LEASE TERMINATION AGREEMENT

Exhibit 10.35

 

LEASE TERMINATION AGREEMENT

 

Dated: As of February 27, 2004

 

Summerfield Suites, Addison, Texas

Summerfield Suites, El Segundo, California

Summerfield Suites, Mt. Laurel, New Jersey

Summerfield Suites, Belmont, California

Summerfield Suites, Los Colinas (Irving), Texas

Sunrise Suites, Tinton Falls, New Jersey

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EXHIBITS:

 

Exhibit A-1: Description of Lease Agreements

Exhibit A-2: Description of Hotels

Exhibit A-3: Legal Description of Hotel Parcels

Exhibit B: Form of Termination of Leasehold Interests

Exhibit C: Form of Bill of Sale and General Assignment

Exhibit D: Form of Assignment of Occupancy Agreements

Exhibit E: Form of Non-Foreign Affidavit

Exhibit F: Form of Accommodation Agreement

Exhibit G: Form of Franchise Agreement

Exhibit G-1: Form of comfort letter pertaining to Franchise Agreement

Exhibit H: Intentionally Deleted

Exhibit I: Form of Mutual Termination and Release—Hotel License Agreement

Exhibit J: Form of Mutual Termination and Release – Management Agreement

 

SCHEDULES:

 

Schedule 1.2: Liquor Licenses

Schedule 3.1(c): Litigation (Terminating Lessors)

Schedule 3.1(d): Violation of Law (Terminating Lessors)

Schedule 3.1(e): Approval and Consents (Terminating Lessors)

Schedule 3.2(d): Litigation (Terminating Lessees)

Schedule 3.2(f): Consents and Approvals (Terminating Lessees)

Schedule 3.2(g): Intentionally Deleted

Schedule 3.2(h): Licenses

Schedule 3.2(i): Intentionally Deleted

Schedule 3.2(j): Service and FF&E Contracts

Schedule 3.2(k): Occupancy Agreements

Schedule 3.3: List of Hotel General Managers

Schedule 4.1(e): Intentionally Deleted

Schedule 4.5: Minimum Per Room Night Rates

 

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LEASE TERMINATION AGREEMENT

 

THIS LEASE TERMINATION AGREEMENT (this “ Agreement ”) dated as of February27, 2004 (the “ Effective Date ”) is made by and among SUMMERFIELD KPA LESSEE, L.P., a Kansas limited partnership (“ Summerfield KPA ”), SUMMERFIELD HOTEL LEASING COMPANY, L.P., a Kansas limited partnership (“ SHLC ”) and PATRIOT AMERICAN HOSPITALITY PARTNERSHIP, a Virginia limited partnership (“ PAHP ”) (Summerfield KPA, SHLC and PAHP are sometimes herein collectively called “ Terminating Lessees ” and individually, a “ Terminating Lessee ”) and INNKEEPERS SUMMERFIELD GENERAL, L.P., a Virginia limited partnership, (“ General I ”), INNKEEPERS SUMMERFIELD GENERAL II, L.P., a Virginia limited partnership (“ General II ”) and INNKEEPERS SUNRISE TINTON FALLS, L.P., a Virginia limited partnership (“ Sunrise ”) (General I, General II and Sunrise sometimes herein collectively called “ Terminating Lessors ” and individually, a “ Terminating Lessor ”), and is as follows:

 

W I T N E S S E T H:

 

RECITALS:

 

A. Terminating Lessees and Terminating Lessors executed those certain Lease Agreements described on Exhibit A-1 attached hereto (each, an “ Original Lease Agreement ” and collectively, the “ Original Lease Agreements ”), as amended by the Amended and Restated Lease Master Agreement dated effective as of October 22, 1998, by and among Terminating Lessors, Terminating Lessees and the other parties named therein (the “ Lease Master Agreement ”) covering the hotels described on Exhibit A-2 (each, a “ Hotel ” and collectively, the “ Hotels ”) on the land more particularly described on Exhibit A-3 attached hereto and made a part hereof (the “ Hotel Parcels ”). The Original Lease Agreements as amended by the Lease Master Agreement are herein collectively called the “ Lease Agreements ” and individually called a “ Lease Agreement .”

 

B. Terminating Lessors have agreed to accept the termination of the Terminating Lessees’ interests (individually, a “ Leasehold Interest ” and collectively, the “ Leasehold Interests ”) in the leasehold estates created under the Lease Agreements (individually, a “ Leasehold Estate ” and collectively, the “ Leasehold Estates ”) pursuant to the terms of this Agreement and to take certain other actions as expressly provided in this Agreement.

 

ARTICLE I

Termination of Leasehold

 

1.1 Termination of Leasehold . Subject to the terms, covenants, conditions and provisions herein set forth, each Terminating Lessee agrees to terminate each Lease Agreement executed by such Terminating Lessee and all of its right, title and interest thereunder as hereinafter provided, and each Terminating Lessor agrees, subject to the terms, covenants,

 

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conditions and provisions herein set forth, to (i) accept from each Terminating Lessee the termination of such Terminating Lessee’s leasehold interest under the Lease Agreement to which such Terminating Lessor is a party, (ii) execute and deliver a termination and release of the Lease Master Agreement and the Guaranty, respectively, and (iii) release the Letters of Credit.

 

1.2 Liquor Licenses . To the extent permitted by applicable law and requested by Terminating Lessors pursuant to Section 4.4 hereof, SFMB, Inc., a Delaware corporation (“ Liquor License Holder ”) agrees to assign, at no cost to Terminating Lessors, to the applicable Terminating Lessor (or the Operator, at the Terminating Lessor’s direction) and Terminating Lessors (or the Operator, if applicable) agree to accept all right, title and interest of Liquor License Holder in and to the existing liquor licenses held by Termination Lessees and Liquor License Holder and described on Schedule 1.2 attached hereto (the “ Liquor Licenses ”).

 

ARTICLE II

Consideration

 

2.1 Consideration . There will be no cash consideration to be paid by Terminating Lessors to Terminating Lessees for the termination of the Lease Agreements and transfer of certain personal property as herein provided. The consideration for the transactions contemplated by this Agreement shall be (a) the release by Terminating Lessors of any claims against and the obligations and liabilities of Terminating Lessees under the Lease Agreements, and (b) the release and return to Terminating Lessees of the Letters of Credit.

 

ARTICLE III

Representations and Warranties

 

3.1 Terminating Lessor’s Representations and Warranties . Each Terminating Lessor hereby represents and warrants, as to itself only, to Terminating Lessees that:

 

(a) Due Organization, Authority . Terminating Lessor is an entity duly organized and validly existing under the laws of the state of its organization and has full right, power and authority to enter into this Agreement and to consummate all of the transactions contemplated hereby. The execution, delivery and performance of this Agreement by Terminating Lessor has been duly authorized by all necessary partnership action on the part of Terminating Lessor and the persons executing this Agreement and all other documents required to consummate the transactions contemplated hereby on behalf of Terminating Lessor are duly authorized to execute this Agreement and such other documents on behalf of Terminating Lessor, and are authorized to bind Terminating Lessor. This Agreement constitutes the legal, valid and binding obligation of Terminating Lessor enforceable in accordance with its terms.

 

(b) No Violation . The execution and performance of this Agreement by Terminating Lessor does not, and the consummation of the transactions contemplated by this Agreement will not violate or constitute a breach of (i) the organization or governance documents of Terminating Lessor, or (ii) to Terminating Lessor’s knowledge, any contract, permit, license, order or decree to which Terminating Lessor is a party or by which Terminating Lessor or its assets are bound.

 

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(c) No Litigation . Except as disclosed on Schedule 3.1(c) attached hereto, as of the Effective Date, there is no pending action, suit, claim, litigation or proceeding as to which Terminating Lessor has been served with process which could reasonably be expected to adversely affect Terminating Lessor’s ability to consummate the transactions contemplated by this Agreement, and to the knowledge of Terminating Lessor, no such proceedings are threatened.

 

(d) No Violation of Law . Except as disclosed on Schedule 3.1(d) attached hereto, Terminating Lessor has not received any written notice of violation of any law from any Governmental Authority which could reasonably be expected to adversely affect Terminating Lessor’s ability to consummate the transactions contemplated by this Agreement.

 

(e) Approvals and Consents . Except as set forth on Schedule 3.1(e) attached hereto, no consent or approval of any Governmental Authority or any Person not a party to this Agreement is required to be obtained by Terminating Lessor as a condition to the execution, delivery or performance of this Agreement by Terminating Lessor or the consummation by it of the transactions contemplated hereby.

 

(f) Brokers . Neither Terminating Lessor nor any of its Affiliates has made any agreement with any person, or taken any action which would cause any person, to become entitled to an agent’s, broker’s or finder’s fee or commission in connection with the transactions contemplated by this Agreement.

 

3.2 Terminating Lessee’s Representations and Warranties . Each Terminating Lessee hereby represents and warrants, as to only itself, each Hotel which is leased by such Terminating Lessee, and the Leasehold Estate(s) to which it holds title, to Terminating Lessors that:

 

(a) Due Organization; Authority . Terminating Lessee is duly organized and validly existing under the laws of the State of its organization and has full partnership power and authority to enter into this Agreement and to consummate all of the transactions contemplated hereby. The execution, delivery and performance of this Agreement by Terminating Lessee have been duly authorized by all necessary corporate and partnership action on the part of Terminating Lessee and the persons executing this Agreement and all other documents required to consummate the transactions contemplated hereby on behalf of the Terminating Lessee are duly authorized to execute this Agreement and such other documents on behalf of the Terminating Lessee, and are authorized to bind the Terminating Lessee. This Agreement constitutes the legal, valid and binding obligation of Terminating Lessee enforceable in accordance with its terms.

 

(b) United States Person . Terminating Lessee is a “United States person,” as defined by Internal Revenue Code Section 1445 and Section 7701.

 

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(c) No Violation . The execution of this Agreement by Terminating Lessee does not, and the performance by Terminating Lessee of the transactions contemplated by this Agreement will not (i) violate or constitute a breach of (A) Terminating Lessee’s organizational documents or its governing board’s authorizing resolution or (B) to the knowledge of Terminating Lessee, any contract, permit, license, order or decree to which Terminating Lessee is a party or by which Terminating Lessee or its assets are bound or (ii) result in the imposition of a lien or encumbrance on any assets of Terminating Lessee.

 

(d) No Litigation . Except as disclosed on Schedule 3.2(d) attached hereto, there is no pending or, to the knowledge of Terminating Lessee, any threatened, action, suit, proceeding, investigation or grievance which could reasonably be expected to adversely affect (i) any Hotel or its operations, or (ii) Terminating Lessee’s ability to consummate the transactions contemplated hereby.

 

(e) No Right or Option . No person, firm, corporation, or other entity has any right or option to acquire the Leasehold Estate(s), or any part thereof, from Terminating Lessee.

 

(f) Consents and Approvals . Except for the Capital Committee Approval and any consents described on Schedule 3.2(f) attached hereto, no consent, approval or authorization is required from any lenders or shareholders of Terminating Lessee and, to Terminating Lessee’s knowledge, no consent, approval, authorization or order of any court, agency or any other person not a party to this Agreement is required in order to permit Terminating Lessee to consummate the transactions contemplated by this Agreement.

 

(g) Brokers . Neither Terminating Lessee nor any of its Affiliates has made any agreement with any person, or taken any action which would cause any person, to become entitled to an agent’s, broker’s or finder’s fee or commission in connection with the transactions contemplated by this Agreement.

 

(h) Licenses, Permits, etc. (i)All Licenses and Liquor Licenses necessary for the lawful use, maintenance, or operation of each Hotel as it has been used, maintained or operated have been obtained and there exists no violation under the Licenses or Liquor Licenses; (ii) a true and correct list of Licenses in effect on the date hereof is attached as Schedule 3.2(h) ; (iii) a true and correct list of the Liquor Licenses in effect on the date hereof is attached as Schedule 1.2 ; and (iv) to terminating Lessee’s knowledge, the applications submitted by Terminating Lessee to obtain the licenses and Liquor Licenses did not contain any misrepresentations by Terminating Lessee.

 

(i) Leases . There are no Leases in effect at any Hotel.

 

(j) Service and FF&E Contracts . A complete and current list of all Major Service and FF&E Contracts and, to Terminating Lessee’s knowledge, all Minor Service and FF&E Contracts is attached as Schedule 3.2(j) . All Major Service and FF&E Contracts are in full force and effect, all payments thereunder are current and no default

 

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or event of default exists or has occurred (that has not been cured or waived) under any of the Major Service and FF&E Contracts, except as otherwise set forth on said Schedule. To Terminating Lessee’s knowledge, all Minor Service and FF&E Contracts are in full force and effect, all payments thereunder are current and no default or event of default exists or has occurred (that has not been cured or waived) under any of the Minor Service and FF&E Contracts.

 

(k) Occupancy Agreements . To Terminating Lessee’s knowledge, a complete and current list of all Occupancy Agreements is attached as Schedule 3.2(k) and the schedule(s) referenced in Section 6.4(c) , when delivered, will be true and correct in all material respects.

 

(l) No Violation . To Terminating Lessee’s knowledge, that there has been no violation of any Legal Requirements (as defined in the Lease Agreement) affecting any Hotel.

 

(m) Zoning Compliance . (A) To Terminating Lessee’s knowledge, the use, maintenance and operation of the Hotel have complied in all material respects with all zoning and use restrictions, and (B) Terminating Lessee has not received any notices of violation of any building code or similar regulations affecting any Hotel.

 

(n) Financial Statements . All financial statements delivered to Terminating Lessors pursuant to the Lease Agreements accurately and fairly reflect in all material respects the financial condition and operation of each Hotel for the period of time reflected by such statements.

 

(o) Notice of Condemnation . Terminating Lessee has not received, with respect to any Hotel, written notice from any governmental authority regarding any condemnation proceedings or proceedings to widen or realign any street or highway adjacent to the Hotel (but excluding any such notice that was delivered to Terminating Lessor) and, to Terminating Lessee’s knowledge, no such proceedings are contemplated.

 

(p) Environmental Violation . To Terminating Lessee’s knowledge, there does not exist any violation of applicable environmental laws or any other environmental issue at any Hotel.

 

(q) No Lease Defaults . Except for the Potential Lease Defaults, to Terminating Lessee’s knowledge (i) there exist no “Event of Default” under the Lease Agreement(s) to which it is a party (as such term is defined in the Lease Agreements), and (ii) Terminating Lessee is in material compliance with the terms of the Lease Agreement to which it is a party.

 

(r) Bankruptcy . Neither Terminating Lessee nor Wyndham has filed a petition for relief (or any other petition in bankruptcy) under the Federal Bankruptcy Code or any other present or future federal or state insolvency, bankruptcy or similar law (all of the foregoing hereinafter collectively called “ applicable Bankruptcy Law ”), nor has an involuntary petition for relief been filed against Terminating Lessee or Wyndham

 

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under any applicable Bankruptcy Law, nor has any order for relief naming Terminating Lessee or Wyndham been entered under any applicable Bankruptcy Law, nor has any composition, rearrangement, extension, reorganization or other relief of debtors now or hereafter existing been requested or consented to by Terminating Lessee or Wyndham, and neither Terminating Lessee nor Wyndham (i) is insolvent or has made a general assignment for the benefit of creditors or (ii) is generally not paying their debts as they become due. No corporate action has been taken for purposes of any of the foregoing.

 

3.3 Definition of Terminating Lessee’s Knowledge . When any representation or warranty of any Terminating Lessee is made “to Terminating Lessee’s knowledge” or the like, such representation or warranty is made to the actual knowledge of the Hotel general managers for each Hotel as listed in Schedule 3.3 attached hereto, the Wyndham Regional Vice President of Operations (as to the Hotel(s) in such party’s region) and the attorneys handling this transaction in the Wyndham legal department without inquiry or investigation and without including any constructive or imputed knowledge, with the understanding and agreement that such persons shall have no personal liability under or in connection with this Agreement.

 

ARTICLE IV

Covenants

 

4.1 Terminating Lessee’s Covenants . Each Terminating Lessee hereby covenants and agrees with Terminating Lessors as follows, on behalf of only itself and with respect to only each Hotel leased by such Terminating Lessee:

 

(a) Operations Pending Closing . Between the Effective Date and the Closing Date, Terminating Lessee shall:

 

(i) Operate, maintain and manage the Hotel in the same manner in which the Terminating Lessee has operated, maintained and managed the Hotel prior to the Effective Date, so as to keep the Hotel in good condition, reasonable wear and tear and damage by casualty or condemnation excepted, and so as to maintain the existing caliber of the Hotel operations conducted at the Hotel and the reasonable goodwill of all employees, guests and other customers of the Hotel.

 

(ii) Maintain its books of accounts and records in the usual, regular and ordinary manner, in accordance with the Uniform System and sound accounting principles applied on a basis consistent with the basis used in keeping its books in prior years.

 

(iii) Maintain in full force and effect all insurance coverage required by the Lease Agreement.

 

(iv) Use and operate the Hotel in compliance with applicable laws and the requirements of any mortgage, lease, Occupancy Agreement and insurance policy affecting the Hotel.

 

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(v) Order, purchase and maintain Supplies in sufficient quantities so as to maintain the condition and appearance of the Hotel and levels of Supplies, consistent with Terminating Lessee’s prior practices (as exemplified by the Hotel’s current operations), requirements under any franchise agreements affecting the Hotels, the overall standard of the Hotel and reasonable operating requirements.

 

(vi) Not diminish the quality or quantity of maintenance and upkeep services heretofore provided to the Hotel.

 

(vii) Promptly deliver to Terminating Lessors upon Terminating Lessors’ request such reports showing the revenue and expenses of the Hotel and all departments thereof, together with such periodic information with respect to room reservations, Occupancy Agreements and other bookings, as Terminating Lessee customarily keeps or receives internally for its own use.

 

(viii) Without the prior written consent of Terminating Lessors, which consent shall not be unreasonably withheld or delayed, not make any agreements which shall be binding upon Terminating Lessors with respect to the Hotel and cannot be terminated without penalty upon thirty (30) days notice.

 

(b) Approvals of Third Parties . As soon as practicable after the date hereof, Terminating Lessee will use all commercially reasonable efforts to secure, at its expense, all necessary consents, approvals and agreements of third parties that shall be required for the Terminating Lessee to perform its obligations and to consummate the transactions contemplated hereby as set forth on Schedule 3.2(f) . The third parties from whom such consents, approvals and agreements shall be sought are as set forth on Schedule 3.2(f) , and include the parties that issued the Licenses, all of which the applicable Terminating Lessor will assume if permitted by applicable law, and the vendor or lessor under each Service and FF&E Contract requiring consent or approval that any Terminating Lessor has not indicated during the Study Period that it will not assume. If a License cannot be assigned under applicable law, Terminating Lessee shall reasonably cooperate with the applicable Terminating Lessor in connection with processing an application for a new License. Terminating Lessee will bear the costs of assigning the Licenses and Service and FF&E Contracts, to the extent assigned to Terminating Lessors pursuant to the terms hereof.

 

(c) Payables . Terminating Lessee shall, in the ordinary course of business, pay or cause to be paid all liquidated liabilities and obligations with respect to the Hotel incurred through the Closing Date, including, but not limited to, all accounts payable, trade payables, rents, taxes, license and permit fees, payments under the Service and FF&E Contracts and compensation to Employees as provided under Section 4.3(d) hereof, except to the extent that Terminating Lessors have received a credit for any such items pursuant to Section 6.4(a) hereof. Notwithstanding the foregoing, it is understood that Terminating Lessee may postpone payment of an account payable which is the subject of a bona fide dispute or in case final bills are not rendered until after the Closing Date; provided that such dispute does not unreasonably interfere with the operation of the Hotel.

 

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(d) Responsibility for Litigation . Terminating Lessee shall be responsible for defending and for all final awards, judgments rendered or settlements reached with respect to any litigation described on Schedule 3.2(d) .

 

(e) Intentionally Deleted.

 

(f) Survival . The covenants and agreements contained in Section 4.1(c) shall survive Closing until all of such liabilities and obligations are satisfied in full by the Terminating Lessee, notwithstanding Section 7.1 or any other provision of this Agreement. The covenants and agreements contained in Section 4.1(d) shall survive Closing until all of such judgments have been rendered or settlements reached and any related awards or settlement amounts (with any penalties and/or interest) paid and required actions taken or ceased, notwithstanding Section 7.1 or any other provision of this Agreement.

 

4.2 Terminating Lessors’ Covenants . Terminating Lessors hereby covenant and agree with Terminating Lessee as follows:

 

(a) Approvals of Third Parties . As soon as practicable after the date hereof, Terminating Lessors will use all commercially reasonable efforts to secure all necessary consents and approvals that shall be required for Terminating Lessors to perform their obligations hereunder and to consummate the transactions contemplated hereby and will otherwise use all commercially reasonable efforts to cause the consummation of such transactions in accordance with the terms and conditions of this Agreement. In any case, the costs of obtaining such consents and approvals shall be paid by Terminating Lessors.

 

(b) Access to Books and Records . Terminating Lessors shall preserve and keep, free of charge, all books, papers and records concerning the Hotel (for periods prior to the Closing Date) and the transactions contemplated hereby for a period of no less than five (5) years following the Closing Date to the extent received by Terminating Lessors. Terminating Lessors agree to permit Terminating Lessees (and any successor to or assignee of Terminating Lessees) and their attorneys, accountants, agents and designees, access to, and the right to make copies of, such books, papers and records from and after the Closing Date for all reasonable purposes. Any such examination shall be at the expense of Terminating Lessees, shall be performed at the place where the records of Terminating Lessors are regularly maintained, shall be preceded by reasonable notice, and shall not unreasonably interfere with Terminating Lessors’ normal business activities. The provisions of this Section 4.2(b) shall survive for a period of five (5) years following the Closing.

 

4.3 Covenants Regarding Employees .

 

(a) WARN Act . To the extent that the WARN Act (as defined below) is applicable, Terminating Lessors (or the Operator) agree to hire and continue the

 

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employment of an adequate number of Employees employed at each of the Hotels such that there will not result an employment loss at any Hotel of 50 Employees or more where such employment loss involves at least 33% of the Employees at the Hotel (excluding part-time employees in each case) (which if such events did occur would trigger the application of the notice requirements under the Worker Adjustment and Retraining Notification Act (or similar local or state laws or regulations) (collectively, the “ WARN Act ”). Without limiting the generality of the foregoing, and to the extent the WARN Act is applicable to this transaction, all Employees hired by Terminating Lessors (or the Operator) (the “ Hired Employees ”) will be hired with salaries or wages and benefits (including, but not limited to, health insurance coverage) valued at eighty-five percent (85%) or more of their salary or wages and benefits existing as of the Closing Date. This covenant shall survive for a period of ninety (90) days following Closing. Each Terminating Lessee shall deliver to Terminating Lessors a Schedule (the “ Employee Schedule ”), which is to be updated at Closing through the Closing Date, showing for each then-current employee of the Hotel leased by such Terminating Lessee, the employee’s name, date of hire, position, Social Security number, wage or salary. Terminating Lessors agree to defend, indemnify and hold harmless Terminating Lessees, Wyndham and any of their respective affiliates from and against any and all matters, claims, actions, liabilities, costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) relating to or arising from Terminating Lessors’ breach of its covenant set forth in this Section 4.3(a) .

 

(b) Post-Closing Employment . Wyndham and Terminating Lessee agree that during the six (6) months following the Closing, neither will directly or indirectly solicit (other than general published advertising) or induce any present or future employee of Terminating Lessors or Operator to accept employment with Wyndham or with any business, operation, corporation, partnership, association, agency, or other person or entity with which Wyndham may be associated.

 

(c) Claims . Terminating Lessors shall be responsible for the payment of any final award or judgment rendered, or settlement reached, with respect to any claims, demands, actions or administrative proceedings brought by any of the Hired Employees which arise out of events which occur after the Closing Date. Terminating Lessees will be responsible for the payment of any final award or judgment rendered, or settlement reached with respect to any claims, demands, actions or administrative proceedings brought by any of the Hired Employees which arise out of events which occurred prior to the Closing Date.

 

(d) Employee Compensation . Each Terminating Lessee shall pay from the Hotel operating accounts all wages and fringe benefits (including accrued vacation pay or other paid leave, sick pay, severance for management personnel not hired by Terminating Lessors, payroll taxes and retirement and insurance benefits) of all employees of the Terminating Lessee (or its manager) rendering services at the Hotel (the “ Employees ”) for the period up to and including the Closing Date.

 

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(e) Survival . The terms of this Section 4.3 shall survive Closing until fully performed notwithstanding Section 7.1 . The provisions of Section 4.3(b) will not survive the termination of this Agreement.

 

4.4 Liquor Licenses . If allowed by applicable law, Liquor License Holder shall, as soon as possible after Closing, initiate a transfer of its Liquor Licenses to Terminating Lessors or their designee (the “ Operator ”). Terminating Lessors shall cause, or shall cause Operator to, promptly execute all forms, applications and other documents required and shall otherwise use their best efforts to effect the acquisition of such Liquor Licenses at the earliest date reasonably practicable, consistent with the laws of the state in which the Hotel is located, in order that all Liquor Licenses may be obtained by Operator at the earliest reasonably practicable time after Closing (but the failure or inability of Terminating Lessors to obtain liquor licenses on or before Closing shall not relieve Terminating Lessors of their obligation to proceed with Closing hereunder). Terminating Lessors shall not permit Operator to attempt to obtain the liquor licenses in any manner that would diminish, prior to the Closing, the full force and effect of the Liquor Licenses maintained by Liquor License Holder in its operation of any restaurants, lounges and bars presently located within the Hotels. If Terminating Lessors or Operator do not obtain any such liquor licenses until after Closing, then Terminating Lessees covenant and agree that they shall cooperate reasonably with Operator in keeping open any such liquor facilities of the Hotels between the Closing and the time when such Liquor Licenses are obtained by Operator or for a period not to exceed one hundred twenty (120) days following the Closing Date, whichever is less, by entering into an Alcoholic Beverage Management Agreement for the continued operation of and under the Liquor Licenses with respect to the affected Hotel, in the form of Exhibit F attached hereto and made a part hereof (the “ Accommodation Agreement ”). In no event shall any Terminating Lessee be required to obtain any additional liquor or alcoholic beverage licenses which it does not possess at the time of Closing. For the purpose of this Section only, the term “Terminating Lessee” shall include the officers, directors and employees of any entity that is a Liquor License Holder and the term “Operator” shall include Terminating Lessors. After the termination of the Accommodation Agreement, Liquor License Holder shall have the right, if the transfer of the Liquor Licenses has not yet then been consummated, to cause the Liquor Licenses to become inactive so that no alcoholic beverages shall be served at the affected Hotel under the Liquor Licenses, but Liquor License Holder shall continue to cooperate with Operator to accomplish the transfer of the Liquor Licenses to Operator. Terminating Lessors and Operator shall indemnify Liquor License Holder and Terminating Lessees with respect to any liability, obligation, costs, expenses (including, without limitation, attorneys’ fees and expenses), fees, fines, claims, causes of action or damages arising out of or related to the sale or serving of alcoholic beverages at the Hotels prior to the consummation of the transfer of the Liquor Licenses to Operator. The terms of this Section shall survive the Closing until fully performed and shall not be terminated by Section 7.1 .

 

4.5 Reservations, Marketing and Sales . Each Terminating Lessee shall, and shall cause its Affiliates to, continue to take guest room reservations and enter into Occupancy Agreements in the ordinary course of business in accordance with its past practices. More specifically, without the prior consent of Terminating Lessors, not to be unreasonably withheld, delayed or conditioned, (A) no Occupancy Agreement shall be entered into, or guest or room booking accepted, relating to one or more dates after the Effective Date, (1) at a per room night

 

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rate of less than the rate specified for each Hotel in Schedule 4.5 , or (2) if the Occupancy Agreement or guest or room booking relates to one or more blocks exceeding 50 total room nights, at a per room night rate of less than 80% of then-currently published room night rates, and (B) no “trade out” agreements shall be entered into relating to one or more dates after the Effective Date. Terminating Lessees shall continue to support all marketing and sales functions at the Hotels and promote the business of the Hotels in generally the same manner as Terminating Lessees did prior to the execution of this Agreement.

 

4.6 Baggage . All baggage or other property of patrons of the Hotels checked or left in care of any Terminating Lessee and all items in such Terminating Lessee’s “Lost and Found” will be listed in an inventory to be prepared in duplicate and signed by Terminating Lessee’s and Terminating Lessors’ representatives on the Closing Date. Terminating Lessors will be responsible for all baggage and property listed in such inventory from, after and including the Closing Date. Each Terminating Lessee shall be responsible for baggage and property not listed in such inventory but alleged to have been left in custody at the Hotel leased by it with respect to the period up to but not including the Closing Date, provided any such claim related thereto is raised within ninety (90) days following the Closing Date.

 

ARTICLE V

Conditions Precedent to Closing

 

5.1 Conditions Precedent to the Obligations of Terminating Lessors . The obligations of Terminating Lessors to be performed on the Closing Date shall be subject to the satisfaction on or prior to the Closing Date of all of the following conditions, except such conditions as Terminating Lessors may waive in writing:

 

(a) Representations and Warranties of Terminating Lessee . Except for such breaches of the representations and warranties of Terminating Lessee made in this Agreement which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect (disregarding for such purposes all materiality and knowledge qualifiers contained in the individual representations and warranties of the Terminating Lessees contained in this Agreement), each of the representations and warranties of the Terminating Lessees contained in this Agreement was true and correct when made on the Effective Date and shall be true, correct and complete as of the Closing Date (or to the extent that a representation or warranty is by its terms made as of another date, then as of such date) as though made on and as of the Closing Date. Anything herein to the contrary notwithstanding, if a Material Adverse Effect exists with respect to any Hotel, the failure of the condition precedent described herein shall apply only to such Hotel, and Terminating Lessors shall have the right to terminate this Agreement as a result thereof as to the affected Hotel only and shall remain obligated to proceed to Closing with respect to the remaining Hotels.

 

(b) Performance of Terminating Lessee’s Obligations . Each Terminating Lessee shall have performed and complied with all of its obligations under this Agreement that are to be performed or complied with by it prior to or on the Closing Date.

 

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(c) No Injunctions or Restraints . No temporary, preliminary or permanent order, decree or injunction shall have been enacted, entered, promulgated or enforced by any court of competent jurisdiction or any Governmental Authority that prevents Terminating Lessors’ consummation of the transactions contemplated by this Agreement; provided , however , that Terminating Lessors shall use all commercially reasonable efforts to have any such order, decree or injunction vacated or reversed.

 

(d) Lender Consents . To the extent required by the operative loan documents, Terminating Lessors shall have obtained the consent of Bank of America, N.A. (with respect to the BOA Hotels) and Nomura (with respect to the Nomura Hotels) (collectively with their successors and assigns, the “ Lenders ”) to the termination of the Leasehold Estates contemplated by this Agreement (the “ Lender Consents ”).

 

(e) No Default . There shall exist no Event of Default under the Lease Agreements (as such term is defined therein), except for the Potential Lease Defaults.

 

5.2 Conditions Precedent to the Obligations of Terminating Lessees . The obligations of Terminating Lessees to be performed on the Closing Date shall be subject to the satisfaction on or prior to the Closing Date of all of the following conditions, except such conditions as Terminating Lessees may waive in writing:

 

(a) Representations and Warranties of Terminating Lessors . Except for such breaches of the representations and warranties of Terminating Lessors made in this Agreement which, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on Terminating Lessors’ financial condition or ability to perform its obligations hereunder (disregarding for such purposes all materiality and knowledge qualifiers contained in the individual representations and warranties of Terminating Lessors contained in this Agreement), each of the representations and warranties of Terminating Lessors contained in this Agreement was true and correct when made on the Effective Date and shall be true, correct and complete as of the Closing Date (or to the extent that a representation or warranty is by its terms made as of another date, then as of such date) as though made on and as of the Closing Date.

 

(b) Performance of Terminating Lessors’ Obligations . Terminating Lessors shall have performed and complied with all of their obligations under this Agreement that are to be performed or complied with by them prior to or on the Closing Date.

 

(c) Lease Guaranty . At Closing, the Consolidated, Amended and Restated Guaranty dated effective as of October 22, 1998 by and between Wyndham for the benefit of General I, General II and Sunrise (the “ Guaranty ”) shall be terminated and Wyndham released from all obligations thereunder (the “ Guaranty Termination ”), which Guaranty Termination will be in a form reasonably satisfactory to Terminating Lessees and Termination Lessors and agreed upon by the parties hereto during the Study Period.

 

(d) Lease Master Agreement . At Closing, the Lease Master Agreement shall be terminated by execution of a termination satisfactory in form and substance to

 

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Terminating Lessees (the “ Lease Master Agreement Termination ”), which Lease Master Agreement Termination will be in a form reasonably satisfactory to Terminating Lessees and Termination Lessors and agreed upon by the parties hereto during the Study Period.

 

(e) No Injunctions or Restraints . No temporary, preliminary or permanent order, decree or injunction shall have been enacted, entered, promulgated or enforced by any court of competent jurisdiction or any Governmental Authority that prevents any Terminating Lessee’s consummation of the transactions contemplated by this Agreement; provided , however , that each Terminating Lessee shall use all commercially reasonable efforts to have any such order, decree or injunction vacated or reversed.

 

(f) Lender Consent . Terminating Lessors shall have delivered to Terminating Lessee written evidence of (i) the consent of each Lender to the transaction and actions contemplated by this Agreement, or (ii) the right of Terminating Lessors to enter into and perform this Agreement under the agreement(s) evidencing each Lender’s rights with respect to the Hotels (which evidence shall include copies of all such agreement(s)), accompanied by an indemnification agreement in form and substance satisfactory to Terminating Lessees and executed by creditworthy entities acceptable to Terminating Lessees, indemnifying Terminating Lessees+ with respect to Terminating Lessors’ failure to obtain the written consent of the Lenders.

 

ARTICLE VI

Closing

 

6.1 Closing . The closing of the transactions contemplated hereby (the “ Closing ”) shall be accomplished through an escrow arrangement described as follows:

 

(a) The Closing shall occur in two (2) stages, with the first Closing to occur on March 1, 2004 (the “ First Tranche Closing Date ”) with respect to the Sunrise Suites – Tinton Falls Hotel (the “ First Closing Tr