CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT. ASTERISKS DENOTE OMISSIONS.
EXECUTION VERSION
MANAGEMENT CONTRACT
FOR
PLANET HOLLYWOOD HOTEL AND CASINO, A SHERATON HOTEL
BETWEEN
SHERATON OPERATING CORPORATION
AND
OPBIZ, LLC
APRIL 23, 2003
<Table>
1. FUNDAMENTAL BUSINESS TERMS ...........................................................1
1.1 DEFINITIONS ................................................................1
1.2 TERM SHEET .................................................................1
2. GENERAL MANAGEMENT AND OPERATIONS ....................................................2
2.1 GENERAL MANAGEMENT SERVICES ................................................2
2.2 DUTIES OF OWNER ............................................................3
2.3 DUTIES OF MANAGER ..........................................................5
2.4 OPERATING PLAN .............................................................6
2.5 CAPITAL EXPENSES ...........................................................7
2.6 BOOKS AND RECORDS; FINANCIAL STATEMENTS ....................................7
2.7 PERSONNEL ..................................................................9
2.8 CENTRALIZED SERVICES ......................................................10
2.9 HOTEL MARKETING PROGRAM ...................................................12
2.10 AUTOMATION ................................................................13
2.11 PURCHASING ................................................................13
2.12 HOTEL PARKING .............................................................13
2.13 INITIAL CAPITAL PROGRAM AND TRANSITIONAL OPERATION ........................13
2.14 LIMITATIONS ON MANAGER'S DUTIES ...........................................14
2.15 LIMITATION ON MANAGER'S LIABILITY .........................................14
2.16 CHAIN CONFLICTS ...........................................................15
2.17 SPG PROGRAM/GENERAL SALES OFFICE ..........................................15
3. FEES AND EXPENSES ...................................................................15
3.1 MANAGEMENT FEE ............................................................15
3.2 CENTRALIZED SERVICES CHARGES ..............................................16
3.3 REIMBURSABLE EXPENSES .....................................................16
3.4 PLACE AND MEANS OF PAYMENT ................................................17
3.5 BANK ACCOUNTS .............................................................17
3.6 DISBURSEMENT OF FUNDS TO OWNER; OWNER'S PROVISION OF FUNDS ................18
4. TERM AND TERMINATION ................................................................19
4.1 TERM OF CONTRACT ..........................................................19
4.2 EVENTS OF DEFAULT .........................................................19
4.3 SPECIAL RIGHTS OF MANAGER .................................................20
4.4 SPECIAL RIGHTS OF OWNER ...................................................21
4.5 ACTIONS TO BE TAKEN ON TERMINATION ........................................22
5. INSURANCE ...........................................................................23
5.1 MAINTENANCE OF INSURANCE COVERAGE .........................................23
</Table>
ii
<Table>
5.2 SPECIAL CONDITIONS OR HAZARDS..............................................24
5.3 PARTIES INSURED AND AMOUNTS OF COVERAGE....................................24
5.4 EVIDENCE OF INSURANCE......................................................24
5.5 DUTIES OF OWNER............................................................25
5.6 REVIEW OF INSURANCE........................................................25
5.7 WAIVER OF LIABILITY........................................................25
6. MORTGAGES............................................................................25
6.1 AUTHORIZATION TO MORTGAGE HOTEL............................................25
6.2 SUBORDINATION OF MANAGER'S INTEREST........................................26
6.3 PROTECTION OF MANAGER'S INTEREST...........................................27
7. DESTRUCTION; TAKING..................................................................27
7.1 DAMAGE OR DESTRUCTION......................................................27
7.2 TAKING.....................................................................28
7.3 EFFECT OF TERMINATION......................................................28
8. BUSINESS INTERRUPTION................................................................28
8.1 BUSINESS INTERRUPTION......................................................28
8.2 PROCEEDS OF BUSINESS INTERRUPTION INSURANCE................................29
9. ASSIGNMENTS AND SALE OF THE HOTEL....................................................29
9.1 RESTRICTIONS ON ASSIGNMENT.................................................29
9.2 ASSIGNMENT BY MANAGER......................................................29
9.3 ASSIGNMENT BY OWNER........................................................30
9.4 EFFECT OF PERMITTED ASSIGNMENTS............................................31
9.5 FURTHER RESTRICTION ON OWNER...............................................31
10. DISPUTES.............................................................................31
10.1 ALTERNATIVE DISPUTE RESOLUTION REQUIRED....................................31
10.2 COMPENSATION OF MEDIATOR OR ARBITRATOR.....................................32
10.3 VENUE, JURISDICTION AND JURY WAIVER........................................32
10.4 EXPENSES...................................................................32
10.5 SURVIVAL AND SEVERANCE.....................................................33
11. TRADEMARKS AND OTHER PROPRIETARY MATERIALS...........................................33
11.1 OWNERSHIP OF TRADEMARKS....................................................33
11.2 USE OF TRADEMARKS..........................................................33
11.3 NAME OF HOTEL..............................................................34
11.4 OBLIGATIONS OF OWNER.......................................................34
11.5 PROPRIETARY INFORMATION....................................................34
12. MISCELLANEOUS........................................................................34
</Table>
iii
<Table>
12.1 INTERPRETATION.............................................................34
12.2 REPRESENTATIONS AND WARRANTIES OF MANAGER..................................35
12.3 COVENANTS, REPRESENTATIONS AND WARRANTIES OF OWNER.........................35
12.4 USE OF AFFILIATES BY MANAGER...............................................36
12.5 GOVERNING LAW..............................................................36
12.6 WAIVERS, MODIFICATIONS, REMEDIES...........................................36
12.7 SEVERABILITY OF PROVISIONS.................................................37
12.8 NOTICES....................................................................37
12.9 INDEMNIFICATION............................................................37
12.10 FORCE MAJEURE EVENTS.......................................................38
12.11 SUCCESSORS AND ASSIGNS.....................................................38
12.12 ESTOPPEL CERTIFICATES......................................................38
12.13 ENTIRE CONTRACT............................................................39
12.14 COUNTERPARTS...............................................................39
12.15 RELATIONSHIP OF THE PARTIES................................................39
12.16 CONFIDENTIALITY............................................................39
12.17 FURTHER ASSURANCE..........................................................39
12.18 AGENCY AND AGENCY WAIVERS..................................................39
12.19 IRREVOCABILITY OF CONTRACT.................................................40
12.20 CASINO AND THEATRICAL/PERFORMANCE FACILITIES...............................40
12.21 NO PERSONAL LIABILITY......................................................41
</Table>
iv
<Table>
EXHIBIT A LIST OF COMPONENTS AND FACILITIES; LEGAL DESCRIPTION
EXHIBIT B CREDIT AGREEMENT
EXHIBIT C DEFINITIONS
EXHIBIT D CENTRALIZED SERVICES CHARGES
EXHIBIT E HOTEL AUTOMATION SERVICES
EXHIBIT F REQUIRED INSURANCE COVERAGES
</Table>
v
MANAGEMENT CONTRACT
This Management Contract (this "Contract") is dated as of April 23,
2003 and is made effective as of the Effective Date specified in Article I below
by and between the Owner and Manager specified in Article I below. Owner and
Manager are sometimes referred to collectively in this Contract as the "Parties"
and individually as a "Party."
RECITALS
A. Owner desires to purchase a certain real property and
related assets located at 3667 Las Vegas Boulevard South, Las Vegas, Nevada
known on the date hereof as "The Aladdin Hotel and Casino" and containing
approximately 2,567 guest rooms, a casino and retail, convention, and
entertainment facilities (the "Complex").
B. Subject to completing its acquisition of the Complex, Owner desires
to engage Manager as an independent contractor to assist Owner in the
development, management, operation and promotion of the first-class hotel
comprising a part of the Complex (the "Hotel"), and to provide Owner and the
Hotel certain services as described herein. The Hotel is located on the real
property as legally described on Schedule 1 to Exhibit A, and includes the
components and facilities listed on Exhibit A, including all FF&E associated
therewith. The Hotel does not include the portion of the Complex operated as:
(i) a casino (the "Casino"); (ii) entertainment and music areas; (iii) the
retail areas; (iv) the parking area subject to the Common Parking Area Agreement
(the "Common Parking Area"); or (v) the portion of the Complex Owner (or an
affiliate) intends to develop into a fractional ownership vacation/resort as
designated on Schedule 2 to Exhibit A (the "Timeshare Project").
C. In connection with its contemplated acquisition of the Complex,
Owner will become a party to that certain Amended and Restated Loan and
Facilities Agreement by and among Owner, as borrower, the lenders party thereto,
as lenders, and BNY Asset Solutions LLC ("Agent"), as agent, providing for the
terms and conditions under which such lenders have agreed to extend certain
credit arrangements to Owner (the "Credit Agreement") attached hereto as Exhibit
B.
AGREEMENTS
In consideration of the mutual promises, covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Parties agree as follows:
1. FUNDAMENTAL BUSINESS TERMS
1.1 DEFINITIONS
All capitalized terms used without definition in this Contract shall
have the meanings assigned to such terms in Exhibit C.
1.2 TERM SHEET
The following are certain fundamental business terms on which this
Contract is based. References to these terms in the other sections and articles
of this Contract shall be deemed to incorporate the specific provisions set
forth below with respect to such terms. This Section 1.2 is sometimes referred
to in this Contract as the "Term Sheet."
EFFECTIVE DATE: The date on which Owner and Manager shall have each executed
this Contract.
OWNER: OpBiz, LLC, a Nevada limited liability company.
1
OWNER'S NOTICE
ADDRESS: WITH A COPY TO
Bay Harbour Management, L.C. Planet Hollywood
International, Inc.
885 Third Avenue 34th Floor 8663 Commodity Circle
New York, NY 10022 Orlando, FL 32819
Attn: Mr. Douglas P. Teitelbaum Attn; Mr. Robert Earl
Fax: 212/371-7497 Fax: 407/876-1836
MANAGER: Sheraton Operating Corporation, a Delaware corporation.
MANAGER'S NOTICE
ADDRESS: WITH A COPY TO THE SAME
ADDRESS, MARKED:
1111 Westchester Avenue
White Plains, New York 10604 Attn: President, North
Attn: General Counsel America Division
Fax: 914.640.8260
NAME OF HOTEL: Subject to Section 2.13.2 and Section 11.3, Planet
Hollywood Hotel and Casino, a Sheraton Hotel or other
combination of words that includes the Brand Name (but need
not include any reference to Planet Hollywood), as
determined from time to time by Owner in consultation with
Manager.
BRAND NAME: Sheraton, subject to Sections 2.13.2 and Section 11.3
OPENING DATE: The Opening Date shall be the date on which Owner completes
the acquisition of the Complex pursuant to the Purchase
Agreement.
OPERATING
TERM: The period commencing on the Opening Date and expiring at
11:59 p.m. on December 31 of the calendar year in which the
twentieth (20th) anniversary of the Opening Date occurs.
MANAGEMENT FEE: Four percent (4%) of Gross Operating Revenue for each
Operating Year during the Operating Term, and two percent
(2%) of Rental Income for each Operating Year during the
Operating Term.
MINIMUM INITIAL
WORKING CAPITAL: [***] (provided that such amount shall be the initial
working capital for the entire Complex).
INITIAL
CAPITAL PROGRAM: Owner shall use diligent efforts to cause the Capital
Improvements to be completed in accordance with the Initial
Capital Program set forth in this Contract (the "Initial
Capital Program") and Manager shall consult with and advise
Owner regarding the Initial Capital Program as provided in
this Contract.
[***] [***]
2. GENERAL MANAGEMENT AND OPERATIONS
2.1 GENERAL MANAGEMENT SERVICES
Subject to the provisions of this Contract, Owner hereby engages
Manager as an independent contractor, and Manager hereby agrees to be so engaged
and to provide various services to the Owner and the Hotel and to otherwise
consult with, advise and assist Owner in the management, operation and promotion
of all aspects of the Hotel as the exclusive provider of the management services
described herein to be provided by Manager to the Hotel
Confidential information redacted and filed separately with the Commission
2
during the Operating Term.
2.2 DUTIES OF OWNER
During the Operating Term, Owner shall, subject to the terms of this
Contract and Manager's obligations hereunder, cause the Hotel to be operated,
serviced, maintained and refurbished: (a) at least at a level of service and
quality generally considered to be "first class" and equal to or better than the
level of service and quality prevailing from time to time at the Managed Hotels,
but in no event less than the Comparable Standards as defined in and required
under the Credit Agreement, (b) in a manner consistent with the requirements and
limitations set forth in this Contract (including those relating to the
Operating Plan and variations thereto permitted pursuant to this Contract), (c)
in accordance with standards, policies and programs established by Manager and
in effect from time to time that are applicable to the operation of Managed
Hotels, including the standards and policies applicable to all phases of
operation and programs including purchasing programs, sales promotion programs
and quality improvement programs to the extent applicable to the Hotel pursuant
to the terms of this Contract and (d) to the extent consistent with the
standards described in clauses (a) through (c) above, in a manner reasonably
expected to (i) protect and preserve the assets that comprise the Hotel; and
(ii) optimize over the Operating Term the value and financial performance of the
Casino and the Hotel. Owner may, in its sole discretion, require that the Hotel
be operated to a higher standard of service and quality than that prevailing,
from time to time at the Managed Hotels, but not to a standard materially higher
than the highest quality hotels within the Managed Hotels. The foregoing
standards, policies, programs and objectives of operation shall hereinafter be
referred to collectively as the "Operating Standard." The Operating Standard for
the Hotel, including the standards of quality, appearance and service, shall be
established by Owner from time to time and shall be of equal or higher quality
in all material respects with all material elements of the level of service and
quality prevailing from time to time at the Managed Hotels, but in no event less
than the Comparable Standards.
To remain competitive and respond to new technology, guest needs, and
market conditions, Manager may modify, alter, change, delete or add to the
standards, policies and programs that comprise the Operating Standard for the
Managed Hotels and Owner acknowledges such rights, and shall conform
qualitatively with such revised Operating Standard. Because absolute uniformity
under varying local conditions may not be possible or practical, Manager may
vary the Operating Standard for the Managed Hotels based upon the
characteristics of a particular location or circumstance, density of population,
business potential, population of trade area, existing business practices or any
other conditions which Manager in its sole discretion deems to be of importance
to the operation of such Managed Hotels provided that neither the intent nor the
effect of such variation is to discriminate against the Hotel as compared to
other Managed Hotels similarly situated. Except to the extent of any such
discrimination against the Hotel, Owner shall have no recourse against Manager
on account of any such variance granted to another Managed Hotel, and Owner
shall not be entitled to require Manager to grant Owner a like or similar
variance hereunder. Manager acknowledges that the Hotel, Casino and other
portions of the Complex will be marketed by Owner with reference to the Planet
Hollywood name and theme or such other name and theme as Owner may determine
from time to time subject to Owner's obligation under this Section 2.2 and
Manager's right to approve, which approval shall not be unreasonably withheld,
the use of the Brand Name, Trademarks and related intellectual property rights
in connection therewith. In furtherance thereof, Manager acknowledges that the
use of the Brand Name at the Hotel may be subordinate to the name and theme
adopted by Owner from time to time and shall not be required to be included in
the primary architectural signage for the Hotel or theme related merchandise
offered for sale in and about the Complex. The Brand Name shall be used in
subordinate exterior and interior Hotel signage, marketing materials (printed,
electronic and other media), stationery, the reservation switchboard, front desk
areas, and other areas and materials as Owner and Manager shall reasonably
agree. Manager agrees that, subject to Owner's obligations under this Section
2.2 regarding the qualitative equivalence of the Operating Standard for the
Hotel and the operating standard for the Managed Hotels, the Hotel will [***]
with the [***] for the Managed Hotels in all particulars. Without limiting the
foregoing, Manager agrees that Owner [***] the Hotel [***] on-site kitchen
equipment, computer equipment, hard goods and soft goods in Rentable Guest
Rooms, public space and room furniture, fixtures, equipment and decor, food
service utensils, toiletries, menus and menu items, staff uniforms, signage,
staffing levels, promotional items, memorabilia displays, television and closed
circuit programming and other physical and operational standards than are used
at other Managed Hotels, as long as those used at the Hotel are qualitatively
equal to or better than those used at other Managed Hotels.
Confidential information redacted and filed separately with the Commission
3
In furtherance of Owner's obligation to operate, service, maintain and
refurbish the Hotel, Owner shall, during the Operating Term:
2.2.1 establish and maintain in consultation with Manager personnel
policies and practices relating to the Hotel generally consistent with the
customary employment practices of Manager at the other Managed Hotels,
including: (i) policies and practices relating to terms and conditions of
employment, screening, selection, training, supervision, compensation, bonuses,
severance, pension plans and other employee benefits, discipline, dismissal,
transfer and replacement; and (ii) policies and practices relating to the
exercise by any Hotel Personnel of rights under the National Labor Relations Act
or any applicable labor laws in relation to the Hotel (including union
organization, recognition and withdrawal of recognition, union elections,
contract negotiation on a single-employer or multi-employer basis, grievances,
unfair labor practice charges, strikes and lockouts);
2.2.2 hire, relocate, pay, transfer and dismiss all Hotel Personnel
in accordance with the policies adopted pursuant to Section 2.2.1.
2.2.3 maintain in consultation with Manager complete books of
account and records for the Hotel consistent with the Uniform System and GAAP in
accordance with Manager's customary accounting policies, practices and systems
for the Managed Hotels including, without limitation, any proprietary accounting
software and systems requested by Manager to coordinate the preparation and
maintenance of the books of account and records for the Hotel with Manager's
centralized accounting system;
2.2.4 negotiate and administer in consultation with Manager all
leases, licenses and concession agreements for all public space at the Hotel,
including all stores, office space and lobby space;
2.2.5 under the direction of Manager keep the Hotel and the FF&E in
good operating order, repair and condition, consistent with the Operating
Standard, including making necessary replacements, improvements, additions and
substitutions thereto;
2.2.6 consult with Manager to coordinate the design, construction
and installation of any renovations, improvements, repairs, or replacements of
FF&E, building systems, or other physical components of the Hotel that may be
undertaken including, without limitation, the Initial Capital Program;
2.2.7 in consultation with Manager, negotiate, enter into and
administer all service contracts and licenses for Hotel operations, including
contracts and licenses for health and safety systems, maintenance, electricity,
gas, telecommunications (including internet service), cleaning, elevator and
boiler maintenance, air conditioning maintenance, laundry and dry cleaning,
master television service, use of copyrighted materials (including music and
videos), entertainment and other services Owner deems advisable;
2.2.8 in consultation with Manager, negotiate, enter into and
administer all contracts for the use of banquet and meeting facilities and guest
rooms by groups and individuals;
2.2.9 supervise and purchase, or direct Manager to arrange for the
purchase of, all inventories, provisions, consumable supplies and operating
supplies that are necessary and proper to maintain and operate the Hotel, and
for use in the management and operation of the Hotel; provided, however, that
Owner reserves the right to control all "pouring rights" agreements for
beverages (including soft drinks and alcoholic beverages) sold at the Complex
and other beverage related promotional or marketing tie-ins.
2.2.10 in consultation with Manager, prepare the Operating Plan for
each Operating Year in accordance with Section 2.4;
2.2.11 cause the Hotel Personnel employed by Owner to be available
to consult with Manager (and the Manager Executive Team) at Manager's reasonable
request concerning policies and procedures affecting the conduct of the business
of the Hotel and its compliance with the Operating Standard;
4
2.2.12 do or cause to be done all such acts and things in or about
the Hotel that are within Owner's control as Owner, in good faith and exercising
prudent commercial judgment, shall believe to be necessary to comply with Legal
Requirements and Approvals and the terms of all insurance policies, and to
discharge any lien, encumbrance, or charge on or with respect to the Hotel and
the operation thereof;
2.2.13 collect, account for and remit to governmental authorities
all applicable excise, sales, occupancy and use taxes or similar governmental
charges collectible by the Hotel directly from patrons or guests, or as part of
the sales price of any goods, services, or displays, including gross receipts,
admission, or similar or equivalent taxes duties, levies or charges; and
2.2.14 collect all charges, rent and other amounts due from guests,
lessees and concessionaires of the Hotel and use those funds, as well as funds
from other sources as may be available to the Hotel, in accordance with the
terms of this Contract.
Owner hereby further agrees to provide to Manager, at Owner's cost and
expense, such office space and support services (such as secretarial support,
telephone and computer system access and other office services in nature and
amount substantially identical to those provided by Owner to similarly situated
employees of Owner) as shall be reasonably requested by Manager to permit
Manager to maintain the Manager Executive Team at the Hotel. In connection with
its rights and obligations under this Contract, during the Operating Term,
Manager and its agents (including the Manager Executive Team) shall have full
and complete access to the Hotel, without notice, at any time and from time to
time to conduct inspections of the Hotel, its operations, its books and records,
as well as its computers and electronic storage medium, and, subject to the
rights of tenants, concessionaires and licensees, all leased areas and
concessions to confirm compliance of the Hotel and its operation with the
Operating Standard. Owner shall promptly take all actions reasonably necessary
to remedy any non-compliance with the Operating Standard, written notice of
which is provided to Owner by Manager. If Manager or an inspection service
retained by Manager makes more than one (1) quality assurance inspection in any
twelve (12) month period because of Owner's failure to comply with the Operating
Standard, or failure to obtain a passing or acceptable inspection score, Owner
shall reimburse Manager for its actual costs in connection with such additional
inspections. Owner agrees to provide complimentary lodging and reasonable food
and beverage to Manager's inspectors. Manager may, with Owner's consent, which
shall not be unreasonably withheld, publish or disclose the results of quality
assurance inspections.
2.3 DUTIES OF MANAGER
Manager shall, during the Operating Term: (i) cause the Manager
Executive Team to report to the CEO (or CFO, as directed by Owner) and consult
with, advise, assist, and provide recommendations to, Owner and the Owner
Executive Team; (ii) direct and supervise the Hotel Personnel regarding the
management and operation of the Hotel on a day-to-day basis in accordance with
the Operating Standard, the Operating Plans and the terms of this Contract;
(iii) consult with and assist Owner in coordinating the efficient operation of
the Hotel and Casino as integrated parts of the Complex; and (iv) implement or
effectuate the Operating Plan, Operating Standards and such other advice,
assistance and recommendations as Owner may adopt in accordance with the terms
of this Contract and in a manner consistent with the standard of performance of
a prudent experienced hotel operator. In furtherance thereof, Manager shall:
2.3.1 consult with and assist Owner in the preparation of the
Operating Plan for each Operating Year in accordance with Section 2.4;
2.3.2 observe the day-to-day operations of the Hotel to confirm that
the Hotel is being operated by Owner in accordance with the Operating Standard;
and consult and cooperate with Owner regarding the Hotel's compliance with the
Operating Standard and Owner's obligations under Section 7.16 of the Credit
Agreement and direct Owner, the Owner Executive Team and Hotel Personnel to take
such actions as Manager reasonably determines are necessary for the Hotel to
become (or remain) in compliance with the Operating Standard;
2.3.3 consult with and otherwise advise Owner in connection with
Owner's duties and obligations under this Contract. In no event shall Manger
have operational control or responsibility for the Casino; and
5
2.3.4 make available to the Owner the reservation system described
in Exhibit D.
2.4 OPERATING PLAN
On or before November 1 of each Operating Year, the CEO working in
conjunction with the Manager Executive Team shall prepare and deliver to Owner
for review and approval by Owner a proposed Operating Plan for the next ensuing
Operating Year, with annualized projections of Gross Operating Revenue and
Operating Expenses for such Operating Year. The proposed Operating Plan for the
next ensuing Operating Year shall be prepared in a manner consistent with
Manager's standard planning and budgeting requirements with such additions and
modifications thereto as shall be deemed appropriate by the CEO to take into
consideration the coordinated operation of the Hotel and the Casino, and shall
contain the following items, which shall be set forth for each month of such
Operating Year: (i) estimated results of operations (including estimated Gross
Operating Revenue and Operating Expenses); (ii) a description of proposed
Capital Improvements to be made during such ensuing Operating Year and itemized
estimated Capital Expenses therefor (the "Capital Budget"), which Capital Budget
shall include capitalized lease expenses and a contingency line item, as set
forth below; (iii) a statement of cash flow, including a schedule of any
anticipated requirements for funding by Owner; together with the following
supporting data: (x) estimates of total labor costs, including both fixed and
variable labor; (y) estimates of the average daily house rate and occupancy; and
(z) an estimate of Management Fees and Centralized Services Charges and other
payments to Manager and its Affiliates; and (iv) the proposed rates for Hotel
usage including room rates for individuals and groups, charges for room service,
food and beverage and for use of recreational or other guest facilities or
amenities at the Hotel, billing policies with respect to the operation of the
Hotel, price schedules, rates and rate schedules and all rents, lease charges
and concession charges for all areas of the Hotel. The proposed Operating Plan
also shall include a marketing plan for the activities to be undertaken by
Manager pursuant to Section 2.9, which plan shall include: (i) a description of
the Hotel's target markets, the Hotel's relative position in those markets, the
proposed room rate structures for each market segment, the current and future
sales plan for the Hotel, the advertising and public relations plan for the
Hotel, and the proposed staffing for the sales and marketing activities of the
Hotel; and (ii) a marketing plan for the Casino which shall include a
description of the Casino's target markets, relative position in those markets
and the proposed [***] and the reimbursement rates therefor (which shall be the
rates payable by Manager with respect to rooms utilized [***] with respect to
standard rooms, [***] for suites (which amount shall be [***] by the same [***]
in estimated average daily occupancy rate included in the Operating Plan for the
year in question), unless Manager shall otherwise agree) to be utilized by Owner
in connection with the marketing of the Casino. Manager shall fully cooperate
with the CEO in Owner's preparation of the Operating Plan and shall make
available to Owner such members of the Manager Executive Team at all reasonable
times as shall be requested by the CEO to permit Owner to perform its
obligations under this Section 2.4. The proposed Operating Plan prepared by the
CEO and approved by Owner shall become the Operating Plan for the ensuing
Operating Year.
2.4.1 During each Operating Year during the Operating Term, and
subject to sufficient funds being made available by Owner, Manager shall cause
the Hotel to be operated in general accordance with the approved Operating Plan
for such Operating Year, as the same may be modified from time to time by the
written direction of the CEO.
2.4.2 If in Owner's reasonable judgment any expenditures are
required on an emergency basis to avoid imminent physical damage to the Hotel or
injury to Persons or property, Owner shall make such expenditures, whether or
not provided for or within the amounts provided for in the approved Operating
Plan for the Operating Year in question, as may reasonably be required to avoid
or mitigate such damage or injury. Such expenditures shall be treated as
Operating Expenses or Capital Expenses as determined in accordance with the
terms hereof. Owner shall notify Manager as promptly as reasonably possible of
the making of any such expenditures.
2.4.3 If any expenditures are required to comply with any Legal
Requirement or to cure or prevent any violation thereof the existence of which
does not create an imminent threat of physical damage to the Hotel or injury to
Persons or property, Owner may elect, in its sole discretion, either to: (i)
make such expenditures, whether or not provided for or within the amounts
provided for in the approved Operating Plan for the Operating Year in question,
as may be necessary to comply with such Legal Requirement or to remove or
prevent the violation
Confidential information redacted and filed separately with the Commission
6
thereof; or (ii) diligently contest in good faith the alleged violation. Any
such expenditures shall be treated as Operating Expenses or Capital Expenses as
determined in accordance with the terms hereof.
2.5 CAPITAL EXPENSES
During the Operating Term, the following provisions shall apply as to
the maintenance and repair of the Hotel:
2.5.1 The Hotel (including the Hotel building, adjacent grounds,
FF&E and hotel equipment and operating supplies) shall be maintained and
repaired by Owner in a manner sufficient to permit the maintenance and operation
of the Hotel in accordance with the Operating Standard and as contemplated in
the Operating Plan in effect from time to time. Without limiting the generality
of the foregoing, Owner shall complete the Initial Capital Program within the
time and in the manner described in the Credit Agreement. As part of its duties,
Manager shall perform physical inspections of the Hotel from time to time, using
Hotel Personnel or third-party consultants as Manager shall reasonably determine
as contemplated in the Operating Plan (the cost of which shall be an Operating
Expenses), consider the useful life of the Hotel's physical plant, evaluate the
Hotel's need for capital replacements and upgrades and make recommendations to
Owner with respect thereto.
2.5.2 Owner shall make available from the Operating Account funds
for the purpose of funding Capital Expenses included in the approved Operating
Plan or otherwise proposed by Owner. In the event Manager reasonably determines
that the Hotel is not being operated in compliance with the Operating Standard,
Manager shall so notify Owner in writing stating with reasonable specificity the
areas of non-compliance and may request Owner to provide funds for the purpose
of causing the Hotel to comply with the Operating Standard.
2.5.3 If the design or construction of the Hotel (including, without
limitation, any work included in the Initial Capital Program) is defective, and
the defective condition causes physical damage to the Hotel, poses a risk of
injury to people or property, or is not in compliance with one or more Operating
Standards, Owner shall as expeditiously as possible remedy such defect. Owner's
obligation to proceed expeditiously shall apply regardless of whether or when
insurance proceeds may be available to cover the necessary expenditures. Any
amounts expended by Owner in effecting the remedy of any such defect shall not
be deducted in determining Gross Operating Revenue.
2.5.4 The lack of sufficient monies in the Operating Account shall
not limit Owner's obligations to maintain the Operating Standard.
2.6 BOOKS AND RECORDS; FINANCIAL STATEMENTS
2.6.1 During the Operating Term, Owner shall cause books of account
and other records relating to or reflecting the results of the operation of the
Hotel to be kept in accordance with GAAP and, to the extent applicable, the
Uniform System and the current policies and standards applicable to Managed
Hotels. Additionally, Owner shall maintain as part of the books and records of
the Hotel any guest profiles, contact information (e.g., addresses, phone
numbers, facsimile numbers and email addresses), histories, preferences and
other information obtained in the ordinary course of business from guests of the
Hotel during such guests' stay at the Hotel or during such guests' use of the
facilities associated with the Hotel (the "Hotel Guest Information"). The Hotel
Guest Information shall not include information pertaining solely to the gaming
activities of customers of the Casino. In maintaining the books and records of
the Hotel and the Hotel Guest Information, Owner shall, in accordance with
Section 2.10 below, utilize the accounting systems recommended by Manager that
are compatible with Manager's current requirements for the Managed Hotels and
Manager shall assist Owner as reasonably necessary in the application and
utilization of such systems. All books of account and other financial records of
the Hotel shall be available to Manager at all reasonable times for examination,
audit, inspection and copying. If such inspection discloses that the Gross
Operating Revenue during any scheduled reporting period actually exceeded by two
percent (2%) or more the amount reported by Owner as Gross Operating Revenue, or
if the audit reveals that the accounting procedures or records are insufficient
(for reasons other than inadequacy of the accounting systems recommended by
Manager) to determine the accuracy of the sum reported, Owner shall bear the
cost of such inspection and audit and in all events shall pay immediately any
such deficiency with interest from the date due at
7
the daily equivalent of the rate provided in Section 3.4.2 on such overdue
amount. All of the financial books and records pertaining to the Hotel,
including books of account and front office records (but excluding Guest Data
and Proprietary Information, as set forth in Section 11.5), shall be the
property of Owner. During the Operating Term, Manager shall have access to the
Hotel Guest Information, and may use the Hotel Guest Information in any
reasonable manner [***] to the use or operation of the Hotel.
2.6.2 Manager shall cause the Hotel Personnel to prepare and deliver
reasonably detailed monthly operating reports to Owner that reflect operational
results of the Hotel for each month of the Operating Year on or before the
twentieth (20th) day of the month following the month (or partial month) to
which such operating report relates. The reports shall be in a format (which may
be amended from time to time) substantially similar to the operating reports
provided by Manager or its Affiliates to other Managed Hotels and in such other
format and including such additional information as may reasonably be required
by the CEO, Agent (pursuant to Section 7.2(l) of the Credit Agreement) or any
other secured lender under a Succeeding Financing. At a minimum, monthly
operating reports shall include: (i) a balance sheet including current month and
prior year-end comparisons and differences in reasonable detail; (ii) an income
and expense statement for the month in question and for the elapsed portion of
the current Operating Year through the end of such month; (iii) a statement of
net cash flow from operations in reasonable detail for such month and such
elapsed portion of the current Operating Year; (iv) a statement of the amount of
the Management Fee, Centralized Services Charges, Reimbursable Expenses and any
other amounts payable or expenses reimbursable to Manager; and (v) a schedule of
Capital Expenses showing, in reasonable detail, items budgeted, actual
expenditures to date and the amount of expenditures projected for completion.
Such reports shall also set forth variances that have occurred and that are
anticipated between the applicable Operating Plan and actual results in a
monthly variance report (along with the statements mentioned above). Owner shall
cooperate with Manager in effecting the Hotel Personnel's preparation of such
reports (including allocating a sufficient number of Hotel Personnel to work in
such regard). Manager shall make available to Owner members of the Manager
Executive Team as reasonably requested by Owner to respond to questions Owner
may have regarding such monthly reports.
2.6.3 Within forty-five (45) days after the end of each Fiscal
Quarter, Manager shall cause the Hotel Personnel to deliver to Owner unaudited
balance sheets, income statements and cash-flow statements prepared in
accordance with GAAP consistently applied, and certified by the CFO as
presenting fairly in all respects the financial condition and results of
operations of the Hotel as of the end of such Fiscal Quarter. Such reports shall
also set forth in comparative form the corresponding figures for the current
Operating Year to date, and the corresponding figures for the entire
corresponding period of the preceding Operating Year, in each case subject to
footnotes and normal year-end adjustments (the "Quarterly Financial
Statements"). Concurrently with the delivery of the Quarterly Financial
Statements, Manager will [***] by Manager and by the CFO [***] under the
Quarterly Financial Statements and the Operating Plan for the corresponding
year-to-date, and including any other information reasonably requested by Owner.
Manager shall make available to Owner members of the Manager Executive Team as
reasonably requested by Owner to respond to questions regarding such Quarterly
Financial Statements.
2.6.4 Within sixty (60) days after the end of each Operating Year,
Manager shall deliver to Owner unaudited balance sheets, income statements and
cash-flow statements prepared in accordance with GAAP consistently applied (the
"Operating Year Financial Statements"). Manager and the Controller shall certify
the Operating Year Financial Statements as presenting fairly in all respects the
financial condition of the Hotel as of the end of the applicable Operating Year
and the results of operations of the Hotel during that Operating Year. The
Operating Year Financial Statements will be in form and substance reasonably
acceptable to Owner and any Mortgagee. Concurrently with the delivery of the
Operating Year Financial Statements, Manager will [***] by Manager and by the
Controller [***] under the Operating Year Financial Statements and the Operating
Plan for the corresponding Operating Year, and including any other information
reasonably requested by Owner or any Mortgagee. Manager shall make available to
Owner members of the Manager Executive Team as reasonably requested by Owner to
respond to questions regarding such Operating Year Financial Statements.
2.6.5 By April 30 of each Operating Year (beginning with April 30 of
the second (2nd) Operating Year, for the first Operating Year), Owner shall
cause to be prepared and delivered, as an Operating Expense, Certified Financial
Statements for the preceding Operating Year. The Certified Financial Statements
shall consist of a balance sheet, a statement of earnings and retained earnings
and a statement of cash flows. The
Confidential information redacted and filed separately with the Commission
8
Certified Financial Statements shall contain a certificate of the Designated
Accountant to the effect that, subject to any qualifications contained therein,
the financial statements fairly present, in conformity with GAAP, the financial
position, and results of operations and cash flows of the Hotel for the
Operating Year then ended. The Certified Financial Statements delivered pursuant
to this Section 2.6.5, and all information contained therein, shall be binding
and conclusive on the Parties unless, within sixty (60) days following the
delivery thereof, either Party shall deliver to the other Party written notice
of its objection thereto setting forth in reasonable detail the nature of such
objection. If the Parties are unable thereafter to resolve any disputes between
them with respect to the matters set forth in the Certified Financial Statements
within sixty (60) days after delivery by either Party of the aforesaid written
notice, either Party shall have the right to cause such dispute to be resolved
by arbitration conducted in accordance with the provisions of Section 10 below.
2.6.6 Except for the reports to be prepared by Manager in accordance
with Sections 2.6.2, 2.6.3 and 2.6.4, Owner shall be responsible for preparing
all of the financial statements and reports required to be prepared and
delivered to Agent pursuant to Section 7.2 of the Credit Agreement.
2.7 PERSONNEL
During the Operating Term, Owner shall, in consultation with Manager,
manage all aspects of the Hotel's human resources functions and shall implement
at the Hotel the personnel policies and procedures applicable to Managed Hotels.
Such policies and procedures shall reflect the Hotel's location in Las Vegas and
themed operation in conjunction with the Casino. Without Owner's prior written
approval, Manager shall not recognize, negotiate or otherwise deal with any
labor union, bargaining unit or similar organization other than with respect to
any agreement to do so applicable to the Hotel and assumed by Owner in
connection with its acquisition of the Hotel, and Owner may require Manager to
use reasonable methods to resist organizing efforts at the Hotel or amongst
Hotel Personnel. In connection with the management of the Hotel's human
resources functions, Manager and Owner shall have the responsibilities and
exercise the rights set forth below:
2.7.1 Owner shall appoint an Owner Executive Team to manage the
Hotel, which team shall consist of the CEO, a Director of Casino Operations, and
a Chief Financial Officer (the "Owner Executive Team"), and Manager shall
appoint a Manager Executive Team consisting of the Director of Hotel Operations,
a Director of Food and Beverage, a Director of Sales and Hotel Marketing, a
Director of Rooms, a Director of Housekeeping, a Front Desk Manager, and such
other department heads as Manager determines are necessary for it to perform its
obligations under this Contract (collectively, the "Manager Executive Team") who
shall be approved by Owner as set forth below. The Manager Executive Team and
the Owner Executive Team shall fully cooperate in causing Owner and Manager to
comply with their respective obligations under this Contract. Owner shall have
the right to interview and approve each individual selected by Manager to serve
on the Manager Executive Team prior to his or her appointment, which approval
shall not be unreasonably withheld. If Owner shall disapprove three (3) or more
consecutive candidates proposed by Manager to occupy a position on the Manager
Executive Team who shall have qualifications consistent with those of executives
of similar level employed by Manager at the Managed Hotels, a rebuttable
presumption shall arise in favor of Manager that Owner has unreasonably withheld
its consent with respect to such position provided that the failure by Owner to
approve any such candidate shall not constitute an Event of Default (but shall
constitute an Arbitrable Dispute). Prior to appointing a member of the Manager
Executive Team, Manager shall provide Owner with a written summary of such
individual's professional experience and qualifications and shall offer Owner
the opportunity to interview the candidate at the Hotel or another mutually
acceptable location. Owner will forego its right to interview any such
individual if Owner or its authorized representative is unwilling or unable to
participate in the interview within five (5) business days following Manager's
offer. Owner shall be deemed to have approved the appointment of any such
individual unless Owner delivers notice of its disapproval of such appointment
within seven (7) business days after Owner's interview of the candidate. Manager
shall, in consultation with the Owner Executive Team, assist Owner in
identifying, appointing, assigning, instructing and supervising all personnel
necessary or advisable for the operation of the Hotel, provided that the Hotel
shall at all times be managed and staffed by Hotel Personnel who have met
Manager's training requirements. If Owner desires that Manager replace one or
more members of the Manager Executive Team, Owner shall provide written notice
thereof stating in reasonable detail the basis for such request. If Manager
declines to accede to such request, Owner shall be afforded the opportunity to
promptly discuss such request with the corporate officer of Manager with primary
responsibility for hotel operations upon Owner's further written request and if
such
9
corporate officer of Manager shall decline such request, Owner shall be so
advised in writing stating the basis therefor.
2.7.2 The terms of employment, including hiring, training,
compensation, bonuses, employee benefits, discharge, transfer and replacement of
all Hotel Personnel shall be established and administered by Owner; provided,
however, that Manager shall advise Owner as to Manager's customary policies and
procedures regarding all such matters, and Owner shall use its commercially
reasonable efforts to comply with such policies and procedures taking into
consideration market factors customary to hotel/casino complexes similar to the
Complex and Owner's retained right with respect to union labor. Owner hereby
authorizes the Manager Executive Team to exercise supervisory authority over all
Hotel Personnel, including, without limitation, authority to cause Owner to hire
or dismiss Hotel Personnel in a manner consistent with applicable Legal
Requirements and the personnel policies and procedures adopted by Owner from
time to time in accordance with the terms of this Contract.
2.7.3 Corporate Personnel who travel to the Hotel to perform
technical assistance or other services for the Hotel shall be permitted, without
charge but subject to availability (with rate-paying guests given preference),
to stay at the Hotel and use its facilities (including reasonable food and
beverage consumption). Corporate Personnel shall be permitted to stay at the
Hotel for business or non-business purposes at reduced rates in accordance with
policies with respect to such stays generally in effect from time to time which
are applicable to the Managed Hotels.
2.7.4 All Hotel Personnel shall be employees of Owner or an
Affiliate of Owner, or of a contractor providing labor to the Hotel. The Manager
Executive Team shall be employees of Manager or an Affiliate of Manager. All
Hotel Personnel Costs (including all employment costs relating to the Manager
Executive Team) shall be Operating Expenses payable by Owner.
2.7.5 Owner acknowledges that Owner or its Affiliate may have an
obligation under federal, state, or local law to give advance notice to Hotel
Personnel of any termination of their employment, and that failure to comply
with any such notification obligation could give rise to civil liabilities.
Therefore, notwithstanding anything to the contrary contained in this Contract,
Owner shall indemnify, hold harmless and defend Manager and its Affiliates from
and against any liabilities in any way based on Owner's employment practice,
policies or actions (including terminating this Contract) which give rise to
such a notification or other obligation on the part of Owner or any of its
Affiliates with respect to or in any way relating to the employment by Owner of
any Hotel Personnel; provided, however, that such indemnification shall not be
required with respect to any matter relating to or arising from the specific
acts of any member of the Manager Executive Team in violation of law or Owner's
employment practices or policies.
2.8 CENTRALIZED SERVICES
During the Operating Term, Manager shall furnish or cause its
Affiliates to furnish to the Hotel the benefits of the Centralized Services, and
Owner hereby agrees to cause the Hotel to participate in any or all such
Centralized Services as required by Manager. Except as otherwise specifically
set forth on Exhibit D, or as indicated from time to time by Manager,
participation by the Hotel in all Centralized Services is mandatory. Without
limiting the generality of the foregoing, Manager shall provide, and Owner shall
cause the Hotel to participate in, centralized marketing, sales and reservation
services as follows:
2.8.1 Manager shall maintain a marketing and sales program that
promotes the brand identity of Manager and its Affiliates, advertises to
Manager's and its Affiliates' markets and secures bookings for hotels and
resorts, including the Hotel, operated under the Brand Name (the "Centralized
Marketing Program"). In addition, Manager shall coordinate the Hotel's
individual marketing program with the Centralized Marketing Program and, as
appropriate, include the Hotel in the brand identity and national advertising
programs conducted as part of the Centralized Marketing Program. To the extent
that Manager conducts any marketing program customized to or for the benefit of
any resort, theme or other specialized hotels included in the Managed Hotels,
Manager shall offer Owner the opportunity to participate in such program or
similar programs on terms equivalent to those offered the affected Managed
Hotels.
10
2.8.2 Manager shall secure bookings for the Hotel through Manager's
sales and reservations offices and other distribution and sales systems, and
shall encourage the use of the Hotel by tourists, special groups, travel
congresses, travel agencies, airlines and other recognized sources of hotel
business. Manager shall develop a sales program, represent the Hotel at
appropriate conventions and travel congresses, and list the Hotel in printings
of general tariff bulletins. In addition, Manager shall process reservations for
the Hotel through Manager's and its Affiliates' worldwide communications
network. To facilitate Manager's provision of such reservations services, Owner
agrees that:
(a) Except as otherwise provided herein, Owner shall not maintain,
hyperlink to or otherwise use in connection with the Hotel any toll-free or
similar telephone line or communications device (including, without limitation,
any website or internet booking service) for making reservations that is
independent of the reservations telephone line and communications device(s)
maintained by Manager or its Affiliates in connection with the worldwide
communications network of Manager and its Affiliates. The toll-free reservations
telephone line or similar telephone number and other communications devices of
Manager and its Affiliates (and those services to which Manager and/or its
Affiliates subscribe or in which they otherwise participate) for making
reservations shall be the only telephone reservations line and communications
devices for the Hotel; provided, however, Manager shall permit Owner and/or
Planet Hollywood or the licensor of any successor theme used to identify the
Hotel or any other portion of the Complex to maintain: (i) a hyperlink from
their own websites to Manager's reservations website; (ii) toll-free telephone
reservations system that automatically feed to Manager's toll-free reservations
service; and (iii) any similar links using such technology as shall be available
during the Operating Term. The Hotel shall be listed in all airline reservations
systems (which include what are known in the hospitality industry as Global
Distribution Systems) under the applicable code for hotels and resorts operated
under the Brand Name. Manager shall permit Owner and/or Planet Hollywood or the
licensor of any successor theme used to identify the Hotel or any other portion
of the Complex to maintain one (1) website for making reservations (the "Owner
Website"). At the election of the CEO, the Owner Website shall be run by the
Owner or Manager and the inter-activity of the Owner Website with the Manager's
website(s) related to the Hotel shall be determined by the CEO. Bookings made
through the Owner Website [***] payable to the Manager.
(b) Owner shall permit Manager to, and Manager shall, load into the
reservations system maintained by Manager and its Affiliates, and maintain on a
current basis, the Hotel's total rooms inventory and all associated room rates.
2.8.3 Subject to the last sentence of Section 2.8.2(a) above,
Manager and its Affiliates shall be entitled to be paid for the existing
Centralized Services based on the charges set forth on Exhibit D (as such
charges may be increased to reflect increases in the costs of operating,
maintaining and upgrading such services). In addition, Manager and its
Affiliates shall be entitled to be paid for any new Centralized Services based
on the reasonable estimate made by Manager and its Affiliates of the costs and
expenses that will be incurred in providing such services on a system-wide basis
to Managed Hotels, which estimate of costs may include equitably allocated
salaries (including payroll taxes and employee benefits) of Corporate Personnel
directly involved in the provision of the Centralized Services, overhead costs
allocable to the provision of the Centralized Services, recovery of development
costs, promotion costs, costs of operating, upgrading and maintaining such
services and costs of all equipment employed in the rendition of such services.
The Hotel's costs for participating in the Centralized Services (collectively,
the "Centralized Services Charges") shall be determined in an equitable manner
and on the same basis as allocated or charged to all of the other Managed Hotels
and the methodology used to determine such allocations to the Hotel (including
internal audits, if any) shall be disclosed to Owner upon written request. In
addition, if equipment and/or software is installed and maintained at the Hotel
in connection with the provision of any Centralized Services, all costs thereof
shall be paid by Owner and charged to the operation of the Hotel either as an
Operating Expense or as a Capital Expense, as determined by the terms herein.
2.8.4 Notwithstanding anything to the contrary in this Contract, if
the Manager adopts Centralized Services in the future which are substitutions
for one or more of the Centralized Services described on Exhibit D in its
current form ("Substitute Centralized Services"), then Owner shall be required
to accept such Substitute Centralized Services [***] Substitute Centralized
Services are substantially similar in nature and purpose to existing Centralized
Services for which Owner [***] pursuant to Exhibit D in its current form. If
Manager adopts Centralized Services in the future [***] described on Exhibit D
in its current form ("New Centralized Services") and
Confidential information redacted and filed separately with the Commission
11
Owner can provide substantially the [***]. Owner shall pay [***] Manager for all
Substitute Centralized Services or New Centralized Services which the Owner
[***].
2.9 HOTEL MARKETING PROGRAM
2.9.1 In addition to affiliating the Hotel with the Centralized
Marketing Program, Manager shall develop and implement in coordination with
Owner a specific marketing program for the Hotel consistent with Owner's
marketing of the Complex and following Manager's policies and guidelines taking
into account the characteristics of the Complex and Owner's desire to market the
Hotel and Casino in a fully coordinated manner, which will provide for the
planning, publicity, internal communications, organizing and budgeting
activities to be undertaken, and which may include the following:
(a) production, distribution and placement of promotional materials
relating to the Hotel, including materials for the promotion of employee
relations;
(b) development and implementation of promotional offers or programs
that benefit the Hotel and are undertaken by Manager or by a group of Managed
Hotels that includes the Hotel;
(c) attendance of Hotel Personnel at conventions, meetings,
seminars, conferences and travel congresses;
(d) selection of and guidance to, as required, advertising agency
and public relations personnel; and
(e) preparation and dissemination of news releases for national and
international trade and consumer publications.
Development and implementation of the Hotel's individual marketing
program will be accomplished substantially by Hotel Personnel and/or personnel
from Owner's Affiliates, supervised and directed by the Manager Executive Team,
with periodic assistance from Corporate Personnel with marketing and sales
expertise. Any such assistance rendered by Corporate Personnel shall be at no
cost to Owner or the Hotel for such personnel's time, but Owner shall pay for
the Out-of-Pocket Expenses reasonably incurred by Manager in connection with
such assistance. The program shall comply with Manager's sales, advertising and
public relations policies and corporate identity requirements, as they may be
modified from time to time; provided, however, the following deviations from
such programs shall be permitted (i) the Brand Name logotype need not be the
only logotype or symbol used to identify the Hotel and to the extent the Brand
Name is utilized, it may be used in a manner subordinate in prominence to the
Planet Hollywood logotype; and (ii) Owner may [***] materials or implement [***]
of its own or maintain any [***] of its own regarding the Complex as a whole on
a [***], in the media and in retail stores through Planet Hollywood subject to
the provisions of Section 2.8.2. During the term of this Contract, Owner [***]
the Guest Data for the [***] development and implementation of the [***]. The
Hotel must participate in all promotional and marketing programs of Manager and
its Affiliates for so long as they are continued, including the Frequency
Programs. The cost of the development and implementation of the Hotel's
marketing program shall be an Operating Expense and the estimated costs for each
Operating Year will be included in the Operating Plan for such Operating Year.
2.9.2 Manager shall have the right to obtain, or, at the request of
Manager, Owner shall have the right but not the obligation to provide, updated
photographs of the Hotel or the Complex (the expense of which shall be an
Operating Expense of the Hotel) from time to time, but not less frequently than
every three (3) years, in accordance with Manager's specifications for property
photography, as such specifications may exist from time to time. In the event
Owner provides the property photography, Owner shall ensure that the property
photography includes unlimited usage rights granted for the benefit of Manager
with respect to the marketing and promotion of the Hotel.
Confidential information redacted and filed separately with the Commission
12
2.10 AUTOMATION
The Hotel shall utilize all automation systems reasonably required by
Manager to enable the Hotel to function as a Managed Hotel, in accordance with
the terms and conditions of Exhibit E; provided that Manager shall utilize the
existing computer and automation systems present at the Hotel and the Hotel may
continue to use other existing automation systems at the Hotel, to the extent
commercially reasonable.
2.11 PURCHASING
In the performance of Owner's and Manager's obligations under Section
2.2.9 and Section 2.3, Manager shall provide Owner the right to purchase the
items described therein under vendor contracts available to Manager under any
purchasing program maintained from time to time by Manager and its Affiliates,
provided that the prices and terms of the goods and services purchased under
such vendor contracts are competitive with the prices and terms of goods and
services of equal quality available from others. In determining, pursuant to the
foregoing, whether such prices and/or fees are competitive, they will be
compared to the prices and/or fees which would be charged by reputable and
qualified unrelated third parties on an arm's length basis for similar goods
and/or services. For purposes of determining competitiveness, the goods and/or
services which are being purchased may be grouped in reasonable categories,
rather than being compared item by item. In respect of such purchases, Owner
understands and acknowledges that Manager and/or its Affiliates may receive
certain payments, fees, commissions or reimbursements from vendors, and that
Manager and/or its Affiliates may have investments in such vendors and may
profit from such payments, fees or reimbursements. Notwithstanding the
foregoing, upon at least thirty (30) days' prior written notice to Manager,
Owner shall have the right to opt out of any purchasing program in respect of
all purchases or such items as Owner may designate in such notice and purchase
items of its own, whether through the Hotel License Agreement and Restaurant
License Agreement with Planet Hollywood or otherwise.
2.12 HOTEL PARKING
2.12.1 Manager has received and reviewed the Common Parking Area Use
Agreement. Manager acknowledges that the only parking available to guests of the
Hotel are (i) approximately five hundred (500) parking spaces located under the
Hotel on land owned by Owner, which spaces are shared with other uses of the
Complex, and (ii) the parking made available to Owner under the Common Parking
Area Use Agreement. Manager acknowledges that Owner may decrease the number of
parking spaces under the Hotel as part of the Initial Capital Program.
2.12.2 Owner is responsible for making all payments necessary to
ensure uninterrupted use (subject to Force Majeure Events and to any provisions
in the Common Parking Area Use Agreement that allows the owner of the Common
Parking Area to restrict access thereto) of the parking spaces that Owner is
entitled to use under the Common Parking Area Use Agreement. Owner may require
Manager to make such payments from the Operating Account. Manager will cooperate
with Owner in making any reports required to be made under the Common Parking
Area Use Agreement and in resolving any disputes with the owner of the Common
Parking Area.
2.13 INITIAL CAPITAL PROGRAM AND TRANSITIONAL OPERATION
2.13.1 Manager shall assist and cooperate with Owner regarding
Owner's performance of the Initial Capital Program, the Parties acknowledging
that the successful completion of the Initial Capital Program is integral to the
success of the Hotel and the Complex. To the extent there is any conflict
between the successful completion of the Initial Capital Program and the
operation of the Hotel in what would otherwise be the normal course of
operations, the successful completion of the Initial Capital Program shall take
priority unless Owner expressly decides otherwise. Nothing herein shall be
deemed to make Manager a project manager for the Initial Capital Program, Owner
acknowledging that it will engage a third party to provide that service.
2.13.2 Between the Opening Date and the substantial completion of
the Initial Capital Program, the Hotel shall be operated by Manager under the
same terms and conditions as are otherwise set forth in this Contract, but under
such other name as Owner may determine (including Aladdin or Planet Hollywood)
and shall not include the Brand Name unless Manager agrees that the Hotel meets
the qualitative service and physical
13
standards prevailing from time to time at the Managed Hotels, which agreement
shall not be unreasonably withheld, conditioned or delayed. Upon the substantial
completion of the Initial Capital Program, the Hotel name shall be changed to
the Name of Hotel and the Brand Name shall be used as otherwise required by this
Contract.
2.14 LIMITATIONS ON MANAGER'S DUTIES
2.14.1 Manager's duties under this Contract are subject to the
availability of sufficient funds from the operation of the Hotel or which are
otherwise provided by Owner. Except as otherwise expressly provided in this
Contract, all costs and expenses of operating, maintaining, marketing and
improving the Hotel shall be payable out of funds from the operation of the
Hotel or which are otherwise provided by Owner. In no event shall Manager be
obligated to advance any of its own funds to pay any such costs or expenses for
the Hotel. Anything in this Contract to the contrary notwithstanding, Manager
shall be excused from its obligations hereunder (i) to the extent and whenever
Manager shall be prevented from performing such obligations by reason of the
occurrence of a Force Majeure Event; (ii) to the extent Manager be prevented
from performing such obligations as a result of any breach by Owner of any
provision hereof (including, without limitation, Owner's obligation to provide
sufficient funds to operate the Hotel in accordance with the Operating
Standards); or (iii) to the extent and wherever there is herein provided a
limitation on Manager's abilities to expend funds in respect of the Hotel when
failure to expend such funds shall reasonably prevent Manager from meeting its
obligations hereunder.
2.14.2 In connection with any insurance coverages required or
obtained under this Contract, neither Manager nor any insurance broker Manager
or its Affiliates may retain makes any warranty or representation regarding the
advisability, nature, or extent of the insurance coverages provided by Manager
for the benefit of Owner or any other coverages that Owner should consider for
the protection of Owner, the Hotel and its operations. Owner agrees to rely
exclusively on its own insurance advisors with respect to all insurance matters.
2.14.3 Any and all financial projections, analyses and budgets
prepared by Manager under this Contract, if any, are intended to assist in
operating the Hotel, but are not to be relied on by Owner or any third party as
to the accuracy of the information contained therein or the results predicted.
Manager does not guarantee the accuracy of the information contained in such
projections and budgets, nor does it guarantee the results of such projections
and budgets, and Owner acknowledges that Manager shall not be held responsible
by Owner or any third party for any divergence between such projections and
budgets and actual operating results achieved. If Owner provides any such
financial projections or budgets to a third party, Owner shall be obligated to
advise such third party in writing of the substance of the disclaimer set forth
in this Section 2.14.3. The failure of the Hotel to achieve any Operating Plan
for any Operating Year shall not be an Event of Default under this Contract and
shall not entitle Owner to claim a breach by Manager or to terminate this
Contract under Section 4.2.
2.14.4 If any environmental, construction, personnel, real
property-related, or other problems arise at the Hotel during the Operating Term
that (a) relate to the operation of the Hotel prior to the Operating Term or to
activities undertaken prior to the Operating Term at the Hotel or on the real
property on which the Hotel is situated, or (b) are caused by sources outside of
the Hotel, Manager's services under this Contract do not extend to management of
any abatement or other correction of such problems and Owner shall retain full
managerial and financial responsibility for and control over abating or
correcting such problems; provided, however, such actions shall be done in a
timely manner with as little disturbance or interruption of the use and
enjoyment of the Hotel as practicable.
2.15 LIMITATION ON MANAGER'S LIABILITY
2.15.1 None of Manager, its Affiliates and its and their respective
officers, trustees, directors, employees, agents or successors shall have any
liability of any nature whatsoever with respect to the design, construction,
initial furnishing, equipping or decoration of the Hotel, including with respect
to any advice, assistance, recommendations or other services or approvals
furnished or given by Manager or its Affiliates in connection with the Initial
Capital Program or any other alteration or renovation of the Hotel. If Manager
or any Affiliate thereof shall review and/or approve any plans, specifications,
budgets or the like in connection with the Initial Capital Program or any other
alteration or renovation of the Hotel, no such review or approval shall impose
14
on Manager or its Affiliate any responsibility for the content thereof, for any
errors or defects contained therein or for any other matter related to the
design or construction of such alteration or renovation or the cost thereof.
2.15.2 Owner hereby unconditionally releases Manager, its Affiliates
and its and their respective officers, trustees, directors, employees, agents
and successors from any and all claims, liabilities and obligations, whether now
existing or hereafter arising, and whether known, unknown, fixed, contingent, or
otherwise, arising from or related to the matters for which Manager has
disclaimed responsibility pursuant to Section 2.15.1.
2.16 CHAIN CONFLICTS.
2.16.1 Owner acknowledges that it has selected Manager as an
independent contractor to assist Owner in the supervision, direction, control,
management and operation of the Hotel in substantial part because of Manager's
management and operation of a chain of first-class hotels and resorts, and the
benefits that Owner expects to derive by including the Hotel as part of
Manager's chain of hotels. Owner further acknowledges that it has determined, on
an overall basis, that the benefits of operation as part of the Manager chain
are substantial notwithstanding that all hotels in the Manager chain will not
benefit equally by inclusion therein. Owner further acknowledges that in certain
respects all hotels compete on a national basis with all other hotels and that
conflicts may, from time to time, arise between the Hotel and other Managed
Hotels, as well as other hotels operated by Manager under its other brands.
Manager agrees, however, that it shall use reasonable efforts to minimize
conflicts among the hotels which are members of its chain, and will in all
events proceed, both in its operation and management of the Hotel and in the
operation and management of its other hotels, in a good faith manner and in a
manner reasonably deemed to serve the overall best interests, on a long term
basis, of all hotels in the Manager chain of hotels including the Hotel. On the
basis of the foregoing covenant by Manager, Owner consents to the operation by
Manager of its chain of hotels and to the addition of other hotels to the chain
wherever located, except as otherwise herein provided.
2.16.2 Notwithstanding Section 2.16.1, Manager agrees that during
the period commencing on the Effective Date and ending on the third anniversary
thereof and provided that this Contract has not been terminated, Manager shall
not, and shall not permit any Affiliate to, own, operate, manage, license or
franchise any hotel, motel or other transient lodging facility under the Brand
Name located on the Strip. Manager hereby further agrees that following the
expiration of such period and prior to the expiration or termination of this
Contract, Manager shall not, and shall not permit any Affiliate to, own,
operate, manage, license or franchise any hotel, motel or other transient
lodging facility under the Brand Name that is located on the Strip and exceeds
500 guest rooms in size. The provisions of this Section 2.16.2 shall not apply
to the Time Share Project.
2.17 SPG PROGRAM/GENERAL SALES OFFICE.
2.17.1 Manager presently is a party to an agreement pursuant to
which: (i) Manager provides general sales office services in connection with the
acceptance of reservations at Caesar's Palace Hotel and Casino in Las Vegas,
Nevada and (ii) members of the Frequency Program are permitted to redeem
Frequency Program points at Caesar's Palace Hotel and Casino in Las Vegas,
Nevada (the "Caesar's Agreement"). Manager shall not renew or extend the
Caesar's Agreement beyond its current expiration date of December 31, 2003.
2.17.2 During the Operating Term, Manager shall not enter into any
agreement pursuant to which Manager shall provide (i) general sales office
reservation services, or (ii) redemption of Frequency Program points with
respect to any hotel or resort on the Strip unless Manager owns, operates,
manages, licenses or franchises such hotel in accordance with the limitation of
Section 2.16.2.
3. FEES AND EXPENSES
3.1 MANAGEMENT FEE
3.1.1 For the services Manager provides in accordance with this
Contract, Owner shall pay Manager the Management Fee specified in the Term
Sheet.
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3.1.2 The Management Fee shall be paid monthly in arrears based on
the actual monthly Gross Operating Revenue of the Hotel. Each monthly
installment of the Management Fee shall be due and payable on the date Manager
furnishes to Owner the monthly operating report as required by Section 2.6.2.
3.1.3 Within thirty (30) days after Manager receives the Certified
Financial Statements for any Operating Year, Manager shall cause to be prepared
and delivered to Owner a statement showing the calculation and payment of the
Management Fee for that Operating Year, and appropriate adjustments shall be
made for any overpayment or underpayment of the Management Fee during such
Operating Year. The Party owing money as a result of the overpayment or
underpayment during such Operating Year shall pay such amount to the other Party
within thirty (30) days after such statement has been delivered by Manager to
Owner.
3.2 CENTRALIZED SERVICES CHARGES
3.2.1 The Centralized Services Charges shall be paid monthly in
arrears during the Operating Term, and each monthly installment shall be due
five (5) business days after the date Manager furnishes to Owner the monthly
operating report required by Section 2.6.2.
3.3 REIMBURSABLE EXPENSES
3.3.1 Subject to any applicable limits set forth in Exhibit D,
Manager shall be entitled to be paid (not more than [***] the date such costs
are to be incurred) or reimbursed by Owner from the Operating Account for the
following expenses (collectively, "Reimbursable Expenses") which shall be due
five (5) business days after the date on which Manager furnishes to Owner the
monthly operating report required by Section 2.6.2:
(a) all Hotel Personnel Costs (including all employment costs
relating to the Manager Executive Team) incurred by Manager in accordance with
the Operating Plan;
(b) the per diem charge, as established from time to time, for
personnel of Manager or its Affiliates (excluding the Manager Executive Team)
assigned to special projects for the Hotel, if approved in writing in advance by
Owner;
(c) all Out-of-Pocket Expenses incurred by Manager directly in
connection with its obligations under this Contract;
(d) payments made or incurred by Manager or its Affiliates, or its
or their employees to third parties for goods and services (x) in accordance
with the Operating Plan, (y) as otherwise approved in writing by Owner or (z)
permitted under this Contract;
(e) all taxes and similar assessments (other than Manager's
franchise, excise and income taxes) levied against any reimbursements payable to
Manager under this Contract for expenses incurred for Owner's account, including
the Reimbursable Expenses described in this Section 3.3.1;
(f) to the extent incurred in connection with Hotel business, travel
expenses of regional and area personnel supervising the Hotel to the extent
provided for in the Operating Plan, training courses for Hotel Personnel and
Manager Executive Team, brand audits (mystery shopping services), property
directories and other brand collateral, third-party market research, guest and
employee satisfaction surveys, employee handbooks, and property photography; and
(g) charges for the Hotel's equitably allocated share of all costs
and charges payable or incurred (without mark-up to Manager or its Affiliates)
to third parties including the following: (i) amounts owed or paid to travel
consortia groups, electronic distribution channels (including the Global
Distribution Systems), Internet-booking services, and providers of network
communications services in connection with processing reservations for the
Hotel; (ii) amounts owed or paid to centralized payers of travel agents'
commissions as Manager or its Affiliates may contract with for the processing of
such commissions earned for reservations consumed at the Hotel; (iii) charges
for the cost of preparing, printing and distributing operations manuals,
accounting bulletins,
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16
employee handbooks, forms and similar publications; (iv) the costs of printing
employee handbooks and forms, and (v) costs incurred by Manager on behalf of
Hotel Personnel and the Manager Executive Team in attending management
conferences and seminars organized by the corporate divisions of Manager and its
Affiliates, and any costs of Corporate Personnel in presenting and/or training
the Hotel Personnel and the Manager Executive Team at such conferences and
seminars.
3.4 PLACE AND MEANS OF PAYMENT
3.4.1 All amounts payable to Manager or its Affiliates under this
Contract (a) shall be paid to Manager in United States Dollars, in immediately
available funds, but [***] any withholding tax, value added tax and any other
assessment, tax, duty, levy or charge required under the [***] any [***] and (b)
shall be made to Manager electronically by wire transfer out of the Operating
Account on the date specified for payment in Section 3.1, 3.2 or 3.3, as
applicable.
3.4.2 Any and all amounts that may become due to Manager from Owner
under this Contract and which shall not be timely paid shall bear interest from
and after the respective due dates thereof until the date on which the amount is
received in the bank account designated by Manager, at an annual rate of
interest equal to the lesser of (a) the prevailing lending rate of Manager's
principal bank for working capital loans to Manager plus three percent (3%), or
(b) the highest rate permitted by applicable law.
3.4.3 Any and all amounts that may become due to Owner from Manager
under this Contract and which shall not be timely paid shall bear interest from
and after the respective due dates thereof until the date on which the amount is
received in the bank account designated by Owner, at an annual rate of interest
equal to the lesser of (a) the prevailing lending rate of Owner's principal bank
for working capital loans to Owner plus three percent (3%), or (b) the highest
rate permitted by applicable law.
3.5 BANK ACCOUNTS
3.5.1 Owner shall establish the following bank accounts (the "Bank
Accounts"):
(a) an account or accounts, bearing the name of the Hotel, into
which Owner shall deposit all funds received in the operation of the Hotel and
from which shall be paid all Operating Expenses and all other charges and
amounts due to Manager under this Contract (collectively, the "Operating
Account(s)"), provided that Owner shall not cause funds from the operation of
the Casino or other portions of the Complex not including the Hotel to be
deposited into the Operating Accounts;
(b) an account or accounts, in the name of the Hotel, into which
amounts sufficient to cover salaries, wages and other employment related costs
of Hotel Personnel shall be deposited from time to time by Owner by transfer of
funds from the Operating Account(s) or Owner (if sufficient funds are not then
available in the Operating Account(s)) (the "Payroll Account(s)");
(c) such other accounts as Owner determines to be necessary or
desirable.
The Bank Accounts established from time to time by Owner in connection
with the ownership and operation of the Hotel shall be established and
maintained in accordance with the requirements of the Credit Agreement and any
Succeeding Financing.
3.5.2 Subject to Agent's rights under the Credit Agreement or the
terms of any Succeeding Financing, Owner's designees (which shall include
designated members of the Manager Executive Team) shall be the only Persons
authorized to draw from the Bank Accounts, and Owner shall make deposits in all
of such accounts, in accordance with the terms of this Contract and Manager's
standard accounting policies and practices. Owner and Manager shall establish
mutually acceptable controls to ensure accurate reporting of all transactions
involving such accounts. As determined appropriate by Manager, accounts shall
require positive pay and electronic reconciliation features to reduce
possibilities of fraud. Programming costs related thereto shall be an Operating
Expense payable by Owner.
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3.5.3 Any loss suffered in any of the Bank Accounts, or in any
investment of funds into any such account, shall be borne by Owner and Manager
shall have no liability or responsibility therefor unless resulting from the
intentional misconduct, fraud or misappropriation of or by Manager.
3.6 DISBURSEMENT OF FUNDS TO OWNER; OWNER'S PROVISION OF FUNDS
3.6.1 Owner, or Manager, if authorized by Owner pursuant to Section
3.5.2 (and then, only to the extent of funds available therefor in such
accounts), shall pay by transfer of funds from the Operating Account(s) (and, as
applicable, the Payroll Account(s)) or from Owner (to the extent that sufficient
funds are not then available in the Operating Account(s) or Payroll Account(s))
monthly the following in the order and priority set forth herein:
(a) First, payment of all Operating Expenses for such month,
(b) Second, payment of Taxes and Insurance Costs;
(c) Third, payment of all debt service under the Credit Agreement or
any Succeeding Financing, if any, for such month;
(d) Fourth, to the extent permitted under the Credit Agreement,
after taking into account projected revenues and expenses for the following
month, retention in the Operating Account of an amount sufficient for the
following month to cover: (i) all accrued but unpaid amounts of the Centralized
Services Charges and Reimbursable Expenses, (ii) all known and reasonably
foreseeable Operating Expenses payable hereunder and other amounts necessary to
maintain the Operating Standards, and (iii) such other amounts as may be agreed
to from time to time by Owner and Manager, but only to the extent the foregoing
amounts do not constitute Excess Cash Flow (as defined in the Credit Agreement)
required to be paid to Agent pursuant to Section 4.1 of the Credit Agreement or
are required to be otherwise applied pursuant to any Succeeding Financing.
(e) Finally, unless the Parties agree otherwise, on or about the day
Manager receives its payment under Section 3.1 and to the extent permitted by
the Credit Agreement or the terms of any Succeeding Financing, Owner may retain
any funds remaining in the Operating Account at the end of the prior month after
payment of the foregoing amounts. Any amounts remaining in the Operating Account
on the termination of this Contract shall be disbursed to Owner; provided,
however, that Owner shall pay Manager prior to such disbursement any and all
amounts owed by Owner to Manager and/or its Affiliates under this Contract.
3.6.2 Owner shall deposit into the Operating Account or otherwise
provide upon commencement of operations at the Hotel, [***] as the initial
working capital agreed upon by Manager and Owner in accordance with the
requirements of the Credit Agreement and the Purchase Agreement, which amount
Manager acknowledges shall be the initial working capital for the entire Complex
(the "Initial Working Capital"). If at any time Manager determines that the
available funds in the Operating Account are insufficient to allow for the
uninterrupted and efficient operation of the Hotel in accordance with the terms
of this Contract, Manager shall notify Owner of the existence and amount of the
shortfall. If Manager uses or pledges its credit (the Parties agreeing that
Manager shall have no obligation to do so) in making ordinary and customary
purchases of goods and services for the Hotel on Owner's behalf in accordance
with the Operating Plan, such election by Manager shall not operate to waive any
default by Owner hereunder and Owner shall pay for such purchases when payment
is due and shall indemnify and defend Manager against all losses, costs and
expenses, including attorneys' fees and costs, interest, and any late payment
fees, that may be incurred by or asserted against Manager by reason of Owner's
failure to pay for such purchases. Owner shall pay interest to Manager on any
advances that Manager may elect, without obligation, to make on Owner's behalf
in payment of any due and unpaid obligations of Owner to third parties at the
rate specified in Section 3.4.2; and such advances, with the interest thereon at
the rate aforesaid, shall be due and payable by Owner to Manager on demand.
3.6.3 If there shall be insufficient funds in the Operating Account
to pay when due the Management Fee or any Centralized Services Fees or
Reimbursable Expenses payable to Manager under this Contract, Manager may, but
shall have no obligation to, elect by written notice to Owner to defer a portion
of the Management Fees and other payments to Manager then due to Manager in the
amount of the shortfall, in which
Confidential information redacted and filed separately with the Commission
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event such deferred amount shall bear interest at the rate specified in Section
3.4.2 and shall be payable out of next available funds in the Operating Account
in the first order of priority. The election by Manager to defer any portion of
the Management Fees and other payments to Manager may be reversed at any time by
Manager by written notice to Owner in which case any deferred amounts shall
become immediately due and payable.
4. TERM AND TERMINATION
4.1 TERM OF CONTRACT
Unless sooner terminated pursuant to the provisions of this Article 4,
the term of this Contract shall be the Operating Term specified in the Term
Sheet (the "Operating Term").
4.2 EVENTS OF DEFAULT
Subject to the other provisions of this Contract dealing with
termination (including Section 2.7.5), if at any time during the Operating Term
any of the events set forth in this Section 4.2 shall occur and continue beyond
the applicable grace period (each an "Event of Default"), the nondefaulting
Party, at its option, may terminate this Contract by giving irrevocable and
unconditional written notice to the other Party specifying a date, not earlier
than five days or later than one hundred and twenty (120) days after the giving
of such notice, on which this Contract shall terminate. In addition to its right
of termination, the nondefaulting Party shall be entitled to pursue all other
remedies available to it under applicable law or in equity as a result of such
Event of Default. Events of Default are as follows:
4.2.1 A failure by either Party to pay any sum of money to the other
Party when due and payable under this Contract that is not cured within ten (10)
days following written notice thereof to the defaulting Party;
4.2.2 [Intentionally Deleted]
4.2.3 A failure by either Party to perform, keep or observe any of
the other material covenants, undertakings or obligations set forth in this
Contract to be performed, kept or observed by such Party that is not cured
within one hundred twenty (120) days following written notice thereof to the
defaulting Party stating with reasonable detail the alleged default provided
that, during such one hundred twenty (120)-day period, the defaulting party
shall not commit a monetary default as described in Section 4.2.1 that is not
cured within the applicable cure period; and, provided further that the one
hundred twenty (120)-day notice and cure period set forth above, shall not be
applicable if the breach or default is of the same covenant or obligation in
this Contract as two or more prior breaches or defaults (even if cured) within
the same calendar year, in which event no further cure period shall be afforded
for such subsequent breach or default of the same covenant or obligation within
the same calendar year; or
4.2.4 Any action by a Party for dissolution of its operations; a
general assignment by a Party for the benefit of its creditors; an arrangement
or composition with its creditors by a Party; a judgment of insolvency against a
Party; a voluntary petition filed by any Party for relief under applicable
bankruptcy, insolvency, or similar debtor relief laws or regulations; the
appointment (or petition or application for appointment) of a receiver,
custodian, trustee, conservator, or liquidator to oversee all or any substantial
part of a Party's assets or the conduct of its business; an order for relief
against a Party under applicable bankruptcy, insolvency, or similar debtor
relief laws or regulations; a Party's failure generally to pay its debts as such
debts become due; a notice to any governmental body of insolvency or pending
insolvency of or suspension of operation by a Party; or any other similar or
analogous proceedings in any relevant jurisdiction affecting any Party; or
4.2.5 The issuance of a levy or an attachment against all or any
portion of the Hotel resulting from a final judgment against a Party for which
all appeal periods have expired and which is not fully covered by insurance or
bonded against within the lesser of any applicable period established by law or
one hundred twenty (120) days; provided, however, that during such one hundred
twenty (120)-day period, the defaulting party shall not commit a monetary
default as described in Section 4.2.1 that is not cured within the applicable
period.
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During the one hundred and twenty (120)-day cure periods set forth
above, Manager shall not be required to perform any obligations under this
Contract, the performance of which would violate any law applicable to the
Manager or the Hotel. Subject to the requirements of Article 10 of this
Contract, in the event of the occurrence of an Event of Default by either Party,
the "Non-Defaulting Party" (that is, the Party not in Default hereunder with
respect to the event in question) shall have and may exercise against the
defaulting Party such rights and remedies as may be available to said
Non-Defaulting Party under this Contract, at law or in equity. The right to
termination of this Contract may be exercised by irrevocable and unconditional
written notice to the defaulting Party and this Contract shall terminate on the
date set forth in such notice, which date shall in no event be sooner than five
(5) days nor later than one hundred twenty (120) days, after the delivery
thereof. The right of termination set forth in the preceding sentence shall be
in addition to, and not in lieu of, any other rights or remedies provided
hereunder or at law or in equity by reason of the occurrence of any such Event
of Default, it being understood and agreed that the exercise of the remedy of
termination shall not constitute an election of remedies and shall be without
prejudice to any such other rights or remedies otherwise available to the
Non-Defaulting Party. During the applicable cure period, the Defaulting Party
shall use commercially reasonably efforts to cure such default as quickly as
reasonably practicable. Notwithstanding the foregoing, if either party hereto
shall have submitted a matter (other than the failure of Owner to pay when due
the Management Fee or any other amount payable to Manager hereunder), that is
the subject of an alleged Event of Default to mediation or arbitration in
accordance with Article 10 hereof within the applicable cure or response period
following receipt of written notice of such matter, then any other rights or
remedies that the Non-Defaulting Party may have against the Defaulting Party
(including, without limitation, any right to terminate this Contract pursuant to
Section 4.2 or otherwise) shall be tolled during the pendency of such mediation
or arbitration.
4.3 SPECIAL RIGHTS OF MANAGER
Subject to Article 10 of this Contract and the provisions of the last
paragraph of Section 4.2, in addition to any termination right that Manager may
have in accordance with Section 4.2 or any other provision of this Contract,
Manager shall have the following additional rights:
4.3.1 Manager may terminate this Contract on not less than one
hundred twenty (120) days written notice to Owner if, at any time during the
Operating Term, Manager determines in the exercise of its good faith judgment
that the Hotel is not being operated in accordance with the Operating Standard,
provided that if Owner cures the situation(s) identified in such notice prior to
the effective date of such termination, Manager's notice of termination shall be
deemed withdrawn; provided, however, that during such one hundred twenty
(120)-day period, the defaulting party shall not commit a monetary default as
described in Section 4.2.1 that is not cured within the applicable cure period;
4.3.2 Manager may terminate this Contract on at least one hundred
and twenty (120) days' notice to Owner in the event of any suspension for a
period in excess of sixty (60) days, or any withdrawal or revocation, of any
material Approval required for Manager's performance of its obligations under
this Contract or the operation of the Hotel in accordance with the terms hereof,
but only if such suspension, withdrawal or revocation is due to circumstances
beyond Manager's reasonable control; and
4.3.3 Manager may terminate this Contract on at least one hundred
twenty (120) days' notice to Owner if at any time during the Operating Term
during which Manager's Affiliates hold gaming licenses, Manager determines, in
the exercise of its good faith judgment, that Owner no longer fulfills the
criteria described in Section 9.3.2(c) and that continued operation of the Hotel
for Owner could subject any of Manager's Affiliates to the loss of gaming
licenses; provided, however, that during such one hundred twenty (120)-day
period, the defaulting party shall not commit a monetary default as described in
Section 4.2.1 that is not cured within the applicable cure period..
4.3.4 [Intentionally Deleted]
4.3.5 [Intentionally Deleted]
4.3.6 Manager may terminate this Contract upon three (3) business
days notice if any person owning an interest (direct or indirect) in Owner or
any officer, director, trustee, partner or member of Owner is
20
convicted of a felony, or any other crime or offense (even if not a crime) that
is likely, in Manager's reasonable judgment, to adversely affect the Hotel or
any of the Proprietary Information or goodwill associated therewith.
4.3.7 Manager may terminate this Contract upon three (3) business
days notice if Owner fails to comply with Section 9.3 of this Contract.
4.3.8 Manager may terminate this Contract upon one hundred and
twenty (120) days notice if Owner makes, or has made, any materially false
statement or report to Manager in connection with this Contract, has maintained
materially false books or records of account or has submitted materially false
reports or information to Manager, or if Owner has determined to have
intentionally under-reported Owner's Gross Operating Revenue by five percent
(5%) or more for any Operating Year.
4.3.9 If Owner abandons the acquisition of the Complex for any
reason, including, without limitation, failure to enter into the Purchase
Agreement or termination of the Purchase Agreement, non-approval of Owner's
purchase of the Complex by the Bankruptcy Court, failure to enter into the
Credit Agreement, or the failure of the Credit Agreement to become effective,
construction non-feasibility, environmental conditions, general economic
conditions or Force Majeure or if Manager shall not have commenced management of
the Hotel under this Agreement on or prior to March 31, 2005 for any reason
other than a default by Manager hereunder, Manager shall have the right to
terminate this Contract by written notice to Owner given prior to the Opening
Date, in which case Manager shall not be entitled to receive any termination
fee, damages, or other compensation other than the reimbursement of amounts owed
to Manager under this Contract up to the date of termination.
No termination of this Contract by Manager pursuant to this Section 4.3 shall
relieve Owner of any liability it may have to Manager by reason of the
circumstances that caused Manager to terminate this Contract.
4.4 SPECIAL RIGHTS OF OWNER
(a) In the event of a Sale of the Hotel by Owner to a bona fide
third party that is not an Affiliate of Owner, if (i) such Sale shall occur at
any time [***] of the Opening Date and on or before [***] of the Opening Date;
and (ii) if the Sale of the Hotel is to a Competitor, Owner or Manager may
terminate this Contract by giving written notice to the other party on or prior
to the Sale of the Hotel. Termination shall be effective upon the Sale of the
Hotel unless Owner and Manager agree otherwise. In the event of such a
termination, Owner shall pay Manager a termination fee equal to: (i) the number
[***] between the Sale of the Hotel and the [***] of the Opening Date; (ii)
multiplied by [***] times the aggregate [***] during the most recent twelve (12)
full calendar months preceding the Sale of the Hotel; (iii) divided by twelve
(12). Owner shall have no right to terminate this Contract in connection with a
Sale of the Hotel prior to the [***] of the Opening Date. If a sale of the Hotel
to Person who is not a Competitor shall occur prior to the [***] of the Opening
Date, the Owner (or the purchaser of the Hotel) may cause this Contract to be
terminated ([***] termination fees, damages or other compensation other than
fees and expenses owed up to the date of termination) effective upon the [***]
of the Opening Date by giving written notice of such election to Manager not
less than ninety (90) days prior to the [***] of the Opening Date.
(b) If a Sale of the Hotel occurs at any time after the sixth (6th)
anniversary of the Opening Date, then this Contract may be terminated (i) by
Owner if the Sale of the Hotel is not to a Competitor or (ii) by either Owner or
Manager if the Sale of the Hotel is to a Competitor. Termination under this
subsection shall be effected by giving written notice to the other party on or
prior to the Sale of the Hotel unless Owner and Manager agree otherwise in
writing. No termination fee shall be payable for a termination pursuant to this
Subsection (b).
4.4.2 If Owner abandons the acquisition of the Complex for any
reason (including, without limitation, failure to enter into the Purchase
Agreement or termination of the Purchase Agreement, non-approval of Owner's
purchase of the Complex by the Bankruptcy Court, failure to enter into the
Credit Agreement or the failure of the Credit Agreement to become effective,
construction nonfeasibility, environmental conditions, general economic
conditions, or Force Majeure), Owner shall have the right to terminate this
Contract by written notice to Manager given before the Opening Date without
payment of any damages, termination fee or other compensation other than
reimbursement of amounts owed to Manager under this Contract up to the date of
termination. If Owner recommences the acquisition of the Complex, at the option
of the Manager, to be exercised by giving written notice
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21
to Owner within thirty (30) days after Manager obtains actual knowledge of such
recommencement, this Contract shall be reinstated.
4.4.3 Subject to the provisions of Article 10 and the last paragraph
of Section 4.2, Owner may terminate this Contract upon 3 business days notice
without payment of any damages, termination fee or other compensation (except
payment of any Management Fee, Centralized Services Charges and Reimbursable
Expenses as accrued prior to the effective date of termination) if Manager
Assigns its interest in this Contract in violation of Section 9.2.
4.4.4 Subject to the provisions of Article 10 and the last paragraph
of Section 4.2, Owner may terminate this Contract upon 3 business days notice
without payment of any damages, termination fee or other compensation (except
payment of any Management Fee, Centralized Services Charges and Reimbursable
Expenses as accrued prior to the effective date of termination) if such
termination is permitted by Article 7 or any other express provision of this
Contract.
4.4.5 Except as expressly stated in this Section 4.4, no termination
of this Contract by Owner pursuant to Section 4.4 shall relieve Manager of any
liability it may have to Owner by reason of the circumstances giving rise to
such termination.
4.5 ACTIONS TO BE TAKEN ON TERMINATION
Upon termination of this Contract for any reason, the following shall
be applicable (in addition, in case of a termination pursuant to Section 4.2,
4.3 or 4.4, to the rights of the non-defaulting Party to pursue all other
remedies available to it under applicable law):
4.5.1 In the event of a termination of this Contract (but not an
expiration of the Operating Term by lapse of time) any and all expenses arising
as a result of such termination or as a result of the cessation of Hotel
operations or services by Manager (including expenses arising under this Section
4.5) shall be for the sole account of Owner, if such termination is for any
reason other than [***] under this Contract and Owner shall reimburse Manager
immediately on receipt of any invoice or invoices from Manager for any expenses,
incurred by Manager in the course of effecting the termination of this Contract
or the cessation of Hotel operations or services by Manager.
4.5.2 Upon termination of this Contract, Owner shall pay Manager all
Management Fees, Centralized Services Charges, Reimbursable Expenses and other
amounts due Manager under the terms of this Contract through the termination
date. This obligation is unconditional and shall survive the termination of this
Contract (including all amounts owed to Manager that are not fully ascertainable
as of the termination date), and Owner shall not have or exercise any rights of
setoff, except to the extent of any outstanding and undisputed payments owed to
Owner by Manager under this Contract.
4.5.3 Manager shall peacefully vacate and surrender the Hotel to
Owner on the effective date of such termination and shall reasonably cooperate
with Owner with respect to the transition of management functions to a successor
manager.
4.5.4 Manager may purchase from Owner, for a purchase price equal to
fair market value, but not exceeding cost, all unbroken cases of hotel equipment
and operating supplies bearing only the identification of Manager or the Brand
Name then on hand at the Hotel or ordered or purchased.
4.5.5 Owner shall honor, and shall cause any successor Manager to
honor, all business confirmed for the Hotel with reservations (including,
without limitation, reservations made in good faith by Manager for discounted
rooms pursuant to the Employee Room Program, Frequency Program, or pursuant to
Manager's other promotional programs) dated after the effective date of the
termination in accordance with the terms of such bookings as accepted by Manager
including, without limitation, Manager's obligations, if any, under this
Contract, to compensate Owner for the use of such rooms made pursuant to the
preceding parenthetical in this sentence. Upon termination of this Contract for
any reason, Manager shall provide Owner with a copy of the Hotel Guest
Information. Owner will assume and fully indemnify Manager with respect to any
advance deposits received by
Confidential information redacted and filed separately with the Commission
22
Manager on behalf of the Hotel and delivered to Owner. In addition, upon the
expiration or termination of this Contract, all of the books of account and
financial records which are the property of Owner shall be turned over forthwith
to Owner so as to ensure the orderly continuance of the operation of the Hotel,
but all of such information shall be retained by Owner and made available to
Manager at the Hotel (or, following a sale of the Hotel by Owner, at another
location in a major metropolitan area of the United States reasonably designated
by Owner), at all reasonable times, for inspection, audit, examination and
copying (at Manager's expense) for at least five (5) years subsequent to the
date of such expiration or termination.
4.5.6 Manager shall to the extent permitted by law or the applicable
agreement assign to Owner or if directed by Owner, a successor manager,
Manager's interest (if any) in, and Owner or such successor manager shall have
the continuing responsibility for all obligations and liabilities relating to,
any and all Approvals, contracts (including, without limitation, collective
bargaining agreements and pension plans, leases, licenses or concession
agreements and maintenance and service contracts) in effect with respect to the
Hotel as of the date of termination of this Contract, and Owner shall confirm
its or the successor manager's obligations in writing if requested by Manager.
4.5.7 Neither Owner, nor any person acting on behalf of Owner, shall
directly or indirectly hold itself or the Hotel out to the public as being or
remaining (or otherwise associated with) a Manager hotel or resort. Owner shall
immediately take all steps reasonably requested by Manager to disassociate the
Hotel and Owner from the Trademarks (including immediately modifying or covering
all Trademark-bearing signage until such signs can be removed), and shall in any
event delete all Trademarks from the Hotel name and cease to use all FF&E and
operating supplies bearing any of the Trademarks on the effective date of
termination. If Owner fails to remove Trademark-bearing Hotel signage not later
than 14 days following the effective date of the termination, Manager shall have
the right, at Owner's expense, to remove and retain all such interior and
exterior signage without any liability for the cost to restore or repair the
Hotel premises or equipment for damage resulting therefrom. Owner shall cease
using and Manager shall have the right to remove from the Hotel, on or before
the effective date of the termination, all operations manuals, policy statements
and the like, any other proprietary information of Manager and its Affiliates
and all other written materials bearing the Trademarks. Under no circumstances
shall Owner copy, reproduce, or retain any of these materials.
4.5.8 As of the effective date of the termination, Manager shall
remove all Proprietary Software from the Hotel and shall disconnect the Hotel
from the reservations systems and their related software applications. Manager
shall provide reasonable assistance to Owner in facilitating the orderly
transfer of Owner's records and data contained in Proprietary Software. To the
extent Manager's Corporate Personnel are needed to provide technical assistance
to effectuate such transfer, Owner shall reimburse Manager for any reasonable
costs and expenses associated therewith. To the extent Manager has leased any
computer equipment or telephone equipment for use at the Hotel in accordance
with the provisions of this Contract pursuant to chain-wide programs for the
acquisition or leasing thereof, Owner shall have the right, at its option,
either to request that any such lease be transferred to Owner (to the extent the
same are transferable without the consent of third parties) or that Manager seek
to buy out the equipment covered by any such lease, the cost of which shall be
borne solely by Owner. Any such lease transfer or buy-out shall be subject to
the consent or approval of the third party owners of such equipment. If not
assignable or if the same cannot be bought out, Manager shall remove all such
equipment from the Hotel at any time on or after the effective date of
termination of this Contract, but in no event later than fourteen (14) days
thereafter.
5. INSURANCE
5.1 MAINTENANCE OF INSURANCE COVERAGE
At all times during the Operating Term and at Owner's expense, Owner
shall maintain insurance with respect to the Hotel with the coverages described
in Exhibit F and the Credit Agreement or as required by any Succeeding
Financing. In the event of a conflict between the insurance required to be
maintained by Owner pursuant to this Contract and the insurance required to be
maintained by Owner pursuant to the Credit Agreement or as required by any
Succeeding Financing, then Owner shall be required to comply with the insurance
requirements which will provide the greater or more extensive insurance
coverage. In respect of such insurance, Owner
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understands and acknowledges that if Owner participates in Manager's insurance
program, the premiums charged by Manager may include an administrative fee
payable to Manager and/or its Affiliates as compensation for administering the
insurance program, negotiating with participating insurers and, with respect to
certain coverages, assuming the financial risk of providing first dollar (i.e.,
no deductible) or low deductible coverage.
5.1.1 If Owner participates in Manager's insurance program and at
any time during the Operating Term any one or more of the coverages required
hereunder shall be unavailable to Manager through blanket policies, Owner shall
place and maintain any such coverages subject to the requirements of Section
5.3. In addition, if Owner participates in Manager's insurance program and at
any time Manager is unable to place any of the insurance required hereunder at
premiums and otherwise on terms and conditions (including amounts of coverage
and deductibles) at least as advantageous to Owner as the premiums and other
terms and conditions available to Owner under blanket insurance policies
available to Owner from time to time, except for workers compensation, employers
liability, crime and employment practices liability insurance, then Owner may
arrange for such insurance through its blanket policies at Owner's cost and
expense. If Owner desires to place its own insurance pursuant to this Section
5.1.1, Owner shall so notify Manager in writing at least sixty (60) days prior
to the scheduled effective date of such insurance or any renewal thereof and
provide Manager a ten (10) day period to review the package proposed by Owner.
To the extent, and for so long as, Hotel Personnel and the Manager Executive
Team are employees of Manager or any Affiliate of Manager, Manager shall have
the sole right to provide workers compensation, employer's liability insurance,
crime and employment practices liability insurance.
5.1.2 The insurers for all insurance required by this Article 5
shall have a minimum AM Best's rating of A-VIII and shall be reasonably
satisfactory to Owner and Manager.
5.2 SPECIAL CONDITIONS OR HAZARDS
Owner has disclosed to Manager the results of the environmental testing
obtained by Owner in connection with the acquisition of the Hotel.
5.3 PARTIES INSURED AND AMOUNTS OF COVERAGE
All insurance policies provided for in this Article 5 shall include:
5.3.1 Manager and Owner as parties insured thereunder, as their
interests may appear;
5.3.2 types of coverages and amounts as required in Exhibit F;
5.3.3 where applicable, mortgage (loss payable) endorsement(s) in
favor of Mortgagee(s), as their interests may appear;
5.3.4 where applicable and permitted under the applicable policy,
the insurer's waiver of subrogation rights against Manager and Owner; and
5.3.5 a requirement that the insurer provide to all named insureds
at least thirty (30) days' prior written notice of cancellation or material
change (other than increases in coverage) in the terms and provisions of the
applicable policy.
5.4 EVIDENCE OF INSURANCE
5.4.1 As soon as practicable prior to the effective date of the
applicable coverages, the Party obtaining the insurance coverages under this
Article 5 shall provide the other Party with insurance certificates evidencing
that the applicable insurance requirements of this Contract have been satisfied.
As soon as practicable prior to the expiration date of each such policy, the
Party obtaining such insurance shall provide the other Party with insurance
certificates evidencing renewal of existing or acquisition of new coverages.
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5.4.2 On request of the other Party, each Party shall furnish the
other with a schedule of insurance obtained by such Party under this Article 5,
listing the policy numbers of the insurance obtained, the names of the companies
issuing such policies, the names of the parties insured, the amounts of
coverage, the expiration date or dates of such policies and the risks covered
thereby.
5.5 DUTIES OF OWNER
Owner promptly shall:
5.5.1 cause to be investigated all damage to or destruction of the
Hotel, as it becomes known to Owner, and report to Manager any such incident
that is material, together with the estimated cost of repair thereof;
5.5.2 prepare any and all reports required by any insurance company
as the result of an incident mentioned in this Section 5.5, acting as the sole
agent for all other named insureds, additional insureds, mortgagees and loss
payees; and
5.5.3 retain all consultants and experts, including architects,
engineers, project managers, accountants and attorneys, as needed, to assist in
analyzing any loss or damage, determining the nature and cost of repair and
preparing and presenting any proofs of loss or claims to any insurers.
5.6 REVIEW OF INSURANCE
All insurance policy limits provided under this Article 5 shall be
reviewed by the Parties every three (3) years following the commencement of the
Operating Term, or sooner if reasonably requested by either party, to determine
the suitability of such insurance limits in view of exposures reasonably
anticipated over the ensuing three (3) years. Owner and Manager hereby
acknowledge that changing practices in the insurance industry and changes in the
local law and custom may necessitate additions to types or amounts of coverage
during the Operating Term. Owner agrees to comply with any other insurance
requirements Manager reasonably requests in order to protect the Hotel and the
respective interests of Owner and Manager.
5.7 WAIVER OF LIABILITY
So long as each Party is named as an insured or additional insured
under the other Party's policies of casualty insurance, or the policies
otherwise permit where each Party is not so named, each Party hereby releases
the other Party, and its Affiliates and agents, and its and their officers and
employees, from any and all liability for damage or destruction to its property
(including, in the case of Owner, the Hotel and the FF&E), whether or not due to
the negligent or other acts or omissions of the other Party, its Affiliates or
agents, or its or their officers or employees, where the damage or destruction
is covered by the insurance policies of the releasing Party.
6. MORTGAGES
6.1 AUTHORIZATION TO MORTGAGE HOTEL
6.1.1 Manager acknowledges that Owner is financing the construction,
development, furnishing and equipping of the Hotel as evidenced by the Credit
Agreement and may from time to time enter into one or more succeeding Financings
of the Hotel through equity and/or debt financing. Owner shall have the right to
encumber all of the assets that comprise the Hotel, any part thereof, or any
interest therein, including the real estate on which the Hotel is located, the
Hotel building and all improvements thereto and all FF&E and hotel equipment and
operating supplies placed in or used in connection with the operation of the
Hotel as contemplated in any Mortgage that is entered into by Owner, and to
assign to any Mortgagee as collateral security for any loan secured by the
Mortgage, all of Owner's right, title and interest in and to this Contract. Each
Mortgagee must be a Person to which Owner could assign this Contract without
Manager's consent pursuant to Section 9.3.2. Manager acknowledges that Agent and
any existing or future Lenders under the Credit Agreement satisfies the
requirements of Section 9.3.2.
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6.1.2 On reasonable advance notice from a Mortgagee, Manager shall
accord to such Person and its agents the right to enter on any part of the Hotel
at any reasonable time for the purposes of examining or inspecting the same, or
examining or making extracts from the books of account and financial records of
the Hotel; provided, however, that any expenses incurred in the Hotel's name in
connection with such activities shall be Operating Expenses of the Hotel. Owner
shall use its best efforts to cause each Mortgagee to agree to treat as
confidential any information it obtains from examining the books and records of
the Hotel or from statements, budgets and the like furnished to it by Owner or
Manager.
6.1.3 Owner shall provide Manager with a true and complete copy of
any Mortgage and all material related documents relevant to Manager's services
under this Contract within thirty (30) days of the signing of such documents by
Owner. Manager shall keep the terms thereof confidential.
6.2 SUBORDINATION OF MANAGER'S INTEREST
6.2.1 Without limiting the obligations of Owner under Section 6.3.2,
Manager hereby agrees and acknowledges that Manager shall, upon the request of
Owner enter into one or more subordination agreements with Agent or with respect
to any Mortgage or Mortgagee contemplated by the Credit Agreement or included in
any Succeeding Financing on customary terms reasonably acceptable to Manager the
effect of which shall be to permit such Mortgagee following a default by Owner
under such Mortgagee's Mortgage, to terminate this Contract and acquire title to
the Hotel by foreclosure, deed-in-lieu thereof or otherwise free of any claims
or interest of Manager, other than claims relating to fees and expenses payable
to Manager for any period during which Manager shall have performed its services
hereunder for the benefit of such Mortgagee. Owner hereby acknowledges and
agrees that to the extent there is any conflict between this Contract and any
such subordination agreement, Manager's compliance with the terms of such
subordination agreement shall not cause a breach or default on the part of
Manager under this Contract.
6.2.2 On or before the due date thereof, and to the extent that
Owner has made sufficient funds available in the Operating Account or from other
sources, Manager shall make all payments due under any Mortgage now or hereafter
entered into and of which Owner has given or hereafter gives Manager notice.
Manager shall give Owner written evidence of the making of each such payment
within five (5) days after such payment is made.'
6.2.3 To the extent that Owner has made sufficient funds available
in the Operating Account or from other sources, Manager shall cause the Hotel to
be operated in compliance with all of the covenants and terms of any Mortgage
now or hereafter entered into and of which Owner has given or hereafter gives
Manager notice.
6.2.4 To the extent that Manager prepares or submits any information
to Owner from time to time pursuant to this Contract, Manager shall, if so
requested by a Mortgagee from time to time, provide the requesting Mortgagee
with a copy of that information.
6.2.5 On reasonable advance notice from a Mortgagee, Manager shall
accord to such Mortgagee and its agents the right to enter on any part of the
Hotel at any reasonable time for the purposes of examining or inspecting the
same, or examining or making extracts from books of account and financial
records of the Hotel; provided, however, that any expenses incurred in the
Hotel's name in connection with such activities shall be Operating Expenses of
the Hotel. Owner shall use its reasonable efforts to cause each Mortgagee to
agree to treat as confidential any information it obtains from examining the
books and records of the Hotel or from statements, budgets and the like
furnished to it by Owner or Manager.
6.2.6 Manager shall promptly provide each Mortgagee of whom Manager
has notice with copies of all notices received from any governmental agency or
department with respect to the Hotel or from any private litigant (except for
any litigation relating to personal injury and seeking damages that are fully
covered by insurance except for any deductible).
6.2.7 To the extent that Manager enters into transactions relating
to the Hotel with any of the Manager's Affiliates, Manager shall, upon request
from any Mortgagee, identify and list all such transactions,
26
summarize the material terms thereof, and provide evidence that such terms are
on terms competitive with the terms of an arms-length transaction available from
third-party providers.
6.2.8 Upon request from any Mortgagee from time to time, Manager
shall confirm the terms of this Article for the benefit of any Mortgagee and/or
enter into a subordination agreement setting forth the terms of this Article and
such other terms as the Mortgagee may then require.
6.3 PROTECTION OF MANAGER'S INTEREST
Owner shall defend, indemnify and hold Manager harmless from and
against any and all losses, damages, costs and expenses that Manager may incur
should this Contract be terminated by any Mortgagee in accordance with the terms
of this Contract so long as no Event of Default by Manager exists. For purposes
of this Section 6.3, "Owner" shall mean the owner of the Hotel whose ownership
interest was foreclosed upon, and shall not include any Mortgagee or successor
Owner who acquired title to the Hotel at, by reason of, or following any such
foreclosure.
7. DESTRUCTION; TAKING
7.1 DAMAGE OR DESTRUCTION
If the Hotel or any portion thereof shall be damaged or destroyed at
any time or times during the Operating Term by fire, casualty or any other
cause, Owner, at its own cost and expense and with due diligence, but subject to
the applicable provisions of the Credit Agreement and any Succeeding Financing,
shall undertake a Casualty Restoration that will restore the Hotel to
substantially the condition it was in immediately prior to such damage or
destruction. Notwithstanding the foregoing, if the Hotel is damaged or destroyed
to such an extent that the cost of the Casualty Restoration as reasonably
estimated by Owner exceeds thirty percent (30%) of the replacement cost of the
Hotel (excluding land, excavations, footings and foundations) or if the Casualty
Restoration will take longer than one hundred eighty (180) days to complete,
Owner shall notify Manager of such fact within ninety (90) days after the
occurrence of such damage or destruction, and Manager may terminate this
Contract by notice to Owner. If Owner determines that the insurance proceeds
available to undertake a Casualty Restoration are not sufficient (when added to
the amount of any applicable deductibles) to complete the Casualty Restoration,
and that Owner therefore will either demolish the Hotel in its entirety or to
cease utilizing the building as a hotel, Owner may terminate this Contract by
notice to Manager, in either case given within thirty (30) days after Owner's
receipt from the insurance company of the insurance company's determination as
to the availability and sufficiency of insurance proceeds. Owner shall
diligently pursue the determination and recovery of insurance proceeds with
respect to such damage or destruction. If neither Party gives such notice within
the respective time periods provided above, this Contract shall remain in full
force and effect and Owner shall be obligated to restore the Hotel in accordance
with this Section 7.1, provided that if at any time Manager subsequently
reasonably believes that the Casualty Restoration will not be completed within
the time period originally set forth by Owner, Manager may terminate this
Contract by notice to Owner. If this Contract is terminated by Owner pursuant to
the preceding sentence and Owner determines at any time within three (3) years
after the date of such termination to either rebuild the Hotel or recommence
utilizing the building as a hotel, then Manager may reinstate this Contract by
notice to Owner given within ninety (90) days after receipt by Manager of notice
from Owner that Owner has elected to undertake a Casualty Restoration and has
commenced the same; provided, however, that if Owner fails to give such notice,
then Manager may reinstate this Contract by notice to Owner given at any time
prior to the later of (i) completion of the Casualty Restoration and the full
reopening of the Hotel, and (ii) ninety (90) days after Manager becomes aware of
the Casualty Restoration. If Owner gives the notice to Manager provided for in
the preceding sentence and Manager elects to reinstate this Contract within the
ninety (90) day period above provided for, Owner shall thereupon become
obligated to complete the Casualty Restoration with due diligence. If this
Contract is terminated and then reinstated pursuant to this Section 7.1, the
remaining term of this Contract upon the effective date of its reinstatement
shall be the term that was remaining under this Contract as of the date of its
earlier termination. If there shall be any dispute between Owner and Manager as
to whether Owner's estimate of the cost of restoration, the full replacement
cost of the Hotel, or the estimated time for repair or restoration is reasonable
under the circumstances, the said dispute shall be submitted to arbitration
conducted in accordance with the provisions of Section 10.
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7.2 TAKING
7.2.1 If a Taking shall occur during the Operating Term, as to the
whole of the Hotel, or in Manager's reasonable opinion that makes it imprudent
or unsuitable to use and operate the remaining portion of the Hotel in
accordance with the Operating Standard, then either Owner or Manager may
terminate this Contract upon ninety (90) days' notice to the other Party. If the
Taking affects only a part of the Hotel or the real property on which it is
erected and if the Taking of such part does not make it unsuitable or imprudent,
in Manager's reasonable opinion, to operate the remainder in accordance with the
Operating Standard, this Contract shall not terminate, and Owner shall, subject
to the applicable provisions of the Credit Agreement and any Succeeding
Financing, undertake such alterations or modifications to the Hotel, or any part
thereof, as shall be reasonably necessary and practicable to make the Hotel a
satisfactory architectural unit as a hotel of the type and class immediately
preceding such taking or condemnation.
7.2.2 Manager shall have the right in the case of a Taking either to
institute or to intervene in any available administrative proceeding or judicial
action intended to determine just compensation for such Taking, for the purpose
of representing Manager's compensable interest in any award therefor arising
from this Contract and more specifically from Manager's right of quiet
enjoyment. Any award made to Owner that does not recognize the separate
compensable interest of Manager shall be apportioned between the Parties in
consideration, without limitation, of such factors as: (i) recoupment by Owner
of its investment, (ii) return on Owner's investment to date, (iii) actual loss
of income (including Manager's fee income hereunder), (iv) loss of reasonably
anticipated future income (including Manager's fee income hereunder), (v) length
of the unexpired term (including any renewals) of this Contract, and/or (vi) the
proportion that the Management Fee has historically borne to the return to Owner
after payment of such fee. If the Parties cannot agree upon such apportionment
within ninety (90) days after the amount of the award payable to Owner has been
determined by settlement or a final judicial determination, either Party may
submit the dispute for resolution pursuant to Article 10.
7.3 EFFECT OF TERMINATION
7.3.1 If this Contract is terminated in accordance with Sections 7.1
or 7.2, the provisions of Section 4.5 shall apply, and, except to the extent
received by Manager pursuant to Section 7.2.2, all expenses arising as a result
of termination of this Contract or as a result of the cessation of Hotel
operations shall be for the sole account of and paid by Owner.
7.3.2 Upon receipt by Manager of the applicable amounts set forth
above in this Article 7 and in Section 4.5, and on completion of the actions set
forth in Section 4.5, neither Owner nor Manager shall have any further rights
against the other under this Contract except under those provisions of this
Contract that, by their terms, survive any termination of this Contract.
8. BUSINESS INTERRUPTION
8.1 BUSINESS INTERRUPTION
8.1.1 If the Hotel suffers damage or loss that results in an
interruption in the operations of the Hotel, Owner shall nevertheless be
obligated to pay to Manager all amounts that would be due to Manager under this
Contract had such damage or loss not occurred, including the Management Fee, the
Centralized Services Charges and all Reimbursable Expenses, for the period of
the business interruption, regardless of whether there are available to Owner
any Business Interruption Insurance proceeds to cover such amounts. In the event
of such a business interruption, the Management Fee and the Centralized Services
Charges shall be calculated based on projections of the Gross Operating Revenue
and Gross Rooms Revenue that would have been generated had the loss or damage
not occurred. The projections regarding Gross Operating Revenue and Gross Rooms
Revenue shall be derived from then-accepted practices in the hotel and insurance
industries for such matters, with due consideration given to the approved
Operating Plan for the Operating Year in which the loss occurred and any
financial projections for the Hotel most recently prepared by Owner prior to the
loss or damage.
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8.1.2 If the Hotel suffers damage or loss that results in an
interruption in the operation of the Hotel, Owner shall nevertheless be
obligated to pay all expenses of operating and maintaining the Hotel (at the
level which is reasonably determined by Manager to be practicable given the
damage or loss that has occurred) regardless of whether there are available to
Owner any Business Interruption Insurance proceeds to cover such amounts, and
Owner shall be responsible for depositing all amounts necessary for the
operation and maintenance of the Hotel in the Operating Account(s) in accordance
with Section 3.6.2 during the period of the business interruption.
8.2 PROCEEDS OF BUSINESS INTERRUPTION INSURANCE
If the business of the Hotel is interrupted by any event or peril
covered by Business Interruption Insurance, the proceeds of any such insurance
shall, subject to the rights of Agent under the Credit Agreement or the
Mortgagee under any Mortgage, be deposited in the Operating Account(s) and
utilized by Owner in the same manner as funds generated from the operation of
the Hotel are utilized by it in accordance with the terms of this Contract,
including payment of Operating Expenses, the Management Fee, the Centralized
Services Charges and all Reimbursable Expenses.
9. ASSIGNMENTS AND SALE OF THE HOTEL
9.1 RESTRICTIONS ON ASSIGNMENT
Except as expressly provided otherwise in Section 6.1 or this Article
9, neither Party may cause, permit or suffer an Assignment of this Contract
without the prior consent of the other Party. Any Assignment by a Party in
violation of the terms of this Article 9 shall be void and of no force or effect
as between the Parties and shall constitute a material breach of this Contract
governed by the terms of Article 4. For purposes of this Article 9 the following
shall apply:
9.1.1 The term "Assignment" shall include (a) an assignment, pledge,
encumbrance or other transfer in any manner of a Party's interest in this
Contract, or any of its rights or obligations under this Contract, (b) any
transfer of direct or indirect legal and/or beneficial interests (whether
partnership interests, stock, limited liability membership and/or management
interests or otherwise) in a Party or in any owner or owners of a Party, whether
occurring in one or a series of transactions, that results in the transfer of
fifty percent (50%) or more of the direct or indirect ownership interests or
voting power in a Party, or (c) any change in the actual or effective voting
control of a Party or an owner of such Party, but excluding in all cases any
transfer of publicly traded stock and any public offering of equity ownership
interests (whether partnership interest, corporate stock, shares, or otherwise)
in either Party or by its parent company or other owner of such Party, or entity
that itself or through its ownership of legal or beneficial interests in one or
more other entities holds legal or beneficial interests or voting power in such
an owner.
9.1.2 As used in Section 9.1.1, the term "owner" means (a) the
holder of legal or beneficial interests or voting power in a Party and (b) the
holder of direct or indirect legal or beneficial interests or voting power in an
owner (as defined in clause (a) above); and the term "direct or indirect" shall
mean the holder of a legal or beneficial interest or voting power in a Party or
an owner directly by a Person or indirectly through such Person's ownership of
legal or beneficial interests or voting power in an owner (as defined above) or
in an entity that itself, or through its ownership of interests or voting power
in one or more other entities, holds legal or beneficial interests or voting
power in an owner.
9.2 ASSIGNMENT BY MANAGER
So long as no Event of Default attributable to Manager has occurred and
remains uncured, Manager shall have the right, without Owner's consent, to
effect an Assignment of its interest in this Contract to: (i) any Affiliate or
Affiliates of Manager having the right to use the Brand Name and Trade Marks in
accordance with the requirements of this Contract and that has access to the
Corporate Personnel and other corporate resources of Manager utilized in the
performance of its duties hereunder on substantially the same terms as Manager,
or (ii) any Person that acquires, whether by merger, consolidation,
reorganization or purchase of assets, all or substantially all of the business
and assets of the hotel management operations of Manager and its Affiliates
relating to hotels and
29
resorts operated under the Brand Name and continues such hotel management
operations using the Trademarks provided such Person is not (a) likely to be
considered by regulators in the gaming industry or by alcoholic beverage control
authorities having jurisdiction to be an unsuitable business associate of Owner
or who would in any other way create a material risk of jeopardy to any gaming,
liquor or other approval applicable to the Hotel or Complex or (b) generally
recognized in the hotel or lodging business or the community at large as a
Person of ill repute or with whom a prudent business person would choose not to
associate in a commercial venture. The assignee must assume and agree to be
bound by all of the terms and provisions of this Contract and the terms of any
subordination or other agreement entered into between Manager and Agent relating
to this Contract, the Hotel, the Complex and/or the relationship among Borrower,
Manager, Agent and/or the Lenders identified in the Credit Agreement. At Owner's
request, Manager shall deliver to Owner an executed counterpart of the
instrument effecting any Assignment by Manager and assumption by the assignee.
9.3 ASSIGNMENT BY OWNER
So long as no Event of Default attributable to Owner has occurred and
remains uncured, Owner shall have the right to effect an Assignment of its
entire interest in this Contract, together with (but not independent of) a Sale
of the Hotel, to an assignee/transferee that has assumed and agreed in writing
(to be delivered to Manager not more than twenty (20) days following the
effective date of such Assignment) to be bound by all of the terms of this
Contract and that:
9.3.1 has been consented to by Manager or is permitted pursuant to
the exercise of a Mortgagee's rights under Article 6; or,
9.3.2 meets the following criteria:
(a) is not a Competitor; and,
(b) is not generally recognized in the community as being a Person
of ill repute and is not in any other manner a Person with whom a prudent
businessperson would not wish to associate in a commercial venture or a Person
that would be considered by regulators in the gaming industry to be an
unsuitable business associate of Manager and its Affiliates or would in any way
jeopardize the Hotel's liquor license. Manager's failure to object in writing to
such proposed assignee within thirty (30) days of Manager's receipt of such
notice stating with reasonable specificity the basis for such objection shall
constitute Manager's approval of such assignee for purposes of this Section 9.3.
Owner and/or any partner or other constituent member or stockholder
of Owner or of an owner of Owner desiring to effect an Assignment of all or any
part of its interest in this Contract shall give Manager not less than
forty-five (45) days advance written notice of its intention to do so, which
notice shall identify in reasonable detail the direct and indirect owners of the
proposed purchaser and shall be accompanied by the latest available audited and
unaudited financial statements of the proposed purchaser and its direct or
indirect beneficial owners.
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9.4 EFFECT OF PERMITTED ASSIGNMENTS
A consent to any particular Assignment shall not be deemed to be a
consent to any other Assignment or a waiver of the requirement that consent be
obtained in the case of any other Assignment. Upon any Assignment by Owner or
Manager permitted under this Article 9 or consented to by the other Party, the
assigning Party shall be relieved of all liabilities and obligations under this
Contract accruing after the effective date of such assignment. No such
assignment shall relieve the assigning Party from its liabilities or obligations
under this Contract accruing prior to the effective date of the Assignment, and,
in the event of an Assignment by Owner, the assignee shall succeed to and assume
responsibility for all obligations and liabilities including vacation, sick
leave, severance and other benefits based on length of service accrued for Hotel
Personnel as of the effective date of the Assignment.
9.5 FURTHER RESTRICTION ON OWNER
9.5.1 No transfer or assignment of a partnership, membership, stock
or other interest in Owner or in any direct or indirect owner of Owner shall be
made, notwithstanding the fact that such transfer or assignment does not result
in an Assignment, if the Person to whom or which such transfer or assignment is
to be made would not qualify under either or both of the criteria set forth in
Section 9.3.2 (a) and (b). Owner shall give Manager the notice provided in the
penultimate sentence of Section 9.3 with respect to any such assignment or
transfer.
9.5.2 In no event shall Owner enter into any operating or similar
lease of the Hotel unless (a) the requirements set out in Article 6 with respect
to Mortgages have been satisfied with respect to such lease, and (b) the lessee
is a Person to which Owner would be entitled to effect an Assignment of this
Contract pursuant to Section 9.3.
10. DISPUTES
10.1 ALTERNATIVE DISPUTE RESOLUTION REQUIRED
10.1.1 The Parties shall attempt to resolve any dispute that may
arise in connection with this Contract through a process of mediation
administered by JAMS ("Judicial Arbitration and Mediation Service, Inc.) or its
successors. If, at the time such a dispute arises, JAMS does not exist or is
unable to administer the mediation of the dispute in accordance with the terms
of this Article 10, and the Parties cannot agree on the identity of a substitute
service provider, then the complaining Party shall petition to a court of
competent jurisdiction located in Clark County, State of Nevada, to identify a
substitute service provider, who will administer the dispute resolution process
in accordance with the terms of this Article 10. The service provider identified
in accordance with the provisions of this Section 10.1.1 shall be referred to as
the "ADR Provider."
10.1.2 The Parties shall attempt to settle the dispute by
participating in at least ten (10) hours of mediation at the offices of the ADR
Provider. The complaining Party must notify the other Party that a dispute
exists and then contact the ADR Provider to schedule the mediation conference. A
designated individual mediator will then be selected in accordance with the
rules of the ADR Provider to conduct the mediation; provided that such mediator
must have experience in the hospitality industry and must not have any conflict
of interest. The mediation will be a nonbinding conference between the Parties
conducted in accordance with the applicable rules and procedures of the ADR
Provider. Neither Party may initiate litigation or arbitration proceedings with
respect to any dispute until the mediation of such dispute is complete with the
sole exception of seeking emergency relief from a court of competent
jurisdiction, as described below. Any mediation will be considered complete: (i)
if the Parties enter into an agreement to resolve the dispute; (ii) with respect
to the Party submitting the dispute to mediation, if the other Party fails to
appear at or participate in a reasonably scheduled mediation conference; or
(iii) if the dispute is not resolved within five (5) business days after the
mediation is commenced.
10.1.3 If any dispute remains between the Parties after the
mediation is complete, then either Party may commence legal proceedings to
resolve such dispute; provided, however, that if the dispute is an Arbitrable
Dispute, either Party may require that the dispute be submitted to final and
binding arbitration (without appeal or review) in Clark County, State of Nevada,
administered by an independent arbitration tribunal pursuant to
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the Commercial Arbitration Rules of the American Arbitration Association.
Notwithstanding the foregoing, the arbitrator's decision on any matter submitted
for arbitration shall be based upon what is commonly referred to as the
"baseball arbitration" approach, whereby the arbitrator may only decide in favor
of the position presented by either Owner or Manager, and may not make a
ruling/determination other than in favor of one of the two positions presented.
If more than one issue shall be submitted to the same arbitrators for
resolution, each such issue shall be deemed a separate arbitration for all
purposes hereof, such issues to be identified separately by the parties in their
submission to arbitration, and each such issue shall be subject to a separate
decision by the arbitrators. All arbitrators appointed hereunder shall be
persons having not less than ten (10) years' experience in the area of expertise
on which the dispute is based (i.e. with respect to operational matters,
experience in the management and operation of hotels of generally the same class
and category as the Hotel, or, with respect to financial matters, experience in
the financial or economic evaluation or appraisal of such first-class hotels).
10.1.4 Any litigation or arbitration of a dispute (including an
Arbitrable Dispute) must be initiated within one (1) year from the date on which
either Party first gave written notice to the other of the existence of the
dispute, and any Party who fails to commence litigation or arbitration within
such one-year period shall be deemed to have waived any of its affirmative
rights and claims in connection with the dispute and shall be barred from
asserting such rights and claims at any time thereafter. An arbitration shall be
deemed commenced by a Party when the Party sends a notice to the other Party,
identifying the Arbitrable Dispute and requesting arbitration. Litigation shall
be deemed commenced by a Party when the Party serves a complaint on the other
Party with respect to the dispute.
10.1.5 THE ARBITRATORS SHALL HAVE NO AUTHORITY TO AWARD ANY PUNITIVE
OR EXEMPLARY DAMAGES OR TO VARY OR IGNORE THE TERMS OF THIS CONTRACT, AND SHALL
BE BOUND BY CONTROLLING LAW.
10.2 COMPENSATION OF MEDIATOR OR ARBITRATOR
Subject to the right of the prevailing Party to seek reimbursement from
the other Party pursuant to Section 10.4, the Parties agree to share equally the
costs, including fees, of the ADR Provider or arbitration tribunal and
arbitrators selected or appointed under this Article 10. As soon as practicable
after selection of the ADR Provider, the ADR Provider or its designated
representative shall determine a reasonable estimate of the ADR Provider's
anticipated fees and costs, and send a statement to each Party setting forth
that Party's equal share of the fees and costs. Within ten (10) days after
receipt of the statement, each Party shall deposit the required sum with the ADR
Provider.
10.3 VENUE, JURISDICTION AND JURY WAIVER
The venue of any mediation, arbitration or judicial proceedings shall
be in Clark County, Nevada, unless otherwise mutually agreed by the Parties.
Each Party irrevocably submits to the exclusive jurisdiction of the federal and
state courts located Clark County, Nevada, unless otherwise mutually agreed by
the Parties. Each Party waives to the fullest extent permitted by law, trial by
jury of all disputes arising out of or relating to this Contract.
10.4 EXPENSES
The prevailing Party in any arbitration, suit or other action arising
out of or related to this Contract shall be entitled to recover from the other
Party all reasonable fees, costs and expenses incurred by the prevailing Party
in connection with the arbitration, suit or other action, including reasonable
judicial and extra-judicial attorneys' fees, expenses and disbursements and
fees, costs and expenses relating to any mediation, arbitration or appeal. If
any Party secures a judgment in any proceeding brought to enforce or interpret
this Contract, then any costs or expenses (including reasonable attorneys' fees)
incurred in enforcing, or in appealing from, such judgment shall be payable by
the Party against whom such judgment or determination on appeal has been
rendered and shall be recoverable separately from and in addition to any other
amount included in such judgment.
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10.5 SURVIVAL AND SEVERANCE
The provisions of this Article 10 are severable from the other
provisions of this Contract and shall survive and not be merged into any
termination or expiration of this Contract or any judgment entered in connection
with any dispute, regardless of whether such dispute arises before or after
termination or expiration of this Contract, and regardless of whether the
related mediation, arbitration or litigation proceedings occur before or after
termination or expiration of this Contract. If any part of this Article 10 is
held to be unenforceable, it shall be severed and shall not affect either the
duties to mediate or arbitrate or any other part of this Article 10.
11. TRADEMARKS AND OTHER PROPRIETARY MATERIALS
11.1 OWNERSHIP OF TRADEMARKS
Manager represents that it has the right to use the Trademarks in
connection with the operation of the Hotel. Owner acknowledges and agrees that
it has no rights to or interest in the Trademarks, and agrees not to contest the
rights of Manager or its Affiliates in respect of the Trademarks, including any
additions or improvements to the Trademarks by whomever developed.
11.2 USE OF TRADEMARKS
As part of the management services to be provided under the terms of
this Contract, and subject to the provisions of Section 2.2, Manager shall use
the Trademarks in performing its obligations under this Contract for the Hotel
in a manner consistent with the Operating Standard and shall have the right to
determine the form of presentation of the Trademarks in conjunction with
performance of its obligations under this Contract for the Hotel.
11.2.1 Owner may not itself use the Trademarks or apply for
international, United States federal, or state or territorial registration of
any rights in the Trademarks. Without Manager's prior consent, Owner may not use
any of the Trademarks as all or part of its legal name or any other trade or
assumed name under which Owner does business, and Owner shall disclose in any
trade or assumed name filing that the Hotel is independently managed and that
Owner has no ownership rights in the Trademarks. Except as provided in Section
2.2 and Section 11.3, Owner shall not combine any of the Trademarks with any
other trademark, service mark or logo.
11.2.2 Manager reserves the sole right and discretion to:
(a) subject to Planet Hollywood's rights under the Planet Hollywood
Hotel and Casino Licensing Agreement, set reasonable minimum operating standards
(which shall not be greater than the Operating Standards which apply to the
Hotel pursuant to the other provisions of this Agreement) associated with the
Trademarks for the Hotel which must be met as a condition of continued
association with the Brand Name;
(b) subject to Planet Hollywood's rights under the Planet Hollywood
Hotel and Casino Licensing Agreement, subject to Section 2.2, determine how and
on what materials the Trademarks may be used;
(c) subject to Planet Hollywood's rights under the Planet Hollywood
Hotel and Casino Licensing Agreement, require the signing of secrecy agreements
by Owner, Hotel Personnel and third parties to protect the Trademarks or any
other confidential or proprietary materials of Manager or its Affiliates;
(d) subject to Planet Hollywood's rights under the Planet Hollywood
Hotel and Casino Licensing Agreement, set standards for and designate approved
third-party suppliers of products bearing any of the Trademarks, and receive
third-party commissions, fees, or royalty payments; and
(e) subject to Planet Hollywood's rights under the Planet Hollywood
Hotel and Casino Licensing Agreement, handle disputes and control actual or
threatened litigation with third parties relating to any part of the Trademarks.
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11.3 NAME OF HOTEL
Subject to Section 2.13.2, the Hotel shall be operated under the name
specified in the Term Sheet. If Manager and its Affiliates change the Brand
Name, the Hotel name shall be changed, at Manager's expense, without Owner's
consent, to reflect the change in the system-wide identification. The Brand Name
and any replacement or substitute name constitutes a distinctive hotel service
mark for use in connection with the Hotel.
11.4 OBLIGATIONS OF OWNER
11.4.1 Except as otherwise expressly permitted under this Contract,
without first obtaining Manager's consent, Owner shall not publish any Hotel
advertising materials or implement any Hotel advertising or promotional programs
of its own.
11.4.2 Owner shall promptly notify Manager of any litigation filed
or threatened against Owner involving the Trademarks, as well as any apparent
third-party infringement of the Trademarks of which Owner becomes aware and
shall cooperate fully with Manager on such matters.
11.5 PROPRIETARY INFORMATION
Owner acknowledges that the Proprietary Information and the goodwill
associated therewith are the sole and exclusive property of Manager and may be
used by Manager and its Affiliates for any purpose. Except for Owner's limited
access to or use of certain information that is part of the Proprietary
Information during the Operating Term as specifically permitted by this
Contract, Owner shall not acquire any right, title or interest of any kind or
nature whatsoever in or to the Proprietary Information or the goodwill
associated therewith. Accordingly, Owner agrees that no right or remedy of Owner
for any default of Manager hereunder, or the delivery of possession of the Hotel
or any provision of this Contract, shall confer upon Owner, or any Person
claiming by or through Owner, the right to use the Proprietary Information in
connection with the use or operation of the Hotel or otherwise. Upon the
expiration or sooner termination of this Contract, in addition to the
requirements set forth in Section 4.5, Owner and its Affiliates shall return to
Manager all Proprietary Information (including any Proprietary Information in
digital form), and shall not use the Proprietary Information. In the event of
any breach of this covenant by Owner, Manager shall be entitled to relief by
injunction, and to all other available legal rights or remedies. Manager hereby
acknowledges and agrees that the limitations of this Section 11.5 shall not
apply to the use by Owner of the Hotel Guest Information, which shall be jointly
owned by Owner and Manager, provided, however, Owner agrees that no
communications with the persons identified in the Hotel Guest Information shall
in any manner refer to Manager, or its Affiliates, or the Brand Name or
Trademarks. The provisions of this Section 11.5 shall survive the expiration or
sooner termination of this Contract.
12. MISCELLANEOUS
12.1 INTERPRETATION
12.1.1 The Recitals set forth at the beginning of this Contract and
the Exhibits attached to this Contract are incorporated in and made a part of
this Contract.
12.1.2 Unless the language specifies or the context implies that a
term of this Contract is a condition, all of the terms of this Contract shall be
deemed and construed to be covenants to be performed by the designated Party.
12.1.3 The use of the terms "including," "include," and "includes"
followed by one or more examples is intended to be illustrative and shall not be
deemed or construed to limit the scope of the classification or category to the
examples listed.
12.1.4 In this Contract, any reference to a section or an article is
a reference to a section or article of this Contract.
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12.1.5 Unless expressly stated otherwise in this Contract, whenever
a matter is submitted to a Party for approval or consent in accordance with the
terms of this Contract, that Party has a duty to act reasonably and timely in
rendering a decision on the matter.
12.1.6 [Intentionally Omitted]
12.1.7 The table of contents and captions to the articles and
sections of this Contract are for convenience of reference only and in no way
define, limit, describe, or affect the scope or intent of any part of this
Contract.
12.2 REPRESENTATIONS AND WARRANTIES OF MANAGER
Manager represents and warrants to Owner as of the Effective Date as
follows:
12.2.1 Manager is a corporation duly organized, validly existing,
and in good standing under the laws of the state of its organization, is duly
qualified to do business in the state in which the Hotel is located, and has
full power, authority, and legal right to execute, perform, and timely observe
all of the provisions of this Contract to be performed or observed by Manager.
Manager's execution, delivery, and performance of this Contract have been duly
authorized by all necessary corporate action on the part of Manager.
12.2.2 This Contract constitutes a valid and binding obligation of
Manager and does not and will not constitute a breach of or default under the
organizational and governing documents of Manager or the terms, conditions, or
provisions of any law, order, rule, regulation, judgment, decree, agreement, or
instrument to which Manager is a party or by which it or any substantial portion
of its assets is bound or affected.
12.2.3 No approval of any third party is required for Manager's
execution and performance of this Contract that has not been obtained prior to
the execution of this Contract.
12.2.4 Manager, at its own expense, shall maintain in full force and
effect throughout the Operating Term its legal existence and the rights required
for it timely to observe and perform all of the terms and conditions of this
Contract.
12.2.5 To its actual knowledge, there is no litigation, proceeding
or governmental investigation pending or threatened against Manager that could
adversely affect the validity of this Contract or the ability of Manager to
comply with its obligations under this Contract.
12.2.6 No broker or finder was retained by Manager to render
services in connection with any of the transactions contemplated hereby, and no
fees are due to any third party with respect hereto.
12.2.7 Manager (or an Affiliate of Manager ) owns the rights to the
Brand Name and Manager has the right to use the Brand Name at the Hotel in the
manner contemplated in this Contract.
12.3 COVENANTS, REPRESENTATIONS AND WARRANTIES OF OWNER
Owner represents and warrants to Manager as of the Effective Date as
follows:
12.3.1 Owner is duly organized, validly existing, and in good
standing under the laws of the state of its organization, is duly qualified to
do business in the state in which the Hotel is located, and has full power,
authority, and legal right to execute, perform, and timely observe all of the
provisions of this Contract to be performed or observed by Owner. Owner's
execution, delivery and performance of this Contract have been duly authorized
by all necessary action on the part of Owner.
12.3.2 This Contract constitutes a valid and binding obligation of
Owner and does not and will not constitute a breach of or default under any of
the organizational or governing documents of Owner or the terms, conditions, or
provisions of any law, order, rule, regulation, judgment, decree, agreement, or
instrument to
35
which Owner is a party or by which it or any substantial portion of its assets
(including the Hotel) is bound or affected.
12.3.3 Subject to obtaining approval by the Bankruptcy Court of
Owner's acquisition of the Complex, no other approval of any third party
(including any ground lessor or the holder of any Mortgage) is required for
Owner's execution and performance of this Contract that has not been obtained
prior to the execution of this Contract.
12.3.4 Owner, at its own expense, shall maintain in full force and
effect throughout the Operating Term its legal existence and the rights required
for it timely to observe and perform all of the terms and conditions of this
Contract.
12.3.5 Owner holds (or will hold prior to the Opening Date) and
shall maintain throughout the Operating Term all Approvals necessary to permit
the ownership and operation of the Hotel in accordance with the Operating
Standard and Legal Requirements.
12.3.6 [Intentionally Omitted]
12.3.7 To its actual knowledge, except for the proceedings of the
Bankruptcy Court relating to the Complex and the matters disclosed in the
Purchase Agreement, there is no litigation, proceeding or governmental
investigation pending or threatened against Owner that could adversely affect
the validity of this Contract or the ability of Owner to comply with its
obligations under this Contract.
12.3.8 [Intentionally Omitted]
12.3.9 No broker or finder was retained by Owner to render services
in connection with any of the transactions contemplated hereby, and no fees are
due to any third party with respect hereto.
12.4 USE OF AFFILIATES BY MANAGER
In fulfilling its obligations under this Contract, Manager may from
time to time use the services of one or more of its Affiliates. If an Affiliate
of Manager performs services Manager is required to provide under this Contract,
Manager shall be ultimately responsible to Owner for its Affiliate's
performance, and Owner shall not pay more for the Affiliate's services and
expenses than Manager would have been entitled to receive under this Contract
had Manager performed the services. If an Affiliate of Manager otherwise
performs services for or provides goods to the Hotel, such goods or services
shall be supplied at prices and on terms at least as favorable to the Hotel as
generally available in the relevant market and consistent with terms made
available to other similar hotels within the group of Managed Hotels.
12.5 GOVERNING LAW
This Contract and all disputes relating to the performance or
interpretation of any term of this Contract shall be construed under and
governed by the laws of the State of New York.
12.6 WAIVERS, MODIFICATIONS, REMEDIES
No failure or delay by a Party to insist on the strict performance of
any term of this Contract, or to exercise any right or remedy consequent on a
breach thereof, shall constitute a waiver of any breach or any subsequent breach
of such term. Neither this Contract nor any of its terms may be changed, waived,
discharged, or terminated except by an instrument in writing signed by the Party
against whom the enforcement of the change, waiver, discharge, or termination is
sought. No waiver of any breach shall affect or alter this Contract, but each
and every term of this Contract shall continue in full force and effect with
respect to any other then existing or subsequent breach. The remedies provided
in this Contract are cumulative and not exclusive of the remedies provided by
law or in equity. ANYTHING HEREIN CONTAINED, AND ANYTHING AT LAW, TO THE
CONTRARY NOTWITHSTANDING, IN ANY ACTION OR PROCEEDING BETWEEN THE PARTIES
(INCLUDING,
36
WITHOUT LIMITATION, ANY ARBITRATION PROCEEDING) ARISING UNDER OR WITH RESPECT TO
THIS CONTRACT OR IN ANY MANNER PERTAINING TO THE HOTEL OR TO THE RELATIONSHIP OF
THE PARTIES HEREUNDER, EACH PARTY HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES
AND RELEASES ANY RIGHT, POWER OR PRIVILEGE EITHER MAY HAVE TO CLAIM OR RECEIVE
FROM THE OTHER PARTY HERETO ANY PUNITIVE OR EXEMPLARY DAMAGES, EACH PARTY
ACKNOWLEDGING AND AGREEING THAT THE REMEDIES HEREIN PROVIDED, AND OTHER REMEDIES
AT LAW AND IN EQUITY, WILL IN ALL CIRCUMSTANCES BE ADEQUATE. THE FOREGOING
WAIVER AND RELEASE SHALL APPLY IN ALL ACTIONS OR PROCEEDINGS BETWEEN THE PARTIES
AND FOR ALL CAUSES OF ACTION OR THEORIES OF LIABILITY, WHETHER FOR BREACH OF
THIS CONTRACT OR FOR VIOLATION OF ANY OTHER DUTY OWING BY EITHER PARTY TO THE
OTHER WHICH MAY IN ANY WAY RELATE TO MANAGER'S MANAGEMENT OR OPERATION OF THE
HOTEL. BOTH PARTIES FURTHER ACKNOWLEDGE THAT THEY ARE EXPERIENCED IN NEGOTIATING
AGREEMENTS OF THIS SORT, HAVE HAD THE ADVICE OF COUNSEL IN CONNECTION HEREWITH,
AND HAVE BEEN ADVISED AS TO, AND FULLY UNDERSTAND, THE NATURE OF THE WAIVERS
CONTAINED IN THIS SECTION 12.6 AND SECTION 12.18.
12.7 SEVERABILITY OF PROVISIONS
If a court of competent jurisdiction or an arbitrator determines that
any term of this Contract is invalid or unenforceable to any extent under
applicable law, the remainder of this Contract (and the application of such term
to other circumstances) shall not be affected thereby, and each remaining term
shall be valid and enforceable to the fullest extent permitted by law.
12.8 NOTICES
All notices, consents, determinations, requests, approvals, demands,
reports, objections, directions and other communications required or permitted
to be given under this Contract shall be in writing and shall be deemed to have
been duly given and to be effective on the date on which such communications are
delivered by personal delivery, by facsimile transmission (with telephonic
confirmation of receipt), DHL, Federal Express, or other similar courier service
or by the United States Postal Service or its successor after being deposited
with the United States Postal Service as Express Mail or as registered or
certified matter, postage prepaid, return receipt requested, addressed to the
Parties at the addresses specified in the Term Sheet, or at such other address
as the Party to whom the notice is sent has designated in accordance with this
Section 12.8.
12.9 INDEMNIFICATION
12.9.1 Subject to Sections 12.9.2 and 12.9.3, Owner shall indemnify,
defend and hold Manager and its Affiliates and its and their respective
directors, trustees, officers, employees, agents and assigns (collectively, the
"Manager Indemnified Parties") harmless for, from and against any and all
Claims. Notwithstanding the foregoing, in no event shall Owner's indemnification
obligations under this Section 12.9.1 extend to Claims to the extent caused by
Manager's Grossly Negligent or Willful Acts.
12.9.2 Subject to Section 12.9.3, Manager shall indemnify, defend
and hold Owner and its Affiliates and their respective directors, officers,
employees, agents and assigns (collectively, the "Owner Indemnified Parties")
harmless from and against any and all Claims that any Owner Indemnified Party or
Parties may incur, become responsible for, or pay out to the extent caused by
Manager's Grossly Negligent or Willful Acts.
12.9.3 The obligations set forth in this Section 12.9 shall survive
the expiration or any termination of this Contract. Notwithstanding any contrary
provision of this Section 12.9, Owner and Manager mutually agree for the benefit
of each other to look first to the appropriate insurance coverages in effect
pursuant to this Contract in the event any claim or liability occurs as a result
of injury to person or damage to property, regardless of the cause of such claim
or liability. In addition, nothing contained in this Section 12.9 shall in any
way affect the releases set forth in Section 5.7.
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12.9.4 Any Party obligated to indemnify any of the other Party's
Indemnified Parties under this Section 12.9 (the "Indemnifying Party") in
respect of any claim shall have the right, by notice to the other Party, to
assume the defense of such claim. If the Indemnifying Party gives such notice:
(i) such defense shall be conducted by counsel selected by the Indemnifying
Party and approved by the other Party; provided, however, that the other Party's
approval shall not be required with respect to counsel designated by the
Indemnifying Party's insurer, (ii) so long as the Indemnifying Party (or its
insurer) is conducting such defense with reasonable diligence, the Indemnifying
Party shall have the right to control such defense and shall not be required to
pay the fees or disbursements of any counsel engaged by the other Party or any
of its Indemnified Parties for services rendered after the Indemnifying Party
has given the notice provided for above to the other Party; and (iii) the
Indemnifying Party shall have the right, without the consent of the other Party
or any of its Indemnified Parties, to settle such claim, but only provided that
the Indemnifying Party (or its insurer) pays all amounts due in connection with
or by reason of such settlement and, as part thereof, the other Party and, if
applicable, its Indemnified Parties are unconditionally released from all
liability in respect of such claim. The other Party and/or its Indemnified
Parties shall have the right to participate in the defense of any claim being
indemnified and defended by the Indemnifying Party at the expense of the other
Party and/or its Indemnified Parties, but the Indemnifying Party shall have the
right to control such defense. In no event shall the other Party and/or any of
its Indemnified Parties (a) settle any claim as to which it or they are entitled
to indemnification hereunder without the prior written consent of the
Indemnifying Party, (b) if a claim is covered by the Indemnifying Party's
liability insurance, take or omit to take any action that would cause the
insurer not to defend such claim or to disclaim liability in respect thereof, or
(c) be represented by more than one (1) attorney or firm of attorneys in respect
of such claim.
12.10 FORCE MAJEURE EVENTS
If at any time during the Operating Term either Party is unable to
perform its obligations under this Contract due to a Force Majeure Event, or if
it becomes necessary, in the Parties' reasonable opinion, to cease operation of
the Hotel in order to protect the Hotel and/or the health, safety or welfare of
the guests and/or employees of the Hotel, then the Parties' may close and cease
or partially cease operation of all or any part of the Hotel as necessary based
on the occurrence of the Force Majeure Event, reopening and recommencing
operation of the Hotel when the Parties reasonably determine that the reopening
and recommencement of operations may be done pursuant to applicable Legal
Requirements and without jeopardy to the Hotel, its guests or Hotel Personnel.
Except as otherwise expressly provided in this Contract, the time within which a
Party is required to perform an obligation (other than the payment of money)
shall be extended for a period of time equivalent to the period of delay caused
by a Force Majeure Event.
12.11 SUCCESSORS AND ASSIGNS
Subject to the provisions of Articles 6 and 9, this Contract shall
inure to the benefit of and shall be binding on the successors and assigns of
the Parties, and the terms "Owner" and "Manager" as used in this Contract shall
include all permitted successors and assigns of the original Parties.
12.12 ESTOPPEL CERTIFICATES
On request at any time and from time to time during the Operating Term,
Manager shall execute, acknowledge, and deliver to Owner or any Mortgagee,
within thirty (30) days following Manager's receipt of written request therefor,
a certificate: (i) certifying that this Contract has not been modified and is in
full force and effect (or, if there have been modifications, that the same is in
full force and effect as modified and specifying the modifications); (ii)
stating whether, to the knowledge of the signatory of such certificate, any
default by Owner exists, including any Event of Default, and if so, specifying
each default of which the signatory may have knowledge; and (iii) providing any
additional information reasonably requested by Owner or a Mortgagee; provided,
however, that in no event shall Manager be required to agree to any
modifications or waivers with respect to this Contract or other agreements in
effect between the Parties. On similar notice, Manager shall be entitled to a
similar certificate from Owner, any Mortgagee (with respect to any Mortgage), or
any ground lessor (with respect to any ground lease).
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12.13 ENTIRE CONTRACT
This Contract (including the attached Exhibits) constitutes the entire
agreement between the Parties relating to the operation of the Hotel and
supersedes all prior contracts and understandings, written or oral. No
representation, undertaking or promise shall be taken to have been given or be
implied from anything said or written in negotiations between the Parties prior
to the execution of this Contract except as expressly stated in this Contract.
Neither Party shall have any remedy in respect of any untrue statement made by
the other Party on which that Party relied in entering into this Contract
(unless such untrue statement was made fraudulently) except to the extent that
such statement is expressly set forth in any of the terms or provisions of this
Contract.
12.14 COUNTERPARTS
This Contract may be executed in several counterparts, each of which
shall be an original, but all of which shall constitute one and the same
instrument.
12.15 RELATIONSHIP OF THE PARTIES
Nothing contained in this Contract shall be construed as creating a
partnership, joint venture, or similar relationship between the Parties. Manager
assumes no independent contractual liability nor shall Manager be obligated to
extend its own credit with respect to any obligation incurred in operating the
Hotel or performing its obligations under this Contract. The Parties hereby
acknowledge that they are each (or will be as of the Opening Date) members of a
limited liability company holding title, directly or indirectly, to the Complex.
12.16 CONFIDENTIALITY
The Parties agree that the matters set forth in this Contract are
strictly confidential. In addition, the Parties agree to keep strictly
confidential all information of a proprietary or confidential nature about or
belonging to a Party or to any Affiliate of a Party to which the other Party
gains or has access by virtue of the relationship between the Parties. Except as
disclosure may be required to obtain the advice of professionals or consultants,
or financing for the Hotel from an institutional lender, or in furtherance of a
permitted assignment of this Contract, or as may be required by law or by the
order of any government, regulatory authority, or tribunal or otherwise to
comply with Legal Requirements (including reporting requirements applicable to
public companies), each Party shall make every effort to ensure that such
information is not disclosed to the press or to any other third Person without
the prior consent of the other Party. The obligations set forth in this Section
12.16 shall survive any termination or expiration of this Contract. The Parties
shall cooperate with one another on all public statements, whether written or
oral and no matter how disseminated, regarding their contractual relationship as
set forth in this Contract or the performance of their respective obligations
under this Contract.
12.17 FURTHER ASSURANCE
The Parties shall do and cause to be done all such acts, matters and
things and shall execute and deliver all such documents and instruments as shall
be required to enable the Parties to perform their respective obligations under,
and to give effect to the transactions contemplated by, this Contract. Without
limiting the generality of the foregoing, Owner, on behalf of itself, its
Affiliates, and its and their owners, partners, principals, officers, successors
and assigns, agrees, at the request of Manager, to complete, execute and furnish
to Manager such questionnaire or forms as may be required for Manager's or any
of its Affiliate's compliance with gaming license requirements or to be filed
with any liquor licensing authority or similar regulatory authority.
12.18 AGENCY AND AGENCY WAIVERS
THE RELATIONSHIP BETWEEN THE PARTIES HERETO SHALL BE THAT OF AN
INDEPENDENT CONTRACTOR AND NOT AS AN AGENCY RELATIONSHIP AND IT IS THE INTENTION
OF THE PARTIES THAT THIS CONTRACT BE INTERPRETED IN ACCORDANCE WITH GENERAL
PRINCIPLES OF CONTRACT INTERPRETATION WITHOUT REGARD TO THE COMMON LAW OF AGENCY
AND THAT LIABILITY BETWEEN THE PARTIES SHALL BE BASED
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SOLELY ON PRINCIPLES OF CONTRACT LAW AND THE EXPRESS PROVISIONS OF THIS
CONTRACT. IN NO EVENT SHALL MANAGER BE DEEMED IN BREACH OF ITS DUTIES HEREUNDER,
OR OTHERWISE AT LAW OR IN EQUITY, SOLELY BY REASON OF (i) THE FAILURE OF THE
FINANCIAL PERFORMANCE OF THE HOTEL TO MEET OWNER'S
EXPECTATIONS OR INCOME PROJECTIONS OR OTHER MATTERS INCLUDED IN THE OPERATING
PLAN, (II) THE ACTS OF HOTEL PERSONNEL, (III) THE INSTITUTION OF LITIGATION OR
THE ENTRY OF JUDGMENTS AGAINST OWNER OR THE HOTEL WITH RESPECT TO HOTEL
OPERATIONS, OR (IV) ANY OTHER ACTS OR OMISSIONS NOT OTHERWISE CONSTITUTING A
BREACH OF THIS CONTRACT, IT BEING THE INTENTION AND AGREEMENT OF THE PARTIES
THAT MANAGER'S SOLE OBLIGATION HEREUNDER SHALL BE TO ACT IN CONFORMITY WITH THE
EXPRESS TERMS OF THIS CONTRACT. FURTHERMORE, AS BETWEEN OWNER AND MANAGER,
MANAGER SHALL HAVE NO LIABILITY FOR PUNITIVE DAMAGES OR FOR INCIDENTAL OR
CONSEQUENTIAL DAMAGES TO OWNER IN RESPECT OF A BREACH OF ANY ALLEGED FIDUCIARY
DUTIES.
12.19 IRREVOCABILITY OF CONTRACT
Owner and Manager each acknowledge that they are entering into this
Contract in reliance on the long term nature of the Contract, and further
acknowledge that the rights, duties, powers and authority of each of the parties
hereto, are intended to be non-terminable throughout the Term, except in
accordance with the express provisions of this Contract or, where appropriate,
as a remedy for the occurrence of any Event of Default. It is agreed that
neither party will achieve the benefits intended to be achieved if either party
has any continuing right or power to terminate this Contract, or the agency
hereby created, except in accordance with the express provisions of this
Contract. Accordingly, both Owner and Manager hereby, as a substantial
inducement to the other to enter into this Contract, as an inducement to Manager
to invest the skill, time, expertise and customer relationships necessary to
achieve the long term benefits herein contemplated, and as an inducement to
Owner to ensure the full and unrestrained best efforts of Manager in assisting
Owner in the management and operation of the Hotel in accordance with the
provisions of this Contract, hereby irrevocably waive and relinquish any right,
power or authority existing at law or in equity, except in accordance with the
express provisions of this Contract. The parties further hereby acknowledge that
any breach of the provisions of this Section 12.19, by either party will cause
irreparable and permanent damage to the other party, not fully or substantially
compensable by money damages.
12.20 CASINO AND THEATRICAL/PERFORMANCE FACILITIES
12.20.1 It is intended that the Hotel be operated independently of
the Casino and all theatrical and performance spaces contained within the
Complex, notwithstanding their physical integration with the Hotel. Nothing in
this Contract gives or shall be deemed to give Manager any responsibility for or
control, power or authority over operations of the Casino or the theatrical and
performance spaces in the Complex.
12.20.2 Absent any other agreement from time to time between the
Hotel and the Casino and/or between the Hotel and the theatrical and performance
spaces, (a) all food and beverage operations within the Casino and/or the
theatrical and performance spaces shall be handled by Casino staff or staff
engaged to service the theatrical and performance spaces, not by Hotel
Personnel, revenues therefrom shall not be included in Gross Operating Revenues
and the costs thereof shall be borne solely by the Casino and/or theatrical and
performance space as applicable, (b) all doormen and valet parking attendants
shall be employees of the Casino and not Hotel Personnel but all bellmen shall
be Hotel Personnel, (c) security in the Casino, the theatrical and performance
spaces and the Hotel shall be handled by employees of the Casino and not by
Hotel Personnel but the cost shall be equitably allocated, and (d) routine
maintenance in the Casino and the theatrical and performance spaces may be
performed by Hotel Personnel, but subject to security requirements and at such
times as the Casino operator or the operator of the theatrical and performance
space shall allow from time to time, with the cost being equitably allocated
between the Hotel and the Casino and/or the theatrical and performance space.
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12.21 NO PERSONAL LIABILITY
In no event shall any member, partner, shareholder, officer, director,
agent or employee of either Party hereto have any personal liability in
connection with or arising from this Contract provided that Manager may have
liability in connection with or arising from this Contract, but solely in its
capacity as manager hereunder, and not in its capacity as a direct or indirect
member in Owner. Any liability of either Party hereby shall be satisfied from
such Party's ownership interest in the Complex, and not from any other assets or
property of such Party or any member, partner, shareholder, officer, director,
agent or employee of such Party.
[Remainder of page left intentionally blank]
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IN WITNESS WHEREOF, the Parties have executed this Contract as of the
day and year first above written.
OPBIZ, LLC
By: ______________________________
Name: ____________________________
Title: _____________________________
By: ______________________________
Name: ____________________________
Title: _____________________________
SHERATON OPERATING CORPORATION
By: ______________________________
Name: Joseph D. Long
Title: Vice President
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EXHIBIT C
DEFINITIONS
As used throughout this Contract and the attached Exhibits, the following terms
shall have the respective meanings set forth below:
Affiliate - with respect to Manager and Owner, any other Person
directly or indirectly controlling, controlled by, or under common control with
Manager or Owner.
Administered Leases - leases, licenses or other occupancy agreements
for space in the Hotel (excluding space utilized for food and beverage
operations under license to Planet Hollywood and space used for theatrical or
other performance events) used for retail, spa, food and beverage or the
provision and sale of other goods and services the cost of which may be charged
by a guest of the Hotel to such guest's Hotel folio accounts.
Agent - as defined in Recital C.
Annualized RevPAR - for any hotel or group of hotels, Revenue per
Available Room as determined in a Smith Travel Trend Report ("STAR" report)
produced by Smith Travel Research (or a similar report prepared by a successor
organization mutually agreed by the Parties) for the twelve month period
inclusive of and ending in December of each given calendar year.
Approvals - licenses, approvals, permits, authorizations, registrations
and the like required by any governmental or regulatory authority in connection
with the ownership or operation of the Hotel.
Arbitrable Dispute - any dispute, claim or issue arising under this
Contract with respect to (i) the proper inclusion or exclusion of items in Gross
Operating Revenue and Operating Expenses, (ii) the proper computation of
Management Fees, Centralized Services Charges and Reimbursable Expenses, (iii)
the approval of all or any portions of the Operating Plan or any amendments
thereto and any other disputes over whether repairs, improvements, replacements,
or other expenditures are necessary to meet the Operating Standard, (iv)
coverages, limits and deductibles under insurance policies, to the extent not
specifically mandated by this Contract, and (v) any other matter as to which
this Contract expressly provides for dispute resolution by arbitration; but
expressly excluding claims (x) relating to preserving or protecting Manager's
proprietary rights, or (y) for extraordinary relief including injunction or
eviction.
Assignment - as defined in Section 9.1.1.
Automation Services - as defined in Exhibit E.
Bank Accounts - as defined in Section 3.5.1.
Bankruptcy Court - refers to United Bankruptcy Court for the District
of Nevada, Southern Division, and, if any appeal of any decision rendered by
that court is timely, any appellate court having jurisdiction.
Brand Name - the hotel brand name set forth in the Term Sheet.
Business Interruption Insurance - insurance coverage against "Business
Interruption and Extra Expense" (as that phrase is used within the United States
insurance industry for application to transient lodging facilities).
Capital Budget - as defined in Section 2.4.
Capital Expense - any item of expense that, according to GAAP, is not
properly deducted as a current expense on the books of the Hotel, but rather
should be capitalized.
Capital Improvement - any item of any nature incorporated into the
Hotel, the cost of which is a Capital Expense.
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Casino - means the casino and gaming facilities included in the
Complex.
Casualty Restoration - the activity of repairing, restoring, replacing,
or rebuilding the Hotel as required by Article 7, after a casualty or Taking, in
accordance with the Operating Standard.
Centralized Marketing Program - as defined in Section 2.8.1.
Centralized Services - the collective reference to (a) those services,
programs and group benefits described in Exhibit D (for so long as such services
are offered generally to all or distinct sub-groups of the Managed Hotels) and
(b) such additional services, programs or group benefits as are, from time to
time, provided generally to all or distinct sub-groups of the Managed Hotels.
Centralized Services Charges - as defined in Section 2.8.3.
Certified Financial Statements - financial statements with respect to
the operations of the Hotel which contain the information and the certificate
described in Section 2.6.5.
CEO - means the Chief Executive Officer of Owner as set forth in the
LLC Agreement.
CFO - means the Chief Financial Officer of Owner as set forth in the
LLC Agreement.
Claims - claims, demands, actions (including enforcement proceedings
initiated by any government agency), penalties, suits and liabilities (including
the cost of defense, settlement, appeal, reasonable attorneys' fees and
disbursements and any other amounts that any Indemnified Party is required to
pay to third parties in connection with such matters) that any Indemnified Party
or Parties may have alleged against them, incur, become responsible for, or pay
out for any reason related to the ownership or operation of the Hotel, including
(i) the employment and discharge of Hotel Personnel (including alleged
discrimination in connection therewith) and matters pertaining to the
accessibility of the Hotel to Persons with disabilities; (ii) an Event of
Default by Owner; (iii) contamination of or any adverse effects on the
environment with respect to the Hotel; (iv) any violation of any Legal
Requirements; (v) injury or damage to Persons or property occurring in or about
the Hotel or the real property on which the Hotel is located; (vi) breach by
Owner of any of its warranties or representations set forth in Section 12.3;
(vii) claims arising under contracts or agreements entered into in accordance
with the terms of this Contract; (viii) claims arising from or related to
matters described in Section 2.13, or (ix) acts or omissions of Manager or any
other Manager Indemnified Party in the performance of services under this
Contract, or in connection with winding up such services on termination or
expiration of this Contract.
Commencement of Construction - With respect to new construction, the
commencement of pouring of the foundation for such new construction. With
respect to renovation programs, the commencement of significant demolition
activities necessary for undertaking the renovation program.
Competitor - a Person (i) in the business of: (a) providing management
services on a third-party basis to owners of hotels, motels or other transient
lodging facilities; or (b) owning, operating, licensing (as licensor),
franchising or managing a brand or system of hotels, motels or other transient
lodging facilities; or (ii) who owns a hotel and casino located on the Strip.
Contract - this Management Contract.
Corporate Personnel - any personnel from the corporate offices of
Manager or its Affiliates who perform activities at or on behalf of the Hotel in
connection with the services provided by Manager under this Contract.
Credit Agreement - as defined in Recital C.
Date of Taking - the earlier of the date on which the relevant
governmental authority is entitled to possession or takes possession as the
result of a Taking.
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Design Guide - collectively, (i) the Design Guide applicable to the
Brand Name, setting forth mandatory requirements for Managed Hotels, (ii) the
fire safety standards, the Fire Suppression Systems Handbook and the Guidelines
for Fire Detection and Emergency Voice Alarm Communication applicable to the
Brand Name, and (iii) the Fitness and Recreation Facilities Guidelines
applicable to the Brand Name, each as then in effect on the date which is thirty
(30) days prior to the awarding of a general contract for the construction or
renovation of the Hotel.
Designated Accountant - a national firm of independent certified public
accountants mutually acceptable to Owner and Manager.
Director of Casino Operations - as defined in Section 2.7.1
Director of Hotel Operations - as defined in Section 2.7.1.
Employee Room Program - the program or programs maintained by Starwood
from time to time pursuant to which Starwood employees may be offered discounted
rates at Managed Hotels.
Event of Default - any of the events so defined in Section 4.2.
FF&E - items of furniture, fixtures and equipment used in the ordinary
course of operating the Hotel, the cost of which is a Capital Expense.
Force Majeure Event - any one or more of the following events or
circumstances that, alone or in combination, directly or indirectly, adversely
affects the operation of the Hotel: fire, earthquake, storm or other casualty to
the extent not caused by the party seeking the benefit of any Force Majeure
provision; performance of approved Capital Improvements adversely affecting a
material portion of the income generating areas of the Hotel or any other area
material to the operation of the Hotel; strikes, lockouts, or other labor
interruptions; war, rebellion, riots, acts of terrorism, or other civil unrest;
or any other event beyond the Parties' reasonable control.
Frequency Program - any incentive program including the frequent guest
recognition program established and operated by Manager or its Affiliates from
time to time as part of the Centralized Services.
Full Operating Year - an Operating Year containing at least 365 days.
Generally Accepted Accounting Principles or GAAP - those conventions,
rules, procedures and practices, consistently applied, affecting all aspects of
recording and reporting financial transactions which are generally accepted by
major independent accounting firms in the United States. If Owner and Manager
cannot in any instance agree on what constitutes GAAP, then the Designated
Accountant shall make the determination on the request of either Party. Any
financial or accounting terms not otherwise defined herein shall be construed
and applied according to GAAP.
Gross Operating Revenue or GOR - with respect to any period of time,
all revenue and income of any kind derived directly or indirectly from
operations at the Hotel (but excluding (i) the Casino, (ii) the Timeshare
Project, (iii) food and beverage operations under license to Planet Hollywood
and (iv) space which is the subject of an Administered Lease (such exclusion to
also apply to any Rental Income therefrom)) and properly attributable to the
period under consideration (including Rental Income, but not gross receipts, of
licensees, lessees, or concessionaires who are not Administered Leases),
determined in accordance with GAAP and the Uniform System, except that the
following shall not be included in determining Gross Operating Revenue:
(i) applicable excise, sales, occupancy and use taxes, or
similar government taxes, duties, levies or charges collected directly
from patrons or guests, or as a part of the sales price of any goods,
services, or displays, including gross receipts, admission, cabaret, or
similar or equivalent taxes;
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(ii) receipts from the financing, sale or other disposition of
capital assets. FF&E and other items not in the ordinary course of the
Hotel's operations and income derived from securities and other
property acquired and held for investment;
(iii) receipts from awards or sales in connection with any
Taking, from other transfers in lieu of and under the threat of any
Taking, and other receipts in connection with any Taking, but only to
the extent that such amounts are specifically identified as
compensation for alterations or physical loss or damage to the Hotel;
(iv) proceeds of any insurance, including, subject to Section
8.1.1, the proceeds of any Business Interruption Insurance;
(v) rebates, discounts, or credits of a similar nature (not
including charge or credit card discounts, which shall not constitute a
deduction from revenues in determining Gross Operating Revenue, but
shall constitute an Operating Expense); and
(vi) revenues generated by parking, whether on-site or
pursuant to the Common Area Parking Use Agreement to the extent subject
to a valet parking agreement or other arrangement which is not an
Administered Lease;
(vii) security deposits;
(viii) any contributions of additional working capital, and
any contributions to any reserve fund (and any interest earned
thereon);
(ix) any refund of Taxes that were overpaid in a prior
Operating Year;
(x) any reversal of any contingency or tax reserve;
(xi) the price of any merchandise or service given in exchange
for other merchandise or service except to the extent the price of the
subsequent merchandise or service exceeds the price of the initial
merchandise or service;
(xii) any proceeds from the settlement or successful
prosecution of any legal claim;
(xiii) any cash on hand, accounts receivable or closing
adjustments received by Owner from the prior owner of the Hotel in
connection with the acquisition of the Hotel by Owner, and any sums
received from any source by Owner after Owner's acquisition of the
Hotel that are either payable to the prior owner of the Hotel, payable
to creditors of the prior owner of the Hotel, or received or retained
by Owner to reimburse itself for claims or closing adjustments incurred
in connection with such acquisition;
(xiv) payments of principal and interest received pursuant to
that certain Subordinated Non-Negotiable Promissory Note dated as of
November 20, 2000 by Aladdin Bazaar, LLC in favor of Aladdin Gaming,
LLC and subsequently endorsed by the payee to Owner, as such promissory
note may have been or may hereafter be amended, restated, extended,
replaced or refinanced; and
(xv) All revenue from all entertainment on or about the
Complex and from all theatrical and performance revenues or spaces.
Gross Rooms Revenue or GRR - that portion of Gross Operating Revenue
derived from the rental, sale, use or occupancy of the Rentable Guest Rooms,
including any "no show" or early departure charges.
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Guest Data - all guest profiles, guest contact information (e.g.,
addresses, phone numbers, facsimile numbers and email addresses), guest
histories, guest preferences and any other guest information in the customer
database of Starwood Hotels & Resorts Worldwide, Inc. which is maintained,
obtained or derived by Manager, or its Affiliates, from: (i) guests of the
Hotel; (ii) guests of any hotel or similar facility (including any condominium
or interval ownership properties) which Manager, or its Affiliates, owns,
leases, operates or franchises; and (iii) any other sources and databases,
including, without limitation, registered users of Starwood brand websites,
Starwood central reservations database, Starwood Preferred Guest Program,
Starwood Vacation Ownership, Starwood Integrated Property System, and the STARS
Direct Program. For the purposes of this definition, "guest" shall be deemed to
include any customers of any hotels or similar facilities (including any
condominium or interval ownership properties) owned, leased, operated, or
franchised by Manager or its Affiliates, and any customers of any of the
facilities associated with such hotels or other properties (e.g. restaurants,
golf courses, spas, etc.).
Hotel - as defined in Recital B.
Hotel Guest Information - as defined in Section 2.6.1.
Hotel Personnel - all individuals performing services in the name of
the Hotel at the Hotel, whether such individuals are employed by Owner or an
Affiliate of Owner, or a contractor providing labor to the Hotel.
Notwithstanding the foregoing, Hotel Personnel shall not include any members of
the Manager Executive Team or the Owner Executive Team.
Hotel Personnel Costs - all costs associated with the employment,
management or termination of Hotel Personnel (and the Manager Executive Team),
including recruitment expenses, the costs of moving executive level Hotel
Personnel (and the Manager Executive Team), their families and their belongings
to the area in which the Hotel is located at the commencement of their
employment at the Hotel, compensation and benefits, employment taxes, training
and severance payments, all in accordance with Legal Requirements and Manager's
non-discrimination policies for Managed Hotels.
Indemnifying Party - as defined in Section 12.9.4.
Index - the Consumer Price Index for All Urban Consumers, All Items,
for the market area that includes the Hotel, as published by the Bureau of Labor
Statistics of the United States Department of Labor, using the years 1982-84 as
a base of 100, or if such index is discontinued, the most comparable index
published by any federal governmental agency, as mutually acceptable to Owner
and Manager.
Initial Capital Program - as set forth in the Term Sheet.
Initial Working Capital - as set forth in Section 3.6.2.
Insurance Costs - insurance premiums relating to liability and casualty
coverage and Business Interruption Insurance policies maintained with respect to
the Hotel.
IT Preliminary Recommendations - as defined in Exhibit E.
Legal Requirements - all laws, statutes, ordinances, rules,
regulations, permits, licenses, authorizations, directions and requirements of
all governments or regulatory authorities, that now or hereafter may be
applicable to the Hotel and the operation thereof, including those relating to
employees, zoning, building, health, safety and environmental matters and
accessibility of public facilities.
LLC Agreement - means the amended and restated limited liability
company operating agreement of Owner dated as of April 22, 2003 as amended from
time to time.
Managed Hotels - all hotels and resorts in the United States that are
managed by Manager and/or its Affiliates under the Brand Name, including all
such hotels and resorts that are owned by Manager and/or its Affiliates.
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Management Fee - as set forth in the Term Sheet.
Manager Executive Team - as defined in Section 2.7.1.
Manager's Grossly Negligent or Willful Acts - any gross negligence,
willful misconduct or fraud committed by Manager, its Affiliates, or the
Corporate Personnel in the performance of Manager's duties under this Contract.
The acts or omissions (including grossly negligent, willful or fraudulent acts
or omissions) of Hotel Personnel or the Manager Executive Team shall not be
imputed to Manager or its Affiliates, or to the Corporate Personnel, or be
deemed to constitute Manager's Grossly Negligent or Willful Acts, unless such
acts or omissions resulted directly from gross negligence or willful misconduct
on the part of the Corporate Personnel in supervising such Hotel Personnel or
the Manager Executive Team. In no event shall the settlement by either Party in
good faith of any claim brought by a third party (including Hotel Personnel) in
connection with the ownership or operation of the Hotel be deemed to create any
presumption of the validity of the claim, nor shall any such settlement be
deemed to create any presumption that the acts or omissions giving rise to such
claim constituted Manager's Grossly Negligent or Willful Acts.
Manager Indemnified Parties - as defined in Section 12.9.1.
Minimum Initial Working Capital - the amount set forth in the Term
Sheet.
Mortgage - any real estate, leasehold, chattel mortgage, security
agreement, deed of trust, security deed or similar document or instrument
encumbering the Hotel or any part thereof, together with all promissory notes,
loan agreements or other documents relating thereto.
Mortgagee - any holder or beneficiary of a Mortgage.
Northwind Obligations - as defined in the Purchase Agreement.
Operating Account(s) - the bank account or accounts established for the
Hotel in accordance with Section 3.5.1(a).
Operating Expenses - all those ordinary and necessary expenses incurred
in the operation of the Hotel in accordance with this Contract, including the
Management Fee, Reimbursable Expenses, Centralized Services Charges, Hotel
Personnel Costs (including all employment costs relating to the Manager
Executive Team), the cost of maintenance and utilities (including, without
limitation, the Northwind Obligations), garage payments, license fees pertaining
to the theme used at the Hotel, administrative expenses, the costs of
advertising, marketing and business promotion and any amounts payable to Manager
as set forth in this Contract, all as determined in accordance with GAAP and the
Uniform System. Notwithstanding the foregoing description, the following shall
not constitute Operating Expenses: (i) Taxes; (ii) Insurance Costs; (iii)
Capital Expenses; (iv) rentals of real and personal property (except, with
respect to personal property, rentals incurred directly in connection with
revenue generating activities); (v) depreciation and amortization of capitalized
assets; (vi) except for Hotel Personnel, costs and expenses of Owner or Owner's
personnel, including entertainment expenses, salaries, wages and employee
benefits of Owner's employees, directors' fees and the expenses of directors or
Owner's employees to attend board meetings; and (vii) professional fees and
costs, including the fees and disbursements of attorneys, accountants and
appraisers, incurred directly or indirectly in connection with any category of
expense that is not itself an Operating Expense.
Operating Plan - the annual marketing and operating plan and budget for
the Hotel prepared in accordance with the terms of Section 2.4.
Operating Standard - the standard of management of the Hotel described
in Section 2.2.
Operating Term - the term of this Contract, as defined in Section 4.1.
Operating Year - each calendar year during the Operating Term, except
that the first Operating Year shall
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be a partial year beginning on the Effective Date or Opening Date, as
applicable, and ending on the following December 31, and if this Contract is
terminated effective on a date other than December 31 in any year, then the last
Operating Year shall also be a partial year commencing on January 1 of the year
in which such termination occurs and ending on the effective date of termination
or expiration.
Out-of-Pocket Expenses - the out-of-pocket costs (with no mark up or
profit to Manager or Manager's affiliates) incurred by Manager in performing its
services under this Contract, including to the extent relating or allocable
solely or predominantly to the Hotel, air and ground transportation, meals,
lodging and taxis, gratuities, computer and automation services, document
reproduction, printing, promotional materials, stationery, postage,
long-distance telephone calls and facsimiles.
Owner Executive Team - as defined in Section 2.7.1.
Owner Indemnified Parties - as defined in Section 12.9.2.
Payroll Accounts - as defined in Section 3.5.1(b).
Person - an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
Proprietary Information - all information and other intellectual
property in a written or tangible form relating to Manager or any of its
Affiliate, the business affairs of Manager or any of its Affiliates, or any
hotel, resort or similar facility (including any condominium or interval
ownership properties) which Manager or any of its Affiliates owns, leases,
operates or franchises, including, without limitation: (i) Trademarks; (ii)
Proprietary Software; (iii) Guest Data; (iv) corporate sales records; (v)
operational manuals (including, without limitation, accounting, financial
administration, personnel administration, and policies and procedures manuals);
(vi) employee surveys; (vii) recipes, menus and wine lists; (viii) management
programs developed by or on behalf of Manager, notwithstanding any modification
or alteration made for application at the Hotel and notwithstanding their
maintenance or administration by any other Person; (ix) business and marketing
plans; (x) internal audit reports or other financial information relating to
Manager or its Affiliates; (xi) material relating to the operating and design
standards of any hotel or resort owned, leased, operated or franchised by
Manager or any of its Affiliates; and (xii) all trade secrets, proprietary
information and other information, materials and copyrightable or patentable
subject matter developed, acquired, or licensed by Manager or any of its
Affiliates in the operation of the Hotel or in any other hotel owned, leased,
operated or franchised by Manager or any of its Affiliates, and any materials
related thereto. "Proprietary Information" shall not include any of the
foregoing to the extent (i) received from Owner, or (ii) developed jointly with
Owner.
Proprietary Software - computer software specially developed by or for
Manager and/or its Affiliates for use in hotels and resorts managed by Manager
and/or its Affiliates, as more fully described in Exhibit E.
Purchase Agreement - means the agreement of purchase and sale entered
(or be entered) into between Owner and Aladdin Gaming LLC for the acquisition of
the Complex by Owner as the same may be amended from time to time.
Reimbursable Expenses - all costs and expenses reimbursable to Manager
pursuant to Section 3.3.
Rentable Guest Room - an enclosed guest-room space that contains its
own entrance from a common area, a bed, a toilet, a sink and a bathing facility.
Rental Income - means net rental, license, concession or other payments
received by Owner in respect of Administered Leases.
Reserve Fund Contribution - the contribution to the Fund identified in
the Term Sheet.
Sale of the Hotel - the direct or indirect transfer of all or part of
(i) Owner's ownership interests in the
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Hotel, or (ii) the ownership interests in Owner, which shall be deemed to have
occurred on the effective date of the transfer in question.
Strip - that portion of Las Vegas, NV as delineated on the drawing
attached at the end of this Exhibit C.
Taking - a taking of all or any portion of the Hotel or the real
property on which it is erected by any governmental authority (or any authority
or entity acting on behalf of or purporting to act on behalf of any governmental
authority) for any purpose whatsoever or a conveyance by Owner in lieu or under
threat thereof.
Taxes - all taxes, including ad valorem taxes on real property,
personal property taxes and business and occupation taxes, relating to or
assessed in connection with the ownership or operation of the Hotel, but not
including income, franchise, or similar taxes imposed on Owner.
Time Share Project - means the interval ownership resort development
contemplated by the Timeshare Agreement (as defined in the Purchase Agreement).
Trademarks - the trademarks, trade name, service marks and copyrights
associated with the Brand Name and the Frequency Programs and the related marks
that include the Brand Name, including the Brand Name mark, and the Brand Name
logo or symbol, together with the right to use any and all slogans, derivations,
trade secrets, know-how and trade dress and all other proprietary rights
associated with such names, marks and slogans.
Uniform System - the latest edition of the Uniform System of Accounts
for the Lodging Industry that is published by the Hotel Association of New York
City, Inc. and approved by the American Hotel & Motel Association (currently,
the 9th Revised Edition, 1996).
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