Exhibit 10.5
ASSET MANAGEMENT AGREEMENT
BETWEEN
STRATEGIC HOTEL CAPITAL, L.L.C.
AS CLIENT
AND
SHC DTRS, INC.
AS MANAGER
ASSET MANAGEMENT AGREEMENT
THIS ASSET MANAGEMENT AGREEMENT (this "AGREEMENT") is made as
of June __, 2004 by and between STRATEGIC HOTEL CAPITAL, L.L.C., a Delaware
limited liability company (the "CLIENT"), and SHC DTRS, INC., a Delaware
corporation (the "MANAGER").
R E C I T A L S
WHEREAS, Client has no employees and wishes to retain Manager
as an independent contractor to provide the Services (as defined below) to
Client for seven hotel properties, in each case under the supervision and at the
direction of Client;
WHEREAS, Manager is willing to render such Services to Client
for seven hotel properties, and Client is willing to pay the Asset Management
Fee (as defined below) to Manager on the terms and conditions set forth herein;
A G R E E M E N T S
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Client and Manager hereby agree as follows:
1. DEFINITIONS
For purposes of this Agreement, unless the context clearly indicates
otherwise, the following terms shall have the following meanings:
(a) "AFFILIATE" means, with respect to any Person, any other Person
that, directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such
Person. For purposes of this definition, the term "CONTROL", as
used with respect to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of
the management of such Person, whether through the ownership of
voting securities, partnership interests or other ownership
interests, by contract or otherwise. The terms "CONTROLS",
"CONTROLLING" and "CONTROLLED" have correlative meanings.
(b) "APPROVED BUSINESS PLAN" shall have the meaning ascribed to it in
Section 2.4.
(c) "CLIENT" shall have the meaning ascribed to it in the preamble,
and any permitted successor or assignee.
(d) "COMMENCEMENT DATE" shall mean the date of this Agreement.
(e) "CONTROLLING SHAREHOLDER" with respect to a Person shall mean a
shareholder which possesses, directly or indirectly, the power to
direct or cause the direction of the management of such Person,
whether through the ownership of voting securities, partnership
interests or other ownership interests, by contract or otherwise.
(f) "FUNDING" means Strategic Hotel Funding, L.L.C., a Delaware
limited liability company.
(g) "HOTEL" shall mean any of the hotel properties set forth in
Exhibit A hereto (collectively, the "HOTELS"). Following a Hotel
Disposition, the term "Hotels" shall be amended to exclude the
Hotel that is no longer held by Client.
(h) "HOTEL DISPOSITION" shall mean a sale, transfer or other
disposition of a Hotel or any interest in a Hotel, pursuant to
which direct or indirect control of the Hotel is no longer held
by Client or an Affiliate thereof.
(i) "HOTEL OPERATORS" shall mean the hotel management companies that
have been engaged by Client to provide property management
services to the Hotels pursuant to management agreements or
leases.
(j) "HOTEL OPERATOR BUDGET" shall have the meaning ascribed to it in
Section 2.4(a).
(k) "MANAGER" shall have the meaning ascribed to it in the preamble,
and any permitted successor or assignee.
(l) "PARTY" means Client or Manager, as the context requires;
"PARTIES" means Client and Manager collectively.
(m) "PERSON" means any natural person, corporation, partnership,
trust, limited liability company, unincorporated organization,
government or any agency or political subdivision, or any other
entity that may be treated as entity under applicable law.
(n) "PROPOSED BUSINESS PLAN" shall have the meaning ascribed to it in
Section 2.4(a).
(o) "REMAINING VALUE" shall mean the sum of the values for each of
the remaining Hotels as listed in Exhibit A, and shall be
calculated using the values listed in Exhibit A immediately
following each Hotel Disposition.
(p) "REIT" means Strategic Hotel Capital, Inc., a Maryland
corporation.
(q) "TERM" means the period commencing on the Commencement Date and
ending on the Termination Date.
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(r) "TERMINATED HOTEL" means any Hotel (or portion thereof) with
respect to which this Agreement has been terminated pursuant to
the terms of Article 3. For the avoidance of doubt, each
Terminated Hotel shall cease to be a Hotel for purposes of this
Agreement.
2. ENGAGEMENT OF MANAGER AND MANAGER'S SERVICES
Section 2.1. Engagement of Manager. Client hereby engages and retains
Manager to render to Client the Services (as defined below) with respect to the
Hotels. Manager hereby accepts such engagement and agrees, during the Term and
on the terms and conditions set forth herein, to render, or to make satisfactory
arrangements for the provision of, such Services at Client's expense (as set
forth herein). Client and Manager acknowledge that Client will retain title,
ownership, and, other than as delegated hereunder, exclusive control of the
Hotels (and any other assets that may be held from time to time by Client), and
that Manager will not acquire title to, or control of, any interest in, or any
rights whatsoever in or with respect to, the Hotels (or such other assets), or
any income, receipts, proceeds, or revenues deriving from any of the foregoing.
Section 2.2. Services. Client hereby appoints Manager to manage the
day-to-day business of Client, which shall include providing the services set
forth in Exhibit B and such other things as may be necessary or convenient
thereto. Client and Manager acknowledge that Client has retained independent
Hotel Operators to act as managers and provide customary hotel management
services. Manager agrees to monitor such Hotel Operators and advise Client of
the non-performance by any such Hotel Operator of any of its material
obligations under the relevant management agreement. Manager agrees to cooperate
with Client in enforcing the terms of the management agreements. The services
contemplated by this Section 2.2 (including Exhibit B) are referred to in this
Agreement as the "SERVICES". Notwithstanding anything in this Agreement to the
contrary, Manager shall at all times be subject to the control of Client's Board
of Managers in the performance of the Services. Subject to the terms hereof,
Manager is authorized to act for Client in its own name or in the name of
Client, as deemed necessary or advisable by Manager. In no case will the Manager
provide services described in 856(l)(3)(A) of the Internal Revenue Code.
From time to time after the date hereof, Client agrees to cooperate in
good faith with Manager and take all appropriate action and execute any
documents which may be necessary or reasonably advisable for Manager to perform
the Services contemplated hereunder.
Section 2.3. Limitation on Manager's Authority. Manager shall not take
or permit to be taken any of the actions set forth in Exhibit C (each, a
"SIGNIFICANT ACTION") without the prior written consent of Client (and Client
shall have the exclusive right, power and authority to take all such Significant
Actions). In addition to the foregoing, if an emergency exists with respect to
which expenditures are in Manager's professional and reasonable determination
necessary for the preservation or the safety of any of the Hotels, for the
safety of the occupants of any of the Hotels, or to avoid the suspension of any
necessary service to any of the Hotels or if the failure to take any such action
would (in Manager's professional and reasonable determination) result in a
material default pursuant to any material contract or agreement to which Client
is a party or would (in Manager's professional and reasonable determination)
have a material adverse effect upon the value of any Hotel, such expenditures
will be made by Manager without the prior approval of Client only to the extent
necessary to remedy such emergency, material default or material adverse effect.
Manager shall give Client prompt written notice of any such action taken
pursuant to the foregoing authorization. Client acknowledges that Manager's
determination as to whether such expenditures are necessary to remedy an
emergency, material default or material adverse effect will, of necessity, be a
matter of judgment, which judgment shall be respected unless it was manifestly
unreasonable under the circumstances.
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Whenever this Agreement provides that consent or approval is required
of or acts shall be performed by or at the discretion of Client, all such
consents, approvals and acts are to be made, given, or performed only upon the
prior written consent of the Board of Managers of Client, or any person
designated in writing by the Board of Managers who shall be vested with the
authority of Client, until such time, as any, as Manager shall receive written
notice from Client designating one or more new authorized representatives of
Client.
Section 2.4. Approved Business Plans.
(a) Prior to the commencement of Client's fiscal year (but no later
than thirty (30) days following approval of all Hotel Operator Budgets, as
defined below) or more frequently from time to time as Client shall reasonably
request, Manager shall prepare for Client a proposed business plan covering all
of the Hotels (a "PROPOSED BUSINESS PLAN") for the forthcoming fiscal year (or
any other period to which such Proposed Business Plan relates) and shall submit
such Proposed Business Plan to Client. Each Proposed Business Plan shall (i)
incorporate all of the annual business plans and budgets prepared by the Hotel
Operators for each of the Hotels and approved by Client (each such approved
annual business plan and budget, a "HOTEL OPERATOR BUDGET"), and (ii) specify
corporate level expenses. Client shall review the Proposed Business Plan
submitted to it, and may propose such modifications as Client shall deem
necessary or appropriate (other than changes to any Hotel Operator Budget). A
Proposed Business Plan must be approved by Client, Manager (Manager's consent
not to be unreasonably withheld), and to the extent applicable, the relevant
Hotel Operators, to become effective (once approved, an "APPROVED BUSINESS
PLAN"). A Proposed Business Plan shall (i) identify the expenses in respect of
its implementation and (ii) include a detailed operating budget (monthly income
and expense), cash flow projections and a capital expenditure plan for each of
the Hotels. From time to time, if a Hotel Operator Budget is revised and such
revision is approved by Client, Client may revise or request that Manager revise
all or any portion of an Approved Business Plan to reflect the changes to the
Hotel Operator Budget.
(b) Client and Manager agree that the Hotel Operator Budgets for fiscal
year 2004 shall be deemed approved by Client as of the date hereof and shall be
incorporated into the Proposed Business Plan for fiscal year 2004. For purposes
of approving the Proposed Business Plan for fiscal year 2004, Client shall have
the right to approve corporate level expenses only.
(c) Client acknowledges that with regard to any annual business plan
and budget prepared by a Hotel Operator for a Hotel (each, a "Proposed Hotel
Operator Budget"), Client may have rights of approval under the management
agreements depending on whether the budget relates to capital expenditures or
operations, and that the management agreements specify time frames during which
such budget must be approved or disapproved during each fiscal year and the
consequences of disapproval. Manager shall promptly submit to Client each
Proposed Hotel Operator Budget that it receives and Client shall respond so as
to permit Manager to make Client's views on such budgets known to the Hotel
Operators within the time frames required by the management agreements. If
Client fails to timely respond to Manager within the time required for Manager
to make its views known to the relevant Hotel Operator, such Proposed Hotel
Operator Budget as submitted by Manager to Client shall be deemed approved.
Notwithstanding the foregoing, so long as Client timely responds to Manager
within the time required for Manager to make its views known to the relevant
Hotel Operator, as between Client and Manager, Client shall have the final
decision making authority to approve or disapprove each Proposed Hotel Operator
Budget. Each Proposed Hotel Operator Budget which is approved (or deemed
approved) shall form a component of the Approved Business Plan.
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(d) In the event that the Proposed Hotel Operator Budget for any Hotel
is not approved by Client and therefore, Hotel Operator and Client are unable to
agree to an annual business plan and budget, the Proposed Business Plan for any
fiscal year submitted by Manager shall include the annual business plan and
budget required under the terms of the relevant management agreement for such
Hotel while Hotel Operator and Client remain in disagreement, and once the
annual business plan and budget for such Hotel is approved and becomes a "Hotel
Operator Budget", the Proposed Business Plan or Approved Business Plan, as the
case may be, shall be revised to reflect the Hotel Operator Budget for such
Hotel.
Section 2.5. Duty of Care.
(a) In carrying out its duties and performing the Services and observing
and performing its covenants and obligations under this Agreement,
Manager shall at all times act honestly, in good faith, and in the
best interests of Client and the Hotels, and in accordance with and
subject to the provisions of this Agreement.
(b) Manager will commit sufficient resources and funds to enable it to
perform all of its duties and obligations required under this
Agreement in a timely, professional, and cost-efficient manner,
provided, that Client shall pay the Asset Management Fee and reimburse
Manager for all Reimbursable Expenses in a timely manner.
(c) Manager shall keep Client informed of all matters that are material to
the interests of Client.
(d) Manager shall exercise the diligence, skill and care in performing the
Services that a prudent asset manager would exercise in comparable
circumstances, with a view to ensuring compliance by Client with
Client's contractual obligations, including loan agreements and other
financing documents.
(e) In carrying out its duties under this Agreement, Manager shall not
enter into any transactions with Affiliates of Manager at the expense
of Client without the prior written consent of Client.
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Section 2.6. Books and Records.
(a) At all times during the Term, Manager shall maintain at its principal
place of business, or at such other location as Client may reasonably
approve, a complete and accurate set of books and records related to
the Hotels, provided, however, that some of these books and records may
be held by the Hotel Operators or any other advisor appointed by
Client.
(b) Manager shall make the files, books, and records maintained by Manager
on behalf of Client available to Client, and any lender that is
providing financing to Client or Client's Affiliates and/or any other
Person designated by Client, as Client may require from time to time or
as an applicable loan agreement may require.
(c) The records and accounts maintained by Manager on behalf of Client
shall be prepared in accordance with generally accepted accounting
principles in the United States and shall accurately reflect all items
of income and expense allocable to the management, servicing and
disposition of the Hotels, as well as such other information that
Client may reasonably require.
(d) At all times during the Term and for a further period of three (3)
years following the Termination Date, Client, any lender that is
providing financing to Client or Client's Affiliates, and/or any other
Person designated by Client, and their duly authorized agents,
representatives, or employees may, at such reasonable times as Client,
such lender, or such other Person may determine, inspect, audit, and
copy any of the books, records, files, reports, and other materials
maintained by Manager on behalf of Client under this Agreement that
relate to Client or that otherwise pertain to the Hotels or to
Manager's performance under this Agreement. After the Termination Date,
Manager may satisfy this obligation by providing all such files to
Client.
Section 2.7. Fidelity Bonds. Manager has obtained, and will maintain at
all times during the Term, with reputable surety or insurance companies the
insurance specified in Schedule 1, covering all officers, employees, or other
persons having access to (or acting in any capacity with respect to) any of
Client's funds, documents, or assets. Such insurance shall insure and protect
Client against loss resulting from fraud, theft and dishonest and other wrongful
acts as well as insure and protect Client against any actual or alleged breach
of duty, neglect, error, misstatement, misleading statement or omission
committed in the conduct of Manager's business. Manager shall cause to be
delivered to Client a certificate of insurance that provides that should the
insurance policies be cancelled prior to their expiration dates, the insurer
will provide at least thirty (30) days written notice to Client. Client shall
also be notified promptly in writing of all draws or claims against the
insurance policies related to this Agreement.
3. TERM AND TERMINATION
Section 3.1. Term. The initial term of this Agreement shall commence on
the Commencement Date and shall expire on the last day of the calendar month in
which the fifth (5th) anniversary of the Commencement Date occurs. Thereafter,
this Agreement shall automatically renew annually unless either Party gives
ninety (90) days' prior written notice to the other Party electing not to extend
this Agreement for a renewal term. The date upon which this Agreement actually
terminates, whether by expiration of the term or pursuant to Sections 3.2, 3.3,
3.4, 3.5, or 3.6 below, is referred to as the "TERMINATION DATE".
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Section 3.2. Termination for Manager Event of Default. If at any time
during the Term any Manager Event of Default (as defined below) shall occur,
Client shall have the right to terminate this Agreement. Client's termination
right shall be exercisable by the delivery to Manager of a written notice
specifying the event or circumstance that resulted in the occurrence of a
Manager Event of Default (a "MANAGER DEFAULT NOTICE"). This Agreement shall
terminate immediately with effect from the date of delivery to Manager of a
Manager Default Notice. "MANAGER EVENT OF DEFAULT" means that Manager or any
Controlling Shareholder of Manager (i) is the subject of a criminal indictment
or an equivalent criminal proceeding before any court for a felony or for a
crime involving moral turpitude or dishonesty (or an attempt of dishonesty) or
for criminal activity that is punishable by imprisonment, (ii) is or becomes
bankrupt or insolvent, (iii) commits gross negligence, fraud, or willful
misconduct with regard to the affairs of Client, any Affiliate of Client, or any
Hotel, or (iv) is in material breach or default under this Agreement.
Section 3.3. Termination for Manager Change-in-Control. If at any time
during the Term any Manager Change-in-Control (as defined below) shall occur,
Client shall have the right to terminate this Agreement. Client's termination
right shall be exercisable by the delivery to Manager of a written notice
specifying the event or circumstance that resulted in the occurrence of a
Manager Change-in-Control (a "CHANGE-IN-CONTROL NOTICE"). This Agreement shall
terminate with effect thirty (30) days from the date of delivery to Manager of a
Change-in-Control Notice. "MANAGER CHANGE-IN-CONTROL" means (i) a material
change in the senior management of Manager, Funding, or the REIT (and/or any
Person that controls Manager, Funding, or the REIT), which change, in Client's
reasonable judgment, is detrimental to the provision of the Services to Client
under this Agreement, (ii) any transaction or series of transactions, after the
Commencement Date, in which any Person (or any two or more Persons acting in
concert) acquires (or acquire), directly or indirectly, a 50% or greater
interest in Manager, Funding or the REIT (and/or in any Person that controls
Manager, Funding or the REIT), (iii) a merger or consolidation or series of
related mergers or consolidations involving any one or more of Manager, Funding
or the REIT in which such person is not the surviving entity (unless the
indirect ownership and control of Manager, Funding or the REIT, as applicable,
is unchanged after such merger or consolidation or series of related mergers or
consolidations, provided that a merger or consolidation or series of mergers or
consolidations which results in not more than a 20% change in ownership and does
not otherwise result in a "Change of Control" (as such term is defined in that
certain Credit Agreement dated as of June __, 2004 (the "REVOLVER"), among
Funding, as the Borrower, various financial institutions, as the Lenders, and
Deutsche Bank Trust Company Americas, as the Administrative Agent) will not
cause a Manager Change-in-Control), or (iv) the sale, transfer, or other
disposition of all or substantially all of the assets of Manager, Funding or the
REIT or the liquidation or dissolution of Manager, Funding, or the REIT. For
purposes of clause (iii) above, the term "Change of Control" as defined in the
Revolver is incorporated by reference herein and as if fully set forth herein,
and shall survive repayment or other discharge of any and all loans under the
Revolver.
Section 3.4. Discretionary Termination. At any time after the second
anniversary of the Commencement Date, Client may elect, in Client's sole
discretion and for any reason, to terminate this Agreement by delivering written
notice to Manager (a "DISCRETIONARY TERMINATION NOTICE") specifying the date of
termination of this Agreement (which date shall be not less than ninety (90)
days immediately following the date of the Discretionary Termination Notice).
This Agreement shall terminate on the date of termination set forth in the
Discretionary Termination Notice. If Client terminates this Agreement pursuant
to this Section 3.4 and the Discretionary Termination Notice is given prior to
the third anniversary of the commencement date, Client shall pay to Manager on
the Termination Date a one-time termination fee equal to three times the monthly
Asset Management Fee in force at the time of delivery of the Discretionary
Termination Notice. If Client terminates this Agreement pursuant to this Section
3.4 and the Discretionary Termination Notice is given after the third
anniversary of the Commencement Date, there shall be no termination fee.
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Section 3.5. Termination for Client Event of Default. If at any time
during the Term a Client Event of Default (as defined below) shall occur,
Manager shall have the right to terminate this Agreement. Manager's termination
right shall be exercisable by the delivery to Client of a written notice
specifying the event or circumstances that resulted in the occurrence of a
Client Event of Default (a "CLIENT DEFAULT NOTICE"). This Agreement shall
terminate immediately with effect from the date of delivery to Client of a
Client Default Notice. "CLIENT EVENT OF DEFAULT" means that Client or any
Controlling Shareholder of Client (i) is the subject of a criminal indictment or
an equivalent criminal proceeding before any court or tribunal for a felony or
for a crime involving moral turpitude or dishonesty (or an attempt of
dishonesty) or for criminal activity that is punishable by imprisonment, (ii) is
or becomes bankrupt or insolvent, or (iii) is in material breach or default
under this Agreement.
Section 3.6. Termination on Disposition.
(a) This Agreement shall terminate automatically with respect to any
Hotel upon: (i) the sale or other disposition by Client of such Hotel or portion
of such Hotel, and/or (ii) expropriation by a governmental authority for at
least thirty (30) days with respect to such Hotel or a material portion of such
Hotel, and/or (iii) the demolition or destruction of more than 25% of such
Hotel; provided, that Client shall have given Manager at least thirty (30) days
prior written notice of such event. For the avoidance of doubt, in the event
that this Agreement has terminated with respect to each Hotel pursuant to this
Section 3.6(a), but not with respect to Client pursuant to Section 3.6(b) below,
this Agreement will remain in effect between Manager and Client, and Client will
continue to be obligated to pay the Asset Management Fee determined pursuant to
Section 5(a) below.
(b) This Agreement shall terminate automatically with respect to Client
and all of the Hotels upon: (i) the sale or other disposition of all of the
membership or other interests in Client and/or (ii) the sale or other
disposition by Client of all of the Hotels; provided, that Client shall have
given Manager at least thirty (30) days prior written notice of such event;
provided, further, that no termination pursuant to this Section 3.6(b) shall be
effective prior to the first anniversary of the Commencement Date.
Section 3.7. Rights on Termination.
(a) From and after the Termination Date and without prejudice to any
remedy available under applicable law, all rights and obligations of the Parties
under this Agreement shall terminate other than in respect of: (i) amounts
accrued and payable but not yet paid by Client to Manager under this Agreement,
(ii) Manager's obligations pursuant to Section 2.6, (iii) breaches of Article 6
occurring prior to the Termination Date, (iv) indemnity obligations provided in
Article 7 and (v) the obligations set forth in this Section 3.7.
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(b) Following a termination pursuant to this Agreement, Manager, as
directed by Client, either will immediately deliver to Client all documents,
files, books, papers, computer files and records and accounts relating to Client
and the relevant Terminated Hotels or otherwise held by Manager on behalf of
Client (the "RECORDS") or will hold the Records for up to three (3) years, as
Client shall direct. Manager may satisfy this obligation by providing all such
files to Client. For avoidance of doubt, all Records shall belong exclusively to
Client.
(c) Following a termination pursuant to this Agreement, Client and
Manager will cooperate with each other to effect an efficient and smooth
transition of responsibility with respect to the relevant Terminated Hotels and
Client.
(d) Within twenty (20) days following a termination pursuant to this
Agreement, Manager shall account for and transmit to Client all of the funds in
the accounts maintained by Manager related to the relevant Terminated Hotels or
belonging to Client with respect thereto.
(e) Following a termination of this Agreement pursuant to Section 3.6,
Client shall reimburse Manager for post-closing expenses that relate to Hotel
Dispositions occurring on or prior to the Termination Date and are incurred by
Manager within 90 days following the Termination Date or for such longer period
as the contract related to such Hotel Dispositions may otherwise require Client
to act.
4. EXPENSES; BANK ACCOUNTS. Manager shall pay, without reimbursement
from Client, all salaries of officers and employees of Manager and overhead
expenses, including, without limitation, rent, electricity, telephone and
general office expenses incurred by Manager in the ordinary course of rendering
the Services. Except as otherwise set forth herein, Client shall be solely
responsible for funding all amounts required in connection with the ownership,
operations, financing and holding of the Hotels, and Manager shall not be
required to pledge its credit in connection with the Services rendered
hereunder. Client and its subsidiaries shall bear all other reasonable and
necessary out of pocket expenses ("REIMBURSABLE EXPENSES") incurred by or on
behalf of Client or its subsidiaries in the conduct of the business of the
Hotels as provided for herein, including, without limitation, (i) fees and
expenses of legal counsel, tax counsel, tax accountants, financial consultants,
engineers or other third-party advisers or consultants with respect to the
Services; (ii) appraisal costs, brokerage fees and commissions, fees and
expenses of custodians or depositories appointed for the safekeeping of Client's
property, and all other expenses incurred in connection with financing, holding
and disposing of property of Client; (iii) accounting, bookkeeping, auditing and
other similar expenses (other than those services provided by Manager and its
personnel); (iv) expenses of preparing, printing and distributing reports and
other documents to be distributed to Client; (v) expenses relating to reporting
to any governmental agency; (vi) funding working capital, capital expenditures
or other funds at the Hotels; (vii) costs associated with post-closing
documentation or pro rations with respect to Terminated Hotels; (viii)
reasonable travel and other business related expenses of Manager related to the
Services; (ix) costs to retain a transfer agent for the investors in Client and
its affiliates and (x) all other similar costs and expenses; provided, however,
that Manager shall obtain Client's pre-approval for any expense in excess of
$25,000, provided, further, that such pre-approval may be granted by approval of
the Approved Business Plan, or, to the extent not contemplated therein, by means
of a separate written approval. Manager shall maintain accurate records of the
foregoing expenses and shall provide evidence of such expenses to Client upon
request. Manager shall pay such Reimbursable Expenses directly from the bank
accounts of Client or its subsidiaries, or, if Manager shall pay such
Reimbursable Expenses from its own accounts, Client shall reimburse Manager for
Reimbursable Expenses within thirty (30) days of Client's receipt of Manager's
written request for reimbursement. Client shall ensure that Manager is a
signatory on all bank accounts as may be necessary for Manager to receive and
disburse funds from the Hotels in accordance with the Approved Business Plan.
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5. ASSET MANAGEMENT FEE
(a) For the Services provided and to be provided by Manager pursuant to
this Agreement, Client shall pay Manager an asset management fee (the "ASSET
MANAGEMENT FEE") determined as follows:
(i) until the first anniversary of the Commencement Date and
thereafter until the occurrence of a Hotel Disposition (if
no prior Hotel Disposition has occurred), the Asset
Management Fee shall be $416,666.67 per month (totaling
$5,000,000 per year);
(ii) thereafter, and adjusted upon each subsequent Hotel
Disposition, the monthly Asset Management Fee shall be
one-twelfth (1/12th) of the greater of (A) 50 basis points
(0.50%) of the Remaining Value of the Hotels, provided that
such amount shall not exceed $5,000,000 per year, and (B)
$1,000,000.
(b) The Asset Management Fee shall be payable monthly, in arrears, on
the last day of each calendar month, provided that if the last day of the
calendar month is not a Business Day, then the next subsequent Business Day. If
this Agreement is not in effect for the entire month, the Asset Management Fee
shall be adjusted to reflect the proportion of days during the month the
Agreement is in effect. If one or more Hotel Dispositions occur between monthly
payments of the Asset Management Fee affecting the rate of the Asset Management
Fee, then the Asset Management Fee payable at the end of the calendar month
shall be adjusted to reflect the proportion of days during the month each rate
is in effect.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 6.1. Representations, Warranties and Covenants of Manager.
Manager (and each Affiliate of Manager that performs Services that would
otherwise be provided by Manager under this Agreement) represents, warrants, and
covenants (acknowledging that Client has relied on each such representation,
warranty, and covenant in entering into this Agreement) as follows:
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(a) Manager is a company duly organized, validly existing, and in good
standing under the laws of Delaware and is duly qualified to carry on business
under the laws applicable to it in each jurisdiction where it carries on
business. No authorization, consent, approval, license or exemption under any
law, rule, or regulation is required by Manager to enter into and perform its
obligations under this Agreement.
(b) The execution, delivery, and performance of this Agreement have
been duly authorized by all necessary corporate action by Manager.
(c) Manager has full right, power, and authority to enter into and
perform its obligations under this Agreement and has full power and authority to
carry on its business as now conducted and as presently proposed to be
conducted.
(d) Manager's performance of the Services shall be in full compliance
with all applicable laws.
(e) This Agreement is a valid and legally binding obligation of Manager
and is enforceable against Manager in accordance with its terms (except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, and by general principles of equity), and
the execution, delivery, and performance of this Agreement by Manager does not
and will not violate any agreement binding on Manager or its principals.
Section 6.2. Representations and Warranties of Client. Client
represents and warrants (acknowledging that Manager has relied on each such
representation and warranty in entering into this Agreement) as follows:
(a) Client is a company duly organized, validly existing, and in good
standing under the laws of Delaware and is duly qualified to carry on business
under the laws applicable to it in each jurisdiction where it carries on
business. No authorization, consent, approval, license, or exemption under any
law, rule, or regulation is required by Client to enter into and perform its
obligations under this Agreement.
(b) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary limited liability company action by Client.
(c) Client has full right, power, and authority to enter into and
perform its obligations under this Agreement and has full power and authority to
carry on its business as now conducted and as presently proposed to be
conducted.
(d) This Agreement is a valid and legally binding obligation of Client
and is enforceable against Client in accordance with its terms (except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, and by general principles of equity), and
the execution, delivery, and performance of this Agreement by Client does not
and will not violate any agreement binding on Client.
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Section 6.3. Continuing Representations. Manager and Client agree that
each of the provisions of this Article 6 shall be a continuing representation,
warranty, and covenant of Manager and Client during the Term, and Manager and
Client shall take all actions as shall from time to time be necessary to cure
any breach or violation by such Person and to obtain any authorizations,
consents, approvals and clearances in order that such representations,
warranties and covenants by it shall be true and correct at all times during the
foregoing period.
7. INDEMNIFICATION
Section 7.1. Indemnification by Client. Manager and its employees,
agents, shareholders, officers, partners, members and Affiliates, together with
their respective heirs, executors and administrators (individually, an
"INDEMNITEE") shall each, to the full extent permitted by law, be indemnified
and held harmless by Client from and against any and all losses, costs, damages,
liabilities, expenses (including legal fees and expenses and the cost of any
investigation or preparation), judgments, fines, settlements and other amounts
arising from or incurred or imposed upon such Indemnitee in connection with any
claims, demands, actions, suits or other proceedings (whether civil, criminal,
administrative or investigative) and any appeal thereof in which such Indemnitee
may be involved, or threatened to be involved, as a party or otherwise by reason
of such Indemnitee's position or capacity pursuant to this Agreement or which
relates to Client, its property, business or affairs, or by reason of any action
or omission or alleged action or omission by such Indemnitee in such position or
capacity, whether or not such Indemnitee remains in the position or capacity
pursuant to which such Indemnitee became entitled to indemnification under this
Section 7.1, at the time any such loss, cost, damage, liability, expense,
judgment, fine, settlement or other amount is paid or incurred (including legal
fees), and regardless of whether such claim, demand, action, suit or other
proceeding is brought, made or threatened by a third party, by Client, or
otherwise by or on behalf of Client, if such Indemnitee's action did not
constitute willful or wanton misconduct, fraud or gross negligence as determined
by a court of competent jurisdiction. Provided such judgment, order, settlement
or its equivalent does not so hold, the termination of a proceeding by judgment,
order, settlement or its equivalent, shall not, of itself, create a presumption
that any Indemnitee's actions constituted willful or wanton misconduct, fraud or
gross negligence.
Section 7.2. Indemnification by Manager. Client and its employees,
agents, shareholders, officers, partners, members and Affiliates, together with
their respective heirs, executors and administrators (individually, a "CLIENT
INDEMNITEE") shall each, to the full extent permitted by law, be indemnified and
held harmless by Manager from and against any and all losses, costs, damages,
liabilities, expenses (including legal fees and expenses and the cost of any
investigation or preparation), judgments, fines, settlements and other amounts
arising from or incurred or imposed upon such Client Indemnitee in connection
with any claims, demands, actions, suits or other proceedings (whether civil,
criminal, administrative or investigative) and any appeal thereof in which such
Client Indemnitee may be involved, or threatened to be involved, as a party or
otherwise by reason of the Manager's willful or wanton misconduct, fraud or
gross negligence as determined by a court of competent jurisdiction. Provided
such judgment, order, settlement or its equivalent does not so hold, the
termination of a proceeding by judgment, order, settlement or its equivalent,
shall not, of itself, create a presumption that Manager's actions constituted
willful or wanton misconduct, fraud or gross negligence.
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Section 7.3. The indemnification provided by this Article 7 shall be in
addition to any other rights to which Indemnitees or Client Indemnitee may be
entitled under any agreement, as a matter of law, or otherwise.
8. Notices. All notices, requests, consents and other communications
under this Agreement shall be in writing and shall be deemed to have been
delivered (a) on the date personally delivered, as evidenced by an executed
receipt, (b) two business days after its delivery by certified mail, return
receipt requested, (c) one business day after deposit with a nationally
recognized overnight courier or (d) one business day following delivery by
facsimile provided a confirmation is obtained and provided further a duplicate
of such item is furnished in accordance with (a), (b) or (c) above within two
business days after its delivery by facsimile, if addressed to the respective
Parties as follows:
If to Client, each of:
Strategic Hotel Capital, L.L.C.
c/o Goldman, Xxxxx & Co.
000 Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxx Xxxxxxxxx
Facsimile: (000) 000-0000
and
Strategic Hotel Capital, L.L.C.
c/o Prudential Investments
0 Xxxxxx Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxx Xxxxxx
Facsimile: (000) 000-0000
If to Manager:
SHC DTRS, Inc.
c/o Strategic Hotel Capital, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn.: General Counsel
Facsimile: (000) 000-0000
Each of Manager and Client may change its address by giving notice in writing to
the other Party stating its new address. Commencing on the tenth (10th) day
after giving such notice, such newly designated address shall be such Party's
address for purposes of all notices or other communications required or
permitted to be given pursuant to this Agreement.
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9. Assignment.
Section 9.1. Assignment by Client. Client may not assign its rights or
obligations under this Agreement in whole or in part without the prior written
consent of Manager, which consent may be withheld in Manager's sole and absolute
discretion. Notwithstanding the foregoing, Client may dispose of any Hotel or
Hotels or any interest in a Hotel or Hotels pursuant to a Hotel Disposition
without the consent of Manager, in which event this Agreement shall terminate
solely with respect to such Hotel or Hotels.
Section 9.2. Assignment by Manager. Manager may not assign its rights
or obligations under this Agreement in whole or in part without the prior
written consent of Client, which consent may be withheld in Client's sole and
absolute discretion. Notwithstanding the foregoing, without Client's consent,
Manager may assign its rights to receive payment of the Asset Management Fee
from Client and Manager may delegate any or all of its obligations under this
Agreement to any Affiliate of Manager provided that Manager shall remain liable
for the performance of such obligations.
10. GENERAL
Section 10.1. No Exclusivity. Manager shall not be bound to perform the
Services exclusively for Client and may perform services, whether similar to the
Services performed for Client or otherwise, for itself or for any other entity.
Section 10.2. Disclosure. The matters set forth in this Agreement and
all statements, reports, projections, and other information or data that is
marked "confidential" ("CONFIDENTIAL INFORMATION") and provided by a Party in
connection with the performance of its obligations under this Agreement are
strictly confidential and each party will make every effort to ensure that
Confidential Information is not disclosed to any Person without the prior
written consent of the other Party; provided, however, that each of the Parties
shall be permitted to disclose this Agreement or such facts regarding this
Agreement as may be required by law or regulation, including rules of the
Securities and Exchange Commission, or to the extent disclosure may be advised
by counsel to comply with any such law or regulation.
Section 10.3. Entire Agreement. This Agreement constitutes the entire
agreement between the Parties with respect to the subject matter hereof.
Section 10.4. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
Section 10.5. Limitation of Liability. Notwithstanding anything to the
contrary contained herein, the liability of Client hereunder shall be limited to
the assets of Client and no member of Client or any of their Affiliates or their
unaffiliated companies, officers, directors, shareholders or any other Person,
disclosed or undisclosed, shall be personally liable hereunder. Notwithstanding
anything to the contrary contained herein, the liability of Manager hereunder
shall be limited to the assets of Manager and those of its parent company,
Strategic Hotel Funding, L.L.C., and no Affiliate of Manager (other than
Strategic Hotel Funding, L.L.C.) or its unaffiliated companies, officers,
directors, shareholders or any other Person, disclosed or undisclosed, shall be
personally liable hereunder.
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Section 10.6. Manager as Independent Contractor. For all purposes of
this Agreement, Manager shall be an independent contractor and not an employee
or dependent agent of Client, and nothing in this Agreement shall be construed
as making Client a co-venturer with Manager or any Affiliate of Manager. If
Manager executes any third-party agreement on behalf of Client with respect to
any matter, Manager shall execute such third-party agreement, "SHC DTRS, Inc.,
on behalf of Strategic Hotel Capital, L.L.C." To the extent Client negotiates
any third party agreement which shall be signed by Manager on behalf of Client,
Client shall use commercially reasonable efforts to include a provision in such
third party agreement stating, in substantially similar terms, that "Manager is
executing this agreement on behalf of Client and not as a principal, and Manager
shall have no personal liability with respect to the foregoing."
Section 10.7. No Waiver. No consent or waiver, express or implied, by a
Party of any breach or default by any other Party in the performance by such
other Party of its obligations under this Agreement shall be deemed or construed
to be a consent or waiver to or of any other breach or default in the
performance by such other Party of the same or any other obligation of such
other Party under this Agreement. Failure on the part of a Party to complain of
any act or failure to act of another Party or to declare another Party in
default, irrespective of how long such failure continues, shall not constitute a
waiver by such first mentioned Party of its rights under this Agreement.
Section 10.8. Further Assurances. The Parties agree to execute,
acknowledge, deliver, file and record such further certificates, amendments,
instruments, powers of attorney and documents, and to do all such other acts and
things, as may be required by law or as, in the reasonable judgment of any other
Party, may be necessary or advisable to carry out the intent and purpose of this
Agreement.
Section 10.9. Successors and Assigns. All of the terms and provisions
of this Agreement shall be binding upon the Parties and their respective
successors and assigns, but shall inure to the benefit of and be enforceable by
the successors and assigns of the Parties only to the extent that they are
permitted successors and permitted assigns pursuant to the terms of this
Agreement, and only if such permitted successors or permitted assigns
contractually agree with the other Parties to be bound by the obligations of the
assigning Party under this Agreement.
Section 10.10. Amendments. This Agreement may not be modified, changed,
or amended except with the prior written consent of Client and Manager.
Section 10.11. Severability. If any term or provision of this Agreement
is finally held to be invalid, illegal or unenforceable, (x) the remaining terms
and provisions of this Agreement shall be unimpaired and (y) the invalid,
illegal, or unenforceable term or provision shall be deemed replaced by a term
or provision that is legal, valid, and enforceable and that comes closest to
expressing the intention of the illegal, invalid, or unenforceable term or
provision.
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Section 10.12. Remedies Not Exclusive. The rights available to the
Parties under this Agreement and at law shall be deemed to be several and not
dependent on each other and each such right shall be accordingly construed as
complete in itself and not by reference to any other such right. Any one or more
and/or any combination of any such rights may be exercised by a Party from time
to time and no such exercise shall exhaust the right or preclude the other
Parties from exercising any one or more of such rights or combinations of rights
from time to time thereafter or simultaneously. Notwithstanding the foregoing,
the indemnity obligations set forth in Section 7 hereof shall in all events
govern the indemnity obligations of each Party to the other Party.
Section 10.13. Subordination. Manager acknowledges and agrees that any
payment due to Manager under this Agreement shall be in all respects subordinate
(to the extent required by the relevant lender) to the payment obligations set
forth in any financing agreements (as such agreements may be amended from time
to time) entered into on or after the Commencement Date by Client and/or
Client's Affiliate(s), and Manager shall execute and deliver, promptly upon
request by Client, all subordination agreements and other instruments or
documents that may be required by Client (or any lender to Client and/or any
lender to Client's Affiliate(s)) to evidence or effectuate such subordination.
For the avoidance of doubt, the Parties acknowledge that the obligations of
Client hereunder are solely the obligations of Client and not of its
subsidiaries.
Section 10.14. Applicable Law. This Agreement shall be governed by, and
shall be construed in accordance with, the laws of the State of New York,
without regard to conflict of law provisions thereof.
Section 10.15. Arbitration. Except as otherwise expressly provided, in
the event a dispute should arise concerning the interpretation or application of
any of the provisions of this Agreement, the Parties agree that the dispute
shall be submitted to arbitration by the American Arbitration Association under
its then prevailing rules. The arbitration tribunal shall be formed of three (3)
arbitrators each of which shall have at least five (5) years' experience in
hotel operation, management or ownership, one (1) to be appointed by each of
Client and Manager and the third (3rd) to be appointed by the American
Arbitration Association. The arbitration shall take place in Chicago, Illinois
and shall be conducted in English. The arbitration award shall be final and
binding upon the Parties and subject to no appeal, and shall deal with the
question of costs of arbitration and all matters related thereto. Judgment upon
the award rendered may be entered into any court having jurisdiction, or
applications may be made to such court for an order of enforcement. Any
arbitration under this Section 10.15 shall be submitted within three (3) months
following the notice which triggers the arbitration, and shall be concluded
within one (1) year thereafter. In the event either of the foregoing deadlines
are missed, either Party may proceed to commence a court proceeding to resolve
the dispute.
Section 10.16. No Third-Party Rights. Nothing expressed or referred to
in this Agreement will be construed to give any Person other than the Parties
any legal or equitable right, remedy or claim under or with respect to this
Agreement or any provision of this Agreement. This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the Parties
and their successors and permitted assigns.
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Section 10.17. Headings and Captions. The headings and captions
contained in this Agreement are for convenience only and do not constitute part
of this Agreement and shall not affect in any way the construction, meaning, or
interpretation of this Agreement.
[Signatures follow.]
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IN WITNESS WHEREOF, Manager and Client have executed this
Agreement as of the date and year first above written.
MANAGER:
SHC DTRS, INC.
By: _______________________________
Name:
Title:
CLIENT:
STRATEGIC HOTEL CAPITAL, L.L.C.
By: _______________________________
Name:
Title:
