Exhibit 10.7

MASTER LEASE AGREEMENT

DATED AS OF NOVEMBER 26, 2002

BETWEEN

SOLOMONS BEACON INN LIMITED PARTNERSHIP

AS LESSOR

AND

TRS SUBSIDIARY, LLC

AS LESSEE

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TABLE OF CONTENTS

 

ARTICLE I    1     1.1    Leased Property    1     1.2    Term    2 ARTICLE II
   2     2.1    Definitions    2 ARTICLE III    11     3.1    Rent    11     3.2
   Additional Charges    12     3.3    Lease Provision    12     3.4   
Conversion of Property    12     3.5    Books and Records    12 ARTICLE IV    13
    4.1    Payment of Impositions    13     4.2    Notice of Impositions    14
    4.3    Adjustment of Impositions    14     4.4    Maintenance    14     4.5
   Insurance Premiums    14 ARTICLE V    14     5.1    No Termination    14
ARTICLE VI    15     6.1    Ownership of the Leased Property    15     6.2   
Lessee’s Personal Property    15     6.3    Lessor’s Lien    16 ARTICLE VII   
16     7.1    Condition of the Leased Property    16     7.2    Use of the
Leased Property    17     7.3    Lessor to Grant Easements, etc.    17 ARTICLE
VIII    18     8.1    Compliance with Legal and Insurance Requirements, etc.   
18     8.2    Legal Requirement Covenants    18     8.3    Environmental
Covenants    19 ARTICLE IX    21     9.1    Capital Improvements, Maintenance
and Repair    21     9.2    Encroachments, Restrictions, Etc.    22 ARTICLE X   
22     10.1    Alterations    22     10.2    Salvage    23     10.3    Joint Use
Agreements    23 ARTICLE XI    23     11.1    Liens    23 ARTICLE XII    23
    12.1    Permitted Contests    23

 

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ARTICLE XIII    24     13.1    General Insurance Requirements    24     13.2   
Replacement Cost    25     13.3    Worker’s Compensation    26     13.4   
Waiver of Subrogation    26     13.5    Form Satisfactory, etc.    26     13.6
   Change in Limits    26     13.7    Blanket Policy    26     13.8    Separate
Insurance    27     13.9    Reports On Insurance Claims    27 ARTICLE XIV    27
    14.1    Insurance Proceeds    27     14.2    Reconstruction in the Event of
Damage or Destruction Covered by Insurance    27     14.3    Reconstruction in
the Event of Damage or Destruction Not Covered by Insurance    29     14.4   
Lessee’s Property    29     14.5    Damage Near End of Term    29     14.6   
Waiver    29 ARTICLE XV    29     15.1    Definitions    29     15.2    Parties’
Rights and Obligations    30     15.3    Total Taking    30     15.4   
Allocation of Award    30     15.5    Partial Taking    30     15.6    Temporary
Taking    30     15.7    Lessee’s Offer    31 ARTICLE XVI    31     16.1   
Events of Default    31     16.2    Surrender    32     16.3    Damages    33
    16.4    Waiver    33     16.5    Application of Funds    33 ARTICLE XVII   
34     17.1    Lessor’s Right to Cure Lessee’s Default    34 ARTICLE XVIII    34
    18.1    Provisions Relating to Purchase of the Leased Property    34 ARTICLE
XIX    35     19.1    Personal Property Limitation    35     19.2    Sublease
Rent Limitation    35     19.3    Sublease Tenant Limitation    35     19.4   
TRS Election and Limitations    35     19.5    Manager Officer and Employee
Limitation    36 ARTICLE XX    36     20.1    Holding Over    36 ARTICLE XXI   
37     21.1    Risk of Loss    37 ARTICLE XXII    37     22.1    Indemnification
   37

 

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ARTICLE XXIII    38     23.1    Subletting and Assignment    38     23.2   
Attornment    38 ARTICLE XXIV    39     24.1    Officer’s Certificates; Lessor’s
Estoppel Certificates and Covenants    39 ARTICLE XXV    39     25.1    Lessor’s
Right to Inspect    39 ARTICLE XXVI    39     26.1    No Waiver    39 ARTICLE
XXVII    39     27.1    Remedies Cumulative    39 ARTICLE XVIII    40     28.1
   Acceptance of Surrender    40 ARTICLE XXIX    40     29.1    No Merger of
Title    40 ARTICLE XXX    40     30.1    Conveyance by Lessor    40     30.2   
Other Interests    40     30.3    Greenwich Loan    41 ARTICLE XXXI    41
    31.1    Quiet Enjoyment    41 ARTICLE XXXII    41     32.1    Notices    41
ARTICLE XXXIII    42     33.1    Appraisers    42 ARTICLE XXXIV    42     34.1
   Lessor May Grant Liens    42     34.2    Lessee’s Right to Cure    43
    34.3    Breach by Lessor    43 ARTICLE XXXV    43     35.1    Miscellaneous
   43     35.2    Transition Procedures    44     35.3    Waiver of Presentment,
etc.    44 ARTICLE XXXVI    44     36.1    Memorandum of Lease    44 ARTICLE
XXXVII    45     37.1    Lessor’s Option to Purchase Assets of Lessee    45
ARTICLE XXXVIII    45     38.1    Lessor’s Option to Terminate Lease    45
ARTICLE XXXIX    46     39.1    Compliance with Franchise Agreement    46
ARTICLE XL    46     40.1    Room Set-Aside    46     40.2    Capital
Expenditures    47     40.3    Prohibited Expenditures    47

Exhibit A - Hotel Properties

 

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MASTER LEASE AGREEMENT

THIS MASTER LEASE AGREEMENT (hereinafter called “Lease”), made as of the 26th
day of November, 2002 by and between Solomons Beacon Inn Limited Partnership, a
Maryland limited partnership (hereinafter called “Lessor”), and TRS Subsidiary,
LLC, a Delaware limited liability company (hereinafter called “Lessee”),
provides as follows.

W I T N E S S E T H:

Lessor owns fee title to, or a leasehold interest in, the “Leased Property” (as
hereinafter defined).

Lessor and Lessee wish to enter into this Lease which shall constitute a
separate lease for each Leased Property.

NOW, THEREFORE, Lessor, in consideration of the payment of rent by Lessee to
Lessor, the covenants and agreements to be performed by Lessee, and upon the
terms and conditions hereinafter stated, does hereby rent and lease unto Lessee,
and Lessee does hereby rent and lease from Lessor, the Leased Property.

ARTICLE I

1.1 Leased Property. The leased property (the “Leased Property”) is comprised of
Lessor’s interest in each of the hotel properties described in Exhibit “A”
attached hereto, as it may be amended from time to time (each a “Leased
Property”), as follows:

(a) the land or ground leasehold interests described in Exhibit “A” attached
hereto and by reference incorporated herein (the “Land”);

(b) all buildings, structures and other improvements of every kind including,
but not limited to, alleyways and connecting tunnels, sidewalks, utility pipes,
conduits and lines (on-site and offsite), parking areas and roadways appurtenant
to such buildings and structures presently situated upon the Land (collectively,
the “Leased Improvements”);

(c) all easements, rights and appurtenances relating to the Land or the Leased
Improvements;

(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

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deemed by the parties hereto to constitute real estate, together with all
replacements, modifications, alterations and additions thereto (collectively,
the “Fixtures”);

(e) all furniture and furnishings and all other items of personal property
(excluding Inventory and personal property owned by Lessee) located on, and used
in connection with, the operation of the Leased Improvements as a hotel,
together with all replacements, modifications, alterations and additions
thereto; and

(f) all existing leases of space within the Leased Property (including any
security deposits or collateral held by Lessor pursuant thereto).

THE LEASED PROPERTY IS DEMISED IN ITS PRESENT CONDITION WITHOUT REPRESENTATION
OR WARRANTY (EXPRESSED OR IMPLIED) BY LESSOR AND SUBJECT TO THE RIGHTS OF
PARTIES IN POSSESSION, AND TO THE EXISTING STATE OF TITLE INCLUDING ALL
COVENANTS, CONDITIONS, RESTRICTIONS, EASEMENTS AND OTHER MATTERS OF RECORD
INCLUDING ALL APPLICABLE LEGAL REQUIREMENTS, THE LIEN OF FINANCING INSTRUMENTS,
MORTGAGES, DEEDS OF TRUST AND SECURITY DEEDS, AND INCLUDING OTHER MATTERS WHICH
WOULD BE DISCLOSED BY AN INSPECTION OF THE LEASED PROPERTY OR BY AN ACCURATE
SURVEY THEREOF.

1.2 Term. The term of the Lease (the “Term”) shall commence on the date hereof
(the “Commencement Date”) and shall end on the tenth anniversary of the last day
of the month in which the Commencement Date occurs unless sooner terminated in
accordance with the provisions hereof.

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 have the meanings assigned to them in this Article and include the
plural as well as the singular, (b) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with generally accepted
accounting principles as are at the time applicable, (c) all references in this
Lease to designated “Articles,” “Sections” and other subdivisions are to the
designated Articles, Sections and other subdivisions of this Lease and (d) the
words “herein,” “hereof” and “hereunder” and other words of similar import refer
to this Lease as a whole and not to any particular Article, Section or other
subdivision:

Additional Charges: As defined in Section 3.2.

Affiliate: As to any Person, (a) any other Person that, directly or indirectly,
controls or is controlled by or is under common control with such Person,
(b) any other Person that owns, beneficially, directly or indirectly, five
percent or more of the outstanding capital stock, shares or equity interests of
such Person, or (c) any officer, director, employee, partner or trustee of such
Person or any Person controlling, controlled by or under common control with
such Person (excluding trustees and Persons serving in similar capacities who
are not otherwise an Affiliate of such Person). For the purposes of this
definition, “control” (including the correlative

 

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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.

Award: As defined in Section 15.1(c).

Base Rate: The rate of interest announced publicly by Citibank, N.A., in New
York, New York, or any successor bank from time to time, as such bank’s base
rate. If no such rate is announced or becomes discontinued, then such other rate
as Lessor may reasonably designate.

Percentage Rent: As defined in Section 3.1(a).

Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that is not a
day on which national banks in the City of Washington, D.C., or in the
municipality wherein the Leased Property is located, are closed.

Capitalization Date: The effective date, as determined by Lessor, of the
transfer, directly or indirectly, by Lessor to Lessee of all of Lessor’s right,
title and interest in and to all Furniture and Equipment and other items of
personal property owned by Lessor and located on, and used in connection with,
the operation of the Leased Improvements as a hotel.

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: As defined in Section XV.

Date of Taking: As defined in Section 15.1(b).

Encumbrance: As defined in Section XXXIV.

Environmental Authority: Any department, agency or other body or component of
any Government that exercises any form of jurisdiction or authority under any
Environmental Law.

Environmental Authorization: Any license, permit, order, approval, consent,
notice, registration, filing or other form of permission or authorization
required under any Environmental Law.

Environmental Laws: All applicable federal, state, local and foreign laws and
regulations relating to pollution of the environment (including without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata), including without limitation laws and regulations relating to
emissions, discharges, Releases or threatened Releases of Hazardous Materials or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials. Environmental
Laws include but are not limited to CERCLA, FIFRA, RCRA, SARA and TSCA.

 

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Environmental Liabilities: Any and all obligations to pay the amount of any
judgment or settlement, the cost of complying with any settlement, judgment or
order for injunctive or other equitable relief, the cost of compliance or
corrective action in response to any notice, demand or request from an
Environmental Authority, the amount of any civil penalty or criminal fine, and
any court costs and reasonable amounts for attorney’s fees, fees for witnesses
and experts, and costs of investigation and preparation for defense of any claim
or any Proceeding, regardless of whether such Proceeding is threatened, pending
or completed, that may be or have been asserted against or imposed upon Lessor,
Lessee, the Leased Property or any property used therein and arising out of:

(a) Failure of Lessee, or Lessor to comply at any time with all Environmental
Laws;

(b) Presence of any Hazardous Materials on, in, under, at or in any way
affecting the Leased Property;

(c) A Release at any time of any Hazardous Materials on, in, at, under or in any
way affecting the Lease Property;

(d) Identification of Lessee or Lessor as a potentially responsible party under
CERCLA or under any Environmental Law similar to CERCLA;

(e) Presence at any time of any above-ground and/or underground storage tanks,
as defined in RCRA or in any applicable Environmental Law on, in, at or under
the Leased Property; or

(f) Any and all claims for injury or damage to persons or property arising out
of exposure to Hazardous Materials originating or located at the Leased
Property, or resulting from operation thereof.

Event of Default: As defined in Section XVI.

Facility: The hotel and/or other facility offering lodging and other services or
amenities being operated or proposed to be operated on the Leased Property.

Fair Market Rental: The fair market rental of the Leased Property means the
rental which a willing tenant not compelled to rent would pay a willing landlord
not compelled to lease for the use and occupancy of such Leased Property
pursuant to the Lease for the term in question, (a) assuming that Lessee is not
in default thereunder and (b) determined in accordance with the appraisal
procedures set forth in Article XXXIII or in such other manner as shall be
mutually acceptable to Lessor and Lessee.

Fair Market Value: The fair market value of the Leased Property means an amount
equal to the price that a willing buyer not compelled to buy would pay a willing
seller not compelled to sell for such Leased Property, (a) assuming the same is
unencumbered by this Lease, (b) determined in accordance with the appraisal
procedures set forth in Article XXXIII or in such other manner as shall

 

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be mutually acceptable to Lessor and Lessee, (c) assuming that such seller must
pay customary closing costs and title premiums, and (d) taking into account the
positive or negative effect on the value of the Leased Property attributable to
the interest rate, amortization schedule, maturity date, prepayment penalty and
other terms and conditions of any encumbrance that is assumed by the transferee.
In addition, in determining the Fair Market Value with respect to damaged or
destroyed Leased Property such value shall be determined as if such Leased
Property had not been so damaged or destroyed.

FIFRA: The Federal Insecticide, Fungicide, and Rodenticide Act, as amended.

Fiscal Year: The 12-month period from January 1 through December 31, except for
the Fiscal Year ending December 31, 2002, which shall mean the period from the
Commencement Date through December 31, 2002.

Fixtures: As defined in Section 1.1.

Franchise Agreement: Any franchise agreement or license agreement with a
franchisor under which the Facility is operated.

Furniture and Equipment: Collectively, all carpet, furniture, furnishings, wall
coverings, fixtures and hotel equipment and systems located at, or used in
connection with, the Facility, together with all replacements therefor and
additions thereto, including, without limitation, (i) all equipment and systems
required for the operation of kitchens, bars, if any, restaurants, if any, and
laundry and dry cleaning facilities, (ii) dining room wagons, materials handling
equipment, cleaning and engineering equipment, (iii) telephone and computerized
accounting systems, and (iv) vehicles.

Government: The United States of America, any state, district or territory
thereof, any foreign nation, any state, district, department, territory or other
political division thereof, or any political subdivision of any of the
foregoing.

Gross Operating Expenses: All of the following with respect to the Facility:
reasonable and customary salaries and employee expense and payroll taxes
(including salaries, wages, bonuses and other compensation of all employees at
the Facility, and benefits including life, medical and disability insurance and
retirement benefits), expenditures described in Section IX, operational
supplies, utilities, insurance to be provided by Lessee under the terms of this
Agreement, governmental fees and assessments, food, beverages, laundry service
expense, the cost of Inventories and fixed asset supplies, license fees,
advertising, marketing, reservation systems and any and all other operating
expenses as are reasonably necessary for the proper and efficient operation of
the Facility incurred by Lessee in accordance with the provisions hereof
(excluding, however, (i) federal, state and municipal excise, sales and use
taxes collected directly from patrons and guests or as a part of the sales price
of any goods, services or displays, such as gross receipts, admissions, cabaret
or similar or equivalent taxes paid over to federal, state or municipal
governments, (ii) the cost of insurance to be provided under Article XIII,
(iii) expenditures by Lessor pursuant to Article XIII and (iv) payments on any
Mortgage or other mortgage or security instrument on the Facility); all
determined in accordance with generally accepted accounting principles and the

 

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Uniform System. No part of Lessee’s central office overhead or general or
administrative expense (as opposed to that of the Facility) shall be deemed to
be a part of Gross Operating Expenses, as herein provided. Reasonable
out-of-pocket expenses of Lessee incurred for the account of or in connection
with the Facility operations, including but not limited to postage, telephone
charges and reasonable travel expenses of employees, officers and other
representatives and consultants of Lessee and its Affiliates, shall be deemed to
be a part of Gross Operating Expenses and such persons shall be afforded
reasonable accommodations, food, beverages, laundry, valet and other such
services by and at the Facility without charge to such persons or Lessee.

Gross Operating Profit: For any Fiscal Year, the excess of Gross Revenues for
such Fiscal Year over Gross Operating Expenses for such Fiscal Year.

Gross Revenues: All revenues, receipts, and income of any kind derived directly
or indirectly by Lessee from or in connection with the Facility (including
rentals or other payments from tenants, lessees, licensees or concessionaires
but not including their gross receipts unless such party is an Affiliate of the
Lessee in which case the gross receipts shall be included) whether on a cash
basis or credit, paid or collected, determined in accordance with generally
accepted accounting principles and the Uniform System, excluding, however:
(i) funds furnished by Lessor, (ii) federal, state and municipal excise, sales,
and use taxes collected directly from patrons and guests or as a part of the
sales price of any goods, services or displays, such as gross receipts,
admissions, cabaret or similar or equivalent taxes and paid over to federal,
state or municipal governments, (iii) gratuities, (iv) proceeds of insurance and
condemnation, (v) proceeds from sales other than sales in the ordinary course of
business, (vi) all loan proceeds from financing or refinancings of the Facility
or interests therein or components thereof, (vii) judgments and awards, except
any portion thereof arising from normal business operations of the hotel, and
(viii) items constituting “allowances” under the Uniform System.

Hazardous Materials: All chemicals, pollutants, contaminants, wastes and toxic
substances, including without limitation:

(a) Solid or hazardous waste, as defined in RCRA or in any Environmental Law;

(b) Hazardous substances, as defined in CERCLA or in any Environmental Law;

(c) Toxic substances, as defined in TSCA or in any Environmental Law;

(d) Insecticides, fungicides, or rodenticides, as defined in FIFRA or in any
Environmental Law; and

(e) Gasoline or any other petroleum product or byproduct, polychlorinated
biphenols, asbestos and urea formaldehyde.

 

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Hotel Property: All Furniture and Equipment and other personal property required
to operate the Leased Property in the manner contemplated by this Lease from and
after the Capitalization Date.

Impositions: Collectively, all taxes (including, without limitation, all ad
valorem, sales and use, single business, gross receipts, transaction privilege,
rent or similar taxes as the same relate to or are imposed upon Lessee or its
business conducted upon the Leased Property) including Real Estate Taxes and
Personal Property Taxes, assessments (including, without limitation, all
assessments for public improvements or benefit, whether or not commenced or
completed prior to the date hereof and whether or not to be completed within the
Term), ground rents, water, sewer or other rents and charges, excises, tax
inspection, authorization and similar fees and all other governmental charges,
in each case whether general or special, ordinary or extraordinary, or foreseen
or unforeseen, of every character in respect of the Leased Property or the
business conducted thereon by Lessee (including all interest and penalties
thereon caused by any failure in payment by Lessee), which at any time prior to,
during or with respect to the Term hereof may be assessed or imposed on or with
respect to or be a lien upon (a) Lessor’s interest in the Leased Property,
(b) the Leased Property, or any part thereof or any rent therefrom or any
estate, right, title or interest therein, (c) the Hotel Property, or (d) 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.

Indemnified Party: Either of a Lessee Indemnified Party or a Lessor Indemnified
Party.

Indemnifying Party: Any party obligated to indemnify an Indemnified

Insurance Requirements: All terms of any insurance policy required by this Lease
and all requirements of the issuer of any such policy.

Inventory: All “Inventories of Merchandise” and “Inventories of Supplies” as
defined in the Uniform System, including, but not limited to, linens and other
non-depreciable personal property.

Land: As defined in Article I.

Lease: This Lease.

Leased Improvements; Leased Property: Each as defined in Article I.

Legal Requirements: All federal, state, county, municipal and other governmental
statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and
injunctions affecting either the Leased Property or the maintenance,
construction, use or alteration thereof (whether by Lessee or otherwise),
whether or not hereafter enacted and in force, including (a) all laws, rules or
regulations pertaining to the environment, occupational health and safety and
public health, safety or welfare, and (b) any laws, rules or regulations that
may (1) require repairs, modifications or alterations in or to the Leased
Property or (2) in any way adversely affect the use and enjoyment thereof; and
all permits, licenses and authorizations and regulations relating thereto and
all covenants, agreements,

 

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restrictions and encumbrances contained in any instruments, either of record or
known to Lessee (other than encumbrances created by Lessor without the consent
of Lessee), at any time in force affecting the Leased Property.

Lending Institution: Any insurance company, credit company, federally insured
commercial or savings bank, national banking association, savings and loan
association, employees welfare, pension or retirement fund or system, corporate
profit sharing or pension trust, college or university, or real estate
investment trust, including any corporation qualified to be treated for federal
tax purposes as a real estate investment trust, such trust having a net worth of
at least $10,000,000.

Lessee: The Lessee designated on this Lease and its respective permitted
successors and assigns.

Lessee Indemnified Party: Lessee, any Affiliate of Lessee, any other Person
against whom any claim for indemnification may be asserted hereunder as a result
of a direct or indirect ownership interest (including a stockholder’s interest)
in Lessee, the officers, directors, stockholders, employees, agents and
representatives of Lessee and any corporate stockholder, agent, or
representative of Lessee, and the respective heirs, personal representatives,
successors and assigns of any such officer, director, stockholder, employee,
agent or representative.

Lessee’s Personal Property: As defined in Section 6.2.

Lessor: The Lessor designated on this Lease and its respective successors and
assigns.

Lessor Indemnified Party: Lessor, any Affiliate of Lessor, any other Person
against whom any claim for indemnification may be asserted hereunder as a result
of a direct or indirect ownership interest (including a stockholder’s or
partnership interest) in Lessor, the officers, directors, stockholders,
employees, agents and representatives of the general partner of Lessor and any
partner, agent, or representative of Lessor, and the respective heirs, personal
representatives, successors and assigns of any such officer, director, partner,
stockholder, employee, agent or representative.

Minimum Price: The sum of (a) the equity in the Leased Property at the time of
acquisition of the Leased Property by Lessor (i.e., that portion of the purchase
price of the Leased Property paid by Lessor in cash or exchange for partnership
interests in the Lessor) plus (b) other capital expenditures on the Leased
Property made by Lessor after the date hereof plus (c) the unpaid principal
balance of all encumbrances against the Leased Property at the time of purchase
of the Leased Property by Lessee, less (x) all proceeds received by Lessor from
any financing or refinancing of the Leased Property after the date hereof (after
payment of any debt refinanced and net of any costs and expenses incurred in
connection with such financing or refinancing, including, without limitation,
loan points, commitment fees and commissions and legal fees) and (y) the net
amount (after deduction of all reasonable legal fees and other costs and
expenses, including without limitation expert witness fees, incurred by Lessor
in connection with obtaining any such proceeds or award) of all insurance
proceeds received by Lessor and awards received by Lessor from any partial
Taking of the Leased Property that are not applied to restoration.

 

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Mortgage: As defined in Section 30.2.

Notice: A notice given pursuant to Article XXXII.

Officer’s Certificate: A certificate of Lessee reasonably acceptable to Lessor,
signed by the chief financial officer or another officer authorized so to sign
by the board of directors or limited liability company agreement of Lessee, or
any other person whose power and authority to act has been authorized by
delegation in writing by any such officer.

Overdue Rate: On any date, a rate equal to the Base Rate plus 5% per annum, but
in no event greater than the maximum rate then permitted under applicable law.

Other Revenues: Gross revenue from the operation of the Facility excluding:

(a) Room Revenues;

(b) the amount of all credit, rebates or refunds to customers, guests or
patrons;

(c) all sales taxes or any other taxes imposed on such revenues.

Payment Date: Any due date for the payment of any installment of Percentage
Rent.

Percentage Rent: As defined in Section 3.1(a).

Person: Any Government, natural person, corporation, partnership, limited
liability company, joint venture, association, trust, or other legal entity.

Personal Property Taxes: All personal property taxes imposed on the furniture,
furnishings or other items of personal property located on, and used in
connection with, the operation of the Leased Improvements as a hotel (other than
Inventory and other personal property owned by the Lessee), together with all
replacement, modifications, alterations and additions thereto.

Primary Intended Use: As defined in Section 7.2(b).

Proceeding: Any judicial action, suit or proceeding (whether civil or criminal),
any administrative proceeding (whether formal or informal), any investigation by
a governmental authority or entity (including a grand jury), and any
arbitration, mediation or other non-judicial process for dispute resolution.

RCRA: The Resource Conservation and Recovery Act, as amended.

Real Estate Taxes: All real estate taxes, including general and special
assessments, if any, which are imposed upon the Land and any improvements
thereon.

Rejectable Offer Price: An amount equal to the greater of (a) the Fair Market
Value, determined as of the applicable purchase date, or (b) the Minimum Price.

 

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Release: A “Release” as defined in CERCLA or in any Environmental Law, unless
such Release has been properly authorized and permitted in writing by all
applicable Environmental Authorities or is allowed by such Environmental Law
without authorizations or permits.

Rent: Collectively, the Percentage Rent and Additional Charges.

Room Revenues: Gross revenue from the rental of guest rooms, whether to
individuals, groups or transients, at the Facility, excluding the following:

(a) the amount of all credits, rebates or refunds to customers, guests or
patrons;

(b) all sales taxes or any other taxes imposed on the rental of such guest
rooms; and

(c) any fees collected for amenities including, but not limited to: telephone,
laundry, movies or concessions.

SARA: The Superfund Amendments and Reauthorization Act of 1986, as amended.

State: The State or Commonwealth of the United States in which the Leased
Property is located

Subsidiaries: Corporations in which Lessee owns, directly or indirectly, more
than 50% of the voting stock or control, as applicable (individually, a
“Subsidiary”).

Taking: A taking or voluntary conveyance during the Term hereof of all or part
of the Leased Property, or any interest therein or right accruing thereto or use
thereof, as the result of, or in settlement of, any Condemnation or other
eminent domain proceeding affecting the Leased Property whether or not the same
shall have actually been commenced.

Term: As defined in Section 1.2.

TSCA: The Toxic Substances Control Act, as amended.

Unavoidable Delays: Delays due to strikes, lock-outs, labor unrest, inability to
procure materials, power failure, acts of God, governmental restrictions, enemy
action, civil commotion, fire, unavoidable casualty or other causes beyond the
control of the party responsible for performing an obligation hereunder,
provided that lack of funds shall not be deemed a cause beyond the control of
either party hereto unless such lack of funds is caused by the failure of the
other party hereto to perform any obligations of such party under this Lease or
any guaranty of this Lease.

Uneconomic for its Primary Intended Use: A state or condition of the Facility
(after the application of any insurance proceeds if any) such that, in the good
faith judgment of Lessee, reasonably exercised and evidenced by the resolution
of the board of directors or other governing body of Lessee, the Facility cannot
be operated on a commercially practicable basis for its Primary Intended Use,
taking into account, among other relevant factors, the number of usable rooms
and projected revenues, such that Lessee intends to, and shall, complete the
cessation of operations from the Facility.

 

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Uniform System: The Uniform System of Accounts for Hotels (8th Revised Edition,
1986) as published by the Hotel Association of New York City, Inc., as same may
hereafter be revised.

Unsuitable for its Primary Intended Use: A state or condition of the Facility
(after the application of insurance proceeds if any) such that, in the good
faith judgment of Lessee, reasonably exercised and evidenced by the resolution
of the board of directors or other governing body of Lessee, due to casualty
damage or loss through Condemnation, the Facility cannot function as an
integrated hotel facility consistent with standards applicable to a well
maintained and operated hotel.

ARTICLE III

3.1 Rent. Lessee covenants and agrees to pay to Lessor in lawful money of the
United States of America which shall be legal tender for the payment of public
and private debts, in immediately available funds without deduction or offset,
at Lessor’s address set forth in Article XXXII hereof or at such other place or
to such other Person as Lessor from time to time may designate in a Notice, all
Percentage Rent and Additional Charges, during the Term, for each Leased
Property as set forth on Exhibit “A” hereto.

(a) Percentage Rent. During the Term, Lessee shall pay percentage rent
(“Percentage Rent”) quarterly in arrears in an amount equal to 30% of all
quarterly Room Revenue; provided, however, that, on the Capitalization Date,
Percentage Rent shall be reduced to an amount equal to 25% of all quarterly Room
Revenue, and such reduction shall be effective retroactive to the Capitalization
Date, if the Capitalization Date occurs in 2002, or to January 1 of the year in
which the Capitalization Date occurs, if the Capitalization Date occurs after
2002.

(b) Officer’s Certificates. An Officer’s Certificate shall be delivered to
Lessor quarterly setting forth the calculation of the related quarterly
Percentage Rent payments 30 days after the end of each such period of each
Fiscal Year (or part thereof) in the Term. The Percentage Rent payments for the
periods to which the Officer’s Certificates relate shall accompany such
Officer’s Certificate. Such quarterly payments shall be based on the formula set
forth in Section 3.1(a). If Percentage Rent is reduced from 30% to 25% as
provided in Section 3.1(a), then, not later than 30 days after the
Capitalization Date, Lessee shall deliver to Lessor an Officer’s Certificate
setting forth the recalculation of all Percentage Rent payments previously paid
for the year in which the Capitalization Date occurred. If Lessee has paid to
Lessor Percentage Rent payments in excess of the recalculated Percentage Rent
payments, then the amount of such excess shall be credited against the next
Percentage Rent payments due from Lessee to Lessor until the amount of such
excess has been credited in full.

The obligation to pay Percentage Rent shall survive the expiration or earlier
termination of the Term, and a final reconciliation, taking into account, among
other relevant adjustments, any adjustments which are accrued after such
expiration or termination date but which related to Percentage Rent accrued
prior to such termination date, and Lessee’s good faith allowances, shall be
made not

 

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later than two years after such expiration or termination date, but Lessee shall
advise Lessor within 60 days after such expiration or termination date of
Lessee’s best estimate at that time of the approximate amount of such
adjustments, which estimate shall not be binding on Lessee or have any legal
effect whatsoever. The accrual of Percentage Rent shall cease with the
termination of the Lease.

3.2 Additional Charges. In addition to the Percentage Rent, (a) Lessee also will
pay and discharge as and when due and payable all other amounts, liabilities,
obligations and Impositions that Lessee assumes or agrees to pay under this
Lease, and (b) in the event of any failure on the part of Lessee to pay any of
those items referred to in clause (a) of this Section 3.2, Lessee also will
promptly pay and discharge every fine, penalty, interest and cost that may be
added for non-payment or late payment of such items (the items referred to in
clauses (a) and (b) of this Section 3.2 being additional rent hereunder and
being referred to herein collectively as the “Additional Charges”), and Lessor
shall have all legal, equitable and contractual rights, powers and remedies
provided either in this Lease or by statute or otherwise in the case of
non-payment of the Additional Charges as in the case of non-payment of the
Percentage Rent. The Lessee’s obligations regarding the payment of Impositions
are set out in Section 4.1. If any installment of Percentage Rent or Additional
Charges (but only as to those Additional Charges that are payable directly to
Lessor) shall not be paid on its due date, Lessee will pay Lessor on demand, as
Additional Charges, a late charge (to the extent permitted by law) computed at
the Overdue Rate on the amount of such installment, from the due date of such
installment to the date of payment thereof. To the extent that Lessee pays any
Additional Charges to Lessor pursuant to any requirement of this Lease, Lessee
shall be relieved of its obligation to pay such Additional Charges to the entity
to which they would otherwise be due and Lessor shall pay same from monies
received from Lessee.

3.3 Lease Provision. The Rent shall be paid so that this Lease shall yield to
Lessor the full amount of the installments of Percentage Rent and Additional
Charges throughout the Term, all as more fully set forth in Article V, but
subject to any other provisions of this Lease that expressly provide for
adjustment of Rent or other charges or expressly provide that certain expenses
or maintenance shall be paid or performed by Lessor.

3.4 Conversion of Property. If, during the Term, Lessee desires to provide food
and beverage operations at the Facility (other than complimentary continental
breakfast), Lessee shall give notice of such desire to Lessor. Lessor and Lessee
shall then commence negotiations to adjust Rent to reflect the proposed change
to the operation of the Facility, each acting reasonably and in good faith. All
other terms of this Lease will remain substantially the same. During
negotiations, which shall not extend beyond 60 days, Lessee shall not “convert”
the Facility and shall continue fulfilling its obligations under the existing
terms of this Lease. If no agreement is reached after such 60-day period, Lessee
shall withdraw such notice and this Lease shall continue in full force. Once the
“conversion” is approved or the Lessor has approved such operations, the Lessee
may lease such converted facilities. If the Lessee desires to relet such
facilities, the Lessor shall approve the terms of such lease unless its terms
are the same or more advantageous to the Lessor than those of the prior lease.

3.5 Books and Records. Lessee shall keep full and adequate books of account and
other records reflecting the results of operation of the Facility on an accrual
basis, all in accordance with the Uniform System and generally accepted
accounting principles

 

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and the obligations of Lessee under this Lease. The books of account and all
other records relating to or reflecting the operation of the Facility shall be
kept either at the Facility or at Lessee’s offices in Columbia, Maryland, or
Norfolk, Nebraska and shall be available to Lessor and its representatives and
its auditors or accountants, at all reasonable times for examination, audit,
inspection, and transcription. All of such books and records pertaining to the
Facility including, without limitation, books of account, guest records and
front office records, at all times shall be the property of Lessor and shall not
be removed from the Facility or Lessee’s offices without the approval of Lessor.

ARTICLE IV

4.1 Payment of Impositions. Subject to Article VII relating to permitted
contests, Lessee will pay, or cause to be paid, all Impositions before any fine,
penalty, interest or cost may be added for non-payment, such payments to be made
directly to the taxing or other authorities where feasible, and will promptly
furnish to Lessor copies of official receipts or other satisfactory proof
evidencing such payments. Lessee’s obligation to pay such Impositions shall be
deemed absolutely fixed upon the date such Impositions become a lien upon the
Leased Property or any part thereof. If any such Imposition may, at the option
of the taxpayer, lawfully be paid in installments (whether or not interest shall
accrue on the unpaid balance of such Imposition), Lessee may exercise the option
to pay the same (and any accrued interest on the unpaid balance of such
Imposition) in installments and in such event, shall pay such installments
during the Term hereof (subject to Lessee’s right of contest pursuant to the
provisions of Article XII as the same respectively become due and before any
fine, penalty, premium, further interest or cost may be added thereto. Lessor,
at its expense, shall, to the extent required or permitted by applicable law,
prepare and file all tax returns in respect of Lessor’s net income, gross
receipts, sales and use, single business, transaction privilege, rent, ad
valorem, franchise taxes and taxes on its capital stock, and Lessee, at its
expense, shall, to the extent required or permitted by applicable laws and
regulations, prepare and file all other tax returns and reports in respect of
any Imposition as may be required by governmental authorities. If any refund
shall be due from any taxing authority in respect of any Imposition paid by
Lessee, the same shall be paid over to or retained by Lessee if no Event of
Default shall have occurred hereunder and be continuing. If an Event of Default
shall have occurred and be continuing, any such refund shall be paid over to or
retained by Lessor. Any such funds retained by Lessor due to an Event of Default
shall be applied as provided in Article XVI. Lessor and Lessee shall, upon
request of the other, provide such data as is maintained by the party to whom
the request is made with respect to the Leased Property as may be necessary to
prepare any required returns and reports. Lessee shall file all Personal
Property Tax returns in such jurisdictions where it is legally required to so
file. Lessor, to the extent it possesses the same, and Lessee, to the extent it
possesses the same, will provide the other party, upon request, with cost and
depreciation records necessary for filing returns for any property classified as
personal property. Where Lessor is legally required to file Personal Property
Tax returns, Lessee shall provide Lessor with copies of assessment notices in
sufficient time for Lessor to file a protest. Lessor may, upon notice to Lessee,
at Lessor’s option and at Lessor’s sole expense, protest, appeal, or institute
such other proceedings (in its or Lessee’s name) as Lessor may deem appropriate
to effect a reduction for those Impositions to be paid by Lessor, and Lessee, at
Lessor’s expense as aforesaid, shall fully cooperate with Lessor in such
protest, appeal, or other action. Lessee may, at its sole

 

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expense, and upon notice to Lessor, protest, appeal or institute such other
proceedings (in its or in Lessor’s name) as Lessee may deem appropriate to
effect a reduction for these Impositions to be paid by the Lessee, and Lessor,
at Lessee’s expense, shall fully cooperate with Lessee in such protest, appeal
or other action. Lessor hereby agrees to indemnify, defend, and hold harmless
Lessee from and against any claims, obligations, and liabilities against or
incurred by Lessee in connection with such cooperation. Lessor, however,
reserves the right to effect any such protest, appeal or other action and, upon
notice to Lessee, shall control any such activity, which shall then go forward
at Lessor’s sole expense. Upon such notice, Lessee, at Lessor’s expense, shall
cooperate fully with such activities. If requested by any lender of the Lessor
relating to the Leased Property, the Lessee shall provide any funds for the
escrow of any Imposition, and the Lessee shall received any income on such
escrowed funds and shall receive any funds released from such escrow.

4.2 Notice of Impositions. Lessor shall give prompt Notice to Lessee of all
Impositions payable by Lessee hereunder of which Lessor at any time has
knowledge, provided that Lessor’s failure to give any such Notice shall in no
way diminish Lessee’s obligations hereunder to pay such Impositions, but such
failure shall obviate any default hereunder for a reasonable time after Lessee
receives Notice or has otherwise acquired knowledge of any Imposition which it
is obligated to pay during the first taxing period applicable thereto.

4.3 Adjustment of Impositions. Impositions imposed in respect of the tax-fiscal
period during which the Term terminates shall be adjusted and prorated between
Lessor and Lessee, whether or not such Imposition is imposed before or after
such termination, and Lessee’s obligation to pay its prorated share thereof
after termination shall survive such termination.

4.4 Maintenance. Lessee will be solely responsible for obtaining and maintaining
utility services to the Leased Property and will pay or cause to be paid all
charges for electricity, gas, oil, water, sewer and other utilities used in the
Leased Property during the Term.

4.5 Insurance Premiums. To the extent provided in Section 13.1(b), Lessee will
pay or cause to be paid all premiums for the insurance coverages required to be
maintained by it under Article XIII.

ARTICLE V

5.1 No Termination. Except as otherwise specifically provided in this Lease, and
except for loss of the Franchise Agreement solely by reason of any action or
inaction by Lessor, Lessee, to the extent permitted by law, shall remain bound
by this Lease in accordance with its terms and shall neither take any action
without the written consent of Lessor to modify, surrender or terminate the
same, nor seek nor be entitled to any abatement, deduction, deferment or
reduction of the Rent, or setoff against the Rent, nor shall the obligations of
Lessee be otherwise affected by reason of (a) any damage to, or destruction of,
any Leased Property or any portion thereof from whatever cause or any Taking of
the Leased Property or any portion thereof, (b) the lawful or unlawful
prohibition of, or restriction upon, Lessee’s use of the Leased Property, or any
portion thereof, or the interference with such use by any Person, corporation,
partnership or other entity, (c) any claim which Lessee has or might have
against Lessor by reason of any default or breach of any warranty by Lessor
under this Lease or any other agreement between Lessor and Lessee, or to which
Lessor and Lessee

 

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are parties, (d) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Lessor or any assignee or transferee of Lessor, or (e) for any other
cause whether similar or dissimilar to any of the foregoing other than a
discharge of Lessee from any such obligations as a matter of law. Lessee hereby
specifically waives all rights, arising from any occurrence whatsoever, which
may now or hereafter be conferred upon it by law to (1) modify, surrender or
terminate this Lease or quit or surrender the Leased Property or any portion
thereof, or (2) entitle Lessee to any abatement, reduction, suspension or
deferment of the Rent or other sums payable by Lessee hereunder, except as
otherwise specifically provided in this Lease. The obligations of Lessee
hereunder shall be separate and independent covenants and agreements and the
Rent and all other sums payable by Lessee hereunder shall continue to be payable
in all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Lease or by termination of this Lease
other than by reason of an Event of Default.

ARTICLE VI

6.1 Ownership of the Leased Property. Lessee acknowledges that the Leased
Property is the property of Lessor and that Lessee has only the right to the
possession and use of the Leased Property upon the terms and conditions of this
Lease.

6.2 Lessee’s Personal Property.

(a) 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
and, from and after the Capitalization Date, all Hotel Property. Lessee may (and
shall as provided herein below), at its expense, install, affix or assemble or
place on any parcels of the Land or in any of the Leased Improvements, any items
of personal property (including Inventory and Hotel Property) owned by Lessee.
Lessee, at the commencement of the Term, and from time to time thereafter, shall
provide Lessor with an accurate list of all such items of Lessee’s personal
property (collectively, the “Lessee’s Personal Property”). Lessee may, subject
to the first sentence of this Section 6.2 and the conditions set forth below,
remove any of Lessee’s Personal Property set forth on such list at any time
during the Term or upon the expiration or any prior termination of the Term. All
of Lessee’s Personal Property, other than Inventory, not removed by Lessee
within ten days following the expiration or earlier termination of the Term
shall be considered abandoned by Lessee and may be appropriated, sold, destroyed
or otherwise disposed of by Lessor without first giving Notice thereof to
Lessee, without any payment to Lessee and without any obligation to account
therefor. Lessee will, at its expense, restore the Leased Property to the
condition required by Section 9.1(a), including repair of all damage to the
Leased Property caused by the removal of Lessee’s Personal Property, effected by
Lessee. Upon the expiration or earlier termination of the Term, Lessor or its
designee shall have the option to purchase all Inventory and any or all Hotel
Property on hand at the Leased Property at the time of such expiration or
termination for a sale price equal to the fair market value of such Inventory.
Lessee may make such financing arrangements, title retention agreements, leases
or other agreements with respect to the Lessee’s Personal Property as it sees
fit provided that Lessee first advises Lessor of any such arrangement and such
arrangement expressly provides that in the event of Lessee’s default thereunder,
Lessor (or its designee) may assume Lessee’s obligations and rights under such
arrangement.

 

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(b) From and after the Capitalization Date, Lessee, at its expense, shall
acquire and maintain, and install, affix or assemble or place on the Land and in
the Leased Improvements, all Hotel Property, all of which shall be deemed to be
part of Lessee’s Personal Property for all purposes hereunder, and none of which
shall be deemed to be Leased Property with respect to any period after the
Capitalization Date.

6.3 Lessor’s Lien. To the fullest extent permitted by applicable law, Lessor is
granted a lien and security interest on all Lessee’s Personal Property now or
hereinafter placed in or upon the Leased Property and the Lessee’s bank
accounts, with the exception of the Lessee’s central disbursement, payroll and
concentration bank accounts (the “Depository Accounts”), and such lien and
security interest shall remain attached to such Lessee’s Personal Property and
Depository Accounts until payment in full of all Rent and satisfaction of all of
Lessee’s obligations hereunder; provided, however, Lessor shall subordinate its
lien and security interest to that of any non-Affiliate of Lessee which finances
such Lessee’s Personal Property or any non-Affiliate conditional seller of such
Lessee’s Personal Property, the terms and conditions of such subordination to be
satisfactory to Lessor in the exercise of reasonable discretion. Lessee shall,
upon the request of Lessor, title the Depository Accounts in the name of the
Lessor or execute such financing statements or other documents or instruments
reasonably requested by Lessor to perfect the lien and security interests herein
granted. In addition, the Lessor shall have unrestricted access to the
Depository Accounts. To the extent that the Lessor withdraws from the Depository
Accounts more than the rent and other obligations of the Lessee to the Lessor,
the excess shall be a loan from the Lessee to the Lessor, repayable upon demand
by the Lessee.

ARTICLE VII

7.1 Condition of the Leased Property. Lessee acknowledges receipt and delivery
of possession of the Leased Property. Lessee has examined and otherwise has
knowledge of the condition of the Leased Property and has found the same to be
satisfactory for its purposes hereunder. Lessee is leasing the Leased Property
“as is” in its present condition. Lessee waives any claim or action against
Lessor in respect of the condition of the Leased Property. LESSOR MAKES NO
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED
PROPERTY, OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR
CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL
SUCH RISKS ARE TO BE BORNE BY LESSEE. LESSEE ACKNOWLEDGES THAT THE LEASED
PROPERTY HAS BEEN INSPECTED BY LESSEE AND IS SATISFACTORY TO IT. Provided,
however, to the extent permitted by law, Lessor shall allow Lessee the benefit
of all of Lessor’s rights to proceed against any predecessor in title other than
Lessee (or an Affiliate of Lessee which conveyed the Property to Lessor) for
breaches of warranties or representations or for latent defects in the Leased
Property. Lessor shall fully cooperate with Lessee in the prosecution of any
such claim, in Lessor’s or Lessee’s name, all at Lessee’s sole cost and expense.
Lessee hereby agrees to indemnify, defend and hold harmless Lessor from and
against any claims, obligations and liabilities against or incurred by Lessor in
connection with such cooperation.

 

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Provided, however, that nothing herein shall be deemed to limit Lessor’s
obligations under Section XL and 40.2.

7.2 Use of the Leased Property.

(a) Lessee covenants that it will obtain and to maintain all approvals needed to
use and operate the Leased Property and the Facility under applicable local,
state and federal law.

(b) Lessee shall use or cause to be used the Leased Property only as a hotel
facility, and for such other uses as may be necessary or incidental to such use
(the “Primary Intended Use”). Lessee shall not use the Leased Property or any
portion thereof for any other use without the prior written consent of Lessor,
which consent may be granted, denied or conditioned in Lessor’s sole discretion.
No use shall be made or permitted to be made of the Leased Property, and no acts
shall be done, which will cause the cancellation or substantially increase the
premium of any insurance policy covering the Leased Property or any part thereof
(unless another adequate policy satisfactory to Lessor is available and Lessee
pays any premium increase), nor shall Lessee sell or permit to be kept, used or
sold in or about the Leased Property any article which may be prohibited by law
or fire underwriter’s regulations. Lessee shall, at its sole cost, comply with
all of the requirements pertaining to the Leased Property of any insurance
board, association, organization or company necessary for the maintenance of
insurance, as herein provided, covering the Leased Property and Lessee’s
Personal Property.

(c) Subject to the provisions of Articles XIV and XV, Lessee covenants and
agrees that during the Term it will (1) operate continuously the Leased Property
as a hotel facility, (2) keep in full force and effect and materially comply
with all the provisions of the Franchise Agreement (except that Lessee shall
have no obligation to complete any improvements to the Leased Property required
by the franchisor unless the Lessor funds the cost thereof), (3) not terminate
or amend the Franchise Agreement without the consent of Lessor, (4) maintain
appropriate certifications and licenses for such use and (5) will seek to
maximize the Gross Revenues generated therefrom consistent with sound business
practices.

(d) Lessee shall not commit or suffer to be committed any waste on the Leased
Property, or in the Facility, nor shall Lessee cause or permit any nuisance
thereon.

(e) Lessee shall neither suffer nor permit the Leased Property or any portion
thereof, or Lessee’s Personal Property, to be used in such a manner as (1) might
reasonably tend to impair Lessor’s (or Lessee’s, as the case may be) title
thereto or to any portion thereof, or (2) may reasonably make possible a claim
or claims of adverse usage or adverse possession by the public, as such, or of
implied dedication of the Leased Property or any portion thereof, except as
necessary in the ordinary and prudent operation of the Facility on the Leased
Property.

7.3 Lessor to Grant Easements, etc. Lessor will, from time to time, so long as
no Event of Default has occurred and is continuing, at the request of Lessee and
at Lessee’s cost and expense (but subject to the approval of Lessor, which
approval shall not be unreasonably withheld or delayed), (a) grant easements and
other rights in the nature of easements with respect to the Leased Property to
third parties, (b) release existing easements or other rights in the nature of
easements which are for the benefit of the

 

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Leased Property, (c) dedicate or transfer unimproved portions of the Leased
Property for road, highway or other public purposes, (d) execute petitions to
have the Leased Property annexed to any municipal corporation or utility
district, (e) execute amendments to any covenants and restrictions affecting the
Leased Property and (f) execute and deliver to any person any instrument
appropriate to confirm or effect such grants, releases, dedications, transfers,
petitions and amendments (to the extent of its interests in the Leased
Property), but only upon delivery to Lessor of an Officer’s Certificate stating
that such grant, release, dedication, transfer, petition or amendment does not
interfere with the proper conduct of the business of Lessee on the Leased
Property and does not materially reduce the value of the Leased Property.

ARTICLE VIII

8.1 Compliance with Legal and Insurance Requirements, etc. Subject to
Section 8.3(b) below and Article XII relating to permitted contests, Lessee, at
its expense, will promptly (a) comply with all applicable Legal Requirements and
Insurance Requirements in respect of the use, operation, maintenance, repair and
restoration of the Leased Property, and (b) procure, maintain and comply with
all appropriate licenses and other authorizations required for any use of the
Leased Property and Lessee’s Personal Property then being made, and for the
proper erection, installation, operation and maintenance of the Leased Property
or any part thereof.

8.2 Legal Requirement Covenants. Subject to Section 8.3(b) below, Lessee
covenants and agrees that the Leased Property and Lessee’s Personal Property
shall not be used for any unlawful purpose, and that Lessee shall not permit or
suffer to exist any unlawful use of the Leased Property by others. Lessee shall
acquire and maintain all appropriate licenses, certifications, permits and other
authorizations and approvals needed to operate the Leased Property in its
customary manner for the Primary Intended Use, and any other lawful use
conducted on the Leased Property as may be permitted from time to time
hereunder. Lessee further covenants and agrees that Lessee’s use of the Leased
Property and maintenance, alteration, and operation of the same, and all parts
thereof, shall at all times materially conform to all Legal Requirements, unless
the same are finally determined by a court of competent jurisdiction to be
unlawful (and Lessee shall cause all such sub-tenants, invitees or others to so
materially comply with all Legal Requirements). Lessee may, however, upon prior
Notice to Lessor, contest the legality or applicability of any such Legal
Requirement or any licensure or certification decision if Lessee maintains such
action in good faith, with due diligence, without prejudice to Lessor’s rights
hereunder, and at Lessee’s sole expense. If by the terms of any such Legal
Requirement compliance therewith pending the prosecution of any such proceeding
may legally be delayed without the incurrence of any lien, charge or liability
of any kind against the Facility or Lessee’s leasehold interest therein and
without subjecting Lessee or Lessor to any liability, civil or criminal, for
failure so to comply therewith, Lessee may delay compliance therewith until the
final determination of such proceeding. If any lien, charge or civil or criminal
liability would be incurred by reason of any such delay, Lessee, on the prior
written consent of Lessor, which consent shall not be unreasonably withheld, may
nonetheless contest as aforesaid and delay as aforesaid provided that such delay
would not subject Lessor to criminal liability and Lessee both (a) furnishes to
Lessor security reasonably satisfactory to Lessor against any loss or injury by
reason of such contest or delay and (b) prosecutes the contest with due
diligence and in good faith.

 

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8.3 Environmental Covenants. Lessor and Lessee (in addition to, and not in
diminution of, Lessee’s covenants and undertakings in Sections 8.1 and 8.2
hereof) covenant and agree as follows:

(a) At all times hereafter until the later of (i) such time as all liabilities,
duties or obligations of Lessee to the Lessor under the Lease have been
satisfied in full and (ii) such time as Lessee completely vacates the Leased
Property and surrenders possession of the same to Lessor, Lessee shall fully
comply with all Environmental Laws applicable to the Leased Property and the
operations thereon. Lessee agrees to give Lessor prompt written notice of
(1) all Environmental Liabilities; (2) all pending, threatened or anticipated
Proceedings, and all notices, demands, requests or investigations, relating to
any Environmental Liability or relating to the issuance, revocation or change in
any Environmental Authorization required for operation of the Leased Property;
(3) all Releases at, on, in, under or in any way affecting the Leased Property,
or any Release known by Lessee at, on, in or under any property adjacent to the
Leased Property; and (4) all facts, events or conditions that could reasonably
lead to the occurrence of any of the above-referenced matters.

(b) Lessor hereby agrees to defend, indemnify and save harmless any and all
Lessee Indemnified Parties from and against any and all Environmental
Liabilities other than Environmental Liabilities which were caused by the acts
or grossly negligent failures to act of Lessee.

(c) Lessee hereby agrees to defend, indemnify and save harmless any and all
Lessor Indemnified Parties from and against any and all Environmental
Liabilities which were caused by the acts or grossly negligent failures to act
of Lessee.

(d) If any Proceeding is brought against any Indemnified Party in respect of an
Environmental Liability with respect to which such Indemnified Party may claim
indemnification under either Section 8.3(b) or 8.3(c), the Indemnifying Party,
upon request, shall at its sole expense resist and defend such Proceeding, or
cause the same to be resisted and defended by counsel designated by the
Indemnified Party and approved by the Indemnifying Party, which approval shall
not be unreasonably withheld; provided, however, that such approval shall not be
required in the case of defense by counsel designated by any insurance company
undertaking such defense pursuant to any applicable policy of insurance. Each
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel will be at the sole expense of such Indemnified Party unless
such counsel has been approved by the Indemnifying Party, which approval shall
not be unreasonably withheld. The Indemnifying Party shall not be liable for any
settlement of any such Proceeding made without its consent, which shall not be
unreasonably withheld, but if settled with the consent of the Indemnifying
Party, or if settled without its consent (if its consent shall be unreasonably
withheld), or if there be a final, nonappealable judgment for an adversary party
in any such Proceeding, the Indemnifying Party shall indemnify and hold harmless
the Indemnified Parties from and against any liabilities incurred by such
Indemnified Parties by reason of such settlement or judgment.

 

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(e) At any time any Indemnified Party has reason to believe circumstances exist
which could reasonably result in an Environmental Liability, upon reasonable
prior written notice to Lessee stating such Indemnified Party’s basis for such
belief, an Indemnified Party shall be given immediate access to the Leased
Property (including, but not limited to, the right to enter upon, investigate,
drill wells, take soil borings, excavate, monitor, test, cap and use available
land for the testing of remedial technologies), Lessee’s employees, and to all
relevant documents and records regarding the matter as to which a
responsibility, liability or obligation is asserted or which is the subject of
any Proceeding; provided that such access may be conditioned or restricted as
may be reasonably necessary to ensure compliance with law and the safety of
personnel and facilities or to protect confidential or privileged information.
All Indemnified Parties requesting such immediate access and cooperation shall
endeavor to coordinate such efforts to result in as minimal interruption of the
operation of the Leased Property as practicable.

(f) The indemnification rights and obligations provided for in this Article VIII
shall be in addition to any indemnification rights and obligations provided for
elsewhere in this Lease.

(g) The indemnification rights and obligations provided for in this Article VIII
shall survive the termination of this Agreement.

For purposes of this Section 8.3, all amounts for which any Indemnified Party
seeks indemnification shall be computed net of (a) any actual income tax benefit
resulting therefrom to such Indemnified Party, (b) any insurance proceeds
received (net of tax effects) with respect thereto, and (c) any amounts
recovered (net of tax effects) from any third parties based on claims the
Indemnified Party has against such third parties which reduce the damages that
would otherwise be sustained; provided that in all cases, the timing of the
receipt or realization of insurance proceeds or income tax benefits or
recoveries from third parties shall be taken into account in determining the
amount of reduction of damages. Each Indemnified Party agrees to use its
reasonable efforts to pursue, or assign to Lessee or Lessor, as the case may be,
any claims or rights it may have against any third party which would materially
reduce the amount of damages otherwise incurred by such Indemnified Party.

Notwithstanding anything to the contrary contained in this Agreement, if Lessor
shall become entitled to the possession of the Leased Property by virtue of the
termination of the Lease or repossession of the Leased Property, then Lessor may
assign its indemnification rights under Section 8.3 of this Agreement (but not
any other rights hereunder) to any Person to whom the Lessor subsequently
transfers the Leased Property, subject to the following conditions and
limitations, each of which shall be deemed to be incorporated into the terms of
such assignment, whether or not specifically referred to therein:

(1) The indemnification rights referred to in this section may be assigned only
if a known Environmental Liability then exists or if a Proceeding is then
pending or, to the knowledge of Lessee or Lessor, then threatened with respect
to the Leased Property.

(2) Such indemnification rights shall be limited to Environmental Liabilities
relating to or specifically affecting the Leased Property; and

 

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(3) Any assignment of such indemnification rights shall be limited to the
immediate transferee of Lessor, and shall not extend to any such transferree’s
successors or assigns.

ARTICLE IX

9.1 Capital Improvements, Maintenance and Repair.

(a) Subject to Section 9.1(b), Lessee will keep the Leased Property and all
private roadways, sidewalks and curbs appurtenant thereto that are under
Lessee’s control, including windows and plate glass, parking lots, mechanical,
electrical and plumbing systems and equipment (including conduit and ductware),
and non-load bearing interior walls, and all Hotel Property in good order and
repair, except for ordinary wear and tear (whether or not the need for such
repairs occurred as a result of Lessee’s use, any prior use, the elements or the
age of the Leased Property, or any portion thereof), and, except as otherwise
provided in Articles XIV or XV, with reasonable promptness, make all necessary
and appropriate repairs thereto of every kind and nature, whether interior or
exterior, ordinary or extraordinary, foreseen or unforeseen, or required by any
governmental agency having jurisdiction over the Leased Property, except as to
the structural elements of the Leased Improvements and underground utilities.

(b) Notwithstanding any other provision of this Lease, unless the need for
compliance with Section 9.1(a) is caused by Lessee’s negligence or willful
misconduct or that of its employees or agents, Lessee shall not be required to
bear the costs of complying with Section 9.1(a) with respect to items classified
as either (i) capital items under U.S. generally accepted accounting principles
or (ii) Fixtures or, prior to the Capitalization Date, Furniture and Equipment
in, on, or under the Facility or its components, except to the extent (X) that
amounts are available therefor from Lessor under Article XL or otherwise or
(Y) required under Articles XIV and XV on the conditions set forth therein.

(c) Article XL sets forth the only obligations of Lessor to fund the cost of any
repairs, replacements, alterations, restorations or renewals of any nature or
description to the Leased Property, whether ordinary or extraordinary, foreseen
or unforeseen, or to make any expenditure whatsoever with respect thereto, in
connection with this Lease, or to maintain the Leased Property in any way.
Lessee hereby waives, to the extent permitted by law, the right to make repairs
at the expense of Lessor pursuant to any law in effect at the time of the
execution of this Lease or hereafter enacted. Lessor shall have the right to
give, record and post, as appropriate, notices of nonresponsibility under any
mechanic’s lien laws now or hereafter existing.

(d) Lessee shall be permitted to prosecute claims against Lessor’s predecessors
in title for breach of any representation or warranty or for any latent defects
in the Leased Property to be maintained by Lessee unless Lessor is already
diligently pursuing such a claim. All repairs shall, to the extent reasonably
achievable, be at least equivalent in quality to the original work. Lessee will
not take or omit to take any action, the taking or omission of which might
materially impair the value or the usefulness of the Leased Property or any part
thereof for its Primary Intended Use.

 

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(e) Intentionally Omitted.

(f) Lessee will, upon the expiration or prior termination of the Term, vacate
and surrender the Leased Property to Lessor in the condition in which the Leased
Property was originally received from Lessor, except as repaired, rebuilt,
restored, altered or added to as permitted or required by the provisions of this
Lease and except for ordinary wear and tear (subject to the obligation of Lessee
to maintain the Leased Property in accordance with Section 9.1(a) above during
the entire Term of the Lease), or damage by casualty or Condemnation (subject to
the obligations of Lessee to restore or repair as set forth in the Lease).

9.2 Encroachments, Restrictions, Etc. If any of the Leased Improvements, at any
time, materially encroach upon any property, street or right-of-way adjacent to
the Leased Property, or violate the agreements or conditions contained in any
lawful restrictive covenant or other agreement affecting the Leased Property, or
any part thereof, or impair the rights of others under any easement or
right-of-way to which the Leased Property is subject, then promptly upon the
request of Lessor or at the behest of any person affected by any such
encroachment, violation or impairment, Lessee shall, at its expense, subject to
its right to contest the existence of any encroachment, violation or impairment
and, in such case, in the event of an adverse final determination, either
(a) obtain valid and effective waivers or settlements of all claims, liabilities
and damages resulting from each such encroachment, violation or impairment,
whether the same shall affect Lessor or Lessee or (b) make such changes in the
Leased Improvements, and take such other actions, as Lessee in the good faith
exercise of its judgment deems reasonably practicable to remove such
encroachment, and to end such violation or impairment, including, if necessary,
the alteration of any of the Leased Improvements, and in any event take all such
actions as may be necessary in order to be able to continue the operation of the
Leased Improvements for the Primary Intended Use substantially in the manner and
to the extent the Leased Improvements were operated prior to the assertion of
such violation, impairment or encroachment. Any such alteration shall be made in
conformity with the applicable requirements of Article X. Lessee’s obligations
under this Section 9.2 shall be in addition to and shall in no way discharge or
diminish any obligation of any insurer under any policy of title or other
insurance held by Lessor.

ARTICLE X

10.1 Alterations. After receiving approval of Lessor, which approval shall not
be unreasonably withheld, Lessee shall have the right to make such additions,
modifications or improvements to the Leased Property from time to time as Lessee
deems desirable for its permitted uses and purposes, provided that such action
will not significantly alter the character or purposes or significantly detract
from the value or operating efficiency thereof and will not significantly impair
the revenue-producing capability of the Leased Property or adversely affect the
ability of the Lessee to comply with the provisions of this Lease. The cost of
such additions, modifications or improvements to the Leased Property shall be
paid by Lessee, and all such additions, modifications and improvements shall,
without payment by Lessor at any time, be included under the terms of this Lease
and upon expiration or earlier termination of this Lease shall pass to and
become the property of Lessor.

 

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10.2 Salvage. All materials which are scrapped or removed in connection with the
making of repairs required by Articles IX or X shall be or become the property
of Lessor or Lessee depending on which party is paying for or providing the
financing for such work.

10.3 Joint Use Agreements. If Lessee constructs additional improvements that are
connected to the Leased Property or share maintenance facilities, HVAC,
electrical, plumbing or other systems, utilities, parking or other amenities,
the parties shall enter into a mutually agreeable cross-easement or joint use
agreement, the form of which has been approved in advance by Lessor, to make
available necessary services and facilities in connection with such additional
improvements, to protect each of their respective interests in the properties
affected, and to provide for separate ownership, use, and/or financing of such
improvements.

ARTICLE XI

11.1 Liens. Subject to the provision of Article XII relating to permitted
contests, Lessee will not directly or indirectly create or allow to remain and
will promptly discharge at its expense any lien, encumbrance, attachment, title
retention agreement or claim upon the Leased Property or any attachment, levy,
claim or encumbrance in respect of the Rent, not including, however, (a) this
Lease, (b) the matters, if any, included as exceptions in the title policy
insuring Lessor’s interest in the Leased Property, (c) restrictions, liens and
other encumbrances which are consented to in writing by Lessor or any easements
granted pursuant to the provisions of Section 7.3 of this Lease, (d) liens for
those taxes upon Lessor which Lessee is not required to pay hereunder,
(e) subleases permitted by Article XXIII hereof, (f) liens for Impositions or
for sums resulting from noncompliance with Legal Requirements so long as (1) the
same are not yet payable or are payable without the addition of any fine or
penalty or (2) such liens are in the process of being contested as permitted by
Article XII, (g) liens of mechanics, laborers, materialmen, suppliers or vendors
for sums either disputed or not yet due provided that (1) the payment of such
sums shall not be postponed under any related contract for more than 60 days
after the completion of the action giving rise to such lien and such reserve or
other appropriate provisions as shall be required by law or generally accepted
accounting principles shall have been made therefor and (2) any such liens are
in the process of being contested as permitted by Article XII hereof, (h) any
liens which are the responsibility of Lessor pursuant to the provisions of
Article XXXIV of this Lease.

ARTICLE XII

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 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

 

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assurance reasonably satisfactory to Lessor that all Claims which may be
assessed against the Leased Property together with interest and penalties, if
any, thereon will be paid, or (b) deposit within the time otherwise required for
payment with a bank or trust company as trustee upon terms reasonably
satisfactory to Lessor, as security for the payment of such Claims, money in an
amount sufficient to pay the same, together with interest and penalties in
connection therewith, as to all Claims which may be assessed against or become a
Claim on the Leased Property, or any part thereof, in said legal proceedings.
Lessee shall furnish Lessor and any lender of Lessor with reasonable evidence of
such deposit within five days of the same. Lessor agrees to join in any such
proceedings at Lessee’s expense if the same be required to legally prosecute
such contest of the validity of such Claims; provided, however, that Lessor
shall not thereby be subjected to any liability for the payment of any costs or
expenses in connection with any proceedings brought by Lessee; and Lessee
covenants to indemnify and save harmless Lessor from any such costs or expenses.
Lessee shall be entitled to any refund of any Claims and such charges and
penalties or interest thereon which have been paid by Lessee or paid by Lessor
and for which Lessor has been fully reimbursed. In the event that Lessee fails
to pay any Claims when due or to provide the security therefor as provided in
this paragraph and to diligently prosecute any contest of the same, Lessor may,
upon ten days advance Notice to Lessee, pay such charges together with any
interest and penalties and the same shall be repayable by Lessee to Lessor as
Additional Charges at the next Payment Date provided for in this Lease.
Provided, however, that should Lessor reasonably determine that the giving of
such Notice would risk loss to the Leased Property or cause damage to Lessor,
then Lessor shall give such Notice as is practical under the circumstances.
Lessor reserves the right to contest any of the Claims at its expense not
pursued by Lessee. Lessor and Lessee agree to cooperate in coordinating the
contest of any claims.

ARTICLE XIII

13.1 General Insurance Requirements.

(a) Coverages. During the Term of this Lease, Lessee shall at all times keep the
Leased Property and Hotel Property insured with the kinds and amounts of
insurance described below provided, however, that the Lessor shall be
responsible for payment of any insurance requested by it pursuant to paragraph
(ix) of Section 13.1(a) of this Lease if not of a type customarily kept by
similar business and properties. This insurance shall be written by companies
licensed and authorized to issue insurance in the State. The policies must name
Lessor as the insured or as an additional named insured, as the case may be.
Losses shall be payable to Lessor or Lessee as provided in this Lease. Any loss
adjustment shall require the written consent of Lessor and Lessee, each acting
reasonably and in good faith. Evidence of insurance shall be deposited with
Lessor. The policies on the Leased Property, including the Leased Improvements,
Fixtures and Lessee’s Personal Property, shall include:

(i) Building insurance on the “Special Form” (formerly “All Risk” form) (which
may include earthquake and flood in reasonable amounts as determined by Lessor)
in an amount not less than 100% of the then full replacement cost thereof (as
defined in Section 13.2) or such other amount which is acceptable to Lessor, and
personal property insurance on the “Special Form” in the full amount of the
replacement cost thereof;

 

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(ii) Insurance for loss or damage (direct and indirect) from steam boilers,
pressure vessels or similar apparatus, now or hereafter installed in the
Facility, in the minimum amount of $5,000,000 or in such lesser or greater
amounts as are then customary or as may be reasonably requested by Lessor from
time to time;

(iii) Loss of income insurance on the “Special Form”, in the amount of one year
of Percentage Rent for the benefit of Lessor, and business interruption
insurance on the “Special Form” in the amount of one year of gross profit, for
the benefit of Lessor or Lessee;

(iv) Commercial general liability insurance, with amounts not less than
$10,000,000 covering each of the following: bodily injury, death, or property
damage liability per occurrence, personal and advertising injury, general
aggregate, products and completed operations, with respect to Lessor, and “all
risk legal liability” (including liquor law or “dram shop” liability, if liquor
or alcoholic beverages are served on the Leased Property) with respect to Lessor
and Lessee;

(v) Insurance covering such other hazards and in such amounts as may be
customary for comparable properties in the area of the Leased Property and is
available from insurance companies, insurance pools or other appropriate
companies authorized to do business in the State at rates which are economically
practicable in relation to the risks covered as may be reasonably requested by
Lessor;

(vi) Fidelity bonds with limits and deductibles as may be reasonably requested
by Lessor, covering Lessee’s employees in job classifications normally bonded
under prudent hotel management practices in the United States or otherwise
required by law;

(vii) Workmen’s compensation insurance to the extent necessary to protect Lessor
and the Leased Property against Lessee’s workman’s compensation claims;

(viii) Vehicle liability insurance for owned, non-owned, and hired vehicles, in
the amount of $1,000,000; and

(ix) Such other insurance as Lessor may reasonably request for facilities such
as the Leased Property and the operation thereof.

(b) Responsibility for Premiums. Lessee shall keep in force the foregoing
insurance coverages at its expense; provided, however, that Lessor shall
reimburse Lessee for any other casualty coverages required by Lessor not
specifically required in (i)—(viii) of subsection (a) above. If requested by any
Lender of the Lessor relating to the Leased Property, the Lessee shall provide
any funds for the escrow of any insurance premiums, and the Lessee shall receive
any income on such escrowed funds and shall receive any funds released from such
account.

13.2 Replacement Cost. The term “full replacement cost” as used herein shall
mean the actual replacement cost of the Leased Property requiring replacement
from time to time including an increased cost of construction endorsement, if
available, and the cost of debris removal. In the event either party believes
that full replacement cost (the then-replacement cost less such exclusions) has
increased or decreased at any time during the Lease Term, it shall have the
right to have such full replacement cost re-determined.

 

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13.3 Worker’s Compensation. Lessee, at its sole cost, shall at all times
maintain adequate worker’s compensation insurance coverage for all persons
employed by Lessee on the Leased Property. Such worker’s compensation insurance
shall be in accordance with the requirements of applicable local, state and
federal law.

13.4 Waiver of Subrogation. All insurance policies carried by Lessor or Lessee
covering the Leased Property, the Fixtures, the Facility or Lessee’s Personal
Property, including, without limitation, contents, fire and casualty insurance
shall expressly waive any right of subrogation on the part of the insurer
against the other party. The parties hereto agree that their policies will
include such waiver clause or endorsement so long as the same are obtainable
without extra cost, and in the event of such an extra charge the other party, at
its election, may pay the same, but shall not be obligated to do so. Each party
agrees to seek recovery from any applicable insurance coverage available to such
party prior to seeking recovery against the other.

13.5 Form Satisfactory, etc. All of the policies of insurance referred to in
this Article XIII shall be written in a form, with deductibles and by insurance
companies satisfactory to Lessor and also shall meet and satisfy the
requirements of any ground lessor, lender or franchisor having any interest in
the Leased Premises. Subject to the right to reimbursement or credit specified
in Section XIII, Lessee shall pay all of the premiums therefor, and deliver such
policies or certificates thereof to Lessor prior to their effective date (and,
with respect to any renewal policy, 30 days prior to the expiration of the
existing policy), and in the event of the failure of Lessee either to effect
such insurance as herein called for or to pay the premiums therefor, or to
deliver such policies or binding certificates thereof to Lessor at the times
required, Lessor shall be entitled, but shall have no obligation, to effect such
insurance and pay the premiums therefor, and Lessee shall reimburse Lessor for
any premium or premiums paid by Lessor for the coverages required under this
Section (other than the premiums required to be paid or reimbursed to Lessee by
Lessor in accordance with Section 13.1(b)) upon written demand therefor, and
Lessee’s failure to repay the same within 30 days after Notice of such failure
from Lessor shall constitute an Event of Default within the meaning of
Section 16.1(c). Each insurer mentioned in this Article XIII shall agree, by
endorsement to the policy or policies issued by it, or by independent instrument
furnished to Lessor, that it will give to Lessor 30 days’ written notice before
the policy or policies in question shall be materially altered, allowed to
expire or canceled.

13.6 Change in Limits. If either Lessor or Lessee at any time deems the limits
of the personal injury or property damage under the comprehensive public
liability insurance then carried to be either excessive or insufficient, Lessor
and Lessee shall endeavor in good faith to agree on the proper and reasonable
limits for such insurance to be carried and such insurance shall thereafter be
carried with the limits thus agreed on until further change pursuant to the
provisions of this Section.

13.7 Blanket Policy. Notwithstanding anything to the contrary contained in this
Article XIII, Lessee or Lessor may bring the insurance provided for herein
within the coverage of a so-called blanket policy or policies of insurance
carried and maintained by Lessee or Lessor;

 

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provided, however, that the coverage afforded to Lessor and Lessee will not be
reduced or diminished or otherwise be different from that which would exist
under a separate policy meeting all other requirements of this Lease by reason
of the use of such blanket policy of insurance, and provided further that the
requirements of this Article XIII are otherwise satisfied.

13.8 Separate Insurance. Lessee shall not on Lessee’s own initiative or pursuant
to the request or requirement of any third party, take out separate insurance
concurrent in form or contributing in the event of loss with that required in
this Article to be furnished, or increase the amount of any then existing
insurance by securing an additional policy or additional policies, unless all
parties having an insurable interest in the subject matter of the insurance,
including in all cases Lessor, are included therein as additional insureds, and
the loss is payable under such additional separate insurance in the same manner
as losses are payable under this Lease. Lessee shall immediately notify Lessor
that Lessee has obtained any such separate insurance or of the increasing of any
of the amounts of the then existing insurance.

13.9 Reports On Insurance Claims. Lessee shall promptly investigate and make a
complete and timely written report to the appropriate insurance company as to
all accidents, claims for damage relating to the ownership, operation, and
maintenance of the Facility, any damage or destruction to the Facility and the
estimated cost of repair thereof and shall prepare any and all reports required
by any insurance company in connection therewith. All such reports shall be
timely filed with the insurance company as required under the terms of the
insurance policy involved, and a final copy of such report shall be furnished to
Lessor. Lessee shall be authorized to adjust, settle, or compromise any
insurance loss, or to execute proofs of such loss, in the aggregate amount of
$5,000 or less, with respect to any single casualty or other event.

ARTICLE XIV

14.1 Insurance Proceeds. Subject to the provisions of Section 14.6, and the
senior rights of any lender, all proceeds payable by reason of any loss or
damage to the Leased Property, or any portion thereof, and insured under any
policy of insurance required by Article XIII of this Lease shall be paid to
Lessor and held in trust by Lessor in an interest-bearing account, shall be made
available, if applicable, for reconstruction or repair, as the case may be, of
any damage to or destruction of the Leased Property, or any portion thereof,
and, if applicable, shall be paid out by Lessor from time to time for the
reasonable costs of such reconstruction or repair upon satisfaction of
reasonable terms and conditions specified by Lessor. Any excess proceeds of
insurance remaining after the completion of the restoration or reconstruction of
the Leased Property shall be paid to Lessee. If neither Lessor nor Lessee is
required or elects to repair and restore, and the Lease is terminated without
purchase by Lessee as described in Section 14.2, all such insurance proceeds
shall be retained by Lessor. All salvage resulting from any risk covered by
insurance shall belong to Lessor.

14.2 Reconstruction in the Event of Damage or Destruction Covered by Insurance.

(a) Except as provided in Section 14.5, if during the Term the Leased Property
is totally or partially destroyed by a risk covered by the insurance described
in Article XIII and the Facility thereby is rendered Unsuitable for its Primary
Intended Use, Lessee shall, at Lessee’s option, either (1) restore the Facility
to substantially the same condition as existed immediately before the

 

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damage or destruction and otherwise in accordance with the terms of the Lease,
or (2) offer to acquire the Leased Property from Lessor for a purchase price
equal to the Rejectable Offer Price of the Leased Property. If Lessee restores
the Facility, the insurance proceeds shall be paid out by Lessor from time to
time for the reasonable costs of such restoration upon satisfaction of
reasonable terms and conditions, and any excess proceeds remaining after such
restoration shall be paid to Lessee. If Lessee acquires the Leased Property,
Lessee shall receive the insurance proceeds. If Lessor does not accept Lessee’s
offer so to purchase the Leased Property within 90 days, Lessee may withdraw its
offer to purchase the Leased Property and, if so withdrawn, Lessee may terminate
the Lease with respect to the Leased Property without further liability
hereunder and Lessor shall be entitled to retain all insurance proceeds.

(b) Except as provided in Section 14.5, if during the Term the Leased Property
is partially destroyed by a risk covered by the insurance described in Article
XIII, but the Facility is not thereby rendered Unsuitable for its Primary
Intended Use, Lessee shall restore the Facility to substantially the same
condition as existed immediately before the damage or destruction and otherwise
in accordance with the terms of the Lease. Such damage or destruction shall not
terminate this Lease; provided, however, that if Lessee cannot within a
reasonable time obtain all necessary government approvals, including building
permits, licenses and conditional use permits, after diligent efforts to do so,
to perform all required repair and restoration work and to operate the Facility
for its Primary Intended Use in substantially the same manner as that existing
immediately prior to such damage or destruction and otherwise in accordance with
the terms of the Lease, Lessee may make a written offer to Lessor to purchase
the Leased Property for a purchase price equal to the Rejectable Offer Price of
the Leased Property determined without regard to such damage or destruction. If
Lessee makes such offer and Lessor does not accept the same within 30 days after
Lessee delivers its offer to Lessor, Lessee shall withdraw such offer, in which
event this Lease shall remain in full force and effect and Lessee shall
immediately proceed to restore the Facility to substantially the same condition
as existed immediately before such damage or destruction and otherwise in
accordance with the terms of the Lease. If Lessee restores the Facility, the
insurance proceeds shall be paid out by Lessor from time to time for the
reasonable costs of such restoration upon satisfaction of reasonable terms and
conditions specified by Lessor, and any excess proceeds remaining after such
restoration shall be paid to Lessee.

(c) If the cost of the repair or restoration exceeds the amount of proceeds
received by Lessor from the insurance required under Article XIII, Lessee shall
be obligated to contribute any excess amounts needed to restore the Facility
prior to commencing work thereon. Such difference shall be paid by Lessee to
Lessor promptly after Lessee receives Lessor’s written invoice therefore, to be
held in trust, together with any other insurance proceeds, for application to
the cost of repair and restoration.

(d) If Lessor accepts Lessee’s offer to purchase the Leased Property under this
Article, this Lease shall terminate as to the Leased Property upon payment of
the purchase price, and Lessor shall remit to Lessee all insurance proceeds
pertaining to the Leased Property being held in trust by Lessor.

 

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14.3 Reconstruction in the Event of Damage or Destruction Not Covered by
Insurance.

Except as provided in Section 14.5, if during the Term the Facility is totally
or materially destroyed by a risk not covered by the insurance described in
Article XIII, whether or not such damage or destruction renders the Facility
Unsuitable for its Primary Intended Use, Lessee at its option shall either,
(a) at Lessee’s sole cost and expense, restore the Facility to substantially the
same condition it was in immediately before such damage or destruction and such
damage or destruction shall not terminate this Lease, or (b) make a written
offer to purchase the Leased Property for a purchase price equal to the
Rejectable Offer Price of the Leased Property without regard to such damage or
destruction. If Lessor does not accept Lessee’s offer so to purchase the Leased
Property within 90 days after Lessee delivers its offer to Lessor, Lessee may
withdraw its offer to purchase the Leased Property and, if so withdrawn, Lessee
may terminate the Lease with respect to the Leased Property without further
liability hereunder. If such damage or destruction is not material, Lessee
shall, at Lessee’s sole cost and expense, restore the Facility to substantially
the same condition as existed immediately before the damage or destruction and
otherwise in accordance with the terms of the Lease, and such damage or
destruction shall not terminate the Lease.

14.4 Lessee’s Property. All insurance proceeds payable by reason of any loss of
or damage to any of Lessee’s Personal Property shall be paid to Lessee;
provided, however, no such payments shall diminish or reduce the insurance
payments otherwise payable to or for the benefit of Lessor hereunder.

14.5 Damage Near End of Term. Notwithstanding any provisions of Section 14.2 or
14.3 appearing to the contrary, if damage to or destruction of the Facility
rendering it unsuitable for its Primary Intended Use occurs during the last 24
months of the Term, then either party shall have the right to terminate this
Lease by giving written notice to the other within 30 days after the date of
damage or destruction, whereupon all accrued Rent shall be paid immediately, and
this Lease shall automatically terminate five days after the date of such
notice.

14.6 Waiver. Lessee hereby waives any statutory rights of termination that may
arise by reason of any damage or destruction of the Facility that Lessor is
obligated to restore or may restore under any of the provisions of this Lease.

ARTICLE XV

15.1 Definitions.

(a) “Condemnation” means a Taking resulting from (1) the exercise of any
governmental power, whether by legal proceedings or otherwise, by a Condemnor,
and (2) a voluntary sale or transfer by Lessor to any Condemnor, either under
threat of condemnation or while legal proceedings for condemnation are pending.

(b) “Date of Taking” means the date the Condemnor has the right to possession of
the property being condemned.

 

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(c) “Award” means all compensation, sums or anything of value awarded, paid or
received on a total or partial Condemnation.

(d) “Condemnor” means any public or quasi-public authority, or private
corporation or individual, having the power of Condemnation.

15.2 Parties’ Rights and Obligations. If during the Term there is any
Condemnation of all or any part of the Leased Property or any interest in this
Lease, the rights and obligations of Lessor and Lessee shall be determined by
this Article XV.

15.3 Total Taking. If title to the fee of the whole of the Leased Property is
condemned by any Condemnor, subject to the provisions of Section 15.6, 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 Percentage
Rent and Additional Charges paid or payable by Lessee hereunder shall be
apportioned as of the Date of Taking, and Lessee shall promptly pay Lessor such
amounts. In the event of any such termination, the provisions of Section 15.7
shall apply.

15.4 Allocation of Award. The total Award made with respect to the Leased
Property or for loss of rent, or for Lessor’s loss of business beyond the Term,
shall be solely the property of and payable to Lessor. Any Award made for loss
of Lessee’s business during the remaining Term, if any, for the taking of
Lessee’s Personal Property, or for removal and relocation expenses of Lessee in
any such proceedings shall be the sole property of and payable to Lessee. In any
Condemnation proceedings Lessor and Lessee shall each seek its Award in
conformity herewith, at its respective expense; provided, however, Lessee shall
not initiate, prosecute or acquiesce in any proceedings that may result in a
diminution of any Award payable to Lessor.

15.5 Partial Taking. If title to less than the whole of the Leased Property is
condemned, and the Leased Property is still suitable for its Primary Intended
Use, and not Uneconomic for its Primary Intended Use, or if Lessee or Lessor is
entitled but neither elects to terminate this Lease as provided in Section 15.3,
Lessee at the expense of the Lessor shall with all reasonable dispatch restore
the untaken portion of any Leased Improvements so that such Leased Improvements
constitute a complete architectural unit of the same general character and
condition (as nearly as may be possible under the circumstances) as the Leased
Improvements existing immediately prior to the Condemnation. In the event of any
Condemnation as described in this Section 15.5, the entire amount of the Award
shall be paid to the Lessor.

15.6 Temporary Taking. If the whole or any part of the Leased Property or of
Lessee’s interest under this Lease is condemned by any Condemnor for its
temporary use or occupancy, this Lease shall not terminate by reason thereof,
Lessee, however, shall be released from its obligations to pay, in the manner
and at the terms herein specified, the Additional Charges. Except only to the
extent that Lessee may be prevented from so doing pursuant to the terms of the
order of the Condemnor, Lessee shall continue to perform and observe all of the
other terms, covenants, conditions and obligations hereof on the part of the
Lessee to be performed and

 

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observed, as though such Condemnation had not occurred. In the event of any
Condemnation as described this Section 15.6, the entire amount of any Award made
for such Condemnation allocable to the Term of this Lease, whether paid by way
of damages, rent or otherwise, shall be paid to Lessor. Lessor covenants that
upon the termination of any such period of temporary use or occupancy it will,
at its sole cost and expense, restore the Leased Property as nearly as may be
reasonably possible to the condition in which the same was immediately prior to
such Condemnation, unless such period of temporary use or occupancy extends
beyond the expiration of the Term, in which case Lessor shall not be required to
make such restoration.

15.7 Lessee’s Offer. In the event of the termination of this Lease as provided
in Section 15.3, Lessee shall offer to acquire the Leased Property from Lessor
for a purchase price equal to the Rejectable Offer Price of the Leased Property
without regard to such taking and, if accepted, Lessee shall receive the entire
Award. If Lessor does not accept Lessee’s offer to purchase the Leased Property,
Lessee shall withdraw its offer to purchase the Leased Property and, if so
withdrawn, Lessee may terminate the Lease with respect to the Leased Property
without further liability hereunder, except for payment of Rent as provided in
the penultimate sentence of Section 15.3 or for matters which by their express
terms survive termination of this Lease, and Lessor shall be entitled to retain
the Award except as provided in Section 15.4.

ARTICLE XVI

16.1 Events of Default. If any one or more of the following events
(individually, an “Event of Default”) occurs:

(a) if an event of default occurs, which is not cured, under any other lease
between Lessor or any Affiliate of Lessor and Lessee or any Affiliate of Lessee;
or

(b) if Lessee fails to make payment of the Percentage Rent or Additional Charges
within ten days after the same becomes due and payable;

(c) if Lessee fails to observe or perform any other term, covenant or condition
of this Lease and such failure is not cured by Lessee within a period of 30 days
after receipt by the Lessee of Notice thereof from Lessor, unless such failure
cannot with due diligence be cured within a period of 30 days, in which case it
shall not be deemed an Event of Default if Lessee proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof
provided, however, in no event shall such cure period extend beyond 90 days
after such Notice; or

(d) if the Lessee shall file a petition in bankruptcy or reorganization for an
arrangement pursuant to any federal or state bankruptcy law or any similar
federal or state law, or shall be adjudicated a bankrupt or shall make an
assignment for the benefit of creditors or shall admit in writing its inability
to pay its debts generally as they become due, or if a petition or answer
proposing the adjudication of the Lessee as a bankrupt or its reorganization
pursuant to any federal or state bankruptcy law or any similar federal or state
law shall be filed in any court and the Lessee shall be adjudicated a bankrupt
and such adjudication shall not be vacated or set aside or stayed within 60 days
after the entry of an order in respect thereof, or if a receiver of the Lessee
or of the whole or substantially all of the assets of the Lessee shall be
appointed in any proceeding brought by the Lessee or if any such receiver,
trustee

 

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or liquidator shall be appointed in any proceeding brought against the Lessee
and shall not be vacated or set aside or stayed within 120 days after such
appointment; or

(e) if Lessee is liquidated or dissolved, or begins proceedings toward such
liquidation or dissolution, or, in any manner, permits the sale or divestiture
of substantially all of its assets; or

(f) if the estate or interest of Lessee in the Leased Property or any part
thereof is voluntarily or involuntarily transferred, assigned, conveyed, levied
upon or attached in any proceeding (unless Lessee is contesting such lien or
attachment in good faith in accordance with Article XI hereof); or

(g) if, except as a result of damage, destruction or a partial or complete
Condemnation, Lessee voluntarily ceases operations on the Leased Property; or

(h) if a material event of default has been declared by the franchisor under the
Franchise Agreement with respect to the Facility on the Leased Premises which
has not been cured within any applicable cure period or such Franchise Agreement
has been terminated as a result of any action or failure to act by the Lessee;
then, and in any such event, Lessor may exercise one or more remedies available
to it herein or at law or in equity, including but not limited to its right to
terminate this Lease by giving Lessee not less than ten days’ Notice of such
termination except in the case of a default under Sections 16.1(e), 16.1(f), or
16.1(g), in which case notice shall not be required.

If litigation is commenced with respect to any alleged default under this Lease,
the prevailing party in such litigation shall receive, in addition to its
damages incurred, such sum as the court shall determine as its reasonable
attorneys’ fees, and all costs and expenses incurred in connection therewith.

No Event of Default (other than a failure to make a payment of money) shall be
deemed to exist under clause (d) during any time for up to one year the curing
thereof is prevented by an Unavoidable Delay, provided that upon the cessation
of such Unavoidable Delay, Lessee remedies such default or Event of Default
without further delay.

16.2 Surrender. If an Event of Default occurs (and the event giving rise to such
Event of Default has not been cured within the curative period relating thereto
as set forth in Section XVI) and is continuing, whether or not this Lease has
been terminated pursuant to Section XVI, Lessee shall, if requested by Lessor so
to do, immediately surrender and assign to Lessor or Lessor’s designee the
Leased Property including, without limitation, any and all books, records,
files, licenses, permits and keys relating thereto, and quit the same and Lessor
may enter upon and repossess the Leased Property by reasonable force, summary
proceedings, ejectment or otherwise, and may remove Lessee and all other persons
and any and all personal property from the Leased Property, subject to rights of
any hotel guests and to any requirement of law. Lessee hereby waives any and all
requirements of applicable laws for service of notice to re-enter the Leased
Property. Lessor shall be under no obligation to, but may if it so chooses,
relet the Leased Property or otherwise mitigate Lessor’s damages.

 

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16.3 Damages. Neither (a) the termination of this Lease, (b) the repossession of
the Leased Property, (c) the failure of Lessor to relet the Leased Property, nor
(d) the reletting of all or any portion thereof, shall relieve Lessee of its
liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting. In the event of any such termination,
Lessee shall forthwith pay to Lessor all Rent due and payable with respect to
the Leased Property to and including the date of such termination.

Lessee shall forthwith pay to Lessor, at Lessor’s option, as and for liquidated
and agreed current damages for Lessee’s default, either:

(1) Without termination of Lessee’s right to possession of the Leased Property,
each installment of Rent and other sums payable by Lessee to Lessor under the
Lease as the same becomes due and payable, which Rent and other sums shall bear
interest at the Overdue Rate, and Lessor may enforce, by action or otherwise,
any other term or covenant of this Lease;

(2) the sum of:

(A) the unpaid Rent which had been earned at the time of termination,
repossession or reletting, and

(B) the worth at the time of termination, repossession or reletting of the
amount by which the unpaid Rent for the balance of the Term after the time of
termination, repossession or reletting, exceeds the amount of such rental loss
that Lessee proves could be reasonably avoided and as reduced for rentals
received after the time of termination, repossession or reletting, if and to the
extent required by applicable law, the worth at the time of termination,
repossession or reletting of the amount referred to in this subparagraph
16.3(2)(B) is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of New York at the time of award plus 1%, and

(C) any other amount necessary to compensate Lessor for all the detriment
proximately caused by Lessee’s failure to perform its obligations under this
Lease or which in the ordinary course of things, would be likely to result
therefrom.

16.4 Waiver. If this Lease is terminated pursuant to Article XVI, Lessee waives,
to the extent permitted by applicable law, (a) any right to a trial by jury in
the event of summary proceedings to enforce the remedies set forth in this
Article XVI, and (b) the benefit of any laws now or hereafter in force exempting
property from liability for rent or for debt and Lessor waives any right to
“pierce the corporate veil” of Lessee other than to the extent funds shall have
been inappropriately paid any Affiliate of Lessee following a default resulting
in an Event of Default.

16.5 Application of Funds. Any payments received by Lessor under any of the
provisions of this Lease during the existence or continuance of any Event of
Default shall be applied to Lessee’s obligations in the order that such
obligations are due or as may be prescribed by the laws of the State.

 

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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 other than a failure to complete improvements required by
the franchisor because the Lessor has not provided Lessee with the funds
therefor, and fails to cure the same within the relevant time periods provided
in Article XVI, Lessor, without waiving or releasing any obligation of Lessee,
and without waiving or releasing any obligation or default, may (but shall be
under no obligation to) at any time thereafter make such payment or perform such
act for the account and at the expense of Lessee, and may, to the extent
permitted by law, enter upon the Leased Property for such purpose and, subject
to Section 16.4, take all such action thereon as, in Lessor’s reasonable
opinion, may be necessary or appropriate therefore. Before entering the Leased
Property for the purposes provided in this Article XVI, Lessor shall notify the
Lessee of its intention to enter the Leased Property unless such Notice would be
impractical. No such entry shall be deemed an eviction of Lessee. All sums so
paid by Lessor and all costs and expenses (including, without limitation,
reasonable attorneys’ fees and expenses, in each case to the extent permitted by
law) so incurred, together with a late charge thereon (to the extent permitted
by law) at the Overdue Rate from the date on which such sums or expenses are
paid or incurred by Lessors, shall be paid by Lessee to Lessor on demand. The
obligations of Lessee and rights of Lessor contained in this Article shall
survive the expiration or earlier termination of this Lease.

ARTICLE XVIII

18.1 Provisions Relating to Purchase of the Leased Property. If Lessee purchases
the Leased Property from Lessor pursuant to any of the terms of this Lease, the
closing of the purchase shall occur 90 days after Lessor accepts Lessee’s offer
to purchase the Leased Property, unless the provision of the Lease under which
such offer was made specifies a different closing date, in which case the date
set forth in such provision shall be the closing date. At such closing, Lessor
shall, upon receipt from Lessee of the applicable purchase price, together with
full payment of any unpaid Rent due and payable with respect to any period
ending on or before the date of the purchase, deliver to Lessee an appropriate
limited or special warranty deed or other conveyance conveying the entire
interest of Lessor in and to the Leased Property to Lessee free and clear of all
encumbrances other than (a) those that Lessee has agreed hereunder to pay or
discharge, (b) those mortgage liens, if any, that Lessee has agreed in writing
to accept and to take title subject to, (c) encumbrances, easements, licenses or
rights of way required to be imposed on the Leased Property under Section 7.3,
(d) any other encumbrances permitted to be imposed on the Leased Property under
the provisions of Article XXXIV that are assumable at no cost to Lessee or to
which Lessee may take subject without cost to Lessee and relating to the period
of time after the purchase (e) any taxes not yet due and payable; and (f) those
encumbrances created, requested or consented to by Lessee. The difference
between the applicable purchase price and the total of the encumbrances assumed
or taken subject to shall be paid in cash to Lessor or as Lessor may direct, in
federal or other immediately available funds, except as otherwise mutually
agreed by Lessor and Lessee. All expenses of such conveyance, including, without
limitation, the cost of title examination or title insurance, if desired by
Lessee, Lessee’s

 

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attorneys’ fees incurred in connection with such conveyance and release, and
transfer taxes and recording fees, shall be paid by Lessee. Lessor shall pay its
attorney’s fees. This Article XVIII is subject to the prior rights of any lender
whose lien is secured by the Leased Premises.

ARTICLE XIX

19.1 Personal Property Limitation. Anything contained in this Lease to the
contrary notwithstanding, the average of the fair market values of the items of
personal property that are leased to the Lessee under this Lease at the
beginning and at the end of any Fiscal Year shall not exceed 15% of the average
of the fair market values of the Leased Property at the beginning and at the end
of such Fiscal Year. This Section 19.1 is intended to ensure that the Rent
qualifies as “rents from real property,” within the meaning of Section 856(d) of
the Code, or any similar or successor provisions thereto, and shall be
interpreted in a manner consistent with such intent.

19.2 Sublease Rent Limitation. Anything contained in this Lease to the contrary
notwithstanding, Lessee shall not sublet the Leased Property on any basis such
that the rental or other amounts to be paid by the sublessee thereunder would be
based, in whole or in part, on either (a) the net income or profits derived by
the business activities of the sublessee, or (b) any other formula such that any
portion of the Rent would fail to qualify as “rents from real property” within
the meaning of Section 856(d) of the Code, or any similar or successor provision
thereto.

19.3 Sublease Tenant Limitation. Anything contained in this Lease to the
contrary notwithstanding, Lessee shall not sublease the Leased Property or any
portions thereof to any Person in which Humphrey Hospitality Trust, Inc. owns,
directly or indirectly, a 10% or more interest, within the meaning of
Section 856(d)(2)(B) of the Code, or any similar or successor provisions
thereto.

19.4 TRS Election and Limitations. Lessee agrees to make an election to be and
to operate as a “taxable REIT subsidiary” of Humphrey Hospitality Trust, Inc.
within the meaning of Section 856(1) of the Code. Lessee shall not (A) directly
or indirectly operate or manage a “lodging facility” within the meaning of
Section 856(d)(9)(D)(ii) of the Code or a “health care facility” within the
meaning of Section 856(e)(6)(D)(ii) of the Code or (B) directly or indirectly
provide to any other person (under a franchise, license, or otherwise) rights to
any brand name under which any lodging facility or health care facility is
operated; provided, however, that Lessee may provide such rights to a manager to
operate or manage a lodging facility as long as such rights are held by Lessee
as a franchisee, licensee, or in a similar capacity and such lodging facility is
either owned by Lessee or is leased to Lessee by Lessor or one of its
Affiliates. Lessee agrees that it will, at all times during the Term, cause the
Leased Property to be operated and managed by a manager that meets all of the
following requirements

(a) The manager does not own, directly or indirectly, more than 35% of the
outstanding stock of Humphrey Hospitality Trust, Inc.

(b) If the manager is a corporation, no more than 35% of the total combined
voting power of its outstanding stock (or 35% of the total shares of all classes
of its outstanding stock) or, if it is not a corporation, no more than 35% of
the ownership interest in its assets or net profits is owned, directly or
indirectly, by one or more Persons owning 35% or more of the outstanding stock
of Humphrey Hospitality Trust, Inc.

 

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(c) Neither Humphrey Hospitality Trust, Inc., the Lessor, the Lessee, nor any
Affiliate thereof derives any income from the manager, except for income from
the leasing of the Norfolk, Nebraska office building.

(d) At the time that the manager enters into a management agreement with the
Lessee to operate the Leased Property, the manager (or any “related person”
within the meaning of Section 856(d)(9)(F) of the Code) is actively engaged in
the trade or business of operating “qualified lodging facilities” within the
meaning of Section 856(d)(9)(D) of the Code for any Person who is not a “related
person” within the meaning of Section 856(d)(9)(F) of the Code with respect to
Humphrey Hospitality Trust, Inc or the Lessee (an “Unrelated Person”). For
purposes of determining whether the requirement of this paragraph (d) has been
met, a manager shall be treated as being actively engaged in such a trade or
business if the manager (i) derives at least 10% of both its profits and revenue
from operating “qualified lodging facilities” within the meaning of
Section 856(d)(9)(D) of the Code for Unrelated Persons or (ii) complies with any
regulations or other administrative guidance under Section 856(d)(9) of the Code
that provide a “safe harbor” rule with respect to the amount of hotel management
business with Unrelated Persons that is necessary to qualify as an “eligible
independent contractor” within the meaning such Code section.

19.5 Manager Officer and Employee Limitation. Anything contained in this Lease
to the contrary notwithstanding, none of the officers or employees of the
manager (or any Person who furnishes or renders services to the tenants of the
Leased Property, or manages or operates the Leased Property) shall be officers
or employees of Humphrey Hospitality Trust, Inc. In addition, if a Person serves
as both (a) a director of the manager (or any Person who furnishes or renders
services to the tenants of the Leased Property, or manages or operates the
Leased Property) and (b) a trustee and officer (or employee) of Humphrey
Hospitality Trust, Inc. that Person shall not receive any compensation for
serving as a director of the manager (or any Person who furnishes or renders
services to the tenants of the Leased Property, or manages or operates the
Leased Property). Furthermore, if a Person serves as both (a) a trustee of
Humphrey Hospitality Trust, Inc. and (b) a director and officer (or employee) of
the manager (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 trustee of Humphrey
Hospitality Trust, Inc.

ARTICLE XX

20.1 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
as rental each month two times the aggregate of (a) one-twelfth of the aggregate
Percentage Rent payable with respect to the last Fiscal Year of the Term,
(b) all Additional Charges accruing during the applicable month and (c) all
other sums, if any, payable by Lessee under this Lease with respect to the
Leased Property. During such period, Lessee shall be obligated to perform and
observe all of the terms, covenants

 

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and conditions of this Lease, but shall have no rights hereunder other than the
right, to the extent given by law to tenancies at sufferance, to continue its
occupancy and use of the Leased Property. Nothing contained herein shall
constitute the consent, express or implied, of Lessor to the holding over of
Lessee after the expiration or earlier termination of this Lease.

ARTICLE XXI

21.1 Risk of Loss. During the Term, the risk of loss or of decrease in the
enjoyment and beneficial use of the Leased Property in consequence of the damage
or destruction thereof by fire, the elements, casualties, thefts, riots, wars or
otherwise, or in consequence of foreclosures, attachments, levies or executions
(other than those caused by Lessor and those claiming from, through or under
Lessor) is assumed by Lessee, and, in the absence of gross negligence, willful
misconduct or breach of this Lease by Lessor pursuant to Section 34.3, Lessor
shall in no event be answerable or accountable therefor, nor shall any of the
events mentioned in this Section entitle Lessee to any abatement of Rent except
as specifically provided in this Lease.

ARTICLE XXII

22.1 Indemnification. Notwithstanding the existence of any insurance, and
without regard to the policy limits of any such insurance or self-insurance, but
subject to the last sentence of Section 13.4 if any insurance coverage is
applicable, Section 16.4 and Article VII, Lessee will protect, indemnify, hold
harmless and defend Lessor Indemnified Parties from and against all liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including, without limitation, reasonable attorney’s fees and expenses) to the
extent permitted by law imposed upon or incurred or asserted against Lessor
Indemnified Parties by reason of: any accident, injury to or death of persons or
loss of or damage to property occurring on or about the Leased Property or
adjoining sidewalks, including without limitation any claims under liquor
liability, “dram shop” or similar laws, (b) any past, present or future use,
misuse, non-use, condition, management, maintenance or repair by Lessee or any
of its agents, employees or invitees of the Leased Property or Lessee’s Personal
Property or any litigation, proceeding or claim by governmental entities or
other third parties to which a Lessor Indemnified Party is made a party or
participant related to such use, misuse, non-use, condition, management,
maintenance, or repair thereof by Lessee or any of its agents, employees or
invitees, including any failure of Lessee or any of its agents, employees or
invitees to perform any obligations under this Lease or imposed by applicable
law (other than arising out of Condemnation proceedings), (c) any Impositions
that are the obligations of Lessee pursuant to the applicable provisions of this
Lease, (d) any failure on the part of Lessee to perform or comply with any of
the terms of this Lease, and (e) the non-performance of any of the terms and
provisions of any and all existing and future subleases of the Leased Property
to be performed by the landlord thereunder and (f) the gross negligent acts and
omissions and willful misconduct of Lessee.

Lessor shall indemnify, save harmless and defend Lessee Indemnified Parties from
and against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses imposed upon or incurred by or asserted against
Lessee Indemnified Parties as a result of the gross negligence or willful
misconduct of Lessor arising in connection with this Lease. The Lessor’s
obligations to indemnify Lessee Indemnified Parties shall be limited to the
value of Lessor’s equity interest in the Facilities. Nothing herein shall be
construed as requiring Lessor to indemnify a Lessee Indemnified Party against
its own grossly negligent acts and omissions and willful misconduct.

 

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Any amounts that become payable by an Indemnifying Party under this Section
shall be paid within ten days after liability therefor on the part of the
Indemnifying Party is determined by litigation or otherwise, and if not timely
paid, shall bear a late charge (to the extent permitted by law) at the Overdue
Rate from the date of such determination to the date of payment. An Indemnifying
Party, at its expense, shall contest, resist and defend any such claim, action
or proceeding asserted or instituted against the Indemnified Party. The
Indemnified Party, at its expense, shall be entitled to participate in any such
claim, action, or proceeding, and neither the Indemnifying Party nor the
Indemnified Party may compromise or otherwise dispose of the same without the
consent of the Indemnified Party or the Indemnifying Party, which may not be
unreasonably withheld. Nothing herein shall be construed as indemnifying a
Lessor Indemnified Party against its own grossly negligent acts or omissions or
willful misconduct.

Lessee’s or Lessor’s liability for a breach of the provisions of this Article
shall survive any termination of this Lease.

ARTICLE XXIII

23.1 Subletting and Assignment. Subject to the provisions of Article XIX and
Section 23.2 and any other express conditions or limitations set forth herein,
Lessee may not without the consent of Lessor, which consent may be withheld in
Lessor’s sole discretion, (a) assign this Lease or sublet all or any part of the
Leased Property or (b) sublet any retail or restaurant portion of the Leased
Improvements in the normal course of the Primary Intended Use; provided that any
subletting to any party other than an Affiliate of Lessee shall not individually
as to any one such subletting, or in the aggregate, materially diminish the Rent
payable under this Lease. In the case of a subletting, the sublessee shall
comply with the provisions of Section 23.2, and in the case of an assignment,
the assignee shall assume in writing and agree to keep and perform all of the
terms of this Lease on the part of Lessee to be kept and performed and shall be,
and become, jointly and severally liable with Lessee for the performance
thereof. In case of either an assignment or subletting made during the Term,
Lessee shall remain primarily liable, as principal rather than as surety, for
the prompt payment of the Rent and for the performance and observance of all of
the covenants and conditions to be performed by Lessee hereunder. An original
counterpart of each such sublease and assignment and assumption, duly executed
by Lessee and such sublessee or assignee, as the case may be, in form and
substance satisfactory to Lessor, shall be delivered promptly to Lessor.

23.2 Attornment. Lessee shall insert in each sublease permitted under Article
XXIII provisions to the effect that (a) such sublease is subject and subordinate
to all of the terms and provisions of this Lease and to the rights of Lessor
hereunder, (b) if this Lease terminates before the expiration of such sublease,
the sublessee thereunder will, at Lessor’s option, attorn to Lessor and waive
any right the sublessee may have to terminate the sublease or to surrender
possession thereunder as a result of the termination of this Lease, and (c) if
the sublessee receives a written Notice from Lessor or Lessor’s assignees, if
any, stating that an uncured Event of Default exists under this Lease, the
sublessee shall thereafter be obligated to pay all rentals accruing under said
sublease directly to the party giving such Notice, or as such party may direct.
All rentals received from the sublessee by Lessor or Lessor’s assignees, if any,
as the case may be, shall be credited against the amounts owing by Lessee under
this Lease.

 

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ARTICLE XXIV

24.1 Officer’s Certificates; Lessor’s Estoppel Certificates and Covenants.

(a) At any time and from time to time upon not less than 30 days Notice by
Lessor, Lessee will furnish to Lessor an Officer’s Certificate certifying that
this Lease is unmodified and in full force and effect (or that this Lease is in
full force and effect as modified and setting forth the modifications), the date
to which the Rent has been paid, whether to the knowledge of Lessee there is any
existing default or Event of Default hereunder by Lessor or Lessee, and such
other information as may be reasonably requested by Lessor. Any such certificate
furnished pursuant to this Section may be relied upon by Lessor, any lender and
any prospective purchaser of the Leased Property.

(b) At any time and from time to time upon not less than 10 days Notice by
Lessee, Lessor will furnish to Lessee or to any person designated by Lessee an
estoppel certificate certifying that this Lease is unmodified and in full force
and effect (or that this Lease is in full force and effect as modified and
setting forth the modifications), the date to which Rent has been paid, whether
to the knowledge of Lessor there is any existing default or Event of Default on
Lessee’s part hereunder, and such other information as may be reasonably
requested by Lessee.

ARTICLE XXV

25.1 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.

ARTICLE XXVI

26.1 No Waiver. No failure by Lessor or Lessee to insist upon the strict
performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the extent permitted by law, no waiver
of any breach shall affect or alter this Lease, which shall continue in full
force and effect with respect to any other then existing or subsequent breach.

ARTICLE XXVII

27.1 Remedies Cumulative. To the extent permitted by law, each legal, equitable
or contractual right, power and remedy of Lessor or Lessee now or hereafter
provided either in this Lease or by statute or otherwise shall be cumulative and
concurrent and shall be in addition to every other right, power and remedy and
the exercise or beginning of the exercise by Lessor or Lessee of any one or

 

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more of such rights, powers and remedies shall not preclude the simultaneous or
subsequent exercise by Lessor or Lessee of any or all of such other rights,
powers and remedies.

ARTICLE XXVIII

28.1 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 XXIX

29.1 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 XXX

30.1 Conveyance by Lessor. If Lessor or any successor owner of the Leased
Property conveys the Leased Property in accordance with the terms hereof other
than as security for a debt, and the grantee or transferee of the Leased
Property expressly assumes all obligations of Lessor hereunder arising or
accruing from and after the date of such conveyance or transfer, Lessor or such
successor owner, as the case may be, shall thereupon be released from all future
liabilities and obligations of Lessor under this Lease arising or accruing from
and after the date of such conveyance or other transfer as to the Leased
Property and all such future liabilities and obligations shall thereupon be
binding upon the new owner.

30.2 Other Interests. This Lease and Lessee’s interest hereunder shall at all
times be subject and subordinate to the lien and security title of any deeds to
secure debt, deeds of trust, mortgages, or other interests heretofore or
hereafter granted by Lessor or which otherwise encumber or affect the Leased
Property and to any and all advances to be made thereunder and to all renewals,
modifications, consolidations, replacements, substitutions, and extensions
thereof (all of which are herein called the “Mortgage”). In confirmation of such
subordination, however, Lessee shall, at Lessor’s request, promptly execute,
acknowledge and deliver any instrument which may be required to evidence
subordination to any Mortgage and attornment to the holder thereof, conditioned
upon receipt of a nondisturbance clause. In the event of Lessee’s failure to
deliver such subordination and if the Mortgage does not change any term of the
Lease, Lessor may, in addition to any other remedies for breach of covenant
hereunder, execute, acknowledge, and deliver the instrument as the agent or
attorney-in-fact of Lessee, and Lessee hereby irrevocably constitutes Lessor its
attorney-in-fact for such purpose, Lessee acknowledging that the appointment is
coupled with an interest and is irrevocable. Lessee hereby waives and releases
any claim it might have against Lessor or any other party for any actions
lawfully taken by the holder of any Mortgage.

 

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30.3 Greenwich Loan. Reference is made to that certain Loan Agreement (the “Loan
Agreement”), dated as of the Commencement Date, among Lessee and Lessor,
collectively, as the borrower, and Greenwich Capital Financial Products, Inc.
(together with its successors and assigns, the “Lender”). Without limiting the
generality of Section 30.2, this Lease is and shall be subject and subordinate
in all respects to (a) the Mortgage (and to the lien of the Mortgage), (b) the
Loan Documents, and (c) any and all modifications, amendments, renewals and/or
substitutions of the Mortgage and/or the other Loan Documents. To the extent of
any conflict between the provisions of this Lease and those of the Loan
Agreement, the provisions of the Loan Agreement shall control. The provisions of
this Section 30.3 shall be self-operative and no further instrument of
subordination shall be required; however, if requested by the Lender, Lessor and
Lessee shall execute and deliver such further instruments as the Lender may deem
reasonably necessary to effectuate the subordination provided by this
Section 30.3. For purposes of this Section 30.3 only, the terms “Mortgage” and
“Loan Documents” are used as defined in the Loan Agreement. The provisions of
this Section 30.3 shall apply only for so long as any indebtedness, liabilities
or obligations of Lessee or Lessor remain outstanding under the Loan Documents.

ARTICLE XXXI

31.1 Quiet Enjoyment. So long as Lessee pays all Rent as the same becomes due
and complies with all of the terms of this Lease and performs its obligations
hereunder, in each case within the applicable grace periods, if any, Lessee
shall peaceably and quietly have, hold and enjoy the Leased Property for the
Term hereof, free of any claim or other action by Lessor or anyone claiming by,
through or under Lessor, but subject to all liens and encumbrances subject to
which the Leased Property was conveyed to Lessor or hereafter consented to by
Lessee or provided for herein and free and clear of any interference by Lessor
with Lessee’s use and occupancy of the premises. Notwithstanding the foregoing,
Lessee shall have the right by separate and independent action to pursue any
claim it may have against Lessor as a result of a breach by Lessor of the
covenant of quiet enjoyment contained in this Section.

ARTICLE XXXII

32.1 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 or by overnight courier), if to Lessor at 7170
Riverwood Drive, Columbia, Maryland 21046, and if to Lessee 7170 Riverwood
Drive, Columbia, Maryland 21046 at or to such other address or addresses as
either party may hereafter designate. Personally delivered Notice shall be
effective upon receipt, and Notice given by mail shall be complete at the time
of deposit in the U.S. Mail system, but any prescribed period of Notice and any
right or duty to do any act or make any response within any prescribed period or
on a date certain after the service of such Notice given by mail shall be
extended five days.

 

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ARTICLE XXXIII

33.1 Appraisers. If it becomes necessary to determine the Fair Market Value or
Fair Market Rental of the Leased Property for any purpose of this Lease, the
party required or permitted to give Notice of such required determination shall
include in the Notice the name of a person selected to act as appraiser on its
behalf. Within 20 days after Notice, Lessor (or Lessee, as the case may be)
shall by Notice to Lessee (or Lessor, as the case may be) appoint a second
person as appraiser on its behalf. The appraisers thus appointed, each of whom
must be a member of the American Institute of Real Estate Appraisers (or any
successor organization thereto) with at least five years experience in the State
appraising property similar to the Leased Property, shall, within 45 days after
the date of the Notice appointing the first appraiser, proceed to appraise the
Leased Property to determine the Fair Market Value or Fair Market Rental thereof
as of the relevant date (giving effect to the impact, if any, of inflation from
the date of their decision to the relevant date); provided, however, that if
only one appraiser shall have been so appointed, then the determination of such
appraiser shall be final and binding upon the parties. To the extent consistent
with sound appraisal practice as then existing at the time of any such
appraisal, such appraisal shall be made on a basis consistent with the basis on
which the Leased Property was appraised for purposes of determining its Fair
Market Value at the time the Leased Property was acquired by Lessor. If two
appraisers are appointed and if the difference between the amounts so determined
does not exceed 5% of the lesser of such amounts, then the Fair Market Value or
Fair Market Rental shall be an amount equal to 50% of the sum of the amounts so
determined. If the difference between the amounts so determined exceeds 5% of
the lesser of such amounts, then such two appraisers shall have 20 days to
appoint a third appraiser. If no such appraiser shall have been appointed within
such 20 days or within 90 days of the original request for a determination of
Fair Market Value or Fair Market Rental, whichever is earlier, either Lessor or
Lessee may apply to any court having jurisdiction to have such appointment made
by such court. Any appraiser appointed by the original appraisers or by such
court shall be instructed to determine the Fair Market Value or Fair Market
Rental within 45 days after appointment of such appraiser. The determination of
the appraiser which differs most in the terms of dollar amount from the
determinations of the other two appraisers shall be excluded, and 50% of the sum
of the remaining two determinations shall be final and binding upon Lessor and
Lessee as the Fair Market Value or Fair Market Rental of the Leased Property, as
the case may be. This provision for determining by appraisal shall be
specifically enforceable to the extent such remedy is available under applicable
law, and any determination hereunder shall be final and binding upon the parties
except as otherwise provided by applicable law. Lessor and Lessee shall each pay
the fees and expenses of the appraiser appointed by it and each shall pay
one-half of the fees and expenses of the third appraiser and one-half of all
other costs and expenses incurred in connection with each appraisal.

ARTICLE XXXIV

34.1 Lessor May Grant Liens. Without the consent of Lessee, Lessor may, subject
to the terms and conditions set forth below in this Section 34.1, from time to
time, directly or indirectly, create or otherwise cause to exist any lien,
encumbrance or title retention agreement (“Encumbrance”) upon the Leased
Property, or any portion thereof or interest therein, whether to secure any
borrowing or other means of financing or refinancing. Any such Encumbrance shall
(a) contain the right to prepay (whether or not subject to a prepayment
penalty); (b) provide that it is subject to the rights of Lessee under this
Lease and (c) contain the Agreement by the holder

 

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of the Encumbrance that it will (1) give Lessee the same notice, if any, given
to Lessor of any default or acceleration of any obligation underlying any such
Encumbrance or any sale in foreclosure under such Encumbrance, (2) permit Lessee
to cure any such default on Lessor’s behalf within any applicable cure period,
and Lessee shall be reimbursed by Lessor for any and all costs incurred in
effecting such cure, including without limitation out-of-pocket costs incurred
to effect any such cure (including reasonable attorneys’ fees) and (3) permit
Lessee to appear by its representative and to bid at any sale in foreclosure
made with respect to any such Encumbrance. Upon the request of Lessor, Lessee
shall subordinate this Lease to the lien of a new mortgage on the Leased
Property and agree to attorn to the new mortgagee, on the condition that the
proposed mortgagee executes a non-disturbance agreement recognizing this Lease,
and agreeing, for itself and its successors and assigns, to comply with the
provisions of this Article XXXIV.

34.2 Lessee’s Right to Cure. Subject to the provisions of Section 34.3, if
Lessor breaches any covenant to be performed by it under this Lease, Lessee,
after Notice to and demand upon Lessor, without waiving or releasing any
obligation hereunder, and in addition to all other remedies available to Lessee,
may (but shall be under no obligation at any time thereafter to) make such
payment or perform such act for the account and at the expense of Lessor. All
sums so paid by Lessee and all costs and expenses (including, without
limitation, reasonable attorneys’ fees) so incurred, together with interest
thereon at the Overdue Rate from the date on which such sums or expenses are
paid or incurred by Lessee, shall be paid by Lessor to Lessee on demand or,
following entry of a final, nonappealable judgment against Lessor for such sums,
may be offset by Lessee against the Rent payments next accruing or coming due.
The rights of Lessee hereunder to cure and to secure payment from Lessor in
accordance with this Section 34.2 shall survive the termination of this Lease
with respect to the Leased Property.

34.3 Breach by Lessor. It shall be a breach of this Lease if Lessor fails to
observe or perform any term, covenant or condition of this Lease on its part to
be performed and such failure continues for a period of 30 days after Notice
thereof from Lessee, unless such failure cannot with due diligence be cured
within a period of 30 days, in which case such failure shall not be deemed to
continue if Lessor, within such 30-day period, proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof within
90 days. The time within which Lessor shall be obligated to cure any such
failure also shall be subject to extension of time due to the occurrence of any
Unavoidable Delay.

ARTICLE XXXV

35.1 Miscellaneous. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, Lessee or Lessor
arising prior to any date of termination of this Lease shall survive such
termination. If any term or provision of this Lease or any application thereof
is invalid or unenforceable, the remainder of this Lease and any other
application of such term or provisions shall not be affected thereby. If any
late charges or any interest rate provided for in any provision of this Lease
are based upon a rate in excess of the maximum rate permitted by applicable law,
the parties agree that such charges shall be fixed at the maximum permissible
rate. Neither this Lease nor any provision hereof may be changed, waived,
discharged or terminated except by a written instrument in recordable form
signed by Lessor and Lessee. All the terms and provisions of this Lease shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. The headings in this Lease are for

 

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convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Lease shall be governed by and construed in accordance with
the laws of the State, but not including its conflicts of laws rules.

35.2 Transition Procedures. Upon the expiration or termination of the Term of
this Lease, for whatever reason, Lessor and Lessee shall do the following (and
the provisions of this Section 35.2 shall survive the expiration or termination
of this Agreement until they have been fully performed) and, in general, shall
cooperate in good faith to effect an orderly transition of the management lease
or of the Facility.

(a) Transfer of Licenses. Upon the expiration or earlier termination of the
Term, Lessee shall use its best efforts (i) to transfer to Lessor or Lessor’s
nominee all licenses, operating permits and other governmental authorizations
and all contracts, including contracts with governmental or quasi-governmental
entities, that may be necessary for the operation of the Facility, including any
Franchise Agreement (collectively, “Licenses”), or (ii) if such transfer is
prohibited by law or Lessor otherwise elects, to cooperate with Lessor or
Lessor’s nominee in connection with the processing by Lessor or Lessor’s nominee
of any applications for, all Licenses; provided, in either case, that the costs
and expenses of any such transfer or the processing of any such application
shall be paid by Lessor or Lessor’s nominee

(b) Leases and Concessions. Lessee shall assign to Lessor or Lessor’s nominee
simultaneously with the termination of this Agreement, and the assignee shall
assume all leases and concession agreements in effect with respect to the
Facility then in Lessee’s name.

(c) Books and Records. All books and records for the Facility kept by Lessee
pursuant to Section 3.5 shall be delivered promptly to Lessor or Lessor’s
nominee, simultaneously with the termination of this Agreement, but such books
and records shall thereafter be available to Lessee at all reasonable times for
inspection, audit, examination, and transcription for a period of one (1) year
and Lessee may retain (on a confidential basis) copies or computer records
thereof

(d) Remittance. Lessee shall remit to Lessor or Lessor’s nominee, simultaneously
with the termination of this Lease, all funds remaining, if any, after payment
of all accrued Gross Operating Expenses, and other amounts due Lessee and after
deducting the costs of any scheduled repair, replacement, or refurbishment of
Furniture and Equipment with respect to which deposits have been made.

35.3 Waiver of Presentment, etc. Lessee waives all presentments, demands for
payment and for performance, notices of nonperformance, protests, notices of
protest, notices of dishonor, and notices of acceptance and waives all notices
of the existence, creation, or incurring of new or additional obligations,
except as expressly granted herein

ARTICLE XXXVI

36.1 Memorandum of Lease. Lessor and Lessee shall promptly upon the request of
either enter into a short form memorandum of this Lease, in form suitable for
recording under the laws of the State in which reference to this Lease, and all
options contained herein, shall be made. Lessee shall pay all costs and expenses
of recording such memorandum of this Lease.

 

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ARTICLE XXXVII

37.1 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, relating to the Leased
Property (other than this Lease), at the expiration or termination of this Lease
for an amount (payable in cash on the expiration date of this Lease) equal to
the fair market value thereof as appraised in conformity with Article XXXIII,
except that the appraisers need not be members of the American Institute of Real
Estate Appraisers, but rather shall be appraisers having at least ten years
experience in valuing similar assets. Notwithstanding any such purchase, Lessor
shall obtain no rights to any trade name or logo used in connection with the
Franchise Agreement unless separate agreement as to such use is reached with the
applicable franchisor.

ARTICLE XXXVIII

38.1 Lessor’s Option to Terminate Lease. In the event Lessor enters into a bona
fide contract to sell the Leased Property to a non-Affiliate, Lessor may
terminate the Lease by giving not less than 30 days prior Notice to Lessee of
Lessor’s election to terminate the Lease effective upon the closing under such
contract or Lessor may convey the Lease pursuant to Article XXX. Effective upon
such closing, this Lease shall terminate and be of no further force and effect
except as to any obligations of the parties existing as of such date that
survive termination of this Lease. As compensation for the early termination of
its leasehold estate under this Article XXVIII, Lessor shall within six months
of such closing either (a) pay to Lessee the fair market value of the Lessee’s
leasehold estate hereunder as the Lease Termination Payment or (b) offer to
lease to Lessee one or more substitute hotel facilities pursuant to one or more
leases that would create for the Lessee leasehold estates that have an aggregate
fair market value of no less than the fair market value of Lessee’s leasehold
estate hereunder, with the fair market value of Lessee’s leasehold estate
hereunder determined as of the closing of the sale of the Lease Property. If
Lessor elects and complies with the option described in (b) above, regardless of
whether Lessee enters into the lease(s) described therein, Lessor shall have no
further obligations to Lessee with respect to compensation for the early
termination of this Lease. In the event Lessor and Lessee are unable to agree
upon the fair market value of an original or replacement leasehold estate within
30 days, it shall be determined by appraisal using the appraisal procedure set
forth in Article XXXIII.

For the purposes of this Section, fair market value of the leasehold estate
means, as applicable, an amount equal to the price that a willing buyer not
compelled to buy would pay a willing seller not compelled to sell for Lessee’s
leasehold estate under this Lease or an offered replacement leasehold estate.

 

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ARTICLE XXXIX

39.1 Compliance with Franchise Agreement. To the extent any of the provisions of
the Franchise Agreement impose a greater obligation on Lessee than the
corresponding provisions of the Lease, then Lessee shall be obligated to comply
with, and to take all reasonable actions necessary to prevent breaches or
defaults under, the provisions of the Franchise Agreement. It is the intent of
the parties hereto that, except as otherwise specifically provided by this
Lease, Lessee shall comply in every respect with the provisions of the Franchise
Agreement so as to avoid any default thereunder during the term of this Lease.
Lessor and Lessee agree to cooperate fully with each other in the event it
becomes necessary to obtain a franchise extension or modification or a new
franchise for the Leased Property.

ARTICLE XL

40.1 Room Set-Aside.

(a) Lessee is obligated to repair or replace in any Fiscal Year Fixtures and
Furniture and Equipment (i) as required by the terms of any Franchise Agreement,
(ii) as required by Article IX and Article XXXIX and (iii) otherwise when and in
a manner it deems fit, to the extent funds are available therefor from amounts
the Lessor is obligated to make available to Lessee under this Section 40.1 or
otherwise makes available to Lessee. During the Term Lessor shall be obligated
to make available to Lessee for repairing or replacing Fixtures and Furniture
and Equipment an amount equal to 4% of Room Revenues from the Facility for each
twelve month period. Lessor shall be required to make such amounts available to
Lessee on a quarterly basis. Upon written request by Lessee to Lessor stating
the specific use to be made and the reasonable approval thereof by Lessor, such
funds shall be made available by Lessor for use by Lessee for periodic repairing
or replacement of Fixtures and Furniture and Equipment that constitute Leased
Property in connection with the Primary Intended Use. Lessor’s obligation shall
be cumulative, but not compounded, and any amounts that have accrued hereunder
shall be payable in future periods for such uses and in accordance with the
procedure set forth herein. Lessee shall be obligated to return any funds
forwarded by Lessor pursuant to this Article XL, but not spent for (i) repair or
replacement of Fixtures and Furniture and Equipment that constitute Leased
Property in connection with the Primary Intended Use or (ii) Capital
Expenditures pursuant to Section 40.2. Other than as specifically set forth
above in this Article XL, Lessee shall have no interest in any accrued
obligation of Lessor hereunder and Lessor shall have no obligation to segregate
or separate any such funds for the benefit of Lessee.

(b) Notwithstanding any provision of Section 40.1(a) to the contrary, after the
Capitalization Date:

(i) Lessee is obligated to repair or replace Hotel Property (x) as required by
the terms of any Franchise Agreement, (y) as required by Article IX and Article
XXXIX, and (z) otherwise when and in a manner it deems fit in order to operate
the Leased Property in the manner contemplated by this Lease; and

(ii) Lessee is obligated to pay all costs and expenses of any and all repairs
and replacements required to be made pursuant to this Section 40.1(b).

 

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40.2 Capital Expenditures. Lessor shall be obligated to pay the actual costs of
any items that are classified as capital items under U.S. generally accepted
accounting principles which are necessary for the continued operation of the
Facility and otherwise approved by Lessor. To the extent that at the end of a
Fiscal Year the amount set aside exceeds the amount spent on repair or
replacement of Fixtures and Furniture and Equipment, the Lessee may apply such
excess amount towards Lessor’s obligations under Article XL.

40.3 Prohibited Expenditures. No amounts made available under this Article shall
be used to purchase property (other than “real property” within the meaning of
Treasury Regulations Section 1.856-3(d)), to the extent that doing so would
cause the Lessor to recognize income other than “rents from real property” as
defined in Section 856(d) of the Code.

 

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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.

 

SOLOMONS BEACON INN LIMITED PARTNERSHIP By:  

Humphrey Hospitality Limited Partnership,

its general partner

By:  

Humphrey Hospitality REIT Trust,

its general partner

  By:  

/s/ George R. Whittemore

  Name:   George R. Whittemore   Title:   President TRS SUBSIDIARY, LLC By:  

/s/ George R. Whittemore

Name:   George R. Whittemore Title:   President