EXHIBIT 10.7
MANAGEMENT AGREEMENT
between
ENN LEASING COMPANY I, L.L.C.
("Owner")
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.......................................................9
3.02 Subordination of Management Agreement..........................10
3.03 Non-Disturbance Agreement......................................10
ARTICLE IV - PRE-OPENING/TAKEOVER EXPENSES....................................11
ARTICLE V - TERM..............................................................10
5.01 Term...........................................................12
5.02 Actions to be Taken upon Termination...........................12
ARTICLE VI - COMPENSATION OF MANAGEMENT COMPANY
6.01 Management Fees................................................14
6.02 Accounting and Interim Payment.................................14
6.03 Reimbursements to Management Company...........................15
ARTICLE VII - WORKING CAPITAL AND FIXED ASSET SUPPLIES
7.01 Working Capital and Inventories................................15
7.02 Fixed Asset Supplies...........................................15
ARTICLE VIII - MAINTENANCE, REPLACEMENT AND CHANGES
8.01 Routine Repairs and Maintenance................................16
8.02 [Intentionally Deleted]........................................16
8.03 Building Alterations, Improvements, Renewals and
Replacements.........................................................16
8.04 Liens..........................................................16
8.05 Ownership of Replacements......................................17
ARTICLE IX - BOOKKEEPING AND BANK ACCOUNTS
9.01 Books and Records..............................................17
9.02 Hotel Accounts: Expenditures..................................17
9.03 Annual Operating Projection....................................18
9.04 Operating Deficits, Credit.....................................20
9.05 Reduction of Working Capital...................................20
ARTICLE X -LICENSE AGREEMENT..................................................20
ARTICLE XI - POSSESSION AND USE OF HOTEL
11.01 Use...........................................................20
11.02 Owner's Right to Inspect......................................21
11.03 Group Services................................................21
ARTICLE XII - INSURANCE
12.01 Property and Operational Insurance............................22
12.02 General Insurance Provisions..................................24
12.03 Coverage......................................................24
12.04 Cost and Expense..............................................24
12.05 Policies and Endorsements.....................................24
12.06 Indemnification...............................................25
ARTICLE XIII - REAL ESTATE AND PROPERTY TAXES
13.01 Impositions...................................................26
13.02 Owner's Responsibility........................................27
ARTICLE XIV - HOTEL EMPLOYEES
14.01 Employees.....................................................27
14.02 Termination...................................................28
14.03 Employee Claims...............................................29
ARTICLE XV - DAMAGE AND CONDEMNATION
15.01 Damage and Repair.............................................29
15.02 Condemnation..................................................30
ARTICLE XVI - DEFAULTS
16.01 Default.......................................................30
16.02 Event of Default..............................................31
16.03 Remedies upon Event of Default................................32
ARTICLE XVII - PROPRIETARY MARKS; INTELLECTUAL PROPERTY
17.01 Proprietary Marks.............................................32
17.02 Computer Software and Equipment...............................33
17.03 Intellectual Property.........................................33
ARTICLE XVIII - WAIVER AND INVALIDITY
18.01 Waiver........................................................33
18.02 Partial Invalidity............................................34
ARTICLE XIX - ASSIGNMENT......................................................30
19.01 Assignment by Management Company and Owner....................34
ARTICLE XX - TERMINATION OF AGREEMENT
20.01 Sale of the Hotel - Assumption of Management Agreement........35
20.02 Sale of the Hotel - Termination of Management Agreement.......36
20.03 Termination without Cause.....................................36
20.04 Termination upon Demolition or Foreclosure....................37
20.05 Performance Termination.......................................37
ARTICLE XXI - MANAGEMENT COMPANY CONDITIONS
21.01 Conditions upon Management Company's Obligations..............37
ARTICLE XXII - MISCELLANEOUS
22.01 Right to Make Agreement.......................................38
22.02 Agency........................................................38
22.03 Failure to Perform............................................38
22.04 Breach of Covenant............................................39
22.05 Consents......................................................39
22.06 Applicable Law................................................39
22.07 Headings......................................................39
22.08 Notices.......................................................39
22.09 Environmental Matters.........................................40
22.10 Equity and Debt Offerings.....................................41
22.11 Estoppel Certificates.........................................41
22.12 Counterparts..................................................42
22.13 Entire Agreement..............................................42
Exhibit A - Legal Description of Hotel Site
MANAGEMENT AGREEMENT
This Management Agreement (this "Agreement") is made effective
as of January 1, 2001 ("Effective Date") by and between ENN Leasing Company I,
L.L.C, a Delaware limited liability company, with its principal place of
business at 0000 Xxxx Xxxxx Xxxxxxxxx, Xxxxxxxxxx, Xxxxxxxxx 00000 ("Owner"),
and Crestline Hotels & Resorts, Inc., a Delaware corporation, with its principal
place of business at 0000 Xxxxxxxxx Xxxxx, 0xx Xxxxx, Xxxxxxxx, Xxxxxxxx 00000
("Management Company").
WITNESSETH:
WHEREAS, Owner owns leasehold title of the _______ Inn hotel
at ______________________________ ("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 Effective Date, 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 is 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 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 (provided that no such lease term shall
extend beyond the term hereof without Owner's approval), 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 Effective 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 Holiday Inn hotel facility. Owner agrees upon request
by Management Company to sign promptly and without charge applications for
licenses, permits or other instruments reasonably 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, management, and
operation of first-class hotels, and Management Company covenants and agrees to
manage and operate the Hotel as a Holiday Inn hotel in accordance with that
certain License Agreement dated as of January 1, 2001, between Holiday
Hospitality Franchising, Inc./Bass Hotels & Resorts, Inc. as the "Licensor" and
Owner, as the "Licensee" (as such agreement may have been or may be amended, the
"License Agreement"), respecting the Hotel.
ARTICLE II
DEFINITION OF TERMS
The following terms when used in this Agreement shall have the meanings
indicated:
A. Accounting Period means a calendar month.
B. [Intentionally Deleted]
C. 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.
D. Annual Operating Projection shall have the meaning set forth in
Section 9.03.
E. Annual Operating Statement shall have the meaning set forth in
Section 9.01.
F. Base Management Fee shall have the meaning set forth in Section
6.01 A.
G. Building Estimate shall have the meaning set forth in Section
8.03 A.
H. Capitalization Multiple means the number ten (10).
I. Coverage Ratio means the number one and three-tenths (1.3).
J. Deductions shall have the meaning set forth in Article II JJ.
K. Default shall have the meaning set forth in Section 16.01.
L. Effective Date shall have the meaning set forth in the Preamble.
M. Employee Claims means any and all claims (including all fines,
judgments, penalties, costs, litigation and/or arbitration expenses, attorneys'
fees and expenses, and costs of settlement with respect to any such claim) 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.
N. Event of Default shall have the meaning set forth in Section 16.02.
O. Executive Employees shall have the meaning set forth in Section
14.02.
P. [Intentionally Deleted]
Q. [Intentionally Deleted]
R. 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 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 with Owner's approval, which shall not be unreasonably withheld;
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.
S. 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. The value of Fixed Asset Supplies
shall be included in the calculation of Working Capital.
X. Xxxxx 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 and
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) the proceeds realized from
the sale of fixtures, furniture, furnishings and equipment no longer necessary
to the operation of the Hotel; (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 A3; (v) condemnation awards; (vi) gross
receipts received by lessees, licensees, or concessionaires of the Hotel; (vii)
proceeds from any financing or refinancing; and (viii) proceeds of any judgment
or settlement not received as compensation for actual or potential loss of Gross
Revenues or Operating Profit.
U. Group Services shall have the meaning set forth in Section 11.03.
V. Hotel means the Holiday Inn at Charleston-Mt. Pleasant, South
Carolina.
W. Impositions shall have the meaning set forth in Section 13.01.
X. Incentive Fee shall have the meaning set forth in Section 6.01 B.
Y. Initial Term shall have the meaning set forth in Article V.
Z. Intellectual Property shall have the meaning set forth in Section
17.03.
AA. 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.
BB. [Intentionally Deleted]
CC. License Agreement shall have the meaning set forth in Section 1.04.
DD. Licensee shall have the meaning set forth in Section 1.04.
EE. Licensor shall have the meaning set forth in Section 1.04.
FF. Management Company means Crestline Hotels & Resorts, Inc., a
Delaware corporation.
GG. 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.
HH. 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 by 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, and (y) shall not
name Management Company as a party in any foreclosure action or proceeding, and
(z) shall
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 earlier terminated 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 an Event of Default, which are to be governed exclusively by clause
(ii) hereof).
II. Operating Loss means a negative Operating Profit.
JJ. 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 the cost and expense is not capitalized in accordance with generally
accepted accounting principles, including without limitation, third parties
providing legal services to Management Company 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 Affiliates' 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, as set forth in the Annual Operating Projection;
7. Management Company's Base Management Fee (referred to
in Section 6.01) of two and one-half percent (2.5%) of Gross Revenues for
services rendered in connection with the operation of the Hotel;
8. All the costs and expenses incurred by Management Company
pursuant to the License 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 License
Agreement shall not be a Deduction from Gross Revenues for purposes of the
calculation of Operating Profit;
9. [Intentionally Deleted]
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 real and personal
property taxes assessed against the Hotel along with related expenses incurred
in connection with all such assessments, unless such taxes are paid by Owner;
12. All costs and expenses 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; and
13. 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 leases approved by Management
Company; 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 &
non-recurring ownership costs, such as Owner's entity administration & servicing
costs; all of which shall be paid by Owner from its own funds, and not from
Gross Revenues.
KK. Owner means ENN Leasing Company I, L.L.C., a Delaware limited
liability company.
LL. Owner-Funded Capital Expenditures shall have the meaning set
forth in Section 8.03.
MM. [Intentionally Deleted]
NN. [Intentionally Deleted]
OO. 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."
PP. Proprietary Marks shall have the meaning set forth in Section
17.01.
QQ. Prospectus shall have the meaning set forth in Section 22.10.
RR. Qualified Lender means any recognized third party institutional lender
such as any federally insured commercial or 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.
SS. 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 Owner's Investment; 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 result of 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 test set forth in
clauses (i), (ii) and (iii) are satisfied, (a) the existing (as of the Effective
Date) balance of any Secured Loan which is secured by a Mortgage existing as of
the Effective 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 only apply 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).
TT. [Intentionally Deleted]
UU. 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 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.
VV. Secured Loan means and includes (i) any indebtedness secured by a
Mortgage encumbering the Hotel or all or any part of Owner's interest therein;
and (ii) all amendments, modifications, supplements and extensions of any such
Mortgage.
WW. Software shall have the meaning set forth in Section 17.02.
XX. Termination means the expiration or sooner cessation of this
Agreement.
YY. 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.
ZZ. 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 and Fixed Asset Supplies, less accounts payable and accrued
current liabilities.
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 title to the land
described in Exhibit A and all improvements thereon, free and clear of all liens
and encumbrances other than:
(i) Easementsor other encumbrances that do not adversely affect
the operation of the Hotel by Management Company and do not
require the payment of any money, other than payment from
Owner's funds;
(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, provided that such agreement also reaffirms
the Qualified Lender's obligations to Management Company under this Agreement.
3.03 Non-Disturbance Agreement
Notwithstanding Section 3.02, Owner agrees that, prior to obtaining any
Qualified Loan, it will use its best 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
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/TAKEOVER EXPENSES
Owner shall provide all funds to pay any amounts or, as applicable,
reimburse any deficiencies arising in connection with the following pre-opening
or takeover expenses in accordance with a pre-opening or takeover budget
prepared by Management Company prior to the Effective Date:
(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 Effective Date;
(iv) any projected "startup losses" associated with the transfer of
operations of the Hotel; and
(v) any other expenses incurred by Owner or Management Company, as
the case may be, in connection with the transfer of operations of the Hotel.
Owner shall advance to Management Company all funds required by
Management Company for such pre-opening or takeover 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 Effective Date, funds for pre-opening or
takeover 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 Effective Date causes increased pre-opening or
takeover expenses that cannot be reasonably avoided, Owner shall be responsible
for and promptly pay such increased pre-opening or takeover expenses. No item
which is or should have been included as a pre-opening or takeover expense shall
be charged as a Deduction.
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 on December 31, 2002. Following the
expiration of the Initial Term, this Agreement shall, upon the written consent
of both Owner and Management Company at least ninety (90) days prior to the
expiration of the Initial Term, continue in force and be extended for one (1)
successive five (5)-year term ("First Renewal Term"). Following the expiration
of the First Renewal Term, this Agreement shall, upon the written consent of
both Owner and Management Company at least ninety (90) days prior to the
expiration of the Initial Term, continue in force and be extended for one (1)
additional successive five (5)-year 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 thirty (30) 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 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 for the Hotel which have been issued in Management
Company's name; 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.
Notwithstanding any provision in the Agreement to the contrary, in the
event that Owner shall elect (i) not to renew this Agreement for the first (1st)
renewal term (described in Section 5.01 above) after the Initial Term or (ii) to
terminate this Agreement for any
reason in accordance with the terms hereof (except in the case of a Termination
by Owner under Section 16.03 below), Owner shall be responsible for all
reasonable and customary costs actually incurred by Management Company in
connection with the Termination of this Agreement (including, without
limitation, in addition to those employee-related costs which are to be paid as
described and in accordance with Section 14.02, any severance payments paid to
any employee of the Hotel in connection with such Termination).
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 two and one-half percent (2.5%) of Gross Revenues for each
Accounting Period. 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.
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, a quarterly incentive fee ("Incentive
Fee") equal to fifteen percent (15%) of the amount by which Operating Profit for
such Fiscal Year exceeds the projected Operating Profit as described in the
Annual Operating Projection for such Fiscal Year (prorated for any partial
Fiscal Year). Each such quarterly fee shall be paid to Management Company (or
retained by Management Company as provided below) within twenty (20) days after
the close of each calendar quarter, based upon the year-to-date actual Operating
Profit as compared to the year-to-date projected Operating Profit.
C. Notwithstanding any provision in this Agreement to the contrary, in
no event shall Management Company be paid an amount in any calendar quarter
(prorated for any partial calendar quarter) for Base Management Fee plus
Incentive Fees exceeding four and one-half percent (4.5%) of Gross Revenues.
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 quarterly Incentive Fees due Management
Company. Such interim accountings shall be in the form of statements reasonably
approved by Owner. Additionally, Management Company shall submit operating
statistics of the Hotel on all business days, via electronic mail, to Owner in
form reasonably acceptable to Management Company and 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 thirty (30)
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
promptly by the parties.
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 B 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).
ARTICLE VII
WORKING CAPITAL AND FIXED ASSET SUPPLIES
7.01 Working Capital and Inventories
At the Effective Date, Owner shall provide to Management Company the
funds necessary to supply the Hotel with Working Capital and Inventories in a
minimum amount of $75,000 and shall at all times thereafter maintain in the
Hotel's operating accounts a minimum balance in the amount of $50,000 (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 and
Fixed Asset Supplies as they are consumed) in accordance with the provisions of
Section 9.05 hereof. Working Capital so advanced shall remain the property
of Owner throughout the term of this Agreement, and Management Company shall
make no claim thereto.
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.
ARTICLE VIII
MAINTENANCE, REPLACEMENT AND CHANGES
8.01 Routine Repairs and Maintenance
From and after the Effective 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 Licensor'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.
8.02 [Intentionally Deleted]
8.03 Building Alterations, Improvements, Renewals and Replacements
A. Management Company shall prepare an annual estimate ("Building
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 minor
alterations referred to in Section 8.01) to the structural, mechanical,
electrical, heating, ventilating, air conditioning, plumbing and vertical
transportation elements of the Hotel building ("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. The failure of Owner
to provide funding for any Owner-Funded Capital Expenditure described in clause
(i) or (ii) 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 normal business hours, examine such records. Within thirty
(30) 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 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 as a Deduction.
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. All debts and
liabilities which have been validly 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.
D. Management Company shall, on a bi-weekly basis, cause all
amounts in the Hotel operating accounts in excess of the $50,000 minimum balance
to be wired electronically to a bank account designated for such purposes by
Owner.
9.03 Annual Operating Projection
A. On or before the fifteenth day of November of each Fiscal Year,
excepting Fiscal Year 2000, a preliminary draft of the budget ("Annual Operating
Projection"), setting forth Management Company's reasonable estimate of Gross
Revenues, Deductions, Operating Profit and Building Estimate 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). If Owner does not approve the preliminary Annual Operating
Projection in full, within forty- five (45) 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 with said 45-day period that it does not approve of specified
Categories, the preliminary Annual Operating Projection shall constitute the
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, the same as the Annual
Operating Projection for the preceding Fiscal Year with adjustments for
inflation, except if such Category is no longer required, or if expenses
incurred in such Category were not reasonable, in Owner's and Management
Company's reasonable discretion.
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 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,
with adjustments for inflation 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, Credit
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.
9.05 Reduction of Working Capital
To the extent that the Working Capital becomes reduced to an amount less
than $75,000, additional funds in a sum equal to the difference between the
$75,000 and the then Working Capital shall be provided by Owner within three (3)
days after Management Company has given written notice to Owner of such
reduction of Working Capital.
ARTICLE X
LICENSE AGREEMENT
During the term of this Agreement, Management Company agrees to operate
the Hotel in accordance with all rules, regulations, inspections and
requirements of Licensor under the License Agreement. If the License Agreement
pertaining to the Hotel shall
terminate, Management Company shall cease operating the Hotel as a Holiday Inn
hotel. In the event of any conflicts between any provision(s) of this Agreement
and the License Agreement, the provision(s) of the License Agreement shall
control. Notwithstanding the consent of Licensor to this Management Agreement,
Owner and all guarantors shall remain liable to Licensor under the terms of the
License Agreement pertaining to the Hotel.
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 be otherwise specified in this Agreement.
B. Management Company shall manage and operate the Hotel in accordance
with the License 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 "Licensor" under the Licensee
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, 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 inspecting or 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.
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. Notwithstanding any provision in this
Agreement to the contrary, in the event and so long as Management Company or any
Management Company Affiliate provides centralized accounting support systems to
the Hotel, Owner shall pay to Management Company a "Centralized Accounting Fee"
equal to One Thousand Dollars ($1,000.00) per calendar month (prorated for any
partial calendar month), to be paid (or retained by Management Company in the
manner provided in Section 6.02 above) at the same time the Base Management Fee
is paid to (or retained by) Management Company.
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 on a fair and equitable basis, consistently
applied, among all of Management Company's hotels receiving such services 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 a Deduction. 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, and shall be
approved in advance by Owner, such approval not to be unreasonably withheld.
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 in connection
therewith.
ARTICLE XII
INSURANCE
12.01 Property and Operational Insurance
A. Management Company shall, commencing with the Effective Date and
continuing throughout the term of this Agreement, procure and maintain, as a
Deduction, with insurance companies reasonably acceptable to Owner, Licensor,
and any Qualified Lender, or by legally qualifying itself as a self insurer, a
minimum of the following insurance:
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 A 1, and 3, 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 Fifteen Million Dollars
($15,000,000) 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;
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, Licensor, or any Qualified Lender, 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
(and any Qualified Lender). 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 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, in Management Company's
reasonable business judgement, will likely need to be paid by either Owner or
Management Company with respect to 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 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 or 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, Crestline
Capital 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 make necessary Owner-Funded Capital Expenditures required in this
Agreement or to comply with applicable legal requirements or any requirements
imposed by the Licensor in accordance with the License 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 License Agreement which arise as a result of (a) any default
by Owner under the terms of this Agreement or the License 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 make necessary Owner-Funded Capital Expenditures
required to comply with applicable legal requirements or any requirements
imposed by the Licensor in accordance with the License 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 Effective Date (referred to as "Prior Liabilities"). Any
such Prior Liabilities shall be paid for by Owner (not from Gross Revenues) 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 (referred to in this Article XIII as "Impositions")
following or allocable to the period following the Effective Date shall be paid
by Management Company (except as Owner shall advise Management Company of
Owner's intent to pay such taxes), to the extent sufficient Working Capital
exists, from Gross Revenues before any fine, penalties, or interest are added
thereto or liens placed upon the Hotel, unless payment is in good faith being
contested and enforcement there 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 a Deduction 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 interest in the Hotel, 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 a Deduction from
Gross Revenues n 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: (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, such policies to be comparable to policies at other
similar hotels managed by Management Company. 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. 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
such request, Management Company shall explain its decision to Owner in
reasonable detail.
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 or temporarily employed
or 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).
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 Retraining
and 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 not to 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 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 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.
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 License Agreement is
terminated due to Owner's failure to repair and restore the Hotel, this
Agreement shall terminate, effective upon the termination of the License
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, as the Qualified Loan agreements permit, 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 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 ten (10)
days after written notice, when such payment is due and payable.
F. Receipt by the Owner of any notice from the Licensor claiming or
alleging any default under the License 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 Licensor within fifteen (15) business days
following the Owner's receipt of such notice, or such time as set forth in the
License Agreement. If such default cannot reasonably be cured within fifteen
(15) business 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 License Agreement.
G. The failure of Owner to provide to Management Company sufficient
Working Capital to operate the Hotel as required by Article VII and Section 9.05
within three (3) business days after written notice from Management Company of
the need for such Working Capital.
H. 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.
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
or H, 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," 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, except during the term of this Agreement to
have signage installed using any Proprietary Xxxx 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. 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.
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, excepting any software which is
owned by Licensor. 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
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
qualified to perform the obligations of Management Company hereunder, and any
such Affiliate shall be deemed to be the Management Company for purposes of this
Agreement.
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 wholly-owned subsidiary of
Owner but only if such subsidiary owns one hundred percent (100%) of the Hotel;
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 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 Owner
of its interest in this Agreement shall not relieve Owner from its obligations
under this Agreement which accrued prior to the date of such assignment; Owner
shall be relieved of such obligations accruing after such date, if the
assignment complies with this Article XIX and if Management Company has received
an assumption agreement executed by the assignee.
ARTICLE XX
TERMINATION OF AGREEMENT
20.01 Sale of the Hotel - Assumption of Management Agreement
A. Owner shall not enter into any Sale of the Hotel to any individual
or entity which does not have sufficient financial resources and liquidity to
fulfill Owner's obligations under this Agreement.
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 (the
"Seller's 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. If, however, Management Company
reasonably determines that a Sale of the Hotel to such prospective purchaser or
tenant would violate the provisions of Section 20.01 A, Management Company shall
so notify Owner by no later than thirty (30) days after Management Company's
receipt of Seller's Notice, provided, however, that any decision regarding any
such prospective purchaser or tenant shall not be binding if the information
furnished by Owner is inaccurate. If Owner enters into an agreement for the Sale
of the Hotel to a purchaser or tenant notwithstanding Management Company's
notice of non-compliance, Management Company shall have the right to terminate
this Agreement by delivery of written termination notice to Owner not earlier
than thirty (30) days, nor more than one hundred twenty (120) days following the
date of the giving of such notice. Management Company shall have the right to
change such effective date of Termination to coincide with the date of the
finalization of the proposed Sale of the Hotel. At Management Company's
election, said notice of Termination shall not be effective if such Sale of the
Hotel is not finalized. If such Termination by Management Company results from a
Default by Owner under Section 20.01 A, such Termination shall not relieve Owner
of liability to Management Company for such Default. If Owner fails to deliver
Seller's Notice to Management Company prior to any Sale of the Hotel, Management
Company shall have the right, at its option, to immediately terminate this
Agreement upon thirty (30) days notice to Owner and Owner shall be deemed to be
in Default hereunder.
C. No Sale of the Hotel shall reduce or otherwise affect (a) the
current level of Working Capital or (b) any of the operating accounts maintained
by Management Company pursuant to this Agreement. If, 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 buying 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.
20.02 Sale of the Hotel - Termination of Management Agreement
The Owner may, by written notice to Management Company, terminate this
Agreement (i) upon any bona fide sale of the Hotel by the Owner to an
unaffiliated third party (excluding a sale and leaseback by Owner) or (ii) upon
the transfer of the management and operation of the Hotel by Owner to an
Affiliate of Owner, upon the payment to Management Company of the average
monthly Base Management Fee and quarterly Incentive Fees paid to Management
Company during the twelve (12) consecutive months immediately preceding such
sale or transfer (or the average management fees earned by Management Company is
such sale or transfer is less than twelve months from the Effective Date) times
one-half the number of months remaining in the then current term of the
Agreement. Such Termination shall be effective no earlier than ninety (90) days
following Management Company's receipt of notice of Termination 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 Workers Adjustment and Retraining
Notification Act.
20.03 Termination without Cause
The Owner may, by written notice to Management Company, terminate this
Agreement without cause at any time following the first anniversary date of the
Effective Date upon the payment to Management Company of One Hundred Fifty
Thousand Dollars ($150,000.00) if such Termination occurs during the second year
of the Initial Term or Two Hundred Fifty Thousand Dollars ($250,000.00) if such
Termination occurs during any renewal term of this Agreement. Such Termination
shall be effective no earlier than ninety (90) days following Management
Company's receipt of notice of Termination 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 Workers Adjustment and Retraining Notification Act.
20.04 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
Workers Adjustment and Retraining Notification 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
or Section 20.01 A.
20.05 Performance Termination
Owner shall have the option to terminate this Agreement if in any one
(1) Fiscal Year Management Company fails to (i) achieve at least ninety percent
(90%) of the projected Operating Profit as specified in the approved Annual
Operating Projection for the applicable Fiscal Year (provided, however,
Management Company shall have the right to cure any such failure and avoid
Termination by paying to Owner, within sixty (60) days of written notice of such
performance termination, an amount equal to the difference between the actual
Operating Profit and 90% of said projected Operating Profit for the applicable
Fiscal Year) and (ii) maintain at least ninety-five (95%) of the previous Fiscal
Year's "Yield Index Percentage" for the Hotel's competitive set as reported by
Xxxxx Travel Research (or similar reporting service in the event Xxxxx Travel
Research reports are no longer available).
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 or other
approvals necessary for the operation of the Hotel.
B. The provision by Owner of the Working Capital described in Article
VII and Section 9.05.
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) at 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.
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
This Agreement shall be construed under and shall be governed by the
laws of the State where the Hotel is located.
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:
--------
ENN Leasing Company I, L.L.C.
0000 Xxxx Xxxxx Xxxx.
Xxxxxxxxxx, XX 00000
Attn: Corporate Secretary
with a copy to:
Hunton & Xxxxxxxx
000 X. Xxxx Xxxxxx
Xxxxxxxxxx Xxxxx, Xxxx Xxxxx
Xxxxxxxx, XX 00000-0000
Attn: Xxxxx X. Xxxxxx, Esq.
To Management Company:
---------------------
Crestline Hotels & Resorts, Inc.
0000 Xxxxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attn: General Counsel
with a copy to:
--------------
Crestline Hotels & Resorts, Inc.
0000 Xxxxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attn: Executive Vice President
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.
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, 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.
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 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, to 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. Any such
certificates may be relied upon by any party to whom the certificate is
directed.
22.12 Counterparts
This Agreement may be executed in multiple counterparts, each of which
is an original and all of which collectively constitute one instrument.
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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers.
ATTEST: OWNER:
ENN LEASING COMPANY I, L.L.C.
By:
--------------------------- -------------------------------
Assistant Secretary Title:
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ATTEST: MANAGEMENT COMPANY:
CRESTLINE HOTELS & RESORTS, INC.
By:
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Assistant Secretary Title:
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Exhibit A
Legal Description of Hotel Site
