MANAGEMENT AGREEMENT
for the
CHICAGO O’HARE INTERNATIONAL AIRPORT HOTELS
between the
CITY OF CHICAGO DEPARTMENT OF AVIATION
and
______
DATED: ______
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TABLE OF CONTENTS
Page
Section 1.AGENCY; CONSTRUCTION; FURNISHING AND EQUIPPING; OPENING OF HOTEL
1.1Agency
1.2Hotels
1.3Furnishings and Equipment; Operating Equipment
1.4“Existing Hotel, New Hotel and Brand Standards” Defined
1.5Budgets
1.6Sustainability
Section 2.RESERVED
Section 3.TERM; TERMINATION
3.1Effective Date
3.2Opening Date
3.3Term
3.4Termination by Owner
3.5Termination by Manager
3.6Owner Termination Right
3.7Cancellation
3.8Events of Default
3.9General Provisions Regarding Termination
3.10Owner’s Right to Perform Manager’s Obligations.
3.11Effect of Default and Remedies.
3.12Claims and Disputes by Manager
Section 4.USE AND OPERATION OF THE HOTELS
4.1Use and Standard of Operation
4.2Transactions with Related Persons, Manager Affiliates, & Third Parties in which Manager has an Economic Interest
4.3Hotel Employees
4.4Limitations on Manager’s Authority
4.5Scope of Authority/Manager’s Duties
4.6Limitations on Manager’s Duties
4.7Leases and Concessions
4.8Bank Accounts
4.9“Force Majeure” Defined
Section 5.MANAGEMENT FEES AND REMITTANCES TO OWNER
5.1Reserved – to come from selected proposal
Section 6.BOOKS AND RECORDS; GROSS RECEIPTS; FF&E FUND
6.1Books and Records
6.2Definition of Gross Receipts
6.3Funds for Replacement of and Additions to Furnishings and Equipment and other Capital Expenditures (FF&E Funds)
Section 7.REPAIRS AND CHANGES; LEGAL REQUIREMENTS; RETAINED RIGHTS OF CITY
7.1Repairs and Maintenance
7.2Compliance with Legal Requirements
7.3Alterations and Additions
7.4Right to Enter, Inspect and Repair
7.5Accommodation of Airport Construction.
7.6Eminent Domain.
Section 8.GENERAL COVENANTS OF MANAGER AND OWNER
8.1Working Capital
8.2Supplemental Services
8.3Right of Inspection and Review
8.4Financial and Other Reports
8.5Payment of Taxes
8.6Owner Supplied Utilities
8.7Warranties and Representations
Section 9.INSURANCE
9.1Owner Insurance
9.2Manager Insurance
Section 10.INDEMNIFICATION OF OWNER
Section 11.INDEMNIFICATION OF MANAGER
Section 12.DAMAGE TO AND DESTRUCTION OF HOTEL
12.1Owner’s Duty of Restoration
12.2Owner’s Election Not to Restore
12.3Eminent Domain
12.4Pro-ration of Management Fees
Section 13.INTEREST ON OVERDUE SUMS
Section 14.TRADE NAME
14.1Manager Trade Name and Trademarks
14.2Owner Trade Name and Trademarks
Section 15.COMPLIANCE WITH ALL LAWS
15.1Applicable Laws.
15.2Ethics/Conflicts of Interest
15.3Conflicts of Interest
15.4Affirmative Action Program
15.5Manager’s ACDBE Commitment
15.6No Personal Liability of Agents
15.7Business Relationships
15.8Federal Terrorist (No-Business) List
15.9Prohibition on Certain Contributions; Mayoral Executive OrderNo.2011-04
15.10Minimum Wage
Section 16.SUCCESSORS AND ASSIGNS
16.1Assignment by Manager
16.2Assignment by Owner
16.3Binding on Successors
Section 17.NOTICES
Section 18.APPROVALS
Section 19.MISCELLANEOUS INSTRUMENTS AND ESTOPPEL CERTIFICATES
19.1Miscellaneous Instruments
19.2Estoppel Certificates
Section 20.APPLICABLE LAW
Section 21.PAYMENT OF AMOUNTS DUE TO OWNER OR MANAGER
Section 22.SURVIVAL AND CONTINUATION
Section 23.MANAGER APPROVALS
Section 24.SALE OF SECURITIES
Section 25.TRANSITION MATTERS
25.1Employment Matters
25.2Insurance
25.3Receivables
25.4Protected Name and Protected Marks
25.5Other Proprietary Interests
25.6Service Contracts
25.7Reserved
25.8Transition Notices
25.9Payments to Manager
25.10Reserve for Post-Termination Costs
25.11Final Accounting; Distributions
Section 26.REPRESENTATIONS AND WARRANTIES OF OWNER AND MANAGER
26.1Representations of Owner
26.2Representations of Manager
Section 27.LIMITATIONS ON OWNER’S LIABILITY
Section 28.NON-COMPETITION
Section 29.ENVIRONMENTAL
29.1Definitions.
29.2Environmental Laws
29.3Subject Materials and Surrender of Hotels
29.4Environmental Representations and Warranties and Other Matters
29.5Reports, Notices, Environmental Claims, and Other Matters
29.6Hazardous Substances
29.7No Illegal Dumping
Section 30.IRS GUIDELINES
30.1QMA Compliance
30.2Compliance with IRS Guidelines
30.3Consequences of Compliance Failures
30.4Determination of QMA Failure or Continuing Compliance Failure
30.5Manager’s Rights to Cure
30.6Manager’s Rights to Participate in Proceedings
30.7Provision of Information to Owner
Section 31.MISCELLANEOUS PROVISIONS
31.1Submission to Jurisdiction
31.2No Third-Party Beneficiaries
31.3Entire Agreement; Document Precedence
31.4Written Amendments
31.5Counterparts; Facsimile and Electronic Execution
31.6Severability
31.7Non-Waiver
31.8Section References; Table of Contents
31.9Approvals; Authority of Commissioner
31.10Manager Intellectual Property
31.11Waiver of Consequential and Punitive Damages
31.12Non-Hotel Marketing Activities by Owner
31.13Owner Financing of Hotel
31.14Illinois Freedom of Information Act
31.15Airport Matters
31.16Data Security and Privacy
31.17Confidentiality.
31.18No Personal Liability.
31.19Limitation of City’s Liability.
31.20Joint and Several Liability.
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EXHIBITS
Exhibit A – Legal Description of Site
Exhibit B – Brand Standards
Exhibit C-1 – Listing of Current Chain Services
Exhibit C-2 – Listing of Direct Deductions
Exhibit C-3 – Listing of Central Office Services
Exhibit D – Assistance Agencies for Identifying MBE/WBEs
Exhibit E – Manager’s Equal Employment Opportunity and Affirmative Action Policy
Exhibit F – Contracting Guidelines
Exhibit G – Economic Disclosure Statement and Affidavit
Exhibit H – Data Privacy and Security Requirements
Exhibit I – FAA Policy and Procedures Memorandum –Airport Division, Number5190.6 – Covenants
Exhibit J – Insurance Required
Exhibit K –Special Conditions Regarding ACDBE Participation
Exhibit L – Form of Cash Management Agreement
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DEFINITIONS
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2014 City Hiring Plan...... 33
ACDBE...... 83
Achieved RevPAR...... 10
ADA...... 69
Advance Deposit Account...... 42
Affiliate...... 88
Agreement...... 1
Airport...... 1
Airport Security Act...... 81
Alcoholic Beverage Account...... 42
Annual Budgets...... 6
Annual Operating Statement...... 55
Annual Profit Transactions Report...... 31
Artwork...... 78
Bonds...... 113
Brand Hotels...... 5
Brand Standards...... 4
Bundle...... 86
Business day...... 94
Cancellation Notice...... 19
Capital Budget...... 5
Capital Expenditures...... 9
Capital Plan...... 8
Certified Financial Statement...... 55
Chain Services...... 51
Chain Services Report...... 51
City...... 1
City Approvals...... 112
City Disclosure Affidavit...... 78
City Persons...... 115
Claim...... 25
Commissioner...... 22
Comparable Hotels...... 10
Competitive Terms Standard...... 30
Continuing Compliance Failure...... 108
Contribution...... 86
Copyright Act...... 78
Council...... 34
CPI...... 7
Data...... 117
day-to-day Operating Expenses...... 100
Debt...... 77
Defaulting Party...... 20
Delivered Materials...... 115
Department...... 74, 108
Direct Deduction...... 52
Direct Deductions Report...... 52
Dispute...... 27
Domestic Partners...... 86
EDS...... 79
EEO...... 36
Effective Date...... 1
Employee Costs...... 31
Environmental Agency...... 102
Environmental Claim...... 102
Environmental Law(s)...... 102
Environmental Laws...... 62
ERISA...... 61
Events of Default...... 19
Excess Sustainability Costs...... 9
Executive Order 2014-1...... 87
Existing Contamination...... 103
Existing Hotel...... 1, 3
Existing Hotel FF&E...... 3
Expert...... 11
Extension Term...... 10
FAA...... 116
FF&E...... 3
FF&E Expenditure...... 46
FF&E Funds...... 45
Final Accounting Statement...... 98
Final Audits...... 56
Financing...... 19
Fiscal Year...... 5
Force Majeure...... 44
Force Majeure Cause...... 44
Foreclosure...... 18
Foreclosure Purchaser...... 18
Fringe Benefits...... 31
Furnishings and Equipment...... 3
GOP Deficiency...... 12
Gross Receipts...... 45
Hotel Employees...... 31
Hotel GOP...... 12
Hotel Gross Receipts Account...... 41
Hotel Main Operating Account...... 42
Hotel Operating Accounts...... 42
Human Rights Ordinance...... 74
Identified Parties...... 85
IL FOIA...... 115
Illinois Human Rights Act...... 74
Improvements...... 3
Indenture...... 113
Information Source...... 13
Initial Term...... 10
Intervening Event...... 14
Intervening Events...... 14
IRC...... 53, 108
IRS Guidelines...... 108
Law(s)...... 103
Laws...... 67
Legal Requirements...... 48
Lender(s)...... 19
LEP...... 76
Liabilities...... 61
LPA...... 35
Major Refurbishing Program...... 47
Manager...... 1, 69
Manager Assignment...... 88
Manager Intellectual Property...... 112
Manager Proposal...... 1
Manager Review Period...... 115
Manager’s Gross Negligence or Willful Misconduct...... 62
Marks...... 67
Mayor...... 85
New Hotel...... 1, 3
New Hotel FF&E...... 3
New Hotel Improvements...... 3
Non-Competition Area...... 101
Non-Defaulting Party...... 20
Non-Routine...... 103
OFAC...... 37
Opening Date...... 10
Operating Equipment...... 3
Operating Expenses...... 13
Operating Threshold...... 43
ORD...... 1
OSHA...... 80
Other Contract...... 86
outstanding parking violation complaint...... 77
Owner...... 1
Owner Collateral...... 100
Owner Data...... 112
Owners...... 85
Parties...... 1
Party...... 1
Performance GOP Test...... 13
Performance Period...... 14
Performance RevPAR Test...... 14
Performance Termination Notice...... 15
Performance Test...... 14
Person...... 88
PLA...... 34
Political fund-raising committee...... 87
Prime...... 65
Profit...... 53
Profit Component...... 30
Profit Transaction...... 30
Prohibited Party...... 89
Protected Marks...... 65
Protected Names...... 65
QMA Failure...... 108
QMA Guidelines...... 108
Rebate...... 53
Reportable Matters...... 36
Requested Information...... 115
Restricted Person...... 90
RFP...... 1
Routine...... 103
Sale...... 90
Sales & Use Taxes...... 38
Self-help...... 23
Senior Executive Personnel...... 63
Sensitive Security Information...... 117
Site...... 1
Specially Designated National or Blocked Person...... 37
Start of Construction...... 17
Start of Renovation...... 17
Subject Material(s)...... 103
Sub-owners...... 85
Successor Manager...... 95
Technical Services Agreement...... 3
Term...... 10
Termination Effective Date...... 14
Termination Fee...... 17
Termination Notice...... 17
Transfer Notice...... 89
Transferee...... 89
Transition Period...... 18
TSA...... 117
Uniform System...... 44
Vacation Club Products...... 113
WARN Act...... 23
WARN Date Notice...... 23
Waste Sections...... 107
Withdrawal liability...... 63
Yield Index Performance Standard...... 14
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MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT (this “Agreement”) is entered into between the City of Chicago(“Owner” or the “City” ), a municipal corporation, body politic, unit of local government and political subdivision of the State of Illinois and ______ (“Manager”); a ______corporation (collectively, the “Parties” and each individually, a “Party”). It takes effect as of ______(“Effective Date”).
RECITALS
Owner currently owns the only existing Hotel (“Existing Hotel”) located at the O’Hare International Airport (“ORD” or the “Airport”) located in the City of Chicago, Illinois and will develop a new Hotel (“New Hotel” and, with the Existing Hotel, the “Hotels”) at the Airport, the locations of which are more particularly described on ExhibitA hereto and referred to herein as the “Sites”.
Owner will cause the Existing Hotel to be renovated to be a first-class “Upper Upscale”(as defined by Smith Travel Research (“STR”)) [or better] ______Hotel. The Existing Hotel currently offers 860 rooms and approximately 44,000 square feet of Hotel dedicated conference space, first-class Hotel amenities such as food and beverage facilities, health and recreational facilities, and the Existing FF&E (as defined below).
Owner will cause a first-class New Hotel to be constructed which will be a first-class Upper Upscale [or better] ______Hotel. The New Hotel will include a building containing not less than _____ (___) guest rooms and suites, not less than ______square feet of Hotel dedicated conference space, usual first-class Hotel amenities such as food and beverage facilities, health and recreational facilities, and the New Hotel FF&E (as defined below).
On November 9, 2016, Owner issued a request for proposals (“RFP”) for the management of the Hotels. Manager responded to the RFP with its proposal dated ______, 2017 (“Manager Proposal”). Owner has evaluated all of the proposals submitted in response to its RFP andhas selected the Manager to provide technical services in connection with the renovation of the Existing Hotel and the development of the New Hotel pursuant to the terms and conditions set forth herein and in the Technical Services Agreement relating to the [New Hotel] dated as of the date hereof. By action of the City Council of the City on ______, 2017 execution and delivery of this Agreement was authorized, but not directed.
Owner and Manager now desire to enter into this Agreement respecting the management by Manager of the Hotels, to be constructed or renovated and furnished by Owner on the Sites under the terms and conditions set forth herein.
Owner and Manager desire that Manager operate the Hotels in a first-class business-like and efficient manner with the primary purpose of maximizing the Hotels’ long-term (i) profitability, (ii) value in a manner consistent with the Brand Standards (as defined herein), and (iii) customer service.
NOW THEREFORE, the Parties agree as follows:
Section 1.AGENCY; CONSTRUCTION; FURNISHING AND EQUIPPING; OPENING OF HOTEL
1.1Agency
Owner hereby appoints Manager as its sole and exclusive agent to supervise, direct, control, manage and operate the Hotels (including its facilities and amenities) for the Term, subject to, and in accordance with, the Brand Standards applicable to each Hotel and the terms of this Agreement. Manager hereby accepts said appointment and agrees, subject to this Section 1.1, that it shall exercise the utmost good faith, loyalty and honesty toward Owner and to exercise the care, skill, judgment and diligence of an experienced first-class upper upscale [or better] Hotel manager and operator in the performance of the duties hereunder for the entire Term in accordance with the Brand Standards and the terms of this Agreement.
The relationship between Owner and Manager shall be that of principal and agent. Nothing in this Agreement shall be deemed or construed to render Owner and Manager partners, joint venturers, landlord/tenant, master-servant or any other relationship. The scope of Manager’s authority, and duties as Owner’s agent, are solely as set forth in this Agreement, and Owner and Manager both acknowledge and agree that the written terms of this Agreement are intended to define and satisfy any fiduciary or other common law duties that may exist as a result of the relationship between the parties, including, without limitation, all duties of loyalty, good faith, fair dealing or full disclosure that may be deemed to exist under common law principles of agency or otherwise.
Accordingly, to the extent there is any inconsistency between the common law duties and responsibilities of principals and agents and the provisions of this Agreement, the provisions of this Agreement shall prevail, it being the intention of the Parties that (a) this Agreement shall be interpreted in accordance with general principles of contract interpretation without regard to the common law principles of agency (except as expressly provided for in this Agreement), (b) any liability between the Parties shall be based solely on principles of contract law and the express provisions of this Agreement, (c) the ability of either Party to develop other Hotels or to terminate this Agreement shall be based solely on the terms of this Agreement without regard to the common law principles of agency, and (d) this Section 1.1 constitutes a knowing and intentional waiver by Owner of any duties or responsibilities (including common law fiduciary duties) owed by an agent to its principal, and a waiver by Manager of any obligations of a principal to its agent, solely to the extent the same are inconsistent with, or would have the effect of modifying, limiting or restricting, the express provisions of this Agreement.
1.2Hotels
The Existing Hotel will consist of: (a) a first-class upper upscale [or better] Hotelto be renovated by the Owner and containing, as of the date hereof, 860 guest rooms and approximately 44,000 square feet of conference space, and (b) usual first-class Hotel amenities such as food and beverage facilities, health and recreational facilities (collectively, the “Existing Hotel Improvements”).
The New Hotel will consist of: (a) a first-class upper upscale [or better] Hotel constructed by the Owner containing not less than [TBD by City]__ guest rooms and suites and approximately [TBD by City]______square feet of conference space, and (b) usual first-class Hotel amenities such as food and beverage facilities, health and recreational facilities, news and gift, and specialty retail and services (collectively, the “New Hotel Improvements”).
The Existing Hotel Improvements and the New Hotel Improvements shall collectively be the “Improvements.” Manager shall coordinate the onsite parking services with the third party parking management company that hasentered into a contract with Owner for Airport parking. Owner shall use commercially reasonable efforts to provide the Hotels with adequate parking to meet the on-going operational needs of the Hotels from the additional parking resources at the Airport under Owner or its agent’s control (which consists of approximately [TBD]___ spaces). If the operation of the Hotels’ dedicated parking by a third party management company, or the operation or use of the additional Airport parking resources, adversely impacts either Hotel’s operations or guest satisfaction on a recurring basis, Owner will work with Manager and the third party management company in good faith to promptly address and correct such operational and guest satisfaction issues.
1.3Furnishings and Equipment; Operating Equipment
Subject to those certain Technical Services Agreementseach dated as of ______, 2017 between Owner and Manager (collectively, the “Technical Services Agreement”) and subject to Owner’s approval rights and the other limitations set forth herein, Owner shall, during the Term, purchase or, subject to Section3.4.1(g), lease and install in or about the Hotels all of the following to the extent reasonably necessary to meet the Brand Standards: (a) furniture and furnishings; (b) Hotel equipment (including computer systems, telephone systems, televisions, public address and audio-visual systems, office equipment and property management equipment as reasonably necessary); (c) uniforms, tools, and utensils; (d) china, glassware, linens, silverware and the like; (e) self-service kiosks; and (f) digital flight information displays. All of the foregoing items shall be referred to as “FF&E.” The items referred to under (a), (b), (e) and (f) shall be collectively referred to as “Furnishings and Equipment” and the items referred to under (c) and(d) shall be collectively referred to as “Operating Equipment”). All of the FF&E is, and at all times will remain, the property of Owner and will be acquired in Owner’s name.
1.4“Existing Hotel, New Hotel and Brand Standards” Defined
The Existing Hotel Site, the Existing Hotel Improvements and the FF&E purchased for the Existing Hotel (“Existing Hotel FF&E”) are herein collectively referred to as the “Exis1ting Hotel.” The New Hotel Site, the New Hotel Improvements and the FF&E purchased for the New Hotel (“New Hotel FF&E”) are herein collectively referred to as the “New Hotel.”
1.4.1Physical Standards
With respect to the physical standards of the Hotels, the “Brand Standards” refers to the standard of construction, furnishing and equipping, which is (a) not lower than the standard of construction, furnishing and equipping of first-class upper upscale [or better] full service hotels in [downtown] Chicago, Illinois, (b) consistent with a hotel commonly recognized in the hotel industry as a “first-class”“Upper Upscale” [or better] full service hotel (as defined by STR, Inc.) with a comparable location, and (c) substantially equivalent to the Brand Hotels.
1.4.2Operational Standards
With respect to the operational standards of the Hotels, the “Brand Standards” refers, at any given time, to the standard of operation which is (a) not lower than the standards of service and operations provided at the other Brand Hotels, and (b) consistent with a Hotel commonly recognized in the Hotel industry as a “first-class” Upper Upscale [or better] full service Hotel with a comparable location. The Brand Standards include, without limitation, operation of the Hotels (although not necessarily all of the facilities contained therein) on a seven day a week, twenty-four hour a day basis, with sufficient staffing to provide first-class staffing, and food, beverage, housekeeping, banquet, concierge, bellmen and porter services, provided that such standard of operation shall never, without Owner’s consent, be lower than the standard of operation existing at the date hereof with respect to the Hotels operated by Manager under the ______trade name, and is subject, however, to the unique physical attributes of the Hotel. The respective Brand Standards for the Existing Hotel and the New Hotel are attached hereto as Exhibits B-1 and B-2. With respect to the operational standards of the Hotels, the required “Brand Standards”shall not change for the initial two (2) years of the Term without the prior written approval of Owner, which may be granted or withheld in Owner’s sole discretion, and during the remainder of the initial Term, no proposed change in the Brand Standards that constitutes a material change from the current standards of service and operations provided at the other Brand Hotelsshall be undertaken at the Hotels without the prior written approval of Owner. Any change in Brand Standards that results in an increase in the Annual Budget by more than three percent (3%) in a given year shall constitute a material change. In the event that Owner and Manager mutually agree to change the reference trade name from ______to an alternate Manager trade name, the foregoing standards will be amended to be the equivalent of the standards then in existence for the alternate Manager trade name.