EXHIBIT 10.6
FORM OF
MANAGEMENT AGREEMENT
for
FELCOR'S DOUBLETREE AND DOUBLETREE GUEST SUITES BRANDED HOTELS
INDEX
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ARTICLE I DEFINITIONS .......................................................... 1
1.01 Definitions ......................................................... 1
1.02 Other Definitions ................................................... 5
ARTICLE 2 SCOPE OF AGREEMENT ................................................... 6
2.01 Subject Matter ...................................................... 6
2.02 Grant to Manager .................................................... 6
2.03 Funding ............................................................. 7
ARTICLE 3 TERM AND EXTENSIONS .................................................. 7
3.01 Commencement Date ................................................... 7
3.02 Term ................................................................ 7
3.03 Owner's Termination Right Upon Sale of Hotel ........................ 7
3.04 Performance Termination ............................................. 8
3.05 Post-Termination Matters; Reimbursements to Manager ................. 10
ARTICLE 4 NONDISTURBANCE ....................................................... 10
ARTICLE 5 STANDARDS AND MANAGER'S CONTROL ...................................... 10
5.01 Operational Standards ............................................... 10
5.02 Manager Control ..................................................... 11
5.03 Contractual Authority ............................................... 11
ARTICLE 6 USE OF MANAGER'S TRADENAME ........................................... 11
6.01 Use of Name ......................................................... 11
6.02 Definition of Marks ................................................. 12
6.03 Disputes Concerning Marks ........................................... 12
6.04 Rights Upon Termination ............................................. 12
ARTICLE 7 OPERATION OF THE HOTEL ............................................... 13
7.01 Permits ............................................................. 13
7.02 Operating Equipment and Operating Supplies .......................... 13
7.03 Personnel ........................................................... 13
Z.04 Sales, Marketing, Advertising and Additional Promotional Programs ... 14
7.05 Trades; Treatment Accorded .......................................... 15
7.06 FF&E Replacements ................................................... 15
7.07 Routine Maintenance and Repairs ..................................... 16
7.08 Capital Repairs ..................................................... 16
7.09 FF&E and Capital Repairs Estimates .................................. 17
7.10 Emergency Repairs; Repairs Required by Law .......................... 17
7.11 Replacement Reserve Fund ............................................ 17
7.12 Capital Improvements ................................................ 18
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ARTICLE 8 FISCAL MATTERS ....................................................... 18
8.01 Accounting Matters and Fiscal Periods ............................... 18
8.02 Annual Business Plan ................................................ 19
8.03 Bank Accounts ....................................................... 21
8.04 Reimbursement of Out-of-Pocket Expenses ............................. 21
ARTICLE 9 ADDITIONAL SERVICES .................................................. 22
9.01 Additional Services ................................................. 22
9.02 Centralized Services ................................................ 22
9.03 National Sales, Business Promotion and Reservations Services ........ 23
9.04 Other Services ...................................................... 24
ARTICLE 10 PAYMENTS TO MANAGER ................................................. 24
10.01 Base Management Fee ................................................. 24
ARTICLE 11 DISBURSEMENTS ....................................................... 25
11.01 Disbursement of Funds ............................................... 25
11.02 Adjustment to Bank Account .......................................... 26
ARTICLE 12 INSURANCE ........................................................... 26
12.01 Insurance Coverage .................................................. 26
12.02 Insurance Policies .................................................. 26
12.03 Manager's Blanket Insurance Coverage ................................ 27
ARTICLE 13 RESPONSIBILITY FOR CLAIMS, ETC. ..................................... 28
13.01 Scope ............................................................... 28
ARTICLE 14 CASUALTY AND CONDEMNATION ........................................... 28
14.01 Casualty ............................................................ 28
14.02 Condemnation ........................................................ 29
14.03 Business Interruption Insurance ..................................... 29
ARTICLE 15 DEFAULT AND TERMINATION ............................................. 30
15.01 Events of Default ................................................... 30
15.02 Termination ......................................................... 30
ARTICLE 16 NOTICES ............................................................. 31
16.01 Procedure ........................................................... 31
ARTICLE 17 RELATIONSHIP, AUTHORITY AND FURTHER ACTIONS ......................... 31
17.01 Relationship ........................................................ 31
17.02 Further Actions ..................................................... 31
ARTICLE 18 APPLICABLE LAW ...................................................... 31
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ARTICLE 19 SUCCESSORS AND ASSIGNS .............................................. 32
19.01 Assignment .......................................................... 32
19.02 Binding Effect ...................................................... 32
ARTICLE 20 AGREEMENT NOT AN INTEREST IN REAL ESTATE ............................ 32
ARTICLE 21 FORCE MAJEURE ....................................................... 32
21.01 Operation of Hotel .................................................. 32
21.02 Extension of Time ................................................... 33
ARTICLE 22 ARBITRATION ......................................................... 33
22.01 Arbitration Procedures .............................................. 33
ARTICLE 23 GENERAL PROVISIONS .................................................. 33
23.01 Authorization ....................................................... 33
23.02 Interest ............................................................ 34
23.03 Formalities ......................................................... 34
23.04 Documents ........................................................... 34
23.05 Consents ............................................................ 34
23.06 Estoppel Certificate ................................................ 34
23.07 Extension of Date of Termination .................................... 35
23.08 Hotel Reservations Honored .......................................... 35
23.09 No Representations .................................................. 35
Exhibit 1 ...................................................................... 37
Exhibit A - Legal Description .................................................. 38
Exhibit B - [Intentionally Deleted] ............................................ 39
Exhibit C - Schedule of Permitted Mortgages .................................... 40
Exhibit D - [Intentionally Deleted] ............................................ 41
Exhibit E - Schedule of Required Insurance ..................................... 42
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MANAGEMENT AGREEMENT
THIS AGREEMENT is dated effective as of the Execution Date, by and
between ___________________________________________ and _______________________.
Each reference in this Agreement to any of the terms and titles contained in any
Exhibit attached to this Agreement shall be deemed and construed to incorporate
herein the data stated under that term or title in such Exhibit.
WITNESSETH:
WHEREAS, Owner is desirous of having Manager operate Owner's hotel as a
hotel under the Tradename on the parcel or parcels of land more particularly
described on Exhibit A attached hereto; and
WHEREAS, Manager (or its Affiliates) owns all right, title and interest
in and to the Tradename, said Tradename being a registered service xxxx of
Manager (or its Affiliates);
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, Owner and Manager agree as follows:
ARTICLE 1
DEFINITIONS
1.01 DEFINITIONS
As used herein the following terms shall have the respective meanings
indicated below:
(a) Hotels - The __________________________ hotels owned by
Holdings in __________________________________________________________________
_________________________________.
(b) Affiliate - any corporation or other entity controlled by,
controlling or under common control with Owner or Manager, as applicable. The
words "control," "controlled" and "controlling" mean ownership, directly or
indirectly, of 50% or more of the legal or beneficial ownership interest of such
corporation or other entity.
(c) Affiliated Hotels - all hotels operating under the tradenames _____
____________________________________________________________________________
________________________________________ and/or any other tradename(s) now or
hereafter utilized by Manager or its Affiliates, including, without limitation,
hotels operated by Manager or its Affiliates and hotels operated by others under
franchise arrangements with Manager or its Affiliates.
(d) Building - all buildings, structures and improvements now located
or hereafter constructed on the Site and all fixtures and equipment attached to,
forming a part of and necessary for the operation of such buildings, structures
or improvements as a hotel (including, without limitation, heating, lighting,
plumbing, sanitary system, air-conditioning, laundry, refrigeration, kitchen,
elevators and similar items) and such (i) restaurants, bars and banquet, meeting
and other
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public areas, (ii) commercial space, including concessions and shops, (iii)
garage and parking space, (iv) storage and service areas, (v) recreational
facilities and areas, (vi) public grounds and gardens, (vii) permanently affixed
signage, (viii) other facilities and appurtenances and (ix) number of keyed
guest rooms ("Keyed Guest Rooms") as presently exist on the Site or are
hereafter added thereon during the Term.
(e) FF&E - all fixtures, furniture, furnishings and equipment (not
including Operating Equipment) required for the operation of the Building as a
hotel in accordance with the standards set forth in this Agreement, including,
without limitation, (i) office furnishings and equipment, (ii) specialized hotel
equipment necessary for the operation of any portion of the Building as a hotel,
including equipment for kitchens, laundries, dry cleaning facilities, bars,
restaurants, public rooms, commercial and parking space, and recreational
facilities, and (iii) all other furnishings and equipment as Manager deems
necessary or desirable for the operation of the Building as a hotel in
accordance with the Operational Standards.
(f) GAAP - generally accepted accounting principals, consistently
applied.
(g) Gross Room Sales - that portion of Total Sales which is derived
from the sale or rental of guest rooms and suites.
(h) Hotel - a collective term for the Site, the Building, the FF&E, the
Operating Equipment and the Operating Supplies.
(i) Hotel Lease - the Lease Agreement of even date herewith between
__________________________________ and Owner relating to the Hotel.
(j) Index - the Consumer Price Index for All Urban Consumers (1982-84 =
100) as published by the United States Bureau of Labor Statistics, U.S. City
Average. If the compilation and/or publication of such Index shall be
discontinued or transferred to any other governmental department or bureau or
agency, Manager shall (subject to Owner's approval, which shall not be
unreasonably withheld) fix an alternate index or method to implement the
parties' intention that the purchasing power of the amounts to be adjusted by
reference to the Index (as hereinafter provided in this Agreement) shall be the
same as the purchasing power of the stated amounts as of the Execution Date.
Likewise, if such Index shall be modified as to components, computing methods or
otherwise, then Manager may (subject to Owner's approval, which shall not be
unreasonably withheld) fix an alternate index or method, as aforesaid, or
Manager may utilize an appropriate conversion factor so as to achieve
substantially the same result as would have been obtained if the Consumer Price
Index in effect and as computed, calculated and constituted on the Execution
Date were still then in effect.
(k) Mortgagee - The holder of any Permitted Mortgage.
(1) Net Operating Income - Total Sales less the sum of (i) Operating
Costs and (ii) Specified Fixed Charges. There shall be excluded from Operating
Costs (A) expenses for gratuities, service charges, sales and gross receipts
taxes and other similar taxes and assessments, to
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the extent that receipts in respect thereof are excluded from Total Sales, and
(B) any overhead or other costs of Owner incurred as a result of being the
lessee under the Hotel Lease.
(m) Operating Cost(s) - the entire cost and expense of maintaining,
operating and supervising the operation of the Hotel. Operating Costs shall be
the sum of such costs and expenses which are normally charged as a cost of
operation under GAAP, including, without limitation,
(i) the cost of Operating Supplies and Operating
Equipment;
(ii) wages, salaries, employee fringe benefits, payroll
taxes, bonuses and other costs related to employees
at the Hotel;
(iii) advertising and promotional expenses incurred
directly by the Hotel, administrative and general
expenses of the Hotel, the cost of Centralized
Services under Article 9.02, the cost of personnel
training programs (without duplication of those
included in Centralized Services), charges for
reservation-related distribution systems (e.g.,
airline reservation systems), utility and energy
costs, operating licenses and permits, and grounds
and landscaping maintenance costs;
(iv) all expenditures made for routine maintenance and
repairs to keep the Hotel in good condition and
repair;
(v) the Base Management Fee provided for in Article
10.01(a) and the National Sales, Business Promotion
and Reservations Services Assessment provided for in
Article 9.03; (vi) all reimbursable expenses due
Manager;
(vi) all reimbursable expenses due Manager;
(vii) liability insurance premiums and premiums for other
insurance to be carried by Manager pursuant to the
requirements of Article 12 and Exhibit E;
(viii) reasonable reserves for uncollectible accounts
receivable as set forth in the Approved Budgets; and
(ix) credit card and travel agent commissions.
There shall be expressly excluded from Operating Costs the following costs and
expenses of the Hotel, which shall be defined as "Fixed Charges":
(i) depreciation of the Building, FF&E and Operating
Equipment, and amortization of financing costs,
pre-opening expenses, organizational and other costs;
(ii) debt service (interest and principal) on any
Permitted Mortgage;
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(iii) rental payments pursuant to any ground lease
(including the Hotel Lease);
(iv) the cost of external (third-party) audits (whether
certified or otherwise) of Hotel operations and/or
with respect to the Owner entity itself;
(v) legal and other professional fees, other than those
properly included in Operating Costs under GAAP;
(vi) other recurring and non-recurring ownership costs,
such as Owner's entity administration and servicing
costs;
(vii) Specified Fixed Charges; and
(viii) such other cash expenditures (including Capital
Repairs) which are normally treated as a capital
expenditure under GAAP.
(n) Operating Equipment - all operating equipment required for the
operation of a hotel, including chinaware, glassware, linens, silverware,
utensils, uniforms and all other similar items.
(o) Operating Supplies - all consumable items used in the operation of
a hotel, including food and beverages, fuel, soap, cleaning materials, matches,
stationery and all other similar items.
(p) Permitted Mortgage - any mortgage, pledge or encumbrance of or
other security interest in the Hotel or any part thereof or interest therein,
which is listed in Exhibit C attached hereto and incorporated by reference as a
part hereof or a copy of which shall hereafter be provided to Manager.
(q) Portfolio Hotels - the Affiliated Hotels, any other hotels which
are owned, operated or managed by Manager or its Affiliates (regardless of
tradename) and any other hotel utilizing the Manager's Centralized Services or
National Sales, Business Promotion and Reservations Services.
(r) Site -- the parcel or parcels of real estate more particularly
described on Exhibit A.
(s) Specified Fixed Charges - the following cash expenditures made in
connection with the operation of the Hotel:
(1) payments pursuant to any equipment leases or
installment sales contracts approved by Manager;
(2) real estate and other ad valorem taxes and
assessments applicable to the Hotel; provided,
however, that for the purposes of determining Net
operating Income, real estate and other ad valorem
taxes and assessments shall be fixed the amounts paid
or payable in respect of the Hotel for Fiscal Year
1998 at
(3) premiums for insurance required to be obtained or
maintained by Owner pursuant to the Hotel Lease; and
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(4) the 3% of Total Sales required to be deposited to the
Replacement Reserve Fund, as described in Article
7.11(a) below.
(t) Total Sales - all revenues and income of any nature derived
directly or indirectly from the Hotel or from the use or operation thereof
including total room sales, food and beverage sales, telephone, telegraph,
telecopier and telex revenues, in-room video and valet service receipts, rental
or other payments from lessees and sublessees (but not the gross receipts of
such lessees and sublessees), and the proceeds of business interruption, use,
occupancy or similar insurance. If Manager itself operates any facilities
instead of having them operated by a lessee, such as a newsstand, gift shop or
other store, the gross receipts of such facility or store shall also be included
in Total Sales. There shall be excluded from Total Sales: (i) any gratuities or
service charges added to a customer's xxxx and distributed as compensation to
the Hotel's employees; (ii) any credits or refunds made to customers, guests or
patrons; (iii) any sums and credits received by Owner for lost or damaged
merchandise; (iv) any sales taxes, excise taxes, gross receipt taxes, admission
taxes, entertainment taxes, tourist taxes or charges; (v) any proceeds from the
sale or other disposition of the Hotel, FF&E, or other capital assets; (vi) any
interest paid with respect to the Replacement Reserve Fund, the Bank Account or
any other deposit or investment of Hotel funds; (vii) any fire and extended
coverage insurance proceeds; (viii) any condemnation awards; and (ix) any
proceeds of financing or refinancing of the Hotel. Total Sales shall be
determined on an accrual basis and in accordance with GAAP.
1.02 OTHER DEFINITIONS
As used herein, the following terms have the meanings set forth in the
respective Articles or Exhibits indicated below:
Additional Program Charges - Article 7.04(c)
Additional Services - Article 9.01
Annual Business Plan - Article 8.02(b)(1)
Approved Budget - Article 8.02(b)(1)
Bank Account - Article 8.03(a)
Base Management Fee - Article 10.01
Capital Repairs - Article 7.08
Capital Repairs Budget - Article 7.09
Centralized Services - Article 9.02(a)
Commencement Date - Article 3.01
Defaulting Party - Article 15.02(a)
Event of Default - Article 15.01
Execution Date - Exhibit 1
Executive Employees - Article 13.01(a)
Extension Notice - Article 3.02
FF&E Replacement Budget - Article 7.09
FF&E Replacements - Article 7.06
Fiscal Year - Article 8.01(c)
Full Insurable Value - Exhibit E
Holdings - Article 1.01(i)
Hotel Lease - Article 1.01(i)
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Initial Term - Article 3.02
Interested Persons - Article 23.06
Keyed Guest Rooms - Article 1.01(d)
Losses - Article 13.01(a)
Manager - Exhibit 1
Marks - Article 6.02
Minimum Balance - Article 2.03(b)
National Sales, Business Promotion and Reservations Services
Assessment - Article 9.03(b)
National Sales, Business Promotion and Reservations Services -
Article 9.03(a)
Non-Defaulting Party - Article 15.02(a)
Number of Keyed Guest Rooms - Exhibit 1
Operating Budget - Article 8.02(b)(1)
Operational Standards - Article 5.01
Option Term - Article 3.02
Owner - Exhibit 1
Project Services - Article 9.04(a)
Replacement Reserve Fund - Article 7.11(a)
Replacement Reserve Percentage - Article 7.11(a)
Sale of the Hotel - Article 3.03(b)
Sale Termination Notice - Article 3.03(a)
Term - Article 3.02
TPR Charges - Article 9.03(c)
Tradename - Article 6.01
ARTICLE 2
SCOPE OF AGREEMENT
2.01 SUBJECT MATTER
The subject matter of this Agreement is the Hotel referred to in
Exhibit 1.
2.02 GRANT TO MANAGER
Owner hereby grants to Manager the sole and exclusive right to
possession of the Hotel for the Term and during said Term the sole and exclusive
right to supervise and direct the management and operation of the Hotel for and
on the account of Owner, and Manager hereby accepts said grant and agrees that
it will supervise and direct the management and operation of the Hotel, all
pursuant to the terms of this Agreement. Manager acknowledges that this
Agreement is subject and subordinate to the Hotel Lease and that Manager, on
behalf of Owner and at Owner's sole expense, shall use its best efforts to
fulfill Owner's duties and obligations under the Hotel Lease. Owner agrees that
it will cooperate with Manager in every reasonable and proper way to permit and
assist Manager to carry out its duties hereunder. Owner and Manager further
agree that this Agreement provides for management in respect of the Hotel, that
Owner and Manager do not intend, nor does this Agreement grant or create, a
franchise within the meaning of the Federal Trade Commission Act, any rule or
regulation promulgated thereunder, or any other applicable law, rule, regulation
or judicial decision.
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2.03 FUNDING
(a) Owner agrees to provide all funds, both initially and throughout
the Term, as shall be necessary to pay for all Operating Costs and Fixed Charges
relating to the Hotel, and to perform and satisfy Owner's covenants and
responsibilities under this Agreement. The performance of all activities by
Manager hereunder shall be on behalf of, and for the account of, Owner.
(b) Upon the Commencement Date, Owner shall deposit in the Bank Account
at least Twenty-Five Thousand Dollars ($25,000) (the "Minimum Balance"); and
throughout the Term, Owner shall maintain the Minimum Balance in the Bank
Account.
ARTICLE 3
TERM AND EXTENSIONS
3.01 COMMENCEMENT DATE
The "Commencement Date" of the Term hereunder shall be 12:01 a.m. local
time on May 29, 1998.
3.02 TERM
The initial term (the "Initial Term") of this Agreement shall cover the
period from and after the Commencement Date and ending on ____________. Manager
shall have the right and option to extend the term of this Agreement to _______
____ (the "Option Term") upon the condition that: (i) Manager gives written
notice to Owner of its desire to extend (the "Extension Notice") not less than
45 days nor more than 90 days prior to the end of the Initial Term; (ii) at the
end of the Initial Term the Owner has accumulated retained earnings (calculated
in accordance with GAAP) generated solely by the Hotel during the Initial Term
of not less than $535,000; (iii) at the end of the Initial Term no Event of
Default on the part of Manager has occurred that is continuing beyond any
applicable cure period under this Agreement, and any then existing Event of
Default shall be cured within any applicable cure period; and (iv) at the end of
the Initial Term ________________ Corporation is not in default under that
certain Amended and Restated Revolving Credit Agreement of even date herewith
between Owner and Doubletree Hotels Corporation (the "Revolving Credit
Agreement"). The Initial Term and, if applicable, the Option Term shall expire
on the dates hereinabove set forth, unless sooner terminated as hereinafter
provided, and are herein referred to collectively as the "Term" of this
Agreement.
3.03 OWNER'S TERMINATION RIGHT UPON SALE OF HOTEL
(a) In the event Manager fails to timely consent, pursuant to Article
19.01(b) hereof, to any proposed assignment by Owner of its rights and
obligations under this Agreement to a proposed purchaser upon a Sale of the
Hotel, or upon a Sale of the Hotel at any time on or after ________________
Owner shall have the right, at its sole option, to terminate this Agreement by
giving 90 days' prior written notice (a "Sale Termination Notice") to Manager.
The Sale Termination Notice shall set forth an estimate of the effective
termination date of this Agreement, which date shall not be less than 90 days
subsequent to the date of the Sale Termination Notice. The actual effective date
of termination shall be on the actual date of closing of the Sale of the Hotel
which was the subject of the
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Sale Termination Notice, regardless of the estimate provided in the Sale
Termination Notice. Accordingly, Owner shall, upon reasonable notice, have the
right to extend the effective date of such termination for a reasonable period
of time based on delays in the closing date of the Sale of the Hotel, provided
that Owner shall pay all actual costs reasonably incurred by Manager in
postponing the effectiveness of such termination.
(b) For the purposes hereof, a "Sale of the Hotel" shall be defined as
a sale of the Hotel or any transaction which is substantially equivalent to a
sale of the Hotel including, without limitation, a sale of all of the interests
in Owner, a merger or consolidation of Owner with a third party in which neither
Owner, Holdings nor any Affiliate of either of them is the surviving or
resulting entity, or a deed, lease, or other conveyance of all or substantially
all of Owner's interest in the Hotel (other than to Holdings or to any of its'
or Owner's Affiliates) whether pursuant to foreclosure proceedings or otherwise.
(c) Notwithstanding anything to the contrary contained herein, Owner's
right to terminate this Agreement pursuant to Article 3.03(a) hereof, shall be
conditioned upon either (i) Owner's extension to Manager, on or before the
effective date of such termination, of an irrevocable offer to become the
manager of another hotel, which in the reasonable judgment of Manager (exercised
in good faith) is substantially comparable to the Hotel in quality, size and
revenues, for a term commencing not more than thirty (30) days following the
effective date of such termination and continuing for at least the unexpired
portion of the Term of this Agreement and upon the same substantive terms and
conditions as are set forth in this Agreement (including a right to extend any
remaining Initial Term to include the Option Term, upon the conditions herein
set forth for such extension) or (ii) Owner's (A) payment to Manager, upon the
effective date of such termination, of an amount equal to the aggregate amount
of the Base Management Fee actually paid to Manager during the twelve full
calendar months immediately preceding the effective date of such termination and
(B) provided that not less than 100 hotel properties are then being operated
under the ____________ name within the United States, requiring the purchaser of
the Hotel, on or before the effective date of such termination, to make an
irrevocable offer to enter into a license agreement with an Affiliate of Manager
for the continued operation of the Hotel under the ____________ name, such
license to be in such Affiliate's then customary form, having a term at least
equal to the greater of (y) five (5) years and (z) the unexpired Term of this
Agreement (including the Option Term, if not theretofore exercised) and
providing for license fees to such Affiliate aggregating not more than 2% of
Gross Room Sales during the first twelve months, 3% of Gross Room Sales during
the second twelve months and 4% of Gross Room Sales thereafter during the term
of such license and such other fees as may then be customarily charged by such
Affiliate in its license agreements for similar hotels.
3.04 PERFORMANCE TERMINATION
(a) Beginning on January 1, 2002, and continuing for the remainder of
the Term, Owner shall have the right to terminate this Agreement if Net
Operating Income for the immediately preceding Fiscal Year does not equal or
exceed 90% of the budgeted Net Operating Income for such Fiscal Year, as
determined pursuant to the budgetary process described in Article 8. Owner may
exercise such right to terminate this Agreement, without incurring a termination
fee or penalty, by giving written notice to Manager within 90 days after
receiving the annual financial statement for such Fiscal Year pursuant to
Article 8.01. Such performance termination notice shall specify the effective
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date of such termination which shall not be less than 90 days from the date of
such performance termination notice.
(b) Notwithstanding anything to the contrary in the foregoing, in the
event that Owner is entitled to provide, and does provide, Manager with timely
notice of termination of this Agreement pursuant to Article 3.04(a), Manager may
elect, but shall not be obligated, to nullify such termination notice and the
termination of this Agreement based thereon, by funding to Owner, within thirty
(30) days after receipt of Owner's performance termination notice, an amount
equal to the amount by which the actual Net Operating Income for the applicable
Fiscal Year was less than 90% of the budgeted Net Operating Income for such
Fiscal Year, as determined pursuant to the budgetary process described in
Article 8. If Manager exercises this Net Operating Income shortfall cure right,
Owner's performance termination notice shall be nullified and of no force and
effect, and this Agreement shall remain in full force and effect and the Fiscal
Year in question shall be deemed not to be a Fiscal Year in which there occurred
a shortfall in Net Operating Income which would give rise to Owner's termination
right under this Article 3.04. Manager shall be entitled to exercise this cure
right any number of times during the Term; provided, however, Manager may not
exercise this cure right for more than 2 consecutive Fiscal Years during the
Term.
(c) Notwithstanding anything to the contrary contained herein, Owner's
right to terminate this Agreement under Article 3.04(a) (and the amount of any
shortfall to be paid by Manager in the event Manager exercises its cure right
pursuant to Article 3.04(b)) shall be eliminated, or reduced, as applicable, to
the extent that the shortfall in Net Operating Income is attributable to (i)
force majeure events as described in Article 21 or (ii) increases in utility
rates and/or premiums for insurance which Manager is responsible to obtain under
Exhibit E, in each case that could not have been reasonably anticipated by
Manager in connection with the submission of the Annual Business Plan. Any
disputes concerning the applicability of this Article 3.04(c) shall be resolved
pursuant to the arbitration procedure described in Article 22, and the time
period governing any Owner termination right or Manager cure right shall be
extended for a reasonable period of time (not exceeding 180 days) pending such
resolution.
(d) Owner and Manager have agreed upon the Hotel's current Competitive
Set and the Hotel's current Yield Index (as reported in the "Star Report"
published by Xxxxx Travel Research) versus such Competitive Set ("Base Yield
Index"), all as set forth on Exhibit 1. As a part of the budgetary process
described in Article 8, Owner and Manager shall review such Competitive Set
annually and in good faith agree upon any additions to or deletions from such
Competitive Set and, if necessary, adjust the Base Yield Index versus such
Competitive Set to reflect any additions thereto or deletions therefrom.
(e) Beginning on the later of (i) January 1, 2002, and (ii) the date
upon which Owner has borrowed the full amount of the then "Commitment" under the
Revolving Credit Agreement, and continuing for the remainder of the Term, Owner
shall have the right to terminate this Agreement if, during each of the two
immediately preceding fiscal years, the Hotel's Yield Index (as reported in the
"Star Report" published by Xxxxx Travel Research) versus its Competitive Set is
below the agreed upon Base Yield Index of the Hotel for each of the applicable
years. Owner may exercise such right to terminate this Agreement, without
incurring a termination fee or penalty, by giving written notice to Manager
within ninety (90) days after information regarding the Yield Index of the
hotels within
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the Competitive Set is published by Xxxxx Travel Research and provided to Owner
by Manager. Such performance termination notice shall specify the effective date
of such termination, which shall not be less than ninety (90) days from the date
of such performance termination notice.
3.05 POST-TERMINATION MATTERS; REIMBURSEMENTS TO MANAGER
Upon any termination or expiration of this Agreement for any reason
whatsoever (including, without limitation, pursuant to Article 15.02), Owner
expressly agrees that Manager may remove any of its documents which are
proprietary to Manager (e.g., without limitation, manuals, software programs,
internal correspondence of a proprietary nature, etc.), specifically excluding
financial records, documents, correspondence or other materials relating to the
Hotel, and that, as a condition to such termination or expiration, within ten
(10) days of billing therefor, Owner shall pay to Manager, in addition to any
other amounts due pursuant to this Agreement (i) Manager's reasonable
out-of-pocket costs incurred by reason of requests by Owner for assistance after
termination of this Agreement and not otherwise reasonably expected of Manager
in the orderly termination of its operations at the Hotel, (ii) any unpaid fees
and other charges and reimbursements due Manager hereunder, and (iii) to the
extent reasonable and consistent with Manager's standard practices and industry
standards, termination-related employee expenses, including sick, vacation,
pension, bonus and termination payments to employees. This Article 3.05 shall
survive the expiration or termination of this Agreement.
ARTICLE 4
NONDISTURBANCE
Owner covenants that Manager, during the Term of this Agreement, shall
have peaceable and quiet possession of the Hotel and shall be entitled to
operate the Hotel in accordance with the terms of this Agreement, free from
molestation, eviction and disturbance by Owner or by any person through whom
Owner shall derive its title to or right to occupy and use the Hotel or by any
other person or persons claiming by, through or under Owner. Owner covenants
that throughout the Term, it will pay, keep, observe and perform all payments,
terms, covenants, conditions and obligations to be made, kept, observed or
performed by Owner under the Hotel Lease and any other lease, concession or
other agreement, mortgage or security agreement in respect of the Hotel, and
will provide all funds as shall be necessary to perform Owner's obligations
hereunder. Owner further covenants, at its own expense, to undertake and
prosecute or to permit Manager to undertake and prosecute all appropriate
actions, judicial or otherwise, required to assure such quiet and peaceable
possession and operation by Manager. Owner also covenants and agrees to pay,
prior to delinquency, all taxes and assessments which may become a lien on or
are assessed against the Hotel or any component thereof and which may be due and
payable during the Term, unless payment thereof is in good faith being contested
by Owner, enforcement is stayed and the amount so contested is escrowed or
guaranteed in a form satisfactory to Manager. Upon Manager's request, Owner
agrees to furnish Manager copies of all documents by and through which Owner has
the right of possession to the Hotel and consequently the ability to enter into
this Agreement.
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ARTICLE 5
STANDARDS AND MANAGERS CONTROL
5.01 OPERATIONAL STANDARDS
Manager covenants to and shall operate the Hotel under the Tradename at
the expense of Owner in accordance with the terms of this Agreement and the
operational standards developed by Manager in connection with its hotel
management business, as such operational standards are modified, revised or
amended from time to time (the "Operational Standards"). Owner shall cooperate
with Manager throughout the Term (as the same may be extended) so that Manager
shall be able to operate the Hotel in accordance with the Operational Standards.
5.02 MANAGER CONTROL
Owner hereby covenants to Manager uninterrupted control in operation of
the Hotel during the Term of this Agreement. Owner further covenants it will not
interfere or involve itself in any way with the day-to-day operation of the
Hotel. Manager shall have the right to determine operating policy, standards of
operation, quality of service and any other matters affecting customer relations
or the efficient management and operation of the Hotel. Without limiting the
foregoing, Manager shall have the right, subject to the other provisions of this
Agreement, to determine the terms of guest admittance to the Hotel, use of rooms
for commercial purposes, policies relating to entertainment, labor policies,
charges for rooms and commercial space, credit policies, food and beverage
services, menu prices and other guest charges, receipt, holding and disbursement
of funds, maintenance of bank accounts, and, from Owner's funds, the procurement
of inventories, supplies and services, promotion and publicity, including,
without limitation, the right to provide complimentary or discounted food,
beverages, rooms and the use of other Hotel facilities to existing or potential
customers, employees and others. Manager shall have the right to institute legal
proceedings with regard to the Hotel or its operations in its own name, without
the consent of Owner, or in Owner's name, with the prior written consent of
Owner.
5.03 CONTRACTUAL AUTHORITY
Subject to the limitations contained elsewhere in this Agreement,
Manager is and shall be authorized to make, enter into and perform in the name
of, for the account of, on behalf of and at the expense of Owner any contracts
and agreements deemed necessary by Manager to carry out and place in effect the
terms and conditions of this Agreement, including the execution by Manager in
Owner's name of equipment leases and the like relating to the Hotel.
Notwithstanding anything to the contrary in the foregoing, Manager shall not,
without Owner's prior written approval, execute any contract in Owner's name
which (a) is not provided for in the Approved Budget; (b) extends beyond one (1)
year and is not cancelable by Owner without penalty thereafter upon thirty (30)
days notice or less; or (c) provides for aggregate payments by Owner over the
life of the contract (taking into account Owner's early termination rights, if
any) in excess of $25,000. Further notwithstanding anything to the contrary in
the foregoing, Owner shall execute in its own name all leases of retail space in
the Hotel, all of which shall be subject to the approval of both Owner and
Manager.
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ARTICLE 6
USE OF MANAGER'S TRADENAME
6.01 USE OF NAME
The Hotel shall (subject to the other provisions of this Article 6.01)
be known and designated as a hotel operating under the tradename ____________
(the "Tradename") unless the parties hereto agree to the use of some other name.
Owner acknowledges that the Tradename is a registered service xxxx of Manager
and that the Tradename is and shall continue to be the sole property of Manager.
It is acknowledged that in the future Manager may determine to change the name
of the chain from the Tradename to another name, and, in connection with such
change, Manager may determine to convert the name of the hotels in the chain,
including the Hotel, from the Tradename to another designation; provided,
however, that Manager, at its sole cost and expense, shall pay any expenses
associated with such change, including, but not limited to, the cost of signage
at the Hotel. Owner hereby consents to any such change of name which is
acceptable to Manager. If such change is effected, references in this Agreement
to the Tradename shall instead or also (as appropriate) be deemed to refer to
such new chain name or names. As used in this Article 6 with reference to the
Tradename and the other Marks, the term Manager shall mean and include Manager
and any Affiliate(s) of Manager which from time to time may own the Tradename
and other Marks.
6.02 DEFINITION OF MARKS
As used herein, "Marks" shall mean the Tradename and any other name,
service marks, trademarks, slogans and the like (including all improvements and
additions whenever made to or associated with any thereof by the parties or
anyone else) now or hereafter used by Manager in connection with the Tradename
or any other future name or names of Affiliated Hotels. Owner shall not contest
Manager's unrestricted and exclusive ownership of the Marks or its right to
grant to others licenses to use the Marks.
6.03 DISPUTES CONCERNING MARKS
Manager shall have the sole right and responsibility to handle disputes
with third parties concerning use of all or any part of the Marks, and Owner
will, at Manager's expense, extend its full cooperation to Manager in all such
matters. Manager need not initiate suit against imitators or infringers and may
settle any dispute by grant of a license or otherwise. Owner shall not initiate
any suit or proceeding to enforce or protect the Marks. Both parties shall make
every effort consistent with the foregoing to protect, maintain, and promote the
Tradename and its distinguishing characteristics (and any other service marks,
trademarks, slogans, etc., associated with the Marks) as standing for hotels
being operated or developed by or by authorization from Manager under the
Tradename and only those hotels.
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6.04 RIGHTS UPON TERMINATION
Upon any termination or expiration of this Agreement for any reason
whatsoever, unless Manager, in its sole discretion, authorizes Owner in writing
to continue to use the Tradename or enters into a license agreement with respect
to the use of the Tradename in connection with the Hotel, Owner, at its expense,
shall immediately cease all uses of the Tradename and all Marks and shall remove
from the Hotel, cover or otherwise conceal, any signs containing the Marks and,
within thirty (30) days following such termination or expiration, cease to use
any Operating Equipment, Operating Supplies, inventory, supplies or any other
materials containing the Marks. Manager shall cooperate with Owner in minimizing
interruption to Hotel operations by reason of such removal. Within thirty (30)
days after the termination date, Manager shall acquire from Owner, at cost, all
remaining non-location specific full-case inventory, amenities, supplies or
similar material containing the Marks or any similar designation which meet
Manager's then-current product specifications.
ARTICLE 7
OPERATION OF THE HOTEL
7.01 PERMITS
Owner warrants that there will be no covenants or restrictions which
would prohibit or limit Manager, provided that the necessary licenses and
permits therefor have been obtained, from operating the Hotel, including
cocktail lounges, restaurants and other facilities in accordance with the
Operational Standards. In cooperation with Owner, Manager shall apply for,
process and take all necessary steps to procure (in Manager's name and/or
Owner's name as required by local authority), at Owner's sole cost and expense,
all licenses and permits required for the operation of the Hotel and related
facilities, including, but not limited to, liquor licenses for the sale of
alcoholic beverages at all restaurants, bars and lounges in the Hotel and in all
banquet, meeting and guest rooms at the Hotel. Owner agrees to assist Manager in
connection with Manager's efforts to obtain said liquor licenses. Manager
undertakes to comply with any conditions set out in any such licenses and
permits and at all times to operate and manage the Hotel in accordance with such
conditions and any other legal requirements. Upon the expiration or sooner
termination of this Agreement, Manager agrees, to the extent permitted by
applicable law, to sell, assign, transfer and convey to Owner or its designee
all of Manager's right, title and interest in and to all such licenses
(including liquor licenses) and permits, without charge (other than expenses of
transfer, which shall be borne by Owner), or (in the event such assignment is
not permitted by applicable law) to use its reasonable best efforts to provide
Owner or its designee with the use and benefits of such licenses until such time
as Owner and/or its designee are able to obtain new licenses.
7.02 OPERATING EQUIPMENT AND OPERATING SUPPLIES
Manager shall procure as an Operating Cost all Operating Supplies and
Operating Equipment as Manager deems necessary to the normal and ordinary course
of operation of the Hotel and to operate the Hotel in accordance with the
Operational Standards.
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7.03 PERSONNEL
(a) All personnel employed at the Hotel at all times shall be the
employees of Manager or of an Affiliate of Manager. Subject to the Approved
Budget, other employees of Manager or an Affiliate of Manager may be assigned
temporarily or on a part-time basis to perform services at the Hotel, and the
allocable portion of such temporary or part-time employee's salary (including
employee benefits) while performing services at the Hotel, and actual expenses
incurred by such employee in traveling to and from the Hotel, shall be
reimbursed to Manager by Owner, and such employees will be entitled to free room
and board (but not alcoholic beverages) and use of Hotel facilities while
performing such services; provided, however, that in no event shall the
reimbursable costs, plus the cost of room, board and facilities usage, of such
temporary employees exceed the amount provided therefor in the Approved Budget
without Owner's prior written consent, which shall not be unreasonably withheld.
Manager shall have absolute discretion to hire, promote, supervise, direct and
train all employees at the Hotel, to fix their compensation and fringe benefits,
subject to the limitations provided in the Approved Budget, and, generally, to
establish and maintain all policies relating to employment and employment
benefits. Notwithstanding anything to the contrary in the foregoing, Owner shall
have the right to interview and consent to the hiring or transfer of the General
Manager and Director of Marketing of the Hotel. This right shall not be deemed
to limit the right of Manager to terminate the employment of such persons;
however, if circumstances permit, Manager shall consult with Owner prior to the
termination of such persons. All costs of every kind and nature pertaining to
all employees at the Hotel arising out of the employer-employee relationship,
including, without limitation, salaries, fringe benefits, bonuses, relocation
costs, employment-related legal costs, costs incurred in connection with
governmental laws and regulations and insurance roles, and such other expenses
as Manager, in its reasonable discretion, may deem appropriate (e.g., costs of
defense of employees charged with a crime in connection with the performance of
their duties at the Hotel and costs of defending claims brought by Hotel
employees against Owner, Manager or the Hotel) shall be an Operating Cost, and
Owner shall reimburse, indemnify and hold harmless Manager from all costs,
expenses, liabilities and claims incurred in connection therewith; provided,
however, that (i) unless agreed to by Owner in the Approved Budget or otherwise,
out-of-pocket expenses of officers of Manager and its parents and affiliates
shall not be reimbursable to Manager by Owner and (ii) with respect to any
employee moving expenses attributable to the Hotel, Manager shall be obligated
to reimburse Owner for one twenty-fourth (1/24th) of such expense during each of
the 24 consecutive months following the date such employee becomes employed at
the Hotel and during which such employee does not remain as an employee at the
Hotel; provided, however, that Manager shall have no such obligation to
reimburse Owner if the employment of such an employee terminates at Owner's
request or with Owner's prior written consent, which consent shall not be
unreasonably withheld.
(b) Upon expiration or other termination of this Agreement (other than
pursuant to Article 15.02 hereof as a consequence of a default on the part of
Manager hereunder), an escrow fund shall be established from Total Sales (or, if
Total Sales are not sufficient, with funds provided by Owner) to reimburse
Manager for all costs and expenses incurred by Manager, such as reasonable
transfer costs, severance pay, unemployment compensation and other employee
liability costs arising out of either the transfer or termination of Hotel
employees. If the parties fail to promptly agree with respect to the amount of
the escrow fund, at the request of either party, the amount thereof shall be
determined by arbitration pursuant to the provisions of Article 22.
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7.04 SALES. MARKETING. ADVERTISING AND ADDITIONAL PROMOTIONAL PROGRAMS
(a) Manager shall arrange, contract for and carry out such advertising
and promotion of the Hotel as Manager shall deem advisable and consistent with
the Approved Budget. Funds for advertising and promotion of the Hotel may be
expended exclusively for or with respect to the Hotel or, to the extent
specified in the Approved Budget, in conjunction with the advertising or
promotion of other Affiliated Hotels (including, without limitation, regional
cooperative advertising and marketing programs), and in either case may be
administered (and in the latter case, coordinated) at and through Manager's
regional or home office which shall use all reasonable efforts to ensure that
the Hotel shall receive an equitable share of the benefit of any such approved
cooperative advertising and promotion, reasonably commensurate with its
contribution to the costs thereof In the case of any such joint or cooperative
advertising or promotion (or other joint or cooperative efforts such as
development and/or publication of standardized directories for hotel rooms), the
costs thereof (without markup or profit to Manager or any Affiliate) shall be
equitably allocated by Manager between the Hotel and any other Affiliated Hotels
participating therein, considering the relative benefits received therefrom by
each of the participants.
(b) Manager shall coordinate with tour programs marketed by airlines,
travel agents and government tourist departments when Manager deems the same to
be advisable and in the best interests of the Hotel. Manager, in its discretion,
may cause the Hotel to participate in sales and promotional campaigns and
activities involving complimentary rooms, food and beverages to bona fide travel
agents, tourist officials and airline representatives where such is customary in
the travel industry or in Manager's practice and policy.
(c) The Hotel shall participate in the existing "Doubletree(R)" cookie
program. The Hotel shall also participate in such other promotional programs
(e.g., frequent flyer programs, etc.) as may, from time to time, be included in
the Operational Standards. In the event the owners of two-thirds (2/3) or more
of the rooms and suites in the Affiliated Hotels elect to participate in such
programs, the Hotel shall participate in such programs. The cost and expense of
such programs ("Additional Program Charges") will be borne by the participating
hotels in a fair and equitable manner, as reasonably determined by Manager, and
will be in addition to the other fees and charges payable by such hotels.
7.05 TRADES: TREATMENT ACCORDED
Manager may arrange for and make trades of goods and/or services
(including, but not limited to, room/suite occupancy, food, beverages,
incidental charge items and taxes relating to any thereof) furnished or to be
furnished to others at the Hotel, for goods and/or services (including, but not
limited to, advertising, air and ground transportation, rental vehicles and
taxes relating to any thereof) furnished or to be furnished to or for the
benefit of the Hotel or Manager. In such event, if the goods and/or services
received in a particular trade are exclusively for the use or benefit of the
Hotel (and not for any other use or benefit of Manager or any other hotel or
activity), there shall be included in Total Sales the usual charges for the
goods and/or services given therefor in such trade and the same amount shall be
deemed contemporaneously expended as Operating Costs for such goods and/or
services received; and if the goods and/or services received in a particular
trade are, to any extent, for the use or benefit of Manager and/or any other
hotel or activity (and not exclusively for the benefit of the Hotel), Manager
shall pay to the Hotel the usual charges for the goods and/or services given
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by the Hotel in such trade (and such payment shall be included in Total Sales),
and if any of the goods or services so received are used by or for the benefit
of the Hotel, the entire amount so paid by Manager shall be equitably allocated
among the Hotel and all other hotels or activities benefitting therefrom in a
manner similar to the allocation of costs of marketing and of Centralized
Services, and the portion thereof fairly allocable to the Hotel shall be
reimbursed to Manager as an Operating Cost.
7.06 FF&E REPLACEMENTS
Owner recognizes the necessity of replacement of FF&E due to age, wear,
condition or obsolescence ("FF&E Replacements"). Owner agrees to expend, in
accordance with the Approved Budget, such amounts for FF&E Replacements as shall
be required in the normal and ordinary course of operation of the Hotel, to
operate the Hotel in accordance with the Operational Standards and the Hotel
Lease. Design and installation of FF&E Replacements, if requested by Owner,
shall be under Manager's supervision, for which Manager may be entitled to
additional compensation as provided in Article 9.04(a) below. Expenditures for
FF&E Replacements shall, to the extent provided in Article 7.11(a) hereof, be
paid from the Replacement Reserve Fund and the balance, if any, shall be paid
from the Bank Account.
7.07 ROUTINE MAINTENANCE AND REPAIRS
Subject to the availability of sufficient funds therefor and to the
limitations of the Approved Budget, Manager shall maintain the Hotel in good
repair and condition and in conformity with the Operational Standards, the Hotel
Lease, and applicable laws and regulations, and shall make or cause to be made
such routine maintenance, repairs and minor alterations, the cost of which can
be expensed under generally accepted accounting principles, as Manager, from
time to time, deems necessary for such purposes. The cost of such routine
maintenance, repairs and alterations shall be paid from Total Sales and shall be
treated as an Operating Cost; to the extent that Hotel revenues are insufficient
therefor, Owner shall, upon Manager's request, provide sufficient funds to pay
for such costs when due. Expenditures under this Article 7.07 shall not be paid
from the Replacement Reserve Fund. The determination of whether an expenditure
is for an FF&E Replacement under Article 7.06 or, in the alternative, for
routine repairs and maintenance under this Article 7.07 shall be made in
accordance with this Agreement and GAAP. If and to the extent that GAAP does not
address and resolve the categorization of an expenditure, the determination
shall be made by Manager, in good faith.
7.08 CAPITAL REPAIRS
In addition to routine maintenance, repairs and alterations under
Article 7.07, and subject to the limitations of the Approved Budget, Manager
shall have the further right to make, as a Fixed Charge, such Capital Repairs as
Manager deems to be beneficial to the Hotel or its operation or which Manager
determines to be necessary in order to maintain the Hotel's competitive position
or to maintain the Hotel in accordance with the Operational Standards and the
Hotel Lease. Expenditures under this Article 7.08 shall, to the extent provided
in Article 7.11(a) hereof, be paid from the Replacement Reserve Fund and the
balance, if any, shall be paid from the Bank Account. The determination of
whether an expenditure is for an FF&E Replacement under Article 7.06 or, in the
alternative, for a Capital Repair under this Article 7.08 shall be made in
accordance with this Agreement and GAAP. If and to the extent that GAAP does not
address and resolve the
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categorization of an expenditure, the determination shall be made by Manager, in
good faith. As used herein, "Capital Repairs" shall mean and include repairs,
alterations, improvements, renewals and replacements (other than FF&E
Replacements) to the Hotel which are normally capitalized under GAAP, including,
without limitation, repairs, alterations, improvements, renewals or replacements
to the Building's structure or to its mechanical, electrical, heating,
ventilating, air conditioning, plumbing or vertical transportation systems,
exterior and interior repainting, and resurfacing building walls, floors, roofs
and parking areas. Design and completion of Capital Repairs, if requested by
Owner, shall be under Manager's supervision. To the extent Owner requests
Manager, in writing, to supervise Capital Repairs, Manager shall do so and shall
be entitled to compensation therefor in accordance with Article 9.04(a) hereof
7.09 FF&E AND CAPITAL REPAIRS ESTIMATES
Manager shall prepare plans and estimates of the expenditures
necessary, in such detail as Owner shall reasonably require, for (a) FF&E
Replacements (the "FF&E Replacement Budget"), and (b) Capital Repairs (the
"Capital Repairs Budget") during each ensuing Fiscal Year, and shall submit such
FF&E Replacement Budget and Capital Repairs Budget to Owner for approval as a
part of the Annual Business Plan described in Article 8.02.
7.10 EMERGENCY REPAIRS: REPAIRS REQUIRED BY LAW
(a) In the event a condition should exist in, on or about the Hotel of
an emergency nature, including Capital Repairs, which condition requires
immediate action to preserve and protect the Hotel, to assure its continued
operation, or to protect Hotel guests or employees, Manager, on behalf of and at
the sole cost and expense of Owner, is authorized to take all steps and to make
all expenditures necessary to repair and correct any such condition, whether or
not provisions have been made in the Approved Budget for any such emergency
expenditures. Manager shall not expend more than $25,000 (which figure shall be
adjusted annually hereafter to reflect increases in the Index) on any one
occasion pursuant to this Article 7.10(a) without Owner's prior approval, unless
Manager determines that the emergency condition constitutes an immediate threat
to the life or safety of Hotel guests or employees; and in any event, Manager
shall advise Owner as promptly as possible of any expenditures made or to be
made under this Article 7.10(a). Expenditures under this Article 7.10(a) shall,
to the extent provided in Article 7.11(a) hereof, be paid from the Replacement
Reserve Fund and the balance, if any, shall be paid from the Bank Account.
(b) In the event that, at any time during the Term, repairs to or
additions, changes or corrections in the Hotel of any nature shall be required
by reason of any laws, ordinances, rules or regulations now or hereafter in
force, or by order of any governmental or municipal power, department, agency,
authority or officer, whether such repairs, etc. are Capital Repairs or
otherwise, such repairs, additions, changes or corrections shall be made at the
direction of Manager and paid for by Owner, unless (and except for so long as)
compliance therewith is in good faith being contested by Owner and enforcement
is stayed in a manner reasonably satisfactory to Manager. Expenditures under
this Article 7.10(b) shall, to the extent provided in Article 7.11(a) hereof, be
paid from the Replacement Reserve Fund and the balance, if any, shall be paid
from the Bank Account.
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7.11 REPLACEMENT RESERVE FUND
(a) Under the terms of the Hotel Lease, there shall be paid over into
the Replacement Reserve Fund in cash in each month during the Term, an amount
equal to 3% of Total Sales for the preceding month (the "Replacement Reserve
Percentage"). The amounts so deposited in the Replacement Reserve Fund shall be
recorded on the Hotel's books of account as "Replacement Reserve Fund." All
deposits to, and the balance in, the Replacement Reserve Fund, from time to
time, shall be placed into and maintained in, an interest-bearing account (the
"Replacement Reserve Fund") established in Owner's name at a bank of Owner's
selection with Manager's designees being the only authorized signatories on said
account. Any expenditures for FF&E Replacements and Capital Repairs during any
Fiscal Year, to the extent provided for in the Approved Budget, may be made
without Owner's further approval and shall be made by Manager, to the extent
permitted under the Hotel Lease, from the Replacement Reserve Fund (including
accrued interest and unused accumulations from earlier years). Any amounts
remaining in the Replacement Reserve Fund at the close of each Fiscal Year shall
be carried forward and retained in the Replacement Reserve Fund until fully used
as herein provided.
(b) To the extent the Replacement Reserve Fund is insufficient at a
particular time or to the extent the Replacement Reserve Fund plus anticipated
contributions for the ensuing year are below the amount provided therefor in the
Approved Budget for the ensuing year, then in either such event, Manager shall
give Owner written notice thereof at least forty-five (45) days before the
anticipated date such funds will be needed. Owner shall supply the necessary
funds by deposit to the Replacement Reserve Fund at least thirty (30) days prior
to the anticipated date such funds will be needed.
(c) All proceeds from the sale or other disposition of FF&E no longer
needed for the operation of the Hotel shall be deposited to the Replacement
Reserve Fund. Sale of such items shall be at the discretion of Manager and
conducted in a commercially reasonably manner. Manager shall not dispose of any
capital item or group of capital items having an aggregate value in excess of
$10,000 without Owner's prior written consent, unless the replacement of such
capital item or group of capital items has been contemplated in the Approved
Budget. Manager shall also obtain the written consent of Mortgagee, if required,
for any such disposition of capital items. Upon termination of this Agreement
for whatever reason, Manager's right to expend any unused portion of the
Replacement Reserve Fund shall terminate and the balance of the fund shall be
paid over to Owner, less any sums then due Manager.
7.12 CAPITAL IMPROVEMENTS
Holdings or Owner may, but shall not be required to, make such other
capital improvements or additions to the Hotel as they deem appropriate, from
time to time. Holdings or Owner, as the case may be, shall consult with Manager
regarding the nature, and cooperate with Manager in the timing, of such
additional capital improvements or additions, with a view to minimizing the
adverse revenue impact thereof upon the Hotel.
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ARTICLE 8
FISCAL MATTERS
8.01 ACCOUNTING MATTERS AND FISCAL PERIODS
(a) The books and records reflecting the Hotel operations shall be kept
by Manager, as an Operating Cost, in accordance with GAAP. Such books and
records shall be maintained either at the Hotel, at the principal office of
Manager or at a regional accounting office, at Manager's option. Owner, the
Mortgagee(s), and the independent accounting firms of Owner, the Mortgagee(s)
and Manager shall each have the right and privilege of examining said books and
records at any reasonable time. No part of Manager's corporate accounting or
reporting functions (as opposed to accounting and reporting for individual
hotels performed at corporate, central or regional offices) shall be charged to
the Hotel or be included as a cost of Centralized Services.
(b) Upon request of Owner and at Owner's sole cost and expense, a
certified audit of the Hotel operations shall be performed by a nationally
recognized, independent Certified Public Accounting firm appointed by Owner.
Manager shall cooperate in good faith with Owner and its representatives to
facilitate such audit. If the difference (if any) in the Net Operating Income of
the Hotel reflected by such audit and the Net Operating Income of the Hotel
reported by Manager hereunder, for any Fiscal Year, is more than 5% of the Net
Operating Income of the Hotel so reported by Manager, Manager shall reimburse
Owner for the entire cost of such audit.
(c) Unless and until Owner and Manager otherwise agree in writing, the
fiscal year of the Hotel shall be the calendar year (the "Fiscal Year"). Manager
shall prepare and furnish to Owner, within fifteen (15) days after the end of
each calendar month (Manager shall use all reasonable efforts to provide such
reports within ten (10) days after the end of each calendar month, but in any
event not later than fifteen (15) days) a detailed balance sheet and profit and
loss statement for the Hotel, setting forth the financial position and results
of operations of the Hotel for such calendar month and the calendar year to
date, with comparisons to the then current Operating Budget and the previous
year's results. Manager shall also provide Owner with additional operating and
financial data as Owner may reasonably request, the cost of providing said data
to be an Operating Cost of the Hotel.
8.02 ANNUAL BUSINESS PLAN
(a) Manager has submitted to Owner an Operating Budget and the Annual
Business Plan for ____ Fiscal Year. The Annual Business Plan for ____ has been
reviewed and approved by Owner in the manner described in Article 8.02(b)(1)
hereof Manager shall operate the Hotel in accordance with the Annual Business
Plan for ______ during the ____ Fiscal Year.
(b) (1) At least forty-five (45) days prior to the commencement of each
subsequent Fiscal Year, Manager shall submit to Owner an annual forecast for the
operation of the Hotel for such Fiscal Year containing, in such detail as may be
reasonably requested by Owner, revenue projections and budgets of expenses (the
"Operating Budget"). The Operating Budget shall be substantially in form
consistent with GAAP. Manager shall, at the same time, also submit to Owner a
Marketing Plan, a Human Resources Compensation Plan, the FF&E Replacement Budget
and the Capital Repairs Budget, which, together with the Operating Budget, will
comprise the "Annual Business Plan." Manager shall provide Owner, upon request,
additional detail, information and assumptions
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used in preparation of the Annual Business Plan. Manager shall review the Annual
Business Plan with Owner, and subject to Owner's approval, which shall not be
unreasonably withheld, Manager shall implement such Annual Business Plan during
the successive Fiscal Year (during which it shall be referred to as the
"Approved Budget"). Owner shall approve the proposed Annual Business Plan or
state its specific objections thereto (or to any specific item or items therein)
within thirty (30) days after the Annual Business Plan is submitted by Manager
to Owner. In the event Owner declines to approve the Annual Business Plan or any
specific line item or items of the Annual Business Plan prior to commencement of
the Fiscal Year in question, pending resolution thereof the Annual Business Plan
or the specific line item or items of expense (not revenue) that have not been
approved shall be suspended and replaced for the Fiscal Year in question by an
amount equal to the lesser of (i) that amount proposed by Manager and (ii) the
amount of such budget item or items for the Fiscal Year prior thereto, adjusted
(per item) by the percentage change in the Index over the twelve (12) month
period immediately preceding the start of the Fiscal Year in question. If,
thereafter, at any time either Owner or Manager determines that the Annual
Business Plan, or any specific line item or items therein, cannot be agreed to
by the parties, then either Manager or Owner may require the matter to be
submitted to arbitration in accordance with Article 22 hereof Manager makes no
assurances that the actual performance of the Hotel shall correspond to its
estimates in the Annual Business Plan. Manager agrees to use all reasonable
efforts to operate the Hotel within the Approved Budget and in a manner designed
to maximize Gross Rooms Sales and Net Operating Income. Centralized Services
costs, the National Sales, Business Promotion and Reservations Services
Assessment, Additional Program Charges and TPR Charges (as herein defined),
shall be included in the Operating Budget, but with Centralized Services costs
to be subject to Owner's approval as part of the budget approval process set
forth above.
(2) Notwithstanding the provisions of Article 8.02(b)(1) or
anything to the contrary contained elsewhere in this Agreement, Manager may,
without Owner's approval, make aggregate expenditures in any year which exceed
the Approved Budget, provided that such excess does not exceed the Approved
Budget by more than 5%. In addition, Manager may expend in excess of said 5%
limitation under the following circumstances (provided such expenditures are
reasonable in nature and amount based on such circumstances):
(A) as the result of increased costs due to
increases in the volume of Total Sales (by
reason of increased occupancy rates or
otherwise); or
(B) as the result of an emergency, as described
in Article 7.10, or of uncontrollable
expenditures, such as insurance, real estate
taxes, weather-related costs, and increases
in the cost of utilities based upon changes
in utility rates.
References in this Agreement to the limitations imposed by the Approved Budget
(and phrases of similar import) shall be deemed to incorporate Manager's
authority to expend funds in excess of the Approved Budget as set forth in this
Article 8.02(b)(2). Manager shall promptly notify Owner of any expenditures that
have been or are expected to be made in excess of the Approved Budget and of the
reasons therefor.
(3) In addition to the additional amounts Manager may expend
pursuant to subparagraph (2) above, Owner and Manager acknowledge and agree that
there may occur from time
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to time unpredicted significant changes, variables or events affecting the
operation of the Hotel, including unanticipated changes in occupancy rates,
market conditions, or additional unanticipated items of income or expense. In
such event, Manager may request variance(s) from the Approved Budget which are
reasonable and necessary to continue to operate the Hotel in accordance with the
Operational Standards and the Hotel Lease. Owner's approval of such a request
shall not be unreasonably withheld. Any such request by Manager shall be
submitted to Owner in writing with an explanation thereof and shall be
accompanied by supporting information for the request. Owner shall respond to
any such request within fifteen (15) days of the receipt thereof
(b) At the time of the review by Owner with Manager of the Annual
Business Plan and at any additional meetings during the Fiscal Year reasonably
called by Owner or Manager, Manager shall consult with Owner on matters of
policy concerning management, sales, room rates, wage scales, personnel, general
overall operating procedures, economics and operation and other matters
affecting the operation of the Hotel.
8.03 BANK ACCOUNTS
(a) Manager shall establish such account(s) in the name of the Owner at
a bank to be designated by Manager and approved by Owner (collectively, the
"Bank Account") as are necessary for the operation of the Hotel. The Bank
Account shall be separate and distinct from any other accounts, reserves or
deposits required by this Agreement and Manager's designees shall be the only
parties authorized to draw upon the Bank Account. Manager shall appoint at least
two such designees, which designees shall be bonded or otherwise insured as
Owner and Manager shall mutually agree. Checks or other items of withdrawal
shall be signed only by such designees, acting singly or jointly.
(b) Manager shall have absolute control of the Bank Account. All sums
received from the operation of the Hotel and any and all items paid by Manager
arising by virtue of management of the Hotel shall pass through the Bank
Account. In addition, reasonable xxxxx cash funds may be maintained at the
Hotel.
(c) In addition to the Bank Account, a payroll account shall be
established by Manager which shall be under the sole ownership and control of
Manager or its designee. Amounts disbursed or to be disbursed by Manager from
its payroll account shall be paid to, and transferred by, Manager from the Bank
Account. Such payment and transfer of funds may occur at such time (whether
prior or subsequent to the release by Manager of checks drawn on its payroll
account) as Manager, in its reasonable discretion, determines is necessary to
assure that it will have sufficient funds from the revenues of the Hotel to
satisfy its liabilities to employees at the Hotel.
(d) In no event shall any funds in the Bank Account, the Replacement
Reserve Fund or any other fund or account under the control of Manager that
contains monies belonging to the Hotel or to the Owner be combined or commingled
with any other accounts or funds belonging to Manager or any other person
whatsoever.
(e) All payments made by Manager hereunder shall be made from
authorized bank accounts and xxxxx cash funds. Except as otherwise expressly
provided in Article 8.05 hereof, Manager shall not be required to make any
advance or payment to or for the account of Owner
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except out of such funds, and Manager shall not be obligated to incur any
liability or obligation for Owner's account without reasonable assurances that
necessary funds for the discharge thereof will be provided by Owner. Reasonable
debts and liabilities incurred by Manager in the normal course of its operation
and management of the Hotel pursuant to the terms hereof whether asserted before
or after termination of this Agreement, shall be paid by Owner to the extent
funds are not available for that purpose from the operation of the Hotel.
8.04 REIMBURSEMENT OF OUT-OF-POCKET EXPENSES
It is agreed that Owner, subject to the Approved Budget, shall
reimburse Manager and its Affiliates for actual, reasonable and necessary
out-of-pocket costs incurred by them in the performance of this Agreement as an
Operating Cost. Such costs shall include, but not be limited to, reasonable
travel, entertainment, telephone, telegraph, electronic communication, postage,
air express, costs of recruitment (including applicable agent's fee) and other
incidental expenses. It is agreed that Manager shall be entitled to
reimbursement of these expenses directly from the Bank Account at the time
incurred. Such reimbursements shall be in addition to the Base Management Fee
and other fees and payments due hereunder.
ARTICLE 9
ADDITIONAL SERVICES
9.01 ADDITIONAL SERVICES
Manager will provide to the Hotel additional services (collectively,
"Additional Services") consisting of (i) Centralized Services, as described in
Article 9.02, (ii) National Sales, Business Promotion and Reservations Services,
as described in Article 9.03, and (iii) the Other Services described in, and as
permitted by, Article 9.04.
9.02 CENTRALIZED SERVICES
(a) Manager will cause to be furnished to the Hotel certain services
("Centralized Services") which are furnished generally on a central or regional
basis to other Portfolio Hotels. Centralized Services shall include (i) training
of personnel, (ii) accounting, internal audit and data processing services, and
(iii) such additional central or regional services as may from time to time be
furnished for the benefit of Portfolio Hotels or in substitution for services
now performed at individual Portfolio Hotels which may be more efficiently
performed on a group basis. Accounting and data processing services shall
include a central office computer, full service accounting (or oversight of
property stand-alone accounting systems) and data processing system/program
support, and audit and system/personnel support for the purpose of ensuring the
consistent and professional execution of accounting and data processing
functions required for the Hotel.
(b) Centralized Services costs shall consist of the actual cost of the
services without markup or profit to Manager or any Affiliate, but shall include
salary and employee benefit costs, cost of equipment used in performing such
services, and overhead costs, reasonably allocable thereto, of the home office
or any regional or other local office providing such services; provided,
however, that costs attributable or allocable to corporate office accounting and
reporting for Manager or any of its Affiliates shall not be included. Costs and
expenses incurred in the providing of Centralized Services
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for Portfolio Hotels shall be allocated by Manager and its Affiliates on a fair
and equitable basis, consistently applied, among all Portfolio Hotels receiving
such services; provided, however, that in no event shall the basis upon which
the cost of such services is allocated to the Hotel be less favorable to the
Hotel than the basis upon which such costs are allocated to any other hotel
under an agreement entered into (as opposed to being assumed as part of an
acquisition) subsequent to the Execution Date. A detailed budget for Centralized
Services shall be prepared and included in the Annual Business Plan submitted to
Owner pursuant to Article 8.02(b)(1) hereof and in each Approved Budget.
Anything herein to the contrary notwithstanding, in no event shall the amounts
charged to the Hotel for any Fiscal Year exceed the amount therefor included in
the Approved Budget for such Fiscal Year, unless otherwise expressly approved by
Owner in writing. Costs of Centralized Services shall be payable monthly as an
Operating Cost. Owner may at any reasonable time review the records of Manager
and its Affiliates pertaining to such charges. In addition, if equipment is
installed and maintained at the Hotel in connection with the rendition of any
Centralized Services, all costs thereof will be charged to the operation of the
Hotel either as current expenses or capitalized over a period of years, as
determined by Manager in good faith and consistent with GAAP.
9.03 NATIONAL SALES. BUSINESS PROMOTION AND RESERVATIONS SERVICES
(a) Manager shall cause to be furnished to the Hotel certain services
("National Sales, Business Promotion and Reservations Services") consisting of
central marketing services and a central reservations system. The central
marketing services shall provide system-wide marketing activities for all
Affiliated Hotels and shall include national and regional advertising, sales
promotion, public relations and direct selling efforts for the collective
business development of all Affiliated Hotels. The central reservations system
shall provide a national toll-free system for inquiries regarding customer
bookings and for making, changing and canceling reservations for the Hotel and
other Affiliated Hotels.
(b) Manager shall assess, and Owner shall pay to Manager, a monthly
assessment (the "National Sales, Business Promotion and Reservations Services
Assessment") for National Sales, Business Promotion and Reservations Services
equal to 3.5% of Gross Room Sales. Such amount may be increased by a vote of the
owners of a majority of the rooms and suites in all Affiliated Hotels. The
National Sales, Business Promotion and Reservations Services Assessment will be
payable each month directly from the Bank Account based upon Gross Room Sales
for the preceding month. Costs of National Sales, Business Promotion and
Reservations Services shall consist of the actual cost of providing such
services without xxxx-up or profit to Manager or any Affiliate, but shall
include salary and employee benefit costs, cost of equipment used in providing
such services, and overhead costs of the home office or any regional or other
local office providing such services, in each case reasonably allocable thereto.
(c) The National Sales, Business Promotion and Reservations Assessment
does not cover charges for third-party reservation systems (such as airline
reservations systems) and/or other third-party reservation fees ("TPR Charges"),
which shall be paid for separately by Owner as an Operating Cost of the Hotel.
TPR Charges shall include costs incurred by Manager or any Affiliate (without
markup for profit to Manager or any Affiliate) in administering such systems or
fees, such as salary and employee benefit costs, cost of equipment, and overhead
costs at the home office or any other regional or local office in administering
such systems and fees, in each case reasonably allocable thereto.
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(d) National Sales, Business Promotion and Reservations Services may be
provided in common with other hotels and resorts and all-suite properties owned,
operated or franchised by, or otherwise affiliated with, Manager or its
Affiliates and with other hotels which elect to participate in such services,
including hotels and resorts in the Canadian Pacific Hotel chain. In any event,
advertising and promotional materials for the Affiliated Hotels may include
cross-sell references to hotels and resorts in the Canadian Pacific Hotel chain,
to other hotels owned, operated or franchised by Manager or its Affiliates, and
to their affiliation with Manager.
9.04 OTHER SERVICES
(a) Direction and administration of Hotel renovation projects, other
planning, design, concept development and implementation, management information
systems and accounting services for specific renovation or other projects, and
related project management services which the Hotel may require (collectively,
"Project Services"), are not Centralized Services and are not provided for under
the scope of this Agreement. Accordingly, Manager will not furnish Project
Services, unless the same are expressly requested by Owner in writing, and the
amount of fees payable hereunder for such Project Services are approved in
writing by Owner, in each instance before any such Project Services are
furnished by Manager on behalf of Owner or at Owner's expense. In the event
Owner so requests and approves such Project Services, Manager may use the
services of its Affiliates to perform Project Services, in which case, Project
Services shall be furnished to Owner on terms and conditions that are generally
no less favorable to Owner than those available from unrelated third parties in
an arms-length transaction. Owner agrees to give good faith consideration to the
use of Manager to provide Project Services, but shall have no obligation to
select Manager to provide the same.
(b) In purchasing goods, supplies, equipment and services for the Hotel
or organizations or entities providing Additional Services for the Hotel,
including, without limitation, Operating Supplies, Operating Equipment,
insurance and long distance telephone services, Manager shall (i) unless
otherwise directed by Owner in writing, utilize the purchasing and procurement
services of Affiliates of Manager and/or other group buying techniques involving
other Portfolio Hotels, provided that the cost thereof shall be generally no
less favorable to Owner than that which would be available through unrelated
third party vendors in an arms-length transaction or (ii) if so directed by
Owner in writing, utilize such other supplier or provider as may be designated
by Owner. The Manager and/or Affiliates of Manager (as the case may be)
providing any such purchasing or procurement services to the Hotel may xxxx up
their costs or receive and retain a fee or other compensation from vendors and
service providers for their services in making the benefit of volume purchases
available to the Hotel or negotiating and implementing the arrangements with
such vendors or providers; provided, however, that the total cost of goods and
services (including such xxxx-up, fee or other compensation charged or retained
by Manager or its Affiliates) so provided to the Hotel by Manager or its
Affiliates shall be generally no less favorable to Owner than that which would
be available through unrelated third party vendors in an arms-length
transaction. Owner agrees to give good faith consideration to the use of Manager
to provide procurement services, but shall have no obligation to select Manager
to provide the same.
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ARTICLE 10
PAYMENTS TO MANAGER
10.01 BASE MANAGEMENT FEE
In consideration of the management of the Hotel by Manager, Owner
agrees to pay to Manager the Base Management Fee. The "Base Management Fee"
shall mean and refer to a fee equal to, during the period from the Commencement
Date to and including _________________, 2.5% of Total Sales with respect to
each month (or portion thereof) during such period, and during the period from
_______________, to and including the end of the Term, 3.0% of Total Sales with
respect to each month during such period. The Base Management Fee for the
immediately preceding month shall be paid monthly to Manager from the Bank
Account; provided, however, that the Base Management Fee shall be reduced as
follows to the extent necessary to permit the Owner to pay, when due, all rent
payable to Holdings under the Hotel Lease and the comparable hotel leases
covering each of the AEW Hotels:
(a) for the period from the Commencement Date through
__________________ up to 1.5% of Total Sales; and
(b) for the period from ________________ through the
remainder of the Initial Term, up to 0.5% of Total
Sales.
Manager shall adjust the amounts charged by it to the Hotel, on a monthly basis,
in respect of the Base Management Fee to reflect any anticipated reduction in
the Base Management Fee payable to it for the then current Fiscal Year or, if no
such reduction is anticipated, to restore reductions made in any previous month
of the then current Fiscal Year. A final reconciliation of the Base Management
Fee due Manager, if any, for each Fiscal Year shall be included with the
financial statements to be provided by Manager to Owner with respect to December
of each Fiscal Year and, within thirty (30) days following delivery thereof, (i)
Owner shall pay to Manager any Base Management Fee due, but not paid to Manager,
for such Fiscal Year, or (ii) Manager shall reimburse to Owner any Base
Management Fee paid to Manager, but in excess of the Base Management Fee due,
for such Fiscal Year. Any reduction in the Base Management Fee payable for any
Fiscal Year, as a result of the foregoing provisions, shall not be payable in
any subsequent Fiscal Year.
ARTICLE 11
DISBURSEMENTS
11.01 DISBURSEMENT OF FUNDS
All funds derived from the operation of the Hotel shall be deposited
into the Bank Account created pursuant to the requirements of Article 8.03.
There shall in turn be disbursed by Manager for and on behalf of Owner, funds
from the Bank Account towards the following items to the extent available (with
appropriate reserves established to cover items payable less frequently than
monthly) in the following order of priority:
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(a) all Operating Costs, including the Base Management
Fee (subject to adjustment as provided in Article
10.01), charges for Additional Services, and all
reimbursable expenses due Manager;
(b) payments pursuant to any equipment leases or
installment sale contracts approved by Manager;
(c) all rental payments required to be made by Owner
pursuant to the Hotel Lease; and
(d) all other Fixed Charges.
11.02 ADJUSTMENT TO BANK ACCOUNT
After the disbursements pursuant to Article 11.01, any excess funds
remaining in the Bank Account over the Minimum Balance shall be disbursed
monthly to Owner. Correspondingly, any deficiency in the Bank Account shall
promptly be provided by Owner as required in Article 2.03. Notwithstanding that
Manager is authorized to and shall make the hereinabove described disbursements
to the extent funds are available, Owner will be solely liable for (i) all
Operating Costs, Specified Fixed Charges and other Fixed Charges and (ii) all
sales taxes, excise taxes, or other taxes which may be assessed by any taxing
authority against or upon Manager with respect to any payments, receipts or
earnings received by Manager pursuant to this Agreement, including, without
limitation the fees received by Manager pursuant to Article 10, excluding in any
case, however, any federal, state or local income, franchise or other taxes
levied against Manager based upon its assets or income.
ARTICLE 12
INSURANCE
12.01 INSURANCE COVERAGE
Owner (or Holdings, to the extent provided under the Hotel Lease) shall
procure and maintain, at its expense, and at all times during the Term, such
casualty and other insurance coverage as is set forth under "Responsibilities of
Owner" in Exhibit E attached hereto. Manager agrees to procure and maintain, as
an Operating Cost, such comprehensive general liability insurance and other
insurance coverage as is set forth under "Responsibilities of Manager" in said
Exhibit E. In connection with all significant construction at the Hotel, Owner
or Manager (whichever is the contracting party) will cause the general
contractor to maintain with a reputable insurer comprehensive general liability
insurance (with products, completed operations and independent contractors
coverage) in at least the amount of $20,000,000.
12.02 INSURANCE POLICIES
(a) All insurance provided for under this Article shall be effected by
policies issued by insurance companies of good reputation and of sound financial
responsibility and shall be subject to Manager's approval. Such insurance may be
carried under blanket policies covering the Hotel and other locations provided
such policies otherwise comply with all of the requirements of Exhibit E.
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(b) Certificates of insurance shall be delivered to Owner and Manager
on or before the Commencement Date. All insurance policies shall be renewed, and
proof of such renewals shall be delivered to Owner and Manager at least ten (10)
days prior to their respective expiration dates.
(c) All insurance policies procured by Owner under Article 12.01 (or by
Holdings, to the extent provided under the Hotel Lease) shall be written in the
name of Owner with Holdings, Manager and any Mortgagee(s) being named thereon as
additional insureds (as their respective interests may appear). All insurance
policies procured by Manager under Article 12.01 shall be written in the name of
Manager with Owner, Holdings any Mortgagee(s) and any other appropriate parties
designated by Owner or Manager being named thereon as additional insureds (as
their respective interests may appear), except for workers' compensation
insurance and other insurance with respect to which it is impractical and
inappropriate to name other parties as additional insureds.
(d) All casualty insurance policies shall be endorsed specifically to
the effect that the proceeds of any building, contents or business interruption
losses shall be made payable to Owner, Holdings, the Mortgagee(s), and Manager
jointly, as their interests may appear, unless otherwise required by any
Mortgagee. All such policies of insurance shall also be endorsed specifically to
the effect that such policies shall not be canceled or materially changed
without at least thirty (30) days' prior written nOtice to Owner, Holdings, the
Mortgagee(s) and Manager. Each party shall use all reasonable efforts to cause
any policy which it is responsible to obtain under Exhibit E to provide that the
insurer shall not have any rights of subrogation to any claim which either party
hereto may have or acquire against the other. Neither Owner nor Manager shall
have any claim against the other with respect to the failure of any insurance
carrier to provide the coverage or protection placed with such carrier as
contemplated by this Agreement.
(e) Certificates of insurance (and copies of policies, to the extent
required) shall be sent to Manager and to Owner at their respective addresses
set forth in Exhibit 1 and to the Mortgagee(s) at such address(es) as the
Mortgagee(s) shall designate.
(f) All coverage limits and deductible amounts set forth in Exhibit E
shall be reviewed by Owner and Manager from time to time for the purpose of
determining the coverage limits and deductible amounts then appropriate for
properties similar in type and construction to the Hotel and for the nature of
the business being conducted. Manager and Owner shall cooperate in good faith to
arrive at an agreement on such matters.
12.03 MANAGER'S BLANKET INSURANCE COVERAGE
Manager may, at its option (but shall not be obligated to) make
available to Owner and Holdings the opportunity to participate in blanket
insurance policies carried by Manager for other properties, including, without
limitation, other Portfolio Hotels, and which cover all or any portion of the
insurance coverage specified in Exhibit E (including all or any portion of that
insurance REQUIRED TO BE PROCURED AND MAINTAINED BY OWNER OR HOLDINGS UNDER
ARTICLE 12.01). OWNER AGREES TO PARTICIPATE IN SUCH BLANKET POLICIES IF (a)
MANAGER DETERMINES TO MAKE SUCH COVERAGE AVAILABLE TO OWNER, AND (b) THE
PREMIUMS FOR, AND THE COVERAGE AND FINANCIAL STRENGTH PROVIDED BY THE INSURER(s)
under such blanket policies applicable to the Hotel shall be competitive with
the premiums for, and the coverage and financial strength provided by the
insurer(s) from which Owner would otherwise obtain such insurance. In such
event, notwithstanding the provisions of Article 12.01 and Exhibit E
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hereof Manager shall be responsible for procuring and maintaining, at the
expense of Owner all insurance coverage represented by such blanket policies.
ARTICLE 13
RESPONSIBILITY FOR CLAIMS. ETC.
13.01 SCOPE
(a) All debts and liabilities arising in the course of business of the
Hotel or otherwise in connection with the use, occupancy or operation thereof
(including, without limitation, all such liabilities under or with respect to
environmental laws, hazards or claims) during the Term are and shall be the
obligation of Owner, and Manager shall not be liable or otherwise responsible
for any such debts or liabilities by reason of its management, supervision and
operation of the Hotel during said Term, except for any such debt or liability
that arises because of Manager's fraud, gross negligence or willful misconduct.
Manager shall defend, indemnify and hold harmless Owner and its Affiliates, and
their respective agents, officers, employees, directors and shareholders, from
and against any and all losses, costs, liabilities, expenses and claims (whether
administrative or judicial), including, without limitation, reasonable
attorneys' fees and expenses (all of the foregoing being referred to as
"Losses"), arising from any matter for which Manager is responsible under this
Article 13.01 (excluding, however, any such loss, cost, liability, expense or
claim covered by the insurance required to be maintained in accordance with this
Agreement). The act or omission of a Hotel employee who is not an Executive
Employee, which act or omission is willful or constitutes fraud or gross
negligence on the part of such employee, shall not constitute fraud, gross
negligence or willful misconduct on the part of Manager unless Manager's home
office or regional staff, or an Executive Employee, acted with gross negligence
in employing, training, supervising or continuing the employment of such
employee. As used herein and elsewhere in this Agreement, "Executive Employees"
shall mean and include the General Manager; Controller, Rooms Manager, Food and
Beverage Manager, Director of Marketing, and Human Resources Director.
(b) Except as to specific acts or omissions for which Manager has
agreed to indemnify Owner in paragraph (a) above, Owner hereby agrees to defend,
indemnify and hold Manager and its Affiliates, and their respective agents,
officers, employees, directors and shareholders, harmless from and against
Losses occurring out of or by reason of this Agreement or otherwise arising in
connection with the ownership, use, occupancy or operation of the Hotel.
(c) No person or entity shall be deemed to be a third party beneficiary
of any term or provision of this Agreement, including, without limitation, the
terms and provisions of this Article 13.01, and no person or entity shall have
any rights of subrogation or similar rights under this Article 13.01, other than
Affiliates of Owner and Manager, respectively, entitled to indemnification
pursuant to the provisions of this Article 13. All indemnification obligations
under this Agreement and the provisions of this Article 13 shall survive the
expiration and any termination of this Agreement.
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ARTICLE 14
CASUALTY AND CONDEMNATION
14.01 CASUALTY
(a) If, during the Term, the Hotel incurs minor damage by fire,
casualty or other cause, Owner shall, at its sole cost and expense and with all
reasonable diligence, repair or replace the damaged portion of the Hotel to the
same condition as existed previously. To the extent available, proceeds from the
insurance described in Article 12 shall be applied to such repairs or
replacements.
(b) In the event damage or destruction to the Hotel from any cause
materially and adversely affects the operation of the Hotel, Owner shall
promptly commence and complete repairing, rebuilding or replacement of the Hotel
to substantially the same character as existed prior to the damage or
destruction provided replacement is justified in comparison to the anticipated
profitability of the Hotel during the remaining Term, and provided that the
available insurance proceeds (plus the amount of the deductible with respect
thereto) permit such repair, rebuilding or replacement. In the event Owner
chooses to not undertake the repairs, rebuilding or replacements specified
above, Manager or Owner may terminate this Agreement upon sixty (60) days'
advance written notice, respectively, to Owner or Manager without the payment of
a termination fee or other penalty of any kind; provided, however, in the event
Owner or any Affiliate (but not any unrelated third party transferee of Owner)
shall reopen the Hotel as a hotel within two years after the date of such
casualty, on or before the date of reopening, Owner shall pay Manager a
termination payment in an amount equal to the aggregate amount of the Base
Management Fee paid to Manager hereunder during the twelve full months
immediately preceding the date of such casualty.
14.02 CONDEMNATION
(a) In the event all or substantially all of the Hotel shall be taken
in any eminent domain, condemnation, compulsory acquisition, or similar
proceeding by any competent authority for any public or quasi-public use or
purpose, or in the event a portion of the Hotel shall be so taken, but the
result is that it is unreasonable to continue to operate the Hotel as a hotel of
the same character and class, this Agreement shall terminate. Owner and Manager
shall each have the right to initiate such proceedings as they deem advisable to
recover any damages to which they may be entitled; provided, however, the
Manager shall not be entitled to pursue any such claim if the effect thereof
would reasonably be expected to have the effect of reducing the amount which may
be awarded to Owner.
(b) In the event a portion of the Hotel shall be taken by the events
described in Article 14.02(a) or the entire Hotel is affected but on a temporary
basis, and the result is not to make it unreasonable to continue to operate the
Hotel, this Agreement shall not terminate. However, PROVIDED THAT OWNER (AND
HOLDINGS, TO THE EXTENT REQUIRED UNDER THE HOTEL LEASE) DETERMINES THAT THE COST
OF REPAIR, REBUILDING OR REPLACEMENT IS JUSTIFIED IN COMPARISON TO THE
ANTICIPATED PROFITABILITY OF THE HOTEL DURING THE REMAINING TERM OF THIS
AGREEMENT, SO MUCH OF ANY AWARD FOR ANY SUCH PARTIAL TAKING OR CONDEMNATION AS
SHALL BE NECESSARY TO RENDER THE HOTEL EQUIVALENT TO ITS CONDITION PRIOR TO SUCH
EVENT SHALL BE USED FOR SUCH PURPOSE; THE BALANCE OF SUCH AWARD, IF ANY, SHALL
BE PAID TO OWNER.
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14.03 BUSINESS INTERRUPTION INSURANCE
Any proceeds from business interruption insurance payable to Owner or
Manager hereunder, including, without limitation, payments made in connection
with, or with respect to periods before or after, the termination of this
Agreement pursuant to Article 14.01 or 14.02, shall be fairly and equitably
apportioned between Owner and Manager in accordance with their respective
interests and equities to the end that the fair value of Manager's expectable
compensation under this Agreement for the period covered by such business
interruption insurance shall be paid to Manager. Any business interruption
insurance paid to Manager pursuant to this Article 14.03 in respect of the
period subsequent to the date of termination of this Agreement shall be credited
against any termination payment payable by Owner to Manager pursuant to Article
14.01 (b).
ARTICLE 15
DEFAULT AND TERMINATION
15.01 EVENTS OF DEFAULT
It shall be an event of default hereunder (an "Event of Default") if
any one or more of the following events shall occur:
(a) If a party fails to timely perform any of its obligations and
agreements under this Agreement; or
(b) If a party shall (i) voluntarily or involuntarily be dissolved
(except that if either party is a partnership and is dissolved solely by reason
of the death, insanity, disappearance, bankruptcy or lack of legal capacity of
one or more of its general partners and its remaining partners, within sixty
(60) days, elect, pursuant the partnership agreement of such partnership to
continue such partnership's business, then such party shall not be considered as
"dissolved" for the purposes hereof); (ii) apply for or consent to the
appointment of a receiver, trustee or liquidator of all or a substantial part of
its assets; (iii) file a voluntary petition in bankruptcy or otherwise
voluntarily avail itself of any federal or state laws for the relief of debtors;
(iv) admit in writing its inability to pay its debts as they become due; (v)
make a general assignment for the benefit of creditors; (vi) file a petition or
an answer seeking reorganization or arrangement with creditors or to take
advantage of any insolvency law or file an answer admitting the material
allegations of any petition filed against it in any bankruptcy, reorganization
or insolvency proceeding; (vii) be the subject of an order, judgment or decree
entered by any court of competent jurisdiction, in the application of any one or
more creditors of such party adjudicating it a bankrupt or insolvent or
approving a petition seeking reorganization or appointing a receiver, trustee or
liquidator of all or a substantial part of its assets, and such order, judgment
or decree shall become final; or (viii) suffer to exist any action or proceeding
to foreclose upon any security interest in the
Management Agreement granted by
it.
15.02 TERMINATION
(a) Upon the occurrence of any Event of Default under Article 15.0 1(a)
by or with respect to one of the parties hereto (the "Defaulting Party"), the
other party hereto (the "Non-Defaulting Party") shall have the right
(exercisable by the giving of notice to the Defaulting Party) to terminate this
Agreement if the Defaulting Party fails to remedy such Event of Default within
ten (10) days after
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its receipt of notice to remedy if such default relates to the payment of a sum
of money and, in all other cases, within thirty (30) days after its receipt of
notice to remedy; provided, however, that if such Event of Default be of a
non-monetary nature and if it cannot reasonably be remedied within said thirty
(30) day period, then such thirty (30) day period shall be deemed to be extended
for such additional period as may reasonably be required to remedy the same if
the Defaulting Party shall promptly commence to remedy upon receipt of notice
from the Non-Defaulting Party and shall continue therewith with due diligence.
(b) With respect to the occurrence of an Event of Default under Article
15.01(b), this Agreement shall terminate, at the election of the Non-Defaulting
Party, upon such occurrence, or at any time after such occurrence provided such
Event of Default has not been remedied.
(c) The terms of this Agreement shall not be deemed to impair the right
of any party to exercise any right or remedy, whether for damages, injunctions,
specific performance or otherwise, upon any breach or wrongful termination
hereof
ARTICLE 16
NOTICES
16.01 PROCEDURE
All consents, approvals, notices or other communications provided for
in this Agreement shall be in writing and shall be deemed delivered when
personally served at, or sent by reputable overnight delivery service or by
postage prepaid Registered or Certified Mail to, the respective addresses for
Owner and Manager set forth in Exhibit 1, until such time as written notice, as
provided hereby, of a change of address with a new address to be used thereafter
is delivered to the other party. Upon request a party shall send copies of any
notice or communication by ordinary mail as instructed by the other party.
ARTICLE 17
RELATIONSHIP. AUTHORITY AND FURTHER ACTIONS
17.01 RELATIONSHIP
Manager and Owner shall not be construed as joint venturers or partners
of each other and neither shall have the power to bind or obligate the other
except as set forth in this Agreement.
17.02 FURTHER ACTIONS
Owner agrees to execute all contracts, agreements and documents, and to
take all actions, necessary to comply with the provisions of this Agreement and
the intent hereof
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ARTICLE 18
APPLICABLE LAW
The interpretation, validity and performance of this Agreement shall be
governed by the laws of the State or Commonwealth in which the Hotel is located.
In the event any court or appropriate judicial authority shall hold or declare
that the law of another jurisdiction is applicable, this Agreement shall remain
enforceable under the laws of that jurisdiction. If any of the terms and
provisions hereof shall be held invalid or unenforceable for any reason, such
invalidity or unenforceability shall in no event affect any of the other terms
or provisions hereof, all such other terms and provisions to be valid and
enforceable to the fullest extent permitted by law.
ARTICLE 19
SUCCESSORS AND ASSIGNS
19.01 ASSIGNMENT
(a) Manager, without the consent of Owner, shall have the right to
assign from time to time this Agreement and its rights and interests hereunder
to (i) any successor or assignee of Manager which may result from any merger,
consolidation or reorganization with, or any sale or assignment to, any
corporation, individual, partnership or other entity which shall acquire all or
substantially all of Manager's hotel management business, and (ii) as security
for any existing or future indebtedness of Manager or its Affiliates. Manager
may also transfer from time to time this
Management Agreement and its rights and
interests hereunder without the consent of Owner to any Affiliate of Manager;
provided, however, that no such transfer shall relieve Manager of any of its
liabilities or obligations hereunder. Any such assignee shall agree to be bound
by the terms and conditions of this Agreement. Except as hereinabove provided,
Manager shall not assign or in any manner sell or transfer any of its rights and
interests as Manager hereunder without the prior written consent of Owner.
(b) Owner shall have the right, without the payment of any transfer or
similar fee, to assign this Agreement to any third party acquiring the Hotel,
subject to Manager's prior written consent, which consent shall not be
unreasonably withheld or delayed.
19.02 BINDING EFFECT
Subject to the restrictions on assignment set forth elsewhere in this
Agreement, this Agreement shall be binding upon and inure to the benefit of
Owner and its successors and assigns, and shall be binding upon and inure to the
benefit of Manager and its successors and assigns.
ARTICLE 20
AGREEMENT NOT AN INTEREST IN REAL ESTATE
This Agreement is not, and shall not be deemed or construed, at any
time or for any purpose, to be or create any interest in real estate or any lien
or other encumbrance of any kind whatsoever against the Hotel or the land upon
which it is erected.
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ARTICLE 21
FORCE MAJEURE
21.01 OPERATION OF HOTEL
If at any time during the term hereof it becomes necessary in Manager's
reasonable opinion to cease operation of the Hotel in order to protect the Hotel
and/or the health, safety and welfare of the guests and/or employees of the
Hotel for reasons of force majeure such as, but not limited to, acts of war,
insurrection, civil strife and commotion, labor unrest or acts of God, then in
such event Manager may close and cease operation of all or part of the Hotel,
reopening and commencing operation when Manager, in consultation with Owner,
deems that such may be done without jeopardy to the Hotel, its guests and
employees.
21.02 EXTENSION OF TIME
With respect to any obligation to be performed by a party during the
Term, such party shall in no event be liable for failure so to do when prevented
by any force majeure cause beyond the reasonable control of such party such as
strike, lockout, breakdown, accident, order or regulation of or by any
governmental authority, failure of supply or inability, by the exercise of
reasonable diligence, to obtain supplies, parts or employees necessary to
perform such obligation, or war or other emergency. The time within which such
obligation shall be performed shall be extended for a period of time equivalent
to the delay from such cause.
ARTICLE 22
ARBITRATION
22.01 ARBITRATION PROCEDURES
Any arbitration referenced in Article 3.04(c), 7.03(b) or 8.02 shall
commence as soon as possible but not more than fifteen (15) days after such need
is determined hereunder. The arbitration shall be held at the Hotel in
accordance with the rules of the American Arbitration Association but not under
the authority of that Association. The arbitration shall be conducted by an
arbitrator named by one of the following accounting firms (selected in the order
named) who shall be an employee or partner of such firm experienced in the work
the firm does for the hotel industry: PKF Consulting; KPMG Peat Marwick; and
Coopers & Xxxxxxx. If none of the named firms or their successor firms are in
existence at the time of a request for arbitration, the parties shall agree on a
similarly experienced accounting firm which shall name the arbitrator and if the
parties are unable to agree, then the arbitrator shall be chosen by the
presiding judge of the highest trial court in the County in which the Hotel is
located. With respect to an Annual Business Plan proposed by Manager for a
Fiscal Year which the Owner has declined to approve pursuant to the provisions
of Article 8.02 and which is the subject of arbitration, the arbitrator shall
decide only that the proposed Annual Business Plan shall or shall not be the
Annual Business Plan for the Fiscal Year; the arbitrator shall not enter
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a decision deciding upon a compromise of any kind. The decision of the
arbitrator shall be binding upon the parties and no appeal of any kind of the
decision shall be made by either party. The non-prevailing party shall pay the
fees and expenses of the arbitrator and the attorneys' fees of the other party
in the amount fixed by the arbitrator. The parties agree that this Article 22
shall apply only to Article 3.04(c), 7.03(b) and 8.02 and that any other dispute
of any nature whatsoever regarding this Agreement or the operation of the Hotel
shall not be subject to the arbitration procedures set forth in this Article 22.
ARTICLE 23
GENERAL PROVISIONS
23.01 AUTHORIZATION
Owner represents that it has full power and authority to execute this
Agreement and to be bound by and perform the terms hereof Manager represents
that it has full power and authority to execute this Agreement and to be bound
by and perform the terms hereof On request each party shall furnish the other
evidence of such authority.
23.02 INTEREST
Any amount payable to Manager which shall not be paid when due shall
accrue interest at the lesser of (a) the highest legal limit, or (b) 1% over the
rate of interest announced by ____________________________ as its prime rate, as
the same may be changed from time to time.
23.03 FORMALITIES
Any change to or modification of this Agreement must be in writing
signed by both parties hereto. This Agreement shall be executed in one or more
counterparts, each of which shall be deemed an original. The captions for each
Article are intended for convenience only.
23.04 DOCUMENTS
Throughout the Term, Owner shall furnish Manager copies of all property
tax and insurance statements, all financing documents (including notes and
mortgages) relating to the Hotel and such other documents pertaining to the
Hotel as Manager shall request.
23.05 CONSENTS
Except as otherwise expressly provided in this Agreement, wherever in
this Agreement it IS provided that an act or proposed act of Owner or Manager is
subject to the consent or approval of the other, such consent or approval shall
not be unreasonably withheld. The standard to be employed to determine
reasonableness shall be the standard of practices and procedures employed at
comparable hotels then being operated by Manager or its Affiliates. If the
approval or consent of one
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party hereto is required for any act or matter contemplated by the other party,
the party desiring such consent may give to the party whose consent is desired,
notice specifying in reasonable detail, the matter to which consent is
requested. Unless otherwise specified herein, if the party whose consent is
requested does not, within 20 days after actual receipt of such notice, respond
positively or negatively to such notice in writing, the requested consent shall
conclusively be deemed given.
23.06 ESTOPPEL CERTIFICATE
Either party shall, at any time and from time to time, upon not less
than ten (10) days prior written request from the other, execute, acknowledge
and deliver to the requesting party, in form reasonably satisfactory to the
requesting party, a written statement certifying (if true) (i) that this
Agreement is unmodified and in full force and effect (or if there have been
modifications, that the same is in full force and effect as modified and stating
the modifications); (ii) that there is no outstanding notice of an Event of
Default hereunder and, to the best of such party's knowledge, no event has
occurred or condition exists which, with the giving of notice or the passage of
time or both, would constitute an Event of Default hereunder, and (iii) such
other accurate information as may be reasonably requested by the requesting
party or by any of the Interested Persons (as hereinafter defined). It is
intended that any such statement delivered pursuant to this Article 23.06 may be
relied upon by the requesting party, any current or prospective Mortgagee or
other party providing financing to Owner or Manager (as the case may be), a
prospective purchaser of the Hotel or permitted assignee of Manager's rights and
interests hereunder, and the respective successors and assigns of any of the
foregoing (the "Interested Persons").
23.07 EXTENSION OF DATE OF TERMINATION
Notwithstanding any contrary provision of this Agreement, the date of
termination of this Agreement, other than upon expiration pursuant to Article
3.02, shall be extended so that the date of termination after notice of
termination is given to or by Manager shall be on a date which is not earlier
than fifteen (15) days plus the number of days, if any, Manager is required to
give its employees advance notice of termination of employment as required by
the Worker Adjustment and Retraining Act, 29 U.S.C., Section 2101 et. seq., as
hereafter amended, or any similar federal or state statute.
23.08 HOTEL RESERVATIONS HONORED
Upon termination of this Agreement for any reason, Owner agrees that
Hotel reservations made by Manager in the ordinary and normal course of
business, for dates not more than two (2) years after the date of termination
and at rates prevailing for such reservations at the time they were made, shall
be honored and remain in effect after the date of termination of this Agreement.
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23.09 NO REPRESENTATIONS
(a) Owner and Manager acknowledge there have been no representations,
inducements, promises or agreements made by Manager or Owner other than those
specifically set forth herein.
(b) Financial projections, budgets or similar forecasts as may have
been prepared or in the future are prepared by Manager or its Affiliates do not
take into account, nor make provisions for, any rise or decline in local or
general economic conditions or other factors beyond the control of Manager.
Manager and its Affiliates cannot and do not warrant or guaranty in any way said
financial projections, budgets or other forecasts. Any financial projections,
budgets or forecasts provided have been prepared on the basis of information
available at the time of such preparation and Manager's and its Affiliate's
experience in the hotel industry. Said financial projections, budgets and
forecasts have been prepared for information only and not as an inducement for
action. Owner hereby acknowledges that in entering into this Agreement, Owner
has not relied on any projection of earnings, statements as to the possibility
of future success, or other similar information which may have been prepared by
Manager or its Affiliates. Owner further understands and acknowledges that no
guaranty is made or implied by Manager or its Affiliates as to the cost, or the
future financial success or profitability, of the Hotel.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement effective the Execution Date.
OWNER:
--------------------------------------------
Witness: --------------------------------------------
By:
----------------------------- ----------------------------------------
MANAGER:
---------------------------------
Witness: ---------------------------------
By:
----------------------------- -------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
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EXHIBIT 1
The following terms shall have the meanings assigned to them below:
Execution Date -
Manager -
Number of Keyed Guest Rooms -
Owner -
Hotel -
Competitive Set -
Base Yield Index -
All notices and other communications required or permitted to be given
hereunder shall be given to the applicable party at the address set forth below:
IF TO OWNER, TO: IF TO MANAGER, TO:
_________________________________
c/o FelCor Suite Hotels, Inc.
000 X. Xxxx Xxxxxxxxx Xxxx.
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Xx.
President
WITH A COPY TO:
WITH A COPY TO:
Jenkens & Xxxxxxxxx, P.C.
0000 Xxxxxxxx Xxxxx
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
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EXHIBIT A
LEGAL DESCRIPTION
EXHIBIT B
[Intentionally Deleted]
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EXHIBIT C
(Article 1.01 (p))
SCHEDULE OF PERMITTED MORTGAGES
None at the present time.
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EXHIBIT D
[Intentionally Deleted]
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EXHIBIT E A \~
(Article 12.01)
SCHEDULE OF REQUIRED INSURANCE
I. Responsibilities of Owner.
A. At all times during the Term, Owner (or Holdings, to the extent
provided under the Hotel Lease) shall procure and maintain, upon all buildings
and improvements now existing or hereafter erected upon or above the Site, and
all equipment, fixtures, motors, machinery, furnishings and furniture
installed and owned or leased by Owner and used in connection with the Site or
with the buildings and improvements upon or above the Site, including all
alterations, rebuildings, replacements and additions thereto, so-called "all
risk" property damage insurance in an amount equal to the "Full Insurable Value"
thereof (as hereinafter defined), subject, at the option of Owner, to
commercially reasonable deductibles, but in any event in an amount not less than
that required to avoid the operation and effect of any co-insurance provisions
in said policies. Fire insurance policies written with no co-insurance clause
will be acceptable to Manager and Owner. If an insurer, or any governmental
agency or authority having jurisdiction over the Site, shall at any time require
that the foundations be insured in order to relieve the insured from the
responsibility as a coinsurer or for any other purpose, the obligations with
respect to insurance herein shall thenceforth be increased to the extent so
required. All buildings and improvements now existing or hereafter erected upon
or above the Site and all other property required to be covered by fire
insurance in accordance with this paragraph A shall be covered by flood
insurance in an amount at least equal to the Full Insurable Value thereof (or
such lesser amount of flood insurance as may be obtainable at commercially
reasonable rates). The term "Full Insurable Value" shall mean actual replacement
cost (exclusive of cost of excavation, foundations and footings below the lowest
basement floor).
B. At all times during the Term, Owner (or Holdings, to the extent
provided under the Hotel Lease) shall procure and maintain boiler and machinery
insurance, in the amount of not less than the Full Insurable Value thereof, on
all steam boilers and high pressure boilers, if any, or such other apparatus as
Owner may reasonably deem necessary to be covered by such insurance, installed
within any building on or above the Site.
C. At all times during the Term, Owner (or Holdings, to the extent
provided under the Hotel Lease) shall procure and maintain Business Interruption
Insurance providing coverage for a period of business interruption of no less
than one year, in an amount mutually satisfactory to Manager and Owner.
D. At all times during the Term, Owner (or Holdings, to the extent
provided under the Hotel Lease) shall procure and maintain such other insurance
(other than insurance to be provided by Manager pursuant to Section II below) in
such amounts as may from time to time be mutually satisfactory to Owner, Manager
and the Permitted Mortgagee(s) against other insurable hazards which, at the
time, are normally insured against in the case of similar premises and
improvements, similarly situated, due regard being given to the height and type
of buildings and improvements on and above the Site, their location,
construction, use and occupancy.
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II. Responsibilities of Manager.
At all times during the Term, Manager shall procure and maintain, as an
Operating Cost of the Hotel, the following insurance coverages:
A. Workers' compensation as may be required under applicable laws
covering all of Manager's and its Affiliates' employees employed at the Hotel.
B. Employer's liability insurance in an amount not less than generally
provided at other hotels managed by Manager and its Affiliates.
C. Fidelity bonds, with reasonable limits and deductibles approved by
Owner, covering employees at the Hotel in job classifications normally bonded in
the other Affiliated Hotels or as otherwise required by law, and comprehensive
crime insurance.
D. Comprehensive general liability insurance against claims for bodily
injury, death or property damage occurring on, in or about the Hotel, and
automobile insurance on vehicles operated in conjunction with the Hotel, with a
combined single limit for each occurrence for personal injury, death and
property damage in an amount which is not less than that generally provided with
respect to the Affiliated Hotels.
E. Such other insurance in amounts as Manager and Owner, in their
reasonable judgment, deem advisable for protection against claims, liabilities
and losses arising out of or connected with the operation of the Hotel.
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