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EXHIBIT 10.28
LEASEHOLD ACQUISITION AGREEMENT
THIS LEASEHOLD ACQUISITION AGREEMENT ("Agreement") is made and entered
into this 30th day of March, 2001, by and among Bass (U.S.A.) Incorporated
("Bass"), in its individual capacity and on behalf of its subsidiaries and
affiliates, including but not limited to Bristol Hotel Tenant Company, Bristol
Hospitality Tenant Company, Bristol Salt Lake Tenant Company and Bristol Lodging
Tenant Company (collectively, the "Bass Parties"), and FelCor Lodging Trust
Incorporated ("FCH"), in its individual capacity and on behalf of its
subsidiaries and affiliates (collectively, the "FCH Parties").
WITNESSETH:
WHEREAS, pursuant to a Leasehold Acquisition Agreement, dated October
12, 2000 (the "C Leasehold Agreement"), by and among the Bass Parties and the
FCH Parties, Bass agreed to cause all of the leasehold estates in, and the other
assets related to the operation of, each of the hotels described on Exhibit A
attached to the C Leasehold Agreement (the "C Hotels") to be transferred to FCH
or its designee effective upon the earlier of (i) the closing of a sale by any
of the FCH Parties of any C Hotel to an unrelated third party and (ii) 12:01
a.m. January 1, 2001 (the "C Leasehold Acquisition");
WHEREAS, one of the FCH Parties is the owner of, and one or more of the
Bass Parties is the lessee, manager and/or franchisee of, each of the hotels
described on Exhibit A attached hereto and incorporated herein by reference
(individually, a "Hotel" and collectively, the "Hotels");
WHEREAS, prior to the transfer by each of the Bass Parties owning one
or more leasehold estates with respect to the Hotels (the "Bass Lessees") of
their leasehold estates therein to one of the FCH Parties, all as provided for
herein, each of the Bass Lessees shall enter into a management agreement, in the
form of Exhibit B attached hereto and incorporated herein by reference,with
another Bass Party (the "Manager") with respect to each such Hotel (the
"Management Agreements"), pursuant to which the Manager will operate such Hotel
on behalf of the related Bass Lessee (or its assignee);
WHEREAS, as part of the same "plan of reorganization" (within the
meaning of Treasury Regulations Section 1.368-2(g)) that includes the C
Leasehold Acquisition, the parties hereto desire to provide for the transfer to
FCH or its designee of all of the leasehold estates in, and the other assets
related to the operation of, the Hotels, subject to the Management Agreements
and in accordance with the terms set forth herein (the "A and B Leasehold
Acquisition"); and
WHEREAS, the parties intend for the transaction that includes the A and
B Leasehold Acquisition and the C Leasehold Acquisition (the "Leasehold
Acquisition") to qualify as one or more reorganizations within the meaning of
Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended (the
"Code").
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AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto do hereby
agree as follows:
1. Transfer of Leasehold Assets. With respect to each Hotel, Bass
shall, by appropriate instrument of assignment and assumption to be effective as
of July 1, 2001, cause the leasehold estate owned by the Bass Parties in such
Hotel (including all rights, title, interest, and benefits arising under or by
virtue of the lease creating such leasehold estate) (the "Leasehold") and all
rights, title, interest, and benefits owned or held by the Bass Parties in, to
or under all tangible and intangible assets, including inventories, contract
rights, licenses, permits, and other assets, benefits, or rights located at,
relating to, or used primarily in the operation or maintenance of, such Hotel,
excepting and excluding any franchise license agreement, system marks, or master
technology agreement relating to any Bass-branded Hotel (collectively, the
"Leasehold Assets"), to be transferred to FCH or its designee effective as of
12:01 a.m. (the "Closing Time") on July 1, 2001 (the "Closing Date"), and FCH or
its designee will expressly assume all liabilities of the applicable Bass Lessee
with respect to the Leasehold and the applicable Management Agreement arising
from and after the Closing Time, as well as all accounts payable (including
intra-company accounts payable) and other liabilities for which FCH receives a
credit on the Working Capital Settlement Statement to be jointly prepared by the
parties pursuant to Section 5(c) hereof. Simultaneously with the execution and
delivery of such instrument of assignment and assumption, FCH will execute and
deliver to the Bass Parties a guarantee of the obligations of the Leasehold
Owners (as defined in the Management Agreements) under the Management
Agreements. The transfer of the Leasehold Assets shall be subject to the
Management Agreements, a schedule of which is attached hereto as Exhibit C and
hereby made a part hereof.
2. Indemnification. Upon the Closing Date, (a) FCH shall execute and
deliver to Bass an indemnity agreement, in form and substance reasonably
satisfactory to Bass, indemnifying the Bass Parties of and from any and all
debts, liabilities, obligations, actions, causes of action, suits, and claims
relating to the Leasehold Assets or the Hotels (but excluding those arising
under or in connection with the Management Agreements) that are incurred, or
arise out of or relate to the occurrence of any act, action, omission, or event
on or after the Closing Date, or which are otherwise assumed by FCH pursuant to
Section 1 above, and (b) Bass shall execute and deliver to FCH an indemnity and
warranty agreement, in form and substance reasonably satisfactory to FCH,
indemnifying the FCH Parties of and from any and all debts, liabilities (except
for such liabilities as are assumed by FCH), obligations, actions, causes of
action, suits, and claims relating to the Leasehold Assets or the Hotels that
are existing or incurred, or arise out of or relate to the occurrence of any
act, action, omission or event, prior to the Closing Date and warranting that
the Leasehold Assets are, at the Closing Date, free and clear of any liens,
claims, or encumbrances whatsoever caused by, related to, or arising in any
manner out of the actions of any Bass Party, and that no person held any right
or option to acquire any interest in the Leasehold Assets.
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3. Consideration. In consideration of and in exchange for the transfer
by the Bass Parties of the Leasehold Assets to FCH or its designee pursuant to
Section 1 hereof, (i) FCH agrees to issue and pay to the applicable Bass Parties
on the Closing Date one hundred (100) shares of the common stock, par value
$0.01 per share, of FCH ("FCH Shares"), and (ii) FCH or Bass, as may be
determined pursuant to Section 5(c) hereof, agrees to make or cause to be made
the payments required under Section 5(c) with respect to the items described
therein.
4. Tax Reporting. Each of FCH and Bass hereby agrees to report the
Leasehold Acquisition (which includes the A and B Leasehold Acquisition and the
C Leasehold Acquisition) on its federal and conforming state income tax returns
as one or more tax-free reorganizations pursuant to Section 368(a)(1)(C) of the
Code except to the extent that (i) FCH obtains the prior written consent of Bass
to report such transaction or transactions in another manner or (ii) FCH is
required to report such transaction or transactions in another manner by the
Internal Revenue Service or applicable state taxing authority or by applicable
judicial or administrative order.
5. Transition Rules. As and when the Leasehold Assets relating to each
Hotel are transferred to FCH or its designee, the following transition rules
will apply with respect to the Bass Parties' hotel operations activities at each
such Hotel:
(a) Employees. Because a Bass Party will continue to manage
and operate each of the Hotels, FCH will not be responsible or liable for any
employee severance payments or costs, any expenses or liabilities arising under
the Worker Adjustment Retraining and Notification Act, or any other
employee-related costs and expenses arising out of, or resulting from, the A and
B Leasehold Acquisition.
(b) Pre-Closing Date Reservations and Agreements. The Managers
will honor the terms and rates of all room reservations, room allocation, and
banquet facility and service agreements relating to the Hotels that are
confirmed or entered into by any of the Bass Parties, as owners of the Leasehold
Assets, in the ordinary and normal course of business prior to the Closing Date
and that are to be honored or performed on or subsequent to the Closing Date.
(c) Working Capital Settlement. As of the Closing Time, Bass
and FCH shall jointly prorate rents, revenues, other income, deposits, taxes
(including personal property taxes), expenses (including pre-paid expenses),
utility charges, assessments, and charges related to each Hotel based upon the
most current information available; provided, however, the Bass Parties shall
receive the entire advantage of any discounts for the prepayment of any taxes,
assessments, or charges made by it in the ordinary and normal course of
business; and further provided, however, that certain accrued liabilities may be
retained by Bass and, to the extent so retained, shall be paid by Bass on or
before the date upon which they are due. This proration will occur through a
final accounting jointly prepared by accountants for Bass and FCH, the results
of which shall be incorporated into a written operations settlement statement
(the "Working Capital Settlement Statement") which shall be executed by both
Bass and FCH aggregating the individual results of settlement with respect to
all of the Hotels. In particular, the following items shall be jointly
determined by Bass and FCH as of the Closing Date and included or
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reflected in the Working Capital Settlement Statement: (i) the most recent
invoice cost of the food, beverage, and alcoholic beverage inventories owned by
the Bass Parties at each Hotel that are in good and useable condition and in
unopened containers (the "F&B Inventories"); (ii) the book value (which the
parties hereby agree is equal to 50% of the original invoice cost) of the linen,
china, crystal/stemware, and silver inventories owned by the Bass Parties at
each Hotel that are in good and useable condition (the "Houseware Inventories");
(iii) the excess of accounts receivable at face value (other than amounts
described in clause (v) of this sentence) over accounts payable relating to the
Hotels (the "Accounts Receivable Excess"), or the excess of accounts payable
over accounts receivable relating to the Hotels (the "Accounts Payable Excess");
(iv) prepaid deposits for confirmed reservations, hotel facilities, and services
for periods on or after the Closing Time (the "Prepaid Deposits"); (v) the
amounts of any accounts receivable of any guests who have not checked out and
who are occupying rooms during the evening prior to the Closing Date (the "Tray
Ledger"); and (vi) cash on hand for petty cash and cashiers' banks (the "House
Funds").
Since the financial results pertaining to the night that
includes the Closing Time are necessary for the completion of the Working
Capital Settlement Statement, Bass shall complete the posting of all such
financial activity, all schedules, credit card billings, and all other
activities normally associated with the daily activity at each Hotel for such
night. In accordance with the terms of and in the manner set forth in this
Section 5(c), FCH shall pay or cause to be paid to the Bass Parties the
aggregate net positive amount, or Bass shall pay or cause to be paid to the FCH
Parties the aggregate net deficit amount, as the case may be, set forth on the
Working Capital Settlement Statement as determined pursuant to this Section
5(c). Such payment shall occur within two business days following the completion
and joint execution of the Working Capital Settlement Statement.
For purposes of this Section 5(c), the following shall apply:
(i) All revenues from the rental of guest rooms
(together with any sales or other taxes thereon) and food and
beverage revenues for the night that includes the Closing Time
shall be split 50%/50% between FCH and Bass. All other
revenues for the night that includes the Closing Time shall
belong solely to Bass.
(ii) FCH shall purchase the F&B Inventories (at most
recent invoice cost), the Tray Ledger (less any revenue
amounts that are allocable to FCH pursuant to subparagraph (i)
above), and the House Funds (exclusive of any non-cash items)
from Bass pursuant to the Working Capital Settlement
Statement.
(iii) The purchase price of the F&B Inventories will
not be treated as an operating expense of the related Hotels
as of the Closing Date, but instead will be treated as an
operating expense of the related Hotels at the time that such
inventories are used, consumed or sold.
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(iv) FCH shall purchase the Houseware Inventories
from Bass pursuant to the Working Capital Settlement
Statement. The purchase price for the Houseware Inventories
shall be their book value as determined in this Section 5(c).
(v) Bass acknowledges and agrees that the FCH Parties
may borrow funds from an affiliate (the "FCH Loans") in an
aggregate amount equal to the purchase price payable for the
Houseware Inventories. The parties hereto agree that the
aggregate principal amount of the FCH Loans will be
apportioned among the FCH Lessees based on the relative book
values of the Houseware Inventories located at the Hotels
leased by each FCH Lessee. Each FCH Loan will bear interest at
a fixed rate of 7 1/2% per annum, payable on the last day of
each calendar quarter, and will mature at the expiration of
the related Management Agreement(s) for the Hotel(s) leased by
the FCH Lessee. The parties hereto agree that the interest
expense incurred by each FCH Lessee in connection with an FCH
Loan will be treated as a special charge deducted in computing
the Net Operating Income (as defined in the Management
Agreement) of the Hotels leased by such FCH Lessee, as more
particularly set forth in the applicable Management Agreement.
(vi) Any net amount due to Bass pursuant to this
Section 5(c) shall be paid to Bass from the Minimum Working
Capital Balance deposited by FCH to the Sweep Account in
accordance with the Management Agreements. Any net amount due
to FCH pursuant to this Section 5(c) shall be paid to FCH, by
wire transfer, on the first business day following the
completion and execution of the Working Capital Settlement
Statement.
(vii) If any account receivable purchased by FCH
pursuant to this Section 5 remains uncollected on or after the
120TH day after the Closing Date, Bass shall repurchase such
account receivable from FCH at a purchase price equal to its
face value.
(d) Liquor License Transfer. The Bass Parties will take such
action as may be necessary or appropriate to assure that any existing alcoholic
beverage licenses held by the Bass Parties or their agents in connection with
their operation of the Hotels (the "Liquor License") remain in full force and
effect and available for the benefit of the Hotels. If and to the extent that
any transfer or reissuance of any Liquor License may be required, Bass and FCH
shall each cooperate with the other in effecting such transfer or reissuance.
Without limiting the generality of the foregoing, if Bass and FCH are unable to
obtain any necessary transfer or reissuance of any Liquor License prior to the
Closing Date with respect to a particular Hotel, then, on the Closing Date, the
appropriate Bass Party shall enter into an interim agreement (the "Interim
Agreement") whereby the Bass Party will continue to operate the liquor
concessions at the affected hotel on behalf of FCH pending the transfer or
issuance of the Liquor License to FCH or the appropriate
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Bass Party and FCH shall indemnify, defend, and hold harmless such Bass Party
from and against any and all claims, liabilities, costs, and expenses
(including, without limitation, reasonable attorneys' fees and costs) arising in
connection with such operation, as provided in the Management Agreement between
FCH and the Bass Party continuing as the manager of the hotel.
(e) Guest Property. All baggage and other property belonging
to guests of a Hotel ("Guest Property") that is in the care, possession, or
control (including, without limitation, checked baggage and property left in
safe deposit boxes) of a Bass Party on the day prior to the Closing Date shall
continue in the care, possession, or control of such Bass Party or shall be
appropriately transitioned to the Manager if such Bass Party is not the Manager.
Bass shall be responsible for, and shall indemnify and hold FCH harmless from
and against any claim for, Guest Property placed in the care, possession, or
control of a Bass Party before the Closing Date. This Section 5(e) shall survive
the A and B Leasehold Acquisition.
6. Transfer Taxes. To the extent that any state or local taxes are
imposed on the transfer of the Leasehold Assets hereunder, FCH shall bear the
expense of such taxes.
7. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which,
together, shall be deemed one and the same agreement.
8. Notices. Any notice required or permitted to be given hereunder
shall be in writing and shall be deemed to be delivered when delivered by hand
or sent by registered or certified mail (return receipt requested and postage
prepaid) or by reputable overnight courier service and addressed as follows:
(a) If to any of the Bass Parties, to:
Bass (U.S.A.) Incorporated
Three Ravinia Drive, Suite 2900
Atlanta, GA 30346-2149
Attention: General Counsel
(b) If to any of the FCH Parties, to:
FelCor Lodging Trust Incorporated
545 E. John Carpenter Frwy., Suite 1300
Irving, TX 75062
Attention: General Counsel
9. Successors. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective subsidiaries, affiliates,
successors, and assigns.
10. Entire Agreement; Amendment. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements and
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understandings among the parties with respect to the matters set forth herein.
No amendment or modification of this Agreement, or of any of the provisions
hereof, shall be binding upon any party unless made in writing and signed by
both Bass and FCH.
11. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to its conflicts
of laws provisions.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, each of FCH, on its own behalf and on behalf of the
FCH Parties, and Bass, on its own behalf and on behalf of the Bass Parties, has
caused this agreement to be duly executed as of the day and year first above
written by an officer thereunto duly authorized.
FELCOR LODGING TRUST INCORPORATED
By:
-------------------------------
Name:
-------------------------------
Title:
------------------------------
BASS (U.S.A.) INCORPORATED
By:
-------------------------------
Name:
-------------------------------
Title:
------------------------------
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EXHIBIT A
HOTELS
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EXHIBIT B
FORM OF MANAGEMENT AGREEMENT
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EXHIBIT C
SCHEDULE OF MANAGEMENT AGREEMENTS
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EXHIBIT `B' TO LEASEHOLD ACQUISITION AGREEMENT
FORM OF MANAGEMENT AGREEMENT FOR BASS-BRANDED HOTELS
THIS MANAGEMENT AGREEMENT ("Agreement") is made and entered into the
1st day of July, 2001, by and between the Leasehold Owner named and having an
office as set forth below (together with permitted assignees, hereinafter
referred to as "Leasehold Owner"), and the Manager named and having offices as
set forth below (together with permitted assignees, hereinafter referred to as
"Manager"), to provide for the operation of the Hotel described below. Such
operation is agreed to be on the terms and conditions set forth in the attached
Schedule 1 ("Standard Provisions") which is incorporated herein by reference, as
supplemented by the defined terms set forth below.
Leasehold Owner:
Name: ________________, a _______________
Address: c/o FelCor Lodging Trust, 545 E. John Carpenter Freeway,
Suite 1300, Irving Texas 75062
Telephone: (972) 444-4900
Facsimile: (972) 444-4949
Manager:
Name: __________________, a _______________
Address: Three Ravinia Drive, Suite 2900, Atlanta, Georgia 30346
Telephone:
Facsimile:
Hotel:
Name:
Brand:
Address:
Number of rooms:
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Term:
Initial Term Expiration Date:
Fees:
Basic Management Fee:
2% of Adjusted Gross Revenues, plus
5% of Rooms Revenue
Incentive Management Fee: As provided in Schedule 1
Services Contribution: As provided in Schedule 1
Priority Club Charge: As provided in Schedule 1
Accounting Fee: As provided in Schedule 1
Technology Fee: As provided in Schedule 1
Superior Owner that is lessor to Leasehold Owner:
Name:
Address: c/o FelCor Lodging Trust, 545 E. John Carpenter Freeway,
Suite 1300, Irving Texas 75062
Telephone:
Facsimile:
Authorized Mortgage Lender, if any:
Name:
Address:
Telephone:
Facsimile:
Legal Description: Attached as Exhibit A
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained or incorporated by reference Leasehold Owner and Manager have entered
into this Agreement as of the date set forth above.
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LEASEHOLD OWNER MANAGER
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By: By:
-------------------------------- --------------------------------
Name: Name:
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Title: Title:
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CONSENTED TO:
SUPERIOR OWNER
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By:
--------------------------------
Name:
------------------------------
Title:
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SCHEDULE 1
STANDARD PROVISIONS TO
MANAGEMENT AGREEMENT
RECITALS, DEFINITIONS AND OPERATIVE PROVISIONS
RECITALS:
A. Leasehold Owner is the lessee of the Hotel pursuant to the
Hotel Lease, and Leasehold Owner desires to have Manager
manage and operate the Hotel under the Brand described in this
Agreement;
B. Manager (or one or more of its Affiliates) owns all right,
title and interest in and to the Brand, said Brand being a
registered System Mark of Manager (or its Affiliates); and
C. Manager desires to manage and to continue to operate the Hotel
after the acquisition by Leasehold Owner of the Hotel Lease.
ARTICLE 1
SCOPE OF AGREEMENT
1.01 Engagement of Manager. Leasehold Owner hereby grants to Manager as
its agent the sole and exclusive right to supervise and direct the management
and operation of the Hotel for the account of Leasehold Owner, and Manager
hereby accepts said grant and agrees that it will control, supervise and direct
the management and operation of the Hotel, and use reasonable commercial efforts
to maximize the
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operating profitability thereof, all subject to the terms and conditions of this
Agreement. Manager also agrees that this Agreement is subject and subordinate to
the Hotel Lease. Subject to such terms and conditions and to the Brand
Standards, Manager shall have the right to determine operating policy, standards
of operation, quality of service and any other matters affecting customer
relations or management and operation of the Hotel. Leasehold Owner and Manager
shall each cooperate with and assist the other in every reasonable and proper
way to permit Manager to carry out its duties hereunder with respect to the
Hotel. Leasehold Owner and Manager further agree that this Agreement provides
for management in respect of the Hotel, that Leasehold 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.
1.02 Funding. Leasehold Owner shall provide all funds, both initially
and throughout the Initial Term and any Renewal Term(s), as shall be necessary
to perform and satisfy Leasehold Owner's covenants and responsibilities under
this Agreement, including all Ownership Costs. Manager's performance of all
activities hereunder shall be on behalf of, and for the account of, Leasehold
Owner.
1.03 Services to be provided by Manager. In return for the management
fees and other compensation to be paid to Manager pursuant to the terms of this
Agreement, and without any additional fee to Manager except as expressly
provided herein, including, without limitation, Article 7 hereof, Manager shall
provide (a) the use of the Brand's marks, symbols, systems and other services
required for the operation of the
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Hotel in compliance with the Brand Standards, and (b) the hotel management
services described herein and/or in Exhibit D attached hereto and made a part
hereof.
ARTICLE 2
TERM AND RENEWALS
2.01 Effective Date. This Agreement shall become effective on and as of
the Effective Date.
2.02 Initial Term. This Agreement shall continue for the Initial Term,
and shall expire on the Initial Term Expiration Date, as such date may be
accelerated if this Agreement is terminated as hereinafter provided in Articles
13, 14, 15 or 19 or as such date may be extended as provided in Section 2.03.
2.03 Renewal Term; Management or Purchase Rights.
(a) The term of this Agreement may be extended by Manager for one
additional five (5) year Renewal Term (beyond the Initial Term Expiration Date),
upon the satisfaction of the conditions hereinafter set forth in this Section
2.03, but in no event for any period longer than the term, including all
extensions, of the leasehold interest of Leasehold Owner or its successors in
the Hotel.
(b) In determining the maximum term of Leasehold Owner's interest
in the Hotel, Leasehold Owner shall be required to exercise all, and may not
waive or reduce any, rights of renewal and extension to which it may be entitled
under the Hotel Lease.
(c) On or before the date which is two hundred and ten (210) days
prior to the expiration of the Initial Term, Leasehold Owner shall provide
Manager written notice (the "Election Notice") of whether or not Leasehold Owner
desires to continue the
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operation of the Hotel under the Brand after the Initial Term Expiration Date.
Failure of Leasehold Owner timely to provide the Election Notice shall
constitute Leasehold Owner's irrevocable option in favor of Manager to extend
the term of this Agreement in accordance with the terms hereof for the Renewal
Term, which option may be exercised by Manager upon written notice to Leasehold
Owner not less than 180 days prior to the Initial Term Expiration Date.
(d) In the event Manager desires to continue the management of
the Hotel under the Brand, it shall so notify Leasehold Owner in writing within
thirty (30) days after receipt of the Election Notice (the "Renewal Notice").
During the period of sixty (60) days immediately following the giving of the
Renewal Notice, (a) Leasehold Owner shall negotiate in good faith, exclusively
with Manager, in an effort to reach mutually acceptable terms and conditions
(the acceptability of which terms shall be within the sole and absolute
discretion of each party) regarding the extension of this Agreement for the
Renewal Term, and (b) Manager, or one of its Affiliates, shall notify Leasehold
Owner in writing of the terms and conditions, if any, upon which it would be
willing to grant a franchise license to Leasehold Owner for the continued
operation of the Hotel under the Brand for not less than five (5) years
following the Initial Term Expiration Date (which franchise license may be
granted or denied by Manager or its Affiliates in the exercise of their sole and
absolute discretion, or conditioned upon the prior or future completion of
certain specified improvements to the Hotel). If Manager and its Affiliates fail
to so offer Leasehold Owner a franchise license for the operation of the Hotel
under the Brand following the Initial Term Expiration Date, such failure shall
constitute
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Manager's waiver of any further rights under this Section 2.03. In the event
Leasehold Owner and Manager are unable to agree upon mutually acceptable terms
and conditions regarding the extension of this Agreement within such sixty (60)
day period, Leasehold Owner shall have the right (a) to solicit or obtain offers
from any unrelated third party experienced in the operation of hotels under the
Brand, setting forth the terms upon which such party would be willing to enter
into a management agreement for the operation of the Hotel under the Brand under
a franchise license and/or (b) notify Manager in writing on or before sixty (60)
days prior to the Initial Term Expiration Date that Superior Owner desires to
sell the Hotel free and clear of the Brand and any management agreement (the
"Sale Notice").
(e) If Manager or one of its Affiliates has timely notified
Leasehold Owner in writing of the terms and conditions upon which it would be
willing to grant a franchise license to Leasehold Owner for the continued
operation of the Hotel under the Brand for not less than five (5) years
following the Initial Term Expiration Date, Leasehold Owner prior to entering
into any such management agreement with an unrelated third party with respect to
the Hotel shall furnish to Manager on or before sixty (60) days prior to the
Initial Term Expiration Date a copy of any offer so obtained by Leasehold Owner
from an unrelated third party for the management of the Hotel that Leasehold
Owner desires to accept (the "Competing Management Offer") and offer Manager the
right to manage the Hotel upon the same terms. If Leasehold Owner shall fail to
timely provide to Manager either (1) a copy of the Competing Management Offer,
if any, or (ii) the Sale Notice, then the term of this Agreement shall be
automatically extended for the Renewal
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Term in accordance with the terms hereof. In the event Leasehold Owner has
provided Manager with a copy of the Competing Management Offer, Manager shall
have thirty (30) days following receipt of the Competing Management Offer within
which to submit a management agreement, duly executed by Manager, to Leasehold
Owner with respect to the Hotel and containing terms and conditions no less
favorable to Leasehold Owner than those set forth in the Competing Management
Offer. Failure of Manager to timely submit such a management contract to
Leasehold Owner with respect to the Hotel shall constitute Manager's waiver of
any further rights under this subparagraph (e). If Manager timely submits an
executed management agreement containing terms and conditions no less favorable
to Leasehold Owner than those contained in the Competing Management Offer,
Leasehold Owner shall be bound thereby and shall promptly execute and return a
copy of such management agreement to Manager.
(f) If Leasehold Owner or Superior Owner shall have given Manager
the Sale Notice, Manager shall have forty-five (45) days following receipt of
the Sale Notice within which to submit to Superior Owner a contract for the
purchase of the Hotel, duly executed by Manager or one of its Affiliates, which
contract shall remain subject to acceptance and execution by Superior Owner at
any time prior to the Initial Term Expiration Date (the "Purchase Offer"). The
failure of Manager and/or its Affiliates to timely submit such Purchase Offer to
Superior Owner as herein provided shall constitute Manager's waiver of any
further rights under this subparagraph (f). If Manager and/or its Affiliates
timely submit such a Purchase Offer to Superior Owner, then Superior Owner shall
not sell the Hotel to any third party upon terms and
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conditions equal to or less favorable to Superior Owner than those contained in
the Purchase Offer for a period of twelve (12) months following the Initial Term
Expiration Date.
(g) If Leasehold Owner indicates in its Election Notice that it
elects not to continue the operation of the Hotel under the Brand, then Manager
shall have the right, upon written notice to Leasehold Owner, to purchase
Leasehold Owner's entire interest in the Hotel for a purchase price to be
mutually agreed upon by Leasehold Owner and Manager. If Manager and Leasehold
Owner, after negotiating in good faith for a period of thirty (30) days, are
unable to agree upon a purchase price, then each of Leasehold Owner and Manager
will select an MAI appraiser having not less than ten (10) years experience in
appraising hotels and give written notice to the other party within sixty (60)
days following the date of the Election Notice of the name, address and
telephone number of the appraiser selected by it. The two appraisers so selected
shall jointly select a third appraiser. If either party fails to timely notify
the other party of the appraiser selected by it, then the appraiser selected by
the other party shall be the sole appraiser. Within thirty (30) days after the
selection of the final appraiser, each appraiser shall complete an appraisal of
Leasehold Owner's entire interest in the Hotel (which appraisal shall reflect
the fair market value of the Hotel for its highest and best use, regardless of
whether or not such use is as a hotel), and the purchase price payable by
Manager shall be the average of the fair market value of Leasehold Owner's
entire interest in the Hotel revealed by all such appraisals. The closing of the
sale of the Hotel to Manager shall occur on the Initial Term Expiration Date or
such earlier date as
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may be mutually agreed upon. Each of Leasehold Owner and Manager shall pay the
cost of the appraiser it selects and one-half of the cost of the third
appraiser.
(h) Manager shall continue to have the right and obligation to
manage the Hotel, and the term of this Agreement shall be extended, for the
period between the Initial Term Expiration Date and the date upon which
Leasehold Owner either enters into a management agreement with a third party
manager pursuant to Section 2.03(e), or sells the Hotel pursuant to Section
2.03(f).
(i) The terms and provisions of Section 2.03 (f) and (h) hereof
shall survive the Initial Term Expiration Date and the expiration of this
Agreement.
ARTICLE 3
TITLE TO HOTEL
3.01 Ownership. Leasehold Owner will maintain full leasehold rights to
the Site, the Building, all Furnishings and Equipment, the Operating Equipment
and Operating Supplies free and clear of all encumbrances other than, and
therefore subject only to, those matters encumbering the Hotel as of the
Effective Date and any subsequent Authorized Mortgage.
3.02 Covenants of Title - Third Parties. During the Initial Term and
any Renewal Term(s), provided Manager is not in default under the terms of this
Agreement beyond the expiration of any applicable cure period, Manager shall
have the right peaceably and quietly to operate the Hotel in accordance with the
terms of this Agreement, free from interference, disturbance and eviction by
Leasehold Owner or by
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any other person from whom Leasehold Owner shall derive its title to or right to
occupy and use the Hotel or by any other person or persons claiming by, through
or under Leasehold Owner, subject only to earlier termination of this Agreement
due to an uncured default by Manager of its material obligations hereunder or
due to the expiration of the Hotel Lease according to its terms or termination
of this Agreement pursuant to the provisions of Articles 13, 14, 15 or 19
hereof. Leasehold Owner shall pay, prior to delinquency, all taxes and
assessments which may become a lien on or are assessed against the Hotel or any
component thereof and which are due and payable during the Initial Term and any
Renewal Term(s) of this Agreement, unless payment thereof is in good faith being
contested by Leasehold Owner and the enforcement of any lien relating thereto is
stayed.
3.03 Covenants of Title - Leasehold Owner. Leasehold Owner covenants
that throughout the Term, it will pay, keep, observe and perform all payments,
terms, covenants, conditions and obligations to be made, kept, observed or
performed by Leasehold Owner under the Hotel Lease and any other lease,
concession or other agreement, mortgage or security agreement in respect of the
Hotel, and will provide all funds as shall be necessary to perform Leasehold
Owner's obligations thereunder. Leasehold Owner, at Leasehold Owner's own
expense, shall undertake and prosecute or permit Manager to undertake and
prosecute at Leasehold Owner's expense, all appropriate actions, judicial or
otherwise, required to assure quiet and peaceable operation of the Hotel by
Manager, and shall pay and discharge any rents due under the Hotel Lease, any
other ground rents, other lease or rental payments, or any other
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charges payable by Leasehold Owner relative to the Hotel or any component
thereof, including, without limitation amounts due under an Authorized Mortgage.
Leasehold Owner may, and upon Manager's request shall, furnish to Manager copies
of all documents by and through which Leasehold Owner has the right of
possession to the Hotel and the right and ability to enter into this Agreement
and by or under which the Hotel is encumbered. Leasehold Owner shall not modify
or supplement the Hotel Lease, or any other agreement with any entity that is
under common control with Leasehold Owner, in a manner that materially increases
any obligation of Manager hereunder or materially reduces the economic benefits
to which Manager is entitled pursuant to this Agreement without Manager's prior
written consent, which consent Manager may give or withhold in its sole
discretion. Leasehold Owner covenants that it will use reasonable, good faith
efforts to obtain the consents referred to in Schedule 3.05 to the Agreement by
July 1, 2001.
3.04 Authorized Mortgage. In no event shall Leasehold Owner encumber
the Hotel by or under any mortgage, deed of trust or similar instrument other
than an Authorized Mortgage, or consent to any such encumbrance by any other
party.
3.05 Representation and Warranty. Leasehold Owner represents and
warrants to Manager that, except as disclosed on Schedule 3.05 to the Agreement,
it has obtained all necessary consents and other approvals from the holder(s) of
any Authorized Mortgages, the Superior Owners under the Hotel Lease, and the
lessors under any ground lease applicable to the Hotel, and agrees to obtain all
such necessary
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consents and other approvals with respect to the items listed on Schedule 3.05
to the Agreement.
ARTICLE 4
BRAND STANDARDS AND MANAGER'S CONTROL
4.01 Brand Standards. Manager shall operate the Hotel at the expense of
Leasehold Owner in accordance with the provisions of this Agreement, applicable
laws and, to the extent economically and legally possible, in accordance with
the Brand Standards. Leasehold Owner and Manager each acknowledge that the
assurance of operation of the Hotel, now and in the future, in accordance with
this Agreement, applicable laws and the Brand Standards, including, without
limitation, the standards relating to life safety and quality of the Hotel, are
essential to inducing Manager and its Affiliates to undertake this Agreement and
must be enforced in the operation of the Hotel at all times to provide the
consideration expected by Manager and its Affiliates who have control and other
interests in the Brand in entering into this Agreement. Manager reserves the
right to revise and amend the Brand Standards from time to time for all hotels
within the same general category as the Hotel, but Manager, to the extent
feasible, shall consult with Leasehold Owner regarding any such change prior to
its implementation. Leasehold Owner acknowledges that Manager and/or its
affiliates has an interest in, and an obligation to, maintain and promote the
Brand for the benefit of all hotels operating thereunder, and that Manager will,
from time to time, take actions and make decisions in order to preserve and
protect the Brand. Leasehold Owner also
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agrees that the Hotel shall be required to participate in Brand-wide quality
programs that are generally implemented from time to time by Manager as to
similarly situated hotels. The Hotel shall bear its equitable share of the costs
of participation in such programs as an Operating Cost of the Hotel in
accordance with Manager's standard allocation of such costs, unless such costs
should properly be capitalized under the Accounting Principles.
4.02 Manager's Control. Subject to the terms of this Agreement, Manager
shall have uninterrupted control over the operation of the Hotel. Leasehold
Owner acknowledges that, under this Agreement, Leasehold Owner delegates all
authorities and responsibilities for the operation of the Hotel to Manager.
Manager, in the exercise of reasonable discretion and business judgment, shall
be solely responsible for determining room rates, food and beverage menu prices
and charges to guests for other Hotel services. Manager shall also have sole
responsibility, in the exercise of reasonable discretion and business judgment,
to determine the terms of guest occupancy and admittance to the Hotel, use of
rooms for commercial purposes, policies relating to entertainment, labor
policies and publicity and promotion. Manager, to the extent feasible, shall
consult with Leasehold Owner prior to the implementation of any material change
in policies, practices and procedures, regarding their contemplated effect on
the financial performance of the Hotel.
4.03 Contractual Authority. Subject to the limitations set forth below
or contained elsewhere in this Agreement, Manager is and shall be authorized to
make, enter into and perform in the name of, for the account of, on behalf of
and at the
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expense of Leasehold Owner any contracts and agreements deemed necessary by
Manager to carry out and place in effect the terms and conditions of this
Agreement, including the execution by Manager in Leasehold Owner's name of
equipment leases, service contracts and the like relating to the Hotel.
Notwithstanding anything to the contrary herein, Manager shall not, without
Leasehold Owner's prior written approval in an Operating Budget or in a writing
delivered separately, execute any contract creating any expense obligation for
the Hotel in Leasehold Owner's name, or on its behalf or for its account, which
either (a) extends beyond one (1) year, unless such contract is cancelable by
Leasehold Owner without penalty thereafter upon thirty (30) days notice or less;
or (b) provides for aggregate payments by Leasehold Owner over the life of the
contract (taking into account Leasehold Owner's early termination rights, if
any) in excess of $25,000.
4.04 Leasing or Disposition of Retail or Incidental Space or
Facilities.
(a) Superior Owner and Leasehold Owner shall retain the sole and
exclusive right to lease, license or otherwise utilize or dispose of any
portions of the Hotel not material to or directly employed by Manager in Hotel
operations, specifically including, but not limited to:
(i) retail space other than gift shops;
(ii) roof-top or other exterior space usable for antennas,
towers, signs or other similar displays;
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(iii) sales desks, offices or telephone stands offering goods
or services unrelated to the business of the hotel, to the extent Manager
reasonably agrees that such space is available;
(iv) pedestrian and/or vehicular access easements, but only to
the extent such easements do not interfere with hotel operations;
(v) restaurant, parking and garage leases. All restaurant,
parking and garage leases entered into after the Effective Date shall be subject
to the provisions of Sections 4.05 and 4.06 below.
(b) It is specifically understood that hotel gift shops, business
centers, vending machines and telephone facilities for guest use are material to
hotel operations and cannot be so leased, licensed or otherwise utilized by
Leasehold Owner without the express written consent of Manager, which consent
may be given or withheld in Manager's sole and absolute discretion.
(c) Leasehold Owner shall have the right to lease, develop and/or
sell excess land or structures not required for the continuation of Hotel
operations, subject to Manager's approval, which approval shall not be
unreasonably withheld or delayed. It is specifically understood that land
utilized for guest and employee parking, or structures in which hotel functions
are regularly conducted or held, shall be considered "required for the
continuation of hotel operations."
4.05 Leasing of Restaurants. To the extent that leased restaurants are
permitted by Brand Standards, Leasehold Owner shall retain the sole and
exclusive right to lease all or a portion of the restaurant and catering
operations at the Hotel to a
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third party, provided such third party and the material contractual terms,
including the amount of rent payable under any such lease, the restaurant brand,
theme, menu offerings and service standards, are approved by Manager, and comply
with Brand Standards.
4.06 Leasing of Parking Facilities. Leasehold Owner shall retain the
sole and exclusive right to lease the parking facilities serving the Hotel, or
any portion thereof, to a third party, provided such third party and the
material contractual terms of any such lease are approved by Manager, and comply
with Brand Standards.
ARTICLE 5
OPERATION OF THE HOTEL
5.01 Permits and Legal Requirements. Manager, as an Operating Cost,
shall obtain and maintain in full force and effect all necessary licenses and
permits, including liquor, bar, restaurant, sign and hotel licenses, as may be
required for the operation of the Hotel. All such licenses and permits shall
belong to the Hotel and, upon expiration or termination of this Agreement,
Manager shall take any and all actions reasonably requested by Leasehold Owner,
and at Leasehold Owner's expense, to transfer such licenses and permits to
Leasehold Owner or its designee. Manager shall, to the extent within its
control, comply with all conditions or requirements set out in or imposed by law
in connection with any such licenses and permits and at all times to manage the
Hotel in accordance with such conditions and any other applicable legal
requirements.
5.02 Equipment and Supplies. Manager shall procure and provide, subject
to Section 9.01 hereof and as an Operating Cost, all such Operating Supplies and
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Operating Equipment as Manager deems necessary for the normal and ordinary
course of operation of the Hotel in accordance with the Brand Standards.
5.03 Personnel.
(a) All personnel employed at the Hotel at all times shall be the
employees of Manager or of an Affiliate of Manager. Manager shall, at Leasehold
Owner's expense as an Operating Cost, hire, supervise, direct, train, discharge
and determine the compensation, other benefits and terms of employment of all
personnel working at the Hotel, including the General Manager. Manager shall be
the sole judge of the fitness and qualifications of such personnel and, except
to the extent otherwise provided in this Agreement, shall be vested with
absolute discretion in the hiring, supervising, directing, discharging and
determining the compensation, other benefits and terms of employment of such
personnel. Manager may elect to staff certain functions at offsite or regional
locations, or to provide benefits on a Brand-wide or other multi-location basis
and may allocate the employee costs among the hotels participating in such
staffing or benefits on a fair and equitable basis. Leasehold Owner shall not
interfere with or give orders or instructions to any personnel employed by
Manager or any of its Affiliates at the Hotel. However, Leasehold Owner shall be
solely responsible for, as an Operating Cost, and shall reimburse and hold
Manager harmless from and against all expenses, costs or charges related to or
incidental to any personnel, including the General Manager, employed in the
operation of the Hotel. Manager shall not grant any employee a relocation
package that requires the Hotel to commit to payments in excess of $50,000 as to
any one employee without Leasehold Owner's prior approval, which
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approval shall not be unreasonably withheld or delayed. The $50,000 threshold
will be adjusted as of the first day of each Fiscal Year during the Initial Term
and any Renewal Term(s) by a percentage equal to the percentage increase in the
Consumer Price Index during the prior Fiscal Year.
(b) Other employees of Manager or an Affiliate of Manager may be
assigned temporarily or on a part-time basis to perform services at the Hotel,
and the actual expenses incurred by such employees in connection with (i)
constructing improvements of additions, renovating, furnishing and supplying the
Hotel; (ii) hiring and training Hotel employees; (iii) maintaining the physical
condition and appearance of the Hotel; (iv) maintaining and promoting proper
operational procedures and practices at the Hotel; and (v) otherwise in
connection with the performance of duties undertaken by, or the exercise of
rights granted to, Manager in this Agreement shall be reimbursed to Manager by
Leasehold Owner as an Operating Cost, and such employees will be entitled to
free room and board at the Hotel. All such temporary assignments and travel
shall be consistent with Manager's policies governing employee assignments and
travel and the Annual Business Plan.
(c) Notwithstanding anything to the contrary in this Agreement, Manager
will consult with Leasehold Owner prior to making any final decision in regard
to the hiring, replacement, transfer or termination of the General Manager of
the Hotel, provided Manager will have the exclusive authority to make any such
decision.
(d) In the event that, without first obtaining the consent of Leasehold
Owner, Manager transfers from the Hotel any employee for whom the Hotel
previously
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incurred relocation costs but who worked at the Hotel less than twenty four (24)
months, Manager shall reimburse to the Hotel or credit to the Hotel the portion
of such costs equal to the fraction that is the number of months less than 24
since such employee commenced work at the Hotel, divided by 24.
(e) Unless agreed to by Leasehold Owner in this Agreement, in the
Operating Budget or otherwise in writing, compensation, overhead costs, and
other expenses of Manager and its parents and Affiliates unrelated to the
operation of the Hotel shall not be reimbursable to Manager by Leasehold Owner.
(f) The costs, fees, compensation or other expenses of any third
parties engaged by Leasehold Owner to perform duties of a special nature,
directly related to the ownership of the Hotel, such as attorneys and
independent accountants, shall be an Ownership Cost and shall be a direct
expense of Leasehold Owner which shall not be the responsibility of Manager or
an Operating Cost disbursed by Manager from Gross Revenues.
5.04 Sales, Marketing and Advertising. Manager, on behalf of Leasehold
Owner, consistent with the Operating Budget and at Leasehold Owner's expense,
shall or shall cause its Affiliates to:
(a) advertise and promote the business of the Hotel;
(b) institute and supervise a sales and marketing program for the
Hotel;
(c) include the Hotel in Manager's local, regional and worldwide
promotional and advertising programs directed at the leisure, business and
meetings markets, as Manager may deem advisable;
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(d) represent the Hotel through Manager's worldwide sales
offices;
(e) include the Hotel in the Bass Hotels & Resorts affinity
program (presently called Priority Club) or any successor or supplemental
program, including, without limitation, inclusion of the Hotel, where
appropriate, in promotional materials distributed to participants of such
program;
(f) coordinate the Hotel's participation in travel programs
marketed by airlines, travel agents, meeting planners and government tourist
departments when Manager deems the same to be advisable; and
(g) cause the Hotel to participate in sales and promotional
campaigns and activities involving complimentary rooms, food and beverages to
bona fide travel agents, meeting planners, tourist officials and airline
representatives where Manager has determined that such participation is in
furtherance of the Hotel's business and is customary in the travel industry or
in the practices and policies of Manager. In the case of any joint or
cooperative advertising, sales, marketing or promotion (or other joint or
cooperative efforts such as development and/or publication of standardized
directories for hotel rooms), Manager shall allocate the costs thereof (without
markup or profit to Manager or any Affiliate) fairly and equitably between the
Hotel and any other hotels operated under the Brand and participating therein,
and the costs thereof shall be an Operating Cost.
5.05 Reservation and Communication Services. The Hotel shall be
included as a participating hotel and eligible to accept reservations via the
Reservation System from and after the Effective Date. Manager shall provide the
following services to the Hotel
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through the Reservation System and communications network used by Manager for
the hotels operated under the Brand:
(a) acceptance of reservations for the Hotel through the
Reservation System for individual customers and groups who contact Manager
directly or through a regional reservation or sales office of Manager;
(b) acceptance of reservations for the Hotel through other hotels
operated under the Brand;
(c) acceptance of reservations for the Hotel through the
reservation systems of other parties in the travel industry, including, without
limitation, general sales agencies, with whom Manager may have agreements from
time to time whereby the reservation systems of such parties are available for
reservations for hotels operated under the Brand; and
(d) acceptance of reservations for the Hotel received through
alternative communications channels such as the Internet.
(e) Use by the Hotel of the communications network used by
Manager for communication between it and hotels operated under the Brand.
Manager shall include the designation "A FelCor Lodging Trust Hotel" on any
hotel specific advertising or promotional materials prepared at the Hotel;
provided that Manager shall have the right to approve the design and layout with
respect to such designation.
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5.06 Maintenance and Repairs.
(a) Leasehold Owner shall be responsible for providing the funds
necessary to maintain the Hotel and its Furniture, Furnishings and Equipment in
good repair and in a condition consistent with the Brand Standards.
(b) Manager shall, on behalf of Leasehold Owner and at Leasehold
Owner's expense, make or cause to be made all repairs, replacements, corrections
and maintenance items as shall be required in the normal and ordinary course of
operation of the Hotel and as shall be required to comply with applicable laws
and the Brand Standards. Manager and Leasehold Owner agree that the expenditures
for maintenance and repairs in any Fiscal Year shall range between 4.0% and 4.5%
of Adjusted Gross Revenues, (after deducting from Adjusted Gross Revenues any
sale or lease proceeds received by Leasehold Owner pursuant to Section 4.04
hereof), unless otherwise agreed by Leasehold Owner and Manager in an Operating
Budget or in a writing executed separately. Subject to the terms of Section
4.03, Manager is authorized to make and enter into for the account of Owner all
contracts and agreement necessary or advisable in Manager's opinion for the
repair and maintenance of the Hotel.
5.07 Capital Expenditures.
(a) Leasehold Owner acknowledges the necessity of making Capital
Replacements in the Hotel both to facilitate the achievement of maximum
operating
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profit from the Hotel and also to maintain the Hotel in accordance with the
Brand Standards.
(b) Leasehold Owner shall expend such amounts for Capital
Replacements as shall be required in the normal and ordinary course of operation
of the Hotel in accordance with the Brand Standards. Design and installation of
Capital Replacements shall be carried out under Leasehold Owner's supervision,
unless Leasehold Owner requests Manager in writing to supervise such Capital
Replacements, and the costs of design, construction management, technical
services fees to Manager, its affiliates or third parties, and similar
project-specific services shall be Leasehold Owner's responsibility. After the
Capital Replacements Budget, reflecting the level of expenditures set forth
below, is agreed upon as provided in Section 6.02(a) and made a part of the
applicable Annual Business Plan, Leasehold Owner shall be responsible for any
further pricing, scheduling or other capital planning necessary to proceed with
any project, absent a separate written agreement with Manager to do so.
Leasehold Owner and Manager agree that, with respect to the Managed Hotels
considered as a group, expenditures on Capital Replacements shall be, unless
otherwise agreed by Leasehold Owner and Manager in the Capital Replacements
Budgets or in a writing separately executed, (i) at least 3% of the Adjusted
Gross Revenues ((after deducting from Adjusted Gross Revenues any sale or lease
proceeds received by Leasehold Owner pursuant to Section 4.04 hereof) of all
Managed Hotels during each Fiscal Year and (ii) at least 5% of the Adjusted
Gross Revenues (after deducting from Adjusted Gross Revenues any sale or lease
proceeds received by Leasehold Owner pursuant to
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Section 4.04 hereof) of all Managed Hotels during the most recent three (3)
consecutive Fiscal Years. To the extent Leasehold Owner requests Manager, in
writing, to supervise any particular Capital Replacements project, Manager and
Leasehold Owner will seek to negotiate a technical services agreement that, if
and when ultimately executed, shall govern the provision of services related to
that project. Notwithstanding the foregoing, if the amounts expended by
Leasehold Owner and it Affiliates (plus any amounts authorized to be spent
directly by Manager and its Affiliates) on Capital Replacements for all Managed
Hotels as a group, at the end of any Fiscal Year, are less than the amounts
required to be expended pursuant to this Section 5.07(b) through the end of such
Fiscal Year, and Leasehold Owner fails to expend the amount of such shortfall
within ninety (90) days following the end of such Fiscal Year, then in such
event Manager shall have the right to perform or complete all uncompleted
Capital Replacements projects approved for completion prior to the end of such
Fiscal Year at Leasehold Owner's expense, at a cost not to exceed 110% of the
amount provided therefor within the applicable Capital Replacements Budget, and
shall be entitled to payment or reimbursement therefor from the Capital Reserve
Account or funds provided by Leasehold Owner as contemplated by this Section
5.07.
(c) Leasehold Owner shall establish an interest bearing bank
account in its name with an institution of its choice to be designated as the
FCH/BHR Capital Reserve Account (the "Capital Reserve Account"). Promptly after
the end of each Fiscal Month, Manager shall deposit into the Capital Reserve
Account an amount equal to three percent (3%) of the Adjusted Gross Revenues
(after deducting from Adjusted
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Gross Revenues any sale or lease proceeds received by Leasehold Owner pursuant
to Section 4.04 hereof with respect to the Hotel) of the Hotel for such Fiscal
Month from the Gross Revenues of the Hotel in accordance with Section 8.01
hereof. Designees of both Leasehold Owner and Manager shall be authorized to
draw upon the Capital Reserve Account solely for the purposes and under the
circumstances provided for herein. In addition, so long as Leasehold Owner,
Guarantor, FelCor or any successor thereof maintains an Approved Facility,
Manager shall not deposit any funds to the Capital Reserve Account that would
increase its balance to more than $1,000,000.
(d) Manager shall compute, as a book reserve, for each Fiscal
Month beginning with the Fiscal Month commencing immediately after the Effective
Date, and continuing for each and every month during the Initial Term and any
Renewal Term(s) the amount equal to five percent (5%) of aggregate Adjusted
Gross Revenues (after deducting from Adjusted Gross Revenues any sale or lease
proceeds received by Leasehold Owner pursuant to Section 4.04 hereof) of the
Managed Hotels for the preceding thirty-six (36) months ending with the month
for which the calculation is made, less capital expenditures actually made on
the Managed Hotels during that period (such net amount being the "Cumulative
Capital Reserve Balance".)
(e) The Leasehold Owner may draw on the Capital Reserve Account
for the payment of all costs of Capital Replacements that have been made by
Leasehold Owner to the Managed Hotels, provided that Leasehold Owner shall have
no right to make any such draw at any time that the balance of the Capital
Reserve Account is equal to or less than $1,000,000. The Manager may draw on the
Capital Reserve
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Account, or if the Capital Reserve Account is inadequate, the Manager may make
demand upon Leasehold Owner, upon five (5) days written notice, for the payment
either directly from Leasehold Owner or from the Approved Facility of all costs
of Capital Replacements that have been made by Manager to the Managed Hotels
pursuant to the then current Capital Replacements Budget.
(f) From time to time, but not less frequently than weekly,
Leasehold Owner shall make deposits to the Capital Reserve Account in amounts
necessary to restore its balance to not less than $1,000,000 or such greater
amount as may be necessary (after taking into account anticipated contributions)
to pay for budgeted Capital Replacements as they come due; provided, however,
that in no event shall Leasehold Owner be required to make any deposits to such
Capital Reserve Account which would cause the balance therein to exceed the then
Cumulative Capital Reserve Balance.
(g) In the event that either (i) Leasehold Owner or one of its
Affiliates fails or refuses to maintain an Approved Facility or Leasehold Owner
fails or refuses to make required timely deposits to the Capital Reserve Account
in amounts necessary to restore its balance to $1,000,000 or to pay for budgeted
Capital Replacements as they come due, or (ii) the amounts expended by Leasehold
Owner and it Affiliates (plus any amounts authorized to be spent directly by
Manager and its Affiliates) on Capital Replacements for all Managed Hotels as a
group, at the end of any period of three consecutive Fiscal Years, are less than
five percent (5%) of aggregate Adjusted Gross Revenues of the Managed Hotels
(after deducting from Adjusted Gross Revenues any
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sale or lease proceeds received by Leasehold Owner pursuant to Section 4.04
hereof) computed for such three-year period, and Leasehold Owner fails to expend
the amount of such shortfall within ninety (90) days following the end of such
three-year period, then upon either of such events, Manager may commence payment
of any cash otherwise distributable to Leasehold Owner from the Sweep Account to
the Capital Reserve Account, and in addition may make written demand that
Leasehold Owner make deposits within five (5) days into the Capital Reserve
Account, until the balance in that account is not less than the Cumulative
Capital Reserve Balance. In the event Leasehold Owner fails to fully fund such
Cumulative Capital Reserve Balance within such five (5) day period, Manager
shall be entitled to retain Net Operating Income of the Hotel and pay such
amounts into the Capital Reserve Account until such account is credited with the
full amount of the Cumulative Capital Reserve Balance as of the date of such
failure by Leasehold Owner.
(h) Any amounts remaining in the Capital Reserve Account at the
close of each Fiscal Year shall be carried forward and retained in the Capital
Reserve Account until used for Capital Replacements or otherwise withdrawn as
herein provided. All interest earned on, and all proceeds from the sale of items
of Furniture, Fixtures and Equipment no longer needed for the operation of the
Hotel, shall be deposited in the Capital Reserve Account. Sale of such items
shall be made only pursuant to an approved capital expenditure program provided
for in the Capital Replacements Budget. Upon termination of this Agreement for
any reason, except to the extent of contractual commitments made pursuant to a
Capital Replacements Budget, Manager's right to
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expend any unused funds in the Capital Reserve Account shall terminate and the
balance of such fund shall be paid over to Leasehold Owner.
(i) In the event that a condition should exist in or about the
Hotel of an illegal or emergency nature, including any structural condition,
which requires immediate repair to protect guests or employees or to preserve
and protect the Hotel, or to maintain its insurance coverage or right to permits
and licenses or otherwise to permit its continued operation, Manager, on behalf
of and at the expense of Leasehold Owner, is hereby authorized to take all steps
and to make all expenditures necessary to repair and correct any such condition,
regardless whether provisions have been made in the applicable Annual Business
Plan for any such emergency expenditures. Upon the occurrence of such an event
or condition, Manager shall take reasonable steps to communicate to Leasehold
Owner all available information regarding such event or condition as soon as
reasonably possible, and to obtain Leasehold Owner's approval before incurring
such expenses, and shall not incur expenses in excess of $25,000 without
Leasehold Owner's knowledge and consent unless the incurrence of expenses in
excess of such amount is unavoidable in the exercise of reasonable business
judgment. Expenditures under this Section 5.07(i) shall not be paid from the
Capital Reserve Account unless the expenditure relates to an item that should
properly be considered a Capital Replacement. To the extent that such
expenditures should properly be considered repairs, the same shall be an
Operating Cost.
(j) In the event that at any time during the Initial Term and any
Renewal Term(s), repairs to or additions, changes or corrections in the Hotel of
any nature shall
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be required by reason of any laws, ordinances, rules or regulations now or
hereafter in force, or by order of any governmental or municipal power,
department, agency, authority or officer, Manager shall notify Leasehold Owner
thereof promptly following Manager's receipt of any notice thereof and such
repairs, additions, changes or corrections thereafter shall be made at the
direction of Leasehold Owner, or if Leasehold Owner so directs, by Manager, at
Leasehold Owner's expense. Such work shall be accomplished with as little
hindrance as possible to the operation of the Hotel. Expenditures under this
Section 5.07(j) shall not be paid from the Capital Reserve Account unless the
expenditure relates to an item that should properly be considered a Capital
Replacement. To the extent that such expenditures should properly be considered
repairs, the same shall be an Operating Cost.
ARTICLE 6
FISCAL MATTERS
6.01 Accounting Matters and Fiscal Periods.
(a) Manager shall maintain complete and accurate books and
records reflecting the Hotel operations in accordance with the Accounting
Principles and shall maintain the same either at the Hotel or at Manager's
corporate office. Superior Owner, Leasehold Owner, Manager, any ground lessor or
holder of an Authorized Mortgage and their respective independent accounting
firms or other representatives shall have the right to examine such books and
records at any reasonable time and to make and retain copies thereof.
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(b) At Leasehold Owner's election and as an Ownership Cost, an
audit of the financial statements reflecting Hotel operations may be performed
annually, and upon a termination or expiration hereof, by a nationally
recognized, independent certified public accounting firm appointed by Leasehold
Owner. Manager shall cooperate in good faith with Leasehold Owner and its
representatives to facilitate such audit. If the aggregate errors identified by
such audit result in a difference in the Net Operating Income of the Hotel
reflected by such audit and the Net Operating Income of the Hotel reported by
Manager hereunder, for any Fiscal Year equal to or greater than 5% of the Net
Operating Income of the Hotel so reported by Manager, Manager (at its own cost
and not as an Operating Cost) shall reimburse Leasehold Owner for one-half of
the cost of such audit that properly relates to the Hotel.
(c) On or before the fifteenth (15th) day after the close of each
calendar month, Manager shall furnish Leasehold Owner with a detailed operating
statement setting forth the results of Hotel operations with respect to such
month, including a detailed balance sheet and profit and loss statement for the
Hotel, setting forth the financial position and results of operations of the
Hotel for such calendar month and the calendar year to date, with comparisons to
the then current Operating Budget and the previous year's results. Manager shall
also provide Leasehold Owner with such additional operating and financial data
as Leasehold Owner may reasonably request, the cost of providing all said
financial and operating data and accounting services on a centralized basis
shall be included within the Accounting Fee charged by Manager pursuant to
Section 7.03, which shall be an Operating Cost. Attached hereto as Exhibit B
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and made a part hereof is a form of the financial statements to be provided by
Manager, as agreed upon by the parties as of the Commencement Date, which may be
modified from time to time by agreement of the parties.
6.02 Budgets.
(a) The Annual Business Plan for Fiscal Year 2001 has been
approved by the parties. Commencing in Fiscal Year 2001, Manager shall submit to
Leasehold Owner (i) a proposed Capital Replacements Budget ninety (90) days
prior to the first day of each subsequent Fiscal Year, and (ii) a projection of
revenues, together with a marketing plan, and a projection of expenses
forty-five (45) days prior to the first day of such Fiscal Year. All of such
budgets and projections shall relate to the ensuing full or partial Fiscal Year,
as the case may be, shall provide for the operation, equipping and maintenance
of the Hotel in compliance with the Brand Standards, and shall contain the items
or information described in Exhibit F. As part of each Budget, Manager shall
specify which expense items represent an allocation of internal costs of Manager
and/or its Affiliates to the Hotel and shall explain the basis for such
allocation. Such proposed budgets, projections and plans, when approved by
Leasehold Owner, will comprise the "Annual Business Plan" for the Hotel. Manager
shall provide Leasehold Owner, upon request, all details, information and
assumptions used in preparation of the Annual Business Plan. Manager shall
review the Annual Business Plan with Leasehold Owner and, subject to Leasehold
Owner's approval, Manager shall implement such Annual Business Plan during the
successive Fiscal Year. Leasehold Owner's approval of the Annual Business Plan
shall not be unreasonably withheld or delayed and shall be
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deemed given unless a written objection thereto is delivered by Leasehold Owner
to Manager within forty-five (45) days after Leasehold Owner receives such
budgets from Manager.
(b) Manager shall not be deemed to have made any guaranty,
warranty or representation whatsoever in connection with any Annual Business
Plan, and Leasehold Owner acknowledges that the Annual Business Plan is intended
only as a reasonable estimate. Manager shall from time to time, issue periodic
forecasts of operating performance, and may revise the Operating Budget as
necessary to reflect any unpredicted significant changes, variables or events or
to include significant additional unanticipated items of income or expense. Any
such revision to the Operating Budget shall be submitted to Leasehold Owner for
approval, which approval shall not be unreasonably withheld or delayed.
(c) In administering the Annual Business Plan, Manager may
reallocate between budget line items within the same general divisional
classification of budget items shown in the Operating Budget, so long as such
reallocation does not materially and adversely affect the purposes for which the
original budget line items were intended. Manager is also authorized to make
expenditures for taxes, insurance, utilities and other essential operating items
billed to the Hotel at the actual costs thereof, regardless of the amount
budgeted therefor. Notwithstanding the foregoing, once an Annual Budget Plan has
been approved by Leasehold Owner, Manager shall not (i) materially increase any
allocation of the internal costs of Manager and/or its Affiliates to this Hotel
or (ii) deviate materially from the strategies and plans reflected therein, as
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revised, without the prior approval of Leasehold Owner, which approval shall not
be unreasonably withheld or delayed.
(d) In the event Leasehold Owner shall disapprove or raise any
objections to the proposed Annual Business Plan, or any revisions thereto,
Leasehold Owner and Manager shall cooperate with each other in good faith to
resolve the disputed or objectionable proposed budget items. Leasehold Owner
must disapprove any objectionable matters in the proposed Annual Business Plan,
or revisions thereto, on a specific line-by-line basis to establish which, if
any, specific line items are not acceptable to Leasehold Owner, and must state
its grounds for objection. In the event Leasehold Owner and Manager are not able
to resolve the disputed or objectionable items within a period of thirty (30)
days after the date on which Leasehold Owner provides written notice of its
objections to Manager, either party shall be entitled to submit the dispute to
arbitration by a panel of three (3) neutral arbitrators, who shall conduct the
arbitration proceedings in accordance with the provisions of this Agreement and
the rules of the American Arbitration Association. Unless otherwise mutually
agreed by Leasehold Owner and Manager, the arbitration proceedings shall be
conducted at the location of the Hotel. All arbitrators shall be persons with
recognized expertise in the operation of hotels of similar size and class as the
Hotel. The party desiring arbitration shall give written notice to that effect
to the other party, specifying in such notice the name, address and professional
qualifications of the person designated by such party to act as a neutral
arbitrator. Within fifteen (15) days after receipt of such notice, the other
party shall give written notice to the party desiring such arbitration
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specifying the name, address and professional qualifications of the person
designated by it to act as a second neutral arbitrator. The two neutral
arbitrators so appointed shall, within fifteen (15) days thereafter, select a
third neutral arbitrator. As soon as practicable after the selection of the
third arbitrator, and no later than fifteen (15) days thereafter, the parties
shall submit their positions on each disputed item in writing to the three
arbitrators. In so submitting their positions, each party shall state only one
substantive proposal as a resolution for each disputed item. The arbitrators
shall not consider multiple or alternative positions from either party with
respect to a disputed item and shall vote only in the affirmative or negative on
each item. The arbitrators shall be required to agree upon and approve the
substantive position of either Leasehold Owner or Manager with respect to each
disputed item, and shall not be authorized to agree upon any alternative
substantive position that has not been presented to the arbitrators by Manager
or Leasehold Owner. A majority vote shall be decisive. The decision of the
arbitrators so chosen shall be given within a period of twenty (20) days after
the appointment of such third arbitrator. The decision in which any two (2)
arbitrators so appointed and acting hereunder concur in writing with respect to
each disputed item shall in all cases be binding and conclusive upon Leasehold
Owner and Manager and a copy of said decision shall be forwarded to the parties.
The fees and expenses of the arbitrators shall be paid one-half by Leasehold
Owner and one-half by Manager and not as an Operating Cost.
(e) If the party receiving a request for arbitration fails to
appoint its arbitrator within the time above specified, or if the two
arbitrators so selected cannot
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agree on the selection of the third arbitrator within the time above specified,
then either party, on behalf of both parties, may request such appointment of
such second or third arbitrator, as the case may be, by application to any judge
of any court in the jurisdiction where the Hotel is located which has original
jurisdictional authority over contractual disputes involving a claim equal to
the aggregate of the disputed budget items upon ten (10) days prior written
notice to the other party of such intent.
(f) With respect to the Annual Business Plan, in the event
Leasehold Owner and Manager are not able to resolve the disputed or
objectionable matters raised by Leasehold Owner prior to the commencement of the
applicable Fiscal Year, either voluntarily or by means of arbitration, Manager
shall be authorized to operate the Hotel in accordance with the proposed Annual
Business Plan; provided, however, that as for disputed budget items, Manager may
not expend more than the previous year's budgeted amount for such item (if any),
increased by a percentage equal to the increase in the Consumer Price Index
during the prior Fiscal Year, and, further provided, that Manager is not
authorized to expend sums in addition to the amount so deemed to be budgeted,
notwithstanding the provisions of this Section 6.02(f), except in instances
contemplated by Sections 5.07(j) and (k). For purposes of this section,
"increase in the Consumer Price Index during the prior Fiscal Year" shall mean
the percentage increase (if any) in the Consumer Price Index between the
December immediately preceding such prior Fiscal Year and the December at the
end of such prior Fiscal Year.
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6.03 Bank Accounts.
(a) Manager, in the name of Leasehold Owner, shall establish one
or more bank accounts, which may include payroll, investment, concentration and
payables accounts and such additional accounts as Manager shall deem advisable
(collectively, the "Sweep Account"), at such bank or banks as may be mutually
selected by Leasehold Owner and Manager, for deposit of all revenues from the
Hotel and the other Managed Hotels and the payment of expenditures for the Hotel
and the other Managed Hotels. Manager shall use commercially reasonable efforts
to cause all funds on deposit in the Sweep Account, at any time, to be invested
or otherwise to earn interest. The Sweep Account shall be separate and distinct
from any other accounts, reserves or deposits required by this Agreement, and
Manager's designees who are included in the coverage of any required fidelity or
similar insurance shall be the only parties authorized to draw upon such
accounts; provided, however, such designees shall only be authorized to draw
upon the Sweep Account for purposes authorized by the terms of this Agreement
and similar agreements with respect to the other Managed Hotels. Checks or other
items of withdrawal shall be handled in accordance with standard practices and
procedures in effect for Manager and its Affiliates from time to time. Upon the
Effective Date, Leasehold Owner shall deposit in the Sweep Account a sum equal
to one hundred and fifteen thousand dollars ($115,000) for each Managed Hotel
(such amount, as adjusted as described below, the "Minimum Working Capital
Balance"). Such amount is based upon the purchasing power of money at the
Effective Date, and Manager annually shall adjust the same with reference to the
Consumer Price Index to
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retain the same purchasing power and notify Leasehold Owner of the amount and
manner of such adjustment. The Minimum Working Capital Balance shall serve as
working capital for Hotel operations. Upon request by Manager, Leasehold Owner
immediately shall deposit to the Sweep Account sufficient funds to make up any
deficiency in the Minimum Working Capital Balance.
(b) Manager shall have exclusive control of the Sweep Account.
Subject to the requirements of any Authorized Mortgage, all sums received from
the operation of the Hotel shall be deposited in, and any and all items paid by
Manager by virtue of its management of the Hotel shall be paid from, the Sweep
Account. Interest earned on any balances shall be deposited to the Sweep
Account. Nothing contained herein shall be construed to deprive Manager of the
right to maintain separate payroll accounts or local depository accounts for
individual hotels (for collection and daily transmission of receipts to the
Sweep Account).
(c) The Capital Reserve Account shall be established as provided
in Section 5.07(c).
(d) Funds in all bank accounts maintained pursuant to this
Agreement shall be subject only to the liens and prior interests of an
Authorized Mortgage, and then only to the extent of funds allocable to the one
or more Managed Hotels that is subject to such Authorized Mortgage. Manager
shall be entitled to commingle the funds of the Hotel with the funds of all
other Managed Hotels in the Sweep Account, but not with any other funds of
Manager or any third party, until otherwise notified in writing by Leasehold
Owner or the holder of an Authorized Mortgage that the funds of the Hotel
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are required to be segregated under the terms of such Authorized Mortgage.
Leasehold Owner shall not, subsequent to the Effective Date, enter into any new
Authorized Mortgage containing cash management requirements inconsistent with
this Agreement, or consent to the amendment of the cash management provisions of
any existing Authorized Mortgage, without Manager's prior written consent, which
consent shall not be unreasonably withheld or delayed. Manager shall cooperate
with Leasehold Owner in assuring that the requirements of all Authorized
Mortgages regarding bank accounts and the withdrawal of cash therefrom are
satisfied.
ARTICLE 7
FEES TO MANAGER
7.01 Management Fees. As consideration for the management and operation
of the Hotel by Manager and such other services as are provided by Manager
pursuant to this Agreement, and subject to Section 8.01 hereof, Manager shall
have the right to withdraw from the Sweep Account and retain a Basic Management
Fee and an Incentive Management Fee as follows:
(a) The Basic Management Fee shall be equal to the percentage of
Adjusted Gross Revenues set forth in this Agreement, plus the percentage of
Rooms Revenues set forth in this Agreement, during each Fiscal Month in the
Initial Term and any Renewal Term. The Basic Management Fee for the immediately
preceding Fiscal Month shall be payable to Manager on the first (1st) day of the
next succeeding calendar month from the Sweep Account. The Basic Management Fee
for any period less than a
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full 12-month Fiscal Year shall be paid on the basis of the Basic Management Fee
earned for the applicable period.
(b) In addition to the Basic Management Fee, Manager shall be
entitled to receive an Incentive Management Fee based upon the combined "Tier 1
Incentive Profit", "Tier 2 Incentive Profit", and "Tier 3 Incentive Profit", if
any, of all of the Managed Hotels, considered in the aggregate.
(i) The Tier 1 Incentive Profit shall be computed as follows:
(A) the aggregate Adjusted Net Operating Income of
all Managed Hotels for the applicable period, minus
(B) the product of the applicable Tier 1 ROI
Percentage (8.50% in 2001 and, for subsequent years, as
adjusted in the manner provided in subsection (b)(v) of this
Section 7.01) multiplied by Leasehold Owner's aggregate
Investment Basis in all of the Managed Hotels for the Fiscal
Year for which the computation is being made, as adjusted in
the manner provided in subsections (b) (v) and (vi) of this
Section 7.01.
If there is any positive "Tier 1 Incentive Profit", as so computed, for
the Managed Hotels as a group, then Manager shall be paid a "Tier 1
Incentive Management Fee" equal to the lesser of the following: (1) the
product of 25% (the "Tier 1 Incentive Management Fee Percentage") times
the Tier 1 Incentive Profit, or (2) the product of the "Maximum Tier 1
Incentive Profit" multiplied by the applicable Tier 1 Incentive
Management Fee Percentage. The Maximum Tier 1 Incentive Profit shall be
computed as follows: multiply (x) the applicable Tier 2 ROI Percentage
minus the applicable Tier 1 ROI
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Percentage, by (y) Leasehold Owner's Investment Basis in all of the
Managed Hotels for the Fiscal Year for which the computation is being
made, as adjusted in the manner provided in subsections (b) (v) and
(vi) of this Section 7.01, and then divide the product so obtained by
one (1) minus the Tier 1 Incentive Management Fee Percentage.
(ii) The Tier 2 Incentive Profit shall be computed as follows:
(A) the aggregate Adjusted Net Operating Income of
all Managed Hotels for the applicable period, minus
(B) the product of the applicable Tier 2 ROI
Percentage (9.50% in 2001 and, for subsequent years, as
adjusted in the manner provided in subsection (b)(v) of this
Section 7.01) multiplied by Leasehold Owner's aggregate
Investment Basis in all of the Managed Hotels for the Fiscal
Year for which the computation is being made, as adjusted in
the manner provided in subsections (b) (v) and (vi) of this
Section 7.01, minus
(C) the Tier 1 Incentive Management Fee.
If there is any positive "Tier 2 Incentive Profit", as so computed, for
the Managed Hotels as a group, then Manager shall be paid a "Tier 2
Incentive Management Fee" equal to the lesser of the following: (1) the
product of 50% (the "Tier 2 Incentive Management Fee Percentage") times
the Tier 2 Incentive Profit, or (2) the product of the "Maximum Tier 2
Incentive Profit" multiplied by the applicable Tier 2 Incentive
Management Fee Percentage. The Maximum Tier 2 Incentive
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Profit shall be computed as follows: multiply (x) the applicable Tier 3
ROI Percentage minus the applicable Tier 2 ROI Percentage, by (y)
Leasehold Owner's Investment Basis in all of the Managed Hotels for the
Fiscal Year for which the computation is being made, as adjusted in the
manner provided in subsections (b) (v) and (vi) of this Section 7.01,
and then divide the product so obtained by one (1) minus the Tier 2
Incentive Management Fee Percentage.
(iii) The Tier 3 Incentive Profit shall be computed as
follows:
(A) The aggregate Adjusted Net Operating Income of
all Managed Hotels for the applicable period, minus
(B) The product of the applicable Tier 3 ROI
Percentage (10.50% in 2001 and, for subsequent years, as
adjusted in the manner provided in subsection (b)(v) of this
Section 7.01) multiplied by Leasehold Owner's aggregate
Investment Basis in all of the Managed Hotels for the Fiscal
Year for which the computation is being made, as adjusted in
the manner provided in subsections (b) (v) and (vi) of this
Section 7.01, minus
(C) The sum of the Tier 1 Incentive Management Fee
and the Tier 2 Incentive Management Fee.
If there is any positive "Tier 3 Incentive Profit", as so computed, for the
Managed Hotels as a group, then Manager shall be paid a Tier 3 Incentive
Management Fee equal to 20% (the "Tier 3 Incentive Management Fee Percentage")
of such Tier 3 Incentive Profit.
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(iv) The sum of the Tier 1 Incentive Management Fee, the Tier
2 Incentive Management Fee and the Tier 3 Incentive Management Fee shall be
known herein as the "Incentive Management Fee." An example of the calculation of
the Incentive Management Fee is set forth on Exhibit H attached hereto and
hereby made a part hereof.
(v) After calendar year 2001, the Tier 1 ROI Percentage, Tier
2 ROI Percentage and Tier 3 ROI Percentage each shall be increased annually by a
percentage equal to the percentage increase in the Consumer Price Index during
the immediately preceding calendar year.
(vi) If a Fiscal Year consists of less than twelve (12)
calendar months or if during any Fiscal Year, any hotel ceases to be a Managed
Hotel or any additional hotel becomes a Managed Hotel, then for the purpose of
calculating the Incentive Management Fee for such Fiscal Year (A) the Adjusted
Net Operating Income for each such hotel shall be included only for the period
during which it constituted a Managed Hotel, (B) Leasehold Owner's Investment
Basis in the Managed Hotels at the end of the immediately preceding Fiscal Year
shall be (1) increased by the Investment Basis in any hotel which first becomes
a Managed Hotel during such Fiscal Year, multiplied by a fraction, the numerator
of which is the number of days during such Fiscal Year that it was a Managed
Hotel and the denominator of which is 365, and (2) decreased by the Investment
Basis in any hotel which ceases to be a Managed Hotel during such Fiscal Year,
multiplied by a fraction, the numerator of which is the number
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of days during the Fiscal Year that it was no longer a Managed Hotel and the
denominator of which is 365.
(vii) The Incentive Management Fee will be paid from the Sweep
Account, subject to Section 8.01 hereof, thirty (30) days following the end of
each calendar quarter, on a year-to-date basis, with a year end reconciliation
of the Incentive Management Fee for such Fiscal Year being made no later than
forty-five (45) days following the end of such Fiscal Year. For purposes of
quarterly calculations, the Quarterly Tier 1 ROI Percentage, the Quarterly Tier
2 ROI Percentage and the Quarterly Tier 3 ROI Percentage shall be defined as one
fourth of the Tier 1 Incentive Management Fee Percentage, the Tier 2 Incentive
Management Fee Percentage and the Tier 3 Incentive Management Fee Percentage,
respectively. For purposes of the year-end reconciliation, the Tier 1 Incentive
Management Fee Percentage, the Tier 2 Incentive Management Fee Percentage and
the Tier 3 Incentive Management Fee Percentage shall be used.
Within thirty (30) days after the end of each calendar quarter Leasehold Owner
shall provide a calculation of the Investment Basis for all Managed Hotels
applicable to such quarter, certified as true and accurate by a financial
officer of Leasehold Owner.
7.02 Services Contribution/Priority Club Charge. Manager shall have the
right to withdraw from the Sweep Account and pay itself or its applicable
Affiliate the Services Contribution and the Priority Club Charge as follows:
(a) The Services Contribution shall be equal to (i) three
percent (3%) of the Rooms Revenue in each Fiscal Month or part thereof during
the Initial Term and any
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Renewal Term(s) with respect to Managed Hotels operated under the Crowne Plaza
and Holiday Inn Sunspree Brands, and (ii) two and one half percent (2.5%) of the
Rooms Revenue in each Fiscal Month or part thereof with respect to Managed
Hotels operated under the Holiday Inn, Holiday Inn Express and Holiday Inn
Select Brands, during the Initial Term and any Renewal Term(s), subject to
adjustment from time to time for hotels within the same general category as the
Hotel. The Services Contribution is to be paid into the Bass Hotels & Resorts
System Fund and is to be used for Brand marketing and reservations activities.
The Services Contribution for each Fiscal Month shall be paid to Manager by the
first (1st) day of the next succeeding calendar month from the Sweep Account.
(b) The Priority Club Charge shall be equal to five percent
(5%) of the Adjusted Gross Revenue (less sale proceeds received by Leasehold
Owner pursuant to Section 4.04 hereof with respect to the Hotel) derived from
Priority Club Members staying at the Hotel for each Fiscal Month during the
Initial Term and any Renewal Term(s), subject to adjustment from time to time
for hotels within the same general category as the Hotel. The Priority Club
Charge for the immediately preceding Fiscal Month shall be paid to Manager by
the first (1st) day of the next succeeding Fiscal Month from the Sweep Account
and shall constitute the sole and exclusive expense or charge for the services
to be provided by Manager under Section 5.04(e) of this Agreement.
7.03 Accounting Fee. The Accounting Fee initially shall be Fifteen
Dollars ($15.00) per guest room for each Fiscal Month or part thereof during the
Initial Term
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and any Renewal Term(s). The Accounting Fee for the immediately preceding Fiscal
Month shall be paid to Manager by the first (1st) day of the next succeeding
Fiscal Month from the Sweep Account. For each Fiscal Year beginning after
December 31, 2001, the Accounting Fee shall be increased or decreased by the
percentage increase or decrease in the Consumer Price Index during the
immediately preceding Fiscal Year. In consideration for the Accounting Fee,
Manager will perform the accounting services described in Article 6 hereof
and/or in Exhibit G attached hereto and made a part hereof.
7.04 Technology Fee. The Technology Fee initially shall be $7.78 per
guest room for each Fiscal Month or part thereof during the Initial Term and any
Renewal Term. The Technology Fee for the immediately preceding Fiscal Month
shall be paid to Manager by the first (1st) day of the next succeeding Fiscal
Month from the Sweep Account. Manager shall have the right to increase the
Technology Fee from time to time for hotels within the same general category as
the Hotel, provided, however, that Manager shall not increase the Technology Fee
by more than ten percent (10%) in any Fiscal Year.
7.05 Reimbursements. Manager shall be entitled to withdraw from the
Sweep Account, as an Operating Cost, the amounts necessary to reimburse itself
and its Affiliates for the costs arising for travel agent commission programs,
field marketing co-op programs, hotel marketing association programs (including,
without limitation, the Crowne Plaza Hotel Marketing Association Fee in effect
from time to time, where applicable) and similar activities in which the Hotel
participates. In addition, to the
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extent that Manager or any of its Affiliates have advanced amounts that shall
properly be treated as Operating Costs, Manager shall be entitled to reimburse
such amounts from the Sweep Account. With respect to any amounts withdrawn from
the Sweep Account by Manager to reimburse itself or its Affiliates, the same
shall be consistent with the Annual Business Plan.
ARTICLE 8
DISBURSEMENTS
8.01 Priority of Disbursements. As and when received by Manager, all Gross
Revenues shall be deposited into the Sweep Account created pursuant to the
requirements of Section 6.03. Manager shall in turn disburse, for and on behalf
of Leasehold Owner, funds from the Sweep Account in the following order of
priority and to the extent of funds available:
(a) To the persons entitled thereto, when due, all Operating Costs,
including the Basic Management Fee, the Services Contribution, Priority Club
Charge, the Accounting Fee and the Technology Fee set out in Article 7, as
provided therein, and all properly reimbursable expenses then due Manager under
this Agreement;
(b) To the persons entitled thereto, when due, such of the following
Ownership Costs as Leasehold Owner elects in writing to have paid directly by
Manager, which shall be disbursed to the extent of funds remaining available:
(i) Debt Service; (ii) an amount (annualized) to satisfy property taxes and
assessments; (iii) an amount (annualized) to satisfy fire and extended coverage
insurance premiums; (iv) rental pursuant to the Hotel Lease or any ground lease,
or any other lease payments;
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(v) payment of previously earned but unpaid Incentive Management Fees; (vi)
expenditures under Section 5.07, including those for Capital Replacements; and
(vii) contributions to the Capital Reserve Account; and
(c) the Incentive Management Fee, if and when applicable.
(d) To Leasehold Owner, prior to the close of each business day, the
amount on deposit in the Sweep Account, if any, that is in excess of the Minimum
Working Capital Balance for all Managed Hotels.
Notwithstanding anything to the contrary in this Agreement, Manager shall have
no obligation to make payment or incur obligations pursuant to this Agreement
unless Manager is reasonably certain that funds to complete such payments and
discharge such obligations will be available as the amounts come due. Leasehold
Owner shall remain liable for all Operating Costs and other amounts coming due
under this Agreement.
ARTICLE 9
OTHER SERVICES
9.01 Transactions With Affiliates. Manager shall be entitled to contract
with companies that are Affiliates (or companies in which Manager has an
ownership interest if such interest is not sufficient to make such a company an
Affiliate) to provide goods and/or services to the Hotel; provided that the
delivered prices and/or terms for such goods and/or services are competitive.
Additionally, Manager may contract for the purchase of goods and/or services for
the Hotel with third parties that have other contractual relationships with
Manager or its Affiliates, so long as the delivered prices
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and terms are competitive. In determining, pursuant to the foregoing, whether
such delivered prices and/or terms are "competitive", they will be compared to
the prices and/or terms which would be available from reputable and qualified
sellers of the same goods and/or services of similar quality. In conducting such
a comparison, the goods and/or services which are being purchased will be
grouped in reasonable categories and compared to similar groups of
goods/services offered by the other sellers, rather than being compared item by
item Manager may include within such prices a reasonable charge for corporate
overhead for Manager and Manager's Affiliates (or other companies in which
Manager has an ownership interest if such interest is not sufficient to make
such a company an Affiliate) and all allowances, credits, rebates, commissions
and discounts received with respect to any such purchases, after deduction for
such overhead, shall be credited to the Hotel.
9.02 Optional Services. Leasehold Owner acknowledges that Manager and its
Affiliates provide optional non-mandatory services which may relate to the Hotel
in addition to those which are considered in or encompassed by this Agreement,
such as, by way of example, construction project management or technical
services including design, architectural, engineering and estimating services.
Such additional services shall be performed by Manager only upon agreement of
Leasehold Owner and Manager, pursuant to a separate written agreement between
Leasehold Owner and Manager. Leasehold Owner agrees to consider in good faith
any proposals presented to it by Manager or any of its Affiliates for such
additional services relative to the Hotel; it
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being understood, however that this Section 9.02 shall in no event be construed
to require Leasehold Owner to accept any such proposals.
ARTICLE 10
SIGNS AND SERVICE MARKS
10.01 Use of Name. The Hotel shall (subject to the other provisions of this
Section 10.01) be known and designated as a hotel operating under the Brand or
such other hotel brand and/or name as the parties hereto agree in writing.
Leasehold Owner acknowledges that the Brand is a registered System Mark of
Manager or its Affiliate and that the Brand is and shall continue to be the sole
property of Manager or its Affiliates. Leasehold Owner agrees and acknowledges
the exclusive right of ownership of Manager and its Affiliates to the Brand, the
System Marks and the Reservation System. Leasehold Owner hereby disclaims any
right or interest therein, regardless of the legal protection afforded thereto.
It is acknowledged that in the future Manager may determine to change the name
of the chain from the Brand to another name, and, in connection with such
change, Manager may determine to convert the name of the hotels in the chain,
including the Hotel, from the Brand to another designation; provided, however,
that Manager, at its sole cost and expense, shall pay any expenses associated
with such change, including, but not limited to, the cost of signage at the
Hotel. Leasehold Owner hereby consents to any such change of name that is
acceptable to Manager and that is generally effected within the Brand. If such
change is effected, references in this Agreement to the Brand shall instead or
also (as appropriate) be deemed to refer to such new chain name or names. As
used in this
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Article 10 with reference to the Brand and the other System Marks, the term
Manager shall mean and include Manager and any Affiliate(s) of Manager that from
time to time may own the Brand and System Marks. Leasehold Owner shall not use
any System Marks or any combination or variation thereof in the name of any
partnership, corporation or other business entity, nor allow the use thereof by
others. Leasehold Owner shall not make, or allow another to make, reference to
any System Marks, or any combination or variation thereof, directly or
indirectly, in connection with Leasehold Owner's participation in a public sale
of securities or other comparable means of financing without the prior written
consent of Manager or its Affiliate as applicable; provided, however, that any
factual reference to the Hotel in any written material prepared by Leasehold
Owner may contain the applicable Brand name without the consent of Manager; and
provided further, that Leasehold Owner may further display one or more of the
System Marks in such written material so long as it is not done in such a way as
to suggest or imply that Manager, any of its affiliates, or the owner of the
System Marks participates in, supports, or endorses such public sale of
securities in any way.
10.02 Cancellation or Termination. In the event of termination or
cancellation of this Agreement, whether as a result of a default by Manager or
otherwise, Leasehold Owner shall not hold itself out as, or operate the Hotel
under the Brand, and will immediately cease using the Brand, and all other
System Marks in connection with the name or marketing of the Hotel and will
immediately cease use of any item bearing or referring to any System Marks
associated with the Brand or Manager. Leasehold
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Owner shall within thirty (30) days of the date of termination or cancellation
of this Agreement have destroyed, or shall have sold and/or transferred to
another Managed Hotel being operated under the Brand or any other hotel
authorized by Manager or its Affiliate to use the Brand, all Furnishings and
Equipment, Operating Equipment and Operating Supplies bearing any System Marks
of Manager. Specifically, it is understood and agreed that Leasehold Owner may
not make any use of such property from and after such termination or
cancellation unless Leasehold Owner is specifically authorized in writing
(whether under license from Manager or otherwise, but other than by reason of
this Agreement) to use property bearing any System Marks of Manager; nor may
Leasehold Owner dispose of such property to any person or entity whatsoever
unless such person or entity's use of such property is specifically authorized
in writing by Manager (whether under license from Manager or otherwise) to
include use of property bearing any System Marks of Manager.
10.03 System Mark Litigation. In the event the Hotel, Leasehold Owner or
Manager is the subject of any litigation or action brought by any party seeking
to claim rights in or to restrain the use of any System Mark used by Manager in
connection with the Hotel, then any such litigation or action shall be defended
entirely by and at the expense of Manager, notwithstanding that Manager may or
may not be named as a party thereto. Leasehold Owner shall not have the right to
bring suit against any user of any System Mark. In all cases the conduct of any
suit whether brought by Manager or instituted against Leasehold Owner and/or
Manager shall be under the absolute control of counsel to be nominated and
retained by Manager notwithstanding that Manager may
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not be a party to such suit. Manager shall hold Leasehold Owner harmless from
and indemnify Leasehold Owner against any amounts voluntarily paid in connection
with a settlement and any judgments or awards of any court or administrative
agency of competent jurisdiction, whether such awards be in the form of damages,
costs or otherwise which Leasehold Owner is required to pay as a result of
Manager using any of its System Marks as the name of or in connection with the
operation of the Hotel in accordance with the terms of this Agreement.
ARTICLE 11
INSURANCE
11.01 Insurance Coverage. Leasehold Owner agrees to procure and maintain,
at all times during the Initial Term and any Renewal Term(s), reasonable and
adequate amounts of casualty, liability and other usual and customary types of
insurance (other than worker's compensation insurance, which will be procured by
Manager), including, but not limited to, the minimum insurance coverages as are
set forth in Exhibit C attached hereto and made a part hereof. Leasehold Owner
acknowledges and agrees that Manager has not made any representations or
warranties regarding the adequacy of the insurance coverages set forth in
Exhibit C for Leasehold Owner and Leasehold Owner's agents, employees, guests
and invitees. Subject to the minimum coverage requirements of this Agreement,
Leasehold Owner shall retain the sole and exclusive authority to control the
placement of all property and liability insurance with respect to Managed
Hotels. Leasehold Owner shall allocate the costs and any deductible amounts
among the Managed Hotels in a fair and equitable manner, taking into
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consideration the nature of the risk covered and the loss experience of the
Hotel. Such insurance may be carried under blanket policies covering the Hotel
and other locations provided such policies otherwise comply with all of the
requirements of Exhibit C hereto. Manager shall be responsible for complying
with all governmental requirements for workers' compensation insurance or
similar coverage, as an Operating Cost, and shall maintain accruals with respect
to workers' compensation insurance (or liability in lieu thereof) only to the
extent required by applicable law or generally accepted accounting principles.
Such accruals shall be subject to review by Leasehold Owner, from time to time,
upon request.
11.02 Insurance Policies.
(a) All insurance provided for under this Article 11 shall be effected
by policies issued by insurance companies of good reputation and of sound
financial responsibility and shall be subject to Manager's approval.
(b) Notwithstanding anything herein to the contrary, this Agreement
shall not be effective until all required insurance coverage has been obtained
and evidence thereof, in the form of certificates of insurance, has been
furnished to Manager.
(c) All insurance policies shall be renewed, and proof of such
renewals shall be delivered to Manager at least ten (10) days prior to their
respective expiration dates. Certificates of insurance shall be sent to:
[Manager Entity Name]
c/o Bass Hotels & Resorts, Inc.
Risk Management Department
Three Ravinia Drive
Suite 2900
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Atlanta, Georgia 30346-2149
Attn: Risk Manager
(d) All liability insurance policies procured by Leasehold Owner shall
be written in the name of Leasehold Owner with Manager, the Superior Owner,
Manager's Affiliate(s), any ground lessor, mortgagee(s) and other beneficiaries
being named thereon as additional insureds. Workers' compensation insurance and
other employment-related insurance (with respect to which it is impractical and
inappropriate to name other parties as additional insureds) shall be entered
into directly by Manager as the employer.
(e) All property insurance policies shall be endorsed specifically to
the effect that the proceeds of any building, contents or business interruption
losses shall be made payable to Leasehold Owner, except as may be otherwise
required by any mortgagee. All such policies of insurance shall also be endorsed
specifically to the effect that such policies shall not be canceled or
materially changed without at least thirty (30) days' prior written notice to
Leasehold Owner, the mortgagee(s) and Manager. Leasehold Owner shall use all
reasonable efforts to cause any policy to provide that the insurer shall not
have any rights of subrogation to any claim that either party hereto may have or
acquire against the other. Neither Leasehold Owner nor Manager shall have any
claim against the other with respect to the failure of any insurance carrier to
provide the coverage or protection placed with such carrier as contemplated by
this Agreement.
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(f) All coverage limits and deductible amounts set forth in Exhibit C
shall be reviewed by Leasehold Owner and Manager from time to time for the
purpose of determining the coverage limits and deductible amounts then
appropriate for properties similar in type and construction to the Hotel and for
the nature of the business being conducted. Manager and Leasehold Owner shall
cooperate in good faith to arrive at an agreement on such matters.
ARTICLE 12
INDEMNITY AND RELATED MATTERS
12.01 Indemnification. Except as otherwise provided herein, Leasehold Owner
and Manager mutually agree for the benefit of each other to look only to the
appropriate insurance coverages in effect pursuant to this Agreement in the
event any demand, claim, action, damage, loss, liability or expense occurs as a
result of injury to person or damage to property by reason of any cause
whatsoever, regardless of whether any such demand, claim, action, damage, loss,
liability or expense is caused or contributed to by, or results from the
negligence of, Leasehold Owner or Manager or their respective subsidiaries,
Affiliates, employees, directors, officers, agents or independent contractors
and regardless whether the injury to person or damage to property occurs in and
about the Hotel or elsewhere, as a result of the performance of this Agreement.
Nevertheless, in the event the insurance proceeds are insufficient or there
is no insurance coverage to satisfy the demand, claim, action, loss, liability
or expense and the same did not arise out of the gross negligence or willful
misconduct of Manager, or its subsidiaries or Affiliates, Leasehold Owner
agrees, at its expense as an Operating
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Cost, to indemnify and hold Manager and its subsidiaries, Affiliates, officers,
directors, employees, agents and independent contractors harmless, to the extent
of the excess liability. For purposes of this Section, any deductible amount
under any policy of insurance shall not be deemed to be included as part of
collectible insurance proceeds. This indemnity shall be in addition to the
general right of Manager to be indemnified as an agent.
Notwithstanding anything contained in this Agreement to the contrary
(including without limitation the preceding provisions of this Section), Manager
shall indemnify, defend and hold harmless Leasehold Owner and Leasehold Owner's
subsidiaries, Affiliates, officers, directors, employees, agents, partners,
shareholders or independent contractors, from all demands, claims, actions,
loss, liability or expense which is not covered by insurance and which is
determined to have resulted from the gross negligence or willful misconduct of
Manager, or its subsidiaries or Affiliates, in connection with the operation of
the Hotel.
12.02 Survival. The provisions of this Article 12 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 the provisions of this Article 12.
12.03 Defense. Leasehold Owner shall defend promptly and diligently, at
Leasehold Owner's expense, any claim, action or proceeding brought against
Manager or Leasehold Owner jointly or severally arising out of or connected with
any of the
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matters referred to in Section 12.01 and for which Leasehold Owner is
responsible to indemnify Manager. Manager shall defend promptly and diligently,
at Manager's expense, any claim, action or proceeding brought against Manager or
Leasehold Owner jointly or severally arising out of or connected with any of the
matters referred to in Section 12.01 and for which Manager is responsible to
indemnify Leasehold Owner.
12.04 Waiver of Subrogation. To the fullest extent permitted by law,
Leasehold Owner and Manager each hereby waives any and all right of subrogation
and right of recovery or cause of action, and agrees to release the other from
liability, for loss or damage to the extent such loss or damage is covered by
valid and collectible insurance in effect at the time of such loss or damage (or
which would have been covered if Leasehold Owner and Manager were carrying the
insurance required by this Agreement). Said waivers shall be in addition to, and
not in limitation or derogation of, any other waiver or release contained in
this Agreement. Written notice of the terms of the above mutual waivers shall be
given to the insurance carriers of Leasehold Owner and Manager and the parties'
insurance policies shall be properly endorsed, if necessary, to prevent the
invalidation of said policies by reason of such waivers. Leasehold Owner and
Manager shall each have included in all policies of commercial property
insurance, commercial general liability insurance and all other forms of
insurance required by the terms of this Agreement a waiver by the insurer of all
right of subrogation against the other in connection with any loss or damage
thereby insured against. Any additional premium for such waiver shall be paid by
the primary insured.
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ARTICLE 13
DAMAGE TO AND DESTRUCTION OF THE HOTEL
13.01 Obligation to Restore. Leasehold Owner agrees, subject to the
provisions of this Article 13 and to the terms of any Authorized Mortgage then
in effect, to repair, restore, rebuild or replace any damage to, or impairment
or destruction of, the Hotel from fire or other casualty. If Leasehold Owner
fails to undertake such work within ninety (90) days after the fire or other
casualty, or fails to pursue completion of such work diligently, Manager may,
but shall not be obligated to, undertake or complete such work for the account
of Leasehold Owner and shall be entitled to be repaid therefor, with reasonable
interest, and Leasehold Owner shall make available to Manager all of the
proceeds of any insurance covering such loss or other casualty for such purpose.
13.02 Termination Option. In the event the Building shall be destroyed or
substantially destroyed during the Initial Term and any Renewal Term(s) by fire
or other casualty and (i) Leasehold Owner shall have maintained policies of
insurance as required by Article 12, and (ii) the cost of repairing, restoring,
rebuilding and replacing the same shall exceed an amount equal to (x) one
hundred percent (100%) of the proceeds of the insurance collectible with respect
to such fire or other casualty, plus (y) the amount of any deductible provided
for in such casualty insurance policies, Leasehold Owner and Manager shall each
have the right and option, upon notice served upon the other within sixty (60)
days after such fire or other casualty, to terminate this Agreement. If the cost
of repairing, restoring, rebuilding or replacing the damage, impairment or
destruction resulting from such fire or other casualty shall be
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less than an amount equal to the sum of (x) one hundred percent (100%) of the
proceeds of the insurance collectible with respect to such fire or other
casualty, plus (y) the amount of any deductible provided for in such casualty
insurance policies, or, if greater and neither party shall have served such
notice within the time aforesaid, or if Leasehold Owner shall not have
maintained policies of insurance as required by Article 12, Leasehold Owner
agrees, at its cost, to repair, restore, rebuild or replace such damage,
impairment or destruction. If Leasehold Owner fails to undertake any such
required work within ninety (90) days after the fire or other casualty or shall
fail to complete the same diligently, Manager may, at its sole election, either
(i) terminate this Agreement upon delivery of written notice to Leasehold Owner,
or (ii) undertake such work pursuant to this Article 13.
ARTICLE 14
CONDEMNATION
14.01 Termination. If the whole of the Hotel shall be taken or condemned in
any eminent domain, condemnation, compulsory acquisition or like proceeding by
any competent authority for any public or quasi-public use or purpose, or if
such a portion thereof shall be taken or condemned as to make it imprudent,
impracticable or uneconomic, in Leasehold Owner's good faith reasonable business
judgment, to use the remaining portion as a hotel of the type and class
immediately preceding such taking or condemnation, then in either of such events
this Agreement shall cease and terminate as of the date of such taking or
condemnation, the Hotel will be deemed to be a sold hotel pursuant to Sections
15.04 and 15.05 hereof.
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14.02 Restoration and Continuation. If only a part of the Hotel is taken or
condemned and the taking or condemnation of such part does not make it
imprudent, impracticable or uneconomic, in Leasehold Owner's and Manager's
mutual good faith reasonable business judgment, to operate the remainder as a
hotel of the type and class immediately preceding such taking or condemnation,
this Agreement shall not terminate, and out of any award to Leasehold Owner, so
much thereof as shall be reasonably necessary to repair any damage to the Hotel,
or any part thereof, or to alter or modify the Hotel, or any part thereof, so as
to render the Hotel a complete and satisfactory architectural unit as a hotel of
the same type and class as it was immediately preceding the taking or
condemnation shall be utilized by Leasehold Owner for that purpose. Manager
shall have no right or interest in any proceeds of condemnation.
ARTICLE 15
DEFAULT AND TERMINATION
15.01 Events of Default. Subject to the provisions of Article 21, it shall
be an event of default ("Event of Default") hereunder if any one or more of the
following events shall occur:
(a) The breach, default or non-compliance in any material respect by a
party hereto with any covenants, obligations, agreements or duties to be
performed by such party under this Agreement, followed by written notice of such
breach, default or non-compliance from the other party to such defaulting party
(and to the mortgagee or mortgagees under any Authorized Mortgage if Leasehold
Owner is the defaulting party)
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and failure of such defaulting party (or such mortgagee if Leasehold Owner is
the defaulting party) to remedy or correct such breach, default or
non-compliance within twenty (20) business days after receipt of such notice. If
the breach, default or non-compliance is other than payment of money and is also
of a nature such that it can be cured, but cannot reasonably be cured within
such twenty (20) business day period, then the defaulting party shall not be
considered to be in default, and an Event of Default shall not be deemed to have
occurred, so long as the defaulting party commences the curing of such default
within such twenty (20) business day period and pursues the completion thereof
with diligence and continuity; or
(b) The occurrence of a default under the Hotel Lease or any ground
lease which results in termination thereof; or
(c) There occurs a default under any Authorized Mortgage or any other
mortgage, deed of trust or other financing instrument encumbering or otherwise
affecting the Hotel which results in the termination of this Agreement,
otherwise than as a result of Manager's breach of this Agreement; or
(d) If: (i) a party shall voluntarily or involuntarily be dissolved;
apply for or consent to the appointment of a receiver, trustee or liquidator of
all or a substantial part of its assets; file a voluntary petition in bankruptcy
(or have filed against it any such petition which shall not have been dismissed
within ninety (90) days after filing) or otherwise voluntarily avail itself of
any federal or state laws for the relief of debtors; admit in writing its
inability to pay its debts as they become due; make a general assignment for the
benefit of creditors; file a petition (or have filed against it any such
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petition which shall not have been dismissed within ninety (90) days after
filing) 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 any petition filed against it in any bankruptcy, reorganization
or insolvency proceeding; or (ii) an order, judgment or decree shall be entered
by any court of competent jurisdiction, on the application of any one or more
creditors of such party, adjudicating such party a bankrupt or insolvent or
approving a petition seeking reorganization or appointing a receiver, trustee or
liquidator of all or a substantial part of its assets, and such order, judgment
or decree shall become final; or (iii) a party shall be directly or indirectly
owned or controlled by another company or entity and an event described in
sub-section (c)(i) or (ii) shall occur with respect to any company or entity
owning or controlling such party; or (iv) if Leasehold Owner passes title to the
Hotel or any part thereof in lieu of foreclosure of any security interest in the
Hotel or if an action to foreclose any security interest in the Hotel or any
part thereof is instituted against Leasehold Owner and is not discharged or
dismissed within ninety (90) days thereafter; or
(e) If Manager ceases to be an "eligible independent contractor" as
described in Section 22.06 hereof; or
(f) If either party assigns its interests in this Agreement in
violation of Sections 19.01 or 19.02 below.
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15.02 Default Termination.
(a) If an Event of Default occurs, this Agreement shall terminate at
the election of the Non-Defaulting Party. Notice of termination pursuant to this
Article 15 may be given by the Non-Defaulting Party to the Defaulting Party at
any time following the occurrence of such Event of Default, and such termination
shall be effective as of the date specified in such notice of termination, which
such date shall be not less than thirty (30) and not more than ninety (90) days
after the date of such notice, except as otherwise provided in this Agreement.
(b) Leasehold Owner shall have no right from and after the termination
of this Agreement to use the Brand with respect to the Hotel.
(c) If this Agreement is terminated by either Leasehold Owner or
Manager, for any reason whatsoever, then Leasehold Owner will, immediately after
calculation of such amounts, pay to Manager all amounts due and owing under this
Agreement through the effective date of such termination.
(d) The waiver of any one Event of Default shall not be construed as
the waiver of any other Event of Default.
(e) Except as otherwise provided in Article 15 below, the termination
of this Agreement shall not be deemed to impair the right of any party to
exercise any right or remedy, whether for damages, injunctions, specific
performance or otherwise, upon any breach or termination hereof.
15.03 Post Termination Obligations. Upon expiration or termination of this
Agreement for any reason, Leasehold Owner and Manager shall proceed as follows:
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(a) Within sixty (60) days following the effective date of such
expiration or termination, Manager shall prepare and submit to Leasehold Owner a
final accounting of Hotel operations through the effective date of such
expiration or termination, which accounting shall be in the form of the
financial statements required by Section 6.01(c) of this Agreement. Leasehold
Owner shall not unreasonably withhold or delay its approval of such final
accounting.
(b) Within forty-five (45) days following its receipt of such final
accounting, Leasehold Owner shall either notify Manager that Leasehold Owner has
approved such accounting or shall provide Manager a written statement of
Leasehold Owner's disapproval, together with an explanation of the reasons for
such disapproval in such reasonable detail as will allow Manager to address
Leasehold Owner's concerns. Failure by Leasehold Owner to timely respond to such
final accounting shall be deemed Leasehold Owner's approval of the same, unless
within such forty-five (45) days Leasehold Owner gives notice of its intention
to refer the dispute to arbitration as provided in regard to the Operating
Budget. In the event that such notice is timely given, and arbitration
thereafter diligently pursued, the final accounting as determined by the
arbitration proceeding shall be deemed approved by both parties.
(c) Once such final accounting has been approved or deemed approved by
any of the methods described herein, Leasehold Owner shall pay to Manager all
amounts owed to Manager pursuant to such final accounting, and any funds
remaining in the Sweep Account and/or Capital Reserve Account allocable to the
Hotel shall be paid to Leasehold Owner.
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(d) Upon the effective date of such expiration or termination,
Manager shall deliver to Leasehold Owner all books and records and accounts
pertaining to the Hotel, provided that Manager may retain copies of any of such
books, records and accounts. Notwithstanding the foregoing, Manager shall not be
required to deliver to Leasehold Owner any information or materials (including
software, database, manuals and technical information proprietary to, owned by
or licensed by Manager) which are proprietary to Manager, but shall cooperate
with Leasehold Owner to assure that Leasehold Owner obtains any non-proprietary
information contained therein or relating thereto that it may reasonably
request. From and after Manager's delivery of such books and records (including,
but not limited to, purchase orders and purchase invoices) to Leasehold Owner,
Leasehold Owner shall have sole responsibility for (i) maintaining such books
and records, (ii) responding to any inquiries and conducting any audits of any
of such books and records (including but not limited to any audit of sales, use,
gross receipts, hotel occupancy, property, withholding or similar taxes) and
(iii) handling the defense of such audits. Manager agrees to reasonably
cooperate with Leasehold Owner, at no cost to Manager, to the extent necessary
or appropriate for the response to any such inquiry or the conduct of any such
audit. Manager and Leasehold Owner shall each be entitled to indemnification
from the costs associated with any such audit (including but not limited to any
penalties and interest) in the manner and to the extent provided in Article 12
hereof.
(e) Upon the effective date of such expiration or termination,
Manager shall deliver possession of the Hotel, and any cash, property and other
assets
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pertaining thereto, together with any and all keys or other access devices, to
Leasehold Owner.
(f) Manager shall reasonably cooperate with and assist Leasehold Owner
as may be necessary for the transfer of any and all Hotel licenses and permits
to Leasehold Owner or Leasehold Owner's designee; provided, however, such
cooperation shall be at no cost or liability to Manager.
(g) The provisions of this Section 15.03 shall survive the expiration
or termination of this Agreement and may be enforced by injunction or other
equitable relief because monetary damages will not be sufficient to compensate
Manager in the event that its proprietary information and assets continue in use
by Leasehold Owner after termination of this Agreement.
15.04 Replacement Fee to Manager Upon a Sale of the Hotel.
(a) Upon the closing of a sale of the Hotel, whether by conveyance of
assets or of stock or partnership interests in the Superior Owner, Leasehold
Owner may terminate this Agreement (provided it has previously given Manager no
less than thirty (30) days notice prior to the date of such sale).
Notwithstanding the foregoing, no sale, transfer, merger consolidation,
reorganization or change in control of any direct or indirect parent of Superior
Owner shall be deemed or construed as a sale of the Hotel or give Leasehold
Owner the right to terminate this Agreement.
(b) A "Replacement Investment" shall mean the amount invested by
Leasehold Owner or one of its Affiliates in (i) the acquisition of any hotel
that, at the time of acquisition, was not a Managed Hotel and that Manager has
approved as being
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appropriate for operation under a Brand owned by Manager or one of its
Affiliates, (which approval shall be in Manager's sole discretion as an
Affiliate of the Brand owner, and may be conditioned upon the prior or future
completion of certain specified improvements to comply with the applicable Brand
Standards, the cost of which improvements shall be part of the amount invested
for acquisition of the Hotel for purposes of this subsection (b)), and that
Leasehold Owner has made or offers to make subject to a new Agreement in favor
of Manager on substantially the same terms as this Agreement (and for a term
equal to the remaining term of this Agreement), and (ii) an expansion of any
existing Managed Hotel which will materially increase Gross Revenues, in the
reasonable opinion of Manager, and which is otherwise approved by Manager, which
approval shall not be unreasonably withheld or delayed. The amount of Leasehold
Owner's "Replacement Investment Balance" shall be equal to the aggregate of its
Replacement Investments, from and after the Effective Date, plus the Net
Proceeds received by Leasehold Owner with respect to any sold Hotel as to which
Leasehold Owner has paid Liquidated Damages as provided in Section 15.05 hereof,
reduced by the Net Proceeds theretofore derived by Leasehold Owner and/or its
Affiliates from the sale of any Managed Hotels.
(c) If, upon the termination of this Agreement in connection with the
closing of a sale of the Hotel, there is a Replacement Investment Balance equal
to or greater than zero, after deducting the Net Proceeds of such sale,
Leasehold Owner shall not be obligated to pay Manager any Replacement Management
Fee or Liquidated
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Damages (as each of such terms is hereinafter defined) with respect to the sale
of the Hotel.
(d) If, upon termination of this Agreement in connection with the
closing of a sale of the Hotel, there is not a positive Replacement Investment
Balance, after deducting the Net Proceeds of such sale, then from and after the
date of such sale, and continuing for twelve (12) months from such date,
Leasehold Owner shall pay Manager a monthly "Replacement Management Fee"
computed as follows: the monthly Replacement Management Fee shall be equal to
one-twelfth (1/12th ) of the sum of (i) the actual Basic Management Fee earned
by Manager from the Hotel for the immediately preceding twelve (12) calendar
months; plus (ii) the Incentive Management Fee attributable to the Hotel for the
previous Fiscal Year, which shall be equal to the Incentive Management Fee
earned by Manager for all of the Managed Hotels during such previous Fiscal Year
multiplied by a fraction, the numerator of which shall be the Hotel's Adjusted
Net Operating Income for such previous Fiscal Year, and the denominator of which
shall be the Adjusted Net Operating Income of all Managed Hotels for the same
period; provided, however, if the Hotel is sold during the first twelve (12)
months of the Initial Term, the monthly Replacement Management Fee for the Hotel
shall be equal to one-twelfth (1/12th ) of the sum of the Basic Management Fee,
and the Incentive Management Fee allocable to the Hotel for the first twelve
(12) months of the Initial Term, as forecast in the Annual Plan for the Hotel
for such twelve (12) month period. The monthly Replacement Management Fee shall
be an Ownership
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Cost and shall be payable, in arrears, from the Sweep Account on the first day
of each month, subject to Section 8.01.
(e) Anything herein to the contrary notwithstanding, if Leasehold
Owner or an Affiliate shall have made, at any time on or prior to the date upon
which the Hotel is sold (the "Testing Date"), or shall make at any time
following the Testing Date and prior to the first anniversary thereof, a
Replacement Investment not applied in its entirety to avoid or reduce the
Replacement Management Fee otherwise payable with respect to any previously sold
Managed Hotel, then as of the later of the Testing Date and the date of such
investment, the amount of the monthly Replacement Management Fee with respect to
the Hotel shall be reduced (but not below zero) by an amount equal to the
product of the monthly Replacement Management Fee (calculated in accordance with
subsection (d) above) multiplied by a fraction, the numerator of which is equal
to the sum of (i) the Replacement Investment Balance on the Testing Date (prior
to deducting the net proceeds from the sale of the Hotel), plus (ii) the amount
of any subsequent Replacement Investment not applied to avoid or reduce the
Replacement Management Fee otherwise payable with respect to any previously sold
Managed Hotel, plus (iii) the amount by which Investment Basis was reduced in
respect of any Managed Hotel as to which Leasehold Owner subsequently has paid
Liquidated Damages in accordance with Section 15.05, and the denominator of
which shall be the Net Proceeds derived by Leasehold Owner and/or its Affiliates
from the sale of the Hotel. If at any time the result of such an adjustment
would reduce the monthly Replacement Management Fee to zero, then no further
Replacement Management Fees or other damages, including, but
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not limited to, Liquidated Damages, shall be payable by Leasehold Owner to
Manager in respect of the Hotel.
(f) If a Replacement Management Fee is paid or payable by Leasehold
Owner with respect to the sale of the Hotel and such Replacement Management Fee
has not been reduced to zero pursuant to subsection (e) above on or before the
first anniversary of the sale of the Hotel, then Leasehold Owner shall pay to
Manager Liquidated Damages as provided in Section 15.05.
(g) The terms of this Section 15.04 shall survive the termination of
this Agreement. Attached hereto as Exhibit I and hereby made a part hereof is an
example of the calculation of the Replacement Management Fee and Liquidated
Damages.
15.05 Termination Liquidated Damages.
(a) In the event Leasehold Owner breaches this Agreement, resulting in
a default and termination hereof, or otherwise causes or suffers a termination
of this Agreement for any reason other than an Event of Default by Manager,
Leasehold Owner acknowledges that Manager and its affiliates will suffer losses
and damages that will be impossible to calculate with any certainty. Leasehold
Owner acknowledges that this Agreement and Manager's expectation of performance
under it for the stated term and any Renewal Term, if any, is part consideration
for the sale by Affiliates of Manager of certain valuable corporate assets to
FelCor or its Affiliates. Accordingly, in the event that Leasehold Owner does
not have a Replacement Investment Balance of at least zero at any time within
twelve (12) months following the date of such termination, then and in such
event, on the first anniversary of the termination of this Agreement (by
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reason of a sale of the Hotel or otherwise than as a consequence of an Event of
Default by Manager) Leasehold Owner shall immediately pay to Manager, in lieu of
any other monetary damages, Liquidated Damages (not as a penalty) calculated as
follows:
(i) First, calculate an amount equal to the product of (A) the average
annual Basic Management Fee and Incentive Management Fee (calculated in
accordance with Section 15.04(d) above) received by Manager from the
Hotel during the thirty-six (36) full Fiscal Months immediately
preceding such date of termination (or during such lesser number of
full Fiscal Months that the Hotel was managed by Manager hereunder
prior to such date of termination), times (B) the multiple indicated in
the chart below for the year in which Manager ceases management of the
Hotel because of such termination,
(ii) Then multiply the product obtained in subclause (i) above by a
fraction, the numerator of which is equal to the monthly Replacement
Management Fee payable as of the first anniversary of the termination
of this Agreement, and the denominator of which is the monthly
Replacement Management Fee, calculated pursuant to Section 15.04(d)
hereof, which would have been applicable upon the termination of this
Agreement if Leasehold Owner did not have a positive Replacement
Investment Balance, after deducting any Net Proceeds of sale, upon the
date of termination of this Agreement, and
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(iii) Then deduct from the product obtained in subclause (ii) above the
amount of any Replacement Management Fee theretofore paid by Leasehold
Owner to Manager with respect to the Hotel.
TERMINATION
MULTIPLES
17.5 Years -
Multiples
Year 2001 2002 2003 2004 2005 2006 2007 2008 2009
Multiple 11.1x 10.6x 9.9x 9.3x 8.7x 8.2x 7.8x 7.2x 6.6x
Year 2010 2011 2012 2013 2014 2015 2016 2017 2018
Multiple 6.0x 5.4x 4.7x 4.0x 3.2x 2.3x 1.4x 0.5x 0.0x
12.5 Years -
Multiples
Year 2001 2002 2003 2004 2005 2006 2007 2008 2009
Multiple 8.9x 8.2x 7.5x 6.7x 6.0x 5.4x 4.7x 4.0x 3.2x
Year 2010 2011 2012 2013
Multiple 2.3x 1.4x 0.5x 0.0x
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(b) If upon any date during the Initial Term or any Renewal Term upon
which Liquidated Damages are payable pursuant to (a) above, if there is then a
negative Replacement Investment Balance and the aggregate hotel rooms contained
within all Managed Hotels is less than sixty-five percent (65%) of the aggregate
hotel rooms contained within all Managed Hotels as of the later of January 1,
2001 or the last date on which Leasehold Owner did not have a negative
Replacement Investment Balance, then the Liquidated Damages payable pursuant
subparagraph (a) of this Section 15.05 will be increased by fifty percent (50%).
The parties hereto acknowledge and agree that such increase in the Liquidated
Damages is not a penalty but instead represents a reasonable pre-estimate of the
additional damages Manager would incur by suffering the widespread loss of
hotels within the Brand, and the loss of certain economies of scale and other
efficiencies which would have inured to the benefit of Manager but for the
reduction of hotel rooms. The terms of this Section 15.05 shall survive the
termination of this Agreement.
15.06 Enforcement of Guaranty. If an Event of Default occurs hereunder due
to the act or failure to act of Leasehold Owner, then in addition to all rights
and remedies available to Manager hereunder or under applicable law, Manager
will have the right to enforce the Guaranty.
ARTICLE 16
NOTICES
16.01 Procedure. All notices or other communications provided for in this
Agreement shall be in writing and shall be personally served or sent by any
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internationally recognized express delivery service, or by confirmed facsimile
transmission followed immediately by a postage prepaid Registered or Certified
Letter at the following address, until such time as written notice, as provided
hereby, of a change of address with a new address to be used thereafter is
delivered the other party:
LEASEHOLD OWNER:
c/o FelCor Lodging Trust Incorporated
545 E. John Carpenter Freeway
Suite 1300
Irving, TX 75062
Attention: General Counsel
Facsimile: (972) 444-4949
SUPERIOR OWNER:
As set forth on the first page of this Agreement
MANAGER:
[Manager Entity Name]
c/o Bass Hotels & Resorts, Inc.
3 Ravinia Drive, Suite 2900
Atlanta, Georgia 30346
Attn: Vice President of Operations
Facsimile: 770-604-2373
with a copy to:
[Manager Entity Name]
c/o Bass Hotels & Resorts, Inc.
3 Ravinia Drive, Suite 2900
Atlanta, Georgia 30346
Attn: General Counsel - Operations
Facsimile: 770-604-5802
The delivery and receipt of any such notice shall be presumed to have
occurred at the address to which it is sent within seventy-two (72) hours, but
such presumption
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shall be rebuttable. Upon request, a party shall send copies of any notice or
communication by ordinary mail as instructed by the other party.
ARTICLE 17
RELATIONSHIP, AUTHORITY AND FURTHER ACTIONS
17.01 Relationship. Manager and Leasehold Owner shall not by virtue of this
Agreement be construed as joint venturers or partners of each other, and neither
shall have the power to bind or obligate the other except as expressly set forth
in this Agreement. Manager shall not constitute a tenant or subtenant of
Leasehold Owner and this Agreement shall not constitute Leasehold Owner a
franchisee of Manager or of any of Manager's Affiliates. This Agreement shall
not create a franchise or a franchisor/franchisee relationship within the
meaning of the Federal Trade Commission Act, any rule or regulation promulgated,
or any other state or federal law, rule regulation, administrative or judicial
decision. Manager is granted such authority and power as may be necessary to
carry out the terms and conditions of this Agreement.
17.02 Further Actions. Leasehold Owner agrees to execute all contracts,
agreements and documents and to take all actions necessary to comply with the
provisions of this Agreement and the intent hereof.
ARTICLE 18
APPLICABLE LAW
18.01 Applicable Law. The interpretation, validity and performance of this
Agreement shall be governed by the laws of the State of Delaware. In the event
any
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court or appropriate judicial authority shall hold or declare that the law of
another jurisdiction is applicable, this Agreement shall remain enforceable
under the laws of that jurisdiction. If any of the terms and provisions hereof
shall be held invalid or unenforceable for any reason, such invalidity or
unenforceability shall in no event affect any of the other terms or provisions
hereof, all such other terms and provisions to be valid and enforceable to the
fullest extent permitted by law; provided, however, if in any event any material
part of either party's obligations under this Agreement shall be declared
invalid or unenforceable, the other party shall have the option to terminate
this Agreement without payment or penalty of any kind.
ARTICLE 19
SUCCESSORS AND ASSIGNS
19.01 Assignment by Manager. Leasehold Owner's consent shall not be
required for Manager to assign any of its rights or interests as Manager
hereunder to any parent, subsidiary or Affiliate of Manager which also succeeds
to the management of all or substantially all of the hotels then managed by
Manager, together with all of Manager's rights in and to the use of the Brand
and the System Marks and the right to participate in the benefits of the Brand
Standards and the Reservation System, provided that any such assignee agrees in
writing to be bound by the terms and conditions of this Agreement. No
assignment, whether or not permitted hereunder, shall release Manager of its
obligations under this Agreement, unless and only to the extent waived by
Leasehold Owner in writing at the time of or after the assignment. Except as
hereinabove provided, Manager shall not sell, assign or transfer (or permit the
sale,
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assignment or transfer of) any of Manager's rights, duties or interests under
this Agreement, or in any manner, either directly or indirectly, cause or permit
a change in a fifty percent (50%) or more equity or profit sharing interest in
Manager or its immediate parent without the prior written consent (which consent
shall not be unreasonably withheld) of Leasehold Owner. If at any time after the
Effective Date hereof, without the prior written consent of Leasehold Owner,
Manager shall effect or suffer to exist any assignment in violation of this
Section 19.01, Leasehold Owner may, within thirty (30) days following its
receipt of notice of such assignment, elect to terminate this Agreement, without
any payment of liquidated or other damages or penalty whatsoever (which
termination shall be effective not less than thirty (30) nor more than ninety
(90) days after Leasehold Owner's having served Manager with timely written
notice of its election to terminate).
19.02 Assignment by Leasehold Owner. Leasehold Owner shall have the right
to assign this Agreement to any parent, subsidiary or Affiliate of Leasehold
Owner or to the holder of any Authorized Mortgage. No assignment, whether or not
permitted hereunder, shall release Leasehold Owner or Guarantor of its
obligations unless and only to the extent waived by Manager in writing at the
time of or after the assignment. Leasehold Owner shall not otherwise assign (or
permit the assignment of) any of Leasehold Owner's interest in this Agreement or
in any manner, either directly or indirectly, partition (or seek the partition
of), sell, assign or transfer any of its rights or interests in the Hotel or
permit a change in a fifty percent (50%) or more equity or profit sharing
interest in Leasehold Owner or its immediate parent without the prior written
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consent (which consent shall not be unreasonably withheld) of Manager. If at any
time after the Effective Date hereof, without the prior written consent of
Manager, Leasehold Owner shall effect or suffer to exist any assignment in
violation of this Section 19.02, Manager may, within thirty (30) days following
its receipt of notice of such assignment, elect to terminate this Agreement
(which termination shall be effective ninety (90) days after Manager's having
served Leasehold Owner with timely written notice of its election to terminate),
and upon such termination Leasehold Owner shall provide a Replacement Investment
or pay to Manager the Replacement Management Fee and/or Liquidated Damages as
contemplated by Article 15 hereof.
19.03 Binding Effect. The terms, provisions, covenants, undertakings,
agreements, obligations and conditions of this Agreement shall be binding upon
and shall inure to the benefit of the permitted successors in interest and/or
assigns of the parties hereto with the same effect as if mentioned in each
instance where the party hereto is named or referred to, except that no
purported assignment in violation of the provisions of this Agreement shall vest
any rights in the purported assignee.
ARTICLE 20
AGREEMENT NOT AN INTEREST IN REAL ESTATE; SUBORDINATION
20.01 Manager's rights under this Agreement shall be those of an agent only
and shall not constitute an interest in real property. Manager shall execute a
subordination and attornment agreement, comfort letter and other documents
mutually satisfactory to it and the holder of any Authorized Mortgage upon the
request of Leasehold Owner; provided, however, Leasehold Owner shall use
diligent, good faith
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efforts to obtain from any such holder a nondisturbance agreement for the
benefit of Manager.
ARTICLE 21
FORCE MAJEURE
21.01 Operation of Hotel. If at any time during the Initial Term and any
Renewal Term(s) it becomes necessary in Manager's reasonable opinion to cease or
alter operation of the Hotel in order to protect the health, safety and welfare
of the guests and/or employees of the Hotel, or the Hotel itself, for reasons of
force majeure beyond the control of Manager such as, but not limited to, acts of
war, insurrection, civil strife and commotion, labor unrest or acts of God, then
in such event Manager may close and cease or alter operation of all or part of
the Hotel, reopening and commencing or resuming operation when Manager deems
that such may be done without jeopardy to the Hotel, its guests and employees.
21.02 Extension of Time. It is further understood and agreed that with
respect to any obligation, other than the payment of money, to be performed by a
party during the Initial Term and any Renewal Term(s) of this Agreement, such
party shall in no event be liable for failure so to do when prevented by any
force majeure cause such as strike, lockout, breakdown, accident, order or
regulation of or by any governmental authority, failure of supply or inability,
by the exercise of reasonable diligence, to obtain supplies, parts or employees
necessary to perform such obligation, or war or other emergency. The time within
which such obligation shall be performed shall be extended for a period of time
equivalent to the delay from such cause.
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ARTICLE 22
GENERAL PROVISIONS
22.01 Authorization. Leasehold Owner represents that it has full power and
authority to execute this Agreement and to be bound by and perform the terms
hereof. Manager represents it has full power and authority to execute this
Agreement and to be bound by and perform the terms hereof. On request each party
shall furnish the other evidence of such authority.
22.02 Authority to Advance Funds. In the event that Manager has elected to
advance funds for Operating Costs or Ownership Costs that are not yet repaid, or
Manager has not been paid its fees and reimbursements as and when due, Manager
shall have the right to draw on any funds distributable to Leasehold Owner for
repayment. From and after written demand for payment from Manager to Leasehold
Owner, until repaid, or funds are available to Manager for such payment, all
amounts owing to Manager shall bear interest at the lesser of (a) the maximum
rate allowed under law or (b) the rate that is 200 basis points in excess of the
most recently announced prime rate of interest quoted by Citibank, N.A., as
announced from time to time.
22.03 Formalities. Any change to or modification of this Agreement must be
in writing signed by both parties hereto. This Agreement shall be executed in
one or more counterparts, each of which shall be deemed an original. The
captions for each Article are intended for convenience only.
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22.04 Documents. Throughout the Initial Term and any Renewal Term(s),
Leasehold Owner shall furnish Manager copies of all property tax and insurance
statements, all financing documents (including notes and mortgages) relating to
the Hotel and such other documents pertaining to the Hotel, as Manager shall
reasonably request.
22.05 Payments. If any payment due hereunder shall be payable on a date
that is a Saturday, Sunday or other holiday upon which banks are generally
closed for business, such payment shall instead be due on the first Business Day
following such date.
22.06 Manager's Status. Throughout the Initial Term and any Renewal
Term(s), the Manager shall qualify as an "eligible independent contractor" as
defined in Section 856(d)(9) of the Internal Revenue Code of 1986, as amended
(the "Code"). To that end, Manager:
(a) shall not permit wagering activities to be conducted at or in
connection with the Hotel by any person who is engaged in the business of
accepting wagers and who is legally authorized to engage in such business at or
in connection with the Hotel;
(b) shall not own, directly or indirectly (within the meaning of
Section 856(d)(5) of the Code), more than 35% of the shares of FelCor; and
(c) shall be (or shall, within the definition of Section 856(d)(9)(F),
be related to a person that is actively) engaged in the trade or business of
operating "qualified lodging facilities" (defined below) for a person who is not
a "related person" within the meaning of Section 856(d)(9)(F) of the Code with
respect to FelCor or
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Leasehold Owner ( "Unrelated Persons"). In order to meet this requirement, the
Manager agrees that it (or any related person) (i) shall derive at least 10% of
both its revenue and profit from operating "qualified lodging facilities" for
Unrelated Persons and (ii) shall comply with any regulations or other
administrative guidance under Section 856(d)(9) of the Code with respect to the
amount of hotel management business with Unrelated Persons that is necessary to
qualify as an "eligible independent contractor" with the meaning of such Code
Section.
(d) A "qualified lodging facility" is defined in Section 856(d)(9)(D)
of the Code and means a "lodging facility" (defined below), unless wagering
activities are conducted at or in connection with such facility by any person
who is engaged in the business of accepting wagers and who is legally authorized
to engage in such business at or in connection with such facility. A "lodging
facility" is a hotel, motel or other establishment more than one-half of the
dwelling units in which are used on a transient basis, and includes customary
amenities and facilities operated as part of, or associated with, the lodging
facility so long as such amenities and facilities are customary for other
properties of a comparable size and class owned by other owners unrelated to
FelCor. Manager shall not sublet the Hotel or enter into any similar arrangement
on any basis such that the rental or other amounts to be paid by the sublessee
thereunder would be based, in whole or in part, on either (a) the net income or
profits derived by the business activities of the sublessee, or (b) any other
formula such that any portion of the rent would fail to qualify as "rents from
real property" within the meaning of Section 856(d) of the Code, or any similar
or successor provision thereto.
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ARTICLE 23
DEFINITIONS
23.01 Definitions. As used herein the following terms shall have the
respective meanings indicated below:
ACCOUNTING FEE - the fee paid to Manager pursuant to Section 7.03.
ACCOUNTING PRINCIPLES - generally accepted accounting principles and
procedures in the United States, based on the then current edition of "the
Uniform System of Accounts for the Lodging Industry", published by the
Educational Institute of the American Hotel and Motel Association, with such
modifications to the Uniform System of Accounts for the Lodging Industry as may
be mutually agreed upon.
ADJUSTED GROSS REVENUES - shall mean and refer to Gross Revenues less: (i)
any gratuities or service charges added to a customer's bill and paid to
employees or staff of the Hotel; (ii) any credits or refunds made to customers,
guests or patrons; (iii) any credit card charge backs; (iv) any sums and credits
(other than those already excluded from Gross Revenues) received by Leasehold
Owner for lost or damaged goods or merchandise; and (v) any sales taxes, excise
taxes, use taxes, gross receipts taxes, admission taxes, entertainment taxes,
tourist taxes or charges, and similar charges required by law to be collected
from patrons or guests, or as part of the sale price for goods, services or
entertainment, and remitted to any governmental authority.
ADJUSTED NET OPERATING INCOME - Net Operating Income plus any Operating
Costs borne by the Hotel and attributable to any portions of the Hotel not
material to or directly employed by Manager in Hotel operations, less: (i)
allocable real property taxes
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and assessments; (ii) allocable premiums for fire, extended coverage and
business interruption insurance; (iii) rental payments pursuant to any ground
lease, equipment lease or any other lease with an unrelated third party; (iv)
any Net Proceeds received by Leasehold Owner in connection with the sale of any
property pursuant to Section 4.04 hereof; and (v) rent or other payments
received by Leasehold Owner pursuant to Section 4.04 hereof.
AFFILIATE - any entity which is owned or controlled by any other entity
or which is under common ownership or control with any other entity is an
"affiliate" of such entity, and the two entities are "affiliated entities"; for
purposes of this definition, ownership shall include and be limited to 50% or
more of the equity interest.
ANNUAL BUSINESS PLAN - collectively, the Operating Budget (including a
marketing plan) and Capital Replacements Budget for the Hotel for any Fiscal
Year.
APPROVED FACILITY - available borrowing capacity of not less than $25
million under a line of credit or loan facility, from one or more recognized
financial institutions, permitting periodic draws and available for the payment
of costs relating to Capital Replacements. Upon request by Manager, Leasehold
Owner shall provide from time to time a certificate of compliance, executed by
an officer of Leasehold Owner, attesting to Leasehold Owner's continued
maintenance of such an Approved Facility. Leasehold Owner shall use diligent
good faith efforts to secure an agreement from the lender under any Approved
Facility to (i) provide Manager with a copy of any default or termination notice
given to Leasehold Owner under such line of credit or loan, and (ii) notify
Manager of any reduction in the borrowing capacities under such line of credit
or
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loan facility to less than $25,000,000, provided that Manager shall assure such
lender in writing that it will not assert any liability or claim against such
lender for failure to give such notice or copy of notice or for any inaccuracy
therein.
AUTHORIZED MORTGAGE - any mortgage, pledge or encumbrance of or other
security interest in the Hotel or any part thereof or interest therein, together
with all instruments, agreements and other documents evidencing the same or
relating thereto, which (i) existed as of the Effective Date, or (ii) came into
being after the Effective Date and has a loan-to-value ratio of not greater than
sixty percent (60%) (based upon the original principal amount of the loan and
the appraised value of the Hotel as of the date of such financing in its present
condition.
BASIC MANAGEMENT FEE - the fee paid to Manager pursuant to Section
7.01(a).
BRAND - the brand name under which the Hotel is operated and marketed
to the public, as set forth in the first page of this Agreement.
BRAND STANDARDS - the standards of operation from time to time in
effect at all hotels similar to the Hotel which are then managed and/or
franchised under the Brand, which standards shall include, but not be limited
to, standards of operation from time to time specified in manuals and/or other
guidelines provided in writing by the owner of the System Marks or its
Affiliates to franchisees of such System Marks. Brand Standards may include
changed or upgraded service and equipment standards instituted on a Brand-wide
basis in the future to maintain the Brand's competitive market position.
BUILDING - all buildings, structures and improvements now or hereafter
located on the Site, and all fixtures and equipment attached to, forming a part
of and necessary
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for the operation of such buildings, structures and improvements as a hotel
(including, without limitation, heating, lighting, sanitary, air-conditioning,
laundry, refrigeration, kitchen, elevator and similar items), having not less
than the number of guest rooms specified in this Agreement, each with bath, and
such (i) restaurants, bars, banquet, meeting and other public areas; (ii)
commercial space, including concessions and shops; (iii) parking facilities and
areas; (iv) storage and service areas; (v) recreational facilities and areas;
(vi) permanently affixed signage; (vii) public grounds and gardens; and (viii)
other facilities and appurtenances and ancillary uses, as may hereafter be
attached to and form a part of the Building in accordance with this Agreement.
CAPITAL REPLACEMENTS BUDGET - the annual budget for Capital
Replacements in the Hotel, covering a Fiscal Year, as prepared by Manager and
approved by Leasehold Owner pursuant to Section 6.02.
CAPITAL RESERVE ACCOUNT - as defined in Section 5.07.
CAPITAL REPLACEMENTS - repairs, alterations, improvements, renewals and
replacements to the Hotel which are normally capitalized under the Accounting
Principles, including, without limitation, replacement or renewal of FF&E items,
alterations, improvements, renewals or replacements to the Building's structure
or to its mechanical, electrical, heating, ventilating, air conditioning,
plumbing or vertical transportation systems, exterior and interior repainting,
and resurfacing building walls, floors, roofs and parking areas.
CONSUMER PRICE INDEX - the Consumer Price Index for all Urban
Consumers, U.S. City Average, published by the United States Bureau of Labor
Statistics.
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CUMULATIVE CAPITAL RESERVE BALANCE - as defined in Section 5.07(d).
DEBT SERVICE - payments of principal and interest and other charges due
under any Authorized Mortgage.
DEFAULTING PARTY - The party responsible for the occurrence of an Event
of Default or on account of whom an Event of Default shall have occurred.
EFFECTIVE DATE - January 1, 2001.
EXPIRATION DATE - the Initial Term Expiration Date as set forth on the
first page of this Agreement, subject to extension as set forth in Section 2.03.
FELCOR - FelCor Lodging Trust Incorporated.
FISCAL MONTH - a calendar month.
FISCAL YEAR - the twelve calendar months ending December 31 of each
year, or such shorter period as may be applicable to the initial and final
Fiscal Years if the Effective Date is not January 1, or the Initial Term
Expiration Date or the expiration date of any Renewal Term is not December 31.
FURNITURE, FIXTURES AND EQUIPMENT or FF&E - all furniture, furnishings
and equipment (excepting "Operating Equipment" as hereinafter defined) now or
hereafter located and installed in or about the Hotel that is used in the
operation thereof as a hotel in accordance with the standards set forth in this
Agreement and the Brand Standards, including, without limitation (i) office
furnishings and equipment including reservation system equipment, and property
management and accounting software and hardware; (ii) specialized hotel
equipment necessary for the operation of any portion of the Building as a hotel,
including equipment for kitchens, laundries, dry cleaning facilities,
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bars, restaurants, public rooms, commercial parking space, parking area, and
recreational facilities; and (iii) all other furnishings and equipment hereafter
located and installed in or about the Building which are used in the operation
of the Building as a hotel under the Brand in accordance with the Brand
Standards.
GROSS REVENUE - shall mean and refer to all revenues and income of any
nature derived directly or indirectly from the use or operation of the Hotel,
including without limitation: room sales; food and beverage sales from
restaurants operated by Manager in the Hotel; telephone, telegraph and telex
revenues; rental or other payments received pursuant to any lease or license
entered into by Leasehold Owner pursuant to Sections 4.04, 4.05, and 4.06 hereof
(but not the gross revenues of any such lessee, licensee or concessionaire); Net
Proceeds received by Leasehold Owner in connection with the sale of any property
pursuant to Section 4.04 hereof; and net cash proceeds actually received from
business interruption insurance in respect of the Hotel. Anything herein to the
contrary notwithstanding, Gross Revenue shall not include any of the following:
any interest or other earnings on the Capital Reserve Account or the Sweep
Account; any proceeds from the sale or other disposition of the Hotel or any
portion thereof (provided, with respect to property which has generated Net
Operating Income in any of the previous three Fiscal Years, the Investment Basis
is reduced by the amount of the gross sale price), or of any FF&E or other
assets utilized in connection therewith; any proceeds of fire and extended
coverage insurance or other insurance proceeds payable in connection with any
casualty loss or liability; any proceeds of condemnation awards or settlements;
any proceeds of financing or refinancing of the Hotel or any portion
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thereof; or any fuel, energy or other special surcharge collected from guests
for payment to third parties.
GUARANTOR - The Superior Owner of the Hotel.
GUARANTY - that certain Guaranty of Payment and Performance executed by
Guarantor for the benefit of Manager, dated of even date herewith and pursuant
to which Guarantor guarantees the obligations of Leasehold Owner under this
Agreement.
HOTEL - a collective term for the Leasehold Owner's interest in the
Site, the Building, the Furniture, Fixtures and Equipment, the Operating
Equipment and the Operating Supplies.
HOTEL LEASE - The lease or agreement between the Superior Owner and
Leasehold Owner with respect to the Hotel.
INCENTIVE MANAGEMENT FEE - The fee paid to Manager pursuant to Section
7.01(b).
INITIAL TERM - the period of time commencing on the Effective Date and
continuing thereafter until the Initial Term Expiration Date set forth on the
first page of this Agreement.
INVESTMENT BASIS - The aggregate investment in all Managed Hotels, as a
group, from time to time. The Investment Basis in the Managed Hotels as of
December 31, 2000, is shown on Exhibit E attached hereto and made a part hereof.
The Investment Basis for any Fiscal Year shall be the Investment Basis in the
Managed Hotels at the end of the immediately preceding Fiscal Year. In
determining Investment Basis at the end of any Fiscal Year, the Investment Basis
at the end of the prior Fiscal
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Year shall be (a) increased by (i) all expenditures on the applicable Managed
Hotels recorded and capitalized by Leasehold Owner for financial reporting
purposes during such Fiscal Year and (ii) the Investment Basis in any hotel
which first becomes a Managed Hotel during such Fiscal Year, and (b) reduced by
(i) the Investment Basis of any Managed Hotel sold during the Fiscal Year, (ii)
the Investment Basis in any hotel which ceases to be a Managed Hotel during such
Fiscal Year, other than as a result of a sale thereof, and (iii) depreciation
recorded by Leasehold Owner for financial reporting purposes during such Fiscal
Year solely with respect to the FF&E in the Managed Hotels.
LIQUIDATED DAMAGES - as defined in Section 15.05.
MANAGED HOTELS - at any given time, all of the hotels owned or leased,
in whole or in part, by FelCor or any of its Affiliates, successors or assigns,
including Leasehold Owner, and managed by Bass Hotels & Resorts, Inc. or its
Affiliates, successors or assigns, including Manager pursuant to an Agreement
incorporating this Schedule 1.
MINIMUM WORKING CAPITAL BALANCE - as defined in Section 6.03(a).
NET OPERATING INCOME OR NOI - the Adjusted Gross Revenue of the Hotel,
less all Operating Costs (exclusive of the Incentive Management Fee, if any,
included in the computation of Operating Costs, and less any special interest
expense charge as described in Section 5(c)(v) of the Leasehold Acquisition
Agreement dated March 30, 2001 by and among Bass (U.S.A.) Incorporated and
FelCor, and various subsidiaries and affiliates of both.
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NET PROCEEDS - with respect to the sale of any Managed Hotel or other
property, the purchase price paid less usual and customary closing costs, but
excluding any fee or commission payable to Leasehold Owner or an Affiliate of
Leasehold Owner.
NON-DEFAULTING PARTY - the party to this Agreement who is not
responsible for an Event of Default.
OPERATING BUDGET - the annual operating budget of the Hotel, covering a
Fiscal Year, as prepared by Manager in accordance with the Accounting Principles
and approved by Leasehold Owner pursuant to Section 6.02.
OPERATING COST(S) - The term "Operating Cost(s)" shall mean and refer
to the entire cost and expense of maintaining, operating and supervising the
operation of the Hotel. Operating Costs shall be the sum of such costs and
expenses as are normally charged as a cost of operation under the Accounting
Principles, including, without limitation:
(a) the cost of Operating Supplies;
(b) wages, salaries and employee fringe benefits, payroll taxes,
bonuses and other costs related to employees at the Hotel;
(c) advertising and promotional expenses incurred directly by the
Hotel, administrative and general expenses of the Hotel, the cost
of the Services Contribution under Article 7, the cost of
personnel training programs, charges for reservation-related
distribution systems (e.g., airline reservation systems), utility
and energy costs, operating licenses and permits, and grounds and
landscaping maintenance costs, and equipment rentals;
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(d) all expenditures made for maintenance and repairs to keep the
Hotel in good condition and repair;
(e) the Basic Management Fee;
(f) the cost of liability and workman's compensation insurance
premiums and deductible amounts applicable to the Hotel;
(g) reasonable reserves for uncollectible accounts receivable as set
forth in the Operating Budgets; and
(h) credit card and travel agent commissions.
OPERATING EQUIPMENT - non-consumable equipment and supplies required
for the operation of the Hotel, including chinaware, glassware, linens,
silverware, utensils, uniforms, and all other non-consumable supplies, whether
similar or dissimilar in nature to the items listed herein.
OPERATING SUPPLIES - food and beverages and other consumable items used
in the operation of a hotel, such as fuel, soap, cleaning materials, matches,
stationery, brochures, folios and all other items, whether similar or dissimilar
in nature to the items listed herein.
OWNERSHIP COSTS - there shall be excluded from Operating Costs the
following, which shall be defined as "Ownership Costs":
(a) Depreciation of the Building, Furniture, Fixtures and Equipment
and Operating Equipment;
(b) Rental payments pursuant to a lease, the Hotel Lease, any ground
lease, or any other equipment lease or lease financial arrangement;
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(c) Debt Service;
(d) Property taxes and assessments;
(e) expenditures under Section 5.07, including those for Capital
Replacements;
(f) audit, legal and other professional or special fees not normally
chargeable to the Hotel under the Accounting Principles;
(g) premiums for fire, extended coverage and business interruption
insurance;
(h) the Incentive Management Fee provided in Section 7.01(b); and
(i) such other costs or expenses that are normally treated as capital
expenditures under the Accounting Principles.
PRIORITY CLUB CHARGE - the fee paid to Manager pursuant to Section
7.02(b).
RENEWAL NOTICE - as defined in Section 2.03(b).
RENEWAL TERM - as defined in Section 2.03.
RENEWAL TERM OPTION PAYMENT - as defined in Section 2.03(b).
REPLACEMENT INVESTMENT - as defined in Section 15.04(b).
REPLACEMENT INVESTMENT BALANCE - as defined in Section 15.04(b).
REPLACEMENT MANAGEMENT FEE - as defined in Section 15.04(d).
RESERVATION SYSTEM - the proprietary system owned by an Affiliate of
Bass Hotels & Resorts, Inc. currently known as Holidex, through which Affiliates
of that group (including Manager) have access to, receive and may schedule guest
reservations,
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including toll free telephone numbers and call centers for hotels which operate
under the Service Marks.
ROOMS REVENUE - all revenue derived from the rental of guest rooms in
the Hotel determined in accordance with the Accounting Principles less: (i) any
gratuities or service charges added to a customer's bill; (ii) any credits or
refunds made to customers, guests or patrons; (iii) any credit card charge
backs; (iv) any sums and credits (other than those already excluded from Gross
Revenues) received by Leasehold Owner for lost or damaged goods or merchandise;
and (v) any sales taxes, excise taxes, use taxes, gross receipts taxes,
admission taxes, entertainment taxes, tourist taxes or charges, and similar
charges required by law to be collected from patrons or guests, or as part of
the sale price for goods, services or entertainment, and remitted to any
governmental authority.
SERVICES CONTRIBUTION - the fee paid to Manager pursuant to Section
7.02(a).
SITE - the parcel or parcels of real estate more particularly described
on Exhibit A hereto and made a part hereof.
SUPERIOR OWNER - as defined on the first page of this Agreement.
SWEEP ACCOUNT - the bank account(s) described in Section 6.03(a).
SYSTEM MARKS - all service marks, trademarks, copyrights, trade names,
logo types, commercial symbols, patents, source code, software, proprietary
rights or other similar rights or registrations now or hereafter held or applied
for by Manager or any Affiliate of Manager in connection with the
Inter-Continental, Crowne Plaza, Holiday Inn, Holiday Express or Staybridge
Suite Brands.
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TECHNOLOGY FEE - The fee paid to Manager pursuant to Section 7.04.
TESTING DATE - as defined in Section 15.04(e).
TEST VALUE - as defined in Section 2.04.
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EXHIBIT A
SITE LEGAL DESCRIPTION
[TO BE INSERTED]
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EXHIBIT B
FORM OF OPERATING STATEMENT
[TO BE INSERTED]
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EXHIBIT C
MINIMUM INSURANCE COVERAGES
Commercial property insurance written on all-risk form, including, but not
limited to, the following on a full replacement cost basis: fire,
explosion, lightning, windstorm, hail, smoke, riot or civil commotion,
vandalism, sprinkler leakage, flood, boiler and machinery. Coverage
shall include Business Interruption and Extra Expense.
Commercial general liability coverage with worldwide jurisdiction (including
coverage for liquor liability, product liability, completed operations,
contractual liability and Comprehensive Automobile liability in an
amount not less than $50,000,000 per occurrence/per location.
Workers' Workers' Compensation and Employer's Employer's Liability.
Comprehensive Crime coverage in an amount equal to not less than $1,000,000.
All coverages to be written on an occurrence form.
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EXHIBIT D
TO BE PROVIDED BY BHR
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EXHIBIT E
Investment Basis for
Managed Hotels as of 12/31/00
{to be inserted}
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EXHIBIT F
CONTENTS OF ANNUAL BUDGET SUBMISSIONS
The proposed Capital Replacements Budget shall contain at a minimum:
(1) A description of the item or task;
(2) A description of its location within the Hotel;
(3) Identification of the requesting department;
(4) An estimated cost of the project or task, including quantities, unit
prices, freight, fees and expenses; and
(5) An assignation of the priority of the request.
The projection of revenues and marketing plan shall contain at a minimum:
(1) A local market assessment, showing the Hotel's position with respect
to identified competitive hotels including actual and projected
penetration, and anticipated additions to supply;
(2) A summary of the anticipated business climate, existing accounts and
targeted accounts, the historical and projected market mix of the
hotel's business with risk and assumption summaries and pricing
philosophies by segment;
(3) A sales plan with key action steps;
(4) Proposed monthly operating revenue for the ensuing fiscal year in
spreadsheet format, including comparisons to prior year(s), and
(5) Summaries of market trends and performance targets.
The projection of expenses shall contain anticipated monthly costs and expenses
by department and by line item, integrated in spreadsheet format with the
monthly operating revenue projections and showing comparisons to prior year(s).
The parties may alter the contents or format of these submissions upon
mutual consent.
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EXHIBIT G
Description of Accounting Services
Manager agrees to perform centralized accounting services to Leasehold Owners'
hotels governed by this agreement, and Leasehold Owner agrees to pay Manager the
Accounting Fee in consideration for these services.
These services include the provision at it own cost by Manager of a central
accounting department in its corporate office and accounting systems available
to Leasehold Owner's hotels at no additional charge, including maintenance and
upgrade of these systems as required.
The central accounting department in Manager's corporate office performs the
following functions on behalf of the hotels:
o Preparation of journal entries
o Month end close
o Sales and use tax preparation and filing (but not including third-party and
out-of-pocket expenses in connection with any audit thereof)
o Bank reconciliations
o Balance Sheet Reconciliations
o Cash flow reporting
o Preparation of Financial Statements and other financial reporting.
FINANCIAL REPORTING
Various financial reports are distributed to hotel operations and to Leasehold
Owner, providing up-to-date performance information on Leasehold Owner's hotels
enabling performance comparison across the estate.
FORECASTING AND BUDGETING
The hotels are provided with a centralized forecasting and budgeting model that
includes historical comparisons and future budget assumptions to facilitate
central review and analysis of the forecasts and budgets.
ASSISTANCE IN RECRUITMENT AND TRAINING OF ACCOUNTING STAFF:
Manager's central accounting department assists hotels with recruitment,
selection and training of accounting management personnel.
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ACCOUNTS PAYABLE:
o The hotels are provided with remote access to Manager's central Accounts
Payable system for entry, review and approval of invoices.
o Manager performs centrally maintenance of this system, set-up of new
vendors and production and mailing of payments at its own cost.
o Manager also provides support to the hotel personnel and all vendors
through their 1-800 customer service number, annual 1099 reporting, and
entertainment and business expense reporting.
o Manager's Accounts Payable system also enables consolidated billing of
hotels and payment to vendors.
PAYROLL:
o Hotel employee hours are maintained through an electronic time clock that
interfaces with the Manager's central payroll system.
o Manager processes payroll, produces and mails checks centrally at its own
cost.
o Manager's payroll department also generates annual W-2s and ensures that
FSLA and IRS requirements are satisfied
CASH MANAGEMENT SERVICES:
Manager provides central management of cash including daily concentration and
investment of funds and banking relationships that minimize the total cost of
funds held by maximizing interest income and minimizing bank charges.
CREDIT AND BANKRUPTCIES:
Manager centrally coordinates and processes bankruptcy filings to collect hotel
receivables where necessary.
INTERNAL AUDITS:
Manager shall include the Managed Hotels in its program of periodic internal
audits in accordance with Manager's own Internal Audit policies and procedures.
Manager will provide copies of such reports on the Managed Hotels to Leasehold
Owner. It is understood and agreed by Leasehold Owner that all such internal
audit reports are prepared solely for management use of Manager and its
affiliates and are not intended to be relied upon by any other person, including
Leasehold Owner and its affiliates. Leasehold Owner may not distribute any
internal audit report to any person other than Leasehold Owner's affiliates.
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EXHIBIT H
[TO BE PROVIDED BY FELCOR]
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EXHIBIT I
CALCULATION OF LIQUIDATED DAMAGES
[to be provided by Felcor]