Exhibit 10.24

LEASE AGREEMENT

DATED AS OF DECEMBER 31, 2013

BY AND BETWEEN

ESA LVP PORTFOLIO LLC

AS LANDLORD

AND

ESA LVP OPERATING LESSEE LLC

AS TENANT

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TABLE OF CONTENTS

 

Article 1

 

DEFINITIONS

     1   

Article 2

 

LEASED PROPERTY AND TERM

     8     

2.1 Leased Property

     8     

2.2 Condition of Leased Property

     9     

2.3 Fixed Term

     10     

2.4 Renewal Term

     10   

Article 3

 

RENT

     10     

3.1 Rent

     10     

3.2 Confirmation of Percentage Rent

     12     

3.3 Additional Charges

     13     

3.4 Payment of Impositions

     13     

3.5 Late Payment of Rent, Etc.

     15     

3.6 Net Lease

     15   

Article 4

 

USE OF THE LEASED PROPERTY

     17     

4.1 Permitted Use

     17     

4.2 Compliance with Legal / Insurance Requirements, Etc.

     17     

4.3 Environmental Matters

     18   

Article 5

 

REPAIRS, MAINTENANCE, AND REPLACEMENTS

     19     

5.1 Repairs and Maintenance Costs that are Expensed

     19     

5.2 Routine Capital Expenditures and FF&E

     19     

5.3 Capital Expenditures

     20     

5.4 Ownership of Replacements

     20     

5.5 Tenant’s Personal Property

     20     

5.6 Yield Up

     21     

5.7 Management Agreement

     21     

5.8 Trademark License Agreements

     21   

Article 6

 

IMPROVEMENTS, ETC.

     22     

6.1 Improvements to the Leased Property

     22     

6.2 Equipment Leases

     22   

Article 7

 

LIENS

     22   

Article 8

 

PERMITTED CONTESTS

     22   

Article 9

 

INSURANCE

     23     

9.1 General Insurance Requirements

     23     

9.2 Waiver of Subrogation

     24     

9.3 Form Satisfactory, Etc.

     24     

9.4 Blanket Policy

     24     

9.5 Separate Insurance

     24     

9.6 Reports on Insurance Claims

     25     

9.7 Indemnification of Landlord

     25   

Article 10

 

DAMAGE, REPAIR, AND CONDEMNATION

     25     

10.1 Damage and Repair

     25     

10.2 Condemnation

     27   

Article 11

 

SUBORDINATION, ETC.

     27     

11.1 No Covenants, Conditions, or Restrictions

     27     

11.2 Liens; Credit

     28     

11.3 Amendments Requested by Mortgagee

     28   

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Article 12

 

DEFAULTS AND REMEDIES

     28     

12.1 Events of Default

     28     

12.2 Damages

     29     

12.3 Waiver of Jury Trial

     30     

12.4 Application of Funds

     30     

12.5 Landlord’s Right to Cure Tenant’s Default

     30     

12.6 Good Faith Dispute

     31   

Article 13

 

HOLDING OVER

     31   

Article 14

 

LANDLORD’S NOTICE OBLIGATIONS; LANDLORD’S DEFAULT

     31     

14.1 Landlord’s Notice Obligation

     31     

14.2 Landlord’s Default

     31     

14.3 Tenant’s Right to Cure

     32   

Article 15

 

INTENTIONALLY OMITTED

     32   

Article 16

 

SUBLETTING AND ASSIGNMENT

     32     

16.1 Subletting and Assignment

     32     

16.2 Required Sublease Provisions

     33     

16.3 Permitted Sublease and Assignment

     34     

16.4 Sublease Limitation

     34   

Article 17

 

ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS

     34     

17.1 Estoppel Certificates

     34     

17.2 Accounting and Annual Reconciliation

     34     

17.3 Books and Records

     35     

17.4 Business Plan

     35   

Article 18

 

LANDLORD’S RIGHT TO INSPECT

     36   

Article 19

 

INTENTIONALLY OMITTED

     37   

Article 20

 

LIMITATIONS

     37     

20.1 REIT Compliance

     37     

20.2 FF&E Limitation

     37     

20.3 Sublease Rent Limitation

     37   

Article 21

 

MISCELLANEOUS

     38     

21.1 No Waiver

     38     

21.2 Remedies Cumulative

     38     

21.3 Severability

     38     

21.4 Acceptance of Surrender

     38     

21.5 No Merger of Title

     38     

21.6 Conveyance by Landlord

     38     

21.7 Quiet Enjoyment

     39     

21.8 Memorandum of Lease

     39     

21.9 True Lease

     39     

21.10 Notices

     39     

21.11 Construction; Nonrecourse

     40     

21.12 Counterparts; Headings

     41     

21.13 Applicable Law

     41     

21.14 Right to Make Agreement

     41   

 

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21.15 Disclosure of Information

     41     

21.16 Operating Lease

     42     

21.17 No Joint Venture or Partnership

     42     

21.18 Tax Allocation

     42    EXHIBITS    EXHIBIT A   MINIMUM RENT; MINIMUM RENT ALLOCATIONS   
EXHIBIT B   PROVISIONS RELATING TO EXCESS FF&E    EXHIBIT C   PROVISIONS
RELATING TO PERCENTAGE RENT    EXHIBIT D   TRADEMARK LICENSE AGREEMENTS   

 

iii

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INDEX OF DEFINED TERMS

 

Accounting Period

     1   

Accounting Period Statement

     34   

Additional Charges

     13   

Affiliate

     1   

Annual Operating Statement

     34   

Applicable Expected Life

     B-1   

Applicable Laws

     1   

Award

     2   

Building Estimate

     19   

Business Day

     2   

Business Plan

     35   

Capital Expenditure

     2   

Capital Reserve Budget

     19   

CC&R(s)

     27   

CERCLA

     17   

Claims

     22   

Code

     2   

Commencement Date

     2   

Condemnation

     2   

Condemnor

     2   

Controlling Interest

     2   

Default

     3   

Default Rent

     29   

Emergency Requirements

     3   

Entity

     3   

Environment

     3   

Environmental Laws

     17   

ESA Brand

     3   

ESH Hospitality

     3   

Event of Default

     27   

Excess FF&E

     B-1   

Excess FF&E FMV

     B-2   

Excess FF&E Notice

     B-1   

Excess FF&E Value

     B-2   

FF&E

     3   

FF&E Adjustment

     B-1   

FF&E Limitation

     B-1   

Final Installment

     10   

First Year FF&E Adjustment

     B-1   

Fiscal Year

     3   

Fixed Term

     9   

GAAP

     3   

GDP Deflator

     3   

Government Agencies

     4   

Gross Revenues

     4   

Hazardous Materials

     18   

Hotel

     4   

Impositions

     4   

Improvements

     8   

Indebtedness

     5   

Index

     5   

Insurance Requirements

     5   

Intangible Property

     5   

Interest Rate

     6   

Inventories

     6   

Land

     1   

Landlord

     1   

Landlord Default

     31   

Landlord Liens

     6   

Lease

     1   

Lease Year

     6   

Leased Property

     8   

Legal Requirements

     6   

Management Agreement

     6   

Manager

     6   

Manager’s System

     6   

Market Leasing Factor

     B-2   

Minimum Rent

     10   

Minor Casualty

     7   

Mortgage

     7   

Mortgagee

     7   

Notice

     7   

Percentage Rent

     10   

Permits

     7   

Permitted Use

     7   

Person

     7   

Progress Installments

     10   

Real Estate Taxes

     7   

Renewal Term

     9   

Rent

     7   

REOC

     36   

REOC Parent

     36   

Revenue Audit

     12   

Routine Capital Expenditures

     7   

Substitute Index

     7   

Tenant

     1   

Tenant’s Personal Property

     7   

Term

     8   

 

 

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Threshold Allocation

     25   

Thresholds

     C-1   

Tier 1 Percentage

     C-1   

Tier 1 Threshold

     C-1   

Tier 2 Percentage

     C-1   

Tier 2 Threshold

     C-1   

Tier 3 Percentage

     C-1   

Tier 3 Threshold

     C-1   

Total Casualty

     8   

Trademark License Agreements

     8   

Uniform System of Accounts

     8   

Working Capital

     8   

 

 

v

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LEASE AGREEMENT

THIS LEASE AGREEMENT (this “Lease”) is entered into as of December 31, 2013, by
and between ESA LVP PORTFOLIO LLC, a Delaware limited liability company
(“Landlord”), and ESA LVP OPERATING LESSEE LLC, a Delaware limited liability
company (“Tenant”).

WITNESSETH

WHEREAS, Landlord is the owner of certain real property located at 15385 Katy
Freeway, Houston, Texas 77094 and 13420 Southwest Freeway, Houston, Texas 77478
(collectively, the “Land”) and the buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and other
improvements now or hereafter located thereon, which Land and improvements are
part of the Leased Property.

WHEREAS, Landlord has agreed to lease the Leased Property to Tenant and Tenant
has agreed to lease the Leased Property from Landlord, all subject to and upon
the terms and conditions herein set forth.

NOW THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the mutual receipt and legal sufficiency
of which are hereby acknowledged, Landlord and Tenant hereby agree as follows.

Article 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 1 shall
have the meanings assigned to them in this Article 1 and include the plural as
well as the singular, (b) all accounting terms not otherwise defined in this
Lease shall have the meanings assigned to them in accordance with GAAP, (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”, “hereunder”, and other words
of similar import refer to this Lease as a whole and not to any particular
Article, Section, or other subdivision of this Lease.

“Accounting Period” means each of 12 calendar months occurring each Fiscal Year.

“Affiliate” means, with respect to any Person, any other Person which, directly
or indirectly, controls, is under common control with, or is controlled by such
specified Person. For purposes of this definition, the term “control” shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of management, policies, or activities of a Person, whether through
ownership of voting securities, by contract, or otherwise.

“Applicable Laws” means all applicable laws, statutes, regulations, rules,
ordinances, codes, licenses, permits, and orders, from time to time in
existence, of all courts of competent jurisdiction and Government Agencies, and
all applicable judicial and administrative and regulatory decrees, judgments,
and orders, including, without limitation, common law rulings and
determinations, relating to injury to, or the protection of real or personal
property or human health (except those requirements which, by definition, are
solely the responsibility of employers) or the

 

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Environment, including, without limitation, all valid and lawful requirements of
courts and other Government Agencies pertaining to reporting, licensing,
permitting, investigation, remediation, and removal of underground improvements
(including, without limitation, treatment or storage tanks, or water, gas, or
oil wells), or emissions, discharges, releases, or threatened releases of
Hazardous Substances, chemical substances, pesticides, petroleum or petroleum
products, pollutants, contaminants, or hazardous or toxic substances, materials,
or wastes whether solid, liquid, or gaseous in nature, into the Environment, or
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of Hazardous Substances, underground
improvements (including, without limitation, treatment or storage tanks, or
water, gas, or oil wells), or pollutants, contaminants, or hazardous or toxic
substances, materials, or wastes, whether solid, liquid, or gaseous in nature.

“Award” means all compensation, sums, or other value awarded, paid, or received
by virtue of a total or partial Condemnation of the Leased Property (after
deduction of all reasonable legal fees and other reasonable costs and expenses,
including, without limitation, expert witness fees, incurred by Landlord, in
connection with obtaining any such award).

“Business Day” means any day other than Saturday, Sunday, or any other day on
which banking institutions in the State of New York are authorized by law or
executive action to close.

“Capital Expenditure” means the expenses necessary for non-routine, major
repairs, alterations, improvements, renewals, replacements, and additions to the
Hotels, including, without limitation, to the structure, the exterior façade
(excluding painting) and all of the mechanical, electrical, heating,
ventilating, air conditioning, plumbing, or vertical transportation elements of
the Hotel buildings, together with all other expenditures which are classified
as “capital expenditures” under GAAP. Capital Expenditures shall not include
Routine Capital Expenditures.

“Code” means the Internal Revenue Code of 1986 and, to the extent applicable,
the Treasury Regulations promulgated thereunder, each as amended from time to
time.

“Commencement Date” means the date of this Lease.

“Condemnation” means (a) the exercise of any governmental power with respect to
the Leased Property, whether by legal proceedings or otherwise, by a Condemnor
of its power of condemnation, (b) a voluntary sale or transfer of the Leased
Property by Landlord to any Condemnor, either under threat of condemnation or
while legal proceedings for condemnation are pending, or (c) a taking or
voluntary conveyance of all or part of the Leased Property, or any interest
therein, or right accruing thereto, or use thereof; as the result 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.

“Condemnor” means any public or quasi-public authority, or Person, having the
power of Condemnation.

“Controlling Interest” means (a) as to a corporation, the right to exercise,
directly or indirectly, more than 50% of the voting rights attributable to the
shares of the Entity (through ownership of such shares or by contract), and
(b) as to an Entity not a corporation, the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
the Entity.

 

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“Default” means any event or condition existing which with the giving of Notice
and/or lapse of time would ripen into an Event of Default.

“Emergency Requirements” means any of the following events or circumstances:
(a) an emergency threatening imminent damage to a Hotel, or the life or property
of such Hotel’s guests, invitees, or employees; or (b) a Legal Requirement, the
violation (or continued violation) of which would subject Tenant, Manager,
and/or Owner to the imminent threat of civil or criminal liability.

“Entity” means any corporation, general or limited partnership, limited
liability company, limited liability partnership, stock company or association,
joint venture, association, company, trust, bank, trust company, land trust,
business trust, cooperative, any government or agency or political subdivision
thereof, or any other association or entity.

“Environment” means soil, surface waters, ground waters, land, streams,
sediments, surface or subsurface strata, and ambient air.

“ESA Brand” means, collectively, (a) the name and mark “Extended Stay America”,
“Crossland Economy Suites”, “Extended Stay Deluxe”, “Homestead Suites”,
“StudioPlus Deluxe Studios” and “Homestead”, alone or in combination with other
words or symbols, any variation or derivative thereof, and any names and marks
confusingly similar thereto, and (b) any additional trademark or brand developed
or acquired by or on behalf of any Affiliate of Landlord after the date hereof.

“ESH Hospitality” means ESH Hospitality, Inc. (f/k/a ESH Hospitality LLC), a
Delaware corporation, together with its successors and assigns.

“FF&E” means furniture, furnishings, fixtures, soft goods, signage, equipment,
and other personal property located at, or used in connection with, the
operation of the Hotels.

“Fiscal Year” means each calendar year during the Term.

“GAAP” means generally accepted accounting principles consistently applied.

“GDP Deflator” means the “Gross Domestic Product Implicit Price Deflator” issued
from time to time by the United States Bureau of Economic Analysis of the
Department of Commerce, or if the aforesaid GDP Deflator is not at such time so
prepared and published, any Substitute Index. Except as otherwise expressly
stated herein, whenever a number or amount is required to be “adjusted by the
GDP Deflator”, or similar terminology, such adjustment shall be equal to the
percentage increase or decrease in the GDP Deflator which is issued for the
month in which such adjustment is to be made (or, if the GDP Deflator for such
month is not yet publicly available, the GDP Deflator for the most recent month
for which the GDP Deflator is publicly available) as compared to the GDP
Deflator which was issued for the month in which the Commencement Date occurred.

 

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“Government Agencies” means any court, agency, authority, board (including,
without limitation, environmental protection, planning, and zoning), bureau,
commission, department, office, or instrumentality of any nature whatsoever of
any governmental or quasi-governmental unit of the United States or the states
in which the Leased Property is located or any county or any political
subdivision of any of the foregoing, whether now or hereafter in existence,
having jurisdiction over Tenant or the Leased Property or any portion thereof or
the Hotel operated thereon.

“Gross Revenues” means all revenues and receipts of every kind derived from
operating the Hotels and all departments and parts thereof, including, without
limitation: income (from both cash and credit transactions) from rental of guest
rooms, telephone charges, stores, offices, exhibit or sales space of every kind;
license, lease, and concession fees and rentals (not including gross receipts of
licensees, lessees, and concessionaires); income from vending machines; income
from parking; wholesale and retail sales of merchandise; service charges; items
constituting “Allowances” under the Uniform Systems of Accounts; and proceeds,
if any, from business interruption or other loss of income insurance; provided,
that Gross Revenues shall not include the following: gratuities to employees of
the Hotels; federal, state, or municipal excise, sales, or use taxes or any
other taxes collected directly from patrons or guests or included as part of the
sales price of any goods or services; proceeds from the sale of furniture,
fixtures, and equipment; interest received or accrued with respect to the funds
in any operating accounts of the Hotels; the amount of any refunds, rebates,
discounts, and credits of a similar nature (including, without limitation,
complimentary hotel stays given to employees of Manager), given, paid, or
returned in the course of obtaining Gross Revenues or components thereof;
insurance proceeds (other than proceeds from business interruption or other loss
of income insurance); condemnation proceeds (other than for a temporary taking);
or any proceeds from any sale of the Hotels or from the refinancing of any debt
encumbering the Hotels. Notwithstanding the foregoing, in the event of any
inconsistency between the foregoing definition and the definition of “Gross
Operating Revenues” set out in the Management Agreement, the definition set out
in the Management Agreement shall prevail.

“Hotel” means individually, a hotel being operated by a Manager on a Leased
Property, and collectively, both of the hotels being operated by a Manager on
the Leased Properties.

“Impositions” means, 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
Tenant or the business conducted upon the Leased Property, including, without
limitation, all personal property taxes on Tenant’s Personal Property, together
will all replacements, modifications, alterations, and additions thereto),
assessments (including, without limitation, all assessments for public
improvements or benefit, whether or not commenced or completed prior to the date
hereof), water, sewer, or other rents and charges, excises, tax levies, fees
(including, without limitation, license, permit, 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
Tenant (including, without limitation, all interest and penalties thereon due to
any failure in payment by Tenant), which at any time prior to, during, or in
respect of the Term hereof may be assessed or imposed on, or in respect of, or
be a lien upon (a) Landlord’s interest in the Leased Property, (b) the Leased
Property, or any part thereof, or any

 

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rent therefrom, or any estate, right, title, or interest therein, or (c) any
occupancy, operation, use, or possession of, or sales from, or activity
conducted on, or in connection with, the Leased Property, or the leasing or use
of the Leased Property or any part thereof by Tenant; provided, that nothing
contained herein shall be construed to require Tenant to pay (i) any tax based
on net income, net worth, or capital imposed on Landlord, (ii) any net revenue
tax of Landlord, (iii) any transfer fee or other tax imposed with respect to the
sale, exchange, or other disposition by Landlord of any Leased Property or the
proceeds thereof, (iv) any single business, gross receipts tax (from any source
other than the rent received by Landlord from Tenant), or similar taxes as the
same relate to or are imposed upon Landlord, except to the extent that any tax,
assessment, tax levy, or charge that would otherwise be an Imposition under this
definition which is in effect at any time during the Term hereof is totally or
partially repealed, and a tax, assessment, tax levy, or charge set forth in
clause (i) or (ii) preceding is levied, assessed, or imposed expressly in lieu
thereof, (v) any interest or penalties imposed on Landlord as a result of the
failure of Landlord to file any return or report timely and in the form
prescribed by law, or to pay any tax or imposition, except to the extent such
failure is a result of a breach by Tenant of its obligations pursuant to
Section 3.4, (vi) any Impositions imposed on Landlord that are a result of
Landlord not being considered a “United States person” as defined in
Section 7701(a)(30) of the Code, (vii) any Impositions that are enacted or
adopted by their express terms as a substitute for any tax that would not have
been payable by Tenant pursuant to the terms of this Lease or (viii) any
Impositions imposed as a result of a breach of covenant or representation by
Landlord in any agreement entered into by Landlord governing Landlord’s conduct
or operation or as a result of the negligence or willful misconduct of Landlord.

“Indebtedness” means all obligations, contingent or otherwise, which in
accordance with GAAP should be reflected on the obligor’s balance sheet as
liabilities.

“Index” means the Consumer Price Index for All Urban Consumers, All Items, for
the market area that includes the Leased Property, as published by the Bureau of
Labor Statistics of the United States Department of Labor, using the years
1982-84 as a base of 100, or if such index is discontinued, the most comparable
index published by any federal governmental agency, as mutually acceptable to
Landlord and Tenant. Whenever a number or amount is required to be adjusted by
changes in the Index or similar terminology, such adjustment shall be equal to
the percentage increase or decrease in the Index which is issued for the month
in which such adjustment is to be made (or if the Index for such month is not
yet publicly available, the Index for the most recent month for which the Index
is publicly available) as compared to the Index which was issued for the month
in which the Commencement Date occurred.

“Insurance Requirements” means all terms of any insurance policy required by
this Lease, and all requirements of the issuer of any such policy, and all
orders, rules and regulations, and any other requirements of the National Board
of Fire Underwriters (or any other body exercising similar functions) binding
upon Landlord, Tenant, or the Leased Property.

“Intangible Property” means (a) Permits and other approvals granted by any
public body or by any private party pursuant to a recorded instrument and
(b) certificates, licenses, warranties, and guarantees other than such Permits
and approvals which are to be held by, or transferred to, Tenant in order to
permit Tenant to operate, or cause Manager to operate, the Leased Property
properly in accordance with the terms of this Lease.

 

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“Interest Rate” means an annual rate of interest equal to, as of the date of
determination, the per annum rate for 10 year U.S. Treasury Obligations as
published in the Wall Street Journal, plus 200 basis points.

“Inventories” means “Inventories” as defined in the Uniform System of Accounts,
including, without limitation, provisions in storerooms, refrigerators, pantries
and kitchens, beverages in wine cellars and bars, other merchandise intended for
sale, fuel, mechanical supplies, stationery, and other expenses, supplies, and
similar items.

“Landlord Liens” means liens on or against the Leased Property or any payment of
Rent (a) which result from any act of, or any claim against, Landlord or any
owner (other than Tenant) of a direct or indirect interest in the Leased
Property, or which result from any violation by Landlord of any terms of this
Lease, or (b) which result from liens in favor of any taxing authority by reason
of any tax owed by Landlord or any fee owner of a direct or indirect interest in
the Leased Property; provided, that “Landlord Liens” shall not include any lien
resulting from any tax for which Tenant is obligated to pay or indemnify
Landlord against until such time as Tenant shall have already paid to, or on
behalf of, Landlord the tax or the required indemnity with respect to the same.

“Lease Year” means any Fiscal Year during the Term and any partial Fiscal Year
at the beginning or end of the Term.

“Legal Requirements” means all federal, state, county, municipal, and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees, and injunctions affecting the Leased Property or the maintenance,
construction, alteration, or operation thereof, whether now or hereafter enacted
or in existence, including, without limitation, (a) all permits, licenses,
authorizations, certificates, and regulations necessary to operate the Leased
Property for its Permitted Use, and (b) all covenants, agreements, declarations,
restrictions, and encumbrances contained in any instruments at any time in force
affecting the Leased Property as of the date hereof, or to which Tenant has
consented or required to be granted pursuant to Applicable Laws, including,
without limitation, those which may (i) require material repairs, modifications,
or alterations in or to the Leased Property or (ii) in any way materially and
adversely affect the use and enjoyment of the Leased Property, but excluding any
requirements arising as a result of Landlord’s or any Landlord’s Affiliate’s
status as a real estate investment trust.

“Management Agreement” means any agreement entered into by Tenant and Manager
with respect to the management and operation of the Leased Property, as the same
may be amended from time to time. As of the date of this Lease, the Management
Agreement is that certain Management Agreement dated as of the date hereof
between Tenant and Manager.

“Manager” means ESA Management, LLC, a Delaware limited liability company,
together with its successors and assigns.

“Manager’s System” means all hotels and resorts in the United States that are
managed by Manager.

 

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“Minor Casualty” means any fire or other casualty which results in damage to a
Hotel and/or its contents, to the extent that the total cost (in Tenant’s
reasonable judgment) of repairing and/or replacing the damaged portion of the
Hotel to the same condition as existed previously does not exceed the dollar
amount of One Million Dollars ($1,000,000), said dollar amount to be adjusted by
the GDP Deflator.

“Mortgage” means any mortgage, deed of trust, deed to secure debt, or other
security document encumbering any Hotel or related to the ownership or operation
of any Hotel and given by Landlord to a lender as security for a Loan.

“Mortgagee” means the holder of any Mortgage.

“Notice” means a notice given in accordance with Section 21.10.

“Permits” means governmental permits, including, without limitation, licenses
and authorizations, required for the ownership and operation of the permits,
signage permits, site use approvals, zoning certificates, environmental and land
use permits, and any and all necessary approvals from state or local
authorities.

“Permitted Use” means any use of the Leased Property permitted pursuant to
Section 4.1(a).

“Person” means any individual or Entity, and the heirs, executors,
administrators, legal representatives, successors, and assigns of such Person
where the context so admits.

“Real Estate Taxes” means all real estate taxes, including, without limitation,
general and special assessments, if any, which are imposed upon the Land or any
improvements thereon.

“Rent” means, collectively, Minimum Rent, Percentage Rent, and Additional
Charges.

“Routine Capital Expenditures” means certain routine, non-major expenditures
which are classified as “capital expenditures” under GAAP, but which will be
funded from funds provided by Landlord (pursuant to Section 5.2), rather than
pursuant to the provisions of Section 5.3. Routine Capital Expenditures consist
of the following types of expenditures: exterior and interior repainting;
resurfacing building walls and floors; resurfacing parking areas; replacing
folding walls; and miscellaneous similar expenditures (all such types of
expenditures to be in accordance with Manager’s policies as then generally
implemented throughout the Manager’s System).

“Substitute Index” means any index comparable to the GDP Deflator selected by
Landlord and reasonably satisfactory to Tenant then prepared and published by an
agency of the Government of the United States, appropriately adjusted for
changes in the manner in which such index is prepared and/or year upon which
such index is based.

“Tenant’s Personal Property” means all motor vehicles, Inventories, FF&E, and
any other tangible personal property of Tenant acquired by Tenant at its
election and with its own funds, on and after the date hereof, and located at
the Leased Property or used in Tenant’s business at the Leased Property, and all
modifications, replacements, alterations, and additions to such personal
property installed at the expense of Tenant.

 

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“Term” means, collectively, the Fixed Term and the Renewal Terms, to the extent
properly exercised pursuant to the provisions of Section 2.4, unless sooner
terminated pursuant to the provisions of this Lease.

“Total Casualty” means any fire or other casualty which results in damage to a
Hotel and its contents to the extent that the total cost of repairing and/or
replacing the damaged portion of the Hotel to the same condition as existed
previously would be 30% or more of the then total replacement cost of the Hotel.

“Trademark License Agreements” means, individually or collectively, as context
may require, (a) any of those certain trademark license agreements described on
Exhibit D hereof and (b) any agreements to license a trademark of the ESA Brands
entered into by Tenant after the date hereof.

“Uniform System of Accounts” means Uniform System of Accounts for the Lodging
Industry, Ninth Revised Edition, 1996, as published by the Hotel Association of
New York City, as the same may be further revised from time to time.

“Working Capital” means funds that are used in the day-to-day operation of the
business of the Hotels, including, without limitation, amounts sufficient for
the maintenance of change and petty cash funds, amounts deposited in operating
bank accounts, receivables, amounts deposited in payroll accounts, prepaid
expenses, and funds required to maintain Inventories, less accounts payable and
accrued current liabilities.

Article 2

LEASED PROPERTY AND TERM

2.1 Leased Property. Upon and subject to the terms and conditions hereinafter
set forth, Landlord leases to Tenant and Tenant leases from Landlord all of
Landlord’s right, title, and interest in and to all of the following
(collectively, the “Leased Property”):

(a) the Land;

(b) all buildings, structures, other improvements and appurtenances of every
kind including, without limitation, the Hotels, the alleyways and connecting
tunnels, sidewalks, utility pipes, conduits and lines (on-site and off-site),
parking garages and parking areas, and roadways appurtenant to such buildings
and structures presently situated upon the Land (collectively, the
“Improvements”);

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

(d) all equipment, machinery, fixtures, and other items of property, now or
hereafter permanently affixed to or incorporated into the Improvements,
including, without limitation, all furnaces, boilers, heaters, electrical
equipment, heating, plumbing, lighting,

 

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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 maximum
extent permitted by law, are hereby deemed by the parties hereto to constitute
real estate, together with all replacements, modifications, alterations, and
additions thereto, but specifically excluding all items included within the
category of Tenant’s Personal Property;

(e) all of the Intangible Property;

(f) all FF&E and other tangible personal property owned by Landlord located in
or on the Hotels as of the date hereof and any and all replacements,
modifications, alterations, and additions to the FF&E and such other tangible
personal property, but specifically excluding Tenant’s Personal Property; and

(g) any and all leases of space (including, without limitation, any security
deposits held by Tenant pursuant thereto) in the Improvements to tenants
thereof.

2.2 Condition of Leased Property. Tenant acknowledges receipt and delivery of
possession of the Leased Property and Tenant accepts and will accept the Leased
Property in its “as is” condition, subject to the rights of parties in
possession, the existing state of title, including, without limitation, all
covenants, conditions, restrictions, reservations, mineral leases, easements,
and other matters of record or that are visible or apparent on the Leased
Property, all applicable Legal Requirements, the lien of any financing
instruments, mortgages permitted by the terms of this Lease, and such other
matters which would be disclosed by an inspection of the Leased Property and the
record title thereto or by an accurate survey thereof. TENANT REPRESENTS THAT IT
HAS INSPECTED THE LEASED PROPERTY AND ALL OF THE FOREGOING AND HAS FOUND THE
CONDITION THEREOF SATISFACTORY AND IS NOT RELYING ON ANY REPRESENTATION OR
WARRANTY OF LANDLORD OR LANDLORD’S AGENTS OR EMPLOYEES WITH RESPECT THERETO,
EXCEPT AS EXPRESSLY SET FORTH HEREIN, AND TENANT WAIVES ANY CLAIM OR ACTION
AGAINST LANDLORD IN RESPECT OF THE CONDITION OF THE LEASED PROPERTY. LANDLORD
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 TENANT. To the maximum extent permitted by
law, however, Landlord hereby assigns to Tenant all of Landlord’s rights to
proceed against any predecessor in title, contractors, and materialmen for
breaches of warranties or representations or for latent defects in the Leased
Property. Landlord shall fully cooperate with Tenant in the prosecution of any
such claims, in Landlord’s or Tenant’s name, all at Tenant’s sole cost and
expense. Tenant shall indemnify, defend, and hold harmless Landlord from and
against any loss, cost, damage, or liability (including reasonable attorneys’
fees) incurred by Landlord in connection with such cooperation.

 

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2.3 Fixed Term. The initial term of this Lease (the “Fixed Term”) shall commence
on the Commencement Date and shall expire on October 31, 2018 unless sooner
terminated in accordance with the provisions hereof.

2.4 Renewal Term. (a) Provided that no Event of Default shall have occurred and
be continuing, this Lease shall automatically extend for two renewal terms of
five years each (each such renewal a “Renewal Term”) unless Tenant elects, by
providing Notice to Landlord no later than 30 months prior to the scheduled
expiration of the Term of this Lease or the previous Renewal Term, as
applicable, to terminate this Lease upon the expiration of the then current
Term. Any such Notice to terminate shall, if given, be irrevocable, but Tenant’s
failure to terminate shall not preclude Landlord from exercising any of its
rights to terminate this Lease in accordance with the terms hereof.

(b) Each Renewal Term shall commence on the day succeeding the expiration of the
Fixed Term or the preceding Renewal Term, as the case may be. All of the terms,
covenants, and provisions of this Lease shall apply to each such Renewal Term.
Tenant shall have no right to extend the Term beyond the expiration of the last
Renewal Term. If Tenant does not give Notice that it elects to terminate this
Lease in accordance with this Section 2.4, then this Lease shall automatically
renew at the end of the Term then in effect as provided in Section 2.4(a).

Article 3

RENT

3.1 Rent. Tenant shall pay, or cause Manager to pay, to Landlord, by wire
transfer of immediately available federal funds or by other means acceptable to
Landlord in its sole discretion, in lawful money of the United States of America
which shall be legal tender for the payment of public and private debts, without
notice, offset, abatement, demand, or deduction (unless otherwise expressly
provided in this Lease), Rent during the Term as follows:

(a) Minimum Rent. Tenant shall pay minimum rent in an amount equal to the
aggregate amount of minimum rent per Fiscal Year set forth in Exhibit A, payable
in advance in equal, consecutive monthly installments, on or before the first
day of each calendar month of the Term (“Minimum Rent”); provided, that in the
case of the first Fiscal Year and the last Fiscal Year, the number of such
installments shall equal the number of calendar months included within the Term
of such Fiscal Year; and provided further, that if the Term commences on a day
other than the first day of the calendar month, the Minimum Rent for the first
month and the last month of the Term shall be prorated on a per diem basis based
on the actual number of calendar days included within the Term of such month;
and

(b) Percentage Rent.

(i) For each Fiscal Year during the Term during which Gross Revenues for such
Fiscal Year exceed the Tier 1 Threshold, Tenant shall pay percentage rent
(“Percentage Rent”) in an amount set forth in Exhibit C. No Percentage Rent
shall be payable for any Fiscal Year during the Term if the Gross Revenues for
such Fiscal Year is less than or equal to the Tier 1 Threshold.

 

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(ii) Percentage Rent, if any, for each Fiscal Year shall be payable, in arrears,
in 12 monthly installments (the first 11 such installments for any Fiscal Year
being referred to in this Lease as the “Progress Installments”; the last such
installment for any Fiscal Year being referred to in this Lease as the “Final
Installment”); provided, that in the case of the first Fiscal Year and the last
Fiscal Year, the number of such installments shall equal the number of months
(or partial calendar months) included within such Fiscal Year. Each of the
Progress Installments shall be payable within 35 days after the calendar month
(or partial calendar month) then most recently ended. The Final Installment
shall be payable within 30 days after Landlord’s receipt of the annual financial
statements and other reports required to be delivered to Landlord pursuant to
Section 17.2(b) for such Fiscal Year. Appropriate provision shall be made in the
case of the final calendar month (or partial calendar month) of the Term.

(iii) (A) Each of the Progress Installments shall be based on actual operations
to date for such Fiscal Year. The first Progress Installment for any Fiscal Year
shall equal 1/12th of the total Percentage Rent payment that would be payable
for such Fiscal Year if the actual Gross Revenues for such Fiscal Year were to
equal the Gross Revenues received to date and annualized. Each subsequent
Progress Installments for any Fiscal Year shall equal (1) the proportionate
share (e.g., the second Progress Installment will equal 2/12ths) of the total
Percentage Rent that would be payable for such Fiscal Year if the actual Gross
Revenues for such Fiscal Year were to equal the Gross Revenues received to date
and annualized, minus (2) the aggregate amount of the Progress Installments, if
any, theretofore paid in respect of Percentage Rent for such Fiscal Year. The
Final Installment shall equal the portion of Percentage Rent for such Fiscal
Year, if any, remaining unpaid after payment of all Progress Installments in
respect thereof,

(B) In calculating Percentage Rent for the first and last Fiscal Year of the
Term, the Thresholds shall be pro-rated based on the number of days included
within the Term of such first and last Fiscal Years and such pro-rated amount
shall be used in lieu of the Thresholds for the purpose of Revenue Computation.
Each Progress Installment for the first and last Fiscal Year shall be calculated
to reflect the number of months or partial months accruing during the Term in
such Fiscal Year.

(iv) At the end of each Fiscal Year, in connection with the submission of annual
financial statements and other reports pursuant to Section 17.2(b) and the
completion of any audit pursuant to Section 3.2, Percentage Rent for such Fiscal
Year shall be determined. If such determination reveals any underpayments or
overpayments in respect of Percentage Rent for such Fiscal Year, then an
adjustment in the amount of Percentage Rent for such Fiscal Year shall be made,
and all sums determined to be owing to either Landlord or Tenant as a result of
such adjustment shall be paid promptly.

(v) Tenant shall deliver to Landlord a statement with each Percentage Rent
payment setting forth the true and correct calculation of the Percentage Rent
payment for the most recently completed month of each Fiscal Year in the Term
and the Percentage Rent year-to-date through such recently completed month.
Percentage Rent shall be subject to confirmation and adjustment, if applicable,
as set forth in Section 3.2.

 

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(c) The obligation to pay 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 Rent accrued prior to such
expiration or termination date, shall be made not later than 30 days after such
expiration or termination date.

(d) Notwithstanding anything in this Lease to the contrary, in the event that
cash available from Gross Revenues after payment by Tenant of all expenses due
and payable by Tenant under this Lease is insufficient to pay the aggregate
amount of Percentage Rent due for such month, then the amount of such deficiency
shall be deferred and added to and paid in connection with the next monthly
Percentage Rent payment or payments hereunder; provided, that any Percentage
Rent deferred as herein provided shall in any event be due and payable and paid
prior to the end of the Fiscal Year in which such deferral occurred unless
Landlord, in its sole and absolute discretion, elects to permit further deferral
of such Percentage Rent for a period determined by Landlord, in which case any
such Percentage Rent that is deferred beyond the end of such Fiscal Year shall
(i) accrue interest at a rate equal to the Interest Rate for the period
commencing on the day after the last day of such Fiscal Year and ending on the
date on which Tenant pays such Percentage Rent to Landlord and (ii) be due and
payable, together with all accrued interest, on or prior to the last day of the
extended deferral period so determined by Landlord.

(e) Minimum Rent payable each Fiscal Year pursuant to Section 3.1(a) shall be
allocated to each Hotel in the amounts set forth in Exhibit A.

(f) If at any time during the Term it becomes necessary to revise any of the
Exhibits to this Lease whether as required in accordance with the provisions of
this Lease or as a result of the agreement of Landlord and Tenant, and whether
to reflect changes in the Leased Properties, the allocation or amount of Minimum
Rent, the calculation of Percentage Rent, or otherwise, then Landlord shall
update the applicable Exhibit to reflect such revision(s) and shall deliver
Notice and a copy thereof to Tenant. Any such revised Exhibit, to the extent
such revision(s) was/were required in accordance with the provisions of this
Lease, shall be binding on Tenant absent manifest error, and any other such
revised Exhibit shall be binding on Tenant upon Tenant’s counter-execution of
the same.

3.2 Confirmation of Percentage Rent. Tenant shall utilize, or cause to be
utilized, an accounting system for the Leased Property in accordance with its
usual and customary practices, and in accordance with GAAP and the Uniform
System of Accounts, that will accurately record all data necessary to compute
Percentage Rent, and Tenant shall retain, for at least five years after the
expiration of each Lease Year, reasonably adequate records conforming to such
accounting system showing all data necessary to conduct Landlord’s audit and to
compute Percentage Rent for the applicable Lease Year. Landlord shall have the
right, for a period of two years following each Lease Year, from time to time,
by its accountants or representatives, to audit such information in connection
with Landlord’s audit, and to examine all Tenant’s records (including supporting
data and sales and excise tax returns) reasonably required to complete
Landlord’s audit and to verify the Percentage Rent, subject to any prohibitions
or limitations on disclosure of any such data under Legal Requirements. If any
Landlord’s audit discloses a deficiency in the payment of Percentage Rent, and
either Tenant agrees with the results of

 

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Landlord’s audit or the matter is otherwise determined or compromised, then
Tenant shall forthwith pay to Landlord the amount of the deficiency, as finally
agreed or determined, together with interest at the Interest Rate from the date
when said payment should have been made to the date of payment thereof. If any
Landlord’s audit discloses a deficiency in the determination or reporting of
Gross Revenue, which, as finally agreed or determined, exceeds three percent,
Tenant shall pay the costs of the portion of Landlord’s audit allocable to the
determination of such Revenues. Any proprietary information obtained by Landlord
pursuant to the provisions of this Section 3.2 shall be treated as confidential,
except that such information may be used, subject to appropriate confidentiality
safeguards, in any litigation or arbitration between the parties and except
further that Landlord may disclose such information to prospective lenders,
investors, and underwriters and to any other persons to whom disclosure is
necessary to comply with applicable laws, regulations, and government
requirements. The obligations of Tenant contained in this Section 3.2 shall
survive the expiration or earlier termination of this Lease. Any dispute as to
the existence or amount of any deficiency in the payment of Percentage Rent as
disclosed by Landlord’s audit shall, if not otherwise settled by the parties, be
submitted to arbitration.

3.3 Additional Charges. In addition to Minimum Rent or Percentage Rent payable
under Section 3.1 of this Lease, (a) Tenant also will pay and discharge as and
when due and payable all other amounts, liabilities, obligations, and
Impositions that Tenant assumes or agrees to pay under this Lease, and (b) in
the event of any failure on the part of Tenant to pay any of those items
referred to in clause (a) of this Section 3.3, Tenant also will promptly pay and
discharge every fine, penalty, interest, and cost that may be added for
non-payment or late payment of such items (the items referred to in clauses
(a) and (b) of this Section 3.3 being additional rent hereunder and being
referred to herein collectively as “Additional Charges”), and Landlord 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
Additional Charges as in the case of non-payment of Minimum Rent or Percentage
Rent. If any installment of Minimum Rent, Percentage Rent or Additional Charges
(but only as to those Additional Charges that are payable directly to Landlord)
shall not be paid on its due date, then Tenant will pay Landlord within 10 days
after demand, as Additional Charges, an amount equal to the interest computed at
the Interest Rate on the amount of such installment, from the due date of such
installment to the date of payment thereof. To the extent that Tenant pays any
Additional Charges to Landlord pursuant to the requirements of this Lease,
Tenant shall be relieved of its obligation to pay such Additional Charges to the
entity to which they would otherwise be due and Landlord shall pay the same from
monies received from Tenant.

3.4 Payment of Impositions. (a) (i) Subject to Article 8 relating to permitted
contests, Tenant shall pay, or cause to be paid, all Impositions (other than
Real Estate Taxes which shall be paid by Landlord) before any fine, penalty,
interest, or cost (other than any opportunity cost as a result of a failure to
take advantage of any discount for early payment) may be added for non-payment,
such payments to be made directly to the taxing authorities where feasible, and
shall promptly, upon request, furnish to Landlord copies of official receipts or
other reasonably satisfactory proof evidencing such payments. 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),
Tenant 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 as the same become due and before any fine,
penalty, premium, further interest, or cost may be added thereto.

 

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(ii) Landlord, at its expense, shall, to the extent required or permitted by
Applicable Law, prepare and file all tax returns and pay all taxes due in
respect of Landlord’s net income, gross receipts (from any source other than
Rent received by Landlord from Tenant), sales and use, single business, ad
valorem, franchise taxes, Real Estate Taxes, and taxes on its capital stock, and
Tenant, at its expense, shall, to the extent required or permitted by Applicable
Laws, prepare and file all other tax returns and reports in respect of any
Imposition as may be required by Government Agencies.

(iii) If any refund shall be due from any taxing authority in respect of any
Imposition paid by Tenant, then the same shall be paid over to or retained by
Tenant if no Event of Default shall have occurred hereunder and be continuing.
If an Event of Default shall have been declared by Landlord and be continuing,
then any such refund shall be paid over to or retained by Landlord.

(iv) Landlord and Tenant 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.

(v) In the event Government Agencies classify any property covered by this Lease
as personal property, then Tenant shall file, or cause Manager to file, all
personal property tax returns in such jurisdictions where it may legally so
file. Each party shall, to the extent it possesses the same, provide the other,
upon request, with cost and depreciation records necessary for filing returns
for any property so classified as personal property. Where Landlord is legally
required (or otherwise elects) to file personal property tax returns for
property covered by this Lease and/or gross receipts tax returns for Rent
received by Landlord from Tenant, Landlord shall file the same with reasonable
cooperation from Tenant.

(vi) Landlord shall provide Tenant with copies of assessment notices in
sufficient time for Tenant to prepare a protest which Landlord shall file.
Landlord may, upon notice to Tenant, at Landlord’s option and at Landlord’s sole
expense, appeal, protest, or institute such other proceedings (in its or
Tenant’s name) as Landlord may deem appropriate to effect a reduction of real
estate assessments and Tenant shall fully cooperate with Landlord in such
protest, appeal, or other action.

(vii) Landlord shall give prompt Notice to Tenant of all Impositions payable by
Tenant hereunder of which Landlord at any time has knowledge; provided, however,
that Landlord’s failure to give any such notice shall in no way diminish
Tenant’s obligation hereunder to pay such Impositions (except that Landlord
shall be responsible for any interest or penalties incurred as a result of
Landlord’s failure promptly to forward the same).

(viii) In addition, Tenant shall pay the following:

(A) Utility Charges. Tenant shall pay or cause to be paid all charges for
electricity, power, gas, oil, water, and other utilities used in connection with
the Leased Property.

 

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(B) Insurance Premiums. Tenant shall pay or cause to be paid all premiums for
the insurance coverage required to be maintained by Tenant pursuant to Article
9.

(C) Other Charges. Tenant shall pay or cause to be paid all other amounts,
liabilities, and obligations arising in connection with the Leased Property
except those obligations expressly assumed by Landlord pursuant to the
provisions of this Lease or expressly stated not to be an obligation of Tenant
pursuant to this Lease.

(b) Reimbursement for Additional Charges. If Tenant pays or causes to be paid
property taxes or similar or other Additional Charges attributable to periods
after the end of the Term, whether upon expiration or sooner termination of this
Lease, then Tenant may, within a reasonable time after the end of the Term,
provide Notice to Landlord of Tenant’s estimate of such amounts. Landlord shall
promptly reimburse Tenant for all payments of such taxes and other similar
Additional Charges that are attributable to any period after the Term of this
Lease.

3.5 Late Payment of Rent, Etc. (a) If any installment of Minimum Rent,
Percentage Rent, or Additional Charges shall not be paid within five
(5) Business Days after its due date, then Tenant shall pay Landlord, within
five days after Landlord’s written demand therefor, as Additional Charges, a
late charge (to the extent permitted by law) computed at the Interest Rate on
the amount of such installment, from the due date of such installment to the
date of payment thereof. To the extent that Tenant pays any Additional Charges
directly to Landlord or any Mortgagee pursuant to any requirement of this Lease,
Tenant shall be relieved of its obligation to pay such Additional Charges to the
Entity to which they would otherwise be due and Landlord shall pay when due, or
cause the applicable Mortgagee to pay when due, such Additional Charges to the
Entity to which they are due. If any payment due from Landlord to Tenant shall
not be paid within 30 days after its due date, then Landlord shall pay to
Tenant, on demand, a late charge (to the extent permitted by law) computed at
the Interest Rate on the amount of such installment from the due date of such
installment to the date of payment thereof.

(b) In the event of any failure by Tenant to pay any Additional Charges when
due, except as expressly provided in Section 3.3 with respect to permitted
contests pursuant to Article 8, Tenant shall promptly pay (unless payment
thereof is in good faith being contested and enforcement thereof is stayed) and
discharge, as Additional Charges, every fine, penalty, interest, and cost which
may be added for non-payment or late payment of such items. Landlord 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
Additional Charges as in the case of non-payment of Minimum Rent and Percentage
Rent.

3.6 Net Lease. Rent shall be absolutely net to Landlord so that this Lease shall
yield to Landlord the full amount of the installments or amounts of Rent
throughout the Term, subject to any other provisions of this Lease which
expressly provide otherwise (including, without limitation, (i) Landlord’s
obligations to pay Real Estate Taxes pursuant to Section 3.4, (ii) Landlord’s
obligation to maintain Insurance pursuant to Article 9, and (iii) those
provisions for adjustment, refunding, or abatement of such Rent and for the
funding of Landlord’s obligations pursuant to Section 14.3). This Lease is a net
lease, and, except to the extent otherwise expressly specified in this Lease, it
is agreed and intended that Rent payable hereunder by Tenant shall be

 

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paid without notice, demand, counterclaim, setoff, deduction, or defense and
without abatement, suspension, deferment, diminution, or reduction and that
Tenant’s obligation to pay all such amounts, throughout the Term and all
applicable Renewal Terms, is absolute and unconditional, and, except to the
extent otherwise expressly specified in this Lease, the respective obligations
and liabilities of Tenant and Landlord hereunder shall in no way be released,
discharged, or otherwise affected for any reason, including, without limitation:
(a) any defect in the condition, merchantability, design, quality, or fitness
for use of the Leased Property or any part thereof, or the failure of the Leased
Property to comply with all Applicable Laws, including, without limitation, any
inability to occupy or use the Leased Property by reason of such noncompliance;
(b) any damage to, removal, abandonment, salvage, loss, condemnation, theft,
scrapping, or destruction of, or any requisition or taking of, the Leased
Property or any part thereof, or any environmental conditions on the Leased
Property or any property in the vicinity of the Leased Property; (c) any
restriction, prevention, or curtailment of, or interference with, any use of the
Leased Property or any part thereof including, without limitation, eviction;
(d) any defect in title to or rights to the Leased Property or any lien on such
title or rights to the Leased Property; (e) any change, waiver, extension,
indulgence, or other action or omission or breach in respect of any obligation
or liability of or by any Person; (f) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation, or other like
proceedings relating to Tenant or any other Person, or any action taken with
respect to this Lease by any trustee or receiver of Tenant or any other Person,
or by any court, in any such proceeding; (g) any right or claim that Tenant has
or might have against any Person, including, without limitation, Landlord (other
than a monetary default) or any vendor, manufacturer, contractor of or for the
Leased Property; (h) any failure on the part of Landlord or any other Person to
perform or comply with any of the terms of this Lease, or of any other
agreement; (i) any invalidity, unenforceability, rejection, or disaffirmance of
this Lease by operation of law or otherwise against or by Tenant or any
provision hereof; (j) the impossibility of performance by Tenant or Landlord, or
both; (k) any action by any court, administrative agency, or other Government
Agencies; (l) any interference, interruption, or cessation in the use,
possession, or quiet enjoyment of the Leased Property or otherwise; or (m) any
other occurrence whatsoever, whether similar or dissimilar to the foregoing,
whether foreseeable or unforeseeable, and whether or not Tenant shall have
notice or knowledge of any of the foregoing; provided, however, that the
foregoing shall not apply or be construed to restrict Tenant’s rights in the
event of any act or omission by Landlord constituting gross negligence or
willful misconduct. Except as specifically set forth in this Lease, this Lease
shall be non-cancellable by Tenant for any reason whatsoever, and, except as
expressly provided in this Lease, Tenant, to the extent now or hereafter
permitted by Applicable Laws, waives all rights now or hereafter conferred by
statute or otherwise to quit, terminate, or surrender this Lease or to any
diminution, abatement, or reduction of Rent payable hereunder. Except as
specifically set forth in this Lease, under no circumstances or conditions shall
Landlord be expected or required to make any payment of any kind hereunder or
have any obligations with respect to the use, possession, control, maintenance,
alteration, rebuilding, replacing, repair, restoration, or operation of all or
any part of the Leased Property, so long as the Leased Property or any part
thereof is subject to this Lease, and Tenant expressly waives the right to
perform any such action at the expense of Landlord pursuant to any law.

 

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Article 4

USE OF THE LEASED PROPERTY

4.1 Permitted Use. (a) Tenant shall, and shall cause Manager to, at all times
during the Term and at any other time that Tenant and Manager shall be in
possession of the Leased Property, continuously use and operate, or cause
Manager to continuously use and operate, the Leased Property as a hotel facility
in a manner consistent with the Management Agreement and shall use reasonable
good faith efforts to seek to maximize Gross Revenues. Subject to Section 16.3,
Tenant shall not, and Tenant shall ensure that Manager shall not, use the Leased
Property, or any portion thereof, for any other use without the prior written
consent of Landlord. No use shall be made or permitted to be made of the Leased
Property, and no acts shall be done thereon, which will cause the cancellation
of any insurance policy covering the Leased Property or any part thereof (unless
another adequate policy is available), and Tenant shall not, and shall ensure
that Manager shall not, sell or otherwise provide or permit to be kept, used, or
sold in or about the Leased Property, any article which may be prohibited by
law, or by the standard form of fire insurance policies, or any other insurance
policies required to be carried hereunder, or fire underwriter’s regulations.
Tenant shall, at its sole cost, comply with all Insurance Requirements. Further,
Tenant shall not, and Tenant shall ensure that Manager shall not, take or omit
to take any action, the taking or omission of which materially impairs the value
or the usefulness of the Leased Property or any part thereof for its Permitted
Use.

(b) Tenant shall proceed with all due diligence and exercise commercially
reasonable efforts to obtain and maintain, or to cause Manager to obtain and
maintain, all approvals necessary to use and operate, for its Permitted Use, the
Leased Property and the Hotels located thereon under applicable law. Landlord
shall cooperate with Tenant in this regard, including, without limitation, by
executing all applications and consents required to be signed by Landlord in
order for Tenant to obtain and maintain such approvals.

(c) Tenant shall not, and Tenant shall ensure that Manager shall not, use or
suffer or permit the use of the Leased Property or Tenant’s Personal Property,
if any, for any unlawful purpose. Tenant shall not, and Tenant shall ensure that
Manager shall not, (i) commit or suffer to be committed any waste on the Leased
Property, or in the Hotels, or cause or permit any unlawful nuisance thereon or
therein, or (ii) permit the Leased Property, or any portion thereof, to be used
in such a manner as (A) might reasonably impair Landlord’s title thereto or to
any portion thereof; or (B) may reasonably allow a claim or claims for adverse
usage of adverse possession by the public, as such, or of implied dedication of
the Leased Property or any portion thereof.

4.2 Compliance with Legal / Insurance Requirements, Etc. Subject to the
provisions of Article 8, Tenant, at its sole expense, shall, or shall cause
Manager to, (a) comply with Legal Requirements and Insurance Requirements in
respect of the use, operation, maintenance, repair, alteration, and restoration
of the Leased Property, and (b) comply with all appropriate licenses, and other
authorizations and agreements, required for any use of the Leased Property and
Tenant’s Personal Property, if any, then being made and which are material to
the operation of the Leased Property for the uses permitted hereunder, and for
the proper operation and maintenance of the Leased Property or any part thereof.

 

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4.3 Environmental Matters. (a) Tenant hereby represents and warrants to Landlord
that, as of the Commencement Date, there are no Hazardous Materials on any
portion of the Leased Property or the Hotels, nor have any Hazardous Materials
been released or discharged on any portion of the Leased Property or the Hotels.
In addition, Tenant hereby represents and warrants that it has previously
delivered to Landlord copies of all reports concerning environmental conditions
which have been received by Tenant or any of its Affiliates. In the event of the
discovery of Hazardous Materials on any portion of the Leased Property or in the
Hotels during the Term, and subject to the provisions of Section 4.3(c), Tenant
shall promptly remove such Hazardous Materials, together with all contaminated
soil and containers, and shall otherwise remedy the problem in accordance with
(i) the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601, et seq., as amended (“CERCLA”); (ii) the regulations
promulgated under CERCLA from time to time; (iii) all federal, state and local
laws, rules, and regulations (now or hereafter in effect) dealing with the use,
generation, treatment, storage, disposal, or abatement of Hazardous Materials;
and the regulations promulgated thereunder from time to time (the items
described in the foregoing clauses (i) through (iii) are collectively referred
to as “Environmental Laws”). Tenant shall indemnify, defend, and hold Landlord
harmless from and against all loss, costs, liability, and damage (including,
without limitation, engineers’ and attorneys’ fees and expenses, and the cost of
litigation) arising from the presence of Hazardous Materials on the Leased
Property or in the Hotels during the Term, and this obligation of Tenant shall
survive the expiration or earlier termination of this Lease. “Hazardous
Materials” means any substance or material containing one or more of any of the
following: “hazardous material”, “hazardous waste”, “hazardous substance”,
“regulated substance”, “petroleum”, “pollutant”, “contaminant”, “polychlorinated
biphenyls”, “lead or lead-based paint”, or “asbestos” as such terms are defined
in any applicable Environmental Law in such concentration(s) or amount(s) as may
impose clean-up, removal, monitoring, or other responsibility under the
Environmental Laws, as the same may be amended from time to time, or which may
present a significant risk of harm to guests, invitees, or employees of the
Hotels.

(b) Subject to the provisions of Section 4.3(c), all costs and expenses of the
removal of Hazardous Materials from the Leased Property or the Hotels in
accordance with the provisions of Section 4.3(a), and of compliance with all
Environmental Laws in accordance with the provisions of Section 4.3(a), and any
amounts paid to Landlord pursuant to the indemnity set forth in Section 4.3(a),
shall be paid by Tenant from its own funds, and not from Gross Revenues.

(c) To the extent not otherwise covered by insurance maintained by either Tenant
or Manager (including, without limitation, any deductible or self-insured
retention, if any, related thereto), the amount of any loss, cost, liability, or
damage (including, without limitation, engineers’ and attorneys’ fees and
expenses, and the cost of litigation) arising from the presence of Hazardous
Materials on or under the Leased Property or in the Hotels as a direct result of
the gross negligence of Tenant’s or Manager’s employees at the Hotels (but not
any third parties, including, without limitation, any independent contractors
retained to provide goods or services to the Hotels) shall be paid from Gross
Revenues.

(d) Each party shall undertake reasonable efforts to notify the other party
concerning the presence of any Hazardous Materials on or under the Leased
Property or in the Hotels of which the notifying party has knowledge; provided,
however, that unless required by Legal Requirements, the parties shall otherwise
maintain the confidentiality of such information.

 

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Article 5

REPAIRS, MAINTENANCE, AND REPLACEMENTS

5.1 Repairs and Maintenance Costs that are Expensed. Tenant shall, and shall
cause Manager to, (a) maintain the Leased Property and all buildings and
improvements located thereon (including, without limitation, the interior and
exterior, structural, plumbing, HVAC, and other elements thereof) in good repair
and working condition and shall make or cause to be made such routine
maintenance, repairs, and minor alterations as it determines are necessary for
such purposes; (b) not commit waste or permit impairment or deterioration of the
Leased Property (normal wear and tear excepted); (c) not abandon the Leased
Property; (d) comply in all material respects with all laws, ordinances,
regulations, and requirements of any governmental body applicable to the Leased
Property; (e) provide prompt written notification to Landlord of any material
adverse change to the Leased Property, such as material changes to any
environmental condition, including, without limitation, the presence of
biocontaminants, such as mold; (f) promptly undertake appropriate assessment,
remedial, and preventative actions sufficient to meet any guidelines established
by Landlord or guidelines or regulations adopted by applicable authoritative
bodies or regulatory agencies in connection with a determination of any material
adverse change, and, in any event with respect to mold contamination, Tenant
shall undertake (i) removal of the mold, (ii) abatement of the underlying cause
of mold (including water intrusion), and (iii) repair of any leaks and
associated water damage at the Leased Property; and (g) return the Leased
Property and all buildings and improvements thereon at the expiration of the
Term in as reasonably a good condition as when received, ordinary wear and tear
excepted and shall make or cause to be made such routine maintenance, repairs,
and minor alterations as it determines are necessary for such purposes. The
phrase “routine maintenance, repairs, and minor alterations” as used in this
Section 5.1 shall include only those items of maintenance, repair, and
alteration which are normally expensed under GAAP. All costs and expenses
incurred in connection with such maintenance, repairs, and alterations shall be
borne by Tenant.

5.2 Routine Capital Expenditures and FF&E. (a) Tenant shall prepare, or cause
Manager to prepare, an annual estimate (the “Capital Reserve Budget”) of the
expenditures necessary for (i) replacements, renewals, and additions to the
FF&E, and (ii) Routine Capital Expenditures, during the ensuing Fiscal Year and
shall deliver the Capital Reserve Budget to Landlord for its review, comment,
and approval at the same time as Manager submits the business plan described in
Section 17.4. The Capital Reserve Budget shall also indicate the estimated time
schedule for making such replacements, renewals, and additions, a reasonable
description of items required to be replaced, the number of units to be
replaced, unit costs, and costs in the aggregate, together with such additional
information as Landlord shall reasonably request, to the extent then known by
Manager.

(b) Tenant shall, or Tenant shall cause Manager to, on behalf of Landlord from
time to time (in compliance with the applicable Capital Reserve Budget, unless
there has been a change in circumstances) make such (i) replacements, renewals,
and additions to the FF&E, and (ii) Routine Capital Expenditures, as Tenant
deems necessary. Notwithstanding the foregoing, no expenditures shall be made in
excess of the amounts set forth in the then-applicable

 

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Capital Reserve Budget without the approval of Landlord; provided, that Tenant
or Manager shall be authorized to take appropriate remedial action (including,
without limitation, making any necessary expenditures above the total aggregate
amount set forth in the then-applicable Capital Reserve Budget), without
receiving Landlord’s prior approval, to remedy or respond to any of the
Emergency Requirements (provided further that Tenant shall notify Landlord of
any such remedial action that requires more than a de minimis expenditure of
funds).

(c) All costs and expenses incurred in connection with the replacements,
renewals, and additions to the FF&E and the Routine Capital Expenditures
required under this Section 5.2 shall be paid by Tenant from amounts provided by
Landlord to Tenant for such purposes.

(d) Landlord and Tenant hereby acknowledge and agree that all FF&E the purchase
of which is funded by Landlord shall be the property of Landlord unless
otherwise provided in this Lease.

5.3 Capital Expenditures. (a) Tenant, or Manager on behalf of Tenant, shall
prepare an annual estimate (the “Building Estimate”) of all Capital
Expenditures, which Building Estimate shall include such detail as is reasonably
required to allow Landlord to review and analyze the Capital Expenditures
described therein. Tenant shall submit, or cause Manager to submit, the Building
Estimate to Landlord for its approval at the same time as Manager submits the
business plan described in Section 17.4. Tenant shall not, and Tenant shall
ensure that Manager shall not, make any Capital Expenditures without the prior
written approval of Landlord, except as otherwise permitted herein.

(b) Notwithstanding the provisions of Section 5.3(a), Tenant shall be authorized
to take appropriate remedial action (including, without limitation, making any
necessary Capital Expenditures) without receiving Landlord’s prior approval, to
remedy or respond to any of the Emergency Requirements; provided that Tenant
shall notify Landlord of any such remedial action that requires a Capital
Expenditure that is not de minimis. Tenant and Manager shall cooperate with
Landlord in the pursuit of any such action and shall have the right to
participate therein. Landlord shall, upon written request by Tenant, or Manager
on behalf of Tenant, promptly reimburse all expenditures made by Tenant or
Manager pursuant to this Section 5.3(b).

(c) The cost of all Capital Expenditures (including, without limitation, the
expenses incurred by Landlord or Tenant or Manager in connection with any civil
or criminal proceeding arising by reason of an Emergency Requirement) shall be
borne solely by Landlord, and shall not be paid from Gross Revenues.

5.4 Ownership of Replacements. All Capital Expenditures and, subject to the
rights of Manager under the Management Agreement, all repairs, alterations,
improvements, renewals, and replacements made pursuant to this Article 5 shall
be the property of Landlord.

5.5 Tenant’s Personal Property. At the expiration or sooner termination of the
Term, Landlord may, in its sole and absolute discretion, elect either (a) to
give Tenant Notice that Tenant shall be required, within 10 Business Days after
such expiration or termination, to remove all Tenant’s Personal Property from
the Leased Property or (b) to buy Tenant’s Personal Property by paying Tenant
the book value of such property. Failure of Landlord to make such election shall
be deemed an election to proceed in accordance with clause (b) of this
Section 5.5.

 

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5.6 Yield Up. (a) Upon the expiration or sooner termination of this Lease,
Tenant shall vacate and surrender the Leased Property to Landlord in
substantially the same condition in which the Leased Property was in on the
Commencement Date, except as repaired, replaced, rebuilt, restored, altered, or
added to as permitted or required by the provisions of this Lease, reasonable
wear and tear and Condemnation (and casualty damage, in the event that this
Lease is terminated following a casualty in accordance with Article 10)
excepted.

(b) In addition, as of the expiration or earlier termination of this Lease,
Tenant shall cooperate in good faith with Landlord to effect an orderly
transition of the management or lease of the Leased Property and Tenant shall,
at Landlord’s sole cost and expense, use its good faith, commercially reasonable
efforts to transfer to and cooperate with Landlord or Landlord’s nominee in
connection with the processing of all applications for licenses, operating
permits, and other governmental authorizations and all contracts entered into by
Tenant, including, without limitation, contracts with governmental or
quasi-governmental Entities which may be necessary for the use and operation of
the Hotels as then operated, but excluding (i) utility deposits and
(ii) telephone numbers. Landlord shall indemnify and hold Tenant harmless for
all claims, costs, and expenses (including, without limitation, reasonable
attorneys’ fees) arising from acts or omissions by Landlord under such contracts
subsequent to the date of transfer thereof to Landlord, and Tenant shall
indemnify and hold Landlord harmless for all claims, costs, and expenses
(including, without limitation, reasonable attorney’s fees) arising from acts or
omissions by Tenant under such contracts prior to the date of transfer thereof
to Landlord.

5.7 Management Agreement. Except as otherwise provided below, Tenant shall not
amend or modify the Management Agreement or replace the Manager without
Landlord’s prior written consent, which consent may be given or withheld by
Landlord in its sole and absolute discretion. The terms of the Management
Agreement (a) shall not, in Landlord’s and its counsel’s reasonable opinion,
cause the Rent to fail to qualify as “rents from real property” within the
meaning of Section 856(d) of the Code, and (b) shall expressly provide that if
Landlord and its counsel reasonably conclude that the terms of the Management
Agreement will have such an effect, then the terms of the Management Agreement
will be modified so that the Management Agreement, in the reasonable opinion of
Landlord and its counsel, does not cause the Rent to be so characterized under
the Code; provided, that no such modifications shall affect the amount of the
Management Fees (as defined in the Management Agreement) or the practical
realization of the rights and benefits of the Manager thereunder.

5.8 Trademark License Agreements. (a) Tenant shall not operate, or permit
Manager to operate, any Hotel under a trade name other than the trade names
licensed to Tenant under the Trademark License Agreements, without the prior
written consent of Landlord, which consent may be given or withheld by Landlord
in its sole and absolute discretion.

(b) To the extent any of the provisions of any Trademark License Agreement
impose a greater obligation on Tenant than the corresponding provisions of this
Lease, then Tenant shall be obligated to comply with, and to take all reasonable
actions necessary to prevent breaches or defaults under, the provisions of such
Trademark License Agreement. It is the intent

 

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of the parties hereto that, except as otherwise specifically provided by this
Lease, Tenant shall comply in every respect with the provisions of any Trademark
License Agreement to which Tenant is a party so as to avoid any default
thereunder during the term of this Lease. Landlord and Tenant agree to cooperate
fully with each other in the event it becomes necessary to obtain a trademark
license extension or modification or a new trademark license for the Leased
Property; provided, that Landlord shall pay the entire cost of any upgrades
required by any licensor.

Article 6

IMPROVEMENTS, ETC.

6.1 Improvements to the Leased Property. Tenant shall not finance the cost of
any construction by the granting of a lien on, or security interest in, the
Leased Property, or Tenant’s interest therein, without the prior written consent
of Landlord, which consent may be withheld by Landlord in Landlord’s sole
discretion. Any such improvements shall, upon the expiration or sooner
termination of this Lease, remain or pass to and become the property of
Landlord, free and clear of all encumbrances any encumbrance permitted to be
created by Landlord.

6.2 Equipment Leases. Landlord shall enter into such leases of equipment and
personal property as Tenant may reasonably request from time to time; provided,
that the form and substance thereof shall be reasonably satisfactory to
Landlord. Tenant shall prepare and deliver to Landlord all such lease documents
for which Landlord’s execution is necessary and Landlord shall promptly, upon
approval thereof, execute and deliver such documents to Tenant. Tenant shall,
throughout the Term, be responsible for performing all of Landlord’s obligations
under all such documents and agreements.

Article 7

LIENS

Subject to Article 8, Tenant shall not, and Tenant shall ensure that Manager
does not, directly or indirectly, create or allow to remain, and each shall
promptly discharge, at its expense, any lien, encumbrance, attachment, title
retention agreement, or claim upon the Leased Property or Tenant’s leasehold
interest therein or any attachment, levy, claim, or encumbrance in respect of
the Rent, other than (a) restrictions, liens, and other encumbrances which are
consented to in writing by Landlord, (b) liens for those taxes of Landlord which
Tenant is not required to pay hereunder, (c) subleases permitted by Article 16,
(d) liens for Impositions or for sums resulting from noncompliance with Legal
Requirements so long as (i) the same are not yet due and payable, or (ii) are
being contested in accordance with Article 8, (e) liens of mechanics, laborers,
materialmen, suppliers, or vendors incurred in the ordinary course of business
that are not yet due and payable (but will be paid in full by Tenant or Manager)
or are for sums that are being contested in accordance with Article 8, (f) any
Mortgage or other liens which are the responsibility of Landlord, and
(g) Landlord Liens.

Article 8

PERMITTED CONTESTS

Tenant, or Manager at Tenant’s direction, shall have the right to contest the
amount or validity of any Imposition, Legal Requirement, Insurance Requirement,
lien, attachment, levy, encumbrance, charge, or claim (collectively, “Claims”)
as to the Leased Property, by appropriate

 

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legal proceedings, conducted in good faith and with due diligence; provided,
that (a) the foregoing shall in no way be construed as relieving, modifying, or
extending Tenant’s obligation to pay any Claims required hereunder to be paid by
Tenant as finally determined, (b) such contest shall not cause Landlord or
Tenant to be in default under any mortgage, deed of trust, or other agreement
encumbering the Leased Property or any part thereof (Landlord agreeing that any
such mortgage, deed of trust, or other agreement shall permit Tenant to exercise
the rights granted pursuant to this Article 8) or any interest therein or result
in a lien attaching to the Leased Property, unless such lien is fully bonded or
is otherwise secured to the reasonable satisfaction of Landlord, (c) no part of
the Leased Property nor any Rent therefrom shall be in any immediate danger of
sale, forfeiture, attachment, or loss, and (d) Tenant hereby indemnifies and
holds harmless Landlord from and against any cost, claim, damage, penalty, or
reasonable expense, including, without limitation, reasonable attorneys’ fees,
incurred by Landlord in connection therewith or as a result thereof. Landlord
agrees to join in any such proceedings if required legally to prosecute such
contest; provided, that Landlord shall not thereby be subjected to any liability
therefor (including, without limitation, for the payment of any costs or
expenses in connection therewith) unless Tenant agrees to assume and indemnify
Landlord with respect to the same. Tenant or Manager, as applicable, shall be
entitled to any refund of any Claims and such charges and penalties or interest
thereon which have been paid by Tenant or paid by Landlord to the extent that
Landlord has been reimbursed by Tenant. If Tenant shall fail to pay or cause to
be paid any Claims when finally determined, to provide reasonable security
therefor, or to prosecute or cause to be prosecuted any such contest diligently
and in good faith, then Landlord may, upon Notice to Tenant, pay such charges,
together with interest and penalties due with respect thereto, and Tenant shall
reimburse Landlord therefor, upon demand, as Additional Charges.

Article 9

INSURANCE

9.1 General Insurance Requirements. (a) Coverages by Landlord. During the Term,
Landlord shall at its expense, without reimbursement from Tenant, at all times
keep the Leased Property insured (except to the extent such insurance is
required to be kept by Tenant pursuant to Section 9.1(b)).

(b) Coverages by Tenant. During the Term, Tenant shall at its expense keep the
insurance described in Sections 9.1(b)(i) through (v). This insurance shall be
written by companies authorized to issue insurance in the applicable state and
otherwise acceptable to Landlord. If required by Landlord, the policies must
name Landlord as an additional named insured.

(i) Fidelity bonds with limits and deductibles as may be reasonably required by
Landlord, covering Tenant’s employees in job classifications normally bonded
under prudent hotel management practices in the United States or otherwise
required by law.

(ii) Workers’ compensation benefits and employers’ liability insurance for all
persons employed by Tenant on the Leased Property to the extent necessary to
protect Landlord and the Leased Property against Tenant’s workers’ compensation
claims.

 

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(iii) Vehicle liability insurance for owned, non-owned, and hired vehicles,
including, without limitation, rented and leased vehicles containing minimum
limits per occurrence of $1,000,000.00.

(iv) General liability insurance with limits and deductibles as may be
reasonably required by Landlord.

(v) Such other insurance relating to the operation of the Hotel business as
Landlord may reasonably request; provided, that such other insurance is
customary for facilities such as the Leased Property and the operation thereof.

9.2 Waiver of Subrogation. All insurance policies carried by Landlord or Tenant
covering the Leased Property, the FF&E, the Hotels, or Tenant’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 cost 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 prior to seeking
recovery against the other.

9.3 Form Satisfactory, Etc. All of the policies of insurance referred to in this
Article 9 shall be written in a form, with deductibles and by insurance
companies reasonably satisfactory to Landlord and also shall meet and satisfy
the requirements of any ground lessor, lender, or franchisor having any interest
in the Leased Property. Tenant shall deliver to Landlord policies or
certificates of the insurance required under Section 9.1(b) as of their
effective date (and, with respect to any renewal policy, upon or prior to the
expiration of the existing policy), and in the event of the failure of Tenant
either to obtain such insurance as herein called for or to pay the premiums
therefor, or to deliver such policies or certificates thereof to Landlord at the
times required, Landlord shall be entitled, but shall have no obligation, to
obtain such insurance and pay the premiums therefor, and Tenant shall reimburse
Landlord for any premium or premiums paid by Landlord for the coverages required
under Section 9.1(b) upon written demand therefor, and repay the same within 30
days after Notice of such failure from Landlord shall constitute an Event of
Default. Each insurer mentioned in this Article 9 shall agree, by endorsement to
the policy or policies issued by it, or by independent instrument furnished to
Landlord, to provide 30 days’ written notice to Landlord before the policy or
policies in question shall be materially altered, allowed to expire, or
canceled.

9.4 Blanket Policy. Notwithstanding anything to the contrary contained in this
Article 9, Tenant or Landlord may bring the insurance provided for herein within
the coverage of a so-called blanket policy or policies of insurance carried and
maintained by Tenant or Landlord; provided, that the coverage afforded to
Landlord and Tenant 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 9 are
otherwise satisfied.

9.5 Separate Insurance. Tenant shall not on Tenant’s own or pursuant to the
request or requirement of any third party, take out separate insurance
concurrent in form or contributing

 

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in the event of loss with that required in this Article 9 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, without limitation, and in
all cases, Landlord, are each included therein as an additional insured, and the
loss is payable under such additional separate insurance in the same manner as
losses are payable under this Lease. Tenant shall immediately provide Notice to
Landlord that Tenant has obtained any such separate insurance or of the
increasing of any of the amounts of the then existing insurance.

9.6 Reports on Insurance Claims. Tenant shall promptly investigate and make a
complete and timely written report to the appropriate insurance company as to
all accidents, claims for damage relating to the ownership, operation, and
maintenance of any Hotel, any damage or destruction to any Hotel, 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
Landlord.

9.7 Indemnification of Landlord. Except as expressly provided herein, Tenant
shall protect, indemnify, and hold harmless Landlord for, from, and against all
liabilities, obligations, claims, damages, penalties, causes of action, costs,
and reasonable expenses (including, without limitation, reasonable attorneys’
fees), to the maximum extent permitted by law, imposed upon or incurred by or
asserted against Landlord by reason of: (a) any accident, injury to, or death of
persons, or loss of or damage to property of third parties, occurring during the
Term on or about the Leased Property or adjoining sidewalks or rights of way
under Tenant’s control, and (b) any use, misuse, condition, management,
maintenance, or repair by Tenant or anyone claiming under Tenant of the Leased
Property or Tenant’s Personal Property during the Term, or any litigation,
proceeding, or claim by governmental entities to which Landlord is made a party
or participant relating to such use, misuse, condition, management, maintenance,
or repair; provided, that Tenant’s obligations hereunder shall not apply to any
liability, obligation, claim, damage, penalty, cause of action, cost, or expense
arising from any gross negligence or willful misconduct of Landlord, its
employees, agents, contractors, or invitees. Tenant, at its expense, shall
defend any such claim, action, or proceeding asserted or instituted against
Landlord covered under this indemnity (and shall not be responsible for any
duplicative attorneys’ fees incurred by Landlord) or may compromise or otherwise
dispose of the same. The obligations of Tenant under this Section 9.7 shall
survive the termination of this Lease for a period of one year.

Article 10

DAMAGE, REPAIR, AND CONDEMNATION

10.1 Damage and Repair. (a) If, during the Term, a Hotel is damaged by a Minor
Casualty, then Tenant shall proceed, or cause Manager to proceed, with all
reasonable diligence, to process the claim with the applicable insurance
carriers, including, without limitation, settling such claim, and to make the
necessary arrangements with appropriate contractors and suppliers to repair
and/or replace the damaged portion of such Hotel. Landlord’s consent shall not
be needed for Tenant or Manager to perform any of the foregoing, all of which
shall be performed in accordance with Tenant’s reasonable judgment; provided,
that all such work shall be undertaken (i) in a workmanlike manner, (ii) in
accordance with the provisions of Section 11.2, and (iii) in

 

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accordance with plans and specifications approved by Landlord (which approval or
disapproval shall be made within 10 Business Days after Landlord receives the
applicable plans or specifications and, if applicable, within 10 Business Days
after Landlord receives any modifications of said plans or specifications to
accommodate Landlord’s comments); provided, that the parties agree that the
standard for such repair and/or replacement shall be to repair and/or replace
the damaged portion of such Hotel to levels of quality and quantity that are
equal to those that existed with respect to such portion of such Hotel prior to
the occurrence of the damage at issue. Landlord agrees to sign promptly any
documents which are necessary to process and/or adjust the claim with the
insurance carriers, as well as any contracts with such contractors and/or
suppliers.

(b) If, during the Term, a Hotel suffers a Total Casualty, then Landlord shall,
at its cost and expense and with all reasonable diligence, repair and/or replace
the damaged portion of such Hotel to the same condition as existed previously.
Such damage or destruction shall not terminate this Lease. Notwithstanding any
provisions of this Article 10 to the contrary, if a Hotel suffers a Total
Casualty during the last 24 months of the Term, then either party shall have the
right to terminate this Lease with respect to such Hotel by giving Notice to the
other within 30 days after the date of damage or destruction, whereupon all
accrued Rent with respect to such Hotel shall be paid immediately, this Lease
shall automatically terminate with respect to such Hotel five (5) days after the
date of such Notice and, upon such termination, Minimum Rent payable hereunder
shall be reduced by an amount equal to the Minimum Rent allocated to the
applicable Hotel set forth in Exhibit A and the Thresholds shall be reduced by
the applicable Threshold Allocation. “Threshold Allocation” means (only for
purposes of this Article 10), with respect to any applicable Hotel and as
applied to the Thresholds, an amount calculated by multiplying the Thresholds by
a fraction, the numerator of which is the Minimum Rent allocated to the
applicable Hotel as set forth in Exhibit A, and the denominator of which is the
aggregate Minimum Rent for all of the Hotels as set forth in Exhibit A.

(c) If, during the Term, a Hotel is damaged by fire, casualty, or other cause to
a greater extent than a Minor Casualty, but not to the extent of a Total
Casualty, then Landlord shall, at its cost and expense and with all reasonable
diligence, repair and/or replace the damaged portion of such Hotel to the same
condition as existed previously. Tenant shall have the right to discontinue
operating, or cause Manager to discontinue operating, the Hotel to the extent
Tenant deems necessary to comply with applicable Legal Requirements or as
necessary for the safe and orderly operation of such Hotel. To the extent
available, proceeds from the insurance described in Section 9.1 of this Lease
shall be applied to such repairs and/or replacements. The parties agree that
Landlord’s obligations to repair and/or replace pursuant to the provisions of
this Section 10.1(c) shall be limited to the extent of available insurance
proceeds (plus the amount of any applicable deductibles). The parties further
agree that if Landlord is obligated to utilize such available insurance proceeds
to repay any obligations pursuant to any Mortgage, then Landlord shall be
entitled to an equitable extension of time (in which Landlord has to fulfill its
obligations pursuant to the provisions of this Section 10.1(c)) that is
sufficient to allow Landlord to obtain the necessary funding to replace such
spent insurance proceeds and to make the repairs and/or replacements required
hereunder. The parties further agree that Landlord’s obligations to repair
and/or replace pursuant to the provisions of this Section 10.1(c) shall be
subject to Landlord’s ability to obtain such entitlements and/or other
governmental approvals as may be necessary to undertake such repair and/or
replacement; provided, that Landlord shall undertake good faith efforts to
obtain such entitlements and/or approvals.

 

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(d) All insurance proceeds payable by reason of any loss of or damage to any of
Tenant’s Personal Property shall be paid to Tenant, and, to the extent necessary
to repair or replace Tenant’s Personal Property in accordance with this
Section 10.1(d), Tenant shall hold such proceeds to pay the cost of repairing or
replacing damaged Tenant’s Personal Property and, if this Lease terminates, pay
the same over to Landlord. If Landlord undertakes to restore the Leased Property
as hereinabove provided, then Tenant shall either (i) restore all of Tenant’s
Personal Property, if any, or (ii) replace Tenant’s Personal Property, if any,
with items of the same or better quality and utility to the operation of the
Leased Property.

10.2 Condemnation. (a) In the event all or substantially all of a Hotel shall be
taken in any eminent domain, condemnation, compulsory acquisition, or similar
proceeding by any competent authority for any public or quasi-public use or
purpose, or in the event a portion of a Hotel shall be so taken, but the result
is that it is unreasonable to continue to operate such Hotel in accordance with
the standards required by this Lease, this Lease shall terminate with respect to
such Hotel as of the date of the taking and, upon such termination, Minimum Rent
payable hereunder shall be reduced by an amount equal to the Minimum Rent
allocated to the applicable Hotel set forth in Exhibit A and the Thresholds
shall be reduced by the applicable Threshold Allocation. Landlord and Tenant
shall each have the right to initiate such proceedings as they deem advisable to
recover any compensation to which they may be entitled.

(b) In the event a portion of a Hotel shall be taken by the events described in
Section 10.2(a), or an entire Hotel is affected but on a temporary basis, and
the result is not to make it unreasonable to continue to operate such Hotel,
this Lease shall not terminate, but the Rent due hereunder shall be equitably
abated taking into consideration, among other relevant factors, the number of
useable rooms, the amount of square footage, or revenues affected or taken by
such events. However, so much of any Award for any such partial taking or
condemnation as shall be necessary to render the Hotel equivalent to its
condition prior to such event shall be used for such purpose and Tenant shall
have the right to discontinue operating, or to cause Manager to discontinue
operating, the Hotel or portion of the Hotel to the extent it deems necessary
for the safe and orderly operation of the Hotel.

Article 11

SUBORDINATION, ETC.

11.1 No Covenants, Conditions, or Restrictions. (a) Landlord covenants that
after the Commencement Date and during the Term, there will not be (unless
Tenant has given its prior consent thereto) any covenants, conditions, or
restrictions, including, without limitation, reciprocal easement agreements or
cost-sharing arrangements (individually or collectively referred to as
“CC&R(s)”) affecting the Leased Property (i) which would prohibit Manager’s
operation of the Hotels in accordance with the terms of this Lease and the
Management Agreement, including, without limitation, related amenities proposed
for the Hotels; (ii) which would allow the Hotels’ facilities (for example,
parking spaces) to be used by persons other than guests, invitees, or employees
of the Hotels except as approved by Tenant; (iii) which would allow the Hotels’
facilities to be used for specified charges or rates which have not been
approved by Manager; or (iv) which would subject the Hotels to exclusive
arrangements regarding food and beverage operation or retail merchandise.

 

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(b) Tenant shall cause Manager to manage and operate the Hotels in compliance
with all obligations imposed on Landlord or the Hotels pursuant to any CC&Rs to
the extent (i) such obligations are known to Manager (ii) such CC&Rs relate to
the management and operation of the Hotels and (iii) the CC&Rs are not
inconsistent with the Management Agreement.

11.2 Liens; Credit. Tenant shall use commercially reasonable efforts to prevent
any liens from being filed against the Hotels which arise from any maintenance,
repairs, alterations, improvements, renewals, or replacements in or to the
Hotels, and shall cooperate fully in obtaining the release of any such liens.

11.3 Amendments Requested by Mortgagee. If requested by any Mortgagee, or
prospective Mortgagee, Tenant agrees to execute and deliver any amendment of
this Lease that is reasonably required by such Mortgagee or prospective
Mortgagee; provided, that Tenant shall be under no obligation to amend this
Lease if the result of such amendment would be to materially and adversely
increase Tenant’s obligations or to materially and adversely affect Tenant’s
rights under this Lease or to amend Article 5. Any such amendment shall be in
effect only for the period of time in which such Mortgage is outstanding.

Article 12

DEFAULTS AND REMEDIES

12.1 Events of Default. The occurrence of any one or more of the following
events shall constitute an “Event of Default” hereunder:

(a) should Tenant fail to make any payment of Minimum Rent or Percentage Rent
within 5 Business Days after Notice thereof, or fail to make payment of any
other Rent or any other sum payable hereunder when due and such failure shall
continue for a period of 30 days after Notice thereof;

(b) should Tenant fail to maintain the insurance coverages required under
Article 9 and such failure shall continue for 10 Business Days after Notice
thereof;

(c) subject to Article 8 relating to permitted contests, should Tenant default
in the due observance or performance of any of the terms, covenants, or
agreements contained herein to be performed or observed by it (other than as
specified in clauses (a) and (b) above) and such default shall continue for a
period of 30 days after Notice thereof from Landlord to Tenant; provided, that
if such default is susceptible of cure but such cure cannot be accomplished with
due diligence within such period of time, and if, in addition, Tenant commences
to cure or cause to be cured such default within 30 days after Notice thereof
from Landlord and thereafter prosecutes the curing of such default with all due
diligence, then such period of time shall be extended to such period of time
(not to exceed 90 days) as may be necessary to cure such default with all due
diligence;

 

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(d) should Tenant generally not be paying its debts as they become due or should
Tenant make a general assignment for the benefit of creditors;

(e) should any petition be filed by or against Tenant under the Federal
bankruptcy laws, or should any other proceeding be instituted by or against
Tenant seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
reorganization, arrangement, adjustment, or composition of it or its debts under
any law relating to bankruptcy, insolvency, or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian, or other similar official for Tenant or for any
substantial part of the property of Tenant and such proceeding is not dismissed
within 60 days after institution thereof, or should Tenant take any action to
authorize any of the actions set forth above in this paragraph;

(f) should Tenant cause or institute any proceeding for its dissolution or
termination;

(g) unless Tenant shall be contesting such lien or attachment in good faith in
accordance with Article 8, should the estate or interest of Tenant in the Leased
Property or any part thereof be levied upon or attached in any proceeding and
the same shall not be vacated, discharged, or fully bonded or otherwise secured
to the reasonable satisfaction of Landlord within the later of (i) 60 days after
such attachment or levy, unless the amount in dispute is less than $100,000.00
(as adjusted each year by increases or decreases in the Index), in which case
Tenant shall give notice to Landlord of the dispute but Tenant may defend in any
suitable way, and (ii) 30 days after receipt by Tenant of Notice thereof from
Landlord; it being understood and agreed that Tenant may commence a contest of
such matter pursuant to Article 8 above following such Notice from Landlord; or

(h) should Tenant be in default under the Management Agreement beyond any
applicable cure period,

then, and in any such event, Landlord, in addition to all other remedies
available to it, may terminate this Lease by giving Notice thereof to Tenant and
upon the expiration of the time fixed in such Notice, this Lease shall terminate
and all rights of Tenant under this Lease shall cease. Landlord shall have and
may exercise all rights and remedies available at law and in equity to Landlord
as a result of Tenant’s breach of this Lease, including, without limitation, the
right of re-entry upon the Leased Property upon and at any time after the
occurrence of an Event of Default.

12.2 Damages. Neither the termination of this Lease, the repossession of the
Leased Property, the failure of Landlord to relet the Leased Property, nor the
reletting of all or any portion thereof shall relieve Tenant of its liability
and obligations hereunder, all of which shall survive any such termination,
repossession, or reletting to the maximum extent permitted by law. In the event
of any such termination, Tenant shall forthwith pay to Landlord all Rent due and
payable with respect to the Leased Property to and including the date of such
termination. In addition, Tenant shall forthwith pay to Landlord, at Landlord’s
option, as and for liquidated and agreed current damages for Tenant’s default,
either:

(a) Without termination of Tenant’s rights to possession of the Leased Property,
each installment of Rent (including Default Rent as determined below) and other
sums payable to Tenant by Landlord under this Lease as the same becomes due and
payable, which

 

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Rent and other sums shall bear interest at the Interest Rate from the date due
until paid or otherwise discharged, and Landlord may enforce, by action or
otherwise, any other term or covenant of this Lease; or

(b) the sum of:

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

(ii) 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 Tenant 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
(ii) 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

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

“Default Rent” for the purposes of this Section 12.2 shall be a sum equal to
(A) the average of the annual amounts of the Percentage Rent for the three
Fiscal Years immediately preceding the Fiscal Year in which the termination,
re-entry, or repossession takes place, or (B) if three Fiscal Years shall not
have elapsed, the average of the Percentage Rent during the preceding Fiscal
Years during which this Lease was in effect, or (C) if one Fiscal Year has not
elapsed, the amount derived by annualizing the Percentage Rent from the
Commencement Date.

12.3 Waiver of Jury Trial. Landlord and Tenant hereby waive, to the maximum
extent permitted by Applicable Laws, trial by jury in any action, proceeding, or
counterclaim brought by either of the parties hereto against the other or in
respect of any matter whatsoever arising out of or in any way connected with
this Lease, the relationship of Landlord and Tenant hereunder, Tenant’s
occupancy of the Leased Property, and/or any claim for injury or damage.

12.4 Application of Funds. Any payments received by Landlord under any of the
provisions of this Lease during the existence or continuance of any Event of
Default (and any payment made to Landlord rather than Tenant due to the
existence of any Event of Default) shall be applied to Tenant’s current and past
due obligations under this Lease in such order as Landlord may determine or as
may be required by Applicable Laws.

12.5 Landlord’s Right to Cure Tenant’s Default. If an Event of Default shall
have occurred and be continuing, then Landlord, after Notice to Tenant with a
courtesy copy to Manager (which Notice shall not be required if Landlord shall
reasonably determine immediate action is necessary to protect person or
property), without waiving or releasing any obligation of Tenant and without
waiving or releasing any Event of Default, may (but shall not be obligated to),
at any time thereafter, make such payment or perform such act for the account
and at the expense of Tenant, and may, to the maximum extent permitted by law,
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any portion thereof for such purpose and take all such action thereon as, in
Landlord’s sole and absolute discretion, may be necessary or appropriate
therefor. No such entry shall be deemed an eviction of Tenant. All reasonable
costs and expenses (including, without limitation, reasonable attorneys’ fees)
incurred by Landlord in connection therewith, together with interest thereon (to
the extent permitted by law) at the Interest Rate from the date such sums are
paid by Landlord until repaid, shall be paid by Tenant to Landlord, on demand.

12.6 Good Faith Dispute. If Tenant shall in good faith dispute the occurrence of
any Default, then Tenant, before the expiration of the applicable cure period,
shall give Notice thereof to Landlord, setting forth, in reasonable detail, the
basis therefor and (provided Tenant shall escrow disputed amounts, if any,
pursuant to an escrow arrangement reasonably acceptable to Landlord and Tenant)
no Event of Default shall be deemed to have occurred; provided, that in the
event of any eventual adverse determination, Tenant shall pay to Landlord
interest on any disputed funds at the Interest Rate, from the date demand for
such funds was made by Landlord until the date of final adverse determination
and, thereafter, at the Interest Rate until paid.

Article 13

HOLDING OVER

Any holding over by Tenant after the expiration or sooner termination of this
Lease shall be treated as a daily tenancy at sufferance at a rate equal to twice
the Rent and other charges herein provided (prorated on a daily basis). Tenant
shall also pay to Landlord all damages (direct or indirect) sustained by reason
of any such holding over. Otherwise, such holding over shall be on the terms and
conditions set forth in this Lease, to the extent applicable. Nothing contained
herein shall constitute the consent, express, or implied, of Landlord to the
holding over of Tenant after the expiration or earlier termination of this
Lease.

Article 14

LANDLORD’S NOTICE OBLIGATIONS; LANDLORD’S DEFAULT

14.1 Landlord’s Notice Obligation. Landlord shall give prompt Notice to Tenant
and the Manager of any materially adverse matters affecting the Leased Property
of which Landlord receives written notice or actual, conscious, present
knowledge, and, to the extent Tenant and/or Manager otherwise has no notice or
actual knowledge thereof, Landlord shall be liable for any liabilities, costs,
damages, or claims (including, without limitation, reasonable attorneys’ fees)
arising from the failure to deliver such Notice to Tenant. As used in this
Lease, “Landlord’s knowledge” or words of similar import shall mean the actual
(and not constructive or imputed), conscious, present knowledge, without
independent investigation or inquiry of William D. Rahm, Vivek Melwani, A.J.
Agarwal, Tyler Henritze, Michael Barr, and Daniel Kamensky.

14.2 Landlord’s Default. (a) It shall be a breach of this Lease if Landlord
fails to observe or perform any term, covenant, or condition of this Lease on
its part to be performed and such failure continues for a period of 30 days
after Notice thereof from Tenant, unless such failure cannot with due diligence
be cured within a period of 30 days, in which case such failure shall not be
deemed a breach if Landlord proceeds within such 30 day period, with due
diligence, to commence to cure the failure and thereafter diligently completes
the curing thereof. The time within which Landlord shall be obligated to cure
any such failure also shall be subject to

 

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extension of time due to the occurrence of any Unavoidable Delay. If Landlord
does not cure any such failure within the applicable time period as aforesaid,
then Tenant may declare the existence of a “Landlord Default” by a second Notice
to Landlord. Thereafter, Tenant may forthwith cure the same. Tenant shall have
no right to terminate this Lease for any Landlord Default and no right, for any
such Landlord Default, to offset or counterclaim against any Rent or other
charges due hereunder.

(b) If Landlord shall in good faith dispute the occurrence of a Landlord Default
and Landlord, before the expiration of the applicable cure period, shall give
Notice thereof to Tenant setting forth, in reasonable detail, the basis
therefor, then no Landlord Default shall be deemed to have occurred and Landlord
shall have no obligation with respect thereto until final adverse determination
thereof, whether through arbitration or otherwise; provided, that in the event
of any such adverse determination, Landlord shall pay to Tenant interest on any
disputed funds at the Interest Rate, from the date demand for such funds was
made by Tenant until the date of final adverse determination and, thereafter, at
the Interest Rate until paid. If Tenant and Landlord shall fail, in good faith,
to resolve any such dispute within 30 days after Landlord’s Notice of dispute,
then either may submit the matter for determination by arbitration, but only if
such matter is required to be submitted to arbitration pursuant to any provision
of this Lease, or otherwise by a court of competent jurisdiction.

14.3 Tenant’s Right to Cure. Subject to the provisions of Section 14.2, if
Landlord breaches any covenant to be performed by it under this Lease, then
Tenant after Notice to and demand upon Landlord as provided in Section 14.2,
without waiving or releasing any obligation hereunder, may (but shall be under
no obligation at any time thereafter to) make such payment or perform such act
for the account and at the expense of Landlord. All sums so paid by Tenant and
all costs and expenses (including, without limitation, reasonable attorneys’
fees) so incurred, together with interest thereon at the Interest Rate from the
date on which such sums or expenses are paid or incurred by Tenant, shall be
paid by Landlord, to Tenant on demand. The rights of Tenant hereunder to cure
and to secure payment from Landlord in accordance with this Section 14.3 shall
survive the termination of this Lease with respect to the Leased Property.

Article 15

INTENTIONALLY OMITTED

Article 16

SUBLETTING AND ASSIGNMENT

16.1 Subletting and Assignment. (a) Except as provided in Section 16.3 and in
this Section 16.1, Tenant shall not, without Landlord’s prior written consent
(which may be given or withheld by Landlord in its sole discretion), assign,
mortgage, pledge, hypothecate, encumber, or otherwise transfer this Lease or
sublease (which term shall be deemed to include the granting of concessions,
licenses, and the like), all or any part of the Leased Property or suffer or
permit this Lease or the leasehold estate created hereby or any other rights
arising under this Lease to be assigned, transferred, mortgaged, pledged,
hypothecated, or encumbered, in whole or in part, whether voluntarily,
involuntarily, or by operation of law, or permit the use or operation of the
Leased Property by anyone other than Tenant (but the foregoing is not to be
construed to limit the Permitted Use or to restrict Tenant from engaging, or
limit the requirement of Tenant to engage,

 

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Manager or other hotel manager), or the Leased Property to be offered or
advertised for assignment or subletting. For purposes of this Section 16.1, an
assignment of this Lease shall be deemed to include the following: without
Landlord’s consent, any direct or indirect transfer of any interest in Tenant or
any transaction pursuant to which Tenant is merged or consolidated with another
Entity or pursuant to which all or substantially all of Tenant’s assets are
transferred to any other Entity, as if such change in control or transaction
were an assignment of this Lease but shall not include any involuntary liens or
attachments contested by Tenant in good faith in accordance with Article 8.

(b) If this Lease is assigned or if the Leased Property or any part thereof is
sublet (or occupied by anybody other than Tenant hereunder), then Landlord may
collect the rents from such assignee, subtenant, or occupant, as the case may
be, and apply the net amount collected to the Rent herein reserved, but no such
collection shall be deemed a waiver of the provisions set forth in the first
paragraph of Section 16.1, the acceptance by Landlord of such assignee,
subtenant, or occupant, as the case may be, as a tenant, or a release of Tenant
from the future performance by Tenant of its covenants, agreements, or
obligations contained in this Lease.

(c) No subletting or assignment shall in any way impair the continuing primary
liability of Tenant hereunder (unless Landlord and Tenant expressly otherwise
agree that Tenant shall be released from all obligations hereunder), and no
consent to any subletting or assignment in a particular instance shall be deemed
to be a waiver of the prohibition set forth in Section 16.1. No assignment,
subletting, or occupancy shall affect any Permitted Use. Any subletting,
assignment, or other transfer of Tenant’s interest under this Lease in
contravention of Section 16.1 shall be voidable at Landlord’s option.

16.2 Required Sublease Provisions. Any sublease of any portion of the Leased
Property entered into on or after the date hereof shall provide (a) that it is
subject and subordinate to this Lease and to the matters to which this Lease is
or shall be subject or subordinate; (b) that in the event of termination of this
Lease or reentry or dispossession of Tenant by Landlord under this Lease,
Landlord may, at its option, terminate such sublease or take over all of the
right, title, and interest of Tenant, as sublessor under such sublease, and,
except as provided below, such subtenant shall, at Landlord’s option, attorn to
Landlord pursuant to the then executory provisions of such sublease, except that
neither Landlord nor any Mortgagee, as holder of a mortgage or as Landlord under
this Lease, if such Mortgagee succeeds to that position, shall (i) be liable for
any act or omission of Tenant under such sublease, (ii) be subject to any
credit, counterclaim, offset, or defense which theretofore accrued to such
subtenant against Tenant, (iii) be bound by any previous prepayment of more than
one Accounting Period, (iv) be bound by any covenant of Tenant to undertake or
complete any construction of the Leased Property or any portion thereof, (v) be
required to account for any security deposit of the subtenant other than any
security deposit actually delivered to Landlord by Tenant, (vi) be bound by any
obligation to make any payment to such subtenant or grant any credits, except
for services, repairs, maintenance, and restoration provided for under the
sublease that are performed after the date of such attornment; (vii) be
responsible for any monies owing by Tenant to the credit of such subtenant, or
(viii) be required to remove any Person occupying any portion of the Leased
Property; and (c) in the event that such subtenant receives a written Notice
from Landlord or any Mortgagee stating that an Event of Default has occurred and
is continuing, such subtenant shall thereafter be obligated to pay all rentals
accruing under such sublease directly to the party giving such Notice or as such
party may

 

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direct. All rentals received from such subtenant by Landlord or the Mortgagee,
as the case may be, shall be credited against the amounts owing by Tenant under
this Lease and such sublease shall provide that the subtenant thereunder shall,
at the request of Landlord, execute a suitable instrument in confirmation of
such agreement to attorn. An original counterpart of each such sublease duly
executed by Tenant and such subtenant shall be delivered promptly to Landlord
and Tenant shall remain liable for the payment of the Rent and for the
performance and observance of all of the covenants and conditions to be
performed by Tenant hereunder. The provisions of this Section 16.2 shall not be
deemed a waiver of the provisions set forth in Section 16.1(a). No subtenant
that is an Affiliate of Tenant shall be required to attorn to Landlord as set
forth above in this Section 16.2.

16.3 Permitted Sublease and Assignment. Notwithstanding the foregoing, but
subject to the provisions of Section 16.4 and any other express conditions or
limitations set forth herein, Tenant may, without Landlord’s consent, sublease
space at the Leased Property for any uses ancillary to the Permitted Use, so
long as such subleases do not demise, in the aggregate, in excess of 3,000
square feet (exclusive of any parking garage subleases), and will not violate or
affect any Legal Requirement or Insurance Requirement.

16.4 Sublease Limitation. For so long as Landlord or any Affiliate of Landlord
or any Member of Landlord or any direct or indirect constituent owner thereof
shall seek to qualify as a real estate investment trust under the Code, anything
contained in this Lease to the contrary notwithstanding, Tenant shall not sublet
the Leased Property on any basis such that the rental to be paid by any
sublessee thereunder would be based, in whole or in part, on either (a) the
income or profits derived by the business activities of such sublessee or
(b) any other formula such that any portion of such sublease rental 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.

Article 17

ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS

17.1 Estoppel Certificates. At any time and from time to time, upon not less
than 10 Business Days prior Notice by either party, the party receiving such
Notice shall furnish to the other a 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, that to its knowledge no Default or an Event of Default by
the other party has occurred and is continuing or, if a Default or an Event of
Default shall exist, specifying in reasonable detail the nature thereof, and the
steps being taken to remedy the same, and such additional information as the
requesting party may reasonably request. If such additional information
reasonably requires more than 10 Business Days to provide, then the party
furnishing such information shall be entitled to such additional period to
respond to such request as may be reasonably required under the circumstances.
Any such certificate furnished pursuant to this Section 17.1 may be relied upon
by the requesting party, its lenders, and any prospective purchaser or mortgagee
of the Leased Property or the leasehold estate created hereby.

17.2 Accounting and Annual Reconciliation. (a) Within 30 days after the close of
each Accounting Period (or such earlier time period as required under the
Management Agreement), Tenant shall cause Manager to deliver an interim
accounting (the “Accounting

 

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Period Statement”) to Landlord showing Gross Revenues, and applications and
distributions thereof for the preceding Accounting Period. Tenant shall cause
Manager to transfer to Tenant, with each Accounting Period Statement, any
interim amounts due Tenant, subject to Working Capital needs, and shall retain
any interim amounts due Manager. Calculations and payments of the Management
Fees due Manager, and distributions to Tenant made with respect to each
Accounting Period within a Fiscal Year shall be accounted for cumulatively.

(b) Within 120 days after the end of each Fiscal Year (or such earlier time
period as required under the Management Agreement), Tenant shall cause Manager
to deliver to Tenant and Landlord a statement (the “Annual Operating Statement”)
in reasonable detail summarizing the operations of the Hotels for the
immediately preceding Fiscal Year, audited and certified by a nationally
recognized firm of certified public accountants having hotel accounting
experience as described in the Management Agreement. The parties shall promptly
after Landlord’s receipt of such Annual Operating Statement, make any
adjustments, by cash payment, in the amounts paid or retained for such Fiscal
Year as are needed because of the final figures set forth in such Annual
Operating Statement as reconciled by Manager and/or Tenant to the Accounting
Period Statements. Such Annual Operating Statement shall be controlling over the
preceding Accounting Period Statements.

17.3 Books and Records. Books of control and account pertaining to operations at
the Hotels shall be kept by Tenant, or by Manager on behalf of Tenant, on the
accrual basis and in all material respects in accordance with the Uniform System
of Accounts and GAAP. Tenant, upon Landlord’s reasonable request and at
reasonable intervals during Manager’s normal business hours, shall examine such
records to seek to obtain such information therefrom as reasonably directed by
Landlord.

17.4 Business Plan. (a) Tenant shall cause Manager to deliver to Landlord and
Tenant for their review and approval, at least 15 days (or such earlier time
period as required under the Management Agreement) prior to the date on which
Landlord is required to deliver same to Landlord’s Mortgagee for each Fiscal
Year which begins after the Commencement Date, a business plan showing the
estimated Gross Revenues for the forthcoming Fiscal Year, in comparison to the
forecasted Gross Revenues for the current Fiscal Year, each in a reasonably
itemized and detailed, as well as summary, form. Such comparison shall include
the estimated percentage changes in such items for the forthcoming Fiscal Year
compared to the current Fiscal Year. Tenant shall also cause Manager to submit
to Landlord for Landlord’s approval the Capital Reserve Budget described in
Section 5.2(b) and the Building Estimate described in Section 5.3 at the same
time that it submits the business plan. Tenant shall cause Manager to prepare
the business plan in accordance with the standards set forth in this Lease and
the Management Agreement. Landlord shall have 5 Business Days after receipt of
the business plan to review and approve such business plan, and, in the event
that Landlord disapproves any category in the business plan, Landlord shall
notify Tenant, and Tenant shall, in turn provide Manager in writing, with the
specific reasons for Landlord’s disapproval, by category, within such 5 Business
Day period. The parties will attempt to resolve in good faith any such
objections by Landlord within 5 Business Days following Manager’s receipt of
Tenant’s notice of Landlord’s disapproval. Notwithstanding the foregoing,
Landlord shall not be entitled to withhold its approval with respect to costs
that are system-wide for Manager’s System, including, without limitation, any
system-wide compensation or benefit programs; provided, that such programs are
reasonably

 

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comparable to others in the hospitality industry. Pending such agreement, Tenant
shall operate, or cause Manager to operate, the Hotels with respect to those
categories that are in dispute based on the previous Fiscal Year’s approved
Business Plan, adjusted in accordance with changes in the GDP Deflator over the
Fiscal Year just ended and anticipated changes in Gross Revenues. If Landlord
fails to provide any objection within the initial 5 Business Day period set
forth above, the business plan as submitted by Manager shall be deemed approved.
If Landlord and Tenant cannot resolve in good faith any objections by Landlord
within the second 5 Business Day period set forth above, then Landlord’s
determination in respect of such objections shall control. The approved business
plan for each Fiscal Year, as same may be revised by Landlord to the extent such
revisions are required by Landlord’s Mortgagee, is herein referred to as the
“Business Plan”.

(b) Tenant shall cause Manager to diligently operate the Hotels in accordance
with the Business Plan.

(c) In addition to the information described in the first sentence of
Section 17.4(a), upon Landlord’s request, Tenant shall cause Manager to include
(to the extent reasonably available to Manager) the following information along
with each business plan submitted to Landlord pursuant to the provisions of
Section 17.4(a): (i) general information concerning pay scales and benefits
programs applicable to employees of the Hotels, Manager’s general staffing
policies, and Manager’s plans for staffing levels at the Hotels for the
forthcoming Fiscal Year; (ii) Manager’s marketing plan for the forthcoming
Fiscal Year; (iii) estimates of furniture, fixtures, and equipment and Capital
Expenditure requirements and expenditures for the forthcoming three Fiscal
Years; and (iv) estimates of the Hotels’ Working Capital and Fixed Asset Supply
needs for the forthcoming Fiscal Year.

Article 18

LANDLORD’S RIGHT TO INSPECT

The parties acknowledge that Landlord is a direct or indirect controlled
subsidiary of an entity, Extended Stay America, Inc., a Delaware corporation
(the “REOC Parent”), that is intended to qualify as a “real estate operating
company” (a “REOC”) within the meaning of the U.S. Department of Labor plan
assets regulation (Section 2510.3-101, Part 2510 of Chapter XXV, Title 29 of the
Code of Federal Regulations) and that it is intended that Landlord will have the
rights, pursuant to this Lease, as would be reasonably necessary to result in
the qualification of REOC Parent as a REOC. Without limiting the generality of
the foregoing, notwithstanding any other provision of this Lease, without
prejudice to the other rights provided to Landlord under this Lease, Tenant
agrees to: (a) permit Landlord and REOC Parent to visit and inspect the Leased
Property, to make such repairs as Landlord is permitted or required to make
pursuant to the terms of this Lease, and inspect and copy the books and records
of Tenant, at such times as Landlord shall reasonably request; provided, that
any inspection or repair by Landlord and REOC Parent or their representatives
will not unreasonably interfere with Tenant’s or Manager’s use and operation of
the Leased Property; (b) periodically (at least quarterly) provide Landlord and
REOC Parent with information and reports regarding Tenant’s or Manager’s
operation and management of the Leased Property and the performance of its
duties under this Lease and with respect to renovations, alterations, general
maintenance, repairs, and development activities that Tenant has engaged in or
intends to engage in with respect to the Leased Property and its surroundings;
(c)

 

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periodically (at least quarterly) consult with Landlord and REOC Parent in
advance with respect to any right retained under this Lease and with respect to
Tenant’s operation and management of the Leased Property, as appropriate, and
the performance of Tenant’s duties under this Lease including, without
limitation, with respect to matters relating to renovations, alterations,
general maintenance, repairs, and development activities with respect to the
Leased Property and its surroundings; and (d) to provide Landlord and REOC
Parent with such other rights as may reasonably be determined by Landlord to be
necessary to enable REOC Parent to qualify as a REOC; provided, that such
additional rights do not materially adversely affect (A) Tenant’s ability to
perform its duties under this Lease or the economic benefits enjoyed by Tenant
under this Lease or (B) the status of ESH Hospitality as a real estate
investment trust under the Code. Tenant agrees to consider, in good faith, the
recommendations of Landlord in connection with the matters on which it is
consulted as described above.

Article 19

INTENTIONALLY OMITTED

Article 20

LIMITATIONS

20.1 REIT Compliance. Landlord is an indirect wholly owned subsidiary of ESH
Hospitality. Tenant acknowledges that ESH Hospitality intends to qualify as a
real estate investment trust under the Code. Tenant agrees that it will not
knowingly or intentionally take or omit to take any action, or permit any status
or condition to exist at the Leased Property, which Tenant actually knows
(acting in good faith) would or could result in (a) the Rent payable under this
Lease not qualifying as “rents from real property” as defined in Section 856(d)
of the Code or (b) ESH Hospitality being disqualified from treatment as a real
estate investment trust under the Code as the provisions exist on the date
hereof; provided, that notwithstanding anything herein to the contrary,
(A) Tenant shall not be responsible for any act or omission of Landlord or
Manager (unless Manager’s action was with the express written consent, or at the
direction, of Tenant), and (B) any action by Tenant taken in compliance with the
express terms of this Lease or the Management Agreement shall not be deemed to
create a Default or Event of Default under this Section 20.1.

20.2 FF&E Limitation. This Section 20.2 is intended to insure that all of the
rent payable under this Lease qualifies as “rents from real property” within the
meaning of Section 856(d) of the Code or any similar or successor provisions
thereto. In furtherance of such purpose, the parties have agreed to the terms
set forth in Exhibit B.

20.3 Sublease Rent Limitation. Anything contained in this Lease to the contrary
notwithstanding, from and after the Commencement Date, Tenant shall not
knowingly or intentionally (acting in good faith) enter into any sublease with
respect to the Leased Property or any part thereof on any basis such that the
rental to be paid by the sublessee thereunder would be based (or considered to
be based), in whole or in part, on either (a) the income or profits derived by
the business activities of the sublessee, or (b) any other formula such that any
portion of the rent payable hereunder would or could, to Tenant’s actual
knowledge (acting in good faith), fail to qualify as “rents from real property”
within the meaning of Section 856(d) of the Code, or any similar or successor
provisions thereto.

 

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Article 21

MISCELLANEOUS

21.1 No Waiver. No failure by Landlord or Tenant 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 maximum 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.

21.2 Remedies Cumulative. To the maximum extent permitted, by law, each legal,
equitable, or contractual right, power, and remedy of Landlord or Tenant, 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 Landlord or Tenant
(as applicable) of any one or more of such rights, powers, and remedies shall
not preclude the simultaneous or subsequent exercise by Landlord of any or all
of such other rights, powers, and remedies.

21.3 Severability. Any clause, sentence, paragraph, section, or provision of
this Lease held by a court of competent jurisdiction to be invalid, illegal, or
ineffective shall not impair, invalidate, or nullify the remainder of this
Lease, but rather the effect thereof shall be confined to the clause, sentence,
paragraph, section, or provision so held to be invalid, illegal, or ineffective,
and this Lease shall be construed as if such invalid, illegal, or ineffective
provisions had never been contained herein.

21.4 Acceptance of Surrender. No surrender to Landlord 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 Landlord and no act by
Landlord or any representative or agent of Landlord, other than such a written
acceptance by Landlord, shall constitute an acceptance of any such surrender.

21.5 No Merger of Title. It is expressly acknowledged and agreed that it is the
intent of the parties that there shall be no merger of this Lease or of the
leasehold estate created hereby by reason of the fact that the same Person may
acquire, own, or hold, directly or indirectly, this Lease or the leasehold
estate created hereby and the fee estate or ground landlord’s interest in the
Leased Property.

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

 

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21.7 Quiet Enjoyment. Provided that no Event of Default shall have occurred and
be continuing, Tenant shall peaceably and quietly have, hold, and enjoy the
Leased Property for the Term, free of hindrance or molestation by Landlord or
anyone claiming by, through, or under Landlord, but subject to (a) any
encumbrance permitted to be created by Landlord hereunder, (b) liens as to
obligations of Landlord that are either not yet due or which are being contested
in good faith and by proper proceedings; provided, that the same do not
materially interfere with Tenant’s or Manager’s ability to operate the Hotels,
and (c) liens that have been consented to in writing by Tenant. Except as
otherwise provided in this Lease, no failure by Landlord to comply with the
foregoing covenant shall give Tenant the right to cancel or terminate this Lease
or abate, reduce, or make a deduction from or offset against the Rent or any
other sum payable under this Lease ,or to fail to perform any other obligation
of Tenant hereunder.

21.8 Memorandum of Lease. Neither Landlord nor Tenant shall record this Lease.
However, Landlord and Tenant shall promptly, upon the request of the other,
enter into a short form memorandum of this Lease, in form suitable for recording
under the laws of the states in which the Hotels are located in which reference
to this Lease, and all options contained herein, shall be made. The parties
shall share equally all costs and expenses of recording such memorandum.

21.9 True Lease. The parties hereto intend that this Lease shall be treated as a
true lease for federal tax purposes.

21.10 Notices. (a) Any and all notices, demands, consents, approvals, offers,
elections, and other communications required or permitted under this Lease shall
be deemed adequately given if in writing and the same shall be delivered either
in hand, or by mail, or Federal Express or similar expedited commercial carrier,
addressed to the recipient of the notice, postpaid, and registered or certified
with return receipt requested (if by mail), or with all freight charges prepaid
(if by Federal Express or similar carrier).

(b) All notices required or permitted to be sent hereunder shall be deemed to
have been given for all purposes of this Lease upon the date of receipt or
refusal, except that whenever under this Lease a notice is either received on a
day which is not a Business Day or is required to be delivered on or before a
specific day which is not a Business Day, the day of receipt or required
delivery shall automatically be extended to the next Business Day.

(c) All such notices shall be addressed,

If to Landlord to:

11525 N. Community House Road, Suite 100

Charlotte, NC 28277

Attention: President

Facsimile No.: (980) 335-3089

Attention: General Counsel

Facsimile No.: (980) 335-3089

 

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with a copy to:

Fried, Frank, Harris, Shriver & Jacobson LLP

One New York Plaza

New York, New York 10004

Attention: Harry R. Silvera, Esq.

Facsimile No.: (212) 859-4000

If to Tenant to:

11525 N. Community House Road, Suite 100

Charlotte, NC 28277

Attention: President

Facsimile No.: (980) 335-3089

Attention: General Counsel

Facsimile No.: (980) 335-3089

with a copy to:

Fried, Frank, Harris, Shriver & Jacobson LLP

One New York Plaza

New York, New York 10004

Attention: Harry R. Silvera, Esq.

Facsimile No.: (212) 859-4000

(d) By notice given as herein provided, the parties hereto and their respective
successors and assigns shall have the right from time to time and at any time
during the term of this Lease to change their respective addresses effective
upon receipt by the other parties of such notice and each shall have the right
to specify as its address any other address within the United States of America.

21.11 Construction; Nonrecourse. Neither this Lease nor any provision hereof may
be changed, waived, discharged, or terminated except by an instrument in writing
signed by all the parties thereto. All the terms and provisions of this Lease
shall be binding upon and inure to the benefit of the parties hereto and their
respective permitted successors and assigns. Each term or provision of this
Lease to be performed by Tenant shall be construed as an independent covenant
and condition. Time is of the essence with respect to the exercise of any rights
of Tenant or Landlord under this Lease. In the event of any dispute between the
parties concerning this Lease, Landlord shall be entitled to an award of
attorney’s fees and costs in connection with such dispute, including, without
limitation, in connection with any suit, action, arbitration, or other
proceeding concerning such dispute. Except as otherwise set forth in this Lease,
any obligations arising prior to the expiration or sooner termination of this
Lease of Tenant (including, without limitation, any monetary, repair, and
indemnification obligations) and Landlord shall survive the expiration or sooner
termination of this Lease; provided, that each party shall be required to give
the other Notice of any such surviving and unsatisfied obligations within one
year after the expiration or sooner termination of this Lease. Nothing contained
in this Lease shall be construed to create or impose any liabilities or
obligations and no such liabilities or obligations shall be imposed on any of
the shareholders, beneficial owners, direct or indirect, officers, directors,
trustees, employees, or agents of Landlord or Tenant for the payment or
performance of the

 

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obligations or liabilities of Landlord or Tenant hereunder. Further, in the
event Landlord shall be in default under this Lease, and if as a consequence of
such default, Tenant shall recover a money judgment against Landlord, then such
judgment shall be satisfied only out of the proceeds of sale received upon
execution of such judgment against the right, title, and interest of Landlord in
the Leased Property.

21.12 Counterparts; Headings. This Lease may be executed in two or more
counterparts, each of which shall constitute an original, but which, when taken
together, shall constitute but one instrument and shall become effective as of
the date hereof when copies hereof, which, when taken together, bear the
signatures of each of the parties hereto shall have been signed. Headings in
this Lease are for purposes of reference only and shall not limit or affect the
meaning of the provisions hereof.

21.13 Applicable Law. This Lease shall be interpreted, construed, applied, and
enforced in accordance with the laws of the State of New York; provided, that
the provisions for the enforcement of Landlord’s rights and remedies hereunder
shall be governed by the laws of each of the respective states where the Leased
Property is located to the extent necessary for the validity and enforcement
thereof.

21.14 Right to Make Agreement. Each party warrants, with respect to itself, that
neither the execution of this Lease, nor the consummation of any transaction
contemplated hereby, shall violate any provision of any law, or any judgment,
writ, injunction, order, or decree of any court or governmental authority having
jurisdiction over it; nor result in or constitute a breach or default under any
indenture, contract, or other commitment or restriction to which it is a party
or by which it is bound; nor require any consent, vote, or approval which has
not been given or taken, or at the time of the transaction involved shall not
have been given or taken. Each party covenants that it has and will continue to
have, throughout the term of this Lease and any extensions thereof, the full
right to enter into this Lease and perform its obligations hereunder.

21.15 Disclosure of Information. (a) The parties hereto agree that the matters
set forth in this Lease and any revenue, expense, net profit, room rate, and
occupancy information provided on a Hotel by Hotel basis are strictly
confidential and each party will make every effort to ensure that the
information is not disclosed to any Person that is not an Affiliate of any party
(including the press) without the prior written consent of the other party,
except as may be required by law and as may be reasonably necessary to obtain
licenses, permits, and other public approvals necessary for the refurbishment or
operation of the Hotels, or, in connection with a Landlord financing, a sale of
a Hotel, or a sale of a Controlling Interest in Landlord or Tenant.

(b) Notwithstanding anything to the contrary in the foregoing provisions of this
Section 21.15 or elsewhere in this Lease, any party (and any employee,
representative, or other agent of any party) may disclose to any and all
Persons, without limitation of any kind, the tax treatment and tax structure of
the transactions contemplated by this Lease and all materials of any kind
(including opinions or other tax analyses) that are provided to any party
relating to such tax treatment and tax structure; provided, that any such
information and materials shall be kept confidential to the extent necessary to
comply with any applicable securities laws. For purposes of the preceding
sentence, the tax treatment and tax structure of the transactions contemplated
by this Lease shall not be deemed to include the identity of the parties, the
location of the Leased

 

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Property, or the amount of Rent payable by Tenant hereunder. The foregoing
authorization of disclosure is retroactively effective immediately upon
commencement of the first discussions among the parties regarding the
transactions contemplated hereby, and the parties aver and affirm that this tax
disclosure authorization has been given on a date which is no later than 30 days
from the first day that any party (or any employee, representative, or other
agent of a party) first made or provided a statement as to the potential federal
income tax consequences that may result from the transactions contemplated
hereby.

(c) The obligations of Tenant and Landlord contained in this Section 21.15 shall
survive the expiration or earlier termination of this Lease.

21.16 Operating Lease. The parties hereto intend that this Lease shall be deemed
for all purposes to be an operating lease and not a capital lease.

21.17 No Joint Venture or Partnership. Landlord and Tenant intend that the
relationship created hereunder be solely that of landlord and tenant. Nothing
herein is intended to create a joint venture, partnership, tenancy-in-common, or
joint tenancy relationship between Landlord and Tenant.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties have executed this Lease as of the date above
first written.

 

LANDLORD ESA LVP PORTFOLIO LLC By:  

/s/ Bill McCanless

  Name:   Bill McCanless   Title:   Vice President & Secretary TENANT ESA LVP
OPERATING LESSEE LLC By:  

/s/ Bill McCanless

  Name:   Bill McCanless   Title:   Vice President & Secretary

Operating Lease — LVP

--------------------------------------------------------------------------------

EXHIBIT A

MINIMUM RENT; MINIMUM RENT ALLOCATIONS

(see attached)

--------------------------------------------------------------------------------

Address

  Minimum
Rent — 2014     Minimum
Rent — 2015     Minimum
Rent — 2016     Minimum
Rent — 2017     Minimum
Rent — 2018     Minimum
Rent — 2019     Minimum
Rent — 2020  

5050 — Houston Katy Freeway Energy Corridor

  $ 197,000.00      $ 203,000.00      $ 209,000.00      $ 215,000.00      $
221,000.00      $ 228,000.00      $ 235,000.00   

5051 — Houston Sugar Land

  $ 203,000.00      $ 209,000.00      $ 215,000.00      $ 222,000.00      $
229,000.00      $ 236,000.00      $ 243,000.00   

Aggregate

  $ 400,000.00      $ 412,000.00      $ 424,000.00      $ 437,000.00      $
450,000.00      $ 464,000.00      $ 478,000.00   

 

Address

  Minimum
Rent — 2021     Minimum
Rent — 2022     Minimum
Rent — 2023     Minimum
Rent – 2024     Minimum
Rent — 2025     Minimum
Rent — 2026  

5050 — Houston Katy Freeway Energy Corridor

  $ 242,000.00      $ 249,000.00      $ 256,000.00      $ 264,000.00      $
272,000.00      $ 280,000.00   

5051 — Houston Sugar Land

  $ 250,000.00      $ 258,000.00      $ 266,000.00      $ 274,000.00      $
282,000.00      $ 291,000.00   

Aggregate

  $ 492,000.00      $ 507,000.00      $ 522,000.00      $ 538,000.00      $
554,000.00      $ 571,000.00   

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EXHIBIT B

PROVISIONS RELATING TO EXCESS FF&E

1. This Exhibit B is intended to insure that all of the rent payable under this
Lease qualifies as “rents from real property” within the meaning of
Section 856(d) of the Code or any similar or successor provisions thereto. In
furtherance of such purpose, the parties have agreed to the terms set forth in
the following paragraphs of this Exhibit B with the objective that, anything
contained in this Lease to the contrary notwithstanding, the average of the fair
market value of the items of “personal property” (within the meaning of
Section 856(d)(1)(C) of the Code) that are leased to Tenant under a lease at the
beginning and at the end of any Fiscal Year shall not exceed 14% of the average
of the aggregate fair market value of the Leased Property under such lease at
the beginning and at the end of each such Fiscal Year as determined by the
Landlord pursuant to Section 856(d)(1)(c) (the “FF&E Limitation”). The
provisions contained in the following paragraphs shall be interpreted in a
manner consistent with the intent and objective described above (it being
understood that this paragraph constitutes a statement of the parties’ mutual
intent only and that the failure to achieve such objective, absent any Default
or Event of Default under the other paragraphs of this Exhibit B or any other
provisions of this Lease, shall not constitute a Default or an Event of Default
hereunder).

2. If Landlord reasonably anticipates and gives Notice (an “Excess FF&E Notice”)
and reasonably satisfactory evidence to Tenant that the FF&E Limitation might be
exceeded with respect to any Leased Property for any Fiscal Year, then Tenant
shall, in accordance with the provisions set forth below and within 60 days
following the delivery of such Excess FF&E Notice, purchase from Landlord, or
Landlord shall contribute to the capital of Tenant, those items or categories of
FF&E to be acquired by Landlord during such Fiscal Year which are designated in
such Excess FF&E Notice as anticipated to cause Landlord to exceed the FF&E
Limitation (“Excess FF&E”). If Tenant shall purchase such Excess FF&E from
Landlord, then the price shall be equal to the Excess FF&E FMV.

3. With respect to any Excess FF&E first received or purchased by Tenant
pursuant to the terms of this Exhibit B during a particular Fiscal Year,
Tenant’s annual Rent obligations shall be reduced, because such Excess FF&E is
no longer leased by Tenant, in the following manner (the “FF&E Adjustment”):

(a) For the Fiscal Year in which such Excess FF&E is first placed in service by
Tenant, such reduction shall be in an amount (the “First Year FF&E Adjustment”)
equal to the mathematical product of (i) the Market Leasing Factor for personal
property with an average expected useful life corresponding to the weighted
average expected useful life (as determined in accordance with GAAP and rounded
to the nearest whole year) of all Excess FF&E first placed in service by Tenant
during such Fiscal Year (such weighted average, the “Applicable Expected Life”)
times (ii) the Excess FF&E Value of all Excess FF&E first placed in service by
Tenant during such Fiscal Year times (iii) 110% times (iv) 50%;

(b) For each subsequent Fiscal Year prior to the Fiscal Year in which the
Applicable Expected Life for such Excess FF&E expires, such reduction shall be
in an amount equal to twice the First Year FF&E Adjustment; and

(c) For the Fiscal Year in which the Applicable Expected Life for such Excess
FF&E expires, such reduction shall be in an amount equal to the First Year FF&E
Adjustment.

 

B-1

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It is contemplated that there would be a separate FF&E Adjustment for all Excess
FF&E first placed in service during a single Fiscal Year (with such FF&E
Adjustment extending for a period equal to the lesser of the remaining Term or
the Applicable Expected Life of the Excess FF&E acquired during such Fiscal
Year). The Rent payable by Tenant for each Accounting Period in a Fiscal Year to
which one or more FF&E Adjustments apply shall be reduced by an amount equal to
the mathematical product of (A) the amount of such applicable FF&E Adjustment
(or if more than one FF&E Adjustment apply in such Fiscal Year, the sum of such
applicable FF&E Adjustments) times (B) a fraction, the numerator of which is one
and the denominator of which is the number of Accounting Periods in such Fiscal
Year. The “Excess FF&E Value” of any Excess FF&E shall be the fair market value
of such Excess FF&E (“Excess FF&E FMV”) plus the aggregate amount of
out-of-pocket transactional costs (including, without limitation, reasonable
attorneys’ fees and any ad valorem, sales, transfer, transaction, or similar
tax, levy, or other governmental charge) incurred by such purchaser in
connection with its purchase of such Excess FF&E. The “Market Leasing Factor”
(with there to be a separate Market Leasing Factor for each whole number of
years of expected useful life of Excess FF&E) shall be determined by an
independent valuation expert, acceptable to both Landlord and Tenant, who shall
determine the Market Leasing Factors based on the median of the leasing rates of
at least three nationally recognized companies engaged in the business of
leasing similar FF&E or personal property and equipment. The cost of such expert
shall be borne by Landlord.

Notwithstanding anything to the contrary contained in this paragraph 3, Tenant’s
annual Rent as reduced by operation of this paragraph shall not be less than the
Minimum Rent provided for in Article 3 of this Lease.

4. In the event that Tenant owns any Excess FF&E at the expiration or earlier
termination of this Lease (including, without limitation, a termination in
connection with a transfer of ownership of the Leased Property), Landlord shall
purchase from Tenant and Tenant shall sell to Landlord, on the effective date of
such expiration or termination, all such Excess FF&E for a purchase price equal
to the fair market value (which the parties hereby agree shall not be less than
the adjusted book value) of such Excess FF&E at such time.

 

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EXHIBIT C

PROVISIONS RELATING TO PERCENTAGE RENT

Percentage Rent for any Fiscal Year shall equal the sum of:

(a) the product of (i) all Gross Revenues for such Fiscal Year in excess of the
Tier 1 Threshold but less than or equal to the Tier 2 Threshold and (ii) the
Tier 1 Percentage; plus

(b) the product of (i) all Gross Revenues for such Fiscal Year in excess of the
Tier 2 Threshold but less than or equal to the Tier 3 Threshold and (ii) the
Tier 2 Percentage; plus

(c) the product of (i) all Gross Revenues for such Fiscal Year in excess of the
Tier 3 Threshold and (ii) the Tier 3 Percentage.

“Tier 1 Percentage” means fifty-four percent (54%).

“Tier 1 Threshold” means $1,200,000.00, increasing at a rate of two percent
(2%) per annum compounded annually for each fiscal year.

“Tier 2 Percentage” means sixty-five percent (65%).

“Tier 2 Threshold” means $1,700,000.00, increasing at a rate of two percent
(2%) per annum compounded annually for each Fiscal Year.

“Tier 3 Percentage” seventy-six and one-half percent (76.5%).

“Tier 3 Threshold” means $3,450,000.00, increasing at a rate of two percent
(2%) per annum compounded annually for each Fiscal Year.

“Thresholds” means each of the Tier 1 Threshold, Tier 2 Threshold, and the Tier
3 Threshold.

 

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EXHIBIT D

TRADEMARK LICENSE AGREEMENTS

Trademark License Agreement, dated as of December 31, 2013, between ESH
Strategies Branding LLC and ESA LVP Operating Lessee LLC.

 

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