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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
PURSUANT TO SECTION 12, 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 21, 1998
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PMC COMMERCIAL TRUST
(Exact name of Registrant as specified in its Charter)
TEXAS 0-22148 75-6446078
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or organization) file number) Identification Number)
17290 Preston Road
3rd Floor
Dallas, Texas 75252
(Address of principal executive offices)
Registrant's telephone number, including area code: (972) 349-3200
Not Applicable
(Former name or former address, if changed since last report)
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Item 5. Other Events.
(a) On June 3, 1998, PMC Commercial Trust, a Texas real estate investment
trust ("PMC Commercial"), and Supertel Hospitality, Inc., a Delaware corporation
("Supertel"), entered into an Agreement and Plan of Merger pursuant to which
Supertel will merge with and into PMC Commercial (the "Merger"). The
consideration to be paid by PMC Commercial would be 0.6 common shares of PMC
Commercial (the "Common Shares") for each share of Supertel, subject to
adjustment in the event the average trading price of the Common Shares for the
ten trading days ending five days before the respective shareholder meetings to
approve the Merger drops below $17.50 or increases above $24.00. The Merger is
subject to a number of conditions, including approval by the shareholders of PMC
Commercial and the stockholders of Supertel.
Additionally, the agreement provides that the stockholders of Supertel
will receive a preclosing dividend of certain of Supertel's earnings and profits
which, if less than $3.00 per share of Supertel Common Stock, allows Supertel to
terminate the agreement. The special dividend would be payable only if the
merger occurs. PMC Commercial anticipates that the Merger will be consummated in
September or October 1998.
Under the agreement, PMC Commercial would acquire the hotel assets of
Supertel in a transaction valued at approximately $134 million, including
approximately $61 million of equity (based on the closing price of the PMC
Commercial common shares on June 3, 1998) with the remainder consisting of the
assumption of debt and/or cash.
The 62 hotels (containing 4,453 rooms) acquired by PMC Commercial pursuant
to the merger will be leased to Norfolk Hospitality Management Co. (the
"Lessee"), an entity to be owned by certain officers and employees of Supertel.
The Lessee will pay an annual base rent of $15,000,000 (including certain
reserve requirements of $600,000) plus additional rent in the amount of 20% of
every dollar of annual gross revenues in the excess of $42,000,000 and 25% of
every dollar of gross revenues in excess of $50,000,000. The lease agreement has
a five year initial term with options for additional two year terms.
(b) On May 21, 1998, PMC Commercial entered into a definitive agreement to
acquire and leaseback 30 AmeriHost(R) hotels with Amerihost Properties, Inc., a
hotel development, operating and management company ("Amerihost"). The average
age of these properties is less than 3 years. The transaction is expected to
close within 90 days subject to customary procedures and documentation. This
acquisition reflects a modification to PMC Commercial's strategic growth plan to
target ownership in properties in addition to providing mortgages.
Under the terms of the agreement, Amerihost will guarantee the 10 year
lease on behalf of its wholly-owned subsidiary which will be the lessee of such
properties. The lease has an initial fixed payment of $7.3 million per year with
maximum 2 percent annual CPI increases beginning after the third year. The
contract also has two lease renewal options of five years each. The 30 hotels,
with a total of 1,834 rooms, were developed by Amerihost and are located in 13
states.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
2.1 Agreement and Plan of Merger, dated as of June 3, 1998 by and
between PMC Commercial Trust and Supertel Hospitality, Inc.
2.2 Agreement of Purchase and Sale, dated as of May 21, 1998, by and
among the various corporations identified on Exhibit A thereto.
10.1 Master Lease Agreement, dated as of June 3, 1998, by and between PMC
Commercial Trust and Norfolk Hospitality Management Co.
99.1 Press Release, dated May 21, 1998.
99.2 Press Release, dated June 4, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: June 5, 1998 PMC COMMERCIAL TRUST
By: /s/ Lance B. Rosemore
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Lance B. Rosemore
President and Chief Executive Officer
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PMC COMMERCIAL TRUST
INDEX TO EXHIBITS
EXHIBIT PAGE
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2.1 Agreement and Plan of Merger, dated as of June 3, 1998 by and
between PMC Commercial Trust and Supertel Hospitality, Inc.
2.2 Agreement of Purchase and Sale, dated as of May 21, 1998, by and
among the various corporations identified on Exhibit A thereto.
10.1 Master Lease Agreement, dated as of June 3, 1998, by and between PMC
Commercial Trust and Norfolk Hospitality Management Co.
99.1 Press Release, dated May 21, 1998.
99.2 Press Release, dated June 4, 1998.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
dated as of June 3, 1998
PMC COMMERCIAL TRUST
and
SUPERTEL HOSPITALITY, INC.
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TABLE OF CONTENTS
ARTICLE 1 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 CHARTER AND BYLAWS OF THE SURVIVING ENTITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Bylaws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 3 DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1 Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 4 STH STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.1 Conversion of the STH Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.2 Exchange of Certificates Representing STH Common Stock. . . . . . . . . . . . . . . . . . . . . . . . 4
4.3 Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF STH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.1 Existence; Good Standing; Authority; Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . 7
5.2 Authorization, Validity and Effect of Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.3 Capital Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.4 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.5 Other Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.6 No Violation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.7 SEC Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.8 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.9 Absence of Certain Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.11 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.12 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.13 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.14 No Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.15 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.16 PMCT Share Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.17 Related Party Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.18 Contracts and Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.19 Development Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.20 Certain Payments Resulting From Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.21 Convertible Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.22 Compliance with Applicable Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.23 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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5.24 Subsidiaries of STH. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.25 Acquisitions by STH and its Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 6 ADDITIONAL REPRESENTATIONS AND WARRANTIES AND COVENANTS RELATING TO HOTELS AND REAL PROPERTY . . . . 16
6.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.2 STH Deliverables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.3 STH Property Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF PMCT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1 Existence; Good Standing; Authority; Compliance with Law . . . . . . . . . . . . . . . . . . . . . . 22
7.2 Authorization, Validity and Effect of Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.3 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.4 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.5 Other Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.6 No Violation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.7 SEC Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.8 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.9 Absence of Certain Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.11 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.12 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.13 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.14 No Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.15 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.16 STH Share Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.17 PMCT Common Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.18 Convertible Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.19 Related Party Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.20 Contracts and Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 8 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1 Acquisition Proposals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.2 Earnings and Profits Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.3 Conduct of Businesses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.4 Damage to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.5 Meetings of Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.6 Filings; Other Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.7 Inspection of Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.8 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.9 Registration Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.10 Listing Application. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.11 Further Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.12 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.13 Governance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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8.14 Reorganization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.15 Third Party Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.16 Efforts to Fulfill Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.17 Representations, Warranties and Conditions Prior to Closing. . . . . . . . . . . . . . . . . . . . . 38
8.18 Cooperation of the Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.19 Tax Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.20 Directors and Officers Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.21 PMCT Earnings and Profits Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 9 CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.1 Conditions to Each Party's Obligations to Effect the Merger. . . . . . . . . . . . . . . . . . . . . 39
9.2 Conditions to Obligations of STH to Effect the Merger. . . . . . . . . . . . . . . . . . . . . . . . 40
9.3 Conditions to Obligation of PMCT to Effect the Merger. . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 10 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.1 Termination by Mutual Consent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.2 Termination by Either PMCT or STH. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.3 Termination by STH. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.4 Termination by PMCT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.5 Effect of Termination and Abandonment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.6 Extension; Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 11 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.2 Nonsurvival of Representations, Warranties and Agreements. . . . . . . . . . . . . . . . . . . . . . 45
11.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.4 Assignment; Binding Effect; Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.5 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.6 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.7 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.10 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.11 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.12 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.13 Incorporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.14 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.15 Enforcement of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.16 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.17 Non-Recourse. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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SCHEDULES
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Schedule 5.3 - Capitalization
Schedule 5.4 - Subsidiaries
Schedule 5.7 - SEC Documents
Schedule 5.8 - Litigation
Schedule 5.9 - Absence of Certain Changes
Schedule 5.10 - Taxes
Schedule 5.12 - Employee Benefit Plans
Schedule 5.13 - Labor Matters
Schedule 5.16 - PMCT Share Ownership
Schedule 5.18 - Contracts and Commitments
Schedule 5.19 - Development Rights
Schedule 5.20 - Certain Payments Resulting From Transactions
Schedule 5.21 - Convertible Securities
Schedule 5.22 - Compliance with Applicable Regulations
Schedule 5.23 - Insurance
Schedule 6.1(a) - Title
Schedule 6.1(d) - Operating Agreements
Schedule 6.1(g) - Violations of Applicable Law
Schedule 6.1(i) - Administrative Actions
Schedule 6.1(j) - Zoning
Schedule 6.1(r) - Compliance with Architectural Barriers Legislation
Schedule 6.1(s) - Environmental
Schedule 7.3 - Capitalization
Schedule 7.4 - Subsidiaries
Schedule 7.7 - SEC Documents
Schedule 7.8 - Litigation
Schedule 7.10 - Taxes
Schedule 7.12 - Employee Benefit Plans
Schedule 7.16 - STH Share Ownership
Schedule 7.19 - Related Party Transactions
Schedule 7.20 - Contracts and Commitments
Exhibit 9.3(d) - Affiliates
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of June
3, 1998, is entered into by and between PMC Commercial Trust, a Texas real
estate investment trust ("PMCT") and Supertel Hospitality, Inc., a Delaware
corporation ("STH").
RECITALS
A. The Board of Trust Managers of PMCT and the Board of Directors
of STH each have determined that a business combination between PMCT and STH is
in the best interests of their respective shareholders and presents an
opportunity for their respective companies to achieve long-term strategic and
financial benefits, and accordingly have agreed to effect a merger subject to
the terms and conditions set forth herein.
B. For federal income tax purposes, it is intended that the
merger provided for herein shall qualify as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and for financial accounting purposes shall be accounted for as a
"purchase."
C. PMCT and STH desire to make certain representations,
warranties and agreements in connection with the merger.
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties, covenants and agreements contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, PMCT and STH hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this
Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL") and the Texas Real Estate Investment Trust Act (the "REIT Act"), at the
Effective Time (as defined in Section 1.3), STH shall be merged with and into
PMCT (the "Merger"). Following the Merger, the separate existence of STH shall
cease and PMCT shall be the surviving entity in the Merger (the "Surviving
Entity"). The Merger shall have the effects specified in Section 254 of the
DGCL and Section 23.10 of the REIT Act.
1.2 The Closing. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place at the
offices of Winstead Sechrest & Minick P.C., located at 1201 Elm, 5400
Renaissance Tower, Dallas, Texas 75270, at 9:00 a.m., local time, on the second
business day after satisfaction or waiver of the conditions set forth in
Article 9, or at such other time, date or place as PMCT and STH may agree. The
date on which the Closing occurs is hereinafter referred to as the "Closing
Date."
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1.3 Effective Time. If all the conditions to the Merger set forth
in Article 9 shall have been fulfilled or waived (and this Agreement shall not
have been terminated as provided in Article 10), PMCT and STH shall cause a
certificate of merger satisfying the requirements of the DGCL and articles of
merger satisfying the requirements of the REIT Act to be properly executed,
verified and delivered for filing in accordance with the DGCL and the REIT Act
and shall make all other filings or recordings required under the DGCL and the
REIT Act. The Merger shall become effective upon the later of (i) the filing
of the articles of merger with the County Clerk of Dallas County, Texas and
(ii) the filing of the certificate of merger with the Secretary of State of the
State of Delaware in accordance with the DGCL, or at such later time which PMCT
and STH shall have agreed upon and designated in such filings in accordance
with applicable law.
ARTICLE 2
CHARTER AND BYLAWS OF THE SURVIVING ENTITY
2.1 Charter. The Declaration of Trust of PMCT in effect
immediately prior to the Effective Time shall be the charter of the Surviving
Entity, until duly amended in accordance with applicable law.
2.2 Bylaws. The Bylaws of PMCT in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Entity, until duly amended
in accordance with applicable law.
ARTICLE 3
DIRECTORS AND OFFICERS
3.1 Directors. The Board of Trust Managers of PMCT immediately
prior to the Effective Time shall be the Board of Trust Managers of the
Surviving Entity as of the Effective Time and immediately following the
Effective Time Paul J. Schulte shall be elected as a trust manager of the
Surviving Entity.
3.2 Officers. The officers of PMCT immediately prior to the
Effective Time shall be the officers of the Surviving Entity as of the
Effective Time.
ARTICLE 4
STH STOCK
4.1 Conversion of the STH Stock.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, each share of the common stock, par
value $0.01 per share (the "STH Common Stock"), of STH issued and outstanding
immediately prior to the Effective Time shall, except as provided in Section
4.3 with respect to shares of STH Common Stock as to which appraisal rights, if
available, shall have been exercised, cease to be outstanding and be converted
into the right to
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receive six-tenths (0.6) of a common share of beneficial interest, par value
$0.01 per share (the "PMCT Common Shares"), of PMCT (the "Exchange Ratio"). If
the Average PMCT Trading Price (as defined below) is (i) greater than $24.00,
PMCT shall have the right to terminate this Agreement, in the manner provided
in Section 4.1(b), unless STH shall elect, in the manner provided in Section
4.1(b), to decrease the Exchange Ratio to a fraction equal to (A) $14.40
divided by (B) the Average PMCT Trading Price, calculated to the nearest
one-one thousandth of a share, or (ii) less than $17.50, STH shall have the
right to terminate this Agreement, in the manner provided in Section 4.1(b)
unless PMCT shall elect, in the manner provided in Section 4.1(b), to increase
the Exchange Ratio to a fraction equal to (A) $10.50 divided by (B) the Average
PMCT Trading Price.
"Average PMCT Trading Price" shall mean the average of the closing
sale prices per PMCT Common Share on the American Stock Exchange for the ten
trading days ending on the fifth trading day immediately preceding the
scheduled date of the first of the meetings contemplated by Section 8.5 (the
"Determination Date").
(b) In the event that either PMCT or STH shall elect to terminate
this Agreement in the circumstances contemplated by Section 4.1(a), then the
party initiating the termination (the "Terminating Party") shall give notice of
termination (the "Termination Notice") to the other party hereto (the
"Receiving Party") prior to 6:00 p.m. (Dallas time) on the first trading day
following the Determination Date. Such termination shall become effective
automatically, without the action of either party, at 6:00 p.m. (Dallas time)
on the trading day immediately preceding the date of the first of the meetings
contemplated by Section 8.5, unless prior to 6:00 p.m. (Dallas time) on the
second trading day following the Determination Date, the Receiving Party shall
deliver notice to the Terminating Party to the effect that it has elected to
increase or decrease the Exchange Ratio, as the case may be, in the manner
contemplated by Sections 4(a)(i) and 4(a)(ii).
(c) As a result of the Merger and without any action on the part
of the holder thereof, at the Effective Time, except as provided in Section 4.3
with respect to shares of STH Common Stock as to which appraisal rights, if
available, shall have been exercised, each holder of a certificate (a
"Certificate") representing any shares of STH Common Stock shall thereafter
cease to have any rights with respect to such shares of STH Common Stock,
except the right to receive, without interest, the PMCT Common Shares and cash
for fractional shares of PMCT Common Shares in accordance with Sections 4.1(a)
and 4.2(d) upon the surrender of such Certificate.
(d) Each share of STH Common Stock issued and held in STH's
treasury at the Effective Time, if any, shall, by virtue of the Merger, cease
to be outstanding and shall be canceled and retired without payment of any
consideration therefor.
(e) (i) As soon as practicable following the date of this
Agreement, the Board of Directors of STH (or, if appropriate, any
committee administering STH's 1994 Stock Option Plan and 1997 Stock
Plan (together, the "STH Stock Option Plans")) shall adopt such
resolutions or take such other actions as may be required to effect
the following with respect to all options to purchase shares of STH
Common Stock granted under the STH Stock Option Plans or otherwise
("Options") not exercised prior to the Closing Date:
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(A) adjust the terms of all such Options to
purchase shares of STH Common Stock to provide that, at the
Effective Time, each Option outstanding and not otherwise
exercised immediately prior to the Effective Time shall expire
and the holder of such Option shall only be entitled to
receive, with respect to such Option, a number of PMCT Common
Shares equal to the quotient of (1) the product of (x) the
difference between the product of the Exchange Ratio
multiplied by the Average PMCT Trading Price minus the
exercise price per share of STH Common Stock issuable upon the
exercise of such Option multiplied by (y) the number of shares
of STH Common Stock for which such Option was exercisable
divided by (2) the Average PMCT Trading Price, calculated to
the nearest one-one thousandth of a share, subject to the
provisions of Section 4.1(c) hereof; and
(B) make such other changes to the STH Stock
Option Plans as it deems appropriate to give effect to the
Merger (subject to the approval of PMCT, which approval shall
not be unreasonably withheld).
(ii) The provisions in the STH Stock Option Plans
providing for the issuance, transfer or grant of any capital stock of
STH or any interest in respect of any capital stock of the STH shall
be deleted as of the Effective Time, and STH shall use its best
efforts to ensure that following the Effective Time no holder of an
Option or any participant in any STH Stock Option Plan shall have any
right thereunder to acquire any capital stock of STH, PMCT or the
Surviving Corporation, except as provided in Section 4.1(e)(i).
(iii) From and after the date of this Agreement, no
additional options shall be granted by STH or the STH Subsidiaries (as
hereinafter defined) under the STH Stock Option Plans or otherwise,
except as may be required by the terms of the STH Stock Option Plans
with respect to non-employee directors of STH.
4.2 Exchange of Certificates Representing STH Common Stock.
(a) As of the Effective Time, PMCT shall deposit, or shall cause
to be deposited, with an exchange agent selected by PMCT, which shall be PMCT's
Transfer Agent or such other party reasonably satisfactory to STH (the
"Exchange Agent"), for the benefit of the holders of shares of STH Common
Stock, for exchange in accordance with this Article 4, certificates
representing the shares of PMCT Common Shares and the cash in lieu of
fractional shares (such cash and certificates for shares of PMCT Common Shares
together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund") to be issued pursuant to
Section 4.1 and paid pursuant to this Section 4.2 in exchange for outstanding
shares of STH Common Stock.
(b) Promptly after the Effective Time, PMCT shall cause the
Exchange Agent to mail to each holder of record of a Certificate or
Certificates (i) a letter of transmittal which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as PMCT may reasonably specify and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of PMCT Common Shares and
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cash in lieu of fractional shares. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly executed and completed in accordance with the instructions thereto, and
such other documents as may be reasonably required by the Exchange Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor
(A) a certificate representing the number of whole shares of PMCT Common Shares
and (B) a check representing the amount of cash in lieu of fractional shares,
if any, and unpaid dividends and distributions, if any, which such holder has
the right to receive in respect of the Certificate surrendered pursuant to the
provisions of this Article 4, after giving effect to any required withholding
tax, and the Certificate so surrendered shall forthwith be canceled.
No interest will be paid or accrued on the cash in lieu of fractional
shares and unpaid dividends and distributions, if any, payable to holders of
Certificates. In the event of a transfer of ownership of STH Common Stock
which is not registered in the transfer records of STH, a certificate
representing the proper number of shares of PMCT Common Shares, together with a
check for the cash to be paid in lieu of fractional shares, may be issued to
such a transferee if the Certificate representing shares of such STH Common
Stock is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid.
(c) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions on PMCT Common Shares shall be paid with
respect to any shares of STH Common Stock represented by a Certificate until
such Certificate is surrendered for exchange as provided herein. Subject to
the effect of applicable laws, following surrender of any such Certificate,
there shall be paid to the holder of the certificates representing whole shares
of PMCT Common Shares issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore payable with respect to such
whole shares of PMCT Common Shares and not paid, less the amount of any
withholding taxes which may be required thereon, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment date subsequent
to surrender payable with respect to such whole shares of PMCT Common Shares,
less the amount of any withholding taxes which may be required thereon.
(d) At and after the Effective Time, there shall be no transfers
on the stock transfer books of STH of the shares of STH Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to PMCT, they shall be delivered to the
Exchange Agent, canceled and exchanged for certificates for shares of PMCT
Common Shares and cash in lieu of fractional shares, if any, and unpaid
dividends and distributions deliverable in respect thereof pursuant to this
Agreement in accordance with the procedures set forth in this Article 4.
(e) No fractional shares of PMCT Common Shares shall be issued
pursuant hereto. Notwithstanding any other provision of this Agreement, each
holder of shares of STH Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a PMCT Common Share
(after taking into account all Certificates delivered by such
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holder) shall receive, from the Exchange Agent in accordance with the
provisions of this Section 4.1(e), a cash payment in lieu of such fractional
PMCT Common Shares.
(f) Any portion of the Exchange Fund (including the proceeds of
any investments thereof and PMCT Common Shares) that remains unclaimed by the
former stockholders of STH one year after the Effective Time shall be delivered
to PMCT. Any former stockholders of STH who have not theretofore complied with
this Article 4 shall thereafter look only to PMCT for delivery of their PMCT
Common Shares, and payment of cash in lieu of fractional shares and unpaid
dividends and distributions on the PMCT Common Shares deliverable in respect of
each share of STH Common Stock such stockholder holds as determined pursuant to
this Agreement, in each case, without any interest thereon.
(g) None of PMCT, STH, the Exchange Agent or any other person
shall be liable to any former holder of shares of STH Common Stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(h) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by PMCT or
the Exchange Agent, the posting by such person of a bond in such reasonable
amount as PMCT may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent or PMCT will
issue in exchange for such lost, stolen or destroyed Certificate the PMCT
Common Shares and cash in lieu of fractional shares, and unpaid dividends and
distributions on PMCT Common Shares as provided in Section 4.2(c), deliverable
in respect thereof pursuant to this Agreement.
4.3 Appraisal Rights. Notwithstanding the terms of Section
4.1(a), to the extent appraisal rights are available under Section 262 of the
DGCL, shares of STH Common Stock outstanding immediately prior to the Effective
Time and held by a holder who has properly exercised appraisal rights for such
shares in accordance with the DGCL and who, as of the Effective Time has not
effectively withdrawn or lost such appraisal rights (the "Dissenting Shares"),
shall not be converted into the right to receive PMCT Common Shares as provided
in Section 4.1(a), but shall be converted into the right to receive such
consideration as may be determined to be due with respect to such Dissenting
Shares pursuant to the DGCL. If after the Effective Time such holder fails to
perfect or withdraws or loses his or her appraisal rights, such shares of STH
Common Stock shall be treated as if they had been converted as of the Effective
Time into the right to receive PMCT Common Shares as provided in Section
4.1(a). STH shall give PMCT prompt written notice of any demands received by
STH for appraisals of shares of STH Common Stock. STH shall not, except with
the prior written consent of PMCT, make any payment with respect to, or settle
or offer to settle, any such demands.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF STH
STH represents and warrants to PMCT as set forth below and subject to those
matters set forth in the Disclosure Schedule.
5.1 Existence; Good Standing; Authority; Compliance with Law. STH
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware. STH is duly licensed or qualified to do
business as a foreign corporation and is in good standing under the laws of any
other state of the United States in which the character of the properties owned
or leased by it therein or in which the transaction of its business makes such
qualification necessary, except where the failure to be so qualified would not
have a material adverse effect on the business, results of operations or
financial condition of STH and the STH Subsidiaries taken as a whole (an "STH
Material Adverse Effect"). STH has all requisite corporate power and authority
to own, operate, lease and encumber its properties and carry on its business as
now conducted. Each STH Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, has the corporate power and authority to own its properties and
to carry on its business as it is now being conducted, and is duly qualified to
do business and is in good standing in each jurisdiction in which the ownership
of its property or the conduct of its business requires such qualification,
except for jurisdictions in which such failure to be so qualified or to be in
good standing would not have an STH Material Adverse Effect.
Neither STH nor any of the STH Subsidiaries is in violation of any
order of any court, governmental authority or arbitration board or tribunal, or
any law, ordinance, governmental rule or regulation to which STH or any STH
Subsidiary or any of their respective properties or assets are subject, where
such violation would have an STH Material Adverse Effect. STH and the STH
Subsidiaries have obtained all licenses, permits, contract rights, including,
without limitation, any necessary franchise arrangements, and other
authorizations and have taken all actions required by Applicable Law,
governmental regulations or otherwise in connection with their business as now
conducted, where the failure to obtain any such item or to take any such action
would have an STH Material Adverse Effect. Complete and correct copies of
STH's and the STH Subsidiaries' charters and bylaws, which reflect all
amendments made thereto, have been delivered or made available to PMCT and its
counsel. The minute books and other records of STH and the STH Subsidiaries
contain in all material respects accurate records of all meetings and
accurately reflect in all material respects all other corporate action of the
stockholders and directors and any committees of the boards of directors of STH
and the STH Subsidiaries. Neither STH nor the STH Subsidiaries are in default
under or in violation of any provision of their respective charters or bylaws.
For the purposes of this Agreement, the term "STH Subsidiary" shall include the
entities set forth on Schedule 5.4 hereto, which are all of STH's subsidiaries.
5.2 Authorization, Validity and Effect of Agreements. STH has the
requisite corporate power and authority to enter into the transactions
contemplated hereby and to execute and deliver this Agreement and all other
documents, agreements and instruments related to the transactions
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contemplated by this Agreement, including, without limitation, the Agreement of
Sale (the "Agreement of Sale") to be dated as of June 3, 1998 by and between
STH and Supertel Hospitality Management Co. ("Supertel Management") and the
Supertel Omnibus Assignment and Assumption Agreement (the "Super 8 Assignment
Agreement") by and among STH, PMCT, Supertel Management and Super 8 Motels,
Inc., in the forms previously provided (collectively, the "STH Ancillary
Agreements"). Subject only to the approval of this Agreement and the
transactions contemplated hereby by the holders of a majority of the
outstanding shares of STH Common Stock, the consummation by STH of this
Agreement, the STH Ancillary Agreements and the transactions contemplated
hereby and thereby have been duly authorized by all requisite corporate action
on the part of STH and no other corporate action on the part of STH is
necessary to authorize this Agreement, the STH Ancillary Agreements or the
transactions contemplated hereby or thereby. This Agreement has been duly
executed and delivered by STH and constitutes, and the STH Ancillary Agreements
to which STH is a party (when executed and delivered by STH pursuant thereto)
will constitute, the valid and legally binding obligations of STH, enforceable
against STH in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and general principles of equity.
5.3 Capital Structure. The authorized capital stock of STH
consists of ten million (10,000,000) shares of STH Common Stock and one million
(1,000,000) shares of Class A Preferred Stock, $1.00 par value per share (the
"STH Preferred Stock"). As of March 31, 1998, (a) there were 4,840,000 shares
of STH Common Stock issued and outstanding, and no shares of STH Preferred
Stock are issued and outstanding, (b) no shares of STH Common Stock or STH
Preferred Stock were held by STH in its treasury, and (c) 139,200 shares of STH
Common Stock were issuable upon the exercise of outstanding options (the "STH
Options") under the STH Stock Option Plan. STH has no outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities having the
right to vote) with the stockholders of STH on any matter. All such issued and
outstanding shares of STH Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. Except (i) for the
STH Options and (ii) as provided on Schedule 5.3 hereto, there are not at the
date of this Agreement any existing options, warrants, calls, subscriptions,
convertible securities, or other rights, agreements or commitments which
obligate STH or any of the STH Subsidiaries to issue, transfer or sell any
shares of capital stock of STH or any of the STH Subsidiaries. There are no
bonds, debentures, notes or other indebtedness of STH having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of STH may vote. There are no outstanding
contractual obligations of STH or any of the STH Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of STH or any capital
stock, voting securities or other securities or other ownership interests in
any of the STH Subsidiaries or make any material investment (in the form of a
loan, capital contribution or otherwise) in any person (other than one of the
STH Subsidiaries). Except as provided in Section 4.1(d), after the Effective
Time, PMCT will have no obligation to issue, transfer or sell any shares of
capital stock or other equity interest of STH or PMCT pursuant to any STH
Benefit Plan (as defined in Section 5.12).
5.4 Subsidiaries. STH owns directly or indirectly all of the
outstanding shares of capital stock of the STH Subsidiaries listed on Schedule
5.4 hereto. Except as set forth on Schedule 5.4 hereto, each of the
outstanding shares of capital stock in each of the STH Subsidiaries is duly
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authorized, validly issued, fully paid and nonassessable, and is owned,
directly or indirectly, by STH free and clear of all liens, pledges, security
interests, claims or other encumbrances. The following information for each
STH Subsidiary is set forth on Schedule 5.4 hereto: (a) its name and
jurisdiction of incorporation; (b) its authorized capital stock; and (c) the
name of each stockholder and the number of issued and outstanding shares of
capital stock held by it.
5.5 Other Interests. Except for interests in the STH
Subsidiaries, neither STH nor any STH Subsidiary owns directly or indirectly
any interest or investment (whether equity or debt) in any corporation,
partnership, joint venture, business, trust or entity (other than investments
in short-term investment securities).
5.6 No Violation. Neither the execution and delivery by STH of
this Agreement or the STH Ancillary Agreements nor the consummation by STH of
the transactions contemplated hereby or thereby in accordance with the terms
hereof or thereof, will: (a) conflict with or result in a breach of any
provisions of the Certificate of Incorporation or Bylaws of STH or the charter
or bylaws of any of the STH Subsidiaries; (b) result in a breach or violation
of, a default under, or, except as set forth in the STH Stock Option Plans, the
triggering of any payment or other material obligations pursuant to, or
accelerate vesting under, the STH Stock Option Plans, or any grant or award
made under any of the foregoing; (c) except as contemplated by the STH
Ancillary Agreements or as forth in the schedules to this Agreement, violate,
or conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties of STH or the STH Subsidiaries under, or result in
being declared void, voidable or without further binding effect, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust or any license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which STH or any of the STH
Subsidiaries is a party, or by which STH or any of the STH Subsidiaries or any
of their properties is bound or affected, except for any of the foregoing
matters which, individually or in the aggregate, would not have an STH Material
Adverse Effect; or (d) other than any filings required under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Securities Act of
1933, as amended (the "Securities Act"), the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), applicable state
securities and "Blue Sky" laws or the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware (collectively, the "Regulatory
Filings"), require any consent, approval or authorization of, or declaration,
filing or registration with, any domestic governmental or regulatory authority,
except where the failure to obtain any such consent, approval or authorization
of, or declaration, filing or registration with, any governmental or regulatory
authority would not, individually or in the aggregate, have an STH Material
Adverse Effect.
5.7 SEC Documents. Schedule 5.7 hereto sets forth all reports,
schedules, forms, statements and other documents STH has filed with the U.S.
Securities and Exchange Commission (the "SEC") pursuant to the Securities Act
and the Exchange Act since March 1, 1994 (the "STH Reports") and such STH
Reports constitute all reports, schedules, forms, statements and other
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documents required to be filed by STH under the Securities Act, the Exchange
Act and the rules and regulations promulgated thereunder (the "Securities
Laws") since such date.
As of their respective dates, the STH Reports (a) complied as to form
in all material respects with the applicable requirements of the Securities
Laws and (b) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading. Each of the consolidated balance sheets of STH
included in or incorporated by reference into the STH Reports (including the
related notes and schedules) (i) complied as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, (ii) were prepared in all material respects in
accordance with generally accepted accounting principles ("GAAP"), and (iii)
fairly presented in all material respects the consolidated financial position
of STH and the STH Subsidiaries as of its date in conformity with GAAP. Each
of the consolidated statements of income, retained earnings and cash flows of
STH included in or incorporated by reference into the STH Reports (including
any related notes and schedules), (A) complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, (B) were prepared in all material
respects in accordance with GAAP, and (C) fairly presented in all material
respects the results of operations, retained earnings or cash flows, as the
case may be, of STH and the STH Subsidiaries for the periods set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which would not be material in amount or effect) in conformity with
GAAP.
Except as and to the extent set forth in the STH Reports and except
for liabilities incurred in connection with this Agreement and the transactions
contemplated hereby, neither STH nor any of the STH Subsidiaries has any
material liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on, or reserved
against in, a balance sheet of STH or in the notes thereto, prepared in
accordance with generally accepted accounting principles consistently applied,
except liabilities arising in the ordinary course of business since such date
which would not have an STH Material Adverse Effect.
5.8 Litigation. To the knowledge of STH, except as set forth on
Schedule 5.8 hereto, there are (a) no continuing orders, injunctions or decrees
of any court, arbitrator or governmental authority to which STH or any STH
Subsidiary is a party or by which any of its properties or assets are bound or,
to the knowledge of STH, to which any of its directors, officers or affiliates
is a party or by which any of their properties or assets are bound, and (b) no
actions, suits or proceedings pending against STH or any STH Subsidiary or, to
the knowledge of STH, against any of its directors, officers or affiliates or,
to the knowledge of STH, threatened against STH or any STH Subsidiary or
against any of its directors, officers or affiliates, at law or in equity, or
before or by any federal or state commission, board, bureau, agency or
instrumentality.
5.9 Absence of Certain Changes. Except as disclosed in the STH
Reports filed with the SEC prior to the date hereof or on Schedule 5.9 hereto,
since the date of the most recent financial statements included in the STH
Reports (the "Financial Statement Date"), (a) STH and the STH Subsidiaries have
conducted their business in all material respects in the ordinary course of
such
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business (which for purposes of this Section 5.9 only, shall include all
acquisitions of real estate properties and financing arrangements made in
connection therewith and the operation of hotels located thereon or otherwise
set forth on Schedule 5.9 hereto); (b) no event has caused an STH Material
Adverse Effect and there has been no event, occurrence or circumstance that
with the passage of time would reasonably be expected to cause an STH Material
Adverse Effect; (c) as of the date hereof, there has not been any declaration,
setting aside or payment of any dividend or other distribution with respect to
the STH Common Stock or any split, combination or reclassification of STH's
capital stock; and (d) there has not been any material change in STH's
accounting principles, practices or methods. There are no material unsatisfied
judgments, orders (other than orders of general applicability), decrees or
stipulations affecting STH or any STH Subsidiary or to which one of them is a
party.
5.10 Taxes. Except as set forth on Schedule 5.10 hereto, STH and
each of its Subsidiaries (a) have timely filed all federal, state and foreign
tax returns, including, without limitation, information returns and reports
required to be filed by any of them for tax periods ended prior to the date of
this Agreement, or requests for extensions have been timely filed and any such
request has been granted and has not expired and all such returns are accurate
and complete to the knowledge of STH in all material respects, (b) has paid or
accrued in accordance with GAAP all taxes shown to be due and payable on such
returns or which have become due and payable pursuant to any assessment,
deficiency notice, 30-day letter or other notice received by it, and (c) has
properly accrued in accordance with GAAP all material taxes for such periods
and periods subsequent to the periods covered by such returns. Except as set
forth on Schedule 5.10 hereto, neither STH nor any of the STH Subsidiaries has
received written notice that the federal, state and local income and franchise
tax returns of STH or any STH Subsidiary will be examined by any taxing
authority. Except as set forth on Schedule 5.10 hereto, neither STH nor any of
the STH Subsidiaries has executed or filed with the Internal Revenue Service
(the "IRS") or any other taxing authority any agreement now in effect extending
the period for assessment or collection of any income or other taxes.
Except as set forth on Schedule 5.10, neither STH nor any of its
Subsidiaries is a party to any pending action or proceeding by any governmental
authority for assessment or collection of taxes, and no claim for assessment or
collection of taxes has been asserted against it. True, correct and complete
copies of all federal, state and local income or franchise tax returns filed by
STH and each of the STH Subsidiaries have been delivered to PMCT or made
available to representatives of PMCT. Except as set forth on Schedule 5.10
hereto, the tax returns filed by STH and any STH Subsidiary have not been, and
are not being, to the knowledge of STH, examined by the IRS or other relevant
taxing authorities for any period nor are there any pending or, to the
knowledge of STH, threatened examinations or tax claims asserted by any such
authorities. There are no tax liens on any of the property of STH. Except as
otherwise disclosed on Schedule 5.10, STH is not a party to, or bound by, any
tax indemnity, tax sharing or tax allocation agreement. Neither STH nor any of
the STH Subsidiaries holds any asset that is subject to a consent filed
pursuant to Section 341(f) of the Code and regulations thereunder. For
purposes of this Section 5.10, "taxes" includes any interest, penalty or
additional amount payable with respect to any tax.
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5.11 Books and Records. All books and records relating to
operating income and expenses of all of the Hotels furnished or made available
to PMCT by STH or STH's agent were and shall be those maintained by STH in
regard to the Hotels in accordance with GAAP. The books of account and other
financial records of STH and the STH Subsidiaries are accurately reflected in
all material respects in the financial statements included in the STH Reports.
5.12 Employee Benefit Plans. All employee benefits plans and other
benefit arrangements covering employees of STH and the STH Subsidiaries (the
"STH Benefit Plans") are set forth in Schedule 5.12 hereto. True and complete
copies of the STH Benefit Plans have been made available to PMCT. To the
extent applicable, the STH Benefit Plans comply, in all material respects, with
the requirements of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and the Code, and any STH Benefit Plan intended to be
qualified under Section 401(a) of the Code has been determined by the IRS to be
so qualified. No STH Benefit Plan is covered by Title IV of ERISA or Section
412 of the Code. Neither STH nor any STH Benefit Plan has incurred any
liability or penalty under Section 4975 of the Code or Section 502(i) of ERISA.
Each STH Benefit Plan has been maintained and administered in all material
respects in compliance with its terms and with ERISA and the Code to the extent
applicable thereto.
Except as set forth on Schedule 5.12 there are no pending or, to the
knowledge of STH, threatened claims against or otherwise involving any of the
STH Benefit Plans and no suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of STH Benefit Plan activities) has
been brought against or with respect to any such STH Benefit Plan, except for
any of the foregoing which would not have an STH Material Adverse Effect. All
material contributions required to be made as of the date hereof to the STH
Benefit Plans have been made or provided for. Neither STH nor any of the STH
Subsidiaries has any liabilities or obligations with respect to any such STH
Benefit Plan, whether accrued, contingent or otherwise, nor to the knowledge of
STH are any such liabilities or obligations expected to be incurred, except for
ongoing funding obligations or contributory obligations required by the terms
of any STH Benefit Plan. Neither STH nor any entity under "common control"
with STH within the meaning of ERISA Section 4001 has contributed to, or been
required to contribute to, any "multiemployer plan" (as defined in Sections
3(37) and 4001(a)(3) of ERISA).
Except as set forth on Schedule 5.12, STH does not maintain or
contribute to any plan or arrangement which provides or has any liability to
provide life insurance, medical or other employee welfare benefits to any
employee or former employee upon his retirement or termination of employment
and STH has never represented, promised or contracted (whether in oral or
written form) to any employee or former employee that such benefits would be
provided.
5.13 Labor Matters. Neither STH nor any of the STH Subsidiaries is
a party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor union organization,
except as set forth on Schedule 5.13. There is no unfair labor practice or
labor arbitration proceeding pending or, to the knowledge of STH, threatened
against STH or the STH Subsidiaries relating to their business, except for any
such proceeding which would not have an STH Material Adverse Effect. To the
knowledge of STH, there are no organizational efforts with respect to the
formation of a collective bargaining unit presently being made or
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threatened involving employees of STH or any of its Subsidiaries. There have
been no material work stoppages, strikes or other concerted actions by
employees of STH or any of the STH Subsidiaries other than those that would not
have an STH Material Adverse Effect.
5.14 No Brokers. Except the fee to be paid to ABN AMRO
Incorporated by STH as described below, STH has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of STH or PMCT to pay any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby.
STH is not aware of any claim for payment of any finder's fees, brokerage or
agent's commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions contemplated
hereby.
5.15 Opinion of Financial Advisor. STH has retained ABN AMRO
Incorporated to review the transactions contemplated by this Agreement and to
issue an opinion to the effect that, as of the date of such opinion the
consideration is fair to holders of STH Common Stock from a financial point of
view.
5.16 PMCT Share Ownership. Except as expressly described in the
Recitals hereto or as may be set forth in Schedule 5.16, neither STH nor any of
the STH Subsidiaries owns any PMCT Common Shares or other securities
convertible shares of beneficial interest of PMCT.
5.17 Related Party Transactions. Except for employment agreements
with its executive officers and option agreements (including loan transactions
in connection therewith) issued to STH officers, directors and other key
employees pursuant to the STH Stock Option Plans, copies of which have been
delivered to PMCT, and which are true, complete and correct when delivered or
made available, there are no arrangements, agreements or contracts entered into
by STH or any of the STH Subsidiaries with (a) any consultant, (b) any person
who is an officer, director or affiliate of STH or any of the STH Subsidiaries,
any relative of any of the foregoing or any entity of which any of the
foregoing is an affiliate, or (c) any person who acquired STH Common Stock in a
private placement.
5.18 Contracts and Commitments.
(a) Schedule 5.18 hereto (with paragraph references corresponding
to those set forth below) contains a true and complete list of each of the
following contracts (true and complete copies or, if none, reasonably complete
and accurate written descriptions of which, together with all amendments and
supplements thereto, have been delivered or made available to PMCT), to which
STH or any of the STH Subsidiaries is a party or by which any Hotel is bound:
(i) all contracts providing for the management of the
Hotels;
(ii) all franchise agreements (the "Franchise
Agreements");
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(iii) all material contracts providing for a commitment of
employment or consultation services for a specified or unspecified
term;
(iv) all contracts with any person containing any
provision or covenant prohibiting or materially limiting the ability
of STH or any of the STH Subsidiaries to engage in any business
activity or to compete with any person;
(v) all partnership, joint venture, stockholders' or
other similar contracts with any person;
(vi) all notes, debentures, bonds and other evidence of
indebtedness which are secured or collateralized by mortgages, deeds
of trust or other security interests in any Hotel or any personal
property of STH or any of the STH Subsidiaries;
(vii) all contracts relating to any business combination;
(viii) all contracts between or among STH or any of the STH
Subsidiaries, on the one hand, and any of their stockholders or
affiliates, on the other hand;
(ix) all collective bargaining or similar labor contracts;
and
(x) all other contracts that involve the annual payment
or potential annual payment pursuant to the terms of such contract, by
or to STH or any of the STH Subsidiaries of more than $25,000 or
aggregate payments in excess of $300,000 that will not (A) be fully
performed on or prior to the Effective Time, (B) expire by their terms
within 90 days following the Effective Time, or (C) be cancelable by
the Surviving Entity, without penalty, upon not more than 30 days
notice, including, without limitation, all leases, contracts for
purchase and sale of assets, advance booking contracts and banquet
contracts.
(b) Each contract required to be disclosed on Schedule 5.18 is in
full force and effect and constitutes a legal, valid and binding agreement,
enforceable in accordance with its terms and, except as disclosed on Schedule
5.18, neither STH, any of the STH Subsidiaries nor, to the knowledge of STH,
any other party to such contract is in violation, breach or default under any
such contract (or with notice or lapse of time or both would be in violation,
breach or default under any such contract), the effect of which, individually
or in the aggregate, could reasonably be expect to result in an STH Material
Adverse Effect.
(c) The Franchise Agreements disclosed on Schedule 5.18 constitute
all of the franchise or similar agreements necessary to operate and manage the
Hotels and neither STH nor any STH Subsidiary has received any notice or has
any knowledge of an event of default or termination or proposed termination
under any such Franchise Agreement.
5.19 Development Rights. Schedule 5.19 hereto sets forth a list of
all material agreements entered into by STH or any of the STH Subsidiaries
relating to the development, rehabilitation, capital improvement or
construction of hotels or additions thereto or other real estate properties,
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which development or construction has not been substantially completed as of
the date of this Agreement. Such agreements, true and correct copies of all of
which have been delivered to PMCT, have not been modified and are valid and
enforceable in accordance with their respective terms.
5.20 Certain Payments Resulting From Transactions. Except for the
payments described in Section 5.17 and except for option agreements (and loans
made in connection therewith) executed pursuant to the STH Stock Option Plan,
deferred compensation arrangements with certain STH executive officers and
employment agreements with certain STH officers each of which arrangements and
agreements is set forth on Schedule 5.20 hereto, the execution of, and
performance of the transactions contemplated by, this Agreement will not
(either alone or upon the occurrence of any additional or subsequent events)
(a) constitute an event under any STH Benefit Plan, policy, practice, agreement
or other arrangement or any trust or loan (the "Employee Arrangements") that
will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any employee, director
or consultant of STH or any of the STH Subsidiaries or (b) result in the
triggering or imposition of any restrictions or limitations on the right of STH
or PMCT to amend or terminate any Employee Arrangement and receive the full
amount of any excess assets remaining or resulting from such amendment or
termination, subject to applicable taxes. Except as set forth on Schedule
5.20, no payment or benefit which will be required to be made pursuant to the
terms of any agreement, commitment or STH Benefit Plan, as a result of the
transactions contemplated by this Agreement, to any officer, director or
employee of STH or any of the STH Subsidiaries, will be characterized as an
"parachute payment" within the meaning of Section 280G(b)(2) of the Code.
5.21 Convertible Securities. Except as set forth on Schedule 5.21,
STH has no outstanding options, warrants or other securities exercisable for,
or convertible into, shares of STH Common Stock, the terms of which would
require any anti-dilution adjustments by reason of the consummation of the
transactions contemplated hereby.
5.22 Compliance with Applicable Laws.
(a) Except as disclosed on Schedule 5.22 hereto, all Hotels and
the operation thereof currently are in substantial compliance with the
requirements of all Applicable Laws, except where the failure to so comply
would not, individually or in the aggregate, be reasonably likely to result in
an STH Material Adverse Effect; and to the knowledge of STH, there are no
material commitments or agreements with any of such agencies affecting any
Hotel which have not been fully disclosed to PMCT in writing.
(b) Except as disclosed on Schedule 5.22 hereto, neither STH nor
any of the STH Subsidiaries has received any written notice of uncured
violations at any of the Hotels of zoning, building, fire, health or any other
applicable statute, ordinance or regulation, relating to any of the Hotels, the
construction or any occupancy thereof, except for violations that, individually
or in the aggregate with respect to any Hotel, would not be reasonably likely
to result in an STH Material Adverse Effect, nor are there presently pending
against STH or against any of the Hotels any judgments relating to any of the
above matters, any judicial proceedings or administrative actions
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or any state of facts which, to the knowledge of STH, with notice or lapse of
time, could reasonably be expected to give rise to any such proceedings or
actions, in either case that would be reasonably likely to result in an STH
Material Adverse Effect.
(c) Neither STH nor any of the STH Subsidiaries has received any
written notice that any material permits, licenses or consents not already
obtained are required by any governmental agencies in connection with the use
and occupancy of any of the Hotels or any material improvements thereto.
5.23 Insurance. The insurance policies listed and described on
Schedule 5.23 hereto are currently in force. Neither STH nor any of the STH
Subsidiaries has received any notice from any insurer of any of the Hotels or
any part thereof requesting any improvements, alterations, additions,
corrections or other work in, on or about the improvements thereto, whether
related to any of the Hotels or to the operation of any occupant thereof, which
have not been cured or satisfied.
5.24 Subsidiaries of STH. All subsidiaries of STH which were taxed
for federal income tax purposes as "S" corporations at the time of their
acquisition by STH were taxed as "S" corporations from their respective dates
of formation and had no earnings and profits prior to their acquisition by STH.
5.25 Acquisitions by STH and its Subsidiaries. Neither STH nor any
of it subsidiaries has made an acquisition which would constitute a
"reorganization" under Section 368(a) of the Code.
ARTICLE 6
ADDITIONAL REPRESENTATIONS AND WARRANTIES
AND COVENANTS RELATING TO HOTELS AND REAL PROPERTY
6.1 Representations and Warranties. STH represents and warrants
to PMCT as set forth below:
(a) Title to Hotels. Except as set forth on Schedule
6.1(a) hereto, STH has on the Effective Time and STH will have on the
Closing Date good and indefeasible fee simple title to the Hotels,
free and clear of all conditions, exceptions, or reservations.
(b) No Consents Required. No consent, except that of the
franchisor(s) listed on Schedule 6.1(b) hereto, those associated with
the Regulatory Filings, that of the STH shareholders and those
required by Section 8.15, waiver, approval, or authorization of, or
filing, registration, or qualification with, or notice to, any
Governmental Authority or any other entity or person (including,
without limitation, its directors is required to be made, obtained, or
given by STH in connection with the execution, delivery, and
performance of this Agreement, except such consent, waiver, approval,
authorization, filing, registration or qualification which has been
made, obtained or given.
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(c) STH Not a Foreign Person. STH is not a "foreign
person" but is a "United States person" as such terms are defined in
the Foreign Investment in the Real Property Tax Act of 1980 and
Sections 1445 and 7701 of the Code; that is to say, STH is a domestic
corporation or trust which is not a foreign estate or foreign trust
within the meaning of Section 7701(a)(30)(c) of the Code.
(d) Operating Agreements. Except as set forth on
Schedule 6.1(d) hereto, no portion of any Hotel is subject to the
burdens or obligations of any Operating Agreement and all Operating
Agreements are current and not in default other than defaults that
will not, individually or in the aggregate, have an STH Material
Adverse Effect.
(e) Tenant Leases. Except as may be specifically noted
to the contrary on Schedule 6.1(e) hereto:
(i) STH or an STH Subsidiary is the sole owner of
the lessor's interest in all of the Leases and all Leases are
in full force and effect without current material default by
either STH or the respective tenants;
(ii) none of the Leases that are material to STH
has been modified in a material way, except as reflected in
amendments to which PMCT has had access;
(iii) all obligations of the lessor under the
Leases with respect to the performance of work or the
installation of equipment or materials required to have been
performed at or prior to the Effective Time have been fully
observed and performed, except for such failures that,
individually or in the aggregate, will not have an STH
Material Adverse Effect;
(iv) no tenant is or shall become entitled to any
material concession, rebate, allowance, or free rent for any
period subsequent to the Closing, without the prior written
consent of PMCT, except as set forth in the Lease with respect
to such tenant;
(v) no tenant has any purchase option or other
interest (other than its leasehold tenancy for a specified
term) in any of the Land and/or the Improvements; and
(vi) no tenant has given STH or any STH Subsidiary
notice of its intention to vacate its demised premises prior
to the end of the term of its lease.
(f) No Condemnation. There is no pending condemnation or
similar proceeding affecting any of the Land, the Improvements, or the
Personal Property or any portion thereof, and neither STH nor any STH
Subsidiary has received any written notice and each has no knowledge
that any such proceeding is contemplated.
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(g) No Violations of Applicable Law. To the knowledge of
STH, except as set forth on Schedule 6.1(g) hereto, the current
location, ownership, operation, use, and occupancy of all of the Land
and Improvements thereon do not violate any Applicable Law, including,
without limitation, all Environmental Laws and the Architectural
Barriers Legislation. To the knowledge of STH, except as set forth on
Schedule 6.1(g) hereto, there are no violations of any Applicable Law
affecting any portion of any of the Land, the Improvements or the
Personal Property, and no written notice of any such violation has
been issued by any Governmental Authority.
(h) Changes in Applicable Laws. Neither STH nor any STH
Subsidiary has any information or knowledge of any change contemplated
in any of the Applicable Laws or any judicial or administrative
action, or any action by adjacent landowners, or any fact or condition
relating to any of the Hotels which is reasonably likely to materially
adversely affect, prevent or limit the use of any of the Hotels as
hotels of the size and nature currently being operated.
(i) No Administrative Actions. To STH's or any STH
Subsidiary's knowledge, except as set forth on Schedule 6.1(i) hereto,
no Hotel is now, to STH's or any STH Subsidiary's knowledge, the
subject of any administrative investigation, action or judicial
proceeding in regard to sex, age, or racially discriminatory practices
initiated by any Governmental Authority, or any private citizen, and
no such investigation, administrative action, or judicial proceeding
is now pending, nor is any Hotel presently operating under any court
order or administrative agreement in regard to alleged sex, age, or
racially discriminatory practices.
(j) Zoning. To STH's or any STH Subsidiary's knowledge,
except as set forth on Schedule 6.1(j) hereto, there are no pending
or, to STH's knowledge, threatened requests, applications or
proceedings to alter or restrict the zoning or other use restrictions
applicable to any Hotel; neither STH nor any STH Subsidiary has
received any notice from any Governmental Authority of zoning,
building, fire, water, use, health, environmental or other violations
of Applicable Law issued in respect of any Hotel that have not been
heretofore corrected, and no such violations exist; all of the
Improvements and the present uses thereof are permitted, conforming
structures and uses under all applicable zoning and building laws and
ordinances.
(k) Parties in Possession. There are no adverse parties
in possession of any of the Hotels or of any part thereof and no
parties in possession thereof except STH and the tenants under the
Leases, except as otherwise expressly disclosed herein, and no party
has been granted any license, lease, or other right relating to the
use or possession of any of the Hotels except the tenants under the
Leases, or except as otherwise expressly disclosed herein.
(l) No Other Contracts. There are no contracts or other
obligations outstanding for the sale, exchange or transfer of any of
the Hotels or any portion thereof or the business operated thereon.
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(m) Utilities. All utilities required by Applicable Laws
for the operation of all of the Improvements including, but not
limited to, water, sewer, gas and electric, enter each parcel of Land
through adjoining public streets or if they pass through adjoining
private land, do so in accordance with valid public or private
easements which inure to the benefit of STH. All of said utilities
are installed and operating and all installation and connection
charges have been paid in full and no fact, condition, or proceeding
exists which would result in the termination or impairment of the
furnishing of or an increase in rates or services to any of the Hotels
of the foregoing utility services.
(n) Access to Land. There are adequate means of ingress
and egress for vehicular and pedestrian traffic to and from each
parcel of Land and each adjoining street, road or highway. All routes
of ingress and egress to and from each parcel of Land, to the extent
they pass through adjoining land do so in accordance with valid public
or private easements which inure to the benefit of STH. To STH's or
any STH Subsidiary's knowledge no parcel of Land or any Improvements
located thereon violates any restriction, condition or agreement
contained in any easement, reciprocal easement, restrictive covenant,
or similar instrument or agreement affecting such Land or Improvements
or any part thereof.
(o) Maintenance and No Defects. To STH's or any STH
Subsidiary's knowledge, the roofs of the buildings comprising all of
the Improvements are free of material leaks; the foundations and all
mechanical systems including air-conditioning, plumbing, heating,
sewage drainage and electrical have been maintained in all material
respects in accordance with industry practices.
(p) Insurance. Neither STH nor any STH Subsidiary has
received, and has no other knowledge or information of, any written
notice from any insurance company or board of fire underwriters
requesting the performance of any material work or alteration with
respect to any of the Hotels, or requiring an increase in the
insurance rates applicable to any of the Hotels. To the knowledge of
STH, all of the Hotels comply with the requirements of all insurance
carriers providing insurance therefor.
(q) Property Not in Flood Area. No portion of any parcel
of Land is situated in an area designated by the Secretary of the
United States Department of Housing and Urban Development (or by any
other federal, state, municipal, or other governmental
instrumentality) as having special flood or mudslide hazards.
(r) Compliance with Architectural Barriers Legislation.
To STH's knowledge, except as set forth on Schedule 6.1(r) hereto, all
of the Improvements were built and continue to be in full compliance
with all legal requirements relative to architectural barriers or
accommodations of disabled persons, including, without limitation,
applicable Architectural Barriers Legislation.
(s) Environmental. To STH's knowledge, except as set
forth on Schedule 6.1(s) hereto, there are no Environmental Conditions
and there is no Environmental Noncompliance
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with respect to any Hotel. All material Permits have been obtained,
are valid and in good standing. To STH's knowledge, all operations on
or at each Hotel are and have been conducted in material compliance
with all applicable Environmental Laws. Neither STH nor any STH
Subsidiary has received any Notification from any governmental
instrumentality seeking any information or alleging any violation of
any Applicable Law or Environmental Law. Neither STH nor any STH
Subsidiary has caused or permitted any Hotel to be used to generate,
manufacture, refine, transport, treat, recycle, store, handle, dispose
of, transfer, produce, or process any Hazardous Materials or solid
waste, except in small quantities utilized in connection with routine
maintenance or repair of the Hotel, all of which have been and will be
stored, used, handled, and disposed of in full compliance with all
Environmental Laws other than such noncompliance that, individually or
in the aggregate, will not have an STH Material Adverse Effect.
Neither STH nor any STH Subsidiary has caused or permitted, and has no
knowledge of, any Release of any such Hazardous Materials on-site or
off-site of any Hotel other than such releases that, individually or
in the aggregate, will not have an STH Material Adverse Effect.
6.2 STH Deliverables. STH has, prior to the execution of this
Agreement, delivered to PMCT, or provided PMCT access to, true and correct
copies of each of the following:
(a) Leases. Each Lease covering or relating to each
Hotel, together with any amendments thereto or other documents
creating further obligations or agreements in connection therewith.
(b) Operating Statements. Operating statements covering
the Hotel for the fiscal year ended December 31, 1997, which
statements are prepared in the ordinary course of STH's business and
form the basis for STH's financial statements.
(c) Tax Statements. Copies of the most recent ad valorem
and personal property tax statements with respect to each Hotel
received.
(d) Plans and Specifications. A full set of "as-built"
plans, specifications and architectural floor plans for all of the
Improvements to the extent available, and the name and address of the
project architects, if known.
(e) Operating Agreements. A list of all Operating
Agreements together with a copy of each Operating Agreement.
(f) List of Defects. A list of all defects or
malfunctions affecting any part of the Hotels and of which STH or any
STH Subsidiary has knowledge with respect to foundations, walls,
roofs, heating, electrical, plumbing or air conditioning equipment or
systems, and drainage or sewage equipment or systems other than such
defects or malfunctions that, individually or in the aggregate, will
not result in an STH Material Adverse Effect.
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(g) Insurance Policies. Copies of all of STH's or an STH
Subsidiary's fire, hazard, liability and other insurance policies
currently in force with respect to the Hotels.
(h) Commission Agreements. All leasing or other
commission agreements with respect to the Hotels and a list of all
unpaid commissions which identifies the payee, amount and date or
event upon which such commission will become due and payable.
(i) Updated record searches relating to existing
environmental site assessments for each Hotel.
(j) A written architectural review of each Hotel
previously identified and agreed upon by STH and PMCT (each an
"Architectural Review") to determine such Hotel's compliance with
Architectural Barriers Legislation by an architect certified as to
such matters and reasonably acceptable to PMCT. Such Architectural
Review shall contain an estimate of the cost of bringing any
noncomplying Hotel into compliance with all Architectural Barriers
Legislation.
6.3 STH Property Reports. STH shall, as soon as possible but in
no event later than forty-five (45) days from the date hereof (except as
provided below), cause to be furnished to PMCT:
(a) Copies of the current Title Policies held by STH as
to each Hotel;
(b) Title Updates as to each Hotel where there is
existing title insurance and, at STH's option, title reports or
updates to legal opinions where there are legal opinions, in all cases
dated as of a date following the date hereof. At such time as STH
causes the Title Updates or such reports or opinions to be furnished
to PMCT, STH shall further cause to be furnished to PMCT true,
correct, and legible copies of all instruments referred to in each
Title Update, report or opinion as conditions or exceptions to title
to each Hotel, including liens, which have not previously been
provided pursuant to Section 6.3(a), and a certificate stating that a
search has been made of both the state and county records wherein
financing statements and security agreements are filed pursuant to the
Uniform Commercial Code of the state in which the Hotel is located and
that such search indicates all security interests or liens of any kind
or nature, including, but not limited to, any equipment financing or
leasing arrangements, that are claimed by any person against the
Hotel, or any part thereof; and
(c) A copy of the Survey of each parcel of Land and the
Improvements located thereon previously identified and agreed upon by
STH and PMCT, prepared by the Surveyor, dated as of a date following
the issuance of the certificate of occupancy with respect to the
applicable Hotel, to the extent not previously provided to PMCT. Such
Surveys shall include a metes and bounds legal description of each
parcel of Land, shall accurately show the location and dimensions of
all the Improvements located thereon, encroachments, uses (including
the location of all highways, streets, roads, easements, alleys and
rights-of-way upon or adjacent to the Land) and encumbrances which are
visible on the ground or listed on the applicable Title Policy and
Title Update (identifying each by volume and page
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reference, if applicable), shall recite an exact area of the Land,
shall show all building set-back lines, shall contain a certificate
specifically addressed to PMCT and STH which shall substantially state
"(i) this survey is true and correct, was made on the ground as per
the field notes shown hereon, correctly shows the boundary lines and
dimensions and area of the land indicated hereon and each individual
parcel thereof indicated hereon, correctly shows the location of all
buildings, structures and other improvements and visible items on the
subject property, and correctly shows the location and dimensions of
all easements, alleys, streets, roads, rights-of-way, building
set-back lines and other matters of record of which the undersigned
has been advised affecting the subject property according to the legal
description in such easements and other matters (with instrument, book
and page number indicated); (ii) except as shown, there are no
improvements, easements, rights-of-way, party walls, visible uses,
conflicts, or other matters of record of which the undersigned has
been advised affecting the subject property, there are no
encroachments or protrusions onto adjoining premises, streets or
alleys by any buildings, structures or other improvements on the
subject property, there are no encroachments on the subject property
by buildings, structures or other improvements situated on adjoining
premises, and there are no encroachments on any easements located on
the subject property by any buildings, structures or other
improvements situated on the subject property; (iii) the distance from
the nearest intersecting street and road to the subject property is as
shown hereon; and (iv) no part of the subject property is within an
area designated on a Federal Flood Insurance Rate Map or Flood Hazard
Boundary Map as having special flood hazards." The Survey (i) as to
Hotels located in Texas, must conform to the current Texas Surveyors
Association Standards and Specifications for a Category IA, Condition
II Survey and (ii) as to Hotels located in all other states, must be
prepared as an "Urban" class survey according to "Minimum Standard
Detail Requirements for ALTA/ACSM Land Title Surveys" as adopted by
the American Land Title Association and the American Congress on
Surveying and Mapping in 1992. STH shall provide the Surveyor with a
copy of this Section 6.3(c) when the Survey is ordered.
(d) A schedule of all operating inventory at the Hotels
as of a date no more than five business days prior to the Closing
Date.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF PMCT
PMCT represents and warrants to STH as set forth below.
7.1 Existence; Good Standing; Authority; Compliance with Law.
PMCT is a real estate investment trust duly organized, validly existing and in
good standing under the laws of the State of Texas. PMCT is duly licensed or
qualified to do business and is in good standing under the laws of any other
state of the United States in which the character of the properties owned or
leased by it therein or in which the transaction of its business makes such
qualification necessary, except where the failure to be so qualified would not
have a material adverse effect on the business, results of operations or
financial condition of PMCT and its subsidiaries (each a "PMCT Subsidiary")
taken
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as a whole (a "PMCT Material Adverse Effect"). PMCT has all requisite power
and authority to own, operate, lease and encumber its properties and carry on
its business as now conducted. Each PMCT Subsidiary is a corporation, limited
liability company or partnership duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has the corporate or partnership power and authority to own its properties and
to carry on its business as it is now being conducted, and is duly qualified to
do business and is in good standing in each jurisdiction in which the ownership
of its property or the conduct of its business requires such qualification,
except for jurisdictions in which such failure to be so qualified or to be in
good standing would not have a PMCT Material Adverse Effect.
Neither PMCT nor any PMCT Subsidiary is in violation of any order of
any court, governmental authority or arbitration board or tribunal, or any law,
ordinance, governmental rule or regulation to which PMCT or any PMCT Subsidiary
or any of their respective properties or assets is subject, where such
violation would have a PMCT Material Adverse Effect. PMCT and the PMCT
Subsidiaries have obtained all licenses, permits and other authorizations and
have taken all actions required by applicable law or governmental regulations
in connection with their business as now conducted, where the failure to obtain
any such item or to take any such action would have a PMCT Material Adverse
Effect. Complete and correct copies of PMCT's Declaration of Trust and the
PMCT Subsidiaries' charters and bylaws, which reflect all amendments made
thereto, have been delivered or made available to STH and its counsel. The
minute books and other records of PMCT and the PMCT Subsidiaries contain in all
material respects accurate records of all meetings and accurately reflect in
all material respects all other corporate action of the stockholders and
directors and any committees of the Board of Trust Managers of PMCT and the
boards of directors of the PMCT Subsidiaries. Neither PMCT nor any PMCT
Subsidiary is in default under or in violation of any provision of their
respective charters or bylaws. For the purposes of the immediately preceding
sentence, the term "PMCT Subsidiary" shall include the entities set forth on
Schedule 7.4 attached hereto, which are all of PMCT's subsidiaries.
7.2 Authorization, Validity and Effect of Agreements. PMCT has
the requisite power and authority to enter into the transactions contemplated
hereby and to execute and deliver this Agreement and all other documents,
agreements and instruments related to the transactions contemplated by this
Agreement to which each of them is a party (the "PMCT Ancillary Agreements").
Subject only to the approval of the issuance of the shares of PMCT Common
Shares pursuant to the Merger contemplated hereby by the holders of two-thirds
of the outstanding shares of PMCT Common Shares, present and voting thereon,
the consummation by PMCT of this Agreement, the PMCT Ancillary Agreements and
the transactions contemplated hereby and thereby have been duly authorized by
all requisite action on the part of PMCT and no other action on the part of
PMCT is necessary to authorize this Agreement, the PMCT Ancillary Agreements or
the transactions contemplated hereby or thereby. This Agreement constitutes,
and the PMCT Ancillary Agreements (when executed and delivered pursuant hereto
for value received) will constitute, the valid and legally binding obligations
of PMCT enforceable against PMCT in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and general principles
of equity.
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7.3 Capitalization. The authorized capital stock of PMCT consists
of 100,000,000 shares of beneficial interest, which may consist of PMCT Common
Shares or such other types of classes of securities as PMCT's Board of Trust
Managers may, from time to time, create. As of June 3, 1998, (a) there were
6,509,231 shares of PMCT Common Shares issued and outstanding and (b) no shares
of PMCT Common Shares were held by PMCT in its treasury. PMCT has no
outstanding bonds, debentures, notes or other obligations the holders of which
have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the shareholders of PMCT on any
matter. All such issued and outstanding shares of PMCT Common Shares are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights. Except as set forth on Schedule 7.3 hereto, there are not at the date
of this Agreement any existing options, warrants, calls, subscriptions,
convertible securities, or other rights, agreements or commitments which
obligate PMCT or any of the PMCT Subsidiaries to issue, transfer or sell any
shares of stock or other equity interest of PMCT or any of the PMCT
Subsidiaries, other than the issuance, by PMCT of up to 95,021 PMCT Common
Shares upon the exercise of stock options issued to employees and trust
managers. There are no agreements or understandings to which PMCT is a party
with respect to the voting of any shares of PMCT Common Shares or which
restrict the transfer of any such shares, except in order to protect its REIT
status. There are no bonds, debentures, notes or other indebtedness of PMCT
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which shareholders of PMCT may
vote. There are no outstanding contractual obligations of PMCT or any of the
PMCT Subsidiaries to repurchase, redeem or otherwise acquire any shares of PMCT
or any capital stock, voting securities or other securities or other ownership
interests in any of the PMCT Subsidiaries or make any material investment (in
the form of a loan, capital contribution or otherwise) in any person (other
than one of the PMCT Subsidiaries).
7.4 Subsidiaries. Except as set forth in Schedule 7.4 hereto,
PMCT owns directly or indirectly all of the outstanding shares of capital stock
or all of the partnership or other equity interests of each of the PMCT
Subsidiaries listed on Schedule 7.4 free and clear of all liens, pledges,
security interests, claims or other encumbrances. Each of the outstanding
shares of capital stock of or other equity interest in each of the PMCT
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable.
The following information for each PMCT Subsidiary is set forth on Schedule
7.4, if applicable: (a) its name and jurisdiction of incorporation or
organization; (b) its authorized capital stock or share capital or partnership
or other interests; (c) the name of each shareholder or owner of an equity
interest and the number of issued and outstanding shares of capital stock or
share capital or percentage ownership for non-corporate entities held by it;
and (d) the name, ownership structure and equity owners of the general
partner(s).
7.5 Other Interests. Except for interests in the PMCT
Subsidiaries, neither PMCT nor any PMCT Subsidiary owns directly or indirectly
any interest or investment (whether equity or debt) in any corporation,
partnership, joint venture, business, trust or entity (other than investments
in short-term investment securities).
7.6 No Violation. Neither the execution and delivery by PMCT of
this Agreement or the PMCT Ancillary Agreements nor the consummation by PMCT of
the transactions contemplated
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hereby or thereby in accordance with the terms hereof or thereof, will: (a)
conflict with or result in a breach of any provisions of the Declaration of
Trust or Bylaws of PMCT; (b) result in a breach or violation of, a default
under, or the triggering of any payment or other material obligations pursuant
to, or accelerate vesting under, any of PMCT's Stock Option Plans, or any grant
or award made under any of the foregoing; (c) violate, or conflict with, or
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination or in a right of termination or cancellation of,
or accelerate the performance required by, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties of
PMCT or the PMCT Subsidiaries under, or result in being declared void, voidable
or without further binding effect, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust or any license,
franchise, permit, lease, contract, agreement or other instrument, commitment
or obligation to which PMCT or any of the PMCT Subsidiaries is a party, or by
which PMCT or any of the PMCT Subsidiaries or any of their properties is bound
or affected, except for any of the foregoing matters which, individually or in
the aggregate, would not have a PMCT Material Adverse Effect; or (d) other than
the Regulatory Filings require any consent, approval or authorization of, or
declaration, filing or registration with, any domestic governmental or
regulatory authority, except where the failure to obtain such consent, approval
or authorization of, or declaration, filing or registration with, any
governmental or regulatory authority would not have a PMCT Material Adverse
Effect.
7.7 SEC Documents. Schedule 7.7 hereto sets forth all reports,
schedules, forms, statements and other documents PMCT has filed with the SEC
pursuant to the Securities Act and the Exchange Act since June 25, 1993 (the
"PMCT Reports") and such PMCT Reports constitute all reports, schedules, forms,
statements and other documents required to be filed by PMCT under the
Securities Laws since such date.
As of their respective dates, the PMCT Reports (a) complied as to form
in all material respects with the applicable requirements of the Securities
Laws and (b) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading. Each of the consolidated balance sheets of PMCT
included in or incorporated by reference into the PMCT Reports (including the
related notes and schedules) (i) complied as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, (ii) were prepared in all material respects in
accordance with GAAP, and (iii) fairly presented in all material respects the
consolidated financial position of PMCT and the PMCT Subsidiaries as of its
date in conformity with GAAP. Each of the consolidated statements of income,
retained earnings and cash flows of PMCT included in or incorporated by
reference into the PMCT Reports (including any related notes and schedules) (A)
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, (B) were prepared in accordance with GAAP, and (C) fairly presented
the results of operations, retained earnings or cash flows, as the case may be,
of PMCT and the PMCT Subsidiaries for the periods set forth therein (subject,
in the case of unaudited statements, to normal year-end audit adjustments which
would not be material in amount or effect) in conformity with GAAP.
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Except as and to the extent set forth in the PMCT Reports and except
for liabilities incurred in connection with this Agreement and the transactions
contemplated hereby, neither PMCT nor any of the PMCT Subsidiaries has any
material liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on, or reserved
against in, a balance sheet of PMCT or in the notes thereto, prepared in
accordance with generally accepted accounting principles consistently applied,
except liabilities arising in the ordinary course of business since such date
which would not have a PMCT Material Adverse Effect.
7.8 Litigation. There are (a) no continuing orders, injunctions
or decrees of any court, arbitrator or governmental authority to which PMCT or
any PMCT Subsidiary is a party or by which any of its properties or assets are
bound or, to the knowledge of PMCT, to which any of its directors, officers, or
affiliates is a party or by which any of their properties or assets are bound,
and (b) except as set forth in Schedule 7.8 hereto, no actions, suits or
proceedings pending against PMCT or any PMCT Subsidiary or, to the knowledge of
PMCT, against any of its directors, officers, or affiliates or, to the
knowledge of PMCT, threatened against PMCT or any PMCT Subsidiary or against
any of its directors, officers, or affiliates, at law or in equity, or before
or by any federal or state commission, board, bureau, agency or
instrumentality, that in the case of clause (a) or (b) above are reasonably
likely, individually or in the aggregate, to have a PMCT Material Adverse
Effect.
7.9 Absence of Certain Changes. Except as disclosed in the PMCT
Reports filed with the SEC prior to the date hereof, since the date of the most
recent financial statements included in the PMCT Reports (the "Financial
Statement Date"), (a) PMCT and the PMCT Subsidiaries have conducted their
business in all material respects in the ordinary course of such business
(which, for purposes of this Section 7.9 only, shall include all financing
arrangements made in connection with the acquisition and/or development of real
estate properties); (b) no event has caused a PMCT Material Adverse Effect and
there has been no event, occurrence or circumstance that with the passage of
time would reasonably be expected to cause a PMCT Material Adverse Effect; (c)
except as otherwise permitted pursuant to the terms of this Agreement, as of
the date hereof there has not been any declaration, setting aside or payment of
any dividend or other distribution with respect to the PMCT Common Shares or
any split, combination or reclassification of the PMCT Common Shares; and (d)
there has not been any material change in PMCT's accounting principles,
practices or methods. There are no material unsatisfied judgments, orders
(other than orders of general applicability), decrees or stipulations affecting
PMCT or any PMCT Subsidiary or to which one of them is a party.
7.10 Taxes. Except as set forth on Schedule 7.10 hereto, PMCT and
each of its Subsidiaries (a) have timely filed all federal, state and foreign
tax returns, including, without limitation, information returns and reports
required to be filed by any of them for tax periods ended prior to the date of
this Agreement, or requests for extensions have been timely filed and any such
request has been granted and has not expired and all such returns are absolute
and complete to the knowledge of PMCT in all material respects, (b) has paid or
accrued in accordance with GAAP all taxes shown to be due and payable on such
returns or which have become due and payable pursuant to any assessment,
deficiency notice, 30-day letter or other notice received by it, and (c) has
properly accrued in accordance with GAAP all material taxes for such periods
subsequent to the periods
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covered by such returns. Except as set forth on Schedule 7.10 hereto, neither
PMCT nor any of the PMCT Subsidiaries has received written notice that the
federal, state and local income and franchise tax returns of PMCT or any PMCT
Subsidiary will be examined by any taxing authority. Except as set forth on
Schedule 7.10 hereto, neither PMCT nor any of the PMCT Subsidiaries has
executed or filed with the IRS or any other taxing authority any agreement now
in effect extending the period for assessment or collection of any income or
other taxes.
Except as set forth on Schedule 7.10 hereto, neither PMCT nor any of
the PMCT Subsidiaries is a party to any pending action or proceeding by any
governmental authority for assessment or collection of taxes, and no claim for
assessment or collection of taxes has been asserted against it. True, correct
and complete copies of all federal, state and local income or franchise tax
returns filed by PMCT and each of the PMCT Subsidiaries have been delivered to
STH or made available to representatives of STH. Except as set forth on
Schedule 7.10 hereto, the tax returns filed by PMCT and any PMCT Subsidiary
have not been, and are not being, to the knowledge of PMCT, examined by the IRS
or other relevant taxing authorities for any period nor are there any pending
or, to the knowledge of PMCT, threatened examinations or tax claims asserted by
any such authorities. There are no tax liens on any of the property of PMCT.
Except as otherwise disclosed on Schedule 7.10, PMCT is not a party to, or
bound by, any tax indemnity, tax sharing or tax allocation agreement. PMCT (i)
has qualified to be taxed as a REIT pursuant to Sections 856 through 859 of the
Code for its taxable years ended December 31, 1994 through 1997, inclusive (ii)
has operated, and intends to continue to operate, in such a manner as to
qualify to be taxed as a REIT pursuant to Sections 856 through 859 of the Code
for its taxable year ended on the effective date of the Merger, and (iii) has
not taken or omitted to take and will not take or omit to take any action which
could result in, and each of the executive officers of PMCT, each acting in his
or her respective capacity as such, has no actual knowledge of, a challenge to
its status as a REIT. Following consummation of the Merger in accordance with
the provisions of this Agreement, PMCT will continue to meet the requirements
for qualification and taxation as a REIT under the Code. PMCT represents that
each of its Subsidiaries which is a corporation for federal income tax purposes
and of which all the outstanding capital stock is owned solely by PMCT (or by
PMCT and one or more of the PMCT Subsidiaries or by one or more of the PMCT
Subsidiaries) is a Qualified REIT Subsidiary as defined in Section 856(i) of
the Code. Neither PMCT nor any of the PMCT Subsidiaries holds any asset (i) the
disposition of which could be subject to rules similar to Section 1374 of the
Code as a result of an election under IRS Notice 88-19 or (ii) that is subject
to a consent filed pursuant to Section 341(f) of the Code and regulations
thereunder. For purposes of this Section 7.10, "taxes" includes any interest,
penalty or additional amount payable with respect to any tax.
7.11 Books and Records. The books of account and other financial
records of PMCT and the PMCT Subsidiaries are accurately reflected in all
material respects in the financial statements included in the PMCT Reports.
7.12 Employee Benefit Plans. All employee benefits plans and other
benefit arrangements covering employees of PMCT and the PMCT Subsidiaries (the
"PMCT Benefit Plans") are set forth on Schedule 7.12. True and complete copies
of the PMCT Benefit Plans have been or will be made available to STH. To the
extent applicable, the PMCT Benefit Plans comply, in all material respects,
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with the requirements of ERISA, and the Code, and any PMCT Benefit Plan
intended to be qualified under Section 401(a) of the Code has been determined
by the IRS to be so qualified. No PMCT Benefit Plan is covered by Title IV of
ERISA or Section 412 of the Code. No PMCT Benefit Plan nor PMCT has incurred
any liability or penalty under Section 4975 of the Code or Section 502(i) of
ERISA. Each PMCT Benefit Plan has been maintained and administered in all
material respects in compliance with its terms and with ERISA and the Code to
the extent applicable thereto.
Except as set forth on Schedule 7.12, there are no pending or, to the
knowledge of PMCT, threatened claims against or otherwise involving any of the
PMCT Benefit Plans and no suit, action or other litigation (excluding claims
for benefits incurred in the ordinary course of PMCT Benefit Plan activities)
has been brought against or with respect to any such PMCT Benefit Plan, except
for any of the foregoing which would not have a PMCT Material Adverse Effect.
All material contributions required to be made as of the date hereof to the
PMCT Benefit Plans have been made or provided for. Neither PMCT nor any PMCT
Subsidiary has any liabilities or obligations with respect to any such PMCT
Benefit Plan, whether accrued, contingent or otherwise, nor to the knowledge of
PMCT are any such liabilities or obligations expected to be incurred. Neither
PMCT nor any entity under "common control" with PMCT within the meaning of
ERISA Section 4001 has contributed to, or been required to contribute to, any
"multiemployer plan" (as defined in Sections 3(37) and 4001(a)(3) of ERISA).
Except as set forth on Schedule 7.12, PMCT does not maintain or
contribute to any plan or arrangement which provides or has any liability to
provide life insurance, medical or other employee welfare benefits to any
employee or former employee upon his retirement or termination of employment
and PMCT has never represented, promised or contracted (whether in oral or
written form) to any employee or former employee that such benefits would be
provided.
7.13 Labor Matters. Neither PMCT nor any of the PMCT Subsidiaries
is a party to, or bound by, any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor union
organization. There is no unfair labor practice or labor arbitration
proceeding pending or, to the knowledge of PMCT, threatened against PMCT or the
PMCT Subsidiaries relating to their business, except for any such proceeding
which would not have a PMCT Material Adverse Effect. To the knowledge of PMCT,
there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of PMCT or any of the PMCT Subsidiaries. There have been no material
work stoppages, strikes or other concerted actions by employees of PMCT or any
of the PMCT Subsidiaries other than those that would not have a PMCT Material
Adverse Effect.
7.14 No Brokers. Except the fee to be paid to J.C. Bradford & Co.
by PMCT as described below, PMCT has not entered into any contract, arrangement
or understanding with any person or firm which may result in the obligation of
PMCT or STH to pay any finder's fees, brokerage or agent's commissions or other
like payments in connection with the negotiations leading to this Agreement or
the consummation of the transactions contemplated hereby. PMCT is not aware of
any claim for payment of any finder's fees, brokerage or agent's commissions or
other like payments in
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connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
7.15 Opinion of Financial Advisor. PMCT has retained J.C. Bradford
& Co. to review the transactions contemplated by this Agreement and to issue an
opinion to the effect that, as of the date of such opinion, the Exchange Ratio
is fair, from a financial point of view, to PMCT and the holders of PMCT Common
Shares.
7.16 STH Share Ownership. Except as expressly described in the
Recitals hereto or as may be set forth in Schedule 7.16, neither PMCT nor any
of the PMCT Subsidiaries owns any shares of capital stock of STH or other
securities convertible into capital stock of STH.
7.17 PMCT Common Shares. The issuance and delivery by PMCT of PMCT
Common Shares in connection with the Merger and this Agreement have been duly
and validly authorized by all necessary action on the part of PMCT except for
the approval of its shareholders contemplated by this Agreement. The PMCT
Common Shares to be issued in connection with the Merger and this Agreement,
when issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable.
7.18 Convertible Securities. PMCT has no outstanding options,
warrants or other securities exercisable for, or convertible into, shares of
PMCT Common Shares, the terms of which would require any anti-dilution
adjustments by reason of the consummation of the transactions contemplated
hereby.
7.19 Related Party Transactions. Schedule 7.19 hereto sets forth a
list of all arrangements, agreements and contracts entered into by PMCT or any
of the PMCT Subsidiaries with (a) any consultant, or (b) any person who is an
officer, director or affiliate of PMCT or any of the PMCT Subsidiaries, any
relative of any of the foregoing or any entity of which any of the foregoing is
an affiliate. Copies of such documents, all of which have been or will be
delivered or made available to STH prior to May 8, 1998, are or will be true,
complete and correct when delivered or made available.
7.20 Contracts and Commitments. Except for loan commitments made
by PMCT in the ordinary course of its business, Schedule 7.20 sets forth (a)
all unsecured notes or other obligations of PMCT and the PMCT Subsidiaries
which individually may result in total payments in excess of $750,000, (b)
notes, debentures, bonds and other evidence of indebtedness which are secured
or collateralized by mortgages, deeds of trust or other security interests in
the PMCT properties or personal property of PMCT and the PMCT Subsidiaries, and
(c) each Commitment entered into by PMCT or any of the PMCT Subsidiaries which
individually may result in total payments or liability in excess of $750,000.
True and correct copies of the foregoing have been delivered or made available
to STH. None of PMCT or any of the PMCT Subsidiaries has received any notice
of a default that has not been cured under any of the documents described in
clause (a) or (b) above or is in default respecting any payment obligations
thereunder beyond any applicable grace periods. All joint venture agreements
to which PMCT or any of the PMCT Subsidiaries is a party are set forth
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on Schedule 7.20 and PMCT or the PMCT Subsidiaries are not in default with
respect to any obligations, which individually or in the aggregate are
material, thereunder.
ARTICLE 8
COVENANTS
8.1 Acquisition Proposals. Prior to the Effective Time, STH and
PMCT each agree (a) that neither of them nor any of their Subsidiaries shall,
and each of them shall direct and use its best efforts to cause its respective
officers, trust managers, directors, employees, agents, affiliates and
representatives (including, without limitation, any investment banker, attorney
or accountant retained by it or any of its Subsidiaries) not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including, without limitation, any
proposal or offer to its shareholders) with respect to a merger, acquisition,
tender offer, exchange offer, consolidation or similar transaction involving,
or any purchase 20% or more of the assets or equity securities (or any debt
securities convertible into equity securities) of, such party or any of its
Subsidiaries, other than the transactions contemplated by this Agreement (any
such proposal or offer being hereinafter referred to as an "Acquisition
Proposal") or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal; (b) that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing and each will take the necessary steps to inform the
individuals or entities referred to above of the obligations undertaken in this
Section 8.1; and (c) that it will notify the other party immediately if any
such inquiries or proposals are received by, any such information is requested
from, or any such negotiations or discussions are sought to be initiated or
continued with, it; provided, however, that nothing contained in this Section
8.1 shall prohibit the Board of Trust Managers or the Board of Directors of
such party from (i) furnishing information to or entering into discussions or
negotiations with, any person or entity that makes an unsolicited bona fide
Acquisition Proposal, if, and only to the extent that, (A) the Board of Trust
Managers or Board of Directors of such party determines in good faith that such
action is required for such body to comply with its fiduciary duties to
shareholders imposed by law as advised by counsel, (B) prior to furnishing such
information to, or entering into discussions or negotiations with, such person
or entity, such party provides written notice to the other party to this
Agreement to the effect that it is furnishing information to, or entering into
discussions with, such person or entity, and (C) subject to any confidentiality
agreement with such person or entity (which such party determined in good faith
was required to be executed in order for such body to comply with its fiduciary
duties to shareholders imposed by law as advised by counsel), such party keeps
the other party to this Agreement informed of the status (but not the terms) of
any such discussions or negotiations; and (ii) to the extent applicable,
complying with Rule 14e-2 promulgated under the Exchange Act with regard to an
Acquisition Proposal.
Nothing in this Section 8.1 shall (x) permit any party to terminate
this Agreement (except as specifically provided in Article 10 hereof), (y)
permit any party to enter into any agreement with
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respect to an Acquisition Proposal during the term of this Agreement (it being
agreed that during the term of this Agreement, no party shall enter into any
agreement with any person that provides for, or in any way facilitates, an
Acquisition Proposal (other than a confidentiality agreement in customary
form)), or (z) affect any other obligation of any party under this Agreement.
8.2 Earnings and Profits Dividend. The Earnings and Profits
Dividend shall be paid to STH shareholders of record as of a date not more than
five (5) trading days nor fewer than three (3) trading days before the Closing
Date. STH shall declare such dividend not less than 10 days nor more than 15
days prior to the record date for such dividend. STH and PMCT shall cause the
Earnings and Profits Dividend to be distributed immediately following the
Closing.
8.3 Conduct of Businesses.
(a) Prior to the Effective Time, except as may be set forth in the
schedules to this Agreement or as contemplated by this Agreement, unless the
other party has consented in writing thereto, PMCT and STH:
(i) Shall use their reasonable efforts, and shall cause
each of their respective Subsidiaries to use their reasonable efforts,
to preserve intact their business organizations and goodwill and keep
available the services of their respective officers and employees;
(ii) Shall confer on a regular basis with one or more
representatives of the other to report operational matters of
materiality and, subject to Section 8.1, any proposals to engage in
material transactions;
(iii) Shall promptly notify the other of any material
emergency or other material change in the condition (financial or
otherwise), business, properties, assets, liabilities, prospects or
the normal course of their businesses or in the operation of their
properties, any material governmental complaints, investigations or
hearings (or communications indicating that the same may be
contemplated), or the breach in any material respect of any
representation, warranty, covenant or agreement contained herein; and
(iv) Shall promptly deliver to the other true and correct
copies of any report, statement or schedule filed with the SEC
subsequent to the date of this Agreement.
(b) Prior to the Effective Time, except as may be set forth in the
schedules to this Agreement, unless PMCT has consented (such consent not to be
unreasonably withheld or delayed) in writing thereto, STH:
(i) Shall, and shall cause each of the STH Subsidiaries
to, conduct its operations according to their usual, regular and
ordinary course in substantially the same manner as heretofore
conducted;
(ii) Shall not amend its Certificate of Incorporation or
Bylaws;
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(iii) Shall not merge or consolidate with any other person;
(iv) Shall not (A) except pursuant to the exercise of
options, warrants, conversion rights and other contractual rights
existing on the date hereof and disclosed pursuant to this Agreement,
issue any shares of its capital stock, effect any stock split, reverse
stock split, stock dividend, recapitalization or other similar
transaction, (B) grant, confer or award any option, warrant,
conversion right or other right (other than so-called "reload options"
which have heretofore been authorized for issuance in connection with
the application of existing STH Common Stock to the exercise price of
existing options) not existing on the date hereof to acquire any
shares of its capital stock, (C) increase any compensation or enter
into or amend any employment agreement with any of its present or
future officers or directors, or (D) adopt any new employee benefit
plan (including any stock option, stock benefit or stock purchase
plan) or amend any existing employee benefit plan in any material
respect, except for changes which are less favorable to participants
in such plans;
(v) Except for the payment of the Earnings and Profits
Dividend in accordance with Section 8.2, shall not declare, set aside
or pay any dividend or make any other distribution or payment with
respect to any shares of its capital stock;
(vi) Other than in the ordinary course of its business,
shall not, and shall not permit any of the STH Subsidiaries to, sell
or otherwise dispose of (A) any Land, Hotel Improvements, Personal
Property or any of its capital stock of or other interests in the STH
Subsidiaries, in each case which are material, individually or in the
aggregate, or (B) except as otherwise contemplated by the Agreement of
Sale, any of its other assets which are material, individually or in
the aggregate;
(vii) Other than in the ordinary course of its business,
shall not, and shall not permit any of the STH Subsidiaries to, make
any loans, advances or capital contributions to, or investments in,
any other person;
(viii) Shall not, and shall not permit any of the STH
Subsidiaries to, pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities reflected
or reserved against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto) of STH
included in the STH Reports or incurred in the ordinary course of
business consistent with past practice;
(ix) Shall not, and shall not permit any of the STH
Subsidiaries to, enter into any commitment which individually may
result in total payments or liability by or to it in excess of $50,000
in the case of any one commitment or in excess of $125,000 for all
commitments;
(x) Shall not, and shall not permit any of the STH
Subsidiaries to, enter into any commitment with any officer, director
or affiliate of STH or any of the STH Subsidiaries
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except to the extent the same occur in the ordinary course of business
consistent with past practice and would not have an STH Material
Adverse Effect;
(xi) Shall manage and operate each Hotel in all material
respects in accordance with the practices and in the manner it was
managed and operated on the date hereof;
(xii) Shall maintain in all material respects the
Improvements and FF&E in a manner consistent with past practices;
(xiii) Shall enter into no material agreement with respect
to the operation or maintenance of any portion of any Hotel without
the prior written consent of PMCT;
(xiv) Other than in the ordinary course of business, shall
not, without the prior written consent of PMCT, permit any material
structural modifications or additions to any Hotel, or sell or permit
to be sold or otherwise dispose of any item or group of items
constituting a portion of any Hotel;
(xv) Shall maintain STH's existing or comparable insurance
coverage with respect to each Hotel from the date of execution of this
Agreement through the Effective Time or earlier termination of this
Agreement;
(xvi) Shall not further encumber or permit encumbrance of
any Hotel in any manner;
(xvii) Shall promptly notify PMCT in writing of the receipt
by STH of any material written levy (or threatened levy) against any
Hotel of any special governmental assessment or similar occurrence;
(xviii) Shall promptly notify PMCT in writing of any
violation, alleged violation or anticipated violation, of any
Applicable Law or Environmental Law, of which it gains knowledge or is
notified which is likely to have a STH Material Adverse Effect;
(xix) Shall not execute an assignment of any Lease, an
assignment of any rent accruing under any Lease or the assignment of
any room rent or booking; and
(xx) To the extent a notice of assumed name or similar
document relating to any name, trademark, trade style or trade name
assigned or passed to PMCT hereunder has been filed with any federal,
state, county or local governmental agency, shall, at PMCT's request,
withdraw such filing and assist PMCT in any reasonable manner to
protect PMCT's interest in any such name, trademark, trade style,
trade name or Servicemark assigned or passed to PMCT hereunder.
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(c) Prior to the Effective Time, except as may be set forth in the
schedules to this Agreement, unless STH has consented (such consent not to be
unreasonably withheld or delayed) in writing thereto, PMCT:
(i) Shall, and shall cause each of the PMCT Subsidiaries
to, conduct its operations according to their usual, regular and
ordinary course in substantially the same manner as heretofore
conducted;
(ii) Shall not amend its Declaration of Trust or Bylaws;
(iii) Shall not merge or consolidate with any other person;
(iv) Shall not (A) except pursuant to the exercise of
options, warrants, conversion rights and other contractual rights
existing on the date hereof and disclosed pursuant to this Agreement,
issue any of its shares of beneficial interest, effect any share
split, reverse share split, share dividend, recapitalization or other
similar transaction, (B) grant, confer or award any option, warrant,
conversion right or other right not existing on the date hereof to
acquire any of its shares of beneficial interest, (C) amend any
employment agreement with any of its present or future officers or
trust managers, or (D) adopt any new employee benefit plan (including
any share option, share benefit or share purchase plan);
(v) Shall not declare, set aside or pay any dividend or
make any other distribution or payment with respect to any shares of
its capital stock, except (A) its regular quarterly dividends not to
exceed per quarter $0.50 per share of PMCT Common Shares, (B) a
special dividend payable to PMCT shareholders contemporaneously with
the Closing in an amount not to exceed $0.50 per share, and (C) any
other dividend or distribution necessary for PMCT to maintain its
ability to qualify to be taxed as a REIT under the Code;
(vi) Except as will be set forth in the schedules to this
Agreement, shall not, and shall not permit any of the PMCT
Subsidiaries to, sell or otherwise dispose of, except in the ordinary
course of business, any of its assets which are material, individually
or in the aggregate;
(vii) Shall not, and shall not permit any of the PMCT
Subsidiaries to, pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the most recent consolidated financial
statements (or the notes thereto) of PMCT included in the PMCT Reports
or incurred in the ordinary course of business consistent with past
practice;
(viii) Shall not, and shall not permit any of the PMCT
Subsidiaries to, enter into any Commitment which individually may
result in total payments or liability by or to it in excess of
$750,000 other than in the ordinary course of business; and
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(ix) Shall not, and shall not permit any of the PMCT
Subsidiaries to, enter into any Commitment with any officer, director
or affiliate of PMCT or any of the PMCT Subsidiaries, except as
provided herein or in the Schedules to this Agreement and except in
the ordinary course of business.
8.4 Damage to Property. STH agrees to give PMCT prompt notice of
any material fire or other material casualty affecting any of the Hotels
between the date hereof and the Closing Date or of any actual or threatened
taking or condemnation of all or any portion of any of the Land or the
Improvements.
8.5 Meetings of Shareholders. Each of PMCT and STH will take all
action necessary in accordance with applicable law and its organizational
documents to convene a meeting of its shareholders as promptly as practicable
to consider and vote upon or otherwise to obtain the consent of its
shareholders to (a) in the case of PMCT, the approval of the issuance of the
shares of PMCT Common Shares pursuant to the Merger and (b) in the case of STH,
the approval of this Agreement and the transactions contemplated hereby. The
Board of Trust Managers of PMCT and the Board of Directors of STH shall each
recommend such approval and PMCT and STH shall each take all lawful action to
solicit such approval, including, without limitation, timely mailing the Proxy
Statement (as defined in Section 8.9); provided, however, that such
recommendation or solicitation is subject to any action taken by, or upon
authority of, the Board of Trust Managers of PMCT or the Board of Directors of
STH, as the case may be, in the exercise of its good faith judgment as to its
fiduciary duties to its shareholders imposed by law as advised by counsel.
PMCT and STH shall coordinate and cooperate with respect to the timing of such
meetings and shall use their best efforts to hold such meetings on the same
day.
8.6 Filings; Other Action. Subject to the terms and conditions
herein provided, STH and PMCT shall: (a) use all reasonable efforts to
cooperate with one another in (i) determining which filings are required to be
made prior to the Effective Time with, and which consents, approvals, permits
or authorizations are required to be obtained prior to the Effective Time from
governmental or regulatory authorities of the United States, the several
states, third party secured and unsecured lenders and rating agencies in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and (ii) timely making all
such filings and timely seeking all such consents, approvals, permits or
authorizations; (b) use all reasonable efforts to obtain in writing any
consents required from third parties in form reasonably satisfactory to STH and
PMCT necessary to effectuate the Merger; and (c) use all reasonable efforts to
take, or cause to be taken, all other action and do, or cause to be done, all
other things necessary, proper or appropriate to consummate and make effective
the transactions contemplated by this Agreement. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purpose of this Agreement, the proper officers and directors or trust managers
of PMCT and STH shall take all such necessary action.
8.7 Inspection of Records. From the date hereof to the Effective
Time, each of STH and PMCT shall allow all designated officers, attorneys,
accountants and other representatives of the other access at all reasonable
times to the records and files, correspondence, audits and properties,
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as well as to all information relating to commitments, contracts, titles and
financial position, or otherwise pertaining to the business and affairs of STH
and PMCT and their respective Subsidiaries.
8.8 Publicity. The initial press release relating to this
Agreement shall be a joint release and thereafter STH and PMCT shall, subject
to their respective legal obligations (including requirements of stock
exchanges and other similar regulatory bodies), consult with each other, and
use reasonable efforts to agree upon the text of any press release, before
issuing any such press release or otherwise making public statements with
respect to the transactions contemplated hereby and in making any filings with
any federal or state governmental or regulatory agency or with any national
securities exchange with respect thereto.
8.9 Registration Statement. As soon as practicable following the
date of this Agreement, PMCT and STH shall prepare and file with the SEC a
preliminary proxy statement (the "Proxy Statement") in form and substance
satisfactory to each of PMCT and STH, and PMCT shall prepare and file with the
SEC a Registration Statement on Form S-4 (the "Registration Statement"), in
which the Proxy Statement will be included as a prospectus. Each of PMCT and
STH shall use its best efforts to (a) respond to any comments of the SEC and
(b) have the Registration Statement declared effective under the Securities Act
and the rules and regulations promulgated thereunder as promptly as practicable
after such filing and to keep the Registration Statement effective as long as
is reasonably necessary to consummate the Merger. Each party will notify the
other promptly of the receipt of any comments from the SEC and of any request
by the SEC for amendments or supplements to the Registration Statement or the
Proxy Statement or for additional information and will supply the other with
copies of all correspondence between such party or any of its representatives
and the SEC, with respect to the Registration Statement or the Proxy Statement.
Whenever any event occurs which is required to be set forth in an amendment or
supplement to the Registration Statement or the Proxy Statement, PMCT or STH,
as the case may be, shall promptly inform the other of such occurrence and
cooperate in filing with the SEC and/or mailing to the shareholders of PMCT and
the stockholders of STH such amendment or supplement. PMCT shall use its best
efforts to obtain, prior to the effective date of the Registration Statement,
all necessary state securities law or "Blue Sky" permits or approvals required
to carry out the transactions contemplated by this Agreement and will pay all
expenses incident thereto. PMCT agrees the Proxy Statement and each amendment
or supplement thereto, at the time of mailing thereof and at the time of the
respective meetings of shareholders of PMCT and STH, or, in the case of the
Registration Statement and each amendment or supplement thereto, at the time it
is filed or becomes effective, will not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, the foregoing shall
not apply to the extent that any such untrue statement of a material fact or
omission to state a material fact was made by PMCT in reliance upon and in
conformity with written information concerning STH furnished to PMCT by STH
specifically for use in the Proxy Statement. STH agrees the written
information provided by it specifically for inclusion in the Proxy Statement
and each amendment or supplement thereto, at the time of mailing thereof and at
the time of the respective meetings of shareholders of PMCT and STH, or, in the
case of written information provided by STH specifically for inclusion in the
Registration Statement or any amendments or supplement thereto, at the time it
is filed or becomes
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effective, will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. PMCT will advise STH, promptly after it receives notice
thereof, of the time when the Registration Statement has become effective or
any supplement or amendment has been filed, the issuance of any stop order, the
suspension of the qualification of the PMCT Common Shares issuable in
connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Proxy Statement or the Registration
Statement or comments thereon and responses thereto or requests by the SEC for
additional information.
8.10 Listing Application. PMCT shall promptly prepare and submit
to the American Stock Exchange ("AMEX") a listing application covering the PMCT
Common Shares issuable in the Merger, and shall use its reasonable efforts to
obtain, prior to the Effective Time, approval for the listing of such PMCT
Common Shares, subject to official notice of issuance.
8.11 Further Action. Each party hereto shall, subject to the
fulfillment at or before the Effective Time of each of the conditions of
performances set forth herein or the waiver thereof, perform such further acts
and execute such documents as may reasonably be required to effect the Merger.
8.12 Expenses. Subject to Section 10.5, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby, other than those associated with the filing, printing and distribution
of the Proxy Statement and the Registration Statement which shall be borne by
PMCT, shall be paid by the party incurring such expenses.
8.13 Governance. PMCT's Board of Trust Managers shall take all
action necessary to cause the full Board of Trust Managers of PMCT at the
Effective Time to take all such action necessary to cause Paul J. Schulte to be
selected and elected as a trust manager of PMCT for a term expiring at the 1999
annual meeting of shareholders, following the Effective Time, to fill one new
position to be created in connection with the transaction contemplated hereby;
provided that, notwithstanding the foregoing, the shareholders of PMCT at the
1999 annual meeting of shareholders shall vote on the election of Mr. Schulte
for a one year term. If, prior to the Effective Time, such person shall
decline or be unable to serve as a trust manager, STH shall designate another
person to serve in such person's stead, which person shall be reasonably
acceptable to PMCT.
8.14 Reorganization. From and after the date hereof and until the
Effective Time, neither PMCT nor STH nor any of their respective Subsidiaries
or other affiliates shall (a) knowingly take any action, or knowingly fail to
take any action, that would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code; or (b) enter
into any contract, agreement, commitment or arrangement with respect to the
foregoing. Following the Effective Time, PMCT shall not take any action that
would not jeopardize the characterization of the Merger as a reorganization
within the meaning of Section 368(a) of the Code.
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8.15 Third Party Consents. PMCT and STH each shall take all
necessary corporate and other action and will use its commercially reasonable
efforts to obtain the consents and applicable approvals from third parties that
may be required to enable it to carry out the transactions contemplated by this
Agreement.
8.16 Efforts to Fulfill Conditions. PMCT and STH each shall use
commercially reasonable efforts to insure that all conditions precedent to its
obligations hereunder are fulfilled at or prior to the Closing.
8.17 Representations, Warranties and Conditions Prior to Closing.
Neither PMCT nor STH shall voluntarily take any action that would reasonably be
expected to cause its representations and warranties contained in this
Agreement not to be true and correct on and as of the Closing Date in all
material respects. Prior to Closing, PMCT and STH each shall promptly notify
the other in writing (a) if any representation or warranty contained in this
Agreement is discovered to or becomes untrue in any material respect or (b) if
PMCT or STH fails to perform or comply in any material respect with any of its
covenants or agreements contained in this Agreement or it is reasonably
expected that it will be unable to perform or comply in any material respect
with any of its covenants or agreements contained in this Agreement.
8.18 Cooperation of the Parties. PMCT and STH each will cooperate
with the other in supplying such information as may be reasonably requested by
the other in connection with obtaining consents or approvals to the
transactions contemplated by this Agreement.
8.19 Tax Election. PMCT agrees to timely file a Notice 88-19
Election with respect to built-in gain assets acquired by PMCT as a result of
the Merger, which election will provide that PMCT will be taxed upon built-in
gain with respect to the sale of any such property within ten years after the
Closing Date to the extent the fair market value of such property at Closing
exceeds the adjusted tax basis of such property at Closing.
8.20 Directors and Officers Insurance.
(a) PMCT shall provide, or shall cause the Surviving Entity to
provide, STH's current covered insureds continuation coverage under STH's
existing Directors and Officers Liability and Employment Practice Liability
insurance and indemnification policy (including any fiduciary liability policy)
to provide coverage with respect to any claims made during the six-year period
following the Effective Time for events occurring prior to the Effective Time
(the "D&O Insurance") or, if substantially equivalent insurance coverage is
unavailable, the best available coverage and PMCT shall pay the deductible
amounts associated with claims made under such D&O Insurance; provided,
however, that the Surviving Entity shall not be required to pay one-time
premium for the D&O Insurance in excess of $125,000, but if such annual premium
would but for this proviso exceed such amount, the PMCT shall purchase as much
coverage as possible for such amount.
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(b) The provisions of this Section 8.20 are intended to be for the
benefit of, and shall be enforceable by, each such covered insured, and such
covered insured's heirs and personal representatives and shall be binding on
all successors and assigns of PMCT.
8.21 PMCT Earnings and Profits Dividend. To the extent the
Earnings and Profits Amount has been reduced as provided in the definition
thereof, PMCT hereby agrees to pay to its shareholders of record as of a date
after Closing, on a pro rata basis, the amount by which the Earnings and
Profits Amount was so reduced on or prior to December 31, 1998. Such dividend
payment shall be in addition to PMCT's regular quarterly dividend for such
period.
ARTICLE 9
CONDITIONS
9.1 Conditions to Each Party's Obligations to Effect the Merger.
The respective obligation of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the transactions contemplated
hereby shall have been approved in the manner required by the
Declaration of Trust of PMCT and the Certificate of Incorporation and
Bylaws of STH, and by applicable law or by applicable regulations of
any stock exchange or other regulatory body and by the holders of the
issued and outstanding shares of capital stock of STH and PMCT
entitled to vote thereon.
(b) Neither of the parties hereto shall be subject to any
order or injunction of a court of competent jurisdiction which
prohibits the consummation of the transactions contemplated by this
Agreement. In the event any such order or injunction shall have been
issued, each party agrees to use its reasonable efforts to have any
such injunction lifted.
(c) The Registration Statement shall have become
effective and all necessary state securities law or "Blue Sky" permits
or approvals required to carry out the transactions contemplated by
this Agreement shall have been obtained and no stop order with respect
to any of the foregoing shall be in effect.
(d) PMCT shall have obtained the approval for the listing
of the PMCT Common Shares issuable in the Merger on the AMEX, subject
to official notice of issuance.
(e) All consents, authorizations, orders and approvals of
(or filings or registrations with) any governmental commission, board,
other regulatory body or third parties required in connection with the
execution, delivery and performance of this Agreement shall have been
obtained or made, except for filings in connection with the Merger and
any other documents required to be filed after the Effective Time and
except where the failure to have obtained or made any such consent,
authorization, order, approval,
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filing or registration would not have a material adverse effect on the
business, results of operations or financial condition of PMCT and STH
(and their respective Subsidiaries), taken as a whole, following the
Effective Time.
9.2 Conditions to Obligations of STH to Effect the Merger. The
obligation of STH to effect the Merger shall be subject to the fulfillment at
or prior to the Closing Date of the following conditions, unless waived by STH:
(a) PMCT shall have performed its agreements contained in
this Agreement required to be performed on or prior to the Closing
Date and the representations and warranties of PMCT contained in this
Agreement shall be true and correct in all material respects as of the
Closing Date as if made on the Closing Date, except representations
and warranties made as of a specific date (which shall be true and
correct in all material respects as of such date), and STH shall have
received a certificate of the President or an Executive Vice President
of PMCT, dated the Closing Date, certifying to such effect.
(b) STH shall have received the opinion of Winstead
Sechrest & Minick P.C. of Dallas, Texas ("PMCT's Counsel"), dated the
Closing Date, to the effect that commencing with its taxable year
ended December 31, 1994, PMCT was organized and has operated in
conformity with the requirements for qualification as a REIT under the
Code and that, after giving effect to the Merger, PMCT's proposed
method of operation will enable it to continue to meet the
requirements for qualification and taxation as a REIT under the Code
(with customary exceptions, assumptions and qualifications and based
upon customary representations) and to the effect that the Merger will
be treated for federal income tax purposes as a reorganization within
the meaning of Section 368(a) of the Code, that STH and PMCT will each
be a party to that reorganization within the meaning of Section 368(a)
of the Code and as to such other customary matters as STH may
reasonably request, such opinion to be reasonably satisfactory to STH.
In rendering its opinion, PMCT's Counsel shall be entitled to rely as
to any factual matter upon certificates given by executive officers of
STH and PMCT.
(c) From the date of the Agreement through the Effective
Time, there shall not have occurred any change in the financial
condition, business or operations of PMCT and the PMCT Subsidiaries,
taken as a whole, that would have or would be reasonably likely to
have a PMCT Material Adverse Effect.
(d) The opinion of ABN AMRO Incorporated addressed to the
Board of Directors of STH that the consideration to be received by the
stockholders of STH is fair, from a financial point of view, shall not
have been withdrawn or materially modified.
(e) PMCT shall have entered into the Super 8 Assignment
Agreement.
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9.3 Conditions to Obligation of PMCT to Effect the Merger. The
obligations of PMCT to effect the Merger shall be subject to the fulfillment at
or prior to the Closing Date of the following conditions, unless waived by
PMCT:
(a) STH shall have performed its agreements contained in
this Agreement required to be performed on or prior to the Closing
Date and the representations and warranties of STH contained in this
Agreement shall be true and correct in all material respects as of the
Closing Date as if made on the Closing Date and PMCT shall have
received a certificate of the Chief Executive Officer, President or an
Executive Vice President of STH dated the Closing Date, certifying to
such effect.
(b) PMCT shall have received the opinion of PMCT's
Counsel, dated the Closing Date, to the effect that the Merger will be
treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, that PMCT and STH will each be
a party to that reorganization within the meaning of Section 368(a) of
the Code. PMCT shall also have received an opinion from McGrath,
North, Mullin & Kratz, P.C. ("STH's Counsel") as to such customary
matters as PMCT may reasonably request, such opinion to be reasonably
satisfactory to PMCT. In rendering its opinion, STH's Counsel shall
be entitled to rely as to any factual matter upon certificates given
by executive officers of PMCT and STH.
(c) From the date of this Agreement through the Effective
Time, there shall not have occurred any change in the financial
condition, business or operations of STH and the STH Subsidiaries,
taken as a whole, that would have or would be reasonably likely to
have an STH Material Adverse Effect.
(d) Each "affiliate" of STH (within the meaning of the
Securities Laws) listed on Exhibit 9.3(d) hereto shall have delivered
to PMCT a written agreement to the effect that such person will not
offer to sell, sell or otherwise dispose of any of the PMCT Common
Shares issued in the Merger, except, in each case, pursuant to an
effective registration statement or in compliance with Rule 145, as
amended from time to time, or in a transaction which, in the opinion
of legal counsel reasonably satisfactory to PMCT, is exempt from the
registration requirements of the Securities Act and that the
certificates representing the PMCT shares issued to him or her in the
Merger may bear a legend to such effect.
(e) STH and Supertel Management shall have entered into
the STH Ancillary Documents.
(f) The opinion of J.C. Bradford & Co. addressed to the
Board of Trust Managers of PMCT that the Exchange Ratio is fair, from
a financial point of view, to PMCT and the holders of PMCT Common
Shares, shall not have been withdrawn or materially modified.
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ARTICLE 10
TERMINATION
10.1 Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval of this Agreement by the shareholders of STH
or PMCT or by the mutual written consent of PMCT and STH, with the prior
approval of their Boards of Trust Managers or Directors, respectively.
10.2 Termination by Either PMCT or STH. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of STH or the Board of Trust Managers of PMCT if (a) the Merger shall not have
been consummated by November 30, 1998, (b) a meeting of STH's stockholders
shall have been duly convened and held and the approval of STH's stockholders
required by Section 9.1(a) shall not have been obtained at such meeting or at
any adjournment thereof, (c) a meeting of PMCT's shareholders shall have been
duly convened and held and the approval of PMCT's shareholders required by
Section 9.1(a) shall not have been obtained at such meeting or at any
adjournment thereof, (d) PMCT or STH elects to terminate this Agreement
pursuant to Section 4.1(a), or (e) a United States federal or state court of
competent jurisdiction or United States federal or state governmental,
regulatory or administrative agency or commission shall have issued an order,
decree or ruling or taken any other action permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by this Agreement and
such order, decree, ruling or other action shall have become final and
non-appealable, provided that the party seeking to terminate this Agreement
pursuant to this clause (e) shall have used commercially reasonable efforts to
remove such order, decree, ruling or injunction, and provided, in the case of a
termination pursuant to clause (a) above, that the terminating party shall not
have breached in any material respect its obligations under this Agreement in
any manner that shall have proximately contributed to the occurrence of the
failure referred to in said clause. The notice of termination shall include
the reasons, if any, for such termination and shall be considered Confidential
Material under Section 11.6.
10.3 Termination by STH. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the adoption and approval by the stockholders of STH referred to in
Section 9.1(a), by action of the Board of Directors of STH, if (a) in the
exercise of its good faith judgment as to its fiduciary duties to its
stockholders imposed by law, as advised by counsel, the Board of Directors of
STH determines that such termination is required by reason of an STH
Acquisition Proposal being made, (b) the Board of Trust Managers of PMCT
withdraws, materially modifies or changes in a manner materially adverse to STH
its recommendations to PMCT's shareholders of this Agreement or the Merger, (c)
the Board of Trust Managers of PMCT postpones the date scheduled for the
meeting of shareholders of PMCT to approve this Agreement and the transactions
contemplated hereby beyond October 31, 1998 or fails to set a date for such
meeting by such date, except with the written consent of STH, (d) there has
been a breach by PMCT of any representation or warranty contained in this
Agreement which would have or would be reasonably likely to have a PMCT
Material Adverse Effect, which breach is not curable by October 31, 1998, (e)
there has been material breach of any of the covenants or
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agreements set forth in this Agreement on the part of PMCT, which breach is not
curable or, if curable, is not cured within 30 days after written notice of
such breach is given by STH to PMCT, or (f) the per share Earnings and Profits
Dividend payable to each holder of STH Common Stock at Closing would be less
than $3.00 per share.
10.4 Termination by PMCT. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by the shareholders of PMCT referred to in Section 9.1(a),
by action of the Board of Trust Managers of PMCT, if (a) the Board of Directors
of STH withdraws, materially modifies or changes in a manner materially adverse
to PMCT its recommendation to STH's stockholders of this Agreement or the
Merger, (b) the Board of Directors of STH postpones the date scheduled for the
meeting of stockholders of STH to approve this Agreement and the transactions
contemplated hereby beyond October 31, 1998 or fails to set a date for such
meeting by such date, except with the written consent of PMCT, (c) there has
been a breach by STH of any representation or warranty contained in this
Agreement which would have or would be reasonably likely to have an STH
Material Adverse Effect, which breach is not curable by October 31, 1998, (d)
there has been a material breach of any of the covenants or agreements set
forth in this Agreement on the part of STH, which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by PMCT to STH, or (e) the aggregate amount of Indebtedness is greater
than $73 million, unless such excess is the result of general market
conditions.
10.5 Effect of Termination and Abandonment.
(a)(i) If an election to terminate this Agreement is made by PMCT
pursuant to Section 10.2(b) or by STH pursuant to Section 10.3(a), and
an Acquisition Proposal relating to STH shall have been made and,
within one year from the date of such termination, STH consummates
that STH Acquisition Proposal or enters into an agreement to
consummate an STH Acquisition Proposal which is subsequently
consummated within 18 months from the date of such termination, STH
shall pay to PMCT, provided PMCT was not in material breach of its
obligations hereunder at the time of such termination, as liquidated
damages and not as a penalty or forfeiture, an amount equal to the
lesser of (A) $1,200,000 (the "Liquidated Damages Amount") and (B) the
maximum amount permitted as liquidated damages pursuant to applicable
Delaware law, provided that the Liquidated Damages Amount shall not
exceed the sum of (1) the maximum amount that can be paid to PMCT
without causing PMCT to fail to meet the requirements of Sections
856(c)(2) and (3) of the Code determined as if the payment of such
amount did not constitute income described in Sections
856(c)(2)(A)-(H) and 856(c)(3)(A)-(I) of the Code ("Qualifying
Income"), as determined by PMCT's certified public accountants, plus
(2) an amount equal to the Liquidated Damages Amount less the amount
payable under clause (1) above in the event PMCT receives a letter
from PMCT's Counsel indicating that PMCT has received a ruling from
the IRS to the effect that Liquidated Damages Amount payments
constitute Qualifying Income. In addition to the Liquidated Damages
Amount, PMCT shall be entitled to receive from STH (or its successor
in interest) up to $700,000, the first $400,000 of which will consist
of an unaccountable reimbursement of PMCT's costs and expenses and the
remaining
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$300,000 will be for reimbursement of documented out-of-pocket costs
and expenses in connection with this Agreement and the transactions
contemplated hereby incurred by PMCT.
(ii) If an election to terminate this Agreement is made by
STH pursuant to Section 10.2(c) or by PMCT pursuant to Section
10.4(a), and an Acquisition Proposal relating to PMCT shall have been
made and, within one year from the date of such termination, PMCT
consummates that PMCT Acquisition Proposal or enters into an agreement
or consummate a PMCT Acquisition Proposal which is subsequently
consummated within 18 months from the date of such termination, PMCT
shall pay to STH, provided STH was not in material breach of its
obligations hereunder at the time of such termination, as liquidated
damages and not as a penalty or forfeiture, the Liquidated Damages
Amount. In addition to the Liquidated Damages Amount, STH shall be
entitled to receive from PMCT (or its successor in interest) up to
$700,000, the first $400,000 of which will constitute of an
unaccountable reimbursement of STH's costs and expenses and the
remaining $300,000 will be for reimbursement of documented
out-of-pocket costs and expenses in connection with this Agreement and
the transactions contemplated hereby incurred by STH.
(iii) The payments to which PMCT and STH are entitled under
this Section 10.5(a) shall be their sole remedy with respect to the
termination of this Agreement under the circumstances contemplated by
this Section 10.5(a).
(b) (i) If an election to terminate this Agreement is made by PMCT
pursuant to (A) Section 10.2(b) (except as a result of a default or breach
hereunder by PMCT) and no Acquisition Proposal with respect to STH is in
existence at such time or (B) Section 10.4(e), PMCT shall be entitled to
receive from STH all documented out-of-pocket costs and expenses in connection
with this Agreement and the transactions contemplated hereby (the "Expenses")
incurred by PMCT, up to a maximum of $700,000. If an election to terminate
this Agreement is made by STH pursuant to Section 10.3(f), PMCT shall be
entitled to receive from STH all Expenses incurred by PMCT, up to a maximum of
$300,000. The payments to which PMCT is entitled under this paragraph shall be
its sole remedy with respect to the termination of the Agreement under the
circumstances contemplated in this paragraph.
(ii) If an election to terminate this Agreement is made by STH
pursuant to Section 10.2(c) (except as a result of a default or breach
hereunder by STH) and no Acquisition Proposal with respect to PMCT is in
existence at such time, STH shall be entitled to recover from PMCT all Expenses
incurred by STH, up to a maximum of $700,000. The payment to which STH is
entitled under this paragraph shall be its sole remedy for termination of the
Agreement in such circumstances.
(c) If this Agreement is terminated pursuant to Section 10.3(d),
Section 10.3(e), Section 10.4(c) or Section 10.4(d), the non-terminating party
shall, provided that the terminating party was not in material breach of its
obligations hereunder at the time of such termination, pay the
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terminating party all Expenses, up to a maximum of $700,000, incurred by it and
the non-terminating party shall remain liable to the terminating party for its
breach.
(d) The payment of the Liquidated Damages Amount or any of the
Expenses pursuant to this Article 10 shall be by wire transfer or bank check,
within 10 days of the date of the event that triggers the payment requirements
set forth in this Article 10.
(e) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article 10, all obligations of the
parties hereto shall terminate, except the obligations of the parties pursuant
to this Section 10.5 and Sections 8.8 and 8.12 and except for the provisions of
Sections 11.4, 11.5, 11.6, 11.7, 11.8, 11.9, 11.11, 11.14, 11.15 and 11.17. In
the event PMCT is required to file suit to seek all or a portion of such
Liquidated Damages Amount, and it ultimately succeeds, it shall be entitled to
all expenses, including attorney's fees and expenses, which it has incurred in
enforcing its right hereunder.
10.6 Extension; Waiver. At any time prior to the Effective Time,
any party hereto, by action taken by its Board of Directors or Trust Managers,
as the case may be, may, to the extent legally allowed, (a) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto and
(c) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
ARTICLE 11
GENERAL PROVISIONS
11.1 Certain Definitions. Except as may otherwise be set forth in
this Agreement, capitalized terms used but not defined herein shall have the
meanings set forth in the glossary attached hereto as "Appendix A".
11.2 Nonsurvival of Representations, Warranties and Agreements.
All representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Merger;
provided, however, that the agreements contained in Article 4, Sections 8.2,
8.6, 8.13, 8.14, 8.19, 8.20 and 8.21, and this Article 11 shall survive the
Merger.
11.3 Notices. Any notice required to be given hereunder shall be
in writing and shall be sent by facsimile transmission (confirmed by any of the
methods that follow), courier service (with proof of service), hand delivery or
certified or registered mail (return receipt requested and first-class postage
prepaid) and addressed as follows:
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If to PMCT:
PMC Commercial Trust
Department 101
17290 Preston Road, 3rd Floor
Dallas, Texas 75252
Facsimile: (972) 349-3265
with a copy to:
Mr. Lance B. Rosemore
President
PMC Commercial Trust
17290 Preston Road, 3rd Floor
Dallas, Texas 75252
and with a copy (which shall not constitute notice) to:
Winstead Sechrest & Minick P.C.
1201 Elm Street
5400 Renaissance Tower
Dallas, Texas 75270
Attention: Kenneth L. Betts, Esq.
Facsimile: (214) 745-5390
If to STH:
Mr. Paul J. Schulte
Chief Executive Officer
Supertel Hospitality, Inc.
309 North 5th Street
Norfolk, Nebraska 68701
Facsimile: (402) 371-4229
with a copy (which shall not constitute notice) to:
McGrath, North, Mullin & Kratz, P.C.
One Central Park Plaza, Suite 1400
222 South Fifteenth Street
Omaha, Nebraska 68102
Attention: David L. Hefflinger, Esq.
Facsimile: (402) 341-0216
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or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
delivered.
11.4 Assignment; Binding Effect; Benefit. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, except as
provided in the following sentence, nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties hereto or
their respective heirs, successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement. The provisions of Article 4 and Sections 7.12, 7.13 and 7.14
(collectively, the "Third Party Provisions") shall benefit the persons
identified therein.
11.5 Entire Agreement. This Agreement, the Exhibits, the
Schedules, the STH Ancillary Agreements, the PMCT Ancillary Agreements and any
documents delivered by the parties in connection herewith constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings among the parties with
respect thereto. No addition to or modification of any provision of this
Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
11.6 Confidentiality. (a) As used herein, "Confidential Material"
means, with respect to either party hereto (the "Providing Party"), all
information (written or oral) furnished (whether before or after the date
hereof) by the Providing Party and its trust managers, directors, officers,
employees, affiliates or representatives of advisors, including counsel,
lenders and financial advisors (collectively, the "Providing Party
Representatives") to the other party hereto (the "Receiving Party") or such
Receiving Party's directors, officers, employees, affiliates or representatives
of advisors, including counsel, lenders and financial advisors or the Receiving
Party's potential sources of financing for the transactions contemplated by
this Agreement (collectively "the Receiving Party Representatives") and all
analyses, compilations, forecasts and other studies or other documents prepared
by the Providing Party or the Providing Party Representatives in connection
with its or their review of the transactions contemplated by this Agreement
which contain or reflect such information. The term "Confidential Material"
does not include, however, information which (i) at the time of disclosure or
thereafter is generally available to and known by the public other than as a
result of a disclosure directly or indirectly by the Receiving Party or the
Receiving Party Representatives in violation of this Agreement, (ii) at the
time of disclosure was available on a nonconfidential basis from a source other
than the Providing Party or the Providing Party Representatives, providing that
such source is not and was not bound by a confidentiality agreement with the
Providing Party, (iii) was known by the Receiving Party prior to receiving the
Confidential Material from the Providing Party or has been independently
acquired or developed by the Receiving Party without violating any of its
obligations under this Agreement, or (iv) is contained in any STH Reports or
PMCT Reports or the Proxy Statement/Prospectus.
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(b) Subject to paragraph (c) below or except as required by law,
the Confidential Material will be kept confidential and will not, without the
prior written consent of the Providing Party, be disclosed by the Receiving
Party or its Representatives, in whole or in part and will not be used by the
Receiving Party or its Representatives, directly or indirectly, for any purpose
other than in connection with this Agreement, the Merger or the evaluating,
negotiating or advising with respect to a transaction contemplated herein.
Moreover, each Receiving Party agrees to transmit Confidential Material to its
Representatives only if and to the extent that such Representatives need to
know the Confidential Material for purposes of such transaction and are
informed by such Receiving Party of the confidential nature of the Confidential
Material and of the terms of this Section.
(c) In the event either Receiving Party, its Representatives or
anyone to whom such Receiving Party or its Representatives supply the
Confidential Material, are requested or required (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand, any informal or formal investigation by any government or
governmental agency or authority or otherwise in connection with legal
processes) to disclose any Confidential Material, such Receiving Party agrees
(i) to immediately notify the Providing Party of the existence, terms and
circumstances surrounding such a request, (ii) to consult with the Providing
Party on the advisability of taking legally available steps to resist or narrow
such request and (iii) if disclosure of such information is required, to
furnish only that portion of the Confidential Material which, in the opinion of
such Receiving Party's counsel, such Receiving Party is legally compelled to
disclose and to cooperate with any action by the Providing Party to obtain an
appropriate protective order or otherwise reliable assurances that confidential
treatment will be accorded the Confidential Material (it being agreed that the
Providing Party shall reimburse the Receiving Party for all reasonable
out-of-pocket expenses incurred by the Receiving Party in connection with such
cooperation).
(d) In the event of the termination of this Agreement in
accordance with its terms, promptly upon request from either Providing Party,
the Receiving Party shall, except to the extent prevented by law, redeliver to
the Providing Party or destroy all tangible Confidential Material and will not
retain any copies, extracts or other reproductions thereof in whole or in part.
Any such destruction shall be certified in writing to the Providing Party by an
authorized officer of the Receiving Party supervising the same.
Notwithstanding the foregoing, each Receiving Party and one Representative
designated by each Receiving Party shall be permitted to retain one permanent
file copy of each document constituting Confidential Material.
(e) Each party hereto further agrees that if this Agreement is
terminated in accordance with its terms, for a period of one year from the date
of termination (i) it will not offer to hire or hire any person currently or
formerly employed by the other party with whom such party has had contact prior
hereto other than persons whose employment shall have been terminated by such
other party prior to the date of such offer to hire or hiring and (ii) neither
it nor its Affiliates shall directly or indirectly, (A) (1) solicit, seek or
offer to effect or effect, (2) negotiate with or provide any information to the
Board of Directors or Trust Managers of the other party, any director or
officer of the other party or any stockholder of the other party with respect
to, (3) make any statement or proposal, whether written or oral, either alone
or in concert with others, to the Board of Directors
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or Trust Managers of the other party, any trust manager, director or officer of
the other party or any stockholder of the other party or any other person with
respect to, or (4) make any public announcement (except as required by law in
respect of actions permitted hereby) or proposal or offer whatsoever
(including, but not limited to, any "solicitation" of "proxies" as such terms
are defined or used in Regulation 14A of the Exchange Act) with respect to, (u)
any form of business combination or similar or other extraordinary transaction
involving the other party or any Affiliate thereof, including, without
limitation, a merger, tender or exchange offer or liquidation of the other
party's assets, (v) any form of restructuring, recapitalization or similar
transaction with respect to the other party or any Affiliate thereto, (w) any
purchase of any securities or assets, or rights or options to acquire any
securities or assets (through purchase, exchange, conversion or otherwise), of
the other party or any Affiliate thereof, (x) any proposal to seek
representation on the Board of Directors or Trust Managers of the other party
or otherwise to seek to control or influence the management, Board of Directors
or Trust Managers or policies of the other party or any Affiliate thereof, (y)
any request or proposal to waive, terminate or amend the provisions of this
Section 11.6 or (z) any proposal or other statement inconsistent with the terms
of this Section 11.6 or (B) instigate, encourage, join, act in concert with or
assist (including, but not limited to, providing or assisting in any way in the
obtaining of financing for, or acting as a joint or co-bidder for the other
party with) any third party to do any of the foregoing, unless and until such
party has received the prior written invitation or approval of a majority of
the Board of Directors or Trust Managers of the other party to do any of the
foregoing; provided that without such invitation or approval, either party may
at any time, on a confidential non-public basis, submit to the Chief Executive
Officer or, if none, the President of the other party a proposal to (a) amend
any of the provisions of this Section 11.6(e) or (b) effect a business
combination or other extraordinary transaction with the other party providing
for the acquisition of all or substantially all of the assets or the securities
of the other party, including, without limitation, a merger, tender offer or
exchange offer. Each party hereto agrees that it will not agree with any third
party to waive its rights under this Section 11.6.
11.7 Amendment. This Agreement may be amended by the parties
hereto, by action taken by their respective Boards of Directors or Trust
Managers, at any time before or after approval of this Agreement or any other
matter presented in connection with the Merger by the shareholders of STH and
PMCT, but after any such shareholder approval, no amendment shall be made which
by law requires the further approval of shareholders without obtaining such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
11.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without regard to
its rules of conflict of laws.
11.9 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
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11.10 Headings. Heading of the Articles and Sections of this
Agreement are for the convenience of the parties only and shall be given no
substantive or interpretive effect whatsoever.
11.11 Interpretation. In this Agreement, unless the context
otherwise requires, words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all genders
and words denoting natural persons shall include corporations and partnerships
and vice versa.
11.12 Waivers. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
11.13 Incorporation. The Schedules and all Exhibits attached hereto
and thereto and referred to herein and therein are hereby incorporated herein
and made a part hereof for all purposes as if fully set forth herein.
11.14 Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
11.15 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed the parties shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any Texas Court, this
being in addition to any other remedy to which they are entitled at law or in
equity.
11.16 Subsidiaries. As used in this Agreement, the word
"Subsidiary" when used with respect to any party means any corporation,
partnership, joint venture, business trust or other entity, of which such party
directly or indirectly owns or controls at least a majority of the securities
or other interests having by their terms ordinary voting power to elect a
majority of the board of directors or others performing similar functions with
respect to such corporation or other organization.
11.17 Non-Recourse. Neither the officers, trust managers nor
shareholders of PMCT shall be personally bound or have any personal liability
hereunder. STH shall look solely to the assets of PMCT for satisfaction of any
liability of PMCT with respect to this Agreement and the Ancillary Agreements
to which it is a party. STH will not seek recourse or commence any action
against any
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of the shareholders of PMCT or any of their personal assets, and will not
commence any action for money judgments against any of the directors or
officers of PMCT or seek recourse against any of their personal assets, for the
performance or payment of any obligation of PMCT hereunder or thereunder.
Neither the directors, officers nor shareholders of STH shall be personally
bound or have any personal liability hereunder. PMCT shall look solely to the
assets of STH for satisfaction of any liability of STH with respect to this
Agreement and the Ancillary Agreements to which it is a party. PMCT will not
seek recourse or commence any action against any of the stockholders of STH or
any of their personal assets, and will not commence any action for money
judgments against any of the directors or officers of STH or seek recourse
against any of their personal assets, for the performance or payment of any
obligation of STH hereunder or thereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf on the day and year first
written above.
ATTEST: PMC COMMERCIAL TRUST
By: /s/ Andrew S. Rosemore By: /s/ Lance B. Rosemore
--------------------------------- --------------------------------
Andrew S. Rosemore Lance B. Rosemore
Executive Vice President and President and Chief Executive
Chief Operating Officer Officer
ATTEST: SUPERTEL HOSPITALITY, INC.
By: /s/ Steve H. Borgmann By: /s/ Paul J. Schulte
--------------------------------- --------------------------------
Steve H. Borgmann Paul J. Schulte
Executive Vice President and President and Chief Executive
Chief Operating Officer Officer
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APPENDIX A
"Applicable Laws" means any applicable federal, state county or
municipal law, statute, ordinance, rule, regulation, order or determination of
any governmental authority or any board of fire underwriters (or other body
exercising similar functions), or any restrictive covenant or deed restriction
or zoning ordinance or classification affecting any of the Hotels, including
without limitation, all applicable codes, flood disaster laws and health and
Environmental Laws, rules and regulations.
"Architectural Barriers Legislation" means the Americans With
Disabilities Act of 1990, P.L. 101-336, as amended.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consumables" means all engineering, maintenance and housekeeping
supplies, including soap, cleaning materials and matches; laundering and toilet
supplies provided to guests as part of hotel services; stationery and printing;
and other supplies of all kinds, whether used, unused, or held in reserve
storage for future use in connection with the maintenance or operation of, or
the services provided by each Hotel, which are on hand on the Closing Date,
subject to such depletion and including such resupplies as shall occur and be
made in the normal course of business, excluding Food and Beverage, Operating
Equipment and all items of personal property owned by Lessees, guests,
employees, or other persons furnishing food or services to each Hotel.
"Earnings and Profits Amount" shall mean the aggregate amount of STH's
accumulated and current earnings and profits, calculated as of the end of the
calendar month preceding the month in which the Closing Date occurs, subject to
certain adjustments thereto, as set forth on Exhibit A hereto, and shall be
set forth in certificate of the chief financial officer of STH, certifying as
to the Earnings and Profits Amount and the method of its calculation. The
Earnings and Profits Amount shall be calculated on a tax basis consistent with
the earnings and profits calculations given to PMCT by STH prior to the
execution of the Agreement.
"Earnings and Profits Dividend" shall mean the dividend of the
Earnings and Profits Amount, reduced on a dollar-for-dollar basis by the amount
of Indebtedness of STH in excess of $70 million, made from STH to the holders
of the STH Common Stock pursuant to Section 8.2 of this Agreement.
"Environmental Conditions" means conditions of the environment,
including the ocean, natural resources (including flora and fauna), soil,
surface water, ground water, any actual or potential drinking or water supply,
subsurface strata, or air, including ambient air, relating to or arising out of
the use, handling, storage, treatment, recycling, generation, transportation,
release, spilling, leaking, pumping, pouring, emptying, discharging, injecting,
escaping, leaching, disposal, dumping or threatened release of Hazardous
Materials from, in, on, or onto any of the parcels of Land.
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"Environmental Laws" means without limitation (i) the Resource
Conservation and Recovery Act, as amended by the Hazardous and Solid Waste
Amendments of 1984, as now or hereafter amended ("RCRA") (42 U.S.C. Section
6901 et seq.), (ii) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, as now or hereafter amended ("CERCLA") (42 U.S.C.
Section 9601 et seq.), (iii) the Clean Water Act, as now or hereafter amended
("CWA") (33 U.S.C. Section 1251 et seq.), (iv) the Toxic Substances Control
Act, as now or hereafter amended ("TSCA") (15 U.S.C. Section 2601 et seq.),
(v) the Clean Air Act, as now or hereafter amended ("CAA") (42 U.S.C. Section
7401 et seq.), (vi) all regulations promulgated under any of the foregoing,
(vii) any local, state or foreign law, statute, regulation or ordinance
analogous to any of the foregoing, and (viii) any other federal, state, local,
or foreign law (including any common law), statute, regulation, or ordinance
regulating, prohibiting, or otherwise restricting the placement, discharge,
release, threatened release, generation, treatment, or disposal upon or into
any environmental media of any substance, pollutant, or waste which is now or
hereafter classified or considered to be hazardous or toxic to human health or
the environment.
"Environmental Noncompliance" means, but is not limited to: (i) the
Release of any Hazardous Material into the environment, any storm drain, sewer,
septic system or publicly owned treatment works, in violation of any effluent
or emission limitations, standards or other criteria or guidelines established
by any Environmental Law; (ii) any noncompliance of physical structure,
equipment, process or premises with the requirements of building or fire codes,
zoning or land use regulations or ordinances, conditional use permits and the
like; (iii) any noncompliance with federal, state or local requirements
governing occupational safety and health; (iv) any operations, procedures,
designs, and the like at or on any of the parcels of Land that do not conform
to the statutory or regulatory requirements of any Environmental Law (including
land use regulations and ordinances) intended to protect public health, welfare
and the environment; (v) the failure to have obtained permits, licenses,
variances or other governmental authorizations necessary for the legal use
and/or operation of any equipment, process, or any activity at any parcel of
Land; and (vi) the operation and/or use of any process or equipment in
violation of any permit condition, schedule of compliance, administrative or
court order and the like, as any of the foregoing may be applicable to any
parcel of Land.
"Equipment Leases" shall mean all material leases, rental or other
agreements for the use of the FF&E, together with all amendments thereto.
"FF&E" shall mean as to each parcel of Land all fixtures, furniture,
furnishings, equipment, machinery, apparatus, appliances, and other articles of
depreciable personal property now owned or leased by STH or any STH Subsidiary
and located on such Land and used or usable in connection with the business or
Improvements located thereon, subject to such depletions, and replacements as
shall occur and be made in the normal course of business excluding, however:
(i) Consumables, (ii) Operating Equipment, (iii) Liquor Inventory and Liquor
Personalty, (iv) Food and Beverage, (v) Improvements, (vi) Vehicles, and (vii)
property owned by Lessees, guests, employees or other persons furnishing goods
or services to the business or Improvements located thereon.
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"Governmental Authority" means any and all applicable courts, boards,
agencies, commissions, offices, or authorities of any nature whatsoever for any
governmental unit (federal, state, county, district, municipal, city or
otherwise) whether now or hereafter in existence.
"Hazardous Materials" means any substance, product matter, material,
waste, solid, liquid, gas, or pollutant, the generation, storage, disposal,
handling, recycling, release (or threatened release), treatment, discharge, or
emission of which is regulated, prohibited, or limited under any Environmental
Law and shall also include, without limitation, (i) gasoline, diesel fuel, fuel
oil, motor oil, waste oil, and any other petroleum hydrocarbons, including any
additives or other by-products associated therewith, (ii) asbestos and
asbestos-containing materials in any form, (iii) polychlorinated biphenyls,
(iv) any substance the presence of which on the Property (A) requires reporting
or remediation under any Environmental Law; (B) causes or threatens to cause a
nuisance at any Hotel or poses or threatens to pose a hazard to the health or
safety of persons at any Hotel; or (C) which, if it emanated or migrated from
at any Hotel, could constitute a trespass, nuisance or health or safety hazard
to persons on adjacent property, (v) radon, (vi) urea formaldehyde foam
insulation, and (vii) underground storage tanks, whether empty, filled or
partially filled with any substance.
"Hotel" means each parcel of Land together with the Improvements and
Personal Property located on, at or used in connection with each parcel of
Land.
"Improvements" means all buildings, structures, and other
improvements, including such fixtures as shall constitute real property,
located on each parcel of Land including, but not limited to, the hotel
buildings containing guest rooms, meeting rooms, dining and beverage
facilities, office space, parking lots, swimming pools, sheds, and all other
hotel amenities (but specifically excluding FF&E).
"Indebtedness" means the aggregate liabilities of STH as of the end of
the calendar month preceding the month in which the Closing Date occurs, as
accrued on the balance sheet of STH as of such date prepared in accordance with
GAAP, subject, however, to those adjustments set forth on Exhibit B attached
hereto.
"Land" means each parcel of land being described more fully on Exhibit
C attached hereto together with all interest, if any, of STH in and to strips
and gores, if any, between the Land and abutting properties and any land lying
in or under the bed of any street, alley, road or right-of-way, open or
proposed, abutting or adjacent to the Land.
"Leases" means all of STH's interest in material leases, subleases and
rental agreements (written or verbal, now or hereafter in effect) that grant a
possessory interest in and to space situated on each parcel of Land or in the
Improvements or that otherwise grant rights with regard to use of all or any
portion of such Land or such Improvements, and all prepaid rentals (to the
extent applicable to a period beyond the Closing Date) and security deposits
under the Leases.
"Lessees" means the tenants under Leases.
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"Miscellaneous Hotel Assets" shall mean all contract rights, as-built
plans, specifications and architectural drawings and floor plans relating to
the construction of each Hotel, construction contracts, all written reports
relating to the condition of each Property, leases, concessions, assignable
warranties covering any portion of each Hotel or the FF&E located thereat, and
other items of intangible personal property owned by STH and relating to the
ownership or operation of the Hotel, including, but not limited to, (i) Service
Contracts, (ii) Equipment Leases, (iii) Permits, (iv) Hotel Names, (v) cash or
other funds, in petty cash or house banks, (vi) assignable utility and similar
deposits, (vii) Bookings, and (viii) prepaid amounts under any Service
Contracts, Equipment Leases, Leases, or Permits.
"Notification" means any written summons, citation, directive, order,
claim, litigation, pleading, investigation, proceeding, judgment, letter, or
any other written communication from any governmental instrumentality, any
entity or any individual, concerning any intentional or unintentional act or
omission which has resulted in or which may result in any Environmental
Noncompliance or Environmental Claim.
"Operating Agreements" means all material contracts of employment,
management, maintenance, service, supply or rental, franchise or license
agreements or other contracts outstanding relating to the operations of the
Hotels.
"Operating Equipment" shall mean all material china, glassware,
linens, and silverware owned by seller, whether in use or held in reserve
storage for future use, in connection with the operations of each Hotel, which
are on hand and located at each Hotel on the Closing Date, subject to such
depletion and including such resupplies as shall be made in the normal course
of business.
"Other Rights" means all rights, titles and interests of STH and any
STH subsidiary in and to any easements, reciprocal easements, rights-of-way,
rights of ingress or egress or other interests in, on, or to, any land,
highway, street, road or avenue, open or proposed, in, on, across, in front of,
abutting or adjoining the Land; all goodwill relating to the Land and
Improvements; all telephone exchanges, if any, related to the operation and
management of any Hotel; all keys to locks at each of the Improvements; and all
office furniture, furnishings, equipment and machinery, if any, in STH's
management office in the Improvements; any and all rights of STH in and to any
contracts or agreements with any city or municipality relating in any manner to
the Land, all rights, titles and interests of STH in and to any condemnation
award made or to be made, after the Effective Time, in respect of the Hotels
and in and to any unpaid award for damage to the Hotels by reason of casualty
to the Hotels or change of grade of any street.
"Permits" means all permits, consents, licenses, certificates,
approvals, registrations, and authorizations which are required by any
Applicable Law or Environmental Law for operation of each Property.
"Personal Property" means the FF&E, the Operating Equipment, the
Miscellaneous Hotel Assets, and all other machinery, equipment, fixtures, the
trade name, and personal property of every
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kind and character, and all accessories and additions thereto, owned by STH and
located in or on or used in connection with each parcel of Land or the
Improvements or the operations thereon.
"Property" means, collectively, the Land, Leases, Improvements,
Personal Property and Other Rights.
"Release" means releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, ejecting, escaping, leaching, disposing,
seeping, infiltrating, draining, or dumping of any Hazardous Material. This
term shall be interpreted to include both the present and past tense, as
appropriate.
"STH Property Reports" shall mean the (a) Title Policies, (b) the
Title Updates, (c) the instruments referred to in the Title Policies and Title
Updates, (d) the Surveys, (e) the Architectural Reviews, (f) the Phase 1
Assessments, and (g) the Phase 2 Assessments, if any.
"Survey" means the survey of each parcel of Land and Improvements
located thereon prepared by the Surveyor in accordance with the terms and
provisions of Section 6.3.
"Surveyor" means a Registered Public Surveyor or a Registered
Professional Engineer duly and currently licensed by the state in which each
parcel of Land is located.
"Title Policy" means as to each Hotel the Owner's Policy of Title
Insurance held by STH.
"Title Update" means as to each Title Policy (other than those dated
after the date hereof) the written confirmation of the title company that
issued such Title Policy of all matters of a public record affecting all or any
portion of the property covered by such Title Policy that have been filed in
the public record since the effective date of the coverage of such Title
Policy.
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EXHIBIT 2.2
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT, made as of the 21st day of May, 1998 (the "Effective Date"), by
and among the various corporations identified on Exhibit "A" attached hereto
and made part hereof (collectively "Seller"), each having an address at 2400 E.
Devon Avenue, Suite 280, Des Plaines, Illinois 60018, and PMC COMMERCIAL
TRUST, a Texas real estate investment trust, having an address at 17290 Preston
Road, 3rd Floor, Dallas, Texas 75252 ("Purchaser");
WITNESSETH:
ARTICLE ONE
PURCHASE AND SALE OF THE PROPERTY
Seller hereby agrees to assign, transfer, convey and sell to Purchaser, and
Purchaser hereby agrees to purchase from Seller, upon the terms and conditions
set forth in this Agreement, all of Seller's respective right, title and
interest in and to those certain thirty (30) motel/hotels commonly known
respectively by the street addresses set forth on Exhibit "B" attached hereto
and made a part hereof and as more particularly described below (hereinafter
referred to, collectively, as the "Property"). As used herein, the term
"Property" shall also refer to each and every one of the thirty (30) individual
motel/hotels, and the term "Seller" shall also refer to each and every one of
the signatories hereto, depending on the context in which the defined term is
utilized. Capitalized terms not defined in context are defined in Article
Eighteen hereof. Each Property shall include, respectively:
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1.1 those certain parcels of land located in the cities, counties
and states more particularly described on Exhibits "B-1" through "B-30"
(collectively, the "Land");
1.2 all buildings and improvements (the "Improvements") located
on, over or beneath the Land (the Land and Improvements hereinafter referred
to, collectively, as the "Real Estate");
1.3 all Personal Property, and
1.4 all Appurtenances and Appurtenant Easements.
ARTICLE TWO
PURCHASE PRICE
2.1 Purchase Price. The purchase price (the "Purchase Price") for
the Property shall be SEVENTY-THREE MILLION AND NO/100 DOLLARS
($73,000,000.00), payable as follows:
(a) Five Hundred Thousand and No/100 Dollars
($500,000.00) (the "Deposit"), by check, subject to
collection, payable to the order of Escrow Agent (as
hereinafter defined) upon execution of this
Agreement, to be held in escrow pursuant to the
provisions of Article Fifteen hereof; interest
accruing thereon, if any, shall follow the
disposition of the principal sum; and;
(B) Seventy-two Million, Five Hundred Thousand and No/100
Dollars ($72,500,000.00), less any interest accrued
on the Deposit as of the Closing (as hereinafter
defined), representing the balance of the Purchase
Price, shall be paid at the Closing, payable (1) by
wire transfer of immediately available federal funds
to an account designated by Seller, or (2) in the
form of a credit
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equal to the amount of indebtedness secured by each
Existing Mortgage (as hereinafter defined) and
assumed by Purchaser, or both. Purchaser and Seller
shall execute mutually acceptable escrow
instructions, consistent with the provisions of this
Agreement, in connection with the escrow to be
created pursuant hereto.
2.2 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Property as set forth on Exhibit "C" attached hereto and
made part hereof, and the values so determined shall be reflected in the
documentary fee or transfer taxes, if any, paid at the Closing.
2.3 Assumption of Mortgages. Various mortgages, deeds of trust or
deeds to secure debt, as the case may be, encumber one or more of the
motel/hotels which comprise the Property (each an "Existing Mortgage"). To the
extent permissible under the terms and provisions of a particular Existing
Mortgage, Purchaser may assume the obligations of the mortgagor or grantor
thereunder, and the borrower under the note(s) secured thereby, and shall
receive a credit against the Purchase Price equal to the amount of
indebtedness at the date of Closing so assumed by Purchaser. Purchaser shall
pay Seller at the Closing, without credit against the Purchase Price, any and
all prepayment premiums or penalties payable upon the prepayment of any
Existing Mortgage not assumed by Purchaser. With respect to any Property
encumbered by an Existing Mortgage which Purchaser desires to assume, Seller
and Purchaser agree to cooperate with each other to effect the sale of such
Property hereunder in a manner, if possible, which would not violate the
applicable provisions of such Existing Mortgage regarding the sale or transfer
of such Property. In the event that Purchaser elects to assume the Existing
Mortgage with respect to any Property located in Marysville, Ohio, Plainfield,
Indiana, Sycamore, Illinois, Macomb, Illinois, or Tupelo, Mississippi
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but such assumption cannot be consummated prior to the Closing Date stipulated
in Section 4.1, the Closing Date with respect to any such Property shall be
adjourned for a period ending no later than June 30, 1999; provided, however
that the Purchase Price will be reduced by an amount equal to Thirty-nine
Thousand Eight Hundred Three and No/100 Dollars ($39,803.00) multiplied by the
number of rooms for each such Property with respect to which the Closing Date
has been so adjourned, and the sum of Fifteen Thousand and No/100 Dollars
($15,000.00) shall remain in escrow with the Escrow Agent for each Property
with respect to which the Closing Date has been so adjourned. In the event
that any such assumption ultimately is not allowed by the mortgagee under such
Existing Mortgage, Purchaser or Seller may (i) elect to pay the prepayment
penalty which would be due upon the repayment of the loan secured by such
Existing Mortgage and consummate the transaction contemplated herein with
respect to the Property encumbered by such Existing Mortgage, or (ii) reject
such Property whereupon the Agreement shall terminate with respect to such
Property and the escrow funds attributable to such Property shall be returned
to Purchaser, and neither party hereto shall have any further claim against the
other by reason of this Agreement with respect to such Property.
Notwithstanding anything contained herein to the contrary, all due diligence
rights of Purchaser with respect to any such Property are expressly reserved
upon any such adjournment of the Closing Date with respect to any such
Property.
ARTICLE THREE
SURVEY AND TITLE
3.1 Surveys. As soon as practical after the Effective Date,
Seller shall deliver or cause to be delivered to Purchaser an as-built, ALTA
survey (collectively, the "Surveys") of each Property. The Surveys shall be
sufficient to permit the Title Insurance Company to delete the standard printed
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survey exception in the title policy or otherwise obtain the ALTA survey
endorsement. The Surveys shall indicate the location and dimensions of all of
the Improvements.
3.2 Title Commitments. As soon as practical after the Effective
Date, Purchaser shall obtain the title commitment (collectively, the "Title
Commitments") for each property, together with copies of all documents
(collectively, the "Title Documents") constituting exceptions to Seller's title
as reflected in the Title Commitments.
3.3 Review Period. Purchaser shall have the Inspection Period (as
hereinafter defined) in which to review the Title Commitments, Title Documents,
UCC Searches (as hereinafter defined) and Phase I Audits (as hereinafter
defined) and to deliver to Seller in writing such reasonable objections as
Purchaser may have to anything contained or set forth in such documents. Each
item to which Purchaser does not accept in writing within such period shall not
be deemed to be a Permitted Exception. Seller shall have and be entitled to a
reasonable period of time within which to clear such objection(s) and shall
cure title or remove said exceptions or defect which may be removed by the
payment of money at the expense of Seller of up to (a) $50,000.00 in the
aggregate with respect to each property and (b) $500,000.00 as an aggregate for
all of the Property. Notwithstanding anything to the contrary, Seller shall
have no obligation to cure title or remove said objection(s) which may be
removed by the payment of money at an expense to Seller in excess of (a)
$50,000.00 with respect to each Property, and (b) $500,000.00 in the aggregate
for all of the Property. If Seller (I) is unable or unwilling to remove any
such objection and fails to cause the Title Insurance Company to remove the
same from Purchaser's title insurance policies (collectively, the "Title
Policies"), or affirmatively insure against the same, or (II) is unable to
convey the Property as herein agreed to be conveyed, then Purchaser shall have
the option of either (A) waiving such
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objection(s) and proceeding with the Closing, accepting title subject to such
objection(s) without any abatement or reduction of the Purchase Price; or (B)
excluding each such Property from the transaction contemplated by this
Agreement, subject to the terms and conditions and with a credit against the
Purchase Price for each Property as set forth in Section 6.6 hereof. Without
limiting the generality of the foregoing, Seller shall not be obligated to
bring any action or proceeding to remove any title objection(s).
3.4 Liens or Encumbrances. Any lien or encumbrance, or apparent
lien or encumbrance, appearing of record against the Property, which can be
discharged by the payment of money, shall not be an objection to title,
provided Seller allows the amount thereof to be credited to Purchaser as an
adjustment to the Purchase Price at the time of the Closing. A lien or
encumbrance dischargeable by satisfaction shall not be deemed an objection to
title, if, at the time of the Closing, Seller shall cause to be delivered to
the Title Insurance Company either (A) a duly executed and acknowledged
satisfaction, along with the filing fee, or (B) a payoff letter and the
appropriate funds to satisfy the lien or encumbrance. Seller shall apply the
proceeds of the sale to the satisfaction of any or all liens or encumbrances.
Notwithstanding anything to the contrary contained within this Article Three,
no matter shall be an objection to title if the Title Insurance Company is
willing to insure the Property without exception therefor or affirmatively
insure against collection out of the Property by reason thereof. The
provisions of this Section 3.4 are subject to the terms and conditions set
forth in Section 2.3 above.
3.5 Title Policy. At the Closing, Seller shall cause the Title
Insurance Company to modify (by interlineation or otherwise) the Title
Commitments so as to then reflect a current commitment by a duly licensed title
insurance company to issue to Purchaser the Title Policies,
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insuring good and indefeasible title to the Land and the Improvements in
Purchaser, subject only to the Permitted Exceptions and the standard printed
exceptions, except that:
(a) The exception relating to restrictions against the
Property shall be deleted, except for such restrictions which are Permitted
Exceptions;
(b) the exception relating to ad valorem taxes and
assessments shall except only standby fees, taxes and assessments owing for the
current and subsequent years; and
(c) Purchaser shall receive the ALTA survey endorsement.
3.6 Title Charges. The cost for the Title Policies shall be paid
by Seller at the Closing, and the additional costs for endorsements, if any,
selected by Purchaser (or its lenders) shall be paid by Purchaser.
ARTICLE FOUR
CLOSING DATE
4.1 Closing Date. The closing of title under this Agreement (the
"Closing") shall take place on or about June 30, 1998 (the "Closing Date), at
the offices of the Title Insurance Company, 18333 Preston Road, Suite 410,
Dallas, Texas 75252, or at such other location as may be reasonably agreeable
to the parties.
ARTICLE FIVE
SPECIAL CONDITIONS
5.1 Conditions Precedent. The obligation of Seller to sell the
Property to Purchaser is subject to the satisfaction on or before the Closing
of the following conditions:
(a) Seller shall have received the prior written consent
of Seller's Board of Directors to the sale of the
Property to Purchaser upon the terms and
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conditions set forth in this Agreement, which consent
shall be in the form of a duly authorized resolution
from each member of Seller's Board of Directors, and
shall be provided to Purchaser within seven (7) days
after the Effective Date.
(b) Purchaser, Amerihost Properties, Inc. and AmeriHost
Inns, Inc. shall enter into a master agreement (the
"Master Agreement"), and Purchaser and AmeriHost
Inns, Inc. shall enter into a lease for each Property
(the "Property Leases"), on terms and conditions
substantially as set forth on Exhibits "D" and "E",
respectively, attached hereto and made part hereof.
(c) Purchaser shall have complied with all of its
obligations herein provided.
(d) Purchaser shall cooperate with Seller in the
consummation of tax-free exchanges with respect to
the Property, including, without limitation, the
assignment of this Agreement by Purchaser to a
tax-free exchange trust in order to accomplish the
foregoing, provided Purchaser shall receive customary
indemnities from Seller and reimbursement of costs
therefor.
5.2 Covenants.
(a) From and after the Effective Date, up to the Closing
Date, Seller may enter into agreements with respect
to the Property which are necessary or desirable in
connection with the operation of the Property in the
ordinary course of business, so long as no such
agreements relate to the sale of any portion of the
Personal Property.
(b) Any liquor licenses or permits utilized in the
operation of the business at the
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Property presently held by Seller or its affiliates
shall continue without assignment or transfer in
Seller's name or its affiliate's name through the
Closing Date.
(c) The repairs and improvements at the Plainfield and
Marysville properties as referenced on Exhibit "F",
attached hereto and made a part hereof, must be
either completed or funds must be placed in escrow
for such purpose prior to Closing.
ARTICLE SIX
PURCHASER'S INSPECTIONS AND APPROVALS
6.1 Submittal to Purchaser. Seller agrees that Purchaser shall be
entitled to enter upon the Property and to conduct such inspections, audits and
reviews of any and all information and materials it deems necessary to effect a
complete analysis of the proposed purchase and sale. The Purchaser shall
complete its due diligence before the expiration of the Inspection Period. The
following items (the "Due Diligence Items") will be delivered to Purchaser
prior to the Closing or will be delivered to Purchaser within the time period
after the date hereof as prescribed in Article Three. The cost and expense
of obtaining and delivering the Due Diligence Items to Purchaser shall be paid
by Seller, unless otherwise stated below:
(a) The Surveys;
(b) Any appraisals of the Property in the possession of
Seller or its agent or employees;
(c) The architectural plans and specifications for the
Property.
(d) The Books and Records. Subject to the provisions of
Section 17.10 hereof,
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Seller specifically permits Purchaser to disclose
information revealed in the Books and Records to its
lenders, if any, and professional advisors, and in
any document (and amendments and supplements thereto)
which Purchaser may be obligated to file with the
Securities and Exchange Commission. Upon reasonable
advance notice, Seller shall make available to the
accountants of Purchaser such financial information
as Purchaser's accountants reasonably require for
investigation of the financial history of the
operations of the Property. Seller has also provided
monthly statements of operations for fiscal year 1997
and 1998 through the month of the Closing (the
statement of operations for the month of the Closing
to be made available after the Closing);
(e) A UCC secured transactions search (collectively, the
"UCC Searches") from each of the applicable recording
offices with respect to the Property, together with a
litigation search related to Seller and the Property
for the county in which the Property is located;
(f) Phase I Audits for each Property. Seller, at its
sole cost and expense, shall provide to Purchaser an
update of the Phase I Audit for each Property listed
on Exhibit "G" attached hereto and made a part
hereof.
(g) Policies of title insurance for the Property, if any,
in the possession of Seller or its agents or
employees, together with the Title Commitments and
the Title Documents, which shall be delivered to
Purchaser by the Title Insurance Company;
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(h) A descriptive summary of all pending litigation, if
any, affecting the Property, and of any written
notice of violation of any of the Legal Requirements
applicable to the Property;
(i) Copies of all of Seller's insurance policies for the
Property or certificates thereof; and
(j) All other documents and information in the possession
of Seller or its agents or employees, or reasonably
available to Seller, relating to the Property, which
Purchaser reasonably requests.
6.2 Authorization for Inspection. Upon reasonable request by
Purchaser, Seller will grant authority to Purchaser and any of Purchaser's
representatives to obtain information provided for or contemplated in Section
6.1 hereof from any third parties. Said authorization will be provided in
writing if requested by Purchaser. All such information shall be subject to
the provisions of Section 17.10.
6.3 Adverse Phase I Audit. If any Phase I Audit states that
Hazardous Materials may be in or under the Land or within the Improvements, or
otherwise evidences any adverse environmental matter at the Property, Purchaser
shall have the right to reject such Property pursuant to Section 6.4 by giving
written notice to Seller of its intention to do so prior to the end of the
Inspection Period. If, notwithstanding such adverse Phase I Audit, Purchaser
desires to proceed with the transaction contemplated hereby with respect to
such Property, then Purchaser shall have the right to order promptly, at its
expense, a Phase II Site Assessment of the Land and the Improvements directed
and certified to Purchaser and its lender, including materials samplings on and
adjacent to the Land, to determine the extent and nature of any contamination
by Hazardous
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Materials. If such Phase II Site Assessment reveals the necessity for material
environmental clean-up of for the Property, then Purchaser may reject such
Property pursuant to Section 6.4 by giving written notice to Seller of its
intention to do so within five (5) business days after receipt by Purchaser of
such Phase II Site Assessment.
6.4 Purchaser's Acceptance or Rejection; Cure or Waiver. If
Purchaser disapproves of any matter relating to any Property arising from
Purchaser's review of the Surveys, the Title Commitments, the UCC Searches or
the Phase I Audits, it shall give Seller written notice of such disapproval
not later than the expiration of the Inspection Period, or such later date as
referenced in Section 6.3, Section 11.1 or Section 11.2. If any matter is
disapproved upon the foregoing notice, then Purchaser may elect in such notice
either to (a) request that Seller cure specific matters disapproved; or (b)
reject such Property from the terms and conditions of this Agreement subject to
Section 6.6. If Purchaser requests Seller to cure any such matter, Seller
shall, within four (4) business days, indicate in writing to Purchaser whether
it shall elect to cure any such matter disproved under clause (a) above. If
Seller is unwilling to cure such matter prior to the Closing, then Purchaser
may, in its sole discretion, within four (4) business days of written notice of
Seller's refusal to cure, elect, by written notice to Seller of its intention
to do so, to (i) waive all matters disapproved and not cured, accept all
matters relating to the Property which have been cured, and proceed with the
acquisition of the Property; or (ii) reject such Property from the terms and
conditions of this Agreement subject to Section 6.6.
6.5 Effect of Termination. If this Agreement shall be terminated
by Purchaser in the exercise of its rights of termination as provided
hereunder, the Deposit, and all interest earned thereon, if any, shall be
promptly returned to Purchaser by Escrow Agent, this Agreement shall be
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null and void, and neither party shall have any further obligation or liability
to the other party, except as expressly herein provided.
6.6 Partial Exclusion. Seller agrees to close the sale of the
Property on the terms and conditions herein contemplated, provided that not
more than six (6) motel/hotels shall have been rejected by Purchaser pursuant
to the provisions of Section 6.4., other than any Property rejected as allowed
pursuant to Section 11.1 and Section 11.2 hereof. Notwithstanding the
foregoing, Seller may, at its sole discretion, elect to close the sale of the
Property on the terms and conditions herein contemplated if more than six (6)
motels/hotels have been rejected by Purchaser pursuant to the provisions of
Section 6.4. In any event, however, the Purchase Price shall be reduced by an
amount equal to Thirty-nine Thousand Eight Hundred Three and No/100 Dollars
($39,803.00) multiplied by the number of rooms for each such Property rejected.
Upon rejection in accordance with the provisions of this Article Six, such
Property shall be deemed deleted from the terms and conditions of this
Agreement and this Agreement shall be deemed so modified and amended as to give
effect to such rejection.
ARTICLE SEVEN
SELLER'S REPRESENTATIONS, WARRANTIES AND AGREEMENTS
Seller represents, warrants and agrees that the following facts and
conditions exist on the date of execution hereof by Seller and shall exist as
of the Closing Date, subject to updating by Seller to the Closing Date and to
limitations otherwise set forth in this Article Seven:
7.1 Title. Seller owns fee simple title to the Real Estate,
including the Land described in Exhibit "A", which, as of the Closing, shall be
free and clear of all mortgages, except those Existing Mortgages which are
assumed by Purchaser, certain of which Existing Mortgages contain
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the assumption fees as set forth on Exhibit "H" attached hereto and made a part
hereof (those Properties being the only Properties whose mortgages or related
promissory notes contain prepayment penalties upon prepayment of the respective
notes), and all liens, encumbrances, subleases, tenancies, security interests,
covenants, conditions, restrictions, rights-of-way, easements, judgments, and
title defects, other than the Permitted Exceptions. To the Knowledge of
Seller, there are no pending or deferred Impositions of Governmental
Authorities affecting the Property, except for real property and personal
property taxes for the year of the Closing. To the Knowledge of Seller, no
easements materially burdening the Property interfere with the use,
maintenance, repair, or operation of the Property, and all easements necessary
for the lawful operation of the Property, including all access, ingress,
support and mechanical easements necessary or incident thereto, are in full
force and effect and are not subject to termination, cancellation or
rescission. Seller will assist in obtaining lender estoppel letters in a form
reasonably satisfactory to Purchaser.
7.2 Zoning and Land Use Matters. To the Knowledge of Seller, all
permanent certificates of occupancy for the Real Estate have been issued, and
all conditions thereof, if any, have been fully complied with and require no
further action. Seller has received no written notice of any requirements for
obtaining necessary licenses, permits, authorizations or approvals with respect
to the Property which Seller does not now possess or maintain, and Seller has
received no written notice of any unwillingness of Governmental Authorities to
renew any Permits and Licenses. To the Knowledge of Seller, the Property, as
constructed and operated, is substantially in compliance with the terms,
conditions and requirements imposed upon the Property by the Permitted
Exceptions. To the Knowledge of Seller, the acquisition of the Property by
Purchaser will not cause a violation, default or breach of any such Permitted
Exceptions and there is no event of default currently in
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existence under any such instrument which constitutes, and there is no event
which, but for the giving of notice or the passage of time, or both, will
constitute, an event of default thereunder.
7.3 Health, Environmental and Fire Codes. To the Knowledge of
Seller, there are no Hazardous Materials in, on or under the Property, except
for Permitted Hazardous Materials, and Seller has received no written notice
that the Property is not substantially in compliance with applicable fire
codes, building codes, health codes or other Legal Requirements which presently
apply to the Property or the operation of all businesses thereon which remain
unresolved.
7.4 No Adverse Action. There are no pending (and Seller has
received no written notice from Governmental Authorities threatening)
condemnation or other similar proceedings affecting the Property or any portion
thereof, or pending public improvements in, about or outside the Property,
which will affect access or create additional cost to Seller. There is no
claim, legal action, tax audit, or other proceeding of any type, including,
without limitation, any action of a civil or criminal nature, or any action or
proceeding before any arbitration board or tribunal, pending against or
affecting the Property which will materially adversely affect Purchaser upon
the consummation of this acquisition. To the Knowledge of Seller, there are no
pending claims against Seller arising out of injury to persons or property
occurring in or on the Property as a result of any accident or occurrence on
the Property thereon during the period of ownership of the Property by Seller
which will materially adversely affect Purchaser upon consummation of this
acquisition or are not covered by insurance. There is no pending claim or
legal action of any type related to any employment matter related to the
operation of the Property which will materially adversely affect Purchaser upon
consummation of this acquisition or is not covered by insurance.
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7.5 Authorization. Seller has all requisite corporate power and
authority to perform its obligations under this Agreement, and the execution,
delivery and performance of this Agreement by Seller has been duly and validly
authorized by all officers and directors whose approval is required under the
corporate documentation of Seller. Each person executing and delivering this
Agreement, and all documents to be executed and delivered in regard to the
consummation of the transaction herein, has due and proper authority to execute
and deliver those documents. This Agreement, and all documents executed and
delivered by Seller in connection with the transaction herein, shall constitute
valid and binding obligations of Seller, enforceable against Seller in
accordance with their terms.
7.6 Organization. Each Seller is a duly organized and validly
existing corporation under the laws of the state of its formation, authorized
to transact business in each state where the Property owned by such Seller is
situated, with full power to enter into and perform this Agreement and to
convey, assign, transfer and lease the Property.
7.7 Legal Requirements. To the Knowledge of Seller, there are no
outstanding citations or violations of Legal Requirements in connection with
the operation of the Property or the sale or provision of food or beverages
thereon.
7.8 Business Records. All documents, items and information,
including, without limitation, the Books and Records, which have been or will
be made available by Seller to Purchaser as Review Items in accordance with the
terms of this Agreement, have been maintained in the ordinary course of
business, fairly reflect the financial condition of the applicable Property in
all material respects, and are true and accurate.
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7.9 No Breach of Prohibition. The transactions contemplated by
this Agreement are not restrained or prohibited by any injunction, order or
judgment rendered by any court or other governmental agency of competent
jurisdiction. To the Knowledge of Seller, no proceedings have been initiated
or are pending in which any creditor of Seller or any other person seeks to
restrain such transactions or otherwise attach the applicable Property.
Neither the execution and delivery of this Agreement, nor the consummation of
the transactions contemplated hereby, will (a) be in material violation of any
agreements, or (b) conflict with or result in the material breach or violation
of any law, regulation, writ, injunction, decree of any court or governmental
body or agreement of any nature, applicable to Seller and the Property.
7.10 No Adverse Notices. Seller has received, within the past
year, no notice from any insurance company which has issued a policy with
respect to any portion of the Property, from any board of fire underwriters, or
from any Governmental Authority, requesting or requiring the performance of any
repairs, alterations, renovations or other physical work on the Property, which
has not been substantially completed.
7.11 No Union Contracts; Other Employee Matters. Seller warrants
that there are no union contracts in effect with respect to the Employees, and
that Purchaser shall incur no liability to the Employees arising out of
Purchaser's acquisition of the Property.
7.12 Easements. Seller will cooperate fully with Purchaser, but at
no expense to Seller, in seeking any corrective documents reasonably deemed
necessary by Purchaser to clarify the location and validity of any Appurtenant
Easement benefiting the Property.
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7.13 Tax Matters. Seller has duly filed all federal, state, county
and municipal, excise, sales, hotel occupancy and other tax returns and
reports, or timely extensions thereof, required to be filed up to the date
hereof with respect to the Property. To the Knowledge of Seller, all such
returns are true and correct in all material respects, and Seller has paid all
taxes, interest and penalties shown on such returns or reports, or claimed to
be due to any federal, state, county and municipal or other taxing authority.
7.14 Property Condition. Seller warrants that each Property not
yet inspected by Purchaser is in substantially the same general condition,
normal wear and tear excepted, as those motel/hotels previously inspected by
Purchaser, and Seller will maintain each Property in such same general
condition until the Closing.
7.15 Bulk Transfers. Seller will take all actions necessary to
comply with any bulk transfer laws applicable to this transaction and Purchaser
will cooperate with any such actions at no cost to Purchaser.
7.16 Representations and Warranties of Seller. All of the
representations and warranties of Seller are true and correct in all material
respects, to the Knowledge of Seller, and do not contain untrue statements of a
material fact or omit any material fact that would make the representations and
warranties misleading. All representations and warranties of Seller shall
survive the Closing and continue in full force and effect for a period of two
(2) years after the Closing.
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ARTICLE EIGHT
PURCHASER'S REPRESENTATIONS AND WARRANTIES
8.1 Purchaser's Duty of Review. Purchaser is entering into this
Agreement in reliance on its own knowledge and familiarity with the motel/hotel
industry and its inspection of the Property. Purchaser is not relying on any
representation of Seller, or its officers, shareholders or agents, except as
expressly set forth in this Agreement or the Exhibits attached to this
Agreement.
8.2 Warranties and Representations. Purchaser represents,
warrants and agrees that the following facts and conditions exist on the date
of execution hereof and shall exist as of the Closing Date:
(a) Organization. Purchaser is a Texas real estate
investment trust duly organized and validly existing
and in good standing under the laws of the State of
Texas, and has power and authority to own its
properties and to transact the business in which it
is engaged. Purchaser has taken all necessary action
to authorize the execution, delivery and performance
of this Agreement and all of the documents executed
and delivered by Purchaser in connection with the
transaction described herein, all of which constitute
valid and binding obligations of Purchaser
enforceable against Purchaser in accordance with
their terms.
(b) Authority. Purchaser has the right, power, legal
capacity and authority to enter into and perform its
obligations under this Agreement, and no approvals or
consents of any persons other than Purchaser are
required in connection with this Agreement. The
execution of this Agreement and the
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consummation of the transactions contemplated hereby
will not result in or continue any default or event
that, with the giving of notice or lapse of time, or
both, would be a default, breach or violation of the
organizational instruments or laws governing
Purchaser or any lease, license, promissory note,
conditional sales contract, commitment, indenture,
mortgage, deed of trust, or other agreement,
instrument, or arrangement to which Purchaser is a
party or by which Purchaser is bound.
8.3 Representations and Warranties of Purchaser. All of the
representations and warranties of Purchaser are true and correct in all
material respects and do not contain untrue statements of a material fact or
omit any material fact that would make any of the representations and
warranties misleading. The representations and warranties herein contained
shall survive the Closing and shall continue in full force and effect for a
period of two (2) years.
ARTICLE NINE
DEFAULTS; FAILURE TO PERFORM; LIQUIDATED DAMAGES
9.1 Default of Purchaser. IN THE EVENT (A) ALL OF THE CONDITIONS
TO THIS AGREEMENT SHALL HAVE BEEN SATISFIED OR WAIVED; (B) SELLER SHALL HAVE
FULLY PERFORMED OR TENDERED PERFORMANCE OF ITS OBLIGATIONS HEREUNDER: (C)
PURCHASER SHALL FAIL TO PERFORM ITS OBLIGATION HEREUNDER; AND (D) THE CLOSING
SHALL FAIL TO OCCUR SOLELY AS A RESULT OF PURCHASER'S DEFAULT HEREUNDER, THEN,
AS SELLER'S SOLE AND EXCLUSIVE REMEDY FOR PURCHASER'S FAILURE TO CLOSE, THE
ENTIRE AMOUNT OF THE DEPOSIT (PLUS ALL INTEREST ACCRUED THEREON, IF ANY) SHALL
BE
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IMMEDIATELY PAID TO SELLER. PURCHASER AND SELLER HEREBY ACKNOWLEDGE AND AGREE
THAT SELLER'S DAMAGES WOULD BE DIFFICULT OR IMPOSSIBLE TO DETERMINE AND THE
AMOUNT OF THE DEPOSIT (PLUS ALL INTEREST ACCRUED THEREON, IF ANY) IS THE
PARTIES' BEST AND MOST ACCURATE ESTIMATE OF DAMAGES SELLER WOULD SUFFER IN THE
EVENT THE TRANSACTION PROVIDED FOR IN THIS AGREEMENT FAILS TO CLOSE. PURCHASER
AND SELLER AGREE THAT SELLER'S RIGHT TO RETAIN THE DEPOSIT (PLUS ALL INTEREST
ACCRUED THEREON IF ANY) SHALL BE THE SOLE AND EXCLUSIVE REMEDY OF SELLER IN THE
EVENT OF A BREACH OF THIS AGREEMENT BY PURCHASER AS PROVIDED ABOVE.
9.2 Default of Seller. If Seller defaults in its obligations
hereunder after the expiration of any notice and cure periods, if applicable,
Purchaser may, as its sole remedy, at its option, either: (A) terminate this
Agreement and receive a refund of the Deposit, whereupon the obligations of the
parties hereto, other than those expressly set forth to survive termination
hereof, shall terminate, and neither shall have any further claim against the
other by reason of this Agreement or (B) seek an action for specific
performance under this Agreement. Purchaser agrees that it shall not record
this Agreement or any memorandum hereof unless Seller has defaulted in its
obligations hereunder. This Section 9.2 shall survive Closing or other
termination of this Agreement.
9.3 Failed Funds. If a payment made on account of the Purchase
Price, whether the Deposit or otherwise, is by check, and if said check fails
due collection, Purchaser shall be deemed in default hereunder, and Seller, at
its sole option, may declare this Agreement terminated pursuant to Section 9.1
hereof and may pursue its remedies against Purchaser upon said check and/or
this Agreement or in any other manner permitted by law, such remedies being
cumulative, but in no
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event shall Seller have any obligations to Purchaser hereunder.
ARTICLE TEN
CLOSING DOCUMENTS
10.1 Closing Documents of Seller. At the Closing, Seller shall
deliver or cause to be delivered to Purchaser the following:
(a) A special, limited warranty deed, as customarily provided on a
state-by-state basis, conveying good and indefeasible title in
the Property (the "Deed") to Purchaser, duly executed and
acknowledged by Seller subject only to the Permitted
Exceptions.
(b) A bill of sale, duly executed and acknowledged by Seller,
conveying title to the Personal Property to Purchaser.
(c) A certificate stating that Seller is not a "Foreign Person"
within the meaning of IRC Section 1445(f)(3).
(d) The Title Policies, issued at Seller's sole cost and expense,
by the Title Insurance Company, insuring Purchaser as owner of
the Property, subject only to the Permitted Exceptions.
(e) An Indemnity Agreement, duly executed and acknowledged by
Seller, pursuant to which Seller agrees to indemnify, defend
and hold harmless Purchaser, and its shareholders, directors
and officers, from any and all claims, losses, damages and
expenses which shall have arisen from any violation of the
Americans for Disabilities Act at the Property prior to the
Closing.
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(f) An Indemnity Agreement duly executed and acknowledged by
Seller, pursuant to which Seller agrees to indemnify, defend
and hold harmless Purchaser, and its shareholders, directors
and officers, from any and all claims, losses, damages and
expenses which shall have arisen from an "Environmental
Problem" (as hereinafter defined) before the Closing.
"Environmental Problem" shall mean the presence or release of
any Hazardous Materials from, onto, on or under any portion of
the Property, or the violation of any environmental law with
respect to the Property or any part thereof, or the failure to
abide by the terms of any permit or approval required under
any environmental law with respect to the Property or any part
thereof.
(g) Such other instruments and documents as may be reasonably
required to consummate the transaction herein contemplated,
including but not limited to, the Property Lease, the Master
Agreement and related guaranty of Amerihost Properties, Inc.
10.2 Closing Documents of Purchaser. At the Closing, Purchaser
shall deliver or cause to be delivered to Seller the following:
(a) The balance of the cash portion of the Purchase Price
provided in Article One hereof, less any interest
accrued on the Deposit.
(b) The Property Leases, executed by Purchaser, as
lessor, in each instance.
(c) The Master Agreement, executed by Purchaser.
(d) Evidence of Purchaser's power and authority to enter
into the subject
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transaction, and evidence of the signatories'
authority to sign on behalf of Purchaser.
(e) A letter addressed to Escrow Agent directing Escrow
Agent to deliver the Deposit and any interest
thereon, if any, to Seller, and releasing Escrow
Agent from any and all liability in connection with
the subject transaction.
(f) An Indemnity Agreement duly executed and acknowledged
by Purchaser, pursuant to which Purchaser agrees to
indemnify, defend and hold harmless Seller, and its
shareholders, directors and officers, from any and
all claims, losses, damages and expenses which shall
have arisen from an "Environmental Problem" (as
hereinafter defined) after the Closing, where the
Environmental Problem is caused by Purchaser.
"Environmental Problem" shall mean the presence or
release of any Hazardous Materials from, onto, on or
under any portion of the Property, or the violation
of any environmental law with respect to the Property
or any part thereof, or the failure to abide by the
terms of any permit or approval required under any
environmental law with respect to the Property or any
part thereof.
(g) Such other instruments and documents as may be
reasonably required to consummate the transaction
herein contemplated.
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ARTICLE ELEVEN
RISK OF LOSS
11.1 Casualty Loss. The risk of loss or damage to the Property by
fire or other casualty, until the Closing, is assumed by Seller, but without
any liability or obligation of Seller to repair same, except Seller, at
Seller's sole option, shall have the right to repair or replace such loss or
damage to the Property. If Seller elects (such election to be made within
twenty (20) days after Seller shall have actual knowledge of such damage) to
make such repair or replacement, and such repair or replacement can be fully
complete prior to the Closing, this Agreement shall continue in full force and
effect. If Seller does not elect to repair or replace any such loss or damage
or such repair or replacement damage cannot be completed prior to the Closing,
the following shall control:
If the Improvements on any motel/hotels comprising the Property shall be
materially damaged or destroyed by fire, storm or other casualty before the
Closing, Purchaser shall have the right to reject any such Property pursuant to
Section 6.4 by giving written notice thereof to Seller within fourteen (14)
days after receiving written notice of such material destruction and Purchaser
shall receive a reduction in the Purchase Price as set forth in Section 6.6.
If Purchaser shall not elect to reject such Property, or if said destruction is
immaterial, this Agreement shall continue in full force and effect without any
modification or abatement of the Purchase Price, and Purchaser shall be
entitled to receive an absolute assignment (without representation or warranty
by or recourse against Seller) from Seller of any interest Seller may have
otherwise had in the proceeds of any insurance on the Property (including any
rent loss or business interruption insurance proceeds allocable to the period
from and after the Closing), except for any expense theretofore incurred by
Seller for restoration or safety in connection therewith, which sum shall be
reimbursed by Purchaser
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to Seller at the Closing.
11.2 Eminent Domain. If notice of any action, suit or proceeding
shall be given after the date hereof, but prior to the Closing, for the purpose
of taking by eminent domain or condemning any material part of the Property,
then Purchaser and Seller shall each have the right to reject any such Property
pursuant to Section 6.4 by written notice to the other party given within
fourteen (14) days after receiving notice of such condemnation or taking and
Purchaser shall receive a reduction in the Purchase Price as set forth in
Section 6.6. If neither Purchaser nor Seller elects to reject such Property as
above provided, or if the taking or condemnation is of an immaterial part of
the Property, or in the event of a change of legal grade, the award with
respect to such condemnation, taking or change, except for any expense
theretofore incurred by Seller for restoration or safety in connection
therewith, which sum shall be reimbursed by Purchaser to Seller at the Closing,
shall be assigned (without representation or warranty by or recourse against
Seller) to Purchaser without further consideration, and this Agreement shall
continue in full force and effect without any modification or abatement of the
Purchase Price or any liability or obligation on the part of Seller by reason
of such taking, and the definition of "Property" shall be accordingly amended.
Any taking of any portion of an Improvement shall be considered "material" for
purposes of this Section 11.2.
ARTICLE TWELVE
CONDITION "AS IS"; NO FURTHER REPRESENTATIONS
12.1 Condition of Property. Purchaser represents that it has
inspected the Property and is thoroughly acquainted with its condition, and it
is agreed and understood that neither Seller nor any person purporting to act
for Seller has made or now makes any representations as to the physical
condition (including, without limitation, the presence of any Hazardous
Materials, or any condition
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which would violate any laws regarding environmental matters), layout, leases,
footage, rent, income, expense, operation or any other matter or thing
affecting or relating to the Property or to this Agreement, except as
specifically set forth in this Agreement, and that no party hereto is relying
on any statement or representation made by any other which is not embodied in
this Agreement. Purchaser hereby expressly acknowledges that no representation
has been made which is not expressly set forth in this Agreement, and Purchaser
further agrees to take and accept the Property "as is" and in its condition at
the Closing. This Article shall survive the Closing and delivery of the Deed
or other termination of this Agreement..
ARTICLE THIRTEEN
FINANCIAL MATTERS; COSTS
13.1 Sales Tax. Although it is not anticipated that any sales tax
shall be due and payable in connection with this transaction, Purchaser agrees
that Purchaser shall indemnify, defend and hold Seller harmless from and
against any and all liability for any sales tax regardless of jurisdiction
which may now or hereafter be imposed upon Seller with respect to this
transaction. This provision shall survive the Closing and delivery of the
Deed.
13.2 Other Changes. Purchaser and Seller shall each pay one-half
of all escrow charges. The parties shall be responsible for all transfer taxes
or documentary taxes which are payable upon the delivery and/or recording of
the Deed or of any document contemplated by this Agreement, and the charges
incurred in connection with the recording of any instrument contemplated hereby
on the basis of custom in the jurisdiction in which the Property is situated.
Notwithstanding the foregoing, costs related to endorsements to the Title
Policies or to Surveys shall be borne by Purchaser.
13.3 Closing Statements. The Title Insurance Company shall prepare
customary
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settlement or closing statements (the "Closing Statements") which shall include
the items set forth in Section 13.2, at least two (2) days before the Closing
Date, and each party shall cause its designated representatives to assist the
Title Insurance Company in doing so. All ad valorem, personal property and
hotel occupancy taxes, if applicable, shall be pro rated as of the Closing
Date.
ARTICLE FOURTEEN
BROKERAGE
14.1 Broker. Seller and Purchaser represent and warrant to each
other that they have not dealt with any broker in connection with this
transaction. Seller agrees to indemnify and hold Purchaser harmless from all
loss, damage, cost and expense (including reasonable attorney's fees and
disbursements) that Purchaser may suffer as a result of any claim for a fee,
commission or payment of any description brought by any person with whom Seller
may have dealt in connection with this transaction. Purchaser agrees to
indemnify and hold Seller harmless from all loss, damage, cost and expense
(including reasonable attorneys' fees and disbursements) that Seller may suffer
as a result of any claim for a fee, commission or payment of any description
brought by any person with whom Purchaser may have dealt in connection with
this transaction. The representations and covenants set forth in this Section
14.1 shall survive delivery of the Deed and the Closing or other termination
of this Agreement.
ARTICLE FIFTEEN
THE DEPOSIT - ESCROW
15.1 Deposit.
(a) The Deposit shall be delivered to the Title Insurance Company
("Escrow Agent"), and Escrow Agent shall hold the proceeds thereof in
escrow and dispose of
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such sums only in accordance with the provisions of this Agreement.
(b) Escrow Agent shall place the Deposit in (I) certificates of
deposit issued by a bank with a Texas office, (II) money market funds
in a bank with a Texas office, or a company such as Dreyfus Liquid
Assets, Inc., or as otherwise approved in writing by Purchaser and
Seller, (III) U.S. Treasury bills or other similar securities, or (IV)
a segregated, interest bearing bank account. Any interest earned
thereon shall be paid to the party entitled to receive the Deposit
simultaneously with disbursement of the Deposit. The party receiving
such interest shall pay any income taxes thereon. At the Closing, the
Deposit and the interest thereon, if any, shall be paid by Escrow
Agent to Seller. If for any reason the Closing has not occurred, and
either party makes a written demand upon Escrow Agent for payment of
such amount stating the basis for such demand, Escrow Agent shall give
written notice to the other party of such demand along with a copy
thereof. If Escrow Agent does not receive a written objection from
the other party to the proposed payment within 15 days after the
giving of such notice by Escrow Agent, which objection states the
basis therefor, Escrow Agent is hereby authorized to make such payment
to the demanding party. If Escrow Agent does receive such written
objection within such 15-day period, or, if for any other reason,
Escrow Agent in good faith shall elect not to make such payment,
Escrow Agent shall continue to hold such amount until otherwise
directed by written instructions from the parties to this Agreement or
a final judgment of a court, and shall disburse said funds
accordingly. Escrow Agent shall send a copy of any objection to the
original demanding party. However, Escrow Agent shall have
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the right at any time to deposit the escrowed proceeds and interest
thereon, if any, with the clerk of the court of the county in which
any Property is located, or with the clerk of the court in which any
litigation between Seller and Purchaser is pending, or in any other
court which Escrow Agent may select in the Chicago metropolitan area,
in an action for interpleader, all costs thereof to be borne by
whichever of Seller or Purchaser is the losing party. Escrow Agent
shall give written notice of such deposit to Seller and Purchaser.
Upon such deposit or payment pursuant to this Agreement, Escrow Agent
shall be relieved and discharged of all obligations and
responsibilities hereunder.
(c) The parties acknowledge that Escrow Agent is acting solely as
a stakeholder at their request and for their convenience; that Escrow
Agent shall not be deemed to be the agent of either of the parties;
and that Escrow Agent shall not be liable to either party for any act
or omission on its part unless taken or suffered in willful disregard
of this Agreement. Escrow Agent may act upon any instrument or
writing believed by Escrow Agent to be genuine and to be signed and
presented by the proper party. Seller and Purchaser shall jointly and
severally indemnify and hold Escrow Agent harmless from and against
all costs, claims and expenses, including reasonable attorneys' fees
(including the value of same if Escrow Agent represents itself),
incurred in connection with the performance of Escrow Agent's duties
hereunder. Escrow Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement. Escrow Agent
shall not be bound by any modification of this Agreement, unless the
Same is in writing, signed by Seller and
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Purchaser and delivered to Escrow Agent, and if Escrow Agent's duties
are affected thereby, unless Escrow Agent shall have given prior
written consent thereto. If Escrow Agent shall be uncertain as to
its duties or rights hereunder, or shall receive instructions from
Purchaser or Seller, which, in Escrow Agent's opinion, are in conflict
with any of the provisions hereof, Escrow Agent shall be hold or apply
the Deposit pursuant to subparagraph (b) hereof and may decline to
take any other action.
ARTICLE SIXTEEN
MERGER OF UNDERSTANDINGS
16.1 Merger. It is understood and agreed that all understandings
and agreements heretofore had between the parties hereto are hereby merged into
this Agreement, which alone fully and completely expresses their agreement, and
that this Agreement is entered into after full investigation, neither party
relying upon any statement or representation made by Seller or Purchaser or
anyone else not embodied in this Agreement. This paragraph shall survive the
Closing and delivery of the Deed or other termination of this Agreement.
ARTICLE SEVENTEEN
MISCELLANEOUS
17.1 Entire Agreement. This Agreement and the exhibits attached
hereto embody the entire agreement between the parties in connection with this
transaction, and there are no oral agreements existing between the parties
relating to this transaction which are not expressly set forth herein. This
Agreement may not be modified or, except as expressly provided to the contrary
herein, canceled or terminated, except in a writing signed by all parties
hereto. This Agreement may be
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executed in any number of counterparts, each of which shall be an original, but
all of which together shall constitute one and the same instrument.
17.2 Waiver. Failure of either party to object to any act or
omission on the part of the other party, no matter how long the same may
continue, shall not be deemed to be a waiver by such party of any of its rights
hereunder, unless expressly provided to the contrary herein. No waiver by any
party at any time, express or implied, of any breach of any provision of this
Agreement, shall be deemed a waiver of a breach of any other provision of this
Agreement or a consent to any subsequent breach of the same or any other
provision. If any action by any party shall require the consent or approval of
another party, such consent or approval of such action on any one occasion
shall not be deemed a consent to or approval of said action on any subsequent
occasion.
17.3 Assignment. Purchaser may not assign any of its right, title
or interest in this Agreement, or its right to the Deposit and any interest
thereon, without the prior written consent of Seller, which consent shall be at
Seller's sole discretion.
17.4 Headings. The captions, section numbers and article numbers
appearing in this Agreement are inserted only as a matter of convenience, and
do not define, limit, construe or describe the scope or intent of such sections
or articles of this Agreement. Furthermore, as used in this Agreement, any
gender shall include any other gender, the singular shall include the plural,
and the plural shall include the singular, wherever applicable.
17.5 Third Parties. No party other than Seller, Purchaser and
their respective successors and permitted assigns, shall have any rights to
enforce or rely upon this Agreement.
This Agreement is binding upon and made solely for the benefit of Seller,
Purchaser and their respective heirs, personal representatives, successors and
permitted assigns.
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17.6 Notices.
(a) Except as expressly provided to the contrary in this
Agreement, notices which must or may be given by any
party hereto must be in writing and shall be deemed
as given hereunder upon actual receipt, if by
personal delivery to the addresses set forth below,
or, if properly addressed, if sent by certified or
registered mail, return receipt requested, four (4)
days after depositing such notice with postage
prepaid at the rates and with the status certified or
registered in a United States mailbox, or one (1) day
after depositing such notice, with proper payment or
credit arrangement, in the custody of a nationally
recognized overnight delivery service. Notice shall
be deemed properly addressed if sent to the following
addresses:
If to Seller: Amerihost Properties, Inc.
2400 E. Devon Street
Suite 280
Des Plaines, IL 60018
Attn: Michael P. Holtz,
President and Chief Executive Officer
With copies to: Helen R. Friedli, P.C.
c/o McDermott Will & Emery
227 West Monroe Street
Chicago, IL 60606-5096
Attn: Helen R. Friedli, Esq.
If to Escrow Agent: Stewart Title Guaranty Corporation
18333 Preston Road, Suite 410
Dallas, TX 75252
Attn: Tom Irons, Esq.
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If to Purchaser: PMC Commercial Trust
17290 Preston Road
Dept. 101
3rd Floor
Dallas, TX 75252
Attn: Jan F. Salit,
Executive Vice President and
Chief Investment Officer, and
Andrew S. Rosemore, Executive
Vice President
With a copy to: PMC Commercial Trust
17290 Preston Road
3rd Floor
Dallas, TX 75252
Attn: Cheryl T. Murray, Esq.
General Counsel
(b) Except as set forth to the contrary herein, any party
may designate, by notice in writing as above
provided, a new or other address to which such notice
or demand shall thereafter be so given, made or
mailed.
(c) The respective attorneys for the parties are hereby
authorized (i) to give any notice which the party is
required to give or may give under this Agreement;
and (ii) to agree to adjournments of the Closing. It
is understood that Seller's attorney is McDermott,
Will & Emery, and Purchaser's attorney is Cheryl T.
Murray, Esq.
17.7 Governing Law. This Agreement shall be governed by the laws
of the State of Illinois, without cognizance to conflicts of laws rules.
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17.8 Survival. The provisions, representations, warranties,
covenants and agreements of this Agreement shall survive the Closing of the
transaction contemplated hereby, unless expressly provided herein to the
contrary.
17.9 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed the parties shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof, this being in addition to
any other remedy to which they are entitled at law or in equity.
17.10 Satisfaction. The acceptance of a Deed by Purchaser for each
Property shall be deemed to be a full performance of and discharge of any and
all agreements and obligations on the part of Seller to be performed pursuant
to the provisions of this Agreement, except those, if any, which are herein
specifically stated to survive delivery of such Deed.
17.11 Confidentiality. All of the information heretofore or
hereafter supplied by Seller to Purchaser shall be deemed confidential and
shall not be revealed by Purchaser other than to a bank or other financial
institution or investment banker or rating agency which shall provide Purchaser
with financing in connection with the purchase of the Property, provided that
this provision shall not apply to disclosure or utilization necessary or
appropriate under applicable securities laws. In the event that the
transaction herein shall not close, all such information shall be returned to
Seller, and copies thereof shall not be retained by Purchaser or any lending
institution. This Section shall survive the Closing and delivery of the Deed
or other termination of this Agreement.
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17.12 Mutuality. This Agreement has been executed after negotiation
and the opportunity by both parties to have this Agreement reviewed and revised
by legal counsel of their choice.
17.13 Marketing. Seller agrees not to market the Property or
solicit or accept any offer for the purchase and sale of the Property from the
date hereof through the earlier to occur of (a) the Closing Date, and (b) the
earlier termination of this Agreement.
ARTICLE EIGHTEEN
DEFINITIONS
Wherever used in this Agreement, the following terms have the meanings set
forth in this Article Eighteen:
"Appurtenances" shall mean all of Seller's right, title and interest in
all rights of way, drives, rights in adjoining streets, sidewalks, alleyways,
passages, curbs, berms and similar rights and areas used in connection with the
Property; all development rights for the Land or Improvements, whether vested
or not; all planned unit development (PUD) plans and other development
approvals for the Land and the Improvements; all appurtenant rights of lateral
support and encroachment rights; and all leases of property situated off-site,
but used in connection with the operation of the Improvements.
"Appurtenant Easements" shall mean all easements and licenses on or over
land or improvements, other than the Land and Improvements, which benefit the
Land or Improvements, including, but not limited to, all easements providing
access to the Land from public streets, roads and ways, all easements, licenses
and agreements for location, maintenance and replacement of off-
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premises signs of the business and utility service lines, and all easements for
parking and storage on adjoining property.
"Books and Records" shall mean all books of account and annual statements
of operations for 1996 and 1997 with respect to the Property (including audited
statements to the extent the same have been audited); the 1998 budgets and all
books of account and preliminary statements of the operations for the current
1998 fiscal year for the Property to date, which are kept by Seller in the
ordinary course of business of operating the Property, and monthly statements
of operations of the Property for 1997 and 1998 through the month of the
Closing (the statement of operations for the month of the Closing to be
provided after the Closing).
"Employees" shall mean all persons employed by Seller in connection with
the management and operation or possession of the Property during the pendency
of this Agreement.
"Excepted Items" shall mean the following property which is excluded from
the definition of "Personal Property" hereunder: (a) items owned by
independent contractors and business entities and not used in the operation of
the Property; (b) all items (prepaid or otherwise) stored, maintained, or
operated at the Property and consumed in the ordinary course of business, (c)
cash in bank accounts and petty cash maintained at the Property, checks and
money orders; (d) room reservation deposits of any kind or nature, (e)
receivables, if any, (f) utility deposits, if any, of every type and nature,
including any interest accrued thereon, and (g) all accounts payable with
respect to the Property, whether owing or accruing prior to, on or after the
Closing Date.
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"Governmental Authorities" shall mean all federal, state, county,
municipal and local governments, administrative agencies and quasi-governmental
authorities having jurisdiction over the Property.
"Hazardous Materials" shall mean any and all substances which are or
become defined as a "hazardous waste," "hazardous substance" pollutant or
contaminant under any Legal Requirements, including, without limitation, the
Comprehensive Environmental Response Compensation and Liability Act (42 U.S.C.
Section 9601 et seq.), as amended, and/or the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.), as amended, and/or the federal
regulations implementing such Acts; "Hazardous Materials" shall include, but
are not limited to, petroleum products and asbestos.
"Impositions" shall mean all real estate, personal property and hotel
occupancy taxes, general and special assessments imposed by Governmental
Authorities, water and sewer charges, and fees and charges assessed or imposed
by Governmental Authorities upon all or part of the Property and which are or
may become a lien on the Property.
"Improvements" shall mean all buildings and structures erected or located
on the Land and Appurtenant Easements at the date of this Agreement, or at any
time between the date of this Agreement and the Closing Date, including all
machinery, equipment and fixtures owned by Seller and attached to such
buildings and structures and used for operation or maintenance of the buildings
and structures, all parking area and driveway surfaces, and curbs and drainage
features, all landscaping, pool areas, all utility lines and appurtenances and
all signs and structural supports for signs.
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"Inspection Period" shall mean the period of time beginning on the date of
receipt of the last Survey, Title Commitment (including Title Documents), UCC
Search or Phase I Audit, and/or updates thereto, and ending thirty (30) days
thereafter, however, in no event shall this Inspection Period extend beyond the
Closing Date.
"Knowledge of Seller" shall mean the actual knowledge of Seller.
"Legal Requirements" shall mean all laws, codes, ordinances, rules,
regulations, and requirements of all Governmental Authorities existing at the
date of this Agreement or at any time between the date of this Agreement and
the Closing Date applicable to all or part of the Property or the ownership,
operation, management, maintenance, development, improvements, repair,
renovation, lease, sale, encumbering, transfer, use or manner of use of all or
part of the property (including, without limitation, any law, code, ordinance,
rule, regulation or requirement relating to Hazardous Materials).
"Permits and Licenses" shall mean all permits, licenses, certificates of
occupancy, sales tax permits, and renewals thereof, which are material to the
normal operation of the Property.
"Permitted Exceptions" shall mean any defects, liens, encumbrances,
covenants, restrictions, easements, reservations, agreements and other matters
affecting title to the Property to which Purchaser does not object prior to the
expiration of the Inspection Period.
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"Permitted Hazardous Materials" shall mean Hazardous Materials in ordinary
quantities which are customarily used in the operation, maintenance and repair
of hotels and lodging facilities similar to the Property and which are stored
and handled according to manufacturers' standards and guidelines and in
compliance with all applicable Legal Requirements, and prepackaged office
supplies, cleaning materials, personal grooming items and other similar items
sold for consumer use.
"Personal Property" excludes the Excepted Items and shall mean all
fixtures, furnishings and equipment located at the Property and required for
the operation of the Improvements as a motel/hotel, including, without
limitation, office furnishings and equipment (exclusive of all of the vehicles
used in the operation of the Improvements); fittings, machinery, heating and
cooling systems, tools, maintenance equipment, appliances, wires and installed
telephones, televisions, pictures, rugs, kitchen equipment, and all other
fixtures and personal property of every kind and nature, other than the
Excepted Items, which are located on, attached to, appurtenant to or used in
the operation, maintenance, management or security of the Property or any
portion of the Property, and which are owned by Seller, including Personal
Property (other than Excepted Items) acquired by Seller between the date of
this Agreement and the Closing Date, and all replacements, substitutions and
additions of and to all of the foregoing. Personal Property does not include
assignable trade names and goodwill. Seller does not lease any Personal
Property, but rather, owns all Personal Property used in operation of the
Property.
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"Phase I Audit" shall mean a Phase I environmental site assessment of the
Property with respect to Hazardous Materials from a qualified environmental
audit firm experienced in Phase I environmental site assessments, as selected
by Purchaser, to be made within the Inspection Contingency Period and pursuant
to the ASTM Standard Practice for Environmental Site Assessments.
"Phase II Site Assessment" shall mean a phase II environmental site
assessment of the Property with respect to Hazardous Materials from a qualified
environmental audit firm experienced with Phase II environmental site
assessments, as selected by Purchaser, to be made pursuant to ASTM Standard
Practice for Environmental Site Assessments.
"Title Insurance Company" shall mean Stewart Title Guaranty Corporation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
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SELLER:
[AMERIHOST PROPERTIES SUBSIDIARIES
to be listed as signatories]
By: /s/ Michael P. Holtz
-------------------------------------
Michael P. Holtz
President and Chief Executive Officer
PURCHASER:
PMC COMMERCIAL TRUST,
a Texas Real Estate Investment Trust
By: /s/ Lance B. Rosemore
-------------------------------------
Name: Lance B. Rosemore
Title: President
The undersigned, Amerihost Properties, Inc., a Delaware corporation, and the
sole shareholder of Seller, hereby joins this Agreement solely for the purpose
of performing its duties and obligations as set forth in Section 5.1 (b) and
Section 6.6, if applicable.
AMERIHOST PROPERTIES, INC.
By: /s/ Michael P. Holtz
-------------------------------------
Michael P. Holtz, President
The undersigned, AmeriHost Inns, Inc., a Delaware corporation, hereby joins
this Agreement solely for the purpose of performing its duties and obligations
as set forth in Section 5.1 (b).
AMERIHOST INNS, INC.
By: /s/ Michael P. Holtz
-------------------------------------
Michael P. Holtz, President
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SCHEDULE OF EXHIBITS
A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property-Owning Subsidiaries
B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Street Addresses
B-1 to B-30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Land
C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Price Allocation per Property
D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Form of Master Agreement
E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Form of Property Lease
F . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repairs for Marysville, Ohio and Plainfield, Indiana
G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Phase I Audit Update Property
H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assumption Fees
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EXHIBIT D
MASTER AGREEMENT
THIS MASTER AGREEMENT (this "AGREEMENT") is made and entered into as
of this ____ day of June, 1998, by and among PMC COMMERCIAL TRUST (the
"LESSOR"), and AMERIHOST PROPERTIES, INC. ("AMERIHOST") AND AMERIHOST INNS, INC.
(the "LESSEE").
RECITALS
WHEREAS, the Lessor has acquired those certain _________ (__) hotels
(the "INITIAL HOTELS") listed on Exhibit A attached hereto;
WHEREAS, simultaneously with the execution of this Agreement, the
Lessor has leased the Initial Hotels to the Lessee;
WHEREAS, Amerihost is a guarantor of the Lessee's obligation to pay
rent under the Property Leases (as hereinafter defined), on the terms and
conditions set forth therein, and
WHEREAS, the parties hereto desire to enter into this Agreement to set
forth certain agreements relating to the matters set forth herein.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties and covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto
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agree as follows:
ARTICLE I
DEFINITIONS
Unless the context otherwise requires, (a) all capitalized terms not
otherwise defined herein shall have the meanings set forth in the Property
Leases, (b) references to the singular shall include the plural and vice versa,
(c) references to designated "Articles," "Sections" or other subdivisions are
references to the designated Articles, Sections or other subdivisions of this
Agreement, (d) all accounting terms not otherwise defined herein shall have the
meanings assigned to them in accordance with GAAP and (e) the words "herein,"
"hereof," and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section or other
subdivision.
ARTICLE II
LEASING OF HOTELS
2.1 Initial Hotels. Simultaneously with entering into this
Agreement, the Lessor and the Lessee have entered into an individual lease in
the form attached hereto as Exhibit "B" (the "PROPERTY LEASE") for each of the
Initial Hotels at the rents specified on Exhibit "C" attached hereto.
2.2 Additional Hotels. Lessor and Lessee may also from time to
time agree to the lease of Additional Hotels (herein so called) to Lessee. The
lease of Additional Hotels shall
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be by mutual agreement of Lessor and Lessee and upon such terms and conditions
as are contained in form of the Property Lease attached hereto as Exhibit B and
such Additional Hotels shall become subject to the terms and conditions of this
Agreement as amended to reference such Additional Hotels and the Amerihost
Guaranty (as hereinafter defined).
ARTICLE III
RENT
So long as this Agreement remains in effect, Lessee promises to pay to
Lessor, in lawful money of the United States of America, in immediately
available funds, rents in the amount specified below:
3.1 The annual amount of rent (the "Base Rent"), payable in equal
monthly installments as set forth on Schedule I attached hereto, shall
initially be $____________ until adjusted as provided in the Property Leases or
as adjusted with the addition of Additional Hotels. The Base Rent shall be
paid monthly in advance in the manner as set forth in Section 3.1 of the
Property Leases.
ARTICLE IV
RESERVES
4.1 Reserves. (a) Lessee shall deposit monthly during the Lease
Term (on or before the 15th day of the subsequent month) into the Capital
Expenditure Reserve Account an amount which is equal to two percent (2%) of
Room Revenues for all Initial Hotels and Additional Hotels, as the case may be,
for the prior month.
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(b) Lessee shall also deposit monthly during the Lease Term
(on or before the 15th day of the subsequent month) into the FF&E
Reserve Account an amount equal to two percent (2%) of the Room
Revenues for all Initial Hotels and Additional Hotels, as the case may
be, for the prior month.
ARTICLE V
ESCROW
Section 5.1 Escrow. The Lessee has deposited in escrow (the
"ESCROW") with Lessor, and Lessor hereby acknowledges receipt of, the sum of
$____________ (the "ESCROW FUNDS"), representing a sum equivalent to two
months' Base Rent under all Property Leases. The Escrow Funds shall be
invested in "Qualified Investments." The Lessor shall cause earnings thereon
to be remitted annually to the Lessee not later than the first day of February
of each year in which the Escrow is maintained, provided that an Event of
Default has not occurred and is continuing under the Property Lease.
Notwithstanding the foregoing provision, the Lessee shall have the option from
time to time, as a substitute for cash, upon reasonable notice to the Lessor,
to provide a letter of credit (the "LETTER OF CREDIT") in favor of the Lessor
in the amount of the Escrow Funds, in form and substance, and issued by an
issuer, reasonably acceptable to the Lessor.
Section 5.2 Coverage Ratio. The Escrow hereby created shall
continue until such date that the ratio of Net Operating Income in the
aggregate on all of the Initial Hotels to the aggregate Base Rent of all
Initial Hotels shall equal or exceed a ratio of 1.25 to 1.0 (such rent
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coverage ratio hereinafter called the "RCR"), as of the first day of each
quarter during the term of the Escrow, on a trailing 12-month basis commencing
on December 31, 1999. In the event Additional Hotels are added under this
Agreement, an Escrow pursuant to Section 5.1 shall be established with respect
to such Additional Hotels and shall continue pursuant to the terms and
conditions set forth in this Section 5.2. Lessor shall have the right to draw
on the Escrow Funds upon the occurrence of an Event of Default by the Lessee in
the payment of Base Rent to the extent necessary to cure the shortfall in
payment of Base Rent and Lessee must replenish the Escrow within two (2)
business days after written notice from Lessor.
Section 5.3 Financial Reports. During the term of this
Agreement, the Lessee shall provide detailed monthly statements to the Lessor
within forty-five (45) days of each fiscal period outlining financial results
for the Property during the accounting period and year-to-date, compared to the
previous fiscal year and budget. Annual financial consolidating statements
shall be sent to the Lessor not later than one hundred twenty (120) days after
the end of the Lessee's fiscal year. The Lessee agrees timely to provide
financial data and to cooperate fully with the Lessor in connection with prompt
quarterly and annual reconciliations of the monthly payments of Base Rent with
the Net Operating Income for equivalent periods.
Section 5.4 Termination of Escrow. Within ten (10) days after
the submission of evidence reasonably satisfactory to the Lessor that the RCR
has been achieved, the Lessor shall remit the Escrow Funds, together with
earnings thereon, if any, or return the Letter of Credit, as the case may be,
to the Lessee and the appropriate Escrow created hereunder shall be closed and
of no further force and effect.
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ARTICLE VI
AMERIHOST GUARANTY
Amerihost hereby executes this Agreement to acknowledge and confirm
Amerihost's agreement to guarantee to the Lessor the prompt and complete
payment of the Base Rent and Additional Rent under the Property Leases in the
form of guaranty attached hereto as Exhibit D (the "Amerihost Guaranty"); it
being expressly understood and agreed that this is a continuing guaranty and an
instrument for the payment of money only, and that the obligation of Amerihost
is and shall be absolute under any and all circumstances.
ARTICLE VII
NON-COMPETITION
During the term of this Agreement, Lessor, Lessee and Amerihost shall
not (and shall take reasonable actions to assure that any Related Party of
Lessor, Lessee or Amerihost shall not) within fifteen (15) miles of the Project
develop a property by constructing a new motel/hotel project without the
written approval of the Lessor or Lessee, as the case may be.
ARTICLE VIII
DEFAULT
Section 8.1 Event of Default. An Event of Default (herein so
called) shall exist under this Agreement if any of the following occur:
(a) Base Rent Payment. Lessee breaches any of its obligations
to pay Base Rent as provided in Section 3.1 hereof and in Sections 3.1
and 3.2 of any of the
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Property Leases subject to any notice and cure period contained in the
Property Leases.
(b) Capital Expenditure Reserve Account. A breach by Lessee
of its obligation to fund the Capital Expenditure Reserve Account as
provided in Section 4.1(a) hereof and Section 3.7(d) of the Property
Leases subject to any notice and cure period contained in the Property
Leases.
(c) FF&E Reserve Account. A breach by Lessee of its
obligation to create and fund the FF&E Reserve Account as provided in
Section 4.1(b) hereof and Section 3.7(f) of the Property Leases
subject to any notice and cure period contained in the Property Lease.
(d) Failure of Lessee to replenish the Escrow within two (2)
business days after written notice from Lessor.
(e) Failure of Amerihost to honor the terms of the Amerihost
Guaranty.
8.2 Remedies. Upon the occurrence of an Event of Default, Lessor
shall have the right to terminate this Agreement upon ten (10) days written
notice to Lessee; in which event Lessor shall have all the rights and remedies
as set forth in Section 12.2 of the Property Leases and this Agreement.
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ARTICLE IX
MISCELLANEOUS
Section 9.1 Modification, Amendments and Waivers. No
modification, amendment or waiver of any provision of this Agreement shall be
effective unless the same is in a writing signed by all parties to this
Agreement.
Section 9.2 Notices. All notices and other communications
pursuant to this Agreement shall be in writing and personally served or mailed
as provided in the Property Lease.
Section 9.3 Successors and Assigns. The provisions of this
Agreement shall be binding upon the parties hereto and all of their successors
and assigns and inure to the benefit of the parties hereto and their permitted
successors and assigns.
Section 9.4 Termination. This Agreement shall terminate at such
time as all of the Property Leases have terminated, except that the Escrow
created under Article V and the Amerihost Guaranty created under Article VI
shall terminate on the terms and conditions therein provided.
Section 9.5 Governing Law. This Agreement shall be governed by
the laws of the State of Texas, without giving effect to the principles of
conflicts of law thereof.
Section 9.6 Counterparts. This Agreement may be signed in one or
more counterparts, each of which shall be an original, with the same force and
effect as if the signatures thereto and hereto were upon the same instrument.
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Section 9.7 Waiver. Each party waives, to the extent permitted
by applicable law, any right to a trial by jury in any proceedings brought by
either party to enforce the provisions of this Agreement.
Section 9.8 Time of the Essence. Time is of the essence of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
LESSOR
PMC COMMERCIAL TRUST
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
LESSEE
AMERIHOST INNS, INC.
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
GUARANTOR
AMERIHOST PROPERTIES, INC.
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
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EXHIBIT D
LEASE AGREEMENT
BY AND BETWEEN
PMC COMMERCIAL TRUST, AS LANDLORD
AND
AMERIHOST INNS, INC., AS TENANT
54
TABLE OF CONTENTS
Page
----
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II DEMISE; TERM; LEASE YEAR
2.1 Demise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Lease Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Renewal Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III RENT AND OTHER CHARGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.1 Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Consumer Price Index Adjustments to Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Payment of Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.4 Utilities and Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.5 Location of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.6 No Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.7 Capital Expenditure Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.8 Specified FF&E and Operating Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE IV ALTERATIONS AND ADDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.1 Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2 Construction Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.3 Removal of Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE V REPAIRS AND MAINTENANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 Termination for Decline in Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.3 Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.4 Right of Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VI HAZARDOUS SUBSTANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1 No Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.3 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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ARTICLE VII COVENANTS OF TENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.1 Use of Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.2 Continuing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.3 Operating Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.4 Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.5 FF&E and Operating Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.6 Permits and Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.7 Tenant's Obligation to Manage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.8 Permitted Contests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VIII RESERVED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE IX INSURANCE AND INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.1 Insurance Coverages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.2 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.3 Exemption of Landlord from Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.4 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.5 Mutual Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.6 Insurance Premium Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE X DAMAGE OR DESTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.1 Reports on Insurance Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.2 Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.3 Reconstruction in the Event of Damage or Destruction . . . . . . . . . . . . . . . . . . . . . . . . 29
10.4 Abatement of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XI CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.1 Taking of Whole . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.2 Partial Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.3 Tenant's Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XII DEFAULTS; REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
12.1 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
12.2 Landlord's Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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12.3 Landlord May Perform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE XIII ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
13.1 Assignment by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
13.2 Tenant Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
13.3 Assignment Due to Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
13.4 Transfer of Landlord's Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13.5 Licenses and Leasehold Mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE XIV RIGHT OF FIRST REFUSAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
14.1 Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
14.2 Conditions of Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
14.3 Restraining Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
14.4 Exclusion from Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE XV GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.1 Estoppel Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.2 Landlord's Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.3 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15.4 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
15.5 Complete Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
15.6 Tenant's Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
15.7 Franchise Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
15.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
15.9 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
15.10 Recording . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
15.11 Holding Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15.12 Covenants and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15.13 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15.14 Subordination and Attornment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15.15 No Joint Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.16 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.17 Expansion of Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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15.18 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.19 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.20 Tenant's Right to Cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.21 Breach by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.22 Landlord to Grant Easements, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.23 Governing Law; Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.24 REIT Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.25 Financings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.26 Landlord's Right to Inspect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.27 "As Is" Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.28 Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
15.29 No Merger of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease") is made and entered into as
of the ___ day of June, 1998 by and between PMC COMMERCIAL TRUST, a Texas real
estate investment trust ("Landlord"), and AMERIHOST INNS, INC., a Delaware
corporation ("Tenant").
REFERENCE PAGE
In addition to the other terms elsewhere defined in this
Lease, the following terms, wherever used in this Lease, shall have the meaning
set forth in this Reference Page.
1. PREMISES: The motel property located at
_________________.
2. NAME: AmeriHost Inn.
3. COMMENCEMENT DATE: June ___, 1998
4. EXPIRATION DATE: June ___, 2008
5. LEASE TERM: Ten (10) years, as the term may be
extended upon Tenant's exercise of either one or both
of Tenant's two (2) options to extend the Lease Term
for five (5) years each.
6. BASE RENT: The rent set forth in Schedule I annexed
hereto and made a part hereof.
7. PROJECT: The Land, Improvements, FF&E, and Operating
Equipment, which comprise a two (2) story motel,
containing ____ rooms, located at the Premises.
The Reference Page information is incorporated into and made a
part of this Lease. In the event of any conflict between any Reference Page
information and the Lease, the Lease shall control.
RECITALS:
A. Landlord is the owner of the Project.
B. Tenant has represented to Landlord that it has
substantial experience in the operation, management and maintenance of
facilities similar to the Project and recognizes Landlord's expectation that
Tenant will use such experience to operate the Project.
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C. Tenant desires to lease from Landlord and Landlord
desires to lease to Tenant the Project for the operation by Tenant of a motel
and Tenant desires to lease and operate the Project subject to and in
accordance with the terms and conditions set forth herein.
AGREEMENTS:
NOW, THEREFORE, for good, fair and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and, intending to be
legally bound hereby, Landlord and Tenant hereby covenant and agree as
follows:
ARTICLE I
DEFINITIONS
The following words and terms shall have the following
meanings ascribed to them:
1.1 "ADDITIONAL RENT" shall mean all costs, expenses, charges and
other amounts owed by Tenant to Landlord hereunder, other than Base Rent.
Additional Rent shall include any cost incurred by Landlord in fulfilling
Tenant's obligations hereunder. Additional Rent shall be due and payable two
(2) business days following written demand, unless specifically provided to the
contrary in this Lease; and shall bear interest at the Default Rate from the
date paid by Landlord until the date paid by Tenant to Landlord, if applicable.
1.2 "AWARD" shall have the meaning ascribed to such term in
Section 11.1 hereof.
1.3 "BANKRUPTCY CODE" shall mean the United States Bankruptcy
Code, as amended.
1.4 "CAPITAL EVENT" shall mean any of the following events: (a)
any sale, assignment, transfer or refinancing of the Lessee's interest in the
Project; (b) the receipt of any insurance payments or damage recoveries paid to
the Lessee in respect of the Project; and (c) any condemnation or eminent
domain proceedings relating to all or part of any leasehold interest in the
Project.
1.5 "CAPITAL EXPENDITURE RESERVE ACCOUNT" shall have the meaning
ascribed to such term in Section 3.7 hereof.
2
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1.6 "CONSUMER PRICE INDEX" shall mean The "U.S. City Average, All
Items" Consumer Price Index for All Urban Consumers published by the Bureau of
Labor Statistics of the United States Department of Labor (Base:
1982-1984=100), or any successor index thereto.
1.7 "DEFAULT" shall mean an event which but for the giving of
notice or passing of time, or both, would constitute an Event of Default
hereunder.
1.8 "DEFAULT RATE" shall mean the annual rate of interest of two
percent (2%) over the Prime Rate as published in The Wall Street Journal,
Southwest Edition, or such lesser amount as may be the maximum amount permitted
by applicable law.
1.9 "ENVIRONMENTAL REGULATION(S)" means any law, rule, regulation,
permit or agreement relating to the environment, human health or safety now
existing or hereafter enacted.
1.10 "EVENT OF DEFAULT" shall have the meaning ascribed to such
term in Section 12.1 hereof.
1.11 "FF&E" shall mean all furniture, furnishings and equipment
owned by Landlord and located at the Project as of the date of this Lease and
required for the operation of the Improvements as a motel, including, without
limitation, (a) office furnishings and equipment, (b) specialized motel
equipment necessary for the operation of any portion of the Improvements as a
motel, including equipment for kitchens, laundries, dry cleaning facilities,
bars, restaurants, public rooms, commercial and parking spaces, and
recreational facilities and (c) all other furnishings and equipment as
necessary or desirable in the operation of the Project in accordance with the
terms and conditions set forth in this Lease.
1.12 "FF&E RESERVE ACCOUNT" shall mean funds available for the
repair, replacement or refurbishment of FF&E, which funds shall be provided by,
and under the control of, Tenant through monthly payment into an account
established on the Commencement Date by Tenant and maintained by Tenant during
the Lease Term.
1.13 "FIXTURES" shall mean all equipment, machinery, fixtures and
other items of property, including all components thereof now and hereafter,
permanently affixed to or incorporated into the 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 thereof.
3
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1.14 "FRANCHISOR" A Related Party of Tenant or any other national
or regional hotel/motel franchisor reasonably acceptable to Landlord.
1.15 "FRANCHISE AGREEMENT" Any agreement that may be entered into
by and between a Franchisor and Tenant, regarding the operation of the Project
as a franchised motel of Franchisor, on terms reasonably acceptable to
Landlord.
1.16 "GAAP" means generally accepted accounting principles.
1.17 "GOVERNMENTAL AUTHORITY" means any federal, state, or local
governmental body including elected bodies, departments, agencies, commissions,
boards or instrumentalities having or purporting to have jurisdiction over
Landlord, Tenant, the Project, or the business conducted or to be conducted
from the Project.
1.18 "HAZARDOUS SUBSTANCES" means any substance, pollutant or
contaminant, as those terms are now or hereafter defined in any Environmental
Regulation, and specifically includes, but is not limited to, asbestos,
asbestos-containing materials, petroleum, or petroleum-based products,
formaldehyde, and polychlorinated biphenyls.
1.19 "IMPOSITIONS" shall have the meaning ascribed to such term in
Section 3.3(a) hereof.
1.20 "IMPROVEMENTS" shall mean all buildings, structures and
improvements now located or hereafter constructed on the Land and all Fixtures
and equipment attached to, forming a part of and necessary for the operation of
such buildings, structures and improvements as a motel, and such (a)
restaurants, bars, banquet, meeting and other public areas, (b) commercial
space, including concessions and shops, (c) parking space, (d) storage and
services areas, (e) recreational facilities and areas, (f) public grounds and
gardens, (g) permanently affixed signage and (h) other facilities and
appurtenances, as necessary or desirable for the operation of the Improvements
as a motel in accordance with the terms and conditions of this Lease.
1.21 "INSURED CASUALTY" shall have the meaning ascribed to such
term in Article 10 hereof.
1.22 "LAND" shall mean that certain real property consisting of the
Premises described in the Reference Page and legally described on Exhibit A
attached hereto, together with all easements and rights benefitting or
appurtenant to such real property.
1.23 "LANDLORD" shall mean PMC Commercial Trust, a Texas real
estate investment trust, and its successors and assigns.
4
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1.24 "LEASE YEAR" shall mean a full calendar year, provided that
the first and last Lease Years shall be determined in accordance with Section
2.3 hereof.
1.25 "LEGAL REQUIREMENTS" shall have the meaning ascribed to such
term in Section 7.4 hereof.
1.26 "MASTER AGREEMENT" shall mean the agreement made and entered
into as of June ___, 1998 by and among PMC Commercial Trust, Amerihost
Properties, Inc. and AmeriHost Inns, Inc.
1.27 "NET OPERATING INCOME" shall mean Room Revenues and Sundry
Revenues, less Operating Expenses, but specifically excludes any and all income
derived by reason of the occurrence of a Capital Event.
1.28 "NET WORTH" shall mean Landlord's net worth which shall be
equal to the excess of Landlord's assets over its liabilities as determined in
accordance with GAAP.
1.29 "OPERATING EQUIPMENT" shall mean (a) all operating equipment
required for the operation of a motel, including chinaware, glassware, linens,
silverware, utensils, uniforms, smallwares, telephone equipment, computers and
all other similar items, and (b) all replacements, substitutions and additions
of and to all of the foregoing.
1.30 "OPERATING EXPENSES" shall mean, for any applicable period,
all expenses incurred by the Tenant in connection with the operation of the
Project in aggregate during such period determined in accordance with GAAP,
which operating expenses shall be deemed to include a reserve of four percent
(4%) of Room Revenues for fixtures, furnishings and equipment and capital
expenditures, and a management fee of four percent (4%) of Room Revenues,
provided, however that "Operating Expenses" shall exclude capital expenditures,
depreciation, amortization expenses and interest expense but shall include
administrative and general expenses, management fees, marketing expenses,
maintenance expenses, energy costs, real and personal property taxes and
insurance premiums, as such terms are described and accounted for by Tenant in
the ordinary course of its business and in accordance with the financial
statements periodically provided by Tenant to Landlord in accordance with the
provisions hereof.
1.31 "OPERATING SUPPLIES" shall mean all food, beverages and other
consumable items used in the operation of a motel, such as fuel, soap, cleaning
materials, matches, stationery, brochures, folios and all other similar items,
together with all substitutions and replacements thereto.
5
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1.32 "PERMITS" shall have the meaning ascribed to such term in
Section 7.6 hereof.
1.33 "PERMITTED USE" shall mean the use of the Project as a motel
in compliance with all Legal Requirements and the terms and conditions of this
Lease.
1.34 "PROHIBITED CASUALTY" shall have the meaning ascribed to such
term in Article 10 hereof.
1.35 "PROHIBITED TAKING" shall have the meaning ascribed to such
term in Section 11.1 hereof.
1.36 "QUALIFIED INVESTMENTS" shall mean any one or more of the
following obligations or securities:
(i) direct obligations of, and obligations fully guaranteed
by, the United States of America or any agency or instrumentality of the United
States of America the obligations of which are backed by the full faith and
credit of the United States of America, excluding any principal-only or
interest-only stripped mortgage pass-throughs and provided that any obligations
of any such agency or instrumentality must be guaranteed as to timely payment
of principal and interest;
(ii) demand and time deposits in, certificates of deposits of,
or bankers' acceptances issued by, any depository institution or trust company
incorporated under the laws of the United States of America or any state
thereof and subject to supervision and examination by federal or state banking
authorities, so long as at the time of such investment or contractual
commitment providing for such investment the commercial paper or other
short-term debt obligations of such depository institution or trust company
(or, in the case of a depository institution which is the principal subsidiary
of a holding company, the commercial paper or other short-term debt obligations
of such holding company) have a credit rating not lower than the second
hightest rating category from a nationally recognized rating agency;
(iii) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable on demand or on a
specified date not more than 270 days after the date of issuance thereof)
having the highest commercial paper rating from a nationally recognized rating
agency;
(iv) money market funds registered under the Investment
Company Act of 1940, as amended, having a credit rating, at the time of such
investment, not lower than the highest rating category from a nationally
recognized rating agency.
6
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1.37 "RELATED PARTY" shall mean a person or entity who controls, is
controlled by or is under common control with another person or entity.
1.38 "RENT" shall mean Base Rent and Additional Rent.
1.39 "ROOM REVENUES" shall mean all revenues, receipts, and income
of any kind derived directly or indirectly by Tenant from or in connection with
the rental of guest rooms or suites, whether to individuals, groups or
transients, at the Project, whether on a cash basis or credit, paid or
collected, determined in accordance with generally accepted accounting
principles, excluding the following:
(a) The amount of all credits, rebates or refunds to
customers, guests or patrons, and all service charges, finance charges,
interest and discounts attributable to charge accounts and credit cards, to the
extent the same are paid to Tenant by its customers, guests or patrons, or to
the extent the same are paid for by the Tenant to, or charged to Tenant by,
credit card companies;
(b) All sales taxes or any other taxes imposed on the rental
of such guest rooms or suites;
(c) Gratuities or service charges actually paid to employees;
(d) Proceeds of business interruption and other insurance; and
(e) Revenues from the sale of food and beverage or Sundry
Revenues.
1.40 "STATE" shall mean the state in which the Project is located.
1.41 "SUNDRY REVENUES" shall mean all revenues, receipts, and
income derived from the Project's meeting rooms, telephones, TV and movie
rentals, check room, washroom, laundry, valet, vending machines, and other
motel related operation sources not specified herein as Room Revenues or food
and beverage revenues.
1.42 "TAX CODE" shall mean the Internal Revenue Code of 1986, as
amended.
1.43 "TENANT" shall mean AmeriHost Inns, Inc., a Delaware
corporation, and its successors and permitted assigns.
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ARTICLE II
DEMISE; TERM; LEASE YEAR
2.1 DEMISE.
(a) Subject to the terms and conditions of this Lease, Landlord leases
to Tenant and Tenant hereby leases from Landlord, the Land, Improvements, FF&E
and Operating Equipment.
(b) It is the intent of Landlord and Tenant that Tenant have
uninterrupted control in the operation of and business conducted at the Project
so long as no Event of Default has occurred and is continuing. Without limiting
any of Landlord's or Tenant's rights hereunder, Tenant shall have absolute
discretion in the determination of room rates and rates and charges to guests of
the Project for other motel related services available at the Project and in
determination of the terms of guest admittance to the Project, use of rooms for
commercial purposes, policies relating to entertainment, labor and food and
beverage service and all phases of advertising, publicity and promotion and
other matters incidental to the operation of Tenant's business at the Project.
2.2 TERM. The term of this Lease shall be for the Lease Term,
unless terminated sooner pursuant to any of the provisions hereof or extended
as provided in Section 2.4 hereof. The Lease Term shall commence on the date
of this Lease. Tenant's obligation to pay Rent shall commence on the
Commencement Date.
2.3 LEASE YEAR. The first Lease Year shall begin on the
Commencement Date and shall end on December 31st of the calendar year following
the calendar year in which the Commencement Date occurs. The second Lease Year
shall begin on the next succeeding January 1st and each Lease Year thereafter
during the Lease Term shall consist of a full calendar year, provided that if
the Lease Term expires on a date other than December 31, the period of time
from January 1 of that calendar year until such expiration date shall be
construed as a Lease Year.
2.4 RENEWAL OPTIONS.
(a) Provided no Event of Default has occurred or is continuing, the
Term of this Lease shall be automatically extended for an additional five (5)
years to commence on the day next succeeding the Expiration Date (the "First
Renewal Term") and to expire on the day (hereinafter referred to as the
"Renewal Term Expiration Date") which shall be the fifth (5th) anniversary of
the Expiration Date, unless Tenant delivers notice to Landlord on or before the
day which is six (6) months prior to the Expiration Date of its election not to
extend the Term of this Lease for the First Renewal Term. If this Lease shall
be renewed for the First Renewal Term, it shall be upon all of the terms and
conditions of this Lease.
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(b) Provided no Event of Default has occurred and is continuing, the
Term of this Lease shall be automatically extended for an additional five (5)
years to commence on the day next succeeding the Renewal Term Expiration Date
(the "Second Renewal Term") and to expire on the day which shall be the fifth
anniversary of the Renewal Term Expiration Date, unless Tenant delivers notice
to Landlord on or before the day which is six (6) months prior to the Renewal
Term Expiration Date of its election not to extend the Term of this Lease for
the Second Renewal Term. If this Lease shall be renewed for the Second Renewal
Term, it shall be upon all of the terms and conditions of this Lease except
that Tenant shall not have any further right to renew the Term of this Lease.
ARTICLE III
RENT AND OTHER CHARGES
3.1 BASE RENT. Tenant shall pay Base Rent commencing on the
Commencement Date. Base Rent shall be payable in advance in monthly
installments as set forth on Schedule I on or before the first day of each
calendar month. Base Rent for any period during the Lease Term which is less
than one (1) month shall be a pro-rata portion of the applicable monthly
installment. If the Base Rent is not paid within two (2) business days after
written notice from Landlord, a late fee equal to two percent (2%) of
one-twelfth (1/12) of the amount of the annual Base Rent shall also be due and
payable.
3.2 CONSUMER PRICE INDEX ADJUSTMENTS TO BASE RENT. Effective as
of the first day of the first month of the fourth Lease Year and the first day
of the first month of each Lease Year thereafter, there shall be made a cost of
living adjustment of the annual Base Rent payable under Section 3.1 hereof.
(a) Effective as of the first day of the first month of the fourth
Lease Year and the first day of first month of each Lease Year thereafter,
annual Base Rent as adjusted shall be increased by two percent (2%) and shall
be payable monthly until such time as the actual change in the Consumer Price
Index can be determined and calculated pursuant to Section 3.2(b) hereof. In
the event that the change in the Consumer Price Index calculated pursuant to
Section 3.2(b) is less than two percent (2%), Landlord shall, within two (2)
business days of such determination, refund the difference to Tenant.
(b) For the Fourth (4th) Lease Year and each Lease Year
thereafter, in the event the Consumer Price Index for the first month of the
Fourth Lease Year and each Lease Year thereafter reflects an increase over the
Consumer Price Index for the first month of the immediately prior Lease Year,
then the Base Rent herein provided to be paid as of the first day of the first
month of such Lease Year and each month thereafter shall be adjusted by
multiplying the Base Rent, as previously adjusted for any Consumer Price Index
increases,
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by the lesser of (i) the percentage difference between the Consumer Price Index
for the first month of the current Lease Year and the Consumer Price Index for
the first month of the prior Lease Year, and (ii) two percent (2%), and the
resulting amount shall be added to the Base Rent, which adjusted Base Rent
shall be effective as of the first day of the first month of the current Lease
Year. Said adjusted Base Rent shall thereafter be payable as set forth on
Schedule I until adjusted as of the first month of the next Lease Year.
(c) If (i) a significant change is made in the number or nature
(or both) of items used in determining the Consumer Price Index, or (ii) the
Consumer Price Index shall be discontinued for any reason, the Bureau of Labor
Statistics shall be requested to furnish a new index comparable to the Consumer
Price Index, together with information which will make possible a conversion to
the new index in computing the adjusted Base Rent hereunder. If for any
reason the Bureau of Labor Statistics does not furnish such an index and such
information, the parties will instead mutually select, accept and use such
other index or comparable statistics on the cost of living that is computed and
published by an agency of the United States or a responsible financial
periodical of recognized authority.
3.3 PAYMENT OF IMPOSITIONS.
(a) Tenant shall pay and discharge when due all taxes of every
kind and nature (including, without limitation, all real and personal property,
franchise, withholding, sales, hotel occupancy, profits and gross receipts
taxes), all charges for any easement or agreement maintained for the benefit of
any portion of the Project, all general and special assessments, levies,
permits, inspection and license fees, all water and sewer rents and charges and
all other public charges, levies or taxes, whether of a like or different
nature, even if unforeseen or extraordinary, imposed upon or assessed of or
against Landlord with respect to the Project, Tenant or any portion of the
Project or interest therein, together with any penalties or interest on any of
the foregoing (all of the foregoing are hereinafter collectively referred to as
the "Impositions"). It is expressly understood and agreed that the Lease is a
triple net lease and all taxes expressly including, but not limited to, the
Michigan Single Business Tax, but not including any fees required to be paid
by Landlord in order for Landlord to maintain its organizational existence or
qualification to do business in certain states as required, the net income and
employee unemployment and withholding taxes of Landlord, shall be paid by
Tenant. Tenant will provide Landlord with copies of all bills and other
demands evidencing Impositions promptly following Tenant's receipt of the same
and Tenant shall deliver to Landlord (i) copies of receipted bills and
cancelled checks evidencing payment of such Imposition if it is a real estate
tax or other public charge, and (ii) evidence acceptable to Landlord showing
the payment of any other such Imposition.
(b) Tenant shall have the right, at Tenant's sole cost and
expense, to contest or object to an Imposition in good faith, but such right
shall not be deemed or construed in any
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way as relieving, modifying or extending Tenant's covenant to pay any such
Imposition at the time and in the manner provided in this Section 3.3, unless
(i) Tenant has given prior written notice to Landlord of Tenant's intent so to
contest or object to an Imposition, (ii) Tenant shall diligently and in good
faith contest the same by appropriate legal proceedings which shall operate to
prevent the enforcement or collection of the same and the sale of the Project
or any part thereof; (iii) Tenant shall have furnished to Landlord a cash
deposit, or an indemnity bond satisfactory to Landlord with a surety
satisfactory to Landlord, in the amount of the Imposition, plus a reasonable
additional sum to pay all costs, interest and penalties that may be imposed or
incurred in connection therewith, to assure payment of the matters under
contest and to prevent any sale or forfeiture of the Project or any part
thereof; (iv) Tenant shall promptly pay upon final determination thereof the
amount of any such Imposition so determined, together with all costs, interests
and penalties which may be payable in connection therewith; (v) notwithstanding
the foregoing, Tenant shall immediately upon the request of Landlord pay (and
if Tenant shall fail to do so, Landlord may, but shall not be required to, pay
or cause to be discharged or bonded against) any such Imposition under protest
notwithstanding such contest, if in the reasonable opinion of Landlord, the
Project shall be in jeopardy or in danger of being forfeited or foreclosed; and
(vi) no Event of Default has occurred and is continuing. Landlord may pay over
any such cash deposit or part thereof to the claimant entitled thereto at any
time when, in the judgment of Landlord, the entitlement of such claimant is
established after Landlord has first requested in writing that Tenant pay such
amount and Tenant does not provide evidence of payment within five (5) business
days thereafter. Tenant shall indemnify, defend and save Landlord harmless
against any loss, cost, expense or damage arising from such contest and shall,
if necessary to prevent a sale or other loss or damage to Landlord, pay such
tax, assessment or charge under protest and take such other steps as may be
necessary in Landlord's determination to prevent any sale or loss of the
Project. Subject to the foregoing, and if Landlord shall so request, within
twenty (20) days after the date when an Imposition is due and payable Tenant
shall deliver to Landlord evidence acceptable to Landlord showing the payment
of such Imposition.
(c) Landlord shall have the right, on notice to or demand upon
Tenant, to pay any Imposition not paid by Tenant after the date such Imposition
shall have become due (subject to Tenant's right to contest such Imposition as
provided in Section 3.3(b) hereof), and nothing herein contained shall affect
such right and such remedy. Any sums paid by Landlord in discharge of any
Impositions shall be treated as Additional Rent.
(d) Upon the occurrence of an Event of Default under this Lease,
Tenant, upon Landlord's request, shall deposit with Landlord monthly (as a
deposit and not a payment) an amount equal to one-twelfth of the annual
Impositions reasonably estimated by Landlord so that Landlord shall have
sufficient funds to pay the Impositions on the first day of the month preceding
the month in which they become due. In such event Tenant further agrees to
cause all bills, statements or other documents relating to Impositions to be
sent or mailed directly to Landlord. Upon receipt of such bills, statements or
other documents, and
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provided Tenant has deposited sufficient funds pursuant to this Section 3.3(d),
Landlord shall pay such amounts as may be due thereunder, in a manner so as to
take advantage of the maximum discount available, out of the funds so
deposited. If at any time and for any reason the funds deposited with Landlord
are or will be insufficient to pay such amounts as may then or subsequently be
due, Landlord shall notify Tenant and Tenant shall immediately deposit an
amount equal to such deficiency with Landlord. Notwithstanding the foregoing,
nothing contained herein shall cause Landlord to be obligated to pay any
amounts in excess of the amount of funds deposited pursuant to this Section
3.3(d). Landlord shall keep such deposits in a segregated account and shall
not commingle said funds with Landlord's own funds. In the event Landlord's Net
Worth decreases below $90,000,000, then Tenant shall deposit such funds with a
bank or financial institution or other escrow agent selected by Landlord and
Tenant, with the consent of Landlord's lender, if such funds have not already
been deposited by Landlord with a bank, financial institution or other escrow
agent (the "Reserve Agent") to administer the deposit account in accordance
with the terms of this Section 3.3(d). All such deposits shall be invested in
Qualified Investments. Any earnings on deposits shall remain in the account.
If amounts collected by Landlord under this Section 3.3(d) together with
earnings thereon exceed amounts necessary in order to pay Impositions, the
excess amounts shall be retained in the account and Tenant shall receive a
credit for such excess amount toward the next payments due for such
Impositions. Except as a result of their gross negligence or willful
misconduct, neither Landlord nor any of its officers, directors, shareholders
or employees shall be liable for any action taken or omitted to be taken by it
hereunder or in connection herewith. Landlord may rely on all certificates,
documents and other proofs delivered to it as to the facts therein disclosed
and the statements therein made, with respect to such investments, and any such
certificate, document or other proof shall be evidence of such facts to protect
Landlord in any action that it may or may not take, or in respect of anything
it may or may not do, by reason of the supposed existence of such fact. Should
Tenant fail to deposit with Landlord sums sufficient to pay such Impositions in
full at least thirty (30) days before delinquency thereof after notice from
Landlord as hereinabove provided, such failure shall constitute an Event of
Default hereunder and Landlord may, at Landlord's election, but without any
obligation so to do, advance any amounts required to make up the deficiency,
which advances, if any, shall be treated as Additional Rent. Upon expiration
or any earlier termination of the Lease Term, and except in case of termination
due to an Event of Default, the sums held by Landlord under this Section 3.3(d)
shall be allocated between Landlord and Tenant as of such expiration or
termination date based upon the periods with respect to which such sums are due
and payable, and Landlord shall be entitled to retain such portion as
represents amounts due and payable up to such termination or expiration date,
and the balance shall be returned to Tenant.
(e) In compliance with Landlord's Net Worth requirement, on the
Commencement Date and within 120 days after the end of each fiscal year
beginning with the fiscal year ending December 31, 1998, the Landlord shall
deliver to the Tenant a copy of its annual audited financial statements which
have been audited by a nationally
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recognized firm of independent public accountants. Such financial statements
shall include a balance sheet, income statement, statement of retained
earnings, statement of stockholder's equity and statement of cash flows and
shall be in comparative form.
3.4 UTILITIES AND OPERATING EXPENSES. Tenant shall pay or cause
to be paid when due, all charges, fees, assessments and related costs for
public utility services (including, without limitation, gas, water, sewer,
electricity, light, power, telephone, cable and other communication services
and refuse and garbage collection) used, rendered or supplied in connection
with the Project throughout the Lease Term. Tenant shall also pay or cause to
be paid when due all other costs and expenses in connection with operating the
Project in accordance with the terms and conditions hereof including, but not
limited to, costs and expenses for personnel, Operating Supplies, Operating
Equipment, insurance and compliance with Legal Requirements (subject to the
provisions of Section 7.4 hereof).
3.5 LOCATION OF PAYMENTS. Tenant shall for the entire Lease Term
pay Rent to Landlord as herein provided at the address set forth in Section
15.8 hereof or at such place as Landlord may from time to time in writing
designate.
3.6 NO SETOFF. It is the intention of the parties hereto that the
obligations of Tenant hereunder shall be separate and independent covenants and
agreements, and that Base Rent, Additional Rent and all other sums payable by
Tenant hereunder shall continue to be payable in all events, including any
default by Landlord hereunder, and that the obligations of Tenant hereunder
shall continue unaffected, unless the requirement to pay or perform the same
shall have been terminated pursuant to an express provision of this Lease.
This is a net lease and Base Rent, Additional Rent and all other sums payable
hereunder by Tenant shall be paid without notice or demand, and without setoff,
counterclaim, recoupment, abatement, suspension, deferment, diminution,
deduction, reduction or defense, except as otherwise specifically set forth
herein. This Lease shall not terminate and Tenant shall not have any right to
terminate this Lease, during the Lease Term (except as otherwise expressly
provided herein). Tenant agrees that, except as otherwise expressly provided
herein, it shall not take any action to terminate, rescind or avoid this Lease
notwithstanding (i) the bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding-up or other proceeding
affecting Landlord, (ii) the exercise of any remedy, including foreclosure,
under any mortgage, (iii) any action with respect to this Lease (including the
disaffirmance hereof) which may be taken by Landlord under the Federal
Bankruptcy Code or by any trustee, receiver or liquidator of Landlord or by any
court under the Federal Bankruptcy Code or otherwise, (iv) the taking of the
Project or any portion thereof (except as specifically provided in this Lease
below), (v) the prohibition or restriction of Tenant's use of the Project under
any legal requirement or otherwise, (vi) the destruction of the Project or any
portion thereof, (vii) the eviction of Tenant from possession of the Project,
by paramount title or otherwise, or (viii) default by Landlord under any other
agreement between Landlord and Tenant. Tenant waives all rights which are not
expressly stated herein but which may now or hereafter otherwise be conferred
by
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law to quit, terminate or surrender this Lease or any of the Project; to any
setoff, counterclaim, recoupment, abatement, suspension, deferment, diminution,
deduction, reduction or defense of or to Base Rent, Additional Rent or any
other sums payable under this Lease, and for any statutory lien or offset right
against Landlord or its property, each except as otherwise expressly provided
herein.
Landlord and Tenant agree that this Lease is a true lease and does not
represent a financing arrangement. Each party shall reflect the transaction
represented hereby in all applicable books, records and reports (including
income tax filings) in a manner consistent with "true lease" treatment rather
than "financing" treatment.
3.7 CAPITAL EXPENDITURE RESERVE ACCOUNT AND FF&E RESERVE ACCOUNT
(a) Landlord shall establish an account (the "Capital Expenditure
Reserve Account") and all amounts deposited therein shall be held by Landlord
in accordance with the terms and conditions of this Section 3.7. In the event
Landlord's "Net Worth" decreases below $90,000,000, then Landlord and Tenant
shall establish and maintain the Capital Expenditure Reserve Account with the
Reserve Agent to administer the account in accordance with the terms of this
Section 3.7. Tenant shall have no right of withdrawal from the Capital
Expenditure Reserve Account except pursuant to the provisions of this Section,
and the Capital Expenditure Reserve Account shall be under the exclusive
dominion and control of Landlord or its assigns as the case may be.
(b) Not later than thirty (30) days prior to the commencement of
each Lease Year, including the first Lease Year, Tenant shall submit for
approval a proposed annual operating budget (the "Operating Budget") and a
capital budget (the "Capital Budget") to Landlord. Landlord shall have twenty
(20) days from the date of receipt of the Capital Budget to review and make
reasonable comment on the Capital Budget and Landlord and Tenant shall
negotiate in good faith the terms of the Capital Budget. If Landlord fails to
object or otherwise respond to the proposed Capital Budget within such 20-day
period, Landlord shall be deemed to have accepted the Capital Budget as so
proposed. The Operating Budget and Capital Budget shall contain the following
as applicable:
(1) Tenant's reasonable estimate of Room Revenues and Sundry
Revenues (including average room rates), operating expenses,
and operating profits for the forthcoming Lease Year on a
monthly basis, as same may be revised or updated from time to
time by Tenant.
(2) An estimate of the amounts to be dedicated to the
capitalizable repair, replacement or refurbishment of the
Improvements from the Capital Expenditure Reserve Account.
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(3) An estimate of the amount to be dedicated to the repair,
replacement or refurbishment of FF&E from the FF&E Reserve
Account.
(4) A cash flow projection.
(5) A marketing plan.
(6) Any amount required to be budgeted for matters required by
the Franchise Agreement except where the Franchisor is a
Related Party of Tenant.
(c) Provided there is no existing Event of Default, Tenant is
authorized to seek reimbursement from the Capital Expenditure Reserve Account
for all items and matters contained in the Capital Budget with respect to
capital expenditures for the Improvements submitted by Tenant and reasonably
approved by Landlord pursuant to Section 3.7(b). In addition, Tenant is
authorized to seek reimbursement from the Capital Expenditure Reserve Account
in emergency situations at the Project when necessary, in the Tenant's opinion,
to maintain the Project and to provide for its continued operation and for the
safety and welfare of the Project guests. Tenant is further authorized to
spend up to Five Thousand Dollars ($5,000.00) per year for replacement and
improvements on a routine basis, without prior approval. In the event that
Tenant desires to make expenditures not contained in the Capital Budget
previously approved or such expenditures are above Tenant's authorized per year
limit, Tenant shall provide an explanation of the circumstances and need for
any requested non-budgeted expenditures from the Capital Expenditure Reserve
Account and prior to purchasing must receive Landlord's consent for such
expenditures. Nothing contained herein to the contrary shall obligate Landlord
to spend or reimburse Tenant for any expenditures in excess of the amount in
the Capital Expenditure Reserve Account. Tenant shall, except in emergency
situations, obtain the approval of Landlord for all expenditures for the
Improvements in any Lease Year which exceed the amount in the Capital
Expenditure Reserve Account for that Lease Year. Any amount of the Capital
Expenditure Reserve Account not actually expended in any Lease Year shall
accumulate in the Capital Expenditure Reserve Account for use in succeeding
Lease Years. Subject to Landlord's rights under Section 12.2(e), an amount
equal to all cash, instruments, securities and funds, if any, remaining in the
Capital Expenditure Reserve Account shall be paid or delivered to Tenant, on
the expiration of the Lease Term, provided no Event of Default exists, by
Landlord.
(d) Tenant shall deposit monthly during the Lease Term (on or
before the 15th day of the subsequent month) into the Capital Expenditure
Reserve Account an amount which is equal to two percent (2%) of Room Revenues
for the prior month. If the required monthly deposit into the Capital
Expenditure Reserve Account is not paid within two (2) days after written
notice from Landlord, a late fee equal to two percent (2%) of the amount of
such deposit shall also be due and payable.
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(e) Funds in the Capital Expenditure Reserve Account held by
Landlord shall be deposited in segregated accounts and may not be commingled
with any other funds of Landlord. Cash on deposit in the Capital Expenditure
Reserve Account shall be invested in Qualified Investments. All dividends,
interest and other income earned from any such investment shall be added to and
become a part of the Capital Expenditure Reserve Account, and any losses from
such investment shall operate to reduce the Capital Expenditure Reserve Account
by the amount of such loss. Except as a result of their gross negligence or
willful misconduct, neither Landlord nor any of its officers, directors,
shareholders or employees shall be liable for any action taken or omitted to be
taken by it hereunder or in connection herewith. Landlord may rely on all
certificates, documents and other proofs delivered to it as to the facts
therein disclosed and the statements therein made, with respect to Qualified
Investments, and any such certificate, document or other proof shall be
evidence of such facts to protect Landlord in any action that it may or may not
take, or in respect of anything it may or may not do, by reason of the supposed
existence of such fact.
(f) Tenant shall also deposit monthly into the FF&E Reserve
Account an amount equal to two percent (2%) of the Room Revenues for the prior
month which payment shall be due and payable on the same terms and conditions
as set forth in Section 3.7(d) for payments into the Capital Expenditure
Reserve Account. Tenant shall also provide Landlord written evidence of such
payment and the receipt thereof by the depository of such account within ten
(10) days following each such payment. Tenant shall at all times be deemed to
be the owner of the FF&E Reserve Account and, upon the expiration or earlier
termination of this Lease, shall have the right to retain all amounts in the
FF&E Reserve Account unless an Event of Default has occurred and Landlord is
entitled to utilize such account pursuant to Section 12.2(e).
(g) If at any time Tenant receives any proceeds from the sale or
disposition of any FF&E, all such proceeds shall be deposited in the FF&E
Reserve Account.
(h) In the event any of the standards of Section 5.1 hereof have
not been satisfied and Landlord determines that the FF&E requires repair,
replacement or refurbishment, or capital expenditures or major repairs to the
Improvements are required, Landlord agrees to make available to Tenant funds
in the Capital Expenditure Reserve Account therefor, and, if Tenant shall fail
to accomplish such repair, replacement or refurbishment of the FF&E or capital
expenditures or major repairs to the Improvements, within thirty (30) days of
Landlord's written notice to Tenant requiring the same (or within such longer
period of time, as may be reasonable and reasonably necessary to accomplish
such work where Tenant is diligently pursuing the work), Landlord shall draw
funds from the Capital Expenditure Reserve Account only in the event there are
no funds remaining in the FF&E Reserve Account as may be needed to make the
required repair, replacement or refurbishment to the FF&E or capital
expenditures or major repairs to the Improvements.
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3.8 SPECIFIED FF&E AND OPERATING EQUIPMENT. Notwithstanding any
other provision in this Lease to the contrary, and without affecting any other
provision of this Lease, Landlord and Tenant agree solely for purposes of this
Section 3.8, that FF&E and Operating Equipment consists of items with economic
useful lives of substantially less than the length of the Lease Term and Tenant
shall be replacing such items during the Lease Term. From and after the date
of the Lease, Landlord shall have no obligation whatsoever to repair, replace,
add to, renew or substitute for, any item constituting FF&E or Operating
Equipment. All such repairs, replacements, additions, renewals and
substitutions and the provision of FF&E or Operating Equipment that is either
necessary or desirable in the operation of the Project shall be at the sole
cost and expense of Tenant. Tenant at its sole cost and expense shall from
time to time replace with other operational equipment or parts any of FF&E,
Operating Equipment or the mechanical systems or other equipment included
within the term "Improvements" as defined in this Lease which shall have become
worn out, obsolete or unusable for the purpose for which it is intended, been
taken by condemnation, or been lost, stolen, damaged or destroyed. Tenant
shall be deemed to be the owner of all FF&E and Operating Equipment replaced by
Tenant during the Lease Term (all such FF&E and Operating Equipment being
referred to herein as the "Specified FF&E and Operating Equipment"). Landlord
and Tenant further agree that during the Lease Term Tenant shall be deemed to
be the owner of such Specified FF&E and Operating Equipment for all purposes of
the Tax Code and that Tenant and not Landlord shall be entitled to depreciation
or cost recovery deductions with respect thereto; provided, however, that upon
the expiration of the Lease Term or earlier termination of this Lease in
accordance with the provisions hereof, title to the FF&E and Operating
Equipment automatically shall vest in Landlord. Notwithstanding such automatic
vesting of title, Tenant agrees to execute and deliver such documents as
Landlord may request in order to effectuate or memorialize such transfer.
Landlord and Tenant agree to prepare their respective tax returns in a manner
consistent with the provisions of this Section 3.8. Nothing in this Section 3.8
should increase the liability of Tenant or limit the rights of Landlord
otherwise provided for in this Lease.
ARTICLE IV
ALTERATIONS AND ADDITIONS
4.1 ALTERATIONS.
(a) Tenant will not make or allow to be made any alterations,
additions or deletions in or to the Project which are not contained in the
Capital Budget and approved by Landlord, without the prior written consent of
Landlord, which consent shall not be unreasonably withheld or delayed, except
as set forth in Sections 3.7(c), 4.1 (b) or 7.5 hereof, or except in the case
where the failure to make such changes would enable the Franchisor to terminate
the Franchise Agreement, except where the Franchisor is a Related Party of
Tenant. Subject to the provisions of Section 3.8 hereof, such alterations,
physical
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additions, or improvements shall become part of the Project and the property of
the Landlord.
(b) Tenant may, at its sole cost and expense, make alterations or
additions to the Improvements without Landlord's prior consent, provided (i)
such alterations or additions do not affect the structural integrity of the
Improvements or adversely affect any of the mechanical or electrical systems of
the Improvements; (ii) such alterations or additions are performed by duly
licensed and qualified contractors in accordance with all Legal Requirements
and in a good and workmanlike manner; (iii) such alterations or additions are
completed prior to the expiration of the Lease Term; (iv) such alterations or
additions do not reduce the value of the Project; and (v) no Default or Event
of Default has occurred and is continuing.
4.2 CONSTRUCTION LIENS. Tenant shall pay when due, and indemnify,
defend and hold Landlord harmless from, all claims for labor or materials
furnished or alleged to have been furnished to Tenant for use in the Project,
which claims are or may be secured by any lien against the Project or any
interest therein in accordance with applicable law. Tenant shall not permit
any liens to be filed against the Project or any interest therein and shall
immediately obtain a release from any lien so filed or remove or discharge the
same by bond in form and content reasonably satisfactory to Landlord. In the
event that any lien does so attach, and is not released or bonded against as
heretofore required, Landlord, in its sole discretion, may pay and discharge
the same and relieve the Project therefrom after first requesting in writing
Tenant to do so and Tenant does not provide evidence of payment within five (5)
business days thereafter, and Tenant agrees to repay and reimburse Landlord
upon demand for the amount so paid by Landlord together with interest at the
Default Rate from the date such amount is paid until the date such amount is
repaid. Nothing in the Lease shall be construed in any way as constituting the
consent or request of Landlord to any contractor, subcontractor, laborer, or
materialman for the performance of any labor or the furnishing of any materials
for any alteration, addition, improvement or repair to the Project, nor as
giving Tenant any right, power or authority to contract for or permit the
rendering of services or the furnishing of materials that would give rise to
the filing of a lien against the Project.
4.3 REMOVAL OF IMPROVEMENTS. All alterations, additions and other
improvements by Tenant shall become the property of Landlord and shall not be
removed from the Project, unless request is made by Landlord to Tenant to
remove those alterations, additions and other improvements which were made
without Landlord's approval where such approval was required under this Lease.
All (i) moveable trade fixtures and signs installed in the Project by Tenant
and paid for by Tenant, other than those items comprising FF&E or Operating
Equipment which are replacements, substitutions or additions thereof or thereto
made by Tenant and FF&E and Operating Equipment present in the Project as of
the date hereof, and (ii) signs, logos and other property, including Operating
Equipment and Supplies, bearing the logo of any Franchisor which is not
continuing as the Franchisor
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following the expiration of the Term of this Lease shall remain the property of
Tenant or Franchisor, as the case may be, and may be removed upon the
expiration of the Lease Term; provided that any of such items as are affixed to
the Project and require severance may be removed only if Tenant repairs any
damage caused by such removal and that Tenant shall have fully performed all of
the terms, conditions and covenants to be performed by Tenant under this Lease.
If Tenant fails to remove such items from the Project by the expiration of the
Lease Term or earlier termination of this Lease, all such trade fixtures,
furniture, furnishings and signs shall become the property of Landlord, unless
Landlord elects to require their removal, in which case Tenant shall, at its
sole cost and expense, promptly remove the same and restore the Project to its
condition on the date of this Lease. The covenants contained in this Section
shall survive the expiration or earlier termination of this Lease.
ARTICLE V
REPAIRS AND MAINTENANCE
5.1 TENANT'S OBLIGATIONS. Tenant is solely responsible for
causing the Project to be kept in good condition and state of repair. Landlord
shall not be required to make any repair, whether foreseen or unforeseen, or to
maintain any of the Project in any way, and Tenant hereby expressly waives the
right to make repairs at the expense of the Landlord, which right may otherwise
be provided for in any law now or hereafter in effect. Nothing in the
preceding sentence shall be deemed to preclude Tenant from being entitled to
insurance proceeds or condemnation awards for restoration pursuant to the terms
of this Lease. Tenant shall, in all events, make all repairs promptly, and all
repairs shall be in good, proper and workmanlike manner. In this regard and by
way of example, Tenant shall keep the exterior of the Project and the
foundations, roof, and structural portions of the walls and roofs of the
Improvements in good condition and repair; Tenant shall also keep the Project
and every part thereof and any fixtures, facilities or equipment contained
therein (including FF&E and Operating Equipment), in good condition and repair,
including, but not limited to, exterior doors, window frames and all portions
of the facade area(s), columns, nonstructural walls and partitions, the
heating, air-conditioning, ventilating, electrical, lighting, plumbing and
sewer systems, and shall make all replacements thereof and of all broken and
cracked glass which may become necessary during the Lease Term. Tenant shall
provide for all scheduled servicing of the Project and maintain necessary
maintenance contracts to assure proper maintenance of the Project. As used in
this Section, the term "repairs" shall include replacements and other
improvements as are necessary to maintain the Project in as good order and
condition. If Landlord is required to make repairs by reason of Tenant's acts
or omissions or those of Tenant's employees, agents, invitees, licensees or
contractors, and provided that Landlord has first given Tenant thirty (30) days
notice of the need for such repairs and Tenant has failed to commence such
repairs within said thirty (30) days or has failed thereafter to diligently
pursue such repairs and complete all work within a reasonable period of time
but immediately upon notice in the event of an
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emergency (that is, imminent danger of injury to persons or property), Landlord
shall have the right, but shall not be obligated, after prior written notice to
Tenant to make such repairs or replacements on behalf of and for the account of
Tenant and Tenant does not make such repairs or replacements within five (5)
business days thereafter. In such event, such work shall be paid for in full by
Tenant as Additional Rent.
5.2 TERMINATION FOR DECLINE IN QUALITY. In the event the
Landlord determines in the exercise of its reasonable business judgment that
there has occurred a material deterioration of the physical condition of a
Project, the Landlord shall have the right to obtain an independent quality
assessment (the "Quality Assessment") of such Project, conducted by a third
party of national reputation in the hotel/motel industry, funded from the
Capital Expenditure Reserve Account. The Landlord shall promptly provide to
the Tenant a complete copy of the Quality Assessment upon receipt by the
Landlord. In the event the rating for the Project from such Quality Assessment
is less than a "B" level as compared to a nationally recognized franchise of
the same class of motel as the subject Project, the Tenant shall have the right
to remedy the reported defects within ninety (90) days of its receipt of the
Quality Assessment, provided that in the event such remedy is not susceptible
of cure within such 90 day period, the Tenant shall be permitted such time as
shall be needed to remedy the defect, with the further provision that the
Tenant shall timely commence to cure and shall prosecute such cure to
completion. If required by the Landlord, a re-inspection of the subject
Project thereafter shall be promptly conducted by the same or comparable
inspector. If the initial defective rating of less than "B" is sustained by
the re-inspection, the Landlord shall have the right to terminate the Lease
upon thirty (30) days' written notice to Tenant, pursuant to and in accordance
with Section 12.2 hereof.
5.3 SURRENDER. On the last day of the Lease Term, or on any
sooner termination of this Lease, Tenant shall surrender the Project in the
same condition as the Project existed on the Commencement Date, ordinary wear
and tear and damage by casualty or the elements excepted, with such additions,
replacements, betterments, alterations and improvements thereto as permitted
hereunder, broom clean, and shall surrender all keys to Landlord.
5.4 RIGHT OF ENTRY. Landlord and its authorized representatives
shall have the right to enter the Project (a) upon prior notice to Tenant at
all reasonable times to inspect the Land, Improvements, FF&E, Operating
Equipment and Operating Supplies or to show the Project to prospective
purchasers or tenants, provided any such entry is done in a manner such as to
avoid interference with the operation of the Project and, (b) in the event of
the existence of an Event of Default hereunder, to make repairs, alterations,
improvements or additions as Landlord may reasonably deem necessary, including
those to be performed by Tenant, without the same constituting an eviction of
Tenant in whole or in part, and Rent shall not abate as a result of such entry.
Nothing herein shall imply any duty upon the part of Landlord to do any work
which the Tenant may be required to perform under
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this Lease, and the performance thereof by Landlord shall not constitute a
waiver of Tenant's default in failing to perform it. If Tenant is not present
to permit entry into the Project, Landlord may, in case of emergency, enter by
master key, or may forcibly enter, without rendering Landlord liable therefor,
except to the extent of Landlord's gross negligence or willful misconduct.
ARTICLE VI
HAZARDOUS SUBSTANCES
6.1 NO HAZARDOUS SUBSTANCES. Tenant shall not bring into or
permit the existence of any Hazardous Substance on the Project. If Tenant
discovers the presence of any Hazardous Substance on or in the Project which is
in violation of any Environmental Regulation, Tenant shall promptly give
Landlord notice thereof. If during Tenant's occupancy or at any time
throughout the Lease Term the existence of a Hazardous Substance is caused or
permitted to occur by Tenant or any of Tenant's agents, employees, contractors
or invitees, (a) Tenant shall remove such Hazardous Substance and dispose of it
as required by any and all applicable Environmental Regulations, or (b)
Landlord, if it is advised to remove such Hazardous Substance itself to protect
or minimize against any liability to Landlord as a result of the presence of
any Hazardous Substance by no less than ten (10) days' notice to Tenant, may
elect to remove any Hazardous Substance and dispose of it as required by any
Environmental Regulation, in which case Tenant shall pay the entire cost of
such disposal within ten (10) days after receipt of a statement for such cost
by Landlord, such amount to be treated as Additional Rent. If any Governmental
Authority shall require any remedial action or other response with respect to
the Project as the result of any Hazardous Substance brought into or permitted
by Tenant on or in the Project during the Lease Term, Tenant shall notify
Landlord of such action or response and shall Tenant shall be responsible for
satisfying the requirements of the applicable Governmental Authority.
6.2 INDEMNITY. Tenant agrees to indemnify, defend, protect and
hold Landlord harmless from any and all claims, causes of action, damages,
penalties, costs and expenses (including reasonable attorneys' fees, consultant
fees and related expenses) which may be asserted against or incurred by
Landlord resulting from the presence, release or threatened release of any
Hazardous Substance on, in or from the Project during the Lease Term and not
caused by Landlord or resulting from or due to any violation or alleged
violation during the Lease Term of any Environmental Regulation by Tenant or
any of Tenant's agents, employees, contractors or invitees. Tenant's duty to
indemnify and hold harmless includes, but is not limited to, proceedings or
actions commenced by any Governmental Authority.
6.3 SURVIVAL. The foregoing covenants and indemnifications shall
be deemed continuing covenants and indemnifications for the benefit of Landlord
and its successors and assigns and shall survive the expiration of the Lease
Term or earlier termination of this
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Lease and shall be in addition to any other obligations or liabilities Tenant
may have to Landlord at common law under all statutes and ordinances or
otherwise.
ARTICLE VII
COVENANTS OF TENANT
7.1 USE OF PROJECT. Tenant covenants and agrees that from and
after the Commencement Date, and except for reasonable periods of time caused by
unforeseeable events beyond Tenant's control or required for remodeling or
restoration otherwise permitted hereunder, it shall continuously and without
interruption use and occupy the entire Project (and not less than one hundred
percent (100%) of the Project except for subleases, licenses and concessions in
the ordinary course of business which are permitted and meet the requirements
hereunder) solely for the purpose of the Permitted Use and for no other purpose.
Tenant will not use or permit the use of the Project in any manner which would
result or would with the passage of time result in the creation of any easement
or prescriptive right. Tenant shall not use or occupy the Project, or knowingly
permit them to be used or occupied, contrary to any statute, rule, order,
ordinance, requirement, regulation or certificate of occupancy affecting the
same, or which would make void or voidable any insurance then in force with
respect thereto or which would make it impossible to obtain fire or other
insurance thereon required to be furnished hereunder at Tenant's expense, or
which would cause structural injury to the Improvements or cause the value of
usefulness of the Project, or any portion thereof, to diminish (reasonable wear
and tear excepted), or which would constitute a public or private nuisance or
waste, and Tenant agrees that it will promptly, upon discovery of any such use,
take all necessary steps to compel the discontinuance of such use.
7.2 CONTINUING COVENANTS. Tenant covenants and agrees with
Landlord to:
1. not abandon the Project;
2. maintain the Project and the abutting grounds,
sidewalks, roads, parking and landscaped areas in
good condition and state of repair;
3. promptly make all necessary repairs, renewals,
replacements and additions, to the Project;
4. not commit or suffer waste with respect to the
Project;
5. not remove, demolish or in any material respect alter
any of the Improvements, FF&E or Operating Equipment,
provided that Tenant may (i) remove any FF&E and
Operating
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Equipment in accordance with the provisions of
Section 7.5 hereof and (ii) make alterations in
accordance with Section 4.1 hereof;
6. subject to any Legal Requirement, not make, install
or permit to be made or installed, any alterations or
additions to the Project if doing so will violate the
terms and conditions of this Lease unless approved in
advance by Landlord in writing;
7. not make, suffer or permit any nuisance to exist on
the Project;
8. conduct its business in a manner consistent with the
purpose and character of the Project and in
accordance with the standards for operating the type
of business currently operated in the Project;
9. keep the Land and Improvements clean and attractive
in appearance;
7.3 OPERATING SUPPLIES. On the Commencement Date and thereafter
during the Lease Term, Tenant, at its sole cost and expense, shall furnish and
maintain at the Project all Operating Supplies necessary or desirable for the
operation of the Project in accordance with the provisions of this Lease.
Tenant, at its sole cost and expense, shall maintain and replace the Operating
Supplies so that the same quantities of such items that existed on the
Commencement Date shall be left for the use of Landlord on the date of the
expiration of the Lease Term.
7.4 LEGAL REQUIREMENTS. Subject to the provisions of Section 7.9
hereof, Tenant shall comply with, or cause to be complied with, and conform to
all present and future laws, statutes, codes, ordinances, orders, judgments,
decrees, injunctions, rules, regulations and requirements pertaining to the
Project including any applicable insurance, environmental, zoning or building,
use and land use laws, ordinances, rules or regulations and all covenants,
restrictions and conditions now or hereafter of record which may be applicable
to it or to any of the Project, or to the use, manner of use, occupancy,
possession, operation, maintenance, alteration, construction, repair or
reconstruction of any of the Project (collectively, the "Legal Requirements").
7.5 FF&E AND OPERATING EQUIPMENT. Any additions to furniture,
fixtures and equipment located at the Project shall become part of the FF&E and
Operating Equipment. Upon the termination of this Lease, by expiration of the
Lease Term or otherwise, Tenant shall, at its sole cost and expense, cause all
of the items of FF&E and Operating Equipment
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to be in proper working order and in good condition (ordinary wear and tear and
damage by casualty and the elements excepted). Any such item which requires
replacement prior to termination of this Lease shall be replaced with an item of
the same utility and quality by Tenant, at its sole cost and expense, and Tenant
shall notify Landlord in writing of such replacement promptly upon the
occurrence of the same.
7.6 PERMITS AND LICENSES. From and after the Commencement Date,
Tenant, at its sole cost and expense and in its name, shall obtain and maintain
all licenses and permits necessary or desirable for the operation of the Project
in accordance with the provisions of this Lease required by any Governmental
Authority (collectively, the "Permits"). If Tenant, for any reason whatsoever,
is denied any necessary Permit or if any necessary Permit shall, at any time be
revoked as a result of the acts or inaction of Tenant and is not reinstated
within a reasonable period of time, the same shall constitute an Event of
Default.
7.7 TENANT'S OBLIGATION TO MANAGE. At all times during the term
hereof, Tenant or a Related Party or a manager reasonably acceptable to Landlord
shall manage and operate the Project.
7.8 PERMITTED CONTESTS. Tenant shall have the right to contest the
amount or validity of any Legal Requirement or insurance requirement or any
lien, attachment, levy, encumbrance, charge or claim ("Claims") 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 Tenant's covenants
to pay or its covenants to cause to be paid any such charges at the time and in
the manner as in this Section provided), on condition, however, that such legal
proceedings shall not operate to relieve Tenant from its obligations hereunder
and shall not cause the sale or risk the loss of any portion of the Project, or
cause Landlord or Tenant to be in default under any mortgage, deed of trust,
security deed or other agreement encumbering the Project or any interest
therein. Upon the request of Landlord, Tenant shall either (a) provide a bond or
other monetary assurance reasonably satisfactory to Landlord that all Claims
which may be assessed against the Project 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 Landlord, 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 Project or any part thereof, in said legal proceedings. Tenant
shall furnish Landlord and any lender of Landlord with reasonable evidence of
such deposit within five (5) days of the same. Landlord agrees to join in any
such proceedings if the same be required legally to prosecute such contest of
the validity of such Claims; provided, however, that Landlord shall not thereby
be subjected to any liability for the payment of any costs or expenses in
connection with any proceedings brought by Tenant; and Tenant covenants to
indemnify, defend and save harmless Landlord from any such costs or expenses.
Tenant shall be entitled to any refund of any Claims and such charges and
penalties or interest thereon which have been
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paid by Tenant or paid by Landlord and for which Landlord has been fully
reimbursed. In the event that Tenant fails to pay any Claims when due or to
provide the security therefor as provided in this Section and diligently to
prosecute any contest of the same, Landlord may, upon ten days advance notice to
Tenant, pay such charges together with any interest and penalties and the same
shall be repayable by Tenant as Additional Rent provided, however, that should
Landlord reasonably determine that the giving of such notice would risk loss to
the Project then Landlord shall give such notice as is practical under the
circumstances. Landlord reserves the right to contest any of the Claims at its
expense not pursued by Tenant. Landlord and Tenant agree to cooperate in
coordinating the contest of any Claims.
ARTICLE VIII
RESERVED
ARTICLE IX
INSURANCE AND INDEMNITIES
9.1 INSURANCE COVERAGES. Tenant shall obtain, at its sole cost and
expense, beginning on the Commencement Date and shall maintain through the Lease
Term, the following insurance coverages:
(a) A policy of commercial general liability insurance (including
Insurance Service Office (ISO) forms and endorsements or their equivalent)
naming Landlord, Tenant and any other party designated by Landlord as an
additional insured, to insure against injury to property, person or loss of life
arising out of the ownership, use, occupancy or maintenance of the Project with
limits of general liability not less than $10,000,000 for death and/or bodily
injury, personal injury, advertising injury and property damage. The policy
shall contain supplemental endorsements covering contractual liability as
provided in an ISO liability policy under the definition of insured contract.
(b) A policy providing commercial property insurance containing
the insuring agreement "Cause of Loss-Special Form" or its equivalent, together
with such endorsements as may be deemed advisable by Landlord to insure the
Improvements, Tenant's leasehold improvements, merchandise, trade fixtures,
furnishings, equipment and personal property, and naming Landlord and any other
party designated by Landlord in connection with a securitization or financing of
the Project as an additional insured. Such
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policy shall provide coverage in an amount not less than the full replacement
cost of the Project. An "Agreed Amount Clause" waiving the coinsurance clause
must be included, as well as, if commercially reasonable and obtainable, flood
and earthquake coverage at limits equal to the maximum foreseeable loss at the
location of the Project. Such coverage must include the expense of tearing down
any Improvements, including the cost of removing its debris and increased cost
of construction coverage.
(c) A policy of workers' compensation insurance must be provided
that insures the benefits required by the State law and includes coverage B
Employer's Liability. The Employer's liability limits must be at least:
Bodily Injury By Accident $1,000,000 Each Accident
Bodily Injury By Disease $1,000,000 Policy Limit
Bodily Injury By Disease $1,000,000 Each Employee
Landlord does not, by requiring such insurance or by any other
act or event, assume or undertake liability for any work-related injuries or
death to Tenant or Tenant's employees.
(d) If Tenant commits or permits any activity or the placing or
operation of any equipment on or about the Project creating unusual hazards,
Tenant shall promptly upon notice or demand from Landlord, procure and maintain
in force, during such activity or operation, insurance sufficient to cover the
risks created thereby. Landlord's demand for unusual hazard insurance shall not
constitute a waiver of any right Landlord may have to demand the removal or
cessation of such activity or operation.
(e) In the event Tenant is in the business of manufacturing,
distributing, selling, servicing or furnishing alcoholic beverages, a policy of
alcoholic beverage and liquor liability insurance naming Landlord and any other
party designated by Landlord in connection with the securitization or financing
of the Project as an additional insured with limits of not less than $10,000,000
per occurrence. The limits may be obtained through a primary and an excess
policy.
(f) A policy of business interruption insurance with an "Extra
Expense" insuring agreement naming Landlord and any other party designated by
Landlord as an additional insured providing coverage of not less than twelve
(12) months of Rent and other business income.
(g) All other insurance, if any, customarily maintained by
businesses of like type, or required by any Legal Requirement to be carried or
maintained by Tenant, or as otherwise may be reasonably required by Landlord,
including but not limited to, boiler and
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machinery coverage, innkeepers liability coverage, automobile and garagekeepers
liability coverage, service interruption coverage, food spoilage coverage and
coverage for employee dishonesty and loss of money and securities.
Tenant may comply with the provisions of this Article by providing
the foregoing insurance coverage under a blanket policy covering other Projects
and properties of Tenant as well as the Project, provided that the amount of
insurance thereunder allocated to the Project is not less than that required
herein, and the blanket policy otherwise complies as to endorsements and
coverage with the provisions of this Article. Evidence of insurance in
compliance with this Section 9.1 shall be provided to Landlord fifteen (15) days
prior to the Commencement Date and, with respect to any renewal policy, thirty
(30) days prior to the expiration of the existing policy. A copy of such
insurance policies will be provided by Tenant to Landlord upon Tenant's receipt
from its insurance company.
9.2 INSURANCE POLICIES. Insurance required under Section 9.1 shall
be written by companies duly qualified to do business in the state where the
Project is located and shall be reasonably satisfactory in all respects to
Landlord, and, if required, the holder of any mortgage or deed of trust against
the Project. The companies providing such insurance shall deliver to Tenant and
Landlord copies of such policies or certificates evidencing the existence and
amount of such insurance. No such policy shall be cancelable or subject to
reduction of coverage or modification except after twenty (20) days prior
written notice to Landlord and such other persons designated by Landlord. At
least ten (10) days prior to the expiration of such policies, Landlord may on
notice to Tenant order such insurance and charge the cost to Tenant as
Additional Rent. Tenant shall not do, or permit anything to be done which will
invalidate the insurance policies furnished pursuant to Section 9.1 or by
Landlord and shall comply with all requirements imposed by Landlord's insurers,
unless such compliance is expressly waived in writing by Landlord. Landlord may
from time to time require that the policy limits of any or all such insurance be
increased to reflect the effects of inflation and changes in normal commercial
insurance practices. Each insurance policy referred to above shall, to the
extent applicable, contain standard non-contributory mortgagee clauses in favor
of any mortgagee of Landlord. Each policy required to be carried by Tenant shall
also provide that any loss otherwise payable thereunder shall be payable
notwithstanding (i) any act or omission of Landlord or Tenant which might,
absent such provision, result in a forfeiture of all or a part of such insurance
payment, (ii) the occupation or use of any of the Project for purposes more
hazardous than permitted by the provisions of such policy, (iii) any foreclosure
or other action or proceeding taken by any mortgagee of Landlord pursuant to any
provision of the mortgage held by such mortgagee upon the happening of an event
of default therein, or (iv) any change in title or ownership of any of the
Project.
Tenant shall pay as they become due all premiums for the insurance
required by this Lease and shall renew or replace each policy. In the event of
Tenant's failure to comply with any of the foregoing requirements of this
Section 9.2 within the earlier of five (5) days
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after receipt of notice of impending cancellation or five (5) days of written
notice from Landlord, Landlord shall be entitled to procure such insurance. Any
sums expended by Landlord in procuring such insurance shall be repaid by Tenant,
together with interest thereon at the Default Rate, from the time of payment by
Landlord until fully paid by Tenant immediately upon written demand therefor by
Landlord.
9.3 EXEMPTION OF LANDLORD FROM LIABILITY. Tenant hereby agrees
that Landlord shall not be liable and Tenant hereby waives all claims against
Landlord for injury to Tenant's business or any loss of income or other
consequential damages or for damage to the inventory, fixtures, furnishings,
improvements or other property of Tenant, Tenant's employees, invitees,
customers, sublessees, agents, occupants, contractors, or injury to the person
of Tenant, Tenant's employees, agents, contractors, occupants, invitees,
customers, sublessees, or any other person in or about the Project, whether such
damage or injury is caused by or results from fire, steam, electricity, gas,
water or rain, or from the breakage, leakage, obstruction or other defects of
pipes, sprinklers, wires, appliances, plumbing, air-conditioning or lighting
fixtures, or from any other cause whatsoever, whether said damage or injury
results from conditions arising upon the Project, or from other sources or
places, and regardless of whether the cause of such damage or injury or the
means of repairing the same is inaccessible to Tenant. Landlord shall not be
liable for any damages arising from any act or neglect of any other tenant of
the Project.
9.4 INDEMNIFICATION. Tenant shall indemnify, defend, protect and
hold harmless Landlord from and against any and all claims arising from Tenant's
use of the Project, or from the conduct of Tenant's business or from any
activity, work or things done, permitted or suffered by Tenant in or about the
Project or elsewhere, except to the extent such claim arises in whole or in part
out of any gross negligence or intentional misconduct of Landlord (and then only
to the extent such claim is attributable to the gross negligence or intentional
misconduct of Landlord), and shall further indemnify, defend and hold harmless
Landlord from and against any and all claims arising from any breach or default
in the performance of any obligation on Tenant's part to be performed under the
terms of this Lease, or arising from any negligence of the Tenant, or any of
Tenant's sublessees, agents, customers, invitees, contractors, occupants, or
employees, and from and against all costs, attorneys' fees, expenses and
liabilities incurred in the defense of any such claim or any action or
proceeding brought thereon. In case any action or proceeding be brought against
Landlord by reason of any such claim, Tenant, upon notice from Landlord, shall
defend the same at Tenant's expense by counsel reasonably satisfactory to
Landlord (but such approval shall not constitute a waiver of Landlord's right to
object to any dual or conflicting representation by such counsel that is
otherwise objectionable under any applicable code of professional conduct or
ethics). Landlord hereby approves of any counsel engaged by Tenant's insurance
carrier. The provisions of this Section shall survive expiration of the Lease
Term or the earlier termination thereof.
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9.5 MUTUAL WAIVER OF SUBROGATION. Nothing in this Lease shall be
construed so as to authorize or permit any insurer of Landlord or Tenant to be
subrogated to any right of Landlord or Tenant against the other party arising
under this Lease. Landlord and Tenant each hereby release the other to the
extent of any loss required to be insured against by either of the parties under
the terms of this Lease, whether or not such insurance has actually been
secured, and to the extent of their respective insurance coverage actually
received for any loss or damage caused by any such casualty, even if such
incidents shall be brought about by the fault or negligence of either party or
persons for whose acts or negligence the other party is responsible. Landlord
and Tenant shall, to the extent permitted by their respective insurers, each
obtain appropriate waivers of subrogation from their respective insurance
carriers giving effect to this Section.
9.6 INSURANCE PREMIUM ESCROW. In the case of a Default or an Event
of Default hereunder, Tenant, upon Landlord's request, shall deposit with
Landlord, as a deposit and not a payment, an amount equal to one-twelfth of the
estimated aggregate annual insurance premiums on all policies of insurance
required by this Lease on the first day of each month. Upon Landlord's request,
Tenant shall cause all bills, statements or other documents relating to the
foregoing insurance premiums to be sent or mailed directly to Landlord. Upon
receipt of such bills, statements or other documents, and providing Tenant has
deposited sufficient funds pursuant to this Section, Landlord shall pay such
amounts as may be due thereunder out of the funds so deposited. If at any time
and for any reason the funds deposited with Landlord are or will be insufficient
to pay such amounts as may then or subsequently be due, Landlord shall notify
Tenant and Tenant shall immediately deposit an amount equal to such deficiency
with Landlord. Notwithstanding the foregoing, nothing contained herein shall
cause Landlord to be obligated to pay any amounts in excess of the amount of
funds deposited with Landlord pursuant to this Section. Landlord shall maintain
all deposits in a segregated account and shall not commingle said funds with its
own funds. All deposits shall be invested in Qualified Investments. In the event
Landlord's Net Worth decreases below $90,000,000 then Tenant shall deposit funds
with the Reserve Agent to administer the deposit account in accordance with the
terms of this Section 9.6. Any earnings on deposits shall remain in the account
to be applied against future premiums. Landlord may impound or reserve for
future payment of insurance premiums such portion of such payments or earnings
thereon as Landlord in its reasonable discretion may deem proper. Should Tenant
fail to deposit sums sufficient to pay in full such insurance premiums at least
thirty (30) days before delinquency thereof, Landlord may, at Landlord's
election, but without any obligation so to do, advance any amounts required to
make up the deficiency, which advances, if any, shall be treated as Additional
Rent. Subject to Section 12.2(e), upon expiration of the Lease Term and payment
of all sums due Landlord under this Lease, all remaining sums held under this
Section 9.6 if any, shall be remitted to Tenant.
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ARTICLE X
DAMAGE OR DESTRUCTION
10.1 REPORTS ON INSURANCE CLAIMS. Tenant 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 Project, any damage or destruction
to the Project and the estimated cost of repair thereof and shall prepare any
and all reports required by any insurance company in connection therewith.
Tenant shall provide Landlord notice of any such accident, claim, damage, or
destruction promptly after the occurrence thereof and at least on a quarterly
basis. 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 Landlord. If no Event of Default has occurred
and is continuing, Tenant shall be authorized to adjust, settle or compromise
any insurance loss, or to execute proofs of such loss, in the aggregate amount
of $25,000 or less, with respect to any single casualty or other event, however,
any single casualty loss or other event over $25,000 shall require Landlord's
consent and approval.
10.2 INSURANCE PROCEEDS. All insurance proceeds payable by reason
of any loss or damage to the Project, or any portion thereof, and insured under
any policy of insurance required by Article 9 of this Lease shall be paid to
Landlord and held in trust by Landlord 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 Project, or any portion thereof, and, if
applicable, shall be paid out by Landlord from time to time for the reasonable
costs of such reconstruction or repair upon satisfaction of reasonable terms and
conditions specified by Landlord or its construction consultants. If neither
Landlord nor Tenant is required or elects to repair and restore, and the Lease
is terminated as described in Section 10.3, all such insurance proceeds shall be
retained by Landlord and salvage resulting from any risk covered by insurance
shall belong to Landlord.
10.3 RECONSTRUCTION IN THE EVENT OF DAMAGE OR DESTRUCTION.
(a) If during the Term the Project is totally or partially
destroyed by a risk covered by the insurance described in Article IX and the
Project thereby is rendered unsuitable for its primary intended use as a motel
facility and no Event of Default has occurred and is continuing Tenant, at its
sole option shall either (i) restore the Project to its original specifications
utilizing materials of similar or superior quality so that it is no longer
unsuitable for its primary intended use as a motel facility and all obligations
of Tenant hereunder shall remain unabated during such restorations or (ii)
terminate this Lease as of the date of the casualty and neither Landlord or
Tenant shall have any further liability hereunder, except for any liabilities
which have arisen prior to or which survive such
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termination, and Landlord shall be entitled to retain all insurance proceeds.
Notwithstanding the above, if the ratio of the average Net Operating Income to
Base Rent for the Project for the prior three (3) years of this Lease does not
equal or exceed 1.1 to 1.0, then Tenant must obtain Landlord's consent to
Tenant's election to either restore the Project or terminate the Lease.
(b) If during the Term the Project is partially destroyed by a
risk covered by the insurance described in Article IX, but the motel is not
thereby rendered unsuitable for its primary intended use as a motel facility
Tenant shall restore the Project to substantially the same condition as existed
immediately before the damage or destruction and otherwise in accordance with
this terms of the Lease. Such damage or destruction shall not terminate this
Lease; provided, however, that if Tenant 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 Project for its primary
intended use as a motel facility 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 either Landlord or Tenant may terminate
this Lease upon notice to the other.
(c) Upon Landlord's final approval of the reconstruction or
repair of the Project, any excess proceeds of insurance and salvage value
resulting from any risk covered by insurance remaining after the completion of
the restoration or reconstruction of the Project, as hereinafter set forth,
shall be paid to Tenant.
(d) In the event that any damage or destruction shall occur at
such time as Tenant shall not have maintained third-party insurance in
accordance with this Lease, Tenant shall pay to the Landlord the amount of the
proceeds that would have been payable had such insurance program been in effect.
10.4 ABATEMENT OF RENT. Any damage or destruction due to casualty
notwithstanding, this Lease shall remain in full force and effect and Tenant's
obligation to pay Rent required by this Lease shall remain unabated by any
damage or destruction.
ARTICLE XI
CONDEMNATION
11.1 TAKING OF WHOLE. In the event (a) the whole of the Project
shall be taken or condemned for a public or quasi-public use or purpose by a
competent authority or sold by Landlord in lieu thereof, (b) such a portion of
the Project or access thereto shall be taken, condemned or sold in lieu thereof
so that the balance cannot be used for the same purpose and with substantially
the same utility to Tenant as immediately prior to such
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taking, or (c) the Project or any portion thereof or access thereto shall be
taken or condemned for a public or quasi-public use or purpose by a competent
authority or sold by Landlord in lieu thereof and Tenant is unable to repair,
rebuild or restore the balance of the Project under the terms of any agreement
to which it is a party, or under any Legal Requirement or other governmental
order to which Landlord or the Project is subject or to such condition that the
Project can be operated for the same purpose and substantially the same utility
to Tenant as immediately prior to such taking (a "Prohibited Taking"), this
Lease shall terminate upon notice from Landlord on Tenant, effective upon
delivery of possession to the condemning authority or its assignee. The award,
compensation or damage (the "Award") for the value of the fee interest in the
Landlord in the Improvements shall be paid to and be the sole property of
Landlord. The Award as compensation for diminution of the value of the leasehold
estate shall be paid to and be the sole property of Tenant. Tenant shall have no
claim against Landlord by reason of such taking or termination. Tenant shall
continue to pay Rent and other charges hereunder until the Lease is terminated.
11.2 PARTIAL TAKING. In the event (a) only a part of the Project
is taken or condemned but the Project or the part remaining can still be used
for the same purpose and with substantially the same utility to Tenant as
immediately prior to such taking, or (b) a Prohibited Taking has not occurred,
this Lease shall not terminate and Tenant shall repair and restore the remaining
Improvements provided the cost and expense of such repair and restoration does
not exceed the amount of the Award made available to Tenant and Base Rent shall
be adjusted in proportion to the lost value of the Project to Tenant for
Tenant's purposes. If the cost of such repair or restoration exceeds the amount
of the Award made available, Tenant may terminate this Lease by giving Landlord
written notice of termination.
11.3 TENANT'S AWARD. Tenant may claim and seek to recover from the
condemning authority such compensation as may otherwise be separately awarded to
Tenant for any damage to Tenant's business by reason of such condemnation and
for any cost or loss incurred by Tenant in removing or relocating Tenant's
fixtures, furnishings, Operating Equipment and Operating Supplies. Except with
respect to an award or payment to which Tenant is entitled pursuant to the
foregoing provisions of this Section, no agreement with any condemnor in
settlement of or under threat of any condemnation shall be made by either
Landlord or Tenant without the written consent of the other, and of Landlord's
mortgagee, if the Project is then subject to a mortgage, which consent shall not
be unreasonably withheld or delayed provided such award or payment is applied in
accordance with this Lease. No award made to Tenant may have the effect of
diminishing any award otherwise available to Landlord.
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ARTICLE XII
DEFAULTS; REMEDIES
12.1 DEFAULTS. The occurrence of any one or more of the following
events shall constitute a default and breach of this Lease by Tenant and each
such event shall be referred to herein as an "Event of Default":
(a) The vacation or abandonment of the Project (not operating for
business in the Project for fourteen (14) consecutive days), except to the
extent caused by casualty or condemnation or during a renovation or acts of God
or third parties not reasonably foreseeable and not within the control of
Tenant.
(b) The failure of Tenant to make any payment of Rent or any other
payment required to be made by Tenant under this Lease, within ten (10) days
after written notice from Landlord.
(c) The failure by Tenant to observe or perform any of the terms,
covenants or conditions of this Lease to be observed or performed by Tenant
(other than those described in Sections 12.1(a), (b), (d), (e) or (f) hereof)
where such failure shall continue for a period of thirty (30) days after written
notice thereof from Landlord to Tenant (or without notice in case of emergency
or a hazardous condition or in case any fine, penalty, interest or cost may
otherwise be imposed or incurred). Notwithstanding the foregoing, Tenant shall
have such longer period of time in excess of thirty (30) days after written
notice as may be reasonably necessary, in which to cure such failure in the
event such failure is reasonably susceptible to cure, Tenant commences such cure
within thirty (30) days of said notice and at all times diligently pursues such
cure.
(d) (i) The making by Tenant or any entity holding a controlling
interest in Tenant of any general assignment, or general arrangement for the
benefit of creditors; (ii) the filing by or against Tenant or any entity holding
a controlling interest in Tenant of a petition to have Tenant or such
controlling entity adjudged a bankrupt or a petition for reorganization or
arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Tenant or such controlling entity, the same is dismissed
within one-hundred and twenty (120) days); (iii) the appointment of a trustee or
receiver to take possession of substantially all of Tenant's assets located at
the Project or of Tenant's interest in this Lease, where possession is not
restored to Tenant within one-hundred and twenty (120) days; or (iv) the
attachment, execution or other judicial seizure of substantially all of Tenant's
assets located at the Project or of Tenant's interest in this Lease or in the
Project, where such seizure is not discharged within one-hundred and twenty
(120) days.
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(e) The existence of any default (a "Franchise Default") by Tenant
under the Franchise Agreement, provided, however, such Franchise Default shall
not constitute an Event of Default under this Lease if (i) the Franchisor has
not elected to exercise any remedy under the Franchise Agreement unless the
Franchisor is a Related Party of Tenant, (ii) the Franchise Default is
reasonably susceptible to cure, (iii) Tenant commences such cure within thirty
(30) days, (iv) Tenant diligently pursues such cure and (v) the Franchise
Default is cured within a reasonable time and (vi) the Tenant enters into a new
Franchise Agreement with a Franchisor.
(f) The Franchise Agreement shall be materially amended or cease
to be in full force and effect for any reason, except by reason of the
expiration of the term thereof, without Landlord's prior written approval.
(g) An assignment shall occur in violation of Article 13 hereof.
(h) The occurrence of an Event of Default by Tenant under the
Master Agreement.
12.2 LANDLORD'S REMEDIES. Upon the occurrence of an Event of
Default, Landlord shall have the following remedies, in addition to all other
rights and remedies provided by law or equity, or elsewhere in this Lease, to
which Landlord may resort cumulatively or in the alternative:
(a) Landlord may, at Landlord's election, terminate this Lease
upon the delivery of written notice of such termination to Tenant. On the
delivery of such notice, all Tenant's rights in the Project, in all improvements
located at the Project, to revenues thereafter arising from the Project, and to
amounts which may otherwise be due from Landlord to Tenant under this Lease,
shall terminate. Promptly after notice of termination, Tenant shall surrender
and vacate the Project in a broom clean condition, and Landlord may reenter and
take possession of the Land, Improvements, FF&E, Operating Equipment and
Operating Supplies and eject all parties in possession or eject some and not
others or eject none. Termination under this Subsection shall not relieve Tenant
from the payment of any sum then due to Landlord or from any claim for damages
previously accrued or then accruing against Tenant. Upon such termination
Landlord shall also be entitled to recover from Tenant unpaid Rent and such
other amounts which have been earned or are payable at the time of termination.
(b) Landlord may, at Landlord's election, terminate Tenant's right
to possession only, without terminating the Lease. Upon termination of Tenant's
right to possession without termination of the Lease, Tenant shall surrender
possession and vacate the Project immediately and deliver possession of the
Land, Improvements, FF&E, Operating Equipment and Operating Supplies to
Landlord, and Tenant hereby grants to Landlord the immediate right to enter into
the Project, remove Tenant's signs and other evidences of
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tenancy, and take and hold possession of the Land, Improvements, FF&E, Operating
Equipment and Operating Supplies with or without process of law, and to
dispossess the others who may be occupying or within the Project, without being
deemed in any manner guilty of trespass, eviction, or forcible entry or
detainer, without incurring any liability for any damage resulting therefrom,
without such entry and possession terminating the Lease or releasing Tenant from
Tenant's obligation to pay Rent and to fulfill all other of Tenant's obligations
under this Lease for the full Lease Term. Landlord shall be entitled to recover
from Tenant (i) unpaid Rent or such other amounts which have been earned or are
payable at the time of termination, and (ii) such amounts as are payable
pursuant to the last sentence of Section 12.2(d) below. Notwithstanding any
remedial action taken hereunder by Landlord short of termination, including
reletting the Project to a substitute tenant, Landlord may at any time
thereafter elect to terminate this Lease for any previous Event of Default.
(c) Landlord may, at Landlord's election, store Tenant's personal
property, if any, for the account and at the cost of Tenant.
(d) Whether or not Landlord elects to terminate the Lease,
Landlord may, but shall be under no obligation to, relet all or any part of the
Project for such rent and upon such terms as shall be satisfactory to Landlord
(including the right to relet the Project as a part of a larger area, the right
to change the character or use of the Project and the right to restrict
prospective tenants to those whose merchandise and business is compatible with
the nature and character of the Project or such larger area, if any). For the
purpose of such reletting, Landlord may decorate or may make any repairs,
changes, alterations or additions in or to the Project that may be necessary or
convenient. If the Lease is not terminated and if the Project is not relet, or
if it is relet and a sufficient sum shall not be realized from such reletting
after paying all of the expenses of any such decorations, repairs, changes,
alterations and additions, the expenses of such reletting and the collection of
the rent accruing therefrom (including, but not limited to, reasonable
attorneys' fees and brokers' commissions), to satisfy the Rent and other charges
herein provided to be paid for remainder of the term of this Lease, Tenant shall
pay to Landlord promptly any deficiency, and Tenant agrees that Landlord may
file suit to recover and recover any sum falling due under the terms of this
Subsection from time to time.
(e) Landlord may, at Landlord's election, withdraw any or all
amounts on deposit pursuant to Sections 3.3(d), 3.7 and 9.6 hereof and apply
such amounts to Tenant's obligations hereunder.
(f) The term "Rent" as used in this Section 12.2 shall be deemed
to be and to mean Base Rent, Additional Rent and such other sums, if any,
required to be paid by Tenant pursuant to the terms of this Lease.
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(g) Notwithstanding anything in this Article XII to the contrary,
Tenant shall not be liable to Landlord for consequential, punitive or exemplary
damages
12.3 LANDLORD MAY PERFORM. Landlord shall have the right at any
time, after ten (10) days notice to Tenant (or without notice with respect to
matters described in Article 9, and in case of emergency or a hazardous
condition or in case any fine, penalty, interest or cost may otherwise be
imposed or incurred), to make any payment or perform any act required of Tenant
under any provision in this Lease which Tenant has failed to make or to perform
beyond the expiration of any notice or cure period, and in exercising such
right, to incur necessary and incidental costs and expenses, including
reasonable attorneys' fees. Nothing herein shall obligate Landlord to make any
payment or perform any act required of Tenant, and this exercise of the right to
so do shall not constitute a release of any obligation or a waiver of any
Default. All payments made and all costs and expenses incurred in connection
with any exercise of such right shall be reimbursed to Landlord by Tenant as
Additional Rent.
ARTICLE XIII
ASSIGNMENT AND SUBLETTING
13.1 ASSIGNMENT BY TENANT AND SUBLEASES.
(a) Provided that Tenant shall remain liable under all of the
terms and conditions of this Lease for the full remainder of the Lease Term, and
provided further that any sublessee shall consent to use the Project for
Permitted Uses only and said sublessee's use does not increase the risk of
Hazardous Substances being used, generated, manufactured, stored, treated,
released or disposed of on, under or about the Project or transported to or from
the Project, Tenant shall have the absolute right to sublet the Project, in
whole or in part, without the consent of Landlord. Except as expressly permitted
below, Tenant shall not assign its interest in this Lease without the prior
written consent of Landlord, which consent shall not be unreasonably withheld or
delayed. Assignment of this Lease by Tenant to a Related Party of Tenant, who
remains a Related Party of Tenant, shall not require the consent of Landlord. A
change of ownership of 51% or more of Tenant shall be deemed an assignment of
this Lease for purposes of this paragraph.
(b) No assignment or subletting shall serve to release Tenant
of any obligations hereunder or alter the primary liability of Tenant for the
payment of Base Rent, Additional Rent and other sums due Landlord hereunder or
for the performance of or compliance with each and every term, covenant,
condition and obligation to be performed or observed by Tenant under this Lease
unless Landlord, in its reasonable discretion, elects to release Tenant of its
obligations or liability hereunder.
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(c) Landlord may accept any rent or performance of Tenant's
obligations from any person other than Tenant and such acceptance of any rent or
performance shall not constitute a waiver or estoppel of Landlord's rights to
exercise its remedies for the default or breach by Tenant of any of the terms,
covenants or conditions of this Lease.
(d) In the event of any default or breach of Tenant's
obligations under this Lease, Landlord may proceed directly against Tenant, or
any one else responsible for the performance of Tenant's obligations under this
Lease, including the sublessee, without first exhausting Landlord's remedies
against any other person or entity responsible thereof, or any security held by
Landlord or Tenant.
(e) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be deemed
for the benefit of Landlord, to have assumed and agreed to conform and comply
with each and every term, covenant, condition and obligation herein to be
observed or performed by Tenant during the term of said assignment or sublease,
other than such obligations as are contrary to or inconsistent with provisions
of the assignment or sublease.
(f) Each sublease of the Project or any part thereof shall be
subject and subordinate to the provisions of this Lease. Tenant agrees that in
the case of an assignment, Tenant shall, within fifteen (15) days after the
execution and delivery of any such assignment, deliver to Landlord (i) a
duplicate original of such assignment in recordable form and (ii) an agreement
executed and acknowledged by the assignee in recordable form wherein the
assignee shall agree to assume and agree to observe and perform all of the terms
and provisions of this Lease on the part of the Tenant to be observed and
performed from and after the date of such assignment, and, in the case of a
sublease, Tenant shall, within fifteen (15) days after the execution and
delivery of such sublease, deliver to Landlord a duplicate original of such
sublease.
(g) The following terms and conditions shall apply to any
subletting by Tenant of all or any part of the Project and shall be deemed
included in all subleases, under this Lease whether or not expressly
incorporated therein: Tenant hereby assigns and transfers to Landlord all of
Tenant's interest in all rents and income arising from any sublease of all or a
portion of the Project heretofore or hereafter made by Tenant, and Landlord may
collect such rent and income and apply same toward Tenant's obligation under
this Lease; provided however, that except during any period in which a breach
has occurred in the performance of Tenant's obligations under this Lease, and
remains uncured Tenant may, except as otherwise provided in this Lease, receive,
collect and enjoy the rents accruing under such sublease. Landlord shall not, by
reason of this assignment of rents or any other assignment of sublease to
Landlord, nor by reason of the collection of the rents from a sublessee, be
deemed liable to the sublessee for any failure of Tenant to perform and comply
with any of Tenant's obligations to such sublessee under such sublease. Tenant
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hereby irrevocably authorizes and directs any such sublessee, upon the receipt
of a written notice from Landlord stating that a default exists in the
performance of Tenant's obligation under this Lease, to pay to Landlord the
rents and other charges due and to become due under the sublease. Sublessee
shall rely upon any such statement and request from Landlord and shall pay such
rents and other charges to Landlord without any obligation or right to inquire
as to whether such default exists and notwithstanding any notice from or claim
from Tenant to the contrary, Tenant shall have no right or claim against said
sublessee, or, until the default has been cured, against Landlord, for any such
rents and other charges so paid by sublessee to Landlord.
(h) In the event of a breach by Tenant in the performance of
its obligations under this Lease, and a resulting termination of Lease by
Landlord, Landlord, at its option and without any obligation to do so, may
require any sublessee to attorn (i.e., agree to become tenant to a new owner or
landlord of the same property) to Landlord, in which event Landlord shall
undertake the obligations of the sublessor under such sublease from the time of
the exercise of said option to the expiration of such sublease; provided,
however, Landlord shall not be liable for any prepaid rents or security deposit
paid by such sublessee to such sublessor or for any prior defaults or breaches
of such sublessor under such sublease.
(i) Any matter or thing requiring the consent of the sublessor
under a sublease shall also require the consent of Landlord herein, if
Landlord's consent is required under this Lease.
(j) Each sublease shall provide that (i) it is subject and
subordinate to this Lease and any mortgage covering the Project; (ii) Landlord
may enforce the provisions of the sublease, including collection of rent; (iii)
if this Lease is terminated for any reason, Landlord may, at its option, either
(A) terminate the sublease, or (B) takeover all of the rights and interest of
Tenant, as sublessor, under such sublease, in which case such sublessee shall
attorn to Landlord. If Landlord elects to takeover the rights and interest of
Tenant, Landlord shall not (i) be liable for any previous act or omission of
Tenant under the sublease, (ii) be subject to any defense or offset in favor of
the sublessee against Tenant, or (iii) be bound by any modification to the
sublease made without Landlord's written consent or by any prepayment by
sublease of more than one month's rent.
(k) Landlord agrees for itself, its successors and assigns,
promptly upon Tenant's request, to enter into a nondisturbance and attornment
agreement with any Qualified Subtenant, as defined below, of the Project upon
the terms described below, pursuant to which Landlord shall agree, for so long
as such Qualified Subtenant is not in default under its Qualified Sublease, as
defined below, that the Qualified Sublease shall not be terminated as a result
of any termination of this Lease and such Qualified Subtenant's use and
occupancy of the premises demised pursuant to the Qualified Sublease shall not
be
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disturbed by Landlord, and pursuant to which such Qualified Subtenant shall
agree to attorn to Landlord or its successor as landlord under the Qualified
Sublease upon any termination of this Lease. Said agreement shall further
provide that nothing therein contained shall impose any obligation on the
Landlord, the then owner or any mortgagee of Landlord or their respective
successors to (i) return or apply any security deposit under such sublease, such
security shall be transferred and turned over to the Landlord, such then owner
or any mortgagee of Landlord, (ii) expend any sums to make any installations or
alterations provided to be made by the sublessor under said sublease or
reimburse the subtenant under said sublease for any installations or alterations
made by it, (iii) be liable for any act or omission of any prior sublessor, (iv)
be subject to any offsets or defense which such subtenant might have against any
prior sublessor, (v) be bound by any rent or additional rent which such
subtenant might have paid for more than the current rent to any prior landlord,
or (vi) be bound by any amendment or modification of the sublease made without
the prior written consent of Landlord, the terms of which amendment or
modification if included in the original sublease would have prevented such
sublease from meeting the criteria for a Qualified Sublease. Any subtenant under
a Qualified Sublease is a "Qualified Subtenant." A "Qualified Sublease" shall be
any absolute net sublease (that is, a subleases that requires the uninterrupted
payment of rent without offset or diminution, that confers all rights to
condemnation awards [other than a separate award for moving expenses and
subtenant's fixtures] upon the sublessor, and that places no obligations upon
the sublessor thereunder other than those of the type placed upon Landlord
hereunder) of the entire Project with a subtenant whose creditworthiness is
reasonably acceptable to Landlord and pursuant to which the subtenant thereunder
is required to fulfill all of the obligations of Tenant hereunder, including,
without limitation, payment of rent which shall at all times be equal to or
greater than the rent which Tenant is required to pay hereunder.
(l) Upon the occurrence of an Event of Default under this
Lease, Landlord shall have the right to collect and enjoy all rents and other
sums of money payable under any sublease of any of the Project, and Tenant
hereby irrevocably and unconditionally assigns such rents and money to Landlord,
which assignment may be exercised upon and after (but not before) the occurrence
of an Event of Default.
13.2 TENANT OWNERSHIP. For the purposes of this Article XIII, an
assignment shall be deemed to include any of the following transactions: (i) the
issuance or sale by Tenant or the sale by any stockholder of Tenant of a
controlling interest in Tenant to persons or entities other than Amerihost
Properties, Inc. and any Related Party; (ii) the sale, conveyance or other
transfer of all or substantially all of the assets of Tenant (whether by
operation of law or otherwise); (iii) any transaction pursuant to which Tenant
is merged with or consolidated into another entity where Tenant or a Related
Party of Amerihost Properties, Inc. is not the surviving entity; and (iv) any
other transaction or series of transactions, which results in Amerihost
Properties Inc. or a Related Party of Amerihost Properties, Inc., no longer
having control of Tenant.
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13.3 ASSIGNMENT DUE TO BANKRUPTCY.
(a) In the event a petition is filed by or against Tenant
under the Bankruptcy Code, Tenant, as debtor and debtor in possession, and any
trustee who may be appointed, agree to adequately protect Landlord as follows:
1. to pay monthly in advance on the first day of each
month as reason-able compensation for use and occupancy
of the Project an amount equal to all Rent due pursuant
to this Lease; and
2. to perform each and every obligation of Tenant under
this Lease until such time as this Lease is either
rejected or assumed by order of a court of competent
jurisdiction; and
3. to determine within sixty (60) days after the filing of
such petition whether to assume or reject this Lease;
and
4. to give Landlord at least thirty (30) days prior
written notice, unless a shorter notice period is
agreed to in writing by the parties, of any proceeding
relating to any assumption of this Lease; and
5. to do all other things of benefit to Landlord otherwise
required under the Bankruptcy Code.
Tenant shall be deemed to have rejected this Lease in the
event of the failure to comply with any of the above.
(b) If Tenant or a trustee elects to assume this Lease subsequent
to the filing of a petition under the Bankruptcy Code, Tenant, as debtor and as
debtor in possession, and any trustee who may be appointed agree as follows:
1. to cure each and every existing breach by Tenant within
not more than thirty (30) days of assumption of this
Lease; and
2. to compensate Landlord for any actual pecuniary loss
resulting from any existing breach, including without
limitation, Landlord's reasonable costs, expenses and
attorney's fees incurred as a result of the breach, as
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determined by a court of competent jurisdiction, within
thirty (30) days of assumption of this Lease; and
3. in the event of an existing breach, to provide adequate
assurance of Tenant's future performance, including
without limitation:
(i) the production to Landlord of written documentation
establishing that Tenant has sufficient present and
anticipated financial ability to perform each and every
obligation of Tenant under this Lease; and
(ii) assurances, in form acceptable to Landlord, as may be
required under any applicable provision of the Bankruptcy
Code; and
4. the assumption will not breach any provision of this
Lease; and
5. the assumption will be subject to all of the provisions
of this Lease unless the prior written consent of
Landlord is obtained; and
6. the prior written consent to the assumption of any
mortgagee to which this Lease has been assigned as
collateral security is obtained.
(c) If Tenant assumes this Lease and proposes to assign the same
pursuant to the provisions of the Bankruptcy Code to any person or entity who
shall have made a bona fide offer to accept any assignment of this Lease on
terms acceptable to Tenant, then notice of such proposed assignment shall be
furnished by Tenant to Landlord, setting forth:
1. the name and address of such person; and
2. all the terms and conditions of such offer; and
3. the adequate assurance to be provided Landlord to
assure such person's future performance under the
Lease, including without limitation, the assurances
referred to in any applicable provision of the
Bankruptcy Code, shall be given to Landlord by Tenant
no later than twenty (20) days after receipt by
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Tenant, but in any event no later than ten (10) days
prior to the date that Tenant shall make application
to a court of competent jurisdiction for authority
and approval to enter into such assignment and
assumption, and Landlord shall thereupon have the
prior right and option, to be exercised by notice to
Tenant given at any time prior to the effective date
of such proposed assignment, to accept (or to cause
its designee to accept) an assignment of this Lease
upon the same terms and conditions and for the same
consideration, if any, as the bona fide offer made by
such person, less any brokerage commissions which may
be payable out of the consideration to be paid by
such person for the assignment of this Lease. The
adequate assurance to be provided Landlord to assure
the assignee's future performance under the Lease
shall include without limitation:
(i) a written demonstration that the assignee meets all
reasonable financial and other criteria of Landlord as did
Tenant and its business at the time of execution of this
Lease, including the production of the most recent audited
financial statement of the assignee prepared by a certified
public accountant; and
(ii) the assignee's use of the Project will be a Permitted
Use; and
(iii) assurances, in form acceptable to Landlord, as to all
matters identified in any applicable provision of the
Bankruptcy Code.
13.4 TRANSFER OF LANDLORD'S RIGHTS. Subject to Landlord's
compliance with Article XIV hereof, Landlord shall have the right to transfer
and assign, in whole or in part, all and every feature of its rights and
obligations hereunder and in the Project. Such transfers or assignments,
howsoever made, are to be fully binding upon and recognized by Tenant provided
the transferee assumes all of Landlord's obligations hereunder and Landlord
delivers to Tenant notice of such transfer within ten (10) days following its
effective date. Upon such transfer or assignment and the assumption of
Landlord's obligations by the transferee, and subject to the provisions of
Section 15.2 hereof, Landlord shall be relieved of all obligations under the
Lease accruing subsequent to the date of transfer.
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13.5 LICENSES AND LEASEHOLD MORTGAGES.
(a) Tenant shall have the right during the Lease Term to grant
licenses of portions of the Project, provided that no such license shall be for
the use and operation of the entire Project without compliance by Tenant with
the provisions of Section 13.1 nor be valid for a period of more than thirty
(30) days. In the event the term of any license shall extend beyond the fixed
date for the expiration of the Lease Term, such license shall be subject to the
consent of Landlord, which consent shall not be unreasonably withheld or
delayed. In the event of the termination or expiration of the Lease Term, any
existing license shall remain in effect notwithstanding the termination of this
Lease. Tenant shall assign such license agreement to Landlord by an instrument
mutually satisfactory to Landlord and Tenant, and any such licensee's use,
occupancy and enjoyment of its premises shall not be disturbed, subject however
to the terms and conditions of any such license agreement.
(b) Tenant may grant a mortgage, deed of trust or other financing
instrument that constitutes or creates a lien on Tenant's interest in this Lease
or the leasehold estate created hereby (such mortgage, deed of trust or other
financing instrument hereinafter a "Leasehold Mortgage"). Landlord will promptly
provide to the holder of the Leasehold Mortgage ("Leasehold Lender") copies of
any material notice or other material correspondence, including, without
limitation, any notice of default or breach under this Lease that Landlord gives
to Tenant, but Landlord's failure to give any such notice shall not constitute a
default by Landlord on this Lease or constitute a waiver of any such default or
breach of Tenant or grant Tenant any additional time to cure any such default or
breach. Landlord hereby grants Leasehold Lender the right to cure any default or
breach under this Lease, the exercise of which shall be at the sole option of
Leasehold Lender. Leasehold Lender shall have the right to enter upon the
Project at any time to cure any such default.
(c) Notwithstanding any contrary provisions of this Lease,
Landlord agrees not to terminate this Lease or Tenant's right of possession of
the Project or to exercise any of Landlord's other remedies under this Lease or
to interfere with Tenant's occupancy, use or enjoyment of the Project for any
default under this Lease unless (x) Landlord has given to Leasehold Lender
notice of such default, which notice shall be set forth in reasonable detail the
nature of such default and (y) if such default constitutes a default under
Section 12.1 (b) of this Lease, the same is not cured within two (2) days after
notice of such default to Leasehold Lender, or if such default constitutes a
default under any other subsection of Section 12.1 of this Lease, which default
is curable by Leasehold Lender, and such default shall not have been cured by
Tenant or Leasehold Lender within the greater of the cure period provided
therefor under the terms of this Lease or a period of ten (10) days following
Leasehold Lender's receipt of such notice. If any non-monetary default that is
curable by Leasehold Lender is of such nature that it cannot be cured within ten
(10) days, Leasehold Lender shall be entitled to such additional period of time
as may be reasonably necessary to cure such default if Leasehold Lender proceeds
promptly to remedy the same. In the event
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of the bankruptcy of Tenant, or a general assignment by Tenant for the benefit
of its creditors, Landlord will not terminate this Lease or exercise its other
remedies under this Lease so long as Leasehold Lender continues to pay all rent
and other sums and performs or causes to be performed all other obligations of
Tenant under this Lease reasonably susceptible of performance by Leasehold
Lender. If any default cannot be cured by Leasehold Lender because such cure
requires possession of the Project, Landlord agrees that it will not exercise
its rights and remedies under this Lease as a result thereof, so long as
Leasehold Lender cures all other curable defaults, including payment of past due
Base Rent and Additional Rent within the cure periods provided in this
paragraph. It is expressly understood and agreed by Landlord that Leasehold
Lender has right to cure Tenant's defaults under this Lease, but shall not have
the obligation to do so. Upon compliance with the foregoing provisions, any
notice of breach or default given by Landlord or any action of Landlord to
terminate or exercise any remedies under this Lease or to otherwise interfere
with the occupancy, use or enjoyment of the Project by reason thereof, shall be
deemed rescinded without any further action by Landlord, Tenant or Leasehold
Lender.
(d) Upon written notice from Leasehold Lender, Landlord, in
its reasonable discretion, agrees to recognize Leasehold Lender or any assignee
or designee of Leasehold Lender approved by Landlord as tenant under this Lease,
provided (i) Leasehold Lender or such assignee or designee assumes this Lease
and all of Tenant's obligations hereunder, (ii) such assignee or designee is a
financially responsible party (which shall be determined by Landlord, such
determination not to be unreasonably withheld or delayed), and (iii) all Base
Rent and Additional Rent payments are then current. In such event, Leasehold
Lender or any assignee or designee of Leasehold Lender shall thereafter be
entitled to all the rights and privileges of the Tenant under this Lease.
Landlord will not unreasonably interfere with the enforcement by Leasehold
Lender of its liens and security interests on Tenant's assets. Leasehold Lender
is permitted to act through its employees or agents.
(e) If Leasehold Lender or its assignee or designee succeeds
to the interest of Tenant under this Lease, upon Landlord's consent, Landlord
agrees to recognize Leasehold Lender or its assignee or designee as the tenant
under this Lease, and if Leasehold Lender so requests, Landlord agrees to enter
into a new lease with Leasehold Lender or its assignee or designee for the
remainder of the Lease Term at the rents and upon the same covenants,
agreements, terms and provisions contained in this Lease, including, without
limitation, any options to renew and rights of first refusal contained herein.
If Leasehold Lender or its assignee or designee succeeds to the interest of
Tenant under this Lease or enters into a new lease with Landlord, Leasehold
Lender or its assignee or designee shall have the right, with Landlord's
consent, to sublease the Project or assign this Lease or new lease to an entity
designated by Leasehold Lender, provided that in the case of an assignment such
entity assumes in writing all of Tenant's obligations under this Lease or new
lease from and after the effective date of such assignment and such entity is a
financially responsible party (which shall be determined by Landlord, such
determination not to be unreasonably withheld or delayed), and all Base Rent and
Additional Rent payments are then current.
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ARTICLE XIV
RIGHT OF FIRST REFUSAL
14.1 RIGHT OF FIRST REFUSAL. During the Lease Term when no Default
or Event of Default exists and for a period of thirty (30) days following the
expiration of the Lease Term, Landlord may not sell, transfer, assign, convey,
pledge, or otherwise dispose of all or any portion of the Project or Landlord's
interest in this Lease, other than a sale, assignment or conveyance in
connection with a securitization or structured financing of the Project, without
having first complied with the provisions of this Article XIV and the following
terms and conditions:
(a) Prior to any transfer or to entering into any contract to
sell, transfer, assign, or convey all or any portion of the Project or
Landlord's interest in this Lease to a third party, or prior to accepting any
bona fide offer to purchase, buy, or acquire all or any portion of the Project
or Landlord's interest in this Lease from a third party, Landlord shall give
written notice of all the terms, provisions, and conditions with respect to such
offer, including a copy of the proposed offer, to Tenant and Landlord shall
offer to sell or to transfer to the Tenant the Project or Landlord's interest in
the Lease which is the subject of such offer on the same terms, provisions, and
conditions as are set forth in such third party offer.
(b) Tenant shall have a period of ten (10) days from the date of
its receipt of the written notice from Landlord to accept such offer on the same
terms, provisions, and conditions stated in such written notice, which
acceptance must be in writing and be received by Landlord prior to the
expiration of such ten (10) day period. Any purported acceptance made orally
shall be ineffective, and any purported acceptance which varies the terms of
such offer shall be deemed a rejection thereof for all purposes. The closing of
the purchase by Tenant shall be held at the time and place specified in the
written notice from Landlord, or such earlier date as is specified by Tenant,
but in no event later than the day the original offer would have been closed.
(c) In the event Tenant delivers written notice of rejection to
Landlord, or in the event Tenant fails to accept the offer in the manner
required by Section 14.1(b) hereof, the offer made by Landlord shall be deemed
to have been rejected by Tenant, and Landlord shall be free to sell, transfer,
assign, or convey such interest to the third party on the terms, provisions, and
conditions set forth in the written notice to Tenant.
(d) In the event that such transaction is not consummated as
provided in Section 14.1(c) hereof on or before thirty (30) days after the
closing date specified in the notice from Landlord to Tenant, or in the event
any material terms and provisions of such transaction are changed following a
rejection by Tenant, no sale, transfer, assignment, or
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conveyance of such interest in the Project or the Lease may be made unless the
provisions of this Article XIV are again complied with.
14.2 CONDITIONS OF OFFER. Landlord shall not be entitled to
exercise its rights under Section 14.1(a) hereof with respect to any offer to
purchase or offer to sell any interest in the Project or the Lease unless such
offer complies with all of the following requirements:
(a) the proposed purchase price (which shall be net of any debts
or liabilities which the proposed purchaser will assume) is payable in its
entirety in cash;
(b) the offer contains provisions whereby the proposed purchaser
is obligated to comply with the provisions of Section 14.2(e) prior to or at
closing;
(c) it is an offer by or to a principal, identified in the offer,
and not an agent acting on behalf of an undisclosed principal; and such
principal shall not be a person or entity with respect to which Landlord has any
direct or indirect ownership or control or from whom Landlord shall receive any
form of undisclosed rebate, commission or other consideration in connection with
the transaction;
(d) the sale is subject to the rights of Tenant under this Lease;
and
(e) The prospective purchaser shall provide to Tenant a statement
signed by such prospective purchaser to the effect that (i) such purchaser is a
principal acting on its own behalf and not an agent acting on behalf of an
undisclosed principal, (ii) such principal is not a person or entity with
respect to which Landlord has any direct or indirect ownership or control, and
(iii) that such purchaser is not paying any rebate, commission or other
consideration not disclosed in the offer.
Notwithstanding any term or provision of Sections 14.1 or 14.2 to the
contrary, Landlord, subject to rights of Tenant under the Lease, may (i) sell,
assign or convey the Project in connection with a securitization or structured
financing of the Project (ii) assign or pledge the Project and its interest in
and to this Lease as security for any loan secured by a mortgage or deed of
trust on the Project, and (iii) sell, assign and convey the Project and its
interest in the Lease to any Related Party of Landlord or any party into which
Landlord merges whether or not Landlord is the surviving entity.
14.3 RESTRAINING ORDER. In the event that Landlord shall at any
time transfer or attempt to transfer the Project or any portion thereof or its
interest in the Lease in violation of the provisions of this Article XIV, then
Tenant shall, in addition to all rights and remedies hereunder and at law and in
equity, be entitled to a decree or order restraining and enjoining such transfer
and Landlord shall not plead in defense thereto that there would be an adequate
remedy at law; it being hereby expressly acknowledged and agreed that
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damages at law will be an inadequate remedy for a breach or a threatened breach
or violation of the provisions concerning transfers set forth in this Article
XIV.
14.4 EXCLUSION FROM RIGHT OF FIRST REFUSAL. Notwithstanding any
other provision of this Article XIV to the contrary, unless the use or operation
of the Project for its intended purpose would be materially adversely affected,
based upon a reasonable determination of such affect, the Landlord may sell,
transfer, assign, lease, convey, pledge or otherwise dispose of all or any
portion of the Land on which none of the Improvements or requisite parking are
located without complying with any of the other terms and provisions of this
Article XIV.
ARTICLE XV
GENERAL PROVISIONS
15.1 ESTOPPEL CERTIFICATE. Either party hereto (the "Certifying
Party") shall at any time, upon not less than ten (10) days after the giving of
written notice by the other party (the "Requesting Party"), execute, acknowledge
and deliver to the Requesting Party or to such person designated by the
Requesting Party, a statement in writing (i) certifying that this Lease is
unmodified and in full force and effect (or if modified, stating the nature of
such modification and certifying that this Lease, as so modified, is in full
force and effect) and the date to which the rent and other charges are paid in
advance, if any, (ii) acknowledging that there are not, to the Certifying
Party's knowledge, any uncured defaults on the part of the Requesting Party
hereunder, or specify such defaults if they are claimed, (iii) acknowledging
that there are no offsets, counterclaims or defenses to the obligations of the
Certifying Party under the Lease, and (iv) certifying as to any other matters as
may be reasonably requested by the Requesting Party. Any such statement may be
conclusively relied upon by any prospective purchaser or encumbrancer or Tenant
of any portion of the Project. If the Certifying Party does not execute,
acknowledge and deliver the statement referred to in this Section within time
set forth above, the information set forth therein shall be deemed true and
correct.
15.2 LANDLORD'S LIABILITY. The term "Landlord," as used in this
Lease, shall mean only the owner or owners at the time in question of the
Improvements, FF&E and the fee title to the Land. In the event of any transfer
of such title or interest, Landlord shall be released from all liability as
respects Landlord's obligations thereafter to be performed, provided that: (a)
Landlord's obligations are assumed by Landlord's transferee; and (b) any funds
held by Landlord at the time of such transfer in which Tenant has an interest,
shall be delivered to such transferee. Specifically, Landlord's delivery of the
Capital Expenditure Reserve Account, and the deposits contemplated in Sections
3.3 and 9.6 hereof to any purchaser of Landlord's interest in the Project, and
the acknowledgment by such purchaser of the receipt of such funds, shall
discharge Landlord from any liability
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to Tenant for the Capital Expenditure Reserve Account, and the deposits
contemplated in Sections 3.3 and 9.6 hereof.
15.3 SEVERABILITY. The invalidity of any provision of this Lease,
or of its application to any person or circumstance as determined by a court of
competent jurisdiction, shall in no way affect the validity of any other
provision hereof and each term, covenant, condition and provision of this Lease
shall be valid and be enforced to the fullest extent permitted by law.
15.4 CAPTIONS. Article and Section captions are not a part of
this Lease.
15.5 COMPLETE AGREEMENT. This Lease and the attached exhibits set
forth all the agreements, terms, covenants and conditions between Landlord and
Tenant concerning the Project and there are no agreements, terms, covenants or
conditions, oral or written, between them other than those herein contained. No
amendment, change or addition to this Lease shall be binding upon Landlord or
Tenant unless it is in writing and signed by each party.
15.6 TENANT'S REMEDIES. If Landlord shall fail to perform any
covenant, term or condition of this Lease required to be performed by Landlord,
if any, and if as a consequence of such default, Tenant shall recover a money
judgment against Landlord, such judgment shall be satisfied only out of the
proceeds of sale, and condemnation or insurance proceeds, received upon
execution of such judgment and levied thereon against the right, title and
interest of Landlord in the Project and out of Rents receivable by Landlord, or
out of the consideration received by Landlord from the sale or other disposition
of all or any part of Landlord's right, title and interest in the Project or
this Lease, and neither Landlord nor its officers, directors, shareholders and
lenders, nor their respective successors and assigns, shall be personally liable
for any deficiency, provided that in the event a deficiency exists after
application of the foregoing assets relating to the Project, Landlord shall be
personally liable for such deficiency to the extent of the amount of all
undisbursed sums in the Capital Expenditure Reserve Account, and the accounts
provided for in Sections 3.3 and 9.6 provided to and held by Landlord hereunder
and required to be returned to Landlord.
15.7 FRANCHISE OBLIGATIONS. Initially the Project will be operated
by Tenant or a Related Party under the Name. Thereafter Tenant may elect to
enter into a Franchise Agreement with a Related Party of AmeriHost Inns, Inc.,
and continue to operate under the Name or with another Franchisor, however, it
is expressly agreed that at all times during the term of this Lease the Project
will be operated under the Name or terms of a Franchise Agreement and all costs
of maintaining, renewing, assigning or obtaining any Franchise Agreement shall
be borne by Tenant. So long as the Franchise Agreement with a Related Party of
AmeriHost Inns, Inc. or with any other Franchisor contains industry standard
terms, including standard franchisee rights upon transfer of the Project and
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termination, Landlord's consent to such Franchise Agreement shall not be
unreasonably withheld or delayed.
15.8 NOTICES. All notices and demands hereunder shall be in
writing, and shall be deemed to have been properly given or served as of (a) the
date of personal delivery with acknowledgment of receipt; (b) three (3) business
days after the same is deposited in the United States mail, prepaid, for
delivery by registered or certified mail, return receipt requested; or (c) the
first business day after the date delivered to a reputable overnight courier
service providing proof of delivery. The initial addresses of Landlord and
Tenant are set forth below:
If to Landlord:
PMC Commercial Trust
Attention: Dept. 101
17290 Preston Road, Third Floor
Dallas, Texas 75252
With a copy to: Lance B. Rosemore, Chief Executive Officer
If to Tenant:
c/o Amerihost Properties, Inc.
2400 East Devon Avenue
Suite 280
Des Plaines, Illinois 60018
Attention: Mike Holtz, President
With a copy to:
McDermott Will & Emery
227 West Monroe Street
Suite 4400
Chicago, IL 60606-5096
Attention: Helen R. Friedli, Esq.
Tele: (312)984-7563
Fax: (312)984-3669
Such addresses may be changed at any time or from time to time or
additional notice parties added, by notice as above provided. If any mortgagee
of Landlord shall have advised Tenant by notice in the manner aforesaid that it
is the holder of a mortgage against the Project and stating in said notice its
address for the receipt of notices, then simultaneously with the giving of any
notice by Tenant to Landlord, Tenant shall serve one or more copies of such
notice upon such mortgagee in the manner aforesaid.
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15.9 WAIVERS. No waiver by Landlord of any provision of this Lease
shall be deemed a waiver of any other provision hereof or of any subsequent
breach by Tenant of the same or any other provision. Landlord's consent to or
approval of any act shall not be deemed to render unnecessary the obtaining of
Landlord's consent to or approval of any subsequent act by Tenant. No payment by
Tenant or receipt by Landlord of a lesser amount than the amount then due shall
be deemed to be other than on account of the earliest rent due, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment as payment be deemed an accord and satisfaction, and Landlord shall
accept such check or payment without prejudice to Landlord's right to recover
the balance of such payment or pursue any other remedy in this Lease provided.
15.10 RECORDING. Landlord agrees, upon Tenant's request, to
execute a short form of this Lease, entitled Memorandum of Lease, a copy of
which is annexed hereto as EXHIBIT B, and Tenant may record the Memorandum of
Lease at its expense following the date on which Landlord acquires fee simple
title to the Land. The provisions of this Lease shall control, however, in
regard to any omissions from the Memorandum of Lease, or with respect to any
provisions hereof which may be in conflict with the Memorandum of Lease.
15.11 HOLDING OVER. Tenant shall surrender the Project upon the
expiration of the Lease Term or earlier termination of the Lease. Any holdover
not consented to by Landlord in writing shall not result in a new tenancy or
interest and, in such case, Landlord may treat Tenant as a trespasser. If Tenant
remains in possession of the Project or any part thereof after the expiration of
the Lease Term or the earlier termination hereof without the express written
consent of Landlord, Tenant shall pay rent (for such holdover period) equal to
the amount of 150% of the amount of Base Rent payable by Tenant under Article 3
during the last month of the Term.
15.12 COVENANTS AND CONDITIONS. Each provision of this Lease
performable by Tenant and Landlord shall be deemed both a covenant and a
condition.
15.13 BINDING EFFECT. This Lease shall bind and inure to the
benefit of Landlord and Tenant and their respective permitted successors and
assigns.
15.14 SUBORDINATION AND ATTORNMENT.
(a) This Lease, at the option of Landlord or any of its lenders,
shall be subordinate to any ground lease, mortgage or any other hypothecation
for security and any renewals, future advances, modifications, consolidations,
replacements and extensions thereof, provided Tenant's rights hereunder continue
to be recognized and Tenant's possession of the Project is not disturbed so long
as no Event of Default has occurred and is continuing. Landlord agrees for
itself, its successors and assigns, promptly upon Tenant's request, to enter
into or cause to be entered into by its lender a nondisturbance agreement in
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such regard for the benefit of Tenant on terms reasonably satisfactory to Tenant
and Landlord.
(b) Provided Tenant's rights hereunder continue to be recognized
and its right of possession is not disturbed so long as no Event of Default has
occurred and is continuing, Tenant shall execute any documents required to
effectuate such subordination or to make this Lease prior to the lien of any
mortgage, ground lease or other security device, as the case may be, and failing
to do so within twenty (20) days after written demand, does hereby make,
constitute and irrevocably appoint Landlord as Tenant's attorney-in-fact and in
Tenant's name, place and stead, to do so and any out-of-pocket expenses incurred
by Tenant in connection therewith shall be paid by Landlord upon Tenant's
request.
(c) In the event of (a) a sale, assignment, ground lease, mortgage
or other transfer of Landlord's interest in the Project or any portion thereof
or in this Lease; or (b) any proceedings brought for the foreclosure of, the
granting of a deed in lieu of foreclosure of or the exercise of the power of
sale under any mortgage or security agreement made by Landlord covering the
Project or any portion thereof or this Lease, and provided that such mortgagee
or other transferee shall agree to recognize Tenant's rights hereunder and not
disturb Tenant's possession of the Project so long as an Event of Default has
not occurred and is continuing, Tenant shall attorn to the mortgagee or other
transferee and recognize such mortgagee or other transferee as Landlord under
this Lease.
15.15 NO JOINT VENTURE. Landlord and Tenant, by entering into this
Lease or consummating the transactions contemplated hereby, shall not be
considered partners or joint venturers.
15.16 QUIET ENJOYMENT. Provided Tenant pays the Rent herein
recited and performs all of Tenant's other covenants and agreements herein
contained, Landlord covenants that Tenant shall peacefully have, hold and enjoy
the Project, subject to all the other provisions herein contained.
15.17 EXPANSION OF PROJECT. Tenant acknowledges and agrees that
the Project may, from time to time and with Landlord's approval, be modified,
including expansion to include additional land, buildings and improvements. Upon
any such expansion, Base Rent payable hereunder and other affected obligations
shall be equitably adjusted. The term "Project," as used in this Lease, refers
to the Project and any such modification thereof.
15.18 COUNTERPARTS. This Lease may be executed in any number of
counterparts, each of which shall be an original and all of which together shall
constitute and be construed as one and the same instrument.
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15.19 BROKERS. In connection with this Lease, Landlord and Tenant
each warrant and represent that they know of no person who is or might be
entitled to a commission, finder's fee or other like payment in connection
herewith, and each party hereto does hereby indemnify and agree to hold the
other harmless from and against any and all loss, liability and expenses that
such other party may incur should such warranty and representation prove
incorrect.
15.20 TENANT'S RIGHT TO CURE. If Landlord breaches any covenant to
be performed by it under this Lease, Tenant, after notice to and demand upon
Landlord, without waiving or releasing any obligation hereunder, and in addition
to all other remedies available to Tenant, 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 Landlord. All sums so paid by Tenant and all costs and
expenses (including, without limitation, reasonable attorneys' fees) so
incurred, together with interest thereon at the Default Rate from the date on
which such sums or expenses are paid or incurred by Tenant, shall be paid by
Landlord to Tenant on demand. The rights of Tenant hereunder to cure and to
secure payment from Landlord in accordance with this Section 15.20 shall survive
the termination of this Lease with respect to the Project.
15.21 BREACH BY LANDLORD. It shall be a breach of this Lease if
Landlord 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 Tenant, 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 Landlord, within such 30-day period, proceeds
promptly and with due diligence to cure the failure and diligently completes the
curing thereof. The time within which Landlord shall be obligated to cure any
such failure also shall be subject to extension of time due to the occurrence of
any delays beyond the reasonable control of Landlord. If Landlord does not cure
any such failure within the applicable time period as aforesaid, Tenant may
declare the existence of a "Landlord Default" by a second notice to Landlord.
Thereafter, Tenant may forthwith cure the same and, subject to the provisions of
the following paragraph, invoice Landlord for costs and expenses (including
reasonable attorneys' fees and court costs) incurred by Tenant in curing the
same, together with interest thereon from the date Landlord receives Tenant's
invoice, at the Default Rate.
15.22 LANDLORD TO GRANT EASEMENTS, ETC. Landlord will, from time
to time, so long as no Event of Default has occurred and is continuing, at the
request of Tenant and at Tenant's cost and expense (but subject to the approval
of Landlord, which approval shall not be unreasonably withheld or delayed), (a)
grant easements and other rights in the nature of easements with respect to the
Project to third parties, (b) release existing easements or other rights in the
nature of easements which are for the benefit of the Project, (c) dedicate or
transfer unimproved portions of the Project for road, highway or other public
purposes, (d) execute petitions to have the Project annexed to any municipal
corporation or
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utility district, (e) execute amendments to any covenants and restrictions
affecting the Project, 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 Project), but
only upon delivery to Landlord 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 Tenant on the Project and does not
materially reduce the value of the Project.
15.23 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Lease is or
will be made and delivered in the State and shall be governed by and construed
and interpreted in accordance with the laws of the United States of America and
the State, without regard to principles of conflict of laws. All judicial
actions, suits or proceedings brought by or against Landlord or Tenant with
respect to its rights, obligations, liabilities or any other matter under or
arising out of or in connection with this Lease or any transaction contemplated
hereby or for recognition or enforcement of any judgment rendered in any such
proceedings shall be brought in any state or federal court in the State. By
execution and delivery of this Lease, Landlord and Tenant accept, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts and
irrevocably agree to be bound by any final judgment rendered thereby in
connection with this Lease or any transaction contemplated hereby from which no
appeal has been taken or is available. Tenant and Landlord each hereby
irrevocably waive any objections, including without limitation any objection to
the laying of venue or based on the grounds of forum non conveniens, which
either may now or hereafter have to the bringing of any such action or
proceeding in any such jurisdiction. Tenant and Landlord acknowledge that final
judgment against it in any action, suit or proceeding referred to in this
Section shall be conclusive and may be enforced in any other jurisdiction by
suit on the judgment, a certified or exemplified copy of which shall be
conclusive evidence of the same.
15.24 REIT COMPLIANCE. Tenant acknowledges that Landlord is or
intends to qualify as a real estate investment trust under the Tax Code. Tenant
agrees that it will not knowingly or intentionally take or omit any action, or
permit any status to exist at the Project, which Tenant knows would or could
result in Landlord being disqualified from treatment as a real estate investment
trust under the Tax Code as the provisions exist on the date hereof.
15.25 FINANCINGS. Notwithstanding any other provisions of this
agreement, to the extent that any trustee, rating agency or purchaser in
connection with a contemplated structured finance or securitization requires
amendment to the Lease for purposes of such structured finance or
securitization, Tenant will not unreasonably withhold approval of such
modification or amendment and any out-of-pocket expenses incurred by Tenant in
connection therewith shall be paid by Landlord upon Tenant's request.
15.26 LANDLORD'S RIGHT TO INSPECT. Tenant shall permit Landlord
and its authorized representatives as frequently as reasonably requested by
Landlord to inspect the Project and Tenant's accounts and records pertaining
thereto and make copies thereof, during
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usual business hours upon reasonable advance notice, subject only to any
business confidentiality requirements reasonably requested by Tenant.
15.27 "AS IS" LEASE. Notwithstanding anything to the contrary
herein contained, Tenant expressly understands, acknowledges and agrees that the
lease of the Project shall be made by Landlord to Tenant on an "as is, where is"
basis, and "with all faults," and Tenant acknowledges that Tenant has agreed to
lease the Project in its present condition and that Tenant is relying solely on
its own examination and inspections of the Project and not on any statements or
representations made by Landlord or any agents or representatives of Landlord.
Additionally, Tenant hereby acknowledges that, Landlord makes no warranty or
representation, express or implied, or arising by operation of law, including,
but in no way limited to, any warranty of condition, habitability,
merchantability, or fitness for a particular purpose of the Project or any
portion thereof. Landlord hereby specifically disclaims any warranty, guaranty
or representation, oral or written, past, present or future, of, as to, or
concerning: (a) the nature and condition of the Project or any part thereof,
including but not by way of limitation, as to its water, soil or geology, or the
suitability thereof, for any and all activities and uses which Tenant may elect
to conduct thereon, or any improvements Tenant may elect to construct thereon,
or any income to be derived therefrom or expenses to be incurred with respect
thereto, or any obligations or any other matter or thing relating to or
affecting the same; (b) the absence of any hazardous substances on, in or under
the Land or Improvements or on, in or under any land adjacent to or abutting the
Land; (c) the manner of construction or condition or state of repair or lack of
repair of the Improvements; (d) the nature or extent of any easement,
restrictive covenant, right-of-way, lease, possession, lien, encumbrance,
license, reservation, condition or other similar matter pertaining to the
Project or any portion thereof; and (e) the compliance of the Project or the
operation of the Project or portion thereof with any Legal Requirements.
15.28 THIRD PARTY BENEFICIARY. The provisions of this Lease are
solely for the benefit of, and may be enforced solely by, the parties hereto and
their respective successors and assign and none of the provisions of this Lease
are intended to, nor shall they be construed so as to create any rights in any
third parties not party to this Lease.
15.29 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 Project.
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IN WITNESS WHEREOF, Tenant and Landlord have executed this
instrument as of the date set forth above.
"LANDLORD"
PMC COMMERCIAL TRUST
a Texas real estate investment trust
By
-----------------------------------
Its
"TENANT"
AMERIHOST INNS, INC.
a Delaware corporation
By
-----------------------------------
Its
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EXHIBIT A
Legal Description of Land
114
EXHIBIT B
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE, made and entered into this ____ day
of _______, 1998, by and between PMC COMMERCIAL TRUST, a ___________ _________
having an office at 17290 Preston Road, Third Floor, Dallas, Texas 75252
("Landlord"), and AMERIHOST INNS, INC., a Delaware corporation, having an office
at 2400 East Devon Avenue, Des Plaines, Illinois 60018 ("Tenant").
W I T N E S S E T H :
1. Landlord, in consideration of the rents reserved and agreed to
be paid by Tenant, and of the covenants, agreements,
conditions and understandings to be performed and observed by
Tenant all as more fully set out in a lease (the "Lease"),
executed by Landlord and Tenant, and dated the ____ day of
__________, 1998, has let, leased and demised to Tenant
certain land described in Exhibit "A" attached hereto (the
"Land") together with the improvements thereon (collectively,
the "Premises") in the building located thereon.
2. The term of the Lease shall commence on the date hereof and
terminate on __________.
3. The Lease grants to Tenant a right of first refusal with
respect to a sale or other conveyance by Landlord of any
interest in the Premises or any portion thereof or of
Landlord's interest in the Lease, as more particularly set
forth in the Lease.
4. This Memorandum of Lease is subject to all of the terms,
conditions and understandings set forth in the Lease between
the Landlord and Tenant, which agreement is incorporated
herein by reference and made a part hereof, as though copied
verbatim herein. In the event of a conflict between the terms
and conditions of this Memorandum of Lease and the terms and
conditions of the Lease, the terms and conditions of the Lease
shall prevail.
115
IN WITNESS WHEREOF, the parties hereto caused this Memorandum
to be duly executed as of the day and year above written.
LANDLORD:
PMC COMMERCIAL TRUST
By:
------------------------------
Name:
Title:
TENANT:
AMERIHOST INNS, INC.
By:
------------------------------
Name:
Title:
[add acknowledgments]
1
EXHIBIT 10.1
MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT (this "Agreement" or this "Lease") is made
and entered into as of this 3rd day of June, 1998, by and between PMC Commercial
Trust (the "Lessor"), and Norfolk Hospitality Management Co. (the "Lessee") to
become operative and effective as of the Commencement Date, defined herein.
RECITALS
WHEREAS, Lessor has acquired, or as of the Commencement Date, will have
acquired, the sixty-two (62) hotels (the "Initial Hotels") listed on Exhibit A
attached hereto;
WHEREAS, effective on the Commencement Date, Lessor has leased the
Initial Hotels to Lessee and, hereafter, Lessor may from time to time lease
additional hotels to Lessee by mutual agreement; and
WHEREAS, The parties hereto desire to enter this Agreement to set forth
certain agreements relating to the matters set forth herein.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties and covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms have the meanings set
forth in this Section or in the Section indicated. Unless the context otherwise
requires, (a) all capitalized terms not otherwise defined herein shall have the
meanings set forth in the Participating Leases, (b) references to the singular
shall include the plural and vice versa, (c) references to gender shall include
all genders, (d) references to designated "Sections" or other subdivisions are
references to the designated Sections or other subdivisions of this Agreement,
(e) all accounting terms not otherwise defined herein shall have the meanings
assigned to them in accordance with GAAP and (f) the words "herein," "hereof,"
and "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular Section or other subdivision.
Additional Hotels: The hotels (if any) other than the Initial
Hotels that have been or, as of any pertinent date, are then currently
leased by the Lessor to the Lessee by mutual agreement of Lessor and
Lessee.
Agreement: The meaning set forth in the Preamble.
2
Base Rent Amount: Initially, the sum of Fourteen Million Four
Hundred Thousand Dollars ($14,400,000.00), as adjusted pursuant to the
terms of this Agreement allocated among the Hotels as set forth on Exhibit
C, as such Exhibit C shall be amended from time to time pursuant to the
terms hereof.
Commencement Date: The date of commencement of this Lease as stated
in Section 3.1 hereof.
Competitive Activity: The ownership or lease of any hotel within the
Competitive Area.
Competitive Area: The area lying within a twenty-five (25) mile
radius of any of the Initial Hotels or of any Additional Hotel.
FF&E: Furniture, fixtures and equipment used or usable in the
operation of the Hotels, including but not limited to room furniture,
exercise fixtures and equipment, office equipment, restaurant and bar
equipment, business center equipment, all operating systems (e.g. HVAC,
electrical, plumbing and Fixtures), beds, lamps, window and wall coverings
and attachments of all kinds, carpets, painting, laundry equipment, water
softeners, on site property management systems, material handling
equipment, cleaning and engineering equipment, on-site computer hardware
and software replacements and upgrades, on-site telephones and
communication equipment, on-site computerized accounting systems and
on-site vehicles.
FF&E Reserve: The reserve account to repair, as applicable,
refurbish, replace and improve FF&E and other items as provided in Section
6.1.
Fair Market Rental: The fair market rental of the Leased Property
means the rental which a willing tenant not compelled to rent would pay a
willing landlord not compelled to lease for the use and occupancy of such
Leased Property pursuant to the Participating 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 the
Participating Lease or in such other manner as shall be mutually
acceptable to Lessor and Lessee.
Form Participating Lease: The meaning set forth in Article II.
GAAP: Generally accepted accounting principles, consistently
applied.
Gross Revenues: All revenues, receipts and income of any kind
received by Lessee and derived directly from the operation of a Hotel
(including rentals or other payments from tenants, lessees, licensees or
concessionaires but not including their gross receipts), including,
without limitation, Room Revenues, Food and Beverage Revenues and Sundry
Revenues, whether on a cash basis or credit, paid and collected,
determined in accordance with GAAP, excluding or deleting, however: (a)
funds furnished by Lessor or by Lessee, (b) federal, state and municipal
excise, sales, use or other taxes collected directly from
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patrons and guests or as a part of the sales price of any goods, services
or displays, such as gross receipts, admissions, cabaret or similar or
equivalent taxes and paid over to federal, state or municipal governments,
(c) the amount of all credits, rebates or refunds to customers, guests or
patrons, and all service charges, finance charges, interest and discounts
attributable to charge accounts and credit cards, to the extent the same
are paid to Lessee by its customers, guests or patrons, or to the extent
the same are paid for by Lessee to, or charged to Lessee by, credit card
companies, (d) gratuities or service charges actually paid to employees,
(e) proceeds of insurance and condemnation, (f) proceeds from sales other
than sales in the ordinary course of business, (g) all loan proceeds from
financing or refinancings of Hotel any or interests therein or components
thereof, (h) judgments and awards, except any portion thereof arising from
normal business operations of any Hotel, (i) items constituting
"allowances" under the Uniform System, (j) all write-offs for failure of
collection, except if any such written-off receivable is ultimately
collected it shall be added back to Gross Revenues to the extent so
collected (less all costs, fees and expenses of collection), and (k) all
fees and amounts paid to or on behalf of Lessee or its Affiliate by
Lessor.
Hotels: As of any pertinent date or for any pertinent period, those
Initial Hotels and those Additional Hotels, if any, which are then
currently leased by the Lessor to the Lessee and included in this Master
Lease.
Initial Hotels: The meaning set forth in the Recitals hereof.
Initial Participating Lease(s): Those Participating Leases covering
the Initial Hotels entered into between the Lessor and the Lessee as of
the date hereof.
Lease Term: The original five (5) year term of this Lease described
in Article III, together with all extensions, automatic or otherwise, and
renewals thereof.
Lease Quarter: Any one of the four consecutive three month periods,
commencing with the Commencement Date, during any Lease Year.
Lease Year: The twelve (12) month period beginning with the
Commencement Date and ending on the day of the month immediately preceding
the day of the month of the Commencement Date one (1) year from the
Commencement Date and each 12-month period thereafter.
Lessee: The meaning set forth in the Preamble.
Lessor: The meaning set forth in the Preamble hereof.
Operating Inventory: The Operating Inventory is defined in Section
6.4 hereof.
Opportunity Period: The meaning set forth in Section 7.1.
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Overdue Rate: A rate of interest equal to the Prime Rate as
published in The Wall Street Journal, Midwest Edition (or the lower of any
two or more of such rates), plus five percent (5%) per annum.
Participating Lease: The meaning set forth in Article II.
Personalty: All FF&E, except for operating systems (e.g. HVAC,
electrical, plumbing and Fixtures) or improvements which cannot be removed
from a Leased Property without material damage to such Leased Property.
Personalty Reserve: Funds available for the purchase of Personalty,
which funds shall be provided by, and under the control of, Lessee through
the payment by Lessee of $50,000 per month (which payment shall be due and
payable on the same date as the Base Rent payments set forth in Section
4.1 hereof) during the term of this Agreement into an account established
by Lessee.
Rent: The total aggregate amount of (a) the Base Rent and (b) the
Percentage Rent paid by the Lessee to the Lessor in accord herewith for
the applicable Lease Year.
Reserves: Collectively, the FF&E Reserve and the Personalty Reserve.
Right of First Opportunity to Lease: The meaning set forth in
Section 7.1.
Termination Value: The meaning set forth in Section 12.2.
ARTICLE II
LEASING OF HOTELS
Section 2.1 Initial Hotels. Lessor and Lessee hereby agree that on or
prior to the Commencement Date they will enter into an individual lease in the
form attached hereto as Exhibit B (the "Form Participating Lease") for each of
the Initial Hotels at the Base Rents specified on Exhibit C attached hereto.
Section 2.2 Additional Hotels. Lessor and Lessee may also from time to
time agree to the lease of Additional Hotels to Lessee. The lease of Additional
Hotels shall be by mutual agreement of Lessor and Lessee upon such terms and
conditions as are agreed upon at the time of the lease. Additional Hotels shall
be leased outside of this Agreement unless the parties agree specifically in
writing to include the respective Additional Hotel under this Agreement. Leases
of the Initial Hotels and of any Additional Hotels which are included within
this Agreement are hereinafter referred to as "Participating Leases."
Section 2.3 Transfer of Hotel. Lessor shall have the right to sell or
otherwise transfer any Hotel, subject to the terms of the applicable
Participating Lease. In the event of the transfer of a Hotel pursuant to the
terms of the applicable Participating Lease, except if such transfer is made
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following the termination of such Participating Lease by Lessor as a result of
an Event of Default by Lessee thereunder or such transfer is made by Lessor in
connection with a structured finance transaction, the Rent shall be adjusted as
provided in Section 2.4. If Lessor transfers any Hotel, other than in connection
with a structured finance transaction, to a Person with a net worth less than
$50,000,000.00, Lessor shall cause such acquiror, pursuant to the terms of the
contract of sale, to fund into escrow for the benefit of Lessee, and to be used
in accordance with the terms of the applicable Participating Lease, an amount
equal to the Allocable Portion of the Reserves (as defined below) for the
Transfer Year (as defined below) plus an amount equal to five percent (5%), of
the greater of (a) the Gross Revenues of such Hotel for the Lease Year preceding
the Transfer Year, or (b) the annualized gross revenues of such Hotel for the
Transfer Year, multiplied by the number of Lease Years (not including the
Transfer Year) remaining in the term of the Participating Lease, less any
amounts paid or payable by Lessee into the Personalty Reserve with respect to
such Hotel. "Allocable Portion of the Reserves" means the difference between
dollar amount set forth in the Annual Budget for such Hotel for the Transfer
Year to be paid out of or reimbursed from, as applicable, the Reserves, plus
$15,000.00, less any amounts already spent or reimbursed with respect to such
Hotel from the Reserves for the Transfer Year. In the event of a forced or
involuntary transfer or termination of a Hotel by condemnation, casualty loss,
or otherwise, the Rent shall be adjusted as provided in Section 2.4. If
additional hotels become subject to the terms of this Agreement, the Rent shall
be adjusted to equitably reflect the increase in the number of hotels.
Section 2.4 Adjustment of Rent.
(a) By mutual agreement, Lessor and Lessee shall adjust the Base
Rent allocated to each Hotel (as then set forth on Exhibit C hereto) at
the commencement of each Lease Year, commencing on the first anniversary
of the Commencement Date, which adjustment shall be based upon market
factors affecting, and the financial performances of, the Hotels,
including, without limitation, gross revenues, gross operating profits,
occupancy rates and room rates, and which amount shall be reflected by an
amendment to Exhibit C hereto. If Lessor and Lessee cannot agree as to
such adjustment by the 20th day following such anniversary date, the
parties hereby agree to submit such adjustment to arbitration in
accordance with Article XXXVIII of the Form Participating Lease. Upon the
transfer by Lessor of a Hotel as provided herein, other than in connection
with a structured finance transaction, the Base Rent payable by Lessee
pursuant to this Agreement will be reduced for all Lease Years following
the Lease Year in which such transfer took place (the "Transfer Year") by
the amount of Base Rent allocated to such Hotel (the "Allocable Amount")
and the Base Rent payable for the remainder of the Transfer Year shall be
reduced by an amount equal to the product of the Allocable Amount
multiplied by the quotient of the number of full months (not including the
month in which such transfer occurred) remaining in the Transfer Year
divided by 12.
(b) (i) If a Hotel is transferred by Lessor pursuant to the terms of
this Agreement, other than in connection with a structured finance
transaction, the Percentage Rent thresholds shall be reduced in the same
proportion as the Gross Revenues of the transferred Hotel bear to the
Gross Revenues of all Hotels (including the transferred Hotel) under this
Agreement. Gross Revenues for purposes of this Section 2.4(b) shall be
equal to
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(A) the average of the Gross Revenues for all Hotels under this Agreement
for the two Lease Years immediately preceding the Transfer Year, or (B) if
two Lease Years shall not have elapsed, the average of such Gross Revenues
for the preceding Lease Year and the annualized Gross Revenues for the
Transfer Year, or (C) if one Lease Year has not elapsed, the annualized
Gross Revenues for the Transfer Year.
(ii) If, during the term of this Agreement, any of the Hotels is
totally or partially destroyed by a risk covered by the insurance
described in the applicable Participating Lease, and Lessor decides to
restore the Hotel pursuant to the terms of such Participating Lease and,
further, as a result of such total or partial destruction of such Hotel,
Lessee files, and receives payment on, a claim with its insurance carrier
under Lessee's business interruption insurance policy with respect to such
total or partial destruction of such Hotel, then the Percentage Rent
thresholds shall be reduced as provided in Section 2.4(b)(i) hereof,
provided that such reduction shall only be in effect for a period
commencing on the date the event, for which insurance proceeds are
received under Lessee's business interruption insurance policy, occurred
and the date restoration of the Hotel is completed pursuant to the terms
of the applicable Participating Lease (the "Restoration Date"). From and
after the Restoration Date, the Percentage Rent thresholds shall revert
back to the applicable amounts for the Lease Year in question, based on
the number of Hotels owned by Lessor as of the Restoration Date. Increases
and decreases, as applicable, in the amount of Percentage Rent payable by
Lessee as a result of such initial reduction in the Percentage Rent
thresholds and the subsequent increase of such thresholds, shall be
calculated as of the end of each Lease Year.
ARTICLE III
LEASE TERM
Section 3.1 Term. The term of this Lease shall commence on the effective
date of the merging of Supertel Hospitality, Inc. with Lessor (the "Commencement
Date") and shall end on the day before the fifth anniversary of the Commencement
Date, unless sooner terminated or extended in accordance with the provisions
hereof.
Section 3.2 Extension Option. Provided that Lessee is not then in default
under the terms of this Lease, Lessee shall have the option, in its sole
discretion, to extend this Lease for one (1) successive term of two (2) years
(the "Option Period") upon the same terms and conditions contained herein and in
the Participating Leases, except for the payment of Base Rent which total amount
shall increase (subject to adjustments from condemnation, casualty, sale, or
otherwise provided herein and in the Participating Leases) from Fourteen Million
Four Hundred Thousand Dollars ($14,400,000.00) to Fifteen Million Dollars
($15,000,000.00) for each of the two (2) years in the Option Period. Upon
exercise of the option, the renewal term shall commence at midnight on the last
day of the original five (5) year term of this Lease. Notice of the exercise of
the option to extend shall be given in writing to Lessor not less than one (1)
year prior to the end of the original five (5) year term of this Lease.
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Section 3.3 Automatic Lease Term Extensions. After the original five (5)
year term of this Lease and after the Option Period, if any, the term of this
Lease shall be automatically extended for an additional two (2) year term,
unless either Lessee or Lessor gives notice in writing to the other at least
eleven (11) months prior to the end of the then current term that it elects not
to allow the automatic extension of the term of this Lease, in which case this
Lease shall terminate at the end of the then current term. In the event this
Lease is extended for an additional two (2) year term, then this Lease shall be
further automatically extended on a continuing basis beyond the then current
term of this Lease by additional successive two (2) year periods unless either
Lessee or Lessor gives written notice to the other at least one (1) year before
the end of the then current term that it elects not to allow the automatic
extension to occur beyond the then current term. It is the intent of the parties
that each will have a minimum of one (1) year notice prior to the end of the
term of this Lease. This shall not preclude the parties from renegotiating this
Lease from time to time.
ARTICLE IV
RENT
So long as this Lease remains in force and effect with respect to all of
the Initial Hotels, Lessee promises to pay to Lessor, in lawful money of the
United States of America, in immediately available funds, rents, in the manner,
at the time, and in the amounts specified below:
Section 4.1 Base Rent. The base rent (the "Base Rent") payable during the
term of this Lease shall initially be Fourteen Million Four Hundred Thousand
Dollars ($14,400,000.00)
Base Rent
Month Amount
--------- -----------
January $ 950,000
February $ 950,000
March $ 1,150,000
April $ 1,350,000
May $ 1,300,000
June $ 1,350,000
July $ 1,450,000
August $ 1,350,000
September $ 1,325,000
October $ 1,325,000
November $ 950,000
December $ 950,000
TOTAL LEASE YEAR
BASE RENT $14,400,000
If the Base Rent is adjusted pursuant to the terms of this Agreement
in the event of a voluntary or involuntary transfer of a Hotel or as
provided in Article III hereof, the new
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amount of annual Base Rent shall be allocated to each month in the same
proportion as provided above. Base Rent shall be payable in monthly
installments in arrears due and payable on the first business day of the
month immediately following the month for which such rent accrues, with
the first installment of Base Rent due and payable on the first business
day of the month following the month in which the Commencement Date
occurs, and a monthly installment to be due and payable on the first day
of each and every month thereafter as long as this Lease remains in
effect. Base Rent for any period during the term of this Lease which is
less than one (1) month shall be a pro-rata portion of the applicable
monthly installment.
Section 4.2 Percentage Rent.
(a) Subject to adjustment as provided herein, the term "Percentage
Rent," as used herein, for any Lease Year shall initially mean the amount
determined by multiplying (i) the amount, if any, by which the Gross
Revenue from the Initial Hotels exceeds Forty-Two Million Dollars
($42,000,000.00) for such Lease Year but is less than Fifty Million
Dollars ($50,000,000.00) for such Lease Year (ii) by twenty percent (20%)
and adding thereto an amount determined by multiplying (iii) the amount,
if any, by which Gross Revenue for the Initial Hotels exceeds Fifty
Million Dollars ($50,000,000.00) for the Lease Year (iv) by 25%.
(b) Percentage Rent shall be paid by Lessee on a quarterly basis for
each quarter of the Lease Year. Percentage Rent shall be payable in
arrears on the first day of second Lease Quarter following the end of each
Lease Quarter. The first such payment of Percentage Rent shall be due on
the first day of the second Lease Quarter following the Lease Quarter in
which the Commencement Date occurs. In the first Lease Year, Percentage
Rent shall be paid over the first three (3) Lease Quarters of the Lease
Year on the assumption that Gross Revenue is accruing at the rate of
Forty-Eight Million Dollars ($48,000,000.00) evenly over the Lease Year.
Each Lease Quarter, Lessee shall pay one-fourth (1/4th) of such assumed
Percentage Rent amount. At the end of the fourth quarter, the amount of
Percentage Rent due for the Lease Year shall be calculated and (i) in the
event that an amount is still due to Lessor, then Lessee shall pay such
amount on or before the first day of the second Lease Quarter immediately
after the end of the Lease Year and (ii) in the event that Lessee has
overpaid the Percentage Rent and an amount is due to Lessee from Lessor,
then Lessor shall pay such amount to Lessee on or before the tenth (10th)
day after receipt of the Officer's Certificate provided pursuant to
Section 4.2(c). The same procedure shall be followed for each subsequent
Lease Year except that Gross Revenues for each subsequent year shall be
assumed for the first three (3) Lease Quarters to be equal to ninety-five
percent (95%) of the Gross Revenues for the immediately prior Lease Year.
(c) On or before first day of the second Lease Quarter immediately
after the end of Lease Year, Lessee shall deliver to Lessor an Officer's
Certificate reasonably acceptable to Lessor setting forth the computation
of the actual Percentage Rent that accrued for the Lease Year that ended
on the immediately preceding Lease Year. If the annual Percentage Rent due
and payable for the Lease Year (as shown in the applicable Officer's
Certificate) exceeds the amount actually paid as Percentage Rent by Lessee
for such year, Lessee also
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shall pay such excess to Lessor at the time such certificate is delivered.
If the Percentage Rent actually due and payable for such Lease Year is
shown by such certificate to be less than the amount actually paid as
Percentage Rent for the applicable Lease Year, Lessor shall pay to Lessee,
within ten (10) days of receipt of such certificate the amount by which
Lessee overpaid the Percentage Rent failing which the amount to be
reimbursed shall bear interest at a rate per annum equal to the Overdue
Rate from the end of such 10-day period until date of payment.
The obligation to pay or to reimburse Percentage Rent shall survive
the expiration or earlier termination of the Lease Term for a period of
one (1) year. A final reconciliation, taking into account, among other
relevant adjustments, any adjustments which are accrued after such
expiration or termination date but which related to Percentage Rent
accrued prior to such termination date, and Lessee's good faith best
estimate of the amount of any unresolved contractual allowances, shall be
made not later than one year 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 an legal effect whatsoever.
Section 4.3 Payment of Rent. Lessee shall not be in default with respect
to any payment of Rent if such Rent payment is received by Lessor on or before
the tenth (10) calendar day of the month in which such Rent was due, provided
that if any Rent payment is not paid on or before the third business day after
such Rent payment was due, Lessee shall pay to Lessor a late fee on such Rent
payment in an amount equal to 1-1/2% of such Rent due.
Section 4.4 Payment on Business Days. Any Rent that falls due on a
Saturday or Sunday or a bank holiday in either Dallas, Texas or Norfolk,
Nebraska shall be deemed due on the next succeeding business day. Payment of
Rent shall be made by wire transfer unless otherwise agreed by the parties.
Section 4.5 O'Neill Addition. Lessor and Lessee acknowledge that one of
the Initial Hotels which is located in O'Neill, Nebraska, may be expanded during
the period from the negotiation and/or the execution of this Lease to the
Commencement Date. In the event of the completion of the expansion prior to the
Commencement Date, the Base Rent for the Hotel shall be increased by and Lessee
shall pay this additional yearly Base Rent which shall be determined by
multiplying 0.115 times the cost of construction of the Hotel expansion. This
additional yearly Base Rent shall be paid on a monthly basis in the same
proportion each month as the original yearly Base Rent to be paid.
Section 4.6 Additional Payments. During the term of this Lease, if Lessee
takes, or fails to take, any action hereunder or under any of the Participating
Leases which causes the debt payable to Hotel Franchising Limited Partnership,
as described on Schedule 4.6 hereto (the "Wingate Debt") to become due and
payable, Lessee shall be assigned and be required to pay the Wingate Debt in
accordance with the terms thereof, unless such action or failure to act was
caused by the negligence
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or willful misconduct of Lessor or is otherwise the obligation of Lessor
hereunder or under the Participating Lease, which obligation shall survive
any termination of this Agreement.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND ADDITIONAL COVENANTS
Lessor and Lessee hereby represent, warrant and agree with each other as
follows, each of which representations and warranties to become effective only
as of the Commencement Date.
Section 5.1 Authority; Compliance with Law. Except as provided in Section
5.2, Lessor will use its best efforts to obtain, at its sole expense, and
thereafter Lessee will use its best efforts to maintain, all licenses, permits,
contract rights, and other authorizations and to have taken all actions required
by applicable law, governmental regulations or otherwise in connection with
leasing and operating the Hotels and as otherwise required in connection with
the operation of its business. Lessor and Lessee each represent to the other
that it is not in violation of any order of any court, governmental authority or
arbitration board or tribunal, or any law, ordinance, governmental rule or
regulation to which it, or any other of its properties or assets are subject.
Section 5.2 Provision of Franchise Rights. Lessor has obtained and will
provide by full and proper assignment or other transfer to Lessee the franchise
rights for each of the Initial Hotels and all Additional Hotels sufficient to
enable the operation of each of the Hotels under the relevant franchise for the
Lease Term. Lessor shall be responsible for all transfer fees and the like for
all Initial Hotels and all Additional Hotels and Lessee shall be responsible for
the payment of the periodic franchise fees. At the termination of the Lease
Term, Lessee agrees to transfer the franchise rights to Lessor, or at Lessor's
option, to any third party. Lessor and Lessee acknowledge, however, that the
Hotel in Bullhead City, Nevada does not operate under a franchise.
Section 5.3 Representations of Lessor. Lessor represents that Lessor has
good marketable title to each of the Initial Hotels and has the full right and
authority to enter into this Lease and each of the Participating Leases. There
are no outstanding leases with respect to any of the Initial Hotels other than
the Participating Leases. Each of the Initial Hotels is able to be operated
after the execution of this Lease in a manner consistent with the manner in
which it is being operated immediately prior to the execution of this Lease
without extraordinary expenditures, which, if incurred, will be the
responsibility of Lessor, including but not limited to, requirements to meet the
Americans with Disability Act Standards and zoning or building standards. None
of the Initial Hotels has suffered any casualty loss which is not fully covered
by insurance both for the purpose of covering all Rent during replacement and
for the purpose of covering full and complete replacement of all loss nor are
any of the Initial Hotels being condemned or being threatened with condemnation.
Section 5.4 Maintenance of Franchise Agreement. Except as otherwise agreed
to in writing by the Lessor, the Lessee shall take all steps necessary,
including the payment of any renewal fees and ongoing expenses associated
therewith, including the periodic franchise fees, to maintain
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all franchise agreements relating to the operation of the Hotels. In addition,
except as otherwise agreed to in writing by the Lessor, the Lessee shall use its
best efforts to maintain the franchise rating at each Hotel with respect to
improvement standards (as established by the franchisor pursuant to the
applicable Franchise Agreement) at a level at least equal to the rating in
existence on the date hereof, provided, however, that the cost of improvements
to meet new or ongoing improvement standards shall be paid by Lessor. Upon the
termination of the Lease, Lessor agrees to pay to Lessee or credit against any
Rent then due, the unused portion of all renewal fees for franchises for which
Lessee has paid the renewal fees. The unused portion of each renewal fee shall
be determined by amortizing the renewal fee on a straightline basis over the
life of the franchise renewal period. Any change from the franchise under which
the Hotel operates to a new franchise shall be by mutual agreement of the
parties. Upon a change in the franchise under which a Hotel operates, capital
costs associated with the change including, but not limited to sign changes and
improvement standard upgrades, shall be paid from the Reserves.
Section 5.5 Financial Statements. Within 45 days after the end of each of
the first three Lease Quarters of each Lease Year, Lessee shall deliver to the
Lessor a copy of its internally prepared quarterly financial statements. Within
120 days after the end of each Lease Year beginning with the Lease Year ending
in the first anniversary of the Commencement Date, Lessee shall deliver to
Lessor a copy of its annual audited financial statements which have been audited
by a nationally recognized firm of independent public accountants. For purposes
of this Section 5.5, such financial statements shall include a balance sheet,
income statement, statement of retained earnings, statement of stockholder's
equity, statement of cash flows and all related notes and schedules and shall be
in comparative form.
ARTICLE VI
RESERVES / OPERATING INVENTORY
Section 6.1 Reserves.
(a) Throughout the Lease Term, Lessor shall establish and maintain a
reserve account (the "FF&E Reserve") for the replacement, improvement,
enhancement and refurbishment of the Leased Property and FF&E used in
conjunction therewith, excluding Personalty to the extent acquired with
funds from the Personalty Reserve as provided below. Each Lease Year,
Lessor shall set aside into the FF&E Reserve an amount equal to five
percent (5%) of the Gross Revenues for the Hotels for such Lease Year
under this Lease, less $600,000, which amount shall accumulate from year
to year. The FF&E Reserve shall be used to refurbish, replace, enhance and
improve from time to time as necessary or desirable under the
circumstances the FF&E, excluding Personalty. The FF&E Reserve may also be
used to the extent available to replace, enhance and improve or perform
any capitalized repair to the structural and roof elements of the Hotels
and the exterior of the Hotel (including but not limited to parking lot,
lawn and landscaping elements).
(b) Lessee shall pay into the Personalty Reserve account $50,000 per
month for each month during the term of this Lease on the same date as the
Base Rent payments.
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Lessee shall also provide to Lessor written evidence of such payment. Upon
written request of Lessor, Lessee shall provide information on the
Personalty Reserve status and usage. The funds in the Personalty Reserve
shall be used by Lessee to repair and replace Personalty. If the funds in
the Personalty Reserve for any Lease Year are insufficient to pay for all
Personalty acquired during such Lease Year, Lessee shall be entitled to
reimbursement for such excess expenditures from the FF&E Reserve in
accordance with the terms and conditions of Section 6.3 hereof. Upon
expiration or termination of this Agreement, any amounts which remain in
the Personalty Reserve shall be expended by Lessee for FF&E, as directed
by Lessor. Any amounts which remain in the Personalty Reserve after any
such expenditures shall be the property of Lessor.
Section 6.2 Use of Reserves. Lessee is authorized to commit and to spend,
and thereafter, if applicable, be reimbursed from, the Reserves for all (a)
items and matters contained in the budget submitted by Lessee and approved by
Lessor pursuant to the Participating Lease; (b) reasonable expenditures in
emergency situations at any hotel when necessary, in the Lessee's opinion, to
maintain the hotel property and to provide for its continued operation and for
the safety and welfare of the hotel guests; and (c) up to Fifteen Thousand
Dollars ($15,000.00) per Hotel for replacement and improvements on a routine
basis. In any case, however, Lessee shall provide invoices and, when requested
by Lessor, explanation of the circumstances and need for non-budgeted
expenditures from the Reserves. Lessee shall, except as provided in (a), (b) and
(c) above, obtain the prior written approval of Lessor for all expenditures in
any Lease Year for which Lessee is entitled to seek reimbursement from Lessor
pursuant to the terms of this Agreement which exceed the amount in the Reserves
for that Lease Year. Any amount of the Reserves not actually expended in any
Lease Year shall accumulate in the respective Reserve for use in succeeding
Lease Years.
Section 6.3 FF&E Reimbursements. To the extent set forth in the Annual
Budget, within the $15,000 per hotel limit or the result of an emergency
situation, Lessor shall reimburse Lessee the expenditures payable from the FF&E
Reserve within ten (10) days of the receipt from Lessee of written
documentation, including invoices and/or purchase orders, setting forth the
amount due. If Lessor's prior approval of such expenditures is required,
following receipt of such approval, Lessee shall send to Lessor the invoices or
purchase orders, as applicable, with respect to such expenditures and Lessor
shall reimburse Lessee or pay the vendor directly. If Lessor fails to reimburse
Lessee for amounts to be reimbursed pursuant to the provisions of the first
sentence of this Section 6.3, the amount to be reimbursed shall bear interest at
a rate per annum equal to the Overdue Rate from date of receipt of the requisite
documentation until date of payment. Lessee shall provide additional reasonable
detail of the amount due and the goods and services provided when requested by
Lessor.
Section 6.4 Operating Inventory. On the Commencement Date, all Operating
Inventory shall be transferred from Lessor to Lessee so that it accompanies the
Leased Property. During the term of this Lease, Lessee, at its sole cost and
expense, shall furnish and maintain at the Leased Property all Operating
Inventory necessary or desirable for the operation of the Leased Property in
accordance with the provisions of this Lease. Lessee, at its sole cost and
expense, shall maintain and replace the Operating Inventory so that
substantially the same quantities of such items that existed on the Commencement
Date shall be available to Lessor on the termination of this Lease. As
additional Rent, upon the termination of this Lease, (a) the Operating Inventory
and (b) any
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Personalty acquired by use of funds from the Personalty Reserve shall be
transferred from Lessee to Lessor so that it accompanies the Leased Property
shall be transferred from Lessee to Lessor so that it accompanies the Leased
Property. The term "Operating Inventory," as used herein, shall mean all food,
beverages (alcoholic and non-alcoholic) and other consumable items used in the
operation of the Hotel such as linens and terry, blankets and spreads, fuel,
engineering, maintenance and housekeeping supplies, soap, cleaning materials,
matches, stationery and printing, brochures, literature, folios and all other
similar items, together with all substitutions and replacements thereto.
Section 6.5 Construction Profit. Lessor authorizes a construction profit
to Lessee, or an affiliate of Lessee, in the amount of seven and one-half
percent (7.5%) of all costs, including, but not limited to, in-house costs
directly related to the construction project, for the construction of a new
hotel, for any additions or improvements to an existing Hotel, or for the
repair, maintenance or renovation of any existing Hotel that Lessee's
construction division or Lessee's construction affiliate oversees or manages.
The parties may, by mutual agreement, agree to a different construction
management fee.
ARTICLE VII
RIGHT OF FIRST OPPORTUNITY TO LEASE
Section 7.1 Hotel Acquisitions. Except as provided in Section 7.6, Lessee
shall have the right of first opportunity ("Right of First Opportunity to
Lease") to lease from Lessor any hotel acquired by Lessor within a Competitive
Area during the Lease Term (the "Opportunity Period") if, and only if, Lessor is
not contractually obligated to retain existing management at any such acquired
hotel.
Section 7.2 Notice. In the event that Lessor proposes to acquire ownership
of any hotel within a Competitive Area during the Opportunity Period, Lessor
shall promptly notify Lessee in writing. If Lessee is to be granted a Right of
First Opportunity with respect to such hotel, (a) the notice shall specify the
material economic terms upon which Lessor would be willing to lease such hotel
to Lessee and (b) Lessor shall provide Lessee with certain due diligence rights
with respect to such hotel as set forth in Section 7.3.
Section 7.3 Due Diligence. Lessor shall arrange for Lessee and its
consultants, at Lessee's sole cost and expense, to have the right, opportunity
and access to conduct physical, financial and legal reviews of the hotel
proposed to be acquired by Lessor, in the manner, to the extent and during the
periods, that Lessor has the right, opportunity and access to do so (whether
pursuant to a purchase agreement or otherwise), with the objective of according
Lessee the same right, opportunity and access to conduct its due diligence with
respect to such hotel as is available to Lessor (as may exist before and during
the term of any related purchase agreement). As a condition to availing itself
of such right, upon request by Lessor, Lessee will agree, in an appropriate
writing or writings, (a) to be bound by such confidentiality agreements
regarding such hotel as to which Lessor shall agree to be bound, (b) to
indemnify the owner of such hotel, Lessor and such other parties as reasonably
are appropriate, against damage to property or injuries to persons occurring as
the result of a negligent or willful act or omission of Lessee's employees,
agents or consultants while conducting
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diligence activities at such hotel (to the same extent as Lessor indemnifies the
owner of such hotel and/or other reasonably appropriate parties), and(c) to
agree to be bound by such other agreements, conditions and limitations regarding
such hotel as Lessor is bound as a condition of it conducting due diligence on
such hotel. Each of Lessor and Lessee agrees, from time to time upon the request
of the other, to deliver or make available (without warranty) to the other,
copies of all due diligence materials regarding such hotel received from third
parties.
Section 7.4 Exercise of Right of First Opportunity. If a Right of First
Opportunity is granted to Lessee with respect to any such hotel within a
Competitive Area to be acquired by Lessor, Lessee shall have a period of
twenty-one (21) days from the date of written notice thereof in which to elect
to lease such hotel from Lessor in substantial conformity with the material
terms and conditions specified in the notice. Lessee may elect to exercise a
Right of First Opportunity only by delivering a written notice of its election
to do so to Lessor within such twenty-one (21) day period. In the event that
Lessee exercises a Right of First Opportunity, Lessor shall lease such hotel to
Lessee as soon thereafter as is practical pursuant to a Participating Lease on
the Form Participating Lease and in substantial conformity with the material
terms and conditions specified in the notice of Right of First Opportunity which
are not materially inconsistent with the Form Participating Lease.
Section 7.5 Failure to Exercise Right of First Opportunity. If Lessee
elects not to exercise a Right of First Opportunity or fails to make an election
within the twenty-one (21) day period following notice of a Right of First
Opportunity, Lessor shall be free to lease such hotel to any third party on
terms and conditions that are not in the aggregate economically less favorable
to Lessor than those offered to Lessee in the related notice of Right of First
Opportunity and only in the form of the Form Participating Lease.
Section 7.6 When Lessee is the Procuring Cause. In the event that Lessee
is the procuring cause of the acquisition of any hotel by Lessor, Lessee shall
have the exclusive right to lease such hotel from Lessor and Lessor shall, at
the option of Lessee, lease such hotel to Lessee on economic terms to be
mutually agreed to between Lessor and Lessee pursuant to the general format of
Form Participating Lease. If the parties are unable to agree on the lease terms,
an independent third party agreeable to both Lessee and Lessor shall establish
the Fair Market Rental. If Lessee, upon receipt of the terms established by the
independent third party, chooses not to lease the hotel at the Fair Market
Rental established, Lessor may rent to any third party but only at a rental rate
at least equal to the Fair Market Rental established and only according to the
terms of the Form Participating Lease. If Lessor is unable to do so within
forty-five (45) days, Lessee's right to lease contained herein shall be
re-established.
Section 7.7 Remedies. If Lessor breaches this Article VII, Lessee shall
have all remedies available at law or in equity. Notwithstanding the foregoing,
Lessee shall be deemed to have waived its right to pursue any of its rights and
remedies with respect to Lessor's failure to comply with Section 7.2 with
respect to any individual hotel acquired by Lessor, if it does not notify Lessor
of its claim with reasonable specificity and in writing within one hundred
eighty (180) days of receiving the notice specified in Section 7.2.
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ARTICLE VIII
HOTEL ACQUISITIONS
Section 8.1 Hotel Acquisition. In the event that Lessee locates an
existing hotel to acquire within a Competitive Area, Lessee shall first offer
the acquisition of the Hotel to Lessor on terms and conditions which are
acceptable to Lessee. Lessor shall have twenty-one (21) days within which to
decide whether to acquire the Hotel on such terms and conditions. (In the
alternative, Lessee may execute a contract for purchase of a hotel within that
Competitive Area which is assignable to Lessor if Lessor, within the twenty-one
(21) day period, decides to acquire the hotel in which case Lessor shall
reimburse Lessee for its direct costs and expenses related to the contract.) In
the event Lessor determines not to acquire the hotel, Lessee may acquire the
Hotel on the same terms and conditions as offered to Lessor. In the event Lessor
decides to purchase the Hotel, Lessee shall be entitled to a reasonable fee for
its work in the preliminary acquisition process in no event to be less than two
percent (2%) no more than six percent (6%) of the total purchase price of the
hotel (which shall include all fees for consulting, non-competition, and similar
amounts payable in conjunction with the purchase of the hotel). Upon failure of
agreement on the percentage of the fee, the matter of the correct percentage
shall be submitted to arbitration as provided in Article XXXVIII of the Form
Participating Lease.
ARTICLE IX
CHANGE IN CONTROL
Section 9.1 Initial Ownership Structure. Lessee represents that on the
date hereof Lessee is a corporation organized and existing under the laws of the
State of Nebraska.
Section 9.2 Transfer of Lease. Without the consent of Lessor, which Lessor
may not unreasonably withhold, the Lessee shall not voluntarily transfer, sell
or convey any direct or indirect interest in this Agreement or in any of the
Participating Leases.
Section 9.3 Change in Management. In the event that neither (a) Steve
Borgmann or Richard Herink nor (b) a person or entity proposed by Lessee and
consented to by Lessor (which consent shall not be unreasonably withheld) is
involved in the management of Lessee, then Lessor shall have the right, as its
sole remedy, to terminate all, but not fewer than all, of the Participating
Leases and Lessee shall pay to Lessor, as a result of such termination, the
Termination Value, provided that if Messrs. Borgmann and Herink are no longer
involved in the management of Lessee due to death or disability Lessor shall
have no right to terminate this Lease pursuant to this Section 9.3. Lessee
hereby agrees to notify Lessor in writing within ten (10) days of the occurrence
of any event which causes Lessee to be in violation of the terms of this Section
9.3. The right granted to Lessor pursuant to this Section 9.3 must be exercised
within ninety (90) days of the date of notice to Lessor of Lessee's failure to
comply with this Section 9.3.
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Section 9.4 Other Business Activities. Neither Lessee, nor any Affiliate
of Lessee, shall engage in any business or activity which relates to the owning,
leasing or managing hotels in a Competitive Area except as provided in this
Agreement.
ARTICLE X
SPECIAL TERMINATION RIGHTS
In the event that Lessee during the term of this Agreement engages in any
Competitive Activity without first complying with the provisions of Articles VII
and VIII, Lessor shall have the right, as its sole and exclusive remedy,
provided Lessee has not ceased such Competitive Activity within a period of 60
days from receipt of a written notice from Lessor identifying such Competitive
Activity, to terminate all, but not fewer than all, of the Participating Leases
and upon such termination, Lessee shall pay to Lessor the Termination Value. The
right to terminate shall not be exercised by Lessor after a period of one
hundred eighty (180) days after Lessor has been given written notice of the
Competitive Activity by Lessee.
ARTICLE XI
AUDIT RIGHTS
Lessor shall have the rights to audit Lessee's books and records with
respect to the Hotels leased to Lessee. If, in any calendar year, the aggregate
deficiency in the payment of Percentage Rent under the Participating Lease on
all of the Hotels, as determined pursuant to Lessor's audit and finally agreed
to by Lessee or determined by a Court of law or by arbitration, exceeds three
percent (3%) of the amount of Percentage Rent payable on all of the Hotels for
such Lease Year, then the Lessee shall immediately pay to the Lessor the cost of
the audit.
ARTICLE XII
DEFAULT
Section 12.1 Default. A "Default by Lessee" shall exist under this
Agreement if any of the following occur:
(a) Rent Payment. Lessee breaches any of its obligations as provided
in Section 4.1 and 4.2(b).
(b) Personalty Reserve Payment. A breach by Lessee of its obligation
to create and fund the Personalty Reserve provided in Section 4.2(b)
within ten (10) days of written notice of failure thereof.
Section 12.2 Remedies. Upon the occurrence of a Default by Lessee as
defined herein, Lessor shall have the right, as Lessor's sole remedy, to
terminate this Agreement upon fourteen (14) days written notice to Lessee, in
which event Lessee shall thereupon surrender all of the Leased
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Properties to Lessor, and, if Lessee fails to so surrender, Lessor shall have
the right, without notice, to enter upon and take possession of the Leased
Properties and to expel or remove Lessee and its effects without being liable
for prosecution or any claim for damages therefor; and Lessee shall, and hereby
agrees to, indemnify Lessor for the loss and damage which Lessor suffers by
reason of such termination in the amount equal to the total of (a) the
reasonable costs of recovering the Leased Properties in the event that Lessee
does not promptly surrender the Leased Properties, and all other reasonable
expenses incurred by Lessor in connection with the Default by Lessee; (b) the
unpaid Base Rent earned as of the date of termination, plus interest at the
Overdue Rate accruing after the due date; and (c) a sum equal to the present
value (using a factor for such purpose equal to the interest payable on ten (10)
year treasury notes plus four percent (4%) per annum) of the total Base Rent
which Lessor would have received under this Agreement for the remainder of the
term of this Agreement then in effect, less Base Rent which Lessee is able to
prove Lessor could have received from the balance of the term of this Agreement
thus in effect (collectively, the "Termination Value"). Lessor acknowledges that
it has a duty to mitigate its losses and damages by using its best efforts to
relet the Hotels at or above the Base Rent herein.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Modification, Amendments and Waivers. No modification,
amendment or waiver of any provision of this Agreement shall be effective unless
the same is in a writing signed by all parties to this Agreement.
Section 13.2 Notices. All notices and other communications pursuant to
this Agreement shall be in writing and personally served or mailed as provided
in Article XXXI of the Form Participating Lease.
Section 13.3 Successors and Assigns. The provisions of this Agreement
shall be binding upon the parties hereto and all of their successors and assigns
and inure to the benefit of the parties hereto and their permitted successors
and assigns.
Section 13.4 Governing Law. This Agreement shall be governed by the laws
of the State of Texas, without giving effect to the principles of conflicts of
law thereof.
Section 13.5 Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall be an original, with the same force and effect
as if the signatures thereto and hereto were upon the same instrument.
Section 13.6 Waiver. Each party waives, to the extent permitted by
applicable law, any right to a trial by jury in any proceedings brought by
either party to enforce the provisions of this Agreement, and Lessee and its
Affiliates waive the benefit of any laws now or hereafter in force exempting
property from liability for rent or debt, and Lessor waives any right to assert
an "alter ego" of the Lessee and its Affiliates or to "pierce the corporate
veil" of Lessee and its Affiliates other than to the extent funds shall have
been inappropriately paid following a Default by Lessee and its
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Affiliates under this Agreement to any person directly or indirectly having an
ownership interest in Lessee and its Affiliates.
Section 13.7 Time of the Essence. Time is of the essence of this
Agreement.
Section 13.8 Names and Marks. Lessor hereby assigns, at no cost, to Lessee
the right to use the name "Supertel" and to use the mark associated therewith,
the red S, and on the tenth anniversary of this Agreement, provided that no
Default by Lessee exists on such tenth anniversary Lessor agrees to the
transfer, without any additional consideration, all of the right in and to the
"Supertel" name and in and to the mark associated therewith.
Section 13.9 Confidential Information. Lessor agrees to keep and maintain
all information about Lessee and the Hotels confidential and agrees to take all
steps reasonably necessary to maintain the confidentiality of all such
information. No third party, unless required by law, shall be provided access to
or provided information about the Hotels or Lessee.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
LESSOR
PMC COMMERCIAL TRUST
By: /s/ Lance B. Rosemore
-------------------------------------
Lance B. Rosemore
President and Chief Executive Officer
LESSEE
NORFOLK HOSPITALITY
MANAGEMENT, CO.
By: /s/ Steve Borgmann
-------------------------------------
Steve Borgmann
President
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EXHIBIT A
INITIAL HOTELS
(PAGE 1 OF 3)
Antigo Super 8 Motel Creston Super 8 Motel Irving Super 8 Motel
535 Century Avenue 804 West Taylor 4245 W. Airport Freeway
Antigo, WI 54409 Creston, IA 50801 Irving, TX 75062
(715) 623-4188 (515) 782-6541 (972) 257-1810
Batesville Super 8 Motel Denton Super 8 Motel Las Colinas Wingate Inn
1287 N. St. Louis Street 620 S. I-35 East 850 West Walnut Hill Lane
Batesville, AR 72501 Denton, TX 76205 Irving, TX 75038
(870) 793-5888 (940) 380-8888 (972) 751-1031
Bedford Super 8 Motel El Dorado Super 8 Motel Jacksonville Super 8 Motel
1800 Airport Freeway 2530 West Central 1003 West Morton Road
Bedford, TX 76022 El Dorado, KS 67042 Jacksonville, IL 62650
(817) 545-8108 (316) 321-4888 (217) 479-0303
River Valley Suites Fayetteville Super 8 Motel Jefferson City Super 8 Motel
320 Lee Streets 1075 S. Shiloh Drive 1710 Jefferson Street
Bullhead City, AZ 86429 Fayetteville, AR 72701 Jefferson City, MO 65110
(520) 754-4651 (501) 521-8866 (573) 636-5456
Burlington Super 8 Motel Ft. Madison Super 8 Motel Keokuk Super 8 Motel
3001 Kirkwood 5107 Avenue O - Hwy 61 West 3511 Main
Burlington, IA 52601 Ft. Madison, IA 52627 Keokuk, IA 52632
(319) 752-9806 (319) 372-8500 (319) 524-3888
Clinton Super 8 Motel Garden City Super 8 Motel Kingdom City Super 8 Motel
1711 Lincoln Way 2808 North Taylor Hwy 54 - P.O. Box 139
Clinton, IA 52732 Garden City, KS 67846 Kingdom City, MO 65262
(319) 242-8870 (316) 275-9625 (573) 642-2888
College Station Super 8 Motel Grapevine Super 8 Motel Kirksville Super 8 Motel
301 Texas Avenue 250 East Highway 114 1101 Country Club Drive
College Station, TX 77840 Grapevine, TX 76051 Kirksville, MO 63501
(409) 846-8800 (817) 329-7222 (816) 665-8826
Columbus Super 8 Motel Hays Super 8 Motel Lenexa Super 8 Motel
3324 20th Street 3730 Vine Street 9601 Westgate
Columbus, NE 68601 Hays, KS 67601 Lenexa, KS 66215
(402) 563-3456 (785) 625-8048 (913) 888-8899
Iowa City Super 8 Motel Houston Wingate Inn Cornhusker Super 8 Motel
611 First Avenue 15615 JFK Blvd. 2545 Cornhusker Highway
Coralville, IA 52241 Houston, TX 77032 Lincoln, NE 68521
(319) 337-8388 (281) 987-8777 (402) 467-4488
21
EXHIBIT A
INITIAL HOTELS
(PAGE 2 OF 3)
West "O" Super 8 Motel Muscatine Super 8 Motel Pittsburg Super 8 Motel
2635 West "O" Street 2900 North Hwy 61 3108 North Broadway
Lincoln, NE 68528 Muscatine, IA 52761 Pittsburg, KS 66762
(402) 476-8887 (319) 263-9100 (316) 232-1881
Macomb Super 8 Motel Norfolk Super 8 Motel (Motel) Plano Super 8 Motel
313 University Avenue 1223 Omaha Avenue 1704 N. Central Expressway
Macomb, IL 61455 Norfolk, NE 68701 Plano, TX 75074-5729
(309) 836-8888 (402) 379-2220 (972) 423-8300
Manhattan Super 8 Motel O'Neill Super 8 Motel Portage Super 8 Motel
200 Tuttle Creek Blvd. East Highway 20 3000 New Pinery Road
Manhattan, KS 66502 O'Neill, NE 68763 Portage, WI 53901
(785) 537-8468 (402) 336-3100 (608) 742-8330
Marshall Super 8 Motel Aksarben Super 8 Motel Russellville Super 8 Motel
1355 West College Drive 7111 Spring Street 2404 North Arkansas Ave.
Marshall, MO 65340 Omaha, NE 68106 Russellville, AR 72801
(816) 886-3359 (402) 390-0700 (501) 968-8898
McKinney Super 8 Motel Omaha Super 8 Motel Sedalia Super 8 Motel
910 N. Central Expressway 10829 "M" Street 3402 West Broadway
McKinney, TX 75070 Omaha, NE 68137 Sedalia, MO 65301
(972) 548-8880 (402) 339-2250 (816) 827-5890
Menomonie Super 8 Motel West Dodge Super 8 Motel Shawano Super 8 Motel
1622 North Broadway 11610 West Dodge Road 211 Waukechon Street
Menomonie, WI 54751 Omaha, NE 68154 Shawano, WI 54166
(715) 235-8889 (402) 492-8845 (715) 526-6688
Minocqua Comfort Inn Oskaloosa Super 8 Motel Sheboygan Comfort Inn
8729 US 51 North 306 South 17th 4332 North 40th Street
Minocqua, WI 54548 Oskaloosa, IA 52577 Sheboygan, WI 53083
(715) 358-2588 (515) 673-8481 (920) 457-7724
Moberly Super 8 Motel Wichita North Super 8 Motel Storm Lake Super 8 Motel
North 300-Highway 24 East 6075 Air Cap Drive 101 West Milwaukee Avenue
Moberly, MO 65270 Park City, KS 67219 Storm Lake, IA 50588
(816) 263-8862 (316) 744-2071 (712) 732-3063
Mountain Home Super 8 Motel Parsons Super 8 Motel Tomah Super 8 Motel
865 Hwy 62 East 229 East Main 1008 E. McCoy Blvd.
Mountain Home, AR 72653 Parsons, KS 67357 Tomah, WI 54660
(870) 424-5600 (316) 421-8000 (608) 372-3901
Mt. Pleasant Super 8 Motel Pella Super 8 Motel Waco Super 8 Motel
Rt. 2, Box 227B 105 East Oskaloosa 1320 S. Jack Kultgen Way
Mt. Pleasant, IA 52641 Pella, IA 50219 Waco, TX 76706
(319) 385-8888 (515) 628-8181 (254) 754-1023
22
Watertown Super 8 Motel
503 14th Avenue S.E.
Watertown, SD 57201
(605) 882-1900
Wayne Super 8 Motel
610 Tomar Drive
Wayne, NE 68787
(402) 375-4898
West Plains Super 8 Motel
1210 Porter Wagoner Blvd.
West Plains, MO 65775
(417) 256-8088
Wichita Super 8 Motel
527 South Webb Road
Wichita, KS 67207
(316) 686-3888
Wichita Falls Super 8 Motel
1307 Kenley Avenue
Wichita Falls, TX 76305
(940) 322-8880
23
LEASE AGREEMENT
DATED AS OF _______________, 1998
BETWEEN
------------------------------
AS LESSOR
AND
-------------------------------
AS LESSEE
24
TABLE OF CONTENTS
ARTICLE I............................................................................ 1
1.1 Leased Property................................................ 1
1.2 Term........................................................... 2
1.3 Extension Option............................................... 2
ARTICLE II........................................................................... 2
2.1 Definitions.................................................... 2
ARTICLE III......................................................................... 12
3.1 Rent.......................................................... 12
3.2 Confirmation of Percentage Rent............................... 13
3.3 Additional Charges............................................ 13
3.4 Net Lease Provision........................................... 14
3.5 Annual Budget................................................. 14
3.6 Books and Records............................................. 15
ARTICLE IV.......................................................................... 15
4.1 Payment of Impositions........................................ 15
4.2 Notice of Impositions......................................... 16
4.3 Adjustment of Impositions..................................... 16
4.4 Utility Charges............................................... 16
4.5 Insurance Premiums............................................ 16
ARTICLE V........................................................................... 16
5.1 No Termination, Abatement, etc................................ 16
ARTICLE VI.......................................................................... 17
6.1 Lessor Representations and Warranties......................... 17
6.2 Deliverables.................................................. 20
6.3 Property Reports.............................................. 21
6.4 Ownership of the Leased Property.............................. 22
6.5 Lessee's Personal Property.................................... 22
ARTICLE VII......................................................................... 22
7.1 RESERVED...................................................... 22
7.2 Use of the Leased Property.................................... 23
7.3 Lessor to Grant Easements, etc................................ 23
ARTICLE VIII........................................................................ 24
8.1 Compliance with Legal and Insurance Requirements, etc......... 24
8.2 Legal Requirement Covenants................................... 24
8.3 Environmental Covenants....................................... 25
25
ARTICLE IX........................................................................... 27
9.1 Maintenance, Repair and Improvements........................... 27
9.2 Encroachments, Restrictions, etc............................... 28
9.3 Reimbursements................................................. 28
ARTICLE X............................................................................ 29
10.1 Alterations.................................................... 29
10.2 Salvage........................................................ 29
10.3 Lessor Alterations............................................. 29
10.4 Joint Use Agreements........................................... 29
10.5 Construction Affiliates........................................ 30
ARTICLE XI........................................................................... 30
11.1 Liens.......................................................... 30
ARTICLE XII.......................................................................... 30
12.1 Permitted Contests............................................. 30
ARTICLE XIII......................................................................... 31
13.1 General Insurance Requirements................................. 31
13.2 Replacement Cost............................................... 32
13.3 Worker's Compensation.......................................... 32
13.4 Waiver of Subrogation.......................................... 33
13.5 Form Satisfactory, etc......................................... 33
13.6 Increase in Limits............................................. 33
13.7 Blanket Policy................................................. 33
13.8 Reports On Insurance Claims.................................... 33
ARTICLE XIV.......................................................................... 34
14.1 Insurance Proceeds............................................. 34
14.2 Reconstruction in the Event of Damage or Destruction
Covered by Insurance........................................... 34
14.3 Reconstruction in the Event of Damage or Destruction
Not Covered by Insurance....................................... 35
14.4 Lessee's Property.............................................. 35
14.5 Abatement of Rent.............................................. 36
14.6 Construction by Lessee or its Affiliate........................ 36
ARTICLE XV........................................................................... 36
15.1 Definitions.................................................... 36
15.2 Parties' Rights and Obligations................................ 36
15.3 Total Taking................................................... 36
15.4 Allocation of Award............................................ 37
15.5 Partial Taking................................................. 37
15.6 Temporary Taking............................................... 37
26
15.7 Lessee's Construction............................................. 38
ARTICLE XVI............................................................................. 38
16.1 Event of Default.................................................. 38
16.2 Remedies.......................................................... 39
16.3 Damages........................................................... 40
16.4 Application of Funds.............................................. 40
ARTICLE XVII............................................................................ 40
17.1 Lessor's Right to Cure Lessee's Default........................... 40
ARTICLE XVIII........................................................................... 40
18.1 Personal Property Limitation...................................... 40
18.2 Sublease Rent Limitation.......................................... 41
18.3 Sublease Tenant Limitation........................................ 41
18.4 Lessee Ownership Limitations...................................... 41
18.5 Lessee Officer and Employee Limitation............................ 41
ARTICLE XIX............................................................................. 42
19.1 Holding Over...................................................... 42
ARTICLE XX.............................................................................. 42
20.1 RESERVED.......................................................... 42
ARTICLE XXI............................................................................. 42
21.1 Indemnification................................................... 42
ARTICLE XXII............................................................................ 43
22.1 Subletting and Assignment......................................... 43
22.2 Attornment........................................................ 43
22.3 Management Agreement.............................................. 44
ARTICLE XXIII........................................................................... 44
23.1 Officer's Certificates: Financial Statements; Lessor's
Estoppel Certificates and Covenants............................... 44
ARTICLE XXIV............................................................................ 45
24.1 Lessor's Right to Inspect......................................... 45
ARTICLE XXV............................................................................. 45
25.1 No Waiver......................................................... 45
ARTICLE XXVI............................................................................ 45
26.1 Remedies Cumulative............................................... 45
ARTICLE XXVII........................................................................... 46
27
27.1 Acceptance of Surrender.......................................... 46
ARTICLE XXVIII.............................................................................. 46
28.1 No Merger of Title............................................... 46
ARTICLE XXIX................................................................................ 46
29.1 Conveyance by Lessor............................................. 46
29.2 Amendment Upon Conveyance. ...................................... 46
29.3 Other Interests.................................................. 47
ARTICLE XXX................................................................................. 48
30.1 Quiet Enjoyment.................................................. 48
ARTICLE XXXI................................................................................ 48
31.1 Notices.......................................................... 48
ARTICLE XXXII............................................................................... 48
32.1 Appraisers....................................................... 48
ARTICLE XXXIII.............................................................................. 49
33.1 Lessor May Grant Liens........................................... 49
33.2 Lessee's Right to Cure........................................... 49
33.3 Breach by Lessor................................................. 50
ARTICLE XXXIV............................................................................... 50
34.1 Miscellaneous.................................................... 50
34.2 Transition Procedures............................................ 51
34.3 Waiver of Presentment, etc....................................... 52
ARTICLE XXXV................................................................................ 52
35.1 Memorandum of Lease.............................................. 52
ARTICLE XXXVI............................................................................... 52
36.1 Lessor's Option to Purchase Assets of Lessee..................... 52
ARTICLE XXXVII.............................................................................. 52
37.1 Compliance with Franchise Agreement and Management Agreement..... 52
ARTICLE XXXVIII............................................................................. 53
38.1 Arbitration...................................................... 53
38.2 Alternative Arbitration.......................................... 53
38.3 Arbitration Procedures........................................... 53
28
LEASE AGREEMENT
THIS LEASE AGREEMENT (hereinafter called "Lease"), is made and entered
into as of the _______ day of _________________, 1998, by and between PMC
Commercial Trust, a Texas real estate investment trust ("Lessor"), and Norfolk
Hospitality Management Co., a Nebraska corporation ("Lessee").
AGREEMENT:
Lessor, for and in consideration of the payment of rent by Lessee to
Lessor, the covenants and agreements to be performed by Lessee, and upon the
terms and conditions hereinafter stated, does hereby rent and lease unto Lessee,
and Lessee does hereby rent and lease from Lessor, the Leased Property.
ARTICLE I
1.1 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, without limitation, alleyways and connecting tunnels,
sidewalks, utility pipes, conduits and lines (on-site and offsite),
parking areas and roadways appurtenant to such buildings and structures
presently situated upon the Land (collectively, the "Leased
Improvements");
(c) all easements, rights and appurtenances relating to the Land and
the Leased Improvements;
(d) all equipment, machinery, fixtures and other items of property
required for or incidental to the use of the Leased Improvements as a
hotel, including all components thereof now and hereafter permanently
affixed to or incorporated into the Leased Improvements, including,
without limitation, all furnaces, boilers, heaters, electrical equipment,
heating, plumbing, lighting, ventilating, refrigerating, incineration, air
and water pollution control, waste disposal, air-cooling and
air-conditioning systems and apparatus, sprinkler systems and fire and
theft protection equipment, all of which to the greatest extent permitted
by law are hereby deemed by the parties hereto to constitute real estate,
together with all replacements, modifications, alterations and additions
thereof (collectively, the "Fixtures");
(e) all furniture and furnishings and all other items of personal
property (excluding Inventory and the Lessee's Personal Property) 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
29
(f) all existing leases of space within the Leased Property
(including any security deposits or collateral held by Lessor pursuant
thereto).
1.2 Term. Unless earlier terminated in accordance with the provisions
hereof, the term of the Lease (the "Term") shall commence on the effective date
of the merger between Lessor and Supertel Hospitality, Inc. (the "Commencement
Date") and shall end on the fifth anniversary of the last day of the month in
which the Commencement Date occurs; provided, however, that the term hereof will
be automatically extended from time to time hereafter as provided in Section 3.3
of the Master Lease Agreement.
1.3 Extension Option. Provided that Lessee is not then in default under
the terms of this Lease, Lessee shall have the option, in its sole discretion,
to extend this Lease for one (1) successive term of two (2) years (the "Option
Period") upon the same terms and conditions contained herein and in the
Participating Leases, except for the payment of Base Rent which total amount
shall increase (subject to adjustments from condemnation, casualty, sale, or
otherwise provided herein and in the Participating Leases) from Fourteen Million
Four Hundred Thousand Dollars ($14,400,000.00) to Fifteen Million Dollars
($15,000,000.00) for each of the two (2) years in the Option Period. Upon
exercise of the option, the renewal term shall commence at midnight on the last
day of the original five (5) year term of this Lease. Notice of the exercise of
the option to extend shall be given in writing to Lessor not less than one (1)
year prior to the end of the original five (5) year term of this Lease.
1.4 Automatic Lease Term Extensions. After the original five (5) year term
of this Lease and after the Option Period, if any, the term of this Lease shall
be automatically extended for an additional two (2) year term, unless either
Lessee or Lessor gives notice in writing to the other at least eleven (11)
months prior to the end of the then current term that it elects not to allow the
automatic extension of the term of this Lease, in which case this Lease shall
terminate at the end of the then current term. In the event this Lease is
extended for an additional two (2) year term, then this Lease shall be further
automatically extended on a continuing basis beyond the then current term of
this Lease by additional successive two (2) year periods unless either Lessee or
Lessor gives written notice to the other at least one (1) year before the end of
the then current term that it elects not to allow the automatic extension to
occur beyond the then current term. It is the intent of the parties that each
will have a minimum of one (1) year notice prior to the end of the term of this
Lease. This shall not preclude the parties from renegotiating this Lease from
time to time.
ARTICLE II
2.1 Definitions. For all purposes of this Lease, except as otherwise
expressly provided or unless the context otherwise requires, (a) the terms
defined in this Article II have the meanings assigned to them in this Article II
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,
- 2 -
30
Sections and other subdivisions of this Lease and (d) the words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this Lease
as a whole and not to any particular Article, Section or other subdivision:
Additional Charges: As defined in Section 3.3.
Affiliate: As used in this Lease the term "Affiliate" of a person shall
mean (a) any person that, directly or indirectly, controls or is controlled by
or is under common control with such person, (b) any other person that owns,
beneficially, directly or indirectly, 5% 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 for the Hotel prepared by Lessee and delivered
to Lessor in accordance with Section 3.5.
Applicable Laws means any applicable federal, state, county or municipal
law, statute, ordinance, rule, regulation, order or determination of any
governmental authority or any board of fire underwriters (or other body
exercising similar functions), or any restrictive covenant or deed restriction
or zoning ordinance or classification affecting any of the Hotels, including
without limitation, all applicable codes, flood disaster laws and health and
Environmental Laws, rule and regulations.
Architectural Barriers Legislation means the Americans With Disabilities
Act of 1990, P.L. 101-336, as amended.
Award: As defined in Section 15.1(a).
Base Rate: The rate of interest published in The Wall Street Journal,
Midwest Edition as the Prime Rate (or the lower of any two or more of such
rates), as it changes. If no such rate is announced or becomes discontinued,
then such other rate as Lessor and Lessee shall reasonably designate by mutual
agreement.
Base Rent: As defined in the Master Lease Agreement.
- 3 -
31
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that is
not a day on which national banks in the City of New York, New York, or in the
municipality wherein the Leased Property is located are closed.
CERCLA: The Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: As defined in Section 1.2.
Condemnation; Condemnor: Each as defined in Section 15.1.
Date of Taking: As defined in Section 15.1(d).
Encumbrance: As defined in Section 33.1.
Environmental Authority: Any department, agency or other body or component
of any Government that exercises any form of jurisdiction or authority under
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 that may hereafter be asserted against or imposed upon Lessor,
Lessee, the Leased Property or any property used therein, and which, when
applicable to Lessee, arise out of any act or omission of Lessee during the
Lease Term which causes a failure of the Leased Property to comply with
Environmental Laws; or claims for injury or damage to persons or property
arising out of exposure to Hazardous Materials originating on the Leased
Property, which, when applicable to Lessee, originated on the Leased Property
during the Term.
- 4 -
32
Event of Default: As defined in Section 16.1.
Fair Market Rental Value: 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 Participating 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 the Participating Lease 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.
FF&E Reserve: The reserve account to refurbish, replace, and improve FF&E
provided in Section 6.1 of the Master Lease Agreement and to repair, refurbish,
replace, and improve the Leased Improvements and the Fixtures.
FIFRA: The Federal Insecticide, Fungicide, and Rodenticide Act, as
amended.
Fixtures: As defined in Section 1.1.
Food and Beverage Revenues: All revenues, receipts and income of any kind
received by Lessee and derived directly from the sale of food, alcoholic and
non-alcoholic beverages, merchandise, services and entertainment from or in a
Restaurant or otherwise in the Hotel (other than any Restaurant Sublease Rent),
whether on a cash basis or credit, paid or collected, determined in accordance
with generally accepted accounting principles, excluding, however: (a) 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, (b) the amount of all
credits, rebates or refunds to customers, guests or patrons, and all service
charges, finance charges, interest and discounts attributable to charge accounts
and credit cards, to the extent the same are paid to Lessee by its customers,
guests or patrons, or to the extent the same are paid for by Lessee to, or
charged to Lessee by, credit card companies, (c) gratuities or service charges
actually paid to employees, (d) sales other than sales in the ordinary course of
business, (e) the cost of meals to Lessee's employees, and the cost of
charitable, promotional or other complimentary meals given by Lessee in the
ordinary course of
- 5 -
33
business and in accordance with its normal policies for giving such meals, as is
customary for similar operations, (f) revenues derived from vending machines
operated by Lessee for the convenience of its employees, (g) receipts for
returns to shippers, manufacturers or suppliers, (h) proceeds of business
interruption or other insurance, and (i) items constituting "allowances" under
the Uniform System.
Franchise Agreement: Any franchise agreement or license agreement with a
franchisor (such as Super 8) under which the Hotel is operated.
Furniture, Fixtures and Equipment: Furniture, fixtures, and equipment used
or usable in the operation of the Hotel, including but not limited to room
furniture, exercise fixtures and equipment, office equipment, restaurant and bar
equipment, business center equipment, all operating systems (e.g. HVAC,
electrical, plumbing, and Fixtures), beds, lamps, window and wall coverings and
attachments of all kinds, carpets, painting, laundry equipment, water softeners,
on site property management systems, material handling equipment, cleaning and
engineering equipment, on-site computer hardware and software replacements and
upgrades, on-site telephones and communication equipment, on-site computerized
accounting systems and on-site 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: All salaries and employee expense and payroll
taxes (including salaries, wages, bonuses and other compensation of all
employees of the Hotel, and benefits including life, medical and disability
insurance and retirement benefits), expenditures described in Section 9.1,
operational supplies, utilities, insurance to be provided by Lessee under the
terms of this Lease, Government fees and assessments, food, beverages, laundry
service expense, the cost of Inventories, license fees, advertising, marketing,
reservation systems and any and all other operating expenses as are reasonably
necessary for the proper and efficient operation of the Hotel incurred by Lessee
in accordance with the provisions hereof (excluding, however, (a) 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, (b) the costs of insurance to be
provided under Article XIII, (c) expenditures by Lessor pursuant to Article XIV,
and (d) payments on any Mortgage or other mortgage or security instrument on the
Hotel); all determined in accordance with generally accepted accounting
principles. No part of Lessee's central office or corporate overhead or general
or administrative expense (as opposed to that of the Hotel) shall be deemed to
be a part of Gross Operating Expenses, except as herein provided. Reasonable
out-of-pocket expenses of Lessee incurred for the account of or in connection
with the on-site Hotel operations, including, without limitation, postage,
telephone charges and reasonable travel expenses of employees, officers and
other representatives and consultants of Lessee and its Affiliates (but
specifically excluding all salary and benefit expenses of such employees,
officers and other representatives and consultants), shall be deemed to be a
part of Gross Operating Expenses and such persons shall be afforded reasonable
accommodations,
- 6 -
34
food, beverages, laundry, valet and other such services by and at the Hotel
without charge to such persons or Lessee.
Gross Operating Profit shall mean, for any Lease Year, the excess of Gross
Revenues for such Lease Year over Gross Operating Expenses for such Lease Year.
Gross Revenues: All revenues, receipts and income of any kind received by
Lessee and derived directly from the operation of the Hotel (including rentals
or other payments from tenants, lessees, licensees or concessionaires but not
including their gross receipts), including, without limitation, Room Revenues,
Food and Beverage Revenues and Sundry Revenues, whether on a cash basis or
credit, paid and collected, determined in accordance with generally accepted
accounting principles, excluding, however: (a) funds furnished by Lessor or by
Lessee, (b) federal, state and municipal excise, sales, use or other taxes
collected directly from patrons and guests or as a part of the sales price of
any goods, services or displays, such as gross receipts, admissions, cabaret or
similar or equivalent taxes and paid over to federal, state or municipal
governments, (c) the amount of all credits, rebates or refunds to customers,
guests or patrons, and all service charges, finance charges, interest and
discounts attributable to charge accounts and credit cards, to the extent the
same are paid to Lessee by its customers, guests or patrons, or to the extent
the same are paid for by Lessee to, or charged to Lessee by, credit card
companies, (d) gratuities or service charges actually paid to employees, (e)
proceeds of insurance and condemnation, (f) proceeds from sales other than sales
in the ordinary course of business, (g) all loan proceeds from financing or
refinancings of the Hotel or interests therein or components thereof, (h)
judgments and awards, except any portion thereof arising from normal business
operations of the Hotel, (i) items constituting "allowances" under the Uniform
System, (j) all write-offs for failure of collection, except if any such
written-off receivable is ultimately collected it shall be added back to Gross
Revenues to the extent collected (less all costs, fees, and expenses of
collection), and (k) all fees and amounts paid to or on behalf of Lessee or its
Affiliate by Lessor.
Hazardous Materials: All chemicals, pollutants, contaminants, wastes and
toxic substances, including, without limitation:
(a) Solid or hazardous waste, as defined in RCRA or any other
Environmental Law;
(b) Hazardous substances, as defined in CERCLA or any other
Environmental law;
(c) Toxic substances, as defined in TSCA or any other Environmental
law;
(d) Insecticides, fungicides or rodenticides, as defined in FIFRA or
any other Environmental Law; and
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(e) Gasoline or any other petroleum product or byproduct,
polychlorinated biphenyl, asbestos and urea formaldehyde.
Holder: As defined in Section 29.3.
Hotel: The hotel and/or other facility offering lodging or other services
or amenities being operated or proposed to be operated on the Leased Property.
Impositions: Collectively, all taxes (including, without limitation, all
ad valorem, sales and use, single business, gross receipts, transaction
privilege, rent or similar taxes as the same relate to or are imposed upon
Lessee or its business conducted upon the Leased Property), assessments
(including, without limitation, all assessments for public improvements or
benefit, whether or not commenced or completed prior to the date hereof and
whether or not to be completed within the Term), ground rents, water, sewer or
other rents and charges, excises, tax inspection, authorization and similar fees
and all other Government charges, in each case whether general or special,
ordinary or extraordinary, or foreseen or unforeseen, of every character in
respect of the Leased Property or the business conducted thereon by Lessee
(including all interest and penalties thereon caused by any failure in payment
by Lessee), which at any time prior to, during or with respect to the Term
hereof may be assessed or imposed on or with respect to or be a lien upon (a)
Lessor's interest in the Leased Property, (b) the Leased Property, or any part
thereof or any rent therefrom or any estate, right, title or interest therein,
or (c) any occupancy, operation, use or possession of, or sales from, or
activity conducted on or in connection with the Leased Property, or the leasing
or use of the Leased Property or any part thereof by Lessee. Nothing contained
in this definition of Impositions shall be construed to require Lessee to pay
(i) any tax based on net income (whether denominated as a franchise or capital
stock or other tax) imposed on Lessor or any other person, or (ii) any net
revenue tax of Lessor or any other person, or (iii) any tax imposed with respect
to the sale, exchange or other disposition by Lessor of any Leased Property or
the proceeds thereof, or (iv) any single business, gross receipts (other than a
tax on any rent received by Lessor from Lessee), transaction, privilege or
similar taxes as the same relate to or are imposed upon Lessor, except to the
extent that any tax, assessment, tax levy or charge that Lessee is obligated to
pay pursuant to the first sentence of this definition and that is in effect at
any time during the Term hereof is totally or partially repealed, and a tax,
assessment, tax levy or charge set forth in clause (i) or (ii) is levied,
assessed or imposed expressly in lieu thereof.
Indemnified Party: Either 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 XXI.
Insurance Requirements: All terms of any insurance policy required by this
Lease and all requirements of the issuer of any such policy.
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Inventory: All "Inventories of Merchandise" and "Inventories of Supplies"
as defined in the Uniform System.
Land: As defined in Section 1.1.
Lease: This Lease.
Leased Improvements; Leased Property: Each as defined in Section 1.1.
Lease Year: The 12-month period beginning with the Commencement Date and
ending on the day of the month immediately preceding the day of the month of the
Commencement Date one (1) year from the Commencement Date and each 12-month
period thereafter.
Legal Requirements: All federal, state, county, municipal and other
Government statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting either the Leased Property or the maintenance,
construction, use or alteration thereof (whether by Lessee or otherwise),
whether now in force or hereafter enacted and in force, including (a) all laws,
rules or regulations pertaining to the environment, occupational health and
safety and public health, safety or welfare, and (b) any laws, rules or
regulations that may (i) require repairs, modifications or alterations in or to
the Leased Property or (ii) 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.
Lessee: The Lessee designated on this Lease and its permitted successors
and assigns.
Lessee Indemnified Party: Lessee, any Affiliate of Lessee, any other
Person against whom any claim for indemnification may be asserted hereunder as a
result of a direct or indirect ownership interest (including a stockholder's
interest) in Lessee, the officers, directors, stockholders, employees, agents
and representatives of Lessee and 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 6.5.
Lessor: The Lessor designated on this Lease and its 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 of Lessor and the respective heirs,
personal representatives, successors and assigns of any such officer, director,
stockholder, employee, agent or representative.
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Management Agreement: As defined in Section 22.3.
Manager: The Lessee or any successor manager that is retained by Lessee to
operate the Hotel pursuant to this Lease, any Management Agreement and the
Franchise Agreement.
Master Lease Agreement: That certain Master Lease Agreement, dated as of
the date hereof, by and between Lessee and Lessor, relating to this Lease and
the Other Leases.
Notice: As defined in Article XXXI.
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.
Other Leases: The leases of the Other Properties.
Other Properties: The properties described on Exhibit B hereto, excluding
the property described on Exhibit A hereto, as the same may be amended from time
to time pursuant to and which become subject to the terms of the Master Lease
Agreement.
Overdue Rate: On any date, a rate equal to the Base Rate plus 5% per
annum, but in no event greater than the maximum rate then permitted under
applicable law.
Payment Date: Any due date for the payment of any installment of Base
Rent.
Percentage Rent: As defined in the Master Lease Agreement.
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 the Lessee's Personal Property), together with all
replacement, modifications, alterations and additions thereto.
Personalty: All FF&E, except for operating systems (e.g. HVAC, electrical,
plumbing and Fixtures) and improvements or fixtures which cannot be removed from
a Leased Property without material damage to such Leased Property.
Personalty Reserve: Funds available for the purchase of Personalty, which
funds shall be provided by, and under the control of, Lessee through the payment
of $50,000 per month (which payment shall be due and payable on the same date as
the Base Rent payments during the term of this Lease into an account to be
established by Lessee.
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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 Government 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.
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 and Percentage Rent.
Reserves: Collectively, the FF&E Reserve and the Personalty Reserve.
Restaurant: Any restaurant or cocktail lounge, together with a kitchen for
those facilities, which may be located in the Hotel at any time and from time to
time.
Restaurant Sublease Rent: The entire net amount of rentals (including base
rent and percentage rent) and other amounts, if any, received by Lessee under
any sublease (or similar agreement) of a Restaurant which may be entered into
from time to time between Lessee and any unaffiliated third party, net of
management fees, if any, payable to the Manager, if any, under any Management
Agreement with respect to such rentals.
Room Revenues: All revenues, receipts, and income of any kind received by
Lessee and derived directly from or in connection with the rental of guest rooms
or suites, whether to individuals, groups or transients, at the Hotel, whether
on a cash basis or credit, paid and collected, determined in accordance with
generally accepted accounting principles, excluding the following:
(a) The amount of all credits, rebates or refunds to customers,
guests or patrons, and all service charges, finance charges, interest and
discounts attributable to charge accounts and credit cards, to the extent
the same are paid to Lessee by its customers, guests or patrons, or to the
extent the same are paid for by Lessee to, or charged to Lessee by, credit
card companies;
(b) All sales taxes or any other taxes imposed on the rental of such
guest rooms or suites;
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(c) Gratuities or service charges actually paid to employees;
(d) Proceeds of business interruption and other insurance; and
(e) Food and Beverage Revenues or Sundry Revenues.
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: Persons in which Lessee owns more than 50% of the voting
equity securities or control, as applicable (individually, a "Subsidiary").
Sundry Revenues: All revenues, receipts, and income received by Lessee and
derived from the Hotel's meeting rooms, telephones, TV and movie rentals, check
room, washroom, laundry, valet, vending machines, and other similar sources not
specified herein as Room Revenues.
Taking: A taking or voluntary conveyance during the Term hereof of all or
part of the Leased Property, or any interest therein or right accruing thereto
or use thereof, as the result of, or in settlement of, any Condemnation or other
eminent domain Proceeding affecting the Leased Property whether or not the same
shall have actually been commenced.
Term: As defined in Section 1.2.
TSCA: The Toxic Substances Control Act, as amended.
Unavoidable Delays: Delays due to strikes, lock-outs, labor unrest,
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, unavoidable casualty or other
causes beyond the control of the party responsible for performing an obligation
hereunder, provided that lack of funds shall not be deemed a cause beyond the
control of either party hereto unless such lack of funds is caused by the
failure of the other party hereto to perform any obligations of such party under
this Lease or any guaranty of this Lease.
Uneconomic for its Primary Intended Use: A state or condition of the Hotel
such that, in the good faith judgment of Lessee, reasonably exercised and
evidenced by the resolution of the board of directors or other governing body of
Lessee, the Hotel cannot be operated on a commercially practicable basis for its
Primary Intended Use, taking into account, among other relevant factors, the
number of usable rooms and projected revenues, such that Lessee intends to, and
shall, complete the cessation of operations from the Leased Hotel.
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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 Hotel
such that, in the good faith judgment of Lessee, reasonably exercised and
evidenced by the resolution of the board of directors or other governing body of
Lessee, due to casualty damage or loss through Condemnation, the Hotel cannot
function as an integrated hotel facility consistent with standards applicable to
a well maintained and operated hotel.
ARTICLE III
3.1 Rent. Lessee will pay to Lessor in lawful money of the United States
of America which shall be legal tender for the payment of public and private
debts, in immediately available funds, at Lessor's address set forth in Article
XXXI 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 Percentage Rent, during the
Term, as provided in this Lease and the Master Lease Agreement. If this Lease is
no longer subject to the Master Lease Agreement, Rent shall be paid according to
Schedule 3.1, which will be attached hereto at that time.
3.2 Confirmation of Percentage Rent. Lessee shall utilize, or cause to be
utilized, the present accounting system or such other system reasonably
agreeable to Lessor, and in accordance with generally accepted accounting
principles, that will accurately record all data necessary to compute Percentage
Rent. Lessee shall retain, for at least four years after the expiration of each
Lease Year, reasonably adequate records conforming to such accounting system
showing all data necessary to compute Percentage Rent for the applicable Lease
Years. Lessor, at its expense (except as provided below), shall have the right
from time to time, upon prior written notice to Lessee and Manager, if any, by
Lessor's accountants or representatives to audit the information that formed the
basis for the data set forth in any Officer's Certificate provided pursuant to
the Master Lease Agreement and, in connection with such audits, to examine all
Lessee's records (including supporting data and sales and excise tax returns)
reasonably required to verify Percentage Rent, subject to any prohibitions or
limitations on disclosure of any such data under Legal Requirements or as
otherwise reasonably required by Lessee. If any such audit discloses a
deficiency in the payment of Percentage Rent, and either Lessee agrees with the
result of such audit or the matter is otherwise determined or compromised,
Lessee shall forthwith pay to Lessor the amount of the deficiency, as finally
agreed or determined, together with interest at the Overdue Rate from the date
when said payment should have been made to the date of payment thereof. If
Lessee has prepaid or overpaid any Percentage Rent, Lessor shall immediately pay
to Lessee the amount by which Lessee prepaid or overpaid the Percentage Rent in
the manner set forth in the Master Lease Agreement. If any such audit discloses
that the Percentage Rent actually due from Lessee for any Lease Year exceeds
that reported by Lessee by more than 3%, Lessee shall pay the cost of such audit
and examination. Any proprietary information obtained by Lessor pursuant to the
provisions of this Section 3.2 or otherwise by this Lease shall be treated as
confidential, except that such information may be used, subject to appropriate
confidentiality safeguards, in any litigation between the parties and except
further that Lessor may disclose such information to
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prospective lenders. The obligations of Lessee and Lessor contained in this
Section 3.2 shall survive the expiration or earlier termination of this Lease.
3.3 Additional Charges. In addition to the Base Rent and
Percentage Rent, (a) Lessee also will pay and discharge as and when due and
payable all other amounts, liabilities, obligations and Impositions that Lessee
assumes or agrees to pay under this Lease, and (b) in the event of any failure
on the part of Lessee to pay any of those items referred to in clause (a) of
this Section 3.3, Lessee also will promptly pay and discharge every fine,
penalty, interest and cost that may be added for non-payment or late payment of
such items (the items referred to in clauses (a) and (b) of this Section 3.3
being referred to herein collectively as the "Additional Charges"). To the
extent that Lessee pays any Additional Charges to Lessor pursuant to this Lease
or the Master Lease Agreement rather than to the entity to which they would
otherwise be due, Lessor shall timely pay same from monies received from Lessee
and shall hold harmless Lessee from any claims, damages and expenses related
thereto and all fines, penalties, interests, and costs for non-payment or late
payment thereof.
3.4 Net Lease Provision. The Rent shall be paid to Lessor without
set off, deduction or counterclaim, subject only to the provisions of the Master
Lease Agreement or of this Lease set forth in Sections 14.2, 14.3, 15.3, 15.5
and 15.6 and further subject to Lessee's right to assert any claim or mandatory
counterclaim in any action brought under this Lease.
3.5 Annual Budget.
(a) Not later than thirty (30) days prior to the commencement
of each Calendar Year, Lessee shall submit the proposed Annual Budget
to Lessor, provided that for that portion of the Term in 1998 and for
calendar year 1999, a budget shall be submitted on or before November
30, 1998. Lessor shall not unreasonably withhold its consent to the
Annual Budget submitted by Lessee. Lessor shall have twenty (20) days
from the date of receipt of the Annual Budget to review and comment on
the Annual Budget and Lessor and Lessee shall negotiate in good faith
the terms of the Annual Budget. If Lessor fails to object or otherwise
respond to the proposed Annual Budget within such 20-day period, Lessor
shall be deemed to have accepted the Annual Budget as so proposed. The
Annual Budget shall contain the following:
(i) Lessee's reasonable estimate of Gross Revenues
(including average room rates and Room Revenues), Gross
Operating Expenses, and Gross Operating Profits for the
forthcoming Lease Year on a monthly basis, as same may be
revised or updated from time to time by Lessee.
(ii) An estimate of the amounts to be dedicated to
the capitalized repair, replacement or refurbishment of
Furniture, Fixture and Equipment from the FF&E Reserve and
from the Personalty Reserve, as applicable, and to the
capitalized repair, refurbishment, replacement, and
improvement of the Leased Improvements and the Fixtures.
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(iii) An estimate of any amounts Lessor will be
required to provide for required or desirable capital
improvements to the Hotel or any of its components in excess
of the FF&E Reserve.
(iv) A cash flow projection.
(v) A marketing plan.
(b) Not later than thirty (30) days following the end of any
month during a Lease Year, Lessee shall submit to Lessor statements
setting forth the actual (i) Gross Revenues, Gross Operating Expenses
and Gross Profits, (ii) amounts for which reimbursement was sought or
will be sought from the FF&E Reserve for such month and (iii) dollar
amount of capital improvements made to the Hotel for such month and a
comparison of such amounts to the estimates set forth in the Annual
Budget.
3.6 Books and Records. Lessee shall keep full and adequate books
of account and other records reflecting the results of operation of the Hotel on
an accrual basis, all in accordance with generally accepted accounting
principles and the obligations of Lessee under this Lease Agreement. The books
of account and all other records relating to or reflecting the operation of the
Hotel shall be kept either at the Hotel or at Lessee's offices in Norfolk,
Nebraska, and shall be available to Lessor and its representatives and its
auditors or accountants, at all reasonable times, upon reasonable prior written
notice to Lessee, for examination, audit, inspection and transcription. All of
such books and records pertaining to the Hotel including, without limitation,
books of account, guest records and front office records, at all times shall be
the property of Lessee and shall be available to Lessor for its review and
audit. Lessee shall be entitled to make a copy of all such books and records for
its tax and accounting purposes, at all times and after the termination of this
Lease.
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 which
are assessed with respect to the Term. Lessor shall pay all Impositions which
are assessed for periods before and after the Term. 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. If any such Imposition may 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 equal, fully amortizing
installments and in such event, shall pay such installments which become
delinquent during the Term hereof (subject to Lessee's right of contest pursuant
to the provisions of Article XII). Lessee shall not be required to pay any
installment which comes due after the Term or before the Commencement Date.
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
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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
Government 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 for application on any
amounts due Lessor by Lessee. Any such funds retained by Lessor due to an Event
of Default shall be applied as provided in Article XVI. Any balance shall be
paid to Lessee. 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 so to file. Lessor, to the extent it
possesses the same, and Lessee, to the extent it possesses the same, will
provide the other party, upon request, with cost and depreciation records
necessary for filing returns for any property classified as personal property.
Lessor may, upon Notice to Lessee, at Lessor's option and at Lessor's sole
expense, protest, appeal or institute such other proceedings (in its or Lessee's
name) as Lessor may deem appropriate to effect a reduction of real estate or
personal property assessments for those Impositions to be paid by Lessor, and
Lessee, at Lessor's expense as aforesaid, shall fully cooperate with Lessor in
such protest, appeal, or other action. Lessor hereby agrees to indemnify,
defend, and hold harmless Lessee from and against any claims, obligations, and
liabilities against or incurred by Lessee in connection with such cooperation.
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.
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 of any Imposition which it is obligated to pay during the
first taxing period applicable thereto.
4.3 Adjustment of Impositions. Impositions imposed in respect of
the tax-fiscal period during which the Term terminates shall be adjusted and
prorated between Lessor and Lessee, whether or not such Imposition is imposed
before or after such termination, and Lessee's obligation to pay its prorated
share thereof after termination shall survive such termination.
4.4 Utility Charges. Lessee will be solely responsible for
obtaining and maintaining utility services to the Leased Property and will pay
or cause to be paid all charges for electricity, gas, oil, water, sewer and
other utilities used in the Leased Property during the Term.
4.5 Insurance Premiums. Lessee will pay or cause to be paid all
premiums for the insurance coverages required to be maintained by it under
Article XIII.
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ARTICLE V
5.1 No Termination, Abatement, etc. Except as otherwise
specifically provided in this Lease, except for default by Lessor, and except
for loss of the Franchise Agreement by reason of any action or inaction by
Lessor, Lessee, to the extent permitted by law, shall remain bound by this Lease
in accordance with its terms and shall neither take any action without the
written consent of Lessor (which shall not be unreasonably withheld or delayed)
to modify, surrender or terminate the same, nor seek nor be entitled to any
abatement, deduction, deferment or reduction of the Rent, or setoff against the
Rent, nor shall the obligations of Lessee be otherwise affected by reason of 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. The Rent and all
other sums payable by Lessee hereunder shall continue to be payable unless the
obligations to pay the same shall be terminated pursuant to the express
provisions of this Lease or by termination of this Lease.
ARTICLE VI
ADDITIONAL REPRESENTATIONS AND WARRANTIES
AND COVENANTS RELATING TO HOTELS AND REAL PROPERTY
6.1 Lessor Representations and Warranties. Lessor represents and
warrants to Lessee, effective as of the Commencement Date, as set forth below:
(a) Title to Hotel. Except as set forth on Schedule 6.1(a)
hereto, Lessor has good and indefeasible fee simple title to the Hotel,
free and clear of all conditions, exceptions, or reservations.
(b) No Consents Required. No consent, waiver, approval, or
authorization of, or filing, registration, or qualification with, or
notice to, any Government authority or any other entity or person
(including, without limitation, Lessor's trust managers) is required to
be made, obtained, or given in connection with the execution, delivery,
and performance of this Lease, except such consent, waiver, approval,
authorization, filing, registration or qualification which has been
made, obtained or given.
(c) Reserved.
(d) Operating Agreements. Except as set forth on Schedule
6.1(d) hereto, no portion of any Hotel is subject to the burdens or
obligations of any Operating Agreement and all Operating Agreements are
current and not in default other than defaults that will not,
individually or in the aggregate, have a material adverse effect on
Lessee.
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(e) Tenant Leases. Except as may be specifically noted to the
contrary on Schedule 6.1(e) hereto.
(i) Lessor is the sole owner of the Lessor's interest
in all of the leases of any portion of the Leased Premises
("Tenant Leases") and all Tenant Leases are in full force and
effect without current default by either Lessor or the
respective tenants;
(ii) none of the Tenant Leases that are material to
Lessor have been modified in a material way, except as
reflected in amendments to which Lessee has had access;
(iii) all obligations of the Lessor under the Tenant
Leases with respect to the performance of work or the
installation of equipment or materials required to have been
performed at or prior to the Commencement Date have been fully
observed and performed except for such failures that,
individually or in the aggregate, will not have a material
adverse effect on Lessee.
(iv) no tenant is or shall become entitled to any
material concession, rebate, allowance, or free rent for any
period subsequent to the Commencement Date, without the prior
written consent of Lessee, except as set forth in the Tenant
Lease with respect to such tenant;
(v) no tenant has any purchase option or other
interest (other than its leasehold tenancy for a specified
term) in the Land and/or the Leased Improvements; and
(vi) no tenant has given Lessor notice of its
intention to vacate its demised premises prior to the end of
the term of its lease.
(f) No Condemnation. There is no pending condemnation or
similar proceeding affecting any of the Land, the Leased Improvements,
or the Hotel personal property or any portion thereof, and Lessor has
received no written notice and has no knowledge that any such
proceeding is contemplated.
(g) No Violations of Applicable Law. To the knowledge of
Lessor, except as set forth on Schedule 6.1(g) hereto, the current
location, ownership, operation, use, and occupancy of all of the Land
and Leased Improvements thereon do not violate any Applicable Law,
including, without limitation, all Environmental Laws and the
Architectural Barriers Legislation. To the knowledge of Lessor, except
as set forth on Schedule 6.1(g) hereto, there are no violations of any
Applicable Law affecting any portion of any of the Land, the Leased
Improvements or the Hotel personal property, and no written notice of
any such violation has been issued by any Government authority.
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(h) Changes in Applicable Laws. Lessor has no information or
knowledge of any change contemplated in any of the Applicable Laws or
any judicial or administrative action, or any action by adjacent
landowners, or any fact or condition relating to the Hotel which is
reasonably likely to materially adversely affect, prevent or limit the
use of any of the Hotels as hotels of the size and nature currently
being operated.
(i) No Administrative Action. To Lessor's knowledge, except as
set forth on Schedule 6.1(i) hereto, the Hotel is not now, the subject
of any administrative investigation, action or judicial proceeding in
regard to sex, age, or racially discriminatory practices initiated by
any Government authority, or any private citizen, and no such
investigation, administrative action, or judicial proceeding is now
pending, nor is the Hotel presently operating under any court order or
administrative agreement in regard to alleged sex, age, or racially
discriminatory practices.
(j) Zoning. To Lessor's knowledge, except as set forth on
Schedule 6.1(j) hereto, there are no pending or threatened requests,
applications or proceedings to alter or restrict the zoning or other
use restrictions applicable to the Hotel; Lessor has not received any
notice from any Government authority of zoning, building, fire, water,
use, health, environmental or other violations of applicable law issued
in respect of the Hotel that have not been heretofore corrected, and no
such violations exist; all of the Leased improvements and the present
uses thereof are permitted, conforming structures and Leased uses under
all applicable zoning and building laws and ordinances.
(k) Parties in Possession. There are no adverse parties in
possession of the Hotel or of any part hereof and no parties in
possession thereof except the tenants under the Tenant Leases, except
as otherwise expressly disclosed herein, and no party has been granted
any license, lease, or other right relating to the use or possession of
any of the Hotels except the tenants under the Leases, or except as
otherwise expressly disclosed herein.
(l) No Other Contracts. There are no contracts or other
obligations outstanding for the sale, exchange or transfer of the Hotel
or any portion thereof or the business operated thereon.
(m) Utilities. All utilities required by applicable laws for
the operation of all of the Leased improvements including, but not
limited to, water, sewer, gas and electric, enter each parcel of land
through adjoining public streets or if they pass through adjoining
private land, do so in accordance with valid public or private
easements which inure to the benefit of Lessor. All of said utilities
are installed and operating and all installation and connection charges
have been paid in full and no fact, condition, or proceeding exists
which would result in the termination or impairment of the furnishing
of or an increase in rates or services to the Hotels of the foregoing
utility services.
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(n) Access to Land. There are adequate means of ingress and
egress for vehicular and pedestrian traffic to and from the land and
each adjoining street, road or highway. All routes of ingress and
egress to and from each parcel of land, to the extent they pass through
adjoining land do so in accordance with valid public or private
easements which inure to the benefit of Lessor. To Lessor's knowledge,
the land and the Leased Improvements do not violate any restriction,
condition or agreement contained in any easement, reciprocal easement,
restrictive covenant, or similar instrument or agreement affecting such
land or improvements or any part thereof.
(o) Maintenance and No Defects. To Lessor's knowledge, the
roofs of the buildings comprising the Leased improvements are free of
material leaks; the foundations and all mechanical systems including
air-conditioning, plumbing, heating, sewage drainage and electrical
have been maintained in all material respects in accordance with
industry practices.
(p) Insurance. Lessor has not received, and has no other
knowledge or information of, any written notice from any insurance
company or board of fire underwriters requesting the performance of any
material work or alteration with respect to any of the Hotels, or
requiring an increase in the insurance rates applicable to any of the
Hotels. To the knowledge of Lessor, the Hotel complies with the
requirements of all insurance carriers providing insurance therefor.
(q) Property Not in Flood Area. Except as described in
Schedule 6.1(q) hereto, no portion of any parcel of land is situated in
an area designated by the Secretary of the United States Department of
Housing and Urban Development (or by any other federal, state,
municipal, or other governmental instrumentality) as having special
flood or mudslide hazards.
(r) Compliance with Architectural Barriers Legislation. To
Lessor's knowledge, except as set forth on Schedule 6.1(r) hereto, all
of the improvements were built and continue to be in full compliance
with all legal requirements relative to architectural, barriers or
accommodations of disabled persons, including, without limitation,
applicable Architectural Barriers Legislation.
(s) Environmental. To Lessor's knowledge, except as set forth
on Schedule 6.1(s) hereto, there are no Environmental Conditions and
there is no Environmental Noncompliance with respect to the Hotel. All
material permits have been obtained, are valid and in good standing. To
Lessor's knowledge, all operations on or at each Hotel are and have
been conducted in material compliance with all applicable Environmental
Laws. Lessor has not received any Notification from any governmental
instrumentality seeking any information or alleging any violation of
any applicable law or Environmental Law. Lessor has not caused or
permitted the Hotel to be used to generate, manufacture, refine,
transport, treat, recycle, store, handle, dispose of, transfer,
produce, or process any Hazardous Materials or solid waste, except in
small quantities utilized in connection with
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routine maintenance or repair of the Hotel, all of which have been and
will be stored, used, handled, and disposed of in full compliance with
all Environmental Laws other than such noncompliance that, individually
or in the aggregate, will not have a material adverse effect on Lessee.
Lessor has not caused or permitted, and has no knowledge of, any
Release of any such Hazardous Materials on-site or off-site of any
Hotel other than such releases that, individually or in the aggregate,
will not have a material adverse effect on Lessee.
6.2 Deliverables. Prior to the Commencement Date, Lessor will
deliver to Lessee, or provide to Lessee, access to, true and correct copies of
each of the following to the extent not otherwise in the possession of Lessee
and to the extent provided to Lessor pursuant to the terms of the Agreement and
Plan of Merger by and between Lessor and Supertel Hospitality, Inc. dated as of
the date hereof.
(a) Leases. Each Lease covering or relating to the Hotel,
together with any amendments thereto or other documents creating
further obligations or agreements in connection therewith.
(b) Operating Statements. Operating statements covering the
Hotel for the fiscal year ended December 31, 1997.
(c) Tax Statements. Copies of the most recent ad valorem and
personal property tax statements with respect to the Hotel received.
(d) Plans and Specifications. A full set of "as-built" plans,
specifications and architectural floor plans for all of the
improvements to the extent available, and the name and address of the
project architects, if known.
(e) Operating Agreements. A list of all operating agreements
for the Hotel together with a copy of each operating agreement.
(f) List of Defects. A list of all defects or malfunctions
affecting any part of the Hotel and of which Lessor has knowledge with
respect to foundations, walls, roofs, heating, electrical, plumbing or
air conditioning equipment or systems, and drainage or sewage equipment
or systems other than such defects or malfunctions that, individually
or in the aggregate, will not result in a material adverse effect in
the operation of the Hotel.
(g) Insurance Policies. Copies of all of Lessor's fire, hazard
liability and other insurance policies currently in force with respect
to the Hotel.
(h) Commission Agreements. All leasing or other commission
agreements with respect to the Hotel and a list of all unpaid
commissions which identifies the payee, amount and date or event upon
which such commission will become due and payable.
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(i) Updates to the "Phase 1" environmental site assessment for
the Hotel.
(j) Any available written architectural review of the Hotel
(an "Architectural Review") prepared to determine the Hotel's
compliance with Architectural Barriers Legislation by an architect
certified as to such matters and reasonably acceptable to Lessee. Such
Architectural Review shall contain an estimate of the cost, if any, to
bring the Hotel into compliance with all Architectural Barriers
Legislation.
6.3 Property Reports. Lessor shall, as soon as possible but in
no event later than the Commencement Date, cause to be furnished to Lessee:
(a) Copies of the current Title Policies held by Lessor as
to the Hotel;
(b) Any Title Updates as to the Hotel where there is existing
title insurance and, at Lessor's option, title reports or updates to
legal opinions where there are legal opinions, in all cases dated as of
a date following the date hereof. At such time as Lessor causes the
Title Updates or such reports or opinions to be furnished to Lessee,
Lessor shall further cause to be furnished to Lessee true, correct, and
legible copies of all instruments referred to in each Title Update as
conditions or exceptions to title to the Hotel, including liens, which
have not previously been provided pursuant to Section 6.3(a), and a
certificate stating that a search has been made of the state and county
records wherein financing statements and security agreements are filed
pursuant to the Uniform Commercial Code of the state in which the Hotel
is located and that such search indicates all security interests or
liens of any kind or nature, including, but not limited to, any
equipment financing or leasing arrangements, that are claimed by any
person against the Hotel, or any part thereof; and
(c) A copy of any available Survey of each parcel of Land and
the Leased improvements located thereon, prepared by the Surveyor.
6.4 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.
6.5 Lessee's Personal Property. On Commencement Date, all
Inventory will be transferred without consideration from Lessor to Lessee for
use on the Leased Property and 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 below), at its
expense, install, affix or assemble or place on any parcels of the Land or in
any of the Lease 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 6.5 and
the conditions set forth below, remove any of Lessee's Personal Property set
forth on such list at any time during
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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
thirty (30) days following the expiration or earlier termination of the Term
shall be considered abandoned by Lessee and may be appropriated, sold, destroyed
or otherwise disposed of by Lessor without first giving Notice thereof to
Lessee, without any payment to Lessee and without any obligation to account
therefor. Lessee will, at its expense, restore the Leased Property to the
condition required by Section 9.1(c), including repair of all damage to the
Leased Property caused by the removal of Lessee's Personal Property by Lessee.
Upon Commencement Date, Lessee received all Inventory on hand at the Leased
Premises; upon the expiration or earlier termination of the Term, Lessee shall
leave all Inventory on hand at the Leased Property in amounts and condition
similar to the amounts and condition of the Inventory on hand upon Commencement
Date. Lessee may make such financing arrangements, title retention agreements,
leases or other agreements with respect to Lessee's Personal Property as it sees
fit provided that Lessee first advises Lessor of any such arrangement and such
arrangement expressly provides that in the event of Lessee's default thereunder,
Lessor (or its designee) may assume Lessee's obligations and rights under such
arrangement.
ARTICLE VII
7.1 RESERVED.
7.2 Use of the Leased Property.
(a) Lessor covenants that it will proceed with all due
diligence and will exercise reasonable efforts to obtain and deliver,
at Lessor's cost, to Lessee and thereafter Lessee will use its best
efforts to maintain all approvals needed to use and operate the Leased
Property and the Hotel under applicable local, state and federal law.
(b) Lessee shall use or cause to be used the Leased Property
as a hotel facility, and for such other uses as may be necessary or
incidental to such use or such other use as otherwise approved by
Lessor (the "Primary Intended Use"), which approval shall not be
unreasonably withheld. No use shall be made or permitted to be made of
the Leased Property, and no acts shall be done, which will cause the
cancellation or increase the premium of any insurance policy covering
the Leased Property or any part thereof (unless another adequate policy
satisfactory to Lessor is available and Lessee pays any premium
increase), nor shall Lessee sell or permit to be kept, used or sold in
or about the Leased Property any article which may be prohibited by law
or fire underwriter's regulations. Lessee shall cause compliance 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. The cost of compliance will be
as otherwise set forth in this Lease and the Master Lease Agreement.
(c) Subject to the terms of this Lease and the Master Lease
Agreement, Lessee covenants and agrees that during the Term it will,
unless prohibited by Applicable Law,
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(i) operate continuously the Leased Property as a hotel facility, (ii)
comply with the operational provisions of the Franchise Agreement,
(iii) not terminate or amend the Franchise Agreement without the
consent of Lessor (which shall not be unreasonably withheld or
delayed), (iv) use its best efforts to maintain appropriate
certifications and licenses for such use, and (v) seek to maximize the
Gross Revenues generated therefrom consistent with sound business
practices.
(d) Lessee shall not commit or suffer to be committed any
waste on the Leased Property, or in the Hotel, nor shall Lessee cause
or permit any nuisance thereon.
(e) Lessee shall neither suffer nor permit the Leased Property
or any portion thereof, or Lessee's Personal Property, to be used in
such a manner as (i) might reasonably tend to impair Lessor's (or
Lessee's, as the case may be) title thereto or to any portion thereof,
or (ii) may reasonably make possible a claim or claims of adverse usage
or adverse possession by the public, as such, or of implied dedication
of the Leased Property or any portion thereof, except as necessary in
the ordinary and prudent operation of the Hotel on the Leased Property.
7.3 Lessor to Grant Easements, etc. Lessor will, from time to
time, so long as no Event of Default has occurred and is continuing, at the
request of Lessee (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, in the opinion of such officer, that such grant, release,
dedication, transfer, petition or amendment does not interfere with the proper
conduct of the business of Lessee on the Leased Property and does not materially
reduce the value of the Leased Property.
ARTICLE VIII
8.1 Compliance with Legal and Insurance Requirements, etc. Except
as otherwise provided in this Lease or the Master Lease Agreement, Lessee will
promptly pay from the Personalty Reserve or cause to be paid or reimbursed from
FF&E Reserve, as applicable, amounts necessary to (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) prepare,
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
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thereof. Reimbursement from FF&E Reserve shall be made within ten (10) days of
the date invoices or receipts for the amount of reimbursement are delivered to
Lessor.
8.2 Legal Requirement Covenants. Subject to Section 8.3(b),
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 use its best efforts to acquire and maintain all appropriate
licenses, certifications, permits and other authorizations and approvals need 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 conform to all Legal Requirements, unless
the same are finally determined by a court of competent jurisdiction to be
unlawful (and Lessee shall require all sub-tenants, invitees or others within
its control so to comply with all Legal Requirements). Lessee may, however, upon
prior Notice to Lessor, contest the legality or applicability of any such Legal
Requirement or any licensure or certification decision if Lessee maintains such
action in good faith, with due diligence, without prejudice to Lessor's rights
hereunder, and at Lessee's sole expense. If by the terms of any such Legal
Requirement compliance therewith pending the prosecution of any such proceeding
may legally be delayed without the incurrence of any charge or liability of any
kind, or the filing of any lien, against the Hotel or Lessee's leasehold
interest therein and without subjecting Lessee or Lessor to any liability, civil
or criminal, for failure so to comply therewith, Lessee may delay compliance
therewith until the final determination of such proceeding. If any lien, charge
or civil or criminal liability would be incurred by reason of any such delay,
Lessee, on the prior written consent of Lessor, which consent shall not be
unreasonably withheld or delayed, may nonetheless contest as aforesaid and delay
as aforesaid provided that such delay would not subject Lessor to criminal
liability and Lessee both (a) furnishes to Lessor security reasonably
satisfactory to Lessor against any loss or injury by reason of such contest or
delay and (b) prosecutes the contest with due diligence and in good faith.
8.3 Environmental Covenants. Lessor and Lessee (in addition to,
and not in definition of, Lessee's covenants and undertakings in Sections 8.1
and 8.2 hereof) covenant and agree as follows:
(a) At all times during the Term and until such time as Lessee
vacates the Leased Property and surrenders possession of the same to
Lessor, Lessee shall comply in all material respects with all
Environmental Laws applicable to the Leased Property and the operations
thereon during such time. Lessee agrees to give Lessor and Lessor
agrees to give Lessee prompt Notice of each of the following of which
it has actual knowledge, to-wit: (A) all Environmental Liabilities, (B)
all pending, threatened or anticipated Proceedings, and all notices,
demands, requests or investigations, relating to any Environmental
Liability or relating to the issuance, revocation or change in any
Environmental Authorization required for operation of the Leased
Property; and (C) all Releases at, on, in, under or in any way
affecting the Leased Property.
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(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 negligence 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 or delayed; provided, however, that such approval shall not be
required in the case of defense by counsel designated by any insurance
company undertaking such defense pursuant to any applicable policy of
insurance. Each Indemnified Party shall have the right to employ
separate counsel in any such Proceeding and to participate in the
defense thereof, but the fees and expenses of such counsel will be at
the sole expense of such Indemnified Party unless such counsel has been
approved by the Indemnifying Party, which approval shall not be
unreasonably withheld or delayed. The Indemnifying Party shall not be
liable for any settlement of any such Proceeding made without its
consent, which shall not be unreasonably withheld or delayed, but if
settled with the consent of the Indemnifying Party, or if settled
without its consent (if its consent shall be unreasonably withheld or
delayed), or if there be a final, nonappealable judgment for an
adversary party in any such Proceeding, the Indemnifying Party shall
indemnify and hold harmless the Indemnified Parties from and against
any liabilities incurred by such Indemnified Parties by reason of such
settlement or judgement.
(e) At any time any Indemnified Party has reason to believe
circumstances exist which could reasonably result in an Environmental
Liability, upon reasonable prior Notice to Lessee stating such
Indemnified Party's basis for such belief, an Indemnified Party shall
be given immediate access to the Leased Property (including, without
limitation, 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 all
relevant documents and records regarding the matter as to which a
responsibility, liability or obligation is asserted or which is the
subject of any Proceeding; provided that such access may be conditioned
or restricted as may be reasonably necessary to ensure compliance with
law and the safety of personnel and facilities or to protect
confidential or privileged information. All Indemnified Parties
requesting such immediate access and cooperation shall endeavor to
coordinate such efforts to result in as minimal interruption of the
operation of the Leased Property as practicable.
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(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 Lease.
For purposes of this Section 8.3, all amounts for which any
Indemnified Party seeks indemnification shall be computed net of (i)
any actual income tax benefit resulting therefrom to such Indemnified
Party, (ii) any insurance proceeds received (net of tax effects) with
respect thereto, and (iii) any amounts recovered (net of tax effects)
from any third parties based on claims the Indemnified Party has
against such third parties which reduce the damages that would
otherwise be sustained; provided that in all cases, the timing of the
receipt or realization of insurance proceeds or income tax benefits or
recoveries from third parties shall be taken into account in
determining the amount of reduction of damages. Each Indemnified Party
agrees to use its reasonable efforts to pursue, or assign to Lessee or
Lessor, as the case may be, any claims or rights it may have against
any third party which would materially reduce the amount of damages
otherwise incurred by such Indemnified Party.
Notwithstanding anything to the contrary contained in this
Lease, if Lessor shall become entitled to the possession of the Leased
Property by virtue of the termination of the Lease or repossession of
the Leased Property, then Lessor may assign its indemnification rights
under Section 8.3 of this Lease (but not any other rights hereunder) to
any Person to whom Lessor subsequently transfers the Leased Property,
subject to the following conditions and limitations, each of which
shall be deemed to be incorporated into the terms of such assignment,
whether or not specifically referred to therein:
(A) The indemnification rights referred to in this
Section 8.3 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;
(B) Such indemnification rights shall be limited to
Environmental Liabilities relating to or specifically
affecting the Leased Property during the Term; and
(C) Any assignment of such indemnification rights
shall be limited to the immediate transferee of Lessor, and
shall not extend to any such transferee's successors or
assigns.
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ARTICLE IX
9.1 Maintenance, Repair and Improvements.
(a) Lessee will cause the Leased Property to be 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, in accord with the terms of the Master Lease Agreement
and except as otherwise provided in Section 9.1(b), Article XIV or
Article XV with reasonable promptness, will arrange for all necessary
and appropriate repairs, replacements and improvements thereto of every
kind and nature, whether interior or exterior, ordinary or
extraordinary, foreseen or unforeseen or arising by reason of a
condition existing prior to the commencement of the Term of this Lease
(concealed or otherwise), or required by any law, ordinance or rule or
regulation established by any Government agency having jurisdiction
over the Leased Property. 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. The
FF&E Reserve established under the Master Lease Agreement shall be used
for all replacement, refurbishment, enhancement, and improvements of
the Furniture, Fixtures, and Equipment and for the capitalized repair,
refurbishment, replacement, and improvement of the Fixtures and of the
Leased Improvements. Lessor shall reimburse Lessee from the FF&E
Reserve for all such expenditures within ten (10) days of the date of
receipt by Lessor from Lessee of an invoice or receipt evidencing the
same as provided in the Master Lease Agreement. Lessee shall bear the
cost of repair of the Furniture, Fixtures and Equipment to the extent
the costs and expenses associated therewith are not capitalized
repairs.
(b) Notwithstanding Lessee's obligations under Section 9.1(a),
except to the extent of damage caused by Lessee's negligence or willful
misconduct or that of its employees or agents, Lessor shall be required
to bear the cost of maintaining any underground utilities and the
structural elements of the Leased Improvements, including exterior
walls and the roof of the Hotel. Lessor shall have the right to give,
record and post, as appropriate, notices of nonresponsibility under any
mechanic's lien laws now or hereafter existing.
(c) Nothing contained in this Lease and no action or inaction
by Lessor shall be construed as (i) constituting the request of Lessor,
expressed or implied, to any contractor, subcontractor, laborer,
materialman or vendor to or for the performance of any labor or
services or the furnishing of any materials or other property for the
construction, alteration, addition, repair or demolition of or to the
Leased Property or any part thereof, or (ii) giving Lessee any right,
power or permission to contract for or permit the performance of any
labor or services or the furnishing of any materials or other property
in such fashion as would permit the making of any claim against Lessor
in respect thereof
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56
or to make any agreement that may create, or in any way be the basis
for any right, title, interest, lien, claim or other encumbrance upon
the estate of Lessor in the Leased Property, or any portion thereof.
(d) Lessee will, upon the expiration or prior termination of
the Term, vacate and surrender the Leased Property to Lessor in the
condition in which the Leased Property was originally received from
Lessor, except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Lease or the Master
Lease Agreement and except for ordinary wear and tear (subject to the
obligation of Lessee to maintain the Leased Property in good order and
repair during the entire Term), or damage by casualty or condemnation.
9.2 Encroachments, Restrictions, etc. If any of the Leased
Improvements, at any time hereafter, materially encroach upon any property,
street or right-of-way adjacent to the Leased Property, or violate the
agreements or conditions contained in any lawful restrictive covenant or other
agreement affecting the Leased Property, or any part thereof, or impair the
rights of others under any easement or right-of-way to which the Leased Property
is subject, then promptly upon the request of Lessor or at the behest of any
person affected by any such encroachment, violation or impairment, Lessee shall
notify Lessor and Lessor shall, at Lessor's expense, 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 Lessor 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.
9.3 Reimbursements. Lessor shall reimburse the Lessee for all
costs, fees and expenses incurred under Section 9.1 for which Lessor or the FF&
E Reserve are responsible within ten (10) days of the receipt from Lessee of
written notice of the amount due, as provided in the Master Lease Agreement,
failing which the amount due shall bear interest at the Overdue Rate. Lessee
shall have the remedy provided in the Master Lease Agreement.
ARTICLE X
10.1 Alterations. After receiving written approval of Lessor,
which approval shall not be unreasonably withheld or delayed, Lessee shall have
the right to make such additions, modifications or improvements to the Leased
Property from time to time as Lessee deems desirable for its permitted uses and
purposes, provided that such action will not significantly alter the character
or purposes or significantly detract from the value or operating efficiency
thereof and will not significantly impair the revenue-producing capability of
the Leased Property or adversely
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affect the ability of Lessee to comply with the provisions of this Lease. The
cost of such additions, modifications or improvements to the Leased Property
shall be reimbursed to Lessee from the FF&E Reserve within ten (10) days, and
all such additions, modifications and improvements shall 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. To the extent such alteration
is required in order for the Leased Premises to remain in compliance with the
Franchise Agreement, the cost of such alteration shall be paid out of the FF&E
Reserve to the extent available, and otherwise shall be paid by Lessor.
10.2 Salvage. Subject to the rights of any third parties, (e.g.
insurance companies), all materials which are scrapped or removed in connection
with the making of repairs required by Article IX or X shall be or become the
property of Lessee unless, within ten (10) days of receipt of Notice with
respect to the existence of such salvaged items, Lessor notifies Lessee prior to
removal that Lessor wants the items removed or scrapped in which case Lessor
shall arrange for their timely retrieval from the Premises.
10.3 Lessor Alterations. Lessor shall have the right, upon prior
written notice to Lessee, to make or cause to be made alterations to the Leased
Property required in connection with (a) Legal Requirements, (b) maintenance of
the Franchise Agreement, and (c) the performance by Lessor of its obligations
under this Lease. Lessor shall further have the right, but not the obligation,
to make such other additions to the Leased Property as it may reasonably deem
appropriate during the term of the Lease, subject to Lessee's approval which
shall not be unreasonably withheld. All such work unless necessitated by
Lessee's acts or omissions (in which event work shall be paid for by Lessee)
shall be performed at Lessor's expense and shall be done after reasonable notice
to and coordination with Lessee, so as to minimize any disruptions or
interference with the operation of the Facility. If Lessee withholds its consent
to any additions or other work which Lessor has the right, but not the
obligation, to make pursuant to the foregoing provisions of this Section 10.3,
the matter shall be referred to arbitration pursuant to the provisions of
Section 38.1.
10.4 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.
10.5 Construction Affiliates. Lessor authorizes Lessee or an
affiliate of Lessee to perform repair, renovation, maintenance, improvement, and
construction work on the Leased Property. Lessor authorizes separate payment of
a construction profit to Lessee, or an affiliate of Lessee, in the amount equal
to seven and one-half percent (7.5%) of all costs of the work, including, but
not limited to, in-house costs directly related to the construction project, for
the construction of a new hotel, for any additions or improvements to the hotel,
or for the repair,
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maintenance or renovation of any of the Leased Property that Lessee's
construction division or Lessee's construction affiliate oversees or manages.
The parties may, by mutual agreement, agree to a different construction
management fee.
ARTICLE XI
11.1 Liens. Subject to the provisions 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 included as exceptions in the title
policy insuring Lessor's interest in the Leased Property, (c) restrictions,
liens and other encumbrances which are consented to in writing by Lessor or any
easements granted pursuant to the provisions of Section 7.3 of this Lease, (d)
liens for those taxes upon Lessor or the Leased Property which Lessee is not
required to pay hereunder, (e) subleases permitted by Article XXII hereof, (f)
liens for Impositions or for sums resulting from noncompliance with Legal
Requirements so long as (i) the same are not yet payable or are payable without
the addition of any fine or penalty or (ii) 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 (i) the payment of such sums shall not be postponed under any
related contract for more than 60 days after the completion of the action giving
rise to such lien and such reserve or other appropriate provisions as shall be
required by law or generally accepted accounting principles shall have been made
therefor or (ii) any such liens are in the process of being contested as
permitted by Article XII hereof, and (h) any liens which arise from items the
costs for which are the responsibility of Lessor pursuant to this Lease.
ARTICLE XII
12.1 Permitted Contests. Lessee shall have the right to contest the
amount or validity of any Imposition to be paid by Lessee or any Legal
Requirement or 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 XII 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
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Claims which may be assessed against or become a Claim on the Leased Property,
or any part thereof, in said legal proceedings. Lessee shall furnish Lessor and
any lender of Lessor with reasonable evidence of such deposit within five days
of the same. Lessor agrees to join in any such proceedings if the same be
required legally to prosecute such contest of the validity of such Claims;
provided, however, that Lessor shall not thereby be subjected to any liability
for the payment of any costs or expenses in connection with any proceedings
brought by Lessee; and Lessee covenants to indemnify and save harmless Lessor
from any such costs or expenses. Lessee shall be entitled to any refund of any
Claims and such charges and penalties or interest thereon which have been paid
by Lessee or paid by Lessor and for which Lessor has been fully reimbursed. In
the event that Lessee fails to pay any Claims when due or to provide the
security therefor as provided in this Article XII and diligently to 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 as Additional Charges at the next Payment Date provided for
in this Lease; provided, however, that should the giving of such Notice risk
loss to the Leased Property or cause damage to Lessor, then Lessor shall give
such Notice as is practical under the circumstances. Lessor reserves the right
to contest any of the Claims at its expense not pursued by Lessee. Lessor and
Lessee agree to cooperate in coordinating the contest of any Claims.
ARTICLE XIII
13.1 General Insurance Requirements. During the Term of this Lease,
Lessee shall at all times keep the Leased Property insured in conjunction with
all Other Properties with the kinds and amounts of insurance described below, or
such other insurance coverage(s) as may be required by the Franchise Agreement.
This insurance shall be written by companies authorized to issue insurance in
the State. Each policy required to be carried by Lessee shall also provide,
subject to proper notice, that any loss otherwise payable thereunder shall be
payable notwithstanding (i) the occupation or use of any of the Leased Property
for purposes more hazardous than permitted by the provisions of such policy;
(ii) any foreclosure or other action or proceeding taken by any mortgagee of
Landlord pursuant to any provision of the mortgage held by such mortgagee upon
the happening of an event of default therein, or (iii) any change in title or
ownership of any of the Leased Property. The applicable policies must name
Lessor as additional insured and loss payee as their interest may appear. Lessee
shall be the named insured on all applicable policies. Losses shall be payable
to Lessor or Lessee as provided in this Lease. Evidence of insurance shall be
deposited with Lessor. The policies on the Leased Property, including the Leased
Improvements, Furniture, Fixtures and Equipment, and Personal Property, shall
include the following:
(a) Building insurance on the "Special Form" (formerly "All
Risk" form) (including earthquake and flood in reasonable amounts as
determined by Lessor) in an amount not less than the then full
replacement cost (as defined in Section 13.2), if rebuilt, thereof or
such other amount which is acceptable to Lessor and Lessee, and
personal property insurance (on other than Lessee's Personal Property)
on the "Special Form" in the amount of the full replacement cost
thereof;
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(b) Insurance for loss or damage (direct and indirect) from
steam boilers, pressure vessels or similar apparatus, air conditioning
systems, piping and machinery and sprinklers;
(c) Commercial General Liability insurance, with amounts not
less than $1,000,000 each occurrence and $2,000,000 in the aggregate
inclusive of the following: bodily injury, death, property damage,
personal and advertising injury, fire legal liability and Products and
Completed Operations; $1,000,000 per occurrence and aggregate for
liquor law or "dram shop" liability, if liquor or alcoholic beverages
are served or sold on the Leased Property;
(d) Fidelity bonds or blanket crime policies with limits and
deductibles as may be reasonably determined 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;
(e) Vehicle liability insurance for owned, non-owned, and
hired vehicles, in the amount of $1,000,000 per accident;
(f) Guest's property insurance covering personal property of
others while on the Leased Property for which Lessor or Lessee is
legally responsible with a limit of not less than $5,000 in any one
occurrence or $25,000 annual aggregate;
(g) Excess liability insurance limits with amounts not less
than $10,000,000 and scheduling both general liability and vehicle
liability as underlying policies.
13.2 Replacement Cost. The term "full replacement cost" as used
herein shall mean the actual replacement cost of the Leased Property requiring
replacement, which is based on an agreed value, if replaced, including an
increased cost of construction endorsement, if available, and the cost of debris
removal. Lessee agrees to carry a limit of insurance equal to or greater than
the replacement cost. 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, if any, 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
Lessee and by Lessor, if any, covering the Lease, the Leased Property, the
Furniture, Fixtures and Equipment, the Hotel or Lessee's Personal Property,
including, without limitation, contents, fire and casualty insurance, shall, if
allowed by the relevant insurance companies, expressly waive any right of
subrogation on the part of the insurer against Lessor or Lessee, as the case may
be. The parties hereto agree that their
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policies will include such waiver clause or endorsement so long as the same are
obtainable with reasonable additional cost, and in the event of such an extra
charge the other party, at its election, may pay the same, but shall not be
obligated to do so.
13.5 Form Satisfactory, etc. All of the policies of insurance
referred to in this Article XIII to be maintained by Lessee shall be written in
a form with deductibles and by insurance companies satisfactory to Lessor.
Lessee shall pay all of the premiums therefor, and deliver certificates of
insurance to Lessor fifteen (15) days prior to the anniversary or effective
date, and in the event of the failure of Lessee either to effect such insurance
as herein called for or to pay the premiums therefor, or to deliver such
policies or certificates thereof to Lessor at the times required, Lessor shall
be entitled, but shall have no obligation, to effect such insurance and pay the
premiums therefor, and Lessee shall reimburse Lessor for any premium or premiums
paid by Lessor for the coverages required of Lessee under this Article XIII upon
written demand therefor, and Lessee's failure to repay the same within 30 days
after the Notice of such failure from Lessor shall constitute an Event of
Default within the meaning of Section 16.1. Each insurer mentioned in this
Article 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. A copy of insurance policies
will be provided by Lessee to Lessor within a reasonable amount of time.
13.6 Increase in Limits. If Lessor 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, 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 Article XIII.
13.7 Blanket Policy. Notwithstanding anything to the contrary
contained in this Article XIII, Lessee may bring the insurance provided for
herein within the coverage of a so-called blanket policy or policies of
insurance carried and maintained by Lessee; provided, however, that the coverage
afforded to Lessor 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 Reports On Insurance Claims. Lessee shall promptly
investigate and make a complete and timely written report to the appropriate
insurance company as to all accidents, claims for damage relating to the
ownership, operation and maintenance of the Hotel, any damage or destruction to
the Hotel and the estimated cost of repair thereof and shall prepare any and
all reports required by any insurance company in connection therewith. Lessee
shall provide Lessor notice of any such accident, claim, damage, or destruction
promptly after the occurrence thereof and at least on a quarterly basis. 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 per
occurrence amount of $25,000.
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ARTICLE XIV
14.1 nsurance Proceeds. 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 or to any other person designated by Lessor, provided such person agrees
to apply such proceeds in accordance with the terms of this Lease, and held in
trust by Lessor, or such other person in an interest-bearing account, shall be
made available, if applicable, for the purpose of reconstruction, replacement,
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 to
Lessee by Lessor from time to time for the reasonable costs of such
reconstruction, replacement, or repair upon satisfaction of reasonable terms and
conditions specified by Lessor. Lessor, or its designee, shall reimburse Lessee
the costs of reconstruction, replacement, and repair incurred by Lessee,
together with any construction allowed to Lessee or its Affiliate by Section
10.5 within ten (10) days of the date of receipt by Lessor of invoices or
receipts for the work performed and goods and services provided. Any excess
proceeds of insurance (and accrued interest) remaining after the completion of
the restoration or reconstruction of the Leased Property, as hereinafter set
forth, shall be paid to Lessor. If neither Lessor nor Lessee is required or
elects to repair and restore, and the Lease is terminated as described in
Section 14.2, all such insurance proceeds shall be retained by Lessor. All
salvage resulting from any risk covered by insurance shall be handled in the
manner provided in Section 10.2.
14.2 Reconstruction in the Event of Damage or Destruction Covered
by Insurance.
(a) If during the Term the Leased Property is totally or
partially destroyed by a risk covered by the insurance described in
Article XIII and the Hotel thereby is rendered Unsuitable for its
Primary Intended Use, Lessor, at its sole option shall either (i)
restore the Hotel within a nine (9) month period from date of damage to
substantially the same quality and condition as existed immediately
prior to the damage and so that it is no longer Unsuitable for its
Primary Intended Use and such destruction shall not terminate this
Lease and all obligations of Lessee hereunder shall remain unabated
during such restoration period or (ii) terminate this Lease as of the
date of the casualty and neither Lessor nor Lessee shall have any
further liability hereunder, except for any liabilities which have
arisen prior to or which survive such termination, and Lessor shall be
entitled to retain all insurance proceeds except for any amount thereof
paid with respect to Lessee's Personal Property. Lessor shall give
Lessee notice of its decision within thirty (30) days of the event of
destruction. Regardless of whether Lessor terminates this Lease
pursuant to the provisions of this Section 14.2, the Base Rent under
the Master Lease Agreement shall be reduced as provided in the Master
Lease Agreement. If Lessor terminates this Lease pursuant to the
provisions of this Section 14.2, the Percentage Rent thresholds under
the Master Lease Agreement shall be adjusted as provided in the Master
Lease Agreement.
(b) If during the Term the Leased Property is partially
destroyed by a risk covered by the insurance described in Article XIII,
but the Hotel is not thereby rendered Unsuitable for its Primary
Intended Use, Lessor shall, or Lessee, at the request of and at the
expense of
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Lessor, shall restore the Hotel to substantially the same condition as
existed immediately before the damage or destruction and otherwise in
accordance with this terms of the Lease. Such damage or destruction
shall not terminate this Lease; provided, however, that if Lessee
cannot within a reasonable time obtain all necessary government
approvals, including building permits, licenses and conditional use
permits, after diligent efforts to do so, to perform all required
repair and restoration work and to operate the Hotel for its Primary
Intended Use in substantially the same manner as that existing
immediately prior to such damage or destruction and otherwise in
accordance with the terms of the Lease either Lessor or Lessee may
terminate this Lease upon notice to the other. If Lessor or Lessee
restores the Hotel, the insurance proceeds shall be paid for the
reasonable costs of such restoration. Except for any amounts thereof
paid with respect to Lessee's Personal Property which shall be paid to
Lessee, any excess proceeds remaining after such restoration shall be
paid to the party undertaking the restoration.
(c) If the cost of the repair or restoration exceeds the
amount of proceeds received from the insurance maintained as required
under Article XIII, Lessor shall be obligated to contribute any excess
amounts needed to restore the Hotel. Such difference shall be paid by
Lessor, together with any other insurance proceeds, for application to
the cost of repair, replacement, and restoration in accord with Article
XIV.
14.3 Reconstruction in the Event of Damage or Destruction Not
Covered by Insurance. If during the Term the Hotel 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 Hotel Unsuitable for its
Primary intended Use, Lessor at its option shall either (a) at Lessor's sole
cost and expense, restore the Hotel to substantially the same condition it was
in immediately before such damage or destruction and such damage or destruction
shall not terminate this Lease, or (b) terminate this Lease and neither Lessor
nor Lessee shall have any further liability hereunder except for liabilities
which have arisen or occurred prior to such termination and those which
expressly survive termination of this Lease. In the event of termination of this
Lease as provided here, the Base Rent and the Percentage Rent thresholds under
the Master Lease Agreement shall be reduced as provided in the Master Lease
Agreement. If such damage or destruction is not material, Lessor shall, at
Lessor's cost, restore the Hotel to substantially the same condition as existed
immediately before the damage or destruction and otherwise in accordance with
the terms of this 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 and the business
interruption insurance maintained for the benefit of Lessee shall be paid to
Lessee.
14.5 Abatement of Rent. Except as specifically provided herein, any
damage or destruction due to casualty notwithstanding, this Lease shall remain
in full force and effect and Lessee's obligation to pay Rent required by this
Lease shall remain unabated by any damage or destruction. If this Lease has not
been terminated by Lessor and if and to the extent that any damage or
destruction results in a reduction of Gross Revenues, which would otherwise be
realizable from the operation of the Hotel, then Lessee shall continue to pay
Base Rent as under this Lease and shall
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be entitled to receive all proceeds from loss of income or business interruption
insurance during the period of restoration.
14.6 Construction by Lessee or its Affiliate. Lessee shall be
entitled to the construction profit described in Section 10.5 for any
restoration, replacement, and repair work after casualty loss.
ARTICLE XV
15.1 Definitions.
(a) "Award" means all compensation, sums or anything of value
awarded, paid or received on a total or partial Condemnation.
(b) "Condemnation" means a taking resulting from (i) the
exercise of any Government power, whether by legal proceedings or
otherwise, by a Condemnor, and (ii) a voluntary sale or transfer by
Lessor to any Condemnor, either under threat of condemnation or while
legal proceedings for condemnation are pending.
(c) "Condemnor" means any public or quasi-public authority, or
private corporation or individual, having the power of Condemnation.
(d) "Date of Taking" means the date the Condemnor has the
right to possession of the property being condemned.
15.2 Parties' Rights and Obligations. If during the Term there is
any Condemnation of all or any part of the Leased Property or any interest in
this Lease, the rights and obligations of Lessor and Lessee shall be determined
by this Article XV.
15.3 Total Taking. If title to the fee of the whole of the Leased
Property is condemned by any Condemnor, this Lease shall cease and terminate as
of the Date of Taking by the Condemnor. If title to the fee of less than the
whole of the Leased Property is so taken or condemned, which nevertheless
renders the Leased Property Unsuitable or Uneconomic for its Primary Intended
Use, Lessee and Lessor shall each have the option, by notice to the other, at
any time prior to the Date of Taking, to terminate this Lease as of the Date of
Taking. 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, with respect to this Hotel shall be
apportioned as of the Date of Taking, and Lessee shall promptly pay Lessor such
amounts. Base Rent attributable to this property and the Percentage Rent
threshold as affected by this Hotel shall be determined in accord with the
Master Lease Agreement and shall reduce Base Rent due under the Master Lease
Agreement.
15.4 Allocation of Award. In any Condemnation proceedings Lessor
and Lessee shall each seek its own Award based upon its own respective interest,
at its respective expense.
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15.5 Partial Taking.
(a) 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
Lessor is entitled but elects not to terminate this Lease as provided
in Section 15.3, then Lessor or, at Lessor's cost and election, Lessee
shall, with all reasonable dispatch and to the extent that the Award,
together with any amount provided by Lessor at its discretion, is
sufficient therefor and is made available to Lessee without any
contribution from Lessee, restore the untaken portion of any Leased
Improvements so that such Leased Improvements constitute a complete
architectural unit of the same general character, quality, and
condition (as nearly as may be possible under the circumstances) as the
Leased Improvements existing immediately prior to the Condemnation.
Lessor shall contribute to the cost of restoration that part of its
Award specifically allocated to such restoration, if any, together with
severance and other damages awarded for the taken Leased Improvements;
provided, however, that the amount of such contribution shall not
exceed such cost.
(b) In the event of a partial Taking as described in Section
15.5(a), which does not result in a termination of this Lease by
Lessor, the Base Rent, as applicable, shall be abated in the manner and
to the extent that is fair, just and equitable to both Lessee and
Lessor, taking into consideration, among other relevant factors, the
number of usable rooms, the amount of square footage, or the revenues
affected by such partial Taking. If Lessor and Lessee are unable to
agree upon the amount of such abatement within thirty (30) days after
such partial Taking, the matter shall be submitted to Arbitration as
provided for in Article XXXVIII hereof.
15.6 Temporary Taking. If the whole or any part of the Leased
property (other than the fee) or of Lessee's interest under this Lease is
condemned by any Condemnor for its temporary use or occupancy, this Lease shall
not terminate by reason thereof, and Lessee shall continue to pay, in the manner
and at the terms herein specified, the full amounts of Base Rent and Additional
Charges. Except only to the extent that Lessee may be prevented from so doing
pursuant to the terms of the order of the Condemnor, Lessee shall continue to
perform and observe all of the other terms, covenants, conditions and
obligations hereof on the part of Lessee to be performed and observed, as though
such Condemnation had not occurred. In the event of any Condemnation as in this
Section 15.6 described, the entire amount of any Award made for such
Condemnation allocable to the Term, whether paid by way of damages, rent or
otherwise, shall be paid to Lessee. Lessee covenants that upon the termination
of any such period of temporary use or occupancy it will, to the extent that its
Award made specifically with respect to restoration, repair, and replacement of
the Leased Premises is sufficient therefor and subject to Lessor's contribution
as set forth below, restore the Leased Property as nearly as may be reasonably
possible to the condition in which the same was immediately prior to such
Condemnation, unless such period of temporary use or occupancy extends beyond
the expiration of the Term, in which case Lessee shall not be required to make
such restoration. If restoration is required hereunder, Lessor shall contribute
to the cost of such
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restoration that portion of its entire Award that is specifically allocated to
such restoration in the judgment or order of the court, if any.
15.7 Lessee's Construction. Lessee or its construction affiliate
shall be entitled to construction profit provided in Section 10.5 hereof for any
construction work performed or managed hereunder.
ARTICLE XVI
16.1 Event of Default. if any one or more the following events
(individually, an "Event of Default" ) occurs:
(a) if Lessee fails to make payment of the Base Rent or
Percentage Rent within ten days after the same becomes due and payable;
(b) if Lessee fails to observe or perform any other term,
covenant or condition of this Lease which is not cured by Lessee within
a period of 30 days after receipt by Lessee of written Notice thereof
from Lessor specifying the default, unless such failure is curable but
cannot with due diligence be cured within a period of 30 days, in which
case it shall not be deemed an Event of Default if 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 120 days after such Notice.
(c) if Lessee shall, subject to cure, deferral, and objection
periods, (i) be unable to pay its debts as they become due, (ii) file,
or consent by answer or otherwise to the filing against it of, a
petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, (iii) make an
assignment for the benefit of its creditors, (iv) consent to the
appointment of a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial
part of its assets, (v) be adjudicated insolvent, or (vi) take
corporate action for the purpose of any of the foregoing; or if a court
or governmental authority of competent jurisdiction shall enter an
order appointing, without consent by Lessee, a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its assets, or if an order for
relief shall be entered in any case or proceeding for liquidation or
reorganization or otherwise to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of Lessee, or if any petition for any such
relief shall be filed against Lessee and such petition shall not be
dismissed within 120 days;
(d) 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;
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(e) except as otherwise provided herein or in the Master Lease
Agreement, 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);
(f) if, except as a result of damage, destruction or a partial
or complete Condemnation, Lessee voluntarily ceases operations on the
Leased Property for a period in excess of 30 consecutive days; or
(g) if an event of default has been declared by the franchisor
under the Franchise Agreement with respect to the Hotel as a result of
any action or failure to act by Lessee or any Person with whom Lessee
contracts for management services at the Hotel, and such default is not
cured by the later of (i) forty-five (45) days following Notice from
Lessor unless the cure of such default takes a longer period of time
when diligently pursued by Lessee, then such date upon which the cure
can be reasonably completed or (ii) such later date as is allowed for
Lessee under the Franchise Agreement to avoid termination of the
Franchise Agreement by the franchisor;
then, and in any such event, Lessor may exercise one or more remedies available
to it herein or at law or in equity, including, without limitation, its right to
terminate this Lease by giving Lessee not less than ten days' Notice of such
termination.
An Event of Default under clauses (c) or (d) above shall constitute an
Event of Default hereunder and under all Other Leases. All other Events of
Default set forth in this Section 16.1 shall be Events of Default only under
this Lease.
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 clauses (b), (f) or (g) during any time the
curing thereof is prevented by an Unavoidable Delay, provided that upon the
cessation of such Unavoidable Delay, Lessee remedies such default or Event of
Default without further delay.
16.2 Remedies. Upon the occurrence of an Event of Default, Lessor
shall have the right, at Lessor's option, to elect upon fourteen (14) days
Notice to Lessee to terminate this Lease, in which event Lessee shall thereupon
surrender the Leased Property to Lessor, and, if Lessee fails to so surrender,
Lessor shall have the right, without further notice, to enter upon and take
possession of the Leased Property and to expel or remove Lessee and its effects
without being liable for prosecution or any claim for damages therefor; and
Lessee shall, and hereby agrees to, indemnify Lessor the loss and damage which
Lessor suffers by reason of such termination in an amount equal
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to the total of (i) the reasonable costs of recovering the Leased Property in
the event that Lessee does not promptly surrender the Leased Property, and all
other reasonable expenses incurred by Lessor in connection with Lessee's
default; and (ii) the unpaid Base Rent earned as of the date of termination,
plus interest at the Overdue Rate accruing after the due date; and (iii) a sum
equal to the present value (using a factor for such purpose equal to the
interest payable at the time on ten (10) year treasury notes, plus four percent
(4%) per annum) of the Base Rent for the Leased Premises which Lessor would have
received under this Lease for the remainder of the Term then in effect, less
Base Rent which Lessee is able to prove Lessor could have received from the
balance of the Term then in effect (the "Termination Value"). Lessor
acknowledges that it has a duty to mitigate its damages by using its best
efforts to relet the Hotel at or above the Base Rent applicable to this Hotel;
16.3 Damages. 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.
16.4 Application of Funds. Subject to Lessee's first right, if
any, to designate the application of funds, any payments received by Lessor
under any of the provisions of this Lease during the existence or continuance
of any Event of Default shall be applied to Lessee's obligations in the order
that Lessor may determine or as may be prescribed by the laws of the State.
ARTICLE XVII
17.1 Lessor's Right to Cure Lessee's Default. If Lessee fails to
make any payment or to perform any act required to be made or performed under
this Lease, including, without limitation, Lessee's failure to comply with the
terms of any Franchise Agreement, and fails to cure the same within the relevant
time periods provided in Section 16.1, Lessor, without waiving or releasing any
obligation of Lessee, and without waiving or releasing any obligation or default
may (but shall be under no obligation to) at any time thereafter make such
payment or perform such act for the account and at the expense of Lessee, and
may, to the extent permitted by law, enter upon the Leased Property for such
purpose and, subject to Section 16.4, take all such action thereon as, in
Lessor's opinion, may be necessary or appropriate therefor. No such entry shall
be deemed an eviction of Lessee. All sums so paid by Lessor and all costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses, in each case to the extent permitted by law) so incurred, together
with a late charge thereon (to the extent permitted by law) at the Overdue Rate
from the date on which such sums or expenses are paid or incurred by Lessors,
shall be paid by Lessee to Lessor on demand. The obligations of Lessee and
rights of Lessor contained in this Article shall survive the expiration of
earlier termination of this Lease.
ARTICLE XVIII
18.1 Personal Property Limitation. Anything contained in this
Lease to the contrary notwithstanding, the average of the adjusted tax bases
of the items of Lessor's personal property that are leased to Lessee under this
Lease at the beginning and at the end of any Lease Year shall not exceed 15% of
the average of the aggregate adjusted tax bases of the Leased Property at the
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beginning and at the end of such Lease Year (the "Personal Property
Limitation"). Lessor and Lessee shall at all times cooperate in good faith and
use their best efforts to permit Lessor to comply with the Personal Property
Limitation, which compliance may include, by way of example only and not by way
of limitation or obligation, the purchase by Lessee at fair market value of
personal property in excess of the Personal Property Limitation. All such
compliance shall be effected in a manner which has no net economic detriment to
Lessee and will not jeopardize Lessor's status as a real estate investment trust
under the applicable provisions of the Code. This Section 18.1 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.
18.2 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.
18.3 Sublease Tenant Limitation. Anything contained in this Lease
to contrary notwithstanding, Lessee shall not sublease the Leased Property to,
or enter into any similar arrangement with, any Person in which Lessor 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.
18.4 Lessee Ownership Limitations. Anything contained in this
Lease to the contrary notwithstanding Lessor shall not take, or permit an
Affiliate of Lessor to take, any action that would cause Lessor to own,
directly or indirectly, a 10% or more interest in the Lessee within the meaning
of Section 856(d)(2)(B) of the Code, or any similar or successor provision
thereto. Anything contained in this Lease to the contrary notwithstanding,
Lessee shall not take, or permit an Affiliate of Lessee to take, any action
that would cause Lessor to own, directly or indirectly, a 10% or more interest
in the Lessee within the meaning of Section 856(d)(2)(B) of the Code, or any
similar or successor provision thereto.
18.5 Lessee Officer and Employee Limitation. If a Person serves as
both (a) a director of Lessee (or any Person who furnishes or renders services
to the tenants of the Leased Property, or manages or operates the Leased
Property) and (b) a trust manager and officer (or employee) of Lessor, that
Person shall not receive any compensation for serving as a director of Lessee
(or any Person who furnishes or renders services to the tenants of the Leased
Property, or manages or operates the Leased Property). Furthermore, if a Person
serves as both (a) a trust manager of Lessor and (b) a director and officer (or
employee) of Lessee (or any Person who furnishes or renders services to the
tenants of the Leased Property, or manages or operates the Leased Property),
that Person shall not receive any compensation for serving as a director of
Lessee (or any Person who furnishes or renders services to the tenants of the
Leased Property, or manages or operates the Leased Property).
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ARTICLE XIX
19.1 Holding Over. If Lessee for any reason remains in possession
of the Leased Property after the expiration or earlier termination of the Term,
such possession shall be as a tenant at sufferance during which time Lessee
shall pay Rent as set forth herein. 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 XX
20.1 RESERVED.
ARTICLE XXI
21.1 Indemnification. Notwithstanding the existence of any
insurance, and without regard to the policy limits of any such insurance or
self-insurance, but subject to Section 16.4 and Article VIII, Lessee will
protect, indemnify, hold harmless and defend Lessor from and against all
liabilities, obligations, claims, damages, penalties causes of action, costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses), to the extent permitted by law, imposed upon or incurred by or
asserted against Lessor Indemnified Parties by reason of: (a) any accident,
injury to or death of persons or loss of damage to property occurring during the
Term on or about the Leased Property or Lessee's Personal Property or adjoining
sidewalks, including, without limitation, any claims under any liquor liability,
"dram shop" or similar laws, (b) any litigation, proceeding or claim by
governmental entities or other third parties to which a Lessor Indemnified Party
is made a party or participant related to such use, misuse, non-use, management,
maintenance, or repair thereof during the Term 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.
Lessor shall indemnify, save harmless and defend Lessee Indemnified
Parties from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses imposed upon or incurred by or
asserted against Lessee Indemnified Parties as a result of (a) the gross
negligence or willful misconduct of Lessor arising in connection with this Lease
or (b) any failure on the part of Lessor to perform or comply with any of the
terms of this Lease or (c) any matters arising either before the Commencement
Date or after the end of the Term.
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Any amounts that become payable by an Indemnifying Party if determined
by litigation or otherwise, and if not timely paid, shall bear a late charge (to
the extent permitted by law) at the Overdue Rate from the date of such
determination to the date of payment. An Indemnifying Party, at its expense,
shall contest, resist and defend any such claim, action or proceeding asserted
or instituted against the Indemnified Party. The Indemnified Party, at its
expense, shall be entitled to participate in any such claim, action, or
proceeding, and the Indemnifying Party may not compromise or otherwise dispose
of the same without the consent of the Indemnified Party, which may not be
unreasonably withheld or delayed. Nothing herein shall be construed as
indemnifying a Lessor Indemnified Party against its own (or Lessor's) grossly
negligent acts or omissions or willful misconduct.
Lessee's or Lessor's liability for a breach of the provisions of this
Article XXI shall survive any termination of this Lease.
ARTICLE XXII
22.1 Subletting and Assignment. Subject to the provisions of
Article XIX and Sections 22.2 and 22.3 and any other express conditions or
limitations set forth herein, Lessee may, but only with the consent of Lessor
(which shall not be unreasonably withheld or delayed), (a) transfer, sell,
convey, or 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 actual or
potential Percentage Rent payable under this Lease. In the case of a subletting,
the sublessee shall comply with the provisions of Sections 22.2 and 22.3, and in
the case of an assignment, the assignee shall assume in writing and agree to
keep and perform all of the terms of this Lease on the 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 liable 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.
22.2 Attornment. Lessee shall insert in each sublease permitted
under Section 22.1 provisions to the effect that (a) such sublease is subject
and subordinate to all of the terms and provisions of this Lease and to the
rights of Lessor hereunder, (b) if this Lease terminates before the expiration
of such sublease, the sublessee thereunder will, at Lessor's option, attorn to
Lessor and waive any right the sublessee may have to terminate the sublease or
to surrender possession thereunder as a result of the termination of this Lease,
and (c) if the sublessee receives a Notice from Lessor or Lessor's assignees, if
any, stating that an uncured Event of Default exists under this Lease, the
sublessee shall thereafter be obligated to pay all rentals accruing under said
sublease directly to the party giving such Notice, or as such party may direct.
All rentals received from the sublessee
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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 or the Master Lease
Agreement.
22.3 Management Agreement. Lessee agrees that immediately upon
entering into any management or agency agreement relating to the management or
operation of the Hotel (the "Management Agreement"), Lessee shall provide Lessor
with a copy thereof. Lessee shall also provide Lessor with copies of any
amendments or modifications of the Management Agreement which are entered into
from time to time. The Management Agreement shall provide that (a) upon
termination of this Lease or termination of Lessee's right to possession of the
Leased Property for any reason whatsoever, the Management Agreement may be
terminated by Lessor without liability for any payment due or to become due to
the manager of the Hotel (the "Manager"), and (b) all fees and other amounts
payable by Lessee to the Manager shall be subordinate on a month to month basis
to Rent and other amounts payable by Lessee to Lessor hereunder prior to the
existence of an Event of Default, and shall be at all times subordinate to Rent
and such other amounts after the occurrence of an Event of Default. Lessor shall
have the right to approve any Manager who is not an Affiliate of Lessee.
ARTICLE XXIII
23.1 Officer's Certificates: Financial Statements; Lessor's
Estoppel Certificates and Covenants.
(a) At any time and from time to time upon not less than 10 days'
Notice by Lessor, Lessee will furnish to Lessor an Officer's Certificate
certifying that this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications), the date to which the Rent has been paid, whether to the
knowledge of Lessee there is any existing default or Event of Default hereunder
by Lessor and such other information as may be reasonably requested by Lessor.
Any such certificate furnished pursuant to this Section 23.1 may be relied upon
by Lessor, any lender and any prospective purchaser of the Leased property.
(b) Lessee will furnish the following statements and operating
information to Lessor:
(i) within 120 days after Lessee's fiscal year end, a copy of
the year end audit prepared by nationally recognized independent
certified public accountants, designated by Lessee which are acceptable
to Lessor, which acceptance shall not be unreasonably withheld, of
Lessee respecting the affairs of Lessee with respect to and the
financial condition of the Leased Property to confirm compliance by
Lessee and its Affiliates; and
(ii) internally prepared financial statements of Lessee within
45 days after each quarter of any Lease Year of Lessee with respect to
the affairs of Lessee with respect to and the financial condition of
the Leased Property; and
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(iii) upon written request of Lessor, on or after the 20th day
of each month, a detailed profit and loss statement for the Leased
Property for the preceding month, and a detailed accounting of revenues
for the Leased Property for the preceding month.
(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 be knowledge of Lessor there is any existing default or Event
of Default on Lessee's part hereunder, and such other information as may be
reasonably requested by Lessee.
ARTICLE XXIV
24.1 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. Lessee will provide customary gratuitous accommodations to
Lessor and its authorized representatives in connection with such inspections to
the extent such accommodations are available.
ARTICLE XXV
25.1 No Waiver. No failure by Lessor or Lessee to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the extent permitted by law, no waiver
of any breach shall affect or alter this Lease, which shall continue in full
force and effect with respect to any other than existing or subsequent breach.
ARTICLE XXVI
26.1 Remedies Cumulative. To the extent permitted by law but
subject to any provisions of this Lease expressly limiting the rights, powers
and remedies of either Lessor or Lessee, (e.g. the limitation of damages upon
Termination) each legal, equitable or contractual right, power and remedy of
Lessor or Lessee now or hereafter provided either in this Lease or by statute or
otherwise shall be cumulative and concurrent and shall be in addition to every
other right, power and remedy and the exercise or beginning of the exercise by
Lessor or Lessee of any one or more of such rights, powers and remedies shall
not preclude the simultaneous or subsequent exercise by Lessor or Lessee of any
or all of such other rights, powers and remedies.
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ARTICLE XXVII
27.1 Acceptance of Surrender. No surrender to Lessor of this Lease
or of the Leased Property or any part thereof, or of any interest therein, shall
be valid or effective unless agreed to and accepted in writing by Lessor, and no
act by Lessor or any representative or agent of Lessor, other than such a
written acceptance by Lessor, shall constitute an acceptance of any such
surrender.
ARTICLE XXVIII
28.1 No Merger of Title. There shall be no merger of this Lease or
of the leasehold estate created hereby by reason of the fact that the same
person or entity may acquire, own or hold, directly or indirectly: (a) this
Lease or the leasehold estate created hereby or any interest in this Lease or
such leasehold estate and (b) the fee estate in the Leased Property.
ARTICLE XXIX
29.1 Conveyance by Lessor. Subject to Lessee's rights to quiet
enjoyment and to non-disturbance in its use and possession of the Leased
Premises and subject to any terms and restrictions on transfer in the Master
Lease Agreement, Lessor shall have the unrestricted right to mortgage or
otherwise sell, transfer, convey, pledge or hypothecate the Leased Property,
provided that, if no Event of Default shall have occurred and be continuing at
the time of such transfer, Lessor shall only transfer the Leased Property
expressly subject to the continued existence of this Lease which shall be
acknowledged in writing by the transferee. If Lessor transfers the Leased
Premises after an Event of Default, such transfer shall constitute a termination
of this Lease and shall limit any damages of Lessor to those Rents due prior to
termination of this Lease. 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 has a net worth of $50,000,000 or more and 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, if,
but only if, Lessee shall have been given in writing right to control the FF&E
Reserve amounts established herein.
29.2 Amendment Upon Conveyance. Lessor and Lessee acknowledge this
Lease is to be read in conjunction with the Master Lease Agreement. Anything to
the contrary herein notwithstanding, Lessor shall not transfer the Leased
Premises to any party unless and until the Lessor and the Lessee shall have
revised and modified this Lease to incorporate the provisions of the Master
Lease Agreement referred to expressly or by implication herein or therein to
make this Lease able to stand alone and apart from the Master Lease Agreement
which maintaining for and providing to Lessee the same rights and opportunities
as currently provided under this Lease in conjunction with the Master Lease
Agreement. Any such transfer in contravention of this provision shall be void.
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29.3 Other Interests.
(a) 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,
including any interests created by Lessor in connection with
collateralizing the Leased Property or the Base Rent payments,
heretofore or hereafter granted by Lessor or which otherwise encumber
or affect the Leased Property and to any and all advances to be made
thereunder and to all renewals, modifications, consolidations,
replacements, substitutions, and extensions thereof (all of which are
herein called the "Mortgage"), provided that the Mortgage and all
security agreements delivered by Lessor in connection therewith shall
be subject to Lessee's rights under this Lease to the full and complete
quiet enjoyment of the Leased Property and to Lessee's rights to
receive all Gross Revenues of the Hotel prior to the earlier of the
occurrence of an Event of Default hereunder or the date that this Lease
is terminated and provided further that the holder of the Mortgage
shall execute a non-disturbance agreement in favor of and in form and
content reasonably agreeable to Lessee.
(b) Lessee shall, upon the written request of Lessor or any
existing or future Holder, (i) provide the Holder at the cost of the
Lessor or the Holder with copies of all licenses, permits, occupancy
agreements, operating agreements, leases, contracts and similar
agreements reasonably requested in connection with any existing or
proposed financing of the Leased Property and (ii) execute such
estoppel agreements and collateral assignments with respect to any of
the aforementioned agreements as may be reasonably requested by Holder
in connection with any such financing, provided that no such estoppel
agreement or collateral assignment shall in any way affect the terms or
affect adversely in any material respects any rights of Lessee under
this Lease.
(c) Lessee shall deliver, by Notice delivered in the manner
provided in Article XXXI to any Holder who gives Lessee written notice
of its status as a Holder at such Holder's address stated in the
Holder's written notice or at such other address as the Holder may
designate by later written notice to Lessee, a duplicate copy of any
and all Notices regarding any default which Lessee may from time to
time give or serve upon Lessor pursuant to the provisions of this
Lease. Copies of such Notices given by Lessee to Lessor shall be
delivered to such Holder simultaneously with delivery to Lessor. No
such Notice by Lessee to Lessor hereunder shall be deemed to have been
given unless and until a copy thereof has been mailed to such Holder.
The failure of Lessee to give notice to any Holder as provided herein
shall not limit Lessee in the exercise of any of its remedies upon
default by Lessor.
(d) At any time, and from time to time, upon not less than ten
(10) days' notice by a Holder to Lessee, Lessee shall deliver to such
Holder an estoppel certificate certifying as to the information
required in paragraph (c) of Article XXIII, and such other information
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as may be reasonably requested by such Holder. Any such certificate
may be relied upon by such Holder.
(e) Subject to Lessee's right to full and complete quiet
enjoyment of the Leased Premises, Lessee shall cooperate in all
reasonable respects, as generally described in Section 29.2, with any
transfer of the Leased Property to a Holder that succeeds to the
interest of Lessor in the Leased Property (including, without
limitation, in connection with the transfer of any franchise, license,
lease, permit, contract, agreement or similar item to such Holder or
such Holder's designee necessary or appropriate to operate the Leased
Property); provided, however, that any such cooperation shall not in
any way affect the Term nor affect adversely in any material respect
any rights of Lessor or Lessee under this Lease.
ARTICLE XXX
30.1 Quiet Enjoyment. So long as Lessee pays all Rent as the same
becomes due and complies with all of the terms of this Lease and performs its
obligations hereunder, in each case within the applicable grace and/or cure
periods, provided herein and in the Master Lease Agreement, 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. Lessor shall pay and perform all obligations of Lessor
under or with respect to any and all liens and encumbrances to which the Leased
Property is subjected at the Commencement Date and under or with respect to any
and all other liens, encumbrances, or mortgages placed upon the Leased Property
by Lessor. 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 30.1.
ARTICLE XXXI
31.1 Notices. All notices, demands, requests, consents, approvals
and other communications ("Notice" or "Notices") hereunder shall be in writing
and personally served or mailed (by registered or certified mail, return receipt
requested and postage prepaid), (a) if to Lessor c/o PMC Commercial Trust, 17290
Preston Road, Third Floor, Department 101, Dallas, Texas 75252, Attn: Lance B.
Rosemore and (b) if to Lessee, Norfolk Hospitality, Management Co., 309 North
5th Street, P.O. Box 1448, Norfolk, Nebraska 68702-1448, Attention: Richard L.
Herink, or to such other address or addresses as either party may hereafter
designate. Personally delivered Notice shall be effective upon receipt, and
Notice given by mail shall be complete at the time of deposit in the U.S. Mail
system, but any prescribed period of Notice and any right or duty to do any act
or make any response within any prescribed period or on a date certain after the
service of such Notice given by mail shall be extended five days.
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ARTICLE XXXII
32.1 Appraisers. If it becomes necessary to determine the Fair
Market Value or Fair Market Rental Value 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 10 days after Notice, Lessor (or Lessee, as
the case may be) shall by Notice to Lessee (or Lessor, as the case may be)
appoint a second person as appraiser on its behalf. The appraisers thus
appointed, each of whom must be a member of the American Institute of Real
Estate Appraisers (or any successor organization thereto) with at least five
years experience in the State appraising 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 Value thereof as of the relevant date (giving
effect to the impact, if any, of inflation from the date of their decision to
the relevant date); provided, however, that if only one appraiser shall have
been so appointed, then the determination of such appraiser shall be final and
binding upon the parties. If two appraisers are appointed and if the difference
between the amounts so determined does not exceed 5% of the lesser of such
amounts, then the Fair Market Value or Fair Market Rental Value shall be an
amount equal to 50% of the sum of the amounts so determined. If the difference
between the amounts so determined exceeds 5% of the lesser of such amounts, then
such two appraisers shall have 10 days to appoint a third appraiser. If no such
appraiser shall have been appointed within such 10 days or within 90 days of the
original request for a determination of Fair Market Value or Fair Market Rental
Value, 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 Value within 30 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 Value 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 XXXIII
33.1 Lessor May Grant Liens. Without the consent of Lessee, Lessor
may, subject to the terms and conditions set forth below in this Section XXXIII,
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, provided that, at all
times, each such lien is either subordinate to the terms of this Lease or the
holder of such lien has executed a non-disturbance agreement in form and content
reasonably agreeable to Lessee.
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33.2 Lessee's Right to Cure. Subject to the provisions of Section
33.3, if Lessor breaches any covenant to be performed by it under this Lease,
Lessee, after Notice to and demand upon Lessor, without waiving or releasing any
obligation hereunder, and in addition to all other remedies available to Lessee,
may (but shall be under no obligation at any time thereafter to) make such
payment or perform such act for the account and at the expense of Lessor. All
sums so paid by Lessee and all costs and expenses (including, without
limitation, reasonable attorneys' fees) so incurred, together with interest
thereon at the Overdue Rate from the date on which such sums or expenses are
paid or incurred by Lessee, shall be paid by Lessor to Lessee on demand. The
rights of Lessee hereunder to cure and to secure payment from Lessor in
accordance with this Section 33.2 shall survive the termination of this Lease
with respect to the Leased Property.
33.3 Breach by Lessor.
(a) 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 except in the case of payment of
reimbursements from the FF&E Reserve or otherwise herein which shall be
made within ten (10) days, 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 or unless such failure is
such that it interrupts operation of the Leased Property for its
Primary Intended Use making observance or performance due sooner than
thirty (30) days in which case Lessee may cure the default immediately
at the cost of Lessor. The time within which Lessor shall be obligated
to cure any such failure also shall be subject to extension of time due
to the occurrence of any Unavoidable Delay. If Lessor does not cure any
such failure within the applicable time period as aforesaid, Lessee may
declare the existence of a "Lessor Default" by a second Notice to
Lessor. Thereafter, Lessee may but shall not be obligated to forthwith
cure the same and, subject to the provisions of the following
paragraph, invoice Lessor for costs and expenses (including reasonable
attorneys' fees and court costs) incurred by Lessee in curing the same,
together with interest thereon from the date Lessor receives Lessee's
invoice, at the Overdue Rate.
(b) If Lessor shall in good faith dispute the occurrence of
any Lessor Default and Lessor, before the expiration of the applicable
cure period, shall give Notice thereof to Lessee, setting forth, in
reasonable detail, the basis therefor, no Lessor Default shall be
deemed to have occurred and Lessor shall have no obligation with
respect thereto until final adverse determination thereof, whether
through arbitration or otherwise; provided, however, that in the event
of any such adverse determination, Lessor shall pay to Lessee interest
at the Overdue Rate, from the date demand for such funds was made by
Lessee until paid.
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ARTICLE XXXIV
34.1 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 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.
34.2 Transition Procedures. Upon the expiration or termination of
the Term of this Lease, for whatever reason (other than a purchase of the Leased
Property by Lessee), Lessor and Lessee shall do the following (and the
provisions of this Section 34.2 shall survive the expiration or termination of
this Lease until they have been fully performed) and, in general, shall
cooperate in good faith to effect an orderly transition of the management lease
or of the Hotel. Nothing contained herein shall limit Lessor's rights and
remedies under this Lease if such termination occurs as the result of an Event
of Default.
(a) Transfer of Licenses. Lessee shall use reasonable efforts
(i) to transfer to Lessor or Lessor's nominee all licenses, operating
permits and other governmental authorizations and all contracts,
including the Franchise Agreement and all contracts with governmental
or quasi-governmental entities, that may be necessary for the operation
of the Hotel (collectively, "Licenses"), or (ii) if such transfer is
prohibited by law or Lessor otherwise elects, to cooperate with Lessor
or Lessor's nominee in connection with the processing by Lessor or
Lessor's nominee of any applications for, all Licenses; provided, in
either case, that the costs and expenses of any such transfer or the
processing of any such application shall be paid by Lessor or Lessor's
nominee.
(b) Leases and Concessions. Lessee shall assign to Lessor or
Lessor's nominee simultaneously with the termination of this Lease, and
the assignee shall assume and indemnify Lessee for, all leases and
concession agreements in effect with respect to the Hotel then in
Lessee's name, all of the costs, fees, and expenses of which shall be
paid by the assignee.
(c) Books and Records. Copies of all books and records for the
Hotel kept by Lessee pursuant to Section 3.6 shall be delivered, at
Lessor's expense and request, promptly to Lessor or Lessor's nominee,
simultaneously with the termination of this Lease, but such
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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,
Fixtures and Equipment and of the Leased Premises and Fixtures, with
respect to which deposits have been made with Lessee from the FF&E
Reserve or other funds of Lessor.
34.3 Waiver of Presentment, etc. Lessee and Lessor each waive all
presentments, demands for payment and for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, and notices
of acceptance and waive all notices of the existence, creation, or incurring of
new or additional obligations, except as expressly granted herein.
ARTICLE XXXV
35.1 Memorandum of Lease. Lessor and Lessee shall promptly, upon
the request of either party, enter into a short form memorandum of this Lease,
in form suitable for recording under the laws of the State in which reference to
this Lease, and all options contained herein, shall be made. Lessee shall pay
all costs and expenses of recording such memorandum of this Lease.
ARTICLE XXXVI
36.1 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 not less than all) of the assets of Lessee, tangible and
intangible, located and used on and 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 XXXII, 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.
ARTICLE XXXVII
37.1 Compliance with Franchise Agreement and Management Agreement.
To the extent any of the provisions of the Franchise Agreement or Management
Agreement, if any, impose a greater obligation on Lessee than the corresponding
provisions of this Lease, then Lessee shall operate in compliance with, and to
take all reasonable actions necessary to maintain, the Franchise Agreement,
including, without limitation, any territorial arrangements contained therein or
associated therewith, and any Management Agreement and to prevent breaches or
defaults under the
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provisions of the Franchise Agreement and any Management Agreement. It is the
intent of the parties hereto that Lessee shall comply in every respect with the
provisions of the Franchise Agreement and any Management Agreement so as to
avoid any material default thereunder during the term of this Lease. The cost of
compliance with the Franchise Agreement shall be borne by Lessee and Lessor as
otherwise set forth in this Lease and in the Master Lease Agreement. Lessee and
Lessor shall not terminate or enter into any modification of the Franchise
Agreement without in each such instance first obtaining the other's written
consent. Lessor and Lessee agree to cooperate fully with each other in the event
it becomes necessary to obtain a franchise extension or modification or a new
franchise for the Leased Property and in any transfer of the Franchise Agreement
to Lessor or any Affiliate thereof or any successor to Lessee upon the
termination of this Lease.
ARTICLE XXXVIII
38.1 Arbitration. In each case specified in this Lease in which it
shall become necessary to resort to arbitration, such arbitration shall be
determined as provided in this Section 38.1. The party desiring such arbitration
shall give Notice to that effect to the other party, and an arbitrator shall be
selected by mutual agreement of the parties, or if they cannot agree within
thirty (30) days of such notice, by appointment made by the American Arbitration
Association ("AAA") from among the members of its panels who are qualified and
who have experience in resolving matters of a nature similar to the matter to be
resolved by arbitration.
38.2 Alternative Arbitration. In each case specified in this Lease
for a matter to be submitted to arbitration pursuant to the provisions of this
Section 38.2, Lessor and Lessee shall select by mutual agreement any nationally
recognized accounting firm with a hospitality division of which neither Lessor
nor an Affiliate of Lessor nor Lessee or an Affiliate of Lessee is a significant
client to serve as arbitrator of such dispute within fifteen (15) days after
written demand for arbitration is received. In the event no nationally
recognized accounting firm satisfying such qualification is available and
willing to serve as arbitrator, the arbitration shall instead be administered as
set forth in Section 38.1.
38.3 Arbitration Procedures. In any arbitration commenced, a single
arbitrator shall be designated and shall resolve the dispute. The arbitrator's
decision shall be binding on all parties and shall not be subject to further
review or appeal except as otherwise allowed by applicable law. To the maximum
extent practicable, the arbitrator and the parties, and the AAA if applicable,
shall take any action necessary to insure that the arbitration shall be
concluded within ninety (90) days of the filing of such dispute. The fees and
expenses of the arbitrator shall be shared equally by Lessor and Lessee. Unless
otherwise agreed in writing by the parties or required by the arbitrator or AAA,
if applicable, arbitration proceedings hereunder shall be conducted in the
State. Notwithstanding formal rules of evidence, each party may submit such
evidence as each party deems appropriate to support its position and the
arbitrator shall have access to and right to examine all books and records of
Lessee and Lessor regarding the Hotel during the arbitration.
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IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
"LESSOR"
----------------------------------------
By:
------------------------------------
"LESSEE"
----------------------------------------
By:
------------------------------------
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IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
"LESSOR"
----------------------------------------
By:
------------------------------------
"LESSEE"
----------------------------------------
By:
------------------------------------
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SCHEDULE 4.6
Wingate Debt
1. $215,000 Promissory Note, dated December 29, 1995, payable to Hotel
Franchising Partnership d/b/a Wingate Inns, L.P. ("Wingate") for Las
Colinas.
2. $215,000 Promissory Note, dated December 29, 1995, payable to Wingate
for Houston Intercontential Airport.
1
EXHIBIT 99.1
PMC COMMERCIAL TRUST ACQUIRES 30 AMERIHOST INN(R) HOTELS
FOR $373 MILLION STRUCTURED AS A SALE-LEASEBACK
Dallas Texas, May 21, 1998: PMC Commercial Trust (AMEX:PCC), a Texas
real estate investment trust, today announced that it has signed a definitive
agreement to acquire and leaseback 30 AmeriHost(R) hotels with Amerihost
Properties, Inc. (NASDAQ:HOST), a hotel development, operating and management
company. The average age of these properties is less than 3 years. The
transaction is expected to close within 90 days subject to customary procedures
and documentation. This acquisition reflects a modification to PMC Commercial
Trust's strategic growth plan to target ownership in properties in addition to
providing mortgages. PMC Commercial Trust is actively exploring other
opportunities for property acquisitions and anticipates entering into another
definitive acquisition agreement within the next couple of days.
"The current yield on this transaction should allow PMC Commercial to
continue its growth while retaining the benefits of property ownership. The
possibilities of appreciation of the real property adds an element of future
income and growth not previously available within the PMC Commercial Trust
structure. The AmeriHost(R) brand is becoming one of the best known names in
the mid-priced sector of the market and we are looking forward to being
partners with Amerihost." said Andrew S. Rosemore, Chairman of the Board of
Trust Managers of PMC Commercial Trust.
Under the terms of the agreement, Amerihost Properties, Inc.
guarantees the 10 year lease on behalf of its wholly-owned subsidiary which is
the Lessee. The lease has an initial fixed payment of $7.3 million per year
with maximum 2 percent annual CPI increases beginning after the third year.
The contract also has two lease renewal options of five years each. The 30
hotels, with a total of 1,834 rooms, developed by Amerihost Properties, Inc.
are located in 13 states.
AmeriHost Inn(R) hotels are targeted to the mid-priced business and
leisure traveler. Each property acquired averages 60-80 rooms and features an
indoor swimming pool, fitness center and complimentary continental breakfast.
The AmeriHost Inn(R) hotel system includes 69 properties which are open and
operating and an additional 15 are under development.
"The sale and leaseback of these AmeriHost Inn(R) hotels will enable
us to grow our AmeriHost Inn(R) brand," said Michael P. Holtz, Amerihost
Properties, Inc., president and chief executive officer. "The fixed-rate lease
allows Amerihost to retain the upside earnings growth from these hotels, while
concurrently providing PMC Commercial Trust with a steady, attractive return on
their investment and capital appreciation of the properties."
PMC Commercial Trust headquartered in Dallas, Texas is a real estate
investment trust with a portfolio of loans predominantly to the hospitality
industry. The assets of PMC Commercial Trust are managed by a wholly-owned
subsidiary of PMC Capital, Inc. (AMEX:PMC).
Amerihost Properties, Inc., headquartered in Des Plaines, IL is a
hotel development, operations and management company that builds, owns, leases
and/or manages 90 mid-market hotels in 17 states, primarily in the Midwest.
2
Certain statements appearing in this press release, including the consummation
of the acquisition of the AmeriHost Inn(R) hotels by PMC Commercial Trust and
the company's strategic alternatives and comments on future profitability, can
ben construed as forward-looking statements within the meaning of Section 27A
of the Securities Act of 1934, as amended, and Section 21E of the Securities
Exchange Act of 1934 as amended. These statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
set forth in the forward-looking statements, including, without limitation,
risks relating to the contractual conditions to the sale transaction, the
development and operation of hotels, the availability of capital to finance
growth and the historical cyclicality of the lodging industry.
1
EXHIBIT 99.2
PMC COMMERCIAL TRUST ENTERS INTO DEFINITIVE AGREEMENT
TO ACQUIRE SUPERTEL HOSPITALITY, INC.
Dallas Texas, June 4, 1998: PMC Commercial Trust (Amex: PCC) and
Supertel Hospitality, Inc. (Nasdaq: SPPR) announced that they have entered into
an Agreement and Plan of Merger pursuant to which Supertel will merge with and
into PMC Commercial. The consideration to be paid by PMC Commercial would be
0.6 common shares of PMC Commercial (the "Common Shares") for each share of
Supertel, subject to an adjustment in the event the average trading price of
the Common Shares for the ten trading days ending five days before the
respective shareholder meetings to approve the merger drops below $17.50 or
increases above $24.00. The merger has been approved by the boards of both
companies, but is subject to a number of conditions, including approval by the
shareholders of PMC Commercial and the stockholders of Supertel.
Additionally, the agreement provides that the stockholders of Supertel
will receive a preclosing dividend of certain of Supertel's earnings and
profits which, if less than $3.00 per share of Supertel Common Stock, allows
Supertel to terminate the agreement. The special dividend would be payable
only if the merger occurs. The merger is expected to be consummated in
September or October 1998.
Under the agreement, PMC Commercial would acquire the hotel assets of
Supertel in a transaction valued at approximately $134 million, including
approximately $61 million of equity (based on the closing price of the PMC
Commercial common shares on June 3, 1998) with the remainder consisting of the
assumption of debt and/or cash.
The 62 hotels (containing 4,453 rooms) acquired by PMC Commercial
pursuant to the merger will be leased to Norfolk Hospitality Management Co.
(the "Lessee"), an entity to be owned by certain officers and employees of
Supertel. The Lessee will pay an annual base rent of $15,000,000 (including
certain reserve requirements of $600,000) plus additional rent in the amount of
20% of every dollar of annual gross revenues in the excess of $42,000,000 and
25% of every dollar of gross revenues in excess of $50,000,000. The lease
agreement has a five year initial term with options for additional two year
terms.
"The anticipated revenues from the hotels would allow PMC Commercial
to continue growth while acquiring the benefits of property ownership. This
acquisition allows continuity of present Supertel management. We are looking
forward to a longtime relationship with the successful, proven management team
from Supertel. The shareholders of both companies should be provided with an
attractive dividend yield plus the possibility of capital appreciation on this
investment. The possibility of appreciation of the 62 properties of Supertel
and the 30 properties to be acquired from Amerihost Properties, Inc. announced
two weeks ago adds an element of growth not previously available within the PMC
Commercial Trust structure." said Andrew S. Rosemore, Chairman of the Board of
Trust Managers of PMC Commercial.
Paul J. Schulte, President and Chief Executive Officer of Supertel
said, "The transaction between Supertel and PMC Commercial is in the best
interests of the stockholders of Supertel and
2
presents an opportunity for our respective shareholders to achieve long-term
strategic and financial benefits." Supertel owns and operates limited-service
motel properties under the Super 8, Comfort Inn and Wingate names. Supertel
has 62 motels, primarily in the Midwest and Texas.
A registration statement relating to the securities to be issued in
the merger will be filed with the Securities and Exchange Commission but has
not yet been filed or become effective. The securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This press release should not constitute an offer to sell or the
solicitation of any offer to buy nor shall there be any sale of the securities
in any state in which such offer, solicitation or sale would be unlawful prior
to the registration or qualification under the securities laws of any such
state.
Statements made in this press release that are forward-looking in
nature are intended to be "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934 and may involve risk and
uncertainties. These statements may differ materially from actual future
events or results. Readers are referred to documents filed by Supertel and PMC
Commercial with the Securities and Exchange Commission, including their Annual
Reports on Form 10-K for the year ended December 31, 1997, which identifies
significant risk factors which could cause actual results to differ from those
contained in the forward-looking statements.
