder from the date of such termination (assuming that, for the
purposes of this Section 12.2, annual payments by Tenant on account of
Additional Charges and Participating Rent would be the same as payments
required for the immediately preceding twelve (12) calendar months, or if
<PAGE>
less than twelve (12) calendar months have expired since the Commencement
Date, the payments required for such lesser period adjusted to an annual
amount) for what would be the then unexpired term of this Agreement if the
same remained in effect, over the fair market rental for the same period,
less any current damages already paid by Tenant. Nothing contained in this
Agreement shall, however, limit or prejudice the right of Landlord to prove
and obtain in proceedings for bankruptcy or insolvency an amount equal to
the maximum allowed by any statute or rule of law in effect at the time
when, and governing the proceedings in which, the damages are to be proved,
whether or not the amount be greater than, equal to, or less than the
amount of the loss or damages referred to above. In case of any Event of
Default, reentry, expiration and dispossession by summary proceedings or
otherwise, Landlord may (a) re-let the Leased Property or any part or parts
thereof, either in the name of Landlord or otherwise, for a term or terms
which may at Landlord's option, be equal to, less than or exceed the period
which would otherwise have constituted the balance of the Term and may
grant concessions or free rent to the extent that Landlord considers
advisable and necessary to re-let the same, and (b) may make such
reasonable alterations, repairs and decorations in the Leased Property or
any portion thereof as Landlord in its sole and absolute discretion,
considers advisable and necessary for the purpose of re-letting the Leased
Property; and the making of such alterations, repairs and decorations shall
not operate or be construed to release Tenant from liability hereunder as
aforesaid. Landlord shall in no event be liable in any way whatsoever for
any failure to re-let all or any portion of the Leased Property, or, in the
event that the Leased Property is re-let, for failure to collect the rent
under such re-letting. To the maximum extent permitted by law, Tenant
hereby expressly waives any and all rights of redemption granted under any
present or future laws in the event of Tenant being evicted or
dispossessed, or in the event of Landlord obtaining possession of the
Leased Property, by reason of the occurrence and continuation of an Event
of Default hereunder. Additionally, upon the occurrence of an Event of
Default, Landlord may, in addition to any other remedies provided herein or
available at law or in equity, enter upon the Leased Property or any
portion thereof and take possession of any and all of Tenant's Personal
Property, if any, and the Records, without liability for trespass or
conversion (Tenant hereby waiving any right to notice or hearing prior to
such taking of possession by Landlord) and sell the same at public or
private sale, after giving Tenant reasonable Notice of the time and place
of any public or private sale, at which sale Landlord or its assigns may
purchase all or any portion of Tenant's Personal Property, if any, unless
otherwise prohibited by law. Unless otherwise provided by law and without
intending to exclude any other manner of giving Tenant reasonable notice,
the requirement of reasonable Notice shall be met if such Notice is given
at least ten (10) days before the date of sale. The proceeds from any such
disposition, less all expenses incurred in connection with the taking of
possession, holding and selling of such property (including, without
limitation, reasonable attorneys' fees) shall be applied as a credit
against the indebtedness which is secured by the security interest granted
in Section 7.2. Any surplus shall be paid to Tenant or as otherwise
required by law and Tenant shall pay any deficiency to Landlord, as
Additional Charges, upon demand.
12.3 Tenant's Waiver. IF THIS AGREEMENT IS TERMINATED PURSUANT TO
SECTION 12.1 OR 12.2, TENANT WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY
RIGHT TO A TRIAL BY JURY IN THE EVENT OF SUMMARY PROCEEDINGS TO ENFORCE THE
REMEDIES SET FORTH IN THIS ARTICLE 12, AND THE BENEFIT OF ANY LAWS NOW OR
HEREAFTER IN FORCE EXEMPTING PROPERTY FROM LIABILITY FOR RENT OR FOR DEBT.
12.4 Application of Funds. Any payments received by Landlord under
any of the provisions of this Agreement during the existence or continuance
of any Event of Default (and any payment made to Landlord rather than
Tenant due to the existence of any Event of Default) shall be applied to
Tenant's current and past due obligations under this Agreement in such
order as Landlord may determine or as may be prescribed by the laws of the
State.
<PAGE>
12.5 Landlord's Right to Cure Tenant's Default. If an Event of
Default shall have occurred and be continuing, Landlord, after Notice to
Tenant (which Notice shall not be required if Landlord shall reasonably
determine immediate action is necessary to protect person or property),
without waiving or releasing any obligation of Tenant and without waiving
or releasing any Event of Default, may (but shall not be obligated to), at
any time thereafter, make such payment or perform such act for the account
and at the expense of Tenant, and may, to the maximum extent permitted by
law, enter upon the Leased Property or any portion thereof for such purpose
and take all such action thereon as, in Landlord's sole and absolute
discretion, may be necessary or appropriate therefor. No such entry shall
be deemed an eviction of Tenant. All reasonable costs and expenses
(including, without limitation, reasonable attorneys' fees) incurred by
Landlord in connection therewith, together with interest thereon (to the
extent permitted by law) at the Overdue Rate from the date such sums are
paid by Landlord until repaid, shall be paid by Tenant to Landlord, on
demand.
<PAGE>
ARTICLE 13
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HOLDING OVER
------------
13.1 Holding Over. Any holding over by Tenant after the expiration
or sooner termination of this Agreement shall be treated as a daily tenancy
at sufferance at a rate equal to one and one-half (1.5) times the Rent and
other charges herein provided (prorated on a daily basis). Tenant shall
also pay to Landlord all damages (direct or indirect) sustained by reason
of any such holding over. Otherwise, such holding over shall be on the
terms and conditions set forth in this Agreement, to the extent applicable.
Nothing contained herein shall constitute the consent, express or implied,
of Landlord to the holding over of Tenant after the expiration or earlier
termination of this Agreement.
<PAGE>
ARTICLE 14
----------
LIMITATION ON LIABILITY
-----------------------
14.1 Limitation of Liability. Notwithstanding any provision of
this Agreement to the contrary, there shall be absolutely no personal
liability on the part of Landlord or the REIT or their Affiliates,
shareholders, directors, trustees, partners, advisors, agents, employees,
or their respective successors or assigns or any mortgagee in possession,
with respect to any of the terms, covenants, or conditions of this
Agreement with respect to any act, omission or negligence of Landlord.
Tenant shall look solely to Landlord's estate and property in the Leased
Property and the proceeds thereof for the satisfaction of Tenant's remedies
whether for the collection of any judgment or other judicial process
requiring the payment of money by Landlord in the event of any default by
Landlord hereunder or otherwise, and no other property or assets of
Landlord shall be subject to levy, execution or other enforcement procedure
for the satisfaction of Tenant's remedies under or with respect to this
Agreement, the relationship of Landlord and Tenant or Tenant's use or
occupancy of the Leased Property.
<PAGE>
ARTICLE 14
----------
SECURITY
--------
15.1 Security Deposit.
(a) To secure the debt, liability and obligations of Tenant to
Landlord under this Agreement and the Participating Leases and any
amendments, modifications, extensions, renewals or replacements of this
Agreement and the Participating Leases (all of which liabilities and
obligations of Tenant being herein collectively referred to as the
"Security Obligations"), Tenant shall deposit with Landlord, and shall
pledge, hypothecate, assign, transfer and grant to Landlord a continuing
lien and perfected security interest in and to, those items in the amounts
and as further described on Exhibit F attached hereto and hereby made a
part hereof, and all renewals, extensions and substitutions thereof,
together with all rights in connection with the foregoing, including, but
not limited to, all distributions, including cash, and other property, real
or personal, tangible or intangible, and all proceeds distributed on
account of the foregoing, and substitutions for and proceeds or products of
any of the foregoing (collectively, the "Security Deposit").
(b) Tenant agrees that Landlord may at any time, after the
occurrence of an Event of Default and without notice and demand to Tenant,
(i) notify the obligor on or issuer of any Security Deposit to make payment
to Landlord of any amounts due or distributed thereon, (ii) in Tenant's
name or Landlord's name enforce collection of any Security Deposit by suit
or otherwise, or surrender, release or exchange all or any part of it, or
compromise, extend or renew for any period any obligation evidenced by the
Security Deposit, (iii) receive all proceeds of the Security Deposit, and
(iv) hold any increase or profits received from the Security Deposit as
additional security for the Security Obligations, except that any money
received from the Security Deposit shall, at Landlord's option, be applied
in reduction of the Security Obligations, in such order of application as
Landlord may determine; provided, however, nothing contained herein shall
preclude Landlord from exercising all rights and remedies available at law
and in equity to Landlord as a result of Tenant's breach of this
Agreement. Notwithstanding anything in this Section 15.1(b), if an Event
of Default results from a Rent Performance Shortfall, and Tenant has failed
to cure same, if permitted pursuant to the terms of this Agreement,
Landlord's sole recourse against the Security Deposit shall be limited to
the amounts necessary to compensate Landlord for (x) the amount necessary
during such Fiscal Year to ensure that Landlord receives the same amount of
Participating Rent as Landlord would have received had there not been a
Rent Performance Shortfall and (y) any costs incurred by Landlord in
exercising its rights thereunder; provided, however, no such action by
Landlord shall be deemed a cure, or waiver, of any Event of Default under
this Agreement.
15.2 Representations, Warranties and Covenants. Tenant represents
and warrants to and covenants and agrees with Landlord that: (a) Tenant
will duly endorse each and every instrument constituting the Security
Deposit by signing on said instrument or by signing a separate document of
assignment or transfer, if required by Landlord; (b) Tenant shall not sell
or transfer or contract to sell or transfer the Security Deposit or any
portion thereof; (c) Tenant shall pay, when due, all taxes and other
governmental charges levied or assessed upon or against any Security
Deposit; (d) at any time, upon request by Landlord, Tenant shall deliver to
Landlord all notices, financial statements, reports or other communications
received by Tenant as an owner or holder of the Security Deposit; (e)
Tenant shall upon receipt deliver to Landlord in pledge as Security Deposit
<PAGE>
all proceeds distributed on account of the Security Deposit such as cash
flow and sale proceeds; (f) Tenant is the owner of the Security Deposit
free and clear of all liens, encumbrances, security interests and
restrictions, except for any security interests granted to Landlord
pursuant to the terms of this Agreement; and (g) the pledge of the Security
Deposit herein by Tenant has been duly authorized by all requisite actions
of Tenant and is not in breach of any agreement of Tenant. Tenant hereby
agrees to execute any and all instruments required by Landlord to
establish, maintain and continue Landlord's perfected security interest in
the Security Deposit.
15.3 Possession and Maintenance of Security Deposit. The Security
Deposit shall be at all times in the possession of Landlord. Landlord
shall take all necessary action as it deems appropriate to preserve,
protect, replenish and maintain the Security Deposit and the rights
represented and evidenced by the Security Deposit, and the costs and
expenses thereof shall be paid by Tenant; provided, however, Landlord shall
not have any liability for any loss to the Security Deposit not
attributable to Landlord's gross negligence, or intentional misconduct, and
no such loss shall relieve Tenant of its obligations under this Agreement.
<PAGE>
ARTICLE 16
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SUBLETTING AND ASSIGNMENT
-------------------------
16.1 Subletting and Assignment. Tenant shall not, without
Landlord's prior written consent (which consent may be given or withheld in
Landlord's sole and absolute discretion), assign, mortgage, pledge,
hypothecate, encumber or otherwise transfer this Agreement or sublease
(which term shall be deemed to include the granting of concessions,
licenses and the like), all or any part of the Leased Property or suffer or
permit this Agreement or the leasehold estate created hereby or any other
rights arising under this Agreement to be assigned, transferred, mortgaged,
pledged, hypothecated or encumbered, in whole or in part, whether
voluntarily, involuntarily or by operation of law, or permit the use or
operation of the Leased Property by any Person other than Tenant and the
Manager, on behalf of Tenant pursuant to the express terms of the
Management Agreement, or the Leased Property to be offered or advertised
for assignment or subletting. For purposes of this Section 16.1, an
assignment of this Agreement shall be deemed to include any transaction
pursuant to which Tenant is merged or consolidated with another Person or
pursuant to which all or substantially all of Tenant's assets are
transferred to any other Entity, as if such Change in Control or
transaction were an assignment of this Agreement. No subletting or
assignment shall in any way impair the continuing primary liability of
Tenant hereunder (unless Landlord and Tenant expressly otherwise agree that
Tenant shall be released from all obligations hereunder), and no consent to
any subletting or assignment in a particular instance shall be deemed to be
a waiver of the prohibition set forth in this Section 16.1. No assignment,
subletting or occupancy shall affect any Permitted Use. Any subletting,
assignment or other transfer of Tenant's interest under this Agreement in
contravention of this Section 16.1 shall be voidable at Landlord's option.
16.2 Required Sublease Provisions. Any sublease of all or any
portion of the Leased Property entered into on or after the date hereof
shall be consistent with any applicable terms and conditions of the
Management Agreement and shall provide: (a) that it is subject and
subordinate to this Agreement and to the matters to which this Agreement is
or shall be subject or subordinate; (b) that in the event of termination of
this Agreement or reentry or dispossession of Tenant by Landlord under this
Agreement, Landlord may, at its option, terminate such sublease or take
over all of the right, title and interest of Tenant, as sublessor under
such sublease, and such subtenant shall, at Landlord's option, attorn to
Landlord pursuant to the then executory provisions of such sublease, except
that neither Landlord nor any Hotel Mortgagee, as holder of a mortgage or
as Landlord under this Agreement, if such mortgagee succeeds to that
position, shall (i) be liable for any act or omission of Tenant under such
sublease, (ii) be subject to any credit, counterclaim, offset or defense
which theretofore accrued to such subtenant against Tenant, (iii) be bound
by any previous modification of such sublease not consented to in writing
by Landlord or by any previous prepayment of more than one (1) month's
Rent, (iv) be bound by any covenant of Tenant to undertake or complete any
construction of the Leased Property or any portion thereof, (v) be required
to account for any security deposit of the subtenant other than any
security deposit actually delivered to Landlord by Tenant, (vi) be bound by
any obligation to make any payment to such subtenant or grant any credits,
except for services, repairs, maintenance and restoration provided for
under the sublease that are performed after the date of such attornment,
(vii) be responsible for any monies owing by Tenant to the credit of such
subtenant, or (viii) be required to remove any Person occupying any portion
of the Leased Property; and (c) in the event that such subtenant receives a
<PAGE>
written Notice from Landlord or any Hotel Mortgagee stating that an Event
of Default has occurred and is continuing, such subtenant shall thereafter
be obligated to pay all rentals accruing under such sublease directly to
the party giving such Notice or as such party may direct for so long as
such Event of Default remains uncured. All rentals received from such
subtenant by Landlord or the Hotel Mortgagee, as the case may be, shall be
credited against the amounts owing by Tenant under this Agreement and such
sublease shall provide that the subtenant thereunder shall, at the request
of Landlord, execute a suitable instrument in confirmation of such
agreement to attorn. An original counterpart of each such sublease and
assignment and assumption, duly executed by Tenant and such subtenant or
assignee, as the case may be, in form and substance reasonably satisfactory
to Landlord, shall be delivered promptly to Landlord and (a) in the case of
an assignment, the assignee shall assume in writing and agree to keep and
perform all of the terms of this Agreement on the part of Tenant to be kept
and performed and shall be, and become, jointly and severally liable with
Tenant for the performance thereof and (b) in case of either an assignment
or subletting, Tenant shall remain primarily liable, as principal rather
than as surety, for the prompt payment of the Rent and for the performance
and observance of all of the covenants and conditions to be performed by
Tenant hereunder. The provisions of this Section 16.2 shall not be deemed
a waiver of the provisions set forth in Section 16.1.
16.3 Sublease Limitation. For so long as the REIT shall seek to
qualify as a real estate investment trust, anything contained in this
Agreement to the contrary notwithstanding, Tenant shall not sublet the
leased Property on any basis such that the rental to be paid by any
sublessee thereunder would be based, in whole or in part, on either (a) the
net income or profits derived by the business activities of such sublessee,
or (b) any other formula such that any portion of such sublease rental, if
it were paid as rent directly to the REIT, 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 nor shall Tenant sublease the
Leased Property to, or enter into any similar arrangement with, any Person
in which the REIT owns, directly or indirectly, a 10% or more interest,
within the meaning of Section 856(d) of the Code or any similar or
successor provisions thereto.
<PAGE>
ARTICLE 17
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ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
----------------------------------------------
17.1 Estoppel Certificates. At any time and from time to time, but
in no event more than four (4) times per Fiscal Year, upon not less than
ten (10) Business Days prior Notice by either party, the party receiving
such Notice shall furnish to the other an Officer's Certificate certifying
that this Agreement is unmodified and in full force and effect (or that
this Agreement is in full force and effect as modified and setting forth
the modifications), the date to which the Rent has been paid, that no
Default or an Event of Default has occurred and is continuing or, if a
Default or an Event of Default shall exist, specifying in reasonable detail
the nature thereof, and the steps being taken to remedy the same, and such
additional information as the requesting party may reasonably request. Any
such certificate furnished pursuant to this Section 17.1 may be relied upon
by the requesting party, its lenders and any prospective purchaser or
mortgagee of the Leased Property or the leasehold estate created hereby.
17.2 Financial Statements. Tenant shall keep true records and
books of account of Tenant in which full, true and correct entries will be
made of dealings and transactions in relation to the business and affairs
of Tenant in accordance with GAAP, where applicable. All records and books
of account of Tenant shall be maintained by Tenant for a period of not less
than seven (7) years after the termination of the Term. Tenant shall apply
accounting principles in the preparation of the financial statements of
Tenant which, in the judgment of and the opinion of its independent public
accountants, are in accordance with GAAP and the Uniform System of
Accounts, where applicable, except for changes approved by such independent
public accountants. Tenant shall provide to Landlord either in a footnote
to the financial statements delivered under this Section 17.2 which relate
to the period in which such change occurs, or in separate schedules to such
financial statements, information sufficient to show the effect of any such
changes on such financial statements. Tenant shall furnish the following
statements to Landlord:
(a) within twenty (20) days after each of the first three quarters
of any Fiscal Year, the most recent Financials, accompanied by a Financial
Officer's Certificate;
(b) within seventy-five (75) days after the end of each Fiscal Year,
the most recent Financials for such year, certified by an independent
certified public accountant reasonably satisfactory to Landlord and
accompanied by a Financial Officer's Certificate;
(c) within twenty (20) days after the end of each Accounting Period,
an unaudited operating statement prepared for the Leased Property,
including occupancy percentages and average rate, accompanied by a
Financial Officer's Certificate and an Officer's Certificate prepared by
the Manager containing an explanation of the performance of the Leased
Property and containing (i) a schedule of profit and loss for such
Accounting Period, (ii) a Schedule of the Capital Expenditures for the year
to date together with a restatement of the Capital Expenditures for the
remainder of the Fiscal Year, (iii) a reforecast of the Budget for the
remainder of the Fiscal Year, including cash flow, and (iv) a balance
sheet, comparison of operations, variance report and anything else
reasonably requested by Landlord;
(d) promptly after the sending or filing thereof, copies of all
reports which Tenant or Manager sends to its security holders generally,
and copies of all periodic reports which Tenant or Manager files with the
SEC or any stock exchange on which its shares are listed or traded;
<PAGE>
(e) promptly after the delivery thereof to Tenant, a copy of any
management letter or written report prepared by the certified public
accountants with respect to the financial condition, operations, business
or prospects of Tenant;
(f) at any time and from time to time upon not less than twenty (20)
days Notice from Landlord, any Financials or any other financial reporting
information required to be filed by Landlord with any securities and
exchange commission, the SEC or any successor agency, or any other
governmental authority, or required pursuant to any order issued by any
court, Government Agency or arbitrator in any litigation to which Landlord
is a party, for purposes of compliance therewith; and
(g) promptly, upon Notice from Landlord, such other information
concerning the business, financial condition and affairs of Tenant as
Landlord reasonably may request from time to time. Landlord may at any
time, and from time to time, provide any Hotel Mortgagee with copies of any
of the foregoing statements. In addition, Landlord shall have the right,
from time to time at Landlord's sole cost and expense, upon reasonable
Notice, during Tenant's customary business hours, to cause Tenant's books
and records with respect to the Leased Property to be audited by auditors
selected by Landlord at the place where such books and records are
customarily kept.
17.3 Annual Budget. Not later than forty-five (45) days prior to
the commencement of each Lease Year, Tenant shall prepare and submit to
Landlord an operating budget (the "Operating Budget") and a capital budget
(the "Capital Budget") prepared in accordance with the requirements of this
Section 17.3. The Operating Budget and the Capital Budget (together, the
"Annual Budget") shall be prepared in accordance with GAAP and the Uniform
System of Accounts, to the extent applicable, and show by month and quarter
and for the year as a whole in the degree of detail specified by the
Uniform System of Accounts for monthly statements, and in accordance with
the detail level of monthly financial statements, the following:
(a) Tenant's reasonable estimate of Gross Revenues (including
room rates and Room Revenues, Food Sales, Telephone Revenues, Beverage
Sales, Retail and Marina Sales Other Income or Additional Charges) for the
forthcoming Lease Year itemized on schedules on a monthly and quarterly
basis as approved by Landlord and Tenant, together with the assumptions, in
narrative form, forming the basis of such schedules;
(b) A cash flow projection, by calendar month, quarter and
year;
(c) A marketing plan including a narrative description of the
program for advertising and marketing the Hotel for the forthcoming Lease
Year containing a detailed budget itemization of the proposed advertising
expenditure by category and the assumptions in narrative form, forming the
basis of such budget itemization;
(d) Tenant's reasonable estimate for each month of the Lease
Year of Participating Rent including Room Revenues, Food Sales, Beverage
Sales, Retail and Marina Sales and Other Income;
(e) A schedule of all Capital Expenditures and Capital Repairs
planned for the forthcoming Lease Year;
(f) An operating budget including line item detail of all
revenues and expenses for the forthcoming Lease Year;
(g) A five (5) year plan of operations and anticipated Capital
Expenditures and Capital Repairs and an accounting of the Reserve Fund
Account and balances for such periods;
<PAGE>
(h) A detailed staffing plan for the hotel operations,
including any anticipated changes in employee numbers or Key Employees,
including a complete explanation of the reasons therefor;
(i) Sensitivity analysis for 5%, 10% and 20% increases and
decreases in Gross Revenues from budgeted amount;
(j) A schedule of all preventative maintenance to be performed
during the forthcoming Lease Year;
(k) Tenant's proposal for the Competitive Set; and
(l) Any other schedules reasonably requested by Landlord.
Landlord shall have thirty (30) days after the date on which it
receives the Annual Budget to review, approve, disapprove or change the
entries and information appearing in the Annual Budget including all of the
schedules included therewith. If the parties are not able to reach
agreement on the Annual Budget for any Lease Year during Landlord's thirty
(30) day review period, the parties shall attempt in good faith during the
subsequent thirty (30) day period to resolve any disputes, which attempt
shall include, if requested by either party, at least one (1) meeting of
executive-level officers of Landlord and Tenant. In the event the parties
are still not able to reach agreement on the Annual Budget for any
particular Lease Year after complying with the foregoing requirements of
this Section 17.3, the parties shall adopt such portions of the Operating
Budget and the Capital Budget as they may have agreed upon, and any matters
not agreed upon shall be referred to arbitration as provided for in Article
23. Pending the results of such arbitration or the earlier agreement of
the parties, (i) if the Operating Budget has not been agreed upon, for the
first ninety (90) days of the new Lease Year the Leased Property will be
operated in a manner reflecting the prior Lease Year's actual revenues, and
thereafter the Leased Property will be operated for the full Lease Year
(including the first ninety (90) days thereof) in a manner consistent with
the Gross Revenues actual results in the prior Lease Year and increased by
five (5%) percent, in each case without adjustment pursuant to Section
3.1.4 until a new Operating Budget is adopted, and (ii) if the Capital
Budget has not been agreed upon, no Capital Expenditures shall be made
unless the same are set forth in a previously approved Capital Budget or
are specifically required by Landlord or are otherwise required to comply
with Legal Requirements or to make emergency repairs.
17.4 General Operations. Tenant shall furnish to Landlord:
(a) Within thirty (30) days after receipt or modification
thereof, copies of all licenses authorizing Tenant and/or the Manager to
operate the Hotel for its Permitted Use; and
(b) Promptly after receipt or sending thereof, copies of all
material notices given or received by Tenant under the Management
Agreement.
<PAGE>
ARTICLE 18
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LANDLORD'S RIGHT TO INSPECT
---------------------------
18.1 Right to Inspect. Tenant shall permit, and shall cause the
Manager to permit, Landlord and its authorized representatives to inspect
the Leased Property during usual business hours upon reasonable notice and
to make such repairs as Landlord is permitted to make pursuant to the terms
of this Agreement, provided that any inspection or repair by Landlord or
its representatives will not unreasonably interfere with Tenant's use and
operation of the Leased Property and further provided that in the event of
an emergency, as determined by Landlord in its reasonable discretion, prior
Notice shall not be necessary. Landlord shall not communicate directly with
any employees of Tenant or Manager, other than to Tenant's or Manager's
designated representative, without the consent of Tenant (which consent
shall not be unreasonably withheld, delayed or conditioned).
<PAGE>
ARTICLE 19
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LIMITATIONS
-----------
19.1 Personal Property Limitation. Anything contained in this
Agreement to the contrary notwithstanding, (i) the average of the adjusted
tax basis, for U.S. federal income tax purposes, of the items of Landlord's
personal property that are leased to the Tenant under this Agreement at the
beginning and at the end of any Lease Year shall not exceed 15% of the
average of the aggregate adjusted tax bases of the Leased Property at the
beginning and at the end of such Lease Year, and (ii) the value of the
items of Landlord's personal property that are leased to the Tenant under
this Agreement shall not at any time exceed 10% of the value of the Leased
Property (together, the "Personal Property Limitation"). Landlord and
Tenant shall at all times cooperate in good faith and use their best
efforts to permit Landlord to comply with the Personal Property Limitation,
which compliance may include, by way of example only and not by way of
limitation or obligation, the purchase by Tenant at fair market value of
personal property in excess of the Personal Property Limitation. All such
compliance shall be effected in a manner which has no material net economic
detriment to Tenant and will not jeopardize the REIT's status as a real
estate investment trust under the applicable provisions of the Code. This
Section 19.1 is intended to ensure that all of the Rent qualifies as "rents
from real property," within the meaning of Section 856(d) of the Code, and
as rents described in Section 512(b)(3)(A) of the Code, or any similar or
successor provisions thereto, and shall be interpreted in a manner
consistent with such intent.
19.2 Tenant Ownership Limitation. Anything contained in this
Agreement to the contrary notwithstanding, Landlord shall not take, or
permit an Affiliate of Landlord to take, any action that would cause the
REIT to own, directly or indirectly, a 10% or more interest in the Tenant,
or in the assets or net profits of Tenant, within the meaning of Section
856(d) of the Code, or any similar or successor provision thereto.
Anything contained in this Agreement to the contrary notwithstanding,
Tenant shall not take, or permit an Affiliate of Tenant to take, any action
that would cause the REIT to own directly or indirectly, a 10% or more
interest in the Tenant, or in the assets or net profits of Tenant, within
the meaning of Section 856(d) of the Code, or any similar or successor
provision thereto.
19.3 Director, Officer and Employee Limitation. Anything contained
in this Agreement to the contrary notwithstanding, Landlord and Tenant
shall cooperate to ensure that (a) no directors, trustees, officers or
employees of Landlord, the REIT or any Affiliate of the REIT shall be
directors, officers or employees of, or own any ownership interest in,
Tenant or any Affiliate thereof (or any Person who furnishes or renders
services to the Tenant or manages or operates the Leased Property), and (b)
no directors, trustees, officers or employees of Tenant or any Affiliate
thereof (or of any Person who furnishes or renders services to the Tenant
or manages or operates the Leased Property) shall be directors, officers or
employees of Landlord, the REIT or any Affiliate of the REIT.
<PAGE>
ARTICLE 20
----------
HOTEL MORTGAGES
---------------
20.1 Landlord May Grant Liens. Without the consent of Tenant,
Landlord may, subject to the terms and conditions set forth in this Section
20.1, from time to time, directly or indirectly, create or otherwise cause
to exist any lien, encumbrance or title retention agreement ("Encumbrance")
upon the Leased Property, or any portion thereof or interest therein,
whether to secure any borrowing or other means of financing or refinancing.
Any such Encumbrance (other than a Hotel Mortgage, in which event the
provisions of Section 20.2 shall govern) shall be, and shall provide that
it is, subject and subordinate to the rights of Tenant under this
Agreement. Additionally, Tenant shall cooperate in all reasonable
respects, and as generally described in Section 22.15, with any transfer of
the Leased Property to a Hotel Mortgagee that succeeds to the interest of
Landlord 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 Hotel Mortgagee or such Hotel
Mortgagee's designee necessary or appropriate to operate the Leased
Property). Landlord and Tenant shall cooperate in (a) including in this
Agreement by suitable amendment from time to time any provision which may
be reasonably requested by any proposed lender, or may otherwise be
reasonably necessary, to implement the provisions of this Section 20.1 and
(b) entering into any further agreement with or at the request of any Hotel
Mortgagee which may be reasonably requested or required by such Hotel
Mortgagee in furtherance or confirmation of the provisions of this Section
20.1; 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 Landlord or Tenant under this Agreement.
20.2 Subordination of Lease. Subject to Section 20.1 and this
Section 20.2, any and all rights of Tenant hereunder, are and shall be
subject and subordinate to any ground or master lease, and all renewals,
extensions, modifications and replacements thereof, and to all mortgages
and deeds of trust, which may now or hereafter affect the Leased Property
or any improvements thereon and/or any of such leases, whether or not such
mortgages or deeds of trust shall also cover other lands and/or buildings
and/or leases, to each and every advance made or hereafter to be made under
such mortgages and deeds of trust, and to all renewals, modifications,
replacements and extensions of such leases and such mortgages and deeds of
trust and all consolidations of such mortgages and deeds of trust. This
Section 20.2 shall be self operative and no further instrument of
subordination shall be required. In confirmation of such subordination,
Tenant shall promptly execute, acknowledge and deliver any instrument that
Landlord, the lessor under any such lease or the holder of any such
mortgage or the trustee or beneficiary of any deed of trust or any of their
respective successors in interest may reasonably request to evidence such
subordination. Any lease to which this Agreement is, at the time referred
to, subject and subordinate is herein called "Superior Lease" and the
lessor of a Superior Lease or its successor in interest at the time
referred to, is herein called "Superior Landlord" and any mortgage or deed
of trust to which this Agreement is, at the time referred to, subject and
subordinate, is herein called "Superior Mortgage" and the holder, trustee
or beneficiary of a Superior Mortgage is herein called "Superior
Mortgagee". Tenant shall have no obligations under any Superior Lease or
Superior Mortgage other than those expressly set forth in this Section
20.2. If any Superior Landlord or Superior Mortgagee or the nominee or
designee of any Superior Landlord or Superior Mortgagee shall succeed to
the rights of Landlord under this Agreement (any such person, "Successor
Landlord"), whether through possession or foreclosure action or delivery of
a new lease or deed, or otherwise, such Successor Landlord shall have the
option either to terminate this Agreement or to recognize Tenant's rights
under this Agreement as herein provided and, in such latter event, Tenant
shall attorn to and recognize the Successor Landlord as Tenant's landlord
<PAGE>
under this Agreement and Tenant shall promptly execute and deliver any
instrument that such Successor Landlord may reasonably request to evidence
such attornment (provided that such instrument does not alter the terms of
this Agreement), whereupon, this Agreement shall continue in full force and
effect as a direct lease between the Successor Landlord and Tenant upon all
of the terms, conditions and covenants as are set forth in this Agreement,
except that the Successor Landlord (unless formerly the landlord under this
Agreement or its nominee, designee or Affiliate) shall not be (a) liable in
any way to Tenant for any act or omission, neglect or default on the part
of any prior Landlord under this Agreement, (b) responsible for any monies
owing by or on deposit with any prior Landlord to the credit of Tenant
(except to the extent actually paid, credited or delivered to the Successor
Landlord), (c) subject to any counterclaim or setoff which theretofore
accrued to Tenant against any prior Landlord, (d) bound by any modification
of this Agreement subsequent to such Superior Lease or Mortgage, or by any
previous prepayment of Minimum Rent or Participating Rent for more than one
(1) month in advance of the date due hereunder, which was not approved in
writing by the Superior Landlord or the Superior Mortgagee thereto, (e)
liable to Tenant beyond the Successor Landlord's interest in the Leased
Property and the rents, income, receipts, revenues, issues and profits
issuing from the Leased Property, (f) responsible for the performance of
any work to be done by the Landlord under this Agreement to render the
Leased Property ready for occupancy by Tenant or with respect to any
insurance or Condemnation proceeds), or (g) required to remove any Person
occupying the Leased Property or any part thereof, except if such Person
claims by, through or under the Successor Landlord. Tenant agrees at any
time and from time to time to execute a suitable instrument in confirmation
of Tenant's agreement to attorn, as aforesaid and, if Tenant has been
requested to attorn, Landlord agrees to provide Tenant with an instrument
of non-disturbance and attornment from each such Superior Mortgagee and
Superior Landlord in form and substance reasonably satisfactory to Tenant.
20.3 Notice to Mortgagee and Ground Landlord. Subsequent to the
receipt by Tenant of Notice from Landlord as to the identity of any Hotel
Mortgagee or ground lessor under a lease with Landlord, as ground lessee,
which includes the Leased Property as part of the demised premises and
which complies with Sections 20.1 and 20.2 (which Notice shall be
accompanied by a copy of the applicable mortgage or lease), no notice from
Tenant to Landlord as to the Leased Property shall be effective unless and
until a copy of the same is given to such Hotel Mortgagee or ground lessor
at the address set forth in the above described Notice, and the curing of
any of Landlord's defaults by such Hotel Mortgagee or ground lessor shall
be treated as performance by Landlord.
<PAGE>
ARTICLE 21
----------
ADDITIONAL COVENANTS OF TENANT
------------------------------
21.1 Prompt Payment of Indebtedness. Tenant shall (a) pay or cause
to be paid when due all payments on Tenant's Indebtedness and shall not
permit or suffer any such Indebtedness to become or remain in default
beyond any applicable grace or cure period, (b) pay or cause to be paid
when due all lawful claims for labor and rents, (c) pay or cause to be paid
when due all trade payables and (d) pay or cause to be paid when due all
other of Tenant's Indebtedness upon which it is or becomes obligated,
except, in each case, other than that referred to in clause (a), to the
extent payment is being contested in good faith by appropriate proceedings
in accordance with Article 8 and if Tenant shall have set aside on its
books adequate reserves with respect thereto in accordance with GAAP, if
appropriate, or unless and until foreclosure, distraint sale or other
similar proceedings shall have been commenced.
21.2 Intentionally Omitted.
21.3 Notice of Litigation, Etc. Tenant shall give prompt Notice to
Landlord of any litigation or any administrative proceeding to which Tenant
may hereafter become a party of which Tenant has notice or actual knowledge
which involves a potential liability equal to or greater than Fifty
Thousand Dollars ($50,000.00) or which may otherwise result in any material
adverse change in the business, operations, property, results of operation
or financial condition of Tenant. Forthwith upon Tenant obtaining
knowledge of any event or condition that would be required to be disclosed
in a current report filed by Tenant on Form 8K or in Part II of a quarterly
report on Form 10-Q if Tenant were required to file such reports under the
Securities Exchange Act of 1934, as amended, Tenant shall furnish Notice
thereof to Landlord specifying the nature and period of existence thereof
and what action Tenant has taken or is taking or proposes to take with
respect thereto.
21.4 Indebtedness of Tenant. Tenant shall not create, incur,
assume or guarantee, or permit to exist, or become or remain liable
directly or indirectly upon, any Indebtedness except the following:
(a) Indebtedness of Tenant to Landlord;
(b) Indebtedness of Tenant for Impositions, to the extent that
payment thereof shall not at the time be required to be made in accordance
with the provisions of Article 8;
(c) Indebtedness of Tenant in respect of judgments or awards (i)
which have been in force for less than the applicable appeal period and in
respect of which execution thereof shall have been stayed pending such
appeal or review, (ii) which are fully covered by insurance payable to
Tenant (subject to any deductibles permitted hereunder);
(d) Trade payables incurred in the ordinary course of business.
21.5 Financial Condition of Tenant. Tenant shall at all times be
Solvent.
21.6 Intentionally Omitted.
21.7 Prohibited Transactions. Tenant shall not permit to exist or
enter into any agreement or arrangement whereby it engages in a transaction
of any kind with any Affiliate of Tenant without the prior written consent
of Landlord, which consent may be withheld or granted in Landlord's sole
discretion.
<PAGE>
21.8 Liens and Encumbrances. Except as permitted by Section 7.1,
Tenant shall not create or incur or suffer to be created or incurred or to
exist any Lien on this Agreement or any of Tenant's assets, properties,
rights or income, or any of its interest therein, now or at any time
hereafter owned, other than:
(a) Permitted Encumbrances; and
(b) As permitted pursuant to Section 21.4.
21.9 Merger, Sale of Assets, Etc. Tenant shall not (a) sell, lease
(as lessor or sublessor), transfer or otherwise dispose of, or abandon, all
or any material portion of its assets (including capital stock) or business
to any Person, other than an Affiliate of Tenant which is 100% owned by
Noble House Hotels & Resorts or the Parent thereof (a "Permitted
Transferee"), (b) merge into or with or consolidate with any other Person
except a Permitted Transferee, or (c) sell, lease (as lessor or sublessor),
transfer or otherwise dispose of, or abandon, any personal property or
fixtures or any real property; provided, however, that, notwithstanding the
provisions of clause (c) Tenant may dispose of equipment or fixtures which
have become inadequate, obsolete, wornout, unsuitable, undesirable or
unnecessary, provided substitute equipment or fixtures having equal or
greater value and utility (but not necessarily having the same function)
have been provided.
21.10 Compliance with Franchise Agreement. If requested by
Landlord, Tenant shall become the Franchisee under the Franchise Agreement.
To the extent any of the provisions of the Franchise Agreement impose a
greater obligation on Landlord than the corresponding provisions of this
Agreement, then Tenant shall be obligated to comply with, and to take all
reasonable actions necessary to prevent breaches or defaults under, the
provisions of the Franchise Agreement. It is the intent of the parties
hereto that Tenant shall comply in every respect with the provisions of the
Franchise Agreement so as to avoid any default thereunder during the term
of this Agreement. Landlord shall not terminate or enter into any
modification of the Franchise Agreement without in each instance first
obtaining Tenant's written consent (which shall not be unreasonably
withheld or delayed). Tenant shall not terminate the Franchise Agreement
without Landlord's prior written consent which may be withheld or granted
in Landlord's sole discretion. Tenant agrees to cooperate fully with
Landlord in the event Landlord deems it necessary, in its sole discretion,
to obtain a franchise for the Leased Property.
21.11 Termination Upon Rent Performance Shortfall, Sale, Etc. (a)
If, with respect to any Fiscal Year, Minimum Rent and Participating Rent
payable under this Agreement is not equal to at least the Rent Thresholds
set forth on Exhibit H (each, a "Rent Performance Shortfall"), such failure
shall constitute a Rent Performance Shortfall under this Lease; provided,
however, if a Force Majeure Event has occurred, then the time period for
determining a Rent Performance Shortfall shall be extended for a period of
time equal to the time period for which the Force Majeure Event was in
effect. The existence of a Rent Performance Shortfall for any Fiscal Year
shall constitute an Event of Default hereunder and shall be determined by
Landlord on the basis of the Officer's Certificate delivered by Tenant to
Landlord pursuant to the requirements of Section 3.1.2(c) and shall be
subject to confirmation pursuant to Section 3.1.2(d). Notwithstanding
anything to the contrary, however, Tenant shall have the right to cure a
Rent Performance Shortfall with respect to any Fiscal Year during the Term
hereof by paying to Landlord, at the time of the annual reconciliation of
Participating Rent, pursuant to Section 3.1.2(c), the amount necessary
during such Fiscal Year to ensure that Landlord receives the same amount of
Participating Rent as Landlord would have received had there not been a
Rent Performance
<PAGE>
Shortfall; provided, however, Tenant's right to cure a Rent
Performance Shortfall shall be limited to one (1) time during the Term.
Landlord shall have no obligation to repay any amount advanced by Tenant to
cure a Rent Performance Shortfall. Nothing contained in this Section 21.11
shall be construed to alter or affect Tenant's obligation to pay Rent as
otherwise provided in this Agreement.
(b) Upon the occurrence of (i) a Rent Performance Shortfall
(unless cured by Tenant within ten (10) days after Notice of termination as
provided in this subsection and unless caused by casualty, Condemnation or
any other cause beyond Tenant's control), (ii) the entering into by
Landlord of a bona-fide contract to sell the Leased Property to a
non-Affiliate (provided such sale actually occurs), (iii) a Tax Law Change
resulting in Landlord's determination to terminate this Agreement, (iv) a
Change of Control in Tenant (other than as provided in Section 22.22) or a
Change of Control of the Manager without Landlord's consent (which consent
will not be unreasonably withheld), or (v) a Material Franchise Change has
occurred, Landlord shall have the right, at Landlord's option, to terminate
this Agreement upon thirty (30) days' Notice to Tenant, in which event this
Agreement and the Management Agreement shall terminate and Tenant shall
immediately surrender the Leased Property to Landlord after the expiration
of such 30 day period, and, if Tenant fails to so surrender, Landlord shall
have the right, without notice, to enter upon and take possession of the
Leased Property and to expel or remove Tenant and its effects without being
liable for prosecution or any claim for damages therefor; and Tenant shall,
and hereby agrees to, indemnify Landlord for the total of (x) in the event
that Tenant does not promptly surrender the Leased Property, the reasonable
costs of recovering the Leased Property and all other losses, liabilities
and reasonable expenses incurred by Landlord in connection with Tenant's
failure to surrender; (y) the unpaid Rent earned as of the date of
termination, plus interest at the Overdue Rate accruing after the due date;
and (z) all other sums of money then owing by Tenant to Landlord.
Landlord's election to terminate this Agreement as a result of a Tax Law
Change shall be deemed to be a determination to simultaneously terminate
all Participating Leases and to enter into a Management Agreement with any
of Tenant's Affiliates upon terms and conditions to be mutually agreed
upon.
21.12 Change in Operations.
(a) The following events shall constitute changes in the operation
of the Hotel ("Change in Operations") for the purposes of this Agreement:
(i) a change in the franchisor, if any, or (ii) the conversion of a
subtenant, licensee or concessionaire to an operating department of the
Hotel or vice-versa without Landlord's consent, or (iii) Tenant's decision
to delegate or eliminate the operation of any food or beverage operations
at the Hotel, or (iv) the repositioning or expansion of the Hotel.
(b) If Tenant desires to implement a Change in Operations, Landlord
may accept or reject such change in its sole and absolute discretion. If
Landlord does not consent to the Change in Operations, Tenant shall not be
entitled to implement the proposed Change in Operations and this Agreement
shall remain in full force and effect.
(c) Notwithstanding anything to the contrary contained herein, no
adjustment of Rent pursuant to a Change in Operations shall be implemented
without the receipt by Landlord of an opinion from its tax counsel,
satisfactory to Landlord in form and substance, that such adjustment will
not adversely affect the REIT's ability to qualify as a real estate
investment trust under the applicable provisions of the Code.
<PAGE>
21.13 Use of the Leased Property. Tenant covenants and agrees that
from and after the Commencement Date, and except for reasonable periods of
time required for remodeling or restoration otherwise permitted hereunder,
it shall continuously and without interruption use and occupy the entire
Leased Property (and not less than one hundred (100%) percent of the Leased
Property) solely for the purpose of the Permitted Use and for no other
purpose. Tenant's business in and throughout the Leased Property shall
continuously be conducted under the Tenant's, or Manager's, name, as the
case may be.
21.14 Continuing Covenants. Tenant, acknowledging that the Leased
Property has been developed and is being maintained as a hotel consistent
with and in a manner such as to preserve the Landlord's property interest
in the Leased Property, and as a further inducement to Landlord to enter
into this Agreement, covenants and agrees with Landlord to:
(a) not abandon the Leased Property;
(b) maintain the Leased Property and the abutting grounds,
sidewalks, roads, parking and landscaped areas in good repair, order and
condition;
(c) promptly make all necessary or desirable repairs, renewals,
replacements and additions, to the Leased Property;
(d) not commit or suffer waste with respect to the Leased Property;
(e) operate the Leased Property in accordance with the Minimum
Operating Standards so as not to diminish the value or integrity of the
Leased Property or the value of this Agreement;
(f) not make, suffer or permit any nuisance to exist on the Leased
Property;
(g) conduct its business in a manner consistent with the purpose and
character of the Leased Property and in accordance with the standards for
operating the type of business currently operated at the Leased Property in
a sufficient manner, consistent with and to preserve the Landlord's
property interest in the Leased Property;
(h) keep the Land and Improvements clean and attractive in
appearance at all times and to keep any refuse in proper containers in the
interior of the Leased Property out of sight until the same is removed;
(i) neither do nor suffer anything to be done or kept in or about
the Leased Property which contravenes Landlord's insurance policies or
increases the premiums therefor;
(j) adequately heat and cool the Leased Improvements;
(k) not enter into any collective bargaining or similar agreement
without prior notification being given to Landlord;
(l) comply with the Franchise Agreement and not amend or otherwise
modify any provision thereof without Landlord's prior written consent;
(m) not enter into a contract for goods or services (x) in an amount
greater than twenty-five thousand dollars ($25,000.00) or (y) for a period
of more than one (1) year without Landlord's prior written consent, not to
be unreasonably withheld; and
(n) not enter into a lease for any items used in the operation of
the Leased Property (x) in an amount in excess of twenty-five thousand
dollars ($25,000.00) or (y) for a period in excess of one (1) year without
Landlord's prior written consent, not to be unreasonably withheld.
<PAGE>
21.15 Intentionally Omitted.
21.16 Other Activities. Tenant covenants, during the Term, that
Tenant will not engage in any business unrelated to the operation and
management of the Hotel or otherwise permitted under any Participating
Leases.
21.17 Reservation System. Tenant shall not change, modify or
terminate the system for making reservations utilized at the Hotel without
the prior consent of Landlord which consent will not be unreasonably
withheld.
<PAGE>
ARTICLE 22
----------
MISCELLANEOUS
-------------
22.1 Limitation on Payment of Rent. All agreements between
Landlord and Tenant herein are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of acceleration of Rent,
or otherwise, shall the Rent or any other amounts payable to Landlord under
this Agreement exceed the maximum permissible under applicable law, the
benefit of which may be asserted by Tenant as a defense, and if, from any
circumstance whatsoever, fulfillment of any provision of this Agreement, at
the time performance of such provision shall be due, shall involve
transcending the limit of validity prescribed by law, or if from any
circumstances Landlord should ever receive as fulfillment of such provision
such an excessive amount, then, ipso facto, the amount which would be
excessive shall be applied to the reduction of the installment(s) of
Minimum Rent next due and not to the payment of such excessive amount.
This provision shall control every other provision of this Agreement and
any other agreements between Landlord and Tenant.
22.2 No Waiver. No failure by Landlord or Tenant to insist upon the
strict performance of any term hereof or to exercise any right, power or
remedy consequent upon a breach thereof, and no acceptance of full or
partial payment of Rent during the continuance of any such breach, shall
constitute a waiver of any such breach or of any such term. To the maximum
extent permitted by law, no waiver of any breach shall affect or alter this
Agreement, which shall continue in full force and effect with respect to
any other then existing or subsequent breach.
22.3 Remedies Cumulative. To the maximum extent permitted by law,
each legal, equitable or contractual right, power and remedy of Landlord or
Tenant, now or hereafter provided either in this Agreement 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 Landlord or Tenant (as applicable) of any one or more of such
rights, powers and remedies shall not preclude the simultaneous or
subsequent exercise by Landlord of any or all of such other rights, powers
and remedies.
22.4 Severability. Any clause, sentence, paragraph, section or
provision of this Agreement held by a court of competent jurisdiction to be
invalid, illegal or ineffective shall not impair, invalidate or nullify the
remainder of this Agreement, but rather the effect thereof shall be
confined to the clause, sentence, paragraph, section or provision so held
to be invalid, illegal or ineffective, and this Agreement shall be
construed as if such invalid, illegal or ineffective provisions had never
been contained therein.
22.5 Acceptance of Surrender. No surrender to Landlord of this
Agreement or of the Leased Property or any part thereof, or of any interest
therein, shall be valid or effective unless agreed to and accepted in
writing by Landlord and no act by Landlord or any representative or agent
of Landlord, other than such a written acceptance by Landlord, shall
constitute an acceptance of any such surrender.
22.6 No Merger of Title. It is expressly acknowledged and agreed
that it is the intent of the parties that there shall be no merger of this
Agreement or of the leasehold estate created hereby by reason of the fact
that the same Person may acquire, own or hold, directly or indirectly this
Agreement or the leasehold estate created hereby and the fee estate or
ground landlord's interest in the Leased Property.
<PAGE>
22.7 Conveyance by Landlord. If Landlord or any successor owner of
all or any portion of the Leased Property shall convey all or any portion
of the Leased Property in accordance with the terms hereof other than as
security for a debt, and the grantee or transferee of such of the Leased
Property shall expressly assume all obligations of Landlord hereunder
arising or accruing from and after the date of such conveyance or transfer,
Landlord or such successor owner, as the case may be, shall thereupon be
released from all future liabilities and obligations of Landlord under this
Agreement with respect to such of the Leased Property arising or accruing
from and after the date of such conveyance or other transfer and all such
future liabilities and obligations shall thereupon be binding upon the new
owner.
22.8 Quiet Enjoyment. Provided that no Event of Default shall have
occurred and be continuing, Tenant shall peaceably and quietly have, hold
and enjoy the Leased Property for the Term, free of hindrance or
molestation by Landlord or any Person claiming by, through or under
Landlord, but subject to (a) any Encumbrance permitted under Article 20 or
otherwise permitted to be created by Landlord hereunder, (b) all Permitted
Encumbrances, (c) Liens as to obligations of Landlord that are either not
yet due or which are being contested in good faith and by proper
proceedings, provided the same do not materially interfere with Tenant's
ability to operate the Hotel and (d) Liens that have been consented to in
writing by Tenant. Except as otherwise provided in this Agreement, no
failure by Landlord to comply with the foregoing covenant shall give Tenant
any right to cancel or terminate this Agreement or abate, reduce or make a
deduction from or offset against the Rent or any other sum payable under
this Agreement, or to fail to perform any other obligation of Tenant
hereunder.
22.9 Memorandum of Lease. Neither Landlord nor Tenant shall record
this Agreement. However, Landlord and Tenant shall promptly, upon the
request of the other, enter into a short form memorandum of this Agreement,
in form suitable for recording under the laws of the State in which
reference to this Agreement shall be made. The parties shall share equally
all costs and expenses of recording such memorandum.
22.10 Notices.
(a) Any and all notices, demands, consents, approvals, offers,
elections and other communications required or permitted under this
Agreement shall be given in writing and the same shall be delivered either
in hand, by telecopier with written acknowledgment of receipt, or by mail
or Federal Express or similar expedited commercial carrier, addressed to
the recipient of the notice, postpaid and registered or certified with
return receipt requested (if by mail), or with all freight charges prepaid
(if by Federal Express or similar expedited carrier).
(b) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Agreement upon
the date of acknowledged receipt, in the case of a notice by telecopier
and, in all other cases, upon the date of receipt or refusal, except that
whenever under this Agreement a notice is either received on a day which is
not a Business Day or is required to be delivered on or before a specific
day which is not a Business Day, the day of receipt or required delivery
shall automatically be extended to the next Business Day.
(c) All such notices shall be addressed,
if to Landlord to:
c/o LaSalle Hotel Advisors
220 East 42nd Street
New York, New York 10017
Attention: Chief Operating Officer
Telecopier: (212) 687-8170
<PAGE>
with a copy to:
LaSalle Partners
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Chief Financial Officer
and with a copy to:
Brown & Wood LLP
One World Trade Center
New York, New York 10048
Attn: Lee S. Saltzman, Esq.
Telecopier No.: (212) 839-5599
if to Tenant to:
c/o Noble House Hotels
& Resorts
25 Central Way, Suite 400
Kirkland, Washington 98053
Attention: Patrick Dyer, Esq.
Telecopier No.: (206) 827-6707
(d) By notice given as herein provided, the parties hereto and
their respective successors and assigns shall have the right from time to
time and at any time during the term of this Agreement to change their
respective addresses effective upon receipt by the other parties of such
notice and each shall have the right to specify as its address any other
address.
22.11 Construction. Anything contained in this Agreement to the
contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination or expiration of this
Agreement with respect to the Leased Property shall survive such
termination or expiration. In no event shall Landlord or Tenant be liable
for any consequential damages suffered by the other as the result of a
breach of this Agreement. Neither this Agreement nor any provision hereof
may be changed, waived, discharged or terminated except by an instrument in
writing signed by the party to be charged. All the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Each term or
provision of this Agreement to be performed by Tenant shall be construed as
an independent covenant and condition. Time is of the essence with respect
to the exercise of any rights of Tenant and Landlord under this Agreement.
Except as otherwise set forth in this Agreement, any obligations of Tenant
(including without limitation, any monetary, repair and indemnification
obligations) and Landlord shall survive the expiration or sooner
termination of this Agreement.
22.12 Counterparts, Headings. This Agreement may be executed in two
or more counterparts, each of which shall constitute an original, but
which, when taken together, shall constitute but one instrument and shall
become effective as of the date hereof when copies hereof, which, when
taken together, bear the signatures of each of the parties hereto shall
have been signed. Headings in this Agreement are for purposes of reference
only and shall not limit or affect the meaning of the provisions hereof.
1.3 Applicable Law, Etc. This Agreement shall be interpreted, construed,
applied and enforced in accordance with the laws of the State applicable to
contracts between residents of the State which are to be performed entirely
within the State, regardless of: (a) where this Agreement is executed or
delivered; (b) where any payment or other performance required by this
Agreement is made or required to be made; (c) where any breach of any
provision of this Agreement occurs, or any cause of action otherwise
accrues; (d) where any action or other proceeding is instituted or pending;
(e) the nationality, citizenship, domicile, principal place of business, or
jurisdiction of organization or domestication of any party; (f) whether the
laws of the forum jurisdiction otherwise would apply the law of a
jurisdiction other than the State; or (g) any combination of the foregoing.
<PAGE>
22.14 Right to Make Agreement. Each party warrants, with respect
to itself, that neither the execution of this Agreement, nor the
consummation of any transaction contemplated hereby, shall violate any
provision of any law, or any judgment, writ, injunction, order or decree of
any court or governmental authority having jurisdiction over it; nor result
in or constitute a breach or default under any indenture, contract, other
commitment or restriction to which it is a party or by which it is bound;
nor require any consent, vote or approval which has not been given or
taken, or at the time of the transaction involved shall not have been given
or taken. Each party covenants that it has and will continue to have
throughout the term of this Agreement and any extensions thereof, the full
right to enter into this Agreement and perform its obligations hereunder.
22.15 Transition Procedures. Upon the expiration or termination of
the Term of this Agreement, for whatever reason, Landlord and Tenant shall
do the following (and the provisions of this Section 22.15 shall survive
the expiration or termination of this Agreement until they have been fully
performed) and, in general, shall cooperate in good faith to effect an
orderly transition of the Hotel. Nothing contained herein shall limit
Landlord's rights and remedies under this Agreement if such termination
occurs as the result of an Event of Default.
(a) Transfer of Licenses. Upon the expiration or earlier
termination of the Term, Tenant shall use its best efforts (i) to transfer
to Landlord or Landlord's nominee all licenses, operating permits and other
governmental authorizations and all contracts, including contracts with
Government Agencies that may be necessary for the operation of the Hotel
(collectively, "Licenses") or (ii) if such transfer is prohibited by law or
Landlord otherwise elects, to cooperate with Landlord or Landlord's nominee
in connection with the processing by Landlord or Landlord's nominee of any
applications for the transfer of all Licenses; provided, in either case,
that the costs and expenses of any such transfer or the processing of any
such application shall be paid by Landlord or Landlord's nominee.
(b) Leases and Concessions. Tenant shall assign to Landlord
or Landlord's nominee simultaneously with the termination of this
Agreement, all leases and concession agreements in effect with respect to
the Hotel then in Tenant's or Manager's name.
(c) Books and Records. To the extent that Landlord has not
already made or received copies thereof, all books and records (including
computer records) for the Hotel kept by Tenant pursuant to Section 17.2
shall be promptly made available to Landlord or Landlord's nominee for
photocopying or other duplication.
(d) Receivables, Payables, and etc. Except with respect to
Minimum Working Capital, or as otherwise provided herein, Tenant shall be
entitled to retain all cash, bank accounts and house banks, and to collect
all Gross Revenues and accounts receivable accrued through the termination
date. Tenant shall be responsible for the payment of Rent, all Gross
Operating Expenses of the Hotel and all other obligations of Tenant accrued
under this Agreement as of the termination date, and Landlord shall be
responsible for all operating expenses of the Hotel accruing after the
termination date.
22.16 Complimentary Rooms. Tenant shall make available (to the
extent that same have not otherwise been committed) "deluxe" or "superior"
guest rooms and all related goods and services, including, without
limitation, food and beverages, telephones and facsimile services on a
no-cost complimentary basis to employees, advisors, consultants, trustees
and members of the board of directors of the REIT or the Landlord who are
visiting the Hotel in connection with the operations of the REIT or the
Landlord or doing business in the State related to the REIT or the
Landlord.
<PAGE>
22.17 Approval of Key Employees. Tenant shall not appoint, nor may
Tenant permit the Manager to appoint, any general manager, controller or
director of sales and marketing (each, a "Key Employee") for the Hotel
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed.
22.18 Incorporation of Prior Agreements. This Agreement and the
attached exhibits set forth all the agreements, terms, covenants and
conditions between Landlord and Tenant concerning the Leased Property and
there are no agreements, terms, covenants or conditions, oral or written,
between them other than those herein contained. No amendment, change or
addition to this Agreement shall be binding upon Landlord or Tenant unless
it is in writing and signed by each party.
22.19 Attorney's Fees. If either Landlord or Tenant retains an
attorney to enforce the terms of or determine rights under this Agreement,
the prevailing party shall be entitled to recover reasonable costs,
attorney's fees and expenses.
22.20 Early Termination. (a) Upon the sale of the Leased
Property by Landlord to a third party who is not related to or affiliated
with Landlord (except as to any loan arrangement between Landlord, as
lender, and such third party, as borrower), Landlord may elect to terminate
this Agreement provided that Tenant is afforded no less than Thirty (30)
days advance written notice from Landlord of such termination.
(b) As compensation for the early termination of Tenant's
leasehold estate under this Section 22.20, Landlord shall pay to Tenant the
present value of a stream of monthly payments of Monthly Cash Flow for
fifty (50%) percent of the number of complete months remaining in the
unexpired Term as of the date of closing of the sale, discounted at a rate
of ten (10%) percent per annum (the "Termination Fee" For the purposes of
this Section, "Monthly Cash Flow" shall mean the average, for each of the
twelve complete Accounting Periods preceding the date of termination of
this Agreement, of the excess of the Gross Revenues over the sum of the
Rent and Gross Operating Expenses (including any and all expenses and fees
payable under the Management Agreement) attributable to such Accounting
Periods.
22.21 Governing Law. Submission to Jurisdiction. This Agreement
is or will be made and delivered in the State and shall be governed by and
construed and interpreted in accordance with the laws of the United States
of America and the State, without regard to principles of conflict of laws.
All judicial actions, suits or proceedings brought by or against Tenant
with respect to its rights, obligations, liabilities or any other matter
under or arising out of or in connection with this Agreement or any
transaction contemplated hereby or for recognition or enforcement of any
judgment rendered in any such proceedings shall be brought by Tenant, and
may be brought by Landlord, in any state or federal court in the State. By
execution and delivery of this Agreement, Tenant accepts, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with this Agreement or any transaction contemplated hereby from
which no appeal has been taken or is available. Tenant hereby irrevocably
waives any objections, including without limitation any objection to the
laying of venue or based on the grounds of forum non conveniens, which it
may now or hereafter have to the bringing of any such action or proceeding
in any such jurisdiction. Nothing herein shall affect the right of
Landlord to bring any action, suit or proceeding against Tenant in the
court of any jurisdiction. Tenant acknowledges that final judgment against
it in any action suit or proceeding referred to in this Section shall be
conclusive and may be enforced in any other jurisdiction by suit on the
judgment, a certified or exemplified copy of which shall be conclusive
evidence of the same.
<PAGE>
22.22 Change of Control of Tenant. If, during the Term, any Parent
or Affiliate (each a "Transferor") of Tenant has elected to transfer its
interest in Tenant, which, for the purposes of this Agreement shall only be
permitted in conjunction with the sale of all, or substantially all, of
Transferor's hotel management businesses (a "Permitted Transfer"), then
such Permitted Transfer shall be made only upon the following terms and
conditions:
(a) Transferor shall give written notice of the proposed
Permitted Transfer to Landlord (the "Sale Notice");
(b) Landlord shall have thirty (30) days from the date of
receipt of the Sale Notice to provide Transferor with written notice (the
"Purchase Notice") of Landlord's intention to purchase, in Landlord's name
or in the name of Landlord's designee, Transferor's interest in Tenant at
the then Fair Market Value of such interest (the "Purchase");
(c) If Landlord elects to make the Purchase, then any parties
holding remaining interests in Tenant (each a "Third Party") shall have the
right, but not the obligation, to require Landlord to purchase (the
"Required Purchase") such remaining interests in the Tenant at the then
Fair Market Value of such interests by delivering to Landlord, no later
than fifteen (15) days from Transferor's receipt of the Purchase Notice,
written notice (the "Third Party Notice") of such Third Party's Required
Purchase election;
(d) If any Third Party fails to exercise its Required Purchase
election as provided in subparagraph (c) above, then such Third Party shall
be deemed to have unconditionally consented to (i) the admission of
Landlord as a [limited][general] partner in Tenant and (ii) the amendment
of Tenant's partnership agreement to provide that said remaining Third
Party shall not transfer its interests in Tenant except as provided for in
this Section 22.22;
(e) The closing of the Purchase, and, if applicable, the
Required Purchase, shall occur within sixty (60) days from the later to
occur of (x) delivery of the Sale Notice or (y) delivery of the Third Party
Notice;
(f) If the parties fail to agree on the Fair Market Value of
the respective interests in Tenant, the matter shall be referred to
arbitration as provided for in Article 23; provided, however, unless and
until the Fair Market Value of the respective interests in Tenant have been
fully determined, Landlord shall have no obligation to complete the
Purchase or the Required Purchase.
22.23 Non-Competition. During the Term, Tenant, or Tenant's Parent
or Affiliate shall not operate, manage, lease or own any interest, directly
or indirectly, in (a) any hotel of similar size, market or lodging category
as the Hotel, (b) any other type of business under the same or a similar
name as the Hotel, within ten (10) miles of the Leased Property. Nothing
contained herein shall prohibit Tenant from operating or participating in
no more than two (2) hotel facilities within the restricted areas if such
facilities (i) contain less than 75 guest units, (ii) are not of a similar
quality and class as would indirectly or directly compete with the Hotel,
(iii) are not in a similar market orientation with the Hotel, and (iv) have
an average daily rate which is no less than $100.00 in excess of the
Hotel's average daily rate.
<PAGE>
ARTICLE 23
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ARBITRATION
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23.1 Arbitration. In each case specified in this Agreement in
which it shall become necessary to resort to arbitration, such arbitration
shall be determined as provided in this Section 23.1. The party desiring
such arbitration shall give Notice to that effect to the other party and an
arbitrator shall be selected by mutual agreement of the parties, or if they
cannot agree within thirty (30) days of such notice, by appointment made by
the American Arbitration Association ("AAA") from among the members of its
panels who are qualified and who have experience in resolving matters of a
nature similar to the matter to be resolved by arbitration.
23.2 Intentionally Omitted.
23.3 Arbitration Procedures. In any arbitration commenced pursuant
to Article 23, a single arbitrator shall be designated and shall resolve
the dispute. The arbitrator's decision shall be binding on all parties and
shall not be subject to further review or appeal except as otherwise
allowed by applicable law. To the maximum extent practicable, the
arbitrator and the parties, and the AAA, if applicable, shall take any
action necessary to insure that the arbitration shall be concluded within
ninety (90) days of the filing of such dispute. The fees and expenses of
the arbitrator shall be shared equally by Landlord and Tenant. Unless
otherwise agreed in writing by the parties or selected by the arbitrator or
AAA, if applicable, arbitration proceedings hereunder shall be conducted in
New York City. Notwithstanding formal rules of evidence, each party may
submit such evidence as each party deems appropriate to support its
position and the arbitrator shall have access to and the right to examine
all books and records of Tenant and Landlord regarding the Hotel during the
arbitration.
IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument as of the date above first written.
LANDLORD:
LHO MISSION BAY HOTEL, L.P.
By: LASALLE HOTEL OPERATING
PARTNERSHIP, L.P., its
General Partner
By: LaSalle Hotel Properties, its
General Partner
By: /s/ MICHAEL D. BARNELLO
Name: Michael D. Barnello
Title: Chief Operating
Officer
TENANT
WESTGROUP SAN DIEGO ASSOCIATES,
LTD.
By: /s/ PHILIP BROWN
Name: Philip Brown
Title: Vice President
