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Exhibit 10.2
CHICAGO
SECOND AMENDMENT TO AMENDED AND
RESTATED MANAGEMENT AGREEMENT
This Second Amendment to Amended and Restated Management Agreement
(this "Second Amendment") is made and entered into as of this 1st day of
September, 1999 by and among 000 Xxxxx Xxxxxxxx Xxxxxx Corporation, a Delaware
corporation, in its capacity as successor-by-assignment to Westin Hotel Company,
a Delaware corporation, (in such capacity, "Westin"), The Westin Chicago Limited
Partnership, a Delaware limited partnership (the "Hotel Partnership"), 000 Xxxxx
Xxxxxxxx Xxxxxx Corporation, a Delaware corporation, in its capacity as general
partner of the Hotel Partnership; (in such capacity, the "Hotel General
Partner"), and Westin Hotels Limited Partnership, a Delaware limited partnership
("WHLP").
RECITALS
1. Westin, the General Partner, the Hotel Partnership and WHLP are parties to
that certain Amended and Restated Management Agreement dated August 21, 1986 (as
amended from time to time, the "Management Agreement') pertaining to the
management of the hotel located at 000 X. Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx,
currently known as The Westin Michigan Avenue (the "Hotel").
2. The Hotel General Partner and WHLP are parties to a certain Amended and
Restated Agreement of Limited Partnership for the Hotel Partnership dated as of
December 31, 1986 (as amended from time to time, the "Hotel Partnership
Agreement") providing for the ownership and operation of the Hotel by the Hotel
Partnership. WHLP is the sole limited partner of the Hotel Partnership.
3. Westin Realty Corp., a Delaware corporation (the "Parent General Partner")
and the persons and entities from time to time reflected on the books and
records of WHLP as limited partners therein (collectively, the "Limited
Partners"), are parties to a certain Amended and Restated Agreement of Limited
Partnership of WHLP dated as of December 31, 1986 (the "WHLP Partnership
Agreement") providing for the ownership and operation of the Hotel through the
ownership of limited partnership interests in the Hotel Partnership, and the
ownership and operation of the hotel commonly known as The Westin St. Xxxxxxx in
San Francisco, California (the "SF Hotel") through the ownership of limited
partnership interests in the Westin St. Xxxxxxx Limited Partnership, a limited
partnership owning the SF Hotel (the "SF Hotel Partnership").
4. The Parent General Partner has been actively reviewing opportunities to sell
the SF Hotel in accordance with Section 8.02(d) of the WHLP Partnership
Agreement and has determined that it is in the best interests of WHLP and the
Limited Partners to solicit offers to purchase the SF Hotel at this time and to
endeavor to sell the SF Hotel to a qualified buyer in accordance with and
subject to the WHLP Partnership Agreement, the SF Hotel Partnership Agreement,
and the management agreement pertaining to the SF Hotel dated August 21, 1986 by
and among St. Xxxxxxx Hotel Corporation, a Delaware corporation (the "SF Hotel
General Partner"), the SF Hotel Partnership and WHLP (the "SF Management
Agreement").
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5. Each of the Management Agreement and the SF Management Agreement
(collectively, the "Management Agreements") contain certain terms and provisions
that provide for Incentive Management Fees (as defined in each of such
Management Agreements) payable to Westin based upon the pooled operations of the
Hotel and the SF Hotel, reflecting the common ownership by WHLP of the Hotel
Partnership and the SF Hotel Partnership.
6. The WHLP Partnership Agreement contains certain cash flow distribution
priorities by which the payment of the Incentive Management Fees is provided
for.
7. The Management Agreements provide that they shall survive sales of the Hotel
and the SF Hotel (collectively, the "Hotels") unless terminated by Westin in
accordance with their terms.
8. The Parent General Partner, the Hotel General Partner and the SF Hotel
General Partner (collectively, the "General Partners') have determined that it
is in the best interests of WHLP, the Hotel Partnership and the SF Hotel
Partners to cause the Management Agreements to be amended in the manner set
forth below to facilitate maximum bids for the SF Hotel, by clarifying certain
ambiguities that arise under the Management Agreements following a sale of one
or both of the Hotels.
9. Westin has agreed to amend the Management Agreements in the manner requested
by the General Partners to facilitate the General Partners' efforts to sell the
SF Hotel and to avoid possible disputes with subsequent owners of the SF Hotel
regarding the effect of certain provisions in the Management Agreements
following a sale of one or more of the Hotels.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:
1. Effectiveness of Amendment. This Second Amendment shall become effective only
upon the sale of the Hotel by the Hotel Partnership.
2. Defined Terms. Capitalized terms used but not otherwise defined in this
Second Amendment shall have the meaning given in the Management Agreement.
3. Amended Incentive Management Fee Provisions. Effective upon a sale of the
Hotel and for all periods following the date of the closing of such sale,
whether effected by a sale, exchange, involuntary conversion, condemnation or
other disposition of all or substantially all of the assets comprising the Hotel
by the Hotel Partnership or the transfer by WHLP of the general and limited
partnership interests in the Hotel Partnership by sale, operation of merger or
otherwise, Sections 3.2(a) - (e) shall be deleted in their entirety and replaced
with the following:
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"a. Base Management Fee. The party owning the Hotel (the "Owner") shall pay to
Westin an annual Base Management Fee equal to three and one-half percent (3.5%)
of the annual Gross Revenue. The Base Management Fee shall be paid monthly based
on the monthly Gross Revenue of the Hotel, prior to distributions of cash to the
Owner.
b. Incentive Management Fees. Westin shall receive Incentive Management Fees
based upon the Net Operating Cash Flow (as defined below) of the Hotel;
provided, however, that if the Owner also owns, directly or indirectly, the SF
Hotel managed by an affiliate of Westin pursuant to a management agreement in
substantially the same form as this Agreement (the "SF Management Agreement"),
the Incentive Management Fees payable under this Agreement and the SF Management
Agreement shall be determined on a pooled basis based upon the combined Net
Operating Cash Flow of the Hotel and the SF Hotel. In such event, the expense
and liability for the Incentive Management Fees, as computed by Westin, shall be
allocated between the Owner and the partnership or other entity owning the SF
Hotel (the "SF Hotel Owner") in the ratio of the positive Net Operating Cash
Flows of each Hotel, provided that if one of the Hotels has negative Net
Operating Cash Flow, then no Incentive Management Fee shall be payable with
respect thereto, and the entire Incentive Management Fee payable in respect of
the combined Net Operating Cash Flows of the Hotels shall be payable with
respect to whichever of the Hotels had positive Net Operating Cash Flow.
(1) The Owner shall pay on a quarterly basis to Westin
pursuant to Section 3.2(e) an Incentive Management Fee based upon
one-fourth of the anticipated annual Net Operating Cash Flow of the
Hotel, as disclosed in the then current approved Operating Plan and
Budget, but adjusted as required during such Operating Year. The
Incentive Management Fee for the final quarter of any Operating Year
shall be that amount required to adjust the preceding three quarters'
estimates to the annual actual computed amount taking into account the
pooling adjustments provided for in the succeeding sentence. If Owner
also owns, directly or indirectly, the SF Hotel, and if the SF Hotel
has negative Net Operating Cash Flow for the Operating Year in
question, then in addition to the adjustment provided for in the
immediately preceding sentence, the Incentive Management Fee shall be
further adjusted to reflect a reduction in Net Operating Cash Flow of
the Hotel by the amount of the negative Net Operating Cash Flow of the
SF Hotel.
(2) In any quarter for which the Hotel's Net Cash Flow, as
defined below, is insufficient to pay Westin the full amount of the
current quarter's Incentive Management Fee in accordance with the
payment provisions of Section 3.2(f), the unpaid portion may be
deferred until subsequent quarters of Owner's Operating Year, without
interest. Incentive Management Fees unpaid at the end of any Operating
Year may be deferred to subsequent Operating Years without interest.
(3) The annual Incentive Management Fee, as described herein,
shall be equal to 20% of Net Operating Cash Flow of the Hotel.
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c. Annual Statement. After each Operating Year, Westin shall cause to be
prepared and delivered to Owner a statement showing the calculation and payment
of the Base Management Fee and the annual Incentive Management Fee for that
Operating Year.
d. Definitions. For purposes of this Section 3.2, with respect to any fiscal
period:
(1) "Net Cash Flow" shall mean all cash receipts and funds
received by Owner from the ownership and operation of the Hotel, (other
than (i) capital contributions to Owner, (ii) the proceeds of any
borrowing by Owner, (iii) any amounts received by Owner from or as a
result of any Sale or refinancing of the Hotel, or (iv) working capital
or other reasonable reserves of the Owner), less the sum of the
following to the extent made from such cash receipts or other funds
received by the Owner (other than the aforesaid funds withdrawn from
reserves therefor):
(1) all sums paid to lenders including, but not by
way of limitation, all principal and interest payments on
mortgages and other indebtedness of the Owner related to or
secured by the Hotel including all principal and interest
payments on the Mortgage Loans;
(2) all cash expenditures incurred incident to the
normal operation of the Owner's business, including without
limitation those expenses of Westin and its Affiliates
reimbursed by Owner pursuant to the provisions hereof (but not
including Incentive Management Fees);
(3) all cash contributed or advanced to or on behalf
of Owner, whether for capital improvements to, or renovation
of, the Hotel but not including cash contributed to Owner by
the owners of the equity interests in Owner for any other
purpose; and
(4) such reserves as Owner in its reasonable
discretion deems to be reasonably required for the proper
operation of the Hotel.
(2) Net Operating Cash Flow shall mean net income (loss) from
operations of the Hotel as determined in accordance with generally
accepted accounting principles, subject to the following adjustments:
(1) in arriving at Net Operating Cash Flow the
following shall be added back if and to the extent that they
have been deducted in determining such net income (loss):
(1) all interest expense;
(2) depreciation and amortization expense;
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(3) other expense items of an extraordinary
nonrecurring nature not associated with normal
operations of the Hotel including, but not limited
to, any uninsured casualty loss and any deductible
paid in conjunction with a loss covered by insurance;
and
(2) the amount of net income (loss) shall be further
adjusted by deducting the amount of all capital improvements
or renovations funded by sources other than external
borrowings.
e. Payment of Incentive Management Fee. The Incentive Management Fee shall
accrue at the rate provided for in Section 3.2(b) and shall be paid from the Net
Cash Flow of the Hotel not less frequently than quarterly; provided, however,
that if Owner also owns, directly or indirectly, the SF Hotel, the amount of
Incentive Management Fees currently payable shall be determined on the basis of
the combined Net Cash Flows of the Hotel and the SF Hotel. Westin shall
determine the amount of the Net Cash Flow available for payment of Incentive
Management Fees in accordance with the following priorities:
(1) 100% of the Net Cash Flow then available for distribution
shall be paid by Westin to the Owner until, with respect to such
Operating Year, the Owner has received an amount equal to $3,645,606
(the "First Incentive Threshold); provided that if Owner also owns,
directly or indirectly, the SF Hotel, the First Incentive Threshold
shall be $12,882,000;
(2) 100% of any remaining Net Cash Flow then available for
distribution shall be paid to Westin as the Incentive Management Fees
payable by Owner with respect to such Operating Year, until Westin has
received an amount equal to 50% of the aggregate Incentive Management
Fees payable by Owner with respect to such Operating Year;
(3) subject to the proviso in subsection (5) below, 70% of any
remaining Net Cash Flow then available shall be paid to Owner and 30%
shall be paid to Westin as additional amounts of current Incentive
Management Fees then payable by Owner, until the aggregate amount of
current Incentive Management Fees then payable by Owner are paid; and
(4) subject to the proviso in subsection (5) below, 70% of any
remaining Net Cash Flow then available for distribution shall be paid
to Owner and 30% shall be paid to Westin in respect of the aggregate
amounts of deferred Incentive Management Fees then payable by Owner,
until such aggregate amounts of deferred Incentive Management Fees then
payable by the Owner are paid.
(5) During any such Operating Year in which Owner shall have
received an amount equal to $5,756,220 (the "Second Incentive
Threshold"), pursuant to clauses (1) through (4) of this Section
3.2(e), the 70%/30% apportionment in subsections (3) and (4) of
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this Section 3.2(e) shall be replaced with a 50%/50% apportionment for
the balance of such Operating Year; provided that if Owner also owns,
directly or indirectly, the SF Hotel, the Second Incentive Threshold
shall be $20,340,000.
f. Application of Sale or Refinancing Proceeds. Sale or Refinancing Proceeds (as
defined below) received by Owner in any Operating Year from a financing or a
Sale of the Hotel shall be paid to Westin by Owner to the extent of all current
and deferred Incentive Management Fees then payable. Payments pursuant to this
Section 3.2(f) shall be made by the end of the Operating Year of the refinancing
or Sale or within 90 days after the date of such refinancing or Sale, whichever
is later. For purposes hereof, "Sale or Refinancing Proceeds' means the net cash
proceeds received by Owner from or as a result of any Sale or refinancing of the
Hotel, or if Owner is a general or limited partnership, limited liability
company, corporation trust or other entity (an "Entity") the net cash proceeds
to the owners of the equity interests (of all classes) of such Entity from the
Sale of the equity interests in such Entity, after deducting (i) any expenses
incurred in connection therewith, (ii) any amounts applied by the Owner in its
sole discretion towards the payment of any indebtedness of the Owner related to
or secured by the Hotel, including payments of principal and interest on the
Mortgage Loans (but not including payment of Incentive Management Fees), (iii)
the payment of any other expenses related to the ownership or operation of the
Hotel and (iv) the establishment of any reserves deemed reasonably necessary by
such Owner related to the ownership or operation of the Hotel."
4. Acknowledgment and Ratification. Except as expressly amended hereby, the
terms and provisions of the Management Agreement are hereby ratified and
confirmed.
signatures on following page
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IN WITNESS WHEREOF, the parties has hereunto executed this First Amendment as of
the date first referenced above.
WESTIN:
000 XXXXX XXXXXXXX XXXXXX CORPORATION, a Delaware
corporation, successor-by-assignment to Westin Hotel
Company
/s/ Xxx Xxxxxxx
By: ___________________________________________________
Xxx Xxxxxxx
President
HOTEL GENERAL PARTNER:
000 XXXXX XXXXXXXX XXXXXX CORPORATION, a Delaware
corporation
/s/ Xxx Xxxxxxx
By: ___________________________________________________
Xxx Xxxxxxx
President
HOTEL PARTNERSHIP:
THE WESTIN CHICAGO LIMITED PARTNERSHIP, a Delaware
limited partnership
By: 000 XXXXX XXXXXXXX XXXXXX CORPORATION, General
Partner
/s/ Xxx Xxxxxxx
By: ___________________________________________________
Xxx Xxxxxxx
President
WHLP:
WESTIN HOTELS LIMITED PARTNERSHIP, a Delaware limited
partnership
By: WESTIN REALTY CORP., General Partner
/s/ Xxx Xxxxxx
By: ___________________________________________________
Xxx Xxxxxx
Vice President & Secretary
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