MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement" is executed on the 15th
day of May, 1996, but is effective as of 12:01 a.m. on the 16th day of May,
1996 (the "Effective Date"), by and between the LAKE XXXXXX ISLANDS
DEVELOPMENT AUTHORITY, a body corporate and politic created and existing
under the laws of the State of Georgia, whose address is 0000 Xxxxxxx Xxxx,
Xxxx Xxxxxx Xxxxxxx, Xxxxxxx 00000 ("LLIDA") and KSL LAKE XXXXXX, INC., a
Delaware corporation, whose address is 0000 Xxxxxxx Xxxx, Xxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000 ("Manager").
STATEMENT OF BACKGROUND
Pursuant to that certain Lease ("Original Lease"), dated April 24,
1968, and identified as Lease Xx. XXXX00-0-00-000, Xxx Xxxxxx Xxxxxx xx
Xxxxxxx, Department of the Army, acting by and through the United States Army
Corps of Engineers (the "Corps") did lease to the Department of State Parks,
State of Georgia ("Parks Department"), certain land originally consisting of
approximately 1,071 acres within the lake commonly known as Lake Xxxxxx
Xxxxxx in Xxxx County, Georgia. The Original Lease has been amended by:
Supplemental Agreement No. 1, dated August 31, 1970; Supplemental Agreement
2, dated June 18, 1973; Supplemental Agreement No. 3, dated March 26, 1974;
Supplemental Agreement No. 4, dated October 30, 1975; and Supplemental
Agreement No. 5, dated April 22, 1986. The Original Lease, as amended by all
of the supplemental agreements listed above, is hereinafter referred to as
the "Corps Lease." The premises leased by the Corps to the Parks Department
(and its successors and assigns) pursuant to the Corps Lease, which now
consists of approximately 1,101 acres as described on Exhibit "A" attached
hereto and incorporated herein by this reference, is hereinafter referred to
as the "Project".
The Corps Lease incorporates by reference the terms of that certain
Contract for Recreational Development at Lake Xxxxxx Xxxxxx, Georgia
("Original Contract"), dated December 11, 1974, and identified as Contract
No. DACW01-9-75-325 by and between The United States of America, Lake Xxxxxx
Islands Development Commission ("LLIDC") and LLIDA. The Original Contract
has been amended by Supplemental Agreement No. 1, dated February 24, 1976;
Supplemental Agreement No. 2, dated December 19, 1977; Supplemental Agreement
No. 3, dated April 25, 1979; Supplemental Agreement No. 4, dated September
15, 1980; and Supplemental Agreement No.5, dated March 24, 1982. The
Original Contract, as amended by all of the supplemental agreements listed
above, is hereinafter referred to as the "Contract".
The interest of the Parks Department under the Lease was assigned to
LLIDC pursuant to Assignment of Lease, dated September 18, 1969, with an
effective date of November 1, 1969. Pursuant to a Management Agreement, dated
December 1, 1971 (the "1971 Management Agreement"), and by Power of Attorney,
dated December 8, 1971, LLIDC delegated certain rights to develop, manage and
operate the Project to LLIDA. Pursuant to a Sublease Agreement dated January
15, 1979 (the "LLIDA Sublease"), the Georgia Department of Natural Resources
DNR, as successor to LLIDC pursuant to the
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Executive Reorganization Act of 1972 (GA. Laws 1972, pp. 1051, 1054), did
sublease all of its interest under the Corps Lease to LLIDA. Subsequent to
the LLIDA Sublease, LLIDA entered into that certain Management Agreement,
dated June 19, 1986 (the "1986 Management Agreement"), pursuant to which
LLIDA surrendered and reconveyed to DNR a portion of the Project.
By Lease Agreement, dated February 26, 1973 (the "Xxxxxxxx
Sublease"), executed by LLIDC, LLIDA and Xxxxxx Islands Inn Associates, a
general partnership, a portion of the Project (the "PineIsle Resort") was
subleased to Xxxxxx Islands Inn Associates. The PineIsle Resort includes a
250-room hotel (the "Xxxxxxxx Hotel") and an 18-hole golf course (the
"PineIsle Golf Course"). The interest of the Lessee under the Xxxxxxxx
Sublease is now held by ("Xxxxxxxx") Renaissance Xxxxxxxx, and Xxxxxxxx
presently operates the PineIsle Resort and the PineIsle Golf Course. The
term of the Xxxxxxxx Sublease expires on April 14, 2018.
The principal existing improvements (all of the existing
improvements owned by LLIDA or DNR and located on the Project are referred to
collectively herein as the ("LLIDA Facilities") now located on the portion of
the Project not leased to Xxxxxxxx under the Xxxxxxxx Sublease include a
224-room Hilton Hotel (the "Hilton Hotel"), an 18-hole golf course (the
"Hilton Golf Course"), a beach and water park (collectively, the "Water
Park"), food and beverage vending operations, boat rental facilities, a gift
shop, an outdoor amphitheater, pavilions, campgrounds, riding stables, and
dock space licensed under an annual license to the Lake Xxxxxx Sailing
Academy (the "Sailing Academy"). LLIDA also presently operates a boat rental
operation on Lake Xxxxxx, and hosts numerous special events, including the
Magical Nights of Lights.
The Governor's Commission on the Privatization of Government
Services has determined that it is in the best interest of the State of
Georgia to privatize the operation, management, development and control of
the Project. Accordingly, at the request of the Governor of the State of
Georgia, LLIDA disseminated a Request for Proposals to Sublease the Resort
Recreation Area Known as the Xxxx Xxxxxx Xxxxxxx, Xxxx Xxxxxx Xxxxxxx,
Xxxxxxx, dated December 15, 1995 (the "RFP"). Pursuant to the RFP, LLIDA
solicited sealed offers or bids for the sublease of the Project and the
privatization of the management and operation of the Project (collectively,
the "Privatization Transaction"). Manager was the apparent successful
proposer.
The basic business terms of the proposed Privatization Transaction
contained in Manager's proposal have been agreed upon and are outlined on
Exhibit "B" attached hereto and incorporated herein. While such basic
business terms have been agreed upon by LLIDA and Manager, those parties are
now diligently negotiating in good faith with one another to finalize other
terms of the proposed Privatization Transaction, and are preparing and
negotiating the documentation thereof. Due in significant part to the need
for various third party consents, approvals and estoppels, LLIDA and Manager
intend to effect closing of the Privatization Transaction on a date
subsequent to this Agreement, but to commence the operation and management of
the Project by Manager as of May 16, 1996. LLIDA and Manager desire to enter
into this Agreement to provide for the terms of such operation and
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management. It is the intention of the parties in entering into this
Agreement that, if the Privatization Transaction is closed, the parties
hereto will be placed in the same economic position as if the Privatization
Transaction had closed on, and all prorations and adjustments of Project
revenues and expenses will be as of, 12:01 a.m., May 15, 1996.
STATEMENT OF AGREEMENT
NOW, THEREFORE, for and in consideration of the sum of TEN DOLLARS
($10.00), in hand paid, and for other good and valuable consideration,
including, without limitation, the mutual covenants and promises set forth
hereinbelow, the receipt, adequacy and sufficiency of which are hereby
acknowledged, LLIDA hereby appoints Manager as its exclusive operator and
manager for the Project, and Manager agrees to manage and operate the Project
for and on behalf of LLIDA and to perform the management services described
herein for and on behalf of LLIDA, for the terms and on the conditions set
forth herein. LLIDA hereby represents to Manager that, to the best of
LLIDA's knowledge, the information set forth in the Statement of Background,
above, is factually correct and acknowledges and agrees that Manager is
authorized to rely, and will rely, thereon as a material inducement to
execute and deliver this Agreement.
ARTICLE I
TERM OF AGREEMENT
1.01 Management and Operation. The term of this Agreement shall
commence on the Effective Date and shall expire on the earlier to occur of
(a) July 16, 1996, subject to the right of Manager, to be exercised by
written notice to LLIDA on or before July 12, 1996, with the consent of
LLIDA, which consent shall not be unreasonably withheld or delayed, to extend
such date to August 16, 1996 if the Privatization Transaction has not closed
by July 12, 1996 by reason of the inability of the parties to obtain any
required third party consent or approval (July 16, 1996, as such date may be
extended with the consent of LLIDA as set forth in this Section, is herein
referred to as the "Outside Closing"), or (b) the date of closing of the
Privatization Transaction (the earlier of said dates being herein referred to
as the "Management Agreement Expiration Date"), unless sooner terminated in
accordance with the provisions of this Agreement.
ARTICLE II
MANAGEMENT OF PROJECT
2.01 Management and Operation. Manager shall manage, operate and
maintain the LLIDA Facilities and the rest of the Project prudently and
efficiently for the benefit of LLIDA in accordance with sound business
practices and in accordance with the standard procedures and management
techniques commonly used by Manager with respect to comparable properties
owned or managed by Manager. Manager shall also administer the Xxxxxxxx
Sublease, including the receipt of all revenues thereunder and the
performance of the obligations of the lessor thereunder.
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2.02 Employees.
(a) Employees of Manager. Manager shall have in its employ at all
times a sufficient number of employees as Manager deems appropriate in its
sole discretion to properly manage, operate, maintain, and account for the
Project, and may offer employment to any and all active employees of LLIDA
performing services in connection with the Project. All matters pertaining
to the employment, training, supervision, compensation, promotion, and
discharge of employees of Manager (whether or not formerly employed by LLIDA)
are and will be the responsibility of, and are and will be in the sole
discretion of, Manager which, in all respects, is and will be the employer of
all such employees. LLIDA will have neither the right, nor the obligation, to
hire, supervise, or discharge any of employees of Manager. Manager and LLIDA
shall fully comply with all applicable federal, state and local laws and
regulations respecting employment and employment practices, terms and
conditions of employment, immigration, workmen's compensation, social
security, unemployment insurance, hours of labor, wages, working conditions,
and other employer-employee related subjects with respect to any of their
respective employees prior to, during and after the term of this Agreement.
Manager will be responsible for payment of, from amounts available from time
to time in the Operating Account or otherwise provided by LLIDA, all
salaries, wages, fringe benefits, other remuneration, worker's compensation
insurance, social security taxes, unemployment insurance and other taxes or
levies now in force or hereafter imposed by any governmental authority with
respect to Manager's employees who work at the Project, including persons who
are currently employees of Manager or its parent, and who are either engaged
full-time in the performance of the obligations of Manager under this
Agreement, or are fulfilling roles currently performed by employees of LLIDA,
including, but not limited to, employees of LLIDA engaged in the marketing
services, human resources, finance, accounting, safety or security services,
and the executive officer (collectively, the "Project Employees"), as well as
all expenses incurred in connection with the hiring, training, and
maintenance of such employees, and all travel expenses incurred in connection
with the management and operation of the Project, including, but not limited
to all salaries, wages, other remuneration, funding for fringe benefits and
any benefits provided by any employee benefit plan, worker's compensation
insurance, social security taxes, unemployment insurance and other taxes or
leves, and workmen's compensation, employer lability, and other claims for
any benefit under any employee benefit plan or claims arising from the
employment of such employees (all such expense being collectively referred to
herein as "Employee Expenses"). Manager, however, will be entitled to
reimburse itself from the Operating Account (as defined below) for all such
Employee Expenses so insured, all of which Employee Expenses are hereby
agreed to as expenses of or related to the management and/or operation of the
Project. To the extent that funds available in the Operating Account from
time to time are insufficient or are reasonably anticipated to be
insufficient to pay all Employee Expenses, LLIDA will, within ten (10)
calendar days after a request by Manager, deposit such additional funds into
the Operating Account as shall be necessary to pay all Employee Expenses, or
will pay the same (if the Privatization Transaction does not close) if due
after the expiration or termination of this Agreement. Employee Expenses
related to Project Employees who are not engaged full-time in the performance
of the obligations of Manager under this Agreement shall be prorated in good
faith by Manager between the Project and any other duties not related to the
Project. LLIDA shall not be required to pay any such Employees Expenses
which result from
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acts by Manager outside the scope of authority granted to Manager under this
Agreement, or from fraudulent acts, or wilful misconduct or gross negligence
on the part of Manager and which do not result from acts by LLIDA. The
provisions of this Section 2.02(a) with respect to Employee Expenses shall be
subject in all respects to the provisions of Article 3, below, pursuant to
which Manager is required to comply with the Operating Budget, as defined
therein. Nothing contained in this Section 2.02(a) shall be deemed or
construed to relieve Manager of any obligation to maintain insurance as
required under this Agreement, or to constitute a release of any obligation
of the insurance companies to pay any loss so insured.
(b) Other Personnel. Manager shall be responsible for payment from
its own funds of expenses of its officers and employees other than Project
Employees.
(c) Hiring by LLIDA of Project Employees on Failure of Privatization
Transaction to Close. Notwithstanding any contrary provision set forth
elsewhere in this Agreement, LLIDA hereby covenants and agrees that upon the
expiration or termination of this Agreement for any reason other than the
closing of the Privatization Transaction, including, without limitation, the
termination of this Agreement by reason of a default by Manager hereunder or
the expiration of the term hereof, LLIDA will immediately rehire all Project
Employees (other than Project Employees who were employees of Manager or its
parent prior to the execution of this Agreement) on the terms and conditions,
including employees benefits, applicable immediately prior to the
commencement of this Agreement, effective and with pay and benefits to accrue
as of the date of such termination or expiration, provided, however, that
LLIDA shall have the right to elect not to rehire fifty (50) or fewer Project
Employees who have been employed by Manager and who were not employed by
LLIDA prior to the date of this Agreement. LLIDA represents to Manager and
agrees that LLIDA will pay and all costs, liabilities and expenses incurred
by LLIDA or Manager to any Project Employee (other than the Project Employees
who were employees of Manager or its parent prior to the execution of this
Agreement) by reason of the termination of the Project Employees without
providing any notice which may be required by applicable federal or state law
in the event that, in violation of the requirements of this Section 2.02(c),
Project Employees are not rehired by LLIDA.
(d) Employee Expenses Accrued and Owing by LLIDA as of Effective
Date. Contemporaneously herewith LLIDA has terminated the employment of
persons who were its employees at the Project and Manager has hired certain
of such former employees of LLIDA to serve as Project Employees of Manager.
LLIDA represents that all such terminated employees were employees at will.
At the time of the termination of such persons by LLIDA, certain of such
persons were and remain entitled to be paid by LLIDA for then accrued unpaid
salaries, wages, fringe benefits and other benefits and remuneration,
including specifically, without limitation, benefits under COBRA
(collectively, "Accrued LLIDA Employee Expenses"). Notwithstanding any
contrary provision contained elsewhere in this Agreement, Manager does not
hereby assume, and will not hereafter assume, any obligation or liability to
pay any Accrued LLIDA Employee Expenses and no Accrued LLIDA Employee
Expenses will now or hereafter be payable from the Operating Account (as
defined below). LLIDA hereby acknowledges, covenants, and agrees that it is
and will remain, solely responsible for the payment of, and that it will
timely and fully pay, all Accrued LLIDA
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Employee Expenses, and that Manager will have no liability for payment of
any Accrued LLIDA Employee Expenses.
(e) Employee Expenses Accrued and Owing by Manager as of Expiration
or Termination. In the event that the Privatization Transaction does not
close, then at the time of the termination of employment of Project
Employees, certain of such persons may be entitled to be paid by Manager for
then accrued unpaid salaries, wages, fringe benefits and other benefits and
remuneration (collectively, "Accrued Manager Employee Expenses").
Notwithstanding any contrary provision contained elsewhere in this Agreement,
LLIDA does hereby agree that, subject in all respects to the provisions of
Article 3, below, pursuant to which Manager is required to comply with the
Operating Budget, as defined therein, in the event that the Privatization
Transaction does not close, it will pay any and all Accrued Manager Employee
Expenses and that Manager will have no liability for payment of any Accrued
Manager Employee Expenses.
2.03 Compliance with Legal Requirements. Manager will be
responsible for full compliance with federal, state, municipal and other
local laws, statutes, ordinances, rules, regulations and orders related to
the management, use, operation, repair and maintenance of the Project,
including, without limitation, all of the LLIDA Facilities located thereon,
and with the rules, regulations, or orders of the local Board of Fire
Underwriters or other similar body (the aforedescribed laws, etc., being
collectively herein referred to as the "Legal Requirements"). By way of
illustration only, Manager will apply for and exercise diligent commercially
reasonable efforts to obtain and/or maintain, in the name of LLIDA, all
approvals, licenses and permits required by any governmental authority for
the operation of the Project. LLIDA hereby represents that all approvals,
licenses and permits currently required by any governmental authority for the
operation of the Project are in full force and effect and will be assigned,
as necessary or appropriate and to the extent assignable, to Manager. LLIDA
will maintain in effect all permits and take all other actions, all at no
expense to Manager, as may be necessary to permit the continued sale of
liquor and other alcoholic beverages on the excursion boats, in the Hilton
Hotel, and in all other LLIDA Facilities where same are not being sold.
Manager will exercise diligent commercially reasonable efforts to promptly
remedy any violation of any such Legal Requirement which violation comes to
its attention. Expenses incurred in complying with, and/or in remedying any
such violation of, any Legal Requirement, may be paid from the Operating
Account or the Capital Account. Manager acknowledges that X.X. Xxxxxx is
named as the licensee under certain liquor licenses presently held by LLIDA
issued by the State of Georgia. Manager does hereby indemnify and agree to
defend and hold harmless X.X.Xxxxxx from and against any and all liabilities,
losses, costs, damages and expenses (including reasonable attorneys' fees)
arising, resulting, sustained or incurred, or which can or may arise, result,
be sustained or incurred by X.X. Xxxxxx in connection with the holding by
X.X. Xxxxxx of such liquor licenses. Manager shall cause X.X. Xxxxxx to be
named as an additional insured in the liability insurance policies to be
provided by Manager under this Agreement, and to provide to X.X. Xxxxxx a
certificate or certificates evidencing such insurance. Nothing contained in
this Section 2.03 shall be deemed to limit the obligations of LLIDA under the
provisions of Section 11.11, below; provided however, that nothing contained
in this Section 2.03 shall be deemed or construed to relieve Manager of any
obligation to maintain insurance as required
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under this Agreement, or to constitute a release of any obligation of the
insurance companies to pay any loss so insured.
2.04 Collection of Room Rents and Other Income. Subject to the
provisions of Section 4.01, below, Manager shall use diligent and reasonable
efforts: (a) to collect all room rents and other charges due from guests,
tenants, vendors, concessionaires, invitees, and licensees, of the Project
and, when and as proper and expedient, to cause any such persons to quite and
surrender space or premises occupied by them; and (b) to ask for, demand,
collect, and receipt for any and all room rents and other charges which may
at any time become due to LLIDA from any guest, tenant or from others for
services provided in connection with or for the occupancy or other use of the
Project or any portion thereof. Manager shall collect and identify any
income due LLIDA from miscellaneous services provided to tenants or the
public, including, but not limited to, tenant storage, and coin operated
machines for all types (including, without limitation, washers, dryers,
vending machines and pay telephones). All monies so collected shall be
deposited in the Operating Account; provided, however, that Manager shall
remit to LLIDA the 5% room tax collected in connection with all room rents,
subject to LLIDA paying scheduled destination and marketing expenses, and
subject to appropriate adjustment at closing if the Privatization Transaction
closes. Manager shall use commercially reasonable efforts to collect all
receivables outstanding as of and through May 15, 1996, and to remit all such
receivables actually collected to LLIDA within ten (10) days after the end of
each calendar month during the term of this Agreement. All expenses incurred
for products and services delivered or rendered prior to or as of and through
May 15, 1996, and for services rendered through May 15, 1996, shall be paid
by LLIDA, and Manager shall promptly forward to LLIDA all invoices received
by Manager with respect to such expenses. LLIDA shall also be reasonable for
the payment of all other liabilities, whether disclosed, arising from events
occurring prior to the date of this Agreement, and Manager shall have no
responsibility for the payment of such liabilities. LLIDA acknowledges that
Manager may provide complimentary rooms, subject to availability, to
employees of Manager while at the Project on business relating to the Project
or in connection with the obligations of Manager under this Agreement.
2.05 Service Contracts.
(a) Existing Service Contracts. LLIDA hereby represents to Manager
that attached hereto as Exhibit "C" is a true, correct and complete list of
all now existing service and supply contracts related to the Project or any
portion thereof (collectively, the "Existing Service Contracts"), and that
all of the Existing Service Contracts are in full force and effect and, to
the knowledge of LLIDA, no default or event or condition, which, with the
giving of notice or the passage of time, or both, would constitute a default
is currently in existence under any of the Existing Service Contracts.
Manager, acting on behalf of and as agent for LLIDA, may modify, extend or
terminate any of the Existing Service Contracts as Manager, in its sole
discretion, may determine to be desirable, provided that any such Existing
Service Contract which is modified or extended is consistent with the
Operating Budget and either (i) is terminable by or on behalf of LLIDA on no
more than thirty (30) days prior written notice without premium, fee or
penalty, or (ii) has a term which is to expire no later than the Outside
Closing Date.
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(b) Additional Service Contracts. Manager, acting on behalf of and
as agent for LLIDA, may, and is hereby authorized to, enter into any new
contract for cleaning, maintaining, repairing, making replacements to, or
servicing any of the LLIDA Facilities or any other part of the Project (an
"Additional Service Control") if same is consistent with the Operating Budget
and either (i) is terminable by or on behalf of LLIDA on no more than thirty
(30) days prior written notice without premium, fee or penalty or (ii) has a
term which is to expire no later than the Outside Closing Date. Any other
proposed new service or supply contract which does not satisfy the parameters
specified in the preceding sentence may be executed by Manager only if
Manager has obtained LLIDA's prior written consent thereto, which consent
shall not be unreasonably withheld, conditioned or delayed. Manager may
modify, extend or terminate any Additional Service Contract provided that any
such Additional Service Contract, as modified or extended, would be permitted
under the provisions of this Section 2.05(b). Manager shall promptly provide
a copy of any Additional Service Contract, or modification of any Existing
Service Contract or Additional Service Contract to LLIDA.
2.06 Leases, Licenses, Concessions, etc. Manager shall, to the
extent, but only to the extent, of funds available from time to time in the
Operating Account or otherwise provided by LLIDA, be responsible for the
making of all payment and the performance of all other duties and obligations
of LLIDA and/or of DNR now or hereafter required to be paid or performed by
LLIDA and/or DNR under the Corps Lease, the Xxxxxxxx Sublease, or under any
other lease, license or concession agreement related to any part of the
Project existing as of the date of this Agreement (all such now existing
leases, licenses, and concession agreements being collectively referred to as
the "Other Project Agreements"). LLIDA hereby represents to Manager that all
Other Project Agreements are identified on Exhibit "D" attached hereto and
incorporated herein and that LLIDA has delivered to Manager true, correct and
complete copies of all Other Project Agreements, that the Other Project
Agreements are in full force and effect, and that, to the knowledge of LLIDA,
no default or event or condition, which, with the giving of notice or the
passage of time, or both, would constitute a default is currently in
existence under any of the Other Project Agreements. During the term hereof,
LLIDA will not encumber the Project, or any part thereof, will not execute
any Other Project Agreement, and will not amend or terminate any Other
Project Agreement. Subject to the provisions of Section 4.01, below,
Manager, acting for and on behalf of and in the name of LLIDA, may execute
any new license or concession agreement as Manager may deem advisable;
provided, however, that, if and to the extent that the Lease requires the
prior approval by the Corps of any new Other Project Agreement, Manager shall
not execute any such Other Project Agreement until such approval has been
obtained; provided further that any such new Other Project Agreement shall be
consistent with the Operating Budget and shall be either (i) terminable by or
on behalf of LLIDA on no more than thirty (30) days prior written notice
without premium, fee or penalty or (ii) have a term which is to expire no
later than the Outside Closing Date. LLIDA hereby represents to Manager that
the Corps has not notified LLIDA that it has declined to approve or has
disapproved any Other Project Agreement.
2.07 Advertising. Manager shall prepare such advertising plans and
promotional material to be used to further room sales and/or to increase
utilization by the
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public of any of the other the LLIDA Facilities as Manager, in its sole
discretion, shall determine to be advisable. Any and all such advertising
and promotional materials shall be prepared in full compliance with all
applicable Legal Requirements.
2.08 Room Sales, Room Rates and other Facilities Use Charges.
Manager may charge and implement prices, price schedules, rates and rate
schedules established from time to time by Manager in its sole discretion.
Manager agrees that during the term of this Agreement it will honor
contractual obligations of LLIDA, such as advance reservations at agreed upon
rates. Manager shall not materially reduce any such prices, price schedules,
rates or rate schedules effective during the term or after the expiration of
this Agreement without the prior written consent of LLIDA, which shall not be
unreasonably withheld, and except to the extent consistent with LLIDA's usual
and customary discounts and promotional practices. Notwithstanding anything
to the contrary in this Agreement, Manager may enter into advance bookings of
rooms or other LLIDA Facilities in accordance with price and rate schedules
consistent with the foregoing, even if such bookings are for days after the
Outside Closing Date.
2.09 License Agreement. LLIDA hereby represents to Manager that the
License Agreement, dated January 1, 1993, executed by and between LLIDA and
Hilton Inns, Inc. ("Hilton") related to the Hilton (the "Hilton License
Agreement"), is in full force and effect, that LLIDA has delivered to Manager
a true, correct and complete copy of the Hilton License Agreement, that to
the knowledge of LLIDA, there is no presently existing default thereunder by
either party thereto nor has Hilton notified LLIDA of any such default, nor
to the knowledge of LLIDA does there now exist any condition, nor has any
event heretofore occurred, which with notice and/or the passage of time will
become a default under the Hilton License Agreement. Manager will exercise
its commercially reasonable efforts to fully comply with and perform all
terms and conditions of the Hilton License Agreement which are required to be
performed by LLIDA, to the extent, but only to the extent, of funds from time
to time available in the Operating Account or the Capital Account or
otherwise provided by LLIDA.
2.10 Insurance. Manager will obtain and maintain in full force and
effect during the term hereof, to the extent, of funds from time to time
available in the Operating Account or otherwise provided by LLIDA, policies
of property damage, fire and hazard insurance with respect to the property
and improvements at the Project, and business interruption insurance (which
shall include business interruption coverage for damages to the bridge
leading to the Project), comprehensive general liability, liquor liability,
workmen's compensation, employer liability and automobile liability insurance
with respect to the Project in amount, with carriers and with deductibles,
all as more particularly described on Exhibit "H" attached hereto and
incorporated herein. LLIDA will be covered as a loss payee under all property
insurance policies maintained by Manger with respect to the Project, and
Manager will be covered as an insured and/or loss payee under all liability
and property insurance policies maintained by Manager with respect to the
Project. The premium for all such policies shall be expenses of the Project
which may be paid or reimbursed from the Operating Account. All insurance
policies required hereunder or otherwise related to the Project and
maintained by Manager shall include waiver of subrogation provisions for the
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benefit of LLIDA and Manager with respect to all losses payable under such
policies. In the event that LLIDA is required to carry separate liability or
property damage insurance policies with respect to the Project, the cost of
such insurance shall not be paid from Project revenues received by Manager
with respect to the period after the date of this Agreement, but shall be a
separate expense of LLIDA, and will not be prorated or otherwise assumed by
Manager in proration and economic adjustment calculations to occur upon
closing of the Privatization Transaction.
2.11 Repairs and Replacements.
(a) Capital Improvements. Manager may make the capital
improvements, repairs or replacements to the Project, and expend, in
connection therewith, the amounts from the Capital Amount (as hereinafter
defined) described in the Schedule of Capital Improvements and Repairs and
Capital Budget attached hereto as Exhibit "E" and incorporated herein. As of
the date of this Agreement, LLIDA has delivered to Manager the Initial
Capital Improvement Deposit (as defined in Article VI, below), and Manager is
authorized to expend the Initial Capital Improvement Deposit for the capital
improvements, repairs and replacements described on the attached Exhibit "E"
without the necessity of any further notice to, or consent from, LLIDA. In
addition, Manager may expend funds for other capital improvements, repairs or
replacements of capital improvements, with the prior written consent of
LLIDA, which shall not be unreasonably withheld, delayed or conditioned,
provided that the amount so expended shall be deducted from the $400,000.00
described in Paragraph 7 of the attached Exhibit "B" to be paid to Manager
upon the closing of the Privatization Transaction. Upon approval of such
capital improvements, repairs or replacements, LLIDA shall deposit the
approved cost thereof into the Capital Account, which funds may be withdrawn
by Manager for the payment of such approved cost.
(b) Non Capital Repairs and Replacements. Manager shall make or
cause to be made, to the extent, but only to the extent, of funds from time
to time available in the Operating in the Operating Account or otherwise
provided by LLIDA, all noncapital repairs, replacements, renovations and
restorations as Manager may determine to be advisable in its sole discretion,
but subject to the limitations specified in the Operating Budget, and without
the necessary of any further notice to, or consent from, LLIDA
(collectively, "Authorized Noncapital Repairs").
2.12 LLIDA's Project Representative. During the term hereof, LLIDA
shall cause to be present, on-site at the Project, during regular business
hours, its representative (the "LLIDA Representative") who shall serve as a
resource person for the Manager in the performance by the Manager of its
duties and obligations hereunder, shall act as a liaison between LLIDA and
Manager, and shall have the discretionary authority to grant any consent or
approval which LLIDA has herein reserved, LLIDA Representative during normal
business hours will generally be available at his office on the Project, at
0000 Xxxxxxx Xxxx, Xxxx Xxxxxx Xxxxxxx, Xxxxxxx. LLIDA hereby designates
X.X. Xxxxxx to serve as the initial LLIDA Representative. LLIDA may from
time to time designate, upon ten (10) days prior written notice to Manager, a
different LLIDA Representative by written notice to Manager, provided that
any such substitute LLIDA Representative shall be reasonably acceptable to
Manager.
11
ARTICLE III
BUDGETS
3.01 Approved Budgets. Attached hereto as collective Exhibit "F and
incorporated herein is the Operating Budget for the Project for the calendar
year ending on December 31, 1996 (the "Operating Budget"). The Operating
Budget was prepared by, and is hereby reaffirmed by, LLIDA and is hereby
approved by Manager. The Capital Budget which is attached hereto as Exhibit
"E", which relates to certain identified capital improvements, repairs or
replacements, was also prepared by, and is hereby reaffirmed by LLIDA, and is
hereby approved by Manager (the "Operating Budget" and the "Capital Budget"
are sometimes hereinafter referred to collectively as the "Budgets").
3.02 Compliance with Budgets. Manager will use commercially
reasonable efforts to cause the actual cots of maintaining and operating the
Project not to exceed the applicable Budget in the aggregate (with the
Operating Budget to be prorated on a daily basis for partial months).
3.03 Modification of Operating Budget. During the term hereof,
Manager will inform LLIDA of any material change in costs and expenses which,
in Manager's judgment, necessitate a modification to the Operating Budget.
LLIDA hereby agrees that it will not unreasonably withhold, condition, or
delay its approval of any modification recommended by Manager related to the
Operating Budget. LLIDA, however, may not unilaterally, without the approval
of Manager, modify the Operating Budget.
3.04 Non-Emergency Deviations from Operating Budget.
Notwithstanding any contrary provision hereinabove in this Article III,
Manager, without the necessity of giving any prior notice to, or of obtaining
any prior approval from, LLIDA, may and is hereby authorized to make any
expenditure which will not cause the expenditures in the Operating Budget to
be exceeded by more than five percent (5%) in the aggregate over the term of
this Agreement (such aggregate to be calculated for the year to date, net of
amounts expended by LLIDA prior to the date hereof), plus an amount equal to
all revenues received by Manager (other than 5% room tax) during the
applicable period in excess of the projected revenues shown in the Operating
Budget (excluding interest income shown in the Operating Budget).
3.05 Emergency Deviations from Operating Budget. The Parties hereto
acknowledge that unanticipated emergency conditions may arise, from time to
time, which may necessitate immediate response to minimize or avoid an
unreasonable risk of danger to the health, safety, or property of persons, or
of damage to the Project or to the environment, or of unnecessary and
material adverse impact on or disruption to the continuous and orderly
operation of the Hilton Hotel or of any other LLIDA Facility (any of such
situations being referred to as an "Emergency Situation"). In the event of
any Emergency Situation, Manager shall diligently exercise commercially
reasonable efforts to promptly notify LLIDA Representative when Manager
becomes aware of the occurrence of any Emergency Situation, but in the
absence of the LLIDA Representative Manager shall have the authority, without
the consent of LLIDA, and notwithstanding the other provisions of this
Article III, to make any
12
reasonable expenditure which will not exceed $10,000 per Emergency Situation
(or any greater amount which the Manager may expend in good faith to halt or
stabilize (as opposed to repair and restore) the Emergency Situation).
Manager shall deliver to LLIDA, within ten (10) days after the initial
occurrence of any such Emergency Situation a written report, in reasonable
detail, of such Emergency Situation. LLIDA will not unreasonably withhold
its approval for any expenditures necessitated by any such Emergency
Situation or for any further subsequent related adjustments to the Operating
Budget.
ARTICLE IV
RESTRICTIONS ON
AUTHORITY OF MANAGER
4.01 Restrictions on Manager's Authority. In performing management
services hereunder, Manager shall not without the prior written consent of
Owner:
(a) Pay any funds generated from the Project to any person or entity
related to or affiliated with Manager (other than Employee Expenses
permitted under Section 2.02, above) except for procurement, in good faith
and in the ordinary course of business, of services and/or products at
prices and on such other terms as are fair, reasonable and no less
favorable to LLIDA than the prices and other terms for comparable services
and/or products which would be obtained in an arm's length transaction with
an unaffiliated person or except as otherwise authorized elsewhere in this
Agreement;
(b) Compromise, settle or adjust any condemnation claim against any
of the Project or make a claim for any proceeds of any such condemnation;
(c) Commence or discontinue any actions in the nature of legal
proceedings in any court, before any governmental authority, or in
arbitration;
(d) Retain legal counsel to represent LLIDA;
(e) Make any changes to the layout of the Project or make capital
additions or capital alterations thereto (other than repairs or
replacements and capital improvements, repairs and replacements permitted
under Section 2.11, above);
(f) Terminate the Hilton License Agreement;
(g) Sell or otherwise encumber the Project or any part thereof;
(h) Enter into agreements providing for occupancy by guests or other
occupants for more than 14 days;
(i) Rent or lease all or any portion of the Project, or enter into
any lease or rental agreement with any guest or occupant of all or any
portion of the Project; or
13
(j) Permit occupancy by any guest or occupant for more than 14 days.
ARTICLE V
FINANCIAL REPORTING AND RECORDKEEPING
5.01 Books of Accounts. Manager shall maintain adequate and
separate books and records for the Project, the entries to which shall be
supported by sufficient documentation to ascertain that said entries are a
proper and accurate record for the Project. Such books and records shall be
maintained by Manager at the Project.
5.02 Account Classification. Manager shall utilize existing
accounting and internal auditing systems presently utilized by LLIDA,
including books of control and accounts consistent with good accounting
procedure, and in accordance with generally accepted accounting principles.
5.03 Financial Reports. Manager shall furnish reports, of the types
and in the forms heretofore approved by LLIDA (collectively, the "Required
Reports"), of all transactions occurring during each calendar month. A
schedule of all Required Reports is set forth in Exhibit "G" hereto. Except
as otherwise specified on Exhibit "G", the Required Reports are to be
delivered to LLIDA no later than the thirtieth (30th) day of the calendar
month following the calendar month to which such Required Reports relate.
5.04 LLIDA's Right to Audit. LLIDA or its representatives, on five
(5) business days prior written notice, at its own expense, may inspect the
books and records maintained for LLIDA by Manager no matter where books and
records are located. LLIDA also reserves the right to perform, after the
aforesaid notice, any and all additional audit tests relating to Manager's
activities either at the Project or at any office of the Manager, provided
such audit tests are related to those activities performed by Manager for
LLIDA.
ARTICLE VI
OPERATING ACCOUNT; CAPITAL ACCOUNT
6.01 Establishing and Maintenance of Operating Account. As of the
date of execution of this Agreement, Manager has opened, in Manager's name,
an operating account, Account No. 3250403286, with NationsBank, 0000 Xxxxxx
Xxxxxxx, Xxxxxx, Xxxxxxx 00000 (the "Operating Account"). The Operating
Account shall be an interest-bearing account. Only officers and/or employees
of Manager designated from time to time by Manager, and the LLIDA
Representative or another officer or employee of LLIDA designated from time
to time by LLIDA, have or will have signature authority on the Operating
Account. Manager will maintain the Operating Account during the term of this
Agreement. As of the date of this Agreement LLIDA has delivered to Manager
the sum of $250,000.00 (the "Minimum Working Capital Amount"), which sum
Manager promptly will deposit into the Operating Account. Manager may open
an additional disbursement account in Manager's name, into which funds from
the Operating Account may be deposited for immediate disbursement for
14
the payment of expenses permitted to be paid hereunder from the Operating
Account. In the event that the Privatization Transaction closes, the Minimum
Working Capital Amount deposited by LLIDA as of the date of this Agreement
shall be credited to LLIDA. The signatories on the Operating Account shall
be bonded or insured in a manner reasonably satisfactory to Manager and
LLIDA. Manager agrees that it will not change the Bank or the account of the
Operating Account without the consent of the LLIDA Representative. Manager
shall have no proprietary interest in the Operating Account, which shall be
at all times during the term hereof the property of LLIDA.
6.02 Deposits to and Disbursements from Operating Account. Manager
shall deposit in the Operating Account (a) all monies paid or furnished by
LLIDA to Manager pursuant to the terms hereof as working capital or for the
payment of authorized costs and expenses of or related to the Project and (b)
all room rents and all other revenues hereafter received by Manager from or
with respect to the Project in connection with the management and operation
of the Project, and shall not commingle in the Operating Account any funds
which are not derived from the management and operation of the Project.
Manager shall make disbursements and payments from the Operating Account in
such amounts as are required in connection with the day-to-day management and
operation of the Project, provided that all such disbursements and payments
shall be in compliance with the terms of this Agreement and the Operating
Budget or, if not in compliance therewith, shall be authorized pursuant to
Section 3.04, above, Section 3.05, above, or Section 2.11, above, or shall
have been approved in advance in writing by LLIDA. Notwithstanding any
provision to the contrary hereinabove in this Section 6.02 or elsewhere in
this Agreement, Manager shall not be required to make any payment on account
of this Agreement if the funds in the Operating Account are insufficient and
LLIDA has failed to advance (when and as determined by Manager to be
necessary) such additional funds for the operation of the Project and payment
of expenses of the Project. Manager will not, under any circumstances, be
responsible for payment from its own funds of any expenses of the Project or
for funding from its own funds any operating or other deficits of or related
to the Project.
6.03 Minimum Working Capital Amount. It is the intent of the
parties hereto that the Operating Account, at all times during the term
hereof, shall have a balance at least equal to the Minimum Working Capital
Amount. If at any time Manager reasonably estimates that the funds then in
the Operating Account are less than the Minimum Working Capital Amount,
Manager shall deliver to LLIDA written notice of such shortage and LLIDA,
within ten (10) calendar days after receipt of such notice, shall deliver to
Manager (by federal wire transfer of funds to the Operating Account)
additional working capital in the amount of such shortage.
6.04 Excess Funds. LLIDA acknowledges and agrees that Manager will
retain in the Operating Account (or a separate disbursement account
established by Manager for immediate disbursements) all funds received in
connection with the operation and management of the Project and not expended
as provided herein or deposited in the Capital Account, as provided below.
LLIDA shall not draft checks on either the Operating Account or the Capital
Account without the prior written consent of Manager, except on the
termination of this Agreement.
15
6.05 Establishment and Maintenance of Capital Account. As of the
date of execution this Agreement, Manager has opened, in Manager's name, a
capital reserve account, Account No. 3250403245, with NationsBank, 0000
Xxxxxx Xxxxxxx, Xxxxxx, Xxxxxxx 00000 (the "Capital Account"). The Capital
Account shall be an interest-bearing account. Only officers and/or employees
of Manager designated from time to time by Manager, and the LLIDA
Representative or another officer or employee of LLIDA designated from time
to time by LLIDA, have or will have signature authority on the Capital
Account. Manager will maintain the Capital Account during the term of this
Agreement. As of the date of this Agreement LLIDA has delivered to Manager
the sum of $30,391.00 (the "Initial Capital Improvement Deposit"), which sum
Manager promptly will deposit into the Capital Account. The signatories on
the Capital Account shall be bonded or insured in a manner reasonably
satisfactory to Manager and LLIDA. Manager agrees that it will not change
the Bank or the account of the Capital Account without the consent of the
LLIDA Representative. Manager shall have no proprietary interest in the
Capital Account, which shall be at all times during the term hereof the
property of LLIDA.
6.06 Deposits to and Disbursements from Capital Account. Manager
shall deposit in the Capital Account, as a reserve for capital repairs and
replacements provided for in the Capital Budget, an amount equal to five (5%)
percent of the cash received by Manager during the preceding month, within
thirty (30) days after the end of each month. Manager shall not commingle in
the Capital Account any funds which are not derived from the management and
operation of the Project or funds in excess of the amount required to be
deposited therein under Section 6.05, above, and this Section 6.06. Manager
shall make disbursements and payments from the Capital Account in such
amounts as are required or permitted under Section 2.11, above, or shall have
been approved in advance in writing by LLIDA. Notwithstanding any provision
to the contrary hereinabove in this Section 6.06 or elsewhere in this
Agreement, Manager shall not be required to make any payment with respect to
capital expenditures if the funds in the Capital Account are insufficient and
LLIDA has failed to advance such additional funds as may be required for the
purposes permitted hereunder. Manager will not, under any circumstances, be
responsible for payment from its own funds of any capital expenses of the
Project.
ARTICLE VII
PAYMENT OF EXPENSES
7.01 Manager's Costs to be Reimbursed. Manager may pay or reimburse
itself out of the Operating Account for costs of the gross salary, wages,
payroll taxes, insurance, worker's compensation and other Employee Expenses
of Manager's Project Employees required to properly, adequately, safely and
economically manage, operate and maintain the Project subject to and in
accordance with the Operating Budget and the terms of this Agreement.
7.02 Costs and Expenses Eligible for Payment from Operating Account.
Subject to the conditions specified in Section 6.02, above, Manager may also
pay all costs
16
and expenses of the Project from the Operating Account, including, without
limitation, the following:
(a) Costs to correct any violation of, or to cause compliance with
the rules, regulations or orders of the local Board of Fire Underwriters or
other similar body or any other Legal Requirements relative to the use,
repair and/or maintenance of the Project;
(b) Actual and reasonable costs of making all repairs, replacements,
decorations and alterations;
(c) Costs incurred by Manager in connection with any Existing
Service Contract or any Additional Service Contract;
(d) Costs of collection of delinquent receipts collected through a
collection agency;
(e) Fees and expenses of attorneys of Manager or other professionals
engaged by Manager for services related to the performance of any of
Manager's duties or obligations under this Agreement, but not such fees and
expenses related to the negotiation or enforcement of this Agreement, the
Privatization Transaction or the documents to be executed in connection
therewith;
(f) Costs of printed checks and other bank service charges and fees
related to the Operating Account or the Capital Account;
(g) Costs of cash registers, adding machines and other equipment of
such type and use located at the Project and owned by LLIDA;
(h) Costs of utilities services for any of the LLIDA Facilities or
any of the rest of the Project;
(i) Costs of advertising for the LLIDA Facilities or any of the rest
of the Project;
(j) Costs of printed forms and supplies required for use at the
Project;
(k) Franchise fees, reservation fees, license fees, rents and other
fees necessary and proper for the efficient operation of the Hilton Hotel
or any other LLIDA Facility;
(l) Costs of food, beverages, supplies, services, equipment, leases,
and other costs and expenses necessary and proper for the efficient
operation of the Hilton Hotel or any other LLIDA Facility;
17
(m) All other costs and expenses incurred in connection with the
operation of the Project that are within the limits of the Operating
Budget, or are authorized by Section 3.04, Section 3.05, above, or are
otherwise approved by LLIDA;
(n) General accounting and reporting services which are within the
reasonable scope of the Manager's responsibility to LLIDA;
(o) Costs of electronic data processing equipment, or any pro-rata
charge thereon, whether located at the Project;
(p) Costs of third party electronic data processing, or any pro-rata
charge thereof, for data and payroll processing provided by service
companies;
(q) costs of real estate and personal property taxes, improvements,
assessments and other like charges, if any; and
(r) Any Management Fee(s) as provided in Article VIII, below.
7.03 Non-Reimbursable Costs. The following expenses or costs incurred
by or on behalf of Manager in connection with the management and operation of
the Project shall be at the sole cost and expense of Manager and shall not be
reimbursed by LLIDA:
(a) Costs of gross salary, wages, payroll taxes, insurance, workmen's
compensation, and other benefits of Project Employees except to the extent
same are allocable to the Project;
(b) Costs of forms, papers, ledgers, and other supplies and equipment
used in the Manager's home office or at any other location off the Project;
(c) Political or charitable contributions; or
(d) Costs attributable to losses arising from gross negligence,
willful misconduct or fraud on the part of Manager or any of Manager's
employees or agents.
ARTICLE VIII
MANAGEMENT FEE
8.01 Management Fee. In consideration of the management services to
be provided by Manager pursuant to this Agreement, Manager shall be entitled
to receive a monthly management fee in the amount of $160,000.00 (the
"Management Fee"). The Management Fee shall be payable to Manager in advance
on the date of this Agreement, and on the first (1st) day of each calendar
month thereafter during the term of this Agreement. If the first month or
the last month in which this Agreement is in effect is less than a full
calendar month, the Management Fee payable with respect to any such partial
calendar month
18
shall be prorated on a daily basis. Manager may pay all Management Fees from
the Operating Account.
ARTICLE IX
TERMINATION
9.01 Termination of Agreement. This Agreement may be terminated
prior to the expiration of the term hereof on the following terms and
conditions, it being understood and agreed, however, that any such early
termination shall not relieve LLIDA or Manager from liabilities or claims
accruing and arising up to and including the date of termination:
(a) By LLIDA for Cause. LLIDA shall have the right to terminate
this Agreement if Manager fails in any material respect to keep, observe or
perform any covenant, agreement, term or provision of this Agreement,
required to be kept, observed, or performed by Manager, and such material
default continues for a period of thirty (30) days after written notice
thereof by LLIDA to Manager; provided, if any such material default
reasonably is not susceptible to being cured within such initial thirty (30)
day curative period and if Manager promptly commences reasonably appropriate
curative measures within such thirty (30) day period and diligently
prosecutes same to completion, such curative period shall be automatically
extended for up to an additional thirty (30) days.
(b) By Manager for Cause. Manager shall have the right to terminate
this Agreement in the event LLIDA fails in any material respect to keep,
observe or perform any covenant, agreement, term or provision of this
Agreement to be kept, observed, or performed by LLIDA and such material
default continues for a period of thirty (30) days after written notice
thereof by Manager to LLIDA.
9.02 Obligations Upon Termination. Upon the expiration or
termination of this Agreement if the Privatization Transaction has not
closed, Manager shall: (i) immediately surrender and deliver to LLIDA the
Project and all funds held by Manager in connection with the Project, after
deduction therefrom of any sums then due and owed to Manager, (ii) deliver to
LLIDA (promptly after receipt by Manager) any monies due LLIDA under this
Agreement, but which are received by Manager after the effective date of such
expiration or termination; (iii) promptly deliver to LLIDA all materials,
equipment, tools and supplies, keys, contracts and documents relating to the
Project and obtained by Manager in connection with the operation and
management of the Project under this Agreement, and such other accountings,
papers and records as LLIDA shall reasonably request pertaining to the
Project; (iv) assign such then existing contracts relating to the operation
and maintenance of the Project as LLIDA shall require; (v) vacate any portion
of the Project then occupied by Manager as a consequence of this Agreement
(provided Manager shall be entitled to ten (10) days in which to vacate
completely) and furnish all such information and take all such actions as
LLIDA shall reasonably require in order to effect an orderly and systematic
ending of Manager's duties and activities hereunder, and (vi) deliver to
LLIDA the originals (or copies where the originals are unavailable) of all
papers and records pertaining to the Project;
19
provided, however, that LLIDA shall make the same available for inspection
and reproduction by Manager at reasonable times upon request by Manager, that
LLIDA shall deliver the same into the possession of Manager in the event that
Manager requests the same for use in legal or quasi-legal proceedings, and
that LLIDA shall not destroy the same without first offering to deliver the
same to Manager.
9.03 Remedies. It is expressly understood that LLIDA's and
Manager's remedies to terminate this Agreement pursuant to the terms of this
Article IX shall not be exclusive, and in the event of any default by a party
hereto, the non-defaulting party shall be entitled to exercise any and all
other remedies and rights set forth herein or at law or in equity (unless
expressly waived in writing by the non-defaulting party).
ARTICLE X
NOTICES
10.01 Notices. All notices, demands, consents and reports provided
for in this Agreement or required by law shall be in writing and shall be
given to LLIDA or Manager at the address set forth below, or at such other
address as such party may hereafter specify in writing in compliance with
this Section 10.10:
Manager: KSL LAKE XXXXXX, INC
0000 Xxxxxxx Xxxx
Xxxx Xxxxxx Xxxxxxx, Xxxxxxx 00000
Fax No.: (000) 000-0000
Attention: Xxxx X. Xxxx, Xx.
WITH A COPY TO:
KSL LAKE XXXXXX, INC
c/o KSL Recreation Corporation
00-000 XXX Xxxxxxxxx
Xx Xxxxxx, Xxxxxxxxxx 00000
Fax No.: (000) 000-0000
Attention: Xxxx X. Xxxx, Esq.
Vice President and General Counsel
WITH A COPY TO:
Long, Xxxxxxxx & Xxxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxx Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Fax No.: (000) 000-0000
Attention: Xxxxx Click, Esq.
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LLIDA: LAKE XXXXXX ISLANDS DEVELOPMENT
AUTHORITY
0000 Xxxxxxx Xxxx
Xxxx Xxxxxx Xxxxxxx, Xxxxxxx 00000
Fax No.: (000) 000-0000
Attention: X.X. Xxxxxx
WITH A COPY TO:
Xxxxxxxx Xxxxxxx LLP
Nationsbank Plaza
000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Fax No.: (000) 000-0000
Attention: Xxxx X. Xxxxx, Esq.
Any notice, or other communication hereunder shall be deemed to have been
validly given or served by delivery of the same in person to the intended
addressee, or by depositing the same with Federal Express or another
reputable private courier service for next business day delivery, or by
depositing the same in the United States mail, postage prepaid, registered or
certified mail, return receipt requested, in any event addressed to the
intended addressee at its address set forth above or at such other address as
shall have been designated hereafter by such party as herein provided. All
notices, demands and requests shall be effective upon such personal delivery,
or one (1) business day after being deposited with the private courier
service, or two (2) business days after being deposited in the United States
mail as required above. Rejection or other refusal to accept or the
inability to deliver because of changed address of which no notice was given
as herein required shall be deemed to be receipt of the notice, demand or
request sent. Notices, demands, requests or other communications also shall
be deemed to have been validly given or served if by facsimile transmission
to the addressee's FAX number provided above upon confirmation of
transmission and (a) where the transmitting party includes a cover sheet
identifying the name, location and identity of the transmitting party, the
phone number of the transmitting device, the date and time of transmission
and the number of pages transmitted (including the cover page), (b) where the
transmitting device or receiving device records verification of receipt and
the date and time of transmission receipt and the phone number of the other
device, and (c) where the facsimile transmission is immediately followed by
service of the original of the subject item in another manner provided
herein. By giving to the other party hereto at least fifteen (15) day's
prior written notice thereof in accordance with the provisions hereof, the
parties hereto shall have the right from time to time to change their
respective addresses and each shall have the right to specify as its address
any other address within the United States of America.
ARTICLE XI
MISCELLANEOUS PROVISIONS
21
11.01 Assignment. Neither party hereto may assign this Agreement
without obtaining the prior written consent of the other party hereto.
11.02 Relationship of Parties. The parties do not intend by this
Agreement to create a partnership or a joint venture, but merely to set forth
the terms upon which Manager shall manage and operate the Project for and on
behalf of LLIDA. Manager has entered into this Agreement as an independent
contractor. To facilitate the efficient, economical and timely performance
by Manager of its duties and obligations hereunder, however, LLIDA has
granted, and does hereby grant and confirm to Manager a special power of
attorney, and does hereby appoint Manager as its agent, with powers of
substitution, to act for and on behalf of LLIDA, and in the name and stead of
LLIDA, for the purpose of performing its obligations under this Agreement and
to the extent necessary to be performed in the name of LLIDA, except that
Manager shall have no power to act for or on behalf of LLIDA in the exercise
of any governmental power or authority. The foregoing power of attorney is
coupled with an interest and is irrevocable, until the expiration or earlier
termination of this Agreement, at which time such power of attorney shall
automatically be deemed to be revoked. Manager may act pursuant to the
foregoing power of attorney to perform any act in the name and on behalf of
LLIDA which Manager is otherwise authorized to perform on its own behalf
hereunder which LLIDA is privileged to perform under or with respect to any
Existing Service Contract, any Additional Service Contract, and any now or
hereafter existing Other Project Agreement. Manager is further authorized to
endorse checks, to sign receipts, and to execute such other instruments for
and on behalf of, and in the name of LLIDA, pursuant to the foregoing power
of attorney, as Manager may deem necessary or convenient in the ordinary
course of business in the operation and management of the Project hereunder.
11.03 Waiver. The failure by either party to exercise any right or
power given herein or by law, or to insist upon strict compliance by the
other party with any obligation imposed hereunder shall in no event
constitute a waiver of either party's right to demand full and complete
compliance with each and every provision hereof or to exercise and enforce
all available powers and remedies.
11.04 Amendments. This Agreement may not be amended except by
written agreement duly executed by the parties hereto, provided, however,
that a waiver of any right or privilege hereunder need be signed only by the
party waiving such right or privilege.
11.05 Covenant of Further Assurances. The parties hereby agree to
execute such other documents and perform such other acts as may be reasonably
necessary or desirable to carry out the purposes of this Agreement.
11.06 Entire Agreement. This document represents the entire
agreement between the parties with respect to the management and operation of
the Project during the term hereof.
11.07 Legal Representatives, Successors, Transferees and Assigns.
This Agreement shall be binding upon and inure to the benefit of LLIDA,
Manager, and their
22
respective legal representatives, successors and permitted assigns, subject,
however, to the limitations on assignments set forth herein.
11.08 Time of the Essence. Time is of the essence of this Agreement.
11.09 Pronouns. All pronouns used in this Agreement, whether used
in the masculine, feminine or neuter gender, shall include all other genders;
the singular shall include the plural, and vice versa.
11.10 Headings. All headings herein are inserted only for
convenience and ease of reference and are not to be considered in the
construction or interpretation of any provision of this Agreement.
11.11 Indemnification. Manager does hereby indemnify and agree to
defend and hold harmless LLIDA from and against any and all liabilities,
losses, costs, damages and expenses (including reasonable attorneys' fees)
arising, resulting, sustained or incurred, or which can or may arise, result,
be sustained or incurred by LLIDA in connection with the performance by
Manager of acts outside the scope of the authority granted to Manager under
this Agreement, and against any fraudulent acts, willful misconduct or gross
negligence on the part of Manager. LLIDA does hereby covenant and agree to
pay Manager for any and all liabilities, losses, costs, damages and expenses
(including reasonable attorneys' fees) arising, resulting, sustained or
incurred, or which can or may arise, result, be sustained or incurred by
Manager in connection with the performance by Manager under this Agreement,
except for such liabilities, losses, costs, damages and expenses arising,
resulting, sustained or incurred in connection with acts outside the scope of
authority granted to Manager under this Agreement, fraudulent acts, or wilful
misconduct or gross negligence on the part of Manager.
11.12 Governing Law. The laws of the State of Georgia shall govern
the interpretation, validity and enforcement of this Agreement.
11.13 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid,
but in the event any such provision should be held invalid or unenforceable,
the remaining provisions hereof shall be not be affected thereby.
11.14 Authority. By execution hereof, each party hereto represents
that it has the right, power and authority to enter into this Agreement in
accordance with the terms and conditions hereof, and the person executing
this Agreement on behalf of each party hereto represents that he has the
right, power and authority to enter into this Agreement on behalf of such
party and that this Agreement is binding upon and effective against such
party.
IN WITNESS WHEREOF the parties hereto have executed this Agreement,
under seal, as of the Effective Date.
LLIDA:
23
LAKE XXXXXX ISLANDS DEVELOPMENT
AUTHORITY, a body corporate and politic
created and existing under the laws of
the State of Georgia
By:_____________________________________
Name:______________________________
Title:_____________________________
Attest:_________________________________
Name:______________________________
Title:_____________________________
(LLIDA SEAL)
MANAGER:
KSL LAKE XXXXXX, INC., a Delaware
corporation
By:_____________________________________
Name:______________________________
Title:_____________________________
Attest:_________________________________
Name:______________________________
Title:_____________________________
(CORPORATE SEAL)
EXHIBIT A
LEGAL DESCRIPTION OF THE PROJECT
All of the property leased under the Original Lease, together with
the property added under Supplemental Agreement No. 1 thereto, and commonly
known as Lake Xxxxxx Islands.
Exhibit "B"
PRELIMINARY STATEMENT OF ESSENTIAL
BUSINESS TERMS OF PRIVATIZATION TRANSACTION
1. DNR and LLIDA will enter into an amendment of the LLIDA Sublease,
pursuant to which DNR will re-sublease and reconvey to LLIDA the portion
of the Project previously surrendered by LLIDA under the 1986 Management
Agreement.
2. DNR and LLIDA will enter into an agreement for the purpose of terminating
the 1971 Management Agreement and the 1986 Management Agreement.
3. Substantially all of the personal property of LLIDA used in connection with
the operation of the Project, including the personal property used in
connection with the operation of the Hilton Hotel, the Water Park, the
Hilton Golf Course and related personal property, furniture, fixtures and
equipment will be conveyed to Manager.
4. KSL will pay to LLIDA a cash payment in LLIDA in the amount of
$9,000,000.00, subject to closing adjustments and prorations.
5. All of the real property interests of LLIDA in the Project (including the
interests of LLIDA in existing improvements) will be subleased to Manager
under the KSL Sublease for a term co-extensive with the remaining term of
the Corps Lease.
6. LLIDA will assist Manager in the presentation to the Corps of any request
for extension of the term of the corps Lease approved by LLIDA and agree to
use its reasonable efforts to attempt to extend the term of the Corps Lease
so that it will have a remaining term of approximately 50 years from May
15, 1996. If the parties are successful in obtaining such an extension,
the KSL Sublease will be automatically extended for the same period.
7. Manager will have a right to extend the term of the KSL Sublease, subject
to a corresponding extension of the Corps Lease, for an additional 10 years
beyond the initial 50 year term described in paragraph 6 above, at a market
rental rate as to both base rental and percentage rental (but in no event
less than the Base Rent [as defined in the KSL Sublease] at the expiration
of the prior term). Manager shall provide notice of such election of LLIDA
within twelve (12) years from the commencement of the KSL Sublease. LLIDA
will assist Manager in the presentation to the Corps of any request for
such extension of the term of the Corps Lease.
8. At closing, LLIDA will pay to Manager the sum of $400,000.00 (less any
portion of such amount paid to manager during the term of the management
Agreement in accordance with Section 2.11 of the Management Agreement) to
be used by Manager for repairs and improvements to the Project. In
addition, LLIDA will pay to Manager any unspent amounts remaining in the
Capital Budget.
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9. The KSL Sublease will provide for annual minimum rent of $3,000,000.00,
payable in equal monthly installments of $250,000.00 each, plus percentage
rents in the amount of 3.5% of Gross Revenue (to be defined in the KSL
Sublease) in excess of $20,000,000.00. There will be a percentage rent
floor of $100,000.00 annually for the first five (5) years, and $200,000.00
annually thereafter.
10. Certain obligations of Manager under the KSL Sublease will be guaranteed by
KSL Recreation Corporation under a Guaranty Agreement to be negotiated in
connection with the negotiation of the KSL Sublease.
11. In the KSL Sublease Manager will grant to LLIDA a perfected security
interest in assets conveyed to manager as described in paragraph 3 above,
having a value of not less than $3,000,000.00, until such time as Manager
has made capital expenditures, as described in Paragraph 12 below of not
less than $3,000,000.00, exclusive of capital expenditures funded from the
reserve account to be established and maintained pursuant to the KSL
Sublease. Such security interest shall be reduced pro rata as such
expenditures are made from time to time.
12. In the KSL Sublease, Manager will agree to make capital expenditures of not
less than $5,000,000.00 during the five (5) years of the lease term
following the first year in which Gross Revenue exceeds $20,000,000.00,
subject to the terms of the KSL Sublease and paragraph 17(c) below.
13. The KSL Sublease will be subordinate to the Xxxxxxxx Sublease, but LLIDA
and DNR will convey to Manager all of their respective rights to the rental
income and rights to enforce the sublessee's obligations under the Xxxxxxxx
Sublease, with a reversion to LLIDA and DNR of such rights in the event of
a termination of the KSL Sublease. LLIDA and DNR agree to cooperate with
Manager in connection with the enforcement of the Xxxxxxxx Sublease, and
Manager will assume the obligations of LLIDA and DNR as sublessor under the
Xxxxxxxx Sublease.
14. LLIDA will endeavor to provide appropriate non-disturbance agreements from
the Corps and from DNR with forms of sublessee and mortgagee recognition
agreements attached. After closing LLIDA will cooperate with Manager in
its efforts to obtain sublessee and mortgagee recognition agreements from
the Corps and DNR.
15. LLIDA will assign all of its rights under the Hilton License to KSL,
provided Hilton will acknowledge and consent to such assignment, which will
specifically include the assignment (with Hilton's consent) of the
termination rights contained therein.
16. Manager will be entitled to mortgage all or portions of the Project without
the consent of LLIDA, and LLIDA will provide mortgagee recognition
agreements (if such mortgagees are registered and meet any other sublease
requirements) in an acceptable form. The KSL Sublease will permit the
foreclosure of such mortgages (or deeds-in-lieu of foreclosure) without
consent, and the subsequent sale of the mortgaged interest in the Project
by the mortgagee or its nominee, without consent.
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17. Manager will be entitled to enter into subleases with respect to all or
portions of the Project, for purposes which comply with the approved KSL
Conceptual Plan, for uses that are permitted under the KSL Sublease, under
an approved sublease form and with rent protection for LLIDA:
(a) To affiliates of Manager, without the consent of LLIDA;
(b) To up to three third parties each with a net worth of at least
$5,000,000 or demonstrated sufficient financial resources, without the
consent of LLIDA for projects included in KSL Conceptual Plan or
amendments thereof approved by LLIDA provided construction begins
within 5 years from date of the KSL Sublease; and
(c) To others, with the consent of LLIDA, which shall not be unreasonably
withheld, delayed or conditioned, in accordance with the terms of the
KSL Sublease; and, in the event of disapproval of any sublease which
is proposed in good faith, the capital expenditure requirements
described in paragraph 12 above will be extinguished to the extent of
capital expenditures which were to be expanded under the proposed
sublease.
In addition, the KSL Sublease will contain language acknowledging that
the KSL Sublease has been entered into with the expectation that
development and subleasing will be permitted by LLIDA, subject to the
terms of the KSL Sublease. Subleases will be deemed approved if not
disapproved within a time period to be agreed upon.
18. Manager will be entitled to assign the KSL Sublease under an approved
assignment form:
(a) To affiliates of manager, without the consent of LLIDA, provided the
guaranty from KSL Recreation Corporation remains in full force and
effect and subject to the application of change of control provisions;
and
(b) To others, with the consent of LLIDA, which shall not be unreasonably
withheld, delayed or conditioned, in accordance with the terms of the
KSL Sublease.
19. LLIDA will, upon written request of Manager, amend the KSL Sublease and
enter into one or more individual subleases with Manager covering any
portion or portions of the Project, in accordance with the terms of the KSL
Sublease.
20. At closing all prorations and adjustments of all Project revenues and
expenses will be as of 12:01 a.m., May 15, 1996. Manager will receive a
credit at closing in an amount to be mutually agreed upon by Manager and
LLIDA, upon the submission of certain inspection reports by Manager to
LLIDA, to be applied toward the correction
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of certain alleged project deficiencies. LLIDA will receive a credit at
closing for the Minimum Working Capital Amount (as defined in the
Management Agreement), any management fees paid to Manager pursuant to
the Management Agreement, the amount of Rent (as defined in the KSL
Sublease) due for the period from May 15, 1996 to the closing date and
any costs incurred during the term of the Management Agreement pursuant
to Section 7.02(a) thereof for the correction of any violation of, or to
cause compliance with, any legal requirements, except to the extent of
the fixed amount described in the preceding sentence of this paragraph 20.
21. To the extent permitted by law, LLIDA will give Manager a right of first
refusal to purchase LLIDA's interest in the Project.
LLIDA and Manager agree to negotiate, diligently and in good faith on an
exclusive basis to consummate the Privatization Transaction substantially on
the terms set forth above. The parties acknowledge, however, that the terms
set forth above are only a summary of the material terms of the Privatization
Transaction, and constitute a basis for further negotiations, but do not
represent all of the terms and conditions of the Privatization Transaction.
Further, the terms set forth above assume that the cooperation of certain
third parties will be obtained and are not a covenant by LLIDA to perform any
matters not within LLIDA's control.
