Exhibit 10.16
FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT
AND
HOTEL MANAGEMENT AGREEMENT
THIS HOTEL MANAGEMENT AGREEMENT AND FIRST AMENDMENT TO PURCHASE AND
SALE AGREEMENT (hereafter collectively referred to as "Management
Agreement") is entered into effective June 1, 1998 between Stellar
Lone Star Limited Liability Company, a Washington limited liability
company (hereafter "Stellar") and Cavanaughs Hospitality Limited
Partnership, a Delaware limited Partnership (hereafter "Cavanaughs"),
for good and valuable consideration, receipt of which is acknowledged,
on the following terms and conditions:
1. PURCHASE AGREEMENT. Stellar and Cavanaughs have previously
entered into a Purchase and Sale Agreement dated April 28, 1998
("Purchase Agreement") for the sale of the Property described in
the Purchase Agreement. The Purchase Agreement is incorporated
in this Management Agreement as if fully set forth herein. All
capitalized terms used in this Management Agreement, unless
specified to the contrary herein, are defined in the Purchase
Agreement. This Management Agreement amends the Purchase
Agreement to the extent set forth in this Management Agreement.
Except as specifically amended herein, the terms of the Purchase
Agreement continue in full force and effect.
2. AMENDMENTS TO PURCHASE AGREEMENT. The Purchase Agreement is
amended as follows:
2.1 The Closing Date shall be July 1, 1998.
2.2 Cavanaughs waives its contingencies under Section 5.3 of
the Purchase Agreement.
2.3 Immediately upon complete execution of this Management
Agreement, Cavanaughs shall increase the amount of the
Xxxxxxx Money, inclusive of any interest accrued to date,
to a total of Two Million Dollars ($2,000,000). Any
interest on the Xxxxxxx Money shall be for the benefit of
Stellar.
2.4 The Cut-off Time shall be 11.59 p.m. of May 31, 1998, and
all closing adjustments described in Sections 9.2 and 10 of
the Purchase Agreement shall be made as of the Cut-off
Time. At Closing, the prorations and adjustments shall
include a credit to Stellar for all deposits which Stellar
has made against work to be performed on the pool,
convention area roof replacement or parking lot of the
Property.
2.5 Effective June 1, 1998, Cavanaughs shall take magement of
the Property under the terms of this Management Agreement.
Possession under the Purchase Agreement will take place at
Closing.
2.6 All deliveries of documents shall be as described in
Section 11 of the Purchase Agreement, provided, however,
that Cavanaughs shall have the full benefit of and
responsibility for the following effective as of the Cut-
off Time under the terms of this Management Agreement:
2.6.1 Cavanaughs shall have the full use of and
responsibility for all Service Equipment,
Consumables, Operating Equipment, Space Leases,
Hotel Contracts, Transferable Permits, Names and
Miscellaneous Assets. There are no Capital Leases.
Cavanaughs is not assuming any Equipment Leases
beyond being responsible for making the payments for
Equipment Leases attributable to the month of June,
1998.
2.6.2 The termination of employees and notice thereof
described in Section 11.1.8 shall be as of the Cut-
off Time. Cavanaughs will hire all employees used
in the management of the Hotel under this Management
Agreement.
2.7 Stellar and Cavanaughs shall execute and deliver to one
another the Olympus Lease/Management Agreement in the form
delivered to Stellar on May 26, 1998.
2.8 Stellar shall deliver to Coopers and Xxxxxxx, in connection
with the audit of the 1997 financial statements of the
Property, the representation letter in the form delivered
to Stellar on May 26, 1998.
3. PROPERTY. Stellar hereby transfers operation of the Property to
Cavanaughs, upon the terms and conditions herein set forth,.
4. USE OF PROPERTY; ENVIRONMENTAL MATTERS. The Property shall be
operated as a hotel, guest services, restaurant and
banquet/meeting facility and for no other purpose (collectively
"Hotel Use") without the prior consent of Stellar. Cavanaughs
shall not allow use of the Property in a manner which would
increase insurance premiums, or for any illegal purpose.
Cavanaughs shall comply with all governmental rules, orders,
regulations, or requirements relating to the use and occupancy of
the Property. Cavanaughs shall not allow the presence, use,
storage or disposal of any hazardous or toxic waste or materials
on the Property at any time other than in full compliance with
all applicable laws, rules, and regulations. Hazardous and/or
toxic waste or materials shall include any substance, waste, or
material which is designated as a Hazardous Substance under the
Comprehensive Environmental Response, Compensation and Liability
Act (42 USC Section 9601 et seq.), the Model Toxics Control Act,
revised Code of Washington Section 70.105D), or under any other
applicable law. Cavanaughs agrees to defend, indemnify and hold
Stellar harmless from and against any liabilities, obligations,
damages, costs, and expenses (including attorneys' fees incurred
prior to trial, at trial and upon appeal) incurred as a result of
any hazardous or toxic waste or material having been used,
stored, or disposed of on the Property or violations of
applicable laws, rules and regulations relating to the use of the
Property during the term of this Management Agreement. This
indemnity shall survive termination of this Management Agreement.
Stellar makes the warranties to Cavanaughs contained in the
Purchase Agreement.
5. TERM. This Management Agreement shall be for a term of one
month, commencing June 1, 1998 ("Commencement Date") and
terminating on July 1, 1998; provided, however, that in the event
Closing is delayed due to the default of a party, this Management
Agreement shall continue through Closing at the sole option of
the non-defaulting party. If Closing does not occur and is not
extended by the parties, this Management Agreement shall
terminate upon either party delivering thirty (30) days prior
written notice.
6. MANAGEMENT FEE. As a management fee, Cavanaughs shall receive
all of the gross receipts of the Property. Cavanaughs shall pay
the Operating Expenses defined below plus a payment to Stellar
("Stellar Payments") of $80,313 for the month of June, 1998 and
$180,313 per month for any month following June 1998 if this
Management Agreement shall continue after June 30, 1998. The
Stellar Payments shall be prorated and refunded to Cavanaughs
based on the number of days remaining in the month during which
this Management Agreement has terminated. The Stellar Payments
shall be paid by Cavanaughs in advance on the first day of each
and every month during the term hereof, except that the first
payment shall be on the latter of June 1 or the date of complete
execution of this Management Agreement. Interest and principal
payments of the debt service for the debt now encumbering the
Property are not the responsibility of Cavanaughs. During the
course of this Management Agreement, Stellar shall hold harmless
and indemnify Cavanaughs from any claim by any secured creditor
of Stellar. The Stellar Payments shall be paid at Stellar's
address set forth in the Purchase Agreement.
7. COSTS OF MANAGEMENT, OPERATION AND MAINTENANCE. Cavanaughs is to
pay all Operating Expenses. The term "Operating Expenses" means
all costs of management, operation, and maintenance of the
Property as a Hotel utilizing the Xxxxxxxxx'x Hotel name or such
other franchise as may be utilized by Cavanaughs from time to
time, including, without limitation, requirements contained in
the Articles, Bylaws, Rules and Regulations of Best Western
International, Inc. and the Membership Agreement between Stellar
and Best Western International, Inc. Operating Expenses include,
without limitation, the following: employment taxes, unemployment
insurance, wages, salaries, fringe benefits, and other direct and
indirect costs of employees; janitorial, cleaning, landscaping,
guard, security and other services; gas; electrical, water, waste
disposal, and other utilities; heating, ventilation and air-
conditioning; window washing; materials and supplies; painting,
repairs, and other maintenance; parking lot resurfacing and
restriping, as well as cleaning, sweeping, and ice and snow
removal; maintenance, repair, replacement, and service of
equipment, including without limitation the HVAC system, alarm
systems, and other equipment; reserves; costs of independent
contractors; management fees and expenses; insurance and
insurance deductibles of any kind; real and personal property
taxes, assessments; utility charges of any kind; the cost of any
repair, renovation, alteration, and improvement required to be
made under any governmental law, rule or regulation (excluding
those in breach of any warranty of Stellar contained in this
Management Agreement); supplying directional signs, other
markers, and car stops; and any other expense or charge which is
a cost of management, operation, or maintenance of the Property.
8. OPERATION OF HOTEL. Cavanaughs shall operate the Property as a
hotel in a first-class manner at least equal to the quality of
Stellar's prior operation of the Hotel. Included within the
Property managed under this Management Agreement is all personal
property, furnishings, fixtures, and inventory owned by Stellar
used in connection with the operation of the Hotel.
9. QUIET ENJOYMENT. Stellar covenants and agrees that so long as
Cavanaughs remains in full compliance with all of Cavanaughs'
obligations under this Management Agreement, Cavanaughs shall
lawfully and quietly hold, occupy, and enjoy the Property during
the term of this Management Agreement.
10. REPAIRS, AND MAINTENANCE BY CAVANAUGHS. Cavanaughs shall be
responsible for all maintenance of the Property during the term
of this Management Agreement. Cavanaughs shall keep the Property
in a neat, clean, sanitary condition, and shall keep the Property
and all items used in connection with the operation of the
Property in as good condition as was done by Stellar.
11. STELLAR'S ACCESS TO PROPERTY. Stellar, provided Stellar notifies
Cavanaughs at least 24 hours in advance, may inspect the Property
at all reasonable times and enter the same for the purpose of
determining whether the Cavanaughs is complying with its
obligations under this Management Agreement.
12. INSURANCE. Cavanaughs shall, at Cavanaughs' sole expense,
maintain comprehensive general liability and property damage
insurance insuring against any and all claims for injury to or
death of persons and loss of or damage to property occurring
upon, in, or outside of the Property. Such insurance shall be of
the type of coverage, and with the coverage limits, at least as
previously maintained on the Property as of the Commencement Date
and shall comply with the requirements of the existing first lien
loan secured by the Property. Cavanaughs shall, at Cavanaughs'
sole expense, maintain on all of Cavanaughs' personal property,
fixtures and leasehold improvements on the Property, a policy of
"all risk" special perils property damage insurance in the amount
of their replacement value in a form which complies with the
requirements of the existing first lien loan secured by the
Property. Such insurance shall name Stellar as an additional
insured, and all proceeds of such insurance shall be applied to
the restoration of personal property, fixtures, and leasehold
improvements; any proceeds of such insurance remaining after such
restoration shall belong to Cavanaughs. Cavanaughs shall, at
Cavanaughs' sole cost and expense maintain a policy of all risk
special perils building and personal property insurance with full
replacement value coverage. Such insurance shall be in at least
the amount of coverage as was previously maintained on the
Property and which complies with the requirements of the existing
first lien loan secured by the Property. All proceeds of any
such insurance shall be applied to the restoration of the
Property. All such insurance shall name Stellar and Cavanaughs as
co-insured as well as any lender of Stellar on the Commencement
Date, all of whom shall receive copies of endorsements and
policies. Policies shall provide for at least thirty (30) days
notice to Stellar prior to cancellation. Such insurance may be
part of blanket coverage and composed of primary and umbrella
policies.
13. DAMAGE OR DESTRUCTION. If the Property is damaged or destroyed
by fire or any other cause except condemnation, Cavanaughs shall
restore the Property as nearly as practical to its condition
immediately prior to such damage or destruction and all insurance
proceeds shall be made available to Cavanaughs for that purpose.
Any restoration shall be promptly commenced and diligently
prosecuted and rent shall not xxxxx during such time. Stellar is
not liable for any damages or abatement of rent for any reason
whatsoever dealing with damage or destruction to the Property.
14. LIENS; WASTE. Cavanaughs shall have no authority to allow any
liens to be filed against the Property and shall not suffer or
permit any lien to be filed against the Property, nor waste
committed thereon. If any such lien is filed against the
Property, the responsible party shall cause the same to be
discharged of record (by bond or payment) within 60 days after
the date of filing the same.
15. INDEMNITY BY PARTIES. Except for damages or injuries which are
the subject of the specific representations and warranties of
Stellar to Cavanaughs contained in the Purchase Agreement,
Cavanaughs agrees that Stellar shall not be liable for any claims
for death of or injury to persons or damages to or destruction of
property sustained by Cavanaughs or by any other person in or
outside of the Property after the Commencement Date, including
without limiting the generality of the foregoing, any claims
caused by or arising from the condition or maintenance of any
part of the Property. Cavanaughs hereby waives all claims
therefor and agrees to hold harmless, defend, and indemnify
Stellar against any such loss, damage, or liability or any
expense (including attorneys' fees at trial or at appeal)
incurred by Stellar in connection therewith. Cavanaughs shall
hold Stellar harmless from and against any and all damages
arising out of any damage to any persons or property occurring
in, on, or about the Property resulting from the negligent acts
or omissions of Cavanaughs or its agents, servants, employees, or
authorized representative. Cavanaughs shall indemnify and hold
Stellar harmless from and against any and all damages arising out
of any damage caused by Cavanaughs failure to obtain and hold any
licenses and permits required for the operation of the Hotel.
Stellar shall hold harmless, defend, and indemnify Cavanaughs
from and against any and all damages arising out of any damage to
any persons or property occurring in, on, or about the Property
resulting from the negligent acts or omissions of Stellar or its
agents, servants, employees, or authorized representatives.
16. DEFAULT; REMEDIES; LATE CHARGES. Time is of the essence hereof.
In the event Cavanaughs fails to make any payment, including the
Stellar Payment or payments of taxes, insurance or the like, and
if such default or violation is not remedied within fifteen (15)
days after notice in writing thereof is given by Stellar to
Cavanaughs, specifying the matter in default, then Stellar may
have its default remedies, as further set forth below. If the
default or violation claimed does not involve the payment of
money, then Cavanaughs must cure the default within thirty (30)
days, or if the default is of such a nature that it cannot be
cured within thirty (30) days, but it can be cured, then
Cavanaughs must commence the cure within the thirty (30) days and
diligently continue the same until complete, or Stellar may
likewise have its default remedies. In the event of such uncured
default, or in the event of a default which cannot by its very
nature be cured, then Stellar may at its option, immediately
declare Cavanaughs' rights under this Management Agreement
terminated, and reenter the Property using such force as may be
necessary, and repossess itself thereof, as of its former estate,
and remove all persons and property. Cavanaughs acknowledges that
late payment by Cavanaughs to Stellar of the Stellar Payment will
cause Stellar to incur costs not contemplated by this Management
Agreement, the exact amount of which would be extremely difficult
and impractical to ascertain. Such costs include, but are not
limited to, processing and accounting charges. Therefore, in the
event Cavanaughs fails to make any payment of the Stellar Payment
within ten (10) days of the date when such payment is due,
Cavanaughs shall pay to Stellar a late charge equal to five
percent (5%) of the amount delinquent. Waiver of said 5% late
charge with respect to any payment shall not be deemed to
constitute a waiver with respect to any subsequent payment.
17. ALTERATIONS, SIGNS AND TRADE FIXTURES. Cavanaughs may install on
the Property such equipment as is customarily used in the type of
business conducted by Cavanaughs on the Property, including
temporary signs identifying Cavanaughs. All signs will comply
with the Best Western agreements, rules and regulations described
above. Cavanaughs shall not remove or install any permanent
signs during the term of this Management Agreement or make any
alterations to the Property without the prior written consent of
Stellar. Upon the expiration of this Management Agreement in the
absence of Closing, Cavanaughs shall, at Cavanaughs' expense,
remove from the Property all such equipment and all other
property of Cavanaughs and repair any damage to the Property
occasioned by the removal thereof. Any property left in the
Property after the expiration or sooner termination of this
Management Agreement shall be deemed to have been abandoned by
Cavanaughs and become the property of Stellar to dispose of as
Stellar deems expedient without accounting to Cavanaughs
therefor.
18. NOTICES. All notices, demands, and requests to be given by
either party to the other shall be in writing and given in the
manner described in the Purchase Agreement.
19. MISCELLANEOUS
. 19.1 NONWAIVER. No failure of Stellar to insist upon the strict
performance of any provision of this Management Agreement
shall be construed as depriving Stellar of the right to
insist on strict performance of such provision or any other
provision in the future. No waiver by Stellar of any
provision of this Management Agreement shall be deemed to
have been made unless expressed in writing and signed by
Stellar. No acceptance of rent or of any other payment by
Stellar from Cavanaughs after any default by Cavanaughs
shall constitute a waiver of any such default or any other
default. Consent by Stellar in any one instance shall not
dispense with necessity of consent by Stellar in any other
instance.
19.2 ATTORNEYS' FEES. If an action is commenced to enforce any
of the provisions of this Management Agreement, the
prevailing party shall, in addition to its other remedies,
be entitled to recover its reasonable attorneys' fees
incurred prior to trial, at trial, and upon appeal.
19.3 CAPTIONS AND CONSTRUCTION. The captions in this Management
Agreement are for the convenience of the reader and are not
to be considered in the interpretation of its terms.
19.4 PARTIAL INVALIDITY. If any term or provision of this
Management Agreement or the application thereof to any
person or circumstance shall to any extent be invalid or
unenforceable, the remainder of this Management Agreement,
or the application of such term or provision to persons or
circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and each term
and provision of this Management Agreement shall be valid
and be enforced as written to the fullest extent permitted
by law.
19.5 GOVERNING LAW. This Management Agreement shall be governed
by the laws of the State of Washington and Venue is King
County for any action, except to the extent required to
enforce provisions of this Management Agreement or the
Purchase Agreement under the laws of the State of Utah.
19.6 INTERPRETATION. This Management Agreement has been
submitted to the scrutiny of all parties hereto and their
counsel if desired, and shall be given a fair and
reasonable interpretation in accordance with the words
hereof, without consideration or weight being given to its
having been drafted by any party hereto or its counsel.
19.7 NUMBER; GENDER; PERMISSIVE VERSUS MANDATORY USAGE. Where
the context permits, references to the singular shall
include the plural and vice versa, and to the neuter gender
shall include the feminine and masculine. Use of the word
"may" shall denote an option or privilege and shall impose
no obligation upon the party which may exercise such option
or privilege; use of the word "shall" shall denote a duty
or an obligation.
19.8 TIME. Time is of the essence of this Management Agreement.
19.9 BINDING EFFECT; COUNTERPART ORIGINALS; FACSIMILE,
ASSIGNMENT. This Management Agreement shall be binding
upon the parties hereto and upon their respective
executors, administrators, legal representatives,
successors, and assigns. Each party to this Agreement may
execute separate originals of this Agreement with the same
effect as if both signed the same original. A facsimile
transmission of the executed original shall be treated as
an original signed document. The parties shall cooperate
to assemble and deliver to one another duplicate signed
originals as soon as is practical following such facsimile
transmission. This Management Agreement may not be
assigned by either party.
20. EARLY PRESENCE ON PROPERTY. In order to effect a smooth
transition of the operation of the Hotel, Stellar and Cavanaughs
agree that Cavanaughs will be present upon the Property on the
two days prior to the Commencement Date, but such presence shall
not otherwise affect the dates specified in this Management
Agreement. Stellar and Cavanaughs shall jointly work on the
transition of operations on those two days, and Stellar's
employees shall work with Cavanaughs on those dates, even though
the employees will not be formally working as Cavanaughs'
employees.
EXECUTED as of the date first above written.
CAVANAUGHS: STELLAR:
Cavanaughs Hospitality Limited Stellar Lone Star LLC
by Cavanaughs Hospitality by X-X Corporation Managing Member
Corporation, General Partner
By /s/ Xxxxxx X. Xxxxxxxx By /s/ Xxxxxx X. Xxxxxx
----------------------------- -------------------------------
Name: Xxxxxx X. Xxxxxxxx Name: Xxxxxx X. Xxxxxx
Title: President Title: Agent
