EXHIBIT 10.5
FORM OF
MANAGEMENT AGREEMENT
for
FELCOR'S EMBASSY SUITES BRANDED HOTELS
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ARTICLE I
THE HOTEL; OTHER RELATED AGREEMENTS ....................................................... 1
Section 1.01. The Hotel ................................................................... 1
Section 1.02. The Other License and Management Agreements ................................. 1
ARTICLE II
TERM ...................................................................................... 1
Section 2.01. Term ........................................................................ 1
ARTICLE III MANAGER'S OBLIGATIONS
Section 3.01. Manager's Obligations .................................................... 1
(a) Costs of the Partnership and Lessee ......................................... 2
(b) Personnel ................................................................... 2
(c) Hotel Policies .............................................................. 3
(d) Bank Accounts ............................................................... 3
(e) Operating Budgets ........................................................... 3
(f) Operating Statement ......................................................... 5
(g) Capital Budgets ............................................................. 5
(h) General Maintenance; Non-Capital Replacements ............................... 6
(i) Operating Equipment ......................................................... 6
(j) Operating Supplies .......................................................... 6
(k) Accounting Standards ........................................................ 6
(l) Marketing and Advertising ................................................... 6
(m) Permits and Licenses ........................................................ 6
(n) Lessee Meetings ............................................................. 7
(o) Insurance ................................................................... 7
(p) Lease and Concession Agreements ............................................. 7
(q) [Intentionally Deleted] ..................................................... 7
(r) Taxes and Assessments ....................................................... 7
(s) Compliance with Law ......................................................... 7
(t) Satisfaction of Obligations ................................................. 7
(u) Requests for Information .................................................... 8
(v) Discounts and Rebates ....................................................... 8
(w) Tax and Insurance Accruals .................................................. 8
ARTICLE IV
LESSEE'S OBLIGATIONS ...................................................................... 8
Section 4.01. Lessee's Obligations ........................................................ 8
(a) License Agreement ........................................................... 8
(b) Licenses and Permits ........................................................ 8
(c) Operating Funds ............................................................. 8
(d) Capital Funds ............................................................... 9
(e) Payments to Manager ......................................................... 10
(f) Lessee's Representative ..................................................... 10
(g) Lessee's Right of Inspection and Review ..................................... 11
(h) Quiet and Peaceable Operation ............................................... 11
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ARTICLE V
MANAGEMENT FEE ............................................................................ 11
Section 5.01. Management Fee .............................................................. 11
ARTICLE VI
CLAIMS AND LIABILITY ...................................................................... 11
Section 6.01. Claims and Liability ........................................................ 11
Section 6.02. Survival .................................................................... 12
ARTICLE VII
CLOSURE, EMERGENCIES AND DELAYS ........................................................... 12
Section 7.01. Events of Force Majeure ..................................................... 12
Section 7.02. Emergencies ................................................................. 12
ARTICLE VIII
CONDEMNATION AND CASUALTY ................................................................. 13
Section 8.01. Condemnation ................................................................ 13
Section 8.02. Casualty .................................................................... 13
ARTICLE IX
DEFAULT; TERMINATION RIGHTS ............................................................... 13
Section 9.01. Lessee's Default ............................................................ 13
Section 9.02. Manager Default ............................................................. 14
Section 9.03. [Intentionally deleted.] .................................................... 15
Section 9.04. Delays ...................................................................... 15
Section 9.05. Manager's Right to Terminate Upon Sale ...................................... 15
Section 9.06. Lessee's Special Rights of Termination ...................................... 15
Section 9.07. Transition Upon Termination ................................................. 16
ARTICLE X
APPLICABLE LAW AND ARBITRATION ............................................................ 16
Section 10.01. Applicable Law ............................................................. 16
Section 10.02. Arbitration of Financial Matters ........................................... 17
Subsection 10.02.1. Matters to be Submitted to Arbitration ....................... 17
Subsection 10.02.2. The Accountants .............................................. 17
Subsection 10.02.3. Procedures ................................................... 17
Section 10.03. Performance During Disputes ................................................ 18
ARTICLE XI
GENERAL PROVISIONS ........................................................................ 18
Section 11.01. Authorization .............................................................. 18
Section 11.02. Relationship ............................................................... 18
Section 11.03. Manager's Contractual Authority in the Performance of this Agreement ....... 18
Section 11.04. Further Actions ............................................................ 18
Section 11.05. Successors and Assigns ..................................................... 19
Section 11.06. Notices .................................................................... 19
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Section 11.07. Documents .................................................................. 19
Section 11.08. Defense .................................................................... 19
Section 11.09. Waivers .................................................................... 20
Section 11.10. Changes .................................................................... 20
Section 11.11. Captions ................................................................... 20
Section 11.12. Severability ............................................................... 20
Section 11.13. Interest ................................................................... 20
Section 11.14. Reimbursement .............................................................. 20
Section 11.15. Agreement Not an Interest in Real Property ................................. 21
Section 11.16. Set Off .................................................................... 21
Section 11.17. Third Party Beneficiary .................................................... 21
Section 11.18. Brokerage .................................................................. 21
Section 11.19. Survival of Covenants ...................................................... 21
Section 11.20. Estoppel Certificate ....................................................... 22
Section 11.21. Other Agreements ........................................................... 22
Section 11.22. Periods of Time ............................................................ 22
Section 11.23. Preparation of Agreement ................................................... 22
Section 11.24. Exhibits ................................................................... 22
Section 11.25. Counterparts ............................................................... 22
Section 11.26. Attorneys' Fees and Other Cost ............................................. 22
Section 11.27. Entire Agreement ........................................................... 22
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MANAGEMENT AGREEMENT
This Management Agreement (the "Agreement") is made and entered into as
of the ______________________ ("Effective Date"), by and between ______________
____________________________________________, with offices located at 545 East
John Carpenter Freeway, Suite 1300, Irving, TX 75062-3933 ("Lessee"), and ______
____________________________________, with offices located at ______________
______________________________ ("Manager").
ARTICLE I
THE HOTEL; OTHER RELATED AGREEMENTS
SECTION 1.01. THE HOTEL. The subject matter of this Agreement is the
management by Manager of the "Hotel," as defined in the Embassy Suites License
Agreement attached hereto as Exhibit "A" (the "License Agreement"), and located
at __________________________________________. The Hotel is owned by FelCor
Suites Limited Partnership, a Delaware limited partnership (the "Partnership"),
and leased to Lessee pursuant to a lease entered into between the Partnership
and Lessee covering the Hotel dated as of _____________ (hereinafter the
"Percentage Lease"). The License Agreement shall exclusively govern Lessee's
right to use the Embassy Suites "System" (as defined in the License Agreement)
in connection with the operation of the Hotel; the Partnership shall have no
right to use the Embassy Suites "System" except as expressly set forth in the
License Agreement. Lessee hereby expressly acknowledges that neither Lessee nor
the Partnership (Lessee and the Partnership are sometimes referred to herein
collectively as "Owners") shall derive any rights in or to the use of the name
________________ or the Embassy Suites System from this Agreement.
SECTION 1.02. THE OTHER LICENSE AND MANAGEMENT AGREEMENTS. Manager or
its predecessor-in-interest, Embassy Suites, Inc., a Delaware corporation, has
entered into other management agreements (the "Other Management Agreements") and
other license agreements (the "Other License Agreements") in relation to those
hotels listed on Exhibit "E" hereto (the "Other Hotels"). The Partnership or an
affiliate of the Partnership entered into percentage leases with Lessee or an
affiliate of Lessee covering the Other Hotels.
ARTICLE II
TERM
SECTION 2.01. TERM. The term shall commence as of the date the
Partnership enters into the Percentage Lease with Lessee covering the Hotel (the
"Commencement Date") and, unless earlier terminated in the manner provided
herein, shall continue for the term of years set forth in Exhibit "B" as
measured from the Commencement Date ("Term").
ARTICLE III
MANAGER'S OBLIGATIONS
SECTION 3.01. MANAGER'S OBLIGATIONS. Manager, on behalf of Lessee and
at Lessee's expense as provided for in this Agreement, shall direct the
operation of the Hotel in accordance
shall be exclusively responsible for directing the day-to-day activities of the
Hotel and for establishing all policies and procedures relating to the
management and operation of the Hotel, subject to the terms and conditions of
this Agreement and the License Agreement. Except as herein specifically
otherwise provided, all cost(s) and expense(s) incurred by Manager in connection
with the performance of its obligations hereinafter set forth shall be Operating
Costs and accordingly shall be paid from the Bank Account as hereinafter defined
in Section 3.01(d) or the Operating Deficit Account as hereinafter defined in
Section 4.01(c), as the case may be. Manager, during the Term, shall have the
following duties and obligations:
(a) Costs of the Partnership and Lessee. Pursuant to the terms of the
Percentage Lease, the Partnership has agreed to pay, among other things (i)
land, building and personal property taxes and assessments applicable to the
Hotel, (ii) premiums and charges for the casualty insurance coverages specified
on Exhibit "D", (iii) expenditures for capital replacements and (iv)
expenditures for maintenance and repair of underground utilities and structural
elements of the Hotel (collectively, "Partnership Costs"). To the extent this
Agreement obligates or authorizes Manager to pay any such Partnership Costs,
Manager shall pay such Partnership Costs on behalf of the Partnership to the
extent of funds in the Bank Account(s), the Operating Deficit Account or the
Reserve Fund (as such terms are defined below) and the Partnership and Lessee
shall make such adjustments and payments to each other as may be necessary from
time to time to take into account any such payments. Manager shall have no duty,
obligation or liability to the Partnership or Lessee (i) to make any
determination as to whether any expense required to be paid by Manager hereunder
is a Partnership Cost or a cost of Lessee, (ii) to make any determination as to
whether funds in the Bank Account(s), the Operating Deficit Account or the
Reserve Fund belong to the Partnership or Lessee or (iii) to require that
Partnership Costs be paid from funds which can be identified as belonging to the
Partnership, or that other costs and expenses required to be paid by Lessee be
paid from funds which can be identified as belonging to Lessee; it being the
intent of the parties to this Agreement that Lessee and the Partnership shall
look only to each other and not to Manager with respect to moneys that may be
owed one to the other as a consequence of Manager's performance under this
Agreement.
(b) Personnel. Manager shall employ all personnel working at the Hotel
(excluding any personnel employed by a lessee or concessionaire of space located
in the Hotel) ("Hotel Personnel"). Manager (except to the extent provided below)
shall be the sole judge of the fitness and qualification of all Hotel Personnel
and shall have the sole and absolute right to hire, supervise, order, instruct,
discharge and determine the compensation, benefits and terms of employment of
all Hotel Personnel. In exercising such discretion, however, Manager shall use
all reasonable efforts to hire the most qualified and competent personnel
available, subject to budgetary and other constraints. Manager shall also have
the right to use employees of Manager, Manager's parent and subsidiary and
affiliated companies not located at the Hotel to provide services to the Hotel
("Off-Site Personnel") and to be reimbursed for travel and other out-of-pocket
expenses (excluding any portion of such Off-Site Personnel's compensation or
other general expenses) incurred by Off-Site Personnel in providing services for
the Hotel; provided, however, travel and out-of-pocket expenses of officers of
Manager and its parents and affiliates shall not be reimbursable. All expenses,
costs (including, but not limited to, salaries, benefits and severance pay, to
the extent provided for by Manager as part of its standard employment policies),
liabilities and claims which are related to Hotel Personnel and all
out-of-pocket expenses incurred by Off-Site Personnel in providing services to
the Hotel that are reimbursed to
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Manager shall be Operating Costs; provided, however, with respect to any moving
expenses for any Hotel Personnel who has not been an employee at the Hotel for
at least twenty-four (24) months, only that portion of such moving expenses
equal to Lessee's Share (as hereinafter defined) shall constitute Operating
Costs and the balance shall be paid by Manager and/or such employee. "Lessee's
Share" shall mean a fraction having twenty-four (24) as its denominator and the
number of months such person has been one of the Hotel Personnel as its
numerator. All expenses for Off-Site Personnel shall be included as a separate
category or item of the Operating Budgets or shall otherwise be approved by
Lessee.
Manager agrees that it will consult with Lessee regarding the hiring,
transferring, or terminating of the General Manager and Director of Sales for
the Hotel. Lessee shall be afforded an opportunity to review the resumes of, and
to interview the candidates for these positions that Manager deems to be the
best candidate(s) for each position. Manager and Lessee shall consult with each
other concerning such decisions, and Manager agrees to give serious
consideration to the views of Lessee, but in the event Manager and Lessee are
not able to reach a mutually agreeable decision, the decision of Manager shall
control.
(c) Hotel Policies. Manager shall determine the terms of guest
admittance to the Hotel, establish room rates, and use of rooms for commercial
purposes, subject to the right of Lessee to identify from time to time certain
individuals who shall be entitled to receive complimentary rooms as guests of
Lessee.
(d) Bank Accounts. Manager shall open and administer the Hotel's bank
accounts in Lessee's name or the name of the Hotel at such banks as Manager and
Lessee shall mutually agree ("Bank Account(s)"). All sums received from the
operation of the Hotel and, except as otherwise provided in Section 4.01(c)
below, all items paid by Manager arising by virtue of Manager's operation of the
Hotel shall pass through the Bank Account(s). Manager's designees shall be
exclusively authorized to administer and make withdrawals from the Bank
Account(s). Each calendar month, Manager, on behalf of Lessee or the
Partnership, as the case may be, shall disburse funds from the Bank Account(s)
to the extent available for the items described on Exhibit "B." The same Bank
Account(s) may be used for the Hotel that are also used for one or more of the
Other Hotels and any sums deposited in such Bank Account(s) may be commingled;
provided, however, no funds from any other hotel may be commingled with sums
deposited in the Bank Account(s) from the operation of the Hotel or any Other
Hotel.
(e) Operating Budgets. The budget for calendar year 1997 has been
prepared by Manager and provided to the Partnership (the "Operating Budget").
Manager, not less than forty-five (45) days prior to the commencement of each
succeeding full or partial calendar year, shall submit to Lessee, for Lessee's
approval, a proposed Operating Budget for the ensuing full or partial calendar
year, as the case may be. Each Operating Budget shall be accompanied by, and
shall include, a business plan which shall describe business objectives and
strategies for the period covered by the Operating Budget. The business plan
shall include without limitation an analysis of the market area in which the
Hotel competes, a comparison of the Hotel and its business with competitive
hotels, an analysis of categories of potential guests, and a description of
sales and marketing activities designed to achieve and implement identified
objectives and strategies. The Partnership shall not have the right to approve
any Operating Budget.
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Lessee's approval of the Operating Budget shall not be unreasonably
withheld or delayed. Manager shall meet with Lessee to discuss the proposed
Operating Budget and Lessee shall provide a written response to Manager
approving or disapproving a proposed Operating Budget within twenty (20) days
after the date Manager and Lessee have met to discuss the proposed Operating
Budget. Lessee shall review the Operating Budget on a line-by-line basis. To be
effective, any notice which disapproves a proposed Operating Budget must contain
specific objections in reasonable detail to individual line items. If Lessee
fails to provide an effective notice disapproving a proposed Operating Budget
within such 20-day period, the proposed Operating Budget shall be deemed to be
approved.
If the proposed Operating Budget contains disputed budget item(s),
Lessee and Manager agree to cooperate with each other in good faith to resolve
the disputed or objectionable proposed item(s). In the event (i) Lessee and
Manager are not able to reach mutual agreement concerning any disputed or
objectionable item within a period of twenty (20) days after the date Lessee
provides written notice of its objections to Manager, and (ii) the amount in
dispute is in excess of fifty thousand dollars ($50,000), then either party
shall be entitled to submit the dispute to arbitration in accordance with the
provisions of Article X. If Lessee and Manager are unable to resolve the
disputed or objectionable matter(s) prior to the commencement of the applicable
calendar year, the undisputed portions of the proposed Operating Budget shall be
deemed to be adopted and approved. The corresponding disputed line item(s)
contained in the Operating Budget for the preceding calendar year shall be
adjusted as set forth herein and shall be substituted in lieu of the disputed
item in the proposed Operating Budget. Those line items which represent variable
costs from year to year which are in dispute shall be determined by increasing
the preceding calendar year's corresponding line items by an amount determined
by Manager which does not exceed the Consumer Price Index for All Urban
Consumers published by the Bureau of Labor Statistics of the United States
Department of Labor, U.S. City Average, all items (1984-1986 = 100) for the
calendar year prior to the calendar year with respect to which the adjustment to
the line item is being calculated or any successor or replacement index thereto.
The resulting Operating Budget obtained in accordance with the preceding
sentence shall be deemed to be the Operating Budget in effect until such time as
Manager and Lessee have resolved the item(s) objected to by Lessee.
Manager may revise the Operating Budget from time to time, as
necessary, to reflect any unpredicted significant changes, variables or events
or to include significant, additional, unanticipated items of revenue and
expense. Any such revision shall be submitted to Lessee for approval, which
approval shall not be unreasonably withheld, delayed or conditioned.
Manager may reallocate part or all of the amount budgeted with respect
to any line item to another line item in the same Department (as hereinafter
defined), but may not reallocate from one Department to another without Lessee's
consent which shall not be unreasonably withheld or delayed. The term
"Department" shall mean and refer to those general divisional categories shown
in the Operating Budget (r.g., Guest Services Department or Administration
Department), but shall not mean or refer to subcategories (g.g., linen
replacement or uniforms) appearing in a divisional category. In addition, in the
event actual Adjusted Gross Revenues (as defined on Exhibit "C" hereto) for any
calendar period are greater than those provided for in the Operating Budget, the
amounts approved in the Operating Budget for suite maintenance, guest services,
food and beverage, telephone, utilities, marketing and hotel repair and
maintenance for any
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calendar month shall be automatically deemed to be increased to an amount that
bears the same relationship (ratio) to the amounts budgeted for such items as
actual Adjusted Gross Revenue for such month bears to the projected Adjusted
Gross Revenue for such month. Lessee acknowledges that the Operating Budget is
intended only to be a reasonable estimate of the Hotel's income and expenses for
the ensuing calendar year. Manager shall not be deemed to have made any
guarantee, warranty or representation whatsoever in connection with the
Operating Budget.
(f) Operating Statement. Manager shall prepare and furnish to Lessee,
the following statements: (i) within fifteen (15) days after the end of each
calendar month (Manager shall use all reasonable efforts to provide such reports
within ten (10) days after the end of each calendar month, but in any respect
not later than fifteen (15) days) a detailed profit and loss statement setting
forth the results of the Hotel's operations for such calendar month and the
calendar year to date, with a comparison to the then current Operating Budget;
and a balance sheet setting forth the results of the Hotel's operations for the
calendar year to date and the previous calendar year; (ii) within twenty (20)
days after the end of each calendar quarter, a statement of Income Before
Lessee's Overhead Expenses (as defined on Exhibit "C" hereto), including Income
Before Lessee's Overhead Expenses from Hotel operations calendar year to date:
(iii) within twenty (20) days after the end of each calendar year, a balance
sheet together with a comparison to the previous calendar year, a related
statement of profit and loss (including all supporting departmental schedules of
revenues and expenses), together with a comparison to the previous calendar
year, and having annexed thereto a computation in reasonable detail of the Basic
Management Fee and the Incentive Management Fee for such calendar year; and (iv)
such other additional statements, computations and reports as Lessee shall
reasonably request.
(g) Capital Budgets. The capital budget for ____ has been prepared by
Manager and provided to the Partnership (the "Capital Budget"). Manager, not
less than forty-five (45) days prior to the commencement of each succeeding
calendar year, shall submit to Lessee a recommended Capital Budget for the
ensuing full or partial calendar year, as the case may be, for furnishings,
equipment, and Hotel capital replacement items as shall be required to
operate the Hotel in accordance with the standards referred to in the License
Agreement. Manager, to the extent it is able to do so without compromising
compliance with the minimum standards required under the terms of the License
Agreement, shall take into consideration the amount of funds available to pay
for the proposed capital expenditures. Manager shall also identify for Lessee
those projects that are required to meet the minimum standards of the License
Agreement and give priority to such items. Lessee and Manager shall meet to
discuss the proposed Capital Budget and Lessee shall be required to make
specific written objections to a proposed Capital Budget in the manner and
within the same time periods specified in Section 3.01(e) with respect to an
Operating Budget. Lessee agrees not to unreasonably withhold or delay its
consent. Manager, at Lessee's expense, shall be responsible for supervising the
design, installation and construction of alterations or additions to, or
rebuilding or renovation of, the Hotel, including any additions to Hotel
furnishings and equipment (collectively, "Capital Improvements"). Lessee shall
have the right to approve and inspect Capital Improvements and any mortgagee
having a first lien on Lessee's leasehold estate in the Hotel ("Lessee's
Mortgagee") or a first lien on the Partnership's fee estate in the Hotel (the
"Partnership's Mortgagee") shall also have any right of approval or inspection
of the Capital Improvements set forth in the mortgage, deed of trust or other
loan documents (collectively, the "Financing Documents") (but only if and to the
extent the
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Manager has been provided with copies of the Financing Documents). The
Partnership shall not have the right to approve any Capital Budget.
After a Capital Budget has been adopted, it shall be subject to review
and modification in the event unpredicted or unanticipated capital expenditures
are required during any calendar year due to an emergency situation or
otherwise. Manager and Lessee each agree not to unreasonably withhold or delay
its consent to a proposed modification of a Capital Budget. Any amendment that
is mutually agreed upon shall be set forth in writing and signed by both
parties.
(h) General Maintenance: Non-Capital Replacements. Manager shall
supervise the maintenance, repair and replacement of fixtures, furnishings and
equipment regardless whether such expenditures are expensed or capitalized and
amortized.
(i) Operating Equipment. Manager shall select and purchase all
operating equipment for the Hotel such as linens, utensils, uniforms and other
similar items.
(j) Operating Supplies. Manager shall select and purchase all operating
supplies for the Hotel such as food, beverages, fuel, soap, cleansing items,
stationery and other consumable items.
(k) Accounting Standards. Manager shall maintain the books and records
reflecting the operations of the Hotel in accordance with the accounting
practices of Manager in conformity with generally accepted accounting principles
("GAAP") consistently applied. The Hotel level generated accounting records
reflecting detailed day-to-day transactions of the Hotel's operations shall be
kept by Manager at the Hotel or at Manager's corporate headquarters, or at such
other location as Manager shall reasonably determine. Manager agrees upon
request to cooperate in good faith with Lessee and its representatives to
facilitate an examination or audit of such books and records; Lessee agrees that
any such examination or audit of such books and records shall be conducted by
one of the "Big Six" firms of certified public accountants.
(l) Marketing and Advertising. Manager shall advertise and promote the
Hotel in coordination with the sales and marketing programs of the Manager and
other Embassy Suites hotels. Manager may cause the Hotel to participate in sales
and promotional campaigns and activities involving complimentary rooms which are
intended to benefit the business of the Hotel. Manager, in marketing and
advertising the Hotel, shall have the right to use marketing and advertising
services of Off-Site Personnel.
(m) Permits and Licenses. Manager shall obtain and maintain all
licenses and permits that are required to be held in its name that are necessary
to enable Manager to operate the Hotel in accordance with the terms of this
Agreement and the License Agreement. In addition, Manager shall upon request
cooperate with and assist Lessee in obtaining the various permits and licenses
that are required to be held in the name of either or both of Lessee and the
Partnership that are necessary to enable Manager to operate the Hotel. Manager
shall use all reasonable efforts, to the extent within its control, to comply
with the terms and conditions of all licenses and permits issued with respect to
the Hotel and the business conducted at the Hotel, including without limitation
the terms and conditions of the License Agreement.
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(n) Lessee Meetings. A representative of Manager's corporate staff and
the Hotel's general manager shall meet with Lessee's Representative (as
hereinafter defined) quarterly to review and discuss the previous and future
quarter's operating statement, cash flow, budget, capital expenditures,
important personnel matters and the general concerns of Lessee and Manager
("Quarterly Lessee's Meeting"). Except to the extent otherwise mutually agreed
upon by Lessee and Manager, all Quarterly Lessee's Meetings shall be held at the
Hotel.
(o) Insurance. Manager shall procure and maintain throughout the Term
the insurance coverages set forth on Exhibit "D".
(p) Lease and Concession Agreements. Manager shall consult with Lessee
to determine the desirability of entering into lease and concession agreements
to provide activities or services, including the food and beverage facilities,
for the benefit of the Hotel and its guests. In situations in which it is
mutually determined to be desirable to enter into lease or concession
agreements, Manager shall assist Lessee to the extent requested in identifying
suitable lessees and concessionaires, negotiating mutually agreeable lease and
concession agreements, and monitoring the performance of the lessees and
concessionaires under the agreements. The revenues and income generated by a
lessee or concessionaire shall be excluded from Gross Revenues, but Gross
Revenues shall include all rental or other payments made to Lessee pursuant to
the provisions of such agreements.
(q) [Intentionally Deleted]
(r) Taxes and Assessments. Manager and/or Manager's agent shall
annually review and submit all real estate and personal property taxes and all
assessments affecting the Hotel to Lessee (who shall provide copies thereof to
the Partnership) and shall recommend payment thereof or appeal therefrom.
Manager shall file all personal property tax returns for the Hotel.
(s) Compliance with Law. Manager shall use all reasonable efforts to
comply with all laws, ordinances, regulations and requirements of any federal,
state, or municipal government that are applicable to the use and operation of
the Hotel, as well as with all orders and requirements of the local fire
department, of which Manager has knowledge; provided, however, that Lessee shall
have the right to contest by proper legal proceedings, the validity of any such
law, ordinance, rule, regulation, order, decision or requirement and may
postpone compliance therewith to the extent and in the manner provided by law
until final determination of any such proceedings. Manager promptly shall notify
Lessee in writing of all notices of legal requirements applicable to the Hotel
that are received by Manager.
(t) Satisfaction of Obligations. Manager agrees to pay, when due, all
amounts due under any equipment leases and all other contracts and agreements
relating to the operation or maintenance of the Hotel, but solely from and to
the extent that funds are available in the Bank Account(s), and to comply with
all other covenants and obligations contained in the equipment leases and all
utility contracts, concession agreements, leases for retail or commercial space
and service and maintenance contracts, to the extent that compliance therewith
is within the reasonable control of Manager by reason of its management and
operation of the Hotel pursuant to this. Manager shall have no obligation to
perform or comply with any obligations of (i) the Partnership or Lessee under
the Percentage Lease or (ii) the Partnership under any Financing
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Documents relating to the Partnership's Mortgagee (other than any right to
approve or inspect Capital Improvements contemplated by paragraph (g) above).
(u) Requests for Information. Manager shall respond, with reasonable
promptness, to any information requests by Lessee's Mortgagee in accordance with
the Lessee's Financing Documents, to the extent such information is required to
be furnished by Manager to Lessee pursuant to this Agreement. Any additional
information or reports requested by Lessee's Mortgagee shall be provided by
Manager only if Lessee so directs Manager in writing and, to the extent such
information or reports are not being prepared for Lessee in the ordinary course
of business pursuant to this Agreement Lessee agrees to pay the reasonable
expenses of preparing such information and reports.
(v) Discounts and Rebates. Lessee shall be credited with the full
amount of any discounts, rebates or commissions obtained by Manager in respect
of any purchases made by Manager for or on behalf of Lessee pursuant to this
Agreement.
(w) Tax and Insurance Accruals. If requested by Lessee, Manager shall
accrue and set aside on a monthly basis Gross Revenues for the payment of real
estate taxes and insurance premiums, and such accruals shall be deposited in a
separate account and not commingled with other operating accounts for Hotel
operations generally. If and to the extent Lessee and Manager agree in writing,
the tax and insurance accruals on deposit may be used from time to time to pay
Operating Costs if Adjusted Gross Revenues are not otherwise sufficient to pay
such Operating Costs.
ARTICLE IV
LESSEE'S OBLIGATIONS
SECTION 4.01. LESSEE'S OBLIGATIONS. During the Term, Lessee shall have
the obligations set forth below:
(a) License Agreement. Lessee shall comply with all the terms and
conditions of the License Agreement (specifically including, but not limited to,
Licensee's obligation to pay the fees, charges and contributions set forth in
paragraph 3.C of the License Agreement) and keep the License Agreement in full
force and effect from the Commencement Date through the remainder of the Term.
Nothing in this Agreement shall be interpreted in a manner which would relieve
Lessee of any of its obligations under the License Agreement.
(b) Licenses and Permits. Lessee shall obtain and maintain (or shall
cause to be obtained and maintained), with Manager's assistance and cooperation,
all governmental permissions, licenses and permits required to be held in either
Lessee's or the Partnership's name that are necessary to enable Manager to
operate the Hotel in accordance with the terms of this Agreement and the License
Agreement.
(c) Operating Funds. Lessee shall provide all funds necessary to enable
Manager to manage and operate the Hotel in accordance with the terms of this
Agreement and the License Agreement. Lessee agrees to deliver to Manager for
deposit into the Bank Account(s) on or
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before the Commencement Date the amount specified on Exhibit "B," which amount
shall be the "Minimum Balance" to be maintained by Lessee in the Bank Account(s)
during each calendar year during the Term. The Minimum Balance shall serve as
working capital for the Hotel's operations. Commencing forty-five (45) days
after the date hereof and continuing on the first day of each calendar month
thereafter, Lessee shall deliver to Manager for deposit in a separate
interest-bearing account in Lessee's name but under the sole control of Manager
(the "Operating Deficit Account") an amount equal to the lesser of five thousand
dollars ($5,000) or the amount necessary to cause the funds in the Operating
Deficit Account plus the balance in the Bank Account(s) as of the last day of
the immediately preceding month to equal one hundred thousand dollars
($100,000), after taking into consideration pending or anticipated distributions
from the Operating Deficit Account to fund cash shortfalls in operations of the
Hotel. The Operating Deficit Account for the Hotel may be consolidated with the
Operating Deficit Account for the Other Hotels. Interest on funds in the
Operating Deficit Account shall be disbursed to Lessee monthly to the extent the
average balance in the account for any calendar month is equal to or greater
than one hundred thousand dollars ($100,000). At such time as any distributions
are made from the Operating Deficit Account, all Net Cash Flow (as hereinafter
defined) shall be deposited into the Operating Deficit Account until the amount
of Net Cash Flow deposited in such account equals the amount of such
distributions. The term "Net Cash Flow" shall have the same meaning as the term
"Income Before Lessee's Overhead," as such term is defined on Exhibit "C"
hereto, except there shall be no deduction for Percentage Lease Payments (other
than to account for amounts deposited into the Reserve Fund in accordance with
paragraph (d) below). Manager may use funds in the Operating Deficit Account
from time to time, without the prior written consent of Lessee or the
Partnership, to pay Operating Costs and, if requested by Lessee, Permitted Costs
(as hereinafter defined) to the extent funds in the Bank Account are not
sufficient to pay such Operating Costs and Permitted Costs. The term "Permitted
Costs" shall mean (i) Percentage Lease Payments (as defined on Exhibit "C"
hereto), (ii) premiums for insurance coverages specified on Exhibit "D" hereto
to the extent Lessee is responsible for paying for such coverages in the
Percentage Lease, (iii) lease payments under Qualifying Capital Leases (as
defined on Exhibit "C" hereto) and (iv) audit legal and other professional fees
incurred by Lessee and directly related to the operation of the Hotel. Within
thirty (30) days of Manager's written request Lessee agrees to furnish Manager
with sufficient funds to make up any deficiency in funds in the Bank Account(s)
and the Operating Deficit Account. Manager's request for sufficient funds may be
based on anticipated cash shortfalls shown on the cash flow projection delivered
to Lessee or incurred cash shortfalls. If Manager determines, in its good faith
business judgment that the amount of the Minimum Balance and the funds in the
Operating Deficit Account are insufficient to adequately meet the working
capital needs for the Hotel's operations, Manager shall notify Lessee and
attempt to reach agreement on an adjustment to the amount of the Minimum
Balance. In the event Lessee and Manager are unable to agree after a period of
thirty (30) days, Manager may submit such matter to arbitration pursuant to
Section 10.02 below. Lessee shall be responsible for providing funds to cover
any shortfall in working capital for the Hotel irrespective of whether such
shortfall is attributable in whole or in part to Partnership Costs.
(d) Capital Funds. Lessee shall expend such amounts for renovation
programs, furnishings, equipment and ordinary Hotel capital replacement items as
are required from time to time to (i) maintain the Hotel in good order and
repair; (ii) comply with the standards referred to in the License Agreement and
(iii) comply with applicable governmental regulations and orders.
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It is recognized that expenditures for capital replacements are
incapable of precise calculation in advance. Therefore, there shall be paid over
in cash in each calendar month after the Commencement Date, four percent (4%)
of Suite Revenues (as hereinafter defined) into a Reserve Fund (as hereinafter
defined) to pay for capital replacements. The term "Suite Revenues" means all
revenue and income from the rental of guest suites at the Hotel with no
deductions except for sales and room taxes. Manager shall establish a reserve
for capital replacements on the books of account for the Hotel and the cash
amounts required for such reserve shall be placed into an interest-bearing
account (the "Reserve Fund") established in the Hotel's name at a bank chosen by
Lessee and reasonably acceptable to Manager, with Manager's designees being the
only authorized signatories on said account. The Reserve Fund for the Hotel may
be consolidated with the Reserve Funds for the Other Hotels. Any expenditures
for capital replacements during any calendar year which have been included in an
approved Capital Budget may be made without either the Partnership's or Lessee's
additional approval and shall be made by Manager from the Reserve Fund
(including accrued interest and unused accumulations from prior calendar years).
Any amounts remaining in the Reserve Fund at the close of each calendar year
shall be carried forward and retained in the Reserve Fund until fully used as
herein provided. To the extent the Reserve Fund is insufficient at a particular
time, or to the extent the Reserve Fund plus anticipated contributions for the
ensuing calendar year is less than budgeted expenditures for the ensuing
calendar year, then, in either such event Manager shall give Lessee written
notice thereof at least forty-five (45) days before the anticipated date such
funds will be needed. Lessee shall supply the necessary funds by deposit to the
Reserve Fund at least thirty (30) days before the anticipated date such funds
will be needed. All proceeds from the sale of capital items no longer needed for
the operation of the Hotel shall be deposited to the Reserve Fund. Sale of such
items shall be at the discretion of Manager, and conducted in a commercially
reasonable manner; Manager shall not dispose of any capital item or group of
capital items having a value in excess of ten thousand dollars ($10,000) without
Lessee's prior written consent unless the replacement of such capital item or
group of capital items has been contemplated in the applicable Capital Budget.
Upon termination of this Agreement for whatever reason, Manager's right to
expend any unused portion of the Reserve Fund shall terminate and the balance of
the fund shall be paid over to Lessee, less any sums then due Manager.
To the extent any expenditure under this paragraph (d) shall exceed ten
thousand dollars ($10,000), Manager shall first solicit bids from at least three
different reputable and qualified third parties, and the lowest of the bidders
shall be selected unless acceptance of a higher bid has been approved by Lessee
in writing.
(e) Payments to Manager. Lessee shall promptly pay to Manager all
amounts due Manager under this Agreement.
(f) Lessee's Representative. Lessee shall appoint two or more
representatives to represent Lessee in all matters relating to this Agreement
and/or the Hotel ("Lessee's Representatives"). Lessee's initial Lessee's
Representatives shall be the individuals named on Exhibit "B." Manager shall
have the right to deal solely with the Lessee's Representatives on all such
matters. Manager may rely upon statements and representations of any one of
Lessee's Representatives (without the joinder of the others) as being from and
binding upon Lessee. Lessee may change one or more of its Lessee's
Representatives from time to time by providing
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written notice to Manager in the manner provided for herein. Lessee shall cause
one or more of Lessee's Representatives or designated substitutes to attend all
Quarterly Lessee's Meetings.
(g) Lessee's Right of Inspection and Review. Lessee, Partnership's
Mortgagee and their respective accountants, attorneys, agents and other
representatives and invitees, shall have the right to enter upon any part of the
Hotel at all reasonable times during normal business hours and during the term
of this Agreement upon reasonable prior notice to Manager for the purpose of
examining, repairing or inspecting the same, preventing damage to the Hotel,
showing the Hotel to prospective purchasers or mortgagees, or auditing,
examining or making extracts of books and records of the Hotel, or for any other
purpose which Lessee, in its reasonable discretion, shall deem necessary or
advisable, but the same shall be done with as little disruption to the business
of the Hotel as under the circumstances is reasonable. Books and records of the
Hotel shall be kept at Manager's office in Memphis, Tennessee or such other
place as the Lessee may hereafter in writing agree. Lessee's rights of
examination and audit of the books and records of the Hotel are subject to the
provisions of Section 3.01 (k) above.
(h) Quiet and Peaceable Operation. Lessee agrees that Manager shall be
entitled to peaceably and quietly possess and operate the Hotel in accordance
with the terms of this Agreement free from molestation, eviction and disturbance
by Lessee or by any other person or persons claiming by, through or under
Lessee.
ARTICLE V
MANAGEMENT FEE
SECTION 5.01. MANAGEMENT FEE. Lessee authorizes Manager to pay itself
from the Bank Account the Basic Management Fees and Incentive Management Fees
(hereinafter collectively referred to as the "Management Fees") calculated and
payable in the manner set forth on Exhibit "C."
ARTICLE VI
CLAIMS AND LIABILITY
SECTION 6.01. CLAIMS AND LIABILITY. Lessee 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, regardless whether any such demand, claim, action,
damage, loss, liability or expense is caused or contributed to by or results
from the negligence of Lessee 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 a breach of this Agreement by Manager
or the gross negligence or willful misconduct of Manager, Lessee agrees, at its
expense, to indemnify and hold Manager and its subsidiaries, affiliates,
officers, directors, employees, agents and independent contractors harmless
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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. Notwithstanding anything
contained in this Agreement to the contrary (including without limitation the
preceding provisions of this Section 6.01 and Sections 3.01(b) and 11 .08),
Manager shall indemnify, defend and hold harmless Lessee and Lessee'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, willful misconduct or
breach of this Agreement by Manager and its agents or employees in connection
with the operation of the Hotel.
SECTION 6.02. SURVIVAL. The provisions of this Article VI 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 VI.
ARTICLE VII
CLOSURE, EMERGENCIES AND DELAYS
SECTION 7.01. EVENTS OF FORCE MAJEURE. If at any time during the Term
of this Agreement it becomes necessary, in Manager's opinion, to cease operation
of the Hotel in order to protect the Hotel and/or the health, safety and welfare
of the guests and/or employees of the Hotel for reasons beyond the reasonable
control of Manager, such as, but not limited to, acts of war, insurrection,
civil strife and commotion, labor unrest governmental regulations and orders,
shortage or lack of adequate supplies or lack of skilled or unskilled employees,
contagious illness, catastrophic events or acts of God ("Force Majeure"), then
in any such event or similar events Manager may close and cease operation of all
or any part of the Hotel, reopening and commencing operation when Manager deems
that such may be done without jeopardy to the Hotel, its guests and employees.
Manager and Lessee agree, except as otherwise provided herein, that the
time within which a party is required to perform an obligation hereunder shall
be extended for a period of time equivalent to the period of delay caused by an
event of Force Majeure, but only to the extent that delay is caused or
contributed to by a specific event of Force Majeure.
SECTION 7.02. EMERGENCIES. If an emergency condition should exist which
requires that immediate repairs be made for the preservation and protection of
the Hotel, its guests or employees, or to assure the continued operation of the
Hotel (for purposes of this Section, an emergency condition shall include any
situation or circumstance that is reasonably estimated to require corrective
action within a period of seventy-two (72) hours or less), Manager is authorized
to take all actions and to make all expenditures necessary to repair and correct
such condition, regardless whether provisions have been made in the applicable
budget for such emergency expenditures. Expenditures made by Manager in
connection with an emergency shall be paid, in Manager's sole discretion, out of
the Bank Account(s) to the extent funds are available and, if not from the
Operating Deficit Account and/or the Reserve Fund. Lessee shall, to the extent
required to meet current obligations, immediately replenish such funds. Manager
shall
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endeavor to communicate with Lessee prior to making any expenditures to correct
an emergency condition, but in any event shall promptly notify Lessee after the
emergency expenditures have been made.
ARTICLE VIII
CONDEMNATION AND CASUALTY
SECTION 8.01. CONDEMNATION. If the Hotel is taken in any eminent
domain, expropriation, condemnation, compulsory acquisition or similar
proceeding by any competent authority, this Agreement shall automatically
terminate as of the date of taking or condemnation. Any compensation for the
taking or condemnation of the physical facility comprising the Hotel shall be
paid to Lessee and Lessee and the Partnership shall share such award in
accordance with the terms of the Percentage Lease. Manager, however, with the
full cooperation of Lessee, shall have the right to file a claim with the
appropriate authorities for the loss of Management Fee income for the remainder
of the Term and any extension thereof because of the condemnation or taking. If
only a portion of the Hotel is so taken and the taking does not make it
unreasonable or imprudent in the reasonable opinion of Lessee and Manager, to
operate the remainder as a hotel of the type and class immediately preceding
such taking, this Agreement shall not terminate. Any compensation shall be used,
however, in whole or in part, to render the Hotel a complete and satisfactory
architectural unit as a hotel of the same type and class as it was immediately
preceding such taking or condemnation.
SECTION 8.02. CASUALTY. In the event of a fire or other casualty,
Lessee shall comply with the terms of the License Agreement and this Agreement
shall remain in full force and effect so long as the License Agreement remains
in full force and effect.
ARTICLE IX
DEFAULT; TERMINATION RIGHTS
SECTION 9.01. LESSEE'S DEFAULT. The following shall, at the election of
Manager, constitute events of default by Lessee under this Agreement (each such
event being referred to herein as a "Lessee's Default"):
(a) The failure of Lessee to pay any amount to Manager
provided for herein for a period of ten (10) days after written notice
by Manager of such failure to pay.
(b) Failure of Lessee to keep or perform any duty, obligation,
covenant or agreement of Lessee under this Agreement (other than the
obligation to pay that is the subject of paragraph (a) above) and such
failure continues for a period of thirty (30) days after receipt of
written notice thereof from Manager; provided, however, if such failure
cannot reasonably be remedied or corrected within such 30-day period,
then such 30-day period shall be extended for such additional period as
may be reasonably required to cure such default but only if the Lessee
promptly commences to cure such default and continue thereafter with
all due diligence to complete such a cure to the satisfaction of
Manager.
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(c) The occurrence of a default by Lessee under any of the
Other Management Agreements, after taking into consideration applicable
notice, grace and cure periods.
(d) The occurrence of a default by the holder of the License
under, or termination of the License Agreement or any of the Other
License Agreements, after taking into consideration applicable notice,
grace and cure periods, if any.
(e) The occurrence of a default under or other termination of
the Percentage Lease.
(f) Lessee or the Partnership is voluntarily or involuntarily
dissolved or declared bankrupt, insolvent or commits an act of
bankruptcy or enters into liquidation whether compulsory or voluntary,
other than for the purpose of amalgamation or reconstruction, or
compounds with its creditors, or has a receiver appointed over all or
any part of its assets, or conveys title in lieu of foreclosure.
(g) A "Change in Ownership", as defined in the License
Agreement occurs unless the new owner of the Hotel receives a
Commitment Agreement (as defined in Section 9.05 below) and enters into
an assumption agreement in accordance with Section 9.05 below.
(h) Failure of the Partnership to keep or perform any duty,
obligation, covenant or agreement of the Partnership under any of the
"Comfort Letters" from Manager to the Partnership agreed to and
accepted by the Partnership (collectively, the "Comfort Letters")
relating to the Hotel and each of the Other Hotels and such failure
continues for a period of thirty (30) days after receipt of written
notice thereof from Manager; provided, however, if such failure cannot
reasonably be remedied or corrected within such 30-day period, then
such 30-day period shall be extended for such additional period as may
be reasonably required to cure such default, but only if the
Partnership promptly commences to cure such default and continue
thereafter with all due diligence to complete such a cure to the
satisfaction of Manager.
On the occurrence of any Lessee's Default Manager shall have the right
to terminate this Agreement by written notice to Lessee, in addition to its
rights to seek damages or other remedies available to it at law or in equity.
SECTION 9.02. MANAGER DEFAULT. The following shall, at the election of
Lessee, constitute events of default by Manager under this Agreement (each such
event being referred to herein as a "Manager Default"):
(a) Failure of Manager to keep or perform any duty,
obligation, covenant or agreement of Manager under this Agreement and
such failure shall continue for a period of thirty (30) days after
receipt of written notice thereof from Lessee; provided, however, if
such failure cannot reasonably be remedied or corrected within such
30-day period, then such 30-day period shall be extended for such
additional period as may be reasonably required to cure such default
provided that Manager promptly commences to
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cure such default and continues thereafter with all due diligence to
complete such cure to the satisfaction of Lessee.
(b) The occurrence of a default by Manager under the License
Agreement or any of the Other License Agreements, after taking into
consideration applicable notice, grace and cure periods, if any.
(c) If Manager is voluntarily or involuntarily dissolved or
declared bankrupt, insolvent or commits an act of bankruptcy, or enters
into liquidation, whether compulsory or voluntary, other than for the
purpose of amalgamation or reconstruction, or compounds with its
creditors, or has a receiver appointed over all or any part of its
assets.
Upon the occurrence of a Manager Default Lessee shall have the right to
terminate this Agreement by written notice to Manager, in addition to its right
to seek damages or other remedies available to it at law or in equity.
SECTION 9.03. [Intentionally deleted.]
SECTION 9.04. DELAYS. Notwithstanding any other provision of this
Agreement, if any event of the type described in Article VII or Article VIII
occurs and Manager is unable to operate any portion of the Hotel for a period of
ninety (90) days, Manager shall have the option to terminate this Agreement upon
thirty (30) days' prior written notice to Lessee, without liability on the part
of Manager, its parent or their subsidiaries or affiliates.
SECTION 9.05. MANAGER'S RIGHT TO TERMINATE UPON SALE. If there is to be
a "Change in Ownership" as defined in the License Agreement and the new owner of
the Hotel has not received a Commitment Agreement to Issue an Embassy Suites
License Agreement for the operation of the Hotel (for purposes of this Section
9.05, said agreement shall be referred to as the "Commitment Agreement"),
Manager shall have the right upon giving notice to Lessee to terminate this
Agreement on the effective date the Change of Ownership occurs. In the event the
new owner applies for a Commitment Agreement Manager, acting in its capacity as
licensor of the Embassy Suites system of hotels, agrees to review and consider
such application in good faith in accordance with its standard procedures and
criteria. If there is a Change of Ownership and the new owner of the Hotel
receives a Commitment Agreement but does not enter into an assumption agreement
pursuant to which the new owner assumes all of Lessee's obligations hereunder
with Manager prior to the date the Change of Ownership occurs, Manager shall
have the right, upon giving notice to Lessee, to terminate this Agreement on the
effective date the Change of Ownership occurs.
SECTION 9.06. LESSEE'S SPECIAL RIGHTS OF TERMINATION. During the Term,
Lessee shall have the right to terminate this Agreement upon the occurrence of
any of the following events:
(a) Sale of Hotel. The Partnership's fee estate in the Hotel is sold
and transferred to an unaffiliated third party and in connection with such
transaction the Percentage Lease is terminated and neither Lessee, nor any of
the Principals (as hereinafter defined) nor any person
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or entity affiliated with the Principals retains any economic or beneficial
interest in the transferee or the Hotel. The term "Principals" means any of
Thomas J. Corcoran, Jr. or Hervey A. Feldman.
(b) Failure to Meet Performance Test. Manager fails to satisfy the
requirements of the "performance test" described in Paragraph A of the Section
entitled "Performance Test; Termination Rights" on Exhibit "B" hereto;
(c) Change in Control. There is a "Change in Control" (as hereinafter
defined) of Manager and Manager fails to satisfy the requirements of the
"performance test" described in Paragraph B of the Section entitled "Performance
Test Termination Rights" on Exhibit "B" hereto. The term "Change in Control"
shall mean any sale or transfer of a majority of the stock of Manager under
circumstances in which ___________________________________ relinquishes direct
or indirect control over the day-to-day operations and business of Manager. If
there is a transfer of a majority of the stock of Manager and Lessee contends
that a Change in Control of Manager has occurred that is disputed by Manager,
then Manager shall demonstrate to the reasonable satisfaction of Lessee that
Promus has retained the ability to control, directly or indirectly, the
day-to-day operations and business of Manager.
SECTION 9.07. TRANSITION UPON TERMINATION. Upon any termination of this
Agreement, all fees and payments due to Manager as of the effective date of
termination, including all accrued and unpaid fees and reimbursable charges and
expenses, shall be paid to Manager within ten (10) days after delivery to Lessee
of an itemized statement of such fees and payments, and Manager shall be
entitled to exercise the right of set-off provided in Section 11.16 below with
respect to such fees, charges and expenses. Manager shall deliver to Lessee, or
such other person or persons as Lessee may designate, copies of all books and
records of the Hotel and all funds in the possession of Manager belonging to
Lessee or received by Manager pursuant to the terms of this Agreement, and shall
assign, transfer or convey to such person or persons all service contracts and
personal property relating to or used in the operation and maintenance of the
Hotel, except any personal property which is owned by Manager. Manager, at its
cost and expense, shall remove all signs that it may have placed at the Hotel
indicating that it is the manager of same and replace and restore any damage
resulting therefrom. Manager shall also, for a period of thirty (30) days after
such expiration or termination, make itself available to consult with and advise
Lessee or such other person or persons regarding the operation and maintenance
of the Hotel at a consultation fee to be agreed upon between Manager and Lessee.
ARTICLE X
APPLICABLE LAW AND ARBITRATION
SECTION 10.01. APPLICABLE LAW. The interpretation, validity and
performance of this Agreement shall be governed by the procedural and
substantive laws of the State of Tennessee. If any judicial authority holds or
declares that the law of another jurisdiction is applicable, this Agreement
shall remain enforceable under the laws of that jurisdiction.
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SECTION 10.02. ARBITRATION OF FINANCIAL MAILERS
SUBSECTION 10.02.1. MAILERS TO BE SUBMITTED TO ARBITRATION. In
the case of a dispute with respect to any of the following matters, either party
may submit such matter to arbitration which shall be conducted by the
Accountants (as hereinafter defined in Subsection 10.02.2):
(a) computation of the Management Fees;
(b) reimbursements due to Manager under the provisions of Sections
11.14 and 11.16
(c) any adjustment in the Minimum Balance under the provisions of
Section 4.01 (c)
(d) any adjustment in dollar amounts of insurance coverages required to
be maintained; and
(e) any dispute concerning the approval of an Operating Budget.
All disputes concerning the above matters shall be submitted to the
Accountants. The decision of the Accountants with respect to any matters
submitted to them under this Subsection 10.02.1 shall be binding on both parties
hereto.
SUBSECTION 10.02.2. THE ACCOUNTANTS. The "Accountants" shall
be one of the so-called "Big Six" firms of certified public accountants,
represented by a partner or manager-level employee who has personal experience
with the hotel industry and hotel operations. Lessee (on behalf of itself and
the Partnership) and Manager may select any one of such public accounting firms,
notwithstanding any existing relationships which may exist between Owners or
Manager and such accounting firm. The party desiring to submit any matter to
arbitration under Subsection 10.02.1 shall do so by written notice to the other
party, which notice shall set forth the items to be arbitrated and such party's
choice of an accounting firm. The party receiving such notice shall within
fifteen (15) days after receipt of such notice either approve such notice, or
designate one of the remaining firms by written notice back to the first party,
and the first party shall within fifteen (15) days after receipt of such notice
either approve such choice or disapprove the same. If both parties shall have
approved one of the firms under the preceding sentence, then such firm shall be
the "Accountants" for the purposes of arbitrating the dispute. If the parties
are unable to agree on an accounting firm, then the accounting firm selected by
each party shall represent the respective parties and the two firms so selected
shall select a third firm, and the three firms so selected shall be the
"Accountants" for such purpose. The Accountants shall be required to render a
decision in accordance with the procedures described in Subsection 10.02.3
within fifteen (15) days after being notified of their selection. The fees and
expenses of the Accountants will be paid by the non-prevailing party.
SUBSECTION 10.02.3. PROCEDURES. In all arbitration proceedings
submitted to the Accountants, the Accountants (either the mutually agreed upon
firm acting alone or two of the three firms selected to constitute a panel)
shall be required to agree upon and approve in writing the substantive position
advocated by Lessee or Manager with respect to each disputed item.
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Any decision rendered by the Accountants that does not reflect the position
advocated by Lessee or Manager shall be beyond the scope of authority granted to
the Accountants and, consequently, may be overturned by either party. All
proceedings by the Accountants shall be conducted in accordance with the Uniform
Arbitration Act, except to the extent the provisions of such act are modified by
this Agreement or by the mutual agreement of the parties. Unless Lessee and
Manager agree otherwise, all arbitration proceedings shall be conducted at the
Hotel.
SECTION 10.03. PERFORMANCE DURING DISPUTES. It is mutually agreed that
during any kind of bona fide, good faith controversy, claim, disagreement or
dispute, including a dispute as to the validity of this Agreement Manager shall
remain in possession of the Hotel as Manager, and Lessee and Manager shall
continue their performance of the provisions of this Agreement and its exhibits.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. AUTHORIZATION. Lessee and Manager represent and warrant
to each other that their respective companies have 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.
SECTION 11.02. RELATIONSHIP. Manager and Lessee shall not be construed
as joint venturers or partners of each other by reason of this Agreement and
neither shall have the power to bind or obligate the other except as set forth
in this Agreement.
SECTION 11.03. MANAGER'S CONTRACTUAL AUTHORITY IN THE PERFORMANCE OF
THIS AGREEMENT. Manager is authorized to make, enter into and perform, in the
name of and for the account of Lessee, any contracts deemed necessary by Manager
to perform its obligations under this Agreement. In exercising its authority
hereunder, Manager shall be entitled to execute and enter into contracts without
the specific approval of Lessee so long as each such contract (i) requires
expenditures or otherwise establishes liability of twenty-five thousand dollars
($25,000) or less and (ii) has a term (excluding options in favor of Manager and
Lessee to renew) of one (1) year or less or can be canceled without penalty upon
sixty (60) days' notice or less. Any contract that does not satisfy the
conditions set forth in the preceding sentence shall require the prior approval
in each instance of Lessee, regardless whether such expenditure is authorized in
an applicable budget, unless the form of the contract proposed to be entered
into has been approved in advance by Lessee. Lessee agrees to promptly respond
to any request for approval and further agrees that its consent shall not be
unreasonably withheld or delayed. Manager shall be authorized to enter into
contracts with affiliates of Manager, but only so long as Lessee shall have
approved in advance the cost of the service or product to be provided.
SECTION 11.04. FURTHER ACTIONS. Lessee and Manager agree to execute all
contracts, agreements and documents and to take all actions reasonably necessary
to comply with the provisions of this Agreement and the intent hereof.
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SECTION 11.05. SUCCESSORS AND ASSIGNS. Lessee's consent shall not be
required for Manager to assign any of its rights, interests or obligations as
Manager hereunder to any parent, subsidiary or affiliate of Manager or ______ or
its successor corporation, provided that any such assignee agrees to be bound by
the terms and conditions of this Agreement and provided further that such
assignee has received assignment of all or substantially all of the management
agreements entered into by Manager with respect to other Embassy Suites hotels
in the Embassy Suites system of hotels. Subject to the provisions of Section
9.06(c) above, the acquisition of Manager or its parent company by a third party
shall not constitute an assignment of this Agreement by Manager and this
Agreement shall remain in full force and effect between Lessee and Manager.
Except as herein provided, Manager shall not assign any of its obligations
hereunder without the prior written consent of Lessee, which consent shall not
be unreasonably withheld or delayed. Lessee shall be deemed to have consented to
such an assignment of this Agreement if Lessee has not notified Manager in
writing to the contrary within fifteen (15) days after Lessee has received
Manager's request for Lessee's consent to an assignment. Manager shall have the
right to pledge or assign its right to receive the Management Fees hereunder
without the prior written consent of Lessee. The Partnership shall not have the
right to consent to any assignment that otherwise complies with the requirements
of this Section 11.05.
Lessee shall have the right to assign this Agreement to any person or
entity which has obtained (i) a leasehold estate in the Hotel in accordance with
the provisions of the Comfort Letter relating to the Hotel and (ii) an Embassy
Suites Commitment Agreement or License Agreement for the Hotel. Except as
hereinabove provided, Lessee shall not have the right to assign this Agreement
without the prior written consent of Manager, which consent shall not be
unreasonably withheld or delayed.
SECTION 11.06. NOTICES. All notices or other communications provided
for in this Agreement shall be in writing and shall be either hand delivered,
delivered by certified mail, postage prepaid, return-receipt requested,
delivered by an overnight delivery service, or delivered by facsimile machine
(with an executed original sent the same day by an overnight delivery service),
addressed as set forth on Exhibit "B." Notices shall be deemed delivered on the
date that is four (4) calendar days after the notice is deposited in the U.S.
mail (not counting the mailing date) if sent by certified mail, or, if hand
delivered, on the date the hand delivery is made, or, if delivered by facsimile
machine, on the date the transmission is made. If given by an overnight delivery
service, the notice shall be deemed delivered on the next business day following
the date that the notice is deposited with the overnight delivery service. The
addresses provided on Exhibit "B" may be changed by any party by notice given in
the manner provided herein.
SECTION 11.07. DOCUMENTS. Lessee shall furnish Manager copies of all
leases, title documents, property tax receipts and bills, insurance statements,
all financing documents (including notes and mortgages) relating to the Hotel
and such other documents pertaining to the Hotel as Manager shall request.
SECTION 11.08. DEFENSE. Manager shall defend and/or settle any claim or
legal action brought against Manager or Lessee, individually, jointly or
severally, in connection with the operation of the Hotel. Manager or the
applicable insurance carrier shall retain legal counsel and Manager shall
supervise legal counsel, accountants and such other professionals, consultants
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and specialists as Manager deems appropriate to defend and/or settle any such
claim or cause of action. Lessee shall have the right to actively participate in
the defense of any such claim or cause of action in which Lessee is a named
defendant. Manager shall confer with Lessee concerning any settlement proposal
that Manager is considering accepting, regardless whether Lessee is a named
party, but Lessee's approval shall not be required if Lessee is not a named
party and the settlement is covered by insurance. Lessee's approval shall be
required with respect to any proposed settlement of any claim or cause of action
in which Lessee is a named party or that is not covered by insurance (excluding
any deductible amount specified in the applicable policy of insurance). All
liabilities, costs, and expenses, including attorneys' fees and disbursements,
incurred in defending and/or settling any such claim or legal action which are
not covered by insurance shall be an expense of Lessee or Manager as applicable
under the provisions of Section 6.01.
SECTION 11.09. WAIVERS. No failure or delay by Manager or Lessee to
insist upon the strict performance of any covenant, agreement, term or condition
of this Agreement, or to exercise any right or remedy consequent upon the breach
thereof, shall constitute a waiver of any such breach or any subsequent breach
of such covenant, agreement, term or condition. No covenant, agreement, term, or
condition of this Agreement and no breach thereof shall be waived, altered or
modified except by written instrument. No waiver of any breach shall affect or
alter this Agreement, but each and every covenant, agreement, term and condition
of this Agreement shall continue in full force and effect with respect to any
other then existing or subsequent breach thereof.
SECTION 11.10. CHANGES. Any change to or modification of this Agreement
including, without limitation, any change in the application of this Agreement
to the Hotel, must be evidenced by a written document signed by both parties
hereto.
SECTION 11.11. CAPTIONS. The captions for each Article and Section are
intended for convenience only.
SECTION 11.12. SEVERABILITY. If any of the terms and provisions hereof
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any of the other terms or provisions hereof. If, however, any
material part of a party's rights under this Agreement shall be declared invalid
or unenforceable (specifically including Manager's right to receive its
Management Fees) the party whose rights have been declared invalid or
unenforceable shall have the option to terminate this Agreement upon thirty (30)
days' written notice to the other party, without liability on the part of the
terminating party.
SECTION 11.13. INTEREST. Any amount payable to Manager or Lessee by the
other which has not been paid when due shall accrue interest at the lesser of
(i) the highest legal limit in the state in which the Hotel is located or (ii)
two percentage points (2%) over the published base rate of interest charged by
Citibank, N.A., New York, New York, to borrowers on ninety (90) day unsecured
commercial loans, as the same may be changed from time to time.
SECTION 11.14. REIMBURSEMENT. The performance by Manager of its
responsibilities under this Agreement are conditioned upon Lessee providing
sufficient funds to Manager on a timely basis to enable Manager to perform its
obligations hereunder. Nevertheless, Manager shall be
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entitled, at its option, after first providing not less than ten (10) days'
prior written notice to Lessee specifying the obligations to be satisfied and
the amount of money to be advanced, to advance funds or contribute property on
behalf of the Lessee to satisfy obligations of Lessee in connection with the
Hotel and this Agreement; provided, however, Manager shall not be required to
give prior written notice to advance funds for the purpose of paying
compensation for Hotel Personnel within the Operating Budget or to remedy an
emergency. Manager shall keep appropriate records to document all reimbursable
expenses paid by Manager, which records shall be made available for inspection
by Lessee or its agents upon request. Lessee agrees to reimburse Manager with
interest upon demand for money paid or property contributed by Manager to
satisfy obligations of Lessee in connection with the Hotel and this Agreement.
Interest shall be calculated at the rate set forth in Section 11.13 from the
date Lessee was obligated to remit the funds or contribute the property for the
satisfaction of such obligation to the date reimbursement is made.
SECTION 11.15. AGREEMENT NOT AN INTEREST IN REAL PROPERTY. This
Agreement is not and shall not be deemed at any time to be or to create, an
interest in real estate or a lien or other encumbrance of any kind whatsoever
against the Hotel or the land on which it is erected.
SECTION 11.16. SET OFF. Without prejudice to Manager's rights to
terminate this Agreement pursuant to the provisions of this Agreement, Manager
may at any time following an Owners Default and without notice to Lessee, set
off or transfer any sum or sums held by Manager or other member of Promus to the
order of or on behalf of Owners (or either of them) or standing to the credit of
Lessee or the Partnership, as the case may be, in the Bank Account(s) and the
Operating Deficit Account, as the case may be, in or towards the satisfaction of
any of Owners' liabilities to Manager in respect of all sums due to Manager
under the terms of this Agreement or any of the Other Management Agreements. If
this Agreement is terminated for any reason, Manager may create a reserve from
any funds in the Bank Account(s), the Operating Deficit Account, the Reserve
Fund or otherwise held by Manager for or on behalf of, or as agent for, Owners
(or either of them) to pay sums owed to Manager as they become due.
SECTION 11.17. THIRD PARTY BENEFICIARY. This Agreement is exclusively
for the benefit of Manager and Lessee and it may not be enforced by any party
other than such parties and shall not give rise to liability to any third party
other than the authorized successors and assigns of such parties.
SECTION 11.18. BROKERAGE. Manager and Lessee represent and warrant to
each other that neither has sought the services of a broker, finder or agent in
this transaction, and neither has employed nor authorized any other person to
act in such capacity. Manager and Lessee each hereby agrees to indemnify and
hold the other harmless from and against any and all claims, loss, liability,
damage or expenses (including reasonable attorneys' fees) suffered or incurred
by the other party as a result of a claim brought by a person or entity engaged
or claiming to be engaged as a finder, broker or agent by the indemnifying
party.
SECTION 11.19. SURVIVAL OF COVENANTS. Any covenant, term or provision
of this Agreement which, in order to be effective, must survive the termination
of this Agreement, shall survive any such termination.
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SECTION 11.20. ESTOPPEL CERTIFICATE. Manager and Lessee agree to
furnish to the other party and to the Partnership Mortgagee, from time to time
upon request, an estoppel certificate in such reasonable form as the requesting
party may request stating whether there have been any defaults under this
Agreement known to the party furnishing the estoppel certificate and such other
information relating to the Hotel as may be reasonably requested.
SECTION 11.21. OTHER AGREEMENTS. Except to the extent as may now or
hereafter be specifically provided, nothing contained in this Agreement shall be
deemed to modify any other agreement between either Owner and Manager with
respect to the Hotel or any other property.
SECTION 11.22. PERIODS OF TIME. Whenever any determination is to be
made or action is to be taken on a date specified in this Agreement, if such
date shall fall on a Saturday, Sunday or legal holiday under the laws of the
state of Tennessee and/or the state in which the Hotel is located, then in such
event said date shall be extended to the next day which is not a Saturday,
Sunday or legal holiday.
SECTION 11.23. PREPARATION OF AGREEMENT. This Agreement shall not be
construed more strongly against either party regardless of who is responsible
for its preparation.
SECTION 11.24. EXHIBITS. All exhibits attached hereto are incorporated
herein by reference and made a part hereof as if fully rewritten or reproduced
herein.
SECTION 11.25. COUNTERPARTS. This Agreement may be executed in two (2)
or more counterparts, each of which shall be deemed an original.
SECTION 11.26. ATTORNEYS' FEES AND OTHER COST. The parties to this
Agreement shall bear their own attorneys' fees in relation to negotiating and
drafting this Agreement. Should Lessee or Manager engage in litigation to
enforce their respective rights pursuant to this Agreement, the prevailing party
shall have the right to indemnity by the non-prevailing party for an amount
equal to the prevailing party's reasonable attorneys' fees, court costs and
expenses arising therefrom.
SECTION 11.27. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between Lessee and Manager regarding the management of the Hotel.
The parties have respectively caused this Agreement to be executed as
of the date set forth in the introductory paragraph above.
LESSEE:
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MANAGER:
-----------------------------------
-----------------------------------
By: /s/
--------------------------------
Its:
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EXHIBIT "A"
LICENSE AGREEMENT
Attached.
A-1
[EMBASSY SUITES LETTERHEAD]
EMBASSY SUITES(R)
LICENSE AGREEMENT
Dated _______________________ between _________________________________
___________ ("Licensor"), and _________________________________________
_________________ ("Licensee"), whose address is c/o FelCor Suite Hotels, Inc.,
545 E. John Carpenter Freeway, Suite 1300, Irving, Texas 75062-3933.
THE PARTIES AGREE AS FOLLOWS:
1. THE LICENSE.
Licensor owns, operates and licenses a system designed to provide a
distinctive, high quality hotel service to the pubic under the name
"Embassy Suites" (the "System"). High standards established by Licensor
are the essence of the System. Future investments may be required of
Licensee under this License Agreement ("Agreement"). Licensee has
independently investigated the risks of the business to be operated
hereunder, including current and potential market conditions,
competitive factors and risks, has read Licensor's "Franchise Offering
Circular," and has made an independent evaluation of all such facts.
Aware of the relevant facts, Licensee desires to enter into this
Agreement in order to obtain a license to use the System in the
operation of an Embassy Suites hotel located at 2727 Stemmons Freeway,
Dallas, Texas 75207 (the "Hotel").
a. THE HOTEL. The Hotel comprises all structures, facilities,
appurtenances, furniture, fixtures, equipment, and entry,
exit, parking and other areas from time to time located on the
site approved for the Hotel and acknowledged by Licensor in
anticipation of the execution of this Agreement, or located on
any land from time to time approved by Licensor for additions,
signs or other facilities. No change in the number of approved
guest suites ("Guest Suites") reflected on Attachment B (the
"Rider") and no other significant change in the Hotel may be
made without Licensor's prior approval. Redecoration and minor
structural changes that comply with Licensor's standards and
specifications will not be considered significant. Licensee
represents that it is entitled to possession of the Hotel
during the entire License Term without restrictions that would
interfere with anything contemplated in this Agreement.
b. THE SYSTEM. The System is composed of elements, as designated
from time to time by Licensor, designed to identify "Embassy
Suites hotels" to the consuming public and/or to contribute to
such identification and its association with quality
standards. The System at present includes the service marks
"Embassy Suites" and such other service marks and such
copyrights, trademarks and similar property rights as may be
designated from time to time by Licensor to be part of the
System; access to a reservation service; distribution of
advertising, publicity and other marketing programs and
materials; the furnishing of training programs and materials,
standards, specifications and policies for construction,
furnishing, operation, appearance and service of the Hotel,
and other requirements as stated or referred to in this
Agreement and from time to time in the Manual (as defined
herein) or in other communications to Licensee; and programs
for inspecting the Hotel and consulting with Licensee.
Licensor may add elements to the System or modify, after or
delete elements of the System at its sole discretion from time
to time. Licensee is only authorized to use "Embassy Suites"
service marks and trademarks at or in connection with the
Hotel.
c. THE MANUAL. Licensee acknowledges the receipt of a current
Embassy Suites Standards Manual ("Manual"). The Manual
contains, among other matters, minimum standards and
requirements for constructing, equipping, furnishing,
supplying, operating, maintaining and marketing the Hotel.
Licensor
1
shall have the right to change the Manual from time to time
and Licensee agrees to abide by the Manual as changed. The
Manual shall at all times remain the sole property of
Licensor. Licensee shall use all reasonable efforts to
maintain the confidentiality of the Manual. Licensee shall
not make or distribute copies of the Manual or any portion
thereof.
d. APPLICATION OF MANUAL. All hotels operated within the System
will be subject to the Manual, as it may from time to time be
modified or revised by Licensor. Licensor may, in its sole
discretion, grant limited exceptions from compliance with the
Manual which may be made based on local conditions or special
circumstances. Each material change in the Manual will be
explained in writing to Licensee at least 30 days before it
goes into effect.
2. GRANT OF LICENSE.
Licensor hereby grants to Licensee a nonexclusive license (the
"License") to use the System only at the Hotel, only in connection with
the operation of an Embassy Suites hotel, only in accordance with this
Agreement and only during the "License Term" beginning with the date
hereof and terminating as provided in Paragraph 13. The License apples
to the location of the Hotel specified herein and no other. This
Agreement does not limit Licensor's right, or the rights of any parent,
subsidiary, division or affiliate of Licensor ("Entities"), to use or
license to others the System or any part thereof or to engage in or
license any business activity at any other location. Licensee
acknowledges that Licensor and its Entities are and may in the future
be engaged in other business activities including activities involving
transient lodging and related activities which may be or may be deemed
to be competitive with the System; that facilities, programs, services
and/or personnel used in connection with the System may also be used in
connection with such other business activities of Licensor and its
Entities; and that Licensee is acquiring no rights hereunder other than
the non-exclusive right to use the System in connection with an Embassy
Suites hotel as specifically defined herein in accordance with the
terms of this Agreement.
3. LICENSOR'S RESPONSIBILITIES.
a. TRAINING. During the License Term, Licensor will specify
required and optional training programs and provide these
programs at various locations. Licensee may be charged for (i)
required training services and materials and (ii) for optional
training services and materials if provided to Licensee.
Travel, lodging and other expenses of Licensee and its
employees will be borne by Licensee.
b. RESERVATION SERVICES. During the License Term, so long as
Licensee is in full compliance with the obligations set forth
in this Agreement, Licensor will afford Licensee access to
reservation services for the Hotel.
c. CONSULTATION. Licensor will, from time to time at Licensor's
sole discretion, make available to Licensee consultation and
advice in connection with operations, facilities and
marketing. Licensor shall have the right to establish fees in
advance for its advice and consultation on a
project-by-project basis.
d. ARRANGEMENTS FOR MARKETING, ETC. Licensor will use the
Marketing/Reservation Contribution for costs associated with
advertising, promotion, publicity, market research and other
marketing programs and related activities, including
reservation programs and services. Licensor may enter into
arrangements for development, marketing, operations,
administrative, technical and support functions, facilities,
programs, services and/or personnel with any other entity and
may use any facilities, programs, services and/or personnel
used in connection with the System in connection with any
business activities of its Entities. Licensor is not obligated
to expend funds for marketing or reservation services in
excess of the amounts received from Licensees using the
System.
e. INSPECTIONS/COMPLIANCE ASSISTANCE. Licensor has the right to
inspect the Hotel at any time, with or without notice to
Licensee, to determine if the Hotel is in compliance with the
standards and rules of operation set forth in the Manual. If
the Hotel fails to comply with such standards and rules of
operation, Licensor may, at its option and at Licensee's cost,
require an action plan to correct the deficiencies. Licensee
must then take all steps necessary to correct any deficiencies
within the times established by Licensor. Licensor's approval
of an action plan does not waive any rights it may have under
this Agreement nor does it relieve Licensee of any obligations
under this Agreement.
2
4. PROPRIETARY RIGHTS.
a. OWNERSHIP OF THE SYSTEM. Licensee acknowledges and will not
contest, either directly or Indirectly, Licensor's
unrestricted and exclusive ownership of the System and any
element(s) or component(s) thereof, and acknowledges that
Licensor has the sole right to grant licenses to use all or
any element(s) or component(s) of the System. Licensee
specifically agrees and acknowledges that Licensor is the
owner of all right, title and interest in and to the service
mark "Embassy Suites", its distinguishing characteristics,
trade names, service marks, trademarks, logos, copyrights,
slogans, etc., and all other marks associated with the System
("Marks") together with the goodwill symbolized thereby and
that Licensee will not contest directly or indirectly the
validity or ownership of the Marks either during the term of
this Agreement or at any time thereafter. All improvements and
additions whenever made to or associated with the System by
the parties to this Agreement or anyone else, and all service
marks, trademarks, copyrights, and service mark and trademark
registrations at any time used, applied for or granted in
connection with the System, and all goodwill arising from
Licensee's use of the Marks shall inure to the benefit of and
become the property of Licensor. Upon expiration or
termination of this Agreement, no monetary amount shall be
assigned as attributable to any goodwill associated with
Licensee's use of the System or any element(s) or component(s)
of the System including the name or Marks.
b. USE OF NAME. Licensee will not use the word "Embassy" or any
similar word(s) in its corporate, partnership, business or
trade name, nor authorize or permit such word(s) to be used by
anyone else.
5. TRADEMARK AND SERVICE MARK.
a. TRADEMARK DISPUTES. Licensor will have the sole right and
responsibility to handle disputes with third parties
concerning use of all or any part of the System, and Licensee
will, at its reasonable expense, extend its full cooperation
to Licensor in all such matters. All recoveries made as a
result of disputes with third parties regarding use of the
System or any part thereof shall be for the account of
Licensor. Licensor need not initiate suit against alleged
imitators or infringers and may settle any dispute by grant of
a license or otherwise. Licensee will not initiate any suit or
proceeding against alleged imitators or infringers or any
other suit or proceeding to enforce or protect the System.
b. PROTECTION OF NAMES AND MARKS. Both parties will make every
effort consistent with the foregoing to protect and maintain
the Marks and name "Embassy Suites" and its distinguishing
characteristics as standing for the System and only the
System; provided, however, both parties acknowledge that
Licensor may allow certain hotels which had written franchise
commitments or licenses in the ___________________________
franchise system to use the name "Embassy Suites" and other
related marks of the System. Licensee agrees to execute any
documents deemed necessary by Licensor or its counsel to
obtain protection for Licensor's Marks or to maintain their
continued validity and enforceability. Licensee agrees to use
such names and Marks only in connection with the operation of
an Embassy Suites hotel and in the manner authorized by
Licensor. Licensee acknowledges that any unauthorized use of
the names or Marks shall constitute infringement of Licensor's
rights. Licensee must notify Licensor immediately, in writing,
of any infringement or challenge to Licensee's use of the
Marks or of any unauthorized use or possible misuse of
Licensor's Marks or Licensor's proprietary information.
6. LICENSEE'S RESPONSIBILITIES.
a. OPERATIONAL AND OTHER REQUIREMENTS. During the License Term,
Licensee will:
(1) promptly pay to Licensor all amounts due Licensor and
its Entities as royalties or fees or for goods or
services purchased by Licensee;
(2) maintain the Hotel in a clean, safe and orderly
manner and in first class condition;
(3) provide efficient, courteous and high-quality service
to the public;
(4) operate the Hotel 24 hours a day every day, except as
otherwise permitted by Licensor based on special
circumstances;
3
(5) strictly comply in all respects with the Manual and
with all other policies, procedures and requirements
of Licensor which may be from time to time
communicated to Licensee;
(6) strictly comply with Licensor's reasonable
requirements to protect the System and the Hotel from
unreliable sources of supply;
(7) strictly comply with Licensor's requirements as to:
(a) the types of services and products that (i)
must be used, promoted or offered at the
Hotel and (ii) may be used at the Hotel;
(b) use, display, style and type of signage;
(c) directory and reservation service listings
of the Hotel;
(d) training of persons to be involved in the
operation of the Hotel;
(e) participation in all marketing, reservation
service, advertising, training and operating
programs designated by Licensor as
System-wide (or area-wide) programs in the
best interests of hotels using the System;
(f) maintenance, appearance and condition of
the Hotel; and
(g) quality and type of service offered to
customers at the Hotel.
(8) use such automated guest service and/or hotel
management and/or telephone system(s) which Licensor
deems to be in the best interests of the System,
including any additions, enhancements, supplements or
variants thereof which may be developed during the
term hereof;
(9) participate in and use those reservation services
which Licensor deems to be in the best interests of
the System, including any additions, enhancements,
supplements or variants thereof which may be
developed during the term hereof;
(10) adopt improvements or changes to the System as may be
from time to time designated by Licensor
(11) strictly comply with all governmental requirements,
including the filing and maintenance of any required
trade name or fictitious name registrations, paying
all taxes, and maintaining all governmental licenses
and permits necessary to operate the Hotel in
accordance with the System;
(12) permit inspection of the Hotel by Licensor's
representatives at any time and give them free
lodging for such time as may be reasonably necessary
to complete their inspections;
(13) upon request by Licensor, provide to Licensor
statistics on Hotel operations in the form specified
by Licensor and using definitions specified by
Licensor;
(14) promote the Hotel on a local or regional basis
subject to Licensor's requirements as to form,
content and prior approvals;
(15) insure that no part of the Hotel or the System is
used to further or promote a competing business or
other lodging facility, except as Licensor may
approve for those competing businesses or lodging
facilities owned, licensed, operated or otherwise
approved by Licensor or its Entities;
(16) use every reasonable means to encourage use of
Embassy Suites facilities everywhere by the public;
4
(17) in all respects use Licensee's best efforts to
reflect credit upon and create favorable public
response to the name "Embassy Suites"; and
(18) comply with Licensor's requirements concerning
confidentiality of information.
b. UPGRADING OF THE HOTEL. Licensor may at any time during the
License Term require substantial modernization, rehabilitation
and other upgrading of the Hotel. Limited exceptions from
those standards may be made by Licensor based on local
conditions or special circumstances. If the upgrading
requirements contained in this Paragraph 6.b. cause Licensee
undue hardship, Licensee may terminate this Agreement by
paying a fee computed according to Paragraph 13.f.
c. STAFF AND MANAGEMENT. Licensee must at all times retain and
exercise direct management control over the Hotel's business.
Licensee shall not enter into any lease, management agreement
or other similar arrangement for the operation of the Hotel or
any part thereof with any entity without the prior written
consent of Licensor.
7. FEES.
a. For each month (or part of a month) during the License Term,
Licensee will pay to Licensor by the 15th of the following
month:
(1) a royalty fee equal to 4 percent of the gross
revenues attributable to or payable for rental of
Guest Suites at the Hotel with deductions for sales
and room taxes only ("Gross Suites Revenue"); and
(2) a "Marketing/Reservation Contribution" equal to 3.5
percent of Gross Suites Revenue (but no less than
$1.75 per guest suite per night). The
Marketing/Reservation Contribution is subject to
change by Licensor from time to time, which
Marketing/Reservation Contributions do not include
the cost, installation or maintenance of reservation
services equipment or training; and
(3) all amounts due Licensor for any other miscellaneous
fees or invoices or for goods or services purchased
by or provided to Licensee; and
(4) an amount equal to any sales, gross receipts or
similar tax imposed on Licensor for the receipt of
the payments required in (1), (2) and (3) of this
Paragraph above, unless the tax is an optional
alternative to an income tax otherwise payable by
Licensor.
b. Licensee will operate the Hotel so as to maximize Gross Suites
Revenue consistent with sound marketing and industry practice
and will not engage in any conduct which is likely to reduce
Gross Suites Revenue in order to further other business
activities.
c. Royalties may be charged on revenues (or upon any other basis,
if so determined by Licensor) from any activity conducted at
the Hotel if added by mutual agreement and if: (i) not now
offered at hotels within the System generally and is likely to
benefit significantly from or be identified significantly with
the Embassy Suites name or other aspects of the System or (ii)
designed or developed by or for Licensor.
d. Licensor may charge for optional products or services accepted
by Licensee from Licensor either in accordance with current
practice or as developed in the future.
e. A Guest Suite addition fee for guest suite additions to a
hotel set forth in Licensor's then current "Franchise Offering
Circular" shall be paid by Licensee to Licensor on Licensee's
submission of an application to add any Guest Suites to the
Hotel. As a condition to Licensor granting its approval of
such application, Licensor may require Licensee to upgrade the
Hotel, subject to Paragraph 6.b.
f. Local and regional marketing programs and related activities
may be conducted by Licensee, but only at Licensee's expense
and subject to Licensor's requirements. Reasonable charges may
be made by Licensor for optional advertising materials ordered
or used by Licensee for such programs and activities.
5
g. Licensee shall participate in Licensor's travel agent
commission program(s) as it may be modified from time to time
and shall reimburse Licensor on or before the 15th of each
month for travel agent commissions paid by Licensor.
h. Each payment under this Paragraph 7 shall be accompanied by
the monthly statement referred to in Paragraph 8. Licensor may
apply any amounts received under this Paragraph 7 to any
amounts due under this Agreement. If any amounts are not paid
when due, such non-payment shall constitute a breach of this
Agreement and, in addition, such unpaid amounts will accrue
interest beginning on the first day of the month following the
due date at 1 1/2 percent per month but not to exceed the
maximum interest permitted by applicable law.
8. RECORDS AND AUDITS.
a. DAILY AND MONTHLY REPORTS. At the request of Licensor,
Licensee shall prepare and delver daily reports to Licensor,
which reports will contain information reasonably requested by
Licensor on a daily basis, such as daily rate and room
occupancy, and which may be used by Licensor for its
reasonable purposes. At least monthly, Licensee shall prepare
a statement which will include all information concerning
Gross Suites Revenue, other revenues generated at the Hotel,
suite occupancy rates, reservation data and other information
required by Licensor that may be useful in connection with
marketing and other functions of Licensor and its Entities
(the "Data"). The Data shall be the property of Licensor. The
Data will be permanently recorded and retained as may be
reasonably required by Licensor. By the 15th of each month,
Licensee will submit to Licensor a statement setting forth the
Data for the previous month and reflecting the computation of
the amounts then due under Paragraph 7. The statement will be
in such form and detail as Licensor may reasonably request
from time to time, and may be used by Licensor for its
reasonable purposes.
b. MAINTENANCE OF RECORDS. Licensee shall, in a manner and form
satisfactory to Licensor and utilizing accounting and
reporting standards as reasonably required by Licensor,
prepare on a current basis (and preserve for no less than four
years), complete and accurate records concerning Gross Suites
Revenue and all financial, operating, marketing and other
aspects of the Hotel, and maintain an accounting system which
fully and accurately reflects all financial aspects of the
Hotel and its business. Such records shall include books of
account, tax returns, governmental reports, register tapes,
daily reports, and complete quarterly and annual financial
statements (profit and loss statements, balance sheets and
cash flow statements).
c. AUDIT. Licensor may require Licensee to have the Gross Suites
Revenue or other monies due hereunder computed and certified
as accurate by a certified public accountant. During the
License Term and for two years thereafter, Licensor and its
authorized agents shall have the right to verify information
required under this Agreement by requesting, receiving,
inspecting and auditing, at all reasonable times, any and all
records referred to above wherever they may be located (or
elsewhere if reasonably requested by Licensor). If any such
inspection or audit discloses a deficiency in any payments due
hereunder, Licensee shall immediately pay to Licensor (i) the
deficiency, (ii) interest thereon as provided in Paragraph
7.h., and (iii) all inspection and audit costs (including
travel, lodging, meals, salaries and other expenses of the
inspecting or auditing personnel). Licensor's acceptance of
Licensee's payment of any deficiency as provided for herein
shall not waive Licensor's right to terminate this Agreement
as provided for herein in Paragraph 13. If the audit discloses
an overpayment, Licensor shall refund the overpayment to
Licensee within 30 days.
d. ANNUAL FINANCIAL STATEMENTS. Licensee will submit to Licensor
complete year-end financial statements for the Hotel, Licensee
and/or any guarantors as soon as available but not later than
90 days after the end of Licensee's fiscal year. Licensee will
certify them to be true and correct and to have been prepared
in accordance with generally accepted accounting principles
consistently applied, and any false certification will be a
breach of this Agreement.
9. INDEMNITY.
Licensee will indemnify, during and after the term of this Agreement,
Licensor and its Entities and their officers, directors, employees,
agents, predecessors, successors and assigns (`Indemnified Parties")
against, hold them
6
harmless from, and promptly reimburse them for, all payments of money
(fines, damages, legal fees, expenses, etc.) by reason of any claim,
demand, tax, penalty, or judicial or administrative investigation or
proceeding (even where negligence of Licensor and/or its Entities
and/or their Indemnified Parties is actual or alleged) arising from any
claimed occurrence at the Hotel or arising from, as a result of or in
connection with the design, construction, furnishings, equipment and
acquisition of supplies or any other of Licensee's acts, omissions or
obligations or those of anyone associated or affiliated with Licensee
or the Hotel. At the election of Licensor, Licensee will also defend
Licensor and/or its Entities and/or their Indemnified Parties against
the same. In any event, Licensor will have the right, through counsel
of its choice, to control any mailer to the extent it could directly or
indirectly affect Licensor and/or its Entities and/or their Indemnified
Parties financially. Licensee will also reimburse Licensor for all
expenses, including attorneys' fees and court costs, reasonably
incurred by Licensor to protect itself and/or its Entities and/or their
Indemnified Parties from, or to remedy Licensee's defaults or to
collect any amounts due under this Agreement.
10. INSURANCE.
a. Licensee will comply with Licensor's specifications for
insurance as to amount and type of coverage as may be
reasonably specified by Licensor from time to time in writing
and will in any event maintain as a minimum the following
insurance underwritten by an insurer approved by Licensor:
(1) employer's liability and workers' compensation
insurance as prescribed by applicable law; and
(2) liquor liability insurance, if applicable, naming
Licensor and its then current Entities and their
predecessors, successors and assigns as additional
insureds with single-limit coverage for personal and
bodily injury and property damage of at least
$10,000,000 for each occurrence; and
(3) commercial general liability insurance (with
products, completed operations and independent
contractors coverage) and comprehensive automobile
liability insurance, all on an occurrence and per
location basis naming Licensor, its Entities and
their predecessors, successors and assigns as
additional insureds and underwritten by an insurer
approved by Licensor, with single-limit coverage for
personal and bodily injury and property damage of at
least $10,000,000 for each occurrence; and
(4) in connection with all construction at the Hotel
during the License Term, Licensee will cause the
general contractor to maintain with an insurer
approved by Licensor commercial general liability
insurance (with products, completed operations, and
independent contractors coverage including workers'
compensation and automobile liability insurance for
such independent contractors) in at least the amount
of $10,000,000 for each occurrence for personal and
bodily injury and property damage with Licensor, its
Entities and their predecessors, successors and
assigns as additional insureds.
b. EVIDENCE OF INSURANCE/CHANGES. This coverage shall be
evidenced by original certificates of insurance submitted to
Licensor simultaneously herewith, annually hereafter and each
time a change is made in any insurance or insurance carrier,
Licensee will furnish to Licensor certificates of insurance
including the term and coverage of the insurance in force, the
persons insured, and a statement that the coverage may not be
cancelled, altered or permitted to lapse or expire without 30
days advance written notice to Licensor. Licensor will send
Licensee notice of any policy or coverage which Licensor, in
its sole discretion, finds unacceptable and upon receipt of
such notice, Licensee will promptly undertake to change such
policy or coverage.
c. If Licensee fails or neglects to obtain or maintain the
insurance or policy limits required by this Agreement,
Licensor shall have the option, without notice, to obtain and
maintain such insurance for Licensee, and Licensee shall pay
immediately upon demand therefore, the premiums and the cost
incurred by Licensor in taking such action.
11. TRANSFER.
a. TRANSFER BY LICENSOR. Licensor shall have the right to
transfer or assign this Agreement or any of Licensor's rights
or obligations under this Agreement to any person or legal
entity.
7
b. TRANSFERS BY LICENSEE. This License is not transferrable and
to change the License holder a new License must be approved by
Licensor and, if approved, executed by the new licensee.
Licensee understands and acknowledges that the rights and
duties set forth in this Agreement are personal to Licensee,
and that Licensor has entered into this Agreement in reliance
on the business skill, financial capacity, and personal
character of Licensee (if Licensee is an individual), and that
of the partners, members, or stockholders of Licensee (if
Licensee is a partnership, company, corporation, or other
legal entity). Accordingly, neither Licensee nor any immediate
or remote successor to any part of Licensee's interest in this
Agreement, nor any individual, partnership, company,
corporation, or other legal entity which directly or
indirectly owns an Equity Interest (as defined herein) in
Licensee shall sell, assign, transfer, convey, pledge,
mortgage, encumber, or give away ("Transfer") any direct or
Indirect Interest in this Agreement or Equity Interest in
Licensee, except as provided in this Agreement.
(1) Any purported transfer, by operation of law or
otherwise, of any interest in this Agreement or any
Equity Interest in Licensee not in accordance with
the provisions of this Agreement shall be null and
void and shall constitute a material breach of this
Agreement, for which Licensor may terminate this
Agreement upon notice without opportunity to cure
pursuant to Paragraph 13.d.
(2) References in this Agreement to "Equity Interests"
shall mean (i) any direct or indirect beneficial
interest in Licensee; (ii) any stock, membership or
partnership interest in Licensee, or (iii) any stock,
membership or partnership interest in any
corporation, partnership, company, or other legal
entity which is a partner, member or stockholder of
Licensee. In addition, "publicly-traded equity
interest" shall mean any Equity Interest which is
traded on any securities exchange or is quoted in any
publication or electronic reporting service
maintained by the National Association of Securities
Dealers, Inc. or any of its successors. In computing
changes of Equity Interests limited partners will not
be distinguished from general partners, and
Licensor's judgment will be final if there is any
question as to the definition of Equity Interest or
as to the computation of relative Equity Interests,
the principal considerations being: direct and
indirect (i) power to exercise control over the
affairs of Licensee; (ii) right to share in
Licensee's profits; and (iii) exposure to risk in the
Licensee's business.
(3) Licensee represents that the Equity Interests are
directly and (if applicable) indirectly owned as
shown on the Rider.
c. TRANSFER OF EQUITY INTERESTS. The following situations are
permitted Transfers of Equity Interests:
(1) Equity Interests may be Transferred as follows, with
Licensor's prior written consent, which will not be
unreasonably withheld, provided at all times adequate
provision is made for management of the Hotel:
(a) Equity Interests which are not
publicly-traded may be Transferred, if after
the transaction, 50 percent or less of all
Equity Interests will have changed hands
since the date of this Agreement.
(b) Equity Interests which require registration
under any federal or state securities law
may be Transferred provided that Licensee
(i) at least 45 days prior to the proposed
registration submits a request for
Licensor's consent accompanied by a
non-refundable payment of $25,000, and (ii)
reimburses Licensor for expenses in excess
of $25,000 incurred in connection with the
review of the materials concerning the
proposed registration, including Licensor's
attorneys' fees and travel expenses.
(c) Licensee and all participants in any
proposed offering (including the sale of
partnership or membership interests) must
also agree to fully indemnify Licensor in
connection with the registration; furnish
Licensor all information requested by
Licensor; avoid any implication of
Licensor's participating in or endorsing the
offering and use Licensor's service marks
and trademarks only as directed by Licensor.
8
(d) Publicly-traded equity interest may be
Transferred without Licensor's consent If
such transfer is exempt from registration
under federal securities law and if
immediately before and after the Transfer,
the transferor and transferee respectively
each own less than 25 percent of the Equity
Interests in Licensee.
(2) PERMITTED TRANSFEREES/LICENSEE'S DEATH.
(a) Licensee, if a natural person, may transfer
the License to one or more of Licensee's
spouse, parents, siblings, nephews,
descendants or spouses descendants or to a
corporation entirely owned by Licensee
("Permitted Transferees") provided (i) the
Permitted Transferee promptly executes a new
license agreement (and guaranty, if
applicable) on Licensee's then current
license agreement form for the unexpired
term of this Agreement and (ii) Licensee
guarantees, in Licensor's usual form, the
performance of the Permitted Transferee's
obligations under the newly executed license
agreement.
(b) If Licensee is a natural person, upon the
Licensee's death, the License will pass in
accordance with Licensee's will, or, if
Licensee dies intestate, in accordance with
laws of intestacy governing the distribution
of the Licensee's estate, as the case may
be, provided the transferee is one or more
of the decedent's Permitted Transferee's
(excluding corporations formerly owned by
the Licensee) and provided the Permitted
Transferee promptly executes a new license
agreement (and guaranty if applicable) on
Licensor's then current license agreement
form for the unexpired term of this
Agreement.
(c) If an Equity Interest is owned by a natural
person, the transfer provisions of Paragraph
11.c.(2)(a) and (b) above will apply to the
Transfer of such Equity Interests to a
Permitted Transferee.
(3) FINANCING. The construction and/or operation of the
Hotel may not be financed by a pubic offering of any
right, title or interest in the Hotel, the property
upon which it is built or the receipts from its
operation without the prior review and approval of
the applicable documentation by Licensor. Licensee
shall submit a non-refundable $25,000 fee with said
documentation.
(4) CHANGE OF OWNERSHIP.
(a) This License is not transferrable. If
Licensee (i) receives an offer to purchase
or lease the Hotel or any portion thereof,
(ii) desires to sell or lease the Hotel or
any portion thereof, (iii) wishes to convey
the Hotel, Hotel site, or any Equity
Interest in the Hotel, Licensee shall give
prompt written notice thereof to Licensor,
stating the identity of the prospective
transferee, purchaser or lessee and the
terms and conditions of the conveyance,
including a copy of any proposed agreement
and all other information with respect
thereto, which Licensor may reasonably
require.
(b) Under the provisions of this Agreement, (i)
any Transfer of Equity Interests (other than
a permitted Transfer) or (ii) Transfer of
all or a substantial part of the Hotel or
Hotel site (if the Hotel or Hotel site is
owned directly or indirectly by Licensee),
to a new owner who desires to operate the
Hotel as an Embassy Suites hotel, shall
constitute a change of ownership requiring
submittal of an application for a new
license.
(c) Licensor shall process such change of
ownership application in good faith and in
accordance with Licensor's then current
procedures, criteria and requirements
regarding fees, upgrading of the Hotel,
credit, operational abilities and
capabilities, prior business dealings,
market feasibility and other factors deemed
relevant by Licensor. If such change of
ownership application is approved, Licensor
and the new owner shall, upon surrender of
this Agreement, enter into a new license
agreement. The new license agreement shall
be on Licensor's then current form and
contain Licensor's then current terms
(except for duration), and if applicable,
the new license agreement will contain
specified upgrading and other requirements.
9
(d) If a change of ownership application for the
proposed new owner is not approved by
Licensor and the conveyance of the Hotel or
Equity Interests to the proposed new owner
occurs, then this Agreement shall terminate
pursuant to Paragraph 13.d hereof and
Licensor shall be entitled to all of its
remedies.
12. CONDEMNATION AND CASUALTY.
a. CONDEMNATION. Licensee shall, at the earliest possible time,
give Licensor notice of any proposed taking by eminent domain.
If Licensor agrees that the Hotel or a substantial part
thereof is to be taken, Licensor may, in its sole discretion
and within a reasonable time of the taking (within four
months) transfer this Agreement to a nearby location selected
by Licensee. If Licensor approves the new location and
authorizes the transfer and if within one year of the closing
of the Hotel Licensee opens a new hotel at the new location in
accordance with Licensor's specifications, then the new hotel
will be deemed to be the Hotel licensed under this Agreement.
If a condemnation takes place and a new hotel does not, for
whatever reason, become the Hotel under this Agreement in
strict accordance with this Paragraph (or if it is reasonably
evident to Licensor that such will be the case), this
Agreement will terminate immediately upon notice thereof by
Licensor to Licensee, without the payment of liquidated
damages as calculated in Paragraph 13.f.
b. CASUALTY. If the Hotel is damaged by fire or other casualty,
Licensee will expeditiously repair the damage. If the damage
or repair requires closing the Hotel, Licensee will
immediately notify Licensor, will repair or rebuild the Hotel
according to Licensor's standards, will commence
reconstruction within four months after closing, and will
reopen the Hotel for continuous business operations as soon as
practicable (but in any event within one year after the
closing of the Hotel), giving Licensor ample advance notice of
the date of reopening. If the Hotel is not reopened according
to this Paragraph, this Agreement will terminate immediately,
upon notice thereof by Licensor to Licensee, with the payment
of liquidated damages as calculated in Paragraph 13.f.
c. NO EXTENSIONS OF TERM. Nothing in this Paragraph 12 will
extend the License Term but Licensee shall not be required to
make any payments pursuant to Paragraph 7 for periods during
which the Hotel is closed by reason of condemnation or
casualty.
13. TERMINATION.
a. EXPIRATION OF TERM. Unless terminated earlier, this Agreement
will expire without notice on _________________ 20__.
b. PERMITTED TERMINATION PRIOR TO EXPIRATION OF TERM. Licensee
may terminate this Agreement on the tenth or fifteenth
anniversary date of this Agreement by giving at least 12 but
not more than 15 months advance notice to Licensor accompanied
by the payment as provided in Paragraph 13.f. herein.
c. TERMINATION OR SUSPENSION BY LICENSOR ON ADVANCE NOTICE. This
Agreement may be terminated if Licensee fails to satisfy any
obligations under this Agreement or any attachment hereto.
Except as provided in Paragraph 13.d, this Agreement shall
terminate following an Event of Default after the Licensor
furnishes adequate notice of termination.
(1) An "Event of Default" shall occur if the Licensee
fails to satisfy or comply with any of the
requirements and conditions or terms as set forth in
Attachment A or this Agreement, or breaches any of
the following provisions of this Agreement: (i) any
transfer, (ii) any representation or warranty, (iii)
any fee obligation, (iv) any certification of
financial statements or (v) any other provision of
this Agreement.
(2) Notice of termination shall be adequate, if (i)
mailed the number of days in advance of the
termination date as Licensor shall determine in its
sole discretion, or (ii) mailed the number of days in
advance of the termination date as required by
applicable state law. If no notice is required by
applicable state law, Licensor may, in its sole
discretion, terminate this Agreement immediately.
Notwithstanding the foregoing, Licensor's failure to
terminate this Agreement immediately shall not waive
any of Licensor's termination rights under this
Agreement.
10
(3) Licensor's notice of termination shall not relieve
Licensee of its obligations under this Agreement or
Attachment A.
(4) As a result of Licensee's efforts to comply with the
terms and conditions contained on Attachment A and
elsewhere in this Agreement, Licensee will incur
substantial expense and expend substantial time and
effort. Licensee acknowledges and agrees that
Licensor shall have no liability or obligation to
Licensee for any losses, obligations, liabilities or
expenses incurred by Licensee if (i) Licensee commits
an Event of Default as described on 13.c(1); (ii) the
Hotel is not authorized by Licensor to Open as
defined in Attachment A or (iii) this Agreement is
terminated because Licensee has not complied with the
terms and conditions of this Agreement.
(5) Notwithstanding the foregoing, following an Event of
Default, Licensor may at any time, in its sole
discretion, suspend its obligations under this
Agreement (including reservation services).
d. IMMEDIATE TERMINATION BY LICENSOR. Notwithstanding the
foregoing Paragraph, this Agreement may be immediately
terminated (or terminated at the earliest time permitted by
applicable law) if one or more of the following material
breaches to this Agreement or any Attachment occur:
(1) Any Event of Default where a prior Event of Default
had also occurred during the preceding 12 months, but
the License was not terminated because Licensee cured
the prior Event of Default;
(2) Any Event of Default where the Licensor in its
reasonable judgment believes that even if the
Licensee were to cure such Event of Default the
relationship between the parties has been irreparably
damaged and cannot be satisfactorily restored;
(3) Licensee or any guarantor of Licensee's obligations
hereunder shall:
(a) generally not pay its debts as they become
due or shall admit in writing its inability
to pay its debts, or shall make a general
assignment for the benefit of creditors; or
(b) commence any case, proceeding or other
action seeking reorganization, arrangement,
adjustment, liquidation, dissolution or
composition of it or its debts under any law
relating to bankruptcy, insolvency,
reorganization or relief of debtors, or
seeking appointment of a receiver, trustee,
custodian or other similar official for it
or for all or any substantial part of its
property; or
(c) take any corporate or other action to
authorize any of the actions set forth above
in Paragraphs (a) or (b); or
(4) Any case, proceeding or other action against Licensee
or any such guarantor shall be commenced seeking to
have an order for relief entered against it as
debtor, or seeking reorganization, arrangement,
adjustment, liquidation, dissolution or composition
of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of
debtors, or seeking appointment of a receiver,
trustee, custodian or other similar official for it
or for all or any substantial part of its property,
and such case, proceeding or other action (i) results
in the entry of an order for relief against it which
is not fully stayed within seven business days after
the entry thereof or (ii) remains undismissed for a
period of 45 days; or
(5) an attachment remains on all or a substantial part of
the Hotel or of Licensee's or any such guarantors
assets for 30 days; or
(6) Licensee or any such guarantor fails within 60 days
of the entry of a final judgment against Licensee in
any amount exceeding $50,000 to discharge, vacate or
reverse the judgment, or to stay execution of it, or
if appointed, to discharge the judgment within 30
days after a final adverse decision in the appeal; or
(7) Licensee loses possession or the right to possession
of all or a significant part of the Hotel or Hotel
site; or
11
(8) Licensee fails to continue to identify the Hotel to
the public as an Embassy Suites hotel; or
(9) Licensee contests in any court or proceeding
Licensor's ownership of the System or any part of the
System, or the validity of any service marks or
trademarks associated with Licensor's business; or
(10) Any action is taken toward dissolving or liquidating
Licensee or any such guarantor, if it is a
corporation or partnership, except for death of a
partner; or
(11) Licensee or any of its principals is, or is
discovered to have been convicted of a felony (or any
other offense if it is likely to adversely reflect
upon or affect the Hotel, the System, the Licensor
and/or its Entities in any way; or
(12) Licensee maintains false books and records of
accounts or submits false reports or Information to
Licensor.
e. DE-IDENTIFICATION OF HOTEL UPON TERMINATION. Upon termination
or expiration of the term, Licensee will take whatever action
is necessary to assure that no use is made of any part of the
System at or in connection with the Hotel or otherwise.
Licensee shall return to Licensor the Manual and all other
proprietary materials, remove all distinctive System features
of the Hotel, including the primary freestanding sign down to
the structural steel, and take all other actions
("De-identification Actions") required to preclude any
possibility of confusion on the part of the public that the
Hotel is still using all or any part of the System or is
otherwise holding itself out to the public as an Embassy
Suites hotel. If within 30 days after termination of this
Agreement Licensee fails to comply with this Paragraph,
Licensor or its agents at Licensee's expense, may enter the
premises of the Hotel to perform the De-identification
Actions. The preceding sentence shall not in any way limit
Licensor's other rights or remedies under this Agreement.
f. LIQUIDATED DAMAGES. The parties recognize the difficulty of
ascertaining damages to Licensor resulting from premature
termination of this Agreement, and have provided for
liquidated damages, which liquidated damages represent the
parties' best estimate as to the damages arising from the
circumstances in which they are provided and which are only
damages for the premature termination of this Agreement, and
not as a penalty or as damages for breaching this Agreement or
in lieu of any other payment. If this Agreement is terminated
pursuant to Paragraphs 6.b., 12.b., 13.c., or 13.d., Licensee
will pay Licensor, within 10 days of termination, an amount
equal to the amount payable under Paragraph 7 for the three
years prior to termination. If the Hotel has been Open for
less than three years, Licensee will pay Licensor, within 10
days of termination, an amount equal to the greater of (i) 36
times the monthly average payable under Paragraph 7, or (ii)
36 times the amount payable under Paragraph 7 for the last
full month prior to termination. Provided, however, if the
Hotel has been authorized to open, but has not been in
operation for one full month, Licensee will pay Licensor,
within 10 days, an amount equal to $5,000 per Guest Suite in
the Hotel. Further, provided, if the Agreement is terminated
pursuant to Paragraph 13.b., the Licensee will pay the
Licensor, within 10 days of notice required, an amount equal
to the amount payable under Paragraph 7 for the two years
prior to notice of termination.
14. RENEWAL.
This Agreement is non-renewable.
15. RELATIONSHIP OF PARTIES.
a. NO AGENCY RELATIONSHIP. Licensee is an independent contractor.
Neither party is the legal representative or agent of, or has
the power to obligate (or has the right to direct or supervise
the daily affairs of) the other for any purpose whatsoever.
Licensor and Licensee expressly acknowledge that the
relationship intended by them is a business relationship based
entirely on, and defined by, the express provisions of this
Agreement and that no partnership, joint venture, agency,
fiduciary or employment relationship is intended or created by
reason of this Agreement.
12
b. LICENSEE'S NOTICES TO PUBLIC CONCERNING INDEPENDENT STATUS.
Licensee will take all necessary steps including those
reasonably requested by Licensor to minimize the chance of a
claim being made against Licensor for anything that occurs at
the Hotel, or for acts, omissions or obligations of Licensee
or anyone associated or affiliated with Licensee or the Hotel.
Such steps may, for example, include giving notice in Guest
Suites, public rooms and advertisements, on business forms and
stationery, etc., making clear to the public that Licensor is
not the owner or operator of the Hotel and is not accountable
for what happens at the Hotel. Unless required by law,
Licensee will not use the words "Embassy", "Embassy Suites" or
any other names or mark associated with the System to incur
any obligation or indebtedness on behalf of Licensor. Licensee
shall not enter into or execute any contracts in the name
"Embassy Suites hotel", and all contracts for the Hotel's
operations and services at the Hotel shall be in the name of
Licensee or Licensee's management company. Likewise, the words
"Embassy", "Embassy Suites", or any similar words will not be
used to name or identify developments adjacent to or
associated with the Hotel, nor will Licensee use such names in
its general business in any manner separated from the business
of the Hotel.
16. MISCELLANEOUS.
a. SEVERABILITY AND INTERPRETATION. The remedies provided in this
Agreement are not exclusive. If any provision of this
Agreement is held to be unenforceable, void or voidable as
being contrary to the law or public policy of the jurisdiction
entitled to exercise authority hereunder, all remaining
provisions shall nevertheless continue in full force and
effect unless deletion of such provision(s) impairs the
consideration for this Agreement in a manner which frustrates
the purpose of the parties or makes performance commercially
impracticable. The provisions of this Agreement shall be
interpreted based on the reasonable intention of the parties
in the context of this transaction without interpreting any
provision in favor of or against any party whether or not such
party was the drafting party or by such party's position
relative to the other party. Any covenant, term or provision
of this Agreement which, in order to effect the intent of the
parties, must survive the termination of this Agreement, shall
survive any such termination.
b. BINDING EFFECT. This Agreement shall become valid when signed
by the parties hereto. It shall be deemed made and entered
into in the State of Tennessee and shall be governed and
construed under and in accordance with the laws of the State
of Tennessee. In entering into this Agreement, Licensee
acknowledges that it has sought, voluntarily accepted and
become associated with Licensor who is headquartered in
Memphis, Tennessee, and that this Agreement contemplates and
will result in business relationships with Licensor's
headquarter's personnel. The choice of law designation
permits, but does not require that all suits concerning this
Agreement be filed in the State of Tennessee.
c. EXCLUSIVE BENEFIT. This Agreement is exclusively for the
benefit of the parties hereto, and it may not give rise to
liability to a third party, except as otherwise specifically
set forth herein. No agreement between Licensor and anyone
else is for the benefit of Licensee.
d. ENTIRE AGREEMENT. Licensor and the Licensee each acknowledge
and warrant to each other that they wish to have all terms of
this business relationship defined in this written agreement,
Neither Licensor nor Licensee wishes to enter into a business
relationship with the other in which any terms or obligations
are the subject of alleged oral statements or in which oral
statements serve as the basis for creating rights or
obligations different than or supplementary to the rights and
obligations set forth in this Agreement. Accordingly, Licensor
and Licensee agree that this Agreement and any Attachments
hereto and the documents referred to herein, shall be
construed together and shall supersede and cancel any prior
and/or contemporaneous discussions or writings (whether
described as representations, inducements, promises,
agreements or any other term) between Licensor or anyone
acting on its behalf and Licensee or anyone acting on his, her
or its behalf, which might be taken to constitute agreements,
representations, inducements, promises or understandings (or
any equivalent to such terms) with respect to this Agreement
or the relationship between the parties and Licensor and
Licensee each agree that they have placed, and will place, no
reliance on any such discussions or writings. This Agreement
(including any Attachments and the documents referred to
herein), is the entire agreement between the parties and
contains all of the terms, conditions, rights and obligations
of the parties with respect to the Hotel or any other aspect
of the relationship between the parties. No future license or
offer of a license for additional locations or any other
business activity have been promised to Licensee and no such
license or offer
13
shall come into existence, except by means of a separate
writing, executed by Licensor's officer or such other entity
granting the license and specifically identified as a License
Agreement. No change, modification, amendment or waiver of any
of the provisions of this Agreement will be effective and
binding upon Licensor unless it is in writing, specifically
identified as an amendment to this Agreement and signed by
Licensor's officer.
e. LICENSOR'S WITHHOLDING CONSENT. Licensor may withhold its
consent, wherever required under this Agreement, if any
default or breach by Licensee exists under this Agreement.
Approvals and consents by Licensor will not be effective
unless evidenced by a writing duly executed on behalf of
Licensor.
f. NOTICES. Notices will be effective hereunder when and only
when they are written and delivered personally, sent via
facsimile or mailed by first class mail, next day express
delivery service or by certified mail to the appropriate party
at its address first stated above or to such person and at
such address as may be designated by notice hereunder.
g. GENERAL RELEASE. Licensee and its respective heirs,
administrators, executors, agents, representatives and their
respective successors and assigns, hereby release, remise,
acquit and forever discharge Licensor and its Entities and
their officers, directors, employees, agents, representatives
and their respective successors and assigns from any and all
actions, claims, causes of action, suits, rights, debts,
liabilities, accounts, agreements, covenants, contracts,
promises, warrants, judgments, executions, demands, damages,
costs and expenses, whether known or unknown at this time, of
any kind or nature, absolute or contingent, if any, at law or
in equity, on account of any matter, cause or thing whatsoever
which has happened, developed or occurred at any time from the
beginning of time to and including the date of Licensee's
execution and delivery to Licensor of this Agreement and that
they will not institute any suit or action at law or otherwise
against Licensor directly or indirectly relating to any claim
released hereby by Licensee. This release and covenant not to
sue shall survive the termination of this Agreement. Licensee
shall take whatever steps are necessary or appropriate to
carry out the terms of this release upon Licensor's request.
h. DESCRIPTIVE HEADINGS. The descriptive headings in this
Agreement are for convenience only and shall not control or
affect the meaning or construction of any provision in this
Agreement.
i. WARRANTIES. Licensee warrants, represents and agrees that all
statements made by Licensee in the Application submitted to
Licensor in anticipation of this Agreement and all other
documents and information submitted by Licensee are true,
correct and complete as of the date hereof and will continue
to be updated so that they are true, correct and complete.
This warranty and representation shall survive the termination
of this Agreement.
j. TIME. Time is of the essence in this Agreement.
k. INCLUDING. Including shall mean including, without limitation.
l. COUNTERPARTS. This Agreement may be executed in counterparts,
and each copy so executed and delivered shall be deemed an
original.
m. AMENDMENTS. If an amendment to this Agreement is required
prior to its execution, said amendment shall be made a part of
this Agreement as an Attachment. If an amendment to this
Agreement is necessary after its execution, said amendment
shall be made a part of this Agreement in the form of a
separate document.
n. PERFORMANCE REQUIREMENTS/RESPONSIBILITIES. Attachment A is
hereby incorporated by reference and made a part of this
Agreement to set forth certain of Licensee's performance
conditions and requirements.
17. EXPIRATION OF AGREEMENT. This Agreement constitutes an offer which must
be accepted by the Applicant named on the signature page hereof by
dating, executing and returning to Licensor two copies hereof (and all
attachments hereto, including, if required, the Guaranty) on or before
the date specified on the Rider.
14
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first stated above.
LICENSEE: LICENSOR:
- ---------------------------------- ----------------------------------
By: By:
------------------------------- -------------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
---------------------------- ----------------------------
Witness: Witness:
--------------------------- ---------------------------
Date: Date:
----------------------------- -----------------------------
15
GUARANTY
Location:
As an inducement to _____________ Inc. ("Licensor") to execute the above License
Agreement, the undersigned, jointly and severally, hereby unconditionally
warrant to Licensor and its successors and assigns that all of Licensee's
representations in the License Agreement and the application submitted by
Licensee to obtain the License Agreement are true and guarantee that all of
Licensee's obligations under the above License Agreement, including any
amendments thereto whenever made (the "Agreement"), will be punctually paid and
performed.
Upon default by Licensee or notice from Licensor, the undersigned will
immediately make each payment and perform each obligation required of Licensee
under the Agreement. Without affecting the obligations of the undersigned under
this Guaranty, Licensor may without notice to the undersigned extend, modify or
release any indebtedness or obligation of Licensee, or settle, adjust or
compromise any claims against Licensee. The undersigned waive notice of
amendment of the Agreement and notice of demand for payment or performance by
Licensee.
Upon the death of an individual guarantor, the estate of such guarantor will be
bound by this Guaranty but only for defaults and obligations hereunder existing
at the time of death, and the obligations of the other guarantors will continue
in full force and effect.
The Guaranty constitutes a guaranty of payment and performance and not of
collection, and each of the guarantors specifically waives any obligation of
Licensor to proceed against Licensee on any money or property held by Licensee
or by any other person or entity as collateral security, by way of set off or
otherwise. The undersigned further agree that this Guaranty shall continue to be
effective or be reinstated as the case may be, if at any time payment or any of
the guaranteed obligations is rescinded or must otherwise be restored or
returned by Licensor upon the insolvency, bankruptcy or reorganization of
Licensee or any of the undersigned, all as though such payment has not been
made.
This Guaranty shall be governed and construed under and in accordance with the
laws of the State of Tennessee.
IN WITNESS WHEREOF, each of the undersigned has signed this Guaranty as of the
date of the above Agreement. Witnesses.
Witnesses: Guarantors:
FelCor Suites Limited Partnership
By: FelCor Suite Hotels, Inc.
- ---------------------------------- -----------------------------
-----------------------------
By: FelCor Suite Hotels, Inc.
- ---------------------------------- -----------------------------
-----------------------------
16
ATTACHMENT A-PERFORMANCE CONDITIONS
CHANGE OF OWNERSHIP
A. CONSULTATION. Licensee or its representative(s) shall meet with
Licensor at a location selected by Licensor, within 45 days following
the date of Licensee's receipt of a request from Licensor for
consultation and coordination with the project manager assigned to
Licensee by Licensor.
B. WORK AND PURCHASE REQUIREMENT. Attachment C, the Product Improvement
Plan (the "PIP"), is incorporated by reference, attached to and made a
part of this Agreement. Licensee shall perform the renovation and/or
construction work and purchase the items described on the PIP (the
"Work") on or before the completion date specified on the Rider.
Whether or not indicated on the PIP, the Work shall include Licensee's
purchasing and/or leasing and installing all fixtures, equipment,
furnishings, furniture, signs, computer terminals and related
equipment, supplies and other items which would be required of a new
Embassy Suites licensee under the Manual and such other equipment,
furnishings and supplies as may be required by Licensor in order to
operate the Hotel. Licensee shall be solely responsible for obtaining
all necessary licenses, permits and zoning variances required for the
Hotel.
C. APPROVAL OF ARCHITECT/ENGINEER AND CONTRACTOR. Licensor shall have the
right to approve the architect/engineer, general contractor and major
subcontractors for the Work. The Work shall not commence until such
approval has been granted, which approvals may be conditioned on
bonding of the contractors. Prior to commencement of the Work, if
requested by Licensor, Licensee shall submit to Licensor, resumes and
financial statements of the architect/engineer, general contractor and
any major sub-contractors for the Work and such additional information
concerning their experience and financial responsibility as Licensor
may request.
D. APPROVAL OF PLANS. On or before the Plans submission date specified on
the Rider, Licensee shall submit to Licensor, Licensee's plans and
specifications and drawings for the Work, including the proposed
furnishings, fixtures, equipment and signs (collectively, "Plans") for
approval. Once Licensor has approved the Plans, no change shall be made
to the Plans without the advance consent of Licensor. In approving the
Plans, Licensor does not in any manner warrant the depth of its
analysis or assume any responsibility for the efficacy of the Plans or
the resulting construction. Licensee shall cause the Hotel renovation
and/or construction to be in accordance with this Agreement, the
approved Plans, the Manual and the PIP.
E. COMMENCEMENT; COMPLETION. Licensee shall commence the Work on or before
the date specified on the Rider and shall continue the Work
uninterrupted (except for interruption by reason of events constituting
force majeure) until it is completed. Notwithstanding the occurrence of
any events constituting force majeure, or any other cause, the Work
shall be completed and the Hotel shall be furnished, equipped, and
shall otherwise be in compliance with this Agreement not later than the
date specified on the Rider. Licensor shall have the sole right to
determine whether the Work has been completed in accordance with this
Agreement, the approved Plans, the Manual and the PIP.
F. INSPECTION. During the course of the Work, Licensee shall, and Licensee
shall cause the architect, engineer, contractors, and subcontractors to
cooperate fully with Licensor for the purpose of permitting Licensor to
inspect the Hotel in order to determine whether the Work is being done
in accordance with this Agreement and shall provide Licensor with
samples of construction materials, etc. as Licensor may request.
G. REPORTS. Licensee shall submit to Licensor each month after the date
hereof (or more frequently if Licensor shall so request) a report
showing progress made toward fulfilling the terms of this Agreement.
H. ACQUISITION OF EQUIPMENT, FURNISHINGS, AND SUPPLIES/STAFFING. Licensee
shall order, purchase and/or lease and install all fixtures, equipment,
furnishings, furniture, signs, computer terminals and related
equipment, supplies and other Items required by Licensor, this
Agreement, the approved Plans, the Manual and the PIP.
In accordance with the Manual and such other instructions as are
furnished to Licensee by Licensor, Licensee shall cause to be hired a
staff to operate the Hotel, and all such personnel shall be trained as
required by the Manual. All costs and expenses incurred directly or
indirectly in hiring and training such staff shall be paid by Licensee,
except as expressly provided otherwise in the Manual.
I. COST OF CONSTRUCTION AND EQUIPPING. Licensee shall bear the entire cost
of the Work, Including the cost of the plans, professional fees,
licenses and permits, equipment, furniture, furnishIngs and supplies.
J. LIMITATION OF LIABILITY. Notwithstanding the right of Licensor to
approve the Plans, the architect, engineer and certain contractors, and
to inspect the Work and the Hotel, Licensor shall have no liability or
obligation with respect to the Work, or the design and construction of
the Hotel, as the rights of Licensor are being exercised solely for the
purpose of assuring compliance with the terms and conditions of this
Agreement. Licensor does not undertake to approve the Hotel as
complying with governmental requirements or as being safe for guests or
other third parties. Licensee should not rely upon Licensor's approval
for any purpose whatsoever except compliance with Licensor's then
prevailing standards and requirements of the Manual.
K. CONDITIONAL AUTHORIZATION. Licensor may conditionally authorize
Licensee to continue to operate the Hotel as an Embassy Suites hotel
even though Licensee has not fully complied with the terms of this
Agreement. Under certain circumstances, Licensor may suspend services
to the Hotel (including reservation services) while the Work is being
performed by Licensee.
L. PERFORMANCE OF AGREEMENT. Licensee agrees to satisfy all of the terms
and conditions of this Agreement, and to equip, supply and staff the
Hotel in accordance with this Agreement and to cooperate with Licensor
in connection therewith. As a result of Licensee's efforts to comply
with the terms and conditions of this Agreement, Licensee will incur
substantial expense and expend substantial time and effort. Licensee
acknowledges and agrees that Licensor shall have no liability or
obligation to Licensee for any losses, obligations, liabilities or
expenses incurred by Licensee if this Agreement is terminated because
Licensee has not complied with the terms and conditions of this
Agreement.
2
ATTACHMENT B
RIDER TO LICENSE AGREEMENT
<Table>
Name and Address of Licensee: ________________________________________
c/o FelCor Suite Hotels, Inc.
545 E. John Carpenter Freeway, Suite 1300
Irving, Texas 75062-3933
Location of Hotel: 2727 Stemmons Freeway
Dallas, Texas 75207
Number of Approved Guest Suites:
Term of License to Expire: 20 years from closing on the purchase of the Hotel
Plans submission date
Preliminary Plans:
Upgrading Plans and Specifications: Within 30 days of closing on the purchase of the Hotel
Construction or Work commencement date: Upon closing on the purchase of the Hotel
Construction or Work Completion date: Within the time frames established in the Product Improvement
Plan
Additional Requirements: Within 30 days of closing, Licensee shall provide Licensor with
a copy of the lease agreement between FelCor Suites Limited
Partnership and DJONT Leasing, L.L.C.
Agreement expiration date:
(Paragraph 17}
Ownership of Licensee:
</Table>
EXHIBIT "B"
DEAL SPECIFIC TERMS
Term:
Initial Minimum Balance for the Bank Account(s) for the Hotel:
Initial Lessee's Representative:
Disbursement Schedule:
B-1
Notices: Lessee: Manager:
545 East John Carpenter Freeway ____________________________
Suite 1300
Irving, Texas 75062-3933
Fax: (214) 444-4949
Attn:
with a copy to:
______________________________
PERFORMANCE TEST; TERMINATION RIGHTS:
A. Lessee shall have the right to terminate this Agreement if,
beginning in the first full calendar year of Hotel operations, Manager fails to
achieve, in any two consecutive calendar years, a Gross Operating Profit which
is at least eighty percent (80%) of the amount set forth in the respective
annual Operating Budget for Gross Operating Profit ("Budgeted GOP") provided,
however, that if within sixty (60) days of receipt of a notice from Lessee that
Lessee intends to terminate this Agreement, Manager pays in cash to Lessee the
difference between the achieved Gross Operating Profit and ninety percent (90%)
of the Budgeted GOP (hereinafter referred to as a "Fund Up Cure") for the second
of the two consecutive calendar years in which shortfalls occurred, then Lessee
shall not be entitled to terminate this Agreement. Notwithstanding such Fund Up
Cure of the second calendar year, if there is a failure to reach eighty percent
(80%) of Budgeted GOP in a third consecutive calendar year, no Fund Up Cure
shall be available. If Lessee is entitled to and elects to terminate this
Agreement, Lessee shall give written notice to Manager within ninety (90) days
following delivery to Lessee of the annual financial statements for the calendar
year. If such notice is not provided by Lessee to Manager within such ninety-day
(90) period, Lessee shall be deemed to have waived its right hereunder to
terminate this Agreement with respect to the calendar year as to which the
failure occurred. In the event Lessee has the right to terminate with respect to
a calendar year but waives such right, Lessee's right to terminate shall carry
forward and shall be applicable to the next succeeding calendar year if Manager
fails to achieve eighty percent (80%) of Budgeted GOP for the next succeeding
year. For purposes of this paragraph, the term "Gross Operating Profit" shall
mean the amount, if any, by which Adjusted Gross Revenues for any calendar year
exceed Operating Costs for such calendar year.
B. In the event there is a Change in Control of Manager which satisfies
the requirements of Section 9.06(c) of this Agreement, (i) the required level of
performance contemplated in paragraph A above shall be increased from eighty
percent (80%) to ninety percent (90%), and (ii) the Fund Up Cure shall be an
amount equal to the difference between the achieved Gross Operating Profit and
one hundred percent (100%) of Budgeted GOP.
B-2
C. The provisions of paragraphs A and B above shall not apply in any
calendar year in which the operation of the Hotel, or the use of the Hotel's
facilities, are significantly disrupted by casualty loss, strike, eminent
domain, or other events of Force Majeure that are beyond the reasonable control
of Manager, or major repairs to or refurbishment of the Hotel. In the event
Lessee exercises the right of termination contemplated in paragraph A or B
above, Lessee shall have no obligation to pay any termination fee or other
damages to Manager as a consequence of such termination except that Lessee shall
be liable to Manager and shall pay immediately upon such termination all fees
earned and other amounts and expenses payable or reimbursable to Manager
pursuant to this Agreement.
B-3
EXHIBIT "C"
MANAGEMENT FEES
1. Defined Terms. Certain capitalized terms in this Exhibit "C" are
defined in Paragraph 6 below; other capitalized terms have the meaning given
such terms herein or in the Agreement.
2. Basic Management Fee. Commencing with the Commencement Date, and
continuing during the Term of this Agreement, Lessee shall pay to Manager a
basic management fee (the "Basic Management Fee"). The Basic Management Fee
shall be payable monthly in an amount equal to two percent (2%) (such
percentage is referred to herein as the "Applicable Percentage") of Adjusted
Gross Revenues.
3. Incentive Management Fee. Commencing with the Commencement Date, and
in addition to the Basic Management Fee, Manager shall be paid an incentive
management fee (the "Incentive Management Fee") in an amount equal to fifty
percent (50%) of Income Before Lessees Overhead Expenses, up to a maximum of
two percent (2%) of Adjusted Gross Revenues. The Incentive Management Fee
shall be payable monthly at the same time the Basic Management Fee is due and
payable.
Notwithstanding anything to the contrary contained herein or in that
certain Management Agreement _____________________________________ of even date
by and between Manager and Lessee related to the ______________________________
___________________________________________________________________________, the
sum of (i) the Incentive Management Fee payable pursuant to this Agreement plus
(ii) the Incentive Management Fee as defined in, and payable pursuant to, the
Syracuse Management Agreement, shall not exceed either:
(A) Fifty percent (50%) of the sum of (i) the Income Before
Lessees Overhead Expenses plus (ii) the Income Before Lessees
Overhead Expenses as defined in the ________________________
Agreement, or
(B) Two percent (2%) of the sum of (i) the Adjusted Gross Revenues
plus (ii) the Adjusted Gross Revenues as defined in the
Syracuse Management Agreement.
4. Books and Records. Manager shall maintain in the books and records
of the Hotel all Management Fees that have been paid and shall set forth therein
the accrual of all Management Fees that have been earned but are not yet due and
payable.
5. Proration. With respect to any calculation in this "Exhibit C" that
is based on a Term Year, such calculation shall be prorated for any partial Term
Year based on the actual number of days elapsed in such partial Term Year that
is applicable to the calculation.
6. Definitions:
The term "Adjusted Gross Revenues" shall mean Gross Revenues less the
following revenues actually received by the Hotel and included in Gross
Revenues: (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 sums and
C-1
credits received by Lessee for lost or damaged merchandise; (iv) any sales
taxes, excise taxes, gross receipt taxes, admission taxes, entertainment taxes,
tourist taxes or charges; (v) any proceeds from the sale or other disposition of
the Hotel, furnishings and equipment or other capital assets; (vi) any fire and
extended coverage insurance proceeds; (vii) any condemnation awards; (viii) any
proceeds of financing or refinancing of the Hotel; and (ix) any interest on the
Bank Account(s) and the Operating Deficit Account.
The term "Excluded Lease Charges" shall mean all of the following: (i)
late charges, penalties, fines, interests and cost associated with or
attributable to non-payment or late payment of any obligation of Lessee or the
Partnership; (ii) damages and liabilities (including legal fees and other legal
costs) arising out of any default by Lessee or the Partnership under the
Percentage Lease, the Management Agreement, the License Agreement any of the
Financing Documents or any obligation owed to a third party; (iii) payments or
liabilities arising under any indemnification obligation contained in the
Percentage Lease; (iv) any cost or expense included in the calculation of
Operating Costs; (v) payments made or costs incurred in connection with the
exercise of any purchase option contained in the Percentage Lease; and (vi)
appraisal costs contained in Article XXXIII of the Percentage Lease.
The term "Gross Revenues" shall be defined as all revenues and income
of any nature derived directly or indirectly from the Hotel or from the use or
operation thereof, whether on or off the site, including total room sales, food
and beverage sales, if any, laundry, telephone, telegraph and telex revenues,
other income, rental or other payments from lessees, sublessees, licensees and
concessionaires (but not the gross receipts of such lessees, sublessees,
licensees or concessionaires) and the proceeds of business interruption, use,
occupancy or similar insurance.
The term "Income Before Lessee's Overhead Expenses" shall mean Adjusted
Gross Revenues less the sum of (i) Operating Costs, (ii) lease payments under
Qualifying Capital Leases, and (iii) Percentage Lease Payments; provided,
however, in calculating Income Before Lessee's Overhead Expenses in deduction
shall be made for (a) deposits into the Operating Deficit Account, (b) debt
service on any borrowings of Lessee or the Partnership, (c) deposits into the
Reserve Account, (d) Partnership Costs (as defined in Section 3.01(a) above) or
(e) administrative and general overhead expenses of Lessee.
The term "New Hotel" shall mean any Other Hotel and any other hotels
with respect to which Lessee acquires a fee simple or leasehold interest after
the Effective Date.
The term "Operating Costs" shall mean 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 which are normally charged as
a cost of operation under standard accounting practices of Manager, including
but not limited to: (i) the Management Fee; (ii) all amounts payable to Manager
under the License Agreement; (iii) all reimbursable expenses due Manager; (iv)
the cost of operating equipment and operating supplies, wages, salaries and
employee fringe benefits, advertising and promotional expenses, the cost of
personnel training programs, utility and energy costs, operating licenses and
permits, grounds and landscaping maintenance costs and equipment rentals
approved by Manager as an Operating Cost; (v) all expenditures made for
maintenance and repairs to keep the Hotel in good condition and repair,
specifically excluding capitalized expenditures for capital replacements; and
(vi) premiums and charges
C-2
on the insurance coverages specified on Exhibit "D" incurred after the
Commencement Date. Operating Costs do not include Ownership Costs.
The term "Ownership Costs" shall mean (i) depreciation of the Hotel,
furnishings, fixtures and equipment; (ii) rental pursuant to a ground lease, if
any, or any other lease payments; (iii) debt service (interest and principal) on
any mortgage(s) encumbering the Lessee's leasehold estate or the Partnership's
fee estate in the Hotel; (iv) property taxes and assessments; (v) amortization
of pre-opening expenses; (vi) expenditures for capital replacements (to the
extent actually capitalized rather than expensed); (vii) audit, legal and other
professional or special fees; (viii) premiums for casualty insurance coverages
specified in Exhibit "D" (ix) equipment rentals for capitalized leases; (x)
administrative and general expenses and disbursements of Owners, including
compensation of employees of Owners; (xi) Federal, State and local Franchise and
Income Taxes; (xii) amortization of bond discounts and mortgage expenses; (xiii)
such other costs or expenses which are normally treated as "Ownership Costs"
under the standard accounting practices of Manager (which are in accordance with
generally accepted accounting principles and are substantially similar to the
Hotel and Motel Standard System of Accounts); (xiv) deposits into the Operating
Deficit Account; and (xv) deposits into the Reserve Fund.
The term "Percentage Lease Payments" shall mean payments of Base Rent,
Percentage Rent and other regularly scheduled payments or charges required to be
paid by Lessee under the Percentage Lease to the extent such payments relate to
the ownership and operation of the Hotel, excluding, however, Excluded Lease
Charges.
The term "Qualifying Capital Leases" shall mean leases of equipment and
other personal property that are capital in nature and are typically leased
rather than purchased by Manager in Embassy Suites hotels owned by Manager.
The term "Term Year" shall mean (i) with respect to the first Term
Year, the period ending on the last day of the twelfth full calendar month after
the Commencement Date, and (ii) with respect to each other Term Year, a
twelve-month period ending on the applicable anniversary date of the first Term
Year.
C-3
EXHIBIT "D"
INSURANCE
In accordance with Section 3.01(o), Manager, on behalf of Lessee and at
Lessee's expense, shall procure the insurance coverages hereinafter set forth
and ensure that they are in full force and effect on the Commencement Date and
that they remain in full force and effect throughout the Term of this Agreement.
All cost(s) and expense(s) incurred by Manager in procuring the following
insurance coverages shall be Operating Costs and shall be paid from the Bank
Account(s):
Coverages: Amounts Of Insurance:
Workers' Compensation Statutory
Employer's Liability $1,000,000
Fidelity (Employee Dishonesty) As required
Money and Securities As required
Builders Risk Completed value of the Hotel
All risk for term of the initial and any subsequent Hotel
construction and renovation
Real and Personal Property 100% replacement value of
building and contents
Blanket Coverage
Replacement Cost - All risk (including fire and earthquake)
Boiler Machinery - written on a comprehensive form
Business Interruption Calculated yearly based on
estimated Hotel revenues
Blanket Coverage for the perils insured against under Real and
Personal Property in this Exhibit "D." This coverage shall
specifically cover Manager's loss of Management Fees. The
business interruption insurance shall be for a twelve (12)
month indemnity period.
Owner's Protective Liability $5,000,000
D-1
All risks from construction and renovation occurring prior to
the Commencement Date and all risks from Hotel construction
and renovation projects costing more than $250,000 occurring
after the Commencement Date
Comprehensive General Liability $10,000,000 per location
Including -
Premises - Operations
Products/Completed Operations
Contractual
Personal Injury
Liquor Liability/Dram Shop (if applicable)
Elevators and Escalators
Automobile Liability $10,000,000
Owned Vehicles
Non-Owned Vehicles
Uninsured Motorist where required by statute
Automobile Physical Damage (Optional)
Comprehensive (To value if insured)
Collision
All insurance coverages provided for under this Exhibit "D" shall be
effected by policies issued by insurance companies (i) that are authorized to do
business in the state in which the Hotel is located; and (ii) that are of good
reputation and of sound and adequate financial responsibility, having a Best
Rating of B + VI, or better, or a comparable rating if Best ceases to publish
its ratings or materially changes its rating standards or procedures.
Lessee hereby authorizes Manager to utilize the services of and/or
place the insurance set forth in this Exhibit "D" with (i) any subsidiary or
affiliated company of Promus or its successor corporation in the insurance
business as Manager deems appropriate; or (ii) a third party insurance carrier,
in each case meeting the specifications set forth above.
Manager shall deliver to Lessee duly executed certificates, and, if
requested by Lessee and if available, duplicate copies of all policies of
insurance to be procured hereunder, including existing, additional and renewal
policies.
Each policy of insurance maintained in accordance with this Exhibit "D"
to the extent obtainable, shall specify that such policies shall not be canceled
or materially changed without at least thirty (30) days prior written notice to
Lessee and Manager.
D-2
Except as otherwise provided in the Agreement, Manager and Lessee each
waives, releases and discharges the other, but only to the extent of collectible
insurance proceeds, from all claims or demands which each may have or acquire
against the other or the other's subsidiaries, affiliates, directors, officers,
agents, employees, independent contractors or partners, with respect to any
claims for any losses, damages, liabilities or expenses (including attorneys'
fees) incurred or sustained by either of them on account of injury to persons or
damage to property or business arising out of the ownership, management,
operation and maintenance of the Hotel, regardless whether any such claim or
demand may arise because of the fault or negligence of the other party or its
subsidiaries, affiliates, officers, employees, directors, agents or independent
contractors. Each policy of insurance maintained in accordance with this Exhibit
"D" shall contain a specific waiver of subrogation reflecting the above.
All policies of insurance provided for under this Exhibit "D" shall be
carried in the name of the Owners and Manager, and losses thereunder shall be
payable to the parties as their respective interests may appear. All liability
policies shall name the Lessee and Manager, and in each case any of their
affiliated or subsidiary companies which they may specify, and their respective
directors, officers, agents, employees and partners as additional named
insureds.
All such policies of insurance shall be written on an "occurrence"
basis to the extent obtainable.
Either Manager or Lessee, by notice to the other, shall have the right
to require that the minimum amount of insurance to be maintained with respect to
the Hotel under this Exhibit "D" be increased to make such insurance comparable
with prudent industry standards and to reflect increases in liability exposures,
taking into account the size and location of the Hotel.
D-3
EXHIBIT "E"
OTHER HOTELS
E-1
E-2