Exhibit 10.3
MANAGEMENT AGREEMENT
This Management Agreement (as the same may be amended, modified or
supplemented from time to time, this "Agreement") is made and entered into as of
the 5th day of October, 1999 ("Effective Date") between Apple Suites Management,
Inc., a Virginia corporation, whose address is 000 Xxxx Xxxx Xxxxxx, Xxxxxxxx,
Xxxxxxxx 00000 ("Owner") and Promus Hotels, Inc., a Delaware corporation, whose
address is 000 Xxxxxxxxx Xxxx, Xxxxxxx, Xxxxxxxxx 00000 ("Manager").
ARTICLE 1
THE HOTEL
Section 1.01. The Hotel. The subject matter of this Agreement is the
management of the "Hotel", as defined in the Homewood Suites License Agreement
attached hereto as Exhibit "A" (hereinafter collectively referred to as the
"License Agreement"), by Manager. The Hotel is owned in fee by Apple Suites,
Inc., a Virginia corporation ("Fee Owner") and leased to Owner pursuant to a
lease between Fee Owner and Owner with a commencement date of even date herewith
covering the Hotel (hereinafter the "Percentage Lease"). The License Agreement
shall exclusively govern Owner's right to use the Homewood Suites "System" (as
defined in the License Agreement) in the operation of the Hotel. Fee Owner shall
have no right to use the Homewood Suites "System" except as expressly set forth
in the License Agreement. Owner hereby expressly acknowledges that neither it
nor Fee Owner shall derive any rights in or to the use of the "Homewood Suites"
name or the Homewood Suites "System" from this Agreement.
ARTICLE 2
TERM
Section 2.01. Term. The term shall commence on the Effective Date and
continue for the term of years from the Effective Date set forth on Exhibit "B"
("Term").
ARTICLE 3
MANAGER'S OBLIGATIONS
Section 3.01. Manager's Obligations. Manager shall, on behalf of Owner
and at Owner's expense, direct the operation of the Hotel pursuant to the terms
of this Agreement and the License Agreement. Manager shall be exclusively
responsible for directing the day-to-day activities of the Hotel and
establishing all policies and procedures relating to the management and
operation of the Hotel. Except as specifically
otherwise provided, all cost(s) and expense(s) incurred by Manager in
association with the performance of the obligations hereinafter set forth shall
be, regardless of the designation of a portion thereof as Fee Ownership Costs
(as herein defined), operating costs and shall accordingly be paid from the Bank
Account(s) as hereinafter defined in Section 3.01(iv) below. Manager, during the
Term, shall have the following obligations:
(i) Costs of Fee Owner and Owner. Pursuant to the terms of the
Percentage Lease, Manager understands that Fee Owner has agreed
to pay, among other things (i) land, building and personal
property taxes and assessments applicable to the Hotel, (ii)
premiums and charges for the casualty insurance coverages
specified on Exhibit "D", (iii) expenditures for capital
replacements, (iv) expenditures for maintenance and repair of
underground utilities and structural elements of the Hotel and
(v) the payments of principal, interest and other sums payable
under the Acquisition Loan (as herein defined) (collectively,
"Fee Ownership Costs"). To the extent this Agreement obligates or
authorizes Manager to pay any such Fee Ownership Costs, Manager
shall pay such Fee Ownership Costs on behalf of Fee Owner to the
extent of funds in the Bank Account(s) (as herein defined) in the
order of priority set forth in Exhibit B or the Reserve Fund (as
herein defined) and Fee Owner and Owner shall make such
adjustments and payments to each other as may be necessary from
time to time to take into account any such payments by Manager.
Manager shall have no duty, obligation or liability to Fee Owner
or Owner (i) to make any determination as to whether any expense
required to be paid by Manager hereunder is a Fee Ownership Cost
or a cost of Owner, (ii) to make any determination as to whether
funds in the Bank Account(s) or the Reserve Fund belong to Fee
Owner or Owner or (iii) to require that Fee Ownership Costs be
paid from funds which can be identified as belonging to Fee
Owner, or that other costs and expenses required to be paid by
Owner be paid from funds which can be identified as belonging to
Owner; it being the intent of the parties to this Agreement that
(i) Owner and Fee Owner shall look only to each other and not to
Manager with respect to moneys that may be owed one to the other
as a consequence of Manager's performance under this Agreement
and (ii) Manager need only look to Owner to pay operating costs,
including, without limitation, those designated herein as Fee
Ownership Costs;
(ii) Personnel. Manager shall be the sole judge of the fitness and
qualification of all personnel working at the Hotel ("Hotel
Personnel") and shall have the sole and absolute right to hire,
supervise, order, instruct, discharge and determine the
compensation, benefits and terms of employment of all Hotel
Personnel. All Hotel Personnel shall be employees of Manager.
Manager shall also have the right to use employees of Manager,
Manager's parent and subsidiary and affiliated companies, not
located at the Hotel to provide services to the Hotel ("Off-Site
Personnel") and the right to have the general manager of the
hotel serve as the regional manager for other hotels managed by
Manager. All expenses, costs (including, but not
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limited to, salaries, benefits and severance pay), liabilities
and claims which are related to Hotel Personnel and Off-Site
Personnel shall be operating costs; provided, however, with
respect to any moving expenses for any Hotel Personnel who has
not been an employee at the Hotel for at least twelve (12)
months, only that portion of such moving expenses equal to
Owner's Share (as hereinafter defined) shall constitute operating
costs and the balance shall be paid by Manager and/or such
employee. Manager shall also have the right to have Off-Site
Personnel performing regional or area duties relating to the
Hotel and other hotels managed by Manager lodged at the Hotel
from time to time free of charge. "Owner's Share" shall mean a
fraction having twelve (12) as its denominator and the number of
months or part thereof such person has been one of the Hotel
Personnel as its numerator. All expenses for Off-Site Personnel
shall be included as a separate category or item of the Operating
Budgets or shall otherwise be approved by Owner.
Manager agrees that it will consult with Owner regarding the
hiring, transferring, or terminating of the general manager and
director of sales for the Hotel. Owner shall be afforded an
opportunity to review the resumes of, and to interview, the
candidates for these positions, all within a time frame
established by Manager, which shall be reasonable under the
circumstances in question. Manager and Owner shall consult with
each other concerning such decisions and Manager agrees to give
serious consideration to the views of Owner prior to Manager's
making a final decision with respect to any such individual;
(iii) Hotel Policies. Manager shall determine the terms of guest
admittance to the Hotel, establish room rates, and use of rooms
for commercial purposes;
(iv) Bank Accounts. Manager shall open and operate the Hotel's bank
accounts. All sums received from the operation of the Hotel and
all items paid by Manager arising by virtue of Manager's
operation of the Hotel shall pass through bank account(s)
established by Manager in Owner's name at such banks as Manager
and Owner shall mutually agree ("Bank Account(s)"); only
Manager's designees shall be exclusively authorized to operate
and draw from the Bank Account(s). Each fiscal month Manager, on
behalf of Owner, shall disburse funds from the Bank Account(s) in
the order of priority and to the extent available in accordance
with the priority schedule set forth on Exhibit "B";
(v) Operating Budgets. Manager has submitted to Owner, for Owner's
approval, a proposed operating budget for the ensuing full or
partial fiscal year, as the case may be ("Operating Budget").
Hereafter, Manager shall, not less than forty-five (45) days
prior to the commencement of each full fiscal year, submit to
Owner, for Owner's approval, a proposed Operating Budget for the
ensuing full or partial fiscal year, as the case may be. Each
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Operating Budget shall be accompanied by, and shall include, a
business plan which shall describe business objectives and
strategies for the period covered by the Operating Budget. The
business plan shall include, without limitation, an analysis of
the market area in which the Hotel competes, a comparison of the
Hotel and its business with competitive hotels, an analysis of
categories of potential guests, and a description of sales and
marketing activities designed to achieve and implement identified
objectives and strategies. Fee Owner shall have no right to
approve any Operating Budget.
Owner's approval of the Operating Budget shall not be
unreasonably withheld and shall be deemed given unless a specific
written objection thereto is delivered by Owner to Manager within
fifteen (15) days after submission. Owner shall review the
Operating Budget on a line-by-line basis. To be effective, any
notice which disapproves a proposed Operating Budget must contain
specific objections in reasonable detail to individual line
items.
If the initial Operating Budget contains disputed budget item(s),
said item(s) shall be deemed adopted until Owner and Manager have
resolved the item(s) objected to by Owner or the Accountant(s)
(hereinafter defined in Section 10.02) have resolved the item(s)
objected to by Owner. Thereafter, if Owner disapproves or raises
objections to a proposed Operating Budget in the manner and
within the time period provided therefor, and Owner and Manager
are unable to resolve the disputed or objectionable matters
submitted by Owner prior to the commencement of the applicable
fiscal year, the undisputed portions of the proposed Operating
Budget shall be deemed to be adopted and approved and the
corresponding line item contained in the Operating Budget for the
preceding fiscal year shall be adjusted as set forth herein and
shall be substituted in lieu of the disputed items in the
proposed Operating Budget. Those line items which are in dispute
shall be determined by increasing the preceding fiscal year's
corresponding line items by an amount determined by Manager which
does not exceed the Consumer Price Index for All Urban Consumers
published by the Bureau of Labor Statistics of the United States
Department of Labor, U.S. City Average, all items (1984-1986=100)
for the fiscal year prior to the fiscal year with respect to
which the adjustment to the line item is being calculated or any
successor or replacement index thereto. The resulting Operating
Budget obtained in accordance with the preceding sentence shall
be deemed to be the Operating Budget in effect until such time as
Manager and Owner have resolved the items objected to by Owner.
Manager shall revise the Operating Budget from time to time, as
necessary, to reflect any unpredicted significant changes,
variables or events or to include significant, additional,
unanticipated items of income or expense. Any such revision shall
be submitted to Owner for approval,
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which approval shall not be unreasonably withheld, delayed or
conditioned. Manager shall be permitted to reallocate part or all
of the amount budgeted with respect to any line item to another
line item and to make such other modifications to the Operating
Budget as Manager deems necessary, provided, however, that
Manager may not reallocate from one Department to another without
Owner's consent, which shall not be unreasonably withheld or
delayed. The term "Department" shall mean and refer to those
general divisional categories shown in the Operating Budget
(e.g., Guest Services Department or Administration Department),
but shall not mean or refer to subcategories (e.g., linen
replacement or uniforms) appearing in a divisional category. In
addition, in the event actual Adjusted Gross Revenues (as defined
in Exhibit "C" hereto) for any calendar period are greater than
those provided for in the Operating Budget, the amounts approved
in the Operating Budget for suite maintenance, guest services,
food and beverage, telephone, utilities, marketing and hotel
repair and maintenance for any calendar month shall be
automatically deemed to be increased to an amount that bears the
same relationship (ratio) to the amounts budgeted for such items
as actual Adjusted Gross Revenue for such month bears to the
projected Adjusted Gross Revenue for such month. Owner
acknowledges that the Operating Budget is intended only to be a
reasonable estimate of the Hotel's income and expenses for the
ensuing fiscal year. Manager shall not be deemed to have made any
guarantee, warranty or representation whatsoever in connection
with the Operating Budget;
(vi) Operating Statement. Manager shall prepare and furnish Owner, on
or before the twentieth (20th) day of the fiscal month
immediately following the close of a fiscal month, with a
detailed operating statement setting forth the results of the
Hotel's operations. Within ninety (90) days after the end of each
fiscal year, Manager shall furnish Owner with a detailed
operating statement setting forth the results of the Hotel's
operations for the fiscal year;
(vii) Capital Budgets. Manager shall, not less than forty-five (45)
days prior to the commencement of each fiscal year, submit to
Owner, for Owner's approval, a recommended "Capital Budget" for
the ensuing full or partial fiscal year, as the case may be, for
furnishings, equipment, and ordinary Hotel capital replacement
items as shall be required to operate the Hotel in accordance
with the standards referred to in the License Agreement. Manager,
to the extent it is able to do so without compromising compliance
with the minimum standards required under the terms of the
License Agreement, shall take into consideration, among other
factors, the amount of funds available to pay for the proposed
capital expenditures. Manager shall also identify for Owner those
projects that are required to meet the minimum standards of the
License Agreement and give priority to such items. Owner and
Manager shall meet to discuss the proposed Capital Budget and
Owner shall be required to make specific written
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objections to a proposed Capital Budget in the manner and within
the same time periods specified in Section 3.01(v) with respect
to an Operating Budget. Owner agrees not to unreasonably withhold
or delay its consent. If Owner does not approve the Capital
Budget, Manager (i) with respect to Capital Improvements (as
herein defined) required to meet the minimum standards of the
License Agreement, will be entitled to spend such amounts as are
necessary to meet such minimum standards and (ii) with respect to
any other Capital Improvements, will only spend such amounts as
are approved by Owner, acting reasonably, provided, however, that
in any event Manager shall be entitled to spend up to five
percent (5%) of Adjusted Gross Revenue for capital expenditures
after the date hereof until the disputed Capital Budget item(s)
have been resolved in accordance with Section 10.02.1(e).
Manager, at Owner's expense, shall be responsible for supervising
the design, installation and construction of alterations or
additions to, or rebuilding or renovation of, the Hotel,
including any additions to Hotel furnishings and equipment
(collectively, "Capital Improvements"). Owner shall have the
right to approve and inspect the installation and construction of
Capital Improvements and any mortgagee having a first lien on
Owner's leasehold estate in the Hotel ("Owner's Leasehold
Mortgagee") or a first lien on Fee Owner's fee estate in the
Hotel (the "Fee Owner's Mortgagee") shall also have any right of
approval or inspection of the installation and construction of
the Capital Improvements to the extent set forth in the mortgage,
deed of trust or other loan documents (collectively, the
"Mortgage Documents") (but only if and to the extent the Manager
has been provided with copies of the Mortgage Documents). Fee
Owner shall not have the right to approve any Capital Budget.
After a Capital Budget has been adopted, it shall be subject to
review and modification in the event unpredicted or unanticipated
capital expenditures are required during any calendar year.
Manager and Owner each agree not to unreasonably withhold or
delay its consent to a proposed modification of a Capital Budget.
Any amendment that is mutually agreed upon shall be set forth in
writing and signed by both parties. It is acknowledged by Owner
that capital expenditures required as a result of an emergency
situation shall not reduce amounts available pursuant to the
Capital Budget or otherwise hereunder, other than to the extent a
Capital Budget item is subsumed within the capital expenditures
required as a result of the occurrence of the emergency;
(viii) General Maintenance Non-Capital Replacements. Manager shall
supervise the maintenance, repair and replacement of non-capital
replacements;
(ix) Operating Equipment. Manager shall select and purchase all
operating equipment for the Hotel such as linens, utensils,
uniforms and other similar items, provided, however, that if
Owner determines that it can
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purchase operating equipment of a quality at least equal to that
which Manager generally uses at a price lower than the price
obtained by Manager, Manager shall purchase such operating
equipment from the vendor designated by Owner;
(x) Operating Supplies. Manager shall select and purchase all
operating supplies for the Hotel such as food, beverages, fuel,
soap, cleansing items, stationery and other consumable items,
provided, however, that if Owner determines that it can purchase
operating supplies of a quality at least equal to that which
Manager generally uses at a price lower than the price obtained
by Manager, Manager shall purchase such operating supplies from
the vendor designated by Owner;
(xi) Accounting Standards. Manager shall maintain the books and
records reflecting the operations of the Hotel in accordance with
the accounting practices of Manager in conformity with generally
accepted accounting practices consistently applied and shall
adopt and follow the fiscal accounting periods utilized by
Manager in its normal course of business. The Hotel level
generated accounting records reflecting detailed day-to-day
transactions of the Hotel's operations, shall be kept by Manager
at the Hotel or at Manager's regional offices or corporate
headquarters, or at such other location as Manager shall
reasonably determine. Manager shall receive a monthly fee for
accounting services provided to the Hotel ("Accounting Fee"). The
current Accounting Fee is set forth on Exhibit "B". The
Accounting Fee shall be adjusted by Manager from time to time and
set forth in the annual Operating Budget;
(xii) Marketing and Advertising. Manager shall advertise and promote
the Hotel in coordination with the sales and marketing programs
of Manager and other Homewood Suites hotels. Manager may
participate in sales and promotional campaigns and activities
involving complimentary rooms. Manager, in marketing and
advertising the Hotel, shall have the right to use marketing and
advertising services of employees of Manager and its parent and
affiliated companies not located at the Hotel. Manager may charge
the Hotel for personnel and other costs and expenses incurred in
providing such services; provided that (i) Manager's allocation
of such costs and expenses among hotels, including the Hotel,
shall be pro rated among all hotels owned or managed by Manager
and (ii) the annual allocation of such costs and expenses to the
Hotel shall not exceed $10,000.00. Such costs and expenses shall
be reflected in the budgets and operating statements required to
be prepared and submitted by Manager under this Agreement;
(xiii) Permits and Licenses. Manager shall obtain and maintain the
various permits and licenses required or permitted to be held in
its name that are necessary to enable Manager to operate the
Hotel in accordance with the terms of this Agreement and the
License Agreement, provided, however,
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that Manager shall only hold liquor licenses and alcoholic
beverage licenses if required by the laws of the jurisdiction in
which the Hotel is located. In addition, Manager shall upon
request cooperate with and assist Owner in obtaining the various
permits and licenses that are required to be held in the name of
either or both of Owner and Fee Owner that are necessary to
enable Manager to operate the Hotel. Manager, at Owner's cost and
expense, shall use all reasonable efforts, to the extent within
its control, to comply with the terms and conditions of all
licenses and permits issued with respect to the Hotel and the
business conducted at the Hotel, including, without limitation,
the terms and conditions of the License Agreement;
(xiv) Owner Meetings. The Hotel's general manager shall meet with
Owner's Representative as hereinafter defined in Section
4.01(viii) quarterly to review and discuss the previous and
future month's operating statement, cash flow, budget, capital
expenditures, important personnel matters and the general
concerns of Owner and Manager. In addition, a representative of
Manager's corporate staff shall meet with Owner's Representative
quarterly to review and discuss the previous and future quarter's
operating statement, cash flow, budget, capital expenditures,
important personnel matters and the general concerns of Owner and
Manager. Except to the extent otherwise mutually agreed upon by
Owner and Manager, the quarterly meetings described in this
clause (xiv) shall be held at the Hotel;
(xv) Insurance. Manager shall procure and maintain throughout the Term
the insurance coverages set forth on Exhibit "D";
(xvi) Compliance with Law. Manager, at Owner's cost and expense, shall
use all reasonable efforts to comply with all laws, ordinances,
regulations and requirements of any federal, state or municipal
government that are applicable to the use and operation of the
Hotel, as well as with all orders and requirements of the local
fire department, of which Manager has knowledge; provided,
however, that Owner shall have the right to contest by proper
legal proceedings, the validity of any such law, ordinance, rule,
regulation, order, decision or requirement and may postpone
compliance therewith to the extent and in the manner provided by
law until final determination of any such proceedings. Manager
promptly shall notify Owner in writing of all notices of legal
requirements applicable to the Hotel that are received by
Manager;
(xvii) Satisfaction of Obligations. Manager agrees to pay, when due,
all amounts due under any equipment leases and all other
contracts and agreements relating to the operation or maintenance
of the Hotel, and, if requested by Owner, any Mortgage Documents
relating to the loan from Owner's Leasehold Mortgagee ("Owner's
Mortgage Documents"), but solely from and to the extent that
funds are available in the Bank Account(s), and to comply, at
Owner's cost and expense, with all other
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covenants and obligations contained in the equipment leases and
all utility contracts, concession agreements, and service and
maintenance contracts, and, if requested by Owner, Owner's
Mortgage Documents to the extent that compliance therewith is
within the reasonable control of Manager by reason of its
management and operation of the Hotel pursuant to this Agreement;
provided, however, Manager shall have no obligation to comply
with any provisions in the Mortgage Documents that conflict with
its rights and obligations under this Agreement. Manager shall
have no obligation to perform or comply with any obligations of
(i) Fee Owner or Owner under the Percentage Lease or (ii) Fee
Owner under any Mortgage Documents relating to the loan from Fee
Owner's Mortgagee (other than any right to approve or inspect
Capital Improvements contemplated by Section 3.01(vii) above);
(xviii) Requests for Information. Manager shall respond, with
reasonable promptness, to any information requests by Owner's
Leasehold Mortgagee in accordance with Owner's Mortgage
Documents, to the extent such information is required to be
furnished by Manager to Owner pursuant to this Agreement. Any
additional information or reports requested by Owner's Leasehold
Mortgagee shall be provided by Manager only if Owner so directs
Manager in writing and, to the extent such information or reports
are not being prepared for Owner in the ordinary course of
business pursuant to this Agreement, Owner agrees to pay the
reasonable expenses of preparing such information and reports;
(xix) Tax and Insurance Accruals. If requested by Owner, Manager shall
accrue and set aside on a monthly basis funds from Adjusted Gross
Revenues if available in the priority set forth on Exhibit B for
the payment of real estate taxes and insurance premiums, and such
accruals shall be deposited in a separate account and not
commingled with other operating accounts for Hotel operations
generally, provided, however, that to the extent such accruals
exceed the amount necessary to pay the actual amount of real
estate taxes and insurance premiums, such excess shall be
available for operating costs, ownership costs, Owner's Basic
Return, the Subordinated Management Fee and the others items set
forth on, and in the priority set forth on, Exhibit B. If such
accruals do not exceed the actual amounts due in respect of real
estate taxes and insurance premiums but Owner and Manager agree
in writing, the tax and insurance accruals on deposit may be used
from time to time to pay operating costs if Adjusted Gross
Revenues are not otherwise sufficient to pay such operating
costs.
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ARTICLE 4
OWNER'S OBLIGATIONS
Section 4.01. Owner's Obligations. During the Term, Owner shall have
the obligations set forth below:
(i) License Agreement. Owner shall comply with all the terms and
conditions of the License Agreement (specifically including, but
not limited to, Licensee's obligation to pay the fees, charges and
contributions set forth in paragraphs 3.c. and 7 of the License
Agreement) and keep the License Agreement in full force and effect
from the Effective Date through the remainder of the Term. Nothing
in this Agreement shall be interpreted in a manner which would
relieve Owner of any of its obligations under the License
Agreement;
(ii) Licenses and Permits. Owner shall obtain and maintain, with
Manager's assistance and cooperation, all governmental
permissions, licenses and permits required to be held in Owner's
and/or Fee Owner's name that are necessary to enable Manager to
operate the Hotel in accordance with the terms of this Agreement
and the License Agreement;
(iii) Insurance. Owner shall procure and maintain throughout the Term
the insurance coverages set forth on Exhibit "E";
(iv) Intentionally Omitted;
(v) Operating Funds. Owner shall provide all funds necessary to enable
Manager to manage and operate the Hotel in accordance with the
terms of this Agreement and the License Agreement, regardless of
the designation of a portion of the operating costs as Fee
Ownership Costs. Owner agrees to deliver to Manager for deposit
into the Bank Account(s) on the Effective Date the amount
specified on Exhibit "B" which amount shall be the "Minimum
Balance" to be maintained by Owner during the first year of the
Hotel's operation. The Minimum Balance thereafter shall be no less
than the Hotel's operating costs for the preceding fiscal month.
The Minimum Balance shall serve as working capital for the Hotel's
operations. Owner agrees, upon Manager's written request, to
immediately furnish Manager with sufficient funds to make up any
deficiency in the Minimum Balance;
(vi) Capital Funds. Owner shall expend such amounts for renovation
programs, furnishings, equipment and ordinary Hotel capital
replacement items as are required from time to time to (a)
maintain the Hotel in good order and repair, (b) comply with the
standards referred to in the License Agreement, and (c) comply
with governmental regulations and orders. Owner shall cooperate
fully with Manager in establishing appropriate procedures and
timetables for Owner to undertake capital replacement projects.
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It is recognized that expenditures for capital replacements are
incapable of precise calculation in advance. Therefore, five
percent (5%) of Gross Revenues each year shall be paid over in
cash in each calendar month after the Effective Date into a
Reserve Fund (as hereinafter defined) to pay for capital
replacements. In lieu of funding monthly into the Reserve Fund as
contemplated above, Owner shall have the right, but not the
obligation, to deposit into the Reserve Fund, on or about the
commencement of each year, the full amount set forth in the
Capital Budget. Manager shall establish a reserve for capital
replacements on the books of account for the Hotel and the cash
amounts required for such reserve shall be placed into an
interest-bearing account (the "Reserve Fund") established in the
Hotel's name at the bank at which the Bank Account(s) are
established, with Manager's designees being the only authorized
signatories on said account. All amounts on deposit in the Reserve
Fund shall be Owner's. Any expenditures for capital replacements
during any calendar year which have been included in an approved
Capital Budget may be made without Owner's or Fee Owner's
additional approval and, to the extent available, shall be made by
Manager from the Reserve Fund (including accrued interest and
unused accumulations from prior calendar years). Any amounts
remaining in the Reserve Fund at the close of each calendar year
shall be carried forward and retained in the Reserve Fund until
fully used as herein provided. To the extent the Reserve Fund is
insufficient at a particular time or to the extent the Reserve
Fund plus anticipated contributions for the ensuing calendar year
is less than the budgeted expenditures set forth in the approved
Capital Budget for the ensuing calendar year then in either such
event, Manager shall give Owner written notice thereof at least
sixty (60) days before the anticipated date such funds will be
needed. Owner shall supply the necessary funds by deposit to the
Reserve Fund at least fifteen (15) days before the anticipated
date such funds will be needed. All proceeds from the sale of
capital items no longer needed for the operation of the Hotel
shall be deposited to the Reserve Fund. Sale of such items shall
be at the discretion of Manager, and conducted in a commercially
reasonable manner. Manager shall not dispose of any capital item
or group of capital items having a value in excess of ten thousand
dollars ($10,000) without Owner's prior written consent unless the
replacement of such capital item or group of capital items has
been contemplated in the applicable Capital Budget. Manager also
shall obtain the consent of Owner's Leasehold Mortgagee when
required for any disposition of capital items otherwise prohibited
under the terms of Owner's Mortgage Documents, provided, however,
that to the extent a capital item is being replaced because the
same is defective or obsolete or with an item of equal or greater
value no such consent need be obtained from Owner's Leasehold
Mortgagee. Upon termination of this Agreement for whatever reason
or upon sale of the Hotel, Manager's right to expend any unused
portion of the Reserve Fund shall terminate and the balance of the
fund shall be paid over to Owner, less any sums then due Manager.
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To the extent any expenditure under this Section 4.01(vi) shall
exceed twenty thousand dollars ($20,000), Manager shall first
solicit bids from at least three different reputable and qualified
third parties, and the lowest of the bidders shall be selected
unless acceptance of a higher bid has been approved by Owner in
writing or unless Manager provides a reasonably detailed
explanation for its selection of a bid higher than the lowest of
the bidders;
(vii) Payments to Manager. Owner shall promptly pay to Manager all
amounts due Manager under this Agreement;
(viii) Owner's Representative. Owner shall appoint a representative to
represent Owner in all matters relating to this Agreement and/or
the Hotel ("Owner's Representative"). Owner's initial Owner's
Representative shall be the individual named on Exhibit "B".
Manager shall have the right to deal solely with the Owner's
Representative on all such matters. Manager may rely upon
statements and representations of Owner's Representative as being
from and binding upon Owner. Owner may change its Owner's
Representative from time to time by providing written notice to
Manager in the manner provided for herein. Owner shall cause the
Owner's Representative to attend all quarterly meetings referred
to in Section 3.01(xiv);
(ix) Owner's Audits. Owner shall have the right to have its independent
accounting firm examine the books and records of the Hotel at any
reasonable time upon forty-eight (48) hours notice to Manager;
(x) Right of Inspection and Review. Owner, Owner's Leasehold
Mortgagee, Fee Owner and Fee Owner's Mortgagee and their
respective accountants, attorneys, agents and other
representatives and invitees, shall have the right to enter upon
any part of the Hotel at all reasonable times during normal
business hours and during the term of this Agreement upon
reasonable prior notice to Manager for the purpose of examining or
inspecting the Hotel, showing the Hotel to prospective purchasers
or mortgagees, or auditing, examining or making extracts of books
and records of the Hotel, or for any other purpose which Owner, in
its reasonable discretion, shall deem necessary or advisable, but
the same shall be done with as little disruption to the business
of the Hotel as under the circumstances is reasonable; and
(xi) Quiet and Peaceable Operation. Owner shall ensure that Manager is
able to peaceably and quietly operate the Hotel in accordance with
the terms of this Agreement, free from molestation, eviction and
disturbance by Owner
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or by any other person or persons claiming by, through or under
Owner. Owner shall undertake and prosecute all reasonable and
appropriate actions, judicial or otherwise, required to assure
such quiet and peaceable operations by Manager.
ARTICLE 5
MANAGEMENT FEE
Section 5.01. Management Fee. On the first day of each fiscal month
after the Effective Date, Manager is authorized by Owner to pay itself from the
Bank Account(s) the Management Fees calculated in the manner set forth on
Exhibit "C".
ARTICLE 6
CLAIMS AND LIABILITY
Section 6.01. Claims and Liability. Owner and Manager mutually agree
for the benefit of each other to look only to the appropriate insurance
coverages in effect pursuant to this Agreement in the event any demand, claim,
action, damage, loss, liability or expense occurs as a result of injury to
person or damage to property regardless whether any such demand, claim, action,
damage, loss, liability or expense is caused or contributed to, by or results
from the negligence of Owner or Manager or their subsidiaries, affiliates,
employees, directors, officers, agents or independent contractors and regardless
whether the injury to person or damage to property occurs in and about the Hotel
or elsewhere as a result of the performance of this Agreement. Nevertheless, in
the event the insurance proceeds are insufficient or there is no insurance
coverage to satisfy the demand, claim, action, loss, liability or expense and
the same did not arise out of the gross negligence or willful misconduct of
Manager, Owner agrees, at its expense, to indemnify and hold Manager and its
subsidiaries, affiliates, officers, directors, employees, agents or independent
contractors harmless to the extent of the excess liability.
Section 6.02. Survival. The provisions of this Article 6 shall survive
any cancellation, termination or expiration of this Agreement and shall remain
in full force and effect until such time as the applicable statute of limitation
shall cut off all demands, claims, actions, damages, losses, liabilities or
expenses which are the subject of the provisions of this Article 6.
ARTICLE 7
CLOSURE, EMERGENCIES AND DELAYS
Section 7.01. Events of Force Majeure. If at any time during the Term
of this Agreement it becomes necessary, in Manager's opinion, to cease operation
of the Hotel in order to protect the Hotel and/or the health, safety and welfare
of the guests
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and/or employees of the Hotel for reasons beyond the reasonable control of
Manager, such as, but not limited to, acts of war, insurrection, civil strife
and commotion, labor unrest, governmental regulations and orders, shortage or
lack of adequate supplies or lack of skilled or unskilled employees, contagious
illness, catastrophic events or acts of God, which shall not include Manager's
computer systems and software not being able to accurately process date data and
information, including, but not limited to, calculating, comparing and
sequencing from, into and between the twentieth century, the year 2000 and the
twenty-first century ("Force Majeure"), then in such event or similar events
Manager may close and cease operation of all or any part of the Hotel, reopening
and commencing operation when Manager deems that such may be done without
jeopardy to the Hotel, its guests and employees.
Manager and Owner agree, except as otherwise provided herein, that the
time within which a party is required to perform an obligation and Manager's
right to manage the Hotel under this Agreement shall be extended for a period of
time equivalent to the period of delay caused by an event of Force Majeure.
Section 7.02. Emergencies. If a condition of an emergency nature should
exist which requires that immediate repairs be made for the preservation and
protection of the Hotel, its guests or employees, or to assure the continued
operation of the Hotel, Manager is authorized to take all actions and to make
all expenditures necessary to repair and correct such condition, regardless
whether provisions have been made in the applicable budget for such emergency
expenditures. Expenditures made by Manager in connection with an emergency shall
be paid, in Manager's sole discretion, out of the Bank Account(s). Owner shall
immediately replenish such funds paid from the Bank Account(s). Manager shall
endeavor to communicate with Owner prior to making any expenditures to correct
an emergency condition, but in any event shall promptly notify Owner after the
emergency expenditures have been made.
ARTICLE 8
CONDEMNATION AND CASUALTY
Section 8.01. Condemnation. If the Hotel is taken in any eminent
domain, expropriation, condemnation, compulsory acquisition or similar
proceeding by a competent authority, this Agreement shall automatically
terminate as of the date of taking or condemnation. Any compensation for the
taking or condemnation of the physical facility comprising the Hotel shall be
paid to Owner. Manager, however, with the full cooperation of Owner, shall have
the right to file a claim with the appropriate authorities for the loss of
Management Fee income for the remainder of the Term and any extension thereof
because of the condemnation or taking. If only a portion of the Hotel is so
taken and the taking does not make it unreasonable or imprudent, in Manager's
and Owner's opinion, to operate the remainder as a hotel of the type immediately
preceding such taking, this Agreement shall not terminate. Any compensation
shall be used, however, in whole or in part, to render the Hotel a complete and
satisfactory architectural unit as a hotel of the same type and class as it was
immediately preceding such taking or condemnation.
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Section 8.02. Casualty. In the event of a fire or other casualty, Owner
shall comply with the terms of the License Agreement and this Agreement shall
remain in full force and effect so long as the License Agreement remains in full
force and effect.
ARTICLE 9
TERMINATION RIGHTS
Section 9.01. Bankruptcy and Dissolution. If either party is
voluntarily or involuntarily dissolved or declared bankrupt, insolvent, or
commits an act of bankruptcy, or if a company enters into liquidation whether
compulsory or voluntary otherwise than for the purpose of amalgamation or
reconstruction, or compounds with its creditors, or has a receiver appointed
over all or any part of its assets, or passes title in lieu of foreclosure, the
other party may terminate this Agreement immediately upon serving notice to the
other party, without liability on the part of the terminating party.
Section 9.02. Manager's Termination Right Upon the Termination of
License Agreement. If the License Agreement is terminated for any reason,
Manager may terminate this Agreement immediately upon serving notice to Owner,
without liability on the part of Manager. Upon such termination, unless
specifically provided otherwise herein, Manager shall be entitled to receive the
Sale Termination Fee calculated in the manner set forth on Exhibit "B".
Notwithstanding anything contained herein, Manager shall not be entitled to
receive the Sale Termination Fee if the License Agreement is terminated because
of Manager's failure to perform its obligations hereunder and Manager's failure
was not caused by the failure of Owner to perform its obligations hereunder.
Section 9.03. (a) Owner's Default. The following shall, at the election
of Manager, constitute events of default by Owner under this Agreement (each
such event being referred to herein as an "Owner's Default"):
(i) The failure of Owner to pay any amount to Manager provided for
herein for a period of ten (10) days after written notice by
Manager of such failure to pay.
(ii) Failure of Owner to keep or perform any duty, obligation, covenant
or agreement of Owner under this Agreement (other than the
obligation to pay that is the subject of paragraph (i) above) and
such failure continues for a period of thirty (30) days after
receipt of written notice thereof from Manager; provided, however,
if such failure cannot reasonably be remedied or corrected within
such thirty (30) day period, then such thirty (30) day period
shall be extended for such additional period as may be reasonably
required to cure such default but only if Owner promptly commences
to cure such default and continues thereafter with all due
diligence to complete such a cure to the satisfaction of Manager.
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(iii) The occurrence of a default under or other termination of the
Percentage Lease.
(iv) Failure of Fee Owner to keep or perform any duty, obligation,
covenant or agreement of Fee Owner under the "Comfort Letter" of
even date herewith from Manager to Fee Owner agreed to and
accepted by Fee Owner (the "Comfort Letter") relating to the Hotel
and such failure continues for a period of thirty (30) days after
receipt of written notice thereof from Manager; provided, however,
if such failure cannot reasonably be remedied or corrected within
such thirty (30) day period, then such thirty (30) day period
shall be extended for such additional period as may be reasonably
required to cure such default, but only if Fee Owner promptly
commences to cure such default and continues thereafter with all
due diligence to complete such a cure to the satisfaction of
Manager.
(v) The occurrence of an "Event of Default" (as defined in the
Acquisition Mortgage Documents (as herein defined)) under the
Acquisition Mortgage Documents.
On the occurrence of any Owner's Default, Manager shall have the right
to terminate this Agreement by written notice to Owner, in addition to its
rights to seek damages or other remedies available to it at law or in equity.
(b) Manager Default. The following shall, at the election of Owner,
constitute an event of default by Manager under this Agreement (such event being
referred to herein as the "Manager Default"): Failure of Manager to keep or
perform any duty, obligation, covenant or agreement of Manager under this
Agreement and such failure shall continue for a period of thirty (30) days after
receipt of written notice thereof from Owner; provided, however, if such failure
cannot reasonably be remedied or corrected within such thirty (30) day period,
then such thirty (30) day period shall be extended for such additional period as
may be reasonably required to cure such default provided that Manager promptly
commences to cure such default and continues thereafter with all due diligence
to complete such cure to the satisfaction of Owner. Upon the occurrence of the
Manager Default, Owner shall have the right to terminate this Agreement by
written notice to Manager, in addition to its right to seek damages or other
remedies available to it at law or in equity.
Section 9.04. Owner's -- Termination Rights. (a) Provided Owner is not
in default under this Agreement at the time of delivery of the Termination
Notice (as defined herein) or on the Termination Date (as defined herein), Owner
shall have the right, after the tenth anniversary of the Effective Date, to
terminate this Agreement by giving written notice (a "Termination Notice") to
Manager setting forth an effective termination date which shall be the last day
of a month (the "Termination Date") and which shall be not less than six (6)
months nor more than twelve (12) months after the date of such Termination
Notice and shall in no event be prior to the tenth anniversary of the Effective
Date. If Owner terminates this Agreement pursuant to this Section 9.04(a), in
addition to payment of all other fees and reimbursable sums due to Manager on
the
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Termination Date, Manager shall have the right to receive the Cancellation
Termination Fee calculated in the manner set forth on Exhibit "B". Such
termination shall be effective so long as on or before the Termination Date (x)
Owner pays to Manager the Cancellation Termination Fee and all amounts
determined by Owner and Manager, each acting reasonably and in good faith, to be
due and owing to Manager pursuant to the terms and provisions of this Agreement
and (y) all sums then outstanding under the Acquisition Loan shall have been
paid in full.
(b) (i) Provided Owner is not in default under this Agreement, Owner
shall have the right to terminate this Agreement if, beginning in the first full
calendar year of Hotel operations, Manager fails to achieve, in any two
consecutive calendar years, a Gross Operating Profit (as herein defined) which
is at least eighty-five percent (85%) of the amount set forth in the respective
annual Operating Budget for Gross Operating Profit ("Budgeted GOP"); provided,
however, that, if within sixty (60) days of receipt of a notice from Owner that
Owner intends to terminate this Agreement pursuant to this Section 9.04(b)(i),
Manager pays in cash to Owner the difference between the achieved Gross
Operating Profit and eighty-five percent (85%) of the Budgeted GOP for the
second of the two consecutive calendar years in which shortfalls occurred, then
Owner shall not be entitled to terminate this Agreement. If Owner is entitled to
and elects to terminate this Agreement, Owner shall give written notice to
Manager within ninety (90) days following delivery to Owner of the annual
financial statements for the calendar year. If such notice is not provided by
Owner to Manager within such ninety (90) day period, Owner shall be deemed to
have waived its right hereunder to terminate this Agreement with respect to the
calendar year as to which the failure occurred. In the event Owner has the right
to terminate with respect to a calendar year but waives such right, Owner's
right to terminate shall carry forward and shall be applicable to the next
succeeding calendar year if Manager fails to achieve eighty-five percent (85%)
of Budgeted GOP for the next succeeding year, subject to Manager's right to cure
for such calendar year. For purposes of this section, the term "Gross Operating
Profit" shall mean the amount, if any, by which Adjusted Gross Revenues for any
calendar year exceed operating costs for such calendar year.
(ii) The provisions of clause (b)(i) above shall not apply in any
calendar year in which the operation of the Hotel, or the use of the Hotel's
facilities, are significantly disrupted by casualty loss, strike, eminent
domain, or other events of Force Majeure that are beyond the reasonable control
of Manager, or major repairs to or refurbishment of the Hotel. In the event
Owner exercises the right of termination contemplated in clause (b)(i) above,
(a) Owner shall have no obligation to pay any termination fee or other damages
to Manager as a consequence of such termination, except that Owner shall be
liable to Manager and shall pay immediately upon such termination all fees
earned and other amounts and expenses payable or reimbursable to Manager
pursuant to this Agreement and (b) the exercise of the right of termination
shall only be valid if on or prior to the termination date all sums outstanding
under the Acquisition Loan shall have been paid in full.
Section 9.05. Manager's Right to Terminate Upon Sale. If there is to be
a "Change in Ownership" as defined in the License Agreement and the new owner of
the
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Hotel has not received a Homewood Suites License Agreement for the operation of
the Hotel (for purposes of this Section 9.05, said agreement shall be referred
to as the "License Agreement"), Manager shall have the right upon giving notice
to Owner to terminate this Agreement on the date the Change of Ownership occurs.
If there is a Change of Ownership and the new owner of the Hotel receives a
License Agreement, but does not enter into an assumption agreement, pursuant to
which the new owner assumes all of Owner's obligations hereunder, with Manager
prior to the date the Change of Ownership occurs, Manager shall have the right,
upon giving notice to Owner, to terminate this Agreement on the date the Change
of Ownership occurs. If Manager terminates this Agreement pursuant to this
Section 9.05 (in addition to payment of all other fees and reimbursable sums due
to Manager to the date of termination), Manager shall have the right to receive
the Sale Termination Fee calculated in the manner set forth on Exhibit "B". If a
Change of Ownership occurs, and the new owner obtains a License Agreement and
the new owner and Manager enter into an assumption agreement pursuant to which
this Agreement remains in full force and effect, Manager shall not receive a
Termination Fee and references in this Agreement to License Agreement shall be
to the License Agreement with such new owner.
Section 9.06. Delays. Notwithstanding any other provision of this
Agreement, if any event of the type described in Article 7 or 8 occurs after the
Effective Date and Manager is unable to operate the Hotel for a period of ninety
(90) days, Manager shall have the option to terminate this Agreement upon thirty
(30) days' prior written notice to Owner, without liability on the part of
Manager, its parent or their subsidiaries or affiliates. Under any such
circumstances, the Acquisition Loan shall be repaid in full.
Section 9.07. Employment Solicitation Restriction Upon Termination.
Owner and its affiliates and subsidiaries and their successors hereby agree not
to solicit the employment of the Hotel general manager, assistant general
manager or director of sales at any time during the term of this Agreement
without Manager's prior written approval. Furthermore, Owner and its affiliates
and subsidiaries and successors agree not to employ the Hotel's general manager,
assistant general manager or director of sales for a period of twelve (12)
months after the termination or expiration of this Agreement, without Manager's
prior written approval.
Section 9.08. Transition Upon Termination. Upon any termination of this
Agreement, all fees and payments due to Manager as of the effective date of
termination, including all accrued and unpaid fees and reimbursable charges and
expenses, shall be paid to Manager within ten (10) days after delivery to Owner
of an itemized statement of such fees and payments. Manager shall be entitled to
exercise the right of setoff provided in Section 11.16 hereof with respect to
such fees, charges and expenses. Manager shall deliver to Owner, or such other
person or persons as Owner may designate, copies of all books and records of the
Hotel and all funds in the possession of Manager belonging to Owner or received
by Manager pursuant to the terms of this Agreement, and shall assign, transfer
or convey to such person or persons all service contracts and personal property
relating to or used in the operation and maintenance of the Hotel, except any
personal property which is owned by Manager. Manager also shall, for a period of
thirty (30) days
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after such expiration or termination, make itself available to consult with and
advise Owner or such other person or persons regarding the operation and
maintenance of the Hotel at a consultation fee to be agreed upon between Manager
and Owner.
ARTICLE 10
APPLICABLE LAW AND ARBITRATION
Section 10.01. Applicable Law. The interpretation, validity and
performance of this Agreement shall be governed by the procedural and
substantive laws of the state of Tennessee and any and all disputes, except
those specifically referred to below, shall be brought and maintained within
that state. If any judicial authority holds or declares that the law of another
jurisdiction is applicable, this Agreement shall remain enforceable under the
laws of that jurisdiction.
Section 10.02. Arbitration of Financial Matters.
Subsection 10.02.1. Matters to be Submitted to Arbitration. In
the case of a dispute with respect to any of the following matters,
either party may submit such matter to arbitration which shall be
conducted by the Accountants (as hereinafter defined in Subsection
10.02.2): (a) computation of the Management Fees; (b) reimbursements
due to Manager under the provisions of Section 11.15; (c) any
adjustment in the Minimum Balance under the provisions of Section
4.01(v); (d) any adjustment in dollar amounts of insurance coverages
required to be maintained; and (e) any dispute concerning the approval
of an Operating Budget.
All disputes concerning the above matters shall be submitted to
the Accountants. The decision of the Accountants with respect to any
matters submitted to them under this Subsection 10.02.1 shall be
binding on both parties hereto.
Subsection 10.02.2. The Accountants. The "Accountants" shall be
one of three (3) firms of certified public accountants of recognized
national standing in the hotel industry. Until otherwise agreed to by
the parties, the three (3) firms shall be Xxxxxx Xxxxxxxx & Co.,
PriceWaterhouseCoopers, and Ernst & Young, notwithstanding any existing
relationships which may exist between Owner and such accounting firms
or Manager and such accounting firms. The party desiring to submit any
matter to arbitration under Subsection 10.02.1 shall do so by written
notice to the other party, which notice shall set forth the items to be
arbitrated and such party's choice of one of the three (3) accounting
firms. The party receiving such notice shall within fifteen (15) days
after receipt of such notice either approve such choice, or designate
one of the remaining two (2) firms by written notice back to the first
party, and the first party shall within fifteen (15) days after receipt
of such notice either approve such choice or disapprove the same. If
both parties shall have approved one of the three (3) firms under the
preceding sentence, then such firm shall be the "Accountants" for the
purposes of arbitrating
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the dispute; if the parties are unable to agree on an accounting firm,
then the third firm, which was not designated by either party, shall be
the "Accountants" for such purpose. The Accountants shall be required
to render a decision in accordance with the procedures described in
Subsection 10.02.3 within fifteen (15) days after being notified of
their selection. The fees and expenses of the Accountants will be paid
by the non-prevailing party.
Subsection 10.02.3. Procedures. In all arbitration proceedings
submitted to the Accountants, the Accountants shall be required to
agree upon and approve the substantive position advocated by Owner or
Manager with respect to each disputed item. Any decision rendered by
the Accountants that does not reflect the position advocated by Owner
or Manager shall be beyond the scope of authority granted to the
Accountants and, consequently, may be overturned by either party. All
proceedings by the Accountants shall be conducted in accordance with
the Uniform Arbitration Act, except to the extent the provisions of
such act are modified by this Agreement or the mutual agreement of the
parties. Unless otherwise agreed, all arbitration proceedings shall be
conducted at the Hotel.
Section 10.03. Performance During Disputes. It is mutually agreed that
during any kind of controversy, claim, disagreement or dispute, including a
dispute as to the validity of this Agreement, Manager shall remain in possession
of the Hotel as Manager; and Owner and Manager shall continue their performance
of the provisions of this Agreement and its exhibits. Manager shall be entitled
to injunctive relief from a civil court or other competent authority to maintain
possession in the event of a threatened eviction during any dispute,
controversy, claim or disagreement arising out of this Agreement.
ARTICLE 11
GENERAL PROVISIONS
Section 11.01. Authorization. Owner and Manager represent and warrant
to each other that their respective corporations have full power and authority
to execute this Agreement and to be bound by and perform the terms hereof. On
request, each party shall furnish the other evidence of such authority.
Section 11.02. Relationship. Manager and Owner shall not be construed
as joint venturers or partners of each other by reason of this Agreement and
neither shall have the power to bind or obligate the other except as set forth
in this Agreement.
Section 11.03. Manager's Contractual Authority in the Performance of
this Agreement. Manager is authorized to make, enter into and perform in the
name of and for the account of Owner any contracts deemed necessary by Manager
to perform its obligations under this Agreement. In exercising its authority
hereunder, Manager shall be entitled to execute and enter into contracts without
the specific approval of Owner and Fee Owner so long as each such contract (i)
requires expenditures or otherwise establishes liability of twenty-five thousand
dollars ($25,000) or less and (ii) has a term
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(excluding options in favor of Manager and Owner to renew) of one (1) year or
less or can be cancelled without penalty upon sixty (60) days' notice or less,
provided, however, that any contract entered into pursuant to the last paragraph
of Section 4.01(vi) shall be governed by the provisions of said Section
4.01(vi). Any contract that does not satisfy the conditions set forth in the
preceding sentence shall require the prior approval in each instance of Owner,
regardless whether such expenditure is authorized in an applicable budget,
unless the form of the contract proposed to be entered into has been approved in
advance by Owner. Owner agrees to promptly respond to any request for approval
and further agrees that its consent shall not be unreasonably withheld or
delayed. Manager shall be authorized to enter into contracts with affiliates of
Manager, but only so long as Owner shall have approved in advance the cost of
the service or product to be provided.
Section 11.04. Further Actions. Owner and Manager agree to execute all
contracts, agreements and documents and to take all actions necessary to comply
with the provisions of this Agreement and the intent hereof.
Section 11.05. Successors and Assigns. Owner's consent shall not be
required for Manager to assign any of its rights, interests or obligations as
Manager hereunder to any parent, subsidiary or affiliate of Manager or Promus
Hotel Corporation, provided that any such assignee agrees to be bound by the
terms and conditions of this Agreement and provided, further, that such assignee
has received an assignment of all or substantially all of the management
agreements entered into by Manager with respect to other Homewood Suites hotels.
The acquisition of Manager or its parent company by a third party shall not
constitute an assignment of this Agreement by Manager and this Agreement shall
remain in full force and effect between Owner and Manager. Except as herein
provided, Manager shall not assign any of its obligations hereunder without the
prior written consent of Owner, which shall not be unreasonably withheld or
delayed. Owner shall be deemed to have consented to such an assignment of this
Agreement if Owner has not notified Manager in writing to the contrary within
fifteen (15) days after Owner has received Manager's request for Owner's consent
to an assignment. Manager shall have the right to pledge or assign its right to
receive the Management Fees hereunder without the prior written consent of
Owner.
Owner shall have the right to assign this Agreement to the person or
entity which has obtained (i) leasehold title to the Hotel in accordance with
the Comfort Letter and (ii) a Homewood Suites License Agreement for the Hotel.
Except as hereinabove provided, Owner shall not have the right to assign this
Agreement.
Section 11.06. Notices. All notices or other communications provided
for in this Agreement shall be in writing and shall be either hand delivered,
delivered by certified mail, postage prepaid, return receipt requested,
delivered by an overnight delivery service, or delivered by facsimile machine
(with an executed original sent the same day by an overnight delivery service),
addressed as set forth on Exhibit "B". Notices shall be deemed delivered on the
date that is four (4) calendar days after the notice is deposited in the U.S.
mail (not counting the mailing date) if sent by certified mail, or, if hand
delivered, on the date the hand delivery is made, or if delivered by facsimile
machine, on the date the transmission is made. If given by an overnight
21
delivery service, the notice shall be deemed delivered on the next business day
following the date that the notice is deposited with the overnight delivery
service. The addresses given above may be changed by any party by notice given
in the manner provided herein.
Section 11.07. Documents. Owner shall furnish Manager copies of all
leases, title documents, property tax receipts and bills, insurance statements,
all financing documents (including notes and mortgages) relating to the Hotel
and such other documents pertaining to the Hotel as Manager shall request.
Section 11.08. Defense. Manager shall defend and/or settle any claim or
legal action brought against Manager or Owner, individually, jointly or
severally in connection with the operation of the Hotel. Manager shall retain
and supervise legal counsel, accountants and such other professionals,
consultants and specialists as Manager deems appropriate to defend and/or settle
any such claim or cause of action. Owner shall have the right to participate
actively in the defense of any such claim or cause of action in which Owner is a
named defendant. Owner's approval shall be required with respect to any proposed
settlement of any claim or cause of action in which Owner is a named party or
that is not covered by insurance (excluding any deductible amount specified in
the applicable policy of insurance). Manager shall confer with Owner concerning
any settlement proposal that Manager is considering accepting, regardless of
whether Owner is a named party, but Owner's approval shall not be required if
Owner is not a named party and the settlement is covered by insurance. All
liabilities, costs, and expenses, including attorneys' fees and disbursements,
incurred in defending and/or settling any such claim or legal action which are
not covered by insurance shall be paid by Owner.
Section 11.09. Waivers. No failure or delay by Manager or Owner to
insist upon the strict performance of any covenant, agreement, term or condition
of this Agreement, or to exercise any right or remedy consequent upon the breach
thereof, shall constitute a waiver of any such breach or any subsequent breach
of such covenant, agreement, term or condition. No covenant, agreement, term, or
condition of this Agreement and no breach thereof shall be waived, altered or
modified except by written instrument. No waiver of any breach shall affect or
alter this Agreement, but each and every covenant, agreement, term and condition
of this Agreement shall continue in full force and effect with respect to any
other then existing or subsequent breach thereof.
Section 11.10. Changes. Any change to or modification of this
Agreement, including, without limitation, any change in the application of this
Agreement to the Hotel, must be evidenced by a written document signed by both
parties hereto.
Section 11.11. Captions. The captions for each Article and Section are
intended for convenience only.
Section 11.12. Severability. If any of the terms and provisions hereof
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any of the other terms or provisions hereof. If, however, any
material part of a party's rights under this Agreement shall be declared invalid
or unenforceable (specifically including Manager's right to receive its
Management Fees), the party whose rights have been declared invalid or
unenforceable shall have the option to terminate this Agreement upon thirty (30)
days' written notice to the other party, without liability on the part of the
terminating party.
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Section 11.13. Interest. Any amount payable to Manager or Owner by the
other which has not been paid when due shall accrue interest at the lesser of:
(a) the highest legal limit in the state in which the Hotel is located, (b) the
highest legal limit in the state of Tennessee, or (c) two percentage points (2%)
over the published base rate of interest charged by Citibank, N.A., New York,
New York, to borrowers on ninety (90) day unsecured commercial loans, as the
same may be changed from time to time.
Section 11.14. Reimbursement. The performance by Manager of its
responsibilities under this Agreement are conditioned upon Owner providing
sufficient funds to Manager on a timely basis to enable Manager to perform its
obligations hereunder. Nevertheless, Manager shall be entitled, at its option,
after first providing not less than ten (10) days' prior written notice to Owner
specifying the obligations to be satisfied and the amount of money to be
advanced, to advance funds or contribute property, on behalf of the Owner, to
satisfy obligations of Owner in connection with the Hotel and this Agreement.
Manager shall keep appropriate records to document all reimbursable expenses
paid by Manager, which records shall be made available for inspection by Owner
or its agents upon request. Owner agrees to reimburse Manager with interest upon
demand for money paid or property contributed by Manager to satisfy obligations
of Owner in connection with the Hotel and this Agreement. Interest shall be
calculated at the rate set forth in Section 11.13 from the date Owner was
obligated to remit the funds or contribute the property for the satisfaction of
such obligation to the date reimbursement is made.
Section 11.15. Travel and Out-of-Pocket Expenses. Manager shall be
reimbursed for all reasonable travel and out-of-pocket expenses of Manager's
employees reasonably incurred in the performance of this Agreement, provided,
however, that travel and out-of-pocket expenses of officers of Manager, its
parent and affiliates shall not be reimbursable by Owner. Manager shall have
sole discretion, which shall not be unreasonably exercised, to determine the
necessity for such travel or other expenses.
Section 11.16. Set off. Without prejudice to Manager's right to
terminate this Agreement pursuant to the provisions of this Agreement, Manager
may at any time and without notice to Owner set off or transfer any sum or sums
held by Manager or other affiliate of Promus Hotels, Inc. to the order or on
behalf of Owner or Fee Owner or standing to the credit of Owner or Fee Owner in
the Bank Account(s) in or towards satisfaction of any of Owner's liabilities to
Manager in respect of all sums due to Manager under the terms of this Agreement.
Section 11.17. Third Party Beneficiary. This Agreement is exclusively
for the benefit of the parties hereto and it may not be enforced by any party
other than the parties to this Agreement and shall not give rise to liability to
any third party other than the authorized successors and assigns of the parties
hereto.
23
Section 11.18. Brokerage. Manager and Owner represent and warrant to
each other that neither has sought the services of a broker, finder or agent in
this transaction, and neither has employed, nor authorized, any other person to
act in such capacity. Manager and Owner each hereby agrees to indemnify and hold
the other harmless from and against any and all claims, loss, liability, damage
or expenses (including reasonable attorneys' fees) suffered or incurred by the
other party as a result of a claim brought by a person or entity engaged or
claiming to be engaged as a finder, broker or agent by the indemnifying party.
Section 11.19. Survival of Covenants. Any covenant, term or provision
of this Agreement which, in order to be effective, must survive the termination
of this Agreement, shall survive any such termination.
Section 11.20. Estoppel Certificate. Manager and Owner agree to furnish
to the other party, from time to time upon request, an estoppel certificate in
such reasonable form as the requesting party may request stating whether there
have been any defaults under this Agreement known to the party furnishing the
estoppel certificate and such other information relating to the Hotel as may be
reasonably requested.
Section 11.21. Other Agreements. Except to the extent as may now or
hereafter be specifically provided, nothing contained in this Agreement shall be
deemed to modify any other agreement between Owner and Manager with respect to
the Hotel or any other property. This Agreement, together with the Comfort
Letter, contains the entire agreement between Owner and Manager regarding the
management of the Hotel.
Section 11.22. Periods of Time. Whenever any determination is to be
made or action is to be taken on a date specified in this Agreement, if such
date shall fall on a Saturday, Sunday or legal holiday under the laws of the
states of Tennessee and Virginia and/or the state in which the Hotel is located,
then in such event said date shall be extended to the next day which is not a
Saturday, Sunday or legal holiday.
Section 11.23. Preparation of Agreement. This Agreement shall not be
construed more strongly against either party regardless of who is responsible
for its preparation.
Section 11.24. Exhibits. All exhibits attached hereto are incorporated
herein by reference and made a part hereof as if fully rewritten or reproduced
herein.
Section 11.25. Attorneys' Fees and Other Costs. The parties to this
Agreement shall bear their own attorneys' fees in relation to negotiating and
drafting this Agreement. Should Owner or Manager engage in litigation to enforce
their respective rights pursuant to this Agreement, the prevailing party shall
have the right to indemnity by the non-prevailing party for an amount equal to
the prevailing party's reasonable attorneys' fees, court costs and expenses
arising therefrom.
Section 11.26. Agreement Not an Interest in Real Property. This
Agreement is not, and shall not be deemed at any time to be or to create, an
interest in real estate or a lien or other encumbrance of any kind whatsoever
against the Hotel or the land on which it is erected.
24
Section 11.27. Acquisition Loan; Agency Coupled With an Interest; No
Termination While the Acquisition Loan Remains Outstanding. In accordance with
the Purchase Agreement (as herein defined) and that certain Agreement of Sale
dated August 6, 1999 by and among Hampton Inns, Inc., Promus Hotels Florida,
Inc. and Promus Hotels, Inc., as sellers, and Fee Owner, as buyer (as the same
has been amended, the "Existing Purchase Agreement"), Promus Hotels, Inc. (in
its capacity as lender, the "Acquisition Lender") has loaned to Fee Owner the
sum of $33,975,000 (the "Acquisition Loan") as purchase money financing for the
acquisition of the properties (the "Properties") conveyed pursuant to the
Purchase Agreement and the Existing Purchase Agreement. The Acquisition Loan is
evidenced by (i) a note of Fee Owner dated September 20, 1999 in the amount of
$26,625,000 and (ii) a note of Fee Owner of even date herewith in the amount of
$7,350,000 and is secured by, among other things, mortgage(s), deed(s) of trust
or deed(s) to secure debt dated September 20, 1999 or of even date herewith from
Fee Owner or its wholly-owned subsidiary which encumbers some or all of the
Properties, which may include the Hotel (the documents evidencing and securing
the Acquisition Loan herein referred to as the "Acquisition Mortgage
Documents"). Owner and Manager specifically acknowledge and agree that (i)
Acquisition Lender has been induced, in part, to make the Acquisition Loan to
Fee Owner based upon Owner's agreement to enter into this Agreement with
Manager, (ii) Acquisition Lender required Owner to enter into this Agreement
with Manager as a condition to making the Acquisition Loan so that (inter alia)
Manager could facilitate the repayment of the Acquisition Loan in accordance
with its terms by managing and operating the Hotel in accordance with the terms
of this Agreement, and (iii) it is the parties' intention that Owner's retention
of Manager to operate the Hotel pursuant to the terms of this Agreement is
intended to, and shall, create an "agency coupled with an interest" in favor of
Manager, which agency shall be irrevocable unless and until the Acquisition Loan
is repaid in full. Manager shall be entitled to the legal and equitable
protections that the status of an agent coupled with an interest confers on
Manager for so long as the Acquisition Loan remains outstanding. Accordingly,
(x) no purported termination of this Agreement by Owner for any reason
whatsoever (including, without limitation, any purported termination pursuant to
Article 8 or Article 9) shall be effective unless and until the Acquisition Loan
shall have been repaid in full, and (y) Manager shall have the right and option
to extend the Term of this Agreement indefinitely for so long as the Acquisition
Loan remains outstanding. The provisions of this Section shall take effect
notwithstanding anything to the contrary set forth in this Agreement.
Section 11.28. Counterparts. This Agreement may be executed in two (2)
or more counterparts, each of which shall be deemed an original.
25
The parties have respectively caused this Agreement to be executed as
of the respective dates shown below.
OWNER:
/s/ Xxx X. Remppies APPLE SUITES MANAGEMENT,
-------------------- INC., a Virginia corporation
Witness:
By /s/ Xxxxx X. Xxxxxx
-------------------------
Name: Xxxxx X. Xxxxxx
Title: President
Date:
MANAGER:
/s/ [illegible] PROMUS HOTELS, INC.
--------------------
Witness:
By /s/ Xxx X. Xxxx
---------------------------
Name: Xxx X. Xxxx
Title: Executive Vice President & CFO
Date:
EXHIBIT "A"
LICENSE AGREEMENT
[Included elsewhere in this Filing.]
A-1
EXHIBIT "B"
DEAL SPECIFIC TERMS
TERM: Fifteen (15) years from the Effective
Date
INITIAL MINIMUM BALANCE
FOR THE BANK ACCOUNT(S) : $75,000
INITIAL OWNER'S REPRESENTATIVE: Xxxx Xxxxxxxx
DISBURSEMENT PRIORITY SCHEDULE:
Each fiscal month Manager, on behalf of Owner, shall disburse funds
from the Bank Account(s) in the following order of priority and to the extent
available:
(a) all fees, assessments and charges due and payable under the License
Agreement when issued;
(b) the Management Fee, but excluding, to the extent then applicable,
the Subordinated Management Fee;
(c) all reimbursable expenses due Manager;
(d) all other Hotel operating costs (herein and in the Agreement
referred to as "operating costs"), as such costs and expenses are
defined under the accounting practices of Manager in conformity
with generally accepted accounting practices consistently applied,
specifically including, but not limited to, (i) the cost of
operating equipment and operating supplies, wages, salaries and
employee fringe benefits, advertising and promotional expenses, the
cost of personnel training programs, utility and energy costs,
operating licenses and permits, grounds and landscaping maintenance
costs and equipment rentals approved by Manager as an operating
cost; (ii) all expenditures made for maintenance and repairs to
keep the Hotel in good condition and repair, specifically excluding
expenditures for Capital Replacements; and (iii) premiums and
charges on the insurance coverages specified in Exhibit "D"
incurred after the Effective Date. There shall be excluded from the
operating costs of the Hotel the following, which shall be
ownership costs of the Hotel: (i) depreciation of the Hotel,
furnishings, fixtures and equipment; (ii) rental pursuant to a
ground lease, if any, or the Percentage Lease or any other lease
payments; (iii) debt service (interest and principal) on any
mortgage(s) encumbering Owner's leasehold interest in, and/or Fee
Owner's fee interest in, the Hotel; (iv) property taxes and
assessments; (v) expenditures for Capital Replacements; (vi) audit,
legal and other professional or special fees; (vii) premiums for
insurance
B-1
coverages specified in Exhibit "E"; (viii) administrative and
general expenses and disbursements of Owner, including compensation
of employees of Owner; (ix) Federal, State and local Franchise and
Income Taxes; (x) amortization of bond discounts and mortgage
expenses; (xi) deposits into the Reserve Fund or amounts held
pursuant to Section 3.01(xix); and (xiii) such other costs or
expenses which are normally treated as ownership costs under the
accounting practices of Manager in conformity with generally
accepted accounting practices consistently applied;
(e) the following ownership costs, disbursed in the following order of
priority and to the extent available:
(i) an amount (annualized) to satisfy land, building and
personal property taxes and assessments;
(ii) an amount (annualized) to satisfy the premiums for the
insurance required to be obtained by Owner in accordance
with Exhibit "E";
(iii) the amount to be deposited in the Reserve Fund pursuant to
Section 4.01(d); and
(iv) any ground lease payments, but specifically excluding,
except as specifically itemized above, any sums payable by
Owner to Fee Owner pursuant to the Percentage Lease;
(f) Owner's Basic Return;
(g) the Subordinated Management Fee;
(h) payments of principal, interest and other sums payable under the
Acquisition Loan;
(i) any payments not specifically contemplated above which are required
to be paid by Owner to Fee Owner pursuant to the Percentage Lease;
and
(j) except as provided above, debt service upon any mortgage(s)
encumbering the Hotel and any capital lease payments.
After the disbursements set forth above, any excess funds remaining in
the Bank Account(s) over the Minimum Balance shall be distributed to Owner. If
after making the disbursements set forth above, there shall be a deficiency in
the Minimum Balance, Owner shall immediately provide such funds as may be
required to maintain the Minimum Balance in the Bank Account(s).
B-2
NOTICES:
Owner: Apple Suites Management, Inc.
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Fax: 804/000-0000
Attention: Xx. Xxxxx X. Xxxxxx
with a copy to:
Jenkens & Xxxxxxxxx
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
Fax: 214/000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
Manager: Promus Hotels, Inc.
000 Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxx 00000
Fax: 901/000-0000
Attention: Corporate Secretary
with a copy to:
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Fax: 212/000-0000
Attention: Xxxxxx X. Xxxx, Esq.
SALE TERMINATION FEE:
The "Sale Termination Fee" shall be: (i) if the termination of this
Agreement occurs on or before the second anniversary of the Effective Date, the
sum of $771,000; (ii) if the termination of this Agreement occurs after the
second anniversary of the Effective Date but on or before the tenth (10th)
anniversary of the Effective Date, an amount equal to the product of (x) three
(3) times (y) the quotient of the aggregate of the Management Fees earned during
the preceding twenty-four (24) month period divided by two (2); (iii) if the
termination of this Agreement occurs after the tenth (10th) anniversary of the
Effective Date but on or before the fourteenth (14th) anniversary of the
Effective Date, an amount equal to the product of (x) one and one-half (1.5)
times (y) the aggregate of the Management Fees earned during the preceding
twenty-four month period divided by two (2); and (iv) if the termination of this
Agreement occurs after the fourteenth (14th) anniversary of the Effective Date,
an amount equal to the product of (x) the aggregate of the Management Fees
earned during the preceding twenty-four (24) month period divided by 24 times
(y) the number of full calendar months remaining in the Term.
B-3
CANCELLATION TERMINATION FEE:
The "Cancellation Termination Fee" shall be: (i) if the termination of
this Agreement occurs after the tenth (10th) anniversary of the Effective Date
but on or before the fourteenth (14th) anniversary of the Effective Date, an
amount equal to the product of (x) two (2) times (y) the aggregate of the
Management Fees earned during the preceding twenty-four month period divided by
two (2); and (ii) if the termination of this Agreement occurs after the
fourteenth (14th) anniversary of the Effective Date, an amount equal to the
product of (x) the aggregate of the Management Fees earned during the preceding
twenty-four (24) month period divided by 24 times (y) the number of full
calendar months remaining in the Term. [FOR EXAMPLE, . . . .]
ACCOUNTING FEE: $1,000/month
[NOTE A - THIS AMOUNT TO BE CALCULATED ON A HOTEL BY HOTEL BASIS AND WILL BE THE
AGGREGATE OF THE FIRST FIVE YEARS OF THE MANAGEMENT FEES AS SHOWN ON THE 10-YEAR
PRO FORMA FOR THE HOTEL IN QUESTION]
B-4
EXHIBIT "C"
MANAGEMENT FEES
The "Management Fee" shall mean and refer to a fee equal to four
percent (4%) of Adjusted Gross Revenues (as hereinafter defined) with respect to
each fiscal month during the term of this Agreement, provided, however, that for
the first two years of the term of this Agreement a portion of the Management
Fee equal to one percent (1%) of Adjusted Gross Revenues (such portion, the
"Subordinated Management Fee") shall be subordinated to Owner's Basic Return (as
hereinafter defined). Manager and Owner agree that, in light of Manager's
agreement to subordinate the Subordinated Management Fee, the Subordinated
Management Fee, while payable monthly to the extent proceeds are available,
shall be adjusted annually and paid, to the extent Adjusted Gross Revenues after
payment of Owner's Basic Return are available therefor, within thirty (30) days
of Manager's delivery of the operating statements required pursuant to Section
3.01(vi) of the Agreement. Any Subordinated Management Fee not so paid pursuant
to the provisions of the immediately preceding sentence shall not thereafter be
payable by Owner.
The term "Gross Revenues" shall be defined as all revenues and income
of any nature derived directly or indirectly from the Hotel or from the use or
operation thereof, whether on or off the Site, including total room sales, food
and beverage sales, if any, laundry, telephone, telegraph and telex revenues,
other income, rental or other payments from lessees, sublessees, licensees and
concessionaires (but not the gross receipts of such lessees, sublessees,
licensees or concessionaires) and the proceeds of business interruption, use,
occupancy or similar insurance.
The term "Adjusted Gross Revenues" shall be defined as Gross Revenues
less the following revenues actually received by the Hotel and included in Gross
Revenues: (i) any gratuities or service charges added to a customer's xxxx; (ii)
any credits or refunds made to customers, guests or patrons; (iii) any sums and
credits received by Owner for lost or damaged merchandise; (iv) any sales taxes,
excise taxes, gross receipt taxes, admission taxes, entertainment taxes, tourist
taxes or charges; (v) any proceeds from the sale or other disposition of the
Hotel, furnishings and equipment or other capital assets; (vi) any fire and
extended coverage insurance proceeds; (vii) any condemnation awards; (viii) any
proceeds of financing or refinancing of the Hotel; and (ix) any interest on the
Bank Account(s).
The term "Owner's Investment" shall mean the sum of (x) the purchase
price for the Hotel ("Purchase Price") as set forth in the Agreement of Sale
dated October 5, 1999 by and between Fee Owner, as buyer, and Hampton Inns,
Inc., as seller (the "Purchase Agreement") plus (y) all reasonable costs and
expenses incurred by Fee Owner in connection with performing its due diligence
in connection with the Purchase Agreement and consummating the purchase
contemplated by the Purchase Agreement, including, without limitation, title and
survey fees and charges, real estate transfer taxes and reasonable attorneys'
fees and charges, which shall be deemed to include any such
C-1
reasonable costs and expenses incurred or advanced by Cornerstone Realty Income
Trust, Inc. or Xxxxx X. Xxxxxx for the benefit of Apple Suites, Inc. or Owner
and reimbursed to it or him by any of Apple Suites, Inc. or Owner and which are
specifically allocable to the Hotel or if not specifically allocable allocated
on a pro rata basis based on the purchase prices set forth in the Existing
Purchase Agreement and the Purchase Agreement and the purchase price of any
other properties acquired by Fee Owner or its directly or indirectly
wholly-owned affiliate(s) from Manager or its directly or indirectly
wholly-owned affiliate(s) on or prior to December 31, 1999, but specifically
excluding fees and charges paid to Apple Suites Advisors, Inc., Apple Suites
Realty Group, Inc. or any other affiliate of Xxxxx X. Xxxxxx or any fees and
charges paid in connection with offering of common stock in Fee Owner plus (z)
amounts advanced by any of Apple Suites, Inc. or Owner in respect of the PIP (as
defined in the License Agreement) and in respect of Hotel capital replacement
items which are in excess of amounts required to be deposited in the Reserve
Fund from Gross Revenues.
The term "Owner's Basic Return" shall mean for the first and second
years, eleven percent (11%) of Owner's Investment.
Attached hereto and made a part hereof, as Exhibit C-1, is an example
of the calculation of, and payment of, the Management Fee (less the Subordinated
Management Fee), the Owner's Basic Return and the Subordinated Management Fee.
C-2
EXHIBIT "C-1"
MANAGEMENT FEE
C-1-1
EXHIBIT "D"
INSURANCE
In accordance with Section 3.01(xv), Manager shall, on behalf of Owner
and at Owner's expense, procure the insurance coverages hereinafter set forth
and ensure that they are in full force and effect as of the Effective Date and
that they remain in full force and effect throughout the Term of this Agreement.
All cost(s) and expense(s) incurred by Manager in procuring the following
insurance coverages shall be operating costs and shall be paid from the Bank
Account(s):
Coverages: Amounts of Insurance
Comprehensive General Liability $10,000,000 per location
Including -
Premises - Operations
Products/Completed Operations
Contractual
Personal Injury
Liquor Liability/Dram Shop (if applicable)
Elevators and Escalators
Automotive Liability $10,000,000
Owned Vehicles
Non-Owned Vehicles
Uninsured Motorist where Required by Statute
Automobile Physical Damage (Optional)
Comprehensive (To Value if insured)
Collision
Workers' Compensation Statutory
Employer's Liability $1,000,000
Fidelity (Employee Dishonesty) As required
Money and Securities As required
All insurance coverages provided for under this Exhibit "D" shall be
effected by policies issued by insurance companies (i) that are authorized to do
business in the state in which the Hotel is located; and (ii) that are of good
reputation and of sound and adequate financial responsibility, having a Bests
Rating of B+ VI, or better, or a comparable rating if Bests ceases to publish
its ratings or materially changes its rating standards or procedures.
D-1
Manager shall deliver to Owner duly executed certificates of insurance
with respect to all of the policies of insurance procured, including existing,
additional and renewal policies.
Each policy of insurance maintained in accordance with this Exhibit
"D," to the extent obtainable, shall specify that such policies shall not be
cancelled or materially changed without at least thirty (30) days' prior written
notice to Owner and Manager.
Except as otherwise provided in the Agreement, Manager and Owner each
waives, releases and discharges the other from all claims or demands which each
may have or acquire against the other, or against each other's subsidiaries,
affiliates, directors, officers, agents, employees, independent contractors or
partners, with respect to any claims for any losses, damages, liabilities or
expenses (including attorneys' fees) incurred or sustained by either of them on
account of injury to persons or damage to property or business arising out of
the ownership, management, operation and maintenance of the Hotel, regardless
whether any such claim or demand may arise because of the fault of negligence of
the other party or its subsidiaries, affiliates, officers, employees, directors,
agents or independent contractors. Each policy of insurance maintained in
accordance with this Exhibit "D" shall contain a specific waiver of subrogation
reflecting the above with respect to insured claims.
All policies of insurance provided for under this Exhibit "D" shall be
carried in the name of the Manager. Owner's interest and that of any other
applicable party will be included in the coverage by an additional insured
endorsement.
All such policies of insurance shall be written on an "occurrence"
basis, with no per location aggregate limitation.
Either Manager or Owner, by notice to the other, shall have the right
to require that the minimum amount of insurance to be maintained with respect to
the Hotel under this Exhibit "D" be increased to make such insurance comparable
with prudent industry standards and to reflect increases in liability exposures,
taking into account the size and location of the Hotel.
Owner hereby authorizes Manager to utilize the services of and/or place
the insurance set forth in this Exhibit "D" with (i) any subsidiary or
affiliated company of Promus Hotels, Inc. in the insurance business as Manager
deems appropriate; or (ii) a third party insurance carrier meeting the
specifications set forth above.
D-2
EXHIBIT "E"
INSURANCE
In accordance with Section 4.01(iii), Owner agrees, at its expense, to
procure and maintain the following insurance coverages, as reasonably adjusted
from time to time, throughout the Term of this Agreement:
Coverages: Amounts of Insurance
Builders Risk Completed value of the Hotel
All risk for term of the initial and any subsequent Hotel
construction and renovation.
Real and Personal Property 100% replacement value of building
and contents
Blanket Coverage
Replacement Cost - all risk
Boiler Machinery - written on a comprehensive form
Business Interruption Calculated yearly based on
estimated Hotel revenues
Blanket Coverage for the perils insured against under Real and
Personal Property in this Exhibit "E". This coverage shall
specifically cover Manager's loss of Management Fees. The business
interruption insurance shall be for a twelve (12) month indemnity
period.
Owner's Protective Liability $10,000,000
All risks from construction and renovation occurring prior to the
Opening Date and all risks from Hotel construction and renovation
projects costing more than $250,000 occurring after the Opening
Date.
All insurance coverages provided for under this Exhibit "E" shall be
effected by policies issued by insurance companies (i) that are authorized to do
business in the state in which the Hotel is located; and (ii) that are of good
reputation and of sound and adequate financial responsibility, having a Bests
Rating of B+ VI, or better, or a comparable rating if Bests ceases to publish
its ratings or materially changes its rating standards or procedures.
Owner shall deliver to Manager duplicate copies of either insurance
policies or certificates of insurance (at Manager's option) with respect to all
of the policies of insurance procured, including existing, additional and
renewal policies, and in the case of insurance nearing expiration, shall deliver
duplicate copies of the insurance policies or certificates of insurance with
respect to the renewal policies to Manager not less than thirty (30) days prior
to the respective dates of expiration.
Each policy of insurance maintained in accordance with this Exhibit
"E," to the extent obtainable, shall specify that such policies shall not be
cancelled or materially changed without at least thirty (30) days' prior written
notice to Owner and Manager.
Except as otherwise provided in this Agreement, Manager and Owner each
waives, releases and discharges the other from all claims or demands which each
may have or acquire against the other, or against each other's subsidiaries,
affiliates, directors, officers, agents, employees, independent contractors or
partners, with respect to any claims for any losses, damages, liabilities or
expenses (including attorneys' fees) incurred or sustained by either of them on
account of injury to persons or damage to property or business arising out of
the ownership, management, operation and maintenance of the Hotel, regardless
whether any such claim or demand may arise because of the fault of negligence of
the other party or its subsidiaries, affiliates, officers, employees, directors,
agents or independent contractors. Each policy of insurance maintained in
accordance with this Exhibit "E" shall contain a specific waiver of subrogation
reflecting the above with respect to insured claims.
All policies of insurance provided for under this Exhibit "E" shall be
carried in the name of the Owner and Manager, and losses thereunder shall be
payable to the parties as their respective interests may appear. All liability
policies shall name the Owner and Manager, and in each case any of their
affiliated or subsidiary companies which they may specify, and their respective
directors, officers, agents, employees and partners as additional named
insureds.
All such policies of insurance shall be written on an "occurrence"
basis.
Either Manager or Owner, by notice to the other, shall have the right
to require the minimum amount of insurance to be maintained with respect to the
Hotel under this Exhibit "E" be increased to make such insurance comparable with
prudent industry standards and to reflect increases in liability exposures,
taking into account the size and location of the Hotel.
