HomeMy WebLinkAboutResolution - 2007-R0439 - City Facilities Lease Agreement - 1859 Management Partners LP - 09/13/2007Resolution No. 2007-RO439
September 13, 2007
Item No. 6.12
RESOLUTION
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK:
THAT the Mayor of the City of Lubbock BE and is hereby authorized and
directed to execute for and on behalf of the City of Lubbock a City Facilities Lease
Agreement with 1859 Management Partners, L.P. Said agreement is attached hereto and
incorporated in this Resolution as if fully set forth herein and shall be included in the
minutes of the Council.
Passed by the City Council this 13th day of September , 2007.
� 05
DAVID A. AILLER, MAYOR
ATTEST:
Rebeccit Garza, City Secretar
APPR VED S CONTENT:
Robn, t City Mnager
Development Services
APPROVED AS TO FORM:
Linda L. Chamales, Senior Attorney
Office Practice Section
Lc CityAtt/Linda/Res-Conference Center City Facilities Lease
September 5, 2007
Resolution No. 2007-R0439
CITY FACILITIES LEASE AGREEMENT
between
CITY OF LUBBOCK-,
as Lessor
and
1859 MANAGEMENT PARTNERS, LP,
as Lessee
TABLE OF CONTENTS
Page
ARTICLE I GRANT, TERM OF LEASE AND CERTAIN DEFINITIONS................................1
1.1.
Leasing Clause.........................................................................................................1
1.2.
Term.........................................................................................................................2
1.3.
Certain Definitions...................................................................................................2
1.3.1. AR&R Fund.................................................................................................2
1.3.2. Base Rental..................................................................................................2
1.3.3. City Facilities...............................................................................................2
1.3.4. Commencement Date...................................................................................2
1.3.5. First Class Manner.......................................................................................2
1.3.6. Franchise Agreement...................................................................................2
1.3.7. Lease...........................................................................................................2
1.3.8. Hotel.............................................................................................................2
1.3.9. Hotel Franchisor...........................................................................................2
1.3.10. Hotel Loan Agreement.................................................................................3
1.3.11. Hotel Reserve Fund......................................................................................3
1.3.12. Impositions...................................................................................................3
1.3.13. Improvements..............................................................................................3
1.3.14. Land.............................................................................................................3
1.3.15. Lease............................................................................................................3
1.3.16. Leased Premises...........................................................................................3
1.3.17. Leasehold Mortgage.....................................................................................3
1.3.18. Leasehold Mortgagee...................................................................................3
1.3.19. Lessee...........................................................................................................3
1.3.20. Lessor...........................................................................................................3
1.3.21. Management Agreement..............................................................................3
1.3.22. Master Development Agreement.................................................................3
1.3.23. Mortgaged Premises.....................................................................................4
1.3.24. Operator.......................................................................................................4
1.3.25. Project..........................................................................................................4
1.3.26. Restrictions and Limitations........................................................................4
1.3.27. Term.............................................................................................................4
1.4.
Effect of Lease........................................................................................................4
ARTICLEII BASE RENTAL..................................................................................................4
2.1. Base Rental..............................................................................................................4
2.2. Statements and Records...........................................................................................4
2.3. Proprietary Information; Confidentiality.................................................................5
ARTICLE III IMPOSITIONS AND UTILITIES......................................................................5
3.1. Payment of Impositions...........................................................................................5
City Facilities Lease Agreement
3.2. Contest of Impositions.............................................................................................5
3.3. Standing...................................................................................................................6
3.4. Utilities.....................................................................................................................6
ARTICLE IV IMPROVEMENTS.............................................................................................6
4.1.
Improvement Rights.................................................................................................6
4.2.
Right to Alter...........................................................................................................6
4.3.
Easements and Dedications......................................................................................6
4.4.
Zoning and Permits..................................................................................................7
4.5.
Personal Property.....................................................................................................7
ARTICLE V
USE OF PREMISES...........................................................................................7
5.1.
Use...........................................................................................................................7
5.2.
Compliance with Laws............................................................................................7
5.3.
Maintenance; Casualty.............................................................................................7
5.4.
Asset Replacement and Renewal Reserve Account.................................................8
5.5.
Operational Rights; Revenue...................................................................................9
ARTICLE VI
INSURANCE AND INDEMNITY...................................................................10
6.1.
Liability Insurance.................................................................................................10
6.2.
Workers' Compensation Insurance........................................................................10
6.3.
Property Insurance.................................................................................................10
6.4.
Policies...................................................................................................................11
6.5.
Adjustment of Losses.............................................................................................1
l
6.6.
Proceeds of Property Insurance.............................................................................11
6.7.
Environmental Investigation and Remediation......................................................1
l
6.8.
Indemnity...............................................................................................................12
ARTICLE VII ASSIGNMENT AND SUBLETTING BY LESSEE........................................13
7.1. Assignment............................................................................................................13
7.2. Subletting and Easement Granting.........................................................................13
7.3. Nondisturbance Agreements..................................................................................13
7.4. General Provisions.................................................................................................13
ARTICLE VIII MORTGAGES..................................................................................................14
8.1.
Leasehold Mortgages Permitted............................................................................14
8.2.
Notices to Leasehold Mortgagees..........................................................................14
8.3.
Leasehold Mortgagee's Right to Cure...................................................................14
8.4.
New Lease..............................................................................................................15
8.5.
Survival..................................................................................................................15
8.6.
Leasehold Mortgagee's Liability...........................................................................15
8.7.
No Modification or Surrender................................................................................16
ARTICLE IX DEFAULT OF LESSEE...................................................................................16
9.1. Defaults..................................................................................................................16
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City Facilities Lease Agreement
ARTICLE X DEFAULT OF LESSOR...................................................................................17
10.1. Defaults and Remedies..........................................................................................17
ARTICLE XI
CONDEMNATION..........................................................................................18
12.1.2. Authority....................................................................................................19
11.1.
Definitions..............................................................................................................18
12.1.5. Consents.....................................................................................................20
11.2.
Efforts to Prevent Taking.......................................................................................18
12.1.8. Compliance with Laws..............................................................................20
11.3.
Entire Taking.........................................................................................................18
..............................21
11.4.
Partial Taking.........................................................................................................18
12.2.2. Authority....................................................................................................21
11.5.
Temporary Taking.................................................................................................19
11.6.
Effect of Taking.....................................................................................................19
12.2.5. Consents.....................................................................................................21
11.7.
Settlement of Proceedings......................................................................................19
ARTICLE XII REPRESENTATIONS, WARRANTIES AND SPECIAL
COVENANTS...................................................................................................19
12.1. Representations, Warranties and Special Covenants.............................................19
12.1.1. Existence....................................................................................................19
12.1.2. Authority....................................................................................................19
12.1.3. Binding Obligation.....................................................................................20
12.1.4. No Defaults................................................................................................20
12.1.5. Consents.....................................................................................................20
12.1.6. Proceedings................................................................................................20
12.1.7. Impositions.................................................................................................20
12.1.8. Compliance with Laws..............................................................................20
12.1.9. As-Is...........................................................................................................20
12.2. Lessor's Representations, Warranties and Special Covenants
..............................21
12.2.1. Existence....................................................................................................21
12.2.2. Authority....................................................................................................21
12.2.3. Binding Obligations...................................................................................21
12.2.4. No Defaults................................................................................................21
12.2.5. Consents.....................................................................................................21
12.2.6. Proceedings................................................................................................21
12.2.7. Impositions.................................................................................................21
12.2.8. Compliance with Laws..............................................................................21
12.2.9. Quiet Enjoyment........................................................................................21
12.2. 10 Limitations................................................................................................22
ARTICLE XIII MISCELLANEOUS..........................................................................................22
13.1 Inspection...............................................................................................................22
13.2. Estoppel Certificates..............................................................................................22
13.3. Release...................................................................................................................22
13.4. Lessor's Right to Perform Lessee's Covenants.....................................................22
13.5. Lessee's Right to Perform Lessor's Covenants.....................................................22
13.6. Notices...................................................................................................................23
13.7. Successors and Assigns..........................................................................................24
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City Facilities Lease Agreement
13.8.
Modifications.........................................................................................................24
13.9.
Descriptive Headings.............................................................................................24
13.10.
Unavoidable Default and Delays...........................................................................24
13.11.
Partial Invalidity.....................................................................................................25
13.12.
Applicable Law and Venue....................................................................................25
13.13.
Attorneys' Fees......................................................................................................25
13.14.
Interpretation..........................................................................................................25
13.15.
Net Lease...............................................................................................................25
13.16.
Brokerage Commission..........................................................................................25
13.17.
Short Form.............................................................................................................25
13.18.
No Third Party Beneficiaries.................................................................................26
13.19.
Lessor's Lien Waiver.............................................................................................26
13.20.
Non-Waiver............................................................................................................26
13.21.
Survival..................................................................................................................26
13.22.
Entire Agreement...................................................................................................26
13.23.
Lease Extensions....................................................................................................26
13.24
Right of First Refusal.............................................................................................28
13.25
Obligations of Purchaser of City Facilities............................................................29
1V
City Facilities Lease Agreement
Resolution No. 2007-RO439
CITY FACILITIES LEASE AGREEMENT
This City Facilities Lease Agreement (this "Lease") is entered into as of the 13th day of
Septeruber1 2007, by and between the CITY OF LUBBOCK, a political subdivision of the State
of Texas located in Lubbock County, Texas ("Lessor") and 1859 MANAGEMENT
PARTNERS, LP, a Texas limited partnership ("Lessee"). Lessor and Lessee sometimes are
referred to herein collectively as the "Parties" or singularly as a "RAgy".
RECITALS
A. Lessor, Overton Park Hotel, LP and Garfield Traub Development, LLC (which
limited liability company is a limited partner of Lessee), entered into the Master Development
Agreement (hereinafter defined), regarding the construction and financing of a hotel,
conference/civic center and parking lot facilities in the City of Lubbock, Texas to accomplish,
among other things, serving the needs of the City of Lubbock, producing increased tax revenues,
promoting tourism and the convention and hotel industry in the City of Lubbock, and otherwise
to benefit the public. This Lease is being entered into as provided in Section 4.2.3 of the Master
Development Agreement.
B. Lessor is the owner of the Land (hereinafter defined).
C. Lessor contemplates the acquisition of approximately 100 parking spaces (the
"Garage Parking Spaces") on one floor of the parking garage to be constructed by a private
developer in close proximity to the Land, as well as approximately 175 surface parking spaces
under a Lease Agreement between Lessor and Lessee on land adjacent to the City Facilities
("Surface Parking Spaces").
D. As contemplated by the Master Development Agreement, Lessor has caused or
will cause to be constructed the City Facilities (hereinafter defined) on the Land, which City
Facilities are a part of the Improvements (hereinafter defined).
E. Lessor desires to lease to Lessee, and Lessee desires to lease and take from
Lessor, the Leased Premises (hereinafter defined) on the terms set forth in this Lease, in
accordance with Section 4.2.3 of the Master Development Agreement.
ARTICLE I
Grant, Term of Lease and Certain Defmitions
1.1. LeasingClause. Upon and subject to the terms and provisions contained herein,
Lessor does hereby lease, demise and let unto Lessee, and Lessee does hereby take and lease
from Lessor, the Leased Premises, to have and to hold the Leased Premises, together with all
rights, privileges and appurtenances belonging to or in any way pertaining to the Leased
Premises, for the term hereinafter provided. This Lease is made and accepted subject to the
Restrictions and Limitations (hereinafter defined), and all laws, ordinances and other police
power and governmental regulations affecting the Leased Premises.
City Facilities Lease Agreement—
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1.2. Term. The term of this Lease shall be for a period commencing on the
Commencement Date (hereinafter defined) and terminating on the 40th anniversary of the
Commencement Date unless earlier terminated in accordance with the provisions of this Lease.
1.3. Certain Definitions. The following terms shall have the meaning set forth below
in this Section 1.3:
1.3.1. AR&R Fund. The replacement and renewal reserve account established in
the joint names of Lessor and Lessee for capital expenditures in connection with the operation
and maintenance of the Leased Premises, and for repairs and replacements by Lessee of all
portions of the Leased Premises that are subject to deterioration, as more particularly described
in Section 5.4 below.
1.3.2. Base Rental. Base Rental shall be in the amounts and as determined in
accordance with Schedule 2.1 attached hereto and incorporated herein.
1.3.3. City Facilities. The Land and the conference/civic center constructed by
Lessor on the Land containing approximately 49,000 square feet of meeting and support space,
including a ballroom of approximately 12,000 square feet, with appurtenant facilities and
amenities including furnishings, fixtures, and equipment.
1.3.4. Commencement Date. The later of (i) the date first above written, on
which date this Lease has been fully executed and delivered by Lessor and Lessee, or (ii) the
opening for business of the City Facilities, which opening the Parties shall confirm in a
recordable document promptly following such date.
1.3.5. First Class Manner. The standard for maintenance of any part of the
Project that is consistent with the brand or franchise standards required by the Hotel Franchisor,
if any, in the Franchise Agreement as of the date such agreement is initially executed by Lessee
(or Operator) and the Hotel Franchisor. If, at any time during the Term there is no Hotel
Franchisor, First Class Manner shall mean standards of maintenance reasonably and customarily
utilized for similarly -situated upscale hotel/convention center projects.
1.3.6. Franchise Agreement. The franchise agreement, if any, for the Hotel and
the City Facilities entered into from time to time by Lessee (or Operator) and a Hotel Franchisor.
1.3.7. Parking Spaces. Collectively, the Garage Parking Spaces and the Surface
Parking Spaces.
1.3.8. Hotel. The not -less -than 300 room full service hotel constructed by
Lessee as part of the Project (but not a part of the Leased Premises).
1.3.9. Hotel Franchisor. The hotel/hospitality franchising company for the
Hotel, as determined in accordance with Section 5.5.
City Facilities Lease Agreement-
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1.3.10. Hotel Loan Agreement. The loan agreement entered into as of July 31,
2007 by Lessee and Plains Capital Bank, pursuant to which such lender has agreed to provide
construction financing for the Hotel.
1.3.11. Hotel Reserve Fund. A replacement and reserve account for capital
expenditures, repairs and replacements for the Hotel established by Lessee or Operator, over
which account or expenditures therefrom Lessor shall have no control.
1.3.12. Impositions. Taxes and assessments against the Leased Premises that
accrue during the Term.
1.3.13. Improvements. All buildings, structures, equipment, improvements and
fixtures from time to time constructed, installed or situated on the Land.
1.3.14. Land. The real property described in Exhibit A attached hereto and made
a part hereof.
1.3.15. Lease. This City Facilities Lease Agreement by and between Lessor, as
lessor, and Lessee, as lessee, covering the Leased Premises.
1.3.16. Leased Premises. All of Lessor's interest in the Land , together with all
present and future Improvements (including the City Facilities) now or hereafter located on the
Land, and other rights, privileges and appurtenances benefiting, belonging to or in any way
appertaining thereto, including, without limitation, Lessor's rights and obligations in and to the
Parking Spaces, if any.
1.3.17. Leasehold Mortgage. Any mortgage, deed of trust or other instrument in
the nature thereof which encumbers any of the rights, titles and interests of Lessee in and to the
Leased Premises, including (without limiting the generality of the foregoing) Lessee's right to
use and occupy the Leased Premises and all of its rights, titles and interests in and to any and all
Improvements.
1.3.18. Leasehold Mortgagee. The mortgagee under a Leasehold Mortgage.
1.3.19. Lessee. 1859 Management Partners, LP, a Texas limited partnership.
1.3.20. Lessor. The City of Lubbock, a political subdivision of the State of Texas,
located in Lubbock County, Texas.
1.3.21. Management Agreement. The City Facilities Management and Operating
Agreement dated 2007 by and between Lessee and Operator, or such replacement
or subsequent agreement for the use, operation, management, maintenance and repair of the City
Facilities as Lessee may enter into with an Operator in accordance with Section 5.5.
1.3.22. Master Development Agreement. That certain Master Development
Agreement dated February 24, 2006, by and among Lessor, Overton Park Hotel, LP and Garfield
Traub Development LLC, relating to the initial development of the Project, as amended.
City Facilities Lease Agreement-
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1.3.23. Mortgaged Premises. All of Lessee's leasehold estate under this Lease
covered by a Leasehold Mortgage.
1.3.24. Net Hotel Room Revenue. Gross hotel room revenue from sales less
applicable credit card commissions, travel agency commissions, rebates, allowances,
chargebacks, and meals or other services included in room rates for complete meeting package
deals.
1.3.25. Operator. 1859 Historic Hotels, Ltd., a Texas limited partnership (an
affiliate of Gal -Tex Hotel Corporation), or an affiliate of 1859 Historic Hotels, Ltd. or such other
management entity as determined in accordance with Section 5.5.
1.3.26. Project. The hotel, conference/civic center and parking facilities project
described as the "Project" in the Master Development Agreement.
1.3.27. Restrictions and Limitations. Those certain matters described on
Exhibit B, attached hereto and made a part hereof for all purposes, which affect the Land, and to
which this Lease is made subject.
1.3.28. Term. The term of this Lease as provided in Section 1.2 of this Lease.
1.4. Effect of Lease. Notwithstanding anything to the contrary contained in this Lease
or the Master Development Agreement, Lessee shall have the exclusive right to possess, use and
operate the Leased Premises as a public facility during the Term, subject only to Lessor's express
rights herein.
ARTICLE II
Base Rental
2.1. Base Rental. Lessee shall pay Lessor the Base Rental as rental for the use and
occupancy of the Leased Premises during the Term in the amounts and at the times set forth on
Schedule 2.1 attached hereto and incorporated herein.
2.2. Statements and Records. Lessee shall provide, on a calendar year basis no later
than 90 days following the end of each calendar year a worksheet with sufficient detail
evidencing Lessee's calculation of Base Rent for the prior Lease year (a "Statement"). Each
Statement shall be in such form and shall be accompanied by such supporting information as
Lessor may reasonably require. If any Statement discloses an error in the calculation of the Base
Rental for any period, an appropriate adjustment shall be made. Lessee shall keep at the Leased
Premises or at Lessee's principal office within the United States a complete and accurate set of
books and records supporting Lessee's calculation of Base Rental and all supporting records
such as tax reports, banking records, cash register tapes, sales slips and other sales records,
which shall be preserved for at least 36 months after the end of each calendar year to which they
relate. Within such 36 month period, Lessor and its agents may, at any reasonable time during
normal business hours, inspect, copy and/or audit any or all of Lessee's books and accounts,
documents, records, sales tax returns, papers and files that reasonably relate to Base Rental and,
City Facilities Lease Agreement-
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at Lessor's request, Lessee shall make all such data available for such examination at the Leased
Premises or Lessee's principal office as applicable at such reasonable times during normal
business hours as Lessor shall specify. If it is determined by any such audit that any Statement
previously delivered to Lessor by Lessee was not accurate, an adjustment shall be made and one
party shall pay to the other party upon demand such sums as may be necessary so that the correct
amount of Base Rental shall have been paid by Lessee to Lessor. If any Statement submitted is
found to have understated Base Rental to an extent of more than five percent (5%) over the
figures submitted by Lessee in such Statement, Lessee shall pay for Lessor's inspection or audit
on demand.
2.3. Proprietary Information; Confidentiality. Lessor and Lessee acknowledge that
information available or provided to Lessor as provided in Section 2.2 above may include
proprietary or other confidential information, the disclosure of which could adversely affect
competitiveness of the operations of the City Facilities, and, consequently, the Base Rental to be
paid to Lessor. Accordingly, Lessor and Lessee covenant and agree, to the extent permitted by
law, that the disclosures requested by Lessee hereunder may be made in such manner as is
reasonably requested by Lessee to avoid the disclosure to the public of information Lessee deems
proprietary, or otherwise making such information subject to disclosure or release under federal,
state or local "open records" laws.
ARTICLE III
Impositions and Utilities
3.1. Payment of Impositions. Lessee shall pay all Impositions (if applicable) before
the same become delinquent, and Lessee, at the request of Lessor, shall furnish to Lessor receipts
or copies thereof showing the payment of such Impositions. Lessee shall be entitled to pay any
Impositions in installments as and to the extent the same may be permitted by the applicable
taxing authority or claimant. Lessor agrees to cooperate with Lessee in seeking the delivery of
all notices of Impositions to Lessee directly from the applicable taxing authorities.
3.2. Contest of Impositions. If the levy of any of the Impositions shall be deemed by
Lessee to be improper, illegal or excessive, or if Lessee desires in good faith to contest the
Impositions for any other reason, Lessee may, at Lessee's sole cost and expense, dispute and
contest the same and file all such protests or other instruments and institute or prosecute all such
proceedings for the purpose of contest as Lessee shall deem necessary or appropriate; provided,
however, that Lessee shall not permit any lien which may be imposed against the Leased
Premises for contested Impositions to be foreclosed and, within 60 days after the commencement
of such contest, Lessee shall provide to Lessor reasonable security therefor. Subject to the
foregoing, any item of contested Imposition need not be paid until it is finally adjudged to be
valid. Lessee shall be entitled to any refund of any Imposition (and the penalties or interest
thereon) refunded by the levying authority pursuant to any such proceeding or contest, if such
Imposition shall have been either (a) paid directly by Lessee, or (b) shall have been paid directly
by Lessor and Lessor was reimbursed therefor by Lessee.
City Facilities Lease Agreement—
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3.3. Standing. If Lessee determines that it lacks standing to contest any Impositions
imposed by a governmental authority or to obtain an extended payment period for any
Impositions, Lessor (to the maximum extent allowed by law), at Lessee's sole expense shall
provide Lessee with sufficient authority to obtain such standing.
3.4. Utilities. After the Commencement Date and during the Term, Lessee shall pay
or cause the Operator or its subtenants to pay any bills for utility service furnished to the Leased
Premises, including, but not limited to, bills for water, electricity, gas, telephone, drainage and
sewer service.
ARTICLE IV
Improvements
4.1. Improvement Rights. Lessor and Lessee acknowledge that the City Facilities
have been designed, financed, and constructed (or are being constructed) in accordance with the
Master Development Agreement. Lessee shall have the right, at its option and expense (subject
only to the Restrictions and Limitations and the express provisions set forth in this Lease) to
further develop any and all portions of the Leased Premises, except the City Facilities, and to
erect Improvements on the Leased Premises for any lawful uses and purposes consistent with the
uses permitted in Article V. Any Improvements not part of the Project shall remain the property
of Lessee until the termination of this Lease, at which time such Improvements shall become the
property of Lessor. Notwithstanding the above, upon termination of this Lease, any furnishings,
fixtures (that can be removed without damage to the Leased Premises), operating supplies,
equipment and any other contents of the Improvements which have been purchased or otherwise
provided by Lessee, other than under the provisions of Section 5.4, shall, at the option of the
Lessee, be and remain the property of Lessee. Lessee may remove such items, at its sole cost,
within a period of thirty (30) days following the termination of the Lease.
4.2. Right to Alter. Lessee shall have the right, at its sole cost and in its sole
discretion, subject to the terms of this Lease, to alter, add to, reconstruct, reconfigure, remodel or
rebuild as often as, and whenever, Lessee deems proper or desirable, any of the Improvements
other than the City Facilities. Lessee shall have the right, at its sole cost, to alter, add to,
reconstruct, reconfigure, remodel or rebuild the City Facilities with the prior written consent of
Lessor.
4.3. Easements and Dedications. It may be necessary or desirable from time to time
that (a) street, water, sewer, drainage, gas, power lines, set back lines or other easements,
dedications or similar rights be granted or dedicated over or within portions of the Leased
Premises by plat, replat, grant, deed or other appropriate instrument or acquired on other
properties, or (b) that existing street, sewer, drainage, gas, power lines, set back lines or other
easements, dedications or similar rights on, in the vicinity of or affecting the Leased Premises or
portions thereof be vacated or abandoned. With respect to the Improvements, Lessor shall, on
written request of Lessee, join with Lessee in executing and delivering such documents or
otherwise cooperating with or assisting Lessee (at Lessee's expense), from time to time
throughout the Term, as may be reasonably appropriate or necessary for the development or
City Facilities Lease Agreement-
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operation of the Leased Premises or to reasonably facilitate future Improvements on the Leased
Premises.
4.4. Zoning and Permits. In the event that Lessee deems it necessary or appropriate to
obtain use, zoning, site plan approval or any permit from Lessor or any other governmental
entity having jurisdiction over the Leased Premises or any part thereof, Lessor, from time to time
on request of Lessee and to the extent necessary as lessee under the Lease and fee owner of the
Improvements, shall cooperate with such applications to the extent that such cooperation is legal
and deemed appropriate by Lessor.
4.5. Personal Property. All personal property (including all furnishings, operating
supplies, and equipment) of Lessee, Operator or any sublessee installed or situated from time to
time in the Leased Premises shall remain the property of Lessee (or Operator or any sublessee
installing same).
ARTICLE V
Use of Premises
5.1. Use. Subject to Section 5.5 hereof, Lessee shall have the exclusive right, subject
to the Restrictions and Limitations, and the provisions of this Lease, including, but not limited to,
Section 4.1, to use the Leased Premises for the development, construction, maintenance and use
of the Leased Premises as a conference center facility for the benefit of the City as set forth in
Recital A of this Lease. Notwithstanding anything to the contrary herein, the portion of the
Improvements constituting the City Facilities are public facilities and shall, subject to such
reasonable and legal operational controls as Lessee deems appropriate, remain open and
available to the public as required by state and federal law. Lessee agrees to comply and
require the Operator to comply with the Guidelines for Utilizing the City Facilities
attached hereto as Exhibit "E" and incorporated herein as if fully set forth.
5.2. Compliance with Laws. Lessee agrees not to use the Leased Premises for any use
or purpose in violation of any valid and applicable law, regulation or ordinance of the United
States, the State of Texas, the City of Lubbock or other lawful governmental authority having
jurisdiction over the Leased Premises, including, without limitation, the Americans with
Disabilities Act of 1990, as amended; provided, however, there shall be no violation by Lessee of
this provision (a) so long as Lessee shall, in good faith within a reasonable time after Lessee
acquires actual knowledge thereof, by appropriate proceedings and with due diligence, contest
the alleged violation or the validity or applicability of the law, regulation or ordinance; (b) until
Lessee has had a reasonable time after a final adjudication that such law, regulation or ordinance,
in fact, has been violated to correct the violation; and (c) so long as neither Lessor nor any
portion of the Leased Premises, during the period of such contest, will be subject to any liability,
loss, penalty or forfeiture.
5.3. Maintenance; Casualty.
(a) Subject to the rights of Lessee pursuant to Section 4.1 hereof and to Lessee's
obtaining all necessary governmental permits, Lessee shall keep the City Facilities and all other
City Facilities Lease Agreement-
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permanent Improvements that from time to time may be located on or a part of the Leased
Premises in a state of good repair (reasonable wear and tear excepted) on a regular and ongoing
basis and shall otherwise maintain and operate the Leased Premises in a First -Class Manner. In
the event this Lease terminates, Lessee shall deliver up the Leased Premises and the
Improvements (subject to Section 4.1) then situated thereon in good condition (reasonable wear
and tear, obsolescence, acts of God and loss by casualty excepted). Lessor shall have no
obligation or responsibility, financial or otherwise, to operate or maintain the Leased Premises
during the Term, and Lessee's obligations to maintain the Leased Premises shall not be limited,
lessened or excused due to any lack of funds available in the AR&R Fund.
(b) With regard to casualty damage to the Leased Premises, Lessee will within 12
months after the date of a casualty commence the work of repair, reconstruction or replacement
of the damaged Improvement, provided that Lessee's obligation in this regard shall be limited to
the amount of insurance proceeds received by Lessee (if Lessee has maintained the property
insurance as required by Section 6.3 below).
(c) Any dispute under this Agreement arising between Lessee and Lessor concerning
(i) the maintenance and repair of the City Facilities (including, without limitation, whether the
City Facilities are being maintained in a First Class Manner in accordance with this Lease) or (ii)
the determination of the budget for the AR&R Fund as described below, shall be settled by a two
step process. Lessee and Lessor shall submit to mediation before a mediator upon which they
agree or, failing agreement, request that the Dispute Resolution Center of Lubbock County,
Texas appoint a mediator. Should mediation not settle the dispute, it shall be settled by
arbitration. Lessor and Lessee shall attempt to agree upon a single arbitrator who is experienced
in the hotel and conference center industry. If they cannot agree on a single arbitrator within
fifteen (15) days of the conclusion of the mediation, Lessee and Lessor shall petition the
American Arbitration Association for a list of qualified arbitrators and the arbitrator shall be
selected by use of the strike method. Arbitration proceedings shall be conducted according to the
Commercial Rules of the American Arbitration Association. The decision of the arbitrator shall
be binding and conclusive. The costs and expenses of such arbitration hereunder and their
apportionment between the Parties shall be determined by the arbitrator(s) in the award or
decision.
(d) Notwithstanding anything to the contrary contained herein, any mediation or
arbitration taking place as provided in Section 5.3(c) above, shall, upon the request of Lessee, be
conducted, to the maximum extent permitted by law, in such a manner that any information
Lessee deems proprietary shall not become "public" or otherwise available under federal, state or
local "open records" laws.
5.4. Asset Replacement and Renewal Reserve Account.
(a) Lessee shall, or shall cause the Operator to, annually contribute to the AR&R
Fund and to the Hotel Reserve Fund an aggregate amount equal to the Required Percentage
(hereinafter defined) of gross revenues received by Lessee and Operator from the operation of
the Project. As used herein, "Required Percentage" means the greater, from time to time, of (i)
the applicable replacement and reserve fund percentage specified in the Franchise Agreement, if
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any, (ii) the applicable replacement and reserve fund percentage specified in the Hotel Loan
Agreement then in effect, if any, or (iii) the applicable replacement and reserve fund percentage
for that operating year as specified in Schedule 5.4 attached hereto. An amount equal to twenty
percent (20%) of the aggregate amount of the funds thus contributed from the Project gross
revenues shall be deposited into the AR&R Fund, and the remainder shall be deposited in the
Hotel Reserve Fund. The AR&R Fund shall be segregated and maintained separately from the
Hotel Reserve Fund. The Parties acknowledge that the City shall have no control over the Hotel
Reserve Fund or the expenditures made with such funds.
(b) The AR&R Fund shall be used and available to Lessee solely for (i) capital
expenditures in connection with the operation and maintenance of the Leased Premises or (ii)
repairs to and replacements of the Leased Premises, in each case only to the extent incurred in
accordance with a capital budget reasonably approved by Lessor or as reasonably required in
connection with a casualty or other circumstance that may lead to injury or material damage to
property. No later than November 15 of each year during the Term, Lessee shall deliver to
Lessor a proposed capital budget for the Leased Premises for the following year, setting forth in
reasonable detail the capital expenditures and repair and replacement costs that Lessee expects to
incur during such period with respect to the Leased Premises. Lessor shall not unreasonably
withhold its approval of such proposed budget. In the event Lessor does not reasonably object in
writing to the proposed budget within 30 days of receipt, such budget shall be deemed approved
by Lessor. In the event Lessor and Lessee are unable to agree upon the proposed budget within
30 days after delivery to Lessor, the matter shall be resolved as provided in Section 5.3(c) above,
and, pending such resolution, the capital budget then in effect shall continue to apply.
(c) Lessee may obtain disbursements of the AR&R Fund by delivering to Lessor a
written draw request. Each such draw request shall include documentation of all costs and
expenses in reasonably sufficient detail to permit Lessor to determine the appropriateness of such
payment. Lessor shall pay or authorize the account -holding institution to make payment of the
amounts set forth in such draw requests as promptly as possible, but in any event within 20 days
after Lessor's receipt of such draw request.
5.5. Operational Rights; Revenue.
(a) Subject to the terms and provisions of this Lease, Lessee shall have full and
exclusive control of the management and operation of the Leased Premises. Without limiting the
generality of the foregoing, (i) Lessee shall have the right to grant and enter into licenses, rights,
subleases, operational agreements, management agreements, operating agreements and any and
all other agreements of any nature relating to the Leased Premises on such terms as Lessee
deems appropriate, and (ii) Lessee shall own all revenues of any source generated by or from the
Leased Premises or the operation or management thereof. Notwithstanding any language herein
to the contrary, Lessee shall not enter into any naming rights agreements for the City Facilities or
any portion thereof without the prior written consent of Lessor, which consent will not be
unreasonably withheld. Lessee intends to enter into an Operating Agreement for the Project with
the Operator on customary and reasonable terms commensurate with similarly situated hotel and
conference/civic center projects.
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(b) Notwithstanding anything in Section 5.5(a) above to the contrary, in the event
Lessee desires to (i) engage a person or entity other than 1859 Historic Hotels, Ltd., a Texas
limited partnership, or any affiliate of such entity, to manage or operate the Improvements
located on the Leased Premises or (ii) enter into a Franchise Agreement (if any) from time to
time, Lessee shall first obtain Lessor's prior written consent. Such consent shall not be
unreasonably withheld.
(c) Lessee shall own all rights, including intellectual property rights, in, to and
relating to the Leased Premises, including, without limitation, the Project, whether now in
existence or created in the future, including, without limitation, all copyrights, trademarks, trade
name, trade dress and merchandising rights of, in or relating to the Leased Premises and any and
all names, logos or other likenesses of the Leased Premises as well as the rights to protect,
enforce and license any or all of the foregoing (collectively, the "Likenesses"); provided,
however, subject to any restrictions or limitations in the Franchise Agreement (if any), Lessor
and its contractors (such as Lubbock Convention Visitors Bureau) shall have the right to use the
Project name, logo and image in connection with any Lessor -approved or Lessor -sponsored
campaign marketing the City of Lubbock, Texas subject to the approval of the Lessee, such
approval not to be unreasonably withheld, conditioned or delayed.
ARTICLE VI
Insurance and Indemnity
6.1. Liability Insurance. Lessee agrees, at its sole expense, to obtain and maintain
public liability insurance at all times during the Term of this Lease with responsible insurance
companies, legally authorized to transact business in the State of Texas for bodily injury
(including death) and property damage with minimum limits of $3,000,000 Combined Single
Limit protecting Lessor and Lessee against any liability, damage, claim or demand arising out of
or connected with the condition or use of the Leased Premises. Such insurance shall include
contractual liability, personal injury and advertising liability, alcohol liability, business
automobile (including owned, non -owned and hired) and independent contractor liability. Such
insurance coverage must be written on an "occurrence" basis. It must be maintained by any
combination of single policies and umbrella policies and may be obtained and maintained by a
sublessee with respect to that portion of the Leased Premises subleased to such sublessee. Lessor
shall be named as an additional insured on a primary and non-contributory basis on all insurance
policies required in this Section 6. 1, whether provided by Lessee or by any sublessee, including
policies providing higher limits of liability or other coverages.
6.2. Workers' Compensation Insurance. Lessee agrees, at its sole expense, to obtain
and maintain workers' compensation insurance, or an acceptable non -subscriber form of
insurance, during the Term, and if so required, with statutory limits and employer's liability with
limits of $500,000 each accident, $500,000 disease each employee and $500,000 disease per
policy. The policy will be endorsed to provide a waiver of subrogation as to Lessor.
6.3. Property Insurance. At all times during the Term of this Lease, Lessee shall, at its
sole expense, keep all buildings and structures included in the Leased Premises (exclusive of
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foundations), insured against "all risk" of loss for full replacement cost coverage to include
direct loss by fire, windstorm, hail, explosion, riot, civil commotion, aircraft, vehicles, smoke,
boiler and machinery, and flood. Coverage must be written by responsible insurance companies
legally authorized to transact business in the State of Texas. Lessor shall be named as the
insured.
6.4. Policies. All insurance policies required by this Article VI shall provide for at
least 30 days written notice to Lessor before cancellation and certificates or copies of policies of
insurance shall be delivered to Lessor. If any blanket general insurance policy of Lessee
complies with the terms of these provisions, the naming of Lessor therein as additional insured
shall be deemed compliance with the requirements for the insurance coverage provided in any
such blanket policy. Lessor and Lessee hereby waive all claims, rights of recovery and
causes of action that either party or any party claiming by, through or under such party by
subrogation or otherwise may now or hereafter have against the other party or any of the
other party's partners, directors, officers, employees or agents, for bodily injuries
(including death) to persons, or loss or damage to property of Lessor and Lessee whether
caused by the negligence or fault of Lessor and Lessee or their partners, directors, officers,
employees or agents or otherwise, to the extent that the injuries, loss or damages are
covered by the proceeds of insurance policies maintained by either party.
6.5. Adjustment of Losses. At the request of Lessee at any time during the Term of
this Lease, any Leasehold Mortgagee may be named as a mortgagee, loss payee or an additional
insured, as appropriate, under any of said insurance policies required under Section 6.3 hereof, as
its interest may appear. Any loss proceeds under any such insurance policy required under
Section 6.3 hereof shall be made payable to Lessee or Leasehold Mortgagee, to the end that such
person shall be entitled to collect all money due under such insurance policies payable in the
event of and by reason of the loss of or damage to the Leased Premises, to be applied pursuant to
Section 6.6 below. The adjustment of losses with the insurer shall be made solely by Lessee or
Leasehold Mortgagee, as applicable.
6.6. Proceeds of Property Insurance. All proceeds payable pursuant to the provisions
of any policies of property insurance carried by Lessee with respect to the City Facilities shall be
used for the repair and restoration of the City Facilities (unless otherwise agreed by Lessor), and
any excess amounts shall be the property of Lessee (Lessor having no right, title or interest
therein) and may be applied by Lessee pursuant to the terms of any Leasehold Mortgage, or as
otherwise directed by Lessee.
6.7. Environmental Investigation and Remediation.
(a) Lessee shall be responsible for performing any environmental investigation and
remediation work which may be required in connection with the use and occupancy of the
Leased Premises and which is caused by the presence of Hazardous Materials (hereinafter
defined) on the Leased Premises whether such presence arose before or after the Commencement
Date, except to the extent such work results from the act of Lessor or its officers, employees,
representatives or agents. Such environmental investigation and remediation work shall be
carried out in accordance with all applicable laws. Lessee shall notify and advise Lessor of the
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remediation Lessee will undertake and the procedures to be used. Lessee shall complete the
remediation with due diligence and shall comply with, and shall cause its agents and contractors
to comply with, all applicable laws regarding the use, removal, storage, transportation, disposal
and remediation of Hazardous Materials. Lessee's obligation as provided above to undertake
environmental investigation and remediation of the Leased Premises shall be a continuing
obligation of Lessee throughout the Term.
(b) The term "Hazardous Materials" means any substance, material or waste which is
now or hereafter classified or considered to be hazardous, toxic or dangerous under any federal,
state or local laws, rules and regulations (collectively "Laws") affecting the Leased Premises
relating to pollution or the protection or regulation of human health, natural resources or the
environment, but shall exclude any such items that are necessary for the ordinary performance of
Lessee's or any sublessee's business activities, provided that such are used, stored and disposed
of in compliance with all Laws. If Lessee breaches its obligations under this Section 6.7 and
such breach is not cured following notice and within the applicable cure period specified in
Article IX below, Lessor may take any and all action reasonably appropriate to remedy such
breach, including taking all appropriate action to clean up or remediate any contamination
resulting from Lessee's use, generation, storage or disposal of Hazardous Materials, and Lessee
shall promptly pay all reasonable costs incurred by Lessor in connection therewith. To the extent
permitted under applicable law, Lessee shall defend, indemnify and hold harmless Lessor, its
officers, agents, employees and representatives, from and against any and all claims, demands,
liabilities, causes of action, suits, judgments, damages and expenses (including reasonable
attorneys' fees and cost of cleanup and remediation) arising from Lessee's failure to comply with
the provisions of this Section 6.7. This indemnity provision shall survive termination or
expiration of this Lease.
6.8. Indemnity.
(a) During the Term, to the extent permitted under applicable law, Lessee agrees to
defend, indemnify and hold harmless Lessor, its officers, employees, representatives and agents
from and against any and all claims, injuries (including death), demands, liabilities, causes of
action, suits, judgments, damages and expenses (including reasonable attorneys' fees) arising
from (i) Lessee's failure to perform its obligations under this Lease, including any insurance
obligation, (ii) the negligence of Lessee, its officers, agents, employees, representatives or
contractors, or (iii) the use, possession, management and maintenance of the Leased Premises
during the Term or any other occurrence on the Leased Premises after the Commencement Date,
except to the extent that such is caused by the breach of this Lease by Lessor or by act or
omission of Lessor or its officers, employees, representatives, agents or contractors (other than
Lessee).
(b) Lessor shall give Lessee written notice of any claim filed, made or asserted
against Lessor by any person or entity other than Lessee that could result in liability of Lessee
under the provisions of Section 6.8(a) above or under the next to the last sentence of
Section 6.7(b) above ("Indemnity Liability') reasonably promptly after Lessor becomes aware
that such claim has been filed, made or asserted against Lessor. Lessor, without the prior written
consent of Lessee, shall not compromise or settle any claim that could result in Indemnity
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Liability or take any action that could materially interfere with, jeopardize or adversely affect the
defense by Lessee or Lessor against any such claim. Lessor, to the extent reasonably requested
by Lessee, and at Lessee's expense, shall cooperate with Lessee in the defense against any such
third party claim and shall assert (and authorizes Lessee to assert) any good faith defenses that
Lessor or Lessee may have against such third party claim. Lessee shall be subrogated to any and
all rights of Lessor to assert any claim, right or action related to any claim that could or does
result in Indemnity Liability.
ARTICLE VII
Assignment and Subletting by Lessee
7.1. Assignment. In connection with the sale or transfer of the Hotel, Lessee shall
have the right, subject to the prior written consent of Lessor (such consent not to be unreasonably
withheld, conditioned or delayed), to sell or assign all of the leasehold estate created hereby in its
entirety, and the rights of Lessee, or any successor, assignee or grantee of Lessee, may pass by
operation of law. Upon any such assignment by Lessee, the assignee shall execute and deliver to
the non -assigning party a written assumption in the form attached hereto as Exhibit D of all of
the obligations of the assigning party pertaining to the Leased Premises and accruing under this
Lease after such assignment, and the assigning party shall thereafter be released of all liabilities
or obligations thereafter accruing under this Lease.
7.2. Subletting and Easement Granting. Subject to Section 5.5(b) above, Lessee shall
have the right, subject to the prior written consent of Lessor (such consent not to be unreasonably
withheld, conditioned or delayed), to grant easements in, and/or sublet all or any portion of the
Leased Premises or enter into such other occupancy or use arrangements for all or any portion of
the Leased Premises as Lessee may deem proper, it being agreed, however, that no granting of
any easement, subletting or other arrangements shall relieve Lessee of any of its obligations
hereunder unless otherwise agreed in writing by Lessor, and all easement grants, subleases and
other arrangements shall be subject to the terms and provisions of this Lease, including, the
terms of Section 5.1 regarding the City Facilities being operated as a public conference/civic
center facility and remaining open and available to the public.
7.3. Nondisturbance Agreements. Upon the written request of Lessee, Lessor will
provide a nondisturbance agreement, in form reasonably acceptable to Lessor and Lessee, to any
sublessee, Operator or Leasehold Mortgagee.
7.4. General Provisions. Lessee shall, in connection with any proposed assignment of
its interest in this Lease, provide notice to Lessor of the name and address of the assignee,
together with a complete copy of the assignment agreement and such ownership and financial
statement of the assignee as reasonably available to Lessee. Lessee shall, in connection with any
sublease, provide notice to Lessor of the name and address of the sublessee, together with a
complete copy of the sublease and, if requested by Lessor, such ownership and public financial
information of the sublessee as reasonably available to Lessee. In addition, Lessee shall provide
Lessor with a description of the nature of the assignee's and sublessee's business to be carried on
in the Leased Premises.
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ARTICLE VIII
Mortgages
8.1. No Liens, Encumbrances or Charges. Except as provided in this Article VIII,
Lessee shall not create or permit to be created any lien, encumbrance, or charge upon the Leased
Premises or any part thereof or the Leasehold Estate, and Lessee shall not suffer any other matter
or thing whereby the estate, rights and/or interest of Lessor and Lessee (or any part thereof) in
the Leased Premises or any part thereof might be encumbered by any such lien or charge.
8.2. Leasehold Mortgages Permitted. Lessee, from time to time and at any time, shall
have the right to grant a Leasehold Mortgage, subject to the prior written consent of Lessor,
which consent shall not be unreasonably withheld, and in such event, upon Lessee's written
request to Lessor, Lessor will execute and deliver a reasonable estoppel certificate addressed to
the Leasehold Mortgagee setting forth the information described in Section 13.2 of this Lease
and providing Lessor's agreement to recognize the Leasehold Mortgagee or any purchaser of the
Mortgaged Premises at foreclosure in the same manner as an assignee pursuant to Section 7.1 of
this Lease. Notwithstanding the foregoing, no Leasehold Mortgagee shall acquire, by virtue of
the Leasehold Mortgage, any greater right in the Mortgaged Premises and in any building or
improvements thereon than Lessee then had under this Lease, and provided further that any
Leasehold Mortgage shall at all times be and remain inferior and subordinate to the leasehold
estate created by this Lease. In no event shall Lessee or any person or entity claiming by,
through or under Lessee have the right to encumber, subordinate or render inferior in any way
Lessor's interest in and to the Leased Premises.
8.3. Notices to Leasehold Mortgagees. If at any time after execution and recordation
of any Leasehold Mortgage in the Real Property Records of Lubbock County, Texas, in
accordance with the provisions of this Article VIII, the Leasehold Mortgagee shall notify Lessor
in writing that the Leasehold Mortgage on the Mortgaged Premises has been given and executed
by Lessee, and shall furnish Lessor at the same time with the address to which such Leasehold
Mortgagee desires copies of notices to be mailed, or designates some person or corporation as its
agent and representative for the purpose of receiving copies of notices, Lessor hereby agrees that
it will thereafter deliver in the manner specified in Section 13.6(a) to such notifying Leasehold
Mortgagee and to the agent or representative so designated by such notifying Leasehold
Mortgagee, at the address so given, duplicate copies of any and all notices in writing which
Lessor may from time to time give or serve upon Lessee under and pursuant to the terms and
provisions of this Lease and any and all pleadings in suits filed by Lessor against Lessee, as
applicable. No notice to Lessee shall be effective as to a notifying Leasehold Mortgagee unless
duplicate copies thereof are delivered to such notifying Leasehold Mortgagee at the same time
the notice is given or served upon Lessee.
8.4. Leasehold Mortgagee's Ri t to Cure. If Lessor shall ever be entitled to exercise
its remedies for a default by Lessee under this Lease after the giving of notice and/or the passage
of time as described in Section 9.1, as applicable, Lessor, subject to notification by Leasehold
Mortgagee pursuant to Section 8.2 above, shall, prior to exercising such remedies, deliver
additional written notice to Leasehold Mortgagee of Lessor's intention to so exercise its
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remedies and describing the existing defaults, and, provided any existing Franchise Agreement
remains in full force and effect, Leasehold Mortgagee thereafter shall have 180 days to cure the
defaults described in such written notice. Lessor shall refrain from exercising its remedies
hereunder until such written notice shall have been given to Leasehold Mortgagee and such 180 -
day period shall have expired without the described defaults having been cured. Leasehold
Mortgagee may, at its option any time, pay any of the Base Rental due hereunder, procure any
insurance required hereunder, pay any Imposition required hereunder, make any repairs and
improvements required hereunder, or do any other act or thing or make any other payment
required of Lessee by the terms of this Lease or which may be necessary and appropriate to
comply with the covenants and conditions of this Lease to prevent or cure a default under this
Lease. All payments so made and all things so done and performed by any such Leasehold
Mortgagee shall be as effective as if performed by Lessee, provided, however, Leasehold
Mortgagee shall have no obligation to take any such action and shall incur no liability to Lessor
whatsoever.
8.5. New Lease. Notwithstanding anything to the contrary contained in this Lease or
otherwise, in the event of termination of this Lease for any reason (other than termination by
mutual agreement by the parties to this Agreement) prior to the stated expiration date, Lessor
shall promptly notify the Leasehold Mortgagee of such termination. If the Leasehold Mortgagee
having the highest priority with respect to the Lease cures all defaults that were the basis for such
termination as provided below, Lessor shall enter into a new lease of the Mortgaged Premises
with such Leasehold Mortgagee or its designee for the remainder of the Term of this Lease, such
new lease to be effective as of the date of termination of this Lease, at the Base Rental payable
hereunder and upon all of the same terms, conditions, covenants, agreements, provisions and
limitations contained herein, subject to the following:
(a) the Leasehold Mortgagee entitled to the new lease shall make written request to
Lessor for a new lease within 45 days after receipt by the Leasehold Mortgagee of written notice
from Lessor of the date of termination of this Lease ("Mortgagee New Lease Period"); and
(b) at the time of the execution and delivery of the new lease, the Leasehold
Mortgagee or its designee shall pay to Lessor all amounts specified in the notice of termination
delivered by Lessor which would have been due hereunder except for such termination and
which are currently due except for such termination, and shall promptly cure all other defaults
that were the basis for such termination.
8.6. Survival. The provisions of Section 8.4, Section 8.5, and Section 8.6 shall survive
the termination of this Lease and shall continue in full force and effect thereafter to the same
extent as if said sections were a separate and independent contract among Lessor, Lessee and any
Leasehold Mortgagee.
8.7. Leasehold Mortgagee's Liability. Unless a new lease shall have been executed
pursuant to Section 8.4 above, no Leasehold Mortgagee shall be or become personally liable to
Lessor as an assignee of this Lease, for the payment or performance of any obligation of Lessee
unless and until it (a) expressly assumes by written instrument the payment or performance of
such obligation or (b) purchases the leasehold interest in the Lease at a foreclosure sale, and,
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except for the foregoing, no assumption of liability shall be inferred from or result from
foreclosure or other appropriate proceedings in the nature thereof or as the result of any other
action or remedy provided for by any Leasehold Mortgage, or from a conveyance or assignment
pursuant to which any purchaser at foreclosure (other than the Leasehold Mortgagee) shall
acquire the rights and interest of Lessee under the terms of this Lease; provided, however, any
such assignee or purchaser must timely and diligently perform all obligations of Lessee
hereunder.
8.8. No Modification or Surrender. During such time as Lessee's leasehold estate is
subject to the Leasehold Mortgage, this Lease of the Leased Premises may not be modified or
voluntarily surrendered without the prior written consent of the Leasehold Mortgagee, which
consent shall not be unreasonably withheld, conditioned or delayed.
ARTICLE IX
Default of Lessee
9.1. Defaults.
(a) Each of the following occurrences shall be an "Event of Default":
(i) Payment Default. Lessee's failure to pay Base Rental within five days
after Lessor has delivered written notice to Lessee that the same is due;
(ii) Permitted Use. If the Leased Premises are used for other than the
permitted uses set forth in Article V and such default continues for a
period of 30 days following written notice thereof to Lessee;
(iii) Estoppel. Lessee fails to provide any estoppel certificate after Lessor's
written request therefor pursuant to Section 13.2 and such failure shall continue for five
days after Lessor's second written notice thereof to Lessee;
(iv) Insurance. Lessee fails to procure, maintain and deliver to Lessor
evidence of the insurance policies and coverages as required under Article VI within 10
business days after written notice from Lessor;
(v) Mechanic's Liens. Lessee fails to pay and release of record, or diligently
contest and bond around, any mechanic's or materialmen's lien filed against the Leased
Premises for any work performed, materials furnished, or obligation incurred by or at the
request of Lessee, within 30 days after written notice thereof;
(vi) Franchise Agreement; Hotel Loan Agreement. A default of the Lessee
and/or Operator shall occur under (A) the Franchise Agreement or (B) the Hotel Loan
Agreement and such default shall continue beyond any applicable notice and cure or
grace periods;
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(vii) Other Defaults. Lessee's failure to perform, comply with, or observe any
other agreement or obligation of Lessee under this Lease and the continuance of such
failure for a period of more than 30 days after Lessor has delivered to Lessee written
notice thereof or such longer period as may be reasonably necessary, provided Lessee
commences to cure such failure and proceeds diligently to completion; and
(viii) Insolvency. The filing of a petition by or against Lessee (1) in any
bankruptcy or other insolvency proceeding; (2) seeking any relief under any state or
federal debtor relief law; (3) for the appointment of a liquidator or receiver for all or
substantially all of Lessee's property or for Lessee's interest in this Lease; (4) for the
reorganization or modification of Lessee's capital structure; or (5) in any assignment for
the benefit of creditors proceeding; however, if such a petition is filed against Lessee,
then such filing shall not be an Event of Default unless Lessee fails to have the
proceedings initiated by such petition dismissed within 90 days after the filing thereof.
(b) Upon and during the continuance of any Event of Default, Lessor may, in addition
to all other rights and remedies afforded Lessor hereunder or by law or equity, including the right
to terminate the Lease on 30 days notice, perform any act Lessee is obligated to perform as
provided in Section 13.4 below.
(c) All remedies of Lessor under this Lease (including Section 5.3(c) above) shall be
cumulative, and the failure to assert any remedy or the granting of any waiver (as provided in
Section 13.20 of this Lease) of any event of default shall not be deemed to be a waiver of such
remedy or any subsequent event of default.
ARTICLE X
Default of Lessor
10.1. Defaults and Remedies. In the event of any breach by Lessor of any covenant of
Lessor under this Lease, Lessee shall have the right to deliver to Lessor a written notice
specifying such breach, and unless within 30 days from and after the date of delivery of such
notice Lessor shall have commenced to remove or to cure such breach or occurrence and shall be
proceeding with reasonable diligence to completely remove or cure such breach or occurrence,
then Lessor shall be in default hereunder, in which event Lessee, may, in addition to all other
rights and remedies afforded Lessee hereunder or by law or equity, have the right to damages
suffered or incurred by Lessee as a result of such default, the right to an injunction and/or an
order seeking specific performance. All remedies of Lessee under this Lease shall be
cumulative, and the failure to assert any remedy or the granting of any waiver (as provided in
Section 13.20 of this Lease) of any event of default shall not be deemed to be a waiver of such
remedy or any subsequent event of default.
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ARTICLE XI
Condemnation
11.1. Definitions. Whenever used in this Article, the following words shall have the
definitions and meanings hereinafter set forth:
(a) "Condemnation Proceedings". Any action brought for the purpose of any taking
of the Leased Premises, or any part thereof or any property interest therein (including, without
limitation, the right to the temporary use of all or any portion of the Leased Premises), by
competent authority as a result of the exercise of the power of eminent domain, including a
voluntary sale to such authority either under threat of condemnation or while such action or
proceeding is pending.
(b) "Taking" or "Taken". The event and date of vesting of title to the Leased
Premises or any part thereof or any property interest therein (including, without limitation, the
right to the temporary use of all or any portion of the Leased Premises), pursuant to a
Condemnation Proceeding.
11.2. Efforts to Prevent Taking. Lessee shall use reasonable efforts to cause all other
competent authorities with the power of eminent domain to refrain from instituting any
Condemnation Proceedings or exercising any other powers of eminent domain with respect to
the Leased Premises, or any part thereof or any interest therein, during the Term of this Lease.
11.3. Entire Taking. If all or substantially all of the Leased Premises shall be Taken in
Condemnation Proceedings, Base Rental shall be fully abated from and after the date of such
Taking and from and after such date Lessee and Lessor shall not have any other obligations
under this Lease with respect to the Leased Premises.
11.4. Partial Taking.
(a) If less than all of the Leased Premises shall be Taken in Condemnation
Proceedings, no portion of the Base Rental shall be abated, but from and after such date Lessee
and Lessor shall not have any other obligations under this Lease with respect to the portion of the
Leased Premises that has been taken.
(b) If, following such Taking, in the opinion of Lessee it is not economically feasible
to continue this Lease, then Lessee, at its election, may vacate the Leased Premises, whereupon
the Base Rental shall be fully abated from and after the date of such vacating, and from and after
such date Lessee and Lessor shall not have any other obligations under this Lease with respect to
the Leased Premises. Such election to vacate, and the vacating of the Leased Premises, must be
exercised and completed no later than 180 days after the date of such Taking.
(c) If Lessee does not elect to vacate the Leased Premises upon any partial Taking,
then (i) the Leased Premises shall be reduced by the portion thereof Taken in the Condemnation
Proceeding, and the Base Rental payable hereunder shall be equitably reduced during the
unexpired portion of the Term as provided above, and (ii) Lessee shall commence and proceed
City Facilities Lease Agreement-
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with reasonable diligence to repair or reconstruct the remaining Improvements on the Leased
Premises; provided, however, Lessee's obligation to so repair or reconstruct the remaining
Improvements shall be limited to the proceeds of the condemnation award actually received by
Lessee.
11.5. Temporary Taking. If any right of temporary possession or occupancy of all or
any portion of the Leased Premises shall be Taken, the Base Rental shall be reduced during the
duration of such Taking in a fair and equitable manner that reflects the inability of Lessee to use
the affected portion of the Leased Premises.
11.6. Effect of Taking.
(a) No Taking shall have the effect of terminating this Lease. None of the provisions
of this Article XI shall affect the right, title or interest of Lessee in the leasehold interest created
by this Lease. This Article XI pertains only to Lessee's and Lessor's continuing obligations
under this Lease following a Taking and to the agreement between Lessor and Lessee regarding
any condemnation awards.
(b) At any time within 180 days following an entire Taking or a partial Taking
following which Lessee vacates the remaining Leased Premises as provided in Section 11.4(b)
above, Lessee may terminate this Lease by delivering a written termination notice to Lessor
specifying the effective date of such termination, in which event the Term shall terminate as of
the date specified by Lessee in such notice.
(c) Any award which shall be made as a result of a taking (i) of the leasehold interest
in the Leased Premises under this Lease shall be paid to Lessee and (ii) of the value of the City
Facilities shall be paid to Lessor. Lessor shall deliver to Lessee that portion of any
condemnation award that Lessor may receive to which Lessee is entitled as provided in this
Section 11.6(c). The provisions of this Section 11.6(c) shall survive any such termination.
11.7. Settlement of Proceedings. Lessor shall not make any settlement with the
condemning authority in any Condemnation Proceedings nor convey or agree to convey the
whole or any portion of the Leased Premises to such authority in lieu of condemnation without
first obtaining the written consent of Lessee and any Leasehold Mortgagee.
ARTICLE XII
Representations, Warranties and Special Covenants
12.1. Representations, Warranties and Special Covenants. Lessee hereby represents,
warrants and covenants as follows:
12.1.1. Existence. Lessee is duly organized and validly existing under the laws of
the state of its organization.
12.1.2. Authority. Lessee has all requisite power and authority to lease the
Leased Premises, to execute, deliver and perform its obligations under this Lease and to
City Facilities Lease Agreement
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consummate the transactions herein contemplated and, by proper action in accordance with all
applicable law has duly authorized the execution and delivery of this Lease, the performance of
its obligations under this Lease and the consummation of the transactions herein contemplated.
12.1.3. Binding Obli ag tion. This Lease is a valid and binding obligation of
Lessee and is enforceable against Lessee in accordance with its terms.
12.1.4. No Defaults. The execution by Lessee of this Lease and the
consummation by Lessee of the transactions contemplated hereby (i) do not, as of the
Commencement Date, result in a breach of any of the terms or provisions of, or constitute a
default, or a condition which upon notice or lapse of time or both would ripen into a default,
under Lessee's charter or any resolution, indenture, agreement, instrument or obligation to which
Lessee is a party or by which the Leased Premises or any portion thereof is bound; and (ii) do
not, to the knowledge of Lessee, constitute a violation of any law, order, rule or regulation
applicable to Lessee or any portion of the Leased Premises of any court or of any federal or state
or municipal regulatory body or administrative agency or other governmental body having
jurisdiction over Lessee or any portion of the Leased Premises.
12.1.5. Consents. No permission, approval or consent by third parties or any
other governmental authorities is required in order for Lessee to enter into this Lease, make the
agreements herein contained or perform the obligations of Lessee hereunder other than those
which have been obtained.
12.1.6. Proceedings. There are no actions, suits or proceedings pending or, to the
reasonable best knowledge of Lessee, threatened or asserted against Lessee affecting any portion
of the Leased Premises, at law or in equity or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality, domestic or
foreign.
12.1.7. Impositions. Lessee has not received any notice of any condemnation
actions or special assessments which are pending or being contemplated with respect to the
Leased Premises or any portion thereof.
12.1.8. Compliance with Laws. Lessee has not received any notice of any
violation of any ordinance, regulation, law or statute of any governmental agency pertaining to
the Leased Premises or any portion thereof.
12.1.9. As -Is. Lessee accepts the leasehold interest granted by this Lease on an
"as -is" basis with all faults, and without warranties of title, express or implied. Other than as
expressly set forth in Section 12.2 below, Lessee is not relying on any representations,
disclosures or non -assertions by Lessor in connection with the lease of the Leased Premises, and
Lessee expressly assumes all responsibility for the condition of the Leased Premises and any
environmental problems on or within, or emanating from, the Leased Premises. By acceptance
of this Lease, Lessee releases any claim or cause of action Lessee may have against Lessor, its
officers and employees, based upon the condition of the Leased Premises, its suitability (or lack
thereof) for any specific purpose. This release is binding upon Lessee, and Lessee's successors
and assigns.
City Facilities Lease Agreement-
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12.2. Lessor's Representations, Warranties and Special Covenants. Lessor hereby
represents, warrants and covenants as follows:
12.2.1. Existence. Lessor is a home rule municipal corporation of the State of
Texas duly incorporated and currently existing pursuant to the constitution and laws of the State
of Texas, including the Texas Local Government Code and Texas Government Code.
12.2.2. Authority. Lessor has all requisite power and authority to own its
property, operate its business, enter into this Lease and consummate the transactions herein
contemplated, and by proper action has duly authorized the execution and delivery of this Lease
and the consummation of the transactions herein contemplated.
12.2.3. Binding Obligations. This Lease is a valid obligation of Lessor and is
binding upon Lessee in accordance with its terms.
12.2.4. No Defaults. The execution by Lessor of this Lease and the
consummation by Lessor of the transactions contemplated hereby (i) do not, as of the
Commencement Date, result in a breach of any of the terms or provisions of, or constitute a
default, or a condition which upon notice or lapse of time or both would ripen into a default,
under Lessor's charter or any resolution, indenture, agreement, instrument or obligation to which
Lessor is a party or by which the Leased Premises or any portion thereof is bound; and (ii) do
not, to the knowledge of Lessor, constitute a violation of any law, order, rule or regulation
applicable to Lessor or any portion of the Leased Premises of any court or of any federal or state
or municipal regulatory body or administrative agency or other governmental body having
jurisdiction over Lessor or any portion of the Leased Premises.
12.2.5. Consents. No other permission, approval or consent by third parties or
any other governmental authorities is required in order for Lessor to enter into this Lease or
consummate the transactions herein contemplated, other than those which have been obtained.
12.2.6. Proceedings. There are no actions, suits or proceedings pending or, to the
reasonable best knowledge of Lessor, threatened or asserted against Lessor affecting any portion
of the Leased Premises, at law or in equity or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality, domestic or
foreign.
12.2.7. Impositions. Lessor has not received any notice of any condemnation
actions or special assessments which are pending or being contemplated with respect to the
Leased Premises or any portion thereof.
12.2.8. Compliance with Laws. Lessor has not received any notice of any
violation of any ordinance, regulation, law or statute of any governmental agency pertaining to
the Leased Premises or any portion thereof.
12.2.9. Quiet Enjoyment. During the Term of this Lease and subject to the terms
of this Lease, Lessee shall have the quiet enjoyment and peaceable possession of the Leased
City Facilities Lease Agreement-
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Premises against hindrance or disturbance by Lessor or by any person or entity acting by,
through or under Lessor.
12.2.10. Limitations. Except as otherwise expressly provided herein, this
Lease is made by Lessor without representation or warranty of any kind, either express or
implied, as to the condition of the Leased Premises, its merchantability, its condition or its fitness
for Lessor's intended use or for any particular purpose.
ARTICLE XIII
Miscellaneous
13.1. Inspection. Lessee shall permit Lessor and its agents, upon no less than 24 hours
prior written notice, to enter into and upon the Leased Premises during normal business hours for
the purpose of inspecting the same on condition that such inspection does not interfere with the
quiet enjoyment of the Leased Premises by Lessee and the sublessees or invitees of Lessee.
13.2. Estoppel Certificates. Lessee and Lessor shall, at any time and from time to time
upon not less than ten days' prior written request by the other Party, execute, acknowledge and
deliver to Lessor or Lessee, as the case may be, a statement in writing certifying (a) its
ownership of the interest of Lessor or Lessee hereunder (as the case may be), (b) that this Lease
is unmodified and in full force and effect (or if there have been any modifications, that the same
is in full force and effect as modified and stating the modifications), (c) the dates to which the
Base Rental has been paid, and (d) that, to the best knowledge of Lessor or Lessee, as the case
may be, no default hereunder on the part of the other Party exists (except that if any such default
does exist, the certifying Party shall specify such default). Upon request by Lessee, Lessor's
estoppel certificate also shall be addressed to the Leasehold Mortgagee or sublessees.
13.3. Release. If requested by Lessor, Lessee, upon termination of this Lease, shall
execute and deliver to Lessor an appropriate release, in form proper for recording, of all Lessee's
interest in the Leased Premises, and upon request of Lessee, Lessor will execute and deliver a
written cancellation and termination of this Lease and release of all claims (if none are then
outstanding) in proper form for recording to the extent such release is appropriate under the
provisions hereof.
13.4. Lessor's Right to Perform Lessee's Covenants. If Lessee shall fail in the
performance of any of its covenants, obligations or agreements contained in this Lease, other
than the obligation to pay Base Rental, and such failure shall continue without Lessee curing or
commencing to cure such failure within all applicable grace and/or notice and cure periods,
Lessor may (but without any obligation to do so) perform the same for the account and at the
expense of Lessee, and the amount of any payment made or other reasonable expenses (including
reasonable attorneys' fees incurred by Lessor for curing such default), with interest thereon at the
rate of 10% per annum, shall be payable by Lessee to Lessor on demand, or if not so paid, shall
be treated at Lessor's option as a monetary default hereunder.
13.5. Lessee's Right to Perform Lessor's Covenants. If Lessor shall fail in the
performance of any of its covenants, obligations or agreements contained in this Lease, and such
City Facilities Lease Agreement-
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failure shall continue without Lessor curing or commencing to cure such failure within all
applicable grace and/or notice and cure periods, Lessee, may (but without any obligation to do
so) perform the same for the account and at the expense of Lessor, and the amount of any
payment made or other reasonable expenses (including reasonable attorneys' fees incurred by
Lessee for curing such default), with interest thereon at the rate of 10% per annum, shall be
payable by Lessor to Lessee on demand. This provision is not in lieu of, but is in addition to,
any other rights or remedies Lessor may have with respect to any such failure of performance by
Lessor.
13.6. Notices. Any notice to be given or to be served in connection with this Lease
must be in writing and shall be given only by (i) actual delivery, (ii) overnight courier, or (iii)
telecopy and shall be deemed to have been given and received upon actual delivery, addressed as
follows:
If to Lessor:
City Manager
City of Lubbock
P.O. Box 2000
Lubbock, Texas 79457
Attention: Rob Allison, Assistant City Manager
Telecopy No. (806)775-2051
With a copy to:
City Attorney
City of Lubbock
P.O. Box 2000
Lubbock, Texas 79457
Attention: Linda Chamales, Senior Attorney
Telecopy No. (806)775-3307
If to Lessee:
1859 Management Partners, LP
c/o Gal -Tex Hotel Corporation
2302 Postoffice Street, Suite 500
Galveston, Texas 77550-1935
Attention: Eugene Lucas
Telecopy No.: (409) 763-5304
With a copy to:
Winstead
1201 Elm St # 5400
Dallas, TX 75270
Attention: John C. Rutherford, Esq.
City Facilities Lease Agreement-
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greement— Page 23
Telecopy No.: (214) 745-5390
Mrs]
Garfield Traub Development LLC
13455 Noel Road, Suite 2150
Dallas, Texas 75240
Attention: Daniel K. Hennessy, Esq.
Telecopy No.: (972) 991-5150
provided, however, that any Party may at any time change the place of receiving notice by ten
days' written notice of such change of address to the other Party in accordance with the manner
of giving notice described above.
13.7. Successors and Assigns. The word "Lessee" as used in this instrument shall
extend to and include the entity executing this Lease, as well as any and all persons or entities
who at any time or from time to time during the Term of this Lease shall succeed to the interest
and estate of Lessee hereunder, immediate or remote, including any purchaser at any foreclosure
sale and successive assignees or successors of the purchaser at any foreclosure sale and grantees
or assignees of the leasehold estate in lieu of foreclosure under any Leasehold Mortgage granted
by Lessee; and all of the covenants, agreements, conditions and stipulations herein contained
which inure to the benefit of or are binding upon Lessee shall also inure to the benefit of and
shall be jointly and severally binding upon the successors, assigns and grantees of Lessee, and
each of them, and any and all persons who at any time or from time to time during the Term shall
succeed to the interest and estate of Lessee created hereby. The word "Lessor" as used in this
instrument shall extend to and include the entity executing this instrument, as well as any and all
persons or entities who at any time or from time to time during the term of this Lease shall
succeed to the interest and estate of Lessor in the Leased Premises, and all of the covenants,
agreements, conditions and stipulations herein contained which inure to the benefit of or are
binding upon Lessor shall also inure to the benefit of and shall be jointly and severally binding
upon the successors, assigns or other representatives of Lessor, and of any and all persons who
shall at any time or from time to time during the Term of this Lease succeed to the interest and
estate of Lessor in the Leased Premises.
13.8. Modifications. Subject to Section 8.7 hereof, this Lease may be modified only by
written agreement signed by Lessor and Lessee.
13.9. Descriptive Headings. The descriptive headings of this Lease are inserted for
convenience in reference only and do not in any way limit or amplify the terms and provisions of
this Lease.
13.10. Unavoidable Default and Delays. The time within which either Party hereto shall
be required to perform any act under this Lease shall be extended by a period of time equal to the
number of days during which performance of such act is delayed by condemnation, casualty
damage, strikes, lockouts, acts of God, governmental restrictions, failure or inability to secure
materials or labor, reason of priority or similar regulations or order of any governmental or
regulatory body, enemy action, civil disturbance, fire, unavoidable casualties or any other cause
City Facilities Lease Agreement—
Page 24
beyond the reasonable control of the party seeking the delay. The provisions of this Section
13.10 shall not operate to excuse Lessee from prompt payment of the Base Rental or any other
payments required of Lessee by the terms of this Lease.
13.11. Partial Invalidity. If any term, provision, condition or covenant of this Lease or
the application thereof to any Party or circumstances shall, to any extent, be held invalid or
unenforceable, the remainder of this Lease, or the application of such term, provisions, condition
or covenant to persons or circumstances other than those as to whom or which it is held invalid
or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall
be valid and enforceable to the fullest extent permitted by law.
13.12. Applicable Law and Venue. This Lease shall be governed by and construed in
accordance with the laws of the State of Texas and the terms, provisions, obligations and
covenants hereof are performable in Lubbock County, Texas. The Parties hereby agree that
exclusive venue for any action instituted in connection with this Lease, or to enforce the right of
either Party hereunder, shall be in a court of competent jurisdiction in Lubbock County, Texas.
13.13. Attorneys' Fees. Should either Party to this Lease engage the services of
attorneys or institute legal proceedings to enforce its rights or remedies under this Lease, the
prevailing Party shall be entitled to recover its reasonable attorneys' fees, court costs and similar
costs incurred in connection, prosecution or defense in such proceedings from the other Party to
the extent authorized by law and awarded by the court.
13.14. Interpretation. Nothing contained herein shall be deemed or construed by the
Parties hereto or by any third party as creating the relationship of principal and agent,
partnership, joint venture or any association between the Parties hereto, it being understood and
agreed that none of the provisions contained herein or any acts of the Parties in the performance
of their respective obligations hereunder shall be deemed to create any relationship between the
Parties hereto other than the relationship of Lessor and Lessee.
13.15. Net Lease. It is the intention of Lessor and Lessee that the Base Rental payable
under this Lease after the Commencement Date and all Impositions and other costs related to
Lessee's use or operation of the Leased Premises under this Lease shall be absolutely net to
Lessor, and that Lessee shall pay during the Term, without any offset or deduction whatsoever,
all such Impositions and other costs due by Lessee under this Lease.
13.16. Brokerage Commission. Lessor and Lessee represent and warrant one to the other
that no broker commission, finder's fees or similar compensation is due to any party claiming
through Lessor or Lessee, as applicable, and Lessor and Lessee agree to hold the other Party
harmless from any liability to pay any such brokerage commission, finder's fees or similar
compensation to any parties claiming same through the indemnifying Party.
13.17. Short Form. Lessor and Lessee agree to execute and deliver to each other a short
form of this Lease in recordable form which incorporates all of the terms and conditions of this
Lease by reference in the form attached hereto as Exhibit C.
City Facilities Lease Agreement—
Page 25
13.18. No Third Party Beneficiaries. This Lease is solely for the benefit of the parties
hereto and their successors and assigns permitted under this Lease, and no provisions of this
Lease shall be deemed to confer upon any other person any remedy, claim, liability,
reimbursement, cause of action or other right. Notwithstanding the foregoing, this Section 13.18
shall not affect the provisions of Article VIII and Article IX.
13.19. Lessor's Lien Waiver. Lessor hereby waives all Lessor's liens that Lessor might
hold, statutory or otherwise, to any of the Improvements and to any of Lessee's (or any
sublessee's or other occupant's) inventory, trade fixtures, equipment or other personal property
now or hereafter placed on the Leased Premises.
13.20. Non -Waiver. No Party shall have or be deemed to have waived any default under
this Lease by the other Party unless such waiver is embodied in a document signed by the
waiving Party that describes the default that is being waived. Further, no party shall be deemed
to have waived its rights to pursue any remedies under this Lease, unless such waiver is
embodied in a document signed by such party that describes any such remedy that is being
waived.
13.21. Survival. Covenants in this Lease providing for performance after termination of
this Lease shall survive the termination of this Lease.
13.22. Entire Agreement. This Lease and the documents referenced in this Lease
constitute the entire agreement between Lessor and Lessee regarding the subject matter hereof.
There are no representations, promises or agreements of either Lessor or Lessee regarding the
subject matter of this Lease not contained in this Lease except for those agreements within the
Master Development Agreement dated February 24, 2006, regarding the construction and use of
the Improvements on the Leased Premises.
13.23. Lease Extensions. Lessee shall have the right to extend the term of this Lease,
both at the end of the original term and the end of the first extension period on the following
terms and conditions:
(a) First Extension:
i. Exercisable on or before one hundred eighty (180) days prior to the end of
original term by written notice to the Lessor. In the event Lessee fails to
give such notice, Lessee shall not be in default and may give the notice at
any time prior to the end of the original term if Lessee pays a late notice fee
of $10,000 to Lessor along with its written notice of extension.
ii. The first extension will be for a term of twenty (20) years.
iii. Rent for the extension period shall consist of a one-time payment of
$100,000 to Lessor on or before thirty (30) days following the end of the
original term and the annual payment of $1,000 per year for each year of
the extension term, each such annual payment being due and payable at any
time on or before the last day of each lease year.
City Facilities Lease Agreement-
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iv. The right to extend this Lease shall be conditioned upon (x) no Event of
Default shall have occurred and still be continuing and (y) Lessee giving
written notice to Lessor that Lessee understands and agrees to all of its
obligations under this Lease, including, without limitation, the obligation to
operate the Leased Premises as a public facility and its indemnity
obligation under Section 6.8 hereof.
(b) Second Extension:
i. Exercisable on or before one hundred eighty (180) days prior to the end of
first extension by written notice to the Lessor. In the event Lessee fails to
give such notice, Lessee shall not be in default and may give the notice at
any time prior to the end of the first extension if Lessee pays a late notice
fee of $10,000 to Lessor along with its written notice of extension.
ii. The second extension will be for a term of twenty (20) years.
iii. Rent for the second extension period shall consist of a one-time payment of
$150,000 to Lessor on or before thirty (30) days following the end of the
first extension term and the annual payment of $1,500 per year for each
year of the second extension term, each such annual payment being due and
payable at any time on or before the last day of each lease year.
iv. The right to extend this Lease shall be conditioned upon (x) no Event of
Default shall have occurred and still be continuing and (y) Lessee giving
written notice to Lessor that Lessee understands and agrees to all of its
obligations under this Lease, including, without limitation, the obligation to
operate the Leased Premises as a public facility and its indemnity
obligation under Section 6.8 hereof.
13.24. Right of First Refusal.
(a) Sale of the City Facilities. The sale and transfer of the City Facilities by Lessor, if
Lessor desires to sell or transfer all or a part of the City Facilities ("Offered
Interest"), and Lessor has received an offer from a proposed buyer (a "Third Party
Offer") with respect to the Offered Interest, then Lessor may consummate a sale
of the Offered Interest only if Lessor complies with the terms and conditions of
this Section 13.24.
021 Offer Notice. Lessor shall give written notice (the "Offer Notice")_to Lessee of
the terms, provisions and conditions under which the Lessor desired to sell and
transfer the Offered Interest. The Offer Notice shall include the following
information:
1. A description of the Offered Interest;
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2. A copy of the Third Party Offer and a copy of any agreed-upon form of
contract, if available;
The delivery of the Offer Notice constitutes an offer (the "Offer") by Lessor to
sell the Offered Interest to Lessee upon identical terms as that offered to Lessor
by the Third Party Offer in accordance with the terms set forth in this Section
13.24.
(c) Response from Lessee.
i. Lessee shall have a period of thirty (30) days from the date of its receipt of
the Offer Notice (this 30 -day period is referred to as the "Election Period")
to elect to purchase all of the Offered Interest upon identical terms as that
offered to Lessor by the Third Party Offer.
ii. If Lessee desires to purchase all of the Offered Interest, then prior to the
end of the Election Period, Lessee must send a written notice of
acceptance to Lessor (the "Election Notice"). Lessee's election to
purchase the Offered Interest must be received by Lessor prior to the
expiration of the Election Period Any purported acceptance made orally
shall be ineffective, and any purported acceptance which varies the terms
of the Offer shall be deemed a rejection thereof for all purposes.
Evaluation of Response. At the end of the Election Period, Lessor shall review
the Election Notice and shall determine the right of Lessee to acquire the Offered
Interest.
i. First, Lessor shall determine if the Lessee has elected to purchase the
Offered Interest as provided in this Section 13.24. If Lessee has so elected
to purchase the Offered Interest, then Lessee shall be obligated to
purchase, and Lessor shall be obligated to sell, the Offered Interest in the
manner set forth in this Section 13.24.
ii. If Lessee has rejected the Offer, Lessor may proceed to execute the
contract with the proposed buyer based on the Third Party Offer and effect
the disposition of the Offered Interest to the proposed buyer on the same
price and payment terms as set forth in the Offer Notice.
iii. If Lessor has not completed a sale of the Offered Interest to the proposed
buyer pursuant to this Section 13.24 within six months after the initial
delivery of the Offer Notice, then Lessor must again comply with the
provisions of this Section 13.24 before Lessor may sell and transfer all or
a part of the City Facilities to the same or to a different proposed buyer.
(e) If, pursuant to this Section 13.24 Lessee becomes obligated to purchase the
Offered Interest, then the Lessor and Lessee shall negotiate a definitive
acquisition agreement in good faith upon identical terms as that offered to Lessor
City Facilities Lease Agreement-
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by the Third Parry Offer as set forth in the Offer Notice. Closing of the transfer of
the Offered Interest shall occur within 60 days after the expiration of the Election
Period. If the closing occurs at any time from and after the end of the original
term of the Lease, the Lessor shall allow Lessee a credit against the purchase
price equal to all rental payments previously made by Lessee to Lessor during the
term(s) of this Lease. If the credits are more than the purchase price Lessor will
not be required to reimburse Lessee for excess rental payments
13.25. Obligations of Purchaser of City Facilities. Lessor and Lessee covenant and agree
that any third party purchaser of the City Facilities shall be obligated to honor and comply with
all of the terms and obligations of Lessor under the Lease. Any failure or decision of Lessee not
to buy the City Facilities in connection with an Offer under Section 13.24, shall not release,
waive or modify in any respect any provision of this Lease, including, but not limited to, any
provision of Article XIII of the Lease.
EXECUTED as of the day and year first above written, but actually executed on the dates
set forth in the respective acknowledgments below.
ATTEST:
Rebe4a Garza, City Secretary
APPROV AS TP CONTENT:
Rob Alli , Assis Manager
Development Services
City Facilities Lease Agreement-
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LESSOR:
1859 MANAGEMENT PARTNERS, LP,
a Texas limited partnership
By: 1859 Management Partners GP LLC,
General Partner
Title:
LESSOR:
CITY OF LUBBOC EXAS Q/
B�. �j G^tel
David A. Miller, Mayor
APPROVED AS TO FORM:
Linda L. Chamales, Senior Attorney
Office Practice Section
City Facilities Lease Agreement-
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STATE OF TEXAS
COUNTY OF b Q I VCJVA
., Thistrument was acknowledged before me on the day of ie007,
by Nk"O c c r of 1859 Management Partners GP, LLC,
general partner of 1859 MANAGEMENT PARTNERS, LP, a Texas limited partnership, on
behalf of said limited partnership.
DEBORAH S. CLIFFORD
* Notary Public, State of Texas
�T ! My Commission Expires
06.01-08
STATE OF TEXAS §
COUNTY OF LUBBOCK §
I &'eMLOU"'l
Notary Public in andd for the St of Texas
This instrument was acknowledged before me on the [ 7 da of
y en,rr, 2007,
by David A. Miller, Mayor, CITY OF LUBBOCK, TEXAS, a political subdivision of the State
of Texas, located in Lubbock County. Texas, on behalf of said city.
Ile_ --m
CELIA WEBB
Notary Public, Sine of Texas
W Canmission Egkn 03-01-2010
City Facilities Lease Agreement-
-Page 31
��L ���
Notary ublic in and for the State of Texas
SCHEDULE 2.1
BASE RENTAL
FIXED RENT
Resolution No. 2007-RO439
Lease Years 1-40: $1.00 per year to be paid in advance on or before 45 days following
the Commencement Date.
INCENTIVE RENT
Calendar years commencing with the calendar year that starts after the third anniversary
of the Commencement Date and ending in December of the calendar year in which the
twentieth (20`h) anniversary of the Commencement Date occurs:
For each of the aforesaid seventeen (17) calendar years beginning after the third
anniversary of the Commencement Date, Lessee shall pay to Lessor an incentive rent
component equal, in each such calendar year, to the greater of.
(a) $65,000 per year plus, commencing with the second such calendar year, an
annual percentage increase thereon equal to the change in CPI from the CPI level in the
first such calendar year. CPI is defined as the CPI -U, all items, Dallas/Fort Worth, Texas
produced by the Federal Bureau on Labor Statistics; or
(b) Fifteen percent (15%) of the excess of net annual Project cash flow (net
Project cash flow less all debt service, incentive fees, Hotel asset management fee, if any,
and any reasonable preferred return to the General Partner of Lessee on total land equity
in the Hotel) over the amount of net annual cash flow from the Project that is necessary to
cause the cumulative net annual Project cash flow calculated from the first day of the
Lease to equal a ten percent (10%) cumulative annual return on the outstanding balances
from time to time of both the total equity (other than land equity) and debt invested, or
arranged, by Lessee in and for the Project. A hypothetical example of this calculation is
attached as Schedule 2.1(a) hereto.
Incentive Rent shall be paid, in arrears, in annual installments on or before 45 days
following the end of each of the aforesaid calendar years.
Lease Years 4-20:
In connection with any sale or debt refinancing of the Hotel that closes and funds after
the third anniversary of the Commencement Date and on or prior to the 20`h anniversary
of the Commencement Date, Lessee shall pay to Lessor a bonus rent component equal to
15% of the net sale or refinance proceeds from such sale and/or refinancing of the Hotel,
such net sale or refinance proceeds being the net cash proceeds actually received by
Lessee from the closing of the sale or debt financing. This calculation shall also take into
City Facilities Lease Agreement — Schedule 2.1 — Page 1
9/10/2007 5:33 PM
consideration a deduction for the ten percent (10%) per annum cumulative amount
described in subparagraph (b) above. A hypothetical example of this calculation is
attached as Schedule 2.1(a) hereto.
Bonus Rent shall be paid, in arrears, within ten (10) days following the closing of the
respective sale or refinancing.
PERCENTAGE RENT
For each of the first 20 years from the date of opening of the Project, Lessee shall pay to
Lessor an amount equal to one percent (1%) of the total daily collected Net Hotel Room
Revenue during a calendar quarter (or part thereof, as applicable).
Percentage Rent shall be paid, in arrears, quarterly on or before twenty (20) days
following the end of each calendar quarter.
City Facilities Lease Agreement — Schedule 2.1 — Page 2
9/10/2007 5:33 PM
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SCHEDULE 5.4
RESERVE PERCENTAGE
Operating Year
AR&R Reserve Percentage
1
1%
2
2%
3
3%
4-40
4%
City Facilities Lease Agreement — Schedule 5.4 — Page 1
9/10/2007 5:33 PM
014367.00016:1029345.04
EXHIBIT "A"
TO CITY FACILITIES LEASE
Land
(CONF]IRM VALIDITY OF LEGAL DESCRIPTION WHEN SURVEY IS
COMPLETED]
A portion of Tract Seven (7), Overton Park, an addition to the City of Lubbock, Lubbock
County, Texas, according to the map, plat and/or dedication deed thereof, recorded in Instrument
No. 2006021039 of the Official Public Records of Lubbock County, Texas.
BEGINNING at a point bearing South a distance of 151.45 feet and West a distance of 382.85
feet from the Southeast Corner of Lot 1, Block 124, Overton Addition and the Northeast Corner
of Tract Nine (9), Overton Park, Lubbock County, Texas.
THENCE S 00006'52" E a distance of 378.66 feet;
THENCE S 450 E a distance of 17.53 feet;
THENCE S 44°59'59" W a distance of 10.26 feet;
THENCE N 45°06'53" W a distance of 203.09 feet;
THENCE S 44053'08" W a distance of 26.72 feet;
THENCE N 45°06'52" W a distance of 19.70 feet;
THENCE S 89053'08" W a distance of 20.74 feet;
THENCE N 00006'52" W a distance of 259.68 feet;
THENCE N 89053'08" E a distance of 192.07 feet to
approximately 1.36 acres.
Exhibit "A" to City Facilities Lease
the Point of Beginning and containing
EXHIBIT "B"
RESTRICTIONS AND LIMITATIONS
1. Terms and Conditions of the Lease.
2. Any and all matters of record in the Real Property Records of Lubbock County, Texas,
but only to the extent such matters are valid, existing and, in fact, affect the Leased
Premises.
3. Those exceptions to Title as shown in the title policy attached hereto as Exhibit `B-1."
4. The Garage Parking Spaces shall only be used for parking for persons visiting, or
attending events in the City Facilities; provided, however, when and to the extent persons
visiting, or attending events in, the City Facilities use parking spaces intended for, or
allocated to, the visitors, guests, and customers of the Hotel, the Lessee may allow
visitors, guests, and customers of the Hotel to use any of the Parking Spaces (on the
theoretical basis of swapping the use of one (1) City Facilities parking space for each
Hotel parking space used by a visitor or attendee of City Facilities).
City Facilities Lease Agreement — Exhibit "B" - Page 1
9/10/2007 5:33 PM
Resolution No. 2007-RO439
MEMORANDUM OF LEASE AGREEMENT
STATE OF TEXAS §
COUNTY OF LUBBOCK §
THIS MEMORANDUM OF LEASE AGREEMENT ("Memorandum") is entered into as
of the f3 ` day of � e11 , 2007, by and between the CITY OF LUBBOCK, a
municipal corporation of Lubbock County, Texas ("Lessor"), and 1859 MANAGEMENT
PARTNERS, LP, a Texas limited partnership ("Lessee"), sometimes collectively referred to
herein as the "Parties" or singularly as a "Fjgy'.
RECITALS
A. Lessor and Lessee have entered into a Lease Agreement (the "Lease") pertaining
to the Leased Premises (as defined in the Lease) which includes the land described on Exhibit A
attached hereto and made a part hereof for all purposes (the "Land").
B. Lessor and Lessee desire to enter into and record this Memorandum in the public
records of Lubbock County, Texas, to put all third parties on notice of the Lease and Lessee's
rights thereunder in and to the Leased Premises.
AGREEMENT
1. The Lease. Upon and subject to the terms and provisions set forth in the Lease,
Lessor has leased, demised and let unto Lessee, and Lessee has taken and leased from Lessor, the
Leased Premises. Lessee has certain rights and interests in the Leased Premises under the Lease.
2. Term. The Term of the Lease is for a period commencing on the date first above
written and ending on the 40th anniversary of the Commitment Date (defined in the Lease),
unless sooner terminated or extended according to the terms and provisions of the Lease.
3. Incorporation of Lease. The terms, conditions and provisions of the Lease are
incorporated herein by reference for all purposes. Any inconsistencies between this
Memorandum and the Lease are governed by the Lease and not by this Memorandum. This
Memorandum in no way modifies or amends the Lease.
Memorandum of Lease Agreement — Page 1
Executed as of the day and year first above written.
ATTEST:
Rebe6ca Garza, City Secret
APPRO ED ASTc
CONTENT:
1
Rob Alli'stant i Manager
Develope
nt Servic
STATE OF TEXAS §
COUNTY OF 1Q WS+0K §
LESSEE:
1859 MANAGEMENT PARTNERS, LP,
a Texas limited partnership
By: 1859 Management GP, LLC,
General
By:_
Name:
Title:
LESSOR:
CITY OF LUBBOCT XAS '
B
David A. Miller, Mayor
This ' ent was acknowl dged before me on the y, day of � ("Il t t1ibr2007,
by -�� ano' -e� of 1859 Management GP, LLC, general
partner of 1859 MANAGEMENT PARTNAS, LP, a Texas limited partnership, on behalf of
said limited partnership.
DEBORAH S. CLIFFORD
# Notary Public, State of Texas
N h My Commission Expires
06-01-08
City Facilities Lease Agreement — Exhibit "C" — Page 2
9/7'2007 5:10 PM
,L�Ial L �V I
Notary Public in for the e of Texas
STATE OF TEXAS §
COUNTY OF LUBBOCK §
This instrument was acknowledged before me on the 17 — day of 2007,
by raved A. Mr. (ler, Mayor, CITY OF LUBBOCK, TEXAS, a political subdivision of the State
of Texas, located in Lubbock County, Texas, on behalf of said city.
CELIA WEBB
Notary Public, State of Texas
E(&:my Commission Expires 03.01-2010
Memorandum of Lease Agreement - Page 3
Dallas 1\5093647'\1
47828-2 9/10/2007
ct�14
Not lic in and for the State of Texas
EXHIBIT "D"
ASSIGNMENT AND RELEASE AGREEMENT
ASSIGNMENT AND RELEASE AGREEMENT, effective as of
(this "Assignment"), between:
a
("Assignor') and
, a , (the "Assignee").
Capitalized terms used herein and not otherwise defined herein shall have the respective
meanings attributed thereto in that certain Lease Agreement (the "Lease") dated , 2007
by and between Assignor and , a (the "["Lessor'/ "Lessee" ).
RECITALS:
Pursuant to Section 7.1 of the Lease, Assignor may assign all of
its entirety under the Lease.
in
NOW, THEREFORE, for good and valuable consideration the receipt of which is hereby
acknowledged, Assignor and Assignee hereto hereby agree as follows:
SECTION 1. ASSIGNMENT AND ASSUMPTION
Effective on and as of the date hereof, Assignor hereby irrevocably and unconditionally
sells, assigns, transfers and sets over unto Assignee all of its right, title and interest in and to the
Lease and Assignee hereby irrevocably and unconditionally assumes and agrees to, and Assignor
is hereby released from its obligation to, perform, discharge and comply with all covenants,
conditions, obligations, liabilities and duties of Assignor under and in respect to the Lease. From
and after the date hereof, the term "Lessee" whenever used in the Lease shall mean and refer to
Assignee in lieu of Assignor. Assignor is hereby relieved of its obligations under the Lease.
SECTION 2. MISCELLANEOUS
2.1. Amendments. No amendment or modification of this Assignment or waiver of
any right hereunder shall be binding on any party hereto unless it is in writing and is signed by
Assignor and Assignee.
2.2. Successors and Assigns. The terms of this Assignment shall be binding upon, and
shall inure to the benefit of, Assignor and Assignee and their respective successors and assigns.
2.3. Counterparts. This Assignment may be executed in one or more counterparts
(and by different parties on separate counterparts), each of which shall be an original, but all of
which together shall constitute one and the same instrument.
2.4. Complete Agreement. This Assignment embodies the entire agreement and
understanding between Assignor and Assignee and supersedes all prior or contemporaneous
City Facilities Lease Agreement — Exhibit "D" — Page 1
9/10/2007 5:33 PM
agreements and understandings of the parties hereto, verbal or written, relating to the subject
matter hereof.
2.5. GOVERNING LAW. THIS ASSIGNMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
2.6. Headings. The headings and captions in this Assignment are for the convenience
of reference only and shall not limit or otherwise affect any terms hereof.
IN WITNESS WHEREOF, each of the undersigned has caused this Assignment to be
duly executed by duly authorized officers as of the day and year first above written.
ASSIGNOR:
a
By:
Name:
Title:
Ev*li-04ZI a-19
By:
Name:
Title:
City Facilities Lease Agreement — Exhibit "D" — Page 2
9/10/2007 5:33 PM
Resolution No. 2007—RO439
EXHIBIT E
GUIDELINES FOR UTILIZING THE CITY FACILITIES
1. Public Facility. The Conference Center is a public facility constructed for the
benefit of the citizens and visitors to the City of Lubbock and shall be operated accordingly.
Funding for the Conference Center came in part from the North Overton Tax Increment Fund
under Chapter 311 of the Texas Tax Code, so the facility is a public improvement and must
remain available to the public at reasonable hours and for public purposes. Use of the
Conference Center may not be limited to use by patrons of the hotel portion of this Project.
2. Non -Discrimination. No person, group, or association shall be excluded from use
of the Conference Center because of handicap, race, color, creed or national origin and no rules
or regulations may be promulgated ed by the Lessee, Operators, or Users of the facility which will
discriminate against any person, group or association or exclude them from use of the facilities
or participation in the facility activities.
3. Smoking. In accordance with City of Lubbock Ordinances, the Conference
Center shall be a smoke-free facility. Smoking shall not be permitted in the Conference Center.
4. Alcohol Service. Operator shall insure that any alcohol served in the Conference
Center will be served by a vendor holding a valid alcoholic beverage permit.
City Facilities Lease Agreement - Exhibit "E" - Page 1
9/10/2007 5:33 PM