EXHIBIT 10.3.2
[THIS AGREEMENT IS SUBJECT TO A CONFIDENTIALITY PROVISION - SECTION 12.21]
[EMBASSY SUITES HOTELS LOGO]
MANAGEMENT AGREEMENT
LOCATION: EMBASSY SUITES __________
DATED: __________, 200_
BY AND BETWEEN
OWNER: __________
MANAGER: PROMUS HOTELS INC.
Embassy Suites __________ Management Agreement
i
MANAGEMENT AGREEMENT
THIS AGREEMENT is made as of ____________________, 2004 by and between
__________, a __________ ("Owner"), having a principal office at 000 Xxxx Xxxx
Xxxxxxxxx Xxxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000, and PROMUS HOTELS INC., a
Delaware corporation ("Manager"), having a principal office at 0000 Xxxxx Xxxxxx
Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000.
PRELIMINARY STATEMENT
WHEREAS, Owner and Manager are parties to that certain Management
Agreement dated as of __________, as amended by the First Amendment to
Management Agreement dated as of __________ (collectively, "Prior Agreement"),
which provides, among other things, for the operation and management of that
certain Embassy Suites hotel located at __________ in __________ ("Hotel") upon
the terms and conditions set forth therein.
WHEREAS, the Prior Agreement expires as of __________;
WHEREAS, Owner desires to continue utilizing the services and experience
of Manager in connection with the operation of the Hotel, and Manager desires to
render such services, all upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which hereby are acknowledged, Owner and Manager agree
as follows:
ARTICLE I
DEFINITIONS
1.01 Definitions. In addition to terms previously defined in the Preamble
and Preliminary Statement, the following terms shall have the meanings
specified:
1.01.1 Affiliate(s) - with respect to any entity, any natural person
or firm, corporation, partnership, association, trust or other entity
which, directly or indirectly, controls, is controlled by, or is under
common control with, the subject entity. For purposes hereof the term
"control" shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of any
such entity, or the power to veto major policy decisions of any such
entity, whether through the ownership of voting securities, by contract,
or otherwise.
1.01.2 Brand - Embassy Suites.
1.01.3 CPI - as defined in Subsection 4.02.3.
1.01.4 Capital Renewals - a collective term for (a) normal capital
replacements of, or additions to, FF&E, and (b) special projects designed
to maintain the Hotel in a first-class condition in accordance with the
standards contemplated by this Agreement, including renovation of the
guest room areas, public space, food and beverage facilities, or back of
the
Embassy Suites __________ Management Agreement
1
house areas, which projects will generally comprise replacements of, or
additions to, FF&E, but may include revisions and alterations in the
Improvements; most of the expenditures for such special projects will be
capitalized, but a portion thereof may be currently expended, such as the
purchase of smaller items of FF&E, or expenditures which are ancillary to
the overall project but which are properly chargeable to "Property
Operations and Maintenance" under the Uniform System of Accounts.
1.01.5 Capital Renewals Budget(s) - as defined in Paragraph
4.02.1(b).
1.01.6 Capital Renewals Reserve and Capital Renewals Account - each
term as defined in Subsection 4.02.5.
1.01.7 Commencement Date - __________, 2004.
1.01.8 Compensation - the direct salaries and wages paid to, or
accrued for the benefit of, any executive or other employee together with
all fringe benefits payable to, or accrued for the benefit of, such
executive or other employee, including employer's contributions required
pursuant to any Legal Requirement, or other employment taxes, pension fund
contributions, group life and accident and health insurance premiums, and
profit sharing, retirement, disability and other similar benefits.
1.01.9 Controlling Person - as defined in Section 12.05.
1.01.10 Corporate Personnel - personnel from the corporate offices
of Manager and/or its Affiliates who perform activities in connection with
the services provided by Manager under this Agreement.
1.01.11 Executive Staff - the Managing Director (if any), General
Manager, Resident Manager (if any), Executive Assistant Manager (if any),
and all non-clerical or administrative positions reporting directly to any
such persons.
1.01.12 FF&E - all furniture, furnishings, equipment, fixtures,
apparatus and other personal property used in, or held in storage for use
in (or if the context so dictates, required in connection with), the
operation of the Hotel, other than Operating Equipment, Operating Supplies
and fixtures attached to and forming part of the Improvements.
1.01.13 Full Operating Year - those Operating Years which are
co-extensive with full calendar years and excluding any partial Operating
Years at the beginning or the end of the Term.
1.01.14 Gross Revenues - as defined in the Management Fee Rider.
1.01.15 Ground Lease - the ground lease, if any, described in
Exhibit I.
1.01.16 Hotel - the hotel referred to in the Preliminary Statement,
including the Land and Improvements, and Owner's interest therein, and any
greater estate or interest hereafter
Embassy Suites __________ Management Agreement
2
acquired, together with all entrances, exits, rights of ingress and
egress, easements and appurtenances belonging or pertaining thereto.
1.01.17 Hotel Accounts - as defined in Section 7.01.
1.01.18 Hotel Personnel - all individuals performing services in the
name of the Hotel at the Hotel who are employed by Manager or an Affiliate
of Manager.
1.01.19 Impositions - all taxes, assessments, water, sewer or other
similar rents, rates and charges, levies, license fees, permit fees,
inspection fees and other authorization fees and charges, which at any
time may be assessed, levied, confirmed or imposed on the Hotel or the
operation thereof.
1.01.20 Improvements - the buildings, structures (surface and
subsurface) and other improvements now or hereafter located on the Land.
1.01.21 Intellectual Property - as defined in Section 11.01
1.01.22 Land - the parcel or parcels of land described in Exhibit I.
1.01.23 Legal Requirements - all public laws, statutes, ordinances,
orders, rules, regulations, permits, licenses, authorizations, directions
and requirements of all governments and governmental authorities, which,
now or hereafter, may be applicable to the Hotel and the operation
thereof, including those relating to zoning, building, life/safety,
environmental and health, employee benefits, and providing continued
health care coverage under the Employees Retirement Income Security Act of
1974, as amended.
1.01.24 License Agreement - the franchise license agreement dated
__________, 2004 by and between __________, as licensee, and __________,
as licensor.
1.01.25 Major Capital Improvements - as defined in Subsection
12.08.1.
1.01.26 Managed Hotels - a collective term for the Hotel and all
Other Managed Hotels.
1.01.27 Management Fee - as defined in the Management Fee Rider.
1.01.28 Manager - the person or entity named in the preamble hereto,
or the successor of Manager's interest with respect to this Agreement.
1.01.29 Manager Software - as defined in Section 11.01
1.01.30 Manager's Grossly Negligent or Willful Acts - any gross
negligence, willful misconduct or fraud committed by Manager, its
Affiliates, the Corporate Personnel or any of the Executive Staff of the
Hotel in the performance of Manager's duties under this Agreement. The
acts or omissions (including grossly negligent, willful or fraudulent acts
or omissions) of Hotel Personnel other than the Executive Staff of the
Hotel shall not be imputed to Manager or its
Embassy Suites __________ Management Agreement
3
Affiliates, or to the Corporate Personnel, nor be deemed to constitute
Manager's Grossly Negligent or Willful Acts, unless such acts or omissions
resulted directly from the gross negligence or willful misconduct of the
Corporate Personnel or the Executive Staff of the Hotel in supervising
such Hotel Personnel.
1.01.31 Mortgage and Mortgagee - each term as defined in Subsection
9.03.3.
1.01.32 Operating Budgets - as defined in Paragraph 4.02.1(a).
1.01.33 Operating Equipment - non-consumable items (other than FF&E)
used in, or held in storage for use in (or if the context so dictates,
required in connection with), the operation of the Hotel, including all
china, glassware, linens, silverware and uniforms.
1.01.34 Operating Manual - the Operating Manual issued by Manager
and revised from time to time which sets out Manager's services and the
policies, practices and standards of Managed Hotels for hotel operations,
identification, advertising and accounting.
1.01.35 Operating Period - the period beginning with the
Commencement Date and ending upon the expiration or termination of this
Agreement.
1.01.36 Operating Supplies - consumable items used in, or held in
storage for use in (or if the context so dictates, required in connection
with), the operation of the Hotel, including food and beverages, fuel,
soap, cleaning materials, matches, stationery, folios, invoices, contract
forms, brochures and other forms of advertising or promotional materials
and other similar items.
1.01.37 Operating Years - the Operating Years shall coincide with,
and be identical to, the calendar years, except that the first Operating
Year shall be a partial year beginning on the Commencement Date and ending
on the following December 31, and if this Agreement shall be terminated
effective on a date other than December 31 in any year, then the partial
year from January 1 of the year in which such termination occurs to such
effective date of termination shall be treated as an Operating Year.
1.01.38 Other Managed Hotels - all full-service hotels and inns
within the United States other than the Hotel which are owned, leased
and/or operated by Manager or any of its Affiliates under the Brand name.
1.01.39 Owner - the person or entity named in the preamble hereto,
or the successor of Owner's interest with respect to this Agreement.
1.01.40 Owner's Invested Capital - as defined in the Management Fee
Rider.
1.01.41 Permitted Exceptions - (i) the Ground Lease, if any, and the
terms thereof; (ii) the Permitted Mortgage(s) and the terms thereof; (iii)
liens for Impositions not delinquent; (iv) undetermined or inchoate liens
or charges for labor or materials supplied to the Hotel in connection with
the construction or current operation thereof, which have not at the time
been filed or recorded pursuant to law; and (v) easements, restrictions on
use, zoning laws and
Embassy Suites __________ Management Agreement
4
ordinances, rights of way and other encumbrances and minor irregularities
in title, which do not individually or in the aggregate impair the use of
the Hotel for hotel purposes.
1.01.42 Permitted Mortgage - as defined in Subsection 9.03.3.
1.01.43 Project - a collective term for the real and personal
property comprising the Hotel.
1.01.44 Technical Services - those advisory and consulting services
which Manager and its Affiliates render to Managed Hotels in connection
with the design, planning, construction, organization and operation
thereof, through which Manager's experience in the field is made available
to such hotels and inns.
1.01.45 Term - as defined in Section 2.01.
1.01.46 Uniform System of Accounts - for purposes of this Agreement
other than the Management Fee Rider, the Uniform System of Accounts for
the Lodging Industry (Ninth Revised Edition, 1996) including any
subsequent revisions of the Uniform System of Accounts; for purposes of
the Management Fee Rider, the Uniform System of Accounts for the Lodging
Industry (Ninth Revised Edition, 1996) not including any subsequent
revisions of the Uniform System of Accounts.
1.02 References and Construction. Except as otherwise specifically
indicated, all references to Article, Section, Subsection and Paragraph numbers
refer to Articles, Sections, Subsections and Paragraphs of this Agreement, and
all references to Exhibits refer to the Exhibits attached hereto. Unless
expressly stated to the contrary, reference to any Section includes the
following Subsections thereof. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as
appropriate. The words "herein", "hereof", "hereunder", "hereinafter" and words
of similar import refer to this Agreement as a whole and not to any particular
Article, Section, Subsection or Paragraph hereof. The terms "include" and
"including" shall each be construed as if followed by the phrase "without being
limited to". This Agreement will be interpreted without interpreting any
provision in favor of or against either party by reason of the drafting of the
provision.
1.03 Preamble and Recitals. The preamble and foregoing recitals are true
and correct and are incorporated herein by reference.
ARTICLE II
TERM
2.01 The Term. The "Term" of this Agreement shall commence on __________,
2004 and shall expire at midnight of __________, 2009.
Embassy Suites __________ Management Agreement
5
ARTICLE III
[INTENTIONALLY OMITTED]
ARTICLE IV
OPERATING PERIOD
4.01 Authority and Duty of Manager. Manager shall have the sole and
exclusive right and obligation to manage and operate the Hotel pursuant to the
terms of this Agreement and Manager agrees that it shall manage and operate the
Hotel as a first-class hotel comparable to Other Managed Hotels in accordance
with the standards for full-service Managed Hotels set forth in the Operating
Manual, taking into account the size, location and character of the Hotel. In
connection therewith, Manager shall have the authority and responsibility,
subject to the provisions of this Agreement, to (i) determine operating policy,
standards of operation, quality of service, the maintenance and physical
appearance of the Hotel and any other matters affecting operations and
management; (ii) subject to reasonable conformity with the approved Operating
Budget and Capital Renewals Budget, supervise and direct all phases of
advertising, sales and business promotion for the Hotel; and (iii) subject to
reasonable conformity with the approved Operating Budget and Capital Renewals
Budget, carry out all programs contemplated by the Operating Budgets and Capital
Renewals Budgets, which have been approved by Owner pursuant to Section 4.02.
Owner agrees that it will cooperate reasonably with Manager to permit and assist
Manager to carry out its duties hereunder.
Owner and Manager further agree that this Agreement provides for management in
respect of the Hotel, that Owner and Manager do not intend, nor does this
Agreement grant or create, a franchise within the meaning of the Federal Trade
Commission Act, any rule or regulation promulgated thereunder, or any other
applicable law, rule, regulation or judicial decision.
Manager acknowledges that this Agreement is subject and subordinate to the Hotel
Lease (it being understood that such subordination does not affect Manager's
right to receive the Base Management Fee when due including during a default by
Owner which has continued beyond the applicable cure period under the Hotel
Lease) and that Manager, on behalf of Owner and at Owner's sole expense, shall
use its reasonable efforts to fulfill Owner's duties and obligations under the
Hotel Lease. Owner shall not pursue any amendments or modifications of the Hotel
Lease if such amendment or modification would affect Manager's rights,
obligations or liabilities under this Agreement, without the prior written
approval of Manager, such approval of Manager not to be unreasonably withheld;
provided, however, that a copy of any amendment, modification or other related
documents shall be delivered to Manager upon execution thereof.
4.02 Operating Budgets and Capital Renewals Budgets.
4.02.1 Preparation. Manager will submit to Owner, not less than
forty-five (45) days in advance of each Operating Year, the following
budgets for such Operating Year:
(a) an operating budget composed of an estimate of profit and loss
by month, an estimated cash flow projection by month, and
departmental forecast of operations (collectively the
"Operating Budgets"); and
Embassy Suites __________ Management Agreement
6
(b) a budget covering estimated Capital Renewals, which indicates
in reasonable detail the replacements of, or additions to,
FF&E, and the nature of the special projects covered thereby
(the "Capital Renewals Budget(s)").
Budgets for Major Capital Improvements initiated under Section 12.08 shall
be treated separately and shall not be included in the Capital Renewals
Budget.
4.02.2 Review. In connection with the submission of the Operating
Budgets and the Capital Renewals Budgets, representatives of Manager will
meet with Owner to have an in-depth discussion thereof, including a
comparison with the previous year's performance of the Hotel, a discussion
of marketing strategy, identity of markets and the proposed expenditures
contained in the Capital Renewals Budget.
4.02.3 Approval of Budgets. The Operating Budget and the Capital
Renewals Budget shall be subject to the approval of Owner, it being
contemplated that each such Operating Budget and Capital Renewals Budget
shall be agreed upon by Owner and Manager within thirty (30) days after
the submission of the same by Manager to Owner. If Owner shall fail to
approve any Operating Budget or Capital Renewals Budget within thirty (30)
days after its submittal by Manager, or to submit its written objections
thereof to Manager within such period, then Owner shall be deemed to have
approved the same. In case of a dispute with regard to any Operating
Budget, then pending the settlement thereof, or until such dispute is
resolved in accordance with Section 12.04, Manager shall be entitled to
continue to operate the Hotel in accordance with the standards set forth
herein and shall be entitled to make expenditures which are contemplated
by and consistent with the Operating Budget proposed by Manager for such
Operating Year; provided that, subject to the standards of performance
described in Subsection 4.02.4 below, the maximum approved amount of such
expenditures shall be equal to (a) the aggregate of all items set forth in
the Operating Budget which are not disputed by Owner, plus (b) with
respect to all items in the Operating Budget which are disputed or
objected to by Owner, the amount allocated to such item(s) in the
Operating Budget for the immediately preceding Operating Year increased by
the greater of (i) five percent (5%), or (ii) the difference between the
Consumer Price Index (All Cities - All Items) (1982-84 = 100) (the "CPI"),
on January 1 of the Operating Year immediately preceding the Operating
Year in question and the CPI on January 1 of the Operating Year in
question. In case of a dispute with regard to any Capital Renewals Budget,
then, pending the settlement thereof, or until such dispute is resolved in
accordance with Section 12.04, Manager shall be entitled to make
expenditures for Capital Renewals during the then current Operating Year
(a) as contemplated by the Capital Renewals Budget proposed by Manager for
all items which are not disputed by Owner plus (b) up to such additional
amount, if any, by which the aggregate amount of such items not disputed
by Owner is less than half the percentage of the Gross Revenues of the
Hotel applicable to the Operating Year then in effect which are to be
deposited in the Capital Renewals Reserve. Manager shall act reasonably
and exercise prudent business judgment in preparing and submitting to
Owner the Operating Budget and the Capital Renewals Budget. Owner shall
act reasonably and exercise prudent business judgment in approving or
disapproving all or any portion of the Operating Budget and the Capital
Renewals Budget and act in a manner that shall permit maintenance and
operation of the Hotel in compliance with the Operating Manual.
Embassy Suites __________ Management Agreement
7
4.02.4 Performance Under Operating Budget. Manager shall use
commercially reasonable efforts to achieve the results set forth in the
Operating Budget with respect to any Operating Year; provided, however,
that Owner acknowledges that the Operating Budget is a composition of
estimates and, therefore, Manager cannot and does not guarantee or warrant
that the actual operation of the Hotel for any Operating Year will be as
set forth in the Operating Budget for such Operating Year. During each
Operating Year, Manager shall use its commercially reasonable efforts to
operate the Hotel within the approved Operating Budget and the Capital
Renewals Budget (subject, in the case of any disputed items, to Subsection
4.02.3). Notwithstanding the foregoing, Owner understands and agrees as
follows:
(a) Certain expenses provided for in the Operating Budget and the
Capital Renewals Budget for any Operating Year will vary based
on the occupancy of the Hotel; and, accordingly, to the extent
that occupancy of the Hotel for any Operating Year exceeds the
occupancy projected in the approved Operating Budget and the
Capital Renewals Budget for such Operating Year, such approved
Operating Budget and the Capital Renewals Budget shall be
deemed to include corresponding increases in such variable
expenses.
(b) The amount of certain expenses including Impositions,
utilities, insurance premiums, and charges provided for in
contracts and leases entered into pursuant to this Agreement,
are not within the ability of Manager to control. Manager
shall have the right to pay all such expenses without
reference to the amounts provided for in respect thereof in
the approved Operating Budget and the Capital Renewals Budget
for any Operating Year.
(c) If any expenditures are required on an emergency basis to
avoid damage to the Hotel or injury to persons or property,
Manager may make such expenditures, as may reasonably be
required to avoid or mitigate such damage or injury, even if
the amounts of such expenditures are not provided for or
within the amounts provided for in the approved Operating
Budget and the Capital Renewals Budget for the Operating Year
in question; provided Manager shall not expend more than
$100,000 (which figure shall be adjusted annually to reflect
increases in CPI) on any one occasion pursuant to this
paragraph 4.02.4(c) without Owner's prior approval unless
Manager determines that the emergency condition constitutes an
immediate threat to the life or safety of Hotel guests or
employees. Manager shall notify Owner as promptly as
reasonably possible of the making of any such expenditures.
(d) If any expenditures are required to comply with any Legal
Requirements or to cure or prevent any violation thereof,
Manager may make such expenditures as may be necessary to
comply with such Legal Requirements or to remove or prevent
the violation thereof even if the amounts of such expenditures
are not provided for or within the amounts provided for in the
approved Operating Budget and the Capital Renewals Budget for
the Operating Year in question.
Embassy Suites __________ Management Agreement
8
Manager shall have the right from time to time during each Operating Year
to propose modifications to the approved Operating Budget and the Capital
Renewals Budget then in effect based on actual operations during the
elapsed portion of the Operating Year in question and on Manager's
judgment as to what will transpire during the remainder of such Operating
Year. Any such modifications shall be subject to Owner's approval. Any
dispute relating to a proposed modification of an approved Operating
Budget and the Capital Renewals Budget may be submitted by either party
for resolution in accordance with Section 12.04.
4.02.5 Capital Renewals Reserve. From the revenues from the
operation of the Hotel, or with funds provided by Owner under Section 7.03
or otherwise, Manager will establish and maintain a reserve (the "Capital
Renewals Reserve") for Capital Renewals. The amount of the required
additions to the Capital Renewals Reserve shall be calculated monthly
concurrently with the delivery to Owner of the reports required under
Paragraph 7.05(a) and shall be an amount equal to four percent (4%) of
Gross Revenues of the Hotel (determined as provided in Section B of the
Management Fee Rider).
The Capital Renewals Reserve shall be used solely for the purpose of
paying for Capital Renewals. Any amounts remaining in the Capital Renewals
Reserve at the end of each Operating Year will be carried forward until
fully expended, but shall not be credited against required contributions
to the Capital Renewals Reserve for any subsequent Operating Year. It is
understood that the amounts to be reserved for Capital Renewals under this
Subsection 4.02.5 are minimum and do not represent the amounts which may
be required in later years to maintain the Hotel in the condition
contemplated by this Agreement and, accordingly, Owner and Manager
recognize that the Capital Renewals Budgets in future years may call for
expenditures in excess of the amounts being reserved therefor under this
Subsection 4.02.5.
Except as may otherwise be agreed between Owner and Manager (a) the
additions to the Capital Renewals Reserve will be deposited in an
interest-bearing account (the "Capital Renewals Account") at a banking
institution to be selected in accordance with Section 7.01, (b) interest
earned on the Capital Renewals Account shall be added to the Capital
Renewals Reserve but shall not be credited against amounts required to be
added thereto, and (c) any funds remaining in the Capital Renewals Account
at the expiration or termination of this Agreement will be disbursed to
Owner.
4.02.6 Compliance with Capital Renewals Budget. Manager shall at all
times comply with the applicable Capital Renewals Budget, and shall not
deviate in any substantial respect therefrom; provided that the Capital
Renewals Budget includes appropriate amounts for contingencies.
Notwithstanding the foregoing, Manager shall be entitled to make
additional expenditures not authorized under the then applicable Capital
Renewals Budget in case of emergencies arising out of fire or any other
like or unlike casualty, or in order to comply with any applicable Legal
Requirements. If Manager at any time determines that expenditures are
required to be made pursuant to Paragraphs 4.02.4(c) or 4.02.4(d), Manager
may make such expenditures out of the Capital Renewals Reserve; provided
further that Manager may reallocate up to five percent (5%) of the Capital
Renewals Reserve during each Operating Year to pay any expenses for
Capital Renewals that Manager may reasonably determine to be appropriate
to maintain the Hotel in a manner consistent with the Operating Manual,
regardless of whether such
Embassy Suites __________ Management Agreement
9
Capital Renewals were specifically included in the Capital Renewals Budget
for such Operating Year. Subject to Subsection 4.02.4, in connection with
any expenditure from the Capital Renewals Reserve that was not
specifically contemplated in the Capital Renewals Budget, Manager shall
attempt to notify Owner at least thirty (30) days prior to the time that
the expenditures in question are made. Subject to the availability of
sufficient amounts in the Capital Renewals Reserve or otherwise provided
by Owner, Manager shall arrange for the completion of all Capital Renewals
approved by Owner in the Capital Renewals Budget for any Operating Year or
otherwise. The lack of sufficient monies in the Capital Renewals Reserve
shall not limit Owner's obligations to make Capital Renewals required to
maintain the Hotel in a manner consistent with the Operating Manual or to
provide funds sufficient (in addition to the amounts in the Capital
Renewals Reserve) to enable Manager to complete and pay for all Capital
Renewals provided for in an approved Capital Renewals Budget or otherwise
approved by Owner or authorized under the terms of this Agreement.
4.03 Management Group Services.. The License Agreement contemplates that,
in consideration of the Monthly Program Fee (as defined therein) and other fees
set forth in the License Agreement, Manager and its Affiliates will provide
pursuant thereto such programs as advertising and other marketing programs, a
centralized reservation service and other programs which benefit the Embassy
Suites hotel system. Manager and its Affiliates will also furnish or cause to be
furnished to the Hotel the benefits of "Management Group Services", which phrase
shall mean such services which Manager or its Affiliates may hereafter furnish
to Other Managed Hotels but not to Embassy Suites hotels that are not Managed
Hotels. Management Group Services currently include:
(a) Purchasing;
(b) Operations support, including performance management and
improvement and functional discipline support;
(c) Operations finance, including supervision and support for
hotel accounting operations (such as accounts payable
processing and payroll processing), reporting and analysis;
(d) Information technology;
(e) Human resources, including recruitment, benefits
administration and training and development;
(f) Legal; and
(g) Risk management.
Management Group Services are not rendered in consideration of the Monthly
Program Fee and may require additional payment by Owner. However, except for any
third party expenses, operations support services, operations finance services,
human resources services (other than training and development charges) and legal
services are provided in consideration of the Management Fee.
Embassy Suites __________ Management Agreement
10
4.04 Technical Services. During the Operating Period, Manager, through its
Technical Services program, will provide, as needed, supervisory and control
services to the Hotel's front office, food, personnel and other operating
departments.
4.05 Personnel.
4.05.1 General. Manager shall hire, train, discharge, promote and
supervise the Executive Staff of the Hotel, and shall supervise through
the Executive Staff the hiring, training, discharging, promotion and work
of all other Hotel Personnel. All members of the Executive Staff of the
Hotel shall be properly qualified for their positions, and the direct
compensation payable to such persons shall be comparable to the direct
compensation paid to the members of the Executive Staff of other
comparable first-class hotels, taking into account the location and size
of the Hotel. Notwithstanding anything contained in the foregoing to the
contrary, Owner shall have the right to approve the selection of any such
individual as the general manager of the Hotel; provided that Owner shall
be deemed to have approved the appointment of any such individual unless
Owner delivers notice of its disapproval of such appointment within seven
(7) days after Manager's delivery to Owner of (a) a written summary of
such individual's professional experience and qualifications and (b)
notice of Manager's desire to arrange an interview between Owner and such
individual at the Hotel or at another mutually acceptable location (it
being agreed that Owner will forego its right to interview any such
individual if Owner is unwilling or unable to have an authorized
representative participate in the interview within seven (7) days
following Manager's notice to Owner of Manager's desire to arrange such an
interview). Moreover, Owner acknowledges that it may not reject more than
three (3) candidates proposed by Manager for the position of general
manager each time the position is being filled.
4.05.2 Manager as Employer. All employees of the Hotel shall be
employees of Manager, and all Compensation of such employees shall be paid
by Manager, and subject to the approved Forecast (with such variances and
modifications as contemplated by Section 4.02.4) the amount of such
payments shall immediately be reimbursed to Manager by Owner in accordance
with Section 4.07 hereof. Accordingly, Manager shall establish appropriate
payroll accounts covering all such employees of the Hotel. Arrangements
shall be made such that Manager can draw on the Hotel Accounts to transfer
funds to such payroll accounts immediately upon its payment of such
Compensation.
4.05.3 Labor Relations. Manager shall negotiate for the best
interest of Owner with any labor unions representing Hotel Personnel, but
any collective bargaining agreement or labor contract resulting therefrom
will be executed by Manager as the employer. In addition, it is understood
that, with respect to labor negotiations not involving multi-employer
bargaining arrangements applicable to the Hotel and other hotel properties
not owned or managed by Manager, Manager shall consult with Owner in
advance of, and, to the extent practicable, during the course of,
negotiations with any labor union.
4.05.4 Manager Personnel. If Manager shall reasonably deem it
advisable in the best interests of the Hotel, or with Owner's reasonable
consent, Manager may temporarily assign the general manager, the director
of finance and other members of the Executive Staff of the Hotel
Embassy Suites __________ Management Agreement
11
from the Corporate Personnel or from the staff of Other Managed Hotels.
All such employees will be paid their regular Compensation, such
Compensation to be paid by the Hotel, or if Manager deems it advisable, by
Manager, in which case Manager will be reimbursed by Owner therefor as
provided in Section 4.07.
4.05.5 Business Expenses. The Executive Staff and other appropriate
Hotel Personnel shall be reimbursed for all reasonable business expenses,
including business entertainment and travel expenses, in accordance with
the standard practices in effect at Other Managed Hotels.
4.05.6 Benefit Plans, etc. Manager shall have the right to provide
to Hotel Personnel who are eligible therefor and who are not covered by
collective bargaining or similar arrangements, with benefits of the
incentive plans, and the pension, profit sharing or other employee
retirement, disability, health or welfare or other benefit plan or plans
now or hereafter applicable to employees of Other Managed Hotels, and to
charge the Hotel with the Hotel's pro rata share of the costs and expenses
of such plan or plans allocated to the Hotel on the same basis as
allocated to participating Other Managed Hotels; provided, however, that
without the prior consent of Owner (not to be unreasonably withheld,
delayed or conditioned), Manager shall not:
(a) Increase, from the amounts in effect as of the date of this
Agreement, the overall annual cash incentive bonus plan payout
targets (expressed as a percentage of annual base salary)
applicable to the General Manager, other members of the
Executive Staff and members of the sales department of the
Hotel, except to the extent, if any, that Manager, at its sole
discretion, elects to fund the amount of such increase;
(b) Reduce, from the amounts in effect as of the date of this
Agreement, the amount of the annual cash incentive bonus plan
payout target (expressed as a percentage of the annual
incentive = bonus) payment of which is dependent upon one or
more financial measures including, but not limited to, total
revenues, food and beverage revenues, catering revenues,
revenues per available guest room, Yield Index, Income After
Undistributed Operating Expenses (also referred to as "Gross
Operating Profit" or "GOP"), GOP margin (i.e., GOP as a
percentage of total revenues) and GOP flow through (i.e.,
marginal GOP as a percentage of marginal total revenues); or
(c) To the extent that payment of all or part of the annual cash
incentive bonus plan payout target not otherwise dependent
upon the financial measures referenced in clause (b) above is
conditioned on achieving threshold levels of one or more
financial measures referenced in clause (b) above, reduce,
from the levels in effect as of the date of this Agreement,
the threshold levels which must be so achieved.
Owner agrees and acknowledges that Manager may (but shall not be required
to) provide benefits and allow participation in such plans on whatever
modified basis as it may determine appropriate under the circumstances,
and may waive any waiting period or any preconditions to coverage or
participation otherwise applicable to such employees. No statement,
promise,
Embassy Suites __________ Management Agreement
12
representation or warranty regarding the terms of such plans or the
participation or coverage of employees shall be enforceable, binding or
effective in any way unless made in writing and signed by an authorized
representative of Manager.
Notwithstanding the foregoing, in no event shall Manager initiate or adopt
any plans, programs or benefits for Hotel Personnel not otherwise in
effect at Other Managed Hotels unless required by applicable collective
bargaining agreements.
4.05.7 Termination of Hotel Personnel. Owner acknowledges that
Manager or its Affiliates may have an obligation under federal, state or
local law to give advance notice to Hotel Personnel of any termination of
their employment, and that failure to comply with any such notification
obligation could give rise to civil liabilities. Therefore,
notwithstanding anything to the contrary contained in this Agreement,
Owner shall indemnify, hold harmless and defend Manager and its Affiliates
from and against any such liabilities based on Owner's actions (including
terminating this Agreement) which give rise to such a notification
obligation on the part of Manager or any of its Affiliates, unless Manager
(or its Affiliates) is given adequate opportunity to comply with such
obligation.
4.05.8 Non-Solicitation. Owner, on behalf of itself, and its
Affiliates and its and their successors, hereby agrees not to solicit the
employment of any of the Executive Staff of the Hotel or Corporate
Personnel at any time during the Term of this Agreement or within twelve
(12) months following the expiration or termination of this Agreement
without Manager's prior written approval.
4.06 Additional Responsibilities of Manager. Manager is authorized to
perform and shall, on behalf of Owner, either in its own name, or in the name of
Owner, perform the following additional services, or cause the same to be
performed for the Hotel:
(a) establish and revise, as necessary, administrative policies
and procedures, including policies and procedures for the
control of revenue and expenditures, for the purchasing of
supplies and services, for the control of credit, and for the
scheduling of maintenance, and verify that the foregoing
procedures are operating in a sound manner;
(b) consummate leases with respect to the commercial and office
space, and concession or other arrangements with respect to
other space and facilities, in the Hotel; provided that
Owner's prior written approval shall be required for any
lease, concession or other such arrangement having a
non-terminable term in excess of one year, if the amount of
the expenditures thereunder would, or is reasonably
anticipated to, exceed $50,000 in the aggregate per annum, or
if Owner would be obligated thereunder to indemnify, defend,
hold harmless or otherwise protect a third party;
Embassy Suites __________ Management Agreement
13
(c) enter into any contracts for goods or services to the Hotel;
provided that:
(i) Owner's prior written approval shall be required for any
contract for goods or services to the Hotel (A) having a
non-terminable term in excess of one year, (B) if the
amount of the expenditures thereunder would, or is
reasonably anticipated to, exceed $50,000 in the
aggregate per annum, or (C) if Owner would be obligated
thereunder to indemnify, defend, hold harmless or
otherwise protect a third party; and
(ii) any contract for goods or services to the Hotel entered
into with Manager or an Affiliate of Manager = (other
than the License Agreement, contracts entered into as
contemplated by the License Agreement and contracts
specifically authorized by another provision of this
Agreement, including Section 12.01), Owner's prior
approval of the costs thereunder shall be required
(which approval shall be deemed given if such costs are
included in identified in (A) the attached Exhibit ___
or (B) the then applicable approved Operating Budget as
being payable to = Manager or an Affiliate of Manager);
(d) subject to compliance with the applicable Capital Renewals
Budget, make all repairs, decorations, revisions, alterations
and improvements to the Hotel as shall be reasonably necessary
for the proper maintenance thereof in good order, condition
and repair;
(e) purchase such Operating Equipment and Operating Supplies as
shall be reasonably necessary for the proper operation of the
Hotel;
(f) apply for, and use its best effort to obtain and maintain, all
licenses and permits required of Owner or Manager in
connection with the operation and management of the Hotel;
Owner agrees to execute and deliver any and all applications
and other documents as shall be reasonably required and to
otherwise cooperate, in all reasonable respects, with Manager
in applying for, obtaining and maintaining such licenses and
permits;
(g) use its reasonable efforts to do, or cause to be done, all
such acts and things in and about the Hotel as shall be
reasonably necessary to comply with Legal Requirements and the
terms of all insurance policies, and to discharge any lien,
encumbrance or charge on or with respect to the Hotel and the
operation thereof, other than Permitted Exceptions;
(h) provided sufficient funds are then available in the Hotel
Accounts, pay all Impositions and insurance premiums, when due
(or reimburse Owner, to the extent Owner pays any such
Impositions or insurance premiums on behalf of the Hotel);
(i) use commercially reasonable efforts to cause the Hotel to
comply with all applicable covenants and provisions of the
Ground Lease (if any) and Mortgage,
Embassy Suites __________ Management Agreement
14
and pay, when due, the installments of rental under the Ground
Lease (if any) and of principal and interest on the Mortgage;
(j) retain legal counsel for the Hotel, which legal counsel shall
perform legal services under the direction of Manager;
(k) cooperate with Owner and any prospective purchaser, lessee,
Mortgagee or other lender in connection with any proposed
sale, lease or financing of or relating to the Hotel;
provided, however, that Manager shall not be required to
release any information that is confidential or proprietary to
Manager or its Affiliates; and provided further that Owner
shall reimburse Manager for any expenses incurred by Manager
in connection with such cooperation when such expense is not
otherwise paid or reimbursed under this Agreement;
(l) institute in its own name or in the name of Owner or the
Hotel, and as an operating expense of the Hotel, any and all
legal actions or proceedings to collect charges, rent or other
income derived from the Hotel's operations or to oust or
dispossess guests, tenants or other persons in possession
therefrom, or to cancel or terminate any lease, license or
concession agreement for the breach thereof or default
thereunder by the tenant, licensee or concessionaire; and at
the direction and expense of Owner (and not as an operating
expense of the Hotel), Manager shall take appropriate steps to
challenge, protest, appeal and/or litigate to final decision
in any appropriate court or forum any alleged non-compliance
with Legal Requirements affecting the Hotel or any alleged
violation of any law, but only provided that (a)
non-compliance with the Legal Requirements or violation of law
in question during such challenge, protest, appeal or
litigation does not result in the closing of any portion of
the Hotel or any facility thereof and does not impose any risk
of criminal or civil liability on Manager or (b) Owner
complies with such Legal Requirements or remedies such
violation of law to the extent necessary to prevent any such
closure or risk of liability; provided further that if such
non-compliance with Legal Requirements or violation of law
resulted from the actions of Manager in the operation of the
Hotel, Manager shall bear the expense of such legal costs,
which costs shall be an operating expense of the Hotel unless
Manager would be obligated to indemnify Owner against the same
pursuant to Subsection 12.03.2 of this Agreement;
(m) collect on behalf of Owner and account for and remit to
governmental authorities all Impositions collectible by the
Hotel directly from patrons or guests, or as part of the sales
price of any goods, services or displays, including gross
receipts, admissions or similar or equivalent taxes, duties,
levies or charges;
(n) collect all charges, rent and other amounts due from guests,
lessees and concessionaires of the Hotel and use those funds,
as well as funds from other sources as may be available to the
Hotel, first to pay for the expenditures stipulated in Section
7.02 and then any other financial obligations of the Hotel as
Owner may direct; and
Embassy Suites __________ Management Agreement
15
(o) perform such other tasks as are customary and usual in the
operation of a hotel of the class and standing of the Hotel.
Owner shall be entitled to meet with the area vice president of Manager, or
other responsible Manager representative, on a quarterly basis to review and
discuss the operation of the Hotel, including any substantial deviation from the
operating strategies, policies or procedures which form the basis on which the
current Operating Budgets were made. Manager shall reasonably consider any
comments or suggestions of Owner.
4.07 Reimbursements to Manager. In addition to the Management Fee provided
for in Article VI, Manager and its Affiliates shall be entitled to be reimbursed
for the following costs and expenses incurred in rendering services to the
Hotel:
(a) the Hotel's share of all costs and expenses incurred in
connection with the rendition of Management Group Services,
allocated on the same basis as allocated to Other Managed
Hotels;
(b) the Compensation paid by Manager or its Affiliates to Hotel
Personnel;
(c) the Compensation payable to Corporate Personnel (other than
Vice Presidents, and higher ranking executive officers), who
are not assigned to the Hotel, under Subsection 4.05.4, while
working on an assignment for the specific benefit of the
Hotel, Owner or its Affiliates;
(d) reasonable travel and entertainment expenses of officers and
employees of Manager and its Affiliates incurred in performing
Manager's duties hereunder in connection with any phase of the
operation of the Hotel in accordance with the policies of
Manager then in effect;
(e) the Compensation and expenses paid or reimbursed by Manager or
its Affiliates to all independent consultants rendering
services to the Hotel if and to the extent contemplated in the
Operating Budget or Capital Renewals Budget for such Operating
Year or as otherwise approved by Owner;
(f) payments made or incurred by Manager or its Affiliates, or its
or their employees to third parties for goods and services in
the ordinary course of business in the operation of the Hotel,
in accordance with the Operating Budget or Capital Renewals
Budget or as otherwise approved by Owner or permitted under
this Agreement;
(g) all taxes and similar assessments (other than Manager's income
taxes) levied against any reimbursements payable to Manager
under this Agreement for expenses incurred for Owner's
account, including the reimbursable expenses described in this
Section 4.07; and
Embassy Suites __________ Management Agreement
16
(h) all other expenditures which are authorized, permitted or
required under the provisions of this Agreement which have
been paid or funded by Manager on Owner's behalf.
It is agreed that, to the extent the entire amount of Compensation or other
expense reimbursable to Manager or its Affiliates under this Section 4.07, or
under any other provisions of this Agreement, is not incurred solely for the
benefit of the Hotel, then such amount or expense shall be appropriately
allocated.
Manager shall be entitled to reimburse itself and its Affiliates for the above
items out of the Hotel Accounts, or may submit statements covering such items to
Owner, and Owner will pay to Manager or its Affiliate(s), as applicable, the
amount indicated thereon promptly upon the receipt of such statements.
ARTICLE V
INSURANCE
5.01 Coverage.
5.01.1 Required Insurance. The following insurance shall be secured
and maintained with respect to the Hotel at all times during the Term of
this Agreement:
(a) Property insurance provided by an all risk policy form,
including coverage for the perils of fire, windstorm, flood,
earthquake and other risks covered by extended coverage
endorsements on the Improvements and contents in an amount
equal to the full replacement value thereof;
(b) Business interruption insurance provided by an all risk policy
form, including business interruption resulting from the
perils of fire, windstorm, flood, earthquake and other risks
covered by extended coverage endorsements for full recovery of
the net profits and continuing expenses of the Hotel
(including the Management Fee) for not less than twelve months
of any such business interruption;
(c) Insurance against loss from accidental damage to, or from the
explosion of, boilers, electrical apparatus, air conditioning
systems, including refrigeration and heating apparatus,
pressure vessels and pressure pipes in an amount equal to the
full replacement value of such items;
(d) Business interruption insurance against loss arising from
accidental damage to, or from the explosion of, boilers,
electrical apparatus, air conditioning systems, including
refrigeration and heating apparatus, pressure vessels and
pressure pipes for full recovery of the net profits and
continuing expenses of the Hotel (including the Management
Fee) for not less than twelve months of any such business
interruption;
Embassy Suites __________ Management Agreement
17
(e) Commercial general liability, commercial automobile liability
insurance including coverage for owned, non-owned and leased
automobiles, garage keepers liability, products and completed
operations, contractual liability, liquor liability and
innkeepers' liability in an amount not less than
$100,000,000.00 per occurrence;
(f) Comprehensive crime insurance in an amount equal to not less
than $5,000,000.00;
(g) Workers' compensation insurance providing statutory benefits
and employers' liability insurance in an amount equal to not
less than (i) $1,000,000.00 each accident, (ii) $1,000,000.00
each disease-policy limit and (iii) $1,000,000.00 each
disease-each employee;
(h) Employment practices liability insurance in the amount of
$2,000,000.00 per claim; and
(i) Insurance against such other insurable risks as Manager may,
from time to time, reasonably require.
5.01.2 Responsibility to Maintain. During the Term, Owner, or if and
to the extent requested by Owner, Manager at the expense of Owner, shall
procure and maintain the above insurance policies, including those
required under clauses (a) through (i) excluding clause (g) of Subsection
5.01.1. Owner may satisfy this requirement by participating in Manager's
insurance programs.
5.01.3 Changes in Coverage. Manager shall have the right to raise
the minimum amount of insurance to be maintained with respect to the Hotel
under the above Subsection 5.01.1 to make such insurance comparable to the
amount of insurance carried with respect to Other Managed Hotels, taking
into account the size and location of the Hotel. In addition, neither
party shall unreasonably withhold its consent to a request by the other
party that such minimum limits of insurance be lowered on the basis that
such insurance cannot be obtained in such amounts, or can be obtained only
at a prohibitive cost. Similarly, if during the Term of this Agreement
changes in the insurance industry shall make any description of the
required insurance coverage inaccurate or inappropriate, then Manager
shall have the right, by notice to and with the prior written approval of
Owner, to change such requirements to accurately describe, in the then
current vernacular, the type of insurance which would be comparable to the
coverage described in the above Subsection 5.01.1.
5.01.4 Requirements. All policies of insurance shall be written on
an "occurrence" basis, if possible, and if any policy is written on a
"claims made" basis, then such policy must, if possible, be continued in
effect for a period of two (2) years following the expiration or early
termination of this Agreement. The insurance coverage shall in any event
comply with the requirements of the Mortgage, if any.
Embassy Suites __________ Management Agreement
18
5.02 Policies and Endorsements.
5.02.1 Policies. All insurance provided for under Section 5.01 shall
be effected by policies issued by insurance companies of good reputation
and of sound and adequate financial responsibility. The party procuring
such insurance shall deliver to the other party certificates of insurance
with respect to the policies of insurance 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 to the other party not less than thirty (30) days after
the respective dates of expiration.
5.02.2 Endorsements. All policies of insurance provided for under
this Article V shall provide that (a) such policy shall not be canceled or
materially changed without at least thirty (30) days prior written notice
to Owner and Manager, and (b) to the maximum extent reasonably obtainable
from the insurer, no act or omission of Owner or Manager shall affect the
obligation of the insurer to pay the full amount of any loss sustained.
All insurance policies procured by Owner pursuant to Subsection 5.01.1
shall contain an endorsement or otherwise provide that such insurance is
primary to any similar coverage provided by Manager.
5.02.3 Named Insureds. All policies of insurance required under
clauses (a) through (i) of Subsection 5.01.1 (excluding clause (g) which
shall be carried in the name of Manager only) shall be carried in the name
of Owner, Manager and, if required, Mortgagee and/or the lessor under any
Ground Lease. Losses thereunder shall be payable to the parties as their
respective interests may appear (excluding insurance required under
clauses (a) and (c) which shall be payable to Owner). Notwithstanding the
foregoing, if Mortgagee is an Institutional Lender and so requires, losses
may be made payable to Mortgagee, or to a bank or trust company qualified
to do business in the state where the Hotel is located, in either instance
as trustee for the custody and disposition of the proceeds therefrom.
Owner agrees to use reasonable efforts to cause Mortgagee to agree that
its Mortgage shall contain a provision to the effect that proceeds from
property insurance shall be made available for restoration of the Hotel.
All insurance policies required in clauses (a) through (i) of Subsection
5.01.1 (excluding clause (g)) procured by Owner shall name Owner and its
Affiliates, directors, officers, agents and employees of each such entity
as named insureds, and Manager, its Affiliates, directors, officers,
agents and employees of each such entity as named insureds or additional
insureds as their interests appear.
5.02.4 Evidence of Insurance. As soon as practicable prior to the
effective date of the applicable coverages, the party obtaining the
insurance coverages under this Article V shall provide the other party
with binders evidencing that the applicable insurance requirements of this
Agreement have been satisfied and, as soon as practicable thereafter,
shall provide certified copies of policies for such insurance. As soon as
practicable prior to the expiration date of each such policy, the party
obtaining such insurance shall provide the other party with binders
evidencing renewal of existing or acquisition of new coverages. Certified
copies of renewed or new policies or certificates of insurance shall be
provided by the party obtaining insurance coverage under this Article V to
the other party as soon as practicable after renewed or new coverages
become effective. On request of the other party, each party shall furnish
the other with a schedule of insurance obtained by such party under this
Article V, listing the policy
Embassy Suites __________ Management Agreement
19
numbers of the insurance obtained, the names of the companies issuing such
policies, the names of the parties insured, the amounts of coverage, the
expiration date or dates of such policies and the risks covered thereby.
5.02.5 Review of Insurance. All insurance policy limits provided
under this Article V shall be reviewed by Owner and Manager every three
(3) years following the Commencement Date, or sooner if reasonably
requested by Manager, to determine the suitability of such insurance
limits in view of exposures reasonably anticipated over the ensuing three
(3) years. Owner and Manager hereby acknowledge that changing practices in
the insurance industry and changes in the local law and custom may
necessitate additions to types or amounts of coverage during the Operating
Period. Owner agrees to comply with any other insurance requirements
Manager reasonably requests in order to protect the Hotel and the
respective interests of Owner and Manager.
5.03 Waiver of Liability. Neither Manager nor Owner shall assert against
the other, and do hereby waive with respect to each other, or against any other
entity or person named as additional insureds on any policies carried under this
Article V, any claims for any losses, damages, liability or expenses (including
attorneys' fees) incurred or sustained by either of them on account of injury to
persons or damage to property arising out of the ownership, development,
construction, completion, operation or maintenance of the Hotel, to the extent
that the same are covered by the insurance required under this Article V. Each
policy of insurance shall contain a specific waiver of subrogation reflecting
this Section 5.03, and a provision to the effect that the existence of the
preceding waiver shall not affect the validity of any such policy or the
obligation of the insurer to pay the full amount of any loss sustained.
5.04 Insurance by Manager. Any insurance provided by Manager under this
Article V may, at its option, be effected under policies of blanket insurance
which cover other properties of Manager and its Affiliates, and Manager shall
have the right to charge the Hotel with the Hotel's pro rata share of the
aggregate premiums charged by Manager to all participating Managed Hotels, such
share to be allocated to the Hotel on the same basis as allocated to
participating Other Managed Hotels. Subject to Owner and Manager agreeing upon
such matters as the identification of the relevant records, the procedures for
reviewing such records, and limitations on use or disclosure of the information
contained in such records, to the extent any insurance coverage relating to this
Agreement is effected under a policy of blanket insurance, Manager shall make
its books and records available, upon Owner's request and at Owner's expense, in
sufficient detail for Owner to verify the allocation and calculation of
premiums. Any policies of insurance maintained by Manager pursuant to this
Article V may contain deductible provisions in such amounts as are maintained
with respect to Other Managed Hotels, for which Owner shall be responsible or
which Manager, at Owner's expense, may pay. Further, in lieu of all or a part of
commercial general liability insurance, workers' compensation and employer's
liability insurance and employment practices liability insurance under clauses
(e), (g) and (h) of Subsection 5.01.1, any or all of the risks covered by such
insurance, at Manager's option, may be self-insured or self-assumed by Owner
under a self-insurance or assumption of risk program similar to those in effect
at Other Managed Hotels, up to such amounts which such risks are self-insured or
assumed at Other Managed Hotels.
Embassy Suites __________ Management Agreement
20
5.05 Business Interruption Insurance. Subject to the terms of any Mortgage
and the Ground Lease, if any, any proceeds from business interruption insurance
payable to Owner hereunder shall be fairly and equitably apportioned between
Owner and Manager in accordance with their respective interests and equities to
the end that the fair value of Manager's expectable compensation under this
Agreement for the period covered by such business interruption insurance shall
be paid to Manager.
ARTICLE VI
MANAGEMENT FEE
6.01 Management Fee. In addition to the reimbursements required under
Section 4.07 for Manager's services hereunder during the Operating Period, Owner
shall pay Manager the Management Fee computed and made payable as provided in
the Management Fee Rider attached hereto.
6.02 Place and Means of Payment. All amounts payable to Manager or its
Affiliates under this Agreement (a) shall be paid to Manager in United States
dollars, in immediately available funds, without reduction for any withholding
tax, value added tax and any other assessment, tax, duty, levy or charge
required under the applicable laws of any applicable jurisdiction; (b) shall be
made to Manager at the place for the giving of notice to Manager set forth in or
pursuant to Section 12.10, or to such other place as Manager shall designate to
Owner; and (c) at Manager's option, shall be made by Manager electronically out
of the Hotel Accounts on the dates specified for payment in the Management Fee
Rider attached hereto, or as elsewhere provided in this Agreement, as
applicable. Any and all amounts that may become due to Manager from Owner under
this Agreement shall bear interest from and after the respective due dates
thereof until the date on which the amount is received in the bank account
designated by Manager, at an annual rate of interest equal to the lesser of (i)
the prevailing lending rate of Manager's principal bank for working capital
loans to Manager plus three percent (3%) and (ii) the maximum amount permitted
by applicable law; provided, however, the foregoing shall not apply if the
delinquency shall have occurred because of the fault of Manager.
6.03 Taxes. If any gross receipts, sales, use, excise or similar tax that
is based upon gross income or revenues is imposed upon Manager for the receipt
of any payments Owner is required to make to Manager hereunder (including the
Management Fee) then Owner shall also pay Manager an amount equal to such tax.
If any gross receipts, sales, use, excise or similar tax that is based upon
gross income or revenues is imposed upon the payment made pursuant to this
Section 6.03, the amount due under this Section 6.03 will be an amount such that
the net amount retained by Manager, after payment of such tax, equals the tax
imposed on all payments made hereunder other than Section 6.03.
ARTICLE VII
ACCOUNTS; WORKING FUNDS; RECORDS AND REPORTS
7.01 Bank Accounts. Bank accounts for the Hotel will be established at a
banking institution or institutions mutually approved by Owner and Manager, such
accounts to be in the name of Owner or the Hotel (the "Hotel Accounts"). Manager
will deposit in such Hotel Accounts all monies furnished by Owner as working
funds under Section 7.03 and all monies received from the operation of the
Hotel, and shall disburse the same for the purposes set forth in Section 7.02.
Notwithstanding the foregoing, Manager shall be entitled to maintain such funds
as it reasonably deems proper in house banks or in xxxxx cash funds at the
Hotel.
Embassy Suites __________ Management Agreement
21
With Owner's consent, funds in the Hotel Accounts, the Capital Renewals Account
or any other fund or account under the control of Manager that contains monies
belonging to the Hotel or to the Owner may be combined or commingled with any
other accounts or funds controlled by Manager or any Affiliate thereof with
respect to other hotels operated by Manager or any Affiliate thereof on behalf
of Owner.
Manager's designees shall be the only authorized signatories on the Hotel
Accounts.
7.02 Expenditures. From the Hotel Accounts (or, if appropriate, from house
banks or xxxxx cash funds available at the Hotel), Manager is hereby authorized
to pay such amounts and at such times as are required in connection with the
ownership, maintenance and operation of the Hotel and related facilities,
including the following (subject to the approval of Owner where such approval is
required hereunder):
(a) the Compensation and expenses of the Executive Staff and other
Hotel Personnel;
(b) all costs and expenditures incurred or made in connection with
the authorized items under Section 4.06 and all other
expenditures which Manager is permitted or required to make
under any other provision of this Agreement;
(c) deposits into the Capital Renewals Account to be established
pursuant to Subsection 4.02.5;
(d) reimbursements and other amounts due to Manager and its
Affiliates under Section 4.07, or under any other provision of
this Agreement;
(e) premiums for any insurance maintained by Manager in accordance
with Article V;
(f) all fees, charges and contributions payable to the licensor
and its Affiliates under the License Agreement; and
(g) the Management Fee computed in accordance with the Management
Fee Rider.
Subject to the working capital requirements of Section 7.03 and the requirements
of the then applicable Operating Budget and Capital Renewals Budget, Manager, as
frequently as Owner and Manager may agree, but no less frequently than monthly,
shall distribute excess funds from the Hotel Accounts to Owner. Any amounts
remaining in the Hotel Accounts on the termination of this Agreement shall be
disbursed to Owner; provided, however, that Manager may deduct and retain prior
to such disbursement any and all amounts owed by Owner to Manager under this
Agreement.
Manager's designees shall be the only persons authorized to draw from the Hotel
Accounts, and Manager shall be entitled to make deposits in all Hotel Accounts,
in accordance with the terms of this Agreement and Manager's standard accounting
policies and practices. Manager shall establish controls to ensure accurate
reporting of all transactions involving the Hotel Accounts. Unless due to
Manager's Grossly Negligent or Willful Acts, any loss suffered in the Hotel
Accounts or any other bank account established pursuant to this Article VII, or
in any investment of funds into any such account, shall be borne by Owner, and
Manager shall have no liability or responsibility therefor.
Embassy Suites __________ Management Agreement
22
7.03 Working Fund Requirements. From time to time, but not less frequently
than weekly, Owner shall make deposits to the Hotel Accounts in amounts
necessary to restore the balance thereof to not less than $__________ or such
greater amount as may be necessary (after taking into account anticipated
deposits of monies received from the operation of the Hotel) sufficient at all
times to assure the uninterrupted and efficient operation of the Hotel, in
accordance with this Agreement and the Operating Manual, including, without
limitation, sufficient funds to pay all of the items described or specified in
the preceding Section 7.02. Such greater amount, if any, shall be set forth by
notice from Manager to Owner specifically setting forth the amount of the
required funds and an explanation of the necessity for such funds. If Manager is
unable to perform any of its agreements or covenants under this Agreement
because of such failure on the part of Owner to provide the required funds, such
failure of performance on the part of Manager shall not be deemed a default on
the part of Manager and shall not give rise to any right of termination, damages
or any other remedy on the part of Owner against Manager. If Owner fails to
deposit all or any portion of the funds so requested and if Manager uses or
pledges its credit (Owner agreeing that Manager shall have no obligation to do
so) in making ordinary and customary purchases of goods and payments for
services for the Hotel on Owner's behalf, Owner shall pay for such purchases
when payment is due and shall indemnify and defend Manager against all losses,
costs and expenses, including attorneys' fees and costs, interest and any late
payment fees, that may be incurred by or asserted against Manager by reason of
Owner's failure to pay for such purchases. Owner shall pay interest to Manager
on any advances that Manager may elect, without obligation, to make on Owner's
behalf in payment of any due and unpaid obligations of Owner to third parties at
the rate specified in Section 6.02; and such advances, with the interest thereon
at the rate aforesaid, shall be due and payable by Owner to Manager on demand
and Manager shall be entitled to reimburse itself therefor, with interest as
aforesaid, out of any available funds from the operation of the Hotel.
7.04 Books and Records. Manager shall keep full and adequate books of
account and such other records as are necessary to reflect the results of the
operation of the Hotel. For this purpose, Owner agrees that it will make
available to Manager, or its representatives, all books and records, including
contract documents, invoices and all other construction records pertaining to
the initial development of the Hotel and any Major Capital Improvements. Owner
acknowledges that, if any such books and records are not made available to
Manager, Manager may be unable to keep books of account which fully and
adequately reflect the results of the operation of the Hotel. Manager shall keep
the books and records for the Hotel in all material respects in accordance with
the Uniform System of Accounts, on an accrual basis in accordance with generally
accepted accounting principles consistently applied. All of the financial books
and records pertaining to the Hotel, including books of account, front office
records and guest information, shall be the property of Owner; provided,
however, that guest information shall also be the property of Manager and may be
used by Manager for any of its business purposes. Notwithstanding the foregoing,
Manager may make and retain copies of all such financial books and records
pertaining to the Hotel. Upon the expiration or termination of this Agreement,
all of such books of account and financial records shall be turned over
forthwith to Owner so as to ensure the orderly continuance of the operation of
the Hotel, but all of such information shall be retained by Owner and made
available to Manager at the Hotel, at all reasonable times, for inspection,
audit, examination and copying (at Manager's expense) for at least five (5)
years subsequent to the date of such expiration or termination. Manager shall
have no obligation to turn over to Owner the proprietary guest information of
Manager. Solely by way of example, proprietary guest information of Manager
shall include, but not be limited to, information not specific to a guest's
experience with the Hotel. Solely by way of example,
Embassy Suites __________ Management Agreement
23
information not specific to a guest's experience with the Hotel shall include,
but not be limited to, information derived from the reservations services
provided by Hilton Reservations Worldwide, L.L.C. and from the HHonors guest
reward program administered by Hilton HHonors Worldwide, L.L.C.
7.05 Reports to Owner. Manager shall deliver, or cause to be delivered, to
Owner the following statements:
(a) within twenty (20) days after the end of each calendar month
during the Operating Period, a detailed profit and loss
statement, substantially in the form used at Other Managed
Hotels, showing the results of operation of the Hotel for such
month and the year-to-date, and a statement of departmental
operations, for such month and year-to-date;
(b) within ninety (90) days after the end of each Operating Year,
a balance sheet, a related statement of profit and loss and a
statement of cash flows, which Owner and Manager anticipate
would reflect the assets employed in the operation of the
Hotel and the liabilities incurred in connection therewith as
of December 31 of such year, and the results of the
operations, and cash flows, of the Hotel during such year
(accompanied by, if requested by Owner and at Owner's
independent and direct expense, an opinion thereon rendered by
a firm of independent certified public accountants of
recognized standing in the hotel industry as may be approved
by Owner and Manager), and having annexed thereto a
computation in reasonable detail of the Management Fee for
such year, calculated as provided in the Management Fee Rider.
If Owner does not supply any historical information necessary
for Manager to cause the financial information required by
this Paragraph 7.05(b) to be prepared and delivered, which
historical information is not otherwise available to Manager,
Manager shall not be obligated to prepare and deliver such
financial information. Manager shall, nonetheless, deliver to
Owner so much of the required financial information as is
possible given the historical information, if any, Owner has
provided.
7.06 Owner's Rights to Inspection and Review. Upon reasonable advance
written notice to the general manager of the Hotel, Manager shall accord to
Owner, its accountants, attorneys and agents, the right to enter upon any part
of the Hotel at all reasonable times during the Term of this Agreement for the
purpose of examining or inspecting the same or examining and making extracts of
the financial books and records of the Hotel or for any other purpose which
Owner, in its discretion, shall deem necessary or advisable, but same shall be
done without material disruption to the operation and business of the Hotel.
7.07 Centralized Accounting Services. Manager may, in its reasonable
discretion, handle directly, or through an Affiliate or one of the Other Managed
Hotels, any of the accounting functions for the Hotel, including accounts
payable, general ledger, payroll and accounts receivable, or any part thereof,
on a centralized basis with one or more Other Managed Hotels for the purpose of
achieving a more cost-efficient operation of the Hotel. Manager or its Affiliate
or the Other Managed Hotel furnishing such centralized accounting functions
shall be entitled to be reimbursed or paid from the Hotel Accounts for (i) the
pro rata share of the costs and expenses of providing such
Embassy Suites __________ Management Agreement
24
accounting functions allocated to the Hotel on the same basis as allocated to
participating Other Managed Hotels utilizing such centralized accounting
services, and (ii) such amounts required to cover or reimburse Manager, its
Affiliate or Other Managed Hotel for the payment of authorized expenditures by
such entity under Section 7.02 as a part of such centralized accounting
services. Subject to Owner and Manager agreeing upon such matters as the
identification of the relevant records, the procedures for reviewing such
records, and limitations on use or disclosure of the information contained in
such records, Manager shall make its books and records available, upon Owner's
request and at Owner's expense, in sufficient detail for Owner to verify the
pass-through nature of such charges.
7.08 Quiet and Peaceable Operation. Owner shall ensure that Manager is
able to peaceably and quietly operate the Hotel in accordance with the terms of
this Agreement, free from molestation, eviction and disturbance by Owner or by
any other person or persons claiming by, through or under Owner. Owner shall
undertake and prosecute all reasonable and appropriate actions, judicial or
otherwise, required to assure such quiet and peaceable operations by Manager.
ARTICLE VIII
TERMINATION RIGHTS
8.01 Termination by Owner.
8.01.1 Each of the following shall be an event of default by Manager
("Manager Event of Default"):
(a) Manager shall fail to keep, observe or perform any material
covenant, agreement, term or provision of this Agreement to be
kept, observed or performed by Manager, and such default shall
continue for a period of thirty (30) days after notice thereof
by Owner to Manager; or
(b) if Manager shall apply for or consent to the appointment of a
receiver, trustee or liquidator of Manager or of all or a
substantial part of its assets, file a voluntary petition in
bankruptcy, or admit in writing its inability to pay its debts
as they come due, make a general assignment for the benefit of
creditors, file a petition or an answer seeking reorganization
or arrangement with creditors or take advantage of any
insolvency law, or file an answer admitting the material
allegations of a petition filed against Manager in any
bankruptcy, reorganization or insolvency proceeding, or if an
order, judgment or decree shall be entered by any court of
competent jurisdiction, on the application of a creditor,
adjudicating Manager a bankrupt or insolvent or approving a
petition seeking reorganization of Manager or appointing a
receiver, trustee or liquidator of Manager or of all or a
substantial part of its assets, and such order, judgment or
decree shall continue unstayed and in effect for any period of
sixty (60) consecutive days.
8.01.2 Each of the following shall be an event permitting
termination of this Agreement by Owner ("Owner Termination Event"):
Embassy Suites __________ Management Agreement
25
(a) if a right of termination on the part of Owner shall have
arisen under Section 10.01;
(b) if a right of termination on the part of Owner shall have
arisen under Section 10.02;
(c) if, because of Owner's monetary default under a Permitted
Mortgage, a Mortgagee has acquired title to the Hotel, whether
by foreclosure, taking a deed in lieu of foreclosure, or
otherwise;
(d) if, because of Manager's Grossly Negligent or Willful Acts,
Owner is required by a Mortgagee to terminate this Agreement
in accordance with a Permitted Mortgage;
(e) if a right of termination on the part of Owner shall have
arisen under Section 9.03.2; or
(f) if Manager shall at any time during the Term own more than 35%
of the shares of FelCor Lodging Trust Incorporated ("FelCor"),
or if Manager revenues and net income as of and during the
one-year period following the date of this Agreement which are
attributable to the management of hotels not owned by Owner or
its Affiliates do not equal at least 10% of all of Manager's
revenues and net income attributable to the management of
hotels at such time and during such period.
8.01.3 If a Manager Event of Default or Owner Termination Event
occurs, then Owner shall have the right to terminate this Agreement upon
written notice to Manager given at any time following the occurrence of
such event, or if a period of grace is provided, then following the
expiration of the applicable grace period, and while such event shall be
continuing, and this Agreement shall terminate upon the date specified
therein, which date shall be not less than thirty (30) days nor more than
seventy-five (75) days after the date of the giving of such notice. As a
condition of any termination of this Agreement by Owner under this Section
8.01.3, Owner shall pay to Manager, on or before the effective date of
such termination all amounts due Manager and its Affiliates under this
Agreement for the period of time prior to the date of termination, but
Owner shall not be required to pay any penalty or termination fee upon
such termination.
8.02 Termination by Manager.
8.02.1 Each of the following shall be an event of default by Owner
("Owner Event of Default"):
(a) if Owner shall fail to provide funds to be deposited in the
Hotel Accounts in accordance with Section 7.03 within ten (10)
days after Manager's request for such additional funds under
Section 7.03 and such failure continues for an additional ten
(10) day period after written notice by Manager to Owner that
such funds have not yet been received;
Embassy Suites __________ Management Agreement
26
(b) if Owner shall fail to keep, observe or perform any other
material covenant, agreement, term or provision of this
Agreement to be kept, observed or performed by Owner, and such
default shall continue for a period of thirty (30) days after
notice thereof by Manager to Owner;
(c) if Owner shall apply for or consent to the appointment of a
receiver, trustee or liquidator of Owner or of all or a
substantial part of its assets, file a voluntary petition in
bankruptcy or admit in writing its inability to pay its debts
as they come due, make a general assignment for the benefit of
creditors, file a petition or an answer seeking reorganization
or arrangement with creditors or to take advantage of any
insolvency law, or file an answer admitting the material
allegations of a petition filed against Owner in any
bankruptcy, reorganization or insolvency proceeding, or if an
order, judgment or decree shall be entered by any court of
competent jurisdiction, on the application of a creditor,
adjudicating Owner a bankrupt or insolvent or approving a
petition seeking reorganization of Owner or appointing a
receiver, trustee or liquidator of Owner or of all or a
substantial part of the assets of Owner, and such order,
judgment or decree shall continue unstayed and in effect for
any period of sixty (60) consecutive days; or
(d) if Owner shall be in default under the License Agreement and
the License Agreement shall have been terminated.
8.02.2 Each of the following shall be an event permitting
termination of this Agreement by Manager ("Manager Termination Event"):
(a) if because of a default under the Ground Lease (if any) or the
Mortgage, the Ground Lease shall be terminated or the Mortgage
shall be foreclosed (or the Hotel sold in lieu of
foreclosure);
(b) if for any reason not caused by the act or omission of
Manager, any required licenses for the sale of alcoholic
beverages are at any time suspended, terminated or revoked and
such suspension, termination or revocation shall continue for
a period of sixty (60) consecutive days, or if, for any reason
not caused by the act or omission of Manager, the right to
serve alcoholic beverages in the Hotel shall otherwise be
suspended for a period of sixty (60) consecutive days;
(c) if any event shall occur or state of facts found to exist,
with respect to the ownership or management of the Hotel,
which in Manager's opinion, would adversely affect any gaming
license or application for gaming license of Manager or its
Affiliates anywhere in the world or the current status of
Manager or any of its Affiliates with any gaming commission,
board or similar governmental or regulatory agency;
(d) if a right of termination on the part of Manager shall have
arisen under Section 10.01;
Embassy Suites __________ Management Agreement
27
(e) if a right of termination on the part of Manager shall have
arisen under Section 10.02; or
(f) if the License Agreement shall have been terminated for any
reason other than a default by Owner thereunder.
8.02.3 If an Owner Event of Default or Manager Termination Event
occurs, then Manager shall have the right to terminate this Agreement upon
written notice to Owner given at any time following the occurrence of any
such event, or if a period of grace is provided, then following the
expiration of the applicable period, and while such event shall be
continuing, and this Agreement shall terminate upon the date specified
therein, which date shall be not less than thirty (30) days nor more than
seventy-five (75) days after the date of the giving of such notice;
provided that notice of termination based upon a termination of the
License Agreement may be sent concurrently with or any time after any
notice of termination of the License Agreement.
8.03 Curing Defaults. Any default by Manager under Paragraph 8.01.1(a) or
Owner under Paragraph 8.02.1(b), as the case may be, which is susceptible of
being cured, shall not constitute a basis of termination if the nature of such
default shall not permit it to be cured within the grace period allotted,
provided that within such grace period either Manager or Owner shall have
commenced to cure such default and shall proceed to complete the same with
reasonable diligence.
8.04 Effect of Termination. The termination of this Agreement under this
Article VIII shall not affect the rights of the terminating party with respect
to any damages it has suffered as a result of any breach of this Agreement, nor
shall it affect the rights of either party with respect to liability or claims
accrued, or arising out of events occurring, prior to the date of termination.
8.05 Remedies. If this Agreement is terminated due to an Owner Event of
Default, Manager shall be entitled to all damages incurred by Manager as a
result of such default, including damages resulting from early termination of
the Agreement. If a Manager Event of Default or an Owner Event of Default
occurs, neither the right of termination nor the right to xxx for damages nor
any other remedy available to either party hereunder shall be exclusive of any
other remedy given hereunder or now or hereafter existing at law or in equity.
8.06 Indemnification Regarding Future Business. Owner shall indemnify and
hold Manager and its Affiliates harmless from all costs, expenses, claims and
liabilities, including reasonable attorneys' fees, arising or resulting from the
failure of Owner, following the expiration or earlier termination (for whatever
cause) of this Agreement, to (i) provide all of the services contracted for
within the scope and terms of this Agreement in connection with the business
booked in the ordinary course of business at any time prior to the date of such
expiration or termination (other than any such services which can only be
provided by hotels operating under the "Hilton" name to the extent Manager is
able, using procedures agreed upon by Owner and Manager, to limit any such
costs, expenses, claims and liabilities, whether by notice to the parties
contracting for such services or otherwise), (ii) honor and fulfill all
obligations of Owner under any contracts or leases entered into in the ordinary
course of business by Manager on behalf of Owner within the scope and terms of
this Agreement prior to such expiration or termination, or (iii) honor all
purchase orders and to pay all payables arising out of the operation by Manager
of the Hotel in the ordinary course of business in accordance with the
provisions of this Agreement prior to
Embassy Suites __________ Management Agreement
28
such expiration or termination, or (iv) pay all Compensation due to Hotel
Personnel; or to make all contributions or otherwise meet its obligations under
or with respect to all employee benefit plans as required under Subsection
4.05.2 or 4.05.6.
8.07 Preservation of Books and Records. In the event of the expiration or
earlier termination of this Agreement, Owner shall preserve all books and
records, files and correspondence remaining at the Hotel in accordance with
Manager's record retention guide then in effect after the expiration or
termination of this Agreement, and Owner shall provide access to Manager, and
its representatives, to such books, records, correspondence and files at all
reasonable times.
8.08 Extension Date of Termination.
8.08.1 Except as set forth in this Section 8.08, notwithstanding any
contrary provision of this Agreement, the date of termination of this
Agreement, other than upon expiration pursuant to Section 2.01, shall be
extended so that the date of termination after notice of termination is
given to or by Manager shall be on a date which is not earlier than
fifteen (15) days plus the number of days, if any, Manager is required to
give its employees advance notice of termination of employment as required
by the Worker Adjustment and Retraining Act, 29 U.S.C. Section 2101 et.
seq., as hereafter amended, or any similar federal or state statute ("WARN
Act").
8.08.2 Owner may nullify the effect of Subsection 8.08.1 by delivery
to Manager of an indemnification of Manager, in form and substance
reasonably satisfactory to Manager, against any and all claims, demands,
actions (including enforcement proceedings initiated by any government
agency), penalties, suits and liabilities (including the cost of defense,
settlement, appeal, reasonable attorneys' fees and disbursements and any
other amounts that Manager is required to pay to third parties) because
Manager's employees do not receive advance notice of termination of
employment as required by the WARN Act.
8.08.3 Manager may nullify the effect of Subsection 8.08.1 in the
event of a termination of this Agreement by Manager as a result of an
Owner Event of Default.
8.09 Actions To Be Taken On Termination. Upon termination of this
Agreement for any reason, the following shall be applicable (in addition, in
case of a termination pursuant to Section 8.01 or 8.02, to the rights of the
non-defaulting party to pursue any remedies provided under this Agreement):
(a) Any and all expenses arising as a result of such termination
or as a result of the cessation of Hotel operations (including
expenses arising under this Section 8.09) shall be for the
sole account of Owner, and Owner shall reimburse Manager
immediately on receipt of any invoice or invoices from Manager
for any expenses, including those arising from or in
connection with severing the employment of Hotel Personnel
(with severance benefits calculated according to policies
applicable generally to employees of Managed Hotels) incurred
by Manager in the course of effecting the termination of this
Agreement or the cessation of Hotel operations.
Embassy Suites __________ Management Agreement
29
(b) Within fifteen (15) days after termination, Owner shall pay
Manager all Management Fees, reimbursable expenses and other
amounts due Manager under the terms of this Agreement through
the termination date. This obligation is unconditional and
shall survive the termination of this Agreement, and Owner
shall not have or exercise any rights of setoff, except to the
extent of any outstanding and undisputed payments owed to
Owner by Manager under this Agreement. In addition, Manager
shall have the right to pay itself the foregoing Management
Fees, reimbursable expenses and other amounts due Manager
under the terms of this Agreement out of any available funds
in the Hotel Accounts.
(c) Manager shall peacefully vacate and surrender the Hotel to
Owner on the effective date of such termination.
(d) Manager shall assign and transfer to Owner:
(i) all of Owner's books and records, contracts, leases and
other documents respecting the Hotel that are not
Manager's proprietary information and are in the custody
and control of Manager, including those provided for in
Section 7.04 (but subject to Manager's rights under the
last sentence of Section 7.04); and
(ii) all of Manager's right, title and interest in and to all
liquor, restaurant and any other licenses and permits,
if any, held by Manager in connection with the operation
of the Hotel; but only to the extent such assignment or
transfer is permitted under the law of the state in
which the Hotel is located; provided, however, that if
Manager has expended any of its own funds in the
acquisition of licenses or permits, Owner shall
reimburse Manager therefor.
(e) Owner shall honor all business confirmed for the Hotel with
reservations dates after the effective date of termination.
(f) Manager shall assign to Owner its interest (if any) in, and
Owner shall confirm in writing its continuing responsibility
for, all obligations and liabilities relating to, any and all
contracts (including collective bargaining agreements and
pension plans, leases, licenses or concession agreements and
maintenance and service contracts) in effect with respect to
the Hotel as of the date of termination of this Agreement.
(g) Manager shall have the right to remove from the Hotel, on or
before the effective date of termination, the Intellectual
Property. Under no circumstances shall Owner copy, reproduce
or retain any of these materials.
(h) As of the effective date of termination, Manager shall remove
the Manager Software from the Hotel and shall disconnect the
Hotel from the related software applications. Manager shall
provide reasonable assistance to Owner in facilitating
Embassy Suites __________ Management Agreement
30
the orderly transfer of Owner's records and data contained in
the Manager Software. To the extent necessary to facilitate
the orderly transfer of Owner's records and data, and to the
extent permitted by the terms of licenses with software
producers, Owner and Manager shall execute Manager's current
form of software license agreement to provide for the use by
Owner of appropriate Manager Software (excluding, in any
event, the reservations system) for a reasonable period of
time (to be mutually agreed to by Owner and Manager) following
the effective date of termination.
8.10 Performance Termination.
8.10.1 Performance Test. Beginning at the end of the second full
Operating Year after the Commencement Date, and continuing for the
remainder of the Term, Owner shall have the right to terminate this
Agreement if, for any two consecutive Operating Years, Gross Operating
Profit (as defined below) for each such Operating Year shall be less than
ninety percent (90%) of the budgeted Gross Operating Profit as set forth
in the Operating Budget for such Operating Year.
Owner may exercise such right to terminate this Agreement, without
incurring a termination fee or penalty, by giving written notice to
Manager within ninety (90) days after Owner's receipt of the annual
financial statement for such Operating Year pursuant to Section 7.05. Such
performance termination notice shall specify the effective date of such
termination, which shall not be less than ninety (90) days from the date
of such performance termination notice.
"Gross Operating Profit" shall mean the "Income After Undistributed
Operating Expenses" of the Hotel for each Operating Year as such term is
referred to and determined in accordance with the Uniform System of
Accounts on an accrual basis in accordance with generally accepted
accounting principles consistently applied.
8.10.2 Fund-Up Cure. In the event that Owner is entitled to provide,
and does provide, Manager with timely notice of termination of this
Agreement pursuant to this Section, Manager may elect, but shall not be
obligated, to nullify such termination notice and the termination of this
Agreement based thereon, by funding to Owner, within thirty (30) days
after receipt of Owner's performance termination notice, an amount equal
to the amount by which the actual Gross Operating Profit for either of the
applicable Operating Years was less than the budgeted Gross Operating
Profit as set forth in the Operating Budget for such Operating Year. If
Manager exercises this cure right, Owner's notice of termination of this
Agreement pursuant to this Section shall be nullified and of no force and
effect, and this Agreement shall remain in full force and effect and the
Operating Year in question shall be deemed not to be an Operating Year in
which there occurred a shortfall in Gross Operating Profit which would
give rise to Owner's termination right under this Section.
8.10.3 Limit on Termination. Notwithstanding anything to the
contrary contained herein, Owner's right to terminate this Agreement under
this Section (and the amount of any shortfall to be paid by Manager in the
event Manager exercises its cure right pursuant to Subsection 8.10.2)
shall be eliminated, or reduced, as applicable, to the extent that the
shortfall is
Embassy Suites __________ Management Agreement
31
attributable to (i) force majeure events or (ii) increases (to the extent
greater than attributable to increases in CPI) in real estate taxes and
assessments, utility rates and/or premiums for insurance which Manager is
responsible to obtain. Any disputes concerning the applicability of this
Subsection 8.10.3 shall be resolved pursuant to the dispute resolution
procedure described in Section 12.04, and the time period governing any
Owner termination right or Manager cure right shall be extended for a
reasonable period of time (not exceeding 180 days) pending such
resolution.
8.11 Liquidated Damages. If Manager terminates this Agreement pursuant to
Paragraph 8.02.1(b) because Owner does not comply with, or does not cooperate
with Manager so that Manager is able to comply with, a revision in the Operating
Manual, Owner shall pay, in addition to any amounts then owing to Manager
pursuant to the terms of this Agreement, as liquidated damages and not as a
penalty, an amount equal to the monthly average Management Fee payable by Owner
to Manager for the preceding twelve (12) months (or, if this Agreement shall
have been in effect for a period less than twelve (12) months, the monthly
average Management Fee for all months this Agreement shall have been in effect)
multiplied by the lesser of (a) thirty-six (36) and (b) the number of months
remaining in the Term.
ARTICLE IX
TITLE MATTERS
9.01 Title to Hotel. Owner covenants that, as of the date hereof, it has
either good and marketable fee title to, or a valid and subsisting leasehold
estate in, the Land, and that it will continue to have good and marketable fee
simple title or a valid and subsisting leasehold estate in and to the Hotel.
Owner further covenants that, subject to the terms and conditions of this
Article IX, throughout the Term of this Agreement it shall maintain full
ownership in such fee interest or leasehold estate in and to the Hotel, and good
title to the FF&E and the Operating Equipment.
9.02 Assignment by Manager.
9.02.1 Prohibited Assignments. Except as provided in the following
Subsection 9.02.2, Manager shall not assign this Agreement without the
prior written consent of Owner. The disposition by Manager of its
controlling interest in any Affiliate to which it has previously assigned
this Agreement, shall be deemed to be a prohibited assignment hereunder
requiring the prior written consent of Owner. It is understood and agreed
that any consent granted by Owner to any such assignment shall not be
deemed a waiver of the covenant herein contained against assignment in any
subsequent case. Except as otherwise provided in Subsection 9.02.2, no
assignment of this Agreement shall operate to release Manager from any of
its obligations under this Agreement.
9.02.2 Permitted Assignments. Manager, without the consent of Owner,
shall have the right to assign this Agreement to any Affiliate of Manager,
or to any entity which may become an Affiliate as a result of a related
and substantially concurrent transaction, or to any successor or assign of
Manager which may result from any merger, consolidation or reorganization
involving Manager, or to a corporation or other entity which shall acquire
all or substantially all of the business and assets of Manager. Upon
execution of any assignment as
Embassy Suites __________ Management Agreement
32
aforesaid under this Subsection 9.02.2, or with Owner's consent under
Subsection 9.02.1, notice thereof in the form of a duplicate original of
such assignment shall be delivered to Owner forthwith, and thereupon,
except in the case of an assignment to an Affiliate of Manager, Manager
shall be released of all of its covenants and liabilities hereunder, other
than liabilities accruing or based upon events occurring prior to the date
of the delivery of such duplicate original to Owner; provided, however,
that such release shall be contingent upon the delivery to Owner of an
appropriate instrument whereby the assignee shall assume all of the
obligations of Manager hereunder.
9.03 Sale, Lease or Assignment by Owner.
9.03.1 Prohibited Transfers. Owner agrees that, without the consent
of Manager, it will not sell, lease or otherwise transfer or convey the
Hotel, or any part thereof, or assign this Agreement, or otherwise
transfer any of its rights hereunder, whether to a transferee of the Hotel
or otherwise, except as provided in this Section 9.03; such prohibition
shall apply, without limitation, to any sale and leaseback transaction.
9.03.2 Effect of Sale or Lease. In the event Owner sells, leases,
assigns or otherwise transfers or conveys the Hotel to an unrelated third
party purchaser in a bona fide arm's length transaction, Owner shall have
the right, at its sole option, to terminate this Agreement by giving
ninety (90) days' prior written notice (a "Sale Termination Notice") to
Manager. The Sale Termination Notice shall set forth an estimate of the
effective termination date of this Agreement, which date shall not be less
than ninety (90) days subsequent to the date of the Sale Termination
Notice. The actual effective date of termination shall be on the actual
date of closing of the sale, lease, assignment or other transfer (the
"Closing") which was the subject of the Sale Termination Notice,
regardless of the estimate provided in the Sale Termination Notice.
Accordingly, Owner shall, upon reasonable notice, have the right to extend
the effective date of such termination for a reasonable period of time
based on delays in the date of Closing, provided that Owner shall pay all
actual costs reasonably incurred by Manager in postponing the
effectiveness of such termination.
9.03.3 Permitted Assignments. Owner, without the consent of Manager,
shall have the right to assign this Agreement to any Affiliate of Owner,
or to any successor or assign of Owner which may result from any merger,
consolidation or reorganization involving Owner. Upon execution of any
assignment as aforesaid under this Subsection 9.03.3, notice thereof in
the form of a duplicate original of such assignment shall be delivered to
Manager forthwith, and thereupon, except in the case of an assignment to
an Affiliate of Owner, Owner shall be released of all of its covenants and
liabilities hereunder, other than liabilities accruing or based upon
events occurring prior to the date of the delivery of such duplicate
original to Manager; provided, however, that such release shall be
contingent upon the delivery to Manager of an appropriate instrument
whereby the assignee shall assume all of the obligations of Owner
hereunder.
9.04 Permitted Mortgages. Owner shall not grant any mortgage, deed of
trust or trust deed, pledge or encumbrance of or other security interest in the
Hotel or any part thereof or interest therein (a "Mortgage") other than a
Permitted Mortgage (as hereinafter defined). As used herein, the holder of or
trustee under any such Mortgage, and the holder of any indebtedness secured
thereby, are herein
Embassy Suites __________ Management Agreement
33
collectively referred to as the "Mortgagee". As used herein, a "Permitted
Mortgage" shall mean any Mortgage which is listed or described in Exhibit II
attached hereto or which shall hereafter be given; provided that the (i)
principal amount of indebtedness secured by such Mortgage as it relates to the
Hotel when aggregated with all other indebtedness secured by the liens against
the Hotel is not in excess of seventy-five percent (75%) of the then appraised
value of the Hotel as determined by Mortgagee in connection with its
underwriting of the loan secured by such Mortgage, (ii) a copy of the Mortgage
and other loan documents shall be delivered to Manager upon execution thereof,
(iii) the related financing is obtained from an Institutional Lender (as
hereinafter defined) which is not an Affiliate of Owner, and (iv) Mortgagee
enters into a Subordination, Attornment and Non-Disturbance Agreement with
Manager in a form and in substance reasonably satisfactory to Manager. The
foregoing shall be applicable both to original financing and to any refinancing,
and this Agreement shall in any and all events survive the foreclosure of any
such Mortgage, or the granting of a deed in lieu thereof, and shall be binding
upon the purchaser at any such foreclosure, or the grantee of a deed in lieu
thereof, and their respective successors and assigns, except any such
third-party purchaser at foreclosure or any third-party grantee of a deed in
lieu which in either case is unaffiliated with such lender. The term
"Institutional Lender" shall mean a commercial bank, a trust company, a savings
bank, a savings and loan association, an insurance company, a college or
university, a pension fund of a corporation whose shares are listed on a
recognized national stock exchange, or a real estate investment trust whose
shares are listed on such an exchange, in each case having assets of no less
than $500,000,000.00 (which amount is based upon the purchasing power of the
United States dollar as of the Commencement Date and shall be annually
increased, if necessary, on each anniversary of the Commencement Date to reflect
an amount which shall have the equivalent purchasing power to said
$500,000,000.00) and which is regularly engaged in the business of making
commercial loans.
9.05 Amendments to Ground Lease or Hotel Lease. Owner shall not pursue any
amendments or modifications of the Ground Lease, if any, or the Hotel Lease if
such amendment or modification would affect Manager's rights, obligations or
liabilities under this Agreement, without the prior written approval of Manager,
such approval of Manager not to be unreasonably withheld; provided, however,
that a copy of any amendment, modification or other related documents shall be
delivered to Manager upon execution thereof.
9.06 Successors and Assigns. Subject to the foregoing, this Agreement
shall inure to the benefit of and be binding upon the parties hereto, their
respective heirs, legal representatives, successors and assigns, and with
respect to Owner, the phrase "successors and assigns" shall include purchasers
and lessees, or sublessees, of Owner's interest in the Hotel.
9.07 Public Offering or Transfer. Neither any transfer of publicly traded
stock nor any public offering of equity ownership interests (whether partnership
interest, corporate stock, shares or otherwise) in either party or by its parent
company or other owner of such party, or entity that itself or through its
ownership of legal or beneficial interests in one or more other entities holds
legal or beneficial interests or voting power in such an owner shall be deemed
to be a sale, lease or assignment under the provisions of this Article IX.
Embassy Suites __________ Management Agreement
34
ARTICLE X
DAMAGE OR DESTRUCTION; EMINENT DOMAIN
10.01 Damage or Destruction. If the Hotel shall be substantially damaged
by fire or other casualty, and the Mortgagee does not make sufficient proceeds
of insurance available to Owner to permit Owner to rebuild and restore the Hotel
to a condition which permits the continued operation of the Hotel by Manager as
contemplated by this Agreement, then Owner, by written notice to Manager given
within sixty (60) days after the occurrence of such event, shall have the right
to terminate this Agreement on the basis that Owner does not elect to rebuild or
restore the Hotel, and neither party shall have any further obligation to the
other party hereunder, except with respect to liability accruing, or based upon
events occurring, prior to or concurrently with the effective date of such
termination. For the purposes hereof, the Hotel shall be deemed to have been
substantially damaged if the estimated length of time required to restore the
Hotel substantially to its condition and character just prior to the occurrence
of such casualty shall be in excess of one hundred eighty (180) days, as
indicated by an architect's certificate or other evidence reasonably
satisfactory to Manager. If this Agreement shall not terminate in the event of
damage to the Hotel, either because (i) the damage does not amount to
substantial damage as described above, or (ii) notwithstanding substantial
damage to the Hotel, Owner shall elect to restore the Hotel, then Owner shall
proceed with all due diligence to commence and complete the restoration of the
Hotel to its condition and character just prior to the occurrence of such
casualty, and if such restoration is not commenced within sixty (60) days of the
occurrence of the casualty, or completed within two (2) years, following the
occurrence of the casualty, then Manager shall have the right to terminate the
Agreement by notice to Owner as provided in Section 8.02.
10.02 Eminent Domain. If all of the Hotel, or such substantial portion
thereof as to make it infeasible, in the reasonable opinion of Owner, to restore
and continue to operate the remaining portion for the purposes contemplated
hereby, shall be taken through the exercise, or by agreement in lieu of the
exercise, of the power of eminent domain, then upon the date that Owner shall be
required to surrender possession of the Hotel, or a portion thereof, this
Agreement shall terminate and neither party shall have any further obligation to
the other party hereunder, except with respect to liabilities accruing, or based
upon events occurring, prior to or concurrently with the effective date of such
termination. In the event a substantial portion of the Hotel is taken, but
Mortgagee fails or refuses to make available to Owner sufficient proceeds of
such eminent domain proceedings in order to permit Owner to make appropriate
alterations, restorations or repairs to the remainder of the Hotel, so that the
Hotel would continue to be operable for the purposes herein contemplated, then
Owner shall have the right to terminate this Agreement upon written notice to
Manager and, upon the date that Owner shall be required to surrender possession
of the Hotel to the condemning authority, this Agreement shall terminate and
neither party shall have any further obligation to the other party hereunder,
except with respect to liabilities accruing, or based upon events occurring,
prior to the effective date of such termination. If such taking of a portion of
the Hotel shall not make it infeasible, in the reasonable opinion of Owner, to
restore and continue to operate the remaining portion thereof for the purpose
herein contemplated, then this Agreement shall not terminate, and Owner shall
proceed with all due diligence to repair any damage to the Hotel, or to alter or
modify the Hotel so as to render it a complete architectural unit which can be
operated as a hotel of substantially the same type and class as before; and if
such restoration is not completed within two (2) years following the taking,
then Manager shall have the right to terminate this Agreement by notice to Owner
as provided in Section 8.02.
Embassy Suites __________ Management Agreement
35
Manager, with the full cooperation of Owner, shall have the right to file a
claim with the appropriate authorities for the loss of Management Fee income for
the remainder of the Term because of such taking.
ARTICLE XI
INTELLECTUAL PROPERTY
11.01 Intellectual Property. Owner acknowledges that Manager or one of its
Affiliates is or will become the owner or licensee of certain intellectual
property including its (i) software in use at one or more Other Managed Hotels
and all source and object code versions thereof and all related documentation,
flow charts, user manuals, listing, and service/operator manuals and any
enhancements, modifications or substitutions thereof ("Manager Software"), and
(ii) trade secrets, know-how and other proprietary information relating to the
operating methods, procedures and policies distinctive to Other Managed Hotels
(collectively "Intellectual Property"). Manager shall utilize the Intellectual
Property in connection with the operation of the Hotel to the extent that it
deems appropriate for the purpose of carrying out its agreements and obligations
hereunder, but such use shall be strictly on a non-exclusive basis, and neither
such use nor anything contained in this Agreement shall confer any proprietary
license or other rights in the Intellectual Property upon Owner or any third
parties, provided it is given prompt notice, reasonable assistance and sole
authority to defend or settle the claim. Manager shall indemnify, defend and
hold harmless Owner from and against any and all claims, costs, expenses,
liabilities, charges and fees directly incurred by Owner to the extent arising
from any copyright or patent infringement claim by any third party and relating
to the use by Manager of the Manager Software and Intellectual Property.
ARTICLE XII
GENERAL PROVISIONS
12.01 Purchases from Manager and Manager's Affiliates. In purchasing
goods, supplies, equipment and services for the Hotel, including Operating
Supplies, Operating Equipment, insurance and long distance telephone services,
Manager (i) unless otherwise directed by Owner in writing, may utilize
purchasing procurement services of Affiliates of Manager and/or other group
buying techniques made available by Manager to other hotels managed and/or
franchised by Manager and its Affiliates, provided that the cost thereof shall
be generally no less favorable to Owner than that which would be available
through unrelated third party vendors in an arms-length transaction; or (ii) if
so directed by Owner in writing, utilize such other supplier or provider as may
be designated by Owner (provided such other supplier or provider, and such other
supplier's or provider's goods, supplies, equipment and services, comply with
the Operational Standards and, to the extent Owner or any Affiliate of Owner
receives and retains xxxx-ups, fees or other compensation from such other
supplier or provider, Owner shall, on a yearly basis, credit to the Hotel the
proportionate share of the pre-tax profits earned by Owner through such xxxx
ups, fees, or other compensation, after deducting all operating expenses and
capital costs attributable to utilizing such other supplier or provider). For
purposes of this Section 12.01, purchasing or procurement services provided by
an Affiliate of Manager shall be considered provided by Manager. In providing
such purchasing or procurement services, Manager may xxxx up its costs or
receive and retain a fee or other compensation from vendors and service
providers for its services in making the benefit of volume purchases available
to the Hotel or negotiating and implementing the arrangements with such vendors
or providers; provided, however, that (i) the total cost of goods and
Embassy Suites __________ Management Agreement
36
services (including such xxxx-up, fee or other compensation charged or retained
by Manager or its Affiliates) so provided to the Hotel by Manager shall be
generally no less favorable to Owner than that which would be available through
unrelated third party vendors in an arms-length transaction, and (ii) Manager
shall, on a yearly basis, remit to Owner the proportionate share of the pre-tax
profits earned by Manager through such xxxx-ups, fees, or other compensation,
after deducting all operating expenses and capital costs attributable to
providing such services. For purposes of calculating Owner's proportionate share
of such pre-tax profits, Manager shall use the number of available rooms at the
Hotel divided by the total number of available rooms in all hotels participating
in such services, or any other manner that reasonably approximates the
proportionate share of purchases made by the Hotel in relation to the total
purchases made by all hotels participating in Manager's purchasing services.
12.02 Budgets and Forecasts. In preparing all budgets and forecasts to be
submitted to Owner hereunder, Manager shall base its estimates upon the most
recent and reliable information then available, taking into account the location
of the Hotel and its experience in other comparable hotels. Manager reserves the
right, and shall have the obligation, to update and revise any such budgets and
forecasts from time to time during the periods covered thereby to reflect
variables and events not reasonably within the control of Manager. All such
updatings and revisions of the Capital Renewals Budget and the Operating Budget
(to the extent any such changes in the Operating Budget indicate shortfalls
which would necessitate a need for additional working capital to be provided by
Owner) shall be submitted, together with reasonable explanations of the reasons
for such changes, to Owner for its approval. Owner agrees that it shall promptly
reply to any such submissions giving its approval or stating the grounds on
which it is withholding its approval.
12.03 Indemnities.
12.03.1 Indemnification to Manager. Subject to Subsections 12.03.2
and 12.03.3, Owner shall indemnify, defend and hold Manager harmless from
and against any and all claims, demands, actions (including enforcement
proceedings initiated by any government agency), penalties, suits and
liabilities (including the cost of defense, settlement, appeal, reasonable
attorneys' fees and disbursements and any other amounts that Manager is
required to pay to third parties in connection with such matters, but
excluding consequential damages sustained by Manager) that Manager may
have alleged against it, incur, become responsible for or pay out for any
reason related to the design, construction, development, ownership or
operation of the Hotel including (i) the employment and discharge of Hotel
Personnel (including alleged discrimination in connection therewith) and
matters pertaining to the accessibility of the Hotel to persons with
disabilities; (ii) an Owner Event of Default; (iii) contamination of or
any adverse effects on the environment with respect to the Hotel; (iv) any
violation of any Legal Requirements; (v) injury or damage to persons or
property occurring in or about the Hotel or the Land on which the Hotel is
located; (vi) breach by Owner of any of its warranties or representations
set forth in this Agreement; (vii) claims arising under contracts or
agreements entered into in accordance with the terms of this Agreement; or
(viii) acts or omissions (whether negligent or otherwise) of Manager in
the performance of services under this Agreement, or in connection with
winding up such services on termination or expiration of this Agreement;
provided, however, that in no event shall Owner's indemnification
obligations under this Subsection 12.03.1 extend to (a) Manager's Grossly
Negligent or Willful Acts, (b) a Manager Event of Default or (c) a breach
by Manager of any of its warranties or representations under this
Agreement.
Embassy Suites __________ Management Agreement
37
12.03.2 Indemnification To Owner. Subject to Subsection 12.03.3,
Manager shall indemnify, defend and hold Owner harmless from and against
any and all claims, demands, actions (including enforcement proceedings
initiated by any government agency), penalties, suits and liabilities
(including the cost of defense, settlement, appeal, reasonable attorneys'
fees and disbursements and any other amounts that Owner is required to pay
to third parties in connection with such matters, but excluding
consequential damages sustained by Owner) that Owner may have alleged
against it, incur, become responsible for or pay out by reason or to the
extent caused by (i) Manager's Grossly Negligent or Willful Acts, (ii) a
Manager Event of Default or (iii) a breach by Manager of any of its
warranties or representations under this Agreement.
12.03.3 Effect of Settlements; Insurance. In no event shall the
settlement by either party in good faith of any claim brought by a third
party (including Hotel Personnel) in connection with the ownership or
operation of the Hotel be deemed to create any presumption of the validity
of the claim, nor shall any such settlement be deemed to create any
presumption that the acts or omissions giving rise to such claim
constituted Manager's Grossly Negligent or Willful Acts or a Manager Event
of Default or a breach of any of Manager's warranties and representations
under this Agreement. Notwithstanding any contrary provision of this
Section 12.03, Owner and Manager mutually agree for the benefit of each
other to look first to the appropriate insurance coverages in effect
pursuant to this Agreement in the event any claim or liability occurs as a
result of injury to person or damage to property, regardless of the cause
of such claim or liability.
12.03.4 Indemnified Parties. The indemnities contained in this
Section 12.03 shall run to the benefit of both Manager and Owner and their
respective Affiliates and the directors, partners, members, managers,
officers and employees of Manager and Owner and their respective
Affiliates.
12.03.5 Expenses Pending Determination. Pending the resolution of
any question as to whether Manager or any of its Affiliates or any of its
officers or employees are entitled to indemnification under this Section
12.03, Manager shall be authorized to pay from the Hotel Accounts all
expenses of defending or handling any matter referred to in this Section
12.03, provided that Manager will reimburse Owner for all such expenses to
the extent that it is ultimately determined that such entities or persons
are not entitled to indemnification hereunder.
12.03.6 Survival. The provisions of Section 12.03 shall survive any
cancellation, termination or expiration of this Agreement and shall remain
in full force and effect until such time as the applicable statute of
limitation shall cut off all demands, claims, actions, damages, losses,
liabilities or expenses which are the subject of this Section 12.03.
12.03.7 Notice. Promptly after receipt by an indemnified party under
Subsection 12.03.1 or 12.03.2 above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to
be made against the indemnifying party under Subsection 12.03.1 or 12.03.2
above, notify the indemnifying party in writing of the commencement
thereof; but the omission or delay of such notice shall not relieve the
indemnifying party from any liability it may have to the indemnified party
under
Embassy Suites __________ Management Agreement
38
Subsection 12.03.1 or 12.03.2 above except to the extent the indemnifying
party is prejudiced as a result of such omission or delay.
12.04 Dispute Resolution. Any controversy, dispute or claim arising out of
or relating to this Agreement or the performance, enforcement, breach,
termination or validity thereof, including the determination of the scope of
this Agreement to arbitrate, shall be determined by arbitration, and not
litigation, in accordance with the terms of this Section 12.04 as set forth in
Schedule "A" attached hereto. Disputes with respect to financial matters shall
be resolved in accordance with Paragraph 2 of Schedule "A", and disputes with
respect to all other matters shall be resolved in accordance with Paragraph 3 of
Schedule "A".
12.05 Sale of Securities. In the event Owner, or any person controlling
Owner (a "Controlling Person") shall, at any time or from time to time, sell or
offer to sell, any securities issued by Owner through the medium of any
prospectus or otherwise, it shall do so only in compliance with all applicable
federal and state securities laws, and shall clearly disclose to all purchasers
and offerees that (i) neither Manager nor any of its Affiliates or their
respective officers, directors, agents or employees shall in any way be deemed
an issuer or underwriter of said securities, and (ii) Manager or its Affiliates
and such officers, directors, agents and employees have not assumed and shall
not have any liability whatsoever arising out of or relating to the sale of, or
offer to sell, such securities, including, but not limited to, any liability or
responsibility for any financial statements, prospectuses or other financial
information contained in any prospectus or similar written or oral
communication. Owner agrees to indemnify, defend and hold Manager and its
Affiliates and their respective officers, directors, agents and employees free
and harmless of and from any and all liabilities, costs, damages, claims or
expenses, including reasonable attorneys' fees, arising out of or related to the
sale or offer of any securities of Owner, except to the extent any claim related
thereto is based solely upon misleading financial or other information provided
by Manager to Owner in connection with the preparation of the disclosures
described in and contemplated pursuant to this Section 12.05. Such
indemnification shall be deemed a cure of any breach of the first sentence of
this Section 12.05. All terms used in this Section 12.05 shall have the same
meaning as in the Securities Act of 1933, as amended.
12.06 License Agreement. The Hotel shall be operated by Manager under the
Embassy Suites brand name in accordance with the License Agreement. Owner shall
comply with all the terms and conditions of the License Agreement (specifically
including Owner's obligation to pay the fees, charges and contributions set
forth in the License Agreement) and keep the License Agreement in full force and
effect throughout the Term of this Agreement. Nothing in this Agreement shall be
interpreted in a manner which would relieve Owner of any of its obligations
under the License Agreement.
12.07 No Restriction. Owner agrees that Manager and any of its successors
(by purchase, merger, acquisition or otherwise) have and shall retain the right
to own, have an ownership interest in, develop, operate, manage, license,
franchise, sell or rent other hotels or inns of any kind, or shared ownership
projects commonly known as vacation ownership or time-share ownership projects
(or similar real estate projects), under the "Embassy Suites" or other name and
wherever located except on the Land under this Agreement, and nothing contained
in this Agreement shall prohibit or limit Manager from engaging in any such
activities, which shall not give rise to any liability for claims relating to
unfair competition and/or breach of the implied covenant of good faith and fair
dealing.
Embassy Suites __________ Management Agreement
39
12.08 Major Capital Improvements.
12.08.1 Major Capital Improvements. Any program of capital
improvements, involving an addition to the Hotel, or designed to
substantially upgrade or change the nature or image of the Hotel (as
opposed to a renovation or refurbishing which takes place as part of the
normal or cyclical upkeep of the Hotel), shall be deemed to be a "Major
Capital Improvement." Major Capital Improvements will be undertaken only
at the request of Owner, whether on its own initiative or at the
suggestion of Manager, and in any event shall be subject to the approval
of Manager, and shall not be included in the Capital Renewals Budgets.
12.08.2 Development. The development of any Major Capital
Improvement shall be the responsibility of Owner and shall be paid for out
of separate funds of Owner and not out of Hotel Accounts.
12.08.3 Prohibition on Casinos. In no event shall a casino be added
to the Hotel or built as a separate structure on any portion of the Land;
nor shall any casino or gaming operations be conducted in the Hotel.
12.09 Manager Programs, etc. The programs, systems and equipment utilized
by Manager in connection with the operation of Other Managed Hotels, including
those relating to security, life/safety, health, communications, and information
management, will from time to time be revised or upgraded and new programs,
systems and equipment will be developed. Accordingly, Manager, from time to
time, shall periodically publish its requirements and any specifications with
respect thereto by appropriate notice to each of the Managed Hotels. Owner
agrees that the Hotel shall comply with such requirements and specifications;
provided that such compliance, with respect to other than security, life/safety
and health related matters, shall be subject to the approved Operating Budget
(with such variances and modifications as contemplated by Subsection 4.02.4).
12.10 Notices. Except as otherwise provided in this Agreement, all
notices, demands, requests, consents, approvals and other communications (herein
collectively called "Notices") required or permitted to be given hereunder, or
which are to be given with respect to this Agreement, shall be in writing and
shall be addressed to the party to be so notified as follows:
If to Owner: __________
If to Manager: PROMUS HOTELS INC.
0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
And
Embassy Suites __________ Management Agreement
40
EMBASSY SUITES __________
Attn: General Manager
Notices may be (i) delivered by registered or certified mail, postage prepaid,
return receipt requested, (ii) sent by overnight air courier service, (iii) hand
delivered, or (iv) sent by telecopy, telegram, telex or other electronic written
communication; provided that in utilizing any form of delivery authorized by
clause (iv) of this sentence, receipt of such Notice is acknowledged by the
addressee through appropriate written communication and an identical Notice is
also sent concurrently by mail, overnight air courier service or hand delivery.
Notices will be effective on (i) the earlier of actual receipt and the seventh
business day after is sent by registered or certified mail, (ii) the day it is
delivered by an overnight air courier service or by hand delivery; or (iii) the
day it is sent by telecopy, telegram, telex or other electronic written
communication. Either party may at any time change the addresses for notices to
such party by delivering a Notice as aforesaid. The means of notice specified in
this Section 12.10 are the sole acceptable means of notice. Refusal to accept
delivery of Notice shall be deemed to constitute delivery of such Notice.
12.11 Modification and Changes. This Agreement cannot be changed or
modified except by another agreement in writing signed by the party sought to be
charged therewith, or by its duly authorized agent.
12.12 Understandings and Agreements. This Agreement constitutes all of the
understandings and agreements of whatsoever nature or kind existing between the
parties with respect to Manager's management of the Hotel. Owner and Manager
each hereby acknowledge, represent and agree that in entering into this
Agreement, they are not relying upon any statement, representation or promise,
or the failure to make any statement, representation or promise, of any other
party (or of any officer, agent, employee, representative or attorney for any
other party), in executing this Agreement except as expressly stated herein.
12.13 Headings. The Article, Section and Subsection headings contained
herein are for convenience and reference only and are not intended to define,
limit or describe the scope or intent of any provision of this Agreement.
12.14 Consents. Except as specifically otherwise provided in this
Agreement, each party agrees that it will not unreasonably withhold any consent
or approval requested by the other party pursuant to the terms of the Agreement,
and that any such consent or approval shall not be unreasonably delayed or
qualified. Similarly, each party agrees that any provision of this Agreement
which permits such party to make requests of the other party, shall not be
construed to permit the making of unreasonable requests.
12.15 Survival of Covenants. Any covenant, term or provision of this
Agreement which, in order to be effective, must survive the termination of this
Agreement, shall survive any such termination.
Embassy Suites __________ Management Agreement
41
12.16 Third Parties. None of the obligations hereunder of either party
shall run to or be enforceable by any party other than the party to this
Agreement or by a party deriving rights hereunder as a result of an assignment
permitted pursuant to the terms hereof.
12.17 Waivers. No failure by Manager or Owner to insist upon the strict
performances of any covenant, agreement, term or condition of this Agreement, or
to exercise any right or remedy consequent upon the breach thereof, shall
constitute a waiver of any such breach or any subsequent breach of such
covenant, agreement, term or condition. No covenant, agreement, term or
condition of this Agreement and no breach thereof shall be waived, altered or
modified except by written instrument. No waiver of any breach shall affect or
alter this Agreement, but each and every covenant, agreement, term and condition
of this Agreement shall continue in full force and effect with respect to any
other then existing or subsequent breach thereof.
12.18 Partial Invalidity. Any provision of this Agreement prohibited by
law or by court decree in any locality or state shall be ineffective to the
extent of such prohibition without in any way invalidating or affecting the
remaining provisions of this Agreement, or without invalidating or affecting the
provisions of this Agreement within the states or localities where not
prohibited or otherwise invalidated by law or by court decree. Further, in the
event that any provision of this Agreement shall be held unenforceable by virtue
of its scope, but may be made enforceable by a limitation thereof, such
provision shall be deemed to be amended to the minimum extent necessary to
render it enforceable under the laws of the jurisdiction in which enforcement is
sought.
12.19 Applicable Law. Owner and Manager acknowledge that the State of New
York has a well developed history of business decisional law and for that reason
agree that this Agreement shall be construed in accordance with and be governed
by the laws of the State of New York, without recourse to New York or any other
choice of law or conflicts of laws principles (unless the License Agreement
provides that it shall be construed in accordance with and be governed by the
laws of a different state, in which event this Agreement shall also be construed
in accordance with and be governed by the laws of such other state, without
recourse to any choice of law or conflicts of laws principles).
12.20 Representations and Warranties .
12.20.1 Representations and Warranties of Manager. Manager
represents and warrants to Owner, as of the date hereof, as follows:
(a) Manager is duly organized, validly existing and in good
standing under the laws of the state of its organization, is
duly qualified to do business in the state in which the Hotel
is located, and has full power, authority and legal right to
execute, perform and timely observe all of the provisions of
this Agreement to be performed or observed by Manager.
Manager's execution, delivery and performance of this
Agreement have been duly authorized by all necessary action on
the part of Manager.
(b) This Agreement constitutes a valid and binding obligation of
Manager and does not and will not constitute a breach of or
default under the organizational and governing documents of
Manager or the terms, conditions or provisions of any
Embassy Suites __________ Management Agreement
42
law, order, rule, regulation, judgment, decree, agreement or
instrument to which Manager is a party or by which it or any
substantial portion of its assets is bound or affected.
(c) No approval of any third party that has not been obtained
prior to the execution of this Agreement is required for
Manager's execution and performance of this Agreement (other
than the licenses and permits to be obtained and maintained as
contemplated by Paragraph 4.06(f)).
(d) Manager, at its own expense, shall maintain in full force and
effect throughout the Term of this Agreement its legal
existence and the rights required for it timely to observe and
perform all of the terms and conditions of this Agreement
(other than the licenses and permits to be obtained and
maintained as contemplated by Paragraph 4.06(f)).
(e) There is no litigation or proceeding pending or threatened
against Manager that could adversely affect the validity of
this Agreement or the ability of Manager to comply with its
obligations under this Agreement.
12.20.2 Representations and Warranties of Owner. Owner represents
and warrants to Manager, as of the date hereof, as follows:
(a) Owner is duly organized, validly existing and in good standing
under the laws of the state of its organization, is duly
qualified to do business in the state in which the Hotel is
located, and has full power, authority and legal right to
execute, perform and timely observe all of the provisions of
this Agreement to be performed or observed by Owner. Owner's
execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of
Owner.
(b) This Agreement constitutes a valid and binding obligation of
Owner and does not and will not constitute a breach of or
default under any of the organizational and governing
documents of Owner or the terms, conditions or provisions of
any law, order, rule, regulation, judgment, decree, agreement
or instrument to which Owner is a party or by which it or any
substantial portion of its assets (including the Hotel) is
bound or affected.
(c) No approval of any third party (including any ground lessor or
the holder of any Mortgage) that has not been obtained prior
to the execution of this Agreement is required for Owner's
execution and performance of this Agreement.
(d) Owner, at its own expense, shall maintain in full force and
effect throughout the Term of this Agreement its legal
existence and the rights required for it timely to observe and
perform all of the terms and conditions of this Agreement.
Embassy Suites __________ Management Agreement
43
(e) Owner is the sole owner of the Hotel building and its contents
and the sole owner of the fee title to (or a ground leasehold
interest in) the Land on which the Hotel is located. Owner has
full power, authority and legal right to own (or lease) such
real and personal property.
(f) Owner holds (or will hold prior to the Commencement Date) and
shall maintain throughout the Operating Period all approvals
and permits necessary to permit the ownership and operation of
the Hotel in accordance with the Operating Manual and Legal
Requirements.
(g) There is no litigation or proceeding pending or threatened
against Owner or the Project that could adversely affect the
validity of this Agreement or the ability of Owner to comply
with its obligations under this Agreement.
(h) To the best of Owner's knowledge, (i) no hazardous or toxic
materials are present in or on or have been released from the
Hotel or the Land, (ii) there exist no other soil, water,
mineral, chemical or environmental conditions in or at the
Hotel or on or under the Land that presently or with the
passage of time will require notice or reporting to any
governmental authority or employees or patrons of the Hotel,
pose any threat to the health and safety of the employees or
patrons of the Hotel or otherwise require, based on any Legal
Requirement or standard of prudent ownership, any monitoring
or remedial action, (iii) there exists no identifiable threat
of the contamination of the Land by release of hazardous or
toxic materials from existing sources adjacent to the Hotel
and (iv) the Land contains no underground tanks.
12.21 Confidentiality. Owner and Manager agree that all matters disclosed
in the negotiation of this Agreement and that the matters set forth in this
Agreement are strictly confidential. In addition, Owner and Manager agree to
keep strictly confidential all information of a proprietary or confidential
nature about or belonging to either party or to any Affiliate of either party to
which the other party gains or has access by virtue of the relationship between
Owner and Manager. Except as disclosure may be required to obtain the advice of
professionals or consultants, or financing for the Hotel from an Institutional
Lender, or in furtherance of a permitted or proposed assignment of this
Agreement, or as may be required by law or by the order of any government,
regulatory authority or tribunal or otherwise to comply with Legal Requirements
(including reporting requirements applicable to public companies), Owner and
Manager shall make every effort to ensure that such information is not disclosed
to the press or to any other third person without the prior consent of the other
party. The obligations set forth in this Section 12.21 shall survive any
termination or expiration of this Agreement. Owner and Manager shall cooperate
with one another on all public statements, whether written or oral and no matter
how disseminated, regarding their contractual relationship as set forth in this
Agreement or the performance of their respective obligations under this
Agreement.
12.22 Further Assurance. Owner and Manager shall do and cause to be done
all such acts, matters and things and shall execute and deliver all such
documents and instruments as shall be required to enable Owner and Manager to
perform their respective obligations under, and to give effect to the
transactions contemplated by, this Agreement. Without limiting the generality of
the foregoing, Owner,
Embassy Suites __________ Management Agreement
44
on behalf of itself, its Affiliates, and its and their owners, partners,
principals, officers, successors and assigns, agrees, at the request of Manager,
to complete, execute and furnish to Manager such questionnaires or forms as may
be required for Manager or any of its Affiliates necessary to meet the
requirements of any liquor licensing authority or similar regulatory authority.
12.23 Counterparts. The parties hereto agree that this Agreement may be
executed in counterparts, each of which shall be deemed an original, and such
counterparts shall together constitute one and the same Agreement, binding all
of the parties hereto, notwithstanding all of the parties are not signatory to
the original or same counterparts. For all purposes, including recordation,
filing and delivery of this Agreement, duplicated unexecuted pages of the
counterparts may be discarded and the remaining pages assembled as one document.
12.24 Relationship of the Parties; Agency and Agency Waivers. The
relationship created by this Agreement between Owner and Manager shall be that
of principal and agent, respectively. This Agreement does not create a
partnership, joint venture, tenancy, or any relationship other than that of
principal and agent. To the extent allowed by law, this Agreement supercedes any
and all duties and remedies provided by the general law of agency. Any conduct
authorized by this Agreement shall not constitute a breach of any agency duty,
and no breach of this Agreement shall also constitute a breach of any agency
duty. Without limiting the generality of the foregoing, Owner and Manager
acknowledge and agree that:
(a) Manager and its Affiliates may own, manage, or franchise any
other business of any nature, including hotels, conference
centers, time share properties, lodging facilities or similar
business, at any location, under any brand name or under no
brand name, on its own account, as agent for any other person
or entity, or as licensor, regardless of whether or to
whatever extent such businesses compete with the Hotel or
Owner.
(b) Except as provided by Section 7.04, Manager shall own all
information and data collected or obtained in the course of
operating the Hotel and may use such data for any purpose
other than to the material detriment of the Hotel. Owner
agrees that it has no claim to or interest in any financial or
other benefit obtained by Manager as a result of any such use.
(c) To the extent that the interests of any individual owners of
Embassy Suites hotels conflict, Manager shall act in the
collective best interests of all of its principals, even if
doing so may be to the detriment of individual principals,
including Owner.
(d) Manager has no duty to disclose or to account to Owner beyond
the requirements of Sections 4.02, 7.05 and 12.01 except (i)
in cases of self-dealing or self-interested transactions
except as authorized by Owner and (ii) upon request by Owner
to provide sufficient documentation to reasonably demonstrate
that charges for goods or services billed by Manager are
consistent with the terms of this Agreement. Any such request
shall not relieve Owner from its obligation to pay such
charges while the request is pending.
Embassy Suites __________ Management Agreement
45
12.25 Limitation on Liability. In no event shall Manager be deemed in
breach of its duties hereunder, or otherwise at law or in equity, solely be
reason of (i) the failure of the financial performance of the Hotel to meet
Owner expectations, income projections or other matters included in the annual
Operating Budget or Capital Renewal Budgets, (ii) the acts of Hotel Personnel,
(iii) the institution of litigation or the entry of judgments against Owner or
the Hotel with respect to Hotel operations, or (iv) any other acts or omissions
not otherwise constituting a breach of this Agreement, it being the intention
and the agreement of the parties that Manager's sole obligation hereunder shall
be to act in conformity with the standard of skill, care and diligence referred
to in Section 4.01, in conformity with the Operating Manual, and otherwise in
conformity with the express terms of this Agreement.
12.26 Limitation on Remedies. Owner and Manager hereby agree that neither
shall be liable to the other for punitive, incidental or consequential damages
as a result of any breach of this Agreement. Owner and Manager further agree in
the event of any breach of any agency duty by Manager, Manager shall not be
liable for (i) punitive damages, (ii) disgorgement, forfeiture or restitution of
any compensation paid by Owner to Manager, (iii) disgorgement, forfeiture or
restitution of any benefit received by Manager in connection with any
transaction on behalf of Owner or the Hotel unless the monetary value of such
benefit could have been calculated and passed through to Owner in a commercially
reasonable manner, (iv) divestiture of any financial or other interest held by
Manager, or (v) any other relief that does not take into account the benefits
received by Owner from the services provided by Manager.
12.27 Waiver of Jury Trial. OWNER AND MANAGER HEREBY JOINTLY WAIVE ANY AND
ALL RIGHTS THAT EITHER MAY HAVE TO TRIAL BY JURY OF ANY DISPUTE ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE RELATIONSHIP CREATED THEREBY.
12.28 Statement on Xxxxxxxx-Xxxxx Act of 2002 . In connection with audits
of the financial statements of Owner, Section 404 of Xxxxxxxx-Xxxxx Act of 2002
as in effect as of the date of this Agreement will require the auditor of such
financial statements to obtain an understanding of Manager's internal controls.
Manager agrees to cooperate reasonably with Owner's auditor to enable such
auditor to obtain such understanding, provided that Owner shall reimburse
Manager for the cost of providing such cooperation.
[SIGNATURE PAGE FOLLOWS]
Embassy Suites __________ Management Agreement
46
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed, all as of the day and year first above written.
OWNER:
_______
By ___________________________
Its __________________________
MANAGER:
PROMUS HOTELS INC.
By ___________________________
Embassy Suites __________ Management Agreement
47
MANAGEMENT FEE RIDER
A. In consideration of Manager's services during the Operating Period,
Owner shall pay to Manager a management fee (the "Management Fee") equal to the
sum of:
(i) ___% of the Gross Revenues (determined as hereinafter provided)
from the operation of the Hotel for each Operating Year (the "Fixed
Management Fee"), and
(ii) the "Incentive Management Fee" which shall be the lesser of
2.0% of the Gross Revenues from the operation of the Hotel for each
Operating Year, prorated for any partial Operating Year, and:
(a) for the period from the Commencement Date through December
31, 2004, the amount determined in accordance with the Management
Fee Rider attached to the Prior Agreement as if the Prior Agreement
were in effect through December 31, 2004; and
(b) for the period from January 1, 2005 through the remainder
of the Term, 20% of the amount of "Cash Flow After Reserves"
(determined as hereinafter provided) from the operation of the Hotel
for each Operating Year, reduced (but not to less than zero) if and
to the extent necessary to provide a return to Owner at the rate of
12% per annum on "Owner's Invested Capital" (determined as
hereinafter provided), prorated for any partial Operating Year.
B. For the purpose of determining the Fixed Management Fee, the term
"Gross Revenues" shall mean "Net Revenues of Total Operated Departments" of the
Hotel for each Operating Year, determined in accordance with the Uniform System
of Accounts, on an accrual basis in accordance with generally accepted
accounting principles consistently applied, excluding interest income.
C. For the purpose of determining the Incentive Management Fee, the term
"Cash Flow After Reserves" shall mean the "Income Before Interest, Depreciation
and Amortization, and Income Taxes" of the Hotel for each Operating Year as such
term is referred to and determined in accordance with the Uniform System of
Accounts on an accrual basis in accordance with generally accepted accounting
principles consistently applied, but after deducting the amount equal to the
percentage of the Gross Revenues of the Hotel for each Operating Year to be
deposited for the Operating Year in the Capital Renewals Account pursuant to
Subsection 4.02.5.
D. For the purpose of determining the Incentive Management Fee, the term
"Owner's Invested Capital" shall mean, as of the Commencement Date, $__________
and, as of any subsequent date, such amount increased by aggregate expenditures
in respect of Capital Renewals incurred by Owner after the Commencement Date
pursuant to the Agreement, other than contributions to or disbursements from the
Capital Renewals Account. For purposes of calculating Owner's return on Owner's
Invested Capital, expenditures not made on the first day of a calendar quarter
shall be deemed to have been made on the first day of the immediately following
calendar quarter.
F. The Management Fee shall be payable in monthly installments
concurrently with the delivery to Owner of the monthly report under clause (a)
of Section 7.05, the installments of the Fixed
Embassy Suites __________ Management Agreement
Management Fee Rider
Page 1
Management Fee to be an amount equal to ___% of Gross Revenues from the
operation of the Hotel for the preceding month, and the installments of the
Incentive Management Fee to be an amount equal to the difference found by
subtracting (i) the aggregate of the monthly installments of the Incentive
Management Fee theretofore paid with respect to the preceding months in the then
current Operating Year from (ii) 20% of year-to-date Cash Flow After Reserves
from the operation of the Hotel for such Operating Year; provided that the
installments of the Incentive Management Fee shall be reduced (but not to less
than zero) if and to the extent necessary to provide a return to Owner at the
rate of 12% per annum on Owner's Invested Capital, prorated for any partial
Operating Year.
If any annual report to be delivered by Manager to Owner under clause
(b) of Section 7.05 shall show that the aggregate of the monthly installments of
the Management Fee paid with respect to the preceding Operating Year shall
exceed or be less than the Management Fee as shown in such annual report for
such Operating Year, then Manager shall deposit into or withdraw from the Hotel
Accounts, the amount of such overpayment or underpayment, as the case may be.
Embassy Suites __________ Management Agreement
Management Fee Rider
Page 2
SCHEDULE A
DISPUTE RESOLUTION
1. Arbitration of Financial and Budgetary Disputes. All disputes relating
to any of the following matters shall be resolved by arbitration pursuant to
this Paragraph 1:
(i) the Management Fee;
(ii) Reimbursable Expenses;
(iii) adjustments in dollar amounts of insurance coverages
required to be maintained;
(iv) approval or modification of the Competitive Set; and
(v) approval of any Operating Budget.
1.1. Selection of the Expert. The party initiating the arbitration
shall give notice to the other party setting forth the items to be
arbitrated. Within five (5) business days, the parties shall confer in
person or by telephone to agree upon a mutually-acceptable neutral third
party to resolve the dispute (the "Expert"). If the parties are unable to
agree upon an Expert, the initiating party shall submit the matter to the
Chairman of the International Society of Hospitality Consultants, who
shall designate as the Expert a person who (i) has at least ten (10) years
experience in the hospitality industry, (ii) is in good standing of the
International Society of Hospitality Consultants, (iii) has not had any
direct relationship with either party in the preceding five (5) year
period, (iv) has demonstrated knowledge of the hotel market where the
Hotel is located, and (v) has demonstrated knowledge of the operation and
marketing of [large (over 300 rooms), upscale, full-service, urban -
replace as necessary w/ appropriate category description] hotels.
1.2. Procedure. The Expert shall establish in his or her sole
discretion the procedure for resolving the dispute, including but not
limited to what evidence to consider, whether to allow written
submissions, and whether to hold a hearing, subject to the following:
(i) The Expert shall have the power to demand from either
party whatever information in that party's possession
that the Expert deems necessary to resolve the dispute;
(ii) Except as specifically requested by the Expert, no party
may present any evidence that was not shared with the
other party before the arbitration was initiated in a
good faith attempt to resolve the dispute;
(iii) No discovery may be conducted between the parties;
(iv) No attorneys may appear on behalf of either party
(although either party may use attorneys for their own
consultation or advice); and
(v) The Expert shall schedule and conduct all proceedings
with the objective of resolving the dispute as quickly
and efficiently as reasonably possible.
1.3. Fees and Expenses. During the pendency of the arbitration, the
parties shall share equally the fees and expenses of the Expert. In
rendering its decision, the Expert shall designate the party whose
position is substantially upheld, who shall recover from the other party
its share of the fees and costs so paid. The Expert may determine that
neither party's position was substantially upheld. The parties shall
otherwise bear their own costs and expenses of the arbitration.
2. Arbitration of Other Disputes. All disputes relating to any matter not
encompassed by Paragraph 1 shall be resolved by a two-step process of mediation
and arbitration, as follows.
2.1. Mediation. As a prerequisite to either party's initiation of
the arbitration process, the parties must first attempt to settle any
dispute by participating in at least ten (10) hours of mediation (in a
single session, unless the parties agree to adjourn to a second session).
(a) The Mediator. Unless agreed otherwise by the parties, the
mediation process shall be administered by J.A.M.S./Endispute,
Inc. or its successors ("JAMS") under its normal rules and
procedures. If, at the time a dispute arises, JAMS does not
exist or is unable to administer the resolution of the dispute
in accordance with the terms of Section 12.04, then the
dispute resolution process shall be administered by the
American Arbitration Association or its successors ("AAA")
under its normal rules and procedures. If, at the time a
dispute arises, AAA does not exist or is unable to administer
the dispute resolution process and the parties cannot agree on
the identity of a substitute service provider, then there
shall be no mediation, and the parties shall proceed to
arbitration as described in Paragraph 2.2 below. The mediator
shall be chosen by the parties or, if the parties are unable
to agree, shall be chosen by the organization administering
the mediation.
(b) Procedure. The party initiating the mediation shall give
notice of the dispute to the other party and then contact JAMS
to schedule the mediation. Unless otherwise agreed by the
parties, the mediation shall take place on a business day not
later than fifteen (15) business days, nor earlier than five
(5) business days, from the date notice of the dispute is
given or as soon thereafter as the mediator is available.
Unless otherwise agreed, the mediation shall be conducted at
the Hotel. The mediation will be considered complete if: (i)
the parties enter into an agreement to resolve the dispute,
(ii) the mediator concludes that further mediation would not
be productive, (iii) either party fails to appear at or
participate in the mediation; or (iv) if the dispute is not
resolved within five (5) days after the mediation is
completed. The mediator shall certify in writing that the
mediation is complete and whether either or both parties
participated in good faith.
2.2. Arbitration. If any dispute remains unresolved between the
parties after the mediation process has been completed, either party may
then submit that dispute (and only that dispute) to final and binding
arbitration. No party may initiate an arbitration unless the mediator has
certified that the party participated in the mediation in good faith.
(a) Selection of the Arbitrators. The party initiating the
arbitration shall give notice to the other party setting forth
the items to be arbitrated. Within five (5) business days,
each party shall select and concurrently designate a
party-appointed arbitrator; the two party-appointed
arbitrators shall select a third, neutral arbitrator as soon
as practicable thereafter.
(b) Administration. The arbitration shall be administered by JAMS.
If, at the time a dispute arises, JAMS does not exist or is
unable to administer the resolution of the dispute, then the
dispute resolution process shall be administered in accordance
with the terms of this Paragraph 2.2 by AAA. If, at the time a
dispute arises, AAA does not exist or is unable to administer
the dispute resolution process and the parties cannot agree on
the identity of a substitute service provider, then either
party may petition the state or federal district court in the
city of New York, New York (unless pursuant to Section 12.19
the Agreement is to be construed in accordance with and be
governed by the laws of a state other than the State of New
York, in which event either party may petition a state or
federal district court in such state) to appoint an arbitrator
to administer the arbitration in accordance with Section
12.04. If such court shall refuse to do so, there shall be no
arbitration, and the parties may proceed to exercise any and
all rights and remedies available to the parties, as if the
provisions of Section 12.04 and the references in this
Agreement to the dispute resolution process under Section
12.04 had not been included in this Agreement.
(c) Rules. The arbitration shall be conducted in accordance with
the rules of the service provider, except that the parties
specifically acknowledge that they have agreed to arbitrate
their disputes in order to avoid the expense and delay of
court litigation. Accordingly, the arbitrators shall strictly
limit discovery, motion practice, and collateral proceedings
to resolve the dispute at issue as efficiently and
expeditiously as reasonably possible.
(d) Equitable Relief. Subject to the limitations on remedies set
forth Subsection 12.11.2 and the applicable law, the
arbitrators shall have the power to grant equitable relief,
both by way of interim relief or as a part of its final award.
(e) Fees and Expenses. During the pendency of the arbitration, the
parties shall pay the fees and expenses of their respective
party-appointed arbitrators and shall share equally the fees
and expenses of the neutral arbitrator. As part of the award,
the arbitrators shall designate the party whose position is
substantially upheld, who shall recover from the other party
all of its costs and attorneys' fees, including its share of
the fees and costs paid to the neutral arbitrator, expert
witness fees, compensation for in-house counsel, and all other
fees and expenses
incurred in connection with the arbitration. The arbitrators
may determine that neither party's position was substantially
upheld or otherwise allocate the fees and expenses in
accordance with the relative extent to which either party's
position was upheld.
(f) Venue, Jurisdiction, and Jury Waiver. Each party submits to
the jurisdiction of any court of competent jurisdiction for
the purpose of confirming or enforcing any arbitration award
rendered pursuant to this section.
