EXHIBIT 10.7
MANAGEMENT AGREEMENT
between
and
CRESTLINE HOTELS & RESORTS, INC.
("Management Company")
TABLE OF CONTENTS
Page
ARTICLE I - APPOINTMENT OF MANAGEMENT COMPANY
1.01 Appointment 1
1.02 Delegation of Authority 1
1.03 No Covenants or Restrictions 2
1.04 Representations of Management Company 2
ARTICLE II - DEFINITION OF TERMS 2
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ARTICLE III - THE HOTEL
3.01 Ownership 13
3.02 Subordination of Management Agreement 13
3.03 Non-Disturbance Agreement 13
ARTICLE IV - PRE-OPENING 12
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ARTICLE V - TERM
5.01 Term 13
5.02 Actions to be Taken upon Termination 13
ARTICLE VI - COMPENSATION OF MANAGEMENT COMPANY
6.01 Management Fees 14
6.02 Accounting and Interim Payment 15
6.03 Reimbursements to Management Company 15
6.04 Performance Termination 15
ARTICLE VII - WORKING CAPITAL AND FIXED ASSET SUPPLIES
7.01 Working Capital and Inventories 16
7.02 Fixed Asset Supplies 16
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ARTICLE VIII - MAINTENANCE, REPLACEMENT AND CHANGES
8.01 Routine Repairs and Maintenance 17
8.02 Repairs and Equipment Reserve 17
8.03 Building Alterations, Improvements, Renewals and 18
Replacements
8.04 Liens 17
8.05 Ownership of Replacements 17
ARTICLE IX - BOOKKEEPING AND BANK ACCOUNTS
9.01 Books and Records 19
9.02 Hotel Accounts: Expenditures 20
9.03 Annual Operating Projection 20
9.04 Operating Deficits 22
ARTICLE X - FRANCHISE AGREEMENT 22
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ARTICLE XI - POSSESSION AND USE OF HOTEL
11.01 Use 23
11.02 Owner's Right to Inspect 23
11.03 Group Services 24
ARTICLE XII - INSURANCE
12.01 Property and Operational Insurance 22
12.02 General Insurance Provisions 23
12.03 Coverage 23
12.04 Cost and Expense 24
12.05 Policies and Endorsements 24
12.06 Indemnification 24
ARTICLE XIII - REAL ESTATE AND PROPERTY TAXES
13.01 Impositions 25
13.02 Owner's Responsibility 26
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ARTICLE XIV - HOTEL EMPLOYEES
14.01 Employees 26
14.02 Termination 27
14.03 Employee Claims 28
ARTICLE XV - DAMAGE AND CONDEMNATION
15.01 Damage and Repair 28
15.02 Condemnation 29
ARTICLE XVI - DEFAULTS
16.01 Default 29
16.02 Event of Default 30
16.03 Remedies upon Event of Default 31
ARTICLE XVII - PROPRIETARY MARKS; INTELLECTUAL PROPERTY
17.01 Proprietary Marks 31
17.02 Computer Software and Equipment 32
17.03 Intellectual Property 32
ARTICLE XVIII - WAIVER AND INVALIDITY
18.01 Waiver 32
18.02 Partial Invalidity 33
ARTICLE XIX - ASSIGNMENT
19.01 Assignment by Management Company and Owner 33
ARTICLE XX - TERMINATION OF AGREEMENT UPON SALE, DEMOLITION, OR FORECLOSURE
20.01 Sale of the Hotel 34
20.02 Termination upon Demolition or Foreclosure 35
ARTICLE XXI - MANAGEMENT COMPANY CONDITIONS
21.01 Conditions upon Management Company's Obligations 35
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ARTICLE XXII - MISCELLANEOUS
22.01 Right to Make Agreement 36
22.02 Agency 36
22.03 Failure to Perform 36
22.04 Breach of Covenant 36
22.05 Consents 37
22.06 Applicable Law 37
22.07 Headings 37
22.08 Notices 37
22.09 Environmental Matters 38
22.10 Equity and Debt Offerings 39
22.11 Franchise Agreement 39
22.12 Estoppel Certificates 39
22.13 Entire Agreement 40
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[Full-Service/revised]
MANAGEMENT AGREEMENT
This Management Agreement ("Agreement") is made effective as of the day
of ______________, 200__ ("Effective Date") by and between a
___________________, with its principal place of business at ("Owner"), and
Crestline Hotels & Resorts, Inc., a Delaware corporation, with its principal
place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("Management Company").
WITNESSETH:
WHEREAS, Owner owns [fee simple/leasehold] title of the
____________________________ ("Hotel") which is located on that certain real
property as described on Exhibit A attached hereto and made a part hereof; and
WHEREAS, Owner desires to have Management Company manage and operate
the Hotel from and after the Management Commencement Date (as defined in Article
II), and Management Company is willing to perform such services for the account
of Owner on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by each of the parties,
the parties hereto agree as follows:
ARTICLE I
APPOINTMENT OF MANAGEMENT COMPANY
1.01 Appointment
Owner hereby appoints and employs Management Company as Owner's
exclusive agent to supervise, direct and control management and operation of the
Hotel for the term provided in Article V. Management Company accepts said
appointment and agrees to manage the Hotel during the Term of this Agreement in
accordance with the terms and conditions hereinafter set forth. The performance
of all activities by Management Company, including the maintenance of all bank
accounts, shall be as the agent of and for the account of Owner.
1.02 Delegation of Authority
Except as otherwise specifically provided in this Agreement, the Hotel
shall be
operated under the exclusive supervision and control of Management
Company, which shall be responsible for the proper and efficient operation of
the Hotel. Except as otherwise specifically provided in this Agreement,
Management Company shall have discretion and control, free from interference,
interruption or disturbance, in all matters relating to the management and
operation of the Hotel, including, without limitation, charges for rooms and
commercial space, credit policies, food and beverage services, granting of
concessions or leasing of shops and agencies within the Hotel, receipt, holding
and disbursement of funds, maintenance of bank accounts (including Working
Capital), procurement of inventories, supplies and services, promotion and
publicity and, generally, all activities necessary for the operation of the
Hotel.
1.03 No Covenants or Restrictions
Owner warrants that there will be on the Management Commencement Date
no covenants or restrictions which would prohibit or limit Management Company
from operating the Hotel, including cocktail lounges, restaurants and other
facilities customarily a part of or related to a first-class hotel facility.
Owner agrees upon request by Management Company to sign promptly and without
charge applications for licenses, permits or other instruments necessary for
operation of the Hotel.
1.04 Representations of Management Company
Management Company represents that it is experienced and capable in the
planning, decorating, furnishing, equipping, promoting, managing, and operating
of first-class hotels, and Management Company covenants and agrees to manage and
operate the Hotel as a first-class hotel in accordance with the standards of
similarly situated first-class hotels in comparable markets and in strict
compliance with that certain Franchise Agreement dated _________, 200_ between
_______ , as the "Franchisor," and __________________, as the "Franchisee" (as
such agreement may have been or may be amended subject to Article X below, the
"Franchise Agreement"), respecting the Hotel. Management Company further
represents that it qualifies as an "eligible independent contractor" as defined
in Section 856(d)(9) of the Internal Revenue Code of 1986, as amended (the
"Code").
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ARTICLE II
DEFINITION OF TERMS
The following terms when used in this Agreement shall have the meanings
indicated:
Accounting Period means a calendar month.
Additional Invested Capital means the cumulative total, as of any given
date during the Term of this Agreement, of: (i) any expenditures made by Owner
pursuant to Section 8.03, plus (ii) any contributions by Owner to the Reserve
beyond the funding described in Section 8.02 A, other than those contributions
which are treated as Deductions or reimbursed to Owner under Section 8.02 E,
plus (iii) any advances of Working Capital made by Owner pursuant to Section
7.01 (including any advances by Owner for the payment of Impositions under
Section 13.01) from its own funds, so long as any such advance is not made as a
result of an Operating Loss (described in Section 9.04), and further provided
that any subsequent reimbursement of Working Capital to Owner (including any
reimbursement of payments made by Owner for Impositions) shall reduce the amount
of Additional Invested Capital by the same amount of any such reimbursement,
plus (iv) any rental payments pursuant to any capital leases approved by
Management Company and Owner that are not otherwise paid from the Reserve or
treated as a Deduction under the terms of this Agreement, plus (v) special
assessments paid by Owner pursuant to clause (2) of Section 13.02.
Affiliate means any individual or entity, directly or indirectly
through one or more intermediaries, controlling, controlled by, or under common
control with a party. The term "control," as used in the immediately preceding
sentence, means, with respect to a corporation, the right to exercise, directly
or indirectly, fifty point one percent (50.1%) or more of the voting rights
attributable to the shares of the controlled corporation, and, with respect to
an entity that is not a corporation, the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of the
controlled entity.
Agreement shall have the meaning set forth in the Preamble.
Annual Operating Projection shall have the meaning set forth in Section
9.03.
Annual Operating Statement shall have the meaning set forth in Section
9.01.
Base Management Fee shall have the meaning set forth in Section 6.01 A.
Building Estimate shall have the meaning set forth in Section 8.03 A.
Code shall have the meaning set forth in Section 1.04.
Consumer Price Index shall mean the Consumer Price Index for All Urban
Consumers (CPI-U) (U.S. City Average), as published by the Bureau of Labor
Statistics,
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Department of Labor, or if such index is no longer published, the "Consumer
Price Index" shall then refer to such comparable statistics on changes in the
cost of living for urban consumers as such may be computed and published by an
agency of the United States or by a responsible financial periodical of
recognized authority as mutually agreed upon by the parties.
Deductions shall have the meaning set forth in the definition of
"Operating Profit."
Default shall have the meaning set forth in Section 16.01.
Effective Date shall have the meaning set forth in the Preamble.
Employee Claims means any and all claims (including all fines,
judgments, penalties, costs, litigation and/or arbitration expenses, attorneys'
fees and expenses, and costs of settlement with respect to any such claims) by
any employee or employees of Management Company against Owner or Management
Company with respect to the employment at the Hotel of such employee or
employees. "Employee Claims" shall include, without limitation, the following:
(i) claims which are eventually resolved by arbitration, by litigation or by
settlement; (ii) claims which also involve allegations that any applicable
employment-related contracts affecting the employees at the Hotel, including
collective bargaining agreements, if any, have been breached; and (iii) claims
which involve allegations that one or more state or federal employment laws have
been violated.
Event of Default shall have the meaning set forth in Section 16.02.
Executive Employees shall have the meaning set forth in Section 14.02.
Existing Twelve Month Management Fees shall have the meaning set forth
in the definition of "Sale Termination Fee."
FF&E shall have the meaning set forth in Section 8.01.
FF&E Estimate shall have the meaning set forth in Section 8.02 C.
Fiscal Year means the calendar year, beginning at 12:01 a.m. on January
1 and ending at midnight on December 31. The partial Fiscal Year between the
Management Commencement Date and the first full Fiscal Year shall be deemed part
of the first full Fiscal Year. The partial Fiscal Year between the end of the
last full Fiscal Year and the Termination of this Agreement shall, for purposes
of this Agreement, constitute a separate Fiscal Year.
Fixed Asset Supplies means supply items included within Property and
Equipment under the Uniform System of Accounts, including linen, china,
glassware, silver, uniforms and similar items.
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Force Majeure means acts of God, acts of war, civil disturbance,
governmental action (including the revocation or refusal to grant licenses or
permits, where revocation or refusal is not due to the fault of Management
Company, its agents or employees), strikes, fire, unavoidable casualties or any
other causes beyond the reasonable control of Management Company, including
without limitation, any failed duty of Management Company which is in part due
to Owner's failure to fund Owner-Funded Capital Expenditures pursuant to Section
8.03 of this Agreement. Force Majeure shall exclude general economic and/or
market factors.
Franchise Agreement shall have the meaning set forth in Section 1.04.
Franchisee shall have the meaning set forth in Section 1.04.
Franchisor shall have the meaning set forth in Section 1.04.
GAAP means generally accepted accounting principles consistently
applied throughout the specified period(s).
Gross Revenues means all revenues and receipts of every kind derived
from operating the Hotel and parts thereof, including, but not limited to:
income (from both cash and credit transactions), before commissions but after
discounts for prompt or cash payments, from rental of rooms, stores, offices,
meeting, exhibit or sales space of every kind; license, lease and concession
fees and rentals (not including gross receipts of licensees, lessees and
concessionaires from their operations); income from vending machines; health
club membership fees; food and beverage sales; wholesale and retail sales of
merchandise; service charges, and proceeds, if any, from business interruption
or other loss of income insurance. Gross Revenues shall not include (i)
gratuities, including tips, paid to Hotel employees by third parties; (ii)
federal, state, and municipal excise, sales, and use taxes or similar
impositions collected directly from patrons or guests or included as part of the
sales price of any rooms, goods, or services; (iii) proceeds realized from the
sale of FF&E no longer necessary to the operation of the Hotel, which shall be
deposited in the Reserve; (iv) proceeds of any insurance other than business
interruption insurance (or other insurance against loss of income) of the type
described in Section 12.01 A4; (v) condemnation awards; (vi) gross receipts
received by lessees, licensees, or concessionaires of the Hotel; (vii) proceeds
from any financing or refinancing; (viii) proceeds of any judgment or settlement
not received as compensation for actual or potential loss of Gross Revenues or
Operating Profit; (ix) interest earned on the Reserve or on any other funds held
in the Hotel bank accounts, which shall be deposited in the respective Reserve
or bank account; and (x) any funds supplied by Owner to the Reserve or to meet
Working Capital needs.
Group Services shall have the meaning set forth in Section 11.03.
Highland means Highland Hospitality Corporation, a Maryland corporation
and the ultimate parent company of Owner.
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Hotel means the ______________________ located at ___________________.
Impositions shall have the meaning set forth in Section 13.01.
Incentive Fee shall have the meaning set forth in Section 6.01 B.
Intellectual Property shall have the meaning set forth in Section
17.03.
Inventories means Inventories as defined in the Uniform System of
Accounts, such as provisions in storerooms, refrigerators, pantries and
kitchens; beverages in wine cellars and bars; other merchandise intended for
sale; fuel; mechanical supplies; stationery; and other expenses, supplies and
similar items.
Management Commencement Date means the date upon which Management
Company shall commence operating the Hotel pursuant to this Agreement which date
shall be confirmed in writing by Owner and Management Company.
Management Company means Crestline Hotels & Resorts, Inc.
Mortgage means any security instrument which encumbers the Hotel and/or
the Hotel premises, including, without limitation, mortgages, deeds of trust,
security deeds and similar instruments.
Non-Disturbance Agreement means an agreement, in recordable form in the
jurisdiction in which the Hotel is located, executed and delivered by a holder
of a Secured Loan (which agreement shall by its terms be binding upon all
assignees of such holder and upon any individual or entity that acquires title
to or possession of the Hotel at or through a foreclosure (referred to as a
"Subsequent Owner")), for the benefit of Management Company, pursuant to which,
in the event such holder (or its assignee) or any Subsequent Owner comes into
possession of or acquires title to the Hotel either at or following a
foreclosure, such holder (and its assignees) and all Subsequent Owners shall:
(x) recognize Management Company's rights under this Agreement, (y) not name
Management Company as a party in any foreclosure action or proceeding, and (z)
not disturb Management Company in its right to continue to manage the Hotel
pursuant to this Agreement; provided, however, that at such time, (i) this
Agreement has not expired or otherwise been terminated earlier in accordance
with its terms, and (ii) there are no outstanding Events of Default by
Management Company, and (iii) no material event has occurred and no material
condition exists which, after notice or the passage of time or both, would
entitle Owner to terminate this Agreement (excluding events which would
constitute Events of Default, which are to be governed exclusively by clause
(ii) hereof).
Operating Loss means a negative Operating Profit.
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Operating Profit means the excess of Gross Revenues over the following
deductions ("Deductions") incurred by Management Company in operating the Hotel:
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1. Cost of sales, salaries, wages, fringe benefits, payroll
taxes and other cash payroll costs related to Hotel employees;
2. Departmental expenses, administrative and general expenses
and the cost of Hotel advertising and business promotion, heat, light and power,
and routine repairs, maintenance and minor alterations treated as Deductions
under Section 8.01;
3. The cost of Inventories and Fixed Asset Supplies consumed
in the operation of the Hotel;
4. A reasonable reserve for uncollectible accounts receivable
as determined by Management Company and approved by Owner;
5. All costs and fees of independent professionals or other
third parties who perform services required or permitted hereunder if and to the
extent such cost and expense are not capitalized in accordance with GAAP,
including without limitation, third parties providing legal services to
Management Company in connection with matters involving the Hotel (excluding
matters in dispute between Owner and Management Company), which services shall
be charged at rates which approximate Management Company's costs associated with
such personnel, which rates shall not exceed rates billed by such independent
professionals or other third parties;
6. The cost and expense of technical consultants and
operational experts for specialized services in connection with non-routine
Hotel work; provided that Owner shall have the right to approve any such
technical consultant or operational expert if its cost or expense is expected to
exceed $25,000.00 in the aggregate for any Fiscal Year and is not included in
the approved Annual Operating Projection for such Fiscal Year;
7. Management Company's Base Management Fee (referred to in
Section 6.01) for services rendered in connection with the operation of the
Hotel;
8. All the costs and expenses incurred by Management Company
pursuant to the Franchise Agreement including, but not limited to, franchise
fees, advertising, chain services, insurance, etc.; provided, however, any
initial licensing fees or capital expenditures necessary for compliance with the
Franchise Agreement shall not be a Deduction from Gross Revenues for purposes of
the calculation of Operating Profit;
9. The amount to be credited to the Reserve described in
Section 8.02;
10. Insurance costs and expenses as described in Article XII;
11. Taxes, if any, payable by or assessed against Management
Company related to this Agreement or to Management Company's operation of the
Hotel (exclusive of Management Company's income taxes) and Impositions,
including without limitation, real and personal property taxes assessed against
the Hotel along with related expenses incurred in connection with all such
assessments; provided that any fines, penalties or
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interest added thereto which are a direct result of Management Company's gross
negligence or willful misconduct shall be paid by Management Company from its
own funds and shall not be treated as Deductions;
12. All costs and expenses incurred in order to obtain and
keep in full force and effect any licenses and permits required for the
operation of the Hotel and related facilities, including without limitation,
liquor licenses for the sale of alcoholic beverages at all restaurants, bars,
lounges, banquet rooms, meeting rooms and guest rooms at the Hotel; provided
that any fines or penalties relating to maintaining such licenses and permits
which are the direct result of either Management Company's or Owner's gross
negligence or willful misconduct shall be paid by such party from its own funds
and shall not be treated as Deductions; and
13. Such other costs and expenses incurred by Management
Company as are specifically provided for elsewhere in this Agreement (including,
without limitation, Group Services and certain reimbursable expenses of
Management Company's corporate staff described in Section 6.03) or are otherwise
reasonably necessary for the proper and efficient operation of the Hotel, unless
any such costs and expenses are specifically stated not to be Deductions under
any provision of this Agreement.
The term "Deductions" shall not include (i) debt service payments
pursuant to any Secured Loan; nor (ii) ground lease rental or other rental
payments pursuant to any ground lease in connection with the Hotel; nor (iii)
any expenditures by Owner in the acquisition or conversion of the Hotel; nor
(iv) rental payments pursuant to any capital lease approved by Management
Company; nor (v) the cost of external (third party) audits of Hotel operations
and/or with respect to the Owner entity itself; nor (vi) other recurring and
non-recurring ownership costs, such as Owner's entity administration and
servicing costs; all of which shall be paid by Owner from its own funds, and not
from Gross Revenues nor from the Reserve.
Owner means _______________________________________.
Owner-Funded Capital Expenditures shall have the meaning set forth in
Section 8.03.
Owner's Investment means the sum of (i) $_________________ [the price
paid by Highland and/or Owner to acquire the Hotel, including closing costs and
conversion costs and pre-opening expenses and fees], plus (ii) Additional
Invested Capital, plus (iii) the initial Working Capital amount deposited by
Owner pursuant to Section 7.01 A.
Owner's Priority means, with respect to each Fiscal Year during the
Term hereof (prorated for any partial Fiscal Year), an amount equal to eleven
percent (11.0%) of Owner's Investment.
Prime Rate means the "prime rate" as published in the "Money Rates"
section of The Wall Street Journal; however, if such rate is, at any time during
the Term of this
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Agreement, no longer so published, the term "Prime Rate" shall mean the average
of the prime interest rates which are announced, from time to time, by the three
(3) largest banks (by assets) headquartered in the United States which publish a
"prime rate."
Profit Minimum shall have the meaning set forth in Section 6.04.
Proprietary Marks shall have the meaning set forth in Section 17.01.
Prospectus shall have the meaning set forth in Section 22.10.
Qualified Lender means any lender, such as any federally insured
commercial or savings bank, national banking association, savings and loan
association, investment banking firm, commercial finance company, trust for
securitized loans and other similar lending institution that is a holder of a
Secured Loan that is a Qualified Loan.
Qualified Loan means any Secured Loan in which the initial principal
amount, as of the date such Secured Loan is incurred, when added to the current
principal balance of all existing Secured Loans as of that date, is less than or
equal to the greater of the following:
(i) Seventy percent (70%) of the sum of: (a) $____________ [the price
paid by Owner to acquire the Hotel, including closing costs and
conversion costs and pre-opening expenses and fees], plus (b)
Additional Invested Capital; or
(ii) Seventy percent (70%) of the fair market value of the Hotel as
reasonably determined by Highland's board of directors; or
(iii) The existing balance of any Secured Loans encumbering the Hotel
immediately prior to the date of the incurrence of such Qualified
Loan, plus commercially reasonable transaction costs (defined as
all normal transaction costs to the extent actually incurred)
associated with such refinancing up to an amount equal to four
percent (4%) of the principal amount of such Qualified Loan.
In addition, regardless of whether or not the above tests set forth in
clauses (i), (ii) and (iii) above are satisfied, (a) the existing (as of the
Management Commencement Date) balance of any Secured Loan which is secured by a
Mortgage existing as of the Management Commencement Date shall be deemed to be a
"Qualified Loan"; and (b) any Secured Loan which Management Company, in its
reasonable discretion, has approved in writing shall be deemed to be a
"Qualified Loan" (provided that an approval by Management Company that a given
Secured Loan shall be deemed to be a Qualified Loan hereunder shall apply only
to the specific hotel or hotels which are described in such approval, and shall
not be deemed to be an approval with respect to other hotels, regardless of
whether such Secured Loan by its terms permits the substitution or addition of
such other hotels as security for such Secured Loan).
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Related Person shall have the meaning set forth in Section 22.02 A.
Reserve shall have the meaning set forth in Section 8.02 A.
Sale of the Hotel means any sale, assignment, transfer or other
disposition, for value or otherwise, voluntary or involuntary, of Owner's title
to the Hotel or the site (either fee or leasehold title, as the case may be),
but shall not include a collateral assignment intended to provide security for a
loan. For purposes of this Agreement, a "Sale of the Hotel" shall also include a
lease (or sublease) of the entire Hotel or site. The phrase "Sale of the Hotel"
shall also include any sale, transfer, or other disposition, for value or
otherwise, in a single transaction or a series of related transactions, of the
controlling interest in the Owner or Highland. If the Owner or Highland, as the
case may be, is a corporation, the phrase "controlling interest" shall mean the
right to exercise, directly or indirectly, fifty percent (50%) or more of the
voting rights attributable to the shares of Owner (through ownership of such
shares or by contract); provided, however, that in no event shall the transfer
of "controlling interest" refer to the acquisition of shares in a publicly
traded corporation by passive investors that have no control or influence over
the business decisions concerning the corporation. If Owner is not a
corporation, the phrase "controlling interest' shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of Owner. Notwithstanding the foregoing, the term "Sale
of the Hotel" shall not include any sale, assignment, transfer or other
disposition of the Hotel or the site by Owner to an Affiliate of Owner.
Sale Termination Fee means that amount payable by Owner to Management
Company pursuant to Section 20.01 D of this Agreement, which is equal to the
following:
[to be inserted if the Hotel was open and operating prior to the Management
Commencement Date: (a) for the Sale of the Hotel at any time during the first or
second full Fiscal Year after the Management Commencement Date, the product of
five and one-half (5.5) times the sum of the aggregate Base Management Fees and
Incentive Fees earned by Management Company during the most recent twelve (12)
month period immediately preceding the Sale of the Hotel (such period is
referred to as the "Test Period" and the collective management fees earned
during the Test Period are referred as the "Existing Twelve Month Management
Fees"); provided, that, if any portion of the Test Period relates to operations
of the Hotel occurring prior to the Management Commencement Date (the "Prior
Period"), the financial operating results from the Prior Period shall be used as
necessary to calculate what Management Company's Existing Twelve Month
Management Fees would have been during any such Prior Period occurring
in the Test Period for the purpose of calculating the Sale Termination Fee]
[to be inserted if the Hotel was not open or operating prior to the Management
Commencement Date: (a) for the Sale of the Hotel at any time during the first or
second full Fiscal Year after the Management Commencement Date, the product of
five and one-half (5.5) times the sum of the aggregate Base Management Fees and
Incentive Fees projected for the most recent twelve (12) month period
immediately preceding the Sale of the Hotel (such period is referred to as the
"Test Period" and the collective management
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fees projected under this clause (a) or earned under clauses (b) through (f)
below during the Test Period are referred as the "Existing Twelve Month
Management Fees") as set forth in the pro forma attached hereto as Exhibit B];
(b) for the Sale of the Hotel at any time during the third, fourth or
fifth full Fiscal Year after the Management Commencement Date, the product of
three (3.0) times Existing Twelve Month Management Fees;
(c) for the Sale of the Hotel at any time during the sixth (6th) full
Fiscal Year after the Management Commencement Date, the product of two (2.0)
times the Existing Twelve Month Management Fees;
(d) for the Sale of the Hotel at any time during the seventh (7th) full
Fiscal Year after the Management Commencement Date, the product of one and
one-half (1.5) times the Existing Twelve Month Management Fees;
(e) for the Sale of the Hotel at any time during the eighth (8th) full
Fiscal Year after the Management Commencement Date, the product of one (1.0)
times the Existing Twelve Month Management Fees; or
(f) for the Sale of the Hotel at any time during the ninth (9th) full
Fiscal Year after the Management Commencement Date and thereafter, there shall
be no Sale Termination Fee.
Secured Loan means and includes (i) any indebtedness secured by a
Mortgage; and (ii) all amendments, modifications, supplements and extensions of
any such Mortgage.
Software shall have the meaning set forth in Section 17.02.
Term shall have the meaning set forth in Section 5.01.
Termination means the expiration or sooner cessation of this Agreement.
Uniform System of Accounts means the Uniform System of Accounts for
Hotels, Ninth Revised Edition, 1996, as revised and adopted by the Hotel
Association of New York City, Inc. from time to time and as modified by
applicable provisions of this Agreement.
Unrelated Persons shall have the meaning set forth in Section 22.02 A.
WARN Act shall have the meaning set forth in Section 14.02.
Working Capital means funds which are reasonably necessary for the
day-to-day operation of the Hotel's business, including, without limitation,
amounts sufficient for the maintenance of change and ▇▇▇▇▇ cash funds, operating
bank accounts, receivables, payrolls, prepaid expenses and funds required to
maintain Inventories, less accounts payable and accrued current liabilities.
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[End of Article II]
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ARTICLE III
THE HOTEL
3.01 Ownership
During the Term of this Agreement, Owner shall take all commercially
reasonable action as is appropriate to assure that Owner has [good and
marketable fee]/[leasehold] title to the land described in Exhibit A and all
improvements thereon, free and clear of all liens and encumbrances other than:
(i) Easements or other encumbrances that do not adversely affect the
operation of the Hotel by Management Company and do not require
the payment of any money;
(ii) Mortgages which are given to secure any one or more Qualified
Loans;
(iii) Liens for taxes, assessments, levies or other public charges
which are not yet due or are being contested in good faith;
(iv) Amendments or modifications to the to the ground lease, if any,
existing as of the Effective Date; provided, however, Owner shall
obtain Management Company's prior written consent prior to
entering into any such amendment or modification that would (i)
materially adversely affect the rights and/or obligations of
Management Company, and/or (ii) have an adverse impact on the
amount of the fees to be paid to Management Company under this
Agreement; and
(v) All other matters or record affecting title as of the Effective
Date.
[It is acknowledged that Owner does not own fee title to the land described in
Exhibit A and, therefore, cannot make any representations or covenants with
respect to the actions or inactions of the fee owner. However, Owner does agree
that it shall (a) by its own action or inaction not do anything in violation of
the provisions of this Section 3.01, and (b) use commercially reasonable efforts
to assure that the fee owner does not enter into any agreements or take any
action in violation of the provisions of this Section 3.01.]
3.02. Subordination of Management Agreement
Excluding Management Company's right to receive payment of the Base
Management Fee, this Agreement and all of the rights and benefits of Management
Company hereunder are, and shall be subject and subordinate to any Qualified
Loan(s) which now or hereafter encumber the Hotel. This subordination provision
shall be self-operative and no other or further instrument of subordination
shall be required. Management Company agrees, however, upon request of any
Qualified Lender, duly to execute and deliver any subordination agreement
requested by such Qualified Lender to evidence and confirm the subordination
effected under this Section 3.02.
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3.03 Non-Disturbance Agreement
Notwithstanding Section 3.02, Owner agrees that, prior to obtaining any
Qualified Loan, it will use commercially reasonable good faith efforts to obtain
from each prospective holder or holders thereof a Non-Disturbance Agreement
pursuant to which Management Company's rights under this Agreement will not be
disturbed as a result of a loan default stemming from non-monetary factors which
(i) relate to Owner and do not relate solely to the Hotel, and (ii) are not
Defaults by Management Company under Article XVI of this Agreement. If Owner
desires to obtain a Qualified Loan, Management Company, on written request from
Owner, shall promptly identify those provisions in the proposed loan documents
which fall within the categories described in clauses (i) and (ii) above, and
Management Company shall otherwise assist in expediting the preparation of an
agreement between the prospective holder and Management Company which will
implement the provisions of this Section 3.03.
ARTICLE IV
PRE-OPENING
4.01 Pre-Opening Expenses
Owner shall provide all funds to pay any amounts or, as applicable,
reimburse any deficiencies arising in connection with the following pre-opening
expenses in accordance with a pre-opening budget prepared by Management Company
and approved by Owner prior to the opening of the Hotel:
(i) payment of any application and/or other fees and expenses due in
connection with obtaining the Franchise;
(ii) payment of all expenses (including, without limitation, any and
all legal expenses) related to or arising in connection with obtaining the
permits and/or licenses necessary for the operation of the Hotel or any
facilities located therein, including, without limitation, any liquor licenses;
(iii) payment of expenses for operating equipment and operating
supplies which may be required as of the Hotel's opening date; and
(iv) any other expenses incurred by Owner or Management Company, as
the case may be, in connection with the opening of the Hotel.
Owner shall advance to Management Company all funds required by
Management Company for such pre-opening expenses (not to exceed amounts
specified in a pre-opening budget approved by Owner) and on the dates as may be
specified by Management Company in a "Request for Funds" to be submitted by
Management Company to Owner. Such amounts shall be provided by Owner within
fifteen (15) days of Owner's receipt of Management Company's Request for Funds.
If following the
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Management Commencement Date, funds for pre-opening expenses are owing to
Management Company, Management Company shall have the option to deduct such
amounts from Owner's share of Operating Profit. It is understood that, to the
extent any delay or postponement of the Management Commencement Date causes
increased pre-opening expenses that cannot reasonably be avoided, Owner shall be
responsible for and promptly pay such increased pre-opening expenses. No item
which is or should have been included as a pre-opening expense shall be charged
as a Deduction.
4.02 Pre-Opening Fee [To be inserted for new development projects only]
In addition to payment of the pre-opening expenses described in Section
4.01 above, Owner shall pay to Management Company a pre-opening fee for services
rendered pursuant to Section 4.01 in the amount of ________________ Dollars
($__________), which shall be paid to Management Company in ____ (__) equal
monthly installments on the first day of each month commencing in the _____ (__)
month prior to the targeted Management Commencement Date of ____________, 200_.
In the event the targeted Management Commencement Date is delayed or postponed
and such delay is not caused directly by the actions or inactions of Management
Company, the pre-opening fee to be paid by Owner to Management Company shall be
increased on a pro-rata per-diem basis of ______ Dollars ($_______) per day from
the targeted Management Commencement Date to the actual Management Commencement
Date.
ARTICLE V
TERM
5.01 Term
This Agreement shall commence on the Effective Date, and, unless sooner
terminated as provided in this Agreement, shall continue for a period ending one
hundred and twenty (120) Accounting Periods after the Management Commencement
Date (the "Term").
5.02 Actions to be Taken upon Termination
Upon a Termination of this Agreement, the following shall be
applicable:
A. Management Company shall, within sixty (60) days after Termination
of this Agreement, prepare and deliver to Owner a final accounting statement
with respect to the Hotel, as more particularly described in Section 9.01, along
with a statement of any sums due from Owner to Management Company pursuant
hereto, dated as of the date of Termination. Within thirty (30) days after the
receipt by Owner of such final accounting statement, the parties will make
whatever cash adjustments are necessary pursuant to such final statement. The
cost of preparing such final accounting statement shall be a Deduction, unless
the Termination occurs as a result of an Event of Default by either party, in
which case the defaulting party shall pay such cost. Management Company and
Owner acknowledge that there may be certain adjustments for which the necessary
information
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will not be available at the time of such final accounting, and the parties
agree to readjust such amounts and make the necessary cash adjustments when such
information becomes available; provided, however, that (unless there are ongoing
disputes of which each party has received notice) all accounts shall be deemed
final as of one hundred eighty (180) days after such Termination.
B. As of the date of the final accounting referred to in subsection A
above, Management Company shall release and transfer to Owner any of Owner's
funds which are held or controlled by Management Company with respect to the
Hotel, with the exception of funds to be held in escrow pursuant to Section
12.04 B and Section 14.02. During the period between the date of Termination and
the date of such final accounting, Management Company shall pay (or reserve
against) all Deductions which accrued (but were not paid) prior to the date of
Termination, using for such purpose any Gross Revenues which accrued prior to
the date of Termination.
C. Management Company shall make available to Owner such books and
records respecting the Hotel (including those from prior years, subject to
Management Company's reasonable records retention policies) as will be needed by
Owner to prepare the accounting statements, in accordance with the Uniform
System of Accounts, for the Hotel for the year in which the Termination occurs
and for any subsequent year. Such books and records shall not include: (i)
employee records which must remain confidential either under applicable laws or
regulations of any governmental authority or agency having jurisdiction over
such matters or under reasonable corporate policies of Management Company; or
(ii) any Intellectual Property.
D. Management Company shall (to the extent permitted by law) assign to
Owner, or to any other manager employed by Owner to operate and manage the
Hotel, all operating licenses, including any liquor licenses, for the Hotel
which have been issued in Management Company's name and in the event that such
licenses are not assignable, Management Company shall cooperate with Owner and
any new manager of the Hotel in connection with the issuance of new licenses;
provided that if Management Company has expended any of its own funds in the
acquisition of any of such licenses, Owner shall reimburse Management Company
therefor if it has not done so already.
E. Owner agrees that Hotel reservations and any and all contracts made
in connection with Hotel convention, banquet or other group services made by
Management Company in the ordinary and normal course of business, for dates
subsequent to 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 Termination of this Agreement.
F. Various other actions shall be taken, as described in this
Agreement, including, but not limited to, the actions described in Sections
12.04 B, 14.02, 17.01, 17.02, and 17.03.
G. Management Company shall cooperate with the new operator of the
Hotel as to effect a smooth transition and shall peacefully vacate and surrender
the Hotel to Owner.
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The provisions of this Section 5.02 shall survive any Termination.
ARTICLE VI
COMPENSATION OF MANAGEMENT COMPANY
6.01 Management Fees
A. Base Management Fees. In consideration of the services to be
performed during the Term of this Agreement by Management Company, Management
Company shall be paid a periodic base management fee ("Base Management Fee") in
the amount of three percent (3%) of Gross Revenues for each Accounting Period.
[In the event that there are 350 or more guest rooms in the Hotel, the Base
Management Fee shall be 2.5% of Gross Revenues.] Each such periodic fee shall be
paid to Management Company (or retained by Management Company as provided below)
at such time as the final monthly report for such Accounting Period is submitted
to Owner as provided in Section 6.02 A below.
B. Incentive Management Fees. In addition to the Base Management Fee
and in consideration of the services to be performed during the Term of this
Agreement, Management Company shall be paid for each Fiscal Year (or partial
Fiscal Year), subject to Section 6.02 B, an incentive fee ("Incentive Fee")
equal to fifteen percent (15%) of the amount by which Operating Profit for such
Fiscal Year (or partial Fiscal Year) minus the amount of any ground lease
rentals or other rental payments pursuant to any ground lease in connection with
the Hotel paid by Owner from its own funds (and not from Gross Revenues or the
Reserve) during the same time period exceeds Owner's Priority (prorated for any
partial Fiscal Year). Notwithstanding the foregoing to the contrary, Management
Company shall not be entitled to receive any Incentive Fee in any Fiscal Year
with respect to which the distributions to Owner have not equaled or exceeded
Owner's Priority.
C. Total Fees Cap. Notwithstanding anything in this Agreement to the
contrary, the total amount of Base Management Fees plus Incentive Fees actually
paid to Management Company during any Fiscal Year shall not exceed four and
one-half percent (4.5%) of Gross Revenues (for purposes of this subsection C,
referred to as the "Fee Cap") for such Fiscal Year (prorated for any partial
Fiscal Year). The Fee Cap is not intended to limit or otherwise cap any other
fees or amounts (other than the Base Management Fees and Incentive Fees as
described in this subsection C) that may be paid to Management Company under
this Agreement unless such fees or amounts are specifically limited by the terms
of this Agreement.
6.02 Accounting and Interim Payment
A. Subject to Section 6.01 C above, within twenty (20) days after the
close of each Accounting Period, Management Company shall submit an accounting
to Owner showing Gross Revenues, Deductions, Operating Profit, and distributions
thereof for such Accounting Period. Management Company shall transfer to Owner
with each accounting any Operating Profit or other sums then available for
distribution to Owner and shall retain
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any periodic Base and Incentive Management Fees due Management Company. Such
interim accountings shall be in the form of statements reasonably approved by
Owner.
B. The calculation and payment of the management fees and the
distribution of Operating Profit made with respect to each Accounting Period
within a Fiscal Year shall be accounted for cumulatively. Within sixty (60) days
after the close of each Fiscal Year, Management Company shall submit an
accounting, as more fully described in Section 9.01 for such Fiscal Year to
Owner, which accounting shall be controlling over the interim accountings. Any
adjustments required for such Fiscal Year by such final accounting shall be made
by the parties within forty-five (45) days after receipt by Owner of such final
accounting.
6.03 Reimbursements to Management Company
In addition to all other amounts for which Management Company is
entitled to reimbursement from Owner pursuant to this Agreement, Owner agrees to
reimburse Management Company for all travel and out-of-pocket expenses (such as
fax, postage, telephone and express mail) of the corporate staff (defined for
purposes of this Section 6.03 as those employees who are not ordinarily located
at the Hotel) of Management Company and Management Company's Affiliates, which
are directly related to the services of such staff on behalf of the Hotel;
provided, however, the reimbursements for such expenses shall be billed, as
Deductions, to the Hotel at cost (without duplication of those expenses included
in Group Services) and such amounts are included in the Annual Operating
Projection or otherwise approved by Owner.
6.04 Performance Termination
Owner shall have the option to terminate this Agreement if the Hotel: (i) fails
to achieve Operating Profit equal to ninety (90%) of the Operating Profit
estimated in the approved Annual Operating Projection (the "Profit Minimum") in
each of two (2) consecutive Fiscal Years (excluding the initial two full Fiscal
Years after the Management Commencement Date), and (ii) fails to maintain one
hundred percent (100%) of the fair market share of revenue per available room
for the Hotel's competitive set as set forth on Exhibit C attached hereto during
each of such two (2) consecutive Fiscal Years as reported by ▇▇▇▇▇ Travel
Research (or similar reporting service in the event that ▇▇▇▇▇ Travel Research
reports are no longer available), and (iii) the fact that Management Company is
failing to meet the tests set forth in (i) and (ii) above is not the result of
Force Majeure; provided that Management Company and Owner shall mutually agree
upon appropriate adjustments to the Hotel's competitive set as set forth on
Exhibit C that may be necessary as a result of such Force Majeure for purposes
of determining whether Management Company has failed the test set forth in (ii)
above. Notwithstanding the foregoing, Management Company shall have the right to
cure any such failure to achieve Operating Profit equal to the Profit Minimum
during any Fiscal Year by paying to Owner the difference between Operating
Profit for such Fiscal Year and the Profit Minimum within sixty (60) days after
the end of such Fiscal Year.
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ARTICLE VII
WORKING CAPITAL AND FIXED ASSET SUPPLIES
7.01 Working Capital and Inventories
A. At the Management Commencement Date, Owner shall provide to
Management Company the funds necessary to supply the Hotel with Working Capital
and Inventories in a minimum amount of One Thousand Dollars ($1,000.00) per
guest room and shall at all times thereafter maintain in the Hotel's operating
accounts a minimum balance in the amount of $_____________ (or, if necessary,
such greater amount to assure the uninterrupted and efficient operation of the
Hotel, including, without limitation, sufficient funds to pay budgeted current
liabilities as they fall due and to replace Inventories as they are consumed, as
set forth in the approved Annual Operating Projection) in accordance with the
provisions of subsection B below. Working Capital so advanced shall remain the
property of Owner throughout the Term of this Agreement, and Management Company
shall make no claim thereto.
B. To the extent that the Working Capital becomes reduced to an amount
less than $________________, additional funds in a sum equal to the difference
between $_________________ and the then Working Capital shall be provided by
Owner within five (5) days after Management Company has given written notice to
Owner of such reduction of Working Capital.
7.02 Fixed Asset Supplies
Owner shall provide such funds as Management Company may reasonably
determine to be necessary to supply the Hotel with Fixed Asset Supplies. Fixed
Asset Supplies shall at all times be owned by, and be the sole property of,
Owner, and Management Company shall make no claim thereto.
ARTICLE VIII
MAINTENANCE, REPLACEMENT AND CHANGES
8.01 Routine Repairs and Maintenance
From and after the Management Commencement Date, Management Company
shall maintain the Hotel in good repair and condition and in conformity with
applicable laws and regulations and in accordance with the Franchisor's
standards for the operation of the Hotel and shall make or cause to be made such
routine maintenance, repairs and minor alterations, the cost of which can be
expensed under GAAP, as Management Company, from time to time, deems necessary
for such purposes. The cost of such maintenance, repairs and alterations shall
be paid from Gross Revenues and shall be treated as a Deduction in determining
Operating Profit. The cost of non-routine repairs and maintenance, either to the
Hotel building or its fixtures, furniture, furnishings and equipment ("FF&E"),
shall be paid for in the manner described in Sections 8.02 and 8.03.
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8.02 Repairs and Equipment Reserve
A. Management Company shall establish, in respect of each Fiscal Year
from and after the Management Commencement Date, a reserve escrow account in the
name of Owner ("Reserve") in a bank approved by Owner. All disbursements and
withdrawals from the Reserve shall be made by representatives of Management
Company whose signatures have been authorized. The Reserve shall be in an amount
equal to the greater of: (i) ___% of Gross Revenues or (ii) the amount required
under the Franchise Agreement for the Hotel or by any Qualified Lender, in a
bank, savings and loan association or other financial institution designated by
Owner to cover the cost of:
1. Replacements and renewals to the Hotel's FF&E; and
2. Certain non-routine repairs and maintenance to the Hotel building
which are normally capitalized under GAAP, such as exterior and interior
repainting, resurfacing building walls, floors, roofs and parking areas, and
replacing folding walls and the like, but which are not major repairs,
alterations, improvements, renewals or replacements to the Hotel building's
structure or to its mechanical, electrical, heating, ventilating, air
conditioning, plumbing or vertical transportation systems, the cost of which are
Owner's sole responsibility under Section 8.03.
B. All amounts from time to time in the Reserve, and all interest
thereon, shall at all times be owned by, and be the exclusive property of,
Owner, and Management Company shall make no claim thereto. Proceeds from the
sale of FF&E no longer necessary for the operation of the Hotel shall be
deposited in the Reserve, as shall any interest which accrues on amounts placed
in the Reserve. Neither (i) proceeds from the disposition of FF&E, nor (ii)
interest which accrues on amounts held in the Reserve, shall either (x) result
in any reduction in the required contributions to the Reserve set forth in 8.02
A above, or (y) be included in Gross Revenues. Management Company shall provide
to Owner each month a copy of the bank statement relating to the Reserve and a
reconciliation of such Reserve account.
C. Management Company shall prepare an estimate ("FF&E Estimate") of
the expenditures necessary for (i) replacement and renewal of the Hotel FF&E and
(ii) building repairs of the nature contemplated by Section 8.02 A 2 during the
ensuing Fiscal Year, and shall submit such Estimate to Owner for Owner's review
and approval at the same time it submits the Annual Operating Projection
described in Section 9.03.
D. Management Company shall from time to time make such substitutions
and replacements of or renewals to FF&E and repairs to the Hotel of the nature
described in Section 8.02 A 2, as are provided for in the FF&E Estimate approved
for such Fiscal Year by Owner pursuant to Section 8.02 C, provided that
Management Company shall not expend more than the balance in the Reserve without
the prior approval of Owner. Management Company will endeavor to follow the
applicable FF&E Estimate, but shall be entitled to depart therefrom (but not
exceeding the Reserve balance), in its reasonable discretion, provided that (a)
such departures from the FF&E Estimate result from
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circumstances which could not reasonably have been foreseen at the time of the
submission of such FF&E Estimate; and (b) such departures from the FF&E Estimate
result from circumstances which require prompt repair and/or replacement; and
(c) Management Company has submitted to Owner a revised FF&E Estimate setting
forth and explaining such departures. At the end of each Fiscal Year, any
amounts then remaining in the Reserve shall be carried forward to the next
Fiscal Year.
E. If any FF&E Estimate which is prepared for a given Fiscal Year would
require funding in excess of the percentage of Gross Revenues which is
required under Section 8.02 A, Owner may elect one of the following: (i) agree
to increase the percentage of Gross Revenues up to the level set forth in such
FF&E Estimate, in order to provide the additional funds required, such
increases to be treated as Deductions; (ii) make a lump-sum contribution to
the Reserve in the necessary amount and agree not to have such contribution
reimbursed from Gross Revenues (in which case the amount of such contribution
shall be added to Additional Invested Capital) or (iii) make a lump-sum
contribution to the Reserve in the necessary amount, in which case such
contribution plus interest (at Prime Rate plus one percentage point per
annum), shall be reimbursed to Owner from Gross Revenues in equal installments
over a period of time mutually agreed upon by Owner and Management Company,
and such installment repayments shall be Deductions. If Owner elects not to
agree to any of such options for excess funding of the Reserve, Management
Company shall be entitled, at its option, to terminate this Agreement upon
ninety (90) days' written notice to Owner; however, such failure by Owner
shall not be deemed a Default by Owner unless such failure to provide excess
funding will cause a default by Owner under Section 16.01.F of this Agreement.
8.03 Building Alterations, Improvements, Renewals and Replacements
A. Management Company shall prepare an annual estimate ("Building
Estimate") of the expenses necessary for major repairs, alterations,
improvements, renewals and replacements (which repairs, alterations,
improvements and renewals are not routine maintenance, repairs and alterations
referred to in Section 8.02) to the structural, mechanical, electrical, heating,
ventilating, air conditioning, plumbing and vertical transportation elements of
the Hotel building, including any such Owner-Funded Capital Expenditures
required under the Franchise Agreement ("Owner-Funded Capital Expenditures") and
shall submit such Building Estimate to Owner for its approval at the same time
the Annual Operating Projection described in Section 9.03 is submitted.
Management Company shall not make any Owner-Funded Capital Expenditures without
the prior written consent of Owner except to the extent such expenditures are:
(i) required by any law (including, without limitation, any law, ordinance, code
or regulation of any governmental authority or agency having jurisdiction over
the business or operation of the Hotel), or (ii) otherwise required to avoid the
risk of harm or further damage to persons or property.
B. The cost of all Owner-Funded Capital Expenditures shall be borne
solely by Owner and shall not be paid from Gross Revenues or from the Reserve.
The failure of Owner to provide funding for any Owner-Funded Capital Expenditure
described in clause
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(i) or (ii) of Section 8.03 A shall be a Default by Owner and Management Company
shall be entitled to terminate this Agreement (along with other remedies it may
have under this Agreement).
8.04 Liens
Management Company and Owner shall use their best efforts to prevent
any liens from being filed against the Hotel which arise from any maintenance,
changes, repairs, alterations, improvements, renewals or replacements in or to
the Hotel. They shall cooperate fully in obtaining the release of any such
liens, and the cost thereof, if the lien was not occasioned by the fault of
either party, shall be treated the same as the cost incurred pursuant to Section
8.03. If the lien arises as a result of the fault of either party, then the
party at fault shall bear the cost of obtaining the lien release.
8.05 Ownership of Replacements
All changes, repairs, alterations, improvements, renewals, or
replacements to the Hotel made pursuant to this Article VIII shall be the
property of Owner.
ARTICLE IX
BOOKKEEPING AND BANK ACCOUNTS
9.01 Books and Records
Books of control and account shall be kept on the accrual basis and in
material respects in accordance with the Uniform System of Accounts and GAAP
with the exceptions provided in this Agreement. Owner may, at reasonable
intervals during Management Company's normal business hours, examine such
records. Within sixty (60) days following the close of each Fiscal Year,
Management Company shall furnish Owner a statement (the "Annual Operating
Statement") in reasonable detail summarizing the Hotel operations for such
Fiscal Year and a certificate of Management Company's chief accounting officer
certifying that such year-end statement is true and correct to the best of his
or her knowledge and belief. If Owner raises no objections within thirty (30)
days after receipt of the Annual Operating Statement, the Annual Operating
Statement shall be deemed to have been accepted by Owner. If Owner does raise
any such objection, Owner shall arrange for an independent audit to be commenced
within sixty (60) days after the date of such objection, and shall diligently
cause such audit to be completed within a reasonable period of time and the
Management Company shall, at no expense to Management Company, cooperate with
such audit. Owner shall pay all costs of such audit at its sole expense (and not
as a Deduction); however, if such audit establishes that Management Company has
understated Operating Profit for that Fiscal Year by five percent (5%) or more,
the reasonable costs and expenses of such audit shall be paid directly by
Management Company from its own funds and shall not be treated as Deductions.
9.02 Hotel Accounts: Expenditures
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A. All funds derived from the operation of the Hotel shall belong to
and be the property of Owner and shall be deposited by Management Company in
bank accounts established by Management Company for Owner in one or more banks
approved by Owner. All disbursements and withdrawals from said accounts as
required or permitted under this Agreement (i.e., the payment of all Deductions
and the distribution of Operating Profit) shall be made by bonded
representatives of Management Company whose signatures have been authorized.
Reasonable ▇▇▇▇▇ cash funds and house banks, in amounts satisfactory to Owner,
shall be maintained at the Hotel.
B. All payments to be made by Management Company hereunder shall be
made from authorized bank accounts, from ▇▇▇▇▇ cash funds or from Working
Capital provided by Owner pursuant to Section 7.01. Debts and liabilities
incurred by Management Company as a result of its operation and management of
the Hotel pursuant to the terms hereof, whether asserted before or after
Termination, will be paid by Owner to the extent funds are not available for
that purpose from Gross Revenues. Management Company shall not be required to
make any advance or payment to or for the account of Owner except out of such
funds, and Management Company shall not be obligated to incur any liability or
obligation for Owner's account without assurances that necessary funds for the
discharge thereof will be provided by Owner.
C. All bank accounts shall be owned by Owner and shall be solely
controlled and operated by Management Company as the agent of Owner; the agency
status of Management Company shall be designated on the checks and drafts drawn
on such banks accounts.
9.03 Annual Operating Projection
A. On or before the first day of December of each Fiscal Year, a
preliminary draft of the budget ("Annual Operating Projection"), setting forth
Management Company's reasonable estimate of Gross Revenues, Deductions,
Operating Profit and such other information as Owner or a Qualified Lender may
reasonably request for the Hotel for the forthcoming Fiscal Year, shall be
prepared by Management Company and submitted to Owner for its review and
approval (which shall not be unreasonably withheld or delayed). In the event
that Management Company is seeking reimbursement from Owner pursuant to
Section 14.01.B(i) for the salaries, wages and/or benefits of any
officers or directors of Management Company or Management Company's Affiliates
who shall be regularly or temporarily employed or assigned on a full-time basis
at the Hotel, this shall be shown as a separate line item under the Deductions
category of the Annual Operating Projection. On or before the fifteenth (15th)
day of December of each Fiscal Year, Management Company and Owner shall have a
meeting to discuss the Annual Operating Projection; provided that Management
Company shall submit the Annual Operating Projection to Owner at least fourteen
(14) days in advance of such meeting (or such meeting shall be rescheduled to a
date that is at least fourteen (14) days after the submission of the Annual
Operating Projection to Owner). If Owner does not approve the preliminary Annual
Operating Projection in full, within thirty (30) days of its receipt, Owner
shall notify Management
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Company of each category of expenses (a "Category") of which Owner does not
approve. The preliminary Annual Operating Projection thereafter shall be revised
as Owner and Management Company may agree, and shall, upon Owner's approval,
constitute the approved Annual Operating Projection for the forthcoming Fiscal
Year. In the event that Owner does not notify Management Company in writing
within said 30-day period that it does not approve of specified Categories, the
preliminary Annual Operating Projection shall constitute the approved Annual
Operating Projection for the forthcoming Fiscal Year. The approval of Owner
shall not be required with respect to any Category if, and to the extent that,
the preliminary Annual Operating Projection with respect to such Category for a
given Fiscal Year is, in all material respects (taking into account any
extraordinary non-recurring items), the same as the Annual Operating Projection
for the preceding Fiscal Year as adjusted by the Consumer Price Index.
B. The Annual Operating Projection is an estimate only and Management
Company shall, from time to time during each Fiscal Year as it deems
appropriate, suggest revisions thereto for Owner's review and approval.
Management Company will at all times give good faith consideration to Owner's
suggestions regarding any Annual Operating Projection. Management Company shall
not, except as provided in Sections 8.03 A above and 9.03 C and 9.03 D below,
depart from any approved Annual Operating Projection, or make any expenditures
or incur any expenses not provided for therein, without Owner's prior approval.
C. If Owner and Management Company fail to mutually agree on any given
Category or Categories in the preliminary Annual Operating Projection within
forty-five (45) days after the submission to Owner of the preliminary draft
described in the first sentence of 9.03 A, Management Company shall continue to
manage and operate the Hotel as follows until such agreement is reached: (i)
with respect to each Category in such preliminary Annual Operating Projection
which has been approved or deemed approved by Owner, Management Company may make
expenditures and incur obligations under such Category as so approved; and (ii)
with respect to any Category which has not been approved by Owner, Management
Company may continue to make expenditures and incur obligations under such
Category in accordance with the amounts provided for such Category in the Annual
Operating Projection approved for the prior Fiscal Year, as adjusted by the
Consumer Price Index, with such additional adjustments therein as shall be
necessary to take into account (x) any differences in occupancy which may be
experienced in the current Fiscal Year as compared to the prior Fiscal Year with
respect to those costs that are occupancy sensitive, and (y) any increased costs
beyond the control of Management Company for the same or comparable services or
products.
D. Owner and Management Company acknowledge that the Annual Operating
Projection approved by Owner is an estimate only and that unforeseen
circumstances such as, but not limited to, the costs of labor, materials,
services and supplies, casualty, operation of law, or economic and market
conditions may make adherence to the Annual Operating Projection impracticable
for certain Categories. If in the judgment of the Management Company the
expenditures reasonably expected to be made in any of the following Categories
during the then current Fiscal Year exceed by five percent (5%) or
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more the amount budgeted for such Category in the then current Annual Operating
Projection, Management Company shall notify Owner promptly in writing: Rooms;
Food, Beverage and Banquet; Telephone, Gift Shop, and other; Administrative and
General; Advertising and Sales; Repairs and Maintenance; Salaries and Wages.
Management Company shall, as soon as practicable thereafter, consult with, and
advise, Owner concerning expenditures for such Category or Categories. The
Category under which any expenditure or obligation falls shall be determined in
accordance with the Uniform System of Accounts.
9.04 Operating Deficits
If Management Company should anticipate any Operating Loss for any
Accounting Period, Management Company shall immediately so advise Owner in
writing, setting forth the estimated amount of such deficiency and an
explanation or justification therefor.
ARTICLE X
FRANCHISE AGREEMENT
During the Term of this Agreement, the Hotel shall be managed and
operated in strict compliance with the terms and conditions of the Franchise
Agreement (including but not limited to all terms and conditions regarding
confidentiality and operation of the Hotel), and Management Company, to the
extent sufficient Working Capital exists, shall at all times comply with such
Agreement and advise and assist Owner in the performance and discharge of its
covenants and obligations thereunder. Owner shall comply with any capital
expenditure, product improvement plan, operating standard changes or other
requirements imposed from time to time by the Franchisor under the Franchise
Agreement, the cost of which shall be paid in accordance with this Agreement. In
the event of any conflicts between any provisions of this Agreement and the
Franchise Agreement, the provisions of the Franchise Agreement shall control.
Owner acknowledges that Franchisor shall have the right to communicate directly
with Management Company regarding day-to-day operation of the Hotel. Owner shall
not enter into any amendment, restatement or renewal of the Franchise Agreement
which would in any event have an adverse impact on the amount of fees to be paid
to Management Company under this Agreement without Management Company's prior
written approval, which approval may be withheld in Management Company's sole
discretion. [insert additional provisions that applicable Franchise Agreement
may require to be included]
ARTICLE XI
POSSESSION AND USE OF HOTEL
11.01 Use
A. [Intentionally Deleted]
B. Management Company shall manage and operate the Hotel in accordance
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with this Agreement and the Franchise Agreement and shall in addition comply
with and abide by all applicable laws, ordinances, and regulations.
C. Provided that Owner shall first have employed a replacement manager
for the Hotel satisfactory to and approved by the "Franchisor" under the
Franchise Agreement, Management Company shall have the option to terminate this
Agreement at any time upon sixty (60) days' written notice to Owner in the event
of a withdrawal or revocation, by any lawful governing body having jurisdiction
thereof, of any material license or permit required for Management Company's
performance hereunder, if such withdrawal or revocation is due to circumstances
beyond Management Company's control or not otherwise caused by the gross
negligence or willful misconduct of Management Company, such termination to be
effective as of the date such replacement manager has commenced management of
the Hotel pursuant to its agreement with Owner.
11.02 Owner's Right to Inspect
Owner or its agent shall have access to the Hotel at any and all
reasonable times for the purpose of protecting the same against fire or other
casualty, prevention of damage to the Hotel, inspection, making repairs, or
showing the Hotel to prospective purchasers, tenants or mortgagees. Owner shall
provide at least 24 hours' notice to Management Company prior to exercising its
rights under this Section 11.02, except in the event of an emergency.
11.03 Group Services
A. Subject to Section 11.03 B, Owner shall reimburse Management Company
for certain other services ("Group Services") as may from time to time be
provided to the Hotel by Management Company or Management Company's Affiliates
more efficiently on a group rather than on an individual basis and approved by
Owner. The Group Services may include, without limitation, the following: (a)
marketing, advertising and promotion; (b) payroll processing, accounting and MIS
support services; (c) recruiting, training, career development and relocation in
accordance with Management Company's or its Affiliates' relocation plan; (d)
employee benefits administration; (e) engineering and risk management; (f)
information technology; (g) legal support (such as license and permit
coordination and standardized contracts); (h) purchasing arising out of ordinary
hotel operations; and (i) such other additional services as are or may be, from
time to time, furnished for the benefit of Management Company's hotels or in
substitution for services now performed at Management Company's individual
hotels which may be more efficiently performed on a group basis.
B. Group Services shall consist of the actual cost of the services
without ▇▇▇▇-up or profit to Management Company or any Affiliates, but shall
include: (a) salary and employee benefit costs, (b) cost of equipment used in
performing Group Services, and (c) overhead costs, reasonably allocated thereto
of any office providing Group Services. Costs and expenses incurred in providing
Group Services shall be allocated equitably across hotel properties that
Management Company manages that are provided Group
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Services, to the extent necessary and appropriate, and in the manner described
in the Annual Operating Projection approved by Owner. Notwithstanding anything
herein to the contrary, the costs and expenses for Group Services shall not
exceed the amounts for such services set forth in the Annual Operating
Projection approved by Owner. Costs of Group Services (approved by Owner
pursuant to this subsection B) shall be Deductions. In addition, if equipment is
installed and maintained at the Hotel in connection with the rendition of any
approved Group Services, all costs thereof will be charged to the operation of
the Hotel, as determined by Management Company in good faith and consistent with
GAAP and the Uniform System of Accounts. Unless a Group Service is approved in
the Annual Operating Projection, such service(s) shall be performed at the Hotel
and the cost thereof shall be a Deduction as set forth in the approved Annual
Operating Projection.
C. In no event shall Management Company's Affiliates be deemed a party
to this Agreement or responsible in any way for Management Company's obligations
pursuant to this Agreement by virtue of providing any services described in this
Agreement (including, without limitation, Group Services) to Management Company
and Owner reimbursing Management Company for the expenses incurred in connection
therewith. Management Company shall make (or cause to be made) available to
Owner the books of any such Affiliate providing any such services to the extent
necessary to complete an audit arranged by Owner pursuant to Section 9.01 of
this Agreement.
11.04 Rebates
Any rebates, refunds or similar payments (for purposes of this Section 11.04,
collectively referred to as "rebates") made to Management Company or any of its
Affiliates from vendors or others providing services or goods to the Hotel shall
be returned to the Hotel bank account or Reserve, as the case may be, from which
payment for such services or goods was made and shall constitute Gross Revenues.
Any such rebates made to Management Company or any of its Affiliates from
vendors or others for goods and services provided to a group of hotels operated
by Management Company or its Affiliates, including the Hotel, shall be equitably
allocated among such hotels and the Hotel's equitable share thereof shall be
returned to the Hotel bank account or Reserve, as the case may be, from which
payment for such services or goods was made and shall constitute Gross Revenues.
ARTICLE XII
INSURANCE
12.01 Property and Operational Insurance
A. Management Company shall, commencing with the Management
Commencement Date and continuing throughout the Term of this Agreement, procure
and maintain, as a Deduction, with insurance companies (i) reasonably acceptable
to Owner, (ii) required by a Qualified Lender, and (iii) licensed to underwrite
the type of insurance being issued in the jurisdiction in which such insurance
policy shall be delivered, a minimum of the following insurance to the extent
reasonably commercially available.
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Subject to Owner's and any Qualified Lender's prior approval (in their sole
discretion), Management Company may procure and maintain such insurance as
required in this Section 12.01 by legally qualifying itself as a self insurer:
1. Insurance on the Hotel (including contents) against loss or
damage by fire, lightning and all other risks covered by the usual standard
extended coverage endorsements, with deductible limits approved by Owner, in an
amount not less than one hundred percent (100%) of the replacement cost thereof;
2. Insurance against loss or damage from explosion of boilers,
pressure vessels, pressure pipes and sprinklers, to the extent applicable,
installed in the Hotel;
3. Insurance on the Hotel (including contents) against loss or
damage by earth movement, with deductible limits approved by Owner, in an amount
to be reasonably determined by Owner consistent with local market conditions;
4. Business interruption insurance covering loss of profits and
necessary continuing expenses for interruptions caused by any occurrence covered
by the insurance referred to in Section 12.01 A1, A2, and A3, of a type and in
amounts and with such deductible limits as are approved by Owner;
5. Workers' compensation and employer's liability insurance as may
be required under applicable laws and employment-related practices insurance
covering all of Management Company's employees at the Hotel in each case, with
such deductible limits as are approved by Owner;
6. Fidelity bonds, in amounts and with deductible limits approved by
Owner, covering Management Company's employees in job classifications which
Owner reasonably requests be bonded, and comprehensive crime insurance to the
extent that Management Company and Owner mutually agree it is necessary for the
Hotel;
7. Comprehensive General Public Liability insurance (including
protective liability coverage on operations of independent contractors engaged
in construction, operation or management, blanket contractual liability
insurance, liquor law legal liability insurance, products liability insurance,
and garage keeper's liability insurance), on an "occurrence" basis for the
benefit of Owner and Management Company against claims for "personal injury"
liability, including, without limitation, bodily injury, death, or property
damage liability, with a limit of not less than Twenty Five Million Dollars
($25,000,000) in the event of "personal injury" to any number of persons or
damage to property arising out of any one occurrence; such insurance, which may
be furnished under a "primary policy" (which shall include an aggregate per
location endorsement) and an "umbrella" policy or policies, shall also include:
(i) coverage against liability for bodily injuries or property damage arising
out of the use by or on behalf of Owner or Management Company of any owned,
non-owned, or hired automotive equipment for a limit not less than that
specified above, and (ii) if applicable, garage keeper's legal liability
insurance in the amount sufficient to prevent Owner from becoming a co-insurer;
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8. Crime insurance and errors and omissions insurance insuring Owner
against intentional or negligent acts or omissions of Management Company or its
employees, such insurance to be in such amounts, with such carriers, and under
such policies, as may from time to time be requested and approved by Owner; and
9. Such other insurance in amounts as Management Company and Owner,
in their reasonable judgment, mutually deem advisable for protection against
claims, liabilities and losses arising out of or connected with the operation of
the Hotel. Notwithstanding anything in this Agreement to the contrary, the
provisions of this Article XII shall be subject to the reasonable requirements
of a Qualified Lender.
12.02 General Insurance Provisions
A. All policies of insurance required under Section 12.01, Paragraphs
1-4 shall be carried in the name of Management Company, Owner and the Qualified
Lender; and losses thereunder shall be payable to the parties as their
respective interests may appear. All insurance described in Section 12.01,
Paragraphs 6-8 shall name Owner as an additional insured.
B. Owner and Management Company shall release each other, and their
respective authorized representatives, agents and employees, from any claims for
damage or loss to any person or to the Hotel that may be caused by or result
from risks insured under any insurance policies carried by said parties and in
force at the time any such damage or loss occurs, to the extent that such
release does not impair any insurance coverage then in effect. To the extent
waivers of subrogation are acceptable to the insurance carrier each policy of
insurance shall provide that the carrier shall have no right of subrogation
against either party hereto, their authorized representatives, agents or
employees by separate endorsement. If extra premium is charged for such waiver
of subrogation, the party for whom such waiver is obtained shall pay the other
party such extra premium within ten (10) business days after request therefore
together with a copy of the invoice evidencing the same.
12.03 Coverage
All insurance described in Section 12.01 may be obtained by Management
Company by endorsement or equivalent means under its blanket insurance policies,
provided that such blanket policies are satisfactory to and approved by Owner.
Management Company may self insure or otherwise retain such risks or portions
thereof as it does with respect to other similar hotels it owns, leases or
manages.
12.04 Cost and Expense
A. Insurance premiums and any costs or expenses with respect to the
insurance described in Section 12.01 shall be treated as Deductions in
determining Operating Profit.
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B. Upon Termination of this Agreement, an escrow fund in an amount
reasonably acceptable to Management Company shall be established from Gross
Revenues (or, if Gross Revenues are not sufficient, with funds provided by
Owner) to cover the amount of any costs which will eventually have to be paid by
either Owner or Management Company with respect to insurance premiums, if any,
not fully billed and paid for prior to Termination and pending or contingent
claims, including those which arise after such Termination for causes arising
during the Term of this Agreement. Upon the final disposition of all such
pending or contingent claims, any unexpended funds remaining in such escrow
shall be paid to Owner.
12.05 Policies and Endorsements
A. The party procuring insurance hereunder shall deliver to the other
party certificates of insurance with respect to all policies so procured,
including existing, additional and renewal policies and, in the case of
insurance about to expire, shall deliver certificates of insurance with respect
to the renewal policies not less than ten (10) days prior to the respective
dates of expiration.
B. All policies of insurance provided for under this Article XII shall,
to the extent obtainable, have attached thereto an endorsement that such policy
shall not be canceled, non-renewed or to the extent reasonably commercially
available, materially changed without at least thirty (30) days' prior written
notice to Owner and Management Company.
C. Owner may, at its option, procure and maintain the insurance
specified in Section 12.01, Paragraphs 1 through 4, with insurance companies
reasonably acceptable to Management Company, subject to the following: (i) all
such policies of insurance shall be carried in the name of Owner, with
Management Company as a named insured, (ii) any property losses thereunder shall
be payable to the respective parties as their interests may appear, and (iii)
premiums for such insurance coverage shall be treated as Deductions, provided
that if the cost of such insurance procured by Owner exceeds the cost of
Management Company's comparable coverage, all such excess costs shall be the
sole responsibility of Owner and shall not be a Deduction. Should Owner exercise
its option to procure the insurance described in this subsection C, Owner hereby
waives its rights of recovery from Management Company and its Affiliates (and
their respective directors, officers, shareholders, agents and employees) for
loss or damage to the Hotel and any resultant interruption of business.
12.06 Indemnification
A. Owner shall indemnify, defend and hold Management Company, Barcelo
Crestline Corporation and their respective directors, officers, shareholders,
employees and agents (collectively, "Management Company Indemnified Parties"),
harmless from and against all claims, causes of action, losses, attorneys' fees
and other costs and expenses (including, but not limited to, liquidated damages,
transfer fees, and termination costs), liabilities and damages (collectively
referred to as "Claims") imposed upon or incurred by or
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asserted against Management Company Indemnified Parties under, or on account of,
or with respect to this Agreement arising out of or resulting from: (i)
Management Company's due performance of this Agreement, or (ii) the failure by
Owner to provide necessary funds to the Reserve or make necessary Owner-Funded
Capital Expenditures required under this Agreement or to comply with applicable
legal requirements or any requirements imposed by the Franchisor in accordance
with the Franchise Agreement or necessary to maintain the safety or structural
soundness of the Hotel, except to the extent the condition giving rise to such
required expenditures is the result of Management Company's gross negligence or
willful misconduct. Without limiting the generality of the foregoing, Owner
shall indemnify, defend and hold Management Company Indemnified Parties harmless
from and against all Claims imposed upon or incurred by or asserted against
Management Company Indemnified Parties under or with respect to the Franchise
Agreement which arise as a result of: (a) any default by Owner under the terms
of this Agreement or the Franchise Agreement (or related "Owner Agreement")
unless such default is a result of gross negligence or willful misconduct on the
part of Management Company; (b) the transfer by Owner of the Hotel or any
interest of Owner in the Hotel, or (c) the failure by Owner to provide necessary
funds to the Reserve or make necessary Owner-Funded Capital Expenditures
required to comply with applicable legal requirements or any requirements
imposed by the Franchisor in accordance with the Franchise Agreement or
necessary to maintain the safety or structural soundness of the Hotel.
B. Owner shall indemnify, defend and hold Management Company
Indemnified Parties harmless from and against all Claims arising out of or
resulting from all liabilities which accrued (or which stem from events which
occurred) prior to the Management Commencement Date (referred to as "Prior
Liabilities"). Any such Prior Liabilities shall be paid for by Owner (not from
Gross Revenues nor from the Reserve) and shall not be treated as Deductions.
C. Management Company shall indemnify, defend and hold Owner and its
directors, officers, shareholders, employees and agents harmless from and
against all Claims arising out of or resulting from any gross negligence or
willful misconduct on the part of Management Company, its employees or agents.
D. The provisions of this Section 12.06 shall survive Termination of
this Agreement.
ARTICLE XIII
REAL ESTATE AND PROPERTY TAXES
13.01 Impositions
During the Term of the Agreement all real estate or ad valorem property
taxes, assessments, inventory and personal property taxes and similar charges on
or relating to the Hotel ("Impositions") following or allocable to the period
following the Management Commencement Date shall be paid by Management Company,
to the extent sufficient Working Capital exists, from Gross Revenues before any
fines, penalties, or interest are
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added thereto or liens are placed upon the Hotel, unless payment is in good
faith being contested and enforcement thereof is stayed. Management Company,
either in its own name or, if legally required, in Owner's name, may contest by
appropriate proceedings conducted in good faith and with due diligence the
amount, validity or application in whole or in part of any such Imposition or
any lien therefor, and Owner shall have the right to participate in any such
proceedings. In addition, Owner shall have the right to contest, or cause
Management Company to contest, the amount, validity or application in whole or
in part of any such Imposition or any lien therefore. In the event Gross
Revenues are likely to be insufficient to pay such Impositions when due,
Management Company shall so advise Owner no later than thirty (30) days prior to
the due date of such Impositions in order to provide Owner sufficient time in
which to provide funds sufficient for the payment of such Impositions.
Management Company shall also, no later than thirty (30) days prior to the date
payment is due or three (3) days following the written request from Owner,
furnish Owner with copies of official tax bills and assessments and evidence of
payment or contest thereof. Any refund or rebate of any Impositions shall be
credited to Operating Profit in the Fiscal Year in which such refund is
received. All reasonable costs incurred in connection with any such negotiations
or proceedings shall constitute Deductions for the year in which they are paid.
Notwithstanding the foregoing, no such contest shall be conducted if it will in
any way endanger title to the Hotel, the land on which the Hotel is located or
Owner's interest in the Hotel, or create a cloud on title to any of the
foregoing or constitute a default under any financing secured by the Hotel, or
otherwise expose Owner to the risk of criminal liability. Owner shall within
thirty (30) days of receipt of evidence of payment or contest furnish Management
Company with copies of official tax bills and assessments and of payment or
contest thereof. All Impositions shall constitute Deductions from Gross Revenues
in determining Operating Profit provided, however, that any fines, penalties or
interest added thereto to the extent resulting from Owner's acts or omissions
shall be paid by Owner at its sole expense.
13.02 Owner's Responsibility
"Impositions" shall not include the following, all of which shall be
paid solely by Owner, not from Gross Revenues nor from the Reserve: (1) Any
income, excess profits or revenue taxes of Owner or any person, firm or entity
as a partner of Owner; (2) Special assessments imposed because of facilities
which are constructed by or on behalf of the assessing jurisdiction (e.g.,
roads, sidewalks, sewers, etc.) which directly benefit the Hotel; (3) "Impact
Fees" which are required of Owner as a condition to the issuance of site plan
approval, zoning variances or building permits; and (4) "Tax-increment
financing" or similar financing whereby the municipality or other taxing
authority has assisted in financing the construction of the Hotel by temporarily
reducing or abating normal Impositions in return for substantially higher levels
of Impositions at later dates.
ARTICLE XIV
HOTEL EMPLOYEES
14.01 Employees
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A. Management Company shall have the discretion and obligation to hire,
promote, supervise, direct, train all employees at the Hotel, to fix their terms
of compensation and, generally to establish and maintain policies relating to
employment at the Hotel. All such employees shall at all times be the employees
of Management Company and not of Owner, and Owner shall have no responsibility
or control respecting such employees unless otherwise specified in this
Agreement. No collective bargaining agreements will be signed without Owner's
approval. Management Company shall inform Owner as to the name, background, and
qualifications of the Hotel's General Manager and Director of Sales. If
Management Company desires to change the General Manager or Director of Sales,
Management Company shall endeavor to give Owner at least forty-five (45) days'
prior notice, if feasible, of such change stating the reasons for such change
and informing Owner of the name, background, and qualifications of any
replacement General Manager or Director of Sales. Owner shall have the right to
interview the proposed replacement General Manager or Director of Sales and
shall be given the opportunity to meet with the appropriate senior executives of
Management Company to discuss the advisability of effectuating any proposed
hiring, dismissal or transfer and any possible alternatives thereto. Any
replacement General Manager (only) shall be subject to Owner's prior approval,
which approval shall not be unreasonably withheld or delayed. Management Company
shall consider in good faith the opinions and requests of Owner with respect to
such matters, and, if Management Company elects not to implement any such
request, Management Company shall explain its decision to Owner in reasonable
detail. Owner acknowledges and approves _________________ as General Manager as
of the Management Commencement Date.
B. Owner shall reimburse Management Company for: (i) salaries, wages
and/or benefits of any officers, directors or employees of Management Company or
Management Company's Affiliates who shall be regularly employed or temporarily
assigned on a full-time basis at the Hotel and (ii) personnel of Management
Company or Management Company's Affiliates not employed at the Hotel providing
information systems support or legal, accounting or tax services to Management
Company in connection with the operation of the Hotel (without duplication of
reimbursements included in Group Services). All costs and expenses described
under this Subsection B shall not exceed the amount for such services set forth
in the approved Annual Operating Projection without the approval of Owner.
C. Management Company and Owner agree to cooperate with each other to
attempt to avoid any disqualification of qualified employee benefit plans of
either of them to the extent such plans may be affected by the provisions of
this Agreement or the services provided hereunder; provided, however, that
neither Management Company nor Owner shall be required to change the terms of
any such plan as part of such cooperation.
D. All personnel employed at the Hotel shall be recruited and trained
by Management Company in a manner consistent with Management Company's practices
at other comparable hotels managed and operated by Management Company.
14.02 ▇▇▇▇▇▇▇▇▇▇▇
-▇▇-
▇▇ ▇▇▇▇▇▇▇▇▇▇▇, other than by reason of an Event of Default by
Management Company hereunder, an escrow fund shall be established from Gross
Revenues (or, if Gross Revenues are not sufficient, with funds provided by
Owner) to reimburse Management Company for all costs and expenses incurred by
Management Company which arise out of either the transfer or the termination of
employment of Management Company's employees at the Hotel, such as reasonable
transfer costs, unemployment compensation, other employee liability costs
(including without limitation costs incurred pursuant to the Worker Adjustment
and Retraining Notification Act of 1990 (as amended, the "WARN Act")) and a
reasonable allowance for severance pay for Executive Employees (as defined
below) of the Hotel who do not continue to be employed with respect to the Hotel
and who will not be transferred to another hotel owned or managed by Management
Company. The amount of such allowance for severance shall not exceed an amount
equal to Management Company's then current severance benefit for such terminated
Executive Employees and that which is customary in the industry, unless Owner
otherwise approves. As used herein, the term "Executive Employees" shall mean
each member of the senior executive staff and each department head of the Hotel.
14.03 Employee Claims
A. Management Company shall pay from its own funds, and not from Gross
Revenues, for any Employee Claim and for the defense of any Employee Claim
which: (i) is a substantial violation of the standards of responsible labor
relations as generally practiced by prudent owners or operators of similar hotel
properties in the general geographic area of the Hotel, or (ii) is not the
isolated act of individual employees, but rather is a direct result of corporate
policies or systematic action of Management Company which either encourage or
fail to discourage such conduct. In addition, Management Company shall
indemnify, defend and hold harmless Owner from and against any fines or
judgments arising out of such conduct, and all litigation expenses (including
reasonable attorneys' fees and expenses) incurred in connection therewith. Any
dispute between Owner and Management Company as to whether or not certain
conduct by Management Company is not in accordance with the aforesaid standards
shall be resolved by arbitration.
ARTICLE XV
DAMAGE AND CONDEMNATION
15.01 Damage and Repair
A. If, during the Term hereof, the Hotel is damaged or destroyed by
fire, casualty, or other cause, Owner shall, with all reasonable diligence, to
the extent that proceeds from the insurance described in Section 12.01 are
available (subject to the provisions of any Mortgage encumbering the Hotel) for
such purpose, repair or replace the damaged or destroyed portion of the Hotel to
substantially the same condition as existed previously; provided that Owner
shall have no obligation to repair or replace the damaged or destroyed portion
of the Hotel if: (i) such damage, destruction or casualty occurs within two (2)
years of the expiration of the Term, (ii) such damage, destruction or casualty
is in
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excess of sixty percent (60%) of the "fair market value" of the Hotel as
agreed by the parties, and (iii) Owner elects not to rebuild the Hotel. In the
event that the conditions set forth in (i), (ii), and (iii) of the preceding
sentence are satisfied, Owner may terminate this Agreement provided that all
amounts due to Management Company hereunder in connection with such termination
shall be paid by Owner. A termination under this Section 15.01 A shall not be a
Default and no termination fees shall be paid to Management Company.
B. In the event damage or destruction to the Hotel from any cause
materially and adversely affects the operation of the Hotel and Owner fails to
timely (subject to unreasonable delays caused by Management Company, including
unreasonable delays in adjusting the insurance claim with the carriers which
participate in Management Company's blanket insurance program, and subject to
Force Majeure delays) commence and complete the repairing, rebuilding or
replacement of the same so that the Hotel shall be substantially the same as it
was prior to such damage or destruction, Management Company may, at its option,
elect to terminate this Agreement upon ninety (90) days' written notice.
Additionally, if the Franchise Agreement is terminated due to Owner's failure to
repair and restore the Hotel, this Agreement shall terminate, effective upon the
termination of the Franchise Agreement.
15.02 Condemnation
A. If all or substantially all of the Hotel is taken in any eminent
domain, condemnation, compulsory acquisition, or similar proceeding by any
competent authority for any public or quasi-public use or purpose, this
Agreement shall terminate as of the date Management Company ceases to have
physical possession of the Hotel. Any award for such taking or condemnation is
to be paid to Owner, provided that Management Company may advance and collect
any claims to which it may be entitled as a result of such taking in accordance
with the terms of Section 15.02 C.
B. In the event a portion of the Hotel shall be taken by the events
described in Section 15.02 A or the entire Hotel is affected on a temporary
basis but the result is not to make it unreasonable to continue to operate the
Hotel, this Agreement shall not terminate. However, so much of any award for any
such partial or temporary taking or condemnation shall be made available by
Owner to the extent necessary to render the Hotel equivalent to its condition
prior to such event, and the balance of such award, if any, shall be paid over
to Owner.
C. All condemnation awards or payments in lieu thereof for the value of
the land and improvements so taken shall be the sole and exclusive property of
Owner. Management Company may make a claim to the condemning authority for its
loss of business arising from the events described in this Section 15.02, but
only to the extent that such claim in no way prejudices, diminishes, reduces, or
impairs Owner's rights under the preceding sentence.
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ARTICLE XVI
DEFAULTS
16.01 Default
Each of the following shall constitute a "Default," to the extent
permitted by applicable law:
A. The appointment of a receiver, trustee, or custodian for all or any
substantial part of the property of Management Company or Owner, as the case may
be, if such appointment is not set aside or vacated within sixty (60) days.
B. The commencement by Management Company or Owner, as the case may be,
of any voluntary case or proceeding under present or future federal bankruptcy
laws or under any other bankruptcy, insolvency, or other laws respecting
debtor's rights.
C. The making of a general assignment by Management Company or Owner,
as the case may be, for the benefit of its creditors.
D. The entry against Management Company or Owner, as the case may be,
of any "order for relief" or other judgment or decree by any court of competent
jurisdiction in any involuntary proceeding against Management Company or Owner,
as the case may be, under any present or future federal bankruptcy laws or under
any other bankruptcy, insolvency, or other laws respecting debtor's rights, if
such order, judgment, or decree continues unstayed and in effect for a period of
sixty (60) consecutive days.
E. The failure of Management Company or Owner, as the case may be, to
make
any payment to be made in accordance with the terms hereof within five (5)
business days after written notice, when such payment is due and payable.
F. Receipt by the Franchisee of any notice from the Franchisor claiming
or alleging any material default under the Franchise Agreement, if such default
is due to any act or omission of Owner or Management Company, as the case may
be, and is not cured, to the satisfaction of the Franchisor within fifteen (15)
days following the Franchisee's receipt of such notice (or, if such default
cannot reasonably be cured within fifteen (15) days and Owner or Management
Company, as the case may be, immediately proceeds with due diligence to cure
such default, then within such additional period of time as is reasonably
required for such cure, taking into account the termination provisions of the
Franchise Agreement).
G. The failure of Owner to provide to Management Company sufficient
Working Capital to operate the Hotel as required by Article VII within three (3)
days after written notice from Management Company of the need for such Working
Capital.
H. The failure of Management Company or Owner, as the case may be, to
perform, keep or fulfill any of the other covenants, undertakings, obligations,
or conditions
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set forth in this Agreement, and the continuance of such default for a period of
thirty (30) days after notice of said failure, or if such default cannot be
reasonably cured within said 30-day time period, the failure of the defaulting
party to commence the cure of such Default within said 30-day period or
thereafter the failure to diligently pursue such efforts to completion.
16.02 Event of Default
Upon the occurrence of any Default by either party (referred to as the
"defaulting party") under Section 16.01 A, B, C or D, such Default shall
immediately and automatically, without the necessity of any notice to the
defaulting party, constitute an "Event of Default" under this Agreement. Upon
the occurrence of any Default by a defaulting party under Section 16.01 E, F, G,
or H, such Default shall constitute an "Event of Default" under this Agreement
if the defaulting party fails to cure such Default within the respective cure or
payment period (as specified in the applicable Paragraph) after written notice
from the non-defaulting party specifying such Default and demanding such cure or
payment; provided, however, that if a Default under Section 16.01 H is such that
it cannot reasonably be cured within said 30-day period, an "Event of Default"
shall then occur if the defaulting party fails to commence the cure of such
Default within the specified 30-day period or thereafter fails to diligently
pursue such efforts to completion.
16.03 Remedies upon Event of Default
Upon the occurrence of an Event of Default, the non-defaulting party
shall have the right to pursue any one or more of the following courses of
action: (i) in the event of a material breach by the defaulting party of its
obligations under this Agreement, to terminate this Agreement by written notice
to the defaulting party, which Termination shall be effective as of the
effective date which is set forth in said notice (provided that said effective
date shall be at least thirty (30) days after the date of said notice; or, if
the defaulting party is the employer of all or a substantial portion of the
employees at the Hotel, the 30-day period shall be extended to such period of
time as may be necessary under applicable law pertaining to termination of
employment); and (ii) to institute any and all proceedings permitted by law or
equity, including, without limitation, actions for specific performance and/or
damages. Upon the occurrence of a Default by either party under Section 16.01 E,
the amount owed to the non-defaulting party shall accrue interest, at the rate
described in Section 22.03, from and after the date on which such payment was
originally due to the non-defaulting party. The rights granted hereunder shall
not be in substitution for, but shall be in addition to, any and all rights and
remedies available to the non-defaulting party by reason of applicable
provisions of law or equity.
ARTICLE XVII
PROPRIETARY MARKS; INTELLECTUAL PROPERTY
17.01 Proprietary Marks
During the Term of this Agreement, the name "Crestline" or "Barcelo
Crestline,"
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whether used alone or in connection with one or more other word(s), and all
proprietary marks (being all present and future trademarks, trade names,
symbols, logos, insignia, service marks, and the like) of Management Company or
any one of its Affiliates, whether or not registered ("Proprietary Marks") shall
in all events remain the exclusive property of Management Company and its
Affiliates. Owner shall have no right to use any Proprietary ▇▇▇▇ of Management
Company or any one of its Affiliates, except during the Term of this Agreement
to have signage installed using any Proprietary ▇▇▇▇ of Management Company or
any one of its Affiliates in conformance with the specifications provided by
Management Company. Upon Termination, any use of a Proprietary ▇▇▇▇ by Owner
under this Agreement shall immediately cease. Upon Termination, Management
Company shall have the option to purchase, at their then book value, any items
of the Hotel's Inventories and Fixed Asset Supplies as may be marked with a
Proprietary ▇▇▇▇ of Management Company or any one of its Affiliates. In the
event Management Company does not exercise such option, Owner agrees that it
will use any such items not so purchased exclusively in connection with Hotel
until they are consumed. During the Term of this Agreement, the name
"___________" whether used alone or in connection with one or more other words,
and all proprietary marks of Owner shall in all events remain the exclusive
property of Owner and its Affiliates. Management Company shall have no right to
use any proprietary ▇▇▇▇ of Owner or its Affiliates, except during the Term of
this Agreement to have signage installed using any proprietary ▇▇▇▇ of Owner or
its Affiliates in conformance with the specifications provided by Owner. Upon
Termination, any use of a proprietary ▇▇▇▇ of Owner or its Affiliates by
Management Company under this Agreement shall immediately cease.
17.02 Computer Software and Equipment
All "Software" (meaning all computer software and accompanying
documentation, other than software which is commercially available, which are
used by Management Company in connection with the property management system,
any reservation system and all future electronic systems developed by Management
Company for use in the Hotel) is and shall remain the exclusive property of
Management Company or any one of its Affiliates (or the licensor of such
Software, as the case may be), and Owner shall have no right to use, or to copy,
any Software. Upon Termination, Management Company shall have the right to
remove from the Hotel all Software, and any computer equipment which is utilized
as part of a centralized property management system or is otherwise considered
proprietary by Management Company; provided, however, that if any of such
computer equipment is owned by Owner, Management Company shall reimburse Owner
for previous expenditures made by Owner for the purchase of such equipment,
subject to a reasonable allowance for depreciation.
17.03 Intellectual Property
All "Intellectual Property" (meaning all Software and manuals,
brochures and directives issued by Management Company to its employees at the
Hotel regarding procedures and techniques to be used in operating the Hotel)
shall at all times be proprietary to Management Company or its Affiliates, and
shall be the exclusive property of
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Management Company or its Affiliates. Upon Termination, all Intellectual
Property shall be removed from the Hotel by Management Company, without
compensation to Owner.
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ARTICLE XVIII
WAIVER AND INVALIDITY
18.01 Waiver
The failure of either party to insist upon strict performance of any of
the terms or provisions of this Agreement, or to exercise any option, right or
remedy herein contained, shall not be construed as a waiver or as a
relinquishment for the future of such term, provision, option, right or remedy,
but the same shall continue and remain in full force and effect. No waiver by
either party of any term or provision hereof shall be deemed to have been made
unless expressed in writing and signed by such party.
18.02 Partial Invalidity
In the event that any portion of this Agreement shall be declared
invalid by order, decree or judgment of a court, this Agreement shall be
construed as if such portion had not been inserted herein except when such
construction would operate as an undue hardship to Management Company or Owner
or constitute a substantial deviation from the general intent and purpose of
said parties as reflected in this Agreement.
ARTICLE XIX
ASSIGNMENT
19.01 Assignment by Management Company and Owner
A. Management Company shall not assign this Agreement, or delegate any
of its responsibilities hereunder, without the prior written consent of Owner;
provided, however, that Management Company, shall have the right, without such
consent, to assign its interest in this Agreement to any of its Affiliates, and
any such Affiliate shall be deemed to be the Management Company for purposes of
this Agreement. Management Company shall be relieved of all further obligations
hereunder if such Affiliate has substantially similar financial resources and
liquidity as Management Company and the expertise to perform the obligations of
Management Company hereunder including, without limitation, access to the Group
Services that are currently being provided by Management Company at the time of
such assignment.
B. Except as permitted pursuant to Section 20.01 B, Owner shall not
assign this Agreement, without the prior written consent of Management Company;
provided, however, that Owner may assign this Agreement upon notice to
Management Company to any wholly-owned subsidiary of Owner but only if such
subsidiary owns one hundred percent (100%) of the Hotel; and upon such
assignment and assumption of this Agreement by the assignee, Owner shall be
relieved of all further liability or obligation hereunder.
C. Notwithstanding any provision contained in this Agreement, (i) the
collateral assignment of this Agreement by Owner as security for any Mortgage
securing a Qualified Loan or (ii) the transfer of this Agreement in connection
with a merger or consolidation or a
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sale of all or substantially all of the assets of either party (provided that
(x) if such transfer is by Owner, the provisions of Article XX shall be complied
with, and (y) if such transfer is by Management Company, such transfer is being
done as part of a merger or consolidation or a sale of all or substantially all
of the business which consists of Management Company's managed hotels), is
permitted without the consent of the other party.
D. If either party consents to an assignment of this Agreement by the
other, no further assignment shall be made without the express consent in
writing of such party, unless such assignment may otherwise be made without such
consent pursuant to the terms of this Agreement.
E. An assignment (either voluntarily or by operation of law) by either
party of its interest in this Agreement shall not relieve either party from its
obligations under this Agreement which accrued prior to the date of such
assignment; such assigning party shall be relieved of such obligations accruing
after such date, if the assignment complies with this Article XIX and if
Management Company or Owner, as the case may be, has received an assumption
agreement executed by the assignee.
ARTICLE XX
TERMINATION OF AGREEMENT UPON SALE, DEMOLITION, OR FORECLOSURE
20.01 Sale of the Hotel
A. Sale to Permitted Transferee. Owner may enter into a Sale of the
Hotel to any individual or entity that: (i) has sufficient financial resources
and liquidity to fulfill Owner's obligations under this Agreement, and (ii) is
not in control of or controlled by persons who have been convicted of felonies
involving moral turpitude in any state or federal court, and (iii) is not
engaged in the business of operating or managing (as distinguished from owning)
2,000 or more guestrooms of a recognized branded hotel chain or chains in
competition with Management Company. If Owner enters into an agreement for the
Sale of the Hotel to a purchaser or tenant that violates the provisions of this
Section 20.01 A and Management Company has notified Owner of such
non-compliance, Owner shall be deemed to be in Default hereunder unless the Sale
Termination Fee is paid to Management Company as described in Section 20.01D.
B. Written Notice of Sale and Assignment of Management Agreement. In
the event that Owner enters into a definitive agreement with respect to the Sale
of the Hotel and desires to have this Agreement assigned to the new owner, Owner
shall give written notice thereof to Management Company, stating the name of the
prospective purchaser or tenant. Such notice shall include appropriate
information relating to such prospective purchaser or tenant demonstrating
compliance with Section 20.01 A. Concurrently with the finalization of such Sale
of the Hotel, and only upon full compliance with the conditions set forth in
Sections 20.01 A, B, and C, the purchaser or tenant shall by appropriate
instrument reasonably satisfactory to Management Company, assume all of Owner's
obligations hereunder. An executed copy of such assumption agreement shall be
delivered to Management Company at the closing or consummation of such Sale of
the
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Hotel. The assignment and assumption of this Agreement by a new owner of the
Hotel upon the Sale of the Hotel in full compliance with Sections 20.01 A, B,
and C shall be deemed to be an assignment by Owner approved by Management
Company pursuant to Section 19.01 B of this Agreement. This Agreement shall not
be assigned to and assumed by any new owner of the Hotel upon the finalization
of a Sale of the Hotel if the conditions set forth in Sections 20.01 A, B, and C
are not fully satisfied.
C. Maintenance of Accounts. No Sale of the Hotel shall reduce or
otherwise affect: (a) the current level of Working Capital; (b) the current
amount deposited in the Reserve; or (c) any of the operating accounts maintained
by Management Company pursuant to this Agreement. If, in connection with any
such Sale of the Hotel, the selling Owner intends to withdraw, for its own use,
any of the cash deposits described in the preceding sentence, the selling Owner
must obtain the contractual obligation of the new Owner to replenish those
deposits (in identical amounts) simultaneously with such withdrawal. The selling
Owner is hereby contractually obligated to Management Company to ensure that
such replenishment in fact occurs. The obligations described in this Section
20.01 C shall survive the Sale of the Hotel and Termination of this Agreement.
D. Termination Upon Sale of the Hotel. Notwithstanding any provision in
this Agreement to the contrary (including, without limitation, Sections 20.01 A,
B, and C above), Owner shall have the right to terminate this Agreement upon any
Sale of the Hotel provided that Owner: (i) provides at least sixty (60) days'
prior notice to Management Company, and (ii) remits to Management Company
payment of the applicable Sale Termination Fee simultaneously with the
Termination of this Agreement.
20.02 Termination upon Demolition or Foreclosure
A. Owner may, by written notice to Management Company, terminate this
Agreement upon the demolition of the Hotel, such Termination to be effective
upon the expiration of ninety (90) days following Management Company's receipt
of such notice from Owner. Any such notice shall contain sufficient information
to permit Management Company to comply with any required notices to Hotel
employees under federal or state laws, including, without limitation, the WARN
Act. Upon termination under this Section 20.02 A, all amounts due to Management
Company hereunder in connection with such termination shall be paid by Owner. A
termination under this Section 20.02 A shall not be a Default and no termination
fees shall be paid to Management Company.
B. Management Company shall have the right to terminate this Agreement
(and pursue any remedies it may have hereunder), on thirty (30) days' written
notice, if title to or possession of the Hotel is transferred by judicial or
administrative process (including, without limitation, a foreclosure, or a sale
pursuant to an order of a bankruptcy court, or a sale by a court-appointed
receiver) to an individual or entity which would not qualify as a permitted
transferee under Section 20.01 A, regardless of whether or not such transfer is
the voluntary action of the transferring Owner, or whether (under applicable
law) the Owner is in fact the transferor; provided, however, that Management
Company shall not have the right to so terminate this Agreement based on the
assertion that a Qualified Lender fails to
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so qualify as a permitted transferee under Section 20.01 A.
ARTICLE XXI
MANAGEMENT COMPANY CONDITIONS
21.01 Conditions upon Management Commencement Date
The obligations of Management Company and Owner hereunder shall not
commence until the satisfaction of the following conditions:
A. Receipt of all licenses, permits, decrees, acts, orders and all
other approvals necessary for the management and operation of the Hotel.
B. The provision by Owner of the Working Capital described in Article VII.
ARTICLE XXII
MISCELLANEOUS
22.01 Right to Make Agreement
Each party warrants, with respect to itself, that neither the execution
of this Agreement nor the finalization of the transactions contemplated hereby
shall violate any provisions of law or judgment, writ, injunction, order or
decree of any court or governmental authority having jurisdiction over it;
result in or constitute a breach or default under any indenture, contract, other
commitment or restriction to which it is a party or by which it is bound; or
require any consent, vote or approval which has not been taken, or at the time
of the transaction involved shall not have been given or taken. Each party
covenants that it has and will continue to have throughout the Term of this
Agreement and any extensions thereof, the full right to enter into this
Agreement and perform its obligations hereunder.
22.02 Relationship of Owner and Management Company
A. During the Term of this Agreement, Management Company shall qualify
as an "eligible independent contractor" as defined in Section 856(d)(9) of the
Code. To that end, during the Term:
(a) Management Company shall not permit wagering activities to be conducted at
or in connection with the Hotel;
(b) Management Company shall not own, directly or indirectly (within
the meaning of Section 856(d)(5) of the Code), more than 35% of
the shares of Highland;
(c) No more than 35% of the total combined voting power of
Management Company's outstanding stock, if any, (or 35% of the
total shares of all classes of its outstanding stock) shall be
owned, directly or indirectly, by
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one or more persons owning 35% or more of the outstanding stock
of Highland; and
(d) Management Company (or a person who is a "related person" within
the meaning of Section 856(d)(9)(F) of the Code (a "Related
Person") with respect to the Management Company) shall be
actively engaged in the trade or business of operating
"qualified lodging facilities" (defined below) for one or more
persons who are not Related Persons with respect to Owner
("Unrelated Persons"). In order to meet this requirement,
Management Company agrees that it (or a Related Person with
respect to Management Company) (i) shall derive at least 10% of
both its revenue and profit from operating "qualified lodging
facilities" for Unrelated Persons and (ii) shall comply with any
regulations or other administrative guidance under Section
856(d)(9) of the Code with respect to the amount of hotel
management business with Unrelated Persons that is necessary to
qualify as an "eligible independent contractor" with the meaning
of such Code Section.
A "qualified lodging facility" is defined in Section 856(d)(9)(D) of the Code
and means a "lodging facility" (defined below), unless wagering activities are
conducted at or in connection with such facility by any person who is engaged in
the business of accepting ▇▇▇▇▇▇ and who is legally authorized to engage in such
business at or in connection with such facility. A "lodging facility" is a
hotel, motel or other establishment more than one-half of the dwelling units in
which are used on a transient basis, and includes customary amenities and
facilities operated as part of, or associated with, the lodging facility so long
as such amenities and facilities are customary for other properties of a
comparable size and class owned by other owners unrelated to Owner. Management
Company's breach of the provisions of this Section 22.02 shall be a material
Event of Default hereunder and be subject to the provisions of Section 16.03 of
this Agreement.
B. Management Company shall perform its duties hereunder as agent for
Owner. Nothing contained in this Agreement shall be construed to create a
partnership or joint venture between Owner and Management Company or their
successors in interest. Neither party shall borrow money in the name of or
pledge the credit of the other.
22.03 Failure to Perform
If Management Company or Owner at any time fails to make any payments
as specified or required hereunder or fails to perform any other act required on
its part to be made or performed hereunder, then the other party after thirty
(30) days' written notice to the defaulting party may (but shall not be
obligated to) pay any such delinquent amount or perform any such other act on
the defaulting party's part. Any sums thus paid and all costs and expenses
incurred in connection with the making of such payment or the proper performance
of any such act, together with interest thereon at the lesser of (i) the
interest rate allowed by the applicable usury laws, or (ii) the Prime Rate plus
three percent (3%), from the date that such payment is made or such costs and
expenses incurred, shall
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constitute a liquidated amount to be paid by the defaulting party under this
Agreement to the other party on demand.
22.04 Breach of Covenant
Owner and Management Company and/or their respective affiliated
companies shall be entitled, in case of any breach of this Agreement by the
other party or others claiming through it, to injunctive relief and to any other
right or remedy available at law.
22.05 Consents
Except as herein otherwise provided, whenever in this Agreement the
consent or approval of Owner or Management Company is required, such consent or
approval shall not be unreasonably withheld, conditioned or delayed.
22.06 Applicable Law and Arbitration
This Agreement shall be construed under and shall be governed by the
laws of the State where the Hotel is located. In the event of any dispute,
controversy or claim arising out of, or in connection with, or relating to this
Agreement, or any breach, or alleged breach hereof, the same shall, upon the
request of either Management Company or Owner, be submitted to and settled by
arbitration. The arbiters shall each have at least ten (10) years' recent
professional experience in the hotel industry. The arbiters are specifically
directed: that the award be definite, certain and final as to the matters
submitted; and to permit or deny the relief sought in its entirety without
partial allocations between the parties (i.e. the preceding shall be a so-called
"baseball arbitration"). Otherwise, the arbitration shall be pursuant to, and in
accordance with, the commercial rules then in effect of the American Arbitration
Association in the State where the Hotel is located, or at any other place or
any other form of arbitration mutually acceptable to the parties so involved.
Any award rendered shall be final and conclusive upon the parties and a judgment
thereon may be entered in the highest court of the forum, state or federal,
having jurisdiction. The expenses of arbitration shall be borne equally by the
parties to the arbitration, provided that each party shall pay the cost of its
own experts, counsel and evidence.
22.07 Headings
Headings of Articles and Sections are inserted only for convenience and
are in no way to be construed as a limitation on the scope of the particular
Articles or Sections to which they refer.
22.08 Notices
Notices, statements and other communications to be given under the
terms of this Agreement shall be in writing and delivered by hand against
receipt or sent by certified mail, return receipt requested, or by nationally
recognized overnight courier:
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To Owner:
--------------------------
c/o Highland Hospitality Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
with a copy to:
--------------------------
c/o Highland Hospitality Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
To Management Company:
Crestline Hotels & Resorts, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
with a copy to:
--------------
Crestline Hotels & Resorts, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
or at such other address as from time to time designated by the party receiving
the notice. Any such notice which is properly mailed, as described above, shall
be deemed to have been served as of three (3) business days after said posting.
22.09 Environmental Matters
A. For purposes of this Section 22.09, "hazardous materials" means any
substance or material containing one or more of any of the following: "hazardous
material," "hazardous waste," "hazardous substance," "regulated substance,"
"petroleum," "pollutant," "contaminant," or "asbestos," as such terms are
defined in any applicable environmental law, in such concentration(s) or
amount(s) as may impose clean-up, removal, monitoring or other responsibility
under any applicable environmental law, or which may present a significant risk
of harm to guests, invitees or employees of the Hotel.
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B. Regardless of whether or not a given hazardous material is permitted
on the Hotel premises under applicable environmental law, Management Company
shall only bring on the premises such hazardous materials as are needed in the
normal course of business of the Hotel. Management Company shall indemnify,
defend and hold Owner and its Affiliates (and their respective directors,
officers, shareholders, employees and agents) harmless from and against all
loss, costs, liability and damage (including, without limitation, engineers' and
attorneys' fees and expenses, and the cost of litigation) arising from the
placing, discharge, leakage, use or storage of hazardous materials in violation
of applicable environmental laws on the Hotel premises or in the Hotel by
Management Company during the Term of this Agreement and shall be responsible
for the payment of any removal or remediation costs resulting therefrom.
C. In the event of the discovery of hazardous materials (as such term
may be defined in any applicable environmental law) on the Hotel premises or in
the Hotel during the Term of this Agreement, Owner shall (except to the extent
such removal is Management Company's responsibility pursuant to Section 22.09 B)
promptly remove, if required by applicable environmental law, such hazardous
materials, together with all contaminated soil and containers, and shall
otherwise remedy the problem in accordance with all environmental laws. Owner
shall (except to the extent that the removal of such hazardous materials is
Management Company's responsibility pursuant to Section 22.09 B) indemnify,
defend and hold Management Company and its Affiliates (and their respective
directors, officers, shareholders, employees and agents) harmless from and
against all loss, costs, liability and damage (including, without limitation,
engineers' and attorneys' fees and expenses, and the cost of litigation) arising
from the presence of hazardous materials on the Hotel premises or in the Hotel.
All costs and expenses of the removal of hazardous materials pursuant to this
Section 22.09 C, and of compliance with all environmental laws, and any amounts
paid to Management Company pursuant to the indemnity set forth above, shall be
paid by Owner from its own funds, not as a Deduction nor from the Reserve.
22.10 Equity and Debt Offerings
Neither Owner nor Management Company (as an "issuing party") shall
make reference to the other party (the "non-issuing party) or any of its
Affiliates in any prospectus, private placement memorandum, offering circular or
offering documentation related thereto (collectively referred to as the
"Prospectus"), issued by the issuing party, unless the non-issuing party has
received a copy of all such references. In no event will the non-issuing party
be deemed a sponsor of the offering described in any such Prospectus, nor will
it have any responsibility for the Prospectus, and the Prospectus will so state.
The issuing party shall be entitled to include in the Prospectus an accurate
summary of this Agreement but shall not include any proprietary ▇▇▇▇ of the
non-issuing party without prior written consent of the non-issuing party. The
issuing party shall indemnify, defend and hold the non-issuing party and its
Affiliates (and their respective directors, officers, shareholders, employees
and agents) harmless from and against all loss, costs, liability and damage
(including attorneys' fees and expenses, and the cost of litigation) arising out
of any Prospectus or the offering described therein.
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22.11 Intentionally Deleted
22.12 Estoppel Certificates
Owner and Management Company will, at any time and from time to time
within fifteen (15) days of the request of the other party or a Qualified
Lender, execute, acknowledge, and deliver to the other party and such Qualified
Lender, if any, and any other person the requesting party may reasonably
request, a certificate certifying:
A. That the 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 such modifications);
B. The dates, if any, on which the distributions of Operating Profit
have been paid;
C. Whether there are any existing Defaults by the other party to the
knowledge of the party making such certification, and specifying the nature of
such Defaults, if any; and
D. Such other matters as may be reasonably requested.
Any such certificates may be relied upon by any party to whom the
certificate is directed.
22.13 Entire Agreement
This Agreement, together with other writings signed by the parties
expressly stated to be supplementary hereto and together with any instruments to
be executed and delivered pursuant to this Agreement, constitutes the entire
agreement between the parties and supersedes all prior understandings and
writings, and may be changed only by a writing signed by the parties hereto.
This instrument may be executed in counterparts, each of which shall be deemed
an original and all such counterparts together shall constitute one and the same
instrument.
22.14 Limitation on Liability.
Notwithstanding anything to the contrary contained in this Agreement,
Owner's liability under this Agreement shall be limited solely to its interest
in the Hotel and no personal liability or deficiency judgment shall append to
Owner relative to, or as result of, this Agreement.
22.15 Confidentiality.
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Owner and Management Company agree that the matters set forth in this
Agreement are strictly confidential and each party will make every effort to
ensure that the information is not disclosed to any outside person or entities
(including any announcements to the press or otherwise pertaining to the
transaction entered into by the parties hereunder without the approval as to
both timing of any such announcement of both Owner and Management Company)
without the prior written consent of the other party except as may be reasonably
necessary to obtain licenses, permits and other public approvals necessary for
the operation of the Hotel, in connection with the Owner's financing of the
Hotel, or the Sale of Hotel. It is understood and agreed that this Section 22.15
is not intended to prohibit or limit disclosure of the matters set forth in this
Section 22.15 by Owner or Management Company (i) to their respective officers,
directors, employees, financial advisors, attorneys, accountants, potential
lenders, consultants and representatives on a need to know basis, (ii) as
required by any governmental agency or any federal or state law or regulation,
or (iii) as required pursuant to the rules of any exchange or securities system
on which such party's (or any of its affiliates') shares are traded, or (iv) the
extent legally compelled by legal process.
22.16 Affiliates.
Management Company shall be entitled to contract with one or more of
its Affiliates to provide goods and/or services to the Hotel only if the prices
and/or fees paid to any such Affiliates are competitive with the prices and/or
fees currently being paid to reputable and qualified parties providing similar
services which are not Affiliates of Management Company, provided, however, that
in any event Management Company shall be required to obtain Owner's consent
prior to contracting with any of Management Company's Affiliates, which consent
shall not be unreasonable withheld or delayed. In connection with obtaining such
consent, Management Company shall provide Owner with underlying documentation
reasonably necessary for Owner to determine whether such prices and/or fees are
competitive with the prices and/or fees currently being paid to reputable and
qualified parties providing similar services which are not Affiliates of
Management Company. To the extent that any such services shall constitute the
Group Services, the prices and/or fees for such services will be determined
pursuant to Section 11.03 B. In the event that the Annual Operating Projection
includes fees to be paid to any Affiliate for the provision of goods and
services to the Hotel, Management Company shall provide Owner with underlying
documentation reasonably necessary for Owner to determine whether such prices
and/or fees are competitive with the prices and/or fees currently being paid to
reputable and qualified parties providing similar services which are not
Affiliates of Management Company.
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22.17 Force Majeure
In the event either party is unable to perform its obligations hereunder due to
an event of Force Majeure, such performance shall be extended for a period of
time reasonably required to complete performance of such obligation(s).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers.
OWNER:
---------------------------
By:
Title:
MANAGEMENT COMPANY:
CRESTLINE HOTELS & RESORTS, INC.
---------------------------
By:
Title:
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Exhibit A
Legal Description of Hotel Site
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Exhibit B
Proforma
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Exhibit C
Hotel's Competitive Set
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