EXHIBIT 10.1
MANAGEMENT AGREEMENT
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by and between
FAIRFIELD FMC CORPORATION
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as "MANAGEMENT COMPANY"
and
FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP
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as "OWNER"
Dated as of November 17, 1989
TABLE OF CONTENTS
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Page
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Article I - Definition of Term
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1.01 Definition of Terms...............................................
Article II - Appointment of Management Company
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2.01 Appointment.......................................................
2.02 Delegation of Authority...........................................
2.03 Licenses and Permits..............................................
2.04 Non-Discrimination................................................
Article III - Ownership of the Hotels
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3.01 Ownership of Inns.................................................
3.02 Compliance with Ground Lease......................................
Article IV - Term
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4.01 Term..............................................................
4.02 Performance Termination...........................................
4.03 Actions to be Taken on Termination................................
4.04 Pre-Closing Termination...........................................
Article V - Compensation of Management Company
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5.01 Management Fees and System Fee....................................
5.02 Incentive Management Fees.........................................
5.03 Application of Capital Proceeds...................................
5.04 Debt Service Payment..............................................
5.05 Accounting and Interim Payment....................................
Article VI - Pre-Opening
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6.01 Pre-Opening Services..............................................
6.02 Responsibility for Pre-Opening Services...........................
Article VII - Working Capital and Fixed Asset Supplies
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7.01 Working Capital and Inventories...................................
7.02 Fixed Asset Supplies..............................................
Article VIII - Repairs, Maintenance and Replacements
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8.01 Routine Repairs and Maintenance...................................
8.02 FF&E Reserve......................................................
8.03 Building Alterations, Improvements, Renewals and Replacements.....
8.04 Liens.............................................................
8.05 Ownership of Replacements.........................................
Article IX - Bookkeeping and Bank Accounts
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9.01 Books and Records.................................................
9.02 Accounts, Expenditures............................................
9.03 Annual Operating Projection.......................................
9.04 Operating Losses; Credit..........................................
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Article X - Trademarks, Trade Names and Service Marks
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10.01 Trademark, Trade Names and Service Marks..........................
10.02 Purchase of Inventories and Fixed Asset Supplies..................
10.03 Breach of Covenant................................................
Article XI - Possession and Use of The Inns
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11.01 Ground Leases.....................................................
11.02 Management of the Inns............................................
11.03 Chain Services....................................................
11.04 Marketing Fund....................................................
11.05 Owner's Right to Inspect..........................................
11.06 Reservations System...............................................
Article XII - Insurance
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12.01 Property and Operational Insurance................................
12.02 General Insurance Provisions......................................
12.03 Cost and Expense..................................................
12.04 Owner Provided Coverage...........................................
12.05 Loan Agreement Insurance Provisions...............................
Article XIII - Taxes
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13.01 Real Estate and Personal Property Taxes...........................
Article XIV - Inn Employees
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14.01 Employees.........................................................
Article XV - Damage, Condemnation and Force Majeure
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15.01 Damage and Repair.................................................
15.02 Condemnation......................................................
15.03 Force Majeure.....................................................
Article XVI - Defaults
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16.01 Events of Default.................................................
16.02 Remedies..........................................................
Article XVII - Waiver and Partial Invalidity
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17.01 Waiver............................................................
17.02 Partial Invalidity................................................
17.03 Estoppel Certificates.............................................
Article XVIII - Assignment
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18.01 Assignment........................................................
18.02 Mortgages and Collateral Assignments..............................
Article XIX - Sale of an Inn or Inns
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19.01 Right of First Refusal............................................
19.02 Effect of Sale or Refinancing of an Inn...........................
Article XX - Miscellaneous
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20.01 Right to Make Agreement...........................................
20.02 Consents..........................................................
20.03 Agency............................................................
20.04 Applicable Law....................................................
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20.05 Recordation.......................................................
20.06 Headings..........................................................
20.07 Notices...........................................................
20.08 Limited Liability.................................................
20.09 Entire Agreement..................................................
20.10 Binding Effect....................................................
20.11 Compliance with Loan Documents....................................
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MANAGEMENT AGREEMENT
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This Management Agreement ("Agreement") is executed as of the
day of November, 1989 ("Execution Date"), by FAIRFIELD INN BY MARRIOTT LIMITED
PARTNERSHIP ("Owner"), a Delaware limited partnership with a mailing address at
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and FAIRFIELD FMC CORPORATION
("Management Company"), a Delaware corporation, with a mailing address at ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
R E C I T A L S :
A. Owner has entered into an agreement (the "Purchase Agreement")
to acquire up to fifty Fairfield Inn properties (collectively, the "Inns" or
individually, an "Inn," as more particularly described in Section 1.01 hereof)
which are being operated or are under construction to be operated under the
trade name "Fairfield Inn." Pursuant to the Purchase Agreement, Owner will
acquire fee title to 18 parcels of real property and leasehold interests in 32
parcels of real property (collectively, the "Sites" or individually, a "Site")
described on Exhibit A attached to this Agreement and incorporated herein. Each
Site is or will be improved with a Fairfield Inn property. Each respective Site
and the Inn thereon are collectively referred to as an "Inn," as more
particularly described in Section 1.01 hereof.
B. Owner desires to have Management Company manage and operate the
Inns and Management Company is willing to perform such services for the account
of Owner on the terms and conditions set forth herein.
C. Management Company has represented that it possesses the
resources necessary to fulfill its obligations under this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITION OF TERMS
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1.01 Definition of Terms
The following terms when used in this Agreement shall have the
meanings indicated:
"Accounting Period" shall mean the four (4) week accounting periods
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having the same beginning and ending dates as Management Company's four (4) week
accounting periods, the first of which during any full Fiscal Year shall begin
on the first Saturday of such Fiscal Year and shall end
on the fourth following Friday. There shall be thirteen (13) consecutive four-
week Accounting Periods in each full Fiscal Year, except that the last
Accounting Period in a Fiscal Year may occasionally contain five (5) weeks when
necessary to conform the accounting system to the calendar.
"Additional Inn Investments" shall mean any amounts expended by Owner,
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after the purchase of the Inns by Owner pursuant to the Purchase Agreement, for
the following purposes:
a) to fund the cost of any expansion or improvements, previously
consented to by Management Company, of any Inn;
b) to fund the cost of any repairs or replacements under
Section 15.01, with respect to any Inn, which are not covered by
insurance proceeds under Section 12.01A;
c) to fund under Section 8.03 A2 the cost of any building
alterations and related expenses requested by Management Company; and,
d) to fund any reasonable business needs (not including amounts
funded under Section 8.02 E) of Owner relating to the operation of one
or more of the Inns, as requested by or otherwise approved by
Management Company (which approval shall not be unreasonably
withheld).
"Additional Inn Investment Loan" shall mean (i) any indebtedness
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incurred by Owner to fund an Additional Inn Investment or any refinancing
thereof, provided that the terms of any such loan are commercially reasonable,
plus (ii) expenses of up to two (2) percentage points of the principal amount of
any refinancing thereof.
"Administrative Expense" shall mean, with respect to any Fiscal Year,
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an annual amount equal to the lesser of (i) the aggregate amount of payments
for, or reserves created for payment for, administrative expenses of Owner with
respect to such Fiscal Year; or (ii) an amount equal to $375,000 for 1989 or,
for any Fiscal Year after 1989, an amount equal to $375,000 increased by the
CPI.
"Agreement" shall have the meaning ascribed to it in the Preamble.
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"Annual Operating Projection" shall have the meaning ascribed to it in
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Section 9.03.
"Base Management Fee" shall mean an annual amount equal, during any
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given Fiscal Year (or portion thereof), to one percent (1%) of Gross Revenues
for each Fiscal Year through 1994 and two percent (2%) of Gross Revenues for
each Fiscal Year thereafter.
"Building Estimate" shall have the meaning ascribed to it in
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Section 8.03 A.
"Capital Proceeds" shall mean Net Refinancing Proceeds and/or Net
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Sales Proceeds.
"Cash Flow Available for Incentive Management Fee" shall have the
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meaning ascribed to it in Section 5.02 F.
"Chain Services" shall have the meaning ascribed to it in
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Section 11.03.
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"Consumer Price Index Adjustment" shall mean an increase by the
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percentage by which the "Consumer Price Index for All Urban Consumers (CPI-U);
U.S. City Average, 1982-84=100, All Items" (or appropriate substitute index if
such index is no longer published) (the "CPI") for January of the Fiscal Year in
question exceeds the CPI for January 1989.
"Contingent Incentive Management Fees" shall mean those portions of
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any Incentive Management Fees for each Fiscal Year (or portion thereof) which
are not paid to Management Company in such Fiscal Year (or portion thereof)
owing to the limitations set forth in Section 5.02 hereof. Notwithstanding
anything herein to the contrary, any portion of the Incentive Management Fee
from the Effective Date through the Accounting Period ending December 31, 1992
that would have been paid for such year but for the aforesaid limitations of
Section 5.02 shall not be included in Contingent Incentive Management Fees and
Management Company shall never be entitled to payment thereof.
"Deductions" shall have the meaning ascribed to it in the definition
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of Operating Profit.
"Development Inn" or "Development Inns" shall mean those Inns
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currently under development by Marriott to be acquired by the Owner from
Marriott or Marriott affiliates on or subsequent to the Effective Date.
"Effective Date" shall mean the date on which Owner first acquires fee
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(or leasehold) title to one or more of the Inns purchased pursuant to the
Purchase Agreement.
"Execution Date" shall have the meaning ascribed to it in the
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Preamble.
"FF&E" shall mean furniture, furnishings, fixtures, vehicles,
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carpeting and equipment (including communication and computer systems), but
shall not include Fixed Asset Supplies.
"FF&E Replacement Estimate" shall have the meaning ascribed to it in
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Section 8.02 D.
"FF&E Reserve" shall have the meaning ascribed to it in
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Section 8.02 A.
"Fiscal Year" shall mean Management Company's Fiscal Year which now
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ends at midnight on the Friday closest to December 31 in each calendar year; the
new Fiscal Year begins on the Saturday immediately following said Friday. A
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. If Management Company's Fiscal Year is changed in the
future, appropriate adjustment to this Agreement's reporting and accounting
procedures shall be made; provided, however, that no such change or adjustment
shall alter the term of this Agreement or in any way reduce the applications of
Operating Profit or other payments due hereunder.
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"Fixed Asset Supplies" shall mean supply items included within
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"Property and Equipment" under the Uniform System of Accounts, including, but
not limited to, linen, uniforms, and similar items, whether used in connection
with public space or rooms.
"Force Majeure" shall have the meaning ascribed to it in
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Section 15.03.
"Gross Revenues" shall mean, for all Accounting Periods to date in
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each Fiscal Year, all revenues and receipts of every kind derived from operating
the Inns and all departments and parts thereof, including, but not limited to:
income (from both cash and credit transactions), before commissions and
discounts for prompt or cash payments, from rental of rooms, meeting rooms and
space of every kind; license, lease and concession fees and rentals (not
including gross receipts of any licensees, lessees and concessionaires); income
from vending, facsimile and copy machines; wholesale and retail sales of
merchandise (except as otherwise provided in Section 8.02C hereof with respect
to the sale of FF&E and except for wholesale sales of merchandise not generally
related to the business of the Inns), service charges, and proceeds, if any,
from business interruption or other loss of income insurance, all determined in
accordance with generally accepted accounting principles; provided, however,
that Gross Revenues shall not include (i) gratuities to Inn employees;
(ii) federal, state or municipal excise, sales or use taxes or similar
assessments or Impositions collected directly from patrons or guests or included
as part of the sales price of any goods or services; (iii) Net Refinancing
Proceeds or Net Sales Proceeds; (iv) proceeds from the sale of FF&E;
(v) interest received or accrued with respect to the funds in the FF&E Reserve
or the other operating accounts of the Inns; or (vi) any refunds, rebates,
discounts and credits of a similar nature, given, paid or returned in the course
of obtaining Gross Revenues or components thereof (including, without
limitation, commissions and discounts for prompt or cash payments).
"Ground Leases" shall have the meaning ascribed to them in the
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definition of Ground Rent.
"Ground Rent" shall mean, for all Accounting Periods to date in each
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Fiscal Year, the total rent and other amounts paid or accrued to the landlord by
Owner pursuant to those certain ground leases entered into between the Owner and
Marriott and certain affiliates of Marriott ("Ground Leases") for leasing of the
land on which 32 of the Inns are or will be located, as amended, renewed or
replaced from time to time.
"Impositions" shall have the meaning ascribed to it in Section 13.01.
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"Incentive Management Fee" shall mean an annual amount which equals
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fifteen percent (15%) of Operating Profit in any Fiscal Year increasing to
twenty percent (20%) of Operating Profit for all Fiscal Years (and portions
thereof) after the end of the first period of thirteen (13) consecutive
Accounting Periods during which Operating Profit has equaled or exceeded the
Operating Profit Objective. Payment of the Incentive Management Fee to
Management Company shall be subject to the provisions of Article V hereof.
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"Initial Term" shall have the meaning ascribed to it in section 4.01.
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"Inn" or "Inns" shall refer individually or collectively to the
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Fairfield Inn properties listed in Exhibit A hereto or any Fairfield Inn
property substituted therefor under the Purchase Agreement. The terms "Inn" or
"Inns" incorporate not only the Site or Sites but also all easement or other
appurtenant rights thereto, together with the buildings and all other
improvements now or hereafter constructed thereon, and all FF&E and Fixed Asset
Supplies installed or located therein. Each Inn shall become subject to this
Agreement when acquired by the Owner pursuant to the Purchase Agreement.
"Inn Retention" shall mean the amount of any loss or reserve under
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Management Company's, Marriott's or a Marriott Affiliate's blanket insurance or
self-insurance programs which is allocated to an Inn, not to exceed the higher
of (a) the maximum per occurrence limit reasonably established for similar inns
or hotels participating in such programs, or (b) if applicable, the insurance
policy deductible on any loss which may fall within high hazard classifications
as mandated by the insurer (e.g., earthquake, flood, windstorm on coastal
properties). If the Inn is not a participant under Management Company's,
Marriott's or a Marriott Affiliate's blanket insurance or self-insurance
programs, "Inn Retention" shall mean the amount of any loss or reserve allocated
to the Inn, not to exceed the insurance policy deductible.
"Inn Term" shall have the meaning ascribed to it in Section 4.01.
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"Inventories" shall mean "Inventories" as defined in the Uniform
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System of Accounts, such as, but not limited to, provisions in storerooms; other
merchandise intended for sale; fuel; mechanical supplies; stationery; and other
expensed supplies and similar items.
"Lender" shall mean Sumitomo Trust & Banking Co. (U.S.A.).
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"Limited Debt Service Guarantee" shall mean the agreements between
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Marriott, the Lender and/or Owner whereby Marriott will lend Owner an amount not
to exceed Sixteen Million Five Hundred Thousand Dollars ($16,500,000) to the
extent necessary for payment of (i) interest on the Permanent Loan and renewals
and replacements thereof, and (ii) the principal amount of the Permanent Loan
and renewals and replacements thereof.
"Limited Debt Service Guarantee Advance" shall mean payments advanced
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by Marriott under the Limited Debt Service Guarantee.
"Loan Agreement" shall mean that certain agreement entered into
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between Owner and Lender regarding the Permanent Loan.
"Management Company" shall have the meaning ascribed to it in the
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Preamble.
"Marketing Fund" shall mean that certain fund (or any successor fund)
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maintained by Management Company, in its capacity as operator or franchisor of
the Fairfield Inn system, to provide for developing, producing and administering
certain system-wide programs/materials for
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advertising, marketing, direct sales, promotions and public relations. The
Management Company will have no ownership interest in the Marketing Fund.
"Marriott" shall mean Marriott Corporation, the corporate parent of
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Management Company.
"Marriott Affiliate" shall mean Marriott and any corporation of which
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Marriott, either directly or indirectly through one or more intermediary
corporations, owns over fifty percent (50%) of the voting stock or any
partnership wherein Marriott, either directly or indirectly, through one or more
intermediary corporations or other entities, owns or controls the general
partnership interests and over fifty percent (50%) of the voting and economic
partnership interests of such partnership.
"Net Refinancing Proceeds" shall mean the cumulative full amount
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disbursed (in one or more advances) under any loan or loans obtained by Owner
(other than Additional Hotel Investment Loans), from time to time, to the extent
and in the amount such disbursement or disbursements are not used for the
following purposes: (i) the simultaneous repayment of other indebtedness of
Owner, (ii) commercially reasonable transaction costs, and (iii) the payment of,
or creation of reserves in the reasonable discretion of Owner for, reasonable
and necessary expenditures of Owner, including (but not limited to)
Administrative Expenses, FF&E Reserves, Ground Rent and Working Capital needs
related to the Inns.
"Net Sales Proceeds" shall mean the cumulative net proceeds received
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by Owner, from time to time, from any one or more of the following: (i) any Sale
of an Inn; (ii) the condemnation, eminent domain taking, casualty or other
disposition of any of (or any portion of) the Inns or the Sites; or (iii) the
liquidation of Owner's property interest in the Inns in connection with a
dissolution of Owner. The phrase "net proceeds," as used in the foregoing
sentence, shall mean the gross proceeds received from any of the foregoing to
the extent and in the amount such gross proceeds are not used for the following
purposes: (i) simultaneous repayment of any indebtedness secured by the Inn or
Inns being sold (or the pro rata portion (according to allocation of the loan
amount to such Inn) of indebtedness secured by all the Inns) and all other
indebtedness required to be repaid therefrom; (ii) commercially reasonable
transaction costs and, in the case of a condemnation, eminent domain taking or
casualty, all costs of repairing, restoring, replacing, and reconstructing an
Inn or any portion thereof; (iii) in the case where Owner exercises the site
purchase option under a Ground Lease, the purchase price of the land covered
thereby; and (iv) the payment of, or creation of reserves in the reasonable
discretion of Owner for, Administrative Expenses, FF&E Reserves, Ground Rent
and Working Capital needs related to the remaining Inns. The term "Net Sales
Proceeds" shall not include proceeds from disposition of FF&E described in
Section 8.02C hereof.
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"Operating Loss" shall mean, for all Accounting Periods to date in
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each Fiscal Year, the excess, if any, of Deductions over Gross Revenues.
"Operating Profit" shall mean, for all Accounting Periods to date in
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each Fiscal Year, the excess of Gross Revenues over the following deductions
("Deductions") incurred by Management Company in operating the Inns:
1. The cost of sales including salaries, wages (including
accruals for periodic bonuses to Inn employees), fringe benefits, payroll taxes
and other costs related to Inn employees (the foregoing costs shall not include
salaries and other employee costs of executive personnel of Management Company
who do not work at one of the Inns on a regular basis);
2. Departmental expenses, administrative and general expenses
and the cost of Inn advertising, central reservations, local marketing and
business promotion, heat, light and power, and routine repairs, maintenance and
minor alterations treated as Deductions under Section 8.01;
3. Credit card and travel agent commissions;
4. The cost of Inventories and Fixed Asset Supplies consumed
in the operation of each Inn;
5. Reasonable bad debt expense (or a reasonable reserve) for
uncollectable accounts receivable as determined by Management Company;
6. All costs and fees of independent accountants or other
third parties retained by Management Company who perform services required or
permitted hereunder;
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7. The cost and expense of technical consultants and
operational experts retained by Management Company (or retained by Owner and
approved by Management Company) for specialized services in connection with non-
routine Inn work or other specialized services not covered by the Base
Management Fee or the System Fee;
8. The Base Management Fee payable after giving effect to
Section 5.01D hereof;
9. The System Fee;
10. The Inn's pro rata share of costs and expenses incurred by
Management Company in providing Chain Services and the national reservations
system;
11. Insurance costs and expenses (including Inn Retention or
other deductibles) as provided in Article XII;
12. Taxes, if any, payable by or assessed against Management
Company related to this Agreement or to Management Company's operation of the
Inns (exclusive of Management Company's income taxes) and all Impositions;
13. The contributions to the FF&E Reserve which are required
pursuant to Section 8.02;
14. Contributions to the Marketing Fund;
15. Amortization of the amounts described in Section 8.02E3;
16. Rent payable under any equipment leases not funded out of
the FF&E Reserve; and
17. Such other costs and expenses as are specifically provided
for elsewhere in this Agreement or are otherwise
[Page missing]
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"Owner's Net Contributed Capital" shall mean the excess of (a) Owner's
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Contributed Capital over (b) cumulative distributions of Net Refinancing
Proceeds and Net Sales Proceeds to the Partners of the Owner pursuant to
Sections 4.06 and 4.07 of the Partnership Agreement (excluding distributions to
the Partners to satisfy the "Partners' 12% Preferred Distribution" (as defined
therein)).
"Owner's Priority Return" shall mean, for all Accounting Periods to
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date in each Fiscal Year, an amount equal to an annual non-cumulative amount
retained by Owner out of Operating Profit, as set forth in Section 5.02B hereof,
equal to nine percent (9%) of Owner's Contributed Capital in 1989 and 1990 (such
amount to be adjusted to reflect the actual number of days between the Effective
Date and the end of each such Fiscal Year), nine and one-half percent (9.5%) of
Owner's Contributed Capital in 1991 and 1992 and ten percent (10%) of Owner's
Contributed Capital in each Fiscal Year thereafter, subject to reduction upon
any Termination.
"Owner's 12% Priority and Capital Return" shall mean, for all
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Accounting Periods to date in each Fiscal Year, an amount equal to (a) the
portion not yet retained by Owner from Operating Profit, Net Refinancing
Proceeds or Net Sales Proceeds of a twelve percent (12%) per annum cumulative
non-compounded return on the average daily balance outstanding of Owner's Net
Contributed Capital plus (b) the portion not yet retained by Owner from Net
Refinancing Proceeds or Net Sales Proceeds of one hundred percent (100%) of
Owner's Net Contributed Capital.
"Partner" or "Partners" shall mean a partner or partners in Owner.
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"Partnership Agreement" shall mean the Amended and Restated Agreement
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of Limited Partnership of Owner of even date herewith.
"Permanent Loan" shall mean the loan in the principal amount of One
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Hundred Sixty Four Million Eight Hundred Fifty Thousand Dollars ($164,850,000)
provided or to be provided to Owner by Lender to finance a portion of the
purchase price of the Inns pursuant to the Purchase Agreement and certain other
amounts pursuant to the Loan Agreement, such as development fees, Lender's fees,
title insurance, and mortgage and transfer taxes.
"Prime Rate" shall mean the prime rate of interest announced from time
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to time by The First National Bank of Chicago.
"Purchase Agreement" shall have the meaning ascribed to it in the
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Recitals.
"Qualified Debt" shall mean the sum of, without duplication, (i) the
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Permanent Loan, (ii) indebtedness incurred to pay the Incentive Management Fees,
any remaining unpaid Base Management Fees under Section 5.01D hereof, any
remaining unpaid Ground Rent under Section 4.02(d) of the Ground Leases, or any
Contingent Incentive Management Fees, (iii) Additional Inn Investment Loans,
(iv) indebtedness incurred to pay any outstanding Limited Debt Service Guarantee
Advances and accrued interest thereon, and (v) Replacement Debt with respect to
the Inns.
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"Qualifying Debt Service" shall mean, for all Accounting Periods to
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date in each Fiscal Year, (i) the Stipulated Debt Service, (ii) interest and
principal actually paid or accrued on all Qualified Debt (other than the
Permanent Loan and all refinancings thereof in an amount up to the original
principal amount thereof), plus (iii) all fees related thereto and all penalties
attributable to acts or omissions of Management Company. In no event, however,
shall "Qualifying Debt Service" include, with respect to any indebtedness:
(i) any balloon payments; or (ii) voluntary prepayments on the Permanent Loan;
or (iii) any repayments of the portion of the principal and interest of any
indebtedness which is incurred for the purpose of distributing the same to the
Partners of Owner. The term "balloon payments," as used in this Agreement, shall
mean any repayments or prepayments (whether voluntary or involuntary) of
principal in any given Fiscal Year (regardless of whether the borrower is
permitted or obligated to make the same) to the extent that any such repayments
or prepayments exceed the principal amount, if any, that would have been payable
during such Fiscal Year pursuant to the terms of such indebtedness.
"Renewal Term(s)" shall have the meaning ascribed to it in
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Section 4.01.
"Replacement Debt" shall mean that portion of any indebtedness Owner
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incurs on commercially reasonable terms (i) to refinance part or all of the
original principal amount of the Permanent Loan or part or all of the then
outstanding balance of other Qualified Debt, plus (ii) to finance the reasonable
costs of any refinancings in clause (i) above but not in excess of 2% of the
principal amount of such refinancing.
"Sale of an Inn" or "Sale of the Inns" shall mean any sale,
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assignment, transfer or other disposition, for value or otherwise, voluntary or
involuntary, of the fee simple title (or leasehold interest, as the case may be)
to one or more of the Inns.
"Seller" shall mean Marriott and each other "Seller" under the
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Purchase Agreement.
"Site" or "Sites" shall refer individually or collectively to the
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parcels of land whose addresses are set forth on Exhibit A attached hereto and
incorporated herein.
"Stipulated Debt Service" shall mean $15,940,995.
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"System Fee" shall mean an annual amount payable to Management
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Company, to pay for a portion of the Inns' share of certain costs and expenses
benefitting all Fairfield Inn properties incurred by Management Company,
Marriott or Marriott Affiliates as described in Section 5.01B. Such amount
shall be equal, during any given Fiscal Year (or portion thereof), to three
percent (3%) of Gross Revenues for each Fiscal Year (or portion thereof). The
System Fee shall be paid as provided in Article V.
"Termination" shall mean the expiration or sooner cessation of this
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Agreement with respect to a specific Inn or all the Inns.
"Uniform System of Accounts" shall mean the Uniform System of Accounts
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for Hotels, Eighth Revised Edition, 1986, as published by the Hotel Association
of New York City, Inc.
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"Working Capital" shall mean funds which are reasonably necessary for
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the day-to-day operation of the Inns' 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.
END OF ARTICLE I
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ARTICLE II
APPOINTMENT OF MANAGEMENT COMPANY
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2.01 Appointment
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Owner hereby appoints and employs Management Company as Owner's
exclusive agent to supervise, direct and control the management and operation of
the Inns for the term provided in Article IV. Management Company accepts said
appointment and agrees to manage the Inns as Fairfield Inns during their
respective Inn Terms and in accordance with the terms and conditions hereinafter
set forth. The performance of all activities by Management Company hereunder
shall be for the account of Owner. Management Company may not delegate its
duties hereunder except to a Marriott Affiliate which satisfies the requirements
of Section 18.01 A 1 hereof. Management Company represents and warrants that it
possesses the resources necessary to fulfill its obligations under this
Agreement. Marriott covenants that it and/or Marriott Affiliates will make
available to Management Company any and all resources possessed by Marriott
and/or Marriott Affiliates, but not otherwise possessed by Management Company,
necessary for Management Company to fulfill its obligations hereunder.
2.02 Delegation of Authority
-----------------------
The operations of the Inns shall be under the exclusive supervision
and control of Management Company which, except as otherwise specifically
provided in this Agreement, shall be
[Page 22 missing]
withdrawal or revocation have been exhausted; (iii) Management Company has made
every reasonable effort to obtain a substitute license or permit that would
allow for the continued operation of such Inn as a Fairfield Inn; and (iv) such
revocation is not common with other economy hotels in the same market area.
2.04 Non-Discrimination
------------------
The parties recognize that Management Company, Marriott and Marriott
Affiliates either own or manage other hotels and inns. Certain of these hotels
and inns, now or in the future, may be located within the general geographical
area of one or more of the Inns. Management Company, Marriott and Marriott
Affiliates shall institute reasonable internal controls and procedures to ensure
that no favoritism shall be accorded to such other hotels or inns owned or
managed by Management Company, Marriott, or a Marriott Affiliate on the basis of
the ownership or management thereof and that, at all times during the term of
this Agreement, Management Company, Marriott and Marriott Affiliates will
operate the various hotels or inns under its management, including the Inns, in
a non-discriminatory manner.
END OF ARTICLE II
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ARTICLE III
OWNERSHIP OF THE INNS
---------------------
3.01 Ownership of Inns
-----------------
A. Owner hereby covenants that, upon the acquisition of each of the
Inns pursuant to the Purchase Agreement, it will, have, keep and maintain good
and marketable title to the respective fee or leasehold interests in each Inn,
free and clear of any and all liens, encumbrances or other charges, except as
follows:
1. Easements or other encumbrances (other than those
described in subsections 2, 3 and 4 hereof) which do not adversely affect the
operation of any Inn by Management Company, including, without limitation, any
encumbrances or other defects of title subject to which title was conveyed to
Owner under the terms of the Purchase Agreement;
2. Mortgages, deeds of trust or similar security instruments
which contain a provision reasonably acceptable to Management Company's counsel
that this Agreement will not be subject to forfeiture or Termination other than
in accordance with the terms hereof, notwithstanding a default under such
mortgage, deed of trust or security instrument; and which either (i) secure one
of the following: (x) any indebtedness on which all or a portion of the payments
constitute Qualifying Debt Service, or (y) debt incurred for distribution to the
Partners of Owner, or (ii) secure any amount due under the Loan Agreement.
3. Liens for taxes, assessments, levies or other public
charges not yet due or which are being contested in good faith;
4. Liens, encumbrances, or other charges resulting from
Management Company's acts; and
5. The terms and conditions of the Ground Leases.
B. Provided Management Company is not in monetary default under
this Agreement, Owner shall pay and discharge, on or before the due date, any
and all installments of principal and interest due and payable upon any
mortgage, deed of trust or like instrument described in this Section (including,
without limitation, any amounts owed under the Loan Agreement) and shall
indemnify Management Company from and against all claims, litigation and damages
arising from the failure to make such payments as and when required.
Notwithstanding the foregoing, Owner shall not be required to indemnify
Management Company for lost profits if the reason for failure to pay and
discharge amounts due under any instrument described in this section is due to
insufficient Operating Profits to make such payments.
3.02 Compliance with Ground Leases
-----------------------------
So long as Management Company is not wrongfully withholding any money
from Owner and no other monetary "event of default" by Management Company has
occurred and is
-13-
continuing, Owner agrees to pay all rental due under the Ground Leases. Owner
and Management Company shall abide by all the terms and conditions of the Ground
Leases and shall not take any or fail to take any action which would result in a
default of the tenant under the Ground Leases provided Management Company shall
have no obligation to pay rent or other monetary obligations of tenant under the
Ground Leases.
END OF ARTICLE III
-14-
ARTICLE IV
TERM
----
4.01 Term
----
A. The term of this Agreement shall be from the Effective Date to
the expiration of the Inn Term (as defined in subsection B below) for the last
Inn to which this Agreement applies.
B. With respect to each Inn, the "Inn Term" shall consist of an
"Initial Term" and the "Renewal Term(s)". The "Initial Term" shall begin on the
Effective Date (or, as to a Development Inn, on the purchase date of such
Development Inn), and shall continue until December 31, 2009. Each Inn Term
will automatically be extended and renewed (on the same terms and conditions
contained herein, except as set forth in the final sentence of this Section
4.01B) for each of five (5) successive periods of ten (10) Fiscal Years each
("Renewal Terms") and one period of five (5) Fiscal Years, provided that an
"event of default" by Management Company has not occurred under Section 16.01
hereof (or, if such an "event of default" has occurred, that it is being cured
in accordance with the provisions of Section 16.01 or 16.02 hereof) unless
Management Company, at its option, elects to terminate this Agreement as to any
or all of the Inns as set forth below. If Management Company elects to exercise
such option to terminate this Agreement, as to one or more of the Inns, on the
expiration of the then current Inn Term with respect to such Inn or Inns,
Management Company shall give Owner written notice to that effect at least
eighteen (18) months prior to the expiration of the then current Inn Term with
respect to such Inn or Inns. Management Company shall continue to manage such
Inn or Inns during the final eighteen (18) months of their respective Inn Terms,
unless, during such eighteen (18) month period, Owner effects a sale of such Inn
or Inns or secures a new manager therefor, in which case the respective Inn
Terms of such affected Inns shall be prematurely terminated, as of the date of
such sale or the effective date of such new management contract. In the event
Management Company elects to terminate as to one or more, but not all, of the
Inns, the adjustments described in subsections B through F of Section 19.02
shall be made to this Agreement.
4.02 Performance Termination
-----------------------
A. Subject to the provisions of Section 4.02 B below, Owner shall
have the option to terminate this Agreement with respect to all of the Inns if
the sum of the Operating Profit for all of the Inns during any three (3)
consecutive Fiscal Years during the term of this Agreement (not including any
period of time before the expiration of the 1992 Fiscal Year) does not equal or
exceed eight percent (8%) of the sum total for the same three (3) Fiscal Years
of (i) the original total cost ($239,127,000) of the Inns, as adjusted for any
Termination, added once for each of such three (3) Fiscal Years, plus (ii) the
weighted average outstanding balance of Additional Inn Investments with
respect to the Inns, added once for each of such three (3) Fiscal Years. Such
option to terminate shall
-15-
be exercised by serving written notice thereof on Management Company no later
than sixty (60) days after the receipt by Owner of the annual accounting under
Section 9.01 hereof for such third consecutive Fiscal Year. Such notice shall
state the basis on which Owner asserts the right of termination and shall show
all mathematical calculations constituting the basis therefor. If Management
Company does not elect to avoid termination pursuant to Section 4.02 B below,
this Agreement shall terminate as of the end of the second full Accounting
Period following the date on which Management Company receives Owner's written
notice of its intent to terminate this Agreement. Owner's failure to exercise
its right to terminate this Agreement pursuant to this Section 4.02 A during any
given Fiscal Year shall not be deemed an estoppel or waiver of Owner's right to
terminate this Agreement as to subsequent Fiscal Years to which this Section may
apply.
B. Upon receipt of Owner's written notice of termination under
Section 4.02 A, Management Company shall have the option, to be exercised within
sixty (60) days after receipt of said notice, to avoid such termination by
advancing to Owner the amount of any deficiency described in Section 4.02 A, and
upon paying such deficiency, Management Company shall be deemed to have
satisfied the test described in Section 4.02 A for such three (3) year period.
If Management Company exercises such option, then the foregoing Owner's election
to terminate this Agreement under Section 4.02 A shall be cancelled and be of no
force or effect, and this Agreement shall not terminate. All advances of up to
$10 million of any deficiencies to Owner pursuant to this Section 4.02 B shall
become "Contingent Incentive Management Fees." Such cancellation, however,
shall not affect the right of Owner, as to subsequent Fiscal Years to which
Section 4.02 A applies, to again elect to terminate this Agreement pursuant to
the provisions of Section 4.02 A (which subsequent election shall again be
subject to Management Company's rights under this Section 4.02 B). If
Management Company does not exercise its option to make the advance permitted by
this Section 4.02 B, then this Agreement shall be terminated as of the date set
forth in Section 4.02 A.
4.03 Actions to be Taken on Termination
----------------------------------
Upon a Termination of this Agreement with respect to any one or more
of the Inns, the following shall be applicable:
A. Management Company shall prepare a final accounting statement
with respect to such Inn or Inns, as more particularly described in Section 9.01
hereof, dated as of the date of Termination. Within thirty (30) days of 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 a default by either party, in which case
the defaulting party shall pay such cost.
B. Management Company shall release and transfer to Owner any of
Owner's funds which are held or controlled by Management Company with respect to
such Inn or Inns.
-16-
C. Management Company shall make available to Owner such books,
records and other documents respecting such Inn or Inns (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 such Inn or Inns for the
year in which the Termination occurs and for any subsequent year.
D. Management Company shall (to the extent permitted by law) assign
to Owner or to the new manager all operating licenses and permits for such Inn
or Inns which have been issued in Management Company's name; provided that if
Management Company has expended any of its own funds in the acquisition of any
of such licenses or permits, Owner shall reimburse Management Company therefor
if it has not done so already.
E. Appropriate adjustments shall be made regarding the application
of this Agreement to any remaining Inns, such as, but not limited to, those
adjustments described in Section 19.02. In the event of Termination for any
reason other than a sale of such Inn or Inns or as a result of an "event of
default" by Owner hereunder, the adjustments described in Section 19.02 shall be
made with respect to the remaining Inns, and Owner shall be released from all
further obligations hereunder with respect to the terminated Inn or Inns.
F. Various other actions shall be taken, as described in this
Agreement, including, but not limited to, the actions described in
Sections 7.01, 10.02, 12.03 and 14.01 C.
G. Management Company shall peacefully vacate and surrender such
Inn or Inns to Owner and cooperate with Owner and the new manager after the
Termination.
4.04 Pre-Closing Termination.
------------------------
A. Owner may terminate this Agreement if it elects, pursuant to
Section 2.06 of the Purchase Agreement, to terminate the transactions
contemplated therein. Should Owner elect to terminate the transactions
contemplated in such Purchase Agreement only with respect to certain Inns, Owner
may terminate this Agreement with respect to such Inns. In such case, the
adjustments and actions described in this Agreement for the termination of this
Agreement with respect to one Inn or the sale of one Inn shall be made (with
such adjustments being made as of the date of the distribution to the Partners
of Owner of the amounts received by Owner in connection therewith).
B. On the Effective Date (or, as to a Development Inn, on the
purchase date of such Development Inn), Manager shall deliver to Owner a
certificate stating, if true, that there are no covenants or restrictions which
would prohibit or materially limit Management Company from operating any Inn as
a Fairfield Inn, including material facilities customarily a part of or related
to a Fairfield Inn (or, if not true, stating the extent to which it is not
true). If on the Effective Date (or, as to a Development Inn, on the purchase
date of such Development Inn) there are any covenants or restrictions which
would prohibit or materially limit Management Company from operating any Inn as
a Fairfield Inn, including material facilities customarily a part of or related
to a Fairfield Inn,
-17-
either party may terminate this Agreement as to such Inn. In such case, the
adjustments and actions described in this Agreement for the termination of this
Agreement with respect to one Inn or the sale of one Inn shall be made.
END OF ARTICLE IV
-18-
ARTICLE V
COMPENSATION OF MANAGEMENT COMPANY
----------------------------------
5.01 Management Fees and System Fee
------------------------------
A. In consideration of services to be performed during the term of
this Agreement, Management Company shall, subject to the provisions of this
Article V, be paid the Base Management Fee and the Incentive Management Fee to
cover services which benefit all Fairfield Inn properties operated by Management
Company, are performed by personnel not normally located at the Inn and are not
Chain Services (whether or not such services are obtained from Management
Company's employees or through third party contractors). Such services include
but are not limited to corporate and divisional executive management, divisional
financial services (excluding certain accounting services included as "Chain
Services"), corporate accounting services, manpower planning, recruiting and
hiring for all Fairfield Inn management positions, management training for
Management Company operated inns, regional management and administrative
services, services of Management Company's technical and operational experts
making periodic inspection and consultation visits to the Inns (excluding visits
for personnel of the Architectural and Construction division of the Management
Company or its affiliates).
[Page missing]
Base Management Fee for such Fiscal Year (or all Accounting Periods to
date in such Fiscal Year) that is required to be paid currently shall be reduced
by the amount of the shortfall in Owner's Net Cash Flow (and such reduction
shall be made before any reduction of Ground Rent as a result of the operation
of Section 4.02(d) of the Ground Leases); provided, however, that such reduction
in the Base Management Fee shall not exceed an amount equal to (a) the maximum
available amount remaining under the Development Fee Adjustment mechanism at the
time of its expiration pursuant to Section 2.10 of the Purchase Agreement (but
in no event greater than $8,000,000), minus (b) the total amount of Base
Management Fees and Ground Rent that is not paid currently during such four (4)
Fiscal Year period as a result of the operation of this Section 5.01D and
Section 4.02(d) of the Ground Leases, respectively. Within forty (40) days
after the end of each Fiscal Year, Owner and Management Company shall make any
necessary adjustments in the amount of Base Management Fee reductions required
hereunder based upon the entire Fiscal Year. Any Base Management Fees which are
not paid currently as a result of the operation of this Section 5.01D shall be
payable, without adjustment for interest, as provided in Section 5.03 hereof.
-19-
5.02 Incentive Management Fees
-------------------------
Any Incentive Management Fee and Contingent Incentive Management Fee
the payment of which is based on Operating Profit shall, in each Fiscal Year
(and with respect to each Accounting Period within each such Fiscal Year, as
more particularly described in Section 5.05 hereof), be payable in accordance
with the following sequence of computations, and no Incentive Management Fee
shall be paid until sufficient Operating Profit is available for actual payment
thereof:
A. First, Owner shall retain any Operating Profit (to the extent of
Operating Profit in that Fiscal Year) in amounts sufficient to pay the Ground
Rent payable after giving effect to Section 4.02(d) of the Ground Leases, the
Qualifying Debt Service and Administrative Expenses for such Fiscal Year (which
shall be prorated among the Accounting Periods within any given Fiscal Year).
B. Second, Owner shall retain any remaining Operating Profit until
Owner has retained an amount equal to Owner's Priority Return (which shall be
prorated among the Accounting Periods within any given Fiscal Year).
C. Third, Owner shall retain any remaining Operating Profit in
amounts necessary to repay any outstanding Limited Debt Service Guarantee
Advances and accrued interest thereon.
D. Fourth, Owner shall retain any and all such additional amounts
as Owner is required pursuant to the terms of the Permanent Loan to pay prior to
payment of Incentive Management Fees and Contingent Incentive Management Fees
hereunder.
E. Fifth, Owner shall retain fifty percent (50%) of any remaining
Operating Profit for such Fiscal Year (which shall be prorated among the
Accounting Periods within any given Fiscal Year).
F. Sixth, Owner shall apply the remaining fifty percent (50%) of
Operating Profit for such Fiscal Year (or portion thereof) ("Cash Flow Available
for Incentive Management Fee") to pay Management Company the Incentive
Management Fee for the current Fiscal Year. Notwithstanding anything herein to
the contrary, in the event Cash Flow Available for Incentive Management Fee is
insufficient to pay the full Incentive Management Fee for any Fiscal Year (or
portion thereof) ending before or nearest December 31, 1992, such unpaid
Incentive Management Fee shall never be paid. In the event Cash Flow Available
for Incentive Management Fee is insufficient to pay the full Incentive
Management Fee for any Fiscal Year beginning thereafter, such unpaid Incentive
Management Fee shall be payable subsequently, without adjustment for interest,
as a "Contingent Incentive Management Fee" pursuant to this Article V.
Following application pursuant to the above to pay the Incentive Management Fee
for the current year, Owner shall apply any remaining balance of Cash Flow
Available for Incentive Management Fee to pay Management
-20-
Company any Contingent Incentive Management Fees then owed to Management
Company. Upon termination of this Agreement with respect to an Inn or Inns due
to a default of Management Company or if Management Company fails to renew the
Term with respect to such Inn or Inns, Management Company shall not be entitled
to receive payment of any Contingent Incentive Management Fee with respect
thereto.
G. Seventh, following application pursuant to paragraph F above,
Owner shall retain any remaining balance of Cash Flow Available for Incentive
Management Fee.
5.03 Application of Capital Proceeds
-------------------------------
In the event that Owner, from time to time during the term of this
Agreement, realizes Capital Proceeds, then Owner shall apply such Capital
Proceeds (to the extent thereof) in the following order and amounts:
(1) First, to pay transaction costs of the sale or refinancing and
other amounts excluded from gross proceeds in determining Capital Proceeds.
(2) Second, Owner shall retain any remaining balance of Capital
Proceeds until Owner has retained an amount equal to any unamortized payments
(and return thereon) under Section 8.02E3 hereof;
(3) Third, Owner shall retain any remaining balance of such Capital
Proceeds until Owner has retained from appropriate sources an amount equal to
Owner's 12% Priority and Capital Return.
(4) Fourth, Owner shall retain any remaining balance of Capital
Proceeds until Owner has retained an amount equal to any outstanding Limited
Debt Service Guarantee Advances (and accrued interest thereon).
(5) Fifth, Owner shall retain any remaining balance of Capital
Proceeds until Owner has retained an amount equal to any Ground Rent remaining
unpaid as a result of the operation of Section 4.02(d) of the Ground Leases.
-21-
(6) Sixth, Owner shall apply any remaining balance of Capital
Proceeds to pay to Management Company an amount equal to any Base Management
Fees remaining unpaid as a result of the operation of Section 5.01D hereof.
(7) Seventh, Owner shall apply the remaining balance of Capital
Proceeds to pay to Management Company any Incentive Management Fees or
Contingent Incentive Management Fees then owed to Management Company.
(8) Eighth, Owner shall retain any remaining balance of Capital
Proceeds.
5.04 Debt Service Payment
--------------------
In the event (i) Owner's actual scheduled debt service on the
principal amount of Owner's indebtedness secured by one or more of the Inns is
in excess of Qualifying Debt Service for any Fiscal Year (or portion thereof)
during the Inn Term, (ii) but for the provisions of this Section 5.04,
Management Company is entitled to receive pursuant to Section 5.02 all or a
portion of the Incentive Management Fee for such Fiscal Year (or portion
thereof), and (iii) the total amount retained by Owner pursuant to Sections
5.02A and 5.02B for such Fiscal Year (or portion thereof) is less than the sum
of the actual debt service described in clause (i) above, plus the Owner's
Administrative Expenses and plus the Ground Rent, then Management Company shall
not be entitled to current payment of such portion of its Incentive Management
Fee for such Fiscal Year (or portion thereof) up to an amount equal to the
excess of said sum over the total amount retained by Owner pursuant to Sections
5.02A and 5.02B for such Fiscal Year (or portion thereof). Owner shall use such
amount otherwise allocated to Incentive Management Fee to pay said actual debt
service. Such portion of the Incentive Management Fee shall become a Contingent
Incentive Management Fee.
5.05 Accounting and Interim Payment
------------------------------
A. Within twenty (20) days after the close of each Accounting
Period, Management Company shall submit an interim accounting to Owner showing,
in reasonable detail, the amount (and calculation where appropriate) of Gross
Revenues, Deductions, FF&E Reserve contributions and expenditures, Operating
Profit, Ground Rent, Cash Flow Available for Incentive Management Fee and (with
respect to 1993 through 1996) Owner's Net Cash Flow, and all retentions,
distributions and other applications thereof with respect to the Inns.
Management Company shall transfer with each accounting any interim amounts due
Owner and shall retain any interim management fees due Management Company (as
described in this Article V). Each accounting will be prepared on a consolidated
basis rather than on an individual Inn basis. Management Company shall also
prepare an accounting showing Gross Revenues, Deductions and Operating Profit on
an individual Inn basis.
B. Calculations and payments of the Base Management Fee, System
Fee, the Incentive Management Fee, the Contingent Incentive Management Fee, and
applications of
-22-
Operating Profit made with respect to each Accounting Period within a Fiscal
Year shall be accounted for cumulatively. Within sixty (60) days after the end
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 by
the Fiscal Year accounting shall be made by cash payments within five (5)
business days of the receipt by Owner of such final accounting. No adjustment
shall be made for any Operating Loss in a preceding or subsequent Fiscal Year.
C. Within twenty (20) days after the closing of a refinancing or a
sale of one or more of the Inns, Owner will provide Management Company an
accounting showing Owner's Priority Return and Owner's 12% Priority and Capital
Return, Net Sales Proceeds, and Net Refinancing Proceeds (as the case may be).
D. Within twenty (20) days after the close of each Accounting
Period, Owner will provide Management Company an accounting showing Owner's
Priority Return, the balance of any principal and interest of Debt Service
Guarantee Advances, and Net Contributed Capital.
END OF ARTICLE V
-23-
ARTICLE VI
PRE-OPENING
-----------
6.01 Pre-Opening Services
--------------------
It is recognized that certain activities must be undertaken so that
the Development Inns can function properly at their Opening Dates as defined in
the Purchase Agreement. Accordingly, Management Company shall on behalf of
Owner:
A. Recruit, train and employ the staff required for the Development
Inn;
B. Undertake pre-opening promotion and advertising, including
opening celebrations;
C. Provide, for a period to end not later than sixty (60) days from
the Opening Date, a task force of experts and personnel to supervise and assist
with certain pre-opening and opening operations;
D. Obtain and maintain the initial licenses and permits required
for the operation of the Development Inns as contemplated by this Agreement;
E. In general, render such other miscellaneous services incidental
to the preparation and organization of the Development Inns' operations as may
be required for the Development Inns to be adequately staffed and capable of
operating at the Opening Dates. The expenses relating to such activities shall
include, but not be limited to, salaries and wages (including those of personnel
of Management Company and Marriott Affiliates), professional fees, telephone
expenses, staff hiring and training costs, travel and moving expenses, costs of
opening celebrations, the cost of heat, light and power not chargeable to the
cost of constructing or operating the Development Inns, advertising and
promotion expense, and miscellaneous expenses.
6.02 Responsibility for Pre-Opening Expenses
---------------------------------------
The expenses for the activities outlined in Section 6.01 shall be
borne by Seller in accordance with the Purchase Agreement and in accordance with
the above, or as otherwise requested by Management Company. Pre-opening
expenses incurred or paid by Management Company promptly shall be reimbursed by
Seller upon receipt of a statement of account for such Pre-opening expenses.
END OF ARTICLE VI
-24-
ARTICLE VII
WORKING CAPITAL AND FIXED ASSET SUPPLIES
----------------------------------------
7.01 Working Capital and Inventories
-------------------------------
The parties recognize that Seller shall sell to Owner, who shall in
turn provide to Management Company, as agent, the initial Working Capital and
Inventories for the Inns. Management Company believes that the level of initial
Working Capital so provided should be reasonably sufficient for each Inn to
operate as a fully functioning Fairfield Inn as of the Effective Date (or in the
case of the Development Inns, as of the their purchase dates) and for a period
of at least six (6) months thereafter. Owner shall from time to time thereafter
promptly advance, upon request of Management Company, any additional funds
necessary to maintain Working Capital and Inventories at levels reasonably
determined by Management Company to be necessary to satisfy the needs of each
Inn as its operation may from time to time require. Funds so advanced for
Working Capital shall be utilized by Management Company on behalf of Owner for
the purposes of this Agreement pursuant to cash-management policies established
for the Fairfield Inn system, but Owner shall be the beneficial owner of all
such funds throughout the term of this Agreement. Upon Termination with respect
to any Inn or Inns, Management Company shall return to Owner any unused Working
Capital (including Inventories), except for Inventories purchased by Management
Company pursuant to Section 10.02.
7.02 Fixed Asset Supplies
--------------------
The parties recognize that Seller shall sell to Owner, who shall in
turn provide to Management Company, as agent, the initial Fixed Asset Supplies
for the Inns. Management Company believes that the level of initial Fixed Asset
Supplies so provided should be reasonably sufficient for each Inn to operate as
a fully functioning Fairfield Inn hotel as of the Effective Date (or in the case
of the Development Inns, as of their purchase dates) and for a period of at
least six (6) months thereafter. Owner shall from time to time thereafter
promptly advance, upon request of Management Company, any additional funds
necessary to maintain Fixed Asset Supplies at levels reasonably determined by
Management Company to be necessary to satisfy the needs of each Inn as its
operation may from time to time require. Fixed Asset Supplies shall remain the
property of Owner throughout the term of this Agreement except for Fixed Asset
Supplies purchased by Management Company pursuant to Section 10.02.
END OF ARTICLE VII
-25-
ARTICLE VIII
REPAIRS, MAINTENANCE AND REPLACEMENTS
-------------------------------------
8.01 Routine Repairs and Maintenance
-------------------------------
Management Company shall maintain the Inns in good repair and
condition and in conformity with applicable laws and regulations and shall make
or cause to be made such routine maintenance, repairs and minor alterations, the
cost of which can be expensed under generally accepted accounting principles, as
it, from time to time, deems reasonably 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 an Inn building or its FF&E,
shall be paid for in the manner described in Sections 8.02 and 8.03.
8.02 FF&E Reserve
------------
A. Management Company shall establish an escrow reserve account for
the Inns ("FF&E Reserve") in a bank designated by Owner and approved by
Management Company to cover the cost of:
1. Replacements and renewals related solely to the Inns' FF&E; and
2. Certain routine repairs and maintenance to the Inns' buildings
which are normally capitalized under generally accepted accounting principles,
such as exterior and interior repainting, resurfacing building walls, floors,
roofs and parking areas, and buying or leasing replacement vehicles, but which
are not major repairs, alterations, improvements, renewals or replacements to
such building's structure or to its mechanical, electrical, heating,
ventilating, air conditioning, plumbing or vertical transportation systems, the
cost of which are paid by Owner under Section 8.03 rather than from the FF&E
Reserve.
B. During the period of time from the Effective Date up to the end
of the 1989 Fiscal Year, Management Company shall transfer into the FF&E Reserve
an amount equal to one percent (1%) of Gross Revenues from the Inns for such
period of time; during the 1990 Fiscal Year, Management Company shall transfer
into the FF&E Reserve an amount equal to two percent (2%) of Gross Revenues from
the Inns for such Fiscal Year; during Fiscal Year 1991, Management Company shall
transfer into the FF&E Reserve an amount equal to three percent (3%) of Gross
Revenues from the Inns for such Fiscal Year; during the 1992 Fiscal Year,
Management Company shall transfer into the FF&E Reserve an amount equal to four
percent (4%) of Gross Revenues from the Inns for such Fiscal Year; during the
Fiscal Year 1993, Management Company shall transfer into the FF&E Reserve an
amount equal to five percent (5%) of Gross Revenues from the Inns for such
Fiscal Year; and commencing with the Fiscal Year 1994, and for all Fiscal Years
thereafter, subject to the provisions of subsection E, below, Management Company
shall transfer into the FF&E Reserve an
-26-
amount equal to six percent (6%) of Gross Revenues from the Inns for each of
such Fiscal Years. Transfers into the FF&E Reserve shall be made at the time of
each interim accounting described in Section 5.06 A. Any amounts held in the
FF&E Reserve may be applied, as between the Inns, without regard for the source
of such amounts, provided that such application satisfies the requirements of
this Article VIII. All amounts transferred into the FF&E Reserve shall be
deducted from Gross Revenues in determining Operating Profit and deposited in
the special FF&E Reserve account described in Section 8.02 A hereof.
C. Management Company shall from time to time make such (1)
replacements and renewals to each Inn's FF&E, and (2) repairs to such Inn's
buildings of the nature described in Section 8.02 A 2, as it deems reasonably
necessary, up to the balance in the FF&E Reserve. No expenditures will be made
in excess of said balance without the prior approval of Owner. At the end of
each Fiscal Year, any amounts remaining in the FF&E Reserve shall be carried
forward to the next Fiscal Year. Proceeds from the sale of FF&E no longer
necessary to the operation of an Inn shall be deposited in the FF&E Reserve. The
FF&E Reserve will be kept in an interest-bearing account, and any interest which
accrues thereon shall be retained in the FF&E Reserve. Neither (i) proceeds
from the disposition of FF&E, nor (ii) interest which accrues on amounts held in
the FF&E Reserve, shall (a) result in any reduction in the required
contributions to the FF&E Reserve set forth in subsection B above, nor (b) be
included in Gross Revenues.
D. Management Company shall prepare an estimate ("FF&E Replacement
Estimate") of the expenditures (and time schedule) necessary for (1)
replacements and renewals to each Inn's FF&E, and (2) repairs to each Inn
building of the nature described in Section 8.02 A 2, during the ensuing Fiscal
Year and shall submit such Repairs and Equipment Estimate to Owner at the same
time it submits the Annual Operating Projection described in Section 9.03.
Management Company will consider in good faith suggestions made by Owner with
respect to the Repairs and Equipment Estimate and make appropriate modifications
thereto.
E. The percentage contributions for the FF&E Reserve described in
Section 8.02 B are estimates based upon Management Company's and Marriott
Affiliates' prior experience. As each Inn ages, these percentages either (i)
may not be sufficient to keep the FF&E Reserve at the levels necessary to make
the replacements and renewals to the FF&E of the Inns, or to make the repairs to
the Inns buildings of the nature described in Section 8.02 A 2, which are
required to maintain such Inns as Fairfield Inn properties or (ii) may be in
excess of those amounts necessary to maintain such Inns as Fairfield Inn
properties. If Management Company reasonably determines that the percentages
contained in Section 8.02 B are in excess of the amounts sufficient to maintain
the Inns as Fairfield Inn properties, then Management Company may reduce the
percentages. Management Company shall provide to Owner upon request from time
to time a report, in
-27-
reasonable detail, supporting the amount in the FF&E Reserve with respect to the
Inns and/or the percentages contained in Section 8.02B.
If the Repairs and Equipment Estimate reasonably prepared in good
faith by Management Company exceeds the available funds in the FF&E Reserve or
if Management Company reasonably determines that the percentages contained in
Section 8.02B are insufficient to maintain the Inns as Fairfield Inn properties
and Management Company requests Owner to increase the percentages, Owner will:
1. Agree to increase the annual percentage in Section 8.02 B to
provide the appropriate funds required, or
2. Arrange to obtain outside financing for the additional funds
required, in which event the principal and interest payments on such financing
shall constitute Deductions in determining Operating Profit, or
3. Provide the additional funds required, in which case such
amounts (plus interest at the Prime Rate plus one percent (1%) per annum), to
the extent not retained pursuant to Section 5.03(2), shall be retained by Owner
from Gross Revenues as if it were a repayment on an interest bearing loan in
equal installments over the period of the next sixty-five (65) Accounting
Periods. Such periodic amounts shall be treated as Deductions.
A failure or refusal by Owner to agree to either 1, 2 or 3 above
within a sixty (60) day period after Management Company's request therefor shall
entitle Management Company, within sixty (60) days after such failure or
refusal, to notify Owner that it will terminate this Agreement, as to those Inns
as to which agreement was not reached, as of a date nine (9) months after the
date of Management Company's notice of termination. If Owner subsequently does
either 1, 2 or 3 above within nine (9) months after Management Company notifies
Owner of its intention to terminate this Agreement, this Agreement shall not be
terminated and Management Company shall continue to manage the Inns in question.
If Management Company does not so notify Owner, it shall continue to manage the
Inns in question, as provided under this Agreement, without the aforesaid
increase in the percentage contribution to the FF&E Reserve.
F. Upon Termination of this Agreement with respect to any one or
more of the Inns, whether pursuant to 8.02 E above or pursuant to other
provisions of this Agreement, a portion of the FF&E Reserve shall be released
from the FF&E Reserve and paid to Owner; such portion shall be computed by
multiplying the amount then in the FF&E Reserve by a fraction, the numerator of
which shall be the Gross Revenues attributable to the Inn or Inns which are the
subject of Termination for the most recently concluded Fiscal Year and the
denominator of which shall be all Gross Revenues for the same Fiscal Year.
G. With the exception of any furniture or equipment leases which
are in effect on the Effective Date and with the exception for telephone
equipment, if Management Company
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elects to lease rather than purchase any FF&E which is customarily purchased in
the Fairfield Inn system with monies from the FF&E Reserve, the lease payments
for such FF&E shall be made from the FF&E Reserve.
8.03 Building Alterations, Improvements, Renewals, and Replacements
--------------------------------------------------------------
A. Management Company shall prepare an annual estimate of the
expenses for necessary major repairs, alterations, improvements, renewals and
replacements (which repairs, alterations, improvements, renewals and
replacements are not among those referred to in Section 8.02 A 2 and are not
expansions) to the structural, mechanical, electrical, heating, ventilating, air
conditioning, plumbing or vertical transportation elements of each Inn building
("Building Estimate") and shall submit such Building Estimate to Owner for its
approval at the same time the Annual Operating Projection is submitted. The
Building Estimate shall be prepared on a consolidated basis showing proposed
expenditures as to each Inn. Management Company shall not make any expenditures
for such purposes until the Building Estimate is approved by Owner; provided
that if major repairs, alterations, improvements, renewals or replacements to
any Inn are required by reason of any law, ordinance, regulation or order of a
competent government authority (after exhausting any appeals), or are otherwise
reasonably required for the continued safe and orderly operation of such Inn,
Management Company shall immediately give Owner notice thereof and shall be
authorized (but not obligated) to take appropriate remedial action without such
approval if Owner does not act; provided further that Management Company shall
in no event act without obtaining Owner's prior consent if the cost of such
remedial action exceeds, for any given Inn: (i) during the first partial and
full Fiscal Years of this Agreement, One Hundred Thousand Dollars ($100,000); or
(ii) during all subsequent Fiscal Years, four percent (4%) of the Inn's annual
Gross Revenues. Owner shall bear the cost of all such alterations,
improvements, renewals or replacements by either:
1. Providing financing for the additional funds required, in which
event the principal and interest payments on such financing shall constitute
Additional Inn Investment Loans and be included in Qualifying Debt Service, or
2. Providing the additional funds required, which amounts shall be
treated as Additional Inn Investments hereunder.
B. If Owner does not approve the Building Estimate as to one or
more or all of the Inns within sixty (60) days after it has been submitted,
Management Company may, within sixty (60) days after the end of said sixty-day
period, notify Owner that it will terminate this Agreement as to those Inns as
to which agreement was not reached as of a date nine (9) months after the date
of Management Company's notice of termination. If Owner subsequently approves
the Building Estimate within nine (9) months after Management Company notifies
Owner of its intention to terminate this Agreement, this Agreement shall not be
terminated and Management Company shall
-29-
continue to manage the Inns in question. If Management Company does not so
notify Owner, it shall continue to manage the Inns in question, as provided
under this Agreement, without making any expenditures in the Building Estimate
that were not approved. The provisions of this subsection 8.03B shall not apply
to requests from Management Company to expand any Inn.
8.04 Liens
-----
Management Company and Owner shall use their reasonable best efforts
to prevent any liens from being filed against any Inn which arise from any
maintenance, repairs, alterations, improvements, renewals or replacements in or
to such Inn. 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 of the matter to which it
relates. 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 repairs, alterations, improvements, renewals or replacements made
pursuant to Article VIII, and all amounts kept in the FF&E Reserve, shall be the
property of Owner.
END OF ARTICLE VIII
-30-
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
all material respects in accordance with the Uniform System of Accounts, 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 after the end of each Fiscal Year, Management Company shall
furnish Owner a statement in reasonable detail summarizing the operations of the
Inns for such Fiscal Year and a certificate of Management Company's chief
accounting officer certifying that such year-end statement is true and correct.
The parties shall, within ten (10) business days after the receipt of such
statement, make any adjustments, by cash payment, in the amounts paid or
retained for such Fiscal Year as are needed because of the final figures set
forth in such statement or send a notice of dispute setting forth the
calculation in reasonable detail. If Owner desires, at its own expense, to
audit such statement and supporting records, Owner shall begin such audit within
ninety (90) days following its receipt of such statement and shall complete such
audit within ninety (90) days thereafter. The cost of such audit shall not be
treated as a Deduction. If Owner does not make an audit, then such statement
shall be deemed to be conclusively accepted by Owner as being correct, and Owner
shall have no right thereafter, except in the event of fraud by Management
Company or as provided in Section 9.01B, to question or examine the same. If
any audit by Owner discloses an understatement of any amounts due Owner,
Management Company shall promptly pay Owner such amounts found to be due, plus
interest thereon (at the Prime Rate plus one percentage point (1%) per annum)
from the date such amounts should originally have been paid. If, however, the
audit discloses that Management Company has not received any amounts due it,
Owner shall pay Management Company such amounts, plus interest thereon (at the
Prime Rate plus one percentage point (1%) per annum) from the date such amounts
should originally have been paid. If Owner disputes the accuracy of such audit,
Owner shall give written notice of such dispute to Management Company setting
forth the dispute in reasonable detail. Any further dispute concerning the
correctness of an audit not settled by Owner and Management Company shall be
settled by arbitration, in accordance with the then current rules of the
American Arbitration Association.
B. If Owner's audit discloses an error in the total payment of
amounts due Owner for any Fiscal Year so audited that is in excess of five
percent (5%), Management Company shall pay for the cost of Owner's audit. In
addition, in such event, Owner may audit the statements of Inn operations and
supporting records at Management Company's expense for the three (3)
-31-
preceding Fiscal Years. The costs of such audits shall not be treated as a
Deduction. Any error or dispute with respect thereto shall be handled as set
forth in Section 9.01A.
C. All statements shall be prepared on a consolidated basis rather
than on an individual Inn basis; however to the extent Management Company
prepares them for its own internal purposes, Management Company shall, on
Owner's written request, furnish Owner with copies of unaudited statements
prepared for each Inn separately.
9.02 Accounts, Expenditures
----------------------
A. All funds derived from operation of the Inns shall be deposited
by Management Company, in accordance with Management Company's cash management
procedures, in bank account(s) in a financial institution(s) designated by
Management Company. Withdrawals from said account(s) shall be made by
representatives of Management Company whose signatures have been authorized.
Reasonable ▇▇▇▇▇ cash funds shall be maintained at each Inn.
B. All payments made by Management Company hereunder shall be made
from authorized bank accounts, ▇▇▇▇▇ cash funds, or from Working Capital
provided pursuant to Section 7.01. 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. Debts and liabilities incurred by
Management Company as a result of its operation and management of the Inns
pursuant to the terms hereof, whether asserted before or after the Termination
of this Agreement, will be paid by Owner to the extent funds are not available
for that purpose from the operation of the Inns.
9.03 Annual Operating Projection
---------------------------
Management Company shall submit to Owner for its review thirty (30)
days after the beginning of each Fiscal Year after the Effective Date an "Annual
Operating Projection." Such projection shall project, on a consolidated and
consolidating basis, the estimated average daily room rates, average occupancy,
Gross Revenues, departmental profits, Deductions, and Operating Profit for the
forthcoming Fiscal Year for the Inns, taking into account each Inn's market
area. Management Company shall use its reasonable best efforts to adhere to the
Annual Operating Projection. It is understood, however, that the Annual
Operating Projection is an estimate only and that unforeseen circumstances such
as, but not limited to, the costs of labor, material, services and supplies,
casualty, operation of law, or economic and market conditions may make adherence
to the Annual Operating Projection impracticable, and Management Company shall
be entitled to depart therefrom due to causes of the foregoing nature.
9.04 Operating Losses; Credit
A. To the extent there is an Operating Loss for any Accounting
Period, additional funds in the amount of any such deficiency shall be provided
by Owner within twenty (20)
-32-
days after Management Company has given written notice to Owner of such
Operating Loss. If Management Company elects not to so notify Owner or if Owner
does not so fund such deficiency on Management Company's request (but, in such
latter case, without affecting Management Company's other remedies under this
Agreement), Management Company shall have the right to withhold an amount equal
to such deficiency from future disbursements of funds otherwise due to Owner.
B. In no event shall either party borrow money in the name of or
pledge the credit of the other.
END OF ARTICLE IX
-33-
ARTICLE X
TRADEMARKS, TRADE NAMES AND SERVICE MARKS
-----------------------------------------
10.01 Trademarks, Trade Names and Service Marks
-----------------------------------------
A. During the term of this Agreement, each Inn shall be known as a
Fairfield Inn, with such additional identification as may be necessary to
provide local identification, and the Marriott name may be used in conjunction
therewith. Notwithstanding anything herein to the contrary, if the name of the
Fairfield Inn system is changed, Management Company shall change the name of the
Inns to conform thereto. The costs for such change shall be treated as either a
Deduction or taken from monies in the FF&E Reserve, depending on the nature of
the cost. The name "Marriott," or "Fairfield Inn" when used alone or in
connection with another word or words and the Marriott trademarks, service
marks, trade names, symbols, logos and designs shall in all events remain the
exclusive property of Marriott, and nothing contained herein shall confer on
Owner the right to use the Marriott or Fairfield Inn name, trademarks, service
marks, trade names, symbols, logos or designs otherwise than in strict
accordance with the terms of this Agreement. Except as provided in Section
10.02, upon Termination with respect to an Inn, any use of or right to use the
Marriott or the Fairfield Inn name, trademarks, service marks, trade names,
symbols, logos or designs by Owner shall cease forthwith with respect to such
Inn and Owner shall as soon as practicable remove from the Inn any signs or
similar items which contain the Marriott or the Fairfield Inn name, trademarks,
service marks, trade names, symbols, logos or designs. If Owner has not removed
such signs or similar items promptly upon Termination, Management Company shall
have the right to remain at the Inn as long as is necessary for it to do so.
B. Included under the terms of this Section are all trademarks,
service marks, trade names, symbols, logos or designs used in conjunction with
the Inns, whether or not the marks contain the "Marriott" or the "Fairfield Inn"
name. The right to use such trademarks, service marks, trade names, symbols,
logos or designs belongs exclusively to Marriott Affiliates or Management
Company, and the use thereof inures to the benefit of Marriott and/or Management
Company whether or not the same are registered and regardless of the source of
the same.
C. Upon Termination of this Agreement with respect to an Inn, if
there are any trademarks, service marks, trade names, symbols, logos or designs
which are unique to such Inn, Management Company shall, to the extent it is
capable, transfer such name(s) to Owner, without charge other than any out-of-
pocket expenses.
10.02 Purchase of Inventories and Fixed Asset Supplies
------------------------------------------------
A. Upon Termination of this Agreement, either in its entirety or
with respect to a given Inn, Management Company shall have the option, to be
exercised within thirty (30) days after Termination, to purchase, at their then
book value, (and remove from the Inn at its expense
-34-
within a reasonable time thereafter) any items of such Inn's Inventories and
Fixed Asset Supplies as may be marked with the Marriott or Fairfield Inn name or
any Marriott or Fairfield Inn trademark, trade name, symbol, logo or design. 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 the Inn
until they are consumed.
B. During the term of this Agreement, for so long as Owner is
known as Fairfield Inn by Marriott Limited Partnership (or any other name
containing the words "Marriott" or "Fairfield Inn"), Owner may use such name to
the extent necessary on its legal and business documents. Upon Termination of
this Agreement as to all of the Inns, Owner shall promptly take all necessary
steps so that its name no longer contains the words "Marriott" or "Fairfield
Inn."
10.03 Breach of Covenant
------------------
Management Company and/or its affiliated companies shall be entitled,
in case of any breach of the covenants of Article X by Owner or others claiming
through it, to injunctive relief and to any other right or remedy available at
law. Article X shall survive Termination.
END OF ARTICLE X
-35-
ARTICLE XI
POSSESSION AND USE OF THE INNS
------------------------------
11.01 Ground Leases
-------------
So long as Management Company is not wrongfully withholding any money
from Owner and so long as no other monetary event of default has occurred and is
continuing, Owner agrees to promptly pay and discharge (i) any and all rental
due and owing pursuant to the Ground Leases and (ii) any payments and charges
required to be paid thereunder and, at its expense, to prosecute all appropriate
actions, judicial or otherwise, necessary to assure Management Company's
operation of those Inns subject to Ground Leases as provided herein.
11.02 Management of the Inns
----------------------
A. Management Company shall manage each Inn under standards
comparable to those prevailing in other inns in the "Fairfield Inn" system,
including all activities in connection therewith which are customary and usual
to such an operation.
B. Unless specifically approved in writing by Owner in its sole
and absolute discretion, no gaming or gambling shall be permitted in the Inns
other than occasional use thereof for such purposes on a not-for-profit basis
and in compliance with all applicable laws.
11.03 Chain Services
--------------
Management Company will, during the term of this Agreement, cause to
be furnished to each Inn certain services ("Chain Services") which are furnished
generally on a central or regional basis to all Fairfield Inn properties in the
Fairfield Inn chain which are managed by Management Company or any Marriott
Affiliate and which benefit each such Fairfield Inn property as a participant in
the Fairfield Inn system. Chain Services shall include: (i) development and
operation of computer systems; (ii) computer payroll services; (iii) accounting
services supporting Fairfield Inn properties managed or operated by Management
Company or any Marriott Affiliate; (iv) regional engineering support; and (v)
such additional central or regional services as may from time to time be
furnished for the benefit of inns in the Fairfield Inn system or in substitution
for services now performed at individual inns which may be more efficiently
performed on a group basis. Costs and expenses incurred in the provision of such
services shall be allocated on the basis of relative Gross Revenues for the most
recently concluded Fiscal Year for all Fairfield Inn properties owned, leased or
managed by Management Company or a Marriott Affiliate in the United States
receiving the same.
11.04 Marketing Fund
--------------
Management Company will, during the term of this Agreement, maintain,
manage and administer the Marketing Fund for the benefit of all hotels in the
Fairfield Inn system. Owner will contribute to the Marketing Fund an annual
amount determined by Management Company,
-36-
such amount to be contributed on an Accounting Period basis within thirty days
after the end of each Accounting Period; provided, however, that if any
Fairfield Inn property in the system at any time shall not be required to
contribute to the Marketing Fund or is required to contribute on a basis that is
more favorable to the owner thereof than the foregoing, then the contribution to
the Marketing Fund hereunder shall be calculated and paid on the same basis as
for such other Fairfield Inn property. Funds in the Marketing Fund shall be
expended only for the purposes of the Marketing Fund. Management Company shall
furnish to Owner, upon request, an annual report setting forth the amount of
contributions to the Marketing Fund and the general breakdown of expenditures
therefrom during the preceding Fiscal Year.
11.05 Owner's Right to Inspect
------------------------
Owner or its agents shall have access to any Inn at any and all
reasonable times for the purpose of protecting the same against fire or other
casualty, prevention of damage to the Inns, inspection, making repairs, or
showing such Inns to prospective purchasers, tenants or mortgagees.
11.06 Reservations System
-------------------
Management Company will, during the term of this Agreement, maintain,
manage and administer, or cause to be maintained, managed and administered by a
Marriott Affiliate, a national reservations system for the benefit of all hotels
in the Fairfield Inn system. Such reservations system shall be comparable to
the current national reservations service and shall be accessible from the
Marriott full-service hotel reservations system. Costs and expenses incurred in
the provision of such reservations system (net of all amounts paid with respect
to the reservations system by other owners of Fairfield Inns such as
franchisees, on a basis other than relative number of reservations) shall be
allocated on the basis of relative number of reservations among all Fairfield
Inn properties in the Fairfield Inn system.
END OF ARTICLE XI
-37-
ARTICLE XII
INSURANCE
---------
12.01 Property and Operational Insurance
----------------------------------
Management Company shall, commencing with the Effective Date and
thereafter during the term of this Agreement, procure and maintain, using funds
deducted from Gross Revenues in determining Operating Profit, either with
insurance companies of recognized responsibility or by legally qualifying itself
as a self insurer in the state where the respective Inn is located, a minimum of
the insurance identified below.
A. Property insurance on each Inn building(s) and contents against
loss or damage by all perils covered by "all risk" (as such term is commonly
used in the insurance industry, excluding earthquake and flood) coverage in an
amount not less than one hundred percent (100%) of the replacement cost thereof
except that if such 100% replacement cost coverage is not available on
reasonable terms and rates, then such insurance shall be in an amount not less
than ninety percent (90%) of the replacement cost of the Inn;
B. Should an Inn be located in a zone identified by the Federal
Emergency Management Agency as a flood hazard area, flood insurance shall be
maintained in an amount not less than the maximum limit available under the
National Flood Insurance Program if required by the Owner's lender holding a
first mortgage on said Inn.
C. Insurance against loss or damage from explosion of boilers,
pressure vessels, pressure pipes and sprinklers, to the extent applicable to
each Inn;
D. 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 A through C for Management
Company's established period (but not less than one (1) year after the
occurrence) of a type and in amounts as are generally established by Management
Company at other similar inns it or Marriott Affiliates own, lease or manage
under the Fairfield Inn name in the United States;
E. General liability insurance against claims for personal injury,
death or property damage occurring on, in, or about any Inn, and automobile
liability insurance on vehicles operated in conjunction with any Inn, with a
combined single limit for each occurrence of not less than Twenty Million
Dollars ($20,000,000);
F. Workers' compensation and employer's liability insurance as may
be required under applicable laws covering all of Management Company's employees
at the Inn;
G. Fidelity bonds, with reasonable limits to be determined by
Management Company, covering its employees in job classifications normally
bonded in other similar inns it, or its Affiliates, own, lease or manage under
the Fairfield Inn name in the United States or as otherwise
-38-
required by law, and comprehensive crime insurance to the extent Management
Company and Owner mutually agree it is necessary for any Inn; and
H. Such other insurance in amounts as Management Company in its
reasonable judgment deems advisable for protection against claims, liabilities
and losses arising out of or connected with the operation of any Inn or as
reasonably required by Owner's lender(s) holding a first mortgage on any Inn,
subject to Management Company's reasonable approval.
12.02 General Insurance Provisions
----------------------------
A. All insurance described in Section 12.01 may be obtained by
Management Company by endorsement or equivalent means under its, Marriott's, or
a Marriott Affiliate's blanket insurance policies, provided that such blanket
policies substantially fulfill the requirements specified herein.
B. Management Company may self insure or otherwise retain such
risks or portions thereof as it does with respect to other similar inns it or
Marriott Affiliates own, lease or manage under the Fairfield Inn name in the
United States.
C. All policies of insurance required under Section 12.01 shall be
carried in the name of Management Company. The policies required under Sections
12.01 A, B, C, D and E shall include Owner as an additional insured. Upon
notice by the Owner, Management Company shall also have the policies required
under Sections 12.01 A, B, C and D include any mortgagee or lender on the Inns
as additional insureds. Subject to the rights of any such Lender, any property
losses thereunder shall be payable to the insured parties as and to the extent
their respective interests may appear. Any mortgage on any Inn shall contain
provisions to the effect that, in the absence of a default thereunder, proceeds
of the insurance policies required to be carried under Section 12.01 A, B and C
shall be available for repair and restoration of the Inn.
D. All policies and certificates of insurance provided for under
Article XII shall, to the extent obtainable, state that the insurance shall not
be cancelled or materially changed without at least thirty (30) days' prior
written notice to the policy holder and all certificate holders.
E. Management Company shall deliver to Owner certificates of
insurance with respect to all policies so procured, including existing,
additional and renewed policies, and, in the case of insurance policies about to
expire, shall deliver certificates with respect to the renewal thereof prior to
the respective dates of expiration.
12.03 Cost and Expense
----------------
Insurance premiums and any costs or expenses with respect to the
insurance or self-insurance required under this Article XII, including any Inn
Retention, shall be treated as Deductions. Such premiums and costs shall be
allocated on an equitable basis to the inns participating under Management
Company's, Marriott's or a Marriott Affiliate's blanket insurance or self-
insurance programs. Any reserves, losses, costs or expenses which are uninsured
shall be
-39-
treated as a cost of insurance and shall be Deductions. Premiums on policies for
more than one year shall be charged pro rata against Gross Revenues as a
Deduction over the period of the policies. Upon Termination, either of this
entire Agreement or with respect to a given Inn, an escrow fund in an amount
reasonably acceptable to Management Company and Owner shall be established from
Gross Revenues (or, if Gross Revenues are not sufficient, with funds provided by
Owner) to cover the amount of any Inn Retention and all other costs which will
eventually have to be paid by Management Company with respect to pending or
contingent claims, including those which arise after Termination for causes
arising during the term of this Agreement.
12.04 Owner Provided Coverage
-----------------------
Notwithstanding anything to the contrary contained in this Article
XII, Owner may, at its option, with sixty (60) days advance written notice to
Management Company, procure the insurance coverages required under subsections
A, B, C, D and E of Section 12.02 hereof, the premiums for which are to be
treated as a Deduction. However, if the cost of such insurance procured by
Owner exceeds the cost of Management Company's insurance by ten percent (10%)
for comparable coverages, all excess costs over such 10% threshold shall be the
sole responsibility of Owner and not be a Deduction in computing Operating
Profit. Should Owner exercise its option to provide such insurance, Owner
hereby waives its rights of recovery from Management Company, its affiliates,
directors and employees for loss or damage to the Hotel, and any resultant
interruption of business, to the extent covered by the insurance provided
herein.
12.05 Loan Agreement Insurance Provisions
-----------------------------------
To the extent that the provisions of this Article XII shall conflict
with the insurance provisions of the Loan Agreement and related documents at the
time such Loan Agreement and related documents are executed and, to the extent
that the provisions of the Loan Agreement and such related documents provide for
more extensive coverage than this Article XII, the insurance provisions of such
Loan Agreement and related documents shall control. Any revisions of the
insurance provisions contained in such Loan Agreement and related documents
occurring subsequent to the date of execution of such Loan Agreement and related
documents shall be with the consent of Management Company for the provision
contained in the first sentence of this Section to apply.
END OF ARTICLE XII
-40-
ARTICLE XIII
TAXES
-----
13.01 Real Estate and Personal Property Taxes
---------------------------------------
All real estate and personal property taxes, levies, assessments and
similar charges on or relating to each Inn ("Impositions") during each Inn Term
shall be paid by Management Company on behalf of Owner from Gross Revenues
before any fine, penalty, or interest is added thereto or lien placed upon the
Inn or this Agreement, unless payment thereof is in good faith being contested
and enforcement thereof is stayed. Accruals of any such payments shall be a
Deduction in determining Operating Profit. Owner shall, within five (5) days of
receipt, furnish Management Company with copies of official tax bills and
assessments which it may receive with respect to any of the Inns. Either Owner
or Management Company, with Owner's consent, not to be unreasonably withheld,
(in which case Owner agrees to sign the required applications and otherwise
cooperate with Management Company in expediting the matter) may initiate
proceedings to contest any Imposition, and all reasonable costs of any such
contest shall be paid from Gross Revenues and shall be a Deduction in
determining Operating Profit.
END OF ARTICLE XIII
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ARTICLE XIV
INN EMPLOYEES
-------------
14.01 Employees
---------
A. All personnel employed at each Inn shall at all times be the
employees of Management Company, Marriott, or a Marriott Affiliate. Management
Company shall have absolute discretion to hire, promote, supervise, direct, move
and train all employees at the Inns, to fix their compensation and, generally,
establish and maintain all policies relating to employment.
B. Management Company shall be permitted to provide free
accommodations and amenities to its employees and representatives visiting each
Inn in connection with its management or operation. No person shall otherwise
be given gratuitous accommodations or services without prior joint approval of
Owner and Management Company except in accordance with usual practices of the
hotel and travel industry.
C. At Termination with respect to a given Inn, other than a
Termination (i) by reason of a default of Management Company hereunder, or
(ii) at Management Company's option (except as a result of a default by Owner),
provided that the expiration of a given Inn Term under Section 4.01 shall not be
deemed "at Management Company's option" for purposes of this Section 14.01, an
escrow fund shall be established from Operating Profit to reimburse Management
Company for all costs and expenses incurred by Management Company in terminating
its employees at the Inn in accordance with its standard policies, such as
severance pay, unemployment compensation and other employee liability costs
arising out of the termination of employment of Management Company's employees
at such Inn. Transfer costs shall not be included.
D. Neither Owner nor Management Company shall effect a Termination
of this Agreement without allowing sufficient time for Management Company to
comply with notice requirements of federal and state laws and regulations
regarding the closing of a business or termination of employees. Management
Company shall comply with notice requirements of federal and state laws and
regulations regarding the closing of a business or termination of employees.
END OF ARTICLE ▇▇▇
-▇▇-
▇▇▇▇▇▇▇ ▇▇
DAMAGE, CONDEMNATION AND FORCE MAJEURE
--------------------------------------
15.01 Damage and Repair
-----------------
A. If, during the term hereof, any Inn is damaged or destroyed by
fire, casualty or other cause, Owner shall, at its cost and expense and with all
reasonable diligence, repair or replace the damaged or destroyed portion of such
Inn to the same condition as existed previously. To the extent available,
proceeds from the insurance described in Section 12.01 shall be applied to such
repairs or replacements. However, Owner shall not be obligated to so repair or
replace the damaged or destroyed portion of such Inn if one or more of the
following is true: (i) the Inn is so badly damaged or destroyed that it cannot
reasonably be repaired or replaced within one (1) year of the date of the
casualty; (ii) the proceeds of insurance available for such repair or
replacement are less than ninety percent (90%) of the estimated repair and
replacement costs; or (iii) the remainder of the Inn Term with respect to such
Inn is less than ten (10) years, and Management Company fails to agree to extend
such Inn Term to a date which is at least ten (10) years after the estimated
date of the completion of such repair and/or replacement. If Owner elects not
to repair or replace said damaged portion of such Inn for one or more of the
foregoing reasons, it shall so notify Management Company by written notice
within ninety (90) days after the date of the casualty. If Owner does not so
notify Management Company, Owner shall promptly commence and complete the
repairing, rebuilding or replacement of the same so that the Inn shall be
substantially the same as it was prior to such damage or destruction.
B. In the event damage or destruction to any Inn from any cause
materially and adversely affects the operation of such Inn and Owner notifies
Management Company pursuant to the provisions of Section 15.01A above that Owner
will not repair or replace such damage for one or more of the reasons set forth
in Section 15.01A, Management Company may, at its option, terminate this
Agreement with respect to such Inn within sixty (60) days after such notice.
C. Subject to the provisions of Section 15.01B, if (i) damage to
any Inn is in excess of the amount of insurance proceeds plus amounts made
available by Management Company or Marriott Affiliates, or (ii) the conditions
of Section 15.01A(i) or (iii) are met, Owner may terminate this Agreement with
respect to such Inn upon sixty (60) days' written notice.
15.02 Condemnation
------------
A. In the event all or substantially all of any Inn shall be taken
in any eminent domain, condemnation, compulsory acquisition, or similar
proceeding by any competent authority for any public or quasi-public use or
purpose, or in the event a portion of the Inn shall be so taken, but the result
is that it is unreasonable to continue to operate such Inn, this Agreement shall
terminate with respect to such Inn. Owner and Management Company shall each have
the right to initiate
-43-
such proceedings as they deem advisable to recover any damages to which they may
be entitled. Management Company's rights to recover any damages subject to this
subsection shall be subject and subordinate to the prior rights of the Lender or
its successors and assigns to recover damages related to its interest in the Inn
being taken.
B. In the event a portion of any Inn shall be taken by the events
described in Section 15.02 A, or the entire Inn is affected but on a temporary
basis, and the result is not to make it unreasonable to continue to operate such
Inn, this Agreement shall not terminate. However, so much of any award for any
such partial taking or condemnation as shall be necessary to render such Inn
equivalent to its condition prior to such event shall be used for such purpose.
Any balance of the condemnation award, to the extent resulting in Net Sales
Proceeds, shall be retained and applied pursuant to Section 5.03.
15.03 Force Majeure
-------------
A. If acts of God, acts of war, civil disturbance, governmental
action, strikes or other organized labor disputes, vendor delays or fires
(collectively herein referred to as "Force Majeure") shall make it impractical
for either Owner or Management Company to perform any of its respective
obligations hereunder, such obligation shall be suspended until it is again
possible for the affected party to perform it. In addition, if such an event,
in Management Company's or Owner's reasonable judgment, makes continued
operation of an Inn impractical for more than a reasonably temporary period,
then Management Company or Owner may terminate this Agreement as to such Inn on
sixty (60) days written notice to the other.
B. The provisions of Section 15.03 A shall not apply to the
specific provisions of this Agreement regarding (i) damage or destruction,
(ii) condemnation, and (iii) withdrawal or revocation of licenses or permits.
END OF ARTICLE XV
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ARTICLE XV
DEFAULTS
--------
16.01 Events of Default
-----------------
The following shall constitute "events of default" to the extent
permitted by applicable law:
A. The failure of either party to make any payment required to be
made in accordance with the terms hereof within ten (10) days after written
notice that such payment has not been made; or
B. Unless Section 16.01 A is applicable, the breach by either
party of any material representation, warranty or covenant contained in this
Agreement, or the default by either party in the performance of any covenants,
undertakings, obligations or conditions set forth in this Agreement, which
breach or default shall not have been cured within thirty (30) days after notice
of such breach or default; provided that an "event of default" shall not exist
with regard thereto if such breach or default (i) is not attributable to a
failure to pay any sums due under this Agreement and (ii) such breach or default
is curable (but not within such thirty (30) day period) and the defaulting party
commences the cure of said breach or default within said thirty (30) day period
and thereafter proceeds diligently and in good faith to complete such cure; or
C. If a court of competent jurisdiction has entered a final, non-
appealable judgment finding Management Company liable for fraud, gross
negligence or willful or wanton misconduct in its dealings with Owner hereunder;
or
D. If Management Company or Owner shall apply for or consent to
the appointment of a receiver, trustee or liquidator of all or a substantial
part of its assets or make a general assignment for the benefit of its
creditors, or file a voluntary-petition in bankruptcy or a petition seeking
reorganization, composition, arrangement with creditors, liquidation or similar
relief under any present or future statute, law or regulation, or file any
answer admitting the material allegations of a petition filed against it in any
such proceeding, or be adjudicated a bankrupt or insolvent, or take any action
looking toward dissolution; or
E. If any final order, judgment or decree (that is, an order,
judgment or decree affirmed on appeal to a court of last resort or after the
expiration of any period to appeal) shall be entered without the application,
approval or consent of Management Company or Owner by any court of competent
jurisdiction, approving a petition seeking reorganization, composition,
arrangement with creditors, liquidation or similar relief under any present or
future statute, law or regulation with respect to Management Company or Owner,
or appointing a receiver, trustee or liquidator of all or a substantial part of
Management Company's or Owner's assets and such order,
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judgment or decree shall continue unstayed and in effect for an aggregate of
sixty (60) days (whether or not consecutive).
16.02 Remedies
--------
A. If, at any time during the term of this Agreement, an "event of
default" (as defined in Section 16.01) shall occur, then the non-defaulting
party may, at its option, terminate this Agreement by giving notice to the other
party, specifying a date, not earlier than thirty (30) days after the receipt of
such notice, for Termination of this Agreement. If the default has not been
cured on or before the date specified in the aforesaid notice, this Agreement
shall terminate on such date.
B. The rights set forth in Section 16.02 A 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 law.
END OF ARTICLE XVI
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ARTICLE XVII
WAIVER, PARTIAL INVALIDITY AND OTHER MATTERS
--------------------------------------------
17.01 Waiver
------
The failure of either party to insist upon a 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.
17.02 Partial Invalidity
------------------
If 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 on Management Company or Owner or constitute a substantial
deviation from the general intent and purpose of said parties as reflected in
this Agreement.
17.03 Estoppel Certificates
---------------------
Promptly after written request therefor from the other party (and in
any event within fifteen (15) days thereafter), each party shall deliver to the
other (and to all actual or potential lenders or transferees thereof as
requested by the other party) a certificate identifying this Agreement and all
amendments hereto, stating that this Agreement as so amended is in full force
and effect, stating the date to which all payments hereunder have been made and
the amount (if ascertainable) of all future payments required hereunder,
identifying any known defaults of the other hereunder, and covering such
additional matters as may be reasonably requested.
END OF ARTICLE XVII
-47-
ARTICLE XVIII
ASSIGNMENT
----------
18.01 Assignment
----------
A. Neither party shall assign or transfer or permit the assignment
or transfer of this Agreement without the prior written consent of the other;
provided, however, that Management Company shall have the right, without such
consent, to (1) assign its interest in this Agreement to any Marriott Affiliate
(other than one which is a partner of Owner) which (i) has adequate experience
in managing hotels and has adequate capital and resources to conduct its
business as Management Company under this Agreement and (ii) agrees in writing
to be bound by and comply with the terms of this Agreement (such written
agreement to be delivered to Owner), and (2) lease shops or grant concessions at
the Inns so long as the terms of any such leases or concessions do not exceed
the term of this Agreement. Nothing contained herein shall prevent (i) the
conditional assignment of this Agreement as security for any mortgage on the
Inns pursuant to Section 18.02; (ii) the transfer of this Agreement in
connection with a merger or consolidation or a sale of all or substantially all
of the assets of Marriott; or (iii) an assignment of this Agreement in
connection with a permitted sale of one or more of the Inns pursuant to
Section 19.01.
B. In the event 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. An assignment by
either Owner or Management Company of its interest in this Agreement shall not
relieve Owner or Management Company, as the case may be, from their respective
obligations under this Agreement, and shall inure to the benefit of, and be
binding upon, their respective successors, heirs, legal representatives, or
assigns.
18.02 Mortgages and Collateral Assignments
------------------------------------
Owner may from time to time (i) grant mortgages, deeds of trust or
similar security instruments encumbering the Inns, and (ii) collaterally assign
its interest under this Agreement as additional security, provided that all such
mortgages, deeds of trust, other security instruments and collateral
assignments: (a) are granted or entered into in connection with indebtedness
that is described in Section 3.01 A 2 hereof, and (b) each contain a non-
disturbance provision in the form described in Section 3.01 A 2 hereof.
Provided that all of the provisions of Section 3.01 A 2 are complied with,
Management Company agrees that (in connection with Owner obtaining such secured
loans) it will: (v) comply with any reasonable reporting requirements of the
lender; (w) provide the lender with notice of any default by Owner hereunder and
thereafter permit the lender to effect a cure thereof within a reasonable
period; (x) deliver to the lender, upon Owner's written request therefor, a
statement that this Agreement is in full force and effect and that there are no
outstanding
-48-
defaults hereunder, or, if there are outstanding defaults, describing what they
are; (y) subordinate Management Company's interest in this Agreement to the
rights of the lender upon foreclosure of any such mortgage, deed of trust,
security agreement or like instrument, or upon the granting of a deed in lieu of
foreclosure (provided that such lender simultaneously agrees to a non-
disturbance provision in the form described in Section 3.01 A 2 hereof); and (z)
attorn to and recognize such lender or its assignee as being the "Owner" under
this Agreement upon a conveyance of title to an Inn to such lender or its
assignee, whether such conveyance is the result of a foreclosure of said
mortgage, deed of trust, security agreement or like instrument, or is the result
of a deed in lieu of foreclosure.
END OF ARTICLE XVIII
-49-
ARTICLE XIX
SALE OF AN INN OR INNS
----------------------
19.01 Right of First Refusal
----------------------
A. If Owner receives an unsolicited bona fide written offer to
purchase or lease any one or more of the Inns and desires to accept such offer,
Owner shall promptly give written notice thereof to Management Company stating
the name of the prospective purchaser or tenant, as the case may be, the price
or rental and the terms and conditions of such proposed sale or lease, together
with all other information reasonably requested by Management Company and
reasonably available to Owner. Within thirty (30) days after the date of receipt
of Owner's written notice, Management Company shall elect, by written notice to
Owner, one of the following alternatives:
1. To purchase or lease such Inn or Inns at the same price
or rental and upon the same terms and conditions as those set forth in the
written notice from Owner to Management Company or upon other terms acceptable
to Owner, in which event Owner and Management Company shall promptly enter into
a purchase agreement for such sale or lease and shall consummate the same within
one hundred fifty (150) days.
2. To enter into a new Management Agreement, with respect to
such Inn or Inns, with such purchaser or tenant, which new Management Agreement
will be on all of the terms and conditions of this Agreement except that in
preparing such new Management Agreement, the provisions of Sections 5.01D and
5.03(5) and (6) hereof shall be deleted from such new Management Agreement and
appropriate adjustments (which in the case of a sale pursuant to a site purchase
option under a Ground Lease shall provide that, from and after the date on which
an Inn is sold pursuant to the exercise of such site purchase option, the amount
of Ground Rent hereunder shall be deemed to be the total rent and other amounts
that would have been paid or accrued to the former landlord by Owner if such
Ground Lease were still in effect) shall be made to all terms and provisions of
this Agreement which have been agreed to and/or computed on the assumption that
this Agreement will apply to all fifty (50) Inns (and reciprocal adjustments
shall likewise be made to this Agreement itself, which will be applicable to the
Inns not being sold under this Section 19.01, as set forth in Section 19.02
hereof); provided, however, that if Management Company in good faith reasonably
believes (and so states in writing to Owner) that any one or more of the
following is true: (i) that the proposed purchaser is a competitor in the
lodging business, of Management Company, Marriott or any Marriott Affiliate
(unless the proposed purchaser is a financial institution that is solely a
passive owner of competitive properties in the lodging business); (ii) the
proposed purchaser is known in the community as being of bad moral character; or
(iii) that the financial condition and prospects of the proposed purchaser are
not adequate to discharge the obligations of Owner under this Agreement,
Management Company shall have the right to terminate this Agreement, by written
-50-
notice to Owner, with respect to such Inn or Inns, and Management Company shall
not be required to enter into such new management agreement with respect
thereto. The effective date of such Termination shall coincide with the date of
the consummation of the proposed sale or lease. Such Termination shall not be
effective if such sale or lease is not consummated.
B. If Management Company shall fail to elect any of the
alternatives of subsection A above within said thirty (30) day period, such
failure shall be conclusively deemed to constitute election under subsection
19.01A2 above to enter into a new management agreement with respect to such Inn
or Inns, with such purchaser or tenant, and the provisions thereof shall prevail
as if Management Company had so elected. Any proposed sale or lease of which
notice has been given by Owner to Management Company hereunder must be
consummated on substantially the same terms within one hundred eighty (180) days
following the giving of such notice, unless Management Company has exercised its
option under subsection 19.01A1 above to purchase or lease the Inns. Failing
such consummation, such notice, and any response thereto given by Management
Company, shall be null and void and all of the provisions of Section 19.01A1
must again be complied with before Owner shall have the right to consummate a
sale or lease of the Inn upon the terms contained in said notice, or otherwise.
C. Any sale, assignment, transfer, or other disposition, for value
or otherwise, voluntary or involuntary, of the controlling interest in Owner
(i.e., the possession directly or indirectly of the power to direct or cause the
direction of the management and policies of Owner, whether through the ownership
of voting securities, or by contract or otherwise) in a single transaction or
series of related transactions (and, if Owner is a limited partnership, which is
combined with a transfer of the general partnership interest(s) in connection
therewith) shall be deemed a sale or lease of the Inns under Section 19.01 and
shall be subject to the provisions thereof.
D. If Owner intends to sell or refinance any one or more of the
Inns, Management Company agrees to cooperate in providing information to
facilitate such sale or refinancing.
19.02 Effect of Sale or Refinancing of an Inn
---------------------------------------
Upon the consummation of the Sale of an Inn or a refinancing of the
Permanent Loan (or any Replacement Debt with respect thereto) as to fewer than
all of the Inns then subject to this Agreement, subject to the provisions of
Section 19.01, then:
A. This Agreement shall terminate with respect to the Inns sold or
released from the mortgage securing the Permanent Loan (or any Replacement Debt
with respect thereto) in connection with such refinancing, but not with respect
to the remaining Inns; as to each such Inn, the actions described in
Section 4.03 shall be taken (except that, if Management Company is entering into
a new management agreement with the purchaser or tenant, as the case may be, of
such Inn, then the action described in subsection G of Section 4.03 shall not be
necessary);
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B. Any sale or lease of all of the Inns shall be conditioned on
the purchaser or tenant assuming the obligations of Owner under this Agreement
with respect to the Inns being sold or leased, subject to the rights of
Management Company under the provisions of Section 19.01B2, by appropriate
instrument in form reasonably satisfactory to Management Company; and any sale
or lease of, or any refinancing of the Permanent Loan (or any Replacement Debt
with respect thereto) as to, fewer than all of the Inns then subject to this
Agreement shall be conditioned on the purchaser or tenant (or Owner in the case
of any such refinancing) entering into a new Management Agreement with respect
to such Inn or Inns in the form described in Section 19.01A2 (except that, in
the case of a refinancing, the provisions of Sections 5.03(5) and (6) hereof
shall not be included in such new Management Agreement). Upon such sale or
lease, an executed copy of such Assumption Agreement or new Management Agreement
shall be delivered to Management Company and Owner hereunder shall be released
from all further obligations hereunder with respect to the Inns being sold or
leased;
C. A portion of the FF&E Reserve maintained pursuant to
Section 8.02 hereof for the Inns being so sold, leased or refinanced shall be
transferred to the purchaser of such Inn (or, at the direction of the Owner,
released to the Owner); such portion shall be computed by multiplying the FF&E
Reserve by a fraction, the numerator of which shall be the Gross Revenues
attributable to such Inn being so sold, leased or refinanced for the most
recently concluded Fiscal Year and the denominator of which shall be the Gross
Revenues attributable to all the Inns for such Fiscal Year;
D. Owner's Priority Return, Owner's Contributed Capital, Owner's
12% Priority and Capital Return, Owner's Net Contributed Capital (and the 12%
return component of Owner's 12% Priority and Capital Return), the Operating
Profit Objective, Owner's Net Cash Flow and the amounts set forth in
Section 5.01D, and the amount set forth in Section 4.02A(i) shall be reduced by
an amount equal to the percentage calculated by dividing the amount of the
Operating Profit for the prior twenty-six (26) Accounting Periods for the Inn
being so sold, leased or refinanced by the total Operating Profit for the prior
twenty-six (26) Accounting Periods for all of the Inns;
E. To the extent Contingent Incentive Management Fees are not
eliminated by the sale of one or more Inns or by previous or current
refinancings, a portion of the remaining Contingent Incentive Management Fee
will be allocated to the Inn being so sold, leased or refinanced. The portion
of the Contingent Incentive Management Fee allocated to the Inn being so sold,
leased or refinanced shall be calculated by multiplying (a) the remaining unpaid
Contingent Incentive Management Fee by (b) the percentage the Operating Profit
generated by the Inn being sold for the prior twenty six (26) Accounting Periods
represents to the total Operating Profit for all the Inns for such prior twenty
six (26) Accounting Period. The purchaser or tenant of such Inn(s) shall assume
the obligation to pay the Contingent Incentive Management Fee allocated to such
Inn(s) pursuant to the terms of the Management Agreement;
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F. Appropriate adjustments shall be made to those other terms and
provisions of this Agreement (e.g., Working Capital, insurance) which have been
agreed on, computed or established on the assumption that this Agreement will
apply to all fifty (50) of the Inns. Such adjustments shall be calculated by
multiplying (a) the total amount of such other term or provision by (b) the
percentage the Operating Profit generated by the Inn being so sold, leased or
refinanced for the prior twenty-six (26) Accounting Periods represents to the
total Operating Profit for all the Inns for the prior twenty-six (26) Accounting
Periods;
G. Unless Management Company has elected not to enter into a new
management agreement with the purchaser or tenant, as the case may be, of such
Inn, for one or more of the reasons set forth in subsections (i), (ii) and
(iii) of Section 19.01A2 hereof, Management Company and such purchaser or tenant
shall execute the new management agreement described in Section 19.01A 2.
H. In the case of any adjustments pursuant to this Section 19.02
which are based on the prior twenty-six (26) Accounting Periods, such
adjustments shall be made based on the actual number of full Accounting Periods
the Inns have been subject to this Agreement if the Inns have been subject to
this Agreement for less than twenty-six full Accounting Periods.
END OF ARTICLE XIX
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ARTICLE XX
MISCELLANEOUS
-------------
20.01 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 provision 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.
20.02 Consents
--------
Wherever in this Agreement the consent or approval of Owner or
Management Company is required, such consent or approval shall not be
unreasonably withheld, shall be in writing and shall be executed by a duly
authorized officer or agent of the party granting such consent or approval. If
either Owner or Management Company fails to respond within thirty (30) days to a
request by the other party for a consent or approval, such consent or approval
shall be deemed to have been given (except as otherwise provided in this
Agreement).
20.03 Agency
------
The relationship of Owner and Management Company shall be that of
principal and agent, and nothing contained in this Agreement shall be construed
to create a partnership or joint venture between them or their successors in
interest. Management Company's agency established by this Agreement is coupled
with an interest and may not be terminated by Owner until the expiration of the
term of this Agreement, except as provided in Section 4.02, Articles XV or XVI.
Notwithstanding the agency relationship created by this Agreement, nothing
contained herein shall prohibit, limit, or restrict (except as specifically set
forth in Sections 2.04 hereof), Management Company or any of its Affiliates and
subsidiaries from developing, owning, operating, leasing, managing or
franchising competing hotels or restaurants or food services facilities in the
market area where any one or more of the Inns are located.
20.04 Applicable Law
--------------
This Agreement shall be construed under and shall be governed by the
laws of the State of Maryland.
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20.05 Recordation
-----------
The terms and provisions of this Agreement shall run with the land
designated as the Sites, and with Owner's interest therein, and shall be binding
upon all successors to such interest. At the request of either party, the
parties shall execute sufficient copies of an appropriate memorandum of this
Agreement in recordable form and cause the same to be recorded in the
jurisdiction where the Inns are located. For so long as the Lender is the
lender under the Permanent Loan, the consent of Lender (such consent not to be
unreasonably withheld or delayed) is required for the recordation of this
Agreement in any jurisdiction in which an Inn, subject to the Permanent Loan at
the time of recordation, is located.
20.06 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.
20.07 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 or registered mail, postage prepaid, return receipt
requested:
To Owner:
--------
Fairfield Inn by Marriott Limited Partnership
c/o Marriott FIBM One Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Assistant General Counsel
(Corporate Finance)
To Management Company:
---------------------
Fairfield Management Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Law Department/Inn Operation
or at such other address as is from time to time designated by the party
receiving the notice. Any such notice which is properly mailed shall be deemed
to have been served as of five (5) days after said posting for purposes of
establishing that the sending party complied with the applicable time
limitations set forth herein, but shall not be binding on the addressee until
actually received.
20.08 Limited Liability
-----------------
Management Company agrees that no general or limited partner of Owner
shall have any personal liability hereunder in excess of such partner's
contribution to the capital of Owner.
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20.09 Entire Agreement
----------------
This Agreement, together with other writings signed by the parties
expressly stated to be supplemental 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.
20.10 Binding Effect
--------------
This Agreement shall bind and inure to the benefit of all the
respective heirs, personal representatives, successors and permitted assigns of
the parties hereto.
20.11 Compliance with Loan Documents
------------------------------
Unless the contrary is otherwise permitted in this Agreement,
Management Company shall take such actions and refrain from taking such actions,
as shall be necessary for Owner to comply with its obligations under the Loan
Agreement and other loan documents executed by Owner in connection with the
Permanent Loan to the extent such loan documents have been furnished to
Management Company and to the extent such loan documents require Owner,
explicitly or implicitly, to cause or limit the performance of Management
Company. Notwithstanding the above, Management Company shall have no obligation
to make any monetary payments under such loan documents.
END OF ARTICLE XXI
-56-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first written above.
Attest: OWNER
-----
FAIRFIELD INN BY MARRIOTT LIMITED
PARTNERSHIP,
a Delaware limited partnership ("Owner")
By: MARRIOTT FIBM ONE
CORPORATION, a Delaware Corporation,
General Partner
By
-------------------------------- ---------------------------------
Secretary President
MANAGEMENT COMPANY
------------------
Attest FAIRFIELD FMC CORPORATION, a Delaware
Corporation
("Management Company")
By
-------------------------------- ------------------------------------
Assistant Secretary Vice President
MARRIOTT
--------
Attest: MARRIOTT CORPORATION
(for purposes of Sections 2.01, 2.04, 6.02,
10.01 and 10.02 only)
By
-------------------------------- ------------------------------------
Assistant Secretary Vice President
-57-
Exhibit A
THE INNS
Birmingham-Homewood, Alabama Atlanta-Northwest, Georgia
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Montgomery, Alabama ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Road ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Buena Park, California Atlanta-Southlake, Georgia
I-5 at Beach Boulevard ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Placentia, California Savannah, Georgia
SR-57 and ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Savannah, Georgia
Gainesville, Florida Bloomington/Normal, Illinois
▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Miami-West, Florida Chicago-Lansing, Illinois
Palmetto Expressway at NW ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Orlando-International Drive, Florida Peoria, Illinois
8342 Jamaican Court ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Orlando-South, Florida Rockford, Illinois
1850 Landstreet Road ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Atlanta-Airport, Georgia Indianapolis-Castleton, Indiana
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Atlanta-Gwinnett Mall, Georgia Indianapolis, College Park, Indiana
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Atlanta-Northlake, Georgia Des Moines, Iowa
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Clive, Iowa 50322
Kansas ▇▇▇▇/▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇-▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ Durham, North Carolina
Exhibit A -- Continued
Kansas City-West, Kansas ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Auburn Hills, Michigan Greensboro, North Carolina
1294 ▇▇▇▇▇▇ Road ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Detroit-Airport, Michigan ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ Drive ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Detroit-Madison Heights, Michigan ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Detroit-Warren, Michigan ▇▇▇▇▇▇▇▇▇/▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Detroit-West (Canton), ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Kalamazoo, Michigan Dayton-North, Ohio
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
St. Louis-Hazelwood, Missouri Toledo-Airport, Ohio
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Charlotte-Airport, North Carolina Florence, South Carolina
▇▇▇▇ ▇-▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Florence, South Carolina 29501
Charlotte-Northeast, North Carolina Greenville, South Carolina
5415 North I-85 Service Road ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Hilton Head, South Carolina Virginia Beach, Virginia
▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ (S.R. 44) and ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Johnson City, Tennessee Madison, Wisconsin
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Hampton, Virginia Milwaukee, Wisconsin
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇