<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): August 11, 1999
HERSHA HOSPITALITY TRUST
(Exact name of registrant as specified in its charter)
Maryland 005-55249 251811499
(State or other jurisdiction (Commission File No.) I.R.S. Employer
of incorporation) (Identification No.)
148 Sheraton Drive, Box A
New Cumberland, Pennsylvania 17070
(Address of principal executive offices)
(717) 770-2405
(Registrant's telephone number, including area code)
N/A
(former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On July 27, 1999, the Board of Trustees of Hersha Hospitality Trust (the
"Company") approved the acquisition of all the partnership interests in 3744
Associates, a Pennsylvania limited partnership and, through the ownership of
3744 Associates, a 60 room Comfort Inn hotel located near the John F. Kennedy
International Airport in Jamaica, New York. The property was purchased on August
11, 1999 (the "Settlement Date") by 3744 Associates from Command Hospitality,
LLC for $5.5 million. The Comfort Inn was newly constructed and commenced
operations on August 12, 1999.
3744 Associates was established as a limited partnership owned by Hasu P.
Shah and certain executive members and affiliates of the Company, (the "Hersha
affiliates"). All of the limited partnership interests in 3744 Associates were
contributed to Hersha Hospitality Limited Partnership ("HHLP" or the
"Partnership"). Further, the general partnership interest in 3744 Associates,
which was owned by an Hersha affiliated entity, Shreenathji Enterprises, Ltd.,
was contributed to Hersha Hospitality, LLC, a Virginia limited liability company
("HHLLC"). HHLP is the sole member of HHLLC. Upon the transfer of both limited
partnership and general partnership interests by the Hersha affiliates, 3744
Associates became a wholly owned subsidiary of HHLP. 3744 Associates does not
own any assets other than this recently acquired Comfort Inn hotel.
The Partnership acquired all the partnership interests in 3744 Associates
and consequently the Comfort Inn, through the use of borrowings under the
Company's line of credit.
Following the acquisition of the hotel, the property was leased by the
Partnership to Hersha Hospitality Management, LP (the "Lessee"), the lessee of
the Partnership's other hotel properties. The Lessee is a limited partnership
owned by Hasu P. Shah, the Company's Chief Executive Officer, and the Hersha
affiliates. The hotel is leased pursuant to a percentage lease that provides
for rent based in part on the room revenues from the hotels. The lease went
into effect on August 11, 1999.
The following table sets forth (i) the Initial Fixed Rent, (ii) Annual Base
Rent, and (iii) the annual Percentage Rent formula currently anticipated for
this Comfort Inn:
<TABLE>
<CAPTION>
Acquired Initial Base
Hotel Fixed Rent Rent Percentage Rent Formula
- ----- ---------- ---- -----------------------
<S> <C> <C> <C>
Comfort Inn $758,300 $357,500 43.7% of room revenue up
Jamaica, NY to $1,370,430, plus 65%
of room revenue in excess
of $1,370,430 but less
than $1,612,271, plus 29.0%
of room revenue in excess
of $1,612,271, plus 8.0% of
all non-room revenue.
</TABLE>
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements. No financial statements are required to be filed in
connection with this acquisition pursuant to Rule 3-05 of Regulation S-X.
(b) Pro Forma Financial Statements. No pro forma financial statements are
required to be filed in connection with this acquisition pursuant to Rule
11-01 of Regulation S-X.
(c) Exhibits. The following exhibits are required by Item 601 of Regulation S-
K and are listed below:
Exhibit No. Description of Exhibit
----------- ----------------------
10.1 Form of Contribution Agreement between the contributors
named therein and Hersha Hospitality Limited Partnership
10.2 Form of Percentage Lease Agreement, dated August 11, 1999,
between Hersha Hospitality Limited Partnership and Hersha
Hospitality Management, L.P.
<PAGE>
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.
HERSHA HOSPITALITY TRUST
Date: August 26, 1999 By: /s/ Hasu P. Shah
------------------------------
Hasu P. Shah
Chief Executive Officer
<PAGE>
Exhibit Index
-------------
Exhibit No. Description of Exhibit
----------- ----------------------
10.1 Form of Contribution Agreement between the contributors
named therein and Hersha Hospitality Limited Partnership
10.2 Form of Percentage Lease Agreement, dated August 11,
1999, between Hersha Hospitality Limited Partnership and
Hersha Hospitality Management, L.P.
<PAGE>
EXHIBIT 10.1
CONTRIBUTION AGREEMENT
----------------------
THIS CONTRIBUTION AGREEMENT, dated as of the ___ day of ________ 1999,
between SHREE ASSOCIATES ("Shree"), JSK II ASSOCIATES ("JSK II"), DEVI
ASSOCIATES (Devi"), SHREEJI ASSOCIATES ("Shreeji"), KUNJ ASSOCIATES ("Kunj"),
SHANTI III ASSOCIATES ("Shanti III"), all Pennsylvania limited partnerships,
NEIL H. SHAH ("Shah"), DAVID L. DESFOR ("Desfor"), MANISH M. PATNI ("Patni")AND
SHREENATHJI ENETERPRISES, LTD., a Pennsylvania corporation ("SEL") (individually
and collectively the "Contributor"), and HERSHA HOSPITALITY LIMITED PARTNERSHIP,
a Virginia limited partnership and/or its assignee (the "Acquiror"), provides:
ARTICLE 1
---------
DEFINITIONS; RULES OF CONSTRUCTION
----------------------------------
1.1 Definitions. The following terms shall have the indicated meanings:
------------
"Act of Bankruptcy" shall mean if a party hereto or any general
-----------------
partner thereof shall (a) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its property, (b) admit in writing its
inability to pay its debts as they become due, (c) make a general assignment for
the benefit of its creditors, (d) file a voluntary petition or commence a
voluntary case or proceeding under the Federal Bankruptcy Code (as now or
hereafter in effect), (e) be adjudicated a bankrupt or insolvent, (f) file a
petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts,
(g) fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case or proceeding
under the Federal Bankruptcy Code (as now or hereafter in effect), or (h) take
any corporate or partnership action for the purpose of effecting any of the
foregoing; or if a proceeding or case shall be commenced, without the
application or consent of a party hereto or any general partner thereof, in any
court of competent jurisdiction seeking (1) the liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of debts, of such
party or general partner, (2) the appointment of a receiver, custodian, trustee
or liquidator or such party or general partner or all or any substantial part of
its assets, or (3) other similar relief under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts,
and such proceeding or case shall continue undismissed; or an order (including
an order for relief entered in an involuntary case under the Federal Bankruptcy
Code, as now or hereafter in effect) judgment or decree approving or ordering
any of the foregoing shall be entered and continue unstayed and in effect, for a
period of 60 consecutive days.
"Shree Assignment and Assumption Agreement" shall mean that certain
-----------------------------------------
assignment and assumption agreement whereby Shree assigns and the Acquiror
assumes the Shree Interest.
"JSK II Assignment and Assumption Agreement" shall mean that certain
------------------------------------------
assignment and assumption agreement whereby JSK assigns and the Acquiror assumes
the JSK II Interest.
"Devi Assignment and Assumption Agreement" shall mean that certain
----------------------------------------
assignment and assumption agreement whereby Devi assigns and the Acquiror
assumes the Devi Interest.
<PAGE>
"Shreeji Assignment and Assumption Agreement" shall mean that certain
-------------------------------------------
assignment and assumption agreement whereby Shreeji assigns and the Acquiror
assumes the Shreeji Interest.
"Kunj Assignment and Assumption Agreement" shall mean that certain
----------------------------------------
assignment and assumption agreement whereby Kunj assigns and the Acquiror
assumes the Kunj Interest.
"Shanti III Assignment and Assumption Agreement" shall mean that
----------------------------------------------
certain assignment and assumption agreement whereby Shanti assigns and the
Acquiror assumes the Shanti III Interest.
"Shah Assignment and Assumption Agreement" shall mean that certain
----------------------------------------
assignment and assumption agreement whereby Shah assigns and the Acquiror
assumes the Shah Interest.
"Desfor Assignment and Assumption Agreement" shall mean that certain
------------------------------------------
assignment and assumption agreement whereby Desfor assigns and the Acquiror
assumes the Desfor Interest.
"Patni Assignment and Assumption Agreement" shall mean that certain
-----------------------------------------
assignment and assumption agreement whereby Patni assigns and the Acquiror
assumes the Patni Interest.
"SEL Assignment and Assumption Agreement" shall mean that certain
---------------------------------------
assignment and assumption agreement whereby SEL assigns and the Acquiror assumes
the SEL Interest.
"Assignment and Assumption Agreements" shall mean the Shree Assignment
------------------------------------
and Assumption Agreement, JSK II Assignment and Assumption Agreement, the Devi
Assignment and Assumption Agreement, the Shreeji Assignment and Assumption
Agreement, the Kunj Assignment and Assumption Agreement, the Shanti III
Assignment and Assumption Agreement, the Shah Assignment and Assumption
Agreement, the Desfor Assignment and Assumption Agreement, the Patni Assignment
and Assumption Agreement and the SEL Assignment and Assumption Agreement.
"Authorizations" shall mean all licenses, permits and approvals
--------------
required by any governmental or quasi-governmental agency, body or officer for
the ownership, operation and use of the Property or any part thereof.
"Bill of Sale - Personal Property" shall mean that certain bill of
--------------------------------
sale conveying title to the Tangible Personal Property, Intangible Personal
Property and the Reservation System from the Contributor to the Acquiror's
property manager, lessee or designee.
"Closing" shall mean the closing of the contribution and acquisition
-------
of the Property.
"Closing Date" shall mean the date on which the Closing occurs.
------------
"Consideration" shall mean Five Million and Five Hundred Thousand
-------------
Dollars($5,500,000).
2
<PAGE>
"Contributor's Financial Information" shall mean that certain
------------------------------------
financial information relative to the Contributor and the Property, including
income and expense statements for the Property for period commencing on the
August 11, 1999, copies of which are attached in Exhibit D.
---------
"Deed" shall mean that certain deed conveying title to the Real
----
Property with general warranty covenants of title from the Contributor to the
Acquiror, subject only to Permitted Title Exceptions. If there is any
difference between the description of the Land, as shown on Exhibit A atatched
---------
hereto and the description of the Land as shown on the Survey, the description
of the Land to be contained in the Deed and the description of the Land set
forth in the Title Commitment shall conform to the description shown on the
Survey.
"Deposit" shall mean all amounts, if any, deposited from time to time
-------
with the Escrow Agent by the Acquiror pursuant to Sections 2.2 and 6.1, plus all
--------------------
interest accrued thereon. The Deposit, if any, shall be held by the Escrow Agent
in an interest-bearing account of a federally-insured bank or banks, and shall
be held and disbursed by the Escrow Agent in strict accordance with the terms
and provisions of this Agreement.
"Escrow Agent" shall mean the Sentinel Agency, 2146 North Second
------------
Street, Harrisburg, Pennsylvania 17110, Telephone: 717/234-2666, Fax:
717/234-8198.
"FIRPTA Certifcate" shall mean the affidavit of the Contributor
-----------------
certifying (i) that the Contributor is not a foreign corporation, foreign
partnership, foreign trust, foreign estate or foreign person (as those terms are
defined in the Internal Revenue Code and the Income Tax Regulations) under
Section 1445 of the Internal Revenue Code, (ii) the information to complete IRS
Form 1099S, and (iii) the information to complete any required state income or
recordation tax reporting requirement, prepared by counsel to the Acquiror and
in form and substance reasonably acceptable to the Acquiror.
"Governmental Body" means any federal, state, municipal or other
-----------------
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign.
"Guest Ledger" shall mean that certain guest ledger dated as of
------------
Closing Date, certified by the Contributor, a copy of which is attached hereto
as Exhibit C. The Guest Ledger shall be updated and recertified as of the
---------
Closing Date.
"Hotel" shall mean the hotel and related amenities located on the
-----
Land.
"Improvements" shall mean the Hotel and all other buildings,
------------
improvements, fixtures and other items of real estate located on the Land.
"Shree Interest" shall mean all right, title and interest of Shree in
--------------
the Partnership, consisting of a 2% limited partnership interest in the
Partnership.
"JSK II Interest" shall mean all right, title and interest of JSKII in
---------------
the Partnership, consisting of a 15% limited partnership interest in the
Partnership.
"Devi Interest" shall mean all right, title and interest of Devi in
-------------
the Partnership, consisting of a 2% limited partnership interest in the
Partnership.
3
<PAGE>
"Shreeji Interest" shall mean all right, title and interest of Shreeji
----------------
in the Partnership, consisting of a 10% limited partnership interest in the
Partnership.
"Kunj Interest" shall mean all right, title and interest of Kunj in
-------------
the Partnership, consisting of a 7% limited partnership interest in the
Partnership.
"Shanti III Interest" shall mean all right, title and interest of
-------------------
Shanti III in the Partnership, consisting of a 15% limited partnership interest
in the Partnership.
"Shah Interest" shall mean all right, title and interest of Shah in
-------------
the Partnership, consisting of a 15% limited partnership interest in the
Partnership.
"Desfor Interest" shall mean all right, title and interest of Desfor
---------------
in the Partnership, consisting of a 3% limited partnership interest in the
Partnership.
"Patni Interest" shall mean all right, title and interest of Patni in
--------------
the Partnership, consisting of a 30% limited partnership interest in the
Partnership.
"SEL Interest" shall mean all right, title and interest of SEL in the
------------
Partnership, consisting of a 1% general partnership interest in the Partnership.
"Intangible Personal Property" shall mean all intangible personal
----------------------------
property owned or possessed by the Contributor and used in connection with the
ownership, operation, leasing, occupancy or maintenance of the Property,
including, without limitation, the right to use any trade name associated with
the Real Property and all variations thereof, all of the Leases and any future
leases of space in the Property, all Operating Agreements, Authorizations,
escrow accounts, insurance policies, general intangibles, business records,
plans and specifications, surveys and title insurance polices pertaining to the
Real Property, the Tangible Personal Property and intangible personal property,
all licenses, permits and approvals with respect to the construction, ownership,
operation, leasing, occupancy or maintenance of the Property and any unpaid
award for taking by condemnation or any damage to the Land by reason of a change
of grade or location of or access to any street or highway, and the share of the
Tray Ledger determined under Section 6.5, but excluding (i) any of the aforesaid
-----------
rights the Acquiror elects not to acquire and (ii) the Contributor's cash on
hand, in bank accounts and invested with financial institutions, and (iii) the
accounts receivable except for the above described share of the Tray Ledger.
"Interests" shall mean the Shree Interest, JSK II Interest, the Devi
---------
Interest, the Shreeji Interest, the Kunj Interest, the Shanti III Interest, the
Shah Interest, the Desfor Interest, and the SEL Interest.
"Inventory" shall mean all "inventories of merchandise" and
---------
"inventories of supplies", as such terms are defined in the Uniform System of
Accounts for Hotels [8th Revised Edition, 1986] as published by the Hotel
Association of New York City, Inc., as revised, and similar consumable supplies.
"Land" shall mean that certain parcel of real estate lying and being
----
located at 144-44 153rd Lane, Springfield Gardens, New York, Queens County, New
York, more commonly known
4
<PAGE>
as the JFK Comfor Inn, as more particularly described on Exhibit A attached
---------
hereto, together with all easements, rights, privileges, remainders, reversions
and appurtenances thereunto belonging or in any way appertaining, and all of the
estate, right, title, interest, claim or demand whatsoever of the Contributor
therein, in the streets and ways adjacent thereto and in the beds thereof,
either at law or in equity, in possession or expectancy, now or hereafter
acquired.
"Leases" shall mean all of the leases, if any, now in effect with
------
respect to the Property or any portion thereof, under which the Contributor is
either a landlord or tenant, and all addenda, modifications or amendments
thereto, certified true copies of which have been delivered by the Contributor
to the Acquiror.
"Operating Agreements" shall mean the management agreements, service
--------------------
contracts and other agreements, if any, in effect with respect to the
construction, ownership, operation, leasing, occupancy or maintenance of the
Property. All of the Operating Agreements in force and effect as of the date
hereof are listed on Exhibit B attached hereto.
---------
"Organizational Documents" shall mean the current partnership
------------------------
agreement and certificate of limited partnership of each of the limited
partnership Contributors, true and correct copies of which are attached hereto
as Exhibits F and G and Articles of Incorporation and Bylaws of SEL, true and
---------- -
correct copies of which are attached hereto as Exhibits O and P.
---------- -
"Shree's Organizational Documents" shall mean the current partnership
--------------------------------
agreement and certificate of limited partnership of Shree, true and correct
copies of which are attached hereto as Exhibits F and G.
---------- -
"JSK II's Organizational Documents" shall mean the current partnership
---------------------------------
agreement and certificate of limited partnership of JSK, true and correct copies
of which are attached hereto as Exhibits F and G.
---------- -
"Devi's Organizational Documents" shall mean the current partnership
-------------------------------
agreement and certificate of limited partnership of Devi, true and correct
copies of which are attached hereto as Exhibits F and G.
---------- -
"Shreeji's Organizational Documents" shall mean the current
----------------------------------
partnership agreement and certificate of limited partnership of Shreeji, true
and correct copies of which are attached hereto as Exhibits F and G.
---------- -
"Kunj's Organizational Documents" shall mean the current partnership
-------------------------------
agreement and certificate of limited partnership of Kunj, true and correct
copies of which are attached hereto as Exhibits F and G.
---------- -
"Shanti III's Organizational Documents" shall mean the current
-------------------------------------
partnership agreement and certificate of limited partnership of Shanti, true and
correct copies of which are attached hereto as Exhibits F and G.
---------- -
"SEL's Organizational Documents" shall mean the current Articles of
------------------------------
Incorporation and Bylaws of SEL, true and correct copies of which are attached
hereto as Exhibits O and P.
---------- -
5
<PAGE>
"Owner's Title Policy" shall mean an owner's policy of title insurance
--------------------
(ALTA Form B-1970) issued to the Acquiror by the Title Company, pursuant to
which the Title Company insures the Acquiror's ownership of fee simple title to
the Real Property (including the marketability thereof), subject only to
Permitted Title Exceptions (which shall exclude all preprinted, standard,
general or similar exceptions), and which provides such affirmative coverages
and endorsements reasonably requested by the Acquiror. The Owner's Title Policy
shall insure the Acquiror in the amount of the Purchase Price and shall be
acceptable in form and substance to the Acquiror. The description of the Land in
the Owner's Title Policy shall be by courses and distances and shall be
identical to the description shown on the Survey.
"Partnership" shall mean 3744 Associates, a Pennsylvania limited
-----------
partnership that owns as its sole assets hotel improvements and land located in
Sprignfield Gardens, New York, Queens County, New York.
"Permitted Title Exceptions" shall mean those exceptions to title to
--------------------------
the Real Property set forth in the Title Commitment (a) which do not require or
secure the payment of money and (b) to which Acquiror makes no objection under
Section 2.3(d).
"Property" shall mean collectively the Real Property, the Inventory,
--------
the Tangible Personal Property and the Intangible Personal Property.
"Real Property" shall mean the Land and the Improvements.
-------------
"Reservation System" shall mean the Contributor's Reservation Terminal
------------------
and Reservation System equipment and software, if any.
"Study Period" shall mean the period commencing at 9:00 a.m. on the
------------
date Contributor certifies that it has delivered all of the items required by
Section 2.3(b), and continuing through 5:00 p.m. on the date that is thirty (30)
days from such date if applicable. The time periods herein referred to shall
mean the time periods a in effect, from time to time, at the place where the
Real Property is located:
"Survey" shall mean the survey to be delivered pursuant to Section
------
5.4.
"Tangible Personal Property" shall mean the Inventory and all other
--------------------------
items of personal property owned by the Contributor, used in connection with the
Property, including, without limitation, those items listed on Exhibit E
----------
hereto.
"Title Commitment" shall mean the commitment by the Title Company to
----------------
issue the owner's Title Policy.
"Title Company" shall mean a title insurance company selected by the
-------------
Acquiror.
"Tray Ledger" shall mean the final night's room revenue (revenue from
-----------
rooms occupied as of 12:01 a.m. on the Closing Date, exclusive of food,
beverage, telephone and "similar charges which accrue prior to Closing),
including any sales taxes, room taxes or other taxes thereon.
6
<PAGE>
"Utilities" shall mean public sanitary and storm sewers, natural gas,
---------
telephone, public water facilities, electrical facilities, cable television
facilities and all other utility facilities and services necessary for the
operation and occupancy of the Property.
1.2 Rules of Construction. The following rules shall apply to the
---------------------
construction and interpretation of this Agreement:
(a) Singular words shall connote the plural number as well as the
singular and vice versa, and the masculine shall include the feminine and the
neuter.
(b) All references herein to particular articles, sections or
subsections, subsections or clauses are references to articles, sections,
subsections or clauses of this Agreement.
(c) The headings contained herein are solely for convenience of
reference and shall not constitute a part of this Agreement nor shall they
affect its meaning, construction or effect.
(d) Each party hereto and/or its counsel have reviewed and revised (or
requested revisions of) this Agreement, and therefore any usual rules of
construction requiring that ambiguities are to be resolved against a particular
party shall not be applicable in the construction and interpretation of this
Agreement or any exhibits hereto or amendments hereof.
ARTICLE 2
---------
ACQUISITION AND CONTRIBUTION; ACCESS; STUDY PERIOD;
--------------------------------------------------
PAYMENT OF CONSIDERATION
------------------------
2.1 Acquisition and Contribution. The Contributor agrees to contribute
-----------------------------
and the Acquiror agrees to acquire the Property for the Consideraation and in
accordance with the other terms and conditions set forth herein.
2.2 Deposit. Intentionally Ommitted.
-------
2.3 Study Period. Intentionally Ommitted.
------------
2.4 Inspection of Books and Records; Access. Intentioanlly Ommitted.
---------------------------------------
2.5 Payment of the Consideration. The consideration shall be paid to the
-----------------------------
Contributor in the following manner:
(a) The Acquiror shall receive a credit against the Consideration in an
amount equal to the Contributor's closing costs assumed and paid for by the
Acquiror pursuant to Section 6.4 hereof.
(b) The Acquiror shall receive a credit against the Consideration in an
amount equal to the outstanding balance (principal, interest, fees and the
like), as of the date of Closing, of the existing mortgage loan encumbering the
property as such balance is evidenced by a letter from the lender, which loan
the Acquiror shall take subject to or, if requested, assume.
7
<PAGE>
(c) The Acquiror shall pay the balance of the Consideration, if any,
as adjusted by the prorations pursuant to Section 6.5 hereof, in the form of
units of limited partnership interest in the Acquiror (the "LP Units") or in the
lawful money of the United States or in any combination thereof as acceptable to
the Contributor.
The parties agree that the transfer of the assets to the Acquiror
pursuant to this Agreement shall be treated for federal income tax purposes as a
contribution of such assets solely in exchange for a partnership interest in
Acquiror that qualifies as a tax-free contribution under Section 721 of the
Internal revenue Code of 1986, as amended.
2.6 Allocation of Consideration. The parties agree that the
---------------------------
Consideration shall be allocated among the various components of the Property in
the manner indicated by the Acquiror at Closing.
2.7 Consideration Contingency.
-------------------------
The Contributor shall value the Hotel on December 31, 2001. The value
of the Hotel shall be computed by applying a 12% capitalization rate to the
audited trailing 12 months net operating income, adjusted for a 4% of revenue
management fee and a 4% of revenue furniture, fixture and equipment reserve.
If the then current value of the Hotel exceeds the consideration paid
by Acquiror hereunder, the Acquiror will issue additional Partnership Units at
$6.00 per Unit or in the lawful money of the United States equal to the
difference between the then current value and the consideration paid hereunder
and all distributions paid on those units since Closing Date.
If the then current value of the Hotel is less than the Consideration
paid by the Acquiror hereunder, the Contributor will return to the Acquirer
Partnership Units at $6.00 per Unit or any lawful money of the United States, if
any, equal to the difference between the then current value of the Hotel and the
Consideration paid hereunder and all distributions paid on those units since the
Closing Date.
2.8 Confidentiality. Except as hereinafter provided, from and after
---------------
the execution of this Agreement, the Acquiror and the Contributor shall keep the
terms, conditions and provisions of this Agreement confidential and neither
shall make any public announcements hereof unless the other first approves of
same in writing, nor shall either disclose the terms, conditions and provisions
hereof, except to persons who "need to know", such as their respective
attorneys, accountants, engineers, surveyors, financiers and bankers.
Notwithstanding the foregoing, it is acknowledged that the general partner of
the Acquiror has elected to be a real estate investment trust ("REIT") and that
the REIT has sold shares and may seek to sell additional shares to the general
public and that in connection therewith, the Acquiror will have the absolute and
unbridled right to market such securities and prepare and file all necessary or
reasonably required registration statements, disclosure statements, and other
papers, documents and instruments necessary or reasonably required in the
Acquiror's judgment and that of its attorneys and underwriters with respect to
the REIT's shares with the U.S. Securities and Exchange Commission and/or
similar state authorities and to cause same to become effective and to disclose
therein and thus to its underwriters, to the U.S. Securities and Exchange
Commission and/or to similar state authorities and to the public all of the
terms, conditions and provisions of this Agreement.
8
<PAGE>
ARTICLE 3
---------
CONTRIBUTOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS
-------------------------------------------------------
To induce the Acquiror to enter into this Agreement and to Acquisition the
Property, and to pay the Purchase Price therefor, the Contributor hereby makes
the following representations, warranties and covenants with respect to the
Property, upon each of which the Contributor acknowledges and agrees that the
Acquiror is entitled to rely and has relied:
3.1 Organization and Power. The Contributor is an entity duly formed and
----------------------
validly existing and in good standing under the laws of the State of its
organization and has all requisite powers and all governmental licenses,
authorizations, consents and approvals to carry on its business as now conducted
and to enter into and perform its obligations hereunder and under any document
or instrument required to be executed and delivered on behalf of the Contributor
/hereunder.
3.2 Authorization and Execution. This Agreement has been duly authorized
---------------------------
by all necessary action on the part of the Contributor, has been duly executed
and delivered by the Contributor, constitutes the valid and binding agreement of
the Contributor and is enforceable in accordance with its terms.
3.3 Noncontravention. The execution and delivery of, and the performance
----------------
by the Contributor of its obligations under this Agreement do not and will not
contravene, or constitute a default under, any provision of applicable Law or
regulation, the Contributor's organizational documents or any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Contributor, or result in the creation of any lien or other encumbrance on any
asset of the Contributor. There are no outstanding agreements (written or oral)
pursuant to which the Contributor (or any predecessor to or representative of
the Contributor) has agreed to sell or has granted an option to Acquisition the
Property (or any part thereof).
3.4 No Special Taxes. The Contributor has no knowledge of, nor has it
----------------
received any notice of, any special taxes or assessments relating to the
Property or any part thereof or any planned public improvements that may result
in a special tax or assessment against the Property.
3.5 Compliance with Existing Laws. The Contributor possesses all
-----------------------------
Authorizations, each of which is valid and in full force and effect, and no
provision, condition or limitation of any of the Authorizations has been
breached or violated. The Contributor has not represented or failed to disclose
any relevant fact in obtaining all Authorizations, and the Contributor has no
knowledge of any change in the circumstances under which those Authorizations
were obtained that could result in their termination, suspension, modification
or limitation. The current use and occupancy of the Property as a hotel are
permitted as a principal use under all laws applicable thereto without the
necessity of resort to any grandfathered or nonconforming use status, or any
special use permit, special exception or other special permit, permission or
consent. The Contributor has no knowledge, nor has it received notice within the
past three years, of any existing or threatened violation of any provision of
any applicable building, zoning, subdivision, environmental or other
governmental ordinance, resolution, statute, rule, order or regulation,
including but not limited to those of environmental agencies or insurance boards
of underwriters, with respect to the ownership, operation, use, maintenance or
condition of the Property or any part thereof, or requiring any repairs or
alterations other than those that have been made prior to the date hereof.
9
<PAGE>
3.6 Personal Property. All of the Tangible Personal Property and
-----------------
Intangible Personal Property are owned and will be conveyed by the Contributor
free and clear of all liens and encumbrances. The Contributor has good,
merchantable title thereto and the right to convey same in accordance with the
terms of this Agreement .
3.7 Title and Survey Matters. The Contributor is the sole owner of full
------------------------
legal, equitable and beneficial title to the Property and no consent of or
joinder by any other person is required for the Contributor to convey the full
legal, equitable and beneficial title to and ownership of the Property to the
Acquiror in accordance with this Agreement. Except to the extent such
obligations may be inconsistent herewith, the Contributor shall perform all of
its obligations under all documents affecting title to all or any part of the
Property and shall not permit or allow to continue any defaults thereunder. The
Contributor shall not, after the date of this Agreement, subject the Property to
any liens, encumbrances, covenants, conditions, restrictions, easements or other
title matters or seek any zoning or other land use changes or take any other
action which may affect or modify the status of title to or the permitted uses
of the Property without the Acquiror's prior express written consent.
3.8 Status off Leases. Each of the Leases is valid and in full force and
------------------
effect, have not been further modified or amended and is assignable to Acquiror
without the consent of the other party thereto. There are no defaults under any
of the Leases by the Contributor or, to the best of the Contributor's knowledge,
by the other party thereunder, and no fact or circumstance has occurred that, by
itself or with the giving of notice or the passage of time or both, would
constitute such a default by the Contributor or, to the best of the
Contributor's knowledge, by the other party thereunder. The Contributor has the
sole right to collect the rent under the Leases and neither such right nor any
of the Leases has been assigned, pledged, hypothecated or otherwise encumbered.
From the date hereof through and including the date of Closing, the Contributor
shall not modify any of the Leases in any material manner. The Contributor shall
perform all of its obligations under the Leases from the date hereof through and
including the date of Closing.
3.9 Operating Agreements and Other Agreements. Each of the Operating
-----------------------------------------
Agreements may be terminated by the Contributor or the Acquiror upon not more
than 30 days' prior written notice and without the payment of any penalty, fee,
premium or other amount. The Contributor has performed all of its obligations
under each of the Operating Agreements and no fact or circumstance has occurred
which, by itself or with the passage of time or the giving of notice or both,
would constitute a default under any of the Operating Agreements. The
Contributor shall not enter into any new management agreement, maintenance or
repair contract, supply contract, lease (as lessor or lessee) or other
agreements with respect to the Property, nor shall the Contributor enter into
any agreements modifying the Operating Agreements, unless (a) any such agreement
or modification will not bind the Acquiror or the Property after the Closing
Date or (b) the Contributor has obtained the express prior written consent of
the Acquiror to such agreement or modification. The Contributor agrees to cancel
and terminate all of the Operating Agreements as of the Closing unless the
Acquiror requests in writing prior to Closing that one or more remain in effect
after Closing. The Acquiror hereby agrees to assume all other agreements and
non-operating agreements to which the Contributor and /or 2844 Associates, a
Pennsylvania limited partnership, is a party.
3.10 Warranties and Guaranties. The Contributor shall not before or after
-------------------------
Closing, release or modify any warranties or guarantees, if any, of
manufacturers, suppliers and installers relating to
10
<PAGE>
Improvements and the Tangible Personal Property and Intangible Personal Property
or any part thereof, except with the prior written consent of the Acquiror.
3.11 Insurance. All of the Contributor's insurance policies are valid
---------
and in full force and effect, all premiums for such policies were paid when due
and all future premiums for such policies (and any replacements thereof) shall
be paid by the Contributor on or before the due date therefor. The Contributor
shall pay all premiums on, and shall not- cancel or voluntarily allow to expire,
any of the Contributor's insurance policies unless such policy is replaced,
without any lapse of coverage, by another policy or policies providing coverage
at least as extensive as the policy or policies being replaced. The Contributor
shall name the Acquiror as an additional insured on each of the Contributor's
insurance's policies. The Contributor agrees to transfer any such policies as of
the Closing Date upon the written request of the Acquiror and the premiums on
any of such policies that the Acquiror elects to have assigned to it shall be
allocated between the Contributor and the Acquiror as of the Closing Date.
3.12 Condemnation Proceedings; Roadways. The Contributor has not received
----------------------------------
notice of any condemnation or eminent domain proceeding pending or threatened
against the Property or any part thereof. The Contributor has no knowledge of
any change or proposed change in the route, grade or width of, or otherwise
affecting, any street or road adjacent to or serving the Real Property.
3.13 Litigation. There is no action, suit or proceeding pending or known to
----------
be threatened against or affecting the Contributor or any principal, subsidiary
or affiliate of the Contributor in any court, before any arbitrator or before or
by any Governmental Body which (a) in any manner raises any question affecting
the validity or enforceability of this Agreement or any other agreement or
instrument to which the Contributor is a party or by which it is bound and that
is or is to be used in connection with, or is contemplated by, this Agreement,
(b) could materially and adversely affect the business, financial position or
results of operations of the Contributor or any principal, subsidiary or
affiliate of the Contributor, (c) could adversely affect the ability of the
Contributor to perform its obligations hereunder, or under any document to be
delivered pursuant hereto, (d) could create a lien on the Property, any part
thereof or any interest therein, (e) the subject matter of which concerns any
past or present employee of the Contributor or its managing agent or (f) could
otherwise adversely affect the Property, any part thereof or any interest
therein or the use, operation, condition or occupancy thereof.
3.14 Labor and Employment Agreements. There are no labor disputes pending
-------------------------------
or, to the best of the Contributor's knowledge, threatened as to the operation
or maintenance of the Property or any part thereof. The Contributor is not a
party to any union or other collective bargaining agreement with employees
employed in connection with the ownership, operation or maintenance of the
Property. The Contributor is not a party to any employment contracts or
agreements, written or oral, with any persons employed with respect to the
Property that will be binding on the Acquiror on or after the Closing. Neither
the Contributor nor its managing agent (if any) will, between the date hereof
and the Closing Date, enter into any new employment contracts or agreements or
hire any new employees that will be binding on the Acquiror on or after the
Closing. The Acquiror will not be obligated to give or pay any amount to any
employee of the Contributor or the Contributor's managing agent. The Acquiror
shall not have any liability under any pension or profit sharing plan that the
Contributor or its managing agent may have established with respect to the
Property or their or its employees.
11
<PAGE>
3.15 Financial Information. All of the Contributor's Financial Information
---------------------
is correct and complete in all respects and presents accurately the results of
the operations of the Property for the period commencing on the 11/th/ of
August, 1999. Since the date of the last financial statement included in the
Contributor's Financial Information, there has been no material adverse change
in the financial condition or in the operations of the Property. The Contributor
will provide access by Acquiror's representatives, to all financial and other
information relating to the Property, and such representatives shall determine
that such information is sufficient to enable them to prepare audited financial
statements in conformity with Regulation S-X of the Securities and Exchange
Commission and any registration statement, report or disclosure statement filed
with and any rule issued by, the Securities and Exchange Commission. The
Contributor will provide a signed representation letter as prescribed by
Generally Accepted Auditing Standards as promulgated by the Aud1ting Standards
Division of the American Institute of Public Accountants which representation is
required to enable an independent public accountant to render an opinion on such
financial statements.
3.16 Organizational Documents. The Contributor's Organizational Documents
------------------------
are in full force and effect and have not been modified or supplemented, and no
fact or circumstance has occurred that, by itself or with the giving of notice
or the passage of time or both, would constitute a default thereunder.
3.17 Excluded Liabilities.
--------------------
(i) The Acquiror is not assuming or undertaking to assume and shall
have no responsibility for any expenses, debts, obligations, liabilities,
claims, demands, fines or penalties, whether fixed or contingent, past, present
or future, or direct for indirect, arising out of or in connection with the
conduct by the Contributor of its business or the ownership and use of the
Property prior to the Closing (the "Excluded Liabilities"), including without
limitation, any of the Excluded Liabilities arising out of or in connection with
the failure by the Contributor to comply with any applicable Environmental Laws
including, without limitation any Environmental Laws regarding pollution
control, underground storage tanks, asbestos or other environmental matters
applicable to the Property.
(ii) The Contributor agrees to defend, indemnify and hold harmless the
Acquiror from and against any of the Excluded Liabilities and any other damages,
losses, costs, expenses, claims or demands (including fines, penalties,
diminution in value of the Property, court costs and reasonable attorneys' fees)
that may be incurred by or imposed on the Acquiror as a result of (i) the
conduct by the Contributor of its business in connection with the Property prior
to the Closing and (ii) any material breach by the Contributor of any
representation or warranty of the Contributor contained herein applicable to the
Property.
3.18 Historical Districts. Neither the Property, nor any portion thereof,
--------------------
is (a) listed, or eligible to be listed, in any national, state or local
register of historic places or areas, or (b) located within any designated
district or area in which the permitted uses of land located therein are
restricted by regulations, rules or laws other than those specified under local
zoning ordinances.
3.19 Brokerage Commission. The Contributor has not engaged the services of,
--------------------
nor is it or will it become liable to, any real estate agent, broker, finder or
any other person or entity for any
12
<PAGE>
brokerage or finder's fee, commission or other amount with respect to the
transactions described herein.
3.20 Environmental.
-------------
(i) The Contributor, and any person or entity for whose conduct the
Contributor is liable, has no liability under, has never materially violated,
and is presently in material compliance with, all federal, state and local
environmental or health and safety-related laws, rules, regulations and
ordinances (together, Environmental Laws) applicable to the Property.
(ii) There exist no environmental conditions with respect to the
Property that could or do result in any damage, loss, cost, expense or liability
to or against the Contributor or the Acquiror.
(iii) Other than those hazardous or toxic substances commonly used in
the operation of a hotel, which hazardous or toxic substances are stored in
accordance with all applicable Environmental Laws, the Contributor, and any
other person or entity for whose conduct Contributor is liable, has not
generated, transported, stored, handled or disposed of any hazardous or toxic
substances at the Property, and has no knowledge of any release or threatened
release of any hazardous or toxic substance at the Property or in the vicinity
of the Property.
(iv) No lien has been imposed on the Property by any federal, state
or local governmental agency in connection with the presence at or near the
Property of any hazardous or toxic substance.
(v) The Contributor, and any person or entity for whose conduct the
Contributor is responsible, has not (i) entered into or been the subject of any
order or decree with respect to environmental matters with respect to the
Property, (ii) received notice under the citizen suit provisions of any
Environmental Law in connection with the Property, (iii) received any request
for information, notice, demand letter, administrative inquiry or formal or
informal complaint or claim in respect of any environmental condition relating
to the Property, or (iv) been subject to or threatened with any governmental or
citizen enforcement action with respect to the Property; and the Contributor,
and any other person for whose conduct the Contributor is liable, has no reason
to believe that any of the foregoing will be forthcoming.
(vi) The Contributor has all licenses, permits or approvals, if any,
required for the activities and operations conducted at the Property and for any
past or ongoing alterations or improvements on the Property.
3.21 Sufficiency of Certain Items. The Property contains not less than:
----------------------------
(a) a sufficient amount of kitchen equipment, bar equipment,
refrigeration equipment, silverware, glassware, china, dishes, "small goods",
napkins, tablecloths, paper goods and other such personal property to
efficiently operate each of the restaurants, bars and lounges, located upon or
within the Improvements;
13
<PAGE>
(b) a sufficient amount of furniture, furnishings, color television
sets, carpets, drapes, rugs, floor coverings, mattresses, pillows, bedspreads
and the like, to furnish each guest room, so that each such guest room is, in
fact, fully furnished; and
(c) a sufficient amount of towels, washcloths and bed linens, so that
there are two and one-half sets of towels, washcloths and linens for each guest
room (one on the beds, one on the shelves, and one-half in the laundry),
together with a sufficient supply of paper goods' soaps, cleaning supplies and
other such supplies and materials, as are reasonably adequate for the current
operation of the Hotel.
3.22 Operation of Property Prior to Closing. Between the date of this
--------------------------------------
Agreement and the Closing Date, Contributor shall operate the Property in
compliance with all laws and in the same manner in which Contributor operated
the Property prior to the execution of this Agreement, so as to keep the
Property in good condition, reasonable wear and tear excepted, and so as to
maintain the existing caliber of the Hotel operations conducted at the Property
and the reasonable good will of the tenants, the Hotel guests, the employees and
other customers of the Hotel. The Contributor shall continue to use its best
efforts to take guest room reservations and to book functions and meetings and
otherwise to promote the business of the Property in generally the same manner
as the Contributor did prior to the execution of this Agreement. All advance
room bookings and reservations and all meetings and function bookings shall be
booked at rates, prices and charges heretofore customarily charged by the
Contributor for such purposes, and in accordance with Contributor's published
rate schedules. From and after the execution and delivery of this Agreement, the
Contributor shall not (i) make any agreements which shall be binding upon the
Acquiror with respect to the Property, or (ii) reduce or cause to be reduced any
room rents or any other charges over which Contributor has operational control.
Between the date hereof and the Closing Date, the Contributor shall deliver to
the Acquiror monthly reports (or for the partial monthly period up to the
Closing Date) showing the income and expenses of the Hotel and all departments
thereof, together with such periodic information with respect to room
reservations and other bookings, as the Contributor customarily keeps internally
for its own use. The Contributor agrees that it will operate the Property and
the Hotel in accordance with the provisions of this section between the date
hereof and the Closing Date.
3.23 Utilities. All Utilities required for the operation of the Property
---------
either enter the Property through adjoining streets, or they pass through
adjoining land, do so in accordance with valid public easements or private
easements, and all of said Utilities are installed and operating and all
installation and connection charges therefor have been paid in full.
3.24 Curb Cuts. All curb cut street opening permits or licenses required
---------
for vehicular access to and from the Real Property from any adjoining public
street have been obtained and paid for and are in full force and effect. The
Real Property has a right of unrestricted access to a public street.
3.25 Room Furnishings. Each room in the Hotel available for guest rental is
----------------
and at Closing will be furnished in accordance with Licensor's standards for the
Hotel and room type.
3.26 Franchise Agreement. The franchise agreement with respect to the
-------------------
Hotel is, and at Closing will be, valid and in full force and effect, and
Contributor is not and will not be in default with respect thereto (with or
without the giving of any required notice and/or lapse of time).
14
<PAGE>
ARTICLE 4
---------
ACQUIROR'S REPRESENTATIONS; WARRANTIES AND COVENANTS
----------------------------------------------------
To induce the Contributor to enter into this Agreement and to contribute
the Property, the Acquiror hereby makes the following representations,
warranties and covenants with respect to the Property, upon each of which the
Acquiror acknowledges and agrees that the Contributor is entitled to rely and
has relied:
4.1 Power. The Acquiror has all powers and all governmental licenses,
-----
authorizations, consents and approvals to carry on its business as now conducted
and to enter into and perform its obligations under this Agreement and any
document or instrument required to be executed and delivered on behalf of the
Acquiror hereunder.
4.2 Execution. This Agreement has been executed and delivered by the
---------
Acquiror, constitutes the valid and binding agreement of the Acquiror and is
enforceable in accordance with its terms.
4.3 Noncontravention. The execution and delivery of and the performance by
----------------
the Acquiror of its obligations hereunder do not and will not contravene, or
constitute a default under, any provisions of applicable law or regulation, or
any agreement, judgment, injunction, order, decree or other instrument binding
upon the Acquiror or result in the creation of any lien or other encumbrance on
any asset of the Acquiror.
4.4 Litigation. There is no action, suit or proceeding, pending or known to
----------
be threatened, against or affecting the Acquiror or any principal, subsidiary or
affiliate of the Acquiror in any court or before any arbitrator or before any
Governmental Body which (a) in any manner raises any question affecting the
validity or enforceability of this Agreement or any other agreement or
instrument to which the Acquiror is a party or by which it is bound and that is
to be used in connection with, or is contemplated by, this Agreement, (b) could
materially and adversely affect the business, financial position or results of
operations of the Acquiror or any principal, subsidiary or affiliate of the
Acquiror, (c) could adversely affect the ability of the Acquiror to perform its
obligations hereunder, or under any document to be delivered pursuant hereto,
(d) could create a lien on the Property, any part thereof or any interest
therein or (e) could adversely affect the Property, any part thereof or any
interest therein or the use, operation, condition or occupancy thereof.
4.5 Bankruptcy. No Act of Bankruptcy has occurred with respect to the
----------
Acquiror.
4.6 Brokerage Commission. The Acquiror has not engaged the services of, nor
--------------------
is it or will it become liable to, any real estate agent, broker, finder or any
other person or entity for any brokerage or finder's fee, commission or other
amount with respect to the transaction described herein.
ARTICLE 5
---------
CONDITIONS AND ADDITIONAL COVENANTS
-----------------------------------
The Acquiror's obligations hereunder are subject to the satisfaction of the
following conditions precedent and the compliance by the Contributor with the
following covenants:
15
<PAGE>
5.1 Contributor's Deliveries. The Contributor shall have delivered to the
------------------------
Acquiror, on or before the Closing Date, all of the documents and other
information required of Contributor pursuant to Section 6.2.
5.2 Representations, Warranties and Covenants; Obligations of Contributor;
----------------------------------------------------------------------
Certificate. All of the Contributor's representations and warranties made in
- -----------
this Agreement shall be true and correct as of the Closing Date as if then made,
there shall have occurred no material adverse change in the financial condition
of the Contributor or the physical or financial condition of the Property since
the date hereof, the Contributor shall have performed all of its covenants and
other obligations under this Agreement and the Contributor shall have executed
and delivered to the Acquiror at Closing a Certificate to the foregoing effect.
5.3 Title Matters. Acquiror shall have received from Contributor a copy of
-------------
Contributor's Owner's Title Policy. The Acquiror shall have determined that the
Contributor is the sole owner of good and marketable fee simple title to the
Real Property free and clear of all liens, encumbrances, restrictions,
conditions and agreements except for Permitted Title Exceptions. The Contributor
shall not have taken any action from the date hereof and through and including
the Closing Date that would adversely affect the status of title to the Real
Property. Fee simple title to the Real Property shall be insurable as such by
the Title Company at or below its regularly scheduled rates subject only to
Permitted Title Exceptions.
5.4 Survey. The Acquiror shall have received the most recent Survey of the
------
Land obtained by or in the possession of Contributor. The Survey provided by the
Contributor (or a survey obtained by Acquiror if Contributor's Survey was
prepared more than one year earlier) shall be adequate for the Title Company to
delete any exception for survey in the Owner's Title Policy.
5.5 Condition of Improvements and the Tangible Personal Property. The
------------------------------------------------------------
Improvements and the Tangible Personal Property (including but not limited to
the mechanical systems, plumbing, electrical, wiring, appliances, fixtures,
heating, air conditioning and ventilating equipment, elevators, boilers,
equipment, roofs, structural members and furnaces) shall be in good condition
and working order and shall have no material defects, structural or otherwise,
and there shall be no deferred maintenance with respect to the Real Property,
the Tangible Personal Property or any part thereof, and the Contributor shall
not have diminished the Inventory. The Contributor, at its expense, shall have
maintained the Real Property and the Tangible Personal Property in compliance
with all applicable laws and in at least as good condition as they are in as of
the date hereof, normal wear and tear excepted. The Contributor shall not have
diminished the quality or quantity of maintenance and upkeep services heretofore
provided to the Real Property and the Tangible Personal Property. The
Contributor shall not have removed or caused or permitted to be removed any part
or portion of the Real Property or the Tangible Personal Property unless the
same is replaced, prior to Closing, with similar items of at least equal
quality and acceptable to the Acquiror.
5.6 Utilities. All of the Utilities shall be installed in and operating at
---------
the Property, and service shall be available for the removal of garbage and
other waste from the Property. Between the date hereof and the Closing Date, the
Contributor shall not have received notice of any extraordinary or material
increase or proposed increase in the rates charged for the Utilities from the
rates in effect as of the date hereof.
16
<PAGE>
5.7 Land Use. The current use and occupancy of the Property as a hotel
--------
and for hotel-related purposes are permitted as a principal use under all laws
applicable thereto without the necessity of resort to any grandfathered or
permitted nonconforming use status, or any special use permit, special exception
or other special permit, permission or consent.
5.8 Lease Estoppel Certificates. The Acquiror shall have received an
---------------------------
estoppel certificate for each of the Leases, if any, as provided herein and, if
required by the Acquiror's lender, subordination, attornment and nondisturbance
agreements acceptable to such lender, all in form and substance reasonably
acceptable to the Acquiror. The Contributor, at its expense, shall request and
use Contributor's best efforts to obtain a lease estoppel certificate from all
of third parties under all of the Leases prior to Closing Date.
5.9 Franchise. The Acquiror or its designee shall have received, at the
---------
Acquiror's option and expense, an assignment or transfer of any existing
franchise agreement currently applicable to the Hotel or a new franchise
agreement from Choice Hotels International (the "Franchisor"), together with an
estoppel certificate from the existing Franchisor in form and substance
acceptable to the Acquiror, which the Contributor agrees to use its best efforts
to obtain.
5.10 Operational Licenses. Acquiror shall have obtained all permits,
--------------------
licenses, approvals and Authorizations necessary or desirable to operate the
Hotel and all restaurants, bars and lounges presently located in the Hotel,
including, without limitation, liquor licenses or alcoholic beverage licenses.
To that end, the Contributor and the Acquiror shall have cooperated with each
other, and each shall have executed such transfer forms, license applications
and other documents as may be necessary or desirable for Acquiror to obtain such
permits, licenses, approvals and Authorizations.
5.11 Securities Compliance. Contributor shall cooperate with Acquiror to
---------------------
provide all information and execute all documents necessary for Acquiror to
comply with all applicable state and federal securities laws.
5.12 First Right of Refusal. Contributor or any of its officers or
----------------------
affiliates shall have right to acquire, develop, manage, lease, operate, or have
any interest in any hotel or lodging establishment in any location within any
distance from the Property (JFK Comfort Inn). However, the Acquiror shall have
a first right of refusal to acquire such a hotel or lodging establishment within
a fifteen (15) mile radius of the Property during a period of five (5) years
from the Closing Date. This provision shall survive the Closing Date.
Each of the conditions and additional covenants contained in this Section
are intended for the benefit of the Acquiror and may be waived in whole or in
part, by the Acquiror, but only by an instrument in writing signed by the
Acquiror.
ARTICLE 6
--------
CLOSING
-------
6.1 Closing. Closing shall be held at the offices of the Acquiror or its
-------
counsel on August 11, 1999, upon notice from Acquiror to Contributor commencing
at 9:00 AM local time unless otherwise agreed by the Acquiror and the
Contributor. The Acquiror shall have the right, but not the obligation, to
extend the Closing Date, one or more times, but not beyond, 1999, by written
17
<PAGE>
notice thereof to the Contributor. Possession of the Property shall be delivered
to the Acquiror at Closing, subject only to Permitted Title Exceptions.
6.2 Contributor's Deliveries.
------------------------
(a) At Closing, the Contributor shall deliver to Acquiror all of
the following instruments, each of which shall have been duly executed and,
where applicable, acknowledged on behalf of the Contributor and shall be dated
as of the Closing Date:
(i) The certificate required by Section 5.2.
-----------
(ii) An Assignment of Leases, if applicable
(iii) Lease Estoppel Certificates, if applicable.
(iv) The FIRPTA Certificate.
(v) The Assignment and Assumption Agreement.
(vi) Settlement Sheet.
(vii) Bill of Sale for all Tangible Personal Property.
(viii) Deed.
(ix) Opinion of counsel or other evidence (such as
organization documents including certificates and authorizing resolutions)
satisfactory to Acquiror as to Contributor's authority to enter into and
consummate this Agreement.
(x) Such agreements, affidavits or other documents as
may be required by the Title Company to issue the Owner's Title Policy.
(b) At Closing, the Contributor shall also deliver or cause to
be delivered to the Acquiror the following:
(i) The originals of any Leases or true, correct and
complete copies thereof certified by the Contributor.
(ii) A valid, final and unconditional certificate of
occupancy as to the Real Property issued by the: appropriate governmental
authority.
(iii) If part of the Tangible Personal Property consists
of a motor vehicle titled under state law, a duly executed and delivered
document transferring title pursuant to applicable state law and related
documents.
(iv) True, correct and complete copies of all plans,
specifications, guaranties and warranties, if any, of contractors,
subcontractors, manufacturers, suppliers and installers possessed by the
Contributor and relating to the Improvements and the Tangible Personal Property
and Intangible Personal Property, or any-part thereof.
(v) Copies of all correspondence, files, documents,
records and data relating the operation of the Property for the period
commencing on January1, 1999 until Closing.
(vi) A11 keys for the Property.
18
<PAGE>
(vii) A complete list of all advance room reservations,
functions and the like, including all deposits thereon, in reasonable detail
specified by the Acquiror.
(viii) Updated Guest Ledger.
(ix) Any other document, instrument, information or item
reasonably requested by the Acquiror or required hereby.
6.3 Acquiror's Deliveries. At Closing, the Acquiror shall pay, deliver or
---------------------
cause to be delivered to the Contributor, as appropriate, the following:
(a) The Purchase Price in the manner set forth in Section 2.5
hereof.
(b) The Assignment and Assumption Agreement.
(c) Any other document or instrument reasonably requested by the
Contributor or required hereby.
6.4 Closing Costs. The Contributor shall pay (i) all applicable sales and
-------------
use taxes (if any) levied on the transfer of the Tangible or Intangible Personal
Property, (ii) any expenses incurred by or on behalf of the Contributor. The
Acquiror shall pay (i) all Title Company charges, (ii) all of the recording
taxes and fees, (iii) all costs of the transfer of franchise and mortgage
secured on the Property, and (iv) any expenses incurred by or on behalf of the
Acquiror. Each party hereto shall pay its own legal fees and expenses.
6.5 Income and Expense Allocations.
------------------------------
(a) At Closing, all income and expenses with respect to the
Property, and applicable to the period of time before and after Closing,
determined in accordance with generally accepted accounting principles
consistently applied, shall be allocated between the Contributor and the
Acquiror as of the Closing Date. The Contributor shall be entitled to all
income, including the Tray Ledger, and responsible for all expenses for the
period of time up to but not including the Closing Date, and the Acquiror shall
be entitled to all income and responsible for all expenses for the period of
time from, after and including the Closing Date. Without limiting the generality
of the foregoing, Contributor shall pay to Acquiror or Acquiror shall pay to
Contributor at Closing, or there shall be an appropriate Closing adjustment for,
the net cash payable to the Acquiror or Contributor, as appropriate, based on
the allocation set forth above. All adjustments shall be shown on the settlement
statement or may be done outside the settlement statement (with such supporting
documentation as the parties may reasonably require being attached as exhibits
to the settlement statements or submit to the parties as appropriate) and if on
the settlement statement shall increase or decrease (as the case may be) the
balance of the Purchase Price payable by the Acquiror at Closing. The
Contributor shall pay at Closing all special assessments and taxes applicable to
the Property and relating to the period prior to Closing.
(b) If accurate allocations cannot be made at Closing because
current bills are not obtainable (as, for example, in the case of utility
bills), the parties shall allocate such income or expenses at Closing on the
best available information, subject to adjustment upon receipt of the final bill
or other evidence of the applicable income or expense. Any expense paid by the
19
<PAGE>
Contributor or the Acquiror with respect to the Property after the Closing Date
shall be promptly allocated in the manner described herein and the parties shall
promptly pay or reimburse any amount due.
(c) Acquiror shall have no obligation to collect any accounts
receivable allocable to the period prior to Closing. All income attributable to
the Property collected by the Acquiror after the Closing Date shall be first
applied against accounts receivable and other obligations allocable to the
period after the Closing Date. The Contributor shall not sue an obligor with
respect to the Property that maintains a contractual relationship with the
Acquiror after the Closing Date.
ARTICLE 7
--------
CONDEMNATION: RISK OF LOSS
--------------------------
7.1 Condemnation. In the event of any actual or threatened taking,
------------
pursuant to the power of eminent domain, of all or any portion of the Real
Property, or any proposed sale in lieu thereof, the Contributor shall give
written notice thereof to the Acquiror promptly after the Contributor learns or
receives notice thereof. If all or any part of the Real Property is, or is to
be, so condemned or sold, the Acquiror shall have the right to terminate this
Agreement pursuant to Section 8.3. If the Acquiror elects not to terminate this
-----------
Agreement, all proceeds, awards and other payments arising out of such
condemnation or sale (actual or threatened) shall be paid to the Acquiror at
Closing.
7.2 Risk of Loss. The risk of any loss or damage to the Property prior to
------------
the Closing shall remain upon the Contributor. If any such loss or damage occurs
prior to Closing, the Acquiror shall have the right to terminate this Agreement
pursuant to Section 3.3. If the Acquiror elects not to terminate this Agreement,
-----------
it may choose to restore the Property itself, in which event Contributor shall
assign or pay, or cause to be paid, to Acquiror all insurance proceeds payable
on account of such loss or damage and the Contributor shall not be responsible
to the Acquiror for any additional sums required to restore the Property.
ARTICLE 8
---------
LIABILITY OF ACQUIROR; INDEMNIFICATION BY CONTRIBUTOR;
------------------------------------------------------
TERMINATION RIGHTS
------------------
8.1 Liability of Acquiror. Except for any obligation expressly assumed or
---------------------
agreed to be assumed by the Acquiror hereunder, the Acquiror does not assume any
obligation of the Contributor or any liability for claims arising out of any
occurrence prior to Closing.
8.2 Indemnification.
---------------
(a) The Contributor hereby indemnifies and holds the Acquiror
harmless from and against any and all claims, costs, penalties, damages, losses,
liabilities and expenses (including reasonable attorneys' fees) that may at any
time be incurred by the Acquiror, whether before or after Closing, as a result
of any material breach by the Contributor of any of Contributor's
representations, warranties, covenants or obligations set forth herein or in any
other document delivered by the Contributor under this Agreement, or as a result
of acts or events occurring prior to the Closing Date.
20
<PAGE>
(b) The Acquiror hereby indemnifies and holds the Contributor harmless
from and against any and all claims, costs, penalties, damages, losses,
liabilities and expenses (including reasonable attorneys' fees) that may at any
time be incurred by the Contributor, whether before or after Closing, as a
result of any material breach by the Acquiror of any of Acquiror's
representations, warranties, covenants or obligations set forth herein or in any
other document delivered by the Acquiror under this Agreement, or as a result of
acts or events occurring after the Closing Date.
8.3 Termination by Acquiror. If any condition set forth herein cannot or
-----------------------
will not be satisfied prior to Closing, or upon the occurrence of any other
event that would entitle the Acquiror to terminate this Agreement and its
obligations hereunder, the Acquiror, at its option, may elect either (a) to
terminate this Agreement and all other rights and obligations of the Contributor
and the Acquiror hereunder shall terminate immediately and the Deposit, if any,
shall be returned to the Acquiror or (b) to waive its right to terminate and to
proceed to Closing. If the Acquiror terminates this Agreement as a consequence
of a material misrepresentation or breach of a warranty or covenant by the
Contributor, or a failure by the Contributor to perform its obligations
hereunder, the Acquiror shall have all remedies available hereunder or at law or
in equity, including but not limited to the right to specific performance of
this Agreement.
8.4 Termination by Contributor. If, prior to Closing, the Acquiror defaults
--------------------------
in performing any of its obligations under this Agreement (including its
obligation to Acquisition the Property), the Contributor's sole remedy for such
default shall be to terminate this Agreement and receive the Deposit, if any.
The Contributor and the Acquiror agree that, in the event of such a default, the
damages that the Contributor would sustain as a result thereof would be
difficult if not impossible to ascertain. The Contributor hereby waives and
releases any and all other rights and remedies for a default by the Acquiror.
Therefore, the Contributor and the Acquiror agree that, the Contributor shall
retain the Deposit, if any, as full and complete liquidated damages and as the
Contributor's sole remedy.
ARTICLE 9
---------
MISCELLANEOUS PROVISIONS
------------------------
9.1 Completeness; Modification. This Agreement constitutes the entire
--------------------------
agreement among the parties hereto with respect to the transactions contemplated
hereby and supersedes all prior discussions, understandings, agreements and
negotiations between the parties hereto. The provisions of the prior sentence
reflects the true intent of the Contributor and the Acquiror and is intended to
be enforceable, notwithstanding any existing or further case law to the
contrary. This Agreement may be modified only by a written instrument duly
executed by the parties hereto.
9.2 Successors and Assigns. This Agreement shall bind and inure to the
----------------------
benefit of the parties hereto and their respective successors and assigns.
9.3 Days. If any action is required to be performed, or if any notice,
----
consent or other communication is given, on a day that is a Saturday or Sunday
or a legal holiday in the jurisdiction in which the action is required to be
performed or in which is located the intended recipient of such notice, consent
or other communication, such performance shall be deemed to be required, and
such notice, consent or other communication shall be deemed to be given, on the
first business day
21
<PAGE>
following such Saturday, Sunday or legal holiday. Unless otherwise specified
herein, all references herein to a "day" or "days" shall refer to calendar days
and not business days.
9.4 Governing Law. This Agreement and all documents referred to herein shall
-------------
be governed by and construed and interpreted in accordance with the laws of the
state wherein the Property is located.
9.5 Counterparts. To facilitate execution, this Agreement may be executed in
------------
as many counterparts as may be required. It shall not be necessary that the
signature on behalf of both parties hereto appear on each counterpart hereof.
All counterparts hereof shall collectively constitute a single agreement.
9.6 Severability. If any term, covenant or condition of this Agreement, or
------------
the application thereof to any person or circumstance, shall to any extent be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term, covenant or condition to other persons or circumstances, shall not be
affected thereby, and each term, covenant or condition of this Agreement shall
be valid and enforceable to the fullest extent permitted by law and shall be
construed so as to give effect to the intent of the parties.
9.7 Costs. Regardless of whether Closing occurs hereunder, and except as
-----
otherwise expressly provided herein, each party hereto shall be responsible for
its own costs in connection with this Agreement and the transactions
contemplated hereby, including without limitation fees of attorneys, engineers
and accountants.
9.8 Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be delivered by hand, by telecopy,
overnight delivery service, or by the United States mail, certified, postage
prepaid, return receipt requested, at the addresses and with such copies as
designated below. Any notice, request, demand or other communication delivered
or sent in the manner aforesaid shall be deemed given or made (as the case may
be) when actually delivered to the intended recipient.
If to the Contributor: Kiran P. Patel
- ----------------------
Hersha Enterprises, Ltd.
148 Sheraton Drive, Box A
New Cumberland, PA 17070
Fax: (717) 774-7383
With a copy to: Jay H. Shah, Esquire
- ---------------
The Shah Law Frim
The Lafayette Building
437 Chestnut Street, 6/th/ Floor
Philadelphia, PA 19106
Fax: (215)238-0157
If to the Acquiror: Hasu P. Shah
- -------------------
22
<PAGE>
Hersha Hospitality Limited Partnership
148 Sheraton Drive, Box A
New Cumberland, PA 17070
Fax: (717) 774-7383
With a copy to: Jay H. Shah, Esquire
- --------------
The Shah Law Frim
The Lafayette Building
437 Chestnut Street, 6/th/ Floor
Philadelphia, PA 19106
Fax: (215) 238-0157
Any party hereto may change its address or designate different or
other persons or entities to receive copies by notifying the other party in a
manner described in this Section.
9.9 Escrow Agent. The Escrow Agent referred to in the definition
------------
thereof contained in Paragraph 1.1 hereof has agreed to act as such for the
convenience of the parties without fee or other charges for such services as
Escrow Agent. The Escrow Agent shall not be liable: (a) to any of the parties
for any act or omission to act except for its own willful misconduct; (b) for
any legal effect, insufficiency, or undesirability of any instrument deposited
with or delivered by Escrow Agent or exchange by the parties hereunder, whether
or not Escrow Agent prepared such instrument; (c) for any loss or impairment of
funds that have been deposited in escrow while those funds are in the course of
collection, or while those funds are on deposit in a financial institution, if
such loss or impairment results from the failure, insolvency or suspension of a
financial institution; (d) for the expiration of any time limit or other
consequence of delay, unless a properly executed written instruction, accepted
by Escrow Agent, has instructed the Escrow Agent to comply with said time limit;
(e) for the default, error, action or omission of either party to the escrow.
The Escrow Agent shall be entitled to rely on any document or paper received by
it, believed by such Escrow Agent, in good faith, to be bona fide and genuine.
It is agreed that the Escrow Agent shall not be disqualified from representing
either party in connection with any litigation which might arise out or in
connection with this Agreement, merely by virtue of the fact that such Escrow
Agent has agreed to act as Escrow Agent hereunder. Further, in that event of any
dispute as to the disposition of the Deposit, if any, or any other monies held
in escrow, the Escrow Agent may, if such Escrow Agent so elects, interplead the
parties by filing an interpleader action in any court having subject matter
jurisdiction of such a matter (to the personal jurisdiction of which both
parties do hereby consent), and pay into the registry of the court the Deposit,
if any, and any other monies held in escrow, including all interest earned
thereon, whereupon such Escrow Agent shall be relieved and released from any
further liability as Escrow Agent hereunder. In the event of such interpleader
action, the Escrow Agent shall not be disabled from representing a party hereto.
Escrow Agent shall not be liable for Escrow Agent's compliance with any legal
process, subpoena, writs, orders, judgments and decree of any court, whether
issued with or without jurisdiction, and whether or not subsequently vacated,
modified, set aside or reversed.
9.10 Incorporation by Reference. All of the Exhibits attached hereto
--------------------------
are by this reference incorporated herein and made a part hereof.
23
<PAGE>
9.11 Survival. All of the representations, warranties, covenants and
--------
agreements of the Contributor and the Acquiror made in, or pursuant to, this
Agreement shall survive Closing and shall not merge into any document or
instrument executed and delivered in connection herewith.
9.12 Further Assurances. The Contributor and the Acquiror each covenant and
------------------
agree to sign, execute and deliver, or cause to be signed, executed and
delivered, and to do or make, or cause to be done or made, upon the written
request of the other party, any and all agreements, instruments, papers, deeds,
acts or things, supplemental, confirmatory or otherwise, as may be reasonably
required by either party hereto for the purpose of or in connection with
consummating the transactions described herein.
9.13 No Partnership. This Agreement does not and shall not be construed to
--------------
create a partnership, joint venture or any other relationship between the
parties hereto except the relationship of Contributor and Acquiror specifically
established hereby.
IN WITNESS WHEREOF, the Contributor and the Acquiror have caused this
Agreement to be executed in their names by their respective duly-authorized
representatives as a sealed instrument.
CONTRIBUTORS:
------------
SHREE ASSOCIATES, a Pennsylvania limited partenrship
By: ____________________________________
Hasu P. Shah, General Partner
JSK II ASSOCIATES, a Pennsylvania limited partenrship
By: ____________________________________
Jay H. Shah, General Partner
DEVI ASSOCIATES, a Pennsylvania limited partnership
By: ____________________________________
Bharat C. Mehta, General Partner
SHREEJI ASSOCIATES a Pennsylvania limited partnership
By: ____________________________________
Rajendra O. Gandhi, General Partner
KUNJ ASSOCIATES a Pennsylvania limited partnership
By: ____________________________________
Kiran P. Patel, General Partner
24
<PAGE>
SHANTI III ASSOCIATES a Pennsylvania limited
partnership
By: ____________________________________
K. D. Patel, General Partner
NEIL H. SHAH, individully
By: ____________________________________
Neil H. Shah
DAVID L. DESFOR, individually
By: ____________________________________
David L. Desfor
MANISH M. PATNI, individully
By: ____________________________________
Manish M. Patni
SHREENATHJI ENETERPRISES, LTD., a Pennsylvania
corporation
By: ____________________________________
Kiran P. Patel, Secretary
ACQUIROR:
--------
HERSHA HOSPITALITY LIMITED PARTNERSHIP, a Virginia
limited partnership
By: HERSHA HOSPITALITY TRUST, a Maryland business
trust, its sole general partner
By: __________________________________________
Hasu P. Shah, President
25
<PAGE>
LIST OF EXHIBITS
Exhibit A Deed
Exhibit B Operating Agreements and other Agreements
Exhibit C Guest Ledger
Exhibit D Contributor's Financial Information
Exhibit E Tangible Personal Properties
26
<PAGE>
EXHIBIT A
---------
Deed
27
<PAGE>
EXHIBIT B
---------
Operating Agreements
28
<PAGE>
EXHIBIT C
---------
Guest Ledger
29
<PAGE>
EXHIBIT D
---------
Contributor's Financial Information
30
<PAGE>
EXHIBIT E
---------
Tangible Personal Property
31
<PAGE>
EXHIBIT 10.2
LEASE AGREEMENT
DATED AS OF AUGUST 11, 1999
BETWEEN
HERSHA HOSPITALITY LIMITED PARTNERSHIP
AS LESSOR
AND
HERSHA HOSPITALITY MANAGEMENT, L.P.
AS LESSEE
IN CONNECTION WITH THE
JFK COMFORT INN, NEW YORK
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE 1.................................................................................................. 1
1.1. Leased Property............................................................................. 1
1.2. Term........................................................................................ 2
1.3. Initial Transition.......................................................................... 3
ARTICLE 2.................................................................................................. 3
2.1. Definitions................................................................................. 3
ARTICLE 3.................................................................................................. 12
3.1. Rent........................................................................................ 12
3.2. Confirmation of Percentage Rent............................................................. 14
3.3. Additional Charges.......................................................................... 14
3.4. No Set Off.................................................................................. 15
3.5. Books and Records........................................................................... 15
3.6. Changes in Operations....................................................................... 15
ARTICLE 4.................................................................................................. 16
4.1. Payment of Impositions...................................................................... 16
4.2. Notice of Impositions....................................................................... 17
4.3. Adjustment of Impositions................................................................... 17
4.4. Utility Charges............................................................................. 17
ARTICLE 5.................................................................................................. 17
5.1. No Termination, Abatement, etc.............................................................. 17
ARTICLE 6.................................................................................................. 18
6.1. Ownership of the Leased Property............................................................ 18
6.2. Lessee's Personal Property.................................................................. 18
6.3. Lessor's Lien............................................................................... 19
ARTICLE 7.................................................................................................. 19
7.1. Condition of the Leased Property............................................................ 19
7.2. Use of the Leased Property.................................................................. 20
ARTICLE 8.................................................................................................. 21
8.1. Compliance with Legal and Insurance Requirements, etc....................................... 21
8.2. Legal Requirement Covenants................................................................. 21
8.3. Environmental Covenants..................................................................... 22
ARTICLE 9.................................................................................................. 24
9.1. Maintenance and Repair; Capital Expenditures................................................ 24
9.2. Encroachments, Restrictions, Etc............................................................ 25
ARTICLE 10................................................................................................. 26
10.1. Alterations................................................................................. 26
10.2. Salvage..................................................................................... 26
10.3. Lessor Alterations.......................................................................... 27
ARTICLE 11................................................................................................. 27
11.1. Liens....................................................................................... 27
ARTICLE 12................................................................................................. 27
12.1. Permitted Contests.......................................................................... 27
ARTICLE 13................................................................................................. 28
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
13.1. General Insurance Requirements.............................................................. 28
13.2. Replacement Cost............................................................................ 30
13.3. (Intentionally omitted)..................................................................... 30
13.4. Waiver of Subrogation....................................................................... 30
13.5. Form Satisfactory, etc...................................................................... 31
13.6. Increase in Limits.......................................................................... 31
13.7. Blanket Policy.............................................................................. 31
13.8. Separate Insurance.......................................................................... 31
13.9. Reports On Insurance Claims................................................................. 32
ARTICLE 14................................................................................................. 32
14.1. Insurance Proceeds.......................................................................... 32
14.2. Reconstruction in the Event of Damage or Destruction Covered by Insurance................... 32
14.3. Reconstruction in the Event of Damage or Destruction Not Covered by Insurance or When
Holder Will Not Release Insurance Proceeds................................................ 33
14.4.Lessee's Property and Business Interruption Insurance........................................ 33
14.5.Abatement of Rent............................................................................ 34
ARTICLE 15................................................................................................. 34
15.1. Definition.................................................................................. 34
15.2. Parties' Rights and Obligations............................................................. 34
15.3. Total Taking................................................................................ 34
15.4. Allocation of Award......................................................................... 35
15.5. Partial Taking.............................................................................. 35
15.6. Temporary Taking............................................................................ 36
ARTICLE 16................................................................................................. 36
16.1. Events of Default........................................................................... 36
16.2. Remedies.................................................................................... 38
16.3. Waiver...................................................................................... 39
16.4. Application of Funds........................................................................ 39
ARTICLE 17................................................................................................. 39
17.1. Lessor's Right to Cure Lessee's Default..................................................... 39
ARTICLE 18................................................................................................. 40
18.1. Personal Property Limitation................................................................ 40
18.2. Sublease Rent Limitation.................................................................... 40
18.3. Sublease Lessee Limitation.................................................................. 40
18.4. Lessee Ownership Limitation................................................................. 41
18.5. Director, Officer and Employee Limitation................................................... 41
ARTICLE 19................................................................................................. 41
19.1. Holding Over................................................................................ 41
ARTICLE 20................................................................................................. 42
20.1. Indemnification............................................................................. 42
ARTICLE 21................................................................................................. 43
21.1. Subletting and Assignment................................................................... 43
21.2. Attornment.................................................................................. 43
21.3. Management Agreement........................................................................ 43
ARTICLE 22................................................................................................. 44
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
22.1. Officer's Certificates; Financial Statements; Lessor's Estoppel Certificates and Covenants.. 44
ARTICLE 23................................................................................................. 46
23.1. Regular Meetings; Lessor's Right to Inspect................................................. 46
ARTICLE 24................................................................................................. 46
24.1. No Waiver................................................................................... 46
ARTICLE 25................................................................................................. 47
25.1. Remedies Cumulative......................................................................... 47
ARTICLE 26................................................................................................. 47
26.1. Acceptance of Surrender..................................................................... 47
ARTICLE 27................................................................................................. 47
27.1. No Merger of Title.......................................................................... 47
ARTICLE 28................................................................................................. 47
28.1. Conveyance by Lessor........................................................................ 47
28.2. Lessor May Grant Liens...................................................................... 48
ARTICLE 29................................................................................................. 50
29.1. Quiet Enjoyment............................................................................. 50
ARTICLE 30................................................................................................. 50
30.1. Notices..................................................................................... 50
ARTICLE 31................................................................................................. 50
31.1. Appraisers.................................................................................. 50
ARTICLE 32................................................................................................. 51
32.1. Lessee's Right to Cure...................................................................... 51
ARTICLE 33................................................................................................. 52
33.1. Miscellaneous............................................................................... 52
33.2. Transition Procedures....................................................................... 52
33.3. Waiver of Presentment, etc.................................................................. 53
33.4. Standard of Discretion...................................................................... 54
33.5. Action for Damages.......................................................................... 54
33.6. Lease Assumption in Bankruptcy Proceeding................................................... 54
33.7. Intra-Family Transfers...................................................................... 54
ARTICLE 34................................................................................................. 55
34.1. Memorandum of Lease......................................................................... 55
ARTICLE 35................................................................................................. 55
ARTICLE 36................................................................................................. 55
36.1. Lessor's Option to Terminate Lease.......................................................... 55
ARTICLE 37................................................................................................. 57
37.1. Compliance with Franchise Agreement......................................................... 57
ARTICLE 38................................................................................................. 57
38.1. Capital Expenditures........................................................................ 57
ARTICLE 39................................................................................................. 58
39.1. Lessor's Default............................................................................ 58
ARTICLE 40................................................................................................. 58
40.1. Arbitration................................................................................. 58
40.2. Alternative Arbitration..................................................................... 59
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
40.3. Arbitration Procedures...................................................................... 59
</TABLE>
iv
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit A - Property Description
Exhibit B - Percentage Rent Provisions
v
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT (hereinafter called "Lease"), made as of the ___ day
of ___________, 1999, by and between HERSHA HOSPITALITY LIMITED PARTNERSHIP, a
Virginia limited partnership (hereinafter called "Lessor"), and HERSHA
HOSPITALITY MANAGEMENT, L.P., a Pennsylvania limited partnership (hereinafter
called "Lessee"), provides as follows.
W I T N E S S E T H:
--------------------
Contemporaneously with the execution hereof, Lessor acquired (i) the Leased
Property (as hereinafter defined) and certain Other Properties, and (ii) Lessor
is entering with Lessee into the Other Leases; and
Lessor and Lessee now wish to enter into this Lease.
NOW, THEREFORE, Lessor, in consideration of the payment of rent by Lessee
to Lessor, the covenants and agreements to be performed by Lessee, and upon the
terms and conditions hereinafter stated, does hereby rent and lease unto Lessee,
and Lessee does hereby rent and lease from Lessor, the Leased Property.
ARTICLE 1
---------
1.1. Leased Property.
----------------
The leased property (the "Leased Property") is comprised of Lessor's
interest in the following:
(a) the land described in Exhibit "A" attached hereto and by reference
-----------
incorporated herein (the "Land");
(b) all buildings, structures and other improvements of every kind
including, but not limited to, alleyways and connecting tunnels, sidewalks,
utility pipes, conduits and lines (on-site and off-site), parking areas and
roadways appurtenant to such buildings and structures presently situated upon
the Land (collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances relating to the Land and
the Leased Improvements;
(d) all equipment, machinery, fixtures, and other items of property
required for or incidental to the use of the Leased Improvements as a hotel,
including all components thereof, now and hereafter permanently affixed to or
incorporated into the Leased Improvements, including, without limitation, all
furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water pollution control, waste
<PAGE>
disposal, air-cooling and air-conditioning systems and apparatus, sprinkler
systems and fire and theft protection equipment, all of which to the greatest
extent permitted by law are hereby deemed by the parties hereto to constitute
real estate, together with all replacements, modifications, alterations and
additions thereto (collectively, the "Fixtures");
(e) all furniture and furnishings and all other items of personal
property (excluding Inventory and personal property owned by Lessee) located on,
and used in connection with, the operation of the Leased Improvements as a
hotel, together with all replacements, modifications, alterations and additions
thereto; and
(f) all existing leases of the Leased Property (including any security
deposits or collateral held by Lessor pursuant thereto).
THE LEASED PROPERTY IS DEMISED IN ITS PRESENT CONDITION WITHOUT REPRESENTATION
OR WARRANTY (EXPRESSED OR IMPLIED) BY LESSOR AND SUBJECT TO THE RIGHTS OF
PARTIES IN POSSESSION, AND TO THE EXISTING STATE OF TITLE INCLUDING ALL
COVENANTS, CONDITIONS, RESTRICTIONS, EASEMENTS AND OTHER MATTERS OF RECORD
INCLUDING ALL APPLICABLE LEGAL REQUIREMENTS, THE LIEN OF FINANCING INSTRUMENTS,
MORTGAGES, DEEDS OF TRUST AND SECURITY DEEDS, AND INCLUDING OTHER MATTERS WHICH
WOULD BE DISCLOSED BY AN INSPECTION OF THE LEASED PROPERTY OR BY AN ACCURATE
SURVEY THEREOF.
1.2. Term.
-----
(a) The term of the Lease (the "Term") shall commence on the date
hereof (the "Commencement Date") and shall end on the fifth anniversary of the
last day of the month in which the Commencement Date occurs, unless sooner
terminated in accordance with the provisions hereof. Lessor and Lessee
acknowledge that the Commencement Date is the date of Lessor's acquisition of
the Leased Property.
(b) Lessee may elect to extend this Lease and all of the Other Leases
for an additional five-year term and, at the end of the first extended term, may
elect to extend this Lease for an additional five-year term (each such
extension, a "Renewal Term") by providing written Notice (a "Renewal Notice") to
Lessor no sooner than 30 months and no later than 6 months prior to the end of
the Term or Renewal Term, as applicable. A Renewal Notice, if given, shall be
irrevocable, but it shall not preclude Lessor from exercising any of its rights
to terminate this Lease in accordance with the provisions hereof. Lessee
acknowledges that Lessor will rely on any Renewal Notice received from Lessee
and not pursue opportunities to select another lessee for the Facility and will
be materially damaged if Lessee fails subsequently to act as lessee for the
Renewal Term for any reason other than Lessor's termination of the Lease in
accordance herewith. No Renewal Notice may be given or shall be effective if
an Event of Default shall have occurred and, if curable hereunder, shall not
have been cured. The terms of the Lease during a Renewal Term shall be the same
as the terms hereof.
2
<PAGE>
1.3. Initial Transition.
-------------------
Simultaneously with the execution of this Lease, Lessee shall acquire
for fair market value from the contributor of the Leased Property to Lessor all
deposits, prepaid revenue and similar accounts, and Inventory existing at or
with respect to the Leased Property as of the Commencement Date.
ARTICLE
-------
2
2.1. Definitions.
------------
For all purposes of this Lease, except as otherwise expressly provided
or unless the context otherwise requires, (a) the terms defined in this Lease
have the meanings assigned to them in this Article and include the plural as
well as the singular, (b) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with GAAP, (c) all references in
this Lease to designated "Articles", "Sections" and other subdivisions are to
the designated Articles, Sections and other subdivisions of this Lease and (d)
the words "herein," "hereof" and "hereunder" and other words of similar import
refer to this Lease as a whole and not to any particular Article, Section or
other subdivision:
Additional Charge(s): As defined in Section 3.3.
--------------------
Affiliate: The term "Affiliate" of a Person shall mean (a) any Person that,
---------
directly or indirectly, controls or is controlled by or is under common control
with such Person, (b) any other Person that owns, beneficially, directly or
indirectly, ten percent or more of the outstanding capital stock, shares or
equity interests of such Person, or (c) any officer, director, employee,
partner, manager, member or trustee of such Person or any Person controlling,
controlled by or under common control with such Person (excluding trustees and
Persons serving in similar capacities who are not otherwise an Affiliate of such
Person). For the purposes of this definition, "control" (including the
correlative meanings of the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, through the ownership of voting securities,
partnership interests or other equity interests, by contract or otherwise.
Award: As defined in Section 15.1(c).
-----
Base Rate: The prime rate (or base rate) reported in the Money Rates
---------
column or comparable section of The Wall Street Journal, Eastern Edition, as the
----------------------------------------
rate then in effect for corporate loans at large U.S. money center commercial
banks, whether or not such rate has actually been charged by any such bank. If
no such rate is reported in The Wall Street Journal, Eastern Edition or if such
----------------------------------------
rate is discontinued, then Base Rate shall mean such other successor or
comparable rate as Lessor may reasonably designate.
3
<PAGE>
Base Rent: As defined in Article 3.
---------
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that is
------------
not a day on which national banks in the City of Philadelphia, Pennsylvania, or
in the municipality wherein the Leased Property is located are closed.
Capital Expenditures: Amounts advanced to pay the costs of Capital
--------------------
Improvements.
Capital Expenditures Allowance: As defined in Article 38.
------------------------------
Capital Impositions: Taxes, assessments or similar charges imposed upon or
-------------------
levied against the Leased Property for the costs of public improvements,
including, without limitation, roads, sidewalks, public lighting fixtures,
utility lines, storm sewers drainage facilities, and similar improvements.
Capital Improvements: Improvements to the Leased Property and replacement
--------------------
or refurbishing of Fixtures and of Furniture and Equipment, all as designated as
capital improvements by and determined in accordance with GAAP.
CERCLA: The Comprehensive Environmental Response, Compensation and
------
Liability Act of 1980, as amended.
Change of Control: (i) The issuance or sale by the Lessee or the sale by
-----------------
any partner of the Lessee of a Controlling interest in Lessee; (ii) the sale,
conveyance or other transfer of all or substantially all of the assets of the
Lessee (whether by operation of law or otherwise); (iii) any transaction, or
series of transactions, pursuant to which the Lessee is merged with or
consolidated into another entity and either (A) the Lessee is not the surviving
entity or (B) the Lessee is the surviving entity but the previous partners of
the Lessee do not maintain a Controlling interest in the Lessee.
Code: The Internal Revenue Code of 1986, as amended.
----
Commencement Date: As defined in Section 1.2.
-----------------
Company: Hersha Hospitality Trust, a Maryland real estate investment trust.
-------
Condemnation, Condemnor: As defined in Section 15.1.
-----------------------
Consolidated Financials: For any fiscal year or other accounting period
-----------------------
for (i) Lessee and (ii) Lessee and Lessee's Affiliates, if any, that lease hotel
properties from Lessor or its Affiliates, a balance sheet and statements of
operations, partners' capital and cash flow (or, in the case of a corporation,
statements of operations, retained earnings and cash flow) for such period and
for the period from the beginning of the respective fiscal year to the end of
such period and the related balance sheet as at the end of such period, together
with the notes to any such yearly statement, all in such detail as may be
required by the SEC with respect to filings made by the
4
<PAGE>
Company or Lessor, and setting forth in comparative form the corresponding
figures for the corresponding period in the preceding fiscal year, and prepared
in accordance with GAAP and audited annually (and quarterly if required by the
SEC) by a firm of independent certified public accountants selected by Lessor.
Consolidated Financials shall be prepared on the basis of a fiscal year ending
on December 31.
Control: As applied to any Person, the possession, directly or indirectly,
-------
of the power to direct or cause the direction of the management and policies of
that Person, whether through the ownership or voting securities, by contract or
otherwise. The terms "Controlling" and "Controlled by" shall have correlative
meanings.
Date of Taking: As defined in Section 15.1(b).
--------------
Emergency Expenditures: Expenditures required to take necessary or
----------------------
appropriate actions to respond to Emergency Situations.
Emergency Situations: Fire, any other casualty, or any other events,
--------------------
circumstances or conditions which threaten the safety or physical well-being of
the Facility's guests or employees or which involve the risk of material
property damage or material loss to the Facility.
Environmental Authority: Any department, agency or other body or component
-----------------------
of any Government that exercises any form of jurisdiction or authority under any
Environmental Law.
Environmental Authorization: Any license, permit, order, approval,
---------------------------
consent, notice, registration, filing or other form of permission or
authorization required under any Environmental Law.
Environmental Laws: All applicable federal, state, local and foreign laws
------------------
and regulations relating to pollution of the environment (including without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata), including without limitation laws and regulations relating to
emissions, discharges, Releases or threatened Releases of Hazardous Materials or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials. Environmental
Laws include but are not limited to CERCLA, FIFRA, RCRA, SARA and TSCA.
Environmental Liabilities: Any and all actual or potential obligations to
-------------------------
pay the amount of any judgment or settlement, the cost of complying with any
settlement, judgment or order for injunctive or other equitable relief, the cost
of compliance or corrective action in response to any notice, demand or request
from an Environmental Authority, the amount of any civil penalty or criminal
fine, and any court costs and reasonable amounts for attorney's fees, fees for
witnesses and experts, and costs of investigation and preparation for defense of
any claim or any Proceeding, regardless of whether such Proceeding is
threatened, pending or completed, that may be or have been asserted against or
imposed upon Lessor, Lessee, any Predecessor, the Leased Property or any
property used therein and arising out of:
5
<PAGE>
(a) the failure to comply at any time with all Environmental Laws
applicable to the Leased Property;
(b) the presence of any Hazardous Materials on, in, under, at or in
any way affecting the Leased Property;
(c) a Release or threatened Release of any Hazardous Materials on,
in, at, under or in any way affecting the Leased Property;
(d) the identification of Lessee, Lessor or any Predecessor as a
potentially responsible party under CERCLA or under any other Environmental Law;
(e) the presence at any time of any above-ground and/or underground
storage tanks, as defined in RCRA or in any applicable Environmental Law on, in,
at or under the Leased Property or any adjacent site or facility; or
(f) any and all claims for injury or damage to persons or property
arising out of exposure to Hazardous Materials originating or located at the
Leased Property, or resulting from operation thereof or any adjoining property.
Event of Default: As defined in Section 16.1.
----------------
Facility: The hotel and/or other facility offering lodging and other
--------
services or amenities being operated or proposed to be operated on the Leased
Property.
FIFRA: The Federal Insecticide, Fungicide, and Rodenticide Act, as
-----
amended.
First Annual Room Revenues Break Point: The amount of Room Revenues for
--------------------------------------
the applicable Lease Year corresponding to such term as set forth on Exhibit C.
---------
First Tier Room Revenue Percentage: The percentage corresponding to such
----------------------------------
term as set forth on Exhibit C.
---------
Fixtures: As defined in Section 1.1.
--------
Franchise Agreement: The franchise agreement or license agreement with
-------------------
Choice Hotels International or any other franchisor under which the Facility is
operated.
Furniture and Equipment: The terms "furniture and equipment" shall mean
-----------------------
collectively all furniture, furnishings, wall coverings, Fixtures and hotel
equipment and systems located at, or used in connection with, the Facility,
together with all replacements therefor and additions thereto, including,
without limitation, (i) all equipment and systems required for the operation of
kitchens, bars and restaurants, and laundry and dry cleaning facilities, (ii)
office equipment (excluding any office equipment used by the Lessee for its own
operations, rather than hotel operations), (iii) dining room wagons, materials
handling equipment, and cleaning and
6
<PAGE>
engineering equipment, (iv) telephone and computerized accounting systems, and
(v) vehicles (excluding any vehicles used by the Lessee for its own operations,
rather than hotel operations).
GAAP: Generally accepted accounting principles as are at the time
----
applicable and otherwise consistently applied.
Government: The United States of America, any city, county, state,
----------
district or territory thereof, any foreign nation, any city, county, state,
district, department, territory or other political division thereof, or any
political subdivision of any of the foregoing.
Gross Revenues: The sum of Room Revenues and Other Revenues.
--------------
Hazardous Materials: All chemicals, pollutants, contaminants, wastes and
-------------------
toxic substances, including without limitation:
(a) Solid or hazardous waste, as defined in RCRA or in any
Environmental Law;
(b) Hazardous substances, as defined in CERCLA or in any Environmental
Law;
(c) Toxic substances, as defined in TSCA or in any Environmental Law;
(d) Insecticides, fungicides, or rodenticides, as defined in FIFRA or
in any Environmental Law;
(e) Gasoline or any other petroleum product or byproduct,
polychlorinated biphenols, asbestos and urea formaldehyde;
(f) Asbestos or asbestos containing materials;
(g) Urea Formaldehyde foam insulation; and
(h) Radon gas.
Holder: Any holder of a Mortgage, any purchaser of the Leased Property or
------
any portion thereof at a foreclosure sale or any sale in lieu thereof, or any
designee of any of the foregoing.
Impositions: Collectively, all taxes (including, without limitation, all
-----------
ad valorem, sales and use, occupancy, single business, gross receipts,
transaction privilege, rent or similar taxes as the same relate to or are
imposed upon Lessee or Lessor or Lessee's business conducted upon the Leased
Property), assessments (including, without limitation, all private property
association assessments and all assessments for public improvements or benefit,
whether or not commenced or completed prior to the date hereof and whether or
not to be completed within the Term), ground rents, water, sewer or other rents
and charges, excises, tax inspection, authorization and
7
<PAGE>
similar fees and all other governmental charges, in each case whether general or
special, ordinary or extraordinary, or foreseen or unforeseen, of every
character in respect of the Leased Property or the business conducted thereon by
Lessee (including all interest and penalties thereon caused by any failure in
payment by Lessee), which at any time prior to, during or with respect to the
Term hereof may be assessed or imposed on or with respect to or be a lien upon
(a) Lessor's interest in the Leased Property, (b) the Leased Property, or any
part thereof or any rent therefrom or any estate, right, title or interest
therein, or (c) any occupancy, operation, use or possession of, or sales from,
or activity conducted on or in connection with the Leased Property, or the
leasing or use of the Leased Property or any part thereof by Lessee. Nothing
contained in this definition of Impositions shall be construed to require Lessee
to pay (1) any tax based on net income (whether denominated as a franchise or
capital stock or other tax) imposed on Lessor or any other person, or (2) any
net or gross revenue tax of Lessor or any other person, or (3) any tax imposed
with respect to the sale, exchange or other disposition by Lessor of any Leased
Property or the proceeds thereof.
Indemnified Party: Either of a Lessee Indemnified Party or a Lessor
-----------------
Indemnified Party.
Indemnifying Party: Any party obligated to indemnify an Indemnified Party
------------------
pursuant to any provision of this Lease.
Insurance Requirements: All terms of any insurance policy required by this
----------------------
Lease and all requirements of the issuer of any such policy.
Inventory: All "Inventories of Merchandise" and "Inventories of Supplies"
---------
as defined in the Uniform System, including, but not limited to, linens, china,
silver, glassware and other non-depreciable personal property, and any property
of the type described in Section 1221(1) of the Code.
Land: As defined in Article 1.
----
Lease: This Lease.
-----
Lease Year: Any 12-month period from January 1 through December 31 during
----------
the Term, or any shorter period at the beginning or the end of the Term.
Leased Improvements: As defined in Article 1.
-------------------
Leased Property: As defined in Section 1.1.
---------------
Legal Requirements: All federal, state, county, municipal and other
------------------
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Leased Property or the maintenance,
construction, use, operation or alteration thereof (whether by Lessee or
otherwise), whether or not hereafter enacted and in force, including (a) all
laws, rules or regulations pertaining to the environment, occupational health
and safety and public health, safety or welfare, and (b) any laws, rules or
regulations that may (1) require
8
<PAGE>
repairs, modifications or alterations in or to the Leased Property or (2) in any
way adversely affect the use and enjoyment thereof; and all permits, licenses
and authorizations necessary or appropriate to operate the Leased Property for
its Primary Intended Use and all covenants, agreements, restrictions and
encumbrances contained in any instruments, either of record or known to Lessee
(other than encumbrances hereafter created by Lessor without the consent of
Lessee), at any time in force affecting the Leased Property.
Lessee: The Lessee designated on this Lease and its permitted successors
------
and assigns.
Lessee Indemnified Party: Lessee, any Affiliate of Lessee, any other
------------------------
Person against whom any claim for indemnification may be asserted hereunder as a
result of a direct or indirect ownership interest in Lessee, the officers,
directors, stockholders, partners, members, employees, agents and
representatives of any of the foregoing Persons and any corporate stockholder,
agent, or representative of any of the foregoing Persons, and the respective
heirs, personal representatives, successors and assigns of any such officer,
director, partner, member, stockholder, employee, agent or representative.
Lessee's Personal Property: As defined in Section 6.2.
--------------------------
Lessor: The Lessor designated on this Lease and its respective successors
------
and assigns.
Lessor Indemnified Party: Lessor, any Affiliate of Lessor, including the
------------------------
Company, any other Person against whom any claim for indemnification may be
asserted hereunder as a result of a direct or indirect ownership interest in
Lessor, the officers, trustees, directors, stockholders, partners, members,
employees, agents and representatives of any of the foregoing Persons and of any
stockholder, partner, member, agent, or representative of any of the foregoing
Persons, and the respective heirs, personal representatives, successors and
assigns of any such officer, trustee, director, partner, member, stockholder,
employee, agent or representative.
Lessor's Audit: An audit by Lessor's independent certified public
--------------
accountants of the operation of the Leased Property during any Lease Year, which
audit may, at Lessor's election, be either a complete audit of the Leased
Property's operations or an audit of Room Revenues realized from the operation
of the Leased Property during such Lease Year.
Management Agreement: As defined in Section 21.3.
--------------------
Manager: As defined in Section 21.3.
-------
Mortgage: As defined in Section 28.2.
--------
Notice: A notice given pursuant to Article 30.
------
Officer's Certificate: A certificate of Lessee reasonably acceptable to
---------------------
Lessor, signed by the chief financial officer or another officer duly authorized
so to sign by Lessee or a general
9
<PAGE>
partner of Lessee, or any other person whose power and authority to act has been
authorized by delegation in writing by any such officer.
Other Revenues: All revenues, receipts and income of any kind derived
--------------
directly or indirectly from or in connection with the Facility other than Room
Revenues.
Other Revenue Percentage: The percentage corresponding to such term as set
------------------------
forth on Exhibit C.
---------
Overdue Rate: On any date, a rate equal to the Base Rate plus 5% per
------------
annum, but in no event greater than the maximum rate then permitted under
applicable law.
Payment Date: Any due date for the payment of any installment of Rent.
------------
Percentage Rent: As defined in Article 3.
---------------
Person: The term "Person" means and includes individuals, corporations,
------
general and limited partnerships, limited liability companies, stock companies
or associations, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, or other entities and any Government
and agencies and political subdivisions thereof.
Personal Property Taxes: All personal property taxes imposed on the
-----------------------
furniture, furnishings or other items of personal property located on, and used
in connection with, the operation of the Leased Improvements as a hotel (other
than Inventory and other personal property owned by the Lessee), together with
all replacements, modifications, alterations and additions thereto.
Predecessor: Any Person whose liabilities arising under any Environmental
-----------
Law have or may have been retained or assumed by Lessor or Lessee pursuant to
the provisions of this Lease.
Primary Intended Use: As defined in Section 7.2(b).
--------------------
Proceeding: Any judicial action, suit or proceeding (whether civil or
----------
criminal), any administrative proceeding (whether formal or informal), any
investigation by a governmental authority or entity (including a grand jury),
and any arbitration, mediation or other non-judicial process for dispute
resolution.
RCRA: The Resource Conservation and Recovery Act, as amended.
----
Real Estate Taxes: All real estate taxes, including general and special
-----------------
assessments, if any, which are imposed upon the Land and any improvements
thereon.
10
<PAGE>
Release: A "Release" as defined in CERCLA or in any Environmental Law,
-------
unless such Release has been properly authorized and permitted in writing by all
applicable Environmental Authorities or is allowed by such Environmental Law
without authorizations or permits.
Rent: Collectively, the Base Rent or Percentage Rent, and Additional
----
Charges.
Room Revenues: Gross revenue from the rental of guest rooms, whether to
-------------
individuals, groups or transients, at the Facility, determined in a manner
consistent with the Uniform System and excluding the following:
(a) The amount of all credits, bad debt write-off rebates or refunds
to customers, guests or patrons; and
(b) All sales taxes or any other taxes imposed on the rental of such
guest rooms; and
(c) any fees collected for amenities including, but not limited to,
telephone, laundry, movies or concessions.
SARA: The Superfund Amendments and Reauthorization Act of 1986, as
----
amended.
SEC: The U.S. Securities and Exchange Commission or any successor agency.
---
Second Annual Room Revenues Break Point: The amount of Room Revenues for
---------------------------------------
the applicable Lease Year corresponding to such term as set forth on Exhibit C.
---------
Second Tier Room Revenue Percentage: The percentage corresponding to such
-----------------------------------
term as set forth on Exhibit C.
---------
State: The State or Commonwealth of the United States in which the Leased
-----
Property is located.
Subsidiaries: Corporations or other entities in which Lessee owns,
------------
directly or indirectly, 50% or more of the voting rights or control, as
applicable (individually, a "Subsidiary").
Taking: A permanent or temporary taking or voluntary conveyance during the
------
Term hereof of all or part of the Leased Property, or any interest therein or
right accruing thereto or use thereof, as the result of, or in settlement of,
any Condemnation or other eminent domain proceeding affecting the Leased
Property whether or not the same shall have actually been commenced.
Term: As defined in Section 1.2.
----
Termination Fee: As defined in Section 36.1(c).
---------------
11
<PAGE>
Third Tier Room Revenue Percentage: The percentage corresponding to such
----------------------------------
term as set forth on Exhibit C.
---------
TSCA: The Toxic Substances Control Act, as amended.
----
Unavoidable Delay: Delay due to strikes, lock-outs, labor unrest,
-----------------
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, unavoidable casualty,
condemnation or other similar causes beyond the reasonable control of the party
responsible for performing an obligation hereunder, provided that lack of funds
shall not be deemed a cause beyond the reasonable control of either party hereto
unless such lack of funds is caused by the breach of the other party's
obligation to perform any obligations of such other party under this Lease.
Uneconomic for its Primary Intended Use: A state or condition of the
---------------------------------------
Facility such that in the reasonable judgment of Lessor the Facility cannot be
operated on a commercially practicable basis for its Primary Intended Use, such
that Lessor intends to, and shall, cease operation of the Facility.
Uniform System: Shall mean the Uniform System of Accounts for Hotels (9th
--------------
Revised Edition, 1996) as published by the Hotel Association of New York City,
Inc., as the same may hereafter be revised, and as the same is interpreted and
applied by the Lessor's independent certified public accountants in connection
with any audit.
Unsuitable for its Primary Intended Use: A state or condition of the
---------------------------------------
Facility such that in the reasonable judgment of Lessor the Facility (i) cannot
function as an integrated hotel facility consistent with standards applicable to
a well maintained and operated hotel comparable in quality and function to that
of the Facility prior to the damage or loss and, (ii) notwithstanding the
application of insurance proceeds that may occur under Section 14.1, will remain
unsuitable for its Primary Intended Use for a period of 90 days or more.
ARTICLE 3
---------
3.1. Rent.
-----
Lessee will pay to Lessor, by wire transfer, in lawful money of the
United States of America which shall be legal tender for the payment of public
and private debts, at Lessor's address set forth in Article 30 hereof or at such
other place or to such other Person as Lessor from time to time may designate in
a Notice, all [Initial Fixed Rent,] Base Rent, Percentage Rent and Additional
Charges, during the Term, as follows:
(a) The Rent payable in each calendar quarter from January 1, ___
until the end of the Lease Term shall equal the greater of:
12
<PAGE>
(i) the annual amount of Base Rent set forth on Exhibit C, which
---------
shall be payable quarterly in arrears on or before the first business day of the
subsequent calendar quarter; provided, however, that Base Rent shall be prorated
as to any Lease Year which is less than four calendar quarters and as to any
partial calendar quarter; plus
(ii) an amount of percentage rent ("Percentage Rent"), calculated
for each calendar quarter, equal to the Period Revenues Computation through the
end of such calendar quarter for the applicable Lease Year, which amount shall
be payable on or before the fifteenth (15th) day of the following calendar
quarter.
The Period Revenues Computation shall be an amount equal to the sum
of, for the applicable Lease Year, (i) an amount equal to the First Tier Room
Revenue Percentage of all Lease Year to date Room Revenues up to (but not
exceeding) the First Annual Room Revenues Break Point, (ii) an amount equal to
the Second Tier Room Revenue Percentage of all Lease Year to date Room Revenues
in excess of the First Annual Room Revenues Break Point but not exceeding the
Second Annual Room Revenues Break Point, (iii) an amount equal to the Third Tier
Room Revenue Percentage of all Lease Year to date Room Revenues in excess of the
Second Annual Room Revenues Break Point, and (iv) an amount equal to the Other
Revenue Percentage of all Lease Year to date Other Revenues.
The [Initial Fixed Rent and the] Base Rent shall accrue pro rata
during each calendar quarter of a Lease Year. However, the amount of [Initial
Fixed Rent or] Base Rent payable for the first three calendar quarters of a
Lease Year shall equal the annual amount of [Initial Fixed Rent or] Base Rent
multiplied by a fraction, the numerator of which is the amount of the Lessee's
budgeted Gross Revenues for such calendar quarter and the denominator of which
is the amount of the Lessee's budgeted Gross Revenues for such Lease Year. The
amount of [Initial Fixed Rent or] Base Rent payable for the fourth calendar
quarter of such Lease Year shall equal the annual amount of [Initial Fixed Rent
or] Base Rent, less the aggregate amount of [Initial Fixed Rent or] Base Rent
payments made by the Lessee for the first three calendar quarters of such Lease
Year. There shall be no reduction in Base Rent regardless of the result of the
Period Revenues Computation.
If the Term begins or ends in the middle of a calendar year, then the
number of calendar quarters falling within the Term during such calendar year
shall constitute a separate Lease Year. In that event, the First Annual Room
Revenues Break Point and the Second Annual Room Revenues Break Point shall be
multiplied by a fraction equal to (x) the number of calendar quarters (including
partial calendar quarters) in the Lease Year divided by (y) four.
----------
(b) Officer's Certificates. An Officer's Certificate shall be
----------------------
delivered to Lessor with each Percentage Rent payment setting forth the
calculation of the Percentage Rent payment for the most recently completed
calendar quarter of each Lease Year in the Term. Percentage Rent shall be
subject to confirmation and adjustment, if applicable, as set forth in Section
3.2.
13
<PAGE>
The obligation to pay Percentage Rent shall survive the expiration or
earlier termination of the Term, and a final reconciliation, taking into
account, among other relevant adjustments, any adjustments which are accrued
after such expiration or termination date but which related to Percentage Rent
accrued prior to such termination date, shall be made not later than 60 days
after such expiration or termination date.
3.2. Confirmation of Percentage Rent.
--------------------------------
Lessee shall utilize, or cause to be utilized, an accounting system
for the Leased Property in accordance with its usual and customary practices,
and in accordance with GAAP and the Uniform System, that will accurately record
all data necessary to compute Percentage Rent, and Lessee shall retain, for at
least five years after the expiration of each Lease Year, reasonably adequate
records conforming to such accounting system showing all data necessary to
conduct Lessor's Audit and to compute Percentage Rent for the applicable Lease
Years. Lessor shall have the right, for a period of two years following each
Lease Year, from time to time, by its accountants or representatives, to audit
such information in connection with Lessor's Audit, and to examine all Lessee's
records (including supporting data and sales and excise tax returns) reasonably
required to complete Lessor's Audit and to verify Percentage Rent, subject to
any prohibitions or limitations on disclosure of any such data under Legal
Requirements. If any Lessor's Audit discloses a deficiency in the payment of
Percentage Rent, and either Lessee agrees with the result of Lessor's Audit or
the matter is otherwise determined or compromised, Lessee shall forthwith pay to
Lessor the amount of the deficiency, as finally agreed or determined, together
with interest at the Overdue Rate from the date when said payment should have
been made to the date of payment thereof. If any Lessor's Audit discloses a
deficiency in the determination or reporting of Room Revenue which, as finally
agreed or determined, exceeds 3%, Lessee shall pay the costs of the portion of
Lessor's Audit allocable to the determination of Room Revenues (the "Revenue
Audit"). Any proprietary information obtained by Lessor pursuant to the
provisions of this Section shall be treated as confidential, except that such
information may be used, subject to appropriate confidentiality safeguards, in
any litigation or arbitration between the parties and except further that Lessor
may disclose such information to prospective lenders, investors and underwriters
and to any other persons to whom disclosure is necessary to comply with
applicable laws, regulations and government requirements. The obligations of
Lessee contained in this Section shall survive the expiration or earlier
termination of this Lease. Any dispute as to the existence or amount of any
deficiency in the payment of Percentage Rent as disclosed by Lessor's Audit
shall, if not otherwise settled by the parties, be submitted to arbitration
pursuant to the provisions of Section 40.2.
3.3. Additional Charges.
-------------------
In addition to the Base Rent and Percentage Rent, (a) Lessee also will
pay and discharge as and when due and payable all other amounts, liabilities,
obligations and Impositions that Lessee assumes or agrees to pay under this
Lease, and (b) in the event of any failure on the part of Lessee to pay any of
those items referred to in clause (a) of this Section 3.3, Lessee also will
promptly pay and discharge every fine, penalty, interest and cost that may be
added for non-payment or late payment of such items (the items referred to in
clauses (a) and (b) of this Section
14
<PAGE>
3.3 being additional rent hereunder and being referred to herein collectively as
the "Additional Charge(s)"), and Lessor shall have all legal, equitable and
contractual rights, powers and remedies provided either in this Lease or by
statute or otherwise in the case of non-payment of the Additional Charges as in
the case of non-payment of the Base Rent. If any installment of Base Rent,
Percentage Rent or Additional Charges (but only as to those Additional Charges
that are payable directly to Lessor) shall not be paid on its due date, Lessee
will pay Lessor within ten days of demand, as Additional Charges, an amount
equal to the interest computed at the Overdue Rate on the amount of such
installment, from the due date of such installment to the date of payment
thereof. To the extent that Lessee pays any Additional Charges to Lessor
pursuant to any requirement of this Lease, Lessee shall be relieved of its
obligation to pay such Additional Charges to the entity to which they would
otherwise be due and Lessor shall pay the same from monies received from Lessee.
3.4. No Set Off.
-----------
Rent shall be paid to Lessor without set off, deduction or
counterclaim, subject to Lessee's right to assert any claim or mandatory
counterclaim in any action brought by either party under this Lease.
3.5. Books and Records.
------------------
Lessee shall keep full and adequate books of account and other records
reflecting the results of operation of the Facility on an accrual basis, all in
accordance with the Uniform System and GAAP and the obligations of Lessee under
this Lease. Lessee agrees that bad-debt expenses will be recorded in a manner
which is consistent with the past practice of the current operator of the
Facility for bad debt writeoffs. The books of account and all other records
relating to or reflecting the operation of the Facility (whether maintained by
Lessee or Manager) shall be kept either at the Facility or at 148 Sheraton
Drive, New Cumberland, Pennsylvania 17070, and shall be available to Lessor and
its representatives and its auditors or accountants, at all reasonable times for
examination, audit, inspection, and transcription. All of such books and
records pertaining to the Facility (whether maintained by Lessee or Manager)
including, without limitation, books of account, guest records and front office
records, at all times shall be the property of Lessor and shall not be removed
from the Facility or Lessee's offices without Lessor's prior written approval.
Lessee shall be entitled to make copies of any or all such books and records for
its own files. Lessee's obligations under this Section 3.5 shall survive
termination of this Lease for any reason.
3.6. Changes in Operations.
----------------------
Without Lessor's prior written consent, which shall not be
unreasonably withheld, Lessee shall not (i) provide food and/or beverage
operations at the Facility if not presently provided, (ii) discontinue any food
and/or beverage operations which are presently provided, or (iii) convert a
subtenant, licensee or concessionaire to an operating department of the Facility
or vice-versa.
15
<PAGE>
ARTICLE 4
---------
4.1. Payment of Impositions.
-----------------------
Lessor shall pay, or cause to be paid, all Real Estate Taxes and
Personal Property Taxes. Subject to Article 12 relating to permitted contests,
Lessee will pay, or cause to be paid, all Impositions (other than Real Estate
Taxes and Personal Property Taxes) before any fine, penalty, interest or cost
may be added for nonpayment, such payments to be made directly to the taxing or
other authorities where feasible, and will promptly furnish to Lessor copies of
official receipts or other satisfactory proof evidencing such payments. Lessee's
obligation to pay such Impositions shall be deemed absolutely fixed upon the
date such Impositions become a lien upon the Leased Property or any part
thereof. If any such Imposition may, at the option of the taxpayer, lawfully be
paid in installments (whether or not interest shall accrue on the unpaid balance
of such Imposition), Lessee may exercise the option to pay the same (and any
accrued interest on the unpaid balance of such Imposition) in installments and
in such event, shall pay such installments (subject to Lessee's right of contest
pursuant to the provisions of Article 12) as the same respectively become due
and before any fine, penalty, premium, further interest or cost may be added
thereto. If an Imposition becomes fixed during the Term hereof and the Lessee
elects to pay such Imposition in installments that continue after the Term
hereof, the Lessee's obligation to pay such installments shall survive the
termination of this Lease. Lessor, at its expense, shall, to the extent required
or permitted by applicable law, prepare and file all tax returns in respect of
Lessor's net income, gross receipts, sales and use, single business, transaction
privilege, rent, ad valorem, franchise taxes, and taxes on its capital stock,
and Lessee, at its expense, shall, to the extent required or permitted by
applicable laws and regulations, prepare and file all other tax returns and
reports in respect of any Imposition as may be required by governmental
authorities. Lessee shall submit copies of Real Estate Taxes and Personal
Property Tax invoices to Lessor promptly upon Lessee's receipt of such invoices.
If any refund shall be due from any taxing authority in respect of any
Imposition paid by Lessee, the same shall be paid over to or retained by Lessee
if no Event of Default shall have occurred hereunder and be continuing. If an
Event of Default shall have been declared by Lessor and be continuing, any such
refund shall be paid over to or retained by Lessor. Any such funds retained by
Lessor due to an Event of Default shall be applied as provided in Article 16.
Any refund for Real Estate Taxes and Personal Property Taxes shall be promptly
remitted to Lessor. Lessor and Lessee shall, upon request of the other,
cooperate with the other party and otherwise provide such data as is maintained
by the party to whom the request is made with respect to the Leased Property as
may be necessary to prepare any required returns and reports. Lessor, to the
extent it possesses the same, and Lessee, to the extent it possesses the same,
will provide the other party, upon request, with cost and depreciation records
necessary for filing returns for any property classified as personal property.
Lessor may, upon notice to Lessee, at Lessor's option and at Lessor's sole
expense, protest, appeal, or institute such other proceedings (in its or
Lessee's name) as Lessor may deem appropriate to effect a reduction of real
estate assessments, and Lessee, at Lessor's expense as aforesaid, shall fully
cooperate with Lessor in such protest, appeal, or other action. Lessor hereby
agrees to indemnify, defend, and hold harmless Lessee from and against any
claims, obligations, and liabilities against or incurred by Lessee in connection
with such
16
<PAGE>
cooperation. Lessor, however, reserves the right to effect any such protest,
appeal or other action and, upon notice to Lessee, shall control any such
activity, which shall then proceed at Lessor's sole expense. Upon such notice,
Lessee, at Lessor's expense, shall cooperate fully with such activities. To the
extent received by it, Lessee shall furnish Lessor with copies of all assessment
notices for Real Estate Taxes in sufficient time for Lessor to file any protest
with respect to such tax must be made and pay such taxes without penalty.
4.2. Notice of Impositions.
----------------------
Lessor shall give prompt Notice to Lessee of all Impositions payable
by Lessee hereunder of which Lessor at any time has knowledge, provided that
Lessor's failure to give any such Notice shall in no way diminish Lessee's
obligations hereunder to pay such Impositions, but if Lessee did not otherwise
have knowledge of such Imposition sufficient to permit it to pay same, such
failure shall obviate any default hereunder for a reasonable time after Lessee
receives Notice of any Imposition which it is obligated to pay during the first
taxing period applicable thereto.
4.3. Adjustment of Impositions.
--------------------------
Impositions payable by Lessee which are imposed in respect of the tax-
fiscal period during which the Term terminates shall be adjusted and prorated
between Lessor and Lessee, whether or not such Imposition is imposed before or
after such termination, and Lessee's obligation to pay its prorated share
thereof after termination shall survive such termination.
4.4. Utility Charges.
----------------
Lessee will be solely responsible for obtaining and maintaining
utility services to the Leased Property and will pay or cause to be paid all
charges for electricity, gas, oil, water, sewer and other utilities used in the
Leased Property during the Term.
ARTICLE 5
---------
5.1. No Termination, Abatement, etc.
-------------------------------
Except as otherwise specifically provided in this Lease, Lessee, to
the extent permitted by law, shall remain bound by this Lease in accordance with
its terms and shall neither take any action without the written consent of
Lessor to modify, surrender or terminate the same, nor seek nor be entitled to
any abatement, deduction, deferment or reduction of the Rent, or setoff against
the Rent, nor shall the obligations of Lessee be otherwise affected by reason of
(a) any damage to, or destruction of, any Leased Property or any portion thereof
from whatever cause or any Taking of the Leased Property or any portion thereof,
(b) any bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding up or other proceedings affecting Lessor or
any assignee or transferee of Lessor, or (c) for any other cause whether similar
or dissimilar to any of the foregoing other than a discharge of Lessee from any
17
<PAGE>
such obligations as a matter of law. Lessee hereby specifically waives all
rights, arising from any default under this Lease by Lessor, which may now or
hereafter be conferred upon it by law to (1) modify, surrender or terminate this
Lease or quit or surrender the Leased Property or any portion thereof, or (2)
entitle Lessee to any abatement, reduction, suspension or deferment of or set
off against the Rent or other sums payable by Lessee hereunder, except as
otherwise specifically provided in this Lease. The obligations of Lessee
hereunder shall be separate and independent covenants and agreements and the
Rent and all other sums payable by Lessee hereunder shall continue to be payable
in all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Lease or by termination of this Lease
other than by reason of an Event of Default.
ARTICLE 6
---------
6.1. Ownership of the Leased Property.
---------------------------------
Lessee acknowledges that the Leased Property is the property of Lessor
and that Lessee has only the right to the possession and use of the Leased
Property upon the terms and conditions of this Lease.
6.2. Lessee's Personal Property.
---------------------------
At commencement of the Term, Lessee shall purchase for fair market
value from Lessor or the Contributor of the Leased Property to Lessor all
Inventory at the Leased Property. At all times during the Term, Lessee shall
maintain Inventory consistent with the amount of inventory which is customarily
maintained in a hotel of the type and character of the Facility and is otherwise
required to operate the Leased Property in the manner contemplated by this Lease
and in compliance with the Franchise Agreement and all Legal Requirements. All
Inventory shall be the property of Lessee. Lessee may (and shall as provided
herein below), at its expense, install, affix or assemble or place on any
parcels of the Land or in any of the Leased Improvements, any items of personal
property (including Inventory) owned by Lessee (collectively, the "Lessee's
Personal Property"). Lessee may, subject to the following sentence of this
Section 6.2, remove any of Lessee's Personal Property at any time during the
Term or upon the expiration or any prior termination of the Term. All of
Lessee's Personal Property not removed by Lessee within 30 days following the
expiration or earlier termination of the Term shall be considered abandoned by
Lessee and may be appropriated, sold, destroyed or otherwise disposed of by
Lessor without first giving Notice thereof to Lessee, without any payment to
Lessee and without any obligation to account therefor. Lessee will, at its
expense, restore the Leased Property to the condition required by Section
9.1(d), including repair of all damage to the Leased Property caused by the
removal of Lessee's Personal Property, whether effected by Lessee or Lessor.
18
<PAGE>
6.3. Lessor's Lien.
--------------
To the fullest extent permitted by applicable law, Lessor is granted a
lien and security interest on all Lessee's Personal Property now or hereinafter
placed in or upon the Leased Property, and such lien and security interest shall
remain attached to such Lessee's Personal Property until payment in full of all
Rent and satisfaction of all of Lessee's obligations hereunder; provided,
however, Lessor shall subordinate its lien and security interest only to that of
any non-Affiliate of Lessee which finances such Lessee's Personal Property or
any non-Affiliate conditional seller of such Lessee's Personal Property, the
terms and conditions of such subordination to be satisfactory to Lessor in the
exercise of reasonable discretion. Lessee shall, upon the request of Lessor,
execute such financing statements or other documents or instruments reasonably
requested by Lessor to perfect the lien and security interests herein granted.
ARTICLE 7
---------
7.1. Condition of the Leased Property.
---------------------------------
Lessee acknowledges receipt and delivery of possession of the Leased
Property. Lessee has examined and otherwise has knowledge of the condition of
the Leased Property and has found the same to be satisfactory for its purposes
hereunder. Lessee is leasing the Leased Property "as is", "with all faults", and
in its present condition. Except as otherwise specifically provided herein,
Lessee waives any claim or action against Lessor in respect of the condition of
the Leased Property. LESSOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, IN RESPECT OF THE LEASED PROPERTY, OR ANY PART THEREOF, EITHER AS TO
ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR
OTHERWISE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR
PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY LESSEE. LESSEE
ACKNOWLEDGES THAT THE LEASED PROPERTY HAS BEEN INSPECTED BY LESSEE AND IS
SATISFACTORY TO IT. Lessee shall have the right to proceed against any
predecessor in title for breaches of warranties or representations or for latent
defects in the Leased Property, and Lessor shall, if requested by Lessee, assign
any such right to Lessee (other than claims against Affiliates of Lessee). If
either party determines to exercise such right, the other party shall fully
cooperate in the prosecution of any such claim, in Lessor's or Lessee's name,
all at the cost and expense of the prosecuting party, who hereby agrees to
indemnify, defend and hold harmless the other party from and against any claims,
obligations and liabilities against or incurred by such other party in
connection with such cooperation, and who further agrees to apply all amounts
realized from the prosecution of such claim, less its expenses in connection
therewith, to remedy such breach or cure such defect.
19
<PAGE>
7.2. Use of the Leased Property.
---------------------------
(a) Lessee covenants that it will proceed with all due diligence and
will exercise its best efforts to obtain and to maintain all approvals needed to
use and operate the Leased Property and the Facility under applicable local,
state and federal law.
(b) Lessee shall use or cause to be used the Leased Property only as
a hotel facility, and for such other uses as may be necessary or incidental to
such use, or such other use as otherwise approved by Lessor (the "Primary
Intended Use"). Lessee shall not use the Leased Property or any portion thereof
for any other use without the prior written consent of Lessor. No use other than
the Primary Intended Use shall be made or permitted to be made of the Leased
Property, and no acts shall be done other than the Primary Intended Use, which
will cause the cancellation or increase the premium of any insurance policy
covering the Leased Property or any part thereof (unless another adequate policy
satisfactory to Lessor is available and Lessee pays any premium increase), nor
shall Lessee sell or permit to be kept, used or sold in or about the Leased
Property any article which is prohibited by law or fire underwriter's
regulations. Lessee shall comply with all of the requirements pertaining to the
Leased Property of any insurance board, association, organization or company
necessary for the maintenance of insurance, as herein provided, covering the
Leased Property and Lessee's Personal Property, which compliance shall be
performed at Lessee's sole cost.
(c) Subject to the provisions of Articles 14 and 15, Lessee covenants
and agrees that during the Term it will either directly or through an approved
Manager (1) operate continuously the Leased Property as a hotel facility, (2)
keep in full force and effect and comply in all material respects with all the
provisions of the Franchise Agreement, (3) not terminate or amend in any respect
the Franchise Agreement without the consent of Lessor, (4) maintain appropriate
certifications and licenses for such use and (5) keep Lessor advised of the
status of any material litigation affecting the Leased Property.
(d) Lessee shall not commit or suffer to be committed any waste on
the Leased Property, or in the Facility, nor shall Lessee cause or permit any
nuisance thereon.
(e) Lessee shall neither suffer nor permit the Leased Property or any
portion thereof, or Lessee's Personal Property, to be used in such a manner as
(1) might reasonably tend to impair Lessor's (or Lessee's, as the case may be)
title thereto or to any portion thereof, or (2) may reasonably make possible a
claim or claims of adverse usage or adverse possession by the public, as such,
or of implied dedication of the Leased Property or any portion thereof.
(f) Lessee shall comply with all of the Lessor's covenants, in any
loan agreement or other financing arrangement, applicable to this Lease or the
operation of the Leased Property. Notwithstanding the foregoing, Lessee shall
not be obligated to comply with Lessor's covenants in any loan agreements which
(A) (i) are not customary, (ii) are not otherwise contemplated by this Lease
Agreement or any agreement or instrument executed by Lessee in connection
herewith for the benefit of Lessor, and (iii)(x) materially and adversely affect
the operations at the Facility or (y) materially increase Lessee's costs of
doing business or decrease
20
<PAGE>
revenues, unless in cases where Subsection (iii)(y) is relied upon by Lessee the
additional cost thereof is borne by Lessor, or (B) obligate Lessee to guarantee
repayment of any debt of Lessor, or (C) require any indemnification undertakings
other than customary undertakings with respect to servicing agents or similar
administrative agents which administer escrow accounts into which Lessee may
deposit Rent payments as required by Lessor's lenders or other servicing agents.
Lessor will provide Lessee with not less than 15, and will attempt in good faith
to provide not less than 30, days prior written notice of the terms of such
covenants, and if Lessee is relying upon Subsection (iii)(y), Lessee shall
within five days of receipt of such notice, notify Lessor in writing of any
anticipated material additional costs which Lessee may incur. Lessor shall then
notify Lessee in writing whether it agrees to pay or reimburse Lessee for the
material additional cost thereof as incurred by Lessee, and Lessee's receipt of
such notice shall be a condition precedent to Lessee's obligation to comply with
such covenants. Lessor shall have the right to dispute Lessee's reliance on
Subsections (A)-(C) or Lessee's estimates of additional costs pursuant to
Subsection (A)(iii)(y), and either party may submit any such disputes to
arbitration under the provisions of Section 40.2.
ARTICLE
-------
8
8.1. Compliance with Legal and Insurance Requirements, etc.
------------------------------------------------------
Subject to Section 8.2, 8.3(b) below and Article 12 relating to
permitted contests, Lessee, at its expense, will promptly (a) comply with all
applicable Legal Requirements and Insurance Requirements in respect of the use,
operation, maintenance, repair and restoration of the Leased Property, and (b)
procure, maintain and comply with all appropriate licenses and other
authorizations required for any use of the Leased Property and Lessee's Personal
Property then being made, and for the proper erection, installation, operation
and maintenance of the Leased Property or any part thereof.
8.2. Legal Requirement Covenants.
----------------------------
(a) Subject to Section 8.3(b) below, Lessee covenants and agrees that
the Leased Property and Lessee's Personal Property shall not be used by anyone
other than Lessor for any unlawful purpose, and that Lessee shall use all
commercially reasonable efforts not to permit or suffer to exist any unlawful
use of the Leased Property by others. Lessee shall acquire and maintain all
licenses, certifications, permits and other authorizations and approvals
required to operate the Leased Property in its customary manner for the Primary
Intended Use, and any other lawful use conducted on the Leased Property as may
be permitted from time to time hereunder. Lessee further covenants and agrees
that Lessee's use of the Leased Property and maintenance, alteration, and
operation of the same, and all parts thereof, shall at all times conform to all
Legal Requirements, unless the same are finally determined by a court of
competent jurisdiction to be unlawful (and Lessee shall cause all its sub-
tenants, invitees or others to so comply with all Legal Requirements).
21
<PAGE>
(b) As between Lessor and Lessee, Lessee is solely responsible for
all liabilities or obligations of any kind with respect to employees at the
Leased Property during the Term. Without limiting the generality of the
foregoing sentence, Lessee is solely responsible for any required compliance
with the Worker Adjustment, Retraining and Notification Act of 1988 (WARN) or
any similar state law applicable to the Leased Property; any required compliance
with the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(COBRA); and all alleged and actual obligations and claims arising from or
relating to any employment agreement, collective bargaining agreement or
employee benefit plans, any grievances, arbitrations, or unfair labor practice
charges, and relating to compliance with any applicable state or federal labor
employment law, including but not limited to all laws pertaining to
discrimination, workers' compensation, unemployment compensation, occupational
safety and health, unfair labor practices, family and medical leave, and wages,
hours or employee benefits. Lessee agrees to indemnify and defend and hold
harmless Lessor from and against any claims relating to any of the foregoing
matters. Lessee further agrees to reimburse Lessor for any and all losses,
damages, costs, expenses, liabilities and obligations of any kind, including
without limitation reasonable attorney's fees and other legal costs and
expenses, incurred by Lessor in connection with any of the foregoing matters.
Notwithstanding the Lessee's obligations under Section 8.1 to obtain and
maintain all permits and licenses required for the use of the Leased Property,
and without limiting any obligations of Lessee hereunder, if (i) applicable law
requires that the owner (rather than a lessee) of a hotel be the licensee under
the required liquor license for the Facility or (ii) the former owner of the
Facility is holding the liquor license and continuing to exercise management and
supervision of the liquor services at the Facility pending transfer of the
license to Lessor or Lessee, the Lessee shall indemnify and hold the Lessor
harmless from any liability, damages or claims (a) arising in connection with
liquor operations at the Facility during such period of time, except for the
Lessor's gross negligence or willful misconduct or (b) made by or through the
former owner with respect to liquor operations at the Facility.
8.3. Environmental Covenants.
------------------------
Lessor and Lessee (in addition to, and not in diminution of, Lessee's
covenants and undertakings in Sections 8.1 and 8.2 hereof) covenant and agree as
follows:
(a) At all times hereafter until Lessee completely vacates the Leased
Property and surrenders possession of the same to Lessor, Lessee shall fully
comply with all Environmental Laws applicable to the Leased Property and the
operations thereon, except to the extent that such compliance would require the
remediation of Environmental Liabilities for which Lessee has no indemnity
obligations under Section 8.3(b). Lessee agrees to give Lessor prompt written
notice of (1) all Environmental Liabilities; (2) all pending, threatened or
anticipated Proceedings, and all notices, demands, requests or investigations,
relating to any Environmental Liability or relating to the issuance, revocation
or change in any Environmental Authorization required for operation of the
Leased Property; and (3) all Releases at, on, in, under or in any way affecting
the Leased Property, or any Release known by Lessee at, on, in or under any
property adjacent to the Leased Property; in each case as to which it has actual
knowledge.
22
<PAGE>
(b) Lessee hereby agrees to defend, indemnify and save harmless any
and all Lessor Indemnified Parties from and against any and all Environmental
Liabilities except to the extent that the same (i) are caused by the
intentionally wrongful acts or grossly negligent failures to act of Lessor, or
(ii) result from Releases or other violations of Environmental Laws originating
on adjacent property but affecting the Leased Property (a "Migration"), provided
that such exclusions shall not apply to the extent that the Migration has been
exacerbated by Lessee's act or negligent failure to act.
(c) Lessor hereby agrees to defend, indemnify and save harmless any
and all Lessee Indemnified Parties from and against any and all Environmental
Liabilities to the extent that the same were caused by the intentionally
wrongful acts or grossly negligent failures to act of Lessor.
(d) If any Proceeding is brought against any Indemnified Party in
respect of an Environmental Liability with respect to which such Indemnified
Party may claim indemnification under either Section 8.3(b) or (c), the
Indemnifying Party, upon request, shall at its sole expense resist and defend
such Proceeding, or cause the same to be resisted and defended by counsel
designated by the Indemnifying Party and approved by the Indemnified Party,
which approval shall not be unreasonably withheld; provided, however, that such
approval shall not be required in the case of defense by counsel designated by
any insurance company undertaking such defense pursuant to any applicable policy
of insurance. Each Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel will be at the sole expense of such
Indemnified Party unless a conflict of interest prevents representation of such
Indemnified Party by the counsel selected by the Indemnifying Party and such
separate counsel has been approved by the Indemnifying Party, which approval
shall not be unreasonably withheld. The Indemnifying Party shall not be liable
for any settlement of any such Proceeding made without its consent, which shall
not be unreasonably withheld, but if settled with the consent of the
Indemnifying Party, or if settled without its consent (if its consent shall be
unreasonably withheld), or if there be a final, nonappealable judgment for an
adversary party in any such Proceeding, the Indemnifying Party shall indemnify
and hold harmless the Indemnified Parties from and against any liabilities
incurred by such Indemnified Parties by reason of such settlement or judgment.
(e) At any time any Indemnified Party has reason to believe
circumstances exist which could reasonably result in an Environmental Liability,
upon reasonable prior written notice to the Lessee and the Lessor stating such
Indemnified Party's basis for such belief, an Indemnified Party shall be given
immediate access to the Leased Property (including, but not limited to, the
right to enter upon, investigate, drill wells, take soil borings, excavate,
monitor, test, cap and use available land for the testing of remedial
technologies), Manager and Lessee's or Manager's employees, and to all relevant
documents and records regarding the matter as to which a responsibility,
liability or obligation is asserted or which is the subject of any Proceeding;
provided that such access may be conditioned or restricted as may be reasonably
necessary to ensure compliance with law and the safety of personnel and
facilities or to protect confidential or privileged information. All Indemnified
Parties requesting such immediate access and
23
<PAGE>
cooperation shall endeavor to coordinate such efforts to result in as minimal
interruption of the operation of the Leased Property as practicable.
(f) The indemnification rights and obligations provided for in this
Article 8 shall be in addition to any indemnification rights and obligations
provided for elsewhere in this Lease, provided that in the event of a conflict
between the provisions of this Section 8.3 and Article 20, the provisions of
this Section 8.3 shall control.
(g) The indemnification rights and obligations provided for in this
Article 8 shall survive the termination of this Lease.
For purposes of this Section 8.3, all amounts for which any
Indemnified Party seeks indemnification shall be computed net of (a) any actual
income tax benefit resulting therefrom to such Indemnified Party, (b) any
insurance proceeds received (net of tax effects) with respect thereto, and (c)
any amounts recovered (net of tax effects) from any third parties based on
claims the Indemnified Party has against such third parties which reduce the
damages that would otherwise be sustained; provided that in all cases, the
timing of the receipt or realization of insurance proceeds or income tax
benefits or recoveries from third parties shall be taken into account in
determining the amount of reduction of damages. Each Indemnified Party agrees
to use its reasonable efforts to pursue, or assign to Lessee or Lessor, as the
case may be, any claims or rights it may have against any third party which
would materially reduce the amount of damages otherwise incurred by such
Indemnified Party.
ARTICLE 9
---------
9.1. Maintenance and Repair; Capital Expenditures.
---------------------------------------------
(a) Lessee will keep the Leased Property and all private roadways,
sidewalks and curbs appurtenant thereto that are under Lessee's control,
including windows and plate glass, parking lots, HVAC, mechanical, electrical
and plumbing systems and equipment (including conduit and ductwork), and non-
load bearing interior walls, in good order and repair, except for ordinary wear
and tear (whether or not the need for such repairs occurred as a result of
Lessee's use, any prior use, the elements or the age of the Leased Property, or
any portion thereof but subject to the obligation to make necessary and
appropriate repairs and replacements as provided in this Section 9.1(a)), and,
except as otherwise provided in Article 14 or Article 15, with reasonable
promptness, make all necessary and appropriate repairs, replacements and
improvements thereto of every kind and nature, whether interior or exterior,
ordinary or extraordinary, foreseen or unforeseen or arising by reason of a
condition existing prior to the commencement of the Term of this Lease
(concealed or otherwise), or required by any governmental agency having
jurisdiction over the Leased Property. Lessee, however, shall be permitted to
prosecute claims against Lessor's predecessors in title for breach of any
representation or warranty or for any latent defects in the Leased Property to
be maintained by Lessee unless Lessor is already diligently pursuing such a
claim. All repairs shall, to the extent reasonably achievable, be at least
equivalent in quality to the original work. Lessee will not take
24
<PAGE>
or omit to take any action, the taking or omission of which might materially
impair the value or the usefulness of the Leased Property or any part thereof
for its Primary Intended Use.. If Lessee fails to make any required repairs or
replacements after 30 days notice from Lessor, or after such longer period as
may be reasonably required provided that Lessee at all times diligently proceeds
with such repair or replacement, then Lessor shall have the right, but shall not
be obligated, to make such repairs or replacements on behalf of and for the
account of Lessee. In such event, such work shall be paid for in full by Lessee
as Additional Charges.
(b) Subject to Lessor's obligation to make available to the Lessee
amounts for Capital Expenditures as set forth in Article 38, Lessee shall be
required to make all Capital Expenditures required in connection with (i)
Emergency Situations, (ii) Legal Requirements, (iii) maintenance of the
Franchise Agreement, (iv) the performance by Lessee of its obligations under
this Lease, and (v) other additions to the Leased Property as it may reasonably
deem appropriate and that are permitted hereunder during the Term. Lessee
hereby waives, to the extent permitted by law, the right to make repairs at the
expense of Lessor pursuant to any law in effect at the time of the execution of
this Lease or hereafter enacted. Lessor shall have the right to give, record
and post, as appropriate, notices of non-responsibility under any mechanic's
lien laws now or hereafter existing.
(c) Nothing contained in this Lease and no action or inaction by
Lessor shall be construed as (1) constituting the request of Lessor, expressed
or implied, to any contractor, subcontractor, laborer, materialman or vendor to
or for the performance of any labor or services or the furnishing of any
materials or other property for the construction, alteration, addition, repair
or demolition of or to the Leased Property or any part thereof, or (2) giving
Lessee any right, power or permission to contract for or permit the performance
of any labor or services or the furnishing of any materials or other property in
such fashion as would permit the making of any claim against Lessor in respect
thereof or to make any agreement that may create, or in any way be the basis for
any right, title, interest, lien, claim or other encumbrance upon the estate of
Lessor in the Leased Property, or any portion thereof.
(d) Lessee will, upon the expiration or prior termination of the
Term, vacate and surrender the Leased Property to Lessor in the condition in
which the Leased Property was originally received from Lessor, except as
repaired, rebuilt, restored, altered or added to as permitted or required by the
provisions of this Lease and except for ordinary wear and tear (subject to the
obligation of Lessee to maintain the Leased Property in good order and repair in
accordance with Section 9.1(a) above, as would a prudent owner of comparable
property, during the entire Term) or damage by casualty or Condemnation (subject
to the obligation of Lessee to restore or repair as set forth in this Lease.)
9.2. Encroachments, Restrictions, Etc.
---------------------------------
If any of the Leased Improvements, at any time, materially encroach
upon any property, street or right of way adjacent to a Leased Property, or
violate the agreements or conditions contained in any lawful restrictive
covenant or other agreement affecting a Leased Property, or any part thereof, or
impair the rights of others under any easement or right of way to
25
<PAGE>
which said Leased Property is subject, then promptly upon the request of Lessor
or at the behest of any person affected by any such encroachment, violation or
impairment, Lessee shall, at its expense, subject to its right to contest the
existence of any encroachment, violation or impairment and, in such case, in the
event of an adverse final determination, either (a) obtain valid and effective
waivers or settlements of all claims, liabilities and damages resulting from
each such encroachment, violation or impairment, whether the same shall affect
Lessor or Lessee or (b) make such changes in the Leased Improvements, and take
such other actions, as Lessee in the good faith exercise of its judgment deems
reasonably practicable to remove such encroachment, and to end such violation or
impairment, including, if necessary, the alteration of any of the Leased
Improvements, and in any event take all such actions as may be necessary in
order to be able to continue the operation of the Leased Improvements for the
Primary Intended Use substantially in the manner and to the extent the Leased
Improvements were operated prior to the assertion of such violation, impairment
or encroachment. Any such alteration shall be made in conformity with the
applicable requirements of Article 10. Lessee's obligations under this Section
9.2 shall be in addition to and shall in no way discharge or diminish any
obligation of any insurer under any policy of title or other insurance held by
Lessor.
ARTICLE 10
----------
10.1. Alterations.
------------
After first obtaining the written approval of Lessor, which shall not
be unreasonably withheld, Lessee shall have the right, but not the obligation,
to make such additions, modifications or improvements to the Leased Property
from time to time as Lessee deems desirable for its permitted uses and purposes,
provided that such action will not alter the character or purposes of the Leased
Property or detract from the value or operating efficiency thereof and will not
impair the revenue-producing capability of the Leased Property or adversely
affect the ability of the Lessee to comply with the provisions of this Lease.
All such work shall be performed in a first class manner in accordance with all
applicable governmental rules and regulations and after receipt of all required
permits and licenses. The cost of such additions, modifications or improvements
to the Leased Property shall be paid by Lessee, and all such additions,
modifications and improvements shall, without payment by Lessor at any time, be
included under the terms of this Lease and upon expiration or earlier
termination of this Lease shall pass to and become the property of Lessor.
10.2. Salvage.
--------
All materials which are scrapped or removed in connection with the
making of repairs required by Articles 9 or 10 shall be or become the property
of Lessor or Lessee depending on which party is paying for or providing the
financing for such work.
26
<PAGE>
10.3. Lessor Alterations.
-------------------
Lessor shall have the right, but not the obligation, to make such
other additions to the Leased Property as it may reasonably deem appropriate
during the Term, subject to the Lessee's approval which shall not be
unreasonably withheld. All such work shall be done after reasonable notice to
and coordination with Lessee, so as to minimize any disruptions or interference
with the operation of the Facility.
ARTICLE 11
----------
11.1. Liens.
------
Subject to the provision of Article 12 relating to permitted contests,
Lessee will not directly or indirectly create or allow to remain and will
promptly discharge at its expense any lien, encumbrance, attachment, title
retention agreement or claim upon the Leased Property resulting from the action
or inaction of Lessee, or any attachment, levy, claim or encumbrance in respect
of the Rent, excluding, however, (a) this Lease, (b) the matters, if any,
included as exceptions or insured against in the title policy insuring Lessor's
interest in the Leased Property,(c) restrictions, liens and other encumbrances
which are consented to in writing by Lessor, (d) liens for those taxes which
Lessee is not required to pay hereunder, (e) subleases permitted by Article 21
hereof, (f) liens for Impositions or for sums resulting from noncompliance with
Legal Requirements so long as (1) the same are not yet delinquent or (2) such
liens are in the process of being contested as permitted by Article 12, (g)
liens of mechanics, laborers, suppliers or vendors for sums either disputed or
not yet due provided that any such liens for disputed sums are in the process of
being contested as permitted by Article 12 hereof, and (h) any liens which are
the responsibility of Lessor pursuant to the provisions of Article 32 of this
Lease.
ARTICLE 12
----------
12.1. Permitted Contests.
-------------------
Lessee shall have the right to contest the amount or validity of any
Imposition to be paid by Lessee or any Legal Requirement or any lien,
attachment, levy, encumbrance, charge or claim (any such Imposition, Legal
Requirement, lien, attachment, levy, encumbrance, charge or claim herein
referred to as "Claims") not otherwise permitted by Article 11, by appropriate
legal proceedings in good faith and with due diligence (but this shall not be
deemed or construed in any way to relieve, modify or extend Lessee's covenants
to pay or its covenants to cause to be paid any such charges at the time and in
the manner as in this Article provided), on condition, however, that such legal
proceedings shall not operate to relieve Lessee from its obligations hereunder
and shall not cause the sale or risk the loss of any portion of the Leased
Property, or any part thereof, or cause Lessor or Lessee to be in default under
any mortgage, deed of trust, security deed or other agreement encumbering the
Leased Property or any interest therein. Upon
27
<PAGE>
the request of Lessor, Lessee shall either (a) provide a bond or other assurance
reasonably satisfactory to Lessor that all Claims which may be assessed against
the Leased Property together with interest and penalties, if any, thereon and
legal fees anticipated to be incurred in connection therewith will be paid, or
(b) deposit within the time otherwise required for payment with a bank or trust
company as trustee upon terms reasonably satisfactory to Lessor, as security for
the payment of such Claims, money in an amount sufficient to pay the same,
together with interest and penalties thereon and legal fees anticipated to be
incurred in connection therewith, as to all Claims which may be assessed against
or become a Claim on the Leased Property, or any part thereof, in said legal
proceedings. Lessee shall furnish Lessor and any lender of Lessor with
reasonable evidence of such deposit within five days of the same. Lessor agrees
to join in any such proceedings if the same be required to legally prosecute
such contest of the validity of such Claims; provided, however, that Lessor
shall not thereby be subjected to any liability for the payment of any costs or
expenses in connection with any proceedings brought by Lessee; and Lessee
covenants to indemnify and save harmless Lessor from any such costs or expenses.
Lessee shall be entitled to any refund of any Claims and such charges and
penalties or interest thereon which have been paid by Lessee or paid by Lessor
and for which Lessor has been fully reimbursed. In the event that Lessee fails
to pay any Claims when due or to provide the security therefor as provided in
this paragraph and to diligently prosecute any contest of the same, Lessor may,
upon ten days advance Notice to Lessee, pay such charges together with any
interest and penalties and the same shall be repayable by Lessee to Lessor as
Additional Charges at the next Payment Date provided for in this Lease.
Provided, however, that should Lessor reasonably determine that the giving of
such Notice would risk loss to the Leased Property or cause damage to Lessor,
then Lessor shall only give such Notice as is practical under the circumstances.
Lessor reserves the right to contest any of the Claims at its expense not
pursued by Lessee. Lessor and Lessee agree to cooperate in coordinating the
contest of any Claims.
ARTICLE 13
----------
13.1. General Insurance Requirements.
-------------------------------
(a) Coverages. During the Term of this Lease, the Leased Property
---------
shall at all times be insured with the kinds and amounts of insurance described
below. This insurance shall be written by companies authorized to issue
insurance in the State. The policies must name the Lessor as an additional
named insured, and the Manager shall also be named as an additional insured
under the coverages described in Sections 13.1(a) (iv) through (xi). Losses
shall be payable to Lessor or Lessee as provided in this Lease. Any loss
adjustment for coverages insuring both parties shall require the written consent
of Lessor and Lessee, each acting reasonably and in good faith. Evidence of
insurance shall be deposited with Lessor. The policies on the Leased Property,
including the Leased Improvements, Fixtures and Lessee's Personal Property,
shall satisfy the requirements of the Franchise Agreement and of any ground
lease, mortgage, security agreement or other financing lien affecting the Leased
Property and at a minimum shall include:
28
<PAGE>
(i) Building insurance on the "Special Form" (formerly "All Risk"
form) (including earthquake and flood in reasonable amounts if and as
determined by Lessor, in the exercise of its reasonable discretion, or
Lessor's underwriters or lenders) in an amount not less than 100% of the
then full replacement cost thereof (as defined in Section 13.2) or such
other amount which is acceptable to Lessor, and personal property insurance
on the "Special Form" in the full amount of the replacement cost thereof;
(ii) Insurance for loss or damage (direct and indirect) from steam
boilers, pressure vessels or similar apparatus, air conditioning systems,
piping and machinery, and sprinklers, if any, now or hereafter installed in
the Facility, in the minimum amount of $5,000,000 or in such greater
amounts as are then customary or as may be reasonably requested by Lessor
from time to time;
(iii) Loss of income insurance on the "Special Form", in the amount
of 18 months of the sum of [Initial Fixed Rent or] Base Rent plus
Percentage Rent (based on the last Lease Year of operation or, to the
extent the Leased Property has not been operated for an entire 18-month
Lease Year, based on prorated Percentage Rent) for the benefit of Lessor,
and business interruption insurance on the "Special Form" in the amount of
18 months of gross profit, for the benefit of Lessee;
(iv) Commercial general liability insurance, with amounts not less
than $1,000,000 combined single limit for each occurrence and $2,000,000
for the aggregate of all occurrences within each policy year, as well as
excess liability (umbrella) insurance with limits of at least $50,000,000
per occurrence, covering each of the following: bodily injury, death, or
property damage liability per occurrence, personal and advertising injury,
general aggregate, products and completed operations, with respect to
Lessor, and "all risk legal liability" (including liquor law or "dram shop"
liability, if liquor or alcoholic beverages are served on the Leased
Property) with respect to Lessor and Lessee;
(v) Fidelity bonds or blanket crime policies with limits and
deductibles as may be reasonably determined by Lessor, covering Lessee's
and/or Manager's employees in job classifications normally bonded under
prudent hotel management practices in the United States or otherwise
required by law;
(vi) Workers' compensation insurance to the extent necessary to
protect Lessor, Lessee and the Leased Property against Lessee's and/or
Manager's workman's compensation claims to the extent required by
applicable state laws;
(vii) Comprehensive form vehicle liability insurance for owned, non-
owned, and hired vehicles, in the amount of $1,000,000;
(viii) Garagekeeper's legal liability insurance covering both
comprehensive and collision-type losses with a limit of liability of
$3,000,000 for any one occurrence, of which coverage in excess of
$1,000,000 may be provided by way of an excess liability policy;
29
<PAGE>
(ix) Innkeeper's legal liability insurance covering property of
guests while on the Leased Property for which Lessor is legally responsible
with a limit of not less than $2,000 per guest and $50,000 in any one
occurrence or $25,000 annual aggregate;
(x) Safe deposit box legal liability insurance covering property of
guests while in a safe deposit box on the Leased Property for which Lessor
is legally responsible with a limit of not less than $50,000 in any one
occurrence; and
(xi) Insurance covering such other hazards (such as plate glass or
other common risks) and in such amounts as may be (A) required by a Holder,
or (B) customary for comparable properties in the area of the Leased
Property and is available from insurance companies, insurance pools or
other appropriate companies authorized to do business in the State at rates
which are economically practicable in relation to the risks covered as may
be reasonably determined by Lessor.
(b) Responsibility for Insurance. Lessor shall obtain the insurance
-----------------------------
and pay the premiums for the coverages described in Section 13.1(a)(i) - (iii)
above (excluding the business interruption insurance for the benefit of the
Lessee in Section 13.1(a)(iii)). Lessee shall obtain the insurance and pay the
premiums for the coverages described in Section 13.1(a)(iii) - (xi) above
(excluding the loss of income insurance for the benefit of the Lessor in Section
13.1(a)(iii)). The Lessee shall also be responsible for any and all deductibles
in connection with such coverages. In the event that Lessor can obtain
comparable insurance coverage required to be carried by Lessee from comparable
insurers and at a cost significantly less than that at which Lessee can obtain
such coverage, the parties shall cooperate in good faith to obtain such coverage
at the lower cost and the Lessee shall pay the premiums therefor.
13.2. Replacement Cost.
-----------------
The term "full replacement cost" as used herein shall mean the actual
replacement cost of the Leased Property requiring replacement from time to time
including an increased cost of construction endorsement, if available, and the
cost of debris removal. In the event either party believes that full
replacement cost has increased or decreased at any time during the Term, it
shall have the right to have such full replacement cost redetermined.
13.3. (Intentionally omitted)
-----------------------
13.4. Waiver of Subrogation.
----------------------
All insurance policies covering the Leased Property, the Fixtures, the
Facility or Lessee's Personal Property, including, without limitation, contents,
fire and casualty insurance, shall expressly waive any right of subrogation on
the part of the insurer against the other party. Each party agrees to seek
recovery from any applicable insurance coverage prior to seeking recovery
against the other party.
30
<PAGE>
13.5. Form Satisfactory, etc.
-----------------------
All of the policies of insurance referred to in this Article 13 that
are the responsibility of the Lessee shall be written in a form, with
deductibles and by insurance companies satisfactory to Lessor and shall satisfy
the requirements of any ground lease, mortgage, security agreement or other
financing lien on the Leased Property and of the Franchise Agreement. The Lessee
shall pay all of the premiums therefor, and deliver copies of such policies or
certificates thereof to the Lessor prior to their effective date (and, with
respect to any renewal policy, 30 days prior to the expiration of the existing
policy), and in the event of the failure of the Lessee either to effect such
insurance as herein called for or to pay the premiums therefor, or to deliver
such policies or certificates thereof to the Lessor at the times required, the
Lessor shall be entitled, but shall have no obligation, after 10 days' Notice to
Lessee (or after less than 10 days' Notice if required to prevent the expiration
of any existing policy), to effect such insurance and pay the premiums therefor,
and to be reimbursed by Lessee for any such premiums upon written demand
therefor. Each insurer mentioned in this Article 13 shall agree, by endorsement
to the policy or policies issued by it, or by independent instrument furnished
to the Lessor that it will give to Lessor 30 days' written notice before the
policy or policies in question shall be materially altered, allowed to expire or
canceled.
13.6. Increase in Limits.
-------------------
If either Lessor or Lessee at any time deems the limits of the
personal injury or property damage under the comprehensive public liability
insurance then carried to be either excessive or insufficient, Lessor and Lessee
shall endeavor in good faith to agree on the proper and reasonable limits for
such insurance to be carried and such insurance shall thereafter be carried with
the limits thus agreed on until further change pursuant to the provisions of
this Section. If the parties fail to agree on such limits, the matter shall be
referred to arbitration as provided for in Section 40.2.
13.7. Blanket Policy.
---------------
Notwithstanding anything to the contrary contained in this Article 13,
Lessee may bring the insurance provided for herein within the coverage of a so-
called blanket policy or policies of insurance carried and maintained by Lessee;
provided, however, that the coverage afforded to Lessor and Lessee will not be
reduced or diminished or otherwise be different from that which would exist
under a separate policy meeting all other requirements of this Lease by reason
of the use of such blanket policy of insurance, and provided further that the
requirements of this Article 13 are otherwise satisfied.
13.8. Separate Insurance.
-------------------
Neither Lessor nor Lessee shall on its own initiative or pursuant to
the request or requirement of any third party, take out separate insurance
concurrent in form or contributing in the event of loss with that required in
this Article to be furnished, or increase the amount of any
31
<PAGE>
then existing insurance by securing an additional policy or additional policies,
unless all parties having an insurable interest in the subject matter of the
insurance, including in all cases Lessor, are included therein as additional
insureds, and the loss is payable under such additional separate insurance in
the same manner as losses are payable under this Lease. Each party shall
immediately notify the other party that it has obtained any such separate
insurance or of the increasing of any of the amounts of the then existing
insurance.
13.9. Reports On Insurance Claims.
----------------------------
Lessee shall promptly investigate and make a complete and timely
written report to the appropriate insurance company as to all accidents, all
claims for damage relating to the ownership, operation, and maintenance of the
Facility, and any damage or destruction to the Facility and the estimated cost
of repair thereof and shall prepare any and all reports required by any
insurance company in connection therewith. All such reports shall be timely
filed with the insurance company as required under the terms of the insurance
policy involved, and a copy of all such reports shall be furnished to Lessor.
Lessee shall be authorized to adjust, settle or compromise any insurable loss,
or to execute proofs of such losses, in the aggregate, of $10,000 or less, with
respect to any single casualty or other event.
ARTICLE 14
----------
14.1. Insurance Proceeds.
-------------------
Subject to the provision of Section 13.9, all proceeds of the insurance
contemplated by Sections 13.1(a) (i) and (ii) payable by reason of any loss or
damage to the Leased Property, or any portion thereof, and insured under any
policy of insurance required by Article 13 of this Lease shall be paid to Lessor
and held in trust in an interest bearing account and made available, if
applicable, for reconstruction or repair, as the case may be, of any damage to
or destruction of the Leased Property or any portion thereof, and, if
applicable, shall be paid out by Lessor from time to time for the reasonable
costs of such reconstruction or repair upon satisfaction of reasonable terms and
conditions specified by Lessor. Any excess proceeds of insurance remaining
after the completion of the restoration or reconstruction of the Leased Property
shall be paid to Lessor. If neither Lessor nor Lessee is required or elects to
repair and restore, and the Lease is terminated as described in Section 14.2,
all such insurance proceeds shall be retained by Lessor except for any amount
thereof paid with respect to Lessee's Personal Property. All salvage resulting
from any risk covered by insurance shall belong to Lessor, except to the extent
of salvage relating to Lessee's Personal Property.
14.2. Reconstruction in the Event of Damage or Destruction Covered by
---------------------------------------------------------------
Insurance.
- ----------
(a) If during the Term the Leased Property is totally or partially
destroyed by a risk covered by the insurance described in Article 13 and the
Facility thereby is rendered Unsuitable for its Primary Intended Use, the Lease
shall terminate as of the date of the casualty and neither Lessor nor Lessee
shall have any further liability hereunder except for any liabilities
32
<PAGE>
which have arisen prior to or which survive such termination, and Lessor shall
be entitled to retain all insurance proceeds except for any amount thereof paid
with respect to Lessee's Personal Property.
(b) If during the Term the Leased Property is partially destroyed by
a risk covered by the insurance described in Article 13, but the Facility is not
thereby rendered Unsuitable for its Primary Intended Use, Lessor or, at the
election of Lessor, Lessee shall restore the Facility to substantially the same
condition as existed immediately before the damage or destruction and otherwise
in accordance with the terms of the Lease. Such damage or destruction shall not
terminate this Lease. If Lessee restores the Facility, the insurance proceeds
shall be paid out by Lessor from time to time for the reasonable costs of such
restoration upon satisfaction of terms and conditions specified by Lessor, and
any excess proceeds remaining after such restoration shall be paid to Lessor
except for any amount thereof paid with respect to Lessee's Personal Property.
(c) If the cost of the repair or restoration exceeds the amount of
proceeds received by Lessor from the insurance required under Article 13, Lessor
shall agree to contribute any excess amounts needed to restore the Facility
prior to requiring Lessee to commence such work. Such difference shall be made
available by Lessor, together with any other insurance proceeds, for application
to the cost of repair and restoration in accordance with the provisions of
Section 14.2(b).
14.3. Reconstruction in the Event of Damage or Destruction Not Covered by
-------------------------------------------------------------------
Insurance or When Holder Will Not Release Insurance Proceeds.
------------------------------------------------------------
If during the Term the Facility is totally or materially damaged or
destroyed by a risk not covered by the insurance described in Article 13, or,
notwithstanding the provisions of Section 14.2(b), if the Holder will not make
the proceeds of such insurance available to Lessor for restoration of the
Facility, whether or not in either event such damage or destruction renders the
Facility Unsuitable for its Primary Intended Use, Lessor, at its option, shall
either, (a) at Lessor's sole cost and expense, restore the Facility to
substantially the same condition it was in immediately before such damage or
destruction and such damage or destruction shall not terminate this Lease, or
(b) terminate the Lease and neither Lessor nor Lessee shall have any further
liability thereunder except for any liabilities which have arisen or occurred
prior to such termination and those which expressly survive termination of this
Lease. If such damage or destruction is determined by Lessor not to be material,
Lessor may, at Lessor's sole cost and expense, restore the Facility to
substantially the same condition as existed immediately before the damage or
destruction and otherwise in accordance with the terms of the Lease, and such
damage or destruction shall not terminate the Lease.
14.4. Lessee's Property and Business Interruption Insurance.
------------------------------------------------------
All insurance proceeds payable by reason of any loss of or damage to
any of Lessee's Personal Property and the business interruption insurance
maintained for the benefit of
33
<PAGE>
Lessee shall be paid to Lessee; provided, however, no such payments shall
diminish or reduce the insurance payments otherwise payable to or for the
benefit of Lessor hereunder.
14.5. Abatement of Rent.
------------------
Any damage or destruction due to casualty notwithstanding, and
provided the Lease has not otherwise been terminated, this Lease shall remain in
full force and effect and Lessee's obligation to pay Rent required by this Lease
shall remain unabated by any damage or destruction which does not result in a
reduction of Gross Revenues. If and to the extent that any damage or destruction
results in a reduction of Gross Revenues which would otherwise be realizable
from the operation of the Facility, then Lessor shall receive all loss of income
insurance and Lessee shall have no obligation to pay Rent in excess of the
amount of Percentage Rent, if any, realizable from Gross Revenues generated by
the operation of the Leased Property during the existence of such damage or
destruction.
ARTICLE 15
----------
15.1. Definition.
-----------
(a) "Condemnation" means a Taking resulting from (1) the exercise of
any governmental power, whether by legal proceedings or otherwise, by a
Condemnor, and (2) a voluntary sale or transfer by Lessor to any Condemnor,
either under threat of condemnation or while legal proceedings for condemnation
are pending.
(b) "Date of Taking" means the date the Condemnor has the right to
possession of the property being condemned.
(c) "Award" means all compensation, sums or anything of value
awarded, paid or received on a total or partial Condemnation.
(d) "Condemnor" means any public or quasi-public authority, or
private corporation or individual, having the power of Condemnation.
15.2. Parties' Rights and Obligations.
--------------------------------
If during the Term there is any Condemnation of all or any part of the
Leased Property or any interest in this Lease, the rights and obligations of
Lessor and Lessee shall be determined by this Article 15.
15.3. Total Taking.
-------------
If title to the fee of the whole of the Leased Property is condemned
by any Condemnor, this Lease shall cease and terminate as of the Date of Taking
by the Condemnor. If title to the fee of less than the whole of the Leased
Property is so taken or condemned, which
34
<PAGE>
nevertheless renders the Leased Property Unsuitable for its Primary Intended Use
or Uneconomic for its Primary Intended Use, then either Lessee or Lessor shall
have the option, by notice to the other, at any time prior to the Date of
Taking, to terminate this Lease as of the Date of Taking. Upon such date, if
such Notice has been given, this Lease shall thereupon cease and terminate. All
Base Rent, Percentage Rent and Additional Charges paid or payable by Lessee
hereunder shall be apportioned as of the Date of Taking, and Lessee shall
promptly pay Lessor such amounts.
15.4. Allocation of Award.
--------------------
The total Award made with respect to the Leased Property or for loss
of rent, or for Lessor's loss of business beyond the Term, shall be solely the
property of and payable to Lessor. Any Award made for loss of Lessee's business
during the remaining Term, if any, for the taking of Lessee's Personal Property,
or for removal and relocation expenses of Lessee in any such proceedings shall
be the sole property of and payable to Lessee. In any Condemnation proceedings
Lessor and Lessee shall each seek its Award in conformity herewith, at its
respective expense; provided, however, neither Lessor nor Lessee shall initiate,
prosecute or acquiesce in any proceedings that may result in a diminution of any
Award payable to the other.
15.5. Partial Taking.
---------------
(a) If title to less than the whole of the Leased Property is
condemned, and the Leased Property is not Unsuitable for its Primary Intended
Use or Uneconomic for its Primary Intended Use, or if Lessor is entitled but
elects not to terminate this Lease as provided in Section 15.3, then Lessor or,
at Lessor's election, Lessee shall, with all reasonable dispatch and to the
extent that the Holder permits the application of the Award therefor and the
Award is sufficient therefor, restore the untaken portion of any Leased
Improvements so that such Leased Improvements constitute a complete
architectural unit of the same general character and condition (as nearly as may
be possible under the circumstances) as the Leased Improvements existing
immediately prior to the Condemnation. Lessor and Lessee shall each contribute
to the cost of restoration that part of its Award specifically allocated to such
restoration, if any, together with severance and other damages awarded for the
taken Leased Improvements; provided, however, that the amount of such
contribution shall not exceed such cost.
(b) In the event of a partial Taking as described in Section 15.5(a),
which does not result in a termination of this Lease by Lessor, the Base Rent
shall be abated in the manner and to the extent that is fair, just and equitable
to both Lessee and Lessor, taking into consideration, among other relevant
factors, the number of usable rooms, the amount of square footage, or the
revenues affected by such partial Taking. If Lessor and Lessee are unable to
agree upon the amount of such abatement within 30 days after such partial
Taking, the matter shall be submitted to Arbitration as provided for in Section
40.2 hereof.
35
<PAGE>
15.6. Temporary Taking.
-----------------
If the whole or any part of the Leased Property or of Lessee's
interest under this Lease is condemned by any Condemnor for its temporary use or
occupancy, this Lease shall not terminate by reason thereof, and Lessee shall
continue to pay, in the manner and at the times herein specified, the full
amounts of Base Rent and Additional Charges, but only to the extent of the Award
made to Lessee for such Condemnation allocable to the Term. In addition, to the
extent of the remaining balance, if any, of the Award made for such Condemnation
allocable to the Term (after payment of Base Rent and Additional Charges),
Lessee shall pay Percentage Rent at a rate equal to the average Percentage Rent
during the last three preceding full Lease Years (or if three full Lease Years
shall not have elapsed, the average during the preceding full Lease Years).
Except only to the extent that Lessee may be prevented from so doing pursuant to
the terms of the order of the Condemnor, Lessee shall continue to perform and
observe all of the other terms, covenants, conditions and obligations hereof on
the part of the Lessee to be performed and observed, as though such Condemnation
had not occurred. In the event of any Condemnation as in this Section 15.6
described, the entire amount of any Award made for such Condemnation allocable
to the Term of this Lease, whether paid by way of damages, rent or otherwise,
shall be paid to Lessee. Lessee covenants that upon the termination of any such
period of temporary use or occupancy it will, to the extent that its Award is
sufficient therefor and subject to Lessor's contribution as set forth below,
restore the Leased Property as nearly as may be reasonably possible to the
condition in which the same was immediately prior to such Condemnation, unless
such period of temporary use or occupancy extends beyond the expiration of the
Term, in which case Lessee shall not be required to make such restoration. If
restoration is required hereunder, Lessor shall contribute to the cost of such
restoration that portion of its entire Award that is specifically allocated to
such restoration in the judgment or order of the court, if any.
ARTICLE 16
----------
16.1. Events of Default.
------------------
Any one or more of the following events shall constitute an Event of
Default hereunder:
(a) if Lessee fails to make any payment of [Initial Fixed Rent,] Base
Rent or Percentage Rent or Additional Charges within ten days after receipt by
Lessee of Notice from Lessor that the same has become due and payable, provided
that Lessor shall not be required to give any such Notice more than twice in any
Lease Year and that any third or subsequent failure by Lessee during such Lease
Year to make any payment of [Initial Fixed Rent,] Base Rent or Percentage Rent
on the date the same becomes due and payable shall constitute an immediate Event
of Default; or
(b) if Lessee fails to observe or perform any other term, covenant or
condition of this Lease and such failure is not curable, or if curable is not
cured by Lessee within a period
36
<PAGE>
of 30 days after receipt by the Lessee of Notice thereof from Lessor, unless
such failure is curable but cannot with due diligence be cured within a period
of 30 days, in which case it shall not be deemed an Event of Default if (i)
Lessee, within such 30 day period, proceeds with due diligence to cure the
failure and thereafter diligently completes the curing thereof within 120 days
of Lessor's Notice to Lessee, which 120-day period shall cease to run during any
period that a cure of such failure is prevented by an Unavoidable Delay and
shall resume running upon the cessation of such Unavoidable Delay, and (ii) the
failure does not result in a notice or declaration of default under any material
contract or agreement to which Lessor, the Company, or any Affiliate of either
of them is a party or by which any of their assets are bound; or
(c) if Lessee or Manager shall (i) be generally not paying its debts
as they become due, (ii) file, or consent by answer or otherwise to the filing
against it of, a petition for relief or reorganization or arrangement or any
other petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, (iii) make an assignment for
the benefit of its creditors, (iv) consent to the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect to it or
with respect to any substantial part of its assets, (v) be adjudicated insolvent
or (vi) take corporate action for the purpose of any of the foregoing; or if a
court or governmental authority of competent jurisdiction shall enter an order
appointing, without consent by Lessee, a custodian, receiver, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of its assets, or if an order for relief shall be entered in
any case or proceeding for liquidation or reorganization or otherwise to take
advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of Lessee, or if any petition for any
such relief shall be filed against Lessee and such petition shall not be
dismissed within 60 days; or
(d) if Lessee or Manager is liquidated or dissolved, or begins
proceedings toward such liquidation or dissolution, or, in any manner, ceases to
do business or permits the sale or divestiture of substantially all of its
assets; or
(e) if the estate or interest of Lessee in the Leased Property or any
part thereof is voluntarily or involuntarily transferred, assigned, conveyed,
levied upon or attached in any Proceeding (for purposes of this Section 16.1(e),
a Change of Control shall constitute an assignment of this Lease); or
(f) if, except as a result of and to the extent required by damage,
destruction, Condemnation, Lessee ceases operations on the Leased Property; or
(g) if the Franchise Agreement with respect to the Facility on the
Leased Property is terminated by the franchisor as a result of any action or
failure to act by the Lessee or its agents, other than the failure to complete
improvements required by the franchisor because the Lessor fails to pay the
costs of such improvements; or
(h) if an Event of Default occurs under any of the Other Leases.
37
<PAGE>
If litigation or arbitration is commenced with respect to any alleged
default under this Lease, the prevailing party in such litigation shall receive,
in addition to its damages incurred, such sum as the court shall determine as
its reasonable attorneys' fees, and all costs and expenses incurred in
connection therewith.
16.2. Remedies.
---------
Upon the occurrence of an Event of Default, Lessor shall have the
right, at Lessor's option, to elect to do any one or more of the following
without further notice or demand to Lessee: (a) terminate this Lease, in which
event Lessee shall immediately surrender the Leased Property to Lessor, and, if
Lessee fails to so surrender, Lessor shall have the right, without notice, to
enter upon and take possession of the Leased Property and to expel or remove
Lessee and its effects without being liable for prosecution or any claim for
damages therefor; and Lessee shall, and hereby agrees to, indemnify Lessor for
all loss and damage which Lessor suffers by reason of such termination,
including without limitation, damages in an amount equal to the total of (1) the
reasonable costs of recovering the Leased Property in the event that Lessee does
not promptly surrender the Leased Property, and all other reasonable expenses
incurred by Lessor in connection with Lessee's default; and (2) the unpaid Rent
earned as of the date of termination, plus interest at the Overdue Rate accruing
after the due date; (3) the total Rent (including Percentage Rent as determined
below) which Lessor would have received under this Lease for the remainder of
the Term, but discounted to the then present value at a rate of 12% per annum,
less the fair market rental value of the balance of the Term as of the time of
such default discounted to the then present value at a rate of 12% per annum;
and (4) all other sums of money and damages owing by Lessee to Lessor; or (b)
enter upon and take possession of the Leased Property without terminating this
Lease and without being liable to prosecution or any claim for damages therefor,
and, if Lessor elects, relet the Leased Property on such terms as Lessor deems
advisable, in which event Lessee shall pay to Lessor on demand the reasonable
cost of repossessing the Leased Property and any deficiency between the Rent
payable hereunder (including Percentage Rent as determined below) and the rent
paid under such reletting; provided, however, that Lessee shall not be entitled
to any excess payments received by Lessor from such reletting (Lessor's failure
to relet the Leased Property shall not release or affect Lessee's liability for
Rent or for damages); or (c) enter the Leased Property without terminating this
Lease and without being liable for prosecution or any claim for damages therefor
and maintain the Leased Property and repair or replace any damage thereto or do
anything for which Lessee is responsible hereunder. Lessee shall reimburse
Lessor immediately upon demand for any expense which Lessor incurs in thus
effecting Lessee's compliance under this Lease, and Lessor shall not be liable
to Lessee for any damages with respect thereto. Notwithstanding anything herein
to the contrary, Lessee shall not be liable to Lessor for consequential,
punitive or exemplary damages.
The rights granted to Lessor in this Section 16.2 shall be cumulative
of every other right or remedy provided in this Lease or which Lessor may
otherwise have at law or in equity or by statute, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies or constitute a forfeiture
38
<PAGE>
or waiver of Rent or damages accruing to Lessor by reason of any Event of
Default under this Lease.
Percentage Rent for the purposes of this Section 16.2 shall be a sum
equal to (i) the average of the annual amounts of the Percentage Rent for the
three full Lease Years immediately preceding the Lease Year in which the
termination, re-entry or repossession takes place, or (ii) if three full Lease
Years shall not have elapsed, the average of the Percentage Rent during the
preceding full Lease Years during which the Lease was in effect, or (iii) if one
full Lease Year has not elapsed, the amount derived by annualizing the
Percentage Rent from the effective date of this Lease.
16.3. Waiver.
-------
Each party waives, to the extent permitted by applicable law, any
right to a trial by jury in any proceedings brought by either party to enforce
the provisions of this Lease, including, without limitation, proceedings to
enforce the remedies set forth in this Article 16, and Lessee waives the benefit
of any laws now or hereafter in force exempting property from liability for rent
or for debt. Lessor waives any right to "pierce the corporate veil" of Lessee
other than to the extent funds shall have been paid to any Affiliate of Lessee
following a default leading to any Event of Default, and then only to the extent
of such payments.
16.4. Application of Funds.
---------------------
Any payments received by Lessor under any of the provisions of this
Lease during the existence or continuance of any Event of Default shall be
applied to Lessee's obligations in the order that Lessor may determine or as may
be prescribed by the laws of the State.
ARTICLE 17
----------
17.1. Lessor's Right to Cure Lessee's Default.
----------------------------------------
If Lessee fails to make any payment or to perform any act required to
be made or performed under this Lease including, without limitation, Lessee's
failure to comply with the terms of any Franchise Agreement, and fails to cure
the same within the relevant time periods provided in Section 16.1, Lessor,
without waiving or releasing any obligation of Lessee, and without waiving or
releasing any obligation or default, may (but shall be under no obligation to)
at any time thereafter upon Notice to Lessee make such payment or perform such
act for the account and at the expense of Lessee, and may, to the extent
permitted by law, enter upon the Leased Property for such purpose and, subject
to Section 16.2, take all such action thereon as, in Lessor's opinion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction of
Lessee. All sums so paid by Lessor and all costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses, in each case to the
extent permitted by law) so incurred, together with a late charge thereon (to
the extent permitted by law) at the Overdue Rate from the date on which such
sums or expenses are paid or incurred by Lessor, shall be paid
39
<PAGE>
by Lessee to Lessor on demand. The obligations of Lessee and rights of Lessor
contained in this Article shall survive the expiration or earlier termination of
this Lease.
ARTICLE 18
----------
18.1. Personal Property Limitation.
-----------------------------
(a) Anything contained in this Lease to the contrary notwithstanding,
the average of the adjusted tax bases of the items of Lessor's personal property
that are leased to Lessee under this Lease at the beginning and at the end of
any Lease Year shall not exceed 15% of the average of the aggregate adjusted tax
bases of the real and personal property contained in the Leased Property at the
beginning and at the end of such Lease Year (the "Personal Property
Limitation"). If Lessor reasonably anticipates that the Personal Property
Limitation will be exceeded with respect to the Leased Property for any Lease
Year, Lessor shall notify Lessee, and Lessee shall purchase items of personal
property anticipated by Lessor to be in excess of the Personal Property
Limitation ("Excess Personal Property Items") either from Lessor or a third
party. If the Excess Personal Property Items are purchased from Lessor, the
purchase prices of such Excess Personal Property Items shall be equal to the
adjusted tax bases of such Excess Personal Property Items in the hands of Lessor
as of the closing of the purchase.
(b) If Lessee purchases Excess Personal Property Items, the Rent
shall be reduced for the calendar quarter in which such purchase occurs and each
of four succeeding calendar quarters by an amount each calendar quarter equal to
20% of the aggregate purchase prices of such Excess Personal Property Items.
(c) If Lessee purchases Excess Personal Property Items, the amount
required by Lessor to be deposited in the Capital Expenditure Reserve pursuant
to Article 38 hereof shall be reduced for the Lease Year during which such
purchase occurs by an amount equal to the aggregate purchase prices of such
Excess Personal Property Items.
18.2. Sublease Rent Limitation.
-------------------------
Anything contained in this Lease to the contrary notwithstanding,
Lessee shall not sublet the Leased Property or enter into any similar
arrangement on any basis such that the rental or other amounts to be paid by the
sublessee thereunder would be based, in whole or in part, on either (a) the net
income or profits derived by the business activities of the sublessee, or (b)any
other formula such that any portion of the Rent would fail to qualify as "rents
from real property" within the meaning of Section 856(d) of the Code, or any
similar or successor provision thereto.
18.3. Sublease Lessee Limitation.
---------------------------
Anything contained in this Lease to the contrary notwithstanding,
Lessee shall not sublease the Leased Property to, or enter into any similar
arrangement with, any Person in which
40
<PAGE>
the Company owns, directly or indirectly, a 10% or greater interest, within the
meaning of Section 856(d) (2) (B) of the Code, or any similar or successor
provisions thereto.
18.4. Lessee Ownership Limitation.
----------------------------
Anything contained in this Lease to the contrary notwithstanding,
neither party shall take, or permit to take, any action that would cause the
Company to own, directly or indirectly, a 10% or greater interest in the Lessee
within the meaning of Section 856(d) (2) (B) of the Code, or any similar or
successor provision thereto.
18.5. Director, Officer and Employee Limitation.
------------------------------------------
Anything contained in this Lease to the contrary notwithstanding,
Lessor and Lessee shall cooperate to ensure that (i) no officers or employees of
Lessor or the Company shall be officers or employees of, or own any ownership
interest in, any Person who furnishes or renders services to the tenants of the
Leased Property, or manages or operates the Leased Property, other than the
Lessee and (ii) no officers or employees of any Person who furnishes or renders
services to the tenants of the Leased Property, or manages or operates the
Leased Property, other than the Lessee shall be officers or employees of Lessor
or the Company. Furthermore, if a Person serves as both (a) a director or
trustee of Lessor, the Company or any other Affiliate of Lessor and (b) a
director and officer (or employee) of the any Person who furnishes or renders
services to the tenants of the Leased Property, or manages or operates the
Leased Property, other than the Lessee, that Person shall not receive any
compensation (excluding reimbursement for expenses) for serving as a trustee of
the Lessor, the Company or the other Affiliate of Lessor.
ARTICLE 19
----------
19.1. Holding Over.
-------------
If Lessee for any reason remains in possession of the Leased Property
after the expiration or earlier termination of the Term, such possession shall
be as a tenant at sufferance during which time Lessee shall pay as rental each
month the aggregate of (a) one-twelfth of the aggregate Base Rent and Percentage
Rent payable with respect to the last Lease Year of the Term, (b)all Additional
Charges accruing during the applicable month and (c) all other sums, if any,
payable by Lessee under this Lease with respect to the Leased Property. During
such period, Lessee shall be obligated to perform and observe all of the terms,
covenants and conditions of this Lease, but shall have no rights hereunder other
than the right, to the extent given by law to tenancies at sufferance, to
continue its occupancy and use of the Leased Property. Nothing contained herein
shall constitute the consent, express or implied, of Lessor to the holding over
of Lessee after the expiration or earlier termination of this Lease.
ARTICLE 20
----------
41
<PAGE>
20.1. Indemnification.
----------------
Subject to the last sentence of Section 13.4, Lessee will protect,
indemnify, hold harmless and defend Lessor Indemnified Parties from and against
all liabilities, obligations, claims, damages, penalties, causes of action,
costs and expenses (including, without limitation, reasonable attorneys' fees
and expenses), to the extent permitted by law, including those resulting from a
Lessor Indemnified Party's own negligence but excluding those resulting from a
Lessor Indemnified Party's gross negligence or willful misconduct, imposed upon
or incurred by or asserted against Lessor Indemnified Parties by reason of: (a)
any accident, injury to or death of persons or loss of or damage to property
occurring on or about the Leased Property or adjoining sidewalks, including
without limitation any claims under liquor liability, "dram shop" or similar
laws, (b) any past, present or future use, misuse, non-use, condition,
management, maintenance or repair by Lessee or any of its agents, employees or
invitees of the Leased Property or Lessee's Personal Property or any litigation,
proceeding or claim by governmental entities or other third parties to which a
Lessor Indemnified Party is made a party or participant related to such use,
misuse, non-use, condition, management, maintenance, or repair thereof by Lessee
or any of its agents, employees or invitees, including any failure of Lessee or
any of its agents, employees or invitees to perform any obligations under this
Lease or imposed by applicable law (other than arising out of Condemnation
proceedings), (c) any Impositions, other than any portion of Real Estate Taxes
that the Lessor is obligated to pay under this Lease, (d) any failure on the
part of Lessee to perform or comply with any of the terms of this Lease, and (e)
the nonperformance of any of the terms and provisions of any and all existing
and future subleases of the Leased Property to be performed by the landlord
thereunder.
Subject to the last sentence of Section 13.4, Lessor shall indemnify,
save harmless and defend Lessee Indemnified Parties from and against all
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses imposed upon or incurred by or asserted against Lessee Indemnified
Parties as a result of (a) the gross negligence or willful misconduct of Lessor
arising in connection with this Lease or (b) any failure on the part of Lessor
to perform or comply with any of the terms of this Lease.
Any amounts that become payable by an Indemnifying Party under this
Section shall be paid within ten days after liability therefor on the part of
the Indemnifying Party is determined by litigation or otherwise, and if not
timely paid, shall bear a late charge (to the extent permitted by law) at the
Overdue Rate from the date of such determination to the date of payment. Any
such amounts shall be reduced by insurance proceeds received and any other
recovery (net of costs) obtained by the Indemnified Party. An Indemnifying
Party, at its expense, shall contest, resist and defend any such claim, action
or proceeding asserted or instituted against the Indemnified Party. The
Indemnified Party, at its expense, shall be entitled to participate in any such
claim, action, or proceeding, and the Indemnifying Party may not compromise or
otherwise dispose of the same without the consent of the Indemnified Party,
which may not be unreasonably withheld. Nothing herein shall be construed as
indemnifying a Lessor Indemnified Party against its own grossly negligent acts
or omissions or willful misconduct.
42
<PAGE>
Lessee's or Lessor's liability for a breach of the provisions of this
Article shall survive any termination of this Lease.
ARTICLE 21
----------
21.1. Subletting and Assignment.
--------------------------
In addition to the provisions of Article 18 and Sections 21.2, 21.3
and any other express consents, conditions, limitations or other provisions set
forth herein and in the Lease Master Agreement, Lessee shall not assign this
Lease or hereafter sublease all or any part of the Leased Property without first
obtaining the written consent of Lessor. In the case of a permitted subletting,
the sublessee shall comply with the provisions of Section 21.2 and 21.3, and in
the case of a permitted assignment, the assignee shall assume in writing and
agree to keep and perform all of the terms of this Lease on the part of Lessee
to be kept and performed and shall be, and become, jointly and severally liable
with Lessee for the performance thereof. In case of either an assignment or
subletting made during the Term, Lessee shall remain primarily liable, as
principal rather than as surety, for the prompt payment of the Rent and for the
performance and observance of all of the covenants and conditions to be
performed by Lessee hereunder. An original counterpart of each such sublease and
assignment and assumption, duly executed by Lessee and such sublessee or
assignee, as the case may be, in form and substance satisfactory to Lessor,
shall be delivered promptly to Lessor.
21.2. Attornment.
-----------
Lessee shall insert in each future sublease permitted under Section
21.1 provisions to the effect that (a) such sublease is subject and subordinate
to all of the terms and provisions of this Lease and to the rights of Lessor
hereunder, (b) if this Lease terminates before the expiration of such sublease,
the sublessee thereunder will, at Lessor's option, attorn to Lessor and waive
any right the sublessee may have to terminate the sublease or to surrender
possession thereunder as a result of the termination of this Lease, and (c) if
the sublessee receives a written Notice from Lessor or Lessor's assignees, if
any, stating that an uncured Event of Default exists under this Lease, the
sublessee shall thereafter be obligated to pay all rentals accruing under said
sublease directly to the party giving such Notice, or as such party may direct.
All rentals received from the sublessee by Lessor or Lessor's assignees, if any,
as the case may be, shall be credited against the amounts owing by Lessee under
this Lease.
21.3. Management Agreement.
---------------------
If the Lessee decides to enter into a management or agency agreement
relating to the management or operation of the Facility (collectively, the
"Management Agreement"), Lessor shall have the right to approve the Management
Agreement , any modifications to the Management Agreement affecting the fees,
costs or expenses payable or collectible thereunder, and any other material
modification to the Management Agreement. Lessor's approval shall not
43
<PAGE>
be unreasonably withheld. The Management Agreement shall provide, among other
things, that (i) upon termination of this Lease or termination of Lessee's right
to possession of the Leased Property for any reason whatsoever, the Management
Agreement may be terminated by Lessor without liability for any payment due or
to become due to the manager of the Facility (the "Manager"), and (ii) all fees
and other amounts payable by Lessee to the Manager shall be subordinate on a
month to month basis to Rent and other amounts payable by Lessee to Lessor
hereunder prior to the existence of an Event of Default, and shall be at all
times subordinate to Rent and such other amounts after the occurrence of an
Event of Default
ARTICLE 22
----------
22.1. Officer's Certificates; Financial Statements; Lessor's Estoppel
---------------------------------------------------------------
Certificates and Covenants.
--------------------------
(a) At any time and from time to time upon not less than 10 days
Notice by Lessor, Lessee will furnish to Lessor an Officer's Certificate
certifying that this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications), the date to which the Rent has been paid, whether to the
knowledge of Lessee there is any existing default or Event of Default hereunder
by Lessor or Lessee, and such other information as may be reasonably requested
by Lessor. Any such certificate furnished pursuant to this Section may be
relied upon by Lessor, any lender, any underwriter and any prospective purchaser
of the Leased Property.
(b) Lessee will furnish, at Lessee's cost and expense, the following
statements and operating information to Lessor, each in a form satisfactory to
Lessor:
(i) Consolidated Financials of Lessee for each calendar
quarter of each Lease Year, and for each calendar quarter in the Lease Year-to-
date, within 20 days after the end of such calendar quarter;
(ii) Consolidated Financials of Lessee and each Affiliate of
Lessee, if any, that leases hotel properties from Lessor or its Affiliates,
for each calendar quarter of each Lease Year, and for each calendar quarter
in the Lease Year to date, within 20 days after the end of such calendar
quarter;
(iii) audited Consolidated Financials of Lessee for each Lease
Year, including the auditor's report thereon, within 60 days after the end
of such year;
(iv) audited Consolidated Financials of Lessee and each
Affiliate of Lessee that leases hotel properties from Lessor or its
Affiliates, if any, for each Lease Year, including the auditor's report
thereon, within 60 days after the end of such year. The fees and expenses
of the auditor incurred in connection with conducting such audits and
delivering such reports shall be paid by Lessor;
44
<PAGE>
(v) with reasonable promptness, such other information
respecting the financial condition and affairs of Lessee (A) as Lessor or
the Company may require or may deem desirable in its discretion to file
with or provide to the SEC or any other governmental agency or any other
Person, all in the form, and either audited or unaudited, as Lessor may
request in Lessor's reasonable discretion, and (B) as may be reasonably
necessary to confirm compliance by Lessee and its Affiliates with the
requirements of this Lease;
(vi) on or before the 20th day of each calendar quarter, a
balance sheet, and detailed profit and loss and cash flow statements
showing the financial position of the Facility as at the end of the
preceding calendar quarter, the results of operation of the Facility for
such preceding calendar quarter and the Lease Year-to-date and the average
daily rate, occupancy and revenue-per-available room of the Facility in
such preceding calendar quarter;
(vii) within five (5) days of Lessee's receipt thereof, any
inspection reports received from the franchisor under the Franchise
Agreement; and
(viii) such other information as Lessor may reasonably request
and that Lessee can provide without unreasonable expense.
(c) At any time and from time to time upon not less than 10 days
notice by Lessee, Lessor will furnish to Lessee or to any person designated by
Lessee an estoppel certificate certifying that this Lease is unmodified and in
full force and effect (or that this Lease is in full force and effect as
modified and setting forth the modifications), the date to which Rent has been
paid, whether to the knowledge of Lessor there is any existing default or Event
of Default on Lessee's part hereunder, and such other information as may be
reasonably requested by Lessee. Any such certificate furnished pursuant to this
Section may be relied upon by Lessee, any lender, any underwriter and any
purchaser of the assets of Lessee.
(d) If Company or Lessor proposes to include in any submission or
filing with its lender, stock exchange or the SEC, Consolidated Financials of
Lessee delivered or required to be delivered hereunder and the consent of
Lessee's auditor is required for such inclusion, Lessee shall use commercially
reasonable efforts to cause its auditor to deliver promptly to Lessor the
auditor's consent, in the form required, to the inclusion in the submission or
filing of the Consolidated Financials (including the report of the auditor, if
the Consolidated Financials to be included are audited). Lessee shall reasonably
cooperate with Lessor regarding Lessee's auditor's compliance with such requests
with the purpose of minimizing costs and delays. Lessee shall reasonably
cooperate with all requests made by its auditor, Lessor or the SEC to promptly
provide to the auditor, Lessor or SEC such information or documents, including
consents and representation letters, as may be necessary or desirable in
connection with the preparation, delivery, audit or inclusion in SEC filings,
submissions or other public documents, of information, including financial
information, related to the Leased Property, the operation and financial results
of the Leased Property, and the financial results and condition of the Lessee.
Without limiting the foregoing, the information shall be sufficient to permit
the preparation of a
45
<PAGE>
Management's Discussion and Analysis of Results of Operations and Financial
Condition with respect to the Lessee as may be required to be included in
reports and documents filed by the Company with the SEC. Lessee shall not be
obligated to incur material additional expense to prepare any reports or
information not specifically provided for herein that Lessor or Company may be
required or elect to file with the SEC, and such material additional third-party
costs shall be paid or reimbursed by Lessor.
ARTICLE 23
----------
23.1. Regular Meetings; Lessor's Right to Inspect.
--------------------------------------------
(a) Lessee agrees that the regional manager, the general
manager, the director of marketing/sales, and the chief engineer for the
Facility will meet with Lessor and its representatives on a monthly basis at the
Facility throughout each Lease Year in order to discuss all aspects of the
management, maintenance and operation of the Facility. If agreed upon by Lessor
and Lessee, such meetings may be held by conference call.
(b) Lessee shall permit Lessor and its authorized
representatives, which may include auditors, underwriters and rating agencies,
as frequently as reasonably requested by Lessor to (i) inspect the Leased
Property and Lessee's accounts and records pertaining thereto, including general
accounting records, corporate records and agreements relating to the operations
of the Leased Property and Lessee's financial condition, and make copies
thereof, and (ii) conduct audits, all during usual business hours upon
reasonable advance notice, subject only to any business confidentiality
requirements reasonably requested by Lessee. In conducting such inspections
Lessor shall not unreasonably interfere with the conduct of Lessee's business at
the Leased Property.
(c) Lessee will, on a space available basis, provide customary
gratuitous accommodations to Lessor and its representatives in connection with
all such meetings and inspections.
ARTICLE 24
----------
24.1. No Waiver.
----------
No failure by Lessor or Lessee to insist upon the strict
performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the extent permitted by law, no waiver
of any breach shall affect or alter this Lease, which shall continue in full
force and effect with respect to any other then existing or subsequent breach.
46
<PAGE>
ARTICLE 25
----------
25.1. Remedies Cumulative.
--------------------
To the extent permitted by law but subject to Article 39 and any
other provisions of this Lease expressly limiting the rights, powers and
remedies of either Lessor or Lessee, each legal, equitable or contractual right,
power and remedy of Lessor or Lessee now or hereafter provided either in this
Lease or by statute or otherwise shall be cumulative and concurrent and shall be
in addition to every other right, power and remedy, and the exercise or
beginning of the exercise by Lessor or Lessee of any one or more of such rights,
powers and remedies shall not preclude the simultaneous or subsequent exercise
by Lessor or Lessee of any or all of such other rights, powers and remedies.
ARTICLE 26
----------
26.1. Acceptance of Surrender.
------------------------
No surrender to Lessor of this Lease or of the Leased Property or
any part thereof, or of any interest therein, shall be valid or effective unless
agreed to and accepted in writing by Lessor and no act by Lessor or any
representative or agent of Lessor, other than such a written acceptance by
Lessor, shall constitute an acceptance of any such surrender.
ARTICLE 27
----------
27.1. No Merger of Title.
-------------------
There shall be no merger of this Lease or of the leasehold estate
created hereby by reason of the fact that the same person or entity may acquire,
own or hold, directly or indirectly: (a) this Lease or the leasehold estate
created hereby or any interest in this Lease or such leasehold estate and (b)
the fee estate in the Leased Property.
ARTICLE 28
----------
28.1. Conveyance by Lessor.
---------------------
Lessor shall have the unrestricted right to mortgage or otherwise
convey the Leased Property to a Holder. If Lessor conveys the Leased Property in
accordance with the terms hereof other than to a Holder, and the grantee or
transferee of the Leased Property expressly assumes in writing all obligations
of Lessor hereunder arising or accruing from and after the date of such
conveyance or transfer, Lessor shall thereupon be released from all future
liabilities and obligations of Lessor under this Lease arising or accruing from
and after the date of such
47
<PAGE>
conveyance or other transfer as to the Leased Property and all such future
liabilities and obligations shall thereupon be binding upon the new owner. If
Lessee is not reasonably satisfied that the new owner is a capable, reliable and
qualified Person of good reputation and character, Lessee may terminate this
Lease upon 60-days Notice to Lessor given within 30 days after Lessee receives
Notice of such conveyance.
28.2. Lessor May Grant Liens.
-----------------------
(a) Subject to Section 7.2, without the consent of Lessee,
Lessor may from time to time, directly or indirectly, create or otherwise cause
to exist any lien, encumbrance or title retention agreement upon the Leased
Property, or any portion thereof or interest therein, or upon Lessor's interest
in this Lease, whether to secure any borrowing or other means of financing or
refinancing. This Lease and Lessee's interest hereunder shall at all times be
subject and subordinate to the lien and security title of any deeds to secure
debt, deeds of trust, mortgages, or other interests heretofore or hereafter
granted by Lessor or which otherwise encumber or affect the Leased Property and
to any and all advances to be made thereunder and to all renewals,
modifications, consolidations, replacements, substitutions, and extensions
thereof (all of which are herein called the "Mortgage"), provided that the
Mortgage and all security agreements delivered by Lessor in connection therewith
shall be subject to Lessee's rights under this Lease to receive all Gross
Revenues of the Facility prior to the earlier of the occurrence of an Event of
Default or the date that this Lease is terminated by the Holder of the Mortgage
in the exercise of its remedies thereunder. In confirmation of such
subordination, Lessee shall, at Lessor's request, promptly execute, acknowledge
and deliver any instrument which may be required to evidence subordination to
any Mortgage and attornment to the Holder thereof and its successors and
assigns, provided Lessee receives customary and reasonable non-disturbance
protection while it is not in default hereunder. The Lessee shall comply with
any material covenants with respect to the Lessee contained in such instrument
of subordination. In the event of Lessee's failure to deliver such subordination
and if the Mortgage does not change any term of the Lease, Lessor may, in
addition to any other remedies for breach of covenant hereunder, execute,
acknowledge, and deliver the instrument as the agent or attorney-in-fact of
Lessee, and Lessee hereby irrevocably constitutes Lessor its attorney-in-fact
for such purpose, Lessee acknowledging that the appointment is coupled with an
interest and is irrevocable.
(b) Lessee shall, upon the request of Lessor or any existing or
future Holder, (i) provide Holder with copies of all licenses, permits,
occupancy agreements, operating agreements, leases, contracts and similar
agreements reasonably requested in connection with any existing or proposed
financing of the Leased Property, and (ii) execute, or cause the Manager or any
relevant Affiliate to execute, such estoppel agreements and collateral
assignments with respect to the Facility's liquor license and any of the other
aforementioned agreements as Holder may reasonably request in connection with
any such financing, provided that no such estoppel agreement or collateral
assignment shall in any way affect the Term or affect adversely in any material
respect any rights of Lessee under this Lease.
(c) No act or failure to act on the part of Lessor which would
entitle Lessee under the terms of this Lease, or by law, to be relieved of any
of Lessee's obligations hereunder
48
<PAGE>
(including, without limitation, its obligation to pay Rent) or to terminate this
Lease, shall result in a release or termination of such obligations of Lessee or
a termination of this Lease unless: (i) Lessee shall have first given written
notice of Lessor's act or failure to act to the Holder, specifying the act or
failure to act on the part of Lessor which would give basis to Lessee's rights;
and (ii) the Holder, after receipt of such notice, shall have failed or refused
to correct or cure the condition complained of within a reasonable time
thereafter (in no event less than 60 days), which shall include a reasonable
time for such Holder to obtain possession of the Leased Property, if possession
is reasonably necessary for the Holder to correct or cure the condition, or to
foreclose such Mortgage, and if the Holder notifies the Lessee of its intention
to take possession of the Leased Property or to foreclosure such Mortgage, and
correct or cure such condition. If such Holder is prohibited by any process or
injunction issued by any court or by reason of any action by any court having
jurisdiction or any bankruptcy, debtor rehabilitation or insolvency proceedings
involving Lessor from commencing or prosecuting foreclosure or other appropriate
proceedings in the nature thereof, provided, however, that the Lease shall
continue to be in full force and effect, the times for commencing or prosecuting
such foreclosure or other proceedings shall be extended for the period of such
prohibition.
(d) Lessee shall deliver by notice delivered in the manner
provided in Article 30 to any Holder who gives Lessee written notice of its
status as a Holder, at such Holder's address stated in the Holder's written
notice or at such other address as the Holder may designate by later written
notice to Lessee, a duplicate copy of any and all notices regarding any default
which Lessee may from time to time give or serve upon Lessor pursuant to the
provisions of this Lease. Copies of such notices given by Lessee to Lessor shall
be delivered to such Holder simultaneously with delivery to Lessor. No such
notice by Lessee to Lessor hereunder shall be deemed to have been given unless
and until a copy thereof has been mailed to such Holder.
(e) At any time, and from time to time, upon not less than ten
(10) days' notice by a Holder to Lessee, Lessee shall deliver to such Holder an
estoppel certificate certifying as to the information required in paragraph (c)
of Article 22, and such other information as may be reasonably requested by such
Holder. Any such certificate may be relied upon by such Holder.
(f) Lessee shall cooperate in all reasonable respects, and as
generally described in Section 33.2 of this Lease, with any transfer of the
Leased Property to a Holder that succeeds to the interest of Lessor in the
Leased Property (including, without limitation, in connection with the transfer
of any franchise, license, lease, permit, contract, agreement, or similar item
to such Holder or such Holder's designee necessary or appropriate to operate the
Leased Property). Lessor and Lessee shall cooperate in (i) including in this
Lease by suitable amendment from time to time any provision which may be
requested by any proposed Holder, or may otherwise be reasonably necessary, to
implement the provisions of this Article and (ii) entering into any further
agreement with or at the request of any Holder which may be reasonably requested
or required by such Holder in furtherance or confirmation of the provisions of
this Article; provided, however, that any such amendment or agreement shall not
in any way affect the Term nor affect adversely in any material respect any
rights of Lessor or Lessee under this Lease.
49
<PAGE>
ARTICLE 29
----------
29.1. Quiet Enjoyment.
----------------
So long as Lessee pays all Rent as the same becomes due and
complies with all of the terms of this Lease and performs its obligations
hereunder, in each case within the applicable grace and/or cure periods, if any,
Lessee shall peaceably and quietly have, hold and enjoy the Leased Property for
the Term hereof, free of any claim or other action by Lessor or anyone claiming
by, through or under Lessor and not claiming by, through or under Lessee, but
subject to all liens and encumbrances subject to which the Leased Property was
conveyed to Lessor or hereafter consented to by Lessee in writing or provided
for herein. Lessee shall have the right by separate and independent action to
pursue any claim it may have against Lessor as a result of a breach by Lessor of
the covenant of quiet enjoyment contained in this Section.
ARTICLE 30
----------
30.1. Notices.
--------
All notices, demands, requests, consents, approvals and other
communications ("Notice" or "Notices") hereunder shall be in writing and
personally served or mailed (by express or overnight mail, courier, or
registered or certified mail, return receipt requested and postage prepaid), (i)
if to Lessor at 148 Sheraton Drive, Box A, New Cumberland, Pennsylvania 17070,
Attention: Hasu P. Shah, and (ii) if to Lessee at 148 Sheraton Drive, Box A, New
Cumberland, Pennsylvania 17070, Attention: K. D. Patel or to such other address
or addresses as either party may hereafter designate. Personally delivered
Notices shall be effective upon receipt, and Notice given by mail shall be
deemed received at the time of deposit in the U.S. Mail system or with a
recognized overnight mail courier, but any prescribed period of Notice and any
right or duty to do any act or make any response within any prescribed period or
on a date certain after the service of such Notice given by mail shall be
extended five days.
ARTICLE 31
----------
31.1. Appraisers.
-----------
If it becomes necessary to determine the fair market value or
fair market rental of the Leased Property for any purpose of this Lease, then,
except as otherwise expressly provided in this Lease, the party required or
permitted to give Notice of such required determination shall include in the
Notice the name of a person selected to act as appraiser on its behalf. Within
10 days after Notice, Lessor (or Lessee, as the case may be) shall by Notice to
Lessee (or Lessor, as the case may be) appoint a second person as appraiser on
its behalf. The appraisers thus appointed, each of whom must be a member of the
American Institute of Real Estate Appraisers (or any successor organization
thereto) with at least five years experience in the State appraising
50
<PAGE>
property similar to the Leased Property, shall, within 10 days after the date of
the Notice appointing the second appraiser, proceed to appraise the Leased
Property to determine the fair market value or fair market rental thereof as of
the relevant date (giving effect to the impact, if any, of inflation from the
date of their decision to the relevant date); provided, however, that if only
one appraiser shall have been so appointed, then the determination of such
appraiser shall be final and binding upon the parties. If two appraisers are
appointed and if the difference between the amounts so determined does not
exceed 5% of the lesser of such amounts, then the fair market value or fair
market rental shall be an amount equal to 50% of the sum of the amounts so
determined. If the difference between the amounts so determined exceeds 5% of
the lesser of such amounts, then such two appraisers shall have 10 days to
appoint a third appraiser. If no such appraiser shall have been appointed within
such 10 days or within 60 days of the original request for a determination of
fair market value or fair market rental, whichever is earlier, either Lessor or
Lessee may apply to any court having jurisdiction to have such appointment made
by such court. Any appraiser appointed by the original appraisers or by such
court shall be instructed to determine the fair market value or fair market
rental within 30 days after appointment of such appraiser. The determination of
the appraiser which differs most in terms of dollar amount from the
determinations of the other two appraisers shall be excluded, and 50% of the sum
of the remaining two determinations shall be final and binding upon Lessor and
Lessee as the fair market value or fair market rental of the Leased Property, as
the case may be. This provision for determining by appraisal shall be
specifically enforceable to the extent such remedy is available under applicable
law, and any determination hereunder shall be final and binding upon the parties
except as otherwise provided by applicable law. Lessor and Lessee shall each pay
the fees and expenses of the appraiser appointed by it and each shall pay one-
half of the fees and expenses of the third appraiser and one-half of all other
costs and expenses incurred in connection with each appraisal.
ARTICLE 32
----------
32.1. Lessee's Right to Cure.
-----------------------
Subject to the provisions of Article 39, if Lessor breaches any
covenant to be performed by it under this Lease, Lessee, after Notice to and
demand upon Lessor as provided in Article 39, without waiving or releasing any
obligation hereunder, may (but shall be under no obligation at any time
thereafter to) make such payment or perform such act for the account and at the
expense of Lessor. All sums so paid by Lessee and all costs and expenses
(including, without limitation, reasonable attorneys' fees) so incurred,
together with interest thereon at the Overdue Rate from the date on which such
sums or expenses are paid or incurred by Lessee, shall be paid by Lessor to
Lessee on demand. The rights of Lessee hereunder to cure and to secure payment
from Lessor in accordance with this Article 32 shall survive the termination of
this Lease with respect to the Leased Property.
51
<PAGE>
ARTICLE 33
----------
33.1. Miscellaneous.
--------------
Anything contained in this Lease to the contrary notwithstanding,
all claims against, and liabilities of, Lessee or Lessor arising prior to any
date of termination of this Lease shall survive such termination. If any term or
provision of this Lease or any application thereof is invalid or unenforceable,
the remainder of this Lease and any other application of such term or provisions
shall not be affected thereby. If any late charges or any interest rate provided
for in any provision of this Lease is based upon a rate in excess of the maximum
rate permitted by applicable law, the parties agree that such charges shall be
fixed at and limited to the maximum permissible rate. Neither this Lease nor any
provision hereof may be changed, waived, discharged or terminated except by a
written instrument in recordable form signed by Lessor and Lessee. All the terms
and provisions of this Lease shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. The headings in
this Lease are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof. This Lease shall be governed by and
construed in accordance with the laws of the State, but not including its
conflicts of laws rules.
33.2. Transition Procedures.
----------------------
Upon any expiration or termination of the Term, Lessor and Lessee
shall do the following and, in general, shall cooperate in good faith to effect
an orderly transition of the management or lease of the Facility. The provisions
of this Section 33.2 shall survive the expiration or termination of this Lease
until they have been fully performed. Nothing contained herein shall limit
Lessor's rights and remedies under this Lease if such termination occurs as the
result of an Event of Default.
(a) Transfer of Franchise Agreement. The Franchise Agreement
-------------------------------
shall be assigned, at Lessor's option, effective on the termination date,
without fee, cost, or penalty payable to the Lessee, and without the imposition
by Lessee of a product improvement (or similar) plan, to (i) Lessor, or (ii) a
designee of Lessor of good reputation and with experience in operating hotels.
(b) Transfer of Licenses. Upon the expiration or earlier
--------------------
termination of the Term, Lessee shall use its best efforts (i) to transfer to
Lessor or Lessor's nominee all licenses, operating permits and other
governmental authorizations and all contracts, including contracts with
governmental or quasi-governmental entities, that may be necessary for the
operation of the Facility (collectively, "Licenses"), or (ii) if such transfer
is prohibited by law or Lessor otherwise elects, to cooperate with Lessor or
Lessor's nominee in connection with the processing by Lessor or Lessor's nominee
of any applications for all Licenses, including Lessee (or its Affiliate)
continuing to operate the liquor operations under its licenses with Lessor
agreeing to indemnify and hold Lessee (or its Affiliate) harmless as a result
thereof except for the gross negligence or
52
<PAGE>
willful misconduct of Lessee; provided, in either case, that the costs and
expenses of any such transfer or the processing of any such application shall be
paid by Lessor or Lessor's nominee.
(c) Leases and Concessions. Lessee shall assign to Lessor or
----------------------
Lessor's nominee simultaneously with the termination of this Agreement, and the
assignee shall assume, all leases, contracts, concession agreements and
agreements in effect with respect to the Facility then in Lessee's name which
are designated by Lessor.
(d) Books and Records. To the extent that Lessor has not
-----------------
already received copies thereof, all books and records (including computer and
computer-generated records) for the Facility kept by Lessee pursuant to Section
3.6 (or copies thereof) shall be delivered simultaneously with the termination
of this Agreement to Lessor or Lessor's nominee.
(e) Receivables and Payables, etc. Lessee shall be entitled to
------------------------------
retain all cash, bank accounts and house banks, and to collect all Gross
Revenues and accounts receivable accrued through the termination date. Lessee
shall be responsible for the payment of Rent, all operating expenses of the
Facility and all other obligations of Lessee accrued under this Lease as of the
termination date, and Lessor shall be responsible for all operating expenses of
the Facility accruing after the termination date.
(f) Final Accounting. Lessee shall, within forty five (45) days
----------------
after the expiration or termination of the Term, prepare and deliver to Lessor a
final accounting statement, dated as of the date of the expiration or
termination, as more particularly described in Article 22, along with a
statement of any sums due from Lessee to Lessor pursuant hereto and payment of
such funds.
(g) Inventory. Lessee shall insure that the Leased Property, at
---------
the date of such termination or expiration, has Inventory of a substantially
equivalent nature and amount as exists at the Leased Property on the
Commencement Date, and Lessor shall acquire such Inventory from Lessee by paying
Lessee the fair market value thereof, calculated on the same basis as the
parties determined the fair market value of the Inventory purchased by Lessee on
the Commencement Date.
(i) Option to Purchase Lessee's Personal Property. Upon the
---------------------------------------------
expiration or termination of the Term, Lessor shall have the option to purchase
Lessee's Personal Property related to the Leased Property at fair market value.
(h) Surrender. Lessee shall peacefully and immediately vacate
---------
and surrender the Leased Property to Lessor or Lessor's designee, shall turn
over all keys to Lessor and Lessor's designee and shall not interfere with
Lessor or any new Lessee or Manager.
33.3. Waiver of Presentment, etc.
---------------------------
Lessee waives all presentments, demands for payment and for
performance, notices of nonperformance, protests, notices of protest, notices of
dishonor, and notices of
53
<PAGE>
acceptance and waives all notices of the existence, creation, or incurring of
new or additional obligations, except as expressly granted herein.
33.4. Standard of Discretion.
-----------------------
In any provision of this Lease requiring or permitting the
exercise by Lessor or Lessee of such party's approval, election, decision,
consent, judgment, determination or words of similar import (collectively, an
"Approval"), such Approval may, unless otherwise expressly specified in such
provision, be given or withheld in such party's sole, absolute and unreviewable
discretion. Any Approval which by the terms of this Lease may not be
unreasonably withheld shall also not be unreasonably delayed.
33.5. Action for Damages.
-------------------
In any suit or other claim brought by either party seeking
damages against the other party for breach of its obligations under this Lease,
the party against whom such claim is made shall be liable to the other party
only for actual damages and not for consequential, punitive or exemplary
damages.
33.6. Lease Assumption in Bankruptcy Proceeding.
------------------------------------------
If an Event of Default occurs and Lessee has filed or has had
filed against it a petition in bankruptcy or for reorganization or other relief
pursuant to the federal bankruptcy code, Lessee shall promptly move the court
presiding over the proceeding to assume the Lease pursuant to 11 U.S.C. (S)365,
without seeking an extension of the time to file said motion.
33.7. Intra-Family Transfers.
-----------------------
Lessee acknowledges that Lessor may transfer legal title to the
Leased Property one or more times to Affiliates of the Lessor in which Lessor or
the Company owns a majority interest (each, an "Affiliated Lessor"). Lessee
hereby consents to such transfers provided that, in each case, this Lease is
assumed by the Affiliated Lessor in its entirety and without modification,
except to the extent that Lessor, or the Affiliated Lessor that then owns the
Leased Property, specifically retains any obligations accrued through the date
of transfer hereunder. Lessee covenants that in connection with such transfers,
Lessee will execute and deliver to Lessor, the Affiliated Lessor and/or their
representatives appropriate estoppels and other documentation requested by them,
including an amendment to this Lease, for the purposes of reflecting and
acknowledging the Affiliated Lessor's interests as lessor hereunder.
54
<PAGE>
ARTICLE 34
----------
34.1. Memorandum of Lease.
--------------------
Lessor and Lessee shall promptly upon the request of either enter
into a short form memorandum of this Lease, in form suitable for recording under
the laws of the State in which reference to this Lease, and all options
contained herein, shall be made. Lessee shall pay all costs and expenses of
recording such memorandum of this Lease.
ARTICLE 35
----------
(Intentionally Omitted)
ARTICLE 36
----------
36.1. Lessor's Option to Terminate.
-----------------------------
(a) In the event Lessor enters into a bona fide contract to
sell the Leased Property to a non-Affiliate other than Lessee or an Affiliate of
Lessee, Lessor may terminate the Lease by giving not less than 60-days prior
Notice to Lessee of Lessor's election to terminate the Lease upon the closing
under such contract. Effective upon such date, this Lease shall terminate and be
of no further force and effect except as to any obligations of the parties
existing as of such date that survive termination of this Lease and all Rent
including Percentage Rent and Additional Charges shall be adjusted as of the
termination date.
(b) As compensation for the early termination of its leasehold
estate under this Article 36 because of a sale of the Leased Property, Lessor
shall within six months after of the closing of such sale, either (i) pay to
Lessee the "Termination Fee" (as defined below) or (ii) offer to lease to Lessee
one or more substitute suite hotel facilities pursuant to one or more leases
that would create for the Lessee leasehold estates that have an aggregate fair
market value of no less than the fair market value of the original leasehold
estate (a "Comparable Lease"), such value to be determined as of the closing of
the sale of the Leased Property. Lessee's acceptance of the Comparable Lease
shall not be unreasonably withheld. If Lessee rejects the Comparable Lease,
Lessor shall pay the Termination Fee to Lessee. In the event Lessor and Lessee
are unable to agree upon the fair market value of an original or replacement
leasehold estate, it shall be determined by appraisal using the appraisal
procedure set forth in Article 31.
(c) (i) For the purposes of this Section, fair market value
of the leasehold estate means, as applicable, an amount equal to the price that
a willing buyer not compelled to buy would pay a willing seller not compelled to
sell for Lessee's leasehold estate under this Lease or an offered replacement
leasehold estate. In computing fair market value of a leasehold estate,
55
<PAGE>
the appraiser shall discount all future income and fees to the then present
value at a rate equal to the Prime Rate plus 2% per annum.
(ii) The Termination Fee shall equal the "Net Present
Value" (as defined below) of the "Lessee Leakage" (as defined below) for (a) the
remaining Lease Years of the Term or, (b) if the termination occurs less than
five Lease Years from the end of the Term, the remaining Lease Years in the Term
plus one year (the "Determination Period"). "Lessee Leakage" for any Lease Year
is defined as the net operating income of the Facility, determined in accordance
with GAAP and as if no Management Agreement existed, less Rent paid and payable
hereunder. The "Net Present Value" of the Lessee Leakage for the Determination
Period shall be determined by (A) averaging the Lessee Leakage actually realized
by Lessee for the three most recently ended Lease Years (or all full Lease Years
if less than three full Lease Years have elapsed since the Commencement Date)
(the "Valuation Period"), (B) assuming that Lessee Leakage in the first Lease
Year of the Determination Period is the average Lessee Leakage (as determined
under subsection (A) above) and that the Lessee Leakage in each subsequent Lease
Year in the Determination Period is the deemed Lessee Leakage for the previous
Lease Year, (C) discounting the deemed Lessee Leakage in each Lease Year of the
Determination Period to then-present value at a rate of twelve percent (12%) per
annum and (D) aggregating the sum of such present values.
(d) In the event that Lessor terminates this Lease upon less
than 60-days written notice pursuant to the provisions of this Article 36 or
pursuant to any other provisions of this Lease except for the provisions
allowing Lessor to terminate this Lease under Articles 14 or 15 or upon the
occurrence of an Event of Default, the parties agree that on and after the
effective date of such termination, hotel personnel employed by Lessee
immediately prior to the effective date of termination will either be employed
by Lessor or its designee, or Lessor or its designee will take such other action
with respect to their employment, which may include notification of the
prospective termination of their employment, so as, in any case, to insure that
Lessee does not incur any liability pursuant to the WARN Act. In that event,
Lessor hereby agrees to defend, indemnify and hold harmless Lessee from and
against any and all manner of claims, actions, liabilities, costs and expenses
(including, without limitation, reasonable attorneys' fees and disbursements)
relating to or arising from Lessor's breach of this covenant, including, without
limitation, any liability, costs and expenses arising out of asserted or actual
violation of the requirements of the WARN Act. Further, Lessor or its designee
shall assume all COBRA liabilities and COBRA obligations to the Facility's
personnel, which Lessee shall or may incur in connection with such termination
of this Lease, and Lessor hereby agrees to defend, indemnify and hold harmless
Lessee from and against any and all manner of claims, actions, liabilities,
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements) relating to or resulting from Lessor's breach of the
foregoing covenant with respect to COBRA matters, including, without limitation,
any liability, costs and expenses arising out of any asserted or actual
violation of the requirements of the COBRA any legislation. Upon Lessor's
written request to Lessee, Lessee shall take all action that is reasonable to
notify, advise and cooperate with Lessor in order to assist Lessor in complying
with the WARN Act or COBRA legislation and to mitigate Lessor's expense or
liability with respect to the WARN Act and COBRA legislation.
56
<PAGE>
ARTICLE 37
----------
37.1. Compliance with Franchise Agreement.
------------------------------------
To the extent any of the provisions of the Franchise Agreement
impose a greater obligation on Lessee than the corresponding provisions of the
Lease, then Lessee shall be obligated to comply with, and to take all reasonable
actions necessary to prevent breaches or defaults under, the provisions of the
Franchise Agreement, except to the extent that Lessee is prevented from
complying with the Franchise Agreement because of Lessor's breach of its
obligations to comply with Article 38. It is the intent of the parties hereto
that Lessee shall comply in every respect with the provisions of the Franchise
Agreement so as to avoid any default thereunder during the Term. Lessee shall
not terminate or enter into any modification of the Franchise Agreement without
in each instance first obtaining Lessor's written consent. Lessor and Lessee
agree to cooperate fully with each other in the event it becomes necessary to
obtain a franchise extension or modification or a new franchise for the Leased
Property, and in any transfer of the Franchise Agreement to Lessor or any
designee thereof or any other successor to Lessee upon the termination of this
Lease.
ARTICLE 38
----------
38.1. Capital Expenditures.
----------------------
(a) Lessor shall be obligated to make available to Lessee an
amount equal to [4][6]% of Room Revenues from the Facility during each Lease
Year ("Capital Expenditures Allowance"). Upon written request by Lessee to
Lessor stating the specific use to be made and subject to the approval thereof
by Lessor, which approval shall not be unreasonably withheld, such funds shall
be made available by Lessor for Capital Expenditures; provided, however, that no
Capital Expenditures shall be made to purchase property (other than "real
property" within the meaning of Treasury Regulations Section 1.856-3(d)), to the
extent that doing so would cause the Lessor to recognize income other than
"rents from real property" as defined in Section 856(d) of the Code. Lessor's
obligation shall be cumulative, but not compounded, and any amounts that have
accrued hereunder shall be payable in future periods for such uses and in
accordance with the procedure set forth herein. Lessee shall have no interest in
any accrued obligation of Lessor hereunder after the termination of this Lease.
All Capital Improvements shall be owned by Lessor subject to the provisions of
this Lease.
(b) Lessor's obligation with respect to Capital Expenditures
shall be limited to amounts available in the Capital Expenditures Allowance.
57
<PAGE>
ARTICLE 39
----------
39.1. Lessor's Default.
-----------------
It shall be a breach of this Lease if Lessor fails to observe or
perform any term, covenant or condition of this Lease on its part to be
performed and such failure continues for a period of 30 days after Notice
thereof from Lessee, unless such failure cannot with due diligence be cured
within a period of 30 days, in which case such failure shall not be deemed a
breach if Lessor proceeds within such 30-day period, with due diligence, to cure
the failure and thereafter diligently completes the curing thereof. The time
within which Lessor shall be obligated to cure any such failure also shall be
subject to extension of time due to the occurrence of any Unavoidable Delay. If
Lessor does not cure any such failure within the applicable time period as
aforesaid, Lessee may declare the existence of a "Lessor Default" by a second
Notice to Lessor. Thereafter, Lessee may forthwith cure the same in accordance
with the provisions of Article 32, subject to the provisions of the following
paragraph. Lessee shall have no right to terminate this Lease for any Lessor
Default and no right, for any such Lessor Default, to offset or counterclaim
against any Rent or other charges due hereunder.
If Lessor shall in good faith dispute the occurrence of any
Lessor Default and Lessor, before the expiration of the applicable cure period,
shall give Notice thereof to Lessee, setting forth, in reasonable detail, the
basis therefor, no Lessor Default shall be deemed to have occurred and Lessor
shall have no obligation with respect thereto until final adverse determination
thereof, whether through arbitration or otherwise; provided, however, that in
------------------
the event of any such adverse determination, Lessor shall pay to Lessee interest
on any disputed funds at the Base Rate, from the date demand for such funds was
made by Lessee until the date of final adverse determination and, thereafter, at
the Overdue Rate until paid. If Lessee and Lessor shall fail, in good faith, to
resolve any such dispute within ten (10) days after Lessor's Notice of dispute,
either may submit the matter for determination by arbitration, but only if such
matter is required to be submitted to arbitration pursuant to any provision of
this Lease, or otherwise by a court of competent jurisdiction.
ARTICLE 40
----------
40.1. Arbitration.
------------
Except as set forth in Section 40.2, in each case specified in
this Lease in which it shall become necessary to resort to arbitration, such
arbitration shall be determined as provided in this Section 40.1. The party
desiring such arbitration shall give Notice to that effect to the other party,
and an arbitrator shall be selected by mutual agreement of the parties, or if
they cannot agree within 30 days of such notice, by appointment made by the
American Arbitration Association ("AAA") from among the members of its panels
who are qualified and who have experience in resolving matters of a nature
similar to the matter to be resolved by arbitration.
58
<PAGE>
40.2. Alternative Arbitration.
------------------------
In each case specified in this Lease for a matter to be submitted
to arbitration pursuant to the provisions of this Section 40.2, Lessor shall be
entitled to designate any nationally recognized accounting firm with a
hospitality division of which Lessor or an Affiliate of Lessor is not a
significant client to serve as arbitrator of such dispute within 15 days after
written demand for arbitration is received or sent by Lessor. In the event
Lessor fails to make such designation within such 15-day period, Lessee shall be
entitled to designate any nationally recognized accounting firm with a
hospitality division of which Lessee or an Affiliate of Lessee is not a
significant client to serve as arbitrator of such dispute within 15 days after
Lessor fails to timely make such designation. In the event no nationally
recognized accounting firm satisfying such qualifications is available and
willing to serve as arbitrator, the arbitration shall instead be administered as
set forth in Section 40.1.
40.3. Arbitration Procedures.
-----------------------
In any arbitration commenced pursuant to Sections 40.1 or 40.2, a
single arbitrator shall be designated and shall resolve the dispute. The
arbitrator's decision shall be binding on all parties and shall not be subject
to further review or appeal except as otherwise allowed by applicable law. Upon
the failure of either party (the "non-complying party") to comply with his
decision, the arbitrator shall be empowered, at the request of the other party,
to order such compliance by the non-complying party and to supervise or arrange
for the supervision of the non-complying party's obligation to comply with the
arbitrator's decision, all at the expense of the non-complying party. To the
maximum extent practicable, the arbitrator and the parties, and the AAA if
applicable, shall take any action necessary to insure that the arbitration shall
be concluded within 90 days of the filing of such dispute. The fees and expenses
of the arbitrator shall be shared equally by Lessor and Lessee except as
otherwise specified above in this Section 40.3. Unless otherwise agreed in
writing by the parties or required by the arbitrator or AAA, if applicable,
arbitration proceedings hereunder shall be conducted in the State.
Notwithstanding formal rules of evidence, each party may submit such evidence as
each party deems appropriate to support its position and the arbitrator shall
have access to and right to examine all books and records of Lessee and Lessor
regarding the Facility during the arbitration.
[Signature Page follows]
59
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized representatives as of the date first above written.
LESSOR:
------
HERSHA HOSPITALITY LIMITED PARTNERSHIP,
a Virginia limited partnership
By: HERSHA HOSPITALITY TRUST, a Maryland real
estate investment trust, its General Partner
By:______________________________________
Hasu P. Shah, President
LESSEE:
------
HERSHA HOSPITALITY MANAGEMENT, L.P., a
Pennsylvania limited partnership
By: HERSHA HOSPITALITY MANAGEMENT CO., a
Pennsylvania corporation, its General Partner
By:______________________________________
K.D. Patel, President
60
<PAGE>
Exhibit A
PROPERTY DESCRIPTION
ALL THAT CERTAIN plot, piece or parcel of land with the buildings or
improvements thereon, erected, situate, lying and being in the Borough and
County of Queens, City and State of New York, bounded and described as follows:
BEGINNING at a point on the westerly side of 153/rd/ Lane (formerly Dakota
Avenue) distant 300.00 feet northerly from the corner formed by the intersection
of the westerly side of 153/rd/ Lane and northerly side of 116/th/ Avenue
(formerly Louisiana Way);
RUNNING THENCE westerly at straight angles to the westerly side of 153/rd/ Lane,
100.5 feet;
THENCE northerly at right angles to the last mentioned course, 135.00 feet;
THENCE easterly again at right angles to the last mention course 100.15 feet to
the westerly side of 153/rd/ Lane;
THENCE southerly along the westerly side of 153rd Lane, 135.00 feet to the point
or place of BEGINNING.
B-1
<PAGE>
Exhibit B
PERCENTAGE RENT PROVISIONS
JFK Comfort Inn
[INITIAL FIXED RENT: $__________ ]
BASE RENT: $__________
PERCENTAGE RENT:
FIRST TIER
ROOM REVENUE PERCENTAGE: __%
FIRST ANNUAL ROOM
REVENUES BREAK POINT: $__________
SECOND TIER
ROOM REVENUE PERCENTAGE: __%
SECOND ANNUAL ROOM
REVENUES BREAK POINT: $__________
THIRD TIER
ROOM REVENUE PERCENTAGE: __%
OTHER REVENUE PERCENTAGE: __%
C-1
