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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
November 15, 1996
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Date of Report (Date of Earliest Event Reported)
EQUITY INNS, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Tennessee 34-O-23290 62-1550848
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(State or Other Jurisdiction (Commission File No.) (I.R.S. Employer
of Incorporation) Identification No.)
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4735 Spottswood
Suite 102
Memphis, Tennessee 38117
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(Address of Principal Executive Offices) (Zip Code)
(901) 761-9651
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
Effective November 15, 1996, Equity Inns, Inc. (the "Company") and
Equity Inns Partnership, L.P. (the "Partnership") for which a wholly-owned
subsidiary of the Company serves as sole general partner, entered into
agreements with Interstate Hotels Corporation ("Interstate Corp.") and certain
of Interstate's affiliates providing for, among other things:
(i) the assumption by Crossroads/Memphis Partnership, L.P., ("New
Lessee"), for which a wholly- owned subsidiary of Interstate Corp.
serves as sole general partner, as lessee, of all existing lease
agreements for hotels owned by the Partnership (the "Percentage
Leases");
(ii) the amendment and restatement of all existing leases for the
Partnership's hotels;
(iii) the guaranty by Interstate Corp. and its parent, Interstate
Hotels Company ("Interstate Co."), of all of the New Lessees'
obligations under the Percentage Leases with the Partnership and all
future leases between the Partnership and affiliates of Interstate
Corp. (collectively, the "Lease Guaranties");
(iv) a right of first offer, subject to certain exceptions, for
Crossroads Future Company, L.L.C., a wholly-owned subsidiary of
Interstate Corp. (the "Future Lessee") to lease hotels acquired or
developed by the Partnership prior to November 15, 2001; and
(v) certain options and rights of first offer for the Partnership
to acquire certain midscale, upper economy, economy and budget hotels
developed or acquired by Interstate Corp. or its affiliates prior to
November 2001.
The agreements are summarized below:
CONTRIBUTION OF ASSETS OF LESSEE TO CROSSROADS/MEMPHIS
Effective November 15, 1996, Trust Leasing, Inc. (the "Lessee"), the
lessee of the 47 hotels owned at such date by the Partnership pursuant to a
Contribution Agreement dated October 4, 1996 (the "Contribution Agreement") by
and among the Lessee, Trust Management, Inc. ("Trust Management"),
Crossroads/Memphis Company, L.L.C. and Crossroads/Memphis Partnership, L.P.
(the "New Lessee"), transferred and assigned its assets, including all leases
between the Lessee and the Partnership, to the New Lessee in exchange for units
of limited partnership interest in the New Lessee. The sole general partner of
the New Lessee is a wholly-owned subsidiary of Interstate.
The 1,957,684 partnership units of the New Lessee received by the
Lessee and an affiliated entity, Trust Management, in exchange for the
contribution of their assets to the New Lessee are redeemable and exchangeable,
on a one-for-one basis, for shares of Common Stock of Interstate Co. The
Lessee and Trust Management must redeem and exchange their partnership units in
the New Lessee for shares of Interstate Co.'s common stock prior to November
15, 2006.
Both the Lessee and Trust Management are wholly owned by Phillip H.
McNeill, Sr., the Chairman and Chief Executive Officer of the Company.
AMENDED HOTEL LEASES
Effective November 15, 1996, each of the existing Percentage Leases
was amended and restated in a Consolidated Lease Amendment between the
Partnership and the New Lessee (the "Consolidated Lease Amendment"). The
principal amendments were as follows: (i) the term of each Percentage Lease
was increased to 15 years from the date of closing, with rent for the final
five years of the term to be re-negotiated after ten years, and, if the parties
cannot agree to new rent terms, the new rent terms will be determined by
arbitration; (ii) the non-compete provision precluding the lessee or its
affiliates from owning, leasing, operating, managing or franchising any hotel
or motel within a 20-mile radius of any hotel in which the Partnership or an
affiliate of the Partnership has an interest, was deleted; (iii) events of
default shall include, among others, (a) the failure of the New Lessee to make
Base Rent or Percentage Rent payments when due and payable and continuing for a
10-day period after receipt of notice from the Partnership, as compared to the
previous 90-day period for non-payment of Percentage Rent and (b) occurrence of
a breach of any representation or
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warranty under the Lease Guaranties; (iv) the New Lessee shall be required, not
later than 30 days prior to the commencement of each lease year, to prepare and
submit to the Partnership for its approval a capital budget; (v) prohibitions
on payment of fees to any affiliate of the lessee were deleted; (vi) the
Partnership has the right to approve any manager of its hotels that is not an
affiliate of the New Lessee; (vii) the New Lessee will have an extended period
(up to 30 days) to cure defaults under the franchise agreements; (viii) certain
amendments were made in the casualty restoration and condemnation provisions;
(ix) the respective obligations of the parties relating to franchise
agreements, capital expenditures and repairs and maintenance were amended; (x)
the Partnership has the right to terminate the lease (a) upon a sale of the
property, provided that the Partnership either (1) offers the New Lessee a
substitute lease or leases creating for the New Lessee a leasehold estate
having substantially the same fair market value as the Percentage Lease for the
property being sold or (2) pays the New Lessee a termination payment equal to
the net present value of the property's cash flow to the New Lessee, and (b) in
the event that the Company terminates its REIT status and the Partnership makes
the applicable lease termination payment; and (xi) the lessee has a right of
first offer to acquire hotels subject to the Percentage Leases.
Future leases between the Partnership and the Future Lessee will
contain provisions substantially similar to the Consolidated Lease Amendment.
The Consolidated Lease Amendment is set forth in Exhibit 10.1 hereto.
LEASE GUARANTIES
In connection with the execution of the Consolidated Lease Amendment
between the Partnership and the New Lessee on November 15, 1996, Interstate Co.
and Interstate Corp. each executed a Lease Guaranty guaranteeing the prompt and
full payment of rent and all other amounts due to the Partnership and the
prompt and complete performance of all obligations owed by the New Lessee to
the Partnership under the Consolidated Lease Amendment. Interstate Co.'s and
Interstate Corp.'s obligations under the Lease Guaranties shall survive the
expiration or early termination of the Consolidated Lease Amendment until (a)
payment in full of the New Lessee's indebtedness to the Partnership and (b)
performance of all of the New Lessee's obligations thereunder. Interstate
Co.'s and Interstate Corp.'s obligations under the Lease Guaranties are
subordinate to Interstate Co.'s and Interstate Corp.'s obligations under
certain loan agreements of Interstate Co.
The Lease Guaranties are set forth in Exhibits 10.2 and 10.3 hereto.
MASTER AGREEMENT
A. FUTURE LESSEE RIGHT OF FIRST OFFER
Pursuant to a Master Agreement dated as of November 4, 1996 (the
"Master Agreement") among the Company, the Partnership, Interstate Corp., the
New Lessee and the Future Lessee, the Company and the Partnership granted to
the Future Lessee a right of first offer (the "Future Lessee Right of First
Offer") to lease hotels acquired or developed by the Partnership or the Company
prior to November 15, 2001 (the "Term"), subject to certain exceptions
described below.
During the Term, the Partnership and any affiliates must deliver to
the Future Lessee a notice (a) specifying the proposed rent terms upon which
the Partnership would be willing to lease a proposed acquisition or development
hotel to the Future Lessee and (b) providing certain additional items of
information to the Future Lessee. For any single acquisition or development
hotel or for any portfolio of up to four such hotels, the Future Lessee shall
have 21 days following receipt of the notice to agree to the Partnership's
proposed terms or propose alternative rent terms and reach an agreement with
the Partnership as to such terms and execute a percentage lease agreement
incorporating such terms. In the event the Future Lessee does not agree within
21 days to lease the particular hotel(s) pursuant to the rent terms set forth
in the notice, the Partnership may lease the hotel(s) to a non-affiliated
lessee (an "Alternative Lessee"); provided, however, that the terms of such
lease are no more favorable to the Alternative Lessee than the terms rejected
by the Future Lessee. For any portfolio of five or more acquisition or
development hotels, the Future Lessee shall have 25 days following receipt of
the notice to agree to the Partnership's proposed terms, execute leases
incorporating such terms. If the Partnership does not enter into a lease with
an Alternative Lessee for any acquisition or development hotel or any hotel
portfolio within 60 days, the Partnership must send a second notice to the
Future Lessee setting forth proposed rent terms of the proposed lease for such
hotel or hotel portfolio. The Future Lessee will then have 21 or 25 days, as
applicable,
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to elect to lease the hotel or hotel portfolio from the Partnership upon the
terms set forth in the second notice.
The Future Lessee Right of First Offer does not apply to (i) hotels
acquired or developed by the Partnership where the seller requires, as a
condition of sale, that the seller or an affiliate of the seller be the lessee
or manager of the hotel following acquisition by the Partnership, (ii) any
acquisition hotel which is subject to a hotel lease which cannot be terminated
without the payment of liquidated damages or other financial penalties and the
Future Lessee does not agree to pay such damages, and (iii) any hotels
currently subject to the Company's agreements with Promus Hotels, Inc.
The Partnership may terminate the Future Lessee Right of First Offer
upon termination of the Company's status as a real estate investment trust (a
"REIT") for federal income tax purposes and subject to the satisfaction of
termination obligations under the Percentage Leases. The Partnership may also
terminate the Future Lessee Right of First Offer: (i) upon the occurrence under
a lease of an event of default by the New Lessee or the Future Lessee; (ii) in
the event of a default under the Master Agreement; or (iii) in the event of a
default under the Lease Guaranties.
Interstate and IHC have agreed to guarantee all future leases between
the Company and affiliates of Interstate.
B. DEVELOPMENT OPTION IN FAVOR OF THE PARTNERSHIP
During the Term, IHC has granted to the Partnership a development
option (the "Development Option") to purchase certain brand name midscale,
upper economy, economy and budget hotels which IHC plans to develop (the "IHC
Development Hotels") and which IHC notifies the Partnership prior to
commencement of construction that IHC plans to sell after completion of
construction for a purchase price equal to the greater of 105% of IHC's
budgeted development costs or such budgeted development costs plus cost
overruns, with the right to terminate in the event of overruns.
IHC must deliver to the Partnership a notice specifying the proposed
development cost budget for each such IHC Development Hotel and providing
certain additional items of information to the Partnership. Within 21 days
following receipt of the notice, the Partnership may exercise its Development
Option to purchase such hotel, and the Future Lessee shall have the right to
lease any IHC Development Hotel sold to the Partnership pursuant to its
exercise of the Development Option. The Future Lessee shall have 15 days
following receipt of the Partnership's proposed rent terms to (i) agree to the
Partnership's proposed terms and execute a Percentage Lease thereto or (ii)
propose alternative rental terms, reach an agreement with the Partnership as to
such terms and execute a Percentage Lease incorporating such terms. In the
event that (a) the Partnership does not provide notice of its intent to
exercise its Development Option within 21 days or (b) the Partnership and the
Future Lessee do not agree within 21 days to rent terms for the particular
hotel, the Partnership shall have waived its rights under the Development
Option and IHC may retain or sell the hotel in its sole discretion.
In the event IHC's actual development costs exceed budgeted
development costs for any such IHC Development Hotel, the Partnership shall
have the right to purchase such hotel for a purchase price equal to (x) 105% of
the budgeted development costs plus (y) the amount by which the actual costs
exceed the budgeted costs of such hotel, with the parties to renegotiate in
good faith the rent terms for such hotel to reflect the increased purchase
price. If the Partnership does not elect to so purchase the hotel, then IHC
shall have the right to sell such hotel to the Partnership for a purchase price
equal to 105% of its budgeted development costs. In the event that, during the
Term, IHC has not offered to the Partnership at least five IHC Development
Hotels, the term of the Development Option shall be extended until such time as
IHC has offered five IHC Development Hotels to the Partnership in accordance
with the Development Option.
C. PARTNERSHIP RIGHT OF FIRST OFFER
During the Term, IHC has granted the Partnership a right of first
offer (the "Partnership Right of First Offer") to acquire midscale, upper
economy, economy and budget hotels which IHC or any affiliate of IHC owned at
November 15, 1996 or acquires or develops during the Term (the "IHC First Offer
Hotels").
Prior to offering an IHC First Offer Hotel for sale, IHC shall deliver
to the Partnership a notice of its intent to sell such hotel and stating IHC's
proposed cash purchase price. Within 21 days following receipt of the notice,
the Partnership may elect to purchase the IHC First Offer Hotel for IHC's
proposed purchase price by delivering a notice to IHC of its intent to purchase
such hotel, and Future Lessee shall have the right to lease any IHC First
Option Hotel
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sold to the Partnership pursuant to its exercise of the Partnership Right of
First Offer. The Future Lessee shall have 15 days following receipt of the
Partnership's proposed rent terms to agree to the Partnership's proposed terms
and execute a Percentage Lease thereto or propose alternative rental terms,
reach an agreement with the Partnership as to such terms and execute a
Percentage Lease incorporating such terms. In the event that (a) the
Partnership does not provide notice of its intent to exercise its Partnership
Right of First Offer within 21 days or (b) the Partnership and the Future
Lessee do not agree within 21 days to rent terms for the particular hotel, (x)
the Partnership shall have waived its rights under the Partnership Right of
First Offer, and (y) IHC may sell such IHC First Offer Hotel at any time within
195 days from the date of its notice of sale to the Partnership, for a purchase
price equal to or greater than 95% of the price listed in such notice. In the
event that IHC desires to sell such IHC First Offer Hotel for a price less than
95% of the price listed in such notice, IHC must again comply with its notice
requirements to the Partnership prior to marketing or soliciting for sale such
hotel.
The Master Agreement and the First Amendment to Master Agreement are
set forth in Exhibits 10.4 and 10.5
hereto.
(c) Exhibits
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10.1 Consolidated Lease Amendment dated as of November 15, 1996 between Equity Inns Partnership, L.P. and
Crossroads/Memphis Partnership, L.P.
10.2 Guaranty of Leases dated November 15, 1996 by Interstate Hotels Company
10.3 Guaranty of Leases dated November 15, 1996 by Interstate Hotels Corporation
10.4 Master Agreement dated as of November 4, 1996 among Equity Inns, Inc., Equity Inns Partnership, L.P.,
Interstate Hotels Corporation, Crossroads/Memphis Partnership, L.P. and Crossroads Future Company,
L.L.C.
10.5 First Amendment to Master Agreement dated as of November 15, 1996 among Equity Inns, Inc., Equity Inns
Partnership, L.P., Interstate Hotels Corporation, Crossroads/Memphis Partnership, L.P. and Crossroads
Future Company, L.L.C.
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SIGNATURE
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.
EQUITY INNS, INC.
December 13, 1996 /s/ Howard A. Silver
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Howard A. Silver
Vice President of Finance,
Secretary, Treasurer and
Chief Financial Officer
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EXHIBIT INDEX
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EXHIBIT
NUMBER DESCRIPTION
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10.1 Consolidated Lease Amendment dated as of November 15, 1996 between Equity Inns Partnership,
L.P. and Crossroads/Memphis Partnership, L.P.
10.2 Guaranty of Leases dated November 15, 1996 by Interstate Hotels Company
10.3 Guaranty of Leases dated November 15, 1996 by Interstate Hotels Corporation
10.4 Master Agreement dated as of November 4, 1996 among Equity Inns, Inc., Equity Inns Partnership,
L.P., Interstate Hotels Corporation, Crossroads/Memphis Partnership, L.P. and Crossroads Future
Company, L.L.C.
10.5 First Amendment to Master Agreement dated as of November 15, 1996 among Equity Inns, Inc.,
Equity Inns Partnership, L.P., Interstate Hotels Corporation, Crossroads/Memphis Partnership,
L.P. and Crossroads Future Company, L.L.C.
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EXHIBIT 10.1
CONSOLIDATED LEASE AMENDMENT
THIS CONSOLIDATED LEASE AMENDMENT (hereinafter called "Lease"), made
as of the 15th day of November, 1996, by and between EQUITY INNS PARTNERSHIP,
L.P., a Tennessee limited partnership (hereinafter called "Lessor"), and
CROSSROADS/MEMPHIS PARTNERSHIP, L.P., a Delaware limited partnership
(hereinafter called "Lessee"), provides as follows:
W I T N E S S E T H:
WHEREAS, pursuant to that certain Contribution Agreement, dated as of
October 4, 1996 (the "Contribution Agreement") among Crossroads Hospitality
Company L.L.C. ("Crossroads"), Trust Leasing, Inc. ("Prior Lessee"), Trust
Management, Inc. ("TM") and Phillip H. McNeill, Sr. ("McNeill"), Prior Lessee
has assigned to Lessee all of its right, title and interest in forty-eight (48)
Separate Lease Agreements listed on Exhibit A attached hereto (the "Existing
Leases").
WHEREAS, notwithstanding the foregoing, the Existing Lease for the
State College, Pennsylvania site, dated January 3, 1995, is by and between
Lessor and State College BBQ/Concord Joint Venture ("State College Lessee"), a
joint venture between State College BBQ Limited Partnership and Prior Lessee;
WHEREAS, Prior Lessee's joint venture interest in State College Lessee
has been transferred to Lessee and as a result, for purposes of this Lease,
Lessee (with respect to the State College, Pennsylvania site) shall mean State
College Lessee, which is joining in the execution hereof solely as to the State
College, Pennsylvania site;
WHEREAS, Lessee is an Affiliate (as hereinafter defined) of IHC and,
as such, is uniquely experienced in the management and operations of facilities
substantially similar to the Facility (as hereinafter defined);
WHEREAS, pursuant to that certain Master Agreement, dated as of
November 4, 1996 among Lessor, Lessee, Equity Inns, Inc. ("Equity Inns"),
Interstate Hotels Corporation ("IHC") and Crossroads Future Company, L.L.C.
(the "Master Agreement"), Lessor (in consideration of the foregoing recital)
has consented to the assignment of the Existing Leases from Prior Lessee to
Lessee, and Lessor and Lessee have agreed that the Existing Leases should be
amended and restated and, as a matter of convenience, have agreed upon the
terms of a single instrument (i.e., this Consolidated Lease Amendment) that
will embody the mutual agreements of Lessor and Lessee in each of the Existing
Leases and supersede the terms thereof.
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NOW, THEREFORE, intending to be legally bound, Lessor and Lessee agree
that (a) the Existing Leases shall remain in full force and effect as
forty-eight (48) separate leases, as amended hereby, (b) this Agreement shall
not be deemed to be a novation or release of any of the Existing Leases, but
only an amendment and restatement thereof, and (c) henceforth the terms of each
of the Existing Leases shall be governed by this Consolidated Lease Amendment,
with the same force and effect as if the terms set forth below had been
restated in their entirety in forty-eight (48) separate lease restatements;
Lessor, in consideration of the payment of rent by Lessee to Lessor,
the covenants and agreements to be performed by Lessee, and upon the terms and
conditions hereinafter stated, does hereby rent and lease unto Lessee, and
Lessee does hereby rent and lease from Lessor, the Leased Property.
ARTICLE I
1.1 Leased Property. The Leased Property is comprised of Lessor's
interest in the following:
(a) the various parcels of land or ground leasehold
interests which are subject to the Existing Leases listed on Exhibit A attached
hereto and by reference incorporated herein and more particularly described in
each of the Existing Leases (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
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connection with, the operation of the Leased Improvements as a hotel, together
with all replacements, modifications, alterations and additions thereto; and
(f) all existing leases of 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, FINANCING INSTRUMENTS, MORTGAGES,
DEEDS OF TRUST AND SECURITY DEEDS, AND INCLUDING OTHER MATTERS WHICH WOULD BE
DISCLOSED BY AN INSPECTION OF THE LEASED PROPERTY OR BY AN ACCURATE SURVEY
THEREOF.
1.2 Individual Leased Property. The intent of the parties is that
each of the Existing Leases, as amended and restated by this Consolidated Lease
Amendment, shall constitute a separate lease for each of the forty-eight (48)
Leased Properties described in the forth-eight (48) Existing Leases,
notwithstanding the fact that this Consolidated Lease Amendment restates the
terms of each of the forty-eight (48) Existing Leases. Therefore, the term
"this Lease" contained in this Consolidated Lease Amendment shall mean the
terms hereof as they apply to each individual Leased Property and not all of
the Leased Properties collectively or any combination of two or more of the
Leased Properties. Unless the context otherwise requires, "Leased Property"
shall mean any individual hotel property listed in Exhibit A and shall not mean
all of the hotels collectively or any combination of two (2) or more hotels.
1.3 Separate Lease Agreements. At the request of either Party,
the other Party shall enter into an individual lease agreement, in form and
substance substantially similar to this Consolidated Lease Amendment, as to any
one or more of the hotel properties listed on Exhibit A providing for Rent
attributable to such hotel properties under this Agreement, and Lessee shall
cause Interstate Hotels Company ("IH Company") and IHC to execute an amended
and restated lease guaranty, in form and substance substantially similar to the
lease guaranty for this Agreement, for such individual lease agreements and
shall cause a Subordination Agreement to be executed with respect to any
management agreements affecting any hotels subject to such individual leases
except those managed by Promus.
1.4 Term. The term of the Lease (the "Term") shall commence on
the date hereof (the "Commencement Date") and shall end on the fifteenth (15th)
anniversary of the last day of the month in which the Commencement Date occurs,
unless sooner terminated or later renewed and extended in accordance with the
provisions hereof.
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ARTICLE II
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, more than fifty percent (50%)
of the outstanding capital stock, shares or equity interests of such person, or
(c) any officer, director, employee, partner or trustee of such person or any
person controlling, controlled by or under common control with such person
(excluding trustees and persons serving in similar capacities who are not
otherwise an Affiliate of such person). The term "person" means and includes
individuals, corporations, general and limited partnerships, stock companies or
associations, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, or other entities and governments and
agencies and political subdivisions thereof.
Annual Budgets: As used in this Lease, the term "Annual Budgets"
shall mean the Operating Budget and Capital Budget prepared, delivered and
approved in accordance with Section 3.6.
Annual Revenue Computation: As defined in Exhibit D.
Award: As defined in Section 15.1(c).
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 becomes discontinued, then such other rate as Lessor may
reasonably designate.
Base Rent: As defined in Article III.
Beverage Sales: Gross revenue from (i) the sale of wine, beer, liquor
or other alcoholic beverages, whether sold in the bar or lounge, delivered to a
guest room, sold at meetings or banquets or at any other location at the Leased
Property or from (ii) non-alcoholic beverages sold in the bar or lounge. Such
revenues shall not include the following:
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(a) Any gratuity or service charge added to a customer's
bill or statement in lieu of a gratuity which is paid
to an employee;
(b) Any revenues that are subsequently credited, rebated
or refunded in the ordinary course of business; and
(c) Sales taxes or taxes of any other kind imposed on the
sale of alcoholic or other beverages.
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.
Capital Budget: As defined in Section 3.6(b).
Capital Expenditures: Amounts advanced to pay the costs of Capital
Improvements.
Capital Improvements: Improvements to (A) the external walls and
internal load-bearing walls (other than windows and plate glass) of the
Facility; (B) the roof of the Facility; (C) private roadways, parking areas,
sidewalks and curbs appurtenant thereto (other than cleaning, patching and
striping); (D) mechanical, electrical and plumbing systems that service common
areas, entire wings of the Facility or the entire Facility, including conduit
and ductware connected thereto; and (E) items of the types described on Exhibit
C attached hereto as "Capital items" of the Facility.
CERCLA: The Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: As defined in Section 1.4 of the Lease.
Condemnation, Condemnor: As defined in Section 15.1.
Consumer Price Index: The "Consumer Price Index" published by the
Bureau of Labor Statistics of the United States Department of Labor, U.S. City
Average, All Items for Urban Wage Earners and Clerical Workers (1982-1984 =
100).
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.
Date of Taking: As defined in Section 15.1(b).
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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 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.
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Equity Inns: Equity Inns, Inc., a Tennessee corporation.
Event of Default: As defined in Section 16.1.
Facility: The hotel and/or other facility offering lodging and other
services or amenities being operated or proposed to be operated on the Leased
Property.
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 XXXIII 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 XXXIII 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 Lease Property such value shall be
determined as if such Leased Property has not been so damaged or destroyed.
FIFRA: The Federal Insecticide, Fungicide, and Rodenticide Act, as
amended.
Fiscal Year: The 12-month period from January 1 to December 31.
Fixtures: As defined in Section 1.1.
Food Sales: Gross revenue from the sale, for on-site consumption, of
food and non-alcoholic beverages sold at the Leased Property, including in
respect to guest rooms, banquet rooms, meeting rooms and other similar rooms.
Such revenues shall not include the following:
(a) Vending machine sales;
(b) Any gratuity or service charges added to a customer's
bill or statement in lieu of a gratuity which is paid
to an employee;
(c) Non-alcoholic beverages sold from the bar or lounge;
(d) Sales taxes or taxes of any other kind imposed on the
sale of food or non-alcoholic beverages; and
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<PAGE> 8
(e) Any revenues that are subsequently credited, refunded
or rebated in the ordinary course of business.
Franchise Agreement: Any franchise agreement or license agreement
with a franchisor under which the Facility 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 Facility, together with all replacements therefor and
additions thereto, including, without limitation, (i) all equipment and systems
required for the operation of kitchens and bars, if any, laundry and dry
cleaning facilities, (ii) office equipment, (iii) dining room wagons, materials
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 political subdivision of
any of the foregoing.
Gross Operating Expenses: For purposes of this Lease, the term
"Gross Operating Expenses" shall mean all salaries and employee expense and
payroll taxes (including salaries, wages, bonuses and other compensation of all
employees at the Facility, 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 Agreement, governmental fees and assessments, food, beverages,
laundry service expense, the cost of Inventories and fixed asset supplies,
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 Facility 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) expenditures by Lessor pursuant to Article XIII and (iii)
payments on any Mortgage or other mortgage or security instrument on the Leased
Property); all determined in accordance with generally accepted accounting
principles and the Uniform System. No part of Lessee's central office overhead
or general or administrative expense (as opposed to that of the Facility) shall
be deemed to be a part of Gross Operating Expenses, as herein provided; provided
that accounting services provided to the Leased Property but performed at
Lessee's central office shall be included in Gross Operating Expenses.
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 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.
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Gross Operating Profit shall mean, 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
Facility (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 and the Uniform System, 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) gratuities, (iv) proceeds of insurance and
condemnation, (v) proceeds from sales other than sales in the ordinary course
of business, (vi) all loan proceeds from financing or refinancings of the Hotel
or interests therein or components thereof, (vii) judgments and awards, except
any portion thereof arising from normal business operations of the hotel, and
(viii) 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 in
any Environmental Law;
(b) Hazardous substances, as defined in CERCLA or in any
Environmental Law;
(c) Toxic substances, as defined in TSCA or in any
Environmental Law;
(d) Insecticides, fungicides, or rodenticides, as defined
in FIFRA or in any Environmental Law; and
(e) Gasoline or any other petroleum product or byproduct,
polychlorinated biphenols, asbestos and urea
formaldehyde.
IHC: As defined in the preamble to this Lease.
IH Company: Interstate Hotels Company, a Pennsylvania corporation and
sole shareholder of IHC.
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), water, sewer or other rents and
charges, excises, tax inspection,
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<PAGE> 10
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 Section 8.3 or Article XXII.
Initial Period: The period ending on the tenth (10th) anniversary of
the last day of the month in which the Commencement Date occurs.
Insurance Requirements: All terms of any insurance policy required by
this Lease and all requirements of the issuer of any such policy.
Inventory: All "Inventories of Merchandise" and "Inventories of
Supplies" as defined in the Uniform System, including, but not limited to,
linens 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 Article I.
Lease: This Lease, as it relates to each Leased Property or all of
the Leased Property as the context may require.
Leased Improvements; Leased Property: Each as defined in Article I.
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<PAGE> 11
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 or not hereafter enacted and in force, including (a) all
laws, rules or regulations pertaining to the environment, occupational health
and safety and public health, safety or welfare, and (b) any laws, rules or
regulations that may (1) require repairs, modifications or alterations in or to
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 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
interest) in Lessee, the officers, directors, stockholders, employees, agents
and representatives of Lessee and any corporate stockholder, agent, or
representative of Lessee, and the respective heirs, personal representatives,
successors and assigns of any such officer, director, stockholder, employee,
agent or representative.
Lessee's Personal Property : As defined in Section 6.2.
Lessor: The Lessor designated on this Lease and its respective
successors and assigns.
Lessor Indemnified Party: Lessor, any Affiliate of Lessor, 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, stockholder,
employees, agents and representatives of the general partner of Lessor and any
partner, agent, or representative of Lessor, and the respective heirs, personal
representatives, successors and assigns of any such officer, director, partner,
stockholder, employee, agent or representative.
Management Agreement: As defined in Section 19.7.
Manager: As defined in Section 19.7.
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<PAGE> 12
Master Agreement: As defined in the preamble to this Lease.
Minimum Price. The sum of (a) the equity in the Leased Property at
the time of acquisition of the Leased Property by Lessor (i.e., that portion of
the purchase price of the Leased Property paid by Lessor in cash) plus (b)
other capital expenditures on the Leased Property by Lessor after the date of
acquisition by Lessor 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 of acquisition by Lessor
(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 30.2.
Notice: A notice given pursuant to Article XXXII.
Officer's Certificate: A certificate of Lessee reasonably acceptable
to Lessor, signed by the chief financial officer or another officer of Lessee's
general partner authorized so to sign by the board of directors or by-laws of
such general partner, or any other person whose power and authority to act has
been authorized by delegation in writing by any such officer.
Operating Budget: As defined in Section 3.6(a).
Other Income: All revenues, receipts and income of any kind derived
directly or indirectly from or in connection with the Facility and included in
Gross Revenues, other than Room Revenues, Food Sales and Beverage Sales.
Overdue Rate: On any date, a rate equal to the Base Rate plus 5% per
annum, but in no event greater than the maximum rate then permitted under
applicable law.
Payment Date: Any due date for the payment of any installment of
Base Rent or Percentage Rent.
Percentage Rent: As defined in Section 3.1(b).
Person: Any Government, natural person, corporation, partnership or
other legal 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
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property owned by the 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 the Lessee,
either contractually or by operation of law, relating to the Leased Property.
Primary Intended Use: As defined in Section 7.2(b).
Proceeding: Any judicial action, suit or proceeding (whether civil or
criminal), any administrative proceeding (whether formal or informal), any
investigation by a governmental authority or entity (including a grand jury),
and any arbitration, mediation or other non-judicial process for dispute
resolution.
Quarterly Revenues Computation: As defined in Exhibit D.
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.
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.
Rent: Collectively, the Base Rent, Percentage Rent, and Additional
Charges.
Revenues Computations: Shall mean, collectively, the Quarterly
Revenues Computation, and the Annual Revenues Computation.
Room Revenues: Gross revenue from the rental of guest rooms, whether
to individuals, groups or transients, at the Facility, excluding the following:
(a) the amount of all credits, rebates or refunds to
customers, guests or patrons; and
(b) all sales taxes or any other taxes imposed on the
rental of such guest rooms; and
(c) any fees collected for amenities including, but not
limited to, telephone, laundry, movies or
concessions.
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SARA: The Superfund Amendments and Reauthorization Act of 1986, as
amended.
State: The State or Commonwealth of the United States in which the
Leased Property is located.
Subsidiaries: Corporations in which Lessee owns, directly or
indirectly, more than 50% of the voting stock or control, as applicable
(individually, a "Subsidiary").
Substitute Leases: As defined in Section 42.3.
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 1.4.
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.
Uneconomic for its Primary Intended Use: A state or condition of the
Facility 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 the general partner of Lessee, the Facility 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 Facility.
Uniform System: Shall mean the Uniform System of Accounts for Hotels
(8th Revised Edition, 1986) as published by the Hotel Association of New York
City, Inc., as same may hereafter be revised.
Unsuitable for its Primary Intended Use: A state or condition of the
Facility 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 the general partner of Lessee, due to casualty damage or loss through
Condemnation, the Facility cannot function as an integrated hotel facility
consistent with standards applicable to a well maintained and operated hotel.
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ARTICLE III
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 on
the signature page 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 and
Additional Charges, during the Term, as follows:
(a) Base Rent: During the period commencing on the
Commencement Date and ending at the end of the first month-end
following the tenth (10th) anniversary thereof (the "Initial Period"),
the annual sum in the amount set forth on Exhibit D hereto (as
adjusted under Section 3.1(e)) as the "Base Rent" for the Leased
Property, 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 and last monthly
payments of Base Rent shall be pro rated as to any partial month
(subject to adjustment as provided in Sections 5.2, 14.5 and 15.3);
and
(b) Percentage Rent: For each Fiscal Year during the
Term commencing with the Fiscal Year beginning January 1, 1996, Tenant
shall pay percentage rent ("Percentage Rent") quarterly, with respect
to the four calendar quarters of each Fiscal Year, in an amount
calculated by the following formula:
The amount equal to the Quarterly Revenues
Computation (as defined on Exhibit D attached hereto)
less
an amount equal to the Base Rent paid year to date
for the applicable Fiscal Year
less
an amount equal to Percentage Rent paid year to date
for the applicable Fiscal Year
equals
Percentage Rent for the applicable quarter.
Notwithstanding the amounts of Percentage Rent paid quarterly
pursuant to the formula set forth above, for any Fiscal Year during the Initial
Term commencing with the Fiscal Year in which the Commencement Date Occurs, the
Percentage Rent payable under this Lease shall be no less than or greater than
the amount calculated by the following formula:
The amount equal to the Annual Revenue Computation
(as defined on Exhibit D attached hereto)
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<PAGE> 16
less
an amount equal to Base Rent paid year to date for
the applicable Fiscal Year
equals
Percentage Rent for the applicable Fiscal Year.
(c) At least one hundred twenty (120) days prior to the
expiration of the Initial Period, Lessor and Lessee shall negotiate in
good faith modifications to the Rent for the final five (5) years of
the Lease Term to adjust such Rent to market rates for hotel REIT
leases for similar hotel/motel properties at that time. In the event
Lessor and Lessee are unable to agree upon Rent terms for the final
five (5) years of the term of the Lease, at least ninety (90) days
prior to the expiration of the Initial Period, the Rent terms for the
final five (5) years of that Lease shall be determined by a panel of
three (3) parties having generally recognized expertise in evaluating
hotel REIT leases. 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 final five (5) years of the Lease Term. In
determining the market rates for the final five (5) years of the Lease
term, the panel members shall be instructed to consider hotel REIT
lease terms with respect to similar hotel/motel property types.
(d) Officer's Certificates. Within 30 days after the
last day of each quarter of each Fiscal Year (or part thereof) in the
Term, Lessee shall deliver to Lessor an Officer's Certificate
reasonably acceptable to Lessor, together with the applicable
quarterly Percentage Rent payment, setting forth the calculation of
Percentage Rent accrued and paid for such quarter including the
quarterly Revenues Computation. Such quarterly payments shall be
based on the formulas set forth in Section 3.1(b). There shall be no
reduction in the Base Rent regardless of the result of the Revenue
Computation.
In addition, on or before March 31 of each year, commencing with March
31, 1997, Lessee shall deliver to Lessor an Officer's Certificate reasonably
acceptable to Lessor setting forth the computation of the actual Percentage
Rent that accrued for each quarter of the Fiscal Year that ended on the
immediately preceding December 31. Additionally, if the annual Percentage Rent
due and payable for any Fiscal Year (as shown in the applicable Officer's
Certificate) exceeds the amount actually paid as Percentage Rent by Lessee for
such year, Lessee shall pay such excess to Lessor at the time such certificate
is delivered. If the Percentage 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 for the applicable Fiscal Year, Lessor, at its option, shall
reimburse such amount to Lessee or credit such amount against subsequent
months' Base Rent and, to the extent necessary, subsequent quarters' Percentage
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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 due and payable for
any Fiscal Year (as shown in the applicable Officer's Certificate or as
adjusted pursuant to Section 3.1(e)) and the total amount of quarterly payments
for such Fiscal Year actually paid by Lessee as Percentage 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 due through the date of
termination of this Lease shall survive the expiration or earlier termination
of the Term, and a final reconciliation, taking into account, among other
relevant adjustments, any adjustments which are accrued after such expiration
or termination date but which related to Percentage Rent accrued prior to such
termination date, and Lessee's good faith best estimate of the amount of any
unresolved contractual allowances, shall be made not later than two years after
such expiration or termination date, but Lessee shall advise Lessor within 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. For each Fiscal Year during the
Term beginning with the Fiscal Year identified as the "CPI Adjustment
Date" for each Leased Property as shown on Exhibit D, the Base Rent
then in effect, and the threshold dollar amounts of Room Revenues then
included in the Revenues Computations set forth in Section 3.1(b),
shall be adjusted as follows:
(1) The average Consumer Price Index for the
twelve months ended on September 30 of the most recently
completed Fiscal Year shall be divided by the average Consumer
Price Index for the twelve months ended on September 30 of the
prior Fiscal Year;
(2) The new Base Rent for the then current
Fiscal Year shall be equal to the product of the Base Rent in
effect in the most recently ended Fiscal Year and the quotient
obtained under subparagraph (1) above;
(3) The new threshold dollar amounts in the
applicable Revenues Computations described in Section 3.1(b)
above for the then current Fiscal Year shall be the product of
the threshold dollar amounts of Room Revenues in effect in the
most recently ended Fiscal Year and the quotient obtained in
subparagraph (1) above.
The amount of any adjustment under paragraphs (e)(1)-(3) to
Base Rent and the threshold dollar amounts of Room Revenues for any Fiscal Year
shall not exceed 7% of the
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Base Rent and threshold dollar amounts of Room Revenues applicable for the
prior Fiscal Year.
By way of example, for Leases with a CPI Adjustment Date of
January 1, 1998 or earlier, the amount of Base Rent and the threshold dollar
amounts of Room Revenues amounts in the Revenues Computations for the Fiscal
Year commencing January 1, 1998 shall be adjusted to reflect any change in the
average Consumer Price Index for the twelve months ended September 30, 1997 as
compared to the twelve months ended September 30, 1996.
Lessor shall calculate the annual Consumer Price Index
adjustments as soon as reasonably possible after the Consumer Price Index
becomes available and shall notify Lessee in writing of the amount of the
annual adjustment, together with a copy of the computation showing the
adjustment amount.
Adjustments calculated as set forth above in the Base Rent and
threshold Room Revenues amounts shall be effective on the CPI Adjustment Date
set forth on Exhibit D. If Rent is paid in any Fiscal Year prior to
determination of the amount of any adjustment to Base Rent or the threshold
dollar amounts of Room Revenues applicable for such Fiscal Year, payment
adjustments for any shortfall in or overpayment of Rent paid shall be made with
the first Base Rent payment due after the amount of the adjustments is
determined.
The "average Consumer Price Index" for any period shall be the
average of the Consumer Price Index for all months during the period.
(4) If (1) a significant change is made in the
number or nature (or both) of items used in determining the Consumer
Price Index, or (2) 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 and threshold dollar amounts
of Room Revenues 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.
3.2 Confirmation of Percentage Rent. Lessee shall utilize, or
cause to be utilized, an accounting system for the Leased Property in
accordance with its usual and customary practices, and in accordance with
generally accepted accounting principles and the Uniform System, that will
accurately record all data necessary to compute Percentage Rent, and Lessee
shall retain, for at least five years after the expiration of each Fiscal Year
(and in any event until the reconciliation described in Section 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 for the
applicable Fiscal Years. Lessor, at its expense (except as provided
hereinbelow), shall have the right from time to time by its accountants or
representatives to audit the information that formed the basis for the data set
forth in any
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Officer's Certificate provided under Section 3.1(c) and, in connection with
such audits, to examine all Lessee's records (including supporting data, sales
and excise tax returns and franchise reports) reasonably required to verify
Percentage Rent, subject to any prohibitions or limitations on disclosure of
any such data under Legal Requirements. If any such audit discloses a
deficiency in the payment of Percentage 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 years
after the date Percentage Rent for any Fiscal Year is reported by Lessee to
Lessor, the deficiency, if any, with respect to such Percentage 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
actually due from Lessee for any Fiscal Year exceed those reported by Lessee by
more than 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 and
Percentage Rent, (a) Lessee also will pay and discharge as and when due and
payable all other amounts, liabilities, obligations and Impositions (other than
Impositions which are Lessor's obligations hereunder) 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 including, but not
limited to, the right to pay such Additional Charges on behalf of Lessee and to
require reimbursement thereof by Lessee, together with interest thereon at the
Overdue Rate. If any installment of Base Rent, Percentage Rent or Additional
Charges (but only as to those Additional Charges that are payable directly to
Lessor) shall not be paid on its due date, Lessee will pay Lessor 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 Rent Payable Without Deduction. The Rent shall be paid to
Lessor so that this Lease shall yield to Lessor the full amount of the
installments of Base Rent, Percentage Rent and Additional Charges throughout
the Term, all as more fully set forth in Article V, 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.
3.5 Conversion of Property. If, during the Term, Lessee desires
to provide food and beverage operations at the Facility (other than
complimentary continental breakfast), Lessee shall give notice of such desire
to Lessor. Lessor and Lessee shall then commence negotiations to adjust Rent
to reflect the proposed change to the operation of the Facility, each acting
reasonably and in good faith. All other terms of this Lease will remain
substantially the same. During negotiations, which shall not extend beyond 60
days, Lessee shall not "convert" the Facility and shall continue fulfilling its
obligations under the existing terms of this Lease. If no agreement is reached
after such 60-day period, Lessee shall withdraw such notice and this Lease
shall continue in full force.
3.6 Budgets. Not later than sixty (60) days prior to the
commencement of each Fiscal Year, Lessee shall submit the following Budgets to
Lessor:
(a) An operating budget ("Operating Budget") prepared in
accordance with this Section 3.6(a), in substantially the form of Exhibit E.
The Operating Budget shall be prepared in good faith and otherwise in
accordance with the Uniform System to the extent applicable and shall show by
month and quarter and for the full Fiscal Year in the degree of detail
specified by the Uniform System, the following:
(i) Lessee's reasonable estimate of Gross Revenues
(including room rates and Room 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.
(ii) An estimate of the amounts to be dedicated to
routine, non-capital repair and maintenance; and
(iii) A cash flow projection.
(iv) Lessee's reasonable estimate of Percentage
Rent by quarter for the Fiscal Year, and
(v) A narrative description of the program for
advertising and marketing the Hotel for the forthcoming Fiscal Year
containing a detailed budget itemization of the proposed advertising
expenditures by category and the assumptions, in narrative form,
forming the basis of such budget itemizations.
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(b) A capital budget ("Capital Budget") in substantially
the form of Exhibit F hereto, containing a description in reasonable detail of
the proposed Capital Improvements and an estimate of all amounts Lessor will be
requested to provide for Capital Improvements to the Facility or any of its
components for the Fiscal Year. The Capital Budget shall be prepared in
accordance with the Uniform System to the extent applicable.
3.7 Approval of Capital Budget. Within thirty (30) days following
submission of the Capital Budget to Lessor, Lessor shall give Lessee written
notice either (a) that Lessor approves the Capital Budget or (b) indicating
with reasonable specificity the respects in which Lessor objects to the Capital
Budget. In the latter event, Lessor and Lessee shall act promptly, reasonably
and in good faith to seek to resolve Lessor's objections. In the event that
Lessor and Lessee fail to reach agreement with respect to the Capital Budget
within thirty (30) days after receipt of Lessor's written notice, Lessee and
Lessor shall refer any disputed Capital Budget matter to arbitration using
procedures set forth in Article XLI hereto and each party shall endeavor to
cause such arbitration to be completed as quickly as possible, but in any event
not later than six (6) months following referral to arbitration. In the event
Lessor fails to deliver the notice set forth in this section, within the
required time period, the Capital Budget shall be deemed approved. Lessor
shall be obligated to make all Capital Expenditures which are pursuant to a
Capital Budget which has been approved or deemed approved in accordance with
the procedures set forth above.
3.8 Capital Projects.
(a) The selection of all design professionals and
contractors for capital projects shall be made by Lessor, after consultation
with Lessee.
(b) Lessor may require that all contracts in connection
with capital projects be subject to competitive bidding procedures reasonably
acceptable to Lessor. Lessor shall also have the right to review and approve
all contract bids, whether competitively bid or not. Lessor may also retain,
at its sole cost and expense, an inspecting architect or engineer to monitor
costs, time, quality and performance for all capital projects.
3.9 Books and Records. Lessee shall keep full and adequate books
of account and other records reflecting the results of operation of the
Facility on an accrual basis, all in accordance with the Uniform System and
generally accepted accounting principles and the obligations of Lessee under
this Lease Facility. The books of account and all other records relating to or
reflecting the operation of the Facility shall be kept either at the Facility
or at Lessee's offices in Pittsburgh, Pennsylvania or Orlando, Florida and
shall be available to Lessor and its representatives and its auditors or
accountants, at all reasonable times for examination, audit, inspection, and
transcription. All of such books and records pertaining to the Facility
including, without limitation, books of account, guest records and front office
records, at all times shall be the property of Lessor and shall not be removed
from the Facility or Lessee's offices without Lessor Approval.
ARTICLE IV
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4.1 Payment of Impositions. Subject to Article XII 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
Article XII) 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 XVI. 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 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 to so 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, and liabilities 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 payment 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.
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4.2 Notice of Impositions. To the extent Lessor is notified of
any Impositions, Lessor shall give prompt Notice to Lessee of such Impositions
payable by Lessee hereunder, 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.
4.3 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.
4.4 Utility Charges. Lessee will be solely responsible for
obtaining and maintaining utility services to the Leased Property and will pay
or cause to be paid all charges for electricity, gas, oil, water, sewer and
other utilities used in the Leased Property during the Term.
4.5 Insurance Premiums. Lessee will pay or cause to be paid all
premiums for the insurance coverages required to be maintained by it under
Article XIII.
4.6 Ground Rent. In the event that Lessor's interest in the Land
is pursuant to a ground lease, Lessor shall be solely responsible for payment
of any ground rent due with respect to the Leased Property, and shall promptly
deliver to Lessee any default notice received by Lessor pursuant to the ground
lease.
4.7 Franchise Fees. Lessee will pay or cause to be paid all
franchise fees due and owing in accordance with the terms and conditions of the
Franchise Agreement.
ARTICLE V
5.1 No Termination, Abatement, etc. 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 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, corporation, partnership or other
entity, or by reason of eviction by paramount title, (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,
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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 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.
5.2 Abatement Procedures. In the event of a partial Taking as
described in Section 15.5, the 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 30 days after such partial
Taking, the matter may be submitted by either party to arbitration in
accordance with the provisions of Article XLI hereof for resolution.
ARTICLE VI
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
through 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 days following
the expiration or earlier termination of the Term shall be considered abandoned
by Lessee and may be appropriated, sold, destroyed, or otherwise disposed of by
Lessor without first giving Notice thereof to Lessee, without any payment to
Lessee and without any obligation to account therefor. Lessee will, at its
expense, restore the Leased Property to the condition required by Section
9.1(d), including repair of all damage to the Leased Property caused by the
removal of
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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 the
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 Representations. Lessor represents and warrants that
(a) Lessor has full partnership authority to grant to the Lessee the leasehold
interest described in this Lease, and (b) that this Lease has been duly
authorized by all necessary partnership action on behalf of Lessor and by all
necessary trust action on behalf of the general partner of Lessor.
6.4 Lessee's Representations. Lessee represents and warrants that
(a) Lessee is a validly existing limited partnership organized under the laws
of the State of Delaware and is qualified to do business in all states in which
it is required to so qualify due to the nature of its business activities, (b)
Lessee has the requisite power and authority to enter into this Lease and (c)
this Lease has been duly authorized by all necessary partnership action on
behalf of Lessee and by all necessary corporate, partnership or limited
liability company action on behalf of the general partner of Lessee.
6.5 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.
ARTICLE VII
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
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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.
7.2 Use of the Leased Property.
(a) Lessee covenants that it will proceed with all due
diligence and will exercise its best efforts to obtain and to maintain all
approvals needed to use and operate the Leased Property and the Facility under
applicable local, state and federal law.
(b) Lessee shall use or cause to be used the Leased
Property only as a hotel facility, and for such other uses as may be necessary
or incidental to such use or such other use as otherwise approved by Lessor
(the "Primary Intended Use"). Lessee shall not use the Leased Property or any
portion thereof for any other use without the prior written consent of Lessor,
which consent may be granted, denied or conditioned upon 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 XIV and XV,
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
(except that Lessee shall have no obligation to complete any capital
improvements to the Leased Property required by the franchisor unless the
Lessor funds the costs thereof), (3) not terminate or amend the Franchise
Agreement without the consent of Lessor, (4) maintain appropriate
certifications and licenses for such use and (5) will 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 Facility, nor shall Lessee cause or
permit any nuisance thereon.
(e) Lessee shall neither suffer nor permit the Leased
Property or any portion thereof, or Lessee's Personal Property, to be used in
such a manner as (1) might reasonably tend to impair Lessor's (or Lessee's, as
the case may be) title thereto or to any portion thereof, or (2) may reasonably
make possible a claim or claims of adverse usage or adverse possession by the
public, as such, or of implied dedication of the Leased Property or any portion
thereof, except as necessary in the ordinary and prudent operation of the
Facility on the Leased Property.
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(f) Lessee agrees to deliver to Lessor upon request by
Lessor from time to time a list of hotels and motels (and locations) owned or
managed by Lessee and its Affiliates.
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.
ARTICLE VIII
8.1 Compliance with Legal and Insurance Requirements, etc.
Subject to Section 8.3(b) below and Article XII relating to permitted contests,
Lessee, at its expense, will promptly (a) comply with all applicable Legal
Requirements and Insurance Requirements in respect of the use, operation,
maintenance, repair and restoration of the Leased Property, and (b) procure,
maintain and comply with all appropriate licenses and other authorizations
required for any use of the Leased Property and Lessee's Personal Property then
being made, and for the proper erection, installation, operation and
maintenance of the Leased Property or any part thereof.
8.2 Legal Requirement Covenants. Subject to Section 8.3(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 such sub-tenants, invitees or others to so 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
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such Legal Requirement compliance therewith pending the prosecution of any such
proceeding may legally be delayed without the incurrence of any lien, charge or
liability of any kind against the Facility 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, 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.
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 the 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
written notice of (i) 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 Environmental Liabilities which were
caused by the acts or grossly 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 caused by the acts or grossly 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 Section 8.3(b) or (c),
the Indemnifying Party, upon request, shall at its sole expense resist and
defend such Proceedings, 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; 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
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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. The Indemnifying Party shall not be liable for
any settlement of any such Proceeding made without its consent, which shall not
be unreasonably withheld, but if settled with the consent of the Indemnifying
Party, or if settled without its consent (if its consent shall be unreasonably
withheld), or if there be a final nonappealable judgment for an adversary party
in any such Proceeding, the Indemnifying Party shall indemnify and hold
harmless the Indemnified Parties from and against any liabilities incurred by
such Indemnified Parties by reason of such settlement or judgment.
(e) At any time any Indemnified Party has reason to
believe circumstances exist which could reasonably result in an Environmental
Liability, upon reasonable prior written notice to Lessee 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 be conditioned or restricted as may be reasonably necessary to ensure
compliance with law and the safety of personnel and facilities or to protect
confidential or privileged information. All Indemnified Parties requesting
such immediate access and cooperation shall 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 VIII 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 VIII shall survive the termination of this Agreement.
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.
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Notwithstanding anything to the contrary contained in this
Agreement, 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
Section 8.3 of this Agreement (but not any other rights hereunder) to any
Person to whom the 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:
(1) 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;
(2) Such indemnification rights shall be
limited to Environmental Liabilities relating to or
specifically affecting the Leased Property; and
(3) 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 IX
9.1 Maintenance and Repair.
(a) Unless caused by Lessee's negligence or willful
misconduct or that of its employees or agents, Lessee shall not be required to
bear the cost of any Capital Improvements, including (without limitation)
Capital Improvements required by the Franchisor under the Franchise Agreement.
Lessor shall be responsible for all Capital Expenditures, subject to (i)
Lessor's right to approve all Capital Expenditures, in connection with Lessor's
approval or deemed approval of the Capital Budget pursuant to Section 3.7 and
(ii) Lessor's right in its sole discretion to refuse to make any Capital
Expenditure required by the Franchisor; provided that, if such refusal results
in a default under or termination of the Franchise Agreement, Lessor shall be
responsible for all damages, termination payments payable by Lessee under the
terms of the Franchise Agreement, application fees for a new franchise license
approved by Lessor, increased royalty fees and other costs arising out of such
refusal or out of the resulting need to apply for and enter into a substitute
franchise license agreement. Except as set forth in the preceding sentence,
nothing herein shall be construed to require Lessor to build or rebuild any
improvement on the Leased Property, or to fund 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. Lessor shall have the right to give, record
and
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post, as appropriate, notices of nonresponsibility under any mechanic's lien
laws now or hereafter existing.
(b) Lessee will keep the Leased Property and all private
roadways, sidewalks and curbs appurtenant thereto that are under Lessee's
control, including windows and plate glass, parking lots, mechanical,
electrical and plumbing systems and equipment (including conduit and ductware),
and non-load bearing interior walls, in good order and repair, except for
ordinary wear and tear (whether or not the need for such repairs occurred as a
result of Lessee's use, any prior use, the elements or the age of the Leased
Property, or any portion thereof), and, except as otherwise provided in
Articles XIV or XV, with reasonable promptness, make all necessary and
appropriate repairs, replacements, and improvements thereto of every kind and
nature, whether interior or exterior ordinary or extraordinary, foreseen or
unforeseen or arising by reason of a condition existing prior to the
commencement of the Term of this Lease (concealed or otherwise), or required by
any governmental agency having jurisdiction over the Leased Property, 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. Notwithstanding any other provision of this
Lease, however, other than under Articles XIV and XV on the conditions set
forth therein, Lessee shall not be required to bear the costs of complying with
this section with respect to items classified as capital items under U.S.
generally accepted accounting principles, but shall be required to comply with
this section as to such items if and to the extent that amounts made available
therefor by Lessor from the reserve required to be established by Lessor under
Article XXXIX or are otherwise provided by Lessor.
(c) Nothing contained in this Lease and no action or
inaction by Lessor shall be construed as (i) constituting the request of
Lessor, expressed or implied, to any contractor, subcontractor, laborer,
materialman or vendor to or for the performance of any labor or services or the
furnishing of any materials or other property for the construction, alteration,
addition, repair or demolition of or to the Leased Property or any part
thereof, or (2) giving Lessee any right, power or permission to contract for or
permit the performance of any labor or services or the furnishing of any
materials or other property in such fashion as would permit the making of any
claim against Lessor in respect thereof or to make any agreement that may
create, or in any way be the basis for any right, title, interest, lien, claim
or other encumbrance upon the estate of Lessor in the Leased Property, or any
portion thereof.
(d) Lessee will, upon the expiration or prior termination
of the Term, vacate and surrender the Leased Property to Lessor in the
condition in which the Leased Property was originally received from Lessor,
except as repaired, rebuilt, restored, altered or added to as permitted or
required by the provisions of this Lease and except for ordinary wear and tear
(subject to the obligation of Lessee to maintain the Leased Property in
accordance with Section
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9.1(b) above 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 herein).
9.2 Encroachments, Restrictions, Etc.. If any of the Leased
Improvements, at any time, materially encroach upon any property, street or
right-of-way adjacent to 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 n 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 alternation 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 X. 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 X
10.1 Alterations. After receiving approval of Lessor, which
approval shall not be unreasonably withheld, 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 the 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 of
earlier termination of this Lease shall pass to and become the property of
Lessor. Nothing set forth in this Section 10.1 is intended to abrogate or
limit Lessor's obligations to make Capital Expenditures set forth in the
approved Capital Budget pursuant to Section 3.7.
10.2 Salvage. All materials which are scrapped or removed in
connection with the making of repairs required by Articles IX or X shall be or
become the property of Lessor or Lessee depending on which party is paying for
or providing the financing for such work.
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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
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.
ARTICLE XI
Liens. Subject to the provision of Article XII 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, if any, 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 which Lessee is not required to pay hereunder, (e)
subleases permitted by Article XXIII 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
Article XII, (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 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 Article
XII hereof, and (h) any liens which are the responsibility of Lessor pursuant
to the provisions of Article XXXIV of this Lease.
ARTICLE XII
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 Article XI, by appropriate legal
proceedings in good faith and with due diligence (but this shall not be deemed
or construed in any way to relieve, modify or extend Lessee's covenants to pay
or its covenants to cause to be paid any such charges at the time and in the
manner as in this Article provided), on condition, however, that such legal
proceedings shall not operate to relieve Lessee from its obligations hereunder
and shall not cause the sale or risk the loss of any portion of the Leased
Property, or any part thereof, or cause Lessor or Lessee to be in default under
any mortgage, deed of trust, security deed or other agreement encumbering the
Leased Property or any interest therein. Upon the request of Lessor, Lessee
shall either (a) provide a bond or other assurance reasonably satisfactory to
Lessor that all Claims which may be
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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 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 days of the same. Lessor agrees to join in any
such proceedings if the same be required to legally prosecute such contest of
the validity of such Claims; provided, however, that Lessor shall not thereby
be subject to any liability for the payment of any costs or expenses in
connection with any proceedings brought by Lessee; and Lessee covenants to
indemnify and save harmless Lessor from any such costs or expenses. Lessee
shall be entitled to any refund of any Claims and such charges and penalties or
interest thereon which have been paid by Lessee or paid by Lessor and for which
Lessor has been fully reimbursed. In the event that Lessee fails to pay any
Claims when due or to provide the security therefor as provided in this
paragraph and to diligently prosecute any contest of the same, Lessor may, upon
ten (10) days advance Notice to Lessee, pay such charges together with any
interest and penalties and the same shall be repayable by Lessee to Lessor as
Additional Charges at the next Payment Date provided for in this Lease;
provided, however, that should Lessor reasonably determine that the giving of
such Notice would risk loss to the Leased Property or cause damage to Lessor,
then Lessor shall 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 XIII
13.1 General Insurance Requirements.
During the Term of this Lease, Lessee shall at all times keep the
Leased Property insured with the kinds and amounts of insurance described
below. This insurance shall be written by qualified, solvent companies which
can legally write insurance in the State. The policies must name Lessor 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. Subject to Section
13.10, any loss adjustment with respect to the insurance coverages set forth in
items (a), (b) and (c), below 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:
(a) Building insurance of risks on the "Special Form" or
"All Risk Form" in an amount not less than 100% of the then full replacement
cost thereof (as defined in Section 13.3) or such other amount which is
acceptable to Lessor, and personal property insurance on the "Special Form" or
"All Risk Form" in the full amount of the replacement cost thereof;
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(b) Earthquake and flood insurance in reasonable and adequate
amounts as mutually agreed by Lessor and Lessee.
(c) Insurance for loss or damage (direct and indirect)
from steam boilers, pressure vessels or similar apparatus, now or hereafter
installed in the Facility, in the minimum amount of $5,000,000 or in such
greater amounts as are then customary or as may be reasonably requested by
Lessor from time to time;
(d) Loss of income insurance on the "Special Form" or
"All Risk Form", in the amount of the greater of (i) one year of Base Rent or
(ii) the prior Fiscal Year's Base Rent plus Percentage Rent for the benefit of
Lessor, and business income or business interruption insurance on the "Special
Form" or "All Risk Form" in amounts not less than one year of gross profit, for
the benefit of Lessee;
(e) Commercial 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 liquor law or "dram shop" liability, if liquor or alcoholic
beverages are served on the Leased Property, with respect to Lessor and Lessee;
(f) 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;
(g) 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;
(h) Worker's compensation insurance to the extent
necessary to protect Lessor and the Leased Property against Lessee's worker's
compensation claims;
(i) Vehicle liability insurance for owned, non-owned, and
hired vehicles, in the amount of $1,000,000; and
(j) Such other insurance as Lessor may reasonably request
for facilities such as the Leased Property and the operation thereof.
13.2 Responsibility for Premiums. Lessee shall keep in force the
foregoing insurance coverage at its expense.
13.3 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
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cost less such 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.
13.4 Workers' Compensation. Lessee, at its sole cost, shall at all
times maintain adequate workers' compensation insurance coverage for all
persons employed by Lessee on the Leased Property. Such workers' compensation
insurance shall be in accordance with the requirements of applicable local,
state and federal law.
13.5 Waiver of Subrogation. All insurance policies carried by
Lessor or Lessee covering the Leased Property, the Fixtures, the Facility or
Lessee's Personal Property, including, without limitation, contents, fire and
casualty insurance, shall expressly waive any right of subrogation on the part
of the insurer against the other party. 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.
13.6 Form Satisfactory, etc. All of the policies of insurance
referred to in this Article XIII shall be written in a form, with deductibles
and by insurance companies reasonably satisfactory to Lessor. Lessee shall be
permitted to acquire insurance through insurance companies which are Affiliates
of Lessee and which otherwise satisfy the requirements of this Article XIII,
provided that the terms of such insurance shall be no more favorable to such
Affiliates than would the same insurance if purchased from an independent third
party. 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, 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 thereon, and Lessee shall reimburse Lessor for
any premium or premiums paid by Lessor for the coverages required under this
Section 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(b). Each
insurer mentioned in this Article XIII 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 30 days' written notice before the policy
or policies in question shall be materially altered, allowed to expire or
canceled.
13.7 Increase in Limits. If either Lessor or Lessee at any time
deems the limits of the personal injury or property damage under the
comprehensive public liability insurance then carried to be either excessive or
insufficient, Lessor and Lessee shall endeavor in good faith to agree on the
proper and reasonable limits for such insurance to be carried and such
insurance shall thereafter be carried with the limits thus agreed on until
further change pursuant to the provisions of this Section.
13.8 Blanket Policy. Notwithstanding anything to the contrary
contained in this Article XIII, Lessee may bring the insurance provided for
herein within the coverage of a so-
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called blanket policy or policies of insurance carried and maintained by
Lessee; provided, however, that the coverage afforded to Lessor and Lessee will
not be reduced or diminished or otherwise be different from that which would
exist under a separate policy meeting all other requirements of this Lease by
reason of the use of such blanket policy of insurance, and provided further
that the requirements of this Article XIII are otherwise satisfied.
13.9 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 have 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 that Lessee has obtained any such separate
insurance or of the increasing of any of the amounts of the then existing
insurance.
13.10 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 Leased Property, any damage or destruction to
the Leased Property 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 not adjust, settle, or
compromise any insurance loss, or execute proofs of such loss, with respect to
the insurance coverages set forth in Subsections 13.1(a), 13.1(b) or 13.1(c), in
the aggregate amount of $10,000 or more, with respect to any single casualty or
other event without the prior written consent of Lessor, which consent shall not
be unreasonably withheld, delayed or conditioned.
ARTICLE XIV
14.1 Insurance Proceeds. Subject to the provisions of Section
14.6, all proceeds payable by reason of any loss or damage to the Leased
Property, or any portion thereof, and insured under any policy of insurance
required by Article XIII 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 remaining
after the completion of the restoration or reconstruction of the Leased
Property 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 shall be
retained by Lessor. All salvage resulting from any risk covered by insurance
shall belong to Lessor.
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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 XIII and the Facility thereby is rendered
Unsuitable for its Primary Intended Use, Lessee shall, at Lessee's option,
either (1) restore the Facility to substantially the same condition as existed
immediately before the damage or destruction and otherwise in accordance with
the terms of the Lease (subject to the provisions of Section 14.2(c)), 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
Facility, 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 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. If this Lease
terminates pursuant to this Section 14.2(a), the Lessee shall pay all Rent due
through the date of such termination.
(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 XIII, but the Facility is not thereby rendered
Unsuitable for its Primary Intended Use, Lessee shall restore the Facility to
substantially the same condition as existed immediately before the damage or
destruction and otherwise in accordance with the terms of the Lease, subject to
the provisions of Section 14.2(c). 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 Facility
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 (a) give Lessor written notice of
termination of the Lease (without affecting any other Leases then in effect
between Lessor and Lessee) or (b) make a written offer to Lessor 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 Lessee makes such offer and Lessor does not accept the same within ninety
(90) days after Lessee delivers its offer to Lessor, Lessee shall withdraw such
offer and, if so terminated or withdrawn, Lessee may terminate this Lease with
respect to the Leased Property without further liability hereunder other than
for accrued obligations hereunder and any other obligations which survive the
termination of this Lease and Lessor shall be entitled to retain all insurance
proceeds. If Lessee restores the Facility, the insurance proceeds shall be
paid out by Lessor from time to time for the reasonable costs of such
restoration upon satisfaction of reasonable terms and conditions specified by
Lessor, and any excess proceeds remaining after such restoration shall be paid
to Lessee.
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(c) If the estimated cost of the repair or restoration
exceeds the amount of proceeds received by Lessor and Lessee from the insurance
required under Article XIII (other than as a result of Lessee's failure to
maintain the types and amounts of insurance coverage required by Article XIII),
and Lessee indicates a desire to restore the Facility if adequate funds were
made available, then if Lessor elects to direct Lessee to make such repairs or
restoration, Lessor shall be obligated to contribute any excess amounts needed
to restore the Facility prior to the commencement of work thereon. Such
difference to be held in trust, together with any other insurance proceeds, for
application to the cost of repair and restoration, shall be paid by Lessor to
Lessee promptly after Lessor receives Lessee's written invoice therefor. In
the event Lessee indicates a desire to restore the Facility but Lessor declines
to provide the additional funds necessary to do so, each of Lessor or Lessee
shall have the right to terminate this Lease as to the Facility in question,
without in any way affecting this Lease with respect to any other Leased
Property, by giving notice to the other. Upon such termination all insurance
proceeds with respect to the Leased Property in question shall be retained by
Lessor.
(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 Facility is totally or substantially destroyed by a risk not covered by the
insurance described in Article XIII, whether or not such damage or destruction
renders the Facility Unsuitable for its Primary Intended Use, Lessee at its
option shall either (a) restore the Facility to substantially the same
condition it was in immediately before such damage or destruction and such
damage or destruction shall not terminate this Lease (subject to the provisions
of Section 14.2(c)), or (b) make a written 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 Lessor does not
accept Lessee's offer so to purchase the Leased Property within ninety (90)
days after Lessee delivers its offer to Lessor, 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.
If such damage or destruction is not material, Lessee shall restore the
Facility to substantially the same condition as existed immediately before the
damage or destruction and otherwise in accordance with the terms of the Lease,
and such damage or destruction shall not terminate the Lease.
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
provided that Lessee's obligation to make rental payments and to pay all other
charges required by this Lease shall not abate during the period required for
the applicable repair and restoration; provided that the
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Lessee shall receive a credit against such rental payments and other charges in
an amount equal to any loss of income insurance proceeds actually received by
Lessor pursuant to any loss of income insurance pursuant to Section 13.1(d).
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 Facility rendering it unsuitable for its Primary Intended
Use occurs during the last 24 months of the Term, then Lessee shall have the
right to terminate this Lease by giving written notice to Lessee 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
days after the date of such notice, without any further liability by Lessee to
Lessor other than liabilities that expressly survive a termination of this
Lease.
14.7 Waiver. Lessee hereby waives any statutory rights of
termination that may arise by reason of any damage or destruction of the
Facility that Lessor is obligated to restore or may restore under any of the
provisions of this Lease.
ARTICLE XV
15.1 Definitions.
(a) "Condemnation" means a Taking resulting from (1) the
exercise of any governmental power, whether by legal proceedings or otherwise,
by a Condemnor, and (2) a voluntary sale or transfer by Lessor to any
Condemnor, either under threat of condemnation or while legal proceedings for
condemnation are pending.
(b) "Date of Taking" means the date the Condemnor has the
right to possession of the property being condemned.
(c) "Award" means all compensation, sums or anything of
value awarded, paid or received on a total or partial Condemnation.
(d) "Condemnor" means any public or quasi-public
authority, or private corporation or individual, having the power of
Condemnation.
15.2 Parties' Rights and Obligations. If during the Term there is
any Condemnation of all or any part of the Leased Property or any interest in
this Lease, the rights and obligations of Lessor and Lessee shall be determined
by this Article XV.
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.
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Upon such date, if such Notice has been given, this Lease shall thereupon cease
and terminate and the provisions of Section 42.3 shall not apply. All Base
Rent, Percentage Rent and Additional Charges paid or payable by Lessee
hereunder shall be apportioned as of the Date of Taking, and Lessee shall
promptly pay Lessor such amounts.
15.4 Allocation of Award. The total Award made with respect to the
Leased Property or for loss of rent, or for Lessor's loss of business beyond
the Term, shall be solely the property of and payable to Lessor. Any Award
made for loss of Lessee's business during the remaining Term, if any, for the
taking of Lessee's Personal Property, or for removal and relocation expenses of
Lessee in any such proceedings shall be the sole property of and payable to
Lessee. In any Condemnation proceedings Lessor and Lessee shall each seek its
Award in conformity herewith, at its respective expense; provided, however,
neither party shall initiate, prosecute or acquiesce in any proceedings that
may result in a diminution of any Award payable to the other party.
15.5 Partial Taking. If title to less than the whole of the Leased
Property is condemned, and the Leased Property is still suitable 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, but only to the extent of any condemnation awards made available to
Lessee and any other sums advanced by Lessor pursuant to the next sentence,
restore the untaken portion of any Leased Improvements so that such Leased
Improvements constitute a complete architectural unit of the same general
character and condition (as nearly as may be possible under the circumstances)
as the Leased Improvements existing immediately prior to the Condemnation. If
the condemnation awards are not adequate to restore the Facility to that
condition, each of Lessor and Lessee shall have the right to terminate this
Lease, without in any way affecting any other leases in effect between Lessor
and Lessee, by giving Notice to the other; provided, however that, if such
termination is by Lessee, Lessor shall have the right, in its sole discretion,
to nullify the termination and keep this Lease in full force by providing,
within thirty (30) days after Lessee's Notice of termination, a Notice to
Lessee of Lessor's unconditional, legally binding obligation to be responsible
for all restoration costs in excess of the condemnation awards. If this Lease
is not terminated and Lessee restores the Facility, the condemnation awards,
and any other sums made available by Lessor as aforesaid, shall be held in
trust by Lessor and 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 awards remaining after such restoration shall be retained by
Lessor unless the partial condemnation materially impairs the operations or
financial performance of the Facility, in which latter event the award shall be
equitably apportioned between Lessor and Lessee in proportion to the then fair
market values of the respective estates and interests of Lessor and Lessee in
and to the Leased Property and under this Lease.
15.6 Temporary Taking. If the whole or any part of the Leased
Property or of Lessee's interest under this Lease is condemned by any Condemnor
for its temporary use or occupancy, this Lease shall not terminate by reason
thereof, and Lessee shall continue to pay, in the manner and at the 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
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Percentage Rent during the last three preceding Fiscal Years (or if three
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 the Lessee to be performed and observed, as
though such Condemnation had not occurred. In the event of any Condemnation as
in this Section 15.6 described, the entire amount of any Award made for such
Condemnation allocable to the Term of this Lease, whether paid by way of
damages, rent or otherwise, shall be paid to Lessee. Lessee covenants that
upon the termination of any such period of temporary use or occupancy it will,
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 of 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.
ARTICLE XVI
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 with respect to the
lease of any Leased Property under the Existing Leases as amended by this
Consolidated Lease Amendment, any leases which are Substitute Leases for such
leases, or any other leases between Lessor or an Affiliate of Lessor, as
landlord, and any Affiliate of IHC, as tenant, or any leases which are
Substitute Leases for such leases.
(b) if Lessee fails to make payment of the Base Rent,
Percentage Rent or Additional Charges within ten (10) days after written notice
from Lessor that the same has become due and payable;
(c) except as set forth in Sections 16.1(b), if either
party fails to observe or perform any other term, covenant or condition of this
Lease and such failure is not cured by such party within a period of thirty
(30) days after receipt by such party of Notice thereof from the other party,
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
such party 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 90 days after such Notice; or
(d) if Lessee, IH Company or IHC 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
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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, IH Company or IHC 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, IH Company or IHC 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 the Lessee, IH Company or IHC or of the whole or
substantially all of the assets of the Lessee, IH Company or IHC shall be
appointed in any proceedings brought by the Lessee, IH Company or IHC or if any
such receiver, trustee or liquidator shall be appointed in any proceeding
brought against Lessee, IH Company or IHC shall not be vacated or set aside or
stayed within sixty (60) days after such appointment; or
(e) if Lessee, IH Company or IHC is liquidated or
dissolved, or begins proceedings toward such liquidation or dissolution, or, if
Lessee in any manner, permits the sale or divestiture of substantially all of
its assets; or
(f) if the estate or interest of Lessee in the Leased
Property or any part thereof (i) 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 Article XII
hereof) or (ii) is transferred, assigned or conveyed except as permitted by the
terms of the Master Agreement; or
(g) if, except as a result of damage, destruction or a
partial or complete Condemnation, Lessee voluntarily ceases operations on the
Leased Property for a period in excess of thirty (30) days; or
(h) if an event of default has been declared by the
franchisor under the Franchise Agreement with respect to the Facility on the
Leased Premises as a result of any action or failure to act by the Lessee or
any other person with whom Lessee contracts for management services at the
Facility (other than a failure to complete a Capital Improvement required by
the franchisor resulting from Lessor's failure to fund the Capital Expenditure
therefor pursuant to Section 9.1(b)) and Lessee has failed, within thirty (30)
days thereafter, to cure such default by either (1) curing the underlying
default under the Franchise Agreement and paying all costs and expenses
associated therewith, or (2) obtaining at Lessee's sole cost and expense a
substitute franchise license agreement with a substitute franchisor acceptable
to Lessor, on terms and conditions acceptable to Lessor; provided, however,
that if Lessee is in good faith disputing an assertion of default by the
franchisor or is proceeding diligently to cure such default, the 30-day period
shall be extended for such period of time as Lessee continues during this
period to dispute such default in good faith or diligently proceeds to cure
such default (but in any event not longer than ninety (90) days following the
assertion of default by the franchisor) and so long as there is no period
during which the Facility is not operated pursuant to a Franchise Agreement
approved by Lessor; or
(i) the occurrence of an Event of Default under either of
the Guaranties of Lease executed by IH Company and IHC, respectively, in favor
of Lessor with respect to Lessee's obligations under this Lease.
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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 with respect to an individual
Leased Property or any other Leases identified on Exhibit A or any leases which
are Substitute Leases for such Leases, or, in the case of a breach by Lessor
under subsection (c) above, Lessee 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 with respect to the individual Leased Property with
respect to which Lessor has breached its obligations under subsection (c) above
(but not with respect to any other Leases identified on Exhibit A).
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 (c) 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 and assign to
Lessor or Lessor's designee 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 reasonable force, 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, except unless otherwise required by applicable law.
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:
(1) Without termination of Lessee's right to possession
of the Leased Property, each installment of Rent (including Percentage
Rent as determined below)
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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
(2) 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 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
Fiscal Years immediately preceding the Fiscal Year in which the termination,
re-entry or repossession takes place, or (ii) if three 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 XVI, 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 inappropriately paid 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 provision 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.
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ARTICLE XVII
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 other than a failure to complete improvements required by
the franchisor because the Lessor has not provided Lessee with funds therefor,
and fails to cure the same within the relevant time periods provided in Section
16.1, Lessor, without waiving or releasing any obligation of Lessee, and
without waiving or releasing any obligation or default, may (but shall be under
no obligation to) at any time thereafter 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 actin thereon as, in Lessor's opinion, may be necessary or
appropriate therefor. No such entry shall be deemed an eviction of Lessee.
All sums so paid by Lessor and all costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses, in each case to the extent
permitted by law) so incurred, together with a late charge thereon (to the
extent permitted by law) at the Overdue Rate from the date on which such sums
or expenses are paid or incurred by Lessor, shall be paid by Lessee to 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 XVIII
Provisions Relating to Purchase of the Leased Property. 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, (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 Section XXXIV 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 transfer taxes and
recording fees, shall be paid by Lessee. Lessor shall pay its attorney's fees.
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ARTICLE XIX
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 the Lessee under this Lease
with respect to a Leased Property at the beginning and at the end of any Fiscal
Year shall not exceed 15% of the average of the aggregate adjusted tax bases of
the Leased Property at the beginning and at the end of such Fiscal Year (the
"Personal Property Limitation"). If Lessor reasonably anticipates that the
Personal Property Limitation will be exceeded with respect to a Leased Property
for any Fiscal Year, Lessor shall notify Lessee, and Lessee either (a) shall
purchase at fair market value any personal property anticipated to be in excess
of the Personal Property Limitation ("Excess Personal Property") either from
the Lessor or a third party or (b) shall lease the Excess Personal Property
from a third party. In either case, Lessee's Rent obligation shall be
equitably adjusted. In addition, in the case of the purchase or lease of
Excess Personal Property by the Lessee from a third party, the Lessor's capital
expenditure reserve obligation pursuant to Article XXXIX shall be appropriately
decreased to reflect the reduced need for Lessor- owned personal property.
Notwithstanding anything to the contrary set forth above, Lessee shall not be
responsible in any way for determining whether or not Lessee has exceeded or
will exceed the Personal Property Limitation, and shall not be liable to Lessor
or any of its shareholders in the event that the Personal Property Limitation
is exceeded, as long as Lessee meets its obligation to acquire or lease any
Excess Personal Property as provided above. 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.
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 Equity Inns, owns, directly or indirectly, a 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 Limitation. Anything contained in this Lease
to the contrary notwithstanding, neither Lessee nor an Affiliate of the Lessee
shall acquire, directly or indirectly, a 10% or more interest in Equity Inns,
within the meaning of Section 856(d)(2)(B) of the Code, or any similar or
successor provision thereto.
19.5 Lessee Officer and Employee Limitation. Anything contained in
this Lease to the contrary notwithstanding, none of the officers or employees
of the Lessee (or any Person who furnishes or renders services to the tenants
of the Leased Property, or manages or operates the Leased Property) shall be
officers or employees of Equity Inns (or any Person who serves as an advisor to
Equity Inns). In addition, if a Person serves as both (a) a director of the
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) a director
or trustee and officer (or employee) of Equity Inns (or any Person
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who serves as an advisor of Equity Inns), that Person shall not receive any
compensation for serving as a director of the 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 and officer (or employee) of the 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 or trustee of Equity Inns (or any Person who serves
as an advisor of Equity Inns).
19.6 Payments to Affiliates of Lessee. Notwithstanding anything to
the contrary contained in this Lease, Lessee shall make no payments to
Affiliates as Gross Operating Expenses unless expressly set forth in the
Operating Budget or an approved Capital Budget or otherwise expressly agreed to
in writing by Lessor, in either case, after full written disclosure (including
information regarding competitive pricing) by Lessee to Lessor of the
affiliation and any other related information requested by Lessor.
Furthermore, Lessee shall be permitted to contract with its Affiliates for
management and other services and to pay fees for such services, provided that
such contracts and fees are disclosed in writing to Lessor and such fees shall
not be included in Gross Operating Expenses and Lessee's obligation to pay such
fees shall be subordinated to Lessee's obligation to pay Base Rent, Percentage
Rent and Additional Charges to Lessor pursuant to the terms of this Lease.
19.7 Management Agreement. Lessor shall have the right in its sole
and absolute discretion to approve or disapprove in advance any manager or
proposed manager (a "Manager") of the Facility which is not an Affiliate of
Lessee which is Controlled by IHC or its senior management, as well as any
agreement relating to the management or operation of the Facility (a
"Management Agreement") by a Manager which is not an Affiliate of Lessee and
Lessee will provide Lessor with an executed copy of any Management Agreement so
approved by Lessor. Any Management Agreement (whether with a Manager which is
an Affiliate or is not an Affiliate of Lessee) must provide that (i) upon
termination of this Lease or termination of Lessor's or Lessee's right to
possession of the Leased Property for any reason, the Management Agreement may
be terminated by Lessor without liability for any payment due or to become due
to the Manager thereunder; (ii) any management fees shall be subordinated to
payments of Rent to Lessor hereunder; and (iii) in the event Lessee is in
default, the Manager shall, at the election of Lessor and provided the Manager
continues to be paid, continues to perform under the terms of the Management
Agreement for a period not to exceed ninety (90) days. No fees or other
amounts payable by Lessee to any Manager shall excuse Lessee from its
obligations to pay Rent and other amounts payable by Lessee to Lessor
hereunder. No Management Agreement may be amended or modified in any manner
which materially affects the subordination of the management fees without the
prior written consent of Lessor.
ARTICLE XX
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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 two times 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 XXI
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 except as specifically provided in this
Lease, and, in the absence of negligence, willful misconduct or breach of this
Lease by Lessor, 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 XXII
Indemnification. Notwithstanding the existence of any insurance, and
without regard to the policy limits of any such insurance or self-insurance,
but subject to Section 16.4 and Article VIII, Lessee will protect, indemnify,
hold harmless and defend Lessor from and against all liabilities, obligations,
claims, damages, penalties, causes of action, costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses), to the extent
permitted by law, imposed upon or incurred by or asserted against Lessor
Indemnified Parties by reason of: (a) any accident, injury to or death of
persons or loss of or damage to property occurring on or about the Leased
Property or adjoining sidewalks, including without limitation any claims under
liquor liability, "dram shop" or similar laws, (b) any past, present or future
use, misuse, non-use, condition, management, maintenance or repair by Lessee or
any of its agents, employees or invitees of the Leased Property or Lessee's
Personal Property or any litigation, proceeding or claim by governmental
entities or other third parties to which a Lessor Indemnified Party is made a
party or participant related to such use, misuse, non-use, condition,
management, maintenance, or repair thereof by Lessee or any of its agents,
employees or invitees, including any failure of Lessee or any of its agents,
employees or invitees to perform any obligations under this Lease or imposed by
applicable law (other than arising out of a Condemnation proceedings), (c) any
Impositions that are the obligations of
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Lessee pursuant to the applicable provisions of this Lease, (d) any failure on
the part of Lessee to perform or comply with any of the terms of this Lease,
and (e) the 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.
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; (b) any failure on the part of Lessor to perform or comply with any of
the terms of this Lease; (c) any Impositions that are the obligations of Lessor
pursuant to the applicable provisions of this Lease; (d) any liability arising
under the Franchise Agreement as a result of inadequate funding by Lessor for
Capital Expenditures; (e) liabilities or obligations arising under the
Americans with Disabilities Act (except to the extent relating to alterations
performed by or actions taken by Lessee subsequent to the Commencement Date of
this Lease); or (f) contractual liabilities to third parties not affiliated
with Lessee (including franchisors) relating to or arising out of, the
termination of this Lease by reason of an Event of Default by Lessor prior to
the expiration of any such third party contract.
To the extent that neither of the foregoing paragraphs applies to a
particular liability, action, claim, damage, cost or expense arising out of
operation of the Leased Property, such liability, action, claim, damage, cost
or expense shall be paid as a Gross Operating Expense.
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 day 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. Nothing herein
shall be construed as indemnifying a Lessor Indemnified Party against its own
grossly negligent acts or omissions or willful misconduct.
Lessee's or Lessor's liability for a breach of the provisions of this
Article shall survive any termination of this Lease.
ARTICLE XXIII
23.1 Subletting and Assignment. Subject to the provisions of
Article XIX and Section 23.2 and any other express conditions or limitations
set forth herein, Lessee may, but only with the consent of Lessor, which
consent may 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
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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. Any other assignment or subletting
shall require the express written consent of Lessor, which consent may be
withheld, delayed or conditioned in Lessor's sole discretion. In the case of a
subletting, the sublessee shall comply with the provisions of Section 23.2, and
in the case of an assignment, the assignee shall assume in writing and agree to
keep and perform all of the terms of this Lease on the apart 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 without the consent of Lessor to (a) any of its Affiliates
which are Controlled by IHC or its then senior management, (b) any entity under
the Control of then senior management of IHC or Crossroads Hospitality Company,
L.L.C. or any successor to either of such entities, or (c) any party providing
a loan to IHC or any of its affiliates (a "Lender") provided the assignment is
for the purpose of granting a collateral interest in Lessee's economic interest
in the Leases or in any future leases between Lessor and Lessee, to the Lender,
or in the economic interest of any Affiliate of IHC in the Lessee, to secure
such loan; provided that any such assignee (other than a Lender) assumes in
writing and agrees to keep and perform all of the terms of the Lease on the
part of the 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. Any transfer of a
controlling interest (i.e. more than a 50% interest) in Lessee's General
Partner shall be subject to the same limitations as are applicable to a direct
assignment of this Lease pursuant to this Section 23.1.
23.2 Attornment. Lessee shall insert in each sublease permitted
under Section 23.1 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 hereunder will, at Lessor's option, attorn to
Lessor and waive any right the sublessee may have to terminate the sublease or
to surrender possession thereunder as a result of the termination of this
Lease, and (c) if the sublessee receives a written Notice from Lessor or
Lessor's assignees, if any, stating that an uncured Event of Default exists
under this Lease, the sublessee shall thereafter be obligated to pay all
rentals accruing under said sublease directly to the party giving such Notice,
or as such party may direct. All rentals received form the sublessee by Lessor
or Lessor's assignees, if any, as the case may be,m shall be credited against
the amounts owing by Lessee under this Lease.
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ARTICLE XXIV
Officer's Certificates; Financial Statements;
Lessor's Estoppel Certificates and Covenants.
(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 hereunder
by Lessor or Lessee, and such other information as may be reasonably requested
by Lessor. Any such certificate furnished pursuant to this Section may be
relied upon by Lessor, any lender and any prospective purchaser of the Leased
Property.
(b) Throughout the Term, Lessee will furnish to Lessor all financial
statements and financial and operating information, and access to Lessee's
books and records as are required pursuant to Section 1.4 of the Master
Agreement.
(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.
ARTICLE XXV
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 XXVI
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.
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ARTICLE XXVII
Remedies Cumulative. To the extent permitted by law, each legal,
equitable or contractual right, power and remedy of Lessor or Lessee now or
hereafter provided either in this Lease or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power
and remedy and the exercise or beginning of the exercise by Lessor or Lessee of
any one or more of such rights, powers and remedies shall not preclude the
simultaneous or subsequent exercise by Lessor or Lessee of any or all of such
other rights, powers and remedies.
ARTICLE XXVIII
Acceptance of Surrender. No surrender to Lessor of this Lease or of
the Leased Property or any part thereof, or of any interest therein, shall be
valid or effective unless agreed to and accepted in writing by Lessor and no act
by Lessor or any representative or agent of Lessor, other than such a written
acceptance by Lessor, shall constitute an acceptance of any such surrender.
ARTICLE XXIX
No Merger of Title. There shall be no merger of this Lease or of the
leasehold estate created hereby by reason of the fact that the same person or
entity may acquire, own or hold, directly or indirectly: (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (b) the fee estate in the Leased Property.
ARTICLE XXX
30.1 Conveyance by Lessor. Subject to the limitations set forth in
the Master Agreement, 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.
30.2 Other Interests. This Lease and Lessee's interest hereunder
shall at all times be subject and subordinate to the lien and security title of
any deeds to secure debt, deeds of trust, mortgages, or other interests
heretofore or hereafter granted by Lessor in order to finance or refinance 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
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Mortgage currently in place or hereafter granted, such subordination is
conditioned upon delivery to Lessee of a commercially reasonable subordination,
non-disturbance and attornment agreement which provides that, provided that
Lessee is not then in Default under this Lease, Lessee shall not be disturbed
in its possession of the Leased Property hereunder following a foreclosure of
such Mortgage, that the holder of such Mortgage or the purchaser at a
foreclosure shall perform all obligations of Lessor under this Lease (but not
obligations which accrued before such holder or purchaser at foreclosure
obtained title to the Leased Property), and that Lessee shall attorn to and
recognize such purchaser as its landlord. 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. Lessee
hereby waives and releases any claim it might have against Lessor or any other
party for any actions lawfully taken by the Holder of any Mortgage.
ARTICLE XXXI
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 or
hereafter consented to by Lessee or provided for herein. 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.
ARTICLE XXXII
Notices. All notices, demands, requests, consents approvals and
other communications ("Notice" or "Notices") hereunder shall be in writing and
personally served or mailed (by registered or certified mail, return receipt
requested and postage prepaid), addressed to Lessor at its principal office, as
indicated on the signature page hereof, Attention: President, and addressed to
Lessee as indicated on the signature page hereof, Attention: General Partner, 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
mail shall be complete at the time of deposit in the U.S. Mail system, but any
prescribed period of Notice and any right or duty to do any act or make any
response within any prescribed period or on a date certain after the service of
such Notice given by mail shall be extended five days.
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ARTICLE XXXIII
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) appoint a second person as appraiser on its behalf.
The appraisers thus appointed, each of whom must be a member of the American
Institute of Real Estate Appraisers (or any successor organization thereto)
with at least five years experience in the State appraising property 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 appraisers are appointed and if the difference between the amounts so
determined does not exceed 5% of the lesser of such amounts, then the Fair
Market Value or Fair Market Rental shall be an amount equal to 50% of the sum
of the amounts so determined. If the difference between the amounts so
determined exceeds 5% of the lesser of such amounts, then such two appraisers
shall have 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 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 50% of the sum of the remaining two
determinations shall be final and binding upon Lessor and Lessee as the Fair
Market Value or Fair Market Rental of the Leased Property, as the case may be.
This provision for determining by appraisal shall be specifically enforceable
to the extent such remedy is available under applicable law, and any
determination hereunder shall be final and binding upon the parties except as
otherwise provided by applicable law. Lessor and Lessee shall each pay the
fees and expenses of the appraiser appointed by it and each shall pay the fees
and expenses of the appraiser appointed by it and each shall pay one-half of
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.
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ARTICLE XXXIV
34.1 Lessor May Grant Mortgages. Without the consent of Lessee,
Lessor may, subject to the terms and conditions set forth below in this Section
XXXIV, from time to time, directly or indirectly, create or otherwise cause to
exist any Mortgage upon the Leased Property, or any portion thereof or interest
therein, whether to secure any borrowing or other means of financing or
refinancing. Any such Mortgage shall contain the agreement by the holder of the
Mortgage that it will (1) give Lessee the same notice, if any, given to Lessor
of any default or acceleration of any obligation secured by any such Mortgage or
any sale in foreclosure under such Mortgage, (2) permit Lessee to cure any such
default on Lessor's behalf within the applicable cure period (in which event,
Lessee shall be reimbursed by Lessor for any and all costs incurred in effecting
such cure, including without limitation out-of-pocket costs incurred to effect
any such cure (including reasonable attorneys' fees)), (3) permit Lessee to
appear by its representative and to bid at any sale in foreclosure made with
respect to any such Mortgage and (4) agree not to disturb Lessee's possession of
the Leased Property hereunder following the foreclosure of the Mortgage, as
provided in Section 30.2 hereof.
34.2 Lessee's Right to Cure. Subject to the provisions of Section
34.3, 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 payments next accruing or coming
due. The rights of Lessee hereunder to cure and to secure payment from Lessor
in accordance with this Section 34.2 shall survive the termination of this Lease
with respect to the Leased Property.
34.3 Breach by Lessor. If there exists an Event of Default with
respect to Lessor pursuant to Section 16.1 hereof, Lessee, without waiving or
releasing any obligations hereunder, and in addition to all other remedies
available to Lessee at law or in equity or pursuant to Section 16.1, 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 Article XVIII.
34.4 Grant of Easements or Imposition of Restrictions. Lessor may not
grant easements or impose restrictions with respect to any Leased Property
without the express written consent of Lessee, which consent may not be
unreasonably withheld.
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ARTICLE XXXV
35.1 Miscellaneous. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, Lessee or Lessor
arising prior to any date of termination of this Lease shall survive such
termination. If any term or provision of this Lease or any application thereof
is invalid or unenforceable, the remainder of this Lease and any other 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.
35.2 Transition Procedures. Upon the expiration or termination of the
Term of this Lease, for whatever reason, Lessor and Lessee shall do the
following (and the provisions of this Section 35.2 shall survive the expiration
or termination of this Agreement until they have been fully performed) and, in
general, shall cooperate in good faith to effect an orderly transition of the
management lease or of the Facility.
(a) Transfer of Licenses. Upon the expiration or earlier
termination of the Term, Lessee shall use its best efforts (i) to transfer to
Lessor or Lessor's nominee or assignee all Franchise Agreements, licenses,
operating permits and other governmental authorizations and all contracts,
including contracts with governmental or quasi-governmental entities, that may
be necessary for the operation of the Facility (collectively, "Licenses"), or
(ii) if such transfer is prohibited by law or Lessor otherwise elects, to
cooperate with Lessor or Lessor's nominee in connection with the processing by
Lessor or Lessor's nominee of any applications for, all Licenses; 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 Facility then in Lessee's name.
(c) Books and Records. All books and records for the
Facility kept by Lessee pursuant to Section 3.7 shall be delivered promptly to
Lessor or Lessor's nominee, simultaneously with the termination of this
Agreement, 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) Remittance. Lessee shall remit to Lessor or Lessor's
nominee, simultaneously with the termination of this Agreement, all funds
remaining, if any, after payment of all accrued Gross Operating Expenses, and
other amounts due Lessee and after
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deducting the costs of any scheduled repair, replacement, or refurbishment of
Furniture and Equipment with respect to which deposits have been made.
35.3 Waiver of Presentment, etc. Lessee waives all presentments,
demands for payment and for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, and notices of acceptance and waives
all notices of the existence, creation, or incurring of new or additional
obligations, except as expressly granted herein.
ARTICLE XXXVI
Memorandum of Lease. Lessor and Lessee shall promptly upon the
request of either enter into a short form memorandum of this Lease, in form
suitable for recording under the laws of the State in which reference to this
Lease, and all options contained herein, shall be made. Lessee shall pay all
costs and expenses of recording such memorandum of this Lease.
ARTICLE XXXVII
Lessor's Possible Purchase of Assets of Lessee. Effective on not less
than ninety (90) days prior Notice given at any time within 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 (and provided that such early
termination is not the result of Lessee's Default hereunder), Lessee, upon
reasonable written notice to Lessor, shall have the option to require that
Lessor purchase all (but not less than all) of the on-site inventory and
supplies of Lessee, relating to the Leased Property, 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 XXXIII, 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 XXXVIII
Compliance with Franchise Agreement. Lessee shall comply in every
respect with the provisions of the Franchise Agreement (other than requirements
with respect to funding Capital Improvements which shall be the responsibility
of Lessor) so as to avoid any default thereunder during the term of this
Agreement. Lessee shall not terminate, extend, modify or enter into any
Franchise Agreement without in each instance first obtaining Lessor's prior
written consent. Lessor and Lessee agree to cooperate fully with each other in
the event it becomes necessary to obtain a Franchise Agreement extension or
modification or a new franchise for the Leased Property. If the Franchise
Agreement expires prior to the expiration of the Lease Term, Lessee, with the
prior approval of Lessor, shall endeavor to obtain a new
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or extended franchise license. Lessee shall be the franchisee under any such
franchise agreement. In the event of a change in the franchise for the Leased
Property, Lessor and Lessee shall promptly negotiate in good faith appropriate
and mutually acceptable modifications to the Rent terms for such Leased
Property under this Lease. In the event that Lessor and Lessee are unable to
agree, within sixty (60) days after such change in the franchise, that
modifications to the Rent terms are warranted by the change in franchise or to
agree on appropriate modifications to the Rent terms either Party may elect to
submit the matter to arbitration pursuant to Article XLI hereof. During the
pendency of the negotiations and/or arbitration, Lessee shall continue to pay
Rent in accordance with the terms of the Lease, with possible retroactive
adjustments based on the outcome of the negotiations and/or arbitration. To
the extent required by the Franchise Agreement, Lessor shall secure its
obligations to make capital expenditures or pay real property taxes by either
depositing the required funds in escrow with an escrow agent acceptable to the
franchisor or by dedicating for such purpose a portion of Lessor's line of
credit either by issuance of a letter of credit in favor of the franchisor or
in some other manner acceptable to the franchisor. If upon any expiration or
earlier termination of the Lease (other than upon an Event of Default by
Lessee), a Franchise Agreement remains in effect, or would but for such
expiration or termination remain in effect, Lessor shall indemnify, defend and
hold Lessee harmless with respect to the obligations and liabilities arising
thereunder after the date of expiration or termination of this Lease.
ARTICLE XXXIX
Capital Expenditures and Reserves. Lessor agrees to establish a
reserve account together with all interest earned thereon for each Facility
(the "Capital Expenditure Reserve Account") to fund Capital Expenditures in an
amount equal to four percent (4%) of annual Room Revenues from each Facility,
net of amounts actually expended for Capital Expenditures for such Facility
during any Fiscal Year. Any funds escrowed pursuant to a Franchise Agreement
or Mortgage and designated for Capital Expenditures shall be deemed to be part
of the Capital Expenditure Reserve Account for the applicable Leased Property.
Any funds escrowed pursuant to a Mortgage may be pledged as security for such
Mortgage, which pledge may provide that, in the event of a default by Lessor
under the Mortgage, the escrowed funds may be applied to the balance of the
loan secured by the Mortgage; provided, however, that in the event the holder
of the Mortgage exercises such remedy, Lessor shall be obligated immediately to
deposit into the Capital Expenditure Reserve Account any amount which may then
be necessary to bring the funds in such account (together with any funds
remaining in any other accounts of Lessor dedicated for such purpose) up to the
aggregate level required by this Article XXXIX. The Capital Expenditure
Reserve Account for each Facility may be commingled by Lessor with similar
accounts of Lessor with respect to other hotel properties leased by Lessor to
Lessee. Upon request by Lessee not more frequently than twice a year, Lessor
shall provide Lessee a written report stating the amounts held in such Capital
Expenditure Reserve Account with respect to each Leased Property and amounts
disbursed out of said account with respect to each Leased Property during the
prior Fiscal Year. Upon written request by Lessee to Lessor stating the
specific use to be made and the reasonable approval thereof by Lessor, the
funds in the Capital Expenditure Reserve Account shall be
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made available by Lessor for use by Lessee for Capital Expenditures in
connection with the Primary Intended Use as set forth in the approved Capital
Budget; 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 the Lessor to recognize income other than "rents from real
property" as defined in Section 856(d) of the Code. Lessor's obligation to
fund the Capital Expenditure Reserve Account shall be cumulative and any
Capital Expenditures with respect to a Facility made in a Fiscal Year
(including Fiscal Years preceding the Term of this Lease) in excess of four
percent (4%) of Gross Revenues on a cumulative basis shall be credited to the
Capital Expenditure Reserve Account for that Facility. All amounts in the
Capital Expenditure Reserve Account are the property of Lessor. Lessee shall
have no interest in the Capital Expenditure Reserve Account other than with
respect to the funding of amounts in a Capital Budget approved by Lessor.
ARTICLE XL
Catastrophic Market Changes. In the event that a Catastrophic Market
Change (as hereinafter defined) occurs with respect to the market in which a
Leased Property is located, Lessor agrees, upon written request from Lessee, to
consider in good faith marketing such Leased Property for sale to a third
party; provided, however, that the Lessor shall have no legally binding
obligation to market or sell the Leased Property. In the event that such sale
is consummated, this Lease shall be terminated upon the date of the transfer
and, thereupon, neither party shall be further obligated to the other under
this Lease, including, without limitation, any obligation by Lessor to pay
Lessee liquidated damages upon such sale under Section 42.3 and any obligation
by Lessee to pay Rent to Lessor beyond the date of transfer. For purposes of
this Article XL, "Catastrophic Market Change" means a specific event or series
of specific events (and not general economic conditions), not caused in whole
or in part by Lessee or Lessee's Affiliates, which is reasonably deemed by
Lessee to be permanent or long-term and which is expected to reduce annual
gross revenues at the Leased Property to a level at which such annual gross
revenues will be less than the sum of Rent plus Gross Operating Expenses.
ARTICLE XLI
Arbitration. Except as otherwise expressly provided, in the event a
dispute should arise concerning the interpretation or application of any of the
provisions of this Agreement, the parties agree that the dispute shall be
submitted to arbitration of the American Arbitration Association under its then
prevailing rules, except as modified by this Article XLI. The Arbitration
Tribunal shall be formed of three (3) Arbitrators each of which shall have at
least five (5) years' experience in hotel operation, management or ownership,
one (1) to be appointed by each of Lessor and Lessee and the third (3rd) to be
appointed by the American Arbitration Association. The arbitration shall take
place in the county in which the Leased Property is located and shall be
conducted in the English language. The arbitration award shall be final and
binding upon the parties hereto and subject to no appeal, and shall deal with
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XLII the question of costs of arbitration and all matters related thereto.
Judgment upon the award rendered may be entered into any court having
jurisdiction, or applications may be made to such court for an order of
enforcement. Any arbitration under this Article XLI shall be submitted within
three (3) months following the notice which triggers the arbitration, and shall
be concluded within one (1) year thereafter. In the event either of the
foregoing deadlines are missed, either party may proceed to commence a court
proceeding to resolve the dispute.
ARTICLE XLIII
43.1 Right of First Offer. In the event that Lessor desires to sell
its interest in the Leased Property, Lessor shall first offer to Lessee by
written Notice (the "Offer Notice") the opportunity to acquire the Leased
Property at the price at which Lessor intends to offer the Leased Property (the
"Offer Price"). In the event that Lessee elects in writing, within fifteen (15)
days following receipt of such Offer Notice, to acquire the Leased Property at
the Offer Price, Lessor shall be obligated to sell the Leased Property to Lessee
or its nominee at the Offer Price, and the closing of said sale shall be
consummated within fifteen (15) days following Lessee's election in accordance
with the provisions of Article XVIII. Upon such sale, this Lease shall
terminate with respect to such Leased Property as if such date were the fixed
expiration date set forth in this Lease, without any further obligation of
either party to the other, other than any accrued obligations hereunder or any
other obligations that expressly survive the termination of this Lease. The
provisions of this Article XLII shall not apply to any sale, transfer or
conveyance by Lessor of any interest in the Leased Property to any Affiliate of
Lessor.
43.2 Sale of Leased Property by Lessor. In the event Lessee does
not elect to acquire the Leased Property in accordance with the preceding
paragraph, Lessor shall be permitted to sell the Leased Property to a third
party at a price equal to or greater than ninety-five percent (95%) of the
Offer Price. In calculating the 95% as stated herein, only the stated purchase
price shall be relevant and no adjustments offered to Lessee shall be
considered in respect of the other terms or conditions of the proposed sale.
If such sale is not consummated within one hundred ninety-five (195) days after
the delivery of the Offer Notice, Lessor shall be obligated to repeat the
procedure set forth in the preceding paragraph. If such sale is consummated,
this Lease shall terminate as of the closing date of such sale.
43.3 Termination of Lease. Upon termination of this Lease pursuant
to Section 42.2, this Lease shall be of no further force and effect except as
to any obligations existing as of such date that survive termination of the
Lease, and all Rent shall be adjusted as of such date. As compensation for the
early termination of Lessee's leasehold estate hereunder, Lessor shall, subject
to the provisions of Section 42.4 below, either (a) pay to Lessee an amount
equal to the Net Present Value (as hereinafter defined), as of the closing of
the sale, of the cash flow to Lessee from the operations of the Leased Property
being sold (after payment of all Rent hereunder) (the "Termination Payment") or
(b) offer to lease to the Lessee one or more substitute hotel facilities
pursuant to one or more leases ("Substitute Leases") that would create for
Lessee leasehold estates that have an aggregate Fair Market Value of no less
than the Fair
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Market Value of the then remaining term of the Lease with respect to the Leased
Property. If Lessor elects and complies with the option described in (b)
above, regardless of whether Lessee enters into any of the Substitute Leases,
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 within three (3) months upon the Fair Market Value of the then
remaining term of this Lease or one or more Substitute Leases, such value(s)
shall be determined by appraisal using the appraisal procedure set forth in
Article XXXIII. The "Net Present Value" of the cash flow to Lessee from the
operations of the Leased Property shall be calculated by multiplying (a) the
average annual EBITDA (as hereinafter defined) to Lessee net of all Rent for
the three (3) Fiscal Years ended immediately prior to the date of sale, times
(b) the number of Fiscal Years (or portions thereof) remaining in the Lease
Term, times (c) one hundred percent (100%) plus the average annual percentage
increase in the CPI during the three (3) Fiscal Years ended immediately prior
to the date of sale, and (d) discounting the product of (a) times (b) times (c)
above by the Base Rate plus one percent. "EBITDA" means net earnings before
interest, taxes, depreciation and amortization.
43.4 New Leases. Notwithstanding the foregoing, in the event that
Lessor sells the Leased Property to a third party pursuant to this Article XLII
at any time after the first anniversary but prior to the fifth anniversary of
the Commencement Date of this Lease, Lessor shall not have the option of
tendering to Lessee a Substitute Lease but shall be obligated to make a
Termination Payment to Lessee unless Lessor has offered at least five (5) new
leases to Lessee or any Affiliate of Lessee for hotel properties not previously
owned, leased or operated by Lessee, during the preceding twelve month period.
Over time, the foregoing requirement shall be met if Lessor has offered an
average of at least five (5) new leases per twelve-month period following the
Commencement Date of this Lease, measured on a cumulative basis. The foregoing
restriction on Lessor's right to tender a Substitute Lease shall terminate
after the fifth anniversary of the Commencement Date of this Lease.
Notwithstanding the foregoing, Lessor may defer paying Lessee any Termination
Payments until the fifth anniversary of the Commencement Date of the Lease. At
that time, a determination shall be made whether or not the net number of new
leases offered by Lessor to Lessee or any Affiliate of Lessee over the five (5)
year period (i.e. the total number of new leases offered by Lessor to Lessee or
any Affiliate of Lessee less the number of leases between Lessor and Lessee or
Affiliates of Lessee which are terminated during that period) equals or exceeds
twenty-five (25). If the net number of new leases offered by Lessor to Lessee
or any Affiliate of Lessee during the aforementioned five (5) year period
equals or exceeds twenty-five (25), no Termination Payment shall be payable
with respect to the termination of this Lease. To the extent that the net
number of new leases offered by Lessor to Lessee or any Affiliate of Lessee
over the aforementioned five (5) year period is less than twenty-five (25),
Termination Payments shall be due with respect to the number of leases by which
such net number is less than twenty-five (25), together with interest thereon
at the Base Rate from the date when such Termination Payments would have been
due and payable but for the foregoing deferral provisions. Notwithstanding the
foregoing, the amount of any Termination Payment otherwise due and owing
hereunder shall be reduced by the Fair Market Value of any hotel management
contracts referred to Lessee or its Affiliates by Lessor or its Affiliates
during the five (5) year period.
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ARTICLE XLIV
Change in REIT Status or REIT Regulations. In the event that ENNS
terminates its status as a real estate investment trust ("REIT") for tax
purposes, or in the event that the Internal Revenue Code provisions are amended
so that REITs are permitted to operate hotels, Lessor may elect to terminate
this Lease. In the event that this Lease is so terminated, Lessor shall be
obligated to pay to Lessee the Termination Payment calculated as set forth in
Article XLII hereof.
ARTICLE XLV
45.1 Lease Renewal. At least ninety (90) days but not more than
one hundred eighty (180) days prior to the expiration of the Term of this
Lease, and provided that (a) no Event of Default nor any event which with the
giving of notice or passage of time or both, would constitute an Event of
Default has occurred and is then continuing; and (b) Lessee has met the Renewal
Performance Standard (as described in Section 44.2) with respect to a
particular Leased Property, Lessor shall submit to Lessee a proposal for the
terms under which it is prepared to extend this Lease with respect to such
Leased Property for an additional five (5) year period. Thereafter, Lessor and
Lessee shall endeavor in good faith to negotiate such extension. In the event
that Lessor and Lessee fail to reach agreement on the terms of such extension
with respect to such Leased Property at least sixty (60) days prior to the
expiration of the Term of this Lease, Lessor shall be permitted to commence
negotiations with third parties which are not Affiliates of Equity Inns or
Lessor with respect to the lease of such Leased Property upon the expiration of
the Term of this Lease, provided that Lessor may not enter into a lease with
any such third party with respect to such Leased Property on terms
substantially more favorable to such third party than those last offered to
Lessee. Notwithstanding anything to the contrary set forth above, Lessee may
renew this Lease with respect to some but not all of the Leased Properties,
provided that Lessee has met the Renewal Performance Standard with respect to
those Leased Properties with respect to which it intends to renew this Lease.
45.2 Renewal Performance Standard. The Renewal Performance
Standard with respect to each Leased Property shall be based upon such Leased
Property's performance when measured against its competitive set within its
market as documented in the annual business plan for such Leased Property
taking into consideration changes in supply. Prior to March 1, of each Fiscal
Year, Lessee shall deliver to Lessor a Competitive Set Analysis for each Leased
Property in the form of Exhibit G hereto. The Renewal Performance Standard
shall be considered satisfied with respect to an individual Leased Property if
during the first fourteen (14) Fiscal Years of the Term of this Lease: the
year-to-year REVPAR growth for the Leased Property has met or exceeded the
year-to-year average REVPAR growth for the hotels in such Leased Property's
competitive set for at least eight (8) Fiscal Years. In the event that the
Leased Property fails to rate in the top one-third (1/3) of its competitive set
in any Fiscal Year when measured in accordance with the criteria set forth on
Exhibit G hereto, such Fiscal Year shall be excluded from the computation of
the Renewal Performance Standard, and the total number of Fiscal Years during
which the Leased Property must meet the Renewal Performance
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Standard shall be reduced by one (1) for each such disqualified Fiscal Year.
If, at any time, Lessor disagrees with the results of Lessee's Competitive Set
Analysis with respect to one or more of the Leased Properties, Lessor may
submit any such dispute to arbitration in accordance with Article XLI, provided
Lessor provides written notice of such arbitration to Lessee within sixty (60)
days of the delivery by Lessee to Lessor of such Competitive Set Analysis.
IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
<TABLE>
<S> <C>
LESSOR
Signed and acknowledged EQUITY INNS PARTNERSHIP, L.P., a
in the presence of: Tennessee limited partnership
(as to both)
By: Equity Inns Trust, general partner
By: /s/ Phillip H. McNeill
- ------------------------------- ---------------------------------
Printed Name: Printed Name: Phillip H. McNeill
------------------ ----------------------------------
Title: CEO
-------------------------------
- ------------------------------- By:
------------------------------------
Printed Name: Printed Name:
------------------ ---------------------------
Title:
----------------------------------
LESSEE
Signed and acknowledged CROSSROADS/MEMPHIS PARTNERSHIP,
in the presence of: L.P., a Delaware limited partnership
(as to both)
By: Crossroads/Memphis Company, L.L.C.,
general partner
By: /s/ Kevin P. Kilkeary
- -------------------------------- -----------------------------------
Printed Name Printed Name: /s/ Kevin P. Kilkeary
-------------------- ---------------------------
Title: Vice President
-------------------------------
- -------------------------------- By:
------------------------------------
Printed Name Printed Name:
------------------- ---------------------------
Title:
---------------------------------
</TABLE>
[SIGNATURES CONTINUED ON NEXT PAGE]
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<TABLE>
<S> <C>
STATE COLLEGE LESSEE
Signed and acknowledged STATE COLLEGE BBQ/CONCORD
in the presence of: JOINT VENTURE
By: STATE COLLEGE BBQ LIMITED
PARTNERSHIP, joint venture partner
/s/ Thomas J. James By: BBQ Restaurants, Inc., its
- ------------------------------- general partner
Printed Name: Thomas J. James
By: /s/ Jon Self
- ------------------------------- -------------------------------------
Printed Name: Printed Name: Jon Self
------------------ -----------------------
Title: President
------------------------------
By: Crossroads/Memphis Partnership, L.P.,
joint venture partner
/s/ Lula M. Horn By: Crossroads/Memphis Company
- ----------------------------- L.L.C., its general partner
Printed Name: Lula M. Horn
By: /s/ Kevin P. Kilkeary
- ------------------------------- ------------------------------
Printed Name: Printed Name: Kevin P. Kilkeary
----------------- ----------------------
Title: Vice President
----------------------------
</TABLE>
65
<PAGE> 66
State of Pennsylvania )
) SS.
County of Allegheny )
BEFORE ME, a Notary Public in and for said State and County,
personally appeared Phillip H. McNeill, Sr. and ________________________, the
C.E.O. and ________________________, respectively, of Equity Inns Trust,
general partner of EQUITY INNS PARTNERSHIP, L.P., a Tennessee limited
partnership, who acknowledged that they executed the foregoing instrument for
and on behalf of said general partner, that the same was their own free act and
deed, individually and as such officers, and the free act and deed of the
partnership.
IN TESTIMONY WHEREOF, I have hereunto set my hand and seal
this 14th day of November, 1996.
/s/ Jamie Speidel
-----------------
Notary Public
My commission expires: May 8, 2000
State of Pennsylvania )
) SS.
County of Allegheny )
BEFORE ME, a Notary Public in and for said State and County,
personally appeared Kevin P. Kilkeary and ________________________, the
____________________________ and ________________________, respectively, of
Crossroads/Memphis Company, L.L.C., general partner of CROSSROADS/MEMPHIS
PARTNERSHIP, L.P., a Delaware limited partnership, who acknowledged that they
executed the foregoing instrument for and on behalf of said general partner,
that the same was their own free act and deed, individually and as such
officers, and the free act and deed of the partnership.
IN TESTIMONY WHEREOF, I have hereunto set my hand and seal
this 14th day of November, 1996.
/s/ Jamie Speidel
-----------------
Notary Public
My commission expires: May 8, 2000
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<PAGE> 67
State of Ohio )
) SS.
County of Franklin )
BEFORE ME, a Notary Public in and for said State and County,
personally appeared Jon Self, the President of BBQ Restaurants, Inc., general
partner of STATE COLLEGE BBQ LIMITED PARTNERSHIP, joint venture partner of
STATE COLLEGE BBQ/CONCORD JOINT VENTURE, who acknowledged that he executed the
foregoing instrument for and on behalf of said general partner, that the same
was his own free act and deed, individually and as such officer, and the free
act and deed of the partnership.
IN TESTIMONY WHEREOF, I have hereunto set my hand and seal
this 13th day of November, 1996.
/s/ Tammy O'Porter-Johnson
--------------------------
Notary Public-State of Ohio
My Commission Expires May 23, 1998
State of Pennsylvania )
) SS.
County of Allegheny )
BEFORE ME, a Notary Public in and for said State and County,
personally appeared Kevin P. Kilkeary, the ____________________________ of
Crossroads/Memphis Company, L.L.C., general partner of CROSSROADS/MEMPHIS
PARTNERSHIP, L.P., joint venture partner of STATE COLLEGE BBQ/CONCORD JOINT
VENTURE, who acknowledged that he executed the foregoing instrument for and on
behalf of said general partner, that the same was his own free act and deed,
individually and as such officer, and the free act and deed of the partnership.
IN TESTIMONY WHEREOF, I have hereunto set my hand and seal
this 14th day of November, 1996.
/s/ Jamie Speidel
-----------------
Notary Public
My commission expires: May 8, 2000
67
<PAGE> 1
EXHIBIT 10.2
GUARANTY OF LEASE
THIS GUARANTY, dated as of November 15, 1996, by INTERSTATE HOTELS
COMPANY, a Pennsylvania corporation (the "Guarantor"), for the benefit of
EQUITY INNS PARTNERSHIP, L.P., a Tennessee limited partnership (the "Lessor"),
recites and provides:
RECITALS
Simultaneously with the execution hereof, the Lessor and
Crossroads/Memphis Partnership, L.P., a Delaware limited partnership (the
"Lessee"), have executed a certain Consolidated Lease Amendment of even date
herewith (the "Lease") for the lease of various parcels of land, together with
all appurtenances thereto, improvements thereon and intangible and tangible
personal property, and more particularly described in the Lease (the "Leased
Premises").
The sole general partner of the Lessee is an indirect wholly owned
subsidiary of the Guarantor. As a condition to executing the Lease, the Lessor
has required the Guarantor to guarantee the prompt and full payment of rent and
all other amounts payable to the Lessor under the Lease, and the prompt and
complete performance of all covenants contained in the Lease on the Lessee's
part to be performed. Because of the substantial economic benefits accruing to
the Guarantor by virtue of the Lessor leasing the Leased Premises to the
Lessee, the Guarantor desires to guarantee such payment and performance, all on
the following terms and conditions.
GUARANTY
NOW, THEREFORE, for and in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Guarantor hereby represents, warrants and agrees as
follows, intending to be legally bound:
ARTICLE I.
REPRESENTATIONS
AND WARRANTIES OF THE GUARANTOR
The Guarantor makes the following representations and warranties, upon
each of which the Lessor, its successors and assigns are entitled to rely and
have relied, and the Guarantor will endeavor in good faith to cause such
representations and warranties to remain true and correct at all times during
the term of this Guaranty as if then made.
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<PAGE> 2
Section 1.1. No Conflicts; Defaults. The execution and delivery
of this Guaranty and the performance by the Guarantor of its obligations
hereunder and the consummation of the transactions contemplated herein are
within the corporate powers of the Guarantor and will not conflict with or
constitute a breach of the Guarantor's articles of incorporation or by-laws.
Except for consents and approvals obtained by Guarantor, true, correct and
complete copies of which have been delivered by the Guarantor to the Lessor
prior to the execution and delivery of this Guaranty, neither the execution,
acknowledgment and delivery of, nor the performance of its obligations under,
this Guaranty, will conflict with or violate, or constitute a default or
require any consent or waiver under, any material provision of any mortgage,
deed of trust, evidence of indebtedness, order, decree or agreement to which
the Guarantor is a party or by which it or any substantial part of its property
is bound.
Section 1.2. Enforceability. This Guaranty is a legal, valid and
binding instrument enforceable against the Guarantor in accordance with its
terms, as the same may be limited by applicable bankruptcy, insolvency,
reorganization and similar laws of general application relating to or affecting
creditors' rights generally and general remedies of equity.
Section 1.3. Representations and Warranties. The Guarantor has
made its own independent investigation of the financial condition and affairs
of the Lessee and has reviewed the Lease, including the rent terms thereof,
prior to entering into this Guaranty and will continue to make its appraisal of
the creditworthiness of the Lessee, and in entering into this Guaranty
Guarantor has not relied upon any representation of the Lessor as to the
financial condition, operation or creditworthiness of the Lessee or with
respect to any other matter. The Guarantor agrees that the Lessor shall have
no duty or responsibility now or hereafter to make any investigation or
appraisal of the Lessee on behalf of the Guarantor or to provide the Guarantor
with any credit or other information which may come to the Lessor's attention.
Section 1.4. Litigation; Violations of Law. There are no actions,
suits or proceedings of a material nature pending or overtly threatened against
or affecting the Guarantor, and no event has occurred (including, without
limitation, the execution, acknowledgment and delivery of this Guaranty and the
consummation of the transactions contemplated hereby) which will violate, be in
conflict with, result in the breach of or constitute (with or without notice or
the passage of time, or both) a default under any judicial decision, statute,
ruling, direction, rule, regulation, permit, certificate or ordinance of any
governmental authority in any way applicable to the Guarantor. The Guarantor
is not in default with respect to any judgment, order, writ, injunction, decree
or demand of any court, arbitrator,
2
<PAGE> 3
administrative agency or other governmental or quasi-governmental authority.
Section 1.5. Information. All information filed by the Guarantor
with the Securities and Exchange Commission is true and complete in all
respects and fully and accurately presents the financial condition of the
Guarantor as of the dates thereof; such information does not omit any statement
of material fact that would make such information misleading; and no material
adverse change has occurred in the financial condition reflected therein or the
Guarantor's business since the dates thereof.
Section 1.6. Insolvency Matters. No bankruptcy, reorganization,
arrangement, readjustment of debt, insolvency or other proceeding has been
commenced or threatened by or against the Guarantor or consented to or
acquiesced in by the Guarantor, and no judgment has been entered against the
Guarantor which has not been satisfied or otherwise discharged.
Section 1.7. Organization. The Guarantor is a corporation duly
organized, validly existing and subsisting under the laws of the Commonwealth
of Pennsylvania and has the power to enter into this Guaranty and to perform
its obligations hereunder and by proper corporate action has duly authorized
the execution and delivery of this Guaranty and the performance of its
obligations hereunder.
Section 1.8. Taxes. All material tax returns and reports required
by law to be filed by the Guarantor have been duly filed, and no taxes,
assessments, contributions, fees or other governmental charges upon it or any
of its assets or income which are due and payable thereon are delinquent,
except to the extent such taxes, assessments, contributions, fees or charges
are being contested in good faith and by proper proceedings and against which
appropriate reserves are being maintained.
Section 1.9. Cross Default. The Guarantor acknowledges and agrees
that a default under the Lease with respect to one of the Leased Premises shall
constitute a default under the Lease with respect to all of the Leased
Premises, and the Lease may be cross defaulted with other leases guaranteed by
the Guarantor.
ARTICLE II
COVENANTS OF THE GUARANTOR
Section 2.1. Definitions.
(a) The term "Indebtedness" shall include all amounts due
and to become due from the Lessee to the Lessor under the Lease, whether such
amounts are direct or indirect, fixed or contingent, or liquidated or
unliquidated obligations of the
3
<PAGE> 4
Lessee including, without limitation, base rent, percentage rent, additional
charges, indemnification payments, damages, interest, service, finance and
other charges, the Lessor's fees, impositions required to be paid by the
Lessee, and other sums, charges, costs of collection, attorneys' fees and
expenses, other expenses of the Lessor due it under the Lease and amounts
advanced by the Lessor to discharge obligations of the Lessee, whether such
amounts are from time to time reduced, thereafter increased or entirely
extinguished and thereafter reincurred.
(b) The term "Obligations" shall mean all obligations,
agreements, covenants, conditions and liabilities of the Lessee set forth in
the Lease.
(c) The term "Lessee," as used herein, shall mean any
successor in interest, assignee, or transferee of Lessee's interest under the
Lease.
Section 2.2. Guaranty of Payment and Performance. The Guarantor
hereby unconditionally and absolutely guarantees to the Lessor the prompt and
full payment of all Indebtedness and the prompt and complete performance of all
Obligations of the Lessee to the Lessor, under and in accordance with the terms
and conditions hereof.
Section 2.3. Nature of Guaranty. This is a guaranty of payment
and not merely of collection.
Section 2.4. Enforcement of Guaranty in First Instance. The
Lessor may collect the Indebtedness, or any part thereof, from the Guarantor
without first exercising its rights against the Lessee, any other guarantor or
any collateral that the Lessor may hold or have access to, and the Guarantor
hereby waives any right to require the Lessor to attempt, by bringing any
action or proceeding against Lessee or otherwise, to collect the Indebtedness
or any part thereof from the Lessee or any other guarantor or to attempt to
realize upon any collateral that the Lessor may hold or have access to before
enforcing the obligations of the Guarantor hereunder.
Section 2.5. Lessor's Election to Perform Obligations. After a
default by the Lessee in the performance of one or more of the Obligations and
the expiration of any notice and cure period expressly provided for in the
Lease, the Lessor, at its option, may elect to perform or cause to be performed
any or all of the Obligations without first exercising its rights against the
Lessee, any other guarantor or any collateral that the Lessor may hold or have
access to, and the Guarantor hereby waives any right to require the Lessor to
attempt, by bringing any action or proceeding against Lessee or otherwise, to
collect the Indebtedness or any part thereof from the Lessee or any other
guarantor or to attempt to realize upon any collateral that the
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Lessor may hold or have access to before performing or causing the performance
of any of the Obligations or enforcing the obligations of the Guarantor
hereunder.
Section 2.6. No Subrogation or Contribution. Until all of the
Indebtedness has been paid in full and all of the Obligations have been duly
and punctually performed to the satisfaction of the Lessor, the Guarantor shall
not be subrogated to any right of the Lessor against the Lessee, any other
guarantor or any collateral, and any moneys, property or other consideration
received, after a default by the Lessee under the Lease, by the Guarantor from
the Lessee prior to payment in full of the Indebtedness and prior to the
performance by the Lessee of all of the Obligations shall be held in trust for
the Lessor and shall be paid or transferred to the Lessor upon demand therefor.
The Guarantor agrees that it will not assert any right of contribution against
any other guarantor of the Indebtedness, whether the obligations of such other
guarantor are evidenced by this Guaranty or other agreement, until such time as
all of the Indebtedness has been paid in full to the Lessor and all of the
Obligations have been performed.
Section 2.7. Waiver of Defenses.
(a) The Guarantor hereby: (i) waives notice of
acceptance of this Guaranty; (ii) waives presentment, demand, notice of
dishonor, protest and notice of protest; (iii) agrees that the Indebtedness or
any part thereof may be renewed, extended, accelerated, modified or compromised
and the Obligations may be modified or delegated and that any collateral or
other security held for the payment of the Indebtedness or the performance of
the Obligations may be released, exchanged, sold, applied or otherwise dealt
with by the Lessor without notice to the Guarantor and without thereby
releasing the Guarantor from any obligation under this Guaranty; (iv) waives
notice of the financial condition or other status of the Lessee and any other
party obligated for the payment of the Indebtedness or the performance of the
Obligations; and (v) waives the benefit of the homestead exemption as to its
obligations set forth herein. This Guaranty is intended to be a full, complete
and perfect guaranty and indemnity to the Lessor to the extent of and for any
Indebtedness and Obligations and to be valid and enforceable without other or
further notice to the Guarantor. The liability of the Guarantor is absolute
and unconditional and is not conditioned or contingent upon any other party
signing this Guaranty or the obtaining of any security upon any of the
Indebtedness or the obtaining of the guaranty of any other party upon any of
the Indebtedness, Obligations or any other matter.
(b) The Guarantor further acknowledges that this Guaranty
and the Guarantor's obligations under this Guaranty are and shall at all times
be valid and enforceable irrespective of
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(i) any assignment of sublease of the Lease, (ii) any other agreements or
circumstances of any nature whatsoever which might otherwise constitute a
defense (other than a defense of payment) to this Guaranty and the obligations
of the Guarantor under this Guaranty or the obligations of the Lessee or any
other person or party relating to this Guaranty or the obligations of
Guarantors hereunder or otherwise with respect to the Lease, or (iii) the
filing of a petition or the commencement of a case with respect to the Lessee
or the Guarantor under Title 11 of the United States Code, as now constituted
or hereafter amended (the "Bankruptcy Code"), or under any other applicable
Federal or state bankruptcy, insolvency or similar law, or any modification,
impairment, abatement, reduction, release, limitation, restructure,
reinstatement or cure, in whole or in part, of the Obligations pursuant to an
order by a bankruptcy court or other court of competent jurisdiction in any
action, case or proceeding brought under the Bankruptcy Code or under any other
applicable Federal or state bankruptcy, insolvency or similar law (including,
but not limited to any stay imposed pursuant to section 362 of the Bankruptcy
Code), it being expressly acknowledged and agreed by the Guarantor that if any
such modification, impairment, abatement, reduction, release, limitation,
restructure, reinstatement or cure, in whole or part, is so ordered in any such
action, case or proceeding, the Guarantor's obligations under this Guaranty
will nevertheless continue to be determined as if such order had not been
issued (i.e., as if the Lessee were still obligated to pay the Indebtedness and
to perform and observe the Obligations strictly in accordance with the terms,
covenants and provisions of the Lease as in existence prior to the issuance of
any such order).
(c) The Guarantor absolutely, unconditionally and
irrevocably waives any and all right to assert any defense, setoff,
counterclaim or crossclaim of any nature whatsoever with respect to this
Guaranty or the obligations of the Lessee or any other person or party relating
to this Guaranty or the obligations of the Guarantor hereunder or otherwise
with respect to the Lease in any action, case or proceeding brought by the
Lessor to enforce the obligations of the Guarantor under this Guaranty
(provided, however, that the foregoing provisions of this sentence shall not be
deemed a waiver of the right of the Guarantor to assert any compulsory
counterclaim in any such action, case or proceeding brought by the Lessor in
any state court if such counterclaim is compelled under local law or rule or
procedure, or in a court of the United States, nor shall the foregoing
provisions of this sentence be deemed a waiver of the right of the Guarantor to
assert any claim which would otherwise constitute a defense, setoff,
counterclaim or crossclaim of any nature whatsoever against the Lessor in any
separate action, case or proceeding brought by the Guarantor against the
Lessor).
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(d) The Guarantor acknowledges that no oral or other
agreements, understandings, representations or warranties exist with respect to
this Guaranty or with respect to the obligations of the Guarantor under this
Guaranty, except those specifically set forth in this Guaranty, and that this
Guaranty sets forth the entire agreement and understanding of the Guarantor and
the Lessor.
Section 2.8. Releases. The Lessor shall have the right to waive
its rights against and to release any guarantor or other person or entity that
is liable for payment of the Indebtedness or performance of the Obligations
without affecting (a) the enforceability of this Guaranty against the Guarantor
or (b) any other right or remedy that the Lessor may have against the
Guarantor.
Section 2.9. Costs and Expenses.
(a) The Guarantor hereby agrees to pay to the Lessor all
costs and expenses, including court costs and reasonable attorneys' fees and
expenses, incurred by the Lessor in seeking advice with regard to, or in
seeking to enforce, any of the obligations of the Guarantor hereunder.
(b) The Guarantor will defend, indemnify and hold
harmless the Lessor and its employees, agents, officers and directors, from and
against any and all claims, demands, penalties, causes of action, fines,
liabilities, settlements, damages, costs or expenses of whatever kind or
nature, known or unknown, foreseen or unforeseen, contingent or otherwise
(including, without limitation, reasonable attorneys' fees and expenses, court
costs and litigation expenses) arising out of or in any way related to any
failure by the Lessee to promptly and fully pay the Indebtedness or fully
perform, observe and comply with any of the Obligations.
Section 2.10. Bankruptcy. In the event that any part of the
Indebtedness is collected by the Lessor and because of bankruptcy or other laws
relating to debtors' relief such payment is set aside as a voidable preference
or fraudulent conveyance or the Lessor is otherwise required to repay all or
any portion of the amount so collected to the Lessee or to any trustee,
receiver or otherwise, then this Guaranty shall continue in full force and
effect with regard to such sums or, if previously terminated, shall be
reinstated without further act or instrument and shall thereafter remain in
full force and effect, as though such payment had not been made or such
termination had not occurred (as the case may be), and the amount or amounts so
repaid shall become part of the Indebtedness and shall be guaranteed hereby.
In the event an action, case or proceeding is filed or commenced under the
Bankruptcy Code or under any other applicable Federal or state bankruptcy,
insolvency or similar law in regard to the
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Lessee or an action, case or proceeding is otherwise commenced for the benefit
of the creditors of the Lessee, this Guaranty shall at all times thereafter
remain effective in regard to any payments or other transfers of assets to the
Lessor received from or on behalf of the Lessee under or in respect of the
Indebtedness which are held voidable on the grounds of preference, fraudulent
conveyance or otherwise, whether or not the Indebtedness has been paid in full
or whether or not any or all of the Obligations have been discharged or
released.
Section 2.11. Application of Proceeds. All payments, whether
voluntary or involuntary, received from the Lessee or on account of the
Indebtedness from any other source, including income from and amounts realized
on security and appropriated bank balances, may be applied by the Lessor toward
the payment of the Indebtedness and in such order of application as the Lessor
may from time to time elect. All payments shall be conclusively presumed to
have been made by the Lessee and no payments shall operate to reduce the
liability of the Guarantor hereunder, unless at the time such payments are
made, express written notice is served upon the Lessor that such payments are
made by the Guarantor in reduction of the liability hereunder.
Section 2.12. Required Notifications. The Guarantor will promptly
inform the Lessor in writing upon the commencement of any proceedings by or
against the Guarantor under any applicable bankruptcy, reorganization,
liquidation, insolvency or other similar law now or hereafter in effect or of
any proceeding in which a receiver, liquidator, trustee or other similar
official is sought to be appointed for the Guarantor or any of its assets.
Section 2.13. Survivability. The obligations of the Guarantor
contained herein shall survive the expiration or earlier termination of the
Lease until payment in full of the Indebtedness and complete performance of all
of the Obligations. Further, no expiration or termination of the Lease, by
operation of law or otherwise, and no re-entry, repossession or removal
pursuant to the Lease or otherwise, and no re-letting of the premises under the
Lease shall relieve the Guarantor of its liabilities and obligations which
arise during the term of the Lease, all of which shall survive such expiration,
termination, re-entry, repossession, removal or re-letting. The obligations of
the Guarantor contained herein shall survive any assignment of the Lease or
sublease of the Leased Premises and any changes in control of the Lessee or
Lessor.
Section 2.14. Guarantor's Assumption of Lessee's Obligations. In
the event of the rejection or disaffirmance of the Lease by the Lessee or the
Lessee's receiver or trustee pursuant to any law affecting creditor's rights,
the Guarantor will, and does hereby (without the necessity of any further
agreement or act), assume all obligations and liabilities of the
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Lessee under or arising out of the Lease, to the same extent as if the
Guarantor had been originally named the lessee under the Lease, and there had
been no such rejection or disaffirmance; the Guarantor will confirm such
assumption in writing at the request of the Lessor, upon or after such
rejection or disaffirmance. The Guarantor, upon such assumption, shall have
all rights of the Lessee under the Lease and shall be entitled to a new lease
on all of the terms and conditions of the Lease with respect to the unexpired
portion of the Lease (to the extent permitted by law). The Guarantor will
execute and deliver such documents, as the Lessor may from time to time
reasonably require to evidence such assumption, to confirm this Guaranty and to
certify that the Guarantor is not in default hereunder.
Section 2.15. Subordination.
(a) Upon any distribution of assets of the Guarantor upon
any dissolution, winding up, total or partial liquidation or reorganization of
the Guarantor, whether voluntary or involuntary, in bankruptcy, insolvency,
receivership or a similar proceeding or upon assignment for the benefit of
creditors or any marshalling of assets or liabilities (a "Triggering Event"),
the obligations of the Guarantor under this Guaranty are subordinated and
junior to all obligations (the "Debt Obligations," and to the extent not
excluded pursuant to the next succeeding sentence, the "Senior Debt") of the
Guarantor under (a) the Credit Agreement dated as of June 25, 1996 among the
Guarantor, the lenders thereto and Credit Lyonnais New York Branch, as
administrative agent (as amended, supplemented, restated or otherwise modified
and as in effect from time to time, the "Designated Credit Agreement"), and (b)
all other credit agreements entered into by Guarantor and any lenders (who may
or may not be parties to the Designated Credit Agreement) (the "Other Credit
Agreements" and together with the Designated Credit Agreement, the "Credit
Agreements"), including, in all cases, the obligation to pay interest on loans
thereunder after any bankruptcy filing by the Guarantor (whether or not an
allowable claim), and under all "Credit Documents" as defined in the Designated
Credit Agreement or under any of the Other Credit Agreements. Notwithstanding
the foregoing, the Debt Obligations will not constitute Senior Debt to which
this Guaranty is subordinate (a) if constituting principal indebtedness of the
Guarantor ("Principal Indebtedness") to the extent that, after giving effect
thereto, at both the time of the incurrence thereof and entering into of a
Credit Agreement (or amendment thereto) providing for same, Principal
Indebtedness exceeds the greater of (x) $595,000,000 or (y) 45% of the
Guarantor's Total Market Capitalization (as hereinafter defined) and (b) if not
constituting Principal Indebtedness, to the extent relating to any Principal
Indebtedness described in clause (a) above.
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(b) Senior Debt shall not include any Principal
Indebtedness constituting pay-in-kind interest, unaccreted principal under any
original issue discount obligation or similar instrument or any other
negatively amortized indebtedness. To the extent any Principal Indebtedness
constitutes Senior Debt at the time of the issuance thereof or the entering
into of an Other Credit Agreement (or of an amendment thereto) providing for
such Principal Indebtedness, then such Principal Indebtedness (and all other
related Debt Obligations) shall at all times constitute Senior Debt. In
addition, to the extent that the Principal Indebtedness under the Designated
Credit Agreement does not exceed $595,000,000 then all obligations under the
Designated Credit Agreement shall in all events constitute Senior Debt.
(c) Guarantor's "Total Market Capitalization," at any
point in time, shall mean the sum of (A) the product of the total number of
shares of Guarantor's common stock outstanding times the closing price of the
Guarantor's common stock on the date of determination as reported on the
principal exchange or trading system on which such common stock is then listed
or traded plus (B) the aggregate principal amount of all outstanding debt of
Guarantor and its subsidiaries. Total Market Capitalization shall be
determined by the Guarantor in good faith in its reasonable discretion after
consultation with the Lessor, at the time of any incurrence of, and/or any
entering into of, or amendment to, any Credit Agreement providing for Principal
Indebtedness, as elected by the Guarantor and notified in writing to Lessor
promptly upon such determination.
(d) Upon any Triggering Event, (i) the holders of all
Senior Debt will first be entitled to receive payment in full in cash or cash
equivalents before the Lessor is entitled to receive any payment hereunder and
(ii) any payment or distribution of assets of the Guarantor of any kind or
character from any source, whether in cash, property or securities to which the
Lessor would be entitled (by set-off or otherwise), except for those
subordination provisions, will be paid by the liquidating trustee or agent or
other person making such a payment or distribution directly to the holders of
such Senior Debt or their representative to the extent necessary to make
payment in full (or have such payment duly provided for) on all such Senior
Debt remaining unpaid, after giving effect to any concurrent payment or
distribution to the holders of such Senior Debt.
(e) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Guarantor shall be received by the
Lessor at a time after the occurrence of a Triggering Event, such payment or
distribution shall be paid over to the agent(s) for the Senior Debt or to a
court, for application to the payment of all such Senior Debt remaining unpaid,
to the extent necessary to pay or to provide for the payment of all such Senior
Debt in full in cash or cash
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equivalents after giving effect to any concurrent payment or distribution to
the holders of such Senior Debt, the Lessor not being responsible for such
application by such agent(s) or court.
(f) No provision contained in this section will affect
the obligation of the Guarantor, which is absolute and unconditional, to pay
when due the Indebtedness and perform the Debt Obligations.
Section 2.16. Existence, etc. So long as any Indebtedness or
Obligations are outstanding, the Guarantor: (a) shall maintain its corporate
existence and shall not dissolve; (b) shall not sell all or substantially all
of its assets unless it shall receive reasonably equivalent value therefor; and
(c) shall not merge with or into another corporation or entity unless such
surviving corporation or entity is obligated to perform the obligations of the
Guarantor hereunder, assumes such obligations in a writing reasonably
satisfactory to Lessor and has a net worth at least equal to that of the
Guarantor immediately prior to the merger.
ARTICLE III
EVENTS OF DEFAULT; REMEDIES
Section 2.1. Events of Default. Any of the following occurrences
or acts shall constitute an "Event of Default" under this Guaranty:
(a) If the Guarantor shall fail to pay any sum, as and
when required to be paid hereunder following any applicable grace period.
(b) If any representation or warranty made by the
Guarantor contained in this Guaranty or any officer's certificate, notice,
certificate, demand or request delivered hereunder or in connection herewith
shall be false or misleading in any material respect as of the date made or
deemed to have been made.
(c) If the Guarantor fails to perform or observe in any
material respect any covenant, term or condition contained in this Guaranty
(other than a failure described in subparagraphs 3.1(a) or (b) above or an
Event of Default described below) and such failure continues for more than 30
days after the Guarantor's receipt of notice thereof from the Lessor; provided,
however, that in the case of any such failure which is susceptible of cure but
not within the applicable time period, provided any delay in exercising the
Lessor's remedies hereunder beyond such applicable time period could not have a
material adverse effect on the rights of the Lessor hereunder, no Event of
Default shall be deemed to occur so long as the Guarantor
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promptly commences to cure such default within the applicable time period and
thereafter diligently and continuously pursues such cure to completion within
120 days.
(d) If the Guarantor or the Lessee shall file a petition
in bankruptcy or for reorganization or for an arrangement pursuant to any
federal or state law, or shall be adjudicated a bankrupt or become insolvent or
shall make a general 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 proposing the adjudication of the Guarantor or the 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 the
Guarantor or the Lessee shall consent to or acquiesce in the filing thereof or
such petition shall not be discharged within 60 days after the filing thereof.
(e) If a receiver, trustee or liquidator of the Guarantor
or the Lessee, or of all or substantially all of the assets of the Guarantor or
the Lessee, shall be appointed in any proceeding brought by the Guarantor or
the Lessee, or if any such receiver, trustee or liquidator shall be appointed
in any proceeding brought against the Guarantor or the Lessee and shall not be
discharged within 60 days after such appointment, or if the Guarantor or the
Lessee shall consent to or acquiesce in such appointment.
Section 2.2. Remedies. Upon the occurrence of an Event of
Default, the Lessor shall have all the rights and remedies available at law or
in equity for purposes of enforcing its rights under this Guaranty.
ARTICLE IV
MISCELLANEOUS PROVISIONS
Section 2.1. Governing Law. This Guaranty, the rights of the
Lessor and the obligations of the Guarantor shall be governed by and construed
in accordance with the laws of the State of Tennessee (excluding, however,
those dealing with conflicts of law) except to the extent that such laws are
preempted by United States federal law, in which case such federal law shall
govern.
Section 2.2. Successors and Assigns. The representations,
warranties, covenants and conditions set forth herein shall be binding upon the
administrators, representatives and permitted successors and assigns of the
Guarantor and shall inure to the benefit of the Lessor, its successors and
assigns.
Section 2.3. Notices. All notices, requests, demands and other
communications with respect hereto shall be in writing and
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shall be delivered by hand, sent prepaid by Federal Express (or a comparable
overnight delivery service) or sent by United States mail, certified, postage
prepaid, return receipt requested, at the following addresses:
If to the Lessor, to -
Equity Inns Partnership, L.P.
c/o Equity Inns, Inc.
4735 Spottswood Avenue
Suite 102
Memphis, Tennessee 38117
Attention: Chairman of the Board
With a copy to -
Hunton & Williams
2000 Riverview Tower
900 South Gay Street
Knoxville, Tennessee 37902
Attention: David C. Wright, Esquire
If to the Guarantor, to -
Interstate Hotels Company
Foster Plaza Ten
680 Anderson Drive
Pittsburgh, Pennsylvania 15220-8126
Attn: General Counsel
With a copy to -
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Zachary T. Paris, Esquire
Any notice, request, demand or other communication delivered or sent in the
manner aforesaid shall be deemed given or made, as the case may be, upon the
earlier of the date it is actually received or (a) on the business day after
the day on which it is delivered by hand, (b) on the business day after the day
on which it is properly delivered to Federal Express (or a comparable overnight
delivery service) or (c) on the third business day after the day on which it is
deposited in the United States mail. Any addressee may change its address by
notifying the other addressees of the new address in any manner permitted by
this Section.
Section 2.4. Captions; Gender; Number. The captions hereof are
for convenience of reference only and shall neither
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limit nor enlarge the provisions hereof. All pronouns used herein, whether
used in the masculine, feminine or neuter gender, shall include all other
genders. The singular shall include the plural and vice versa unless the
context requires otherwise.
Section 2.5. Severability. If any provision of this Guaranty, or
the application thereof to any person or circumstance, shall to any extent be
invalid or unenforceable, the remainder of the provisions hereof, or the
application thereof to other persons or circumstances, shall not be affected
thereby, and each provision hereof shall be valid and enforceable to the
fullest extent permitted by law.
Section 2.6. Amendments. No provision of this Guaranty may be
amended, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the amendment, waiver,
discharge or termination is sought. No subsequent guaranty by the Guarantor or
any other person with respect to the Indebtedness or the Obligations shall be
deemed in lieu of or to supersede this Guaranty, but such guaranty shall be
construed as an additional or supplementary guaranty unless otherwise expressly
provided for in such subsequent guaranty. Furthermore, this Guaranty shall be
construed to be an additional or supplementary guaranty to any guaranty
previously executed by the Guarantor or any other guarantor of the Indebtedness
or the Obligations and shall not terminate any prior guaranty unless such
termination is expressly provided for herein.
Section 2.7. Service of Process. The Guarantor hereby agrees that
any suit, action or proceeding arising out of or relating to this Guaranty may
be instituted in the United States District Court for the Western District of
Tennessee, at the option of the Lessor; and the Guarantor hereby waives any
objection which it may have to the laying of the venue of any such suit, action
or proceeding and irrevocably submits to the jurisdiction of either such court
in any such suit, action or proceeding.
Section 2.8. Joint and Several Obligations. The obligations of
the Guarantor hereunder shall be joint and several with respect to (a) the
Lessee, (b) Interstate Hotels Corporation under a Guaranty of Lease of even
date herewith and (c) each and any other guarantor or obligor of the Lessee's
obligations under the Lease which guarantor or obligor is an affiliate of the
Guarantor, and the Lessor may demand and exercise its rights and remedies
hereunder and/or thereunder against any such guarantors or obligors separately,
or all or any of them together, at Lessor's option.
Section 2.9. Third Party Beneficiary. Equity Inns, Inc., a
Tennessee corporation and parent company of the general partner
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of the Lessor, shall be deemed a third party beneficiary of this Guaranty and
shall have the right to enforce the terms of this Guaranty to the same extent
as the Lessor.
Section 2.10. Counterparts. This Guaranty may be executed in
several counterparts, each of which shall be an original and all of which
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of the
date first above written.
INTERSTATE HOTELS COMPANY, a
Pennsylvania corporation
By: /s/ Robert L. Froman
--------------------------------
Name: Robert L. Froman
------------------------------
Title: Vice President
-----------------------------
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EXHIBIT 10.3
GUARANTY OF LEASE
THIS GUARANTY, dated as of November 15, 1996, by INTERSTATE HOTELS
CORPORATION, a Pennsylvania corporation (the "Guarantor"), for the benefit of
EQUITY INNS PARTNERSHIP, L.P., a Tennessee limited partnership (the "Lessor"),
recites and provides:
RECITALS
Simultaneously with the execution hereof, the Lessor and
Crossroads/Memphis Partnership, L.P., a Delaware limited partnership (the
"Lessee"), have executed a certain Consolidated Lease Amendment of even date
herewith (the "Lease") for the lease of various parcels of land, together with
all appurtenances thereto, improvements thereon and intangible and tangible
personal property, and more particularly described in the Lease (the "Leased
Premises").
The sole general partner of the Lessee is an indirect wholly owned
subsidiary of the Guarantor. As a condition to executing the Lease, the Lessor
has required the Guarantor to guarantee the prompt and full payment of rent and
all other amounts payable to the Lessor under the Lease, and the prompt and
complete performance of all covenants contained in the Lease on the Lessee's
part to be performed. Because of the substantial economic benefits accruing to
the Guarantor by virtue of the Lessor leasing the Leased Premises to the
Lessee, the Guarantor desires to guarantee such payment and performance, all on
the following terms and conditions.
GUARANTY
NOW, THEREFORE, for and in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Guarantor hereby represents, warrants and agrees as
follows, intending to be legally bound:
ARTICLE I
REPRESENTATIONS
AND WARRANTIES OF THE GUARANTOR
The Guarantor makes the following representations and warranties, upon
each of which the Lessor, its successors and assigns are entitled to rely and
have relied, and the Guarantor will endeavor in good faith to cause such
representations and warranties to remain true and correct at all times during
the term of this Guaranty as if then made.
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Section 1.1. No Conflicts; Defaults. The execution and delivery
of this Guaranty and the performance by the Guarantor of its obligations
hereunder and the consummation of the transactions contemplated herein are
within the corporate powers of the Guarantor and will not conflict with or
constitute a breach of the Guarantor's articles of incorporation or by-laws.
Except for consents and approvals obtained by Guarantor, true, correct and
complete copies of which have been delivered by the Guarantor to the Lessor
prior to the execution and delivery of this Guaranty, neither the execution,
acknowledgment and delivery of, nor the performance of its obligations under,
this Guaranty, will conflict with or violate, or constitute a default or
require any consent or waiver under, any material provision of any mortgage,
deed of trust, evidence of indebtedness, order, decree or agreement to which
the Guarantor is a party or by which it or any substantial part of its property
is bound.
Section 1.2. Enforceability. This Guaranty is a legal, valid and
binding instrument enforceable against the Guarantor in accordance with its
terms, as the same may be limited by applicable bankruptcy, insolvency,
reorganization and similar laws of general application relating to or affecting
creditors' rights generally and general remedies of equity.
Section 1.3. Representations and Warranties. The Guarantor has
made its own independent investigation of the financial condition and affairs
of the Lessee and has reviewed the Lease, including the rent terms thereof,
prior to entering into this Guaranty and will continue to make its appraisal of
the creditworthiness of the Lessee, and in entering into this Guaranty
Guarantor has not relied upon any representation of the Lessor as to the
financial condition, operation or creditworthiness of the Lessee or with
respect to any other matter. The Guarantor agrees that the Lessor shall have
no duty or responsibility now or hereafter to make any investigation or
appraisal of the Lessee on behalf of the Guarantor or to provide the Guarantor
with any credit or other information which may come to the Lessor's attention.
Section 1.4. Litigation; Violations of Law. There are no actions,
suits or proceedings of a material nature pending or overtly threatened against
or affecting the Guarantor, and no event has occurred (including, without
limitation, the execution, acknowledgment and delivery of this Guaranty and the
consummation of the transactions contemplated hereby) which will violate, be in
conflict with, result in the breach of or constitute (with or without notice or
the passage of time, or both) a default under any judicial decision, statute,
ruling, direction, rule, regulation, permit, certificate or ordinance of any
governmental authority in any way applicable to the Guarantor. The Guarantor
is not in default with respect to any judgment, order, writ, injunction, decree
or demand of any court, arbitrator,
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administrative agency or other governmental or quasi-governmental authority.
Section 1.5. Information. All information provided by the
Guarantor to the Lessor is true and complete in all respects and fully and
accurately presents the financial condition of the Guarantor as of the dates
thereof; such information does not omit any statement of material fact that
would make such information misleading; and no material adverse change has
occurred in the financial condition reflected therein or the Guarantor's
business since the dates thereof.
Section 1.6. Insolvency Matters. No bankruptcy, reorganization,
arrangement, readjustment of debt, insolvency or other proceeding has been
commenced or threatened by or against the Guarantor or consented to or
acquiesced in by the Guarantor, and no judgment has been entered against the
Guarantor which has not been satisfied or otherwise discharged.
Section 1.7. Organization. The Guarantor is a corporation duly
organized, validly existing and subsisting under the laws of the Commonwealth
of Pennsylvania and has the power to enter into this Guaranty and to perform
its obligations hereunder and by proper corporate action has duly authorized
the execution and delivery of this Guaranty and the performance of its
obligations hereunder.
Section 1.8. Taxes. All material tax returns and reports required
by law to be filed by the Guarantor have been duly filed, and no taxes,
assessments, contributions, fees or other governmental charges upon it or any
of its assets or income which are due and payable thereon are delinquent,
except to the extent such taxes, assessments, contributions, fees or charges
are being contested in good faith and by proper proceedings and against which
appropriate reserves are being maintained.
Section 1.9. Cross Default. The Guarantor acknowledges and agrees
that a default under the Lease with respect to one of the Leased Premises shall
constitute a default under the Lease with respect to all of the Leased
Premises, and the Lease may be cross defaulted with other leases guaranteed by
the Guarantor.
ARTICLE II
COVENANTS OF THE GUARANTOR
Section 2.1. Definitions.
(a) The term "Indebtedness" shall include all amounts due
and to become due from the Lessee to the Lessor under the Lease, whether such
amounts are direct or indirect, fixed or contingent, or liquidated or
unliquidated obligations of the
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Lessee including, without limitation, base rent, percentage rent, additional
charges, indemnification payments, damages, interest, service, finance and
other charges, the Lessor's fees, impositions required to be paid by the
Lessee, and other sums, charges, costs of collection, attorneys' fees and
expenses, other expenses of the Lessor due it under the Lease and amounts
advanced by the Lessor to discharge obligations of the Lessee, whether such
amounts are from time to time reduced, thereafter increased or entirely
extinguished and thereafter reincurred.
(b) The term "Obligations" shall mean all obligations,
agreements, covenants, conditions and liabilities of the Lessee set forth in
the Lease.
(c) The term "Lessee," as used herein, shall mean any
successor in interest, assignee, or transferee of Lessee's interest under the
Lease.
Section 2.2. Guaranty of Payment and Performance. The Guarantor
hereby unconditionally and absolutely guarantees to the Lessor the prompt and
full payment of all Indebtedness and the prompt and complete performance of all
Obligations of the Lessee to the Lessor, under and in accordance with the terms
and conditions hereof.
Section 2.3. Nature of Guaranty. This is a guaranty of payment
and not merely of collection.
Section 2.4. Enforcement of Guaranty in First Instance. The
Lessor may collect the Indebtedness, or any part thereof, from the Guarantor
without first exercising its rights against the Lessee, any other guarantor or
any collateral that the Lessor may hold or have access to, and the Guarantor
hereby waives any right to require the Lessor to attempt, by bringing any
action or proceeding against Lessee or otherwise, to collect the Indebtedness
or any part thereof from the Lessee or any other guarantor or to attempt to
realize upon any collateral that the Lessor may hold or have access to before
enforcing the obligations of the Guarantor hereunder.
Section 2.5. Lessor's Election to Perform Obligations. After a
default by the Lessee in the performance of one or more of the Obligations and
the expiration of any notice and cure period expressly provided for in the
Lease, the Lessor, at its option, may elect to perform or cause to be performed
any or all of the Obligations without first exercising its rights against the
Lessee, any other guarantor or any collateral that the Lessor may hold or have
access to, and the Guarantor hereby waives any right to require the Lessor to
attempt, by bringing any action or proceeding against Lessee or otherwise, to
collect the Indebtedness or any part thereof from the Lessee or any other
guarantor or to attempt to realize upon any collateral that the
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Lessor may hold or have access to before performing or causing the performance
of any of the Obligations or enforcing the obligations of the Guarantor
hereunder.
Section 2.6. No Subrogation or Contribution. Until all of the
Indebtedness has been paid in full and all of the Obligations have been duly
and punctually performed to the satisfaction of the Lessor, the Guarantor shall
not be subrogated to any right of the Lessor against the Lessee, any other
guarantor or any collateral, and any moneys, property or other consideration
received, after a default by the Lessee under the Lease, by the Guarantor from
the Lessee prior to payment in full of the Indebtedness and prior to the
performance by the Lessee of all of the Obligations shall be held in trust for
the Lessor and shall be paid or transferred to the Lessor upon demand therefor.
The Guarantor agrees that it will not assert any right of contribution against
any other guarantor of the Indebtedness, whether the obligations of such other
guarantor are evidenced by this Guaranty or other agreement, until such time as
all of the Indebtedness has been paid in full to the Lessor and all of the
Obligations have been performed.
Section 2.7. Waiver of Defenses.
(a) The Guarantor hereby: (i) waives notice of
acceptance of this Guaranty; (ii) waives presentment, demand, notice of
dishonor, protest and notice of protest; (iii) agrees that the Indebtedness or
any part thereof may be renewed, extended, accelerated, modified or compromised
and the Obligations may be modified or delegated and that any collateral or
other security held for the payment of the Indebtedness or the performance of
the Obligations may be released, exchanged, sold, applied or otherwise dealt
with by the Lessor without notice to the Guarantor and without thereby
releasing the Guarantor from any obligation under this Guaranty; (iv) waives
notice of the financial condition or other status of the Lessee and any other
party obligated for the payment of the Indebtedness or the performance of the
Obligations; and (v) waives the benefit of the homestead exemption as to its
obligations set forth herein. This Guaranty is intended to be a full, complete
and perfect guaranty and indemnity to the Lessor to the extent of and for any
Indebtedness and Obligations and to be valid and enforceable without other or
further notice to the Guarantor. The liability of the Guarantor is absolute
and unconditional and is not conditioned or contingent upon any other party
signing this Guaranty or the obtaining of any security upon any of the
Indebtedness or the obtaining of the guaranty of any other party upon any of
the Indebtedness, Obligations or any other matter.
(b) The Guarantor further acknowledges that this Guaranty
and the Guarantor's obligations under this Guaranty are and shall at all times
be valid and enforceable irrespective of
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(i) any assignment of sublease of the Lease, (ii) any other agreements or
circumstances of any nature whatsoever which might otherwise constitute a
defense (other than a defense of payment) to this Guaranty and the obligations
of the Guarantor under this Guaranty or the obligations of the Lessee or any
other person or party relating to this Guaranty or the obligations of
Guarantors hereunder or otherwise with respect to the Lease, or (iii) the
filing of a petition or the commencement of a case with respect to the Lessee
or the Guarantor under Title 11 of the United States Code, as now constituted
or hereafter amended (the "Bankruptcy Code"), or under any other applicable
Federal or state bankruptcy, insolvency or similar law, or any modification,
impairment, abatement, reduction, release, limitation, restructure,
reinstatement or cure, in whole or in part, of the Obligations pursuant to an
order by a bankruptcy court or other court of competent jurisdiction in any
action, case or proceeding brought under the Bankruptcy Code or under any other
applicable Federal or state bankruptcy, insolvency or similar law (including,
but not limited to any stay imposed pursuant to section 362 of the Bankruptcy
Code), it being expressly acknowledged and agreed by the Guarantor that if any
such modification, impairment, abatement, reduction, release, limitation,
restructure, reinstatement or cure, in whole or part, is so ordered in any such
action, case or proceeding, the Guarantor's obligations under this Guaranty
will nevertheless continue to be determined as if such order had not been
issued (i.e., as if the Lessee were still obligated to pay the Indebtedness and
to perform and observe the Obligations strictly in accordance with the terms,
covenants and provisions of the Lease as in existence prior to the issuance of
any such order).
(c) The Guarantor absolutely, unconditionally and
irrevocably waives any and all right to assert any defense, setoff,
counterclaim or crossclaim of any nature whatsoever with respect to this
Guaranty or the obligations of the Lessee or any other person or party relating
to this Guaranty or the obligations of the Guarantor hereunder or otherwise
with respect to the Lease in any action, case or proceeding brought by the
Lessor to enforce the obligations of the Guarantor under this Guaranty
(provided, however, that the foregoing provisions of this sentence shall not be
deemed a waiver of the right of the Guarantor to assert any compulsory
counterclaim in any such action, case or proceeding brought by the Lessor in
any state court if such counterclaim is compelled under local law or rule or
procedure, or in a court of the United States, nor shall the foregoing
provisions of this sentence be deemed a waiver of the right of the Guarantor to
assert any claim which would otherwise constitute a defense, setoff,
counterclaim or crossclaim of any nature whatsoever against the Lessor in any
separate action, case or proceeding brought by the Guarantor against the
Lessor).
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(d) The Guarantor acknowledges that no oral or other
agreements, understandings, representations or warranties exist with respect to
this Guaranty or with respect to the obligations of the Guarantor under this
Guaranty, except those specifically set forth in this Guaranty, and that this
Guaranty sets forth the entire agreement and understanding of the Guarantor and
the Lessor.
Section 2.8. Releases. The Lessor shall have the right to waive
its rights against and to release any guarantor or other person or entity that
is liable for payment of the Indebtedness or performance of the Obligations
without affecting (a) the enforceability of this Guaranty against the Guarantor
or (b) any other right or remedy that the Lessor may have against the
Guarantor.
Section 2.9. Costs and Expenses.
(a) The Guarantor hereby agrees to pay to the Lessor all
costs and expenses, including court costs and reasonable attorneys' fees and
expenses, incurred by the Lessor in seeking advice with regard to, or in
seeking to enforce, any of the obligations of the Guarantor hereunder.
(b) The Guarantor will defend, indemnify and hold
harmless the Lessor and its employees, agents, officers and directors, from and
against any and all claims, demands, penalties, causes of action, fines,
liabilities, settlements, damages, costs or expenses of whatever kind or
nature, known or unknown, foreseen or unforeseen, contingent or otherwise
(including, without limitation, reasonable attorneys' fees and expenses, court
costs and litigation expenses) arising out of or in any way related to any
failure by the Lessee to promptly and fully pay the Indebtedness or fully
perform, observe and comply with any of the Obligations.
Section 2.10. Bankruptcy. In the event that any part of the
Indebtedness is collected by the Lessor and because of bankruptcy or other laws
relating to debtors' relief such payment is set aside as a voidable preference
or fraudulent conveyance or the Lessor is otherwise required to repay all or
any portion of the amount so collected to the Lessee or to any trustee,
receiver or otherwise, then this Guaranty shall continue in full force and
effect with regard to such sums or, if previously terminated, shall be
reinstated without further act or instrument and shall thereafter remain in
full force and effect, as though such payment had not been made or such
termination had not occurred (as the case may be), and the amount or amounts so
repaid shall become part of the Indebtedness and shall be guaranteed hereby.
In the event an action, case or proceeding is filed or commenced under the
Bankruptcy Code or under any other applicable Federal or state bankruptcy,
insolvency or similar law in regard to the
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Lessee or an action, case or proceeding is otherwise commenced for the benefit
of the creditors of the Lessee, this Guaranty shall at all times thereafter
remain effective in regard to any payments or other transfers of assets to the
Lessor received from or on behalf of the Lessee under or in respect of the
Indebtedness which are held voidable on the grounds of preference, fraudulent
conveyance or otherwise, whether or not the Indebtedness has been paid in full
or whether or not any or all of the Obligations have been discharged or
released.
Section 2.11. Application of Proceeds. All payments, whether
voluntary or involuntary, received from the Lessee or on account of the
Indebtedness from any other source, including income from and amounts realized
on security and appropriated bank balances, may be applied by the Lessor toward
the payment of the Indebtedness and in such order of application as the Lessor
may from time to time elect. All payments shall be conclusively presumed to
have been made by the Lessee and no payments shall operate to reduce the
liability of the Guarantor hereunder, unless at the time such payments are
made, express written notice is served upon the Lessor that such payments are
made by the Guarantor in reduction of the liability hereunder.
Section 2.12. Required Notifications. The Guarantor will promptly
inform the Lessor in writing upon the commencement of any proceedings by or
against the Guarantor under any applicable bankruptcy, reorganization,
liquidation, insolvency or other similar law now or hereafter in effect or of
any proceeding in which a receiver, liquidator, trustee or other similar
official is sought to be appointed for the Guarantor or any of its assets.
Section 2.13. Survivability. The obligations of the Guarantor
contained herein shall survive the expiration or earlier termination of the
Lease until payment in full of the Indebtedness and complete performance of all
of the Obligations. Further, no expiration or termination of the Lease, by
operation of law or otherwise, and no re-entry, repossession or removal
pursuant to the Lease or otherwise, and no re-letting of the premises under the
Lease shall relieve the Guarantor of its liabilities and obligations which
arise during the term of the Lease, all of which shall survive such expiration,
termination, re-entry, repossession, removal or re-letting. The obligations of
the Guarantor contained herein shall survive any assignment of the Lease or
sublease of the Leased Premises and any changes in control of the Lessee or
Lessor.
Section 2.14. Guarantor's Assumption of Lessee's Obligations. In
the event of the rejection or disaffirmance of the Lease by the Lessee or the
Lessee's receiver or trustee pursuant to any law affecting creditor's rights,
the Guarantor will, and does hereby (without the necessity of any further
agreement or act), assume all obligations and liabilities of the
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Lessee under or arising out of the Lease, to the same extent as if the
Guarantor had been originally named the lessee under the Lease, and there had
been no such rejection or disaffirmance; the Guarantor will confirm such
assumption in writing at the request of the Lessor, upon or after such
rejection or disaffirmance. The Guarantor, upon such assumption, shall have
all rights of the Lessee under the Lease and shall be entitled to a new lease
on all of the terms and conditions of the Lease with respect to the unexpired
portion of the Lease (to the extent permitted by law). The Guarantor will
execute and deliver such documents, as the Lessor may from time to time
reasonably require to evidence such assumption, to confirm this Guaranty and to
certify that the Guarantor is not in default hereunder.
Section 2.15. Subordination.
(a) Upon any distribution of assets of the Guarantor upon
any dissolution, winding up, total or partial liquidation or reorganization of
the Guarantor, whether voluntary or involuntary, in bankruptcy, insolvency,
receivership or a similar proceeding or upon assignment for the benefit of
creditors or any marshalling of assets or liabilities (a "Triggering Event"),
the obligations of the Guarantor under this Guaranty are subordinated and
junior to all obligations (the "Debt Obligations," and to the extent not
excluded pursuant to the next succeeding sentence, the "Senior Debt") of the
Guarantor under (a) the Credit Agreement dated as of June 25, 1996 among the
Guarantor, the lenders thereto and Credit Lyonnais New York Branch, as
administrative agent (as amended, supplemented, restated or otherwise modified
and as in effect from time to time, the "Designated Credit Agreement"), and (b)
all other credit agreements entered into by Guarantor and any lenders (who may
or may not be parties to the Designated Credit Agreement) (the "Other Credit
Agreements" and together with the Designated Credit Agreement, the "Credit
Agreements"), including, in all cases, the obligation to pay interest on loans
thereunder after any bankruptcy filing by the Guarantor (whether or not an
allowable claim), and under all "Credit Documents" as defined in the Designated
Credit Agreement or under any of the Other Credit Agreements. Notwithstanding
the foregoing, the Debt Obligations will not constitute Senior Debt to which
this Guaranty is subordinate (a) if constituting principal indebtedness of the
Guarantor ("Principal Indebtedness") to the extent that, after giving effect
thereto, at both the time of the incurrence thereof and entering into of a
Credit Agreement (or amendment thereto) providing for same, Principal
Indebtedness exceeds the greater of (x) $595,000,000 or (y) 45% of the
Guarantor's Total Market Capitalization (as hereinafter defined) and (b) if not
constituting Principal Indebtedness, to the extent relating to any Principal
Indebtedness described in clause (a) above.
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(b) Senior Debt shall not include any Principal
Indebtedness constituting pay-in-kind interest, unaccreted principal under any
original issue discount obligation or similar instrument or any other
negatively amortized indebtedness. To the extent any Principal Indebtedness
constitutes Senior Debt at the time of the issuance thereof or the entering
into of an Other Credit Agreement (or of an amendment thereto) providing for
such Principal Indebtedness, then such Principal Indebtedness (and all other
related Debt Obligations) shall at all times constitute Senior Debt. In
addition, to the extent that the Principal Indebtedness under the Designated
Credit Agreement does not exceed $595,000,000 then all obligations under the
Designated Credit Agreement shall in all events constitute Senior Debt.
(c) Guarantor's "Total Market Capitalization," at any
point in time, shall mean the sum of (A) the product of the total number of
shares of Guarantor's common stock outstanding times the closing price of the
Guarantor's common stock on the date of determination as reported on the
principal exchange or trading system on which such common stock is then listed
or traded plus (B) the aggregate principal amount of all outstanding debt of
Guarantor and its subsidiaries. Total Market Capitalization shall be
determined by the Guarantor in good faith in its reasonable discretion after
consultation with the Lessor, at the time of any incurrence of, and/or any
entering into of, or amendment to, any Credit Agreement providing for Principal
Indebtedness, as elected by the Guarantor and notified in writing to Lessor
promptly upon such determination.
(d) Upon any Triggering Event, (i) the holders of all
Senior Debt will first be entitled to receive payment in full in cash or cash
equivalents before the Lessor is entitled to receive any payment hereunder and
(ii) any payment or distribution of assets of the Guarantor of any kind or
character from any source, whether in cash, property or securities to which the
Lessor would be entitled (by set-off or otherwise), except for those
subordination provisions, will be paid by the liquidating trustee or agent or
other person making such a payment or distribution directly to the holders of
such Senior Debt or their representative to the extent necessary to make
payment in full (or have such payment duly provided for) on all such Senior
Debt remaining unpaid, after giving effect to any concurrent payment or
distribution to the holders of such Senior Debt.
(e) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Guarantor shall be received by the
Lessor at a time after the occurrence of a Triggering Event, such payment or
distribution shall be paid over to the agent(s) for the Senior Debt or to a
court, for application to the payment of all such Senior Debt remaining unpaid,
to the extent necessary to pay or to provide for the payment of all such Senior
Debt in full in cash or cash
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equivalents after giving effect to any concurrent payment or distribution to
the holders of such Senior Debt, the Lessor not being responsible for such
application by such agent(s) or court.
(f) No provision contained in this section will affect
the obligation of the Guarantor, which is absolute and unconditional, to pay
when due the Indebtedness and perform the Debt Obligations.
Section 2.16. Existence, etc. So long as any Indebtedness or
Obligations are outstanding, the Guarantor: (a) shall maintain its corporate
existence and shall not dissolve; (b) shall not sell all or substantially all
of its assets unless it shall receive reasonably equivalent value therefor; and
(c) shall not merge with or into another corporation or entity unless such
surviving corporation or entity is obligated to perform the obligations of the
Guarantor hereunder, assumes such obligations in a writing reasonably
satisfactory to Lessor and has a net worth at least equal to that of the
Guarantor immediately prior to the merger.
ARTICLE III
EVENTS OF DEFAULT; REMEDIES
Section 2.1. Events of Default. Any of the following occurrences
or acts shall constitute an "Event of Default" under this Guaranty:
(a) If the Guarantor shall fail to pay any sum, as and
when required to be paid hereunder following any applicable grace period.
(b) If any representation or warranty made by the
Guarantor contained in this Guaranty or any officer's certificate, notice,
certificate, demand or request delivered hereunder or in connection herewith
shall be false or misleading in any material respect as of the date made or
deemed to have been made.
(c) If the Guarantor fails to perform or observe in any
material respect any covenant, term or condition contained in this Guaranty
(other than a failure described in subparagraphs 3.1(a) or (b) above or an
Event of Default described below) and such failure continues for more than 30
days after the Guarantor's receipt of notice thereof from the Lessor; provided,
however, that in the case of any such failure which is susceptible of cure but
not within the applicable time period, provided any delay in exercising the
Lessor's remedies hereunder beyond such applicable time period could not have a
material adverse effect on the rights of the Lessor hereunder, no Event of
Default shall be deemed to occur so long as the Guarantor
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promptly commences to cure such default within the applicable time period and
thereafter diligently and continuously pursues such cure to completion within
120 days.
(d) If the Guarantor or the Lessee shall file a petition
in bankruptcy or for reorganization or for an arrangement pursuant to any
federal or state law, or shall be adjudicated a bankrupt or become insolvent or
shall make a general 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 proposing the adjudication of the Guarantor or the 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 the
Guarantor or the Lessee shall consent to or acquiesce in the filing thereof or
such petition shall not be discharged within 60 days after the filing thereof.
(e) If a receiver, trustee or liquidator of the Guarantor
or the Lessee, or of all or substantially all of the assets of the Guarantor or
the Lessee, shall be appointed in any proceeding brought by the Guarantor or
the Lessee, or if any such receiver, trustee or liquidator shall be appointed
in any proceeding brought against the Guarantor or the Lessee and shall not be
discharged within 60 days after such appointment, or if the Guarantor or the
Lessee shall consent to or acquiesce in such appointment.
Section 2.2. Remedies. Upon the occurrence of an Event of
Default, the Lessor shall have all the rights and remedies available at law or
in equity for purposes of enforcing its rights under this Guaranty.
ARTICLE IV
MISCELLANEOUS PROVISIONS
Section 2.1. Governing Law. This Guaranty, the rights of the
Lessor and the obligations of the Guarantor shall be governed by and construed
in accordance with the laws of the State of Tennessee (excluding, however,
those dealing with conflicts of law) except to the extent that such laws are
preempted by United States federal law, in which case such federal law shall
govern.
Section 2.2. Successors and Assigns. The representations,
warranties, covenants and conditions set forth herein shall be binding upon the
administrators, representatives and permitted successors and assigns of the
Guarantor and shall inure to the benefit of the Lessor, its successors and
assigns.
Section 2.3. Notices. All notices, requests, demands and other
communications with respect hereto shall be in writing and
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shall be delivered by hand, sent prepaid by Federal Express (or a comparable
overnight delivery service) or sent by United States mail, certified, postage
prepaid, return receipt requested, at the following addresses:
If to the Lessor, to -
Equity Inns Partnership, L.P.
c/o Equity Inns, Inc.
4735 Spottswood Avenue
Suite 102
Memphis, Tennessee 38117
Attention: Chairman of the Board
With a copy to -
Hunton & Williams
2000 Riverview Tower
900 South Gay Street
Knoxville, Tennessee 37902
Attention: David C. Wright, Esquire
If to the Guarantor, to -
Interstate Hotels Corporation
Foster Plaza Ten
680 Anderson Drive
Pittsburgh, Pennsylvania 15220-8126
Attn: General Counsel
With a copy to -
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Zachary T. Paris, Esquire
Any notice, request, demand or other communication delivered or sent in the
manner aforesaid shall be deemed given or made, as the case may be, upon the
earlier of the date it is actually received or (a) on the business day after
the day on which it is delivered by hand, (b) on the business day after the day
on which it is properly delivered to Federal Express (or a comparable overnight
delivery service) or (c) on the third business day after the day on which it is
deposited in the United States mail. Any addressee may change its address by
notifying the other addressees of the new address in any manner permitted by
this Section.
Section 2.4. Captions; Gender; Number. The captions hereof are
for convenience of reference only and shall neither
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limit nor enlarge the provisions hereof. All pronouns used herein, whether
used in the masculine, feminine or neuter gender, shall include all other
genders. The singular shall include the plural and vice versa unless the
context requires otherwise.
Section 2.5. Severability. If any provision of this Guaranty, or
the application thereof to any person or circumstance, shall to any extent be
invalid or unenforceable, the remainder of the provisions hereof, or the
application thereof to other persons or circumstances, shall not be affected
thereby, and each provision hereof shall be valid and enforceable to the
fullest extent permitted by law.
Section 2.6. Amendments. No provision of this Guaranty may be
amended, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the amendment, waiver,
discharge or termination is sought. No subsequent guaranty by the Guarantor or
any other person with respect to the Indebtedness or the Obligations shall be
deemed in lieu of or to supersede this Guaranty, but such guaranty shall be
construed as an additional or supplementary guaranty unless otherwise expressly
provided for in such subsequent guaranty. Furthermore, this Guaranty shall be
construed to be an additional or supplementary guaranty to any guaranty
previously executed by the Guarantor or any other guarantor of the Indebtedness
or the Obligations and shall not terminate any prior guaranty unless such
termination is expressly provided for herein.
Section 2.7. Service of Process. The Guarantor hereby agrees that
any suit, action or proceeding arising out of or relating to this Guaranty may
be instituted in the United States District Court for the Western District of
Tennessee, at the option of the Lessor; and the Guarantor hereby waives any
objection which it may have to the laying of the venue of any such suit, action
or proceeding and irrevocably submits to the jurisdiction of either such court
in any such suit, action or proceeding.
Section 2.8. Joint and Several Obligations. The obligations of
the Guarantor hereunder shall be joint and several with respect to (a) the
Lessee, (b) Interstate Hotels Company under a Guaranty of Lease of even date
herewith and (c) each and any other guarantor or obligor of the Lessee's
obligations under the Lease which guarantor or obligor is an affiliate of the
Guarantor, and the Lessor may demand and exercise its rights and remedies
hereunder and/or thereunder against any such guarantors or obligors separately,
or all or any of them together, at Lessor's option.
Section 2.9. Third Party Beneficiary. Equity Inns, Inc., a
Tennessee corporation and parent company of the general partner
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of the Lessor, shall be deemed a third party beneficiary of this Guaranty and
shall have the right to enforce the terms of this Guaranty to the same extent
as the Lessor.
Section 2.10. Counterparts. This Guaranty may be executed in
several counterparts, each of which shall be an original and all of which
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of the
date first above written.
INTERSTATE HOTELS CORPORATION, a
Pennsylvania corporation
By: /s/ Kevin P. Kilkeary
--------------------------------
Name: Kevin P. Kilkeary
------------------------------
Title: Vice President
-----------------------------
15
<PAGE> 1
EXHIBIT 10.4
MASTER AGREEMENT
THIS MASTER AGREEMENT (the "Agreement") is made as of this 4th
day of November, 1996 by and among EQUITY INNS PARTNERSHIP, L.P., a Tennessee
limited partnership ("EIP"), INTERSTATE HOTELS CORPORATION, a Pennsylvania
corporation ("IHC"), EQUITY INNS, INC., a Tennessee corporation ("ENNS"),
CROSSROADS FUTURE COMPANY, L.L.C., a Delaware limited liability company ("New
Lessee") and CROSSROADS/MEMPHIS PARTNERSHIP, L.P., a Delaware limited
partnership (the "Partnership").
WITNESSETH:
WHEREAS, EIP owns the Leased Hotels which have been leased to
Trust Leasing, Inc., a Tennessee corporation ("TLI"), pursuant to the Existing
Leases;
WHEREAS, a wholly-owned subsidiary of ENNS serves as sole
general partner of EIP and an indirect wholly-owned subsidiary of IHC serves as
sole general partner of the Partnership;
WHEREAS, pursuant to the Contribution Agreement, TLI has agreed
to contribute and assign to the Partnership and the Partnership has agreed to
assume all of the Existing Leases with EIP affecting the Leased Hotels, as
amended by the Consolidated Lease Amendment, as described herein;
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
<PAGE> 2
I. THE TRANSACTIONS
1.1 Defined Terms. Certain capitalized terms used herein shall
have the meanings given to such terms in Article VII hereof.
1.2 Amendment and Assignment of Existing Leases. (a) At the
Closing, EIP and the Partnership will amend and restate each of the Existing
Leases effective as of the Closing Date pursuant to a Consolidated Lease
Amendment in the form attached hereto as Exhibit A ("Consolidated Lease
Amendment").
(b) At or prior to the Closing Date, EIP and ENNS
will consent to the contribution and assignment of the Existing Leases to the
Partnership, such consent to be in the form attached hereto as Exhibit B.
1.3 REIT Status. (a) Each of IHC, New Lessee and the
Partnership acknowledges the restrictions under the Code and under the amended
and restated charter of ENNS relating to the ownership of equity securities of
ENNS (which may require ownership of ENNS equity securities by IHC, New Lessee,
the Partnership and certain of their Affiliates, including their officers and
directors, to be aggregated for purposes of the foregoing restrictions).
(b) For purposes of this Agreement, the following shall
constitute the "REIT Requirements":
(i) The average of the adjusted tax bases of EIP's
personal property that is leased to the Partnership or New Lessee
under each Lease at the beginning and end of a calendar year cannot
exceed 15% of the average of the
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aggregate adjusted tax bases of all of EIP's property that is leased
to the Partnership or New Lessee under such Lease at the beginning and
end of such calendar year.
(ii) The Partnership and New Lessee cannot sublet the
property that is leased to it by EIP, or enter into any similar
arrangement, on any basis such that the rental or other amounts paid by
the sublessee thereunder would be based, in whole or in part, on either
(x) the net income or profits derived by the business activities of the
sublessee or (y) any other formula such that any portion of the rent
paid by the Partnership or New Lessee to EIP would fail to quality as
"rents from real property" within the meaning of Section 856(d) of the
Code.
(iii) The Partnership and New Lessee cannot sublease
the property leased to it by EIP to, or enter into any similar
arrangement with, any person in which ENNS owns, directly or
indirectly, a 10% or more interest, within the meaning of Section
845(d)(2)(B) of the Code.
(iv) ENNS cannot own, directly or indirectly, a 10%
or more interest in IHC, the Partnership or New Lessee, within the
meaning of Section 856(d)(2)(B) of the Code.
(v) No person can own, directly or indirectly,
capital stock of ENNS that exceeds the "Limit" (as defined in ENNS'
Charter, as amended and restated).
(c) IHC, New Lessee and Partnership agree that during the
period beginning on the Closing and ending on the earlier to occur of (x) the
date no Lease remains in effect, and (y) ENNS
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ceases to be qualified as a real estate investment trust under the Code (the
"Notice Period"), to notify ENNS, and to cause any of their Affiliates which are
direct or indirect wholly-owned Subsidiaries of IHC to notify ENNS, in advance
of any direct purchase by it of equity securities of ENNS, and to use their
reasonable efforts to permit the REIT Requirements to be satisfied, including
but not limited to, providing ENNS with information regarding the ownership of
IHC, the Partnership and New Lessee and their direct or indirect wholly owned
Subsidiaries, if and to the extent the satisfaction of the REIT Requirements is
with the reasonable control of IHC, New Lessee or Partnership, all at the
expense of ENNS. Upon request by ENNS made during the Notice Period and at the
expense of ENNS, IHC, New Lessee and the Partnership agree to cooperate with
ENNS and agree to take reasonable steps requested by ENNS necessary to maintain
the REIT Requirements. Notwithstanding the foregoing, neither IHC nor the
Partnership nor New Lessee shall be obligated to take any action which could
reasonably be expected to materially adversely affect IHC, New Lessee or the
Partnership. Notwithstanding anything to the contrary contained in this
Agreement, in no event shall IHC, New Lessee or the Partnership be liable to
ENNS or EIP for any consequential damages relating to, resulting from or arising
out of a breach or alleged breach of this Section 1.3.
1.4 Financial Reports. (a) During the period beginning on the
Closing and ending on the date no Lease remains in effect, IHC, New Lessee and
the Partnership agree to provide
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to ENNS the following financial reports and information within the specified
time periods at the Partnership's or New Lessee's expense (so as to permit ENNS
to file its required 1934 Act reports and file and have declared effective its
1933 Act registration statements):
(i) Not more than 30 days following the end
of each of the first three calendar quarters of each year, quarterly unaudited
financial statements, including a balance sheet, statement of operations,
statement of shareholders' equity, statement of cash flows, and related
schedules for the Partnership and New Lessee for the most recently ended
calendar quarter, calendar year to date and comparable prior year periods
prepared in conformity with GAAP;
(ii) Not more than 60 days following the end
of each calendar year, audited annual financial statements and schedules for the
Partnership and New Lessee for the most recently ended calendar year prepared in
accordance with GAAP, audited by a national accounting firm;
(iii) During the time periods set forth in
(i) and (ii) above, any historical financial information necessary to re-state
historical financial information of the Partnership or New Lessee to conform to
the presentation of the Partnership's or New Lessee's audited and unaudited
financial statements at any future time; and
(iv) On a timely basis, at EIP's or ENNS'
expense, any other information with respect to the Partnership, New Lessee or
the Leased Hotels necessary to permit ENNS to file
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on a timely basis its audited annual (calendar fiscal year) and unaudited
quarterly financial statements and schedules for EIP (but not separate
financial statements for the Leased Hotels) with the Securities and Exchange
Commission.
(b) If requested by ENNS, and at EIP's or ENNS'
expense, IHC, New Lessee and the Partnership will permit ENNS and EIP and their
independent public accountants, counsel, financial advisors, underwriters,
underwriters' counsel, rating agencies and lenders to continue to have access
(during normal business hours and upon three business days notice) to review
(i) the financial records of the Leased Hotels and perform generally accepted
auditing procedures with respect to the Partnership, New Lessee and the Leased
Hotels and (ii) such other records and documents with respect to each Leased
Hotel as ENNS or EIP may reasonably request.
(c) The Partnership and New Lessee shall use their
reasonable best efforts to cause the independent public accountants preparing
audits of the Partnership and New Lessee to provide ENNS and the Partnership
with all consents of such accountants required for ENNS' or EIP's filings with
the SEC under the 1933 Act and the 1934 Act or to have ENNS' or EIP's
registration statements declared effective by the SEC under the 1933 Act.
(d) IHC, the Partnership and New Lessee shall
continue to provide EIP and ENNS true and accurate daily operating and
financial reports in the form set forth on Schedule 1.4 with respect to each
Leased Hotel.
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1.5 Right of First Offer. Effective as of the Closing, EIP
hereby grants to New Lessee a right of first offer (the "Right of First Offer")
to lease and manage any hotel, motel, inn, resort or similar property which is
acquired or for which a purchase contract has been entered into or for which
development has commenced by EIP or any of its Affiliates during the five (5)
year period following the Closing (subject to Section 1.8 hereof), as follows:
(a) During the term of the Right of First Offer, with
respect to each hotel, motel, inn, resort or similar property proposed to be
acquired by EIP or an Affiliate (an "Acquisition Hotel") or developed by EIP or
a third party and acquired by EIP or an Affiliate (a "Development Hotel") (other
than any hotel proposed to be acquired from IHC or any of its Affiliates), EIP
shall promptly notify New Lessee of such proposed acquisition or development and
submit the following to New Lessee with such a notice ("Notice") (or if not then
available, as soon as EIP obtains the same): (i) such historical financial
(including gross operating profit and net operating income) and operating
information (including ADR, occupancy and REVPAR) with respect to the
Acquisition Hotel or projected financial and operating information (including
related assumptions) for the Development Hotel, if any, as is reasonably
available to EIP, (ii) any market study information obtained or developed by EIP
with respect to the Acquisition Hotel or Development Hotel, (iii) the proposed
base rent and percentage rent terms for the lease of the Acquisition Hotel or
Development
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Hotel (the "Proposed Rent Terms"), (iv) notice of the right of New Lessee to
commence due diligence on such Acquisition Hotel or Development Hotel
simultaneously with EIP's performance of due diligence (provided that New Lessee
agrees, in an appropriate writing or writings, (A) to be bound by such
confidentiality agreements regarding such hotel to which EIP has agreed to be
bound, (B) to indemnify the owner of such hotel, ENNS, EIP, and such other
parties as appropriate, against damage to property or injuries to persons
occurring as the result of a negligent or willful act or omission of the New
Lessee's employees, agents, or consultants while conducting diligence activities
at such hotel), and (C) to agree to be bound by such other agreements,
conditions and limitations regarding such hotel as EIP is bound as a condition
of it conducting due diligence), and (v) copies of all environmental,
structural, engineering, title reports and commitments, surveys and other
reports and studies ("Studies") performed by, on behalf of or at the request of
EIP, and will use its reasonable efforts to obtain letters from any third
parties performing the Studies stating that New Lessee and its Affiliates may
rely upon the Studies as if New Lessee and/or its Affiliates had ordered the
Studies with any additional cost for such letters to be paid for by New Lessee.
In addition, New Lessee will provide to EIP copies of all of the Studies
performed by, on behalf of or at the request of New Lessee and will, at EIP's
request, use its reasonable efforts to obtain from any third parties performing
the Studies letters stating that EIP and its Affiliates may rely on such Studies
as if EIP and/or its
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Affiliates had ordered the Studies with any additional cost for such letters to
be paid for by EIP. IHC and New Lessee agree to advise EIP and ENNS immediately
upon receipt of any Notice, if IHC, New Lessee or any Affiliate thereof, is
reviewing or pursuing the acquisition of the Acquisition Hotel or Development
Hotel which is the subject of the Notice on behalf of themselves or any
Affiliate. Notwithstanding the foregoing, neither EIP nor ENNS shall be required
to provide IHC or New Lessee any lease sensitivity analyses or similar
analytical information prepared by EIP or ENNS with respect to an Acquisition
Hotel or Development Hotel.
(b) New Lessee will perform its own due diligence, at
its own expense, with respect to any Acquisition Hotel or Development Hotel and
EIP and ENNS will make no representations as to the adequacy or accuracy of any
information provided to New Lessee as to any Acquisition Hotel or any
Development Hotel; provided, however, EIP will use its reasonable efforts to
include in the purchase agreement for any Acquisition Hotel or a Development
Hotel developed by someone other than EIP and ENNS an express acknowledgement by
the seller of such Acquisition Hotel or Development Hotel that New Lessee may
rely upon all representations and warranties contained in such purchase
agreement as if New Lessee was the purchaser under such purchase agreement.
(c) New Lessee and IHC (and their Affiliates and
agents) shall maintain in strictest confidence any confidential information
received from EIP in connection with a proposed
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Acquisition Hotel or Development Hotel in accordance with any confidentiality
agreement to which EIP is a party for a period of one year from the date of
receipt of such information and will not use such information (x) other than to
evaluate New Lessee's proposed lease of the Acquisition Hotel or Development
Hotel and will not provide any such information to any other party, including
without limitation, any potential acquiror of the Acquisition Hotel or
Development Hotel, (y) unless required by law or necessary to comply with
federal, state or local regulatory requirements or (z) except as permitted by
clause (x) or (y), for a period of ninety (90) days following disclosure of
such information by EIP to New Lessee or thereafter during the one-year period
described above unless following such 90-day period EIP fails to diligently
pursue the consummation of the acquisition of the Acquisition Hotel or
Development Hotel. Nothing contained herein shall preclude IHC or New Lessee or
any of their Affiliates from acquiring any Acquisition Hotel or Development
Hotel for which EIP has notified New Lessee in writing that EIP is no longer
interested in acquiring.
(d) New Lessee shall have twenty-one (21) business
days following receipt of the Notice and all of the information set forth in
Section 1.5(a)(i)-(iv), including the Proposed Rent Terms for any single
Acquisition Hotel or Development Hotel or portfolio of two (2) to four (4)
Acquisition Hotels or Development Hotels proposed to be acquired in a single
transaction, to (A) agree in writing with EIP to the Proposed Rent Terms (in
which event it shall execute a Lease or Leases
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incorporating such terms) or (B) propose to EIP alternative rental terms, reach
an agreement with EIP as to such terms and execute a Lease incorporating such
terms and (c) cause a Subordination Agreement and IHC Guarantees (but without
cross default provisions) to be executed and delivered to EIP with respect
thereto. New Lessee may exercise the Right of First Offer by (i) delivering
written notice of its election to do so to EIP and (ii) executing and delivering
a Lease with respect thereto and (iii) delivering to EIP a Subordination
Agreement and IHC Guarantees (but without cross default provisions) within the
twenty-one (21) business day period as described above. If EIP and New Lessee
fail to agree, after negotiating in good faith, to rent terms and execute a
Lease incorporating such rent terms within the twenty-one (21) business day
period described above, EIP may thereafter lease the Acquisition Hotel or
Development Hotel to an unrelated third party which is not an Affiliate of ENNS
or EIP (an "Alternative Lessee") on terms no more favorable to the Alternative
Lessee than the terms which New Lessee has rejected, subject to the requirement
to again present to New Lessee Proposed Rent Terms as set forth in the last
sentence of this Section. With respect to EIP's proposed acquisition of five (5)
or more Acquisition Hotels or Development Hotels in a single transaction, New
Lessee and EIP shall have twenty-five (25) business days to (A) agree upon the
Proposed Rent Terms, (B) execute Leases for such hotels and (C) cause a
Subordination Agreement and IHC Guarantees (without cross default provisions) to
be executed and delivered to EIP with respect thereto. If EIP
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does not enter into a lease with an Alternative Lessee for any such Acquisition
Hotel or Development Hotel within sixty (60) days after the date on which New
Lessee delivers notice to EIP of its lack of interest in leasing such
Acquisition Hotel or Development Hotel (or if it fails to deliver such notice,
within 60 days after expiration of the 21 business day or 25 business day
periods described above), EIP will be required to again present to New Lessee
Proposed Rent Terms for such Acquisition Hotel or Development Hotel and provide
New Lessee with the opportunity to update its due diligence review of such hotel
and Lessee shall again have the twenty one (21) business day or twenty five (25)
business day time periods described above to agree to such Proposed Rent Terms
and execute a Lease and deliver to EIP an executed Subordination Agreement and
IHC Guarantees (without cross default provisions) with respect thereto before
EIP may lease such Acquisition Hotel or Development Hotel to an Alternative
Lessee.
(e) The lease agreement for all Acquisition Hotels
and Development Hotels leased by New Lessee pursuant to this Section 1.5 shall
be substantially in the form of the Consolidated Lease Amendment, but shall not
be cross-defaulted with the Consolidated Lease Amendment.
(f) Notwithstanding the foregoing, the Right of First
Offer will not apply to: (i) EIP's acquisition of an Acquisition Hotel or
Development Hotel where (x) a seller/developer, as a condition of sale, requires
that the seller/developer, an affiliate or existing management become or
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remain the lessee of the hotel or (y) an Acquisition Hotel is subject to a
hotel lease which cannot be terminated without the payment of liquidated
damages or the imposition of other financial penalties and the New Lessee does
not agree, in its sole discretion, to pay such damages, or (ii) any of the
hotels currently subject to the Promus Agreements.
1.6 Purchase Option in Favor of EIP for IHC Hotels.
(a) Effective as of the Closing, during the five (5)
year period following the Closing ("Development Option Period"), IHC hereby
grants to EIP an option ("Development Option") to purchase all budget, economy,
upper economy or midscale hotels, motels or inns of the brands listed on
Schedule 1.6a (excluding any developments subject to a joint venture or
partnership agreement with parties who are not Affiliates of IHC) which IHC
plans to develop and which IHC notifies EIP prior to the commencement of
construction thereof of its intention to sell after completion of construction
(the "IHC Development Hotels") for a purchase price equal to one hundred five
percent (105%) of IHC's budgeted Development Costs (including appropriate
contingency and development fees), provided that IHC will develop and offer EIP
at least five (5) of the hotels listed on Schedule 1.6 in accordance with the
Development Option. As notification of IHC's intention to sell an IHC
Development Hotel, IHC shall deliver to EIP as soon as available (i) the
proposed Development Cost budget, (ii) any market study information related to
such IHC Development Hotel obtained or developed by IHC, and (iii)
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copies of any Studies related to an IHC Development Hotel obtained or developed
by IHC.
(b) EIP will perform its own due diligence, at its own
expense, with respect to any IHC Development Hotel. EIP will maintain in
strictest confidence any confidential information received from IHC in
connection with an IHC Development Hotel and will not use such information (i)
otherthan to evaluate EIP's proposed acquisition of the IHC Development Hotel or
(ii) unless required by law or necessary to comply with federal, state or local
regulatory requirements.
(c) Within twenty-one (21) business days after
receipt of the information to be delivered under Section 1.6(a) ("Development
Option Period"), EIP may exercise its option to purchase such IHC Development
Hotel and shall provide IHC with written notice stating that it exercises such
option. New Lessee shall have the right to lease any IHC Development Hotel sold
to EIP pursuant to the exercise of the Development Option and EIP shall deliver
to New Lessee prior to or with such written notice the Proposed Rent Terms for
such IHC Development Hotel. New Lessee shall have fifteen (15) business days
following receipt of the Proposed Rent Terms to (i) agree in writing with EIP
to the Proposed Rent Terms and execute a Lease incorporating such terms, or
(ii) to propose alternative rental terms, reach an agreement with EIP as to
such rental terms and execute a Lease containing such terms, (but without
cross-default provisions) and deliver to EIP an executed Subordination
Agreement and IHC Guarantees
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(without cross default provisions) with respect thereto. If EIP does not provide
such notice of exercise within the Development Option Period or if EIP and New
Lessee are unable to agree, after negotiating in good faith, to rent terms and
execute a lease incorporating such rent terms within the Development Option
Period, EIP shall have waived any and all rights with respect to such IHC
Development Hotel under this Section 1.6(c) and IHC may retain or sell such
hotel as it determines in its sole discretion.
(d) If a Development Option is properly exercised, EIP
shall, simultaneously with the execution and delivery by EIP and IHC of an
agreement of purchase and sale substantially in the form of Exhibit C attached
hereto ("Sales Agreement"), deposit in escrow with a bank or other financial
institution acceptable to IHC as escrowee an earnest money deposit in cash in an
amount equal to $100,000 which shall be applied to the purchase price and the
parties shall promptly execute and deliver a Lease in substantially the form of
the Consolidated Lease Amendment (but without cross-default provisions) and IHC
shall cause to be executed and delivered to EIP a Subordination Agreement and
IHC Guarantees (without cross default provisions) with respect thereto, which
shall be effective upon closing under the Sales Agreement.
(e) In the event IHC's actual Development Costs
("Actual Costs") for an IHC Development Hotel exceed the budgeted Development
Costs set forth in the Sales Agreement ("Purchase Costs") for such Hotel, EIP
shall have the right, but not the
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obligation, to purchase such Hotel for a purchase price equal to the sum of (i)
105% of the Purchase Costs and (ii) the amount by which the Actual Costs exceed
the Purchase Costs ("New Cost"). If EIP does not elect to so purchase such IHC
Development Hotel, then IHC shall have the right, but not the obligation, to
sell such IHC Development Hotel to EIP for a purchase price equal to 105% of
the Purchase Costs. If EIP elects to proceed to purchase such IHC Development
Hotel for the New Cost, the parties shall in good faith renegotiate the rent
terms for such Hotel to reflect the increased purchase price prior to the
closing of the purchase and sale of the IHC Development Hotel.
(f) The Right of First Offer described in Section 1.7
hereof shall not apply to any IHC Development Hotel which IHC offers to EIP
under this Section 1.6 and which EIP does not ultimately purchase in accordance
with the provisions of this Section 1.6, for any reason whatsoever.
(g) In the event that during the Development Option
Period, IHC has not offered to EIP at least five (5) IHC Development Hotels,
the Development Option Period will be extended until such time as IHC has
offered to EIP at least five (5) IHC Development Hotels in accordance with the
Development Option.
1.7 Right of First Offer in Favor of EIP for IHC Hotels; Future
Acquisition Opportunities.
(a) Effective as of the Closing and for the five (5)
year period following the Closing, IHC hereby grants to EIP a right of first
offer to acquire all budget, economy, upper
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economy or midscale hotels of the brands listed on Schedule 1.6a which IHC or
any direct or indirect wholly-owned Subsidiary owns as of the Closing or
acquires or develops ("IHC First Offer Hotel") during the five (5) year period
following the Closing. EIP acknowledges that the Holiday Inn Brentwood
(Tennessee) is the only hotel presently owned by IHC or any of its direct or
indirect wholly-owned Subsidiaries that falls within the foregoing
classification and to which the right of first offer shall apply as of the
Closing.
(b) Prior to offering an IHC First Offer Hotel
for sale, IHC shall give EIP written notice ("Sale Notice") of its intent to
sell or market such IHC First Offer Hotel, together with occupancy, ADR and
REVPAR, stating IHC's proposed cash purchase price together with copies of all
financial statements of the IHC First Offer Hotel during IHC's ownership period
therefor. IHC will also provide EIP with such other information in IHC's
possession regarding the IHC First Offer Hotel as EIP reasonably requests. EIP
will perform its own due diligence, at its own expense, with respect to any IHC
First Offer Hotel. EIP will maintain in strictest confidence any confidential
information received from IHC in connection with an IHC First Offer Hotel and
will not use such information (i) other than to evaluate EIP's proposed
acquisition of the IHC First Offer Hotel or (ii) unless required by law or
necessary to comply with any and all federal, state or local regulatory
requirements. Within twenty-one (21) business days after its receipt of the
Sale Notice and any requested historical financial (including gross
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operating profit and net operating income) and operating information (including
ADR, occupancy and REVPAR) reasonably available to IHC and any market study
information reasonably available to IHC, EIP may elect, by delivering written
notice to IHC, to purchase such IHC First Offer Hotel at the price set forth in
the Sale Notice. New Lessee shall have the right to lease any IHC First Offer
Hotel sold to EIP hereunder and EIP shall deliver to New Lessee prior to or
with such written notice the Proposed Rent Terms for such IHC First Offer
Hotel. New Lessee shall have fifteen (15) business days following receipt of
the Proposed Rent Terms to (i) agree in writing with EIP to the Proposed Rent
Terms and execute a Lease incorporating such terms or (ii) to propose
alternative rental terms, reach agreement regarding such terms with EIP and
execute a Lease incorporating such terms, and deliver to EIP an executed a
Subordination Agreement and IHC Guarantees (without cross default provisions).
A failure by EIP to notify IHC of its exercise of the right of first offer
within such twenty-one (21) day period or a failure of EIP and New Lessee to
agree, after negotiating in good faith, upon rent terms and execute a Lease
(without cross-default provisions) incorporating such terms within such period
shall constitute a waiver of any or all of EIP's rights hereunder.
(c) In the event that EIP shall have elected to
purchase the IHC First Offer Hotel in accordance with the provisions of the
preceding subsection (b), EIP shall deposit in escrow with a bank, title
company or other financial institution acceptable to IHC as escrowee an earnest
money deposit in cash in
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an amount equal to $100,000 which shall be applied to the purchase price,
simultaneously with the execution and delivery by IHC and EIP of a Sales
Agreement for such hotel.
(d) If EIP elects or is deemed to have elected
not to purchase the IHC First Offer Hotel, then at any time within one hundred
ninety-five (195) days from the date of the Sale Notice, IHC may sell such IHC
First Offer Hotel for a purchase price which is equal to or greater than 95% of
the price contained in the Sale Notice. In determining the application of the
95% as stated herein, only the stated purchase price shall be relevant and no
adjustments offered to EIP shall be considered in respect of the other terms or
conditions of a proposed sale. Should IHC desire to sell such IHC First Offer
Hotel at a price which is less than 95% of the price set forth in the Sale
Notice, or should the one hundred ninety five (195) day time period expire, IHC
shall again comply with the requirements set forth in this Section prior to
marketing or soliciting for sale any such IHC First Offer Hotel.
(e) Effective as of the Closing and during the five
(5) year period following the Closing, IHC, the Partnership and their
Affiliates which are direct or indirect wholly-owned Subsidiaries will use
their reasonable efforts but subject to any confidentiality agreements to which
they are a party, to direct to EIP all opportunities presented to them for
acquisitions of budget, economy, upper economy or midscale hotels, motels, or
inns of the brands listed on Schedule 1.6a which they do not
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intend to purchase for their own account, through an Affiliate, or as part of a
joint venture or partnership.
1.8 Termination. (a) The Right of First Offer granted pursuant
to Section 1.5 may be terminated by EIP: (i) subject to the satisfaction of the
requirements set forth in Article XLII of the Leases, upon termination of ENNS'
status as a real estate investment trust for federal income tax purposes; or
(ii) in the event of a Default by the Partnership or New Lessee hereunder or
under the Leases; or (iii) in the event of a Default under the IHC Guarantees.
(b) The purchase option and right of first offer granted
pursuant to Sections 1.6 and 1.7 hereof may be terminated by the Partnership or
New Lessee in the event of a Default by EIP or ENNS hereunder or under the
Leases.
(c) For purposes hereof, a Default shall be (i) a failure to
comply with any material provision of this Agreement for a period of thirty (30)
days after notification by a nondefaulting party of such failure to comply, or
(ii) an Event of Default as defined in the Leases or the IHC Guarantees.
1.9 Expenses of Transaction. Except as otherwise provided
herein, each party hereto shall bear its own costs and expenses incurred in
connection with entering into this Agreement and consummating the transactions
contemplated herein including without limitation, all fees of counsel,
accountants and consultants; provided, however, that notwithstanding anything
contained herein to the contrary, EIP and/or ENNS shall be solely responsible
for any and all costs or expenses associated with any
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property improvement program imposed and/or required as a result of the
transactions contemplated herein and in the Contribution Agreement.
1.10 Closing. Subject to the fulfillment or waiver of the
conditions precedent specified in Sections 4.1, 4.2 and 4.3, the consummation of
the transactions contemplated hereby (the "Closing") will take place on November
13, 1996 or such other date as agreed to by the parties (the "Closing Date").
The Closing will take place at 10:00 a.m., E.S.T. on the Closing Date at the
offices of Jones, Day, Reavis & Pogue at 500 Grant Street, Pittsburgh,
Pennsylvania.
1.11 Non-Public Information. To the extent that, EIP or
ENNS, on the one hand, or IHC, the Partnership or New Lessee on the other hand,
obtains information or becomes aware of material information concerning the
other that has not been disclosed in a public announcement or filing under the
1933 Act or 1934 Act, each party agrees that it shall not improperly disclose
or unlawfully utilize such information or otherwise act unlawfully with respect
thereto.
II. REPRESENTATIONS AND WARRANTIES.
2.1 Representations and Warranties of EIP and ENNS. As used
herein, the term "to the knowledge of" or similiar phrase, shall mean actual
knowledge of an executive officer of ENNS or the general partner of EIP based
solely on a written notice or notification to ENNS or EIP from a third party
and does not include any knowledge any such officer may have obtained in
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any other capacity. EIP and ENNS each hereby represents and warrants to the
Partnership, New Lessee and IHC as follows:
2.1.1 Organizational Matters. (a) EIP is a limited partnership
duly organized, validly existing and in good standing under the laws of the
State of Tennessee and has the requisite partnership power and authority to
own, lease or otherwise hold the assets owned, leased or otherwise held by it
and to carry on its business as presently conducted by it. EIP is duly
qualified to do business as a foreign limited partnership under the laws of the
jurisdictions where such qualification is necessary or required to operate its
assets and/or conduct its business.
(b) Equity Inns Trust, a Maryland real estate investment
trust ("General Partner") and a wholly owned subsidiary of ENNS is the sole
general partner of EIP. ENNS is a corporation and General Partner is a Maryland
real estate investment trust, duly organized, validly existing and in good
standing under the laws of the State of Tennessee and the State of Maryland,
respectively and have the requisite corporate and trust power and authority to
own, lease or otherwise hold the assets owned, leased or otherwise held by them
and to carry on their respective business as presently conducted by them. ENNS
is duly qualified to do business as a foreign corporation under the laws of the
jurisdictions where such qualification is necessary or required to operate its
assets and/or conduct its business. The General Partner is duly qualified to do
business as a foreign trust where such qualification is necessary or required
to operate its assets and/or conduct its business.
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2.1.2 Authorization and Effect of Agreement. Each of ENNS and
EIP has the requisite corporate or partnership power and authority to execute
and deliver this Agreement, and EIP has the requisite partnership power to
execute and deliver the Consolidated Lease Amendment and each Lease and to
perform the transactions contemplated hereby and thereby to be performed by
each of them. The execution and delivery by EIP and ENNS of this Agreement and
the execution and delivery by EIP of the Consolidated Lease Amendment and the
performance by EIP and ENNS of the transactions contemplated hereby and thereby
to be performed by it have been duly authorized by all necessary action on the
part of EIP and ENNS. This Agreement has been duly executed and delivered by
EIP and ENNS, and the Consolidated Lease Amendment will be duly executed and
delivered by EIP and, assuming the due execution and delivery of this Agreement
and the Consolidated Lease Amendment by the Partnership, New Lessee and IHC,
constitute (or as to the Consolidated Lease Amendment, will contitute) valid
and binding agreements of EIP and ENNS enforceable in accordance with their
respective terms.
2.1.3 No Restrictions. The execution and delivery of this
Agreement by EIP and ENNS and execution and delivery of the Consolidated Lease
Amendment by EIP and the performance by EIP and ENNS of the transactions
contemplated hereby and thereby to be performed by each of them will not
violate any law, rule, regulation, judgment, order or decree applicable to EIP
or ENNS or conflict with, or result in any violation of, or constitute a
default (with or without notice or lapse of time, or both) under,
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or give rise to a right of termination, cancellation or acceleration of any
obligation or to the loss of a material benefit under, any provision of the
partnership agreement of EIP or the charter or bylaws of ENNS or any material
agreement, contract, lease, or other instrument or obligation to which EIP or
ENNS is a party or by which its assets are bound (subject to obtaining the
consents described on Schedule 2.1.3). Except as set forth on Schedule 2.1.3,
no material consent, approval, order or authorization of, notice to or
registration, declaration or filing with, any Governmental Authority or other
entity, domestic or foreign or other third party is required to be obtained or
made by or with respect to EIP or ENNS in connection with the execution and
delivery of this Agreement or the Consolidated Lease Amendment by EIP or the
performance by EIP or ENNS of the transactions contemplated hereby or thereby
to be performed by it.
2.1.4 No Brokerage or Finder's Fees. Neither EIP nor ENNS has
incurred any liability to any broker, finder or agent for any brokerage fees,
finder's fees or commissions with respect to the transactions contemplated by
this Agreement.
2.1.5 Litigation; Decrees. To the knowledge of EIP and ENNS
there are no lawsuits, claims, administrative or other proceedings pending or
threatened which seek to enjoin or otherwise affect the transactions
contemplated by this Agreement, or the Consolidated Lease Amendment or relate to
the conduct of the Current Hotels or against or affecting EIP or ENNS or the
Current Hotels which, if determined adversely, would have a
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material adverse effect on the Current Hotels. Neither EIP nor ENNS is in
default under any judgment, order or decree of any Governmental Authority
applicable to the ownership, of the Current Hotels.
2.1.6 Existing Leases. Each Existing Lease is a valid and
binding obligation of EIP and is in full force and effect. EIP has performed
all obligations required to be performed by it under the Existing Leases and is
not (with or without the lapse of time or the giving of notice, or both) in
breach or default in any respect thereunder. EIP has made available to IHC
true, correct and complete copies of each Existing Lease.
2.2 Representations and Warranties of IHC, New Lessee and
Partnership. IHC, New Lessee and the Partnership hereby represent and warrant
to EIP and ENNS as follows:
2.2.1 Organization. (a) IHC and New Lessee are a corporation
and a limited liability company, respectively, duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania and the
State of Delaware, respectively, and have the requisite corporate or company
power as applicable and authority to own, lease or otherwise hold their
properties and assets and to carry on their business as presently conducted and
as proposed to be conducted under the Consolidated Lease Amendment.
(b) Partnership is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite partnership power and authority to own, lease or
otherwise hold its properties and
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assets and to carry on its business as presently conducted. A wholly owned
subsidiary of IHC owns all of the outstanding equity interests of the sole
general partner of the Partnership and at the Closing, the Partnership and the
sole general partner will be qualified to do business and will be in good
standing as a foreign limited partnership or foreign limited liability company,
respectively, in each state in which a Leased Hotel is located. The New Lessee
is an indirect, wholly owned subsidiary of IHC. IHC is a wholly-owned subsidary
of Company.
2.2.2 Authorization and Effect of Agreement. IHC, New Lessee
and the Partnership have the requisite corporate or partnership power, as
applicable, and authority to execute and deliver this Agreement, the
Partnership has the requisite partnership power to execute and deliver the
Consolidated Lease Amendment and New Lessee has the requisite company power to
execute and deliver the Leases and to perform the transactions contemplated
hereby and thereby to be performed by each of them. The execution and delivery
by IHC, New Lessee and the Partnership of this Agreement and the execution and
delivery by the Partnership of the Consolidated Lease Amendment and the
performance by IHC, New Lessee and the Partnership of the transactions
contemplated hereby and thereby to be performed by it have been duly authorized
by all necessary action on the part of IHC, New Lessee and the Partnership.
This Agreement has been duly executed and delivered by IHC, New Lessee and the
Partnership and the Consolidated Lease Amendment will be duly executed and
delivered by the Partnership and, assuming the due
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execution and delivery of this Agreement and the Consolidated Lease Amendment by
ENNS and EIP, constitute (or as to the Consolidated Lease Amendment, will
constitute) valid and binding agreements of IHC, New Lessee and the Partnership,
enforceable in accordance with their respective terms.
2.2.3 No Restrictions. The execution and delivery of this
Agreement and the Consolidated Lease Amendment by IHC, New Lessee and the
Partnership and the performance by IHC, New Lessee and the Partnership of the
transactions contemplated hereby to be performed by each of them will not
violate any law, rule, regulation, judgment, order or decree applicable to IHC,
New Lessee or Partnership or conflict with, or result in any violation of, or
constitute a default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of any
obligation or to the loss of a material benefit under, any provision of the
articles of incorporation or bylaws of Company or IHC or the certificate of
limited partnership and partnership agreement of the Partnership or any
material agreement, contract, lease or other instrument to which Company, IHC,
New Lessee or the Partnership is a party or by which any of their assets are
bound. Except as set forth on Schedule 2.2.3, no material consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Authority or other entity domestic or foreign or other third party
is required to be obtained or made by or with respect to IHC, New Lessee or the
Partnership in connection with the execution and delivery of this
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Agreement or the Consolidated Lease Amendment by IHC, New Lessee or the
Partnership or the performance by IHC, New Lessee or the Partnership of the
transactions contemplated hereby or thereby to be performed by each of them.
2.2.4 No Brokerage or Finder's Fees. Neither IHC nor the
Partnership nor New Lessee has incurred any liability to any broker, finder or
agent for any brokerage fees, finder's fees or commissions with respect to the
transactions contemplated by this Agreement.
2.2.5 Leases. The execution and delivery of the Consolidated
Lease Amendment and the performance by the Partnership of the transactions
contemplated thereby to be performed by the Partnership have been duly
authorized by all necessary action on the part of the Partnership. Upon
execution and delivery of the Consolidated Lease Amendment by the Partnership
and EIP, the Consolidated Lease Amendment will constitute a valid and binding
obligation of the Partnership, enforceable in accordance with its terms.
2.2.6 IHC Guarantees. The execution and delivery of the IHC
Guarantees (as defined in Section 4.3.3 below) have been authorized by all
necessary action on the part of IHC and Company and, upon execution and delivery
of the IHC Guarantees by Company and IHC, each of the IHC Guarantees will
constitute a valid and binding obligation of Company and IHC, respectively,
enforceable in accordance with their respective terms.
2.2.7 Real Property. IHC, the Partnership and New Lessee
have had access to such deeds, title policies,
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environmental reports, structural or other engineering reports and surveys with
respect to the Current Hotels as IHC, the Partnership or New Lessee has deemed
necessary to its review.
2.2.8 Litigation; Decrees. To the knowledge of IHC, New Lessee
or the Partnership, there are no lawsuits, claims, administrative or other
proceedings pending or threatened which seek to enjoin or otherwise affect the
transactions contemplated by this Agreement, the Contribution Agreement or the
Consolidated Lease Amendment.
III. COVENANTS PENDING CLOSING
3.1 Investigation by IHC. Prior to the Closing, upon reasonable
notice from IHC to EIP given in accordance with this Agreement, EIP and ENNS
will afford to the officers, attorneys, accountants or other authorized
representatives of IHC reasonable access during normal business hours to the
facilities and the books and records of EIP and ENNS relating to the Existing
Leases and/or Current Hotels so as to afford IHC full opportunity to make such
review, examination and investigation of the Existing Leases and/or Current
Hotels as IHC reasonably may desire to make (including, without limitation,
environmental audits of the Current Hotels). IHC will be permitted to make
extracts from or to make copies of such books and records as may be necessary.
3.2 No Announcement/Confidentiality. Upon execution of this
Agreement, ENNS, EIP, Partnership, New Lessee and IHC agree to make a mutually
agreed upon press releases. Prior to the Closing Date, no party shall publish
or permit any of its Affiliates to publish any other press release or similar
public
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announcement with respect to the transactions contemplated by this Agreement
without prior written consent of all of the other parties, other than as the
person making such disclosure may determine in good faith to be required by
law, rule, regulation, judicial or administrative process (in which case the
disclosing party shall use reasonable efforts to give notice to all of the
other parties prior to making such disclosure and, if reasonably practicable in
the circumstances, give such other parties the opportunity to review and
comment upon the proposed disclosure).
3.3 Regulatory Filings. Each of the parties will use its
reasonable best efforts to obtain, and to cooperate with the other in obtaining,
all authorizations, consents, orders and approvals of Governmental Authorities
that may be or become necessary in connection with the consummation of the
transactions contemplated by this Agreement including, without limitation,
filings required under the HSR Act and to take all reasonable actions to avoid
the entry of any order or decree by any Governmental Authority prohibiting the
consummation of the transactions contemplated hereby.
3.4 Operation of the Business. Prior to the Closing, EIP will:
(a) Use best efforts to keep the Existing Leases
intact and not take or permit to be taken or do or suffer to be done anything
other than in the ordinary course of EIP's business as presently conducted, and
use reasonable best efforts to maintain the goodwill associated with the
Current Hotels; and
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(b) Except as provided in Section 1.2, terminate,
amend or modify any of the Existing Leases.
3.5 Satisfaction of Conditions. Without limiting the generality
or effect of any provision of Article IV, prior to the Closing, each of the
parties hereto will use reasonable efforts with due diligence and in good faith
to satisfy promptly all conditions required hereby to be satisfied by such party
in order to expedite the consummation of the transactions contemplated hereby.
3.6 No Solicitation. Prior to the Closing, neither EIP nor
ENNS, nor its respective employees, officers, agents or representatives shall
directly or indirectly (a) solicit, initiate or encourage any inquiries,
proposals or offers from any person relating to any lease or purchase of any of
the Current Hotels, or (b) with respect to any effort or attempt by any other
person to do or seek any of the foregoing (i) participate in any discussions or
negotiations, (ii) furnish to any other person any confidential information with
respect to the Current Hotels, or (iii) otherwise cooperate in any way with, or
assist or participate in, or facilitate or encourage any such effort.
IV. THE CLOSING
4.1 Conditions Precedent to Obligations of Parties. The
obligations of each of EIP, ENNS, IHC, New Lessee and the Partnership under
this Agreement to consummate the transactions contemplated hereby will be
subject to the satisfaction, at or prior to Closing, of the conditions that (a)
each governmental approval, liquor license and other approvals, consents or
waivers
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identified on Schedule 2.1.3 or Schedule 2.2.3 as being a condition of the
Closing shall have been obtained (or in the case of liquor licenses,
consummation of an arrangement deemed acceptable by IHC in its sole discretion
under the applicable liquor laws allowing the continuation of liquor service
pending the approval of the license transfer application) including, without
limitation, under the HSR Act, (b) there shall not have been entered a
preliminary or permanent injunction, temporary restraining order or other
judicial or administrative order or decree in any domestic jurisdiction, the
effect of which prohibits the Closing, and (c) all conditions to the closing
under that certain Contribution Agreement dated as of October 4, 1996 by and
among TLI, Trust Management, Inc., Phillip H. McNeill Sr. and the Partnership
("Contribution Agreement") shall have been satisfied other than the obligations
hereunder and (d) approval of ENNS' line of credit lender shall have been
obtained and (e) approval of the Franchisors shall have been obtained and (f)
the approval of Credit Lyonnais shall have been obtained and (g) the approval of
Merrill Lynch & Co. shall have been obtained. Any of the foregoing conditions
may be waived, (i) insofar as it is a condition to the obligations of the
Partnership or IHC, by IHC at its option and (ii) insofar as it is a condition
to the obligations of EIP or ENNS, by EIP at its option.
4.2 Additional Conditions Precedent to Obligations of the
Partnership, New Lessee and IHC. The obligations of the Partnership, New Lessee
and IHC under this Agreement to
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consummate the transactions contemplated hereby will be subject to the
satisfaction, at or prior to the Closing, of all of the following conditions,
any one or more of which may be waived at the option of the Partnership, New
Lessee and IHC:
4.2.1 No Material Misrepresentation or Breach. There shall
have been no material breach by EIP or ENNS in the performance of any of their
covenants herein to be performed by them in whole or in part prior to the
Closing, and the representations and warranties of EIP and ENNS contained in
this Agreement shall be true and correct in all respects as of the Closing
Date, except for representations or warranties made as of a specified date,
which shall be true and correct in all respects as of the specified date, and
EIP and ENNS shall have delivered to the Partnership, New Lessee and IHC a
certificate certifying each of the foregoing, dated the Closing Date and signed
by its president and chief financial officer on its behalf.
4.2.2 Closing Documents. There shall have been delivered to
the Partnership, New Lessee and IHC by EIP and ENNS the following documents as
executed by EIP, ENNS and the other parties thereto:
(a) Incumbency and Specimen Signature Certificate of
EIP and ENNS;
(b) Resolutions of the Board of Directors of ENNS
authorizing the execution and delivery of this Agreement and the consummation
of the transactions contemplated by it, certified by the Secretary of ENNS;
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(c) Certificate of (i) the Secretary of State of the
State of Tennessee (with respect to EIP and ENNS) and (ii) the Department of
Assessments and Taxation of the State of Maryland (with respect to the General
Partner), dated as of a date no more than ten (10) days prior to Closing, to
the effect that EIP, ENNS and the General Partner, as the case may be, is
validly existing and in good standing in such jurisdiction;
(d) True and correct copies of the organizational
documents of EIP and ENNS certified by the Secretaries of the general partners
of EIP and ENNS;
(e) The opinion of Hunton & Williams, counsel for EIP
and ENNS, to cover the matters set forth in Exhibit D, attached hereto;
(f) The Consolidated Lease Amendment; and
(g) The consents provided in Section 1.2(b), consents
from ground lessors for applicable Hotels , if such consent is, in the
Partnership's and EIP's reasonable judgment, required for the Partnership to
become lessee of the Current Hotels without default, penalty, change in terms
or charges and evidence that any other required consents have been obtained.
4.3 Additional Conditions Precedent to Obligations of EIP and
ENNS. The obligations of EIP and ENNS under this Agreement to consummate the
transactions contemplated hereby will be subject to the satisfaction, at or
prior to the Closing, of all the following conditions, any one or more of which
may be waived at the option of EIP and ENNS.
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4.3.1 No Material Misrepresentation or Breach. There shall
have been no material breach by the Partnership, New Lessee or IHC in the
performance of any of their covenants herein to be performed by them in whole
or in part prior to the Closing, and the representations and warranties of the
Partnership, New Lessee and IHC contained or referred to in this Agreement
shall be true and correct in all respects as of the Closing Date, except for
representations or warranties made as of a specified date, which shall be true
and correct in all respects as of the specified date, and the Partnership, New
Lessee and IHC shall have delivered to EIP and ENNS a certificate certifying
each of the foregoing, dated the Closing Date and signed by its president and
chief financial officer on its behalf.
4.3.2 Closing Documents. There shall have been delivered to
EIP and ENNS by the Partnership, New Lessee and IHC the following documents as
executed by IHC, the Partnership, New Lessee and the other parties thereto:
(a) Incumbency and Specimen Signature Certificate of
Partnership, New Lessee and IHC;
(b) Certificates of the Secretary of State of the
State of Delaware and the Commonwealth of Pennsylvania, respectively, to the
effect that the Partnership, New Lessee, Company and IHC are validly existing
and in good standing and certificates from various state authorities to the
effect the Partnership is in good standing as a foreign jurisdiction in each
state listed in Schedule 4.3.2 dated as of a date not more than ten (10) days
prior to Closing;
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(c) Resolutions of the Board of Directors of New
Lessee, Company, IHC and the general partner of the Partnership authorizing the
execution and delivery of this Agreement, the execution and delivery by Company
and IHC of the IHC Guarantees and the consummation of the transactions
contemplated herein and therein.
(d) True and correct copies of the organizational
documents of IHC, New Lessee and the Partnership certified by the Secretaries
of New Lessee, IHC and the general partner of Partnership;
(e) The opinion of Jones, Day, Reavis & Pogue, counsel
for the Partnership, New Lessee and IHC, to cover the matters set forth in
Exhibit E attached hereto; and
(f) The Consolidated Lease Amendment.
4.3.3 Guarantees. At the Closing, IHC shall have caused
Company to have executed and delivered to EIP and IHC shall have executed and
delivered to EIP a Guaranty Agreement in the form of Exhibit F attached hereto
(collectively "IHC Guarantees"). At any time prior to or after the Closing, if
requested by EIP or ENNS, IHC shall execute and deliver and IHC shall cause
Company to execute and deliver one or more separate guarantees in the form of
Exhibit F evidencing the guarantee of any single Lease or group of Leases for
any Leased Hotels.
4.3.4 Promus Agreements. The Partnership or an Affiliate
reasonably acceptable to EIP and Promus Hotels Corp. ("Promus"), shall have
assumed all of the duties and obligations of TLI arising after the Closing Date
under (a) the Development
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Agreement dated May 31, 1996 among ENNS, EIP, TLI and Promus and (b) any
Management Agreements entered into between TLI and Promus (collectively, the
"Promus Agreements") and Promus shall have consented in writing to the
assumption of such obligations under the Promus Agreements.
4.3.5 Subordination Agreement. At the Closing, IHC shall have
caused Crossroads Hospitality Company, L.L.C. to have executed and delivered to
EIP and ENNS a Subordination Agreement substantially in the form of Exhibit G
attached hereto ("Subordination Agreement").
4.4 Termination. Notwithstanding anything contained in this
Agreement to the contrary, this Agreement may be terminated at any time prior
to the Closing:
(a) By the mutual written consent of Partnership, New
Lessee, IHC, ENNS and EIP;
(b) By any of the Partnership, New Lessee, IHC, ENNS
or EIP by notice to the other parties hereto if the Closing shall not have
occurred on or before December 1, 1996, provided that the party (or an Affiliate
thereof) so terminating is not in default of its obligations hereunder; or
(c) By either the Partnership, IHC, New Lessee, ENNS
or EIP if there shall have been entered a final, nonappealable order or
injunction of any Governmental Authority restraining or prohibiting the
consummation of the transactions contemplated hereby or any material part
thereof. In the event of termination of this Agreement under this Section 4.4
each party hereto will pay all of its own fees and
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expenses. There will be no further liability hereunder on the part of any party
hereto if this Agreement is so terminated, except by reason of a material
breach of any covenant contained in this Agreement.
V. SURVIVAL AND INDEMNIFICATION.
5.1 Survival; Definitions. (a) Each of the representations and
warranties contained in Article II, will survive the Closing and remain in full
force and effect until June 30, 1998. Any claim for indemnification with
respect to any of such matters which is not asserted by notice given as herein
provided within such specified period of survival may not be pursued. Any claim
for an Indemnifiable Loss asserted within such period of survival as herein
provided will be timely made for purposes hereof.
(b) Unless a specified period is set forth in this
Agreement (in which event such specified period will control), the covenants
contained herein will survive the Closing and remain in effect indefinitely.
5.2 Indemnification. (a) Subject to Section 5.1, EIP and ENNS
will indemnify, defend and hold harmless the Partnership, New Lessee, IHC and
its Affiliates and their respective directors, officers, partners, employees,
agents and representatives from and against any and all Indemnifiable Losses
relating to, resulting from or arising out of:
(i) Any breach by EIP or ENNS of any of the
representations or warranties of EIP or ENNS
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contained in this Agreement or in any Sales
Agreement;
(ii) Any breach by EIP or ENNS of any
covenant of EIP or ENNS contained in this Agreement;
(iii) Any Third Party Claim relating to or
arising out of the ownership (but not the operation
or management) of the Current Hotels on or prior to
the Closing Date;
(iv) The 1934 Act reports or the 1933 Act
registration statements of ENNS or EIP, other than
Indemnifiable Losses arising out of inaccurate
information provided to EIP or ENNS by Partnership or
New Lessee; and/or
(v) Any and all violations of the ADA other
than those caused by the Partnership's, IHC's or the
New Lessee's negligence or willful misconduct.
(b) Subject to Section 5.1, the Partnership, New
Lessee and IHC will indemnify, defend and hold harmless EIP and ENNS and their
respective Affiliates, directors, officers, partners, employees, agents and
representatives from and against any and all Indemnifiable Losses relating to,
resulting from or arising out of any of the following:
(i) Any breach by the Partnership, New
Lessee or IHC of any of the representations
or warranties of the Partnership or IHC
contained in this Agreement or in any Sales
Agreement; and/or
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(ii) Any breach by Partnership, New Lessee
or IHC of any covenant of the Partnership,
New Lessee or IHC contained in this
Agreement.
5.3 Defense of Claims. (a) If any Indemnitee receives notice of
the assertion or commencement of any Third Party Claim against such Indemnitee
with respect to which an Indemnifying Party is obligated to provide
indemnification under this Agreement, the Indemnitee will give such Indemnifying
Party reasonably prompt written notice thereof, but in any event not later than
20 calendar days after receipt of such notice of such Third Party Claim. Such
notice will describe the Third Party Claim in reasonable detail, will include
copies of all material written evidence thereof and will indicate the estimated
amount, if reasonably practicable, of the Indemnifiable Loss that has been or
may be sustained by the Indemnitee. The Indemnifying Party will have the right
to participate in, or, by giving written notice to the Indemnitee, to assume,
the defense of any Third Party Claim at such Indemnifying Party's own expense
and by such Indemnifying Party's own counsel (reasonably satisfactory to the
Indemnitee), and the Indemnitee will cooperate in good faith in such defense.
(b) If, within ten (10) calendar days after giving
notice of a Third Party Claim to an Indemnifying Party pursuant to Section
5.3(a), an Indemnitee receives written notice from the Indemnifying Party that
the Indemnifying Party has elected to assume the defense of such Third Party
Claim as
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provided in the last sentence of Section 5.3(a), the Indemnifying Party will not
be liable for any legal expenses subsequently incurred by the Indemnitee in
connection with the defense thereof; provided, however, that if the Indemnifying
Party fails to take reasonable steps necessary to defend diligently such Third
Party Claim within ten (10) calendar days after receiving written notice from
the Indemnitee that the Indemnitee believes the Indemnifying Party has failed to
take such steps or if the Indemnifying Party has not undertaken fully to
indemnify the Indemnitee in respect of all Indemnifiable Losses relating to the
matter, the Indemnitee may assume its own defense, and the Indemnifying Party
will be liable for all reasonable costs or expenses paid or incurred in
connection therewith. Without the prior written consent of the Indemnitee, the
Indemnifying Party will not enter into any settlement of any Third Party Claim
which would lead to liability or create any financial or other obligation on the
part of the Indemnitee for which the Indemnitee is not entitled to
indemnification hereunder. If a firm offer is made to settle a Third Party Claim
without leading to liability or the creation of a financial or other obligation
on the part of the Indemnitee for which the Indemnitee is not entitled to
indemnification hereunder and the Indemnifying Party desires to accept and agree
to such offer, the Indemnifying Party will give written notice to the Indemnitee
to that effect. If the Indemnitee fails to consent to such firm offer within ten
(10) calendar days after its receipt of such notice, the Indemnitee may continue
to contest or defend such Third Party Claim and, in
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such event, the maximum liability of the Indemnifying Party as to such Third
Party Claim will not exceed the amount of such settlement offer, plus costs and
expenses paid or incurred by the Indemnitee through the end of such ten (10)
calendar day period.
(c) Any claim by an Indemnitee on account of an
Indemnifiable Loss which does not result from a Third Party Claim (a "Direct
Claim") will be asserted by giving the Indemnifying Party reasonably prompt
written notice thereof, but in any event not later than twenty (20) calendar
days after the Indemnitee becomes aware of such Direct Claim, and the
Indemnifying Party will have a period of twenty (20) calendar days within which
to respond in writing to such Direct Claim. If the Indemnifying Party does not
so respond within such twenty (20) calendar day period, the Indemnifying Party
will be deemed to have rejected such claim, in which event the Indemnitee will
be free to pursue such remedies as may be available to the Indemnitee on the
terms and subject to the provisions of this Article VI.
(d) A failure to give timely notice or to include any
specified information in any notice as provided in Sections 5.2(a) or 5.2(b)
will not affect the rights or obligations of any party hereunder except and
only to the extent that such failure is actually prejudicial to the rights or
obligations of the Indemnifying Party.
(e) Any liability for any indemnification hereunder
shall be net of any insurance proceeds received by an Indemnitee with respect
to any Third Party Claim.
VI. MISCELLANEOUS PROVISIONS.
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6.1 Notices. All notices and other communications required or
permitted hereunder will be in writing and, unless otherwise provided in this
Agreement, will be deemed to have been duly given when delivered in person or
when dispatched by telegram or electronic facsimile transfer (confirmed in
writing by mail simultaneously dispatched) or one business day after having
been dispatched by a nationally recognized overnight courier service to the
appropriate party at the address specified below:
(a) If to the Partnership, New Lessee or IHC, to:
Interstate Hotels Corporation
Foster Plaza Ten, 680 Andersen Drive
Pittsburgh, PA 15220-8126
Facsimile No.: 412-937-8055
Attention: Kevin P. Kilkeary
With a copy to:
Interstate Hotels Corporation
Foster Plaza, 680 Andersen Drive
Pittsburgh, PA 15220-8126
Facsimile No.: 412-937-3116
Attention: Marvin I. Droz, Esquire
Senior Vice President and General
Counsel
(b) If to EIP or ENNS, to:
c/o Equity Inns, Inc.
4735 Spottswood, Suite 102
Memphis, TN 38117
Facsimile No.: (901) 761-3945
Attention: Chairman of the Board
With a copy to:
Hunton & Williams
2000 Riverview Tower
900 S. Gay Street
Knoxville, TN 37902
Facsimile No.: (423) 549-7704
Attention: David C. Wright, Esq.
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6.2 Successors and Assigns. This Agreement will be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. This Agreement may not be assigned by IHC,
New Lessee or the Partnership and the Leases may not be assigned by New Lessee
or the Partnership without the prior written consent of EIP and ENNS (except to
an entity under the control of (i) IHC or Company, (ii) the then senior
management of IHC, or (iii) Crossroads Hospitality Company L.L.C.), provided
that in connection with any such transaction, any transferee, assignee,
successor in interest to IHC, New Lessee or the Partnership agrees in writing
with EIP and ENNS to assume all of IHC's, New Lessee's and the Partnership's
obligations hereunder. During the term of the Leases, IHC, New Lessee and
Partnership agree that there will be no change in control of New Lessee or the
Partnership (except to an entity under the control of (i) IHC or Company, (ii)
the then senior management of IHC, or (iii) Crossroads Hospitality Company
L.L.C.) and any such change in control shall be deemed an assignment of the
Leases and this Agreement and which shall require the prior written consent of
EIP and ENNS. In no event shall a change in control, merger, consolidation or
sale of all or substantially all of the assets of IHC or Company or any
successor be deemed to be an assignment hereunder or under the Leases.
6.3 Waiver. IHC, New Lessee and the Partnership, on the one
hand, and ENNS and EIP, on the other hand, by written notice to the other may
(a) extend the time for performance of
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any of the obligations or other actions of the other under this Agreement, (b)
waive any inaccuracies in the representations or warranties of the other
contained in this Agreement, (c) waive compliance with any of the conditions or
covenants of the other contained in this Agreement, or (d) waive or modify
performance of any of the obligations of the other under this Agreement;
provided, however, that no such party may, without the prior written consent of
such other party, make or grant such extension of time, waiver of inaccuracies
or compliance or waiver or modification of performance with respect to its (or
any of its Affiliates') representations, warranties, conditions or covenants
hereunder. Except as provided in the immediately preceding sentence, no action
taken pursuant to this Agreement will be deemed to constitute a waiver of
compliance with any representations, warranties or covenants contained in this
Agreement and will not operate or be construed as a waiver of any subsequent
breach, whether of a similar or dissimilar nature.
6.4 Entire Agreement. This Agreement (including the Schedules
and Exhibits hereto) and as to the Partnership the Contribution Agreement
(including the Schedules and Exhibits thereto, to which EIP is neither a party
nor is bound) supersedes any other agreement, whether written or oral, that may
have been made or entered into by any party (or by any director, officer or
representative thereof) including that certain letter agreement dated September
12, 1996 relating to the matters contemplated hereby. This Agreement (together
with the Schedules and Exhibits hereto) and as to the Partnership, the
Contribution Agreement
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<PAGE> 46
(together with the Schedules and Exhibits thereto) constitute the entire
agreement by and among the parties hereto and thereto and there are no
agreements or commitments by or among such parties except as expressly set forth
herein and therein.
6.5 Amendments, Supplement. This Agreement may be amended or
supplemented at any time by additional written agreements signed by all of the
parties hereto.
6.6 Rights of the Parties. Except as specifically set forth
herein, nothing expressed or implied in this Agreement is intended or will be
construed to confer upon or give any person or entity other than the parties
hereto and where applicable, their respective Affiliates, successors and
permitted assigns any rights, duties, obligations or remedies under or by
reason of this Agreement or any transaction contemplated hereby.
6.7 Further Assurances. From time to time, as and when
requested by any party hereto, the other parties will execute and deliver, or
cause to be executed and delivered, all such documents and instruments as may
be reasonably necessary to consummate the transactions contemplated by this
Agreement.
6.8 Time of Essence. Time shall be of the essence for all
provisions of this Agreement.
6.9 Applicable Law. This Agreement and the legal relations
among the parties hereto will be governed by and construed in accordance with
the substantive Laws of the Commonwealth of Pennsylvania, without giving effect
to the principles of conflict of laws thereof. Any action arising out of this
Agreement may be brought in the state or federal courts
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<PAGE> 47
of Pennsylvania or Tennessee. The parties hereby irrevocably submit to the
exclusive jurisdiction of the appropriate state or federal court in
Pennsylvania for the purpose of any suit, action, proceeding or judgement
relating to or arising out of this Agreement. Each of the Partnership, IHC, New
Lessee, ENNS and EIP further agrees that service of any process, summons, notice
or document by U.S. registered mail to such party's respective address set forth
above shall be effective service of process for any action, suit or proceeding
in Pennsylvania with respect to any matters to which it has submitted to
jurisdiction as set forth above in the immediately preceding sentence. Each of
the Partnership, New Lessee, IHC, ENNS and EIP irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the transactions contemplated hereby in (a) the
Supreme Court of the Commonwealth of Pennsylvania or the State of Tennessee, or
(b) the United States District Court for the Western District of Pennsylvania or
Tennessee, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum. The parties
hereto unconditionally waive any right to a jury trial for any action, suit or
proceeding arising out of this Agreement or the transactions contemplated
hereby.
6.10 Execution in Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be
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<PAGE> 48
deemed an original, but all of which together shall constitute one and the same
agreement.
6.11 Titles and Headings. Titles and headings to Sections
herein are inserted for convenience of reference only, and are not intended to
be a part of or to affect the meaning or interpretation of this Agreement.
6.12 Certain Interpretive Matters and Definitions. (a) Unless
the context otherwise requires, (i) all references to Sections, Articles,
Schedules or Exhibits are to Sections, Articles, Schedules or Exhibits of or to
this Agreement, (ii) each term defined in this Agreement has the meaning
assigned to it, (iii) each accounting term not otherwise defined in this
Agreement has the meaning assigned to it in accordance with GAAP, (iv) "or" is
disjunctive but not necessarily exclusive and (v) words in the singular include
the plural and vice versa. All references to "$" or dollar amounts will be to
lawful currency of the United States of America.
(b) No provision of this Agreement will be interpreted
in favor of, or against, any of the parties hereto by reason of the extent to
which any such party or its counsel participated in the drafting thereof or by
reason of the extent to which any such provision is inconsistent with any prior
draft hereof or thereof.
6.13 Survival. To the extent that any obligations under this
Agreement requires action or involves liability or obligation after the
Closing, such obligation shall survive the Closing.
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<PAGE> 49
6.14 Invalid Provisions. If any provision hereof is held to be
illegal, invalid or unenforceable under present or future laws, such provision
shall be fully severable; this Agreement shall be construed and enforced as if
such illegal, invalid or unenforceable provision has never comprised a part
hereof; and the remaining provisions hereof shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom. In lieu of such illegal, invalid or
unenforceable provision there shall be added automatically as a part hereof a
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
6.15 Securitization Financing. If requested by EIP, IHC,
the Partnership and New Lessee agree to cooperate in good faith with EIP,
including considering forming a new bankruptcy-remote lessee entity to serve as
the lessee for one or more Hotels owned by EIP which are leased to the
Partnership or New Lessee, in connection with a securitized financing by EIP or
ENNS; provided that the business terms and the legal liabilities imposed upon
the Partnership, New Lessee or IHC shall not be materially different from those
under the arrangements contemplated by this Agreement, in the reasonable
judgment of the Partnership, IHC and/or New Lessee.
VII. DEFINITIONS
Unless otherwise expressly defined herein, the following terms
shall have the following meanings:
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<PAGE> 50
"ADR" shall mean total hotel room revenues divided by occupied
rooms.
"Affiliate" shall have the meaning given to such term in Rule
1-02 of Regulation S-X under the 1933 Act.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Company" shall mean Interstate Hotels Company, a Pennsylvania
corporation.
"Contamination" shall mean the intentional or unintentional
emission, discharge, release or threatened emission, discharge or release of any
Hazardous Substance to, on, onto or into the environment in any concentration
that now or in the future could pose a hazard or threat to human health or the
environment, and the past, current and future effects of such intentional or
unintentional emission, discharge, release or threatened emission, discharge or
release of Hazardous Substances to, on, onto or into the environment.
"Current Hotels" shall mean those hotels listed in Schedule
VIIa.
"Contribution Agreement" shall have the meaning given to such
term in Section 4.1.
"Development Costs" shall mean all land acquisition costs and
any and all hard and soft construction and preconstruction costs.
"Environmental Laws" shall mean all Laws (including, without
limitation, Permits, directives, guidelines, standards or the equivalent issued
by any Governmental Authority and relating
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<PAGE> 51
to or addressing Contamination, protection of the environment and/or occupation
or human health and safety.
"Environmental Liability" shall mean any and all liabilities,
losses, claims, penalties, damages or expenses costs (including, without
limitation, reasonable attorneys, consultants and engineers fees and expenses)
arising from or relating to compliance with any Environmental Law or arising
under any theory of Law or in equity relating to or arising from any
Contamination or the use, treatment, storage, disposal, transport, generation
or handling of any Hazardous Substances.
"Existing Leases" shall mean the leases for the Hotels between
EIP and TLI described on Schedule VIIb attached hereto.
"Franchisors" shall mean the franchisors with respect to the
Leased Hotels.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"Governmental Authority" shall mean any nation, or any
political subdivision thereof, or any agency, court or body of any such
government exercising executive, legislative, judicial, regulatory or
administrative functions.
"Hazardous Substances" shall mean any substance or material
that, whether by its nature or use, could be considered toxic or hazardous or
the exposure to which could pose a hazard or threat to human health or the
environment, or which is or contains petroleum, gasoline, diesel fuel or
another petroleum hydrocarbon product or friable asbestos or asbestos
containing materials or PCBs.
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<PAGE> 52
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as the same may be amended from time to time.
"IHC Guarantees" shall have the meaning given to such term in
Section 4.3.3 hereof.
"Indemnifiable Losses" shall mean any and all claims, demands
or suits (by any person or entity, including without limitation any Governmental
Authority), losses (including, direct, indirect, consequential or actual),
liabilities, damages, costs and expenses, including without limitation the costs
and expenses of any and all actions, suits, proceedings, demands, assessments,
judgments, settlements and compromises relating thereto and reasonable
attorneys', accountants', expert witness' or consultants' fees and expenses in
connection therewith.
"Indemnitee" shall mean any person or entity entitled to
indemnification under this Agreement.
"Indemnity Payment" shall mean any amount of Indemnifiable
Losses required to be paid pursuant to this Agreement.
"Laws" shall mean any law, decree, rule, order, regulation or
other governmental requirement of any governmental department, commission,
board, agency or instrumentality, domestic or foreign, having jurisdiction over
it or its assets or business or operations.
"Leased Hotels" shall mean all of the Current Hotels, together
with any hotels subject to a Lease by and between EIP and New Lessee or an
Affiliate of IHC.
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<PAGE> 53
"Leases" shall mean the Consolidated Lease Amendment and/or
any lease of a hotel or motel entered into by and between EIP and Partnership
or New Lessee or an Affiliate of IHC.
"Liens" shall mean any mortgages, liens, security interests,
leases, pledges, encumbrances, equities, claims, charges, options,
restrictions, rights of first refusal, title retention agreements or other
exceptions to title.
"Permits" shall mean any and all Licenses, franchises,
approvals, permits and other governmental authorizations.
"Promus Agreements" shall have the meaning set forth in Section
4.3.
"REVPAR" shall mean total room revenues divided by the number
of available room nights, net of any room nights for which a room is out of
service.
"SEC" shall mean the Securities and Exchange Commission.
"Subordination Agreement" shall mean an agreement in the form
of Exhibit G hereto.
"Subsidiary" shall have the meaning ascribed to such term in
Rule 1-02 of Regulation S-X under the 1933 Act.
"Third Party Claim" shall mean any claim, action or proceeding
made or brought by any person or entity who or which is not a party to this
Agreement or an Affiliate of a party to this Agreement.
"Transfer" shall mean sell, transfer, convey, pledge, assign
and/or deliver.
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<PAGE> 54
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
EQUITY INNS PARTNERSHIP, L.P.
By: EQUITY INNS TRUST,
general partner
By: /s/ Phillip H. McNeill
-----------------------------------
Title:
CROSSROADS/MEMPHIS PARTNERSHIP, L.P.
By: CROSSROADS/MEMPHIS COMPANY, L.L.C.
its general partner
By: /s/ Kevin P. Kilkeary
-----------------------------------
Title: President/CEO
-------------------------------
INTERSTATE HOTELS CORPORATION
By: /s/ Marvin I. Droz
-----------------------------------
Title:
EQUITY INNS, INC.
By: /s/ Phillip H. McNeill
-----------------------------------
Title:
CROSSROADS FUTURE COMPANY, L.L.C.
By: /s/ Kevin P. Kilkeary
-----------------------------------
Title: President/CEO
-------------------------------
<PAGE> 1
EXHIBIT 10.5
FIRST AMENDMENT TO MASTER AGREEMENT
THIS FIRST AMENDMENT TO MASTER AGREEMENT ("Amendment") is made
as of the 15th day of November, 1996 by and among CROSSROADS/FUTURE COMPANY,
L.L.C., a Delaware limited liability company ("New Lessee"), CROSSROADS/MEMPHIS
PARTNERSHIP, L.P., a Delaware limited partnership (the "Partnership"),
INTERSTATE HOTELS CORPORATION, a Pennsylvania corporation ("IHC"), EQUITY INNS
PARTNERSHIP, L.P., a Tennessee limited partnership ("EIP") and EQUITY INNS,
INC., a Tennessee corporation ("ENNS")
WITNESSETH:
WHEREAS, New Lessee, the Partnership, IHC, EIP and ENNS
entered into that certain Master Agreement, dated November 4, 1996 ("Master
Agreement"); and
WHEREAS, the parties wish to amend the Master Agreement in the
manner set forth in this Amendment;
NOW, THEREFORE, for valuable consideration, receipt of which
is hereby acknowledged, and intending to be legally bound, the parties hereto
agree as follows:
1. DEFINITIONS. Unless otherwise defined herein,
capitalized terms used in this Amendment have the definitions ascribed to them
in the Master Agreement.
2. EXHIBITS. (a) Exhibit A (Consolidated Lease Amendment)
to the Master Agreement is hereby deleted in its entirety and replaced with
Exhibit A attached to this Amendment.
(b) Exhibit F (IHC Guarantees) to the Master Agreement
is hereby deleted in its entirety and replaced with Exhibit F attached to this
Amendment (which shall include the Acknowledgment of Collateral Assignment of
Guaranty of Lease when requested by EIP).
3. CROSS-DEFAULT. (a) All of the Lessee's obligations
under the Leases shall be cross-defaulted. The phrase "but shall not be
cross-defaulted with the Consolidated Lease Amendment" is hereby deleted from
Section 1.5(e) of the Master Agreement.
(b) The parentheticals "(but without cross-default
provisions)" or "(without cross-default provisions)" are hereby deleted from
(i) the third sentence of Section 1.6(c) of the Master Agreement; (ii) Section
1.6(d) of the Master Agreement; and (iii) each of the seventh and eighth
sentences of Section 1.7(b) of the Master Agreement.
<PAGE> 2
4. CREDIT AGREEMENT THIRD AMENDMENT. With respect to the
Third Amendment to Credit Agreement and Other Credit Facility Documents dated as
of November 14, 1996 (the "Credit Amendment"), among EIP, Smith Barney Mortgage
Capital Group, Inc. and the other "Co-Lenders" (as defined in the Credit
Agreement), IHC, New Lessee and the Partnership agree to execute and deliver,
and cause Interstate Hotels Company and their "Affiliates" (as defined in the
Master Agreement) to execute and deliver, when applicable to and required by the
appropriate party, all as required by the Credit Agreement, (a) in the event of
an assignment of the Lessee's interest under a Lease in accordance with the
terms thereof, (i) an assumption by such successor Lessee of the Lessee's
obligations under the Lease, (ii) a subordination, nondisturbance and attornment
agreement in the form attached as Exhibit S to the Credit Agreement and (iii)
lease guarantees in the form of the IHC Guarantees attached as Exhibit R-1 to
the Credit Agreement and Exhibit F to this Amendment, (b) a subordination,
nondisturbance and attornment agreement in the form of Exhibit S to the Credit
Agreement upon the entering into of an Additional Lease and (c) an
acknowledgement of collateral assignment of guaranty of lease in form attached
as Exhibit T to the Credit Amendment and Exhibit F to this Amendment to the
Credit Agreement and Exhibit F to this Amendment, upon the execution and
delivery of any future IHC Guarantees of any leases entered into under the
Master Agreement.
5. MISCELLANEOUS. (a) The date "November 13, 1996" set
forth in Section 1.10 of the Master Agreement is deleted and replaced with
"November 15, 1996."
(b) The word "not" is hereby added immediately before
the word "terminate" in Section 3.4(b) of the Master Agreement.
6. EFFECT OF AMENDMENT. Except as expressly modified
hereunder, the Master Agreement shall remain in full force and effect.
7. HEADINGS. The headings of the paragraphs herein are
included solely for convenience of reference and shall not control the meaning
of the interpretation of any provision of this Amendment.
8. MERGER. The Master Agreement, as amended by this
Amendment, contains the entire understanding between the parties hereto and
supersedes any prior or contemporaneous contracts, agreement, understandings
and/or negotiations, whether oral or written.
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<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the day and the year first above-written.
EQUITY INNS PARTNERSHIP, L.P.
By: EQUITY INNS TRUST,
general partner
By: /s/ Phillip H. McNeill, Sr.
-------------------------------
Title: CEO
----------------------------
CROSSROADS/MEMPHIS PARTNERSHIP, L.P.
By: CROSSROADS/MEMPHIS COMPANY, L.L.C.
its general partner
By: /s/ Kevin P. Kilkeary
-------------------------------
Title: Vice President
---------------------------
INTERSTATE HOTELS CORPORATION
By: /s/ Kevin P. Kilkeary
-------------------------------
Title: Vice President
---------------------------
EQUITY INNS, INC.
By: /s/ Phillip H. McNeill, Sr.
-------------------------------
Title: CEO
---------------------------
CROSSROADS FUTURE COMPANY, L.L.C.
By: /s/ Kevin P. Kilkeary
-------------------------------
Title: Vice President
---------------------------
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