Exhibit 10.3
HOTEL MANAGEMENT AGREEMENT
THIS HOTEL MANAGEMENT AGREEMENT (the "Agreement") is made and entered into this
28th day of April, 1998, by and between ALPINE HOSPITALITY VENTURES LLC, a
Delaware limited liability company ("Parent"), RSVP-BI OPCO, LLC, a Delaware
limited liability company ("OPCO"), RSVP-ABI REALCO, LLC, a Delaware limited
liability company ("REALCO") (OPCO and REALCO are hereinafter collectively
referred to as "Borrower") (Parent and Borrower are hereinafter collectively
referred to as "Owner") and USFS MANAGEMENT, INC., a Georgia corporation
("Operator").
WITNESSETH:
WHEREAS, Borrower owns (or is the ground lessee relating to) the 11
Best Inn hotels and 6 Best Suite hotels listed on Exhibit A (collectively, the
"Hotels");
WHEREAS, the Hotels are licensed by Best Franchising, Inc.
("Licensor") as Best Inns or Best Suites (as applicable) hotels to Borrower
pursuant to the terms of 17 amended and restated license agreements (the
"Licenses"), each dated April 28, 1998;
WHEREAS, Licensor assumed the rights, duties and obligations under
the original license agreements of the original licensor, America's Best Inns,
Inc., and Borrower assumed the rights, duties and obligations under the original
license agreement of the original licensees, affiliates of America's Best Inns,
Inc., pursuant to the terms of certain assignments of license agreements each
dated as of April 28, 1998;
WHEREAS, Parent is the guarantor of the rights, duties and
obligations of Borrower under the License;
WHEREAS, Owner wishes to engage Operator as its agent to manage and
operate the Hotels on behalf of Owner under the Licenses; and
WHEREAS, Operator has the knowledge and expertise to manage and
operate the Hotels on behalf of Owner pursuant to the terms herein and the
License;
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, and other good and lawful consideration, and
intending to be legally bound hereby, the parties agree as follows:
ARTICLE 1
GENERAL
1.1 Appointment and Term. Owner hereby appoints Operator as the
manager of the Hotels with the sole and exclusive obligation and authority to
direct, supervise, manage, and operate the Hotels as the agent of the Owner.
This Agreement and the obligations of Operator hereunder shall be effective the
date the Hotels are purchased by the Owner ("Effective Date"). Unless terminated
pursuant to other terms contained herein, this Agreement will continue for a
term commencing on the Effective Date and ending at the end of the then next
calendar month following the twentieth (20th) anniversary of the Effective Date.
1.2 Management. Operator accepts its appointment and agrees to
supervise, manage, and operate the Hotels in accordance with (i) the provisions
of the Agreement, (ii) applicable law, (iii) the Licenses, incorporated by
reference herein, (iv) Owner's obligations under all loan agreements applicable
to the Hotels that Operator is aware of, and (v) the fiduciary obligation of
Operator to Owner.
ARTICLE 2
OPERATIONS
2.1 Employees. Operator shall, in the name of the Owner, hire,
terminate where appropriate, supervise, direct, train and assign the duties of
the managers, assistant managers, employees and agents (collectively,
"Employees") at the Hotels as may be required in the Operator's discretion to
operate the Hotels, and prompt notice of any such proposed change shall be given
to Operator. The Employees shall in every instance be deemed agents or
employees, as the case may be, of Owner. All hiring expenses, salaries, wages
and other compensation of the Employees of the Owner hereunder working
exclusively at and for the benefit of the Hotels, including, but not limited to,
fringe benefits, medical and health insurance and profit sharing shall be an
Operating Expense (as hereinafter defined). Reasonable meal allowances for
Operator's personnel visiting the Hotels in connection with the management
thereof shall also be considered Operating Expenses of the Hotels. Owner shall
provide free lodging at the Hotels to Operator's personnel visiting the Hotels
in connection with the management thereof.
2.2 Compliance with Laws. Operator shall be responsible, at Owner's
expense, for the management, operation and maintenance of the Hotels in
compliance with the License and all laws, ordinances, regulations, permits and
orders relative to the leasing, management, operation, repair and maintenance of
the Hotels.
2.3 Operating Budget. Operator agrees to submit to Owner not later
than seventy (70) days prior to the end of the calendar year, an operating
budget setting forth an estimated profit and loss statement for the ensuing year
on a monthly basis
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(the "Operating Budget"), in the form prescribed by Owner's first mortgage
lender. The Operating Budget represents Operator's best good faith efforts to
accurately project revenues and expenditures but in no way does Operator
guarantee such results.
2.4 Capital Expenditures Budget. Operator shall submit to Owner not
later than seventy (70) days prior to the end of the calendar year, a capital
expenditures budget setting forth a good faith estimate of the capital
expenditures proposed for the ensuing year ("Capital Expenditures Budget"), in
the form prescribed by Owner's first mortgage lender. Operator shall make those
alterations, additions, or improvements in or to the Hotel that have been
approved by Owner as part of the approved Capital Expenditures Budget. The cost
of such alterations, additions, or improvements shall be paid from the Capital
Reserve. It shall be the responsibility of Owner to ensure that funds from the
Capital Reserve established and maintained by Owner's lender are available to
Operator to effectuate capital maintenance and repairs. Operator shall receive
no purchasing fee in connection with any purchases made on behalf of the Owner.
2.5 Other Reports. Operator shall prepare and deliver to Owner such
other reports as may be required to be furnished to Owner's first mortgage
lender not less than five (5) business days prior to the date such reports are
to be delivered to Owner's lender. Such reports shall be prepared by Operator in
the manner prescribed by Owner's lender to ensure compliance with the terms of
the Owner's first mortgage loan documents, as amended from time to time.
Notwithstanding the foregoing, upon an amendment to such loan documents Owner
shall be obligated to provide Operator with notice of all new or revised reports
to be prepared for the benefit of Owner's lender in accordance with this Section
2.5, which notice shall include the format and all applicable time requirements
regarding the submission of such reports. Operator shall also prepare all such
reports as required by Licensor in a timely manner in compliance with the terms
of the License.
2.6 Repairs. Operator shall use its reasonable best efforts to
maintain the Hotels in good repair and maintenance.
2.7 Service Contracts. Operator shall negotiate service contracts
reasonably necessary or desirable in connection with the operation of the Hotels
in the usual course of business, and shall be authorized to enter into such
service contracts in Owner's name. Operator shall provide Owner with prompt
notice following execution of any such contracts.
2.8 Insurance. Unless Owner requests in writing for Operator to
obtain insurance for each Hotel, Owner will obtain and maintain at its own
expense all insurance. All insurance coverage (i) shall be placed with such
companies which are in good standing and licensed to do business in the states
where the Hotels are located, in such amounts, against such risks and with such
beneficial interest as shall be acceptable to and in conformity with the
requirements of Licensor, Owner's lender
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and applicable law, (ii) shall not be claims-made types policies, and (iii)
shall include workers compensation procured on behalf of Owner's Employees as
mandated by applicable law. Operator shall notify Owner in writing of any
material accident or material claim for damage concerning the ownership,
operation or maintenance of the Hotels or any material damage to the Hotels and
the estimated cost of repair thereof and Operator shall prepare (with Owner's
assistance) reports to any insurance company in connection therewith. Owner
shall furnish Operator with certificates evidencing all insurance obtained by
Owner, which certificates shall list Operator, Licensor, Licensor's parent,
Owner and Owner's lender as additional insureds under all insurance policies and
state that Operator shall receive thirty (30) days advance written notice prior
to cancellation.
ARTICLE 3
ACCOUNTING
3.1 Books of Account. Operator shall maintain separate books and
records for the operation and management of the Hotels in accordance with
generally accepted accounting principles. Operator shall also be entitled to
receive a monthly accounting fee of $1,000 for each Hotel managed by Operator
pursuant to this Agreement. All books and records of the Hotels shall be
available to Owner and Owner's lender at all reasonable times for examination,
audit, inspection and transcription. Upon termination of this Agreement, all
such books and records shall be turned over to Owner. Operator shall provide
Owner with financial reports for the Hotels each month within twenty (20) days
after the close of each month and annually within seventy-five (75) days of the
end of the calendar year, all in such form as prescribed by Owner's first
mortgage lender. Without limiting the foregoing, Operator shall coordinate with
the Owner and the Owner's independent public accountants to ensure that Owner's
annual audited financial statements are delivered to the Owner's first mortgage
lender on or prior to March 31 of the following year. These reports shall
include an unaudited balance sheet, operating statement, and cash flow statement
indicating both monthly and year-to-date figures. The cost of any audit of the
financial statements or reports provided to Owner shall be an expense of the
Owner. Operator shall also provide such other reports, and prepare and maintain
such records and accounting systems, as required by Owner's lender (including,
but not limited to, Section 12 of the Loan Agreement with Owner's first mortgage
lender) or Licensor (including, but not limited to, Sections 6A, 6B and 6D of
the License) in a timely fashion as outlined in Section 2.5 of this Agreement.
3.2 Operating Account. Operator is authorized to establish, as agent
for Owner, one or more accounts (collectively, the "Operating Account") at
financial institutions approved by Owner. Operator and Owner shall each
designate signatures authorized to access such account. Operator shall not
commingle its funds with the funds of the Hotels. Operator shall pay all
expenses incurred in connection with the operation and supervision of the Hotels
and any other payments relative to the Hotels
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as required by this Agreement ("Operating Expenses") from the Operating Account
after funds are wired into the Operating Account by Owner or Owner's lender.
Payment of all expenses concerning the ownership of the Hotels shall be the
responsibility of Owner. Owner agrees that Operating Expenses to be paid out of
the Operating Account include, but are not limited to, salary and wages, payroll
taxes, utilities, costs of collection of delinquent accounts, management fees,
and all royalty fees and reservation/marketing fees under the License. After
Operator has paid, to the extent funds are available in the Operating Account,
all bills, charges, costs and expenses of operating and managing the Hotels,
Operator shall submit to Owner written notice together with copies of all
remaining unpaid, due and outstanding bills. Owner shall advance to the
Operating Account funds in an amount necessary to pay all such remaining unpaid
bills within a reasonable time after the receipt of said written notice.
Operator shall in no event be required to advance any of its funds for the
operation of the Hotels, nor to incur any obligation to third parties in
connection with the operation of the Hotels. Any operating loss and/or negative
cash flow shall be for the account of and shall be borne by the Owner
exclusively, and shall not reduce any fees due to Operator or Licensor.
ARTICLE 4
COMPENSATION
4.1 Management Fee. Operator shall receive a monthly management
fee within ten (10) days of Owner's lender wiring funds into the Operating
Account, if applicable, otherwise within ten (10) days from the end of each
calendar month (the "Management Fee") equal to five percent (5%) of Gross
Revenue (as hereinafter defined) for each month from the Effective Date until
the expiration or sooner termination of this Agreement.
4.2 "Gross Revenue" Defined.
A. "Gross Revenue" shall mean all revenues from the operation of the
Hotels, computed on an accrual basis, from whatever source derived, including,
but not limited to, proceeds from the use of rooms (both sleeping rooms and
public rooms) and the sale of food and beverage services from the Hotels.
B. "Gross Revenue" shall not include, and there shall be deducted
from the computation of Gross Revenues: (i) all gratuities, tips, or sales
charges added to a customer's xxxx which are payable to hotel employees; (ii)
all sales taxes, excise taxes, gross receipts taxes, admission taxes,
entertainment taxes, tourist taxes, liquor taxes and all other taxes; (iii) all
abatements of taxes; (iv) interest on investments or Hotel accounts; (v) awards
arising out of a taking by eminent domain; (vi) discounts and dividends on
insurance policies; (vii) proceeds recovered or collected with regard to or on
account of insurance covering the Hotels; and (viii) amounts collected from a
third party and/or their insurance carrier as the result of damage to the
Hotels.
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ARTICLE 5
TERMINATION
5.1 Termination By Owner.
A. Notwithstanding Section 1.1, Owner may terminate this Agreement
upon written notice to the Operator given at any time after either of the
following events:
(i) Operator shall default on any of the material terms or
conditions of this Agreement or the material obligations imposed hereunder and
shall fail to cure such default within thirty (30) days after receipt of written
notice from Owner. Notwithstanding the foregoing, any default which cannot be
cured within thirty (30) days shall not give Owner a right to terminate this
Agreement if Operator is diligently attempting to cure such default; or
(ii) If any Hotel is materially damaged by fire or other casualty
and Owner shall not within thirty (30) days after such casualty, elect to
rebuild or renovate the Hotel, this Agreement shall terminate with respect to
that Hotel and shall continue in full force and effect with respect to the
remaining Hotels.
B. Notwithstanding Sections 1.1 or 5.1, Owner may terminate this
Agreement without cause at any time but with sixty (60) days prior written
notice to Operator with respect to one or more Hotels, subject to the payment to
Operator of the Termination Fee provided in Section 5.2.
5.2 Effect of Termination. Upon termination of this Agreement
pursuant to Section 5.1, Operator shall be entitled to a final accounting of and
payment of any sums due to Operator through the date of termination. If this
Agreement is terminated pursuant to Section 5.1B, including, without limitation,
a termination in connection with any sale, assignment or other transfer of all
or any of the Hotels, the Owner agrees to pay Operator a Termination Fee with
respect to the particular Hotel(s) being sold, assigned, transferred or
otherwise terminated in an amount equal to three (3) multiplied by the lesser of
(i) the annual fees paid to Operator for the last 12 months under this
Agreement, as supplemented by the parties, and (ii) the average annual fees paid
to operator for the last 36 months under this Agreement, as supplemented by the
parties (the amount determined under clause (i) or (ii) is being referred to as
the "Applicable Annual Amount").
ARTICLE 6
INDEMNIFICATION
6.1 Standard of Performance. Operator shall not be liable to Owner
for the failure to perform any act or any omission in connection with the
performance of any
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duty hereunder except to the extent that such failure is due to the gross
negligence or willful misconduct of Operator, or Operator's officers, agents,
servants or employees. Owner shall not be liable to Operator for the failure to
perform any act or any omission in connection with the performance of any duty
hereunder except to the extent that such failure is due to the gross negligence
or willful misconduct of Owner, or Owner's officers, agents, servants, or
employees.
6.2 Indemnification.
A. Operator hereby agrees to indemnify, defend and hold Owner and
Parent and each officer, director, employee, partner, member or agent of Owner,
its affiliates, partners, members and joint venturers harmless from and against
any loss, expense, damage, claim, liability, obligation, judgment or injury
sustained by it by reason of any act, omission or alleged act or omission
arising out of Operator's gross negligence or willful misconduct in connection
with the management and/or operation of the Hotels. The indemnification rights
herein shall be in addition to any rights of Owner pursuant to this Agreement,
at law or in equity and shall survive the termination of this Agreement.
B. Owner hereby agrees to indemnify, defend, and hold Operator and
its parent and each officer, director, employee, parent, agent, affiliate or
joint venturer thereof harmless from and against any loss, expense, damage,
claim, liability, obligation, judgment or injury sustained by it by reason of
any act, omission or alleged act or omission arising out of or incidental to
Owner's ownership of the Hotel (other than in connection with this Agreement or
the Operator's discharge of its obligations hereunder). The indemnification
rights herein shall be in addition to any rights of Operator pursuant to this
Agreement, at law or in equity and shall survive the termination of this
Agreement.
6.3 Priority of Agreement and Estoppel Certificates. This Agreement
shall be subordinate to the payment of senior debt service related to the
payment of the Owner's first mortgage lender. Upon request of either party, the
other party shall execute a certificate stating whether or not this Agreement is
in full force and effect, specifying the nature of any uncured defaults
hereunder and specifying any amounts due and owing hereunder which have not been
paid.
ARTICLE 7
MISCELLANEOUS
7.1 Assignment. Neither party may assign its rights, duties or
obligations under this Agreement without the prior written consent of the other
party, and any such purported assignment shall be considered void and of no
force and effect. Operator's consent shall not be required if Owner assigns its
rights hereunder to the holder of any senior debt covering the Hotel(s). In
connection with the sale or
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transfer of a Hotel(s), Owner may terminate this Agreement with respect to the
Hotel(s) being sold or transferred upon payment to Operator of the Termination
Fee provided in Section 5.2. Operator may assign its rights, duties and
obligations hereunder to any wholly owned subsidiary of U.S. Franchise Systems,
Inc. without Owner's consent, provided, however, that any such assignment by
Operator shall not relieve Operator of its obligation to perform its duties and
obligations hereunder.
7.2 Notices. All notices, demands, requests and other communications
hereunder shall be in writing and shall be deemed to be delivered when received
whether through U.S. Express Mail or any private overnight service or personal
delivery (as evidenced by a written receipt), addressed to the addressee at its
address set forth below or at such other address as such party may have
specified by notice delivered in accordance with this Section:
If to Operator: USFS Management, Inc.
00 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
If to Parent or
Borrower: 1285 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxxxx, Esq.
7.3 Survival. Except as otherwise expressly provided herein,
obligations accrued to the date of any termination of this Agreement shall
survive the termination.
7.4 Governing Law; Venue. The laws of the State of Georgia shall
govern the validity, enforcement and interpretation of this Agreement unless
otherwise agreed to in writing by Owner and Operator.
7.5 Integration; Modification; Waiver. This Agreement constitutes
the complete and final expression of the agreement of the parties relating to
the Hotels and supersedes all previous contracts, agreements and understandings
of the parties, either oral or written, relating to the Hotels. This Agreement
cannot be modified, or any of the terms hereof waived, except in writing
executed by all parties hereto.
7.6 Counterpart Execution. This Agreement may be executed in several
counterparts, each of which shall be fully effective as an original and all of
which together shall constitute one and the same instrument.
7.7 Headings; Construction. The headings used throughout this
Agreement have been inserted for convenience of reference only and do not
constitute matter to be construed in interpreting this Agreement. The words
"herein," "hereof," "hereunder" and other similar compounds of the word "here"
when used in this
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Agreement shall refer to the entire Agreement and not to any particular
provision or section.
7.8 Agent Only for Owner. Operator is acting solely as agent for and
on behalf of and for the account of the Owner. Nothing in this Agreement shall
create or be construed to create a partnership or joint venture relationship
between Owner, its successors and assigns, and Operator, its successor and
assigns. Operator shall bear no portion of losses arising out of or connected
with the ownership or operation of the Hotel except as specifically set forth
herein.
7.9 Limited Liability. The parties agree that no officer, director,
shareholder, member or partner of the other shall have any personal liability
under this Agreement.
7.10 Invalid Provisions. If any of the provisions of this Agreement
shall be held invalid or unenforceable such provision shall be modified to the
minimum extent necessary to make it or its application valid and enforceable,
and the validity and enforceability of all other provisions of this Agreement
and all other applications for any such provision shall not be affected thereby.
7.11 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of Owner and Operator and their respective successors and
permitted assigns. Except as expressly provided herein, nothing in this
Agreement is intended to confer on any person, other than the parties thereto
and their respective successors and permitted assigns, any rights or remedies
under or by reason of this Agreement.
SIGNATURES TO FOLLOW ON NEXT PAGE
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PARENT: OPERATOR:
ALPINE HOSPITALITY USFS MANAGEMENT, INC.
VENTURES LLC
by Ventures Manager Inc.,
its managing member By: /s/ Xxxx X. Xxxxxxx
------------------------------
Xxxx X. Xxxxxxx,
Executive Vice President
By: /s/ Xxxxxxx X. Xxxxxxxxx and Chief Financial Officer
------------------------
Xxxxxxx X. Xxxxxxxxx
President
BORROWER:
RSVP-BI OPCO, LLC
by OPCO MANAGER INC.,
its managing member
By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------
Xxxxxxx X. Xxxxxxxxx
President
BORROWER:
RSVP-ABI REALCO, LLC
by RSVP-BI OPCO, LLC,
its managing member,
by OPCO Manager, Inc.,
its managing member
By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------
Xxxxxxx X. Xxxxxxxxx
President
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EXHIBIT A
Montgomery, AL (Suites)
Mobile, AL (Suites)
Johnston, IA (Inn)
Mobile, AL (Inn)
Birmingham, AL (Suites)
Libertyville, IL (Inn)
Caseyville, IL(Inn)
Carbondale, IL (Inn)
Springfield, IL (Inn)
Ft. Xxxxx, IN (Inn)
South Bend, IN (Inn)
Anderson, IN (Inn)
Paducah, KY (Inn)
Jackson, MS (Suites)
Asheville, NC (Inn)
Canton, OH (Suites)
Nashville, TN (Suites)
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EXHIBIT
Listing of Properties
1. Montgomery Best Suites
0000 Xxxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Xxxxxxxxxx County
2. Birmingham Best Suites
000 Xxxxx Xxxx Xxxxxxx
Xxxxxxxx, XX 00000
Xxxxxxxxx Xxxxxx
3. Mobile Best Suites
000 Xxxxxxxx Xxxxxxx Xxxxx
Xxxxxx, XX 00000
Mobile County
4. Mobile Best Inns
000 Xxxxxxxx Xxxxxxx Xxxxx
Xxxxxx, XX 00000
Mobile County
5. Carbondale Best Inns
0000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Xxxxxxx County
6. Libertyville Best Inns
0000 X. Xxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Lake County
7. South Bend Best Inns
000 Xxxxx Xxxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
St. Xxxxxx County
8. Jackson Best Suites
0000 Xxxxxxxxxx Xxxxxxx 00 Xxxxx
Xxxxxxx, XX 00000
Xxxxx County
9. Canton Best Suites
0000 Xxxxxxxx Xxxx X.X.
Xxxxxx, XX 00000
Xxxxx County
10. Springfield Best Inns
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Xxxxxxxx Xxxxxx
11. Paducah Best Inns
0000 Xxxxxxxxxxx Xxxx
Xxxxxxx, XX 00000
XxXxxxxxx County
12. Caseyville Best Inns
0000 Xxx Xxxxxxx Xxx Xxxxx
Xxxxxxxxxx, XX 00000
St. Clair County
13. Asheville Best Inns
0000 Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
Xxxxxxxx Xxxxxx
14. Des Moines Best Inns
0000 Xxxxx Xxx Xxxx
Xxxxxxxx, XX 00000
County of Polk
15. Anderson Best Inns
0000 Xxxxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Xxxxxxx Xxxxxx
16. Nashville Best Suites
0000 Xxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Davidson County
17. Fort Xxxxx Best Inns
0000 Xxxx Xxxxxxxx Xxxx.
Xxxx Xxxxx, XX 00000
County of Xxxxx
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