Exhibit 10.6
Investment and Right
of First Refusal Agreements
Among
Sandalwood Lodging Investment Corporation,
Sandalwood Hospitality Advisors, LLC
and
Barcelo Crestline Corporation
December 6, 2002
RIGHT OF FIRST REFUSAL AND SERVICES AGREEMENT
THIS RIGHT OF FIRST REFUSAL AND SERVICES AGREEMENT (this "Agreement") by
and among Sandalwood Lodging Investment Corporation and its subsidiaries
(collectively, "Sandalwood"), Sandalwood Hospitality Advisors, LLC and its
subsidiaries (collectively, the "Advisor"), and Barcelo Crestline Corporation
and its subsidiaries (collectively, "Barcelo Crestline") (Sandalwood, the
Advisor and Barcelo Crestline, each a "Party" and together the "Parties") is
made this 6th day of December 2002.
RECITALS
WHEREAS, Sandalwood, a Maryland corporation with its principal place of
business at 00000 Xxxx Xxxx, Xxxxxxx, Xxxxxxxx 00000, is in the business of
acquiring and owning hotel properties;
WHEREAS, Sandalwood filed with the Securities and Exchange Commission (the
"SEC") on May 24, 2002 an S-11 registration statement and exhibits, as
subsequently amended, for an initial public offering of 11,752,688 shares of its
common stock (the "IPO"), which registration statement was declared effective by
the SEC on November 6, 2002;
WHEREAS, the Advisor, a Delaware limited liability company with its
principal place of business at 00000 Xxxx Xxxx, Xxxxxxx, Xxxxxxxx 00000, was
formed to act as the advisor for Sandalwood and as managing member of Sandalwood
Lodging, LLC, a subsidiary of Sandalwood;
WHEREAS, Barcelo Crestline, a Maryland corporation with its principal place
of business at 0000 Xxxxxxxxxx Xxxxx, Xxxxx 000, XxXxxx, Xxxxxxxx 00000, is in
the business of providing Management Services;
WHEREAS, Sandalwood expects to acquire hotels with a portion of the
proceeds of the IPO and with other capital to be raised;
WHEREAS, Barcelo Crestline desires to have the right to provide Management
Services to Sandalwood with respect to certain specified hotels that Sandalwood
acquires, and Sandalwood desires to obtain such Management Services from Barcelo
Crestline; and
WHEREAS, Sandalwood desires to obtain from Barcelo Crestline certain
specified rights and services in connection with the acquisition and potential
acquisition of certain hotels.
Confidential treatment has been requested with respect to the portions of the
Agreement indicated with brackets and asterisks [***]. A complete copy of this
Agreement, including the redacted portions, has been separately filed with the
Securities and Exchange Commission.
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NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, Advisor, Sandalwood and Barcelo Crestline agree and
bind themselves as follows.
DEFINITIONS
A. General Provisions
1. The capitalized terms set forth in this Agreement, unless
capitalized solely for grammatical purposes, shall have the meanings
provided for in this Section I or otherwise in this Agreement.
2. Any term defined in this Section by reference to another document,
instrument or agreement shall continue to have the meaning ascribed
thereto whether or not such other document, instrument or agreement
remains in effect.
3. Words importing the singular include the plural and vice versa.
4. A reference to any statute, regulation, proclamation, ordinance or
law includes all statutes, regulations, proclamations, ordinances or
laws varying, consolidating or replacing the same from time to time,
and a reference to a statute includes all regulations, policies,
protocols, codes, proclamations and ordinances issued or otherwise
applicable under that statute unless, in any such case, otherwise
expressly provided in any such statute or in the Agreement.
5. A definition of or reference to any document, instrument or
agreement includes any amendment or supplement to, or restatement,
replacement, modification or novation of, any such document,
instrument or agreement unless otherwise specified in such definition
or in the context in which such reference is used.
6. A reference to a particular section, paragraph or other part of a
particular statute shall be deemed to be a reference to any other
section, paragraph or other part substituted therefore from time to
time.
7. A reference to any Person includes such Person's successors and
permitted assigns (in the designated capacity).
8. If the date as of which any right, obligation, option or election
required or exercisable, is stated to be on a date or day that is not
a Business Day, such right, obligation option or election may or shall
(as the case may be) be exercised, on the next succeeding Business Day
with the same effect as if the same was exercised or made on such date
or day;
9. Words such as "hereunder," hereto," "hereof" and "herein" and other
words of similar import shall, unless the context requires otherwise,
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refer to the whole of the applicable document and not to any
particular article, section, subsection, paragraph or clause thereof.
10. A reference to "including" means including without limiting the
generality of any description preceding such term, and for purposes
hereof the rule of ejusdem generis shall not be applicable to limit a
general statement, followed by or referable to an enumeration of
specific matters, to matters similar to those specifically mentioned.
11. Words not otherwise defined herein or in any exhibit, schedule or
appendix hereto that have well known and generally accepted technical
or trade meanings are used herein in accordance with such recognized
meanings.
B. Definitions.
"AMEX" shall mean the American Stock Exchange.
"Business Days" shall mean any day other than Saturday or Sunday or other
day on which commercial banks in the state of Maryland are authorized or
required by law or executive order to close.
"IPO Initial Closing" shall mean the sale of common shares of Sandalwood
generating at least fifty million dollars ($50,000,000) of gross proceeds.
"Management Agreement" shall mean the agreement substantially in the form
attached hereto as Exhibit A for the provision of Management Services.
"Management Services" shall mean the services provided by Barcelo Crestline
pursuant to the Management Agreement.
"Net Proceeds Available for Investment" shall have the meaning assigned to
it in the "Estimated Use of Proceeds" section of the Prospectus.
"Person" shall mean an individual, corporation, partnership, association,
labor union, trust or any other entity or organization including a
government, governmental body or political subdivision.
"Property Improvement Plan" means the property improvement plan setting out
the necessary or required property improvements as agreed by Barcelo
Crestline, Sandalwood and the franchisor for any hotel purchased by
Sandalwood.
"PIP Costs" means the costs incurred by Sandalwood pursuant to a Property
Improvement Plan during the first two years of Sandalwood's ownership of a
Qualifying Hotel.
"Qualifying Hotel" means a hotel being acquired by Sandalwood that meets
any of the criteria of Section II.A.
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"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Stock Purchase and Rights Agreement" shall mean the Agreement pursuant to
which Sandalwood shall issue shares of its common stock to Barcelo
Crestline and that sets out the rights and obligations of Sandalwood and
Barcelo Crestline with respect to such shares substantially in the form
attached hereto as Exhibit E.
"Total Debt and Equity Invested" shall mean the purchase price and related
closing costs of any hotel acquired by Sandalwood
II. RIGHT OF FIRST REFUSAL
A. Sandalwood hereby grants Barcelo Crestline a right of first refusal
to provide M anagement S ervices (the "Right of First Refusal") for all
hotels acquired by Sandalwood where:
1. the existing provider of m anagement s ervices (the "Existing
Manager") may be terminated immediately by Sandalwood without the
payment of a termination fee upon acquisition by Sandalwood of a hotel
property (the "No Fee Terminable Management Agreements");
2. the Existing Manager may be terminated by Sandalwood immediately
upon or within three years of Sandalwood's acquisition of a hotel
property with a payment of a termination fee less than or equal to one
hundred and fifty percent (150%) of the annual management fees
currently being paid to the Existing Manager (the "Other Terminable
Management Agreements"); or
3. the Existing Manager may be terminated by Sandalwood immediately
upon or within three years of Sandalwood's acquisition of a hotel
property with a payment of a termination fee greater than one hundred
and fifty percent (150%) of the annual management fees currently being
paid to the Existing Manager (the "Excess Fee Terminable Management
Agreements").
B. Sandalwood is hereby obligated to offer Barcelo Crestline a Right
of First Refusal for each Qualifying Hotel (a "Qualifying Offer") until
Sandalwood has made Qualifying Offers for Qualifying Hotels in which the
sum of Total Debt and Equity Invested plus PIP Costs (the "Initial Hotel
Properties") equals at least One Hundred Million Dollars ($100,000,000)
(the "Investment Commitment").
1. Any Qualifying Offer made to Barcelo Crestline pursuant to
paragraph II.A.3 (Excess Fee Terminable Management Agreements) shall
only be counted towards fulfillment of the Investment Commitment if:
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a. Barcelo Crestline agrees to pay the amount by which the
termination fee payable to the Existing Manager exceeds one
hundred and fifty percent (150%) of annual management fees
currently being paid to the Existing Manager; or
b. Sandalwood agrees to pay the amount by which the
termination fee payable to the Existing Manager exceeds one
hundred and fifty percent (150%) of the annual management fees
currently being paid to the Existing Manager.
2. For the avoidance of doubt, Sandalwood shall pay in a manner consistent
with the terms of the Existing Manager's management agreement the entire
termination fee for Other Terminable Management Agreements and the
termination fee for Excess Fee Terminable Management Agreements up to one
hundred and fifty percent (150%) of the annual management fee due payable
to the Existing Manager; provided however, Sandalwood may elect to pay the
entire termination fee for Excess Fee Terminable Management Agreements
pursuant to Section II.B.1.b.
C. Once Sandalwood has made Qualifying Offers that satisfy the
Investment Commitment, Sandalwood shall be obligated to provide Barcelo
Crestline with a Right of First Refusal for every second Qualifying Hotel
(the "Additional Hotel Properties") until Sandalwood has made Qualifying
Offers to Barcelo Crestline for Qualifying Hotels in which the sum of Total
Debt and Equity Invested plus PIP Costs in such hotels equals at least
Seventy-Five Million Dollars ($75,000,000) (the "Additional Investment
Commitment").
1. With respect to any Additional Hotel Properties that Sandalwood has
made Qualifying Offers to Barcelo Crestline and Barcelo Crestline has
accepted such Qualifying Offer, Barcelo Crestline shall invest at
least five percent (5%) equity (pari passu with Sandalwood's equity)
in the ownership entity that owns such Additional Hotel Property.
Sandalwood and Barcelo Crestline shall use commercially reasonable
good faith efforts to execute a joint venture agreement or similar
commercial arrangement (the "Barcelo Crestline Joint Venture
Investment") mutually acceptable to the parties.
2. If Sandalwood and Barcelo Crestline are unable to reach agreement
on the specific terms and conditions of the Barcelo Crestline Joint
Venture Investment within 30 days of Barcelo Crestline's agreement to
provide Management Services with respect to an Additional Hotel
Property, either Sandalwood or Barcelo Crestline may withdraw the
offer or acceptance to provide Management Services (as appropriate),
and the offer to provide Management Services shall not be counted
towards fulfillment of the Additional Investment Commitment.
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D. Sandalwood agrees that, upon the IPO Initial Closing, Sandalwood
will reserve the greater of Nineteen Million Dollars ($19,000,000) or forty
percent (40%) of the Net Proceeds Available for Investment from the IPO for
six (6) months to be used exclusively to purchase Qualifying Hotels.
Sandalwood agrees to use commercially reasonable good faith efforts to
identify and acquire such hotels. Sandalwood will not terminate the IPO
until at least seventy-five (75) days following the date on which the IPO
is declared effective by the SEC.
E. For each Qualifying Hotel, Sandalwood shall make each Qualifying
Offer in a written notice (the "Sandalwood Notice") that will be delivered
to Barcelo Crestline. In the event that any Qualifying Hotel has a No Fee
Terminable Management Agreement, an Other Terminable Management Agreement
or an Excess Fee Terminable Management Agreement that is immediately
terminable by Sandalwood upon acquisition, Sandalwood shall give the
Sandalwood Notice as early as practicable in connection with the potential
acquisition of a Qualifying Hotel, but in no event less than ten (10)
Business Days after the execution of a binding letter of intent or similar
document for such acquisition of a Qualifying Hotel. In the event that any
Qualifying Hotel has an Other Terminable Management Agreement or an Excess
Fee Terminable Management Agreement that is terminable within the first
three years after acquisition, Sandalwood shall give the Sandalwood Notice
at least sixty (60) days prior to the proposed date of the termination of
the Existing Manager of such Qualifying Hotel. The Sandalwood Notice shall
set out the name, location, number of rooms, a good faith estimate of the
Total Debt and Equity Investment, termination fee to be paid by Barcelo
Crestline (if any), and operating history of the hotel as provided by the
seller or Sandalwood, as the case may be. (For the avoidance of doubt,
Sandalwood will not certify or warrant any information contained in the
operating history provided by the seller of such Qualifying Hotel.).
Barcelo Crestline shall notify Sandalwood in writing whether it will or
will not provide Management Services for the hotel specified in the
Sandalwood Notice within ten (10) Business Days of receipt of the
Sandalwood Notice.
1. If Barcelo Crestline rejects Sandalwood's offer in the Sandalwood
Notice, Sandalwood may retain any other management company, and
Barcelo Crestline shall have no further rights with respect to such
hotel.
2. If Barcelo Crestline rejects Sandalwood's offer in the Sandalwood
Notice because it cannot meet Sandalwood's request to commence the
provision of Management Services by a particular date, then the offer
to provide Management Services shall not be counted towards
fulfillment of the Investment Commitment; provided however that if
Barcelo Crestline rejects an offer in the Sandalwood Notice for a No
Fee Terminable Management Agreement, an Other Terminable Management
Agreement or an Excess Fee Terminable Management Agreement that is
immediately terminable upon acquisition of a Qualifying Hotel by
Sandalwood and Sandalwood has provided at least thirty (30) days
between the date of the Sandalwood Notice and the requirement to
commence provision of
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Management Services, the offer to provide Management Services shall be
counted towards the fulfillment of the Investment Commitment.
F. Other than as provided in paragraphs II.A. 3 (with respect to the
Excess Fee Terminable Management Agreements) and II.C.1 (with respect to
the Additional Hotel Properties) of this Agreement, Sandalwood will not
require any investment or payment by Barcelo Crestline in connection with
negotiating or executing any Management Agreement.
G. Notwithstanding any other provision of this Agreement, Sandalwood
may offer Barcelo Crestline the option to provide Management Services for
any hotel it acquires that is not a Qualifying Hotel. If Barcelo Crestline
accepts the terms and conditions of such offer, then the Total Debt and
Equity Investment and PIP Costs for such hotel shall be counted against the
Investment Commitment or the Additional Investment Commitment (as
appropriate). For the avoidance of doubt, if Barcelo Crestline declines
Sandalwood's offer pursuant to this Section G, then the Total Debt and
Equity Investment and PIP Costs for such hotel shall not be counted against
the Investment Commitment or the Additional Investment Commitment (as
appropriate).
H. If Barcelo Crestline accepts a Qualifying Offer, Sandalwood and
Barcelo Crestline shall execute a Management Agreement substantially in the
form set forth in Exhibit A.
III. ACQUISITION SERVICES
A. Subject to the terms of this Section III, subsequent to the IPO
Initial Closing and until the earlier to occur of (i) fulfillment of both
the Investment Commitment and trading of Sandalwood's common stock on AMEX
or another national securities exchange or over-the-counter market reaches
(in the aggregate) during any consecutive ninety day period a volume that
is equal to or greater than six percent (6%) of Sandalwood's average daily
number of total outstanding shares during such consecutive ninety (90) day
period, (ii) Barcelo Crestline's sale of all shares of Sandalwood's common
stock pursuant to the terms of the Stock Purchase and Rights Agreement, or
(iii) termination of this Agreement pursuant to Section VIII.J.2 below,
Barcelo Crestline hereby agrees to provide the services set out in Section
III.B. (the "Acquisition Services").
B. The following activities shall constitute Acquisition Services:
1. Assist in market and feasibility analysis and other related due
diligence for Qualifying Hotels that may be acquired by Sandalwood.
2. Informing Sandalwood and the Advisor of prospective acquisitions of
hotels meeting Sandalwood's investment criteria as set forth in the
Prospectus which come to the attention of Barcelo Crestline.
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3. Once the IPO Initial Closing has occurred, Barcelo Crestline will
grant Sandalwood a 30 day right of first refusal to purchase hotels
meeting Sandalwood's investment criteria as set forth in the
Prospectus, which pursuant to an existing agreement, Barcelo
Crestline:
a. has the contractual right to purchase;
b. has decided not to purchase;
c. has the right to assign such purchase right to Sandalwood
or an affiliate of Sandalwood; and
d. has received appropriate indemnities from Sandalwood in
connection with such assignment.
C. In consideration of the provision of Acquisition Services as
contemplated hereunder, Sandalwood hereby agrees to pay Barcelo Crestline
an annual acquisition services fee equal to Two Hundred Thousand Dollars
($200,000), payable Sixteen Thousand Six Hundred Sixty-Six and 67/100
Dollars ($16,666.67) on the 15th day of each month (the "Acquisition
Services Fee"), in consideration of the Acquisition Services; provided that
such amount shall be prorated accordingly if such services begin or end on
a day that is other than the first Business Day of the month. In addition
to payment of the Acquisition Services Fee, Sandalwood shall promptly
reimburse Barcelo Crestline for reasonable out-of-pocket expenses and
reasonable allocated overhead costs of Barcelo Crestline's development
personnel working on Sandalwood transactions.
IV. BARCELO CRESTLINE'S INVESTMENT IN SANDALWOOD
A. In accordance with the provisions of Section VII, Barcelo Crestline
acknowledges that Sandalwood may be required to disclose this Agreement,
the Stock Purchase and Rights Agreement and the Management Agreement and
the transactions contemplated hereunder and thereunder in Sandalwood's S-11
registration statement No. 333-89094, relating to the shares of Sandalwood
common stock being offered in the IPO, such registration statement,
including all information deemed to be part of such registration statement
as of the effective time, including pursuant to Rule 430A under the
Securities Act, and including all amendments or post-effective amendments
and all exhibits and schedules thereto (collectively, the "Registration
Statement") and that such agreements may be required to be filed as
exhibits to the Registration Statement.
B. Sandalwood will provide Barcelo Crestline with a complete draft of
each registration statement, prospectus or any amendment or supplement
thereto comprising a portion of the Registration Statement (as defined
below), each registration statement, prospectus or any amendment or
supplement thereto comprising the Prospectus, and the IPO Marketing
Material (as defined in section 6(c)(ii) of the Stock Purchase and Rights
Agreement) for its review and comment on disclosures containing Barcelo
Crestline Information, at least five (5) Business
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Days in advance of any filing of such Registration Statement or the
Prospectus with the SEC. Barcelo Crestline agrees to complete its review
and forward comments to Sandalwood within three (3) Business Days
thereafter. Sandalwood will provide a revised copy of the Registration
Statement or the Prospectus to Barcelo Crestline for its further review and
comment at least one (1) Business Day prior to its filing.
C. Sandalwood hereby agrees to indemnify and hold harmless Barcelo
Crestline and its affiliates and each of their respective officers,
directors, partners, stockholders and employees and each person who is
deemed to control Barcelo Crestline or such affiliate within the meaning of
Section 15 of the Securities Act, against any losses, claims, damages, or
liabilities, to which Barcelo Crestline or any such person or entity may
become subject, under the Securities Act or otherwise, insofar as losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any prospectus, or
preliminary prospectus or a prospectus included in or deemed a portion the
Registration Statement, including pursuant to Rule 424(b) under the
Securities Act (the "Prospectus"), or any amendment or supplement thereto,
or any other prospectus or preliminary prospectus, including but not
limited to any marketing materials used by or on behalf of Sandalwood in
connection with the IPO, or arise out or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
will reimburse each such indemnified person for any legal or other expenses
reasonably incurred by such indemnified person in connection with
investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred; provided, however, that Sandalwood
will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement in or omission or alleged omission
from any of such documents in reliance upon and in conformity with written
information furnished to Sandalwood by Barcelo Crestline it being
understood and agreed that the only information furnished by Barcelo
Crestline consists of the information set forth on Exhibit B hereto and any
other written information specifically identified as being so furnished for
the Registrations Statement or the Prospectus (together, the "Barcelo
Crestline Information").
X. Xxxxxxx Crestline hereby agrees to indemnify and hold harmless
Sandalwood and its affiliates and each of their officers, directors,
partners, stockholders and employees and each person who is deemed to
control Sandalwood or such affiliate within the meaning of Section 15 of
the Securities Act, against any losses, claims, damages, or liabilities, to
which Sandalwood may become subject, under the Securities Act or otherwise,
insofar as losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon the any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement or the Prospectus, or arise out or are based upon the omission or
alleged omission to state therein a material fact required to
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be stated therein or necessary to make the statements therein not
misleading, to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with the Barcelo Crestline
Information and will reimburse Sandalwood for any legal or other expenses
reasonably incurred by such indemnified person in connection with
investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred.
X. Xxxxxxx Crestline will provide information about Barcelo Crestline
as provided in this Section IV.E to be included in the Prospectus only if
such information is specifically requested by the SEC. Barcelo Crestline
may decline to provide any requested information if (a) in Barcelo
Crestline's reasonable judgment, the information is confidential or
competitive in nature and not already in the public domain and could be
considered misleading in light of the circumstances or (b) provision of
such information (x) requires the consent of a third party and such third
party declines to give consent after being requested to do so by Barcelo
Crestline or (y) requires Barcelo Crestline to pay more than a nominal sum
of money to any third party. Barcelo Crestline agrees that Sandalwood may
disclose in the Registration Statement, Prospectus, and in the IPO
Marketing Materials and Sandalwood hereby agrees to limit the information
about Barcelo Crestline in the IPO disclosure in the Registration
Statement, the Prospectus and in the marketing materials used by Sandalwood
in the IPO to the information set out in the disclosure set forth on
Exhibit D attached hereto (the "Barcelo Crestline Information") and any
information specifically provided by Barcelo Crestline pursuant to this
Section IV.X.
X. Xxxxxxx Crestline hereby agrees to invest in Sandalwood a total of
Three Million Dollars ($3,000,000) (the "Barcelo Crestline Investment"), in
accordance with the terms and conditions set forth in the Stock Purchase
and Rights Agreement attached hereto as Exhibit C.
G. In consideration of the Right of First Refusal and the Acquisition
Services Fee, as set out below in this paragraph IV.G, Barcelo Crestline
agrees to advance to Sandalwood or the Advisor (whichever has incurred the
expense) an amount (as and when required) equal to up to forty percent
(40%) of all Initial Closing Expenses (the "Barcelo Crestline Advances") up
to One Million Dollars ($1,000,000) (the "Barcelo Crestline Maximum Initial
Closing Expense Contribution").
1. The "Initial Closing Expenses" shall consist of all organization,
offering and marketing expenses related to the IPO Initial Closing,
including, but not limited to, attorneys fees (but only up to Fifty
Thousand Dollars ($50,000) pursuant to subparagraph G.5 of this
Section), travel expenses and due diligence expenses incurred by
Sandalwood or the Advisor (as appropriate) (or Barcelo Crestline in
the case of subparagraph G.4 of this Section).
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2. If, prior to the IPO Initial Closing, Barcelo Crestline agrees
pursuant to a Qualified Offer, to provide Management Services with
respect to a Qualifying Hotel, Barcelo Crestline agrees to pay forty
percent (40%) of the first Two Hundred and Fifty Thousand Dollars
($250,000) of expenses related to such acquisition incurred by
Sandalwood. Such amount shall be due upon request by Sandalwood and
shall be evidenced by actual invoices or other appropriate
documentation provided to Barcelo Crestline (the "Barcelo Crestline
Due Diligence Fee").
3. If the IPO Initial Closing occurs, Sandalwood will credit the
Aggregate Advances (as defined in Section 1(b) of the Stock Purchase
and Rights Agreement) towards the purchase of the Purchased Shares in
accordance with Section 1 of the Stock Purchase and Rights Agreement.
If the IPO Initial Closing does not occur, Sandalwood shall have no
obligation to refund any portion of the Aggregate Advances or to
convert any portion of Aggregate Advances into Purchased Shares or to
otherwise compensate Barcelo Crestline for the Aggregate Advances, and
Barcelo Crestline shall have no further obligations to Sandalwood
except as otherwise provided herein.
4. Exhibit D sets out the initial cash flow budget prepared by the
Advisor and approved by Sandalwood (the "Cash Flow Budget"). Through
November 30, 2002, Sandalwood and the Advisor have incurred Initial
Closing Expenses of $1,079,239. On the date hereof, Sandalwood hereby
provides to Barcelo Crestline true and accurate copies of actual
invoices and other appropriate documentation with respect to the
Initial Closing Expenses incurred to date by Sandalwood and the
Advisor. Within five (5) Business Days of the execution of this
Agreement, Barcelo Crestline shall wire transfer to the Sandalwood
bank account identified in Exhibit B, as an initial installment of the
Barcelo Crestline Advance, an amount equal to forty percent (40%) of
the Initial Closing Expenses incurred to date by Sandalwood and the
Advisor. Barcelo Crestline agrees that, thereafter and until the IPO
Initial Closing, upon a request by Sandalwood or the Advisor
accompanied by actual invoices or other appropriate documentation, no
more frequently than once a month, it will wire transfer to
Sandalwood, within five (5) Business Days of such request, subsequent
installments of the Crestline Advance for Initial Closing Expenses
incurred by Sandalwood or the Advisor from and after the date hereof.
Sandalwood shall provide Barcelo Crestline a full accounting of how
all such funds have been used and provide a certification as to the
invoices that have been paid. In addition on a quarterly basis,
Sandalwood shall provide an updated forecast of the Initial Closing
Expenses through the IPO Initial Closing.
5. A maximum of $50,000 of Initial Closing Expenses shall be allocated
to the legal costs for preparing this Agreement, the Stock Purchase
and Rights Agreement and the Management Agreement in the
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amount of up to $30,000 to Sandalwood and up to $20,000 to Barcelo
Crestline. Legal costs in excess of such limitations shall be borne by
the individual parties.
V. THE ADVISOR'S PARTICIPATION IN THE TRANSACTION.
A. Within five (5) Business Days of the execution of this Agreement,
the Advisor will contribute to Sandalwood an amount equal to sixty percent
(60%) of the Initial Closing Expenses incurred to date by Sandalwood and
the Advisor (the "Advisor's Initial Closing Expense Contribution") pursuant
to actual invoices or other appropriate documentation minus any such
Initial Closing Expenses already paid by Sandalwood, the Advisor and their
respective affiliates. The Advisor agrees that, thereafter, on a monthly
basis, it will contribute to Sandalwood, as needed, sixty percent (60%) of
Initial Closing Expenses, up to $1.5 million dollars, including the
Advisor's Initial Expense Contribution (the "Advisors Contributions").
B. Pursuant to the Advisory Agreement among Sandalwood Lodging
Investment Corporation, Sandalwood Lodging LLC, Sandalwood Hospitality
Advisors, LLC, and a subsidiary or subsidiaries of Sandalwood Lodging, LLC,
which Advisory Agreement provides for certain advisory services to be
provided by the Advisor, Sandalwood will refund all of the Advisors
Contributions that it received up to $1.5 million dollars to the Advisor
upon the IPO Initial Closing. However, in the event the IPO Initial Closing
does not occur, Sandalwood shall have no obligation to refund any of the
Advisors Contributions or to convert any portion of the Advisors
Contributions into shares of Sandalwood or to otherwise compensate the
Advisor for the Advisors Contributions.
C. Pursuant to a stock purchase agreement executed between the Advisor
and Sandalwood, the Advisor has agreed to purchase $1.5 million dollars of
Sandalwood's common shares at a price per share equal to the price per
share to the public of Sandalwood's common stock as set forth on the cover
of the final prospectus of the registration statement of Sandalwood's
initial public offering pursuant to Registration Statement No. 333-89094.
VI. USE OF BARCELO CRESTLINE NAME, TRADEMARK AND INFORMATION.
As set out in detail in a trademark licensing agreement set out in Exhibit E,
Barcelo Crestline will permit, subject to Barcelo Crestline's review and
approval, during the marketing of the IPO and during subsequent operations of
Sandalwood, Sandalwood to:
A. use the Barcelo Crestline name and logo on Sandalwood's website as
Sandalwood's potential manager of its hotel properties;
B. identify Barcelo Crestline as Sandalwood's potential manager of its
hotel properties in its marketing materials in connection with the IPO
provided however, that all information about Barcelo Crestline shall only
be information
Page 13
that is contained in the Registration Statement or Prospectus or any
amendment or supplement thereto that has been deemed effective by the SEC
(if required); and
C. identify Barcelo Crestline in future select trade advertising
journals, email newsletters, powerpoint presentations and direct mail
initiatives as Sandalwood's potential manager of its hotel properties.
VII. CONFIDENTIALITY/EXCLUSIVITY.
A. Subject to the disclosure requirements of the Securities Act and
applicable rules and regulations, pertaining to the Prospectus, the parties
agree that the terms of that certain Confidentiality Agreement dated May
15, 2002, between Crestline Capital Corporation (now known as Barcelo
Crestline Corporation) and Sandalwood Lodging Investment Corporation (the
"Confidentiality Agreement"), shall apply to this Agreement, the actions
contemplated herein, the negotiation and preparation of all mutually
acceptable agreements and the Prospectus, and any due diligence associated
therewith. The parties further agree that the Confidentiality Agreement
shall be binding on the parties' successors and assigns and that the terms
of the Confidentiality Agreement shall be incorporated herein by reference.
B. Sandalwood will not enter into any other agreements similar to the
provisions of this Agreement with hotel managers or operators until the
earlier to occur of:
1. Fulfillment of both the Investment Commitment, and trading of
Sandalwood's common stock on AMEX or another national securities
exchange or over-the-counter market reaches (in the aggregate) during
any consecutive ninety day period a volume that is equal to or greater
than six percent (6%) of Sandalwood's average daily number of total
outstanding shares during such consecutive ninety (90) day period; or
2. Barcelo Crestline's sale of Sandalwood common stock pursuant to the
terms of the Stock Purchase and Rights Agreement.
C. This Section VII is not intended to prohibit Sandalwood from
entering into management contracts with other management companies to
manage Sandalwood hotels, upon Sandalwood fulfilling its obligations under
this Agreement.
VIII. MISCELLANEOUS
A. Public Announcement. The Parties agree that all press releases and
public announcements relating to the transactions contemplated by this
Agreement will be mutually agreed to and prepared jointly by the parties.
B. Notices. All notices, requests and other communications provided
for herein including, without limitation, any modifications of, or waivers,
requests
Page 14
or consents under, this Agreement shall be given or made in writing
(including, without limitation, by telecopy) and delivered to the intended
recipient at the "Address for Notices" specified below, or, as to any
party, at such other address as shall be designated by such party in a
notice to each other party. Except as otherwise provided in this Agreement,
all such communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of a
mailed notice, upon receipt, in each case given or addressed as provided
for herein. The Address for Notices of the respective parties are as
follows:
Sandalwood Lodging Investment Company
00000 Xxxx Xxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X.X. Xxxxxx
Sandalwood Hospitality Advisors LLC
000 Xxxx Xxxxxx
Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Chairman
With a copy to:
Xxxxxx Xxxxx, LLP
0000 Xxxx Xxxx Xxxxx
Xxxxx 000
XxXxxx, Xxxxxxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxxxx, Esq.
Barcelo Crestline Corporation
0000 Xxxxxxxxxx Xxxxx
Xxxxx 000
XxXxxx, XX 00000
Attention: General Counsel
With a copy to:
Barcelo Crestline Corporation
0000 Xxxxxxxxxx Xxxxx
Xxxxx 000
XxXxxx, XX 00000
Attention: EVP, Chief Financial Officer &
Treasurer
Page 15
C. No Waiver. No failure on the part of any Party to this Agreement to
exercise, and no delay in exercising, any right hereunder shall operate as
a waiver thereof nor shall any single or partial exercise by any Party of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right.
D. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland without regard to its
conflict of law provisions
E. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of each of the Parties and their respective successors
and assigns, except that no Party may assign or transfer its rights or
obligations hereunder without the prior written consent of the Parties.
F. Complete Agreement; Amendments. This Agreement, the Stock Purchase
and Rights Agreement and the Trademark License Agreement are intended by
the Parties to be a complete and final expression of their agreement. No
amendment, modification, or waiver of any provision hereof or thereof, and
no consent to any departure of any of the Parties herefrom or therefrom,
shall be effective unless approved in writing by each of the Parties, and
then such amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
G. Headings. The headings and sub-headings contained in the title of
this Agreement are intended to be used for convenience only and do not
constitute part of this Agreement.
H. Severability. If any term, provision or condition, or any part
thereof, of this Agreement shall for any reason be found or held invalid or
unenforceable, such invalidity or unenforceability shall not affect the
remainder of such term, provision or condition nor any other term,
provision or condition, and this Agreement shall survive and be construed
as if such invalid or unenforceable term, provision or condition had not
been contained therein
I. Recitals, Schedules, Appendicies and Exhibits. Each recital hereof
and each schedule, appendix and exhibit attached hereto or referred to
herein is incorporated herein as an integral and binding part of this
Agreement.
J. Term/Termination.
1. This Agreement shall remain in effect until the earlier of (1)
Sandalwood's fulfillment of the Investment Commitment and the
Additional Investment Commitment obligations, (2) five years, or (3)
Barcelo Crestline's transfer of its shares of Sandalwood common stock
acquired pursuant to the Stock Purchase and Rights Agreement.
Page 16
2. If Barcelo Crestline fails to purchase the shares of Sandalwood in
accordance with the terms and conditions of the Stock Purchase and
Rights Agreement, Sandalwood may terminate this Agreement immediately,
and shall have no obligation to refund any portion of the Barcelo
Crestline Advances or the Barcelo Crestline Due Diligence Fee or to
offer Barcelo Crestline any right of first refusal on any hotel it
acquires.
K. Arbitration. Any controversy, dispute or claim between the parties
relating to this Agreement shall be resolved by binding arbitration in
Xxxxxxxxxx County, Maryland in accordance with the rules of the American
Arbitration Association. The parties agree that in the event that any
controversy, dispute or claim between the parties relating to this
Agreement, is resolved by binding arbitration, the prevailing party, if
any, as determined by the arbitrator's award, shall be entitled to
reimbursement of all expenses incurred in the arbitration including
reasonable attorneys' fees; provided that in no event shall the arbitrator
have the authority to award punitive damages. Judgment on the xxxx may be
entered in any court having jurisdiction over the award. Any party may,
however, seek injunctive or other equitable relief from any court of
appropriate jurisdiction.
L. Sandalwood Representations and Warranties. Sandalwood represents
and warrants to Barcelo Crestline that as of the date hereof and as of the
IPO Initial Closing:
1. It is duly organized, validly existing and in good standing under
the laws of its state of organization, and has corporate power and
authority to own its assets and carry on its business as it is
presently being conducted. It is duly qualified and in good standing
to do business in each jurisdiction in which the business of
Sandalwood makes such qualification necessary.
2. It has corporate power and authority to execute and deliver this
Agreement and to consummate the transaction contemplated hereby and
thereby. The execution and delivery by Sandalwood of this Agreement
and the consummation by it of the transactions contemplated hereby and
thereby, have been duly authorized by its Board of Directors and no
other corporate proceeding on the part Sandalwood is necessary with
respect thereto. This Agreement constitutes a valid and binding
obligation of Sandalwood, enforceable in accordance with its terms,
except as the enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally or by the principles governing the
availability of equitable remedies.
3. The execution and delivery by Sandalwood of this Agreement does
not, and the consummation of the transactions contemplated hereby,
will not (i) violate or result in a breach of any provision of the
charter or bylaw, or other constituent documents of Sandalwood, (ii)
result in a
Page 17
default, or give rise to any right of termination, modification or
acceleration, under the terms or provisions of any agreement or other
instrument or obligation to which Sandalwood is a party, or (iii)
violate any law or regulation, or any judgment, order or decree of any
court, governmental body commission, agency or arbitrator applicable
to Sandalwood.
4. Sandalwood has properly filed with the appropriate governmental
agencies, other regulatory body, or self regulating entity, including
without limitation, AMEX, all documents, materials and information
necessary to consummate the transactions contemplated by this
Agreement.
5. The Registration Statement, including the Prospectus and each
schedule and exhibit comprising a portion thereof, any amendment or
supplement thereto, or any prospectus or preliminary prospectus or any
other document or materials used in connection with the IPO complies
in all respects with the requirements of the Securities Act and the
rules and regulations of the SEC and does not include any untrue
statement of a material fact or omit to state any material fact
required to be to be stated therein or necessary to make the
statements therein not misleading; and on the date that it is declared
effective or filed with the SEC or used (as applicable), the
Registration Statement, including the Prospectus and each schedule and
exhibit comprising a portion thereof, any amendment or supplement
thereto, or any prospectus or preliminary prospectus or any other
document or materials used in connection with the IPO, will comply in
all respects to the requirements of the Securities Act and the rules
and regulations of the SEC and will not include any untrue statement
of a material fact or omit to state any material fact required to be
to be stated therein or necessary to make the statements therein not
misleading.
X. Xxxxxxx Crestline Representations and Warranties. Barcelo Crestline
represents and warrants to Sandalwood that as of the date hereof and as of
the IPO Initial Closing:
1. It is duly organized, validly existing and in good standing under
the laws of its state of organization, and has corporate power and
authority to own its assets and carry on its business as it is
presently being conducted. It is duly qualified and in good standing
to do business in each jurisdiction in which the business of Barcelo
Crestline makes such qualification necessary.
2. It has corporate power and authority to execute and deliver this
Agreement and to consummate the transaction contemplated hereby and
thereby. The execution and delivery by Barcelo Crestline of this
Agreement and the consummation by it of the transactions contemplated
Page 18
hereby and thereby, have been duly authorized by its Board of
Directors and no other corporate proceeding on the part Barcelo
Crestline is necessary with respect thereto. This Agreement
constitutes a valid and binding obligation of Barcelo Crestline,
enforceable in accordance with its terms, except as the enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally
or by the principles governing the availability of equitable remedies.
3. The execution and delivery by Barcelo Crestline of this Agreement
does not, and the consummation of the transactions contemplated
hereby, will not (i) violate or result in a breach of any provision of
the charter or bylaw, or other constituent documents of Barcelo
Crestline, (ii) result in a default, or give rise to any right of
termination, modification or acceleration, under the terms or
provisions of any agreement or other instrument or obligation to which
Barcelo Crestline is a party, or (iii) violate any law or regulation,
or any judgment, order or decree of any court, governmental body
commission, agency or arbitrator applicable to Barcelo Crestline.
4. There is no requirement applicable to Barcelo Crestline to make any
filing with, or to obtain any consent or approval from any Person, as
a condition to the consummation of the transactions contemplated by
this Agreement.
N. Counterparts. This Agreement may be executed in counterparts,
including counterparts executed and transmitted by facsimile, each of which
shall be deemed an original, but all of which together shall constitute one
and the same instrument.
O. Interpretation. This Agreement, the Stock Purchase and Rights
Agreement and the Trademark License Agreement shall be interpreted to be
consistent with each other. If there should exist any conflict between any
provision of this Agreement and the Stock Purchase and Rights Agreement,
the Stock Purchase and Rights Agreement shall govern, but only to the
extent of such inconsistency.
P. Indemnification.
1. In addition to the indemnification provisions set out in Section IV
of this Agreement, each of the Parties (an "Indemnifying Party") shall
indemnify and hold harmless the each other Party and its respective
officers, agents, consultants and employees, (each, an "Indemnified
Party") to the fullest extent permitted by law from and against any
and all losses, claims, damages, expenses (including reasonable fees,
disbursements and other charges of counsel) or other liabilities
("Liabilities") arising or resulting from any breach of any covenant,
Page 19
agreement, representation or warranty of the Indemnifying Party in
this Agreement; provided, however, that if and to the extent that such
indemnification is unenforceable for any reason, the Indemnifying
Party shall make the maximum contribution to the payment and
satisfaction of such indemnified liability which shall be permissible
under applicable laws.
2. Each Indemnified Party will, promptly after the receipt of notice
of the commencement of any action or other proceeding against such
Indemnified Party in respect of which indemnity may be sought from the
Indemnifying Party, notify the Indemnifying Party in writing of the
commencement thereof. The failure of any Indemnified Party so to
notify the Indemnifying Party of any such action shall not relieve the
Indemnifying Party from any liability which it may have to such
Indemnified Party (a) unless, and only to the extent that, such
failure results in the Indemnifying Party's forfeiture of substantive
rights of defenses. In case any such action or other proceeding shall
be brought against any Indemnified Party and it shall notify the
Indemnifying Party of the commencement thereof, the Indemnifying Party
shall be entitled to participate therein and, to the extent that it
may wish, to assume the defense thereof, with counsel reasonably
satisfactory to such Indemnified Party; provided, however, that any
Indemnified Party may, at its own expense, retain separate counsel to
participate in such defense. Notwithstanding the foregoing, in any
action or proceeding in which both the Indemnifying Party and an
Indemnified Party is, or is reasonably likely to, become a party, such
Indemnified Party shall have the right to employ separate counsel at
the Indemnifying Party's expense and to control its own defense of
such action or proceeding if, in the opinion of counsel to such
Indemnified Party, (a) there are or may be defenses or counterclaims
available to such Indemnified Party or to other indemnified parties
that are different from or additional to those available to the
Indemnifying Party or (b) any conflict or potential exists between the
Indemnifying Party and such Indemnified Party that would make such
separate representation advisable; provided, however, that in no event
shall the Indemnifying party be required to pay fees and expenses
under this Section VIII.O. for more than one firm of attorneys in any
jurisdiction in any one legal action or group of related legal
actions. The Indemnifying Party agrees that it will not, without the
prior written consent of the Indemnified Party, settle, compromise or
consent to the entry of any judgment in any pending or threatened
claim, action or proceeding relating to the matters contemplated
hereby (if any Indemnified Party is a party thereto or has been
actually threatened to be made a party thereto) unless such
settlement, compromise or consent includes an unconditional release of
the Indemnified Party and each other Indemnified Party from all
liability arising or that may arise out of such claims, action or
proceeding. The rights accorded to indemnified parties hereunder shall
be in addition to any rights that any Indemnified Party may have at
common law, by separate agreement or otherwise.
Page 20
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
SANDALWOOD LODGING INVESTMENT CORPORATION
By /s/ Xxxxxxx X.X. Xxxxxx
-----------------------------------------------
Xxxxxxx X. X. Xxxxxx, Managing Director,
Vice Chairman and Chief Investment Officer
SANDALWOOD HOSPITALITY ADVISORS LLC
By /s/ Xxxxxxx X.X. Xxxxxx
-----------------------------------------------
Xxxxxxx X. X. Xxxxxx, Managing Director,
Vice Chairman and Chief Investment Officer
BARCELO CRESTLINE CORPORATION
By /s/ Xxxxx X. Xxxxxx
-----------------------------------------------
Xxxxx X. Xxxxxx
Executive Vice President
EXHIBIT A
FORM OF MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT
between
and
CRESTLINE HOTELS & RESORTS, INC.
("Management Company")
TABLE OF CONTENTS
Page
----
ARTICLE I - APPOINTMENT OF MANAGEMENT COMPANY
1.01 Appointment.......................................................1
1.02 Delegation of Authority...........................................1
1.03 No Covenants or Restrictions......................................2
1.04 Representations of Management Company.............................2
ARTICLE II - DEFINITION OF TERMS...............................................2
ARTICLE III - THE HOTEL
3.01 Ownership........................................................13
3.02 Subordination of Management Agreement............................13
3.03 Non-Disturbance Agreement........................................13
ARTICLE IV - PRE-OPENING .....................................................12
ARTICLE V - TERM
5.01 Term.............................................................13
5.02 Actions to be Taken upon Termination.............................13
ARTICLE VI - COMPENSATION OF MANAGEMENT COMPANY
6.01 Management Fees..................................................14
6.02 Accounting and Interim Payment...................................15
6.03 Reimbursements to Management Company.............................15
6.04 Performance Termination..........................................15
ARTICLE VII - WORKING CAPITAL AND FIXED ASSET SUPPLIES
7.01 Working Capital and Inventories..................................16
7.02 Fixed Asset Supplies.............................................16
ARTICLE VIII - MAINTENANCE, REPLACEMENT AND CHANGES
8.01 Routine Repairs and Maintenance..................................17
8.02 Repairs and Equipment Reserve....................................17
8.03 Building Alterations, Improvements, Renewals and Replacements....18
8.04 Liens............................................................17
8.05 Ownership of Replacements........................................17
ARTICLE IX - BOOKKEEPING AND BANK ACCOUNTS
9.01 Books and Records................................................19
9.02 Hotel Accounts: Expenditures....................................20
9.03 Annual Operating Projection......................................20
9.04 Operating Deficits...............................................22
ARTICLE X - FRANCHISE AGREEMENT...............................................22
ARTICLE XI - POSSESSION AND USE OF HOTEL
11.01 Use..............................................................23
11.02 Owner's Right to Inspect.........................................23
11.03 Group Services...................................................24
ARTICLE XII - INSURANCE
12.01 Property and Operational Insurance...............................22
12.02 General Insurance Provisions.....................................23
12.03 Coverage.........................................................23
12.04 Cost and Expense.................................................24
12.05 Policies and Endorsements........................................24
12.06 Indemnification..................................................24
ARTICLE XIII - REAL ESTATE AND PROPERTY TAXES
13.01 Impositions......................................................25
13.02 Owner's Responsibility...........................................26
2
ARTICLE XIV - HOTEL EMPLOYEES
14.01 Employees........................................................26
14.02 Termination......................................................27
14.03 Employee Claims..................................................28
ARTICLE XV - DAMAGE AND CONDEMNATION
15.01 Damage and Repair................................................28
15.02 Condemnation.....................................................29
ARTICLE XVI - DEFAULTS
16.01 Default..........................................................29
16.02 Event of Default.................................................30
16.03 Remedies upon Event of Default...................................31
ARTICLE XVII - PROPRIETARY MARKS; INTELLECTUAL PROPERTY
17.01 Proprietary Marks................................................31
17.02 Computer Software and Equipment..................................32
17.03 Intellectual Property............................................32
ARTICLE XVIII - WAIVER AND INVALIDITY
18.01 Waiver...........................................................32
18.02 Partial Invalidity...............................................33
ARTICLE XIX - ASSIGNMENT
19.01 Assignment by Management Company and Owner.......................33
ARTICLE XX - TERMINATION OF AGREEMENT UPON SALE, DEMOLITION, OR FORECLOSURE
20.01 Sale of the Hotel................................................34
20.02 Termination upon Demolition or Foreclosure.......................35
ARTICLE XXI - MANAGEMENT COMPANY CONDITIONS
21.01 Conditions upon Management Company's Obligations.................35
3
ARTICLE XXII - MISCELLANEOUS
22.01 Right to Make Agreement..........................................36
22.02 Agency...........................................................36
22.03 Failure to Perform...............................................36
22.04 Breach of Covenant...............................................36
22.05 Consents.........................................................37
22.06 Applicable Law...................................................37
22.07 Headings.........................................................37
22.08 Notices..........................................................37
22.09 Environmental Matters............................................38
22.10 Equity and Debt Offerings........................................39
22.11 Franchise Agreement..............................................39
22.12 Estoppel Certificates............................................39
22.13 Entire Agreement.................................................40
4
MANAGEMENT AGREEMENT
This Management Agreement ("Agreement") is made effective as of the
--------
day of , 200 ("Effective Date") by and between a
----------- -- -------------------
, with its principal place of business at
----------------------- ----------------
("Owner"), and Crestline Hotels & Resorts, Inc., a Delaware corporation, with
its principal place of business at 0000 Xxxxxxxxxx Xxxxx, Xxxxx 000, XxXxxx,
Xxxxxxxx 00000 ("Management Company").
WITNESSETH:
WHEREAS, Owner owns [fee simple/leasehold] title of the
-------------------
("Hotel") which is located on that certain real property as described on Exhibit
A attached hereto and made a part hereof; and
WHEREAS, Owner desires to have Management Company manage and operate the
Hotel from and after the Management Commencement Date (as defined in Article
II), and Management Company is willing to perform such services for the account
of Owner on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties, the parties
hereto agree as follows:
ARTICLE I
APPOINTMENT OF MANAGEMENT COMPANY
1.01 Appointment
Owner hereby appoints and employs Management Company as Owner's exclusive
agent to supervise, direct and control management and operation of the Hotel for
the term provided in Article V. Management Company accepts said appointment and
agrees to manage the Hotel during the term of this Agreement in accordance with
the terms and conditions hereinafter set forth. The performance of all
activities by Management Company, including the maintenance of all bank
accounts, shall be as the agent of and for the account of Owner.
1.02 Delegation of Authority
Except as otherwise specifically provided in this Agreement, the Hotel
shall be operated under the exclusive supervision and control of Management
Company, which shall be responsible for the proper and efficient operation of
the Hotel. Except as otherwise specifically provided in this Agreement,
Management Company shall have
5
discretion and control, free from interference, interruption or disturbance, in
all matters relating to the management and operation of the Hotel, including,
without limitation, charges for rooms and commercial space, credit policies,
food and beverage services, granting of concessions or leasing of shops and
agencies within the Hotel, receipt, holding and disbursement of funds,
maintenance of bank accounts (including Working Capital), procurement of
inventories, supplies and services, promotion and publicity and, generally, all
activities necessary for the operation of the Hotel.
1.03 No Covenants or Restrictions
Owner warrants that there will be on the Management Commencement Date no
covenants or restrictions which would prohibit or limit Management Company from
operating the Hotel, including cocktail lounges, restaurants and other
facilities customarily a part of or related to a first-class hotel facility.
Owner agrees upon request by Management Company to sign promptly and without
charge applications for licenses, permits or other instruments necessary for
operation of the Hotel.
1.04 Representations of Management Company
Management Company represents that it is experienced and capable in the
planning, decorating, furnishing, equipping, promoting, managing, and operating
of first-class hotels, and Management Company covenants and agrees to manage and
operate the Hotel as a first-class hotel in accordance with the standards of
other first-class hotels managed and operated by Management Company and in
strict compliance with that certain Franchise Agreement dated
between , as the "Franchisor," and
--------------------- --------------------
[Sandalwood entity ], as the "Franchisee" (as such agreement may have been or
may be amended subject to Article X below, the "Franchise Agreement"),
respecting the Hotel.
ARTICLE II
DEFINITION OF TERMS
The following terms when used in this Agreement shall have the meanings
indicated:
Accounting Period means a calendar month.
Additional Invested Capital means the cumulative total, as of any given
date during the term of this Agreement, of: (i) any expenditures made by Owner
pursuant to Section 8.03 (including any expenditures made by Owner during the
first twenty-four (24) Accounting Periods following the Management Commencement
Date pursuant to any property improvement plan setting forth required property
improvements as mutually agreed by Management Company, Owner and Franchisor),
plus (ii) any contributions by Owner to the Reserve beyond the funding described
in Section 8.02 A, other than those contributions which are treated as
Deductions or reimbursed to Owner under Section 8.02 E, plus (iii) any advances
of Working Capital made by Owner pursuant to Section 7.01, so
6
long as any such advance is not made as a result of an Operating Loss (described
in Section 9.04), and further provided that any subsequent reimbursement of
Working Capital to Owner shall reduce the amount of Additional Invested Capital
by the same amount of any such reimbursement, plus (iv) any rental payments
pursuant to any capital leases approved by Management Company and Owner that are
not otherwise paid from the Reserve or treated as a Deduction under the terms of
this Agreement.
Affiliate means any individual or entity, directly or indirectly through
one or more intermediaries, controlling, controlled by, or under common control
with a party. The term "control," as used in the immediately preceding sentence,
means, with respect to a corporation, the right to exercise, directly or
indirectly, fifty percent (50%) or more of the voting rights attributable to the
shares of the controlled corporation, and, with respect to an entity that is not
a corporation, the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of the controlled entity.
Annual Operating Projection shall have the meaning set forth in Section
9.03.
Annual Operating Statement shall have the meaning set forth in Section
9.01.
Base Management Fee shall have the meaning set forth in Section 6.01 A.
Building Estimate shall have the meaning set forth in Section 8.03 A.
Capitalization Multiple means the number ten (10).
Consumer Price Index shall mean the Consumer Price Index for All Urban
Consumers (CPI-U) (U.S. City Average), as published by the Bureau of Labor
Statistics, Department of Labor, or if such index is no longer published, the
"Consumer Price Index" shall then refer to such comparable statistics on changes
in the cost of living for urban consumers as such may be computed and published
by an agency of the United States or by a responsible financial periodical of
recognized authority as mutually agreed upon by the parties.
Coverage Ratio means the number one and three-tenths (1.3).
Debt Service means the amount of regularly-scheduled principal and interest
payments on any Qualified Loan (excluding balloon payments) provided that the
amortization period for such Qualified Loan shall not be less than twenty (20)
years.
Deductions shall have the meaning set forth in the definition of "Operating
Profit."
Default shall have the meaning set forth in Section 16.01.
Effective Date shall have the meaning set forth in the Preamble.
Employee Claims means any and all claims (including all fines, judgments,
7
penalties, costs, litigation and/or arbitration expenses, attorneys' fees and
expenses, and costs of settlement with respect to any such claims) by any
employee or employees of Management Company against Owner or Management Company
with respect to the employment at the Hotel of such employee or employees.
"Employee Claims" shall include, without limitation, the following: (i) claims
which are eventually resolved by arbitration, by litigation or by settlement;
(ii) claims which also involve allegations that any applicable
employment-related contracts affecting the employees at the Hotel have been
breached; and (iii) claims which involve allegations that one or more state or
federal employment laws have been violated.
Event of Default shall have the meaning set forth in Section 16.02.
Executive Employees shall have the meaning set forth in Section 14.02.
Existing Twelve Month Management Fees shall have the meaning set forth in
the definition of "Sale Termination Fee."
FF&E shall have the meaning set forth in Section 8.01.
FF&E Estimate shall have the meaning set forth in Section 8.02 C.
Fiscal Year means Management Company's Fiscal Year, which now begins at
12:01 a.m. on January 1 and ends at midnight on December 31. The partial Fiscal
Year between the Management Commencement Date and the first full Fiscal Year
shall be deemed part of the first full Fiscal Year. The partial Fiscal Year
between the end of the last full Fiscal Year and the Termination of this
Agreement shall, for purposes of this Agreement, constitute a separate Fiscal
Year. If Management Company's Fiscal Year is changed in the future, appropriate
adjustment to this Agreement's reporting and accounting procedure, shall be
made; provided, however, that no such change or adjustment shall alter the term
of this Agreement or in any way reduce the distributions of Operating Profit or
other payments due Owner or alter and/or modify the rights of Owner hereunder.
Fixed Asset Supplies means supply items included within Property and
Equipment under the Uniform System of Accounts, including linen, china,
glassware, silver, uniforms and similar items.
Force Majeure means acts of God, acts of war, civil disturbance,
governmental action (including the revocation or refusal to grant licenses or
permits, where revocation or refusal is not due to the fault of Management
Company, its agents or employees), strikes, fire, unavoidable casualties or any
other causes beyond the reasonable control of Management Company, including
without limitation, any failed duty of Management Company which is in part due
to Owner's failure to fund Owner-Funded Capital Expenditures pursuant to Section
8.03 of this Agreement. Force Majeure shall exclude general economic and/or
market factors.
Franchise Agreement shall have the meaning set forth in Section 1.04.
8
Franchisee shall have the meaning set forth in Section 1.04.
Franchisor shall have the meaning set forth in Section 1.04.
Gross Revenues means all revenues and receipts of every kind derived from
operating the Hotel and parts thereof, including, but not limited to: income
(from both cash and credit transactions), before commissions but after discounts
for prompt or cash payments, from rental of rooms, stores, offices, meeting,
exhibit or sales space of every kind; license, lease and concession fees and
rentals (not including gross receipts of licensees, lessees and concessionaires
from their operations); income from vending machines; health club membership
fees; food and beverage sales; wholesale and retail sales of merchandise;
service charges, and proceeds, if any, from business interruption or other loss
of income insurance. Gross Revenues shall not include (i) gratuities, including
tips, paid to Hotel employees by third parties; (ii) federal, state, and
municipal excise, sales, and use taxes or similar impositions collected directly
from patrons or guests or included as part of the sales price of any rooms,
goods, or services; (iii) proceeds realized from the sale of FF&E no longer
necessary to the operation of the Hotel, which shall be deposited in the
Reserve; (iv) proceeds of any insurance other than business interruption
insurance (or other insurance against loss of income) of the type described in
Section 12.01 A4; (v) condemnation awards; (vi) gross receipts received by
lessees, licensees, or concessionaires of the Hotel; (vii) proceeds from any
financing or refinancing; (viii) proceeds of any judgment or settlement not
received as compensation for actual or potential loss of Gross Revenues or
Operating Profit; (ix) interest earned on the Reserve, which shall be deposited
in the Reserve; and (x) any funds supplied by Owner to the Reserve.
Group Services shall have the meaning set forth in Section 11.03.
Hotel means the located at .
---------------------- -----------------------
Impositions shall have the meaning set forth in Section 13.01.
Incentive Fee shall have the meaning set forth in Section 6.01 B.
Initial Term shall have the meaning set forth in Section 5.01.
Intellectual Property shall have the meaning set forth in Section 17.03.
Inventories means Inventories as defined in the Uniform System of Accounts,
such as provisions in storerooms, refrigerators, pantries and kitchens;
beverages in wine cellars and bars; other merchandise intended for sale; fuel;
mechanical supplies; stationery; and other expenses, supplies and similar items.
Management Commencement Date means the date upon which Management Company
shall commence operating the Hotel pursuant to this Agreement which date shall
be confirmed in writing by Management Company.
9
Management Company means Crestline Hotels & Resorts, Inc.
Mortgage means any security instrument which encumbers the Hotel and/or the
Hotel premises, including, without limitation, mortgages, deeds of trust,
security deeds and similar instruments.
Non-Disturbance Agreement means an agreement, in recordable form in the
jurisdiction in which the Hotel is located, executed and delivered by a holder
of a Secured Loan (which agreement shall by its terms be binding upon all
assignees of such holder and upon any individual or entity that acquires title
to or possession of the Hotel at or through a foreclosure (referred to as a
"Subsequent Owner")), for the benefit of Management Company, pursuant to which,
in the event such holder (or its assignee) or any Subsequent Owner comes into
possession of or acquires title to the Hotel either at or following a
foreclosure, such holder (and its assignees) and all Subsequent Owners shall:
(x) recognize Management Company's rights under this Agreement, (y) not name
Management Company as a party in any foreclosure action or proceeding, and (z)
not disturb Management Company in its right to continue to manage the Hotel
pursuant to this Agreement; provided, however, that at such time, (i) this
Agreement has not expired or otherwise been terminated earlier in accordance
with its terms, and (ii) there are no outstanding Events of Default by
Management Company, and (iii) no material event has occurred and no material
condition exists which, after notice or the passage of time or both, would
entitle Owner to terminate this Agreement (excluding events which would
constitute Events of Default, which are to be governed exclusively by clause
(ii) hereof).
Operating Loss means a negative Operating Profit.
Operating Profit means the excess of Gross Revenues over the following
deductions ("Deductions") incurred by Management Company in operating the Hotel:
1. Cost of sales, salaries, wages, fringe benefits, payroll taxes and
other cash payroll costs related to Hotel employees;
2. Departmental expenses, administrative and general expenses and the
cost of Hotel advertising and business promotion, heat, light and power, and
routine repairs, maintenance and minor alterations treated as Deductions under
Section 8.01;
3. The cost of Inventories and Fixed Asset Supplies consumed in the
operation of the Hotel;
4. A reasonable reserve for uncollectible accounts receivable as
determined by Management Company and approved by Owner;
5. All costs and fees of independent professionals or other third
parties who perform services required or permitted hereunder if and to the
extent such cost and expense are not capitalized in accordance with generally
accepted accounting principles, including without limitation, third parties
providing legal services to Management Company
10
in connection with matters involving the Hotel (excluding matters in dispute
between Owner and Management Company), which services shall be charged at rates
which approximate Management Company's costs associated with such personnel;
6. The cost and expense of technical consultants and operational
experts for specialized services in connection with non-routine Hotel work;
provided that Owner shall have the right to approve any such technical
consultant or operational expert if its cost or expense is expected to exceed
$50,000 in the aggregate for any Fiscal Year and is not included in the approved
Annual Operating Projection for such Fiscal Year;
7. Management Company's Base Management Fee (referred to in Section
6.01) for services rendered in connection with the operation of the Hotel;
8. All the costs and expenses incurred by Management Company pursuant
to the Franchise Agreement including, but not limited to, franchise fees,
advertising, chain services, insurance, etc.; provided, however, any initial
licensing fees or capital expenditures necessary for compliance with the
Franchise Agreement shall not be a Deduction from Gross Revenues for purposes of
the calculation of Operating Profit;
9. The amount to be credited to the Reserve described in Section 8.02;
10. Insurance costs and expenses as described in Article XII;
11. Taxes, if any, payable by or assessed against Management Company
related to this Agreement or to Management Company's operation of the Hotel
(exclusive of Management Company's income taxes) and Impositions, including
without limitation, real and personal property taxes assessed against the Hotel
along with related expenses incurred in connection with all such assessments;
provided that any fines, penalties or interest added thereto which are a direct
result of Management Company's gross negligence or willful misconduct shall be
paid by Management Company from its own funds and shall not be treated as
Deductions;
12. All costs and expenses incurred in order to obtain and keep in
full force and effect any licenses and permits required for the operation of the
Hotel and related facilities, including without limitation, liquor licenses for
the sale of alcoholic beverages at all restaurants, bars, lounges, banquet
rooms, meeting rooms and guest rooms at the Hotel; provided that any fines or
penalties relating to maintaining such licenses and permits which are the direct
result of either Management Company's or Owner's gross negligence or willful
misconduct shall be paid by such party from its own funds and shall not be
treated as Deductions;
13. Rental payments pursuant to any capital lease approved by
Management Company and Owner which does not exceed $50,000 in the aggregate for
any Fiscal Year; provided that such rental payments may be paid either from the
Reserve or paid as a Deduction as mutually agreed by Owner and Management
Company; and
11
14. Such other costs and expenses incurred by Management Company as
are specifically provided for elsewhere in this Agreement (including, without
limitation, Group Services and certain reimbursable expenses of Management
Company's corporate staff described in Section 6.03) or are otherwise reasonably
necessary for the proper and efficient operation of the Hotel, unless any such
costs and expenses are specifically stated not to be Deductions under any
provision of this Agreement.
The term "Deductions" shall not include (i) debt service payments pursuant
to any Secured Loan; nor (ii) ground lease rental or other rental payments
pursuant to any ground lease in connection with the Hotel; nor (iii) any
expenditures by Owner in the acquisition or conversion of the Hotel; nor (iv)
rental payments pursuant to any capital lease approved by Management Company
which exceeds $50,000 in the aggregate for any Fiscal Year; nor (v) the cost of
external (third party) audits of Hotel operations and/or with respect to the
Owner entity itself; nor (vi) other recurring and non-recurring ownership costs,
such as Owner's entity administration and servicing costs; all of which shall be
paid by Owner from its own funds, and not from Gross Revenues nor from the
Reserve.
Owner means .
---------------------------------------
Owner-Funded Capital Expenditures shall have the meaning set forth in
Section 8.03.
Owner's Investment means the sum of (i) $_________________ [the price paid
by Owner to acquire the Hotel, including closing costs and conversion costs] and
(ii) Additional Invested Capital minus the original principal amount of any
Qualified Loan.
Owner's Priority means, with respect to each Fiscal Year during the term
hereof (prorated for any partial Fiscal Year), an amount equal to (i) twelve
percent (12%) of Owner's Investment, plus (ii) annual Debt Service for such
Fiscal Year (or partial Fiscal Year), plus (iii) annual ground lease rental or
additional rental payments made by Owner pursuant to any ground lease in
connection with the Hotel.
Prime Rate means the "prime rate" as published in the "Money Rates" section
of The Wall Street Journal; however, if such rate is, at any time during the
term of this Agreement, no longer so published, the term "Prime Rate" shall mean
the average of the prime interest rates which are announced, from time to time,
by the three (3) largest banks (by assets) headquartered in the United States
which publish a "prime rate."
Profit Minimum shall have the meaning set forth in Section 6.04.
Proprietary Marks shall have the meaning set forth in Section 17.01.
Prospectus shall have the meaning set forth in Section 22.10.
Qualified Lender means any lender, such as any federally insured commercial
or
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savings bank, national banking association, savings and loan association,
investment banking firm, commercial finance company and other similar lending
institution that is a holder of a Secured Loan that is a Qualified Loan.
Qualified Loan means any Secured Loan in which the initial principal
amount, as of the date such Secured Loan is incurred, when added to the current
principal balance of all existing Secured Loans as of that date, is less than or
equal to the greater of the following:
(i) Seventy percent (70%) of the sum of: (a) $____________ [the price paid
by Owner to acquire the Hotel, including closing costs and conversion
costs], plus (b) Additional Invested Capital; or
(ii) The result obtained by (a) dividing the Operating Profit for the
twelve (12) most recent full Accounting Periods by the Coverage Ratio;
then, (b) multiplying the quotient from clause (a) by the
Capitalization Multiple; or
(iii)The existing balance of any Secured Loans encumbering the Hotel
immediately prior to the date of the incurrence of such Qualified
Loan, plus commercially reasonable transaction costs (defined as all
normal transaction costs to the extent actually incurred) associated
with such refinancing up to an amount equal to four percent (4%) of
the principal amount of such Qualified Loan.
In addition, regardless of whether or not the above tests set forth in
clauses (i), (ii) and (iii) above are satisfied, (a) the existing (as of the
Management Commencement Date) balance of any Secured Loan which is secured by a
Mortgage existing as of the Management Commencement Date shall be deemed to be a
"Qualified Loan"; and (b) any Secured Loan which Management Company, in its
reasonable discretion, has approved in writing shall be deemed to be a
"Qualified Loan" (provided that an approval by Management Company that a given
Secured Loan shall be deemed to be a Qualified Loan hereunder shall apply only
to the specific hotel or hotels which are described in such approval, and shall
not be deemed to be an approval with respect to other hotels, regardless of
whether such Secured Loan by its terms permits the substitution or addition of
such other hotels as security for such Secured Loan).
Renewal Term shall have the meaning set forth in Section 5.01.
Reserve shall have the meaning set forth in Section 8.02 A.
Sale of the Hotel means any sale, assignment, transfer or other
disposition, for value or otherwise, voluntary or involuntary, of Owner's title
to the Hotel or the site (either fee or leasehold title, as the case may be),
but shall not include a collateral assignment intended to provide security for a
loan. For purposes of this Agreement, a "Sale of the Hotel" shall also include a
lease (or sublease) of the entire Hotel or site. The phrase "Sale of the Hotel"
shall also include any sale, transfer, or other disposition, for value or
otherwise, in a single transaction or a series of related transactions, of the
controlling
13
interest in the Owner. If the Owner is a corporation, the phrase "controlling
interest" shall mean the right to exercise, directly or indirectly, fifty
percent (50%) or more of the voting rights attributable to the shares of Owner
(through ownership of such shares or by contract). If Owner is not a
corporation, the phrase "controlling interest' shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of Owner. Notwithstanding the foregoing, the term "Sale
of the Hotel" shall not include any sale, assignment, transfer or other
disposition of the Hotel or the site by Owner to an Affiliate of Owner.
Sale Termination Fee means that amount payable by Owner to Management
Company pursuant to Section 20.01 E of this Agreement, which is equal to the
following: (a) the for Sale of the Hotel between the fifth (5th) anniversary of
the Management Commencement Date and the seventh (7th) anniversary of the
Management Commencement Date, the product of two (2) times the sum of the Base
Management Fees plus the Incentive Fees earned by Management Company during the
most recent twelve (12) month period immediately preceding the Sale of the Hotel
(collectively, the "Existing Twelve Month Management Fees"), (b) for the Sale of
the Hotel after the seventh (7th) anniversary of the Management Commencement
Date but on or before the ninth (9th) anniversary of the Management Commencement
Date, the product of one and one-half (1 1/2) times the Existing Twelve Month
Management Fee, (c) for the Sale of the Hotel after the ninth (9th) anniversary
of the Management Commencement Date but on or before the expiration of the
Initial Term of this Agreement, the product of one (1) times the Existing Twelve
Month Management Fees, (d) for the Sale of the Hotel at any time during any
Renewal Term of this Agreement, there shall be no Sale Termination Fee.
Secured Loan means and includes (i) any indebtedness secured by a Mortgage;
and (ii) all amendments, modifications, supplements and extensions of any such
Mortgage.
Software shall have the meaning set forth in Section 17.02.
Termination means the expiration or sooner cessation of this Agreement.
Uniform System of Accounts means the Uniform System of Accounts for Hotels,
Ninth Revised Edition, 1996, as revised and adopted by the Hotel Association of
New York City, Inc. from time to time and as modified by applicable provisions
of this Agreement.
WARN Act shall have the meaning set forth in Section 14.02.
Working Capital means funds which are reasonably necessary for the
day-to-day operation of the Hotel's business, including, without limitation,
amounts sufficient for the maintenance of change and xxxxx cash funds, operating
bank accounts, receivables, payrolls, prepaid expenses and funds required to
maintain Inventories, less accounts payable and accrued current liabilities.
14
ARTICLE III
THE HOTEL
3.01 Ownership
During the term of this Agreement, Owner shall take such action as is
appropriate to assure that Owner has good and marketable [fee/leasehold] title
to the land described in Exhibit A and all improvements thereon, free and clear
of all liens and encumbrances other than:
(i) Easements or other encumbrances that do not adversely affect the
operation of the Hotel by Management Company and do not require the
payment of any money;
(ii) Mortgages which are given to secure any one or more Qualified Loans;
(iii) Liens for taxes, assessments, levies or other public charges which
are not yet due or are being contested in good faith; and
(iv) Amendments or modifications to the ground lease, if any, existing as
of the Effective Date to which Management Company consents (which
consent shall not be unreasonably withheld, provided that: (i) the
proposed amendment or modification would not materially adversely
affect the rights and/or obligations of Management Company, and (ii)
in any event, such amendment or modification would have no adverse
impact on the amount of the fees to be paid to Management Company
under this Agreement).
3.02. Subordination of Management Agreement
Excluding Management Company's right to receive payment of the Base
Management Fee, this Agreement and all of the rights and benefits of Management
Company hereunder are, and shall be subject and subordinate to any Qualified
Loan(s) which now or hereafter encumber the Hotel. This subordination provision
shall be self-operative and no other or further instrument of subordination
shall be required. Management Company agrees, however, upon request of any
Qualified Lender, duly to execute and deliver any subordination agreement
requested by such Qualified Lender to evidence and confirm the subordination
effected under this Section 3.02.
3.03 Non-Disturbance Agreement
Notwithstanding Section 3.02, Owner agrees that, prior to obtaining any
Qualified Loan, it will use commercially reasonable good faith efforts to obtain
from each prospective holder or holders thereof a Non-Disturbance Agreement
pursuant to which Management Company's rights under this Agreement will not be
disturbed as a result of a loan default stemming from non-monetary factors which
(i) relate to Owner and do not relate solely to the Hotel, and (ii) are not
Defaults by Management Company under Article XVI of this
15
Agreement. If Owner desires to obtain a Qualified Loan, Management Company, on
written request from Owner, shall promptly identify those provisions in the
proposed loan documents which fall within the categories described in clauses
(i) and (ii) above, and Management Company shall otherwise assist in expediting
the preparation of an agreement between the prospective holder and Management
Company which will implement the provisions of this Section 3.03.
ARTICLE IV
PRE-OPENING
Owner shall provide all funds to pay any amounts or, as applicable,
reimburse any deficiencies arising in connection with the following pre-opening
expenses in accordance with a pre-opening budget prepared by Management Company
and approved by Owner prior to the opening of the Hotel:
(i) payment of any application and/or other fees and expenses due in
connection with obtaining the Franchise;
(ii) payment of all expenses (including, without limitation, any and all
legal expenses) related to or arising in connection with obtaining the permits
and/or licenses necessary for the operation of the Hotel or any facilities
located therein, including, without limitation, any liquor licenses;
(iii) payment of expenses for operating equipment and operating supplies
which may be required as of the Hotel's opening date;
(iv) any projected losses associated with the opening of the Hotel; and
(v) any other expenses incurred by Owner or Management Company, as the case
may be, in connection with the opening of the Hotel.
Owner shall advance to Management Company all funds required by Management
Company for such pre-opening expenses in the amounts and on the dates as may be
specified by Management Company in a "Request for Funds" to be submitted by
Management Company to Owner. Such amounts shall be provided by Owner within
fifteen (15) days of Owner's receipt of Management Company's Request for Funds.
If following the Management Commencement Date, funds for pre-opening expenses
are owing to Management Company, Management Company shall have the option to
deduct such amounts from Owner's share of Operating Profit. It is understood
that, to the extent any delay or postponement of the Management Commencement
Date causes increased pre-opening expenses that cannot reasonably be avoided,
Owner shall be responsible for and promptly pay such increased pre-opening
expenses. No item which is or should have been included as a pre-opening expense
shall be charged as a Deduction.
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ARTICLE V
TERM
5.01 Term
The initial term ("Initial Term") of this Agreement shall commence on the
Effective Date, and, unless sooner terminated as provided in this Agreement,
shall continue for a period ending one hundred and twenty (120) Accounting
Periods after the Management Commencement Date. Following the expiration of the
Initial Term, this Agreement shall, unless terminated pursuant to the provisions
of this Agreement, continue in force and be automatically extended for two (2)
successive five (5)-year terms (each individually a "Renewal Term") unless
either party provides written notice of termination to the other at least ninety
(90) days prior to the end of the then current term.
5.02 Actions to be Taken upon Termination
Upon a Termination of this Agreement, the following shall be applicable:
A. Management Company shall, within sixty (60) days after Termination of
this Agreement, prepare and deliver to Owner a final accounting statement with
respect to the Hotel, as more particularly described in Section 9.01, along with
a statement of any sums due from Owner to Management Company pursuant hereto,
dated as of the date of Termination. Within thirty (30) days after the receipt
by Owner of such final accounting statement, the parties will make whatever cash
adjustments are necessary pursuant to such final statement. The cost of
preparing such final accounting statement shall be a Deduction, unless the
Termination occurs as a result of an Event of Default by either party, in which
case the defaulting party shall pay such cost. Management Company and Owner
acknowledge that there may be certain adjustments for which the necessary
information will not be available at the time of such final accounting, and the
parties agree to readjust such amounts and make the necessary cash adjustments
when such information becomes available; provided, however, that (unless there
are ongoing disputes of which each party has received notice) all accounts shall
be deemed final as of one hundred eighty (180) days after such Termination.
B. As of the date of the final accounting referred to in subsection A
above, Management Company shall release and transfer to Owner any of Owner's
funds which are held or controlled by Management Company with respect to the
Hotel, with the exception of funds to be held in escrow pursuant to Section
12.04 B and Section 14.02. During the period between the date of Termination and
the date of such final accounting, Management Company shall pay (or reserve
against) all Deductions which accrued (but were not paid) prior to the date of
Termination, using for such purpose any Gross Revenues which accrued prior to
the date of Termination.
C. Management Company shall make available to Owner such books and records
respecting the Hotel (including those from prior years, subject to Management
Company's reasonable records retention policies) as will be needed by Owner to
prepare
17
the accounting statements, in accordance with the Uniform System of Accounts,
for the Hotel for the year in which the Termination occurs and for any
subsequent year. Such books and records shall not include: (i) employee records
which must remain confidential either under applicable laws or regulations of
any governmental authority or agency having jurisdiction over such matters or
under reasonable corporate policies of Management Company; or (ii) any
Intellectual Property.
D. Management Company shall (to the extent permitted by law) assign to
Owner, or to any other manager employed by Owner to operate and manage the
Hotel, all operating licenses, including any liquor licenses, for the Hotel
which have been issued in Management Company's name and in the event that such
licenses are not assignable, Management Company shall cooperate with Owner and
any new manager of the Hotel in connection with the issuance of new licenses;
provided that if Management Company has expended any of its own funds in the
acquisition of any of such licenses, Owner shall reimburse Management Company
therefor if it has not done so already.
E. Owner agrees that Hotel reservations and any and all contracts made in
connection with Hotel convention, banquet or other group services made by
Management Company in the ordinary and normal course of business, for dates
subsequent to the date of Termination and at rates prevailing for such
reservations at the time they were made, shall be honored and remain in effect
after Termination of this Agreement.
F. Various other actions shall be taken, as described in this Agreement,
including, but not limited to, the actions described in Sections 12.04 B, 14.02,
17.01, 17.02, and 17.03.
G. Management Company shall cooperate with the new operator of the Hotel as
to effect a smooth transition and shall peacefully vacate and surrender the
Hotel to Owner.
The provisions of this Section 5.02 shall survive any Termination.
ARTICLE VI
COMPENSATION OF MANAGEMENT COMPANY
6.01 Management Fees
A. Base Management Fees. In consideration of the services to be performed
during the term of this Agreement by Management Company, Management Company
shall be paid a periodic base management fee ("Base Management Fee") in the
amount of four percent (4%) of Gross Revenues for each Accounting Period.[In the
event that there are 250 or more rooms in the Hotel, the Base Management Fee
shall be 3% rather than 4%] Each such periodic fee shall be paid to Management
Company (or retained by Management Company as provided below) at such time as
the final monthly report for such Accounting Period is submitted to Owner as
provided in Section 6.02 A below.
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B. Incentive Management Fees. In addition to the Base Management Fee and in
consideration of the services to be performed during the term of this Agreement,
Management Company shall be paid for each Fiscal Year (or partial Fiscal Year),
subject to Section 6.02 B, an incentive fee ("Incentive Fee") equal to fifteen
percent (15%) of the amount by which Operating Profit for such Fiscal Year (or
partial Fiscal Year) exceeds Owner's Priority (prorated for any partial Fiscal
Year). Notwithstanding the foregoing to the contrary, Management Company shall
not be entitled to receive any Incentive Fee in any Fiscal Year with respect to
which the distributions to Owner have not equaled or exceeded Owner's Priority.
6.02 Accounting and Interim Payment
A. Within twenty (20) days after the close of each Accounting Period,
Management Company shall submit an accounting to Owner showing Gross Revenues,
Deductions, Operating Profit, and distributions thereof for such Accounting
Period. Management Company shall transfer to Owner with each accounting any
Operating Profit or other sums then available for distribution to Owner and
shall retain any periodic Base and Incentive Management Fees due Management
Company. Such interim accountings shall be in the form of statements reasonably
approved by Owner.
B. The calculation and payment of the management fees and the distribution
of Operating Profit made with respect to each Accounting Period within a Fiscal
Year shall be accounted for cumulatively. Within sixty (60) days after the close
of each Fiscal Year, Management Company shall submit an accounting, as more
fully described in Section 9.01 for such Fiscal Year to Owner, which accounting
shall be controlling over the interim accountings. Any adjustments required for
such Fiscal Year by such final accounting shall be made by the parties within
forty-five (45) days after receipt by Owner of such final accounting.
6.03 Reimbursements to Management Company
In addition to all other amounts for which Management Company is entitled
to reimbursement from Owner pursuant to this Agreement, Owner agrees to
reimburse Management Company for all travel and out-of-pocket expenses (such as
fax, postage, telephone and express mail) of the corporate staff (defined for
purposes of this Section 6.03 as those employees who are not ordinarily located
at the Hotel) of Management Company and Management Company's Affiliates, which
are directly related to the efforts of such staff on behalf of the Hotel;
provided, however, the reimbursements for such expenses shall be billed, as
Deductions, to the Hotel at cost (without duplication of those expenses included
in Group Services) and such amounts are included in the Annual Operating
Projection or otherwise approved by Owner.
6.04 Performance Termination
Owner shall have the option to terminate this Agreement if the Hotel: (i) fails
to achieve Operating Profit equal to ninety (90%) of the Operating Profit
estimated in the approved
19
Annual Operating Projection (the "Profit Minimum") in each of two (2)
consecutive Fiscal Years (excluding the initial two full Fiscal Years after the
Management Commencement Date; provided that, if the Management Commencement Date
is on or before June 30th, such partial Fiscal Year shall be deemed to be the
first full Fiscal Year for purposes of this Section 6.04), and (ii) fails to
maintain one hundred percent (100%) of the fair market share of revenue per
available room for the Hotel's competitive set as set forth on Exhibit B
attached hereto during each of such two (2) consecutive Fiscal Years as reported
by Xxxxx Travel Research (or similar reporting service in the event that Xxxxx
Travel Research reports are no longer available), and (iii) the fact that
Management Company is failing to meet the tests set forth in (i) and (ii) above
is not the result of Force Majeure; provided that Management Company and Owner
shall mutually agree upon appropriate adjustments to the Hotel's competitive set
as set forth on Exhibit B that may be necessary as a result of such Force
Majeure for purposes of determining whether Management has failed the test set
forth in (ii) above. Notwithstanding the foregoing, Management Company shall
have the right to cure any such failure to achieve Operating Profit equal to the
Profit Minimum during any Fiscal Year by paying to Owner the difference between
Operating Profit for such Fiscal Year and the Profit Minimum within sixty (60)
days after the end of such Fiscal Year.
ARTICLE VII
WORKING CAPITAL AND FIXED ASSET SUPPLIES
7.01 Working Capital and Inventories
A. At the Management Commencement Date, Owner shall provide to Management
Company the funds necessary to supply the Hotel with Working Capital and
Inventories in a minimum amount of One Thousand Dollars ($1,000.00) per guest
room and shall at all times thereafter maintain in the Hotel's operating
accounts a minimum balance in the amount of $______________ (or, if necessary,
such greater amount to assure the uninterrupted and efficient operation of the
Hotel, including, without limitation, sufficient funds to pay budgeted current
liabilities as they fall due and to replace Inventories as they are consumed) in
accordance with the provisions of subsection B below. Working Capital so
advanced shall remain the property of Owner throughout the term of this
Agreement, and Management Company shall make no claim thereto.
B. To the extent that the Working Capital becomes reduced to an amount less
than $_______________ , additional funds in a sum equal to the difference
between $_________________ and the then Working Capital shall be provided by
Owner within five (5) days after Management Company has given written notice to
Owner of such reduction of Working Capital.
7.02 Fixed Asset Supplies
Owner shall provide such funds as Management Company may reasonably
determine to be necessary to supply the Hotel with Fixed Asset Supplies. Fixed
Asset Supplies shall at all times be owned by, and be the sole property of,
Owner, and Management Company shall make no claim thereto.
20
ARTICLE VIII
MAINTENANCE, REPLACEMENT AND CHANGES
8.01 Routine Repairs and Maintenance
From and after the Management Commencement Date, Management Company shall
maintain the Hotel in good repair and condition and in conformity with
applicable laws and regulations and in accordance with the Franchisor's
standards for the operation of the Hotel and shall make or cause to be made such
routine maintenance, repairs and minor alterations, the cost of which can be
expensed under generally accepted accounting principles, as Management Company,
from time to time, deems necessary for such purposes. The cost of such
maintenance, repairs and alterations shall be paid from Gross Revenues and shall
be treated as a Deduction in determining Operating Profit. The cost of
non-routine repairs and maintenance, either to the Hotel building or its
fixtures, furniture, furnishings and equipment ("FF&E"), shall be paid for in
the manner described in Sections 8.02 and 8.03.
8.02 Repairs and Equipment Reserve
A. Management Company shall establish, in respect of each Fiscal Year from
and after the Management Commencement Date, a reserve escrow account in the name
of Owner ("Reserve") in a bank approved by Owner. All disbursements and
withdrawals from the Reserve shall be made by representatives of Management
Company whose signatures have been authorized. The Reserve shall be in an amount
equal to the greater of: (i) % of Gross Revenues or (ii) the amount required
---
under the Franchise Agreement for the Hotel or by any Qualified Lender, in a
bank, savings and loan association or other financial institution designated by
Owner to cover the cost of:
1. Replacements and renewals to the Hotel's FF&E; and
2. Certain non-routine repairs and maintenance to the Hotel building
which are normally capitalized under generally accepted accounting principles,
such as exterior and interior repainting, resurfacing building walls, floors,
roofs and parking areas, and replacing folding walls and the like, but which are
not major repairs, alterations, improvements, renewals or replacements to the
Hotel building's structure or to its mechanical, electrical, heating,
ventilating, air conditioning, plumbing or vertical transportation systems, the
cost of which are Owner's sole responsibility under Section 8.03.
B. All amounts from time to time in the Reserve, and all interest thereon,
shall at all times be owned by, and be the exclusive property of, Owner, and
Management Company shall make no claim thereto. Proceeds from the sale of FF&E
no longer necessary for the operation of the Hotel shall be deposited in the
Reserve, as shall any interest which accrues on amounts placed in the Reserve.
Neither (i) proceeds from the disposition of FF&E, nor (ii) interest which
accrues on amounts held in the Reserve, shall either (x) result in any reduction
in the required contributions to the Reserve set forth in
21
8.02 A above, or (y) be included in Gross Revenues. Management Company shall
provide to Owner each month a copy of the bank statement relating to the Reserve
and a reconciliation of such Reserve account.
C. Management Company shall prepare an estimate ("FF&E Estimate") of the
expenditures necessary for (i) replacement and renewal of the Hotel FF&E and
(ii) building repairs of the nature contemplated by Section 8.02 A 2 during the
ensuing Fiscal Year, and shall submit such Estimate to Owner for Owner's review
and approval at the same time it submits the Annual Operating Projection
described in Section 9.03.
D. Management Company shall from time to time make such substitutions and
replacements of or renewals to FF&E and repairs to the Hotel of the nature
described in Section 8.02 A 2, as are provided for in the FF&E Estimate approved
for such Fiscal Year by Owner pursuant to Section 8.02 C, provided that
Management Company shall not expend more than the balance in the Reserve without
the prior approval of Owner. Management Company will endeavor to follow the
applicable FF&E Estimate, but shall be entitled to depart therefrom (but not
exceeding the Reserve balance), in its reasonable discretion, provided that (a)
such departures from the FF&E Estimate result from circumstances which could not
reasonably have been foreseen at the time of the submission of such FF&E
Estimate; and (b) such departures from the FF&E Estimate result from
circumstances which require prompt repair and/or replacement; and (c) Management
Company has submitted to Owner a revised FF&E Estimate setting forth and
explaining such departures. At the end of each Fiscal Year, any amounts then
remaining in the Reserve shall be carried forward to the next Fiscal Year.
E. If any FF&E Estimate which is prepared for a given Fiscal Year would
require funding in excess of the percentage of Gross Revenues which is required
under Section 8.02 A, Owner may elect one of the following: (i) agree to
increase the percentage of Gross Revenues up to the level set forth in such FF&E
Estimate, in order to provide the additional funds required, such increases to
be treated as Deductions; (ii) make a lump-sum contribution to the Reserve in
the necessary amount and agree not to have such contribution reimbursed from
Gross Revenues (in which case the amount of such contribution shall be added to
Additional Invested Capital) or (iii) make a lump-sum contribution to the
Reserve in the necessary amount, in which case such contribution plus interest
(at Prime Rate plus one percentage point per annum), shall be reimbursed to
Owner from Gross Revenues in equal installments over a period of time mutually
agreed upon by Owner and Management Company, and such installment repayments
shall be Deductions. If Owner elects not to agree to either option for excess
funding of the Reserve, Management Company shall be entitled, at its option, to
terminate this Agreement upon ninety (90) days' written notice to Owner;
however, such failure by Owner shall not be deemed a Default by Owner unless
such failure to provide excess funding will cause a default by Owner under
Section 16.01.F of this Agreement.
8.03 Building Alterations, Improvements, Renewals and Replacements
A. Management Company shall prepare an annual estimate ("Building
22
Estimate") of the expenses necessary for major repairs, alterations,
improvements, renewals and replacements (which repairs, alterations,
improvements and renewals are not routine maintenance, repairs and alterations
referred to in Section 8.02) to the structural, mechanical, electrical, heating,
ventilating, air conditioning, plumbing and vertical transportation elements of
the Hotel building, including any such Owner-Funded Capital Expenditures
required under the Franchise Agreement ("Owner-Funded Capital Expenditures") and
shall submit such Building Estimate to Owner for its approval at the same time
the Annual Operating Projection described in Section 9.03 is submitted.
Management Company shall not make any Owner-Funded Capital Expenditures without
the prior written consent of Owner except to the extent such expenditures are:
(i) required by any law (including, without limitation, any law, ordinance, code
or regulation of any governmental authority or agency having jurisdiction over
the business or operation of the Hotel), or (ii) otherwise required to avoid the
risk of harm or further damage to persons or property.
B. The cost of all Owner-Funded Capital Expenditures shall be borne solely
by Owner and shall not be paid from Gross Revenues or from the Reserve. The
failure of Owner to provide funding for any Owner-Funded Capital Expenditure
described in clause (i), (ii) or (iii) of Section 8.03 A shall be a Default by
Owner and Management Company shall be entitled to terminate this Agreement
(along with other remedies it may have under this Agreement).
8.04 Liens
Management Company and Owner shall use their best efforts to prevent any
liens from being filed against the Hotel which arise from any maintenance,
changes, repairs, alterations, improvements, renewals or replacements in or to
the Hotel. They shall cooperate fully in obtaining the release of any such
liens, and the cost thereof, if the lien was not occasioned by the fault of
either party, shall be treated the same as the cost incurred pursuant to Section
8.03. If the lien arises as a result of the fault of either party, then the
party at fault shall bear the cost of obtaining the lien release.
8.05 Ownership of Replacements
All changes, repairs, alterations, improvements, renewals, or replacements
to the Hotel made pursuant to this Article VIII shall be the property of Owner.
ARTICLE IX
BOOKKEEPING AND BANK ACCOUNTS
9.01 Books and Records
Books of control and account shall be kept on the accrual basis and in
material respects in accordance with the Uniform System of Accounts with the
exceptions provided in this Agreement. Owner may, at reasonable intervals during
Management Company's
23
normal business hours, examine such records. Within sixty (60) days following
the close of each Fiscal Year, Management Company shall furnish Owner a
statement (the "Annual Operating Statement") in reasonable detail summarizing
the Hotel operations for such Fiscal Year and a certificate of Management
Company's chief accounting officer certifying that such year-end statement is
true and correct to the best of his or her knowledge and belief. If Owner raises
no objections within thirty (30) days after receipt of the Annual Operating
Statement, the Annual Operating Statement shall be deemed to have been accepted
by Owner. If Owner does raise any such objection, Owner shall arrange for an
independent audit to be commenced within sixty (60) days after the date of such
objection, and shall diligently cause such audit to be completed within a
reasonable period of time. Owner shall pay all costs of such audit at its sole
expense (and not as a Deduction); however, if such audit establishes that
Management Company has understated Operating Profit for that Fiscal Year by five
percent (5%) or more, the reasonable costs and expenses of such audit shall be
paid directly by Management Company from its own funds and shall not be treated
as Deductions.
9.02 Hotel Accounts: Expenditures
A. All funds derived from the operation of the Hotel shall belong to and be
the property of Owner and shall be deposited by Management Company in bank
accounts established by Management Company for Owner in one or more banks
approved by Owner. All disbursements and withdrawals from said accounts as
required or permitted under this Agreement (i.e., the payment of all Deductions
and the distribution of Operating Profit) shall be made by bonded
representatives of Management Company whose signatures have been authorized.
Reasonable xxxxx cash funds and house banks, in amounts satisfactory to Owner,
shall be maintained at the Hotel.
B. All payments to be made by Management Company hereunder shall be made
from authorized bank accounts, from xxxxx cash funds or from Working Capital
provided by Owner pursuant to Section 7.01. Debts and liabilities incurred by
Management Company as a result of its operation and management of the Hotel
pursuant to the terms hereof, whether asserted before or after Termination, will
be paid by Owner to the extent funds are not available for that purpose from
Gross Revenues. Management Company shall not be required to make any advance or
payment to or for the account of Owner except out of such funds, and Management
Company shall not be obligated to incur any liability or obligation for Owner's
account without assurances that necessary funds for the discharge thereof will
be provided by Owner.
C. All bank accounts shall be owned by Owner and shall be solely controlled
and operated by Management Company as the agent of Owner; the agency status of
Management Company shall be designated on the checks and drafts drawn on such
banks accounts.
9.03 Annual Operating Projection
A. On or before the first day of December of each Fiscal Year, a
preliminary
24
draft of the budget ("Annual Operating Projection"), setting forth Management
Company's reasonable estimate of Gross Revenues, Deductions, and Operating
Profit for the forthcoming Fiscal Year for the Hotel, shall be prepared by
Management Company and submitted to Owner for its review and approval (which
shall not be unreasonably withheld or delayed). In the event that Management
Company is seeking reimbursement from Owner pursuant to Section 14.01.B(i) for
the salaries, wages and/or benefits of any officers or directors of Management
Company or Management Company's Affiliates who shall be regularly or temporarily
employed or assigned on a full-time basis at the Hotel, this shall be shown as a
separate line item under the Deductions category of the Annual Operating
Projection. On or before the fifteenth (15th) day of December of each Fiscal
Year, Management Company and Owner shall have a meeting to discuss the Annual
Operating Projection; provided that Management Company shall submit the Annual
Operating Projection to Owner at least fourteen (14) days in advance of such
meeting (or such meeting shall be rescheduled to a date that is at least
fourteen (14) days after the submission of the Annual Operating Projection to
Owner). If Owner does not approve the preliminary Annual Operating Projection in
full, within thirty (30) days of its receipt, Owner shall notify Management
Company of each category of expenses (a "Category") of which Owner does not
approve. The preliminary Annual Operating Projection thereafter shall be revised
as Owner and Management Company may agree, and shall, upon Owner's approval,
constitute the approved Annual Operating Projection for the forthcoming Fiscal
Year. In the event that Owner does not notify Management Company in writing
within said 30-day period that it does not approve of specified Categories, the
preliminary Annual Operating Projection shall constitute the approved Annual
Operating Projection for the forthcoming Fiscal Year. The approval of Owner
shall not be required with respect to any Category if, and to the extent that,
the preliminary Annual Operating Projection with respect to such Category for a
given Fiscal Year is, in all material respects (taking into account any
extraordinary non-recurring items), the same as the Annual Operating Projection
for the preceding Fiscal Year as adjusted by the Consumer Price Index.
B. The Annual Operating Projection is an estimate only and Management
Company shall, from time to time during each Fiscal Year as it deems
appropriate, suggest revisions thereto for Owner's review and approval.
Management Company will at all times give good faith consideration to Owner's
suggestions regarding any Annual Operating Projection. Management Company shall
not, except as provided in Sections 8.03 A above and 9.03 C and 9.03 D below,
depart from any approved Annual Operating Projection, or make any expenditures
or incur any expenses not provided for therein, without Owner's prior approval.
C. If Owner and Management Company fail to mutually agree on any given
Category or Categories in the preliminary Annual Operating Projection within
forty-five (45) days after the submission to Owner of the preliminary draft
described in the first sentence of 9.03 A, Management Company shall continue to
manage and operate the Hotel as follows until such agreement is reached: (i)
with respect to each Category in such preliminary Annual Operating Projection
which has been approved or deemed approved by Owner, Management Company may make
expenditures and incur obligations under such Category as so approved; and (ii)
with respect to any Category which has not been
25
approved by Owner, Management Company may continue to make expenditures and
incur obligations under such Category in accordance with the amounts provided
for such Category in the Annual Operating Projection approved for the prior
Fiscal Year, as adjusted by the Consumer Price Index, with such additional
adjustments therein as shall be necessary to take into account (x) any
differences in occupancy which may be experienced in the current Fiscal Year as
compared to the prior Fiscal Year, and (y) any increased costs beyond the
control of Management Company for the same or comparable services or products.
D. Owner and Management Company acknowledge that the Annual Operating
Projection approved by Owner is an estimate only and that unforeseen
circumstances such as, but not limited to, the costs of labor, materials,
services and supplies, casualty, operation of law, or economic and market
conditions may make adherence to the Annual Operating Projection impracticable
for certain Categories. If in the judgment of the Management Company the
expenditures reasonably expected to be made in any of the following Categories
during the then current Fiscal Year exceed by ten percent (10%) or more the
amount budgeted for such Category in the then current Annual Operating
Projection, Management Company shall notify Owner promptly in writing: Rooms;
Food, Beverage and Banquet; Telephone, Gift Shop, and other; Administrative and
General; Advertising and Sales; Repairs and Maintenance; Salaries and Wages.
Management Company shall, as soon as practicable thereafter, consult with, and
advise, Owner concerning expenditures for such Category or Categories. The
Category under which any expenditure or obligation falls shall be determined in
accordance with the Uniform System of Accounts.
9.04 Operating Deficits
If Management Company should anticipate any Operating Loss for any
Accounting Period, Management Company shall immediately so advise Owner in
writing, setting forth the estimated amount of such deficiency and an
explanation or justification therefor.
ARTICLE X
FRANCHISE AGREEMENT
During the term of this Agreement, the Hotel shall be managed and operated
in strict compliance with the terms and conditions of the Franchise Agreement
(including but not limited to all terms and conditions regarding confidentiality
and operation of the Hotel), and Management Company, to the extent sufficient
Working Capital exists, shall at all times comply with such Agreement and advise
and assist Owner in the performance and discharge of its covenants and
obligations thereunder. Owner shall comply with any capital expenditure, product
improvement plan, operating standard changes or other requirements imposed from
time to time by the Franchisor under the Franchise Agreement, the cost of which
shall be paid in accordance with this Agreement. In the event of any conflicts
between any provisions of this Agreement and the Franchise Agreement, the
provisions of
26
the Franchise Agreement shall control. Owner acknowledges that Franchisor shall
have the right to communicate directly with Management Company regarding
day-to-day operation of the Hotel. Owner shall not enter into any amendment,
restatement or renewal of the Franchise Agreement which would in any event have
an adverse impact on the amount of fees to be paid to Management Company under
this Agreement without Management Company's prior written approval, which
approval may be withheld in Management Company's sole discretion. [insert
additional provisions that applicable Franchise Agreement may require to be
included]
ARTICLE XI
POSSESSION AND USE OF HOTEL
11.01 Use
A. Owner covenants that, so long as an Event of Default by Management
Company has not occurred and Owner has not exercised any right to terminate this
Agreement (under any Section of this Agreement), Management Company shall have
the right to quietly hold, occupy and enjoy the Hotel throughout the term hereof
free from hindrance or ejection by Owner or other party claiming under, through
or by right of Owner, except as may otherwise be specified in this Agreement.
B. Management Company shall manage and operate the Hotel in accordance with
the Franchise Agreement and shall in addition comply with and abide by all
applicable laws, ordinances, and regulations.
C. Provided that Owner shall first have employed a replacement manager for
the Hotel satisfactory to and approved by the "Franchisor" under the Franchise
Agreement, Management Company shall have the option to terminate this Agreement
at any time upon sixty (60) days' written notice to Owner in the event of a
withdrawal or revocation, by any lawful governing body having jurisdiction
thereof, of any material license or permit required for Management Company's
performance hereunder, if such withdrawal or revocation is due to circumstances
beyond Management Company's control or not otherwise caused by the gross
negligence or willful misconduct of Management Company, such termination to be
effective as of the date such replacement manager has commenced management of
the Hotel pursuant to its agreement with Owner.
11.02 Owner's Right to Inspect
Owner or its agent shall have access to the Hotel at any and all reasonable
times for the purpose of protecting the same against fire or other casualty,
prevention of damage to the Hotel, inspection, making repairs, or showing the
Hotel to prospective purchasers, tenants or mortgagees. Owner shall provide at
least 24 hours' notice to Management Company prior to exercising its rights
under this Section 11.02, except in the event of an emergency.
27
11.03 Group Services
A. Owner shall reimburse Management Company for certain other services
("Group Services") as may from time to time be provided to the Hotel by
Management Company or Management Company's Affiliates more efficiently on a
group rather than on an individual basis. The Group Services shall include,
without limitation, the following: (a) marketing, advertising and promotion; (b)
payroll processing, accounting and MIS support services; (c) recruiting,
training, career development and relocation in accordance with Management
Company's or its Affiliates' relocation plan; (d) employee benefits
administration; (e) engineering and risk management; (f) information technology;
(g) legal support (such as license and permit coordination and standardized
contracts); (h) purchasing arising out of ordinary hotel operations; and (i)
such other additional services as are or may be, from time to time, furnished
for the benefit of Management Company's hotels or in substitution for services
now performed at Management Company's individual hotels which may be more
efficiently performed on a group basis.
B. Group Services shall consist of the actual cost of the services without
xxxx-up or profit to Management Company or any Affiliates, but shall include:
(a) salary and employee benefit costs, (b) cost of equipment used in performing
Group Services, and (c) overhead costs, reasonably allocated thereto of any
office providing Group Services. Costs and expenses incurred in providing Group
Services shall be allocated equitably across hotel properties that Management
Company manages that are provided Group Services, to the extent necessary and
appropriate, and in the manner described in the Annual Operating Projection; the
costs and expenses for Group Services shall not exceed the amounts for such
services set forth in the Annual Operating Projection. Costs of Group Services
shall be Deductions. In addition, if equipment is installed and maintained at
the Hotel in connection with the rendition of any Group Services, all costs
thereof will be charged to the operation of the Hotel, as determined by
Management Company in good faith and consistent with GAAP and the Uniform System
of Accounts.
C. In no event shall Management Company's Affiliates be deemed a party to
this Agreement or responsible in any way for Management Company's obligations
pursuant to this Agreement by virtue of providing any services described in this
Agreement (including, without limitation, Group Services) to Management Company
and Owner reimbursing Management Company for the expenses incurred in connection
therewith.
ARTICLE XII
INSURANCE
12.01 Property and Operational Insurance
A. Management Company shall, commencing with the Management Commencement
Date and continuing throughout the term of this Agreement, procure and maintain,
as a Deduction, with insurance companies reasonably acceptable to Owner or by
legally qualifying itself as a self insurer, a minimum of the following
insurance to the extent reasonably commercially available:
28
1. Insurance on the Hotel (including contents) against loss or damage
by fire, lightning and all other risks covered by the usual standard extended
coverage endorsements, with deductible limits approved by Owner, in an amount
not less than ninety percent (90%) of the replacement cost thereof (Management
Company acknowledges that Owner may require such insurance to be in an amount up
to one hundred percent (100%) of replacement cost);
2. Insurance against loss or damage from explosion of boilers,
pressure vessels, pressure pipes and sprinklers, to the extent applicable,
installed in the Hotel;
3. Insurance on the Hotel (including contents) against loss or damage
by earth movement, with deductible limits approved by Owner, in an amount to be
reasonably determined by Owner consistent with local market conditions;
4. Business interruption insurance covering loss of profits and
necessary continuing expenses for interruptions caused by any occurrence covered
by the insurance referred to in Section 12.01 A1, A2, and A3, of a type and in
amounts and with such deductible limits as are approved by Owner;
5. Workers' compensation and employer's liability insurance as may be
required under applicable laws and employment-related practices insurance
covering all of Management Company's employees at the Hotel in each case, with
such deductible limits as are approved by Owner;
6. Fidelity bonds, in amounts and with deductible limits approved by
Owner, covering Management Company's employees in job classifications which
Owner reasonably requests be bonded, and comprehensive crime insurance to the
extent that Management Company and Owner mutually agree it is necessary for the
Hotel;
7. Comprehensive General Public Liability insurance (including
protective liability coverage on operations of independent contractors engaged
in construction, operation or management, blanket contractual liability
insurance, liquor law legal liability insurance, products liability insurance,
and garage keeper's liability insurance), on an "occurrence" basis for the
benefit of Owner and Management Company against claims for "personal injury"
liability, including, without limitation, bodily injury, death, or property
damage liability, with a limit of not less than Twenty Five Million Dollars
($25,000,000) in the event of "personal injury" to any number of persons or
damage to property arising out of any one occurrence; such insurance, which may
be furnished under a "primary policy" (which shall include an aggregate per
location endorsement) and an "umbrella" policy or policies, shall also include:
(i) coverage against liability for bodily injuries or property damage arising
out of the use by or on behalf of Owner or Management Company of any owned,
non-owned, or hired automotive equipment for a limit not less than that
specified above, and (ii) if applicable, garage keeper's legal liability
insurance in the amount sufficient to prevent Owner from becoming a co-insurer;
29
8. Crime insurance and errors and omissions insurance insuring Owner
against intentional or negligent acts or omissions of Management Company or its
employees, such insurance to be in such amounts, with such carriers, and under
such policies, as may from time to time be requested and approved by Owner; and
9. Such other insurance in amounts as Management Company and Owner, in
their reasonable judgment, mutually deem advisable for protection against
claims, liabilities and losses arising out of or connected with the operation of
the Hotel.
12.02 General Insurance Provisions
All policies of insurance required under Section 12.01, Paragraphs 1-4
shall be carried in the name of Management Company, Owner and the Qualified
Lender; and losses thereunder shall be payable to the parties as their
respective interests may appear. All insurance described in Section 12.01,
Paragraphs 6-8 shall name Owner as an additional insured.
12.03 Coverage
All insurance described in Section 12.01 may be obtained by Management
Company by endorsement or equivalent means under its blanket insurance policies,
provided that such blanket policies are satisfactory to and approved by Owner.
Management Company may self insure or otherwise retain such risks or portions
thereof as it does with respect to other similar hotels it owns, leases or
manages.
12.04 Cost and Expense
A. Insurance premiums and any costs or expenses with respect to the
insurance described in Section 12.01 shall be treated as Deductions in
determining Operating Profit.
B. Upon Termination of this Agreement, an escrow fund in an amount
reasonably acceptable to Management Company shall be established from Gross
Revenues (or, if Gross Revenues are not sufficient, with funds provided by
Owner) to cover the amount of any costs which will eventually have to be paid by
either Owner or Management Company with respect to insurance premiums, if any,
not fully billed and paid for prior to Termination and pending or contingent
claims, including those which arise after such Termination for causes arising
during the term of this Agreement. Upon the final disposition of all such
pending or contingent claims, any unexpended funds remaining in such escrow
shall be paid to Owner.
12.05 Policies and Endorsements
A. The party procuring insurance hereunder shall deliver to the other party
certificates of insurance with respect to all policies so procured, including
existing, additional and renewal policies and, in the case of insurance about to
expire, shall deliver
30
certificates of insurance with respect to the renewal policies not less than ten
(10) days prior to the respective dates of expiration.
B. All policies of insurance provided for under this Article XII shall, to
the extent obtainable, have attached thereto an endorsement that such policy
shall not be canceled, non-renewed or to the extent reasonably commercially
available, materially changed without at least thirty (30) days' prior written
notice to Owner and Management Company.
C. Owner may, at its option, procure and maintain the insurance specified
in Section 12.01, Paragraphs 1 through 4, with insurance companies reasonably
acceptable to Management Company, subject to the following: (i) all such
policies of insurance shall be carried in the name of Owner, with Management
Company as an additional insured, (ii) any property losses thereunder shall be
payable to the respective parties as their interests may appear, and (iii)
premiums for such insurance coverage shall be treated as Deductions, provided
that if the cost of such insurance procured by Owner exceeds the cost of
Management Company's comparable coverage, all such excess costs shall be the
sole responsibility of Owner and shall not be a Deduction. Should Owner exercise
its option to procure the insurance described in this subsection C, Owner hereby
waives its rights of recovery from Management Company and its Affiliates (and
their respective directors, officers, shareholders, agents and employees) for
loss or damage to the Hotel and any resultant interruption of business.
12.06 Indemnification
A. Owner shall indemnify, defend and hold Management Company, Barcelo
Crestline Corporation and their respective directors, officers, shareholders,
employees and agents (collectively, "Management Company Indemnified Parties"),
harmless from and against all claims, causes of action, losses, attorneys' fees
and other costs and expenses (including, but not limited to, liquidated damages,
transfer fees, and termination costs), liabilities and damages (collectively
referred to as "Claims") imposed upon or incurred by or asserted against
Management Company Indemnified Parties under, or on account of, or with respect
to this Agreement arising out of or resulting from: (i) Management Company's due
performance of this Agreement, or (ii) the failure by Owner to provide necessary
funds to the Reserve or make necessary Owner-Funded Capital Expenditures
required under this Agreement or to comply with applicable legal requirements or
any requirements imposed by the Franchisor in accordance with the Franchise
Agreement or necessary to maintain the safety or structural soundness of the
Hotel. Without limiting the generality of the foregoing, Owner shall indemnify,
defend and hold Management Company Indemnified Parties harmless from and against
all Claims imposed upon or incurred by or asserted against Management Company
Indemnified Parties under or with respect to the Franchise Agreement which arise
as a result of: (a) any default by Owner under the terms of this Agreement or
the Franchise Agreement (or related "Owner Agreement") unless such default is a
result of gross negligence or willful misconduct on the part of Management
Company; (b) the transfer by Owner of the Hotel or any interest of Owner in the
Hotel, or (c) the failure by Owner to provide necessary funds to the Reserve or
make necessary Owner-Funded Capital Expenditures required to comply with
applicable legal requirements
31
or any requirements imposed by the Franchisor in accordance with the Franchise
Agreement or necessary to maintain the safety or structural soundness of the
Hotel.
B. Owner shall indemnify, defend and hold Management Company Indemnified
Parties harmless from and against all Claims arising out of or resulting from
all liabilities which accrued (or which stem from events which occurred) prior
to the Management Commencement Date (referred to as "Prior Liabilities"). Any
such Prior Liabilities shall be paid for by Owner (not from Gross Revenues nor
from the Reserve) and shall not be treated as Deductions.
C. Management Company shall indemnify, defend and hold Owner and its
directors, officers, shareholders, employees and agents harmless from and
against all Claims arising out of or resulting from any gross negligence or
willful misconduct on the part of Management Company, its employees or agents.
D. The provisions of this Section 12.06 shall survive Termination of this
Agreement.
ARTICLE XIII
REAL ESTATE AND PROPERTY TAXES
13.01 Impositions
During the term of the Agreement all real estate or ad valorem property
taxes, assessments, inventory and personal property taxes and similar charges on
or relating to the Hotel ("Impositions") following or allocable to the period
following the Management Commencement Date shall be paid by Management Company,
to the extent sufficient Working Capital exists, from Gross Revenues before any
fines, penalties, or interest are added thereto or liens are placed upon the
Hotel, unless payment is in good faith being contested and enforcement thereof
is stayed. Management Company, either in its own name or, if legally required,
in Owner's name, may contest by appropriate proceedings conducted in good faith
and with due diligence the amount, validity or application in whole or in part
of any such Imposition or any lien therefor, and Owner shall have the right to
participate in any such proceedings. In the event Gross Revenues are likely to
be insufficient to pay such Impositions when due, Management Company shall so
advise Owner no later than thirty (30) days prior to the due date of such
Impositions in order to provide Owner sufficient time in which to provide funds
sufficient for the payment of such Impositions. Management Company shall also,
no later than thirty (30) days prior to the date payment is due or three (3)
days following the written request from Owner, furnish Owner with copies of
official tax bills and assessments and evidence of payment or contest thereof.
Any refund or rebate of any Impositions shall be credited to Operating Profit in
the Fiscal Year in which such refund is received. All reasonable costs incurred
in connection with any such negotiations or proceedings shall constitute
Deductions for the year in which they are paid. Notwithstanding the foregoing,
no such contest shall be conducted if it will in any way endanger title to the
Hotel, the land on which the Hotel is located or Owner's
32
interest in the Hotel, or create a cloud on title to any of the foregoing or
constitute a default under any financing secured by the Hotel. Owner shall
within thirty (30) days of receipt of evidence of payment or contest furnish
Management Company with copies of official tax bills and assessments and of
payment or contest thereof. All Impositions shall constitute Deductions from
Gross Revenues in determining Operating Profit provided, however, that any
fines, penalties or interest added thereto to the extent resulting from Owner's
acts or omissions shall be paid by Owner at its sole expense.
13.02 Owner's Responsibility
"Impositions" shall not include the following, all of which shall be paid
solely by Owner, not from Gross Revenues nor from the Reserve: (1) Any income,
excess profits or revenue taxes of Owner or any person, firm or entity as a
partner of Owner; (2) Special assessments imposed because of facilities which
are constructed by or on behalf of the assessing jurisdiction (e.g., roads,
sidewalks, sewers, etc.) which directly benefit the Hotel; (3) "Impact Fees"
which are required of Owner as a condition to the issuance of site plan
approval, zoning variances or building permits; and (4) "Tax-increment
financing" or similar financing whereby the municipality or other taxing
authority has assisted in financing the construction of the Hotel by temporarily
reducing or abating normal Impositions in return for substantially higher levels
of Impositions at later dates.
ARTICLE XIV
HOTEL EMPLOYEES
14.01 Employees
A. Management Company shall have the discretion and obligation to hire,
promote, supervise, direct, train all employees at the Hotel, to fix their terms
of compensation and, generally to establish and maintain policies relating to
employment at the Hotel. All such employees shall at all times be the employees
of Management Company and not of Owner, and Owner shall have no responsibility
or control respecting such employees unless otherwise specified in this
Agreement. No collective bargaining agreements will be signed without Owner's
approval. Management Company shall inform Owner as to the name, background, and
qualifications of the Hotel's General Manager. If Management Company desires to
change the General Manager, Management Company shall endeavor to give Owner at
least forty-five (45) days' prior notice, if feasible, of such change stating
the reasons for such change and informing Owner of the name, background, and
qualifications of any replacement General Manager. Owner shall have the right to
interview the proposed replacement General Manager and shall be given the
opportunity to meet with the appropriate senior executives of Management Company
to discuss the advisability of effectuating any proposed hiring, dismissal or
transfer and any possible alternatives thereto, and any replacement General
Manager shall be subject to Owner's prior approval, which approval shall not be
unreasonably withheld or delayed. Management Company shall consider in good
faith the opinions and requests of Owner with respect to such matters, and, if
Management Company elects not to implement any
33
such request, Management Company shall explain its decision to Owner in
reasonable detail. Owner acknowledges and approves as General
-----------------
Manager of the Hotel as of the Management Commencement Date.
B. Owner shall reimburse Management Company for: (i) salaries, wages and/or
benefits of any officers, directors or employees of Management Company or
Management Company's Affiliates who shall be regularly employed or temporarily
assigned on a full-time basis at the Hotel and (ii) personnel of Management
Company or Management Company's Affiliates not employed at the Hotel providing
information systems support or legal, accounting or tax services to Management
Company in connection with the operation of the Hotel (without duplication of
reimbursements included in Group Services). All costs and expenses described
under this Subsection B shall not exceed the amount for such services set forth
in the approved Annual Operating Projection without the approval of Owner.
C. Management Company and Owner agree to cooperate with each other to
attempt to avoid any disqualification of qualified employee benefit plans of
either of them to the extent such plans may be affected by the provisions of
this Agreement or the services provided hereunder; provided, however, that
neither Management Company nor Owner shall be required to change the terms of
any such plan as part of such cooperation.
D. All personnel employed at the Hotel shall be recruited and trained by
Management Company in a manner consistent with Management Company's practices at
other comparable hotels managed and operated by Management Company. Management
Company shall decide which, if any, of the Hotel's employees or guests shall
reside at the Hotel and shall be permitted to provide gratuitous accommodations,
services, and amenities to its employees and guests in accordance with the usual
practices of the hotel and travel industry, subject to such guidelines as Owner
may from time to time approve.
14.02 Termination
At Termination, other than by reason of an Event of Default by Management
Company hereunder, an escrow fund shall be established from Gross Revenues (or,
if Gross Revenues are not sufficient, with funds provided by Owner) to reimburse
Management Company for all costs and expenses incurred by Management Company
which arise out of either the transfer or the termination of employment of
Management Company's employees at the Hotel, such as reasonable transfer costs,
unemployment compensation, other employee liability costs (including without
limitation costs incurred pursuant to the Worker Adjustment and Retraining
Notification Act of 1990 (as amended, the "WARN Act")) and a reasonable
allowance for severance pay for Executive Employees (as defined below) of the
Hotel who do not continue to be employed with respect to the Hotel and who will
not be transferred to another hotel owned or managed by Management Company. The
amount of such allowance for severance pay shall not exceed an amount equal to
Management Company's then current severance benefit for such terminated
Executive Employees, unless Owner otherwise approves. As used herein, the term
"Executive Employees" shall mean each member of the senior executive staff and
each
34
department head of the Hotel.
14.03 Employee Claims
A. Management Company shall pay from its own funds, and not from Gross
Revenues, for any Employee Claim and for the defense of any Employee Claim
which: (i) is a substantial violation of the standards of responsible labor
relations as generally practiced by prudent owners or operators of similar hotel
properties in the general geographic area of the Hotel, or (ii) is not the
isolated act of individual employees, but rather is a direct result of corporate
policies or systematic action of Management Company which either encourage or
fail to discourage such conduct. In addition, Management Company shall
indemnify, defend and hold harmless Owner from and against any fines or
judgments arising out of such conduct, and all litigation expenses (including
reasonable attorneys' fees and expenses) incurred in connection therewith. Any
dispute between Owner and Management Company as to whether or not certain
conduct by Management Company is not in accordance with the aforesaid standards
shall be resolved by arbitration.
ARTICLE XV
DAMAGE AND CONDEMNATION
15.01 Damage and Repair
A. If, during the term hereof, the Hotel is damaged or destroyed by fire,
casualty, or other cause, Owner shall, with all reasonable diligence, to the
extent that proceeds from the insurance described in Section 12.01 are available
(subject to the provisions of any Mortgage encumbering the Hotel) for such
purpose, repair or replace the damaged or destroyed portion of the Hotel to
substantially the same condition as existed previously; provided that Owner
shall have no obligation to repair or replace the damaged or destroyed portion
of the Hotel if: (i) such damage, destruction or casualty occurs within the two
(2) years of the Initial Term or any Renewal Term, (ii) such damage, destruction
or casualty is in excess of sixty percent (60%) of the "fair market value" of
the Hotel as agreed by the parties, and (iii) Owner elects not to rebuild the
Hotel. In the event that the conditions set forth in (i), (ii), and (iii) of the
preceding sentence are satisfied, Owner may terminate this Agreement provided
that all amounts due to Management Company hereunder in connection with such
termination shall be paid by Owner (excluding any management termination fee
payment).
B. In the event damage or destruction to the Hotel from any cause
materially and adversely affects the operation of the Hotel and Owner fails to
timely (subject to unreasonable delays caused by Management Company, including
unreasonable delays in adjusting the insurance claim with the carriers which
participate in Management Company's blanket insurance program) commence and
complete the repairing, rebuilding or replacement of the same so that the Hotel
shall be substantially the same as it was prior to such damage or destruction,
Management Company may, at its option, elect to terminate this Agreement upon
ninety (90) days' written notice. Additionally, if the Franchise
35
Agreement is terminated due to Owner's failure to repair and restore the Hotel,
this Agreement shall terminate, effective upon the termination of the Franchise
Agreement.
15.02 Condemnation
A. If all or substantially all of the Hotel is taken in any eminent domain,
condemnation, compulsory acquisition, or similar proceeding by any competent
authority for any public or quasi-public use or purpose, this Agreement shall
terminate as of the date Management Company ceases to have physical possession
of the Hotel. Any award for such taking or condemnation is to be paid to Owner,
provided that Management Company may advance and collect any claims to which it
may be entitled as a result of such taking in accordance with the terms of
Section 15.02 C.
B. In the event a portion of the Hotel shall be taken by the events
described in Section 15.02 A or the entire Hotel is affected on a temporary
basis but the result is not to make it unreasonable to continue to operate the
Hotel, this Agreement shall not terminate. However, so much of any award for any
such partial or temporary taking or condemnation shall be made available by
Owner to the extent necessary to render the Hotel equivalent to its condition
prior to such event, and the balance of such award, if any, shall be paid over
to Owner.
C. All condemnation awards or payments in lieu thereof for the value of the
land and improvements so taken shall be the sole and exclusive property of
Owner. Management Company may make a claim to the condemning authority for its
loss of business arising from the events described in this Section 15.02, but
only to the extent that such claim in no way prejudices, diminishes, reduces, or
impairs Owner's rights under the preceding sentence.
ARTICLE XVI
DEFAULTS
16.01 Default
Each of the following shall constitute a "Default," to the extent permitted
by applicable law:
A. The appointment of a receiver, trustee, or custodian for all or any
substantial part of the property of Management Company or Owner, as the case may
be, if such appointment is not set aside or vacated within sixty (60) days.
B. The commencement by Management Company or Owner, as the case may be, of
any voluntary case or proceeding under present or future federal bankruptcy laws
or under any other bankruptcy, insolvency, or other laws respecting debtor's
rights.
C. The making of a general assignment by Management Company or Owner, as
36
the case may be, for the benefit of its creditors.
D. The entry against Management Company or Owner, as the case may be, or
any "order for relief" or other judgment or decree by any court of competent
jurisdiction in any involuntary proceeding against Management Company or Owner,
as the case may be, under any present or future federal bankruptcy laws or under
any other bankruptcy, insolvency, or other laws respecting debtor's rights, if
such order, judgment, or decree continues unstayed and in effect for a period of
sixty (60) consecutive days.
E. The failure of Management Company or Owner, as the case may be, to make
any payment to be made in accordance with the terms hereof within five (5)
business days after written notice, when such payment is due and payable.
F. Receipt by the Franchisee of any notice from the Franchisor claiming or
alleging any material default under the Franchise Agreement, if such default is
due to any act or omission of Owner or Management Company, as the case may be,
and is not cured, to the satisfaction of the Franchisor within fifteen (15) days
following the Franchisee's receipt of such notice (or, if such default cannot
reasonably be cured within fifteen (15) days and Owner or Management Company, as
the case may be, immediately proceeds with due diligence to cure such default,
then within such additional period of time as is reasonably required for such
cure, taking into account the termination provisions of the Franchise Agreement)
and, in the case of a material default by Owner which has not been cured within
the applicable cure period, such material default has a material adverse affect
on Management Company's ability to operate the Hotel or has an adverse impact on
the amount of the fees paid to Management Company under this Agreement.
G. Termination of the Franchise Agreement by the Franchisor for a default
thereunder due to any act or omission of Owner or Management Company, as the
case may be, unless, Management Company and Owner have agreed upon a comparable
replacement franchise agreement which does not have an adverse impact on the
amount of the fees paid to Management Company under this Agreement and
Management Company incurs no transition costs in connection with such
replacement.
H. The failure of Owner to provide to Management Company sufficient Working
Capital to operate the Hotel as required by Article VII within three (3) days
after written notice from Management Company of the need for such Working
Capital.
I. The failure of Management Company or Owner, as the case may be, to
perform, keep or fulfill any of the other covenants, undertakings, obligations,
or conditions set forth in this Agreement, and the continuance of such default
for a period of thirty (30) days after notice of said failure, or if such
default cannot be reasonably cured within said 30-day time period, the failure
of the defaulting party to commence the cure of such Default within said 30-day
period or thereafter the failure to diligently pursue such efforts to
completion.
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16.02 Event of Default
Upon the occurrence of any Default by either party (referred to as the
"defaulting party") under Section 16.01 A, B, C or D, such Default shall
immediately and automatically, without the necessity of any notice to the
defaulting party, constitute an "Event of Default" under this Agreement. Upon
the occurrence of any Default by a defaulting party under Section 16.01 E, F, G,
H, or I, such Default shall constitute an "Event of Default" under this
Agreement if the defaulting party fails to cure such Default within the
respective cure or payment period (as specified in the applicable Paragraph)
after written notice from the non-defaulting party specifying such Default and
demanding such cure or payment; provided, however, that if a Default under
Section 16.01 H is such that it cannot reasonably be cured within said 30-day
period, an "Event of Default" shall then occur if the defaulting party fails to
commence the cure of such Default within the specified 30-day period or
thereafter fails to diligently pursue such efforts to completion.
16.03 Remedies upon Event of Default
Upon the occurrence of an Event of Default, the non-defaulting party shall
have the right to pursue any one or more of the following courses of action: (i)
in the event of a material breach by the defaulting party of its obligations
under this Agreement, to terminate this Agreement by written notice to the
defaulting party, which Termination shall be effective as of the effective date
which is set forth in said notice (provided that said effective date shall be at
least thirty (30) days after the date of said notice; or, if the defaulting
party is the employer of all or a substantial portion of the employees at the
Hotel, the 30-day period shall be extended to such period of time as may be
necessary under applicable law pertaining to termination of employment); and
(ii) to institute any and all proceedings permitted by law or equity, including,
without limitation, actions for specific performance and/or damages. Upon the
occurrence of a Default by either party under Section 16.01 E, the amount owed
to the non-defaulting party shall accrue interest, at the rate described in
Section 22.03, from and after the date on which such payment was originally due
to the non-defaulting party. The rights granted hereunder shall not be in
substitution for, but shall be in addition to, any and all rights and remedies
available to the non-defaulting party by reason of applicable provisions of law
or equity.
ARTICLE XVII
PROPRIETARY MARKS; INTELLECTUAL PROPERTY
17.01 Proprietary Marks
During the term of this Agreement, the name "Crestline" or "Barcelo
Crestline," whether used alone or in connection with other another word(s), and
all proprietary marks (being all present and future trademarks, trade names,
symbols, logos, insignia, service marks, and the like) of Management Company or
any one of its Affiliates, whether or not registered ("Proprietary Marks") shall
in all events remain the exclusive property of Management Company and its
Affiliates. Owner shall have no right to use any Proprietary Xxxx of Management
Company or any one of its Affiliates, except during the term of this
38
Agreement to have signage installed using any Proprietary Xxxx of Management
Company or any one of its Affiliates in conformance with the specifications
provided by Management Company. Upon Termination, any use of a Proprietary Xxxx
by Owner under this Agreement shall immediately cease. Upon Termination,
Management Company shall have the option to purchase, at their then book value,
any items of the Hotel's Inventories and Fixed Asset Supplies as may be marked
with a Proprietary Xxxx of Management Company or any one of its Affiliates. In
the event Management Company does not exercise such option, Owner agrees that it
will use any such items not so purchased exclusively in connection with Hotel
until they are consumed. During the terms of this Agreement, the name
"Sandalwood" whether used alone or in connection with other another word(s), and
all proprietary marks of Owner shall in all events remain the exclusive property
of Owner and its Affiliates. Management Company shall have no right to use any
proprietary xxxx of Owner or its Affiliates, except during the term of this
Agreement to have signage installed using any proprietary xxxx of Owner or its
Affiliates in conformance with the specifications provided by Owner. Upon
Termination, any use of a proprietary xxxx of Owner or its Affiliates by
Management Company under this Agreement shall immediately cease.
17.02 Computer Software and Equipment
All "Software" (meaning all computer software and accompanying
documentation, other than software which is commercially available, which are
used by Management Company in connection with the property management system,
any reservation system and all future electronic systems developed by Management
Company for use in the Hotel) is and shall remain the exclusive property of
Management Company or any one of its Affiliates (or the licensor of such
Software, as the case may be), and Owner shall have no right to use, or to copy,
any Software. Upon Termination, Management Company shall have the right to
remove from the Hotel, without compensation to Owner, all Software, and any
computer equipment which is utilized as part of a centralized property
management system or is otherwise considered proprietary by Management Company.
If any of such computer equipment is owned by Owner, Management Company shall
reimburse Owner for previous expenditures made by Owner for the purchase of such
equipment, subject to a reasonable allowance for depreciation.
17.03 Intellectual Property
All "Intellectual Property" (meaning all Software and manuals, brochures
and directives issued by Management Company to its employees at the Hotel
regarding procedures and techniques to be used in operating the Hotel) shall at
all times be proprietary to Management Company or its Affiliates, and shall be
the exclusive property of Management Company or its Affiliates. Upon
Termination, all Intellectual Property shall be removed from the Hotel by
Management Company, without compensation to Owner.
ARTICLE XVIII
WAIVER AND INVALIDITY
18.01 Waiver
39
The failure of either party to insist upon strict performance of any of the
terms or provisions of this Agreement, or to exercise any option, right or
remedy herein contained, shall not be construed as a waiver or as a
relinquishment for the future of such term, provision, option, right or remedy,
but the same shall continue and remain in full force and effect. No waiver by
either party of any term or provision hereof shall be deemed to have been made
unless expressed in writing and signed by such party.
18.02 Partial Invalidity
In the event that any portion of this Agreement shall be declared invalid
by order, decree or judgment of a court, this Agreement shall be construed as if
such portion had not been inserted herein except when such construction would
operate as an undue hardship to Management Company or Owner or constitute a
substantial deviation from the general intent and purpose of said parties as
reflected in this Agreement.
ARTICLE XIX
ASSIGNMENT
19.01 Assignment by Management Company and Owner
A. Management Company shall not assign this Agreement, or delegate any of
its responsibilities hereunder, without the prior written consent of Owner;
provided, however, that Management Company, shall have the right, without such
consent, to assign its interest in this Agreement to any of its Affiliates, and
any such Affiliate shall be deemed to be the Management Company for purposes of
this Agreement. Management Company shall be relieved of all further obligations
hereunder if such Affiliate has substantially similar financial resources and
liquidity as Management Company and the expertise to perform the obligations of
Management Company hereunder.
B. Owner shall not assign this Agreement, without the prior written consent
of Management Company; provided, however, that Owner may assign this Agreement
upon notice to Management Company to any Affiliate of Owner but only if such
Affiliate has substantially similar financial resources and liquidity as Owner
and Owner has obtained any necessary Franchisor consent; and upon such
assignment and assumption of this Agreement by the assignee, Owner shall be
relieved of all further liability or obligation hereunder.
C. Notwithstanding any provision contained in this Agreement, (i) the
collateral assignment of this Agreement by Owner as security for any Mortgage
securing a Qualified Loan or (ii) the transfer of this Agreement in connection
with a merger or consolidation or a sale of all or substantially all of the
assets of either party (provided that (x) if such transfer is by Owner, the
provisions of Article XX shall be complied with, and (y) if such transfer is by
Management Company, such transfer is being done as part of a merger or
consolidation or a sale of all or substantially all of the business which
consists of Management
40
Company's managed hotels), is permitted without the consent of the other party.
D. If either party consents to an assignment of this Agreement by the
other, no further assignment shall be made without the express consent in
writing of such party, unless such assignment may otherwise be made without such
consent pursuant to the terms of this Agreement.
E. An assignment (either voluntarily or by operation of law) by either
party of its interest in this Agreement shall not relieve either party from its
obligations under this Agreement which accrued prior to the date of such
assignment; such assigning party shall be relieved of such obligations accruing
after such date, if the assignment complies with this Article XIX and if
Management Company or Owner, as the case may be, has received an assumption
agreement executed by the assignee.
ARTICLE XX
TERMINATION OF AGREEMENT UPON SALE, DEMOLITION, OR FORECLOSURE
20.01 Sale of the Hotel
A. Owner shall not enter into any Sale of the Hotel to any individual or
entity which (i) does not have sufficient financial resources and liquidity to
fulfill Owner's obligations under this Agreement; provided that any individual
or entity with substantially similar financial resources and liquidity as Owner
shall be deemed to be sufficient for purposes of this Section 20.01 A, (ii) is
in control of or controlled by persons who have been convicted of felonies
involving moral turpitude in any state or federal court, or (iii) is engaged in
the business of operating or managing (as distinguished from owning) two
thousand (2,000) or more guestrooms of a recognized branded hotel chain or
chains in competition with Management Company. If Owner enters into an agreement
for the Sale of the Hotel to a purchaser or tenant that violates the provisions
of this Section 20.01 A and Management Company has notified Owner of such
non-compliance, Owner shall be deemed to be in Default hereunder.
B. If Owner receives a bona fide written offer to enter into a Sale of the
Hotel, Owner shall give written notice thereof to Management Company, stating
the name of the prospective purchaser or tenant. Such notice shall include
appropriate information relating to such prospective purchaser or tenant
demonstrating compliance with Section 20.01 A. Concurrently with the
finalization of such Sale of the Hotel, the purchaser or tenant shall by
appropriate instrument reasonably satisfactory to Management Company, assume all
of Owner's obligations hereunder. An executed copy of such assumption agreement
shall be delivered to Management Company at the closing or consummation of such
Sale of the Hotel.
C. No Sale of the Hotel shall reduce or otherwise affect: (a) the current
level of Working Capital; (b) the current amount deposited in the Reserve; or
(c) any of the operating accounts maintained by Management Company pursuant to
this Agreement. If,
41
in connection with any such Sale of the Hotel, the selling Owner intends to
withdraw, for its own use, any of the cash deposits described in the preceding
sentence, the selling Owner must obtain the contractual obligation of the new
Owner to replenish those deposits (in identical amounts) simultaneously with
such withdrawal. The selling Owner is hereby contractually obligated to
Management Company to ensure that such replenishment in fact occurs. The
obligations described in this Section 20.01 C shall survive the Sale of the
Hotel and Termination of this Agreement.
D. Notwithstanding any provision in this Agreement to the contrary, Owner
shall have the right to terminate this Agreement upon any Sale of the Hotel
occurring on or after the passage of sixty (60) Accounting Periods after the
Management Commencement Date, provided that Owner: (i) provides at least thirty
(30) days' prior notice to Management Company, and (ii) remits to Management
Company payment of the applicable Sale Termination Fee simultaneously with the
Termination of this Agreement.
20.02 Termination upon Demolition or Foreclosure
A. Owner may, by written notice to Management Company, terminate this
Agreement upon the demolition of the Hotel, such Termination to be effective
upon the expiration of ninety (90) days following Management Company's receipt
of such notice from Owner. Any such notice shall contain sufficient information
to permit Management Company to comply with any required notices to Hotel
employees under federal or state laws, including, without limitation, the WARN
Act.
B. Management Company shall have the right to terminate this Agreement (and
pursue any remedies it may have hereunder), on thirty (30) days' written notice,
if title to or possession of the Hotel is transferred by judicial or
administrative process (including, without limitation, a foreclosure, or a sale
pursuant to an order of a bankruptcy court, or a sale by a court-appointed
receiver) to an individual or entity which would not qualify as a permitted
transferee under Section 20.01 A, regardless of whether or not such transfer is
the voluntary action of the transferring Owner, or whether (under applicable
law) the Owner is in fact the transferor; provided, however, that Management
Company shall not have the right to so terminate this Agreement based on the
assertion that a Qualified Lender fails to so qualify as a permitted transferee
under Section 20.01 A.
ARTICLE XXI
MANAGEMENT COMPANY CONDITIONS
21.01 Conditions upon Management Company's Obligations
The obligations of Management Company hereunder shall be conditioned upon
the following:
A. Receipt of all licenses, permits, decrees, acts, orders and all other
approvals necessary for the management and operation of the Hotel.
42
B. The provision by Owner of the Working Capital described in Article VII.
ARTICLE XXII
MISCELLANEOUS
22.01 Right to Make Agreement
Each party warrants, with respect to itself, that neither the execution of
this Agreement nor the finalization of the transactions contemplated hereby
shall violate any provisions of law or judgment, writ, injunction, order or
decree of any court or governmental authority having jurisdiction over it;
result in or constitute a breach or default under any indenture, contract, other
commitment or restriction to which it is a party or by which it is bound; or
require any consent, vote or approval which has not been taken, or at the time
of the transaction involved shall not have been given or taken. Each party
covenants that it has and will continue to have throughout the term of this
Agreement and any extensions thereof, the full right to enter into this
Agreement and perform its obligations hereunder.
22.02 Agency
The relationship of Owner and Management Company shall be that of principal
and agent. Nothing contained in this Agreement shall be construed to create a
partnership or joint venture between them or their successors in interest.
Neither party shall borrow money in the name of or pledge the credit of the
other.
22.03 Failure to Perform
If Management Company or Owner at any time fails to make any payments as
specified or required hereunder or fails to perform any other act required on
its part to be made or performed hereunder without limitation, then the other
party after thirty (30) days' written notice to the defaulting party may (but
shall not be obligated to) pay any such delinquent amount or perform any such
other act on the defaulting party's part. Any sums thus paid and all costs and
expenses incurred in connection with the making of such payment or the proper
performance of any such act, together with interest thereon at the lesser of (i)
the interest rate allowed by the applicable usury laws, or (ii) the Prime Rate
plus three percent (3%), from the date that such payment is made or such costs
and expenses incurred, shall constitute a liquidated amount to be paid by the
defaulting party under this Agreement to the other party on demand.
22.04 Breach of Covenant
Owner and Management Company and/or their respective affiliated companies
shall be entitled, in case of any breach of this Agreement by the other party or
others claiming through it, to injunctive relief and to any other right or
remedy available at law.
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22.05 Consents
Except as herein otherwise provided, whenever in this Agreement the consent
or approval of Owner or Management Company is required, such consent or approval
shall not be unreasonably withheld, conditioned or delayed.
22.06 Applicable Law and Arbitration
This Agreement shall be construed under and shall be governed by the laws
of the State where the Hotel is located. In the event of any dispute,
controversy or claim arising out of, or in connection with, or relating to this
Agreement, or any breach, or alleged breach hereof, the same shall, upon the
request of either Management Company or Owner, be submitted to and settled by
arbitration. The arbiters are specifically directed: that the award be definite,
certain and final as to the matters submitted; and to permit or deny the relief
sought in its entirety without partial allocations between the parties (i.e. the
preceding shall be a so-called "baseball arbitration"). Otherwise, the
arbitration shall be pursuant to, and in accordance with, the commercial rules
then in effect of the American Arbitration Association in , or at
---------------
any other place or any other form of arbitration mutually acceptable to the
parties so involved. Any award rendered shall be final and conclusive upon the
parties and a judgment thereon may be entered in the highest court of the forum,
state or federal, having jurisdiction. The expenses of arbitration shall be
borne equally by the parties to the arbitration, provided that each party shall
pay the cost of its own experts, counsel and evidence.
22.07 Headings
Headings of Articles and Sections are inserted only for convenience and are
in no way to be construed as a limitation on the scope of the particular
Articles or Sections to which they refer.
22.08 Notices
Notices, statements and other communications to be given under the terms of
this Agreement shall be in writing and delivered by hand against receipt or sent
by certified mail, return receipt requested, or by nationally recognized
overnight courier:
To Owner:
with a copy to:
To Management Company:
44
Crestline Hotels & Resorts, Inc.
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
XxXxxx, Xxxxxxxx 00000
Attn: General Counsel
with a copy to:
Crestline Hotels & Resorts, Inc.
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
XxXxxx, Xxxxxxxx 00000
Attn: Chief Executive Officer
or at such other address as from time to time designated by the party receiving
the notice. Any such notice which is properly mailed, as described above, shall
be deemed to have been served as of three (3) business days after said posting.
22.09 Environmental Matters
A. For purposes of this Section 22.09, "hazardous materials" means any
substance or material containing one or more of any of the following: "hazardous
material," "hazardous waste," "hazardous substance," "regulated substance,"
"petroleum," "pollutant," "contaminant," or "asbestos," as such terms are
defined in any applicable environmental law, in such concentration(s) or
amount(s) as may impose clean-up, removal, monitoring or other responsibility
under any applicable environmental law, or which may present a significant risk
of harm to guests, invitees or employees of the Hotel.
B. Regardless of whether or not a given hazardous material is permitted on
the Hotel premises under applicable environmental law, Management Company shall
only bring on the premises such hazardous materials as are needed in the normal
course of business of the Hotel. Management Company shall indemnify, defend and
hold Owner and its Affiliates (and their respective directors, officers,
shareholders, employees and agents) harmless from and against all loss, costs,
liability and damage (including, without limitation, engineers' and attorneys'
fees and expenses, and the cost of litigation) arising from the placing,
discharge, leakage, use or storage of hazardous materials in violation of
applicable environmental laws on the Hotel premises or in the Hotel by
Management Company during the term of this Agreement and shall be responsible
for the payment of any removal or remediation costs resulting therefrom.
C. In the event of the discovery of hazardous materials (as such term may
be defined in any applicable environmental law) on the Hotel premises or in the
Hotel during the term of this Agreement, Owner shall (except to the extent such
removal is Management Company's responsibility pursuant to Section 22.09 B)
promptly remove, if required by applicable environmental law, such hazardous
materials, together with all contaminated soil and containers, and shall
otherwise remedy the problem in accordance with all environmental laws. Owner
shall (except to the extent that the removal of such hazardous materials is
Management Company's responsibility pursuant to Section 22.09 B) indemnify,
defend and hold Management Company and its Affiliates (and their respective
directors, officers, shareholders, employees and agents) harmless from and
against all loss, costs,
45
liability and damage (including, without limitation, engineers' and attorneys'
fees and expenses, and the cost of litigation) arising from the presence of
hazardous materials on the Hotel premises or in the Hotel. All costs and
expenses of the removal of hazardous materials pursuant to this Section 22.09 C,
and of compliance with all environmental laws, and any amounts paid to
Management Company pursuant to the indemnity set forth above, shall be paid by
Owner from its own funds, not as a Deduction nor from the Reserve.
22.10 Equity and Debt Offerings
Neither Owner nor Management Company (as an "issuing party") shall make
reference to the other party (the "non-issuing party) or any of its Affiliates
in any prospectus, private placement memorandum, offering circular or offering
documentation related thereto (collectively referred to as the "Prospectus"),
issued by the issuing party, unless the non-issuing party has received a copy of
all such references. In no event will the non-issuing party be deemed a sponsor
of the offering described in any such Prospectus, nor will it have any
responsibility for the Prospectus, and the Prospectus will so state. The issuing
party shall be entitled to include in the Prospectus an accurate summary of this
Agreement but shall not include any proprietary xxxx of the non-issuing party
without prior written consent of the non-issuing party. The issuing party shall
indemnify, defend and hold the non-issuing party and its Affiliates (and their
respective directors, officers, shareholders, employees and agents) harmless
from and against all loss, costs, liability and damage (including attorneys'
fees and expenses, and the cost of litigation) arising out of any Prospectus or
the offering described therein.
22.11 Intentionally Deleted
22.12 Estoppel Certificates
Owner and Management Company will, at any time and from time to time within
fifteen (15) days of the request of the other party or a Qualified Lender,
execute, acknowledge, and deliver to the other party and such Qualified Lender,
if any, a certificate certifying:
A. That the Agreement is unmodified and in full force and effect (or, if
there have been modifications, that the same is in full force and effect as
modified and stating such modifications);
B. The dates, if any, on which the distributions of Operating Profit have
been paid;
C. Whether there are any existing Defaults by the other party to the
knowledge of the party making such certification, and specifying the nature of
such Defaults, if any; and
D. Such other matters as may be reasonably requested.
46
Any such certificates may be relied upon by any party to whom the
certificate is directed.
22.13 Entire Agreement
This Agreement, together with other writings signed by the parties
expressly stated to be supplementary hereto and together with any instruments to
be executed and delivered pursuant to this Agreement, constitutes the entire
agreement between the parties and supersedes all prior understandings and
writings, and may be changed only by a writing signed by the parties hereto.
This instrument may be executed in counterparts, each of which shall be deemed
an original and all such counterparts together shall constitute one and the same
instrument.
22.14 Limitation on Liability.
Notwithstanding anything to the contrary contained in this Agreement,
Owner's liability under this Agreement shall be limited solely to its interest
in the Hotel and no personal liability or deficiency judgment shall append to
Owner relative to, or as result of, this Agreement.
22.15 Confidentiality.
Owner and Management Company agree that the matters set forth in this
Agreement are strictly confidential and each party will make every effort to
ensure that the information is not disclosed to any outside person or entities
(including any announcements to the press or otherwise pertaining to the
transaction entered into by the parties hereunder without the approval as to
both timing of any such announcement of both Owner and Management Company)
without the prior written consent of the other party except as may be reasonably
necessary to obtain licenses, permits and other public approvals necessary for
the operation of the Hotel, in connection with the Owner's financing of the
Hotel, or the Sale of Hotel. It is understood and agreed that this Section 22.15
is not intended to prohibit or limit disclosure of the matters set forth in this
Section 22.15 by Owner or Management Company (i) to their respective officers,
directors, employees, financial advisors, attorneys, accountants, potential
lenders, consultants and representatives on a need to know basis, (ii) as
required by any governmental agency or any federal or state law or regulation,
or (iii) the extent legally compelled by legal process.
22.16 Affiliates.
Management Company shall be entitled to contract with one or more of its
Affiliates to provide goods and/or services to the Hotel only if the prices
and/or fees paid to any such Affiliates are competitive with the prices and/or
fees currently being paid to reputable and qualified parties providing similar
services which are not Affiliates of Management Company, provided, however, that
in any event Management Company shall be required to obtain Owner's consent
prior to contracting with any of Management Company's Affiliates, which consent
shall not be unreasonable withheld or delayed. In connection with obtaining
47
such consent, Management Company shall provide Owner with underlying
documentation reasonably necessary for Owner to determine whether such prices
and/or fees are competitive with the prices and/or fees currently being paid to
reputable and qualified parties providing similar services which are not
Affiliates of Management Company. In the event that the Annual Operating
Projection includes fees to be paid to any Affiliate for the provision of goods
and services to the Hotel, Management Company shall provide Owner with
underlying documentation reasonably necessary for Owner to determine whether
such prices and/or fees are competitive with the prices and/or fees currently
being paid to reputable and qualified parties providing similar services which
are not Affiliates of Management Company.
22.17 Force Majeure
In the event either party is unable to perform its obligations hereunder due to
an event of Force Majeure, such performance shall be extended for a period of
time reasonably required to complete performance of such obligation(s).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers.
ATTEST: OWNER:
By:
-------------------------------------- ------------------------------------
Assistant Secretary Title:
---------------------------------
ATTEST: MANAGEMENT COMPANY:
CRESTLINE HOTELS & RESORTS, INC.
By:
-------------------------------------- ------------------------------------
Assistant Secretary Title:
---------------------------------
48
Exhibit A to Form of Management Agreement
Legal Description of Hotel Site
49
EXHIBIT B
BARCELO CRESTLINE INFORMATION
Lodging
Barcelo Crestline Corporation (formerly known as Crestline Capital Corporation),
through its subsidiary Crestline Hotels & Resorts, manages over 30 hotels,
resorts and conference and convention centers with over 7,000 rooms in twelve
states and the District of Columbia. Barcelo Crestline is among the 20 largest
independent hotel management companies in the United States. Barcelo Crestline
manages quality properties independently and under such well-regarded brands as
Marriott, Hilton, Sheraton, Renaissance, Holiday Inn, Radisson, Courtyard by
Marriott and Residence Inn.
Barcelo Crestline through its subsidiaries also leases 28 limited-service hotels
and subleases 71 limited-service hotels as well as owns 67% of the Portsmouth
Renaissance and 50% of the Charlotte Downtown Courtyard and 50% of the Stratford
Staybridge Suites.
Barcelo Crestline's senior executives average over 20 years of hospitality
experience with a tradition of managing financially successful hotels.
Industry Relationships
Crestline Hotels & Resorts has long-term relationships with the industry's best
brands and has been a consistent recipient of numerous franchisor awards. These
include awards for revenue maximization, associate satisfaction, product quality
and customer satisfaction.
Crestline Hotels & Resorts Franchisor Awards
Times
Franchisor Award Awarded
------------------------- ----------------------------- -------
Marriott Hotels & Resorts Partnership Circle Award 7
Marriott Hotels & Resorts Revenue Premium Award 5
Marriott Hotels & Resorts Guest Focus Award 5
Holiday Inn Torchbearer Award 1
Hyatt Hotels & Resorts Excellence Through Partnering 1
Marriott Hotels & Resorts Best Opening Award 1
Renaissance Hotels Best Opening Award 1
Renaissance Hotels Guest Focus Award 1
The members of Barcelo Crestline's executive team served in senior management
capacities with Host Marriott and Marriott International prior to Crestline
Capital's December 1998 spin-off from Host Marriott Corporation. Crestline
Capital was subsequently acquired by Barcelo Hotels & Resorts and changed its
name to Barcelo Crestline in June 2002.
EXHIBIT C
STOCK PURCHASE AND RIGHTS AGREEMENT
STOCK PURCHASE AND RIGHTS AGREEMENT
THIS STOCK PURCHASE AND RIGHTS AGREEMENT (this "Agreement") made as of
December 6, 2002, between Sandalwood Lodging Investment Corporation, a Maryland
corporation ("Sandalwood" or the "Company"), and Barcelo Crestline Corporation,
a Maryland corporation, ("Barcelo Crestline" or the "Purchaser").
WHEREAS, the Purchaser, Sandalwood Hospitality Advisors, LLC and the
Company have entered into that certain Right of First Refusal and Services
Agreement dated of even date herewith (the "ROFR Agreement"); and
WHEREAS, the Purchaser has agreed to purchase three million dollars
($3,000,000) of registered common stock of the Company that are registered
pursuant the Company's S-11 registration statement and exhibits that was
initially filed with the Securities and Exchange Commission (the "SEC") on May
24, 2002, as subsequently amended, which registration statement was declared
effective by the SEC on November 6, 2002 (the "Common Stock").
NOW, THEREFORE, for and in consideration of the mutual covenants and
benefits to be derived herefrom, the receipt and sufficiency of which are hereby
acknowledged by each of the parties hereto, the parties hereto agree as follows:
Section 1. Purchase and Sale of Common Stock
a. Purchase of Shares. Subject to the terms and conditions of
this Agreement and in reliance on the representations, warranties and agreements
contained herein, the Purchaser hereby agrees to purchase, and the Company
hereby agrees to sell to the Purchaser the number of whole shares of Common
Stock (the "Purchased Shares") equal to three million dollars ($3,000,000) (the
"Purchase Price") divided by the price per share to the public of common stock
as set forth on the cover of the final prospectus of the registration statement
(the "Price Per Share") of the Company's initial public offering pursuant to
Registration Statement No. 333- 89094 (the "IPO").
b. Deposit to Escrow Account. Upon the satisfaction of the
conditions set forth in Section 2 of this Agreement, within three (3) Business
Days of the day on which the escrow account containing the deposits of third
parties who have committed to purchase shares of the Company contains at least
forty-eight million dollars ($48,000,000) (the "Escrow Account"), or on such
other date as the parties hereto may agree, the Purchaser shall deposit into the
Escrow Account an amount equal to the Purchase Price minus the aggregate amount
of the Barcelo Crestline Advances and the Barcelo Crestline Due Diligence Fee
(together, the "Aggregate Advances") actually paid to Sandalwood or the Advisor
(the "Balance Due").
c. Closing. Within one (1) business day of the Purchaser's
deposit of the Balance Due and the satisfaction of the conditions set out in
Section 2(b) of this Agreement, the Company shall consummate the IPO Initial
Closing and shall deliver or cause to be delivered to the Purchaser certificates
representing the Purchased Shares which shall be validly issued, duly
authorized, fully paid and non-assessable, and free and clear of any Liens. No
fractional shares or scrip representing fractional shares shall be issued by the
Company at the Closing. If the number of Purchased Shares to be issued in
accordance with the calculation set out in Section 1(a) results in a fraction of
a share being issuable, the Company shall pay to the Purchaser an amount equal
to the fraction of the share to be issued multiplied by the Price Per Share.
Section 2. Conditions to Fund and Close.
a. Purchaser's Conditions to Fund. The obligation of the
Purchaser to deposit the Balance Due in the Escrow Account in accordance with
Section 1(b) of this Agreement is subject to the satisfaction as of the date
such deposit is made of the following conditions:
(i) Representations and Warranties; Covenants. The
representations and warranties contained in Section 6 hereof and Section VIII.L.
of the ROFR Agreement shall be true and correct in all material respects on and
as of the date hereof and on and as of the date the Balance Due is deposited in
the Escrow Account with the same effect as though such representations and
warranties had been made on the date the Balance Due was deposited. The Company
shall have performed in all material respects all of the covenants and
agreements required to be performed by the Company hereunder and under the ROFR
Agreement prior to the date on which the Balance Due is deposited in the Escrow
Account.
(ii) Closing Documents. The Company shall have delivered to
the Purchaser the resolutions certified by its Secretary duly adopted by the
Company's board of directors authorizing the execution, delivery and performance
of this Agreement, and the issuance and sale of the Purchased Shares.
(iii) Proceedings. All corporate and other proceedings taken
or required to be taken by the Company in connection with the transactions
contemplated hereby and under the ROFR Agreement to be consummated at or prior
to the date on which the Balance Due is deposited in the Escrow Account and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchaser.
(iv) Escrow Account Balance; Listing. The Company shall have
received deposits for the purchase of at least forty eight million dollars
($48,000,000) of common stock of the Company in the Escrow Account, and shall
have received a conditional commitment to list following the closing of the IPO
on the AMEX or other national stock exchange or over the counter market.
(v) No Breach. There shall be no breach of any material
obligation of the Company under this Agreement or the ROFR Agreement.
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(vi) Registration Statement. The Registration Statement has
been declared effective by the SEC, and no stop order has been issued by the
SEC.
(vii) Filings. All filings required to sell the Purchased
Shares in the IPO have been made with the SEC, the AMEX or other national stock
exchange or over the counter market on which the Company's shares will be
listed.
b. Company's Conditions to Close. The obligation of the Company
to issue and sell the Purchased Shares to the Purchaser in accordance with the
provisions of Section 1(c) of this Agreement at the Closing is subject to the
satisfaction as of the Closing of the following conditions:
(i) Representations and Warranties; Covenants. The
representations and warranties contained in Section 7 hereof and Section VIII.M.
of the ROFR Agreement shall be true and correct in all material respects on and
as of the date hereof and on and as of the Closing with the same effect as
though such representations and warranties had been made on the date of the
Closing. The Purchaser shall have performed in all material respects all of the
covenants and agreements required to be performed by the Purchaser hereunder and
under the ROFR Agreement prior to the Closing.
(ii) Closing Documents. The Purchaser shall have delivered
to the Company the resolutions certified by its Secretary duly adopted by the
Purchaser's board of directors authorizing the execution, delivery and
performance of this Agreement, and the purchase of the Purchased Shares.
(iii) Proceedings. All corporate and other proceedings taken
or required to be taken by the Purchaser in connection with the transactions
contemplated hereby and under the ROFR Agreement to be consummated at or prior
to the Closing and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Company.
(iv) Escrow Account; Listing. The Company shall have
received deposits for the purchase of at least fifty million dollars
($50,000,000) of common stock of the Company in the Escrow Account, and shall
have received a conditional commitment to list following the closing of the IPO
on the AMEX or other national stock exchange or over the counter market.
(v) No Breach. There shall be no breach of any material
obligation of the Purchaser under this Agreement or the ROFR Agreement.
Section 3. Failure to Consummate the IPO. If the Company fails to
consummate the IPO Initial Closing by June 30, 2004, unless the Company elects
to terminate the offering earlier, then the Purchaser shall have no obligation
to deliver the Purchase Price or to otherwise conclude the transaction
contemplated by this Agreement. If the Company fails to consummate the IPO
Initial Closing, the Company shall have no obligation to refund any of the
Aggregate Advances or to convert any portion of the
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Aggregate Advances into Purchased Shares or to otherwise compensate the
Purchaser for the Aggregate Advances.
Section 4. Failure to Purchase the Purchased Shares. If, after all the
conditions to close set out in Section 2(a) of this Agreement have been
fulfilled by the Company or waived by the Purchaser, the Purchaser fails to
deposit the Balance Due in the Escrow Account in accordance with the provisions
of Section 1(b) of this Agreement, the Company may terminate the ROFR Agreement,
and shall have no obligation to refund any of the Aggregate Advances or to
convert any portion of the Aggregate Advances into Purchased Shares or to
otherwise compensate the Purchaser for the Aggregate Advances.
Section 5. Transfer of Purchased Shares.
a. Restriction on Transfers. Other than as a result of a breach
by Sandalwood of this Agreement or the ROFR Agreement and as set out below in
Sections 5(b), (c), and (d), Barcelo Crestline will have no right to sell,
pledge, encumber or otherwise transfer the Purchased Shares.
b. Rights to Transfer. Barcelo Crestline may sell, pledge,
encumber or otherwise transfer any or all of the Purchased Shares after
fulfillment of (i) the Investment Commitment and (ii) trading of Sandalwood's
common stock on AMEX or another national securities exchange or over the counter
market reaches (in the aggregate) during any consecutive ninety day period a
volume that is equal to or greater than six percent (6%) of Sandalwood's average
daily number of total outstanding shares during such consecutive ninety (90) day
period.
c. Failure to Reach Investment Commitment. If the Investment
Commitment is not fulfilled within two (2) years following the IPO Initial
Closing, Barcelo Crestline may transfer the Purchased Shares as follows:
(i) If Sandalwood has not made Qualifying Offers of at least
fifty million dollars ($50,000,000) (calculated as Total Debt and Equity
Invested plus PIP costs) in Qualifying Hotels, Barcelo Crestline may sell any or
all of the Purchased Shares or demand that Sandalwood repurchase any or all of
the Purchased Shares at the Market Price on the day the repurchase demand is
made.
(ii) If Sandalwood has made Qualifying Offers for more than
fifty million dollars ($50,000,000) (calculated as Total Debt and Equity
Invested plus PIP costs) but less than the Investment Commitment in Qualifying
Hotels, Barcelo Crestline may sell the Purchased Shares or demand that
Sandalwood repurchase a pro rata amount of the Purchased Shares equivalent to
the unfulfilled Investment Commitment (e.g., if only one-half of the Investment
Commitment has been fulfilled, Sandalwood would repurchase up to one-half of the
Purchased Shares) at the Market Price on the day the repurchase demand is made.
d. Subsidiaries and Affiliates. The Purchased shares may be
transferred by Barcelo Crestline to any Subsidiary of Barcelo Crestline or to
any Affiliate
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of Barcelo Crestline. For the purposes of this section, the term "Subsidiary"
shall mean any entity in which Barcelo Crestline owns equity representing 51% or
more of the voting power of such entity. The term "Affiliate" means any entity
that directly or indirectly controls or is under common control with Barcelo
Crestline. Any transferee who obtains any shares pursuant to the provisions of
this Section 5(d) shall be subject to the rights and obligations of this
Agreement.
e. Legend. Notwithstanding any provision in this Agreement,
Barcelo Crestline will not sell any Purchased Shares if such sale is restricted
by the legend as set out in Section 10(a) of this Agreement.
f. Failure to Reach Investment Commitment. Following the IPO
Initial Closing, other than the right to enforce the payment of the Acquisition
Services Fee and reimbursement of out-of-pocket expenses relating to the
Acquisition Services, Barcelo Crestline's sole remedy for noncompliance by
Sandalwood with the provisions of Section II of the ROFR Agreement are the
rights provided in Section 5(c) of this Agreement. For the avoidance of doubt
Barcelo Crestline shall have all rights and remedies available at law or in
equity in the event that Sandalwood breaches any other obligation under the ROFR
Agreement or any of its obligations under this Agreement, the Management
Agreement, or the Trademark License Agreement.
g. Legend Removal. The third paragraph of the legend relating to
restrictions contained in Section 10(a) of this Agreement may be removed when
this Agreement is terminated pursuant to its terms or by a valid, final and
binding order of a court or arbitrator. For the avoidance of doubt, the
paragraph of the legend relating to Sandalwood's status as a real estate
investment trust ("REIT") will remain on the Purchased Shares for so long as the
Company qualifies as a REIT under the applicable provisions of the Internal
Revenue Code.
Section 6. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchaser that:
a. Organization, Corporate Power and Licenses. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of Maryland. The Company possesses all requisite corporate power and authority
and all material licenses, permits and authorizations necessary to own and
operate its properties, to carry on its businesses as now conducted and
presently proposed to be conducted as described in the Prospectus and has all
requisite power to execute, deliver, carry out and perform its obligations under
this Agreement.
b. Authorization; No Breach. The execution, delivery and
performance of this Agreement has been duly authorized by the Company. This
Agreement constitutes a valid and binding obligation of the Company, enforceable
in accordance with its terms, except as the enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally or by the principles governing the
availability of equitable remedies. The execution, delivery and performance by
the Company of this Agreement
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and the issuance of the Purchased Shares pursuant hereto, do not and shall not
(A) conflict with or result in a breach of the terms, conditions or provisions
of, (B) constitute a default under, (C) result in the creation of any Lien,
security interest, charge or encumbrance upon the Company's capital stock or
assets pursuant to, (D) give any third party the right to modify, terminate or
accelerate any obligation under, or (E) result in a violation of, require any
authorization, consent, approval, exemption or other action by or notice to any
court or administrative or governmental body pursuant to, the articles of
incorporation or by-laws of the Company or any law, statute, rule or regulation
to which the Company is subject, or any agreement, instrument, order, judgment
or decree to which the Company is subject, presently in effect.
c. IPO. With respect to its initial public offering of shares of
the Company's common stock the Company represents and warrants that:
(i) the initial public offering of the Company's common
stock (the "IPO"), including the offering of the Purchased Shares pursuant to
the Registration Statement in the IPO, complies with the Securities Act and the
rules and regulations promulgated thereto;
(ii) the Registration Statement, including the Prospectus
and each schedule and exhibit comprising a portion thereof, any amendment or
supplement thereto, the marketing materials used to sell the common stock of the
Company in connection with the IPO (the "IPO Marketing Materials") or any
prospectus or preliminary prospectus complies in all respects with the
requirements of the Securities Act and the rules and regulations of the SEC and
does not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and on the date that it is declared effective or filed
with the SEC and used (as applicable), the Registration Statement, including the
Prospectus and each schedule and exhibit comprising a portion thereof, any
amendment or supplement thereto, the IPO Marketing Materials, or any prospectus
or preliminary prospectus, will comply in all respects to the requirements of
the Securities Act and the rules and regulations of the SEC and will not include
any untrue statement of a material fact or omit to state any material fact
required to be to be stated therein or necessary to make the statements therein
not misleading;
(iii) the Prospectus and any amendment or supplement
thereto, the IPO Marketing Materials or any prospectus or preliminary prospectus
complies in all respects with the requirements of the Securities Act and the
rules and regulations of the SEC and does not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading;
(iv) the Purchased Shares are being issued pursuant to the
Registration Statement in the IPO;
(v) the Registration Statement has been declared effective
by the SEC, and no stop order has been issued by the SEC;
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(vi) the Company has complied with all state Blue Sky laws
required for issuance of the Purchased Shares in the IPO; and
(vii) the Company has made all filings required by the SEC
and AMEX or other national market or over the counter market on which the
Company's shares will be listed.
d. REIT Status; Compliance with Law. The Company intends to
qualify as a REIT under the Internal Revenue Code of 1986, as amended, and is
otherwise in compliance with all applicable laws, except where such
non-compliance would not have a material adverse effect on the Company.
e. Validly Issued. The Purchased Shares to be issued pursuant to
this Agreement, when issued and delivered in accordance with the terms hereof,
will be duly and validly issued, fully paid and non-assessable.
Section 7. Representations and Warranties of the Purchaser. The
Purchaser hereby represents, warrants and covenants to the Company as follows:
a. Organization and Corporate Power. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of Maryland. The Purchaser has all requisite power to execute, deliver, carry
out and perform its obligations under this Agreement.
b. Authorization, No Breach. The execution, delivery and
performance of this Agreement has been duly authorized by the Purchaser. This
Agreement constitutes a valid and binding obligation of the Purchaser,
enforceable in accordance with its terms, except as the enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally or by the principles
governing the availability of equitable remedies. The execution, delivery and
performance by the Purchaser of this Agreement and the purchase of the Purchased
Shares pursuant hereto, do not and shall not (A) conflict with or result in a
breach of the terms, conditions or provisions of, (B) constitute a default
under, (C) result in a violation of, (D) require any authorization, consent,
approval, exemption or other action by or notice to any court or administrative
or governmental body or (E) result in a violation of, any authorization,
consent, approval, exemption or other action by or notice to any court or
administrative or governmental body pursuant to, the certificate of
incorporation or by-laws of the Purchaser, or any law, statute, rule or
regulation to which the Purchaser is subject, or any agreement, instrument,
order, judgment or decree to which the Purchaser is subject, presently in
effect.
c. Access to Information. The Purchaser has received and has
reviewed the information, including the risk factors provisions, set out in the
Prospectus.
Section 8. Indemnification.
a. Scope. Each of the Parties (an "Indemnifying Party") shall
indemnify and hold harmless the each other Party and its respective officers,
agents,
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consultants and employees, (each, an "Indemnified Party") to the fullest extent
permitted by law from and against any and all losses, claims, damages, expenses
(including reasonable fees, disbursements and other charges of counsel) or other
liabilities ("Liabilities") arising or resulting from any breach of any
covenant, agreement, representation or warranty of the Indemnifying Party in
this Agreement; provided, however, that if and to the extent that such
indemnification is unenforceable for any reason, the Indemnifying Party shall
make the maximum contribution to the payment and satisfaction of such
indemnified liability which shall be permissible under applicable laws.
b. Procedure. Each Indemnified Party will, promptly after the
receipt of notice of the commencement of any action or other proceeding against
such Indemnified Party in respect of which indemnity may be sought from the
Indemnifying Party, notify the Indemnifying Party in writing of the commencement
thereof. The failure of any Indemnified Party so to notify the Indemnifying
Party of any such action shall not relieve the Indemnifying Party from any
liability which it may have to such Indemnified Party unless, and only to the
extent that, such failure results in the Indemnifying Party's forfeiture of
substantive rights of defenses. In case any such action or other proceeding
shall be brought against any Indemnified Party and it shall notify the
Indemnifying Party of the commencement thereof, the Indemnifying Party shall be
entitled to participate therein and, to the extent that it may wish, to assume
the defense thereof, with counsel reasonably satisfactory to such Indemnified
Party; provided, however, that any Indemnified Party may, at its own expense,
retain separate counsel to participate in such defense. Notwithstanding the
foregoing, in any action or proceeding in which both the Indemnifying Party and
an Indemnified Party is, or is reasonably likely to, become a party, such
Indemnified Party shall have the right to employ separate counsel at the
Indemnifying Party's expense and to control its own defense of such action or
proceeding if, in the opinion of counsel to such Indemnified Party, (a) there
are or may be defenses or counterclaims available to such Indemnified Party or
to other indemnified parties that are different from or additional to those
available to the Indemnifying Party, or (b) any conflict or potential exists
between the Indemnifying Party and such Indemnified Party that would make such
separate representation advisable; provided, however, that in no event shall the
Indemnifying Party be required to pay fees and expenses under this Section 8(b)
for more than one firm of attorneys in any jurisdiction in any one legal action
or group of related legal actions. The Indemnifying Party agrees that it will
not, without the prior written consent of the Indemnified Party, settle,
compromise or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding relating to the matters contemplated hereby (if any
Indemnified Party is a party thereto or has been actually threatened to be made
a party thereto) unless such settlement, compromise or consent includes an
unconditional release of the Indemnified Party and each other Indemnified Party
from all liability arising or that may arise out of such claims, action or
proceeding. The rights accorded to Indemnified Parties hereunder shall be in
addition to any rights that any Indemnified Party may have at common law, by
separate agreement or otherwise.
-8-
Section 9. Definitions.
a. Capitalized terms used in this Agreement shall have the
meaning set out in the ROFR Agreement. If any term is capitalized but not
defined in the ROFR Agreement, it shall have the meaning set out in this Section
9 or as otherwise set out in this Agreement.
"Liens" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Company, any subsidiary or any affiliate,
any filing or agreement to file a financing statement as debtor under the
Uniform Commercial Code or any similar statute other than to reflect ownership
by a third party of property leased to the Company or any Subsidiaries under a
lease which is not in the nature of a conditional sale or title retention
agreement, or any subordination arrangement in favor of another Person (other
than any subordination arising in the ordinary course of business).
"Market Price" means the last bid price for a share of common stock of
the Company at the close of the most recent day in which shares of common stock
of the Company were traded on AMEX or another national securities exchange or
the over-the-counter market. If there is no public trading of the common stock
of the Company, market price shall mean the last price paid by a third party in
an arm's length transaction consummated during the most recent 3 month period
for shares of the Company's common stock provided such transaction was for the
purchase of common stock that did not include any special or preferential rights
or that would provide the acquirer of such shares with control of the Company or
make such acquirer the largest single shareholder of the Company. If no such
sale has taken place, then market price shall mean the price per share
determined by the Company's board of directors in good faith.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
Section 10. Miscellaneous.
a. Legends on Securities. The Purchaser acknowledges that each
instrument or certificate representing the Purchased Shares shall be imprinted
with a legend in substantially the following form:
FOR THE PURPOSE OF MAINTENANCE OF THE CORPORATION'S STATUS AS A REAL
ESTATE INVESTMENT TRUST (A "REIT") UNDER SECTIONS 856 THROUGH 860 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), THESE SECURITIES ARE
SUBJECT TO RESTRICTIONS ON TRANSFER AND OWNERSHIP AS FOLLOWS:
"Except as otherwise provided pursuant to the Articles of
Incorporation of the Corporation, no Person may (i)
Beneficially or Constructively Own Common Stock of the
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Corporation in excess of 9.8% (or such greater percent as
may be determined by the Board of Directors of the
Corporation) of the outstanding Common Stock; (ii)
Beneficially or Constructively Own shares of any series of
Preferred Stock of the Corporation in excess of 9.8% of the
outstanding shares of such series of Preferred Stock; or (iii)
Beneficially or Constructively Own Common Stock or
Preferred Stock (of any class or series) which would result
in the Corporation being "closely held" under Section
856(h) of the Code or which otherwise would cause the
Corporation to fail to qualify as a REIT. Any Person who
has Beneficial or Constructive Ownership, or who Acquires
or attempts to Acquire Beneficial or Constructive
Ownership of Common Stock and/or Preferred Stock in
excess of the above limitations and any Person who
Beneficially or Constructively Owns Excess Shares as a
transferee of Common or Preferred Stock resulting in an
exchange for Excess Shares (as described below)
immediately must notify the Corporation in writing or, in
the event of a proposed or attempted Transfer or
Acquisition or purported change in Beneficial or
Constructive Ownership, must give written notice to the
Corporation at least 15 days prior to the proposed or
attempted transfer, transaction or other event. Any Transfer
or Acquisition of Common Stock and/or Preferred Stock or
other event which results in violation of the ownership or
transfer limitations set forth in the Corporation's Articles of
Incorporation shall be void ab initio and the Purported
Beneficial and Record Transferee shall not have or acquire
any rights in such Common Stock and/or Preferred Stock.
If the transfer and ownership limitations referred to herein
are violated, the Common Stock or Preferred Stock
represented hereby automatically will be exchanged for
Excess Shares to the extent of violation of such limitations,
and such Excess Shares will be held in trust by the
Corporation, all as provided by the Articles of
Incorporation of the Corporation. All defined terms used in
this legend have the meanings identified in the
Corporation's Articles of Incorporation, as the same may be
amended from time to time, a copy of which, including the
restrictions on transfer, will be sent without charge to each
stockholder who so requests."
THESE SECURITIES ARE FURTHER SUBJECT TO RESTRICTIONS ON TRANSFER
PURSUANT TO THE TERMS OF THAT CERTAIN STOCK PURCHASE AND RIGHTS AGREEMENT,
BETWEEN BARCELO CRESTLINE
-10-
CORPORATION AND SANDALWOOD LODGING INVESTMENT CORPORATION, DATED DECEMBER ,
---
2002.
b. Consent to Amendments. No provision of this Agreement may be
amended except with the written consent of the Purchaser and the Company. No
obligation of either party shall be waived, except in writing by the other
party.
c. Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not. Neither party may assign its rights or obligations under this Agreement
without the written consent of the other party, which consent shall not be
unreasonably withheld.
d. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
e. Counterparts. This Agreement may be executed simultaneously in
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together shall constitute one and the
same Agreement.
f. Descriptive Headings Interpretation. The descriptive headings
of this Agreement are inserted for convenience only and do not constitute a
substantive part of this Agreement. The use of the word "including" in this
Agreement shall be by way of example rather than by limitation.
g. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Maryland without giving
effect to any choice of law or conflict of law rules or provisions (whether of
the State of Maryland or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Maryland.
h. Notices. All notices, or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable overnight courier service (charges
prepaid) or five days after deposit in the U.S. Mail to the recipient by
certified or registered mail, return receipt requested and postage prepaid. Such
notices, demands and other communications shall be sent to the Purchaser and to
the Company at the respective addresses indicated in the ROFR Agreement or to
such other address or to the attention of such other person as the recipient
party has specified by prior written notice to the sending party.
-11-
i. Confidentiality. The information contained in this
Agreement is subject to the Confidentiality/Exclusivity provisions contained in
Section VII of the ROFR Agreement.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
-12-
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase and Rights Agreement on the date first written above.
SANDALWOOD LODGING
INVESTMENT CORPORATION
By: /s/ Xxxxxxx Xxxxxx
-------------------------------
Name: Xxxxxxx Xxxxxx
Title: Chief Investment Officer
Sandalwood Lodging
Investment Corporation
BARCELO CRESTLINE CORPORATION
By: /s/ Xxxxx X. Xxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxx
Title: Executive Vice President
-13-
EXHIBIT D
INITIAL CASH FLOW BUDGET
[***]
Confidential treatment has been requested with respect to the portions of the
Agreement indicated with brackets and asterisks [***]. A complete copy of this
Agreement, including the redacted portions, has been separately filed with the
Securities and Exchange Commission.
EXHIBIT E
TRADEMARK LICENSE AGREEMENT
TRADEMARK LICENSE AGREEMENT
THIS TRADEMARK LICENSE AGREEMENT ("Agreement") is entered into as of
December 6, 2002 ("Effective Date") between Barcelo Crestline Corporation,
("Barcelo Crestline") and Sandalwood Lodging Investment Corporation
("Sandalwood").
WHEREAS, Barcelo Crestline and Sandalwood have executed that certain Right
of First Refusal and Services Agreement, dated December 6, 2002 (the "Definitive
Agreement")
WHEREAS, Barcelo Crestline is the owner of all right, title and interest in
and to the registered and/or common law trade marks and trade names in the
United States all of which are listed on Schedule A (collectively, the " Barcelo
Crestline Xxxx"); and
WHEREAS, Barcelo Crestline wishes to grant to Sandalwood a license to use
the Barcelo Crestline Xxxx for the purposes referenced in this Agreement, or in
any amendment to this Agreement during the term of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to this Agreement's
conditions and terms, the parties agree:
1. Term. This Agreement is effective on the date above, and will terminate,
except with respect to those obligations identified in this Agreement as
surviving termination, as provided in this Agreement ("Term").
2. Barcelo Crestline's Rights and Obligations. For its part, Barcelo Crestline:
a. Grants to Sandalwood, a royalty-free, non-exclusive limited license to
use the Barcelo Crestline Xxxx:
(i) on Sandalwood's website;
(ii) to identify Barcelo Crestline as Sandalwood's potential manager
of its hotel properties in its marketing materials in connection
with Sandalwood's initial public offering; and
(iii) in future select trade advertising journals, email newsletters,
powerpoint presentations and direct mail initiatives as
Sandalwood's potential manager of its hotel properties ((i), (ii)
and (iii), together, "Uses").
Sandalwood may not make any other use of the Barcelo Crestline Xxxx and may not
sublicense, assign, sell or otherwise transfer any of its rights under this
Agreement.
b. Will provide to Sandalwood copies of the Barcelo Crestline Xxxx, and any
changes to the Barcelo Crestline Xxxx, throughout the Term.
c. Represents and warrants that it owns all right, title and interest
(including U.S. trademarks) in and to the Barcelo Crestline Xxxx that are
necessary for the licenses granted in this Agreement; that the Barcelo Crestline
Xxxx do not infringe on or violate the U.S. trademark rights of, and to the best
of Barcelo Crestline's knowledge are not infringed on or violated by, any third
party, and that Barcelo Crestline has the full and unrestricted right, power and
authority to enter into and perform under this Agreement.
d. May, from time to time inspect Sandalwood's use of the Barcelo Crestline
Xxxx, requesting Sandalwood to provide it with representative specimens of
advertisements and promotions displaying the Barcelo Crestline Xxxx. Barcelo
Crestline reserves the option to review Sandalwood advertisements and
promotional materials during the Term.
e. May, from time to time, review and evaluate Sandalwood's use of the
Barcelo Crestline Xxxx to determine that the goodwill associated with the
Barcelo Crestline Xxxx is not being adversely affected by Sandalwood's use. If
Sandalwood's use of the Barcelo Crestline Xxxx is inconsistent with this
Agreement, Barcelo Crestline may terminate this Agreement or request
2
Sandalwood to modify such use within a reasonable time.
3. Sandalwood's Rights and Obligations. For its part, Sandalwood:
a. Will use only the Barcelo Crestline Xxxx that Barcelo Crestline provides
unless Barcelo Crestline provides advance written approval for the use of any
other Barcelo Crestline trademark. Sandalwood will not change the Barcelo
Crestline Xxxx in any way without the prior written consent of Barcelo
Crestline. Sandalwood may reproduce the Barcelo Crestline Xxxx on press releases
and promotional material produced in conjunction with the Uses during the Term.
Sandalwood will begin using new versions of the Barcelo Crestline Xxxx promptly
after they are provided.
b. Will, promptly at Barcelo Crestline's request, provide to Barcelo
Crestline descriptions of Sandalwood's use of the Barcelo Crestline Xxxx. When
Barcelo Crestline reasonably requests, Sandalwood will submit for Barcelo
Crestline's review all materials that will bear the Barcelo Crestline Xxxx.
c. Will comply with all laws, rules and regulations that apply to the
promotion, advertisement, marketing or sale of Sandalwood's common stock as part
of its initial public offering in connection with which the Barcelo Crestline
Xxxx are used, and will not knowingly do anything which Barcelo Crestline should
reasonably expect would bring disrepute to or in any manner impair or damage the
Barcelo Crestline Xxxx or the goodwill in the Barcelo Crestline Xxxx.
d. Will, in connection with the use of the Barcelo Crestline Xxxx, apply
the appropriate notice (e.g., "TM" or "(R)") required or permitted to be applied
under applicable law or such other notice as Barcelo Crestline may specify from
time to time in writing.
e. Will, at the request and expense of Barcelo Crestline, cooperate in
preparing, executing and filing all papers necessary to prosecute, procure and
maintain registration and recordation of the Barcelo Crestline Xxxx.
f. Acknowledges that Barcelo Crestline is the owner of the Barcelo
Crestline Xxxx, that all use thereof inures to the sole benefit of Barcelo
Crestline, and that the Barcelo Crestline Xxxx
3
symbolize the valuable goodwill of Barcelo Crestline. Sandalwood acknowledges
that it obtains no ownership rights in the Barcelo Crestline Xxxx by virtue of
the license granted in this Agreement. Sandalwood will never challenge Barcelo
Crestline's ownership of the Barcelo Crestline Xxxx or registrations nor do
anything to impair in any way Barcelo Crestline's rights in the Barcelo
Crestline Xxxx.
g. Will notify Barcelo Crestline of known infringement of any of the
Barcelo Crestline Xxxx and, on request by Barcelo Crestline, will cooperate and
join with Barcelo Crestline in any protest, civil action or proceeding involving
such infringement or other disputes concerning the Barcelo Crestline Xxxx.
Barcelo Crestline in its sole discretion will control the institution,
prosecution or defense of such cases and will bear all related expenses and
retain all awards. Sandalwood will not, without informing Barcelo Crestline in
advance, effect the settlement, defense of, consent to a judgment or decree or
other action with respect to any suit, action or proceeding before any federal,
state, local or foreign court, agency, authority involving any Barcelo Crestline
Xxxx.
4. Intellectual Property Rights. Sandalwood recognizes and agrees that all
right, title and interest (including patents, copy rights, trademarks, trade
secrets and any other proprietary rights) in and to the Barcelo Crestline Xxxx
remain in Barcelo Crestline. Sandalwood acknowledges and agrees that it has no
proprietary rights (other than the licenses granted in this Agreement) in or to
the Barcelo Crestline Xxxx.
5. Consideration. The parties acknowledge the sufficiency of the consideration
exchanged under this Agreement and the Definitive Agreement and do not impose
the obligation of any additional royalty during the Term of this Agreement.
6. Indemnification.
a. Barcelo Crestline agrees to indemnify, defend and hold harmless
Sandalwood from and against any and all claims, liabilities, costs and expenses
(including reasonable attorneys' fees and disbursements) incurred by Sandalwood
by or related to any claim which, if upheld, would constitute Barcelo
Crestline's breach of its representations and warranties under this Agreement.
Notwithstanding the foregoing, Barcelo Crestline will have no liability for any
claim of infringement
4
based on (i) use of the Barcelo Crestline Xxxx in a manner that is inconsistent
with Barcelo Crestline instructions or (ii) the combination or use of the
Barcelo Crestline Xxxx with materials not furnished by Barcelo Crestline. In the
event that any Barcelo Crestline Xxxx are held (or reasonably believed by
Barcelo Crestline) to infringe, Barcelo Crestline will, at its option: (1)
obtain the right to continue using the Barcelo Crestline Xxxx, (2) terminate
Sandalwood's right to use the Barcelo Crestline Xxxx and replace or modify the
Barcelo Crestline Xxxx so as to make it non-infringing, or (3) upon Barcelo
Crestline reasonable determination that the options specified in clauses (1) and
(2) are not commercially feasible, terminate this Agreement.
b. Except for any claims relating to any representations, warranties or
covenants made by Barcelo Crestline in this Agreement, Sandalwood agrees to
indemnify, defend and hold Barcelo Crestline harmless against all claims,
liabilities, costs and expenses (including reasonable attorneys' fees and
disbursements) incurred by Barcelo Crestline arising from or relating to
Sandalwood's breach of its covenants, duties and obligations under this
Agreement.
c. In the event of an actual or potential loss for which indemnification
applies, the indemnified party will notify the indemnifying party in writing
with the facts known; provided that failure to notify the indemnifying party
will not relieve the indemnifying party from liability except to the extent the
indemnifying party was prejudiced by such failure, and in no event shall such
failure relieve the indemnifying party from any other liability which it may
have to the indemnified party. If any claim or action is brought against the
indemnified party, the indemnifying party may participate in and assume the
defense of that action with counsel satisfactory to the indemnified party. After
notice to the indemnified party of the indemnifying party's election to assume
the defense of any claim or action, the indemnifying party shall not be liable
to the indemnified party for any legal expenses that the indemnified party
subsequently incurs in connection with the defense of that action other than the
reasonable costs of investigation and cooperation with the indemnifying party's
defense of the claim or action; provided that the indemnified party may employ
separate counsel and pay for the same. The indemnifying party may not, without
the written consent of the indemnified party, agree to settle any claim, other
than settlement solely for monetary damages for which the indemnifying party
shall be responsible under this Agreement and relating to which the claiming
party provides a complete written release in favor of the indemnified party in
respect of the subject matter of the claim or action, will be applied to or
against the indemnified party.
5
7. Termination.
a. The Agreement will terminate immediately on the termination of the
Definitive Agreement.
b. Either party may terminate this Agreement immediately, with written
notice to the other party, if the other party is adjudged insolvent or declares
or is forced into bankruptcy, is wound up or liquidated, or is involved in a
crime or offense that the terminating party believes is likely to have an
adverse effect on it, its intellectual property or goodwill.
c. Upon termination, Sandalwood shall immediately cease all display and use
of the Barcelo Crestline Xxxx.
d. This Agreement may be terminated by either party upon a material default
by the other party after the non-defaulting party has provided the defaulting
party with 30 days prior written notice specifying the nature of the default and
an opportunity to cure the default during such period. If the default cannot be
cured within 30 days notwithstanding the diligent efforts of the defaulting
party, then the defaulting party will have another 30 days to cure the default.
e. This Agreement may be terminated by Barcelo Crestline in accordance with
the terms of Section 2(e) or Section 6(a)(3).
8. Post Termination Obligations. On Agreement termination:
a. The license granted under this Agreement immediately ceases, and rights
granted revert to Barcelo Crestline.
b. Sandalwood must immediately cease distribution of all materials bearing
Barcelo Crestline Xxxx and provide Barcelo Crestline with a written summary of
Xxxx-bearing inventory, if any, as of the date of termination.
6
c. Sandalwood must immediately refrain from further use of the Barcelo
Crestline Xxxx or any name that is confusingly similar to the Barcelo Crestline
Xxxx;
d. Notwithstanding the foregoing, any terms of this Agreement that would,
by their nature, survive the termination of this Agreement shall so survive
including, without limitation, Sections 2(c), 4 and 6.
9. General.
a. Entire Agreement. This Agreement constitutes the entire agreement
between the parties regarding the Agreement's subject, and supersedes any other
oral and written agreements entered before or at the same time as this Agreement
concerning the Agreement's subject.
b. Modification. The parties may modify this Agreement, but only in writing
signed by both parties.
c. Force Majeure. A party will not be liable to the other should its
performance under this Agreement be prevented, restricted or interfered with by
reason of any circumstance or event beyond the reasonable control of the party
affected; provided, the party so affected uses its best efforts to continue,
resume or substantially resume performance promptly on the end of the
circumstance or event preventing performance.
d. Waiver. Either party may waive an obligation under this Agreement, but
only in writing and for the specific instance for which such waiver was given.
Either party's failure or delay will not operate as a waiver, nor will any
single or partial exercise of any right under this Agreement preclude any other
further exercise of that right or the exercise of any other right.
e. Assignment. Neither party may transfer or assign this agreement or its
Agreement obligations to a third party without the prior written consent of the
other party, not to be unreasonably withheld. If either party assigns this
Agreement, this Agreement's provisions will be binding on and inure to the
benefit of the parties to this Agreement and each party's respective successors
and assigns.
7
f. Governing Law, Litigation. This Agreement will be governed by Maryland
law without regard to Maryland conflicts of laws principles. Each party consents
to the exclusive personal jurisdiction of the Maryland federal and state courts
with respect to any action concerning their respective Agreement obligations. If
either party must enforce this Agreement in a judicial proceeding or appeal, the
prevailing party will be entitled to reimbursements of its litigation costs and
expenses, including reasonable accounting and legal fees, whether incurred in
preparation for, or in contemplation of the filing of any written demand, claim,
action, hearing or proceeding to enforce the Agreement.
g. Severability. If any Agreement provision is held by a court of competent
jurisdiction to be unenforceable, then a court may rewrite that provision with
the least modification necessary to render the provision valid, and the
remaining Agreement provisions will remain in full force and effect.
h. Notice. Both parties will send any notices required under this Agreement
via registered or certified mail, return receipt requested, to the other party
at the addresses included in the Definitive Agreement or to such other address
as a party may indicate by like notice. Any such notice shall be deemed to have
been given (i) if so mailed, as of the close of the fifth business day following
the date so mailed, and (ii) if delivered by courier, on the date received.
i. Headings. Agreement headings are for convenience only and are not
intended to affect the Agreement interpretation.
j. Execution in Counterparts. This Agreement may be signed in one or more
counterparts, all of which are deemed original.
The parties to this Agreement, dated above, each indicate their acceptance
of the terms and conditions of this Agreement by the signature of a duly
authorized and empowered officer.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth above.
8
BARCELO CRESTLINE CORPORATION SANDALWOOD LODGING
INVESTMENT CORPORATION
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxxxxx X.X. Xxxxxx
--------------------------------- --------------------------------
Name: Xxxxx X. Xxxxxx Name: Xxxxxxx X.X. Xxxxxx
Title: Executive Vice President Title: Chief Investment Officer
9
Schedule A
List of Barcelo Crestline Xxxx
Trade Name
Trademark Xxxx
-------------------------------------------------------
XXXX DATE FILED SERIAL NO.
-------------------------------------------------------
Crestline Capital Corporation 12/16/1998 75-606,606
-------------------------------------------------------
-------------------------------------------------------
10
