ADDENDUM TO FEBRUARY 28, 1998 MANAGEMENT AGREEMENT
FOR THE CITY BAR & GRILL
IN THE SAN XXXX XXXXXX HOTEL
As of September 1, 1998, this addendum shall apply to the Management Agreement
dated February 20, 1998 ("the Agreement") by and between the Hilton Hotel
("Hotel") in San Jose, CA and Grill Concepts, Inc. (GCI) in Los Angeles, CA, as
follows:
Section 2.1 in the Agreement shall be replaced with the following:
In return for management of the food and beverage operations as defined in
Section 1 of the Agreement, Manager shall receive a Management Fee calculated in
the manner described in this section below.
Revenue Targets based upon the last four quarters' actual category revenue per
occupied hotel room plus a ten percent growth factor shall be established for
Restaurant and Room Service Food Revenue ("Food Revenue Per Occupied Room
Quarterly Target"), Beverage Revenue ("Beverage Revenue Per Occupied Room
Quarterly Target"), and Room Service Delivery Charge Revenue ("Room Service
Delivery Charge Revenue Per Occupied Room Quarterly Target"). These Revenue
Targets are based on actual revenue and occupied from figures from 2nd Quarter
1997 through 1st Quarter 1998 and are defined in Exhibit A attached and are
calculated for each fiscal quarter.
Expense Targets shall also be established for food cost of sales ("Target Food
Cost of Sales"), beverage cost of sales ("Target Beverage Cost of Sales"), wages
and benefits ("Target Wages and Benefits"), and other expenses ("Target Other
Expenses"). These Expense Targets are defined in Exhibit A attached and are
calculated for each fiscal quarter.
The Management Fee payable to Manager shall be calculated as follows:
1. Compute the Target Total Quarterly Revenue Figure:
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Take the appropriate Food Revenue Per Occupied Room Quarterly Target
multiplied by actual occupied rooms for that quarter. The result is Target
Quarterly Food Revenue.
Take the appropriate Beverage Revenue Per Occupied Room Quarterly Target
multiplied by actual occupied rooms for that quarter. The result is Target
Quarterly Beverage Revenue.
Take the appropriate Room Service Delivery Charge Revenue Per Occupied Room
Quarterly Target multiplied by actual occupied rooms for that quarter. The
result is Target Quarterly Room Service Delivery Charge Revenue.
Add together all of the Target Quarterly Category Revenue Figures to get a
Target Quarterly Total Revenue Figure.
2. Apply Target Cost Figures:
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From the Target Quarterly Total Revenue Figure, subtract the target costs
outlined in the "Targets" section of Exhibit A. The result is the Target
Quarterly Profit for the City Grill and Room Service combined.
3. Computation of Management Fee:
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GCI will earn a fee that will vary depending upon how the Target Quarterly
Profit compares with the Actual Profit after Management Fees as determined
by the profit and loss statement issued by the hotel. The three levels of
fees are described as follow:
Level One:
If the actual profit, as reflected on the Profit and Loss report (including
a base fee equal to 4% of Gross Receipts), is less than the Target
Quarterly Profit for that quarter, then Manager shall be paid a base fee
equal to 4% of Gross Receipts and will not be entitled to any additional
fees.
Level Two:
If the actual profit, as reflected on the Profit and Loss report (including
a base fee equal to 4% of Gross Receipts), is greater than the Target
Quarterly Profit, then Manager will be paid a base fee of 4% of Gross
Receipts plus any actual profit above the Target Quarterly Profit ("Surplus
Profits") until total fees paid to Manager total 8% of Gross Receipts.
Level Three:
If actual profit, as reflected on the Profit and Loss report (including a
base fee equal to 4% of Gross Receipts) and after paying Manager any
Surplus Profits (resulting in total Management Fees equaling 8% of Gross
Receipts) is greater than the Target Quarterly Profit, then the Hotel and
Manager shall split fifty-fifty (50%/50%) the amount above the Target
Profit ("Surplus Profit After Fee").
The Profit and Loss report shall be calculated by the hotel using identical
accounting practices used to generate the 1997 reports. An additional expense
line item shall be added to the Profit and Loss report to reflect the Management
Fee paid to Manager.
Examples of the Management Fee calculation are included in Exhibit B and are for
illustrative purposes only.
Section 2.4 of the Agreement shall be replaced by the following:
Determination of and Payment of Management Fees:
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Manager shall be paid a base fee equal to 4% of Gross Receipts on a monthly
basis. Determination of and payment of any fees above that amount will
occur at the end of each quarter within 30 days of the end of that quarter.
Section 3.1 of the Agreement shall be replaced with the following:
Manager shall oversee the operation of the restaurant and shall employ the
restaurant General Manager. All other employees of the restaurant including
Assistant Managers, Chef and hourly employees shall report to the General
Manager of the restaurant but shall remain employees of Hotel. It is the
intention of Hotel to have salaried managers, including Assistant Managers and
Chef, become employees of GCI as current positions are vacated and refilled as
time progresses, and these positions shall be evaluated on a case by case basis.
Section 3.3 of the Agreement shall be deleted due to the calculation in Section
2.1 of this Addendum.
Section 6.2 of the Agreement shall be deleted.
Section 6.3 of the Agreement shall be replaced with the following:
Either party shall have the right to terminate this agreement with 30 days
written notice, with or without cause. In the event that Hotel shall exercise
this option, Hotel shall reimburse Manager for any and all costs which have not
been recovered through payment of the Management Fee. Additionally, Hotel's use
of any and all Operating Systems shall cease upon termination.
All other sections of the Agreement not addressed by this Addendum remain in
full force and effect.
IN WITNESS WHEREOF, this Management Agreement has been executed as of September
1, 1998.
HILTON HOTEL
By: /s/
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Its: General Manager
GRILL CONCEPTS, INC.
By: /s/
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Its: President
