EXHIBIT 10.8
MASTER MANAGEMENT AGREEMENT
between
ENN LEASING COMPANY, INC.
and
CROSSROADS HOSPITALITY COMPANY, L.L.C.
January 1, 2001
MASTER MANAGEMENT AGREEMENT
This Master Management Agreement ("Agreement") is made this 1st day of
January, 2001 by and between ENN LEASING COMPANY, INC., a Tennessee corporation,
whose principal place of business is 0000 Xxxx Xxxxx Xxxxxxxxx, Xxxxxxxxxx,
Xxxxxxxxx 00000 (hereinafter referred to as "Lessee"), and CROSSROADS
HOSPITALITY COMPANY, L.L.C., a Delaware limited liability company, whose
principal place of business is Xxxxxx Plaza Ten, 000 Xxxxxxxx Xxxxx, Xxxxxxxxxx,
Xxxxxxxxxxxx 00000 (hereinafter referred to as "Manager").
RECITATIONS
WHEREAS, Lessee is the lessee of certain hotels more fully described in
Exhibit A attached hereto (individually, a "Hotel" and collectively, the
"Hotels");
WHEREAS, subject to the terms and provisions of this Agreement, Lessee
desires to have Manager manage and operate the Hotels; and
WHEREAS, Manager is willing to perform such services as agent of and
for the account of the Lessee in accordance with the terms hereof.
NOW THEREFORE, in consideration of the foregoing recitals and the
premises and the mutual covenants herein contained, the parties hereto agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 Accounting Period shall mean each of twelve (12) accounting
periods of one (1) calendar month occurring each Fiscal Year.
Section 1.2 Additional Incentive Fee. The term Additional Incentive Fee
as used in this Agreement shall have the meaning set forth in Section 9.2
hereof.
Section 1.3 Base Management Fee. The term Base Management Fee as used
in this Agreement shall have the meaning set forth in Section 9.1 hereof.
Section 1.4 Consumer Price Index: The term Consumer Price Index as used
in this Agreement shall mean the "Consumer Price Index" published by the Bureau
of Labor Statistics of the United States Department of Labor, U.S. City Average,
All Items for Urban Consumers (1982-1984 = 100) (CPI-U).
Section 1.5 Fiscal Year. The term Fiscal Year shall mean a Calendar
Fiscal Year starting on January 1 and ending on December 31 or portion thereof
depending upon the Management Commencement Date (as defined in Section 1.9
hereof) and the applicable Termination Date (as defined in Section 11.1 hereof).
Section 1.6 Gross Operating Revenues. The term Gross Operating Revenues
as used in this Agreement shall mean all receipts, revenues, income and proceeds
of sales of every kind received by Manager directly or indirectly from the
operation of the Hotels. Gross Operating Revenues shall exclude all sales and
excise taxes and any similar taxes collected as direct taxes payable to taxing
authorities; gratuities or service charges collected for payment to and paid to
employees; credit or refunds to guests; proceeds of insurance, save and except
for proceeds of insurance with respect to use and occupancy or business
interruption insurance; proceeds of sales of real estate and/or FF&E; proceeds
of refinancings; and proceeds of condemnation.
Section 1.7 Gross Operating Profit. The term "Gross Operating Profit"
as used in this Agreement shall mean the excess, during each Fiscal Year (and
proportionately for any period less than a Fiscal Year), of Gross Operating
Revenues over expenses and deductions incurred in the operation of the Hotels by
Manager in fulfilling its duties hereunder during such period, determined in
accordance with the accounting system established by the Uniform System (except
as modified by this Agreement). In arriving at Gross Operating Profit, all
expenses shall be proper deductions from Gross Operating Revenues insofar as
they relate to the operation of the Hotels including all Base Management Fees,
license fees, and direct out-of-pocket charges of employees of Manager or its
affiliates as well as corporate charges (as described below); provided, however,
in arriving at Gross Operating Profit, there shall be no deduction for any
Incentive Fees, any Additional Incentive Fees, or any of the following fixed
charges: property taxes, insurance, capital leases, reserve for replacements and
debt service and/or lease payments.
In accordance with Manager's past practices, out-of-pocket costs and corporate
charges include, but are not limited to the following:
(a) travel costs for corporate staff traveling specifically on behalf
of or for the benefit of the Hotel;
(b) express mail and regular postage for items sent specifically to
or on behalf of the Hotel, which would include accounts payable
checks, weekly invoices and accounting information to and from
the Hotel, payroll checks and reports from ADP and other
documents necessary for the efficient operation of the Hotel;
(c) telephone and fax costs specifically for the Hotel, tracked on an
individual call basis;
(d) costs of photocopying specifically for the Hotel, tracked
electronically by copier code.
In addition, in accordance with Manager's past practices, certain
corporate charges are billed on a consolidated or group basis to all hotels
operated by Manager and are allocated to the individual Hotels. These charges
include, but are not limited to:
(a) Xxxxx Travel Research reports;
(b) Human Resource forms, including employment applications,
pamphlets, newsletters, employee manuals and other employment
related forms;
(c) costs for envelopes and check stock for accounts payable allocated
on an actual check processed basis;
(d) ADP payroll processing costs billed on a per active employee
contract basis;
(e) record storage charges for each Hotel, which is based on mandatory
record retention schedules;
(f) prorated share of the costs for regional and national conferences
attended by employee(s) of the Hotel.
Section 1.8 Incentive Fee. The term Incentive Fee as used in this
Agreement shall have the meaning set forth in Section 9.2 hereof.
Section 1.9 Management Commencement Date. The term Management
Commencement Date as used in this Agreement shall have the meaning set forth in
Section 2.2 hereof.
Section 1.10 Operating Funds. The term Operating Funds as used in this
Agreement shall have the meaning set forth in Section 6.2 hereof.
Section 1.11 Ramp-Up Hotels. The term Ramp-Up Hotels as used in this
Agreement shall mean the Chicago, IL Homewood Suites, the Orlando, FL Homewood
Suites, the Seattle, WA Homewood Suites and the Winston-Salem, NC Holiday Inn.
Section 1.12 RevPAR. The term RevPAR as used in this Agreement shall
mean revenue per available room.
Section 1.13 Uniform System. The term Uniform System as used in this
Agreement shall mean the Uniform System of Accounts for Hotels, "Ninth Revised
Edition", 1996, as revised and adopted by the Hotel Association of New York
City, Inc., from time to time and as modified by applicable provisions of this
Agreement.
Other terms are defined in the Recitations and the further provisions
of this Agreement, and shall have the respective meanings there ascribed to
them.
ARTICLE II
ENGAGEMENT OF MANAGER AND
COMMENCEMENT OF MANAGEMENT OF THE HOTELS
Section 2.1 Engagement of Manager to Manage Hotels. Lessee hereby
appoints Manager as Lessee's exclusive agent, subject to the terms of this
Agreement, to supervise, direct and control the management and operation of the
Hotels, and Manager hereby undertakes and agrees to perform, as the agent of and
for the account of Lessee, all of the services and to comply with all of the
provisions of this Agreement, upon all of the terms and conditions hereinafter
set forth.
Section 2.2 Management Commencement Date and Pre-Commencement
Activities.
A. Manager shall assume management and operation of the Hotels at
12:01 A.M. on January 1, 2001 (the "Management Commencement Date").
ARTICLE III
OPERATION OF THE HOTELS
AFTER THE MANAGEMENT COMMENCEMENT DATE
Section 3.1 Authority of Manager. On and after the Management
Commencement Date, the Manager shall have the exclusive authority and duty to
direct, supervise, manage and operate the Hotels in an efficient and economical
manner and to determine the programs and policies to be followed in connection
therewith, all in accordance with the provisions of this Agreement and the
approved Annual Business Plan (or the Annual Business Plan being used pursuant
to Section 8.2 hereof). Subject to the provisions of this Agreement, Manager
shall have the discretion and absolute control in all matters relating to the
management and operation of the Hotels. Without limiting the generality of the
foregoing, Manager shall have the authority and duty to:
A. Subject to Section 3.3 hereof, recruit, employ, relocate, pay,
supervise, and discharge all employees and personnel necessary
for the operation of the Hotels. Included in the foregoing
shall be the determination of all personnel policies.
B. Establish all prices, price schedules, rates and rate
schedules, rents, lease charges, and concession charges, all
within the parameters of the approved Annual Business Plan (or
the Annual Business Plan being used pursuant to Section 8.2
hereof); provided, "trade-outs" in excess of one thousand
dollars ($1,000) per hotel per Accounting Period shall be
approved by Lessee.
C. Subject to Section 12.2(B) hereof, administer leases, license
and concession agreements for all public space at the Hotels,
including all stores, office space and lobby space. All such
leases, licenses or concessions shall be in Lessee's name and
may be executed by Manager on Lessee's behalf; provided,
however, any such lease, license or concession for a term in
excess of one (1) year shall be approved by Lessee, which
approval shall not be unreasonably withheld or delayed.
D. Negotiate and enter into, on behalf of the Lessee, service
contracts and licenses required in the ordinary course of
business in operating the Hotels provided, however, any
contract for a term in excess of one (1) year shall be
approved by Lessee, which approval shall not be unreasonably
withheld or delayed.
Section 3.2 Employees. Manager or an affiliate of Manager shall be the
employer of all employees in the Hotels. Lessee's and Manager's agents and
employees, but excluding any affiliates of Manager who provide consulting
services to Manager in connection with the Hotels (e.g., Continental Design and
Supplies Company, L.L.C.), shall be acting as the agent of the Lessee. Manager
shall have complete authority over pay scales and all benefit plans, subject to
Lessee's approval of the Annual Business Plan described in Article VIII hereof.
Section 3.3 Key Hotel Management Personnel. With respect to the General
Manager and the Director of Sales ( or the Sales Manager, if there is not a
Director of Sales position at a Hotel) of the Hotels (the "Key Hotel Management
Personnel"), Lessee shall have the following rights:
(A) Lessee shall have the right to approve the appointment of any
Key Hotel Management Personnel at a Hotel that occurs within
one (1) year prior to the applicable Scheduled Termination
Date of such Hotel (as defined in Section 11.1 hereof).
(B) Manager shall provide to Lessee at least ten (10) days prior
notice of any transfers of Key Hotel Management Personnel from
a Hotel that will occur within six (6) months prior to the
applicable Scheduled Termination Date of such Hotel (as
defined in Section 11.1 hereof) and Manager shall permit
Lessee to speak with any such Key Hotel Management Personnel
regarding possible continued employment at the Hotel
subsequent to the Scheduled Termination Date.
(C) Lessee shall have the right to approve all transfers of Key
Hotel Management Personnel from a Hotel to another hotel
also managed by Manager that is in the same market, if
such transferee hotel is not owned by Lessee or an affiliate.
For the purposes of this Section 3.3(C), "market" shall mean
(i) the Hotel's current competitive set as listed in the
Hotel's Xxxxx Travel Research Report plus (ii) any new
competitor hotels that are or would be included in such
competitive set.
Notwithstanding the foregoing, nothing in this Agreement shall prohibit Manager
from terminating or disciplining any Key Hotel Management Personnel in
accordance with Manager's employment practices, policies and procedures
consistently applied.
Section 3.4 Purchases from Manager's Affiliates and National Account
Vendors. Manager shall be permitted to utilize both Manager's affiliates and the
national account vendors of Manager or Manager's affiliates in contracting for
goods or services for the Hotels; provided, however, if Lessee demonstrates to
Manager that another vendor will provide the same goods or services at a cost
which is more than ten percent (10%) below the cost of the goods or
services obtained through Manager's affiliate or the national account vendor and
on equal terms and quality, Lessee may require Manager to purchase such goods or
services from such other vendor following the expiration or termination of the
then existing contract for such goods and services. Notwithstanding the
foregoing, Lessee cannot require Manager to terminate any then existing contract
with a third-party vendor for goods or services prior to its scheduled
termination or expiration date. Attached hereto as Schedule 3.4 is a list of the
existing service or purchase contracts with national account vendors in place at
the Hotels, which contracts cannot be terminated without penalty upon thirty
(30) days or less notice to the vendor.
ARTICLE IV
OPERATING EXPENSES PAID BY LESSEE
Section 4.1 Expenses Incurred by Manager on Behalf of Lessee.
Everything done by Manager in the performance of its obligations and all
expenses incurred under this Agreement shall be for and on behalf of Lessee and
for its account. All debts and liabilities arising in the course of business of
the Hotels are and shall be the obligations of Lessee, and Manager shall not be
liable for any of such obligations by reason of its management, supervision and
operation of the Hotels for Lessee. Unless expressly stated herein, neither
Manager nor any of its Affiliates shall be obligated to advance any of its own
funds to or for the account of Lessee, nor to incur any liability unless Lessee
shall have furnished Manager with funds necessary for the discharge thereof
prior to incurring such liability.
ARTICLE V
COMPLIANCE WITH LAWS
Section 5.1 Compliance by Manager and Lessee After Management
Commencement Date. Manager shall make all reasonable efforts, at expense of
Lessee, to comply with all laws, rules, regulations, requirements, orders,
notices, determinations and ordinances of any governing authority, including,
without limitation, the state and local liquor authorities, the Board of Fire
Underwriters and the requirements of any insurance companies covering any of the
risks against which the Hotels are insured. If the cost of compliance exceeds
Two Thousand Five Hundred Dollars ($2,500) in any instance, Manager shall
promptly notify Lessee, and Lessee shall promptly provide Manager with funds for
the payment of such costs.
Section 5.2 Lessee's Right to Contest or Postpone Compliance. With
respect to a violation of any such laws or rules, the Lessee shall have the
right to contest any of the foregoing and postpone compliance pending the
determination of such contest, if so permitted by law and not detrimental to the
operation of the Hotels, but in such event, Lessee shall indemnify and hold
harmless Manager from any loss, cost, damage or expense, as a result thereof
(but excluding any loss, cost, damage or expense resulting from Manager's
failure to notify Lessee of the need to comply with a law or rule, of which
Lessee would not otherwise have notice).
Section 5.3 Manager's Right to Terminate Agreement. Notwithstanding
anything in this
Agreement to the contrary but subject to Article XV hereof, if within sixty (60)
days of receiving Manager's written request Lessee fails to approve the changes,
repairs, alterations, improvements, renewals or replacements to the Hotels which
Manager determines in its reasonable judgment are necessary to (i) protect the
Hotels, Lessee and/or Manager from innkeeper liability exposure; or (ii) ensure
material compliance with any applicable code requirements pertaining to life
safety systems requirements; or (iii) ensure material compliance with any
application state, local, or federal employment law, including, without
limitation, the Americans with Disabilities Act, then Manager may,
notwithstanding the provisions of Section 11.4, terminate this Agreement any
time after such thirty (30) day period upon seven (7) days' written notice.
ARTICLE VI
BANK ACCOUNTS AND OPERATING FUNDS
Section 6.1 Bank Accounts. (a) All monies received by Manager in the
operation of the Hotels shall be deposited on a daily basis in accounts, in
Manager's name, as agent of Lessee, in the bank or trust company that is
convenient to the physical location of each Hotel, as recommended by Manager and
approved by Lessee (the "Local Depository Accounts"). Whenever possible, the
choice of bank will be affiliated with Bank of America or other bank recommended
by Manager and approved by Lessee (the "Master Bank"). Each Local Depository
Account will be swept to a zero balance daily, by automated electronic means
provided by the Master Bank, to a single cash concentration account (the
"Concentration Account") at the Master Bank; provided that, Local Depository
Accounts that are not included in the Master Bank's network will be transferred
on Tuesday and Friday of each week (unless such days are not banking days, in
which case the transfers shall occur on the next business day) by ACH drafts
initiated by the Manager. The Concentration Account will be invested daily into
an investment vehicle recommended by the Manager and approved by the Lessee, and
investment income earned will be credited to each Hotel monthly on a prorata
basis.
(b) The Manager will establish a master disbursement account, a master
payroll account and, as needed, master GM accounts at the Master Bank, each of
which shall be a zero balance account (collectively, the "ZBA Accounts"), from
which the Manager shall pay all operating expenses of the Hotels and any fees or
compensation of any kind due it pursuant to this Agreement in accordance with
the provisions of this Agreement. The ZBA Accounts shall be funded from the
Concentration Account on a daily basis as items are presented for payment.
However, for payments to vendors that require an electronic method of payment,
Manager may remit payment to such vendors by ACH drafts drawn against the Master
Bank's depository accounts.
(c) All accounts established pursuant to this Article VI shall be in
Manager's name, as agent of the Lessee, and the monies therein shall not be
mingled with Manager's other funds. Withdrawals from all accounts established
pursuant to this Article VI shall be signed or initiated by representatives of
the Manager only, provided such representatives are bonded or otherwise insured.
(d) Manager agrees to comply with the reasonable requirements of
Lessee's lenders with respect to payments to lockbox accounts; provided that
Manager shall not be required to pay to such lockbox accounts its management
Fees or amounts for which it is entitled to reimbursement.
(e) Manager shall submit to the Lessee by the tenth (10th) calendar day
of each Accounting Period a consolidated report detailing, by Hotel, the flow of
cash into and out of the Concentration Account, including investment income,
cash deposits, credit card deposits, payroll checks paid, operating expense
checks paid, ACH drafts paid, wires transmitted to Lessee and any other use of
cash. This report must also reconcile to the sum of the individual general
ledger cash balances of each Hotel, provided that Lessee acknowledges that this
bank reconciliation will be provided one month in arrears.
Section 6.2 Minimum Balance. During the Term of this Agreement, Lessee
shall maintain cash in the Concentration Account ("Operating Funds") sufficient
in amount to properly operate the Hotels. If at any time during the Term, the
funds in the Concentration Account fall below the Minimum Balance (as defined
below), Lessee shall deposit in the Concentration Account additional funds in an
amount equal to the difference between the funds therein and the Minimum
Balance. The minimum balance (the "Minimum Balance") required in the
Concentration Account shall be an amount equal to (a) Fifty Thousand Dollars
($50,000) per Hotel for the following seven (7) Hotels: Seattle, WA Homewood
Suites, Portland, OR Residence Inn, Orlando, FL Homewood Suites, Chicago, IL
Homewood Suites, Jacksonville, FL Hampton Inn, Jacksonville Beach, FL Comfort
Inn and Tucson, AZ Residence Inn plus (b) Twenty Thousand Dollars ($20,000) per
Hotel for all other Hotels. On a daily basis, the funds in the Concentration
Account in excess of the Minimum Balance will be transferred to the Lessee, by
electronic wire, to arrive at Lessee's bank before 12 Noon Central CST.
ARTICLE VII
BOOKS, RECORDS AND FINANCIAL STATEMENTS
Section 7.1 Accounting System. Manager shall keep full and adequate
books of account and other records reflecting the results of operation of the
Hotels on an accrual basis, all in accordance with the Uniform System and
consistent with Generally Accepted Accounting Principles. Manager may perform
accounting services at Manager's affiliate's corporate office or at the Hotels.
Manager reserves the right to contract, at Lessee's expense, with a qualified
independent third party for payroll and other services to the extent that such a
contract would be cost justified. Except for such books and records as Manager
may elect to keep in its affiliate's corporate office or other suitable location
pursuant to the operation of centralized accounting services, Manager shall keep
the books of account and all other records relating to, or reflecting the
operation of, the Hotels at the Hotels and, in any event, all such books and
records (including payroll records) shall be available to Lessee and its
representatives at all reasonable times for examination, audit, inspection and
transcription. All of such books and records (other than payroll records),
including, without limitation, books of accounts, guest records and front office
records, at all times shall be the property of Lessee. Upon termination of this
Agreement, all the books and records (other than payroll records) shall be
turned over to Lessee to ensure the orderly continuation of the operation of the
Hotels, but the books and records shall thereafter be available to the Manager
at all reasonable times for inspection, audit, examination and transcription.
Section 7.2 Financial Statements. Manager shall deliver to Lessee
within twenty (20) calendar days after the end of each Accounting Period and
within twenty-five (25) calendar days after the end of each fiscal year the
following:
A. Profit & Loss Statement by Department with Month-End and Year-to-
Date Actual and Budget
B. Balance Sheet
Any disputes as to the contents of any such statements or any
accounting matter hereunder, shall be determined by PricewaterhouseCoopers LLP
or such other independent auditor mutually agreed upon by Lessee and Manager
(the AIndependent Auditor@) whose decision shall be final and conclusive on
Manager and Lessee.
ARTICLE VIII
ANNUAL BUSINESS PLAN
Section 8.1 Preparation of Annual Business Plan. At least sixty (60)
days prior to the Management Commencement Date, Manager shall submit to Lessee
an Annual Business Plan for each Hotel for Fiscal Year 2001. Thereafter, at
least sixty (60) days prior to the end of each Fiscal Year, Manager shall submit
an Annual Business Plan for each Hotel for the succeeding Fiscal Year. The
Annual Business Plan shall include: an operating budget showing estimated Gross
Operating Revenues, department profits, operating expenses, and Gross Operating
Profit for the forthcoming Fiscal Year for the Hotel; and a marketing plan; all
in reasonable detail and, where appropriate, with the basis for all assumptions
expressly set forth. Lessee shall review the Annual Business Plan and either
approve or notify Manager of any objections to the Annual Business Plan in
writing within thirty (30) days of its receipt thereof. Lessee's approval of the
Annual Business Plan shall not be unreasonably withheld or delayed. Manager
acknowledges that Lessee shall prepare each Hotel's annual capital expenditure
budget and that such budget shall not be subject to the approval of Manager.
Lessee recognizes, however, that the capital expenditure budget and the
implementation of such budget will have a direct impact on the operational
performance of the Hotels. As a result, Lessee and Manager acknowledge that the
performance standard of Section 11.2(B)(ii) of this Agreement, as well as the
Incentive Fee and Additional Incentive Fee calculations, may need to be
equitably adjusted upon mutual agreement of the parties in order to reflect
material deviations from the scope and schedule of a capital expenditure budget
approved by Lessee.
Section 8.2 Annual Business Plan Disputes. If Manager and Lessee are
unable to agree upon an Annual Business Plan or any details thereof,
until a new Annual Business Plan is agreed to Manager shall operate the
particular Hotel or Hotels in accordance with the prior Fiscal Year's actual
results, with the following adjustments:
A. The expenses provided therein shall be increased to be equal to
the product of (1) the expenses in the prior Fiscal Year's
actual results multiplied by (2) the CPI Quotient. As used
herein, "CPI Quotient" shall mean (a) the Average Consumer
Price Index for the twelve months ended on September 30 of the
most recently completed Fiscal Year divided by (b) the Average
Consumer Price Index for the twelve months ended on September
30 of the prior Fiscal Year. As used herein, the "Average
Consumer Price Index" for any period shall be the average of
the Consumer Price Index for all months during the period.
B. The RevPAR provided therein shall be increased over the
previous twelve (12) months' RevPAR, based upon the applicable
Market Tract RevPAR growth percentage for the previous twelve
(12) months, as published by Xxxxx Travel Research, for
revenue growth.
If Lessee and Manager cannot agree upon an Annual Business Plan or any details
thereof on or prior to January 31st of a Fiscal Year, the dispute shall be
decided by submission to arbitration before one of the following three (3)
independent arbitrators (each, an "Independent Arbitrator"), each of which shall
be a hospitality industry expert:
1. Xxxxxx Xxxxxxxx XX
2. Ernst & Young
3. Xxxxxxx Xxxx Xxxxxx
The dispute shall be submitted initially to the first Independent Arbitrator on
the above list; if the first Independent Arbitrator is unavailable for any
reason it shall instead be submitted to the second Independent Arbitrator; and
if the second Independent Arbitrator is unavailable for any reason it shall
instead be submitted to the third Independent Arbitrator. In rendering his or
her decision, the Independent Arbitrator shall take into account both the state
of the economy and the conditions in the specific market in which the Hotel in
question is located. The Independent Arbitrator shall render his or her decision
within fourteen (14) days following the submission of the dispute, and such
decision shall be final and binding upon the parties. Arbitration expenses shall
not be an expense in determining Gross Operating Profit.
Section 8.3 Deviations from Annual Business Plan. Manager shall
diligently pursue all feasible measures to enable the Hotels to adhere to the
Annual Business Plan. Notwithstanding anything herein to the contrary, Manager
is not warranting or guaranteeing in any respect that the actual operating
results of the Hotels during the period covered by the Annual Business Plan will
not materially vary from the projections described in the Annual Business Plan.
However, the Manager will provide explanations for all significant variances and
programs put in place to correct or improve situations that deviate from the
original plan.
ARTICLE IX
MANAGER'S FEES AND REIMBURSEMENTS
Section 9.1 Base Management Fee. During each Fiscal Year after the
Management Commencement Date (and for a fraction of any partial Fiscal Year), in
consideration of the services Manager is to render under this Agreement, Manager
will be paid a fee ("Base Management Fee") per Hotel at the rate of the
following percentage of Gross Operating Revenues of such Hotel per Fiscal Year:
Fiscal Year Base Management Fee
----------- -------------------
2001 One percent (1%) of Gross Operating Revenues
2002 Two percent (2%) of Gross Operating Revenues
2003 Two percent (2%) of Gross Operating Revenues
2004 Two percent (2%) of Gross Operating Revenues
2005 Two and one-half percent (2 .5%) of Gross Operating
Revenues
The Base Management Fee will be paid in installments by deducting such
fee from Gross Operating Revenues of each Hotel immediately following each
Accounting Period at the rate of the corresponding percentage of Gross Operating
Revenues for that Accounting Period. At the end of each Accounting Period, an
adjustment will be made on a cumulative year-to-date basis, if necessary, and
all sums due either the Manager or Lessee shall be paid immediately.
Section 9.2 Incentive Fees.
A. In addition to the Base Management Fee, during each Fiscal Year
after the Management Commencement Date (and for any partial
Fiscal Year) in which Manager is to render services under this
Agreement, for each Hotel in which the Gross Operating Profit
amount equals the Gross Operating Profit amount budgeted in
such Hotel's Annual Business Plan, Manager will be paid an
incentive fee ("Incentive Fee") with respect to such Hotel
equal to one-half percent (.5%) of the Gross Operating
Revenues of such Hotel.
B. In addition to the Base Management Fee and the Incentive Fee,
during each Fiscal Year after the Management Commencement Date
(and for any partial Fiscal Year) in which Manager is to
render services under this Agreement, for each Hotel in which
(i) the actual Gross Operating Profit amount equals or exceeds
the Gross Operating Profit amount budgeted in such Hotel's
Annual Business Plan and (ii) the actual Gross Operating
Revenues equals at least ninety-nine percent (99%) of the
Gross Operating Revenues budgeted in such Hotel's Annual
Business Plan, Manager will be paid an additional incentive
fee ("Additional Incentive Fee") with respect to such Hotel as
follows: for each one percent (1%) of actual audited Gross
Operating Profit amount in excess of the budgeted Gross
Operating Profit amount, Manager will be paid an Additional
Incentive Fee equal to one-tenth of one percent (0.1%) of the
Gross Operating Revenues of such Hotel, up to the following
maximum levels:
Fiscal Year Maximum Additional Incentive Fee
----------- --------------------------------
2001 One and one-half percent (1.5%) of Gross
Operating Revenues
2002 One-half percent (0.5%) of Gross Operating
Revenues
2003 One-half percent (0.5%) of Gross Operating
Revenues
2004 One-half percent (0.5%) of Gross Operating
Revenues
2005 One-half percent (0.5%) of Gross Operating
Revenues
The Incentive Fee and the Additional Incentive Fee will be payable to Manager
from Gross Operating Revenues of each applicable Hotel following the end of each
Fiscal Year. The Manager will submit to the Lessee the calculation of the
Incentive Fee and the Additional Incentive Fee along with the delivery of the
year-end financial statements pursuant to Section 7.2, after which the Lessee
shall have ten (10) calendar days to advise the Manager of any disagreement with
such calculation. Following the Fiscal Year-end audit conducted by Lessee or
Lessee's representatives (at Lessee's cost), an adjustment will be made if
necessary, and all sums due either Manager or Lessee shall be paid immediately.
Section 9.3 Accounting Fee. In addition to the Base Management Fee and
the Incentive Fee, the Manager shall be paid a fee for centralized accounting
services (the "Accounting Fee") equal to $1,000 per Hotel per Accounting Period
during the Term of this Agreement and for one (1) Accounting Period after the
applicable termination of this Agreement with respect to a Hotel. Such
centralized accounting services consist of the processing of daily accounting
transactions necessary for the preparation of the monthly financial statements,
including general ledger, accounts payable, payroll (in conjunction with the
payroll processing firm) and banking.
ARTICLE X
INSURANCE
Section 10.1 Insurance Coverage. Manager, at the direction and approval
of Lessee, shall provide and maintain, at Lessee's cost and expense, insurance
sufficient to furnish to Lessee and Manager reasonable and adequate protection
in the management and operation of the Hotels. Such insurance shall provide
coverage for comprehensive general liability, automobile, garagekeepers
liability, excess/umbrella liability, property insurance and boiler & machinery,
all as more particularly set forth on the attached Exhibit B. All insurance
shall be in the name of Lessee and Manager as the insureds and shall contain
riders and endorsements adequately protecting the interests of Manager as it may
appear including, without limitation, provisions for at least twenty (20) days'
notice to Manager of cancellation or of any material change therein. Prior to
the Management Commencement Date and the commencement of each Fiscal Year
thereafter, Manager shall furnish Lessee with certificates evidencing the
insurance coverages required pursuant to Exhibit B and with evidence of the
payment of premiums therefor. Lessee agrees that it will utilize Manager's
insurance program to satisfy the requirements of this Section 10.1; provided,
however, if Lessee demonstrates to Manager that another insurer can provide the
same insurance coverages at a cost which is more than ten percent (10%) below
the cost of the insurance coverages obtained through Manager and on at least
equal terms and quality of coverages, Lessee may require Manager to purchase
such insurance coverages from such other insurer in the future. Notwithstanding
the foregoing, Lessee cannot require Manager to terminate any then existing
insurance coverages prior to their scheduled termination or expiration date. It
shall be the Manager's obligation as the employer, at the Lessee's expense, to
obtain Workers Compensation, Crime/Fidelity Bond, and Employment Practices
coverages as set forth on Exhibit B. If Lessee becomes the employer, this
obligation shall become the responsibility of the Lessee, at its own expense.
Section 10.2 Waiver of Subrogation - Lessee Assumes Risk of Adequacy.
Lessee shall have all policies of insurance provide that the insurance company
will have no right of subrogation against either party hereto, their agents or
employees. Lessee assumes all risks in connection with the adequacy of any
insurance or self-insurance program, and subject to the provisions of Article XV
hereof, waives any claim against Manager for any liability, costs or expenses
arising out of any uninsured claim, in part or in full, of any nature
whatsoever.
ARTICLE XI
TERM OF AGREEMENT AND TERMINATION
Section 11.1 Term. This Agreement shall be for a period commencing on
the date hereof and unless sooner terminated as hereinafter provided, shall
continue with respect to each Hotel until the applicable scheduled termination
date (the "Scheduled Termination Date") set forth on Exhibit C attached hereto
(with respect to each Hotel, the "Term"). The term "Termination Date" as used in
this Agreement shall mean the earlier of the applicable Scheduled Termination
Date or earlier termination as hereinafter provided.
Section 11.2 Early Termination. This Agreement can be terminated
earlier with respect to any individual Hotel or Hotels as described below. Upon
termination of this Agreement with respect to any individual Hotel, the rights
and obligations of the parties will cease with respect to such Hotel except as
to fees and reimbursements due the Manager and other claims of liabilities of
either party which accrued or arose before termination.
A. Either Party can terminate this Agreement with respect to a
Hotel if:
(i) the Hotel is damaged or destroyed by a casualty and
the damaged portion of the Hotel cannot be
reasonably repaired or restored within one (1) year
of the occurrence of the event; or
(ii) the entire Hotel is taken in a condemnation
proceeding or a portion of the Hotel is taken such
that either party determines in its reasonable
judgment that the Hotel cannot be operated at
levels substantially like those experienced prior
to the condemnation; or,
(iii) the other party shall: apply for or consent to the
appointment of a receiver, trustee or liquidator of
such party or of all or a substantial part of its
assets; file a voluntary petition in bankruptcy, or
admit in writing its inability to pay its debts as
they come due; make a general assignment for the
benefit of creditors; file a petition or an answer
seeking reorganization or arrangement with
creditors or to take advantage of any insolvency
law or file an answer admitting the material
allegations of a petition filed against it in any
bankruptcy, reorganization or insolvency
proceedings; or if an order, judgment or decree
shall be entered by any court of competent
jurisdiction, on the application of a creditor,
adjudicating it a bankrupt or insolvent or
approving a petition seeking reorganization of it
or appointing a receiver, trustee or liquidator of
it or of all or a substantial part of its assets,
and such order, judgment or decree shall continue
unstayed and in effect for any period of ninety
(90) consecutive days; or
B. The Lessee can terminate this Agreement with respect to a
Hotel if:
(i) Manager shall fail to keep, observe or perform
any material covenant, agreement, term or provision
of this Agreement with respect to the Hotel and
such default shall continue for a period of thirty
(30) days after notice thereof by Lessee to
Manager, unless it is impossible for such breach
of non-compliance to be remedied or corrected
within such time due to no fault of Manager in
which event, Manager shall remedy or correct such
breach of non-compliance as soon as reasonably
possible but in any event no later than ninety (90)
days after such written notice unless the cure or
remedy for such breach or non-compliance requires
construction, in which event, Lessee shall proceed
with such construction as expeditiously as possible
and shall have a reasonable period of time to
complete such work; or
(ii) Manager fails to achieve at least eighty-five
percent (85%) of the annual budgeted Gross
Gross Operating Profit for the Hotel as approved by
the Lessee as part of the Annual Business Plan for
any two (2) consecutive Fiscal Years; provided,
however, Manager shall have the right, but not the
obligation, to cure such failure by within sixty
(60) days following the end of the second of
such Fiscal Years contributing to Gross Operating
Profit for such second Fiscal Year an amount
necessary to cause Gross Operating Profit to equal
at least eighty-five percent (85%) of the amount
of Gross Operating Profit set forth in the
Annual Business Plan for such second Fiscal Year,
in which event Lessee shall have no right to
terminate this Management Agreement with respect to
such Hotel; or
(iii) the applicable franchise agreement for a Hotel is
terminated, if such termination is solely due to
Manager's failure to satisfy its obligations under
this Agreement (and not as a result of Lessee's
failure to satisfy any of Lessee's obligations
under this Agreement or such franchise agreement);
or
(iv) With respect to any Hotel that is not a Ramp-Up
Hotel, Lessee or the owner of the Hotel sells the
Hotel to a bona fide unaffiliated third party and
either (a) Lessee pays to Manager a termination
payment equal to (x) the aggregate Gross Operating
Revenues for such Hotel during the immediately
preceding twelve (12) month period multiplied by
(y) the then applicable aggregate Base Management
Fee and Incentive Fee (but not Additional Incentive
Fee) percentages (based on the assumption that the
Hotel achieves the budgeted Gross Operating Profit
for the remainder of the Term applicable to such
Hotel); or (b) within sixty (60) days following
termination Lessee enters into a management
agreement with Manager for a replacement hotel or
hotels that are commercially reasonably acceptable
to Manager and have budgeted annual Gross Operating
Revenues no less than the actual annual Gross
Operating Revenues of the terminated Hotel
(provided that, if Lessee elects to replace
pursuant to this clause (b), for any period in
which a replacement management agreement is not yet
in place Lessee shall pay to Manager the fees which
Manager would have received for such period if the
termination had not occurred); or
(v) With respect to any Ramp-Up Hotel, Lessee or the
owner of the Hotel sells the Hotel to a bona fide
unaffiliated third party and either (a) Lessee pays
to Manager a termination payment equal to (x) if
the sale occurs in 2001, the budgeted Gross
Operating Revenues for such Hotel for Fiscal Year
2001 (increased by three percent (3%) for each
succeeding Fiscal Year during the Term) multiplied
by the then applicable aggregate Base Management
Fee and Incentive Fee (but not Additional Incentive
Fee) percentages (based on the assumption that the
Hotel achieves the budgeted Gross Operating Profit
for the remainder of the Term applicable to such
Hotel) and (y) if the sale occurs in Fiscal Year
2002 or thereafter, the actual Gross Operating
Revenues for such Hotel for Fiscal Year 2001
(increased by three percent (3%) for each
succeeding Fiscal Year during the Term) multiplied
by the then applicable aggregate Base Management
Fee and Incentive Fee (but not Additional Incentive
Fee) percentages (based on the assumption that the
Hotel achieves the budgeted Gross Operating Profit
for the remainder of the Term applicable to such
Hotel); or (b) within sixty (60) days following
termination Lessee enters into a management
agreement with Manager for a replacement hotel or
hotels that are commercially reasonably acceptable
to Manager and have budgeted annual Gross Operating
Revenues no less than the actual annual Gross
Operating Revenues of the terminated Hotel
(provided that, if Lessee elects to replace
pursuant to this clause (b), for any period in
which a replacement management agreement is not yet
in place Lessee shall pay to Manager the fees which
Manager would have received for such period if the
termination had not occurred);
For the purposes of clauses (iv) and (v), a "sale
of a Hotel to a bona fide unaffiliated third party"
shall include the sale of greater than fifty
percent (50%) of the economic and controlling
interests in the Lessee or the owner of the Hotel
to a bona fide unaffiliated third party. Lessee
anticipates that the number of terminations
pursuant to the foregoing clauses (iv) and (v) will
not exceed the following number per Fiscal Year:
Fiscal Year Maximum Number of Sales
----------- -----------------------
2001 6
2002 4
2003 3
2004 2
2005 1
--
Total 16
==
Lessee shall not be prohibited from exceeding the
maximum total of sixteen (16) of such terminations;
provided, however, for each such termination prior to
December 31, 2005 in excess of the maximum total of
sixteen (16), the termination fee calculated pursuant
to clause (iv) or (v) for such Hotel shall be
doubled.
C. The Manager can terminate with respect to a Hotel at any time
if:
(i) Lessee fails to pay any amounts due to Manager with
respect to the Hotel, followed by written notice
from Manager to the Lessee and failure of the
Lessee to remedy or correct same within thirty (30)
ays after receipt of such notice; or
(ii) the Lessee fails to furnish required Operating
Funds with respect to the Hotel in accordance with
the provisions of Article VI hereof; or
(iii) Lessee fails to make any other payment with respect
to the Hotel in accordance with the terms hereof
when such payment is due and payable, followed by
written notice from Manager to the Lessee and
failure of the Lessee to remedy or correct same
within thirty (30) days after receipt of such
notice; or
(iv) there is a default under the terms and conditions
of any security instruments executed in connection
with the Hotel, which default has not been cured
within the applicable cure period for such default,
followed by written notice from Manager to the
Lessee and failure of the Lessee to remedy or
correct same within thirty (30) days after receipt
of such notice; or
(v) Lessee fails to provide the funds to provide and
maintain the insurance policies with respect to the
Hotel called for in Article X; or
(vi) any licenses for the sale of alcoholic beverages in
the Hotel, if applicable, or any other license or
permit necessary for the operation of the Hotel is
not issued on the Management Commencement Date and
thereafter maintained throughout the term of this
Agreement, followed by written notice from Manager
to the Lessee and failure of the Lessee to remedy
or correct same within thirty (30) days after
receipt of such notice (unless Lessee is diligently
pursuing such license or permit in good faith and
the lack of such license or permit does not
materially impair the operation of the Hotel); or
(vii) there is a breach of, or non-compliance by the
Lessee with any other material term, condition or
covenant contained in this Agreement with respect
to the Hotel followed by written notice from
Manager to the Lessee and failure of the Lessee to
remedy or correct same within thirty (30) days
after receipt of such notice, unless it is
impossible for such breach of non-compliance to be
remedied or corrected within such time due to no
fault of Lessee, in which event, Lessee shall
remedy or correct such breach of non-compliance as
soon as reasonably possible but in any event no
later than ninety (90) days after such written
notice unless the cure or remedy for such breach or
non-compliance requires construction, in which
event, Lessee shall proceed with such construction
as expeditiously as possible and shall have a
reasonable period of time to complete such work.
Section 11.3 Remedies on Default. Notwithstanding the other provisions
of this Article XI, the party asserting a default hereunder may, without
prejudicing its rights to terminate this Agreement pursuant to this Article XI,
seek arbitration in accordance with the provisions of Section 16.6 hereof, or
any other legal or equitable remedy.
Section 11.4 Termination Procedure.
A. If a termination occurs pursuant to Section 11.2(A), the party
electing to terminate shall give the other party written
notice of such election. On the date which is thirty (30) days
after the date of such notice, Manager shall cease all
activities at the Hotel and shall have no further obligations
under this Agreement.
B. If a termination occurs pursuant to Section 11.2(B)(i), Lessee
shall give Manager written notice of such election to
terminate. On the date which is ten (10) days after the date
of such notice, Manager shall cease all activities at the
Hotel and shall have no further obligations under this
Agreement.
C. If a termination occurs pursuant to Section 11.2(B)(ii),
Lessee shall give Manager written notice of such election to
terminate within ninety (90) days following the end of the
second consecutive Fiscal Year. On the date which is thirty
(30) days after the date of such notice, Manager shall cease
all activities at the Hotel and shall have no further
obligations under this Agreement.
D. If a termination occurs pursuant to Section 11.2(B)(iii),
Lessee shall give Manager written notice of its election to
terminate thereunder within ninety (90) days following the
termination of the applicable franchise agreement. On the date
which is thirty (30) days after the date of such notice,
Manager shall cease all activities at the Hotel and shall have
no further obligations under this Agreement.
E. If a termination occurs pursuant to Section 11.2(B)(iv) or
(v), Lessee shall give Manager at least sixty (60) days prior
written notice of such election to terminate. On the date
specified in such notice, Manager shall cease all activities
at the Hotel and shall have no further obligations under this
Agreement.
F. If a termination occurs pursuant to Section 11.2(C), Manager
shall give to Lessee written notice of such election. Any time
thereafter, Manager may, on ten (10) days' written notice,
cease all activities at the Hotel and thereafter have no
further obligations under this Agreement.
G. After the notice is given, and prior to the date Manager
ceases activities at the Hotel, Manager shall be paid any and
all fees or expenses due it pursuant to this Agreement, and
Manager shall cooperate with Lessee in the orderly transfer of
management to Lessee or Lessee's designated agent.
H. Lessee acknowledges that Lessee is obligated to pay expenses
incurred on or before the date of termination including those
that must be paid by the Manager after its termination of
activities at the Hotel. A budget will be prepared for
Lessee's approval and an accounting will be made of these
monies and surpluses will be sent to Lessee. Any deficits from
the Hotel's Operating Funds will be funded by Lessee within
five (5) days of written request from Manager.
Section 11.5 Non-Solicitation of Employees. During the period ending
one year from the termination or expiration of this Agreement, Lessee shall not,
directly or indirectly, hire or solicit for hire (whether as an employee,
consultant or otherwise) any employees of Manager or an affiliate of Manager
employed or based out of Manager's Pittsburgh, Pennsylvania or Orlando, Florida
offices, without the prior written consent of Manager. Nothing in this Section
11.5 is intended to restrict Lessee's rights under Section 3.3 hereof.
ARTICLE XII
REPRESENTATIONS AND COVENANTS
Section 12.1 Lessee's Representations. Lessee covenants, represents
and warrants as follows:
A. The Lessee is the lessee of the Hotels and has full power and
authority to enter into this Agreement;
B. Each Hotel is zoned for use as a hotel, motor hotel or resort,
and all necessary governmental and other permits and approvals
for such use and for the food and beverage (including the sale
and service of liquor, if applicable) operations of the Hotels
have been obtained and are in full force and effect; and
C. Throughout the term of this Agreement, the Lessee will pay,
keep, observe and perform all payments, terms, covenants,
conditions and obligations under any lease or other
concession, any deed of trust, mortgage or other security
agreement, and any real estate taxes or assessments covering
or affecting the Hotels, unless compliance with or payment
thereof is, in good faith, being contested and enforcement
thereof is stayed.
Section 12.2 Manager's Representations. A. During the Term of this
Agreement, the Manager shall qualify as an "eligible independent contractor" as
defined in Section 856(d)(9) of the Internal Revenue Code of 1986, as amended
(the "Code"). To that end, during the Term of this Agreement, the Manager:
(i) shall not permit wagering activities to be conducted at or in
connection with the Hotels;
(ii) shall not own, directly or indirectly (within the meaning of
Section 856(d)(5) of the Code), more than 35% of the shares of
Equity Inns, Inc.;
(iii) shall be actively engaged in the trade or business of
operating "qualified lodging facilities" (defined below) for
persons who are not "related persons" within the meaning of
Section 856(d)(9)(F) of the Code with respect to Equity Inns,
Inc. or the [Lessee] ("Unrelated Persons"). In order to meet
this requirement, the Manager agrees that it (i) shall derive
at least 10% of both its revenue and profit rom operating
"qualified lodging facilities" for Unrelated Persons and (ii)
shall comply with any regulations or other administrative
guidance under Section 856(d)(9) of the Code with respect to
the amount of hotel management business with Unrelated Persons
that is necessary to qualify as an "eligible independent
contractor" within the meaning of such Code section (so long
as the Lessee has advised the Manager in writing of such
regulations or other administrative guidance).
A "qualified lodging facility" is defined in Section 856(d)(9)(D) of the Code
and means a "lodging facility" (defined below), unless wagering activities are
conducted at or in connection with such facility by any person who is engaged in
the business of accepting xxxxxx and who is legally authorized to engage in such
business at or in connection with such facility. A "lodging facility"
is a hotel, motel or other establishment more than one-half of the dwelling
units in which are used on a transient basis, and includes customary amenities
and facilities operated as part of, or associated with, the lodging facility so
long as such amenities and facilities are customary for other properties of a
comparable size and class owned by other owners unrelated to Equity Inns, Inc.
B. During the Term of this Agreement, the Manager shall not sublet the Hotel or
enter into any similar arrangement on any basis such that the rental or other
amounts to be paid by the sublessee thereunder would be based, in whole in part,
on either (i) the net income or profits derived by the business activities of
the sublessee or (ii) any other formula such that any portion of the rent would
fail to qualify as "rents from real property" within the meaning of Section
856(d) of the Code, or any similar or successor provision thereto.
ARTICLE XIII
ASSIGNMENT
Section 13.1 Assignment. Neither party shall assign or transfer or
permit the assignment or transfer of this Agreement without the prior written
consent of the other; provided, however, that (a) Manager shall have the right,
without such consent, to irrevocably and totally assign its interest in this
Agreement to any of its Affiliates or to an entity under the control of then
current senior executives of Interstate Hotels Corporation, an Affiliate of
Manager and (b) Lessee shall have the right, without such consent, to
irrevocably and totally assign its interest in this Agreement to any of its
Affiliates or to an entity under the control of then current senior executives
of Equity Inns, Inc., an Affiliate of Manager. Nothing contained herein shall
prevent the transfer of this Agreement in connection with a merger or
consolidation of substantially all of the assets of either party or their
respective Affiliates. In the event of consent by either party to an assignment
of this Agreement by the other, no further assignment shall be made without the
express consent in writing of such party, unless such assignment may otherwise
be made without such consent pursuant to the terms of this Agreement. An
assignment by either Lessee or Manager of its interest in this Agreement shall
not relieve Lessee or Manager, as the case may be, from their respective
obligations hereunder unless the assignee accepts full responsibility for
performance of the same.
ARTICLE XIV
TAXES
Section 14.1 Real Estate and Property Taxes. All real estate and ad
valorem property taxes, assessments and similar charges on or relating to the
Hotels during the term of this Agreement shall be paid by Lessee before any
fine, penalty or interest is added thereto or lien placed upon the Hotels or
this Agreement, unless payment thereof is, in good faith, being contested and
enforcement thereof is stayed. Manager's responsibilities specifically exclude
the preparation, filing or contesting of these taxes.
ARTICLE XV
INDEMNIFICATION AND LIMITATION OF LIABILITY
Section 15.1 Indemnification and Limitation of Liability. Lessee shall
hold harmless, indemnify and, subject to Section 15.3 hereof, defend Manager and
its Affiliates and their respective agents, employees, officers, directors and
shareholders from and against all expenses incurred by Manager or its Affiliates
which, in Manager's sole judgment, were or are necessary or desirable for the
operation of the Hotels in accordance with the terms of this Agreement, and all
claims (administrative or judicial), damages, losses and expenses (including,
but not limited to, attorneys' fees for pre-trial, trial and appellate
proceedings, accounting fees, appraisal fees and consulting and expert witness
fees) arising out of or resulting from Manager's activities performed pursuant
to this Agreement, any franchise agreement, any past or future building code or
life/safety code violations, and injury to person(s) and damage to property or
business by reason of any cause whatsoever in and about the Hotels or elsewhere,
and any requirement or award relating to course of employment, working
conditions, wages and/or compensation of employees or former employees at the
Hotels, unless any such injury or damage is caused by gross negligence, willful
misconduct, or fraud on the part of Manager, its agents, employees, or
representatives. Notwithstanding the foregoing, without Owner's prior approval,
Manager shall not settle any employment-related case in which the Owner would be
required to make a settlement payment in excess of $5,000. Any indemnification
shall apply regardless of whether or not said claim, damage, loss or expense is
covered by insurance as herein provided (however, the indemnified party shall
not be entitled to a duplicate recovery with respect to a claim, damage, loss or
expense).
Section 15.2 Manager's Indemnification. Manager shall hold harmless,
indemnify and defend Lessee and its Affiliates, and their respective agents,
employees, officers, directors and shareholders, from and against all claims,
damages, losses and expenses (including, but not limited to, attorneys' fees for
pre-trial, trial and appellate proceedings) arising out of or resulting from
Manager's gross negligence (including Manager's violation of a law as determined
pursuant to a final, unappealable order issued by a court of competent
jurisdiction), willful misconduct or fraud.
Section 15.3 Indemnification Procedure. Upon the occurrence of an event
giving rise to indemnification, the party seeking indemnification shall notify
the other party hereto and provide the other party hereto with copies of any
documents reflecting the claim, damage, loss or expense. The party seeking
indemnification is entitled to engage such attorneys and other persons to defend
against the claim, damage, loss or expense, as it may choose subject to
reasonable approval of the party providing indemnification. The party providing
indemnification shall pay the reasonable charges and expenses of such attorneys
and other persons on a current basis within twenty (20) days of submission of
invoices or bills. If any claim, lawsuit or action (administrative or judicial)
is maintained against Manager, Lessee or the Hotels due to allegations or
actions arising prior to the Term, Lessee shall bear full and complete
responsibility for the defense of the Hotels, the Lessee, the Manager,
specifically including all legal fees and necessary and attendant expenses for
the vigorous defense and representation of the interests of the Manager (for
pre-trial, trial and appellate proceedings), the Hotels and the Lessee. Lessee
shall support and pay for all legal fees and representations necessary to remove
Manager from any claim, action (administrative or judicial), or lawsuit covered
by this provision.
Section 15.4 No Successor Liability. Notwithstanding anything herein to
the contrary, neither Manager nor its affiliates shall be liable as a successor
employer or entity for any actions Lessee or Lessee's predecessors may have
taken in the employer-employee relationship with Lessee's current or former
employees or employees of Lessee's agents before the commencement of the Term.
Specifically, Manager shall not be liable or responsible in any manner for, and
Lessee shall indemnify and hold Manager harmless from, pending claims, lawsuits,
actions (administrative or judicial), or unasserted claims arising out of
Lessee's or Lessee's predecessors' ownership, operation, or employment of
employees of the Hotels.
Section 15.5 Survival. The provisions of this Article XV shall survive
the termination of this Agreement.
ARTICLE XVI
MISCELLANEOUS
Section 16.1 Severability. In the event that any portion of this
Agreement shall be declared invalid by order, decree or judgment of a court,
this Agreement shall be construed as if such portion had not been inserted
herein except when such construction would operate as an undue hardship to
Manager or Lessee or constitute a substantial deviation from the general intent
and purpose of said parties as reflected in this Agreement.
The failure of either party to insist upon a strict performance of any
of the terms or provisions of this Agreement or to exercise any option, right or
remedy herein contained, shall not be construed as a waiver or as a
relinquishment for the future of such term, provision, option, right or remedy,
but the same shall continue and remain in full force and effect. No waiver by
either party of any term or provision hereof shall be deemed to have been made
unless expressed in writing and signed by such party.
Section 16.2 Agency. The relationship of Lessee and Manager shall be
that of principal and agent. Nothing contained in this Agreement shall be
construed to create a partnership or joint venture between them or their
successors in interest. Neither party shall borrow money in the name of, or
pledge the credit of, the other. Manager's agency established by this Agreement
may not be terminated by Lessee except in accordance with the terms hereof.
Section 16.3 Consents. Except as herein otherwise provided, whenever in
this Agreement the consent or approval of Lessee or Manager is required, such
consent or approval shall not be unreasonably withheld or delayed. Such consent
or approval shall be in writing only and shall be duly executed by an authorized
officer or agent of the party granting such consent or approval.
Section 16.4 Applicable Law. This Agreement shall be construed under,
and governed in accordance with, the laws of the State of Tennessee.
Section 16.5 Successors Bound. This Agreement shall be binding upon
and inure to the benefit of Lessee, its successors and assigns, and shall be
binding and inure to the benefit of Manager and its permitted assigns.
Section 16.6 Arbitration. In the event a dispute should arise
concerning the interpretation or application of any of the provisions of this
Agreement, the parties agree the dispute shall be submitted to arbitration of
the American Arbitration Association, except as modified by this Section 16.6.
The Arbitration Tribunal shall be formed of three (3) Arbitrators each of which
shall have at least ten (10) years' experience in hotel operation, management or
ownership, one (1) to be appointed by each party and the third (3rd) to be
appointed by the American Arbitration Association. The arbitration shall take
place in Pittsburgh, Pennsylvania and shall be conducted in the English
language. The arbitration award shall be final and binding upon the parties
hereto and subject to no appeal, and shall deal with the question of costs of
arbitration and all matters related thereto. Arbitration expenses shall not be
an expense in determining Gross Operating Profit. Judgment upon the award
rendered may be entered into any court having jurisdiction, or applications may
be made to such court for an order of enforcement.
Section 16.7 Incorporation of Recitals. The recitals set forth in the
preamble of this Agreement are hereby incorporated into this Agreement as if
fully set forth herein.
Section 16.8 Force Majeure. If act of God, acts of war, acts of
terrorism, civil disturbance, labor strikes, governmental action, including the
revocation of any material license or permit necessary for the operation
contemplated in this Agreement where such revocation is not due to Manager's
fault, or any other causes beyond the control of Manager shall, in Manager's
reasonable opinion, have a significant adverse effect upon the operations of the
Hotels, then Manager shall be entitled to terminate this Agreement upon sixty
(60) days' written notice from the date of such event; provided, however, such
termination shall not be effective if the event giving rise to the termination
has been cured to the reasonable satisfaction of Manager within such sixty (60)
day period.
Section 16.9 Notices. Notices, statements and other communications to
be given under the terms of this Agreement shall be in writing and delivered by
hand against receipt or sent by certified or registered mail or by Federal
Express or other similar overnight mail service, return receipt requested:
To Lessee: with copy to:
---------
ENN LEASING COMPANY, INC. HUNTON & XXXXXXXX
0000 Xxxx Xxxxx Xxxxxxxxx 000 X. Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000 Riverfront Plaza, East Tower
Attn: Corporate Secretary Xxxxxxxx, XX 00000-0000
Phone: (000)000-0000 Attn: Xxxxx X. Xxxxxx
Fax: (000)000-0000 Phone: (000)000-0000
Fax: (000)000-0000
To Manager: with copy to:
----------
CROSSROADS HOSPITALITY COMPANY, CROSSROADS HOSPITALITY COMPANY,
L.L.C. L.L.C.
Xxxxxx Xxxxx Xxx, 000 Xxxxxxxx Xxxxx Xxxxxx Plaza Ten, 000 Xxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000 Xxxxxxxxxx, XX 00000
Attn: President Attn: General Counsel
Phone: (000)000-0000 Phone: (000)000-0000
Fax: (000)000-0000 Fax: (000)000-0000
or at such other address as from time to time designated by the party receiving
the notice.
Section 16.10 Entire Agreement. This Agreement, together with other
writings signed by the parties expressly stated to be supplementing hereto and
together with any instruments to be executed and delivered pursuant to this
Agreement, constitutes the entire agreement between the parties and supersedes
all prior understandings and writings, and may be changed only by a writing
signed by the parties hereto.
Section 16.11 Time. Time is of the essence with respect to this
Agreement.
Section 16.12 Attorneys' Fees. In the event of any litigation arising
out of this Agreement, the prevailing party shall be entitled to reasonable
costs and expenses, including without limitation, attorneys' fees.
Section 16.13 Complimentary Rooms.
A. Without Lessee's approval, (1) complimentary rooms provided to
general managers at Hotels in connection with relocations
shall not exceed sixty (60) days per relocation and (2)
complimentary rooms provided to other manager-level employees
at Hotels in connection with relocations shall not exceed
thirty (30) days per relocation.
B. With respect to the Orlando, Florida Homewood Suites (the
"Orlando Hotel"), the following practices shall apply with
respect to complimentary and reduced rate rooms provided to
employees or business associates of Manager or Manager's
affiliates:
1. rooms used for persons traveling for business purposes
related to Manager's Orlando, FL corporate office,
including, regional staff visits, relocation of corporate
staff, task force employees, employee interviews,
training classes and Manager's visits by business
associates: if the Orlando Hotel's occupancy is equal to
or less than 95%, Manager shall be entitled to charge the
rooms at Manager's employee rate; and if the Orlando
Hotel's occupancy is greater than 95%, Manager shall be
entitled to charge the rooms at the Orlando Hotel's
corporate rate;
2. rooms for persons traveling for business purposes related
to the Orlando Hotel: Manager shall be entitled to
provide complimentary rooms;
3. rooms for employees of Manager or Manager's affiliates
traveling for non-business purposes: for corporate
associates, Manager shall be entitled to provide
complimentary rooms; and for hotel associates, Manager
shall be entitled to charge the rooms at Manager's
employee rate, each on a space available basis.
Section 16.14. Subordination. This Agreement shall be subordinate to
any mortgage encumbering a Hotel, and Manager agrees to enter into a
lender-manager agreement with respect to each Hotel, which agreement shall
contain reasonable lender-manager provisions, including, without limitation,
Manager's acknowledgment that its real estate interest in and to a Hotel, if
any, created by this Agreement is subordinate to any mortgage encumbering such
Hotel, including providing any purchaser of such Hotel at a foreclosure sale or
deed-in-lieu of foreclosure (including the lender) with the right to terminate
this Agreement with respect to such Hotel; provided, however, in no event will
Manager agree to subordinate or waive its right to receive fees, reimbursements
or indemnification payments under the this Agreement arising prior to
termination (but (a) if this Agreement is terminated by the lender or such
purchaser with respect to such Hotel, Manager shall not look to the lender for
payment of such fees, reimbursements or indemnification payments and Manager's
right to receive such fees, reimbursements or indemnification payments shall be
subordinated to the lender's rights and (b) if this Agreement is not terminated
by the lender or such purchaser with respect to such Hotel, then such fees,
reimbursements or indemnification payments shall be payable by the lender or
such purchaser).
Section 16.15 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
Section 16.16 Compliance with Franchise Agreement. During the Term of
this Agreement and so long as a Hotel is licensed as a Marriott International,
Inc. ("Marriott") product, the following provisions shall apply to such Hotel:
A. Subject to the provisions of this Agreement, Owner and Manager
acknowledge and agree that the Manager shall have the
authority for the day-to-day management of the Hotel;
B. Subject to the provision by Owner of sufficient funds to so
comply, the Manager will operate the Hotel during the Term of
this Agreement in strict compliance with the Marriott license
agreement (the "License Agreement");
C. Except in extraordinary circumstances, such as theft or fraud
on the part of the Manager or default by Lessee under the
License Agreement caused by the Manager for which the Lessee
needs to promptly remove the Manager from the Hotel, this
Agreement shall not be terminated by Lessee without at least
thirty (30) days' prior written notice to Marriott;
D. If there are conflicts between any provision(s) of this
Agreement and the License Agreement, the provision(s) of the
License Agreement shall control; and
E. Manager and Owner acknowledge that the License Agreement
permits Marriott to communicate directly with the Manager
regarding day-to-day operation of the Hotel.
[signature page follows]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers.
ATTEST: LESSEE:
ENN LEASING COMPANY, INC., a
Tennessee corporation
By:
Name:
Title:
ATTEST: MANAGER:
CROSSROADS HOSPITALITY COMPANY, L.L.C.
By:
Xxxxx X. Xxxxxxxx
President and Chief Operating Officer
