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Exhibit 10.1
 
 
MASTER AGREEMENT
 
Dated: October 3, 2006

Table of Contents

Page
ARTICLE I
Definitions
2
1.1
Definitions
2
1.2
References
5
1.3
Pronouns
5
ARTICLE II
Conversion
5
2.1
Project Management Agreements
5
2.2
Conversion of Affiliate Hotels
5
2.3
Project Assumptions
6
2.4
Plans and Specifications
7
2.5
Opening Date
7
2.6
FF&E and Capital Expenditures
8
ARTICLE III
Project Management Services
8
3.1
Project Management Services
8
3.2
Performance of Services by Select
9
3.3
Performance of Services by Third Party Contractor
10
3.4
Project Management Fee
11
3.5
Guaranty of Performance by ENN TRS Holdings, Inc.
11
3.6
Cooperation
12
ARTICLE IV
Additional Agreements to Be Executed
13
4.1
Existing Management Agreement
13
4.2
Affiliate Franchise Agreement
13
4.3
Affiliate Management Agreement
13
4.4
Termination Agreement
13
4.5
Lender Approval
13
4.6
Select Guarantee Obligations
14
ARTICLE V
General
14
5.1
Notices
14
5.2
Indemnities
14
5.3
Default
14
5.4
Assignment by ENN
16
5.5
Assignment by Select and Franchisor
18
5.6
Termination
19
5.7
Approvals
19
5.8
Applicable Law
20
5.9
Third Party Beneficiaries
20
5.10
Counterparts
20
5.11
Entire Agreement
20
5.12
Headings
20
5.13
Duration
20

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Schedule 1 - Affiliate Hotels
Schedule 2  - Conversion Schedule
Schedule 3 - Scope of Work
 
Annex A  - Form of Affiliate Franchise Agreement
Annex B  - Form of Affiliate Management Agreement
Annex C   - Form of Termination Agreement
Annex D  - Form of Amendment to Existing Management Agreement
 

 

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MASTER AGREEMENT
 
THIS MASTER AGREEMENT (this “Agreement”) is made and entered into as of the 3rd
day of October, 2006 by and among the parties set forth on the signature pages
hereto.
PRELIMINARY STATEMENT
 
The parties set forth on the signature pages hereto under the heading “Owners”
(each, an “Owner” and collectively, the “Owners”) own the hotels set forth
opposite their respective names as set forth on Schedule 1 hereto. Such hotels
are leased by the Owners to the lessees as set forth on Schedule 1 hereto
(“Lessees”). Each hotel is currently licensed as an AmeriSuites Hotel pursuant
to a franchise agreement, as amended (the “Existing Franchise Agreement”),
between its respective Lessee and AmeriSuites Franchising, Inc. (the “Original
Franchisor”) and is managed by the existing manager of such hotel as set forth
on Schedule 1 hereto (each, an “Existing Manager” and collectively, the
“Existing Managers”) pursuant to an Existing Management Agreement (as defined
below) between the Lessee and the Existing Manager for such hotel. Upon
completion of Conversion (as defined herein), the parties desire to convert the
hotels to “Hyatt Place Hotels” pursuant to new Affiliate Franchise Agreements
(as defined below) entered into with Franchisor (as defined below). At the Date
of Conversion (as defined below) of each hotel, the Existing Management
Agreement and the Existing Franchise Agreement will be terminated and the hotels
will be operated as Hyatt Place Hotels pursuant to an Affiliate Franchise
Agreement (as defined below) and managed by Select Hotels Group, L.L.C.
(“Select”) pursuant to an Affiliate Management Agreement (as defined below).
The parties desire to enter into this Agreement to set forth their respective
rights and the obligations with respect to the Conversion and the other matters
set forth herein.
NOW, THEREFORE, the parties hereto do hereby agree as follows:
ARTICLE I  
 
 
Definitions
 
1.1  Definitions.
“Affiliate Hotels” shall mean those AmeriSuites hotels described in Schedule 1
hereto, but shall not include any such hotels that are sold or transferred by
their Owners prior to the Date of Conversion.
 
“Affiliate Franchise Agreement” shall mean, with respect to an Affiliate Hotel,
a franchise agreement as amended, effective as of the Date of Conversion,
entered into by and between Franchisor and the Lessee for each Affiliate Hotel,
in the form attached hereto as Annex A.
 
“Affiliate Management Agreement” shall mean a hotel management agreement,
effective as of the Date of Conversion, entered into by and between Select and
the Lessee for each Affiliate Hotel, in the form attached hereto as Annex B.
 
“Affiliates” shall mean, with respect to any party, any other party that,
directly or indirectly, controls, is controlled by, or is under common control
with, the subject party. For purposes hereof, the term “control” shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity, either alone or in
combination with any one or more parties. Parties who are Affiliates of each
other are sometimes herein referred to as being “Affiliated”.
 
“Commencement of Conversion” shall occur upon the commencement of the work
identified and set forth in the Scope of Work to effect the Conversion of an
Affiliate Hotel.
 
“Conversion Commencement Date” shall mean, with respect to an Affiliate Hotel,
the date on which the Commencement of Conversion shall occur, pursuant to the
Conversion Schedule.
 
“Conversion” shall mean all construction, renovation, installation and work to
be performed at an Affiliate Hotel, both in the guest rooms and in the public
areas (as set forth with specificity in the Scope of Work and Project Budget)
and the equipping of such Affiliate Hotel and purchase and stocking of all
Operating Equipment (as defined in the Affiliate Management Agreement),
operating supplies and inventory items meeting the Systems Standards as defined
in the Affiliate Franchise Agreement.
 
“Conversion Cost” shall mean, with respect to each Affiliate Hotel, all amounts
expended by ENN for the Conversion of the Affiliate Hotel, including without
limitation, all rebranding, construction and related costs, all FFE, all
Operating Equipment (as both terms are defined in the Affiliate Management
Agreements), and related costs required to be capitalized under GAAP (as defined
in the Affiliate Management Agreements), all operating systems and the cost
associated with the personnel hired for the installation of the same, all fees
and reimbursements to be expended by ENN under the Project Management Agreement,
including fees and expenses of contractors and vendors (including without
limitation, amounts to be paid or reimbursed to a Third Party Contractor) and
any fees or reimbursements charged by Select or its Affiliates in connection
with the Conversion. The Conversion Cost with respect to an Affiliate Hotel
shall be subject to the Project Budget for such Affiliate Hotel (subject to any
changes and modifications approved in accordance with this Agreement).
 
“Conversion Schedule” shall mean, with respect to each Affiliate Hotel, the
schedule attached hereto as Schedule 2 and incorporated herein by this
reference, which illustrates the schedule of various stages of the Conversion
with respect to such Affiliate Hotel.
 
“Date of Conversion” shall mean, with respect to an Affiliate Hotel, the date on
which the Affiliate Hotel commences operation as a Hyatt Place Hotel pursuant to
the terms of the Affiliate Franchise Agreement for such Affiliate Hotel.
 
“ENN” shall mean collectively the Owners and the Lessees of the Affiliate
Hotels, collectively, or the Owner or Lessee of a specific Affiliate Hotel, as
the context requires.
 
“Existing Franchise Agreement” shall have the meaning set forth in the
preliminary statement to this Agreement.
 
“Existing Guarantee Termination Date” shall mean, with respect to an Affiliate
Hotel, the date set forth on Schedule 1 hereto, subject to the provisions of the
Existing Management Agreement with respect to the occurrence of the 150 day
extension or Date of Conversion, if applicable.
 
“Existing Management Agreement” shall mean, with respect to each Affiliate
Hotel, the management agreement pursuant to which such Affiliate Hotel is
currently being managed, as such agreement may be amended from time to time.
 
“Existing Manager” shall have the meaning set forth in the preliminary statement
to this Agreement.
 
“Franchisor” shall mean Hyatt Place Franchising, L.L.C.
 
“Hyatt Conversion” shall have the meaning set forth in Section 2.2 hereof.
 
“Hyatt Place Hotels” shall have the meaning ascribed to such term in the
Affiliate Management Agreements.
 
“Lessee” or “Lessees” shall have the meaning set forth in the preliminary
statement to this Agreement.
 
“Original Franchisor” shall have the meaning set forth in the preliminary
statement to this Agreement.
 
“Owner” or “Owners” shall have the meaning set forth in the preliminary
statement to this Agreement.
 
“Ownership Interest” shall mean an equity interest in Owner.
 
“Person” means 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.
 
“Plans” shall mean, with respect to each Affiliate Hotel, the final construction
and modification plans and specifications prepared for such Affiliate Hotel,
consistent with the Scope of Work for such Affiliate Hotel.
 
“Pre-Existing Condition” shall have the meaning set forth in Section 2.2.
 
“Pre-Opening Period” shall mean, with respect to each Affiliate Hotel, the
period from the Conversion Commencement Date to the day immediately preceding
the Date of Conversion.
 
“Project Budget” shall mean, with respect to an Affiliate Hotel, the budgeted
(itemized and on a per room basis) amount for the Conversion Cost for such
Affiliate Hotel, which amount shall not exceed the product of $25,000 multiplied
by the number of guest rooms at an Affiliate Hotel; provided, however, that the
Project Budget for the Affiliate Hotel located in Las Vegas, Nevada shall be
agreed upon separately by the parties and may exceed $25,000.
 
“Project Manager” shall mean, with respect to each Affiliate Hotel, Select, or a
project manager who has been designated by Select (which may be a Third Party
Contractor), and reasonably approved by ENN, to manage the Conversion with
respect to such Affiliate Hotel and whose duties and obligations shall be more
specifically set forth in the Project Management Agreement.
 
“Project Management Agreement” shall mean, with respect to each Affiliate Hotel,
an agreement to be negotiated in good faith and entered into between (i) Select
and the Lessee of such Affiliate Hotel or (ii) a Third Party Contractor and the
Lessee of such Affiliate Hotel with respect to the Conversion of such Affiliate
Hotel, consistent with the terms of this Agreement.
 
“Project Management Services” shall mean, with respect to each Affiliate Hotel,
the services to be provided pursuant to the Project Management Agreement
consistent with Section 3.1.
 
“Project Management Fee” shall mean the fee payable pursuant to the Project
Management Agreement.
 
“Scope of Work” shall mean, with respect to an Affiliate Hotel, the scope of
work, modifications, alterations and installations to be performed at such
Affiliate Hotel, strictly and exclusively in connection with the Conversion, as
set forth in Schedule 3 hereto.
 
“Termination Agreement” shall mean the agreement with respect to each Affiliate
Hotel terminating the Existing Franchise Agreement and the Existing Management
Agreement in the form attached hereto as Annex C.
 
“Third Party Contractor” shall mean a third party contractor (not an Affiliate
of Select) that is recommended by Select as a contractor and retained by ENN to
perform the functions of Project Manager in accordance with the Project
Management Agreement for an Affiliate Hotel.
 
1.2  References. All references in this Agreement to particular sections or
articles shall, unless expressly otherwise provided or unless the context
otherwise requires, be deemed to refer to the specific sections or articles in
this Agreement. In addition, the words “hereof”, “herein”, “hereunder” and words
of similar import refer to this Agreement as a whole and not to any particular
section or article.
1.3  Pronouns. All pronouns and variations thereof used herein shall, regardless
of the pronoun actually used, be deemed to refer to the masculine, feminine,
neuter, singular or plural as the identity of the person, persons or entity may,
in the context in which such pronoun is used, require.
ARTICLE II  
 
 
Conversion
 
2.1  Project Management Agreements. ENN and Select agree to negotiate in good
faith toward execution of mutually acceptable Project Management Agreements
setting forth with specificity their respective duties and obligations with
respect to Project Management Services for the Affiliate Hotels (or, pursuant to
Section 3.3 of this Agreement, in the case of a Third Party Contractor, Select
shall use its best efforts to select (subject to approval by ENN) Third Party
Contractors to provide Project Management Services for the Affiliate Hotels).
2.2  Conversion of Affiliate Hotels. Select and ENN agree to undertake
Conversion of the Affiliate Hotels in accordance with the applicable Scope of
Work, the Conversion Schedule and the terms of this Agreement. ENN agrees to
fund the full cost of Conversion, subject to the Project Budget. Any expenses in
excess of the Project Budget or any material changes to the Scope of Work shall
be subject to approval of ENN in its sole discretion and in accordance with the
terms and conditions of the Project Management Agreement. Notwithstanding the
foregoing, the parties agree that ENN will be under no obligation to commence
Conversion of any Affiliate Hotel on any Conversion Commencement Date or
continue any Conversion that is commenced unless and until Select or its
Affiliates have substantially converted and/or opened at least thirty (30) Hyatt
Place Hotels owned by Select or its Affiliates (such event being herein referred
to as the “Hyatt Conversion”). In the event the Hyatt Conversion has not
occurred by June 30, 2007, the parties’ obligations hereunder with respect to
Conversion shall terminate.
2.3  Project Assumptions. The parties hereby acknowledge and agree that the
Conversion Schedule, the Scope of Work and the Project Budget have been prepared
by Select and its Affiliates, using certain assumptions, and are only an
estimate of the time, cost and the actual work required based on what is known
at the time they were prepared. Such assumptions assume that the Affiliate
Hotels are ready for Conversion as of the Conversion Commencement Date for such
Affiliate Hotel without the need or requirement for any material corrective
measures, repair or replacements and further assume that each Affiliate Hotel
and its Building Systems (as defined in the Affiliate Management Agreement),
including, without limitation, its pipes, wires, fixtures and equipment, and
structural elements, are in good working order and condition, ordinary wear and
tear excepted.
ENN acknowledges that the Conversion Schedule, the Scope of Work and the Project
Budget contemplate the time, funds, materials and work necessary and required
for the work specifically, directly and exclusively related to the Conversion
only and do not take into account any other material work, repair, or materials
needed as a result of the condition (such as removal of mold, leaking pipes,
water infiltration, or similar occurrences) of an Affiliate Hotel at the
Conversion Commencement Date (“Pre-Existing Condition”), which may not be
uncovered until the Commencement of Conversion. In the event a Pre-Existing
Condition is uncovered after the date hereof, ENN and Select will use their
reasonable good faith efforts to update the applicable Conversion Schedule, the
Scope of Work and the Project Budget to take into account any increase in cost
or expenses and any delay expected to be caused by such Pre-Existing Condition
or by any Force Majeure event (as defined in the Affiliate Management
Agreement), any of which shall be subject to reasonable approval by ENN. In the
event of any delay in Conversion directly caused by a Pre-Existing Condition or
Force Majeure Event, such delay shall not be the fault or liability of Select.
Costs associated with Pre-Existing Conditions shall not be included in
calculations for Project Costs, as that term is defined in the Affiliate
Management Agreements; provided, however, the parties agree to work together in
good faith to resolve any disputes or issues that arise with respect to
increased Project Costs as a direct result of the discovery of Pre-Existing
Conditions during Conversion.
2.4  Plans and Specifications. Pursuant to the specific terms of the Project
Management Agreements, Select (or its Affiliate) shall hire an architect to
prepare Plans for each Affiliate Hotel, consistent with the Scope of Work for
such Affiliate Hotel. Such architect shall be reasonably satisfactory to and be
approved by ENN and the Plans shall be subject to the review, comment and
approval of ENN in accordance with the terms and conditions of the Project
Management Agreement.
2.5  Opening Date. The parties hereby acknowledge that no Affiliate Hotel shall
operate as a Hyatt Place Hotel until all construction, furnishing and equipping
thereof have been completed and all requirements set forth in the applicable
Affiliate Franchise Agreement have been met. The parties hereby agree,
acknowledge and understand that until such time as an Affiliate Hotel has
completed Conversion and meets the requirements under the applicable Affiliate
Franchise Agreement, it shall continue to operate as an AmeriSuites Hotel under
its Existing Franchise Agreement and the Existing Management Agreement, as they
may be amended from time to time by the parties thereto.
2.6  FF&E and Capital Expenditures. Notwithstanding anything to the contrary in
the Existing Management Agreements or the Existing Franchise Agreements, prior
to the Date of Conversion, ENN shall have no obligation to escrow or fund or
otherwise undertake capital improvements or expenditures for furniture, fixtures
and equipment at an Affiliate Hotel, other than in connection with Conversion in
accordance with the terms hereof or necessary to maintain the Affiliate Hotel in
proper working order.
ARTICLE III  
 
 
Project Management Services
 
3.1  Project Management Services. The parties agree that Select’s duties and
responsibilities under the Project Management Agreement for each Affiliate Hotel
during the Pre-Opening Period shall include, without limitation, and consistent
with the Scope of Work and Conversion Schedule for such Affiliate Hotel, the
following:
(a)  selection, with the approval of ENN, of architects, designers, contractors
and other specialists, and, upon the request of ENN, providing advice and
assistance in connection with the negotiation of contracts or agreements with
any of said parties.
(b)  interior design and the functional layout of guest rooms and public areas.
(c)  interior and exterior lighting schemes.
(d)  electrical, mechanical, plumbing, HVAC and other Building Systems.
(e)  guest safety systems, including appropriate fire and other safety systems,
room key systems and door hardware, public address systems and the like.
(f)  guest amenities to be included in the Affiliate Hotels including in-room
entertainment systems; guest laundry and valet services; guest information
systems; check-in and check-out systems and procedures; reservation systems,
procedures and equipment; computerized management systems; credit card checking
systems; and the like, and recommendation of appropriate vendors for the same.
(g)  design standards and criteria, and review and comment on layouts and design
for kitchen and laundry rooms, and other support functions within the Affiliate
Hotels.
(h)  preparation of bid packages and review and comment on cost projections and
budgets; review of bid packages and bid submissions to ensure that they are in
line with the line items in the Project Budget.
(i)  additional assistance regarding any additional matters required pursuant to
the Project Management Agreement.
3.2  Performance of Services by Select. In performing the foregoing services,
Select shall not be liable for any errors or omissions in the Plans or designs
for any Affiliate Hotel, or for any misfeasance or malfeasance by any
specialists or consultant retained on behalf of ENN, whether or not upon the
recommendation of Select, or for any defects in construction, alteration and
installation, or for any operational deficiencies in the design or construction
of any of the Affiliate Hotels (including, without limitation, life safety
systems, building codes or accessibility laws), or any failure of any such plans
(including the Plans) or specifications to conform to applicable law, it being
the intention of the parties that in rendering the Project Management Services,
Select shall be functioning solely as a consultant sharing with ENN the benefit
of its prior experience in the management and operation of hotels and its
knowledge of guest preferences and market demands. No approvals by Select or its
Affiliates of any plans (including the Plans), specifications, drawings,
budgets, financing, contractors or specialists shall constitute an opinion by
Select or its Affiliates as to the legal, functional, structural, mechanical or
professional adequacy or competence thereof (as to plans, specifications,
drawings, contractors or specialists or the adequacy of budgets or financing),
and ENN acknowledges that Select and its Affiliates have not held themselves out
as expert as to any of the foregoing matters. Conversely, Select shall have no
authority hereunder to approve, alter or revise any Plans for the Affiliate
Hotels or to approve, alter or modify any proposed Building System or guest
systems without first submitting the same for review and approval by ENN. ENN
shall (subject to compliance with the provisions of Section 2.2 above) have the
right to accept, reject or modify any suggestions or proposals made by Select
(so long as such any such rejection or modification will not result in any
violation under the requirements under the Affiliate Franchise Agreement). For
purposes of ease of administering the Conversion process and ensuring clear
communication, each of ENN and Select hereby agrees to designate a
representative for each Affiliate Hotel, who will coordinate Conversion matters,
all as may be set forth in the Project Management Agreement.
3.3  Performance of Services by Third Party Contractor. Notwithstanding the
foregoing, to ensure that the Conversion Schedule for the Affiliate Hotels is
met, Select may in its discretion retain the services of a Third Party
Contractor(s) for certain Affiliate Hotels, subject to ENN’s reasonable prior
approval. In such event, such Third Party Contractor shall enter into a Project
Management Agreement with Select, pursuant to which such Third Party Contractor
shall be responsible for providing the Project Management Services as Project
Manager and shall assume all the obligations of Select with respect to such
services as set forth herein. Select or its Affiliate shall manage and
coordinate the performance of the Project Manager, and the Project Management
Fee to be paid to Select or its Affiliate shall reflect the coordination
activities to be undertaken by Select or its Affiliate.
3.4  Project Management Fee. For its Project Management Services to ENN in
accordance with the provisions hereof, Select shall be entitled to a reasonable
“Project Management Fee” for each Affiliate Hotel to be agreed upon by the
parties and as set forth in the applicable Project Management Agreement, payable
pursuant to the terms thereof. In addition to the Project Management Fee, Select
shall be entitled to reimbursement for its reasonable out-of-pocket costs
incurred in connection herewith, which costs shall include travel costs and
expenses of its personnel to the extent travel shall be required for the
performance of its duties hereunder. Select agrees that it will make appropriate
personnel available for the rendition of the foregoing services as, where and
when necessary, subject to reasonable scheduling requirements (consistent with
the Conversion Schedule for the Applicable Affiliate Hotel), including the
availability of such persons at the site or at such other locations as shall be
reasonably necessary. ENN hereby acknowledges that the Project Management Fee
shall be in addition to any other fees charged by any Third Party Contractor or
any contractor or consultant Select or its Affiliates retains on behalf of ENN,
which fees shall be paid by ENN in accordance with the Project Management
Agreement.
3.5  Guaranty of Performance by ENN TRS Holdings, Inc. ENN TRS Holdings, Inc.
(“TRS Holdings”) hereby represents and warrants that its Affiliates own the
Affiliated Hotels. TRS Holdings acknowledges and agrees that Select and
Franchisor agreed to certain concessions and incentives in the respective
Affiliate Management Agreements and Affiliate Franchise Agreements, in return
for TRS Holdings’ willingness to cause all Affiliate Hotels to undergo
Conversion as contemplated in this Agreement. In consideration for the
concession and incentives of Select and Franchior, subject to the terms of this
Agreement, TRS Holdings hereby agrees as follows:
(a)  TRS Holdings shall cause its Affiliates to cooperate and collaborate with
Select and Franchisor in the formation and any subsequent modification approved
by ENN of the Project Budget for each Conversion, as more specifically set forth
in the Project Management Agreement.
(b)  TRS Holdings shall provide or ensure that adequate funding is made
available to each Affiliate (which leases an Affiliate Hotel) to timely commence
and complete each Conversion pursuant to the applicable Conversion Schedule.
(c)  TRS Holdings hereby guarantees the performance of the Conversion as set
forth in Section 3.5(b) above, and cause such Conversions to occur, if any of
its Affiliates is unable to effect the performance thereof.
3.6  Cooperation.
(a)  The parties shall cooperate and collaborate in the formation and any
subsequent modification approved by ENN of the Project Budget for each
Conversion, as more specifically set forth in the Project Management Agreement
and herein.
(b)  Subject to the terms of this Agreement, the Project Budget, the Scope of
Work and the Project Management Agreement, ENN shall provide or ensure that
adequate funding is made available to timely commence and complete each
Conversion pursuant to the Conversion Schedule.
ARTICLE IV  
 
 
Additional Agreements to Be Executed
 
4.1  Existing Management Agreement. Effective upon receipt of approval of ENN’s
lenders, each Existing Manager and each Lessee hereby agree to execute and
deliver the Second Amendment to the Existing Management Agreement in the form
attached hereto as Annex D (the “Existing Management Agreement Amendment”).
4.2  Affiliate Franchise Agreement. Effective upon the Date of Conversion for
such Affiliate Hotel, the Franchisor and the Lessee for each Affiliate Hotel
hereby agree to execute and deliver the Affiliate Franchise Agreement.
4.3  Affiliate Management Agreement. Effective upon the Date of Converstion for
such Affiliate Hotel, Select and the Lessee for each Affiliate Hotel hereby
agree to execute and deliver the Affiliate Management Agreement for the
Affiliate Hotel.
4.4  Termination Agreement. Effective upon the Date of Conversion for such
Affiliate Hotel, each Lessee, the Original Franchisor and the Existing Manager
hereby agree to execute and deliver the Termination Agreement simultaneously
with the effectiveness of the Affiliate Franchise Agreement and the Affiliate
Management Agreement.
4.5  Lender Approval. The parties acknowledge and agree that the form of the
Existing Franchise Agreement Amendment, the Existing Management Agreement
Amendment, the Affiliate Franchise Agreement, the Affiliate Management Agreement
and the Termination Agreement (collectively, the “Agreements”) and the execution
and delivery thereof are subject to the review and approval of ENN’s lenders and
the parties hereto agree to negotiate in good faith any revisions or
modifications to the Agreements proposed or required by such lender. Each of the
parties hereto agree to use commercially reasonable efforts and to assist and
cooperate with the other parties to obtain lender approval of the Agreements.
4.6  Select Guarantee Obligations. Each Existing Management Agreement provides
for certain payment obligations by the Existing Manager to the applicable Lessee
through the Existing Guarantee Termination Date. Select hereby irrevocably and
unconditionally guarantees all obligations of each Existing Manager under each
Existing Management Agreement, as it may be amended from time to time, arising
under any Existing Management Agreement prior to its Existing Guarantee
Termination Date. Until the date of the last Existing Guarantee Termination
Date, Select agrees and covenants that its net worth will not fall below
$200,000,000.
ARTICLE V  
 
 
General
 
5.1  Notices. All notices required or permitted hereunder shall be in writing
and shall be deemed duly delivered if delivered in accordance with the
provisions of Article XIV of the Affiliate Management Agreement.
5.2  Indemnities. The provisions of Article VII of the Affiliate Management
Agreements are hereby, by this reference, incorporated in this Agreement and
made a part hereof and shall be deemed fully applicable throughout the
Pre-Opening Period to any acts or omissions of the parties with respect to any
of the matters herein contemplated during the Pre-Opening Period, with ENN being
substituted for “Owner” therein.
5.3  Default. The following shall constitute an event of default by a party
hereto:
(a)  If any party fails to perform, keep or fulfill any of the material
covenants, undertakings, obligations or conditions set forth in this Agreement,
and the continuance of any such failure for a period of thirty (30) calendar
days after notice of said failure; or
(b)  If a party shall apply for or consent to the appointment of a receiver,
trustee or liquidator for such party, or for all or a substantial part of its
assets, file a voluntary petition in bankruptcy, or admit in writing its
inability to pay its debts as they come due, make a general assignment for the
benefit of creditors, file a petition or answer seeking reorganization or
arrangement with creditors or liquidators or to take advantage of any insolvency
proceeding, or if any order, judgment or decree shall be entered by any court of
competent jurisdiction on the application of a creditor adjudicating such party
a bankrupt or insolvent or approving a petition seeking reorganization or
liquidation of such party or appointing a receiver, trustee or liquidator for
such party or for all or a substantial portion of its assets, and such judgment,
order or decree shall continue unstayed and in effect for any period of ninety
(90) consecutive days.
Upon an event of default, Select, with respect to an event of default by ENN,
and any Owner or Lessee, with respect to an event of default by Select, the
Existing Managers, the Original Franchisor or the Franchisor, may give written
notice of intention to terminate this Agreement after the expiration of a period
of fifteen (15) calendar days from the date of such notice, and upon the
expiration of such period, this Agreement shall terminate. If, however, upon
receipt of such notice, the defaulting party shall promptly cure the default,
then such notice shall be of no force and effect or, when such default is not
susceptible of being cured within fifteen (15) calendar days, if the defaulting
party shall, in good faith, take action to cure such default with all due
diligence, then the effective date of the termination notice shall be extended
for such reasonable time as shall be required for the defaulting party to cure
such default. In no event shall additional time to cure apply in cases where the
event of default in question may be cured on a timely basis by the payment of
money in the amount due.
The rights granted hereunder shall not be in substitution for, but shall be in
addition to any and all rights and remedies for breach of contract granted by
applicable provisions of law. Notwithstanding the foregoing, no party shall be
deemed to be in default under this Agreement if a bona fide dispute with respect
to one of the foregoing events of default has arisen and such dispute has been
submitted to arbitration.
Except as otherwise provided in this Agreement, should a party hereto be delayed
in or prevented, in whole or in part, from performing any obligation or
condition hereunder with the exception of the payment of money, or from
exercising its rights by reason or as a result of any Force Majeure event (as
defined in the Affiliate Management Agreement) such party shall be excused from
performing such obligations or conditions for a period of time equivalent to the
period of delay caused by the Force Majeure event and for thirty (30) days
thereafter.
5.4  Assignment by ENN. In addition to any permitted collateral assignments to
Lenders, Owner, Lessee and ENN TRS Holdings, Inc. shall have the right to assign
its entire rights and interests in this Agreement without the prior written
consent of the Original Franchisor, the Franchisor, any Existing Manager or
Select (collectively, the “Hyatt Parties”) to (i) any Person Affiliated with
Owner and (ii) any Person in connection with a sale or transfer of such
Affiliate Hotel (including, without limitation, any lease of such Affiliate
Hotel in its entirety), so long as and unless otherwise agreed to by the Hyatt
Parties, all conditions set forth in this Section 5.4 shall have been met and
satisfied and such assignee shall have applied for and qualified for the
assumption of the Affiliate Franchise Agreement or entered into a then current
Hyatt Place franchise agreement for the duration of the Term (as defined in the
Affiliate Management Agreement), prior to the effective date of any such
assignment. Unless otherwise agreed to by the Hyatt Parties, Owner shall not
sell, assign or transfer any Affiliate Hotel, or any interest therein or issue
or permit the transfer of any Ownership Interest to any Person (i) engaged,
directly or indirectly, as a substantial part of its business, in franchise
licensing of hotels and not Affiliated with Owner; (ii) who fails or refuses to
assume Owner’s responsibilities under this Agreement; or (iii) who would
otherwise not qualify as a franchisee under the terms of the Affiliate Franchise
Agreement or (iv) who does not wish to apply for and enter into a then current
Hyatt Place franchise agreement for the Affiliate Hotel. Upon any assignment
hereof in connection with a sale or other transfer of such Affiliate Hotel,
Owner shall be relieved of its duties, obligations and liabilities hereunder
arising after such assignment so long as all conditions set forth in this
Section 5.4 have been met and the assignee thereof expressly assumes in writing
all such duties, obligations and liabilities (including, without limitation,
those arising or relating to events occurring prior to any such assignment) and
shall agree to be bound by this Agreement as evidenced by a written instrument
executed by such assignee in favor of the Hyatt Parties in form and substance
reasonably satisfactory to the Hyatt Parties. If Owner desires to effect an
assignment of a majority of its Ownership Interest, Owner shall give the Hyatt
Parties not less than forty-five (45) days advance notice of its intention to do
so, which notice shall identify in reasonable detail the direct and indirect
owners of the proposed purchaser. In the event that the sale or transfer
contemplated in this Section 5.4 is to a Person not Affiliated with Owner or
involves the transfer of a majority Ownership Interest in Owner, then the
assignment of this Agreement shall specifically exclude (i) Select’s obligation
to reduce its fees if a Deficiency occurs or refund Owner’s Priority as set
forth in Section 5.1, (ii) Section 2.5 and (iii) Section 2.7 of the Affiliate
Management Agreement. Notwithstanding the foregoing, if (i) Owner transfers 50%
or more of the Ownership Interest to a Person Affiliated with Owner, (ii) ENN
transfers fifty percent (50%) or more of the Affiliate Hotels (in a single
transaction or series of related transactions with the same buyer or Persons
Affiliated With that buyer, and provided such buyer agrees to operate such
Affiliate Hotels as Hyatt Place Hotels) or (iii) there is a transaction or event
which constitutes a “change in control” of Equity Inns, Inc., then the
applicable Affiliate Management Agreements and Affiliate Franchise Agreements
shall be assignable without any modifications or exclusions, so long as the
transferees comply with the provisions of this Section 5.4.
5.5  Assignment by Select and Franchisor.
(a)  Except as herein provided, Select and Franchisor shall not sell, assign,
hypothecate, transfer or otherwise dispose of, in whole or in part, any of its
rights or interests hereunder. Notwithstanding the foregoing, Select and
Franchisor may transfer or assign their rights under this Agreement in whole,
but not in part, to any Affiliate of Select, whether as a result of merger,
reorganization, acquisition, “change of control”, public offering or or similar
transaction subject, in each such case, to each of the following terms and
conditions:
(i)  The transferee shall, no later than the effective date of the transfer, be
an Affiliate of Hyatt Corporation;
(ii)  The transferee shall have the full right, power and authority to enter
into this Agreement and to fulfill the obligations of Select and Franchisor
hereunder;
(iii)  Not later than the effective date of any such transfer, the transferee
shall have available to it the entire operating system of Select and Franchisor
for the use and benefit of the transferee and the management and operation of
the Affiliate Hotels as part of Hyatt Place Hotels, including, without
limitation, the benefit of services that are designed to approximate the Shared
Services available to the Hotel prior to any such transfer; and
(iv)  The transferee shall have executed a written instrument in form and
substance reasonably satisfactory to Owner, a certified copy of which shall be
delivered to Owner not later than twenty (20) days following the effective date
of any such transfer, expressly assuming and agreeing to pay, perform and
discharge all of the liabilities and obligations of Select or Franchisor
hereunder, including, without limitation, any such liabilities or obligations
arising or accruing prior to, on or after the effective date of any such
transfer.
(b)  Upon satisfaction and discharge of all conditions set forth herein, Select
and Franchisor shall be relieved of any liability or obligation hereunder
arising after the date of such assignment.
5.6  Termination. Except as otherwise provided in Section 5.4 and 5.5, upon any
other assignment or transfer by a party hereto of its rights or interests in
this Agreement, the non-transferring party shall have the option, exercisable
within 60 days from the receipt by the nontransferring party of notice of such
transfer or assignment, to terminate this Agreement without liability or payment
to the transferring party.
5.7  Approvals. If any party hereto shall desire the approval of any other party
as to any matter, such party may give written notice to such other party that it
requests such approval, specifying in such notice the matter as to which such
approval is requested and reasonable detail respecting such matter. All
approvals shall be in writing. If such other party shall not give its approval
in writing in response to such notice within thirty (30) days after receipt
thereof or any other period as prescribed in the request for approval, such
other party shall be deemed not to have approved the matter referred to in such
notice.
5.8  Applicable Law. This Agreement shall be governed in all respects by the
laws of Illinois.
5.9  Third Party Beneficiaries. None of the obligations hereunder of any party
shall run to or be enforceable by any party other than the parties to this
Agreement or their respective successors and assigns in accordance with the
provisions of this Agreement.
5.10  Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which when taken
together shall constitute a single instrument.
5.11  Entire Agreement. This Agreement, and the schedules, exhibits and annexes
hereto, constitute the entire understanding and agreement of the parties hereto
with respect to the subject matter hereof and supersede all prior understandings
and writings between the parties.
5.12  Headings. The Article and Section headings contained herein are for
convenience of reference only and are not intended to define, limit or describe
the scope or intent of any provision of this Agreement.
5.13  Duration. This Agreement shall continue in full force and effect from the
date hereof and until the Full Conversion Date (as defined in the Affiliate
Management Agreements).
[Signature page follows.]
 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
ENN TRS HOLDINGS, INC.
 
By: /s/ J. Mitchell Collins_______________
Name:_J. Mitchell Collins______________
Title:_Executive Vice President__________
SELECT HOTELS GROUP, L.L.C.
 
By:_/s/ Steven Goldman_________________
Name:_Steven Goldman_________________ 
Title:__Executive Vice President__________
 
 
OWNERS
 
EQI FINANCING PARTNERSHIP II, LP
 
By: EQI Financing Corporation II,
its general partner
 
By: /s/ J. Mitchell Collins_______________
 
Name:_J. Mitchell Collins______________
 
Title:_Executive Vice President__________
 
 
 
LESSEES
 
ENN LEASING COMPANY, INC.
 
By: /s/ J. Mitchell Collins_______________
Name:_J. Mitchell Collins______________
Title:_Executive Vice President__________
EQI FINANCING PARTNERSHIP V, LP
 
By: EQI Financing Corporation V,
its general partner
 
By: /s/ J. Mitchell Collins______________
Name:_J. Mitchell Collins______________
Title:_Executive Vice President_________
 
ENN LEASING COMPANY II, L.L.C.
 
By: /s/ J. Mitchell Collins_______________
Name:_J. Mitchell Collins______________
Title:_Executive Vice President__________
EQUITY INNS PARTNERSHIP, LP
 
By: Equity Inns Trust,
its general partner
 
By: /s/ J. Mitchell Collins______________
Name:_J. Mitchell Collins______________
Title:_Executive Vice President_________
 
ENN LEASING COMPANY V, L.L.C.
 
 
By: /s/ J. Mitchell Collins_______________
 
 
Name:_J. Mitchell Collins______________
 
 
Title:_Executive Vice President__________
 
   

[Signature page to Master Agreement]

--------------------------------------------------------------------------------

   
EXISTING MANAGERS
 
 
ORADELL HOLDING, L.L.C.
 
By:_/s/ Steven Goldman_________________
Name:__Steven Goldman________________
Title:_Executive Vice President___________
FRANCHISOR
 
 
HYATT PLACE FRANCHISING, L.L.C.
 
By:_/s/ Steven Goldman_________________
Name:__Steven Goldman________________
Title:_Executive Vice President___________
   
CALDWELL HOLDING, L.L.C.
 
By:_/s/ Steven Goldman_________________
Name:__Steven Goldman________________
Title:_Executive Vice President___________
ORIGINAL FRANCHISOR
 
AMERISUITES FRANCHISING, INC.
 
By:_/s/ Steven Goldman_________________
Name:__Steven Goldman________________
Title:_Executive Vice President___________
   
WAYNE HOLDING, L.L.C.
 
By:_/s/ Steven Goldman_________________
Name:__Steven Goldman________________
Title:_Executive Vice President___________
 

[Signature page to Master Agreement]
 

--------------------------------------------------------------------------------

SCHEDULE 1
AFFILIATE HOTELS

 
Hotel
Owner
Lessee
Existing Manager
Existing Guarantee Termination Date
BC
 
AmeriSuites
(Birmingham/Riverchase)
2980 John Hawkins Parkway
Hoover, AL 35244
EQI Financing Partnership V, LP
ENN Leasing Company V, L.L.C.
 
Oradell Holding, L.L.C.
 
June 30, 2008
FF
AmeriSuites
(Flagstaff/Interstate Crossroads)
2455 S. Beulah Road
Flagstaff, AZ 86001
EQI Financing Partnership V, LP
ENN Leasing Company V, L.L.C.
Oradell Holding, L.L.C.
December 31, 2007
M
M
AmeriSuites
(Miami/Kendall)
11520 SW 88th Street
Miami, FL 33176
Equity Inns Partnership, LP
ENN Leasing Company, Inc.
Caldwell Holding, L.L.C.
June 30, 2008
M
P
AmeriSuites
(Miami/Airport West)
3655 NW 82nd Avenue
Miami, FL 33166
Equity Inns Partnership, LP
ENN Leasing Company, Inc.
Caldwell Holding, L.L.C.
December 31, 2007
TA
AmeriSuites
(Tampa Airport/Westshore)
4811 West Main Street
Tampa, FL 33607-4501
EQI Financing Partnership V, LP
ENN Leasing Company V, L.L.C.
Oradell Holding, L.L.C.
December 31, 2007
IA
AmeriSuites
(Indianapolis/Keystone)
9104 Keystone Crossing
Indianapolis, IN 46240
EQI Financing Partnership II, LP
ENN Leasing Company II, L.L.C.
Wayne Holding, L.L.C.
December 31, 2007
OP
AmeriSuites
(Overland Park/Metcalf)
6801 West 112th Street
Overland Park, KS 66211
EQI Financing Partnership II, LP
 
ENN Leasing Company II, L.L.C.
Wayne Holding, L.L.C.
December 31, 2007
BR
AmeriSuites
(Baton Rouge/East)
6080 Bluebonnet Boulevard
Baton Rouge, LA 70809
Equity Inns Partnership, LP
ENN Leasing Company, Inc.
Caldwell Holding, L.L.C.
June 30, 2008
B
M
AmeriSuites
(Baltimore/BWI Airport)
940 International Drive
Linthicum Heights, MD 21090
EQI Financing Partnership V, LP
ENN Leasing Company V, L.L.C.
Oradell Holding, L.L.C.
July 1, 2008
M
L
AmeriSuites
(Minneapolis/Mall of America)
7800 International Drive
Bloomington, MN 55425-1508
Equity Inns Partnership, LP
ENN Leasing Company, Inc.
Caldwell Holding, L.L.C.
June 30, 2008
LG
AmeriSuites
(Las Vegas/Paradise Road)
4520 Paradise Road
Las Vegas, NV 89109-7111
Equity Inns Partnership, LP
ENN Leasing Company, Inc.
Caldwell Holding, L.L.C.
June 30, 2008
A
Q
AmeriSuites
(Albuquerque/Uptown)
6901 Arvada North East
Albuquerque, NM 87110
EQI Financing Partnership V, LP
ENN Leasing Company V, L.L.C.
Oradell Holding, L.L.C.
June 30, 2008
CO
AmeriSuites
(Cincinnati/Blue Ash)
11435 Road Hartman Highway
Blue Ash, OH 45241
Equity Inns Partnership, LP
ENN Leasing Company, Inc.
Caldwell Holding, L.L.C.
December 31, 2007
CS
AmeriSuites
(Columbus/Worthington)
7490 Vantage Drive
Columbus, OH 43235
EQI Financing Partnership II, LP
ENN Leasing Company II, L.L.C.
Wayne Holding, L.L.C.
December 31, 2007
FO
AmeriSuites
(Cincinnati/North)
12001 Chase Plaza Drive
Forest Park, OH 45240
EQI Financing Partnership V, LP
ENN Leasing Company V, L.L.C.
Oradell Holding, L.L.C.
December 31, 2007
FN
 
AmeriSuites
(Nashville/Cool Springs)
650 Bakers Bridge Avenue
Franklin, TN 37067
Equity Inns Partnership, LP
 
ENN Leasing Company, Inc.
 
Caldwell Holding, L.L.C.
 
June 30, 2008
M
T
AmeriSuites
(Memphis/Cordova)
7905 Giacosa Place
Memphis, TN 38133
EQI Financing Partnership II, LP
ENN Leasing Company II, L.L.C.
Wayne Holding, L.L.C.
June 30, 2008
RO
AmeriSuites
(Richmond/Innsbrook)
4100 Cox Road
Glen Allen, VA 23060
EQI Financing Partnership II, LP
ENN Leasing Company II, L.L.C.
Wayne Holding, L.L.C.
December 31, 2007

Schedule 1 -

--------------------------------------------------------------------------------

SCHEDULE 2
 
CONVERSION SCHEDULE

Name
Anticipated Guestroom Renovation Dates
Anticipated Lobby Renovation Dates
Albuquerque/Uptown
Apr-15-2007
Jul-10-2007
Apr-15-2007
Jul-10-2007
Birmingham/Riverchase
Apr-15-2007
Jul-10-2007
Apr-15-2007
Jul-10-2007
Baltimore/BWI Airport
Apr-15-2007
Jul-10-2007
Apr-15-2007
Jul-10-2007
Baton Rouge/East
Jul-15-2007
Oct-1-2007
Jul-15-2007
Oct-1-2007
Cincinnati/Blue Ash
Jul-15-2007
Oct-1-2007
Jul-15-2007
Oct-1-2007
Columbus/Worthington
Apr-15-2007
Jul-10-2007
Apr-15-2007
Jul-10-2007
Flagstaff/Interstate Crossroads
Apr-15-2007
Jul-10-2007
Apr-15-2007
Jul-10-2007
Nashville/Cool Springs
Jul-15-2007
Oct-1-2007
Jul-15-2007
Oct-1-2007
Cincinnati/North
Jul-15-2007
Oct-1-2007
Jul-15-2007
Oct-1-2007
Indianapolis/Keystone
Jul-15-2007
Oct-1-2007
Jul-15-2007
Oct-1-2007
Las Vegas/Paradise Road
Jun-1-2007
Nov-1-2007
Jun-1-2007
Nov-1-2007
Minneapolis/Mall of America
Apr-15-2007
Jul-10-2007
Apr-15-2007
Jul-10-2007
Miami/Kendall
Jul-15-2007
Oct-1-2007
Jul-15-2007
Oct-1-2007
Miami/Airport West
Jul-15-2007
Oct-1-2007
Jul-15-2007
Oct-1-2007
Memphis/Cordova
Jul-15-2007
Oct-1-2007
Jul-15-2007
Oct-1-2007
Overland Park/Metcalf
Jul-15-2007
Oct-1-2007
Jul-15-2007
Oct-1-2007
Richmond/Innsbrook
Apr-15-2007
Jul-10-2007
Apr-15-2007
Jul-10-2007
Tampa Airport/Westshore
Jul-15-2007
Oct-1-2007
Jul-15-2007
Oct-1-2007

 

Schedule 2 -

--------------------------------------------------------------------------------

SCHEDULE 3
 
SCOPE OF WORK

Schedule 3 -

--------------------------------------------------------------------------------

ANNEX A

 
Location: ______________

                    ID Number:
 
Date: ____________, 200_
 
FORM OF
 
FRANCHISE AGREEMENT
 
between
 
Hyatt Place Franchising, L.L.C.
 
and
 
[INSERT NAME OF FRANCHISEE]
 

Annex A - 

--------------------------------------------------------------------------------

HYATT PLACE HOTEL
 
FRANCHISE AGREEMENT
 
This Franchise Agreement (“Agreement” or “Franchise Agreement”) is made and
entered into as of October 3, 2006 (the “Effective Date”) (regardless of the
dates of the parties’ signatures) by and between HYATT PLACE FRANCHISING,
L.L.C., a Delaware limited liability company having its principal business
address at 200 West Monroe, 8th Floor, Chicago, Illinois 60606 (“we,” “our,” or
“us”), and ______________, a _____________ limited liability company having an
address at 7700 Wolf River Boulevard, Germantown, Tennessee 38138 (“you” or
“your”).
 
1. The Franchise.
 
We have the exclusive right to license and franchise a concept and system (the
“Hotel System”) associated with the establishment and operation of hotels under
the name “HYATT® PLACE” and other Proprietary Marks (defined below)
(collectively, “Hyatt Place Hotels”). Before signing this Agreement, you read
our Uniform Franchise Offering Circular and independently investigated and
evaluated the risks of investing in the hotel industry generally and acquiring a
Hyatt Place Hotel franchise specifically. Following your investigation and
recognizing the benefits that you may derive from being identified with the
Hotel System, you wish to enter into this Agreement to obtain a franchise to use
the Hotel System to operate a Hyatt Place Hotel located at ___________,
___________, ________(the “Hotel”).
 
A. The Hotel. The Hotel includes all structures, facilities, appurtenances,
furniture, fixtures, equipment, entrances, exits, and parking areas located on
the real property identified on Attachment A or any other real property we
approve for Hotel expansion, signage, or other facilities. You may not make any
material changes to the Hotel’s existing or planned construction without our
prior written consent, including any change in the number of guest rooms at the
Hotel (collectively “Guest Rooms”).
 
B. The Hotel System. We and our affiliates have designed the Hotel System so
that the public associates Hyatt Place Hotels with high quality standards. The
Hotel System now includes: (a) the trade names, trademarks, and service marks
“Hyatt Place” and such other trade names, trademarks, service marks, logos,
slogans, trade dress, domain names, and other designations of source and origin
(including all derivatives of the foregoing) that we periodically develop and
designate for use in connection with the Hotel System (collectively, the
“Proprietary Marks”); (b) all copyrightable materials that we periodically
develop and designate for use in connection with the Hotel System, including the
Manual (as defined below), videotapes, CDs/DVDs, marketing materials (including
advertising, promotional, and public relations materials), architectural
drawings (including all architectural plans, designs, and layouts such as,
without limitation, site, floor, plumbing, lobby, electrical, and landscape
plans), building designs, and business and marketing plans, whether or not
registered with the U.S. Copyright Office (“Copyrighted Materials”); (c) all
materials and other information that we designate as “confidential” orally or in
writing or which, under the circumstances surrounding disclosure, ought to be
treated as confidential, including all operations information, confidential
manuals, revenue information, specifications, procedures, and business,
marketing and other plans, as more fully identified in Section 5F of this
Agreement (collectively, “Confidential Information”); (d) a national toll-free
number for, and other aspects of, the central reservation system, as we renovate
and modify it from time to time (“CRS”); (e) a global distribution system, as we
renovate and modify it from time to time (“GDS”); (f) the national directory of
Hyatt Place Hotels (which, at our option, also may be associated with any other
hotel brand or other business that we or our affiliates own, operate, franchise,
license or manage) (the “National Directory”); (g) management, personnel, and
operational training programs, materials, and procedures; (h) standards,
specifications, procedures, and rules for operations, marketing, construction,
equipment, furnishings, and quality assurance (collectively, “System Standards”)
described in our confidential manuals, as amended from time to time
(collectively, the “Manual”), or in other written or electronic communications;
and (i) marketing, advertising, and promotional programs. Although we retain the
right to establish and periodically to modify System Standards for the Hotel
that you agree to implement and maintain, and to modify the Hotel System as we
deem best for Hyatt Place Hotels, you retain the right to control, and
responsibility for, the Hotel’s day-to-day management and operation and
implementing and maintaining System Standards at the Hotel. In addition, our
mandatory System Standards do not include any personnel or security-related
policies or procedures that we (at our option) make available to you in the
Manual or otherwise for your optional use. You will determine to what extent, if
any, these optional policies and procedures should apply to your Hotel’s
operations. You acknowledge that we do not dictate or control labor or
employment matters for franchisees and their employees and will not be
responsible for the safety and security of Hotel employees or patrons.
 
2. Grant.
 
A. Term. Commencing on the Effective Date and continuing during the term
provided in Section 10A (the “Term”), we hereby grant you, and you hereby
accept, the non-exclusive right and franchise to use the Hotel System to build
or convert and operate the Hotel at the site specified in Attachment A (the
“Site”) in accordance with this Agreement’s terms. Your right to operate the
Hotel will cease upon termination or expiration of this Agreement.
 
B. Area of Protection. We grant you a geographic area of protection, which is
described in Attachment B (the “Area of Protection”), in which to construct and
operate your Hotel. Subject to the one exception below, neither we nor any of
our affiliates will open and operate, or authorize any other party to open and
operate, any other Hyatt Place Hotels the physical premises of which are located
within the Area of Protection. The one exception to this restriction is that, if
we or any of our affiliates acquire (whether through purchase, sale, merger,
consolidation, or other transaction) another chain, franchise system, group or
portfolio of at least four (4) hotels, or acquire the right to operate or manage
another chain, franchise system, group or portfolio of at least four (4) hotels,
one (1) or more of which hotels are located in the Area of Protection (as we
have the right to do), we and/or our affiliates then will have the unrestricted
right to convert, or cause to be converted, the acquired hotel(s) within the
Area of Protection from its (or their) original trade identity to the Hotel
System and then to operate, or authorize any other party to operate, such
hotel(s) as Hyatt Place Hotels using the Hotel System, even if one (1) or more
of the other acquired hotels, whether operating within or outside the Area of
Protection, are not converted to Hyatt Place Hotels.
 
Except for the limited exclusivity provided above, there are no restrictions on
us or our affiliates, your rights under this Agreement are nonexclusive in all
respects, the Hotel has no territorial protection whatsoever, and we and our
affiliates have the right without any restrictions at all to engage in any and
all activities we and they desire (including any and all types of lodging
facilities), at any time and place, whether or not using the Proprietary Marks
or any aspect of the Hotel System, whether or not those activities compete with
your Hotel, and whether or not we or our affiliates start those activities
ourselves or purchase, merge with, acquire, or affiliate with businesses that
already engage in such activities. We and our affiliates may engage in all
activities not expressly prohibited in this Agreement. We and our affiliates may
use or benefit from common hardware, software, communications equipment and
services, administrative systems, reservation systems, franchise application
procedures, central purchasing, approved vendor lists, and personnel. You agree
that you will have no right to pursue any claims, demands, or damages as a
result of these activities, whether under breach of contract, unfair
competition, implied covenant of good faith and fair dealing, divided loyalty,
or other theories, because you have expressly allowed us and our affiliates to
engage in all such activities without restriction.
 
You acknowledge that our affiliates operate other franchise and non-franchised
systems for lodging facilities (including time-share or interval ownership
facilities and vacation clubs) that use different brand names, trademarks, and
service marks, including those with the “Hyatt” name as part of their brand
name, some of which might operate and have facilities in the Area of Protection,
that will compete directly with you. None of those activities, even other uses
of the “Hyatt” name, will constitute a violation of this Agreement. Only the
operation of a “Hyatt Place” Hotel the physical premises of which are located
within the Area of Protection would constitute a violation of this Agreement,
unless the one exception noted above applies.
 
C. Opening. You have no right to open the Hotel for business under the Hotel
System unless and until we authorize you to do so in writing. The date on which
you first open the Hotel for business shall be deemed the “Opening Date.” You
must not open the Hotel for business and begin operating the Hotel until: (1)
you have properly developed and equipped the Hotel according to our System
Standards and in compliance with all applicable laws, rules and regulations; (2)
all pre-opening training for the Hotel’s personnel has been completed to our
satisfaction; (3) all amounts then due to us and our affiliates have been paid;
(4) you have obtained all required certificates of occupancy, licenses and
permits to operate the Hotel; (5) you have given us copies of all insurance
policies required under this Agreement, or such other evidence of insurance
coverage and payment of premiums as we request; and (6) we have conducted a
pre-opening inspection and approved the Hotel for opening. Our determination
that you have met all of our pre-opening requirements will not constitute a
representation or warranty, express or implied, that the Hotel complies with any
laws or a waiver of your non-compliance, or of our right to demand full
compliance, with such pre-opening requirements.
 
3. Your Responsibilities.
 
A. Operational and Other Requirements. During the Term, you agree to do the
following (many of which requirements also are addressed in more detail
elsewhere in this Agreement):
 

 
(1)
have your owners, employees, and approved independent contractors satisfactorily
complete all required orientation and training programs and ensure that a
trained management and operations staff, including a general manager and sales
manager who devote full time to their duties at the Hotel, is in place at the
Hotel at all times, as you are responsible for management of the Hotel’s
business;

 

 
(2)
maintain the Hotel in first class condition and in a clean, safe, and orderly
manner;

 

 
(3)
provide efficient, courteous, competent, prompt, and high-quality service to the
public while maintaining a high moral and ethical standard and atmosphere at the
Hotel;

 

 
(4)
operate the Hotel twenty-four (24) hours a day, every day, and use the Hotel
premises solely for the business franchised under this Agreement;

 

 
(5)
strictly comply in all respects with our mandatory System Standards and other
requirements, as we may periodically modify them, concerning:

 

 
(a)
the Hotel System, the Manual (other than any personnel and security-related
policies and procedures contained in the Manual, which are for your optional
use), and all other mandatory policies and procedures we periodically
communicate to you;

 

 
(b)
our quality standards and the types of services, products, and amenities you may
use, promote, or offer at the Hotel;

 

 
(c)
your use of the Proprietary Marks and display, style, location, and type of
signage, as outlined in this Agreement, the Manual, and other written directives
we periodically issue;

 
(d) directory and reservation service listings of the Hotel; and
 

 
(e)
your participation in and compliance with the terms of all of our marketing,
reservation service, rate and room inventory management, advertising,
cooperative advertising, guest frequency, discount or promotional, customer
award, Internet, computer, training, and operating programs, including a
property management system that interfaces with the CRS or any other central
reservation system we periodically adopt. We may periodically establish and/or
coordinate these programs with third parties we designate. These third parties
might (but need not) be our affiliates. You must sign and comply with any
license, participation and other agreements we periodically specify relating to
these programs. You acknowledge and agree that we have the right, without prior
notice to you, to access your computer systems, including the property
management system, and all data and information that you have processed or
stored with, through, or otherwise in connection with such computer systems;

 

 
(6)
participate in, connect with, and use the CRS and GDS in the manner we designate
in the Manual or otherwise for offering, booking, modifying, and communicating
Guest Room and meeting space reservations for the Hotel and bear all related
costs and expenses. You may not use any other central reservation or similar
system without our prior written consent. You agree to pay all applicable
monthly maintenance fees;

 
(7) adopt all changes we periodically make to the Hotel System;
 

 
(8)
strictly comply with all governmental requirements concerning the Hotel’s
operation, including

 
(a)  paying all taxes when due,
 
(b)  filing and maintaining trade or fictitious name registrations,
 

 
(c)
filing and maintaining all licenses and permits necessary to operate the Hotel,
and

 

 
(d)
obtaining and maintaining all licenses required to sell alcoholic beverages at
the Hotel (unless we, at our sole option, have determined that no alcoholic
beverages may be offered at or from the Hotel’s premises);

 

 
(9)
permit our representatives to inspect or audit the Hotel at any time and give
them free lodging during the inspection period;

 

 
(10)
refer guests and customers, wherever reasonably possible, only to Hyatt Place
Hotels or other brands affiliated with us, not use the Hotel or the Hotel System
to promote a competing business or other lodging facility, and not divert
business from the Hotel to a competing business;

 

 
(11)
use your best efforts to create a favorable response to the name “Hyatt Place”
and the names of any brand extensions and other Proprietary Marks;

 

 
(12)
participate in, and pay all fees of, any Hotel System travel agent commission
payment program, as we periodically modify it, and promptly pay as we require
all travel agent commissions and third party reservation service charges
according to the terms of those programs;

 

 
(13)
promptly pay us and/or our affiliates when due all royalties and other amounts
owed, whether under this Agreement or any related agreement;

 

 
(14)
honor all nationally recognized credit cards and other payment mechanisms we
periodically designate and enter into all necessary credit card and other
agreements with the issuers of those cards and other applicable parties;

 

 
(15)
treat as confidential and proprietary the Manual and any other Confidential
Information and

 

 
(a) 
use such material only in operating the Hotel during the Term,

 

 
(b) 
not duplicate, circulate, distribute, reproduce, copy, or exhibit any portion of
the Manual or Confidential Information, and

 

 
(c)
not divulge any Confidential Information to any person unless he or she needs to
know the Confidential Information in order to perform his or her duties at the
Hotel;

 

 
(16)
use best efforts to require anyone with access to any Confidential Information
to keep the Confidential Information confidential. You must obtain a written
agreement from those of your officers, directors, employees, and managers whom
we specify agreeing to this Agreement’s restrictions regarding the Confidential
Information. We have the right to regulate the form of agreement that you use
and to be a third party beneficiary of that agreement with independent
enforcement rights. You must keep copies of those agreements and send them to us
upon request;

 

 
(17)
conduct a pre-opening marketing program for the Hotel according to our
requirements. At least one hundred twenty (120) days before the Hotel’s grand
opening, you must

 

 
(a) 
pay us an amount equal to One Hundred Dollars ($100) multiplied by the number of
Guest Rooms at the Hotel (the “Marketing Deposit”), and

 

 
(b) 
prepare and submit to us for our approval a written pre-opening marketing
program that contemplates spending the Marketing Deposit and satisfies our
requirements. You must change the program as we specify and implement the
approved program. We will use the Marketing Deposit to pay, on your behalf,
providers of products and services according to the approved pre-opening
marketing program;

 

 
(18)
conduct your advertising in a dignified manner. Before you use them, you must
submit to us for our prior approval all advertising, promotional, and public
relations plans, programs, and materials that you desire to use, including any
materials in digital, electronic, computerized, or other form (including
materials to be made available through a computer or telecommunications network
such as the Internet, or on a Hotel Website (defined below), subject to
Subsection (23) below). If you do not receive written disapproval within fifteen
(15) business days after we receive the materials, they are deemed to be
approved. You may not use any advertising, promotional, or public relations
materials or engage in any programs that we have not approved or have
disapproved and must discontinue using any previously-approved materials and
engaging in any previously-approved programs within the timeframe we specify
after you receive written notice from us;

 

 
(19)
continually, but not less than once every six (6) months, send us current
information regarding the name, address, and telephone number of the financial
institution (the “Lender”), if any, that provided or is providing the financing
enabling you to purchase or operate the Hotel and the name and telephone number
of your contact at the Lender;

 

 
(20)
notify us in writing within ten (10) days after you receive information or
documentation about any lawsuit, action, or proceeding, or the issuance of any
injunction, award, or decree of any court, quasi-judicial body, or governmental
agency, that might adversely affect the Hotel, your ability to perform your
obligations under this Agreement, or your financial condition;

 

 
(21)
subject to our rights and your obligations under Section 8 below, notify us in
writing at least ten (10) days in advance of your intent to list the Hotel for
sale and promptly send us all information we reasonably request regarding any
proposed sale. You also must ensure that each holder of a direct or indirect
Controlling Ownership Interest (defined in Section 8B below), whether that
person or entity owns that interest as of the Effective Date or acquires that
interest during the Term (subject to our rights and your obligations under
Section 8 below), signs our required form of Guaranty and Assumption of
Obligations;

 

 
(22)
at our request, send us the names of Hotel customers and guests and give us
access to your sales and customer database;

 

 
(23)
not create a separate website promoting your Hotel (a “Hotel Website”) without
our prior written approval. If we approve your use of a Hotel Website, we will
own all intellectual property and other rights in the domain name or URL for the
Hotel Website, the log of “hits” by visitors, and any personal or business data
that visitors supply. You must sign the documents we periodically request to
secure our ownership of those rights. We may implement and periodically modify,
and you must comply with, System Standards relating to the Hotel Website and
similar websites. The Hotel Website may not contain any content that references
any other hotel, motel, or other lodging facility. In addition, you may allow
the Hotel to be listed on third-party websites (other than the Hotel System
website) that offer and sell travel-related products and services, but we have
the right to approve in advance these websites and your proposed listings on or
links to these websites in order to protect the Proprietary Marks and Hotel
System and may withdraw our approval of any website or listing that no longer
meets our minimum standards;

 

 
(24)
comply with all System Standards concerning mystery shopper programs, guest
relations, and guest complaints and resolution, including reimbursing
dissatisfied guests for their costs of staying at the Hotel and participating in
other guest satisfaction programs in the manner we specify;

 

 
(25)
purchase or lease, install, and maintain at the Hotel all fixtures; equipment;
furnishings; furniture; telephone systems; communications systems; facsimile
machines; copiers; signs; property management, revenue management, in-room
entertainment, and other computer and technology systems; and other items
(collectively, “FF&E”) we specify for the Hotel System. You may not install at
the Hotel, without our prior written consent, any FF&E or other items we have
not previously approved. You may use at the Hotel only FF&E, supplies, and other
goods and services at the Hotel that conform to our System Standards. We may
specify for the Hotel System a particular model or brand of FF&E, supplies, and
other goods and services that is available from only one manufacturer or
supplier. We may specify that certain FF&E, supplies, and other goods and
services be purchased only from us or our affiliates or sources we designate or
approve. If you wish to obtain any FF&E, supplies, or other goods and services
for which we have established standards or specifications from a source that we
have not previously approved as meeting our System Standards, you must send us a
written request with any information and samples we consider necessary to
determine whether the item and source meet our then current criteria. Upon our
request, you must reimburse our costs in reviewing your request and evaluating
the item and/or source. If you comply with our processes and procedures
regarding approval of alternate or additional manufacturers or suppliers, we
will respond to your request within a reasonable time period. You may not
purchase any FF&E, supplies or other goods or services for the Hotel unless the
purchase is from a source we designate or approve or we have approved in writing
that the item you proposed meets our standards and specifications. We may modify
our System Standards in this area as we deem best. We reserve the right, at our
option, to revoke our approval of certain sources or items if they fail to
continue to meet our System Standards. We may refuse any of your requests if we
already have designated a particular source for, or model or brand of, FF&E,
supplies or other goods or services that we (in our sole judgment) determine to
be critical to the Hotel System and we do not desire to expand the list of
approved sources, models, or brands. We may make this decision as we deem
best. We and our affiliates have the right to receive payments from suppliers on
account of their actual or prospective dealings with you and other franchisees
and to use all amounts we and our affiliates receive without restriction for any
purposes we and our affiliates deem appropriate (unless we and our affiliates
agree otherwise with the supplier);

 

 
(26)
own fee simple title (or a long-term ground leasehold interest, provided that
such interest has been granted to you by an unrelated third party ground lessor
in an arms-length transaction for a term equal to, or longer than, the Term) to
the Hotel’s real property and improvements or, at our request, cause the fee
simple owner or other third party acceptable to us to provide its guarantee
covering all your obligations under this Agreement in form and substance
acceptable to us. You must provide us copies of any lease for the Hotel’s
premises (and any amendments thereto) upon our request. You acknowledge that our
approval of the Hotel’s site is not a guarantee or warranty, express or implied,
of the success or profitability of a Hyatt Place Hotel operated at that
location. Our approval indicates only that we believe that the site meets our
then acceptable criteria; and

 

 
(27)
promptly send us a copy of any notice of default you receive from any mortgagee,
trustee under any deed of trust, or ground lessor for the Hotel and, at our
request, any additional information we request concerning any alleged default or
any subsequent action or proceeding in connection with any alleged default.

 
B. Performance of the Work. As a primary inducement for us to enter into this
Agreement, you agree to perform the work listed on Attachment C (the “Work”) in
strict accordance with our specifications and this Agreement’s other applicable
terms and conditions.
 
C. Hotel Upgrading. We may require you at any time and from time to time during
the Term to upgrade or renovate the Hotel to comply with then current building
décor, appearance, and trade dress standards that we have established and
require for Hyatt Place Hotels generally, and this upgrading or renovation may
obligate you to invest additional capital in the Hotel and/or incur higher
operating costs. You agree to implement such upgrading and renovation, and any
other changes in System Standards, within the time period we request, regardless
of their cost or the point during the Term when we require you to do so, as if
they were part of this Agreement as of the Effective Date. Your failure to do so
within the timeframe we specify may result in our issuing a quality default
notice that could lead to the termination of this Agreement and your obligation
to pay liquidated damages under Section 10E of this Agreement.
 
D. Fees.
 

 
(1)
Unless otherwise specified, all fees that you paid us before or simultaneously
with the execution of this Agreement, or will pay us during the Term, are
non-refundable.

 

 
(2)
If we and you agree to add additional Guest Rooms to the Hotel during the Term,
then you must pay us an additional Application Fee in an amount equal to Four
Hundred Dollars ($400) multiplied by the number of additional Guest Rooms. When
you request our approval of your plans to develop the additional Guest Rooms,
you must pay us a non-refundable Property Improvement Plan (“PIP”) fee of Five
Thousand Dollars ($5,000.00). We will apply this PIP fee toward the additional
Application Fee if we approve your plans. The remaining portion of the
additional Application Fee is due, fully earned by us, and non-refundable on the
date we approve your plans to develop the additional Guest Rooms.

 

 
(3)
On or before the tenth (10th) day of each month beginning with the month
following the Opening Date, you shall pay us:

 

 
(a)
a “Royalty Fee” equal to

 

 
(i)
three percent (3%) of the Hotel’s Gross Rooms Revenue (as defined in Section
3D(6)) accrued during the First Year (defined below);

 

 
(ii)
four percent (4%) of the Hotel’s Gross Rooms Revenue accrued during the Second
Year (defined below); and

 

 
(iii)
five percent (5%) of the Hotel’s Gross Rooms Revenue during the balance of the
Term.

 
The “First Year” means the calendar twelve (12) month period beginning on the
first (1st) day of the calendar month during which the Opening Date occurs, and
the “Second Year” means the calendar twelve (12) month period beginning on the
first (1st) anniversary of the first (1st) day of the calendar month during
which the Opening Date occurs;
 

 
(b)
a contribution to the Marketing, Central Reservations and Technology Fund
(described in Section 4D) (“Contribution”) equal to three and one-half percent
(3½%) of the Hotel’s Gross Rooms Revenue during the preceding month. At any time
during the Term, we may, upon thirty (30) days’ prior notice to you,
periodically increase the Contribution, but it will not exceed four percent (4%)
of the Hotel’s Gross Rooms Revenue; and

 

 
(c)
all fees and other amounts that we (or our affiliates) then have paid or have
agreed to pay on your behalf to the then current CRS operator (if applicable),
then current GDS operator (if applicable), and other providers of products or
services for the Hotel (collectively, the “Providers”). If any Provider assesses
a single or group fee or other charge that covers all or a group of Hyatt Place
Hotels to which that Provider provides products or services, you agree that our
allocation of that fee or other charge among the Hotel and other Hyatt Place
Hotels is final. The Providers may periodically increase the fees and other
charges they impose. At our option, you must begin paying these fees and other
charges directly to the applicable Provider(s).

 
(5) You agree to pay on a timely basis:
 

 
(a)
applicable commissions to travel agents;

 

 
(b)
all commissions and fees for reservations you accept through any sources
(including the Internet), whether processed through us, the CRS, or a
third-party reservation system or billed directly to you;

 

 
(c)
all contributions for cooperative advertising programs in which you agree to
participate, as required in Section 3E below;

 

 
(d)
charges for telephone and other equipment related to the CRS; and

 

 
(e)
all fees and assessments due for guest frequency programs or other marketing
programs we initiate that are attributable to the Hotel. Failure to pay any of
these fees is a default under this Agreement.

 

 
(6)
“Gross Rooms Revenue” shall mean all gross revenues attributable to or payable
for the rental of Guest Rooms, including guaranteed no-show revenue and
cancellation fees and all cash, check, barter, credit, debit, and other
transactions, whether or not collected, at the actual rates charged, reduced by
Guest Room rebates and overcharges (but only if originally included in Gross
Rooms Revenue) and excluding any sales or room taxes you collect and transmit to
the appropriate taxing authority. Gross Rooms Revenue also shall include the
proceeds from any business interruption insurance applicable to loss of revenue
due to the non-availability of Guest Rooms. Gross Rooms Revenue shall be
accounted for in accordance with the Uniform System of Accounts for the Lodging
Industry, Ninth Edition, as published by The Hotel Association of New York City,
Inc., or a later edition that we approve.

 
(7) You must make all payments for Royalty Fees, Contributions, and other fees
due to us under this Agreement by electronic funds transfer (“EFT”). You must
sign the documents we periodically specify to allow us to debit your bank
account or otherwise process these payments through EFT. You also must sign any
additional or new forms and complete any reasonable procedures we establish for
EFT. We will require payment by EFT only for Royalty Fees, Contributions, and
other fees due to us under this Agreement. We periodically may change the
procedure for monthly payments and require you to
 

 
(a)
make your monthly payments to a designated bank account by wire transfer or
other means we specify and

 

 
(b)
sign any authorizations or other documents required to implement that procedure.

 
On the date Royalty Fees and Contributions are due, you shall report to us by
telephone, electronic means, or in written form, as we direct, pursuant to our
standard transmittal procedures, information regarding your Gross Rooms Revenue
and any additional information we request. Funds must be available in your
account to cover our withdrawals. You may not change your bank, financial
institution, or account without first telling us.
 

 
(8)
You agree to pay us a late fee of Two Hundred Twenty-Five Dollars ($225) for
each required payment not made on or before its original due date and for each
payment not honored by your financial institution. The late fee is not interest
or a penalty but compensates us for increased administrative and management
costs due to your late payment. In addition, all amounts that you owe us that
are more than seven (7) days late will bear interest accruing as of their
original due date at one and one-half percent (1.5%) per month or the highest
commercial contract interest rate the law allows, whichever is less. We may
debit your bank account automatically for the late fee and interest. You
acknowledge that this subparagraph is not our agreement to accept any payments
after they are due or our commitment to extend credit to, or otherwise finance
your operation of, the Hotel.

 

 
(9)
Subject to our requirements and at your own expense, you may conduct local and
regional marketing and advertising programs. You shall pay us the reasonable
fees we periodically establish for optional advertising materials you order from
us for these programs.

 

 
(10)
Despite any designation you make, we may apply any of your payments to any of
your past due indebtedness to us or our affiliates. We may set off any amounts
you or your owners owe us or our affiliates against any amounts we or our
affiliates owe you or your owners. You may not withhold payment of any amounts
you owe us or our affiliates due to our alleged nonperformance of any of our
obligations under this Agreement.

 

 
(11)
If any gross receipts, sales, use, excise, or similar tax is imposed upon us due
to any payment you make to us under this Agreement (but not our own income
taxes), you must reimburse us for all tax payments we make so that the amount of
your payments we retain after paying the applicable taxes equals the full amount
of the payments you were required to make under this Agreement had the tax not
been imposed upon us.

 
E. Cooperative Advertising Programs. We may identify a region in which two (2)
or more Hyatt Place Hotels are located in order to establish a local or regional
advertising cooperative (a “Cooperative”). We may form, change, dissolve and
merge Cooperatives. The Cooperative’s purpose will be to collect funds from its
members and to plan, discuss, organize, develop, utilize, produce, disseminate,
and implement advertising and promotional programs and materials on a collective
basis (and to cover related expenses) for the sale of services at participating
Hyatt Place Hotels. We will not require you to participate in a Cooperative.
However, if you choose to participate in the Cooperative, you must do so
according to the Cooperative’s rules, including by paying your Hotel’s allocable
share of any advertising, marketing, promotional and other programs that the
Cooperative conducts. All restrictions under this Agreement relating to any
advertising, marketing or promotional programs that you conduct also apply to
any such programs that the Cooperative conducts.
 
F. Management of the Hotel. Unless we consent in writing, you must at all times
retain and exercise direct management control over the Hotel’s business. You may
not enter into any lease, management agreement, or other similar arrangement
with any independent entity for all or a part of the Hotel’s operation (a
“Management Arrangement”) without our prior written consent, which we will not
unreasonably withhold if the independent entity meets our minimum
qualifications, attends and satisfactorily completes required training programs,
agrees to sign the documents we require to protect our Proprietary Marks,
Copyrighted Materials, and Confidential Information, and agrees to perform its
management responsibilities in compliance with this Agreement. Nevertheless, we
may refuse to approve a management company which is, or that has an affiliate
which is, a Brand Owner. Under this Agreement, “Brand Owner” means any entity
that is a franchisor or owner, or is affiliated with or manages hotels
exclusively for the franchisor or owner, of a hotel concept that in our opinion
competes with Hyatt Place Hotels, irrespective of the number of hotels operating
under that concept’s trade name. Even after we approve a Management Arrangement,
we may at our option revoke that approval, and upon delivery of written notice
to you require you to terminate the Management Arrangement, if the independent
entity or any of its affiliates at any time becomes a Brand Owner or otherwise
fails to meet our minimum qualifications or to comply with this Agreement.
 
G. Guest Room Rates. You will establish the Hotel’s room rates and submit them
to us promptly upon our request. Except for special event periods, you may not
charge any rate exceeding the rate you submit in writing for sale by the CRS.
 
4. Our Responsibilities.
 
A. Orientation and Training.
 
(1) Owner/Management Orientation. Within ninety (90) days after the Effective
Date, your managing owners and core management team must attend an
owner/management orientation program at our principal business address. We do
not charge for this orientation program.
 
(2) General Manager Certification Program/Central Reservation System Training
Program. Before opening the Hotel for business, your general manager and other
key personnel we specify must attend and successfully complete our General
Manager Certification Program, our Central Reservation System Training Program,
and such other training programs and curriculum we specify. If you replace your
general manager or any other key personnel whom we require to attend training,
you must have their replacements attend and successfully complete the applicable
training programs within thirty (30) days (or such other period we periodically
designate) after they assume their positions. We will designate the dates,
locations, and duration of all training. You must pay our then current fees for
the initial and all subsequent General Manager Certification Programs and
Central Reservation System Training Programs.
 
(3) Sales Director Training Program. Before opening the Hotel for business, your
sales director must attend and successfully compete our Sales Director Training
Program. If you replace your sales director, you must have his or her
replacement attend and successfully complete the training program within thirty
(30) days (or such other period we periodically designate) after he or she
assumes the position. We will designate the dates, locations, and duration of
training. You must pay our then current fees for the initial and all subsequent
Sales Director Training Programs.
 
(4) On-Site Training. We will send one or two trainers (at our option) to assist
with training your staff and the Hotel’s grand opening. You must pay us our then
current fee and our trainer(s)’ travel and living expenses associated with this
training. The trainer(s) will arrive at or before the Hotel’s grand opening and
stay for the period that we specify. The trainer(s) will generally assist and
train Hotel staff with aspects of day-to-day operations, including laundry,
customer service, food and beverage, and front desk operations.
 
(5) Supplemental Training. We may, at such times and places we deem best,
require your general manager, your sales director, and other key personnel to
attend and successfully complete supplemental training courses in connection
with Hotel System modifications. These individuals must attend any supplemental
training within one hundred and eighty (180) days after you receive notice from
us that such training is required. The fee for supplemental training ranges from
One Hundred Fifty Dollars ($150) to Two Thousand Five Hundred Dollars ($2,500)
per person, depending on the nature of the training program. Supplemental
training may be conducted by, and tuition may be payable to, third parties we
designate.
 
(6) Training Expenses. Besides the training fees we charge for the training
discussed above, you are responsible for all costs of transportation, meals,
lodging, salaries, and other compensation incurred in connection with training.
If we hold any training at your Hotel, you must provide free lodging for our
representatives.
 
B. Services. If you are in full compliance with your obligations under this
Agreement, you shall have access to the CRS, listings in advertising
publications, and the National Directory. You must participate in, connect with,
and use the CRS and GDS in the manner we periodically designate for offering,
booking, modifying, and communicating Guest Room and meeting space reservations
for the Hotel and bear all related costs and expenses. We or our representative
will provide data installation services relating to the initial set-up of the
CRS and GDS at the Hotel You must honor and give first priority on available
rooms to all confirmed reservations that the CRS or GDS refers to the Hotel. The
CRS and GDS are the only reservation system or service that your Hotel may use
for outgoing reservations that the Hotel refers to other hotels. You are solely
responsible for notifying the reservation center of any changes in your Hotel’s
room rates. You may not charge any guest a rate higher than the rate that the
reservations center specifies to the guest at the time he or she makes the
reservation. We may suspend your access to and listings in these sources while
you are in default under this Agreement.
 
C. Guidance and Assistance. During the Term, we may advise you from time to time
regarding the Hotel’s operation based on your reports or our evaluations and
inspections and may guide you with respect to
 

 
(1)
System Standards that Hyatt Place Hotels use,

 

 
(2)
purchasing required and authorized FF&E and other items and arranging for their
distribution to you,

 

 
(3)
advertising and marketing materials and programs,

 

 
(4)
employee training, and

 

 
(5)
administrative, recordkeeping, and accounting procedures.

 
We may guide you in the Manual; in bulletins or other written materials; by
electronic media; by telephone consultation; and/or at our headquarters or the
Hotel. If you request, and we agree to provide, additional or special guidance,
assistance, or training, you agree to pay our then applicable charges, including
our personnel’s per diem charges and travel and living expenses.
 
D. Marketing, Central Reservations and Technology Fund. We or our designee will
administer a Marketing, Central Reservations and Technology Fund for the Hotel
System (the “Fund”). You must make the Contributions specified in Section
3D(4)(b) above. For administrative convenience, we may (but are not required to)
collect the Contributions before passing them on to the Fund. Hyatt Place Hotels
that we or our affiliates own and operate will contribute to the Fund on the
same percentage basis as franchisees. We also have the right to collect for
deposit into the Fund any advertising, marketing, or similar allowances paid to
us by suppliers who deal with Hyatt Place Hotels and with whom we agree to so
deposit these allowances.
 
We will determine and direct all programs that the Fund finances, with sole
control over the creative concepts, materials, and endorsements used and their
geographic, market, and media placement and allocation, including by determining
on our own the amounts to be spent for the various purposes identified in this
Section. The Fund may pay for preparing and producing video, audio, and written
materials and electronic media; developing, implementing, maintaining and
improving the Hotel System’s website and/or related strategies; developing,
implementing, operating, maintaining and improving the CRS, GDS, and National
Directory and any other related or successor programs or systems; developing,
implementing, maintaining and improving any video, computer-related or other
technology for use or sale by Hyatt Place Hotels; planning, coordinating and
conducting various sales efforts for Hyatt Place Hotels; market research and
other research and development activities relating to improving the Hotel
System; administering regional and multi-regional marketing and advertising
programs, including purchasing trade journal and other media advertising and
using advertising, promotion, and marketing agencies and other advisors to
provide assistance; and supporting public relations and other advertising,
promotion, and marketing activities. The Fund periodically will give you samples
of advertising, marketing, and promotional formats and materials at no cost. We
will sell you multiple copies of these materials at our direct cost of producing
them, plus any related shipping, handling, and storage charges.
 
We will account for the Fund separately from our other monies (but we need not
segregate the Fund from our assets). We will not use the Fund for any of our
general operating expenses. However, we may use the Fund to pay the reasonable
salaries, benefits and expenses of personnel who manage, administer and/or
perform services for or on behalf of the Fund, including those who account for
Contributions; the Fund’s other administrative costs; travel expenses of
personnel while they are on Fund business; meeting costs; rent, utilities, other
overhead costs, and other costs for equipment, supplies and other materials
relating or allocable to Fund business; and other expenses that we incur in
activities reasonably related to administering or directing the Fund and its
programs, including conducting market research and other research and
development activities, public relations, preparing advertising, promotion, and
marketing materials, collecting and accounting for Contributions, paying
Providers for services relating to the CRS and GDS, and paying for technical and
support functions.
 
The Fund will not be our asset. Although the Fund is not a trust, we will hold
all Contributions for the benefit of the contributors and use Contributions only
for the purposes described in this Section. We do not owe any fiduciary
obligation to you for administering the Fund or any other reason. The Fund may
spend in any fiscal year more or less than the total Contributions in that year,
borrow from us or others (paying reasonable interest) to cover deficits, or
invest any surplus for future use. We will use all interest (if any) earned on
Contributions to pay costs before using the Fund’s other assets.
 
We will prepare an annual, unaudited statement of Fund collections and expenses
and give you a copy of the statement upon written request. We may have the Fund
audited periodically, at the Fund’s expense, by an independent certified public
accountant. We may incorporate the Fund or operate it through a separate entity
whenever we deem appropriate. The successor entity will have all of the rights
and duties specified in this Section.
 
We intend the Fund to maximize recognition of the Proprietary Marks, patronage
of Hyatt Place Hotels, and the productive and efficient operation of the CRS and
GDS, any related or successor programs or systems, and other technologies.
Although we will try to use the Fund in a manner that will benefit all Hyatt
Place Hotels, we need not ensure that Fund expenditures in or affecting any
geographic area are proportionate or equivalent to Contributions by Hyatt Place
Hotels operating in that geographic area or that any Hyatt Place Hotel benefits
directly or in proportion to its Contributions from the programs and other
products and services that the Fund finances.
 
We have the right, but no obligation, to use collection agents and institute
legal proceedings at the Fund’s expense to collect Contributions. We also may
forgive, waive, settle, and compromise all claims by or against the Fund. Except
as expressly provided in this Section, we assume no direct or indirect liability
or obligation to you for collecting amounts due to, maintaining, directing, or
administering the Fund.
 
We may at any time defer or reduce Contributions of a Hyatt Place Hotel
franchisee and, upon thirty (30) days’ prior written notice to you, reduce or
suspend Contributions and operations for one or more periods of any length and
terminate (and, if terminated, reinstate) the Fund. If we terminate the Fund, we
will distribute all unspent monies to our franchisees, and to us and our
affiliates, in proportion to their and our respective Contributions during the
preceding twelve (12) month period.
 
E. Application of Manual. You must comply with the terms of the Manual (other
than any personnel and security-related policies and procedures, which are for
your optional use). Because complete and detailed uniformity under many varying
conditions might not be possible or practical, you acknowledge that we
specifically reserve the right and privilege, as we deem best, to vary System
Standards for any franchisee based upon the peculiarities of any condition or
factors that we consider important to that franchisee’s successful operation.
You have no right to require us to grant you a similar variation or
accommodation.
 
The Manual may include audiotapes, videotapes, compact disks, computer software,
other electronic media, and/or written materials. It contains System Standards
and information on your other obligations under this Agreement. We may modify
the Manual periodically to reflect changes in System Standards. You agree to
keep your Manual current and in a secure location at the Hotel. If there is a
dispute over its contents, our master copy of the Manual controls. You agree
that the Manual’s contents are confidential. If your copy of the Manual is lost,
destroyed, or significantly damaged, you agree to obtain a replacement copy at
our then applicable charge.
 
At our option, we may post some or all of the Manual on a restricted website or
extranet to which you will have access. If we do so, you agree to monitor and
access the website or extranet for any updates to the Manual, System Standards,
or other aspects of the Hotel System. Any passwords or other digital
identifications necessary to access the Manual on a website or extranet will be
deemed to be part of Confidential Information. We may require you to return a
portion or the entire copy of the Manual given to you in paper or other tangible
form after we post the Manual on a restricted website or extranet.
 
F. Other Arrangements. We may arrange for development, marketing, operations,
administration, technical, and support functions, facilities, services, and/or
personnel with any other entity. We and our affiliates may use any facilities,
programs, services, and/or personnel used in connection with the Hotel System in
our and our affiliates’ other business activities, even if these other business
activities compete with the Hotel or the Hotel System. You agree that we have
the right to delegate the performance of any portion or all of our obligations
under this Agreement to third-party designees, whether these designees are our
affiliates, agents, or independent contractors with whom we contract to perform
these obligations. If we do so, the third-party designees will be obligated to
perform the delegated functions for you in compliance with this Agreement.
 
G. Inspections/Compliance Assistance and Quality Assurance Program. We may
inspect your Hotel at any time, with or without notice to you, to determine
whether you and the Hotel are complying with the Hotel System, System Standards,
and other terms and conditions of this Agreement. If you or the Hotel fails to
comply with such obligations, we may require you, at your own cost (and in
addition to our other rights and remedies), to correct the deficiencies within
the reasonable time we establish. Your Hotel must participate in the quality
assurance program that we develop and periodically modify (the “Quality
Assurance Program”). As part of the Quality Assurance Program, we and/or our
representatives and designees may evaluate whether the Hotel is complying with
the Hotel System and System Standards. The primary means of operating the
Quality Assurance Program will be evaluations conducted through stays at Hyatt
Place Hotels. If we determine that the Hotel is not complying with the Hotel
System, System Standards, and other terms and conditions of this Agreement and
then instruct you to correct those deficiencies, we may charge you One Thousand
Five Hundred Dollars ($1,500) for each follow-up or re-evaluation visit until
the deficiencies have been fully corrected.
 
H. Annual Conventions. We may, at our option, hold an annual convention for
Hyatt Place Hotels or all Hyatt Select Hotels Group hotels (which currently
include Hyatt Place Hotels and Hyatt Summerfield Suites hotels and may include
other hotel brands in the future) (the “Annual Convention”) at a location we
designate. We may require your general manager and other key Hotel personnel to
attend the Annual Convention. You must pay us our then current attendance fee
for each person from your Hotel who attends the Annual Convention. You also must
pay all expenses your attendees incur to attend the Annual Convention.
 
I. Exercise of Our Judgment. We have the right to develop, operate, and change
the Hotel System in any manner not specifically prohibited by this Agreement.
Whenever we have reserved in this Agreement a right to take or to withhold an
action, or to grant or decline to grant you the right to take or omit an action,
we may, except as otherwise specifically provided in this Agreement, make our
decision or exercise our rights based on information readily available to us and
our judgment of what is in the best interests of us, Hyatt Place Hotel
franchisees generally, or the Hotel System at the time our decision is made,
without regard to whether we could have made other reasonable or even arguably
preferable alternative decisions or whether our decision promotes our financial
or other individual interest.
 
5. Proprietary Rights.
 
A. Ownership and Goodwill of Proprietary Marks, Copyrighted Materials, and
Confidential Information. Our affiliate has licensed the Proprietary Marks,
Copyrighted Materials, and Confidential Information to us to use and sublicense
in franchising, developing, and operating Hyatt Place Hotels.  Your right to use
the Proprietary Marks, Copyrighted Materials, and Confidential Information is
derived only from this Agreement and is limited to your operating the Hotel
according to this Agreement and all System Standards we prescribe during the
Term. Your unauthorized use of the Proprietary Marks, Copyrighted Materials, and
Confidential Information is a breach of this Agreement and infringes our and our
affiliate’s rights in the Proprietary Marks, Copyrighted Materials, and
Confidential Information. You acknowledge and agree that your use of the
Proprietary Marks, Copyrighted Materials, and Confidential Information and any
goodwill established by that use are exclusively for our and our affiliate’s
benefit and that this Agreement does not confer any goodwill or other interests
in the Proprietary Marks, Copyrighted Materials, and Confidential Information
upon you (other than the right to operate the Hotel under this Agreement). You
may not at any time during or after the Term contest or assist any other person
in contesting the validity, or our and our affiliate’s ownership, of the
Proprietary Marks, Copyrighted Materials, and Confidential Information.
 
B. Limitations on your Use of Proprietary Marks. You agree to use the
Proprietary Marks as the Hotel’s sole identification, except that you must
identify yourself as its independent owner in the manner we periodically
specify. You may not use any Proprietary Mark (1) as part of any corporate or
legal business name, (2) with any prefix, suffix, or other modifying words,
terms, designs, or symbols (other than logos we license to you), (3) in
providing or selling any unauthorized services or products, (4) as part of any
domain name, homepage, meta tags, keyword, electronic address, or otherwise in
connection with a website or other electronic media (unless we have approved
such use in advance), or (5) in any other manner we have not expressly
authorized in writing. If we discover your unauthorized use of the Proprietary
Marks, in addition to our other rights and remedies under this Agreement and
applicable law, we may require you to destroy (with no reimbursement from us)
all offending items reflecting such unauthorized use.
 
You may not use any Proprietary Mark in advertising the transfer, sale, or other
disposition of the Hotel or an ownership interest in you without our prior
written consent, which we will not unreasonably withhold. You agree to display
the Proprietary Marks prominently as we prescribe at the Hotel and on forms,
advertising, supplies, and other materials we periodically designate. You agree
to give the notices of trade and service mark registrations that we specify and
to obtain any fictitious or assumed name registrations required under applicable
law.
 
C. Notification of Infringements and Claims. You agree to notify us immediately
of any apparent infringement or challenge to your use of any Proprietary Mark,
Copyrighted Materials, or Confidential Information, or of any person’s claim of
any rights in any Proprietary Mark, Copyrighted Materials, or Confidential
Information, and not to communicate with any person other than us, our
affiliates, and our and their attorneys, and your attorneys, regarding any
infringement, challenge, or claim. We and our affiliates may take the action we
and they deem appropriate (including no action) and control exclusively any
litigation, U.S. Patent and Trademark Office proceeding, or other administrative
proceeding arising from any infringement, challenge, or claim or otherwise
concerning any Proprietary Mark, Copyrighted Materials, or Confidential
Information. You agree to sign any documents and take any other reasonable
action that, in the opinion of our and our affiliates’ attorneys, are necessary
or advisable to protect and maintain our and our affiliates’ interests in any
litigation or Patent and Trademark Office or other proceeding or otherwise to
protect and maintain our and our affiliates’ interests in the Proprietary Marks,
Copyrighted Materials, and Confidential Information. We or our affiliate will
reimburse your reasonable out-of-pocket costs for taking any requested action.
 
D. Discontinuance of Use of Proprietary Marks. If it becomes advisable at any
time for us and/or you to modify, discontinue using, and/or replace any
Proprietary Mark and/or to use one or more additional, substitute, or
replacement trade or service marks together with or in lieu of any
previously-designated Proprietary Mark, you agree to comply with our directions
within a reasonable time after receiving notice. Neither we nor our affiliates
will reimburse you for your expenses of changing the Hotel’s signs, for any loss
of revenue due to any modified or discontinued Proprietary Mark, or for your
expenses of promoting a modified or substitute trademark or service mark.
 
Our rights in this Section 5D apply to any and all of the Proprietary Marks (and
any portion of any Proprietary Mark) that this Agreement authorizes you to use.
We may exercise these rights at any time and for any reason, business or
otherwise, we think best. You acknowledge both our right to take this action and
your obligation to comply with our directions.
 
E. Indemnification for Use of Proprietary Marks. We agree to reimburse you for
all damages and expenses that you incur in any trademark infringement proceeding
disputing your authorized use of any Proprietary Mark under this Agreement if
you have timely notified us of, and comply with our directions in responding to,
the proceeding. At our option, we and/or our affiliate(s) may defend and control
the defense of any proceeding arising from your use of any Proprietary Mark
under this Agreement.
 
F. Confidential Information. We and our affiliates possess (and will continue to
develop and acquire) Confidential Information, some of which constitutes trade
secrets under applicable law, relating to developing and operating Hyatt Place
Hotels, including:
 
(1)  site selection criteria;
 
(2)  the substance, design, and construction of Hyatt Place Hotels;
 
(3)  training and operations materials and manuals, including the Manual;
 

 
(4)
methods, formats, specifications, standards, systems, procedures, sales and
marketing techniques, knowledge, and experience used in developing and operating
Hyatt Place Hotels;

 

 
(5)
marketing and advertising programs for Hyatt Place Hotels;

 

 
(6)
information regarding the Hotel’s guests;

 

 
(7)
knowledge of specifications for and suppliers of FF&E and other products and
supplies;

 

 
(8)
any computer software or other technology that is proprietary to us or the Hotel
System, including digital passwords and identifications and any source code of,
and data, reports, and other printed materials generated by, the software or
other technology;

 

 
(9)
knowledge of the operating results and financial performance of Hyatt Place
Hotels other than the Hotel; and

 

 
(10)
graphic designs and related intellectual property. All information we obtain
from you or about the Hotel or its guests pursuant to this Agreement, or any
agreement ancillary to this Agreement (including agreements relating to the CRS
and other software systems we provide or require), or otherwise related to the
Hotel, will become part of Confidential information and our property, which we
then may use for any reason we deem necessary or appropriate. However, you may
at any time during or after the Term use to the extent lawful and at your own
risk any information and data stored in your Hotel’s property management system
database.

 
(11) You acknowledge and agree that you will not acquire any interest in
Confidential Information, other than the right to use certain Confidential
Information as we specify while operating the Hotel during the Term, and that
Confidential Information is proprietary, includes our and our affiliate’s trade
secrets, and is disclosed to you only on the condition that you agree, and you
hereby do agree, that you:
 
(a)  will not use Confidential Information in any other business or capacity;
 

 
(b)
will keep confidential each item deemed to be a part of Confidential
Information, both during and after the Term (afterward for as long as the item
is not generally known in the hotel industry);

 

 
(c)
will not make unauthorized copies of any Confidential Information disclosed via
electronic medium or in written or other tangible form; and

 

 
(d)
will adopt and implement reasonable procedures to prevent unauthorized use or
disclosure of Confidential Information.

 
Confidential Information does not include information, knowledge, or know-how
that you can demonstrate lawfully came to your attention before we or our
affiliate provided it to you directly or indirectly; that, at the time we or our
affiliate disclosed it to you, already had lawfully become generally known in
the hotel industry through publication or communication by others (without
violating an obligation to us or our affiliate); or that, after we or our
affiliate disclose it to you, lawfully becomes generally known in the hotel
industry through publication or communication by others (without violating an
obligation to us or our affiliate). However, if we include any matter in
Confidential Information, anyone who claims that it is not Confidential
Information must prove that one of the exclusions provided in this paragraph is
satisfied.
 
All ideas, concepts, techniques, or materials relating to a Hyatt Place Hotel,
whether or not protectable intellectual property and whether created by or for
you or your owners or employees, must be promptly disclosed to us and will be
deemed to be our and our affiliate’s sole and exclusive property, part of the
Hotel System, and works made-for-hire for us and our affiliate. If any item does
not qualify as a “work made-for-hire” for us and our affiliate, by this
paragraph you assign ownership of that item, and all related rights to that
item, to us and agree to take whatever action (including signing assignment or
other documents) we request to evidence our ownership or to help us obtain
intellectual property rights in the item.
 
6. Records and Audits
 
A. Reports. At our request, you must prepare and deliver to us daily, monthly,
quarterly, and annual operating statements, profit and loss statements, balance
sheets, and other reports we require, prepared in the form, by the methods, and
within the timeframes we specify in the Manual. The reports must contain all
information we require and be certified as accurate in the manner we require. By
the tenth (10th) day of each month, you agree to prepare and send us a statement
for the previous month, certified by your chief financial or principal
accounting officer, listing Gross Rooms Revenue, other Hotel revenues, room
occupancy rates, reservation data, the amounts currently due under Section 3D,
and other information we deem useful in connection with the Hotel System (the
“Data”). The statement will be in the form and contain the detail we reasonably
request, will be our property, and may be used by us for all reasonable
purposes.
 
B. Preparation and Maintenance of Records. You agree to:
 

 
(1)
prepare on a current basis in a form satisfactory to us, and preserve for at
least four (4) years, complete and accurate records concerning Gross Rooms
Revenue and all financial, operating, marketing, and other aspects of the Hotel;
and

 

 
(2)
maintain an accounting system that fully and accurately reflects all financial
aspects of the Hotel, including books of account, tax returns, governmental
reports, register tapes, daily reports, profit and loss and cash flow
statements, balance sheets, and complete quarterly and annual financial
statements.

 
We reserve the right to access your computer system independently to obtain
sales information, occupancy information, and other Data. You must send us upon
our request any information that we do not access independently from your
computer system.
 
C. Audit. We may at any time during your regular business hours, and without
prior notice to you, examine your and the Hotel’s business, bookkeeping, and
accounting records, sales and income tax records and returns, and other records.
You agree to cooperate fully with our representatives and independent
accountants in any examination. If any examination discloses an understatement
of the Hotel’s Gross Rooms Revenue, you agree to pay us, within fifteen (15)
days after receiving the examination report, the Royalty Fees and Contributions
due on the amount of the understatement, the late fee, and interest on the
understated amounts from the date originally due until the date of payment.
Furthermore, if an examination is necessary due to your failure to furnish
reports, supporting records, or other information as required, or to furnish
these items on a timely basis, or if our examination reveals a Royalty Fee or
Contribution underpayment to us of three percent (3%) or more of the total
amount owed during any six (6) month period, or that you willfully understated
the Hotel’s Gross Rooms Revenue, you agree to reimburse us for the costs of the
examination, including the charges of attorneys and independent accountants and
the travel expenses, room and board, and compensation of our employees. These
remedies are in addition to our other remedies and rights under this Agreement
and applicable law.
 
D. Annual Financial Information. At our request, not later than ninety (90) days
after the end of your fiscal year, you must send us one or more of the following
as we may request, certified by your chief financial or principal accounting
officer to be true and correct: complete financial statements for that fiscal
year (including a balance sheet, statement of operations and statement of cash
flow) prepared in accordance with generally accepted accounting principles
consistently applied; your income tax returns for the Hotel for that year; and
statements reflecting all Gross Rooms Revenue and all sources and amounts of
other Hotel revenue generated during the year. Any false certification shall be
a material breach of this Agreement. At our request from time to time, you also
agree to provide us with those operating statistics for the Hotel that we
specify. We may require you to have audited financial statements prepared
annually during the Term.
 
7. Indemnity and Insurance.
 
A. Our and Your Relationship. We and you may not make any express or implied
agreements, warranties, guarantees, or representations, or incur any debt, in
the name or on behalf of the other or represent that our respective relationship
is other than franchisor and franchisee. We will not be obligated for any
damages to any person or property directly or indirectly arising out of the
Hotel’s operation or the business you conduct under this Agreement.
 
B. Your Indemnification of Us. In addition to your obligation under this
Agreement to procure and maintain insurance, you agree to indemnify, defend, and
hold harmless us, our affiliates, and our and their respective owners, officers,
directors, agents, employees, representatives, successors, and assigns (the
“Indemnified Parties”) against, and to reimburse any one or more of the
Indemnified Parties for, any and all claims, obligations, and damages directly
or indirectly arising out of, resulting from, or in connection with
 
(1) the application you submitted to us for the rights granted under this
Agreement,
 

 
(2)
the construction, development, use, occupancy, or operation of the Hotel,
including any claim or allegation relating to the Americans with Disabilities
Act or any similar law concerning public accommodations for persons with
disabilities,

 

 
(3)
any bodily injury, personal injury, death, or property damage suffered by any
Hotel guest, customer, visitor, or employee,

 

 
(4)
claims alleging either intentional or negligent conduct, acts, or omissions by
you or us relating to the operation of the Hotel or the Hotel System, and

 

 
(5)
your breach of the terms and conditions of this Agreement.

 
For purposes of this indemnification, “claims” include all obligations, damages
(actual, consequential, or otherwise), and costs that any Indemnified Party
reasonably incurs in defending any claim against it, including reasonable
accountants’, arbitrators’, attorneys’, and expert witness fees, costs of
investigation and proof of facts, court costs, travel and living expenses, and
other expenses of litigation, arbitration, or alternative dispute resolution,
regardless of whether litigation, arbitration, or alternative dispute resolution
is commenced. Each Indemnified Party may defend any claim against it at your
expense and agree to settlements or take any other remedial, corrective, or
other actions, provided that the Indemnified Party will seek your advice and
counsel, and keep you informed, with regard to any proposed or contemplated
settlement.
 
The obligations under this Subsection will continue in full force and effect
subsequent to and notwithstanding this Agreement’s expiration or termination. An
Indemnified Party need not seek recovery from any insurer or other third party,
or otherwise mitigate its losses and expenses, in order to maintain and recover
fully a claim against you under this subparagraph. You agree that a failure to
pursue a recovery or mitigate a loss will not reduce or alter the amounts that
an Indemnified Party may recover from you under this Subsection.
 
If separate counsel is appropriate in our opinion because of actual or potential
conflicts of interest, we may retain attorneys and/or independently defend any
claim, action, or alleged claim or action at your sole expense. No party may
settle any claim or action that could have an adverse effect on us, the Hotel
System, or other franchisees without our prior approval.
 
You have no obligation to indemnify under this Subsection if a court of
competent jurisdiction makes a final decision not subject to further appeal that
we or our employees directly engaged in willful misconduct or intentionally
caused the property damage or bodily injury that is the subject of the claim, so
long as the claim is not asserted on the basis of theories of vicarious
liability (including agency, apparent agency, or employment) or our failure to
compel you to comply with this Agreement (which are claims for which we are
entitled to indemnification under this Section 7B). You shall notify us
immediately (but not later than five (5) days following your receipt of notice)
of any claim, action, or potential claim or action naming any Indemnified Party
as a defendant or potential defendant (the “Indemnification Notice”). The
Indemnification Notice shall include copies of all correspondence or court
papers relating to the claim or action. Your obligation to indemnify us shall
not be limited in any way by reason of any insurance that we maintain.
 
C. Insurance. At your expense, you must procure and at all times during the Term
maintain such insurance as may be required by the terms of any lease or mortgage
on the premises where the Hotel is located, and in any event no less than the
following:
 
(1) Property Insurance
 
(a) Property insurance (or builder’s risk insurance during any period of
construction) on the Hotel building(s) and contents against loss or damage by
fire, lightning, windstorm, and all other risks covered by the usual all-risk
policy form, all in an amount not less than ninety percent (90%) of the full
replacement cost thereof and a waiver of co-insurance and agreed amount
endorsement. Such policy shall also include coverage for landscape improvements
and law and ordinance coverage in reasonable amounts.
 
(b) Boiler and machinery insurance against loss or damage caused by machinery
breakdown or explosion of boilers or pressure vessels to the extent applicable
to the Hotel.
 
(c) Business interruption insurance covering at least twelve (12) months’ loss
of profits and necessary continuing expenses for interruptions caused by any
occurrence covered by the insurance referred to in subsections (a) and (b)
above.
 
(d) If the Hotel is located in whole or in part within an area identified by the
federal government as having a special flood hazard, flood insurance in an
amount not less than the maximum coverage available under the National Flood
Insurance Program and excess flood coverage with reasonable limits, including
business interruption coverage for at least twelve (12) months’ loss of profits
and necessary continuing expenses.
 
(e) If the Hotel is located in an “earthquake prone zone” as determined by the
U.S. Geological Survey, earthquake insurance in an amount not less than the
probable maximum loss less any applicable deductibles, including business
interruption coverage for at least twelve (12) months’ loss of profits and
necessary continuing expenses, all as determined by a recognized earthquake
engineering firm.
 

 
(2)
Workers’ Compensation insurance in statutory amounts on all Hotel employees and
Employer’s Liability Insurance in amounts not less than $1,000,000 per
accident/disease.

 

 
(3)
Comprehensive or Commercial General Liability Insurance for any claims or losses
arising or resulting from or pertaining to the Hotel or its operation, with
combined single limits of $1,000,000 per each occurrence for bodily injury and
property damage. If the general liability coverages contain a general aggregate
limit, such limit shall be not less than $2,000,000, and it shall apply in total
to the Hotel only by specific endorsement. Such insurance shall be on an
occurrence policy form and include premises and operations, independent
contractors, blanket contractual, products and completed operations, advertising
injury, employees as additional insureds, broad form property damage, personal
injury, incidental medical malpractice, severability of interests, innkeeper’s
and safe deposit box liability, and explosion, collapse and underground coverage
during any construction.

 

 
(4)
Liquor Liability (applicable when you distribute, sell, serve, or furnish
alcoholic beverages) for combined single limits of bodily injury and property
damage of not less than $1,000,000 each occurrence.

 

 
(5)
Business Auto Liability, including owned, non-owned and hired vehicles for
combined single limits of bodily injury and property damage of not less than
$1,000,000 each occurrence.

 

 
(6)
Umbrella Excess Liability on a following form in amounts not less than
$24,000,000 if the Hotel is four to six stories in height above ground or
$14,000,000 if the Hotel is three stories or less in height in excess of the
liability insurance required under subsections (2) through (5) above. We may
require you to increase the amount of coverage if the number of floors of the
Hotel above ground is greater than six or if, in our judgment, such an increase
is warranted.

 

 
(7)
Such other insurance as may be customarily carried by other hotel operators on
hotels similar to the Hotel.

 
We may periodically increase the amounts of coverage required under these
insurance policies and/or require different or additional insurance coverage at
any time to reflect inflation, identification of new risks, changes in law or
standards of liability, higher damage awards or relevant changes in
circumstances. You also must satisfy the following general insurance
requirements:
 
(i) All insurance must by endorsement specifically name us and any affiliates
that we periodically designate (and our and their employees and agents) as
unrestricted additional insureds.
 
(ii) Any deductibles or self-insured retentions that you maintain (excluding
deductibles for high hazard risks in high hazard geological zones, such as
earthquake and windstorm, which shall be as required by the insurance carrier)
shall not exceed $25,000, or such higher amount as we (at our option) may
approve in writing in advance.
 
(iii) You must purchase each policy from an insurance company reasonably
acceptable to us and licensed, authorized or registered to do business in the
state where the Hotel is located. However, this licensing requirement shall not
apply to those insurers providing Umbrella Excess Liability above $5,000,000
under Subsection (6) above.
 
(iv) All required insurance must be specifically endorsed to provide that the
coverages will be primary and that any insurance carried by any additional
insured shall be excess and non-contributory.
 
(v) All policies must provide that they may not be canceled, non-renewed, or
materially changed without at least thirty (30) days’ prior written notice to
us.
 
(vi) You may satisfy your insurance obligations under blanket insurance policies
that cover your and your affiliates’ other properties so long as such blanket
insurance fulfills the requirements in this Agreement.
 
(vii) You must deliver to us a certificate of insurance (or certified copy of
such insurance policy if we request) evidencing the coverages required above and
setting forth the amount of any deductibles. You must deliver to us renewal
certificates of insurance (or certified copies of such insurance policy if we
request) not less than ten (10) days prior to their respective inception dates.
 
(viii) Your obligation to maintain insurance shall not relieve you of your
obligations under Section 7B.
 
(ix) All insurance must be satisfactory to us and comply with the System
Standards. If you fail for any reason to procure or maintain the insurance
required by this Agreement, we shall have the right and authority (although
without any obligation to do so) to immediately procure such insurance and to
charge you the cost together with a reasonable fee for our expenses.
 
8. Transfer.
 
A. Transfer by Us. You acknowledge that we maintain a staff to manage and
operate the Hotel System and that staff members can change as employees come and
go. You represent that you have not signed this Agreement in reliance on any
particular owner, director, officer, or employee remaining with us in that
capacity. We may change our ownership or form and/or assign this Agreement and
any other agreement to a third party without restriction. After our assignment
of this Agreement to a third party who expressly assumes the obligations under
this Agreement, we no longer will have any performance or other obligations
under this Agreement.
 
B. Transfer by You—Defined. You understand and acknowledge that the rights and
duties this Agreement creates are personal to you and your owners and that we
have granted you the franchise in reliance upon our perceptions of your and your
owners’ collective character, skill, aptitude, attitude, business ability, and
financial capacity. Accordingly, neither this Agreement (or any interest in this
Agreement), the Hotel or substantially all of its assets, or an ownership
interest in you or your owners (if such owners are legal entities) may be
transferred without our prior written approval, which will not be unreasonably
withheld if the conditions for transfer contained in this Section 8 are
satisfied. A transfer of the Hotel’s ownership, possession, or control, or
substantially all of its assets, may be made only with a transfer of this
Agreement. Any transfer without our approval is a breach of this Agreement and
has no effect, meaning that you will continue to be obligated to us for all of
your obligations under this Agreement.
 
For purposes of this Agreement, a “Controlling Ownership Interest” in you or one
of your owners (if that owner is a legal entity) means the greater of: (a) the
percent of the voting shares or other voting rights that results from dividing
one hundred percent (100%) of the ownership interests by the number of owners.
In the case of a proposed transfer of an ownership interest in you or one of
your owners, the determination of whether a “Controlling Ownership Interest” is
involved must be made as of both immediately before and immediately after the
proposed transfer to see if a “Controlling Ownership Interest” will be
transferred (because of the number of owners before the proposed transfer) or
will be deemed to have been transferred (because of the number of owners after
the proposed transfer); or (b) twenty percent (20%) of the voting shares or
other voting rights. In addition, regardless of whether the thresholds in (a) or
(b) are satisfied, any transfer of effective control of the power to direct or
cause the direction of your (or your owners’) management and policies to someone
who did not possess such control as of the Effective Date constitutes the
transfer of a Controlling Ownership Interest.
 
In this Agreement, the term “transfer” includes a voluntary, involuntary,
direct, or indirect assignment, sale, gift, or other disposition of any interest
in this Agreement; you; the Hotel or substantially all of its assets; any of
your owners (if such owner is a legal entity); or any right to receive all or a
portion of the Hotel’s, your, or your owner’s profits or losses. An assignment,
sale, gift, or other disposition includes the following events: (1) transfer of
ownership of capital stock, a partnership or membership interest, or another
form of ownership interest; (2) merger or consolidation or issuance of
additional securities or other forms of ownership interest; (3) any sale of a
security convertible to an ownership interest; (4) transfer of an interest in
you, this Agreement, the Hotel or substantially all of its assets, your owner,
or any right to receive all or a portion of the Hotel’s, your, or your owner’s
profits or losses in a divorce, insolvency, or entity dissolution proceeding or
otherwise by operation of law; (5) if one of your owners, or an owner of one of
your owners, dies, a transfer of an interest in you, this Agreement, the Hotel
or substantially all of its assets, your owner, or any right to receive all or a
portion of the Hotel’s, your, or your owner’s profits or losses by will,
declaration of or transfer in trust, or under the laws of intestate succession;
or (6) pledge of this Agreement (to someone other than us) or of an ownership
interest in you or one of your owners as security, foreclosure upon the Hotel,
or your transfer, surrender, or loss of the Hotel’s possession, control, or
management. You may mortgage the Hotel (but not this Agreement) to a lender that
finances your acquisition, development, and/or operation of the Hotel without
having to obtain our prior written approval. However, we may require the lender
to agree to certain procedures or grant us certain rights if you default and the
lender wishes to foreclose on its security interest.
 
C. Conditions for Approval of Transfer. If you (and your owners) are
substantially complying with this Agreement, then, subject to the other
provisions of this Section 8, we will approve a transfer that meets all of the
requirements in this Section 8C. A non-Controlling Ownership Interest in you or
your owners (determined as of the date on which the proposed transfer will
occur) may be transferred if the proposed transferee and its direct and indirect
owners (if the transferee is a legal entity) are of good character and otherwise
meet our then applicable standards for owners of Hyatt Place Hotel franchisees.
You also must pay us Seven Thousand Five Hundred Dollars ($7,500) for processing
and related costs we incur.
 
If the proposed transfer is of this Agreement or a Controlling Ownership
Interest in you or one of your owners, or is one of a series of transfers
(regardless of the time period over which these transfers take place) that in
the aggregate transfer this Agreement or a Controlling Ownership Interest in you
or one of your owners, then all of the following conditions must be met before
or concurrently with the effective date of the transfer:
 

 
(1)
the transferee has the necessary business experience, aptitude, and financial
resources to operate the Hotel and meets our then applicable standards for Hyatt
Place Hotel franchisees. The proposed transferee must submit to us a complete
application for a new franchise agreement (the “Change of Ownership
Application”), accompanied by payment of our then current application fee
(although no such fee is due if the transfer is to the spouse, child, parent, or
sibling of the owner(s) or from one owner to another). If we do not approve the
Change of Ownership Application, we will refund any application fee paid, less
Seven Thousand Five Hundred Dollars ($7,500) for processing costs.

 
We will process the Change of Ownership Application according to our then
current procedures, including review of criteria and requirements regarding
upgrading the Hotel, credit, background investigations, operations ability and
capacity, prior business dealings, market feasibility, guarantees, and other
factors concerning the proposed transferee(s) (and, if applicable, its owner(s))
we deem relevant. We have sixty (60) days from receipt of the completed and
signed application to consent or withhold our consent to the proposed transfer.
If we approve the Change of Ownership Application, the proposed owner will be
required to pay any other applicable fees and charges we then impose for new
Hyatt Place Hotel franchisees;
 

 
(2)
you have paid all Royalty Fees, Contributions, and other amounts owed to us, our
affiliates, and third party vendors; have submitted all required reports and
statements; and have not violated any material provision of this Agreement or
any other agreement with us during both the sixty (60) day period before you
requested our consent to the transfer and the period between your request and
the effective date of the transfer;

 

 
(3)
the transferee’s general manager and other key personnel we specify, if
different from your general manager and key personnel, satisfactorily complete
our required training programs;

 

 
(4)
the transferee and its owners shall (if the transfer is of this Agreement), or
you and your owners shall (if the transfer is of a Controlling Ownership
Interest in you or one of your owners), sign our then current form of franchise
agreement and related documents (including guarantees and assumptions of
obligations), any and all of the provisions of which may differ materially from
any and all of those contained in this Agreement, including the Royalty Fee and
Contribution, and the term of which franchise agreement will be equal to the
remaining unexpired portion of the Term;

 
(5) you (and your transferring owners) sign our then current form of termination
agreement and a general release, in a form satisfactory to us, of any and all
claims against us and our owners, affiliates, officers, directors, employees,
and agents;
 
(6) we have determined that the purchase price and payment terms will not
adversely affect the transferee’s operation of the Hotel;
 
(7) you sign all documents we request evidencing your agreement to remain liable
for all obligations to us and our affiliates existing before the effective date
of the transfer; and
 
(8) you and your transferring owners will not directly or indirectly at any time
or in any manner identify yourself or themselves in any business as a current or
former Hyatt Place Hotel or as one of our franchisees; use any Proprietary Mark,
any colorable imitation of a Proprietary Mark, or other indicia of a Hyatt Place
Hotel in any manner or for any purpose; or utilize for any purpose any trade
name, trade or service mark, or other commercial symbol that suggests or
indicates a connection or association with us.
 
We may review all information regarding the Hotel that you give the proposed
transferee, correct any information that we believe is inaccurate, and give the
transferee copies of any reports that you have given us or we have made
regarding the Hotel.
 
D. Transfers of Equity Interest in You Upon Death. Upon the death or mental
incompetency of a person with a Controlling Ownership Interest in you, that
person’s executor, administrator, or personal representative (“Representative”)
must, within three (3) months after the date of death or mental incompetency,
transfer the owner’s interest in you to a third party, subject to our approval
and the conditions set forth in Section 8C. In the case of a transfer by devise
or inheritance, if the heirs or beneficiaries cannot meet the conditions of
Section 8C within this three (3) month period, the Representative will have six
(6) months from the date of death or mental incompetency to dispose of the
interest, subject to our approval and the conditions set forth in Section 8C. We
may terminate this Agreement if this required transfer fails to occur within the
required timeframe.
 
E. Registration of a Proposed Transfer of Equity Interests. Subject to this
Agreement’s other provisions, ownership interests in you or in owners of a
Controlling Ownership Interest in you may be offered to the public only with our
prior written consent. All materials required by federal or state law for the
sale of any interest in you or your affiliates, including any materials to be
used in an offering exempt from registration under federal or state securities
laws, must be submitted to us for review before their distribution to
prospective investors or filing with any government agency. No such offering may
imply or state (by use of the Proprietary Marks or otherwise) that we are
participating as an underwriter, issuer, or your representative, suggest that we
endorse your offering or agree with any financial projections, or otherwise
contain any information about us, this Agreement and our relationship with you,
or the Hotel System that we disapprove. Our review and approval of the materials
will not in any way be our endorsement of the offering or representation that
you have complied or are complying with applicable laws. Our approval will mean
only that we believe the references in the offering materials to us, this
Agreement and our relationship with you, and the Hotel System, and the use in
the offering materials of the Proprietary Marks, are accurate and acceptable.
You must pay us a non-refundable fee equal to Five Thousand Dollars ($5,000) to
review each proposed offering. We may require changes to your offering materials
for the purposes specified above and have the right to request and receive a
full indemnification from all participants in the offering before issuing our
consent.
 
F. Non-Waiver of Claims. Our consent to a transfer of this Agreement and the
Hotel, or an ownership interest in you or your owners, is not a representation
of the fairness of the terms of any contract between you (or the owners) and the
transferee, a guarantee of the Hotel’s or transferee’s prospects of success, or
a waiver of any claims we have against you (or the owners) or of our right to
demand the transferee’s full compliance with this Agreement.
 
9. Condemnation and Casualty.
 
A. Condemnation. You must immediately notify us of any proposed taking of any
portion of the Hotel by eminent domain or condemnation. If we agree that all or
a substantial portion of the Hotel is to be taken, we may (but have no
obligation to) allow you to transfer this Agreement to a new location you select
within four (4) months after the taking. If we approve the new location, and if
within eighteen (18) months after closing the Hotel you open a new Hyatt Place
Hotel at the new location according to our specifications and this Agreement’s
other terms and conditions, then the new Hyatt Place Hotel shall be deemed to be
the Hotel franchised under this Agreement. If a condemnation takes place, and
you do not open a new hotel within such eighteen (18) month period, we may
terminate this Agreement immediately upon notice to you but will not require you
to pay us any liquidated damages. However, if a condemnation takes place and you
open a new hotel but that new hotel is not a Hyatt Place Hotel or does not for
whatever reason become the Hotel franchised under this Agreement (or if it is
evident to us that this will be the case), we may terminate this Agreement
immediately upon notice to you, and you will be required to pay us liquidated
damages equal to Four Thousand Dollars ($4,000) multiplied by the number of
guest rooms at the new hotel.
 
B. Casualty. If the Hotel is damaged by fire or casualty, you must repair the
damage according to our System Standards and this Agreement’s other terms and
conditions. If the damage or repair requires you to close all or any portion of
the Hotel, you must:
 
(1)  notify us immediately;
 
(2)  commence reconstruction within four (4) months after closing; and
 

 
(3)
reopen for continuous business operations as a Hyatt Place Hotel as soon as
practicable (but in any event within twenty-four (24) months) after closing the
Hotel but not without providing us at least ten (10) days’ advance notice of the
proposed reopening date.

 
If the Hotel is reopened, but not in accordance with this Section 9B (including
by your failure to reopen the Hotel as a Hyatt Place Hotel), we may terminate
this Agreement and exercise the rights under either Section 10E(1) or (2).
However, if the Hotel is not reopened (either as a Hyatt Place Hotel or under
any other brand) in accordance with this Section 9B, we may terminate this
Agreement, and you will be required to pay us liquidated damages as provided
under Section 10E(2), provided, however, that the amount of liquidated damages
will not exceed the amount of any insurance proceeds you receive. When you pay
the liquidated damages, you must show us documentation evidencing the insurance
proceeds you have received.
 
C. Extensions of Term. The Term will be extended for the period of time during
which the Hotel is not operating due to fire or other casualty. You need not
make any payments under Sections 3D(4)(a) and (b) while the Hotel is closed by
reason of condemnation or casualty unless you receive insurance proceeds.
 
10. Termination.
 
A. Expiration of Term. This Agreement will expire without notice effective
twenty (20) years from the Opening Date, subject to its earlier termination as
set forth in this Agreement. Subject to your renewal rights in Section 11, when
the Term expires, you must comply with our de-identification procedures set
forth in Section 10D of this Agreement and/or in the Manual (the
“De-Identification Procedures”).
 
B. Termination by Franchisee. You have no right to terminate this Agreement at
any time, under any circumstances, before the Term expires. You must operate the
Hotel within the Hotel System in compliance with this Agreement for the full
Term.
 
C. Termination by Us.
 

 
(1)
Default with Opportunity to Cure. We have the right to terminate this Agreement,
effective on the date stated in our written notice (or the earliest date
permitted by applicable law), if:

 

 
(a)
you fail to pay us or any of our affiliates any fees or other amounts due under
this Agreement or any other agreement between you and us and any of our
affiliates and do not cure that default within ten (10) days after delivery of
our written notice of default to you;

 

 
(b)
you fail to pay when due any financial obligation to a Provider and do not cure
that default within thirty (30) days after delivery of our written notice of
default to you;

 

 
(c)
you fail to comply with any other provision of this Agreement, the Manual, or
any System Standard and do not cure that default within thirty (30) days after
delivery of our written notice of default to you;

 

 
(d)
you fail to comply with any other agreement with us or our affiliates relating
to the Hotel and do not cure that default within thirty (30) days (or such
shorter time period that the other agreement specifies for curing that default)
after delivery of our written notice of default to you;

 

 
(e)
you fail to send us a copy of the recorded deed, an executed lease for at least
the Term, or other evidence satisfactory to us of your right to control the
Hotel’s premises before you commence construction or any material renovation of
the Hotel or within ten (10) days after our request for such information or
materials; or

 

 
(f)
you do not buy, maintain, or send us evidence of required insurance coverage and
do not cure that default within ten (10) days after delivery of our written
notice of default to you.

 

 
(2)
Default Without Opportunity to Cure (Immediate Termination by Us). We may
terminate this Agreement immediately, without giving you an opportunity to cure
the default, effective upon delivery of written notice to you (or such later
date as required by law), if:

 

 
(a)
you or any guarantor of your obligations (a “Guarantor”) admits its inability to
pay its debts as they become due or makes a general assignment for the benefit
of creditors;

 

 
(b)
you or any Guarantor commences or consents to any case, proceeding, or action
seeking: (i) reorganization, arrangement, adjustment, liquidation, dissolution,
or composition of debts under any law relating to bankruptcy, insolvency,
reorganization, or relief of debtors; or (ii) appointment of a receiver,
trustee, custodian, or other official for any portion of its property;

 

 
(c)
you or any Guarantor takes any corporate or other action to authorize any of the
actions set forth above in Section 10C(2)(a) or 10C(2)(b);

 

 
(d)
any case, proceeding, or other action against you or any Guarantor is commenced
seeking an order for relief against it as debtor, or seeking reorganization,
arrangement, adjustment, liquidation, dissolution, or composition of it or its
debts under any law relating to bankruptcy, insolvency, reorganization, or
relief of debtors, or seeking appointment of a receiver, trustee, custodian, or
other official for it or any portion of its property, and such case, proceeding,
or other action: (i) results in an order for relief against it that is not fully
stayed within seven (7) business days after being entered; or (ii) remains
un-dismissed for forty-five (45) days;

 

 
(e)
an attachment remains on all or any part of the Hotel or your or any Guarantor’s
assets for at least thirty (30) days;

 

 
(f)
you or any Guarantor fails, within sixty (60) days after the entry of a final
judgment against you or any Guarantor in any amount exceeding Fifty Thousand
Dollars ($50,000), to discharge, vacate, or reverse the judgment, to stay its
execution, or, if appealed, to discharge the judgment within thirty (30) days
after a final adverse decision in the appeal;

 

 
(g)
you cease constructing and/or operating the Hotel at the location designated on
Attachment A under the Proprietary Marks, or lose possession or the right to
possess all or a significant part of the Hotel, for any reason except as
otherwise provided in this Agreement;

 

 
(h)
you contest in any court or proceeding all or any portion of our ownership of
the Hotel System or the validity of any Proprietary Mark, Copyrighted Materials,
or Confidential Information;

 

 
(i)
you (or any of your owners) make or attempt to make a transfer in violation of
Section 8;

 

 
(j)
you fail to identify the Hotel to the public as a Hyatt Place Hotel or
discontinue operating the Hotel as a Hyatt Place Hotel, and it is not
unreasonable for us under the facts and circumstances to conclude that you do
not intend to continue to operate the Hotel under the Proprietary Marks;

 

 
(k)
any action is taken to dissolve or liquidate you or any Guarantor, except due to
death;

 

 
(l)
you or any of your owners or Guarantors is, or is discovered to have been,
convicted of a felony or any other offense likely in our reasonable opinion to
reflect adversely upon us, the Hotel System, or the Proprietary Marks, including
any violation of laws or regulations relating to discrimination, equal
employment, or equal opportunity;

 

 
(m)
you knowingly maintain false books and records of account or knowingly submit
false or misleading reports or information to us, including any information you
provide or fail to provide on your franchise application;

 

 
(n)
you (or any of your owners) knowingly make any unauthorized use or disclosure of
any part of the Manual or any other Confidential Information;

 

 
(o)
we determine that a serious threat or danger to public health or safety results
from the construction, maintenance, or operation of the Hotel, such that an
immediate shutdown of the Hotel or construction site is necessary to avoid a
substantial liability or loss of goodwill to the Hotel System;

 

 
(p)
we exercise our right to terminate this Agreement pursuant to Section 9A because
of a condemnation;

 

 
(q)
you or your affiliates register or attempt to register any Proprietary Mark or a
derivative without our prior written consent;

 

 
(r)
you violate any law, ordinance, or regulation and do not begin to cure the
violation immediately after receiving notice from us or any other party and to
complete the cure as soon as is reasonably practicable or within the timeframe
allowed by law, whichever is shorter;

 

 
(s)
you fail to pay when due any federal or state income, service, sales, or other
taxes due on the Hotel’s operation, unless you are in good faith contesting your
liability for those taxes or have received an extension from the applicable
government agency of the time within which to make such payments;

 

 
(t)
you (1) fail on three (3) or more separate occasions within any twelve (12)
consecutive month period to comply with this Agreement, whether the failures
relate to the same or different obligations under this Agreement and whether or
not you correct the failures after our delivery of notice to you; or (2) fail on
two (2) or more separate occasions within any six (6) consecutive month period
to comply with the same obligation under this Agreement, whether or not you
correct the failures after our delivery of notice to you; or

 

 
(u)
your or any of your owners’ assets, property, or interests are blocked under any
law, ordinance, or regulation relating to terrorist activities, or you or any of
your owners otherwise violate any such law, ordinance, or regulation.

 

 
(3)
Suspension of Rights. You acknowledge that, upon your failure to remedy any
default specified in any written notice issued to you under Section 10C, we have
the right, until you comply to our satisfaction with the written notice, to

 

 
(a)
suspend your right to use, and your access to, the CRS, the GDS, any Cooperative
advertising program and any materials and programs that the Fund makes
available,

 

 
(b)
remove your Hotel from our advertising publications and/or the National
Directory,

 

 
(c)
suspend or terminate any temporary or other fee reductions to which we might
have agreed in any amendment(s) to this Agreement, and/or

 

 
(d)
refuse to provide any operational support, including other information
technology and network services.

 
If we suspend you from the CRS, we have the right to divert reservations
previously made for the Hotel to other Hyatt Place Hotels or affiliated brand
hotels. We will exercise our right to suspend your rights only after your cure
period under the written notice of default has expired. Our exercise of this
right will not constitute an actual or constructive termination of this
Agreement nor be our sole and exclusive remedy for your default. If we exercise
our right not to terminate this Agreement but to implement such suspension
and/or removal, we may at any time after the appropriate cure period under the
written notice has lapsed terminate this Agreement without giving you any
additional corrective or cure period. During any suspension period, you must
continue to pay all fees and other amounts due under, and otherwise comply with,
this Agreement and any related agreement. Our election to suspend your rights as
provided above will not be a waiver by us of any breach of this Agreement. If we
rescind any suspension of your rights, you will not be entitled to any
compensation, including repayment, reimbursement, refunds, or offsets, for any
fees, charges, expenses, or losses you might have incurred due to our exercise
of any suspension right provided above.
 
(4) General.
 

 
(a)
In any arbitration or other proceeding in which the validity of our termination
of this Agreement is contested, we may cite and rely upon all of your defaults
or violations of this Agreement, not only the defaults or violations referenced
in any written default notice sent to you.

 

 
(b)
No notice of termination that we issue will relieve you of your obligations that
survive termination of this Agreement, including your de-identification,
indemnification, and liquidated damages payment obligations.

 

 
(c)
By signing this Agreement, you agree that we have the right and authority (but
not the obligation) to notify your Lender and suppliers if you are in default
under, or we have terminated, this Agreement.

 
D. Obligations Upon Termination or Expiration of this Agreement.
 

 
(1)
The “De-identification Date” means the date upon which we give you written
notice of our decision not to purchase the Hotel’s premises and related property
under Section 10E(1) below, or, if we do not give you either such a written
notice or a Purchase Notice (as defined in Section 10E(1) below), on the
fifteenth (15th) day following the date that this Agreement expires or
terminates. Beginning on the De-Identification Date, you must immediately cease
using the Hotel System and de-identify the Hotel by taking whatever action we
deem necessary to ensure that the Hotel no longer is identified as a hotel
within the Hotel System. You agree to take the following steps, among other
actions, to de-identify the Hotel:

 

 
(a)
return to us the Manual, all other Copyrighted Materials, and all materials
containing Confidential Information or bearing any of the Proprietary Marks and
cease using all such items;

 

 
(b)
remove all items identifying the Hotel System, including by taking the following
actions: remove all elements of the trade dress and other distinctive features,
devices, and/or items associated with the Hotel System, including FF&E, interior
signage, lobby signage, door identifier signage, directional signage, phone face
plates, memo pads, pens, cups, glasses, signage on the back of guest room doors,
and all other signage bearing one or more of the Proprietary Marks. However, you
may immediately cover all exterior signage in a professional manner until such
time, not to exceed thirty (30) days after the De-identification Date, that
permanent removal occurs if you immediately schedule the permanent removal of
all exterior signage bearing any of the Proprietary Marks and give us written
evidence of that schedule. In addition, you must make at your expense such
specific additional changes that we reasonably request to de-identify the Hotel;

 

 
(c)
change the Hotel’s telephone listing and immediately stop answering the
telephone in any way that would lead a current or prospective customer, vendor,
or other person to believe that the Hotel still is associated with the Hotel
System or us;

 

 
(d)
stop all use of the Hotel Website and its domain name (which is our property)
and require all third-party websites to remove any references that directly or
indirectly associate the Hotel with the Proprietary Marks;

 

 
(e)
cancel all fictitious, assumed, or other business name registrations relating to
your use of the Proprietary Marks; and

 

 
(f)
permit our representatives to enter the Hotel on no less than twenty four (24)
hours’ prior notice to conduct inspections on a periodic basis until
de-identification is completed to our satisfaction.

 
Beginning on the De-identification Date and continuing until de-identification
is completed to our satisfaction, you must maintain a conspicuous sign at the
registration desk in a form we specify stating that the Hotel no longer is
associated with the Hotel System. You may not without our permission represent
to the public or hold yourself out as a former franchisee of ours. You
acknowledge that the de-identification process is intended to alert the public
immediately that the Hotel is not affiliated with the Hotel System. If you fail
to comply strictly with all of the de-identification provisions in this Section
10D(1), you will be obligated to: (i) pay us a Royalty Fee of Five Thousand
Dollars ($5,000) per day until de-identification is completed to our
satisfaction; and (ii) permit our representatives to enter the Hotel to complete
the de-identification process at your expense. You agree to pay all our costs
and expenses of enforcing these de-identification provisions, including all
attorneys’ fees and costs. Nothing in this Section or this Agreement limits our
rights or remedies at law or in equity if you do not complete the
de-identification procedures as provided above, including our right to seek and
obtain an injunction to remove or cause to be removed, at your sole cost and
expense, all signage from the Hotel.
 

 
(2)
Unless otherwise provided in this Agreement, within five (5) days after the
termination or expiration of this Agreement, you must pay all amounts owed to us
and our affiliates under this Agreement or any other agreement.

 

 
(3)
Upon this Agreement’s termination or expiration for any reason, we have the
right to contact those individuals or entities who have reserved rooms with you
through the CRS, and any other Hotel customers, and inform them that your
lodging facility no longer is part of the Hotel System. We also have the right
to inform those individuals and entities of other Hyatt Place Hotels within our
Hotel System that are proximately located to your lodging facility in case they
prefer to change their reservations so that they can stay at a Hyatt Place
Hotel. Our exercise of these rights will not constitute an interference with
your contractual or business relationship. You acknowledge that the individuals
and entities that made reservations with your lodging facility when it was a
Hotel under this Agreement constitute our customers.

 

 
(4)
The following Sections of this Agreement shall survive termination or expiration
of this Agreement regardless of the circumstances: 3A(13), 3A(15), 5A, 5F, 6C,
7A, 7B, 7C, 10D, 10E, 12 and 13. Additionally, all of your covenants,
obligations, and agreements that by their terms or by implication are to be
performed after the termination or expiration of the Term shall survive such
termination or expiration.

 
E. Purchase Rights or Payment of Liquidated Damages. You acknowledge and confirm
that we will suffer substantial damages as a result of the termination of this
Agreement, including lost Royalty Fees, lost Contributions, lost market
penetration and goodwill, loss of Hotel System representation in the Hotel’s
market area, confusion of national accounts and individual customers,
disadvantage in competing for national accounts and other types of bookings for
the Hotel System, lost opportunity costs, and expenses we will incur in
developing another franchise in the Hotel’s market area, all of which damages
are difficult to estimate accurately and proof of which would be burdensome and
costly, although such damages are real and meaningful to us. Therefore, upon
termination of this Agreement before the Term expires (except for a termination
pursuant to Section 9A), you and we agree that we will have the right to choose
one of the following two alternatives, exercisable upon giving you written
notice:
 

 
(1)
We have the right, exercisable upon written notice to you (“Purchase Notice”)
within fifteen (15) days after the date of such termination, to purchase the
Hotel’s premises and related property. During the period beginning on the date
that we provide you a Purchase Notice and ending on the date upon which we and
you close the asset purchase that this Subsection (1) contemplates, you must
continue to comply with this Agreement and the related agreements as if they
were still in full force and effect. If we and you agree on a purchase price,
the closing will take place within thirty (30) days after that agreement. If we
and you cannot agree on a purchase price within fifteen (15) days after the date
of the Purchase Notice, we and you will each obtain an appraisal of the Hotel’s
fair market value from a nationally recognized appraiser of hotel properties
comparable to the Hotel. However, the purchase price shall not include any value
for the rights granted by this Agreement, goodwill attributable to the
Proprietary Marks, our brand image, and other intellectual property, or the
Hotel’s participation in the network of Hyatt Place Hotels. We and you must pay
the costs of our respective appraisers. If, after receiving the appraisals, we
and you agree on the Hotel’s fair market value, that fair market value will
constitute the purchase price, and the closing will take place within thirty
(30) days after such agreement. If, after receiving the appraisals, we and you
cannot within ten (10) days agree on the Hotel’s fair market value, the purchase
price will be determined by “baseball arbitration” in the city of our then
current principal business address according to the American Arbitration
Association’s then current Arbitration Rules for the Real Estate Industry (“AAA
Rules”), as modified below in this Section 10E. We and you will jointly select a
third party to act as the sole arbitrator (the “Arbitrator”) to determine the
Hotel’s fair market value. That Arbitrator must be a person having at least ten
(10) years’ recent professional experience in valuing real estate, including
lodging properties, and be qualified to act as an Arbitrator in accordance with
the AAA Rules. If we and you do not agree on an Arbitrator with such
qualifications within fifteen (15) days after the expiration of the ten (10) day
period referenced above, the Arbitrator shall be appointed by the American
Arbitration Association according to the AAA Rules.

 

 
(a)
The Arbitrator will be instructed and obligated to decide, within thirty (30)
days after his or her appointment, only whether the appraisal we submitted or
the appraisal you submitted most accurately reflects the Hotel’s fair market
value based upon the appraisals submitted and other information normally
considered by an appraiser of hotels and real estate. The Arbitrator has no
authority to compromise between the two appraisals; he or she is authorized only
to choose one or the other. Each party agrees to cooperate fully and provide all
information the Arbitrator requests to determine fair market value.

 

 
(b)
The Arbitrator’s choice of appraisal shall be in writing, shall constitute the
purchase price under this Agreement, shall be final, conclusive, and binding on
the parties as an “award” under the AAA Rules, and may be enforced by a court of
competent jurisdiction. We and you will share equally all arbitration expenses.
We (or our designee) will purchase the Hotel premises and related property at
the purchase price fixed by the Arbitrator, and closing shall take place within
thirty (30) days after being notified in writing of the Arbitrator’s decision.

 
The closing under this Section 10E(1) will take place at a location and on a
date (subject to the timeframes set forth above) we choose. We and you will sign
documents, including deeds, affidavits, transfers and assignments, and any other
documents necessary or appropriate to vest legal, marketable, and insurable fee
simple title to the Hotel in us. You must satisfy all liens, mortgages, and/or
encumbrances on the Hotel. We and you will share equally any closing costs. We
are entitled to all customary representations, warranties, and indemnities in
our purchase, including representations and warranties as to ownership and
condition of and title to assets; liens and encumbrances on assets; validity of
contracts and agreements; liabilities affecting the assets, contingent or
otherwise; and indemnities for all actions, events, and conditions that existed
or occurred in connection with the Hotel or your business before the closing. We
have the unrestricted right to assign this option to purchase to a third party
(including an affiliate) who then will have all the rights described in this
Section.
 

 
(2)
We have the right, exercisable upon written notice to you (“Liquidated Damages
Notice”) within fifteen (15) days after the date of such termination, to receive
liquidated damages in a lump sum as calculated below as of the effective date of
termination. You must pay us the liquidated damages within fifteen (15) days
after the date of our Liquidated Damages Notice. If the Hotel had opened for
business before the effective date of termination, the liquidated damages
payable under this Section 10E(2) shall be equal to the greater of: (i) Four
Thousand Dollars ($4,000) multiplied by the number of approved Guest Rooms at
the Hotel; or (ii) either (a), (b) or (c) below, whichever is applicable.

 

 
(a)
If this Agreement is terminated before the fifth (5th) anniversary of the
Opening Date, the product of (x) the number of months remaining between the
month of termination and the eighth (8th) anniversary of the Opening Date,
multiplied by (y) the average monthly Royalty Fees and Contributions you owed us
during the twelve (12) month period immediately preceding the month of
termination (or for such lesser period that the Hotel has been open, if the
Hotel has not then been open for at least twelve (12) months);

 

 
(b)
If this Agreement is terminated on or after the fifth (5th) anniversary of the
Opening Date, but before the seventeenth (17th) anniversary of the Opening Date,
the product of thirty-six (36) multiplied by the average monthly Royalty Fees
and Contributions you owed us during the twelve (12) month period immediately
preceding the month of termination; or

 

 
(c)
If this Agreement is terminated on or after the seventeenth (17th) anniversary
of the Opening Date, the product of (x) the number of months remaining between
the month of termination and the twentieth (20th) anniversary of the Opening
Date, multiplied by (y) the average monthly Royalty Fees and Contributions you
owed us during the twelve (12) month period immediately preceding the month of
termination.

 
If the Hotel had not yet opened for business as of the effective date of
termination, you agree to pay us liquidated damages in the amount of Four
Thousand Dollars ($4,000) multiplied by the number of approved Guest Rooms at
the Hotel. Notwithstanding any temporary fee reductions to which we might have
agreed in an amendment(s) to this Agreement, all liquidated damages calculations
based on monthly fees shall be calculated on the full (and not the discounted)
monthly Royalty Fees and Contributions required under this Agreement as of the
Effective Date. You agree that the liquidated damages calculated under this
Section 10E(2) represent the best estimate of our damages arising from any
termination of this Agreement before the Term expires. Your payment of the
liquidated damages to us will not be considered a penalty but, rather, a
reasonable estimate of fair compensation to us for the damages we will incur
because this Agreement did not continue for the Term’s full length. You
acknowledge that your obligation to pay us liquidated damages is in addition to,
and not in lieu of, your obligations to pay other amounts due to us under this
Agreement as of the date of termination and to comply strictly with the
de-identification procedures in Section 10D(1) and your other post-termination
obligations. If any valid law or regulation governing this Agreement limits your
obligation to pay, and our right to receive, the liquidated damages for which
you are obligated under this Section, you shall be liable to us for any and all
damages we incur, now or in the future, as a result of your breach of this
Agreement.
 
11. Renewal.
 
A. Your Right to Enter Into a Successor Franchise Agreement. When this Agreement
expires:
 
(1) if you (and your owners) have substantially complied with this Agreement
during its Term;
 
(2) if you received passing Quality Assurance Scores (as defined in the Manual)
on a ll evaluations we conducted during the preceding three (3)-year period;
 
(3) if you (and your owners) are, both on the date you give us written notice of
your election to acquire a successor franchise (as provided below) and on the
date on which the term of the successor franchise commences, in full compliance
with this Agreement and all System Standards; and
 
(4) provided that:
 
(a)  you maintain possession of and agree (regardless of cost) to renovate,
remodel, and/or expand the Hotel (which may include structural alterations), add
or replace improvements and FF&E, and otherwise modify the Hotel as we require
to comply with System Standards then applicable for new Hyatt Place Hotels, or
 
(b)  at your option, you secure a substitute site that we approve and you
construct and develop that site according to System Standards then applicable
for Hyatt Place Hotels, we will offer you the right to enter into a successor
franchise agreement to operate the Hotel as a Hyatt Place Hotel for a term
commencing immediately upon the expiration of this Agreement and expiring ten
(10) years from that date (the “Successor Franchise Right”). You agree to sign
the franchise agreement we then use to grant franchises for Hyatt Place Hotels
(modified as necessary to reflect the fact that it is for a successor franchise
and that there will be no further renewal or successor franchise rights), which
may contain provisions that differ materially from any and all of those
contained in this Agreement. You must pay us our then current PIP fee.
 
If you (and your owners) are not, both on the date you give us written notice of
your election to exercise the Successor Franchise Right and on the date on which
the term of the successor franchise agreement is scheduled to commence, in full
compliance with this Agreement and all System Standards, you acknowledge that we
need not enter into a successor franchise agreement with you, whether or not we
had, or chose to exercise, the right to terminate this Agreement during its
Term.
 
B. Grant of a Successor Franchise. You agree to give us written notice of your
election to exercise the Successor Franchise Right no more than two hundred
twenty (220) days and no less than one hundred eighty (180) days before this
Agreement expires. We agree to give you written notice (“Our Notice”), not more
than ninety (90) days after we receive your notice, of our decision:
 
(1) to enter into a successor franchise agreement with you;
 
(2) to enter into a successor franchise agreement with you on the condition that
you correct existing deficiencies of the Hotel or in your operation of the
Hotel; or
 
(3) not to enter into a successor franchise agreement with you based on our
determination that you and your owners have not substantially complied with this
Agreement during its Term, that you did not receive passing Quality Assurance
Scores on all evaluations we conducted during the preceding three (3)-year
period, or that you (and your owners) were not in full compliance with this
Agreement and all System Standards on the date you gave us written notice of
your election to exercise the Successor Franchise Right.
 
If applicable, Our Notice will:
 
(a) describe the renovation, remodeling, expansion, improvements, and/or
modifications required to bring the Hotel into compliance with then applicable
System Standards for new Hyatt Place Hotels; and
 
(b) state the actions you must take to correct operating deficiencies and the
time period in which you must correct these deficiencies.
 
If we elect not to enter into a successor franchise agreement with you, Our
Notice will describe the reasons for our decision. If we elect to enter into a
successor franchise agreement with you, your effective exercise of the Successor
Franchise Right is subject to your full compliance with all of the terms and
conditions of this Agreement through the date of its expiration, in addition to
your compliance with the obligations described in Our Notice.
 
If Our Notice states that you must cure certain deficiencies of the Hotel or its
operation as a condition to our entering into a successor franchise agreement
with you, we will give you written notice of our decision not to enter into a
successor franchise agreement with you, based upon your failure to cure those
deficiencies, at least ninety (90) days before this Agreement expires. However,
we need not give you this ninety (90) days’ notice if we decide not to enter
into a successor franchise agreement with you due to your breach of this
Agreement during the ninety (90) day period before it expires. If we fail to
give you:
 
(1) notice of deficiencies in the Hotel, or in your operation of the Hotel,
within ninety (90) days after we receive your timely election to exercise the
Successor Franchise Right (if we elect to enter into a successor franchise
agreement with you under subparagraphs (2) and (b) above); or
 
(2) notice of our decision not to enter into a successor franchise agreement
with you at least ninety (90) days before this Agreement expires, if this notice
is required, we may unilaterally extend the Term for the time period necessary
to give you either reasonable time to correct deficiencies or the ninety (90)
days’ notice of our refusal to grant a successor franchise. If you fail to
notify us of your election to enter into a successor franchise agreement within
the prescribed time period, we will deem this to be your decision not to
exercise the Successor Franchise Right or enter into a successor franchise
agreement with us.
 
C. Agreements/Releases. If you satisfy all of the other conditions for a
successor franchise agreement, you and your owners agree to sign the form of
franchise agreement and any ancillary agreements we then customarily use in
granting franchises for Hyatt Place Hotels (modified as necessary to reflect the
fact that it is for a successor franchise and that there will be no further
renewal or successor franchise rights), which may contain provisions that differ
materially from any and all of those contained in this Agreement. You and your
owners further agree to sign general releases, in a form satisfactory to us, of
any and all claims against us and our owners, affiliates, officers, directors,
employees, agents, successors, and assigns. We will consider your or your
owners’ failure to sign these agreements and releases and to deliver them to us
for acceptance and execution (together with our then current PIP fee) within
thirty (30) days after their delivery to you to be an election not to enter into
a successor franchise agreement.
 
12. Relationship of Parties.
 
A. No Agency Relationship. You are an independent contractor. Neither party is
the legal representative or agent of, or has the power to obligate, the other
for any purpose. The parties have a business relationship defined entirely by
this Agreement’s express provisions. No partnership, joint venture, affiliate,
agency, fiduciary, or employment relationship is intended or created by this
Agreement.
 
B. Your Notices to Public Concerning Independent Status. You must take the steps
we periodically require to minimize the chance of a claim being made against us
for any occurrence at the Hotel or for acts, omissions, or obligations of you or
anyone affiliated with you or the Hotel. Such steps may include giving notice in
private or public rooms or on advertisements, business forms, and stationery and
other places, making clear to the public that we are not the Hotel’s owner or
operator and are not accountable for events occurring at the Hotel.
 
13. Miscellaneous.
 
A. Severability and Interpretation. Except as expressly provided to the contrary
in this Agreement, each section, paragraph, term, and provision of this
Agreement is severable, and if, for any reason, any part is held to be invalid
or contrary to or in conflict with any applicable present or future law or
regulation in a final, unappealable ruling issued by any court, agency, or
tribunal with competent jurisdiction, that ruling will not impair the operation
of, or otherwise affect, any other portions of this Agreement, which will
continue to have full force and effect and bind the parties. If any applicable
and binding law or rule of any jurisdiction requires more notice than this
Agreement requires of this Agreement’s termination or of our refusal to offer
you the Successor Franchise Right, or some other action that this Agreement does
not require, or if, under any applicable and binding law or rule of any
jurisdiction, any provision of this Agreement or any System Standard is invalid,
unenforceable, or unlawful, the notice and/or other action required by the law
or rule will be substituted for the comparable provisions of this Agreement, and
we may modify the invalid or unenforceable provision or System Standard to the
extent required to be valid and enforceable or delete the unlawful provision in
its entirety. You agree to be bound by any promise or covenant imposing the
maximum duty the law permits that is subsumed within any provision of this
Agreement, as though it were separately articulated in and made a part of this
Agreement.
 
B. Waiver of Obligations. We and you may by written instrument unilaterally
waive or reduce any obligation of or restriction upon the other under this
Agreement, effective upon delivery of written notice to the other or another
effective date stated in the notice of waiver. Any waiver granted will be
without prejudice to any other rights we or you have, will be subject to
continuing review, and may be revoked at any time and for any reason effective
upon delivery of ten (10) days’ prior written notice.
 
We and you will not waive or impair any right, power, or option this Agreement
reserves (including our right to demand compliance with every term, condition,
and covenant or to declare any breach to be a default and to terminate this
Agreement before the Term expires) because of any custom or practice that varies
from this Agreement’s terms; our or your failure, refusal, or neglect to
exercise any right under this Agreement or to insist upon the other’s compliance
with this Agreement, including any System Standard; our waiver of or failure to
exercise any right, power, or option, whether of the same, similar, or different
nature, with other Hyatt Place Hotels; the existence of franchise agreements for
other Hyatt Place Hotels that contain provisions differing from those contained
in this Agreement; or our acceptance of any payments due from you after any
breach of this Agreement. No special or restrictive legend or endorsement on any
check or similar item given to us will be a waiver, compromise, settlement, or
accord and satisfaction. We are authorized to remove any legend or endorsement,
and they will have no effect.
 
Neither we nor you will be liable for loss or damage or be in breach of this
Agreement if our or your failure to perform our or your obligations results
from: (1) compliance with the orders, requests, regulations, or recommendations
of any federal, state, or municipal government; (2) acts of God; (3) fires,
strikes, embargoes, war, acts of terrorism or similar events, or riot; or
(4) any other similar event or cause. Any delay resulting from any of these
causes will extend performance accordingly or excuse performance, in whole or in
part, as may be reasonable, except that these causes will not excuse payments of
amounts owed at the time of the occurrence or payment of Royalty Fees or
Contributions due afterward.
 
C. Binding Effect. This Agreement is valid when signed and accepted by us at our
office in Chicago, Illinois.
 
D. Entire Agreement and Construction. This Agreement is binding upon us and you
and our and your respective executors, administrators, heirs, beneficiaries,
permitted assigns, and successors in interest. Subject to our right to modify
the Manual, Hotel System and System Standards, this Agreement may not be
modified except by a written agreement signed by both our and your
duly-authorized officers. The Attachments are a part of this Agreement which,
together with System Standards contained in the Manual (which may be
periodically modified, as provided in this Agreement), constitutes our and your
entire agreement, and there are no other oral or written understandings or
agreements between us and you, and no oral or written representations by us,
relating to the subject matter of this Agreement, the franchise relationship, or
the Hotel (any understandings or agreements reached, or any representations
made, before this Agreement are superseded by this Agreement). You may not rely
on any alleged oral or written understandings, agreements, or representations
not contained in this Agreement.
 
Any policies that we adopt and implement from time to time to guide us in our
decision-making are subject to change, are not a part of this Agreement, and are
not binding on us. Except as expressly provided in this Agreement, nothing in
this Agreement is intended or deemed to confer any rights or remedies upon any
person or legal entity not a party to this Agreement.
 
References in this Agreement to “we,” “us,” and “our,” with respect to all of
our rights and all of your obligations to us under this Agreement, include any
of our affiliates, successors and assigns with whom you deal. The term
“affiliate” means any person or entity directly or indirectly owned or
controlled by, under common control with, or owning or controlling you or us.
For purposes of this definition, “control” means the power to direct or cause
the direction of management and policies. References to “owner” mean any person
holding a direct or indirect ownership interest (whether of record,
beneficially, or otherwise) or voting rights in you, including any person who
has a direct or indirect interest in you, this Agreement, the franchise, or the
Hotel and any person who has any other legal or equitable interest, or the power
to vest in himself or herself any legal or equitable interest, in their revenue,
profits, rights, or assets. The words “include” and “including,” whenever used
in this Agreement, will mean “including, by way of example, but without
limitation.”
 
E. Our Withholding of Consent. Except where this Agreement expressly obligates
us reasonably to approve or not unreasonably to withhold our approval of any of
your actions or requests, we have the absolute right to refuse any request you
make or to withhold our approval of any of your proposed, initiated, or
completed actions that require our approval. However, we may withhold our
consent, whenever and wherever otherwise required, if you are in default under
this Agreement.
 
F. Arbitration. We and you agree that, except for controversies, disputes, or
claims related to or based on improper use of the Proprietary Marks, Copyrighted
Materials, or Confidential Information, all controversies, disputes, or claims
between us (and/or our affiliates and our and their respective owners, officers,
directors, agents, and/or employees), and you (and/or your affiliates and
Guarantors and your and their respective owners, officers, directors, agents
and/or employees) arising out of or related to:
 
(1) this Agreement or any other agreement between you and us;
 
(2) our relationship with you;
 

 
(3)
the scope or validity of this Agreement or any other agreement between you and
us or any provision of any of those agreements (including this Subsection); or

 
(4) any System Standard;
 
must be submitted for binding arbitration to the American Arbitration
Association (the “AAA”). The arbitration proceedings will be conducted by one
(1) arbitrator and, except as this Section otherwise provides, according to the
AAA’s then current commercial arbitration rules. The arbitrator must be a
licensed attorney, have hotel industry experience, and be listed on the AAA’s
National Roster of Neutrals (or such other equivalent replacement roster of
experienced arbitrators that the AAA designates). All proceedings will be
conducted at a suitable location chosen by the arbitrator that is within ten
(10) miles of our then current principal business address. All matters relating
to arbitration will be governed by the Federal Arbitration Act (9 U.S.C. §§ 1
et seq.) and not by any state arbitration law. Judgment upon the arbitrator’s
award may be entered in any court of competent jurisdiction.
 
The arbitrator has the right to award or include in his or her award any relief
that he or she deems proper, including money damages (with interest on unpaid
amounts from the date due), specific performance, injunctive relief, and
attorneys’ fees and costs, provided that the arbitrator may not declare any
Proprietary Mark generic or otherwise invalid or, except as expressly provided
in Section 13M below, award any punitive, exemplary, or treble or other forms of
multiple damages against either party (we and you hereby waiving to the fullest
extent permitted by law, except as expressly provided in Section 13M below, any
right to or claim for any punitive, exemplary, and treble and other forms of
multiple damages against the other).
 
We and you agree to be bound by the provisions of any limitation on the period
of time in which claims must be brought under applicable law or this Agreement,
whichever expires earlier. We and you further agree that, in any arbitration
proceeding, each must submit or file any claim that would constitute a
compulsory counterclaim (as defined by the Federal Rules of Civil Procedure)
within the same proceeding as the claim to which it relates. Any claim that is
not submitted or filed as required is forever barred. The arbitrator may not
consider any settlement discussions or offers that might have been made by
either you or us.
 
We and you agree that arbitration will be conducted on an individual, not a
class-wide, basis. Only we (and our affiliates and our and their respective
owners, officers, directors, agents, and/or employees, as applicable) and you
(and your Guarantors and affiliates and your and their respective owners,
officers, directors, agents and/or employees, as applicable) may be the parties
to any arbitration proceedings described in this Section. An arbitration
proceeding between us (and our affiliates and our and their respective owners,
officers, directors, agents, and/or employees) and you (and/or your Guarantors
and affiliates and your and their respective owners, officers, directors, agents
and/or employees) may not be consolidated with any other arbitration proceeding
between us and any other person.
 
Despite our and your agreement to arbitrate, we and you each have the right in a
proper case to seek temporary restraining orders and temporary or preliminary
injunctive relief from a court of competent jurisdiction; provided, however,
that we and you must contemporaneously submit our dispute for arbitration on the
merits as provided in this Section 13F. The provisions of this Section are
intended to benefit and bind certain third party non-signatories and will
continue in full force and effect subsequent to and notwithstanding this
Agreement’s expiration or termination.
 
G. Notices. All written notices, reports, and payments permitted or required to
be delivered by this Agreement or the Manual will be deemed to be delivered:
 
(1)  at the time delivered by hand;
 

 
(2)
at the time delivered via computer transmission and, in the case of the Royalty
Fee, Contributions, and other amounts due, at the time we actually receive
payment via EFT;

 

 
(3)
one (1) business day after transmission by facsimile or other electronic system
if the sender has confirmation of successful transmission;

 

 
(4)
one (1) business day after being placed in the hands of a nationally recognized
commercial courier service for next business day delivery; or

 

 
(5)
three (3) business days after placement in the United States Mail by Registered
or Certified Mail, Return Receipt Requested, postage prepaid.

 
Any notice to us must be sent to the address specified below, although we may
change this address for notice by giving you thirty (30) days’ prior notice by
any of the means specified in subparagraphs (1) through (5) above. Any notice
that we send you may be sent to the one (1) person identified below, even if you
have multiple owners, at the address specified below. You may change the person
and/or address for notice only by giving us thirty (30) days’ prior notice by
any of the means specified in subparagraphs (1) through (5) above.
 
Notices to us:
Hyatt Place Franchising, L.L.C.
200 West Monroe, 8th Floor,
Chicago, Illinois 60606
Attention: Senior Vice President - Franchising
Notices to you:
[________________]
7700 Wolf River Boulevard
Germantown, Tennessee 38138
Attention: Senior Vice President -  Asset Management

Any required payment or report that we do not actually receive during regular
business hours on the date due (or postmarked by postal authorities at least two
(2) days before then) will be deemed delinquent. Notices delivered via the means
specified above will be deemed delivered as of the times specified above whether
or not you accept delivery. We reserve the right to notify both your Lender and
any or all of your owners, creditors, and/or suppliers if we issue any default
notice under this Agreement.
 
H. Descriptive Headings. The headings in this Agreement are for convenience only
and will not control or affect the meaning or construction of any provision.
 
I. Attorneys’ Fees. If we incur costs and expenses due to your failure to pay
when due amounts owed to us, to submit when due any reports, information, or
supporting records, or otherwise to comply with this Agreement, you agree,
whether or not we initiate a formal legal proceeding (and, if we do initiate a
formal legal proceeding, in the event that we prevail in that proceeding), to
reimburse us for all of the costs and expenses that we incur, including
reasonable accounting, attorneys’, arbitrators’, and related fees.
 
J. Cumulative Remedies. Our and your rights under this Agreement are cumulative,
and our and your exercise or enforcement of any right or remedy under this
Agreement will not preclude our or your exercise or enforcement of any other
right or remedy that we or you are entitled by law to enforce.
 
K. Governing Law. ALL MATTERS RELATING TO ARBITRATION WILL BE GOVERNED BY THE
FEDERAL ARBITRATION ACT (9 U.S.C. SECTIONS 1 ET SEQ.). EXCEPT TO THE EXTENT
GOVERNED BY THE FEDERAL ARBITRATION ACT, THE UNITED STATES TRADEMARK ACT OF 1946
(LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.) OR OTHER FEDERAL LAW, THIS
AGREEMENT, THE FRANCHISE, AND ALL CLAIMS ARISING FROM THE RELATIONSHIP BETWEEN
US AND YOU WILL BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD
TO ITS CONFLICT OF LAWS RULES, EXCEPT THAT ANY ILLINOIS LAW REGULATING THE OFFER
OR SALE OF FRANCHISES, BUSINESS OPPORTUNITIES, OR SIMILAR INTERESTS, OR
GOVERNING THE RELATIONSHIP BETWEEN A FRANCHISOR AND A FRANCHISEE OR ANY SIMILAR
RELATIONSHIP, WILL NOT APPLY UNLESS ITS JURISDICTIONAL REQUIREMENTS ARE MET
INDEPENDENTLY WITHOUT REFERENCE TO THIS SECTION.
 
L. Consent To Jurisdiction. SUBJECT TO THE PARTIES’ ARBITRATION OBLIGATIONS AND
THE PROVISIONS BELOW, YOU AND YOUR OWNERS AGREE THAT ALL ACTIONS ARISING UNDER
THIS AGREEMENT OR OTHERWISE AS A RESULT OF THE RELATIONSHIP BETWEEN YOU AND US
MUST BE COMMENCED IN THE STATE OR FEDERAL COURT OF GENERAL JURISDICTION CLOSEST
TO OUR THEN CURRENT PRINCIPAL BUSINESS ADDRESS, AND YOU (AND EACH OWNER)
IRREVOCABLY SUBMIT TO THE JURISDICTION OF THOSE COURTS AND WAIVE ANY OBJECTION
YOU (OR THE OWNER) MIGHT HAVE TO EITHER THE JURISDICTION OF OR VENUE IN THOSE
COURTS. NONETHELESS, YOU AND YOUR OWNERS AGREE THAT WE MAY ENFORCE THIS
AGREEMENT AND ANY ARBITRATION ORDERS AND AWARDS IN THE COURTS OF THE STATE OR
STATES IN WHICH YOU ARE DOMICILED OR THE HOTEL IS LOCATED.
 
M. Waiver Of Punitive Damages And Jury Trial. EXCEPT FOR THE INDEMNIFICATION
OBLIGATIONS FOR THIRD PARTY CLAIMS UNDER SECTION 7B, AND EXCEPT FOR PUNITIVE,
EXEMPLARY, AND TREBLE AND OTHER FORMS OF MULTIPLE DAMAGES AVAILABLE TO EITHER
PARTY UNDER FEDERAL LAW, WE AND YOU (AND YOUR OWNERS) WAIVE TO THE FULLEST
EXTENT PERMITTED BY LAW ANY RIGHT TO OR CLAIM FOR ANY PUNITIVE, EXEMPLARY, AND
TREBLE AND OTHER FORMS OF MULTIPLE DAMAGES AGAINST THE OTHER AND AGREE THAT, IN
THE EVENT OF A DISPUTE BETWEEN US AND YOU (AND/OR YOUR OWNERS), THE PARTY MAKING
A CLAIM WILL BE LIMITED TO EQUITABLE RELIEF AND TO RECOVERY OF ANY ACTUAL
DAMAGES IT SUSTAINS.
 
SUBJECT TO THE PARTIES’ ARBITRATION OBLIGATIONS, WE AND YOU IRREVOCABLY WAIVE
TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM, WHETHER AT LAW OR IN
EQUITY, BROUGHT BY EITHER OF US.
 
N. Limitations of Claims. EXCEPT FOR CLAIMS ARISING FROM YOUR NON-PAYMENT OR
UNDERPAYMENT OF AMOUNTS YOU OWE US, ANY AND ALL CLAIMS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR OUR RELATIONSHIP WITH YOU WILL BE BARRED UNLESS A
LEGAL PROCEEDING (IN THE REQUIRED OR PERMITTED FORUM) IS COMMENCED WITHIN
EIGHTEEN (18) MONTHS FROM THE DATE ON WHICH THE PARTY ASSERTING THE CLAIM KNEW
OR SHOULD HAVE KNOWN OF THE FACTS GIVING RISE TO THE CLAIMS.
 
O. Time is of the Essence. Time is of the essence in this Agreement, and all
provisions of this Agreement shall be so interpreted.
 
P. Acknowledgements. To induce us to sign this Agreement and grant you the
rights under this Agreement, you acknowledge:
 

 
(1)
That you have independently investigated the Hyatt Place Hotel franchise
opportunity, including the current and potential market conditions and
competitive factors and risks, and recognize that, like any other business, the
nature of a Hyatt Place Hotel’s business will evolve and change over time.

 

 
(2)
That an investment in a Hyatt Place Hotel involves business risks that could
result in the loss of a significant portion or all of your investment.

 
(3) That your business abilities and efforts are vital to your success.
 

 
(4)
That retaining customers for your Hotel will require a high level of customer
service and strict adherence to the Hotel System and our System Standards, and
that you are committed to maintaining our System Standards.

 

 
(5)
That you have not received from us, and are not relying upon, and that we
expressly disclaim making, any representation, warranty or guaranty, express or
implied, as to the actual or potential volume, sales, income or profits of your
Hotel or any other Hyatt Place Hotel.

 

 
(6)
That any information you have acquired from other Hyatt Place Hotel franchisees,
including information regarding their sales, profits or cash flows, is not
information obtained from us, and we make no representation about that
information’s accuracy.

 

 
(7)
That you have no knowledge of any representations made about the Hyatt Place
Hotel franchise opportunity by us, our affiliates or any of their respective
officers, directors, owners or agents that are contrary to the statements made
in our Franchise Offering Circular or to the terms and conditions of this
Agreement.

 

 
(8)
That in all of their dealings with you, our officers, directors, employees and
agents act only in a representative, and not in an individual, capacity and that
business dealings between you and them as a result of this Agreement are only
between you and us.

 

 
(9)
That you have represented to us, to induce our entering into this Agreement,
that all statements you have made and all materials you have given us in
acquiring the rights under this Agreement are accurate and complete and that you
have made no misrepresentations or material omissions in obtaining those rights.

 

 
(10)
That you have read this Agreement and our Franchise Offering Circular and
understand and accept that the terms and covenants in this Agreement are
reasonable and necessary for us to maintain our high standards of quality and
service, as well as the uniformity of those standards at each Hyatt Place Hotel,
and to protect and preserve the goodwill of the Proprietary Marks.

 

 
(11)
That you have independently evaluated this opportunity, including by using your
own business professionals and advisors, and have relied solely upon those
evaluations in deciding to enter into this Agreement.

 

 
(12)
That you have been afforded an opportunity to ask any questions you have and to
review any appropriate materials of interest to you concerning the Hyatt Place
Hotel franchise opportunity.

 

 
(13)
That you have been afforded an opportunity, and we have encouraged you, to have
this Agreement and all other agreements and materials that we have given or made
available to you reviewed by an attorney and have either done so or
intentionally chosen not to do so.

 

 
(14)
That you have a net worth that is sufficient to make the investment in the Hyatt
Place Hotel franchise opportunity represented by this Agreement, and you will
have sufficient funds to meet all of your obligations under this Agreement.

 

 
(15)
That any statements, oral or written, by us or our agents before the execution
of this Agreement were for informational purposes only and do not constitute any
representation or warranty by us. Our only representations, warranties, and
obligations are those specifically set forth in this Agreement. You must not
rely on, and the parties do not intend to be bound by, any statement or
representation not contained in this Agreement.

 
14. Compliance with Anti-Terrorism Laws
 
You and your owners agree to comply, and to assist us to the fullest extent
possible in our efforts to comply, with Anti-Terrorism Laws (defined below). In
connection with that compliance, you and your owners certify, represent, and
warrant that none of your property or interests is subject to being blocked
under, and that you and your owners otherwise are not in violation of, any of
the Anti-Terrorism Laws. “Anti-Terrorism Laws” mean Executive Order 13224 issued
by the President of the United States, the USA PATRIOT Act, and all other
present and future federal, state, and local laws, ordinances, regulations,
policies, lists, and other requirements of any governmental authority addressing
or in any way relating to terrorist acts and acts of war. Any violation of the
Anti-Terrorism Laws by you or your owners, or any blocking of your or your
owners’ assets under the Anti-Terrorism Laws, shall constitute good cause for
immediate termination of this Agreement, as provided in Section 10C(2)(u) above.
 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties have signed this Agreement as of the dates set
forth by their signatures, to be effective as of the Effective Date.
 

 
FRANCHISEE:
 
[INSERT NAME]
a ____________ limited liability company
 
By:    
Name:   
Title:   
 
Date: 
 
Attest: 
     
FRANCHISOR:
 
HYATT PLACE FRANCHISING, L.L.C.
 
By:    
Name:   
Title:   
 
Date: 
 
Attest: 

Annex A - 

--------------------------------------------------------------------------------

ATTACHMENT A

THE HOTEL

Facilities (Section 1):

Site:      A Hyatt Place hotel located at:
______________________

Number of Approved Guest Rooms:        Rooms

FRANCHISEE:
 
[INSERT NAME]
a _______________ limited liability company
 
By:  
Name:  
Title:  
 
Date:  
 
Attest:
 
FRANCHISOR:
 
HYATT PLACE FRANCHISING, L.L.C.
 
By:
Senior Vice President
 
Date:  
 
Attest:  

ATTACHMENT B

AREA OF PROTECTION

__________________

The Area of Protection is defined as follows:

AOP Term:

The AOP shall be granted for three (3) years from the effective date of the
Franchise Agreement.

AOP Area:

The AOP shall be a three (3) mile radius from the center of the hotel lobby.

--------------------------------------------------------------------------------

 
FRANCHISEE:
 
[INSERT NAME]
a _____________ limited liability company
 
By:  
Name:  
Title:  
 
Date:  
 
Attest:
 
FRANCHISOR:
 
HYATT PLACE FRANCHISING, L.L.C.
 
By:
Senior Vice President
 
Date:  
 
Attest:  

ATTACHMENT C

THE WORK

You acknowledge that every detail of the Hotel System is important to us and
other franchisees operating under the Hotel System to develop and maintain the
Hotel System’s standards and public image. You agree to comply strictly with the
Hotel System’s details, as set forth in the Manual or otherwise in writing. You
must bear the entire cost of developing and constructing the Hotel, including
professional services, financing, insurance, licensing, contractors, permits,
equipment, and furnishings. The following constitutes the Hotel’s development
schedule.

A. New Development

1) Your managing owner or general manager shall attend at your expense a
briefing at our headquarters in Chicago, Illinois to acquaint you with our
building process and support structure within three (3) months after the
Effective Date.

2) You must submit preliminary plans (the “Plans”), including site layout and
outline specifications, within four (4) months after the Effective Date.

3) You must submit to us complete working drawings and specifications for the
Hotel, including its proposed equipment, furnishings, facilities, and signs,
with such detail and containing such information that we require within seven
(7) months after the Effective Date. The Plans must conform to our then current
Hotel System standards. Construction may not begin until we have approved the
Plans in writing. After we approve your Plans, you may not make any changes
without our prior written consent, which we will not unreasonably withhold. If
changes in the Plans are required during the course of construction, you must
notify us immediately. Your failure to construct the Hotel in strict accordance
with the approved Plans constitutes a material breach of this Agreement and may
lead to our issuing a default notice and subsequently terminating this
Agreement. Our approval of the Plans is intended only to ensure compliance with
our then current System Standards. We will have no liability to you for the
Hotel’s construction. It is your responsibility to make sure that the Plans
comply with our requirements, the Americans with Disabilities Act and similar
rules, other applicable ordinances, building codes, and permit requirements.
 
4) Construction shall commence within twelve (12) months from the Effective
Date. You shall notify us within (5) days after you commence construction, which
means pouring concrete for the Hotel’s foundation or a finished slab for the
Hotel. Construction shall continue uninterrupted (unless interrupted by force
majeure) until the Hotel is completed. The term “force majeure” means an act of
God, war, civil disturbance, government action, fire, flood, accident,
hurricane, earthquake, or other calamity, strike, or other labor dispute.

5) The Hotel must be ready to open for business within eighteen (18) months from
the Effective Date (“Completion Date”). Within ten (10) days after the
Completion Date, you must ask us to conduct a final inspection, which we shall
promptly conduct. You may not open for business before our written authorization
to do so, and you agree to open within ten (10) days after our authorization.
Before the Opening Date, you must submit to us written certification that the
Hotel is in compliance with the approved Plans and that the Hotel was
constructed in compliance with our System Standards and is in compliance with
all applicable laws. If you want to request an extension of the Completion Date,
you must submit a written request and a Ten Thousand Dollar ($10,000) extension
fee before the Completion Date. If we approve the extension, we will set a new
Completion Date, and the extension fee will be non-refundable. If we deny the
extension, we will refund the extension fee.

B. Conversion of an Existing Facility

1) You agree to renovate the Hotel in strict accordance with, and within the
time frames set forth on, the attached property improvement plan (“PIP”) or in
accordance with your renovation plans. At our request, you agree to submit your
Hotel renovation plans to us for our approval. If we require you to submit your
renovation plans, renovations may not begin until we approve the renovation
plans in writing. After we approve the renovation plans, you may not change them
without our prior written consent. Our approval of your renovation plans is
exclusively for the purpose of ensuring compliance with our then current System
Standards. Your failure to renovate the Hotel in strict accordance with the PIP
and within the specified time frames constitutes a material breach of this
Agreement and may lead to our issuing a default notice and subsequently
terminating this Agreement. Commencement of renovation shall mean beginning any
site work at the Hotel.

2) The Hotel must be ready to open for business not later than six (6) months
from the Effective Date unless otherwise provided in the PIP (“Completion
Date”). Within ten (10) days after the Completion Date, you must ask us to
conduct a final inspection, which we shall promptly conduct. You may not open
for business before our written authorization to do so, and you must open within
ten (10) days after our authorization. Before the Hotel’s Opening Date, you must
submit written certification that the Hotel is in compliance with the approved
plans and specifications prepared by the architect and that the Hotel was
constructed in compliance with our System Standards and is in compliance with
all applicable laws. If you want to request an extension of the Completion Date,
you must submit a written request and a Ten Thousand Dollar ($10,000) extension
fee before the Completion Date. If we approve the extension, we will set a new
Completion Date, and the extension fee will be non-refundable. If we deny the
extension, we will refund the extension fee.

3) If this Agreement anticipates your conversion of an existing franchised
facility to a Hyatt Place Hotel, then before any Proprietary Marks (including
signage) are installed or displayed, and before the Hotel is authorized to open
as a Hyatt Place Hotel, you must submit satisfactory evidence of the termination
of your previous franchise agreement in accordance with applicable legal
requirements.

C. Our Role as an Advisor.

You acknowledge that we act only in an advisory capacity and are not responsible
for the adequacy or coordination of any plans or specifications, the integrity
of any structures, compliance with applicable laws (including the Americans with
Disabilities Act), any building code of any governmental authority, or any
insurance requirement or for obtaining necessary permits, all of which shall be
your sole responsibility and risk. You shall give us a written certificate or
opinion from your architect, licensed professional engineer, or recognized
expert consultant on the Americans with Disabilities Act stating that the Hotel
conforms to the design standards and requirements of the Americans with
Disabilities Act, related federal regulations, and all other applicable state
and local laws, regulations, and other requirements governing public
accommodations for persons with disabilities. At our request, you must give us
copies of all other certificates of architects, contractors, engineers, and
designers and such other similar verifications and information we reasonably
request.

 

ATTACHMENT D

OUR RIGHT OF FIRST OFFER FOR STRATEGIC MARKETS

By signing this Attachment D, we and you acknowledge that our right of first
offer reflected in this Attachment D applies to this Agreement. If we and you do
not sign this Attachment D, then it does not apply to this Agreement.

If you (or any of your owners) at any time during the Term determine to sell or
transfer for consideration this Agreement and the Hotel, or a Controlling
Ownership Interest in you (except to or among your then current owners, which is
not subject to this Attachment D), then you must first give us the opportunity
to acquire those rights (the “Offered Rights”) by delivering written notice to
us. Your notice must contain the specific terms and conditions of the proposed
sale or transfer, including the proposed consideration and the terms of any
financing you will provide for the proposed purchase price (the “Offer Terms”).
The Offer Terms must relate exclusively to the Offered Rights and not to any
other assets or rights.

We will then have thirty (30) days after receiving the Offer Terms to notify you
whether we elect to acquire the Offered Rights on the Offer Terms, provided that
(1) we may substitute cash, a cash equivalent, or marketable securities for any
form of payment proposed in the Offer Terms (such as ownership interests in an
entity) and may elect to pay the net present value of any payments to be made
over time; and (2) we must receive, and you and your owners agree to make, all
customary representations, warranties, and indemnities in our purchase,
including representations and warranties as to ownership and condition of and
title to assets; liens and encumbrances on assets; validity of contracts and
agreements; liabilities affecting the assets, contingent or otherwise; and
indemnities for all actions, events, and conditions that existed or occurred in
connection with the Hotel or your business before the closing. We have the
unrestricted right to assign our right of first offer to a third party, who then
will have the rights described in this Attachment D.

If we exercise the right of first offer, the closing will take place at a
location and on a date (within thirty (30) days after we deliver our notice of
exercise to you) we choose. We and you will sign documents, including deeds,
affidavits, transfers and assignments, and any other documents necessary or
appropriate for the sale or transfer of the Offered Rights. You must satisfy all
liens, mortgages, and/or encumbrances on the Hotel. We and you will share
equally any closing costs.

If we notify you in writing that we do not intend to exercise our right of first
offer with respect to any Offer Terms, or fail to notify you of our decision
within the thirty (30)-day period described above, then you thereafter may offer
the Offered Rights to any third party on terms no more favorable to that party
than the Offer Terms. However, you or your owners may sell or transfer the
Offered Rights only if we otherwise approve the transfer in accordance with, and
you (and your owners) and the transferee comply with the conditions in,
Sections 8B and C above. This means that, even if we do not exercise our right
of first offer, if the proposed transfer otherwise would not be allowed under
Sections 8B and C above, you (or your owners) may not move forward with the
transfer at all.

Later, you may determine to offer the Offered Rights on terms which are more
favorable to the buyer than the Offer Terms, or you may determine to change the
Offered Rights. If you do, then you must first offer those new terms to us
according to the procedures described above.

By signing below, we and you acknowledge and agree that the terms of this
Attachment D will apply to this Agreement.

 
FRANCHISEE:
 
[INSERT NAME]
a ___________ limited liability company
 
By:
Name:  
Title:  
 
Date:  
 
Attest:
 
FRANCHISOR:
 
HYATT PLACE FRANCHISING, L.L.C.
 
By:
Senior Vice President
 
 
Date:  
 
Attest:  
 

MANAGEMENT COMPANY RIDER
to the Franchise Agreement dated as of __________, 200__ (“Franchise Agreement”)
Between Hyatt Place Franchising, L.L.C. (“Franchisor”) and
___________________ (“Franchisee”)

SELECT HOTELS GROUP, L.L.C. (“Management Company”) has entered into a Management
Agreement with Franchisee under which Management Company will operate the Hyatt
Place Hotel located at _________, _________, ______ (the “Hotel”) in accordance
with the terms and conditions of the Franchise Agreement. However, under the
Franchise Agreement, Management Company may not operate the Hotel without
Franchisor’s consent, and Franchisor is unwilling to provide such consent unless
Franchisee and Management Company agree to the terms of this Rider.

In consideration of the rights granted to Management Company under the
Management Agreement described above and of Franchisor’s consent (under the
Franchise Agreement) to Management Company’s operation of the Hotel, Management
Company hereby acknowledges and ratifies the terms and conditions of the
Franchise Agreement and agrees to fully observe and be bound by all terms,
conditions and restrictions regarding the management and operation of the Hotel
set forth in the Franchise Agreement for as long as Management Company operates
the Hotel, as if and as though Management Company had executed the Franchise
Agreement as “Franchisee” or “you,” including, without limitation, all terms and
conditions of Section 3A of the Franchise Agreement (other than Subsections
(13), (19) and (26)). Management Company further agrees to be bound by the
confidentiality covenants set forth in Section 5F of the Franchise Agreement
(including all remedies available to Franchisor under the Franchise Agreement
for breach thereof) during and subsequent to its tenure as manager of the Hotel.
However, notwithstanding the foregoing, nothing in this Rider constitutes an
agreement of Management Company to pay or assume any financial obligation of
Franchisee to Franchisor or to any third party.

Management Company agrees that Franchisor may enforce directly against
Management Company those terms and conditions of the Franchise Agreement to
which Management Company has hereby agreed to be bound. Franchisee acknowledges
and agrees that any act or omission of Management Company relating directly or
indirectly to the Hotel will be deemed and considered the act or omission of
Franchisee for purposes of Franchisor’s rights and remedies under the Franchise
Agreement (including, without limitation, Franchisee’s indemnification and
defense obligations under Section 7B of the Franchise Agreement), any other
agreement, or applicable law. Sections 12, 13 (excluding Subsection 13P, but
including, without limitation, the provisions concerning arbitration, governing
law, consent to jurisdiction and waivers of punitive damages and jury trial) and
14 of the Franchise Agreement, entitled “Relationship of Parties,”
“Miscellaneous” and “Compliance With Anti-Terrorism Laws,” respectively, are
incorporated by reference in this Rider and will govern all aspects of
Franchisor’s and Management Company’s relationship and this Rider as if fully
restated within the text of this Rider, with all references to “Franchisee” or
“you” interpreted as references to Management Company.

HYATT PLACE FRANCHISING, L.L.C.  MANAGEMENT COMPANY:
a Delaware limited liability company
SELECT HOTELS GROUP, L.L.C.
a Delaware limited liability company
By:  
Name:   By:  
Title:   Name:  
Title:  

FRANCHISEE:

[INSERT NAME]
a ____________ limited liability company

By:  
Name:  
Title:  

FIRST AMENDMENT TO
FRANCHISE AGREEMENT

The Hyatt Place Hotel Franchise Agreement dated ___________, 200__ (the
“Franchise Agreement”) by and between Hyatt Place Franchising, L.L.C.
(“Franchisor,” “we,” “our,” or “us”) and __________________ (“Franchisee,” “you”
or “your”) for the hotel located at _________, _________, ________ (the
“Hotel”), is hereby amended as set forth in this First Amendment to Franchise
Agreement (“Amendment”) of even date therewith. The terms of this Amendment
supersede any inconsistent or conflicting provisions in the Franchise Agreement.
Capitalized terms used but not defined herein shall have the meanings ascribed
to such terms in the Franchise Agreement. All references to section numbers
contained herein refer to corresponding section numbers in the Franchise
Agreement.

Recitals

The Hotel is one of several hotels (the “Portfolio Hotels”) owned by Equity
Inns, Inc. or one of its affiliates (collectively, “ENN”) that, prior to the
Opening Date, have been operated as AmeriSuites Hotels.

The Hotel will be managed by an affiliate of Franchisor, Select Hotels Group,
L.L.C. (“Select”) pursuant to that certain Management Agreement between Select
and Franchisee of even date herewith (the “Management Agreement”). The time
period during which the Hotel is managed by Select as a Hyatt Place Hotel is
referred to herein as the “Select Management Period.”

The parties wish to make certain changes to the Franchise Agreement.

Now, therefore, in consideration of the mutual agreements contained herein and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:

1. The Franchise

 
a.
Grant. The first (1st), second (2nd), third (3rd), and fourth (4th) sentences of
Section 2.B. of the Franchise Agreement are hereby deleted in their entirety and
are replaced by the following:

A. “During the five (5) year period immediately following the Opening Date
(defined below) (the ‘Exclusivity Period’), neither we nor any of our affiliates
will open and operate, or authorize any other party to open and operate, any
other Hyatt Place Hotels, the physical premises of which are located within the
geographic area described in Attachment B (‘Area of Protection’). Franchisee
acknowledges and agrees that following the expiration of the Exclusivity Period,
Franchisee shall no longer have any territorial protection and that the Area of
Protection shall be null, void, and of no further force or effect.

Except for the limited territorial protection in the Area of Protection during
the Exclusivity Period provided for above, there are no restrictions on us or
our affiliates, your rights under this Agreement are nonexclusive in all
respects, the Hotel has no territorial protection whatsoever, and we and our
affiliates have the right without any restrictions at all to engage in any and
all activities we and they desire (including any and all types of lodging
facilities), at any time and place, whether or not using the Proprietary Marks
or any aspect of the Hotel System, whether or not those activities compete with
your Hotel, and whether or not we or our affiliates start those activities
ourselves or purchase, merge with, acquire, or affiliate with businesses that
already engage in such activities. We and our affiliates may use or benefit from
common hardware, software, communications equipment and services, administrative
systems, reservation systems, franchise application procedures, central
purchasing, approved vendor lists, and personnel. You agree that you will not
have any right to pursue any claims, demands, or damages based solely on the
fact that we may derive benefit as a result of these common activities, whether
under breach of contract, unfair competition, implied covenant of good faith and
fair dealing, divided loyalty, or other theories, because you have expressly
allowed us and our affiliates to engage in all such common activities.”

 
b.
Section 2.C. is hereby deleted in its entirety and replaced with the following:

 
“C.
Opening. You have no right to open the Hotel for business under the Hotel System
unless and until we authorize you to do so in writing. The date on which you
first open the Hotel for business shall be deemed the “Opening Date.” You must
not open the Hotel for business and begin operating the Hotel until: (1) you
have properly developed and equipped the Hotel according to our System Standards
and in compliance with all applicable laws, rules and regulations; (2) all
pre-opening training for the Hotel’s personnel has been completed to our
satisfaction; (3) all amounts then due to us and our affiliates have been paid;
(4) you have obtained all required certificates of occupancy, licenses and
permits to operate the Hotel; (5) you have given us copies of all insurance
policies required under this Agreement, or such other evidence of insurance
coverage and payment of premiums as we request; (6) we have conducted a
pre-opening inspection and approved the Hotel for opening; and (7) on or before
the Opening Date, you must execute a mutual termination and release agreement,
the form of which is attached hereto as Exhibit 1, (the “Mutual Termination
Agreement”) with respect to the AmeriSuites Hotel Franchise Agreement under
which the Hotel has been operating prior to the Opening Date, to be effective as
of the Opening Date. Your failure to executed the Mutual Termination Agreement
as provided in (7) above shall be deemed a default of the Franchise Agreement
for which we may terminate the Franchise Agreement immediately upon notice to
you. Our determination that you have met all of our pre-opening requirements
will not constitute a representation or warranty, express or implied, that the
Hotel complies with any laws or a waiver of your non-compliance, or of our right
to demand full compliance, with such pre-opening requirements.”

2. Your Responsibilities.

a. Section 3.A.(2) is hereby deleted in its entirety and replaced with the
following:

“(2)  maintain the Hotel in good condition and repair and in a clean, safe, and
orderly manner;”

b. Section 3.A.(17) is hereby deleted in its entirety and replaced with the
following:

“(17) Intentionally omitted;”

c. Section 3.A.(19) is hereby deleted in its entirety and replaced with the
following:

 
“(19)
pursuant to our written request, send us current information regarding the name,
address, and telephone number of the financial institution (the “Lender”), if
any, that provided or is providing the financing enabling you to purchase or
operate the Hotel and the name and telephone number of your contact at the
Lender;”

d. Section 3.A.(21) is hereby deleted in its entirety and replaced with the
following:

“(21)  Intentionally omitted;”

 
e.
The second sentence of Section 3.A.(25) is deleted in its entirety and replaced
with the following:

You may not install at the Hotel, without our prior written consent, any
fixtures, furnishings, furniture, signs, property management, in room
entertainment and other similar computer and technology systems necessary to the
operations of the Hotel we have not previously approved.

f. The first (1st) paragraph of Section 3.D.(2) is hereby deleted.

 
g.
Section 3.D.(4)(a) is hereby deleted in its entirety and replaced with the
following:

“(a) a Royalty Fee (the “Royalty Fee”) equal to four percent (4%) of the Hotel’s
Gross Rooms Revenue (as defined in Section 3.D.(6)) during the preceding month.”

3. Our Responsibilities.

 
a.
The first sentence of Section 4.B. is hereby deleted and replaced with the
following:

“You shall have access to the CRS, listings in advertising publications and the
National Directory unless you are in default under this Agreement and such
default is not capable of cure or has not been cured within the time period
applicable in this Agreement.”

 
b.
The last sentence of Section 4.B is hereby deleted and replaced with the
following:

“We may suspend your access to and listings in these sources while you are in
default under this Agreement if such default is not capable of cure or has not
been cured within the time period applicable in this Agreement.” 

 
c.
The third (3rd) paragraph of Section 4.D. is hereby deleted and replaced with
the following:

“We will account for the Fund separately from our other monies (but we need not
segregate the Fund from our assets). We will not use the Fund for any of our
general operating expenses. However, we may use the Fund to pay the reasonable
salaries, benefits and expenses of personnel who manage, administer and/or
perform if and only to the extent that such salaries, benefits or expenses are
directly attributable to services rendered to the Fund; the Fund’s other
administrative costs; travel expenses of personnel while they are on Fund
business; meeting costs; rent, utilities, other overhead costs, and other costs
for equipment, supplies and other materials relating or allocable to Fund
business; and other expenses that we incur in activities reasonably related to
administering or directing the Fund and its programs, including conducting
market research and other research and development activities, public relations,
preparing advertising, promotion, and marketing materials, collecting and
accounting for Contributions, paying Providers for services relating to the CRS
and GDS, and paying for technical and support functions.”

4. Proprietary Rights.

 
a.
The last sentence of first (1st) paragraph of Section 5.D. is hereby deleted and
replaced with the following:

“We or our affiliates will reimburse you for your direct expenses incurred in
connection with any modification or discontinuation of a Proprietary Mark during
the first 24 months of this Agreement, not to include any loss of revenue due to
any modified or discontinued Proprietary Mark. Thereafter, neither we nor our
affiliates will reimburse you for your expenses of changing the Hotel’s signs,
for any loss of revenue due to any modified or discontinued Proprietary Mark, or
for your expenses of promoting a modified or substitute trademark or service
mark.”

5. Records and Audits.

 
a.
The third sentence of Section 6.A. is hereby deleted and replaced with the
following:

“At our request, the fifteenth (15th) day of each month, you agree to prepare
and send us a statement for the previous month, listing Gross Rooms Revenue,
other Hotel revenues, room occupancy rates, reservation data, the amounts
currently due under Section 3D, and other information we deem useful in
connection with the Hotel System (the “Data”).”

 
b.
The second sentence of Section 6.B. is hereby deleted in its entirety and
replaced with the following:

“We reserve the right to access the Hotel’s computer system independently to
obtain sales information, occupancy information, and other Data. You must send
us upon our request any information that we do not access independently from
your computer system.”

 
c.
The following language is hereby deleted from the first (1st) sentence of
Section 6.D.:

“, certified by your chief financial or principal accounting officer to be true
and correct.”
6. Indemnity and Insurance.

 
a.
The first (1st) paragraph of Section 7.B. is hereby deleted and replaced with
the following:

“B. Your Indemnification of Us. In addition to your obligation under this
Agreement to procure and maintain insurance, you agree to indemnify, defend, and
hold harmless us, our affiliates, and our and their respective owners, officers,
directors, agents, employees, representatives, successors, and assigns (the
“Indemnified Parties”) against, and to reimburse any one or more of the
Indemnified Parties for, any and all claims, obligations, and damages directly
or indirectly arising out of, resulting from, or in connection with (a) the
application you submitted to us for the rights granted under this Agreement, (b)
the construction, development, use, occupancy, or operation of the Hotel,
including any claim or allegation relating to the Americans with Disabilities
Act or any similar law concerning public accommodations for persons with
disabilities  (except to the extent the claim, obligation or damage relates to
the Copyrighted Materials or a prescribed System Standard),(c) any bodily
injury, personal injury, death, or property damage suffered by any Hotel guest,
customer, visitor, or employee, (d) claims alleging either intentional or
negligent conduct, acts, or omissions by you relating to the operation of the
Hotel or the Hotel System, and (e) your breach of the terms and conditions of
this Agreement.”

 
b.
The following language is hereby deleted from the third (3rd) paragraph of
Section 7.B.:

“An Indemnified Party need not seek recovery from any insurer or other third
party, or otherwise mitigate its losses and expenses, in order to maintain and
recover fully a claim against you under this subparagraph.”

 
c.
The fifth (5th) paragraph of Section 7.B. is hereby amended to replace “five
(5)” with “ten (10).”

7. Transfer.

 
a.
Sections 8.B and 8.C are hereby deleted in its entirety and replaced with the
following:

 
“B.
Transfer by You. You understand and acknowledge that the rights and duties this
Agreement creates are personal to you and your owners and that we have granted
you the franchise in reliance upon our perceptions of your and your owners’
collective character, skill, aptitude, attitude, business ability, and financial
capacity. Accordingly, neither this Agreement (or any interest in this
Agreement), a Controlling Ownership Interest in the Hotel or substantially all
of the assets of the Hotel, or a Controlling Ownership Interest in you or your
owners (if such owners are legal entities) may be transferred without our prior
written approval, which will not be unreasonably withheld if the conditions for
transfer contained in Section 8.C. are satisfied; provided, however, that this
Agreement may be transferred without our prior written approval to an entity in
which you or your owners own a Controlling Ownership Interest; provided that we
will approve the sale of the Hotel and/or its assets where the purchaser does
not, for any reason, assume this Agreement only upon payment by you of
Liquidated Damages in accordance with Section 10.E. of this Agreement. A
transfer of the Hotel’s ownership, possession or control or substantially all of
its assets may be made only with a transfer of this Agreement. Any transfer
without our approval is a breach of this Agreement and has no effect, meaning
that you will continue to be obligated to us for all of your obligations under
this Agreement.

For purposes of this Agreement, a “Controlling Ownership Interest” means greater
than 50% of the equity interests in the Hotel, you or your owners. In the case
of a proposed transfer of an ownership interest in the Hotel, you or one of your
owners, the determination of whether a “Controlling Ownership Interest” is
involved must be made as of both immediately before and immediately after the
proposed transfer to see if a “Controlling Ownership Interest” will be
transferred (because of the number of owners before the proposed transfer) or
will be deemed to have been transferred (because of the number of owners after
the proposed transfer). In addition, regardless of whether the threshold is
satisfied, any transfer of effective control of the power to direct or cause the
direction of your (or your owners’) management and policies to someone who did
not possess such control as of the Effective Date constitutes the transfer of a
Controlling Ownership Interest.

In this Agreement, the term “transfer” includes a voluntary, involuntary,
direct, or indirect assignment, sale, gift, or other disposition of any interest
in this Agreement; you; the Hotel or substantially all of its assets; any of
your owners (if such owner is a legal entity); or any right to receive all or a
portion of the Hotel’s, your, or your owner’s profits or losses. An assignment,
sale, gift, or other disposition includes the following events: (1) transfer of
ownership of capital stock, a partnership or membership interest, or another
form of ownership interest; (2) merger or consolidation or issuance of
additional securities or other forms of ownership interest; (3) any sale of a
security convertible to an ownership interest; (4) transfer of any right to
receive all or a portion of the Hotel’s, your, or your owner’s profits or losses
in an insolvency, or entity dissolution proceeding or otherwise by operation of
law or (5) pledge of this Agreement (to someone other than us) or of an
ownership interest in you or one of your owners as security, foreclosure upon
the Hotel, or your transfer, surrender, or loss of the Hotel’s possession,
control, or management. You may mortgage the Hotel (but not this Agreement) to a
lender that finances your acquisition, development, and/or operation of the
Hotel without having to obtain our prior written approval.
 

 
C.
Conditions for Approval of Transfer. If you (and your owners) are substantially
complying with this Agreement, then, subject to the other provisions of this
Section 8, we will approve a transfer that meets all of the requirements in this
Section 8.C. You must pay us Two Thousand Five Hundred Dollars ($2,500) for
processing and related costs we incur. In the event of a transfer to one of your
affiliates of this Agreement (or any interest in this Agreement), a Controlling
Ownership Interest in the Hotel or substantially all of the assets of the Hotel,
or a Controlling Ownership Interest in you or your owners, we will waive the
$2,500 processing fee.

If the proposed transfer requires our prior written approval pursuant to Section
8.B. above, then all of the following conditions must be met before or
concurrently with the effective date of the transfer:

 
(1)
the transferee has the necessary business experience, aptitude, and financial
resources to operate the Hotel and meets our then applicable standards for Hyatt
Place Hotel franchisees. The proposed transferee must submit to us a complete
application for a new franchise agreement (the “Change of Ownership
Application”), accompanied by payment of our then current application fee
(although no such fee is due if the transfer is to the spouse, child, parent, or
sibling of the owner(s) or from one owner to another, or if to an affiliate in
which you or your owners own a Controlling Interest). If we do not approve the
Change of Ownership Application, we will refund any application fee paid, if
any, less Two Thousand Five Hundred Dollars ($2,500) for processing costs (if to
a non-affiliate).

We will process the Change of Ownership Application according to our then
current procedures, including review of criteria and requirements regarding
upgrading the Hotel, credit, background investigations, operations ability and
capacity, prior business dealings, market feasibility, guarantees, and other
factors concerning the proposed transferee(s) (and, if applicable, its owner(s))
we deem relevant. We have sixty (60) days from receipt of the completed and
signed application to consent or withhold our consent to the proposed transfer.

 
(2)
you have paid all Royalty Fees, Contributions, and other amounts owed to us, our
affiliates, and third party vendors; have submitted all required reports and
statements; and have not violated any material provision of this Agreement or
any other agreement with us during both the sixty (60) day period before you
requested our consent to the transfer and the period between your request and
the effective date of the transfer;

 
(3)
the transferee’s general manager and other key personnel we specify, if
different from your general manager and key personnel, satisfactorily complete
our required training programs;

 
(4)
the transferee and its owners shall (if the transfer is of this Agreement), or
you and your owners shall (if the transfer is of a Controlling Ownership
Interest in you or one of your owners), sign a new franchise agreement and
related documents (including guarantees and assumptions of obligations) in
substantially the same form as this Agreement and the related documents executed
in connection herewith, the term of which franchise agreement will be equal to
the remaining unexpired portion of the Term;

 
(5)
you (and your transferring owners) sign our then current form of termination
agreement and a mutual general release, in a form satisfactory to us, of any and
all claims against us and our owners, affiliates, officers, directors,
employees, and agents (not to include claims subject to indemnification
obligations under this Agreement);

 
(6)
we have determined that the purchase price and payment terms will not adversely
affect the transferee’s operation of the Hotel;

 
(7)
you sign all documents we request evidencing your agreement to remain liable for
all obligations to us and our affiliates existing before the effective date of
the transfer; and

 
(8)
except to the extent you maintain a current Hyatt Place franchise agreement at
another hotel, you will not directly or indirectly at any time or in any manner
identify yourself or themselves in any business as a current or former Hyatt
Place Hotel or as one of our franchisees; use any Proprietary Mark, any
colorable imitation of a Proprietary Mark, or other indicia of a Hyatt Place
Hotel in any manner or for any purpose; or utilize for any purpose any trade
name, trade or service mark, or other commercial symbol that suggests or
indicates a connection or association with us.

We may review all information regarding the Hotel that you give the proposed
transferee, correct any information that we believe is inaccurate, and give the
transferee copies of any reports that you have given us or we have made
regarding the Hotel.

Notwithstanding the foregoing, if this Agreement is being transferred to a
single third-party purchaser (the “Portfolio Purchaser”) that we have approved
as a transferee in accordance with this Section 8 as part of a single
transaction in which ENN (as defined in the First Amendment hereto) is selling
fifty percent (50%) or more of the Portfolio Hotels (as defined in the First
Amendment hereto) to the Portfolio Purchaser (a “Portfolio Transaction”), then
this Agreement, including the negotiated changes contemplated by the First
Amendment hereto, may be assumed by the Portfolio Purchaser in lieu of the
Portfolio Purchaser executing the then current form of franchise agreement,
provided that the Portfolio Purchaser agrees to enter into an amendment to this
Agreement that, among other things, requires the direct and indirect owners of
the Portfolio Purchaser to execute a guaranty of the Portfolio Purchaser’s
obligations under this Agreement in the form that we require. Nothing herein
limits or otherwise affects your obligations to comply with the other conditions
to transfer provided for in Section 8.C. with respect to a Portfolio
Transaction.

b. Section 8.D. is hereby deleted in its entirety and replaced with the
following:

“D. Intentionally omitted.”

c. Section 8.E. is hereby deleted in its entirety and replaced with the
following:

“E. Intentionally omitted.”

8. Condemnation and Casualty. The fourth sentence of Section 9.A. is hereby
deleted and replaced with the following:

 
(1)
“If a condemnation takes place, and you do not open a new hotel on the site of
the Hotel within such eighteen (18) month period, we may terminate this
Agreement immediately upon notice to you but will not require you to pay us any
liquidated damages.”

9. Termination.

a. Section 10.A. is hereby deleted in its entirety and is replaced with the
following:
 

 
“A.
Expiration of Term. This Agreement will expire without notice at 12:00 a.m.
Central Daylight Time on June 30, 2028, subject to its earlier termination as
set forth in this Agreement. Subject to your renewal rights in Section 11., when
the Term expires, you must comply with our de-identification procedures set
forth in Section 10.D. of this Agreement and/or in the Manual (the
“De-Identification Procedures”).”

b. Section 10.B. is hereby deleted in its entirety and replaced with the
following:

 
“B.
Termination by Franchisee. You have the right to terminate this Agreement if:

 
(1)
we admit our inability to pay our debts as they become due or make a general
assignment for the benefit of creditors;

 
(2)
we commence or consent to any case, proceeding, or action seeking: (i)
reorganization, arrangement, adjustment, liquidation, dissolution, or
composition of debts under any law relating to bankruptcy, insolvency,
reorganization, or relief of debtors; or (ii) appointment of a receiver,
trustee, custodian, or other official for any portion of its property;

 
(3)
we take any corporate or other action to authorize any of the actions set forth
above in Section 10.B.(1)(a) or 10.B.(2);

 
(4)
any case, proceeding, or other action against us is commenced seeking an order
for relief against us as debtor, or seeking reorganization, arrangement,
adjustment, liquidation, dissolution, or composition of it or its debts under
any law relating to bankruptcy, insolvency, reorganization, or relief of
debtors, or seeking appointment of a receiver, trustee, custodian, or other
official for it or any portion of its property, and such case, proceeding, or
other action: (i) results in an order for relief against us that is not fully
stayed within seven (7) business days after being entered; or (ii) remains
un-dismissed for forty-five (45) days.”

c. Section 10.C.(1)(a) is hereby deleted and replaced with the following:

 
“(a)
you fail to pay us or any of our affiliates any fees or other amounts due under
this Agreement and do not cure that default within ten (10) days after delivery
of our written notice of default to you”

d. Section 10.C.(1)(d) is hereby deleted and replaced with the following:

 
“(d)
you fail to comply with any other agreement with us or our affiliates relating
to the Hotel (with the exception of any Management Agreement entered into
between your and our affiliates) and do not cure that default within thirty (30)
days (or such shorter time period that the other agreement specifies for curing
that default) after delivery of our written notice of default to you ”

 
e.
Section 10.C.(2)(h) is hereby deleted in its entirety and replaced with the
following:

 
“(h)
you contest in any court or proceeding all or any portion of our ownership of
the Hotel System or the validity of any Proprietary Mark or Copyrighted
Materials;”

f. Section 10.C.(4) is hereby deleted in its entirety and replaced with the
following:

 
“(4)
General. No notice of termination that we issue will relieve you of your
obligations that survive termination of this Agreement, including your
de-identification, indemnification, and liquidated damages payment obligations.”

 
g.
The third sentence of Section 10.D.(1) is hereby deleted in its entirety and
replaced with the following:

(1) “You agree to take the following steps, among other actions, to de-identify
the Hotel: (a) return to us the Manual, all other Copyrighted Materials, and all
materials containing Confidential Information or bearing any of the Proprietary
Marks and cease using all such items; (b) remove all items identifying the Hotel
System, including by taking the following actions: remove all elements of the
trade dress and other distinctive features, devices, and/or items associated
with the Hotel System, including FF&E that includes a Proprietary Mark, interior
signage, lobby signage, door identifier signage, directional signage, phone face
plates, memo pads, pens, cups, glasses, signage on the back of guest room doors,
and all other signage bearing one or more of the Proprietary Marks.”

h. Section 10.E. is hereby deleted in its entirety and replaced with the
following:

 
“E.
Payment of Liquidated Damages. You acknowledge and confirm that we will suffer
substantial damages as a result of the termination of this Agreement, including
lost Royalty Fees, lost Contributions, lost market penetration and goodwill,
loss of Hotel System representation in the Hotel’s market area, confusion of
national accounts and individual customers, disadvantage in competing for
national accounts and other types of bookings for the Hotel System, lost
opportunity costs, and expenses we will incur in developing another franchise in
the Hotel’s market area, all of which damages are difficult to estimate
accurately and proof of which would be burdensome and costly, although such
damages are real and meaningful to us. Therefore, upon termination of this
Agreement before the Term expires (except for a termination pursuant to Section
9A), you and we agree that we will have the right to upon written notice to you
(“Liquidated Damages Notice”) within fifteen (15) days after the date of such
termination, to receive liquidated damages in a lump sum as calculated below as
of the effective date of termination. You must pay us the liquidated damages
within fifteen (15) days after the date of our Liquidated Damages Notice. If the
Hotel had opened for business before the effective date of termination, the
liquidated damages payable under this Section 10E(2) shall be equal to the
greater of: (i) Four Thousand Dollars ($4,000) multiplied by the number of
approved Guest Rooms at the Hotel; or (ii) either (1), (2) or (3) below,
whichever is applicable.

 
(1)
If this Agreement is terminated before the fifth (5th) anniversary of the
Opening Date, the product of (x) the number of months remaining between the
month of termination and the eighth (8th) anniversary of the Opening Date,
multiplied by (y) the average monthly Royalty Fees and Contributions you owed us
during the twelve (12) month period immediately preceding the month of
termination (or for such lesser period that the Hotel has been open, if the
Hotel has not then been open for at least twelve (12) months);

 
(2)
If this Agreement is terminated on or after the fifth (5th) anniversary of the
Opening Date, but before the seventeenth (17th) anniversary of the Opening Date,
the product of thirty-six (36) multiplied by the average monthly Royalty Fees
and Contributions you owed us during the twelve (12) month period immediately
preceding the month of termination; or

 
(3)
If this Agreement is terminated on or after the seventeenth (17th) anniversary
of the Opening Date, the product of (x) the number of months remaining between
the month of termination and the twentieth (20th) anniversary of the Opening
Date, multiplied by (y) the average monthly Royalty Fees and Contributions you
owed us during the twelve (12) month period immediately preceding the month of
termination. If the Hotel had not yet opened for business as of the effective
date of termination, you agree to pay us liquidated damages in the amount of
Four Thousand Dollars ($4,000) multiplied by the number of approved Guest Rooms
at the Hotel. Notwithstanding any temporary fee reductions to which we might
have agreed in an amendment(s) to this Agreement, all liquidated damages
calculations based on monthly fees shall be calculated on the full (and not the
discounted) monthly Royalty Fees and Contributions required under this Agreement
as of the Effective Date. You agree that the liquidated damages calculated under
this Section 10E(2) represent the best estimate of our damages arising from any
termination of this Agreement before the Term expires. Your payment of the
liquidated damages to us will not be considered a penalty but, rather, a
reasonable estimate of fair compensation to us for the damages we will incur
because this Agreement did not continue for the Term’s full length. You
acknowledge that your obligation to pay us liquidated damages is in addition to,
and not in lieu of, your obligations to pay other amounts due to us under this
Agreement as of the date of termination and to comply strictly with the
de-identification procedures in Section 10D(1) and your other post-termination
obligations. If any valid law or regulation governing this Agreement limits your
obligation to pay, and our right to receive, the liquidated damages for which
you are obligated under this Section, you shall be liable to us for any and all
damages we incur, now or in the future, as a result of your breach of this
Agreement.”

 
i.
Anything in Section 10. to the contrary notwithstanding, during the Select
Management Period, Franchisor will not terminate the Franchise Agreement based
solely on defaults of the provisions that set forth the requirements with
respect to the operation of the Hotel contained in Section 3.A. of the Franchise
Agreement that are the responsibility of Select and that are solely within the
control of Select, as manager of the Hotel. This paragraph 9.j. shall be void
and of no further force or effect upon the expiration or termination of the
Select Management Period.

 
j.
Anything in the Franchise Agreement to the contrary notwithstanding, Section
10.C.(1)(d) shall not apply during the Select Management Period. This paragraph
9.k. shall be void and of no further force or effect upon the expiration or
termination of the Select Management Period.

10. Miscellaneous.

 
a.
Section 13.E. is hereby deleted in its entirety and replaced with the following:

 
“E.
Our Withholding of Consent. Except where this Agreement expressly obligates us
reasonably to approve or not unreasonably to withhold our approval of any of
your actions or requests, we have the right to refuse any request you make or to
withhold our approval of any of your proposed, initiated, or completed actions
that require our approval. However, we may withhold our consent, whenever and
wherever otherwise required, if you are in default under this Agreement.”

 
b.
The phrase “specific performance” in Section 13.F. is hereby deleted.

 
c.
Section 13.I. is hereby deleted in its entirety and replaced with the following:

“I. Intentionally omitted.”

 
d.
Section 13.M. is hereby deleted in its entirety and replaced with the following:

“M. Intentionally omitted.”

11. Compliance with Anti-Terrorism Laws. Section 14 is hereby deleted in its
entirety and replaced with the following:

“14. Compliance with Anti-Terrorism Laws
Both parties hereto and their respective affiliates agree to comply, and to
assist the other party to the fullest extent possible in efforts to comply, with
Anti-Terrorism Laws (defined below). In connection with that compliance, both
parties hereto and their respective affiliates certify, represent, and warrant
that none of their property or interests is subject to being blocked under, and
that they and their respective affiliates otherwise are not in violation of, any
of the Anti-Terrorism Laws. “Anti-Terrorism Laws” mean Executive Order 13224
issued by the President of the United States, the USA PATRIOT Act, and all other
present and future federal, state, and local laws, ordinances, regulations,
policies, lists, and other requirements of any governmental authority addressing
or in any way relating to terrorist acts and acts of war. Any violation of the
Anti-Terrorism Laws by either party or its affiliates, owners, or any blocking
of they or their owners’ assets under the Anti-Terrorism Laws, shall constitute
good cause for immediate termination of this Agreement by either party hereto.”

12. Attachments.

a. Attachment C is hereby deleted in its entirety.

b. Attachment D is hereby deleted in its entirety.

13. Construction. Except to the extent expressly set forth in this Amendment,
the terms of the Franchise Agreement control.

IN WITNESS WHEREOF, Franchisor and Franchisee have executed this First Amendment
to Franchise Agreement.

FRANCHISOR:

HYATT PLACE FRANCHISING, L.L.C.,
a Delaware limited liability company

By:        
Name:        
Title:       

FRANCHISEE:

[INSERT NAME],
a ____________ limited liability company

By:        
Name:        
Title:       

Attachment D - Page

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ANNEX B

 
FORM OF HOTEL MANAGEMENT AGREEMENT
 
between
 
[INSERT NAME]
 
a Delaware limited liability company
 
and
 
SELECT HOTELS GROUP, L.L.C.,
 
a Delaware limited liability company
 
DATED: _________, 200_
 
THIS DOCUMENT CONTAINS WAIVERS OF PUNITIVE AND EXEMPLARY DAMAGES; SEE ARTICLE
XII AND SECTION 13.4.
 

FORM OF HOTEL MANAGEMENT AGREEMENT
 
THIS HOTEL MANAGEMENT AGREEMENT (“Agreement”), is made and entered into as of
_________, 200_, by and between ___________, a Delaware limited liability
company (“Owner”), and SELECT HOTELS GROUP, L.L.C., a Delaware limited liability
company (“Select”), an Affiliate of Global Hyatt Corporation.
PRELIMINARY STATEMENT
 
Owner is the lessee of that certain AmeriSuites Hotel, located at ________,
__________, ____, situated on a real property more particularly described on
Exhibit A attached hereto (“Site”). Owner proposes to convert and renovate such
AmeriSuites Hotel to conform to and to meet the System Standards (as defined
below) and the requirements under the Franchise Agreement (as defined below),
and upon completion of such conversion and renovation desires to retain Select
to manage and operate the Hotel (as defined below), as one of the Hyatt Place
Hotels (as defined below), in accordance with the terms and conditions of this
Agreement and the Franchise Agreement. Select desires to manage and operate the
Hotel on behalf of Owner as herein provided. In connection with such conversion
and renovation, Select or its Affiliates will be providing certain Pre-Opening
Services (as defined below) during the Pre-Opening Period (as defined below) to
assist in the conversion and renovation of the Hotel. Until such time as the
Hotel has been converted and renovated to meet the System Standards and all
requirements under the Franchise Agreement as a Hyatt Place Hotel, the Hotel
will continue to be managed and operated by Existing Manager (as defined below)
under the terms of the Existing Agreement (as defined below) as an AmeriSuites
Hotel. Immediately prior to the Opening Date (as defined below) and the
effectiveness of this Agreement, Owner and Existing Manager shall terminate the
Existing Agreement, subject to the terms of this Agreement. Concurrently with
the execution of this Agreement, certain Affiliates of Owner are entering into
other hotel management agreements with Select, on terms materially similar to
this Agreement, for management of each of the Affiliate Hotels (as defined
below) as a Hyatt Place Hotel.
NOW, THEREFORE, Owner and Select hereby agree as follows:
ARTICLE I
 
 
Definitions
 
1.1 Definitions.
In addition to any other definitions herein contained, the following terms shall
have the respective meanings as indicated below:
“Accountants” shall have the meaning set forth in Section 6.2.
 
“Adjusted NOI” shall mean, for any relevant period, Income After Undistributed
Operating Expenses less deductions for the following amounts incurred for and
allocable to such relevant period (but only to the extent that such amounts are
not otherwise deducted in computing Income After Undistributed Operating
Expenses):
 

 
(a)
An amount equal to Maintenance Cap Ex Reserve as calculated under Section 3.12
for such period;

 

 
(b)
The cost of all insurance maintained by Owner and Select in accordance with the
provisions of this Agreement, together with the cost of property insurance and
terrorism insurance (if any) maintained by Owner with respect to the Hotel;

 

 
(c)
All real and personal property taxes referred to in Section 8.3 (less refunds,
offsets or credits thereof, and interest thereon, if any, received during the
period in question);

 

 
(d)
The Basic Fee and all fees payable under the Franchise Agreement;

 

 
(e)
Lease payments; and

 

 
(f)
All other amounts deductible in respect of such period under the express terms
of this Agreement.

 
To the extent the Hotel is part of a mixed-use project (which, for this purpose,
shall mean any project that includes, in addition to the Hotel, any facilities
not subject to management or operation by Select hereunder), a portion of common
costs relating both to the Hotel and to the non-Hotel portions of the project,
such as, for example, but not by way of limitation, real estate taxes,
insurance, common area landscaping, site maintenance, trash removal,
extermination and other such costs intended for the benefit both of the Hotel
and the non-Hotel portions of the development, shall be allocated in a fair and
reasonable manner so that the Hotel shall bear only its fair and reasonable
portion of such common expenses.
 
“Affiliate” shall mean, with respect to any Person, any other Person which,
directly or indirectly, controls, is controlled by, or is under common control
with, the subject Person. For purposes hereof, the term “control” shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity, either alone or in
combination with any one or more Persons whether by contract, ownership or
otherwise. Persons who are Affiliates of each other are sometimes herein
referred to as being “Affiliated”.
 
“Affiliate Hotels” shall mean those other AmeriSuites Hotels, in addition to the
Hotel, that are owned by the Affiliates of Owner, which are to be converted to
and be franchised as Hyatt Place Hotels and to be managed by Select as set forth
in the applicable Affiliate Hotel Management Agreement for each of such hotels
pursuant to the terms thereof, which hotels are listed on Schedule 1 attached to
this Agreement but which shall not include any of such hotels that are sold or
transferred prior to completion of such Conversion in accordance with the terms
of the Master Agreement.
 
“Affiliate Management Agreements” shall mean those hotel management agreements
similar in material terms with this Agreement, entered into by the Affiliates of
Owner for the management of the applicable Affiliate Hotels by Select pursuant
to the terms thereof.
 
“Annual Plan” shall have the meaning set forth in Section 3.10.
 
“Basic Fee” shall have the meaning set forth in Section 5.1.
 
“Building(s)” shall mean all buildings and other permanent improvements
constructed on the Site which shall include, without limitation, all buildings
and other improvements comprising of guest rooms, parking, lobby, café, gallery
and other public areas, and shall also include those hotel amenities and
facilities which are permanent improvements to the Site such as swimming pools
and the like.
 
“Building Systems” shall mean any structural, mechanical, electrical, plumbing,
heating, ventilating, air conditioning and life safety equipment and systems;
major architectural features or systems such as water features, curtain walls
and roofs; major laundry appliances; major kitchen appliances; elevators and
escalators; pumps, filters and other pool equipment; water features and other
similar systems and items of equipment installed in or upon, and affixed to, the
Building, whether or not the same may be movable and whether or not removal
thereof would cause damage to the Building or the Site, excluding, however, any
items of FFE.
 
“Capital Budget” shall have the meaning set forth in Section 3.10.
 
“Capital Expenditures” shall mean any costs or expenses actually incurred after
the Opening Date (excluding costs of initial construction, furnishing, equipping
and opening of the Hotel) for the Hotel that are properly categorized as capital
in nature under GAAP.
 
“Capital Lease” shall mean any lease of equipment or other items of personal
property used in connection with the operation of the Hotel and which, under
GAAP, is classified as a “capital lease”. Owner shall provide Select with such
information (including, without limitation, a copy of the lease in question) as
shall be relevant for purposes of determining whether said lease is properly
classified as a capital lease under GAAP.
 
“Chain Contracts” shall mean those contracts entered into by Select with third
party vendors of goods or services that are intended by Select to be available
for use at all Select managed or operated Hyatt Place Hotels and other hotels
managed or operated by Select or its Affiliates.
 
“Conversion” shall mean all construction, renovation, installation and work to
be performed at the Hotel, both in the guest rooms and in the public areas and
the equipping of the Hotel and purchase and stocking of the Operating Equipment,
operating supplies and inventory items meeting the Systems Standards and all
other requirements of the Franchise Agreement for purposes of the Hotel being
converted to a Hyatt Place Hotel as set forth in the Master Agreement.
 
“Conversion Cost” means all amounts expended by Owner for the Conversion of the
Hotel, including without limitation, all rebranding, construction and related
costs as set forth in the scope of work attached to the Master Agreement, all
FFE, all Operating Equipment and related costs required to be capitalized in
accordance with GAAP, all operating systems and the cost associated with the
personnel hired for the installation of the same, all fees and reimbursements
for the Pre-Opening Services provided by contractors and vendors (recommended by
Select) and Select and its Affiliates.
 
“Corporate Personnel” shall mean any personnel from the corporate offices of
Select and its Affiliates who perform activities in connection with the services
provided by Select in accordance with this Agreement.
 
“CPI” shall mean the Consumer Price Index for United States City Averages for
All Urban Consumers, All Items, published from time to time by the United States
Bureau of Labor Statistics (1982-84 = 100). If the CPI is discontinued or is
unavailable or is substantially revised, a comparable index agreeable to Owner
and Select reflecting the changes in the cost of living or the purchasing power
of the consumer dollar, published by any governmental agency or recognized
authority shall be used in place thereof. Unless otherwise provided, any CPI
adjustment shall reflect CPI changes from the end of the CPI reporting period
next preceding the Opening Date to the end of the CPI reporting period next
preceding the effective date of any such adjustment.
 
“Cumulative Period” in connection with the calculation of Management Fees for
any month shall mean the period from the beginning of the Fiscal Year in
question to the end of the month for which the calculation is being made, not to
exceed 12 months.
 
“Debt Service” shall mean both (i) the amount of principal and interest required
to be paid under any indebtedness of Owner secured by a mortgage or other
similar lien on the Hotel, or any part thereof or interest therein, and (ii) the
amount of rent required to be paid under any Ground Lease.
 
“Default”, “Event of Default” and “Defaulting Party” shall all have the meanings
set forth in Sections 13.1 and 13.2.
 
“Deficiency” shall mean, for any relevant period, the amount by which Adjusted
NOI is less than Owner’s Priority for such relevant period.
 
“Employee Costs” shall mean the aggregate compensation, including, without
limitation, salary, fringe benefits, incentive compensation, bonuses, employee
performance and service awards, and other such amounts paid or payable to Hotel
employees, and other employee related costs such as payroll taxes and COBRA
expenses less the net benefit of any tax credits (after deduction for any costs
incurred in applying for or claiming said tax credits) received by Select during
the applicable period in question by reason of employment at the Hotel. The term
“fringe benefits” shall include, without limitation, the cost of profit sharing
plans, workers’ compensation benefits, group life and accident and health
insurance or equivalent benefits, and similar benefits available to Hotel
employees by virtue of their employment.
 
“Excess Adjusted NOI” shall mean the amount by which Adjusted NOI exceeds
Owner’s Priority.
 
“Existing Management Agreement” shall mean that certain Management Agreement
dated January 1, 2002 by and between Owner and Existing Manager, as amended by
that certain First Amendment to Management Agreement, dated May 14, 2003 between
Owner and Existing Manager and further amended on October 3, 2006 by Owner and
Existing Manager.
 
“Existing Guarantee Termination Date” shall mean ______, 200_, subject to the
provisions of the Existing Management Agreement with respect to the occurrence
of the 150 day extension or Date of Conversion, if applicable.
 
“Existing Loan Documents” shall mean the loan agreements, notes, mortgages,
deeds of trust, security agreements and other documents relating to the existing
loans with respect to the Hotel.
 
“Existing Manager” shall mean _____________, an Affiliate of Select.
 
“FFE” shall mean all fixtures, furniture, furnishings and equipment located at
the Hotel, together with all replacements therefore and additions thereto, but
shall not include Operating Equipment.
 
“Financial Records” shall have the meaning set forth in Section 6.1.
 
“Financial Statements” shall have the meaning set forth in Section 6.2.
 
“Fiscal Year” shall mean the calendar year except that the first Fiscal Year
hereunder shall commence on the Opening Date and end on December 31 of the same
calendar year as the Opening Date, and the last Fiscal Year hereunder shall
commence on January 1 of the calendar year in which the last day of the Term
occurs or the earlier termination of this Agreement occurs and end on the date
of the last day of the Term or the date of earlier termination of this
Agreement.
 
“Force Majeure” or “Force Majeure Cause” shall mean any one or more events or
circumstances beyond the reasonable control of the party whose performance is
affected thereby that, alone or in combination, adversely affects the operation
of the Hotel whether or not such events or circumstances occur geographically in
a location remote from the Hotel, including, without limitation, casualties,
war, invasion, insurrection, acts of terrorism, sabotage, failure of
transportation, inability to procure or general shortage of labor, equipment,
facilities, materials or supplies in the open market, actions of labor unions,
and governmental actions (but excluding causes which can be controlled by the
reasonable expenditure of money in accordance with usual business practices).
 
“Franchise Agreement” refers to that certain Franchise Agreement, dated as of
October 3, 2006, by and between Owner and Franchisor, pursuant to which the
Hotel will be franchised as a Hyatt Place Hotel during the Term.
 
“Franchisor” shall mean Hyatt Place Franchising, L.L.C., an Affiliate of Select,
and its successors and assigns.
 
“Full Conversion Date” shall mean a day which is on or after the Opening Date
and the first day on which the last Affiliate Hotel is operating as a Hyatt
Place Hotel pursuant to the terms of the applicable Franchise Agreement.
 
“GAAP” shall mean United States generally accepted accounting principles.
 
“Gross Receipts” for any period shall mean all revenues and income of any kind
derived, directly or indirectly, from the operation of the Hotel during such
period, including all revenues derived from the sale during such period of
rooms, food and beverages, telephone revenue, revenue derived from any other
revenue source and rents or fees payable by tenants or concessionaires for such
period (but not the gross receipts of such sub-tenants or concessionaires).
Without limiting the generality of the foregoing, it is the intention of the
parties that the term “Gross Receipts” shall mean all amounts properly accounted
for as Revenue or Total Revenue or Total Operated Departments in accordance
with, and as defined in, the Uniform System. Notwithstanding the foregoing,
there shall be excluded in determining Gross Receipts for any period the sum of
(i) any sales, excise or occupancy taxes actually collected during such period
in accordance with Legal Requirements from guests or patrons of the Hotel and
either remitted, or required to be remitted, to appropriate taxing authorities;
(ii) amounts collected from guests or patrons of the Hotel on behalf of Hotel
tenants and other third parties; (iii) interest earned on funds held in
Operating Accounts (if any); and (iv) insurance proceeds, condemnation proceeds,
financing or refinancing proceeds and the proceeds of sale of any real or
personal property comprising part of the Hotel (as distinguished from the sale
of merchandise, food and beverage and other consumer goods or services). Gross
Receipts shall in all events include only amounts actually paid or payable to
the Hotel (in cash or services), and shall not include, except as otherwise
herein expressly provided, (i) the value of any Hotel goods or services in
excess of actual amounts paid (in cash or services) provided by the Hotel on a
complimentary or discounted basis, (ii) gratuities or service charges collected
for payment to Hotel employees and (iii) credits or refunds to Hotel guests.
 
“Ground Lease” shall mean any lease with respect to the Site, or the Site
together with the Building, Building Systems and/or other real or personal
property, or any part or parts thereof or interests therein, regardless of its
term.
 
“Ground Lessor” shall mean the landlord or lessor under a Ground Lease.
 
“Guarantee Termination Date” shall mean the Existing Guarantee Termination Date.
 
“Hotel” shall mean the Site, the Building(s), the Building Systems, the FFE and
the Operating Equipment, together with all other items of real and personal
property at any time used in connection with the operation of the foregoing,
collectively.
 
“Hyatt Place Hotels” shall mean all hotels that are owned, operated, or
franchised by Franchisor under the “Hyatt Place” name. No hotel shall be deemed
a “Hyatt Place Hotel” solely by virtue of the fact that (i) it contains the word
“Hyatt” in its name or refers to its affiliation with Select or its Affiliates
(including Hyatt Corporation), such as, for example, but without limitation, “a
Hyatt affiliated hotel”, “a Select affiliated hotel”, “a member of the Hyatt
group of hotels”, “a member of the Select group of hotels”, “one of the family
of Hyatt hotels”, “one of the family of Select hotels”, “by Hyatt”, “by
Select”), or similar such references, or (ii) it participates in the Select
central reservations system, in certain Shared Services as set forth in Exhibit
C-1 or C-2 or in the same programs offered by Select and its Affiliates such as
Gold Passport®.
 
“Incentive Fee” shall have the meaning set forth in Section 5.1.
 
“Income After Undistributed Operating Expenses” shall mean such amount as is
calculated in the ninth edition of the Uniform System, without regard to any
revisions or future editions thereof.
 
“Legal Requirements” shall mean any provision of law, including, without
limitation, any statute, ordinance, regulation, rule, award or order of any
governmental agency or tribunal having jurisdiction over the Hotel or its
operations.
 
“Lender(s)” shall mean any Person, not Affiliated with Owner or any Ownership
Participant, providing debt financing secured by the Hotel, for the development,
construction, furnishing, equipping or operation of the Hotel, or to refinance
any financing obtained for any of the foregoing purposes, and any of its
successors or assigns.
 
“Maintenance Cap Ex Reserve” shall have the meaning set forth in Section 3.12.
 
“Management Fees” shall mean the Basic Fee and the Incentive Fee, collectively
and without distinction between them, and shall include the proceeds of any
business interruption insurance required to be paid to Select with respect to
lost Basic Fee or Incentive Fee or both.
 
“Mandatory Contracts” shall mean those Chain Contracts which, by the terms of
such contracts, are, or by determination by Select should be, regarded as
standard for all Select operated or managed Hyatt Place Hotels, and therefore in
which participation therein by Hyatt Place Hotels is mandatory, subject to the
terms of this Agreement. As set forth in Exhibit C-1, the costs of certain of
the Mandatory Contracts (referred to as “Chargeable Mandatory Contracts”) shall
be charged back to the Hotel, and such costs shall not be included in the flat
monthly rate referenced in the Shared Services Costs.
 
“Master Agreement” shall mean that Master Agreement dated October 3, 2006 among
Owner, Select and certain of their Affiliates.
 
“Non-Disturbance Agreement” shall mean either the “Creditor Non-Disturbance
Agreement” or the “Lessor Non-Disturbance Agreement” referred to in Section 4.3,
without distinction between them.
 
“Opening Date” shall mean the day on which the Hotel shall first open for
business to the public as a Hyatt Place Hotel, which shall occur only after
Franchisor has inspected and approved the Conversion and acknowledges in writing
that all requirements under the Franchise Agreement have been met for purposes
of converting the Hotel to a Hyatt Place Hotel and that the Hotel is fully
supplied and equipped and otherwise ready to open and operate as a Hyatt Place
Hotel.
 
“Operating Accounts” shall mean the bank accounts into which all funds received
from the management and operation of the Hotel, and all Owner contributions to
Hotel working capital, shall be deposited, and from which Select shall pay Hotel
costs and expenses. The Operating Accounts are continuing sole property of Owner
and shall be subject to use by Select during the Term in accordance with the
provisions of this Agreement.
 
“Operating Budget” shall have the meaning set forth in Section 3.10.
 
“Operating Equipment” shall mean linens, china, glassware, silverware, uniforms
and the like, excluding FFE.
 
“Owner’s Priority” shall mean an amount equal to nine and one-half percent
(9.5%) of the Project Costs.
 
“Owner’s Remittance Amount” shall have the meaning set forth in Section 3.14.
 
“Owner’s Return” shall have the meaning set forth in Section 5.1.
 
“Ownership Interest” shall mean the interest in Owner owned by any Ownership
Participant.
 
“Ownership Participant” shall mean any Person holding an ownership interest in
Owner.
 
“Person” shall mean 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.
 
“Pre-Opening Period” shall mean the period from the date hereof up to, but not
including, the Opening Date.
 
“Pre-Opening Services” shall mean the (i) services provided by the project
manager recommended by Select to assist in and to oversee the Conversion and to
coordinate with the vendors providing the FFE and Operating Equipment and
operating supplies and inventory items and (ii) any other service provided by
Select or its Affiliates to prepare and convert the Hotel as a Hyatt Place
Hotel, not otherwise covered under the Franchise Agreement, including without
limitation, recommendations of vendors and contractors to owner, assistance and
review of the budget for the Conversion and approval of contractors and vendors
hired by Owner.
 
“Pritzker Family” shall mean (i) all natural and adoptive lineal descendants of
Nicholas J. Pritzker, deceased, and their spouses; (ii) all trusts for the
benefit of any Person described in clause (i) and the trustees of such trusts in
their capacities as such; (iii) all legal representatives of any Person or
trusts described in clauses (i) or (ii); and (iv) all partnerships,
corporations, limited liability companies or other entities controlled by or
under common control with any Person, trust or other entity described in clauses
(i), (ii) or (iii). “Control” for purposes of this definition shall mean the
ability to direct or otherwise significantly affect the major policies,
activities or actions of any Person.
 
“Project Costs” means the sum of (a) the actual gross (i.e., undepreciated)
costs of the Hotel incurred and paid or accrued on or before December 31, 2006
by Owner, to the extent required to be capitalized under GAAP and (b) the
Conversion Cost; LESS the amount equal to four percent (4%) of the Gross
Receipts for twelve (12) months of the Fiscal Year during which the majority of
the Conversion occurs (anticipated to be 2007). As soon as practicable after
completion of the Conversion and after payment and determination of all costs
and expensed in connection thereof, the parties shall execute a supplemental
written agreement setting forth the amount of the Project Costs, which
supplemental written agreement shall thereafter constitute a part of this
Agreement and the Projected Costs reflected therein shall constitute the
Projects Costs throughout the term of this Agreement, notwithstanding any
subsequent or additional capital expenditures thereafter made or incurred, and
without reduction for depreciation or amortization.
 
“Proprietary Materials” shall mean (i) all software from time to time owned by,
or leased or licensed on an exclusive basis to, Select or Select’s Affiliates
(including, without limitation, revisions or enhancements to otherwise
commercially available software) together with related source and object codes,
(ii) copyrighted materials, (iii) operating handbooks (including employee
manuals, training materials, user manuals, and maintenance procedures), (iv)
operating policies and procedures, (v) reporting and budgeting formats, (vi)
Select promotional materials, (vii) recipes, (viii) customer information and
customer contact lists for guests, patrons and groups patronizing other Hyatt
Place Hotels (whether or not also patrons of the Hotel) or other hotels managed
by Select or its Affiliates, (ix) data and information on potential guests or
groups, not otherwise guests or groups patronizing the Hotel, (x) financial
records of Select and its Affiliates (except as otherwise herein expressly
provided), (xi) information relating to other Hyatt Place Hotels or other hotels
managed, operated or franchised by Select or its Affiliates, (xii) room rates
and other charges at hotels other than the Hotel, and (xiii) information that
Select reasonably determines may not be disclosed by Select or its Affiliates
under applicable Legal Requirements, including without limitation, privacy or
identity theft laws, in each case, as used in the operation of the Hotel as a
Hyatt Place Hotel but shall not include any of the foregoing to which Owner is
entitled pursuant to the Franchise Agreement.
 
“Purchasing Company” shall mean any company or companies designated by Select
from time to time, which may or may not be a Select Affiliate, to provide
purchasing services to Select operated or managed Hyatt Place Hotels as
described in Section 3.7.
 
“Refurbishing Program” shall mean (i) any program for replacement of or
additions to a major portion of FFE as part of a program to renovate a block of
not less than 25% of the guest rooms and suites in the Hotel at a single time or
(ii) any program of replacement of carpeting, furnishings, fixtures or wall
coverings in twenty-five percent (25%) or more of the Hotel public space square
footage, which shall mean the lobby, guest room corridors and café.
 
“Rosemont” shall mean Rosemont Project Management, LLC, an Affiliate of Select.
 
“Select’s Grossly Negligent Acts or Willful Misconduct” shall mean any gross
negligence, willful misconduct or fraud committed by Select or its Affiliates,
in the performance of Select’s duties under this Agreement.
 
“Senior Executive Personnel” shall mean the individuals employed from time to
time as the Regional or Divisional Vice President with oversight responsibility
for the Hotel, Senior Vice President-Operations and Senior Vice President and
Managing Director (or serving such functions, regardless of the specific titles
given to such individuals).
 
“Shared Services” shall mean those services provided to Hyatt Place Hotels by
Select or its Affiliates on a centralized services platform for finance,
accounting, human resources. information technology and other operating systems,
excluding, however, any services provided under the Franchise Agreement.
Attached hereto as Exhibit C-1 is a brief description of Select’s current
Mandatory Shared Services (as such term is defined in Exhibit C-1, and such
Services shall be subject to revision, addition or deletion from time to time)
provided to the Hotel and covered under Shared Services Costs. Select will not
add additional categories of Shared Services to those set forth as items 1-6 on
Exhibit C-1, without the prior approval of Owner, which shall not be
unreasonably withheld. Attached hereto as Exhibit C-2 is a brief description of
Select’s current Non-Mandatory Shared Services (as such term is defined in
Exhibit C-2, and such Services shall be subject to revision, addition or
deletion from time to time) available to the Hotel and other Hyatt Place Hotels,
not covered by Shared Services Costs, and for which Owner may elect to opt in at
additional cost.
 
“Shared Services Costs” shall mean all costs actually incurred or properly
accrued by Select or its Affiliates for the applicable period in respect of
Shared Services for Select managed or operated Hyatt Place Hotels and other
hotels managed or operated by Select or its Affiliates (including all hotels
owned by Select or its Affiliates), as set forth on Exhibit C-1, including
without limitation, any costs or expenses payable to third party vendors or
employees of Select or its Affiliates (including support personnel) engaged in
the rendition of such Shared Services as permitted by the express terms of this
Agreement. The Shared Services Costs shall be allocated to and be paid by the
Hotel on the same basis as the other hotels receiving Shared Services and may
include an allocation of certain shared costs such as employee costs, occupancy
costs, utilities and the like. The Shared Services Costs are comprised of (i) a
flat monthly rate of Three Thousand Dollars ($3,000) charged to the Hotel and
other hotels without any mark up, premium or profit for the items listed as 1-6
of Exhibit C-1; and (ii) costs associated with the Chargeable Mandatory
Contracts that are charged back to the Hotel listed as item 7 in Exhibit C-1.
The flat monthly rate for Shared Services Costs may be reasonably adjusted by
Select from time to time, but not more than once annually and Owner shall be
notified of any such adjustment when the Operating Budgets for the immediately
succeeding Fiscal Year are submitted to Owner by Select under the provisions of
Section 3.10. In any case in which employees of Select or any of its Affiliates
devote less than all of their time to the rendition of Shared Services, the cost
of such employees shall be allocated in a reasonable manner determined in good
faith by Select to reflect the portion of time devoted by such employees to
Shared Services. Other shared costs such as occupancy costs, utilities and the
like relating only partially to Shared Services shall likewise be allocated by
Select to Shared Services Costs on a fair and reasonable basis as determined in
good faith by Select. Any such allocation of shared personnel or other costs
made by Select in good faith and with the intention of fairly allocating such
costs shall be binding on the parties hereto. Shared Services Costs shall
include only the actual amounts thereof incurred by Select and its Affiliates,
and shall not be subject to any mark up, premium or profit. Any rebates,
commissions or discounts received by Select and its Affiliates from vendors or
service providers whose costs are included as part of Shared Services Costs,
shall be offset against Shared Services Costs, which offset shall be reflected
in any future adjustments of Shared Services Costs.
 
“Successor Manager” shall mean any Person (including Owner or any Affiliate of
Owner) designated by Owner as the manager and operator of the Hotel to succeed
Select upon expiration or earlier termination of this Agreement.
 
“System Standards” shall have the meaning assigned to such term in the Franchise
Agreement.
 
“Term” shall have the meaning set forth in Section 2.3.
 
“Uniform System” shall mean the “Uniform System of Accounts for the Lodging
Industry”, ninth revised edition, as adopted by the Hotel Lodging Association of
New York City, Inc., and the American Hotel & Lodging Association, as the same
may be modified, amended, supplemented or superseded by any subsequent editions
or revisions thereto, except where, and to the extent, a specific edition has
been specified in this Agreement.
 
“WARN” or “WARN Act” shall mean the United States Worker Adjustment Retraining
and Notification Act, together with any state and local laws, ordinances or
regulations of similar import applicable to the Hotel, all as the same may have
heretofore, or may hereafter, be amended.
 
1.2 References.
All references in this Agreement to particular sections or articles shall,
unless expressly otherwise provided or unless the context otherwise requires, be
deemed to refer to the specific sections or articles in this Agreement. In
addition, the words “hereof”, “herein”, “hereunder” and words of similar import
refer to this Agreement as a whole and not to any particular section or article.
ARTICLE II
 
 
Appointment of Manager and Term
 
2.1 Appointment of Manager.
Owner hereby appoints Select as its sole and exclusive agent to supervise,
direct, control, manage and operate the Hotel, and all of the facilities and
amenities comprising any part of the Hotel for the Term and Select hereby
accepts said appointment and shall supervise, direct, control, manage and
operate the Hotel during the Term strictly in accordance with and subject to,
the terms and conditions of this Agreement. In the performance of its duties and
obligations hereunder, Select agrees that it shall at all times (i) manage and
operate the Hotel for the account and benefit of the Owner in a business-like
and efficient manner in accordance with the terms of this Agreement and the
Franchise Agreement and (ii) use that degree of skill, care and diligence as is
customary and usual of operators of select service hotels in the United States,
subject in all cases to the System Standards and to the terms and conditions of
this Agreement.
2.2 Chain Conflicts.
Owner has chosen Select for the supervision, direction, control, management and
operation of the Hotel in substantial part because of Select’s management and
operation of a chain of select service hotels, and the benefits that Owner
expects to derive by including the Hotel as part of Hyatt Place Hotels pursuant
to the terms of this Agreement and the Franchise Agreement. Owner has
determined, on an overall basis that the benefits of operation as part of Hyatt
Place Hotels are substantial notwithstanding that not all Hyatt Place Hotels
will benefit equally by inclusion therein. Owner consents to the operation by
Select of its chain of hotels and to the addition of other hotels to the chain
of Hyatt Place Hotels wherever located (including the operation or addition of
other hotels that may otherwise be deemed competitive with the Hotel), subject
to the terms of the Franchise Agreement.
2.3 Term.
This Agreement shall be effective on and as of the date hereof. The Term of this
Agreement, however, shall commence on the Opening Date and shall continue until
11:59 p.m. (local time at the Hotel) on the earlier of (i) the tenth (10th)
anniversary from the Full Conversion Date, unless this Agreement is sooner
terminated as herein provided; or (ii) the expiration or termination of the
Franchise Agreement. On the Full Conversion Date, Owner and Select shall enter
into an addendum of this Agreement, in the form of Exhibit B attached hereto
setting forth the date of the Full Conversion Date and the date on which the
Term expires and a counterpart of such addendum shall be attached to and become
a part of each counterpart of this Agreement.
2.4 Gaming Regulations. As previously disclosed to Owner, certain Select
Affiliates are engaged, in the United States and certain foreign countries, in
the ownership and operation of gaming facilities. As such, Select and its
Affiliates are subject to licensing and other gaming regulations which, among
other things, prohibit association by Select with Persons deemed, by gaming
regulators, to be unsuitable. To be compliant with gaming regulations, Select
periodically undertakes a gaming compliance review. Owner agrees to use
reasonable efforts to provide Select such information regarding Owner and its
Affiliates and Ownership Participants (other than proprietary confidential or
non-public information) as Select reasonably requests to complete its compliance
review, and will use reasonable efforts to obtain such information from actual
or potential Lenders and Ground Lessors, all at Select’s sole cost and expense.
In addition, if, at any time during the Term, or during the Pre-Opening Period,
either Select or any of its Affiliates receives notice from any gaming
regulatory authority in any jurisdiction in which Select, or its said
Affiliates, conducts, or intends to conduct, gaming operations, requesting
information regarding Owner or any Ownership Participant, Owner agrees that it
shall, and shall cause said Ownership Participant to, provide such information
to Select promptly at Select’s sole cost and expense. In the event any gaming
regulator shall determine that any gaming license applied for or held by Select,
or any of its Affiliates, are subject to denial, revocation or non-renewal by
reason of Select’s association with Owner or any Ownership Participant, or any
Lender or Ground Lessor, Select shall have the right, exercisable by written
notice to Owner, to terminate this Agreement (and, if applicable, the Franchise
Agreement), and all the rights and obligations of the parties hereunder (and, if
applicable, under the Franchise Agreement), such termination to be effective
upon the date (not sooner than ninety (90) days nor later than one hundred
eighty (180) days after delivery of said notice) set forth in the notice from
Select to Owner.
2.5 Termination for Failure to Meet Owner’s Priority. Starting on the day which
is the fifth (5th) anniversary date from the Full Conversion Date, and each
anniversary thereafter, if the Adjusted NOI of the Hotel for the Fiscal Year
immediately preceding such anniversary date is less than Owner’s Priority,
either Owner or Select shall have the right to terminate this Agreement by
notifying the other of such termination in writing within ninety (90) days
following the applicable anniversary date, provided that Owner has received the
Adjusted NOI calculation from Select not less than thirty (30) days following
such anniversary date. If Owner does not receive the Adjusted NOI calculation
from Select within thirty (30) days following such anniversary date, the period
in which Owner may terminate this Agreement pursuant to this Section 2.5 shall
be extended for such number of days as are necessary to provide Owner with a
full 60 day period in which to terminate this Agreement following receipt of the
calculation of Adjusted NOI. The effective termination date shall be specified
in such notice, but shall not be on a day which is less than ninety (90) days or
more than one hundred twenty (120) days from the date of the written notice.
Upon such termination, unless the Franchise Agreement is then in default beyond
any applicable cure period, the Franchise Agreement shall continue to remain in
full force and effect pursuant to the terms thereof and the provisions of
Article XV shall govern with respect to the transition required for such
termination of this Agreement. Notwithstanding such termination, all amounts
incurred by Select and its Affiliates pursuant to the terms and conditions of
this Agreement shall be due and payable in accordance with the provisions of
this Agreement.
2.6 Termination of Existing Agreement. The Opening Date shall occur as soon as
practicable after the receipt of written approval of the Conversion from
Franchisor in accordance with the Franchise Agreement. In connection with the
execution hereof, Owner and Existing Manager shall execute a termination
agreement, terminating the Existing Agreement as of the Opening Date, which
termination agreement shall be in the form of Exhibit D attached hereto setting
forth the effective date of the termination.
2.7 Franchise Royalty Fee. Notwithstanding anything to the contrary in this
Agreement or the Franchise Agreement, during the first sixty (60) months after
the Full Conversion Date, Franchisor, by execution hereof, agrees that the
Royalty Fee (as defined in the Franchise Agreement) otherwise payable by Owner
for any Fiscal Year shall be reduced, up to the full amount of any such Royalty
Fee as calculated under the Franchise Agreement, in the event of any Deficiency
for such Fiscal Year, to the extent of the Deficiency remaining after reduction
of the Basic Fee in accordance with Section 5.1(b). The obligation of Franchisor
to reduce or eliminate its Royalty Fee in any Fiscal Year is limited to the full
amount of the Deficiency for such Fiscal Year only, and the Royalty Fee for any
Fiscal Year shall not be reduced as a result of any Deficiency in any prior or
subsequent Fiscal Year. Owner hereby agrees that, for any Fiscal Year, the
combined obligation of Franchisor and Select to reduce their respective fees as
set forth in this Section 2.7 and Section 5.1 shall not exceed the amount of
Deficiency for such Fiscal Year. In each Fiscal Year during which both the
Royalty Fee and the Basic Fee are reduced due to a Deficiency, the Basic Fee
shall be reduced in full before the Royalty Fee is reduced to cover any
remaining amount of the Deficiency. To the extent Franchisor has received any
such Royalty Fees it will remit such fees to Owner as determined herein. See
example set forth on Exhibit E hereto for a demonstration of this calculation.
ARTICLE III
 
 
Operating
 
3.1 Operating Authority in General.
Select shall operate the Hotel only for its intended purpose as a hotel
conforming to the System Standards. In performing its duties and
responsibilities hereunder, Select shall have the sole and exclusive right and
full authority to direct, manage and control all aspects of the management and
operation of the Hotel, in the discretion of Select, in accordance with the
terms and conditions of this Agreement and the System Standards. Such authority
shall include the right and power to negotiate and enter into such reasonable
contracts as may be reasonably necessary or advisable in connection with the
operation of the Hotel, the right to determine the terms of admittance, charges
for rooms, charges for entertainment, food and beverage, the right to set labor
policies (including wage rates and fringe benefits and other items comprising
Employee Costs), the right to advertise and market the Hotel alone, as part of
the chain of Hyatt Place Hotels or as part of the chain of other Hyatt hotels,
and all phases of promotion and publicity relating to the Hotel, and otherwise
to do and perform all such acts and things as may be reasonably necessary or
desirable to fulfill its express duties and obligations hereunder consistent
with and in accordance with the terms of this Agreement. Select shall not have
the right to enter into collective bargaining agreements and labor or other
employment agreements binding or affecting the Hotel (unless ordered to do so by
a court of law) without the consent of Owner, which consent may be withheld in
Owner’s sole discretion. Select and its Affiliates also shall not have the right
to enter into collective bargaining agreements and labor or other employment
agreements for other properties, whether master agreements or otherwise, that
govern the Hotel or agree to grant concessions or set wages that affect the
Hotel (unless ordered to do so by a court of law) without the consent of Owner,
which can be withheld in Owner’s sole discretion. In addition, Select shall have
reasonable and customary operating discretion and authority consistent with the
terms of this Agreement.
3.2 Specific Covenants, Duties and Obligations of Select.
In addition to each of the other covenants, duties and obligations of Select
hereunder, Select hereby agrees, throughout the Term, that it shall (and shall
have full right and authority to), subject in all events to the availability of
adequate funds in the Operating Accounts and the overall standard of skill, care
and diligence set forth in Section 2.1:
(a) Establish rates for hotel usage including room rates for individuals and
groups, charges for food and beverage and for use of recreational or other guest
facilities or amenities at the Hotel. Select shall not provide rooms, goods or
services on a complimentary or discount basis except as reasonably approved by
Owner and in accordance with the Franchise Agreement and Select’s standard
policies in effect, from time to time. The Hotel’s general manager shall have
the right, in his/her discretion, to grant discounted or complimentary rooms,
food, beverage or other hotel services, consistent with industry standards, when
he/she reasonably deems the same to be in the best business interests of the
Hotel. All such discounts and complimentary grants shall be disclosed at least
monthly to Owner.
(b) Establish and maintain a sound system of accounting and record keeping, with
adequate systems of internal accounting controls so as to enable Owner to comply
with applicable Legal Requirements. In addition to the foregoing, Select shall
develop and implement an appropriate records management and retention system and
policies, providing for the maintenance, storage and destruction of Hotel
records.
(c) Take good care of the Hotel and use reasonable efforts to maintain the same
in good condition and repair throughout the Term including all portions of the
Building, Building Systems, FFE and Operating Equipment, all in accordance with
maintenance programs established by Select from time to time and as required by
the Franchise Agreement for the Hotel, subject to ordinary wear and tear, the
availability of funds, the limitations on Capital Expenditures herein set forth,
and Force Majeure Causes. In connection with the foregoing, Select shall arrange
for all maintenance and service contracts reasonably necessary for the
maintenance and protection of the Hotel, and its various parts, including,
without limitation, elevator maintenance, extermination services, trash removal,
fuel supply and utility services, any of which may be provided through a
Purchasing Company contract or other contracts with other third parties and all
of which shall be set forth in the Annual Plan.
(d) Upon request of Owner from time to time, make available, for inspection (but
not copying) by Owner, copies of all employee handbooks, manuals, policies and
procedures, including, without limitation, copies of employee manuals and
handbooks, in effect at the Hotel, all of which are Proprietary Materials and
shall be kept confidential by Owner and returned to Select upon expiration or
earlier termination of this Agreement.
(e) Pay all bills and invoices for the Hotel other than Debt Service, real
estate and personal property taxes and insurance premiums (unless Owner has
elected to participate in Select’s insurance programs and then only to the
extent it has so elected) and cooperate with Owner in contesting any such taxes,
should Owner so elect.
(f) As agent for Owner, (i) enforce the rights of Owner under any leases,
licenses or concession agreements with respect to the Hotel, and provide for the
benefit of all tenants, licensees or concessionaires those Hotel services
required to be provided by Owner as landlord thereunder and (ii) without
limiting the generality of the foregoing, use commercially reasonable efforts to
collect all rents from tenants, licensees and concessionaires and shall deposit
the same in the Operating Accounts, all subject to the terms and conditions of
this Agreement.
(g) Adopt and implement appropriate credit policies and procedures, including,
without limitation, policies regarding the acceptance of credit cards, but
Select shall in no event be deemed a guarantor of the credit of any guest,
group, patron, travel agent or credit card company.
(h) On behalf of Owner, collect, account for and remit promptly to proper
governmental authorities all applicable excise, sales and use taxes or similar
governmental charges collected by the Hotel directly from patrons or guests such
as gross receipts, admission, cabaret, use or occupancy taxes, or similar or
equivalent taxes (except that portion thereof, if any, which is required to be
collected, or whose collection has been assumed, by a third party electronic
distribution intermediary such as, for example, Expedia.com), subject to the
collectibility thereof from such patrons or guests.
(i) Keep the Hotel fully stocked and equipped with all necessary inventories of
food, operating supplies, beverages and other consumables, and Operating
Equipment.
(j) Plan, prepare and supervise such marketing, advertising, sales, public
relations and promotional programs or campaigns for the benefit of the Hotel as
are necessary or appropriate in Select’s reasonable opinion, in addition to
participation by the Hotel in Shared Services and other programs as required by
the Franchise Agreement, including, without limitation, participation in airline
frequent traveler programs, all in accordance with the Annual Plan.
(k) As agent of Owner, comply with the terms of and perform the obligations
under the Franchise Agreement that are within the bounds of authority conferred
to Select hereunder.
3.3 Hotel Employees.
Select shall select, appoint and supervise all personnel for the proper
operation of the Hotel and in order to enable Select to perform its duties and
obligations under this Agreement. All employees of the Hotel shall be the
employees of Select, and Select may reimburse itself out of the Operating
Accounts for all Employee Costs. Unless the amount thereof has been deducted in
computing the amount of reimbursement to Select for Employee Costs, Select shall
remit to Owner, by deposit to the Operating Accounts, the full amount of the net
benefit of any tax credits received by Select by reason of employment at the
Hotel after deduction for any costs incurred in applying for or claiming said
tax credits. Select shall have the sole and exclusive right and authority to
direct Hotel employees and to hire, promote, demote, transfer in or transfer
out, discipline, suspend or terminate any and all Hotel employees; provided that
Owner shall have the right to approve the general manager and the senior
personnel at the Hotel, which approval shall not be unreasonably delayed or
withheld.
3.4 Limitations on Select’s Authority.
Notwithstanding anything herein contained to the contrary and in addition to any
other limitations and restrictions herein contained, the following provisions
shall constitute limitations and restrictions on the rights or authority of
Select hereunder:
(a) Except for an “Excluded Transaction”, and subject to the provisions of this
Agreement regarding contracts with Select Affiliates, Select shall not, without
the consent of Owner, enter into any contract or other arrangement (or series of
related contracts or arrangements) if the expenditures thereunder would, or are
reasonably anticipated to, exceed Twenty-Five Thousand Dollars ($25,000)
(subject to annual CPI adjustment) in the aggregate, or if the non-cancelable
term of such contract is in excess of one (1) year or would extend beyond the
Term. For purposes hereof, the term “Excluded Transaction” shall mean: (i)
employment or compensation arrangements so long as the same (other than fringe
benefit programs) do not involve a non-cancelable term in excess of one (1) year
and are in accordance with the Annual Plan; (ii) costs incurred under Chain
Contracts to the extent applicable to the Hotel and in accordance with the
Annual Plan; (iii) expenditures under the Capital Budget as provided in Section
3.10(c)(3); (iv) expenditures incident to the booking of rooms, food and
beverage and other Hotel business entered into in the ordinary course of
business and performing Hotel obligations under any such booking arrangements,
all in accordance with the Annual Plan; (v) contracts or expenditures reasonably
required in order to protect life, health, safety or property in cases of
emergency or casualty; (vi) contracts settling, or partially settling,
litigation matters (including, without limitation, arbitrations and
administrative proceedings) in accordance with the provisions of Section 3.11
and (vii) contracts or expenditures for customary operating costs, including
without limitation, contracts and expenditures for utility services in
accordance with the Annual Plan.
(b) Owner shall have the sole power and authority to settle any property
insurance claims and any condemnation awards regardless of amount.
(c) Owner shall have the right to approve the institution or defense of any
legal or equitable proceedings with respect to the Hotel, including the
selection of counsel, excluding, however, (i) routine collection litigation;
(ii) selection of labor counsel in connection with collective bargaining matters
and any other employment matters relating to the Hotel employees and (iii) other
matters involving ordinary day to day operations of the Hotel; in each of cases
(i), (ii) and (iii) of this Section 3.4(c), wherein the amount in controversy is
less than Twenty Five Thousand Dollars ($25,000) (subject to annual CPI
adjustment), all such excluded matters (including the selection of counsel with
respect thereto) are within the operating authority of Select.
(d) Except for Shared Services, Mandatory Contracts, and purchases made by or
through a Purchasing Company, as contemplated under the provisions of this
Agreement, Select shall not purchase goods, supplies or services from itself or
any Affiliate, or enter into any other transaction with an Affiliate of Select
wherein any portion of the cost thereof will be paid or reimbursed by the Hotel,
except with the prior written consent of Owner. Notwithstanding the foregoing,
recognizing the varied nature and scope of investments by or on behalf of the
Pritzker Family, there may be situations where a company in which the Pritzker
Family holds an interest does business, directly or indirectly, with Select or
individual Hyatt Place Hotels, in some cases without the knowledge of such
interest by Select. Subject to the provisions of the succeeding sentence of this
Section 3.4(d), any such transactions entered into in the ordinary course of
business will not be deemed a violation of the provisions of this Section.
However, where the Pritzker Family interest is material and is known or becomes
known to Select, Select will inform Owner, and will discontinue such
arrangements if Owner so requests.
(e) Select shall not enter into any leases for space in the Hotel without the
prior approval of Owner.
(f) No agreement shall be binding on Owner or the Hotel after the Termination of
this Agreement unless (i) it is terminable without penalty or termination cost
upon one month’s or less notice or (ii) the agreement is approved by Owner.
3.5 Excuse for Performance.
Anything in this Agreement to the contrary notwithstanding, Select shall be
excused from its obligations to operate the Hotel in conformity with its
obligations under this Agreement: (i) to the extent and whenever Select is
prevented from compliance with such standards by reason of the occurrence of a
Force Majeure Cause; (ii) to the extent of any breach by Owner of any provision
hereof; or (iii) to the extent and wherever there is herein provided a
limitation on Select’s abilities to expend funds, or an insufficiency of funds
available to Select, in respect of the Hotel when such limitation or
insufficiency shall reasonably prevent Select from complying with such
standards.
3.6 Shared Services.
Throughout the Term, Select shall make available to and for the benefit of the
Hotel the full range of Shared Services (as they may be added, deleted or
altered by Select, from time to time) made available to other Select operated or
managed Hyatt Place Hotels, from time to time. Notwithstanding the foregoing,
Owner shall have the right, at its option, from time to time, to elect not to
participate or receive any of the Shared Services that are listed on Exhibit C-2
hereto as “non-mandatory”. Unless otherwise set forth on Exhibit C-2, all other
Shared Services shall be deemed mandatory, subject to Owner’s rights set forth
in Section 3.7(c) hereof.
Upon request by Owner, Select shall disclose such financial statements regarding
the Shared Services listed in Exhibit C-2 as are reasonably necessary to
demonstrate the allocation of Shared Services Costs.
3.7 Purchasing.
During the Term, Select shall arrange for the purchase of Operating Equipment,
consumables and inventories and services, in compliance with the provisions of
this Agreement and specifically, the Annual Plan. All such purchases shall, at
Select’s discretion, be made either directly from vendors and suppliers or
through the services of one or more Purchasing Companies, subject to Owner’s
rights set forth in Section 3.7(c) hereof. In connection with any purchases of
goods or services for the Hotel, the following provisions shall apply:
(a) Neither Select, Rosemont nor any Purchasing Company shall make any purchases
of initial quantities of FFE or Operating Equipment, or of FFE in connection
with a Refurbishing Program, except with the express written approval of Owner.
With respect to any purchases contemplated by this subsection (a), Select shall
enter into separate contracts or agreements on behalf of Owner with Rosemont
setting forth the scope of purchasing services, the terms and conditions
applicable thereto, and the fees, commissions, rebates or other remuneration to
be paid in connection therewith.
(b) For all purchases of goods or services for the Hotel made pursuant to
Mandatory Contracts, Select shall receive no fees, rebates or commissions under
or with respect to such purchases, unless as otherwise specifically provided
hereunder, although certain of the Chain Contracts may provide for promotional
or other allowances that are then allocated among participating Hyatt Place
Hotels on a fair and equitable basis as reasonably determined by Select. Select
shall maintain a current list of Mandatory Contracts, which list shall be
provided to Owner, typically on an annual basis in connection with the delivery
of the Annual Plan or as otherwise requested by Owner. Owner shall have the
right to request at such times and in such detail as it shall reasonably request
that Select disclose the costs for the Hotel associated with each Chain
Contract, including on a cumulative annual basis and on a per room night basis,
and if any costs are shared with other properties, the basis for such sharing.
Other than for goods or services provided by Avendra, LLC, if such costs are in
excess of 105% of the costs that would have been charged by competing suppliers
of similar quality, then Owner shall have the right to request that Select use
the competing supplier only if they meet the System Standards and doing so will
not cause unreasonable contract administration obstacles for Select.
(c) Select currently makes various goods and services available to Hyatt Place
Hotels through a centralized purchasing program currently administered by
Avendra, LLC (“Avendra”), a procurement services company in which an Affiliate
of Select has a minority ownership interest, and which, for purposes of this
Agreement, is a Purchasing Company. While Select receives no fees, commissions,
rebates or other remuneration in connection with such purchasing services, the
Purchasing Company may receive fees, rebates or commissions on goods or services
so provided (which include a profit component). Owner shall be entitled from
time to time to elect whether, and the extent to which, the Hotel shall use the
services of the Purchasing Company (other than in the case of Mandatory
Contracts and Avendra, LLC), and, if not, may designate other purchasing agents,
vendors or suppliers for the Hotel, subject to the following conditions: (i) the
goods or services available from such purchasing agent, vendor or supplier shall
be of equal or better quality and at comparable or better prices, as those
purchased through Purchasing Company or from Select-designated vendors or
suppliers; and (ii) reliability of service and delivery schedules are comparable
to that available from Purchasing Company or Select-designated vendors and
suppliers. If Owner requests that Select obtain goods or services provided by
Avendra, LLC from another supplier or vendor at a lower price than that quoted
by Avendra, Select shall make good faith efforts to accommodate such request
subject to the conditions of (i) and (ii) above, and its obligations under its
agreement with Avendra.
(d) With respect to any purchases of FFE or Operating Equipment, other than as
provided in subsection (a) above and goods or services not covered by a
Mandatory Contract, if Select has the right and authority hereunder to make such
purchases, it may do so through Rosemont (or its successor), and may pay a fee
or commission to Rosemont from the Operating Accounts at the standard fee or
commission rate then being charged by Rosemont; provided, however, at any time
during the Term, Owner shall have the right to (i) direct in writing that Select
use the services of an alternate purchasing agent recommended by Owner for all
such purchases and/or (ii) designate local or other sources of supply therefor.
In either event, Select shall comply with any such written direction from Owner,
provided, however, the provisions of Section 3.7(c) regarding Owner designation
of vendors, suppliers and purchasing agents also shall be applicable to this
Section 3.7(d). Select shall provide Owner with information, including pricing
and all specifications reasonably requested by Owner to allow it to consider
alternative bid proposals in connection with any such purchases or contracts.
3.8 Legal Requirements.
On the Opening Date, Owner and the Hotel shall have met all applicable Legal
Requirements, including, without limitation, the procurement of all liquor and
other licenses required to meet such Legal Requirements. Throughout the Term,
Select shall operate the Hotel in compliance with all Legal Requirements
including the rules, regulations or orders of any agency or instrumentality
establishing life safety or fire safety standards applicable to the Hotel.
Following the Opening Date, Select shall maintain in Owner’s name or in Select’s
name, or both, as may be required by Legal Requirements, and shall keep in force
any and all licenses or permits required for the operation of the Hotel and its
related facilities, but not of permits (such as certificates of occupancy)
relating to the Hotel’s structure, which shall be the responsibility of Owner.
To the extent required in order to obtain or maintain licenses or permits, Owner
shall cooperate in all reasonable respects.
3.9 Operating Accounts.
Select shall establish one or more Operating Accounts in a bank or banks
designated by Owner, and also shall maintain sufficient sums on hand at the
Hotel in house banks and petty cash funds to meet cash needs of Hotel
operations. Absent unusual circumstances, the cash balance maintained in such
Operating Accounts is not expected to exceed Thirty Thousand Dollars ($30,000).
All such Operating Accounts shall be maintained in the name of Select as agent
for Owner, and all funds deposited therein shall be the sole property of Owner.
All monies transferred to Select as working capital by Owner shall be deposited
in the Operating Accounts, together with all monies received by Select from the
operation of the Hotel. So long as and to the extent there are available funds
in the Operating Accounts, Select shall pay out of such accounts all costs and
expenses incurred in connection with the operation of the Hotel (other than
property taxes, Debt Service and insurance premiums, unless Owner has opted to
participate in the insurance program provided by Select) and all other amounts
to be paid by Select under this Agreement. Checks or other documents of
withdrawal drawn upon the Operating Accounts shall be signed exclusively by
representatives of Select or Hotel employees designated by Select, as agent for
Owner. All persons drawing on such accounts shall be bonded or insured. Owner
may grant security interests in the Operating Accounts to secure the obligations
of Owner to Lenders and Select acknowledges that Owner or its Affiliates has
granted security interests in the Operating Accounts pursuant to the Existing
Loan Documents.
Unless due to Select’s Grossly Negligent Acts or Willful Misconduct, any loss
suffered in an Operating Account shall be borne by Owner and Select shall have
no liability or responsibility therefor.
Select will provide Owner with regular accounting of all deposits to and
withdrawals from the Operating Accounts on a monthly basis.
3.10 Annual Plan.
(a) Preparation and Submission.
(1) No later than November 1st of each calendar year during the Term, Select
will prepare and submit to Owner for the following calendar year by month (i) a
forecasted budget of the Hotel’s operations, including forecasts of revenues and
departmental operating expenses and the assumptions underlying the same; (ii) a
proposed marketing plan; and (iii) a proposed budget of Capital Expenditures
(for this purpose, inclusive of additions to and replacements of FFE). The
materials described in clauses (i) and (ii) above are herein collectively
referred to as the “Operating Budget”, the budget referred to in clause (iii)
above is herein referred to as the “Capital Budget” and they are collectively
referred to as the “Annual Plan”.
(2) The Annual Plan shall be prepared in accordance with Select’s standard
internal planning and budgeting procedures and shall be in a format reasonably
acceptable to Owner. Owner agrees that it shall promptly review all Operating
Budgets and Capital Budgets upon receipt, and Select agrees that it shall
provide Owner with such additional and supplemental information with respect
thereto as shall be reasonably requested by Owner.
(3) Promptly after submission of the Annual Plan, representatives of Owner and
Select shall meet at the Hotel or at such other location as may be mutually
agreed and at a mutually convenient time to discuss, and attempt in good faith
to agree upon, the Annual Plan as provided below.
(b) Operating Budget.
(1) All items of expenditure contained in the Operating Budget shall be subject
to approval of Owner except for the following (unless otherwise specifically set
forth herein): (i) costs associated with contracts or arrangements Select has
made for Select operated or managed Hyatt Place Hotels or other hotels operated
or managed by Select or its Affiliates in accordance with Select’s authority
under the terms of this Agreement including, without limitation, Mandatory
Contracts; (ii)menu prices; (iii) individual compensation levels for Hotel
employees or for Select chain-wide or regional fringe benefit programs; or (iv)
other expenditures required to be made under this Agreement and the Franchise
Agreement including, without limitation, expenditures for Management Fees and
Shared Services Costs. Owner shall not withhold its approval for any
expenditures that are reasonably necessary, in nature or amount, to enable the
Hotel to continue operating in accordance with the System Standards and in
compliance with the terms of the Franchise Agreement.
(2) Subject to the foregoing, Select shall take into consideration the views and
suggestions of Owner regarding the Operating Budget. Owner and Select shall
attempt, in good faith, to reach a mutually satisfactory agreement, and
incorporate any such agreements into the Operating Budget. Owner shall have the
right to suggest changes in operating policies and in the proposed Operating
Budget that it considers reasonably necessary to achieve the objectives of
near-term and long-term maximization of Hotel profits, subject to the System
Standards. To the extent Select disagrees with Owner’s suggestions and comments,
Select shall provide written explanations for its disagreements. Promptly
following the foregoing discussions and explanations, Select shall submit a
revised Operating Budget for further comment and discussion in the manner set
forth above. Thereafter, the parties shall continue to discuss the Operating
Budget until such time as both Select and Owner shall have reached agreement on
all items comprising the Operating Budget for which Owner has approval rights
hereunder.
(3) Until such time as the parties have agreed on all line items of the proposed
Operating Budget for which Owner has approval rights hereunder, Select shall
have the right to operate the Hotel in accordance with an Operating Budget
comprised of those line items that do not require Owner approval hereunder and
those line items that have been agreed upon by Owner and Select. For those line
items for which Owner has approval rights hereunder, but not yet approved by
Owner, Select shall operate in accordance with the standards of operation and
operating policies in effect during the preceding Fiscal Year for those line
items (or, for the Hotel’s first Fiscal Year, as proposed by Select at the
opening of the Hotel). Once the Operating Budget has been approved by Owner and
Select, Select agrees that it shall use commercially reasonable efforts to
operate the Hotel in a manner consistent with the approved Operating Budget.
(4) Notwithstanding anything to the contrary in this Section 3.10, the forecasts
of revenues and estimated expenses contained in the Operating Budget represent
Select’s best estimate of the same for the following Fiscal Year and not in any
way a guarantee of actual results. Actual revenues and expenses can vary from
forecasts and estimates for reasons beyond the reasonable control of Select due
to unanticipated market circumstances. Owner acknowledges that so long as Select
uses commercially reasonable efforts to operate the Hotel in a manner consistent
with the approved Operating Budget and the terms of this Agreement, Select shall
have no liability to Owner, and shall not otherwise be deemed in Default
hereunder, if actual operating results vary from the Operating Budget.
(5) If at any time during any Fiscal Year, Select anticipates that revenues
shall be materially less or expenditures shall be materially more than those
forecasted in the Operating Budget, Select shall promptly so notify Owner and
may, but has no obligation to, submit revisions to the Operating Budget for
Owner approval as provided above, and the need for any such reforecasting of the
Annual Plan, or any portion of it, shall not be deemed an Event of Default by
Select hereunder.
(c) Capital Budget Approval.
All items of expenditure contained in the Capital Budget shall be subject to
Owner’s prior approval, and Owner and Select will cooperate in good faith to
finalize within 90 days of receipt all Capital Budgets or relevant portions
thereof that are reasonably necessary for the operation of the Hotel.
Owner shall administer the Capital Budget and oversee all expenditures under the
Capital Budget. Select may not incur Capital Expenditures except for the
following: (i) expenditures, including Capital Expenditures, which Select
reasonably deems necessary to minimize personal injury and property damage in
cases of casualty or emergency, and (ii) expenditures for emergency purchases,
including Capital Expenditures, that Select reasonably deems necessary in order
to provide essential guest services consistent with System Standards.
3.11 Legal Proceedings.
Subject to Section 3.4(c), legal proceedings arising in the ordinary course of
business of the Hotel, such as collections, enforcement of Hotel contracts,
proceedings against Hotel guests or commercial tenants for amounts due, may be
instituted by Select in its name using counsel designated by Select. In
addition, Select shall have the right to defend, through counsel designated by
it, legal proceedings brought against Select arising from or relating to the
operation of the Hotel, against the Hotel together with one or more other Hyatt
Place Hotels, or against the Hotel in the ordinary course of business. Select
shall forward to insurer all claims against Owner or Select arising out of the
management or operation of the Hotel that are covered in whole or in part by
insurance. Owner and Select shall cooperate with each other in such legal
proceedings. The costs of all legal proceedings arising from or relating to the
operation of the Hotel (other than any claims relating to Title III of the
Americans with Disabilities Act and environmental laws relating to the Site
(unless arising out of requirements set forth in the Master Agreement or the
Franchise Agreement), the defense and costs of which shall not be deemed Hotel
expenses but shall be paid exclusively by Owner), whether incurred by Owner or
Select, inclusive of damages, awards, fines and penalties, if any, shall be
deemed Hotel expenses and be deducted in computing Adjusted NOI, except in cases
of gross negligence, willful misconduct, recklessness or intentional misconduct
of Owner or in cases of Select’s Grossly Negligent Acts or Willful Misconduct,
in which event all such costs of such proceedings, whether incurred by Select or
Owner, shall be borne by the party whose conduct resulted therein. The costs
relating to actions or proceedings against Select relating to the Hotel together
with one or more other Hyatt Place Hotels, shall (subject to the limitations set
forth in the preceding sentence) be allocated on a fair and reasonable basis
among the Hotel and such other Hyatt Place Hotels to which such proceedings may
relate.
3.12 Maintenance Cap Ex Reserve.
During the Term, for purposes of calculating Adjusted NOI, there shall be
deducted from Income After Undistributed Operating Expenses, on a monthly basis,
an amount equal to three percent (3%) of the Gross Receipts for each calendar
month through and including the end of the first (1st) Fiscal Year hereunder;
3.5% of the Gross Receipts for each calendar month thereafter until the end of
the eighth month of the second (2nd) Fiscal Year hereunder; 3.5% of the Gross
Receipts for the last four calendar months of the second (2nd) Fiscal Year
hereunder if Full Conversion occurs prior to September 1 of that Fiscal Year;
3.25% of the Gross Receipts for the last four calendar months of the second
(2nd) Fiscal Year hereunder if Full Conversion does not occur prior to September
1 of that Fiscal Year; four percent (4%) of the Gross Receipts for each calendar
month thereafter until the end of the fourth (4th) Fiscal Year hereunder; five
percent (5%) of the Gross Receipts for each calendar month thereafter until the
end of the fifth (5th) Fiscal Year; and four percent (4%) of the Gross Receipts
for each calendar month thereafter.
3.13 Intentionally Omitted.
3.14 Distributions to Owner.
Each week and at the end of each month during the Term, Select shall remit to
Owner out of the Operating Accounts by wire transfer the amount (“Owner’s
Remittance Amount”) by which the total funds then in the Operating Accounts
exceed Thirty Thousand Dollars ($30,000). Each remittance shall be paid to Owner
by wire transfer pursuant to written instructions delivered to Select, or to
such other account or accounts as Owner may, from time to time, designate in a
notice to Select. Notwithstanding the foregoing, if Select reasonably
anticipates that circumstances will require the cash balance in the Operating
Accounts to exceed $30,000 in order to carry on the uninterrupted operation of
the Hotel in accordance with System Standards and enable Select to perform its
obligations hereunder, upon Select’s request, Owner shall, at its option (i)
permit Select to withhold additional funds or (ii) wire sufficient funds into
the Operating Accounts to meet such circumstances and Owner will reasonably
cooperate with such request.
ARTICLE IV
 
 
Financing
 
4.1 Owner Financing.
Select acknowledges that Owner intends to finance the construction, development,
furnishing and equipping of the Hotel through equity and/or debt financing.
Owner shall have full discretion in arranging financing, all of which shall be
arranged at the sole cost and expense of Owner. Owner shall likewise have the
right to refinance any of Owner’s previous financing.
4.2 Non-Disturbance.
A Subordination Non-Disturbance and Attornment agreement (“SNDA”) shall be
requested by Owner for each financing. The granting of such SNDA shall be
determined solely by the lender in its sole and absolute discretion. Select
agrees to execute any and all subordination agreements (with or without
non-disturbance) and other documents reasonably requested by lender provided
that such documents do not require Select to perform services without
compensation or in contravention of Select’s rights and obligations under this
Agreement.
Ground Lease. No Ground Lease shall be entered into with respect to the Hotel,
including, without limitation, any Ground Lease between Owner and any Affiliate
of Owner, unless the Ground Lessor shall theretofore or concurrently therewith
have entered into a “Lessor Non-Disturbance Agreement” with Select, whereby,
upon a termination of the said Ground Lease during the Term, Select shall attorn
to the Ground Lessor with respect to this Agreement, and the Ground Lessor shall
agree, for itself and any successor-in-interest under the Ground Lease, to
accept such attornment, to assume the obligations of Owner hereunder, and to not
disturb or otherwise interfere with Select’s rights, authority or privileges
hereunder except in accordance with the express provisions of this Agreement.
4.3 Specific Covenants for the Benefit of Lenders.
[To be included in exhibit.]
4.4 Intentionally Omitted.
4.5 Estoppel Certificates.
Upon written request and within thirty (30) days of receipt of such request,
Select shall execute and deliver to Owner or any Lender or Ground Lessor a
certificate: (i) certifying that this Agreement 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 actual knowledge of the Senior Vice President and
Managing Director, any Default by Owner exists, and if so, specifying each such
Default; and (iii) providing any additional information reasonably requested by
Owner or a Lender or Ground Lessor; provided, however, that in no event shall
Select be required to agree to any waivers with respect to this Agreement or
other agreements in effect between the parties. On similar notice from Select,
Owner will use its reasonable good faith efforts to obtain a similar certificate
from any Lender (with respect to any mortgage on the Hotel), or any Ground
Lessor (with respect to any Ground Lease).
ARTICLE V
 
 
Management Fees and Reimbursements
 
5.1 Management Fees.
For the services to be rendered by Select under this Agreement and subject to
the terms of Section 5.2, Owner shall pay Management Fees to Select as follows:
(a) Until the Guarantee Termination Date (if the Opening Date occurs prior to
such day), Select shall receive Management Fees equal to the amount of the
Excess Cash Flow (as defined in Schedule 3) in excess of “Owner’s Return”.
“Owner’s Return” shall mean the sum of (i) the amount of the Threshold (as
defined in Schedule 3) and (ii) seventy-five percent (75%) of the Excess Cash
Flow above or below the amount of the Threshold, provided however, if the
Management Fees for any Fiscal Year are in excess of the Initial Cap (as defined
in Schedule 3), as part of Owner’s Return, Owner shall be entitled to receive as
part of Owner’s Return, an additional amount equal to ninety percent (90%) of
the Excess Cash Flow remaining after the payment of the amount of the Initial
Cap. Notwithstanding the foregoing, if during any Fiscal Year, the amount of
Owner’s Return is less than the Minimum Return (as defined in Schedule 3),
Select shall fund the difference between the amount of the Minimum Return and
the amount of Owner’s Return for such Fiscal Year. Owner and Select hereby agree
that the definitions set forth on Schedule 3 are derived from the Existing
Agreement and shall be in effect only until the Guaranty Termination Date and
for purposes of and in connection with this Section 5.1(a) only and it is the
intention of the parties that this Section 5.1(a) provide for the same rights
and obligations with respect to the management fees and consistent with the
Existing Agreement and with past practice of Owner and the Existing Managers.
(b) On and after the Guarantee Termination Date, a basic fee (“Basic Fee”) equal
to three percent (3%) of the Gross Receipts, provided however, if in any given
Fiscal Year, there is a Deficiency, as calculated monthly on a cumulative Fiscal
Year-to-Date basis, with Owner’s Priority being calculated on a monthly and
Fiscal Year-to-Date basis by multiplying (A) Project Costs by (B) 9.5% and
further multiplying the product thereof by the number of months elapsed in the
Fiscal Year divided by 12, then the Basic Fee shall be reduced by an amount
equal to the full amount of the Deficiency, provided however, if the amount of
the Fiscal Year-to-Date Deficiency exceeds the full amount of the Basic Fee for
the Fiscal Year-to-Date, Select shall have no other obligations to Owner with
respect to any remaining Deficiency, subject to the Franchisor complying with
its obligations under Section 2.7 hereof. The obligation of Select to reduce or
eliminate its Basic Fee as to any Fiscal Year is limited to the full amount of
the Deficiency for such Fiscal Year only, and Owner and Select hereby agree that
the Basic Fee for any Fiscal Year shall not be reduced as a result of any
Deficiency in any prior or subsequent Fiscal Year.
(c) On and after the Guarantee Termination Date, an incentive fee (“Incentive
Fee”) equal to ten percent (10%) of the amount of Excess Adjusted NOI.
Except for the Management Fees and the fees and reimbursements to Select and its
Affiliates referred to herein and in the Franchise Agreement, Select and its
Affiliates shall not be entitled to any fees or other form of remuneration or
compensation for any services provided to the Hotel. Other than as provided in
this Section 5.1, there shall be no reduction in the Basic Fee or other
liability to Select for any deficit in Adjusted NOI for any Fiscal Year, nor
shall any deficit in Adjusted NOI be carried back to any previous Fiscal Year or
carried forward to any subsequent Fiscal Year. Notwithstanding the foregoing,
Owner hereby assigns and agrees to deliver to Select (to be retained by Select),
promptly upon receipt thereof by Owner, to the extent of any recovery of
business interruption insurance attributable to the Management Fees payable
hereunder, the amount of the Management Fees required to be covered by business
interruption insurance under Section 9.1.
An example of the calculation and payment of Basic Fee and Incentive Fee and the
reduction of fees is set forth on Exhibit E hereto, including for periods that
are less than a full calendar year.
5.2 Time and Manner of Payment.
Subject to the terms of Section 2.7 and Section 5.1, with respect to any Fiscal
Year and each calendar month included therein, Select shall calculate and
deliver to Owner an accounting of Owner’s Return, any Basic Fee, Incentive Fee
and Royalty Fee, which amounts due or owed shall be payable in monthly
installments of the respective amounts provided in Section 2.7 and Section 5.1
hereof by Select (i) to Select and Franchisor by withdrawing the same from the
Operating Accounts or to Owner by depositing same into the Operating Accounts,
or (ii) if prior to the Guarantee Termination Date Owner’s Return is less than
the Minimum Return for such calendar month, to Owner by depositing the same into
the Operating Accounts, in each of (i) and (ii), within 15 days after Select
shall have furnished to Owner the unaudited financial statement for such
calendar month pursuant to Section 6.2 hereof to which Owner had not then
objected pursuant to Section 6.3 hereof.
5.3 Shared Services Costs and Franchise Fees.
In addition to the Management Fees and all other amounts required to be paid to
Select and its Affiliates under this Agreement, Owner shall pay to Select and
its Affiliates the Hotel’s Shared Services Costs set forth in the agreed upon
Annual Plan. Shared Services Costs shall be assessed to the Hotel (and paid by
Owner) on the same basis (although not necessarily in the same overall dollar
amount) as assessed to other Select managed or operated Hyatt Place Hotels and
other hotels managed or operated by Select or its Affiliates (including hotels
owned by Select or its Affiliates) receiving Shared Services. Such amounts shall
be paid to Select, on a monthly basis, by Select’s withdrawing the same from the
Operating Accounts on scheduled dates during such month when such amounts are
generally payable to Select by other Hyatt Place Hotels. In the case of fees due
under the Franchise Agreement, subject to provisions of Section 2.7, Owner
hereby authorizes Select on behalf of Owner, to pay such fees out of the
Operating Accounts consistent with the terms of and requirements under the
Franchise Agreement. If the Hotel is closed as a result of casualty or Force
Majeure Cause and remains closed for reasons beyond the control of both parties,
Owner shall not be obligated for payment of Shared Services Costs during the
casualty and Force Majeure Event. However, if a portion of the Hotel remains
open or in Select’s reasonable opinion is capable of operation, Owner shall pay
Shared Services Costs on a pro rata basis to the extent of the Hotel’s ability
to operate for the duration of the casualty or Force Majeure Event until
expiration or earlier termination of this Agreement, provided that Select
provides to Owner a complete accounting of any such fees.
5.4 Reimbursements.
In addition to the Management Fees, Shared Services Costs, and any other amounts
required to be paid to Select or its Affiliates in accordance with the
provisions of this Agreement or the Franchise Agreement, Owner shall reimburse
Select as follows: (i) for all Employee Costs with respect to the Hotel
employees; (ii) travel and other reasonable out-of-pocket expenses of Select
personnel when assigned to temporary full-time duty at the Hotel (for the period
of such assignment not to exceed ninety (90) days without approval by Owner);
(iii) travel and other reasonable out-of-pocket expenses of Select’s divisional
or corporate headquarters office staff when traveling for the benefit of the
Hotel; (iv) reasonable relocation costs for employees transferred to the Hotel
not to exceed $25,000 (unless Owner reasonably approves additional relocation
costs); (v) insurance premiums for coverage maintained by Select with respect to
the Hotel pursuant to Section 9.2 and for any additional coverage under Select
chain-wide policies made available to the Hotel in which Owner elects to
participate as provided in Section 9.4; and (vi) all third party costs and
expenses incurred by Select, including, without limitation, reasonable
attorneys’ fees, in connection with any assistance requested by Owner (such as,
for example, but without limitation, execution of consents, agreements or other
documents) relating to any sale, transfer, leasing or financing of the Hotel by
Owner. The reimbursements provided for in this Section 5.4 shall include only
direct out-of-pocket expenses without any overhead and shall be allocated to the
Hotel on a direct pass through basis, without mark up or profit, and after
deduction for any portions thereof properly allocated to any other Hyatt Place
Hotel.
5.5 Tax on Reimbursements.
If Select shall be subject to any tax relating to the operation of the Hotel
(including a fee, charge or other imposition for the issuance of a license,
permit or the privilege to conduct business at the Hotel), imposed, levied or
assessed by any governmental agency or instrumentality (other than income taxes,
corporate franchise taxes and other amounts due and payable by Select but not
directly related to Hotel operations) due and measured, in whole or in part, by
reference to reimbursements to Select by Owner for compensation, employment
taxes, fringe benefits or Shared Services Costs paid or payable hereunder, then
Owner will indemnify and hold Select harmless from and against any and all
liability for such tax or taxes to the extent so measured. Any payments made by
Owner in this connection shall be paid from the Operating Accounts and be
deducted in computing Adjusted NOI for the period incurred. At Owner’s request,
Select will contest, by appropriate proceedings, any liability for any tax which
is the subject of the foregoing indemnification, in which case all expenses,
attorneys’ fees and costs incurred by Select in contesting or defending itself
against such liability shall be deemed a Hotel expense payable from the
Operating Accounts.
 
ARTICLE VI
 
 
Books and Records and Reporting
 
6.1 Financial Records.
Select shall keep full and adequate books of account and other records
reflecting the financial results of the operation of the Hotel (the “Financial
Records”). Such Financial Records shall, at all times, be kept in all material
respects in accordance with the Uniform System and shall be in a form reasonably
acceptable to Owner. The Financial Records shall remain the property of Owner,
and shall be available at the corporate headquarters of Select for inspection
and copying by Owner and its representatives at all reasonable times upon
reasonable advance notice to Select. Financial Records shall be maintained by
Select pursuant to Select’s records retention programs and policies in effect
from time to time, a copy of which shall be made available to Owner.
6.2 Financials.
On a monthly, quarterly and annual basis, no later than twelve (12) days
following the end of each monthly and quarterly period, and no later than
fourteen (14) days following the end of each Fiscal Year, Select shall deliver
the following financial statements (the “Financial Statements”) for the month,
quarter or Fiscal Year just ended containing (i) a report on the results of
operations of the Hotel showing, in reasonable detail, Gross Receipts for such
period by department, Adjusted NOI for such period, and the amount of Management
Fees, Shared Services Costs and Franchise Agreement fees paid to Select and its
Affiliates during such period and (ii) a comparison of the results of operations
for the Hotel for such period then ended with the Operating Budget and with the
same period in the immediately preceding Fiscal Year. If Owner desires to obtain
an audit of the financial books and records of the Hotel, it shall do so by
retaining a firm of independent certified public accountants (“Accountants”)
selected by Owner. In connection with such audit, Select shall make available to
the Accountants all Financial Records that they may request and shall otherwise
cooperate in all reasonable respects for the performance of the audit. The cost
of the audit shall be an operating expense (and deducted in computing Adjusted
NOI) to be charged in the Fiscal Year in which the audit is conducted and be
paid from the Operating Accounts.
6.3 Reports.
During the Term, (a) Select shall deliver to Owner, within 14 days after notice
from Owner, a SAS 70 internal control letter with respect to the Affiliate
Hotels, in form and substance reasonably satisfactory to Owner, and (b) on a
daily basis, Select shall submit to Owner via electronic transmission, the
following room statistics for rooms at the Hotel for the preceding day: (i)
rooms available, (ii) rooms sold, (iii) rooms revenue, (iv) rooms out of order,
and (v) number of rooms complimented. If Owner requests a SAS 70 letter, which
letter must be applicable to all Affiliate Hotels, Owner shall pay the first
$25,000 of Select’s direct cost and expense of such a letter for the Hotel and
all Affiliate Hotels collectively, and then shall pay fifty percent (50%) of the
remaining balance of such cost and expense for the Hotel and Affiliate Hotels
collectively. Notwithstanding the foregoing, if Select is required to provide a
SAS 70 letter for owners of other Hyatt Place hotels, the direct cost and
expense of such letter shall be equitably shared among such other owners and
Owner.
The Financial Statements delivered and all information contained therein, shall
be binding and conclusive on the parties hereto unless, within sixty (60) days
following the delivery thereof, either party shall deliver to the other party
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 any matter set forth in the Financial Statements
within sixty (60) days after delivery of the aforesaid notice of objection,
either party shall have the right to cause such dispute to be resolved by
arbitration conducted in accordance with the provisions of Article XII below.
6.4 Meetings.
Select agrees that it shall meet with Owner and its representatives, from time
to time at the request of Owner to discuss any of the matters set forth in any
of the financial or other reports delivered pursuant to Section 6.3 or to
discuss matters pertaining to the operation of the Hotel. Such meetings shall be
conducted between Owner and one of the Senior Executive Personnel.
ARTICLE VII
 
 
Indemnification
 
7.1 Indemnification of Select.
To the extent Select is not fully recompensed by insurance, Owner hereby agrees
to indemnify, defend and hold Select (and its officers, directors, shareholders,
agents, employees and Affiliates) free and harmless of and from any and all
damages, liability, cost, claim or expense, including, without limitation,
reasonable attorneys fees and expenses, arising out of or in any way related to
the Hotel or to the performance by Select of its duties hereunder in accordance
with the terms hereof, other than any such damages, liabilities, costs, claims
or expenses (i) arising out of or in any way related to Select’s negligent
selection, appointment, supervision or treatment of, conduct concerning,
benefits or compensation provided to, or decision or actions with respect to,
employees of the Hotel (which, as set forth in Section 3.3 above, are Select
employees), applicants for employment with the Hotel, or other personnel,
consultants or contractors used by Select for operation of the Hotel; or (ii)
that arise out of or are attributable to Select’s Grossly Negligent Acts or
Willful Misconduct; provided, however, Owner shall have no liability hereunder
to the extent Select is reimbursed for its loss from the proceeds of insurance
maintained in accordance with the provisions of Article IX, and Select agrees
that it will, in good faith, pursue its available insurance recoveries prior to
making demand on Owner for indemnity. Amounts paid by Owner in fulfillment of
its indemnification obligations under this Section 7.1 shall constitute Hotel
expenses and shall be deducted in computing Adjusted NOI for the Fiscal Year in
which they are incurred.
 
7.2 Indemnification of Owner.
To the extent Owner is not fully recompensed by insurance, Select hereby agrees
to indemnify, defend and hold Owner (its partners, shareholders, officers,
directors, agents, employees and Affiliates) free and harmless of and from any
and all damages, liabilities, costs, claims or expenses, including, without
limitation, attorneys fees and expenses arising out of or in any way relating to
(i) Select’s operations, business or conduct other than in connection with the
performance of its duties hereunder; (ii) Select’s Grossly Negligent Acts or
Willful Misconduct; or (iii) the breach of this Agreement by Select; provided,
however, Select shall have no liability hereunder to the extent Owner is
reimbursed for its loss from the proceeds of insurance. Owner agrees that it
will, in good faith, pursue its available insurance recoveries prior to making
demand on Select for indemnity. Amounts paid by Select in fulfillment of its
indemnification obligations under this Section 7.2, shall not be deemed an
expense of the operation of the Hotel and shall be borne and paid for solely by
Select.
7.3 Survival.
The indemnification provisions of this Agreement as set forth in this Article
VII shall survive the expiration or earlier termination of this Agreement, but
shall relate solely to events occurring or matters arising during the Term.
ARTICLE VIII
 
 
Specific Covenants and Representations
 
8.1 General Covenant of Owner.
In addition to each of the other covenants and obligations of Owner herein
contained, Owner hereby agrees to the additional covenants and agreements as set
forth in this Article VIII.
8.2 Working Capital.
Except as otherwise provided in this Agreement, at all times during the Term,
Owner shall cause sufficient working capital funds to be in the Operating
Accounts to ensure (i) the timely payment of all current liabilities of the
Hotel (including, without limitation, Management Fees and all other amounts
payable to Select and its Affiliates hereunder, and all other items entering
into the calculation of Adjusted NOI (other than property taxes, Debt Service
and insurance premiums, unless Owner has opted to participate in the insurance
program provided by Select) and (ii) the uninterrupted and efficient operation
of the Hotel in accordance with the terms of this Agreement. On the Opening
Date, Owner shall have adequate funds in the Operating Accounts and all
necessary inventories of food, beverages and operating supplies shall be ready
and available at the Hotel.
8.3 Payment of Taxes.
During the Term, Owner shall, prior to delinquency, pay all real and personal
property taxes assessed against the Hotel other than those being contested in
good faith. Such property taxes for any period that includes the Opening Date or
the date on which the Term shall expire or otherwise terminate shall be prorated
and only the portion of such property taxes applicable to the Term shall be
deducted in computing Adjusted NOI hereunder.
8.4 Title.
Owner represents and warrants that it is an entity duly organized in its
jurisdiction of organization as set forth herein and has all necessary authority
and approvals to enter into this Agreement and perform its obligations
hereunder. Owner further covenants that throughout the Term either Owner, its
successor or successors-in-interest, shall own the Hotel or have a valid and
subsisting leasehold interest therein sufficient to enable Select to perform its
duties and obligations hereunder in accordance with the provisions of this
Agreement. Without limiting the generality of the foregoing, Owner covenants and
agrees, for the benefit of Select, as follows:
(a) So long as Select is not in Default hereunder (and so long as any applicable
cure period has not expired), Select shall be entitled to operate the Hotel for
the Term, and Owner shall, at no expense to Select, undertake and prosecute all
appropriate actions, judicial or otherwise, to protect the title or leasehold
interest of Owner in the Hotel to enable Select to operate the Hotel in
accordance with the provisions of this Agreement, without any interruption.
(b) Keep and maintain, or cause to be kept and maintained, any leases covering
real or personal property or other agreements necessary to the ownership or
control of the Hotel, or any part thereof, in full force and effect and free
from default. Owner shall pay and discharge, or cause to be paid and discharged,
any ground rents or other rental payments or other charges payable by Owner in
respect of the ownership of the Hotel.
(c) Maintain, or cause to be maintained, in good standing and free from default
any and all mortgages affecting the Hotel.
(d) Observe, or cause to be observed, and comply with, or cause to be complied
with, any and all liens, encumbrances, covenants, charges, burdens or
restrictions pertaining to the Hotel or any part thereof.
(e) Grant no rights or interests in the Hotel, or any part thereof or interest
therein that could materially adversely affect the ability of Select to operate
and manage the Hotel as herein provided.
8.5 Involvement in Hotel Operations.
Owner acknowledges and agrees that it is appointing Select as its exclusive
agent to conduct all Hotel operations on the terms and conditions set forth
herein. Subject to the terms hereof, Owner agrees that it will not unduly or
unreasonably interfere with the managerial rights and authority of Select
hereunder and any exercise thereof by Select, and further agrees that it will
not seek to perform or cause another to perform the obligations and duties of
Select or interfere or cause another to interfere with the rights of Select
under this Agreement.
8.6 Hotel Alterations.
Owner shall not, without prior consultation with Select, modify or alter the
Hotel if such modifications or alterations constitutes a Refurbishing Program.
8.7 “As Built” Drawings.
Upon request by Select, if in Owner’s possession, Owner shall provide Select a
full set of “as-built” drawings of the Hotel and one set of microfilm or
digitized reproductions of those drawings, or such other form as may be
reasonably acceptable by Select.
8.8 Representations and Covenants of Select.
(a) Select represents and warrants that it is duly organized as a limited
liability company under the laws of the State of Delaware and has all necessary
authority and licenses and regulatory and other approvals, to enter into this
Agreement and perform its obligations hereunder. The execution, delivery and
performance by Select of its obligations hereunder will not conflict with or
cause a violation of (i) any of Select’s organizational documents, (ii) any
contract, agreement or instrument to which Select is a party or by which Select
or its properties is bound, or (iii) any statute, rule, regulation, or
administrative order applicable to Select or by which Select or its properties
is bound.
(b) During the Term, Select shall qualify as an “eligible independent
contractor” as defined in Section 856(d)(9) of the Internal Revenue Code of
1986, as amended (the “Code”). To that end, during the term of this Agreement,
Select:
(i) shall not permit wagering activities to be conducted at or in connection
with the Hotel;
(ii) shall not own, directly or indirectly (within the meaning of Section
856(d)(5) of the Code), more than 35% of the shares of Equity Inns, Inc.;
(iii) shall be actively engaged in the trade or business of operating “qualified
lodging facilities” (defined below) for persons who are not “related persons”
within the meaning of Section 856(d)(9)(F) of the Code with respect to Equity
Inns, Inc. or Owner (“Unrelated Persons”). In order to meet this requirement,
Select agrees that it (i) shall derive at least 10% of both its revenue and
profit from operating “qualified lodging facilities” for Unrelated Persons and
(ii) shall comply with any regulations or other administrative guidance under
Section 856(d)(9) of the Code with respect to the amount of hotel management
business with Unrelated Persons that is necessary to qualify as an “eligible
independent contractor” within the meaning of such Code Section (so long as
Owner has advised Select in writing of such regulations or other administrative
guidance).
A “qualified lodging facility” is defined in Section 856(d)(9)(D) of the Code
and means a “lodging facility” (defined below), unless wagering activities are
conducted at or in connection with such facility by any person who is engaged in
the business of accepting wagers and who is legally authorized to engage in such
business at or in connection with such facility. A “lodging facility” is a
hotel, motel or other establishment more than one-half of the dwelling units in
which are used on a transient basis, and includes customary amenities and
facilities operated as part of, or associated with, the lodging facility so long
as such amenities and facilities are customary for other properties of a
comparable size and class owned by other owners unrelated to Equity Inns, Inc.
ARTICLE IX
 
 
Insurance
 
9.1 Insurance to be Maintained by Owner.
The following insurance shall be secured and maintained with respect to the
Hotel at all times during the term of this Agreement:
(a) All risk property insurance, including fire, windstorm, flood, earthquake
and other risks covered by extended coverage endorsements on the Improvements
and contents;
(b) All risk business interruption insurance, including fire, windstorm, flood,
earthquake and other risks covered by extended coverage endorsements for full
recovery of the net profits of the Hotel for the entire period of any such
business interruption, or not less than twelve (12) months;
(c) Insurance against loss from accidental damage to, or from the explosion of,
boilers, air conditioning systems, including refrigeration and heating
apparatus, pressure vessels and pressure pipes in an amount equal to the full
replacement value of such items;
(d) Business interruption insurance against loss from accidental damage to, or
from the explosion of, boilers, air conditioning systems, including
refrigeration and heating apparatus, pressure vessels and pressure pipes for
full recovery of the net profits for the entire period of any such business
interruption;
(e) Comprehensive or commercial general liability for any claims or losses
arising or resulting from the Hotel, with combined single limits of $1,000,000
per each occurrence for bodily injury and property damage. If the general
liability coverages are provided by a commercial general liability policy form,
the general aggregate limit shall not be less than $2,000,000. Such insurance
shall be on an occurrence policy form and shall include premises and operations,
independent contractors, blanket contractual, products and completed operations,
advertising injury, employees as additional insureds, broad form property
damage, personal injury, incidental medical malpractice, severability of
interests, and explosion, collapse and underground coverage during any
construction;
(f) If Select will provide valet parking, garagekeepers liability insurance in a
minimum amount of $100,000;
(g) Statutory workers’ compensation insurance on all employees in accordance
with the requirements of applicable law;
(h) Employment practices liability insurance in an amount not less that
$1,000,000, per occurrence and $1,000,000 in the aggregate (the amount of any
deductible under such insurance shall be paid out of Gross Revenues unless the
claim arises out of Select’s gross negligence or willful misconduct, and the
amount of such deductible shall be satisfactory to Owner);
(i) Insurance against such other insurable risks as any mortgagee may, from time
to time, reasonably require;
(j) Liquor liability (if applicable) for combined single limits of bodily injury
and property damage of not less than $1,000,000 per occurrence;
(k) Business auto liability including owned, non-owned and hired vehicles for
combined single limits of bodily injury and property damage of not less than
$1,000,000 per occurrence;
(l) Umbrella excess liability in amounts consistent with the Franchise
Agreement; and
(m) Comprehensive crime insurance in a minimum amount of $50,000.
9.2 Responsibility to Maintain.
During the Term, Owner or Select (if requested to do so by Owner and if Select
agrees) at the expense of Owner, shall procure and maintain the insurance
policies required under clauses (a) through (f) and (i) through (l) of Section
9.1, and Select shall procure and maintain the coverages required under clauses
(g), (h) and (m) of Section 9.1, at the expense of Owner.
9.3 Requirements.
All policies of liability insurance shall be written on an “occurrence” basis,
if possible. The insurance coverage shall in any event comply with the
requirements of the mortgage, if any. Any deductibles within the property
insurance policies required above shall not exceed $25,000, except for wind,
flood, and earthquake deductibles which shall be approved by Owner or bought
down to $25,000 at the expense of Owner, or as may be written by Select for
other participating hotels as set forth in Section 9.6.
9.4 Policies and Endorsements.
(a) Policies. All insurance provided for under the above Section 9.1 shall be
effected by policies issued by insurance companies of good reputation and of
sound and adequate financial responsibility, and rated no less than A-VIII in
Best’s Insurance Guide. The party procuring such insurance shall deliver to the
other party certificates of insurance with respect to all of the policies of
insurance so procured, including existing, additional and renewal policies, and
in the case of insurance about to expire, shall deliver certificates of
insurance with respect to the renewal policies to the other party not more than
thirty (30) days after the respective dates of expiration. If Owner shall elect
to procure any portion of the property insurance, it shall also deliver to
Select full copies of the policies under which such insurance is maintained.
(b) Endorsements. All policies of insurance provided for under this Article IX
shall have attached thereto (a) an endorsement that such policy shall not be
canceled or materially changed without at least thirty (30) days prior written
notice to Owner and Select, and (b) an endorsement to the effect that no act or
omission of Owner or Select shall affect the obligation of the insurer to pay
the full amount of any loss sustained. All insurance policies procured by Owner
shall name Select as an additional insured and contain an endorsement to the
effect that such insurance shall be primary to any similar insurance carried by
Select.
(c) Named Insured. All policies of insurance required under clauses (a) through
(d) of Section 9.1 shall be carried in the name of Owner, if purchased by Owner,
and, if required, mortgagee and the lessor under the Ground Lease, if any, and
Select shall be named as a loss payee as to business interruption insurance.
Losses thereunder shall be payable to the parties as their respective interests
may appear. Notwithstanding the foregoing, if mortgagee is an institutional
lender, and so requires, losses may be made payable to mortgagee, or to a bank
or trust company qualified to do business in the state where the Hotel is
located, in either instance as trustee for the custody and disposition of the
proceeds therefrom. Owner agrees to use reasonable efforts to attempt to cause
any mortgagee to agree that its mortgage shall contain a provision to the effect
that proceeds from property insurance shall be made available for restoration of
the Hotel. All insurance policies required in clauses (e), (f), and (i) through
(l) of Section 9.1, shall name Owner and its Affiliates, directors, officers,
agents and employees of each such entity as additional insureds on a primary
basis, irrespective of any other coverage, whether collectable or not. If said
insurance is written by Owner, Select will be an additional insured, such
insurance being primary to any insurance written by Select. Policies required in
clauses (g), (h) and (m) shall be written in the name of the employer.
9.5 Waiver of Liability.
Neither Select nor Owner shall assert against the other, and do hereby waive
with respect to each other, or against any other entity or person named as
additional insureds on any policies carried under this Article IX, any claims
for any losses, damages, liability or expenses (including attorneys’ fees)
incurred or sustained by either of them on account of injury to persons or
damage to property arising out of the ownership, development, construction,
completion, operation or maintenance of the Hotel, to the extent that the same
are covered by the insurance required under this Article IX. Each policy of
insurance shall contain a specific waiver of subrogation reflecting the
provisions of this Section 9.5, and a provision to the effect that the existence
of the preceding waiver shall not affect the validity of any such policy or the
obligation of the insurer to pay the full amount of any loss sustained.
9.6 Insurance by Select.
Any insurance provided by Select under this Article IX may be effected under
policies of blanket insurance which cover other properties of Select and its
Affiliates, and Select shall have the right to charge the Hotel with the Hotel’s
share of such premiums either pro-rata or as reasonably determined by Select’s
brokers (subject to approval by Owner), which shall be allocated to the Hotel on
the same basis as allocated to other participating Hyatt Place Hotels. Any
policies of insurance maintained by Select pursuant to the provisions of this
Article IX may contain deductible provisions in such amounts as are maintained
with respect to other participating Hyatt Place Hotels, for which Owner shall be
responsible or which Select, at Owner’s expense, may pay.
9.7 Insurance Claims.
Select shall, on behalf of Owner, promptly investigate all accidents on or about
the Hotel made known to Select, and report the same promptly to the appropriate
insurance carrier. Upon request from time to time by Owner, Select shall make a
full report to Owner as to all material claims for damages relating to the
ownership, operation and maintenance of the Hotel, and as to any damage or
destruction to the Hotel and the estimated cost thereof, as such matters become
known to Select, and shall prepare any and all reports and furnish any and all
information required by any insurance company in connection therewith to the
extent such information is within the knowledge or possession of Select.
ARTICLE X
 
 
Damage and Condemnation
 
10.1 Damage to or Destruction of the Hotel.
If any portion of the Hotel shall be damaged or destroyed at any time during the
Term by fire, casualty or any other cause to an extent that would interfere with
the income producing capacity of the Hotel, Owner shall, with due diligence,
repair, rebuild or replace the same substantially to its condition prior to such
damage or destruction. Such obligations of Owner are subject to (a) the receipt
of adequate insurance proceeds (excluding business interruption insurance
proceeds) available to Owner sufficient therefor and (b) the receipt of the
consent of any Lender to the application of the insurance proceeds to such
repair and rebuilding. If both conditions set forth in (a) and (b) have been
met, and if Owner fails to undertake such work within one hundred eighty (180)
days after the fire or other casualty (or such later date on which the
conditions are met), or shall fail to complete such work diligently, within the
time period agreed to therefor between Owner and Select, Select may, at its
option, terminate this Agreement immediately by delivering a notice to Owner.
Owner shall not be liable for damages by reason of any such termination. For
purposes hereof, insurance coverage shall be deemed adequate if the amount
thereof, plus any deductible amounts under the policy are, in the aggregate,
sufficient to repair, rebuild and restore the damaged Hotel.
Notwithstanding the foregoing, if:
(i) the Hotel is damaged or destroyed to such an extent that the cost of repairs
or restoration as reasonably estimated by Owner exceeds thirty percent (30%) of
the full replacement cost (excluding land, excavations, footings and
foundations) of the Hotel; or
(ii) the Hotel is damaged or destroyed to such an extent that the estimated time
for repair or restoration thereof, in the reasonable opinion of Owner, shall
exceed eighteen (18) months from the commencement of such repair or restoration;
or
(iii) the damage or destruction shall occur at any time within the last three
(3) years of the Term;
and if in connection with any of the foregoing, Owner elects not to rebuild or
restore the Hotel, then Owner shall be entitled to elect by notice to Select
given at any time within one hundred eighty (180) days after the occurrence of
such damage or destruction to terminate this Agreement without liability to
Select or Owner by reason of such termination. Notwithstanding the foregoing, if
Owner terminates this Agreement by reason of any of the foregoing provisions,
and Owner thereafter nevertheless commences repair or restoration or rebuilding
of a limited service hotel on the Site at any time within two (2) years
following any such termination, and so long as the Franchise Agreement is still
in effect, Select shall have the right (but not the obligation) exercisable at
any time within ninety (90) days after Select has actual knowledge of Owner’s
intention to rebuild or restore the Hotel, to elect to manage and operate the
rebuilt or restored Hotel in accordance with the provisions of this Agreement
from the opening date of the rebuilt or restored Hotel and for the unexpired
Term (but not exceeding any period beyond the term of the Franchise Agreement,
then in effect) remaining as of the date of the damage or destruction event
which resulted in Owner’s termination hereof. If there is any dispute between
Owner and Select 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 Article
XII.
10.2 Condemnation.
(a) If the whole of the Hotel, or such portion thereof as shall, in the
reasonable opinion of Owner, render the remaining portion of the Hotel
unsuitable for use as a hotel conforming to the System Standards, shall be taken
or condemned in any eminent domain, condemnation, compulsory acquisition,
expropriation or like proceeding (including conveyances or transfers in lieu
thereof) by any competent authority for any public or quasi-public use or
purpose, Owner or Select may terminate this Agreement upon ninety (90) days
notice to the other party. Select shall not be entitled to participate in any
award or compensation received for such taking or condemnation, but nothing
herein shall preclude Select from seeking an award or compensation for its loss
of business or profits resulting from such taking or condemnation, provided no
such award to Select shall have the effect of reducing amounts to which Owner
would otherwise be entitled.
(b) If, however, the portion of the Hotel remaining after any taking or
condemnation described above is, in the reasonable opinion of both Owner and
Select, suitable for use as a hotel meeting the System Standards and the
Franchise Agreement continues to remain in effect, this Agreement shall not
terminate, and subject to the consent and interest of any Lender, Owner shall
make available out of its award such amount as shall be reasonably necessary to
repair any damage to the Hotel, so as to render the Hotel a complete and
satisfactory architectural and operational unit meeting the System Standards. If
any Lender does not make available the proceeds of the award to Owner for
repairs and restoration, then Owner shall, not later than one hundred eighty
(180) days after the date of such taking, be entitled to terminate this
Agreement upon ninety (90) days notice to Select.
(c) If there is a taking or condemnation of all or part of the Hotel for
temporary use not in excess of two (2) years, this Agreement shall remain in
full force and effect. Owner shall commence restoration, repairs and alterations
promptly after the termination or the taking or condemnation for temporary use
and shall complete the same with diligence. All awards or other proceeds on
account of the taking shall be the property of Owner. This Agreement shall then
continue in effect for the balance of the Term (but not exceeding any period
beyond the term of the Franchise Agreement, then in effect) remaining after the
initial date of such taking.
ARTICLE XI
 
 
Assignment
 
11.1 Assignment by Select.
(a) Except as herein provided, Select shall not sell, assign, hypothecate,
transfer or otherwise dispose of, in whole or in part, any of its rights or
interests hereunder (but may, without Owner’s consent, assign or grant security
interests in or to its right to receive Management Fees hereunder as security
for any monetary obligations of Select). Notwithstanding the foregoing, Select
may transfer or assign its rights under this Agreement in whole, but not in
part, to any Affiliate of Select, whether as a result of merger, reorganization,
acquisition, or “change in control,” subject, in each such case, to each of the
following terms and conditions:
(1) The transferee shall, no later than the effective date of the transfer, be
an Affiliate of Hyatt Corporation;
(2) The transferee shall have the full right, power and authority to enter into
this Agreement and to fulfill the obligations of Select hereunder;
(3) Not later than the effective date of any such transfer, the transferee shall
have available to it the entire operating system of Select for the use and
benefit of the transferee and the management and operation of the Hotel as part
of Hyatt Place Hotels, including, without limitation, the benefit of services
that are designed to approximate the Shared Services available to the Hotel
prior to any such transfer; and
(4) The transferee shall have executed a written instrument in form and
substance reasonably satisfactory to Owner, a certified copy of which shall be
delivered to Owner not later than twenty (20) days following the effective date
of any such transfer, expressly assuming and agreeing to pay, perform and
discharge all of the liabilities and obligations of Select hereunder, including,
without limitation, any such liabilities or obligations arising or accruing
prior to, on or after the effective date of any such transfer.
(b) Upon satisfaction and discharge of all conditions set forth in Section
11.1(a), Select shall be relieved of any liability or obligation hereunder
arising after the date of such assignment.
(c) Except as otherwise provided in this Section 11.1, upon any other assignment
or transfer by Select of its rights or interests in this Agreement, Owner shall
have the option, exercisable within 60 days from the receipt by Owner of notice
of such transfer or assignment, to terminate this Agreement without liability or
payment to Select.
11.2 Assignment by Owner.
(a) In addition to any permitted collateral assignments to Lenders, Owner shall
have the right to assign its entire rights and interests in this Agreement
without the prior written consent of Select to (i) any Person Affiliated with
Owner and (ii) any Person in connection with a sale or transfer of the Hotel
(including, without limitation, any lease of the Hotel in its entirety), so long
as all conditions set forth in this Section 11.2 shall have been met and
satisfied and such assignee shall have applied for and qualified for the
assumption of the Franchise Agreement or entered into a then-current Hyatt Place
franchise agreement for the duration of the Term, prior to the effective date of
any such assignment. Unless otherwise agreed to by Select, Owner shall not sell,
assign or transfer the Hotel, or any interest therein or issue or permit the
transfer of any Ownership Interest to any Person (i) engaged, directly or
indirectly, as a substantial part of its business, in franchise licensing of
hotels and not Affiliated with Owner; (ii) who fails or refuses to assume
Owner’s responsibilities under this Agreement; or (iii) who would otherwise not
qualify as a franchisee under the terms of the Franchise Agreement or who does
not wish to apply for and enter into a then-current Hyatt Place franchise
agreement for the Hotel for the duration of the Term. Upon any assignment hereof
in connection with a sale or other transfer of the Hotel, Owner shall be
relieved of its duties, obligations and liabilities hereunder arising after such
assignment so long as all conditions set forth in this Section 11.2(a) have been
met and the assignee thereof expressly assumes in writing all such duties,
obligations and liabilities (including, without limitation, those arising or
relating to events occurring prior to any such assignment) and shall agree to be
bound by this Agreement as evidenced by a written instrument executed by such
assignee in favor of Select in form and substance reasonably satisfactory to
Select. If Owner desires to effect an assignment of a majority of its Ownership
Interest, Owner shall give Select not less than forty-five (45) days advance
notice of its intention to do so, which notice shall identify in reasonable
detail the direct and indirect owners of the proposed purchaser. In the event
that the sale or transfer contemplated in this subsection (a) is to a Person not
Affiliated with Owner or involves the transfer of a majority Ownership Interest
in Owner, then the assignment of this Agreement shall specifically exclude
Select’s obligation to reduce its fees in the event a Deficiency occurs or
refund Owner’s Priority, as set forth in Section 5.1, (ii) Section 2.5 and (iii)
Section 2.7. Any such assignment further shall provide that that the Basic Fee
is three percent (3%) of the Gross Receipts as of the effective date of the
assignment of this Agreement. Notwithstanding the foregoing, if (i) Owner
transfers 50% or more of the Ownership Interest to a Person Affiliated with
Owner, (ii) Owner transfers fifty percent (50%) or more of the Affiliate Hotels
(including the Hotel in a single transaction or series of related transactions
with the same buyer or Person Affiliated with that buyer, and provided such
Affiliate Hotels are being operated as Hyatt Place Hotels) or (iii) there is a
transaction or event which constitutes a “change in control” of Equity Inns,
Inc., then this Agreement (along with the applicable Affiliate Management
Agreements) shall be assignable without any modifications or exclusions, so long
as the transferees comply with the provisions of this Section 11.2(a).
(b) Notwithstanding the foregoing, in no event shall Owner subject the Hotel, or
any part or interest therein, to a strata or condominium ownership regime, or
permit the same to be so subjected, without the written consent of Select, which
consent shall be in Select’s sole discretion.
(c) In the event of an assignment of any Ground Lease relating to the Hotel,
whether to or from an Affiliate of the then Owner or Ownership Participant or
otherwise, (i) if the lessee shall become the “Owner” hereunder, such Person
shall assume all of the liabilities and obligations of Owner herein set forth;
and (ii) if the lessee is an Affiliate of Owner, the lessor shall not be
relieved of any of the liabilities or obligations of Owner hereunder.
(d) Notwithstanding anything herein to the contrary, the provisions of this
Article XI shall be binding upon any transferee or subsequent transferee.
ARTICLE XII
 
 
Arbitration
 
12.1 General. Any and all claims, disputes or controversies (collectively,
“Disputes”) arising out of or relating in any manner or way to the Hotel, this
Agreement or the breach thereof, or the relationship of the parties hereto,
including but not limited to any Dispute over (a) the interpretation and/or
enforceability of this Agreement, (b) whether or not an agreement between the
parties exists, or (c) whether or not a Dispute is arbitrable, shall be resolved
by arbitration in the manner provided for in Section 13F of the Franchise
Agreement substituting Owner and Select for Owner and Franchisor therein.
12.2 Miscellaneous. Notwithstanding any provision of the Franchise Agreement to
the contrary, if any, Owner and Select hereby agree as follows:
THE ARBITRATORS SHALL HAVE NO AUTHORITY TO AWARD ANY PUNITIVE OR EXEMPLARY
DAMAGES OR TO VARY OR IGNORE THE TERMS OF THIS AGREEMENT, AND SHALL BE BOUND BY
CONTROLLING LAW.
ARTICLE XIII
 
 
Default
 
13.1 Select Defaults.
The occurrence of any one or more of the following events that continues for
more than the period of grace (if any) provided below shall constitute an “Event
of Default” by Select hereunder, and Select shall be deemed a “Defaulting Party”
with respect thereto and in “Default” hereunder:
(a) If Select shall fail to keep, observe or perform any material covenant,
agreement, term or provision of this Agreement, and such default shall continue
for a period of thirty (30) days after written notice thereof by Owner to
Select.
(b) If Select shall apply for or consents to the appointment of a receiver,
trustee or liquidator for Select, or for all or a substantial part of its
assets, file a voluntary petition in bankruptcy, or admit in writing its
inability to pay its debts as they come due, make a general assignment for the
benefit of creditors, file a petition or answer seeking reorganization or
arrangement with creditors or liquidators or to take advantage of any insolvency
proceeding, or if any order, judgment or decree shall be entered by any court of
competent jurisdiction on the application of a creditor adjudicating Select a
bankrupt or insolvent or approving a petition seeking reorganization or
liquidation of Select or appointing a receiver, trustee or liquidator for Select
or for all or a substantial portion of its assets, and such judgment, order or
decree shall continue unstayed and in effect for any period of ninety (90)
consecutive days.
(c) If any required licenses for the sale of alcoholic beverages are at any time
suspended, terminated or revoked by reason of the unlicensability of Select (as
opposed to any general legislation or governmental act prohibiting the sale of
alcoholic beverages in general or by the class of businesses of which the Hotel
is a part) and such suspension, termination or revocation shall continue for a
period of sixty (60) consecutive days.
(d) If the Franchisor defaults in its obligations pursuant to Section 2.7
hereof.
13.2 Owner Defaults.
The occurrence of any one or more of the following events that continues for
more than the period of grace (if any) provided below shall constitute an “Event
of Default” by Owner hereunder, and Owner shall be deemed a “Defaulting Party”
with respect thereto and in “Default” hereunder:
(a) If Owner shall fail to provide funds to be deposited in the Operating
Accounts in accordance with the provisions of Section 8.2, and such failure
shall continue for a period twenty (20) days following notice from Select that
such funds are required and the reasons therefor and have not been provided
within the time period herein set forth.
(b) If Owner shall fail to keep, observe or perform any other material covenant,
agreement, term or provision of this Agreement and such default shall continue
for a period of thirty (30) days after notice thereof by Select to Owner.
(c) If Owner shall apply for or consents to the appointment of a receiver,
trustee or liquidator for Owner, or for all or a substantial part of its assets,
file a voluntary petition in bankruptcy, or admit in writing its inability to
pay its debts as they come due, make a general assignment for the benefit of
creditors, file a petition or answer seeking reorganization or arrangement with
creditors or liquidators or to take advantage of any insolvency proceeding, or
if any order, judgment or decree shall be entered by any court of competent
jurisdiction on the application of a creditor adjudicating Owner a bankrupt or
insolvent or approving a petition seeking reorganization or liquidation of Owner
or appointing a receiver, trustee or liquidator for Owner or for all or a
substantial portion of its assets, and such judgment, order or decree shall
continue unstayed and in effect for any period of ninety (90) consecutive days.
(d) Any required licenses for the sale of alcoholic beverages are at any time
suspended, terminated or revoked by reason of the unlicensability of Owner (as
opposed to any general legislation or governmental act prohibiting the sale of
alcoholic beverages in general or by the class of businesses of which the Hotel
is a part) and such suspension, termination or revocation shall continue for a
period of sixty (60) consecutive days.
(e) If Owner shall fail to keep, observe or perform any material covenant,
agreement, term or provision of the Franchise Agreement; provided, however, that
for such purposes, during the Term, Owner shall not be deemed to be in default
with respect to any covenant, agreement, term or provision of the Franchise
Agreement relating to Select’s management of the Hotel.
13.3 Curing Defaults.
Subject to the terms of Article XVI and the Franchise Agreement, no event that,
by the nature of such event, is not susceptible, with the exercise of diligence,
of being cured within the applicable grace period, shall constitute an Event of
Default so long as the Defaulting Party has commenced to cure such default
within such grace period and proceeds thereafter with due diligence and in good
faith to cure the same. In no event shall additional time to cure apply in cases
where the Event of Default in question may be cured on a timely basis by the
payment of money in the amount due.
13.4 Remedies.
Subject to the provisions of Article XV, in the event of the occurrence of an
Event of Default by the Defaulting Party, the other party, the “Non-Defaulting
Party” shall have and may exercise against the Defaulting Party such rights and
remedies as may be available to the Non-Defaulting Party at law or in equity,
including termination of this Agreement. Termination may be exercised by
irrevocable and unconditional notice to the Defaulting Party and this Agreement
shall terminate on the date set forth in such notice, which date shall in no
event be sooner than ten (10) days nor later than thirty (30) days, after the
delivery thereof. The right of termination, if available, 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. 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.
ANYTHING HEREIN CONTAINED, AND ANYTHING AT LAW, TO THE CONTRARY NOTWITHSTANDING,
IN ANY ACTION OR PROCEEDING BETWEEN THE PARTIES (INCLUDING, WITHOUT LIMITATION,
ANY ARBITRATION PROCEEDING) ARISING OUT OF OR RELATED TO THIS AGREEMENT 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 AGREEMENT OR FOR
VIOLATION OF ANY OTHER DUTY OWING BY EITHER PARTY TO THE OTHER WHICH MAY IN ANY
WAY RELATE TO SELECT’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 HEREIN CONTAINED.
ARTICLE XIV
 
 
Notices
 
All notices or other communications hereunder shall be in writing and shall be
deemed duly delivered (i) upon personal delivery thereof to, and actual receipt
by, the other party; (ii) upon electronic facsimile transmission to the other
party, at its fax number as set forth below, provided such delivery is followed
by an original of the notice delivered to the other party by overnight delivery
or United States postal service delivery and provided the facsimile copy sent by
the sender provides an automatic notation confirming the delivery thereof; (iii)
on the next business day following delivery by the sender to a recognized and
reliable air freight delivery service; or (iv) three (3) business days following
deposit in the United States mails. Selection of the method of delivery shall be
at the election and risk of the party sending the notice. All notices delivered
hereunder shall be pre-paid by the sending party and shall be addressed to the
parties as follows:
If to Owner:  ENN Leasing Company, L.L.C.
7700 Wolf River Boulevard
Germantown, Tennessee 38138
 
Fax No.: (901) 754-2374
Attention: Senior Vice President - Asset Management
 
With a copy to: David C. Wright
Hunton & Williams LLP
951 East Byrd Street
Richmond, Virginia 23219
 
Fax No.: 804.788.8218
 
If to Select:  Select Hotels Group, L.L.C.
71 South Wacker Drive
12th Floor
Chicago, Illinois 60606
Attention: General Counsel
Fax No.: 312.780.5284
 
Either party hereto shall have the right to change its address for notice or its
fax number, or the identity of Persons (not more than two (2) in number)
entitled to receive copies of any such notices, by delivery in the manner
hereinabove provided of an appropriate notice to the other party setting forth
the new address or the new fax number, or the identity of the additional or
replacement Persons entitled to receive copies, or any one or more thereof.
ARTICLE XV
 
 
Transition and Termination of Franchise Agreement
 
Upon expiration or earlier termination of this Agreement, Select and Owner will
cooperate with each other to effect an orderly transition of management
functions from Select to Owner, or to any Successor Manager designated by Owner.
If the Franchise Agreement expires or is terminated for any reason whatsoever,
notwithstanding any other provision of this Agreement to the contrary, this
Agreement shall terminate contemporaneously with the effective termination date
of the Franchise Agreement, but this Article XV shall survive such termination.
In such event, Select and Owner will cooperate with each other to effect an
orderly transition of management functions from Select to Owner, or to any
Successor Manager designated by Owner. The provisions of this Article XV shall
govern with respect to specific matters relating to the transition of management
of the Hotel. To the extent there are any inconsistent provisions regarding the
termination of this Agreement hereunder, the terms of this provision shall
prevail.
15.1 Employment Matters.
Because all Hotel employees will be Select employees, the termination of this
Agreement may result in a termination of their employment with Select; provided,
however, that Select, upon obtaining express written approval from Owner, may
make offers of employment to any management personnel then employed at the Hotel
for employment at other Hyatt Place Hotels or hotels managed or operated by
Select or its Affiliates. If Owner does not provide approval pursuant to this
Section 15.1, Owner shall make or cause a new manager to make offers of
employment to all such management personnel.
Select agrees that, immediately upon receiving notice of termination of this
Agreement from Owner, Select will take whatever steps are necessary, if any, to
comply with the WARN Act. In the event (i) Owner gives Select less than 75
(seventy-five) days notice of the effective date of termination of this
Agreement, and (ii) Owner is terminating this Agreement for some reason other
than Select’s breach of this Agreement or Select’s Grossly Negligent Acts or
Willful Misconduct, Owner agrees to indemnify, defend and hold Select, and each
of Select’s shareholders, officers, directors, employees and agents, completely
free and harmless of and from any and all manner of liability, claim, loss,
damage or expense of any kind or nature concerning Hotel employees that arise
from Owner’s termination of this Agreement (notwithstanding the continuation of
their employment at the Hotel as employees of Owner or a Successor Manager),
including, without limitation, accrued payroll, accrued benefits such as
vacation pay and sick days, any multi employer withdrawal liability, and any
liabilities or obligations under WARN and other requirements applicable to
severance or termination of employment (including severance obligations only to
the extent any severance payments are made consistent with Select’s standard
employment policies and such employees are not rehired by Owner or new manager)
and other employment liabilities up to and including the date of termination of
such employee as a Select employee. Notwithstanding anything contained herein to
the contrary, Owner shall not be obligated to make any severance payments for
employees rehired by Owner or new manager. Owner shall take reasonable steps to
prevent Select from incurring any foreseeable losses under the WARN Act with
respect to Hotel employees.
15.2 Insurance.
If Owner shall be included under any of Select’s chain-wide policies of
insurance, or under the self-insurance program, such participation will be
terminated as of the effective termination date of this Agreement, and Select
shall have the right to reimburse itself for such premiums which may have
accrued to the date of termination by withdrawing the appropriate amount thereof
from the Operating Accounts. If Owner’s pro rata share of premiums under the
chain-wide policies of insurance shall have been paid in advance, Select shall
promptly reimburse Owner for the unused portion of such insurance premiums.
Owner consents to the termination of the insurance program with respect to the
Hotel as of the effective date of termination of this Agreement and agrees that
Select shall have no further obligation, after the effective date of such
termination, to provide or obtain any insurance coverage for the benefit of
Owner or the Hotel thereafter. If the Hotel has participated in Select’s
self-insured worker’s compensation, or other self-insured programs, Owner shall
remain liable for the payment of deductible amounts under such programs for
claims attributable to events occurring on or prior to the expiration or earlier
termination hereof.
15.3 Receivables.
Select will reasonably cooperate with Owner, at Owner’s sole cost and expense,
in the collection of any receivables outstanding as of the expiration or earlier
termination of this Agreement, and will remit to Owner any amounts collected
directly by Select after the effective date of termination that relate to such
receivables.
15.4 Intentionally Omitted.
15.5 Proprietary Materials.
Except as may be used with respect to an Affiliate Hotel, Owner agrees, as of
the termination hereof, to cease using all Proprietary Materials, all such
Proprietary Materials being the sole property of Select that may be removed by
Select (without any payment or other reimbursement) as of the effective date of
termination of this Agreement, and Owner shall no longer be entitled to use any
thereof. Non-proprietary information on guests, patrons or groups relating to
the Hotel may be used by Select and Owner, and their Affiliates, on a
non-exclusive basis in the conduct of their respective businesses both during
and after the Term including, but not limited to, use by Select in connection
with guest loyalty programs.
Although the removal of any software programs shall be coordinated with the
installation of replacement systems, Select shall have no obligation to allow
the proprietary software to remain in the Hotel beyond the termination of this
Agreement, other than as required by the Franchise Agreement. To the extent
necessary for an orderly transition of management functions, both a hard copy
and, if feasible, an electronic copy of guest information relating to their
patronage of the Hotel for the period through the termination of this Agreement
shall be given to Owner (except for such information previously discarded in
accordance with applicable records retention policies). To the extent Select has
leased any computer equipment or communications equipment for use at the Hotel
in accordance with the provisions of this Agreement 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 Select 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 approval of the third party owners of such equipment. If not
assignable or if the same cannot be bought out, Select shall remove all such
equipment from the Hotel at any time on or after the effective date of
termination of this Agreement but in no event later than fourteen (14) days
thereafter.
15.6 Service Contracts.
Owner acknowledges that Select may not have the ability to transfer to Owner the
continuing benefits of Chain Contracts, or any contract with a Purchasing
Company, upon termination of this Agreement. Owner agrees that such contracts,
leases and service agreements will not be assigned, transferred or continued
after such date, and Select may, therefore, remove the Hotel from any such
contracts applicable to the Hotel, as of the effective date of termination of
this Agreement. Any leases or contracts entered into by Select as agent for
Owner in accordance with the terms of this Agreement shall remain the liability
and obligation of Owner.
15.7 Bookings.
Following the termination of this Agreement, Owner agrees that it shall, and
shall cause any Successor Manager to, honor all bookings for future reservations
or use of Hotel rooms or facilities that may have been accepted or entered into
by Select on or at any time prior to the termination of this Agreement, in
accordance with the terms of such bookings as accepted by Select (including,
without limitation, bookings made in good faith by Select for employee
complimentary or discounted rooms, Gold Passportâ reservations and bookings
pursuant to outstanding gift certificates or Select promotional programs).
Select shall, on the effective date of termination, provide Owner with a
complete list of all such bookings, the terms applicable thereto, and the amount
of advance deposits (if any) received with respect to each such booking. Owner
will assume and fully indemnify Select with respect to any claims by guests
relating to advance deposits theretofore received by Select, on behalf of the
Hotel and disclosed to and remitted to Owner. Notwithstanding the foregoing,
once the termination date has been established, Select agrees that without
Owner’s consent Select will not book reservations for rooms or public space at
the Hotel for dates after such termination.
15.8 Licenses and Permits.
All licenses or permits relating to the Hotel that have been obtained in the
name of Select shall be transferred and assigned to Owner or the Successor
Manager. Select shall provide Owner with a complete listing of all permits and
licenses as soon as reasonably practicable prior to the effective date of
termination so as to permit Owner or Successor Manager sufficient time to apply
for new licenses or permits or to effect transfer to the name of Owner or
Successor Manager. With respect to any non-transferable licenses or permits,
Select agrees that it shall cooperate with Owner and Successor Manager in
obtaining new licenses or permits, and, in connection therewith, shall surrender
or agree to surrender corresponding licenses or permits to the extent applicable
solely to the Hotel which are then carried in Select’s name.
15.9 Operating Accounts.
All funds in the Operating Accounts that are in excess of minimum amounts
necessary to keep such accounts open, plus the amount of then outstanding
checks, drafts, or orders of withdrawal or other items drawn against the
Operating Accounts and any amounts payable to Select and its Affiliates under
this Agreement, shall be remitted to Owner as of the effective date of
expiration or termination. Operating Accounts shall remain open for a period of
one (1) year after expiration or termination in order to enable clearance of
outstanding items. After such one (1) year period, Select will cooperate with
Owner to close all such Operating Accounts and transfer any remaining funds to
Owner.
15.10 Accounts Payable.
Accounts payable of the Hotel incurred in accordance with the terms hereof
remaining unpaid as of the effective date of expiration or termination shall be
assumed by Owner and paid as and when due. For this purpose, the term “accounts
payable” shall include, without limitation, liabilities accrued as of such date,
but not yet billed, together with any amounts required to be paid to Select
hereunder. In addition, if any items of FFE have been ordered prior to
expiration or termination hereof in accordance with the provisions of this
Agreement, Owner shall pay all required charges therefor, whether or not shipped
or received at the Hotel prior to such date. Owner shall indemnify and hold
Select harmless from any cost or liability relating to the foregoing.
ARTICLE XVI
 
 
General
 
16.1 Third Party Beneficiaries.
Except for those provisions herein which are for the express benefit of Lenders
and Franchisor, and the provisions herein relating to the Franchisor’s
subordination of fees payable under the Franchise Agreement, none of the rights
or obligations hereunder of either party shall run to, or be enforceable by, or
be deemed to have been made for the benefit of, any party other than the parties
to this Agreement and their respective successors and assigns in accordance with
the provisions of this Agreement.
16.2 Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be an original and all of which when taken together shall constitute a
single instrument.
16.3 Entire Agreement.
Other than specific references made to other agreements in this Agreement, this
Agreement and its exhibits constitute the entire understanding and agreement of
the parties hereto with respect to the subject matter hereof and supersede all
prior understandings and writings between the parties.
16.4 Amendments.
This Agreement may be changed or modified only by an agreement in writing signed
by the parties hereto, and no oral understandings shall be binding as between
the parties.
16.5 Brokers.
Owner and Select each warrants and represents to the other that no broker or
finder was retained by such party to render services in connection with any of
the transactions contemplated hereby, and that no fees are due to any third
party with respect hereto.
16.6 Successors and Assigns.
Subject to the express provisions of Article XI above, this Agreement shall be
binding upon, and shall inure to the benefit of, the parties hereto, and their
respective successors and assigns.
16.7 Headings.
The Article and Section headings contained herein are for convenience of
reference only and are not intended to define, limit or describe the scope or
intent of any provision of this Agreement.
16.8 Governing Law.
This Agreement is made pursuant to and shall be construed and interpreted in
accordance with, the laws of Illinois.
16.9 Interest on Overdue Sums.
If either party shall fail to pay, when due (after any applicable cure period as
defined herein), any sum payable to the other party hereunder, then the
Defaulting Party shall, without notice to or demand upon it, be liable to the
other party for the payment of such sum together with interest thereon at the
rate of (i) “Prime” plus 1% per annum or (ii) the maximum rate of interest
allowed by law, whichever shall be less, from the date when such sum shall
become due to the date of actual payment. For the purposes hereof, “Prime” shall
mean the rate per annum published from time to time in the Wall Street Journal
as the prevailing prime rate of interest.
16.10 Approvals.
If a party shall desire the approval or consent of the other party hereto to any
matter, such party may give notice to such other party that it requests such
approval, specifying in reasonable detail the matter as to which such approval
is requested. If such other party shall not approve such matter in writing
within twenty (20) days after receipt of such notice or such longer period as
may be specifically provided for herein, such other party shall be deemed to
have disapproved the matter referred to in such notice.
16.11 Relationship Waivers.
The relationship between the parties hereto shall be that of principal and
agent. Nothing herein contained shall be deemed or construed to render the
parties hereto partners, joint venturers, landlord/tenant or any other
relationship. To the extent there is any inconsistency between the common law
fiduciary duties and responsibilities of principals and agents and the
provisions of this Agreement, the provisions of this Agreement shall prevail,
and this Agreement shall be deemed a waiver by Owner of any fiduciary duties
owed by an agent to its principal, and a waiver by Select of any obligations of
a principal to its agent, to the extent the same are inconsistent with, or would
have the effect of modifying, limiting or restricting, the express provisions of
this Agreement. This Agreement shall be interpreted in accordance with general
principles of contract interpretation without regard to the common law of agency
except as expressly incorporated in the provisions of this Agreement, and that
liability between the parties shall be based solely on principles of contract
law. Furthermore, neither party shall have any duty or obligation to the other
party, otherwise arising as a matter of law, except as specifically set forth
herein. In no event shall Select 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 expectations or income
projections or other matters included in the Annual Plan, (ii) the institution
of litigation or the entry of judgments against Owner or the Hotel with respect
to the Hotel operations, or (iii) any other acts or omissions not otherwise
constituting a breach of this Agreement. The parties agree that Select’s sole
obligation hereunder shall be to act in conformity with the standard of skill,
care and diligence referred to in Section 2.1, in conformity with the System
Standards, and otherwise in conformity with the express terms of this Agreement.
Furthermore, as between Owner and Select, Select shall have NO LIABILITY FOR
PUNITIVE DAMAGES OR FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES to Owner in respect
of a breach of fiduciary duties.
16.12 Survival and Continuation.
Notwithstanding the termination of the Term or Select’s management of the Hotel
in accordance with this Agreement, all terms, provisions and obligations of
either party contained herein which, by the terms of this Agreement, survive the
expiration or termination hereof, or which, in order to give them effect and
accomplish their intent and purpose, need to survive such termination
(including, without limitation, the provisions of Article XVI hereof), shall
survive and continue until they have been fully satisfied or performed.
16.13 Select Approvals of Plans and Budgets.
Owner and Select agree that in each instance in this Agreement, or elsewhere
where Select is required or entitled to approve plans, specifications, budgets
and/or financing, notwithstanding that Owner may have retained services of
contractors or vendors recommended by Select, no such approval shall imply or be
deemed to constitute an opinion by Select, nor impose upon Select any
responsibility for the design or construction of Building elements including,
but not limited to, structural integrity, life/safety requirements, adequacy of
budgets and/or financing or the compliance with environmental laws.
All the above reviews and approvals by Select under the terms of this Agreement
are for the sole and exclusive benefit of Select and no other Person or party
shall have the right to rely on any such reviews or approvals by Select. Select
shall have the absolute right, in its sole discretion, to waive any such reviews
or approvals as a condition to its performance under the Management Agreement.
16.14 Confidentiality.
All information regarding the Hotel or Owner not otherwise in the public domain
by publication or otherwise shall, except as otherwise herein expressly
permitted or provided, be received and maintained by Select in a confidential
manner and shall not be disclosed to any third party without the prior written
consent of Owner or otherwise in accordance with the express provisions of this
Agreement. Owner agrees that it will hold confidential all information relating
to Select and its operating procedures and policies including, without
limitation, all Proprietary Materials. The foregoing obligations shall survive
the termination of the Term of this Agreement by expiration or otherwise.
Notwithstanding the foregoing, (i) nothing contained herein shall be deemed to
prohibit Select from disclosing any such information to reputable statistical
computation firms who agree not to disclose the identity of the Hotel with
respect to such confidential information; or (ii) to other Persons when such
disclosure is deemed reasonably necessary by Select in order to perform its
obligations hereunder; (iii) to other Persons in accordance with lawful standard
industry information sharing arrangements; (iv) to financing sources and
prospective purchasers of Select, or its assets, or of the Hotel, that has
executed a confidentiality agreement; or (v) to gaming regulators as
contemplated by Section 2.4.
16.15 Non-Recourse.
Select shall look solely and only to the Hotel (including, for this purpose, the
Operating Accounts) and the revenues therefrom and proceeds thereof for the
payment of any amount and the performance and observance of any representation,
warranty, covenant, undertaking, obligation or provision to be paid, performed,
discharged or observed by Owner under this Agreement. No partner, shareholder,
employee or agent of Owner, nor any disclosed or undisclosed principal for whom
Owner may be acting, nor any of their respective heirs, administrators,
executors, personal representatives, successors or assigns, shall have any
personal liability or other personal obligation for or with respect to any
payment, performance or observance of any obligations, provisions,
representations, warranties, covenants, indemnification or other undertakings to
be paid, performed, discharged or observed by Owner under this Agreement, and,
except as otherwise provided herein, Select agrees not to seek to enforce any
money judgment against any of the foregoing parties or personally against any of
their assets other than their respective rights and interests in the Hotel
(including, for this purpose, the Operating Accounts), its revenues and
proceeds.
16.16 Force Majeure.
Except as provided herein, the obligations of either party to perform under this
Agreement within specified times (other than the payment of money) shall be
extended for a period of time equivalent to the period of delay caused by Force
Majeure. If, at any time during the Term, Select is unable to perform its
obligations under this Agreement due to Force Majeure, or if it becomes
necessary, in Select’s reasonable opinion, to cease operation of the Hotel in
order to protect the Hotel and/or the health, safety and welfare of the guests
and/or employees of the Hotel due to the occurrence of a Force Majeure Cause,
then Select 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 Cause,
reopening and recommencing operation of the Hotel when Select deems that the
reopening and recommencement of operations may be done pursuant to applicable
Legal Requirements and without jeopardy to the Hotel, its guests or employees.
16.17 Select’s Use of Affiliates.
In fulfilling its obligations under this Agreement, Select may from time to time
use the services of one or more of its Affiliates. If an Affiliate of Select
performs services Select is required to provide under this Agreement, Select
shall be ultimately responsible to Owner for the Affiliate’s performance, and
Owner shall not pay more for the Affiliate’s services and expenses than Select
would have been entitled to receive under this Agreement had Select performed
the said services.
16.18 No Representation Regarding Forecasts.
In entering into this Agreement, Select and Owner acknowledge that neither Owner
nor Select has made any representation to the other regarding forecasted
earnings, the probability of future success or any other similar matter
respecting the Hotel and that Select and Owner understand that no guarantee is
made to the other as to any amount of income to be received by Select or Owner
or as to the future financial success of the Hotel.
16.19 Continued Effectiveness of Franchise Agreement.
Select and Owner hereby agree and acknowledge that this Agreement is being
entered into in support of and in conjunction with the Franchise Agreement,
notwithstanding that the Franchise Agreement has been previously executed. The
parties further agree that if this Agreement is terminated for any reason
whatsoever, the Franchise Agreement shall continue to remain in full force and
effect so long as there are no defaults under the terms thereof.
[Signature page follows.]

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
OWNER:
 
[INSERT NAME],
a Delaware limited liability company
 
By: 
Name: 
Title: 
 
SELECT:
 
SELECT HOTELS GROUP, L.L.C.,
a Delaware limited liability company
 
By: 
Name: 
Title: 
 
The undersigned, Hyatt Place Franchising, L.L.C., hereby acknowledges and
confirms that it has reviewed the provisions of Section 2.7, Section 5.1,
Section 5.2 and Section 11.2 of the foregoing Agreement, and by the signature
set forth below confirms its consent to the provisions of such Section 2.7,
Section 5.1, Section 5.2 and Section 11.2.
HYATT PLACE FRANCHISING, L.L.C.,
a Delaware limited liability company
 
By:  
Name:  
Title:  
 
[Signature page to Management Agreement]
 

Annex B - 

--------------------------------------------------------------------------------

EXHIBIT A
 
Site
 

 

EXHIBIT B
 
ADDENDUM TO MANAGEMENT AGREEMENT
 
This Addendum to Management Agreement is made and entered into this ___ day of
_____, 20___ by and between _____________, a _______________ (“Owner”), and
SELECT HOTELS GROUP, L.L.C., a Delaware limited liability company (“Select”).

PRELIMINARY STATEMENT

Owner and Select have heretofore entered into a certain Management Agreement,
dated as of ___________, 2006, pursuant to which Owner has appointed Select, and
Select has accepted the appointment, as agent for and on behalf of Owner to
manage and operate the Hotel property therein referred to. The “Hotel” has now
opened for business to the public as a Hyatt Place Hotel, and Owner and Hyatt
wish to document certain relevant dates under the “Management Agreement”.

NOW, THEREFORE, it is hereby agreed, by and between Owner and Select as follows:

1.
Definitions. All terms used herein, including quoted terms used in the
[Preliminary Statement,] shall have the same meaning as set forth, or
incorporated, in the Management Agreement.

2.
Term. For all purposes of the Management Agreement, the Full Conversion Date
shall mean ______________________, 2008 and the “Initial Term” shall end on
___________ _________, 20__.

3.
Reconfirmation. In all other respects, the Management Agreement shall continue
in full force and effect.

IN WITNESS WHEREOF, the parties hereto, have caused this instrument to be duly
executed as of the date and year first above written.

 
OWNER:
 
[INSERT NAME],
 
a   limited liability company
 
By: 
Name: 
Title: 
 
SELECT:
 
SELECT HOTELS GROUP, L.L.C., a Delaware limited liability company
 
By: 
Name: 
Title: 

 

 

 

EXHIBIT C-1
 
Mandatory Contracts
 
The Hotel will be required to participate in certain programs and/or shared
services made available by Select and/or its Affiliates from time to time
(collectively “Mandatory Shared Services”) for the hotels operated or managed by
Select. Select utilizes centralized services functions to operate its managed
hotels on a cost effective basis. In order to reduce costs at the hotel level,
certain services are performed and supervised at the company’s headquarters
location. The allocation of costs for Mandatory Shared Services is based upon
specific formulae developed by Select certain of which include an allocable
share of corporate office overhead and occupancy costs, as applicable, but
without a profit or mark-up component to Select.

The Mandatory Shared Services currently are provided out of Select’s Shared
Services Center located at 200 West Monroe Street, Chicago, IL 60606, which
provides operational departmental supervision and control services for, among
others, hotel finance and accounting, information technology, and human
resources departments. Current Mandatory Contracts are described as follows:

The following 1-6 are subject to the flat monthly rate for Shared Services:

1.
Human Resources Services. Select provides full service human resource and
employee relations services to Hyatt Place Hotels including, but not limited to,
centralized payroll, specialized and divisional training programs, preparation
and revision of manuals, administrative and policy enforcement, employee
relations, administration of compensation programs, oversight of workers
compensation and safety programs, hotel-level training and development,
recruiting, diversity programs, and monitoring compliance with affirmative
action policies and other employment policies and practices.

2.
Technology Services. Select provides information technology services for the
benefit of Hyatt Place Hotels and other hotels operated and managed by Select
through resources located at it corporate office in Chicago, Computer Sciences
Corporation located in Oakbrook, IL and in the Hotel Technology Group located at
the company’s Marion Reservations Center in Marion IL. Hotel property management
services are provided by MSI located in Phoenix AZ.

 
Select’s Shared Services Center, through its own resources and those of its
vendors, provides centralized management and support of technology-based systems
and infrastructure, including, but not limited to, installation, maintenance and
support for property-based operating systems. Such systems include local and
long distance communication, property management systems, business center
support, point of sale service, and web-based functions.

3.
Purchasing Services. Select makes various goods and services available to Hyatt
Place Hotels through a centralized purchasing program currently administered by
Avendra, LLC (“Avendra”), a procurement services company in which an affiliate
of Select has a minority ownership interest. Other than sponsorship funds from
Avendra vendors used to defray meeting costs otherwise allocable to
participating Hyatt Place Hotels, Select receives no fees, commissions or other
remuneration in connection with such purchasing services.

Under the terms of Select’s current Procurement Services Agreement with Avendra
effective April 1, 2004, Avendra is entitled to charge a specified fee on
purchases made by Select accounts through its programs, typically based on a
percentage of the actual cost of the goods or services being provided. All
unrestricted allowances, fees or commissions made available by vendors or
distributors on purchases made by a hotel, after payment of Avendra’s fee on
those purchases, are returned to that hotel.

With respect to FFE purchasing services, Rosemont Project Management, LLC,
provides purchasing services to Hyatt Place Hotels for the purchase of
furniture, fixtures and equipment that, together with renovation related
services are typically subject to a separate contract and fee structure (which
includes a profit component).

4.
Accounting and Finance Services. Through the operational oversight of its Shared
Services Center, Select provides certain accounting and finance support to Hyatt
Place Hotels and other hotels operated or managed by Select to ensure integrated
accounting processes and establish and maintain a sound system of accounting and
record keeping with adequate systems of internal accounting controls. This
support includes, but is not limited to, payroll processing and related
functions, centralized reporting functions, maintenance of operating licenses
and permits, payment of expenses incurred in the operation of the Hotel,
purchase of all Hotel operating supplies and Operating Equipment, production and
distribution of reports, and preparation of all sales, use, occupancy and
business tax returns.

5.
Taxes. In certain jurisdictions, Select may be required to file local or state
sales, use, occupancy and similar taxes on a consolidated basis. In these
situations, amounts owed by each hotel are aggregated and remitted to the
applicable taxing authority. Any additional charges or refunds are determined
based on specific cost/revenue base of each hotel for the applicable tax.

6.
Other Corporate Services. Select provides a number of other corporate services
and programs for the benefit of Hyatt Place Hotels, including, without
limitation, revenue management, employment tax credits, certain training
programs and other various services. Costs are allocated among hotels that
receive these services or participate in these programs as a component of the
flat monthly fee charged to each Hotel.

The following are not subject to the flat monthly rate for Shared Services:

7.
Chargeable Mandatory Contracts. Select from time to time negotiates contracts
with vendors or providers of services that necessitate mandatory participation
by all Hyatt Place Hotels (such as credit card acceptance commissions and
processing fees, music license agreements, telecommunications agreements,
benefits administration services by Hewitt Associates, payroll processing by
ADP, workers compensation and employee practices insurance) or by certain Hyatt
Place Hotels (e.g. hotels in a certain business segment) provided, however, that
the Hotel shall not be subject to any contract to the extent its term extends
beyond the Term. In addition to the flat rate for Shared Services Costs set
forth herein, the costs of these contracts are billed back to each hotel
directly or based upon Select’s reasonable determination of the appropriate
allocation for such hotel. While Select does not receive any fees, rebates or
commissions under, or with respect to, Chargeable Mandatory Contracts, certain
of the Chargeable Mandatory Contracts may provide for promotional or other
allowances that are then allocated among participating Hyatt Place Hotels as
determined by Select (or as required by the vendor or supplier in question) or
utilized for promotional activities benefiting all or substantially all Hyatt
Place Hotels.

Specifically with respect to employee benefits plan administration, Select has
an outsourcing agreement with Hewitt Associates for plan administration at a
pass through cost of $7.10 per employee per month as follows:

 
a.
Health and Dental Plan (Non-Union Personnel and Non-HMO Personnel). Select is
self-insured for these programs. Claims and administrative costs are allocated
among the hotels on the basis of the number of participating employees in each
plan. Amounts are paid to Select, reconciled and aggregated and then charged to
each hotel.

 
b.
Retirement Plans (Non-Union Employees). All hotels managed by Select pay a
percentage of eligible compensation pursuant to the applicable retirement plan
documents and/or a fixed amount per employee (class), which is reconciled and
aggregated at the Select corporate level and deposited in a retirement trust
fund. Employees self-direct the investment of their individual account balances
for these defined contribution plans. In addition, certain plan related
communications and other direct expenses are allocated to each hotel based on
plan eligible full-time equivalents.

 
c.
Other Benefit Plans. Costs associated with other benefit plans such as life
insurance, long term disability and business and travel accident plans, are
based on preliminary eligible classifications and are paid directly to the
carriers by Hewitt Associates and billed back to each hotel.

 

EXHIBIT C-2
 
Non- Mandatory Shared Services
 
Select and its Affiliates make certain additional programs and/or services
available to Hyatt Place Hotels allowing each hotel to participate at its
discretion. These programs and/or services include the following (“Non-Mandatory
Shared Services”):

1.
Insurance Programs. Select offers various insurance programs to Hyatt Place
Hotels, participation in which is voluntary and generally subject to the
acceptance of the hotel into the program by underwriters. These various programs
are as follows:

 
a.
General Liability and Auto Insurance. Comprehensive general liability insurance,
including liquor and dram shop liability insurance, automobile coverage for all
hotel vehicles, umbrella liability insurance, and crime and fidelity insurance,
the cost of which is allocated among all participating hotels based upon their
respective total hotel revenues.

 
b.
Property Insurance. Property and business interruption insurance, the cost of
which depends on the valuation of each participating hotel.

For all insurance programs offered by Select, neither Select nor its Affiliates
intend to make a profit, nor are they expected to incur costs if actual claims
are in excess of premiums paid by participating hotels. Accordingly, Select
reserves the right either to charge additional amounts (including cancellation
penalties if a hotel cancels its participation in the middle of a policy year),
or credit future premiums or refund amounts, as applicable, to participating
hotels as necessary and desirable to ensure that Select’s insurance programs are
adequately funded and that all amounts paid by participating hotels are used to
cover actual costs of Select’s insurance programs, including an allocable share
of corporate office overhead, without mark up or profit to Select.

2.
Pritzker Family Business Interests. Given the varied nature and scope of
investments by or on behalf of Pritzker Family Business Interests, there may be
situations where a company in which Pritzker Family Business Interests hold an
interest (either directly or indirectly) does business with Select or individual
Hyatt Place Hotels. Where that interest is material and is known to Select,
Select will inform hotel owners. For example, TransUnion, one of the two vendors
approved to perform employee background checks at Hyatt Place Hotels, is one of
the Marmon companies owned by Pritzker Family Business Interests. While
TransUnion is neither a Select company nor a Select Affiliate, owners of hotels
that selected TransUnion are notified of this relationship prior to their
selection. As another example, in certain years, Select or Select’s primary
insurers may obtain certain insurance product lines through Western General
Insurance, Ltd., a Bermuda re-insurance company in which Pritzker Family
Business Interests hold an interest. Any such transactions, either direct or
indirect, are arms length to Select and do not contain a profit element to
Select.

 

EXHIBIT D
 
Intentionally Omitted

 

 

EXHIBIT E
 
EXAMPLE COMPUTATION OF MANAGEMENT FEES/FRANCHISE FEES
(amounts are for demonstration purposes only)

 
YTD
3/31/08
YTD
8/31/08
YTD
12/31/08
Project Costs
$10,000,000
$10,000,000
$10,000,000
Minimum % Return
Owner’s Priority
9.50%
$950,000
9.50%
$950,000
9.50%
$950,000
Cumulative YTD Owner’s Priority (1)
A $237,500
$633,333
$950,000
Total Hotel Revenue (i.e. Gross Receipts)
$650,000
$1,700,000
$2,400,000
Adjusted NOI, before Royalty Fee & Basic Fee(2)
B $266,500
$799,000
$1,080,000
Adjusted NOI above Owner’s Priority
B-A $29,000
$165,667
$130,000
Royalty Fee Earned (Max of 4%)
C $26,000
4.0%
$68,000
4.0%
$96,000
4.0%
Basic Fee Earned
(Max of 3%)
D $3,000
0.5%
$51,000
3.0%
$34,000
1.4%
Adjusted NOI
B-C-D=E
$237,500
$680,000
$950,000
Excess Adjusted NOI
E-A $0
$46,667
$0
Incentive Fee Earned (10% of Excess Adjusted NOI)
None
$4,667
0.3%
None

(1) Calculated based on actual months divided by 12.

(2) Before Royalty Fee and Basic Fee.

SCHEDULE 1
 
AFFILIATE HOTELS

 
Hotel
Owner
Lessee
Existing Manager
Existing Guarantee Termination Date
 
BC
 
AmeriSuites
(Birmingham/Riverchase)
2980 John Hawkins Parkway
Hoover, AL 35244
 
EQI Financing Partnership V, LP
 
ENN Leasing Company V, L.L.C.
 
Oradell Holding, L.L.C.
 
June 30, 2008
FF
AmeriSuites
(Flagstaff/Interstate Crossroads)
2455 S. Beulah Road
Flagstaff, AZ 86001
EQI Financing Partnership V, LP
ENN Leasing Company V, L.L.C.
Oradell Holding, L.L.C.
December 31, 2007
MM
AmeriSuites
(Miami/Kendall)
11520 SW 88th Street
Miami, FL 33176
Equity Inns Partnership, LP
ENN Leasing Company, Inc.
Caldwell Holding, L.L.C.
June 30, 2008
MP
AmeriSuites
(Miami/Airport West)
3655 NW 82nd Avenue
Miami, FL 33166
Equity Inns Partnership, LP
ENN Leasing Company, Inc.
Caldwell Holding, L.L.C.
December 31, 2007
TA
AmeriSuites
(Tampa Airport/Westshore)
4811 West Main Street
Tampa, FL 33607-4501
EQI Financing Partnership V, LP
EQI Financing Partnership V, L.P.
Oradell Holding, L.L.C.
December 31, 2007
IA
AmeriSuites
(Indianapolis/Keystone)
9104 Keystone Crossing
Indianapolis, IN 46240
EQI Financing Partnership II, LP
ENN Leasing Company II, L.L.C.
Wayne Holding, L.L.C.
December 31, 2007
OP
AmeriSuites
(Overland Park/Metcalf)
6801 West 112th Street
Overland Park, KS 66211
EQI Financing Partnership II, LP
ENN Leasing Company II, L.L.C.
Wayne Holding, L.L.C.
December 31, 2007
BR
AmeriSuites
(Baton Rouge/East)
6080 Bluebonnet Boulevard
Baton Rouge, LA 70809
Equity Inns Partnership, LP
ENN Leasing Company, Inc.
Caldwell Holding, L.L.C.
June 30, 2008
BM
AmeriSuites
(Baltimore/BWI Airport)
940 International Drive
Linthicum Heights, MD 21090
EQI Financing Partnership V, LP
ENN Leasing Company V, L.L.C.
Oradell Holding, L.L.C.
June 30, 2008
ML
AmeriSuites
(Minneapolis/Mall of America)
7800 International Drive
Bloomington, MN 55425-1508
Equity Inns Partnership, LP
ENN Leasing Company, Inc.
Caldwell Holding, L.L.C.
June 30, 2008
LG
AmeriSuites
(Las Vegas/Paradise Road)
4520 Paradise Road
Las Vegas, NV 89109-7111
Equity Inns Partnership, LP
ENN Leasing Company, Inc.
Caldwell Holdings, L.L.C.
June 30, 2008
AQ
AmeriSuites
(Albuquerque/Uptown)
6901 Arvada North East
Albuquerque, NM 87110
EQI Financing Partnership V, LP
ENN Leasing Company V, L.L.C.
Oradell Holding, L.L.C.
June 30, 2008
CO
AmeriSuites
(Cincinnati/Blue Ash)
11435 Road Hartman Highway
Blue Ash, OH 45241
Equity Inns Partnership, LP
ENN Leasing Company, Inc.
Caldwell Holding, L.L.C.
December 31, 2007
CS
AmeriSuites
(Columbus/Worthington)
7490 Vantage Drive
Columbus, OH 43235
EQI Financing Partnership II, LP
ENN Leasing Company II, L.L.C.
Wayne Holding, L.L.C.
December 31, 2007
FO
AmeriSuites
(Cincinnati/North)
12001 Chase Plaza Drive
Forest Park, OH 45240
EQI Financing Partnership V, LP
ENN Leasing Company V, L.L.C.
Oradell Holding, L.L.C.
December 31, 2007
FN
AmeriSuites
(Nashville/Cool Springs)
650 Bakers Bridge Avenue
Franklin, TN 37067
Equity Inns Partnership, LP
ENN Leasing Company, Inc.
Caldwell Holding, L.L.C.
June 30, 2008
 
 
 
MT
 
 
 
AmeriSuites
(Memphis/Cordova)
7905 Giacosa Place
Memphis, TN 38133
 
 
 
EQI Financing Partnership II, LP
 
 
 
ENN Leasing Company II, L.L.C.
 
 
 
Wayne Holding, L.L.C.
 
 
 
June 30, 2008
RO
AmeriSuites
(Richmond/Innsbrook)
4100 Cox Road
Glen Allen, VA 23060
EQI Financing Partnership II, LP
ENN Leasing Company II, L.L.C.
Wayne Holding, L.L.C.
December 31, 2007

 

 

SCHEDULE 2
 
Costs for Initial Development of Hotel
(prior to December 31, 2006)
 

 

SCHEDULE 3
 
Terms from Existing Agreement
 
The following definitions shall apply with regard to the terms used in Section
5.1(a) of this Agreement:

1. “Excess Cash Flow” shall mean, for any relevant period, Gross Operating
Profit, less the cost of the insurance coverages described in Article 9 and
rents under any operating leases.

2. “Gross Operating Profit” shall mean, for any relevant period, Gross Revenues
less Operating Expenses.

3. “Gross Revenue” shall mean, for any relevant period, all revenues of the
Hotel and all its uses of every nature and kind regardless of source, excluding
Excluded Revenues. By way of illustration but not limitation, Gross Revenue will
include:

(a) the amount received as payment for the use and occupancy of all guest rental
units;
(b) the amount received as payment for the use and occupancy of all meeting
rooms, banquet function rooms, and public areas;
(c) all revenues derived from the sale of food and other edibles in restaurants,
lounges, meeting rooms, banquets, guest rooms, and any other location at the
Hotel;
(d) all revenues derived from the sale of liquor, beverage, and other potables
in restaurants, lounges, meeting rooms, banquets, guest rooms, and any other
location at the Hotel;
(e) all revenues derived from the use of telephone in guest rooms or in public
areas;
(f) all revenues derived from leases, subleases, concessions, vending, valet
services, swimming pool memberships, banquet extras, movies or income of a
similar or related nature; and
(g) proceeds of business interruption insurance.

4. “Excluded Revenues” means (i) any gratuity or sales charges added to a
customer’s bill, which are payable to Hotel employees, (ii) sales taxes, excise
taxes, gross receipt taxes, admission taxes, entertainment taxes, tourist taxes
or other similar taxes, (iii) proceeds from the sale or refinancing of the
Hotel, (iv) abatement of taxes, (v) proceeds of insurance, except business
interruption insurance and (vi) telecommunication leases and licenses.

5. “Initial Cap” shall mean, for any relevant period, an amount equal to six and
one-half percent (6.5%) of Gross Receipts for such relevant period.

6. “Minimum Return” shall mean, for Fiscal Year 2001, an annual amount of
$________, subject to adjustment each subsequent Fiscal Year by multiplying (a)
the amount of the Minimum Return for the most recently ended Fiscal Year and (b)
the number obtained by dividing the average CPI for the twelve (12) months ended
on September 30 of the most recently completed Fiscal Year by the average CPI
for the twelve (12) months ended on September 30 of the immediately preceding
Fiscal Year. The amount of the Minimum Return shall be prorated for any partial
Fiscal Year.

7. “Threshold” shall mean, until the end of Fiscal Year 2008, an annual amount
equal to $_________. The amount of the Threshold shall be prorated for any
partial Fiscal Year.

Annex B - 

--------------------------------------------------------------------------------

ANNEX C
FORM OF TERMINATION AGREEMENT
 
This Termination Agreement (“Agreement”) is being entered as of this  day of __,
200__ by and among _________, a ___________________ (“Owner” or “Franchisee”)
and ______________, a ___________________ (“Manager”) and AmeriSuites
Franchising, Inc., a _____________ (“Franchisor”).
 
Recitals
 
A. Owner and Manager entered into that certain Management Agreement, dated
_____________, as amended from time to time (collectively, the “AmeriSuites
Management Agreement”), for the management and operation of that certain hotel
known as AmeriSuites Hotel, located in ___________, ______________ (“Hotel”).
 
B. Franchisee and Franchisor entered into that certain AmeriSuites Franchise
Agreement dated __________________, as amended from time to time (collectively,
the “AmeriSuites Franchise Agreement”).
 
C. Owner is an affiliate of Equity Inns, Inc. (“ENN”) and Manager and Franchisor
are each affiliates of Select Hotels Group, L.L.C. (“Select”).
 
D. ENN and Select entered into a Master Agreement (“Master Agreement”), pursuant
to which the Hotel and other Affiliate Hotels (as defined in the Master
Agreement) will undergo Conversion (as defined in the Master Agreement) to
become “Hyatt Place Hotels.”
 
E. Immediately after the execution of this Agreement, Owner and Manager are
entering into a new management agreement with respect to the Hotel (the “Hyatt
Place Management Agreement”) and Franchisor and Franchisee are entering into a
new franchise agreement with respect to the Hotel (the “Hyatt Placement
Franchise Agreement”).
 
F. Owner and Manager both wish to provide for the termination of the AmeriSuites
Management Agreement and the AmeriSuites Franchise Agreement as set forth in
this Agreement.
 
Agreement
 
NOW, THEREFORE, the parties hereto do hereby agree as follows:
1. Immediately prior to the effective time of the Hyatt Place Management
Agreement and the Hyatt Place Franchise Agreement (the “Termination Time”), each
of the AmeriSuites Management Agreement and the AmeriSuites Franchise Agreement
shall terminate and be of no further force or effect, and Manager shall no
longer have any rights to manage or operate any portion of the Hotel after the
Termination Time.
 
2. Owner shall be liable to Manager and Franchisor for all fees and
reimbursements incurred under the AmeriSuites Management Agreement and the
AmeriSuites Franchise Agreement, respectively, up to the Termination Time.
 
3. Manager and Franchisor shall be liable to Owner for all monies due to Owner
under the AmeriSuites Management Agreement and the AmeriSuites Franchise
Agreement, respectively, up to the Termination Time.
 
4. This Agreement shall terminate all rights and agreements of Owner, Manager
and Franchisor under the AmeriSuites Management Agreement and the AmeriSuites
Franchise Agreement.
 
5. Owner, Manager and Franchisor acknowledge and agree that as of the
Termination Time, all obligations accrued up to the Termination Time under the
AmeriSuites Management Agreement and the AmeriSuites Franchise Agreement will
have been satisfactorily fulfilled and performed and there will be no
outstanding obligations thereunder, which will not have been performed or which
will require additional performance, including without limitation, payment of
Owner’s Return and Manager’s Return (as both terms are defined in the
AmeriSuites Management Agreement).
 
[Signature page follows.]
 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto, have caused this instrument to be duly
executed as of the date and year first above written.
 
Owner:
 
[Insert Name],
 
a 
 
By:  
Name:  
Title:  
 
Manager:
 
[Insert Name],
 
a  
 
By:  
Name:  
Title:  
 
Franchisor:
 
[Insert Name],
 
a  
 
By:  
Name:  
Title:  
 
[Signature page to Termination Agreement]
 

Annex C - 

--------------------------------------------------------------------------------

ANNEX D

FORM OF
SECOND AMENDMENT TO MANAGEMENT AGREEMENT
 
THIS SECOND AMENDMENT TO MANAGEMENT AGREEMENT (“Amendment”) is being made
effective the 3rd day of October, 2006 (the “Effective Date”), by and among
____________, (the “Owner” or “Franchisee”), _____________, (the “Manager”) and
AmeriSuites Franchising, Inc. (the “Franchisor”).
 
RECITALS AND SUMMARY OF CHANGES:
 
Owner and Manager are parties to that Management Agreement dated January 1,
2002, as amended by the First Amendment to Management Agreement dated May 14,
2003, between Owner and Manager (the “First Amendment” and collectively, the
“Management Agreement”), with respect to the management and operation of Owner’s
AmeriSuites hotel located at ________, _________, _____ (the “Hotel”). Owner,
Manager and Franchisor, together with certain other of their respective
affiliates, are parties to a Master Agreement dated the date hereof (the “Master
Agreement”) which provides for, among other things, the termination of the
Management Agreement, as amended hereby, and the Existing Franchise Agreement
(as defined in the Master Agreement) on the date of completion of conversion of
the Hotel to a Hyatt Place hotel in accordance with the terms of the Master
Agreement (the “Date of Conversion”), all as set forth in the Master Agreement.
Capitalized terms used but not defined herein shall have the meanings set forth
in the Master Agreement. The parties now wish to enter into this Amendment to
evidence their agreement to amend certain provisions of the Management Agreement
or in the Master Agreement, as the case may be, as set forth herein accordingly,
which amendments among other things will provide the following:
 
A. Effective as of the Effective Date, the calculation of Owner’s Return shall
be subject to modification, as set forth herein.
 
B. On _________, 200__ (the “Existing Guarantee Termination Date”), Manager’s
obligation to make payment of Owner’s Return shall continue until the earlier of
150 days after the Existing Guarantee Termination Date or the Date of Conversion
(the “New Guarantee Termination Date”).
 
C. Effective as of the New Guarantee Termination Date, the Management Fees and
Continuing Royalty Fees shall be subject to subordination as herein provided,
unless the Management Agreement, as amended hereby, has been terminated in
accordance with the terms of the Master Agreement.
 
NOW, THEREFORE, in consideration of the foregoing, and other good and valuable
consideration, the receipt and legal sufficiency of all of which is hereby
acknowledged, the parties hereby agree to amend the Management Agreement as
follows:
 
1. Amendments.
 
(a) Effective as of the Effective Date, Section 6.01 of the Management Agreement
is hereby amended to add the following at the end of existing Section 6.01:
 
Owner and Manager hereby agree that the Minimum Return for the 2006 Fiscal Year
is $_________, subject to annual CPI adjustment as set forth herein. In
addition, Minimum Return for any period shall be increased quarterly beginning
July 1, 2006, by an amount determined by multiplying (A) Conversion Cost to date
by (B) 9.5% and further multiplying the product thereof by the number of months
elapsed in the Fiscal Year divided by 12.
 
(b) Effective as of the Effective Date, paragraph 3. of the First Amendment
shall be of no further force or effect.
 
(c) Effective as of the New Guarantee Termination Date, Section 6.01 of the
Management Agreement shall be deleted in its entirety and replaced with the
following:
 
6.01 Management Fees. For each Fiscal Year, Owner shall pay Management Fees to
Manager as follows:
 
(a) a basic fee (“Basic Fee”) equal to three percent (3%) of the Gross Receipts,
provided however, if in any given Fiscal Year, there is a Deficiency, as
calculated monthly on a cumulative Fiscal Year-to-Date basis, with Owner’s
Priority being calculated on a monthly and Fiscal Year-to-Date basis by
multiplying (A) Project Costs by (B) 9.5% and further multiplying the product
thereof by the number of months elapsed in the Fiscal Year divided by 12, then
the Management Fees shall be reduced by an amount equal to the full amount of
the Deficiency, provided however, if the amount of the Fiscal Year-to-Date
Deficiency exceeds the full amount of the Management Fees for the Fiscal
Year-to-Date, Manager shall have no other obligations to Owner with respect to
any remaining Deficiency, subject to the Franchisor complying with its
obligations to subordinate its Continuing Royalty Fee in accordance with
Section 6.04 of this Amendment. The obligation of Manager to reduce or eliminate
its Management Fees as to any Fiscal Year is limited to the full amount of the
Deficiency for such Fiscal Year only, and Owner and Manager hereby agree that
the Management Fees for any Fiscal Year shall not be reduced as a result of any
Deficiency in any prior or subsequent Fiscal Year.
 
(b) an Incentive Fee (“Incentive Fee”) equal to ten percent (10%) of the amount
of Excess Adjusted NOI.
 
Except for the Management Fees and the fees and reimbursements to Manager and
its Affiliates referred to herein and in the Existing Franchise Agreement,
Manager and its Affiliates shall not be entitled to any fees or other form of
remuneration or compensation for any services provided to the Hotel. Other than
as provided in this Section 6.01(b), there shall be no reduction in the Basic
Fee or other liability to Manager for any deficit in Adjusted NOI for any Fiscal
Year, nor shall any deficit in Adjusted NOI be carried back to any previous
Fiscal Year or carried forward to any subsequent Fiscal Year.
 
An example of the calculation and payment of Basic Fee, Incentive Fee and
Continuing Royalty Fee and the reduction of fees is set forth on Exhibit A
hereto, including for periods that are less than a full calendar year.
 
(d) Effective as of the New Guarantee Termination Date, the Franchisor shall be
added as a party to the Management Agreement and Article 6 of the Management
Agreement shall be amended to include Section 6.04 as follows:
 
6.04 Franchise Fees.
 
Notwithstanding anything to the contrary in this Agreement or the Existing
Franchise Agreement, Franchisor, by execution hereof, agrees that (i) the
Continuing Royalty Fee payable pursuant to Section 9.3 of the Existing Franchise
Agreement shall be 4% of Franchisee’s prior month’s Gross Room Sales (as defined
in the Existing Franchise Agreement) and (ii) until the 60 month anniversary of
the Full Conversion Date, the Continuing Royalty Fee otherwise payable by Owner
for any Fiscal Year shall be reduced, up to the full amount of any such
Continuing Royalty Fee in the event of any Deficiency for such Fiscal Year, to
the extent of the Deficiency remaining after reduction of the Basic Fee in
accordance with Section 6.01(a). The obligation of Franchisor to reduce or
eliminate its Continuing Royalty Fee in any Fiscal Year is limited to the full
amount of the Deficiency for such Fiscal Year only, and the Continuing Royalty
Fee for any Fiscal Year shall not be reduced as a result of any Deficiency in
any prior or subsequent Fiscal Year. Owner hereby agrees that, for any Fiscal
Year, the combined obligation of Franchisor and Manager to reduce their
respective fees as set forth in this Section 6.04 and Section 6.01 shall not
exceed the amount of the Deficiency for such Fiscal Year. In each Fiscal Year
during which both the Continuing Royalty Fee and the Basic Fee are reduced due
to a Deficiency, the Basic Fee shall be reduced in full before the Continuing
Royalty Fee is reduced to cover any remaining amount of the Deficiency. To the
extent Franchisor has received any such Continuing Royalty Fee it will remit
such fees to Owner as determined herein.
 
An example of the calculation and payment of Basic Fee, Incentive Fee and
Continuing Royalty Fee and the reduction of fees is set forth on Exhibit A
hereto, including for periods that are less than a full calendar year.
 
(e) Effective as of the Effective Date, the following Article 18 is hereby added
to the Management Agreement:
 
18. ASSIGNMENT.
 
18.1 Assignment by Manager.
 
(a) Except as herein provided, Manager shall not sell, assign, hypothecate,
transfer or otherwise dispose of, in whole or in part, any of its rights or
interests hereunder. Notwithstanding the foregoing, Manager may transfer or
assign its rights under this Agreement in whole, but not in part, to any
Affiliate of Manager, whether as a result of a merger, reorganization,
acquisition or “change in control,” subject, in each such case, to each of the
following terms and conditions:
 
(1) The transferee shall, no later than the effective date of the transfer, be
an Affiliate of Hyatt Corporation;
 
(2) The transferee shall have the full right, power and authority to enter into
this Agreement and to fulfill the obligations of Manager hereunder;
 
(3) Not later than the effective date of any such transfer, the transferee shall
have available to it the entire operating system of Manager for the use and
benefit of the transferee and the management and operation of the Hotel as part
of AmeriSuites Hotels, including, without limitation, the benefit of services
that are designed to approximate the services available to the Hotel prior to
any such transfer; and
 
(4) The transferee shall have executed a written instrument in form and
substance reasonably satisfactory to Owner, a certified copy of which shall be
delivered to Owner not later than twenty (20) days following the effective date
of any such transfer, expressly assuming and agreeing to pay, perform and
discharge all of the liabilities and obligations of Manager hereunder,
including, without limitation, any such liabilities or obligations arising or
accruing prior to, on or after the effective date of any such transfer.
 
(b) Upon satisfaction and discharge of all conditions set forth in
Section 18.1(a), Manager shall be relieved of any liability or obligation
hereunder arising after the date of such assignment.
 
(c) Except as otherwise provided in this Section 18.1, upon any other assignment
or transfer by Manager of its rights or interests in this Agreement, Owner shall
have the option, exercisable from the time of such transfer or assignment and
for 60 days following notice to Owner of such transfer or assignment, to
terminate this Agreement without liability or payment to Manager.
 
18.2 Assignment by Owner.
 
(a) In addition to any permitted collateral assignments to Lenders, Owner shall
have the right to assign its entire rights and interests in this Agreement
without the prior written consent of Manager to (i) any Person Affiliated with
Owner, (ii) any Person in connection with a sale or transfer of the Hotel
(including, without limitation, any lease of the Hotel in its entirety), so long
as in the case of (ii), all conditions set forth in this Section 18.2 shall have
been met and satisfied and such assignee shall have applied for and qualified
for the assumption of the Existing Franchise Agreement or entered into a
then-current AmeriSuites franchise agreement for the duration of the Term (as
defined in the Management Agreement), prior to the effective date of any such
assignment. Unless otherwise agreed to by Manager, Owner shall not sell, assign
or transfer the Hotel, or any interest therein or issue or permit the transfer
of any Ownership Interest to any Person (i) engaged, directly or indirectly, as
a substantial part of its business, in franchise licensing of hotels and not
Affiliated with Owner; (ii) who fails or refuses to assume Owner’s
responsibilities under this Agreement; (iii) who would otherwise not qualify as
a franchisee under the terms of the Existing Franchise Agreement or (iv) who
does not wish to apply for and enter into a then-current AmeriSuites franchise
agreement for the Hotel. Upon any assignment hereof in connection with a sale or
other transfer of the Hotel, Owner shall be relieved of its duties, obligations
and liabilities hereunder arising after such assignment so long as all
conditions set forth in this Section 18.2(a) have been met and the assignee
thereof expressly assumes in writing all such duties, obligations and
liabilities (including, without limitation, those arising or relating to events
occurring prior to any such assignment) and shall agree to be bound by this
Agreement as evidenced by a written instrument executed by such assignee in
favor of Manager in form and substance reasonably satisfactory to Manager. If
Owner desires to effect an assignment of a majority of its Ownership Interest,
Owner shall give Manager not less than forty-five (45) days advance notice of
its intention to do so, which notice shall identify in reasonable detail the
direct and indirect owners of the proposed purchaser. In the event that the sale
or transfer contemplated in this subsection (a) is to a Person not Affiliated
with Owner or involves the transfer of a majority Ownership Interest in Owner,
then the assignment of this Agreement shall specifically exclude Manager’s and
Franchisor’s obligations set forth in Section 6.01 and 6.04 hereof. Any such
assignment further shall provide that that the Basic Fee is three percent (3%)
of the Gross Receipts as of the effective date of the assignment of this
Agreement. Notwithstanding the foregoing, if (i) Owner transfers 50% or more of
the Ownership Interest to a Person Affiliated With Owner, (ii) Owner transfers
fifty percent (50%) or more of the Affiliate Hotels (including the Hotel in a
single transaction or series of related transactions with the same buyer or
Persons Affiliated with that buyer, and provided such Affiliate Hotels are being
operated as AmeriSuites Hotels) or (iii) there is a transaction or event which
constitutes a “change in control” of Equity Inns, Inc., then this Agreement and
specifically including Section 6.01 and 6.04 hereof (along with the applicable
Existing Management Agreements) shall be assignable without any modifications or
exclusions so long as the transferees comply with the provisions of this
Section 18.2.
 
(b) Notwithstanding the foregoing, in no event shall Owner subject the Hotel, or
any part or interest therein, to a strata or condominium ownership regime, or
permit the same to be so subjected, without the written consent of Manager,
which consent shall be in Manager’s sole discretion.
 
(c) In the event of an assignment of any Ground Lease relating to the Hotel,
whether to or from an Affiliate of the then Owner or Ownership Participant or
otherwise, (i) if the lessee shall become the “Owner” hereunder, such Person
shall assume all of the liabilities and obligations of Owner herein set forth;
and (ii) if the lessee is an Affiliate of Owner, the lessor shall not be
relieved of any of the liabilities or obligations of Owner hereunder.
 
(d) Notwithstanding anything herein to the contrary, the provisions of this
Section 18 shall be binding upon any transferee or subsequent transferee.
 
(f) Effective as of the Effective Date, Article 14 of the Management Agreement
is hereby amended by inserting into the appropriate alphabetical locations, the
following definitions:
 
“Conversion” shall mean all construction, renovation, installation and work to
be performed at the Hotel, both in the guest rooms and in the public areas and
the equipping of the Hotel and purchase and stocking of the Operating Equipment,
operating supplies and inventory items meeting the Systems Standards and all
other requirements of the Affiliate Franchise Agreement for purposes of the
Hotel being converted to a Hyatt Place Hotel as set forth in the Master
Agreement.
 
“Conversion Cost” shall mean all amounts expended by Owner for the Conversion of
the Hotel, including without limitation, all rebranding, construction and
related costs as set forth in the scope of work attached to the Master
Agreement, all FFE, all Operating Equipment and related costs required to be
capitalized in accordance with GAAP, all operating systems and the cost
associated with the personnel hired for the installation of the same, all fees
and reimbursements for the Pre-Opening Services provided by contractors and
vendors (recommended by Manager) and Manager and its Affiliates.
 
“Fiscal Year” shall mean the calendar year except that the first Fiscal Year
hereunder shall commence on the Effective Date and end on December 31 of the
same calendar year as the Effective Date, and the last Fiscal Year hereunder
shall commence on January 1 of the calendar year in which the last day of the
Term occurs or the earlier termination of this Agreement occurs and end on the
date of the last day of the Term or the date of earlier termination of this
Agreement.
 
“Operating Equipment” shall mean linens, china, glassware, silverware, uniforms
and the like, excluding FFE.
 
“Pre-Opening Services” shall mean the (i) services provided by the project
manager recommended by Select to assist in and to oversee the Conversion and to
coordinate with the vendors providing the FFE and Operating Equipment and
operating supplies and inventory items and (ii) any other service provided by
Select or its Affiliates to prepare and convert the Hotel as a Hyatt Place
Hotel, not otherwise covered under the Franchise Agreement, including without
limitation, recommendations of vendors and contractors to owner, assistance and
review of the budget for the Conversion and approval of contractors and vendors
hired by Owner.
 
(g) Effective as of the New Guarantee Termination Date, Article 14 of the
Management Agreement is hereby amended by inserting into the appropriate
alphabetical locations, the following definitions:
 
“Adjusted NOI” shall mean, for any relevant period, Income After Undistributed
Operating Expenses less deductions for the following amounts incurred for and
allocable to such relevant period (but only to the extent that such amounts are
not otherwise deducted in computing Income After Undistributed Operating
Expenses):
 
(a) An amount equal to Maintenance Cap Ex Reserve of 4% of Gross Receipts for
such period;
 
(b) The cost of all insurance maintained by Owner and Manager in accordance with
the provisions of this Agreement, together with the cost of property insurance
and terrorism insurance (if any) maintained by Owner with respect to the Hotel;
 
(c) All real and personal property taxes (less refunds, offsets or credits
thereof, and interest thereon, if any, received during the period in question);
 
(d) The Basic Fee and all fees payable under the Existing Franchise Agreement;
 
(e) Lease payments; and
 
(f) All other amounts deductible in respect of such period under the express
terms of this Agreement.
 
To the extent the Hotel is part of a mixed-use project (which, for this purpose,
shall mean any project that includes, in addition to the Hotel, any facilities
not subject to management or operation by Manager hereunder), a portion of
common costs relating both to the Hotel and to the non-Hotel portions of the
project, such as, for example, but not by way of limitation, real estate taxes,
insurance, common area landscaping, site maintenance, trash removal,
extermination and other such costs intended for the benefit both of the Hotel
and the non-Hotel portions of the development, shall be allocated in a fair and
reasonable manner so that the Hotel shall bear only its fair and reasonable
portion of such common expenses.
 
“Basic Fee” shall have the meaning set forth in Section 6.01 hereof.
 
“Deficiency” shall mean, for any relevant period, the amount by which Adjusted
NOI is less than Owner’s Priority for such relevant period.
 
“Excess Adjusted NOI” shall mean the amount by which Adjusted NOI exceeds
Owner’s Priority.
 
“Incentive Fee” shall have the meaning set forth in Section 6.01 hereof.
 
“Gross Receipts” for any period shall mean all revenues and income of any kind
derived, directly or indirectly, from the operation of the Hotel during such
period, including all revenues derived from the sale during such period of
rooms, food and beverages, telephone revenue, revenue derived from any other
revenue source and rents or fees payable by tenants or concessionaires for such
period (but not the gross receipts of such sub-tenants or concessionaires).
Without limiting the generality of the foregoing, it is the intention of the
parties that the term “Gross Receipts” shall mean all amounts properly accounted
for as Revenue or Total Revenue or Total Operated Departments in accordance
with, and as defined in, the Uniform System. Notwithstanding the foregoing,
there shall be excluded in determining Gross Receipts for any period the sum of
(i) any sales, excise or occupancy taxes actually collected during such period
in accordance with Legal Requirements from guests or patrons of the Hotel and
either remitted, or required to be remitted, to appropriate taxing authorities;
(ii) amounts collected from guests or patrons of the Hotel on behalf of Hotel
tenants and other third parties; (iii) interest earned on funds held in
Operating Accounts (if any); and (iv) insurance proceeds, condemnation proceeds,
financing or refinancing proceeds and the proceeds of sale of any real or
personal property comprising part of the Hotel (as distinguished from the sale
of merchandise, food and beverage and other consumer goods or services). Gross
Receipts shall in all events include only amounts actually paid or payable to
the Hotel (in cash or services), and shall not include, except as otherwise
herein expressly provided, (i) the value of any Hotel goods or services in
excess of actual amounts paid (in cash or services) provided by the Hotel on a
complimentary or discounted basis, (ii) gratuities or service charges collected
for payment to Hotel employees and (iii) credits or refunds to Hotel guests.
 
“Income After Undistributed Operating Expenses” shall mean such amount as is
calculated in the ninth edition of the Uniform System, without regard to any
revisions or future editions thereof.
 
“Owner’s Priority” shall mean an amount equal to nine and one-half percent
(9.5%) of the Project Costs.
 
“Project Costs” shall mean the sum of (a) the actual gross (i.e., undepreciated)
costs of the Hotel incurred and paid or accrued on or before December 31, 2006
by Owner, to the extent required to be capitalized under GAAP and (b) the
Conversion Cost; LESS the amount equal to four percent (4%) of the Gross
Receipts for twelve (12) months of the Fiscal Year during which the majority of
the Conversion occurs (anticipated to be 2007).
 
2. Conforming Amendments. The terms of this Amendment shall control if there is
any conflict between any term of this Amendment and any term of the Management
Agreement. Each term of the Management Agreement hereby is amended as required
to conform to the terms of this Amendment, whether or not such term of the
Management Agreement is identified or expressly amended in this Amendment.
 
3. Execution. This Amendment may be executed by the parties in counterparts,
each of which shall be deemed an original.
 
4. No Further Amendments. Other than with respect to those amendments set forth
herein, including the conforming amendments under paragraph 2, above, the
Management Agreement shall remain in full force and effect and is hereby
ratified and confirmed by the parties.
 
[Signature page follows.]

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties executed this Amendment to be mad effective on
the Effective Date.
 
OWNER:
 
[__________________]
 
By: 
 
Name: 
 
Title: 
 
MANAGER:
 
[______________________]
 
By: 
 
Name: 
 
Title: 
 
FRANCHISOR:
 
AMERISUITES FRANCHISING, INC.
 
By: 
 
Name: 
 
Title: 
 

 
[Signature page to Second Amendment to Management Agreement]
 
Exhibit A
 
EXAMPLE COMPUTATION OF MANAGEMENT FEES/FRANCHISE FEES
(amounts are for demonstration purposes only)
 

 
YTD
3/31/08
YTD
8/31/08
YTD
12/31/08
 
Project Costs
 
$10,000,000
 
$10,000,000
 
$10,000,000
 
Minimum % Return Owner’s Priority
 
9.50%
 
$950,000
 
9.50%
 
$950,000
 
9.50%
 
$950,000
 
Cumulative YTD Owner’s Priority (1)
 
A $237,500
 
$633,333
 
$950,000
 
Total Hotel Revenue (i.e. Gross Receipts)
 
$650,000
 
$1,700,000
 
$2,400,000
 
Adjusted NOI, before Continuing Royalty Fee & Basic Fee
 
B $266,500
 
$799,000
 
$1,080,000
 
Adjusted NOI above Owner’s Priority (2)
 
B-A $29,000
 
$165,667
 
$130,000
 
Continuing Royalty Fee Earned (Max of 4%)
 
C $26,000
4.0%
 
$68,000
4.0%
 
 
$96,000
4.0%
 
Basic Fee Earned
(Max of 3%)
 
D $3,000
0.5%
 
$51,000
3.0%
 
$34,000
1.4%
 
Adjusted NOI
 
B-C-D=E
$237,500
 
$680,000
 
$950,000
 
Excess Adjusted NOI
 
E-A $0
 
$46,667
 
$0
 
Incentive Fee Earned (10% of Excess Adjusted NOI)
 
None
 
$4,667
0.3%
 
None

(1) Calculated based on actual months divided by 12.
(2) Before Continuing Royalty Fee and Basic Fee.
48066.000199 RICHMOND 1846975v2