SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): May 8, 2000
APPLE SUITES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
VIRGINIA 000-30491 54-1933472
(State of (Commission (IRS Employer
incorporation) File Number) Identification No.)
306 EAST MAIN STREET
RICHMOND, VIRGINIA 23219
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
(804) 643-1761
<PAGE>
APPLE SUITES, INC.
FORM 8-K
Index
<TABLE>
<CAPTION>
Page No.
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<S> <C> <C>
Item 2. Acquisition or Disposition of Assets 6
Item 7. Financial Statements and Exhibits
a. Financial Statements
Malvern, Pennsylvania Homewood Suites(R) by Hilton hotel
1. Property Financial Statements 13
Independent Auditors Report*
Balance Sheets - December 31, 1999 and December 31, 1998*
Statements of Shareholders' Equity - Years ended December 31,
1998 and December 31, 1999*
Income Statements - Years ended December 31, 1999 and
December 31, 1998*
Statements of Cash Flows - Years ended December 31, 1999 and
December 31, 1998*
Notes to the Financial Statements - December 31, 1999 and
December 31, 1998*
* * *
Balance Sheet - March 31, 2000 (unaudited)*
Statement of Shareholders' Equity - For the Period January 1,
2000 through March 31, 2000 (unaudited)*
Income Statement - For the Period January 1, 2000 through March
31, 2000 (unaudited)*
</TABLE>
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*To be filed by amendment.
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<PAGE>
<TABLE>
<S> <C> <C>
Statement of Cash Flows - For the Period January 1, 2000 through
March 31, 2000 (unaudited)*
Notes to the Financial Statements - For the Period January 1,
2000 through March 31, 2000 (unaudited)*
2. Pro Forma Financial Statements* 14
</TABLE>
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*To be filed by amendment.
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<PAGE>
b. Exhibits
4.1 Note dated May 8, 2000 in the principal amount of $11,616,750
made payable by Apple Suites, Inc. to the order of Promus
Hotels, Inc.
4.2 Leasehold and Subleasehold Mortgage, Assignment of Leases and
Rents and Security Agreement dated May 8, 2000 from Apple
Suites, Inc., as Trustee for Apple Suites Pennsylvania
Business Trust, and Apple Suites Management, Inc. for the
benefit of Promus Hotels, Inc. pertaining to the Malvern,
Pennsylvania hotel.
4.3 Fee and Leasehold Deed of Trust, Assignment of Leases and
Rents and Security Agreement dated May 8, 2000 from Apple
Suites, Inc. and Apple Suites Management, Inc. for the benefit
of Promus Hotels, Inc., constituting a second lien on the
Jackson, Mississippi hotel.
4.4 Deed to Secure Debt Modification Agreement dated May 8, 2000,
among Promus Hotels, Inc., Apple Suites, Inc. and Apple Suites
Management, Inc. pertaining to the Atlanta - Peachtree hotel.
4.5 Second Deed to Secure Debt Modification Agreement dated May 8,
2000, among Promus Hotels, Inc., Apple Suites, Inc. and Apple
Suites Management, Inc. pertaining to the Atlanta -
Galleria/Cumberland hotel.
4.6 Mortgage Modification Agreement dated May 8, 2000 from Apple
Suites, Inc. and Apple Suites Management, Inc. for the benefit
of Promus Hotels, Inc. constituting a second lien on the
Detroit - Warren hotel.
4.7 Deed of Trust Modification Agreement dated May 8, 2000, from
Apple Suites, Inc. and Apple Suites Management, Inc. for the
benefit of Promus Hotels, Inc. constituting a second lien on
the Salt Lake City - Midvale hotel.
4.8 Third Deed of Trust Modification Agreement dated May 8, 2000,
among Promus Hotels, Inc., Apple Suites REIT Limited
Partnership and Apple Suites Services Limited Partnership
pertaining to the North Dallas - Plano hotel.
4.9 Third Deed of Trust Modification Agreement dated May 8, 2000,
among Promus Hotels, Inc., Apple Suites REIT Limited
Partnership and Apple Suites Services Limited Partnership
pertaining to the Dallas - Addison and Dallas - Irving/Las
Colinas hotels.
10.1 Indemnity dated May 8, 2000 from Apple Suites, Inc. to Promus
Hotels, Inc. pertaining to the Malvern, Pennsylvania hotel.
10.2 Master Hotel Lease Agreement dated May 8, 2000 between Apple
Suites, Inc., as Trustee for Apple Suites Pennsylvania
Business Trust (as lessor) and Apple Suites Management, Inc.
(as lessee).
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<PAGE>
10.3 Homewood Suites License Agreement between Promus Hotels, Inc.
and Apple Suites Management, Inc. pertaining to the Malvern,
Pennsylvania hotel.
10.4 Management Agreement dated May 8, 2000 between Apple Suites
Management, Inc. and Promus Hotels, Inc. pertaining to the
Malvern, Pennsylvania hotel.
10.5 Letter dated May 8, 2000 among Apple Suites, Inc., Hampton
Inns, Inc., Promus Hotels Florida, Inc. and Promus Hotels,
Inc. pertaining to the repayment of notes made by Apple
Suites, Inc. in connection with the purchase of all of its
Homewood Suites(R)by Hilton hotels.
10.6 Letter dated May 8, 2000 between Apple Suites, Inc. and Promus
Hotels, Inc. pertaining to the release of certain hotel
properties as security upon the repayment of certain debt by
Apple Suites, Inc.
10.7 Comfort Letter dated May 8, 2000 among Promus Hotels, Inc.,
Apple Suites, Inc., as Trustee for Apple Suites Pennsylvania
Business Trust and Apple Suites Management, Inc. pertaining to
the Malvern, Pennsylvania hotel.
10.8 Negative Pledge Agreement dated May 8, 2000 between Apple
Suites, Inc. and Promus Hotels, Inc.
10.9 Promissory Note dated May 8, 2000 in the amount of $55,350
made payable by Apple Suites Management, Inc. to the order of
Apple Suites, Inc. (Hotel Franchise Fees)
10.10 Promissory Note dated May 8, 2000 in the amount of $12,300
made payable by Apple Suites Management, Inc. to the order of
Apple Suites, Inc. (Hotel Supplies)
10.11 Declaration of Trust of Apple Suites Pennsylvania Business
Trust
10.12 Ground Lease dated July 1, 1996 between named Landlords and
Promus Hotels, Inc. as Tenant, as amended by Amendment to
Ground Lease dated as of July 1, 1996 and Second Amendment to
Ground Lease and Amendment to Short Form Lease dated as of
March 6, 2000
10.13 Assignment and Assumption of Lease dated May 8, 2000 by and
among named Landlords, Promus Hotels, Inc. as Assignor and
Apple Suites, Inc., as Trustee for Apple Suites Pennsylvania
Business Trust, as Assignee
24 Consent of Independent Auditors*
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<PAGE>
Item 2. Acquisition or Disposition of Assets
On May 8, 2000, Apple Suites, Inc. ("we") purchased a long-term
leasehold interest in the Malvern (Philadelphia), Pennsylvania Homewood
Suites(R) by Hilton hotel. This leasehold interest was purchased through an
assignment and assumption of lease, dated as of May 8, 2000 with respect to a
ground lease, dated as of July 1, 1996. The total purchase price was
$15,489,000. We used the net proceeds from our offering of common shares to pay
25% of this total, or $3,872,250, at closing in cash. The balance of 75%, or
$11,616,750, is being financed by the seller, Promus Hotels, Inc., as short-term
or "bridge financing." The financing and the ground lease are described in
further detail in other sections below.
We made this purchase through one of our subsidiaries, Apple Suites
Pennsylvania Business Trust (a business trust organized under Pennsylvania law),
based on business and tax planning considerations. We are the sole trustee and
sole beneficiary of Apple Suites Pennsylvania Business Trust. The Malvern
(Philadelphia), Pennsylvania hotel has been leased to Apple Suites Management,
Inc. under a master hotel lease agreement dated as of May 8, 2000.
We paid a real estate commission on this purchase to Apple Suites
Realty Group, Inc., as our real estate broker. This corporation is owned by
Glade M. Knight, who is our president and chief executive officer. The total
amount of the real estate commission was $309,780, which equals 2% of the total
purchase price.
HOTEL SUPPLIES AND FRANCHISE FEES
We have provided Apple Suites Management, Inc. with funds for the
purchase of certain hotel supplies (such as sheets, towels and so forth) for the
Malvern (Philadelphia), Pennsylvania hotel. Apple Suites Management, Inc. is
obligated to repay us under a promissory note made in the principal amount of
$12,300. This promissory note provides for an annual interest rate of nine
percent (9%), which would increase to twelve percent (12%) if a default occurs,
and repayment in sixty-one (61) monthly installments. The first installment
consists of interest only. The due date for the first installment, subject to a
five-day grace period, is June 1, 2000. The remaining installments consist of
principal and interest on an amortized basis. The final maturity date is June 1,
2005.
We have also provided Apple Suites Management, Inc. with funds for the
payment of hotel franchise fees to Promus Hotels, Inc. Apple Suites Management,
Inc. is obligated to repay us under a promissory note made in the principal
amount of $55,350. This promissory note is substantially similar to the one
described above, but provides for repayment in one hundred twenty-one (121)
monthly installments and has a final maturity date of June 1, 2010.
DESCRIPTION OF FINANCING
As indicated above, Promus Hotels, Inc. is financing 75% of the
purchase price with respect to the Malvern (Philadelphia), Pennsylvania hotel.
This financing is substantially similar to the financing provided by Promus
Hotels, Inc. when we purchased our other hotels. The amounts we owe to Promus
Hotels, Inc. are evidenced by the following promissory notes:
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<PAGE>
<TABLE>
<CAPTION>
Original
Month of Principal Annual Rate Date of
Promissory Note Amount of Interest Maturity
--------------- ------ ----------- --------
<S> <C> <C> <C>
September 1999 $26,625,000 8.5% October 1, 2000
October 1999 $ 7,350,000 8.5% October 1, 2000
November 1999 $30,210,000 8.5% December 1, 2000
December 1999 $ 4,384,500 8.5% January 1, 2001
May 2000 $11,616,750 8.5% April 28, 2001
----------
TOTAL $80,186,250
==========
</TABLE>
We consider the financing from Promus Hotels, Inc. to be "bridge
financing" because of its short-term nature (that is, each promissory note
reaches maturity within approximately one year of its date of execution).
Despite the temporary use of bridge financing, over the long-term we will seek
to hold our properties on an all-cash basis, as indicated in the prospectus.
The promissory notes have several provisions in common, which include
the following:
o monthly interest payments, based on the actual number of days
per month
o our delivery of monthly notices to specify the net equity
proceeds from our offering
o our right to prepay the notes, in whole or in part, without
premium or penalty
o a late payment premium of four percent (4%) for any payment
not made within ten (10) days of its due date
Revenue from the operation of the hotels will be used to pay interest
under the promissory notes we have made to Promus Hotels, Inc. The "net equity
proceeds" from our offering of common shares are intended to be the source of
our principal payments. The phrase "net equity proceeds" means the total
proceeds from our offering of common shares, as reduced by selling commissions,
a marketing expense allowance, closing costs, various fees and charges (legal,
accounting, and so forth), a working capital reserve and a reserve for
renovations, repairs and replacements of capital improvements.
Under a letter agreement dated May 8, 2000, we are permitted to use
such net equity proceeds to pay 25% of the purchase price for the leasehold
interest in the Malvern (Philadelphia), Pennsylvania hotel. Otherwise, to the
extent that we have such net equity proceeds, we generally are obligated to make
monthly principal payments under the promissory notes listed above.
DEEDS OF TRUST AND RELATED DOCUMENTS
Each of our hotels, including the Malvern (Philadelphia), Pennsylvania
hotel, is encumbered. In general, the encumbrances consist of a mortgage on the
hotel building and its underlying real property, a security interest in any
personal property and an assignment of hotel rents and revenues, all in favor of
Promus Hotels, Inc. (As described above, Promus Hotels, Inc. provided financing
for our hotel purchases).
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<PAGE>
These encumbrances are created by substantially similar documents
having a variety of names, many of which depend on state law. For simplicity, we
will refer to each of these documents as a "deed of trust." At each closing on a
purchase with respect to a hotel or group of hotels, we further encumbered our
other hotels with additional deeds of trust or with negative pledges. These
additional encumbrances are designed to provide additional security for the
earlier promissory notes.
We are subject to various requirements under the deeds of trust. For
instance, we must maintain adequate insurance on the hotels and we must not
grant any further deeds of trust or assignments of rents or leases with respect
to the hotels.
Each deed of trust contains a substantially similar definition of
events of default. In each case, the events of default include (without
limitation) any default that occurs under any of the promissory notes or under
another deed of trust, and any sale of the secured property without the prior
consent of Promus Hotels, Inc. Upon any event of default, various remedies are
available to Promus Hotels, Inc. Those remedies include, for example (a)
declaring the entire principal balance under the promissory notes, and all
accrued and unpaid interest, to be due and payable immediately; (b) taking
possession of the secured property, including the hotels; and (c) collecting
hotel rents and revenues, or foreclosing on the hotels, to satisfy unpaid
amounts under the promissory notes. Each deed of trust requires us to pay any
costs that may be incurred in exercising such remedies.
Negative pledges apply to the three hotels in Florida, Maryland and
Virginia. The negative pledges prohibit any transfer or further encumbrance of
the hotels, in whole or in part, without the prior written consent of Promus
Hotels, Inc. The negative pledges will terminate when our promissory notes to
Promus Hotels, Inc. are paid in full.
GROUND LEASE
The Malvern (Philadelphia), Pennsylvania hotel is subject to a ground
lease dated as of July 1, 1996. We caused Apple Suites Pennsylvania Business
Trust, in our capacity as its sole trustee and sole beneficiary, to become the
tenant under the ground lease. This result was achieved through an assignment
and assumption of lease dated as of May 8, 2000.
The ground lease has an initial term of 30 years. The tenant has the
option to extend the ground lease for three additional periods of ten years
each.
The ground lease provides for annual rent, payable in advance in
monthly installments. The annual rent is $100,000 for each of the first five
years (that is, until August 1, 2000). Every five years, the annual rent will be
adjusted in proportion to the Consumer Price Index for the metropolitan
Philadelphia area.
The tenant has certain obligations under the ground lease. For example,
the tenant must operate the premises in accordance with applicable law and must
maintain general public liability insurance on the premises. For a default that
involves the tenant's failure to provide insurance and that continues for ten
days after written notice to the tenant, the landlord may arrange for substitute
insurance at the tenant's expense. Furthermore, because a hotel has been
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<PAGE>
constructed on the premises, the permitted uses of the premises during the first
ten years under the ground lease are limited to hotel and related uses.
Under the ground lease, the tenant has 30 days after written notice to
cure any payment default under the ground lease, and 60 days after written
notice to cure any other default. If the default cannot be cured in 60 days, the
cure period will be extended if the tenant promptly begins to cure the default
and diligently continues to do so. In general, if a default occurs and is not
cured within the appropriate time period, the landlord's remedies include
terminating the ground lease.
If the landlord wishes to sell the premises and the tenant is not in
default, the landlord must notify the tenant in writing and grant it the first
option to purchase the premises. If this option is declined, the landlord may
sell the premises within six months, but the terms and conditions of the sale
cannot be materially more favorable to the buyer than those offered to the
tenant.
Upon expiration or termination of the ground lease, all improvements on
the land become the property of the landlord without any payment or compensation
due to the tenant. Thus, unless we purchase the interests of the landlord, we
will not own the hotel past the term of the ground lease. However, the
expiration or termination of the ground lease will not affect our obligation to
repay the $11,616,750 purchase money promissory note issued to Promus Hotels,
Inc.
MASTER HOTEL LEASE AGREEMENT
We, as tenant under the ground lease, have in turn leased the Malvern
(Philadelphia), Pennsylvania hotel to Apple Suites Management, Inc. pursuant to
a master hotel lease agreement dated as of May 8, 2000. This agreement is
substantially similar to the master hotel lease agreements, dated as of
September 20, 1999, that apply to our other hotels.
The agreement provides for an initial term of ten years. Apple Suites
Management, Inc. has the option to extend the lease term for two additional
five-year periods, provided it is not in default at the end of the prior term or
at the time the option is exercised. The master hotel lease agreement provides
that Apple Suites Management, Inc. will pay an annual base rent, a quarterly
percentage rent and a quarterly sundry rent. Each type of rent is explained
below.
Annual base rent is payable in advance in equal monthly installments.
Beginning in 2001, the base rent will be adjusted each year in proportion to the
Consumer Price Index (based on the U.S. City Average). The annual base rent for
the Malvern (Philadelphia), Pennsylvania hotel is currently $942,375.
Percentage rent is payable quarterly. Percentage rent depends on a
formula that compares fixed "suite revenue breakpoints" with a portion of "suite
revenue," which is equal to gross revenue from suite rentals (less sales and
room taxes). Beginning in 2001, the suite revenue breakpoints will be adjusted
each year in proportion to the Consumer Price Index (based on the U.S. City
Average). Suite revenue breakpoints have been determined for the first quarter
of each year during the initial term of the master hotel lease agreement. The
suite revenue breakpoints for subsequent quarters are determined by multiplying
the first quarter values by two, three or four, respectively. The following
table shows the suite revenue breakpoints for the first quarter for the Malvern
(Philadelphia), Pennsylvania hotel, before any adjustment due to the Consumer
Price Index:
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<PAGE>
<TABLE>
<CAPTION>
Suite Revenue Breakpoints for the First Quarter
2001 2002 2003 2004 2005 2006 2007 2008 2009
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$300,219 $309,456 $323,313 $332,550 $341,700 $351,025 $360,263 $369,500 $378,738
</TABLE>
Specifically, the percentage rent is equal to the sum of (a) 17% of all
year-to-date suite revenue, up to the applicable suite revenue breakpoint; plus
(b) 55% of the year-to-date suite revenue in excess of the applicable suite
revenue breakpoint, as reduced by base rent and the percentage rent paid year to
date.
The sundry rent is payable quarterly and equals 99% of all sundry
revenue, which consists of revenue other than suite revenue, less the amount of
sundry rent paid year-to-date.
OTHER AGREEMENTS
The Malvern (Philadelphia), Pennsylvania hotel is subject to a license
agreement and a management agreement with Promus Hotels, Inc. We have entered
into an environmental indemnity agreement with Promus Hotels, Inc., as well as a
comfort letter agreement regarding the lease with Apple Suites Management, Inc.
and certain other issues. These agreements are substantially similar to
agreements that exist with respect to our other hotels.
DESCRIPTION OF MALVERN, PENNSYLVANIA HOTEL
The Homewood Suites(R) by Hilton in Malvern (Philadelphia),
Pennsylvania is located on a 4.1 acre site at 12 East Swedesford Road, Malvern,
Pennsylvania, near Philadelphia. The hotel is approximately 22 miles from
downtown Philadelphia and 25 miles from the Philadelphia International Airport.
The hotel opened in 1998. It was constructed with a masonry frame and
has a sand stucco exterior finish. The hotel consists of a single four-story
building. The hotel contains 123 suites, which have a combined rentable area of
63,600 square feet. The following types of suites are available:
<TABLE>
<CAPTION>
Type of Suite Number Available Square Feet/ Suite
------------- ---------------- ------------------
<S> <C> <C>
Master Suite 95 500
Homewood Suite 21 500
Two-Bedroom Suite 7 800
</TABLE>
The hotel offers a 40-seat breakfast/lounge area, a meeting room that
accommodates 25 to 30 people, and a business center that offers guests the use
of a personal computer, a photocopier and an electric typewriter. Recreational
facilities include an outdoor pool, a whirlpool and an exercise room. The hotel
also contains a guest convenience store and laundry. The hotel has its own
parking lot with 136 spaces. The hotel provides complimentary shuttle service
within a 5 mile radius.
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<PAGE>
We believe that the hotel has been generally well maintained and is
generally in very good condition. Over the next 12 months, we plan to spend
approximately $100,000 on renovations or improvements. We expect that the
principal renovations and improvements will include upgrading bathrooms and
kitchens, providing additional signage and replacing exterior doors. We expect
to pay for the costs of these renovations and improvements with proceeds from
our ongoing offering of common shares.
During 2000, the average stay at the hotel has been approximately 5
nights, and approximately 59% of the guests have stayed for five nights or more.
In general, occupancy at the hotel is not seasonal. The following table shows
average daily occupancy rates, expressed as a percentage, since the opening of
the hotel:
Average Daily Occupancy Rate (calendar year)
2000
1998 1999 (annualized)
---- ---- -----------
66.7% 76.4% 74.4%
During 2000, the average daily rate per suite has been $122.01, and the
average daily net revenue per suite has been $90.79. As explained above, revenue
from the hotel's operations will be used to pay interest due under the
promissory note we executed in connection with our purchase of the hotel. There
can be no assurance, however, the proceeds of the offering will be sufficient to
permit the payments of principal. Assuming that no principal payments are made
until the maturity of the promissory note, and that the hotel continues to have
the level of net revenue specified above, approximately 24.2% of the hotel's
revenue would be needed to cover its portion of the interest payments.
The hotel's current daily rate structure is based on length of stay and
type of suite, as summarized below:
Length of Stay
(number of nights) Homewood Master Two Bedroom
- ------------------ -------- ------ -----------
1 to 4 $145 $145 $194
5 to 11 129 129 185
12 to 29 124 124 179
30 or more 99 99 159
The hotel offers a weekend discount. This discount varies by type of
suite and generally reduces the basic rate by 38%. The weekend discount is not
available to guests who stay for five nights or more. The hotel also offers
discounts to guests who stay under certain corporate accounts. These discounts
are often negotiated with the corporate customer and vary from account to
account. We estimate that approximately 43% of the hotel's guests during 2000
received a corporate discount.
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<PAGE>
The chief corporate accounts (as designated in the hotel's records)
include: SAP, Astra Zeneca, Vanguard, Shared Medical Systems, Centocor, Unisys,
Wyeth, Supplyforce.com, Decision One, and SCT (Systems/Computer Training).
During 2000, the 10 largest corporate accounts were responsible for
approximately 43% of the hotel's occupancy. There can be no assurance, however,
that the hotel will continue to receive significant occupancy, or any occupancy,
from the corporate accounts identified above.
The table below shows the average effective annual rental per square
foot since the opening of the hotel:
2000
1998 1999 (annualized)
---- ---- ------------
$52.85 $59.58 $63.72
The depreciable real property component of the hotel has a currently
estimated Federal tax basis of $14,898,789 and will be depreciated over a life
of 39 years (or less, as permitted by the Internal Revenue Code) using the
straight-line method. The basis of the personal property component of the hotel
will be depreciated in accordance with the modified accelerated cost recovery
system of the Internal Revenue Code.
The following table summarizes the hotel's real estate tax information
for 2000:
Tax Assessed Tax Rate Amount
Jurisdiction Value (per $1000) of Tax
- ------------ ----- ----------- ------
School District $14,248,760 11.670 $166,283
County of Chester 14,248,760 3.014 42,946
East Whiteland Township 14,248,760 0.445 6,341
--------
TOTAL $215,570
We estimate that the annual property tax on the expected improvements
will be approximately $1,600 or less.
At least seven competing hotels are located within eight miles of the
hotel. (The names of the competing franchises, as listed below, may be
registered as service marks or trade names.) Of these competing hotels, two are
newer than the hotel. The newer competing hotels have franchises with Hampton
Inn and Choice Hotels. The other competing hotels have franchises with Marriott
(in 2 cases) Sheraton, Summerfield Suites and Wyndham. We believe that the rates
charged by our hotel are generally competitive with the rates charged by these
other hotels. We are aware of ongoing or proposed construction for two other
extended-stay hotels within approximately six miles of the hotel. We expect
these new hotels to be franchised with Residence Inn and Springhill Suites.
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<PAGE>
ITEM 7.a.1.*
*To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements will be
filed as an amendment to this report as soon as possible, but in no event more
than 60 days after the date of filing of this report.
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<PAGE>
ITEM 7.a.2.*
*To be filed by amendment. It is impracticable to include herein the required
pro forma financial information. The required pro forma financial information
will be filed as an amendment to this report as soon as possible, but in no
event more than 60 days after the date of filing of this report.
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<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.
Apple Suites, Inc.
Date: May 23, 2000 By: /s/ Glade M. Knight
-------------------
Glade M. Knight,
Chief Executive Officer of
Apple Suites, Inc.
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Exhibit 4.1
NOTE
Date of Note: May 8, 2000
Principal Amount: $11,616,750
Maturity Date: April 28, 2001
Interest Rate: 8.5% per annum to be computed on an actual/365-day basis
(i.e., interest for each day during which any of the
Principal Amount is outstanding shall be computed at the
Interest Rate divided by 365).
FOR VALUE RECEIVED, the undersigned ("Maker") does hereby
covenant and promise to pay to the order of PROMUS HOTELS, INC., a Delaware
corporation or its successors or assigns (collectively, "Payee"), at 755
Crossover Lane, Memphis, Tennessee 38117-4900, or at such other place as Payee
may designate to Maker in writing from time to time, the Principal Amount, on
the Maturity Date, together with interest at the Interest Rate on the unpaid
portion of the Principal Amount on the first day of the first month following
the Date of Note and on the first day of each month thereafter until this Note
is paid in full, and with a late payment premium of 4% of any principal or
interest payment made more than ten (10) days after the due date thereof which
shall be due with any such late payment. All payments of principal, interest and
other sums hereunder shall be made in lawful money of the United States and in
immediately available funds.
Pursuant to Section 2(b) of the Purchase Agreement (as
hereinafter defined), in addition to the payment of interest as provided herein,
commencing on the first day of the first month following the repayment in full
of all sums evidenced by (w) the Note made by Maker to Payee dated September 20,
1999 in the principal amount of $26,625,000, (x) the Note made by Maker to Payee
dated October 5, 1999 in the principal amount of $7,350,000, (y) the Note made
by Maker to Payee dated November 29, 1999 in the principal amount of $30,210,000
and (z) the Note made by Maker to Payee dated December 22, 1999 in the principal
amount of $4,384,500 and on the first day of each month thereafter, Maker hereby
covenants and promises to pay a monthly principal amortization payment equal to
the Amortization Amount, as hereinafter defined. Each such principal
amortization payment shall be applied in reduction of the Principal Amount. In
connection with calculating the Amortization Amount, on or before the
twenty-second (22nd) day of each month (or if such 22nd day is not a business
day, the first business day thereafter) between the date hereof and the
repayment in full of amounts evidenced by this Note and secured by the Mortgage
(as hereinafter defined), Maker shall notify Payee (the "Equity Proceeds
Notice") of (1) the total proceeds received in connection with the "best
efforts" public offering of shares in Maker (the
<PAGE>
"Equity Proceeds") and (2) the net sum available to Maker from the Equity
Proceeds after deduction of offering expenses, including, without limitation,
accountants' fees, legal fees, printing expenses, registration fees, NASD filing
fees, stock exchange/quotation service listing fees and transfer agent and
escrow charges, selling commissions, marketing expense allowance, Property (as
herein defined) acquisition fees and expenses and closing costs and a working
capital reserve and a reserve for renovations, repairs and replacements of
capital improvements for each Property (the "Net Equity Proceeds"), all as
contemplated in Maker's Form S-11 Registration Statement, filed on August 3,
1999. For the purposes of this Note (i) the "Amortization Amount" shall mean an
amount equal to the excess of the Net Equity Proceeds set forth in the most
recent Equity Proceeds Notice over the sum of (x) $95,298,500 plus (y) the
aggregate of all previous principal amortization payments applied in reduction
of the Principal Amount and (ii) "Property" shall mean, collectively, the
properties sold to Maker as of the date hereof pursuant to that certain
Agreement of Sale dated November 22, 1999 between Hampton Inns, Inc., Promus
Hotels Florida, Inc. and Promus Hotels, Inc., as sellers, and Maker, as buyer
(the "Purchase Agreement"). Notwithstanding the foregoing, nothing provided
herein shall prevent Payee from paying the Amortization Amount more often than
monthly.
This Note is secured by, among other things, mortgages and/or
deeds of trust and/or deeds to secure debt (individually and collectively, the
"Mortgage"), which Mortgage specifies various defaults upon the happening of
which all sums owing on this Note may, at Payee's option, be declared
immediately due and payable.
Maker agrees that it shall be bound by any agreement extending
the time or modifying the above terms of payment, made by Payee and the owner or
owners of the property affected by the Mortgage, whether with or without notice
to Maker, and Maker shall continue liable to pay the amount due hereunder, but
with interest at a rate no greater than the Interest Rate, according to the
terms of any such agreement of extension or modification. This Note may be
prepaid, in whole or in part, without premium or penalty.
This Note may not be changed orally, but only by an agreement
in writing, signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
Should the indebtedness represented by this Note or any part
thereof be collected at law or in equity, or in bankruptcy, receivership or any
other court proceedings (whether at the trial or appellate level), or should
this Note be placed in the hands of attorneys for collection upon default, Maker
agrees to pay, in addition to the principal, premium and interest due and
payable hereon, all costs of collection or attempting to collect this Note,
including reasonable attorneys' fees and expenses.
All parties to this Note, whether Maker, principal, surety,
guarantor or endorser, hereby waive presentment for payment, demand, protest,
notice of protest and notice of dishonor.
2
<PAGE>
Anything herein to the contrary notwithstanding, the
obligations of Maker under this Note and the Mortgage shall be subject to the
limitation that payments of interest shall not be required to the extent that
receipt of any such payment by Payee would be contrary to provisions of law
applicable to Payee limiting the maximum rate of interest that may be charged or
collected by Payee.
In case of any loss, theft, destruction or mutilation of this
Note, Maker shall, upon its receipt of an affidavit of an officer of Payee as to
such loss, theft, destruction or mutilation and an appropriate indemnification,
execute and deliver a replacement Note to Payee in the same principal amount and
otherwise of like tenor as this Note.
MAKER BY EXECUTION HEREOF, AND PAYEE BY ACCEPTANCE HEREOF,
HEREBY EXPRESSLY AND UNCONDITIONALLY WAIVES, IN CONNECTION WITH ANY SUIT, ACTION
OR PROCEEDING BROUGHT BY PAYEE ON THIS NOTE, ANY AND EVERY RIGHT IT MAY HAVE TO
A TRIAL BY JURY.
This Note and the rights and obligations of the parties
hereunder shall in all respects be governed by, and construed and enforced in
accordance with, the laws of the State of Tennessee (without giving effect to
Tennessee's principles of conflicts of law). Maker hereby irrevocably submits to
the non-exclusive jurisdiction of any Tennessee State or Federal court sitting
in The City of Memphis over any suit, action or proceeding arising out of or
relating to this Note, and Maker hereby agrees and consents that, in addition to
any methods of service of process provided for under applicable law, all service
of process in any such suit, action or proceeding in any Tennessee State or
Federal court sitting in The City of Memphis may be made by certified or
registered mail, return receipt requested, directed to Maker at the address
indicated below, with a copy to counsel at Jenkens & Gilchrist, Fountain Place,
1445 Ross Avenue, Suite 3200, Dallas, Texas 75202, and service so made shall be
complete five (5) days after the same shall have been so mailed.
[Remainder of page intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, Maker has executed and delivered this Note
on the day and year first above written.
APPLE SUITES, INC.,
a Virginia corporation
By /s/ Glade M. Knight
------------------------------
Name: Glade M. Knight
Title: Chairman of the Board and
President
Address of Maker:
-----------------
306 East Main Street
Richmond, Virginia 23219
Attention: Glade M. Knight
This is to certify that this Note was executed in my presence
on the date hereof by the party whose signature appears above in the capacity
indicated.
/s/ Jacquelyn B. Owens
---------------------------------
Notary Public
My commission expires:
6/30/03
---------------------------------
Exhibit 4.2
[Pennsylvania]
THIS MORTGAGE IS AN OPEN-END MORTGAGE AND SECURES FUTURE ADVANCES
(All notices to be given to Mortgagee pursuant to 42 Pa. C.S.A.ss. 8143 shall be
given as set forth in Section 3.06 of this Mortgage.)
Pennsylvania Tax Parcel Identification No.: 42-4-258
================================================================================
Date: May 8, 2000
LEASEHOLD AND SUBLEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES
AND RENTS AND SECURITY AGREEMENT
("this Mortgage")
FROM
APPLE SUITES, INC.,
a Virginia corporation
as trustee for Apple Suites Pennsylvania Business Trust
("Fee Owner")
AND
APPLE SUITES MANAGEMENT, INC.,
a Virginia corporation
("Lessee")
Address of Fee Owner and Lessee: 306 East Main Street
Richmond, Virginia 23219
Attention: Glade M. Knight
TO
PROMUS HOTELS, INC.,
a Delaware corporation
("Mortgagee")
Address of Mortgagee: 755 Crossover Lane
Memphis, Tennessee 38117
Mortgage Amount: $80,186,250
================================================================================
This instrument prepared by, and after recording please return to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092
Attention: Graham R. Hone, Esq.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
RECITAL.............................................................................................1
CERTAIN DEFINITIONS AND RULES OF CONSTRUCTION.......................................................2
GRANTING CLAUSE.....................................................................................4
Article I COVENANTS OF MORTGAGOR....................................................5
Section 1.01. (a) Warranty of Title; Power and Authority..............................5
(b) Hazardous Materials.................................................6
(c) Flood Hazard Area...................................................7
Section 1.02. (a) Further Assurances..................................................7
(b) Information Reporting and Back-up Withholding.......................7
Section 1.03. (a) Filing and Recording of Documents...................................7
(b) Filing and Recording Fees and Other Charges.........................7
Section 1.04. Payment and Performance of Loan Documents.................................8
Section 1.05. Maintenance of Existence; Compliance with Laws............................8
Section 1.06. After-Acquired Property...................................................8
Section 1.07. (a) Payment of Taxes and Other Charges..................................8
(b) Payment of Mechanics and Materialmen................................9
(c) Good Faith Contests.................................................9
Section 1.08. Taxes on Mortgagee........................................................9
Section 1.09. Insurance................................................................10
Section 1.10. Protective Advances by Mortgagee.........................................13
Section 1.11. (a) Visitation and Inspection..........................................13
(b) Financial and Other Information....................................13
(c) Estoppel Certificates..............................................14
Section 1.12. Maintenance of Premises and Improvements.................................14
Section 1.13. Condemnation.............................................................14
Section 1.14. Leases...................................................................15
Section 1.15. Premises Documents.......................................................15
Section 1.16. Trust Fund; Lien Laws....................................................16
Article II EVENTS OF DEFAULT AND REMEDIES...........................................16
Section 2.01. Events of Default and Certain Remedies...................................16
Section 2.02. Other Matters Concerning Sales...........................................20
Section 2.03. Payment of Amounts Due...................................................21
Section 2.04. Actions; Receivers.......................................................22
Section 2.05. Mortgagee's Right to Possession..........................................23
Section 2.06. Remedies Cumulative......................................................23
Section 2.07. Moratorium Laws; Right of Redemption.....................................23
Section 2.08. Mortgagee's Rights Concerning Application of Amounts Collected...........23
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Article III MISCELLANEOUS............................................................24
Section 3.01. Assignment of Rents......................................................24
Section 3.02. Security Agreement.......................................................24
Section 3.03. Application of Certain Payments..........................................24
Section 3.04. Severability.............................................................25
Section 3.05. Modifications and Waivers in Writing.....................................25
Section 3.06. Notices..................................................................25
Section 3.07. Successors and Assigns...................................................25
Section 3.08. Limitation on Interest...................................................25
Section 3.09. Counterparts.............................................................26
Section 3.10. Substitute Mortgages.....................................................26
Section 3.11. Mortgagee's Sale of Interests in Loan....................................26
Section 3.12. No Merger of Interests...................................................26
Section 3.13. CERTAIN WAIVERS..........................................................26
Section 3.14. CONFESSION OF JUDGMENT...................................................27
Section 3.15. GOVERNING LAW............................................................28
</TABLE>
-ii-
<PAGE>
THE AMOUNT OF THIS MORTGAGE IS $80,186,250.
RECITAL
Mortgagee, Hampton Inns, Inc. ("Hampton") and Promus Hotels Florida,
Inc. ("Promus Florida"), as sellers, and Apple Suites, Inc. ("Parent"), as
buyer, have heretofore entered into an Agreement of Sale dated as of August 6,
1999 (as amended, the "First Agreement of Sale") for the purchase of certain
premises more particularly described therein (the "Initial Premises"). Hampton,
as seller, and Parent, as buyer, have entered into an Agreement of Sale dated as
of October 5, 1999 (as amended, the "Second Agreement of Sale") for the purchase
of certain premises more particularly described therein (the "Additional
Premises"; together with the Initial Premises, collectively, the "Existing
Premises"). Mortgagee, Hampton and Promus Florida, as sellers, and Parent, as
buyer, have entered into an Agreement of Sale dated as of November 22, 1999 (as
amended, the "Third Agreement of Sale"; together with the First Agreement of
Sale and the Second Agreement of Sale, collectively, the "Agreement of Sale")
for the purchase of, among other premises, the leasehold interest in the
premises described in SCHEDULE A attached hereto and made a part hereof.
Pursuant to an Assignment and Assumption Agreement dated on or about the date
hereof between Parent and Fee Owner, Parent has assigned, and Fee Owner has
assumed, Parent's obligations under the Third Agreement of Sale with respect to
the acquisition of the leasehold interest in the premises described in SCHEDULE
A. Parent, directly or indirectly, owns one hundred percent (100%) of the
beneficial interests in Fee Owner. Fee Owner has acquired and is the owner of
the leasehold interest in the premises described in SCHEDULE A and Lessee is the
owner of a subleasehold interest therein. Fee Owner and Lessee acknowledge that
they will derive substantial benefit from the making of the loans to Parent
contemplated in the Agreement of Sale and further acknowledges that the
obligation of Mortgagee to make such loans is conditioned upon, among other
things, the execution and delivery by Fee Owner and Lessee of this Mortgage. In
connection with the purchase of the Existing Premises by Parent (or its indirect
wholly-owned subsidiary) from Mortgagee (or its affiliates) pursuant to the
First Agreement of Sale and the Second Agreement of Sale, Parent has borrowed
(i) the sum of $26,625,000 and has executed and delivered to Mortgagee its note,
dated September 20, 1999, obligating it to pay the sum of $26,625,000, with
interest thereon as therein provided (the "First Note") and (ii) the sum of
$7,350,000 and has executed and delivered to Mortgagee its note, dated October
5, 1999, obligating it to pay the sum of $7,350,000, with interest thereon as
therein provided (the "Second Note"). Prior to the date hereof, in connection
with the purchase of certain premises described in the Third Agreement of Sale
by Parent (or its indirect wholly-owned subsidiary), Parent has borrowed the sum
of $34,594,500 and has executed and delivered to Mortgagee its note, dated
November 29, 1999, obligating it to pay the sum of $30,210,000, with interest as
therein provided, and its note, dated December 22, 1999, obligating it to pay
the sum of $4,384,500, with interest as therein provided (collectively, the
"Interim Notes"). In connection with the purchase on the date hereof of the
Premises, Parent will borrow $11,616,750 from Mortgagee and has executed and
delivered to Mortgagee its note, dated the date hereof, obligating it to pay the
sum of $11,616,750, with interest thereon as therein provided (the "Fourth
Note"; together with the First Note, the Second Note, the Interim Notes and as
any thereof may hereafter be amended, modified, extended, severed,
<PAGE>
assigned, renewed, replaced or restated, hereinafter, the "Note"). The notes
comprising the Note have different maturities with the latest to mature being
April 28, 2001. In order to secure the payment of the Note, Fee Owner and
Lessee, as mortgagors, have duly authorized the execution and delivery of this
Mortgage. For purposes of this Mortgage, "Mortgagor" shall mean Fee Owner and
Lessee but only to the extent of their respective interests in the Mortgaged
Property (as herein defined) and their respective obligations under the Note,
the Head Lease and the Subground Lease. This Mortgage is an "Open-End Mortgage"
as set forth in 42 Pa. C.S.A. ss. 8143 and secures obligations up to a maximum
amount of principal indebtedness outstanding at any time of One Hundred Sixty
Million Dollars ($160,000,000), plus accrued and unpaid interest and other sums
thereon, including, but not limited to, advances, whenever made, for the payment
of taxes, assessments, maintenance charges, insurance premiums, costs incurred
for the protection of the Premises or the lien of this Mortgage, expenses
incurred by Mortgagee by reason of any default by Mortgagor under this Mortgage,
including, without limitation, legal fees and costs incurred by Mortgagee in
connection therewith, and advances for alteration or renovation on the Premises,
together with all other sums due hereunder or under the Note or secured hereby.
CERTAIN DEFINITIONS AND RULES OF CONSTRUCTION
Mortgagor and Mortgagee agree that, unless the context otherwise
specifies or requires, the following terms shall have the meanings herein
specified.
"Chattels" means all fixtures, furnishings, fittings, appliances,
apparatus, equipment, building materials and components, machinery and articles
of personal property, of whatever kind or nature, including any replacements,
proceeds or products thereof and additions thereto, other than those owned by
lessees, now or at any time hereafter intended to be or actually affixed to,
attached to, placed upon, or used in any way in connection with the complete and
comfortable use, enjoyment, development, occupancy or operation of the Premises,
and whether located on or off the Premises.
"Default Rate" means the rate (or, if more than one, the highest of the
rates) of interest per annum provided in the Note plus 5%, but in no event to
exceed the maximum rate allowed by law.
"Events of Default" means the events and circumstances described as
such in Section 2.01.
"Ground Lease" means collectively the Head Lease and the Subground
Lease.
"Hazardous Materials" means any pollutant, effluents, emissions,
contaminants, toxic or hazardous wastes, materials or substances, as any of
those terms are defined from time to time in or for the purposes of any relevant
environmental law, rule, regulation, code, permit, order, notice, demand letter
or other binding determination (hereinafter, "Environmental Laws") including,
without limitation, asbestos fibers and friable asbestos, polychlorinated
biphenyls and any petroleum or hydrocarbon-based products or derivatives, in
each case in amounts in violation of applicable Environmental Laws.
2
<PAGE>
"Head Lease" means that certain Ground Lease by and among Loretta M.
Cimeo, George C. Morelli, Joseph P. Morelli, Esther E. Morelli, Charles P.
Morelli, Thomas W. Morelli and John J. Morelli (collectively, "Landlord"), as
landlord, and Mortgagee, as tenant, dated July 1, 1996, as amended by Amendment
To Ground Lease between Landlord and Mortgagee dated July 1, 1996 and by Second
Amendment To Ground Lease And Amendment To Short Form Lease between Landlord and
Mortgagee dated March 6, 2000, and a Short Form Lease was recorded on November
15, 1996 as Instrument No.: 68773 with the Chester County, Pennsylvania, Office
of the Recorder of Deeds, as the ground lessee's interest therein has been
assigned to Fee Owner pursuant to Assignment and Assumption of Lease among
Landlord, Mortgagee and Fee Owner dated on or about the date hereof.
"Improvements" means all structures or buildings, and replacements
thereof, now or hereafter located upon the Premises, including all plant
equipment, apparatus, machinery and fixtures of every kind and nature whatsoever
forming part of said structures or buildings.
"lease" or "leases" means any lease or leases of all or any portion of
the Premises, whether affecting the fee or leasehold portion thereof.
"Loan" means the loan made by Mortgagee to Mortgagor evidenced by the
Note and secured hereby.
"Premises" means the leasehold and subleasehold interest in the
premises described in SCHEDULE A created by the Head Lease and the Subground
Lease, and including all of the easements, rights, privileges and appurtenances
(including air or development rights) thereunto belonging or in anywise
appertaining, and all of the estate, right, title, interest, claim or demand
whatsoever of Mortgagor therein and in the streets and ways adjacent thereto,
either in law or in equity, in possession or expectancy, now or hereafter
acquired, and as used herein shall, unless the context otherwise requires, be
deemed to include the Improvements.
"Premises Documents" means all reciprocal easement or operating
agreements, declarations of covenants, conditions or restrictions, declarations
of condominium, developer's or utility agreements with any village, town, county
or other governmental authority, and any similar such agreements or declarations
now or hereafter affecting the Premises or any part thereof.
"Subground Lease" means the Hotel Lease Agreement dated on or about the
date hereof between Fee Owner and Lessee covering, among other premises, the
premises described in SCHEDULE A, as the same may be amended, supplemented or
modified from time to time.
All terms of this Mortgage which are not defined above shall have the
meaning set forth elsewhere in this Mortgage.
Except as expressly indicated otherwise, when used in this Mortgage (i)
"or" is not exclusive, (ii) "hereunder", "herein", "hereof" and the like refer
to this Mortgage as a whole, (iii) "Article", "Section" and "Schedule" refer to
Articles, Sections and Schedules
3
<PAGE>
of this Mortgage, (iv) terms defined in the singular have a correlative meaning
when used in the plural and vice versa, (v) a reference to a law or statute
includes any amendment or modification to, or replacement of, such law or
statute and (vi) a reference to an agreement, instrument or document means such
agreement, instrument or document as the same may be amended, modified or
supplemented from time to time in accordance with its terms and as permitted
hereby and by the other documents executed or delivered to Mortgagee in
connection with the Loan. The cover page and all Schedules hereto are
incorporated herein and made a part hereof. Any table of contents and the
headings and captions herein are for convenience only and shall not affect the
interpretation or construction hereof.
GRANTING CLAUSE
NOW, THEREFORE, Mortgagor, in consideration of the premises and in
order to secure the payment of both the principal of, and the interest and any
other sums payable under, the Note or this Mortgage and the performance and
observance of all the provisions hereof and of the Note, has given, granted,
bargained, sold, warranted, aliened, enfeoffed, remised, released, conveyed,
assigned, transferred, mortgaged, hypothecated, deposited, pledged, set over and
confirmed and, by these presents, intending to be legally bound, does hereby
irrevocably give, grant, bargain, sell, warrant, alien, enfeoff, remise,
release, convey, assign, transfer, mortgage, hypothecate, deposit, pledge, set
over and confirm unto Mortgagee, all its estate, right, title and interest in,
to and under any and all of the following described property (hereinafter, the
"Mortgaged Property") whether now owned or held or hereafter acquired:
(i) the Premises;
(ii) the Improvements;
(iii) the Chattels;
(iv) the Premises Documents;
(v) all rents, royalties, issues, profits, revenue, income,
recoveries, reimbursements and other benefits of the Mortgaged Property
(hereinafter, the "Rents") and all leases of the Mortgaged Property or
portions thereof now or hereafter entered into and all right, title and
interest of Mortgagor thereunder, including, without limitation, cash
or securities deposited thereunder to secure performance by the lessees
of their obligations thereunder, whether such cash or securities are to
be held until the expiration of the terms of such leases or applied to
one or more of the installments of rent coming due immediately prior to
the expiration of such terms, and including any guaranties of such
leases and any lease cancellation, surrender or termination fees in
respect thereof, all subject, however, to the provisions of Section
3.01;
(vi) all (a) development work product prepared in
connection with the Premises, including, but not limited to,
engineering, drainage, traffic, soil and other studies and tests;
water, sewer, gas, electrical and telephone approvals, taps
4
<PAGE>
and connections; surveys, drawings, plans and specifications; and
subdivision, zoning and platting materials; (b) building and other
permits, rights, licenses and approvals relating to the Premises; and
(c) contracts and agreements (including, without limitation, contracts
with architects and engineers, construction contracts and contracts for
the maintenance or management of the Premises), contract rights, logos,
trademarks, trade names, copyrights and other general intangibles used
or useful in connection with the ownership, operation or occupancy of
the Premises or any part thereof;
(vii) all proceeds of the conversion, voluntary or
involuntary, of any of the foregoing into cash or liquidated claims,
including, without limitation, proceeds of insurance and condemnation
awards, and all rights of Mortgagor to refunds of real estate taxes and
assessments;
(viii) all revenue and income received by or on behalf of
Mortgagor resulting from the operation of the Premises as a hotel,
including all sums (1) paid by customers for the use of hotel rooms
located within the Premises, (2) derived from food and beverage
operations located within the Premises, (3) generated by other hotel
operations, including any parking, convention, sports and recreational
facilities and (4) business interruption insurance proceeds;
(ix) all accounts and accounts receivable, including all
present and future right to payment from any consumer credit or charge
card organization or entity (such as those organizations which sponsor
or administer the American Express, Carte Blanche, Discover Card,
Diners Club, Visa and Master Card) arising out of the leasing and
operation of, or the business conducted at or in relation to, all or
any part of the Premises; and
(x) any deposit, operating or other account including the
entire balance therein (now or hereafter existing) of Mortgagor
containing proceeds of the operation of the Premises with any banking
or financial institution and all money, instruments, securities,
documents, chattel paper, credits, demands, and any other property,
rights, or interests of Mortgagor relating to the operation of the
Premises which at any time shall come into the possession, custody or
control of any banking or financial institution.
TO HAVE AND TO HOLD unto Mortgagee, its successors and assigns forever.
ARTICLE I
COVENANTS OF MORTGAGOR
Mortgagor represents, except as known by Mortgagee or its affiliates to
the contrary, or disclosed to Mortgagee in connection with the sale of the
Mortgaged Property to Mortgagor, and Mortgagor covenants and agrees as follows:
Section 1.01. (a) Warranty of Title; Power and Authority. Mortgagor
warrants that, with respect to the leasehold interest in the Premises, it is the
owner of a
5
<PAGE>
valid and subsisting interest as tenant under the Head Lease, that the Head
Lease is in full force and effect, there are no defaults thereunder and no event
has occurred or is occurring which after notice or passage of time or both will
result in such a default, that the Head Lease is subject to no lien, charge or
encumbrance of any kind and is prior to all liens, charges and encumbrances
whatsoever on the fee interest of the landlord thereunder, except in either case
such as are listed as exceptions to title in the title policy insuring the lien
hereof; and, Mortgagor further warrants that, with respect to the subleasehold
interest in the Premises, that it is the owner of a valid and subsisting
interest as tenant under the Subground Lease, that the Subground Lease is in
full force and effect, there are no defaults thereunder and no event has
occurred or is occurring which after notice or passage of time or both will
result in such a default; that it owns the Chattels, all leases and the Rents in
respect of the Mortgaged Property and all other personal property encumbered
hereby free and clear of liens and claims; and Mortgagor warrants that this
Mortgage is and will remain a valid and enforceable lien on the Mortgaged
Property subject only to the exceptions referred to above. Mortgagor has full
power and lawful authority to mortgage the Mortgaged Property in the manner and
form herein done or intended hereafter to be done. Mortgagor will preserve such
leasehold estates created by the Ground Lease and will forever warrant and
defend the same to Mortgagee and will forever warrant and defend the validity
and priority of the lien hereof against the claims of all persons and parties
whomsoever. Mortgagor will perform or cause to be performed all of the covenants
and conditions required to be performed by it under the Ground Lease, will do
all things necessary to preserve unimpaired its rights thereunder, and will not
(i) enter into any agreement modifying or amending the Ground Lease that would
reduce the term of the Ground Lease, increase the amount of rent payable
thereunder (except as contemplated by the provisions of the Ground Lease) or
have a material adverse effect on the lien created by this Mortgage or the
rights of Mortgagee hereunder or (ii) for so long as the Ground Lease is in
effect, release the landlord thereunder from any obligations imposed upon it
thereby. If Mortgagor receives a notice of default under the Ground Lease, it
shall immediately cause a copy of such notice to be sent by registered United
States mail to Mortgagee.
(b) Hazardous Materials. To the best of Mortgagor's knowledge,
Mortgagor represents and warrants that (i) the Premises and the improvements
thereon and the surrounding areas are not currently and have never been subject
to Hazardous Materials or their effects, in each case in amounts in violation of
applicable Environmental Laws, (ii) neither it nor any portion of the Premises
or improvements thereon is in violation of, or subject to any existing, pending
or threatened investigation or proceeding by any governmental authorities under,
any Environmental Law, (iii) there are no claims, litigation, administrative or
other proceedings, whether actual or threatened, or judgments or orders,
concerning Hazardous Materials relating in any way to the Premises or the
improvements thereon and (iv) Mortgagor is not required by any Environmental Law
to obtain any permits or licenses to construct or use any improvements, fixtures
or equipment with respect to the Premises, or if any such permit or license is
required it has been obtained and is capable of being mortgaged and assigned
hereby. Mortgagor will comply with all applicable Environmental Laws and will,
at its sole cost and expense, promptly remove, or cause the removal of, any and
all Hazardous Materials or the effects thereof at any time identified as being
on, in, under or affecting the Premises.
6
<PAGE>
(c) Flood Hazard Area. Mortgagor represents that neither the Premises
nor any part thereof is located in an area identified by the Secretary of the
United States Department of Housing and Urban Development or by any applicable
federal agency as having special flood hazards or, if it is, Mortgagor has
obtained the insurance required by Section 1.09.
Section 1.02. (a) Further Assurances. Mortgagor will, at its sole cost
and expense, do, execute, acknowledge and deliver all and every such further
acts, deeds, conveyances, mortgages, assignments, notices of assignment,
transfers and assurances as Mortgagee shall from time to time reasonably
require, for the better assuring, conveying, assigning, transferring and
confirming unto Mortgagee the property and rights hereby conveyed or assigned or
intended now or hereafter so to be, or which Mortgagor may be or may hereafter
become bound to convey or assign to Mortgagee, or for carrying out the intention
or facilitating the performance of the terms hereof, or for filing, registering
or recording this Mortgage and, on demand, will execute and deliver, and hereby
authorizes Mortgagee to execute and file in Mortgagor's name, to the extent it
may lawfully do so, one or more financing statements, chattel mortgages or
comparable security instruments, to evidence or perfect more effectively
Mortgagee's security interest in and the lien hereof upon the Chattels and other
personal property encumbered hereby.
(b) Information Reporting and Back-up Withholding. Mortgagor will, at
its sole cost and expense, do, execute, acknowledge and deliver all and every
such acts, information reports, returns and withholding of monies as shall be
necessary or appropriate to comply fully, or to cause full compliance, with all
applicable information reporting and back-up withholding requirements of the
Internal Revenue Code of 1986 (including all regulations now or hereafter
promulgated thereunder) in respect of the Premises and all transactions related
to the Premises, and will at all times provide Mortgagee with satisfactory
evidence of such compliance and notify Mortgagee of the information reported in
connection with such compliance.
Section 1.03. (a) Filing and Recording of Documents. Mortgagor
forthwith upon the execution and delivery hereof, and thereafter from time to
time, will cause this Mortgage and any security instrument creating a lien or
evidencing the lien hereof upon the Chattels and each instrument of further
assurance to be filed, registered or recorded in such manner and in such places
as may be required by any present or future law in order to publish notice of
and fully to protect the lien hereof upon, and the interest of Mortgagee in, the
Mortgaged Property.
(b) Filing and Recording Fees and Other Charges. Mortgagor will pay all
filing, registration or recording fees, and all expenses incident to the
execution and acknowledgment hereof, any mortgage supplemental hereto, any
security instrument with respect to the Chattels, and any instrument of further
assurance, and any reasonable expenses (including attorneys' fees and
disbursements) incurred by Mortgagee in connection with the Loan, and will pay
all federal, state, county and municipal stamp taxes and other taxes, duties,
imposts, assessments and charges arising out of or in connection with the
execution and delivery of the Note, this Mortgage, any mortgage supplemental
hereto, any security instrument with respect to the Chattels or any instrument
of further assurance.
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Section 1.04. Payment and Performance of Loan Documents. Mortgagor will
punctually pay the principal and interest and all other sums to become due in
respect hereof and of the Note at the time and place and in the manner specified
therein, according to the true intent and meaning thereof, all in currency of
the United States of America which at the time of such payment shall be legal
tender for the payment of public and private debts. Mortgagor will duly and
timely comply with and perform all of the terms, provisions, covenants and
agreements contained in said documents and in all other documents or instruments
executed or delivered by Mortgagor to Mortgagee in connection with the Loan, and
will permit no failures of performance thereunder.
Section 1.05. Maintenance of Existence; Compliance with Laws.
Mortgagor, if other than a natural person, will, so long as it is owner of all
or part of the Mortgaged Property, do all things necessary to preserve and keep
in full force and effect its existence, franchises, rights and privileges as a
business or stock corporation, partnership, limited liability company, trust or
other entity under the laws of the state of its formation. Mortgagor will duly
and timely comply with all laws, regulations, rules, statutes, orders and
decrees of any governmental authority or court applicable to it or to the
Mortgaged Property or any part thereof.
Section 1.06. After-Acquired Property. All right, title and interest of
Mortgagor in and to all extensions, improvements, betterments, renewals,
substitutes and replacements of, and all additions and appurtenances to, the
Mortgaged Property, hereafter acquired by, or released to, Mortgagor or
constructed, assembled or placed by Mortgagor on the Premises, and all
conversions of the security constituted thereby, immediately upon such
acquisition, release, construction, assembling, placement or conversion, as the
case may be, and in each such case, without any further mortgage, conveyance,
assignment or other act by Mortgagor, shall become subject to the lien hereof as
fully and completely, and with the same effect, as though now owned by Mortgagor
and specifically described in the Granting Clause hereof, but at any and all
times Mortgagor will execute and deliver to Mortgagee any and all such further
assurances, mortgages, conveyances or assignments thereof as Mortgagee may
reasonably require for the purpose of expressly and specifically subjecting the
same to the lien hereof.
Section 1.07. (a) Payment of Taxes and Other Charges. Mortgagor, from
time to time before the same shall become delinquent, will pay and discharge all
taxes of every kind and nature (including real and personal property taxes and
income, franchise, withholding, profits and gross receipts taxes), all general
and special assessments, levies, permits, inspection and license fees, all water
and sewer rents and charges, and all other public charges whether of a like or
different nature, imposed upon or assessed against it or the Mortgaged Property
or any part thereof or upon the revenues, rents, issues, income and profits of
the Mortgaged Property or arising in respect of the occupancy, use or possession
thereof. Mortgagor will, upon Mortgagee's request, deliver to Mortgagee receipts
evidencing the payment of all such taxes, assessments, levies, fees, rents and
other public charges imposed upon or assessed against it or the Mortgaged
Property or any portion thereof.
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Mortgagee may, at its option following the occurrence of an Event of
Default, to be exercised by thirty (30) days' notice to Mortgagor, require the
deposit by Mortgagor, at the time of each payment of an installment of interest
or principal under the Note (but no less often than monthly), of an additional
amount sufficient to discharge the obligations under this clause (a) when they
become due. The determination of the amount so payable and of the fractional
part thereof to be deposited with Mortgagee, so that the aggregate of such
deposits shall be sufficient for this purpose, shall be made by Mortgagee in its
sole discretion. Such amounts shall be held by Mortgagee without interest and
applied to the payment of the obligations in respect of which such amounts were
deposited or, at Mortgagee's option, to the payment of said obligations in such
order or priority as Mortgagee shall determine, on or before the respective
dates on which the same or any of them would become delinquent. If one (1) month
prior to the due date of any of the aforementioned obligations the amounts then
on deposit therefor shall be insufficient for the payment of such obligation in
full, Mortgagor within ten (10) days after demand shall deposit the amount of
the deficiency with Mortgagee. Nothing herein contained shall be deemed to
affect any right or remedy of Mortgagee under any provisions hereof or of any
statute or rule of law to pay any such amount and to add the amount so paid,
together with interest at the Default Rate, to the indebtedness hereby secured.
(b) Payment of Mechanics and Materialmen. Mortgagor will pay, from time
to time when the same shall become due, all lawful claims and demands of
mechanics, materialmen, laborers, and others which, if unpaid, might result in,
or permit the creation of, a lien on the Mortgaged Property or any part thereof,
and in general will do or cause to be done everything necessary so that the lien
hereof shall be fully preserved, at the cost of Mortgagor and without expense to
Mortgagee, other than those liens which Mortgagee or its affiliates have
indemnified Mortgagor pursuant to the provisions set forth in the Agreement of
Sale.
(c) Good Faith Contests. Nothing in this Section 1.07 shall require the
payment or discharge of any obligation imposed upon Mortgagor by this Section so
long as Mortgagor shall in good faith and at its own expense contest the same or
the validity thereof by appropriate legal proceedings which shall operate to
prevent the collection thereof or other realization thereon and the sale or
forfeiture of the Mortgaged Property or any part thereof to satisfy the same;
provided, however, that (i) during such contest Mortgagor shall set aside
reserves sufficient to discharge Mortgagor's obligation hereunder and of any
additional charge, penalty or expense arising from or incurred as a result of
such contest and (ii) if at any time payment of any obligation imposed upon
Mortgagor by clause (a) above shall become necessary to prevent the delivery of
a tax deed or other instrument conveying the Mortgaged Property or any portion
thereof because of non-payment, then Mortgagor shall pay the same in sufficient
time to prevent the delivery of such tax deed or other instrument.
Section 1.08. Taxes on Mortgagee. Mortgagor will pay any taxes, except
income taxes, imposed on Mortgagee by reason of its ownership of the Note or
this Mortgage, provided that Mortgagee can require payment of the Note in full
within ninety (90) days if it shall be illegal for Mortgagor to pay any tax or
if the payment of such tax by Mortgagor would result in the violation of
applicable usury laws.
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Section 1.09. Insurance. (a) Mortgagor will at all times provide,
maintain and keep in force:
(i) policies of insurance insuring the Premises, Improvements
and Chattels against loss or damage by fire and lightning; against loss
or damage by other risks embraced by coverage of the type now known as
All Risk Replacement Cost Insurance with agreed amount endorsement,
including but not limited to riot and civil commotion, vandalism,
malicious mischief and theft; and against such other risks or hazards
as Mortgagee from time to time reasonably may designate in an amount
sufficient to prevent Mortgagee or Mortgagor from becoming a co-insurer
under the terms of the applicable policies, but in any event in an
amount not less than 100% of the then full replacement cost of the
Improvements (exclusive of the cost of excavations, foundations and
footings below the lowest basement floor) without deduction for
physical depreciation;
(ii) policies of insurance insuring the Premises against the
loss of "rental value" of the buildings which constitute a part of the
Improvements on a "rented or vacant basis" arising out of the perils
insured against pursuant to clause (i) above in an amount equal to not
less than one (1) year's gross "rental value" of the Improvements.
"Rental value" as used herein is defined as the sum of (A) the total
anticipated gross rental income from tenant occupancy of such buildings
as furnished and equipped, (B) the amount of all charges which are the
legal obligation of tenants and which would otherwise be the obligation
of Mortgagor and (C) the fair rental value of any portion of such
buildings which is occupied by Mortgagor. Mortgagor hereby assigns the
proceeds of such insurance to Mortgagee, to be applied by Mortgagee in
payment of the interest and principal on the Note, insurance premiums,
taxes, assessments and private impositions until such time as the
Improvements shall have been restored and placed in full operation, at
which time, provided Mortgagor is not then in default hereunder, the
balance of such insurance proceeds, if any, held by Mortgagee shall be
paid over to Mortgagor;
(iii) if all or part of the Premises are located in an area
identified by the Secretary of the United States Department of Housing
and Urban Development or by any applicable federal agency as a flood
hazard area, flood insurance in an amount at least equal to the maximum
limit of coverage available under the National Flood Insurance Act of
1968, provided, however, that Mortgagee reserves the right to require
flood insurance in excess of said limit if such insurance is
commercially available up to the amount provided in clause (i) above;
(iv) during any period of restoration under this Section 1.09
or Section 1.13, a policy or policies of builder's "all risk"
insurance, written on a Standard Builder's Risk Completed Value Form
(100% non-reporting), in an amount not less than the full insurable
value of the Premises against such risks (including, without
limitation, fire and extended coverage, collapse and earthquake
coverage to agreed limits) as Mortgagee may reasonably request, in form
and substance acceptable to Mortgagee;
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(v) a policy or policies of workers' compensation insurance as
required by workers' compensation insurance laws (including employer's
liability insurance, if requested by Mortgagee) covering all employees
of Mortgagor;
(vi) comprehensive liability insurance on an "occurrence" basis
against claims for "personal injury" liability, including, without
limitation, bodily injury, death or property damage liability, with a
limit of not less than $15,000,000 in the event of "personal injury" to
any number of persons or of damage to property arising out of one
"occurrence". Such policies shall name Mortgagee as additional insured
by an endorsement, and shall contain cross-liability and severability
of interest clauses, all satisfactory to Mortgagee; and
(vii) such other insurance (including, but not limited to,
earthquake insurance), and in such amounts, as may from time to time be
reasonably required by Mortgagee against the same or other insurable
hazards.
Notwithstanding anything herein to the contrary, for so long as that
certain Management Agreement of even date herewith between Lessee and Mortgagee
with respect to the Premises remains in full force and effect (as the same may
be amended, the "Management Agreement"), the types and amounts of insurance
required by the Management Agreement to the extent inconsistent with those set
forth above shall govern and control Mortgagor's obligations in respect thereof.
(b) All policies of insurance required under this Section 1.09 shall be
issued by companies having Best's ratings and being otherwise reasonably
acceptable to Mortgagee, shall be subject to the reasonable approval of
Mortgagee as to amount, content, form and expiration date and, except for the
liability policies described in clauses (a)(v) and (vi) above, shall contain a
Non-Contributory Standard Mortgagee Clause and Lender's Loss Payable
Endorsement, or their equivalents, in favor of Mortgagee, and shall provide that
the proceeds thereof shall be payable to Mortgagee. Mortgagee shall be furnished
with the original of each policy required hereunder, which policies shall
provide that they shall not lapse, nor be modified or cancelled, without thirty
(30) days' written notice to Mortgagee. At least thirty (30) days prior to
expiration of any policy required hereunder, Mortgagor shall furnish Mortgagee
appropriate proof of issuance of a policy continuing in force the insurance
covered by the policy so expiring. Mortgagor shall furnish to Mortgagee,
promptly upon request, receipts or other satisfactory evidence of the payment of
the premiums on such insurance policies. In the event that Mortgagor does not
deposit with Mortgagee a new certificate or policy of insurance with evidence of
payment of premiums thereon at least thirty (30) days prior to the expiration of
any expiring policy, then Mortgagee may, but shall not be obligated to, procure
such insurance and pay the premiums therefor, and Mortgagor agrees to repay to
Mortgagee the premiums thereon promptly on demand, together with interest
thereon at the Default Rate.
(c) Mortgagor hereby assigns to Mortgagee all proceeds of any insurance
required to be maintained by this Section 1.09 which Mortgagor may be entitled
to receive for loss or damage to the Premises, Improvements or Chattels. All
such insurance proceeds shall be payable to Mortgagee, and Mortgagor hereby
authorizes and directs any
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affected insurance company to make payment thereof directly to Mortgagee
subject, however, to clause (f) below. Mortgagor shall give prompt notice to
Mortgagee of any casualty, whether or not of a kind required to be insured
against under the policies to be provided by Mortgagor hereunder, such notice to
generally describe the nature and cause of such casualty and the extent of the
damage or destruction. Mortgagor may settle, adjust or compromise any claims for
loss, damage or destruction, regardless of whether or not there are insurance
proceeds available or whether any such insurance proceeds are sufficient in
amount to fully compensate for such loss or damage, subject to Mortgagee's prior
consent. Notwithstanding the foregoing, Mortgagee shall have the right to join
Mortgagor in settling, adjusting or compromising any loss of $100,000 or more.
Mortgagor hereby authorizes the application or release by Mortgagee of any
insurance proceeds under any policy of insurance, subject to the other
provisions hereof. The application or release by Mortgagee of any insurance
proceeds shall not cure or waive any default or notice of default hereunder or
invalidate any act done pursuant to such notice.
(d) In the event of the foreclosure hereof or other transfer of the
title to the Mortgaged Property in extinguishment, in whole or in part, of the
indebtedness secured hereby, all right, title and interest of Mortgagor in and
to any insurance policy, or premiums or payments in satisfaction of claims or
any other rights thereunder then in force, shall pass to the purchaser or
grantee notwithstanding the amount of any bid at such foreclosure sale. Nothing
contained herein shall prevent the accrual of interest as provided in the Note
on any portion of the principal balance due under the Note until such time as
insurance proceeds are actually received and applied to reduce the principal
balance outstanding.
(e) Mortgagor shall not take out separate insurance concurrent in form
or contributing in the event of loss with that required to be maintained under
this Section 1.09 unless Mortgagee is included thereon as a named insured with
loss payable to Mortgagee under standard mortgage endorsements of the character
and to the extent above described. Mortgagor shall promptly notify Mortgagee
whenever any such separate insurance is taken out and shall promptly deliver to
Mortgagee the policy or policies of such insurance.
(f) Any and all monies received as payment which Mortgagor may be
entitled to receive for loss or damage to the Premises, Improvements or Chattels
under any insurance maintained pursuant to this Section 1.09 (other than
proceeds under the policies required by clause (a)(ii) above) shall be paid over
to Mortgagee and, at Mortgagee's option, either applied to the prepayment of the
Note and all interest and other sums accrued and unpaid in respect thereof or
disbursed from time to time to Mortgagor in reimbursement of its costs and
expenses incurred in the restoration of the Improvements in accordance with
Mortgagee's standard construction lending practices, terms and conditions, in
either case, less Mortgagee's reasonable expenses for collecting and, if
applicable, disbursing the insurance proceeds, or otherwise incurred in
connection therewith. Notwithstanding the provisions of the immediately
preceding sentence, provided no default exists hereunder, Mortgagee agrees to
apply any such proceeds received by it to the reimbursement of Mortgagor's costs
of restoring the Improvements. Advances of insurance proceeds shall be made to
Mortgagor from time to time in
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accordance with Mortgagee's standard construction lending practices, terms and
conditions; amounts not required for such purposes shall be applied, at
Mortgagee's option, to the prepayment of the Note and to interest accrued and
unpaid thereon in such order and proportions as Mortgagee may elect. In no event
shall Mortgagee be required to advance such proceeds to Mortgagor unless
Mortgagee shall have (i) received satisfactory evidence that the
funding/expiration dates of the commitment, if any, for the permanent financing
of the Improvements have been extended for such period of time as is reasonably
necessary to complete said restoration and (ii) reasonably determined that the
restoration of the Improvements can be completed by the Maturity Date of the
Note at a cost which does not exceed the amount of available insurance proceeds
or, in the event that such proceeds are reasonably determined by Mortgagee to be
inadequate, Mortgagee shall have received from Mortgagor a cash deposit equal to
the excess of said estimated cost of restoration over the amount of said
available proceeds. If the conditions for the advance of insurance proceeds for
restoration set forth in clauses (i) and (ii) above are not satisfied within
sixty (60) days of Mortgagee's receipt thereof or if the actual restoration
shall not have been commenced within such period, Mortgagee shall have the
option at any time thereafter to apply such insurance proceeds to the payment of
the Note and to interest accrued and unpaid thereon in such order and
proportions as Mortgagee may elect.
Section 1.10. Protective Advances by Mortgagee. If Mortgagor shall fail
to perform any of the covenants contained herein, Mortgagee may make advances to
perform the same on its behalf and all sums so advanced shall be a lien upon the
Mortgaged Property and shall be secured hereby. Mortgagor will repay on demand
all sums so advanced on its behalf together with interest thereon at the Default
Rate. The provisions of this Section shall not prevent any default in the
observance of any covenant contained herein from constituting an Event of
Default.
Section 1.11. (a) Visitation and Inspection. Mortgagor will keep
adequate records and books of account in accordance with generally accepted
accounting principles and will permit Mortgagee, by its agents, accountants and
attorneys, to visit and inspect the Mortgaged Property and examine its records
and books of account and make copies thereof or extracts therefrom, and to
discuss its affairs, finances and accounts with the officers or general
partners, as the case may be, of Mortgagor, at such reasonable times as may be
requested by Mortgagee.
(b) Financial and Other Information. Mortgagor will deliver to
Mortgagee with reasonable promptness such financial information with respect to
Mortgagor or the Premises as Mortgagee may reasonably request from time to time.
All financial statements of Mortgagor shall be prepared in accordance with
generally accepted accounting principles and shall be accompanied by the
certificate of a principal financial or accounting officer or general partner,
as the case may be, of Mortgagor, dated within five (5) days of the delivery of
such statements to Mortgagee, stating that he or she knows of no Event of
Default, nor of any event which after notice or lapse of time or both would
constitute an Event of Default, which has occurred and is continuing, or, if any
such event or Event of Default has occurred and is continuing, specifying the
nature and period of existence thereof and what action Mortgagor has taken or
proposes to take with respect thereto, and, except as otherwise specified,
stating that Mortgagor has fulfilled all
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of its obligations hereunder and otherwise in respect of the Loan which are
required to be fulfilled on or prior to the date of such certificate.
(c) Estoppel Certificates. Mortgagor, within three (3) days upon
request in person or within five (5) days upon request by mail, will furnish a
statement, duly acknowledged, of the amount due whether for principal or
interest on this Mortgage and whether any offsets, counterclaims or defenses
exist against the indebtedness secured hereby.
Section 1.12. Maintenance of Premises and Improvements. Mortgagor will
not commit any waste on the Premises or make any change in the use of the
Premises which will in any way increase any ordinary fire or other hazard
arising out of construction or operation. Mortgagor will, or shall cause its
Lessee to, at all times, maintain the Improvements and Chattels in good
operating order and condition and will promptly make, from time to time, all
repairs, renewals, replacements, additions and improvements in connection
therewith which are needful or desirable to such end. The Improvements shall not
be demolished or substantially altered, nor shall any Chattels be removed
without Mortgagee's prior consent except where appropriate replacements free of
superior title, liens and claims are immediately made of value at least equal to
the value of the removed Chattels.
Section 1.13. Condemnation. Mortgagor, immediately upon obtaining
knowledge of the institution or pending institution of any proceedings for the
condemnation of the Premises or any portion thereof, will notify Mortgagee
thereof. Mortgagee may participate in any such proceedings and may be
represented therein by counsel of its selection. Mortgagor from time to time
will deliver to Mortgagee all instruments requested by it to permit or
facilitate such participation. In the event of such condemnation proceedings,
the award or compensation payable is hereby assigned to and shall be paid to
Mortgagee. Mortgagee shall be under no obligation to question the amount of any
such award or compensation and may accept the same in the amount in which the
same shall be paid. The proceeds of any award or compensation so received shall,
at Mortgagee's option, either be applied to the prepayment of the Note and all
interest and other sums accrued and unpaid in respect thereof at the rate of
interest provided therein regardless of the rate of interest payable on the
award by the condemning authority, or be disbursed to Mortgagor from time to
time for restoration of the Improvements in accordance with Mortgagee's standard
construction lending practices, terms and conditions, in either case, less
Mortgagee's reasonable expenses for collecting and, if applicable, disbursing
the award, or otherwise incurred in connection therewith. Notwithstanding the
provisions of the immediately preceding sentence, provided no monetary or
bankruptcy related default or any Event of Default exists hereunder, Mortgagee
agrees to apply any such condemnation award proceeds received by it to the
reimbursement of Mortgagor's costs of restoring the Improvements. Advances of
condemnation award proceeds shall be made to Mortgagor from time to time in
accordance with Mortgagee's standard construction lending practices, terms and
conditions; amounts not required for such purposes shall be applied, at
Mortgagee's option, to the prepayment of the Note and to interest accrued and
unpaid thereon (at the rate of interest provided therein regardless of the rate
of interest payable on the award by the condemning authority) in such order and
proportions as Mortgagee may elect.
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Section 1.14. Leases. (a) Mortgagor will not (i) execute an assignment
of the rents or any part thereof from the Premises without Mortgagee's prior
consent, (ii) except where the lessee is in default thereunder, terminate or
consent to the cancellation or surrender of any lease of the Premises or of any
part thereof, now existing or hereafter to be made, having an unexpired term of
one (1) year or more, provided, however, that any lease may be cancelled if
promptly after the cancellation thereof a new lease is entered into with a new
lessee having a credit standing at least equivalent to that of the lessee whose
lease was cancelled, on substantially the same terms as the terminated or
cancelled lease, (iii) modify any such lease so as to shorten the unexpired term
thereof or so as to decrease, waive or compromise in any manner the amount of
the rents payable thereunder or materially expand the obligations of the lessor
thereunder, (iv) accept prepayments of more than one month of any installments
of rents to become due under such leases, except prepayments in the nature of
security for the performance of the lessees thereunder, (v) modify, release or
terminate any guaranties of any such lease or (vi) in any other manner impair
the value of the Mortgaged Property or the security hereof.
(b) Mortgagor will not execute any lease of all or a substantial
portion of the Premises except for actual occupancy by the lessee thereunder or
its property manager, and will at all times promptly and faithfully perform, or
cause to be performed, all of the covenants, conditions and agreements contained
in all leases of the Premises or portions thereof now or hereafter existing, on
the part of the lessor thereunder to be kept and performed and will at all times
do all things reasonably necessary to compel performance by the lessee under
each lease of all obligations, covenants and agreements by such lessee to be
performed thereunder. If any of such leases provide for the giving by the lessee
of certificates with respect to the status of such leases, Mortgagor shall
exercise its right to request such certificates within five (5) days of any
demand therefor by Mortgagee and shall deliver copies thereof to Mortgagee
promptly upon receipt.
(c) In the event of the enforcement by Mortgagee of the remedies
provided for hereby or by law, the lessee under each of the leases of the
Premises will, upon request of any person succeeding to the interest of
Mortgagor as a result of such enforcement, automatically become the lessee of
said successor in interest, without change in the terms or other provisions of
such lease, provided, however, that said successor in interest shall not be
bound by (i) any payment of rent or additional rent for more than one (1) month
in advance, except prepayments in the nature of security for the performance by
said lessee of its obligations under said lease or (ii) any amendment or
modification of the lease made without the consent of Mortgagee or such
successor in interest. Each lease shall also provide that, upon request by said
successor in interest, such lessee shall execute and deliver an instrument or
instruments confirming such attornment.
Section 1.15. Premises Documents. Mortgagor shall (a) do all things
reasonably necessary to cause the due compliance and faithful performance by the
other parties to the Premises Documents with and of all obligations and
agreements by such other parties to be complied with and performed thereunder,
except for any continuing failure of the Premises to comply with the Premises
Documents of the date of the acquisition hereof from Mortgagee or its affiliate,
and (b) deliver promptly to Mortgagee copies of any notices which it gives or
receives under any of the Premises Documents.
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Section 1.16. Trust Fund; Lien Laws. Mortgagor will receive the
advances secured hereby and will hold the right to receive such advances as a
trust fund to be applied first for the purpose of paying the costs of
improvements on the Premises and will apply the same first to the payment of
such costs before using any part of the total of the same for any other purpose.
Mortgagor will indemnify and hold Mortgagee harmless against any loss or
liability, cost or expense, including, without limitation, any judgments,
attorney's fees, costs of appeal bonds and printing costs, arising out of or
relating to any proceeding instituted by any claimant alleging a violation by
Mortgagor of any applicable lien law.
ARTICLE II
EVENTS OF DEFAULT AND REMEDIES
Section 2.01. Events of Default and Certain Remedies. If one or more of
the following Events of Default shall happen, that is to say:
(a) if (i) default shall be made in the payment of any
principal, interest, fees or other sums under the Note, in any such
case, when and as the same shall become due and payable, whether at
maturity or by acceleration or as part of any payment or prepayment or
otherwise, in each case, as herein or in the Note provided, and such
default shall have continued for a period of ten (10) days or (ii)
default shall be made in the payment of any tax or other charge
required by Section 1.07 to be paid and said default shall have
continued for a period of twenty (20) days; or
(b) if default shall be made in the due observance or
performance of any covenant, condition or agreement in the Note, this
Mortgage or in any other document executed or delivered to Mortgagee in
connection with the Loan, and such default shall have continued for a
period of thirty (30) days after notice thereof shall have been given
to Mortgagor by Mortgagee, or, in the case of such other documents,
such shorter grace period, if any, as may be provided for therein; or
(c) if any representation or warranty made by Mortgagor in
Section 1.01 shall be incorrect, or if any other representation or
warranty made to Mortgagee in this Mortgage, or in any other document,
certificate or statement executed or delivered to Mortgagee in
connection with the Loan shall be incorrect in any material respect
when made or remade; or
(d) if by order of a court of competent jurisdiction, a
trustee, receiver or liquidator of the Mortgaged Property or any part
thereof, or of Mortgagor shall be appointed and such order shall not be
discharged or dismissed within sixty (60) days after such appointment;
or
(e) if Mortgagor shall file a petition in bankruptcy or for an
arrangement or for reorganization pursuant to the Federal Bankruptcy
Act or any similar federal or state law, or if, by decree of a court of
competent jurisdiction,
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Mortgagor shall be adjudicated a bankrupt, or be declared insolvent, or
shall make an assignment for the benefit of creditors, or shall admit
in writing its inability to pay its debts generally as they become due,
or shall consent to the appointment of a receiver or receivers of all
or any part of its property; or
(f) if any of the creditors of Mortgagor shall file a petition
in bankruptcy against Mortgagor or for reorganization of Mortgagor
pursuant to the Federal Bankruptcy Act or any similar federal or state
law, and if such petition shall not be discharged or dismissed within
sixty (60) days after the date on which such petition was filed; or
(g) if final judgment for the payment of money shall be
rendered against Mortgagor and Mortgagor shall not discharge the same
or cause it to be discharged within sixty (60) days from the entry
thereof, or shall not appeal therefrom or from the order, decree or
process upon which or pursuant to which said judgment was granted,
based or entered, and secure a stay of execution pending such appeal;
or
(h) [Intentionally Omitted]; or
(i) if there shall occur a default which is not cured within
the applicable grace period, if any, under any mortgage, deed of trust
or other security instrument covering all or part of the Mortgaged
Property regardless of whether any such mortgage, deed of trust or
other security instrument is prior or subordinate hereto or under any
mortgage, deed of trust or other security instrument now or hereafter
securing the Note or any other note of Parent to Mortgagee; it being
further agreed by Mortgagor that an Event of Default hereunder shall
constitute an Event of Default under any such mortgage, deed of trust
or other security instrument held by Mortgagee; or
(j) if there shall occur a default which is not cured within
the applicable grace period, if any, under any of the Premises
Documents, except for any continuing failure of the Premises to comply
with the Premises Documents of the date of the acquisition hereof from
Mortgagee or its affiliate; or if any of the Premises Documents is
amended, modified, supplemented or terminated without Mortgagee's prior
consent; or
(k) if Mortgagor shall transfer, or agree to transfer (or
suffer or permit the transfer or agreement to transfer), in any manner,
either voluntarily or involuntarily, by operation of law or otherwise,
all or any portion of the Mortgaged Property, or any interest or rights
therein (including air or development rights) without, in any such
case, Mortgagee's prior consent. As used in this clause, "transfer"
shall include, without limitation, any sale, assignment, lease (other
than to Lessee) or conveyance except leases for occupancy subordinate
hereto and to all advances made and to be made hereunder or, in the
event Mortgagor (or a general partner or co-venturer thereof) is a
partnership, joint venture, limited liability company, trust or
closely-held corporation, the sale, conveyance, transfer or other
disposition of more than 10%,
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in the aggregate, of any class of the issued and outstanding capital
stock of such closely-held corporation or of the beneficial interest of
such partnership, venture, limited liability company or trust, or a
change of any general partner, joint venturer, member or beneficiary,
as the case may be. In the event Mortgagor is a limited partnership,
and so long as a limited partner has contributed to (or remains
personally liable for) the present and future partnership capital
contributions required of such limited partner by the partnership
agreement, such partner may sell, convey, devise, transfer or dispose
of all or a part of his limited partnership interest to his spouse,
children, grandchildren or a family trust in which his spouse, children
or grandchildren are sole beneficiaries; or
(l) if Mortgagor shall encumber, or agree to encumber, in any
manner, either voluntarily or involuntarily, by operation of law or
otherwise, all or any portion of the Mortgaged Property, or any
interest or rights therein (including air or development rights)
without, in any such case, Mortgagee's prior consent. As used in this
clause, "encumber" shall include, without limitation, the placing or
permitting the placing of any mortgage, deed of trust, assignment of
rents or other security device. (Mortgagee may grant or deny its
consent under this clause and the immediately preceding clause in its
sole discretion and, if consent should be given, any such transfer or
encumbrance shall be subject hereto and to any other documents which
evidence or secure the Loan, and, if a transfer, any such transferee
shall assume all of Mortgagor's obligations hereunder and thereunder
and agree to be bound by all provisions and perform all obligations
contained herein and therein; consent to one such transfer or
encumbrance shall not be deemed to be a waiver of the right to require
consent to future or successive transfers or encumbrances);
then and in every such case:
I. During the continuance of any such Event of Default,
Mortgagee, by notice to Mortgagor, may declare the entire principal of
the Note then outstanding (if not then due and payable), and all
accrued and unpaid interest and other sums in respect thereof, to be
due and payable immediately, and upon any such declaration the
principal of the Note and said accrued and unpaid interest and other
sums shall become and be immediately due and payable, anything herein
or in the Note (other than Section 3.08 hereof, the provisions thereof
limiting interest payable thereunder to the maximum amount permitted by
applicable law) to the contrary notwithstanding.
II. During the continuance of any such Event of Default,
Mortgagee personally, or by its agents or attorneys, may enter into and
upon all or any part of the Premises, and each and every part thereof,
and is hereby given a right and license and appointed Mortgagor's
attorney-in-fact and exclusive agent to do so, and may exclude
Mortgagor, its agents and servants wholly therefrom; and having and
holding the same, may use, operate, manage and control the Premises and
conduct the business thereof, either personally or by its
superintendents, managers, agents, servants, attorneys or receivers;
and upon every such entry, Mortgagee, at the expense of the Mortgaged
Property, from time to time, either by
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purchase, repairs or construction, may maintain and restore the
Mortgaged Property, whereof it shall become possessed as aforesaid; may
complete the construction of the Improvements and in the course of such
completion may make such changes in the contemplated Improvements as
Mortgagee may deem desirable and may insure the same; and likewise,
from time to time, at the expense of the Mortgaged Property, Mortgagee
may make all necessary or proper repairs, renewals and replacements and
such useful alterations, additions, betterments and improvements
thereto and thereon as to it may seem advisable; and in every such case
Mortgagee shall have the right to manage and operate the Mortgaged
Property and to carry on the business thereof and exercise all rights
and powers of Mortgagor with respect thereto either in the name of
Mortgagor or otherwise as it shall deem best; and Mortgagee shall be
entitled to collect and receive the Rents and every part thereof, all
of which shall for all purposes constitute property of Mortgagor; and
in furtherance of such right Mortgagee may collect the rents payable
under all leases of the Premises directly from the lessees thereunder
upon notice to each such lessee that an Event of Default exists
hereunder accompanied by a demand on such lessee for the payment to
Mortgagee of all rents due and to become due under its lease, and
Mortgagor FOR THE BENEFIT OF MORTGAGEE AND EACH SUCH LESSEE hereby
covenants and agrees that the lessee shall be under no duty to question
the accuracy of Mortgagee's statement of default and shall
unequivocally be authorized to pay said rents to Mortgagee without
regard to the truth of Mortgagee's statement of default and
notwithstanding notices from Mortgagor disputing the existence of an
Event of Default such that the payment of rent by the lessee to
Mortgagee pursuant to such a demand shall constitute performance in
full of the lessee's obligation under the lease for the payment of
rents by the lessee to Mortgagor; and after deducting the expenses of
conducting the business thereof and of all maintenance, repairs,
renewals, replacements, alterations, additions, betterments and
improvements and amounts necessary to pay for taxes, assessments,
insurance and prior or other proper charges upon the Mortgaged Property
or any part thereof, as well as just and reasonable compensation for
the services of Mortgagee and for all attorneys, counsel, agents,
clerks, servants and other employees by it engaged and employed,
Mortgagee shall apply the moneys arising as aforesaid, first, to the
payment of the principal of the Note and the interest thereon, when and
as the same shall become payable and in such order and proportions as
Mortgagee shall elect and second, to the payment of any other sums
required to be paid by Mortgagor hereunder.
III. Mortgagee, with or without entry, personally or by its
agents or attorneys, insofar as applicable, may:
(1) sell the Mortgaged Property to the extent permitted
and pursuant to the procedures provided by law, and all
estate, right, title and interest, claim and demand therein,
and right of redemption thereof, at one (1) or more sales as
an entity or in parcels or parts, and at such time and place
upon such terms and after such notice thereof as may be
required or permitted by law; or
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(2) institute proceedings for the complete or partial
foreclosure hereof; or
(3) take such steps to protect and enforce its rights
whether by action, suit or proceeding in equity or at law for
the specific performance of any covenant, condition or
agreement in the Note or herein, or in aid of the execution of
any power herein granted, or for any foreclosure hereunder, or
for the enforcement of any other appropriate legal or
equitable remedy or otherwise as Mortgagee shall elect.
Section 2.02. Other Matters Concerning Sales. (a) Mortgagee may adjourn
from time to time any sale by it to be made hereunder or by virtue hereof by
announcement at the time and place appointed for such sale or for such adjourned
sale or sales; and, except as otherwise provided by any applicable provision of
law, Mortgagee, without further notice or publication, may make such sale at the
time and place to which the same shall be so adjourned.
(b) Upon the completion of any sale or sales made by Mortgagee under or
by virtue of this Article II, Mortgagee, or an officer of any court empowered to
do so, shall execute and deliver to the accepted purchaser or purchasers a good
and sufficient instrument or instruments conveying, assigning and transferring
all estate, right, title and interest in and to the property and rights sold.
Mortgagee is hereby appointed the true and lawful attorney irrevocable of
Mortgagor, in its name and stead, to make all necessary conveyances,
assignments, transfers and deliveries of the Mortgaged Property and rights so
sold and for that purpose Mortgagee may execute all necessary instruments of
conveyance, assignment and transfer, and may substitute one or more persons with
like power, Mortgagor hereby ratifying and confirming all that its said attorney
or such substitute or substitutes shall lawfully do by virtue hereof.
Nevertheless, Mortgagor, if requested by Mortgagee, shall ratify and confirm any
such sale or sales by executing and delivering to Mortgagee or to such purchaser
or purchasers all such instruments as may be advisable, in the judgment of
Mortgagee, for the purpose, and as may be designated in such request. Any such
sale or sales made under or by virtue of this Article II, whether made under the
power of sale herein granted or under or by virtue of judicial proceedings or of
a judgment or decree of foreclosure and sale, shall operate to divest all the
estate, right, title, interest, claim and demand whatsoever, whether at law or
in equity, of Mortgagor in and to the properties and rights so sold, and shall
be a perpetual bar both at law and in equity against Mortgagor and against any
and all persons claiming or who may claim the same, or any part thereof from,
through or under Mortgagor.
(c) In the event of any sale or sales made under or by virtue of this
Article II (whether made under the power of sale herein granted or under or by
virtue of judicial proceedings or of a judgment or decree of foreclosure and
sale), the entire principal of, and interest and other sums on, the Note, if not
previously due and payable, and all other sums required to be paid by Mortgagor
pursuant hereto, immediately thereupon shall, anything in any of said documents
(other than Section 3.08 hereof) to the contrary notwithstanding, become due and
payable.
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(d) The purchase money, proceeds or avails of any sale or sales made
under or by virtue of this Article II, together with any other sums which then
may be held by Mortgagee hereunder, whether under the provisions of this Article
II or otherwise, shall be applied as follows:
First: To the payment of the costs and expenses of such sale,
including reasonable compensation to Mortgagee, its agents and counsel,
and of any judicial proceedings wherein the same may be made, and of
all expenses, liabilities and advances made or incurred by Mortgagee
hereunder, together with interest at the Default Rate on all advances
made by Mortgagee, and of all taxes, assessments or other charges,
except any taxes, assessments or other charges subject to which the
Mortgaged Property shall have been sold.
Second: To the payment of the whole amount then due, owing or
unpaid upon the Note for principal and interest, with interest on the
unpaid principal at the Default Rate from and after the happening of
any Event of Default described in clause (a) of Section 2.01 from the
due date of any such payment of principal until the same is paid, in
such order and amounts as Mortgagee may elect.
Third: To the payment of any other sums required to be paid by
Mortgagor pursuant to any provision hereof or of the Note, including
all expenses, liabilities and advances made or incurred by Mortgagee
hereunder or in connection with the enforcement hereof, together with
interest at the Default Rate on all such advances.
Fourth: To the payment of the surplus, if any, to whomsoever
may be lawfully entitled to receive the same.
(e) Upon any sale or sales made under or by virtue of this Article II,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale,
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof and
in lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the indebtedness secured hereby the net sales price after
deducting therefrom the expenses of the sale and the costs of the action and any
other sums which Mortgagee is authorized to deduct hereunder.
Section 2.03. Payment of Amounts Due. (a) In case an Event of Default
described in clause (a) of Section 2.01 shall have happened and be continuing,
then, upon demand of Mortgagee, Mortgagor will pay to Mortgagee the whole amount
which then shall have become due and payable on the Note, for principal or
interest or both, as the case may be, and after the happening of said Event of
Default will also pay to Mortgagee interest at the Default Rate on the then
unpaid principal of the Note, and the sums required to be paid by Mortgagor
pursuant to any provision hereof, and in addition thereto such further amount as
shall be sufficient to cover the costs and expenses of collection, including
reasonable compensation to Mortgagee, its agents and counsel and any expenses
incurred by Mortgagee hereunder. In the event Mortgagor shall fail forthwith to
pay all such amounts upon such demand, Mortgagee shall be entitled and empowered
to institute such action or proceedings at law or in equity as may be advised
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by its counsel for the collection of the sums so due and unpaid, and may
prosecute any such action or proceedings to judgment or final decree, and may
enforce any such judgment or final decree against Mortgagor and collect, out of
the property of Mortgagor wherever situated, as well as out of the Mortgaged
Property, in any manner provided by law, moneys adjudged or decreed to be
payable.
(b) Mortgagee shall be entitled to recover judgment as aforesaid either
before, after or during the pendency of any proceedings for the enforcement of
the provisions hereof; and the right of Mortgagee to recover such judgment shall
not be affected by any entry or sale hereunder, or by the exercise of any other
right, power or remedy for the enforcement of the provisions hereof, or the
foreclosure of the lien hereof; and in the event of a sale of the Mortgaged
Property, and of the application of the proceeds of sale, as herein provided, to
the payment of the debt hereby secured, Mortgagee shall be entitled to enforce
payment of, and to receive all amounts then remaining due and unpaid upon, the
Note, and to enforce payment of all other charges, payments and costs due
hereunder or otherwise in respect of the Loan, and shall be entitled to recover
judgment for any portion of the debt remaining unpaid, with interest at the
Default Rate. In case of proceedings against Mortgagor in insolvency or
bankruptcy or any proceedings for its reorganization or involving the
liquidation of its assets, then Mortgagee shall be entitled to prove the whole
amount of principal, interest and other sums due upon the Note to the full
amount thereof, and all other payments, charges and costs due hereunder or
otherwise in respect of the Loan, without deducting therefrom any proceeds
obtained from the sale of the whole or any part of the Mortgaged Property,
provided, however, that in no case shall Mortgagee receive, from the aggregate
amount of the proceeds of the sale of the Mortgaged Property and the
distribution from the estate of Mortgagor, a greater amount than such principal
and interest and such other payments, charges and costs.
(c) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect in any manner or to any extent, the lien
hereof upon the Mortgaged Property or any part thereof, or any liens, rights,
powers or remedies of Mortgagee hereunder, but such liens, rights, powers and
remedies of Mortgagee shall continue unimpaired as before.
(d) Any moneys thus collected by Mortgagee under this Section 2.03
shall be applied by Mortgagee in accordance with the provisions of clause (d) of
Section 2.02.
Section 2.04. Actions; Receivers. After the happening of any Event of
Default and immediately upon the commencement of any action, suit or other legal
proceedings by Mortgagee to obtain judgment for the principal of, or interest
on, the Note and other sums required to be paid by Mortgagor pursuant to any
provision hereof, or of any other nature in aid of the enforcement of the Note
or hereof, Mortgagor will (a) waive the issuance and service of process and
enter its voluntary appearance in such action, suit or proceeding and (b) if
required by Mortgagee, consent to the appointment of a receiver or receivers of
all or part of the Mortgaged Property and of any or all of the Rents in respect
thereof. After the happening of any Event of Default and during its continuance,
or upon the
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commencement of any proceedings to foreclose this Mortgage or to enforce the
specific performance hereof or in aid thereof or upon the commencement of any
other judicial proceeding to enforce any right of Mortgagee, Mortgagee shall be
entitled, as a matter of right, if it shall so elect, without the giving of
notice to any other party and without regard to the adequacy or inadequacy of
any security for the indebtedness secured hereby, forthwith either before or
after declaring the unpaid principal of the Note to be due and payable, to the
appointment of such a receiver or receivers.
Section 2.05. Mortgagee's Right to Possession. Notwithstanding the
appointment of any receiver, liquidator or trustee of Mortgagor, or of any of
its property, or of the Mortgaged Property or any part thereof, Mortgagee shall
be entitled to retain possession and control of all property now or hereafter
held hereunder.
Section 2.06. Remedies Cumulative. No remedy herein conferred upon or
reserved to Mortgagee is intended to be exclusive of any other remedy or
remedies, and each and every such remedy shall be cumulative, and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law, in equity or by statute. No delay or omission of Mortgagee to exercise any
right or power accruing upon any Event of Default shall impair any such right or
power, or shall be construed to be a waiver of any such Event of Default or any
acquiescence therein; and every power and remedy given hereby to Mortgagee may
be exercised from time to time as often as may be deemed expedient by Mortgagee.
Nothing herein or in the Note shall affect the obligation of Mortgagor to pay
the principal of, and interest and other sums on, the Note in the manner and at
the time and place therein respectively expressed.
Section 2.07. Moratorium Laws; Right of Redemption. Mortgagor will not
at any time insist upon, or plead, or in any manner whatever claim or take any
benefit or advantage of any stay or extension or moratorium law, any exemption
from execution or sale of the Mortgaged Property or any part thereof, wherever
enacted, now or at any time hereafter in force, which may affect the covenants
and terms of performance hereof, nor claim, take or insist upon any benefit or
advantage of any law now or hereafter in force providing for the valuation or
appraisal of the Mortgaged Property, or any part thereof, prior to any sale or
sales thereof which may be made pursuant to any provision herein, or pursuant to
any decree, judgment or order of any court of competent jurisdiction; nor, after
any such sale or sales, claim or exercise any right under any statute heretofore
or hereafter enacted to redeem the property so sold or any part thereof and
Mortgagor hereby expressly waives all benefit or advantage of any such law or
laws, and covenants not to hinder, delay or impede the execution of any power
herein granted or delegated to Mortgagee, but to suffer and permit the execution
of every power as though no such law or laws had been made or enacted.
Mortgagor, for itself and all who may claim under it, waives, to the extent that
it lawfully may, all right to have the Mortgaged Property marshaled upon any
foreclosure hereof.
Section 2.08. Mortgagee's Rights Concerning Application of Amounts
Collected. Notwithstanding anything to the contrary contained herein, upon the
occurrence of an Event of Default, Mortgagee may apply, to the extent permitted
by law, any amount collected hereunder to principal, interest or any other sum
due under the Note or otherwise in respect of the Loan in such order and
amounts, and to such obligations, as Mortgagee shall elect in its sole and
absolute discretion.
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ARTICLE III
MISCELLANEOUS
Section 3.01. Assignment of Rents. This Mortgage is intended to
constitute a present, absolute and irrevocable assignment of all of the Rents
now or hereafter accruing, and Mortgagor, without limiting the generality of the
Granting Clause hereof, specifically hereby presently, absolutely and
irrevocably assigns all of the Rents now or hereafter accruing to Mortgagee. The
aforesaid assignment shall be effective immediately upon the execution hereof
and is not conditioned upon the occurrence of any Event of Default hereunder or
any other contingency or event, provided, however, that Mortgagee hereby grants
to Mortgagor the right and license to collect and receive the Rents as they
become due, and not in advance, so long as no Event of Default exists hereunder.
Immediately upon the occurrence of any such Event of Default, the foregoing
right and license shall be automatically terminated and of no further force or
effect. Nothing contained in this Section or elsewhere herein shall be construed
to make Mortgagee a mortgagee in possession unless and until Mortgagee actually
takes possession of the Mortgaged Property, nor to obligate Mortgagee to take
any action or incur any expense or discharge any duty or liability under or in
respect of any leases or other agreements relating to the Mortgaged Property or
any part thereof.
Section 3.02. Security Agreement. This Mortgage constitutes a security
agreement under the applicable Uniform Commercial Code with respect to the
Chattels and such other of the Mortgaged Property which is personal property. In
addition to the rights and remedies granted to Mortgagee by other applicable law
or hereby, Mortgagee shall have all of the rights and remedies with respect to
the Chattels and such other personal property as are granted to a secured party
under the applicable Uniform Commercial Code. Upon Mortgagee's request after an
Event of Default, Mortgagor shall promptly and at its expense assemble the
Chattels and such other personal property and make the same available to
Mortgagee at a convenient place acceptable to Mortgagee. Mortgagor, after an
Event of Default, shall pay to Mortgagee on demand, with interest at the Default
Rate, any and all expenses, including attorneys' fees, incurred by Mortgagee in
protecting its interest in the Chattels and such other personal property and in
enforcing its rights with respect thereto. Any notice of sale, disposition or
other intended action by Mortgagee with respect to the Chattels and such other
personal property sent to Mortgagor in accordance with the provisions hereof at
least five (5) days prior to such action shall constitute reasonable notice to
Mortgagor. The proceeds of any such sale or disposition, or any part thereof,
may be applied by Mortgagee to the payment of the indebtedness secured hereby in
such order and proportions as Mortgagee in its discretion shall deem
appropriate.
Section 3.03. Application of Certain Payments. In the event that all or
any part of the Mortgaged Property is encumbered by one or more mortgages held
by Mortgagee, Mortgagor hereby irrevocably authorizes and directs Mortgagee to
apply any payment received by Mortgagee in respect of any note secured hereby or
by any other such mortgage to the payment of such of said notes as Mortgagee
shall elect in its sole and absolute discretion, and Mortgagee shall have the
right to apply any such payment in reduction of principal and/or interest and in
such order and amounts as Mortgagee shall
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elect in its sole and absolute discretion without regard to the priority of the
mortgage securing the note so repaid or to contrary directions from Mortgagor or
any other party.
Section 3.04. Severability. In the event any one or more of the
provisions contained herein or in the Note shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, but this Mortgage
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein or therein.
Section 3.05. Modifications and Waivers in Writing. No provision hereof
may be changed, waived, discharged or terminated orally or by any other means
except an instrument in writing signed by the party against whom enforcement of
the change, waiver, discharge or termination is sought. Any agreement hereafter
made by Mortgagor and Mortgagee relating hereto shall be superior to the rights
of the holder of any intervening or subordinate lien or encumbrance.
Section 3.06. Notices. (a) All notices, demands, consents, approvals
and statements required or permitted hereunder shall be in writing and shall be
deemed to have been sufficiently given or served for all purposes when presented
personally, three (3) days after mailing by registered or certified mail,
postage prepaid, or one (1) day after delivery to a nationally recognized
overnight courier service providing evidence of the date of delivery, if to
Mortgagor at its address stated above, , with a copy to Thomas E. Davis, Esq.,
Jenkens & Gilchrist, 1445 Ross Avenue, Suite 3200, Dallas, Texas 75202-2799, and
if to Mortgagee to its address stated above, or at such other address of which a
party shall have notified the party giving such notice in accordance with the
provisions of this Section.
(b) All notices given to Mortgagee by any person or entity (other than
Mortgagor) pursuant to Pa. C.S.A.ss. 8143(b), (c) or (d) shall be in writing and
shall be sent exclusively by United States registered mail, return receipt
requested, to Mortgagee at the address specified in paragraph (a) of this
Section above.
(c) Without limiting, in any manner, any of Mortgagee's other rights
and remedies under this Mortgage or the Note, if (i) Mortgagor shall at any time
deliver or cause to be delivered to Mortgagee a notice pursuant to 42 Pa. C.S.A.
ss.8143 electing to limit the indebtedness secured by this Mortgage or (ii)
Mortgagee shall receive or be served with any notice pursuant to 42 Pa. C.S.A.
ss.8143(b) or (d), then, in any such case, Mortgagee's obligations, if any, to
continue to make advances under this Mortgage shall thereupon immediately cease
and be of no further force or effect, anything contained in this Mortgage or the
Note to the contrary notwithstanding.
Section 3.07. Successors and Assigns. All of the grants, covenants,
terms, provisions and conditions herein shall run with the land and shall apply
to, bind and inure to the benefit of, the respective successors and assigns of
Mortgagor and Mortgagee.
Section 3.08. Limitation on Interest. Anything herein or in the Note to
the contrary notwithstanding, the obligations of Mortgagor hereunder and under
the Note shall be subject to the limitation that payments of interest shall not
be required to the
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extent that receipt of any such payment by Mortgagee would be contrary to
provisions of law applicable to Mortgagee limiting the maximum rate of interest
that may be charged or collected by Mortgagee.
Section 3.09. Counterparts. This Mortgage may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original; and all such counterparts shall together constitute but one
and the same mortgage.
Section 3.10. Substitute Mortgages. Mortgagor and Mortgagee shall, upon
their mutual agreement to do so, execute such documents as may be necessary in
order to effectuate the modification hereof, including the execution of
substitute mortgages, so as to create two (2) or more liens on the Mortgaged
Property in such amounts as may be mutually agreed upon but in no event to
exceed, in the aggregate, the unpaid principal portion of the Mortgage Amount;
in such event, Mortgagor covenants and agrees to pay the reasonable fees and
expenses of Mortgagee and its counsel in connection with any such modification.
Section 3.11. Mortgagee's Sale of Interests in Loan. Mortgagor
recognizes that Mortgagee may sell and transfer interests in the Loan to one or
more participants or assignees and that all documentation, financial statements,
appraisals and other data, or copies thereof, relevant to Mortgagor or the Loan,
may be exhibited to and retained by any such participant or assignee or
prospective participant or assignee.
Section 3.12. No Merger of Interests. Unless expressly provided
otherwise, in the event that ownership hereof and title to the fee and/or
leasehold estates in the Premises encumbered hereby shall become vested in the
same person or entity, this Mortgage shall not merge in said title but shall
continue to be and remain a valid and subsisting lien on said estates in the
Premises for the amount secured hereby.
Section 3.13. CERTAIN WAIVERS. MORTGAGOR EXPRESSLY AND UNCONDITIONALLY
WAIVES BY EXECUTION HEREOF, AND MORTGAGEE WAIVES BY ACCEPTANCE HEREOF, IN
CONNECTION WITH ANY FORECLOSURE OR SIMILAR ACTION OR PROCEDURE BROUGHT BY
MORTGAGEE ASSERTING AN EVENT OF DEFAULT UNDER CLAUSE (a) OF SECTION 2.01 OF THIS
MORTGAGE, ANY AND EVERY RIGHT IT MAY HAVE TO A TRIAL BY JURY.
MORTGAGOR (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
MORTGAGEE HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (II)
ACKNOWLEDGES THAT THE ENTERING INTO BY MORTGAGEE OF THE LOAN SECURED BY THIS
MORTGAGE HAS BEEN INDUCED BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS
SET FORTH IN THIS SECTION. MORTGAGOR FURTHER ACKNOWLEDGES THAT IT HAS HAD THE
ASSISTANCE OF INDEPENDENT LEGAL COUNSEL, SELECTED OF MORTGAGOR'S OWN FREE WILL,
IN THE REVIEW AND EXECUTION OF THIS
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MORTGAGE AND IN THE MAKING OF THE WAIVERS HEREIN CONTAINED, THAT IT HAS HAD THE
OPPORTUNITY TO DISCUSS SAID WAIVERS WITH SAID COUNSEL AND THAT THE MEANING AND
EFFECT THEREOF HAVE BEEN FULLY EXPLAINED TO MORTGAGOR BY SAID COUNSEL, AND AS
EVIDENCE OF SUCH FACT AN AUTHORIZED SIGNATORY OF MORTGAGOR SIGNS HIS/HER
INITIALS.
/s/ GMK
------------------
Initials
Section 3.14. CONFESSION OF JUDGMENT. THE FOLLOWING SECTION SETS FORTH
WARRANTS OF ATTORNEY FOR ANY ATTORNEY TO CONFESS JUDGMENTS AGAINST MORTGAGOR. IN
GRANTING THESE WARRANTS OF ATTORNEY TO CONFESS JUDGMENTS AGAINST MORTGAGOR,
MORTGAGOR HEREBY KNOWINGLY, INTENTIONALLY, VOLUNTARILY AND UNCONDITIONALLY
WAIVES ANY AND ALL RIGHTS MORTGAGOR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY
FOR HEARING UNDER THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA AND THE UNITED STATES OF AMERICA.
FOR THE PURPOSES OF OBTAINING POSSESSION OF THE MORTGAGED PROPERTY, OR
ANY PORTION(S) THEREOF, AFTER THE OCCURRENCE OF AN EVENT OF DEFAULT, MORTGAGOR
HEREBY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD IN THE
COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE, AS ATTORNEY FOR MORTGAGOR AND ALL
PERSONS CLAIMING UNDER OR THROUGH MORTGAGOR, BY COMPLAINT OR OTHERWISE, TO
APPEAR FOR AND ENTER AND CONFESS JUDGMENT AGAINST MORTGAGOR, AND AGAINST ALL
PERSONS CLAIMING UNDER OR THROUGH MORTGAGOR, IN FAVOR OF MORTGAGEE, FOR RECOVERY
BY MORTGAGEE OF POSSESSION OF THE MORTGAGED PROPERTY, OR ANY PORTION(S) THEREOF,
FOR WHICH THIS MORTGAGE, OR A COPY THEREOF VERIFIED BY AFFIDAVIT, SHALL BE A
SUFFICIENT WARRANT; AND THEREUPON A WRIT OF POSSESSION MAY IMMEDIATELY ISSUE FOR
POSSESSION OF THE MORTGAGED PROPERTY, OR SUCH PORTION(S) THEREOF, WITHOUT ANY
PRIOR WRIT OR PROCEEDING WHATSOEVER AND WITHOUT ANY STAY OF EXECUTION. IF FOR
ANY REASON AFTER SUCH ACTION HAS BEEN COMMENCED IT SHALL BE DISCONTINUED, OR
POSSESSION OF THE MORTGAGED PROPERTY, OR SUCH PORTION(S) THEREOF, SHALL REMAIN
IN OR BE RESTORED TO MORTGAGOR, MORTGAGEE SHALL HAVE THE RIGHT FOR THE SAME
EVENT OF DEFAULT OR ANY SUBSEQUENT EVENT OF DEFAULT TO BRING ONE OR MORE FURTHER
ACTIONS OR ENTER AND CONFESS JUDGMENT ONE OR MORE TIMES AS ABOVE PROVIDED TO
RECOVER POSSESSION OF THE MORTGAGED PROPERTY, OR ANY PORTION(S) THEREOF.
MORTGAGEE MAY BRING AN ACTION IN EJECTMENT AND CONFESS JUDGMENT THEREIN BEFORE
OR AFTER THE INSTITUTION OF PROCEEDINGS TO FORECLOSE THIS MORTGAGE OR TO
27
<PAGE>
ENFORCE THE NOTE, OR AFTER ENTRY OF JUDGMENT THEREIN OR ON THE NOTE, OR AFTER A
SHERIFF'S SALE OR JUDICIAL SALE OR OTHER FORECLOSURE SALE OF THE MORTGAGED
PROPERTY, OR ANY PORTION(S) THEREOF, IN WHICH MORTGAGEE IS THE SUCCESSFUL
BIDDER, IT BEING THE UNDERSTANDING OF THE PARTIES THAT THE AUTHORIZATION TO
PURSUE SUCH PROCEEDINGS FOR OBTAINING POSSESSION AND CONFESSION OF JUDGMENT
THEREIN IS AN ESSENTIAL PART OF THE REMEDIES FOR ENFORCEMENT OF THIS MORTGAGE
AND THE NOTE, THE LOAN AGREEMENT AND OTHER LOAN DOCUMENTS, AND SHALL SURVIVE ANY
EXECUTION SALE TO MORTGAGEE.
MORTGAGOR (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
MORTGAGEE HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT
SEEK TO EXERCISE OR ENFORCE THE FOREGOING PROVISIONS CONCERNING CONFESSION OF
JUDGMENTS AND (II) ACKNOWLEDGES THAT THE ENTERING INTO BY MORTGAGEE OF THE LOAN
SECURED BY THIS MORTGAGE HAS BEEN INDUCED BY, AMONG OTHER THINGS, THE INCLUSION
HEREIN OF SAID PROVISIONS. MORTGAGOR FURTHER ACKNOWLEDGES THAT IT HAS HAD THE
ASSISTANCE OF INDEPENDENT LEGAL COUNSEL, SELECTED OF MORTGAGOR'S OWN FREE WILL,
IN THE REVIEW AND EXECUTION OF THIS MORTGAGE AND IN THE MAKING OF SAID
PROVISIONS, THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS SAID PROVISIONS WITH SAID
COUNSEL AND THAT THE MEANING AND EFFECT THEREOF HAVE BEEN FULLY EXPLAINED TO
MORTGAGOR BY SUCH COUNSEL, AND AS EVIDENCE OF SUCH FACT AN AUTHORIZED OFFICER OF
MORTGAGOR SIGNS HIS/HER INITIALS.
/s/ GMK
--------------------
Initials
Section 3.15. GOVERNING LAW. THE PERFORMANCE REQUIRED BY THIS MORTGAGE
SHALL, INSOFAR AS IS POSSIBLE, BE RENDERED TO THE MORTGAGEE AT ITS OFFICE IN
TENNESSEE. MORTGAGOR AND MORTGAGEE INTEND THAT THE VALIDITY AND CONSTRUCTION OF
THE OBLIGATIONS SECURED BY THIS MORTGAGE BE GOVERNED BY THE LAWS OF THE STATE OF
TENNESSEE INCLUDING ALL OBLIGATIONS AND LIABILITIES HEREUNDER WITH RESPECT TO
THE PAYMENT OF INTEREST OR ANY OTHER COMPENSATION FOR THE USE, FORBEARANCE OR
DETENTION OF MONEY. THIS MORTGAGE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TENNESSEE, WITHOUT REFERENCE TO THE CONFLICTS OF
LAW PRINCIPLES OF THAT STATE, EXCEPT ONLY TO THE EXTENT THAT PENNSYLVANIA LAW
EXPRESSLY PROVIDES THAT IT GOVERNS AND THAT A CONTRARY AGREEMENT BY THE PARTIES
IS INEFFECTIVE AND EXCEPT THAT THE LAW OF THE STATE OF PENNSYLVANIA SHALL APPLY
TO ANY AND ALL ACTS WITH RESPECT TO THE CREATION AND PRIORITY OF THE LIEN OF
THIS MORTGAGE AND ASSIGNMENT OF LEASES AND RENTS ON
28
<PAGE>
THE MORTGAGED PROPERTY HEREBY EVIDENCED AND ON THE MORTGAGED PROPERTY. MORTGAGOR
AND MORTGAGEE COVENANT AND AGREE TO TAKE ANY AND ALL ACTION WHICH MAY BE
NECESSARY UNDER PENNSYLVANIA LAW WITH RESPECT TO FORECLOSURE UNDER THE LAWS OF
THE STATE OF PENNSYLVANIA. SHOULD ANY OBLIGATION OR REMEDY UNDER THIS MORTGAGE
BE INVALID OR UNENFORCEABLE UNDER THE LAWS PROVIDED HEREIN TO GOVERN, THE LAWS
OF ANOTHER STATE WHOSE LAWS CAN VALIDATE AND APPLY TO THIS MORTGAGE SHALL APPLY.
29
<PAGE>
IN WITNESS WHEREOF, this Mortgage has been duly executed and delivered
by Mortgagor.
APPLE SUITES, INC., a Virginia
corporation, as trustee for Apple Suites
Pennsylvania Business Trust
By /s/ Glade M. Knight
-------------------------------------
Name: Glade M. Knight
Title: Chairman of the Board and
President
APPLE SUITES MANAGEMENT, INC., a
Virginia corporation
By /s/ Glade M. Knight
-------------------------------------
Name: Glade M. Knight
Title: Chairman, Chief Executive
Officer and President
<PAGE>
STATE OF VIRGINIA )
) ss.:
CITY OF RICHMOND )
On this 2nd day of May, 2000, before me, the undersigned
officer, personally appeared Glade M. Knight, President & Chairman of APPLE
SUITES, INC., who acknowledged himself to be the President & Chairman of said
corporation and that he, as such officer, being authorized to do so on behalf of
the corporation, as trustee for Apple Suites Pennsylvania Business Trust,
executed the foregoing instrument, for the purposes therein contained, by
signing the name of the corporation, as President & Chairman.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Jacquelyn B. Owens
--------------------------------
Notary Public
My commission expires:
6/30/03
- ---------------------
<PAGE>
STATE OF VIRGINIA )
) ss.:
CITY OF RICHMOND )
On this 2nd day of May, 2000, before me, the undersigned
officer, personally appeared Glade M. Knight, President & Chairman of APPLE
SUITES MANAGEMENT, INC., who acknowledged himself to be the President & Chairman
of said corporation and that he, as such officer, being authorized to do so on
behalf of the corporation, executed the foregoing instrument, for the purposes
therein contained, by signing the name of the corporation, as President &
Chairman.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Jacquelyn B. Owens
--------------------------------
Notary Public
My commission expires:
6/30/03
- ---------------------
<PAGE>
SCHEDULE A
LEGAL DESCRIPTION OF PREMISES
ALL THAT CERTAIN parcel of land SITUATE in East Whiteland Township, Chester
County, Pennsylvania, being bounded and described according to a Survey and Plan
thereof entitled ALTA/ACSM Land Title Survey for Promus Hotel Corporation, dated
August 12, 1996 by Chester Valley Engineers, Inc., Paoli, Pennsylvania, and
being more fully described as follows:
BEGINNING at a point on the southerly legal Right of Way Line of Swedesford Road
- - S. R. 1002, 94 feet wide, a corner in common of these and lands now or late of
the Pennsylvania State University; THENCE from the point of beginning, leaving
said right of way line, along said lands, South 28 degrees 04 minutes 35 seconds
East 566.35 feet to a point on line of other lands now or late of the
Pennsylvania State University; THENCE along said lands, along the northerly
Legal Right of Way Line for Limited Access of U.S. Route 202 - S. R. 0202,
variable width, South 59 degrees 09 minutes 34 seconds West 168.05 feet; THENCE
continuing along said right of way line, North 88 degrees 24 minutes 32 seconds
West 186.61 feet to a corner of lands now or late of Loretta M. Cimeo, et al:
THENCE leaving said right of way line, along said lands, North 28 degrees 04
minutes 35 seconds West 457.22 feet to a point on the southerly Legal Right of
Way Line of Swedesford Road - S.R. 1002, aforesaid; THENCE along said right of
way line, along a curve to the right having a radius of 13.468.61 feet, an arc
length of 330.94 feet, and a chord bearing North 57 degrees 36 minutes 55
seconds East 330.94 feet to the point of beginning.
Exhibit 4.3
[Mississippi]
================================================================================
Date: May 8, 2000
FEE AND LEASEHOLD DEED OF TRUST, ASSIGNMENT OF LEASES
AND RENTS AND SECURITY AGREEMENT
("this Deed")
FROM
APPLE SUITES, INC.,
a Virginia corporation
("Fee Owner")
AND
APPLE SUITES MANAGEMENT, INC.,
a Virginia corporation
("Lessee")
Address of Fee Owner and Lessee: 306 East Main Street
Richmond, Virginia 23219
Attention: Glade M. Knight
TO
LAWYERS TITLE REALTY SERVICES, INC.
("Trustee")
Address of Trustee: 7557 Rambler Road, Suite 1200
L.B. #31
Dallas, Texas 75231
FOR THE BENEFIT OF
PROMUS HOTELS, INC.,
a Delaware corporation
("Beneficiary")
Address of Beneficiary: 755 Crossover Lane
Memphis, Tennessee 38117
Note Amount: $11,616,750
================================================================================
This instrument prepared by, and after recording please return to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092
Attention: Graham R. Hone, Esq.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITAL.............................................................................................1
CERTAIN DEFINITIONS AND RULES OF CONSTRUCTION.......................................................1
GRANTING CLAUSE.....................................................................................3
ARTICLE I COVENANTS OF GRANTOR......................................................4
Section 1.01. (a) Warranty of Title; Power and Authority..............................4
(b) Hazardous Materials.................................................5
(c) Flood Hazard Area...................................................5
Section 1.02. (a) Further Assurances..................................................6
(b) Information Reporting and Back-up Withholding.......................6
Section 1.03. (a) Filing and Recording of Documents...................................6
(b) Filing and Recording Fees and Other Charges.........................6
Section 1.04. Payment and Performance of Loan Documents.................................7
Section 1.05. Maintenance of Existence; Compliance with Laws............................7
Section 1.06. After-Acquired Property...................................................7
Section 1.07. (a) Payment of Taxes and Other Charges..................................7
(b) Payment of Mechanics and Materialmen................................8
(c) Good Faith Contests.................................................8
Section 1.08. Taxes on Trustee or Beneficiary...........................................8
Section 1.09. Insurance.................................................................9
Section 1.10. Protective Advances by Beneficiary.......................................12
Section 1.11. (a) Visitation and Inspection..........................................12
(b) Financial and Other Information....................................12
(c) Estoppel Certificates..............................................13
Section 1.12. Maintenance of Premises and Improvements.................................13
Section 1.13. Condemnation.............................................................13
Section 1.14. Leases...................................................................14
Section 1.15. Premises Documents.......................................................14
Section 1.16. Trust Fund; Lien Laws....................................................15
Section 1.17. Expenses of Trustee......................................................15
ARTICLE II EVENTS OF DEFAULT AND REMEDIES...........................................15
Section 2.01. Events of Default and Certain Remedies...................................15
Section 2.02. Other Matters Concerning Sales...........................................19
Section 2.03. Payment of Amounts Due...................................................21
Section 2.04. Actions; Receivers.......................................................22
Section 2.05. Beneficiary's Right to Possession........................................22
Section 2.06. Remedies Cumulative......................................................22
i
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 2.07. Moratorium Laws; Right of Redemption.....................................23
Section 2.08. Intentionally Omitted....................................................23
Section 2.09. Beneficiary's Rights Concerning Application of Amounts Collected.........23
ARTICLE III CONCERNING TRUSTEE.......................................................23
Section 3.01. Trustee's Performance....................................................23
Section 3.02. Resignation by Trustee...................................................23
Section 3.03. Removal of Trustee; Successors...........................................24
ARTICLE IV MISCELLANEOUS............................................................24
Section 4.01. Assignment of Rents......................................................24
Section 4.02. Security Agreement.......................................................24
Section 4.03. Application of Certain Payments..........................................25
Section 4.04. Severability.............................................................25
Section 4.05. Modifications and Waivers in Writing.....................................25
Section 4.06. Notices..................................................................25
Section 4.07. Successors and Assigns...................................................26
Section 4.08. Limitation on Interest...................................................26
Section 4.09. Counterparts.............................................................26
Section 4.10. Substitute Deeds.........................................................26
Section 4.11. Beneficiary's Sale of Interests in Loan..................................26
Section 4.12. No Merger of Interests...................................................26
Section 4.13. CERTAIN WAIVERS..........................................................26
Section 4.14. GOVERNING LAW............................................................27
</TABLE>
ii
<PAGE>
RECITAL
Beneficiary, Hampton Inns, Inc. and Promus Hotels Florida, Inc., as
sellers, and Fee Owner, as buyer, have heretofore entered into an Agreement of
Sale dated as of November 22, 1999 (as amended, the "Agreement of Sale") for the
purchase by Fee Owner on the date hereof of certain premises described therein
(the "New Premises"). Fee Owner has acquired and is the owner of the premises
described in SCHEDULE A attached hereto and made a part hereof and Lessee is the
owner of a leasehold interest therein. Lessee acknowledges that it will derive
substantial benefit from the making of the loan contemplated herein and further
acknowledges that the obligation of Beneficiary to make such loan is conditioned
upon, among other things, the execution and delivery by Lessee of this Deed. In
connection with the purchase of the New Premises by Fee Owner from Beneficiary
(or its affiliates) pursuant to the Agreement of Sale, Fee Owner will borrow
$11,616,750 from Beneficiary and has executed and delivered to Beneficiary its
note, dated the date hereof, obligating it to pay the sum of $11,616,750, with
interest thereon as therein provided (said note, as the same may hereafter be
amended, modified, extended, severed, assigned, renewed, replaced or restated,
hereinafter, the "Note"). In order to secure the payment of the Note, Fee Owner
and Lessee, as grantors, have duly authorized the execution and delivery of this
Deed. For purposes of this Deed, "Grantor" shall mean Fee Owner and Lessee but
only to the extent of their respective interests in the Mortgaged Property (as
herein defined) and their respective obligations under the Note and Ground
Lease.
CERTAIN DEFINITIONS AND RULES OF CONSTRUCTION
Grantor, Trustee and Beneficiary agree that, unless the context
otherwise specifies or requires, the following terms shall have the meanings
herein specified.
"Chattels" means all fixtures, furnishings, fittings, appliances,
apparatus, equipment, building materials and components, machinery and articles
of personal property, of whatever kind or nature, including any replacements,
proceeds or products thereof and additions thereto, other than those owned by
lessees, now or at any time hereafter intended to be or actually affixed to,
attached to, placed upon, or used in any way in connection with the complete and
comfortable use, enjoyment, development, occupancy or operation of the Premises,
and whether located on or off the Premises.
"Default Rate" means the rate (or, if more than one, the highest of the
rates) of interest per annum provided in the Note plus 5%, but in no event to
exceed the maximum rate allowed by law.
"Events of Default" means the events and circumstances described as
such in Section 2.01.
"Ground Lease" means the Master Hotel Lease Agreement dated as of
September 20, 1999 between Fee Owner and Lessee covering, among other
properties, the Premises described in SCHEDULE A, as the same may be amended,
supplemented or modified from time to time.
<PAGE>
"Hazardous Materials" means any pollutant, effluents, emissions,
contaminants, toxic or hazardous wastes, materials or substances, as any of
those terms are defined from time to time in or for the purposes of any relevant
environmental law, rule, regulation, code, permit, order, notice, demand letter
or other binding determination (hereinafter, "Environmental Laws") including,
without limitation, asbestos fibers and friable asbestos, polychlorinated
biphenyls and any petroleum or hydrocarbon-based products or derivatives, in
each case in amounts in violation of applicable Environmental Laws.
"Improvements" means all structures or buildings, and replacements
thereof, now or hereafter located upon the Premises, including all plant
equipment, apparatus, machinery and fixtures of every kind and nature whatsoever
forming part of said structures or buildings.
"lease" or "leases" means any lease or leases of all or any portion of
the Premises, whether affecting the fee or leasehold portion thereof.
"Loan" means the loan made by Beneficiary to Fee Owner evidenced by the
Note and secured hereby.
"Premises" means the premises described in SCHEDULE A, including the
leasehold interest therein created by the Ground Lease, and including all of the
easements, rights, privileges and appurtenances (including air or development
rights) thereunto belonging or in anywise appertaining, and all of the estate,
right, title, interest, claim or demand whatsoever of Grantor therein and in the
streets and ways adjacent thereto, either in law or in equity, in possession or
expectancy, now or hereafter acquired, and as used herein shall, unless the
context otherwise requires, be deemed to include the Improvements.
"Premises Documents" means all reciprocal easement or operating
agreements, declarations of covenants, conditions or restrictions, declarations
of condominium, developer's or utility agreements with any village, town, county
or other governmental authority, and any similar such agreements or declarations
now or hereafter affecting the Premises or any part thereof.
All terms of this Deed which are not defined above shall have the
meaning set forth elsewhere in this Deed.
Except as expressly indicated otherwise, when used in this Deed (i)
"or" is not exclusive, (ii) "hereunder", "herein", "hereof" and the like refer
to this Deed as a whole, (iii) "Article", "Section" and "Schedule" refer to
Articles, Sections and Schedules of this Deed, (iv) terms defined in the
singular have a correlative meaning when used in the plural and vice versa, (v)
a reference to a law or statute includes any amendment or modification to, or
replacement of, such law or statute and (vi) a reference to an agreement,
instrument or document means such agreement, instrument or document as the same
may be amended, modified or supplemented from time to time in accordance with
its terms and as permitted hereby and by the other documents executed or
delivered to Beneficiary in connection with the Loan. The cover page and all
Schedules hereto are
2
<PAGE>
incorporated herein and made a part hereof. Any table of contents and the
headings and captions herein are for convenience only and shall not affect the
interpretation or construction hereof.
GRANTING CLAUSE
NOW, THEREFORE, Grantor, in consideration of the premises and in order
to secure the payment of both the principal of, and the interest and any other
sums payable under, the Note or this Deed and the performance and observance of
all the provisions hereof and of the Note, hereby gives, grants, bargains,
sells, warrants, aliens, remises, releases, conveys, assigns, transfers,
mortgages, hypothecates, deposits, pledges, sets over and confirms unto Trustee,
In Trust, all its estate, right, title and interest in, to and under any and all
of the following described property (hereinafter, the "Mortgaged Property")
whether now owned or held or hereafter acquired:
(i) the Premises;
(ii) the Improvements;
(iii) the Chattels;
(iv) the Premises Documents;
(v) all rents, royalties, issues, profits, revenue, income,
recoveries, reimbursements and other benefits of the Mortgaged Property
(hereinafter, the "Rents") and all leases of the Mortgaged Property or
portions thereof now or hereafter entered into and all right, title and
interest of Grantor thereunder, including, without limitation, cash or
securities deposited thereunder to secure performance by the lessees of
their obligations thereunder, whether such cash or securities are to be
held until the expiration of the terms of such leases or applied to one
or more of the installments of rent coming due immediately prior to the
expiration of such terms, and including any guaranties of such leases
and any lease cancellation, surrender or termination fees in respect
thereof, all subject, however, to the provisions of Section 4.01;
(vi) all (a) development work product prepared in connection with
the Premises, including, but not limited to, engineering, drainage,
traffic, soil and other studies and tests; water, sewer, gas,
electrical and telephone approvals, taps and connections; surveys,
drawings, plans and specifications; and subdivision, zoning and
platting materials; (b) building and other permits, rights, licenses
and approvals relating to the Premises; and (c) contracts and
agreements (including, without limitation, contracts with architects
and engineers, construction contracts and contracts for the maintenance
or management of the Premises), contract rights, logos, trademarks,
trade names, copyrights and other general intangibles used or useful in
connection with the ownership, operation or occupancy of the Premises
or any part thereof;
3
<PAGE>
(vii) all proceeds of the conversion, voluntary or involuntary, of
any of the foregoing into cash or liquidated claims, including, without
limitation, proceeds of insurance and condemnation awards, and all
rights of Grantor to refunds of real estate taxes and assessments;
(viii) all revenue and income received by or on behalf of Grantor
resulting from the operation of the Premises as a hotel, including all
sums (1) paid by customers for the use of hotel rooms located within
the Premises, (2) derived from food and beverage operations located
within the Premises, (3) generated by other hotel operations, including
any parking, convention, sports and recreational facilities and (4)
business interruption insurance proceeds;
(ix) all accounts and accounts receivable, including all present
and future right to payment from any consumer credit or charge card
organization or entity (such as those organizations which sponsor or
administer the American Express, Carte Blanche, Discover Card, Diners
Club, Visa and Master Card) arising out of the leasing and operation
of, or the business conducted at or in relation to, all or any part of
the Premises; and
(x) any deposit, operating or other account including the entire
balance therein (now or hereafter existing) of Grantor containing
proceeds of the operation of the Premises with any banking or financial
institution and all money, instruments, securities, documents, chattel
paper, credits, demands, and any other property, rights, or interests
of Grantor relating to the operation of the Premises which at any time
shall come into the possession, custody or control of any banking or
financial institution.
TO HAVE AND TO HOLD unto Trustee, its successors and assigns forever.
IN TRUST, to secure the payment to Beneficiary of the principal of and
interest on the Note at the maturity thereof and all other sums due hereunder or
under the Note and the performance of all covenants and agreements herein and in
the Note, whereupon this Deed shall cease and be void and the Mortgaged Property
shall be released at the cost of Grantor.
ARTICLE I
COVENANTS OF GRANTOR
Grantor represents, except as known by Beneficiary or its affiliates to
the contrary, or disclosed to Beneficiary in connection with the sale of the
Mortgaged Property to Grantor, and Grantor covenants and agrees as follows:
Section 1.01. (a) Warranty of Title; Power and Authority. Grantor
warrants that, with respect to the fee interest in the Premises, it has a good
and marketable title to an indefeasible fee estate subject to no lien, charge or
encumbrance, that the Ground Lease is subject to no lien, charge or encumbrance
of any kind and is prior to all liens,
4
<PAGE>
charges and encumbrances whatsoever on the fee interest of the landlord
thereunder, except in either case such as are listed as exceptions to title in
the title policy insuring the lien hereof; and, Grantor further warrants that,
with respect to the leasehold interest in the Premises, that it is the owner of
a valid and subsisting interest as tenant under the Ground Lease, that the
Ground Lease is in full force and effect, there are no defaults thereunder and
no event has occurred or is occurring which after notice or passage of time or
both will result in such a default; that it owns the Chattels, all leases and
the Rents in respect of the Mortgaged Property and all other personal property
encumbered hereby free and clear of liens and claims; and Grantor warrants that
this Deed is and will remain a valid and enforceable lien on the Mortgaged
Property subject only to the exceptions referred to above. Grantor has full
power and lawful authority to subject the Mortgaged Property to the lien hereof
in the manner and form herein done or intended hereafter to be done. Grantor
will preserve such title, will preserve such leasehold estate created by the
Ground Lease and will forever warrant and defend the same to Trustee and
Beneficiary and will forever warrant and defend the validity and priority of the
lien hereof against the claims of all persons and parties whomsoever. Grantor
will perform or cause to be performed all of the covenants and conditions
required to be performed by it under the Ground Lease, will do all things
necessary to preserve unimpaired its rights thereunder, and will not (i) enter
into any agreement modifying or amending the Ground Lease that would reduce the
term of the Ground Lease, increase the amount of rent payable thereunder (except
as contemplated by the provisions of the Ground Lease) or have a material
adverse effect on the lien created by this Deed or the rights of Beneficiary
hereunder or (ii) for so long as the Ground Lease is in effect, release the
landlord thereunder from any obligations imposed upon it thereby. If Grantor
receives a notice of default under the Ground Lease, it shall immediately cause
a copy of such notice to be sent by registered United States mail to
Beneficiary.
(b) Hazardous Materials. To the best of Grantor's knowledge, Grantor
represents and warrants that (i) the Premises and the improvements thereon and
the surrounding areas are not currently and have never been subject to Hazardous
Materials or their effects, in each case in amounts in violation of applicable
Environmental Laws, (ii) neither it nor any portion of the Premises or
improvements thereon is in violation of, or subject to any existing, pending or
threatened investigation or proceeding by any governmental authorities under,
any Environmental Law, (iii) there are no claims, litigation, administrative or
other proceedings, whether actual or threatened, or judgments or orders,
concerning Hazardous Materials relating in any way to the Premises or the
improvements thereon and (iv) Grantor is not required by any Environmental Law
to obtain any permits or licenses to construct or use any improvements, fixtures
or equipment with respect to the Premises, or if any such permit or license is
required it has been obtained and is capable of being mortgaged and assigned
hereby. Grantor will comply with all applicable Environmental Laws and will, at
its sole cost and expense, promptly remove, or cause the removal of, any and all
Hazardous Materials or the effects thereof at any time identified as being on,
in, under or affecting the Premises.
(c) Flood Hazard Area. Grantor represents that neither the Premises nor
any part thereof is located in an area identified by the Secretary of the United
States Department of Housing and Urban Development or by any applicable federal
agency as having special flood hazards or, if it is, Grantor has obtained the
insurance required by Section 1.09.
5
<PAGE>
Section 1.02. (a) Further Assurances. Grantor will, at its sole cost
and expense, do, execute, acknowledge and deliver all and every such further
acts, deeds, conveyances, mortgages, assignments, notices of assignment,
transfers and assurances as Trustee or Beneficiary shall from time to time
reasonably require, for the better assuring, conveying, assigning, transferring
and confirming unto Trustee the property and rights hereby conveyed or assigned
or intended now or hereafter so to be, or which Grantor may be or may hereafter
become bound to convey or assign to Trustee, or for carrying out the intention
or facilitating the performance of the terms hereof, or for filing, registering
or recording this Deed and, on demand, will execute and deliver, and hereby
authorizes Trustee or Beneficiary to execute and file in Grantor's name, to the
extent they may lawfully do so, one or more financing statements, chattel
mortgages or comparable security instruments, to evidence or perfect more
effectively Beneficiary's security interest in and the lien hereof upon the
Chattels and other personal property encumbered hereby.
(b) Information Reporting and Back-up Withholding. Grantor will, at its
sole cost and expense, do, execute, acknowledge and deliver all and every such
acts, information reports, returns and withholding of monies as shall be
necessary or appropriate to comply fully, or to cause full compliance, with all
applicable information reporting and back-up withholding requirements of the
Internal Revenue Code of 1986 (including all regulations now or hereafter
promulgated thereunder) in respect of the Premises and all transactions related
to the Premises, and will at all times provide Beneficiary with satisfactory
evidence of such compliance and notify Beneficiary of the information reported
in connection with such compliance.
Section 1.03. (a) Filing and Recording of Documents. Grantor forthwith
upon the execution and delivery hereof, and thereafter from time to time, will
cause this Deed and any security instrument creating a lien or evidencing the
lien hereof upon the Chattels and each instrument of further assurance to be
filed, registered or recorded in such manner and in such places as may be
required by any present or future law in order to publish notice of and fully to
protect the lien hereof upon, and the title of Trustee to, the Mortgaged
Property.
(b) Filing and Recording Fees and Other Charges. Grantor will pay all
filing, registration or recording fees, and all expenses incident to the
execution and acknowledgment hereof, any deed of trust supplemental hereto, any
security instrument with respect to the Chattels, and any instrument of further
assurance, and any reasonable expenses (including attorneys' fees and
disbursements) incurred by Beneficiary in connection with the Loan, and will pay
all federal, state, county and municipal stamp taxes and other taxes, duties,
imposts, assessments and charges arising out of or in connection with the
execution and delivery of the Note, this Deed, any deed of trust supplemental
hereto, any security instrument with respect to the Chattels or any instrument
of further assurance.
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Section 1.04. Payment and Performance of Loan Documents. Grantor will
punctually pay the principal and interest and all other sums to become due in
respect hereof and of the Note at the time and place and in the manner specified
therein, according to the true intent and meaning thereof, all in currency of
the United States of America which at the time of such payment shall be legal
tender for the payment of public and private debts. Grantor will duly and timely
comply with and perform all of the terms, provisions, covenants and agreements
contained in said documents and in all other documents or instruments executed
or delivered by Grantor to Beneficiary in connection with the Loan, and will
permit no failures of performance thereunder.
Section 1.05. Maintenance of Existence; Compliance with Laws. Grantor,
if other than a natural person, will, so long as it is owner of all or part of
the Mortgaged Property, do all things necessary to preserve and keep in full
force and effect its existence, franchises, rights and privileges as a business
or stock corporation, partnership, limited liability company, trust or other
entity under the laws of the state of its formation. Grantor will duly and
timely comply with all laws, regulations, rules, statutes, orders and decrees of
any governmental authority or court applicable to it or to the Mortgaged
Property or any part thereof.
Section 1.06. After-Acquired Property. All right, title and interest of
Grantor in and to all extensions, improvements, betterments, renewals,
substitutes and replacements of, and all additions and appurtenances to, the
Mortgaged Property, hereafter acquired by, or released to, Grantor or
constructed, assembled or placed by Grantor on the Premises, and all conversions
of the security constituted thereby, immediately upon such acquisition, release,
construction, assembling, placement or conversion, as the case may be, and in
each such case, without any further deed of trust, conveyance, assignment or
other act by Grantor, shall become subject to the lien hereof as fully and
completely, and with the same effect, as though now owned by Grantor and
specifically described in the Granting Clause hereof, but at any and all times
Grantor will execute and deliver to Trustee or Beneficiary any and all such
further assurances, deeds of trust, conveyances or assignments thereof as
Trustee or Beneficiary may reasonably require for the purpose of expressly and
specifically subjecting the same to the lien hereof.
Section 1.07. (a) Payment of Taxes and Other Charges. Grantor, from
time to time before the same shall become delinquent, will pay and discharge all
taxes of every kind and nature (including real and personal property taxes and
income, franchise, withholding, profits and gross receipts taxes), all general
and special assessments, levies, permits, inspection and license fees, all water
and sewer rents and charges, and all other public charges whether of a like or
different nature, imposed upon or assessed against it or the Mortgaged Property
or any part thereof or upon the revenues, rents, issues, income and profits of
the Mortgaged Property or arising in respect of the occupancy, use or possession
thereof. Grantor will, upon Beneficiary's request, deliver to Beneficiary
receipts evidencing the payment of all such taxes, assessments, levies, fees,
rents and other public charges imposed upon or assessed against it or the
Mortgaged Property or any portion thereof.
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Beneficiary may, at its option following the occurrence of an Event of
Default, to be exercised by thirty (30) days' notice to Grantor, require the
deposit by Grantor, at the time of each payment of an installment of interest or
principal under the Note (but no less often than monthly), of an additional
amount sufficient to discharge the obligations under this clause (a) when they
become due. The determination of the amount so payable and of the fractional
part thereof to be deposited with Beneficiary, so that the aggregate of such
deposits shall be sufficient for this purpose, shall be made by Beneficiary in
its sole discretion. Such amounts shall be held by Beneficiary without interest
and applied to the payment of the obligations in respect of which such amounts
were deposited or, at Beneficiary's option, to the payment of said obligations
in such order or priority as Beneficiary shall determine, on or before the
respective dates on which the same or any of them would become delinquent. If
one (1) month prior to the due date of any of the aforementioned obligations the
amounts then on deposit therefor shall be insufficient for the payment of such
obligation in full, Grantor within ten (10) days after demand shall deposit the
amount of the deficiency with Beneficiary. Nothing herein contained shall be
deemed to affect any right or remedy of Beneficiary under any provisions hereof
or of any statute or rule of law to pay any such amount and to add the amount so
paid, together with interest at the Default Rate, to the indebtedness hereby
secured.
(b) Payment of Mechanics and Materialmen. Grantor will pay, from time
to time when the same shall become due, all lawful claims and demands of
mechanics, materialmen, laborers, and others which, if unpaid, might result in,
or permit the creation of, a lien on the Mortgaged Property or any part thereof,
and in general will do or cause to be done everything necessary so that the lien
hereof shall be fully preserved, at the cost of Grantor and without expense to
Trustee or Beneficiary, other than those liens which Beneficiary or its
affiliates have indemnified Grantor pursuant to the provisions set forth in the
Agreement of Sale.
(c) Good Faith Contests. Nothing in this Section 1.07 shall require the
payment or discharge of any obligation imposed upon Grantor by this Section so
long as Grantor shall in good faith and at its own expense contest the same or
the validity thereof by appropriate legal proceedings which shall operate to
prevent the collection thereof or other realization thereon and the sale or
forfeiture of the Mortgaged Property or any part thereof to satisfy the same;
provided, however, that (i) during such contest Grantor shall set aside reserves
sufficient to discharge Grantor's obligation hereunder and of any additional
charge, penalty or expense arising from or incurred as a result of such contest
and (ii) if at any time payment of any obligation imposed upon Grantor by clause
(a) above shall become necessary to prevent the delivery of a tax deed or other
instrument conveying the Mortgaged Property or any portion thereof because of
non-payment, then Grantor shall pay the same in sufficient time to prevent the
delivery of such tax deed or other instrument.
Section 1.08. Taxes on Trustee or Beneficiary. Grantor will pay any
taxes, except income taxes, imposed on Trustee or Beneficiary by reason of their
ownership of the Note or this Deed, provided that Beneficiary can require
payment of the Note in full within ninety (90) days if it shall be illegal for
Grantor to pay any tax or if the payment of such tax by Grantor would result in
the violation of applicable usury laws.
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Section 1.09. Insurance. (a) Grantor will at all times (directly or
indirectly) provide, maintain and keep in force:
(i) policies of insurance insuring the Premises, Improvements and
Chattels against loss or damage by fire and lightning; against loss or
damage by other risks embraced by coverage of the type now known as All
Risk Replacement Cost Insurance with agreed amount endorsement,
including but not limited to riot and civil commotion, vandalism,
malicious mischief and theft; and against such other risks or hazards
as Beneficiary from time to time reasonably may designate in an amount
sufficient to prevent Beneficiary or Grantor from becoming a co-insurer
under the terms of the applicable policies, but in any event in an
amount not less than 100% of the then full replacement cost of the
Improvements (exclusive of the cost of excavations, foundations and
footings below the lowest basement floor) without deduction for
physical depreciation;
(ii) policies of insurance insuring the Premises against the loss
of "rental value" of the buildings which constitute a part of the
Improvements on a "rented or vacant basis" arising out of the perils
insured against pursuant to clause (i) above in an amount equal to not
less than one (1) year's gross "rental value" of the Improvements.
"Rental value" as used herein is defined as the sum of (A) the total
anticipated gross rental income from tenant occupancy of such buildings
as furnished and equipped, (B) the amount of all charges which are the
legal obligation of tenants and which would otherwise be the obligation
of Grantor and (C) the fair rental value of any portion of such
buildings which is occupied by Grantor. Grantor hereby assigns the
proceeds of such insurance to Beneficiary, to be applied by Beneficiary
in payment of the interest and principal on the Note, insurance
premiums, taxes, assessments and private impositions until such time as
the Improvements shall have been restored and placed in full operation,
at which time, provided Grantor is not then in default hereunder, the
balance of such insurance proceeds, if any, held by Beneficiary shall
be paid over to Grantor;
(iii) if all or part of the Premises are located in an area
identified by the Secretary of the United States Department of Housing
and Urban Development or by any applicable federal agency as a flood
hazard area, flood insurance in an amount at least equal to the maximum
limit of coverage available under the National Flood Insurance Act of
1968, provided, however, that Beneficiary reserves the right to require
flood insurance in excess of said limit if such insurance is
commercially available up to the amount provided in clause (i) above;
(iv) during any period of restoration under this Section 1.09 or
Section 1.13, a policy or policies of builder's "all risk" insurance,
written on a Standard Builder's Risk Completed Value Form (100%
non-reporting), in an amount not less than the full insurable value of
the Premises against such risks (including, without limitation, fire
and extended coverage, collapse and earthquake coverage to agreed
limits) as Beneficiary may reasonably request, in form and substance
acceptable to Beneficiary;
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(v) a policy or policies of workers' compensation insurance as
required by workers' compensation insurance laws (including employer's
liability insurance, if requested by Beneficiary) covering all
employees of Grantor;
(vi) comprehensive liability insurance on an "occurrence" basis
against claims for "personal injury" liability, including, without
limitation, bodily injury, death or property damage liability, with a
limit of not less than $15,000,000 in the event of "personal injury" to
any number of persons or of damage to property arising out of one
"occurrence". Such policies shall name Beneficiary as additional
insured by an endorsement, and shall contain cross-liability and
severability of interest clauses, all satisfactory to Beneficiary; and
(vii) such other insurance (including, but not limited to,
earthquake insurance), and in such amounts, as may from time to time be
reasonably required by Beneficiary against the same or other insurable
hazards.
Notwithstanding anything herein to the contrary, for so long as that
certain Management Agreement of even date herewith between Lessee and
Beneficiary with respect to the Premises remains in full force and effect (as
the same may be amended, the "Management Agreement"), the types and amounts of
insurance required by the Management Agreement to the extent inconsistent with
those set forth above shall govern and control Grantor's obligations in respect
thereof.
(b) All policies of insurance required under this Section 1.09 shall be
issued by companies having Best's ratings and being otherwise reasonably
acceptable to Beneficiary, shall be subject to the reasonable approval of
Beneficiary as to amount, content, form and expiration date and, except for the
liability policies described in clauses (a)(v) and (vi) above, shall contain a
Non-Contributory Standard Mortgagee Clause and Lender's Loss Payable
Endorsement, or their equivalents, in favor of Beneficiary, and shall provide
that the proceeds thereof shall be payable to Beneficiary. Beneficiary shall be
furnished with the original of each policy required hereunder, which policies
shall provide that they shall not lapse, nor be modified or cancelled, without
thirty (30) days' written notice to Beneficiary. At least thirty (30) days prior
to expiration of any policy required hereunder, Grantor shall furnish
Beneficiary appropriate proof of issuance of a policy continuing in force the
insurance covered by the policy so expiring. Grantor shall furnish to
Beneficiary, promptly upon request, receipts or other satisfactory evidence of
the payment of the premiums on such insurance policies. In the event that
Grantor does not deposit with Beneficiary a new certificate or policy of
insurance with evidence of payment of premiums thereon at least thirty (30) days
prior to the expiration of any expiring policy, then Beneficiary may, but shall
not be obligated to, procure such insurance and pay the premiums therefor, and
Grantor agrees to repay to Beneficiary the premiums thereon promptly on demand,
together with interest thereon at the Default Rate.
(c) Grantor hereby assigns to Beneficiary all proceeds of any insurance
required to be maintained by this Section 1.09 which Grantor may be entitled to
receive for loss or damage to the Premises, Improvements or Chattels. All such
insurance
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proceeds shall be payable to Beneficiary, and Grantor hereby authorizes and
directs any affected insurance company to make payment thereof directly to
Beneficiary subject, however, to clause (f) below. Grantor shall give prompt
notice to Beneficiary of any casualty, whether or not of a kind required to be
insured against under the policies to be provided by Grantor hereunder, such
notice to generally describe the nature and cause of such casualty and the
extent of the damage or destruction. Grantor may settle, adjust or compromise
any claims for loss, damage or destruction, regardless of whether or not there
are insurance proceeds available or whether any such insurance proceeds are
sufficient in amount to fully compensate for such loss or damage, subject to
Beneficiary's prior consent. Notwithstanding the foregoing, Beneficiary shall
have the right to join Grantor in settling, adjusting or compromising any loss
of $100,000 or more. Grantor hereby authorizes the application or release by
Beneficiary of any insurance proceeds under any policy of insurance, subject to
the other provisions hereof. The application or release by Beneficiary of any
insurance proceeds shall not cure or waive any default or notice of default
hereunder or invalidate any act done pursuant to such notice.
(d) In the event of the foreclosure hereof or other transfer of the
title to the Mortgaged Property in extinguishment, in whole or in part, of the
indebtedness secured hereby, all right, title and interest of Grantor in and to
any insurance policy, or premiums or payments in satisfaction of claims or any
other rights thereunder then in force, shall pass to the purchaser or grantee
notwithstanding the amount of any bid at such foreclosure sale. Nothing
contained herein shall prevent the accrual of interest as provided in the Note
on any portion of the principal balance due under the Note until such time as
insurance proceeds are actually received and applied to reduce the principal
balance outstanding.
(e) Grantor shall not take out separate insurance concurrent in form or
contributing in the event of loss with that required to be maintained under this
Section 1.09 unless Beneficiary is included thereon as a named insured with loss
payable to Beneficiary under standard mortgage endorsements of the character and
to the extent above described. Grantor shall promptly notify Beneficiary
whenever any such separate insurance is taken out and shall promptly deliver to
Beneficiary the policy or policies of such insurance.
(f) Any and all monies received as payment which Grantor may be
entitled to receive for loss or damage to the Premises, Improvements or Chattels
under any insurance maintained pursuant to this Section 1.09 (other than
proceeds under the policies required by clause (a)(ii) above) shall be paid over
to Beneficiary and, at Beneficiary's option, either applied to the prepayment of
the Note and all interest and other sums accrued and unpaid in respect thereof
or disbursed from time to time to Grantor in reimbursement of its costs and
expenses incurred in the restoration of the Improvements in accordance with
Beneficiary's standard construction lending practices, terms and conditions, in
either case, less Beneficiary's reasonable expenses for collecting and, if
applicable, disbursing the insurance proceeds, or otherwise incurred in
connection therewith. Notwithstanding the provisions of the immediately
preceding sentence, provided no default exists hereunder, Beneficiary agrees to
apply any such proceeds received by it to the reimbursement of Grantor's costs
of restoring the Improvements. Advances of
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insurance proceeds shall be made to Grantor from time to time in accordance with
Beneficiary's standard construction lending practices, terms and conditions;
amounts not required for such purposes shall be applied, at Beneficiary's
option, to the prepayment of the Note and to interest accrued and unpaid thereon
in such order and proportions as Beneficiary may elect. In no event shall
Beneficiary be required to advance such proceeds to Grantor unless Beneficiary
shall have (i) received satisfactory evidence that the funding/expiration dates
of the commitment, if any, for the permanent financing of the Improvements have
been extended for such period of time as is reasonably necessary to complete
said restoration and (ii) reasonably determined that the restoration of the
Improvements can be completed by the Maturity Date of the Note at a cost which
does not exceed the amount of available insurance proceeds or, in the event that
such proceeds are reasonably determined by Beneficiary to be inadequate,
Beneficiary shall have received from Grantor a cash deposit equal to the excess
of said estimated cost of restoration over the amount of said available
proceeds. If the conditions for the advance of insurance proceeds for
restoration set forth in clauses (i) and (ii) above are not satisfied within
sixty (60) days of Beneficiary's receipt thereof or if the actual restoration
shall not have been commenced within such period, Beneficiary shall have the
option at any time thereafter to apply such insurance proceeds to the payment of
the Note and to interest accrued and unpaid thereon in such order and
proportions as Beneficiary may elect.
Section 1.10. Protective Advances by Beneficiary. If Grantor shall fail
to perform any of the covenants contained herein, Trustee or Beneficiary may
make advances to perform the same on its behalf and all sums so advanced shall
be a lien upon the Mortgaged Property and shall be secured hereby. Grantor will
repay on demand all sums so advanced on its behalf together with interest
thereon at the Default Rate. The provisions of this Section shall not prevent
any default in the observance of any covenant contained herein from constituting
an Event of Default.
Section 1.11. (a) Visitation and Inspection. Grantor will keep adequate
records and books of account in accordance with generally accepted accounting
principles and will permit each of Trustee and Beneficiary, by their agents,
accountants and attorneys, to visit and inspect the Mortgaged Property and
examine its records and books of account and make copies thereof or extracts
therefrom, and to discuss its affairs, finances and accounts with the officers
or general partners, as the case may be, of Grantor, at such reasonable times as
may be requested by Trustee or Beneficiary.
(b) Financial and Other Information. Grantor will deliver to
Beneficiary with reasonable promptness such financial information with respect
to Grantor or the Premises as Beneficiary may reasonably request from time to
time. All financial statements of Grantor shall be prepared in accordance with
generally accepted accounting principles and shall be accompanied by the
certificate of a principal financial or accounting officer or general partner,
as the case may be, of Grantor, dated within five (5) days of the delivery of
such statements to Beneficiary, stating that he or she knows of no Event of
Default, nor of any event which after notice or lapse of time or both would
constitute an Event of Default, which has occurred and is continuing, or, if any
such event or Event of Default has occurred and is continuing, specifying the
nature and period of existence thereof and what action Grantor has taken or
proposes to take with respect thereto, and,
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except as otherwise specified, stating that Grantor has fulfilled all of its
obligations hereunder and otherwise in respect of the Loan which are required to
be fulfilled on or prior to the date of such certificate.
(c) Estoppel Certificates. Grantor, within three (3) days upon request
in person or within five (5) days upon request by mail, will furnish a
statement, duly acknowledged, of the amount due whether for principal or
interest on this Deed and whether any offsets, counterclaims or defenses exist
against the indebtedness secured hereby.
Section 1.12. Maintenance of Premises and Improvements. Grantor will
not commit any waste on the Premises or make any change in the use of the
Premises which will in any way increase any ordinary fire or other hazard
arising out of construction or operation. Grantor will, or shall cause its
Lessee to, at all times, maintain the Improvements and Chattels in good
operating order and condition and will promptly make, from time to time, all
repairs, renewals, replacements, additions and improvements in connection
therewith which are needful or desirable to such end. The Improvements shall not
be demolished or substantially altered, nor shall any Chattels be removed
without Beneficiary's prior consent except where appropriate replacements free
of superior title, liens and claims are immediately made of value at least equal
to the value of the removed Chattels.
Section 1.13. Condemnation. Grantor, immediately upon obtaining
knowledge of the institution or pending institution of any proceedings for the
condemnation of the Premises or any portion thereof, will notify Trustee and
Beneficiary thereof. Trustee and Beneficiary may participate in any such
proceedings and may be represented therein by counsel of Beneficiary's
selection. Grantor from time to time will deliver to Beneficiary all instruments
requested by it to permit or facilitate such participation. In the event of such
condemnation proceedings, the award or compensation payable is hereby assigned
to and shall be paid to Beneficiary. Beneficiary shall be under no obligation to
question the amount of any such award or compensation and may accept the same in
the amount in which the same shall be paid. The proceeds of any award or
compensation so received shall, at Beneficiary's option, either be applied to
the prepayment of the Note and all interest and other sums accrued and unpaid in
respect thereof at the rate of interest provided therein regardless of the rate
of interest payable on the award by the condemning authority, or be disbursed to
Grantor from time to time for restoration of the Improvements in accordance with
Beneficiary's standard construction lending practices, terms and conditions, in
either case, less Beneficiary's reasonable expenses for collecting and, if
applicable, disbursing the award, or otherwise incurred in connection therewith.
Notwithstanding the provisions of the immediately preceding sentence, provided
no monetary or bankruptcy related default or any Event of Default exists
hereunder, Beneficiary agrees to apply any such condemnation award proceeds
received by it to the reimbursement of Grantor's costs of restoring the
Improvements. Advances of condemnation award proceeds shall be made to Grantor
from time to time in accordance with Beneficiary's standard construction lending
practices, terms and conditions; amounts not required for such purposes shall be
applied, at Beneficiary's option, to the prepayment of the Note and to interest
accrued and unpaid thereon (at the rate of interest provided therein regardless
of the rate of interest payable on the award by the condemning authority) in
such order and proportions as Beneficiary may elect.
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Section 1.14. Leases. (a) Grantor will not (i) execute an assignment of
the rents or any part thereof from the Premises without Beneficiary's prior
consent, (ii) except where the lessee is in default thereunder, terminate or
consent to the cancellation or surrender of any lease of the Premises or of any
part thereof, now existing or hereafter to be made, having an unexpired term of
one (1) year or more, provided, however, that any lease may be cancelled if
promptly after the cancellation or surrender thereof a new lease is entered into
with a new lessee having a credit standing at least equivalent to that of the
lessee whose lease was cancelled, on substantially the same terms as the
terminated or cancelled lease, (iii) modify any such lease so as to shorten the
unexpired term thereof or so as to decrease, waive or compromise in any manner
the amount of the rents payable thereunder or materially expand the obligations
of the lessor thereunder, (iv) accept prepayments of more than one month of any
installments of rents to become due under such leases, except prepayments in the
nature of security for the performance of the lessees thereunder, (v) modify,
release or terminate any guaranties of any such lease or (vi) in any other
manner impair the value of the Mortgaged Property or the security hereof.
(b) Grantor will not execute any lease of all or a substantial portion
of the Premises except for actual occupancy by the lessee thereunder or its
property manager, and will at all times promptly and faithfully perform, or
cause to be performed, all of the covenants, conditions and agreements contained
in all leases of the Premises or portions thereof now or hereafter existing, on
the part of the lessor thereunder to be kept and performed and will at all times
do all things reasonably necessary to compel performance by the lessee under
each lease of all obligations, covenants and agreements by such lessee to be
performed thereunder. If any of such leases provide for the giving by the lessee
of certificates with respect to the status of such leases, Grantor shall
exercise its right to request such certificates within five (5) days of any
demand therefor by Beneficiary and shall deliver copies thereof to Beneficiary
promptly upon receipt.
(c) In the event of the enforcement by Trustee or Beneficiary of the
remedies provided for hereby or by law, the lessee under each of the leases of
the Premise will, upon request of any person succeeding to the interest of
Grantor as a result of such enforcement, automatically become the lessee of said
successor in interest, without change in the terms or other provisions of such
lease, provided, however, that said successor in interest shall not be bound by
(i) any payment of rent or additional rent for more than one (1) month in
advance, except prepayments in the nature of security for the performance by
said lessee of its obligations under said lease or (ii) any amendment or
modification of the lease made without the consent of Beneficiary or such
successor in interest. Each lease shall also provide that, upon request by said
successor in interest, such lessee shall execute and deliver an instrument or
instruments confirming such attornment.
Section 1.15. Premises Documents. Grantor shall (a) do all things
reasonably necessary to cause the due compliance and faithful performance by the
other parties to
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the Premises Documents with and of all obligations and agreements by such other
parties to be complied with and performed thereunder, except for any continuing
failure of the Premises to comply with the Premises Documents of the date of the
acquisition hereof from Beneficiary or its affiliate, and (b) deliver promptly
to Beneficiary copies of any notices which it gives or receives under any of the
Premises Documents.
Section 1.16. Trust Fund; Lien Laws. Grantor will receive the advances
secured hereby and will hold the right to receive such advances as a trust fund
to be applied first for the purpose of paying the costs of improvements on the
Premises and will apply the same first to the payment of such costs before using
any part of the total of the same for any other purpose. Grantor will indemnify
and hold Trustee and Beneficiary harmless against any loss or liability, cost or
expense, including, without limitation, any judgments, attorney's fees, costs of
appeal bonds and printing costs, arising out of or relating to any proceeding
instituted by any claimant alleging a violation by Grantor of any applicable
lien law.
Section 1.17. Expenses of Trustee. Grantor shall pay all costs, fees
and expenses of Trustee, its agents and counsel in connection with the
performance of its duties hereunder.
ARTICLE II
EVENTS OF DEFAULT AND REMEDIES
Section 2.01. Events of Default and Certain Remedies. If one or more of
the following Events of Default shall happen, that is to say:
(a) if (i) default shall be made in the payment of any principal,
interest, fees or other sums under the Note, in any such case, when and
as the same shall become due and payable, whether at maturity or by
acceleration or as part of any payment or prepayment or otherwise, in
each case, as herein or in the Note provided, and such default shall
have continued for a period of ten (10) days or (ii) default shall be
made in the payment of any tax or other charge required by Section 1.07
to be paid and said default shall have continued for a period of twenty
(20) days; or
(b) if default shall be made in the due observance or performance
of any covenant, condition or agreement in the Note, this Deed or in
any other document executed or delivered to Beneficiary in connection
with the Loan, and such default shall have continued for a period of
thirty (30) days after notice thereof shall have been given to Grantor
by Beneficiary, or, in the case of such other documents, such shorter
grace period, if any, as may be provided for therein; or
(c) if any representation or warranty made by Grantor in Section
1.01 shall be incorrect, or if any other representation or warranty
made to Beneficiary in this Deed, or in any other document, certificate
or statement executed or delivered to Beneficiary in connection with
the Loan shall be incorrect in any material respect when made or
remade; or
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(d) if by order of a court of competent jurisdiction, a trustee,
receiver or liquidator of the Mortgaged Property or any part thereof,
or of Grantor shall be appointed and such order shall not be discharged
or dismissed within sixty (60) days after such appointment; or
(e) if Grantor shall file a petition in bankruptcy or for an
arrangement or for reorganization pursuant to the Federal Bankruptcy
Act or any similar federal or state law, or if, by decree of a court of
competent jurisdiction, Grantor shall be adjudicated a bankrupt, or be
declared insolvent, or shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or shall consent to the appointment of a
receiver or receivers of all or any part of its property; or
(f) if any of the creditors of Grantor shall file a petition in
bankruptcy against Grantor or for reorganization of Grantor pursuant to
the Federal Bankruptcy Act or any similar federal or state law, and if
such petition shall not be discharged or dismissed within sixty (60)
days after the date on which such petition was filed; or
(g) if final judgment for the payment of money shall be rendered
against Grantor and Grantor shall not discharge the same or cause it to
be discharged within sixty (60) days from the entry thereof, or shall
not appeal therefrom or from the order, decree or process upon which or
pursuant to which said judgment was granted, based or entered, and
secure a stay of execution pending such appeal; or
(h) (Intentionally Omitted)
(i) if there shall occur a default which is not cured within the
applicable grace period, if any, under any mortgage, deed of trust or
other security instrument covering all or part of the Mortgaged
Property regardless of whether any such mortgage, deed of trust or
other security instrument is prior or subordinate hereto or under any
mortgage, deed of trust or other security instrument now or hereafter
securing the Note; it being further agreed by Grantor that an Event of
Default hereunder shall constitute an Event of Default under any such
mortgage, deed of trust or other security instrument held by or for the
benefit of Beneficiary; or
(j) if there shall occur a default which is not cured within the
applicable grace period, if any, under any of the Premises Documents,
except for any continuing failure of the Premises to comply with the
Premises Documents of the date of the acquisition hereof from
Beneficiary or its affiliate; or if any of the Premises Documents is
amended, modified, supplemented or terminated without Beneficiary's
prior consent; or
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(k) if Grantor shall transfer, or agree to transfer (or suffer or
permit the transfer or agreement to transfer), in any manner, either
voluntarily or involuntarily, by operation of law or otherwise, all or
any portion of the Mortgaged Property, or any interest or rights
therein (including air or development rights) without, in any such
case, Beneficiary's prior consent. As used in this clause, "transfer"
shall include, without limitation, any sale, assignment, lease (other
than to Lessee) or conveyance except leases for occupancy subordinate
hereto and to all advances made and to be made hereunder or, in the
event Grantor (or a general partner or co-venturer thereof) is a
partnership, joint venture, limited liability company, trust or
closely-held corporation, the sale, conveyance, transfer or other
disposition of more than 10%, in the aggregate, of any class of the
issued and outstanding capital stock of such closely-held corporation
or of the beneficial interest of such partnership, venture, limited
liability company or trust, or a change of any general partner, joint
venturer, member or beneficiary, as the case may be. In the event
Grantor is a limited partnership, and so long as a limited partner has
contributed to (or remains personally liable for) the present and
future partnership capital contributions required of such limited
partner by the partnership agreement, such partner may sell, convey,
devise, transfer or dispose of all or a part of his limited partnership
interest to his spouse, children, grandchildren or a family trust in
which his spouse, children or grandchildren are sole beneficiaries; or
(l) if Grantor shall encumber, or agree to encumber, in any
manner, either voluntarily or involuntarily, by operation of law or
otherwise, all or any portion of the Mortgaged Property, or any
interest or rights therein (including air or development rights)
without, in any such case, Beneficiary's prior consent. As used in this
clause, "encumber" shall include, without limitation, the placing or
permitting the placing of any mortgage, deed of trust, assignment of
rents or other security device. (Beneficiary may grant or deny its
consent under this clause and the immediately preceding clause in its
sole discretion and, if consent should be given, any such transfer or
encumbrance shall be subject hereto and to any other documents which
evidence or secure the Loan, and, if a transfer, any such transferee
shall assume all of Grantor's obligations hereunder and thereunder and
agree to be bound by all provisions and perform all obligations
contained herein and therein; consent to one such transfer or
encumbrance shall not be deemed to be a waiver of the right to require
consent to future or successive transfers or encumbrances);
then and in every such case:
I. During the continuance of any such Event of Default,
Beneficiary, by notice to Grantor, may declare the entire principal of
the Note then outstanding (if not then due and payable), and all
accrued and unpaid interest and other sums in respect thereof, to be
due and payable immediately, and upon any such declaration the
principal of the Note and said accrued and unpaid interest and other
sums shall become and be immediately due and payable, anything herein
or in the Note (other than Section 4.08 hereof, the provisions thereof
limiting interest payable thereunder to the maximum amount permitted by
applicable law) to the contrary notwithstanding.
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II. During the continuance of any such Event of Default, Trustee
or Beneficiary personally, or by their agents or attorneys, may enter
into and upon all or any part of the Premises, and each and every part
thereof, and are each hereby given a right and license and appointed
Grantor's attorney-in-fact and exclusive agent to do so, and may
exclude Grantor, its agents and servants wholly therefrom; and having
and holding the same, may use, operate, manage and control the Premises
and conduct the business thereof, either personally or by their
superintendents, managers, agents, servants, attorneys or receivers;
and upon every such entry, Trustee or Beneficiary, at the expense of
the Mortgaged Property, from time to time, either by purchase, repairs
or construction, may maintain and restore the Mortgaged Property,
whereof they shall become possessed as aforesaid; may complete the
construction of the Improvements and in the course of such completion
may make such changes in the contemplated Improvements as Beneficiary
may deem desirable and may insure the same; and likewise, from time to
time, at the expense of the Mortgaged Property, Trustee or Beneficiary
may make all necessary or proper repairs, renewals and replacements and
such useful alterations, additions, betterments and improvements
thereto and thereon as Beneficiary may seem advisable; and in every
such case Trustee or Beneficiary shall have the right to manage and
operate the Mortgaged Property and to carry on the business thereof and
exercise all rights and powers of Grantor with respect thereto either
in the name of Grantor or otherwise as Beneficiary shall deem best; and
Trustee or Beneficiary shall be entitled to collect and receive the
Rents and every part thereof, all of which shall for all purposes
constitute property of Grantor; and in furtherance of such right
Beneficiary may collect the rents payable under all leases of the
Premises directly from the lessees thereunder upon notice to each such
lessee that an Event of Default exists hereunder accompanied by a
demand on such lessee for the payment to Beneficiary of all rents due
and to become due under its lease, and Grantor FOR THE BENEFIT OF
BENEFICIARY AND EACH SUCH LESSEE hereby covenants and agrees that the
lessee shall be under no duty to question the accuracy of Beneficiary's
statement of default and shall unequivocally be authorized to pay said
rents to Beneficiary without regard to the truth of Beneficiary's
statement of default and notwithstanding notices from Grantor disputing
the existence of an Event of Default such that the payment of rent by
the lessee to Beneficiary pursuant to such a demand shall constitute
performance in full of the lessee's obligation under the lease for the
payment of rents by the lessee to Grantor; and after deducting the
expenses of conducting the business thereof and of all maintenance,
repairs, renewals, replacements, alterations, additions, betterments
and improvements and amounts necessary to pay for taxes, assessments,
insurance and prior or other proper charges upon the Mortgaged Property
or any part thereof, as well as just and reasonable compensation for
the services of Trustee and Beneficiary and for all attorneys, counsel,
agents, clerks, servants and other employees by them engaged and
employed, Trustee or Beneficiary, as the case may be, shall apply the
moneys arising as aforesaid, first, to the payment of the principal of
the Note and
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the interest thereon, when and as the same shall become payable
and in such order and proportions as Beneficiary shall elect and
second, to the payment of any other sums required to be paid by
Grantor hereunder.
III. Trustee or Beneficiary, as the case may be, with or without
entry, personally or by their agents or attorneys, insofar as
applicable, may:
(1) sell the Mortgaged Property and all estate, right, title
and interest, claim and demand therein, at public auction at such
time and place, and upon such terms and conditions as Beneficiary
may deem expedient or as may be required or permitted by
applicable law, having first given such notice prior to the sale
of such time, place and terms by publication in one (1) or more
newspapers published or having a general circulation in the county
or counties of the state in which the Mortgaged Property is
located as may be required or permitted by law and by such other
methods, if any, as Trustee or Beneficiary may deem desirable or
as may be required or permitted by applicable law. In the event of
any sale of all or part of the Mortgaged Property under the terms
hereof, Grantor shall pay (in addition to taxable costs) a
reasonable fee to Trustee which shall be in lieu of all other fees
and commission permitted by statute or custom to be paid,
reasonable attorneys' fees and all expenses incurred in obtaining
or continuing abstracts of title for the purpose of any such sale;
or
(2) institute proceedings for the complete or partial
foreclosure hereof; or
(3) take such steps to protect and enforce their rights
whether by action, suit or proceeding in equity or at law for the
specific performance of any covenant, condition or agreement in
the Note or herein, or in aid of the execution of any power herein
granted, or for any foreclosure hereunder, or for the enforcement
of any other appropriate legal or equitable remedy or otherwise as
Trustee or Beneficiary shall elect.
Section 2.02. Other Matters Concerning Sales. (a) Trustee or
Beneficiary may adjourn from time to time any sale by it to be made hereunder or
by virtue hereof by announcement at the time and place appointed for such sale
or for such adjourned sale or sales; and, except as otherwise provided by any
applicable provision of law, Trustee or Beneficiary, as the case may be, without
further notice or publication, may make such sale at the time and place to which
the same shall be so adjourned.
(b) Upon the completion of any sale or sales made by Trustee or
Beneficiary, as the case may be, under or by virtue of this Article II, Trustee,
or an officer of any court empowered to do so, shall execute and deliver to the
accepted purchaser or purchasers a good and sufficient instrument or instruments
conveying, assigning and transferring all estate, right, title and interest in
and to the property and rights sold. Trustee is hereby appointed the true and
lawful attorney irrevocable of Grantor, in its name and stead, to
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make all necessary conveyances, assignments, transfers and deliveries of the
Mortgaged Property and rights so sold and for that purpose Trustee may execute
all necessary instruments of conveyance, assignment and transfer, and may
substitute one or more persons with like power, Grantor hereby ratifying and
confirming all that its said attorney or such substitute or substitutes shall
lawfully do by virtue hereof. Nevertheless, Grantor, if requested by Trustee or
Beneficiary, shall ratify and confirm any such sale or sales by executing and
delivering to Trustee or to such purchaser or purchasers all such instruments as
may be advisable, in the judgment of Trustee or Beneficiary, for the purpose,
and as may be designated in such request. Any such sale or sales made under or
by virtue of this Article II, whether made under the power of sale herein
granted or under or by virtue of judicial proceedings or of a judgment or decree
of foreclosure and sale, shall operate to divest all the estate, right, title,
interest, claim and demand whatsoever, whether at law or in equity, of Grantor
in and to the properties and rights so sold, and shall be a perpetual bar both
at law and in equity against Grantor and against any and all persons claiming or
who may claim the same, or any part thereof from, through or under Grantor.
(c) In the event of any sale or sales made under or by virtue of this
Article II (whether made under the power of sale herein granted or under or by
virtue of judicial proceedings or of a judgment or decree of foreclosure and
sale), the entire principal of, and interest and other sums on, the Note, if not
previously due and payable, and all other sums required to be paid by Grantor
pursuant hereto, immediately thereupon shall, anything in any of said documents
(other than Section 4.08 hereof) to the contrary notwithstanding, become due and
payable.
(d) The purchase money, proceeds or avails of any sale or sales made
under or by virtue of this Article II, together with any other sums which then
may be held by Trustee or Beneficiary hereunder, whether under the provisions of
this Article II or otherwise, shall be applied as follows:
First: To the payment of the costs and expenses of such sale,
including reasonable compensation to Trustee and Beneficiary, their
agents and counsel, and of any judicial proceedings wherein the same
may be made, and of all expenses, liabilities and advances made or
incurred by Trustee hereunder, together with interest at the Default
Rate on all advances made by Trustee, and of all taxes, assessments or
other charges, except any taxes, assessments or other charges subject
to which the Mortgaged Property shall have been sold.
Second: To the payment of the whole amount then due, owing or
unpaid upon the Note for principal and interest, with interest on the
unpaid principal at the Default Rate from and after the happening of
any Event of Default described in clause (a) of Section 2.01 from the
due date of any such payment of principal until the same is paid, in
such order and amounts as Beneficiary may elect.
Third: To the payment of any other sums required to be paid by
Grantor pursuant to any provision hereof or of the Note, including all
expenses, liabilities and advances made or incurred by Beneficiary
hereunder or in connection with the enforcement hereof, together with
interest at the Default Rate on all such advances.
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Fourth: To the payment of the surplus, if any, to whomsoever
may be lawfully entitled to receive the same.
(e) Upon any sale or sales made under or by virtue of this Article II,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale,
Beneficiary may bid for and acquire the Mortgaged Property or any part thereof
and in lieu of paying cash therefor may make settlement for the purchase price
by crediting upon the indebtedness secured hereby the net sales price after
deducting therefrom the expenses of the sale and the costs of the action and any
other sums which Trustee or Beneficiary are authorized to deduct hereunder.
Section 2.03. Payment of Amounts Due. (a) In case an Event of Default
described in clause (a) of Section 2.01 shall have happened and be continuing,
then, upon demand of Beneficiary, Grantor will pay to Beneficiary the whole
amount which then shall have become due and payable on the Note, for principal
or interest or both, as the case may be, and after the happening of said Event
of Default will also pay to Beneficiary interest at the Default Rate on the then
unpaid principal of the Note, and the sums required to be paid by Grantor
pursuant to any provision hereof, and in addition thereto such further amount as
shall be sufficient to cover the costs and expenses of collection, including
reasonable compensation to Trustee and Beneficiary, their agents and counsel and
any expenses incurred by Trustee or Beneficiary hereunder. In the event Grantor
shall fail forthwith to pay all such amounts upon such demand, Beneficiary shall
be entitled and empowered to institute such action or proceedings at law or in
equity as may be advised by its counsel for the collection of the sums so due
and unpaid, and may prosecute any such action or proceedings to judgment or
final decree, and may enforce any such judgment or final decree against Grantor
and collect, out of the property of Grantor wherever situated, as well as out of
the Mortgaged Property, in any manner provided by law, moneys adjudged or
decreed to be payable.
(b) Beneficiary shall be entitled to recover judgment as aforesaid
either before, after or during the pendency of any proceedings for the
enforcement of the provisions hereof; and the right of Beneficiary to recover
such judgment shall not be affected by any entry or sale hereunder, or by the
exercise of any other right, power or remedy for the enforcement of the
provisions hereof, or the foreclosure of the lien hereof; and in the event of a
sale of the Mortgaged Property, and of the application of the proceeds of sale,
as herein provided, to the payment of the debt hereby secured, Beneficiary shall
be entitled to enforce payment of, and to receive all amounts then remaining due
and unpaid upon, the Note, and to enforce payment of all other charges, payments
and costs due hereunder or otherwise in respect of the Loan, and shall be
entitled to recover judgment for any portion of the debt remaining unpaid, with
interest at the Default Rate. In case of proceedings against Grantor in
insolvency or bankruptcy or any proceedings for its reorganization or involving
the liquidation of its assets, then Beneficiary shall be entitled to prove the
whole amount of principal, interest and other
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sums due upon the Note to the full amount thereof, and all other payments,
charges and costs due hereunder or otherwise in respect of the Loan, without
deducting therefrom any proceeds obtained from the sale of the whole or any part
of the Mortgaged Property, provided, however, that in no case shall Beneficiary
receive, from the aggregate amount of the proceeds of the sale of the Mortgaged
Property and the distribution from the estate of Grantor, a greater amount than
such principal and interest and such other payments, charges and costs.
(c) No recovery of any judgment by Beneficiary and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Grantor shall affect in any manner or to any extent, the lien hereof
upon the Mortgaged Property or any part thereof, or any liens, rights, powers or
remedies of Trustee or Beneficiary hereunder, but such liens, rights, powers and
remedies of Trustee or Beneficiary shall continue unimpaired as before.
(d) Any moneys thus collected by Beneficiary under this Section 2.03
shall be applied by Beneficiary in accordance with the provisions of clause (d)
of Section 2.02.
Section 2.04. Actions; Receivers. After the happening of any Event of
Default and immediately upon the commencement of any action, suit or other legal
proceedings by Trustee or Beneficiary to obtain judgment for the principal of,
or interest on, the Note and other sums required to be paid by Grantor pursuant
to any provision hereof, or of any other nature in aid of the enforcement of the
Note or hereof, Grantor will (a) waive the issuance and service of process and
enter its voluntary appearance in such action, suit or proceeding and (b) if
required by Beneficiary, consent to the appointment of a receiver or receivers
of all or part of the Mortgaged Property and of any or all of the Rents in
respect thereof. After the happening of any Event of Default and during its
continuance, or upon the commencement of any proceedings to foreclose this Deed
or to enforce the specific performance hereof or in aid thereof or upon the
commencement of any other judicial proceeding to enforce any right of Trustee or
Beneficiary, Trustee or Beneficiary shall be entitled, as a matter of right, if
they shall so elect, without the giving of notice to any other party and without
regard to the adequacy or inadequacy of any security for the indebtedness
secured hereby, forthwith either before or after declaring the unpaid principal
of the Note to be due and payable, to the appointment of such a receiver or
receivers.
Section 2.05. Beneficiary's Right to Possession. Notwithstanding the
appointment of any receiver, liquidator or trustee of Grantor, or of any of its
property, or of the Mortgaged Property or any part thereof, Trustee and
Beneficiary shall be entitled to retain possession and control of all property
now or hereafter held hereunder.
Section 2.06. Remedies Cumulative. No remedy herein conferred upon or
reserved to Trustee or Beneficiary is intended to be exclusive of any other
remedy or remedies, and each and every such remedy shall be cumulative, and
shall be in addition to every other remedy given hereunder or now or hereafter
existing at law, in equity or by statute. No delay or omission of Trustee or
Beneficiary to exercise any right or power accruing upon any Event of Default
shall impair any such right or power, or shall be
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construed to be a waiver of any such Event of Default or any acquiescence
therein; and every power and remedy given hereby to Trustee or Beneficiary may
be exercised from time to time as often as may be deemed by them expedient.
Nothing herein or in the Note shall affect the obligation of Grantor to pay the
principal of, and interest and other sums on, the Note in the manner and at the
time and place therein respectively expressed.
Section 2.07. Moratorium Laws; Right of Redemption. Grantor will not at
any time insist upon, or plead, or in any manner whatever claim or take any
benefit or advantage of any stay or extension or moratorium law, any exemption
from execution or sale of the Mortgaged Property or any part thereof, wherever
enacted, now or at any time hereafter in force, which may affect the covenants
and terms of performance hereof, nor claim, take or insist upon any benefit or
advantage of any law now or hereafter in force providing for the valuation or
appraisal of the Mortgaged Property, or any part thereof, prior to any sale or
sales thereof which may be made pursuant to any provision herein, or pursuant to
the decree, judgment or order of any court of competent jurisdiction; nor, after
any such sale or sales, claim or exercise any right under any statute heretofore
or hereafter enacted to redeem the property so sold or any part thereof and
Grantor hereby expressly waives all benefit or advantage of any such law or
laws, and covenants not to hinder, delay or impede the execution of any power
herein granted or delegated to Trustee or Beneficiary, but to suffer and permit
the execution of every power as though no such law or laws had been made or
enacted. Grantor, for itself and all who may claim under it, waives, to the
extent that it lawfully may, all right to have the Mortgaged Property marshaled
upon any foreclosure hereof.
Section 2.08. Intentionally Omitted.
Section 2.09. Beneficiary's Rights Concerning Application of Amounts
Collected. Notwithstanding anything to the contrary contained herein, upon the
occurrence of an Event of Default, Beneficiary may apply, to the extent
permitted by law, any amount collected hereunder to principal, interest or any
other sum due under the Note or otherwise in respect of the Loan in such order
and amounts, and to such obligations, as Beneficiary shall elect in its sole and
absolute discretion.
ARTICLE III
CONCERNING TRUSTEE
Section 3.01. Trustee's Performance. Trustee, by its acceptance hereof,
covenants faithfully to perform and fulfill the trusts herein created, being
liable, however, only for willful negligence or misconduct, and hereby waives
any statutory fee and agrees to accept reasonable compensation, in lieu thereof,
for any services rendered by it in accordance with the terms hereof.
Section 3.02. Resignation by Trustee. Trustee may resign at any time
upon giving thirty (30) days' notice to Grantor and Beneficiary.
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Section 3.03. Removal of Trustee; Successors. Beneficiary may remove
Trustee at any time or from time to time and select a successor trustee. In the
event of the death, removal, resignation or refusal or inability to act of
Trustee, or in its sole discretion for any reason whatsoever, Beneficiary may,
without notice and without specifying any reason therefor and without applying
to any court, select and appoint a successor Trustee, and all powers, rights,
duties and authority of Trustee, as aforesaid, shall thereupon become vested in
such successor. In such connection, Beneficiary may, on its and Grantor's
behalf, execute, acknowledge and record an instrument or agreement of such
substitution, and Grantor hereby irrevocably appoints Beneficiary as its
attorney-in-fact, with full power of substitution, to do so. Such substitute
trustee shall not be required to give bond for the faithful performance of its
duties unless required by Beneficiary.
ARTICLE IV
MISCELLANEOUS
Section 4.01. Assignment of Rents. This Deed is intended to constitute
a present, absolute and irrevocable assignment of all of the Rents now or
hereafter accruing, and Grantor, without limiting the generality of the Granting
Clause hereof, specifically hereby presently, absolutely and irrevocably assigns
all of the Rents now or hereafter accruing to Beneficiary. The aforesaid
assignment shall be effective immediately upon the execution hereof and is not
conditioned upon the occurrence of any Event of Default hereunder or any other
contingency or event, provided, however, that Beneficiary hereby grants to
Grantor the right and license to collect and receive the Rents as they become
due, and not in advance, so long as no Event of Default exists hereunder.
Immediately upon the occurrence of any such Event of Default, the foregoing
right and license shall be automatically terminated and of no further force or
effect. Nothing contained in this Section or elsewhere herein shall be construed
to make Beneficiary a mortgagee in possession unless and until Beneficiary
actually takes possession of the Mortgaged Property, nor to obligate Beneficiary
to take any action or incur any expense or discharge any duty or liability under
or in respect of any leases or other agreements relating to the Mortgaged
Property or any part thereof.
Section 4.02. Security Agreement. This Deed constitutes a security
agreement under the applicable Uniform Commercial Code with respect to the
Chattels and such other of the Mortgaged Property which is personal property. In
addition to the rights and remedies granted to Beneficiary by other applicable
law or hereby, Beneficiary shall have all of the rights and remedies with
respect to the Chattels and such other personal property as are granted to a
secured party under the applicable Uniform Commercial Code. Upon Beneficiary's
request after an Event of Default, Grantor shall promptly and at its expense
assemble the Chattels and such other personal property and make the same
available to Beneficiary at a convenient place acceptable to Beneficiary.
Grantor, after an Event of Default, shall pay to Beneficiary on demand, with
interest at the Default Rate, any and all expenses, including attorneys' fees,
incurred by Beneficiary in protecting its interest in the Chattels and such
other personal property and in enforcing its rights with respect thereto. Any
notice of sale, disposition or other intended action by
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Beneficiary with respect to the Chattels and such other personal property sent
to Grantor in accordance with the provisions hereof at least five (5) days prior
to such action shall constitute reasonable notice to Grantor. The proceeds of
any such sale or disposition, or any part thereof, may be applied by Beneficiary
to the payment of the indebtedness secured hereby in such order and proportions
as Beneficiary in its discretion shall deem appropriate. To the extent Grantor
may lawfully do so and without limiting any rights and/or privileges herein
granted to Beneficiary, Grantor agrees that Beneficiary and/or Trustee and any
successor Trustee may dispose of any or all of the Chattels at the same time and
place and after giving the same notices provided in this Deed in connection with
a non-judicial foreclosure sale under the terms and conditions set forth in
Article II, Section 2.01, or III of this Deed. In this connection, Grantor
agrees that the sale may be conducted by Trustee or successor Trustee; that the
sale of the real estate and improvements described in this Deed and the Chattels
or any part thereof, may be sold separately or together; and that in the event
the Premises and the Chattels or any part thereof are sold together, Beneficiary
will not be obligated to allocate the consideration received as between the
Premises and the Chattels.
Section 4.03. Application of Certain Payments. In the event that all or
any part of the Mortgaged Property is encumbered by one or more deeds of trust
held by or for the benefit of Beneficiary, Grantor hereby irrevocably authorizes
and directs Beneficiary to apply any payment received by Beneficiary in respect
of any note secured hereby or by any other such deed of trust to the payment of
such of said notes as Beneficiary shall elect in its sole and absolute
discretion, and Beneficiary shall have the right to apply any such payment in
reduction of principal and/or interest and in such order and amounts as
Beneficiary shall elect in its sole and absolute discretion without regard to
the priority of the deed of trust securing the note so repaid or to contrary
directions from Grantor or any other party.
Section 4.04. Severability. In the event any one or more of the
provisions contained herein or in the Note shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, but this Deed
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein or therein.
Section 4.05. Modifications and Waivers in Writing. No provision hereof
may be changed, waived, discharged or terminated orally or by any other means
except an instrument in writing signed by the party against whom enforcement of
the change, waiver, discharge or termination is sought. Any agreement hereafter
made by Grantor and Beneficiary relating hereto shall be superior to the rights
of the holder of any intervening or subordinate lien or encumbrance.
Section 4.06. Notices. All notices, demands, consents, approvals and
statements required or permitted hereunder shall be in writing and shall be
deemed to have been sufficiently given or served for all purposes when presented
personally, three (3) days after mailing by registered or certified mail,
postage prepaid, or one (1) day after delivery to a nationally recognized
overnight courier service providing evidence of the date of delivery, if to
Grantor at its address stated above, with a copy to Thomas E. Davis, Esq.,
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Jenkens & Gilchrist, 1445 Ross Avenue, Suite 3200, Dallas, Texas 75202-2799, and
if to Beneficiary to its address stated above, or at such other address of which
a party shall have notified the party giving such notice in accordance with the
provisions of this Section.
Section 4.07. Successors and Assigns. All of the grants, covenants,
terms, provisions and conditions herein shall run with the land and shall apply
to, bind and inure to the benefit of, the successors and assigns of Grantor, the
successors in trust of Trustee and the endorsees, transferees, successors and
assigns of Beneficiary.
Section 4.08. Limitation on Interest. Anything herein or in the Note to
the contrary notwithstanding, the obligations of Grantor hereunder and under the
Note shall be subject to the limitation that payments of interest shall not be
required to the extent that receipt of any such payment by Beneficiary would be
contrary to provisions of law applicable to Beneficiary limiting the maximum
rate of interest that may be charged or collected by Beneficiary.
Section 4.09. Counterparts. This Deed may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original; and all such counterparts shall together constitute but one and
the same deed.
Section 4.10. Substitute Deeds. Grantor and Beneficiary shall, upon
their mutual agreement to do so, execute such documents as may be necessary in
order to effectuate the modification hereof, including the execution of
substitute deeds of trust, so as to create two (2) or more liens on or security
titles in respect of the Mortgaged Property in such amounts as may be mutually
agreed upon but in no event to exceed, in the aggregate, the unpaid principal
portion of the Note Amount; in such event, Grantor covenants and agrees to pay
the reasonable fees and expenses of Beneficiary and its counsel in connection
with any such modification.
Section 4.11. Beneficiary's Sale of Interests in Loan. Grantor
recognizes that Beneficiary may sell and transfer interests in the Loan to one
or more participants or assignees and that all documentation, financial
statements, appraisals and other data, or copies thereof, relevant to Grantor,
any Guarantor or the Loan, may be exhibited to and retained by any such
participant or assignee or prospective participant or assignee.
Section 4.12. No Merger of Interests. Unless expressly provided
otherwise, in the event that ownership hereof and title to the fee and/or
leasehold estates in the Premises encumbered hereby shall become vested in the
same person or entity, this Deed shall not merge in said title but shall
continue to be and remain a valid and subsisting lien and/or trust deed on said
estates in the Premises for the amount secured hereby.
Section 4.13. CERTAIN WAIVERS. GRANTOR EXPRESSLY AND UNCONDITIONALLY
WAIVES BY EXECUTION HEREOF, AND BENEFICIARY WAIVES BY ACCEPTANCE HEREOF, IN
CONNECTION WITH ANY FORECLOSURE OR SIMILAR ACTION OR PROCEDURE BROUGHT BY
BENEFICIARY ASSERTING AN EVENT OF DEFAULT UNDER CLAUSE (A) OF SECTION 2.01 OF
THIS DEED, ANY AND EVERY RIGHT IT MAY HAVE TO A TRIAL BY JURY.
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<PAGE>
Section 4.14. GOVERNING LAW. THE PERFORMANCE REQUIRED BY THIS DEED
SHALL, INSOFAR AS IS POSSIBLE, BE RENDERED TO THE BENEFICIARY AT ITS OFFICE IN
TENNESSEE. GRANTOR AND BENEFICIARY INTEND THAT THE VALIDITY AND CONSTRUCTION OF
THE OBLIGATIONS SECURED BY THIS DEED BE GOVERNED BY THE LAWS OF THE STATE OF
TENNESSEE INCLUDING ALL OBLIGATIONS AND LIABILITIES HEREUNDER WITH RESPECT TO
THE PAYMENT OF INTEREST OR ANY OTHER COMPENSATION FOR THE USE, FORBEARANCE OR
DETENTION OF MONEY. THIS DEED SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TENNESSEE, WITHOUT REFERENCE TO THE CONFLICTS OF LAW
PRINCIPLES OF THAT STATE, EXCEPT ONLY TO THE EXTENT THAT MISSISSIPPI LAW
EXPRESSLY PROVIDES THAT IT GOVERNS AND THAT A CONTRARY AGREEMENT BY THE PARTIES
IS INEFFECTIVE AND EXCEPT THAT THE LAW OF THE STATE OF MISSISSIPPI SHALL APPLY
TO ANY AND ALL ACTS WITH RESPECT TO THE CREATION AND PRIORITY OF THE LIEN OF THE
DEED AND ASSIGNMENT OF LEASES AND RENTS ON THE MORTGAGED PROPERTY HEREBY
EVIDENCED AND FORECLOSURE BY TRUSTEE ON THE MORTGAGED PROPERTY. GRANTOR,
BENEFICIARY AND TRUSTEE COVENANT AND AGREE TO TAKE ANY AND ALL ACTION WHICH MAY
BE NECESSARY UNDER MISSISSIPPI LAW WITH RESPECT TO FORECLOSURE UNDER THE LAWS OF
THE STATE OF MISSISSIPPI. SHOULD ANY OBLIGATION OR REMEDY UNDER THIS DEED BE
INVALID OR UNENFORCEABLE UNDER THE LAWS PROVIDED HEREIN TO GOVERN, THE LAWS OF
ANOTHER STATE WHOSE LAWS CAN VALIDATE AND APPLY TO THIS DEED SHALL APPLY.
27
<PAGE>
IN WITNESS WHEREOF, this Deed has been duly executed and delivered by
Grantor.
APPLE SUITES, INC.,
a Virginia corporation
By /s/ Glade M. Knight [L.S.]
------------------------------------
Name: Glade M. Knight
Title: Chairman of the Board and
President
APPLE SUITES MANAGEMENT, INC.,
a Virginia corporation
By /s/ Glade M. Knight [L.S.]
------------------------------------
Name: Glade M. Knight
Title: Chairman, CEO and President
<PAGE>
STATE OF VIRGINIA
CITY OF RICHMOND
PERSONALLY appeared before me, the undersigned authority in and for the
said County and State, on this 2nd day of May, 2000, within my jurisdiction, the
within named Glade M. Knight, who acknowledged to me that he/she executed and
delivered the above and foregoing instrument of writing for and on behalf of
said Apple Suites, Inc.
GIVEN UNDER MY HAND AND OFFICIAL SEAL OF OFFICE.
/s/ Jacquelyn B. Owens
---------------------------------------------
Notary Public
My commission expires:
6/30/03
- ---------------------
<PAGE>
STATE OF VIRGINIA
CITY OF RICHMOND
PERSONALLY appeared before me, the undersigned authority in and for the
said County and State, on this 2nd day of May, 2000, within my jurisdiction, the
within named Glade M. Knight, who acknowledged to me that he/she executed and
delivered the above and foregoing instrument of writing for and on behalf of
said Apple Suites Management, Inc.
GIVEN UNDER MY HAND AND OFFICIAL SEAL OF OFFICE.
/s/ Jacquelyn B. Owens
---------------------------------------------
Notary Public
My commission expires:
6/30/03
- -----------------------
Beneficiary's Address:
- ---------------------
c/o Promus Hotels, Inc.
755 Crossover Lane
Memphis, Tennessee 38117-4900
Grantor's Address:
- -----------------
c/o Cornerstone Realty Income Trust, Inc.
306 East Main Street
Richmond, Virginia 23219
Prepared by:
- -----------
Graham R. Hone, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
212/259-8000
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF PREMISES
ALL THAT CERTAIN parcel of land SITUATE in East Whiteland Township, Chester
County, Pennsylvania, being bounded and described according to a Survey and Plan
thereof entitled ALTA/ACSM Land Title Survey for Promus Hotel Corporation, dated
August 12, 1996 by Chester Valley Engineers, Inc., Paoli, Pennsylvania, and
being more fully described as follows:
BEGINNING at a point on the southerly legal Right of Way Line of Swedesford Road
- - S. R. 1002, 94 feet wide, a corner in common of these and lands now or late of
the Pennsylvania State University; THENCE from the point of beginning, leaving
said right of way line, along said lands, South 28 degrees 04 minutes 35 seconds
East 566.35 feet to a point on line of other lands now or late of the
Pennsylvania State University; THENCE along said lands, along the northerly
Legal Right of Way Line for Limited Access of U.S. Route 202 - S. R. 0202,
variable width, South 59 degrees 09 minutes 34 seconds West 168.05 feet; THENCE
continuing along said right of way line, North 88 degrees 24 minutes 32 seconds
West 186.61 feet to a corner of lands now or late of Loretta M. Cimeo, et al:
THENCE leaving said right of way line, along said lands, North 28 degrees 04
minutes 35 seconds West 457.22 feet to a point on the southerly Legal Right of
Way Line of Swedesford Road - S.R. 1002, aforesaid; THENCE along said right of
way line, along a curve to the right having a radius of 13.468.61 feet, an arc
length of 330.94 feet, and a chord bearing North 57 degrees 36 minutes 55
seconds East 330.94 feet to the point of beginning.
Exhibit 4.4
[Gwinnett]
DEED TO SECURE DEBT MODIFICATION AGREEMENT
DEED TO SECURE DEBT MODIFICATION AGREEMENT (this "Agreement")
made this 8th day of May, 2000, among PROMUS HOTELS, INC., a Delaware
corporation, having an office at 755 Crossover Lane, Memphis, Tennessee
38117-4900 ("Mortgagee"), and APPLE SUITES, INC., a Virginia corporation ("Fee
Owner"), APPLE SUITES MANAGEMENT, INC., a Virginia corporation ("Lessee";
together with Fee Owner, collectively, "Mortgagor"), each of Fee Owner and
Lessee having an office at 306 East Main Street, Richmond, Virginia 23219.
Preliminary Statement
Mortgagee is the lawful owner and holder of the obligations
secured by the Fee and Leasehold Deed To Secure Debt dated December 22, 1999,
from Mortgagor to Mortgagee, recorded in the Records of Gwinnett County, Georgia
in Deed Book ______, Page ______ (the "Deed To Secure Debt"). The Deed To Secure
Debt secures a $4,384,500 note of Fee Owner dated December 22, 1999 (the
"Original Note"), which evidences a purchase money loan (the "Loan") in the
amount of $4,384,500 from Mortgagee to Fee Owner.
Pursuant to the Agreement of Sale (as defined in the Deed to
Secure Debt), Fee Owner is to acquire certain additional premises described
therein and in connection therewith, Fee Owner will borrow $11,616,750 from
Mortgagee and has executed and delivered to Mortgagee its note, dated the date
hereof, obligating it to pay the sum of $11,616,750 (the "New Note"), with
interest thereon as therein provided and
<PAGE>
with final payment being due on April 28, 2001. The New Note by this reference
is made a part hereof and of the Deed To Secure Debt.
In consideration of such additional loan by Mortgagee to Fee
Owner, Mortgagee and Mortgagor have agreed to modify the Deed To Secure Debt to
secure the New Note and thereby increase the amount secured by the Deed To
Secure Debt, all in the manner hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:
1. The Deed To Secure Debt is modified as follows: The term
"Note" shall mean, collectively, the Original Note and the New Note, as the same
may hereafter be amended, modified, extended, severed, assigned, renewed or
restated, from time to time and the term "Mortgage Amount" shall mean the sum of
Sixteen Million One Thousand Two Hundred Fifty and 00/100 Dollars ($16,001,250).
Accordingly, the Deed To Secure Debt shall secure the amount of $16,001,250.
2. Mortgagor warrants and represents that there are no
defenses, offsets or counterclaims with respect to its obligations under the
Deed To Secure Debt, as modified hereby, including, without limitation, its
obligation for the payment of the Note.
3. Except as modified in the manner set forth above, the Deed
To Secure Debt shall remain unmodified and in full force and effect.
4. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Agreement by signing any such
counterpart.
2
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by each of the parties hereto as of the date first above written.
PROMUS HOTELS, INC.,
Attest: a Delaware corporation
By /s/ Stevan D. Porter [SEAL]
- ---------------------------- ------------------------------
Name: Stevan D. Porter
Executive Vice President
Signed, sealed and delivered this
4th day of May,
2000 in the presence of:
- ----------------------------
Unofficial Witness
Subscribed and sworn to before me this 4th day of May, 2000
/s/ David Marote
- -----------------------------
Notary Public
----------------------------
[Notarial Seal] DAVID MAROTE
[Notarial Stamp] COMM. #1192700
NOTARY PUBLIC-CALIFORNIA
LOS ANGELES COUNTY
COMM. EXP. AUG. 8, 2002
-----------------------------
APPLE SUITES, INC.,
Attest: a Virginia corporation
/s/ S. J. Olander, Jr. By /s/ Glade M. Knight [SEAL]
- -------------------------------- ----------------------------------
Name: Name: Glade M. Knight
Title: Chairman of the Board
and President
Signed, sealed and delivered this
2nd day of May,
2000 in the presence of:
/s/ Gus G. Remppies
- ---------------------------------
Unofficial Witness
/s/ Jacquelyn B. Owens
- ---------------------------------
Notary Public
[Notarial Seal]
[Notarial Stamp]
<PAGE>
APPLE SUITES MANAGEMENT, INC.,
Attest: a Virginia corporation
/s/ S. J. Olander, Jr. By /s/ Glade M. Knight [SEAL]
- ---------------------------------- -----------------------------
Name: Name: Glade M. Knight
Title: Chairman, Chief Executive
Officer and President
Signed, sealed and delivered this
2nd day of May,
2000 in the presence of:
/s/ Gus G. Remppies
- ----------------------------------
Unofficial Witness
/s/ Jacquelyn B. Owens
- ----------------------------------
Notary Public
[Notarial Seal]
[Notarial Stamp]
Exhibit 4.5
[Cobb]
SECOND
DEED TO SECURE DEBT MODIFICATION AGREEMENT
SECOND DEED TO SECURE DEBT MODIFICATION AGREEMENT (this
"Agreement") made this 8th day of May, 2000, among PROMUS HOTELS, INC., a
Delaware corporation, having an office at 755 Crossover Lane, Memphis, Tennessee
38117-4900 ("Mortgagee"), and APPLE SUITES, INC., a Virginia corporation ("Fee
Owner"), APPLE SUITES MANAGEMENT, INC., a Virginia corporation ("Lessee";
together with Fee Owner, collectively, "Mortgagor"), each of Fee Owner and
Lessee having an office at 306 East Main Street, Richmond, Virginia 23219.
Preliminary Statement
Mortgagee is the lawful owner and holder of the obligations
secured by the Fee and Leasehold Deed To Secure Debt dated November 29, 1999,
from Mortgagor to Mortgagee, recorded in the Records of Cobb County, Georgia in
Deed Book ______, Page ______, as amended by Deed To Secure Debt Modification
Agreement dated December 22, 1999 among Mortgagee, Fee Owner and Lessee which
has been or is to be recorded in the Records of Cobb County, Georgia
(collectively, the "Deed To Secure Debt"). The Deed To Secure Debt secures a
$30,210,000 note of Fee Owner dated November 29, 1999 and a $4,384,500 note of
Fee Owner dated December 22, 1999 (said notes, collectively, the "Original
Notes"), which evidence purchase money loans (collectively, the "Loans") in the
aggregate amount of $34,594,500 from Mortgagee to Fee Owner.
<PAGE>
Pursuant to the Agreement of Sale (as defined in the Deed to
Secure Debt), Fee Owner is to acquire certain additional premises described
therein and in connection therewith, Fee Owner will borrow $11,616,750 from
Mortgagee and has executed and delivered to Mortgagee its note, dated the date
hereof, obligating it to pay the sum of $11,616,750 (the "New Note"), with
interest thereon as therein provided and with final payment being due on April
28, 2001. The New Note by this reference is made a part hereof and of the Deed
To Secure Debt.
In consideration of such additional loan by Mortgagee to Fee
Owner, Mortgagee and Mortgagor have agreed to modify the Deed To Secure Debt to
secure the New Note and thereby increase the amount secured by the Deed To
Secure Debt, all in the manner hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:
1. The Deed To Secure Debt is modified as follows: The term
"Note" shall mean, collectively, the Original Notes and the New Note, as the
same may hereafter be amended, modified, extended, severed, assigned, renewed or
restated, from time to time and the term "Mortgage Amount" shall mean the sum of
Forty-Six Million Two Hundred Eleven Thousand Two Hundred Fifty and 00/100
Dollars ($46,211,250). Accordingly, the Deed To Secure Debt shall secure the
amount of $46,211,250.
2. Mortgagor warrants and represents that there are no
defenses, offsets or counterclaims with respect to its obligations under the
Deed To Secure Debt, as modified hereby, including, without limitation, its
obligation for the payment of the Note.
2
<PAGE>
3. Except as modified in the manner set forth above, the Deed
To Secure Debt shall remain unmodified and in full force and effect.
4. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Agreement by signing any such
counterpart.
3
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by each of the parties hereto as of the date first above written.
PROMUS HOTELS, INC.,
Attest: a Delaware corporation
By /s/ Stevan D. Porter [SEAL]
- ---------------------------- ----------------------------------
Name: Stevan D. Porter
Executive Vice President
Signed, sealed and delivered this
4th day of May,
2000 in the presence of:
- ----------------------------
Unofficial Witness
Subscribed and sworn to before me this 4th day of May, 2000
/s/ David Marote
- ----------------------------
Notary Public
--------------------------
[Notarial Seal] DAVID MAROTE
[Notarial Stamp] COMM. #1192700
NOTARY PUBLIC - CALIFORNIA
LOS ANGELES COUNTY
COMM. EXP. AUG. 8, 2002
--------------------------
APPLE SUITES, INC.,
Attest: a Virginia corporation
By /s/ Glade M. Knight [SEAL]
- ---------------------------- ---------------------------------
Name: Name: Glade M. Knight
Title: Chairman of the Board
and President
Signed, sealed and delivered this
2nd day of May,
2000 in the presence of:
/s/ Gus G. Remppies
- ----------------------------
Unofficial Witness
/s/ Jacquelyn B. Owens
- ----------------------------
Notary Public
[Notarial Seal]
[Notarial Stamp]
<PAGE>
APPLE SUITES MANAGEMENT, INC.,
Attest: a Virginia corporation
By /s/ Glade M. Knight [SEAL]
- ---------------------------- -------------------------------
Name: Name: Glade M. Knight
Title: Chairman, CEO and President
Signed, sealed and delivered this
2nd day of May,
2000 in the presence of:
/s/ Gus G. Remppies
- ----------------------------
Unofficial Witness
/s/ Jacquelyn B. Owens
- ----------------------------
Notary Public
[Notarial Seal]
[Notarial Stamp]
Exhibit 4.6
[Michigan]
MORTGAGE MODIFICATION AGREEMENT
MORTGAGE MODIFICATION AGREEMENT (this "Agreement") made this
8th day of May, 2000, among PROMUS HOTELS, INC., a Delaware corporation, having
an office at 755 Crossover Lane, Memphis, Tennessee 38117-4900 ("Mortgagee"),
and APPLE SUITES, INC., a Virginia corporation ("Fee Owner"), APPLE SUITES
MANAGEMENT, INC., a Virginia corporation ("Lessee"; together with Fee Owner,
collectively, "Mortgagor"), each of Fee Owner and Lessee having an office at 306
East Main Street, Richmond, Virginia 23219.
Preliminary Statement
Mortgagee is the lawful owner and holder of the obligations
secured by the Fee and Leasehold Mortgage dated December 22, 1999, from
Mortgagor to Mortgagee, recorded in the Macomb County Records, Michigan in Book
______, Page ______ (the "Mortgage"). The Mortgage secures a $4,384,500 note of
Fee Owner dated December 22, 1999 (the "Original Note"), which evidences a
purchase money loan (the "Loan") in the amount of $4,384,500 from Mortgagee to
Fee Owner.
Pursuant to the Agreement of Sale (as defined in the
Mortgage), Fee Owner is to acquire certain additional premises described therein
and in connection therewith, Fee Owner will borrow $11,616,750 from Mortgagee
and has executed and delivered to Mortgagee its note, dated the date hereof,
obligating it to pay the sum of $11,616,750 (the "New Note"), with interest
thereon as therein provided and with final payment being due on April 28, 2001.
<PAGE>
In consideration of such additional loan by Mortgagee to Fee
Owner, Mortgagee and Mortgagor have agreed to modify the Mortgage to secure the
New Note and thereby increase the amount secured by the Mortgage, all in the
manner hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:
1. The Mortgage is modified as follows: The term "Note" shall
mean, collectively, the Original Note and the New Note, as the same may
hereafter be amended, modified, extended, severed, assigned, renewed or
restated, from time to time and the Mortgage shall secure the amount of
$16,001,250.
2. Mortgagor warrants and represents that there are no
defenses, offsets or counterclaims with respect to its obligations under the
Mortgage, as modified hereby, including, without limitation, its obligation for
the payment of the Note.
3. Except as modified in the manner set forth above, the
Mortgage shall remain unmodified and in full force and effect.
4. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Agreement by signing any such
counterpart.
2
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by each of the parties hereto as of the date first above written.
Witness: PROMUS HOTELS, INC.,
a Delaware corporation
- ----------------------------
Name:
By /s/ Stevan D. Porter [L.S.]
---------------------------
- ---------------------------- Stevan D. Porter
Name: Executive Vice President
Witness: APPLE SUITES, INC.,
a Virginia corporation
/s/ Gus G. Remppies
- ----------------------------
Name:
By /s/ Glade M. Knight [L.S.]
---------------------------
/s/ Angela M. [illegible] Name: Glade M. Knight
- ---------------------------- Title: Chairman of the Board and
Name: President
Witness: APPLE SUITES MANAGEMENT, INC.,
a Virginia corporation
/s/ Gus G. Remppies
- ----------------------------
Name:
By /s/ Glade M. Knight [L.S.]
---------------------------
/s/ Angela M. [illegible] Name: Glade M. Knight
- ------------------------------------------ Title: Chairman, CEO and
Name: President
<PAGE>
STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
THIS INSTRUMENT was acknowledged before me on the 4th day of
May, 2000, by Stevan D. Porter, Executive Vice President of Promus Hotels, Inc.,
a Delaware corporation, on behalf of said Promus Hotels, Inc.
/s/ David Marote
--------------------------------------------
Notary Public, State of California
Printed Name: David Marote
------------------------------
Commission Expires: 8/8/2002
------------------------
<PAGE>
STATE OF VIRGINIA
CITY OF RICHMOND
THIS INSTRUMENT was acknowledged before me on the 2nd day of
May, 2000, by Glade M. Knight, Chairman & President of Apple Suites, Inc., a
Virginia corporation, on behalf of said Apple Suites, Inc.
/s/ Jacquelyn B. Owens
--------------------------------------------
Notary Public, State of Virginia
Printed Name: Jacquelyn B. Owens
------------------------------
Commission Expires: 6/30/03
------------------------
<PAGE>
STATE OF VIRGINIA
CITY OF RICHMOND
THIS INSTRUMENT was acknowledged before me on the 2nd day of
May, 2000, by Glade M. Knight, Chairman, President & CEO of Apple Suites
Management, Inc., a Virginia corporation, on behalf of said Apple Suites
Management, Inc.
/s/ Jacquelyn B. Owens
--------------------------------------------
Notary Public, State of Virginia
Printed Name: Jacquelyn B. Owens
------------------------------
Commission Expires: 6/30/03
------------------------
Exhibit 4.7
[Utah]
DEED OF TRUST MODIFICATION AGREEMENT
DEED OF TRUST MODIFICATION AGREEMENT (this "Agreement") made
this 8th day of May, 2000, among PROMUS HOTELS, INC., a Delaware corporation,
having an office at 755 Crossover Lane, Memphis, Tennessee 38117-4900
("Beneficiary"), APPLE SUITES, INC., a Virginia corporation ("Fee Owner"), APPLE
SUITES MANAGEMENT, INC., a Virginia corporation ("Lessee"; together with Fee
Owner, collectively, "Grantor"), each of Fee Owner and Lessee having an office
at 306 East Main Street, Richmond, Virginia 23219, and LAWYERS TITLE REALTY
SERVICES, INC., having an address at 7557 Rambler Road, Suite 1200, L.B. #31,
Dallas, Texas 75231 ("Trustee").
Preliminary Statement
Beneficiary is the beneficiary under, and the lawful owner and
holder of the obligations secured by, the Fee and Leasehold Deed of Trust,
Assignment of Leases and Rents and Security Agreement, securing the Note Amount
of $4,384,500, dated December 22, 1999, from Grantor to Trustee, as trustee,
recorded in the Official Records of Salt Lake County, Utah on ____________ as
Entry No. ____________ in Book ______ at Page ______ (the "Deed of Trust"). The
Deed of Trust secures a $4,384,500 note of Fee Owner dated December 22, 1999
(the "Original Note"), which Original Note evidences a purchase money loan (the
"Loan") in the amount of $4,384,500 from Beneficiary to Fee Owner.
Pursuant to an Agreement of Sale dated November 22, 1999
between Beneficiary, Hampton Inns, Inc. and Promus Hotels Florida, Inc., as
sellers, and Fee
<PAGE>
Owner, as buyer, Fee Owner is on the date hereof to acquire certain premises
described therein and in connection therewith, Fee Owner will borrow $11,616,750
from Beneficiary and has executed and delivered to Beneficiary its note, dated
the date hereof, obligating it to pay the sum of $11,616,750 (the "New Note").
In consideration of such additional loan by Beneficiary to Fee
Owner, Beneficiary and Grantor have agreed to modify the Deed of Trust to secure
the New Note and thereby increase the Note Amount secured by the Deed of Trust
and in the manner hereinafter set forth, and Trustee has agreed to join in the
execution of this Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:
1. The Deed of Trust is modified as follows: The term "Note"
shall mean, collectively, the Original Note and the New Note, as the same may
hereafter be amended, modified, extended, severed, assigned, renewed or
restated, from time to time and the term "Note Amount" shall mean $16,001,250.
2. Grantor warrants and represents that there are no defenses,
offsets or counterclaims with respect to its obligations under the Deed of
Trust, as modified hereby, including, without limitation, its obligation for the
payment of the Note.
3. Except as modified in the manner set forth above, the Deed
of Trust shall remain unmodified and in full force and effect.
4. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Agreement by signing any such
counterpart.
2
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by each of the parties hereto as of the date first above written.
PROMUS HOTELS, INC.
By /s/ Stevan D. Porter
---------------------------------------
Stevan D. Porter
Executive Vice President
APPLE SUITES, INC.,
a Virginia corporation
By /s/ Glade M. Knight
---------------------------------------
Name: Glade M. Knight
Title: Chairman of the Board and
President
APPLE SUITES MANAGEMENT, INC.,
a Virginia corporation
By /s/ Glade M. Knight
---------------------------------------
Name: Glade M. Knight
Title: Chairman, CEO and President
LAWYERS TITLE REALTY SERVICES,
INC.
By
---------------------------------------
Name:
Title:
<PAGE>
STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
On the 4th day of May, A.D. 2000 personally appeared before me Stevan
D. Porter who being by me duly sworn did say, for himself, that he is the
Executive Vice President of Promus Hotels, Inc., that he executed the above
instrument on behalf of said corporation by authority of a resolution of its
board of directors and said Executive Vice President duly acknowledged to me
that said corporation executed the same.
/s/ David Marote
---------------------------------------
Notary Public
Residing at:
10639 [illegible], #3
---------------------------------------
Los Angeles, CA 90024
---------------------------------------
My commission expires:
8/8/2002
- ----------------------
Notary Seal
<PAGE>
STATE OF VIRGINIA
CITY OF RICHMOND
On the 2nd day of May, A.D. 2000 personally appeared before me Glade M.
Knight who being by me duly sworn did say, for himself, that he is the President
& Chairman of Apple Suites, Inc., that he executed the above instrument on
behalf of said corporation by authority of a resolution of its board of
directors and said Glade M. Knight duly acknowledged to me that said corporation
executed the same.
/s/ Jacquelyn B. Owens
---------------------------------------
Notary Public
Residing at:
306 East Main Street
---------------------------------------
Richmond, Virginia 23219
---------------------------------------
My commission expires:
6/30/03
- ----------------------
Notary Seal
<PAGE>
STATE OF VIRGINIA
CITY OF RICHMOND
On the 2nd day of May, A.D. 2000 personally appeared before me Glade M.
Knight who being by me duly sworn did say, for himself, that he is the President
& Chairman of Apple Suites Management, Inc., that he executed the above
instrument on behalf of said corporation by authority of a resolution of its
board of directors and said Glade M. Knight duly acknowledged to me that said
corporation executed the same.
/s/ Jacquelyn B. Owens
---------------------------------------
Notary Public
Residing at:
306 East Main Street
---------------------------------------
Richmond, Virginia 23219
---------------------------------------
My commission expires:
6/30/03
- ----------------------
Notary Seal
<PAGE>
STATE OF _______________
COUNTY OF _______________
On the ______ day of May, A.D. 2000 personally appeared before me
_________________________ who being by me duly sworn did say, for himself, that
he is the _______________ of Lawyers Title Realty Services, Inc., that he
executed the above instrument on behalf of said corporation by authority of a
resolution of its board of directors and said _________________________ duly
acknowledged to me that said corporation executed the same.
---------------------------
Notary Public
Residing at:
---------------------------
---------------------------
My commission expires:
- ---------------------
Notary Seal
Exhibit 4.8
THIRD
DEED OF TRUST MODIFICATION AGREEMENT
THIRD DEED OF TRUST MODIFICATION AGREEMENT (this "Agreement")
made this 8th day of May, 2000, among PROMUS HOTELS, INC., a Delaware
corporation, having an office at 755 Crossover Lane, Memphis, Tennessee
38117-4900 ("Beneficiary"), APPLE SUITES REIT LIMITED PARTNERSHIP, a Virginia
limited partnership ("Fee Owner"), APPLE SUITES SERVICES LIMITED PARTNERSHIP, a
Virginia limited partnership ("Lessee"; together with Fee Owner, collectively,
"Grantor"), each of Fee Owner and Lessee having an office at 306 East Main
Street, Richmond, Virginia 23219, and DAVID LONG, an individual, having an
address at Hoge, Evans, Holmes, Carter & Ledbetter, PLLC, 4311 Oak Lawn Avenue,
Suite 600, Dallas, Texas 75219 ("Trustee").
Preliminary Statement
Beneficiary is the beneficiary under, and the lawful owner and
holder of the obligations secured by, the Fee and Leasehold Deed of Trust,
Assignment of Leases and Rents and Security Agreement, dated October 5, 1999,
from Grantor to Trustee, as trustee, recorded in the County Clerk's Office in
Collin County, Texas on October 6, 1999 in Book 04516 at Page 01103, as amended
by Deed of Trust Modification Agreement dated November 29, 1999 among
Beneficiary, Grantor and Trustee, as trustee, and by Second Deed of Trust
Modification Agreement dated December 22, 1999 among Beneficiary, Grantor and
Trustee, as trustee, all of which have been or are to be recorded in the County
Clerk's Office in Collin County, Texas (as amended, the "Deed of Trust"). The
Deed of Trust secures a $7,350,000 note of Apple Suites, Inc. ("Borrower")
<PAGE>
dated October 5, 1999, a $30,210,000 note of Borrower dated November 29, 1999
and a $4,384,500 note of Borrower dated December 22, 1999 (said notes,
collectively, the "Original Notes"), which Original Notes evidence purchase
money loans (collectively, the "Loans") in the aggregate amount of $41,944,500
from Beneficiary to Grantor. Borrower indirectly owns one hundred percent (100%)
of the beneficial interests in Fee Owner.
Pursuant to an Agreement of Sale dated November 22, 1999
between Beneficiary, Hampton Inns, Inc. and Promus Hotels Florida, Inc., as
sellers, and Borrower, as buyer, Borrower is on the date hereof to acquire
certain premises described therein and in connection therewith, Borrower will
borrow $11,616,750 from Beneficiary and has executed and delivered to
Beneficiary its note, dated the date hereof, obligating it to pay the sum of
$11,616,750 (the "New Note").
In consideration of such additional loan by Beneficiary to
Borrower, Beneficiary and Grantor have agreed to modify the Deed of Trust to
secure the New Note and thereby increase the Note Amount secured by the Deed of
Trust and in the manner hereinafter set forth, and Trustee has agreed to join in
the execution of this Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:
1. The Deed of Trust is modified as follows: The term "Note"
shall mean, collectively, the Original Notes and the New Note, as the same may
hereafter be amended, modified, extended, severed, assigned, renewed or
restated, from time to time and the term "Note Amount" shall mean $53,561,250.
2
<PAGE>
2. Grantor warrants and represents that there are no defenses,
offsets or counterclaims with respect to its obligations under the Deed of
Trust, as modified hereby, including, without limitation, its obligation for the
payment of the Note.
3. Except as modified in the manner set forth above, the Deed
of Trust shall remain unmodified and in full force and effect.
4. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Agreement by signing any such
counterpart.
[Remainder of page intentionally left blank.]
3
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by each of the parties hereto as of the date first above written.
PROMUS HOTELS, INC.
By /s/ Stevan D. Porter
----------------------------------------
Stevan D. Porter
Executive Vice President
APPLE SUITES REIT LIMITED
PARTNERSHIP, a Virginia limited
partnership
By: Apple Suites General, Inc., its
general partner
By /s/ Glade M. Knight
----------------------------------
Name: Glade M. Knight
Title: President and Chairman
of the Board
APPLE SUITES SERVICES LIMITED
PARTNERSHIP, a Virginia limited
partnership
By: Apple Suites Services General, Inc.,
its general partner
By /s/ Glade M. Knight
----------------------------------
Name: Glade M. Knight
Title: President and Chairman
of the Board
/s/ David W. Long
-------------------------------------------
DAVID LONG, as Trustee
<PAGE>
STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
THIS INSTRUMENT was acknowledged before me on the 4th day of
May, 2000, by Stevan D. Porter, Executive Vice President of Promus Hotels, Inc.,
a Delaware corporation.
/s/ David Marote
----------------------------------------
Notary Public, State of California
Printed Name: David Marote
--------------------------
Commission Expires: 8/8/2002
--------------------
<PAGE>
STATE OF VIRGINIA
CITY OF RICHMOND
THIS INSTRUMENT was acknowledged before me on the 2nd day of
May, 2000, by Glade M. Knight, President & Chairman of Apple Suites General,
Inc., a Virginia corporation, as general partner of Apple Suites REIT Limited
Partnership, on behalf of said Apple Suites General, Inc., as general partner of
Apple Suites REIT Limited Partnership.
/s/ Jacquelyn B. Owens
----------------------------------------
Notary Public, State of Virginia
Printed Name: Jacquelyn B. Owens
--------------------------
Commission Expires: 6/30/03
--------------------
<PAGE>
STATE OF VIRGINIA
CITY OF RICHMOND
THIS INSTRUMENT was acknowledged before me on the 2nd.day of
May, 2000, by Glade M. Knight, President & Chairman of Apple Suites Services
General, Inc., a Virginia corporation, as general partner of Apple Suites
Services Limited Partnership, on behalf of said Apple Suites Services General,
Inc., as general partner of Apple Suites Services Limited Partnership.
/s/ Jacquelyn B. Owens
----------------------------------------
Notary Public, State of Virginia
Printed Name: Jacquelyn B. Owens
--------------------------
Commission Expires: 6/30/03
--------------------
<PAGE>
STATE OF TEXAS
COUNTY OF DALLAS
THIS INSTRUMENT was acknowledged before me on the 1st day of
May, 2000, by David Long, an individual.
/s/ John Keith Pettiette
----------------------------------------
Notary Public, State of Texas
Printed Name: John Keith Pettiette
--------------------------
Commission Expires: February 22, 2004
--------------------
Exhibit 4.9
THIRD
DEED OF TRUST MODIFICATION AGREEMENT
THIRD DEED OF TRUST MODIFICATION AGREEMENT (this "Agreement")
made this ______ day of May, 2000, among PROMUS HOTELS, INC., a Delaware
corporation, having an office at 755 Crossover Lane, Memphis, Tennessee
38117-4900 ("Beneficiary"), APPLE SUITES REIT LIMITED PARTNERSHIP, a Virginia
limited partnership ("Fee Owner"), APPLE SUITES SERVICES LIMITED PARTNERSHIP, a
Virginia limited partnership ("Lessee"; together with Fee Owner, collectively,
"Grantor"), each of Fee Owner and Lessee having an office at 306 East Main
Street, Richmond, Virginia 23219, and DAVID LONG, an individual, having an
address at Hoge, Evans, Holmes, Carter & Ledbetter, PLLC, 4311 Oak Lawn Avenue,
Suite 600, Dallas, Texas 75219 ("Trustee").
Preliminary Statement
Beneficiary is the beneficiary under, and the lawful owner and
holder of the obligations secured by, the Fee and Leasehold Deed of Trust,
Assignment of Leases and Rents and Security Agreement, dated October 5, 1999,
from Grantor to Trustee, as trustee, recorded in the County Clerk's Office in
Dallas County, Texas on October 6, 1999 in Book 99195 at Page 05671, as amended
by Deed of Trust Modification Agreement dated November 29, 1999 among
Beneficiary, Grantor and Trustee, as trustee, and by Second Deed of Trust
Modification Agreement dated December 22, 1999 among Beneficiary, Grantor and
Trustee, as trustee, all of which have been or are to be recorded in the County
Clerk's Office in Dallas County, Texas (as amended, the "Deed of Trust"). The
Deed of Trust secures a $7,350,000 note of Apple Suites, Inc. ("Borrower")
<PAGE>
dated October 5, 1999, a $30,210,000 note of Borrower dated November 29, 1999
and a $4,384,500 note of Borrower dated December 22, 1999 (said notes,
collectively, the "Original Notes"), which Original Notes evidence purchase
money loans (collectively, the "Loans") in the aggregate amount of $41,944,500
from Beneficiary to Grantor. Borrower indirectly owns one hundred percent (100%)
of the beneficial interests in Fee Owner.
Pursuant to an Agreement of Sale dated November 22, 1999
between Beneficiary, Hampton Inns, Inc. and Promus Hotels Florida, Inc., as
sellers, and Borrower, as buyer, Borrower is on the date hereof to acquire
certain premises described therein and in connection therewith, Borrower will
borrow $11,616,750 from Beneficiary and has executed and delivered to
Beneficiary its note, dated the date hereof, obligating it to pay the sum of
$11,616,750 (the "New Note").
In consideration of such additional loan by Beneficiary to
Borrower, Beneficiary and Grantor have agreed to modify the Deed of Trust to
secure the New Note and thereby increase the Note Amount secured by the Deed of
Trust and in the manner hereinafter set forth, and Trustee has agreed to join in
the execution of this Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:
1. The Deed of Trust is modified as follows: The term "Note"
shall mean, collectively, the Original Notes and the New Note, as the same may
hereafter be amended, modified, extended, severed, assigned, renewed or
restated, from time to time and the term "Note Amount" shall mean $53,561,250.
2
<PAGE>
2. Grantor warrants and represents that there are no defenses,
offsets or counterclaims with respect to its obligations under the Deed of
Trust, as modified hereby, including, without limitation, its obligation for the
payment of the Note.
3. Except as modified in the manner set forth above, the Deed
of Trust shall remain unmodified and in full force and effect.
4. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Agreement by signing any such
counterpart.
[Remainder of page intentionally left blank.]
3
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by each of the parties hereto as of the date first above written.
PROMUS HOTELS, INC.
By /s/ Stevan D. Porter
----------------------------------------
Stevan D. Porter
Executive Vice President
APPLE SUITES REIT LIMITED
PARTNERSHIP, a Virginia limited
partnership
By: Apple Suites General, Inc., its
general partner
By /s/ Glade M. Knight
----------------------------------
Name: Glade M. Knight
Title: President and Chairman
of the Board
APPLE SUITES SERVICES LIMITED
PARTNERSHIP, a Virginia limited
partnership
By: Apple Suites Services General, Inc.,
its general partner
By /s/ Glade M. Knight
----------------------------------
Name: Glade M. Knight
Title: President and Chairman
of the Board
/s/ David W. Long
-------------------------------------------
DAVID LONG, as Trustee
<PAGE>
STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
THIS INSTRUMENT was acknowledged before me on the 4th day of
May, 2000, by Stevan D. Porter, Executive Vice President of Promus Hotels, Inc.,
a Delaware corporation.
/s/ David Marote
----------------------------------------
Notary Public, State of California
Printed Name: David Marote
--------------------------
Commission Expires: 8/8/2002
--------------------
<PAGE>
STATE OF VIRGINIA
CITY OF RICHMOND
THIS INSTRUMENT was acknowledged before me on the 2nd day of
May, 2000, by Glade M. Knight, President & Chairman of Apple Suites General,
Inc., a Virginia corporation, as general partner of Apple Suites REIT Limited
Partnership, on behalf of said Apple Suites General, Inc., as general partner of
Apple Suites REIT Limited Partnership.
/s/ Jacquelyn B. Owens
----------------------------------------
Notary Public, State of Virginia
Printed Name: Jacquelyn B. Owens
--------------------------
Commission Expires: 6/30/03
--------------------
<PAGE>
STATE OF VIRGINIA
CITY OF RICHMOND
THIS INSTRUMENT was acknowledged before me on the 2nd.day of
May, 2000, by Glade M. Knight, President & Chairman of Apple Suites Services
General, Inc., a Virginia corporation, as general partner of Apple Suites
Services Limited Partnership, on behalf of said Apple Suites Services General,
Inc., as general partner of Apple Suites Services Limited Partnership.
/s/ Jacquelyn B. Owens
----------------------------------------
Notary Public, State of Virginia
Printed Name: Jacquelyn B. Owens
--------------------------
Commission Expires: 6/30/03
--------------------
<PAGE>
STATE OF TEXAS
COUNTY OF DALLAS
THIS INSTRUMENT was acknowledged before me on the 1st day of
May, 2000, by David Long, an individual.
/s/ John Keith Pettiette
----------------------------------------
Notary Public, State of Texas
Printed Name: John Keith Pettiette
--------------------------
Commission Expires: February 22, 2004
--------------------
Exhibit 10.1
[Pennsylvania]
INDEMNITY
May 8, 2000
Promus Hotels, Inc.
755 Crossover Lane
Memphis, Tennessee 38117-4900
Attention: General Counsel
Loan: Purchase money financings aggregating $80,186,250
Borrower: Apple Suites, Inc., individually and as trustee for
Apple Suites Pennsylvania Business Trust
Premises: 12 East Swedesford Road, Malvern, Pennsylvania
Dear Sirs:
Except to the extent of any existing liability of you and/or
your affiliates for Corrective Work with respect to Hazardous Materials
currently in, on or under the Property, for good and valuable consideration in
hand received, the undersigned, and if there are two or more signers, each of
us, hereby jointly and severally covenants and agrees for your benefit, in
addition to, and not in limitation of, any other rights and remedies available
to you at law or in equity, as follows:
1. Definitions: The following terms shall be defined as set forth
below.
(a) Corrective Work: The removal, relocation, elimination,
remediation or encapsulation of Hazardous Materials from all
or any portion of the Property and (to the extent provided in
Subparagraph 2(b) hereof) surrounding areas and, to the extent
thereby required, the reconstruction and rehabilitation of the
Property pursuant to, and in compliance with, Governmental
Requirements;
(b) Governmental Requirements: Any present and future (i) federal,
state or local laws, rules or regulations and (ii) judicial or
administrative interpretation thereof, including any judicial
or administrative orders or judgments;
(c) Hazardous Materials: (i) Asbestos and polychlorinated
biphenyls and (ii) hazardous or toxic materials, wastes and
substances which are defined, determined or identified as such
(including petroleum
<PAGE>
products if they are defined, determined or identified as
such) in, or subject to, any Governmental Requirements, in
each case in amounts in violation of applicable Governmental
Requirements;
(d) Indemnified Losses: Incurred damages, losses, liabilities,
costs and expenses of Corrective Work, including, without
limitation, obligations, penalties, fines, impositions, fees,
levies, lien removal or bonding costs, claims, litigation,
demands, defenses, judgments, suits, proceedings, costs,
disbursements or expenses (including, without limitation,
attorneys' and experts' reasonable fees and disbursements) of
any kind and nature whatsoever, including interest thereon;
(e) Loan Documents: The documents comprising the total
documentation pertaining to the Loan indicated above made to,
or for the benefit of, the above-named Borrower, including,
without limitation, and as applicable, any loan agreement,
building loan or construction loan agreement, note, mortgage,
deed of trust, security agreement, assignment of leases and
rents, any guaranty or guaranties (whether of payment and/or
performance), pledge agreement, commitments, letters of
credit, assignment of partnership interests, and all other
instruments and documents evidencing, securing, or collateral
to, the Loan;
(f) Property: The land more particularly described in Exhibit A
hereto attached and as indicated above, together with the
buildings, improvements, structures and betterments now or
hereafter existing thereon or thereunder.
2. (a) Except as hereinafter limited in Paragraph 9 and Subparagraphs 2(b)
and 2(c), the undersigned covenant and agree, at their sole cost and
expense, to indemnify, protect and save you harmless against and from
any and all Indemnified Losses which may at any time be imposed upon,
incurred by or asserted or awarded against you arising from, out of,
attributable to or by reason of, the:
(i) nonperformance or delayed performance and completion of
Corrective Work; or
(ii) enforcement of this Indemnity or the assertion by the
undersigned of any defense to its obligations hereunder
(except the successful defense of actual performance not
subject to further appeal);
whether the Indemnified Losses arise before, during or after,
enforcement of the remedies and rights available to you under the Loan
Documents, including the acquisition of title to all or any portion of
the Property by you or your successors or affiliates (as such terms are
defined in Paragraph 8(a) hereof).
2
<PAGE>
(b) The Indemnified Losses shall not extend to the costs of Corrective
Work pertaining to surrounding areas if the applicable Hazardous
Materials did not originate from any portion of the Property, unless
the removal of the Hazardous Materials from the surrounding areas by
Borrower is necessitated by Governmental Requirements.
(c) If you, or any of your successors or affiliates, take
(i) title to the Property at a foreclosure sale, at a sale pursuant
to a power of sale under a mortgage or deed of trust, or by deed in
lieu of foreclosure, or by exercise of other remedial rights; or
(ii) possession, custody and control of the Property as a
mortgagee-in-possession or through court designated receiver and
Borrower, and its successors or affiliates, never reacquire such
possession, custody and control,
then the Indemnified Losses shall not include or apply to Hazardous
Materials which are initially placed on, in or under all or any portion
of the Property at any time thereafter.
3. (a) So long as Borrower is in possession, custody and control of the
Property you agree that prior to the undertaking of Corrective Work by
you, the Borrower or the undersigned may at their sole cost and expense
contest the Governmental Requirements and/or perform any Corrective
Work, provided that at all times all of the following conditions are
continuously satisfied in full:
(i) no uncured event of default (other than as related to the
Hazardous Materials involved in such contest or Corrective Work)
exists under any of the Loan Documents;
(ii) you (and your agents, officers, directors, servants,
employees, contractors and shareholders) shall not be subject to
any criminal or other penalties, fines, costs or expenses, by
reason of such contest or Corrective Work or any delays in
connection therewith;
(iii) unless the undersigned has instituted a contest as permitted
hereunder with respect to any Corrective Work, the undersigned
shall commence the Corrective Work promptly after obtaining actual
knowledge of the Hazardous Materials on, in, under or affecting the
Property or any surrounding areas, but at least fifteen (15) days
prior to commencement of such Corrective Work, submit to you in
conformity with your reasonable requirements (which requirements
may not create conditions which violate
3
<PAGE>
Governmental Requirements), reasonably detailed plans for such
Corrective Work complying with Governmental Requirements. If, within
said fifteen (15)-day period, you, in your reasonable judgment, reject
such plans, the undersigned shall promptly submit revised plans
conforming to your reasonable requirements to you for your approval. If
within fifteen (15) days from your receipt of the original plans, or
revised plans, you fail to approve or reject such original plans, or
revised plans, as the case may be, the same shall be deemed accepted by
you. All Corrective Work shall be performed in compliance with such
approved original or revised plans;
(iv) a contest, if instituted, shall be instituted promptly after the
undersigned, or Borrower, obtains actual knowledge of an action, suit,
proceeding, or governmental order or directive which asserts any
obligation or liability affecting all or any portion of the Property,
or Borrower or any of the undersigned and diligently prosecuted until a
final judgment is obtained;
(v) Corrective Work shall be instituted promptly following an
unsuccessful nonappealable completion of the contest and shall be
diligently prosecuted until the Hazardous Materials involved in the
contest are removed, relocated, encapsulated and/or disposed of as
required by the Governmental Requirements;
(vi) the undersigned shall notify you within ten (10) days after
commencement of such contest or Corrective Work and shall render to you
a written monthly report detailing the progress thereof including such
information as you shall reasonably request; and
(vii) if you are named in any action or proceeding as a necessary party
or as a party defendant relating to matters covered by this Indemnity,
you agree to utilize counsel designated by the undersigned, subject to
your right of approval, not to be unreasonably withheld or delayed. If
you are not named in any such action or proceeding, you, at your
expense, shall have the right (but not the obligation) to join in any
action or proceeding in which the undersigned or Borrower contests any
Governmental Requirements.
So long as all of such conditions are continuously satisfied, you agree
that you will not enter into any settlement agreement binding upon the
undersigned, or Borrower, without their prior consent, which consent will
not be unreasonably withheld or delayed.
(b) Promptly after the receipt by you of written notice of any demand or
claim or the commencement of any action, suit or proceeding in respect of
any
4
<PAGE>
of the Indemnified Losses, you shall notify the undersigned thereof in
writing, but the failure by you promptly to give such notice shall not
relieve the undersigned of any of their obligations under this Indemnity,
except to the extent of prejudice to any defense to such Indemnified Losses
resulting from such delay.
4. The liability of the undersigned under this Indemnity shall in no way be
limited or impaired by (a) any amendment or modification of the Loan
Documents; (b) any extensions of time for performance required by any of
the Loan Documents; (c) any sale, assignment or foreclosure pursuant to the
Loan Documents or any sale or transfer of all or any part of the Property;
(d) any exculpatory provision in any of the Loan Documents limiting your
recourse to the Property or to any other security, or limiting your rights
to a deficiency judgment against Borrower, or the undersigned; (e) the
accuracy or inaccuracy of any representations or warranties made to you
under the Loan Documents; (f) the release of Borrower or any other person
from performance or observance of any of the agreements, covenants, terms
or conditions contained in any of the Loan Documents by operation of law,
your voluntary act, or otherwise; (g) the release or substitution, in whole
or in part, of any security for the note or other evidence of debt issued
pursuant to the Loan Documents; (h) your failure to record or file any of
the Loan Documents (or your improper recording or filing of any thereof) or
to otherwise perfect, protect, secure or insure any security interest or
lien given as security for the note or other evidence of indebtedness under
the Loan Documents, (i) any other action or circumstance whatsoever which
constitutes, or might be construed to constitute, a legal or equitable
discharge or defense of Borrower or others for their obligations under any
of the Loan Documents or of the undersigned for their obligations under
this Indemnity or (j) the invalidity, irregularity or unenforceability, in
whole or in part, of any of the Loan Documents; and in any of such cases,
whether with or without notice to Borrower or the undersigned and with or
without consideration.
5. The undersigned (a) waive any right or claim of right to cause a
marshalling of the undersigned's assets or to cause you to proceed against
any of the security for the Loan Documents before proceeding under this
Indemnity or to cause you to proceed against the undersigned in any
particular order; (b) agree that any payments required to be made hereunder
shall become due on demand; (c) waive and relinquish all rights and
remedies accorded by applicable law to indemnitors or guarantors, except
any rights of subrogation which the undersigned may have, provided that (i)
the indemnity provided for hereunder shall neither be contingent upon the
existence of any such rights of subrogation nor subject to any claims or
defenses whatsoever which may be asserted in connection with the
enforcement or attempted enforcement of such subrogation rights including,
without limitation, any claim that such subrogation rights were abrogated
by any of your acts, and (ii) the undersigned postpone and subordinate (A)
the exercise of any and all of
5
<PAGE>
their rights of subrogation to your rights against the undersigned under
this Indemnity and (B) any rights of subrogation to any collateral securing
the Loan until the Loan shall have been paid in full.
6. No delay on your part in exercising any right, power or privilege under any
of the Loan Documents shall operate as a waiver of any such privilege,
right or power.
7. Any one or more of the undersigned, or any other party liable upon or in
respect of this Indemnity or the Loan, may be released from liability (in
whole or in part) under this Indemnity or the Loan Documents without
affecting the liability hereunder of any of the undersigned not so
released.
8. (a) This Indemnity shall be binding upon the undersigned and their
respective heirs, personal representatives, successors and assigns and
shall inure to the benefit of and, where applicable, shall be binding upon,
you and your successors and affiliates, which acquire all or any part of
the Property by any sale, assignment or foreclosure under the Loan
Documents, by deed or other assignment in lieu of foreclosure, or
otherwise, including if you, or such successor, affiliate or participant,
is the successful bidder at a foreclosure or other remedial sale. For
purposes of this Indemnity your (i) "successors" shall mean successors by
merger, consolidation or acquisition of all or a substantial part of your
assets and business and (ii) "affiliates" shall mean your parent, if any,
or its successors as above defined and any direct or indirect subsidiary or
affiliate of your parent or its successors as above defined.
(b) Except as provided in Subparagraph 8(a) above, the obligations of the
undersigned under this Indemnity shall not inure to the benefit of (i) any
other purchaser of the Property at a foreclosure sale or a sale pursuant to
a power of sale or other remedial rights under the Loan Documents or (ii)
any subsequent holder of the Loan Documents unless such holder is your
successor, affiliate or participant as hereinabove defined.
9. (a) Except as provided in Subparagraph 9(b) hereof, this Indemnity shall
terminate and be of no further force and effect upon payment in full by
Borrower or guarantor of all principal, interest and other sums and costs
evidenced or secured by the Loan Documents, provided that at the time of
such full payment neither you, nor your successors or affiliates, have, at
any time, or in any manner, through exercise of their remedial rights under
the Loan Documents, participated in the management or control of, taken
possession of, or title to, the Property or any portion thereof, whether by
foreclosure, deed in lieu of foreclosure, sale under power of sale pursuant
to the Loan Documents, or otherwise.
(b) Notwithstanding Subparagraph 9(a) above, the undersigned agree that
this Indemnity shall continue after full payment of the Loan with respect
to:
6
<PAGE>
(i) litigation or administrative claims involving Indemnified
Losses pertaining to Hazardous Materials covered by this Indemnity
pending at the date of payment in full of the Loan, and
(ii) reasonable costs and expenses (including experts' and
attorneys' fees and disbursements) incurred or expended by you in
(A) enforcing Subparagraph 2(a)(ii) of this Indemnity or (B) any
litigation, arbitration, administrative claims or matters relating
to any Indemnified Losses subsequently arising within four (4)
years after the date of such full payment (hereinafter called
("Subsequent Claims") involving Hazardous Materials on, in or under
the Property, or if covered by this Indemnity, any surrounding
areas, but the undersigned's obligation under this Indemnity as to
Subsequent Claims is hereby limited and shall not extend to payment
of any monetary awards or damages against you but only to the costs
and expenses above mentioned. You agree to utilize counsel
designated by the undersigned (whether or not the undersigned are
also parties defendant in such matters) subject to your right of
approval, not to be unreasonably withheld or delayed.
10. This Indemnity shall continue to be effective, or be reinstated
automatically, as the case may be, if at any time payment, in whole or in
part, of any of the obligations indemnified against hereby is rescinded or
otherwise must be restored or returned by you (whether as a preference,
fraudulent conveyance or otherwise) upon or in connection with the
insolvency, bankruptcy, dissolution, liquidation or reorganization of
Borrower, any of the undersigned or any other person, or upon or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, Borrower, any of the undersigned or any
other person or for a substantial part of Borrower's, any of the
undersigned's or any of such other person's property, as the case may be,
or otherwise, all as though such payment had not been made. Each of the
undersigned further agrees that in the event any such payment is rescinded
or must be restored or returned, all costs and expenses (including, without
limitation, legal fees and expenses) incurred by you or on your behalf in
defending or enforcing such continuance or reinstatement, as the case may
be, shall constitute costs of enforcement which are covered by each of the
undersigned's indemnification obligations under this Indemnity.
11. Each of the undersigned represents and covenants to you that:
(i) if a corporation, partnership, venture, trust or limited
liability company, it is duly organized, validly existing and in
good standing under the laws of the state of its formation and has
full power and authority to execute, deliver and perform this
Indemnity; each of the undersigned will preserve and maintain such
legal existence and good standing;
7
<PAGE>
(ii) there are no actions, suits or proceedings pending or
threatened against or affecting Borrower or any of the undersigned,
at law, in equity or before or by any governmental authorities
except actions, suits or proceedings which are fully covered by
insurance or would, if adversely determined, not be likely to have
a material adverse effect on Borrower's or any of the undersigned's
business or financial condition; neither Borrower nor any of the
undersigned is in material default with respect to any order, writ,
injunction, decree or demand of any court or governmental
authorities;
(iii) the consummation of the transactions contemplated hereby and
the performance of this Indemnity have not resulted and will not
result in any breach of, or constitute a default under, any
mortgage, deed of trust, lease, bank loan or credit agreement,
corporate charter, by-laws, partnership agreement or other
instrument to which any of the undersigned is a party or by which
any of the undersigned may be bound or affected; and
(iv) each of the undersigned is in compliance with, and the
transactions contemplated by this Indemnity do not and will not
violate any provision of, or require any filing, registration,
consent or approval under, any federal, state or local law, rule,
regulation, ordinance, order, writ, judgment, injunction, decree,
determination or award (hereinafter, "Laws") presently in effect
having applicability to it; each of the undersigned will comply
promptly with all Laws now or hereafter in effect having
applicability to it.
12. You shall, at all times, at your discretion and expense, be free to
independently establish to your satisfaction the existence or non-existence
of any fact or facts, the existence or non-existence of which is a
condition of this Indemnity or any of its provisions.
13. This Indemnity may be executed in one or more counterparts, each of which
shall be deemed an original. Said counterparts shall constitute but one and
the same instrument and shall be binding upon each of the undersigned as
fully and completely as if all had signed but one instrument. The joint and
several liability of the undersigned shall be unaffected by the failure of
any of the undersigned to execute any or all of the counterparts.
14. All notices hereunder shall be in writing and shall be deemed to have been
sufficiently given or served for all purposes when sent by registered or
certified mail, if to the undersigned at their respective addresses stated
on the signature page hereof and if to you, at your address indicated
above, or at such other address of which a party shall have notified the
party giving such notice in writing in accordance with the foregoing
requirements.
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15. No provision of this Indemnity may be changed, waived, discharged or
terminated orally, by telephone or by any other means except by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
16. THE UNDERSIGNED BY EXECUTION HEREOF, AND YOU, BY ACCEPTANCE HEREOF, HEREBY
EXPRESSLY AND UNCONDITIONALLY WAIVE, IN CONNECTION WITH ANY SUIT, ACTION OR
PROCEEDING BROUGHT BY YOU ON THIS INDEMNITY, ANY AND EVERY RIGHT THEY MAY
HAVE TO A TRIAL BY JURY.
17. THIS INDEMNITY AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TENNESSEE APPLICABLE TO THE
INTERPRETATION, CONSTRUCTION AND ENFORCEMENT OF INDEMNITIES (WITHOUT GIVING
EFFECT TO TENNESSEE'S PRINCIPLES OF CONFLICTS OF LAW). THE EXISTENCE OF
HAZARDOUS MATERIALS SHALL BE DETERMINED IN ACCORDANCE WITH FEDERAL LAW AND
STATE AND LOCAL LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED.
18. THE UNDERSIGNED IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY
TENNESSEE STATE OR FEDERAL COURT SITTING IN THE CITY OF MEMPHIS, STATE OF
TENNESSEE, OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS INDEMNITY AND THE UNDERSIGNED AGREE AND CONSENT THAT, IN ADDITION
TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL
SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY ABOVE
STATED COURT SITTING IN THE CITY OF MEMPHIS MAY BE MADE BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO THE UNDERSIGNED AT
THEIR RESPECTIVE ADDRESSES INDICATED ON THE SIGNATURE PAGE HEREOF, AND
SERVICE SO MADE SHALL BE COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE
BEEN SO MAILED.
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Very truly yours,
Indemnitor: Address Of Indemnitor:
- ---------- ---------------------
APPLE SUITES, INC., a 306 East Main Street
Virginia corporation Richmond, Virginia 23219
Attention: Mr. Glade M. Knight
By /s/ Glade M. Knight With a copy to:
----------------------------
Name: Glade M. Knight
Title: Chairman of the Board Thomas E. Davis, Esq.
and President Jenkens & Gilchrist
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202-2799
This is to certify that this Indemnity was executed in my
presence on the date hereof by the parties whose signatures appear above in the
capacities indicated.
/s/ Jacquelyn B. Owens
-------------------------------------
Notary Public
My commission expires:
6/30/03
-------------------------------------
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EXHIBIT A
LEGAL DESCRIPTION OF PREMISES
ALL THAT CERTAIN parcel of land SITUATE in East Whiteland Township, Chester
County, Pennsylvania, being bounded and described according to a Survey and Plan
thereof entitled ALTA/ACSM Land Title Survey for Promus Hotel Corporation, dated
August 12, 1996 by Chester Valley Engineers, Inc., Paoli, Pennsylvania, and
being more fully described as follows:
BEGINNING at a point on the southerly legal Right of Way Line of Swedesford Road
- - S. R. 1002, 94 feet wide, a corner in common of these and lands now or late of
the Pennsylvania State University; THENCE from the point of beginning, leaving
said right of way line, along said lands, South 28 degrees 04 minutes 35 seconds
East 566.35 feet to a point on line of other lands now or late of the
Pennsylvania State University; THENCE along said lands, along the northerly
Legal Right of Way Line for Limited Access of U.S. Route 202 - S. R. 0202,
variable width, South 59 degrees 09 minutes 34 seconds West 168.05 feet; THENCE
continuing along said right of way line, North 88 degrees 24 minutes 32 seconds
West 186.61 feet to a corner of lands now or late of Loretta M. Cimeo, et al:
THENCE leaving said right of way line, along said lands, North 28 degrees 04
minutes 35 seconds West 457.22 feet to a point on the southerly Legal Right of
Way Line of Swedesford Road - S.R. 1002, aforesaid; THENCE along said right of
way line, along a curve to the right having a radius of 13.468.61 feet, an arc
length of 330.94 feet, and a chord bearing North 57 degrees 36 minutes 55
seconds East 330.94 feet to the point of beginning.
Exhibit 10.2
MASTER HOTEL LEASE AGREEMENT
DATED AS OF MAY 8, 2000
BETWEEN
APPLE SUITES, INC., AS TRUSTEE FOR
APPLE SUITES PENNSYLVANIA BUSINESS TRUST
A PENNSYLVANIA BUSINESS TRUST
AS LESSOR
AND
APPLE SUITES MANAGEMENT, INC.
A VIRGINIA CORPORATION
AS LESSEE
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TABLE OF CONTENTS
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ARTICLE 1 LEASED PROPERTY; OTHER DEFINITIONS........................................................................1
1.1. Leased Property............................................................................................1
1.2. Definitions................................................................................................2
ARTICLE 2 TERM; TERMINATION........................................................................................14
2.1. Term......................................................................................................14
2.2. Lessor's Option to Terminate Lease........................................................................15
2.3. Transition Procedures.....................................................................................16
2.4. Holding Over..............................................................................................17
ARTICLE 3 RENT; RENT ADJUSTMENTS...................................................................................17
3.1. Rent......................................................................................................17
3.2. Confirmation of Percentage Rent and Sundry Rent...........................................................21
3.3. Additional Charges........................................................................................22
3.4. Net Lease; No Termination, Abatement, Etc.................................................................23
3.5. Material Changes in Economic Climate......................................................................23
3.6. Rent Adjustment: Basic Assumptions Incorrect.............................................................24
ARTICLE 4 ANNUAL BUDGETS; BOOKS AND RECORDS........................................................................25
4.1. Annual Budget.............................................................................................25
4.2. Books and Records.........................................................................................26
ARTICLE 5 IMPOSITIONS; HOTEL COSTS.................................................................................26
5.1. Payment of Impositions....................................................................................26
5.2. Notice of Impositions.....................................................................................27
5.3. Adjustment of Impositions.................................................................................27
5.4. Utility Charges...........................................................................................27
5.5. Insurance Premiums........................................................................................27
5.6. Franchise Fees............................................................................................27
5.7. Ground Rent...............................................................................................27
ARTICLE 6 LEASED PROPERTY; LESSEE'S PERSONAL PROPERTY..............................................................28
6.1. Ownership of the Leased Property..........................................................................28
6.2. Lessee's Personal Property................................................................................28
6.3. Lessor's Lien.............................................................................................28
6.4. Lessor's Option to Purchase Assets of Lessee..............................................................29
ARTICLE 7 CONDITION AND USE OF LEASED PROPERTY.....................................................................29
7.1. Condition of the Leased Property..........................................................................29
7.2. Use of the Leased Property................................................................................29
7.3. Lessor to Grant Easements, Etc............................................................................30
ARTICLE 8 LESSEE'S COMPLIANCE WITH LAW; ENVIRONMENTAL COVENANTS....................................................31
8.1. Compliance with Legal and Insurance Requirements, Etc.....................................................31
8.2. Legal Requirement Covenants...............................................................................31
8.3. Environmental Covenants...................................................................................32
ARTICLE 9 MAINTENANCE AND REPAIRS; ENCROACHMENTS AND RESTRICTIONS..................................................34
9.1. Maintenance and Repairs...................................................................................34
9.2. Encroachments, Restrictions, Etc..........................................................................35
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ARTICLE 10 ALTERATIONS AND IMPROVEMENTS; FF&E RESERVE..............................................................36
10.1. Alterations............................................................................................36
10.2. Salvage................................................................................................36
10.3. Joint Use Agreements...................................................................................36
10.4. Initial Upgrade of Leased Improvements.................................................................37
10.5. Furniture, Fixture and Equipment Allowance.............................................................37
ARTICLE 11 COMPLIANCE WITH FRANCHISE...............................................................................37
11.1. Compliance with Franchise Agreement and Management Agreement...........................................37
ARTICLE 12 PERMITTED LIENS AND CONTESTS............................................................................38
12.1. Liens..................................................................................................38
12.2. Permitted Contests.....................................................................................38
ARTICLE 13 INSURANCE REQUIREMENTS..................................................................................39
13.1. General Insurance Requirements.........................................................................39
13.2. Replacement Cost.......................................................................................40
13.3. Waiver of Subrogation..................................................................................41
13.4. Form Satisfactory, Etc.................................................................................41
13.5. Increase in Limits.....................................................................................41
13.6. Blanket Policy.........................................................................................42
13.7. No Separate Insurance..................................................................................42
13.8. Reports On Insurance Claims............................................................................42
ARTICLE 14 CASUALTY INSURANCE PROCEEDS; RECONSTRUCTION.............................................................42
14.1. Insurance Proceeds.....................................................................................42
14.2. Reconstruction in the Event of Damage or Destruction Covered by Insurance..............................43
14.3. Reconstruction in the Event of Damage or Destruction Not Covered by Insurance..........................44
14.4. Lessee's Property......................................................................................44
14.5. Abatement of Rent......................................................................................44
14.6. Damage Near End of Term................................................................................44
14.7. Waiver.................................................................................................44
ARTICLE 15 CONDEMNATION; AWARD ALLOCATION..........................................................................45
15.1. Definitions............................................................................................45
15.2. Parties' Rights and Obligations........................................................................45
15.3. Total Taking...........................................................................................45
15.4. Allocation of Award....................................................................................45
15.5. Partial Taking.........................................................................................45
15.6. Temporary Taking.......................................................................................46
ARTICLE 16 DEFAULT BY LESSEE; LESSOR'S REMEDIES....................................................................46
16.1. Events of Default......................................................................................46
16.2. Surrender..............................................................................................48
16.3. Damages................................................................................................48
16.4. Waiver.................................................................................................49
16.5. Application of Funds...................................................................................49
16.6. Lessor's Right to Cure Lessee's Default................................................................49
ARTICLE 17 DEFAULT BY LESSOR; LESSEE'S REMEDIES....................................................................50
17.1. Breach by Lessor.......................................................................................50
17.2. Lessee's Right to Cure.................................................................................50
17.3. Provisions Relating to Purchase of the Leased Property by Lessee.......................................51
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ARTICLE 18 INDEMNIFICATION.........................................................................................51
18.1. Indemnification........................................................................................51
ARTICLE 19 REIT REQUIREMENTS AND RESTRICTIONS......................................................................52
19.1. Personal Property Limitation...........................................................................52
19.2. Sublease Rent Limitation...............................................................................52
19.3. Sublease Tenant Limitation.............................................................................53
19.4. Lessee Ownership Limitations...........................................................................53
19.5. Lessee Officer and Employee Limitation.................................................................53
19.6. Payments to Affiliates of Lessee.......................................................................53
ARTICLE 20 SUBLETTING AND ASSIGNMENT...............................................................................53
20.1. Subletting and Assignment..............................................................................53
20.2. Attornment.............................................................................................54
20.3. Conveyance by Lessor...................................................................................54
ARTICLE 21 QUIET ENJOYMENT; RISK OF LOSS...........................................................................54
21.1. Quiet Enjoyment........................................................................................54
21.2. Risk of Loss...........................................................................................55
ARTICLE 22 LESSOR MORTGAGES; SUBORDINATION OF LEASE................................................................55
22.1. Lessor May Grant Liens.................................................................................55
22.2. Subordination of Lease.................................................................................55
ARTICLE 23 ESTOPPEL CERTIFICATES; FINANCIAL STATEMENTS; INSPECTION RIGHTS..........................................56
23.1. Estoppel Certificates; Financial Statements............................................................56
23.2. Lessor's Right to Inspect..............................................................................57
ARTICLE 24 APPRAISERS..............................................................................................57
24.1. Appraisers.............................................................................................57
ARTICLE 25 ARBITRATION AND DISPUTE RESOLUTION PROCEDURES...........................................................58
25.1. Arbitration............................................................................................58
25.2. Alternative Arbitration................................................................................58
25.3. Arbitration Procedure..................................................................................58
ARTICLE 26 NOTICES.................................................................................................59
26.1. Notices................................................................................................59
ARTICLE 27 MISCELLANEOUS...........................................................................................59
27.1. No Waiver..............................................................................................59
27.2. Remedies Cumulative....................................................................................59
27.3. Waiver of Trial by Jury................................................................................59
27.4. Acceptance of Surrender................................................................................60
27.5. No Merger of Title.....................................................................................60
27.6. Waiver of Presentment, Etc.............................................................................60
27.7. Action for Damages.....................................................................................60
27.8. Lease Assumption in Bankruptcy Proceeding..............................................................60
27.9. Enforceability.........................................................................................60
27.10. Memorandum of Lease....................................................................................61
</TABLE>
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Exhibit A - Legal Description
Exhibit B - Work Letter
Schedule 2.1 - Commencement Dates
Schedule 3.1(a) - Base Rents
Schedule 3.1(b) - Suite Revenue Breakpoint
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MASTER HOTEL LEASE AGREEMENT
THIS MASTER HOTEL LEASE AGREEMENT (hereinafter called "Lease"), made as
of the 8th day of May, 2000, by and between Apple Suites Inc., as trustee for
Apple Suites Pennsylvania Business Trust, a Pennsylvania Business Trust
(hereinafter called "Lessor"), and Apple Suites Management Inc., a Virginia
corporation (hereinafter called "Lessee"), provides as follows:
AGREEMENT:
Lessor, for and 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
LEASED PROPERTY; OTHER DEFINITIONS
1.1. Leased Property. The Leased Property shall mean and 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 offsite), parking areas and
roadways appurtenant to such buildings and structures presently situated upon
the Land (collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances relating to the
Land and the Leased Improvements;
(d) all equipment, machinery, fixtures, and other items of
property required for or incidental to the use of the Leased Improvements as a
hotel, including all components thereof, now and hereafter permanently affixed
to or incorporated into the Leased Improvements, including, without limitation,
all furnaces, boilers, heaters, electrical equipment, heating, plumbing,
lighting, ventilating, refrigerating, incineration, air and water pollution
control, waste disposal, air-cooling and air-conditioning systems and apparatus,
sprinkler systems and fire and theft protection equipment, all of which to the
greatest extent permitted by law are hereby deemed by the parties hereto to
constitute real estate, together with all replacements, modifications,
alterations and additions thereto (collectively, the "Fixtures");
(e) all furniture and furnishings and all other items of
personal property (excluding Inventory and personal property owned by Lessee)
located on, and used in connection with, the operation of the Leased
Improvements as a hotel, together with all replacements, modifications,
alterations and additions thereto; and
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(f) all existing leases of space within 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 AND OTHER MATTERS WHICH WOULD BE
DISCLOSED BY AN INSPECTION OF THE LEASED PROPERTY OR BY AN ACCURATE SURVEY
THEREOF.
1.2. Definitions. For all purposes of this Lease, except as otherwise
expressly provided or unless the context otherwise requires, (a) the terms
defined in this Article 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
generally accepted accounting principles as are at the time applicable, (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 Charges: As defined in Section 3.3.
Affiliate: As used in this Lease 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 (10%) or more of
the outstanding capital stock, shares or equity interests of such Person, or (c)
any officer, director, employee, partner, manager or trustee of such Person or
any Person controlling, controlled by or under common control with such Person
or any Person that owns, beneficially, directly or indirectly, ten percent (10%)
or more of the outstanding capital stock, shares or equity interests of such
Person (excluding trustees and Persons serving in similar capacities who are not
otherwise an Affiliate of such Person). For the purposes of this definition,
"control" (including the correlative meanings of the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, through the ownership
of voting securities, partnership interests or other equity interests.
Annual Budget: As used in this Lease, the term "Annual Budget"
shall mean an operating and capital budget prepared by Lessee and delivered to
Lessor in accordance with Section 4.1.
Award: As defined in Subsection 15.1(a).
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Base Rate: The rate of interest announced publicly by
Citibank, N.A., in New York, New York, from time to time, as such bank's base
rate. If no such rate is announced or if such rate becomes discontinued, then
such other rate as Lessor may reasonably designate.
Base Rent: As defined in Subsection 3.1(a).
Business Day: Each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which national banks in the City of New York, New
York, or in the municipality wherein the Leased Property is located are closed.
CERCLA: The Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
Change of Control: The sale, conveyance, assignment,
encumbering, pledging, hypothecation, granting a security interest in, granting
of options with respect to, or other disposition of (directly or indirectly,
voluntarily or involuntarily, by operation of law or otherwise, and whether or
not for consideration) of any class stock or other equity interests in a Person
(other than among existing holders of interests in such Person on the
Commencement Date and/or family members of such holders and/or trusts for the
benefit of any of the foregoing) that, upon a transfer of any portion thereof,
will create in the transferee thereof, directly or indirectly, a majority of any
class of stock or other equity interests of such Person.
Claims: As defined in Section 12.2.
COBRA: As defined in Subsection 8.2(b).
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: As defined in Section 2.1.
Competitive Set: As defined in the STR Reports. Lessor and
Lessee shall work in good faith to determine any additions and deletions to the
Hotel's Competitive Set, on or before November 15th of each year, with such
changes to be applicable for the following Fiscal Year. In the event Lessor and
Lessee cannot agree to the Hotel's Competitive Set by November 15th of any year,
such unagreed items shall be determined by Smith Travel Research (or, if it
refuses or is unable to do so, by arbitration pursuant to Section 25.2). The
costs of resetting the Hotel's Competitive Set shall be borne equally by the
parties.
Comparison Month: As defined in Subsection 3.1(d).
Condemnation, Condemnor: As defined in Section 15.1
Consolidated Financials: For any fiscal year or other
accounting period for Lessee and its consolidated subsidiaries, if any,
statements of earnings and retained earnings and of changes in financial
position 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,
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together with the notes thereto, all in reasonable detail and setting forth in
comparative form the corresponding figures for the corresponding period in the
preceding fiscal year, and prepared in accordance with generally accepted
accounting principles and audited by independent certified public accountants
acceptable to Lessor in its sole discretion.
Consumer Price Index: The "U.S. City Average, All Items"
Consumer Price Index for All Urban Consumers published by the Bureau of Labor
Statistics of the United States Department of Labor (Base: 1982-1984=100), or
any successor index thereto. If the Consumer Price Index is hereafter converted
to a different standard reference base or otherwise revised, any determination
hereunder that uses the Consumer Price Index shall be made with the use of such
conversion factor, formula or table for converting the Consumer Price Index as
may be published by the Bureau of Labor Statistics, or, if the Bureau shall no
longer publish the same, then with the use of such conversion factor, formula or
table as may be published by Prentice Hall, Inc., or, failing such publication,
by any other nationally recognized publisher of similar statistical information.
Date of Taking: As defined in Subsection 15.1(d).
Encumbrance: As defined in Section 22.1.
Environmental Audit: As defined in Subsection 8.3(b).
Environmental Authority: Any department, agency or other body
or component of any Government that exercises any form of jurisdiction or
authority under any Environmental Law.
Environmental Authorization: Any license, permit, order,
approval, consent, notice, registration, filing or other form of permission or
authorization required under any Environmental Law.
Environmental Laws: All applicable federal, state, local and
foreign laws and regulations relating to pollution of the environment (including
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata), including without limitation laws and regulations relating
to emissions, discharges, Releases or threatened Releases of Hazardous Materials
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials.
Environmental Laws include but are not limited to CERCLA, FIFRA, RCRA, SARA and
TSCA.
Environmental Liabilities: Any and all obligations to pay the
amount of any judgment or settlement, the cost of complying with any settlement,
judgment or order for injunctive or other equitable relief, the cost of
compliance or corrective action in response to any notice, demand or request
from an Environmental Authority, the amount of any civil penalty or criminal
fine, and any court costs and reasonable amounts for attorney's fees, fees for
witnesses and experts, and costs of investigation and preparation for defense of
any claim or any Proceeding, regardless of whether such Proceeding is
threatened, pending or completed, that may be or have been asserted
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against or imposed upon Lessor, Lessee, any Predecessor, the Leased Property or
any property used therein and arising out of:
(a) Failure of Lessee, Lessor, any Predecessor or the Leased
Property to comply at any time with all Environmental Laws;
(b) Presence of any Hazardous Materials on, in, under, at or
in any way affecting the Leased Property;
(c) A Release at any time of any Hazardous Materials on, in,
at, under or in any way affecting the Leased Property;
(d) Identification of Lessee, Lessor or any Predecessor as a
potentially responsible party under CERCLA or under any Environmental Law
similar to CERCLA;
(e) 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.
Fair Market Rental: The fair market rental of the Leased
Property means the rental which a willing tenant not compelled to rent would pay
a willing landlord not compelled to lease for the use and occupancy of such
Leased Property pursuant to the Lease for the term in question, (a) assuming
that Lessee is not in default thereunder and (b) determined in accordance with
the appraisal procedures set forth in Article 24 or in such other manner as
shall be mutually acceptable to Lessor and Lessee.
Fair Market Value: The fair market value of the Leased
Property means an amount equal to the price that a willing buyer not compelled
to buy would pay a willing seller not compelled to sell for such Leased
Property, (a) assuming the same is unencumbered by this Lease, (b) determined in
accordance with the appraisal procedures set forth in Article 24 or in such
other manner as shall be mutually acceptable to Lessor and Lessee, (c) assuming
that such seller must pay customary closing costs and title premiums, and (d)
taking into account the positive or negative effect on the value of the Leased
Property attributable to the interest rate, amortization schedule, maturity
date, prepayment penalty and other terms and conditions of any encumbrance that
is assumed by the transferee. In addition, in determining the Fair Market Value
with respect to damaged or destroyed Leased Property such value shall be
determined as if such Leased Property had not been so damaged or destroyed.
FIFRA: The Federal Insecticide, Fungicide, and Rodenticide
Act, as amended.
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Fiscal Year: The twelve (12) month period from January 1 to
December 31, or any shorter period at the beginning or end of the Term.
Fixtures: As defined in Section 1.1.
Force Majeure: An Unavoidable Occurrence, generally affecting
travel and/or the hotel or lodging business in the market and/or submarket in
which the Hotel is located.
Franchise Agreement: Any franchise agreement or license
agreement with a franchisor (such as Promus Hotels, Inc.) under which the Hotel
is operated.
Furniture and Equipment: For purposes of this Lease, 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 Hotel, together with all replacements therefor and
additions thereto, including, without limitation, (i) all equipment and systems
required for the operation of kitchens and bars, laundry and dry cleaning
facilities, (ii) office equipment, (iii) material handling equipment, cleaning
and engineering equipment, (iv) telephone and computerized accounting systems,
and (v) vehicles.
Government: The United States of America, any state, district
or territory thereof, any foreign nation, any state, district, department,
territory or other political division thereof, or any agency or political
subdivision of any of the foregoing.
Gross Operating Expenses: The term "Gross Operating Expenses"
shall include (i) all costs and expenses of operating the Hotel included within
the meaning of the term "Total Costs and Expenses" contained in the Uniform
System and, (ii) without duplication, the following: all salaries and employee
expense and payroll taxes (including salaries, wages, bonuses and other
compensation of all employees of the Hotel, and benefits including life, medical
and disability insurance and retirement benefits), expenditures described in
Section 9.1, operational supplies, utilities, insurance to be provided by Lessee
under the terms of this Lease, governmental fees and assessments, common area
maintenance costs and other common area fees and assessments, food, beverages,
laundry service expense, the cost of Inventories, license fees, advertising,
marketing, reservation systems and any and all other operating expenses as are
reasonably necessary for the proper and efficient operation of the Hotel and the
Leased Property incurred by Lessee in accordance with the provisions hereof
(excluding, however, (i) federal, state and municipal excise, sales and use
taxes collected directly from patrons and guests or as a part of the sales price
of any goods, services or displays, such as gross receipts, admissions, cabaret
or similar or equivalent taxes paid over to federal, state or municipal
governments, (ii) the cost of insurance to be provided under Article 13, (iii)
expenditures by Lessor pursuant to Article 13 and (iv) payments on any Mortgage
or other mortgage or security instrument on the Hotel); all determined in
accordance with generally accepted accounting principles. No part of Lessee's
central office overhead or general or administrative expense (as opposed to that
of the Hotel) shall be deemed to be a part of Gross Operating Expenses, as
herein provided. Reasonable out-of-pocket expenses of Lessee incurred for the
account of or in connection with the Hotel operations, including but not limited
to postage, telephone charges and reasonable travel expenses of employees,
officers and other representatives and consultants of Lessee and its Affiliates,
shall be deemed to be a part of Gross Operating
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Expenses and such Persons shall be afforded reasonable accommodations, food,
beverages, laundry, valet and other such services by and at the Hotel without
charge to such Persons or Lessee.
Gross Operating Profit: For any Fiscal Year, the excess of
Gross Revenues for such Fiscal Year over Gross Operating Expenses for such
Fiscal Year.
Gross Revenues: All revenues, receipts, and income of any kind
derived directly or indirectly by Lessee from or in connection with the Hotel
(including rentals or other payments from tenants, lessees, licensees or
concessionaires but not including their gross receipts) whether on a cash basis
or credit, paid or collected, determined in accordance with generally accepted
accounting principles, excluding, however: (i) funds furnished by Lessor, (ii)
federal, state and municipal excise, sales, and use taxes collected directly
from patrons and guests or as a part of the sales price of any goods, services
or displays, such as gross receipts, admissions, cabaret or similar or
equivalent taxes and paid over to federal, state or municipal governments, (iii)
the amount of all credits, rebates or refunds to customers, guests or patrons,
and all service charges, finance charges, interest and discounts attributable to
charge accounts and credit cards, to the extent the same are paid to Lessee by
its customers, guests or patrons, or to the extent the same are paid for by
Lessee to, or charged to Lessee by, credit card companies, (iv) gratuities or
service charges actually paid to employees, (v) proceeds of insurance and
condemnation, (vi) proceeds from sales other than sales in the ordinary course
of business, (vii) all loan proceeds from financing or refinancings of the Hotel
or interests therein or components thereof, (viii) judgments and awards, except
any portion thereof arising from normal business operations of the Hotel, and
(ix) items constituting "allowances" under the Uniform System.
Hazardous Materials: All chemicals, pollutants, contaminants,
wastes and toxic substances, including without limitation:
(a) Solid or hazardous waste, as defined in RCRA or any other
Environmental Law;
(b) Hazardous substances, as defined in CERCLA or any other
Environmental Law;
(c) Toxic substances, as defined in TSCA or any other
Environmental Law;
(d) Insecticides, fungicides, or rodenticides, as defined in
FIFRA or any other Environmental Law; and
(e) Gasoline or any other petroleum product or byproduct,
polychlorinated biphenyl, asbestos and urea formaldehyde.
Hotel: The hotel and/or other facility offering lodging and
other services or amenities being operated or proposed to be operated on the
Leased Property.
Hotel Market Decline: A period of six (6) consecutive calendar
months during which there is (i) a twenty percent (20%) decline in average hotel
occupancy for the Hotel from the average hotel occupancy levels for same period
during the prior calendar year and (ii) a twenty
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percent (20%) decline in average hotel occupancy for the Hotel's Competitive Set
from the average hotel occupancy levels for the same period during the prior
calendar year, as published in the applicable STR Reports.
Impositions: Collectively, all taxes (including, without
limitation, all ad valorem, sales and use, single business, gross receipts,
transaction, privilege, rent or similar taxes as the same relate to or are
imposed upon Lessee or its business conducted upon the Leased Property),
assessments (including, without limitation, all assessments for public
improvements or benefit, whether or not commenced or completed prior to the date
hereof and whether or not to be completed within the Term), ground rents, water,
sewer or other rents and charges, excises, tax inspection, authorization and
similar fees and all 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 revenue tax of Lessor or any other Person, or (3) any tax imposed with
respect to the sale, exchange or other disposition by Lessor of any Leased
Property or the proceeds thereof, or (4) any single business, gross receipts
(other than a tax on any rent received by Lessor from Lessee), transaction,
privilege or similar taxes as the same relate to or are imposed upon Lessor,
except to the extent that any tax, assessment, tax levy or charge that Lessee is
obligated to pay pursuant to the first sentence of this definition and that is
in effect at any time during the Term hereof is totally or partially repealed,
and a tax, assessment, tax levy or charge set forth in clause (1) or (2) is
levied, assessed or imposed expressly in lieu thereof.
Indemnified Party: Either of a Lessee Indemnified Party or a
Lessor Indemnified Party.
Indemnifying Party: Any party obligated to indemnify an
Indemnified Party pursuant to Sections 8.3 or 18.1.
Insurance Requirements: All terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
Inventory: All "Inventories of Merchandise" and "Inventories
of Supplies" as defined in the Uniform System, including without limitation
linens, china, silver, glassware and other non-depreciable personal property,
and including any property of the type described in Section 1221(1) of the Code.
Land: As defined in Section 1.1.
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Lease: This Lease.
Leased Improvements; Leased Property: Each 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 or alteration thereof (whether by Lessee or
otherwise), whether now in force or hereafter enacted and in force, including
(a) all laws, rules or regulations pertaining to the environment, occupational
health and safety and public health, safety or welfare, and (b) any laws, rules
or regulations that may (1) require repairs, modifications or alterations in or
to the Leased Property or (2) in any way adversely affect the use and enjoyment
thereof; and all permits, licenses and authorizations and regulations relating
thereto and all covenants, agreements, restrictions and encumbrances contained
in any instruments, either of record or known to Lessee (other than encumbrances
created by Lessor without the consent of Lessee), at any time in force affecting
the Leased Property.
Lending Institution: Any insurance company, credit company,
federally-insured commercial or savings bank, national banking association,
savings and loan association, employees welfare, pension or retirement fund or
system, corporate profit sharing or pension trust, college or university, or
real estate investment trust, including any corporation qualified to be treated
for federal tax purposes as a real estate investment trust, such trust having a
net worth of at least $10,000,000.
Lessee: The Lessee designated on this Lease and its respective
permitted successors and assigns.
Lessee Indemnified Party: Lessee, any Affiliate of Lessee, any
other Person against whom any claim for indemnification may be asserted
hereunder as a result of a direct or indirect ownership interest (including a
stockholder's or member's interest) in Lessee, the officers, directors,
stockholders, members, managers, employees, agents and representatives of
Lessee, and the respective heirs, personal representatives, successors and
assigns of any such officer, director, stockholder, member, manager, employee,
agent or representative.
Lessee's Personal Property: As defined in Section 6.2.
Lessee's Work: As defined in Section 10.4.
Lessor: The Lessor designated In this Lease and its respective
successors and assigns.
Lessor Indemnified Party: Lessor, any Affiliate of Lessor, any
other Person against whom any claim for indemnification may be asserted
hereunder as a result of a direct or indirect ownership interest (including a
stockholder's or partnership interest) in Lessor, the officers, directors,
stockholders, members, managers, employees, agents and representatives of the
general partner of Lessor and any partner, agent, or representative of Lessor,
and the respective heirs,
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personal representatives, successors and assigns of any such officer, director,
stockholder, partner, member, manager, employee, agent or representative.
Licenses: As defined in Subsection 2.3(a).
Management Agreement: The agreement pursuant to which Manager
operates the Hotel.
Manager: Promus Hotels, Inc., a Delaware corporation, or any
successor manager that is retained by Lessee to operate the Hotel pursuant to
this Lease and the Franchise Agreement.
Minimum Price: The sum of (a) the equity in the Leased
Property at the time of acquisition of the Leased Property by Lessor, plus (b)
other capital expenditures on the Leased Property by Lessor after the date
hereof (less depreciation and amortization thereof) plus (c) the unpaid
principal balance of all encumbrances against the Leased Property at the time of
purchase of the Leased Property by Lessee, less (x) all proceeds received by
Lessor from any financing or refinancing of the Leased Property after the date
hereof (after payment of any debt refinanced and net of any costs and expenses
incurred in connection with such financing or refinancing, including, without
limitation, loan points, commitment fees and commissions and legal fees) and (y)
the net amount (after deduction of all reasonable legal fees and other costs and
expenses, including without limitation expert witness fees, incurred by Lessor
in connection with obtaining any such proceeds or award) of all insurance
proceeds received by Lessor and awards received by Lessor from any partial
Taking of the Leased Property that are not applied to restoration.
Mortgage: As defined in Section 22.2.
National Economic Decline: A period of six (6) consecutive
calendar months during which there occurs or continues a ten percent (10%)
decline in average hotel occupancy, from average hotel occupancy levels for the
same period during the prior calendar year, for all open and operating hotels in
the United States as determined from the applicable STR Reports or, if the STR
Reports are not longer published, other reputable national economic data
regarding the hospitality industry.
Notice: As defined in Article 26.
Officer's Certificate: A certificate of Lessee reasonably
acceptable to Lessor, signed by the chief financial officer or another officer
authorized so to sign by the board of directors or other governing body of
Lessee, or bylaws or limited liability company agreement of Lessee, or any other
Person whose power and authority to act has been authorized by delegation in
writing by any such officer.
Optional Termination Date: As defined in Section 2.2.
Overdue Rate: On any date, a rate equal to the Base Rate plus
five percent (5%) per annum, but in no event greater than the maximum rate then
permitted under applicable law.
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Payment Date: Any due date for the payment of any installment
of Base Rent.
Percentage Rent: As defined in Subsection 3.1(b).
Person: Any Government, natural person, corporation, general
or limited partnership, limited liability company, stock company or association,
joint venture, association, company, trust, bank, trust company, land trust,
business trust, or other entity.
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 Lessee), together
with all replacement, 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,
either contractually or by operation of law, relating to the Leased Property.
Primary Intended Use: As defined in Subsection 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.
Quarterly Revenues Computation: As defined in Subsection
3.1(b).
RCRA: The Resource Conservation and Recovery Act, as amended.
Real Estate Taxes: All real estate taxes, including general
and special assessments, if any, which are imposed upon the Land, and any
improvements thereon.
Regional Market Decline: A period of six (6) consecutive
calendar months during which there is a twenty percent (20%) decline in average
hotel occupancy from hotel occupancy levels for the same period during the then
prior calendar year, for all open and operating hotels in the Smith Travel
Research Region in which the Hotel is located, as determined from applicable STR
Reports or, if the STR Reports are no longer published, other reputable regional
economic data regarding the hospitality industry.
Rejectable Offer Price: An amount equal to the greater of (a)
the Fair Market Value, determined as of the applicable purchase date, or (b) the
Minimum Price.
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.
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Rent: Collectively, the Base Rent, Percentage Rent, Sundry
Rent and Additional Charges.
Repositioning: As defined in Section 3.6.
SARA: The Superfund Amendments and Reauthorization Act of
1986, as amended.
Solvent: As to any Person, (a) the sum of the assets of such
Person exceeds its liabilities and (b) such Person has sufficient capital with
which to conduct its business as presently conducted and as proposed to be
conducted.
State: The state or commonwealth in which the Hotel is
located.
STR Reports: Reports compiled by Smith Travel Research, or its
successor, which contain historical supply and demand, occupancy, and average
rate information for the Hotel and hotels with which it competes (or, in the
event that Smith Travel Research discontinues providing such information,
reports of similar nature compiled by an authority recognized nationally in the
hospitality industry).
Subsidiaries: Persons in which Lessee owns, directly or
indirectly, more than fifty percent (50%) of the voting stock or control, as
applicable.
Suite Revenue Breakpoint: As defined in Subsection 3.1(b).
Suite Revenues: All revenues, receipts, and income of any kind
derived directly or indirectly by Lessee from or in connection with the rental
of guest rooms or suites, whether to individuals, groups or transients, at the
Hotel, whether on a cash basis or credit, paid or collected, determined in
accordance with generally accepted accounting principles, but excluding the
following:
(a) The amount of all credits, rebates or refunds to
customers, guests or patrons, and all service charges, finance charges, interest
and discounts attributable to charge accounts and credit cards, to the extent
the same are paid to Lessee by its customers, guests or patrons, or to the
extent the same are paid for by Lessee to, or charged to Lessee by, credit card
companies;
(b) All sales taxes or any other taxes imposed on the rental
of such guest rooms or suites;
(c) Gratuities or service charges actually paid to employees;
(d) Proceeds of business interruption and other insurance; and
(e) Sundry Revenues.
Sundry Rent: As defined in Section 3.1(c).
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Sundry Revenues: All revenues, receipts, and income derived
from the Hotel's meeting rooms, telephones, TV and movie rentals, check room,
washroom, laundry, valet, vending machines, and other sources not specified
herein as Suite Revenues.
Taking: A taking or voluntary conveyance during the Term
hereof of all or part of the Leased Property, or any interest therein or right
accruing thereto or use thereof, as the result of, or in settlement of, any
Condemnation or other eminent domain Proceeding affecting the Leased Property
whether or not the same shall have actually been commenced.
Term: As defined in Section 2.1.
TSCA: The Toxic Substances Control Act, as amended.
Unavoidable Delays: Delays 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 or other
causes beyond the control of the party responsible for performing an obligation
hereunder, provided that lack of funds shall not be deemed a cause beyond the
control of either party hereto unless such lack of funds is caused by the
failure of the other party hereto to perform any obligations of such party under
this Lease or any guaranty of this Lease.
Unavoidable Occurrence. The occurrence of strikes, lockouts,
labor unrest, gasoline and other energy shortages, widespread disruption of air,
auto or other travel, inability to procure materials or services, power or other
utility failure, acts of God (such as hurricanes, tornadoes, earthquakes, floods
and mud slides), governmental restrictions, war or other enemy or terrorist
action, civil commotion, fire, casualty, condemnation, the Year 2000 Problem or
other similar causes, in each case, if such cause is beyond the reasonable
control of Lessee; provided that (i) lack of funds shall not be deemed a cause
beyond the reasonable control of either party hereto unless such lack of funds
is caused by the failure of the other party hereto to perform any obligations of
such party under this Lease or any guaranty of this Lease, and (ii) any such
occurrence is an extraordinary, as opposed to a routine or cyclical, material
event that was not reasonably foreseeable when the then-applicable Annual Budget
was prepared.
Uneconomic for its Primary Intended Use: A state or condition
of the Hotel such that, in the good faith judgment of Lessee, reasonably
exercised and evidenced by the resolution of the board of directors or other
governing body of Lessee, the Hotel cannot be operated on a commercially
practicable basis for its Primary Intended Use, taking into account, among other
relevant factors, the number of usable rooms and projected revenues, such that
Lessee intends to, and shall, complete the cessation of operations from the
Leased Hotel.
Uniform System: The Uniform System of Accounts for Hotels (9th
Revised Edition, 1996) as published by the Hotel Association of New York City,
Inc., with such later revisions as may be agreed to by both Lessor and Lessee.
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Unsuitable for its Primary Intended Use: A state or condition
of the Hotel such that, in the good faith judgment of Lessee, reasonably
exercised and evidenced by the resolution of the board of directors or other
governing body of Lessee, due to casualty damage or loss through Condemnation,
the Hotel cannot function as an integrated hotel facility consistent with
standards applicable to a well maintained and operated hotel.
WARN Act: As defined in Subsection 8.2(b).
Work Letter: As defined in Section 10.4.
Working Capital: Funds reasonably necessary for the day-to-day
operation of the Hotel's business for a thirty (30) day period, including,
without limitation, amounts sufficient for the maintenance of change and petty
cash funds, operating bank accounts, payrolls, accounts payable, accrued current
liabilities, and funds required to maintain Inventories.
Year 2000 Problem: The malfunction of software, hardware or an
embedded technological system due to the failure to properly process any date or
input which includes an indication of or reference to a date, including
specifically but not limited to dates that represent or reference different
centuries or more than one century, if either (i) Lessor had previously refused
to make or approve a capital expenditure reasonably proposed by Lessee to avoid
such Year 2000 Problem, or (ii) such Year 2000 Problem results from a
governmental or other third party failure to be year 2000 compliant and Lessee
has not failed to take reasonable steps to seek assurances that such parties
will be year 2000 compliant.
ARTICLE 2
TERM; TERMINATION
2.1. Term.
(a) The term of the Lease (the "Term") shall commence on the
date specified in Schedule 2.1 (the "Commencement Date"), and shall end on the
tenth (10th) anniversary of the Commencement Date, unless sooner terminated in
accordance with the provisions hereof or extended to an anniversary of the
initial expiration date pursuant to this Article 2.
(b) Lessee is granted the option to extend the Term of this
Lease for a period of five (5) years (the "First Extension"), provided that
Lessee is not in default hereunder either at the time of deemed exercise of the
option or at the end of the original Term, which option must be exercised by
written notice to Lessor at least one hundred twenty (120) days prior to the
expiration of the original Term. The First Extension shall be upon the same
terms, conditions and rentals as set forth herein for the original Term.
(c) Lessee is granted an option to extend the Term for a
period of five (5) years following the end of the First Extension (the "Second
Extension"), provided that Lessee is not in default hereunder either at the time
of exercise of the option or at the end of the First Extension, which option
must be exercised by written notice to Lessor at least one hundred twenty (120)
days
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prior to the expiration of the First Extension. If such option is exercised,
Lessor and Lessee shall negotiate in good faith modifications to the Rent for
the Second Extension to adjust such Rent to market rates for arms-length hotel
REIT leases between unrelated parties for similar hotel properties at that time.
In the event Lessor and Lessee are unable to agree upon Rent terms for the
Second Extension at least ninety (90) days prior to the expiration of the Term,
the Rent terms for the Second Extension shall be determined by a panel of three
(3) persons who have generally recognized expertise in evaluating hotel REIT
leases and who are not Affiliates of Lessor or Lessee. Lessee and the Lessor
each shall have the right to designate one panel member and the two (2) panel
members so designated will designate the third panel member. Rent terms approved
by at least two (2) of the three (3) panel members will be binding on Lessee and
Lessor for the Second Extension, which shall be otherwise on the terms set forth
herein. In determining the market rates for the Second Extension, the panel
members shall be instructed to consider hotel REIT lease terms with respect to
similar hotel property types. The Second Extension shall be otherwise upon the
same terms and conditions as set forth herein for the original Term.
2.2. Lessor's Option to Terminate Lease. In the event Lessor enters
into a bona fide contract to sell the Leased Property to a non-Affiliate, there
is a Change of Control of Lessor, or the provisions of the Code are amended to
permit Lessor to operate hotels or otherwise render the structure embodied by
this Lease to be obsolete, Lessor may terminate the Lease by giving not less
than thirty (30) days' prior Notice to Lessee of Lessor's election to terminate
the Lease effective upon, as appropriate, the closing under such contract, the
date of such Change of Control, or the effective date of such amendment to the
Code (or any other specified date within 30 days after such date) (the "Optional
Termination Date"). Effective upon the Optional Termination Date, this Lease
shall terminate and be of no further force and effect except as to any
obligations of the parties existing as of such date that survive termination of
this Lease. As compensation for the early termination of its leasehold estate
under this Section 2.2, Lessor shall within 12 months of the Optional
Termination Date either (a) pay to Lessee the fair market value of Lessee's
leasehold estate hereunder plus interest thereon at the Base Rate as of the
Optional Termination Date or (b) offer to lease to Lessee one or more substitute
hotel facilities pursuant to one or more leases that would create for Lessee
leasehold estates that have an aggregate fair market value of no less than the
fair market value of the original leasehold estate, both such values as
determined as of the Optional Termination Date. Lessor also shall pay to Lessee,
or reimburse Lessee for any assignment fees, termination fees or other
liabilities arising under the Franchise Agreement or Management Agreement solely
as a result of the assignment or termination of such Franchise Agreement or
Management Agreement in connection with the termination of this Lease under this
Section 2.2. If Lessor elects and complies with the option described in (b)
above, regardless of whether Lessee enters into the lease(s) described therein,
Lessor shall have no further obligations to Lessee with respect to compensation
for the early termination of this Lease. 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 24.
For the purposes of this Article, 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, taking into account that the leasehold estate is encumbered by the
Franchise Agreement and an arm's-length Management Agreement.
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2.3. Transition Procedures. Upon the expiration or termination of the
Term of this Lease, for whatever reason (other than a purchase of the Leased
Property by Lessee), Lessor and Lessee shall do the following (and the
provisions of this Section 2.3 shall survive the expiration or termination of
this Lease until they have been fully performed) and, in general, shall
cooperate in good faith to effect an orderly transition of the management and/or
lease of the Hotel:
(a) Transfer of Licenses. Lessee shall use reasonable 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 Hotel (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; 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.
(b) Leases and Concessions. Lessee shall assign to Lessor or
Lessor's nominee simultaneously with the termination of this Lease, and the
assignee shall assume, all leases and concession agreements in effect with
respect to the Hotel then in Lessee's name.
(c) Books and Records. All books and records for the Hotel
kept by Lessee pursuant to Section 4.2 shall be delivered promptly to Lessor or
Lessor's nominee, simultaneously with the termination of this Lease, but such
books and records shall thereafter be available to Lessee at all reasonable
times for inspection, audit, examination, and transcription for a period of one
(1) year and Lessee may retain (on a confidential basis) copies or computer
records thereof.
(d) Receivables and Payables. Lessee shall be entitled to
retain all cash, bank accounts and house banks, and to collect all Gross
Revenues and accounts receivable accrued through the termination date. Lessee
shall be responsible for the payment of Rent, all Gross Operating Expenses and
all other obligations of Lessee accrued under this Lease as of the termination
date, and Lessor or Lessor's nominee shall be responsible for all Gross
Operating Expenses of the Hotel accruing after the termination date.
(e) Final Accounting. Lessee shall, within forty five (45)
days after the expiration or termination of the Term, prepare and deliver to
Lessor a final accounting statement, dated as of the date of the expiration or
termination, along with a statement of any sums due from Lessee to Lessor
pursuant hereto and payment of such funds.
(f) Inventory. Lessee shall insure that the Leased Property,
at the date of such termination or expiration, has Inventory of a substantially
equivalent nature and amount as exists at the Leased Property on the
Commencement Date, and Lessor or its designee shall acquire such Inventory from
Lessee for a sale price equal to the fair market value of such Inventory.
(g) Surrender. 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
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permitted or required by the provisions of this Lease and except for ordinary
wear and tear (subject to the obligation of Lessee to maintain the Leased
Property in good order and repair, as would a prudent owner, during the entire
Term of the Lease), or damage by casualty or Condemnation (subject to the
obligations of Lessee to restore or repair as set forth in the Lease)
The provisions of this Section 2.3 shall survive the expiration or
termination of this Lease until they have been fully performed. Nothing
contained herein shall limit Lessor's rights and remedies under this Lease if
such termination occurs as the result of an Event of Default.
2.4. 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 150% of the aggregate of (a) one-twelfth of the
aggregate Base Rent and Percentage Rent payable with respect to the last Fiscal
Year of the Term, (b) all Additional Charges accruing during the applicable
month and (c) all other sums, if any, payable by Lessee under this Lease with
respect to the Leased Property. During such period, Lessee shall be obligated to
perform and observe all of the terms, covenants and conditions of this Lease,
but shall have no rights hereunder other than the right, to the extent given by
law to tenancies at sufferance, to continue its occupancy and use of the Leased
Property. Nothing contained herein shall constitute the consent, express or
implied, of Lessor to the holding over of Lessee after the expiration or earlier
termination of this Lease.
ARTICLE 3
RENT; RENT ADJUSTMENTS
3.1. Rent. Lessee will pay to Lessor in lawful money of the United
States of America which shall be legal tender for the payment of public and
private debts, in immediately available funds, at Lessor's address set forth in
Article 26 hereof or at such other place or to such other Person as Lessor from
time to time may designate in a Notice, all Base Rent, Percentage Rent, Sundry
Rent and Additional Charges, during the Term, as follows:
(a) Base Rent: The annual sum specified in Schedule 3.1(a)
(prorated for fiscal year 1999), as adjusted pursuant to Subsection 3.1(d)
hereof, payable in advance in equal, consecutive monthly installments, on or
before the tenth day of each calendar month of the Term ("Base Rent"); provided,
however, that the first monthly payment of Base Rent shall be payable during the
second calendar month of the Term, and that the first and last monthly payments
of Base Rent shall be pro rated as to any partial month (subject to adjustment
as provided in Sections 14.5, 15.3 and 15.5).
(b) Percentage Rent: For each calendar quarter during the Term
commencing with the calendar quarter in which the Commencement Date falls and
ending with the calendar quarter in which the Term (including any applicable
extensions) ends, Lessee shall pay percentage rent ("Percentage Rent").
Percentage Rent for the applicable quarter shall be an amount equal to
the following formula:
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The amount equal to the applicable Quarterly Revenues
Computation (as defined below) less the sum of
(i) an amount equal to the Base Rent paid with
respect to such quarter and all prior calendar quarters of the
applicable Fiscal Year and
(ii) an amount equal to Percentage Rent paid with
respect to all prior calendar quarters of the applicable
Fiscal Year.
For the purpose of the above formula:
The quarterly revenues computation ("Quarterly Revenues Computation")
is equal to the amount obtained by adding, for the applicable calendar quarter,
an amount equal to the sum of (i) seventeen percent (17%) of all Fiscal Year to
date Suite Revenues up to the applicable suite revenue breakpoint (the "Suite
Revenue Breakpoint") described in Schedule 3.1(b), attached hereto, (prorated
for the first and last calendar quarters of the Term (including any applicable
extensions)) and fifty-five percent (55%) of all Fiscal Year to date Suite
Revenues in excess of the applicable Suite Revenue Breakpoint. At the beginning
of each Fiscal Year, the Suite Revenue Breakpoints shall be adjusted by the same
percentage that the Base Rent is adjusted pursuant to Subsection 3.1(d).
The Percentage Rent shall be payable as follows:
(i) with respect to each calendar month of the Term, except for
the calendar months in the first partial and next two full
calendar quarters at the beginning of the Term, Lessee shall
pay on or before the last day of the calendar month an amount
equal to the excess, if any, of (A) seventy-five percent (75%)
of the amount of Lessee's budgeted Percentage Rent payable
with respect to the then current calendar month (which
budgeted amount shall be equal to one-third (1/3) of the
quarterly estimate of Percentage Rent included in the Annual
Budget for the calendar quarter in which the calendar month
occurs) over (B) Base Rent for such calendar month; and
(ii) with respect to each calendar quarter of the Term, except for
the calendar month in the first partial and next two full
calendar quarters at the beginning of the Term, Lessee shall
pay on or before the 15th day following the end of the
calendar quarter an amount equal to the amount, if any, by
which the aggregate of all payments in respect of Base Rent
and Percentage Rent for such calendar quarter shall be less
than the amount determined pursuant to the Quarterly Revenues
Computation for such calendar quarter; and
(iii) with respect to the first partial and next two full calendar
quarters at the beginning of the Term, Lessee shall pay on or
before the 15th day following the end of the calendar quarter
an amount equal to the amount, if any, by which the aggregate
of all payments in respect of Base Rent for such calendar
quarter shall be less than the
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amount determined pursuant to the Quarterly Revenues
Computation for such calendar quarter.
In no event will the amount of Percentage Rent payable for any calendar quarter
or the result of any Quarterly Revenues Computation be less than zero, and there
shall be no reduction in the Base Rent regardless of the result of any Quarterly
Revenues Computation.
(c) Sundry Rent. For each calendar quarter during the Term
commencing with the calendar quarter in which the Commencement Date falls and
ending with the calendar quarter in which the Term (including any applicable
extensions) ends, Lessee shall pay sundry rent ("Sundry Rent"). Sundry Rent
shall be an amount equal to fifty-five percent (55%) of all Fiscal Year to date
Sundry Revenues less an amount equal to Sundry Rent paid with respect to all
prior calendar quarters of the applicable Fiscal Year. Sundry Rent shall be
payable as follows:
(i) with respect to each calendar month of the Term, except for
the calendar months in the first partial and next two full
calendar quarters at the beginning of the Term, on or before
the last day of the calendar month an amount equal to
seventy-five percent (75%) of the amount of Lessee's budgeted
Sundry Rent payable with respect to the then current calendar
month (which budgeted amount shall be equal to one-third (1/3)
of the quarterly estimate of Sundry Rent included in the
Annual Budget for the calendar quarter in which the calendar
month occurs); and
(ii) with respect to each calendar quarter of the Term, except for
the calendar months in the first partial and next two full
calendar quarters at the beginning of the Term, on or before
the 15th day following the end of the calendar quarter an
amount equal to the amount, if any, by which the aggregate of
all payments pursuant to Section 3.1(c)(i) in respect of
Sundry Rent for such calendar quarter shall be less than
ninety-nine percent (99%) of Sundry Revenues for such calendar
quarter; and
(iii) with respect to the first partial and next two full calendar
quarters at the beginning of the Term, on or before the 15th
day following the end of the calendar quarter.
(d) Officer's Certificates. Additionally, an Officer's
Certificate shall be delivered to Lessor quarterly, together with such quarterly
Percentage Rent payment and quarterly Sundry Rent payment, setting forth the
calculation of such rent payment for such quarter, within thirty (30) days after
each of the first three quarters of each Fiscal Year (or part thereof) in the
Term. Such quarterly payments shall be based on the formula set forth in
Subsection 3.1(b) and 3.1(c), as applicable. There shall be no reduction in the
Base Rent regardless of the result of the Quarterly Revenues Computations.
In addition, on or before March 1 of each year, commencing with March
1, 2000, Lessee shall deliver to Lessor an Officer's Certificate reasonably
acceptable to Lessor setting forth the computation of the actual Percentage Rent
and Sundry Rent that accrued for each quarter of the Fiscal Year that ended on
the immediately preceding December 31 and shall pay to Lessor Percentage Rent
and Sundry Rent, if due and payable, for the last quarter of the applicable
Fiscal Year. Additionally, if the annual Percentage Rent and Sundry Rent due and
payable for any Fiscal
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Year (as shown in the applicable Officer's Certificate) exceeds the amount
actually paid as Percentage Rent and Sundry Rent by Lessee for such year, Lessee
also shall pay such excess to Lessor at the time such certificate is delivered.
If the Percentage Rent and Sundry Rent actually due and payable for such Fiscal
Year is shown by such certificate to be less than the amount actually paid as
Percentage Rent and Sundry Rent for the applicable Fiscal Year, Lessor, at its
option, shall reimburse such amount to Lessee or credit such amount against
subsequent months' Base Rent or Sundry Rent, as applicable, and with respect to
Percentage Rent, to the extent necessary, subsequent quarters' Percentage Rent
payments. Any such credit to Base Rent shall not be applied for purposes of
calculating Percentage Rent payable for any subsequent quarter.
Any difference between the annual Percentage Rent or Sundry Rent due
and payable for any Fiscal Year (as shown in the applicable Officer's
Certificate or as adjusted pursuant to Section 3.3) and the total amount of
quarterly payments for such Fiscal Year actually paid by Lessee as Percentage
Rent or Sundry Rent, whether in favor of Lessor or Lessee, shall bear interest
at the Overdue Rate, which interest shall accrue from the due date of the last
quarterly payment for the Fiscal Year until the amount of such difference shall
be paid or otherwise discharged. Any such interest payable to Lessor shall be
deemed to be and shall be payable as Additional Charges.
The obligation to pay Percentage Rent and Sundry 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 and Sundry Rent accrued prior to such termination date, and
Lessee's good faith best estimate of the amount of any unresolved contractual
allowances, shall be made not later than two (2) years after such expiration or
termination date, but Lessee shall advise Lessor within sixty (60) days after
such expiration or termination date of Lessee's best estimate at that time of
the approximate amount of such adjustments, which estimate shall not be binding
on Lessee or have any legal effect whatsoever.
(e) CPI Adjustments to Base Rent and Percentage Rent. For each
year of the Term beginning on or after January 1, 2001, the Base Rent shall be
adjusted from time to time as follows:
(1) If the most recently published Consumer Price
Index as of the last day of the last month (the "Comparison
Month") of any Fiscal Year is different than the average
Consumer Price Index for the twelve (12) month period prior
thereto, the Base Rent for the next Fiscal Year shall be
adjusted by the percentage change in the Consumer Price Index
calculated as follows:
(A) The difference between the Consumer
Price Index for the most recent Comparison Month and the
average Consumer Price Index for the twelve (12) month period
prior thereto shall be divided by the average Consumer Price
Index for the twenty four (24) month period prior thereto.
(B) The Base Rent shall be multiplied by the
lesser of (i) seven percent (7%) or (ii) the quotient obtained
in subparagraph (d)(1)(A) above.
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(C) The product obtained in subparagraph
(d)(1)(B) above shall be added to the Base Rent.
Adjustments in the Base Rent shall be effective on the first day of the
first calendar month of the Fiscal Year to which such adjusted Base Rent
applies. The Suite Revenue Breakpoint then included in the Quarterly Revenues
Computation pursuant to Subsection 3.1(b) shall be similarly adjusted, effective
with any such adjustment in the Base Rent.
(2) If (i) a significant change is made in the number
or nature (or both) of items used in determining the Consumer
Price Index, or (ii) the Consumer Price Index shall be
discontinued for any reason, the Bureau of Labor Statistics
shall be requested to furnish a new index comparable to the
Consumer Price Index, together with information which will
make possible a conversion to the new index in computing the
adjusted Base Rent hereunder. If for any reason the Bureau of
Labor Statistics does not furnish such an index and such
information, the parties will instead mutually select, accept
and use such other index or comparable statistics on the cost
of living in Washington, D.C. that is computed and published
by an agency of the United States or a responsible financial
periodical of recognized authority.
(f) Manager Fund-up Cure Payments. If and to the extent that
Manager pays amounts to Lessee pursuant to the Management Agreement in order to
avoid termination of the Management Agreement by Lessee for Manager's failure to
meet certain performance hurdles described therein, such amounts shall be
treated as additional Suite Revenues for purposes of the Percentage Rent
calculation hereunder.
(g) Allocation of Rent. The parties hereto acknowledge and
agree that the Base Rent paid or payable by Lessee to Lessor hereunder shall, to
the extent relevant, be allocated between the personal property and real
property constituting Leased Property hereunder in direct proportion to the then
recognizable fair market value of such personal property and real property.
Percentage Rent in excess of Base Rent shall be allocated solely to real
property.
3.2. Confirmation of Percentage Rent and Sundry 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
generally accepted accounting principles, that will accurately record all data
necessary to compute Percentage Rent and Sundry Rent, and Lessee shall retain,
for at least four (4) years after the expiration of each Fiscal Year (and in any
event until the reconciliation described in Subsection 3.1(c) for such Fiscal
Year has been made), reasonably adequate records conforming to such accounting
system showing all data necessary to compute Percentage Rent and Sundry Rent for
the applicable Fiscal Years. Lessor, at its expense (except as provided
hereinbelow), shall have the right from time to time, upon prior written notice
to Lessee and Manager, by its accountants or representatives to audit the
information that formed the basis for the data set forth in any Officer's
Certificate provided under Subsection 3.1(d) and, in connection with such
audits, to examine all Lessee's records (including supporting data and sales and
excise tax returns) reasonably required to verify Percentage Rent and Sundry
Rent, subject to any prohibitions or limitations on disclosure of any such data
under Legal Requirements; provided, however that Lessor may only inspect or
audit records in Manager's possession subject to the terms
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of Lessee's access thereto under the Management Agreement. If any such audit
discloses a deficiency in the payment of Percentage Rent or Sundry Rent, and
either Lessee agrees with the result of such audit or the matter is otherwise
determined or compromised, Lessee shall forthwith pay to Lessor the amount of
the deficiency, as finally agreed or determined, together with interest at the
Overdue Rate from the date when said payment should have been made to the date
of payment thereof; provided, however, that as to any audit that is commenced
more than two (2) years after the date Percentage Rent or Sundry Rent for any
Fiscal Year is reported by Lessee to Lessor, the deficiency, if any, with
respect to such Percentage Rent or Sundry Rent shall bear interest at the
Overdue Rate only from the date such determination of deficiency is made unless
such deficiency is the result of gross negligence or willful misconduct on the
part of Lessee, in which case interest at the Overdue Rate will accrue from the
date such payment should have been made to the date of payment thereof. If any
such audit discloses that the Percentage Rent or Sundry Rent actually due from
Lessee for any Fiscal Year exceed those reported by Lessee by more than three
percent (3%), Lessee shall pay the cost of such audit and examination. Any
proprietary information obtained by Lessor pursuant to the provisions of this
Section shall be treated as confidential, except that such information may be
used, subject to appropriate confidentiality safeguards, in any litigation
between the parties and except further that Lessor may disclose such information
to prospective lenders. The obligations of Lessee contained in this Section
shall survive the expiration or earlier termination of this Lease.
3.3. Additional Charges. In addition to the Base Rent, Percentage Rent
and Sundry Rent, (a) Lessee also will pay and discharge as and when due and
payable all other amounts, liabilities, obligations and Impositions that Lessee
assumes or agrees to pay under this Lease, and (b) in the event of any failure
on the part of Lessee to pay any of those items referred to in clause (a) of
this Section 3.3, Lessee also will promptly pay and discharge every fine,
penalty, interest and cost that may be added for non-payment or late payment of
such items (the items referred to in clauses (a) and (b) of this Section 3.3
being additional rent hereunder and being referred to herein collectively as the
"Additional Charges"), and Lessor shall have all legal, equitable and
contractual rights, powers and remedies provided either in this Lease or by
statute or otherwise in the case of non-payment of the Additional Charges as in
the case of non-payment of the Base Rent. If any installment of Base Rent,
Percentage Rent, Sundry 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 on demand, as Additional Charges, a late charge
(to the extent permitted by law) computed at the Overdue Rate on the amount of
such installment, from the due date of such installment to the date of payment
thereof. To the extent that Lessee pays any Additional Charges to Lessor
pursuant to any requirement of this Lease, Lessee shall be relieved of its
obligation to pay such Additional Charges to the entity to which they would
otherwise be due and Lessor shall pay same from monies received from Lessee.
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3.4. Net Lease; No Termination, Abatement, Etc.
(a) The Rent shall be paid absolutely net to Lessor, so that
this Lease shall yield to Lessor the full amount of the installments of Base
Rent, Percentage Rent, Sundry Rent and Additional Charges throughout the Term,
all as more fully set forth in Article 5, but subject to any other provisions of
this Lease that expressly provide for adjustment or abatement of Rent or other
charges or expressly provide that certain expenses or maintenance shall be paid
or performed by Lessor.
(b) Except as otherwise specifically provided in this Lease,
and except for loss of the Franchise Agreement solely by reason of any action or
inaction by Lessor, Lessee, to the extent permitted by law, shall remain bound
by this Lease in accordance with its terms and shall neither take any action
without the written consent of Lessor (which shall not be unreasonably withheld
or delayed) 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) the lawful or unlawful prohibition of, or restriction upon,
Lessee's use of the Leased Property, or any portion thereof, or the interference
with such use by any Person other than Lessor, (c) any claim which Lessee has or
might have against Lessor by reason of any default or breach of any warranty by
Lessor under this Lease or any other agreement between Lessor and Lessee, or to
which Lessor and Lessee are parties, (d) any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding up
or other proceedings affecting Lessor or any assignee or transferee of Lessor,
or (e) for any other cause whether similar or dissimilar to any of the foregoing
other than a discharge of Lessee from any such obligations as a matter of law.
Lessee hereby specifically waives all rights, arising from any occurrence
whatsoever, which may now or hereafter be conferred upon it by law to (1)
modify, surrender or terminate this Lease or quit or surrender the Leased
Property or any portion thereof, or (2) entitle Lessee to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by Lessee
hereunder, except as otherwise specifically provided in this Lease. 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.
3.5. Material Changes in Economic Climate.
(a) In the event of the occurrence of a Force Majeure or a
Hotel Market Decline, Lessor and Lessee shall, in good faith, negotiate possible
modifications to the Base Rent and Percentage Rent to reduce such Base Rent and
Percentage Rent to recent market rates for hotel REIT leases for similar hotel
properties in the Hotel's Competitive Set, retroactively effective as of the
first calendar month of the Term following the last day of the six-month period
during which such Hotel Market Decline has occurred with the excess of Base Rent
and Percentage Rent actually paid for such period over the reduced Base Rent and
Percentage Rent, plus interest thereon at the Base Rate, to be credited to the
next payments of Rent due and owing hereunder. If Lessor and
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Lessee are unable to agree that a Force Majeure or a Hotel Market Decline has
occurred, within thirty (30) days after the date of written certification from
Lessee to Lessor that a Force Majeure and Hotel Market Decline has occurred
(accompanied by reasonably detailed computations and documentation to support
such assertion), the matter may be submitted by either party to arbitration
under Section 25.2 hereof for resolution (during which period Lessee shall
continue to pay Base Rent and Percentage Rent as required under Section 3.1 of
this Lease). If, within ninety (90) days (during which period Lessee shall
continue to pay Base Rent and Percentage Rent as required under Section 3.1 of
this Lease) following the date of such written certification from Lessee (or the
date of a decision of an arbitrator if required hereunder to determine that a
Force Majeure and Hotel Market Decline has occurred), Lessor and Lessee are
unable to agree upon the amount of reduction in Base Rent and Percentage Rent
contemplated hereby, Lessee shall have the option to terminate this Lease upon
not less than thirty (30) days prior written notice to Lessor.
(b) In the event of the occurrence of a National Economic
Decline or a Regional Market Decline, Lessor and Lessee shall, in good faith,
negotiate (i) possible modifications to the Base Rent and Percentage Rent to
reduce such Base Rent and Percentage Rent to recent market rates for hotel REIT
leases for similar hotel properties in the Hotel's Competitive Set, and (ii)
possible modifications to the Base and Percentage Rent payable under each of the
Other Leases for Other Hotels in the same Region (as defined in the STR Reports)
as the Hotel to reduce such Base Rent and Percentage Rent to recent market rates
for hotel REIT leases for similar hotel properties in the Hotel's Competitive
Set, in each case retroactively effective as of the first calendar month of the
Term following the last day of the six month period during which such Regional
Market Decline has occurred with the excess of Base Rent and Percentage Rent
actually paid for such period over the reduced Base Rent and Percentage Rent,
plus interest thereon at the Base Rent, to be credited to the next payments of
Rent due and owing hereunder. If, within thirty (30) days after the date of
written certification from Lessee to Lessor that a National Economic Decline and
Regional Market Decline has occurred (accompanied by reasonably detailed
computations and documentation to support such assertion), Lessor and Lessee are
unable to agree that a National Economic Decline or Regional Market Decline has
occurred, the matter may be submitted by either party to arbitration under
Section 25.2 hereof for resolution (during which period Lessee shall continue to
pay Base Rent and Percentage Rent as required under Section 3.1 of this Lease).
If, within ninety (90) days (during which period Lessee shall continue to pay
Base Rent and Percentage Rent as required under Section 3.1 of this Lease)
following the date of such initial written certification from Lessee (or the
date of a decision of an arbitrator if required hereunder to determine that a
National Economic Decline and Regional Market Decline has occurred), Lessor and
Lessee are unable to agree upon the amount of reduction in Base Rent and
Percentage Rent contemplated hereby, Lessee shall have the option, upon not less
than sixty (60) days prior written notice to Lessor, to terminate all (but not
less than all) of the Existing Leases of hotels in the same Region as the Hotel,
including this Lease.
3.6. Rent Adjustment: Basic Assumptions Incorrect. Except to the extent
that doing so would cause Lessor to recognize income other than "rents from real
property" as defined in Section 856(d) of the Code, notwithstanding anything
herein (other than Article 19) to the contrary, if (i) the facts and
circumstances underlying the documented, basic assumptions upon which both
Lessor and Lessee have relied in determining the Base Rent, the Suite Revenue
Breakpoint, and the Percentage Rent payable hereunder become materially
incorrect solely as a result of (A) a decision
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to re-brand the Hotel that is made after the Commencement Date, (B) the scope or
cost of substantial renovations or other capital improvements to the Hotel, or
(C) the implementation of any other hotel repositioning strategies (that were
not planned as of the Commencement Date) resulting in significant disruption of
the operations of the Hotel (collectively, a "Repositioning"), and (ii) Lessor
and Lessee so agree in writing, then Lessor and Lessee shall, in good faith,
negotiate modifications to the Base Rent, Suite Revenue Breakpoint and
Percentage Rent to adjust (i.e., increase, decrease or reallocate among revenue
categories) such Base Rent, Suite Revenue Breakpoint and Percentage Rent to
reflect such change in basic assumptions for the affected periods, using the
same methodology and other basic assumptions as were initially utilized in
determining the Base Rent, Suite Revenue Breakpoint and Percentage Rent
hereunder. If Lessor and Lessee are unable to agree, within thirty (30) days
after the date of written certification from either Lessee or Lessor to the
other party that a good faith dispute exists, as to the existence of the
occurrence of a Repositioning or the adjustments to be made to the amounts or
percentages for the Base Rent, Suite Revenue Breakpoint and Percentage Rent
hereunder as a result of any repositioning, the dispute may be submitted by
either party to arbitration under Section 25.2 hereof for resolution (during
which period Lessee shall continue to pay Base Rent and Percentage Rent as
required under Section 3.1 of this Lease); provided, however, that for purposes
of applying the procedures in Section 25.3 to such arbitration, the target
deadline therein for concluding the arbitration shall be shortened from ninety
(90) days to thirty (30) days.
ARTICLE 4
ANNUAL BUDGETS; BOOKS AND RECORDS
4.1. Annual Budget. Not later than thirty (30) days prior to the
commencement of each Fiscal Year, Lessee shall submit the Annual Budget to
Lessor. The Annual Budget shall contain the following, to the extent included in
the operating budgets and capital budgets provided to Lessee by Manager under
the management agreement for the Hotel:
(a) Lessee's reasonable estimate of Gross Revenues (including
room rates and Suite Revenues), Gross Operating Expenses, and Gross Operating
Profits for the forthcoming Fiscal Year itemized on schedules on a quarterly
basis as approved by Lessor and Lessee, as same may be revised or replaced from
time to time by Lessee and approved by Lessor, together with the assumptions, in
narrative form, forming the basis of such schedules.
(b) An estimate of the amounts to be dedicated to the repair,
replacement, or refurbishment of Furniture and Equipment.
(c) An estimate of any amounts Lessor will be required to
provide for required or desirable capital improvements to the Hotel or any of
its components.
(d) A cash flow projection.
(e) A business plan, which shall describe business objectives
and strategies for the forthcoming Fiscal Year, and shall include without
limitation an analysis of the market area in which the Hotel competes, a
comparison of the Hotel and its business with competitive hotels, an
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analysis of categories of potential guests, and a description of sales and
marketing activities designed to achieve and implement identified objectives and
strategies.
4.2. Books and Records. Lessee shall keep full and adequate books of
account and other records reflecting the results of operation of the Hotel on an
accrual basis, all in accordance with generally accepted accounting principles
and the obligations of Lessee under this Lease. The books of account and all
other records relating to or reflecting the operation of the Hotel shall be kept
either at the Hotel or at Lessee's offices in Richmond, Virginia or at Manager's
central offices, and shall be available to Lessor and its representatives and
its auditors or accountants, at all reasonable times, upon prior written notice
to Lessee and Manager, for examination, audit, inspection, and transcription;
provided, however that Lessor may only inspect or audit records in Manager's
possession subject to the terms of Lessee's access thereto under the Management
Agreement. All of such books and records pertaining to the Hotel 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
Hotel or Lessee's offices or Manager's central offices (but may be moved among
any of the foregoing) by Lessee without Lessor approval.
ARTICLE 5
IMPOSITIONS; HOTEL COSTS
5.1. Payment of Impositions. Subject to Section 12.2 (relating to
permitted contests), Lessee will pay, or cause to be paid, all Impositions
(other than Real Estate Taxes and Personal Property Taxes, which shall be paid
by Lessor) before any fine, penalty, interest or cost may be added for
non-payment, such payments to be made directly to the taxing or other
authorities where feasible, and will promptly furnish to Lessor copies of
official receipts or other satisfactory proof evidencing such payments. Lessee's
obligation to pay such Impositions shall be deemed absolutely fixed upon the
date such Impositions become a lien upon the Leased Property or any part
thereof. If any such Imposition may, at the option of the taxpayer, lawfully be
paid in installments (whether or not interest shall accrue on the unpaid balance
of such Imposition), Lessee may exercise the option to pay the same (and any
accrued interest on the unpaid balance of such Imposition) in installments and
in such event, shall pay such installments during the Term hereof (subject to
Lessee's right of contest pursuant to the provisions of Section 12.2) as the
same respectively become due and before any fine, penalty, premium, further
interest or cost may be added thereto. Lessor, at its expense, shall, to the
extent required or permitted by applicable law, prepare and file all tax returns
in respect of Lessor's net income, gross receipts, sales and use, single
business, transaction privilege, rent, ad valorem, franchise taxes, Real Estate
Taxes, Personal Property Taxes 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. If any refund
shall be due from any taxing authority in respect of any Imposition paid by
Lessee, the same shall be paid over to or retained by Lessee if no Event of
Default shall have occurred hereunder and be continuing. If an Event of Default
shall have occurred and be continuing, any such refund shall be paid over to or
retained by Lessor. Any such funds retained by Lessor due to an Event of Default
shall be applied as provided in Article 16. Lessor and Lessee shall, upon
request of the other, provide such data as is maintained by the party to whom
the request is made with respect to the Leased Property as may
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be necessary to prepare any required returns and reports. Lessee shall file all
Personal Property Tax returns in such jurisdictions where it is legally required
so to file. 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. Where Lessor is legally required to file
Personal Property Tax returns, Lessee shall provide Lessor with copies of
assessment notices in sufficient time for Lessor to file a protest. 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 or personal property
assessments for those Impositions to be paid by Lessor, and Lessee, at Lessor's
expense as aforesaid, shall fully cooperate with Lessor in such protest, appeal,
or other action. Lessor hereby agrees to indemnify, defend, and hold harmless
Lessee from and against any claims, obligations, liabilities and loss against or
incurred by Lessee in connection with such cooperation. Billings for
reimbursement of Personal Property Taxes by Lessee to Lessor shall be
accompanied by copies of a bill therefor and payments thereof which identify the
personal property with respect to which such payments are made. Lessor, however,
reserves the right to effect any such protest, appeal or other action and, upon
Notice to Lessee, shall control any such activity, which shall then go forward
at Lessor's sole expense. Upon such Notice, Lessee, at Lessor's expense, shall
cooperate fully with such activities.
5.2. 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 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.
5.3. Adjustment of Impositions. Impositions imposed in respect of the
tax-fiscal period during which the Term terminates shall be adjusted and
prorated between Lessor and Lessee, whether or not such Imposition is imposed
before or after such termination, and Lessee's obligation to pay its prorated
share thereof after termination shall survive such termination.
5.4. Utility Charges. Lessee will be solely responsible for obtaining
and maintaining utility services to the Leased Property and will pay or cause to
be paid all charges for electricity, gas, oil, water, sewer and other utilities
used in the Leased Property during the Term.
5.5. Insurance Premiums. Lessee will pay or cause to be paid all
premiums for the insurance coverage's required to be maintained by it under
Article 13.
5.6. Franchise Fees. Lessee will maintain in full force and effect, and
pay or cause to be paid all fees and other charges payable pursuant to, any
Franchise Agreement with respect to the Hotel.
5.7. Ground Rent. In the event that Lessor's interest in the Land is
pursuant to a Ground Lease or sublease, Lessor shall be solely responsible for
the payment of any ground rent, building rent or subrent, as the case may be,
due with respect to the Leased Property.
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ARTICLE 6
LEASED PROPERTY; LESSEE'S PERSONAL PROPERTY
6.1. Ownership of the Leased Property. Lessee acknowledges that the
Leased Property is the property of Lessor and that Lessee has only the right to
the possession and use of the Leased Property upon the terms and conditions of
this Lease.
6.2. Lessee's Personal Property. Lessee will acquire and maintain
throughout the Term such Inventory as is required to operate the Leased Property
in the manner contemplated by this Lease. Lessee may (and shall as provided
hereinbelow), at its expense, install, affix or assemble or place on any parcels
of the Land or in any of the Leased Improvements, any items of personal property
(including Inventory) owned by Lessee. Lessee, at the commencement of the Term,
and from time to time thereafter, shall provide Lessor with an accurate list of
all such items of Lessee's personal property (collectively, the "Lessee's
Personal Property"). Lessee may, subject to the first sentence of this Section
6.2 and the conditions set forth below, remove any of Lessee's Personal Property
set forth on such list at any time during the Term or upon the expiration or any
prior termination of the Term. All of Lessee's Personal Property, other than
Inventory, not removed by Lessee within ten (10) 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 Subsection 2.3(g), including repair
of all damage to the Leased Property caused by the removal of Lessee's Personal
Property, whether effected by Lessee or Lessor. Upon the expiration or earlier
termination of the Term, Lessor or its designee shall have the option to
purchase all Inventory on hand at the Leased Property at the time of such
expiration or termination for a sale price equal to the fair market value of
such Inventory. Lessee may make such financing arrangements, title retention
agreements, leases or other agreements with respect to Lessee's Personal
Property as it sees fit provided that Lessee first advises Lessor of any such
arrangement and such arrangement expressly provides that in the event of
Lessee's default thereunder, Lessor (or its designee) may assume Lessee's
obligations and rights under such arrangement.
6.3. Lessor's Lien. To the fullest extent permitted by applicable law,
Lessor is granted a lien and security interest on all Lessee's personal property
now or hereinafter placed in or upon the Leased Property, and such lien and
security interest shall remain attached to such Lessee's personal property until
payment in full of all Rent and satisfaction of all of Lessee's obligations
hereunder; provided, however, Lessor shall subordinate its lien and security
interest 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. Lessee hereby authorizes Lessor to execute and file
financing statements signed only be a representative of Lessor covering the
security interest of Lessor in Lessee's personal property.
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6.4. Lessor's Option to Purchase Assets of Lessee. Effective on not
less than ninety (90) days' prior Notice given at any time within one hundred
eighty (180) days before the expiration of the Term, but not later than ninety
(90) days prior to such expiration, or upon such shorter Notice period as shall
be appropriate if this Lease is terminated prior to its expiration date, Lessor
shall have the option to purchase all (but not less than all) of the assets of
Lessee, tangible and intangible, relating to the Leased Property (other than
this Lease), at the expiration or termination of this Lease for an amount
(payable in cash on the expiration date of this Lease) equal to the fair market
value thereof as appraised in conformity with Article 24, except that the
appraisers need not be members of the American Institute of Real Estate
Appraisers, but rather shall be appraisers having at least ten (10) years'
experience in valuing similar assets. Notwithstanding any such purchase, Lessor
shall obtain no rights to any trade name or logo used in connection with the
Franchise Agreement unless separate agreement as to such use is reached with the
applicable franchisor.
ARTICLE 7
CONDITION AND USE OF LEASED PROPERTY
7.1. Condition of the Leased Property. Lessee acknowledges receipt and
delivery of possession of the Leased Property. Lessee has examined and otherwise
has knowledge of the condition of the Leased Property and has found the same to
be satisfactory for its purposes hereunder. Lessee is leasing the Leased
Property "as is" in its present condition. 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. Provided,
however, to the extent permitted by law, Lessor hereby assigns to Lessee all of
Lessor's rights to proceed against any predecessor in title (other than any
Affiliate of Lessee which conveyed the Property to Lessor) for breaches of
warranties or representations or for latent defects in the Leased Property.
Lessor shall fully cooperate with Lessee in the prosecution of any such claim,
in Lessor's or Lessee's name, all at Lessee's sole cost and expense. Lessee
hereby agrees to indemnify, defend and hold harmless Lessor from and against any
claims, obligations and liabilities against or incurred by Lessor in connection
with such cooperation.
7.2. Use of the Leased Property.
(a) Lessee covenants that it will proceed with all due
diligence and will exercise reasonable efforts to obtain and to maintain all
Licenses and other approvals needed to use and operate the Leased Property and
the Hotel under applicable local, state and federal law.
(b) Lessee shall use or cause to be used the Leased Property
only as a Homewood Suites(R) all-suite 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
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Use"). Lessee shall not use the Leased Property or any portion thereof for any
other use without the prior written consent of Lessor, which consent may be
granted, denied or conditioned in Lessor's sole discretion. No use shall be made
or permitted to be made of the Leased Property, and no acts shall be done, which
will cause the cancellation or increase the premium of any insurance policy
covering the Leased Property or any part thereof (unless another adequate policy
satisfactory to Lessor is available and Lessee pays any premium increase), nor
shall Lessee sell or permit to be kept, used or sold in or about the Leased
Property any article which may be prohibited by law or fire underwriter's
regulations. Lessee shall, at its sole cost, comply with all of the requirements
pertaining to the Leased Property of any insurance board, association,
organization or company necessary for the maintenance of insurance, as herein
provided, covering the Leased Property and Lessee's Personal Property.
(c) Subject to the provisions of Articles 14, 15, 18 and 21,
Lessee covenants and agrees that during the Term it will (1) operate
continuously the Leased Property as a hotel facility, (2) keep in full force and
effect and comply with all the provisions of the Franchise Agreement and the
Management Agreement, (3) not terminate or amend the Franchise Agreement or the
Management Agreement without the consent of Lessor (which shall not be
unreasonably withheld or delayed), (4) maintain appropriate certifications and
Licenses for such use and (5) seek to maximize the Gross Revenues generated
therefrom consistent with sound business practices.
(d) Lessee shall not commit or suffer to be committed any
waste on the Leased Property, or in the Hotel, nor shall Lessee cause or permit
any nuisance thereon.
(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,
except as necessary in the ordinary and prudent operation of the Hotel on the
Leased Property.
7.3. Lessor to Grant Easements, Etc. Lessor will, from time to time, so
long as no Event of Default has occurred and is continuing, at the request of
Lessee and at Lessee's cost and expense (but subject to the approval of Lessor,
which approval shall not be unreasonably withheld or delayed), (a) grant
easements and other rights in the nature of easements with respect to the Leased
Property to third parties, (b) release existing easements or other rights in the
nature of easements which are for the benefit of the Leased Property, (c)
dedicate or transfer unimproved portions of the Leased Property for road,
highway or other public purposes, (d) execute petitions to have the Leased
Property annexed to any municipal corporation or utility district, (e) execute
amendments to any covenants and restrictions affecting the Leased Property and
(f) execute and deliver to any Person any instrument appropriate to confirm or
effect such grants, releases, dedications, transfers, petitions and amendments
(to the extent of its interests in the Leased Property), but only upon delivery
to Lessor of an Officer's Certificate stating that such grant, release,
dedication, transfer, petition or amendment does not interfere with the proper
conduct of the business of Lessee on the Leased Property and does not materially
reduce the value of the Leased Property.
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ARTICLE 8
LESSEE'S COMPLIANCE WITH LAW; ENVIRONMENTAL COVENANTS
8.1. Compliance with Legal and Insurance Requirements, Etc. Subject to
Subsection 8.3(b) below and Section 12.2 (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 (excluding any repair
or restoration of any portion of the Leased Property required to be made by
Lessor pursuant to Subsection 9.1(b) below, which repair shall be made by
Lessor), 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 Subsection 8.3(b) and Subsection 9.1(b) below,
Lessee covenants and agrees that the Leased Property and Lessee's Personal
Property shall not be used for any unlawful purpose, and that Lessee shall not
permit or suffer to exist any unlawful use of the Leased Property by others.
Lessee shall acquire and maintain all appropriate licenses, certifications,
permits and other authorizations and approvals needed to operate the Leased
Property in its customary manner for the Primary Intended Use, 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 sub-tenants, invitees or others within its control
so to comply with all Legal Requirements). Lessee may, however, upon prior
Notice to Lessor, contest the legality or applicability of any such Legal
Requirement or any licensure or certification decision if Lessee maintains such
action in good faith, with due diligence, without prejudice to Lessor's rights
hereunder, and at Lessee's sole expense. If by the terms of any such Legal
Requirement compliance therewith pending the prosecution of any such proceeding
may legally be delayed without the occurrence of any charge or liability of any
kind, or the filing of any lien, against the Hotel or Lessee's leasehold
interest therein and without subjecting Lessee or Lessor to any liability, civil
or criminal, for failure so to comply therewith, Lessee may delay compliance
therewith until the final determination of such proceeding. If any lien, charge
or civil or criminal liability would be incurred by reason of any such delay,
Lessee, on the prior written consent of Lessor, which consent shall not be
unreasonably withheld or delayed, may nonetheless contest as aforesaid and delay
as aforesaid provided that such delay would not subject Lessor to criminal
liability and Lessee both (a) furnishes to Lessor security reasonably
satisfactory to Lessor against any loss or injury by reason of such contest or
delay and (b) prosecutes the contest with due diligence and in good faith.
(b) As between Lessor and Lessee, Lessee is solely responsible
for all liabilities or obligations of any kind with respect to employees at the
Leased Property during the Term. 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 (the "WARN
Act") or any similar state law applicable to the Leased Property; any required
compliance
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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.
(c) Notwithstanding the Lessee's obligations under Section 8.1
to obtain and maintain all permits and licenses required for the use of the
Leased Property, and without limiting any obligations of Lessee hereunder, if
(i) applicable law requires that the owner (rather than a lessee) of a hotel be
the licensee under the required liquor license for the Hotel or (ii) the former
owner of the Hotel is holding the liquor license and continuing to exercise
management and supervision of the liquor services at the Hotel pending transfer
of the license to Lessor or Lessee, the Lessee shall indemnify and hold Lessor
harmless from any liability, damages or claims (a) arising in connection with
liquor operations at the Hotel during such period of time following the
Commencement Date, except to the extent caused by Lessor's gross negligence or
willful misconduct or (b) made by or through the former owner with respect to
liquor operations at the Hotel following the Commencement Date.
8.3. Environmental Covenants. Lessor and Lessee (in addition to, and
not in diminution of, Lessee's covenants and undertakings in Sections 8.1 and
8.2 hereof) covenant and agree as follows:
(a) At all times hereafter until the later of (i) such time as
all liabilities, duties or obligations of Lessee to Lessor under the Lease have
been satisfied in full and (ii) such time as 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. Lessee agrees to give Lessor prompt 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;
(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; and (4) all facts, events or conditions that could reasonably
lead to the occurrence of any of the above-referenced matters.
(b) Lessor hereby agrees to defend, indemnify and save
harmless any and all Lessee Indemnified Parties from and against any and all
Environmental Liabilities other than (i) Environmental Liabilities resulting
from conditions disclosed in any environmental audit obtained by Lessor and
provided to Lessee prior to the execution of this Lease (the "Environmental
Audit"),
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and (ii) Environmental Liabilities which were caused by the acts or negligent
failures to act of Lessee.
(c) Lessee hereby agrees to defend, indemnify and save
harmless any and all Lessor Indemnified Parties from and against any and all
Environmental Liabilities which were (i) resulting from conditions disclosed in
the Environmental Audit, and (ii) caused by the acts or negligent failures to
act of Lessee.
(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 Subsection 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 Indemnified Party and approved by the Indemnifying Party,
which approval shall not be unreasonably withheld or delayed; provided, however,
that such approval shall not be required in the case of defense by counsel
designated by any insurance company undertaking such defense pursuant to any
applicable policy of insurance. Each Indemnified Party shall have the right to
employ separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel will be at the sole expense
of such Indemnified Party unless such counsel has been approved by the
Indemnifying Party, which approval shall not be unreasonably withheld or
delayed. The Indemnifying Party shall not be liable for any settlement of any
such Proceeding made without its consent, which shall not be unreasonably
withheld or delayed, but if settled with the consent of the Indemnifying Party,
or if settled without its consent (if its consent shall be unreasonably withheld
or delayed), 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 and loss
incurred by such Indemnified Parties by reason of such settlement or judgement.
(e) At any time any Indemnified Party has reason to believe
circumstances exist which could reasonably result in an Environmental Liability,
upon reasonable prior Notice to Lessee and Manager stating such Indemnified
Party's basis for such belief, an Indemnified Party shall be given immediate
access to the Leased Property (including, but not limited to, the right to enter
upon, investigate, drill wells, take soil borings, excavate, monitor, test, cap
and use available land for the testing of remedial technologies), Lessee's
employees, and to all relevant documents and records regarding the matter as to
which a responsibility, liability or obligation is asserted or which is the
subject of any Proceeding; provided that such access may he conditioned or
restricted as may be reasonably necessary to ensure compliance with law and the
safety of personnel and facilities or to protect confidential or privileged
information. All Indemnified Parties requesting such immediate access and
cooperation shall endeavor to coordinate such efforts to result in as minimal
interruption of the operation of the Leased Property as practicable.
(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.
(g) The indemnification rights and obligations provided for in
this Article 8 shall survive the termination of this Lease.
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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.
Notwithstanding anything to the contrary contained in this Lease, if
Lessor shall become entitled to the possession of the Leased Property by virtue
of the termination of the Lease or repossession of the Leased Property, then
Lessor may assign its indemnification rights under this Section 8.3 (but not any
other rights under this Section 8.3) to any Person to whom Lessor subsequently
transfers the Leased Property, subject to the following conditions and
limitations, each of which shall be deemed to be incorporated into the terms of
such assignment, whether or not specifically referred to therein:
(i) The indemnification rights referred to in this section may
be assigned only if a known Environmental Liability then exists or if a
Proceeding is then pending or, to the knowledge of Lessee or Lessor,
then threatened with respect to the Leased Property;
(ii) Such indemnification rights shall be limited to
Environmental Liabilities relating to or specifically affecting the
Leased Property; and
(iii) Any assignment of such indemnification rights shall be
limited to the immediate transferee of Lessor, and shall not extend to
any such transferee's successors or assigns.
ARTICLE 9
MAINTENANCE AND REPAIRS; ENCROACHMENTS AND RESTRICTIONS
9.1. Maintenance and Repairs.
(a) Lessee, at its sole expense, will keep the Leased
Property, and all private roadways, sidewalks and curbs appurtenant thereto that
are under Lessee's control, including windows and plate glass, mechanical,
electrical and plumbing systems and equipment (including conduit and ductware),
and non-load bearing interior walls, and parking lot surfaces, in good order and
repair, except (i) 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) and (ii) to the extent of
damage caused by Lessor's gross negligence or willful misconduct or that of its
employees or agents, and, except as otherwise provided in Subsection 9.1(b),
Article 14 or Article 15, with reasonable promptness, make all necessary and
appropriate
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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, except as to the structural
elements of the Leased Improvements. Lessee, however, shall be permitted to
prosecute claims against Lessor's predecessors in title for breach of any
representation or warranty or for any latent defects in the Leased Property to
be maintained by Lessee unless Lessor is already diligently pursuing such a
claim. All repairs shall, to the extent reasonably achievable, be at least
equivalent in quality to the original work. Lessee will not take or omit to 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.
(b) Notwithstanding Lessee's obligations under Subsection
9.1(a) above, except to the extent of damage caused by Lessee's negligence or
willful misconduct or that of its employees or agents, Lessor shall be required
to bear the cost of maintaining any underground utilities and the structural
elements of the Leased Improvements, including exterior walls and the roof of
the Hotel (but excluding windows and plate glass, mechanical, electrical and
plumbing systems and equipment, including conduit and ductware, and non-load
bearing walls, and parking lot surfaces). Except as set forth in the preceding
sentence and in Section 10.5, Lessor shall not under any circumstances be
required to build or rebuild any improvement on the Leased Property, or to make
any repairs, replacements, alterations, restorations or renewals of any nature
or description to the Leased Property, whether ordinary or extraordinary,
foreseen or unforeseen, or to make any expenditure whatsoever with respect
thereto, in connection with this Lease, or to maintain the Leased Property in
any way. Lessee hereby waives, to the extent permitted by law, the right to make
repairs at the expense of Lessor, pursuant to any law in effect at the time of
the execution of this Lease or hereafter enacted, except following default by
Lessor under this Lease, to the extent of repairs (for which Lessor is obligated
hereunder) required to be made in order for the Hotel, and Lessee's use thereof,
to comply with Lessee's obligations under the Franchise Agreement and the
Management Agreement. Lessor shall have the right to give, record and post, as
appropriate, notices of nonresponsibility 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.
9.2. Encroachments, Restrictions, Etc. Lessor represents and warrants
that the Leased Improvements do not materially encroach upon any property,
street or right-of-way adjacent to the Leased Property, or violate the
agreements or conditions contained in any lawful restrictive
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covenant or other agreement affecting the Leased Property, or any part thereof,
or impair the rights of others under any easement or right-of-way to which the
Leased Property is subject. Except to the extent that such representation and
warranty is breached by Lessor, if any of the Leased Improvements, at any time
hereafter, materially encroach upon any property, street or right-of-way
adjacent to the Leased Property, or violate the agreements or conditions
contained in any lawful restrictive covenant or other agreement affecting the
Leased Property, or any part thereof, or impair the rights of others under any
easement or right-of-way to which the Leased Property is subject, then promptly
upon the request of Lessor or at the behest of any Person affected by any such
encroachment, violation or impairment, 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
ALTERATIONS AND IMPROVEMENTS; FF&E RESERVE
10.1. Alterations. After receiving approval of Lessor, which approval
shall not be unreasonably withheld or delayed, Lessee shall have the right 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 significantly alter the character or purposes
or significantly detract from the value or operating efficiency thereof and will
not significantly impair the revenue-producing capability of the Leased Property
or adversely affect the ability of Lessee to comply with the provisions of this
Lease. 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.
10.3. Joint Use Agreements. If Lessee constructs additional
improvements that are connected to the Leased Property or share maintenance
facilities, HVAC, electrical, plumbing or other systems, utilities, parking or
other amenities, the parties shall enter into a mutually agreeable
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cross-easement or joint use agreement, the form of which has been approved in
advance by Lessor, to make available necessary services and facilities in
connection with such additional improvements, to protect each of their
respective interests in the properties affected, and to provide for separate
ownership, use, and/or financing of such improvements.
10.4. Initial Upgrade of Leased Improvements. Lessee desires to
install, construct and complete the improvements, alterations, upgrades and
refurbishments in the Leased Improvements (collectively, "Lessee's Work")
necessary to qualify the Leased Improvements to operate under the Franchise
Agreement as a "Homewood Suites" hotel. Pursuant to the terms of the Work Letter
(the "Work Letter") attached hereto as Exhibit B, Lessee agrees to perform
Lessee's Work; provided, however, Lessor shall pay the costs actually incurred
by Lessee to perform Lessee's Work, subject to and in accordance with the terms
and conditions of the Work Letter. Lessee shall pay all increased taxes and
insurance on Lessee's Work or attributable thereto.
10.5. Furniture, Fixture and Equipment Allowance. Lessor shall be
obligated to pay Lessee, when and as required to meet the requirements of the
Franchise Agreement and the Management Agreement for a reserve for periodic
repair, replacement or refurbishing of furniture, fixtures and equipment that
constitute Leased Property, an amount equal up to five percent (5%) of Suite
Revenues monthly. Upon written request by Lessee to Lessor stating the specific
use to be made and the reasonable approval thereof by Lessor (or as otherwise
required by the franchisor under the Franchise Agreement or Manager under the
Management Agreement), such reserve funds (and additional funds of Lessor, if
necessary) shall be made available by Lessor for use by Lessee for replacement
or refurbishing of furniture, fixtures and equipment that constitute Leased
Property in connection with the Primary Intended Use; provided, however, that no
amounts made available under this Article shall be used to purchase property
(other than "real property" within the meaning of Treasury Regulations Section
1.856-3(d)), to the extent that doing so would cause Lessor to recognize income
other than "rents from real property" as defined in Section 856(d) of the Code.
Lessor's obligation shall be cumulative, but not compounded, and any amounts
that have accrued hereunder shall be payable in future periods for such uses and
in accordance with the procedure set forth herein. Lessee shall have no interest
in any accrued obligation of Lessor hereunder after the termination of this
Lease.
ARTICLE 11
COMPLIANCE WITH FRANCHISE
11.1. Compliance with Franchise Agreement and Management Agreement. To
the extent any of the provisions of the Franchise Agreement or Management
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 and the Management Agreement. It is the
intent of the parties hereto that Lessee shall comply in every respect with the
provisions of the Franchise Agreement and the Management Agreement so as to
avoid any material default thereunder during the term of this Lease. Lessee
shall not terminate, extend or enter into any material modification of the
Franchise Agreement or the Management Agreement without in each instance first
obtaining Lessor's prior written consent, which shall not be unreasonably
withheld. Lessor and Lessee agree
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to cooperate with each other in the event it becomes necessary to obtain a
franchise extension or modification (or, at Lessor's option, a new franchise)
for the Leased Property, and in any transfer of the Franchise Agreement or
Management Agreement to Lessor or any designee of Lessor or any successor to
Lessee upon the termination of this Lease. In the event of expiration or
termination of a Franchise Agreement or Management Agreement, for whatever
reason, Lessor will have the right, in the exercise of its sole discretion, to
approve any new Franchise Agreement or Management Agreement for the Hotel.
ARTICLE 12
PERMITTED LIENS AND CONTESTS
12.1. Liens. Subject to the provisions of Section 12.2 relating to
permitted contests, Lessee will not directly or indirectly create or allow to
remain and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Leased Property or any
attachment, levy, claim or encumbrance in respect of the Rent, not including,
however, (a) this Lease, (b) the matters included as exceptions 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 or any
easements granted pursuant to the provisions of Section 7.3 of this Lease, (d)
liens for those taxes upon Lessor or the Leased Property which Lessee is not
required to pay hereunder, (e) subleases permitted by Article 20 hereof, (f)
liens for Impositions or for sums resulting from noncompliance with Legal
Requirements so long as (1) the same are not yet payable or are payable without
the addition of any fine or penalty or (2) such liens are in the process of
being contested as permitted by Section 12.2, (g) liens of mechanics, laborers,
materialmen, suppliers or vendors for sums either disputed or not yet due
provided that (1) the payment of such sums shall not be postponed under any
related contract for more than sixty (60) days after the completion of the
action giving rise to such lien and such reserve or other appropriate provisions
as shall be required by law or generally accepted accounting principles shall
have been made therefor or (2) any such liens are in the process of being
contested as permitted by Section 12.2 hereof, and (h) any liens which are the
responsibility of Lessor pursuant to the provisions of Article 22 of this Lease.
12.2. Permitted Contests. Lessee shall have the right to contest the
amount or validity of any Imposition to be paid by Lessee or any Legal
Requirement or Insurance Requirement or any lien, attachment, levy, encumbrance,
charge or claim ("Claims") not otherwise permitted by Section 12.1, 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 Section provided), on condition,
however, that such legal proceedings shall not operate to relieve Lessee from
its obligations hereunder and shall not cause the sale or risk the loss of any
portion of the Leased Property, or any part thereof, or cause Lessor or Lessee
to be in default under any mortgage, deed of trust, security deed or other
agreement encumbering the Leased Property or any interest therein. Upon the
request of Lessor, Lessee shall either (a) provide a bond or other assurance
reasonably satisfactory to Lessor that all Claims which may be assessed against
the Leased Property together with interest and penalties, if any, thereon will
be paid, or (b) deposit within the time otherwise required for payment with a
bank or trust company as trustee upon terms reasonably satisfactory to Lessor,
as security for the payment of such Claims, money in an amount
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sufficient to pay the same, together with interest and penalties in connection
therewith, as to all Claims which may be assessed against or become a Claim on
the Leased Property, or any part thereof, in said legal proceedings. Lessee
shall furnish Lessor and any lender of Lessor with reasonable evidence of such
deposit within five (5) days of the same. Lessor agrees to join in any such
proceedings if the same be required legally to prosecute such contest of the
validity of such Claims; provided, however, that Lessor shall not thereby be
subjected to any liability or loss 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 liabilities, losses, 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 Section and diligently to prosecute any contest of the same, Lessor may,
upon ten (10) days' advance Notice to Lessee, and Lessee's failure to correct
the same within such ten (10) day period, pay such charges together with any
interest and penalties and the same shall be repayable by Lessee to Lessor as
Additional Charges at the next Payment Date provided for in this Lease;
provided, however, that should Lessor reasonably determine that the giving of
such Notice would risk loss to the Leased Property or cause damage to Lessor,
then Lessor shall give such Notice as is practical under the circumstances.
Lessor reserves the right to contest any of the Claims at its expense not
pursued by Lessee. Lessor and Lessee agree to cooperate in coordinating the
contest of any Claims.
ARTICLE 13
INSURANCE REQUIREMENTS
13.1. General Insurance Requirements. During the Term of this Lease,
Lessor and Lessee shall at all times keep the Leased Property insured with the
kinds and amounts of insurance described below, or such other insurance
coverage(s) as may be required by the Franchise Agreement. This insurance shall
be written by companies authorized to issue insurance in the State. The policies
must name Lessor and/or Lessee, as applicable, as the insured or as an
additional named insured, as the case may be. Losses shall be payable to Lessor
or Lessee as provided in this Lease. Any loss adjustment 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 include the following:
(a) Lessor shall obtain and maintain, at its own expense:
(i) Building insurance on the "Special Form"
(formerly "All Risk" form) (including earthquake and flood in
reasonable amounts as determined by Lessor) 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 Lessee, and personal property
insurance (on other than Lessee's Personal Property) 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, now or hereafter installed in the Hotel, in the
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minimum amount of $5,000,000 or in such greater amounts as are
then customary; and
(iii) Loss of income insurance on the "Special Form",
in the amount of one year of Base Rent and Additional Charges
(to the extent quantifiable) for the benefit of Lessor.
(b) Lessee shall obtain and maintain, at its own expense:
(i) Personal property insurance on Lessee's Personal
Property on the "Special Form" in the full amount of the
replacement cost thereof;
(ii) Comprehensive general liability insurance, with
amounts not less than $10,000,000 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;
(iii) Insurance covering such other hazards and in
such amounts as may be customary for comparable properties in
the area of the Leased Property and is available from
insurance companies, insurance pools or other appropriate
companies authorized to do business in the State at rates
which are economically practicable in relation to the risks
covered, as may be reasonably requested by Lessor;
(iv) Fidelity bonds with limits and deductibles as
may be reasonably requested by Lessor, covering Lessee's
employees in job classifications normally bonded under prudent
hotel management practices in the United States or otherwise
required by law;
(v) Worker's compensation insurance coverage for all
persons, if any, employed by Lessee on the Leased Premises, to
the extent necessary to protect Lessor and the Leased Property
against Lessee's worker's compensation claims, such worker's
compensation insurance to be in accordance with the
requirements of applicable local, state and federal law;
(vi) Vehicle liability insurance for owned,
non-owned, and hired vehicles, in the amount of $5,000,000;
and
(vii) Such other insurance as Lessor may reasonably
request for facilities such as the Leased Property and the
operation thereof.
13.2. Replacement Cost. The term "full replacement cost" as used herein
shall mean the actual replacement cost of the Leased Property requiring
replacement from time to time including an increased cost of construction
endorsement, if available, and the cost of debris removal. In the event either
party believes that full replacement cost (the then-replacement cost less such
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exclusions) has increased or decreased at any time during the Lease Term, it
shall have the right to have such full replacement cost re-determined.
13.3. Waiver of Subrogation. All insurance policies carried by Lessor
or Lessee covering the Leased Property, the Fixtures, the Hotel 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. The parties hereto agree that their policies
will include such waiver clause or endorsement so long as the same are
obtainable without extra cost, and in the event of such an extra charge the
other party, at its election, may pay the same, but shall not be obligated to do
so.
13.4. Form Satisfactory, Etc.
(a) All of the policies of insurance referred to in this
Article 13 to be maintained by Lessee shall be written in a form, with
deductibles and by insurance companies satisfactory to Lessor. Lessee shall pay
all of the premiums therefor, and deliver such policies or certificates thereof
to Lessor prior to their effective date (and, with respect to any renewal
policy, thirty (30) days prior to the expiration of the existing policy), and in
the event of the failure of Lessee either to effect such insurance as herein
called for or to pay the premiums therefor, or to deliver such policies or
certificates thereof to Lessor at the times required, Lessor shall be entitled,
but shall have no obligation, to effect such insurance and pay the premiums
therefor, and Lessee shall reimburse Lessor for any premium or premiums paid by
Lessor for the coverages required of Lessee under this Article 13 upon written
demand therefor, and Lessee's failure to repay the same within thirty (30) days
after Notice of such failure from Lessor shall constitute an Event of Default
within the meaning of Section 16.1. Each insurer mentioned in this Article 13
shall agree, by endorsement to the policy or policies issued by it, or by
independent instrument furnished to Lessor, that it will give to Lessor thirty
(30) days' written notice before the policy or policies in question shall be
materially altered, allowed to expire or canceled.
(b) All of the policies of insurance referred to in this
Article 13 to be maintained by Lessor shall be written in a form, with
deductibles and by insurance companies satisfactory to Lessee. Lessor shall pay
all of the premiums therefor, and deliver such policies or certificates thereof
to Lessee prior to their effective date (and, with respect to any renewal
policy, thirty (30) days prior to the expiration of the existing policy), and in
the event of the failure of Lessor either to effect such insurance as herein
called for or to pay the premiums therefor, or to deliver such policies or
certificates thereof to Lessee at the times required, Lessee shall be entitled,
but shall have no obligation, to effect such insurance and pay the premiums
therefor, and Lessor shall reimburse Lessee for any premium or premiums paid by
Lessee for the coverages required under this Section 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 Lessee, that it will give to Lessee thirty (30) days' written notice before
the policy or policies in question shall be materially altered, allowed to
expire or canceled.
13.5. Increase in Limits. If either Lessor or Lessee at any time deems
the limits of the personal injury or property damage under the comprehensive
public liability insurance then carried to be either excessive or insufficient,
Lessor and Lessee shall endeavor in good faith to agree on the
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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 Article 13.
13.6. Blanket Policy. Notwithstanding anything to the contrary
contained in this Article 13. Lessee or Lessor 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 (or Manager) or Lessor; provided,
however, that the coverage afforded to Lessor and Lessee will not be reduced or
diminished or otherwise be different from that which would exist under a
separate policy meeting all other requirements of this Lease by reason of the
use of such blanket policy of insurance, and provided further that the
requirements of this Article 13 are otherwise satisfied.
13.7. No Separate Insurance. Lessee shall not, on Lessee's own
initiative or pursuant to the request or requirement of any third party, take
out separate insurance concurrent in form or contributing in the event of loss
with that required in this Article to be furnished, or increase the amount of
any then existing insurance by securing an additional policy or additional
policies, unless all parties having an insurable interest in the subject matter
of the insurance, including in all cases Lessor, are included therein as
additional insured, and the loss is payable under such additional separate
insurance in the same manner as losses are payable under this Lease. Lessee
shall immediately notify Lessor of any such separate insurance that Lessee has
obtained or of the increase of any of the amounts of the then existing
insurance.
13.8. Reports On Insurance Claims. Lessee shall promptly investigate
and make a complete and timely written report to the appropriate insurance
company as to all accidents, claims for damage relating to the ownership,
operation, and maintenance of the Hotel, any damage or destruction to the Hotel
and the estimated cost of repair thereof and shall prepare any and all reports
required by any insurance company in connection therewith. All such reports
shall be timely filed with the insurance company as required under the terms of
the insurance policy involved, and a final copy of such report shall be
furnished to Lessor. Lessee shall be authorized to adjust, settle, or compromise
any insurance loss, or to execute proofs of such loss, in the aggregate amount
of $25,000 or less, with respect to any single casualty or other event.
ARTICLE 14
CASUALTY INSURANCE PROCEEDS; RECONSTRUCTION
14.1. Insurance Proceeds. Subject to the provisions of Section 14.4,
all proceeds payable by reason of any loss or damage to the Leased Property, or
any portion thereof, insured under any policy of insurance required by Article
13 of this Lease, shall be paid to Lessor and held in trust by Lessor in an
interest-bearing account, shall be made available, if applicable, for
reconstruction or repair, as the case may be, of any damage to or destruction of
the Leased Property, or any portion thereof, and, if applicable, 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 (and accrued interest) remaining after
the completion of the restoration or reconstruction of the Leased Property, as
hereinafter set forth, shall be paid to Lessee. If neither Lessor nor Lessee is
required or elects to repair and restore, and the Lease is terminated without
purchase by Lessee as described in Section 14.2, all such insurance proceeds
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shall be retained by Lessor. All salvage resulting from any risk covered by
insurance shall belong to Lessor.
14.2. Reconstruction in the Event of Damage or Destruction Covered
by Insurance.
(a) Except as provided in Section 14.6, if during the Term the
Leased Property is totally or partially destroyed by a risk covered by the
insurance described in Article 13 and the Hotel thereby is rendered Unsuitable
for its Primary Intended Use, Lessee shall, at Lessee's option, either (1)
restore the Hotel to substantially the same condition as existed immediately
before the damage or destruction and otherwise in accordance with the terms of
the Lease, or (2) offer to acquire the Leased Property from Lessor for a
purchase price equal to the Rejectable Offer Price of the Leased Property. If
Lessee restores the Hotel, the insurance proceeds shall be paid out by Lessor
from time to time for the reasonable costs of such restoration upon satisfaction
of reasonable terms and conditions, and any excess proceeds remaining after such
restoration shall be paid to Lessee. If Lessee acquires the Leased Property,
Lessee shall receive the insurance proceeds. If Lessor does not accept Lessee's
offer so to purchase the Leased Property within ninety (90) days, Lessee may
withdraw its offer to purchase the Leased Property and, if so withdrawn, Lessee
may terminate the Lease with respect to the Leased Property without further
liability hereunder and Lessor shall be entitled to retain all insurance
proceeds.
(b) Except as provided in Section 14.6, if during the Term the
Leased Property is partially destroyed by a risk covered by the insurance
described in Article 13, but the Hotel is not thereby rendered Unsuitable for
its Primary Intended Use, Lessee shall restore the Hotel to substantially the
same condition as existed immediately before the damage or destruction and
otherwise in accordance with the terms of the Lease. Such damage or destruction
shall not terminate this Lease; provided, however, that if Lessee cannot within
a reasonable time obtain all necessary government approvals, including building
permits, licenses and conditional use permits, after diligent efforts to do so,
to perform all required repair and restoration work and to operate the Hotel for
its Primary Intended Use in substantially the same manner as that existing
immediately prior to such damage or destruction and otherwise in accordance with
the terms of the Lease, Lessee may offer to purchase the Leased Property for a
purchase price equal to the Rejectable Offer Price of the Leased Property,
determined without regard to such damage or destruction if insurance proceeds
are available to restore the Hotel. If Lessee makes such offer and Lessor does
not accept the same, Lessee shall withdraw such offer, in which event this Lease
shall remain in full force and effect and Lessee shall immediately proceed to
restore the Hotel to substantially the same condition as existed immediately
before such damage or destruction and otherwise in accordance with the terms of
the Lease. If Lessee restores the Hotel, the insurance proceeds shall be paid
out by Lessor from time to time for the reasonable costs of such restoration
upon satisfaction of reasonable terms and conditions specified by Lessor, and
any excess proceeds remaining after such restoration shall be paid to Lessee.
(c) If the cost of the repair or restoration exceeds the
amount of proceeds received by Lessor from the insurance it maintains as
required under Article 13, Lessee shall be obligated to contribute any excess
amounts needed to restore the Hotel. Such difference shall be paid by Lessee to
Lessor promptly after Lessee receives Lessor's written invoice therefor, to be
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held in trust in an interest-bearing account, together with any other insurance
proceeds, for application to the cost of repair and restoration.
(d) If Lessor accepts Lessee's offer to purchase the Leased
Property under this Article, this Lease shall terminate as to the Leased
Property upon payment of the purchase price, and Lessor shall remit to Lessee
all insurance proceeds pertaining to the Leased Property being held in trust by
Lessor.
14.3. Reconstruction in the Event of Damage or Destruction Not Covered
by Insurance. Except as provided in Section 14.6, if during the Term the Hotel
is totally or materially destroyed by a risk not covered by the insurance
described in Article 13, whether or not such damage or destruction renders the
Hotel Unsuitable for its Primary Intended Use, Lessee at its option shall
either, (a) at Lessee's sole cost and expense, restore the Hotel 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) offer to purchase the Leased Property for a purchase price equal to the
Rejectable Offer Price of the Leased Property without regard to such damage or
destruction. If such damage or destruction is not material, Lessee shall restore
the Hotel to substantially the same condition as existed immediately before the
damage or destruction and otherwise in accordance with the terms of the Lease.
If Lessor does not accept Lessee's offer so to purchase the Leased Property
within ninety (90) days, Lessee may withdraw its offer to purchase the Leased
Property and, if so withdrawn, Lessee may terminate the Lease with respect to
the Leased Property without further liability hereunder.
14.4. Lessee's Property. All insurance proceeds payable by reason of
any loss of or damage to any of Lessee's Personal Property 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, this Lease shall remain in full force and effect and Lessee's
obligation to make rental payments and to pay all other charges required by this
Lease shall remain unabated during the first three (3) months of any period
required for the applicable repair and restoration. Thereafter, Base Rent shall
be equitably abated.
14.6. Damage Near End of Term. Notwithstanding any provisions of
Section 14.2 or 14.3 appearing to the contrary, if damage to or destruction of
the Hotel rendering it unsuitable for its Primary Intended Use occurs during the
last twenty-four (24) months of the Term, then Lessor or Lessee shall have the
right to terminate this Lease by giving Notice, respectively, to Lessee or
Lessor within thirty (30) days after the date of damage or destruction,
whereupon all accrued Rent shall be paid immediately, and this Lease shall
automatically terminate five (5) days after the date of such Notice.
14.7. Waiver. Lessee hereby waives any statutory rights of termination
that may arise by reason of any damage or destruction of the Hotel that Lessor
is obligated to restore or may restore under any of the provisions of this
Lease.
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ARTICLE 15
CONDEMNATION; AWARD ALLOCATION
15.1. Definitions.
(a) "AWARD" means all compensation, sums or anything of value
awarded, paid or received on a total or partial Condemnation.
(b) "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.
(c) "CONDEMNOR" means any public or quasi-public authority, or
private corporation or individual, having the power of Condemnation.
(d) "DATE OF TAKING" means the date the Condemnor has the
right to possession of the property being condemned.
15.2. Parties' Rights and Obligations. If during the Term there is any
Condemnation of all or any part of the Leased Property or any interest in this
Lease, the rights and obligations of Lessor and Lessee shall be determined by
this Article 15.
15.3. Total Taking If title to the fee of the whole of the Leased
Property is condemned by any Condemnor, this Lease shall cease and terminate as
of the Date of Taking by the Condemnor. If title to the fee of less than the
whole of the Leased Property is so taken or condemned, which nevertheless
renders the Leased Property Unsuitable or Uneconomic for its Primary Intended
Use, Lessee and Lessor shall each have the option, by Notice to the other, at
any time prior to the Date of Taking, to terminate this Lease as of the Date of
Taking. Upon such date, if such Notice has been given, this Lease shall
thereupon cease and terminate. All Base Rent, Percentage Rent and Additional
Charges paid or payable by Lessee hereunder shall be apportioned as of the Date
of Taking, and Lessee shall promptly pay Lessor such amounts.
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, Lessee shall
not initiate, prosecute or acquiesce in any proceedings that may result in a
diminution of any Award payable to Lessor.
15.5. Partial Taking. If title to less than the whole of the Leased
Property is condemned, and the Leased Property is not Unsuitable for its Primary
Intended Use, and not Uneconomic for its Primary Intended Use, or if Lessee or
Lessor is entitled but neither elects to terminate this Lease as provided in
Section 15.3, Lessee at its cost shall with all reasonable dispatch restore the
untaken
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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 shall 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. In the event of such a partial Taking,
this Lease shall not terminate, but 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 thirty (30) days after such partial Taking, the matter may be
submitted by either party to a court of competent jurisdiction for resolution.
15.6. Temporary Taking. If the whole or any part of the Leased Property
(other than the fee) or of Lessee's interest under this Lease is condemned by
any Condemnor for its temporary use or occupancy (which shall mean a period not
to exceed two years), this Lease shall not terminate by reason thereof, and
Lessee shall continue to pay, in the manner and at the terms herein specified,
the full amounts of Base Rent and Additional Charges. In addition, Lessee shall
pay Percentage Rent at a rate equal to the average Percentage Rent during the
last three (3) preceding Fiscal Years (or if three (3) Fiscal Years shall not
have elapsed, the average during the preceding Fiscal 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 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, at its sole cost and expense (subject to
Lessor's contribution as set forth below), restore the Leased Property as nearly
as may be reasonably possible to the condition in which the same was immediately
prior to such Condemnation, unless 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, and Lessee shall fund the balance of such costs in a
manner reasonably satisfactory to Lessor.
ARTICLE 16
DEFAULT BY LESSEE; LESSOR'S REMEDIES
16.1. Events of Default. If any one or more of the following events
(individually, an "Event of Default") occurs:
(a) if an Event of Default occurs under any other lease
between Lessor or any Affiliate of Lessor and Lessee or any Affiliate of Lessee;
or
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(b) if Lessee fails to make payment of the Base Rent within
ten (10) days after the same becomes due and payable; or
(c) if Lessee fails to make payment of Percentage Rent when
the same becomes due and payable and such condition continues for a period of
thirty (30) days after the end of the applicable quarter; or
(d) if Lessee fails to observe or perform any other term,
covenant or condition of this Lease and such failure is not cured by Lessee
within a period of thirty (30) days after receipt by Lessee of Notice thereof
from Lessor, unless such failure cannot with due diligence be cured within a
period of thirty (30) days, in which case it shall not be deemed an Event of
Default if Lessee proceeds promptly and with due diligence to cure the failure
and diligently completes the curing thereof provided, however, in no event shall
such cure period extend beyond ninety (90) days after such Notice; or
(e) if Lessee shall file a petition in bankruptcy or
reorganization for an arrangement pursuant to any federal or state bankruptcy
law or any similar federal or state law, or shall be adjudicated a bankrupt or
shall make an assignment for the benefit of creditors or shall admit in writing
its inability to pay its debts generally as they become due, or if a petition or
answer proposing the adjudication of Lessee as a bankrupt or its reorganization
pursuant to any federal or state bankruptcy law or any similar federal or state
law shall be filed in any court and Lessee shall be adjudicated a bankrupt and
such adjudication shall not be vacated or set aside or stayed within sixty (60)
days after the entry of an order in respect thereof, or if a receiver of Lessee
or of the whole or substantially all of the assets of Lessee shall be appointed
in any proceeding brought by Lessee or if any such receiver, trustee or
liquidator shall be appointed in any proceeding brought against Lessee and shall
not be vacated or set aside or stayed within sixty (60) days after such
appointment; or
(f) if Lessee is liquidated or dissolved, or begins
proceedings toward such liquidation or dissolution, or, in any manner, permits
the sale or divestiture of substantially all of its assets; or
(g) if, except as expressly permitted herein, 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 (unless Lessee is contesting such lien or attachment in good faith in
accordance with Section 12.2 hereof) or there is a Change of Control of Lessee;
or
(h) if, except as a result of damage, destruction or a partial
or complete Condemnation as contemplated by this Lease, Lessee voluntarily
ceases operations on the Leased Property for a period in excess of thirty (30)
days; or
(i) if an event of default has been declared by the franchisor
under the Franchise Agreement with respect to the Hotel as a result of any
action or failure to act by Lessee or any Person with whom Lessee contracts for
management services at the Hotel, and such default is not cured by the earlier
of (A) ten (10) days following notice from Lessor or (B) such earlier date as is
required for Lessee to avoid termination of the Franchise Agreement by the
franchisor;
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then, and in any such event, Lessor may exercise one or more remedies available
to it herein or at law or in equity, including but not limited to its right to
terminate this Lease by giving Lessee not less than ten (10) days' Notice of
such termination.
If litigation 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.
No Event of Default (other than a failure to make a payment of
money) shall be deemed to exist under clause (d) during any time the curing
thereof is prevented by an Unavoidable Delay, provided that upon the cessation
of such Unavoidable Delay, Lessee remedies such default or Event of Default
without further delay.
16.2. Surrender. If an Event of Default occurs (and the event giving
rise to such Event of Default has not been cured within the curative period
relating thereto as set forth in Section 16.1) and is continuing, whether or not
this Lease has been terminated pursuant to Section 16.1, Lessee shall, if
requested by Lessor so to do, immediately surrender to Lessor the Leased
Property including, without limitation, any and all books, records, files,
licenses, permits and keys relating thereto, and quit the same and Lessor may
enter upon and repossess the Leased Property by summary proceedings, ejectment
or otherwise, and may remove Lessee and all other Persons and any and all
personal property from the Leased Property, subject to rights of any hotel
guests and to any requirement of law. Lessee hereby waives any and all
requirements of applicable laws for service of notice to re-enter the Leased
Property. Lessor shall be under no obligation to, but may if it so chooses,
relet the Leased Property or otherwise mitigate Lessor's damages.
16.3. Damages. Neither (a) the termination of this Lease, (b) the
repossession of the Leased Property, (c) the failure of Lessor to relet the
Leased Property, nor (d) the reletting of all or any portion thereof, shall
relieve Lessee of its liability and obligations hereunder, all of which shall
survive any such termination, repossession or reletting. In the event of any
such termination, Lessee shall forthwith pay to Lessor all Rent due and payable
with respect to the Leased Property to and including the date of such
termination.
Lessee shall forthwith pay to Lessor, at Lessor's option, as
and for liquidated and agreed current damages for Lessee's default, either:
(i) Without termination of Lessee's right to
possession of the Leased Property, each installment of Rent
(including Percentage Rent as determined below) and other sums
payable by Lessee to Lessor under the Lease as the same
becomes due and payable, which Rent and other sums shall bear
interest at the Overdue Rate, and Lessor may enforce, by
action or otherwise, any other term or covenant of this Lease;
or
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(ii) the sum of:
(A) the unpaid Rent which had been earned at
the time of termination, repossession or reletting, and
(B) the worth at the time of termination,
repossession or reletting of the amount by which the unpaid
Rent for the balance of the Term after the time of
termination, repossession or reletting, exceeds the amount of
such rental loss that Lessee proves could be reasonably
avoided and as reduced for rentals received after the time of
termination, repossession or reletting, if and to the extent
required by applicable law, and
(C) any other amount necessary to compensate
Lessor for all the detriment proximately caused by Lessee's
failure to perform its obligations under this Lease or which
in the ordinary course of things, would be likely to result
therefrom.
The worth at the time of termination, repossession or
reletting of the amount referred to in subparagraph (B) is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of New
York at the time of award plus one percent (1%). Percentage Rent for the
purposes of this Section 16.3 shall be a sum equal to (i) the average of the
annual amounts of the Percentage Rent for the three (3) Fiscal Years immediately
preceding the Fiscal Year in which the termination, re-entry or repossession
takes place, or (ii) if three (3) Fiscal Years shall not have elapsed, the
average of the Percentage Rent during the preceding Fiscal Years during which
the Lease was in effect, or (iii) if one Fiscal Year has not elapsed, the amount
derived by annualizing the Percentage Rent from the effective date of this
Lease.
16.4. Waiver. If this Lease is terminated pursuant to Section 16.1,
Lessee waives, to the extent permitted by applicable law, (a) any right to a
trial by jury in the event of summary proceedings to enforce the remedies set
forth in this Article 16, and (b) the benefit of any laws now or hereafter in
force exempting property from liability for rent or for debt and Lessor waives
any right to "pierce the corporate veil" of Lessee other than to the extent
funds shall have been fraudulently paid by Lessee to any Affiliate of Lessee
following a default resulting in an Event of Default.
16.5. Application of Funds. Any payments received by Lessor under any
of the provisions of this Lease during the existence or continuance of any Event
of Default shall be applied to Lessee's obligations in the order that Lessor may
determine or as may be prescribed by the laws of the State.
16.6. Lessor's Right to Cure Lessee's Default. If Lessee fails to make
any payment or to perform any act required to be made or performed under this
Lease, including, without limitation, Lessee's failure to comply with the terms
of any Franchise Agreement, and fails to cure the same within the relevant time
periods provided in Section 16.1, Lessor, without waiving or releasing any
obligation of Lessee, and without waiving or releasing any obligation or
default, may (but shall be
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under no obligation to) at any time thereafter make such payment or perform such
act for the account and at the expense of Lessee, and may, to the extent
permitted by law, enter upon the Leased Property for such purpose and, subject
to Section 16.4, take all such action thereon as, in Lessor's opinion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction of
Lessee. All sums so paid by Lessor and all costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses, in each case to the
extent permitted by law) so incurred, together with a late charge thereon (to
the extent permitted by law) at the Overdue Rate from the date on which such
sums or expenses are paid or incurred by Lessors, shall be paid 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 17
DEFAULT BY LESSOR; LESSEE'S REMEDIES
17.1. Breach by Lessor. It shall be a breach of this Lease if Lessor
fails to observe or perform any term, covenant or condition of this Lease on its
part to be performed and such failure continues for a period of thirty (30) days
after Notice thereof from Lessee, unless such failure cannot with due diligence
be cured within a period of thirty (30) days, in which case such failure shall
not be deemed to continue if Lessor, within such thirty (30) day period,
proceeds promptly and with due diligence to cure the failure and diligently
completes the curing thereof; provided, however, that such default shall be
cured by Lessor in any event prior to the date on which the default becomes an
event of default under the terms of the Franchise Agreement for the Hotel. 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 fails to cure any such breach within the grace period described above,
Lessee, without waiving or releasing any obligations hereunder, and in addition
to all other remedies available to Lessee at law or in equity, may purchase the
Leased Property from Lessor for a purchase price equal to the then Fair Market
Value. If Lessee elects to purchase the Leased Property it shall deliver a
Notice thereof to Lessor specifying a settlement date to occur not less than
ninety (90) days subsequent to the date of such Notice on which it shall
purchase the Leased Property, and the same shall be thereupon conveyed in
accordance with the provisions of Section 17.3; provided, however, that Lessor
shall pay the cost of Lessee's title insurance and all closing costs associated
with such purchase by Lessee following default by Lessor.
17.2. Lessee's Right to Cure. Subject to the provisions of Section
17.1, if Lessor breaches any covenant to be performed by it under this Lease,
Lessee, after Notice to and demand upon Lessor, without waiving or releasing any
obligation hereunder, and in addition to all other remedies available to Lessee,
may (but shall be under no obligation at any time thereafter to) make such
payment or perform such act for the account and at the expense of Lessor. All
sums so paid by Lessee and all costs and expenses (including, without
limitation, reasonable attorneys' fees) so incurred, together with interest
thereon at the Overdue Rate from the date on which such sums or expenses are
paid or incurred by Lessee, shall be paid by Lessor to Lessee on demand or,
following entry of a final, nonappealable judgment against Lessor for such sums,
may be offset by Lessee against the Base Rent and/or Percentage Rent payments
next accruing or coming due. The rights of Lessee hereunder to cure and to
secure payment from Lessor in accordance with this Section 17.2 shall survive
the termination of this Lease with respect to the Leased Property.
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17.3. Provisions Relating to Purchase of the Leased Property by Lessee.
If Lessee purchases the Leased Property from Lessor pursuant to any of the terms
of this Lease, Lessor shall, upon receipt from Lessee of the applicable purchase
price, together with full payment of any unpaid Rent due and payable with
respect to any period ending on or before the date of the purchase, deliver to
Lessee an appropriate limited or special warranty deed or other conveyance
conveying the entire interest of Lessor in and to the Leased Property to Lessee
free and clear of all encumbrances other than (a) those that Lessee has agreed
hereunder to pay or discharge, (b) those mortgage liens, if any, that Lessee has
agreed in writing to accept and to take title subject to, (c) those liens and
encumbrances subject to which the Leased Property was conveyed to Lessor, to the
extent not released in connection with the transactions contemplated by this
Lease, (d) encumbrances, easements, licenses or rights of way required to be
imposed on the Leased Property under Section 7.3, and (e) any other encumbrances
permitted to be imposed on the Leased Property under the provisions of Article
22 that are assumable at no cost to Lessee or to which Lessee may take subject
without cost to Lessee. The difference between the applicable purchase price and
the total of the encumbrances assumed or taken subject to shall be paid in cash
to Lessor or as Lessor may direct, in federal or other immediately available
funds, except as otherwise mutually agreed by Lessor and Lessee. All expenses of
such conveyance, including, without limitation, the cost of title examination or
title insurance, if desired by Lessee, Lessee's attorneys' fees incurred in
connection with such conveyance and release, and one-half of any transfer taxes
and recording fees, shall be paid by Lessee. Lessor shall pay one-half of any
transfer taxes and recording fees and its attorney's fees.
ARTICLE 18
INDEMNIFICATION
18.1. Indemnification.
(a) Notwithstanding the existence of any insurance, and
without regard to the policy limits of any such insurance or self-insurance, but
subject to Section 13.3 and Section 8.3, Lessee will protect, indemnify, hold
harmless and defend Lessor from and against all liabilities, losses,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses), to the
extent permitted by law, 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 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
during the Term 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
that are the obligations of Lessee pursuant to the applicable provisions of this
Lease, (d) any failure on the
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part of Lessee to perform or comply with any of the terms of this Lease, and (e)
the non-performance of any of the terms and provisions of any and all existing
and future subleases of the Leased Property to be performed by the landlord
thereunder.
(b) Notwithstanding the existence of any insurance, and
without regard to the policy limits of any such insurance or self-insurance, but
subject to Section 13.3 and Section 8.3, Lessor shall indemnify, save harmless
and defend Lessee Indemnified Parties from and against all liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
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 (10) days
after liability therefor on the part of the Indemnifying Party is determined by
litigation or otherwise, and if not timely paid, shall bear a late charge (to
the extent permitted by law) at the Overdue Rate from the date of such
determination to the date of payment. 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 or delayed. Nothing herein shall be construed as
indemnifying a Lessor Indemnified Party against its own (or Lessor's) grossly
negligent acts or omissions or willful misconduct.
(c) Lessee's or Lessor's liability for a breach of the
provisions of this Article shall survive any termination of this Lease.
ARTICLE 19
REIT REQUIREMENTS AND RESTRICTIONS
19.1. Personal Property Limitation. Anything contained in this Lease to
the contrary notwithstanding, the average of the adjusted tax bases of the items
of personal property that are leased to Lessee under this Lease at the beginning
and at the end of any Fiscal Year shall not exceed fifteen percent (15%) of the
average of the aggregate adjusted tax bases of the Leased Property at the
beginning and at the end of such Fiscal Year. This Section 19.1 is intended to
ensure that the Rent qualifies as "rents from real property," within the meaning
of Section 856(d) of the Code, or any similar or successor provisions thereto,
and shall be interpreted in a manner consistent with such intent.
19.2. Sublease Rent Limitation. Anything contained in this Lease to the
contrary notwithstanding, Lessee shall not sublet the Leased Property on any
basis such that the rental to be paid by the sublessee thereunder would be
based, in whole or in part, on either (a) the 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.
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19.3. Sublease Tenant Limitation. Anything contained in this Lease to
the contrary notwithstanding, Lessee shall not sublease the Leased Property to
any Person in which Lessor owns, directly or indirectly, a ten percent (10%) or
more interest, within the meaning of Section 856(d)(2)(B) of the Code, or any
similar or successor provisions thereto.
19.4. Lessee Ownership Limitations.
(a) Anything contained in this Lease to the contrary
notwithstanding, neither Lessee nor an Affiliate of Lessee shall acquire,
directly or indirectly, a ten percent (10%) or more interest in Lessor within
the meaning of Section 856(d)(2)(B) of the Code, or any similar or successor
provision thereto.
(b) Lessee shall not own, operate, manage or have any interest
in any hotel or motel property in which Lessor or an Affiliate of Lessor does
not have an interest, pursuant to this Lease or another lease, agreement or
arrangement with Lessor or an Affiliate of Lessor. Lessor agrees to notify
Lessee promptly of the location of any hotel or motel property in which Lessor
or an Affiliate of Lessor has an interest.
19.5. Lessee Officer and Employee Limitation. If a Person serves as
both (a) a director of Lessee (or any Person who furnishes or renders services
to the tenants of the Leased Property, or manages or operates the Leased
Property) and (b) an officer (or employee) of the Lessor that Person shall not
receive any compensation for serving as a director of Lessee (or any Person who
furnishes or renders services to the tenants of the Leased Property, or manages
or operates the Leased Property). Furthermore, if a Person serves as both (a) a
director of the Lessor and (b) an officer (or employee) of Lessee (or any Person
who furnishes or renders services to the tenants of the Leased Property, or
manages or operates the Leased Property), that Person shall not receive any
compensation for serving as a director of the Lessor. No Person, other than
Glade M. Knight, shall serve as an officer (or employee) of both Lessor and
Lessee.
19.6. Payments to Affiliates of Lessee. During the Term, Lessee shall
not pay, or become obligated to pay, any fees to any Affiliate of Lessee in
connection with the Hotel, other than fees that are subordinated to the payments
that are required to be made to Lessor pursuant to this Lease.
ARTICLE 20
SUBLETTING AND ASSIGNMENT
20.1. Subletting and Assignment. Subject to the provisions of Article
19 and Section 20.2 and any other express conditions or limitations set forth
herein, Lessee may, but only with the consent of Lessor (which shall not be
unreasonably withheld or delayed), (a) assign this Lease or sublet all or any
part of the Leased Property to an Affiliate of Lessee, or (b) sublet any retail
or restaurant portion of the Leased Improvements in the normal course of the
Primary Intended Use; provided that any subletting to any party other than an
Affiliate of Lessee shall not individually as to any one such subletting, or in
the aggregate, materially diminish the actual or potential Percentage Rent
payable under this Lease. In the case of a subletting, the sublessee shall
comply with the provisions of Section 20.2, and in the case of an assignment,
the assignee shall assume in
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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. Notwithstanding the
above, Lessee may assign the Lease to an Affiliate without the consent of
Lessor; provided that any such assignee assumes in writing and agrees to keep
and perform all of the terms of the 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.
20.2. Attornment. Lessee shall insert in each sublease permitted under
Section 20.1 provisions to the effect that (a) such sublease is subject and
subordinate to all of the terms and provisions of this Lease and to the rights
of Lessor hereunder, (b) if this Lease terminates before the expiration of such
sublease, the sublessee thereunder will, at Lessor's option, attorn to Lessor
and waive any right the sublessee may have to terminate the sublease or to
surrender possession thereunder as a result of the termination of this Lease,
and (c) if the sublessee receives a Notice from Lessor or Lessor's assignees, if
any, stating that an uncured Event of Default exists under this Lease, the
sublessee shall thereafter be obligated to pay all rentals accruing under said
sublease directly to the party giving such Notice, or as such party may direct.
All rentals received from the sublessee by Lessor or Lessor's assignees, if any,
as the case may be, shall be credited against the amounts owing by Lessee under
this Lease.
20.3. Conveyance by Lessor. Lessor may assign this Lease to any
purchaser of the Leased Property. If Lessor or any successor owner of the Leased
Property conveys the Leased Property in accordance with the terms hereof other
than as security for a debt, and the grantee or transferee of the Leased
Property expressly assumes all obligations of Lessor hereunder arising or
accruing from and after the date of such conveyance or transfer, Lessor or such
successor owner, as the case may be, shall thereupon be released from all future
liabilities and obligations of Lessor under this Lease arising or accruing from
and after the date of such conveyance or other transfer as to the Leased
Property and all such future liabilities and obligations shall thereupon be
binding upon the new owner.
ARTICLE 21
QUIET ENJOYMENT; RISK OF LOSS
21.1. Quiet Enjoyment. So long as Lessee pays all Rent as the same
becomes due and complies with all of the terms of this Lease and performs its
obligations hereunder, in each case within the applicable grace periods, if any,
Lessee shall peaceably and quietly have, hold and enjoy the Leased Property for
the Term hereof, free of any claim or other action by Lessor or anyone claiming
by, through or under Lessor, but subject to all liens and encumbrances subject
to which the Leased Property was conveyed to Lessor, to the extent not released
in connection with the transactions contemplated by this Lease, or hereafter
consented to by Lessee or provided for herein.
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Notwithstanding the foregoing, Lessee shall have the right by separate and
independent action to pursue any claim it may have against Lessor as a result of
a breach by Lessor of the covenant of quiet enjoyment contained in this Section.
21.2. Risk of Loss. During the Term, the risk of loss or of decrease in
the enjoyment and beneficial use of the Leased Property in consequence of the
damage or destruction thereof by fire, the elements, casualties, thefts, riots,
wars or otherwise, or in consequence of foreclosures, attachments, levies or
executions (other than those caused by Lessor and those claiming from, through
or under Lessor) is assumed by Lessee, and, in the absence of gross negligence,
willful misconduct or breach of this Lease by Lessor pursuant to Section 17.1,
Lessor shall in no event be answerable or accountable therefor, nor shall any of
the events mentioned in this Section entitle Lessee to any abatement of Rent
except as specifically provided in this Lease.
ARTICLE 22
LESSOR MORTGAGES; SUBORDINATION OF LEASE
22.1. Lessor May Grant Liens. Without the consent of Lessee, Lessor
may, subject to the terms and conditions set forth below in this Section 22.1,
from time to time, directly or indirectly, create or otherwise cause to exist
any lien, encumbrance or title retention agreement ("Encumbrance") upon the
Leased Property, or any portion thereof or interest therein, whether to secure
any borrowing or other means of financing or refinancing. Upon the request of
Lessor, Lessee shall subordinate this Lease to the lien of a new mortgage on the
Leased Property, on the condition that the proposed mortgagee executes a
non-disturbance agreement recognizing this Lease in accordance with the
provisions of Section 22.2, and agreeing, for itself and its successors and
assigns, to comply with the provisions of this Article 22.
22.2. Subordination of Lease. 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
Encumbrances 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, however, that with respect to any Mortgage hereafter
granted, such subordination is conditioned upon delivery to Lessee of a
non-disturbance agreement which provides that Lessee shall not be disturbed in
its possession of the Leased Property hereunder following a foreclosure of such
Mortgage (or delivery of a deed-in-lieu-of-foreclosure) and that the holder of
such Mortgage or the purchaser at a foreclosure sale (or grantee under such
deed-in-lieu-of-foreclosure) shall perform all obligations of Lessor under this
Lease. In confirmation of such subordination, however, Lessee shall, at Lessor's
request, promptly execute, acknowledge and deliver any instrument which may be
required to evidence subordination to any Mortgage and to the holder thereof. 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.
55
<PAGE>
ARTICLE 23
ESTOPPEL CERTIFICATES; FINANCIAL STATEMENTS; INSPECTION RIGHTS
23.1. Estoppel Certificates; Financial Statements.
(a) At any time and from time to time upon not less than ten
(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 exists
thereunder 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 and any prospective purchaser of the Leased
Property.
(b) Lessee will furnish the following statements to Lessor:
(i) with reasonable promptness, such information
respecting the financial condition and affairs of Lessee
including audited financial statements prepared by the same
certified independent accounting firm that prepares the
returns for Lessor or such other accounting firm as may be
approved by Lessor, as Lessor may request from time to time;
and
(ii) the most recent Consolidated Financials of
Lessee within forty-five (45) days after each quarter of any
Fiscal Year (or, in the case of the final quarter in any
Fiscal Year, the most recent audited Consolidated Financials
of Lessee within ninety (90) days); and
(iii) on or about the 20th day of each month, a
detailed profit and loss statement for the Leased Property for
the preceding month, a balance sheet for the Leased Property
as of the end of the preceding month, and a detailed
accounting of revenues for the Leased Property for the
preceding month, each in form acceptable to Lessor.
Lessee will permit the inclusion of such statements in any filings required to
be made by Lessor under the Securities Act of 1933 and the Securities Exchange
Act of 1934.
(c) At any time and from time to time upon not less than ten
(10) days Notice by Lessee, Lessor will furnish to Lessee or to any Person
designated by Lessee an estoppel certificate certifying that this Lease is
unmodified and in full force and effect (or that this Lease is in full force and
effect as modified and setting forth the modifications), the date to which Rent
has been paid, whether to the knowledge of Lessor there is any existing default
or Event of Default on Lessee's part hereunder, and such other information as
may be reasonably requested by Lessee.
56
<PAGE>
(d) Lessee shall at all times be Solvent. Furthermore, as of
the date of this Agreement, Lessee or its Affiliate agree to establish and
maintain, in a form satisfactory to Lessor, a funding commitment in an amount
equal to $2,000,000 upon which Lessee may draw upon to pay to Lessor Base Rent,
Percentage Rent and Additional Charges. Repayment of the funding commitment
shall be subordinated to all payments of Base Rent, Percentage Rent and
additional charges under all Leases between Lessor and Lessee.
23.2. Lessor's Right to Inspect. Lessee shall permit Lessor and its
authorized representatives as frequently as reasonably requested by Lessor to
inspect the Leased Property and Lessee's accounts and records pertaining thereto
and make copies thereof, during usual business hours upon reasonable advance
Notice, subject only to any business confidentiality requirements reasonably
requested by Lessee.
ARTICLE 24
APPRAISERS
24.1. 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, the party required or permitted to give Notice of such required
determination shall include in the Notice the name of a Person selected to act
as appraiser on its behalf. Within ten (10) days after Notice, Lessor (or
Lessee, as the case may be) shall by Notice to Lessee (or Lessor, as the case
may be) appoint a second Person as appraiser on its behalf. The appraisers thus
appointed, each of whom must be a member of the American Institute of Real
Estate Appraisers (or any successor organization thereto) with at least five (5)
years' experience in the State appraising property similar to the Leased
Property, shall, within forty-five (45) days after the date of the Notice
appointing the first appraiser, proceed to 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. To the extent consistent with sound
appraisal practice as then existing at the time of any such appraisal, such
appraisal shall be made on a basis consistent with the basis on which the Leased
Property was appraised for purposes of determining its Fair Market Value at the
time the Leased Property was acquired by Lessor. If two (2) appraisers are
appointed and if the difference between the amounts so determined does not
exceed five percent (5%) of the lesser of such amounts, then the Fair Market
Value or Fair Market Rental shall be an amount equal to fifty percent (50%) of
the sum of the amounts so determined. If the difference between the amounts so
determined exceeds five percent (5%) of the lesser of such amounts, then such
two appraisers shall have twenty (20) days to appoint a third appraiser. If no
such appraiser shall have been appointed within such twenty (20) days or within
ninety (90) days of the original request for a determination of Fair Market
Value 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
forty-five (45) days after appointment of such appraiser. The determination of
the appraiser which differs most in the terms of dollar amount from the
determinations of the other two appraisers shall be excluded, and fifty percent
(50%) of the sum of the remaining two
57
<PAGE>
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 25
ARBITRATION AND DISPUTE RESOLUTION PROCEDURES
25.1. Arbitration. Except as set forth in Section 25.2, 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
25.1. The party desiring such arbitration shall give Notice to that effect to
the other party, and an arbitrator shall be selected by mutual agreement of the
parties, or if they cannot agree within thirty (30) days of such notice, by
appointment made by the American Arbitration Association ("AAA") from among the
members of its panels who are qualified and who have experience in resolving
matters of a nature similar to the matter to be resolved by arbitration.
25.2. Alternative Arbitration. In each case specified in this Lease for
a matter to be submitted to arbitration pursuant to the provisions of this
Section 25.2, Lessor and Lessee will agree upon a nationally recognized
accounting firm with a hospitality division of which neither party nor their
Affiliates of Lessor is a significant client to serve as arbitrator of such
dispute within fifteen (15) days after written demand for arbitration is
received or sent by either party. In the event the parties fail to make such
designation within such fifteen (15) day period, Lessor shall be entitled to
designate any nationally recognized accounting firm with a hospitality division
of which Lessor or an Affiliate of Lessor is not a significant client to serve
as arbitrator of such dispute within fifteen (15) days after the parties fail to
timely make such designation. In the event Lessor fails to make such designation
within such fifteen (15) day period, Lessee shall be entitled to designate any
nationally recognized accounting firm with hospitality division of which Lessee
or an Affiliate of Lessee is not a significant client to serve as arbitrator of
such dispute within fifteen (15) days after the parties fail to timely make such
designation. In the event no nationally recognized accounting firm satisfying
such qualifications is available and willing to serve as arbitrator, the
arbitrator shall instead be administered as set forth in Section 25.1.
25.3. Arbitration Procedure. In any arbitration commenced pursuant to
Sections 25.1 or 25.2, a single arbitrator shall be designated and shall resolve
the dispute. The arbitrator's decision shall be binding on all parties, shall
not be subject to further review or appeal except as otherwise allowed by
applicable law and may be filed in and enforced by a court of competent
jurisdiction. Upon the failure of either party (the "non-complying party") to
comply with his decision, the arbitrator shall be empowered, at the request of
the other party, to order such compliance by the non-complying party and to
supervise or arrange for the supervision of the non-complying party's obligation
to comply with the arbitrator's decision, all at the expense of the
non-complying party. To the maximum extent practicable, the arbitrator and the
parties, and the AAA if applicable, shall take any action necessary to insure
that the arbitration shall be concluded within ninety (90) days of
58
<PAGE>
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 25.3. Unless otherwise agreed in writing by the parties or required by
the arbitrator or AAA, if applicable, arbitration proceedings hereunder shall be
conducted in the State. Notwithstanding formal rules of evidence, each party may
submit such evidence as each party deems appropriate to support its position and
the arbitrator shall have access to and right to examine all books and records
of Lessee and Lessor regarding the Hotel during the arbitration.
ARTICLE 26
NOTICES
26.1. Notices. All notices, demands, requests, consents approvals and
other communications ("Notice" or "Notices") hereunder shall be in writing and
hand-delivered, sent by FedEx or other nationally recognized overnight courier
service, or mailed (by registered or certified mail, return receipt requested
and postage prepaid), if to Lessor at 306 East Main Street, Richmond, Virginia
23219, Attn: Glade M. Knight and if to Lessee at 306 East Main Street, Richmond,
Virginia 23219, Attn: Glade M. Knight or to such other address or addresses as
either party may hereafter designate. Personally delivered Notice shall be
effective upon receipt, and Notice given by overnight courier service or by mail
shall be complete at the time of deposit with the courier service or in the U.S.
Mail system, respectively, 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 overnight courier service
shall be extended one (1) day and by mail shall be extended five (5) days.
ARTICLE 27
MISCELLANEOUS
27.1. 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.
27.2. Remedies Cumulative. To the extent permitted by law and unless
otherwise provided herein to the contrary, 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.
27.3. Waiver of Trial by Jury. LESSOR AND LESSEE EACH WAIVE, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY
59
<PAGE>
JURY IN THE EVENT OF A PROCEEDING WITH RESPECT TO THIS LEASE, INCLUDING, WITHOUT
LIMITATION, SUMMARY PROCEEDINGS TO ENFORCE THE REMEDIES SET FORTH IN ARTICLE 16.
27.4. 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.
27.5. No Merger of Title. There shall be no merger of this Lease or of
the leasehold estate created hereby by reason of the fact that the same Person
may acquire, own or hold, directly or indirectly: (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (b) the fee estate in the Leased Property.
27.6. Waiver of Presentment, Etc. Lessee waives all presentments,
demands for payment and for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, and notices of acceptance and waives
all notices of the existence, creation, or incurring of new or additional
obligations, except as expressly granted herein.
27.7. Action for Damages. Except as otherwise expressly provided
herein, in any suit or other claim brought by either party seeking damages
against the other party for breach of its obligations under this Lease, the
party against whom such claim is made shall be liable to the other party only
for actual damages and not for consequential, punitive or exemplary damages.
27.8. 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
this Lease pursuant to 11 U.S.C. Section 365, without seeking an extension of
the time to file said motion.
27.9. Enforceability. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, Lessee or Lessor
arising prior to any date of termination of this Lease shall survive such
termination. If any term or provision of this Lease or any application thereof
is invalid or unenforceable, the remainder of this Lease and any other
application of such term or provisions shall not be affected thereby. If any
late charges or any interest rate provided for in any provision of this Lease
are based upon a rate in excess of the maximum rate permitted by applicable law,
the parties agree that such charges shall be fixed at the maximum permissible
rate. Neither this Lease nor any provision hereof may be changed, waived,
discharged or terminated except by a written instrument in recordable form
signed by Lessor and Lessee. All the terms and provisions of this Lease shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted 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.
60
<PAGE>
27.10. Memorandum of Lease. Lessor and Lessee shall promptly, upon the
request of either party, 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.
61
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
"LESSOR"
APPLE SUITES INC., AS TRUSTEE FOR
APPLE SUITES PENNSYLVANIA BUSINESS TRUST
By: /s/ Glade M. Knight
---------------------------
Name: Glade M. Knight
---------------------------
Title: President
---------------------------
"LESSEE"
APPLE SUITES MANAGEMENT, INC.
By: /s/ Glade M. Knight
---------------------------
Name: Glade M. Knight
---------------------------
Title: President
---------------------------
<PAGE>
EXHIBIT A-1
LEGAL DESCRIPTION
<PAGE>
EXHIBIT B
WORK LETTER
This Work Letter describes and specifies the rights and obligations of
Apple Suites Inc., as trustee for Apple Suites Pennsylvania Business Trust
("Lessor"), and Apple Suites Management, Inc. ("Lessee"), with respect to the
design, construction, installation and payment for the completion of Lessee's
Work (as defined in Section 10.4 of the Lease).
1. Definitions. Terms which are defined in that certain Hotel Lease
Agreement (the "Lease") executed contemporaneously herewith, by and between
Lessor and Lessee, shall have the same meaning in this Work Letter.
Additionally, as used in this Work Letter, the following terms (when delineated
with initial capital letters) shall have the respective meaning indicated for
each as follows:
(a) "Plans and Specifications" shall mean, collectively, the
plans, specifications and other information prepared or to be prepared
by Lessee's architect and, where necessary, by Lessee's electrical,
mechanical and structural engineers, which shall detail Lessee's Work
and which shall be approved in writing by both Lessee and Lessor prior
to the commencement of such work. The Plans and Specifications shall
comply with the minimum requirements established by Lessor.
(b) "Cost of the Work" shall mean the actual contract costs of
all materials and labor for the design, construction and installation
to completion of the Lessee's Work in accordance with the Plans and
Specifications.
(c) "Change Cost" shall mean any increase in the Cost of the
Work attributable to any change in the Plans and Specifications.
2. Procedure for the Completion of Plans and Specifications. The Plans
and Specifications shall be completed in accordance with the following
procedure:
(a) Design Drawings. Lessee shall submit to Lessor design
drawings specifying the intended design, character and finishing of
Lessee's Work. The design drawings shall set forth the requirements of
Lessee with respect to the installation of Lessee's Work.
i) After receipt of design drawings, Lessor shall
return to Lessee Lessor's required modifications and/or
approval.
ii) If Lessor requires modifications, the design
drawings shall be revised by Lessee and resubmitted to Lessor
for approval. Unless such action is taken, Lessee will be
deemed to have accepted and approved all of Lessor's comments
on the design drawings. This process will continue until
approval of Lessor is obtained.
<PAGE>
(b) Completion of Plans and Specifications. All Plans and
Specifications shall be prepared in strict compliance with applicable
standards and requirements as set forth in the Lease, this Work Letter
and otherwise, and shall also adhere to the design drawings approved by
Lessor. Lessee shall deliver to Lessor, as soon as practicable after
the date of Lessor's approval of design drawings, the proposed Plans
and Specifications. If the Plans and Specifications are returned to
Lessee with comments, but not bearing approval of Lessor, the Plans and
Specifications shall be revised by Lessee and resubmitted to Lessor for
approval. This process will continue until approval of Lessor is
obtained.
(c) Compliance with Laws. Lessee shall have the sole
responsibility for compliance of the Plans and Specifications with all
applicable statutes, codes, ordinances and other regulations. The
approval of the Plans and Specifications or calculations included
therein by Lessor shall not constitute an indication, representation or
certification by Lessor that such Plans and Specifications or
calculations are in compliance with said statutes, codes, ordinances
and other regulations. In instances where several sets of requirements
must be met, the requirements of Lessor's insurance underwriter or the
strictest applicable requirements shall apply where not prohibited by
applicable codes.
3. Pricing. As soon as practicable after finalization of the Plans and
Specifications, as evidenced by Lessor's written approval thereof, Lessee shall
notify Lessor in writing of the Cost of the Work. Lessor shall either approve
the Cost of the Work in writing or request that the Plans and Specifications and
the Cost of the Work be revised and resubmitted to Lessor for approval. Lessee
shall revise the Plans and Specifications and the Cost of the Work and resubmit
them to Lessor for approval. This procedure shall continue until Lessor approves
the Cost of the Work.
4. Performance of Work and Delays. Lessee shall select one or more
contractors ("Contractors") to furnish labor and/or materials for the Lessee's
Work in substantial accordance with the Plans and Specifications. Each
Contractor and the contract between Lessee and such Contractor must be approved
in advance by Lessor. After Lessor's approval of the Plans and Specifications,
the Cost of the Work, Contractors and contracts, Lessee agrees to cause the
Contractors to commence the construction and installation of the Lessee's Work
as promptly as reasonably practicable and to proceed with due diligence to
perform Lessee's Work in a good and workmanlike manner. Lessee warrants to
Lessor that all materials and equipment furnished in constructing and installing
the Lessee's Work will be new, unless otherwise specified to Lessor, and that
such work shall be of good quality, free from faults and defects; provided,
however, Lessor's sole remedy for breach of the above warranty shall be that
Lessee, for a period of twelve (12) months after substantial completion of the
Lessee's Work, at its sole cost and expense, will make all necessary repairs,
replacements and corrections of any nature or description as may become
necessary by reason of faulty construction, labor or materials in the Lessee's
Work. Any delays in the completion of Lessee's Work shall not justify any
abatement or reduction of the rent payable under the Lease.
5. Payments for Cost of Work. Lessor shall be liable for payment of the
Cost of the Work. Within ten (10) days after Lessor's receipt of an invoice from
Lessee, together with supporting billing statements, architect certificates and
other detailed information required by the construction
2
<PAGE>
contracts with the Contractors, Lessor shall pay to Lessee the amount of the
invoice. Lessee shall pay over to its Contractors any payments by Lessor to
Lessee for the Cost of the Work. Lessor may, at its option, elect to make its
payments for the Cost of the Work directly to the Contractors rather than to
Lessee. Lessor shall not be obligated to pay for, and Lessee shall not pay for,
any work performed by any of the Contractors or their mechanics, workmen or
subcontractors until Lessor has received a lien waiver from any said party.
6. Change Orders. All changes and modifications in Lessee's Work from
that contemplated in the Plans and Specifications, whether or not such change or
modification gives rise to a Change Cost, must be evidenced by a written change
order executed by both Lessor and Lessee. In that regard, Lessee shall submit to
Lessor such information as Lessor shall require with respect to any change order
requested by Lessee. After receipt of any requested change order, together with
such information as Lessor shall require with respect thereto, Lessor shall
return to Lessee either the executed change order, which will evidence Lessor's
approval thereof, or the Plans and Specifications with respect thereto with
Lessor's suggested modifications. Lessee shall revise the change order and
resubmit it to Lessor. This process will continue until Lessor's approval is
obtained.
7. Punch List. Within ten (10) days after Lessor receives notice from
Lessee of the substantial completion of Lessee's Work, Lessor shall give Lessee
written notice specifying any details of construction, decoration, installation
or mechanical adjustment which remain to be performed with respect to Lessee's
Work; and except for the details contained in such written notice from Lessor,
all obligations of Lessee in regard to Lessee's Work shall be deemed to have
been satisfied. Lessor or its agents, servants, employees or contractors shall
have the right to enter the Leased Improvements during the progress and after
the completion of the Lessee's Work to inspect any details of the Lessee's Work,
and entry by Lessor, its agents, servants, employees or contractors for such
purpose shall not relieve Lessee of any of its obligations under the Lease or
impose any liability on Lessor or its agents, servants, employees or
contractors.
8. Insurance; Liability. Lessee shall procure and maintain adequate
Workmen's Compensation and public liability insurance for bodily injury and
property damage, all in amounts, with companies and in forms satisfactory to
Lessor. Lessee shall also cause each of the Contractors to provide and maintain
certificates of such insurance and furnish copies of same to Lessor prior to
proceeding with the Lessee's Work. Lessor shall not be liable in any way for any
injury, loss or damage which may occur in connection with or as a result of the
Lessee's Work, the same being solely at Lessee's risk. Lessee shall hold Lessor
harmless from any claim, demand or action arising from the construction or
installation activities in connection with Lessee's Work, the Contractors or any
workmen, mechanics or subcontractors working on the Lessee's Work.
9. Whole Agreement; No Oral Modification. This Work Letter and the
Lease embody all representations, warranties and agreements of Lessor and Lessee
with respect to the matter described herein, and this Work Letter may not be
altered or modified except by an agreement in writing signed by the parties.
3
<PAGE>
10. Paragraph Headings. The paragraph headings contained in this Work
Letter are for convenient reference only and shall not in any way affect the
meaning or interpretation of such paragraphs.
11. Notices. All notices required or contemplated hereunder shall be
given to the parties in the manner specified for giving notices under the Lease.
12. Binding Effect. This Work Letter shall be construed under the laws
of the State of Texas and shall be binding upon and shall inure to the benefit
of the parties hereto and their respective permitted successors and assigns.
13. Conflict. In the event of conflict between this Work Letter and any
other exhibits or addenda to the Lease, this Work Letter shall prevail.
DATED as of the 8th day of May, 2000.
"LESSOR"
APPLE SUITES INC., AS TRUSTEE FOR
APPLE SUITES PENNSYLVANIA BUSINESS TRUST
By:
--------------------------------
Name: Glade M. Knight
--------------------------------
Title: President
--------------------------------
"LESSEE"
APPLE SUITES MANAGEMENT, INC.
By:
--------------------------------
Name: Glade M. Knight
--------------------------------
Title: President
--------------------------------
<PAGE>
SCHEDULE 2.1
COMMENCEMENT DATES
(a) Homewood Suites(R) Malvern - Malvern
Malvern, Pennsylvania
May 8, 2000
<PAGE>
SCHEDULE 3.1(a)
BASE RENTS
(a) Homewood Suites(R) Malvern - Malvern
Malvern, Pennsylvania
$942,375
<PAGE>
SCHEDULE 3.1(b)
SUITE REVENUE BREAKPOINT
(a) HOMEWOOD SUITES(R) MALVERN - MALVERN
MALVERN, PENNSYLVANIA
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
QUARTERS 2000 2001 2002 2003 2004
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
1ST QUARTER ---- $300,219 $309,456 $323,313 $332,550
2ND QUARTER $196,669 $600,438 $618,913 $646,625 $665,100
3RD QUARTER $529,219 $900,656 $928,369 $969,938 $997,650
4TH QUARTER $861,769 $1,200,875 $1,237,825 $1,293,250 $1,330,200
- -----------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------
QUARTERS 2005 2006 2007 2008 2009
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
1ST QUARTER $341,700 $351,025 $360,263 $369,500 $378,738
2ND QUARTER $683,575 $702,050 $720,525 $739,000 $757,475
3RD QUARTER $1,025,363 $1,053,075 $1,080,788 $1,108,500 $1,136,213
4TH QUARTER $1,367,150 $1,404,100 $1,441,050 $1,478,000 $1,514,950
- -----------------------------------------------------------------------------------------
</TABLE>
Exhibit 10.3
[GRAPHIC OMITTED] PHILADELPHIA/GREAT VALLEY, PENNSYLVANIA
PROMUS HOTELS, INC
755 CROSSOVER LANE
MEMPHIS, TENNESSEE 38117
HOMEWOOD SUITES
LICENSE AGREEMENT
DATED ____________________ BETWEEN PROMUS HOTELS, INC., A DELAWARE CORPORATION
("LICENSOR"), AND APPLE SUITES MANAGEMENT, INC., A VIRGINIA CORPORATION
("LICENSEE"), WHOSE ADDRESS IS 306 EAST MAIN STREET, RICHMOND, VIRGINIA 23219.
THE PARTIES AGREE AS FOLLOWS:
1. THE LICENSE.
Licensor owns, operates and licenses a system designed to provide a
distinctive, high quality hotel service to the public under the name
"Homewood Suites" (the "SYSTEM"). High standards established by
Licensor are the essence of the System. Future investments may be
required of Licensee under this License Agreement ("AGREEMENT").
Licensee has independently investigated the risks of the business to be
operated hereunder, including current and potential market conditions,
competitive factors and risks, has read Licensor's "Franchise Offering
Circular," and has made an independent evaluation of all such facts.
Aware of the relevant facts, Licensee desires to enter into this
Agreement in order to obtain a license to use the System in the
operation of a Homewood Suites hotel located at 12 EAST SWEDESFORD
ROAD, MALVERN, PENNSYLVANIA 19355 (the "HOTEL") subject to the terms of
this Agreement.
A. THE HOTEL. The Hotel comprises all structures, facilities,
appurtenances, furniture, fixtures, equipment, and entry, exit,
parking and other areas from time to time located on the site
approved for the Hotel and acknowledged by Licensor in
anticipation of the execution of this Agreement, or located on any
land from time to time approved by Licensor for additions, signs
or other facilities. No change in the number of approved guest
suites ("GUEST SUITES") reflected on Attachment B (the "RIDER")
and no other significant change in the Hotel may be made without
Licensor's prior approval. Redecoration and minor structural
changes that comply with Licensor's standards and specifications
will not be considered significant. Licensee represents that it is
entitled to possession of the Hotel during the entire License Term
without restrictions that would interfere with anything
contemplated in this Agreement.
B. THE SYSTEM. The System is composed of elements, as designated from
time to time by Licensor, designed to identify "Homewood Suites
hotels" to the consuming public and/or to contribute to such
identification and its association with quality standards. The
System at present includes the service mark "Homewood Suites" and
such other service marks and such copyrights, trademarks and
similar property rights as may be designated from time to time by
Licensor to be part of the System; access to a reservation
service; distribution of advertising, publicity and other
marketing programs and materials; the furnishing of training
programs and materials, standards, specifications and policies for
construction, furnishing, operation, appearance and service of the
Hotel, and other requirements as stated or referred to in this
Agreement and from time to time in the Manual (as defined herein)
or in other communications to Licensee; and programs for
inspecting the Hotel and consulting with Licensee. Licensor may
add elements to the System or modify, alter or delete elements of
the System (including the trade name and/or brand name of the
Hotel) at its sole discretion from time to time. Licensee is only
authorized to use "Homewood Suites" ---- service marks and
trademarks at or in connection with the Hotel.
C. THE MANUAL. Licensee acknowledges the receipt of a current
Homewood Suites Standards Manual
<PAGE>
("MANUAL"). The Manual contains, among other matters, minimum
standards and requirements for constructing, equipping,
furnishing, supplying, operating, maintaining and marketing the
Hotel. Licensor shall have the right to change the Manual from
time to time and Licensee agrees to abide by the Manual as
changed. The Manual shall at all times remain the sole property of
Licensor. Licensee shall use all reasonable efforts to maintain
the confidentiality of the Manual. Licensee shall not make or
distribute copies of the Manual or any portion thereof.
D. APPLICATION OF MANUAL. All hotels operated within the System will
be subject to the Manual, as it may from time to time be modified
or revised by Licensor. Licensor may, in its sole discretion,
grant limited exceptions from compliance with the Manual which may
be made based on local conditions or special circumstances. Each
material change in the Manual will be explained in writing to
Licensee at least 30 days before it goes into effect. Licensee is
responsible for the costs of implementing all changes required
because of modification to the Manual.
Licensor may require that particular models or brands of
furniture, fixtures, equipment, food, and other items
(collectively, the "SUPPLIES") be used in the operation of the
Hotel or be purchased from Licensor or from a source designated by
Licensor. Otherwise, Licensee may purchase all Supplies from any
source as long as the standards and specifications in the Manual
are met, which standards and specifications may be changed by
Licensor from time to time. Licensee will be responsible for the
costs, if any, associated with the purchase of Supplies or
changing brands, models or sources of supply.
2. GRANT OF LICENSE.
Licensor hereby grants to Licensee a nonexclusive license (the
"LICENSE") to use the System only at the Hotel, only in connection with
the operation of a Homewood Suites hotel, only in accordance with this
Agreement and only during the "License Term" beginning with the date
hereof and terminating as provided in Paragraph 13. The License applies
to the location of the Hotel specified herein and no other. This
Agreement does not limit Licensor's right, or the rights of any parent,
subsidiary, division or affiliate of Licensor ("ENTITIES"), to use or
license to others the System or any part thereof or to engage in or
license any business activity at any other location. Licensee
acknowledges that Licensor and its Entities are and may in the future
be engaged in other business activities including activities involving
transient lodging and related activities which may be or may be deemed
to be competitive with the System; that facilities, programs, services
and/or personnel used in connection with the System may also be used in
connection with such other business activities of Licensor and its
Entities; and that Licensee is acquiring no rights hereunder other than
the non-exclusive right to use the System in connection with a Homewood
Suites hotel as specifically defined herein in accordance with the
terms of this Agreement.
3. LICENSOR'S RESPONSIBILITIES.
A. TRAINING. During the License Term, Licensor will specify required
and optional training programs and provide these programs at
various locations. Licensee may be charged for (i) required
training services and materials and (ii) for optional training
services and materials if provided to Licensee. Travel, lodging
and other expenses of Licensee and its employees will be borne by
Licensee.
B. RESERVATION SERVICES. During the License Term, so long as Licensee
is in full compliance with the obligations set forth in this
Agreement, Licensor will afford Licensee access to reservation
services for the Hotel.
C. CONSULTATION. Licensor will, from time to time at Licensor's sole
discretion, make available to Licensee consultation and advice in
connection with operations, facilities and marketing. Licensor
shall have the right to establish fees in advance for its advice
and consultation on a project-by-project basis.
D. ARRANGEMENTS FOR MARKETING, ETC. Licensor will use the
Marketing/Reservation Contribution for costs associated with
advertising, promotion, publicity, market research and other
marketing programs and related activities, including reservation
programs and services. Licensor may enter into arrangements for
development, marketing, operations, administrative, technical and
support functions, facilities, programs, services and/or personnel
with any other entity and may use any facilities, programs,
services and/or personnel used in connection with the System in
connection with any business activities of its Entities.
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Licensor is not obligated to expend funds for marketing or
reservation services in excess of the amounts received from
Licensees using the System. Licensor and its designees shall have
no obligation in administering any marketing and reservation
activities to make expenditures for Licensee which are equivalent
or proportionate to Licensee's payments, or to ensure that any
particular hotel benefits directly or proportionately from such
expenditures.
E. INSPECTIONS/COMPLIANCE ASSISTANCE. Licensor has the right to
inspect the Hotel at any time, with or without notice to Licensee,
to determine if the Hotel is in compliance with the standards and
rules of operation set forth in the Manual. If the Hotel fails to
comply with such standards and rules of operation, Licensor may,
at its option and at Licensee's cost, require an action plan to
correct the deficiencies. Licensee must then take all steps
necessary to correct any deficiencies within the times established
by Licensor. Licensor's approval of an action plan does not waive
any rights it may have under this Agreement nor does it relieve
Licensee of any obligations under this Agreement.
4. PROPRIETARY RIGHTS.
A. OWNERSHIP OF THE SYSTEM. Licensee acknowledges and will not
contest, either directly or indirectly, Licensor's (or its
affiliates', as the case may be) unrestricted and exclusive
ownership of the System and any element(s) or component(s)
thereof, and acknowledges that Licensor has the sole right to
grant licenses to use all or any element(s) or component(s) of the
System. Licensee specifically agrees and acknowledges that
Licensor (or its affiliates) is the owner of all right, title and
interest in and to the service mark "Homewood Suites", its
distinguishing characteristics, trade names, service marks,
trademarks, logos, copyrights, slogans, etc., and all other marks
associated with the System ("MARKS") together with the goodwill
symbolized thereby and that Licensee will not contest directly or
indirectly the validity or ownership of the Marks either during
the term of this Agreement or at any time thereafter. All
improvements and additions whenever made to or associated with the
System by the parties to this Agreement or anyone else, and all
service marks, trademarks, copyrights, and service mark and
trademark registrations at any time used, applied for or granted
in connection with the System, and all goodwill arising from
Licensee's use of the Marks shall inure to the benefit of and
become the property of Licensor (or its applicable affiliate).
Upon expiration or termination of this Agreement, no monetary
amount shall be assigned as attributable to any goodwill
associated with Licensee's use of the System or any element(s) or
component(s) of the System including the name or Marks.
B. USE OF NAME. Licensee will not use the word "Homewood" or
"Homewood Suites" or any similar word(s) in its corporate,
partnership, business or trade name, or in any Internet related
name (including a domain name) except as provided in this
Agreement or the Manual, nor authorize or permit such word(s) to
be used by anyone else.
5. TRADEMARK AND SERVICE MARK.
A. TRADEMARK DISPUTES. Licensor will have the sole right and
responsibility to handle disputes with third parties concerning
use of all or any part of the System, and Licensee will, at its
reasonable expense, extend its full cooperation to Licensor in all
such matters. All recoveries made as a result of disputes with
third parties regarding use of the System or any part thereof
shall be for the account of Licensor. Licensor need not initiate
suit against alleged imitators or infringers and may settle any
dispute by grant of a license or otherwise. Licensee will not
initiate any suit or proceeding against alleged imitators or
infringers or any other suit or proceeding to enforce or protect
the System.
B. PROTECTION OF NAMES AND MARKS. Both parties will make every effort
consistent with the foregoing to protect and maintain the Marks
and name "Homewood Suites" and its distinguishing characteristics
as standing for the System and only the System. Licensee agrees to
execute any documents deemed necessary by Licensor or its counsel
to obtain protection for Licensor's Marks or to maintain their
continued validity and enforceability. Licensee agrees to use such
names and Marks only in connection with the operation of a
Homewood Suites hotel and in the manner authorized by Licensor.
Licensee acknowledges that any unauthorized use of the names or
Marks shall constitute infringement of Licensor's rights. Licensee
must notify Licensor immediately, in writing, of any infringement
or challenge to Licensee's use of the Marks or of any unauthorized
use or possible misuse of Licensor's Marks or Licensor's
proprietary information.
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<PAGE>
6. LICENSEE'S RESPONSIBILITIES.
A. OPERATIONAL AND OTHER REQUIREMENTS. During the License Term,
Licensee will:
(1) promptly pay to Licensor all amounts due Licensor and its
Entities as royalties or fees or for goods or services
purchased by Licensee;
(2) maintain the Hotel in a clean, safe and orderly manner and
in first class condition;
(3) provide efficient, courteous and high-quality service to the
public;
(4) operate the Hotel 24 hours a day every day, except as
otherwise permitted by Licensor based on special
circumstances;
(5) strictly comply in all respects with the Manual and with all
other policies, procedures and requirements of Licensor
which may be from time to time communicated to Licensee;
(6) strictly comply with Licensor's reasonable requirements to
protect the System and the Hotel from unreliable sources of
supply;
(7) strictly comply with Licensor's requirements as to:
(a) the types of services and products that either must or
may be used, promoted or offered at the Hotel;
(b) use, display, style and type of signage;
(c) directory and reservation service listings of the
Hotel;
(d) training of persons to be involved in the operation of
the Hotel;
(e) participation in all marketing, reservation service,
advertising, training and operating programs
designated by Licensor as System-wide (or area-wide)
programs based on Licensor's assessment of the
long-term best interests of hotels using the System,
considering the interest of the System overall;
(f) maintenance, appearance and condition of the Hotel;
(g) quality and types of services offered to customers at
the Hotel, and
(h) its 100% Satisfaction Guarantee rule of operation, and
any similar rules of operation designed to maintain or
improve relationships with past, present and potential
guests and other hotel customers, as such rule or
rules are in effect or as they may be established or
revised hereafter;
(8) use such automated guest service and/or hotel management
and/or telephone system(s) which Licensor deems to be in the
best interests of the System based on Licensor's assessment
of the long-term best interests of hotels using the System,
considering the interests of the System overall, including
any additions, enhancements, supplements or variants thereof
which may be developed during the term hereof;
(9) participate in and use those reservation services which
Licensor deems to be in the best interests of the System
based on Licensor's assessment of the long-term best
interests of hotels using the System, considering the
interests of the System overall, including any additions,
enhancements, supplements or variants thereof which may be
developed during the term hereof;
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<PAGE>
(10) adopt improvements or changes to the System as may be from
time to time designated by Licensor;
(11) strictly comply with all governmental requirements,
including the filing and maintenance of any required trade
name or fictitious name registrations, paying all taxes, and
maintaining all governmental licenses and permits necessary
to operate the Hotel in accordance with the System;
(12) permit inspection of the Hotel by Licensor's representatives
at any time and give them free lodging for such time as may
be reasonably necessary to complete their inspections;
(13) upon request by Licensor, provide to Licensor statistics on
Hotel operations in the form specified by Licensor and using
definitions specified by Licensor;
(14) promote the Hotel on a local or regional basis subject to
Licensor's requirements as to form, content and prior
approvals;
(15) ensure that no part of the Hotel or System is used to
further or promote another lodging facility or any business
that competes with any business Licensor or an affiliate
engages in at any time during the Agreement (including, but
not limited to, the timeshare resort or vacation ownership
business), except for those approved by Licensor, its
parent, subsidiaries or affiliates;
(16) use every reasonable means to encourage use of Homewood
Suites facilities everywhere by the public; provided,
however, this will not prohibit Licensor from requiring
Licensee's participation in programs designed to refer
prospective customers to other hotels (in the System or
otherwise);
(17) in all respects use Licensee's best efforts to reflect
credit upon and create favorable public response to the name
"Homewood Suites";
(18) comply with Licensor's requirements concerning
confidentiality of information;
(19) not at any time during the term of this Agreement, through
itself or any member of an affiliated group (as defined by
the Internal Revenue Code) own, in whole or in part, or be
the licensor of, a hotel brand, tradename, system or chain
without the written consent of Licensor in its sole
discretion. Hereafter, any entity that, through itself or
any affiliate, owns in whole or in part, or is the licensor
of a hotel brand, tradename, system or chain shall be
referred to as a COMPETITOR; and
(20) maintain possession and control of the Hotel and Hotel site.
B. UPGRADING OF THE HOTEL. Licensor may at any time during the
License Term require substantial modernization, rehabilitation and
other upgrading of the Hotel to meet the then current standards
specified in the Manual as long as those standards apply to a
majority of the hotels operated by Licensor and its licensees in
the same brand or category as the Hotel. Nothing in this paragraph
shall be construed to relieve Licensee from the obligation to
maintain acceptable product quality ratings at the Hotel and
maintain the Hotel in accordance with the Manual at all times
during the Agreement. Limited exceptions from those standards may
be made by Licensor based on local conditions or special
circumstances. If the upgrading requirements contained in this
Paragraph 6b cause Licensee undue hardship, Licensee may terminate
this Agreement by paying a fee computed according to Paragraph
13f.
C. STAFF AND MANAGEMENT. Licensee is at all times responsible for the
management of the Hotel's business. Licensee may fulfill this
responsibility by retaining a third party management company
("MANAGER"); provided, however, Licensee shall not enter into any
lease, management agreement or other similar arrangement for the
operation of the Hotel or any part thereof with any entity without
the prior written consent of Licensor in Licensor's sole
discretion (there being no obligation on the part of Licensor to
approve a third party management company). Licensee understands
that Licensor will not normally approve a Competitor to manage the
Hotel, or any entity that (through itself or an affiliate) is the
exclusive manager for a Competitor. If a Manager becomes a
Competitor at any time during the term of the Agreement, Licensee
shall have 90 days to retain a substitute manager suitable to
Licensor. As a prerequisite for Licensor's approval of a
5
<PAGE>
Manager, the proposed management agreement must provide (1)
that the Manager has authority for the day-to-day management of
the Hotel; (2) that the Manager has the authority to perform the
obligations of the Licensee under this Agreement; and (3) that in
the case of any conflict between this Agreement and the management
agreement, this Agreement prevails.
7. FEES.
A. Commencing on the opening date of the Hotel as a Homewood Suites
hotel and continuing for the full term of this Agreement, for each
month (or part of a month), Licensee will pay to Licensor by the
15th of the following month:
(1) a royalty fee equal to 4 percent of the gross revenues
attributable to or payable for rental of Guest Suites at the
Hotel with deductions for sales and room taxes only ("GROSS
SUITES REVENUE"); and
(2) a "MARKETING/RESERVATION CONTRIBUTION" equal to 4 percent of
Gross Suites Revenue. The Marketing/Reservation Contribution
is subject to change by Licensor from time to time, which
Marketing/Reservation Contributions do not include the cost,
installation or maintenance of reservation services
equipment or training; and
(3) all amounts due Licensor for any other miscellaneous fees or
invoices or for goods or services purchased by or provided
to Licensee or paid by Licensor on Licensee's behalf; and
(4) an amount equal to any sales, gross receipts or similar tax
imposed on Licensor for the receipt of the payments required
in (1), (2) and (3) of this Paragraph above, unless the tax
is an optional alternative to an income tax otherwise
payable by Licensor.
B. Licensee will operate the Hotel so as to maximize Gross Suites
Revenue consistent with sound marketing and industry practice and
will not engage in any conduct which is likely to reduce Gross
Suites Revenue in order to further other business activities.
C. Royalties may be charged on revenues (or upon any other basis, if
so determined by Licensor) from any activity conducted at the
Hotel if added by mutual agreement and if: (i) not now offered at
hotels within the System generally and is likely to benefit
significantly from or be identified significantly with the
Homewood Suites name or other aspects of the System or (ii)
designed or developed by or for Licensor.
D. Licensor may charge for optional products or services accepted by
Licensee from Licensor either in accordance with current practice
or as developed in the future.
E. A Guest Suite addition fee for guest suite additions to a hotel
set forth in Licensor's then current "FRANCHISE OFFERING CIRCULAR"
shall be paid by Licensee to Licensor on Licensee's submission of
an application to add any Guest Suites to the Hotel. As a
condition to Licensor granting its approval of such application,
Licensor may require Licensee to upgrade the Hotel, subject to
Paragraph 6b.
F. Local and regional marketing programs and related activities may
be conducted by Licensee, but only at Licensee's expense and
subject to Licensor's requirements. Reasonable charges may be made
by Licensor for optional advertising materials ordered or used by
Licensee for such programs and activities.
G. Licensee shall participate in Licensor's travel agent commission
program(s) as it may be modified from time to time and shall
reimburse Licensor on or before the 15th of each month for call
costs associated with such programs including, but not limited to,
travel agent commissions and third party reservation service
charges (such as airline reservation systems).
H. Each payment paid by Licensor under this Paragraph 7 shall be
accompanied by the monthly statement referred to in Paragraph 8.
Licensor may apply any amounts received under this Paragraph 7 to
any amounts due under this Agreement. If any amounts are not paid
when due, such non-payment shall constitute a breach of this
Agreement and, in addition, such unpaid amounts will accrue a
service charge beginning on the first day of the month following
the due date of 1 1/2 percent per month but not to exceed the
maximum amount permitted by applicable law.
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8. RECORDS AND AUDITS.
A. DAILY AND MONTHLY REPORTS. At the request of Licensor, Licensee
shall prepare and deliver daily reports to Licensor, which reports
will contain information reasonably requested by Licensor on a
daily basis, such as daily rate and room occupancy, and which may
be used by Licensor for its reasonable purposes. At least monthly,
Licensee shall prepare a statement which will include all
information concerning Gross Suites Revenue, other revenues
generated at the Hotel, suite occupancy rates, reservation data
and other information required by Licensor (the "Data"). The Data
will be permanently recorded and retained as may be reasonably
required by Licensor. By the 15th of each month, Licensee will
submit to Licensor a statement setting forth the Data for the
previous month and reflecting the computation of the amounts then
due under Paragraph 7. The statement will be in such form and
detail as Licensor may reasonably request from time to time, and
may be used by Licensor for its reasonable purposes.
B. MAINTENANCE OF RECORDS. Licensee shall, in a manner and form
satisfactory to Licensor and utilizing accounting and reporting
standards as reasonably required by Licensor, prepare on a current
basis (and preserve for no less than four years), complete and
accurate records concerning Gross Suites Revenue and all
financial, operating, marketing and other aspects of the Hotel,
and maintain an accounting system which fully and accurately
reflects all financial aspects of the Hotel and its business. Such
records shall include books of account, tax returns, governmental
reports, register tapes, daily reports, and complete quarterly and
annual financial statements (profit and loss statements, balance
sheets and cash flow statements).
C. AUDIT. Licensor may require Licensee to have the Gross Suites
Revenue or other monies due hereunder computed and certified as
accurate by a certified public accountant. During the License Term
and for two years thereafter, Licensor and its authorized agents
shall have the right to verify information required under this
Agreement by requesting, receiving, inspecting and auditing, at
all reasonable times, any and all records referred to above
wherever they may be located (or elsewhere if reasonably requested
by Licensor). If any such inspection or audit discloses a
deficiency in any payments due hereunder, Licensee shall
immediately pay to Licensor (i) the deficiency, (ii) a service
charge thereon as provided in Paragraph 7h, and (iii) all
inspection and audit costs (including travel, lodging, meals,
salaries and other expenses of the inspecting or auditing
personnel). Licensor's acceptance of Licensee's payment of any
deficiency as provided for herein shall not waive Licensor's right
to terminate this Agreement as provided for herein in Paragraph
13. If the audit discloses an overpayment, Licensor shall refund
the overpayment to Licensee within 30 days.
D. ANNUAL FINANCIAL STATEMENTS. Licensee will submit to Licensor
complete year-end financial statements for the Hotel, Licensee
and/or any guarantors as soon as available but not later than 90
days after the end of Licensee's fiscal year. Licensee will
certify them to be true and correct and to have been prepared in
accordance with generally accepted accounting principles
consistently applied, and any false certification will be a breach
of this Agreement.
E. All of the information provided to Licensor pursuant to this
paragraph or any other part of this Agreement, or pursuant to any
agreement ancillary to this Agreement (including agreements
relating to the System 21 business system or other property
management system provided by Licensor) (the "INFORMATION"), shall
be the property of Licensor. HOWEVER, NOTWITHSTANDING ANYTHING TO
THE CONTRARY IN THIS AGREEMENT, INFORMATION, SUCH AS FINANCIAL
STATEMENTS, PREPARED FOR THE HOTEL, LICENSEE AND/OR GUARANTORS,
WHICH ANY SUCH PARTIES ARE REQUIRED BY LAW OR BY THEIR NORMAL
BUSINESS PRACTICES TO USE FOR OTHER PURPOSES (SUCH AS IN FILINGS
WITH THE SECURITIES AND EXCHANGE COMMISSION OR OTHER GOVERNMENTAL
AUTHORITIES OR FOR TRANSMISSION TO SHAREHOLDERS) MAY BE USED BY
THEM FOR SUCH PURPOSES, AND SUCH PARTIES SHALL RETAIN OWNERSHIP IN
SUCH INFORMATION TO THE EXTENT NECESSARY TO PERMIT SUCH USE.
NEVERTHELESS, LICENSOR SHALL OWN THE COPIES OF ANY SUCH
INFORMATION PROVIDED BY ANY SUCH PARTIES IN ACCORDANCE WITH THE
TERMS OF THIS AGREEMENT. Licensor will use reasonable efforts to
sort, categorize, classify and otherwise analyze the information
to help licensees market their hotels. The Information will remain
the proprietary information of Licensor which Licensor will share
with licensees only as determined by Licensor in its sole
discretion. Licensor and its affiliates may use the Information
for any reason whatsoever, including an earnings claim in
Licensor's offering circular.
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9. INDEMNITY.
SUBJECT TO THE PROVISIONS OF ANY MANAGEMENT AGREEMENT BETWEEN LICENSOR
(AS MANAGER THEREUNDER) AND LICENSEE (AS OWNER THEREUNDER), Licensee
will indemnify, during and after the term of this Agreement, Licensor
and its affiliates, and their respective officers, directors,
employees, agents, predecessors, successors and assigns ("INDEMNIFIED
PARTIES") against, hold them harmless from, and promptly reimburse them
for, all payments of money (fines, damages, legal fees, expenses, etc.)
by reason of any claim, demand, tax, penalty, or judicial or
administrative investigation or proceeding (even where negligence of
Licensor and/or its Entities and/or their Indemnified Parties is actual
or alleged) arising from any claimed occurrence at the Hotel or arising
from, as a result of, or in connection with the development or
operation of the Hotel (including, but not limited to, the design,
construction, financing, furnishing, equipment, acquisition of supplies
or operation of the Hotel in any way), or any other of Licensee's acts,
omissions or obligations or those of anyone associated or affiliated
with Licensee or the Hotel in any way arising out of or related to this
Agreement. At the election of Licensor, Licensee will also defend
Licensor and/or its Entities and/or their Indemnified Parties against
the same. In any event, Licensor will have the right, through counsel
of its choice, to control any matter to the extent it could directly or
indirectly affect Licensor and/or its Entities and/or their Indemnified
Parties financially. Licensee will also reimburse Licensor for all
expenses, including attorneys' fees and court costs, reasonably
incurred by Licensor to protect itself and/or its Entities and/or their
Indemnified Parties from, or to remedy Licensee's defaults or to
collect any amounts due under this Agreement.
10. INSURANCE.
A. Licensee will comply with Licensor's specifications for insurance
as to amount and type of coverage as may be reasonably specified
by Licensor from time to time in writing and will in any event
maintain as a minimum the following insurance underwritten by an
insurer approved by Licensor:
(1) employer's liability and workers' compensation insurance as
prescribed by applicable law; and
(2) liquor liability insurance, if applicable, naming Licensor
and its then current Entities and their predecessors,
successors and assigns as additional insureds with
single-limit coverage for personal and bodily injury and
property damage of at least $10,000,000 for each occurrence;
and
(3) commercial general liability insurance (with products,
completed operations and independent contractors coverage)
and comprehensive automobile liability insurance, all on an
occurrence and per location basis naming Licensor, its
Entities and their predecessors, successors and assigns as
additional insureds and underwritten by an insurer approved
by Licensor, with single-limit coverage for personal and
bodily injury and property damage of at least $10,000,000
for each occurrence; and
(4) in connection with all construction at the Hotel during the
License Term, Licensee will cause the general contractor to
maintain with an insurer approved by Licensor commercial
general liability insurance (with products, completed
operations, and independent contractors coverage including
workers' compensation and automobile liability insurance for
such independent contractors) in at least the amount of
$10,000,000 for each occurrence for personal and bodily
injury and property damage with Licensor, its Entities and
their predecessors, successors and assigns as additional
insureds.
B. EVIDENCE OF INSURANCE/CHANGES. This coverage shall be evidenced by
original certificates of insurance submitted to Licensor
simultaneously herewith, annually hereafter and each time a change
is made in any insurance or insurance carrier, Licensee will
furnish to Licensor certificates of insurance including the term
and coverage of the insurance in force, the persons insured, and a
statement that the coverage may not be cancelled, altered or
permitted to lapse or expire without 30 days advance written
notice to Licensor. Licensor will send Licensee notice of any
policy or coverage which Licensor, in its sole discretion, finds
unacceptable and upon receipt of such notice, Licensee will
promptly undertake to change such policy or coverage.
C. If Licensee fails or neglects to obtain or maintain the insurance
or policy limits required by this Agreement, Licensor shall have
the option, without notice, to obtain and maintain such insurance
for Licensee, and
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Licensee shall pay immediately upon demand therefore, the premiums
and the cost incurred by Licensor in taking such action.
11. TRANSFER.
A. TRANSFER OF THIS AGREEMENT BY LICENSOR. Licensor shall have the
right to transfer or assign this Agreement or any of Licensor's
rights, obligations, or assets under this Agreement to any person
or legal entity provided that the transferee assumes all of
Licensor's obligations to Licensee under this Agreement.
B. TRANSFERS BY LICENSEE.
(1) General Statement of Explanation and Intent.
This Agreement is not transferable by Licensee, and a change
in ownership of the Hotel or the licensed business (i.e.,
either this Agreement, the Licensee or any indirect
ownership interest in the Licensee) is not allowed under
this Agreement. Certain intra-family transfers of interest
and (in the case of corporate licensees) corporate
restructurings are permitted as long as the requirements
described below are met. However, Licensor has entered into
this Agreement with a particular Licensee or its owners. If
the Licensee wants to transfer the Hotel or its interest in
the licensed business, such a transfer will constitute a
"change of ownership". If the transferee wants to continue
to operate the Hotel as a Homewood Suites hotel, the
transferee will have to apply for a new license which, if
approved, will last at most for the balance of the term of
this Agreement. If the change of ownership is not approved,
or if the transferee does not want to continue to operate
the Hotel as a Homewood Suites hotel, Licensor may refuse to
consent to the termination of this Agreement. If Licensor
does consent to termination, this Agreement will terminate
and Licensee will owe liquidated damages. In addition, if
the transfer is to a Competitor, Licensor has the right to
buy the Hotel. The foregoing explanation is more fully
described and qualified by the following specific
provisions.
(2) Licensee understands and acknowledges that the rights and
duties set forth in this Agreement are personal to Licensee,
and that Licensor has entered into this Agreement in
reliance on the business skill, financial capacity, and
personal character of Licensee (if Licensee is an
individual), and that of the partners, members, or
stockholders of Licensee (if Licensee is a partnership,
company, corporation, or other legal entity). Accordingly,
no direct or indirect interest in the Hotel or in this
Agreement, and no direct or indirect Equity Interest (as
defined herein) in Licensee may be sold, leased, assigned,
or transferred, (such instances hereafter referred to
collectively as a "TRANSFER"), without the consent of the
Licensor. Nothing herein shall require Licensor's approval
for any pledge, mortgage, or hypothecation of all or any
part of the assets of the licensed business (other than this
Agreement or any Equity Interest in Licensee) to banks or
other lending institutions.
(3) Any purported Transfer, by operation of law or otherwise,
not in accordance with the provisions of this Agreement
shall be null and void and shall constitute a breach of this
Agreement, for which Licensor may terminate this Agreement
upon notice without opportunity to cure pursuant to
Paragraph 13d, and as a result of which Licensee will owe
liquidated damages.
(4) References in this Agreement to "EQUITY INTERESTS" shall
mean any direct or indirect beneficial interest in Licensee
(an "INDIRECT" interest is an interest in an entity other
than the Licensee that either itself, or through others, has
an interest in the Licensee). In addition, "PUBLICLY-TRADED
EQUITY INTEREST" shall mean any Equity Interest which is
traded on any securities exchange or is quoted in any
publication or electronic reporting service maintained by
the National Association of Securities Dealers, Inc. or any
of its successors. In computing changes of Equity Interests,
limited partners will not be distinguished from general
partners. Licensor's judgment will be final if there is any
question as to the definition of Equity Interest or as to
the computation of relative Equity Interests, the principal
considerations being: direct and indirect (i) power to
exercise control over the affairs of Licensee; (ii) right to
share in Licensee's profits; and (iii) exposure to risk in
the Licensee's business.
(5) Licensee represents that the Equity Interests are directly
and (if applicable) indirectly owned as shown on the Rider.
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C. PROCEDURES FOR TRANSFERS. Licensee must provide written notice to
Licensor in advance of any proposed Transfer stating the identity
of the prospective transferee, purchaser, or lessee and the terms
and conditions of the conveyance. As a condition to consenting to
the transfer, Licensor may require any one or more of the
following to be met:
(1) Licensee will upon request provide a copy of any proposed
agreement of transfer and all other information with respect
thereto which Licensor may reasonably require;
(2) Licensee will upon request provide documents showing
ownership structure of the Licensee, site control by the
Licensee, possession or management control by the Licensee,
financial statements of any participants, and any other
documents reasonably requested by Licensor;
(3) Licensee will upon request pay a processing fee to Licensor
of up to $5,000 to cover Licensor's costs to review and
consent to the Transfer; provided however, in the case of a
transfer of Equity Interests which require registration
under any federal or state securities law, Licensee will pay
a processing fee that will not exceed $25,000;
(4) Licensee and all participants in any proposed public
offering (including the sale of partnership or membership
interests) (i) agree to fully indemnify Licensor in
connection with the registration, (ii) furnish Licensor with
all information requested, and (iii) avoid using Licensor's
service marks or trademarks or otherwise implying Licensor's
participation in or endorsing of any public offering;
(5) Licensee will at all times adequately provide for the
management of the Hotel during any Transfer; or
(6) Licensor may require the transferee to promptly execute a
new license agreement on Licensor's then current license
agreement for the unexpired term of this Agreement, and
Licensor may require the guarantee of the new license
agreement by the same guarantors of this Agreement (or
substitute guarantors approved by Licensor in its sole
discretion).
D. PERMITTED TRANSFERS. Licensor will not unreasonably withhold
consent to any of the following Transfers provided Licensee
complies with all the requirements specified by Licensor pursuant
to Subparagraph c above (it being understood that if Licensee is
in default of any of its obligations under the Agreement, it will
not be unreasonable for Licensor to refuse to consent to any of
these Transfers):
(1) EQUITY INTERESTS WHICH ARE NOT PUBLICLY-TRADED MAY BE
TRANSFERRED, IF AFTER THE TRANSACTION, GLADE M. KNIGHT OWNS,
DIRECTLY OR INDIRECTLY, A BENEFICIAL INTEREST IN THE
LICENSEE AND CONTROLS THE MANAGEMENT AND POLICIES OF SUCH
LICENSEE AND NOT LESS THAN 50% OF ALL EQUITY INTERESTS ARE
OWNED, DIRECTLY OR INDIRECTLY, BY GLADE M. KNIGHT AND, IN
THE CASE OF ANY SUCH PERMITTED TRANSFER, THE REQUIREMENTS OF
CLAUSES (3) AND (6) OF SUBPARAGRAPH C. ABOVE NEED NOT BE
COMPLIED WITH BY LICENSEE.
(2) Publicly-traded equity interests may be transferred (without
Licensor's consent and without notification) if such
transfer is exempt from registration under federal
securities law and if immediately before and after the
transfer, the transferor and transferee respectively each
own less than 25 percent of the Equity Interests in
Licensee.
(3) Licensee, if a natural person, may transfer its interest in
the License or Equity Interest in the Licensee to one or
more of Licensee's spouse, parents, siblings, nephews,
descendants or spouses' descendants or to a corporation
entirely owned by Licensee ("PERMITTED TRANSFEREES").
(4) If Licensee is a natural person, upon the Licensee's death,
the License or Licensee's Equity Interest in the Licensee
will pass in accordance with Licensee's will, or, if
Licensee dies intestate, in accordance with laws of
intestacy governing the distribution of the Licensee's
estate, as the case may be, provided the transferee is one
or more of the decedent's Permitted Transferees (excluding
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corporations formerly owned by the Licensee) and within one
year after the death the Permitted Transferees meet all
Licensor's normal requirements of an approved applicant.
(5) Licensee may sell or lease the Hotel, the Hotel site, or any
portion thereof if, in the reasonable judgment of Licensor,
after such transfer, Licensee will retain possession and
control of the Hotel site and management control of the
Hotel operations (which may be via third party management
contract pursuant to Paragraph 6c). If, in the reasonable
judgment of Licensor, the transfer of the Hotel will result
in the loss of possession or control of the Hotel or Hotel
site or management of the Hotel, the transfer will
constitute a change of ownership as described in
Subparagraph e.
E. CHANGE OF OWNERSHIP.
(1) Any Transfer that does not qualify as a permitted transfer
under Subparagraph d above shall constitute a change of
ownership. If in the case of a change of ownership, the
transferee desires to continue to operate the Hotel as a
Homewood Suites hotel, the transferee must submit an
application for a new license agreement. The new license, if
approved, will be at most for the unexpired term of this
Agreement. The transferee shall be responsible for all
normal fees and costs (including application fees and costs
of improvements to the Hotel).
(2) Licensor shall process such change of ownership application
in good faith and in accordance with Licensor's then current
procedures, criteria and requirements regarding upgrading of
the Hotel, credit, operational abilities and capabilities,
prior business dealings, market feasibility, guarantees, and
other factors deemed relevant by Licensor. If such change of
ownership application is approved, Licensor and the new
owner shall, upon surrender of this Agreement, enter into a
new license agreement. The new license agreement shall be on
Licensor's then current form and contain Licensor's then
current terms (except for duration), and if applicable, the
new license agreement will contain specified upgrading and
other requirements. If the application is approved, Licensee
submits a voluntary termination of this Agreement and signs
a release (in a form satisfactory to Licensor) of all claims
against Licensor, and the proposed new owner executes a new
license within 30 days of the sale of the Hotel, no
liquidated damages described in Paragraph 13 will be owed by
Licensee for the termination of this Agreement.
(3) If a change of ownership application for the proposed
transferee is not approved by Licensor or the transferee
does not want to continue to operate the Hotel as a Homewood
Suites hotel, Licensor may refuse consent to the transfer
and reserve all remedies; if Licensor does consent and the
Transfer occurs, then this Agreement shall terminate
pursuant to Paragraph 13d hereof and Licensor shall be
entitled to all of its remedies including liquidated
damages.
F. TRANSFER TO COMPETITOR. Notwithstanding any of the foregoing, if
the Licensee receives a bona fide offer from a Competitor to
purchase or lease the Hotel or to purchase Licensee or any entity
that controls Licensee, or to purchase an interest in either, and
Licensee or any person or entity that owns or controls Licensee
wishes to accept such offer, Licensee shall give written notice
thereof to Licensor, stating the name and full identity of the
prospective purchaser or tenant, as the case may be, including the
names and addresses of the owners of the capital stock,
partnership interests or other proprietary interests of such
prospective purchaser or tenant, the price or rental and all terms
and conditions of such proposed transaction, together with all
other information with respect thereto which is requested by
Licensor and reasonably available to Licensee. Within 60 days
after receipt by Licensor of such written notice from Licensee,
Licensor shall elect by written notice to Licensee one of the
following four alternatives:
(1) If the proposed transaction is a sale or lease of the Hotel,
Licensor (or its designee) shall have the right to purchase
or lease the Hotel premises and related property at the same
price or rental and upon the same terms and conditions as
those set forth in such bona fide offer from a Competitor.
In such event Licensee and Licensor (or its designee) shall
promptly enter into an agreement for sale or lease at the
price or rental and on terms consistent with such bona fide
offer.
(2) If the proposed transaction is a purchase of all or a
portion of the stock or assets (which includes the Hotel) of
Licensee or the person that owns or controls Licensee,
Licensor (or its designee) shall have
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the right to purchase the Hotel premises and related
property. If the parties are unable to agree as to a
purchase price and terms within thirty days of Licensor's
election, the fair market value of the Hotel premises and
related property shall be determined by arbitration as
follows: Either party may by written notice to the other
appoint an arbitrator. Thereupon, within 15 days after the
giving of such notice, the other shall by written notice to
the former appoint another arbitrator, and in default of
such second appointment the arbitrator first appointed shall
be the sole arbitrator. When any two arbitrators have been
appointed as aforesaid, they shall, if possible, agree upon
a third arbitrator and shall appoint him by notice in
writing, signed by both of them in triplicate, one of which
triplicate notices shall be given to each party hereto; but
if 15 days shall lapse without the appointment of the third
arbitrator as aforesaid, then such third arbitrator shall be
appointed by the American Arbitration Association from its
qualified panel of arbitrators, and shall be a person having
at least ten (10) years' recent professional experience as
to the subject matter in question. Upon appointment of the
third arbitrator (whichever way appointed as aforesaid), the
three arbitrators shall meet and render their decision. The
decision of a majority of the arbitrators so chosen shall be
conclusive. Licensor (or its designee) shall have the right,
at any time within 30 days of being notified in writing of
the decision of the arbitrators as aforesaid, to purchase
the Hotel premises and related property at the valuation
fixed by the arbitrators. The parties shall share equally
the expense of such arbitration.
(3) To terminate this Agreement, in which event Licensee shall
be obligated to pay to Licensor liquidated damages pursuant
to a Special Termination as set forth in Paragraph 13f.
(4) To refuse to consent to the Transfer, reserving all remedies
under the applicable law.
G. FINANCING. The construction and/or operation of the Hotel may not
be financed by a public offering of any right, title or interest
in the Hotel, the property upon which it is built or the receipts
from its operation without the prior review and approval of the
applicable documentation by Licensor. Licensee shall submit a
non-refundable $25,000 fee with said documentation.
12. CONDEMNATION AND CASUALTY.
A. CONDEMNATION. Licensee shall, at the earliest possible time, give
Licensor notice of any proposed taking by eminent domain. If
Licensor agrees that the Hotel or a substantial part thereof is to
be taken, Licensor may, in its sole discretion and within a
reasonable time of the taking (within four months) transfer this
Agreement to a nearby location selected by Licensee. If Licensor
approves the new location and authorizes the transfer and if
within one year of the closing of the Hotel Licensee opens a new
hotel at the new location in accordance with Licensor's
specifications, then the new hotel will be deemed to be the Hotel
licensed under this Agreement. If a condemnation takes place and a
new hotel does not, for whatever reason, become the Hotel under
this Agreement in strict accordance with this paragraph (or if it
is reasonably evident to Licensor that such will be the case),
this Agreement will terminate immediately upon notice thereof by
Licensor to Licensee, without the payment of liquidated damages as
calculated in Paragraph 13f.
B. CASUALTY. If the Hotel is damaged by fire or other casualty,
Licensee will expeditiously repair the damage. If the damage or
repair requires closing the Hotel, Licensee will immediately
notify Licensor, will repair or rebuild the Hotel according to
Licensor's standards, will commence reconstruction within four
months after closing, and will reopen the Hotel for continuous
business operations as soon as practicable (but in any event
within one year after the closing of the Hotel), giving Licensor
ample advance notice of the date of reopening. If the Hotel is not
reopened according to this Paragraph, this Agreement will
terminate immediately, upon notice thereof by Licensor to
Licensee, with the payment of liquidated damages as calculated in
Paragraph 13f, provided however, if Licensee's insurer fails to
pay the applicable insurance policy proceeds to Licensee, or if
Licensee's lender, pursuant to a valid agreement with Licensee,
refuses to allow the insurance proceeds to be used for repair or
rebuilding, the Agreement may be terminated by Licensee without
payment of the liquidated damages in Paragraph 13f. In such case
Licensee shall notify Licensor and provide any reasonable proof
requested by Licensor.
C. NO EXTENSIONS OF TERM. Nothing in this Paragraph 12 will extend
the License Term but Licensee shall not be required to make any
payments pursuant to Paragraph 7 for periods during which the
Hotel is closed by reason of condemnation or casualty.
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13. TERMINATION.
A. EXPIRATION OF TERM. Unless terminated earlier, this Agreement will
expire without notice 20 YEARS FROM THE EFFECTIVE DATE OF THIS
AGREEMENT, AS DEFINED ON ATTACHMENT B HEREIN.
B. PERMITTED TERMINATION PRIOR TO EXPIRATION OF TERM. Licensee may
terminate this Agreement on the tenth or fifteenth anniversary
date of the opening of the Hotel by giving at least 12 but not
more than 15 months advance notice to Licensor accompanied by the
payment as provided in Paragraph 13f herein.
C. TERMINATION OR SUSPENSION BY LICENSOR ON ADVANCE NOTICE. This
Agreement may be terminated if Licensee fails to satisfy any
obligations under this Agreement or any attachment hereto. Except
in the case of an immediate termination as provided in
subparagraph 13d below, this Agreement shall terminate if Licensee
fails to cure an Event of Default after the Licensor furnishes
adequate notice of termination based on the Event of Default.
(1) An "EVENT OF DEFAULT" shall occur if the Licensee fails to
satisfy or comply with any of the requirements, conditions,
or terms set forth in (i) this Agreement or any attachment
including, but not limited to, any provisions regarding: any
transfer of the Hotel, or any direct or indirect interest in
the Agreement or Licensee, any representation or warranty,
any fee obligation, any operational requirements (including
the standards in the Manual); trademarks usage; maintenance
of records, insurance and indemnity; or (ii) any other
agreement between Licensor (or an affiliate) and Licensee
relating to the Hotel, including, but not limited to, any
property management system agreement, such as the System 21
business system agreement, or any agreement to manage the
Hotel.
(2) Notice of termination shall be adequate, if mailed thirty
(30) days (or such longer period required by applicable law)
in advance of the termination date.
(3) Licensor's notice of termination shall not relieve Licensee
of its obligations under this Agreement or any attachment.
(4) As a result of Licensee's efforts to comply with the terms
and conditions contained on Attachment A and elsewhere in
this Agreement, Licensee will incur substantial expense and
expend substantial time and effort. Licensee acknowledges
and agrees that Licensor shall have no liability or
obligation to Licensee for any losses, obligations,
liabilities or expenses incurred by Licensee if (i) Licensee
commits an Event of Default as described in Paragraph
13c(1); (ii) the Hotel is not authorized by Licensor to Open
as defined in Attachment A or (iii) this Agreement is
terminated because Licensee has not complied with the terms
and conditions of this Agreement.
(5) Notwithstanding the foregoing, following an Event of
Default, Licensor may at any time, in its sole discretion,
suspend its obligations under this Agreement (including
reservation services).
D. IMMEDIATE TERMINATION BY LICENSOR. Notwithstanding the foregoing
paragraph, this Agreement may be immediately terminated (or
terminated at the earliest time permitted by applicable law) if
one or more of the following material breaches to this Agreement
or any Attachment occur:
(1) Any Event of Default where a prior Event of Default had also
occurred during the preceding 12 months, but the License was
not terminated because Licensee cured the prior Event of
Default;
(2) Licensee or any guarantor of Licensee's obligations
hereunder shall:
(a) generally not pay its debts as they become due or shall
admit in writing its inability to pay its debts, or
shall make a general assignment for the benefit of
creditors; or
(b) commence any case, proceeding or other action seeking
reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any
law relating to bankruptcy, insolvency, reorganization
or relief of debtors, or seeking appointment of a
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receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its
property; or
(c) take any corporate or other action to authorize any of
the actions set forth above in Paragraphs (a) or (b).
(3) Any case, proceeding or other action against Licensee or any
such guarantor shall be commenced seeking to have an order
for relief entered against it as debtor, or seeking
reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief
of debtors, or seeking appointment of a receiver, trustee,
custodian or other similar official for it or for all or any
substantial part of its property, and such case, proceeding
or other action (i) results in the entry of an order for
relief against it which is not fully stayed within seven
business days after the entry thereof or (ii) remains
undismissed for a period of 45 days; or
(4) an attachment remains on all or a substantial part of the
Hotel or of Licensee's or any such guarantors assets for 30
days; or
(5) Licensee or any such guarantor fails within 60 days of the
entry of a final judgment against Licensee in any amount
exceeding $50,000 to discharge, vacate or reverse the
judgment, or to stay execution of it, or if appealed, to
discharge the judgment within 30 days after a final adverse
decision in the appeal; or
(6) Licensee loses possession or the right to possession of all
or a significant part of the Hotel or Hotel site; or
(7) Licensee fails to continue to identify the Hotel to the
public as a Homewood Suites hotel; or
(8) Licensee contests in any court or proceeding Licensor's
ownership of the System or any part of the System, or the
validity of any service marks or trademarks associated with
Licensor's business; or
(9) Any action is taken toward dissolving or liquidating
Licensee or any such guarantor, if it is a corporation or
partnership, except for death of a partner; or
(10) Licensee or any of its principals is, or is discovered to
have been convicted of a felony (or any other offense if it
is likely to adversely reflect upon or affect the Hotel, the
System, the Licensor and/or its Entities in any way; or
(11) Licensee maintains false books and records of accounts or
submits false reports or information to Licensor.
(12) Licensee becomes a Competitor (as defined in Paragraph
6a(19).
E. DE-IDENTIFICATION OF HOTEL UPON TERMINATION. Upon termination or
expiration of the term, Licensee will take whatever action is
necessary to assure that no use is made of any part of the System
(including but not limited to the Marks) at or in connection with
the Hotel or otherwise. Licensee shall return to Licensor the
Manual and all other proprietary materials, remove all distinctive
System features of the Hotel, including the primary freestanding
sign down to the structural steel, and take all other actions
("DE-IDENTIFICATION ACTIONS") required to preclude any possibility
of confusion on the part of the public that the Hotel is still
using all or any part of the System or is otherwise holding itself
out to the public as a Homewood Suites hotel. If within 30 days
after termination of this Agreement Licensee fails to comply with
this paragraph, Licensor or its agents at Licensee's expense, may
enter the premises of the Hotel to perform the De-identification
Actions. The preceding sentence shall not in any way limit
Licensor's other rights or remedies under this Agreement.
F. LIQUIDATED DAMAGES. The parties recognize the difficulty of
ascertaining damages to Licensor resulting from premature
termination of this Agreement, and have provided for liquidated
damages, which represent the parties' best estimate as to the
damages arising from the circumstances in which they are provided
and
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which are only damages for the premature termination of this
Agreement, and not as a penalty or as damages for breaching this
Agreement or in lieu of any other payment. If this Agreement is
terminated other than by the expiration of the term described in
Paragraph 13a, Licensee will pay Licensor, within 10 days of
termination, liquidated damages in an amount determined as
follows:
(1) an amount equal to the amount payable under Paragraph 7
(regarding Fees) for the three years prior to termination;
or
(2) if the Hotel opened but has been Open for less than three
years, an amount equal to the greater of: (i) 36 times the
monthly average payable under Paragraph 7, or (ii) 36 times
the amount payable under Paragraph 7 for the last full month
prior to termination; or
(3) if the Hotel opened, but has not been in operation for one
full month, an amount equal to $3,000 per Guest Suite in the
Hotel; or
(4) if the Agreement is terminated before the commencement of
construction or of the Work (as described in the applicable
attachment), an amount equal to the initial application fee
that would be due for a license application according to
Licensor's then current franchise offering circular (in
addition to any initial application fee already paid); or
(5) if the Agreement is terminated after commencement of
construction or of the Work but before opening of the Hotel,
an amount equal to two times the initial application fee; or
(6) if the Agreement is terminated pursuant to Paragraph 13b
(permitted termination after 10th or 15th year) only, an
amount equal to the amount payable under Paragraph 7 for the
two years prior to notice of termination.
Furthermore, Licensee recognizes the additional harm by way of
confusion with respect to national accounts, greater difficulty in
re-entering the market, and damage to goodwill of the Marks that
Licensor will suffer in the case of (i) a Licensee who terminates
two or more license agreements with Licensor at approximately the
same time (between either itself or its affiliates and Licensor)
or (ii) a license that terminates as a result of the Hotel or
Licensee being acquired by a Competitor, and the Licensor is
unable or elects not to buy the Hotel pursuant to Paragraph 11f
(each of these will be referred to as a "SPECIAL TERMINATION").
Licensee agrees that in the case of a Special Termination, the
amount of liquidated damages as calculated above will be doubled.
14. RENEWAL.
This Agreement is non-renewable.
15. RELATIONSHIP OF PARTIES.
A. NO AGENCY RELATIONSHIP. Licensee is an independent contractor.
Neither party is the legal representative or agent of, or has the
power to obligate (or has the right to direct or supervise the
daily affairs of) the other for any purpose whatsoever. Licensor
and Licensee expressly acknowledge that the relationship intended
by them is a business relationship based entirely on, and defined
by, the express provisions of this Agreement and that no
partnership, joint venture, agency, fiduciary or employment
relationship is intended or created by reason of this Agreement.
B. LICENSEE'S NOTICES TO PUBLIC CONCERNING INDEPENDENT STATUS.
Licensee will take all necessary steps including those reasonably
requested by Licensor to minimize the chance of a claim being made
against Licensor for anything that occurs at the Hotel, or for
acts, omissions or obligations of Licensee or anyone associated or
affiliated with Licensee or the Hotel. Such steps may, for
example, include giving notice in Guest Suites, public rooms and
advertisements, on business forms and stationery, etc., making
clear to the public that Licensor is not the owner or operator of
the Hotel and is not accountable for what happens at the Hotel.
Unless required by law, Licensee will not use the words
"Homewood", "Homewood Suites" or any other names or mark
associated with the System to incur any obligation or indebtedness
on behalf of
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Licensor. Licensee shall not enter into or execute any contracts
in the name "Homewood Suites hotel", and all contracts for
the Hotel's operations and services at the Hotel shall be in the
name of Licensee or Licensee's management company. Likewise, the
words "Homewood", "Homewood Suites", or any similar words will not
be used to name or identify developments adjacent to or associated
with the Hotel, nor will Licensee use such names in its general
business in any manner separated from the business of the Hotel.
16. MISCELLANEOUS.
A. SEVERABILITY AND INTERPRETATION. The remedies provided in this
Agreement are not exclusive. If any provision of this Agreement is
held to be unenforceable, void or voidable as being contrary to
the law or public policy of the jurisdiction entitled to exercise
authority hereunder, all remaining provisions shall nevertheless
continue in full force and effect unless deletion of such
provision(s) impairs the consideration for this Agreement in a
manner which frustrates the purpose of the parties or makes
performance commercially impracticable. The provisions of this
Agreement shall be interpreted based on the reasonable intention
of the parties in the context of this transaction without
interpreting any provision in favor of or against any party
whether or not such party was the drafting party or by such
party's position relative to the other party. Any covenant, term
or provision of this Agreement which, in order to effect the
intent of the parties, must survive the termination of this
Agreement, shall survive any such termination.
B. CONTROLLING LAW. This Agreement shall become valid when signed by
the parties hereto. It shall be deemed made and entered into in
the State of Tennessee and shall be governed and construed under
and in accordance with the laws of the State of Tennessee. In
entering into this Agreement, Licensee acknowledges that it has
sought, voluntarily accepted and become associated with Licensor
who is headquartered in Memphis, Tennessee, and that this
Agreement contemplates and will result in business relationships
with Licensor's headquarter's personnel. The choice of law
designation permits, but does not require that all suits
concerning this Agreement be filed in the State of Tennessee.
C. EXCLUSIVE BENEFIT. This Agreement is exclusively for the benefit
of the parties hereto, and it may not give rise to liability to a
third party, except as otherwise specifically set forth herein. No
agreement between Licensor and anyone else is for the benefit of
Licensee.
D. ENTIRE AGREEMENT. Licensor and the Licensee each acknowledge and
warrant to each other that they wish to have all terms of this
business relationship defined in this written agreement. Neither
Licensor nor Licensee wishes to enter into a business relationship
with the other in which any terms or obligations are the subject
of alleged oral statements or in which oral statements serve as
the basis for creating rights or obligations different than or
supplementary to the rights and obligations set forth in this
Agreement. Accordingly, Licensor and Licensee agree that this
Agreement and any Attachments hereto and the documents referred to
herein, shall be construed together and shall supersede and cancel
any prior and/or contemporaneous discussions or writings (whether
described as representations, inducements, promises, agreements or
any other term) between Licensor or anyone acting on its behalf
and Licensee or anyone acting on his, her or its behalf, which
might be taken to constitute agreements, representations,
inducements, promises or understandings (or any equivalent to such
terms) with respect to this Agreement or the relationship between
the parties and Licensor and Licensee each agree that they have
placed, and will place, no reliance on any such discussions or
writings. This Agreement (including any Attachments and the
documents referred to herein), is the entire agreement between the
parties and contains all of the terms, conditions, rights and
obligations of the parties with respect to the Hotel or any other
aspect of the relationship between the parties. No future license
or offer of a license for additional locations or any other
business activity have been promised to Licensee and no such
license or offer shall come into existence, except by means of a
separate writing, executed by Licensor's officer or such other
entity granting the license and specifically identified as a
License Agreement. No change, modification, amendment or waiver of
any of the provisions of this Agreement will be effective and
binding upon Licensor unless it is in writing, specifically
identified as an amendment to this Agreement and signed by
Licensor's officer.
E. LICENSOR'S WITHHOLDING CONSENT. Licensor may withhold its consent,
wherever required under this Agreement, if any default or breach
by Licensee exists under this Agreement. Approvals and consents by
Licensor will not be effective unless evidenced by a writing duly
executed on behalf of Licensor.
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F. NOTICES. Any notice must be in writing and will be effective on
either (1) the day it is sent via facsimile with a confirmation of
receipt; or (2) the third day after it is mailed by first class
mail; or (3) the day it is delivered by express delivery service;
or (4) the third day after it is sent by certified mail to the
appropriate party at its address first stated above or to such
person and at such address as may be designated by notice
hereunder.
G. GENERAL RELEASE. Licensee and its respective heirs,
administrators, executors, agents, representatives and their
respective successors and assigns, hereby release, remise, acquit
and forever discharge Licensor and its Entities and their
officers, directors, employees, agents, representatives and their
respective successors and assigns from any and all actions,
claims, causes of action, suits, rights, debts, liabilities,
accounts, agreements, covenants, contracts, promises, warrants,
judgments, executions, demands, damages, costs and expenses,
whether known or unknown at this time, of any kind or nature,
absolute or contingent, if any, at law or in equity, on account of
any matter, cause or thing whatsoever which has happened,
developed or occurred at any time from the beginning of time to
and including the date of Licensee's execution and delivery to
Licensor of this Agreement and that they will not institute any
suit or action at law or otherwise against Licensor directly or
indirectly relating to any claim released hereby by Licensee. This
release and covenant not to sue shall survive the termination of
this Agreement. Licensee shall take whatever steps are necessary
or appropriate to carry out the terms of this release upon
Licensor's request.
H. DESCRIPTIVE HEADINGS. The descriptive headings in this Agreement
are for convenience only and shall not control or affect the
meaning or construction of any provision in this Agreement.
I. WARRANTIES. Licensee warrants, represents and agrees that all
statements made by Licensee in the Application submitted to
Licensor in anticipation of this Agreement and all other documents
and information submitted by Licensee are true, correct and
complete as of the date hereof and will continue to be updated so
that they are true, correct and complete. This warranty and
representation shall survive the termination of this Agreement.
J. TIME. Time is of the essence in this Agreement.
K. INCLUDING. Including shall mean including, without limitation.
L. COUNTERPARTS. This Agreement may be executed in counterparts, and
each copy so executed and delivered shall be deemed an original.
M. AMENDMENTS. If an amendment to this Agreement is required prior to
its execution, said amendment shall be made a part of this
Agreement as an Attachment. If an amendment to this Agreement is
necessary after its execution, said amendment shall be made a part
of this Agreement in the form of a separate document.
N. PERFORMANCE REQUIREMENTS/RESPONSIBILITIES. Attachment A is hereby
incorporated by reference and made a part of this Agreement to set
forth certain of Licensee's performance conditions and
requirements.
O. BUSINESS JUDGMENT. The parties hereto recognize, and any mediator
or judge is affirmatively advised, that certain provisions of this
Agreement describe the right of Licensor to take (or refrain from
taking) certain actions in the exercise of its assessment of the
long-term best interests of hotels using the System, considering
the interests of the System overall. Where such decisions have
been taken by Licensor and are supported by the business judgment
of Licensor, neither a mediator nor a judge nor any other person
reviewing such decisions shall substitute his, her or its judgment
for the judgment so exercised by Licensor.
17. EXPIRATION OF OFFER.
This Agreement constitutes an offer which must be accepted by the
Licensee named on the signature page hereof by dating, executing and
returning to Licensor two copies hereof (and all attachments hereto,
including, if required, the Guaranty) on or before the date specified
on the Rider.
17
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first stated above.
- --------------------------------------------------------------------------------
LICENSEE: LICENSOR:
APPLE SUITES MANAGEMENT, INC. PROMUS HOTELS, INC.
BY: /s/ Glade M. Knight BY:
NAME: GLADE M. KNIGHT, PRESIDENT NAME:
-------------------------------
TITLE: PRESIDENT TITLE:
------------
WITNESS: WITNESS:
DATE: DATE:
18
<PAGE>
GUARANTY
Location: 12 EAST SWEDESFORD ROAD, PHILADELPHIA/GREAT VALLEY, PENNSYLVANIA
----------------------------------------------------------------
As an inducement to Promus Hotels, Inc. ("LICENSOR") to execute the above
License Agreement, the undersigned, jointly and severally, hereby
unconditionally warrant to Licensor and its successors and assigns that all of
Licensee's representations in the License Agreement and the application
submitted by Licensee to obtain the License Agreement are true and guarantee
that all of Licensee's obligations under the above License Agreement, including
any amendments thereto whenever made (the "AGREEMENT"), will be punctually paid
and performed.
Upon default by Licensee or notice from Licensor, the undersigned will
immediately make each payment required of Licensee under the Agreement. Without
affecting the obligations of the undersigned under this Guaranty, Licensor may
without notice to the undersigned extend, modify or release any indebtedness or
obligation of Licensee, or settle, adjust or compromise any claims against
Licensee. The undersigned waive notice of amendment of the Agreement and notice
of demand for payment or performance by Licensee.
Upon the death of an individual guarantor, the estate of such guarantor will be
bound by this Guaranty but only for defaults and obligations hereunder existing
at the time of death, and the obligations of the other guarantors will continue
in full force and effect.
The Guaranty constitutes a guaranty of payment and not of collection, and each
of the guarantors specifically waives any obligation of Licensor to proceed
against Licensee on any money or property held by Licensee or by any other
person or entity as collateral security, by way of set off or otherwise. The
undersigned further agree that this Guaranty shall continue to be effective or
be reinstated as the case may be, if at any time payment or any of the
guaranteed obligations is rescinded or must otherwise be restored or returned by
Licensor upon the insolvency, bankruptcy or reorganization of Licensee or any of
the undersigned, all as though such payment has not been made.
This Guaranty shall be governed and construed under and in accordance with the
laws of the State of Tennessee.
IN WITNESS WHEREOF, each of the undersigned has signed this Guaranty as of the
date of the above Agreement.
Witnesses: Guarantors:
Apple Suites, Inc.
- ------------------------------- By:
- ----------------------------------(Seal)
Glade M. Knight, President
19
<PAGE>
ATTACHMENT B
RIDER TO LICENSE AGREEMENT
1. Name and Address of Licensee: Apple Suites Management, Inc.
Attn: Glade M. Knight
306 East Main Street
Richmond, Virginia 23219
2. Location of Hotel: 12 East Swedesford Road
Malvern, Pennsylvania 19355
3. Number of Approved Guest Rooms: 123
4. Effective Date of License: Date Apple Suites, Inc. closes the
purchase of and obtains possession
and control of the Hotel
("Closing").
It shall be a condition precedent to
the validity of this Agreement, and
this Agreement shall be of no force
and effect and Licensee shall have
no rights hereunder unless and until
on or before April 15, 2000,
Licensee shall have submitted to
Licensor, written verification, in a
form satisfactory to Licensor, that
Closing has occurred. Within five
days of Closing, Licensee shall
submit to Licensor (i) a copy of the
deed, as recorded, transferring the
Hotel to Apple Suites, Inc., (ii) a
copy of the lease agreement between
Licensee and Apple Suites, Inc., and
(iii) the franchise application fee
in the amount of $55,350
5. Term of License to Expire: 20 years from the date of Closing
6. Plans Submission Dates: as required under the Product
Improvement Plan (Attachment C)
7. Construction or Work Commencement Date: upon Closing
8. Construction or Work Completion Date: within 90 days of Closing
9. Offer Expiration Date [Paragraph 17]: April 15, 2000
10. Ownership of Licensee: Apple Suites Management, Inc. 100%
Stockholder:
-----------
Glade M. Knight 100%
Attachment B-1
<PAGE>
ATTACHMENT A - PERFORMANCE CONDITIONS
CHANGE OF OWNERSHIP
I. CONSULTATION. Licensee or its representative(s) shall meet with Licensor
at a location selected by Licensor, within 30 days following the date of
Licensee's receipt of a request from Licensor for consultation and
coordination with the project manager assigned to Licensee by Licensor.
II. WORK AND PURCHASE REQUIREMENt. Attachment C, the Product Improvement
Plan (the "PIP"), is incorporated by reference, attached to and made a
part of this Agreement. Licensee shall perform the renovation and/or
construction work and purchase the items described on the PIP (the
"WORK") on or before the completion date specified on the Rider. Whether
or not indicated on the PIP, the Work shall include Licensee's
purchasing and/or leasing and installing all fixtures, equipment,
furnishings, furniture, signs, computer terminals and related equipment,
supplies and other items which would be required of a new Homewood
Suites licensee under the Manual and such other equipment, furnishings
and supplies as may be required by Licensor in order to operate the
Hotel. Licensee shall be solely responsible for obtaining all necessary
licenses, permits and zoning variances required for the Hotel.
III. APPROVAL OF ARCHITECT/ENGINEER AND CONTRACTOR. Licensor shall have the
right to approve the architect/engineer, general contractor and major
subcontractors for the Work. The Work shall not commence until such
approval has been granted, which approvals may be conditioned on bonding
of the contractors. Prior to commencement of the Work, if requested by
Licensor, Licensee shall submit to Licensor, resumes and financial
statements of the architect/engineer, general contractor and any major
sub-contractors for the Work and such additional information concerning
their experience and financial responsibility as Licensor may request.
IV. APPROVAL OF PLANS. On or before the Plans submission date specified on
the Rider, Licensee shall submit to Licensor, Licensee's plans and
specifications and drawings for the Work, including the proposed
furnishings, fixtures, equipment and signs (collectively, "PLANS") for
approval. Licensor may supply Licensee with representative prototype
Guest Room and public area plans and schematic building plans as a guide
for preparation of plans and specifications for the Hotel. Once Licensor
has approved the Plans, no change shall be made to the Plans without the
advance consent of Licensor. In approving the Plans, Licensor does not
in any manner warrant the depth of its analysis or assume any
responsibility for the efficacy of the Plans or the resulting
construction. Licensee shall cause the Hotel renovation and/or
construction to be in accordance with this Agreement, the approved
Plans, the Manual and the PIP.
V. COMMENCEMENT; COMPLETION. Licensee shall commence the Work on or before
the date specified on the Rider and shall continue the Work
uninterrupted (except for interruption by reason of events constituting
force majeure) until it is completed. Notwithstanding the occurrence of
any events constituting force majeure, or any other cause, the Work
shall be completed and the Hotel shall be furnished, equipped, and shall
otherwise be in compliance with this Agreement not later than the date
specified on the Rider. Licensor shall have the sole right to determine
whether the Work has been completed in accordance with this Agreement,
the approved Plans, the Manual and the PIP.
VI. INSPECTION. During the course of the Work, Licensee shall, and Licensee
shall cause the architect, engineer, contractors, and subcontractors to
cooperate fully with Licensor for the purpose of permitting Licensor to
inspect the Hotel in order to determine whether the Work is being done
in accordance with this Agreement and shall provide Licensor with
samples of construction materials, etc. as Licensor may request.
VII. REPORTS. Licensee shall submit to Licensor each month after the date
hereof (or more frequently if Licensor shall so request) a report
showing progress made toward fulfilling the terms of this Agreement.
Attachment A-1
<PAGE>
VIII. ACQUISITION OF EQUIPMENT, FURNISHINGS, AND SUPPLIES/STAFFING. Licensee
shall order, purchase and/or lease and install all fixtures, equipment,
furnishings, furniture, signs, computer terminals and related equipment,
supplies and other items required by Licensor, this Agreement, the
approved Plans, the Manual and the PIP.
In accordance with the Manual and such other instructions as are
furnished to Licensee by Licensor, Licensee shall cause to be hired a
staff to operate the Hotel, and all such personnel shall be trained as
required by the Manual. All costs and expenses incurred directly or
indirectly in hiring and training such staff shall be paid by Licensee,
except as expressly provided otherwise in the Manual.
IX. COST OF CONSTRUCTION AND EQUIPPING. Licensee shall bear the entire cost
of the Work, including the cost of the plans, professional fees,
licenses and permits, equipment, furniture, furnishings and supplies.
X. LIMITATION OF LIABILITY. Notwithstanding the right of Licensor to
approve the Plans, the architect, engineer and certain contractors, and
to inspect the Work and the Hotel, Licensor shall have no liability or
obligation with respect to the Work, or the design and construction of
the Hotel, as the rights of Licensor are being exercised solely for the
purpose of assuring compliance with the terms and conditions of this
Agreement. Licensor does not undertake to approve the Hotel as complying
with governmental requirements or as being safe for guests or other
third parties. Licensee should not rely upon Licensor's approval for any
purpose whatsoever except compliance with Licensor's then prevailing
standards and requirements of the Manual.
XI. CONDITIONAL AUTHORIZATION. Licensor may conditionally authorize Licensee
to continue to operate the Hotel as a Homewood Suites hotel even though
Licensee has not fully complied with the terms of this Agreement. Under
certain circumstances, Licensor may suspend services to the Hotel
(including reservation services) while the Work is being performed by
Licensee.
XII. PERFORMANCE OF AGREEMENT. Licensee agrees to satisfy all of the terms
and conditions of this Agreement, and to equip, supply and staff the
Hotel in accordance with this Agreement and to cooperate with Licensor
in connection therewith. As a result of Licensee's efforts to comply
with the terms and conditions of this Agreement, Licensee will incur
substantial expense and expend substantial time and effort. Licensee
acknowledges and agrees that Licensor shall have no liability or
obligation to Licensee for any losses, obligations, liabilities or
expenses incurred by Licensee if this Agreement is terminated because
Licensee has not complied with the terms and conditions of this
Agreement.
Attachment A-2
Exhibit 10.4
[Pennsylvania]
MANAGEMENT AGREEMENT
This Management Agreement (as the same may be amended, modified or
supplemented from time to time, this "Agreement") is made and entered into as of
the 8th day of May, 2000 ("Effective Date") between Apple Suites Management,
Inc., a Virginia corporation, whose address is 306 East Main Street, Richmond,
Virginia 23219 ("Owner") and Promus Hotels, Inc., a Delaware corporation, whose
address is 755 Crossover Lane, Memphis, Tennessee 38117 ("Manager").
ARTICLE 1
THE HOTEL
Section 1.01. The Hotel. The subject matter of this Agreement is the
management of the "Hotel", as defined in the Homewood Suites License Agreement
attached hereto as Exhibit "A" (hereinafter collectively referred to as the
"License Agreement"), by Manager. The leasehold interest in the Hotel is owned
by Apple Suites, Inc., a Virginia corporation, as trustee for Apple Suites
Pennsylvania Business Trust ("Fee Owner") and is subleased to Owner pursuant to
a lease between Fee Owner and Owner with a commencement date of even date
herewith covering the Hotel (hereinafter the "Percentage Lease"). The License
Agreement shall exclusively govern Owner's right to use the Homewood Suites
"System" (as defined in the License Agreement) in the operation of the Hotel.
Fee Owner shall have no right to use the Homewood Suites "System" except as
expressly set forth in the License Agreement. Owner hereby expressly
acknowledges that neither it nor Fee Owner shall derive any rights in or to the
use of the "Homewood Suites" name or the Homewood Suites "System" from this
Agreement.
ARTICLE 2
TERM
Section 2.01. Term. The term shall commence on the Effective Date and
continue for the term of years from the Effective Date set forth on Exhibit "B"
("Term").
ARTICLE 3
MANAGER'S OBLIGATIONS
Section 3.01. Manager's Obligations. Manager shall, on behalf of Owner
and at Owner's expense, direct the operation of the Hotel pursuant to the terms
of this Agreement and the License Agreement. Manager shall be exclusively
responsible for directing the day-to-day activities of the Hotel and
establishing all policies and
<PAGE>
procedures relating to the management and operation of the Hotel. Except as
specifically otherwise provided, all cost(s) and expense(s) incurred by Manager
in association with the performance of the obligations hereinafter set forth
shall be, regardless of the designation of a portion thereof as Fee Ownership
Costs (as herein defined), operating costs and shall accordingly be paid from
the Bank Account(s) as hereinafter defined in Section 3.01(iv) below. Manager,
during the Term, shall have the following obligations:
(i) Costs of Fee Owner and Owner. Pursuant to the terms of the
Percentage Lease, Manager understands that Fee Owner has agreed
to pay, among other things (i) land, building and personal
property taxes and assessments applicable to the Hotel, (ii)
premiums and charges for the casualty insurance coverages
specified on Exhibit "D", (iii) expenditures for capital
replacements, (iv) expenditures for maintenance and repair of
underground utilities and structural elements of the Hotel, (v)
ground rent under the ground lease pursuant to which Fee Owner
has leasehold title to the Hotel, and (vi) the payments of
principal, interest and other sums payable under the Acquisition
Loan (as herein defined) (collectively, "Fee Ownership Costs").
To the extent this Agreement obligates or authorizes Manager to
pay any such Fee Ownership Costs, Manager shall pay such Fee
Ownership Costs on behalf of Fee Owner to the extent of funds in
the Bank Account(s) (as herein defined) in the order of priority
set forth in Exhibit B or the Reserve Fund (as herein defined)
and Fee Owner and Owner shall make such adjustments and payments
to each other as may be necessary from time to time to take into
account any such payments by Manager. Manager shall have no duty,
obligation or liability to Fee Owner or Owner (i) to make any
determination as to whether any expense required to be paid by
Manager hereunder is a Fee Ownership Cost or a cost of Owner,
(ii) to make any determination as to whether funds in the Bank
Account(s) or the Reserve Fund belong to Fee Owner or Owner or
(iii) to require that Fee Ownership Costs be paid from funds
which can be identified as belonging to Fee Owner, or that other
costs and expenses required to be paid by Owner be paid from
funds which can be identified as belonging to Owner; it being the
intent of the parties to this Agreement that (i) Owner and Fee
Owner shall look only to each other and not to Manager with
respect to moneys that may be owed one to the other as a
consequence of Manager's performance under this Agreement and
(ii) Manager need only look to Owner to pay operating costs,
including, without limitation, those designated herein as Fee
Ownership Costs;
(ii) Personnel. Manager shall be the sole judge of the fitness and
qualification of all personnel working at the Hotel ("Hotel
Personnel") and shall have the sole and absolute right to hire,
supervise, order, instruct, discharge and determine the
compensation, benefits and terms of employment of all Hotel
Personnel. All Hotel Personnel shall be employees of Manager.
Manager shall also have the right to use employees of Manager,
Manager's parent and subsidiary and affiliated companies, not
located at the Hotel to provide services to the Hotel ("Off-Site
Personnel") and the right to have the general manager of the
hotel serve as the regional manager for other
2
<PAGE>
hotels managed by Manager. All expenses, costs (including, but
not limited to, salaries, benefits and severance pay),
liabilities and claims which are related to Hotel Personnel and
Off-Site Personnel shall be operating costs; provided, however,
with respect to any moving expenses for any Hotel Personnel who
has not been an employee at the Hotel for at least twelve (12)
months, only that portion of such moving expenses equal to
Owner's Share (as hereinafter defined) shall constitute operating
costs and the balance shall be paid by Manager and/or such
employee. Manager shall also have the right to have Off-Site
Personnel performing regional or area duties relating to the
Hotel and other hotels managed by Manager lodged at the Hotel
from time to time free of charge. "Owner's Share" shall mean a
fraction having twelve (12) as its denominator and the number of
months or part thereof such person has been one of the Hotel
Personnel as its numerator. All expenses for Off-Site Personnel
shall be included as a separate category or item of the Operating
Budgets or shall otherwise be approved by Owner.
Manager agrees that it will consult with Owner regarding the
hiring, transferring, or terminating of the general manager and
director of sales for the Hotel. Owner shall be afforded an
opportunity to review the resumes of, and to interview, the
candidates for these positions, all within a time frame
established by Manager, which shall be reasonable under the
circumstances in question. Manager and Owner shall consult with
each other concerning such decisions and Manager agrees to give
serious consideration to the views of Owner prior to Manager's
making a final decision with respect to any such individual;
(iii) Hotel Policies. Manager shall determine the terms of guest
admittance to the Hotel, establish room rates, and use of rooms
for commercial purposes;
(iv) Bank Accounts. Manager shall open and operate the Hotel's bank
accounts. All sums received from the operation of the Hotel and
all items paid by Manager arising by virtue of Manager's
operation of the Hotel shall pass through bank account(s)
established by Manager in Owner's name at such banks as Manager
and Owner shall mutually agree ("Bank Account(s)"); only
Manager's designees shall be exclusively authorized to operate
and draw from the Bank Account(s). Each fiscal month Manager, on
behalf of Owner, shall disburse funds from the Bank Account(s) in
the order of priority and to the extent available in accordance
with the priority schedule set forth on Exhibit "B";
(v) Operating Budgets. Manager has submitted to Owner, for Owner's
approval, a proposed operating budget for the ensuing full or
partial fiscal year, as the case may be ("Operating Budget").
Hereafter, Manager shall, not less than forty-five (45) days
prior to the commencement of each full fiscal year, submit to
Owner, for Owner's approval, a proposed Operating Budget for the
ensuing full or partial fiscal year, as the case may be. Each
Operating Budget shall be accompanied by, and shall include, a
business
3
<PAGE>
plan which shall describe business objectives and strategies for
the period covered by the Operating Budget. The business plan
shall include, without limitation, an analysis of the market area
in which the Hotel competes, a comparison of the Hotel and its
business with competitive hotels, an analysis of categories of
potential guests, and a description of sales and marketing
activities designed to achieve and implement identified
objectives and strategies. Fee Owner shall have no right to
approve any Operating Budget.
Owner's approval of the Operating Budget shall not be
unreasonably withheld and shall be deemed given unless a specific
written objection thereto is delivered by Owner to Manager within
fifteen (15) days after submission. Owner shall review the
Operating Budget on a line-by-line basis. To be effective, any
notice which disapproves a proposed Operating Budget must contain
specific objections in reasonable detail to individual line
items.
If the initial Operating Budget contains disputed budget item(s),
said item(s) shall be deemed adopted until Owner and Manager have
resolved the item(s) objected to by Owner or the Accountant(s)
(hereinafter defined in Section 10.02) have resolved the item(s)
objected to by Owner. Thereafter, if Owner disapproves or raises
objections to a proposed Operating Budget in the manner and
within the time period provided therefor, and Owner and Manager
are unable to resolve the disputed or objectionable matters
submitted by Owner prior to the commencement of the applicable
fiscal year, the undisputed portions of the proposed Operating
Budget shall be deemed to be adopted and approved and the
corresponding line item contained in the Operating Budget for the
preceding fiscal year shall be adjusted as set forth herein and
shall be substituted in lieu of the disputed items in the
proposed Operating Budget. Those line items which are in dispute
shall be determined by increasing the preceding fiscal year's
corresponding line items by an amount determined by Manager which
does not exceed the Consumer Price Index for All Urban Consumers
published by the Bureau of Labor Statistics of the United States
Department of Labor, U.S. City Average, all items (1984-1986=100)
for the fiscal year prior to the fiscal year with respect to
which the adjustment to the line item is being calculated or any
successor or replacement index thereto. The resulting Operating
Budget obtained in accordance with the preceding sentence shall
be deemed to be the Operating Budget in effect until such time as
Manager and Owner have resolved the items objected to by Owner.
Manager shall revise the Operating Budget from time to time, as
necessary, to reflect any unpredicted significant changes,
variables or events or to include significant, additional,
unanticipated items of income or expense. Any such revision shall
be submitted to Owner for approval, which approval shall not be
unreasonably withheld, delayed or conditioned. Manager shall be
permitted to reallocate part or all of the
4
<PAGE>
amount budgeted with respect to any line item to another line
item and to make such other modifications to the Operating Budget
as Manager deems necessary, provided, however, that Manager may
not reallocate from one Department to another without Owner's
consent, which shall not be unreasonably withheld or delayed. The
term "Department" shall mean and refer to those general
divisional categories shown in the Operating Budget (e.g., Guest
Services Department or Administration Department), but shall not
mean or refer to subcategories (e.g., linen replacement or
uniforms) appearing in a divisional category. In addition, in the
event actual Adjusted Gross Revenues (as defined in Exhibit "C"
hereto) for any calendar period are greater than those provided
for in the Operating Budget, the amounts approved in the
Operating Budget for suite maintenance, guest services, food and
beverage, telephone, utilities, marketing and hotel repair and
maintenance for any calendar month shall be automatically deemed
to be increased to an amount that bears the same relationship
(ratio) to the amounts budgeted for such items as actual Adjusted
Gross Revenue for such month bears to the projected Adjusted
Gross Revenue for such month. Owner acknowledges that the
Operating Budget is intended only to be a reasonable estimate of
the Hotel's income and expenses for the ensuing fiscal year.
Manager shall not be deemed to have made any guarantee, warranty
or representation whatsoever in connection with the Operating
Budget;
(vi) Operating Statement. Manager shall prepare and furnish Owner, on
or before the twentieth (20th) day of the fiscal month
immediately following the close of a fiscal month, with a
detailed operating statement setting forth the results of the
Hotel's operations. Within ninety (90) days after the end of each
fiscal year, Manager shall furnish Owner with a detailed
operating statement setting forth the results of the Hotel's
operations for the fiscal year;
(vii) Capital Budgets. Manager shall, not less than forty-five (45)
days prior to the commencement of each fiscal year, submit to
Owner, for Owner's approval, a recommended "Capital Budget" for
the ensuing full or partial fiscal year, as the case may be, for
furnishings, equipment, and ordinary Hotel capital replacement
items as shall be required to operate the Hotel in accordance
with the standards referred to in the License Agreement. Manager,
to the extent it is able to do so without compromising compliance
with the minimum standards required under the terms of the
License Agreement, shall take into consideration, among other
factors, the amount of funds available to pay for the proposed
capital expenditures. Manager shall also identify for Owner those
projects that are required to meet the minimum standards of the
License Agreement and give priority to such items. Owner and
Manager shall meet to discuss the proposed Capital Budget and
Owner shall be required to make specific written objections to a
proposed Capital Budget in the manner and within the same time
periods specified in Section 3.01(v) with respect to an Operating
Budget. Owner agrees not to unreasonably withhold or delay
5
<PAGE>
its consent. If Owner does not approve the Capital Budget,
Manager (i) with respect to Capital Improvements (as herein
defined) required to meet the minimum standards of the License
Agreement, will be entitled to spend such amounts as are
necessary to meet such minimum standards and (ii) with respect to
any other Capital Improvements, will only spend such amounts as
are approved by Owner, acting reasonably, provided, however, that
in any event Manager shall be entitled to spend up to five
percent (5%) of Gross Revenue for capital expenditures after the
date hereof until the disputed Capital Budget item(s) have been
resolved in accordance with Section 10.02.1(e). Manager, at
Owner's expense, shall be responsible for supervising the design,
installation and construction of alterations or additions to, or
rebuilding or renovation of, the Hotel, including any additions
to Hotel furnishings and equipment (collectively, "Capital
Improvements"). Owner shall have the right to approve and inspect
the installation and construction of Capital Improvements and any
mortgagee having a first lien on Owner's subleasehold estate in
the Hotel ("Owner's Leasehold Mortgagee") or a first lien on Fee
Owner's leasehold estate in the Hotel (the "Fee Owner's
Mortgagee") shall also have any right of approval or inspection
of the installation and construction of the Capital Improvements
to the extent set forth in the mortgage, deed of trust or other
loan documents (collectively, the "Mortgage Documents") (but only
if and to the extent the Manager has been provided with copies of
the Mortgage Documents). Fee Owner shall not have the right to
approve any Capital Budget.
After a Capital Budget has been adopted, it shall be subject to
review and modification in the event unpredicted or unanticipated
capital expenditures are required during any calendar year.
Manager and Owner each agree not to unreasonably withhold or
delay its consent to a proposed modification of a Capital Budget.
Any amendment that is mutually agreed upon shall be set forth in
writing and signed by both parties. It is acknowledged by Owner
that capital expenditures required as a result of an emergency
situation shall not reduce amounts available pursuant to the
Capital Budget or otherwise hereunder, other than to the extent a
Capital Budget item is subsumed within the capital expenditures
required as a result of the occurrence of the emergency;
(viii) General Maintenance Non-Capital Replacements. Manager shall
supervise the maintenance, repair and replacement of non-capital
replacements;
(ix) Operating Equipment. Manager shall select and purchase all
operating equipment for the Hotel such as linens, utensils,
uniforms and other similar items, provided, however, that if
Owner determines that it can purchase operating equipment of a
quality at least equal to that which Manager generally uses at a
price lower than the price obtained by Manager, Manager shall
purchase such operating equipment from the vendor designated by
Owner;
6
<PAGE>
(x) Operating Supplies. Manager shall select and purchase all
operating supplies for the Hotel such as food, beverages, fuel,
soap, cleansing items, stationery and other consumable items,
provided, however, that if Owner determines that it can purchase
operating supplies of a quality at least equal to that which
Manager generally uses at a price lower than the price obtained
by Manager, Manager shall purchase such operating supplies from
the vendor designated by Owner;
(xi) Accounting Standards. Manager shall maintain the books and
records reflecting the operations of the Hotel in accordance with
the accounting practices of Manager in conformity with generally
accepted accounting practices consistently applied and shall
adopt and follow the fiscal accounting periods utilized by
Manager in its normal course of business. The Hotel level
generated accounting records reflecting detailed day-to-day
transactions of the Hotel's operations, shall be kept by Manager
at the Hotel or at Manager's regional offices or corporate
headquarters, or at such other location as Manager shall
reasonably determine. Manager shall receive a monthly fee for
accounting services provided to the Hotel ("Accounting Fee"). The
current Accounting Fee is set forth on Exhibit "B". The
Accounting Fee shall be adjusted by Manager from time to time and
set forth in the annual Operating Budget;
(xii) Marketing and Advertising. Manager shall advertise and promote
the Hotel in coordination with the sales and marketing programs
of Manager and other Homewood Suites hotels. Manager may
participate in sales and promotional campaigns and activities
involving complimentary rooms. Manager, in marketing and
advertising the Hotel, shall have the right to use marketing and
advertising services of employees of Manager and its parent and
affiliated companies not located at the Hotel. Manager may charge
the Hotel for personnel and other costs and expenses incurred in
providing such services; provided that (i) Manager's allocation
of such costs and expenses among hotels, including the Hotel,
shall be pro rated among all hotels owned or managed by Manager
and (ii) the annual allocation of such costs and expenses to the
Hotel shall not exceed $10,000.00. Such costs and expenses shall
be reflected in the budgets and operating statements required to
be prepared and submitted by Manager under this Agreement;
(xiii) Permits and Licenses. Manager shall obtain and maintain the
various permits and licenses required or permitted to be held in
its name that are necessary to enable Manager to operate the
Hotel in accordance with the terms of this Agreement and the
License Agreement, provided, however, that Manager shall only
hold liquor licenses and alcoholic beverage licenses if required
by the laws of the jurisdiction in which the Hotel is located. In
addition, Manager shall upon request cooperate with and assist
Owner in obtaining the various permits and licenses that are
required to be held in the name of either or both of Owner and
Fee Owner that are necessary to enable Manager to operate the
Hotel. Manager, at Owner's
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cost and expense, shall use all reasonable efforts, to the extent
within its control, to comply with the terms and conditions of
all licenses and permits issued with respect to the Hotel and the
business conducted at the Hotel, including, without limitation,
the terms and conditions of the License Agreement;
(xiv) Owner Meetings. The Hotel's general manager shall meet with
Owner's Representative as hereinafter defined in Section
4.01(viii) quarterly to review and discuss the previous and
future month's operating statement, cash flow, budget, capital
expenditures, important personnel matters and the general
concerns of Owner and Manager. In addition, a representative of
Manager's corporate staff shall meet with Owner's Representative
quarterly to review and discuss the previous and future quarter's
operating statement, cash flow, budget, capital expenditures,
important personnel matters and the general concerns of Owner and
Manager. Except to the extent otherwise mutually agreed upon by
Owner and Manager, the quarterly meetings described in this
clause (xiv) shall be held at the Hotel;
(xv) Insurance. Manager shall procure and maintain throughout the Term
the insurance coverages set forth on Exhibit "D";
(xvi) Compliance with Law. Manager, at Owner's cost and expense, shall
use all reasonable efforts to comply with all laws, ordinances,
regulations and requirements of any federal, state or municipal
government that are applicable to the use and operation of the
Hotel, as well as with all orders and requirements of the local
fire department, of which Manager has knowledge; provided,
however, that Owner shall have the right to contest by proper
legal proceedings, the validity of any such law, ordinance, rule,
regulation, order, decision or requirement and may postpone
compliance therewith to the extent and in the manner provided by
law until final determination of any such proceedings. Manager
promptly shall notify Owner in writing of all notices of legal
requirements applicable to the Hotel that are received by
Manager;
(xvii) Satisfaction of Obligations. Manager agrees to pay, when due,
all amounts due under any equipment leases and all other
contracts and agreements relating to the operation or maintenance
of the Hotel, and, if requested by Owner, any Mortgage Documents
relating to the loan from Owner's Leasehold Mortgagee ("Owner's
Mortgage Documents"), but solely from and to the extent that
funds are available in the Bank Account(s), and to comply, at
Owner's cost and expense, with all other covenants and
obligations contained in the equipment leases and all utility
contracts, concession agreements, and service and maintenance
contracts, and, if requested by Owner, Owner's Mortgage Documents
to the extent that compliance therewith is within the reasonable
control of Manager by reason of its management and operation of
the Hotel pursuant to this Agreement; provided, however, Manager
shall have no obligation to comply with any provisions in the
Mortgage Documents that conflict with its rights and obligations
under this Agreement. Manager shall have no
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obligation to perform or comply with any obligations of (i) Fee
Owner or Owner under the Percentage Lease or (ii) Fee Owner under
any Mortgage Documents relating to the loan from Fee Owner's
Mortgagee (other than any right to approve or inspect Capital
Improvements contemplated by Section 3.01(vii) above);
(xviii) Requests for Information. Manager shall respond, with
reasonable promptness, to any information requests by Owner's
Leasehold Mortgagee in accordance with Owner's Mortgage
Documents, to the extent such information is required to be
furnished by Manager to Owner pursuant to this Agreement. Any
additional information or reports requested by Owner's Leasehold
Mortgagee shall be provided by Manager only if Owner so directs
Manager in writing and, to the extent such information or reports
are not being prepared for Owner in the ordinary course of
business pursuant to this Agreement, Owner agrees to pay the
reasonable expenses of preparing such information and reports;
(xix) Tax and Insurance Accruals. If requested by Owner, Manager shall
accrue and set aside on a monthly basis funds from Adjusted Gross
Revenues if available in the priority set forth on Exhibit B for
the payment of real estate taxes and insurance premiums, and such
accruals shall be deposited in a separate account and not
commingled with other operating accounts for Hotel operations
generally, provided, however, that to the extent such accruals
exceed the amount necessary to pay the actual amount of real
estate taxes and insurance premiums, such excess shall be
available for operating costs, ownership costs, Owner's Basic
Return, the Subordinated Management Fee and the others items set
forth on, and in the priority set forth on, Exhibit B. If such
accruals do not exceed the actual amounts due in respect of real
estate taxes and insurance premiums but Owner and Manager agree
in writing, the tax and insurance accruals on deposit may be used
from time to time to pay operating costs if Adjusted Gross
Revenues are not otherwise sufficient to pay such operating
costs.
ARTICLE 4
OWNER'S OBLIGATIONS
Section 4.01. Owner's Obligations. During the Term, Owner shall have
the obligations set forth below:
(i) License Agreement. Owner shall comply with all the terms and
conditions of the License Agreement (specifically including, but
not limited to, Licensee's obligation to pay the fees, charges and
contributions set forth in paragraphs 3.c. and 7 of the License
Agreement) and keep the License Agreement in full force and effect
from the Effective Date through the remainder of the Term. Nothing
in this Agreement shall be interpreted in a manner which would
relieve Owner of any of its obligations under the License
Agreement;
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(ii) Licenses and Permits. Owner shall obtain and maintain, with
Manager's assistance and cooperation, all governmental
permissions, licenses and permits required to be held in Owner's
and/or Fee Owner's name that are necessary to enable Manager to
operate the Hotel in accordance with the terms of this Agreement
and the License Agreement;
(iii) Insurance. Owner shall procure and maintain throughout the Term
the insurance coverages set forth on Exhibit "E";
(iv) Intentionally Omitted;
(v) Operating Funds. Owner shall provide all funds necessary to
enable Manager to manage and operate the Hotel in accordance
with the terms of this Agreement and the License Agreement,
regardless of the designation of a portion of the operating
costs as Fee Ownership Costs. Owner agrees to deliver to Manager
for deposit into the Bank Account(s) on the Effective Date the
amount specified on Exhibit "B" which amount shall be the
"Minimum Balance" to be maintained by Owner during the first
year of the Hotel's operation. The Minimum Balance thereafter
shall be no less than the Hotel's operating costs for the
preceding fiscal month. The Minimum Balance shall serve as
working capital for the Hotel's operations. Owner agrees, upon
Manager's written request, to immediately furnish Manager with
sufficient funds to make up any deficiency in the Minimum
Balance;
(vi) Capital Funds. Owner shall expend such amounts for renovation
programs, furnishings, equipment and ordinary Hotel capital
replacement items as are required from time to time to (a)
maintain the Hotel in good order and repair, (b) comply with the
standards referred to in the License Agreement, and (c) comply
with governmental regulations and orders. Owner shall cooperate
fully with Manager in establishing appropriate procedures and
timetables for Owner to undertake capital replacement projects.
It is recognized that expenditures for capital replacements are
incapable of precise calculation in advance. Therefore, five
percent (5%) of Gross Revenues each year shall be paid over in
cash in each calendar month after the Effective Date into a
Reserve Fund (as hereinafter defined) to pay for capital
replacements. In lieu of funding monthly into the Reserve Fund
as contemplated above, Owner shall have the right, but not the
obligation, to deposit into the Reserve Fund, on or about the
commencement of each year, the full amount set forth in the
Capital Budget. Manager shall establish a reserve for capital
replacements on the books of account for the Hotel and the cash
amounts required for such reserve shall be placed into an
interest-bearing account (the "Reserve Fund") established in the
Hotel's name at the bank at which the Bank Account(s) are
established, with
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Manager's designees being the only authorized signatories on
said account. All amounts on deposit in the Reserve Fund shall
be Owner's. Any expenditures for capital replacements during any
calendar year which have been included in an approved Capital
Budget may be made without Owner's or Fee Owner's additional
approval and, to the extent available, shall be made by Manager
from the Reserve Fund (including accrued interest and unused
accumulations from prior calendar years). Any amounts remaining
in the Reserve Fund at the close of each calendar year shall be
carried forward and retained in the Reserve Fund until fully
used as herein provided. To the extent the Reserve Fund is
insufficient at a particular time or to the extent the Reserve
Fund plus anticipated contributions for the ensuing calendar
year is less than the budgeted expenditures set forth in the
approved Capital Budget for the ensuing calendar year then in
either such event, Manager shall give Owner written notice
thereof at least sixty (60) days before the anticipated date
such funds will be needed. Owner shall supply the necessary
funds by deposit to the Reserve Fund at least fifteen (15) days
before the anticipated date such funds will be needed. All
proceeds from the sale of capital items no longer needed for the
operation of the Hotel shall be deposited to the Reserve Fund.
Sale of such items shall be at the discretion of Manager, and
conducted in a commercially reasonable manner. Manager shall not
dispose of any capital item or group of capital items having a
value in excess of ten thousand dollars ($10,000) without
Owner's prior written consent unless the replacement of such
capital item or group of capital items has been contemplated in
the applicable Capital Budget. Manager also shall obtain the
consent of Owner's Leasehold Mortgagee when required for any
disposition of capital items otherwise prohibited under the
terms of Owner's Mortgage Documents, provided, however, that to
the extent a capital item is being replaced because the same is
defective or obsolete or with an item of equal or greater value
no such consent need be obtained from Owner's Leasehold
Mortgagee. Upon termination of this Agreement for whatever
reason or upon sale of the Hotel, Manager's right to expend any
unused portion of the Reserve Fund shall terminate and the
balance of the fund shall be paid over to Owner, less any sums
then due Manager.
To the extent any expenditure under this Section 4.01(vi) shall
exceed twenty thousand dollars ($20,000), Manager shall first
solicit bids from at least three different reputable and
qualified third parties, and the lowest of the bidders shall be
selected unless acceptance of a higher bid has been approved by
Owner in writing or unless Manager provides a reasonably
detailed explanation for its selection of a bid higher than the
lowest of the bidders;
(vii) Payments to Manager. Owner shall promptly pay to Manager all
amounts due Manager under this Agreement;
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(viii) Owner's Representative. Owner shall appoint a representative to
represent Owner in all matters relating to this Agreement and/or
the Hotel ("Owner's Representative"). Owner's initial Owner's
Representative shall be the individual named on Exhibit "B".
Manager shall have the right to deal solely with the Owner's
Representative on all such matters. Manager may rely upon
statements and representations of Owner's Representative as
being from and binding upon Owner. Owner may change its Owner's
Representative from time to time by providing written notice to
Manager in the manner provided for herein. Owner shall cause the
Owner's Representative to attend all quarterly meetings referred
to in Section 3.01(xiv);
(ix) Owner's Audits. Owner shall have the right to have its
independent accounting firm examine the books and records of the
Hotel at any reasonable time upon forty-eight (48) hours notice
to Manager;
(x) Right of Inspection and Review. Owner, Owner's Leasehold
Mortgagee, Fee Owner and Fee Owner's Mortgagee and their
respective accountants, attorneys, agents and other
representatives and invitees, shall have the right to enter upon
any part of the Hotel at all reasonable times during normal
business hours and during the term of this Agreement upon
reasonable prior notice to Manager for the purpose of examining
or inspecting the Hotel, showing the Hotel to prospective
purchasers or mortgagees, or auditing, examining or making
extracts of books and records of the Hotel, or for any other
purpose which Owner, in its reasonable discretion, shall deem
necessary or advisable, but the same shall be done with as
little disruption to the business of the Hotel as under the
circumstances is reasonable; and
(xi) Quiet and Peaceable Operation. Owner shall ensure that Manager
is able to peaceably and quietly operate the Hotel in accordance
with the terms of this Agreement, free from molestation,
eviction and disturbance by Owner or by any other person or
persons claiming by, through or under Owner. Owner shall
undertake and prosecute all reasonable and appropriate actions,
judicial or otherwise, required to assure such quiet and
peaceable operations by Manager.
ARTICLE 5
MANAGEMENT FEE
Section 5.01. Management Fee. On the first day of each fiscal month
after the Effective Date, Manager is authorized by Owner to pay itself from the
Bank Account(s) the Management Fees calculated in the manner set forth on
Exhibit "C".
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ARTICLE 6
CLAIMS AND LIABILITY
Section 6.01. Claims and Liability. Owner and Manager mutually agree
for the benefit of each other to look only to the appropriate insurance
coverages in effect pursuant to this Agreement in the event any demand, claim,
action, damage, loss, liability or expense occurs as a result of injury to
person or damage to property regardless whether any such demand, claim, action,
damage, loss, liability or expense is caused or contributed to, by or results
from the negligence of Owner or Manager or their subsidiaries, affiliates,
employees, directors, officers, agents or independent contractors and regardless
whether the injury to person or damage to property occurs in and about the Hotel
or elsewhere as a result of the performance of this Agreement. Nevertheless, in
the event the insurance proceeds are insufficient or there is no insurance
coverage to satisfy the demand, claim, action, loss, liability or expense and
the same did not arise out of the gross negligence or willful misconduct of
Manager, Owner agrees, at its expense, to indemnify and hold Manager and its
subsidiaries, affiliates, officers, directors, employees, agents or independent
contractors harmless to the extent of the excess liability.
Section 6.02. Survival. The provisions of this Article 6 shall survive
any cancellation, termination or expiration of this Agreement and shall remain
in full force and effect until such time as the applicable statute of limitation
shall cut off all demands, claims, actions, damages, losses, liabilities or
expenses which are the subject of the provisions of this Article 6.
ARTICLE 7
CLOSURE, EMERGENCIES AND DELAYS
Section 7.01. Events of Force Majeure. If at any time during the Term
of this Agreement it becomes necessary, in Manager's opinion, to cease operation
of the Hotel in order to protect the Hotel and/or the health, safety and welfare
of the guests and/or employees of the Hotel for reasons beyond the reasonable
control of Manager, such as, but not limited to, acts of war, insurrection,
civil strife and commotion, labor unrest, governmental regulations and orders,
shortage or lack of adequate supplies or lack of skilled or unskilled employees,
contagious illness, catastrophic events or acts of God, which shall not include
Manager's computer systems and software not being able to accurately process
date data and information, including, but not limited to, calculating, comparing
and sequencing from, into and between the twentieth century, the year 2000 and
the twenty-first century ("Force Majeure"), then in such event or similar events
Manager may close and cease operation of all or any part of the Hotel, reopening
and commencing operation when Manager deems that such may be done without
jeopardy to the Hotel, its guests and employees.
Manager and Owner agree, except as otherwise provided herein, that the
time within which a party is required to perform an obligation and Manager's
right to manage the Hotel under this Agreement shall be extended for a period of
time equivalent to the period of delay caused by an event of Force Majeure.
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Section 7.02. Emergencies. If a condition of an emergency nature should
exist which requires that immediate repairs be made for the preservation and
protection of the Hotel, its guests or employees, or to assure the continued
operation of the Hotel, Manager is authorized to take all actions and to make
all expenditures necessary to repair and correct such condition, regardless
whether provisions have been made in the applicable budget for such emergency
expenditures. Expenditures made by Manager in connection with an emergency shall
be paid, in Manager's sole discretion, out of the Bank Account(s). Owner shall
immediately replenish such funds paid from the Bank Account(s). Manager shall
endeavor to communicate with Owner prior to making any expenditures to correct
an emergency condition, but in any event shall promptly notify Owner after the
emergency expenditures have been made.
ARTICLE 8
CONDEMNATION AND CASUALTY
Section 8.01. Condemnation. If the Hotel is taken in any eminent
domain, expropriation, condemnation, compulsory acquisition or similar
proceeding by a competent authority, this Agreement shall automatically
terminate as of the date of taking or condemnation. Any compensation for the
taking or condemnation of the physical facility comprising the Hotel shall be
paid to Owner. Manager, however, with the full cooperation of Owner, shall have
the right to file a claim with the appropriate authorities for the loss of
Management Fee income for the remainder of the Term and any extension thereof
because of the condemnation or taking. If only a portion of the Hotel is so
taken and the taking does not make it unreasonable or imprudent, in Manager's
and Owner's opinion, to operate the remainder as a hotel of the type immediately
preceding such taking, this Agreement shall not terminate. Any compensation
shall be used, however, in whole or in part, to render the Hotel a complete and
satisfactory architectural unit as a hotel of the same type and class as it was
immediately preceding such taking or condemnation.
Section 8.02. Casualty. In the event of a fire or other casualty, Owner
shall comply with the terms of the License Agreement and this Agreement shall
remain in full force and effect so long as the License Agreement remains in full
force and effect.
ARTICLE 9
TERMINATION RIGHTS
Section 9.01. Bankruptcy and Dissolution. If either party is
voluntarily or involuntarily dissolved or declared bankrupt, insolvent, or
commits an act of bankruptcy, or if a company enters into liquidation whether
compulsory or voluntary otherwise than for the purpose of amalgamation or
reconstruction, or compounds with its creditors, or has a receiver appointed
over all or any part of its assets, or passes title in lieu of foreclosure, the
other party may terminate this Agreement immediately upon serving notice to the
other party, without liability on the part of the terminating party.
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Section 9.02. Manager's Termination Right Upon the Termination of
License Agreement. If the License Agreement is terminated for any reason,
Manager may terminate this Agreement immediately upon serving notice to Owner,
without liability on the part of Manager. Upon such termination, unless
specifically provided otherwise herein, Manager shall be entitled to receive the
Sale Termination Fee calculated in the manner set forth on Exhibit "B".
Notwithstanding anything contained herein, Manager shall not be entitled to
receive the Sale Termination Fee if the License Agreement is terminated because
of Manager's failure to perform its obligations hereunder and Manager's failure
was not caused by the failure of Owner to perform its obligations hereunder.
Section 9.03. (a) Owner's Default. The following shall, at the election
of Manager, constitute events of default by Owner under this Agreement (each
such event being referred to herein as an "Owner's Default"):
(i) The failure of Owner to pay any amount to Manager provided for
herein for a period of ten (10) days after written notice by
Manager of such failure to pay.
(ii) Failure of Owner to keep or perform any duty, obligation,
covenant or agreement of Owner under this Agreement (other than
the obligation to pay that is the subject of paragraph (i)
above) and such failure continues for a period of thirty (30)
days after receipt of written notice thereof from Manager;
provided, however, if such failure cannot reasonably be remedied
or corrected within such thirty (30) day period, then such
thirty (30) day period shall be extended for such additional
period as may be reasonably required to cure such default but
only if Owner promptly commences to cure such default and
continues thereafter with all due diligence to complete such a
cure to the satisfaction of Manager.
(iii) The occurrence of a default under or other termination of the
Percentage Lease.
(iv) Failure of Fee Owner to keep or perform any duty, obligation,
covenant or agreement of Fee Owner under the "Comfort Letter" of
even date herewith from Manager to Fee Owner agreed to and
accepted by Fee Owner (the "Comfort Letter") relating to the
Hotel and such failure continues for a period of thirty (30)
days after receipt of written notice thereof from Manager;
provided, however, if such failure cannot reasonably be remedied
or corrected within such thirty (30) day period, then such
thirty (30) day period shall be extended for such additional
period as may be reasonably required to cure such default, but
only if Fee Owner promptly commences to cure such default and
continues thereafter with all due diligence to complete such a
cure to the satisfaction of Manager.
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(v) The occurrence of an "Event of Default" (as defined in the
Acquisition Mortgage Documents (as herein defined)) under the
Acquisition Mortgage Documents.
On the occurrence of any Owner's Default, Manager shall have the right
to terminate this Agreement by written notice to Owner, in addition to its
rights to seek damages or other remedies available to it at law or in equity.
(b) Manager Default. The following shall, at the election of Owner,
constitute an event of default by Manager under this Agreement (such event being
referred to herein as the "Manager Default"): Failure of Manager to keep or
perform any duty, obligation, covenant or agreement of Manager under this
Agreement and such failure shall continue for a period of thirty (30) days after
receipt of written notice thereof from Owner; provided, however, if such failure
cannot reasonably be remedied or corrected within such thirty (30) day period,
then such thirty (30) day period shall be extended for such additional period as
may be reasonably required to cure such default provided that Manager promptly
commences to cure such default and continues thereafter with all due diligence
to complete such cure to the satisfaction of Owner. Upon the occurrence of the
Manager Default, Owner shall have the right to terminate this Agreement by
written notice to Manager, in addition to its right to seek damages or other
remedies available to it at law or in equity.
Section 9.04. Owner's -- Termination Rights. (a) Provided Owner is not
in default under this Agreement at the time of delivery of the Termination
Notice (as defined herein) or on the Termination Date (as defined herein), Owner
shall have the right, after the tenth anniversary of the Effective Date, to
terminate this Agreement by giving written notice (a "Termination Notice") to
Manager setting forth an effective termination date which shall be the last day
of a month (the "Termination Date") and which shall be not less than six (6)
months nor more than twelve (12) months after the date of such Termination
Notice and shall in no event be prior to the tenth anniversary of the Effective
Date. If Owner terminates this Agreement pursuant to this Section 9.04(a), in
addition to payment of all other fees and reimbursable sums due to Manager on
the Termination Date, Manager shall have the right to receive the Cancellation
Termination Fee calculated in the manner set forth on Exhibit "B". Such
termination shall be effective so long as on or before the Termination Date (x)
Owner pays to Manager the Cancellation Termination Fee and all amounts
determined by Owner and Manager, each acting reasonably and in good faith, to be
due and owing to Manager pursuant to the terms and provisions of this Agreement
and (y) all sums then outstanding under the Acquisition Loan shall have been
paid in full.
(b) (i) Provided Owner is not in default under this Agreement, Owner
shall have the right to terminate this Agreement if, beginning in the first full
calendar year of Hotel operations, Manager fails to achieve, in any two
consecutive calendar years, a Gross Operating Profit (as herein defined) which
is at least eighty-five percent (85%) of the amount set forth in the respective
annual Operating Budget for Gross Operating Profit ("Budgeted GOP"); provided,
however, that, if within sixty (60) days of receipt of a notice from Owner that
Owner intends to terminate this Agreement pursuant to this Section 9.04(b)(i),
Manager pays in cash to Owner the difference between the achieved Gross
Operating Profit and eighty-five percent (85%) of the Budgeted GOP for the
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second of the two consecutive calendar years in which shortfalls occurred, then
Owner shall not be entitled to terminate this Agreement. If Owner is entitled to
and elects to terminate this Agreement, Owner shall give written notice to
Manager within ninety (90) days following delivery to Owner of the annual
financial statements for the calendar year. If such notice is not provided by
Owner to Manager within such ninety (90) day period, Owner shall be deemed to
have waived its right hereunder to terminate this Agreement with respect to the
calendar year as to which the failure occurred. In the event Owner has the right
to terminate with respect to a calendar year but waives such right, Owner's
right to terminate shall carry forward and shall be applicable to the next
succeeding calendar year if Manager fails to achieve eighty-five percent (85%)
of Budgeted GOP for the next succeeding year, subject to Manager's right to cure
for such calendar year. For purposes of this section, the term "Gross Operating
Profit" shall mean the amount, if any, by which Adjusted Gross Revenues for any
calendar year exceed operating costs for such calendar year.
(ii) The provisions of clause (b)(i) above shall not apply in any
calendar year in which the operation of the Hotel, or the use of the Hotel's
facilities, are significantly disrupted by casualty loss, strike, eminent
domain, or other events of Force Majeure that are beyond the reasonable control
of Manager, or major repairs to or refurbishment of the Hotel. In the event
Owner exercises the right of termination contemplated in clause (b)(i) above,
(a) Owner shall have no obligation to pay any termination fee or other damages
to Manager as a consequence of such termination, except that Owner shall be
liable to Manager and shall pay immediately upon such termination all fees
earned and other amounts and expenses payable or reimbursable to Manager
pursuant to this Agreement and (b) the exercise of the right of termination
shall only be valid if on or prior to the termination date all sums outstanding
under the Acquisition Loan shall have been paid in full.
Section 9.05. Manager's Right to Terminate Upon Sale. If there is to be
a "Change in Ownership" as defined in the License Agreement and the new owner of
the Hotel has not received a Homewood Suites License Agreement for the operation
of the Hotel (for purposes of this Section 9.05, said agreement shall be
referred to as the "License Agreement"), Manager shall have the right upon
giving notice to Owner to terminate this Agreement on the date the Change of
Ownership occurs. If there is a Change of Ownership and the new owner of the
Hotel receives a License Agreement, but does not enter into an assumption
agreement, pursuant to which the new owner assumes all of Owner's obligations
hereunder, with Manager prior to the date the Change of Ownership occurs,
Manager shall have the right, upon giving notice to Owner, to terminate this
Agreement on the date the Change of Ownership occurs. If Manager terminates this
Agreement pursuant to this Section 9.05 (in addition to payment of all other
fees and reimbursable sums due to Manager to the date of termination), Manager
shall have the right to receive the Sale Termination Fee calculated in the
manner set forth on Exhibit "B". If a Change of Ownership occurs, and the new
owner obtains a License Agreement and the new owner and Manager enter into an
assumption agreement pursuant to which this Agreement remains in full force and
effect, Manager shall not receive a Termination Fee and references in this
Agreement to License Agreement shall be to the License Agreement with such new
owner.
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Section 9.06. Delays. Notwithstanding any other provision of this
Agreement, if any event of the type described in Article 7 or 8 occurs after the
Effective Date and Manager is unable to operate the Hotel for a period of ninety
(90) days, Manager shall have the option to terminate this Agreement upon thirty
(30) days' prior written notice to Owner, without liability on the part of
Manager, its parent or their subsidiaries or affiliates. Under any such
circumstances, the Acquisition Loan shall be repaid in full.
Section 9.07. Employment Solicitation Restriction Upon Termination.
Owner and its affiliates and subsidiaries and their successors hereby agree not
to solicit the employment of the Hotel general manager, assistant general
manager or director of sales at any time during the term of this Agreement
without Manager's prior written approval. Furthermore, Owner and its affiliates
and subsidiaries and successors agree not to employ the Hotel's general manager,
assistant general manager or director of sales for a period of twelve (12)
months after the termination or expiration of this Agreement, without Manager's
prior written approval.
Section 9.08. Transition Upon Termination. Upon any termination of this
Agreement, all fees and payments due to Manager as of the effective date of
termination, including all accrued and unpaid fees and reimbursable charges and
expenses, shall be paid to Manager within ten (10) days after delivery to Owner
of an itemized statement of such fees and payments. Manager shall be entitled to
exercise the right of setoff provided in Section 11.16 hereof with respect to
such fees, charges and expenses. Manager shall deliver to Owner, or such other
person or persons as Owner may designate, copies of all books and records of the
Hotel and all funds in the possession of Manager belonging to Owner or received
by Manager pursuant to the terms of this Agreement, and shall assign, transfer
or convey to such person or persons all service contracts and personal property
relating to or used in the operation and maintenance of the Hotel, except any
personal property which is owned by Manager. Manager also shall, for a period of
thirty (30) days after such expiration or termination, make itself available to
consult with and advise Owner or such other person or persons regarding the
operation and maintenance of the Hotel at a consultation fee to be agreed upon
between Manager and Owner.
ARTICLE 10
APPLICABLE LAW AND ARBITRATION
Section 10.01. Applicable Law. The interpretation, validity and
performance of this Agreement shall be governed by the procedural and
substantive laws of the state of Tennessee and any and all disputes, except
those specifically referred to below, shall be brought and maintained within
that state. If any judicial authority holds or declares that the law of another
jurisdiction is applicable, this Agreement shall remain enforceable under the
laws of that jurisdiction.
Section 10.02. Arbitration of Financial Matters.
Subsection 10.02.1. Matters to be Submitted to Arbitration. In
the case of a dispute with respect to any of the following matters,
either party may submit
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such matter to arbitration which shall be conducted by the Accountants
(as hereinafter defined in Subsection 10.02.2): (a) computation of the
Management Fees; (b) reimbursements due to Manager under the provisions
of Section 11.15; (c) any adjustment in the Minimum Balance under the
provisions of Section 4.01(v); (d) any adjustment in dollar amounts of
insurance coverages required to be maintained; and (e) any dispute
concerning the approval of an Operating Budget.
All disputes concerning the above matters shall be submitted to
the Accountants. The decision of the Accountants with respect to any
matters submitted to them under this Subsection 10.02.1 shall be
binding on both parties hereto.
Subsection 10.02.2. The Accountants. The "Accountants" shall be
one of three (3) firms of certified public accountants of recognized
national standing in the hotel industry. Until otherwise agreed to by
the parties, the three (3) firms shall be Arthur Andersen & Co.,
PriceWaterhouseCoopers, and Ernst & Young, notwithstanding any existing
relationships which may exist between Owner and such accounting firms
or Manager and such accounting firms. The party desiring to submit any
matter to arbitration under Subsection 10.02.1 shall do so by written
notice to the other party, which notice shall set forth the items to be
arbitrated and such party's choice of one of the three (3) accounting
firms. The party receiving such notice shall within fifteen (15) days
after receipt of such notice either approve such choice, or designate
one of the remaining two (2) firms by written notice back to the first
party, and the first party shall within fifteen (15) days after receipt
of such notice either approve such choice or disapprove the same. If
both parties shall have approved one of the three (3) firms under the
preceding sentence, then such firm shall be the "Accountants" for the
purposes of arbitrating the dispute; if the parties are unable to agree
on an accounting firm, then the third firm, which was not designated by
either party, shall be the "Accountants" for such purpose. The
Accountants shall be required to render a decision in accordance with
the procedures described in Subsection 10.02.3 within fifteen (15) days
after being notified of their selection. The fees and expenses of the
Accountants will be paid by the non-prevailing party.
Subsection 10.02.3. Procedures. In all arbitration proceedings
submitted to the Accountants, the Accountants shall be required to
agree upon and approve the substantive position advocated by Owner or
Manager with respect to each disputed item. Any decision rendered by
the Accountants that does not reflect the position advocated by Owner
or Manager shall be beyond the scope of authority granted to the
Accountants and, consequently, may be overturned by either party. All
proceedings by the Accountants shall be conducted in accordance with
the Uniform Arbitration Act, except to the extent the provisions of
such act are modified by this Agreement or the mutual agreement of the
parties. Unless otherwise agreed, all arbitration proceedings shall be
conducted at the Hotel.
Section 10.03. Performance During Disputes. It is mutually agreed that
during any kind of controversy, claim, disagreement or dispute, including a
dispute as to the validity of this Agreement, Manager shall remain in possession
of the Hotel as
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Manager; and Owner and Manager shall continue their performance of the
provisions of this Agreement and its exhibits. Manager shall be entitled to
injunctive relief from a civil court or other competent authority to maintain
possession in the event of a threatened eviction during any dispute,
controversy, claim or disagreement arising out of this Agreement.
ARTICLE 11
GENERAL PROVISIONS
Section 11.01. Authorization. Owner and Manager represent and warrant
to each other that their respective corporations have full power and authority
to execute this Agreement and to be bound by and perform the terms hereof. On
request, each party shall furnish the other evidence of such authority.
Section 11.02. Relationship. Manager and Owner shall not be construed
as joint venturers or partners of each other by reason of this Agreement and
neither shall have the power to bind or obligate the other except as set forth
in this Agreement.
Section 11.03. Manager's Contractual Authority in the Performance of
this Agreement. Manager is authorized to make, enter into and perform in the
name of and for the account of Owner any contracts deemed necessary by Manager
to perform its obligations under this Agreement. In exercising its authority
hereunder, Manager shall be entitled to execute and enter into contracts without
the specific approval of Owner and Fee Owner so long as each such contract (i)
requires expenditures or otherwise establishes liability of twenty-five thousand
dollars ($25,000) or less and (ii) has a term (excluding options in favor of
Manager and Owner to renew) of one (1) year or less or can be cancelled without
penalty upon sixty (60) days' notice or less, provided, however, that any
contract entered into pursuant to the last paragraph of Section 4.01(vi) shall
be governed by the provisions of said Section 4.01(vi). Any contract that does
not satisfy the conditions set forth in the preceding sentence shall require the
prior approval in each instance of Owner, regardless whether such expenditure is
authorized in an applicable budget, unless the form of the contract proposed to
be entered into has been approved in advance by Owner. Owner agrees to promptly
respond to any request for approval and further agrees that its consent shall
not be unreasonably withheld or delayed. Manager shall be authorized to enter
into contracts with affiliates of Manager, but only so long as Owner shall have
approved in advance the cost of the service or product to be provided.
Section 11.04. Further Actions. Owner and Manager agree to execute all
contracts, agreements and documents and to take all actions necessary to comply
with the provisions of this Agreement and the intent hereof.
Section 11.05. Successors and Assigns. Owner's consent shall not be
required for Manager to assign any of its rights, interests or obligations as
Manager hereunder to any parent, subsidiary or affiliate of Manager or Promus
Hotel Corporation, provided that any such assignee agrees to be bound by the
terms and conditions of this Agreement and provided, further, that such assignee
has received an assignment of all or substantially all of the management
agreements entered into by Manager with respect to
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other Homewood Suites hotels. The acquisition of Manager or its parent company
by a third party shall not constitute an assignment of this Agreement by Manager
and this Agreement shall remain in full force and effect between Owner and
Manager. Except as herein provided, Manager shall not assign any of its
obligations hereunder without the prior written consent of Owner, which shall
not be unreasonably withheld or delayed. Owner shall be deemed to have consented
to such an assignment of this Agreement if Owner has not notified Manager in
writing to the contrary within fifteen (15) days after Owner has received
Manager's request for Owner's consent to an assignment. Manager shall have the
right to pledge or assign its right to receive the Management Fees hereunder
without the prior written consent of Owner.
Owner shall have the right to assign this Agreement to the person or
entity which has obtained (i) subleasehold title to the Hotel in accordance with
the Comfort Letter and (ii) a Homewood Suites License Agreement for the Hotel.
Except as hereinabove provided, Owner shall not have the right to assign this
Agreement.
Section 11.06. Notices. All notices or other communications provided
for in this Agreement shall be in writing and shall be either hand delivered,
delivered by certified mail, postage prepaid, return receipt requested,
delivered by an overnight delivery service, or delivered by facsimile machine
(with an executed original sent the same day by an overnight delivery service),
addressed as set forth on Exhibit "B". Notices shall be deemed delivered on the
date that is four (4) calendar days after the notice is deposited in the U.S.
mail (not counting the mailing date) if sent by certified mail, or, if hand
delivered, on the date the hand delivery is made, or if delivered by facsimile
machine, on the date the transmission is made. If given by an overnight delivery
service, the notice shall be deemed delivered on the next business day following
the date that the notice is deposited with the overnight delivery service. The
addresses given above may be changed by any party by notice given in the manner
provided herein.
Section 11.07. Documents. Owner shall furnish Manager copies of all
leases, title documents, property tax receipts and bills, insurance statements,
all financing documents (including notes and mortgages) relating to the Hotel
and such other documents pertaining to the Hotel as Manager shall request.
Section 11.08. Defense. Manager shall defend and/or settle any claim or
legal action brought against Manager or Owner, individually, jointly or
severally in connection with the operation of the Hotel. Manager shall retain
and supervise legal counsel, accountants and such other professionals,
consultants and specialists as Manager deems appropriate to defend and/or settle
any such claim or cause of action. Owner shall have the right to participate
actively in the defense of any such claim or cause of action in which Owner is a
named defendant. Owner's approval shall be required with respect to any proposed
settlement of any claim or cause of action in which Owner is a named party or
that is not covered by insurance (excluding any deductible amount specified in
the applicable policy of insurance). Manager shall confer with Owner concerning
any settlement proposal that Manager is considering accepting, regardless of
whether Owner is a named party, but Owner's approval shall not be required if
Owner is not a named party and the settlement is covered by insurance. All
liabilities, costs, and expenses, including attorneys' fees and disbursements,
incurred in defending and/or settling any such claim or legal action which are
not covered by insurance shall be paid by Owner.
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Section 11.09. Waivers. No failure or delay by Manager or Owner to
insist upon the strict performance of any covenant, agreement, term or condition
of this Agreement, or to exercise any right or remedy consequent upon the breach
thereof, shall constitute a waiver of any such breach or any subsequent breach
of such covenant, agreement, term or condition. No covenant, agreement, term, or
condition of this Agreement and no breach thereof shall be waived, altered or
modified except by written instrument. No waiver of any breach shall affect or
alter this Agreement, but each and every covenant, agreement, term and condition
of this Agreement shall continue in full force and effect with respect to any
other then existing or subsequent breach thereof.
Section 11.10. Changes. Any change to or modification of this
Agreement, including, without limitation, any change in the application of this
Agreement to the Hotel, must be evidenced by a written document signed by both
parties hereto.
Section 11.11. Captions. The captions for each Article and Section are
intended for convenience only.
Section 11.12. Severability. If any of the terms and provisions hereof
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any of the other terms or provisions hereof. If, however, any
material part of a party's rights under this Agreement shall be declared invalid
or unenforceable (specifically including Manager's right to receive its
Management Fees), the party whose rights have been declared invalid or
unenforceable shall have the option to terminate this Agreement upon thirty (30)
days' written notice to the other party, without liability on the part of the
terminating party.
Section 11.13. Interest. Any amount payable to Manager or Owner by the
other which has not been paid when due shall accrue interest at the lesser of:
(a) the highest legal limit in the state in which the Hotel is located, (b) the
highest legal limit in the state of Tennessee, or (c) two percentage points (2%)
over the published base rate of interest charged by Citibank, N.A., New York,
New York, to borrowers on ninety (90) day unsecured commercial loans, as the
same may be changed from time to time.
Section 11.14. Reimbursement. The performance by Manager of its
responsibilities under this Agreement are conditioned upon Owner providing
sufficient funds to Manager on a timely basis to enable Manager to perform its
obligations hereunder. Nevertheless, Manager shall be entitled, at its option,
after first providing not less than ten (10) days' prior written notice to Owner
specifying the obligations to be satisfied and the amount of money to be
advanced, to advance funds or contribute property, on behalf of the Owner, to
satisfy obligations of Owner in connection with the Hotel and this Agreement.
Manager shall keep appropriate records to document all reimbursable expenses
paid by Manager, which records shall be made available for inspection by Owner
or its agents upon request. Owner agrees to reimburse Manager with interest upon
demand for money paid or property contributed by Manager to satisfy obligations
of Owner in connection with the Hotel and this Agreement. Interest shall be
calculated at the rate set forth in Section 11.13 from the date Owner was
obligated to remit the funds or contribute the property for the satisfaction of
such obligation to the date reimbursement is made.
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Section 11.15. Travel and Out-of-Pocket Expenses. Manager shall be
reimbursed for all reasonable travel and out-of-pocket expenses of Manager's
employees reasonably incurred in the performance of this Agreement, provided,
however, that travel and out-of-pocket expenses of officers of Manager, its
parent and affiliates shall not be reimbursable by Owner. Manager shall have
sole discretion, which shall not be unreasonably exercised, to determine the
necessity for such travel or other expenses.
Section 11.16. Set off. Without prejudice to Manager's right to
terminate this Agreement pursuant to the provisions of this Agreement, Manager
may at any time and without notice to Owner set off or transfer any sum or sums
held by Manager or other affiliate of Promus Hotels, Inc. to the order or on
behalf of Owner or Fee Owner or standing to the credit of Owner or Fee Owner in
the Bank Account(s) in or towards satisfaction of any of Owner's liabilities to
Manager in respect of all sums due to Manager under the terms of this Agreement.
Section 11.17. Third Party Beneficiary. This Agreement is exclusively
for the benefit of the parties hereto and it may not be enforced by any party
other than the parties to this Agreement and shall not give rise to liability to
any third party other than the authorized successors and assigns of the parties
hereto.
Section 11.18. Brokerage. Manager and Owner represent and warrant to
each other that neither has sought the services of a broker, finder or agent in
this transaction, and neither has employed, nor authorized, any other person to
act in such capacity. Manager and Owner each hereby agrees to indemnify and hold
the other harmless from and against any and all claims, loss, liability, damage
or expenses (including reasonable attorneys' fees) suffered or incurred by the
other party as a result of a claim brought by a person or entity engaged or
claiming to be engaged as a finder, broker or agent by the indemnifying party.
Section 11.19. Survival of Covenants. Any covenant, term or provision
of this Agreement which, in order to be effective, must survive the termination
of this Agreement, shall survive any such termination.
Section 11.20. Estoppel Certificate. Manager and Owner agree to furnish
to the other party, from time to time upon request, an estoppel certificate in
such reasonable form as the requesting party may request stating whether there
have been any defaults under this Agreement known to the party furnishing the
estoppel certificate and such other information relating to the Hotel as may be
reasonably requested.
Section 11.21. Other Agreements. Except to the extent as may now or
hereafter be specifically provided, nothing contained in this Agreement shall be
deemed to modify any other agreement between Owner and Manager with respect to
the Hotel or any other property. This Agreement, together with the Comfort
Letter, contains the entire agreement between Owner and Manager regarding the
management of the Hotel.
Section 11.22. Periods of Time. Whenever any determination is to be
made or action is to be taken on a date specified in this Agreement, if such
date shall fall on a Saturday, Sunday or legal holiday under the laws of the
states of Tennessee and Virginia and/or the state in which the Hotel is located,
then in such event said date shall be extended to the next day which is not a
Saturday, Sunday or legal holiday.
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Section 11.23. Preparation of Agreement. This Agreement shall not be
construed more strongly against either party regardless of who is responsible
for its preparation.
Section 11.24. Exhibits. All exhibits attached hereto are incorporated
herein by reference and made a part hereof as if fully rewritten or reproduced
herein.
Section 11.25. Attorneys' Fees and Other Costs. The parties to this
Agreement shall bear their own attorneys' fees in relation to negotiating and
drafting this Agreement. Should Owner or Manager engage in litigation to enforce
their respective rights pursuant to this Agreement, the prevailing party shall
have the right to indemnity by the non-prevailing party for an amount equal to
the prevailing party's reasonable attorneys' fees, court costs and expenses
arising therefrom.
Section 11.26. Agreement Not an Interest in Real Property. This
Agreement is not, and shall not be deemed at any time to be or to create, an
interest in real estate or a lien or other encumbrance of any kind whatsoever
against the Hotel or the land on which it is erected.
Section 11.27. Acquisition Loan; Agency Coupled With an Interest; No
Termination While the Acquisition Loan Remains Outstanding. In accordance with
the Purchase Agreement (as herein defined), that certain Agreement of Sale dated
August 6, 1999 by and among Hampton Inns, Inc., Promus Hotels Florida, Inc. and
Promus Hotels, Inc., as sellers, and Apple Suites, Inc. ("Parent"), as buyer,
and that certain Agreement of Sale dated October 5, 1999 between Hampton Inns,
Inc., as seller, and Parent, as buyer (as the same have been amended,
collectively, the "Existing Purchase Agreement"), Promus Hotels, Inc. (in its
capacity as lender, the "Acquisition Lender") has loaned to Parent the sum of
$80,186,250 (the "Acquisition Loan") as purchase money financing for the
acquisition of the properties (the "Properties") conveyed pursuant to the
Purchase Agreement and the Existing Purchase Agreement. The Acquisition Loan is
evidenced by (i) a note of Parent dated September 20, 1999 in the amount of
$26,625,000, (ii) a note of Parent dated October 5, 1999 in the amount of
$7,350,000, (iii) a note of Parent dated November 29, 1999 in the amount of
$30,210,000, (iv) a note of Parent dated December 22, 1999 in the amount of
$4,384,500 and (v) a note of Parent of even date herewith in the amount of
$11,616,750 is secured by, among other things, mortgage(s), deed(s) of trust or
deed(s) to secure debt dated September 20, 1999, October 5, 1999, November 29,
1999, December 22, 1999 or of even date herewith from Parent or its wholly-owned
subsidiary(ies) which encumbers some or all of the Properties, which may include
the Hotel (the documents evidencing and securing the Acquisition Loan herein
referred to as the "Acquisition Mortgage Documents"). Owner and Manager
specifically acknowledge and agree that (i) Acquisition Lender has been induced,
in part, to make the Acquisition Loan to Parent based upon Owner's agreement to
enter into this Agreement with Manager, (ii) Acquisition Lender required Owner
to enter into this Agreement with Manager as a condition to making the
Acquisition Loan so that (inter alia) Manager could facilitate the repayment of
the Acquisition Loan in accordance with its terms by managing and operating the
Hotel in accordance with the terms of this Agreement, and
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(iii) it is the parties' intention that Owner's retention of Manager to operate
the Hotel pursuant to the terms of this Agreement is intended to, and shall,
create an "agency coupled with an interest" in favor of Manager, which agency
shall be irrevocable unless and until the Acquisition Loan is repaid in full.
Manager shall be entitled to the legal and equitable protections that the status
of an agent coupled with an interest confers on Manager for so long as the
Acquisition Loan remains outstanding. Accordingly, (x) no purported termination
of this Agreement by Owner for any reason whatsoever (including, without
limitation, any purported termination pursuant to Article 8 or Article 9) shall
be effective unless and until the Acquisition Loan shall have been repaid in
full, and (y) Manager shall have the right and option to extend the Term of this
Agreement indefinitely for so long as the Acquisition Loan remains outstanding.
The provisions of this Section shall take effect notwithstanding anything to the
contrary set forth in this Agreement.
Section 11.28. Counterparts. This Agreement may be executed in two (2)
or more counterparts, each of which shall be deemed an original.
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The parties have respectively caused this Agreement to be executed as
of the respective dates shown below.
OWNER:
/s/ Gus G. Remppies APPLE SUITES MANAGEMENT,
- ------------------------------- INC., a Virginia corporation
Witness:
By /s/ Glade M. Knight
--------------------------------
Name: Glade M. Knight
Title: Chairman, CEO and President
Date:
MANAGER:
/s/ Gus G. Remppies PROMUS HOTELS, INC.
- -------------------------------
Witness:
By /s/ Stevan D. Porter
--------------------------------
Stevan D. Porter
Executive Vice President
Date:
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EXHIBIT "A"
LICENSE AGREEMENT
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EXHIBIT "B"
DEAL SPECIFIC TERMS
TERM: Fifteen (15) years from the Effective
- ---- Date
INITIAL MINIMUM BALANCE
FOR THE BANK ACCOUNT(S) : $75,000
- -------------------------
INITIAL OWNER'S REPRESENTATIVE: Doug Schepker
DISBURSEMENT PRIORITY SCHEDULE:
- ------------------------------
Each fiscal month Manager, on behalf of Owner, shall disburse funds
from the Bank Account(s) in the following order of priority and to the extent
available:
(a) all fees, assessments and charges due and payable under the
License Agreement when issued;
(b) the Management Fee, but excluding, to the extent then applicable,
the Subordinated Management Fee;
(c) all reimbursable expenses due Manager;
(d) all other Hotel operating costs (herein and in the Agreement
referred to as "operating costs"), as such costs and expenses are
defined under the accounting practices of Manager in conformity
with generally accepted accounting practices consistently
applied, specifically including, but not limited to, (i) the cost
of operating equipment and operating supplies, wages, salaries
and employee fringe benefits, advertising and promotional
expenses, the cost of personnel training programs, utility and
energy costs, operating licenses and permits, grounds and
landscaping maintenance costs and equipment rentals approved by
Manager as an operating cost; (ii) all expenditures made for
maintenance and repairs to keep the Hotel in good condition and
repair, specifically excluding expenditures for Capital
Replacements; and (iii) premiums and charges on the insurance
coverages specified in Exhibit "D" incurred after the Effective
Date. There shall be excluded from the operating costs of the
Hotel the following, which shall be ownership costs of the Hotel:
(i) depreciation of the Hotel, furnishings, fixtures and
equipment; (ii) rental pursuant to a ground lease, if any, or the
Percentage Lease or any other lease payments; (iii) debt service
(interest and principal) on any mortgage(s) encumbering Owner's
leasehold interest in, and/or Fee Owner's fee interest in, the
Hotel; (iv) property taxes and assessments; (v) expenditures for
Capital Replacements; (vi) audit, legal and other professional or
special fees; (vii) premiums for insurance
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coverages specified in Exhibit "E"; (viii) administrative and
general expenses and disbursements of Owner, including
compensation of employees of Owner; (ix) Federal, State and local
Franchise and Income Taxes; (x) amortization of bond discounts
and mortgage expenses; (xi) deposits into the Reserve Fund or
amounts held pursuant to Section 3.01(xix); and (xiii) such other
costs or expenses which are normally treated as ownership costs
under the accounting practices of Manager in conformity with
generally accepted accounting practices consistently applied;
(e) the following ownership costs, disbursed in the following order
of priority and to the extent available:
(i) an amount (annualized) to satisfy land, building and
personal property taxes and assessments;
(ii) an amount (annualized) to satisfy the premiums for the
insurance required to be obtained by Owner in accordance
with Exhibit "E";
(iii) the amount to be deposited in the Reserve Fund pursuant
to Section 4.01(d); and
(iv) any ground lease payments, but specifically excluding,
except as specifically itemized above, any sums payable
by Owner to Fee Owner pursuant to the Percentage Lease;
(f) Owner's Basic Return;
(g) the Subordinated Management Fee;
(h) payments of principal, interest and other sums payable under the
Acquisition Loan;
(i) any payments not specifically contemplated above which are
required to be paid by Owner to Fee Owner pursuant to the
Percentage Lease; and
(j) except as provided above, debt service upon any mortgage(s)
encumbering the Hotel and any capital lease payments.
After the disbursements set forth above, any excess funds remaining in
the Bank Account(s) over the Minimum Balance shall be distributed to Owner. If
after making the disbursements set forth above, there shall be a deficiency in
the Minimum Balance, Owner shall immediately provide such funds as may be
required to maintain the Minimum Balance in the Bank Account(s).
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NOTICES:
Owner: Apple Suites Management, Inc.
----- 306 East Main Street
Richmond, Virginia 23219
Fax: 804/782-9302
Attention: Mr. Glade M. Knight
with a copy to:
Jenkens & Gilchrist
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202-2799
Fax: 214/855-4300
Attention: Thomas E. Davis, Esq.
Manager: Promus Hotels, Inc.
------- 755 Crossover Lane
Memphis, Tennessee 38117
Fax: 901/374-5050
Attention: Corporate Secretary
with a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092
Fax: 212/259-6333
Attention: Graham R. Hone, Esq.
SALE TERMINATION FEE:
The "Sale Termination Fee" shall be: (i) if the termination of this
Agreement occurs on or before the second anniversary of the Effective Date, the
sum of $1,032,820; (ii) if the termination of this Agreement occurs after the
second anniversary of the Effective Date but on or before the tenth (10th)
anniversary of the Effective Date, an amount equal to the product of (x) three
(3) times (y) the quotient of the aggregate of the Management Fees earned during
the preceding twenty-four (24) month period divided by two (2); (iii) if the
termination of this Agreement occurs after the tenth (10th) anniversary of the
Effective Date but on or before the fourteenth (14th) anniversary of the
Effective Date, an amount equal to the product of (x) one and one-half (1.5)
times (y) the aggregate of the Management Fees earned during the preceding
twenty-four month period divided by two (2); and (iv) if the termination of this
Agreement occurs after the fourteenth (14th) anniversary of the Effective Date,
an amount equal to the product of (x) the aggregate of the Management Fees
earned during the preceding twenty-four (24) month period divided by 24 times
(y) the number of full calendar months remaining in the Term.
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CANCELLATION TERMINATION FEE:
The "Cancellation Termination Fee" shall be: (i) if the termination of
this Agreement occurs after the tenth (10th) anniversary of the Effective Date
but on or before the fourteenth (14th) anniversary of the Effective Date, an
amount equal to the product of (x) two (2) times (y) the aggregate of the
Management Fees earned during the preceding twenty-four month period divided by
two (2); and (ii) if the termination of this Agreement occurs after the
fourteenth (14th) anniversary of the Effective Date, an amount equal to the
product of (x) the aggregate of the Management Fees earned during the preceding
twenty-four (24) month period divided by 24 times (y) the number of full
calendar months remaining in the Term.
ACCOUNTING FEE: $1,000/month
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EXHIBIT "C"
MANAGEMENT FEES
The "Management Fee" shall mean and refer to a fee equal to four
percent (4%) of Adjusted Gross Revenues (as hereinafter defined) with respect to
each fiscal month during the term of this Agreement, provided, however, that for
the first two years of the term of this Agreement a portion of the Management
Fee equal to one percent (1%) of Adjusted Gross Revenues (such portion, the
"Subordinated Management Fee") shall be subordinated to Owner's Basic Return (as
hereinafter defined). Manager and Owner agree that, in light of Manager's
agreement to subordinate the Subordinated Management Fee, the Subordinated
Management Fee, while payable monthly to the extent proceeds are available,
shall be adjusted annually and paid, to the extent Adjusted Gross Revenues after
payment of Owner's Basic Return are available therefor, within thirty (30) days
of Manager's delivery of the operating statements required pursuant to Section
3.01(vi) of the Agreement. Any Subordinated Management Fee not so paid pursuant
to the provisions of the immediately preceding sentence shall not thereafter be
payable by Owner.
The term "Gross Revenues" shall be defined as all revenues and income
of any nature derived directly or indirectly from the Hotel or from the use or
operation thereof, whether on or off the Site, including total room sales, food
and beverage sales, if any, laundry, telephone, telegraph and telex revenues,
other income, rental or other payments from lessees, sublessees, licensees and
concessionaires (but not the gross receipts of such lessees, sublessees,
licensees or concessionaires) and the proceeds of business interruption, use,
occupancy or similar insurance.
The term "Adjusted Gross Revenues" shall be defined as Gross Revenues
less the following revenues actually received by the Hotel and included in Gross
Revenues: (i) any gratuities or service charges added to a customer's bill; (ii)
any credits or refunds made to customers, guests or patrons; (iii) any sums and
credits received by Owner for lost or damaged merchandise; (iv) any sales taxes,
excise taxes, gross receipt taxes, admission taxes, entertainment taxes, tourist
taxes or charges; (v) any proceeds from the sale or other disposition of the
Hotel, furnishings and equipment or other capital assets; (vi) any fire and
extended coverage insurance proceeds; (vii) any condemnation awards; (viii) any
proceeds of financing or refinancing of the Hotel; and (ix) any interest on the
Bank Account(s).
The term "Owner's Investment" shall mean the sum of (x) the purchase
price for the Hotel ("Purchase Price") as set forth in the Agreement of Sale
dated November 22, 1999 by and between Parent, as buyer, and Hampton Inns, Inc.,
Promus Hotels Florida, Inc. and Promus Hotels, Inc. as sellers (the "Purchase
Agreement") plus (y) all reasonable costs and expenses incurred by Parent in
connection with performing its due diligence in connection with the Purchase
Agreement and consummating the purchase contemplated by the Purchase Agreement,
including, without limitation, title and survey fees and charges, real estate
transfer taxes and reasonable attorneys' fees and charges, which shall
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be deemed to include any such reasonable costs and expenses incurred or advanced
by Cornerstone Realty Income Trust, Inc. or Glade M. Knight for the benefit of
Apple Suites, Inc. or Owner and reimbursed to it or him by any of Apple Suites,
Inc. or Owner and which are specifically allocable to the Hotel or if not
specifically allocable allocated on a pro rata basis based on the purchase
prices set forth in the Existing Purchase Agreement and the Purchase Agreement,
including the purchase price of any other properties acquired by Parent or its
directly or indirectly wholly-owned affiliate(s) from Manager or its directly or
indirectly wholly-owned affiliate(s) pursuant to the Purchase Agreement after
the date hereof, but specifically excluding fees and charges paid to Apple
Suites Advisors, Inc., Apple Suites Realty Group, Inc. or any other affiliate of
Glade M. Knight or any fees and charges paid in connection with offering of
common stock in Parent plus (z) amounts advanced by any of Apple Suites, Inc. or
Owner in respect of the PIP (as defined in the License Agreement) and in respect
of Hotel capital replacement items which are in excess of amounts required to be
deposited in the Reserve Fund from Gross Revenues.
The term "Owner's Basic Return" shall mean for the first and second
years, eleven percent (11%) of Owner's Investment.
Attached hereto and made a part hereof, as Exhibit C-1, is an example
of the calculation of, and payment of, the Management Fee (less the Subordinated
Management Fee), the Owner's Basic Return and the Subordinated Management Fee.
C-2
<PAGE>
EXHIBIT "C-1"
MANAGEMENT FEE
C-1-1
<PAGE>
EXHIBIT "D"
INSURANCE
In accordance with Section 3.01(xv), Manager shall, on behalf of Owner
and at Owner's expense, procure the insurance coverages hereinafter set forth
and ensure that they are in full force and effect as of the Effective Date and
that they remain in full force and effect throughout the Term of this Agreement.
All cost(s) and expense(s) incurred by Manager in procuring the following
insurance coverages shall be operating costs and shall be paid from the Bank
Account(s):
Coverages: Amounts of Insurance
- ---------- --------------------
Comprehensive General Liability $10,000,000 per location
Including -
Premises - Operations
Products/Completed Operations
Contractual
Personal Injury
Liquor Liability/Dram Shop (if applicable)
Elevators and Escalators
Automotive Liability $10,000,000
Owned Vehicles
Non-Owned Vehicles
Uninsured Motorist where Required by Statute
Automobile Physical Damage (Optional)
Comprehensive (To Value if insured)
Collision
Workers' Compensation Statutory
Employer's Liability $1,000,000
Fidelity (Employee Dishonesty) As required
Money and Securities As required
All insurance coverages provided for under this Exhibit "D" shall be
effected by policies issued by insurance companies (i) that are authorized to do
business in the state in which the Hotel is located; and (ii) that are of good
reputation and of sound and
D-1
<PAGE>
adequate financial responsibility, having a Bests Rating of B+ VI, or better, or
a comparable rating if Bests ceases to publish its ratings or materially changes
its rating standards or procedures.
Manager shall deliver to Owner duly executed certificates of insurance
with respect to all of the policies of insurance procured, including existing,
additional and renewal policies.
Each policy of insurance maintained in accordance with this Exhibit
"D," to the extent obtainable, shall specify that such policies shall not be
cancelled or materially changed without at least thirty (30) days' prior written
notice to Owner and Manager.
Except as otherwise provided in the Agreement, Manager and Owner each
waives, releases and discharges the other from all claims or demands which each
may have or acquire against the other, or against each other's subsidiaries,
affiliates, directors, officers, agents, employees, independent contractors or
partners, with respect to any claims for any losses, damages, liabilities or
expenses (including attorneys' fees) incurred or sustained by either of them on
account of injury to persons or damage to property or business arising out of
the ownership, management, operation and maintenance of the Hotel, regardless
whether any such claim or demand may arise because of the fault of negligence of
the other party or its subsidiaries, affiliates, officers, employees, directors,
agents or independent contractors. Each policy of insurance maintained in
accordance with this Exhibit "D" shall contain a specific waiver of subrogation
reflecting the above with respect to insured claims.
All policies of insurance provided for under this Exhibit "D" shall be
carried in the name of the Manager. Owner's interest and that of any other
applicable party will be included in the coverage by an additional insured
endorsement.
All such policies of insurance shall be written on an "occurrence"
basis, with no per location aggregate limitation.
Either Manager or Owner, by notice to the other, shall have the right
to require that the minimum amount of insurance to be maintained with respect to
the Hotel under this Exhibit "D" be increased to make such insurance comparable
with prudent industry standards and to reflect increases in liability exposures,
taking into account the size and location of the Hotel.
Owner hereby authorizes Manager to utilize the services of and/or place
the insurance set forth in this Exhibit "D" with (i) any subsidiary or
affiliated company of Promus Hotels, Inc. in the insurance business as Manager
deems appropriate; or (ii) a third party insurance carrier meeting the
specifications set forth above.
D-2
<PAGE>
EXHIBIT "E"
INSURANCE
In accordance with Section 4.01(iii), Owner agrees, at its expense, to
procure and maintain the following insurance coverages, as reasonably adjusted
from time to time, throughout the Term of this Agreement:
Coverages: Amounts of Insurance
- ---------- --------------------
Builders Risk Completed value of the Hotel
All risk for term of the initial and any subsequent Hotel
construction and renovation.
Real and Personal Property 100% replacement value of building
and contents
Blanket Coverage
Replacement Cost - all risk
Boiler Machinery - written on a comprehensive form
Business Interruption Calculated yearly based on estimated
Hotel revenues
Blanket Coverage for the perils insured against under Real and
Personal Property in this Exhibit "E". This coverage shall
specifically cover Manager's loss of Management Fees. The business
interruption insurance shall be for a twelve (12) month indemnity
period.
Owner's Protective Liability $10,000,000
All risks from construction and renovation occurring prior to the
Opening Date and all risks from Hotel construction and renovation
projects costing more than $250,000 occurring after the Opening
Date.
All insurance coverages provided for under this Exhibit "E" shall be
effected by policies issued by insurance companies (i) that are authorized to do
business in the state in which the Hotel is located; and (ii) that are of good
reputation and of sound and adequate financial responsibility, having a Bests
Rating of B+ VI, or better, or a comparable rating if Bests ceases to publish
its ratings or materially changes its rating standards or procedures.
Owner shall deliver to Manager duplicate copies of either insurance
policies or certificates of insurance (at Manager's option) with respect to all
of the policies of insurance procured, including existing, additional and
renewal policies, and in the case of insurance nearing expiration, shall deliver
duplicate copies of the insurance policies or certificates of insurance with
respect to the renewal policies to Manager not less than thirty (30) days prior
to the respective dates of expiration.
E-1
<PAGE>
Each policy of insurance maintained in accordance with this Exhibit
"E," to the extent obtainable, shall specify that such policies shall not be
cancelled or materially changed without at least thirty (30) days' prior written
notice to Owner and Manager.
Except as otherwise provided in this Agreement, Manager and Owner each
waives, releases and discharges the other from all claims or demands which each
may have or acquire against the other, or against each other's subsidiaries,
affiliates, directors, officers, agents, employees, independent contractors or
partners, with respect to any claims for any losses, damages, liabilities or
expenses (including attorneys' fees) incurred or sustained by either of them on
account of injury to persons or damage to property or business arising out of
the ownership, management, operation and maintenance of the Hotel, regardless
whether any such claim or demand may arise because of the fault of negligence of
the other party or its subsidiaries, affiliates, officers, employees, directors,
agents or independent contractors. Each policy of insurance maintained in
accordance with this Exhibit "E" shall contain a specific waiver of subrogation
reflecting the above with respect to insured claims.
All policies of insurance provided for under this Exhibit "E" shall be
carried in the name of the Owner and Manager, and losses thereunder shall be
payable to the parties as their respective interests may appear. All liability
policies shall name the Owner and Manager, and in each case any of their
affiliated or subsidiary companies which they may specify, and their respective
directors, officers, agents, employees and partners as additional named
insureds.
All such policies of insurance shall be written on an "occurrence"
basis.
Either Manager or Owner, by notice to the other, shall have the right
to require the minimum amount of insurance to be maintained with respect to the
Hotel under this Exhibit "E" be increased to make such insurance comparable with
prudent industry standards and to reflect increases in liability exposures,
taking into account the size and location of the Hotel.
E-2
Exhibit 10.5
May 8, 2000
Apple Suites, Inc.
306 East Main Street
Richmond, Virginia 23219
Attention: Mr. Glade M. Knight
Re: Agreement of Sale dated November 22, 1999 by
and between the undersigned and you (the
"Agreement"; capitalized terms not otherwise
defined herein have the meanings ascribed to
them in the Agreement)
--------------------------------------------
Gentlemen:
We hereby agree that the Outside Closing Date shall be
extended to May 9, 2000 and, if you or your wholly-owned subsidiary acquires the
property located in Malvern, Pennsylvania pursuant to the Agreement of Sale on
or before May 9, 2000, the Outside Closing Date shall be further extended to
June 30, 2000.
We hereby further agree that, notwithstanding anything to the contrary in (i)
the notes (collectively, the "Notes") dated September 20, 1999, October 5, 1999,
November 29, 1999 and December 22, 1999 in the aggregate principal amount of
$68,569,500 and, if the closing occurs with respect to the property located in
Malvern, Pennsylvania pursuant to the Agreement, the $11,616,750 note to be
executed in connection therewith or (ii) the Agreement and for so long as no
Event of Default exists under the mortgages, deeds of trust, deed to secure debt
and like instruments securing the Notes and such new note, Buyer shall be
permitted to retain and invest the Net Equity Proceeds that otherwise are
required to be paid to Promus to be applied to the payment of principal of the
Notes and such new note (the "Retained Amounts"), until such time as the
remaining two (2) properties the subject of the Agreement (each, a "Remaining
Property" and, collectively, the "Remaining Properties") close, at which time,
in the case of the first closing, a portion of the Retained Amounts equal to 25%
of the purchase price of the Malvern property shall be applied in respect of
such purchase price and, in the case of the last Remaining Property to close,
the sum of (a) a portion of the Retained Amounts equal to 25% of the purchase
price of such last Remaining Property plus (b) after application pursuant to
clause (a), all then remaining Retained Amounts in excess of $1,500,000 or such
higher amount as is agreed to by us (such $1,500,000 or higher amount, the
"Closing Costs Amount") shall be applied in respect of the purchase price of
such Remaining Property; provided, however, that upon the sale of the last
Remaining
<PAGE>
Property, if the purchase price of such last Remaining Property is paid in full
from such Retained Amounts, the balance of any then remaining Retained Amounts
in excess of the Closing Costs Amount shall be applied in reduction of the
outstanding principal balance of the Notes and such new note and, provided,
further, however, that if, on or before May 9, 2000, the property located in
Malvern, Pennsylvania has not been purchased by Buyer in accordance with the
Agreement or if, on or before June 30, 2000, the property located in Boulder,
Colorado has not then been purchased by Buyer in accordance with the Agreement,
the "Amortization Amount", as defined in the Notes, shall be due and payable,
except that Buyer shall be permitted, subject to the provisions of the
immediately succeeding sentence, to retain and invest the Closing Costs Amount,
which shall thus not constitute a portion of the Amortization Amount. If the
refinancing described in that certain letter agreement of even date herewith
between you and Promus Hotels, Inc. occurs on or before September 30, 2000, the
Closing Costs Amount shall be applied in respect of closing costs incurred in
connection with the closing of such refinancing with any excess applied in
reduction of any notes from Buyer then held by us or if such refinancing does
not occur on or before September 30, 2000, the Closing Costs Amount shall be
applied in reduction of the outstanding principal balance of the Notes and such
new notes. Except as expressly set forth herein, the Notes shall continue in
full force and effect, binding upon Buyer in favor of Promus.
If either or both of the Remaining Properties close, the
maturity date of the note or notes executed in connection with the purchase
money financing provided by Promus Hotels, Inc. shall be April 28, 2001.
If you are in agreement with the foregoing, please sign in the
space provided below.
This letter agreement may be executed in one or more
counterparts, each of which shall be deemed an original. Said counterparts shall
constitute but one and the same instrument and shall be binding upon each of the
parties hereto individually as fully and completely as if all had signed but one
instrument and shall be unaffected by the failure of any party hereto to execute
any or all of said counterparts.
Very truly yours,
HAMPTON INNS, INC. , successor-by-
merger to Homewood Suites Equity
Development Corp.
By /s/ Stevan D. Porter
-----------------------
Name:
Title:
2
<PAGE>
PROMUS HOTELS FLORIDA, INC.
By /s/ Stevan D. Porter
-----------------------
Name:
Title:
PROMUS HOTELS, INC.
By /s/ Stevan D. Porter
-----------------------
Name:
Title:
Accepted and agreed to this 8th
day of May, 2000.
APPLE SUITES, INC., a
Virginia corporation
By /s/ Glade M. Knight
------------------------------
Name: Glade M. Knight
Title: Chairman of the Board and President
3
Exhibit 10.6
May 8, 2000
Apple Suites, Inc.
306 East Main Street
Richmond, Virginia 23219
Attention: Mr. Glade M. Knight
Re: The notes (collectively, the "Notes") dated
September 20, 1999, October 5, 1999,
November 29, 1999 and December 22, 1999 in
the aggregate principal amount of
$68,569,500
--------------------------------------------
Gentlemen:
We are the owner and holder of the Notes and the mortgages,
deeds of trust, deeds to secure debt and like instruments securing the Notes
dated the same dates as the Notes (collectively, the "Existing Security
Documents"). On the date hereof we have provided financing in the amount of
$11,616,750 in connection with the purchase by your wholly-owned subsidiary of
property located in Malvern, Pennsylvania (the "Malvern Property") which
financing is evidenced by a note of even date herewith made by you in the amount
of $11,616,750 (the "Malvern Note") and is secured by a mortgage encumbering the
Malvern Property (the "Malvern Mortgage") and by mortgages, deeds of trust,
deeds to secure debt and like instruments encumbering the properties (the
"Existing Properties") encumbered by the Existing Security Documents
(collectively, the "Malvern Cross-Collateralization Security Documents"). In
addition, if you or your wholly-owned subsidiary acquires the property located
in Boulder, Colorado (the "Boulder Property") pursuant to the Agreement of Sale
dated November 22, 1999 among the undersigned and you, among others (as amended,
the "Agreement of Sale"), we shall provide financing in accordance with the
Agreement of Sale in connection with such acquisition in which event such
financing shall be evidenced by a note made by you (the "Boulder Note") and will
be secured by a deed of trust encumbering the Boulder Property (the "Boulder
DOT") and by mortgages, deeds of trust, deeds to secure debt and like
instruments encumbering the Existing Properties and the Malvern Property
(collectively, the "Boulder Cross-Collateralization Security Documents").
You have advised us that you intend to finance the Existing
Properties with another lender and in connection therewith repay in full the
amounts evidenced and secured by the Notes and the Existing Security Documents
and have requested that upon such financing and repayment we agree to release
the Existing Properties as security for the Malvern Note and the Boulder Note.
We hereby agree that, simultaneously with the
<PAGE>
repayment in full of all amounts evidenced and secured by the Notes and the
Existing Security Documents (which for the avoidance of doubt does not include
amounts evidenced by the Malvern Note and the Boulder Note) and provided there
then exists no monetary default with respect to the Malvern Note or the Boulder
Note or any bankruptcy related default under the Malvern Mortgage or Boulder
DOT, we shall release the Existing Properties from the Malvern
Cross-Collateralization Security Documents and the Boulder
Cross-Collateralization Security Documents, except that cross-collateralization
between the Malvern Property and the Boulder Property as to the Malvern Note and
the Boulder Note shall remain in place. We acknowledge that the "repayment in
full" of amounts secured by the Existing Security Documents does not include any
amounts owed to us under management agreements or license agreements with us but
is limited to amounts evidenced by the Notes and protective advances made by us,
if any, pursuant to the Existing Security Documents.
You have further advised us that the financing described above
may be in two tranches, with the second or junior tranche being amortized with
the net proceeds available from the public offering of your shares. The use of
net proceeds to amortize any indebtedness other than Promus's indebtedness would
conflict with the terms of the Malvern Note and, if executed, the Boulder Note.
We hereby agree that if the amounts evidenced and secured by the Notes and the
Existing Security Documents are repaid in full as described above and if the
structure of the repayment financing contains a second or junior tranche in an
amount of not more than $13,000,000 which requires amortization from such net
proceeds, simultaneously with the repayment of the Notes, the Malvern Note and,
if executed, the Boulder Note will be modified to permit Net Equity Proceeds (as
defined in the Malvern Note) to be applied in reduction of the principal balance
of any such second or junior tranche in lieu of being applied in reduction of
the Malvern Note and, if executed, the Boulder Note.
[Remainder of page intentionally left blank]
2
<PAGE>
This letter agreement may be executed in one or more
counterparts, each of which shall be deemed an original. Said counterparts shall
constitute but one and the same instrument and shall be binding upon each of the
undersigned individually as fully and completely as if all had signed but one
instrument and shall be unaffected by the failure of any of the undersigned to
execute any or all of said counterparts.
Very truly yours,
PROMUS HOTELS, INC.
By /s/ Stevan D. Porter
-----------------------------------
Stevan D. Porter
Executive Vice President
Accepted and agreed to this 8th
day of May, 2000.
APPLE SUITES, INC., a
Virginia corporation
By /s/ Glade M. Knight
--------------------------------------------
Name: Glade M. Knight
Title: Chairman of the Board and President
3
Exhibit 10.7
[Pennsylvania]
COMFORT LETTER
May 8, 2000
Apple Suites, Inc., as trustee for Apple
Suites Pennsylvania Business Trust
306 East Main Street
Richmond, Virginia 23219
Attention: Mr. Glade M. Knight
Re: Homewood Suites(R) hotel located at 12 East
Swedesford Road, Malvern, Pennsylvania (the
"Hotel")
--------------------------------------------
Gentlemen:
Promus Hotels, Inc. ("Promus") is about to execute with
respect to the Hotel (i) a License Agreement and the Rider, Attachment and
Exhibits referenced therein (the "License Agreement"), dated the date hereof,
pertaining to the licensing of Apple Suites Management, Inc., a Virginia
corporation ("Lessee"), to operate the Hotel as a Homewood Suites(R) hotel, and
(ii) a management agreement of even date herewith (the "Management Agreement")
with respect to the operation of the Hotel by Promus, as Manager. In addition,
Promus has loaned to Apple Suites, Inc. ("Parent") the sum of $80,186,250 (the
"Acquisition Loan") as purchase money financing for the acquisition of certain
properties (the "Properties") conveyed pursuant to the Purchase Agreement (as
defined in the Management Agreement), that certain Agreement of Sale dated
August 6, 1999 by and among Hampton Inns, Inc., Promus Hotels Florida, Inc. and
Promus, as sellers, and Parent, as buyer, as the same has been amended, and that
certain Agreement of Sale dated October 5, 1999 between Hampton Inns, Inc., as
seller, and Parent, as buyer, as the same has been amended, which Acquisition
Loan is evidenced by (i) a note of Parent dated September 20, 1999 in the amount
of $26,625,000, (ii) a note of Parent dated October 5, 1999 in the amount of
$7,350,000, (iii) a note of Parent dated November 29, 1999 in the amount of
$30,210,000, (iv) a note of Parent dated December 22, 1999 in the amount of
$4,384,500 and (v) a note of Parent of even date herewith in the amount of
$11,616,750 and is secured by, among other things, mortgage(s), deed(s) of trust
or deed(s) to secure debt dated September 20, 1999, October 5, 1999, November
29, 1999, December 22, 1999 or of even date herewith from
<PAGE>
Parent or its wholly-owned subsidiary which encumbers some or all of the
Properties, which may include the Hotel (the documents evidencing and securing
the Acquisition Loan herein referred to as the "Acquisition Mortgage
Documents"). Lessee is the owner of a subleasehold estate in the Hotel pursuant
to a Hotel Lease Agreement dated on or about the date hereof (as supplemented,
amended and modified, the "Percentage Lease") with Apple Suites, Inc., as
trustee for Apple Suites Pennsylvania Business Trust ("Fee Owner"). Although the
License Agreement is non-assignable, and is not subject to any collateral
assignment, Lessee and Fee Owner have requested that Promus enter into this
letter agreement with Fee Owner with respect to, among other things, Fee Owner's
rights with regard to the License Agreement, and Promus has requested that Fee
Owner enter into this letter agreement with Promus with respect to, among other
things, the Management Agreement and its continuing rights to operate the Hotel
for the term of the Management Agreement, subject to the terms thereof and
hereof, and to confirm certain understandings with respect to the Acquisition
Loan. No third party beneficiaries (other than Fee Owner) are intended or
implied. Fee Owner has requested that Promus inform you of the procedures Promus
agrees to follow in the event Lessee commits a breach under the provisions of
the License Agreement. Promus, Fee Owner and Lessee acknowledge that (i) Fee
Owner's interest in the Hotel is a leasehold interest and (ii) Lessee's interest
therein is a subleasehold interest and agree that references in this letter
agreement to the parties' interests in the Hotel shall be interpreted
accordingly. Fee Owner agrees to maintain the lease or other agreement (the
"Ground Lease") through which its interest in the Hotel is derived in full force
and effect and to pay and discharge any ground rents or other payments due and
payable under the Ground Lease as and when the same become due and payable.
So long as Fee Owner is the owner of the Hotel, and the
License Agreement is in effect, Promus will notify Fee Owner by certified mail
at the above address (or such other address as you may specify in a written
notice to Promus pursuant hereto) of any default as a result of any breach of
the License Agreement or Management Agreement by Lessee, provided, however, that
to the extent the default is a default under, or termination of, the Percentage
Lease or a default under the Acquisition Loan, Promus shall have no obligation
to notify Fee Owner as contemplated above. This notice will be in the form of a
copy of the notice of such default that is sent to Lessee. In the notice, Promus
will give Fee Owner (i) ten (10) days to cure or cause to be cured monetary
defaults identified in Promus's default notice and (ii) thirty (30) days to cure
or cause to be cured the non-monetary breach(es) identified in Promus's default
notice, provided, however, that to the extent the default identified in Promus's
default notice is not capable of being cured by Fee Owner (i.e., the bankruptcy
of Lessee or a transfer in violation of the License Agreement), Fee Owner will
not be afforded an opportunity to cure such incurable defaults. If a breach
identified in the notice is of a curable non-monetary nature which is not
reasonably capable of being cured within such thirty (30) day period, Promus
shall extend the cure period for such length of time as Promus in its sole
discretion reasonably determines is necessary for such breach to be cured (not
to exceed in any event an additional period of ninety (90) days).
In the event a default occurs under the Percentage Lease
(other than a default under the Acquisition Loan) and, as a consequence thereof,
Fee Owner elects to
2
<PAGE>
terminate the Percentage Lease, or remove Lessee from possession of the Hotel
without terminating the Percentage Lease or if Lessee does not elect to extend
the Percentage Lease term through the full term of the License Agreement (any
such event being referred to herein as a "Triggering Event") while the License
Agreement and/or the Management Agreement are in effect, Fee Owner shall give
Promus written notice of such termination ("Triggering Event Notice"). Fee Owner
shall have a ninety (90) day period from the date such Triggering Event Notice
is given to elect to enter into a lease agreement with a substitute lessee of
the Hotel satisfying the conditions set forth in Paragraph 1 below (a "Successor
Lessee") and to obtain a new license agreement for such Hotel in the name of
such Successor Lessee, for a term equal to the balance of the original term of
the License Agreement and otherwise on the terms and conditions set forth in the
License Agreement, except that it shall be issued to Successor Lessee without
the payment of any application fee or transfer fee. Promus's obligations to
issue a new license agreement pursuant to this paragraph are subject to and
conditioned upon the satisfaction of the following:
1. Successor Lessee shall (i) be a "Permitted Transferee" (as
hereinafter defined) and (ii) either (y) be (1) at least fifty percent (50%)
owned by Parent or persons that are its "Affiliates" (as hereinafter defined)
and (2) controlled by Parent or its Affiliates or (z) have complied with the
requirements of Section 11 of the applicable License Agreement.
For purposes of this letter agreement the following terms
shall have the respective meanings assigned thereto:
(a) The term "Permitted Transferee" means a person or entity
that (i) has adequate financial resources to perform all of Lessee's
obligations under and in accordance with the terms of the License
Agreement, the Percentage Lease, and/or the Management Agreement, (ii)
is not the franchisor or an operator of a chain of hotels (i.e., a
group of hotels marketed under the same brand name) which competes with
the Homewood Suites(R)system of hotels, and (iii) enjoys a favorable
reputation for integrity in his or its community; provided, however,
that an entity the stock of which is not traded on a national stock
exchange shall not qualify as a "Permitted Transferee" unless (A) all
officers, directors, managing members and general partners of such
entity and all persons having, directly or indirectly, a ten percent
(10%) or more equity or profit-sharing interest in such entity would
qualify as Permitted Transferees under clauses (ii) and (iii) of this
sentence, and (B) all officers, directors, managing members and general
partners of any entity having, directly or indirectly, a ten percent
(10%) or more equity or profit-sharing interest in such entity, the
stock of which is not traded on a national stock exchange, would
qualify as Permitted Transferees under clauses (ii) and (iii) of this
sentence. For purposes of the foregoing, it is agreed that any person
or entity who or which, because of reputation or past conduct, has been
denied or would be likely to be denied a gaming license by any
governmental authority shall not qualify as a "Permitted Transferee".
(b) The term "Affiliate" means, with respect to any person or
entity, any other person or entity which, directly or indirectly,
controls, is controlled by, or is under common control with, such first
person or entity. For the purposes of
3
<PAGE>
this definition, "control" (including, with correlative meanings, the
terms "controlled by" and "under common control with"), shall mean the
possession, directly or indirectly, of the power (i) to vote more than
fifty percent (50%) of the securities having ordinary voting power for
the election of directors of the controlled person, or (ii) to direct
or cause the direction of the management and policies of the controlled
person, whether through the ownership of voting shares or by contract
or otherwise, and shall be deemed to include the directors and
executive officers of Parent.
2. Successor Lessee shall also enter into a management
agreement with Promus covering the Hotel for a term equal to the balance of the
original term of the Management Agreement covering the Hotel and otherwise on
the terms and conditions set forth in such Management Agreement.
If Fee Owner fails to provide a written notice to Promus of
Successor Lessee's intention to obtain a new license within such ninety (90) day
period, the License Agreement shall, at Promus's option, terminate upon the date
of expiration of such ninety (90) day period, in which event Fee Owner shall pay
to Promus an amount, as liquidated damages, equal to the aggregate amount owed
under the License Agreement (including liquidated damages attributable to such
termination as provided in Paragraph 13 of the License Agreement) and the
Management Agreement.
If Fee Owner enters into a new lease with a Successor Lessee
who intends to obtain a new license, all existing breaches under the License
Agreement and the Management Agreement (collectively, the "Hotel Agreements") of
which Promus notifies Fee Owner must be cured on or before the final day of the
ninety (90) day period, provided, however, if such breach(es) are of the type
set forth in paragraph 13.d.(3) and (4) of the License Agreement or Section 9.01
of the Management Agreement and are not capable of being cured by Fee Owner or a
Successor Lessee within such ninety (90) day period, such breach(es) need not be
cured if Fee Owner or a Successor Lessee cures all other breaches of the Hotel
Agreements. With regard to any breaches of a non-monetary nature which are not
reasonably capable of being cured within said ninety (90) day period, Promus
shall extend the cure period for such period of time as Promus in its sole
discretion reasonably determines is necessary for such breaches to be cured.
In the event Fee Owner exercises its rights under the terms of
this letter agreement to enable a Successor Lessee to obtain a new license
agreement, Lessee shall not be released from its obligations under the
applicable Hotel Agreements accruing prior to the date such Successor Lessee
obtains a new license and enters into a new management agreement with Promus.
In addition, in the event the provisions of Internal Revenue
Code, as amended, applicable to real estate investment trusts ("REIT") are
amended to permit REITs, such as Parent, to operate hotels or otherwise render
the structure embodied by the Percentage Lease to be obsolete as economically
unnecessary, Fee Owner may give Promus written notice thereof (the "Tax Event
Notice") and of Fee Owner's election to terminate the Percentage Lease and of
its desire to obtain a new license agreement for the Hotel in Fee Owner's name
for a term equal to the balance of the original term of the
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<PAGE>
License Agreement and otherwise on the terms and conditions set forth in the
License Agreement, except that it shall be issued to Fee Owner without the
payment of any application fee or transfer fee. The Tax Event Notice shall, in
addition, contain Lessee's consent to the termination of the Management
Agreement and the License Agreement and acknowledgment of the provisions of the
immediately succeeding paragraph. Promus's obligations to issue a new license
agreement pursuant to this paragraph are subject to and conditioned upon the
satisfaction of the following:
1. Fee Owner shall be a "Permitted Transferee", except that
clause (i) thereof shall be amended to read "(i) has adequate financial
resources to perform all of owner's obligations under and in accordance with the
terms of the License Agreement and/or the Management Agreement".
2. Fee Owner shall also enter into a management agreement with
Promus covering the Hotel for a term equal to the balance of the original term
of the Management Agreement covering the Hotel and otherwise on the terms and
conditions set forth in the Management Agreement.
In the event Fee Owner exercises its right under the terms of
the immediately preceding paragraph of this letter agreement to enable it to
obtain a new license agreement, Lessee shall not be released from its
obligations under the applicable Hotel Agreements accruing prior to the date Fee
Owner obtains a new license and enters into a new management agreement with
Promus.
In connection with Lessee's execution and delivery of the
License Agreement, Apple Suites, Inc. has executed and delivered for the benefit
of Promus that certain Guaranty of even date herewith with respect to the
License Agreement (the "Guaranty"). Promus acknowledges that, in the event of
actual conflict, the terms and provisions of this letter agreement shall control
over the terms and provisions of the Guaranty. Without limiting the generality
of the foregoing, and in order to provide Apple Suites, Inc. with the full
benefits intended by the provisions of the immediately preceding sentence,
Promus shall notify Apple Suites, Inc. by certified mail not less than ten (10)
days prior to Promus's execution and delivery of any amendment or modification
of the License Agreement or of its acceptance of any voluntary surrender or
termination by Lessee of the License Agreement, other than amendments or
modifications or surrender or termination which has been requested by Fee Owner
or Apple Suites, Inc. or to which Fee Owner is a party. Nothing in the foregoing
sentence shall be deemed or construed to limit or restrict Promus's rights to
terminate or exercise any other remedy under the License Agreement in the event
of a default by Lessee thereunder, subject to the other terms and provisions of
this letter agreement.
With reference to Licensee's representation in the last
sentence of Section 1(a) of the License Agreement, Promus acknowledges that the
Percentage Lease is for a base term of less than twenty (20) years and that only
upon exercising all extension options available to Licensee, including certain
options requiring negotiation of fair market rental, will the term of the
Percentage Lease extend to the full twenty (20) years of the term of the License
Agreement. Fee Owner and Lessee acknowledge that the failure for any reason to
exercise the extension options will result in the application of the
5
<PAGE>
liquidated damages provisions of Paragraph 13.f of the License Agreement if,
upon the termination of the Percentage Lease, Fee Owner or a Successor Lessee
does not obtain a new license agreement for the Hotel for a term equal to the
balance of the original term of the License Agreement, as contemplated herein.
Promus hereby confirms for the benefit of Fee Owner and Lessee
that the License Agreement shall be read with the following clarifications:
(i) with respect to the provisions of Paragraph 1.d. of the
License Agreement relating to the requirement to use particular
Supplies or that particular Supplies be purchased from Promus or a
source designated by Promus, such requirements shall only be imposed on
the licensee under the License Agreement to the extent Promus is
imposing such requirements on substantially all of its licensees of the
System, but that with respect to other Supplies if Lessee determines
that it can purchase Supplies of a quality at least equal to that which
Promus is requiring at a price lower than the price then being charged
by Promus or its designated supplier, Lessee may purchase such Supplies
from its vendor;
(ii) with respect to the provisions of Paragraph 6.a.(19) of
the License Agreement, such provisions are not intended to preclude
Lessee or any member of an affiliated group from owning licensed hotels
of other, even competing, brands, but from owning a hotel brand,
tradename, system or chain;
(iii) with respect to the provisions of Paragraph 11 of the
License Agreement relating to change in ownership or a transfer of the
hotel, the provisions are intended to apply only to Lessee's beneficial
or equity interests or its interest in the hotel; and
(iv) with respect to the language of the second sentence of
Paragraph 13.f. of the License Agreement reading "If this Agreement is
terminated other than by the expiration of the term described in
Paragraph 13.a.,", this language is not intended to modify other
provisions of the License Agreement relating to whether or not
liquidated damages are payable under other circumstances and
accordingly shall be read as if preceded by the phrase "Subject to the
other provisions of this Agreement". In addition, liquidated damages
shall not be payable if the License Agreement is terminated as a result
of Promus's default under the License Agreement.
Promus acknowledges that, in the event of actual conflict
between this letter agreement and the License Agreement, the terms and
provisions of this letter agreement shall control over the terms and provisions
of the License Agreement. Without limiting the generality of the foregoing, (i)
no transfer of any interest in Fee Owner, or of fee ownership of the Hotel to an
affiliate of Fee Owner, shall constitute a prohibited change of ownership under
the License Agreement, subject, however, to the penultimate paragraph of this
letter agreement, (ii) no transfer of the leasehold interest of Lessee in the
Hotel to a Successor Lessee shall constitute a prohibited change of ownership
under the License Agreement, and (iii) in no event shall the initial Licensee be
liable for liquidated damages as the result of termination of the Percentage
Lease or
6
<PAGE>
default under the License Agreement if a Successor Lessee is supplied by Fee
Owner or Fee Owner enters into a new License Agreement following a Tax Event
Notice, and all prior curable defaults under the License Agreement are cured by
Fee Owner, as contemplated herein.
Fee Owner and Lessee agree with Promus as follows with respect
to the relationship of Promus and Lessee under the Management Agreement:
(a) Pursuant to the terms of the Percentage Lease, Fee Owner
has agreed to pay, among other things, (i) land, building and personal
property taxes and assessments applicable to the Hotel, (ii) premiums
and charges for property casualty insurance coverages specified in
Exhibit "D" to the Management Agreement, (iii) expenditures for capital
replacements, (iv) expenditures for maintenance and repair of
underground utilities and structural elements of the Hotel, (v) ground
rent under the Ground Lease and (vi) the payments of principal,
interest and other sums payable under the Acquisition Loan
(collectively, "Fee Owner Costs"). To the extent the Management
Agreement obligates or authorizes Promus to pay any Fee Owner Costs,
Promus shall pay such Fee Owner Costs on behalf of Lessee to the extent
of funds in the Hotel's bank account(s) (collectively, the "Hotel
Accounts"), including, without limitation, the Bank Account(s) and the
Reserve Fund (as such terms are defined in the Management Agreement)
subject to any limitations contained in the Management Agreement and
Fee Owner and Lessee shall make such adjustments and payments to each
other as may be necessary from time to time to take into account any
such payments. Promus shall have no duty, obligation or liability to
Fee Owner (x) to make any determination as to whether any expense
required to be paid by Promus under the Management Agreement is a Fee
Owner Cost or a cost of Lessee, or (y) to make any determination as to
whether funds in the Hotel Accounts belong to Fee Owner or Lessee, or
(z) to require that Fee Owner Costs be paid from funds which can be
identified as belonging to Fee Owner, or other costs and expenses
required to be paid by Lessee be paid from funds which can be
identified as belonging to Lessee; it being the intent of this
provision that (i) Fee Owner and Lessee shall look only to each other
and not to Promus with respect to moneys that may be owed one to the
other as consequence of Promus's performance of the Management
Agreement and (ii) Promus need only look to Lessee to pay operating
costs, including, without limitation, those designated herein as Fee
Owner Costs.
(b) Promus shall be permitted (and is hereby authorized) to
set off against any amounts owed to Promus by Lessee under the
Management Agreement and the License Agreement any funds held by Promus
pursuant to the Management Agreement, including amounts in the Hotel
Accounts, whether or not amounts are due to Fee Owner by Lessee under
the Percentage Lease.
(c) Fee Owner has approved the form of the Management
Agreement and License Agreement and agrees that Fee Owner's consent or
approval is not required with respect to the performance of any of its
rights, duties or obligations under the Management Agreement or the
License Agreement.
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<PAGE>
(d) Fee Owner hereby approves the deposit of funds into the
Reserve Account and the expenditure of funds from the Reserve Account
by Promus in accordance with the terms of the Management Agreement.
(e) To the extent required by applicable laws, Fee Owner shall
obtain and maintain (or cooperate in obtaining and maintaining) any
licenses, permits or approvals of any governmental authority necessary
to operate and manage the Hotel in accordance with the Management
Agreement.
(f) Fee Owner acknowledges and agrees that, unless it enters
into a license agreement pursuant to a Tax Event Notice, it has no
right to use the Homewood Suites(R) "System" except as expressly set
forth in the License Agreement nor any right to use the name "Homewood
Suites" or the Homewood Suites(R) "System" as a result of Lessee
entering into the Hotel Agreements.
(g) Fee Owner acknowledges and agrees that any amounts owed to
Promus under the License Agreement and the Management Agreement are
superior to any amounts owed by Lessee to Fee Owner under the
Percentage Lease, other than amounts owed in respect of the
Subordinated Management Fee, as defined in the Management Agreement, to
the extent Lessee applies amounts received in respect of Owner's Basic
Return, as defined in the Management Agreement, in respect of amounts
owed by Lessee to Fee Owner under the Percentage Lease.
(h) Fee Owner agrees not to amend or modify the Percentage
Lease in any manner that would (i) reduce the term of the Percentage
Lease, (ii) increase the amount of rent payable by Lessee thereunder
(except as contemplated by the provisions of the Percentage Lease), or
(iii) have a material adverse effect on any of the rights, duties and
privileges of Promus under the Management Agreement. Nothing in this
paragraph (h) shall be deemed or construed to limit or restrict Fee
Owner's rights to terminate or exercise any other remedy under the
Percentage Lease in the event of a default by Lessee thereunder.
(i) Fee Owner acknowledges and agrees that Promus has no duty
or obligation to comply with any of the terms of the Percentage Lease
and that Fee Owner will look solely to Lessee with respect to such
matters.
(j) Fee Owner acknowledges and agrees that (i) no sale,
transfer or conveyance of Fee Owner's fee estate in the Hotel shall
terminate the Management Agreement, (ii) except as provided below,
neither the termination of the Percentage Lease nor the assignment of
Lessee's interest therein shall terminate the Management Agreement, and
(iii) no merger of the leasehold and fee simple estates of the Hotel
shall terminate the Management Agreement; it being the intent of Fee
Owner and Promus that the Management Agreement shall continue in effect
for the term of the Management Agreement so long as the Hotel is
operating as a Homewood Suites(R) hotel pursuant to a license agreement
and Manager is not in default of its obligations under the Management
Agreement
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<PAGE>
(subject, however, to any express rights of termination contained in
the Management Agreement).
(k) Fee Owner acknowledges and agrees that Manager shall have
a right to file a separate claim in any condemnation case in accordance
with Article VIII of the Management Agreement.
(l) Fee Owner agrees that so long as the License Agreement is
in effect the casualty insurance proceeds will be applied in the manner
provided in the License Agreement.
(m) In the event that Fee Owner terminates the Percentage
Lease and as a consequence thereof Promus terminates the License
Agreement and does not enter into a new license agreement with any
successor operator of the Hotel, Promus and Fee Owner, subject to the
payment of all amounts owed under the Management Agreement and all
amounts owed under the Acquisition Loan, shall have the right to
terminate the Management Agreement covering the Hotel. Otherwise, the
successor operator shall assume in writing the remaining term of such
Management Agreement.
Fee Owner and Lessee further agree with Promus with respect to
the Acquisition Loan that the Percentage Lease shall be subject and subordinate
to the lien of the Acquisition Mortgage Documents and to all of the terms,
conditions and provisions thereof, to all advances made or to be made
thereunder, and to any renewals, extensions, modifications or replacements
thereof, including any increases therein or supplements thereto. The foregoing
provisions shall be self-operative. However, Fee Owner and Lessee agree to
execute and deliver to Promus such other instrument as Promus shall request in
order to effectuate said provisions.
It is acknowledged and agreed that (i) Promus shall be
entitled to rely upon any written notice or request by Fee Owner made pursuant
to the provisions hereof without requirement of investigating the accuracy or
authenticity of such written notice or any facts or allegations contained
therein, and (ii) Fee Owner shall be entitled to rely upon any written notice or
request by Promus made pursuant to the provisions hereof without requirement of
investigating the accuracy or authenticity of such written notice or any facts
or allegations contained therein.
You agree to notify Promus by certified mail at 755 Crossover
Lane, Memphis, Tennessee 38117-4900, Attention: General Counsel (or such other
address as Promus may specify in a written notice to you) of any action
regarding the Hotel to: (a) terminate the Percentage Lease; (b) petition for
appointment of a Receiver or Trustee for Lessee to take any action under Federal
Bankruptcy law or similar state laws; or (c) take possession of the Hotel,
through a Successor Lessee or otherwise, without termination of the Percentage
Lease.
The rights, powers and interests of Promus hereunder may be
transferred and assigned by Promus, without the prior written consent of Fee
Owner, Lessee and, if applicable, any Successor Lessee, to any person to whom
the License Agreement and
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<PAGE>
Management Agreement may be assigned. The rights and obligations of Fee Owner,
Lessee and, if applicable, Successor Lessee hereunder are not transferable
without the written consent of Promus.
Subject to the foregoing limitations, this letter agreement
shall extend to, and shall bind, the respective successors and assigns of
Promus, Fee Owner, Lessee and, if applicable, any Successor Lessee, provided,
however, that in the case of Fee Owner, this letter agreement shall not extend
to any transferee of Fee Owner's fee interest in the Hotel nor to Fee Owner if
Apple Suites, Inc. is not a publicly held REIT.
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Please indicate your agreement with the terms of this letter
agreement by signing and returning four executed copies to Promus. This letter
may be executed by original signature or by signature received by telecopy in
any number of counterparts, each of which shall be original and all of which
together shall constitute and be construed as one and the same instrument.
Very truly yours,
PROMUS HOTELS, INC.
By /s/ Stevan D. Porter
-----------------------------
Stevan D. Porter
Executive Vice President
cc: Franchise Administration
Accepted and Agreed:
APPLE SUITES, INC., as trustee for Apple
Suites Pennsylvania Business Trust
By /s/ Glade M. Knight
-----------------------------------
Name: Glade M. Knight
Title: Chairman of the Board and President
Acknowledged and Agreed:
APPLE SUITES MANAGEMENT, INC.
By /s/ Glade M. Knight
-----------------------------------
Name: Glade M. Knight
Title: Chairman, CEO and President
Exhibit 10.8
APPLE SUITES, INC.
c/o Cornerstone Realty Income Trust, Inc.
306 East Main Street
Richmond, Virginia 23219
May 8, 2000
Promus Hotels, Inc.
755 Crossover Lane
Memphis, Tennessee 38117-4900
Re: Agreement of Sale dated November 22, 1999 (as amended,
the "Purchase Agreement"; capitalized terms not
otherwise defined herein shall have the meanings
ascribed to such terms in the Purchase Agreement)
between Hampton Inns, Inc., Promus Hotels Florida,
Inc. and Promus Hotels, Inc., as Sellers, and Apple
Suites, Inc., as Buyer
Gentlemen:
Reference is made to (i) the Purchase Agreement and (ii) the
purchase money note of even date herewith made by the undersigned in the amount
of $11,616,750 (the "Note") and the mortgages and/or deeds of trust and/or deeds
to secure debt securing the Note (individually and collectively, the
"Mortgage").
We hereby agree that until such time as all amounts evidenced
and secured by the Note and the Mortgage have been paid in full we shall not:
(i) transfer, or agree to transfer (or suffer or permit the
transfer or agreement to transfer), in any manner, either voluntarily
or involuntarily, by operation of law or otherwise, all or any portion
of any of the properties located in Henrico County, Virginia, Pinellas
County, Florida and Anne Arundel County, Maryland heretofore
transferred to us by deeds from you dated September 20, 1999 or
November 29, 1999 (the "Restricted Properties"), without, in any such
case, your prior written consent, which shall not be unreasonably
withheld in the case of a transfer to any affiliate or subsidiary
wholly owned by Apple Suites, Inc.; or
(ii) encumber, or agree to encumber, in any manner, either
voluntarily or involuntarily, by operation of law or otherwise, all or
any portion of any of the Restricted Properties, or any interest or
rights therein without, in any such case, your prior written consent.
As used in this clause, "encumber" shall include, without limitation,
the placing or permitting the placing of any mortgage, deed of trust,
assignment of rents or other security device. (It is understood that
you may grant or deny your consent under this clause and the
immediately preceding clause in your sole discretion).
<PAGE>
Notwithstanding the foregoing, it is understood that neither
the lease to Apple Suites Management, Inc. from us, dated September 20, 1999 nor
the Deed of Trust, Assignment of Leases and Rents and Security Agreement (or
other mortgage document) made by us and Apple Suites Management, Inc. for your
benefit dated September 20, 1999 or November 29, 1999, shall constitute a
violation of the foregoing restrictions.
Very truly yours,
APPLE SUITES, INC.,
a Virginia corporation
By /s/ Glade M. Knight
--------------------------------
Name: Glade M. Knight
Title: Chairman of the Board and
President
Exhibit 10.9
(HOTEL FRANCHISE FEES)
PROMISSORY NOTE
$55,350.00 RICHMOND, VIRGINIA
MAY 8, 2000
FOR VALUE RECEIVED, Apple Suites Management, Inc., a Virginia corporation (the
"Maker"), hereby makes an UNCONDITIONAL PROMISE TO PAY TO THE ORDER OF Apple
Suites, Inc., a Virginia corporation (the "Holder"), in lawful money of the
United States of America, the principal sum of Fifty Five Thousand Three Hundred
Fifty and 00/100 Dollars ($55,350.00), together with interest thereon, in
accordance with the following terms:
1. INTEREST.
Interest shall accrue on the unpaid principal balance at the annual
rate of nine percent (9%) (the "Note Rate"). If there is an Event of Default (as
defined below), the annual rate of interest shall increase to twelve percent
(12%) until such Event of Default is fully cured, and interest at the Default
Rate shall be compounded monthly on the first day of each month. All interest
computations shall be based on a 360-day year and a uniform period of 30 days
per month. Interest for any partial month shall be prorated based on the actual
number of days elapsed and the appropriate per diem interest rate.
2. PAYMENTS.
(a) The debt represented by this Note shall be paid in one hundred
twenty-one (121) consecutive monthly installments. The first installment shall
consist entirely of interest, as prorated to the extent necessary for the
initial month, and shall equal $332.10. The amount of each subsequent
installment shall be $701.15, consisting of principal and interest on an
amortized basis.
(b) The due date for each installment shall be the first day of each
month, beginning with June 1, 2000 (each a "Payment Date"). Payment Dates shall
continue to occur until this Note is paid in full. The entire balance of
principal and interest shall be due and payable in full on June 1, 2010.
(c) The Maker is entitled to prepay the principal balance under this
Note, in whole or in part, on one or more occasion(s), without premium or
penalty.
(d) The Holder shall have the right to allocate all payments under this
Note in accordance with the following priority: (1) first, to accrued but unpaid
interest; and (2) second, to unpaid principal.
3. PAYMENT ADDRESS AND METHOD.
The Holder shall have the right, which may be exercised on one or more
occasion(s) in the sole discretion of the Holder, to require the Maker to use
any address for the delivery of payment
<PAGE>
and any reasonable method of payment, including but not limited to cashier's
check or wire transfer. For present purposes, the Holder hereby requires the
Maker to use a single check for each installment payment, and to use the mailing
address shown below for the delivery of all payments:
Apple Suites, Inc.
Attn: Stanley J. Olander, Jr., Secretary
9 North Third Street
Richmond, VA 23219
4. SECURITY AND COLLATERAL.
The Holder and the Maker acknowledge and agree that no security
interest has been granted in any property or collateral in connection with this
Note.
5. PURPOSE.
The Maker has leased an extended-stay hotel in Malvern, Pennsylvania.
The Maker has received funds from the Holder for the satisfaction of various
franchise fees for such hotel. This Note serves as evidence of the indebtedness
of the Maker to the Holder, and provides for the repayment of such indebtedness
to the Holder.
6. EVENTS OF DEFAULT.
(a) Each of the following events shall constitute an "Event of Default"
under this Note:
(1) the Maker's failure to pay to the Holder, within a grace
period of five (5) calendar days after any Payment Date, the full amount due on
such Payment Date;
(2) the acceleration of any payment obligation of the Maker
under any other promissory note, debt instrument or other financial instrument
or agreement that now exists or may exist in the future;
(3) the commencement of any proceeding to appoint any
receiver, trustee, custodian, liquidator, or similar official for the Maker, or
the final appointment of any of the foregoing;
(4) the attachment, levy, seizure or garnishment, whether in
whole or in part, of any wages, funds, financial accounts or other property of
the Maker;
(5) the entry of any judgment against the Maker that exceeds,
when combined with its other unpaid judgments, ten percent (10%) of the then
unpaid principal balance under this Note;
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<PAGE>
(6) the general inability of the Maker to pay its debts as
they become due;
(7) the filing or commencement, by the creditors of the Maker,
of any Insolvency Action (as defined below) that is not dismissed within thirty
(30) calendar days after the original date of filing or commencement;
(8) the approval or voluntary filing of any Insolvency Action,
or the approval or consummation of any plan to make a general assignment for the
benefit of creditors, by the Maker;
(9) the approval of any plan, or the execution of any
contract, that causes or is intended to cause any of the following with respect
to the Maker: (A) its dissolution; (B) the liquidation of its assets; (C) the
termination of its corporate existence, whether by merger or otherwise; or (D)
the sale or transfer of all, or substantially all, of its assets;
(10) any event that causes or will cause the Maker to cease
its business or operations for a period of more than thirty (30) consecutive
calendar days; or
(11) any event that terminates or will terminate the business,
operations or legal existence of the Maker.
(b) For purposes of this Note, the term "Insolvency Action" shall mean
any case or proceeding, or petition relating thereto, that arises under any
state or Federal laws relating to bankruptcy or insolvency, whether now existing
or subsequently enacted, and that seeks reorganization, liquidation or other
relief with respect to the debts, assets or businesses of the Maker.
7. REMEDIES.
(a) If an Event of Default occurs, all unpaid principal and accrued
interest under this Note shall become immediately due and payable in full,
without any action whatsoever by the Holder.
(b) The Maker shall pay all costs, including but not limited to
reasonable legal fees and expenses, whether arising in connection with an
Insolvency Action or otherwise, that may be incurred by the Holder to enforce
this Note or to collect the amounts due under this Note ("Enforcement Costs").
The Holder, in its sole discretion, shall have the right to treat Enforcement
Costs as additional interest under this Note.
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<PAGE>
8. TRANSFER AND ASSIGNMENT.
(a) The Holder shall have the right to transfer this Note and to assign
any rights or remedies under this Note. Such right may be exercised in whole or
in part, on one or more occasion(s), in the sole discretion of the Holder. The
obligations of the Maker under this Note shall not be altered or affected in any
way by any such transfer or assignment by the Holder.
(b) The Maker shall be absolutely prohibited from assigning any of its
obligations under this Note without the prior written consent of the Holder. The
Holder shall be entitled to withhold such consent in its sole discretion for any
reason or no reason. Any attempted assignment in violation of such prohibition
shall be ineffective and void.
(c) The Holder and the Maker acknowledge and agree that this Note (1)
is evidence of commercial debt financing; and (2) is not an investment contract,
is not designed to raise capital, is not part of any plan of distribution and is
not related to any offering of securities.
9. WAIVERS.
(a) The Holder shall not be deemed to have waived any of its rights or
remedies under this Note unless the Holder delivers a written notice to the
Maker that states the nature and scope of such waiver. Without limiting the
foregoing, no waiver of the Holder's rights or remedies shall be deemed to exist
solely because the Holder, on one or more occasion(s), may have: (1) waived
certain rights or remedies; (2) elected certain rights or remedies in lieu of
others; (3) delayed in exercising any rights or remedies; (4) extended any
Payment Dates under this Note; or (5) refrained from requiring the Maker to act
in strict compliance with this Note.
(b) The Maker, to the maximum extent permitted by law, hereby grants a
complete, irrevocable and unconditional waiver of each of the following: (1) the
right to require presentment, demand, dishonor, protest or any notices of any
kind or nature from the Holder in connection with this Note; (2) the right to
assert any statute of limitations as a defense to the enforcement of this Note;
(3) any claim that seeks to restrain, enjoin, prohibit, delay or interfere with
any transfer of this Note by the Holder, or any assignment of the Holder's
rights or remedies under this Note; (4) any claim that a transfer or assignment
by the Holder with respect to this Note has altered or affected the obligations
of the Maker in any way; and (5) any claim that the Holder has waived its rights
or remedies under this Note in a manner other than the manner described in
subsection (a) immediately above.
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<PAGE>
10. GENERAL.
(a) Time is of the essence with respect to this Note and each Payment
Date. Except as expressly set forth in this Note, or in a written waiver that
may be granted by the Holder, there are no grace periods and no extensions of
time for payment with respect to this Note, and no grace periods or extensions
shall be implied.
(b) This Note shall be interpreted and enforced in accordance with the
laws of the Commonwealth of Virginia, without regard to any choice of law
provisions or principles thereof to the contrary.
(c) All provisions in this Note are severable and each valid and
enforceable provision shall remain in full force and effect, regardless of any
official or formal determination that declares certain provisions of this Note
to be invalid or unenforceable.
(d) Captions and headings are used in this Note for convenience only
and shall not affect the interpretation of this Note. Terms such as "hereof,"
"hereby," "hereto," "herein" and "hereunder" shall be deemed to refer to this
Note as a whole, rather than to any particular provision of this Note.
(e) All terms and conditions of this Note shall be binding upon, and
enforceable against, the Holder and the Maker, and all of their respective
assignees and successors in title or interest.
APPLE SUITES MANAGEMENT, INC.,
a Virginia corporation
By: /s/ Glade M. Knight
---------------------------
Glade M. Knight, President
-5-
Exhibit 10.10
(HOTEL SUPPLIES)
PROMISSORY NOTE
$12,300.00 RICHMOND, VIRGINIA
MAY 8, 2000
FOR VALUE RECEIVED, Apple Suites Management, Inc., a Virginia corporation (the
"Maker"), hereby makes an UNCONDITIONAL PROMISE TO PAY TO THE ORDER OF Apple
Suites, Inc., a Virginia corporation (the "Holder"), in lawful money of the
United States of America, the principal sum of Twelve Thousand Three Hundred and
00/100 Dollars ($12,300.00) together with interest thereon, in accordance with
the following terms:
1. INTEREST.
Interest shall accrue on the unpaid principal balance at the annual
rate of nine percent (9%) (the "Note Rate"). If there is an Event of Default (as
defined below), the annual rate of interest shall increase to twelve percent
(12%) until such Event of Default is fully cured, and interest at the Default
Rate shall be compounded monthly on the first day of each month. All interest
computations shall be based on a 360-day year and a uniform period of 30 days
per month. Interest for any partial month shall be prorated based on the actual
number of days elapsed and the appropriate per diem interest rate.
2. PAYMENTS.
(a) The debt represented by this Note shall be paid in sixty-one (61)
consecutive monthly installments. The first installment shall consist entirely
of interest, as prorated to the extent necessary for the initial month, and
shall equal $73.80. The amount of each subsequent installment shall be $255.33,
consisting of principal and interest on an amortized basis.
(b) The due date for each installment shall be the first day of each
month, beginning with June 1, 2000 (each a "Payment Date"). Payment Dates shall
continue to occur until this Note is paid in full. The entire balance of
principal and interest shall be due and payable in full on June 1, 2005.
(c) The Maker is entitled to prepay the principal balance under this
Note, in whole or in part, on one or more occasion(s), without premium or
penalty.
(d) The Holder shall have the right to allocate all payments under this
Note in accordance with the following priority: (1) first, to accrued but unpaid
interest; and (2) second, to unpaid principal.
3. PAYMENT ADDRESS AND METHOD.
The Holder shall have the right, which may be exercised on one or more
occasion(s) in the sole discretion of the Holder, to require the Maker to use
any address for the delivery of payment
<PAGE>
and any reasonable method of payment, including but not limited to cashier's
check or wire transfer. For present purposes, the Holder hereby requires the
Maker to use a single check for each installment payment, and to use the mailing
address shown below for the delivery of all payments:
Apple Suites, Inc.
Attn: Stanley J. Olander, Jr., Secretary
9 North Third Street
Richmond, VA 23219
4. SECURITY AND COLLATERAL.
The Holder and the Maker acknowledge and agree that no security
interest has been granted in any property or collateral in connection with this
Note.
5. PURPOSE.
The Maker has leased an extended-stay hotel in Malvern, Pennsylvania.
The Maker has received funds from the Holder for the purchase of various
supplies for such hotel, including without limitation, sheets, towels and
similar supplies to be used in connection with the operation of such hotel (the
"Supplies"). This Note serves as evidence of the indebtedness of the Maker to
the Holder, and provides for the repayment of such indebtedness to the Holder.
6. EVENTS OF DEFAULT.
(a) Each of the following events shall constitute an "Event of Default"
under this Note:
(1) the failure by the Maker to pay to the Holder, within a
grace period of five (5) calendar days after any Payment Date, the full amount
due on such Payment Date;
(2) the acceleration of any payment obligation of the Maker
under any other promissory note, debt instrument or other financial instrument
or agreement that now exists or may exist in the future;
(3) the commencement of any proceeding to appoint any
receiver, trustee, custodian, liquidator, or similar official for the Maker, or
the final appointment of any of the foregoing;
(4) the attachment, levy, seizure or garnishment, whether in
whole or in part, of any wages, funds, financial accounts or other property of
the Maker;
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(5) the entry of any judgment against the Maker that exceeds,
when combined with other unpaid judgments of the Maker, ten percent (10%) of the
then unpaid principal balance under this Note;
(6) the general inability of the Maker to pay its debts as
they become due;
(7) the filing or commencement, by the creditors of the Maker,
of any Insolvency Action (as defined below) that is not dismissed within thirty
(30) calendar days after the original date of filing or commencement;
(8) the Maker's approval or voluntary filing of any Insolvency
Action, or its approval or consummation of any plan to make a general assignment
for the benefit of creditors;
(9) the approval of any plan, or the execution of any
contract, that causes or is intended to cause any of the following with respect
to the Maker: (A) its dissolution; (B) the liquidation of its assets; (C) the
termination of its corporate existence, whether by merger or otherwise; or (D)
the sale or transfer of all, or substantially all, of its assets;
(10) any event that causes or will cause the Maker to cease
its business or operations for a period of more than thirty (30) consecutive
calendar days; or
(11) any event that terminates or will terminate the business,
operations or legal existence of the Maker.
(b) For purposes of this Note, the term "Insolvency Action" shall mean
any case or proceeding, or petition relating thereto, that arises under any
state or Federal laws relating to bankruptcy or insolvency, whether now existing
or subsequently enacted, and that seeks reorganization, liquidation or other
relief with respect to the debts, assets or businesses of the Maker.
7. REMEDIES.
(a) If an Event of Default occurs, all unpaid principal and accrued
interest under this Note shall become immediately due and payable in full,
without any action whatsoever by the Holder.
(b) The Maker shall pay all costs, including but not limited to
reasonable legal fees and expenses, whether arising in connection with an
Insolvency Action or otherwise, that may be incurred by the Holder to enforce
this Note or to collect the amounts due under this Note ("Enforcement Costs").
The Holder, in its sole discretion, shall have the right to treat Enforcement
Costs as additional interest under this Note.
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<PAGE>
8. TRANSFER AND ASSIGNMENT.
(a) The Holder shall have the right to transfer this Note and to assign
any rights or remedies under this Note. Such right may be exercised in whole or
in part, on one or more occasion(s), in the sole discretion of the Holder. The
obligations of the Maker under this Note shall not be altered or affected in any
way by any such transfer or assignment by the Holder.
(b) The Maker shall be absolutely prohibited from assigning any of its
obligations under this Note without the prior written consent of the Holder. The
Holder shall be entitled to withhold such consent in its sole discretion for any
reason or no reason. Any attempted assignment in violation of such prohibition
shall be ineffective and void.
(c) The Holder and the Maker acknowledge and agree that this Note (1)
is evidence of commercial debt financing; and (2) is not an investment contract,
is not designed to raise capital, is not part of any plan of distribution and is
not related to any offering of securities.
9. WAIVERS.
(a) The Holder shall not be deemed to have waived any of its rights or
remedies under this Note unless the Holder delivers a written notice to each of
the Maker that states the nature and scope of such waiver. Without limiting the
foregoing, no waiver of the Holder's rights or remedies shall be deemed to exist
solely because the Holder, on one or more occasion(s), may have: (1) waived
certain rights or remedies; (2) elected certain rights or remedies in lieu of
others; (3) delayed in exercising any rights or remedies; (4) extended any
Payment Dates under this Note; or (5) refrained from requiring the Maker to act
in strict compliance with this Note.
(b) The Maker, to the maximum extent permitted by law, hereby grants a
complete, irrevocable and unconditional waiver of each of the following: (1) the
right to require presentment, demand, dishonor, protest or any notices of any
kind or nature from the Holder in connection with this Note; (2) the right to
assert any statute of limitations as a defense to the enforcement of this Note;
(3) any claim that seeks to restrain, enjoin, prohibit, delay or interfere with
any transfer of this Note by the Holder, or any assignment of the Holder's
rights or remedies under this Note; (4) any claim that a transfer or assignment
by the Holder with respect to this Note has altered or affected the obligations
of the Maker in any way; and (5) any claim that the Holder has waived its rights
or remedies under this Note in a manner other than the manner described in
subsection (a) immediately above.
10. GENERAL.
(a) Time is of the essence with respect to this Note and each Payment
Date. Except as expressly set forth in this Note, or in a written waiver that
may be granted by the Holder, there are no grace periods and no extensions of
time for payment with respect to this Note, and no grace periods or extensions
shall be implied.
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<PAGE>
(b) This Note shall be interpreted and enforced in accordance with the
laws of the Commonwealth of Virginia, without regard to any choice of law
provisions or principles thereof to the contrary.
(c) All provisions in this Note are severable and each valid and
enforceable provision shall remain in full force and effect, regardless of any
official or formal determination that declares certain provisions of this Note
to be invalid or unenforceable.
(d) Captions and headings are used in this Note for convenience only
and shall not affect the interpretation of this Note. Terms such as "hereof,"
"hereby," "hereto," "herein" and "hereunder" shall be deemed to refer to this
Note as a whole, rather than to any particular provision of this Note.
(e) All terms and conditions of this Note shall be binding upon, and
enforceable against, the Holder and the Maker, and all of their respective
assignees and successors in title or interest.
APPLE SUITES MANAGEMENT, INC.,
a Virginia corporation
By: /s/ Glade M. Knight
-----------------------------
Glade M. Knight, President
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Exhibit 10.11
DECLARATION OF TRUST
Agreement and declaration of trust made April 24, 2000, by and between
Apple Suites, Inc., a corporation organized and existing under the laws of the
Commonwealth of Virginia, referred to in this declaration as trustee, and such
persons or entities as may become parties to this declaration by acceptance of
certificate shares, for the purpose of enabling the trustee to hold and manage
the trust estate and to carry on business as provided below in this declaration.
The trustee declares that all property now held or acquired after the
effective date of this declaration by it or its successor, as trustee, and all
income and profits from such property, shall be managed, administered, received,
collected, disposed of, and distributed for the benefit of such persons as may
from time to time be owners of certificates of shares evidencing beneficial
interests in this trust estate, in the manner and subject to the terms and
conditions set forth in this instrument and any amendments to this instrument.
The property now held by the trustee subject to the terms of this trust
consists of the following: Homewood Suites, 12 East Swedesford Road, Malvern,
Pennsylvania 19355.
ARTICLE ONE
CHARACTER OF THE ORGANIZATION
It is expressly declared that there is created a trust, of the type
commonly termed a business trust, pursuant to 15 Pa. C.S. Section 9501 et. seq.,
and not a partnership, a corporation, or a joint-stock association.
ARTICLE TWO
NAME AND LOCATION
A. The trustee may be designated as Apple Suites Pennsylvania Business
Trust, in which name it makes and executes contracts and all kinds of
instruments, conducts business, acquires and conveys real or personal property,
and sues and is sued.
B. The principal office of the trust shall be at 9 North Third Street,
Richmond, Virginia 23219, unless and until it is changed by the trustee.
C. The trustee may establish such branch offices or places of business
as it shall determine to be in the best interests of the trust.
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ARTICLE THREE
CAPITAL STOCK AND SHARES
A. The beneficial interests in the trust shall be divided into 100
shares, no par value.
B. The trustee may sell or exchange such shares to such persons, for
such sums or other consideration, and on such terms, as it may deem expedient.
C. The trustee shall issue or cause to be issued to subscribers for or
purchasers of such shares, certificates in such form as the trustee deems
proper, evidencing the beneficial interests of such share owners.
D. The certificates shall be personal property and shall entitle owners
of such certificates to participate in all dividends and other distributions of
income or principal in the proportion which the number of shares of each owner
bears to the total number of shares issued and outstanding.
E. Any trustee of the trust may acquire, hold, and dispose of shares in
the trust to the same extent and in the same manner as if it were not a trustee
and without affecting in any way its status or power as such.
ARTICLE FOUR
TRANSFER OF SHARES
A. The shares of the trust shall be transferable by an appropriate
instrument in writing and by the surrender to the trustee or to the person
designated therefor by it, but no transfer shall be of any effect as against the
trustee until it has been recorded upon the books of the trustee kept for that
purpose. On the transfer and surrender, and recording in the trust books, a new
certificate shall be issued to the transferee. In case of a transfer of only a
part of the shares evidenced by a certificate, a new certificate for the residue
shall be issued to the transferor.
B. The person in whose name shares stand on the books of the trust
shall be deemed to be and treated as the absolute owner of such shares for all
purposes of this instrument, and until the existing certificate is surrendered
and transfer is recorded as required above, the trustee shall not be affected by
an notice, actual or constructive, of any transfer.
C. Any person becoming entitled to become a shareholder in the trust as
a result of the death or bankruptcy of any shareholder, or in any way other than
by transfer in accordance with the above provisions of this article, may receive
a new certificate for the share and be recorded on the books of the trust as the
owner of such share, upon the production of proper evidence of his or her
entitlement to such share and the delivery of the existing certificate to the
trustee or any person designated by it. Until such evidence is produced and the
existing certificate is surrendered, the trustee shall not be affected by any
notice of the change in title.
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ARTICLE FIVE
LOSS OR DESTRUCTION OF CERTIFICATE
In case of the loss or destruction of a certificate of shares, a new
one may be issued in its place, on such conditions as the trustee may deem
necessary and proper.
ARTICLE SIX
EFFECT OF DEATH OF SHAREHOLDER OR TRANSFER OF SHARES
A. The death, insolvency, or incapacity of one or more of the
shareholders, or the transfer of shares, shall not operate to terminate or
dissolve the trust or affect its continuity in any way, nor shall such event
entitle any legal representative or other person to dissolve the trust or to
partition the trust property or to demand an accounting.
B. In the event of the death of a shareholder, or a transfer of shares,
the transferee, heirs, legatees, or legal representatives of the decedent or
transferor shall succeed to his or her rights.
ARTICLE SEVEN
INSPECTION OF STOCK BOOKS
The stock books of the trust, showing the ownership of all shares of
the trust and recording all transfers of such shares, shall be subject to
inspection by any shareholder or his or her attorney or agent at all reasonable
times, under such reasonable conditions as the trustee may prescribe.
ARTICLE EIGHT
DIVIDENDS
The trustee may, from time to time, declare and pay out of the net
earnings received by it such dividends as it, in its discretion, deems proper
and advisable.
ARTICLE NINE
RIGHTS OF SHAREHOLDERS
A. The rights of shareholders and of transferees and other persons
becoming entitled to shares of the trust shall be subject to all the terms and
conditions of this declaration of trust.
B. The shares of the trust shall be personal property, and the
ownership of such shares shall not give any person any legal or equitable title
in or to the trust property or any part of such
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property, but shall only entitle the owners of shares to their proportionate
shares of dividends and distributions as provided above.
C. No shareholder shall have any rights to manage or control the
property, affairs, or business of the trust, or any power to control the trustee
in these respects.
D. No shareholder shall have any right to a partition of the trust
property or to an accounting during the continuation of the trust.
ARTICLE TEN
LIABILITIES OF SHAREHOLDERS
A. Shareholders shall not be liable for any assessment, and the trustee
shall have no power to bind the shareholders personally.
B. All persons dealing with or having any claim against the trustee or
any officer or agent of the trust shall look only to the funds and property of
the trust for the payment of any debt, claim, damage, judgment, or decree, or
any money or thing that may become due or payable in any way, whether founded on
contract or tort, and the shareholders shall not be personally or individually
liable for any such debt, claim, damage, judgement, or decree.
C. No amendment shall ever be made to this declaration of trust
increasing or enlarging the liability of shareholders, without the written
consent of all the shareholders.
ARTICLE ELEVEN
SHAREHOLDERS' MEETINGS; ELECTIONS
A. The shareholders shall meet at the principal office of the trust
once each year for the purpose of electing the trustee(s) and of exercising and
discharging any other powers or duties vested in them by this instrument.
B. The trustee may call special meetings of shareholders at any time.
C. The trustee shall notify all shareholders of the time and place of
all meetings of shareholders, whether regular or special, and, in the case of
special meetings, shall also give notice to all shareholders of the general
purpose of the meeting and the nature of the business to be considered at such
meeting, and such special meetings shall be limited to the business thus
specified in the call, unless the owners of at least 50% of all outstanding
shares consent in writing to the consideration of other matters.
D. Notice mailed to a shareholder directed to him or her at the address
shown on the books of the trust shall be deemed sufficient for the provisions of
this article and for all other purposes unless written notice of change of
address is given to the trustee.
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E. At all meetings of shareholders, the president named by the trustee,
or such other person as may be designated by the trustee, shall preside. Each
share shall be entitled to one vote, and shareholders may vote by proxy. The
owners of one-half of the issued and outstanding shares, or their proxies, shall
constitute a quorum for the purposes of any meeting, In the election of the
trustee, and on other matters except where it is otherwise provided in this
instrument, a majority of the shares represented and voting at the meeting shall
control.
ARTICLE TWELVE
RESIGNATION OF TRUSTEE
A. Any trustee may be removed during his or her term at any regular
meeting of trustees or at any meeting specially called by any trustee for that
purpose, by a majority of all trustees for any cause by them deemed sufficient.
B. Written notification of any special meeting called for the purpose
of considering the removal of any trustee shall be given or mailed to each
trustee at least ten days prior to such meeting, but no such notification shall
be necessary in the case of a regular meeting of trustees.
ARTICLE THIRTEEN
MEETINGS OF TRUSTEE; MANNER OF FUNCTIONING
A. Regular meetings of the trustee shall be held at the principal
office of the trust at least once a year, at such times as it may from time to
time fix, and it may hold meetings at any time for the transaction of any
business upon the call of any trustee. The president or, in his or her absence,
any other person as the trustee may designate, shall preside at such meetings.
B. No informality or defect in the manner of calling or holding
meetings, and no failure to call or hold such meeting, shall affect the validity
of any action taken by a majority of all trustees.
C. A majority of trustees shall constitute a quorum; and the
concurrence of all trustees shall not be necessary to the validity of any action
taken by them, but the decision or action of a majority of trustees present and
voting at any meeting shall be conclusive and binding as the act and decision of
the trustees as a body.
D. Any trustee may delegate to any one or more of their number the
exercise of any power or the performance of any duty that trustees as a body
might exercise or perform.
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ARTICLE FOURTEEN
REPORTS BY THE TRUSTEE
The trustee shall annually make a written report of operations during
the preceding fiscal year, showing receipts, disbursements, and earnings, and
the assets and condition of the trust estate. Such report shall be kept on file
at the principal office of the trust at all times, and shall be subject to
inspection by any shareholder or his or her attorney or agent at any reasonable
time; and a copy or summary of such report shall be furnished to any shareholder
upon written request.
ARTICLE FIFTEEN
OFFICERS AND AGENTS
A. The trustee shall appoint a president and a secretary, and such
officers shall have such authority and shall perform such duties as the trustee
shall prescribe and such as are usually incident to those offices in the case of
corporations, so far as applicable and in the absence of the adoption of
contrary provisions by the trustee.
B. The terms of all officers shall be fixed by the trustee, and the
trustee may at any time, with or without cause, remove or discharge any such
officer or any agent or employee; provided, that the removal of an officer as
such shall not affect its status as trustee.
ARTICLE SIXTEEN
GENERAL POWERS AND FUNCTIONS OF THE TRUSTEE
A. The trustee shall hold the legal title to all property at any time
belonging to the trust, and shall have absolute and exclusive control,
management, and disposition of such property, and absolute and exclusive power
and control over the management and conduct of the businesses and affairs of the
trust, free from any power of control on the part of the shareholders.
B. The trustee may hold, manage, deal with, and dispose of the property
and business of the trust in the same manner as if it were the absolute owner of
such property, subject only to the specific limitations placed on its powers by
this instrument.
C. The enumeration of powers contained in this article shall not be
construed as limiting in any way the general powers conferred on the trustee. It
shall have all powers necessary, convenient, or appropriate to the purposes and
ends of this trust, and is authorized to take any action that it may deem proper
to carry out such purposes.
D. The trustee shall have the power, among others, to purchase or
otherwise acquire property, and to sell, exchange, lease, mortgage, pledge, or
in any manner dispose, encumber, improve, or deal with the property of the
trust, or any part of such property or any interest in such property, on such
terms and for such consideration and purposes as it deems proper.
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E. The trustee may engage in business, manufacture, and deal in goods,
wares, and merchandise, incur indebtedness, borrow or loan money with or without
security, enter into contracts of all kinds, execute, accept, discount,
negotiate, and deal in commercial paper and evidences of indebtedness, execute
conveyances, mortgages, deeds of trust, leases, and any other instrument in
writing; it may invest and reinvest the trust funds; it may compromise or settle
any suits, claims, or demands, or waive or release any rights, relating to the
trust estate or business; it may appoint and employ officers, agents, and
attorneys.
F. The trustee may sue and be sued and prosecute and defend any and all
actions affecting the trust or its business or property, either in the name of
the trust or in its own name.
G. The trustee may adopt and enforce such bylaws or rules and
regulations, not inconsistent with the provisions of this instrument, as they
may from time to time deem expedient; it may adopt and use a common seal; it may
vote in person or by proxy any stock belonging to the trust estate, and receive
the dividends on such stock.
ARTICLE SEVENTEEN
APPLICATION OF TRUST FUNDS
A. Any act or thing done by the trustee, or by the officers or agents
of the trust under authority from the trustee, shall, as to strangers dealing
with such trustee, officers, or agents, be conclusively deemed to be within the
purposes of this trust and within the powers of the trustee.
B. No person dealing with the trustee or with any officer or agent of
the trust, shall be bound to see to the application by the trustee of any funds
or property passing into its hands or control.
ARTICLE EIGHTEEN
LIABILITY OF THE TRUSTEE
A. No trustee shall be liable for any act or omission whatsoever of any
other trustee or of any officer, agent, or employee of the trust.
B. No trustee shall be liable for any negligence or error in judgment,
or for any act or omission, except for its own willful breach of trust.
C. No trustee shall be required to give any bond or surety to secure
the performance of the trust.
D. Every act or thing done or omitted, and every power exercised or
obligation incurred by any trustee in the administration of the trust or in
connection with any business, property, or concern of the trust, whether
ostensibly in its own name or in its trust capacity, shall be done, omitted,
exercised, or incurred by it as trustee and not as individuals.
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E. Every person contracting or dealing with the trustee or having any
debt, claim, or judgment against it shall look only to the funds and property of
the trust for payment or satisfaction. No trustee, officer, or agent of the
trust shall ever be personally liable for or on account of any contract, debt,
tort, claim, damage, judgment, or decree arising out of, or preservation of, the
trust estate or the conduct of any business of the trust. A stipulation or
notice to this effect may be inserted in any contract, order, or other
instrument made by the trustee or its officers or agents, and on stationery used
by it, but the omission of such stipulation or notice shall not be construed as
a waiver of the above-stated provision, and shall not render the trustee,
officers, or agents personally liable.
ARTICLE NINETEEN
REIMBURSEMENT AND INDEMNIFICATION OF THE TRUSTEE
Each trustee shall be indemnified by and reimbursed from the trust
estate for any personal liability, loss, or damage incurred or suffered by it,
including liability, loss or damage resulting from torts, in the administration
of the trust estate or in conducting any business or performing any act
authorized or permitted by this declaration of trust or any amendment to this
declaration, except such as may arise from its own willful breach of trust; but
such indemnity or reimbursement shall be limited to the trust estate, and no
shareholder shall be personally or individually liable for such indemnity or
reimbursement to any extent.
ARTICLE TWENTY
AMENDMENT
This declaration of trust may be amended in any particular, except as
regards the liability of shareholders, by the trustee, but only with the consent
of the owners of at least two-thirds of the shares, or their proxies, voting at
a meeting called for that purpose pursuant to notice given as provided in this
instrument and specifying the purpose of the meeting and the nature of the
proposed amendment.
ARTICLE TWENTY-ONE
DURATION AND TERMINATION
A. The duration of this trust shall be perpetual, unless sooner
terminated.
B. The trustee may terminate and dissolve this trust at any time, but
only with the assent of the owners of at least two-thirds of the shares, or
their proxies, voting at a meeting called for that purpose pursuant to notice
given as provided in this instrument and specifying the purpose of the meeting.
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C. On the termination of this trust by any cause, the trustee shall
liquidate the trust estate, wind up its affairs, and dispose of its property and
assets at public or private sales, and, after discharging all legal obligations
of the trust, shall distribute the proceeds among the shareholders in proportion
to their interests, and for these purposes the trustee shall continue to act
until such duties have been fully performed.
ARTICLE TWENTY-TWO
GOVERNING LAW
This instrument and the trust shall be governed by, construed, and
enforced in accordance with the laws of the Commonwealth of Pennsylvania.
In witness, the parties have executed this declaration of trust on the
day and year first above written.
Apple Suites, Inc., as trustee
By: /s/ Glade M. Knight
------------------------------
Name: Glade M. Knight
Title: CEO and President
Apple Suites, Inc., shareholder
By: /s/ Glade M. Knight
------------------------------
Name: Glade M. Knight
Title: CEO and President
Exhibit 10.12
2/13/96
GROUND LEASE
1. Parties: Habendum.
This Ground Lease is made as of the 1st day of July, 1996, by and
between Loretta M. Cimeo, George C. Morelli, Joseph P. Morelli, Esther E.
Morelli, Thomas W. Morelli, Charles P. Morelli, and John J. Morelli, hereinafter
collectively referred to as Landlord, and Promus Hotels, Inc., a Delaware
corporation, hereinafter referred to as Tenant. Landlord hereby leases to
Tenant, and Tenant hereby hires from Landlord the Premises hereinafter
described.
2. Premises.
The "Premises" consist of: approximately 4.0 acres of real property
located on Swedesford Road in Malvern, East Whiteland Township, PA, as more
fully described on Exhibit A attached hereto, together with any buildings and
other improvements hereafter constructed thereon (such buildings and other
improvements hereafter constructed are hereinafter called the "Improvements");
any and all interests of Landlord in streets adjacent thereto; and any and all
other rights and interests of Landlord appurtenant to said parcel and streets.
"Ground Leasehold Estate" shall mean all of Tenant's rights and interests under
this Ground Lease. "Registry of Deeds" shall mean the land records office or
offices in which the deed of the Premises is recorded, as identified on Exhibit
A.
Landlord represents and warrants that Landlord has good and clear
record and marketable title to the Premises, subject only to encumbrances
identified on Exhibit A. Landlord covenants and agrees not to grant or permit or
suffer to attach to the Premises any easement, restriction, lien or other
encumbrance affecting the title to the Premises
<PAGE>
during the Term of this Ground Lease other than restrictions and other
encumbrances in the name of Landlord requested by Tenant. Landlord shall have
thirty (30) days to bond off or otherwise discharge any encumbrance suffered in
violation of the preceding sentence.
Tenant accepts the Premises "as is" and in their present condition.
Tenant hereby acknowledging that Tenant has not been influenced to enter into
this Ground Lease by, nor has Tenant relied upon, any warranties and
representations of Landlord concerning the physical condition of the Premises,
except as follows:
(a) No notice from any governmental body has been served upon Landlord
to date claiming any violation of any law, ordinance, code or regulation;
(b) No portion of the Premises has been condemned or otherwise taken by
public authority, and Landlord has no actual knowledge that any such
condemnation is threatened or contemplated;
(c) There are no actions, suits or proceedings pending, or to
Landlord's actual knowledge, threatened or contemplated which could have an
adverse affect upon the Premises; and
(d) No portion of the Premises has ever been used for the manufacture
or storage of hazardous waste, as defined by applicable state local or federal
law.
The "Original Term" shall be a period of thirty (30) years, commencing
upon the first day of the month following execution of this Ground Lease.
The term "Ground Lease Year" as used in this Ground Lease shall mean
each of the consecutive twelve-month periods of the Original Term or of any
Extension Term of this Ground Lease.
<PAGE>
Tenant shall have the absolute and unconditional option to extend the
Term of this Ground Lease for one or more of three (3) successive ten (10) year
Extension Terms, each on all of the terms and conditions set forth in this
Ground Lease. Each such extension option shall be exercisable by written notice
from Tenant to Landlord given at least six (6) months before the commencement of
each such Extension Term.
4. Rent.
During the Term of this Ground Lease, Tenant shall pay rent to Landlord
at the address from time to time specified by Landlord pursuant to Paragraph 20,
absolutely net without assertion of any counterclaim, setoff, deduction or
defense and, except as otherwise expressly provided herein, without abatement,
diminution or reduction, in advance in monthly installments on the first day of
each month during the Term, in an amount equal to one-twelfth of the Annual Rent
specified in this Section.
The Annual Rent with respect to the first five (5) Ground Lease Years
of the Original Term shall be $100,000.
Upon every fifth (5th) anniversary of the commencement date of the
Original Term, the Annual Rent shall be adjusted to equal (i) the product of (A)
$100,000, multiplied by (B) a fraction, the numerator of which is the CPI, as
defined below, for the last full calendar month preceding such anniversary date
(the "Extension Index"), and the denominator of which is the CPI, as defined
below, for the last full calendar month preceding the commencement date of the
Original Term (the "Beginning Index"), but not to exceed an increase of fifteen
percent (15%), and in no event shall the Annual Rent be less than $100,000.
The "CPI" shall mean the Consumer Price Index for the Metropolitan
Philadelphia area. All items, 1982-84=100, as published by the U.S. Department
of Labor, or, if such
<PAGE>
index is no longer published, the most nearly similar index which is published
by the U.S. Department of Labor.
5. Taxes; Assessments.
In the event the Premises is a portion of a larger tax parcel, Landlord
agrees to use its best efforts to have the Premises designated as a separate
parcel for taxing purposes so that the assessed valuation of the land and
buildings shall relate only to the land constituting the Premises and to the
buildings and improvements constructed on the Premises.
In the event the Premises is a portion of a larger tax parcel and the
Landlord is unable to have the Premises designated as a separate parcel for
taxing purposes so that taxes are assessed upon the larger tax parcel of which
the Premises is a portion, Tenant agrees to pay that portion of the taxes which
is reasonably attributable to the Premises, determined as follows:
A. In the event the taxes are identified or apportioned by the taxing
authorities or are identifiable or apportionable based on
valuation or other information furnished by the taxing authority
so that the portion of the taxes attributable to the value of the
land can be distinguished from the portion of the taxes
attributable to the value of the buildings, then as to that
portion of the taxes attributable to the value of the land. Tenant
will pay a percentage of such portion of the taxes determined by
dividing the area of the Premises by the total area of the
assessed parcel, and as to the portion of the taxes attributable
to the value of the buildings, Tenant will pay a percentage of
such portion of the taxes determined by dividing the gross floor
area of the
<PAGE>
building on the Premises by the gross floor area of all buildings
located on the assessed parcel.
B. In the event the taxes are not identified or apportioned by the
taxing authority and are not identifiable or apportionable based
on valuation or other information furnished by the taxing
authority so that the portion of the taxes attributable to the
value of the land cannot be distinguished from the portion of the
taxes attributable to the value of the buildings, then as to all
taxes, Tenant will pay a percentage of the taxes determined by
dividing the area of the Premises by the total area of the
assessed parcel.
Landlord will notify Tenant in writing of any taxes which Tenant is
required to pay in accordance with the provisions of this Section. Such
notification shall be furnished to Tenant not less than twenty (20) days before
the date such taxes are due and shall be accompanied by a copy of the tax bill.
Any taxes which Tenant is required to pay shall be paid by it no later than the
date on which such taxes are due unless the notification by Landlord is received
by Tenant less than twenty (20) days before the date on which such taxes are
due, in which event Tenant shall pay such taxes within twenty (20) days after
the date of such notification, and Landlord shall be responsible for the payment
of any penalties, interest or other charges imposed upon delinquent payment of
taxes. In the event the Premises is a portion of a larger tax parcel, then the
written notification by Landlord to Tenant of such taxes shall set forth (1) the
total taxes on the larger tax parcel accompanied by a copy of the tax bill; (2)
whether the total taxes on the larger tax parcel are identifiable or
apportionable between land and buildings and if so, the amount of taxes,
attributable to the land and the amount of taxes attributable to buildings; and
(3)
<PAGE>
Tenant's portion of the total taxes together with a statement showing how
Tenant's portion was calculated in accordance with this Section.
If Tenant fails to pay any taxes which it is required to pay within the
time period provided above, Landlord may, at its option, pay said taxes,
together with any and all penalties and said amount shall become immediately due
and payable as additional rent.
Tenant shall have the right in its own name, or in Landlord's name
where appropriate, but at its own cost and expense, to contest the amount or
legality of any taxes which it is obligated to pay hereunder and make
application for the reduction thereof, or any assessment upon which the same may
be based, and the Landlord agrees, at the request of Tenant, to execute or join
in the execution of any instruments or documents necessary in connection with
such contest or application. If Tenant shall contest such tax assessment, or
other imposition, the time within which Tenant shall be required to pay the same
shall be extended until such contest or application shall have been finally
determined, except that Tenant shall be responsible for any penalty imposed by
the taxing authority resulting from the late payment of taxes due to said
contest.
In no event shall Tenant be liable for payment of any income, estate or
inheritance taxes imposed upon Landlord or the estate of Landlord. Tenant shall
not pay any income, franchise, excise, sales or excess profits tax levied upon,
required to be collected by, or assessed against Landlord.
Tenant shall, within thirty (30) days after payment thereof, provide
Landlord with a photocopy of the tax bill marked "paid" or other suitable
evidence that the same has been paid. Not withstanding the specification of such
30-day period, Tenant's obligations under the preceding sentence are expressly
agreed to be subject to the general rights of cure by Tenant after notice, as
set forth in Paragraph 13, and by any Ground Leasehold
<PAGE>
Mortgagees after notice, as set forth in Paragraph 10. If applicable law or
statute permits the payment of any or all of the above items to be made in
installments (whether or not interest accrues on the unpaid balance), Tenant
may, at Tenant's election, utilize the permitted installment method, but shall
pay each installment with any interest before delinquency or the commencement of
tax title proceedings.
Landlord shall pay and discharge all real estate taxes and other sums
due in respect of, or which might become a lien upon, the land of which the
Premises are a part except to the extent the same is the responsibility of
Tenant under this Ground Lease.
All payments of taxes or assessments or both, except permitted
installment payments for betterments and assessments, shall be prorated for the
initial partial tax year included within the Term and for the partial tax year
in which the Term expires. For such permitted installment payments, Tenant shall
pay only the installment(s) falling due during the Term of this Ground Lease.
Landlord appoints Tenant as Landlord's attorney-in-fact for the purpose
of making all payments to any taxing authorities and for the purpose of
contesting any taxes, assessments, or charges, all as hereinabove set forth.
If either party shall fail to make any payment of taxes, assessments or
charges as and when the same is required to be paid by it hereunder and either
(i) such failure shall continue for ten (10) days after receipt by it of notice
from the other of such failure or (ii) the other shall in good faith determine
that immediate payment is necessary to prevent jeopardy to the other's interest
in the land constituting part of the Premises and shall simultaneously give
notice to the party required to make such payment to such effect, the other may
cure such failure by making such payment, together with any interest and penalty
thereon, the amount of which payment, plus interest thereon at a rate two
percent
<PAGE>
(2%) above the so-called "Prime Rate", "Base Rate" or "Corporate Rate" of any
successor rate quoted from time to time in the Wall Street Journal (the
"Involuntary Interest Rate"), shall be paid by the party required to make such
payment upon demand.
6. Uses.
Tenant currently intends to use and permit the use of the Premises for
the construction, maintenance, and operation of a hotel and accessory uses, but
Tenant is not obligated to construct a hotel or any other Improvements on the
Premises. If, at any time prior to the commencement of construction of
Improvements on the Premises, Tenant determines that Tenant will probably not be
able to secure approvals for and construct a hotel of at least 125 rooms. Tenant
shall promptly give notice to Landlord of such fact. In such event, Landlord
shall have the option to terminate this Ground Lease by written notice to Tenant
given within thirty (30) days after such notice from Tenant, in which event the
Ground Lease shall terminate on the date when Landlord gives such notice, rent
and other amounts paid in advance shall be prorated, and neither party shall
have any other obligation to the other. In the event Tenant gives such a notice
but Landlord does not elect to terminate the Ground Lease Tenant shall
thereafter have the absolute right at any time to use the Premises, or permit
them to be used, or any lawful purpose except for adult movies/bookstores or an
abortion clinic. In the event that Tenant constructs a hotel on the Premises,
the Premises shall be used for hotel and accessory uses only during the first 10
Ground Lease years, and Tenant shall thereafter have the absolute right at any
time to use the Premises, or permit them to be used, for any lawful purpose
except for adult movies/bookstores or an abortion clinic.
Tenant may obtain zoning changes and conditional use permits and may
enter into agreements restricting use or granting easements in or over the
Premises, provided that
<PAGE>
no such agreements shall be binding upon Landlord or the Premises after the
expiration or termination of the Term of this Ground Lease without Landlord's
prior written consent. Landlord shall, at Tenant's request and expense, join
with Tenant in applications and proceedings to obtain easements, use and zoning
changes at Tenant's expense.
7. Improvements.
At any time and from time to time during the Term of this Ground Lease,
Tenant shall have the right, but shall not be obligated, to construct or cause
to be constructed new buildings and other Improvements on all or any part of the
Premises and to demolish, remove, replace, alter, relocate, reconstruct, or add
to any buildings and other Improvements now and hereafter constituting part of
the Premises in whole or in part, and to modify or change the contour or grade,
or both, of the land. All salvage shall belong to Tenant. Notwithstanding the
foregoing, except as necessary to comply with Tenant's obligation to maintain
the Premises in compliance with Requirements of Law, Tenant shall not have the
right to commence any work under this paragraph if there is then a continuing
default on the part of Tenant hereunder as to which Landlord has given the
required notices and all applicable periods of grace and periods for cure by
Tenant and any Ground Leasehold Mortgagees have expired without cure or
commencement of cure as in Paragraphs 10 and 13 of this Ground Lease
specifically provided ("Terminable Default").
Any work of demolition, construction, alteration, or repair of
Improvements undertaken by or for Tenant during the Term of this Ground Lease in
or on the Premises shall be in compliance with all then applicable laws, codes,
ordinances, rules, regulations, orders and requirements for permits and
approvals, including but not restricted to building permits, zoning and planning
requirements, and other such approvals from federal, state,
<PAGE>
county and municipal governmental authorities from time to time having
jurisdiction over the Premises ("Requirements of Law").
During any major work (as hereinafter defined) or demolition, removal,
construction, reconstruction, alteration or repair in or on the Premises, Tenant
shall maintain and shall deliver to Landlord prior to the commencement of any
major work certificates evidencing insurance coverage for "builder's risk"
(including comprehensive public liability) and for worker's compensation
covering all persons employed in connection with the work and with respect to
whom death or bodily injury claims could be asserted against Landlord or the
Premises. Tenant's obligations under the preceding sentence are expressly agreed
to be subject to the general rights of cure by Tenant after notice, as set forth
in Paragraph 13 and by any Ground Leasehold Mortgagees after notice, as set
forth in Paragraph 10. Notwithstanding the provisions of Paragraph 18, unless
Tenant shall provide Landlord with suitable payment and performance bonds
insuring completion of the work Tenant shall be personally liable, without
limitation, to complete any major work of demolition, removal, construction,
reconstruction, alteration or repair of Improvements once begun in or on the
Premises, to the point that the Premises are in compliance with all Requirements
of Law. However, nothing in the preceding sentence shall obligate Tenant to
undertake any work of construction, alteration or repair or, except as expressly
set forth herein, affect the rights of Tenant to demolish, remove, alter or
replace the Improvements from time to time during the Term of this Ground Lease.
Tenant shall, at Landlord's request in each case, provide Landlord with copies
of "as built" plans as soon as practicable (but no more than 180 days) after the
completion of any major work of construction, alteration or repair in or on the
Premises. Tenant's obligations under the preceding sentence are expressly agreed
to be subject to the general rights to cure by Tenant after notice, as set forth
in
<PAGE>
Paragraph 13, and by any Ground Leasehold Mortgages after notice, as set forth
in Paragraph 10. "Major work of construction, alteration or repair" shall mean
work having an estimated cost exceeding twenty-five percent (25%) of the then
value of the Improvements.
Neither party shall permit to be enforced against the other's interest
in the Premises any mechanic's, materialman's, contractor's, or subcontractor's
lien arising from any work in or on the Premises, in the case of Tenant, or in
or on the land of which the Premises are a part, in the case of Landlord,
however such lien may arise. However, each party may in good faith and at its
own expense contest the validity of any such asserted lien, provided it has
furnished any bond required under applicable lien laws or has otherwise
discharged any lien from said Registry of Deeds. If the responsible party shall
fail, within thirty (30) days after notice from the other, to bond off any such
asserted lien, the other may cure such failure by arranging for such bond and
the cost of such bond, plus interest thereon at the Involuntary Interest Rate,
shall be paid by the responsible party upon demand.
Throughout the Term of this Ground Lease, Tenant shall, at Tenant's
sole cost and expense, maintain the Premises in accordance with all applicable
Requirements of Law and shall not commit waste of the Improvements except,
however, that nothing in this sentence defining the duty of maintenance shall be
construed as limiting any right given elsewhere in this Ground Lease to
demolish, remove, alter or replace the Improvements from time to time during the
Term of this Ground Lease.
Tenant shall have the right, for so long as there exists no Terminable
Default, to contest by appropriate judicial or administrative proceedings,
without cost or expense to Landlord, the validity or application of any
Requirements of Law and Tenant shall not be
<PAGE>
required to comply with any such Requirements of Law until a reasonable time
following final determination of Tenant's contest. Landlord may, but is not
required to, contest any such law independently of Tenant. Landlord shall, at
Tenant's request execute all documents and otherwise cooperate in Tenant's
contest, but without cost or expense to Landlord and without any obligation on
the part of Landlord to attend or have any representatives of Landlord attend
any proceedings in connection with such contest.
All Improvements shall be owned by Tenant and Tenant shall have the
entire insurable interest in the same until expiration or termination of this
Ground Lease, whereupon the same shall, without compensation to Tenant, be and
become Landlord's property free and clear of all claims to or against them by
Tenant or any third person claiming under Tenant. Tenant shall hold harmless
Landlord for any obligations and/or liabilities arising out of Tenant's actions
set forth in this paragraph.
8. Utilities and Services.
Tenant shall make all arrangements, whether with private providers,
governmental authorities and/or public utilities, for all utilities and other
like services to the Premises during the Term of this Ground Lease, including,
without limitation, electricity, telephone, water, sewage and gas. Landlord
shall have no responsibility for such arrangements. The expense, including
installation, maintenance, use and servicing, of all utilities and services
shall be the direct and sole responsibility of Tenant.
Landlord grants to Tenant the right to grant to governmental
authorities and utility companies, for the purpose of serving only the Premises,
rights of way or easements on over the Premises for poles or conduits or both
for such utilities and services. Promptly after the recording thereof Tenant
shall provide Landlord with a copy of any such rights of way or easement.
Tenant's obligations under the preceding sentence are
<PAGE>
expressly agreed to be subject to the general rights of cure by Tenant, after
notice, as set forth in Paragraph 13 and by any Ground Leasehold Mortgagees
after notice, as set forth in Paragraph 10 hereof.
9. Assignments, Subleases of Tenant's Interest.
Except as set forth herein, Tenant shall have the unrestricted right,
from time to time, to assign all or any portion of or any interest in Tenant's
interest in this Ground Lease and the Improvements (including the leasehold
estate created hereunder) without the prior consent of Landlord, provided that
no such assignment shall be valid and effective as against Landlord until there
shall be delivered to Landlord a true copy of the written instrument or
instruments of assignment containing the name and address of the assignee and an
instrument by which the assignee assumes all outstanding obligations of the
assignor including all indemnification obligations of the assignors then
existing hereunder.
Upon any such valid assignment of this Ground Lease provided such
assignee has a net worth in excess of $5,000,000 adjusted by a factor, the
numerator of which is the Extension Index as of the date of such assignment and
the denominator of which is the Beginning Index as defined in Section 4, has a
good business reputation and experience in hotel operation and management if a
hotel has been developed on the leased premises at the time of the assignment,
or has a good business reputation and agrees that any improvements to be
constructed on the leased premises will be in accordance with applicable
township zoning ordinances and standards if a hotel has been developed on the
leased premises at the time of the assignment the assignor shall be relieved of
all obligations of the Tenant hereunder or under such separate Ground Lease
thereafter
<PAGE>
occurring. A certified statement of net worth of the assignee shall be supplied
to Landlord prior to execution of the assignment for verification of net worth.
Tenant shall have the absolute right to sublet all or any part or parts
of the Premises and to assign, encumber, extend, or renew any subleases. Unless
otherwise expressly agreed by Landlord in writing, all subleases shall be
expressly subject and subordinate to this Ground Lease, it being understood and
agreed that no such subleases shall relieve Tenant from Tenant's obligations
under this Ground Lease. Any use of the property for adult movies/bookstores or
abortion clinic is prohibited.
10. Ground Leasehold Mortgages; Sale and Ground Leaseback.
The term "Ground Leasehold Mortgage" as used in this Ground Lease shall
include a mortgage, a deed of trust, a deed to secure debt, assignment, security
interest, pledge, financing statement, and any other instruments or agreements
intended to grant security for a debt or other obligation or other security
instrument by which the Ground Leasehold Estate is mortgaged, conveyed,
assigned, or otherwise transferred, and shall also include an Institutional
Ground Leasehold Mortgage. The term "Institution Ground Leasehold Mortgage" as
used in this Ground Lease shall include a Ground Leasehold Mortgage of which the
original holder is an institution. The term "Institution" shall mean a savings
bank, a commercial bank or trust company (whether acting individually, or in any
fiduciary capacity), an insurance company, an educational institution, or a
state, municipal or similar public employees' welfare or other pension or
retirement fund or system or a private profit sharing trust or fund, or a
corporate, private or union pension trust or fund, or any other corporation or
entity entitled to exemption from income tax under the Internal Revenue Code of
the United States as amended from time to time or any other bank, company, firm,
corporation, system, trust, fund or other entity regularly in the business of
<PAGE>
making real estate mortgage loans and shall include any of the foregoing when
acting as trustee for another holder or holders, whether or not such other
holder or holders are themselves Institutions. The term "Ground Leasehold
Mortgagee" and "Institutional Ground Leasehold Mortgagee" as used in this Ground
Lease shall refer to the holders of record of Ground Leasehold Mortgages and
Institutional Ground Leasehold Mortgages, respectively, which holders shall each
be conclusively deemed in each case to have the address last specified for the
holder of each such Ground Leasehold Mortgage or Institutional Ground Leasehold
Mortgagee, as the case may be in notice to Landlord as provided for in this
Paragraph 10. The terms Ground Leasehold Mortgage and Ground Leasehold Mortgagee
include Institutional Ground Leasehold Mortgage and Institutional Ground
Leasehold Mortgagee, respectively.
Tenant shall have the absolute right to enter into Ground Leasehold
Mortgages on one or more occasions from time to time without the consent of
Landlord.
Each Ground Leasehold Mortgagee may from time to time specify its name
and a United States address by notice to Landlord and by recording a copy of
such notice with the Registry of Deeds. Landlord shall upon request promptly
provide to any Ground Leasehold Mortgagee an acknowledgment of such name and
address in recordable form. Whether or not Landlord shall have provided such
acknowledgment, the projections and provisions of this Ground Lease applicable
to Ground Leasehold Mortgagees shall be applicable to each Ground Leasehold
Mortgagee that has recorded a notice as to its name and address in said Registry
of Deeds as aforesaid. Any notice to be given by Landlord to a Ground Leasehold
Mortgage pursuant to any provisions of this Paragraph 10 shall be deemed
properly addressed if sent to the Ground Leasehold Mortgagee at the
<PAGE>
address specified in such Ground Leasehold Mortgagee's most recent duly recorded
notice to Landlord.
No cancellation (other than a termination hereof by Landlord for a
Terminable Default as defined in Paragraph 7), surrender or modification of this
Ground Lease or waiver or amendment of any provision of this Ground Lease shall
be binding upon or effective as against any Ground Leasehold Mortgagee unless
consented to in writing by such Ground Leasehold Mortgagee.
Landlord, upon providing to Tenant any notice of (i) default under this
Ground Lease or (ii) termination of this Ground Lease, shall at the same time
provide a copy of such notice to every Ground Leasehold Mortgagee. No such
notice by Landlord to Tenant shall be deemed to have been duly given unless and
until a copy thereof has been so provided to every Ground Leasehold Mortgagee.
From and after such notice of default has been given to a Ground Leasehold
Mortgagee, such Ground Leasehold Mortgagee shall have the same period, after the
giving of such notice to it, within which to remedy any default or acts or
omissions which are the subject matter of such notice or to cause the same to be
remedied, as is given Tenant after the giving of such notice to Tenant, plus in
the case of Institutional Ground Leasehold Mortgagees only, the additional
periods of time specified in the next two succeeding paragraphs of this
Paragraph 10 to remedy, commence remedying, or cause to be remedied the defaults
or acts or omissions which are the subject matter of such notice specified in
any such notice. Landlord shall accept such performance by or at the instigation
of such Ground Leasehold Mortgagee for the account of and as if the same had
been done by Tenant and such Ground Leasehold Mortgagee shall not thereby be or
be deemed to be in possession of the Premises. If two or more Ground Leasehold
Mortgagees simultaneously offer to
<PAGE>
perform for or to remedy some default or act or omission of Tenant, Landlord may
elect to accept performance from the Ground Leasehold Mortgagee most senior in
lien upon the Ground Leasehold Estate.
Anything contained in this Ground Lease to the contrary
notwithstanding, if any default shall occur which would entitle Landlord to
terminate this Ground Lease under Paragraph 13, Landlord shall have no such
right to terminate unless, following the expiration of the period of time given
Tenant to cure such default or the act or omission which gave rise to such
default. Landlord shall give notice of termination to every Institutional Ground
Leasehold Mortgagee at least thirty (30) days in advance of the proposed
effective date of such termination if such default is capable of being cured by
the payment of money, and at least ninety (90) days in advance of the proposed
effective date of such termination if such default is not capable of being cured
by the payment of money. The provisions of the next succeeding paragraph of this
Paragraph 10 shall apply if, during such thirty (30) or ninety (90) day period
in advance of the proposed effective date of such termination, any Institutional
Ground Leasehold Mortgagee shall:
(1) notify Landlord of such Institutional Ground Leasehold Mortgagee's
intent to nullify such notice, and
(2) pay or cause to be paid all rent, additional rent, and other
monetary obligations of Tenant under this Ground Lease (a) then
due and in arrears as specified in such termination notice to such
Institutional Ground Leasehold Mortgagee and (b) which may become
due during such thirty (30) or ninety (90) day period, and
(3) comply with all non-monetary obligations of Tenant under this
Ground Lease (a) then in default as specified in such termination
notice to such
<PAGE>
Institutional Ground Leasehold Mortgagee and (b) which may become
applicable during such thirty (30) or ninety (90) day period, but
only such non-monetary obligations as are reasonably susceptible
of being complied with by such Institutional Ground Leasehold
Mortgagee.
If Landlord shall elect to terminate this Ground Lease by reason of any
default of Tenant, and an Institutional Ground Leasehold Mortgagee shall have
proceeded in the manner provided for in the immediately preceding paragraph of
this Paragraph 10, the specified date for the termination of this Ground Lease
as fixed by Landlord in its termination notice shall be extended for a period of
six (6) months, provided that such Institutional Ground Leasehold Mortgagee
shall, during such six (6) month period;
(1) Pay or cause to be paid all rent, additional rent and other
monetary obligations of Tenant under this Ground Lease as the same
become due, and continue to comply with all non-monetary
obligations of Tenant, under this Ground Lease, but only such as
are reasonably susceptible to being complied with by such
Institutional Ground Leasehold Mortgagee; and
(2) for so long as not enjoined or stayed, take step to acquire or
sell the Ground Leasehold Estate by foreclosure or assignment in
lieu of foreclosure of the Institutional Ground Leasehold Mortgage
or other appropriate means and prosecute the same to completion
with due diligence.
If at the end of such six (6) month period such Institutional Ground Leasehold
Mortgagee is continuing to comply with subparagraphs (1) and (2) above, this
Ground Lease shall not then terminate, and the time for completion by such
Institutional Ground Leasehold Mortgagee of its proceedings shall continue so
long as such Institutional Ground Leasehold Mortgagee is enjoined or stayed and
thereafter so long as such Institutional
<PAGE>
Ground Leasehold Mortgagee proceeds to complete steps to acquire or sell the
Ground Leasehold Estate by foreclosure or assignment in lieu of foreclosure of
the Institutional Ground Leasehold Mortgage or by other appropriate means with
reasonable diligence and continuity. Nothing in this paragraph, however, shall
be construed to extend this Ground Lease beyond the expiration of the Term of
the Ground Lease. If an Institutional Ground Leasehold Mortgagee is complying
with this paragraph, upon the acquisition of the Ground Leasehold Estate by such
Institution Ground Leasehold Mortgagee or its designee or any other purchaser at
a foreclosure sale or otherwise this Ground Lease shall continue in full force
and effect as if Tenant had not defaulted under this Ground Lease.
In the event that this Ground Lease is terminated by operation of the
federal Bankruptcy Code or other applicable law, each Institutional Mortgagee
shall have the same rights as in the event of a default by Tenant, except that
Landlord shall, upon the written request of any Institutional Mortgagee who has
complied with the foregoing provisions, execute a new lease with such
Institutional Mortgagee on all of the same terms and conditions of this Ground
Lease, for the Term which would remain under this Ground Lease if it had not
been terminated and on all of the other terms and conditions hereof. In the
event that more than one Institutional Mortgagee requests such a new lease
Landlord shall grant such new lease to the Institutional Mortgagee requesting
such new lease which is prior in lien if they are then in compliance with the
terms of the Lease.
The making of a Ground Leasehold Mortgage shall not be deemed to
constitute an assignment or transfer of the Ground Leasehold Estate nor shall
any Ground Leasehold Mortgagee, as such, or in the exercise of its rights to
perform obligations of Tenant, be deemed to be an assignee or transferee or
mortgagee in possession of the
<PAGE>
Ground Leasehold Estate so as to require such Ground Leasehold Mortgagee, as
such, to assume or otherwise be obligated to perform any of the terms, covenants
or conditions on the part of the Tenant to be performed hereunder, except when
and then only for so long as such Ground Leasehold Mortgagee enters into
possession of the Premises in the exercise of its remedies under the applicable
Ground Leasehold Mortgage (as distinct from its rights hereunder to cure Tenant
defaults).
The purchaser at any sale of the Ground Leasehold Estate in any
proceedings for the foreclosure of any Ground Leasehold Mortgage, or the
assignee or transferee of the Ground Leasehold Estate under any instrument of
assignment or transfer in lieu of the foreclosure of any Ground Leasehold
Mortgage, shall be deemed to be an assignee or transferee of the Ground Lease
and shall be deemed to have assumed all of the obligations of Tenant hereunder
from and after the date of such purchase and assignment, but only for so long as
such purchaser or assignee is the owner of this Ground Lease and the Ground
Leasehold Estate. All restrictions hereunder shall apply to any purchaser at any
sale. Any Leasehold Mortgagee or other acquirer of the Ground Leasehold Estate
pursuant to foreclosure, assignment in lieu of foreclosure or other proceedings
may, upon acquiring the Ground Leasehold Estate, subject to all of the
provisions of Paragraph 9. Nothing contained herein shall (i) prevent Landlord
from bidding at such a foreclosure or from negotiating directly with any Ground
Leasehold Mortgagee for the purchase of the interest of such Ground Leasehold
Mortgagee, or (ii) require any Ground Leasehold Mortgagee or its assignee as a
condition to its exercise of any rights hereunder to comply with or cure any
default of Tenant not reasonably
<PAGE>
susceptible to being complied with or cured by such Ground Leasehold Mortgagee
or its assignee in order to comply with the provisions of this Paragraph 10.
The failure of any Ground Leasehold Mortgagee to exercise in timely
fashion its rights under this paragraph 10 to prevent a termination of this
Ground Lease by reason of a default on the part of Tenant hereunder shall be
deemed an automatic waiver of such rights if Landlord has otherwise properly
elected to terminate this Ground Lease.
Landlord and Tenant shall cooperate in including in this Ground Lease
by suitable amendment from time to time any provision which may reasonably be
requested by any current or proposed Institutional Ground Leasehold Mortgagee
for the purpose of implementing the mortgagee protection provision contained in
this Ground Lease and allowing such Ground Leasehold Mortgagee reasonable means
to protect or preserve the lien of the Ground Leasehold Mortgage on the
occurrence of a default on the part of Tenant under the terms of this Ground
Lease. Landlord and Tenant agree to execute and deliver (and to acknowledge, if
necessary, for recording purposes) any agreement necessary to effect any such
amendment; provided, however, that any such amendment shall not in any way
affect the Term or rent under this Ground Lease nor otherwise in any material
respect adversely affect any rights of Landlord under this Ground Lease.
Notwithstanding anything in this Ground Lease to the contrary, Tenant
shall have the absolute right to sell, assign, transfer and convey the Ground
Leasehold Estate without the purchaser, assignee, transferee or grantee being
deemed to have assumed or becoming obligated to perform any of the terms,
covenants or conditions on the part of Tenant to be performed hereunder,
provided Tenant simultaneously with such sale, assignment, transfer or
conveyance reserves, retains or receives, as part of a financing transaction, a
sublease or similar interest commonly known as a "leaseback". In such
<PAGE>
event, such purchaser, assignee, transferee or grantee shall, upon giving notice
to Landlord in accordance with Paragraph 10, be entitled to the rights and
projections of a Ground Leasehold Mortgagee (or, if such purchaser, assignee,
transferee or grantee is an Institution, of an Institutional Ground Leasehold
Mortgagee) under this Ground Lease, and Tenant shall remain liable under this
Ground Lease, subject to the rights of assignment set forth in this Ground
Lease.
11. Insurance; Indemnity.
Tenant may, but shall not have any obligation to, maintain so-called
property insurance against fire or other casualty affecting the Improvements
from time to time constituting part of the Premises, it being understood,
however, that Tenant and any subtenants holding under Tenant shall have the
entire insurable interest in such Improvements and that the proceeds of any such
insurance shall be applied as set forth in any Ground Leasehold Mortgages or
paid to Tenant or its subtenants. Tenant may, but shall not have any obligation
to, repair, restore, replace or reconstruct any Improvements damaged by casualty
or apply any insurance proceeds to such repair, restoration, replacement or
reconstruction; however, if Tenant opts not to repair, replace, or reconstruct
any improvements damaged by casualty and Tenant is in default of this Lease,
Landlord has the right to attach said proceeds to the extent of the default,
subject always to the rights of any Ground Leasehold Mortgagee.
Tenant shall maintain comprehensive broad form general public
liability insurance against claims for bodily injury or death and damage to
personal property occurring in or about the Premises or any part thereof or the
adjoining sidewalks, curbs, vaults, and vault space, if any, streets or ways,
with contractual liability coverage and limits reasonably adequate to protect
Landlord and Tenant against judgments from time to time being
<PAGE>
awarded in Pennsylvania for bodily injury, death and property damage. At the
date hereof, such limits shall be at least $10,000,000 combined single limit for
injury and death and at least $500,000 for property damage, which limits shall
be increased upon notice of request from Landlord but not more frequently than
every (3) years to such amounts as are from time to time customarily maintained
for similar commercial properties in the municipality in which the Premises are
located. Such insurance shall be effected with insurers of recognized
responsibility, qualified to do business or subject to service of process in the
state in which the Premises are located. Certificates signed by an authorized
representative of the insurer or duplicates of such insurance policies shall be
furnished to Landlord and other insured parties as evidence that such insurance
is maintained by Tenant and in force, where applicable. No such insurance shall
be subject to cancellation or reduction without at least thirty (30) days' prior
written notice given by the insurance carrier to Landlord and other insured
parties. All such policies shall be issued in favor of Ground Leasehold
Mortgagees, pursuant to standard mortgagee clauses or endorsements, Tenant and
Landlord as their interest may appear.
Landlord and Tenant release each other from any and all liability or
responsibility (to such party or anyone claiming through or under such party by
way of subrogation or otherwise) for any loss or damage to the extent covered by
the insurance policies maintained by, or for the benefit of, such party even if
such casualty shall have been caused by the fault or negligence of the other
party or its agents.
If Tenant shall fail to maintain any insurance required to be
maintained hereunder by Tenant for the benefit of Landlord, and either (i) such
failure shall continue for ten (10) days after receipt by Tenant of notice from
Landlord or insurer of such failure of (ii) Landlord shall in good faith
determine that immediate arrangements for such insurance
<PAGE>
is necessary to prevent irreparable injury to an insurable interest of Landlord
under such insurance and shall simultaneously give notice to Tenant to such
effect, Landlord may cure such failure by making arrangements for such insurance
and reasonable cost thereof, with interest at the Involuntary Interest Rate,
shall be paid by Tenant to Landlord upon demand as additional rent hereunder.
Tenant shall indemnify and save Landlord harmless from and against all
liabilities, obligations, claims, damages, penalties, cause of action,
judgments, costs and expenses, including reasonable attorneys' fees, imposed
upon or incurred by Landlord by reason of any bodily injury or death to persons
or damage to personal property occurring in the Premises or any part thereof or
arising out of the condition thereof or any construction, repairs, alterations
or additions thereon, or arising in connection with Tenant's possession or
occupancy of the Premises or arising from any breach or default on the part of
Tenant in the performance of any covenant or agreement on the part of Tenant to
be performed pursuant to the terms of this Ground Lease and other agreements
relating to the Premises. Anything in this Ground Lease to the contrary
notwithstanding, Tenant shall have no obligation or liability in respect of
anything resulting from or arising out of any act or negligence of Landlord, its
agents, contractors, servants and employees.
12. Eminent Domain.
If, during the Term of this Ground Lease, the entire Premises are
taken by eminent domain or destroyed by the action of any public or quasi-public
authority or conveyed in lieu or in anticipation thereof (collectively, a
"Taking"), or if a material portion of the Premises are the subject of a Taking
and Tenant, at Tenant's sole option, gives notice to Landlord electing to
terminate the Ground Lease, then in either of such events this Ground Lease
shall terminate as of the date of possession shall be taken by the authority
<PAGE>
and all rent shall be adjusted as of the date. Landlord hereby assigns to Tenant
the right to receive, and there shall be paid to Tenant or, to the extent
provided in any Ground Leasehold Mortgages, to Ground Leasehold Mortgagees, the
amount of any awards or other sums received, in proportion to the damages
sustained by Tenant, as compensation as a result of any Taking, (i) the full
value of any Improvements which are the subject of a Taking, whether or not the
value of the Improvements is subject of a separate award or otherwise separately
determined by the Taking authority; and (ii) the full value of the land which is
the subject of the Taking less an amount equal to the then discounted present
value of the rental income payable under this Ground Lease and the then
discounted present value of the residual value of the Land hereby demised, which
amount shall be paid to Landlord.
If less than the entire Premises are the subject of a Taking and
Tenant does not elect to terminate this Ground Lease, the rent payable hereunder
shall thereafter by permanently abated in the same proportion that the land
which is the subject of the Taking bears to the entire parcel of land
constituting part of the Premises immediately prior to the Taking.
In the event Landlord becomes aware of a Taking or involved in any
proceedings or negotiations in which there is reference to or threat of a
possible Taking of any interest in the Premises, Landlord shall promptly give
notice thereof and such a general description to Tenant and to any Ground
Leasehold Mortgagees, Landlord, Tenant and any Ground Leasehold Mortgagees may
appear in such proceedings or negotiations and be represented by their
respective counsel.
13. Surrender; Default by Tenant.
<PAGE>
At the expiration or earlier termination of the Term of this Ground
Lease, Tenant shall surrender the Premises to Landlord.
If Tenant shall neglect or fail to pay or cause to be paid rent or
other sums to be paid by it within thirty (30) days after notice to Tenant and
to all Ground Leasehold Mortgagees from Landlord that the same is overdue, or
shall neglect or fail to perform or cause to be performed any of Tenant's other
covenants, agreements or obligations hereunder for sixty (60) days after notice
to Tenant and all Ground Leasehold Mortgagees from Landlord specifying the same
(provided that such period shall be extended if the matters complained of in
such notice cannot reasonably be performed within sixty (60) days and Tenant
begins promptly to perform such matters within sixty (60) days and thereafter
prosecutes the correction to completion with reasonable diligence), then, in any
of such cases, Landlord may, after giving an additional thirty (30) days notice
of its intention to do so to Tenant and all Ground Leasehold Mortgagees,
terminate the Term of this Ground Lease, in which event Tenant shall promptly
vacate the Premises. Payment or performance by any Ground Leasehold Mortgagee
shall be deemed to be payment or performance by Tenant.
14. Landlord's Mortgages.
Landlord covenants and agrees that it shall not grant mortgages upon
Landlord's fee interest in the Premises, at any time.
15. Right of First Refusal.
If Landlord wishes to sell the Premises at any time during the Term,
and if Tenant is not then in Terminable Default, Landlord shall first give
Tenant a notice offering to sell the Premises to Tenant, specifying the terms
and conditions on which Landlord is willing to sell the Premises. Tenant shall
have the right to accept such offer by giving written
<PAGE>
notice to Landlord within thirty (30) days after Landlord's notice is given,
which notice of acceptance shall be accompanied by the deposit (not in excess of
10% of the price) called for in Landlord's notice. If Tenant so accepts
Landlord's offer, Landlord shall sell and Tenant shall purchase the Premises on
all of the terms and conditions of Landlord's offer. If Tenant does not so
accept Landlord's offer, Landlord shall be entitled at any time within six (6)
months thereafter to sell the Premises on terms and conditions not materially
more favorable to the buyer than those offered to Tenant. If Landlord does not
sell the Premises within such six (6) month period Landlord shall not thereafter
sell the Premises without giving Tenant such an offer. Any transfers by Landlord
to members of the Morelli family shall be exempt from the provisions of this
paragraph. Any and all members of the Morelli family who become owners of the
Premises shall be bound by the provisions of the paragraph for purposes of
transfers to purchasers not a member of the Morelli family.
16. Non-Merger of Fee and Ground Leasehold Estates.
If both Landlord's and Tenant's estates in the Premises or the
Improvements or both become vested in the same owner, this Ground Lease shall
nevertheless not be destroyed by agreement or by application of the doctrine or
principle of merger except with the express, recorded written election of said
owner and the express, recorded written consents of all Ground Leasehold
Mortgagees.
17. Limited Liability of Landlord, Tenant.
The term "Landlord," as used in this Ground Lease, means only the
owner from time to time of the land which constitutes part of the Premises, such
that in the event of any sale or sales of such land, or assignments, transfers,
or other conveyances of Landlord's rights under this Ground Lease, the selling
or transferring Landlord shall be
<PAGE>
entirely freed and relieved of any covenants and obligations of Landlord
hereunder thereafter arising.
Landlord agrees that Landlord shall look solely to Tenant's Ground
Leasehold Estate, including without limitation thereof, the Premises, in the
event of any default or breach by Tenant with respect to any of the terms and
provisions of this Ground Lease on the part of the Tenant to be performed or
observed, it being understood and agreed that Tenant shall have no personal
liability and that no other assets of Tenant shall be subject to levy,
execution, or other judicial process or aware for the satisfaction of Landlord's
claim. For the purposes of this paragraph, the term "Tenant" includes its
general and limited partners, trustees, beneficiaries, directors, officers, and
stockholders (as applicable from time to time) and Tenant's agents, contractors
and employees.
18. Estoppel Certificates.
Tenant agrees at any time and from time to time upon not less than ten
(10) days' prior written notice by Landlord or any other party designated by
Landlord, to execute, acknowledge and deliver, without charge, to Landlord or to
any other party designated by Landlord, a statement in writing certifying that
this Ground Lease is in full force and effect and unmodified (or if there have
been modifications, identifying the same), that Tenant has not received any
notice of default under or termination of this Ground Lease (or if Tenant has
received such notice, that it has been revoked, if such be the case), the date
to which the rents to be paid hereunder by Tenant have been paid, and such other
matters relating to the Premises, Tenant and this Ground Lease as Landlord may
reasonably request.
Landlord agrees at any time and from time to time upon not less than
ten (10) days' prior written notice by Tenant, or a Ground Leasehold Mortgagee
or any other party
<PAGE>
designated by Tenant, to execute, acknowledge and deliver, without charge, to
Tenant, any Ground Leasehold Mortgagee or any other party designated by Tenant a
statement in writing certifying that this Ground Lease is in full force and
effect and unmodified (or if there have been modifications, identifying the
same), that no notice of default or termination of this Ground Lease has been
served on Tenant (or if Landlord has served such notice, that it has been
revoked, if such be the case), that Landlord has no knowledge of any event or
condition which would immediately or with the giving of any notice or lapse of
time entitle it to serve notice of termination of this Ground Lease on Tenant
(or if it has such knowledge, identifying the event or condition which would or
may give rise to such right to terminate), the date to which the rents to be
paid hereunder have been paid, and such other matters relating to the Premises,
Landlord and this Ground Lease as Tenant may reasonably request.
19. Notices.
All notices and other communications required or permitted to be given
hereunder shall be in writing and mailed by certified or registered mail, return
receipt requested, and addressed as hereinafter provided. The time period in
which a response to any notice must be made, if any, shall commence to run from
the date of receipt, refusal, or attempted delivery on the return receipt of the
notice. Any party listed below may change its address under this Paragraph 20 by
notice to the other party hereto. Until further notice, notices hereunder shall
be addressed as follows:
If to Landlord: Loretta M. Cimeo
c/o Thomas W. Morelli
209 Great Valley Center
Malvern, PA 19355
<PAGE>
with a copy to:
If to Tenant: Promus Hotels, Inc.
755 Crossover Lane
Memphis, TN 38117
Attention: General Counsel
and with a copy to each Ground Leasehold Mortgagee;
The address listed for Landlord above shall be the address at which
payments of rent and other sums payable hereunder shall be made. Landlord may
change the address for making payments hereunder by notice to Tenant, which
address may be different from Landlord's address for notices hereunder.
20. No Recording; Notices of Ground Lease.
This Ground Lease shall not be recorded; Landlord and Tenant hereby
agree, each at the request of the other or of any leasehold mortgagee, promptly
to execute, acknowledge, and deliver in recordable form such short forms or
memorandum of lease or notices of assignments of rents and profits or other
instruments containing such information as may from time to time be necessary or
appropriate under the law of the state in which the Premises are located. The
initial notice of lease or memorandum of lease shall be recorded at the expense
of Landlord and any other such instrument shall be recorded at the expense of
the party requesting such instrument.
21. Attorneys' Fees and Other Costs.
The parties to this Ground Lease shall bear their own attorneys fees in
relation to negotiating and drafting this Agreement. Should Landlord or Tenant
engage in litigation to enforce their respective rights pursuant hereto, the
prevailing party shall have the right to indemnify by the non-prevailing party
for an amount equal to the prevailing party's reasonable attorneys' fees, court
costs, and expenses arising therefrom.
<PAGE>
22. General.
This Ground Lease shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania. If any provisions of this Ground
Lease shall to any extent and for any reason be invalid or illegal, the
remainder of this Ground Lease shall not be affected thereby. This Ground Lease
may be amended only by instruments in writing executed by Landlord and Tenant.
The failure of Landlord to insist in any one or more instances upon the strict
performance of any of the covenants of this Ground Lease, or to exercise any
remedy herein set forth, shall not constitute or be construed as a waiver or
relinquishment of such covenant or remedy in future such instances. The titles
of the Paragraphs contained herein are for identification and convenience only
and shall not be considered in construing this Ground Lease. Unless repugnant to
the context, the words "Landlord" and "Tenant" appearing in this Ground Lease
shall be construed to mean those named in Paragraph 1 and their respective
successors and assigns, and those claiming by, through, or under them,
respectively. Payment or performance by any Ground Leasehold Mortgagee of any
covenant or obligation of Tenant hereunder shall be deemed to be payment or
performance by Tenant.
23. Power of Attorney.
The undersigned, being all of the owners of the Premises, have made,
and by their execution of this Ground Lease, hereby appoint Thomas W. Morelli as
their true and lawful attorney-in-fact for each of them to enter into, make,
sign, modify, amend, compromise, settle, deliver and to perform each and every
act or thing necessary or desirable to be done in the exercise of any of the
rights or powers granted in this Ground Lease. The undersigned individuals do
hereby confirm and ratify any writing, or thing that, in the option of Thomas W.
Morelli, is necessary or proper to be entered into,
<PAGE>
made, signed, executed, delivered or acknowledged in the performance of this
Ground Lease. The rights, powers, and authority of Thomas W. Morelli, as
attorney-in-fact, shall commence and be in full force on the date of this Ground
Lease. These rights, powers, and authorities shall continue in full force and
effect until termination of this Ground Lease. If Thomas W. Morelli is, for any
reason, unable to act as attorney-in-fact, Landlord agrees to promptly appoint a
successor attorney-in-fact having the same rights, powers and authority granted
to Thomas W. Morelli pursuant to this Section 23. The undersigned do hereby
ratify and confirm the Agreement To Lease pertaining to the Premises dated
September 18, 1995, between Thomas W. Morelli and Promus Hotels, Inc.
IN WITNESS WHEREOF, the parties have caused this Ground Lease to be
executed under seal as of the day and year first above written.
Landlord:
/s/ Loretta M. Cimeo
------------------------------------------------
Loretta M. Cimeo
/s/ George C. Morelli
------------------------------------------------
George C. Morelli
/s/ Joseph P. Morelli
------------------------------------------------
Joseph P. Morelli
/s/ Esther E. Morelli
------------------------------------------------
Esther E. Morelli
/s/ Thomas W. Morelli
------------------------------------------------
Thomas W. Morelli
/s/ Charles P. Morelli
------------------------------------------------
Charles P. Morelli
/s/ John J. Morelli
------------------------------------------------
John J. Morelli
Tenant: PROMUS HOTELS, INC.
By: /s/ Terry O'Mally
-------------------------------------------
Its: Vice President
-------------------------------------------
<PAGE>
CHESTER VALLEY ENGINEERS, INC.
CIVIL ENGINEERS & LAND SURVEYORS
EST. 1935
#13811 - Homewood Suites
Line Easement Description
April 11, 1996
Dwg. 15554
Page 1
ALL THAT CERTAIN line SITUATE in East Whiteland
Township, Chester County, Pennsylvania being shown as
[ILLEGIBLE] Line Easement Description on Land Development Plan for
Homewood Suites dated November 2, 1995, and being last
revised March 26, 1996 by Chester Valley Engineers,
Inc., Paoli, Pennsylvania, and being more fully
described along the centerline of a proposed storm
sewer pipe as follows:
BEGINNING at a point on line of land now or late of
Penn State University, said beginning point being
measured the two (2) following courses and distances
from an iron pin on the southeasterly right of way line
of Swedesford Road, E.R.-1002. 94' wide, said iron pin
being a common corner with said land of Penn State
University: (1) South 28 degrees 04 minutes 35 seconds
East 566 35 feet to an iron pin; (2) South 59 degrees
09 minutes 34 seconds West 17.06 feet to a point of
intersection with a storm sewer pipe, the point of
beginning; thence from the point of beginning,
following said storm sewer pipe through said land of
Penn State University had three (3) following courses
and distances: (1) South 17 degrees 15 minutes 44
seconds East 32.94 feet to MH #3; (2) South 78 degrees
10 minutes 39 seconds East 241.27 feet to MH #4; (3)
continuing along said storm sewer pipe easterly to an
existing Basin Easement, the point of terminus.
EXHIBIT "A"
159 WEST LANCASTER AVENUE o P.O. BOX 447 o PAOLI o PENNSYLVANIA o 18508
(618) 644-4625 o Fax (618) 889-9183
<PAGE>
AMENDMENT TO GROUND LEASE
This Amendment to Ground Lease (Amendment) is entered into as of this the 1st
day of July, 1996, between Thomas W. Morelli (hereafter Landlord) and Promus
Hotels, Inc. (hereafter Tenant).
RECITALS
A. Of even date herewith, Landlord and Tenant entered into a Ground Lease
regarding certain real property located in Malvern, East Whiteland
Township, Pennsylvania, as more particularly described on an Exhibit A
attached thereto.
B. Landlord and Tenant now desire to amend certain portions of the Ground
Lease as more particularly set forth herein.
C. Thomas W. Morelli is executing this Amendment as attorney-in-fact for
Loretta M. Cimeo, George C. Morelli, Joseph P. Morelli, Esther E. Morelli,
Charles P. Morelli, and John J. Morelli pursuant to Section 23. Power of
Attorney of the Ground Lease.
AGREEMENT
Now, Therefore, in consideration of the mutual terms and conditions contained
herein, Landlord and Tenant agree that the Ground Lease is hereby amended as
follows:
1. Section 4. Rent is amended by deleting the second paragraph in its entirety
and substituting the following language therefore:
The Annual Rent with respect to the first five (5) Ground Lease Years of
the Original Term shall be $100,000, commencing on May 1, 1997 or upon the
date that the Improvements on the Premises are opened to the public for
business, whichever date occurs first.
2. Except as amended hereby, the Ground Lease shall remain unchanged.
<PAGE>
In Witness Whereof, Landlord and Tenant have executed this Amendment effective
on the day and date first written above.
LANDLORD: THOMAS W. MORELLI
/s/ Thomas W. Morelli
---------------------------
TENANT: PROMUS HOTELS, INC.
BY: /s/ Terry O'Malley
-----------------------
ITS: Vice President
----------------------
<PAGE>
CHESTER VALLEY ENGINEERS, INC.
CIVIL ENGINEERS & LAND SURVEYORS
EST. 1935
#13811 - Homewood Suites
Line Easement Description
April 11, 1996
Dwg. 15554
Page 1
ALL THAT CERTAIN line SITUATE in East Whiteland
Township, Chester County, Pennsylvania being shown as
[ILLEGIBLE] Line Easement Description on Land Development Plan for
Homewood Suites dated November 2, 1995, and being last
revised March 26, 1996 by Chester Valley Engineers,
Inc., Paoli, Pennsylvania, and being more fully
described along the centerline of a proposed storm
sewer pipe as follows:
BEGINNING at a point on line of land now or late of
Penn State University, said beginning point being
measured the two (2) following courses and distances
from an iron pin on the southeasterly right of way line
of Swedesford Road, E.R.-1002. 94' wide, said iron pin
being a common corner with said land of Penn State
University: (1) South 28 degrees 04 minutes 35 seconds
East 566 35 feet to an iron pin; (2) South 59 degrees
09 minutes 34 seconds West 17.06 feet to a point of
intersection with a storm sewer pipe, the point of
beginning; thence from the point of beginning,
following said storm sewer pipe through said land of
Penn State University the three (3) following courses
and distances: (1) South 17 degrees 15 minutes 44
seconds East 32.94 feet to MH #3; (2) South 78 degrees
10 minutes 39 seconds East 241.27 feet to MH #4; (3)
continuing along said storm sewer pipe easterly to an
existing Basin Easement, the point of terminus.
EXHIBIT "A"
159 WEST LANCASTER AVENUE o P.O. BOX 447 o PAOLI o PENNSYLVANIA o 18508
(618) 644-4625 o Fax (618) 889-9183
<PAGE>
SECOND AMENDMENT TO GROUND LEASE
AND
AMENDMENT TO SHORT FORM LEASE
THIS SECOND AMENDMENT TO GROUND LEASE AND AMENDMENT TO SHORT FORM LEASE
(collectively, this "Amendment") is entered into as of this the 6th day of
March, 2000, between LORETTA M. CIMEO, GEORGE C. MORELLI, JOSEPH P. MORELLI,
ESTHER E. MORELLI, CHARLES P. MORELLI, THOMAS W. MORELLI AND JOHN J. MORELLI
(colletively, "Landlord") and PROMUS HOTELS, INC. (hereafter, "Tenant").
RECITALS
A. On July 1, 1996 Landlord and Tenant entered into a Ground Lease
regarding certain real property located in Malvern, East Whiteland Township,
Pennsylvania, as amended by Amendment To Ground Lease between Landlord and
Tenant also dated July 1, 1996 (collectively, the "Ground Lease").
B. Landlord and Tenant also entered into a Short Form Lease which was
recorded in the Office of the Recorder of Deeds, Chester County, Pennsylvania on
November 15, 1996 as Instrument No. 68773 in Book 4107, Page 2237 and
re-recorded as Instrument No. 24154 in Book 4171, Page 2029 (the "Short Form
Lease").
C. Due to an error Exhibit A attached to the Ground Lease and the Short
Form Lease does not describe the premises intended to be demised pursuant to the
Ground Lease.
D. Landlord and Tenant desire to correct said error by amending Exhibit
A attached to the Ground Lease and the Short Form Lease.
E. Thomas W. Morelli is executing this Amendment as attorney-in-fact
for Lorena M. Cimeo, George C. Morelli, Joseph P. Morelli, Esther E. Morelli,
Charles P. Morelli, and John J. Morelli pursuant to Section 23. Power of
Attorney of the Ground Lease.
AGREEMENT
NOW, THEREFORE, in consideration of ten dollars ($10.00) and other good
and valuable consideration, Landlord and Tenant agree that the Ground Lease and
the Short Form Lease is each amended as follows:
1. Exhibit A attached to each of the Ground Lease and the Short Form
Lease is hereby deleted in its entirety and replaced with Exhibit A attached to
this Amendment.
2. Except as amended hereby, the Ground Lease and the Short Form Lease
shall remain unchanged.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment
effective on the day and year first above written.
LANDLORD:
/s/ Thomas W. Morelli
---------------------------
THOMAS W. MORELLI
as attorney-in-fact
TENANT:
PROMUS HOTELS, INC.
By /s/ Kevin W. Kern
------------------------
Name: Kevin W. Kern
Title: V.P.
2
<PAGE>
STATE OF PENNSYLVANIA )
) ss.:
COUNTY OF CHESTER )
On this 6th day of March, 2000, before me, the undersigned officer,
personally appeared Thomas W. Morelli, known to me (or satisfactorily proven) to
be the person whose name is subscribed to the within instrument and acknowledged
that he executed the same for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Lynda Ellison
-----------------------------------
Notary Public
My commission expires:
-----------------------------------
Notarial Seal
Lynda Ellison, Notary Public
Malvern Boro. Chester County
My Commission Expires June 17, 2002
-----------------------------------
Member, Pennsylvania Association of Notaries
<PAGE>
STATE OF TENNESSEE )
) ss.:
COUNTY OF SHELBY )
On this 13th day of March, 2000, before me, the undersigned officer,
personally appeared Kevin W. Kern, Vice President of PROMUS HOTELS, INC., who
acknowledged himself to be the Vice President of said corporation and that he,
as such officer, being authorized to do so on behalf of the corporation,
executed the foregoing instrument, for the purposes therein contained, by
signing the name of the corporation, as Vice President.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Connie L. ????
-----------------------
Notary Public
My commission expires:
12-16-2000
- ----------------------
[NOTARY PUBLIC GRAPHIC]
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF PREMISES
ALL THAT CERTAIN of land SITUATE in East Whiteland Township, Chester County,
Pennsylvania, being bounded and described according to a Survey and Plan thereof
entitled ALTA/ACSM Land Title Survey for Promus Hotel Corporation, dated August
12, 1996 by Chester Valley Engineers, Inc., Paoli, Pennsylvania, and being more
fully described as follows:
BEGINNING at a point on the southerly Legal Right of May Line of Swedesford Road
- - S.R. 1002, 94 feet wide, a corner in common of these and lands now or late of
the Pennsylvania State University: THENCE from the point of beginning, leaving
said right of way line, along said lands, South 28 degrees 04 minutes 35 seconds
East 566.35 feet to a point on line of other lands now or late of the
Pennsylvania State University: THENCE along said lands, along the northerly
Legal Right of Way Line for Limited Access of U.S. Routh 202 - S.R. 0202,
variable width, South 59 degrees 09 minutes 34 seconds West 168.05 feet: THENCE
continuing along said right of way line, North 88 degrees 24 minutes 32 seconds
West 186.61 feet to a corner of lands now or late of Loretta M. Cimeo, et al:
THENCE leaving said right of way line, along said lands, North 28 degrees 04
minutes 35 second West 457.22 feet to a point on the southerly Legal Right of
Way Line of Swedesford Road - S.R. 1002, aforesaid: THENCE along said right of
way line, along a curve to the right having a radius of 13.468.61 feet. an arc
length of 330.94 feet, and a chord bearing North 57 degrees 36 minutes 55
seconds East 330.94 feet to the point of beginning.
Exhibit 10.13
ASSIGNMENT AND ASSUMPTION OF LEASE
THIS ASSIGNMENT AND ASSUMPTION OF LEASE (this "Assignment") is
made and entered into effective as of May 8, 2000 (the "Effective Date") by and
among LORETTA M. CIMEO, GEORGE C. MORELLI, JOSEPH P. MORELLI, ESTHER E. MORELLI,
CHARLES P. MORELLI, THOMAS W. MORELLI AND JOHN J. MORELLI (collectively,
"Landlord"), PROMUS HOTELS, INC., a Delaware corporation ("Assignor"), and APPLE
SUITES, INC., a Virginia corporation, as trustee for Apple Suites Pennsylvania
Business Trust ("Assignee"). Capitalized terms used but not defined herein shall
have the meanings assigned to such terms in the documents assigned and assumed
hereby.
WITNESSETH:
WHEREAS, Landlord, as the landlord, and Assignor, as the
tenant, entered into certain Ground Lease dated July 1, 1996, as amended by
Amendment To Ground Lease between Landlord and Assignor dated July 1, 1996 and
by Second Amendment To Ground Lease And Amendment To Short Form Lease between
Landlord and Assignor dated March 6, 2000 (as so amended, the "Ground Lease"),
and a Short Form Lease was recorded on November 15, 1996 as Instrument No.:
68773 with the Chester County, Pennsylvania, Office of the Recorder of Deeds,
relating to the lease of certain real property located in Malvern, East
Whiteland, Pennsylvania, as more particularly described in Exhibit A attached
hereto and made a part hereof (the "Leased Premises"); and
WHEREAS, Assignor and Assignee desire that Assignor assign the
Ground Lease to Assignee and that Assignee assume the obligations of the tenant
thereunder, and Assignor and Assignee desire that Landlord evidence its consent
to same and its release of Assignor from any and all obligations arising under
the Ground Lease as tenant thereunder from and after the Effective Date; and
WHEREAS, Landlord, Assignor and Assignee desire to execute
this Assignment to evidence such assignment, assumption, consent and release;
NOW, THEREFORE, KNOW ALL PERSONS BY THESE PRESENTS:
THAT, for and in consideration of the premises and the sum of
Ten Dollars ($10.00) and other good and valuable consideration cash in hand
paid, the receipt and sufficiency of which are hereby acknowledged and
confessed, Assignor by these presents does hereby SELL, TRANSFER and ASSIGN unto
Assignee all of the right, title and interest of Assignor in, to and under the
Ground Lease, subject to all matters set forth or described in Exhibit B
attached hereto and made a part hereof.
<PAGE>
TO HAVE AND TO HOLD such interest of Assignor in, to and under
the Ground Lease, together with all and singular the rights and appurtenances
pertaining thereto, unto Assignee and Assignee's successors and assigns forever;
and, subject to the matters herein set forth, Assignor does hereby bind itself
and its successors and assigns to WARRANT AND FOREVER DEFEND such interest unto
Assignee and Assignee's successors and assigns, against every person whomsoever
lawfully claiming or to claim the same or any part thereof by, through or under
Assignor, but not otherwise.
Assignee hereby assumes all of the obligations of the tenant
under the Ground Lease arising on and after the Effective Date and agrees to be
bound by and to perform all of the terms, conditions and covenants by which the
tenant is bound thereunder. Assignor hereby agrees to indemnify, defend and hold
Assignee harmless from and against all of the obligations of the tenant under
the Ground Lease arising prior to the Effective Date.
Landlord hereby consents to the assignment of the Ground Lease
from Assignor to Assignee, and Assignee's assumption of the obligations of the
tenant thereunder on and after the Effective Date. In connection with such
consent, Landlord hereby releases and discharges Assignor from each and every
obligation and liability accruing under the Ground Lease on and after the
Effective Date, provided, however, that Assignor shall remain fully liable for
each and every obligation and liability accruing under the Ground Lease prior to
the Effective Date.
Each of Landlord, Assignor and Assignee hereby confirms that
it intends for this Assignment to be a complete assignment to Assignee of all of
Assignor's rights, titles and interests in, to and under the Ground Lease, and
all of Assignor's obligations thereunder, and is not a sublease of the Leased
Premises.
ASSIGNEE HEREBY ACKNOWLEDGES AND AGREES THAT, EXCEPT AS SET
FORTH HEREIN AND IN THAT CERTAIN AGREEMENT OF SALE DATED NOVEMBER 22, 1999
BETWEEN, AMONG OTHERS, ASSIGNOR AND APPLE SUITES, INC., AS THE SAME HAS BEEN
AMENDED, ASSIGNOR HAS NOT MADE ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED,
STATUTORY OR OTHERWISE.
For purposes of providing notices to the tenant under the
Ground Lease pursuant to same, the address of Assignee is:
c/o Cornerstone Realty Income Trust, Inc.
306 East Main Street
Richmond, Virginia 23219
Attention: Mr. Glade M. Knight
Telephone: 804/643-1761
Facsimile: 804/782-9302
with a copy to:
Jenkens & Gilchrist
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202-2799
Attention: Thomas E. Davis, Esq.
Telephone: 214/855-4500
Facsimile: 214/855-4300
2
<PAGE>
This Assignment shall be binding upon and shall inure to the
benefit of Landlord, Assignor and Assignee and their respective successors and
assigns.
This Assignment may be executed in one or more counterparts,
each of which shall be deemed an original. Said counterparts shall constitute
but one and the same instrument and shall be binding upon each of the
undersigned individually as fully and completely as if all had signed but one
instrument and shall be unaffected by the failure of any of the undersigned to
execute any or all of said counterparts.
Thomas W. Morelli is executing this Assignment as
attorney-in-fact for Loretta M. Cimeo, George C. Morelli, Joseph P. Morelli,
Esther E. Morelli, Charles P. Morelli, and John J. Morelli pursuant to the
provisions of "Section 23. Power of Attorney" of the Ground Lease.
EXECUTED as of the Effective Date.
[Signature Pages Follow]
3
<PAGE>
Assignor Signature Page
to
Assignment and Assumption of Lease made and entered into effective as
of May 8, 2000 by and among Loretta M. Cimeo, George C. Morelli, Joseph
P. Morelli, Esther E. Morelli, Charles P. Morelli, Thomas W. Morelli
and John J. Morelli, Promus Hotels, Inc., a Delaware corporation, and
Apple Suites, Inc., a Virginia corporation, as trustee for Apple Suites
Pennsylvania Business Trust
ASSIGNOR:
PROMUS HOTELS, INC.
By /s/ Stevan D. Porter
-----------------------------------
Stevan D. Porter
Executive Vice President
<PAGE>
Assignee Signature Page
to
Assignment and Assumption of Lease made and entered into effective as
of May 8, 2000 by and among Loretta M. Cimeo, George C. Morelli, Joseph
P. Morelli, Esther E. Morelli, Charles P. Morelli, Thomas W. Morelli
and John J. Morelli, Promus Hotels, Inc., a Delaware corporation, and
Apple Suites, Inc., a Virginia corporation, as trustee for Apple Suites
Pennsylvania Business Trust
ASSIGNEE:
APPLE SUITES, INC., as trustee for Apple
Suites Pennsylvania Business Trust
By /S/ Glade M. Knight
-------------------------------------
Name: Glade M. Knight
Title: Chairman of the Board and
President
<PAGE>
Landlord Signature Page
to
Assignment and Assumption of Lease made and entered into effective as
of May 8, 2000 by and among Loretta M. Cimeo, George C. Morelli, Joseph
P. Morelli, Esther E. Morelli, Charles P. Morelli, Thomas W. Morelli
and John J. Morelli, Promus Hotels, Inc., a Delaware corporation, and
Apple Suites, Inc., a Virginia corporation, as trustee for Apple Suites
Pennsylvania Business Trust
LANDLORD:
/s/ Thomas W. Morelli
-----------------------------------
THOMAS W. MORELLI, Attorney-in-Fact
<PAGE>
STATE OF CALIFORNIA )
) ss.:
COUNTY OF LOS ANGELES )
On this 4th day of May, 2000, before me, the undersigned
officer, personally appeared Stevan D. Porter, Executive Vice President of
PROMUS HOTELS, INC., who acknowledged himself to be the Executive Vice President
of said corporation and that he, as such officer, being authorized to do so on
behalf of the corporation, executed the foregoing instrument, for the purposes
therein contained, by signing the name of the corporation, as Executive Vice
President.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ David Marote
----------------------------------------
Notary Public
My commission expires:
8/8/2002
- ---------------------
<PAGE>
STATE OF VIRGINIA )
) ss.:
CITY OF RICHMOND )
On this 2nd day of May, 2000, before me, the undersigned
officer, personally appeared Glade M. Knight, President and Chairman of APPLE
SUITES, INC., who acknowledged himself to be the President and Chairman of said
corporation and that he, as such officer, being authorized to do so on behalf of
the corporation, executed the foregoing instrument as trustee for Apple Suites
Pennsylvania Business Trust, for the purposes therein contained, by signing the
name of the corporation, as President and Chairman.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Jacquelyn B. Owens
---------------------------------------
Notary Public
My commission expires:
6/30/03
- ---------------------
<PAGE>
STATE OF PENNSYLVANIA )
) ss.:
COUNTY OF CHESTER )
On this 3rd day of May, 2000, before me, the undersigned
officer, personally appeared Thomas W. Morelli, known to me (or satisfactorily
proven) to be the person whose name is subscribed to the within instrument and
acknowledged that he executed the same for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Lynda Ellison
-----------------------------------------
Notary Public
My commission expires:
June 17, 2002
- ---------------------
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF PREMISES
ALL THAT CERTAIN parcel of land SITUATE in East Whiteland Township, Chester
County, Pennsylvania, being bounded and described according to a Survey and Plan
thereof entitled ALTA/ACSM Land Title Survey for Promus Hotel Corporation, dated
August 12, 1996 by Chester Valley Engineers, Inc., Paoli, Pennsylvania, and
being more fully described as follows:
BEGINNING at a point on the southerly legal Right of Way Line of Swedesford Road
- - S. R. 1002, 94 feet wide, a corner in common of these and lands now or late of
the Pennsylvania State University; THENCE from the point of beginning, leaving
said right of way line, along said lands, South 28 degrees 04 minutes 35 seconds
East 566.35 feet to a point on line of other lands now or late of the
Pennsylvania State University; THENCE along said lands, along the northerly
Legal Right of Way Line for Limited Access of U.S. Route 202 - S. R. 0202,
variable width, South 59 degrees 09 minutes 34 seconds West 168.05 feet; THENCE
continuing along said right of way line, North 88 degrees 24 minutes 32 seconds
West 186.61 feet to a corner of lands now or late of Loretta M. Cimeo, et al:
THENCE leaving said right of way line, along said lands, North 28 degrees 04
minutes 35 seconds West 457.22 feet to a point on the southerly Legal Right of
Way Line of Swedesford Road - S.R. 1002, aforesaid; THENCE along said right of
way line, along a curve to the right having a radius of 13.468.61 feet, an arc
length of 330.94 feet, and a chord bearing North 57 degrees 36 minutes 55
seconds East 330.94 feet to the point of beginning.
<PAGE>
EXHIBIT B
1. Taxes and assessments for the year 2000 and subsequent years.
2. Right of Way Easement by and between Promus Hotels, Inc., a Delaware
corporation, and the Pennsylvania State University, dated July 2, 1996 and
recorded November 15, 1996 in Record Book 4107, Page 2244.
3. Terms and conditions of Ground Lease between Thomas W. Morelli, Loretta M.
Cimeo, George C. Morelli, Joseph P. Morelli, Esther E. Morelli, Charles P.
Morelli, and John J. Morelli ("Landlord") and Promus Hotels, Inc.
("Tenant"), as amended by Amendment To Ground Lease between Landlord and
Tenant dated July 1, 1996 and by Second Amendment To Ground Lease And
Amendment To Short Form Lease between Landlord and Tenant dated March 6,
2000 (the "Second Amendment"), a Memorandum of which was dated July 1, 1996
and recorded November 15, 1996 in Book 4107, Page 2237, as amended by the
Second Amendment which has been or is to be recorded.
4. Building Entrance Facility Grant by Thomas W. Morelli, Loretta M. Cimeo, et
al. and Promus Hotels, Inc. for the benefit of Bell Atlantic-Pennsylvania,
Inc. dated December 11, 1996 and recorded in Book 4171, Page 2027.
