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Exhibit 10.1
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT (this “Agreement”) is made and entered into
as of this ___ day of June, 2006 (the “Effective Date”), by and between CNL
HOTELS & RESORTS, INC. (“Customer”), and CNL FINANCIAL GROUP, INC. (“Service
Provider”).  (Customer and Service Provider may be referred to herein as a
“Party” and collectively as the “Parties”).
Preliminary Statement
WHEREAS, Customer desires that Service Provider provide certain services to
Customer upon the terms and subject to the conditions of this Agreement; and
WHEREAS, Service Provider is willing to provide such services to Customer upon
the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, for and in consideration of the foregoing premises and the
mutual covenants and agreements hereinafter set forth, Customer and Service
Provider agree as follows:
1.                  Services.  Service Provider, directly or through its
subsidiaries, shall provide, or cause to be provided, the services for Customer
as are more particularly described in Schedule “A” attached hereto and made a
part hereof (collectively, the “Services”).  (As used herein, the term “Service
Provider” shall include any such subsidiaries providing any Services.).  The
Services and Fees set forth on Schedule “A” attached hereto accurately describe
the Services being provided to Customer by Service Provider and/or its
subsidiaries, and the fees being charged for such Services as of the Effective
Date (as defined in Section 3 below).  The Fees and rates payable by Customer
hereunder for all of the Services other than Legal Services are at Service
Provider’s historical cost without any profit mark-up and are the same Fees or
rates that Service Provider charges to its other customers (which are all either
subsidiaries or other affiliates of Service Provider), and the Fees payable by
Customer hereunder for Legal Services are an annual fixed amount agreed upon in
advance by Customer and Service Provider without any profit mark-up.  All
Services provided by Service Provider hereunder shall be provided promptly and
in a first-class, professional manner, consistent with the manner and level of
care with which such services were provided by Service Provider to Customer on
March 31, 2006 and consistent with industry standards for provision of such
services.  Notwithstanding anything in this Agreement to the contrary, all
Services to be provided by Service Provider pursuant to this Agreement will be
rendered solely for purposes of providing operational and other support to
Customer in the conduct of Customer’s business, and all decisions requiring the
business judgment of the officers, directors and other appropriate management
personnel of Customer shall at all times remain in their sole and exclusive
discretion.
2.                  Compensation.  As compensation for the Services to be
provided by Service Provider to Customer hereunder, Customer shall pay those
fees on Schedule “A” (collectively, the “Fees”).  Within fifteen (15) days after
the end of each month, Service Provider will submit one invoice to Customer for
the Fees (the “Invoice’), together with reasonable documentation supporting each
of the invoiced amounts.  Service Provider shall maintain accurate and complete
books of account necessary to support the amounts set forth on all Invoices, and
Service Provider shall furnish to Customer such additional documentation
supporting an Invoice or the calculation of the Fees thereon as Customer shall
reasonably request in writing.  All Fees shall be payable monthly within thirty
(30) days after receipt by Customer of the Invoice for the Services provided. 
Any delinquent Fees shall accrue interest at the “prime rate”, as published in
The Wall Street Journal from time to time, plus two percent (2%), per annum,
until paid in full.

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3.                  Term and Termination.  The term of this Agreement shall
commence on the Effective Date, and shall continue for an initial term
terminating the later of nine (9) months from the Effective Date or March 31,
2007 (the “Initial Term”).  Customer, at its option, may terminate this
Agreement in its entirety at the end of any term upon ninety (90) days prior
written notice to Service Provider (the “Termination Notice”).  Following the
Initial Term, if no Termination Notice is timely given, then, solely with
respect to any Services not otherwise previously terminated as provided
hereunder, the term of this Agreement shall automatically be extended for
successive six (6) month periods until a Termination Notice is timely given. 
Subject to its obligations to make payments pursuant to this Agreement for
Services previously rendered, Customer, at its sole option, may terminate any or
all Services, other than the Investor Relations / Call Center and Legal
Services, either in whole or in part, under this Agreement upon thirty (30)
business days prior written notice to Service Provider, and Customer, at its
sole option, may terminate the Investor Relations / Call Center and/or the Legal
Services (part (A) or part (B) or both), upon ninety (90) days written notice to
Service Provider.  Upon the termination of all Services by Customer, this
Agreement shall automatically terminate provided that Customer has paid in full
for all Services previously rendered.  Notwithstanding the foregoing, (a)
Service Provider may terminate this entire Agreement at any time in its sole
discretion, without penalty or other cost, upon giving at least one hundred and
eighty (180) days prior written notice to Customer; (b) either Party may
terminate this Agreement upon giving written notice to the other Party in the
event that (i) the other Party becomes insolvent, (ii) the other Party makes a
general assignment for the benefit of its creditors, or (iii) if a voluntary or
involuntary petition under the United States Bankruptcy Code is filed regarding
the other Party; or (c) if the Customer fails to pay the Fees within the time
specified under this Agreement, then Service Provider may terminate this
Agreement upon giving written notice to Customer if such default has continued
for a period of thirty (30) days after Service Provider gave written notice of
such default to Customer.  Notwithstanding the foregoing, (y) the Service
Provider shall not be obligated to provide the Software Services (as described
on Schedule “A” attached hereto) to Customer after September 30, 2006; and (z)
in the event of any termination of this Agreement or any of the Services for any
reason, Service Provider shall use commercially reasonable efforts to cooperate
with any third-party and/or Customer in the transition of such Services for a
reasonable period of time following such termination not to exceed thirty (30)
days from such termination date.  Nothing in this Agreement shall prevent
Customer from engaging other service providers to provide any or all of the
Services or from “in-sourcing” any or all of the Services, and any such activity
shall not waive or alter any of Customer’s rights under this Agreement;
provided, however, that this provision shall not relieve Customer of its
obligation to provide Service Provider with the appropriate notice of
termination of any such Services within the time periods specified above and to
pay the Fees for Services rendered by Service Provider pursuant to this
Agreement.

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4.                  Indemnification.  Service Provider agrees to indemnify
Customer, its subsidiaries and their officers, directors, employees, agents,
successors and assigns for and hold them harmless from any liabilities, losses,
damages, costs and expenses (including reasonable attorney’s fees) incurred by
them arising out of the provision of the Services by Service Provider or its
officers, directors, employees or other representatives and resulting from its
or their gross negligence or willful misconduct.  The provisions of this Section
4 shall survive the termination or expiration of this Agreement.
5.                  Insurance.  During the term of this Agreement and for two
(2) years after the termination or expiration of this Agreement, Service
Provider shall maintain in full force and effect on its behalf, and on behalf of
any of its subsidiaries providing the Services hereunder (the “Subsidiaries”),
insurance with responsible and reputable insurance companies with respect to its
and their respective properties and business, in such amounts and covering such
risks as is carried generally in accordance with sound business practice by
companies in similar businesses similarly situated, including, without
limitation, a general commercial liability insurance policy which shall insure
Service Provider and the Subsidiaries against claims for up to $2,000,000.  Upon
written request by Customer, Service Provider shall furnish Customer a
certificate of insurance evidencing the insurance coverage required under this
Section 5.  Service Provider shall notify Customer in advance of any
termination, cancellation, nonrenewal or material modification of any such
insurance coverage.  The provisions of this Section 5 shall survive the
termination or expiration of this Agreement.
6.                  Limitation of Liability.  IN NO EVENT SHALL EITHER PARTY BE
LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, PUNITIVE, SPECIAL OR
CONSEQUENTIAL DAMAGES OR LOST PROFITS ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE PERFORMANCE OR BREACH THEREOF.  SERVICE PROVIDER’S LIABILITY TO
CUSTOMER, IF ANY, SHALL IN NO EVENT EXCEED THE TOTAL AMOUNT OF COMPENSATION PAID
TO SERVICE PROVIDER HEREUNDER BY CUSTOMER EXCEPT IN THE EVENT OF FRAUD, WILLFUL
MISCONDUCT, GROSS NEGLIGENCE OR BAD FAITH BY SERVICE PROVIDER OR THE APPLICABLE
SUBSIDIARY, AS THE CASE MAY BE.  FURTHERMORE, IN NO EVENT SHALL SERVICE PROVIDER
BE LIABLE TO CUSTOMER FOR ANY DAMAGES RESULTING FROM OR RELATED TO ANY DELAY BY
SERVICE PROVIDER IN THE PERFORMANCE OF SERVICES UNDER THIS AGREEMENT SOLELY DUE
TO EVENTS OR ACTS BEYOND SERVICE PROVIDER’S CONTROL AND SO LONG AS SERVICE
PROVIDER SHALL HAVE USED COMMERCIALLY REASONABLE EFFORTS TO MITIGATE THE EFFECTS
OF SUCH EVENTS OR ACTS TO THE EXTENT SERVICE PROVIDER WAS ABLE TO DO SO.
7.                  Employees/Independent Contractor.  With respect to a
particular Service, Service Provider shall be responsible for selecting the
employees who will perform any particular Service and administering such
employees (i.e. setting such employees’ hours of work, establishing compensation
structure, work load balancing, etc.).  Customer shall have the right to assist
Service Provider in directing the employees assigned to perform specific
Services with respect to the substance of their work and for determining
authorization levels governing each particular Service and the disbursement of
any of Customer’s funds that Service Provider’s employees will have the right to
commit for any Service hereunder.  Service Provider shall act as an independent
contractor and not as the agent of Customer in performing the Services,
maintaining control over its employees, its subcontractors and their employees
and complying with all withholding of income at source requirements, whether
federal, state, local or foreign.  No employee of Service Provider performing
Services shall be considered an employee of Customer or any of its affiliates
until such time, if ever, as they accept Customer’s offer of employment. 
Furthermore, Service Provider shall not subcontract any of the Services without
the prior written approval of Customer, provided, however, that certain Services
may be performed by one or more Subsidiaries (as defined in Section 5 above). 
Service Provider shall, and shall cause its employees to, observe and comply in
all material respects with any and all laws bearing on the performance of the
Services, including but not limited to (as applicable), the Occupational Safety
& Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as
amended, Title VII of the Civil Rights Acts of 1964 and 1991, the Age
Discrimination in Employment Act, the Americans with Disability Act and
Executive Order 11246, as amended (including Equal Opportunity and
Nondiscrimination provisions thereof), FIFRA and all environmental laws
pertinent to the performance of the Services.

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8.                  Taxes.  Service Provider shall be paid the Fees provided for
in Schedule "A” without withholding for any taxes.  In the event that there are
any sales or similar taxes required to be paid on the Services or on this
Agreement (other than federal or state income taxes) (“Taxes”), then Customer
shall be responsible for payment of any such Taxes.  If any Taxes are paid by
Service Provider on this Agreement or the Services, then Service Provider shall
be entitled to provide reasonably detailed written invoices to Customer for the
amount of such Taxes, and Customer shall pay such invoices within thirty (30)
days following receipt thereof.  Any delinquent payment by Customer shall accrue
interest as set forth in Section 2 above.
9.                  Sarbanes-Oxley Act Compliance.  In connection with
Customer’s responsibility to maintain effective internal controls as required by
the Sarbanes-Oxley Act of 2002, Service Provider shall furnish to Customer
copies of Service Provider’s applicable policies, procedures, internal controls,
and other such documentation as Customer shall reasonably request in writing
pertaining to the Services provided hereunder as shall be necessary for Customer
to comply with the Sarbanes-Oxley Act, including, but not limited to, activities
required by the Public Company Accounting Oversight Board (the “PCAOB”) in its
release 2004-1, or other similar guidance promulgated by the PCAOB or other
regulatory agency having jurisdiction over Customer.  Customer shall promptly
reimburse Service Provider for the reasonable out of pocket costs and expenses
incurred by Service Provider in complying with this Section 9 upon its receipt
of an invoice from Service Provider.  Any documents or information furnished to
Customer by Service Provider pursuant to this Section 9 shall be treated as
“Confidential Information” pursuant to Section 19 below.
10.              Notices.  Any notice, approval, request, authorization,
consent, or other communication required or permitted under this Agreement shall
be given in writing and shall be deemed to be given when delivered in person,
sent by facsimile transmission on a business day, with proof of receipt, or two
(2) business days after being deposited in the United States mail, properly
addressed and stamped with the required postage, registered or certified mail,
return receipt requested, to the intended recipient as set forth below:

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If to Customer:
 
CNL Hotels & Resorts, Inc.
420 South Orange Avenue
Suite 700
Orlando, FL  32801-3313
Attention:  Chief Financial Officer
Fax: 407-835-3229
 
If to Service Provider:
 
CNL Financial Group, Inc.
CNL Center at City Commons
450 S. Orange Avenue
14th Floor
Orlando, FL 32801
Attention:  Chief Financial Officer
Fax: 407-650-1199
 
 
With a copy to:
 
General Counsel
Fax:  407-540-2702
 
 

Either Party may change its address or facsimile number specified above by
giving the other Party notice of such change in accordance with this Section 10.
11.              No Third Party Beneficiaries.  Notwithstanding anything to the
contrary in this Agreement, the Parties do not intend any person or entity not a
party to this Agreement to be a beneficiary of any provision of this Agreement,
and no provision of this Agreement shall be interpreted or construed as being
for the benefit of any third party. Further, no third party shall by virtue of
any provision of this Agreement have a right to action or an enforceable legal
remedy against either Party to this Agreement.
12.              Non-Waiver.  The failure of either Party to insist upon or
enforce strict performance by the other Party of any provision of this Agreement
or to exercise any right under this Agreement shall not be construed as a waiver
to any extent of such Party’s right to assert or rely upon any such provision or
right in that or any other instance.
13.              Assignment; Binding Effect.  Neither Party shall assign this
Agreement or any right, interest or benefit under this Agreement without the
prior written consent of the other Party; provided, however, that (a) certain
Services may be performed by one or more subsidiaries of Service Provider, and
(b) Customer may assign its rights under this Agreement (i) to a direct or
indirect wholly-owned subsidiary upon written notice to Service Provider,
provided further, that in such event Customer shall remain liable for the
payment of the Fees due hereunder, (ii) by operation of law, or (iii) to any
successor corporate entity.  Subject to the foregoing, this Agreement shall be
fully binding upon, inure to the benefit of and be enforceable by, the Parties
and their respective successors and permitted assigns.
14.              Entire Agreement.  This Agreement and Schedule “A” attached
hereto set forth the entire agreement of the Parties with regard to the subject
matter hereof, and supersede any and all prior representations, statements or
agreements of the Parties with respect to such subject matter.

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15.              Amendment.  No change, amendment or modification of any
provision of this Agreement shall be valid unless set forth in a written
instrument signed by both of the Parties hereto.
16.              Legal Compliance.  Service Provider will, at its sole cost and
expense, comply with all federal, state, and local laws, rules, regulations, and
ordinances affecting the Services provided under this Agreement.
17.              Governing Law.  This Agreement shall be interpreted and
construed under the laws of the State of Florida, and will be deemed for such
purposes to have been made, executed, and performed in the State of Florida.
18.              Savings Clause.  The invalidity or unenforceability of any
particular provision of this Agreement shall not invalidate any other provision
of this Agreement and the Agreement shall be construed in all respects as if
such invalid or unenforceable provision had been omitted provided that all of
the essential terms and conditions of this Agreement for each Party remain
valid, binding, and enforceable.
19.              Confidentiality.
(a)                For purposes of this Section 19:  (i) “Confidential
Information” means all trade secrets or other confidential or proprietary
information, financial or otherwise, about the business, affairs, and assets of
a Party and its Affiliates; (ii) “Affiliate” means any entity that, directly or
indirectly, is in control of, is controlled by, or is under common control with
(A) a Party or (B) James M. Seneff, Jr., individually or jointly with his wife;
(iii) “Controlled Affiliates” means with respect to a Party, any entity that
directly or indirectly is controlled by such Party; (iv) an entity shall be
deemed to be “controlled by” a person if the person possesses, directly or
indirectly, the power to either (A) vote 50% or more of the securities
(including, without limitation, convertible securities) having ordinary voting
power, or (B) direct or cause the direction of the management or policies of
such entity whether by contract or otherwise, and (v) “Representative” means the
employees, contractors, agents, directors, officers, legal counsel, accountants
and financial advisors of a party.
(b)               A Party, a Party’s Controlled Affiliates, and the
Representatives of a Party and the Party’s Controlled Affiliates will not
disclose or use any Confidential Information which is furnished, or to be
furnished, to it (each a “Receiving Party”) by the other Party (the “Disclosing
Party”) or any of the Representatives or Affiliates of the Disclosing Party at
any time or in any manner other than as permitted by this Agreement.
(c)                Notwithstanding the prohibition in Section 19 above, the
Receiving Party shall be entitled to disclose Confidential Information:  (i) to
its Controlled Affiliates and to its and its Controlled Affiliates’
Representatives, to the extent necessary to permit such Controlled Affiliates
and Representatives to assist the Receiving Party in performing the conduct of
its business, (ii) to the extent such information becomes publicly available
through no fault of the Receiving Party, any of Receiving Party’s Controlled
Affiliates or the Representatives of the Receiving Party or the Receiving
Party’s Controlled Affiliates; or (iii) as compelled or required by applicable
law, a valid subpoena, or other legal mandate; provided, however, (A) in the
event that the Receiving Party or any of Receiving Party’s Controlled Affiliates
or the Representatives of the Receiving Party or the Receiving Party’s
Controlled Affiliates receives such a subpoena or other legal mandate, it shall
provide the Disclosing Party with prompt written notice of same as far in
advance as practicable of the date such party is required to make such
disclosure, and (B) Customer shall use commercially reasonable efforts to have
the fees in Schedule “A” hereto redacted from any filing of this Agreement with
a governmental body or agency.

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(d)               Upon a termination of this Agreement, each Receiving Party
shall return, in the manner directed by the Disclosing Party, the Confidential
Information that has been furnished to such Receiving Party, such Receiving
Party shall destroy copies of all materials that contain Confidential
Information or portions of Confidential Information, in whatever form or medium
such copies or portions are contained (provided that, with respect to electronic
copies, destruction shall be required only to the extent reasonably
practicable), and the Receiving Party shall furnish to the Disclosing Party a
certificate to the reasonable satisfaction of the Disclosing Party certifying
that such destruction has taken place.
(e)                Notwithstanding anything herein to the contrary (including
elsewhere in this Section 19), Service Provider shall take all commercially
reasonable steps and follow all reasonable direction from Customer in order to
protect the confidentiality, and any privileged nature of, any information
provide to, or generated by, Service Provider in connection with the performance
of the Legal Services.
(f)                 The provisions of this Section 19 shall survive the
termination or expiration of this Agreement.
20.              Counterparts.  This Agreement may be executed in counterparts,
each of which shall be deemed an original, and all of which shall constitute one
and the same instrument.
21.              Attorneys Fees.  In connection with any litigation, including
appellate proceedings or bankruptcy proceedings, arising under this Agreement,
the prevailing party in such litigation shall be entitled to recover reasonable
attorney’s fees and costs from the non-prevailing party.
 
 
 
 
[SIGNATURE PAGE TO FOLLOW]

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IN WITNESS WHEREOF, the Parties have duly executed this Transition Services
Agreement effective as of the Effective Date.
 
 

     

“Customer”
 

CNL HOTELS & RESORTS, INC.
 
   
   
    By:   /s/ Greerson G. McMullen  

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Name: Greerson G. McMullen   Title: Senior Vice President, General Counsel and
Corporate Secretary

 

     

“Service Provider”
 
 
CNL FINANCIAL GROUP, INC.
 
   
   
 
 
 
By:   /s/ James M. Seneff, Jr.  

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Name: James M. Seneff, Jr.   Title: Chief Executive Officer

 
 

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SCHEDULE “A”
SERVICES
Service
Summary Description
Fee
Software Services
Provide access to Oracle Financial enterprise resource planning system.  Provide
Oracle database administration support.
$155 per hour for database administration based on actual hours used by
Customer; 33.33% allocation of Oracle outsourcing cost (Customer’s portion
approximately $6,000 per month)
Investor Relations /
Call Center Services
Investor Relations: Maintain and update investor database as necessary (address
changes, etc.), facilitate transfers for investors, process distributions to
investors including calculation, payment and mailing, facilitate redemptions and
the Distribution Reinvestment Plan (DRP), facilitate mailing to investors as
necessary (such as quarterly mailings to New York investors and quarterly
reports), assist with proxy solicitation process as necessary.
Call Center: Answer calls received from registered representatives of
broker/dealer firms and investors.  Questions range from answering historical
performance questions, questions re: distributions, tax information, current
events, etc.  The Call Center also assists investors or their financial advisors
with processes, such as how to complete a transfer, how to participate in the
DRP or how to redeem shares, and provides items requested by investors and/or
their financial advisors (such as copies of tax information).
Proportionate allocation of the direct cost of compensation, benefits and direct
overhead expenses of the Service Provider’s associates (employees) providing the
services based upon the number of investors attributable to Customer relative to
the total number of investors being serviced by Service Provider.  (Estimated
annual fee is $850,000).
Legal Services
Service Provider’s Office of General Counsel provides:  assistance with
retention and management of outside legal counsel; negotiation of fee discounts
with outside legal counsel; bill review, billing guideline compliance, and
processing and tracking of bills from outside legal counsel.
$80,000 annually paid in twelve equal monthly installments of $6,667.