TRANSITION SERVICES AGREEMENT
Exhibit 10.1
THIS TRANSITION SERVICES
AGREEMENT (this “Agreement”) is made and entered into as of this ___
day of June, 2006 (the “Effective Date”), by and between CNL HOTELS
& RESORTS, INC. (“Customer”), and CNL FINANCIAL GROUP,
INC. (“Service Provider”). (Customer and Service Provider may be
referred to herein as a “Party” and collectively as the “Parties”).
Preliminary Statement
WHEREAS,
Customer desires that Service Provider provide certain services to Customer
upon
the terms and subject to the conditions of this Agreement; and
WHEREAS,
Service Provider is willing to provide such services to Customer upon the
terms
and subject to the conditions of this Agreement.
NOW,
THEREFORE, for and in consideration of the foregoing premises and the
mutual covenants and agreements hereinafter set forth, Customer and Service
Provider agree as follows:
1.
Services. Service Provider, directly
or through its
subsidiaries, shall provide, or cause to be provided, the services for
Customer
as are more particularly described in Schedule “A” attached hereto and made a
part hereof (collectively, the “Services”). (As used herein, the term
“Service Provider” shall include any such subsidiaries providing any
Services.). The Services and Fees set forth on Schedule “A” attached
hereto accurately describe the Services being provided to Customer by Service
Provider and/or its subsidiaries, and the fees being charged for such Services
as of the Effective Date (as defined in Section 3 below). The Fees and
rates payable by Customer hereunder for all of the Services other than
Legal
Services are at Service Provider’s historical cost without any profit xxxx-up
and are the same Fees or rates that Service Provider charges to its other
customers (which are all either subsidiaries or other affiliates of Service
Provider), and the Fees payable by Customer hereunder for Legal Services
are an
annual fixed amount agreed upon in advance by Customer and Service Provider
without any profit xxxx-up. All Services provided by Service Provider
hereunder shall be provided promptly and in a first-class, professional
manner,
consistent with the manner and level of care with which such services were
provided by Service Provider to Customer on March 31, 2006 and consistent
with
industry standards for provision of such services. Notwithstanding
anything in this Agreement to the contrary, all Services to be provided
by
Service Provider pursuant to this Agreement will be rendered solely for
purposes
of providing operational and other support to Customer in the conduct of
Customer’s business, and all decisions requiring the business judgment of the
officers, directors and other appropriate management personnel of Customer
shall
at all times remain in their sole and exclusive discretion.
2.
Compensation. As compensation for
the Services to be
provided by Service Provider to Customer hereunder, Customer shall pay
those
fees on Schedule “A” (collectively, the “Fees”). Within fifteen (15) days
after the end of each month, Service Provider will submit one invoice to
Customer for the Fees (the “Invoice’), together with reasonable documentation
supporting each of the invoiced amounts. Service Provider shall maintain
accurate and complete books of account necessary to support the amounts
set
forth on all Invoices, and Service Provider shall furnish to Customer such
additional documentation supporting an Invoice or the calculation of the
Fees
thereon as Customer shall reasonably request in writing. All Fees shall be
payable monthly within thirty (30) days after receipt by Customer of the
Invoice
for the Services provided. Any delinquent Fees shall accrue interest at
the “prime rate”, as published in The Wall Street Journal from time to time,
plus two percent (2%), per annum, until paid in full.
3.
Term and Termination. The term of this Agreement
shall
commence on the Effective Date, and shall continue for an initial term
terminating the later of nine (9) months from the Effective Date or March
31,
2007 (the “Initial Term”). Customer, at its option, may terminate this
Agreement in its entirety at the end of any term upon ninety (90) days
prior
written notice to Service Provider (the “Termination Notice”). Following
the Initial Term, if no Termination Notice is timely given, then, solely
with
respect to any Services not otherwise previously terminated as provided
hereunder, the term of this Agreement shall automatically be extended for
successive six (6) month periods until a Termination Notice is timely
given. Subject to its obligations to make payments pursuant to this
Agreement for Services previously rendered, Customer, at its sole option,
may
terminate any or all Services, other than the Investor Relations / Call
Center
and Legal Services, either in whole or in part, under this Agreement upon
thirty
(30) business days prior written notice to Service Provider, and Customer,
at
its sole option, may terminate the Investor Relations / Call Center
and/or the Legal Services (part (A) or part (B) or both), upon ninety (90)
days
written notice to Service Provider. Upon the termination of all Services
by Customer, this Agreement shall automatically terminate provided that
Customer
has paid in full for all Services previously rendered. Notwithstanding the
foregoing, (a) Service Provider may terminate this entire Agreement at
any time
in its sole discretion, without penalty or other cost, upon giving at least
one
hundred and eighty (180) days prior written notice to Customer; (b) either
Party
may terminate this Agreement upon giving written notice to the other Party
in
the event that (i) the other Party becomes insolvent, (ii) the other Party
makes
a general assignment for the benefit of its creditors, or (iii) if a voluntary
or involuntary petition under the United States Bankruptcy Code is filed
regarding the other Party; or (c) if the Customer fails to pay the Fees
within
the time specified under this Agreement, then Service Provider may terminate
this Agreement upon giving written notice to Customer if such default has
continued for a period of thirty (30) days after Service Provider gave
written
notice of such default to Customer. Notwithstanding the foregoing, (y) the
Service Provider shall not be obligated to provide the Software Services
(as
described on Schedule “A” attached hereto) to Customer after September 30, 2006;
and (z) in the event of any termination of this Agreement or any of the
Services
for any reason, Service Provider shall use commercially reasonable efforts
to
cooperate with any third-party and/or Customer in the transition of such
Services for a reasonable period of time following such termination not
to
exceed thirty (30) days from such termination date. Nothing in this
Agreement shall prevent Customer from engaging other service providers
to
provide any or all of the Services or from “in-sourcing” any or all of the
Services, and any such activity shall not waive or alter any of Customer’s
rights under this Agreement; provided, however, that this
provision shall not relieve Customer of its obligation to provide Service
Provider with the appropriate notice of termination of any such Services
within
the time periods specified above and to pay the Fees for Services rendered
by
Service Provider pursuant to this Agreement.
4.
Indemnification. Service Provider agrees
to indemnify
Customer, its subsidiaries and their officers, directors, employees, agents,
successors and assigns for and hold them harmless from any liabilities,
losses,
damages, costs and expenses (including reasonable attorney’s fees) incurred by
them arising out of the provision of the Services by Service Provider or
its
officers, directors, employees or other representatives and resulting from
its
or their gross negligence or willful misconduct. The provisions of this
Section 4 shall survive the termination or expiration of this
Agreement.
5.
Insurance. During the term of this
Agreement and for
two (2) years after the termination or expiration of this Agreement, Service
Provider shall maintain in full force and effect on its behalf, and on
behalf of
any of its subsidiaries providing the Services hereunder (the “Subsidiaries”),
insurance with responsible and reputable insurance companies with respect
to its
and their respective properties and business, in such amounts and covering
such
risks as is carried generally in accordance with sound business practice
by
companies in similar businesses similarly situated, including, without
limitation, a general commercial liability insurance policy which shall
insure
Service Provider and the Subsidiaries against claims for up to $2,000,000.
Upon written request by Customer, Service Provider shall furnish Customer
a
certificate of insurance evidencing the insurance coverage required under
this
Section 5. Service Provider shall notify Customer in advance of any
termination, cancellation, nonrenewal or material modification of any such
insurance coverage. The provisions of this Section 5 shall survive the
termination or expiration of this Agreement.
6.
Limitation of Liability. IN NO EVENT SHALL EITHER
PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, PUNITIVE,
SPECIAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS ARISING OUT OF OR RELATED
TO
THIS AGREEMENT OR THE PERFORMANCE OR BREACH THEREOF. SERVICE PROVIDER’S
LIABILITY TO CUSTOMER, IF ANY, SHALL IN NO EVENT EXCEED THE TOTAL AMOUNT
OF
COMPENSATION PAID TO SERVICE PROVIDER HEREUNDER BY CUSTOMER EXCEPT IN THE
EVENT
OF FRAUD, WILLFUL MISCONDUCT, GROSS NEGLIGENCE OR BAD FAITH BY SERVICE
PROVIDER
OR THE APPLICABLE SUBSIDIARY, AS THE CASE MAY BE. FURTHERMORE, IN NO EVENT
SHALL SERVICE PROVIDER BE LIABLE TO CUSTOMER FOR ANY DAMAGES RESULTING
FROM OR
RELATED TO ANY DELAY BY SERVICE PROVIDER IN THE PERFORMANCE OF SERVICES
UNDER
THIS AGREEMENT SOLELY DUE TO EVENTS OR ACTS BEYOND SERVICE PROVIDER’S CONTROL
AND SO LONG AS SERVICE PROVIDER SHALL HAVE USED COMMERCIALLY REASONABLE
EFFORTS
TO MITIGATE THE EFFECTS OF SUCH EVENTS OR ACTS TO THE EXTENT SERVICE PROVIDER
WAS ABLE TO DO SO.
7.
Employees/Independent Contractor. With respect to a
particular Service, Service Provider shall be responsible for selecting
the
employees who will perform any particular Service and administering such
employees (i.e. setting such employees’ hours of work, establishing compensation
structure, work load balancing, etc.). Customer shall have the right to
assist Service Provider in directing the employees assigned to perform
specific
Services with respect to the substance of their work and for determining
authorization levels governing each particular Service and the disbursement
of
any of Customer’s funds that Service Provider’s employees will have the right to
commit for any Service hereunder. Service Provider shall act as an
independent contractor and not as the agent of Customer in performing the
Services, maintaining control over its employees, its subcontractors and
their
employees and complying with all withholding of income at source requirements,
whether federal, state, local or foreign. No employee of Service Provider
performing Services shall be considered an employee of Customer or any
of its
affiliates until such time, if ever, as they accept Customer’s offer of
employment. Furthermore, Service Provider shall not subcontract any of the
Services without the prior written approval of Customer, provided,
however, that certain Services may be performed by one or more
Subsidiaries (as defined in Section 5 above). Service Provider shall, and
shall cause its employees to, observe and comply in all material respects
with
any and all laws bearing on the performance of the Services, including
but not
limited to (as applicable), the Occupational Safety & Health Act of 1970, as
amended, the Fair Labor Standards Act of 1938, as amended, Title VII of
the
Civil Rights Acts of 1964 and 1991, the Age Discrimination in Employment
Act,
the Americans with Disability Act and Executive Order 11246, as amended
(including Equal Opportunity and Nondiscrimination provisions thereof),
FIFRA
and all environmental laws pertinent to the performance of the
Services.
8.
Taxes. Service Provider shall
be paid the Fees
provided for in Schedule "A” without withholding for any taxes. In the
event that there are any sales or similar taxes required to be paid on
the
Services or on this Agreement (other than federal or state income taxes)
(“Taxes”), then Customer shall be responsible for payment of any such
Taxes. If any Taxes are paid by Service Provider on this Agreement or the
Services, then Service Provider shall be entitled to provide reasonably
detailed
written invoices to Customer for the amount of such Taxes, and Customer
shall
pay such invoices within thirty (30) days following receipt thereof. Any
delinquent payment by Customer shall accrue interest as set forth in Section
2
above.
9.
Xxxxxxxx-Xxxxx Act Compliance. In connection with
Customer’s responsibility to maintain effective internal controls as required by
the Xxxxxxxx-Xxxxx Act of 2002, Service Provider shall furnish to Customer
copies of Service Provider’s applicable policies, procedures, internal controls,
and other such documentation as Customer shall reasonably request in writing
pertaining to the Services provided hereunder as shall be necessary for
Customer
to comply with the Xxxxxxxx-Xxxxx Act, including, but not limited to, activities
required by the Public Company Accounting Oversight Board (the “PCAOB”) in its
release 2004-1, or other similar guidance promulgated by the PCAOB or other
regulatory agency having jurisdiction over Customer. Customer shall
promptly reimburse Service Provider for the reasonable out of pocket costs
and
expenses incurred by Service Provider in complying with this Section 9
upon its
receipt of an invoice from Service Provider. Any documents or information
furnished to Customer by Service Provider pursuant to this Section 9 shall
be
treated as “Confidential Information” pursuant to Section 19 below.
10.
Notices. Any notice, approval,
request, authorization,
consent, or other communication required or permitted under this Agreement
shall
be given in writing and shall be deemed to be given when delivered in person,
sent by facsimile transmission on a business day, with proof of receipt,
or two
(2) business days after being deposited in the United States mail, properly
addressed and stamped with the required postage, registered or certified
mail,
return receipt requested, to the intended recipient as set forth
below:
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If to Customer:
CNL Hotels & Resorts, Inc.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000-0000
Attention: Chief Financial
Officer
Fax: 000-000-0000
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If to Service Provider:
CNL Financial Group, Inc.
CNL Center at City Commons
000 X. Xxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, XX 00000
Attention: Chief Financial
Officer
Fax: 000-000-0000
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With a copy to:
General Counsel
Fax: 000-000-0000
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Either Party may change its address or
facsimile number specified above by giving the other Party notice of such
change
in accordance with this Section 10.
11.
No Third Party Beneficiaries. Notwithstanding anything
to the contrary in this Agreement, the Parties do not intend any person
or
entity not a party to this Agreement to be a beneficiary of any provision
of
this Agreement, and no provision of this Agreement shall be interpreted
or
construed as being for the benefit of any third party. Further, no third
party
shall by virtue of any provision of this Agreement have a right to action
or an
enforceable legal remedy against either Party to this Agreement.
12.
Non-Waiver. The failure of either
Party to insist upon
or enforce strict performance by the other Party of any provision of this
Agreement or to exercise any right under this Agreement shall not be construed
as a waiver to any extent of such Party’s right to assert or rely upon any such
provision or right in that or any other instance.
13.
Assignment; Binding Effect. Neither Party shall
assign
this Agreement or any right, interest or benefit under this Agreement without
the prior written consent of the other Party; provided, however,
that (a) certain Services may be performed by one or more subsidiaries
of
Service Provider, and (b) Customer may assign its rights under this Agreement
(i) to a direct or indirect wholly-owned subsidiary upon written notice
to
Service Provider, provided further, that in such event Customer shall
remain liable for the payment of the Fees due hereunder, (ii) by operation
of
law, or (iii) to any successor corporate entity. Subject to the foregoing,
this Agreement shall be fully binding upon, inure to the benefit of and
be
enforceable by, the Parties and their respective successors and permitted
assigns.
14.
Entire Agreement. This Agreement and Schedule
“A”
attached hereto set
forth the entire agreement of the Parties with regard to the
subject matter hereof, and supersede any and all prior representations,
statements or agreements of the Parties with respect to such subject
matter.
15.
Amendment. No change, amendment
or modification of any
provision of this Agreement shall be valid unless set forth in a written
instrument signed by both of the Parties hereto.
16.
Legal Compliance. Service Provider will,
at its sole
cost and expense, comply with all federal, state, and local laws, rules,
regulations, and ordinances affecting the Services provided under this
Agreement.
17.
Governing Law. This Agreement shall
be interpreted and
construed under the laws of the State of Florida, and will be deemed for
such
purposes to have been made, executed, and performed in the State of
Florida.
18.
Savings Clause. The invalidity or unenforceability
of
any particular provision of this Agreement shall not invalidate any other
provision of this Agreement and the Agreement shall be construed in all
respects
as if such invalid or unenforceable provision had been omitted provided
that all
of the essential terms and conditions of this Agreement for each Party
remain
valid, binding, and enforceable.
19.
Confidentiality.
(a)
For purposes of this Section
19: (i) “Confidential
Information” means all trade secrets or other confidential or proprietary
information, financial or otherwise, about the business, affairs, and assets
of
a Party and its Affiliates; (ii) “Affiliate” means any entity that,
directly or indirectly, is in control of, is controlled by, or is under
common
control with (A) a Party or (B) Xxxxx X. Xxxxxx, Xx., individually or jointly
with his wife; (iii) “Controlled Affiliates” means with respect to a
Party, any entity that directly or indirectly is controlled by such Party;
(iv)
an entity shall be deemed to be “controlled by” a person if the person
possesses, directly or indirectly, the power to either (A) vote 50% or
more of
the securities (including, without limitation, convertible securities)
having
ordinary voting power, or (B) direct or cause the direction of the management
or
policies of such entity whether by contract or otherwise, and (v)
“Representative” means the employees, contractors, agents, directors,
officers, legal counsel, accountants and financial advisors of a
party.
(b)
A Party, a Party’s Controlled Affiliates, and
the Representatives
of a Party and the Party’s Controlled Affiliates will not disclose or use any
Confidential Information which is furnished, or to be furnished, to it
(each a
“Receiving Party”) by the other Party (the “Disclosing Party”) or any of the
Representatives or Affiliates of the Disclosing Party at any time or in
any
manner other than as permitted by this Agreement.
(c)
Notwithstanding the prohibition
in Section 19 above, the Receiving
Party shall be entitled to disclose Confidential Information: (i) to its
Controlled Affiliates and to its and its Controlled Affiliates’ Representatives,
to the extent necessary to permit such Controlled Affiliates and Representatives
to assist the Receiving Party in performing the conduct of its business,
(ii) to
the extent such information becomes publicly available through no fault
of the
Receiving Party, any of Receiving Party’s Controlled Affiliates or the
Representatives of the Receiving Party or the Receiving Party’s Controlled
Affiliates; or (iii) as compelled or required by applicable law, a valid
subpoena, or other legal mandate; provided, however, (A) in the
event that the Receiving Party or any of Receiving Party’s Controlled Affiliates
or the Representatives of the Receiving Party or the Receiving Party’s
Controlled Affiliates receives such a subpoena or other legal mandate,
it shall
provide the Disclosing Party with prompt written notice of same as far
in
advance as practicable of the date such party is required to make such
disclosure, and (B) Customer shall use commercially reasonable efforts
to have
the fees in Schedule “A” hereto redacted from any filing of this Agreement with
a governmental body or agency.
(d)
Upon a termination of this Agreement,
each Receiving Party shall
return, in the manner directed by the Disclosing Party, the Confidential
Information that has been furnished to such Receiving Party, such Receiving
Party shall destroy copies of all materials that contain Confidential
Information or portions of Confidential Information, in whatever form or
medium
such copies or portions are contained (provided that, with respect to electronic
copies, destruction shall be required only to the extent reasonably
practicable), and the Receiving Party shall furnish to the Disclosing Party
a
certificate to the reasonable satisfaction of the Disclosing Party certifying
that such destruction has taken place.
(e)
Notwithstanding anything herein
to the contrary (including
elsewhere in this Section 19), Service Provider shall take all commercially
reasonable steps and follow all reasonable direction from Customer in order
to
protect the confidentiality, and any privileged nature of, any information
provide to, or generated by, Service Provider in connection with the performance
of the Legal Services.
(f)
The provisions of this Section
19 shall survive the termination or
expiration of this Agreement.
20.
Counterparts. This Agreement may be
executed in
counterparts, each of which shall be deemed an original, and all of which
shall
constitute one and the same instrument.
21.
Attorneys Fees. In connection with any
litigation,
including appellate proceedings or bankruptcy proceedings, arising under
this
Agreement, the prevailing party in such litigation shall be entitled to
recover
reasonable attorney’s fees and costs from the non-prevailing party.
[SIGNATURE PAGE TO
FOLLOW]
IN WITNESS WHEREOF, the
Parties have duly executed this Transition Services Agreement effective
as of
the Effective Date.
| “Customer”
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CNL
HOTELS & RESORTS, INC.
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| By: | /s/ Xxxxxxxx X. XxXxxxxx | |
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Name: Xxxxxxxx X. XxXxxxxx |
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| Title: Senior Vice President, General Counsel and Corporate Secretary | ||
| “Service
Provider”
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CNL
FINANCIAL GROUP, INC.
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By: | /s/ Xxxxx X. Xxxxxx, Xx. |
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Name: Xxxxx X. Xxxxxx, Xx. |
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| Title: Chief Executive Officer | ||
SCHEDULE “A”
SERVICES
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Service
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Summary
Description
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Fee
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Software
Services
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Provide
access to Oracle Financial enterprise resource planning system.
Provide Oracle database administration support.
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$155
per
hour for database administration based on actual hours used by
Customer;
33.33% allocation of Oracle outsourcing cost (Customer’s portion
approximately $6,000 per month)
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Investor
Relations /
Call
Center
Services
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Investor
Relations: Maintain and update investor database as necessary (address
changes, etc.), facilitate transfers for investors, process distributions
to investors including calculation, payment and mailing, facilitate
redemptions and the Distribution Reinvestment Plan (DRP), facilitate
mailing to investors as necessary (such as quarterly mailings to
New York
investors and quarterly reports), assist with proxy solicitation
process
as necessary.
Call
Center: Answer calls received from registered representatives of
broker/dealer firms and investors. Questions range from answering
historical performance questions, questions re: distributions,
tax
information, current events, etc. The Call Center also assists
investors or their financial advisors with processes, such as how
to
complete a transfer, how to participate in the DRP or how to redeem
shares, and provides items requested by investors and/or their
financial
advisors (such as copies of tax information).
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Proportionate
allocation of the direct cost of compensation,
benefits and direct overhead expenses of the Service Provider’s associates
(employees) providing the services based upon the number of investors
attributable to Customer relative to the total number of investors
being
serviced by Service Provider. (Estimated annual fee is
$850,000).
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Legal
Services
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Service
Provider’s Office of General Counsel provides: assistance with
retention and management of outside legal counsel; negotiation
of fee
discounts with outside legal counsel; xxxx review, billing guideline
compliance, and processing and tracking of bills from outside legal
counsel.
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$80,000
annually paid in twelve equal monthly installments of $6,667.
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