<PAGE>
EXHIBIT 10.33
LEASE AGREEMENT
DATED AS OF______________ 2000
BETWEEN
HUMPHREY HOSPITALITY LIMITED PARTNERSHIP
AS LESSOR
AND
_________________ HOSPITALITY MANAGEMENT, INC.
AS LESSEE
HOTEL, CITY, STATE
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<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
SECTION PAGE
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ARTICLE I...................................................................................................... 1
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1.1 Leased Property.............................................................................. 1
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1.2 Term......................................................................................... 2
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ARTICLE II..................................................................................................... 3
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Definitions........................................................................................... 3
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ARTICLE III.................................................................................................... 14
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3.1 Rent......................................................................................... 15
----
3.2 Additional Charges........................................................................... 15
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3.3 Lease Provision.............................................................................. 16
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3.4 Conversion of Property....................................................................... 16
----------------------
3.5 Annual Budget................................................................................ 17
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3.6 Books and Records............................................................................ 17
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ARTICLE IV..................................................................................................... 18
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4.1 Payment of Impositions....................................................................... 18
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4.2 Notice of Impositions........................................................................ 19
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4.3 Adjustment of Impositions.................................................................... 19
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4.5 Insurance Premiums........................................................................... 19
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ARTICLE V...................................................................................................... 19
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5.1 No Termination, Abatement, etc............................................................... 19
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5.2 Abatement Procedures......................................................................... 20
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ARTICLE VI..................................................................................................... 20
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6.1 Ownership of the Leased Property............................................................. 20
--------------------------------
6.2 Lessee's Personal Property................................................................... 20
--------------------------
6.3 Lessor's Lien................................................................................ 21
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ARTICLE VII.................................................................................................... 21
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7.1 Condition of the Leased Property............................................................. 21
--------------------------------
7.2 Use of the Leased Property................................................................... 22
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7.3 Lessor to Grant Easements, etc............................................................... 23
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ARTICLE VIII................................................................................................... 24
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8.1 Compliance with Legal and Insurance Requirements, etc........................................ 24
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8.2 Legal Requirement Covenants.................................................................. 24
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8.3 Environmental Covenants...................................................................... 25
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<TABLE>
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ARTICLE IX...................................................................................................... 27
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9.1 Capital Improvements, Maintenance and Repair.................................................. 27
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9.2 Encroachments, Restrictions, Etc.............................................................. 28
---------------------------------
ARTICLE X....................................................................................................... 29
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10.1 Alterations................................................................................... 29
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10.2 Salvage....................................................................................... 29
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10.3 Joint Use Agreements.......................................................................... 29
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ARTICLE XI...................................................................................................... 30
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Liens .............................................................................................. 30
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ARTICLE XII..................................................................................................... 30
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Permitted Contests..................................................................................... 30
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ARTICLE XIII.................................................................................................... 31
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13.1 General Insurance Requirements................................................................ 31
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13.2 Replacement Cost.............................................................................. 33
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13.3 Worker's Compensation......................................................................... 33
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13.4 Waiver of Subrogation......................................................................... 33
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13.5 Form Satisfactory, etc........................................................................ 33
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13.6 Change in Limits.............................................................................. 34
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13.7 Blanket Policy................................................................................ 34
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13.8 Separate Insurance.............................................................................34
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13.9 Reports On Insurance Claims................................................................... 34
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ARTICLE XIV..................................................................................................... 35
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14.1 Insurance Proceeds............................................................................ 35
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14.2 Reconstruction in the Event of Damage or Destruction Covered by Insurance..................... 35
-------------------------------------------------------------------------
14.3 Reconstruction in the Event of Damage or Destruction Not Covered by Insurance................. 36
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14.4 Lessee's Property............................................................................. 37
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14.5 Damage Near End of Term....................................................................... 37
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14.6 Waiver........................................................................................ 37
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ARTICLE XV...................................................................................................... 37
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15.1 Definitions................................................................................... 37
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15.2 Parties' Rights and Obligations............................................................... 38
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15.3 Total Taking.................................................................................. 38
------------
15.4 Allocation of Award........................................................................... 38
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15.5 Partial Taking................................................................................ 38
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15.6 Temporary Taking.............................................................................. 39
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15.7 Lessee's Offer................................................................................ 39
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<TABLE>
<S> <C>
ARTICLE XVI..................................................................................................... 39
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16.1 Events of Default............................................................................. 39
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16.2 Surrender..................................................................................... 39
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16.3 Damages....................................................................................... 41
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16.4 Waiver........................................................................................ 42
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16.5 Application of Funds.......................................................................... 42
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ARTICLE XVII.................................................................................................... 43
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Lessor's Right to Cure Lessee's Default................................................................ 43
---------------------------------------
ARTICLE XVIII................................................................................................... 43
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Provisions Relating to Purchase of the
--------------------------------------
Leased Property........................................................................................ 43
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ARTICLE XIX..................................................................................................... 44
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19.1 Personal Property Limitation.................................................................. 44
----------------------------
19.2 Sublease Rent Limitation...................................................................... 44
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19.3 Sublease Tenant Limitation.................................................................... 44
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19.4 Lessee Ownership Limitation................................................................... 44
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19.5 Lessee Officer and Employee Limitation........................................................ 45
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ARTICLE XX...................................................................................................... 45
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Holding Over........................................................................................... 45
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ARTICLE XXI..................................................................................................... 45
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Risk of Loss........................................................................................... 45
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ARTICLE XXII.................................................................................................... 46
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Indemnification........................................................................................ 46
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ARTICLE XXIII................................................................................................... 47
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23.1 Subletting and Assignment..................................................................... 47
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23.2 Attornment.................................................................................... 47
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ARTICLE XXIV.................................................................................................... 48
Officer's Certificates; Financial Statements; Lessor' Estoppel Certificates and Covenants.............. 48
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ARTICLE XXV..................................................................................................... 49
Lessor's Right to Inspect.............................................................................. 49
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ARTICLE XXVI.................................................................................................... 49
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No Waiver.............................................................................................. 49
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</TABLE>
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<TABLE>
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ARTICLE XXVII................................................................................................... 49
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Remedies Cumulative.................................................................................... 49
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ARTICLE XXVIII.................................................................................................. 49
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Acceptance of Surrender................................................................................ 49
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ARTICLE XXIX.................................................................................................... 50
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No Merger of Title..................................................................................... 50
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ARTICLE XXX..................................................................................................... 50
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Conveyance by Lessor................................................................................... 50
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Other Interests........................................................................................ 50
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ARTICLE XXXI.................................................................................................... 51
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Quiet Enjoyment........................................................................................ 51
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ARTICLE XXXII................................................................................................... 51
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Notices................................................................................................ 51
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ARTICLE XXXIII.................................................................................................. 51
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Appraisers............................................................................................. 51
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ARTICLE XXXIV................................................................................................... 52
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34.1 Lessor May Grant Liens........................................................................ 52
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34.2 Lessee's Right to Cure........................................................................ 53
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34.3 Breach by Lessor.............................................................................. 53
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ARTICLE XXXV.................................................................................................... 53
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35.1 Miscellaneous................................................................................. 53
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35.2 Transition Procedures......................................................................... 54
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35.3 Waiver of Presentment, etc.................................................................... 55
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ARTICLE XXXVI................................................................................................... 55
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Memorandum of Lease.................................................................................... 55
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ARTICLE XXXVII.................................................................................................. 55
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Lessor's Option to Purchase Assets of Lessee........................................................... 55
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ARTICLE XXXVIII................................................................................................. 55
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Lessor's Option to Terminate Lease..................................................................... 55
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ARTICLE XXXIX................................................................................................... 56
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Compliance with Franchise Agreement.................................................................... 56
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ARTICLE XL...................................................................................................... 56
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</TABLE>
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<TABLE>
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40.1 Room Set-Aside................................................................................ 56
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40.2 Capital Expenditures.......................................................................... 57
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40.3 Prohibited Expenditures....................................................................... 57
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</TABLE>
v
<PAGE>
Exhibit 10.33
LEASE AGREEMENT
---------------
THIS LEASE AGREEMENT (hereinafter called "Lease"), made as of the _____ day
of _________ 2000, by and between Humphrey Hospitality Limited Partnership a
Virginia limited partnership (hereinafter called "Lessor"), and
_________________ Hospitality Management, Inc. a Maryland corporation
(hereinafter called "Lessee"), provides as follows.
W I T N E S S E T H:
- - - - - - - - - -
Contemporaneously with the execution hereof, Lessor acquired the "Leased
Property" (as hereinafter defined) and entered into other leases with Lessee.
In furtherance of the consummation of such series of transactions, Lessor
and Lessee wish to enter into this Lease.
NOW, THEREFORE, Lessor, in consideration of the payment of rent by Lessee
to Lessor, the covenants and agreements to be performed by Lessee, and upon the
terms and conditions hereinafter stated, does hereby rent and lease unto Lessee,
and Lessee does hereby rent and lease from Lessor, the Leased Property.
ARTICLE I
---------
1.1. Leased Property. The leased property (the "Leased Property") is
---------------
comprised of Lessor's interest in the following:
(a) the land described in Exhibit "A" attached hereto and by reference
-----------
incorporated herein (the "Land");
(b) all buildings, structures and other improvements of every kind
including, but not limited to, alleyways and connecting tunnels, sidewalks,
utility pipes, conduits and lines (on-site and 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 or
the Leased Improvements;
1
<PAGE>
(d) all equipment, machinery, fixtures, and other items of property
required for or incidental to the use of the Leased Improvements as a hotel,
including all components thereof, now and hereafter permanently affixed to or
incorporated into the Leased Improvements, including, without limitation, all
furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water pollution control, waste
disposal, air-cooling and air-conditioning systems and apparatus, sprinkler
systems and fire and theft protection equipment, all of which to the greatest
extent permitted by law are hereby deemed by the parties hereto to constitute
real estate, together with all replacements, modifications, alterations and
additions thereto (collectively, the "Fixtures");
(e) all furniture and furnishings and all other items of personal
property (excluding Inventory and personal property owned by Lessee) located on,
and used in connection with, the operation of the Leased Improvements as a
hotel, together with all replacements, modifications, alterations and additions
thereto; and
(f) all existing leases of 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, THE LIEN OF FINANCING INSTRUMENTS,
MORTGAGES, DEEDS OF TRUST AND SECURITY DEEDS, AND INCLUDING OTHER MATTERS WHICH
WOULD BE DISCLOSED BY AN INSPECTION OF THE LEASED PROPERTY OR BY AN ACCURATE
SURVEY THEREOF.
1.2. Term. The term of the Lease (the "Term") shall commence on the date
----
hereof (the "Commencement Date") and shall end on the ________ anniversary of
the last day of the month in which the Commencement Date occurs unless the
Lessee chooses to renew the Lease for an additional five years, unless sooner
terminated in accordance with the provisions hereof.
2
<PAGE>
ARTICLE II
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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 3.2.
-------------------
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, five percent or more 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, limited liability companies, 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. For the purposes of this
definition, "control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such person,
through the ownership of voting securities, partnership interests or other
equity interests.
Annual Budget: As used in this Lease, the term "Annual Budget" shall mean
--------------
an operating and capital budget prepared by Lessee and delivered to Lessor in
accordance with Section 3.5.
Award: As defined in Section 15.1(c).
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3
<PAGE>
Base Rate: The rate of interest announced publicly by Citibank, N.A., in
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New York, New York, or any successor bank 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 Section 3.1(a).
---------
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that is
-------------
not a day on which national banks in the City of Washington, D.C., or in the
municipality wherein the Leased Property is located, are closed.
CERCLA: The Comprehensive Environmental Response, Compensation and
-------
Liability Act of 1980, as amended.
Code: The Internal Revenue Code of 1986, as amended.
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Commencement Date: As defined in Section 1.2 of the Lease.
------------------
Condemnation, Condemnor: As defined in Section 15.1.
------------------------
Consolidated Financials: For any fiscal year or other accounting period
-----------------------
for Lessee and its consolidated subsidiaries, statements of earnings and
retained earnings and of changes in financial position for such period and for
the period from the beginning of the respective fiscal year to the end of such
period and the related balance sheet as at the end of such period, together with
the notes thereto, all in reasonable detail and setting forth in comparative
form the corresponding figures for the corresponding period in the preceding
fiscal year, and prepared in accordance with generally accepted accounting
principles and audited by independent certified public accountants acceptable to
Lessor in its sole discretion.
Consolidated Net Worth: At any time, the sum of the following for Lessee
-----------------------
and any consolidated subsidiaries, on a consolidated basis determined in
accordance with generally accepted accounting principles:
(a) the amount of capital or stated capital (after deducting the cost of
any shares held in its treasury), plus
(b) the amount of capital surplus and retained earnings (or, in the case of
a capital or retained earnings deficit, minus the amount of such deficit), minus
4
<PAGE>
(c) the sum of the following (without duplication of deductions with
respect to items already deducted in arriving at surplus and retained earnings):
(1) unamortized debt discount and expense; and (2) any write-up in the book
value of assets resulting from a revaluation thereof subsequent to the date of
the most recent Consolidated Financials prior to the date thereof, except any
net write-up in value of foreign currency in accordance with generally accepted
accounting principles.
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).
Date of Taking: As defined in Section 15.1(b).
--------------
Encumbrance: As defined in Section 34.1.
-----------
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, the Leased Property or any property used therein and arising out of:
(a) Failure of Lessee, or Lessor 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;
5
<PAGE>
(c) A Release at any time of any Hazardous Materials on, in, at, under or
in any way affecting the Lease Property;
(d) Identification of Lessee or Lessor as a potentially responsible party
under CERLA 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
(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.
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 Leased Property such value shall be determined as if such
Leased Property had not been so damaged or destroyed.
FIFRA: The Federal Insecticide, Fungicide, and Rodenticide Act, as
-----
amended.
Fiscal Year: The 12-month period from January 1 to December 31.
------------
Fixtures: As defined in Section 1.1.
---------
6
<PAGE>
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 carpet, furniture, furnishings, wall
coverings, fixtures and hotel equipment and systems located at, or used in
connection with, the Facility, together with all replacements therefor and
additions thereto, including, without limitation, (i) all equipment and systems
required for the operation of kitchens, bars, if any, restaurants, if any, and
laundry and dry cleaning facilities, (ii) dining room wagons, materials handling
equipment, cleaning and engineering equipment, (iii) telephone and computerized
accounting systems, and (iv) 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 of the following with respect to the
Facility: reasonable and customary 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) the cost of insurance to be provided under Article XIII, (iii)
expenditures by Lessor pursuant to Article XIII and (iv) payments on any
Mortgage or other mortgage or security instrument on the Facility); 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. Reasonable out-of-
pocket expenses of Lessee incurred for the account of or in connection with the
Facility 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 Facility
without charge to such persons or Lessee.
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.
7
<PAGE>
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 unless such party is an
Affiliate of the Lessee in which case the gross receipts shall be included)
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 Facility 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.
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) including Real Estate
Taxes and Personal Property Taxes, assessments (including, without limitation,
all assessments for public improvements or benefit, whether or not commenced or
completed prior to the date hereof and whether or not to be completed within the
Term), ground rents, water, sewer or other rents and charges, excises, tax
inspection, authorization and similar fees and all other governmental charges,
in each case whether general or special, ordinary or extraordinary, or foreseen
or unforeseen, of every character in respect of the Leased Property or the
business conducted thereon by Lessee (including all interest and penalties
thereon caused by any failure in payment by Lessee), which at any time prior to,
during or with respect to the Term hereof may be assessed or imposed on or with
respect to or be a lien upon (a) Lessor's interest in the Leased Property, (b)
the Leased Property, or any part thereof or any rent therefrom or any estate,
right, title or interest therein, or (c) any occupancy, operation, use or
possession of, or
8
<PAGE>
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.
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.
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.
Land: As defined in Article I.
----
Lease: This Lease.
-----
Leased Improvements; Leased Property: Each as defined in Article I.
------------------------------------
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 respective permitted
------
successors and assigns.
9
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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, stockholders,
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.
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 or exchange for
partnership interests in the Lessor) plus (b) other capital expenditures on the
Leased Property made by Lessor after the date hereof plus (c) the unpaid
principal balance of all encumbrances against the Leased Property at the time of
purchase of the Leased Property by Lessee, less (x) all proceeds received by
Lessor from any financing or refinancing of the Leased Property after the date
hereof (after payment of any debt refinanced and net of any costs and expenses
incurred in connection with such financing or refinancing, including, without
limitation, loan points, commitment fees and commissions and legal fees) and (y)
the net amount (after deduction of all reasonable legal fees and other costs and
expenses, including without limitation expert witness fees, incurred by Lessor
in connection with obtaining any such proceeds or award) of all insurance
proceeds received by Lessor and awards received by Lessor from any partial
Taking of the Leased Property that are not applied to restoration.
Notice: A notice given pursuant to Article XXXII.
------
10
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Officer's Certificate: A certificate of Lessee reasonably acceptable to
---------------------
Lessor, signed by the chief financial officer or another officer authorized so
to sign by the board of directors or by-laws of Lessee, or any other person
whose power and authority to act has been authorized by delegation in writing by
any such officer.
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.
Other Revenues: Gross revenue from the operation of the Facility
--------------
excluding:
(a) Room Revenues;
(b) the amount of all credit, rebates or refunds to customers, guests or
patrons;
(c) all sales taxes or any other taxes imposed on such revenues.
Payment Date: Any due date for the payment of any installment of Base
------------
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 property owned by the Lessee), together with
all replacement, modifications, alterations and additions thereto.
Primary Intended Use: As defined in Section 7.2(b).
--------------------
Proceeding: Any judicial action, suit or proceeding (whether civil or
----------
criminal), any administrative proceeding (whether formal or informal), any
investigation by a governmental authority or entity (including a grand jury),
and any arbitration, mediation or other non-judicial process for dispute
resolution.
RCRA: The Resource Conservation and Recovery Act, as amended.
----
Real Estate Taxes: All real estate taxes, including general and special
-----------------
assessments, if any, which are imposed upon the Land and any improvements
thereon.
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.
11
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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, the Percentage Rent and Additional
----
Charges.
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;
(b) all sales taxes or any other taxes imposed on the rental of such guest
rooms; and
(c) any fees collected for amenities including, but not limited to:
telephone, laundry, movies or concessions.
SARA: The Superfund Amendments and Reauthorization Act of 1986, as
----
amended.
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").
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 1.2.
----
TSCA: The Toxic Substances Control Act, as amended.
----
12
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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 (after the application of any insurance proceeds if any) such that, in
the good faith judgment of Lessee, reasonably exercised and evidenced by the
resolution of the board of directors or other governing body of Lessee, the
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 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 (after the application of insurance proceeds if any) such that, in the
good faith judgment of Lessee, reasonably exercised and evidenced by the
resolution of the board of directors or other governing body of Lessee, due to
casualty damage or loss through Condemnation, the Facility cannot function as an
integrated hotel facility consistent with standards applicable to a well
maintained and operated hotel.
ARTICLE III
-----------
3.1. Rent. Lessee covenants and agrees to 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 without deduction or
offset, at Lessor's address set forth in Article XXXII hereof or at such other
place or to such other Person as Lessor from time to time may designate in a
Notice, all Base Rent and Additional Charges, during the Term, as follows:
(a) Base Rent: The annual sum of $___________, payable in arrears in
---------
equal, consecutive monthly installments, on or before the tenth day of each
calendar months 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;
and
(b) Percentage Rent: Commencing on the closing date, Lessee shall pay
---------------
percentage rent ("Percentage Rent") (i) monthly in arrears from the Closing Date
an amount equal to 8% of all monthly Other Revenue, and (ii) monthly in arrears
an amount equal to 17.9% of all monthly Room Revenues.
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(c) Officer's Certificates. An Officer's Certificate shall be delivered to
----------------------
Lessor monthly setting forth the calculation of the related monthly Percentage
Rent payments 30 days after the end of each such period of each Fiscal Year (or
part thereof) in the Term. The Percentage Rent payments for the periods to which
the Officer's Certificates relate shall accompany such Officer's Certificate.
Such monthly payments shall be based on the formula set forth in Section 3.1(b).
The obligation to pay Percentage Rent shall survive the expiration or
earlier termination of the Term, and a final reconciliation, taking into
account, among other relevant adjustments, any adjustments which are accrued
after such expiration or termination date but which related to Percentage Rent
accrued prior to such termination date, and Lessee's good faith 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. The accrual of Percentage Rent shall cease
with the termination of the Lease.
3.2. Additional Charges. In addition to the Base Rent and Percentage Rent,
------------------
(a) Lessee also will pay and discharge as and when due and payable all other
amounts, liabilities, obligations and Impositions that Lessee assumes or agrees
to pay under this Lease, and (b) in the event of any failure on the part of
Lessee to pay any of those items referred to in clause (a) of this Section 3.2,
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 3.2 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 and Percentage Rent. The Lessee's obligations regarding the
payment of Impositions are set out in Section 4.2. 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.
3.3 Lease Provision. The Rent shall be paid so that this Lease shall
---------------
yield to Lessor the full amount of the installments of Base Rent and 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.
14
<PAGE>
3.4 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. Once the "conversion" is approved or the Lessor has approved such
operations, the Lessee may lease such converted facilities. If the Lessee
desires to relet such facilities, the Lessor shall approve the terms of such
lease unless its terms are the same or more advantageous to the Lessor than
those of the prior lease.
15
<PAGE>
3.5 Annual Budget. Not later than fifteen (15) days prior to the
-------------
commencement of each Fiscal Year beginning with the Fiscal Year commencing
January 1, Lessee shall submit the Annual Budget to Lessor. The Annual Budget
shall be subject to the approval of the Lessor unless Net Operating Income for
such Fiscal Year, as of December 1, exceeds Net Operating Income for the prior
Fiscal Year by an amount greater than the amount change of the Consumer Price
Index during such period. The Annual budget shall contain the following:
(a) 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.
(b) An estimate of the amounts to be spent for the repair,
replacement, or refurbishment of Furniture and Equipment.
(c) An estimate of any amounts Lessor will be required to provide in
the forthcoming Fiscal Year for required or desirable items that would be
classified as capital items by generally accepted accounting principles, and
projections of the amounts that may be required in the two succeeding Fiscal
Years for such items.
(d) A cash flow projection.
(e) A narrative description of the program for advertising and
marketing the Facility 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 itemization.
3.6 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.
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 Columbia, Maryland, or Norfolk, Nebraska 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 the approval of Lessor.
ARTICLE IV
----------
4.1 Payment of Impositions. Subject to Article XII relating to permitted
----------------------
contests, Lessee will pay, or cause to be paid, all Impositions before any fine,
penalty, interest or cost may
16
<PAGE>
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 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 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. Lessee may, at its sole
expense, and upon notice to Lessor, protest, appeal or institute such other
proceedings (in its or in Lessor's name) as Lessee may deem appropriate to
effect a reduction for these Impositions to be paid by the Lessee, and Lessor,
at Lessee's expense, shall fully cooperate with Lessee in such protest, appeal
or other action. Lessor hereby agrees to indemnify, defend, and hold harmless
Lessee from and against any claims, obligations, and liabilities against or
incurred by Lessee in connection with such cooperation. Lessor, however,
reserves the right to effect any such protest, appeal or other action and, upon
notice to Lessee, shall control any such activity, which shall then go forward
at Lessor's sole expense. Upon such notice, Lessee, at Lessor's expense, shall
cooperate fully with such activities. If requested by any lender of the Lessor
relating to the Leased Property, the Lessee shall provide any funds for the
escrow of any Imposition, and the Lessee shall received any income on such
escrowed funds and shall receive any funds released from such escrow.
17
<PAGE>
4.2 Notice of Impositions. Lessor shall give prompt Notice to Lessee of
---------------------
all Impositions payable by Lessee hereunder of which Lessor at any time has
knowledge, provided that Lessor's failure to give any such Notice shall in no
way diminish Lessee's obligations hereunder to pay such Impositions, but such
failure shall obviate any default hereunder for a reasonable time after Lessee
receives Notice or has otherwise acquired knowledge 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 Maintenance. 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. To the extent provided in Section 13.1(b), Lessee
------------------
will pay or cause to be paid all premiums for the insurance coverages required
to be maintained by it under Article XIII.
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, (c) any claim which
Lessee has or might have against Lessor by reason of any default or breach of
any warranty by Lessor under this Lease or any other agreement between Lessor
and Lessee, or to which Lessor and Lessee are parties, (d) any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation, dissolution,
winding up or other proceedings affecting Lessor or any assignee or transferee
of Lessor, or (e) for any other cause whether similar or dissimilar to any of
the foregoing other than a discharge of Lessee from any such obligations as a
matter of law. Lessee hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law to
(1) modify, surrender or terminate this Lease or quit or surrender the Leased
Property or any portion thereof, or (2) entitle Lessee to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by Lessee
hereunder, except as otherwise specifically provided in this Lease. The
obligations of Lessee hereunder shall be separate and independent covenants and
agreements and the Rent and all other sums payable by Lessee hereunder shall
continue to be payable in all events unless the obligations to pay the same
18
<PAGE>
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 a court of competent jurisdiction 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
---------------------------
throughout the Term such Inventory as is required to operate the Leased Property
in the manner contemplated by this Lease. Lessee may (and shall as provided
hereinbelow), at its expense, install, affix or assemble or place on any parcels
of the Land or in any of the Leased Improvements, any items of personal property
(including Inventory) owned by Lessee. Lessee, at the commencement of the Term,
and from time to time thereafter, shall provide Lessor with an accurate list of
all such items of Lessee's personal property (collectively, the "Lessee's
Personal Property"). Lessee may, subject to the first sentence of this Section
6.2 and the conditions set forth below, remove any of Lessee's Personal Property
set forth on such list at any time during the Term or upon the expiration or any
prior termination of the Term. All of Lessee's Personal Property, other than
Inventory, not removed by Lessee within ten 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(a), including repair of
all damage to the Leased Property caused by the removal of Lessee's Personal
Property, effected by Lessee. 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 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
19
<PAGE>
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 PURPOSE OR OTHERWISE, AS TO THE
QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING
AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY LESSEE. LESSEE ACKNOWLEDGES THAT
THE LEASED PROPERTY HAS BEEN INSPECTED BY LESSEE AND IS SATISFACTORY TO IT.
Provided, however, to the extent permitted by law, Lessor shall allow Lessee the
benefit of all of Lessor's rights to proceed against any predecessor in title
other than Lessee (or an Affiliate of Lessee which conveyed the Property to
Lessor) for breaches of warranties or representations or for latent defects in
the Leased Property. Lessor shall fully cooperate with Lessee in the
prosecution of any such claim, in Lessor's or Lessee's name, all at Lessee's
sole cost and expense. Lessee hereby agrees to indemnify, defend and hold
harmless Lessor from and against any claims, obligations and liabilities against
or incurred by Lessor in connection with such cooperation. Provided, however,
that nothing herein shall be deemed to limit Lessor's obligations under Section
40.1 and 40.2.
7.2 Use of the Leased Property.
--------------------------
(a) Lessee covenants that it will 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 (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 in Lessor's sole
discretion. No use shall be made or permitted to be made of the Leased Property,
and no acts shall be done, which will cause the cancellation or substantially
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
20
<PAGE>
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 materially comply
with all the provisions of the Franchise Agreement (except that Lessee shall
have no obligation to complete any improvements to the Leased Property required
by the franchisor unless the Lessor funds the cost 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.
7.3 Lessor to Grant Easements, etc. Lessor will, from time to time, so
------------------------------
long as no Event of Default has occurred and is continuing, at the
request of Lessee and at Lessee's cost and expense (but subject to the
approval of Lessor, which approval shall not be unreasonably withheld
or delayed), (a) grant easements and other rights in the nature of
easements with respect to the Leased Property to third parties, (b)
release existing easements or other rights in the nature of easements
which are for the benefit of the Leased Property, (c) dedicate or
transfer unimproved portions of the Leased Property for road, highway
or other public purposes, (d) execute petitions to have the Leased
Property annexed to any municipal corporation or utility district, (e)
execute amendments to any covenants and restrictions affecting the
Leased Property and (f) execute and deliver to any person any
instrument appropriate to confirm or effect such grants, releases,
dedications, transfers, petitions and amendments (to the extent of its
interests in the Leased Property), but only upon delivery to Lessor of
an Officer's Certificate stating that such grant, release, dedication,
transfer, petition or amendment does not interfere with the proper
conduct of the business of Lessee on the Leased Property and does not
materially reduce the value of the Leased Property.
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ARTICLE 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 materially 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
materially comply with all Legal Requirements). Lessee may, however, upon prior
Notice to Lessor, contest the legality or applicability of any such Legal
Requirement or any licensure or certification decision if Lessee maintains such
action in good faith, with due diligence, without prejudice to Lessor's rights
hereunder, and at Lessee's sole expense. If by the terms of any such Legal
Requirement compliance therewith pending the prosecution of any such proceeding
may legally be delayed without the 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
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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 (1) all Environmental Liabilities; (2) all pending, threatened
or anticipated Proceedings, and all notices, demands, requests or
investigations, relating to any Environmental Liability or relating to the
issuance, revocation or change in any Environmental Authorization required for
operation of the Leased Property; (3) all Releases at, on, in, under or in any
way affecting the Leased Property, or any Release known by Lessee at, on, in or
under any property adjacent to the Leased Property; and (4) all facts, events or
conditions that could reasonably lead to the occurrence of any of the above-
referenced matters.
(b) Lessor hereby agrees to defend, indemnify and save harmless any
and all Lessee Indemnified Parties from and against any and all Environmental
Liabilities other than 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 Proceeding, or cause the same to be resisted and defended by counsel
designated by the Indemnified Party and approved by the Indemnifying Party,
which approval shall not be unreasonably withheld; provided, however, that such
approval shall not be required in the case of defense by counsel designated by
any insurance company undertaking such defense pursuant to any applicable policy
of insurance. Each Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel will be at the sole expense of such
Indemnified Party unless such counsel has been approved by the Indemnifying
Party, which approval shall not be unreasonably withheld. 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
judgement.
(e) At any time any Indemnified Party has reason to believe
circumstances exist which could reasonably result in an Environmental Liability,
upon reasonable prior 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
23
<PAGE>
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.
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
transferree's successors or assigns.
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<PAGE>
ARTICLE IX
----------
9.1 Capital Improvements, Maintenance and Repair.
--------------------------------------------
(a) Subject to Section 9.1(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 thereto of every kind and nature, whether interior or exterior, ordinary
or extraordinary, foreseen or unforeseen, or required by any governmental
agency having jurisdiction over the Leased Property, except as to the structural
elements of the Leased Improvements and underground utilities.
(b) Notwithstanding any other provision of this Lease, unless the need
for compliance with Section 9.1(a) is caused by Lessee's negligence or willful
misconduct or that of its employees or agents, Lessee shall not be required to
bear the costs of complying with Section 9.1(a) with respect to items classified
as either (i) capital items under U.S. generally accepted accounting principles
or (ii) Fixtures or Furniture and Equipment in, on, or under the Facility or its
components, except to the extent (X) that amounts are available therefor from
Lessor under Article XL or otherwise or (Y) required under Articles XIV and XV
on the conditions set forth therein.
(c) Article XL sets forth the only obligations of Lessor to fund the
cost of 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 post, as appropriate, notices of nonresponsibility
under any mechanic's lien laws now or hereafter existing.
(d) Lessee 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.
(e) Intentionally Omitted.
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(f) 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
9.1(a) 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 in the Lease).
9.2 Encroachments, Restrictions, Etc. If any of the Leased Improvements,
---------------------------------
at any time, materially encroach upon any property, street or right-of-way
adjacent to the Leased Property, or violate the agreements or conditions
contained in any lawful restrictive covenant or other agreement affecting the
Leased Property, or any part thereof, or impair the rights of others under any
easement or right-of-way to which the Leased Property is subject, then promptly
upon the request of Lessor or at the behest of any person affected by any such
encroachment, violation or impairment, Lessee shall, at its expense, subject to
its right to contest the existence of any encroachment, violation or impairment
and, in such case, in the event of an adverse final determination, either (a)
obtain valid and effective waivers or settlements of all claims, liabilities and
damages resulting from each such encroachment, violation or impairment, whether
the same shall affect Lessor or Lessee or (b) make such changes in the Leased
Improvements, and take such other actions, as Lessee in the good faith exercise
of its judgment deems reasonably practicable to remove such encroachment, and to
end such violation or impairment, including, if necessary, the alteration of any
of the Leased Improvements, and in any event take all such actions as may be
necessary in order to be able to continue the operation of the Leased
Improvements for the Primary Intended Use substantially in the manner and to the
extent the Leased Improvements were operated prior to the assertion of such
violation, impairment or encroachment. Any such alteration shall be made in
conformity with the applicable requirements of Article 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 or earlier termination of this Lease
shall pass to and become the property of Lessor.
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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.
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.
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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 XXV 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 and (2) any such liens are
in the process of being contested as permitted by Article XII hereof, (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 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 at Lessee's expense if
the same be required to legally prosecute such contest of
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the validity of such Claims; provided, however, that Lessor shall not thereby be
subjected to any liability for the payment of any costs or expenses in
connection with any proceedings brought by Lessee; and Lessee covenants to
indemnify and save harmless Lessor from any such costs or expenses. Lessee shall
be entitled to any refund of any Claims and such charges and penalties or
interest thereon which have been paid by Lessee or paid by Lessor and for which
Lessor has been fully reimbursed. In the event that Lessee fails to pay any
Claims when due or to provide the security therefor as provided in this
paragraph and to diligently prosecute any contest of the same, Lessor may, upon
ten days advance Notice to Lessee, pay such charges together with any interest
and penalties and the same shall be repayable by Lessee to Lessor as Additional
Charges at the next Payment Date provided for in this Lease. Provided, however,
that should Lessor reasonably determine that the giving of such Notice would
risk loss to the Leased Property or cause damage to Lessor, then Lessor shall
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.
------------------------------
(a) Coverages. 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 provided, however, that the Lessor shall be responsible for
payment of any insurance requested by it pursuant to paragraph (IX) of Section
13.1(a) of this Lease if not of a type customarily kept by similar business and
properties. This insurance shall be written by companies licensed and authorized
to issue 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. Any loss adjustment shall
require the written consent of Lessor and Lessee, each acting reasonably and in
good faith. Evidence of insurance shall be deposited with Lessor. The policies
on the Leased Property, including the Leased Improvements, Fixtures and Lessee's
Personal Property, shall include:
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(i) Building insurance on the "Special Form" (formerly "All Risk"
form) (which may include earthquake and flood in reasonable amounts as
determined by Lessor) in an amount not less than 100% of the then full
replacement cost thereof (as defined in Section 13.2) or such other amount which
is acceptable to Lessor, and personal property insurance on the "Special Form"
in the full amount of the replacement cost thereof;
(ii) Insurance for loss or damage (direct and indirect) from steam
boilers, pressure vessels or similar apparatus, now or hereafter installed in
the Facility, in the minimum amount of $5,000,000 or in such lesser or greater
amounts as are then customary or as may be reasonably requested by Lessor from
time to time;
(iii) Loss of income insurance on the "Special Form", in the amount
of one year of Base Rent for the benefit of Lessor, and business interruption
insurance on the "Special Form" in the amount of one year of gross profit, for
the benefit of Lessor or Lessee;
(iv) 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 "all risk legal liability" (including liquor law or "dram shop" liability,
if liquor or alcoholic beverages are served on the Leased Property) with respect
to Lessor and Lessee;
(v) 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;
(vi) 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;
(vii) Workmen's compensation insurance to the extent necessary to
protect Lessor and the Leased Property against Lessee's workman's compensation
claims;
(viii) Vehicle liability insurance for owned, non-owned, and hired
vehicles, in the amount of $1,000,000; and
(ix) Such other insurance as Lessor may reasonably request for
facilities such as the Leased Property and the operation thereof.
(b) Responsibility for Premiums. Lessee shall keep in force the foregoing
---------------------------
insurance coverages at its expense; provided, however, that Lessor shall
reimburse Lessee for any other casualty coverages required by Lessor not
specifically required in (i) - (viii) above. If requested
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by any Lender of the Lessor relating to the Leased Property, the Lessee shall
provide any funds for the escrow of any insurance premiums, and the Lessee shall
receive any income on such escrowed funds and shall receive any funds released
from such account.
13.2 Replacement Cost. The term "full replacement cost" as used herein
----------------
shall mean the actual replacement cost of the Leased Property requiring
replacement from time to time including an increased cost of construction
endorsement, if available, and the cost of debris removal. In the event either
party believes that full replacement cost (the then-replacement cost less such
exclusions) has increased or decreased at any time during the Lease Term, it
shall have the right to have such full replacement cost re-determined.
13.3 Worker's Compensation. Lessee, at its sole cost, shall at all times
---------------------
maintain adequate worker's compensation insurance coverage for all persons
employed by Lessee on the Leased Property. Such worker's compensation insurance
shall be in accordance with the requirements of applicable local, state and
federal law.
13.4 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. Each party agrees to seek recovery from any applicable insurance coverage
available to such party prior to seeking recovery against the other.
13.5 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 satisfactory to Lessor and also shall meet and satisfy the
requirements of any ground lessor, lender or franchisor having any interest in
the Leased Premises. Subject to the right to reimbursement or credit specified
in Section 13.1, 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 binding certificates thereof to Lessor at the times
required, Lessor shall be entitled, but shall have no obligation, to effect such
insurance and pay the premiums therefor, and Lessee shall reimburse Lessor for
any premium or premiums paid by Lessor for the coverages required under this
Section (other than the premiums required to be paid or reimbursed to Lessee by
Lessor in accordance with Section 13.1(b)) upon written demand therefor, and
Lessee's failure to repay the same within 30 days after Notice of such failure
from Lessor shall constitute an Event of Default within the meaning of Section
16.1(d). 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.
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13.6 Change 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.
13.7 Blanket Policy. Notwithstanding anything to the contrary contained in
--------------
this Article XIII, Lessee or Lessor may bring the insurance provided for herein
within the coverage of a so-called blanket policy or policies of insurance
carried and maintained by Lessee or Lessor; provided, however, that the coverage
afforded to Lessor and Lessee will not be reduced or diminished or otherwise be
different from that which would exist under a separate policy meeting all other
requirements of this Lease by reason of the use of such blanket policy of
insurance, and provided further that the requirements of this Article XIII are
otherwise satisfied.
13.8 Separate Insurance. Lessee shall not on Lessee's own initiative or
------------------
pursuant to the request or requirement of any third party, take out separate
insurance concurrent in form or contributing in the event of loss with that
required in this Article to be furnished, or increase the amount of any then
existing insurance by securing an additional policy or additional policies,
unless all parties having an insurable interest in the subject matter of the
insurance, including in all cases Lessor, are included therein as additional
insureds, 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.
13.9 Reports On Insurance Claims. Lessee shall promptly investigate and
---------------------------
make a complete and timely written report to the appropriate insurance company
as to all accidents, claims for damage relating to the ownership, operation, and
maintenance of the Facility, any damage or destruction to the Facility and the
estimated cost of repair thereof and shall prepare any and all reports required
by any insurance company in connection therewith. All such reports shall be
timely filed with the insurance company as required under the terms of the
insurance policy involved, and a final copy of such report shall be furnished to
Lessor. Lessee shall be authorized to adjust, settle, or compromise any
insurance loss, or to execute proofs of such loss, in the aggregate amount of
$5,000 or less, with respect to any single casualty or other event.
ARTICLE XIV
-----------
14.1 Insurance Proceeds. Subject to the provisions of Section 14.6, and
------------------
the senior rights of any lender, 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
32
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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.
14.2 Reconstruction in the Event of Damage or Destruction Covered by
---------------------------------------------------------------
Insurance.
---------
(a) Except as provided in Section 14.5, 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, 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.
(b) Except as provided in Section 14.5, 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. 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 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 30 days after
Lessee delivers its offer to Lessor, Lessee shall withdraw such offer, in which
event this Lease shall remain in full force and effect and Lessee shall
immediately proceed to restore the Facility to substantially the same condition
as existed immediately before such damage or destruction and otherwise in
accordance with the terms of the Lease. If Lessee restores the 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.
33
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(c) If the cost of the repair or restoration exceeds the amount of
proceeds received by Lessor from the insurance required under Article XIII,
Lessee shall be obligated to contribute any excess amounts needed to restore the
Facility prior to commencing work thereon. Such difference shall be paid by
Lessee to Lessor promptly after Lessee receives Lessor's written invoice
therefore, to be held in trust, together with any other insurance proceeds, for
application to the cost of repair and restoration.
(d) If Lessor accepts Lessee's offer to purchase the Leased Property
under this Article, this Lease shall terminate as to the Leased Property upon
payment of the purchase price, and Lessor shall remit to Lessee all insurance
proceeds pertaining to the Leased Property being held in trust by Lessor.
14.3 Reconstruction in the Event of Damage or Destruction Not Covered by
-------------------------------------------------------------------
Insurance.
---------
Except as provided in Section 14.5, if during the Term the Facility is totally
or materially 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)
at Lessee's sole cost and expense, restore the Facility to substantially the
same condition it was in immediately before such damage or destruction and such
damage or destruction shall not terminate this Lease, or (b) 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 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, at Lessee's sole cost and expense, restore the Facility to substantially
the same condition as existed immediately before the damage or destruction and
otherwise in accordance with the terms of the Lease, and such damage or
destruction shall not terminate the Lease.
14.4 Lessee's Property. 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 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 either party shall have the right to terminate
this Lease by giving written notice to the other within 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.
14.6 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.
34
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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, subject to the provisions of Section 15.7, this
Lease shall cease and terminate as of the Date of Taking by the Condemnor. If
title to the fee of less than the whole of the Leased Property is so taken or
condemned, which nevertheless renders the Leased Property Unsuitable or
Uneconomic for its Primary Intended Use, Lessee and Lessor shall each have the
option, by notice to the other, at any time prior to the Date of Taking, to
terminate this Lease as of the Date of Taking. Upon such date, if such Notice
has been given, this Lease shall thereupon cease and terminate. All Base Rent,
Percentage Rent and Additional Charges paid or payable by Lessee hereunder shall
be apportioned as of the Date of Taking, and Lessee shall promptly pay Lessor
such amounts. In the event of any such termination, the provisions of Section
15.7 shall apply.
15.4 Allocation of Award. The total Award made with respect to the Leased
-------------------
Property or for loss of rent, or for Lessor's loss of business beyond the Term,
shall be solely the property of and payable to Lessor. Any Award made for loss
of Lessee's business during the remaining Term, if any, for the taking of
Lessee's Personal Property, or for removal and relocation expenses of Lessee in
any such proceedings shall be the sole property of and payable to Lessee. In
any Condemnation proceedings Lessor and Lessee shall each seek its Award in
conformity herewith, at its respective expense; provided, however, Lessee shall
not initiate, prosecute or acquiesce in any proceedings that may result in a
diminution of any Award payable to Lessor.
35
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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 the expense of the Lessor shall with all reasonable
dispatch 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. In
the event of any Condemnation as described in this Section 15.5, the entire
amount of the Award shall be paid to the Lessor.
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,
Lessee, however, shall be released from its obligations to pay, in the manner
and at the terms herein specified, the pro rata amounts of Base Rent based on
the number of rooms affected by such Condemnation and the total rooms in the
Leased Property and Additional Charges. 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 described this Section 15.6, 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 Lessor.
Lessor covenants that upon the termination of any such period of temporary use
or occupancy it will, at its sole cost and expense, restore the Leased Property
as nearly as may be reasonably possible to the condition in which the same was
immediately prior to such Condemnation, unless such period of temporary use or
occupancy extends beyond the expiration of the Term, in which case Lessor shall
not be required to make such restoration.
15.7 Lessee's Offer. In the event of the termination of this Lease as
--------------
provided in Section 15.3, Lessee shall offer to acquire the Leased Property from
Lessor for a purchase price equal to the Rejectable Offer Price of the Leased
Property without regard to such taking and, if accepted, Lessee shall receive
the entire Award. If Lessor does not accept Lessee's offer to purchase the
Leased Property, Lessee shall 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, except for payment of Rent as
provided in the penultimate sentence of Section 15.3 or for matters which by
their express terms survive termination of this Lease, and Lessor shall be
entitled to retain the Award except as provided in Section 15.4.
ARTICLE XVI
-----------
16.1 Events of Default. If any one or more of the following events
-----------------
(individually, an "Event of Default") occurs:
36
<PAGE>
(a) if an Event of Default occurs, which is not cured, under any
other lease between Lessor and Lessee, any Affiliate of Lessee or Solomons
Beacon Inn Limited Partnership; or
(b) if Lessee fails to make payment of the Base Rent, Percentage Rent
or Additional Charges within ten days after the same becomes due
and payable;
(c) if Lessee fails to observe or perform any other term, covenant or
condition of this Lease and such failure is not cured by Lessee within a period
of 30 days after receipt by the Lessee of Notice thereof from Lessor, unless
such failure cannot with due diligence be cured within a period of 30 days, in
which case it shall not be deemed an Event of Default if Lessee proceeds
promptly and with due diligence to cure the failure and diligently completes the
curing thereof provided, however, in no event shall such cure period extend
beyond 90 days after such Notice; or
(d) if the Lessee shall file a petition in bankruptcy or
reorganization for an arrangement pursuant to any federal or state bankruptcy
law or any similar federal or state law, or shall be adjudicated a bankrupt or
shall make an assignment for the benefit of creditors or shall admit in writing
its inability to pay its debts generally as they become due, or if a petition or
answer proposing the adjudication of 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 Lessee shall be
adjudicated a bankrupt and such adjudication shall not be vacated or set aside
or stayed within 60 days after the entry of an order in respect thereof, or if a
receiver of the Lessee or of the whole or substantially all of the assets of the
Lessee shall be appointed in any proceeding brought by the Lessee or if any such
receiver, trustee or liquidator shall be appointed in any proceeding brought
against the Lessee and shall not be vacated or set aside or stayed within 120
days after such appointment; or
(e) if Lessee is liquidated or dissolved, or begins proceedings
toward such liquidation or dissolution, or, in any manner, permits the sale or
divestiture of substantially all of its assets; or
(f) if the estate or interest of Lessee in the Leased Property or any
part thereof is voluntarily or involuntarily transferred, assigned, conveyed,
levied upon or attached in any proceeding (unless Lessee is contesting such lien
or attachment in good faith in accordance with Article XII hereof); or
(g) if, except as a result of damage, destruction or a partial or
complete Condemnation, Lessee voluntarily ceases operations on the Leased
Property; or
(h) if a material event of default has been declared by the
franchisor under the Franchise Agreement with respect to the Facility on the
Leased Premises which has not been cured within any applicable cure period or
such Franchise Agreement has been terminated as a result of any action or
failure to act by the Lessee; then, and in any such event, Lessor may
37
<PAGE>
exercise one or more remedies available to it herein or at law or in equity,
including but not limited to its right to terminate this Lease by giving Lessee
not less than ten days' Notice of such termination except in the case of a
default under Sections 16.1(e),(f), or (g), in which case notice shall not be
required.
If litigation is commenced with respect to any alleged default under
this Lease, the prevailing party in such litigation shall receive, in addition
to its damages incurred, such sum as the court shall determine as its reasonable
attorneys' fees, and all costs and expenses incurred in connection therewith.
No Event of Default (other than a failure to make a payment of money)
shall be deemed to exist under clause (d) during any time for up to one year 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.
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:
38
<PAGE>
(1) Without termination of Lessee's right to possession of the Leased Property,
each installment of Rent (including Percentage Rent as determined below) and
other sums payable by Lessee to Lessor under the Lease as the same becomes due
and payable, which Rent and other sums shall bear interest at the Overdue Rate,
and Lessor may enforce, by action or otherwise, any other term or covenant of
this Lease;
(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, the
worth at the time of termination, repossession or reletting of
the amount referred to in this 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%, 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.
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 provisions of this Lease during the existence or continuance of any Event of
Default shall be applied to Lessee's obligations in the order that such
obligations are due or as may be prescribed by the laws of the State.
39
<PAGE>
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 the 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 action thereon as, in Lessor's reasonable
opinion, may be necessary or appropriate therefore. Before entering the Leased
Property for the purposes provided in this Article XVII, Lessor shall notify the
Lessee of its intention to enter the Leased Property unless such Notice would be
impractical. No such entry shall be deemed an eviction of Lessee. All sums so
paid by Lessor and all costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses, in each case to the extent permitted by
law) so incurred, together with a late charge thereon (to the extent permitted
by law) at the Overdue Rate from the date on which such sums or expenses are
paid or incurred by Lessors, shall be paid by Lessee to Lessor on demand. The
obligations of Lessee and rights of Lessor contained in this Article shall
survive the expiration or earlier termination of this Lease.
ARTICLE 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, the closing of the purchase shall occur 90 days after Lessor accepts
Lessee's offer to purchase the Leased Property, unless the provision of the
Lease under which such offer was made specifies a different closing date, in
which case the date set forth in such provision shall be the closing date. At
such closing, 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) encumbrances,
easements, licenses or rights of way required to be imposed on the Leased
Property under Section 7.3, (d) 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
and relating to the period of time after the purchase (e) any taxes not yet due
and payable; and (f) those encumbrances created, requested or consented to by
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,
40
<PAGE>
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. This Article XVIII is subject to the prior rights of any lender
whose lien is secured by the Leased Premises.
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 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. 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. Anything contained in this Lease to the contrary
---------------
notwithstanding, Lessee shall not sublease the Leased Property or any portions
thereof to any Person in which Humphrey Hospitality Trust, Inc. 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 or an Affiliate of the Lessee shall
acquire, directly or indirectly, a 10% or more interest in Humphrey Hospitality
Trust, Inc. 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 Humphrey Hospitality Trust, Inc. 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 trustee and officer (or employee) of Humphrey
Hospitality Trust, Inc. 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 trustee of
Humphrey Hospitality Trust, Inc. and (b) a director and officer (or employee) of
the Lessee (or any Person who furnishes or
41
<PAGE>
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 trustee of Humphrey Hospitality Trust, Inc.
ARTICLE XX
----------
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 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, and, in the absence of gross negligence, willful
misconduct or breach of this Lease by Lessor pursuant to Section 34.3, 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 the last sentence of Section 13.4 if any insurance coverage is
applicable, Section 16.4 and Article VII, Lessee will protect, indemnify, hold
harmless and defend Lessor Indemnified Parties from and against all liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including, without limitation, reasonable attorney's fees and expenses) to the
extent permitted by law imposed upon or incurred or asserted against Lessor
Indemnified Parties by reason of: 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
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a party or participant related to such use, misuse, non-use, condition,
management, maintenance, or repair thereof by Lessee or any of its agents,
employees or invitees, including any failure of Lessee or any of its agents,
employees or invitees to perform any obligations under this Lease or imposed by
applicable law (other than arising out of Condemnation proceedings), (c) any
Impositions that are the obligations of Lessee pursuant to the applicable
provisions of this Lease, (d) any failure on the 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 and (f) the gross
negligent acts and omissions and willful misconduct of Lessee.
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 the gross negligence or
willful misconduct of Lessor arising in connection with this Lease. The
Lessor's obligations to indemnify Lessee Indemnified Parties shall be limited to
the value of Lessor's equity interest in the Facilities. Nothing herein shall
be construed as requiring Lessor to indemnify a Lessee Indemnified Party against
its own grossly negligent acts and omissions and willful misconduct.
Any amounts that become payable by an Indemnifying Party under this Section
shall be paid within ten days after liability therefor on the part of the
Indemnifying Party is determined by litigation or otherwise, and if not timely
paid, shall bear a late charge (to the extent permitted by law) at the Overdue
Rate from the date of such determination to the date of payment. 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 neither the Indemnifying Party nor
the Indemnified Party may compromise or otherwise dispose of the same without
the consent of the Indemnified Party or the Indemnifying 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 not without the consent of Lessor, which consent may be
withheld in Lessor's sole discretion, (a) assign this Lease or sublet all or any
part of the Leased Property or (b) sublet any retail or restaurant portion of
the Leased Improvements in the normal course of the Primary Intended Use;
provided that any subletting to any party other than an Affiliate of Lessee
shall not individually as to any one such subletting, or in the aggregate,
materially diminish the Rent payable under this Lease. 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
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terms of this Lease on the part of Lessee to be kept and performed and shall be,
and become, jointly and severally liable with Lessee for the performance
thereof. In case of either an assignment or subletting made during the Term,
Lessee shall remain primarily liable, as principal rather than as surety, for
the prompt payment of the Rent and for the performance and observance of all of
the covenants and conditions to be performed by Lessee hereunder. An original
counterpart of each such sublease and assignment and assumption, duly executed
by Lessee and such sublessee or assignee, as the case may be, in form and
substance satisfactory to Lessor, shall be delivered promptly to Lessor.
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 thereunder will, at Lessor's option, attorn to Lessor
and waive any right the sublessee may have to terminate the sublease or to
surrender possession thereunder as a result of the termination of this Lease,
and (c) if the sublessee receives a written Notice from Lessor or Lessor's
assignees, if any, stating that an uncured Event of Default exists under this
Lease, the sublessee shall thereafter be obligated to pay all rentals accruing
under said sublease directly to the party giving such Notice, or as such party
may direct. All rentals received from the sublessee by Lessor or Lessor's
assignees, if any, as the case may be, shall be credited against the amounts
owing by Lessee under this Lease.
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 30 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) Lessee will furnish the following statements to Lessor:
(1) with reasonable promptness, such information respecting the
financial condition and affairs of Lessee, including audited financial
statements prepared by the same certified independent accounting firm
that prepares the returns for Lessor or such other accounting firm as
may be approved by Lessor, as Lessor may reasonably request from time
to time; and
(2) the most recent Consolidated Financials of Lessee within 45
days after each quarter of any Fiscal Year (or, in the case of the
final quarter in any
44
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Fiscal Year, the most recent audited Consolidated Financials of Lessee
within 90 days); and
(3) on or about the 15th day of each month, a detailed profit and
loss statement for the Leased Property for the preceding month, a
balance sheet for the Leased Property as of the end of the preceding
month, and a detailed accounting of revenues for the Leased Property
for the preceding month, each in form acceptable to Lessor.
(c) At any time and from time to time upon not less than 10 days
Notice by Lessee, Lessor will furnish to Lessee or to any person designated by
Lessee an estoppel certificate certifying that this Lease is unmodified and in
full force and effect (or that this Lease is in full force and effect as
modified and setting forth the modifications), the date to which Rent has been
paid, whether to the knowledge of Lessor there is any existing default or Event
of Default on Lessee's part hereunder, and such other information as may be
reasonably requested by Lessee.
(d) Lessee covenants that during the Term it will maintain a ratio of
total debt-to-Consolidated Net Worth of 50% or less, exclusive of capitalized
leases on an annual basis as of December 31, 1999.
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.
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
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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
-----------
Conveyance by Lessor. 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.
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 or which otherwise encumber or affect the Leased
Property and to any and all advances to be made thereunder and to all renewals,
modifications, consolidations, replacements, substitutions, and extensions
thereof (all of which are herein called the "Mortgage"). 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 attornment to the holder thereof,
conditioned upon receipt of a nondisturbance clause. 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.
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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 and free and clear of any interference by Lessor
with Lessee's use and occupancy of the premises. 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 or by overnight courier), if to Lessor at 7170
Riverwood Drive, Columbia, Maryland 21046, and if to Lessee 7170 Riverwood
Drive, Columbia, Maryland 21046 at 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.
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 20 days after Notice, Lessor (or Lessee, as the case may be)
shall by Notice to Lessee (or Lessor, as the case may be) appoint a second
person as appraiser on its behalf. The appraisers thus appointed, each of whom
must be a member of the American Institute of Real Estate Appraisers (or any
successor organization thereto) with at least five years experience in the State
appraising property similar to the Leased Property, shall, within 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
47
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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 20 days to appoint a third appraiser. If no such
appraiser shall have been appointed within such 20 days or within 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 one-half of the
fees and expenses of the third appraiser and one-half of all other costs and
expenses incurred in connection with each appraisal.
ARTICLE XXXIV
-------------
34.1 Lessor May Grant Liens. 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
lien, encumbrance or title retention agreement ("Encumbrance") upon the Leased
Property, or any portion thereof or interest therein, whether to secure any
borrowing or other means of financing or refinancing. Any such Encumbrance
shall (a) contain the right to prepay (whether or not subject to a prepayment
penalty); (b) provide that it is subject to the rights of Lessee under this
Lease and (c) contain the Agreement by the holder of the Encumbrance that it
will (1) give Lessee the same notice, if any, given to Lessor of any default or
acceleration of any obligation underlying any such Encumbrance or any sale in
foreclosure under such Encumbrance, (2) permit Lessee to cure any such default
on Lessor's behalf within any applicable cure period, and 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) and (3) permit Lessee to appear by
its representative and to bid at any sale in foreclosure made with respect to
any such Encumbrance. Upon the request of Lessor, Lessee shall subordinate this
Lease to the lien of a new mortgage on the Leased Property and agree to attorn
to the new mortgagee, on the condition that the proposed mortgagee executes a
non-disturbance agreement recognizing this Lease, and agreeing, for itself and
its successors and assigns, to comply with the provisions of this Article XXXIV.
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
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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 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. It shall be a breach of this Lease if Lessor fails to
----------------
observe or perform any term, covenant or condition of this Lease on its part to
be performed and such failure continues for a period of 30 days after Notice
thereof from Lessee, unless such failure cannot with due diligence be cured
within a period of 30 days, in which case such failure shall not be deemed to
continue if Lessor, within such 30-day period, proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof within
90 days. The time within which Lessor shall be obligated to cure any such
failure also shall be subject to extension of time due to the occurrence of any
Unavoidable Delay.
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
application of such term or provisions shall not be affected thereby. If any
late charges or any interest rate provided for in any provision of this Lease
are based upon a rate in excess of the maximum rate permitted by applicable law,
the parties agree that such charges shall be fixed at the maximum permissible
rate. Neither this Lease nor any provision hereof may be changed, waived,
discharged or terminated except by a written instrument in recordable form
signed by Lessor and Lessee. All the terms and provisions of this Lease shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and 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 all licenses,
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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, including any Franchise
Agreement (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 Agreement, 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 Lease, all funds remaining, if any,
after payment of all accrued Gross Operating Expenses, and other amounts due
Lessee and after 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 Option to Purchase Assets of Lessee. Effective on not less than
--------------------------------------------
90 days prior Notice given at any time within 180 days before the expiration of
the Term, but not later than 90 days prior to such expiration, or upon such
shorter Notice period as shall be appropriate if this Lease is terminated prior
to its expiration date, Lessor shall have the option to purchase all (but
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not less than all) of the assets of Lessee, tangible and intangible, relating to
the Leased Property (other than this Lease), at the expiration or termination of
this Lease for an amount (payable in cash on the expiration date of this Lease)
equal to the fair market value thereof as appraised in conformity with Article
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
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
---------------
Lessor's Option to Terminate Lease. In the event Lessor enters into a bona
----------------------------------
fide contract to sell the Leased Property to a non-Affiliate, Lessor may
terminate the Lease by giving not less than 30 days prior Notice to Lessee of
Lessor's election to terminate the Lease effective upon the closing under such
contract or Lessor may convey the Lease pursuant to Article XXX. Effective upon
such closing, this Lease shall terminate and be of no further force and effect
except as to any obligations of the parties existing as of such date that
survive termination of this Lease. As compensation for the early termination of
its leasehold estate under this Article XXXVIII, Lessor shall within six months
of such closing either (a) pay to Lessee the fair market value of Lessee's
leasehold estate hereunder or (b) offer to lease to Lessee one or more
substitute hotel facilities pursuant to one or more leases that would create for
the Lessee leasehold estates that have an aggregate fair market value of no less
than the fair market value of Lessee's leasehold estate hereunder, with the fair
market value of Lessee's leasehold estate hereunder determined as of the closing
of the sale of the Lease Property. If Lessor elects and complies with the
option described in (b) above, regardless of whether Lessee enters into the
lease(s) described therein, Lessor shall have no further obligations to Lessee
with respect to compensation for the early termination of this Lease. In the
event Lessor and Lessee are unable to agree upon the fair market value of an
original or replacement leasehold estate within 30 days, it shall be determined
by appraisal using the appraisal procedure set forth in Article XXXIII.
For the purposes of this Section, fair market value of the leasehold estate
means, as applicable, an amount equal to the price that a willing buyer not
compelled to buy would pay a willing seller not compelled to sell for Lessee's
leasehold estate under this Lease or an offered replacement leasehold estate.
ARTICLE XXXIX
-------------
Compliance with Franchise Agreement. To the extent any of the provisions
-----------------------------------
of the Franchise Agreement impose a greater obligation on Lessee than the
corresponding provisions of the Lease, then Lessee shall be obligated to comply
with, and to take all reasonable actions necessary to prevent breaches or
defaults under, the provisions of the Franchise Agreement. It is the intent of
the parties hereto that, except as otherwise specifically provided by this
Lease, Lessee shall comply in every respect with the provisions of the Franchise
Agreement so as to avoid any default thereunder during the term of this Lease.
Lessor and Lessee agree to cooperate
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fully with each other in the event it becomes necessary to obtain a franchise
extension or modification or a new franchise for the Leased Property.
ARTICLE XL
----------
40.1 Room Set-Aside. Lessee is obligated to repair or replace in any
--------------
Fiscal Year Fixtures and Furniture and Equipment (i) as required by the terms of
any Franchise Agreement, (ii) as required by Article IX and Article XXXIX and
(iii) otherwise when and in a manner it deems fit, to the extent funds are
available therefor from amounts the Lessor is obligated to make available to
Lessee under this Section 40.1 or otherwise makes available to Lessee. During
the Term Lessor shall be obligated to make available to Lessee for repairing or
replacing Fixtures and Furniture and Equipment an amount equal to 6% of Room
Revenues from the Facility for each twelve month period. Lessor shall be
required to make such amounts available to Lessee on a quarterly basis. Upon
written request by Lessee to Lessor stating the specific use to be made and the
reasonable approval thereof by Lessor, such funds shall be made available by
Lessor for use by Lessee for periodic repairing or replacement of Fixtures and
Furniture and Equipment that constitute Leased Property in connection with the
Primary Intended Use. Lessor's obligation shall be cumulative, but not
compounded, and any amounts that have accrued hereunder shall be payable in
future periods for such uses and in accordance with the procedure set forth
herein. Lessee shall be obligated to return any funds forwarded by Lessor
pursuant to this Section 40.1, but not spent for (i) repair or replacement of
Fixtures and Furniture and Equipment that constitute Leased Property in
connection with the Primary Intended Use or (ii) Capital Expenditures pursuant
to Section 40.2. Other than as specifically set forth above in this Section
40.1, Lessee shall have no interest in any accrued obligation of Lessor
hereunder and Lessor shall have no obligation to segregate or separate any such
funds for the benefit of Lessee.
40.2 Capital Expenditures. Lessor shall be obligated to pay the actual costs of
--------------------
any items that are classified as capital items under U.S. generally accepted
accounting principles which are necessary for the continued operation of the
Facility and otherwise approved by Lessor. To the extent that at the end of a
Fiscal Year the amount set aside exceeds the amount spent on repair or
replacement of Fixtures and Furniture and Equipment, the Lessee may apply such
excess amount towards Lessor's obligations under Section 40.2.
40.3 Prohibited Expenditures. 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.
IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
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Humphrey Hospitality Limited Partnership
By: Humphrey Hospitality REIT Trust
Its: General Partner
By: __________________________
Paul J. Schulte
Title: Chairman
By: __________________________
James I. Humphrey, Jr.
Title: President
_________________ Hospitality Management
By: __________________________
Randy P. Smith
Title: President
<PAGE>
Exhibit A
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PROPERTY DESCRIPTION
A-1
