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Exhibit 10.4
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BEACHSIDE ALL-SUITES HOTEL, A CONDOMINIUM
HOTEL OPERATING AND RENTAL POOL AGREEMENT
BY AND AMONG
SOUTHWIND DEVELOPMENT COMPANY, L.L.C.
AND
THE OWNERS OF THE UNITS
AND
INNISFREE HOTELS, INC.
DATED AS OF ________________, 1999
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS................................................................................. 1
Definitions................................................................................... 1
ARTICLE II HOTEL RENTAL MANAGEMENT.................................................................... 8
Management of Hotel Rental Pool............................................................... 8
Hotel Rental Pool............................................................................. 8
Use........................................................................................... 9
Restrictions Regarding Condominium Documents.................................................. 9
Monitoring Use by Owners...................................................................... 9
ARTICLE III THE BOARD OF DIRECTORS.................................................................... 9
Board of Directors............................................................................ 9
Release and Indemnity of Board of Directors................................................... 9
Major Decisions - Special Resolutions......................................................... 9
Owners to be Bound............................................................................ 10
ARTICLE IV COMMENCEMENT DATE, TERM OF AGREEMENT....................................................... 10
Commencement Date............................................................................. 10
Initial Term.................................................................................. 10
Renewal....................................................................................... 10
Renewal - By Agreement........................................................................ 11
Performance by Innisfree...................................................................... 11
Revpar Test................................................................................... 11
ARTICLE V BUDGET...................................................................................... 12
Approval...................................................................................... 12
Items to be Included.......................................................................... 13
Budget Summary................................................................................ 14
ARTICLE VI OWNERS' REVENUES AND DISTRIBUTIONS TO OWNERS............................................... 14
Calculations by Innisfree..................................................................... 14
Calculations of Unit Revenue Share............................................................ 15
In the Rental Pool............................................................................ 15
Payments to Owners............................................................................ 15
Maintenance and Repair of Units............................................................... 16
FF&E Reserve.................................................................................. 16
Operating Cash Reserve........................................................................ 16
Shortfalls.................................................................................... 17
Payment of Unit Expenses by Owners............................................................ 17
Other Taxes................................................................................... 17
No Separate Revenue for Innisfree............................................................. 17
Foreign Owners................................................................................ 18
ARTICLE VII MANAGEMENT AND OTHER FEES AND REIMBURSABLE EXPENSES....................................... 18
Base Fee...................................................................................... 18
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Incentive Fee................................................................................. 18
Sales, Reservations, Advertising and Marketing Expenses....................................... 19
Limitation on Innisfree's Marketing and Sales Expenses........................................ 19
Accounting Fee................................................................................ 19
Reimbursement of Innisfree Recoveries......................................................... 19
ARTICLE VIII HOTEL BANK ACCOUNT AND BOOKS AND RECORDS................................................. 20
Hotel Bank Account............................................................................ 20
Books, Records, Financial Statements.......................................................... 20
ARTICLE IX SERVICES TO BE RENDERED BY INNISFREE....................................................... 20
Management Services........................................................................... 20
General Management............................................................................ 21
Maintenance................................................................................... 22
Changes and Alterations....................................................................... 22
Capital Expenditures.......................................................................... 23
Personnel and Employees....................................................................... 24
Marketing of the Hotel........................................................................ 24
Reservation and Sales Systems................................................................. 25
Other Innisfree Systems....................................................................... 26
Performance of Innisfree's Services........................................................... 26
Meetings...................................................................................... 26
ARTICLE X USE OF UNITS BY OWNERS...................................................................... 27
Use of Units by Owners........................................................................ 27
Daily Cleaning................................................................................ 27
No Charge for Common Property or Common Facilities............................................ 27
Owner Election Not to Use..................................................................... 27
Use by or on Behalf of Owner.................................................................. 28
Promotional Use by Owner-Seller............................................................... 28
Additional Personal Use Benefits.............................................................. 28
ARTICLE XI COVENANTS, REPRESENTATIONS AND WARRANTIES.................................................. 28
Covenants..................................................................................... 28
Representations and Warranties of Innisfree................................................... 28
Representations and Warranties of Owners...................................................... 28
ARTICLE XII INSURANCE................................................................................. 29
Insurance..................................................................................... 29
Parties Insured............................................................................... 30
Insurance by Innisfree........................................................................ 30
Schedules of Insurance........................................................................ 30
ARTICLE XIII TITLE.................................................................................... 30
Title......................................................................................... 30
ARTICLE XIV DEFAULT, OBLIGATIONS ON TERMINATION....................................................... 31
Events of Default............................................................................. 31
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Remedies for Owners........................................................................... 31
Termination by Innisfree...................................................................... 31
Condemnation Proceedings...................................................................... 32
Remedies for Innisfree........................................................................ 32
Obligations on Termination.................................................................... 32
ARTICLE XV OWNER-SELLER, UNITS, DISPOSITIONS.......................................................... 33
Initial Agreement by Owner-Seller............................................................. 33
Limitation of Owners' Liability............................................................... 33
Sale of Unit by any Owner..................................................................... 33
Assumption and Release........................................................................ 34
Financing of Units............................................................................ 34
Estoppel Certificates......................................................................... 35
Attornment by Innisfree....................................................................... 35
ARTICLE XVI ASSIGNMENT BY INNISFREE................................................................... 35
Assignment by Innisfree....................................................................... 35
ARTICLE XVII ARBITRATION.............................................................................. 36
Arbitration................................................................................... 36
ARTICLE XVIII MISCELLANEOUS........................................................................... 37
Third Party Beneficiary....................................................................... 00
Xxxxxxxxxxx................................................................................... 00
Xxxxxx Xxxxxx Funds........................................................................... 37
No Waiver of Breach........................................................................... 37
Severability of Provisions.................................................................... 37
Notices....................................................................................... 37
Successors and Assigns........................................................................ 38
Counterparts.................................................................................. 38
Waiver........................................................................................ 38
Independent Contractor; No Partnership or Joint Venture....................................... 38
Approvals..................................................................................... 38
Force Majeure................................................................................. 38
Interpretation................................................................................ 38
Applicable Law................................................................................ 39
Statutes...................................................................................... 39
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HOTEL OPERATING AND RENTAL POOL AGREEMENT
This Agreement dated as of ______________________, 1999, by and among SOUTHWIND
DEVELOPMENT COMPANY, L.L.C., an Alabama limited liability company, and THE
OWNERS OF THE UNITS from time to time, who are parties to this Agreement in
accordance with Article 16 hereof (collectively, the "Owners") and INNISFREE
HOTELS, INC., an Alabama Corporation ("Innisfree").
WHEREAS:
A. The Owners are the owners of the Units;
B. Innisfree is knowledgeable in the operation of hotels and has performed
such functions in Alabama, Arizona and Florida;
C. The Owners desire to engage Innisfree to act as the Owners' exclusive
manager for the operation of the Hotel in accordance with the terms and
conditions set out in this Agreement; and
D. Innisfree agrees to perform such services for the Owners in accordance
with this Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms as used in this Agreement have the
following meanings, except as otherwise expressly provided or unless the context
otherwise requires:
(a) "ADMINISTRATION FEE" means the fee payable to Innisfree
established and paid pursuant to Section 7.5.
(b) "AFFILIATE" means, with respect to any person:
(i) any person which is Controlled by that particular
person; or
(ii) any person which Controls that particular person,
whether such Control be direct or indirect;
(c) "ANNUAL GENERAL MEETING" means the annual general meeting of
the Association pursuant to the Condominium Act;
(d) "ANNUAL STATEMENT" has the meaning set forth in Section 8.2;
(e) "APPROVED BUDGET" means any Budget approved, or deemed to be
approved, pursuant to Section 5.1;
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(f) "ARM'S LENGTH" means characteristic of a transaction
negotiated by unrelated parties each acting in its own best interests;
(g) "ASSESSMENT" means a Common Expense Assessment or a Special
Assessment levied against Unit pursuant to the Condominium Documents;
(h) "ASSOCIATION" means Beachside All-Suites Hotel Condominium
Owners Association, Inc., an Alabama non-profit corporation;
(i) "ASSOCIATION EXPENSES" means expenditures made by or on behalf
of the Association for professional services rendered by accountants, attorneys,
consultants and any manager engaged by the Association who performs any services
other than those required to be performed by Innisfree under this Agreement;
(j) "BASE FEE" means the fee payable to Innisfree established and
paid pursuant to Section 7.1;
(k) "BOARD OF DIRECTORS" means the duly elected board of directors
of the Association, or its authorized agent;
(l) "BUDGET" means the marketing and operating plan and budget for
the operations of the Hotel for any Operating Year established pursuant to the
terms of Sections 5.1 and 5.2;
(m) "BUSINESS DAY" means any day which is not a Saturday, Sunday,
or a statutory state or federal holiday in the State of Alabama;
(n) "CAPITAL EXPENDITURES" means all expenditures of the Hotel of
a capital nature which are not expenses, as determined in accordance with
Generally Accepted Hotel Accounting Principles;
(o) "CERTIFIED PUBLIC ACCOUNTANTS" means the firm of certified
public accountants selected by Innisfree and approved by the Board of Directors;
(p) "COMMENCEMENT DATE" means the date that the Hotel (including
the parking areas contained therein) is opened by Innisfree for business as a
hotel;
(q) "COMMON ELEMENTS" means Parcels A and B on the Plat and all
other portions of the Condominium other than the Units.
(r) "COMPETITIVE SET" means those hotels in the Gulf Shores,
Alabama market that are considered comparable to the Hotel, such hotels being
more particularly listed or described in Section 4.6(d) below.
(s) "CONDOMINIUM ACT" means the Alabama Uniform Condominium Act of
1991, Code of Alabama, Sections 35-8A-101 through 35-8A-417, as amended from
time to time.
(t) "CONDOMINIUM DOCUMENTS" means the Declaration, the Articles of
Incorporation and the Bylaws of the Association.
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(u) "CONTROL" means:
(i) the right to exercise a majority of the votes which
may be put at a meeting of the shareholders of a
corporation, the partners of a partnership, or the
members of a limited liability company; and
(ii) the right to elect or appoint, directly or
indirectly, a majority of the directors of a
corporation or the manager of a limited liability
company or other persons who have the right to manage
or supervise the management of the affairs and
business of a person;
(v) "DECLARATION" means the Declaration for Beachside All-Suites
Hotel, A Condominium, dated ________________, 1999, by Southwind Development
Company, L.L.C., an Alabama limited liability company, which condominium
declaration has been recorded at Slide ______, in the office of the Judge of
Probate of Xxxxxxx County, Alabama, and any amendments, supplements or
corrections thereto;
(w) "EMPLOYEES" means the employees of the Hotel hired by
Innisfree pursuant to Section 9.6;
(x) "ESCALATION FACTOR" means the greater of five percent (5%) or
a fraction of which:
(i) the numerator is the Consumer Price Index for all
Urban Consumers (CPI-U) U.S. City Average (1982-84 =
100), issued by the United States Department of
Labor, Bureau of Labor Statistics (the "Consumer
Price Index") as of the date that the Escalation
Factor is to be determined; and
(ii) the denominator is the Consumer Price Index as of the
prior date to which the date of the determination of
the Escalation Factor is being compared, except that
if at any time the Bureau of Labor Statistics no
longer publishes the Consumer Price Index or is no
longer operated by the United States government, the
Escalation Factor will be determined by the agreement
of the Board of Directors and Innisfree or, failing
such agreement, by arbitration in accordance with
Section 17.1, but in no event less than five percent
(5%);
(y) "FF&E RESERVE" means the reserve to be established by
Innisfree pursuant to the terms of Section 6.6;
(z) "FRINGE BENEFITS" means those benefits normally given from
time to time to employees or personnel at any hotel within the Innisfree Group,
including without limitation, pension, medical, health and life insurance and
similar employee plans, bonus or gain sharing plan participation, the benefits
of any housing loan and relocation costs;
(aa) "FURNITURE, FIXTURES AND EQUIPMENT" means all furniture,
equipment, fixtures and furnishings necessary for the proper operation of the
Hotel and wherever situated in the Hotel Premises, whether or not located in a
Unit or in the Common Elements, including, without limitation, office equipment
and furniture, computers and computer systems, laundry equipment, telephones and
telephone systems, heating and air-conditioning equipment, video machines, mini
bars, refrigerators,
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stoves, kitchen equipment, carpeting, rugs and other floor coverings, draperies,
curtains, tapestries, screens, works of art, pictures, paintings, prints, beds,
mattresses, bedspreads, pillows, radios and television sets, including such
items bearing the Innisfree name or identifying characteristics as Innisfree,
acting reasonably, considers appropriate;
(ab) "GENERALLY ACCEPTED HOTEL ACCOUNTING PRINCIPLES" means
generally accepted accounting principles observed by certified public
accountants in the United States and as supplemented by the Uniform System of
Accounts for Hotels published by the American Hotel & Motel Association;
(ac) "GROSS REVENUE" means all revenue of any kind whatsoever
derived directly or indirectly from the Hotel Premises or any portion thereof
and the operation of the Hotel, including, without limitation, all of the
following:
(i) all revenue from the use and enjoyment of the Hotel
by Hotel Guests and Owners pursuant to this
Agreement, including room charges, mini-bar revenue
(if applicable), housekeeping charges, telephone
revenue, movie rental revenue and the fees and
charges referred to in Section 10.2;
(ii) all revenue from parking, if any;
(iii) proceeds received from any business interruption
insurance; and
(iv) all other revenue from the operation of the Hotel,
including revenue from any amenity at the Hotel for
which a charge is made and from any business or
facility operated within the Hotel Premises, vending
machine revenue and revenue and fees from licensees
or concessionaires within the Hotel Premises,
excluding, however, all of the following:
(v) applicable excise, sales, income, hotel, room,
entertainment and use taxes or similar government
charges collected directly from Hotel Guests and
Owners or as part of the sales price of any goods or
services;
(vi) gains arising from the sale or other disposition of
capital assets or unwanted inventory;
(vii) revenue from condemnation awards or sales or other
transfers in lieu of and under the threat of
condemnation;
(viii) proceeds of any insurance other than business
interruption insurance;
(ix) rebates, discounts or credits of a similar nature
(other than credit card discounts, which will be
included as an item of revenue and considered a Hotel
Expense);
(x) gratuities paid to Employees; and
(xi) payments received at the Hotel for accommodation,
goods or services to be provided at other hotels;
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(ad) "HEAD OFFICE PERSONNEL" means any member of the corporate
staff of Innisfree operating on behalf of the Innisfree Group and not for the
Hotel only;
(ae) "HOTEL" means the Hotel Premises and the hotel operation known
as "Beachside All-Suites Hotel", managed by Innisfree for the Owners in respect
of the Hotel Premises pursuant to this Agreement;
(af) "HOTEL BANK ACCOUNT" means the bank account established
pursuant to Section 8.1;
(ag) "HOTEL EXPENSES" means all expenses properly incurred in
accordance with Generally Accepted Hotel Accounting Principles and the terms and
conditions set out in this Agreement in connection with the earning of the Gross
Revenue and chargeable to the Owners in accordance with this Agreement,
including, without limitation:
(i) the Base Fee;
(ii) the Innisfree Marketing and Sales Expenses;
(iii) the Innisfree Recoveries;
(iv) the Accounting Fee;
(v) any amount payable to and in respect of the Employees
in accordance with this Agreement, including hiring
costs and expenses, Fringe Benefits, withholding
amounts and costs of termination;
(vi) utility costs and charges;
(vii) the cost of the Operating Supplies and Expendables;
(viii) expenses in connection with the maintenance and
repair of the Hotel Premises and the maintenance and
repair of any Furniture, Fixtures and Equipment;
(ix) the cost of operating and maintaining any parking
facility at the Hotel;
(x) travel agent commissions and credit card commissions;
(xi) insurance premiums;
(xii) deductibles paid in connection with claims on
insurance policies required to be maintained under
Article XII; and
(xiii) the cost of filing any tax returns and reports in
regards to the taxes described in Section 6.10(a);
but excluding the following:
(xiv) the Association Expenses;
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(xv) Special Assessments for capital improvements
(xvi) the Incentive Fee;
(xvii) depreciation and amortization;
(xviii) capital lease payments;
(xix) Capital Expenditures;
(xx) any taxes personal to the Owners, including but not
limited to income taxes, real property taxes and
capital gains taxes; and
(xxi) debt service payments payable by the Owners;
(ah) "HOTEL GUESTS" means the users and occupants of the Hotel from
time to time including the Owners, other than the Owners using the Hotel in
accordance with Schedule B and persons claiming under the Owners pursuant to
Schedule B;
(ai) "HOTEL PREMISES" means the real property located in the City
of Gulf Shores, Xxxxxxx County, Alabama, together with the buildings and other
improvements located thereon and more particularly described as the
"Condominium" in the Declaration;
(aj) "INCENTIVE FEE" means the fee payable to Innisfree established
and paid pursuant to Section 7.2;
(ak) "INITIAL TERM" has the meaning set forth in Section 4.2;
(al) "IN THE RENTAL POOL" has the meaning set forth in Section 6.3;
(am) "INNISFREE" means Innisfree Hotels, Inc., an Alabama
corporation;
(an) "INNISFREE GROUP" means the group of hotels as may, from time
to time, be managed by Innisfree or any Affiliate of Innisfree;
(ao) "INNISFREE MARKETING AND SALES EXPENSES" has the meaning set
forth in Section 7.3;
(ap) "INNISFREE RECOVERIES" has the meaning set forth in Section
7.6;
(aq) "NET HOTEL RETURN" means Gross Revenue less the aggregate of
all of the following:
(i) the Hotel Expenses; and
(ii) the amount contributed to the FF&E Reserve in respect
of all of the Hotel Premises during the Operating
Year for which the Net Hotel Return is being
determined;
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(ar) "OPERATING CASH RESERVE" means the reserve to be established
pursuant to Section 6.7;
(as) "OPERATING SUPPLIES AND EXPENDABLES" means any operating
supplies used by Innisfree in the operation of the Hotel in accordance with this
Agreement, including the terms of any Approved Budget, including, without
limitation, laundry supplies, linens, housekeeping supplies, engineering
supplies, accounting supplies, miscellaneous general supply items, uniforms,
food and beverage inventories, inventories, paper supplies and other such items
that when used once are considered to be disposed of and all other similar items
necessary or appropriate for the operation of the Hotel as contemplated by this
Agreement;
(at) "OPERATING YEAR" means:
(i) the period from the Commencement Date to and
including December 31 of the year in which the
Commencement Date occurs; and
(ii) thereafter, each twelve (12) month period from and
including the first day of January to and including
the last day of December, or any portion thereof in
the case of the last year of the Term.
(au) "OWNER-SELLER" means Southwind Development Company, L.L.C., an
Alabama limited liability company;
(av) "PERCENTAGE INTEREST" means the percentage interest of any
Unit as set forth in the Declaration;
(aw) "PERSON" means any individual, corporation, body corporate,
limited liability company, partnership, joint venture, trust, unincorporated
organization or other entity, government or governmental or regulatory
authority, however constituted, or any trustee, executor, administrator or other
legal representative;
(ax) "PLAT" means the Condominium Plat for Beachside All-Suites
Hotel, a Condominium, which plat has been recorded in Slide _______ in the
records of the office of the Judge of Probate of Xxxxxxx County, Alabama, and
any amendments, supplements or corrections thereto;
(ay) "PRIME RATE" means the "prime rate" published in the "Money
Rates" or equivalent section of the Eastern Edition of THE WALL STREET JOURNAL;
provided, however, that if a "prime rate" range is published by THE WALL STREET
JOURNAL, then the highest rate of that range will be used, and if THE WALL
STREET JOURNAL ceases publishing a prime rate or prime rate range, the Prime
Rate will be determined by the agreement of the Board of Directors and Innisfree
or, failing such agreement, by arbitration in accordance with Section 17.1;
(az) "RELATED PERSON" means, with respect to any person: (a) any
Affiliate of such person; (b) any person who is not at Arm's Length to such
person or any Affiliate of such person; or (c) any person who is a director,
officer, employee or agent of such person or any Affiliate of such person or any
spouse, parent, child or relative (including by marriage) of any of the
foregoing;
(ba) "RENTAL POOL" means the rental management arrangement in
respect of the Hotel
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undertaken by Innisfree on behalf of the Owners pursuant to this Agreement;
(bb) "REVPAR" means "Room Revenue" divided by "Available Rooms",
where:
(i) "Room Revenue" means all gross revenue derived from
the rental of sleeping rooms, net of any applicable
rebates and discounts and excluding any incidental
revenue such as telephone charges and movie rental;
and
(ii) "Available Rooms" means the total number of rooms
available for rental to the public on a daily basis,
and in the case of the Hotel, the Available Rooms
will mean the total number of rooms in the Rental
Pool on a daily basis;
(bc) "REVPAR TEST" means that test contemplated by Section 4.6;
(bd) "SECURITY" has the meaning set forth in Section 15.5;
(be) "SECURITY HOLDER" has the meaning set forth in Section 15.5;
(bf) "SPECIAL RESOLUTION" means a resolution passed at a meeting of
the Owners properly convened in accordance with the Condominium Documents passed
by Owners present or represented by proxy and representing not less than 75% of
the Owners entitled to vote thereon.
(bg) "TERM" has the meaning set forth in Section 4.2;
(bh) "UNIT REVENUE SHARE" has the meaning set forth in Section 6.2;
(bi) "UNIT" means that portion of the Hotel Premises designated for
separate ownership or occupancy, the boundaries of which are described in
Section 4.5 of the Declaration together with any limited common element for the
exclusive use of any such Units;
ARTICLE II
HOTEL RENTAL MANAGEMENT
2.1 Management of Hotel Rental Pool. The Owners hereby appoint Innisfree as
their exclusive agent to rent the Units and to manage and operate the Hotel and
the Rental Pool in accordance with the terms and conditions set out in this
Agreement. Innisfree shall undertake on an exclusive basis, on behalf of and for
the account of the Owners, all duties and obligations coming within the scope of
the management and marketing of the Hotel Premises, including those specific
services as set forth herein. Without limiting any of its duties or obligations
set out in this Agreement, Innisfree shall operate the Hotel Premises
substantially in accordance with the standards of the Competitive Set, except to
the extent that Innisfree is prevented from maintaining this standard of service
due to any default by any Owner of its duties or obligations pursuant to this
Agreement.
2.2 Hotel Rental Pool. Innisfree will manage the rental of the Units in
accordance with this Agreement. Each of the Owners hereby irrevocably covenants
and agrees to be bound by the rental bookings of its Unit made by Innisfree in
accordance with this Agreement.
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2.3 Use. The Units will be used only as condominium hotel units and only in
accordance with the Condominium Documents and this Agreement and will not be
used for any other purpose without the prior written consent of the Owners and
Innisfree. Any use of the Units will comply with the Condominium Documents and
all applicable laws, bylaws, rules and regulations.
2.4 Restrictions Regarding Condominium Documents. No Owner will vote in
favor of any amendment or modification of, or addition to, the Condominium
Documents which conflicts with a term or condition set out in this Agreement.
2.5 Monitoring Use by Owners. Innisfree will maintain such books and
records as may be necessary to monitor use of the Units by Owners to ensure that
no Owner uses its Unit more than is permitted by this Agreement.
ARTICLE III
THE BOARD OF DIRECTORS
3.1 Board of Directors. With respect to the rights, duties and obligations
of the Owners under this Agreement, the Owners hereby appoint the Board of
Directors to represent them in interacting with Innisfree in the operation of
the Rental Pool except as otherwise specifically provided herein. Innisfree and
the Owners agree that:
(a) Innisfree will advise the Owners of any nominee to the Board
of Directors who is a representative of a person who is a Related Person to
Innisfree prior to the election of such person to the Board of Directors;
(b) unless otherwise determined by the Owners from time to time,
Innisfree will be given notice of and be entitled to attend meetings of the
Board of Directors;
(c) Innisfree will be entitled to rely on any agreement, document
or instrument signed by the chairperson or any two members of the Board of
Directors or the duly appointed agent of the Board of Directors; and
(d) all acts and things done by the Board of Directors or its duly
appointed agent as set out in this Agreement will be binding upon all of the
Owners and Innisfree will be entitled to rely on all acts and things done by the
Board of Directors in purported compliance with this Agreement, except where a
Special Resolution is expressly required.
3.2 Release and Indemnity of Board of Directors. The Owners hereby release
and indemnify and hold harmless the members of the Board of Directors for all
acts and things done by such members as members of the Board of Directors in
good faith in connection with this Agreement.
3.3 Major Decisions - Special Resolutions. The following actions are
subject to the approval of the Owners by Special Resolution:
(a) any amendment to or modification of this Agreement;
(b) the renewal of the Term pursuant to Section 4.4;
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(c) termination of the appointment of Innisfree as Owners' manager
pursuant to Section 14.2;
(d) assignment, transfer or disposition of Innisfree's rights
under this Agreement if required in Section 16.1;
(e) changes and modifications to the Hotel Premises as provided in
Section 9.4(a); and
(f) any other matter which, pursuant to the terms of this
Agreement, is required to be approved by a Special Resolution.
3.4 Owners to be Bound. All of the Owners shall be bound by any acts and
things done by the Board of Directors in accordance with the Condominium
Documents and this Agreement and any Special Resolutions passed by the Owners at
any meeting of the Owners in accordance with the Condominium Documents and this
Agreement.
ARTICLE IV
COMMENCEMENT DATE, TERM OF AGREEMENT
4.1 Commencement Date. This Agreement will be a binding agreement and bind
the Hotel Premises, Innisfree and all of the Owners upon the execution and
delivery hereof by the Owner-Seller and Innisfree. The duties and obligations of
the parties under this Agreement will come into full force and effect upon the
Commencement Date except that Innisfree's obligation to prepare a Budget for the
first Operating year will come into full force and effect upon execution of this
Agreement by all of the parties hereto.
4.2 Initial Term. The initial term of the appointment of Innisfree as the
Owners' manager under this Agreement will be a period commencing on the
Commencement Date and terminating at midnight at the end of the day on December
31, 2014 (the "Initial Term"). For purposes of this Agreement, the word "Term"
means the Initial Term and any extensions thereof pursuant to Section 4.3 or
Section 4.6.
4.3 Renewal. Following the Initial Term, the appointment of Innisfree as
the Owners' manager pursuant to this Agreement will be automatically renewed
(without the requirement for notice by either the Owners or Innisfree) for two
successive periods of five years each (each called a "Renewal Term"), provided
that:
(a) the Owners have not, prior to the end of the Initial Term or
any Renewal Term, elected to terminate the appointment of Innisfree as manager
under this Agreement pursuant to Section 14.2;
(b) Innisfree has not, prior to the end of the Initial Term or any
Renewal Term, elected to terminate its appointment as manager under this
Agreement pursuant to Section 14.3 or Section 14.4;
(c) the Initial Term has been extended for all prior periods;
(d) Innisfree, in its sole discretion, has not given the Owners
written notice of its election not to so renew such appointment on or before the
date which is six months prior to the end of the then existing Initial Term or
Renewal Term, as the case may be; and
(e) the Owners have not elected to terminate the appointment of
Innisfree as manager under
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this Agreement in accordance with Section 4.5.
4.4 Renewal - By Agreement. In addition to renewals pursuant to Section
4.3, the parties may agree in writing to renew the appointment of Innisfree as
the Owners' manager pursuant to this Agreement for such period or periods and
upon such terms and conditions as may be approved by Innisfree and the Owners
and both Innisfree and all of the Owners will be bound by any such renewal.
4.5 Performance by Innisfree. This Agreement may be terminated by the
Owners in 2005 or any subsequent Operating Year by Special Resolution if the
Revpar Test is not met. Such termination shall be effected by written notice
from the Owners or the Board of Directors to Innisfree and shall be effective no
less than 60 and no more than 90 days after delivery of the notice of
termination.
4.6 Revpar Test.
(a) Commencing in 2004, the Revpar Test shall be deemed to not
have been met if, in two consecutive Operating Years beginning on or after 2003,
the Revpar for the Hotel, under Innisfree's management, is not at least the
Minimum Average Revpar of the Competitive Set (as determined below). For
purposes of this Section 4.6(a), the Minimum Average Revpar shall be equal to
80% of the average Revpar of the Competitive Set for the comparable time period.
(b) Commencing in 2009, the Revpar Test shall be deemed to not
have been met if, in two consecutive Operating Years beginning on or after 2008,
the Revpar for the Hotel, under Innisfree's management, is not at least the
Minimum Average Revpar of the Competitive Set. For purposes of this Section
4.6(b), the Minimum Average Revpar shall be equal to 90% of the average Revpar
of the Competitive Set for the comparable time period.
(c) The Minimum Average Revpar may be adjusted higher or lower by
agreement of the Owner-Seller and Innisfree as provided in Section 4.6(i) and
following an addition to or deletion from the Competitive Set.
(d) The Competitive Set shall initially consist of the following
hotels:
Young's By The Sea
Holiday Inn-Gulf Shores
Oleander Hotel
Lighthouse Hotel
Quality Inn-Gulf Shores
(e) The Competitive Set may not be changed except as provided in
Section 4.6(i) and except as agreed to by the Owners and Innisfree where one of
the following occurs:
(i) One of the Competitive Set members ceases to operate
for a period of 24 months or more or no longer meets
the criteria for the Competitive Set.
(ii) An additional hotel that satisfies the Competitive
Set criteria opens in the vicinity of Gulf Shores,
Alabama and completes 2 full years of operation.
The addition or deletion of a hotel as a member of
the Competitive Set shall, at
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the request of the Owners or Innisfree, be subject to
review by a member of the International Society of
Hospitality Consultants ("ISH") to determine whether
the proposed hotel satisfies the criteria for being a
member of the Competitive Set.
(f) The Competitive Set shall consist of the hotels determined
from time to time in accordance with this Agreement based on the following
criteria:
(i) the number of rooms;
(ii) quality and value of the overall facilities and
amenities;
(iii) character and style of the hotel;
(iv) rate structure and market position; and
(v) location factors such as direct beach frontage.
(g) The Competitive Set and the amount of the Minimum Average
Revpar shall be reevaluated and, if appropriate, changed by agreement of the
Owner-Seller and Innisfree approximately five months prior to the Commencement
Date.
(h) If Innisfree and the Owners are unable to agree within ninety
(90) days after a change in the Competitive Set, upon an appropriate Minimum
Average Revpar taking into account the effect, if any, of such change, then,
such matter shall be resolved by arbitration in the manner described in this
Section 4.6. All arbitrators appointed pursuant to this Section 4.6 shall be
hospitality industry experts selected from the membership of the ISH. If the
Owners and Innisfree are unable to agree, within thirty (30) days after the
event giving rise to the arbitration, upon the selection of a single arbitrator
to arbitrate the dispute, Innisfree and the Owners shall each select one
arbitrator to arbitrate the dispute. If the two arbitrators selected by the
Owners and Innisfree are unable to agree upon a resolution of the dispute, a
third arbitrator shall be selected by the Chairman of the ISH for that purpose.
The authority of the arbitrators shall be limited to determining the Minimum
Average Revpar or the Competitive Set, as the case may be.
(i) Commencing in 2002, Innisfree shall compile Revpar information
for the Competitive Set on or before June 30 of each year. The Revpar
information shall be obtained, to the extent available, from a generally
accepted industry source, such as Xxxxx Travel Research. Innisfree shall attempt
to directly obtain Revpar information for any Competitive Set property for which
the Revpar information is not available from an recognized industry source. The
Owners and Innisfree agree that the Revpar information, whether obtained
directly from a Competitive Set property or through a recognized industry
source, shall be deemed to be conclusively accurate, absent manifest error.
ARTICLE V
BUDGET
5.1 Approval.
(a) For the first Operating Year, the Budget will be prepared by
Innisfree and approved by the Owner-Seller, prior to the Commencement Date. Such
Budget will be an Approved Budget and
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Innisfree will mail a summary thereof to each of the Owners.
(b) After the first Operating Year, on or before December 1 of
each year Innisfree will prepare and deliver to the Owners and to the Board of
Directors a preliminary Budget for the following Operating Year and Innisfree
will review such preliminary Budget with the Board of Directors at a duly
convened meeting of the Board of Directors. The Board of Directors will give
good faith consideration to the preliminary Budget and will not unreasonably
refuse to accept any item, provided such item is in accordance with this
Agreement. The Board of Directors may request additional information from
Innisfree. Within thirty (30) days of the delivery of the preliminary Budget to
the Board of Directors, the Board of Directors may give Innisfree written notice
(an "Objection Notice") of objections to the Preliminary Budget and proposals
for amendment of any disputed items. The Board of Directors and Innisfree, both
acting reasonably, will endeavor to resolve any such disputed items. If the
Board of Directors fails to approve or disapprove the preliminary Budget or to
send an Objection Notice within such 30 day period, then the Owners will be
deemed to have approved the preliminary Budget and such Budget will be deemed to
be an Approved Budget.
(c) Each Budget is subject to the approval of the Board of
Directors and no Budget will be an Approved Budget unless it is approved or
deemed to be approved by the Board of Directors in accordance with this Section
5.1. If any Budget is not approved or deemed to be approved by the Board of
Directors, then:
(i) pending resolution of any disputed item, the specific
disputed items of the Budget will be suspended and
replaced for the Operating Year in question by an
amount equal to the lesser of (A) that proposed by
Innisfree for such Operating Year or (B) such budget
item in the Approved Budget for the Operating Year
prior thereto, subject to escalation per item by the
Escalation Factor, over the 12 month period
immediately following the start of the Operating Year
in question, provided that if such budget item was
not in the Approved Budget for the Operating Year
prior thereto, such item will be suspended pending
resolution of such item; and
(ii) either the Board of Directors or Innisfree may submit
the Budget to be settled by arbitration in accordance
with Section 17.1.
Notwithstanding the foregoing, if labor costs, or any component thereof, is an
item in dispute, then the average within the Competitive Set for such costs or
components shall be adopted and included in the approved Budget.
(d) Innisfree makes no assurances that actual performance of the
Hotel will correspond to such estimates contained in the Approved Budget.
However, Innisfree agrees to use its best efforts to operate the Hotel within
the Approved Budget. The Owners acknowledge that notwithstanding Innisfree's
experience and expertise in relation to the operation of hotels, the projections
contained in each Approved Budget are subject to and may be affected by changes
in financial, economic and other conditions and circumstances beyond Innisfree's
control.
5.2 Items to be Included. The Budget will be a reasonably detailed budget
of revenue and expenses prepared in connection with the operation of the Hotel,
similar in kind and scope to operating plans and budgets prepared by Innisfree
for other hotels in the Innisfree Group as of the Commencement Date, and
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will include the following:
(a) the projected Gross Revenue, detailed as to each source of
revenue, together with information and background as to how the various
projections have been determined;
(b) the budgeted Hotel Expenses, by major expense category,
together with information and background as to how the various projections have
been determined;
(c) the projected Unit Revenue Share for each Unit;
(d) the marketing strategy and plan for the Hotel;
(e) any recommended Capital Expenditures for capital improvements
to be made to the Hotel Premises; and
(f) the basis upon which the Innisfree Marketing and Sales
Expenses and Innisfree Recoveries will be charged.
5.3 Budget Summary. Innisfree will mail to each of the Owners a summary of
each Approved Budget once it is approved in accordance with this Article V.
ARTICLE VI
OWNERS' REVENUES AND DISTRIBUTIONS TO OWNERS
6.1 Calculations by Innisfree. For each calendar month during the Term,
Innisfree will prepare or cause to be prepared reasonably detailed financial
statements, prepared in accordance with Generally Accepted Hotel Accounting
Principles and for each such period Innisfree will calculate:
(a) the Gross Revenue;
(b) the Hotel Expenses;
(c) the Capital Expenditures, if any;
(d) the FF&E Reserve;
(e) the Incentive Fee, if any;
(f) capital lease payments, if any;
(g) the Operating Cash Reserve;
(h) the Unit Revenue Share for each Unit, determined in accordance
with Section 6.2.;
(i) the number of days in the month the Unit was occupied; and
(j) the number of days in the month the Unit was in the Rental
Pool.
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No later than the 25th day following the end of each calendar month during the
Term, Innisfree will deliver to the Board of Directors such financial statements
and mail to each of the Owners a written summary statement (the "Monthly
Statement"), setting out the amounts calculated pursuant to Section 6.1 above
and the calculations thereof, in reasonable detail.
6.2 Calculations of Unit Revenue Share. The Owners and Innisfree agree
that:
(a) for each day that a Unit is In the Rental Pool, the Owner of
such Unit will be entitled to share in the Gross Revenue from the Hotel Premises
and the operation of the Hotel earned on such day, as calculated by multiplying
the Gross Revenue earned on such day by the fraction which has as its numerator
the Percentage Interest of such Unit and as its denominator the aggregate of the
Percentage Interests of all of the Units In the Rental Pool on such day;
(b) each Owner of a Unit will be responsible for the payment of
its share of all Hotel Expenses, Capital Expenditures exceeding the FF&E
Reserve, capital lease payments and Incentive Fees payable for all days (whether
or not the Unit is In the Rental Pool), as calculated by multiplying the
relevant Hotel Expenses, the Capital Expenditures exceeding the FF&E Reserve,
capital lease payments and Incentive Fees by the Percentage Interest;
(c) each Owner will be responsible for its share of the FF&E
Reserve in accordance with Section 6.6 and for the Operating Cash Reserve in
accordance with Section 6.7, as calculated by multiplying each of the FF&E
Reserve and the Operating Cash Reserve by the Percentage Interest; and
For the purposes of this Agreement, the "Unit Revenue Share" for any Unit in
respect of any period means the amount allocated to such Unit in accordance with
Section 6.2(a) for such period less the amounts allocated to such Unit in
accordance with Sections 6.2(b) and 6.2(c).
6.3 In the Rental Pool. For the purposes of this Agreement, a Unit will be
considered to be "In the Rental Pool" on a particular day only if it is not
booked by the Owner for use by the Owner in accordance with Article X.
6.4 Payments to Owners. Concurrently with the mailing of the Monthly
Statement, Innisfree will mail to each Owner a check, drawn upon the Hotel Bank
Account, in the amount equal to the Owner's Unit Revenue Share for the month for
which the Monthly Statement applies less the following amounts:
(a) any unpaid amount then payable by the Owner to Innisfree
pursuant to Section 6.8;
(b) any amount deductible therefrom pursuant to Sections 6.9, 6.10
or 10.3;
(c) any other amount payable by the Owner to Innisfree pursuant to
this Agreement; and
(d) withholding tax, if applicable.
Notwithstanding the foregoing, Innisfree may at any time, in consultation with
the Board of Directors, prepare a reasonable estimate of the annual Unit Revenue
Share payable to each of the Owners pursuant to this Section 6.4 and distribute
to the Owners concurrently with the mailing of the monthly statements the amount
of such estimate, less a percentage (not to exceed 20%) established by Innisfree
for seasonal working capital requirements in twelve (12) equal monthly payments,
in which case at the end of such
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Operating Year Innisfree will calculate or cause to be calculated the actual
Unit Revenue Share payable to each of the Owners in accordance with this
Agreement and include such calculation in the Annual Statement as set out in
Section 8.2(b) and at such time Innisfree will pay to each Owner the balance of
his or her Unit Revenue Share payable for such Operating Year.
6.5 Maintenance and Repair of Units. Innisfree will, for and on behalf of
the Owners, keep the Units in substantially the same condition they were in as
of the Commencement Date, normal wear and tear excepted, and the cost thereof
will be a Hotel Expense. The Owners acknowledge and agree that the cost of
maintaining and repairing the Units will be shared by all of the Owners during
the Term in accordance with their respective Percentage Interests.
6.6 FF&E Reserve. Innisfree will establish for and on behalf of the Owners
a reserve in the following amounts:
Amount to be Reserved Each Operating Year Expressed
Operating Year as a Percentage of Gross Revenue in that Year
1 1%
2 2%
3 3%
4 4%
5 and subsequent 5%
Operating Years
The FF&E Reserve will be held by Innisfree, for and on behalf of the Owners, in
a separate account from the Hotel Bank Account, as a reserve for Capital
Expenditures for the repair and replacement of the Hotel Premises and for the
repair and replacement of any Furniture, Fixtures and Equipment in accordance
with Section 9.3. Innisfree will, for and on behalf of the Owners, keep the
Hotel Premises and the Furniture, Fixtures and Equipment in substantially the
same condition, quality and scope they were in as of the Commencement Date,
normal wear and tear excepted, and the Owners hereby authorize Innisfree to use
the FF&E Reserve only for such purposes. Innisfree will be under no obligation
to use its own funds for such purpose. The Owners acknowledge and agree that the
FF&E Reserve will be for the benefit of all of the Units collectively and not
for each individual Unit separately and that the cost of maintaining and
replacing the Furniture, Fixtures and Equipment will be shared by all of the
Owners during the Term in accordance with their respective Percentage Interests.
The FF&E Reserve, at all times during the Term and after termination or expiry
of this Agreement, shall remain the property of the Owners.
6.7 Operating Cash Reserve. A reserve in the amount of $50,000 will be
established for and on behalf of the Owners, for use by Innisfree on behalf of
the Owners, as working capital in connection with the operation of the Hotel.
The Operating Cash Reserve will be initially established with funds paid by each
Owner at the time of closing of the Owner's purchase of its Unit. If, twelve
(12) months after the Commencement Date, there have not been a sufficient number
of purchases of Units to fund the Operating Cash Reserve in the amount of
$50,000, Owner-Seller shall contribute such amounts as are necessary to fully
fund the Operating Cash Reserve. Owner-Seller shall be reimbursed for the amount
so contributed out of closing proceeds as and when remaining Units are
purchased. Commencing twelve (12) months after the Commencement Date, Innisfree
will at all times be authorized to withhold each month from the Owners' Unit
Revenue Shares sufficient funds in order to keep the Operating Cash Reserve at
such $50,000 level throughout the Term. The Operating Cash Reserve will be held
in the Hotel Bank Account
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and, commencing as of the Commencement Date, Innisfree may withdraw funds from
the Operating Cash Reserve to pay any Hotel Expenses, Capital Expenditures in
excess of the FF&E Reserve, capital lease payments and the Incentive Fee. Within
ninety (90) days following the twelve (12) month period following the
Commencement Date, Owner-Seller shall pay to Innisfree for deposit into the
Operating Cash Reserve the amount by which funds derived from the operations of
the Hotel during such twelve (12) month period were insufficient to pay Hotel
Expenses, Capital Expenditures, capital lease payments and the Incentive Fee for
such twelve (12) month period. The Operating Cash Reserve, at all times during
the Term and after termination or expiry of this Agreement, shall remain the
property of the Owners.
6.8 Shortfalls. If at any time the funds in the Hotel Bank Account are not
sufficient to pay when due any Hotel Expenses, Capital Expenditures in excess of
the FF&E Reserve, capital lease payments or Incentive Fees payable under this
Agreement, then:
(a) Innisfree may (such as in the case of seasonal operating
shortfalls), but will not be obligated to, pay any such amount out of its own
funds, in which case the Owners will repay such amount to Innisfree forthwith
upon demand and will pay interest on any amount outstanding at the rate equal to
the Prime Rate plus 2% per annum, calculated from the date of advance by
Innisfree until the date of repayment by the Owners and Innisfree may deduct the
amount of any such payment by Innisfree and interest thereon from the Hotel Bank
Account; or
(b) Innisfree may require the Owners to pay the amount of the
shortfall estimated by Innisfree, by mailing to the Owners a written notice
setting out such amount and each Owner's proportionate share thereof, as
calculated by multiplying the amount of such shortfall by such Owner's
Percentage Interest.
(c) Innisfree shall have all rights and remedies available at law
or in equity to enforce the payment of any shortfall by any Owner.
6.9 Payment of Unit Expenses by Owners. Each of the Owners will promptly
pay when due all taxes personal to the Owners in respect of such Owner's Unit,
including income taxes and capital gains taxes, and all amounts owing under any
financing of the Owner's Unit arranged by such Owner. For administrative
purposes, each Owner agrees that Innisfree may, if requested by the Board of
Directors, pay to the Association for and on behalf of and in the name of each
Owner, out of the Unit Revenue Share payable to such Owner, such Owner's pro
rata share of Assessments.
6.10 Other Taxes. The parties agree that:
(a) Innisfree will, as agent for and on behalf of the Owners,
collect and remit to any applicable taxing authority, within the required time
for the remittance thereof, any hotel tax, transient lodging tax, bed tax and
other tax imposed or collected in connection with the use of the Hotel Premises
by Hotel Guests and Owners, and make any necessary filings and reports in
respect thereof; and
(b) Innisfree may withhold from any of the Owners and remit to any
relevant taxing authority any amount required to be withheld or remitted in
respect of withholding tax or any other applicable statutory tax, charge or levy
which Innisfree is required to withhold or remit.
6.11 No Separate Revenue for Innisfree. Except as specifically set out in
this Agreement or any other agreement in writing between or among Innisfree and
the Owners or the Association, neither Innisfree nor any Related Person of
Innisfree will receive any other revenue, profit or reward of any kind or nature
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from or in respect of the Hotel Premises or the Hotel or any portion thereof.
Notwithstanding anything in this Agreement to the contrary, Innisfree and any
Related Person of Innisfree are entitled to receive any amount payable to
Innisfree or such person pursuant to this Agreement as an Owner of any Unit and
to the extent Innisfree or any Related Person of Innisfree owns any Units,
Innisfree or such Related Person shall be entitled to all of the rights,
benefits and privileges, and shall be subject to all of the burdens, obligations
and liabilities of an Owner hereunder.
6.12 Foreign Owners. Owners that are non-resident aliens or foreign
corporations agree to file such tax returns and make such tax elections with,
and provide such information to, all applicable taxing authorities located in
the United States as may be required to avoid the necessity for withholding
income tax on distributions. In addition, Owners that are non-resident aliens or
foreign corporations agree to pay all income taxes for which withholding would
otherwise be required because of such Owners' status as non-resident aliens or
foreign corporations. Each Owner that is a non-resident alien or foreign
corporation shall notify Innisfree, in writing, of its status as such and shall
advise Innisfree whether it is subject to income tax on withholding or is exempt
therefrom. Each Owner that is a non-resident alien or foreign corporation shall
indemnify and hold harmless all other Owners, Owner-Seller and Innisfree, for,
from and against any and all liability, including liability for taxes, penalties
and interest, arising out of or in connection with such Owner's failure to
fulfill its obligations under this Section 6.12.
ARTICLE VII
MANAGEMENT AND OTHER FEES AND REIMBURSABLE EXPENSES
7.1 Base Fee. The Owners and Innisfree agree that during the Term,
Innisfree will receive the Base Fee as compensation for the services rendered in
accordance with this Agreement. The Owners will pay to Innisfree a Base Fee of
5.0% of Gross Revenue for each Operating Year. Such Base Fee shall be payable in
monthly installments based on the Gross Revenue for the preceding month upon the
delivery of the Monthly Statement in respect of such month, and shall be payable
as a Hotel Expense in each case; provided, however, that during any period that
operation of the Hotel is interrupted by fire, hurricane, or other catastrophic
events and said interruption decreases the number of rentable rooms or requires
additional resources or personnel of Innisfree, then business interruption
insurance proceeds will not be included as Gross Revenue, but Innisfree shall be
paid a Base Fee for such month (prorated for any partial month) equal to the
average monthly fee paid Innisfree pursuant to this Section 7.1 for the twelve
(12) month period preceding the period of interruption, plus $1,500.00 per
month.
7.2 Incentive Fee. The Owners and Innisfree agree that:
(a) if, in any Operating Year during the Term, the Net Hotel
Return exceeds $1,252,987 the Owners will pay to Innisfree an Incentive Fee for
such Operating Year in an amount equal to the sum of the following percentages
for any given year of operation:
NET HOTEL RETURN: YEAR 1 YEAR 2 YEARS 3 - 5 YEARS 6 - 15
Over $1,252,987 and 15.0% 15.0% 12.0% 10.0%
up to $1,384,522 of the amount by which Net Hotel Return exceeds $1,252,987 and is less than $1,384,522
Over $1,384,522 30.0% 25.0% 22.50% 20.0%
of the amount by which Net Hotel Return exceeds $1,384,522
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(b) for purposes of computing the Incentive Fee, the first
Operating Year shall be deemed to commence on January 1, 2001 and end on
December 31, 2001;
(c) the Incentive Fee in respect of each Operating Year, will be
payable to Innisfree within 30 days after the mailing of the Annual Statement;
and
(d) during any Renewal Term, the Incentive Fee shall be computed
in the same manner as in years 6 through 15 of the Initial Term.
7.3 Sales, Reservations, Advertising and Marketing Expenses. For the
services provided by Innisfree pursuant to Article IX, including, without
limitation, the Innisfree Group advertising and marketing programs, sales and
reservation systems the Owners will, pay to Innisfree and its Affiliates the
fees and charges set out in Sections 9.9(c) and 9.9(g), (net of any applicable
credits) (collectively called "Innisfree's Marketing and Sales Expenses"). The
Owners acknowledge that the basis and method of allocation of Innisfree's
Marketing and Sales Expenses may change during the Term and the Owners agree to
any such change provided it is in accordance with Section 7.4.
7.4 Limitation on Innisfree's Marketing and Sales Expenses. Innisfree
agrees that none of Innisfree's Marketing and Sales Expenses will be (a) charged
on a basis different than that charged to any other hotel in the Innisfree
Group; or (b) allocated by a method other than that set out in the then current
Approved Budget.
7.5 Accounting Fee. The Owners and Innisfree agree that (a) for the
services provided by Innisfree pursuant to Articles II and VI the Owners will
pay to Innisfree an annual Accounting Fee equivalent to $30.00 per month per
Unit; and (b) the Accounting Fee will be payable monthly as a Hotel Expense in
each case upon the delivery of the Monthly Statement in respect of such month.
7.6 Reimbursement of Innisfree Recoveries. The Owners agree to reimburse
Innisfree for all reasonable costs incurred by Innisfree for the Owners' account
in the ordinary course of business, which costs will be Hotel Expenses,
including, without limitation, the following:
(a) the daily per diem rate for those personnel of Innisfree
assigned to special projects, which will be based upon each individual's rate of
pay and Fringe Benefits (such special projects will include, but not be limited
to, special sales or marketing programs, training and installation of capital
purchases and reasonable travel and out-of-pocket expenses will be included);
(b) reasonable travel and out-of-pocket expenses incurred directly
in connection with the operation of the Hotel by Head Office Personnel; and
(c) the reasonable cost of the standard Innisfree corporate
services utilized by hotels within the Innisfree Group such as, but not limited
to, attendance at Innisfree's management seminars and other conferences,
operating handbooks and manuals, purchasing services, departmental services, and
corporate marketing services.
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When any expenses required to be reimbursed hereunder were incurred in visiting
a number of hotels within the Innisfree Group, the cost will be reasonably
prorated to all those hotels. Each of the foregoing expenses shall be set out in
an Approved Budget or otherwise preapproved by the Board of Directors.
ARTICLE VIII
HOTEL BANK ACCOUNT AND BOOKS AND RECORDS
8.1 Hotel Bank Account. Innisfree may designate the United States bank
having a branch reasonably convenient to the Hotel with which the Hotel will
conduct its various banking affairs. All funds received in the operation of the
Hotel will be deposited into a trust account bearing the name of the Hotel in
such bank. The Hotel Bank Account will be under the control of Innisfree. Checks
and other documents of withdrawal will be signed only by persons authorized by
Innisfree. All funds in the Hotel Bank Account will belong to the Owners and
will be dealt with in accordance with this Agreement. Innisfree is hereby
authorized to pay all Hotel Expenses, Capital Expenditures, Association
Expenses, capital lease payments (if any) and Incentive Fees incurred in
accordance with this Agreement and all amounts repayable to the Owner-Seller
pursuant to Section 6.7 from funds in the Hotel Bank Account.
8.2 Books, Records, Financial Statements.
(a) Innisfree agrees, on behalf of the Owners, to keep on the
Hotel Premises books of account and other records relating to or reflecting the
results of the operations of the Hotel in accordance with this Agreement. All
books of account and other records are the property of the Owners and will be
available to the Board of Directors and to the Owners at all reasonable times
for examination, audit, inspection and copying. Upon any termination of this
Agreement, all financial books and records and a list of the Hotel's individual
guests who stayed at the Hotel during the preceding two years (with their names
and addresses and the dates of their arrivals and departures) will be turned
over forthwith to the Board of Directors to ensure the orderly continuance of
the operation of the Hotel. All books and records will thereafter be available
to Innisfree at the Hotel, at all reasonable times, for inspection, audit,
examination and copying. Any costs and expenses incurred in providing books and
records to Innisfree after termination will be paid by Innisfree.
(b) Within seventy five (75) days after the end of each Operating
Year, Innisfree shall cause to be prepared and mailed to all of the Owners,
reasonably detailed financial statements in accordance with Generally Accepted
Hotel Accounting Principles, together with an annual statement setting out the
items referred to in Section 6.1 and the calculation of each of them
(collectively called the "Annual Statement") and any other reports or
information as may be reasonably required by the Owners for tax purposes. Unless
otherwise agreed by the Board of Directors in advance, the Annual Statement will
be audited by the Certified Public Accountants and will contain a certification
by the Certified Public Accountants to the effect that all of such items have
been calculated in accordance with the terms of this Agreement.
ARTICLE IX
SERVICES TO BE RENDERED BY INNISFREE
9.1 Management Services. Innisfree will:
(a) use all reasonable efforts to sell room nights in respect of
the Units to Hotel Guests;
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(b) carry out and perform all such acts and things as are
reasonably necessary or desirable in connection with the operation of the Hotel
in a manner substantially in accordance with the standards of the Competitive
Set;
(c) procure and maintain any licenses and permits which may be
required in connection with the carrying out of its duties and obligations under
this Agreement;
(d) strictly observe and abide by the terms and conditions set out
in the Declaration; and
(e) diligently and faithfully perform its duties and obligations
under this Agreement as would a reasonably prudent hotel manager in the position
of Innisfree.
9.2 General Management. Subject to the terms and conditions of this
Agreement and any Approved Budget, Innisfree agrees to and shall have all
necessary power and authority to perform all appropriate and necessary
management services in connection with the operation of the Hotel as a hotel in
a manner substantially in accordance with the standards of the Competitive Set,
including but not limited to:
(a) the general organization of the Hotel;
(b) the development and implementation of sales, advertising,
personnel, employment, purchasing and maintenance programs consistent with the
provisions of this Agreement;
(c) the implementation of administrative accounting, budgeting,
and operational policies and practices of Innisfree as used in the hotels within
the Innisfree Group, from time to time. Such policies and practices will be
deemed to be in compliance with Innisfree's obligations hereunder, and the
Owners will accept such policies and practices so long as they do not conflict
with any term or condition of this Agreement or any Approved Budget;
(d) the review of the conduct of hotel operations at the Hotel
from time to time in accordance with the standards of the Competitive Set and
established management practices and policies of Innisfree;
(e) the establishment and supervision of Innisfree's standard
accounting and inventory control systems which are normally used for the hotels
within the Innisfree Group which are comparable to the Hotel;
(f) the arrangement for the provision to the Hotel of all goods
and services as are necessary for the proper operation and maintenance of the
Hotel in a manner substantially in accordance with the standards of the
Competitive Set;
(g) the establishment of all prices, charges and rates, and in
connection therewith, the supervision and control of the collection, receipt and
giving of receipts for all goods or services provided or revenue of any nature
derived from the operations of the Hotel;
(h) the determination of the Hotel's purchasing policy, including
the selection of the merchandise, supplies and materials and establishment and
maintenance of all inventories required for the proper operation of the Hotel,
and the selection of the suppliers and negotiation of supply contracts in order
to assure that all purchases are made on the best available terms;
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(i) the negotiation and execution of contracts which are normally
entered into within the scope of hotel operations and preparation of the
corresponding legal documents;
(j) the determination of credit practices applicable to suppliers
and to the Hotel's clientele and negotiation of arrangements with credit
organizations, in particular those issuing credit cards;
(k) with the prior approval of the Board of Directors, acting
reasonably, instituting in the name of the Hotel any lawsuits or other legal
actions having a direct link with the operations of the Hotel and deemed
necessary or advisable by Innisfree; and
(l) the supervision of the activities of Owners while in occupancy
of a Unit, Hotel Guests and any tenants, concessionaires and holders of
privileges in respect of any portion of the Hotel Premises and their employees,
including the dispossession of Hotel Guests, Owners and tenants for nonpayment
of rent or any other proper cause, or the termination of the rights of
concessionaires or licensees for proper cause.
(m) the employment of persons, agents and contractors in the
rental operation and management of the Units, including, but not limited to,
supervisory managing agents, building management agents, rental agents,
marketing representatives, security personnel and insurance brokers, on such
terms and for such compensation as Innisfree deems appropriate.
(n) the employment of persons to perform legal and independent
auditing services in connection with the rental operation and the management of
the Units and to provide services in connection with the preparation and filing
of any tax returns required in connection with the Hotel or the rental pool.
9.3 Maintenance.
(a) Innisfree shall cause the Hotel Premises and the Furniture,
Fixtures and Equipment to be maintained in good operating condition and repair,
normal wear and tear excepted, and Innisfree will replace, at the expense of the
Owners, such items of the Furniture, Fixtures and Equipment and Operating
Supplies and Expendables as from time to time may be appropriate in accordance
with the then current Approved Budget. All items of Furniture, Fixtures and
Equipment not located within a Unit, upon acquisition and receipt by Innisfree
of any payment therefor, will become, without further act, the property of the
Owners and will be owned collectively in accordance with their respective
Percentage Interests. Upon completion of reconstruction of any change or
addition to the Hotel, Innisfree will furnish to the Owners any guaranties and
warranties relating to any portions of the Hotel or the Furniture, Fixtures and
Equipment and Operating Supplies and Expendables. Innisfree agrees to cooperate
with the Owners to enforce the provisions of such guaranties and warranties.
Innisfree will not make any Capital Expenditures except if the same is included
in an Approved Budget or otherwise preapproved by the Board of Directors.
(b) The Owners acknowledge that the Hotel will be operated as a
member of the Innisfree Group and that it will, therefore, be mandatory for the
Hotel Premises and the Furniture, Fixtures and Equipment to be maintained in a
manner substantially in accordance with the standards of the Competitive Set in
order to continue operation of the Hotel as part of the Innisfree Group.
9.4 Changes and Alterations. From time to time during the Term, Innisfree
may make, at the Owners' expense, but subject to the terms of this Agreement and
the then current Approved Budget, reasonable
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changes and alterations to the Hotel Premises, or any part thereof, subject,
however, in all cases to the following:
(a) no change or alteration will be made without the prior consent
of the Owners by Special Resolution which would:
(i) change the general character of the Hotel;
(ii) involve the excavation of any portion of the Hotel
Premises;
(iii) include alteration of, or result in increasing the
burden upon the foundation of the Hotel Premises; or
(iv) reduce the size of any Unit.
(b) all permits, licenses and authorizations required to be
procured in connection with any change or alteration will be procured (or caused
to be procured) by Innisfree, and the cost of the same will be a Hotel Expense;
(c) any change or alteration will be made promptly in a good and
workmanlike manner and in compliance with all applicable laws, rules,
regulations and permits and insurance requirements;
(d) the cost of any change or alteration will be promptly paid (or
caused to be paid) so that the Hotel Premises will at all times be free from any
lien, encumbrance, mortgage, chattel mortgage, conditional sales agreement,
title retention agreement or other charge for labor, services or material
supplied or claimed to have been supplied to the Hotel Premises;
(e) if any such change or alteration involves an estimated cost of
more than $50,000, then:
(i) Innisfree agrees to obtain the specific approval (in
addition to approval of the Approved Budget) of the
Board of Directors to such change or alteration prior
to Innisfree proceeding;
(ii) if Innisfree proposes to have such change or
alteration supervised by personnel of Innisfree or
the Hotel, Innisfree will obtain the specific
approval of the Board of Directors as to whether such
change or alteration requires the supervision of an
independent engineer or architect; and
(iii) if the Board of Directors so advises Innisfree in
writing prior to the Owners approving same, such
change or alteration will be made under the
supervision of an architect or engineer approved by
the Board of Directors in accordance with detailed
plans and specifications approved by the Board of
Directors prepared by such architect or engineer and
the Board of Directors will have the right to approve
the contractor and to supervise construction.
9.5 Capital Expenditures. Innisfree is authorized to make Capital
Expenditures only in accordance with the terms of the then current Approved
Budget or otherwise pre-approved by the Board of Directors, except where
required in an emergency to preserve property or the safety of persons in or
about the Hotel
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Premises.
9.6 Personnel and Employees.
(a) The selection and employment of the general manager and all
such other employees and personnel necessary for the proper operation of the
Hotel is the responsibility of Innisfree and all such persons will be employed
by Innisfree as its employees. The hiring, promoting and discharging of the
general manager and any other employees and personnel and the terms of their
employment, including compensation, will be at the sole discretion of Innisfree,
acting reasonably and in the best interest of the Owners.
(b) Innisfree may delegate to the general manager of the Hotel,
who in turn may delegate to others, the selection and hiring of all employees
and personnel required for the operation of the Hotel.
(c) The general manager may, during the Term be replaced by
Innisfree, and likewise the employment of any other Employee may be terminated
by Innisfree or the general manager or by the person or persons to whom the
general manager will delegate such authority. The decision in regard to any such
discharge, whether directly or through the general manager of the Hotel, will be
at the sole discretion of Innisfree, acting reasonably.
(d) The Owners agree that all costs and expenses incurred by
Innisfree, acting reasonably and prudently, in connection with the employment of
the Employees (including any hiring costs and expenses, Fringe Benefits,
withholding amounts and termination costs payable, including the costs of
terminating Employees at the end of the Term or earlier termination of the
appointment of Innisfree under this Agreement), will be Hotel Expenses, payable
by the Owners pursuant to this Agreement.
9.7 Marketing of the Hotel.
(a) Innisfree agrees to integrate the Hotel in all corporate
publicity, advertising, audio visual and public relation programs and campaigns
with respect to hotels affiliated with the Innisfree Group, including the
promotion of the clientele of the other hotels in and affiliated with the
Innisfree Group in a similar manner to the other hotels in and affiliated with
the Innisfree Group.
(b) Innisfree will carry out, on behalf of the Hotel, all
operational marketing activities and the implementation of the Innisfree Group
marketing policy as applied to the Hotel.
(c) Marketing at the Hotel level will be established and carried
out by Innisfree for the market where the Hotel is located and other markets
which Innisfree reasonably believes relevant considering the nature of the
Hotel.
(d) Innisfree agrees to establish for the Hotel, as part of the
Operating Plan and Budget, an annual marketing plan for each Operating Year,
including, but not limited to:
(i) the determination of the sales policy of the Hotel;
(ii) the determination of yearly and long-term objectives
regarding occupancy rates, revenues and clientele;
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(iii) the establishment of all Hotel rates;
(iv) the setting of any special sales terms;
(v) the determination of credit practices;
(vi) the establishment of sales methods and procedures
relating to the various clientele segments; and
(vii) the analysis of results and permanent control.
(e) Innisfree agrees to perform appropriate advertising and
promotion services at the Hotel level including:
(i) the definition of the Hotel policy regarding
advertising and promotion;
(ii) the preparation of advertising documents and
brochures; and
(iii) the reasonable distribution of such documents in the
hotels of the Innisfree Group and other sales
outlets.
(f) Innisfree agrees to make its central sales office available to
the Hotel for marketing action intended for specific territories. Innisfree will
assist the Hotel in reaching specific market segments through the drafting of
potential clientele lists, the visiting of selected travel agencies, tour
operators and corporations and the following up of such activities in the
processing of sales orders.
(g) Innisfree may undertake advertising campaigns in specific
territories through the Innisfree Group sales offices if necessary, subject to
the Approved Budget.
(h) The Owners consent to the integration of the Hotel's guest
list and client list into Innisfree's guest history and client listing data
base, which may be used by hotels in the Innisfree Group.
9.8 Reservation and Sales Systems.
(a) The Hotel will be integrated into all reservation systems
established and used by the Innisfree Group including other sales and
reservation systems chosen by the Hotel and available under contract with the
Innisfree Group according to the same terms and conditions negotiated by the
Innisfree Group for the other hotels of the Innisfree Group (including
international airlines and independent reservations systems).
(b) Innisfree agrees with the Owners that throughout the Term, the
Hotel will have the right to benefit from the sales communication systems used
by the Innisfree Group.
(c) The Owners agree to abide by the reservation charges
negotiated or established by Innisfree with or for the Other Reservation
Systems.
(d) The Owners agree to honor all reservations made by Innisfree
in accordance with this Agreement, including those made for the twenty four (24)
month period after the termination of the
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appointment of Innisfree under this Agreement.
(e) The Hotel will be entitled to benefit from the sales and
promotional activities planned for groups undertaken at the national or
international level and intended for travel agents, tour operators, incentive
groups, conventions, corporations, governmental agencies, international
associations and airline companies. These activities will be performed by or
through Head Office Personnel.
(f) Innisfree agrees to distribute to all sales outlets as
determined by Innisfree (i) information on services and facilities offered by
the Hotel and advertising literature published by the Hotel; and (ii) the
individual and group rates established annually by the Hotel, and if necessary,
any special rates offered for specific markets.
(g) The Owners agree that the Hotel will abide by all commission
agreements negotiated and established by Innisfree in good faith with third
parties who are not Related to Innisfree, pursuant to which the services
described in Section 9.8(e) may be offered to hotels in the Innisfree Group.
9.9 Other Innisfree Systems. Innisfree agrees to make available to the
Hotel:
(a) all operational departmental supervision and control and other
similar services furnished to other hotels within the Innisfree Group; and
(b) all services used by hotels within the Innisfree Group
generally, with regard to the procurement of all Furniture, Fixtures and
Equipment and Operating Supplies and Expendables and other goods and services
required for the Hotel.
9.10 Performance of Innisfree's Services.
(a) In its management of the Hotel and to provide the Hotel with
the benefits of volume purchasing, market research in the development of new and
used equipment and supplies and design, decorating and other services, Innisfree
may, subject to the Approved Budget or the prior approval of the Board of
Directors, purchase goods, supplies and services from or through Innisfree or
any of its Affiliates, so long as the prices and terms are competitive with the
prices and terms of goods and services of equal quality available from others.
(b) Innisfree may pay to any of its Affiliates a reasonable fee
for the negotiation of contracts for the direct purchase by Innisfree from
independent suppliers of goods, supplies and services so long as the prices and
terms thereof when added to the fee are competitive. Such fee and the prices and
terms of goods and services charged to the operation of the Hotel will be on the
same basis as charged to the operation of hotels owned by Innisfree Affiliates.
(c) Subject to the Approved Budget, Innisfree may retain an
Affiliate or division as a consultant and to perform technical services in
connection with any substantial remodeling, repairs, construction or other
capital improvement to the Hotel and the Affiliate or division will be
reasonably compensated for its services.
9.11 Meetings. Innisfree agrees to meet with the Board of Directors
quarterly, upon reasonable written notice, to discuss general Hotel operating
procedures, the current Approved Budget, the Budget for an Operating Year,
results of an Operating Year, or any other matter of interest or concern.
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ARTICLE X
USE OF UNITS BY OWNERS
10.1 Use of Units by Owners. The parties agree that the terms and conditions
set out in Schedule B are binding upon Innisfree, all the Owners, and all
persons claiming under any Owner pursuant to Schedule B and are hereby
incorporated into this Agreement. Each Owner and each person claiming under the
Owner will be permitted to use its Unit in accordance with Schedule B and in no
other manner whatsoever. If any Owner proposes to book the use of his or her
Unit in accordance with Schedule B, Innisfree will not be responsible if the
Unit has been otherwise booked, provided that Innisfree has complied with
Schedule B. Notwithstanding anything contained in Schedule B (including the
definition of "Day"), the Owners will be bound by and comply with the check-in
and check-out times established by Innisfree for the use of the Units.
10.2 Daily Cleaning. The Owners will pay, upon checkout, Innisfree's daily
mandatory cleaning charge, payable by an Owner for the periods in which the
Owner or a person claiming under the Owner uses the Owner's Unit in accordance
with Schedule B. The cleaning charge shall initially be $30.00, but may be
changed by Innisfree, subject to approval of the Board of Directors. In
addition, the Owners and those using the Units with the permission of the Owners
in accordance with Schedule B will pay the standard charges established by
Innisfree for the following:
(a) long distance calls;
(b) movie rentals;
(c) vending machine charges;
(d) charges for use of any recreational facilities, including
spas, golf courses and racquet sport facilities located off the Hotel Premises
pursuant to agreement with third parties; and
(e) purchases of other goods and services offered by Innisfree.
If any Owner or person claiming under any Owner does not pay any fee or charge
set out in this Section 10.2, Innisfree may deduct such amount from the Owner's
Unit Revenue Share. All of the fees and charges set out in this Section 10.2
received by Innisfree will be included in the Gross Revenue.
10.3 No Charge for Common Property or Common Facilities. Except as set out
in Section 10.2, Innisfree will not charge any Owner or any person claiming
under the Owner pursuant to Schedule B for the use or enjoyment of its Unit or
any portion of the Hotel Premises (including parking), provided that such use is
in accordance with this Article X and Schedule B.
10.4 Owner Election Not to Use. The Owner will notify Innisfree in writing
if the Owner determines or discovers at any time that the Owner or any person
claiming under such Owner will not use the Unit on any of the days for which the
Owner gave notice of the Owners use thereof pursuant to Schedule B and Innisfree
may then rent out the Owner's Unit to Hotel Guests on such days.
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10.5 Use by or on Behalf of Owner. No Owner will use or permit any person to
use the Owner's Unit or the Common Elements except in accordance with this
Article X or with the prior written consent of Innisfree in its sole discretion.
The Owner will be responsible for any use of its Unit by the Owner or any person
claiming under the Owner in accordance with this Article X and any amount
payable from any Owner in respect of such use of such Owner's Unit to Innisfree
hereunder. Under no circumstances will the Owner during the Term directly or
indirectly charge rent or accept any form of consideration for the use of the
Owner's Unit except in accordance with this Agreement.
10.6 Promotional Use by Owner-Seller. Notwithstanding any other provision in
this Agreement to the contrary, until Owner-Seller has sold all of the Units to
another Owner, Owner-Seller shall have the right to use Units reasonably
designated by Innisfree as models for the promotion and sale of the remaining
unsold Units.
10.7 Additional Personal Use Benefits.
(a) Each Owner will have privileges with other Innisfree hotels
managed or operated in North America by Innisfree or its parent company to
reserve rooms at a 25% discount off the rack rate, subject to availability.
(b) Each Owner will receive, upon application to Innisfree or its
parent company, membership in the Elite Club guest recognition program. The
Owner's benefits and continued membership as an Elite Club member holder are
subject to the rules of such program, as such rules may be amended by Innisfree
from time to time.
ARTICLE XI
COVENANTS, REPRESENTATIONS AND WARRANTIES
11.1 Covenants. All of the terms and provisions of this Agreement will be
deemed and construed to be "covenants" to be performed by the respective parties
as though words specifically expressing or importing covenants and conditions
were used in each separate term and provision hereof.
11.2 Representations and Warranties of Innisfree. Innisfree represents and
warrants as of the date hereof and at all times during the Term, as follows:
(a) it is a corporation duly organized, validly existing and in
good standing under the laws of the State of Alabama.
(b) it has full corporate power, authority and legal right to
operate the Hotel and to perform and observe the provisions of this Agreement;
and
(c) this Agreement constitutes a binding obligation of Innisfree
enforceable in accordance with its terms; and
Innisfree hereby covenants that it will, during the Term, preserve and keep in
effect, at its own expense and not as a Hotel Expense, its corporate existence,
rights and licenses as required to carry on business in the State of Alabama.
11.3 Representations and Warranties of Owners. Each of the Owners represents
and warrants as of the
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date hereof and at all during the Term, as follows:
(a) if such Owner is a corporation, it is a corporation duly
authorized to do business under the laws of the State of Alabama;
(b) it has full power, authority and legal right to own real
property in the State of Alabama and to execute and deliver, and to perform and
observe the provisions of this Agreement; and
(c) this Agreement constitutes the valid and binding obligations
of the Owner enforceable in accordance with its terms.
Each Owner covenants that if such Owner is a corporation, it will, during the
term of this Agreement, preserve and keep in effect, at its own expense, its
corporate existence, rights and licenses to carry on business in the State of
Alabama.
ARTICLE XII
INSURANCE
12.1 Insurance. Innisfree will, for itself, the Owners, and the Association,
at the sole cost and expense of the Owners, as a Hotel Expense, take out and
maintain, to the extent that such insurance is available on commercially
reasonable terms, at all times during the Term:
(a) insurance in respect of the Hotel Premises and all the
Furniture, Fixtures and Equipment, including those in the Units, against loss or
damage by fire and all other reasonably insurable perils included in the broad
form extended coverage endorsement available under fire policies in an amount
not less than the actual replacement cost;
(b) comprehensive public, products and innkeepers' liability and
property damage insurance against claims for personal and bodily injury or death
and property damage occurring in or about the Hotel Premises, with a single
limit of not less than $1,000,000.00 per occurrence, wherever practicable, or
such higher amount as the Board of Directors and Innisfree may agree, acting
prudently;
(c) reasonable levels of business interruption insurance, as
determined by Innisfree, acting reasonably;
(d) worker's compensation insurance to the extent necessary to meet the
requirements of the laws of Alabama;
(e) employer's liability insurance, with a minimum liability limit
of $1,000,000;
(f) employee honesty insurance in the amount of $25,000 per
occurrence;
(g) reasonable levels of boiler and machinery insurance; and
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(h) such insurance coverages as are required under the Declaration
with limits no less than are required under the Declaration; provided, however,
that nothing contained herein shall require Innisfree and the Association to
maintain dual coverage for any of the policies of insurance listed above.
12.2 Parties Insured. All insurance policies provided for in Section 12.1
will, to the extent reasonably possible, include the Owners, Innisfree and the
Association as parties insured as their interests may appear. All insurance
policies referred to in Section 12.1 will provide that the same may not be
canceled or materially modified until at least ten (10) days after prior notice
to the Board of Directors and Innisfree. Innisfree and the Board of Directors
will be provided copies of all such policies.
12.3 Insurance by Innisfree. The cost of furnishing any insurance pursuant
to Section 12.1 will be borne by the Owners and charged by Innisfree to the
Owners as a Hotel Expense.
12.4 Schedules of Insurance. Innisfree will provide the Board of Directors
with copies of insurance certificates for any insurance obtained pursuant to
Section 12.1. At least once during each Operating Year, Innisfree will furnish
to the Owners a schedule of insurance, listing the number of the policies of
insurance obtained by Innisfree then outstanding and in force with respect to
the Hotel Premises, or any part thereof, the names of the companies issuing such
policies, or dates of such policies and the risks covered thereby.
ARTICLE XIII
TITLE
13.1 Title. Each Owner represents, warrants, covenants and agrees that:
(a) it has, and that throughout the Term it will maintain, full
ownership of the Owner's Unit and the Furniture, Fixtures and Equipment therein,
free and clear of all non-consensual liens and encumbrances except any Security
and any other liens or encumbrances which do not materially affect the operation
of the Hotel by Innisfree, and those hereafter approved in writing by Innisfree;
(b) the Owner will not remove, and will not permit any person
claiming under the Owner to remove, any item of FF&E in the Owner's Unit except
in accordance with this Agreement; and
(c) Innisfree, in the course of fulfilling its duties and
obligations herein, will and may peaceably and quietly possess, manage and
operate the Owner's Unit and the Furniture, Fixtures and Equipment therein
during the Term.
Each Owner will, at its own expense, undertake and prosecute any appropriate
action, judicial or otherwise, to assure peaceful and quiet possession of such
Owner's Unit by Innisfree. Each Owner further agrees that throughout the Term it
will observe and perform all terms, covenants, conditions, duties and
obligations required under any law, mortgage, or other agreement creating a lien
on the Owner's Unit and the Furniture, Fixtures and Equipment therein and pay
all property taxes and other charges levied with the property taxes.
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ARTICLE XIV
DEFAULT, OBLIGATIONS ON TERMINATION
14.1 Events of Default. The following will constitute events of default on
the part of Innisfree:
(a) the filing of a voluntary petition in bankruptcy or insolvency
or a petition for reorganization under any bankruptcy law by Innisfree;
(b) the consent to an involuntary petition in bankruptcy or the
failure to vacate within sixty (60) days from the date of entry thereof any
order approving an involuntary petition by Innisfree;
(c) the entering of an order, judgement, or decree by any court of
competent jurisdiction, on the application of one or more creditors,
adjudicating Innisfree a bankrupt or insolvent or approving a petition seeking
reorganization or appointing a receiver, trustee or liquidator of all or a
substantial part of such party's assets, and such order, judgment or decree will
continue unstayed and in effect for a period of one hundred twenty (120)
consecutive days; and
(d) the failure of Innisfree to perform, keep or fulfil any of its
material covenants, undertakings, obligations or conditions set forth in this
Agreement.
14.2 Remedies for Owners. If Innisfree is in default pursuant to Section
14.1, the Board of Directors may give to Innisfree notice of its intention to
call a meeting after the expiration of a period of fifteen (15) days from the
date of such notice of the Owners to terminate the appointment of Innisfree
under this Agreement. Notwithstanding the foregoing, with respect to events of
default referred to in Sections 14.1(a) and (d), upon receipt of such notice,
Innisfree, promptly and with all due diligence, will proceed to cure the default
referred to in Sections 14.1(a) and 14.1(d), or if such default is not
susceptible of being cured within a fifteen (15) day period, Innisfree will take
and continue action to cure such default with all due diligence until the same
is cured, such additional period not to exceed ninety (90) days from such
notice. During such ninety (90) day period, the Board of Directors shall not
terminate the appointment of Innisfree. Once a cure has been effected the notice
will be of no effect. If, following the expiration of such period such default
has not been cured, the Owners may, by Special Resolution, terminate the
appointment of Innisfree pursuant to this Agreement. The remedies granted in
this Section 14.2 will not be in substitution for, but will be in addition to
any rights and remedies otherwise available for breach of contract or otherwise.
14.3 Termination by Innisfree.
(a) Innisfree may terminate its appointment as manager under this
Agreement at any time upon sixty (60) days written notice to the Owners and the
Board of Directors if the Owners fail to make or to authorize Innisfree to make
(at the sole cost and expense of the Owners) Capital Expenditures without which
the Hotel cannot be operated substantially in accordance with the standards of
the Competitive Set (and Innisfree hereby acknowledges and agrees that as of the
Commencement Date the capital improvements within the Hotel Premises are
sufficient for the Hotel to be operated substantially in accordance with the
standards of the Competitive Set). Any termination by Innisfree pursuant to this
Section 14.3 is without prejudice to any other rights that Innisfree might
otherwise have against the Owners or any of them.
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(b) Provided that Innisfree shall have maintained the insurance
required by this Agreement, in the event that (i) the Hotel shall be totally
destroyed by fire or other casualty, or (ii) any building constituting a portion
of the Hotel is damaged by fire or other casualty to the extent of fifty percent
(50%) or more of the replacement value of all building improvements Innisfree
shall, at its election, terminate this Agreement by written notice to the Owners
within sixty (60) days following the occurrence of such casualty and pay or
assign all of the insurance proceeds to the Association.
14.4 Condemnation Proceedings.
(a) If the whole of the Hotel shall be taken for any public or
quasi-public use under any statute or by right of eminent domain, or by private
purchase in lieu thereof, then this Agreement shall automatically terminate as
of the date that title shall be taken with respect to the Hotel. If any part of
the Hotel shall be so taken as to substantially impair the operation of the
Hotel to the extent that the remaining premises would not be economically or
feasibly usable by Innisfree, then Innisfree shall have the right to terminate
this Agreement on thirty (30) days written notice to the Owners given within
ninety (90) days after the date of such taking.
(b) In the event of a partial taking, if this Agreement is not
terminated by Innisfree pursuant to subparagraph (a) above, then the entire
condemnation award shall be made available to Innisfree, and Innisfree shall
apply the total award to the restoration and reconstruction of the Hotel.
14.5 Remedies for Innisfree. The Owners acknowledge and agree that if any
Owner or Owners are in breach of any of their duties or obligations under this
Agreement Innisfree may seek an injunction or the specific performance by such
Owner or Owners of such duties or obligations, instead of or in addition to,
seeking damages against such Owner or Owners.
14.6 Obligations on Termination. Upon termination or expiration of the
appointment of Innisfree under this Agreement, the following will apply:
(a) Innisfree and the Owners will cooperate with respect to all
matters relating to the transition of the Management of the Hotel;
(b) all fees and payments payable to Innisfree in accordance with
this Agreement, other than those referred to in Subsection 14.6(c), will be paid
to Innisfree when due, provided that Innisfree will not be entitled to any Base
Fee, Administrative Fee, Incentive Fee, Innisfree Marketing and Sales Expenses
or Innisfree Recoveries for any period following such termination or expiry;
(c) all fees and payments due to Innisfree in accordance with this
Agreement which are computed on an annual or other periodic basis will be
annualized, prorated and paid within thirty (30) days after termination of the
appointment of Innisfree under this Agreement, including all deferred, accrued
and unpaid fees;
(d) Innisfree will peacefully vacate the Hotel Premises and
surrender the management of the Hotel to or to the order of the Owners; and
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(e) Innisfree will deliver to the Owners all the Owners' books and
records respecting the Hotel in the custody and control of Innisfree, and assign
and transfer to or to the order of the Owners all of Innisfree's right, title
and interest in and to all licenses and permits, if any, used by Innisfree in
the operation of the Hotel, provided that if Innisfree has expended any of its
own funds in the acquisition of such licenses or permits, the Owners will
reimburse Innisfree therefor if the Owners request assignment and transfer of
such licenses and permits.
ARTICLE XV
OWNER-SELLER, UNITS, DISPOSITIONS
15.1 Initial Agreement by Owner-Seller. The parties acknowledge and agree
that this Agreement is initially entered into with the Owner-Seller, as the
owner of all of the Units. The Owner-Seller entered into this Agreement on
behalf of all subsequent owners of the Units and each such subsequent owner of
a Unit will be bound by the terms and conditions of this Agreement insofar as
this Agreement relates to such Owner's Unit as though such Owner was a signatory
hereto. This Agreement will run with each of the Units and bind the Owners from
time to time of all of the Units and all of the Units will continue to be in the
Rental Pool in accordance with the terms and conditions of this Agreement.
Forthwith upon the completion of the sale of each unit from the Owner-Seller,
Owner-Seller will provide to Innisfree the Assignment and Assumption Agreement
in the form of Schedule A, duly executed by the Owner-Seller and the purchaser.
15.2 Limitation of Owners' Liability. Notwithstanding anything contained in
this Agreement, the duties, obligations and liabilities of each Owner pursuant
to this Agreement will be limited to:
(a) with respect to the duties and obligations relating directly
to the Units, to such Owner's duties and obligations arising directly in respect
of any Unit owned by such Owner; and
(b) with respect to duties and obligations of the Owners
collectively under this Agreement, to such Owner's proportionate share of such
duties and obligations, as calculated in accordance with the Percentage
Interest, and without limiting the generality of the foregoing.
The duties and obligations of the Owners are several only and not joint duties
or obligations. Innisfree will not look to any Owner for the payment of any
amount in connection with this Agreement except as is expressly set out herein.
No Owner will be liable for any act or omission of any other Owner.
15.3 Sale of Unit by any Owner. The Owners and Innisfree agree that if at
any time any Owner wishes to sell, lease or otherwise directly or indirectly
dispose of its Unit or any interest therein to any person (in this Section 15.3
called a "Transferee") (other than by way of financing to any Security Holder):
(a) prior to entering into any contract or agreement with any
Transferee, the Owner will notify the proposed Transferee of the existence and
substance of this Agreement and the fact that the ownership and use of the Unit
are subject to the rights of Innisfree and any bookings of the Unit by the
Selling Owner pursuant to this Agreement and the Declaration, notify the
proposed Transferee of any bookings of the Unit by the Owner pursuant to Article
X and provide the proposed Transferee with a true copy of this Agreement;
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(b) the Owner will not directly or indirectly sell, lease or
otherwise directly or indirectly dispose of the Unit or any interest therein
unless prior to the completion of such transaction the proposed Transferee
covenants pursuant to an agreement in writing in favor of Innisfree, in the form
and content of Schedule A (modified to change the name of the Owner-Seller to
the name of the vendor of such Unit), to fully assume and be bound by this
Agreement insofar as it relates to such Unit, and Innisfree will provide the
Owner and the Transferee with copies of such agreement, duly executed by
Innisfree, as soon as reasonably possible thereafter;
(c) upon written request from the Owner, Innisfree will provide
any prospective Transferee therein with details of any bookings of the Unit by
the Owner pursuant to Article X;
(d) the Owner or the Transferee will notify Innisfree of the
completion of the sale, lease or other disposition of the Unit and provide
Innisfree with reasonable evidence thereof, together with the assignment and
assumption agreement in the form of Schedule A, duly executed by the Owner and
the Transferee;
(e) Innisfree will not be required to make any adjustments as
between the Owner and any Transferee and Innisfree will be deemed to have fully
discharged its obligations hereunder if Innisfree pays the Unit Revenue Share
payable to such Owner in accordance with Section 6.4 to or to the order of the
person who was, according to the records of Innisfree, the registered owner of
the Unit on the days such Unit Revenue Share is payable to such Owner in
accordance with Section 6.4; and
(f) subject to Innisfree's approval, acting reasonably, the
Transferee may upon not less than thirty (30) days' notice to Innisfree,
reschedule the use by the Transferee pursuant to Article X.
15.4 Assumption and Release. Upon the execution and delivery of the
assignment and assumption agreement in the form of Schedule A by the vendor
(including the Owner-Seller as vendor) and purchaser of any Unit and the
transfer of title of such Unit to the purchaser thereof:
(a) the vendor of such Unit will be released from its duties and
obligations under this Agreement insofar as such duties and obligations relate
to such Unit for the period from and including the date of such transfer of
title, provided that the vendor of such Unit will not be released from any of
its duties or obligations under this Agreement in respect of any other Unit
owned by such vendor; and
(b) the purchaser of such Unit will be responsible for all duties
and obligations under this Agreement insofar as such duties and obligations
relate to such Unit for the period from and including the date of such transfer
of title.
15.5 Financing of Units. If title to any Unit is at any time to be subject
to any mortgage, assignment of rents or other security registered or to be
registered by any Owner against title to its Unit, including any renewals,
modifications, replacements or extensions thereof (collectively called the
"Security"), then:
(a) prior to granting any Security, the Owner of such Unit will
notify the proposed holder of such Security (the "Security Holder") of the
existence and substance of this Agreement and the fact that the ownership and
use of the Unit are subject to the rights of Innisfree and the Hotel Guests
pursuant to this Agreement and the Owner will provide the Security Holder with a
true copy of this Agreement; and
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(b) if the Security Holder in respect of such Security does not
agree to the priority of the Declaration and this Agreement over the Security,
the Declaration and this Agreement will be subordinate to such Security and
Innisfree will, upon request of the Owner, execute any instrument of
postponement or in confirmation of the subordination of the Declaration and this
Agreement pursuant to this Section 15.5(b) and in such case the Owner will use
its best efforts to obtain a non-disturbance agreement in the form of Schedule B
from such Security Holder.
15.6 Estoppel Certificates. Innisfree will, from time to time, upon not less
than ten (10) days' prior notice by any Owner or any Security Holder, execute
and deliver to such Owner or Security Holder, a certificate in writing
certifying that this Agreement is unmodified and in force (or, if there have
been modifications, that the same is in force as modified and stating the
modifications), stating such facts as to this Agreement as such Owner or
Security Holder reasonably requires, and stating whether or not to the best
knowledge of the signer of such certificate, there exists any default in the
performance of any duty or obligation contained in this Agreement, and, if so,
specifying each such default of which the signer may have knowledge. Any
certificate so delivered may be relied upon by such Owner and by any such
Security Holder or prospective Security Holder. Innisfree, upon similar notice,
will be entitled to a similar certificate from each Owner.
15.7 Attornment by Innisfree. Innisfree agrees to attorn to and become the
manager, in accordance with this Agreement, of any purchaser, mortgagee or
trustee who becomes entitled to possession of any Unit in accordance with any
requirements set out in this Article XV.
ARTICLE XVI
ASSIGNMENT BY INNISFREE
16.1 Assignment by Innisfree. Innisfree has the right to assign its rights
under this Agreement as security to its bankers, provided prior thereto the
assignee agrees to be liable hereunder for the obligations of Innisfree to the
Owners upon any enforcement by the assignee of its security comprising
Innisfree's rights under this Agreement. Innisfree has the further right, so
long as it is not then in default under this Agreement, to assign its rights
under this Agreement to an Affiliate of Innisfree; or to any successor assignee
of Innisfree which may result from any merger, transfer, consolidation or
reorganization, provided in any such case that such assignee enjoys the benefits
of the organization of Innisfree and that Innisfree will continue to be liable
for its obligations hereunder and following any such assignment, Innisfree will
deliver to the Board of Directors an agreement pursuant to which such assignee
agrees to assume and be bound by all of the provision of this Agreement on terms
and conditions determined by Innisfree, acting reasonably. Except as provided,
Innisfree will not directly or indirectly assign, transfer, convey or otherwise
dispose of this Agreement, any interest in this Agreement or any of its rights
or duties and obligations under this Agreement without the Owners' prior
approval by Special Resolution.
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ARTICLE XVII
ARBITRATION
17.1 Arbitration. Any dispute, controversy or claim of any kind or nature
(other than pursuant to Section 4.6 which may arise between the parties, whether
arising out of past, present or future dealings between the parties, shall be
settled by arbitration in accordance with this Section 17.1 and such arbitration
shall be conducted as follows:
(a) The Federal Arbitration Act and the Commercial Rules of the
American Arbitration Association (the "Rules") will apply to the arbitration,
except as otherwise provided in this Section 17.1.
(b) Such matter will be determined by a single arbitrator agreed
upon by the parties, or, failing agreement on the arbitrator by the date which
is ten (10) days after the party submitting the matter to arbitration has
notified the other party that it wishes the matter to be determined by
arbitration, the arbitrator will be appointed in accordance with the Rules, upon
request by either party at any time after such date.
(c) The arbitrator will be an experienced hotel consultant or such
other person as is approved by Innisfree and the Board of Directors.
(d) The arbitrator will make this determination on the basis of
written submissions and affidavits (including expert evidence) submitted by the
parties, without any hearing, unless the arbitrator determines that a hearing is
necessary, and the arbitrator may require the parties to make further and other
written submissions or provide further and other affidavits. Each party will
receive a copy of each such submission and affidavit.
(e) The arbitrator's decision will be final and binding on the
parties and any judgment upon the award by the arbitrator may be entered in any
court having jurisdiction thereof.
(f) The parties will share all costs of the arbitrator equally,
unless otherwise determined by the arbitrator.
(g) The parties acknowledge and agree that they have provided for
arbitration to determine the matters set out in this Section 17.1 so as to
promote the efficient, expeditious and inexpensive resolution of the issue. The
parties agree to act at all times so as to facilitate, and not frustrate nor
delay, such efficient, expeditious and inexpensive resolution of the issue. The
arbitrator is authorized and directed to make orders, on his initiative or upon
application of either party, to ensure that the arbitration proceeds in an
efficient, expeditious and inexpensive manner, and, in particular, to enforce
strictly the time limits provided for in the Rules or as set by order of the
arbitrator, unless the arbitrator considers it inappropriate to do so. The
parties acknowledge and agree that it is their wish that the issue be determined
within thirty (30) days after appointment of the arbitrator, subject to an order
of the arbitrator extending the date.
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ARTICLE XVIII
MISCELLANEOUS
18.1 Third Party Beneficiary. The Association is a third party beneficiary
of this Agreement.
18.2 Cooperation. Subject to the terms and conditions set out in this
Agreement, the parties will at all times during the Term act in good faith,
cooperate and act reasonably in respect of all matters within the scope of this
Agreement.
18.3 United States Funds. Unless otherwise noted, all amounts payable by
either party to the other hereunder will be paid in funds of the United States.
18.4 No Waiver of Breach. No failure by Innisfree or the Owners 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 a breach,
will constitute a waiver of any such breach or any subsequent breach of such
Covenant, agreement, term or condition. No waiver of any breach will affect or
alter this Agreement, but each and every Covenant, agreement, term and condition
of this Agreement will continue in full force and effect with respect to any
other then existing or subsequent breach.
18.5 Severability of Provisions. If any provision of this Agreement or the
application thereof to any person or circumstance will, to any extent, be
invalid or unenforceable, the remainder of this Agreement and the application of
such provision to persons or circumstances other than those as to which it is
held invalid or unenforceable, as the case may be, will not be affected thereby,
and each provision of this Agreement will be valid and enforceable to the
fullest extent permitted by law.
18.6 Notices. All notices, requests, approvals, demands and other
communications required or permitted to be given under this Agreement will be in
writing and addressed to the parties as follows:
(a) if to Innisfree: INNISFREE HOTELS, INC.
000 Xxxxxxxxx Xxxxx
Xxxx Xxxxxx, Xxxxxxx 00000
ATTENTION: President
Fax No.: (000) 000-0000
and:
(b) if to the Owners:
(1) in the case of the Owner-Seller: SOUTHWIND DEVELOPMENT
COMPANY, L.L.C.
000 Xxxxxxxxx Xxxxx
Xxxx Xxxxxx, Xxxxxxx 00000
Attention: President
Fax No.: (000) 000-0000
(2) in the case of any other Owner, to the address of such Owner
as notified by such Owner to Innisfree,
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or at such other address as the party to whom the notice is sent will have
designated in accordance with the provision of this Section 18.6. All notices
will be delivered personally, transmitted by fax or mailed by postage prepaid
mail (provided that in the event of a disruption in mail services, notices will
be delivered personally or transmitted by fax). Notices will be deemed to be
received on the date of delivery or transmittal thereof if delivered personally
or sent by fax; or on the fifth Business Day after the mailing thereof, if sent
by mail.
18.7 Successors and Assigns. Subject to Section 15.4, this Agreement will
enure to the benefit of and will be binding upon the heirs, executors,
successors, legal representatives and permitted assigns of the parties.
18.8 Counterparts. This Agreement may be executed in several counterparts,
each of which will be an original, but all of which will constitute but one and
the same instrument.
18.9 Waiver. No provision of this Agreement may be changed orally, but only
by an instrument in writing signed by the party against which the enforcement of
the change is sought.
18.10 Independent Contractor; No Partnership or Joint Venture. For all
purposes of this Agreement, Innisfree and its affiliates shall be and act as
independent contractors. Nothing contained in this Agreement will constitute or
be deemed to create a partnership or joint venture between the Owners or the
Association and Innisfree or its Affiliates.
18.11 Approvals. Except as expressly set out herein, whenever any party
hereto is requested to give its approval to any matter, such approval will not
be withheld or delayed unreasonably. If a party will desire the approval of the
other party hereto to any matter, such party will give notice to such other
party that it requests such approval, specifying in such notice the matter (in
reasonable detail) as to which such approval is requested.
18.12 Force Majeure. If a party is prevented or delayed from performing any
of the obligations on its part to be performed hereunder by reason of Act of
God, strike, labor dispute, lockout, threat of imminent strike, fire, flood,
hurricane or other tropical storm, tornado, interruption or delay in
transportation, war, insurrection or mob violence, requirement or regulation of
government, or statute, unavoidable casualties, shortage of labor, equipment or
materials, economic or market conditions, plant breakdown or failure of
operation equipment or any disabling cause (other than lack of funds), without
regard to the foregoing enumeration, beyond the control of either party or which
cannot be overcome by the means normally employed in performance, then and in
every such event, any such prevention or delay will not be deemed to be a breach
of this Agreement but performance of any of the said obligations or requirements
will be suspended during such period or disability and the period of all such
delays resulting from any such thing required or permitted by either party to be
done is to be done hereunder, it being understood and agreed that the time
within which anything is to be done, or made pursuant hereto will be extended by
the total period of all such delays.
18.13 Interpretation. For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
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(a) "this Agreement" means this Hotel Operating and Rental Pool
Agreement, as it may from time to time be supplemented or amended by one or more
agreements between the parties in accordance with the terms hereof;
(b) except where otherwise specifically stated, all references in
this Agreement to designated "Articles", "sections" and other subdivisions are
to be designated Articles, sections and other subdivisions of this Agreement;
(c) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Agreement as a whole or not to any particular
Article, section or other subdivision;
(d) the headings are for convenience of reference only and do not
form a part of this Agreement and they will not be used to interpret, define or
limit the scope, extent or intent of this Agreement or any provision hereof;
(e) the word "including", when following any general statement,
term or matter, will not be construed to limit such general statement, term or
matter to the specific items or matters set forth immediately following such
word or to similar items or matters, whether or not non-limiting language (such
as "without limitation", "without limiting the generality of the foregoing", or
"but not limited to" or words of similar import) is used with reference thereto,
but rather will be deemed to refer to all other items or matters that could
reasonably fall within the broadest possible scope of such general statement,
term or matter;
(f) the masculine gender shall be deemed to include the feminine
and vice versa, the neuter gender shall be deemed to include the masculine or
feminine gender and the singular shall include the plural, and vice versa.
18.14 Applicable Law. This Agreement will be governed by and construed and
enforced in accordance with the laws of the State of Alabama (without giving
effect to the principles thereof relating to conflicts of law) which will be
deemed to be the proper law hereof, and, subject to Article XVII, the courts of
the State of Alabama or of the United States of America for the Southern
District of Alabama will have exclusive jurisdiction in connection with all
matters under this Agreement and the interpretation and enforceability hereof.
18.15 Statutes. Any reference in this Agreement to any statute means such
statute and any statute or law enacted to supersede or replace such statute.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
INNISFREE HOTELS, INC.
By:
-----------------------------------------
Its:
----------------------------------------
SOUTHWIND DEVELOPMENT COMPANY, L.L.C.
By:
-----------------------------------------
Its:
----------------------------------------
SOUTHWIND DEVELOPMENT COMPANY, L.L.C.
On behalf of the Owners
By:
-----------------------------------------
Its:
----------------------------------------
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SCHEDULE A
ASSIGNMENT AND ASSUMPTION OF HOTEL OPERATING
AND RENTAL POOL AGREEMENT
"INNISFREE" INNISFREE HOTELS, INC.
000 Xxxxxxxxx Xxxxx
Xxxx Xxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
"SELLER" Name:
-----------------------------
Address:
----------------------------------
----------------------------------
----------------------------------
Phone:
----------------------------
Fax:
------------------------------
"PURCHASER" Name:
-----------------------------
Address:
----------------------------------
----------------------------------
----------------------------------
Phone:
----------------------------
Fax:
------------------------------
Name:
-----------------------------
Address:
----------------------------------
----------------------------------
----------------------------------
Phone:
----------------------------
Fax:
------------------------------
"UNIT" Beachside All-Suites Hotel, a Condominium Unit
"SALE DATE" ________________, 1999
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WHEREAS:
A. Seller is the owner of the Unit.
B. Seller and Purchaser have entered into a contract for the sale
of the Unit from Seller to Purchaser on the Sale Date.
C. Seller and Innisfree are parties to a Hotel Operating and
Rental Pool Agreement dated as of _________________________, 1999, among
Innisfree, Southwind Development Company, L.L.C., and the Owners of the Units
(as defined therein), as amended by the amendments, if any, described in Section
5 below (collectively, the "RENTAL POOL AGREEMENT") in respect of the Beachside
All- Suites Hotel, a Condominium.
D. The parties are required to enter into this Agreement in
accordance with the Rental Pool Agreement.
NOW, THEREFORE, in consideration of the transfer of the Unit from
Seller to Purchaser on the Sale date, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
all of the parties, the parties agree as follows:
1. Assignment to Purchaser. Effective as of the Sale Date, Seller
hereby absolutely assigns, transfers and conveys, effective from and including
the Sale Date, all of Seller's right, title and interest in and to the Rental
Pool Agreement insofar as they arise from ownership of and related to the Unit,
and all rights and benefits to be derived thereunder (including any amounts
payable to Seller thereunder) insofar as such rights and benefits arise from
ownership of and related to the Unit.
2. Direction to Pay. Seller and Purchaser hereby direct Innisfree
to pay any amounts payable under the Rental Pool Agreement in respect to the
Unit from and including the Sale Date to Purchaser at the address set out above.
3. Assumption and Indemnity by Purchaser. Purchaser hereby
assumes, from and including the Sale Date, all of the duties and obligations of
Seller under the Rental Pool Agreement insofar as such duties and obligations
arise from ownership of and relate to the Unit, and covenants and agrees with
Seller and Innisfree to perform and observe all of such duties and obligations
from and including the Sale Date, and ratifies the Rental Pool Agreement in all
respects.
4. Other Units Excluded. This Agreement relates only to the Unit
and not to any other units in the Development.
5. Amendments to Rental Management Agreement. Seller represents
to Purchaser that the Rental Pool Agreement has not been amended except as
follows [none if not completed]:
6. Miscellaneous. If either Seller or Purchaser is comprised of
more than one person, the covenants and agreements of Seller or Purchaser, as
the case may be, are joint and several covenants and agreements. This Agreement
will be binding upon and inure to the benefit of the heirs, executors,
successors, legal and personal representatives, and assigns of the parties, as
applicable.
7. Purchaser's Acknowledgment. Purchaser acknowledges that
Purchaser has received a copy
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of and has been given an opportunity to read the Rental Pool Agreement
(including any amendments set out in Section 5 above).
Dated:______________, 1999.
SELLER:
-------------------------------------------,
a(n)
----------------------------------------
By:
-----------------------------------------
Name:
---------------------------------------
Its:
----------------------------------------
PURCHASER:
-------------------------------------------,
a(n)
----------------------------------------
By:
-----------------------------------------
Name:
---------------------------------------
Its:
----------------------------------------
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CONSENT OF INNISFREE
Innisfree hereby agrees that Seller is hereby released from all of
Seller's duties and obligations under the Rental Pool Agreement arising from and
including the Sale Date, insofar as such duties and obligations arise from
ownership of or relate to the Unit.
Dated:______________, 1999.
Innisfree Hotels, Inc., an Alabama corporation
By:
--------------------------------------------
Name:
------------------------------------------
Its:
-------------------------------------------
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SCHEDULE B
BEACHSIDE ALL-SUITES HOTEL, A CONDOMINIUM
USE OF UNITS BY OWNERS
1. DEFINITIONS. For the purposes of this Schedule B:
(a) capitalized terms used in this Schedule B and not defined
herein have the meanings ascribed to such terms in the Hotel
Operating and Rental Pool Agreement;
(b) "Day" means any period of 24 consecutive hours, commencing at
2:00 p.m. on any day and ending at 2:00 p.m. on the
immediately following day;
(c) "Hotel Operating and Rental Pool Agreement" means the hotel
operating and rental pool agreement to which this Schedule B
is attached.
(d) "Hotel Operator" means the entity appointed by the Unit Owners
under the Hotel Operating and Rental Pool Agreement as the
Unit Owners' exclusive manager to manage the Hotel and the
Rental Pool.
(e) "Public" means all persons other than the Unit Owner;
(f) "Registered Owner" means the person shown in the records of
the Judge of Probate of Xxxxxxx County, Alabama as owner in
fee simple of the Unit;
(g) "Unit Owner" means the Registered Owner and the spouse,
children and parents of such Registered Owner and the parents
of the Registered Owner's spouse; and where there is more than
one Registered Owner, all the Registered Owners and their
spouses, children, parents and the parents of their spouses
will together constitute the "Unit Owner" for the Unit and,
where the Registered Owner is a corporation or corporations,
all directors, officers, shareholders and employees and the
spouses, children and parents of corporations constitute the
"Unit Owner" for the Unit; and "Unit Owner" will include any
person permitted by any of the foregoing to Use the Unit free
of charge;
(h) "Use" includes the purpose to which the Unit is put, and
includes reside, sleep, inhabit, or otherwise occupy;
(i) "Year" means a calendar year.
2. FOUR MONTH ADVANCE RESERVATIONS.
(a) A Unit Owner may reserve and Use its Unit for up to a maximum
of 14 days per Year provided that the Registered Owner (or any
other person permitted by the Hotel Operator, in its sole
discretion, to reserve the use of the Unit on behalf of the
Registered Owner) first reserves the Use of the Unit by a
notice in writing to the Hotel Operator at least four months
prior to the commencement of the period in which the Unit
Owner wishes to Use the Unit. If the Unit is not reserved for
use by the Public, the Unit owner may reserve the use of its
Unit on less than four months notice on a "space available
basis" and in the discretion of the Hotel operator.
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(b) If a Unit is reserved for a stay which commences at or after
2:00 p.m. on a Friday or a Saturday, the Unit must be reserved
for Use for a minimum of 2 Days. A Unit Owner may Use the Unit
no more than 4 times per Year with respect to 2 or 3 Day stays
that commence at or after 2:00 p.m. on a Friday or a Saturday.
(c) If the Unit Owner (or any other person permitted by the Hotel
Operator, in its sole discretion, to reserve the Use of the
Unit on behalf of the Registered Owner) reserves the Use of
the Unit pursuant to this Paragraph 2, the Unit Owner shall be
entitled to Use such Unit during the period or periods so
reserved regardless of whether the Hotel Operator has accepted
a reservation from the Public for the Use of the Unit for the
period or periods reserved by the Registered Owner and Use
shall be in accordance with the applicable provisions of the
Hotel Operating and Rental Pool Agreement, including Section
10.2 of the Hotel Operating and Rental Pool Agreement
regarding payment for any services used by the Unit Owner and
payment of any restocking/cleaning charges. For purposes of
determining whether the Registered Owner participates in any
rental pool provided for in the Hotel Operating and Rental
Pool Agreement (or as operated by the Association, if no Hotel
Operating and Rental Pool Agreement is in effect), a
Registered Owner will be deemed to have Used the Unit during
the period or periods so reserved, whether or not the Unit
Owner actually Uses or occupies the Unit during such period or
periods unless the Unit is available for rental to the Public
and at least 30 Days prior to the Unit Owner's scheduled Use
of the Unit the Unit Owner cancels such reservation, with the
approval of the Hotel Operator, acting reasonably.
(d) If the Unit Owner does not Use the Unit for the full 14 Days
permitted to be Used by the Unit Owner pursuant to this
Paragraph 2 in any Year, the Unit Owner will not be entitled
to accumulate or otherwise use the unused Days in any future
Year.
(e) The Unit may only be reserved and Used for a total of 14 Days
per Year pursuant to this Paragraph 2, regardless of the
number of Registered Owners of the Unit or Unit Owners during
such Year.
3. USE RESTRICTIONS. Use of the Units shall be subject to the following
restrictions:
(a) The Units must be used only for commercial rental by the hotel
operator to the public for tourist, visitor and transient
traveller accommodation.
(b) An Owner may not individually lease his Unit or directly or
indirectly charge rent or any form of consideration for the
use of the Owner's Unit except in accordance with the terms of
the Hotel Operating and Rental Pool Agreement.
(c) The use of the Units is subject to the requirements of, among
other documents, the Hotel Operating and Rental Pool Agreement
and the Declaration.
(d) The rights of an Owner to make use of the common elements at
the hotel are limited to those times when the Owner has the
right to occupy his Unit in accordance with the terms of the
Hotel Operating and Rental Pool Agreement.
(e) The hotel operator is authorized to designate certain areas of
the hotel for the exclusive
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use of the hotel operator and the Owners may not interfere
with that exclusive use.
(f) A Unit Owner is guaranteed use of his own Unit for a maximum
of 14 days in any year provided at least four months advance
notice is given.
(g) No animals are allowed in the Units or in other areas of the
hotel except for physical impairment assistive animals to the
extent that they are required by persons at the hotel.
(h) Except for signs incidental to the operation of the hotel, and
any other advertising signs that Declarant elects to post in
connection with the development of the hotel, no signs are
permitted on the exterior of any Unit or any other portion of
the hotel without the prior written approval of the Board of
Directors.
(i) No owner may remove, replace, substitute, alter, repair or add
to any part of the hotel (including the owner's Unit) or any
of the furniture, fixtures or equipment located in and around
the hotel (including in any Unit).
4. Subject to the Use by the Unit Owners pursuant to this Schedule B, the
Unit will be available at all times for rental to the Public; the Hotel
Operator may accept reservations from the Public for the Use of the
Unit for any future Day or Days, unless the Registered Owner has
already reserved that Day or those Days pursuant to paragraph 2 hereof.
THERE ARE TAX CONSEQUENCES TO A REGISTERED OWNER (SOME OF WHICH MAY BE
ADVERSE) THAT RESULT FROM THE USE OF A UNIT BY A UNIT OWNER. THE
REGISTERED OWNER SHOULD CONSULT ITS TAX ADVISOR REGARDING HOW THE USE
OF THE UNIT MAY AFFECT THE REGISTERED OWNER'S TAX SITUATION.
THE REGISTERED OWNER IS RESPONSIBLE FOR MONITORING THE IMPACT ANY USE OF ITS
UNIT MAY HAVE ON THE REGISTERED OWNER'S TAXES. NEITHER SOUTHWIND DEVELOPMENT
COMPANY, L.L.C. NOR THE HOTEL OPERATOR SHALL HAVE ANY LIABILITY OR
RESPONSIBILITY FOR THE TAX CONSEQUENCES TO A REGISTERED OWNER RESULTING FROM THE
USE OF THE REGISTERED UNIT OWNER BY A UNIT OWNER.
3
