MANAGEMENT AGREEMENT
FOR
THE CITY BAR & GRILL
IN THE SAN XXXX XXXXXX HOTEL
This Consulting/Management Agreement is entered into as of February 20,
1998, by and between The Hilton Hotel (Hotel) in San Jose, CA and Grill
Concepts, Inc. (GCI) in Los Angeles, CA. The parties agree to the following:
1. Scope of Agreement
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1.1 Hotel wishes to retain GCI as Manager of the restaurant operation known
as The City Bar & Grill ("the restaurant"), located in The Hilton Hotel in San
Xxxx. The scope of operations to be included under this agreement are to include
all food and beverages, and accompanying services, sold from the current
operation, excluding all banquet sales. Specifically, Manager will manage
restaurant sales for all hours of operations including: breakfast, lunch,
dinner, bar sales and room service sales.
1.2 Banquet sales will be sold and managed by the Hotel, however, food and
beverage which is prepared by the restaurant, will be sold to the Hotel at cost
plus a 10% fee. Additionally, all labor costs associated with banquet sales will
be accounted for and charged separately for means of accounting net income for
the restaurant operation. Banquet allocations and the system of accounting shall
be reviewed after 90 days of operation under the Management Contract.
1.3 This Agreement shall commence on the date noted above, and shall
continue for a period of ten (10) years unless earlier terminated pursuant to
the provisions contained herein. The Consulting phase of this agreement will not
exceed 90 days. The Management Agreement will begin as of the date that the
Consulting phase is complete.
2. Management Fee
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2.1 In return for management of the restaurant, Manager will receive a
Management Fee equal to eight-percent (8%) of Gross Receipts received by the
Hotel in connection with or resulting from food and beverage sales in the
restaurant and room service, excluding banquet revenue. In addition, the Hotel
shall pay Manager fifty-percent (50%) of all annual profits in excess of the
1997 profit level of $230,000.00(1), using identical accounting practices to
those used to generate the 1997 reports. An additional expense line item shall
be added to the Profit & Loss report to reflect the 8% Management Fee paid to
Manager which will not alter the predetermined net income amount that is
required for Manager to be eligible to participate in profits.
2.3 The Hotel will provide to Manager a detailed Profit & Loss statement
for the business year 1997, which will be on record as the model Profit & Loss
statement from which all future comparisons, as described within this agreement,
will be calculated. Upon request from Manager, the Hotel will provide, within
reason, any "back-up" to the 1997 Profit & Loss statement as it relates directly
to the calculations used in determining payment of the Management Fee.
2.4 Payment of the Management Fee will begin as of the time and date that
all operational changes, as agreed to, have been executed by Manager. This date
will xxxx the commencement of the Management Contract. Management Fee is to be
paid monthly, and will be due by the 10th day of each month for the preceding
month.
3. Scope of Responsibility
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3.1 Manager shall oversee the operation of the restaurant and shall
supervise the General Manager, who will remain an employee of Hotel and will
conform to overall hotel direction and policies, and who will also be
responsible for managing the day-to day operation of the restaurant.
Additionally, Manager will advise in the areas of purchasing, facility
maintenance, advertising and public relations.
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(1) This number has been calculated to include the pre-established 1997 profit
level of $200,000.00 plus a $30,000.00 credit for the 10% fee on banquet food
cost.
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3.2. Operational changes are to include: 1) implementation of a new menu,
based upon the menu currently utilized in Daily Grill restaurant operations, to
the extent that the kitchen facilities of the restaurant are adequate to
reproduce the menu in its entirety; 2) management and service staff training as
agreed upon by both parties to incorporate the philosophy and style of service
as currently performed at Daily Grill operations, and 3) implementation of all
other elements of Daily Grill's operating system, as deemed necessary in a
mutually agreed upon Strategic Plan, as it relates to the successful management
of the restaurant, which may include modifications to policies and procedures in
various areas of operations. A detailed description of the areas to be covered
by this agreement are attached in Exhibit 1: Management Consulting Plan.
3.3 The restaurant must, under Manager, realize profit levels that are
comparable to or better than current operations, using the exact methods of
accounting as currently utilized by the Hotel. Manager will be granted a three
month Grace Period, from the start date of the Management Agreement, within
which period, they will not be held responsible to realize profit levels equal
to that of previous profits. In the event that the agreed upon remodeling has
not been completed, the Grace Period will be extended until such time that the
remodeling is complete.
4. Consulting Phase
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4.1 During the initial Consultation Agreement, not to exceed ninety (90)
days, Manager will be considered a consultant to the Hotel and will be paid on a
daily rate for each employee assigned to the project. The rate for each employee
shall be calculated to a prorated amount of the employee's current base salary
plus 25% to cover all fringe benefits for the first 45 days, and shall revert to
only the prorated base salary, less fringe benefits on any days exceeding 45.
4.2 The Hotel will provide food at the restaurant and lodging for Manager's
supervisory and training personnel during the consultation phase of this
agreement. Additionally, all out-of-pocket expenses will be billed to and
reimbursed by the Hotel.
5. Hotel's Obligations
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5.1 Hotel is obligated and solely liable to pay for any and all
improvements, including capital improvements, to the restaurant. The Hotel shall
be required to maintain, at a minimum, the current condition and standard of the
physical plant.
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5.2 The Hotel shall provide to Manager, hotel rooms, at no charge, for
twelve (12) nights per year as well as on-site meals during such occupancy.
5.3 Within ten (10) days after the end of each calendar month and within
thirty (30) days after the end of each calendar year, the Hotel shall submit to
Manager a Profit & Loss statement which shall fairly and accurately reflect
Gross Receipts, Operating Expenses and Net Income for the period in question. If
Manager elects to audit any such statement and if such audit reveals an
understatement of Gross Receipts and/or Net Income of more than two-percent
(2%), the Hotel shall pay the cost of the audit.
5.4 Hotel agrees to indemnify, defend, and hold harmless Manager from all
claims, loss, damage or expense (including legal fees and costs) resulting
directly or indirectly from its performance as Manager, including without
limitation claims, losses, and/or damages and expenses arising directly or
indirectly from the negligence of Manager's agents and employees. The foregoing
indemnity shall not include indemnification for acts of gross negligence or
willful misconduct when Manager is in control of such employees and has
liability for such conduct, nor shall it include indemnification from any acts
which constitute a breach of Manager's obligations hereunder.
5.5 The Hotel agrees to preserve and protect the distinctive features of
Manager's Operating Systems, including; menus; recipes; operating procedure;
manuals; training systems; marketing plans and all other distinctive elements
designed by Manager to enhance the restaurant, and that all previously noted
elements be used solely in the restaurant located in the Hilton Hotel in San
Jose, CA. It is understood that this Operating System remains the property of
Manager and in the event of termination of this agreement shall be returned to
Manager and use by Hotel will be discontinued.
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6. Termination of Agreement
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6.1 Manager does not have the right to assign or delegate any of its
obligations contained herein to any person or entity without the prior written
consent of the Hotel. If Hotel sells or conveys the facility containing the
restaurant, Hotel will notify Manager of the transfer. Manager may, at its sole
option, terminate the rights and obligations of the parties effective on the
date of such transfer or conveyance.
6.2 Hotel maintains the right to terminate this agreement should Manager
fail to perform to the current level of profits as set by the 1997 model Profit
& Loss statement during either, a) two (2) consecutive accounting quarters, or
b) in a calendar year. Manager shall have the option to cure any profit
deficiency for the purpose of keeping this agreement in force.
6.3 Either party shall have the right to terminate this agreement with
30-day written notice, with or without cause. In the event that Hotel shall
exercise this option, Hotel shall reimburse Manager for any and all costs which
have not been recovered by Manager through payment of the 8% Management Fee.
Additionally, Hotel's use of all Operating Systems shall cease upon termination
(Section 5.5).
7. No Joint Venture
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7.1 Nothing contained in this Agreement shall be deemed or construed by the
parties hereto or by any third party as creating a relationship of principal or
agent, a partnership or joint venture between the parties. It is understood and
agreed that neither any provision contained in this Agreement nor any acts of
the parties shall be deemed to create any relationship between them other than
the relationship set forth herein and agents shall at all times be considered an
independent contractor.
IN WITNESS WHEREOF, this Consulting /Management Agreement has been executed
as of the date first set forth above.
HILTON HOTEL
By:/s/
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Its: General Manager
GRILL CONCEPTS, INC.
By:/s/
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Its: President
