Submanagement Agreement for Food and Beverage Department at DoubleTree Guest Suites Hotel, Chicago, Illinois, between DoubleTree Partners and Mrs. Parks Management Company, LLC

Summary

This agreement is between DoubleTree Partners (the hotel manager) and Mrs. Parks Management Company, LLC (the food manager), effective October 24, 1994. It outlines the terms under which the food manager will operate the food and beverage department at the DoubleTree Guest Suites Hotel in Chicago, Illinois. The agreement covers the scope of services, operational standards, compensation, use of tradenames, renovation responsibilities, insurance, and termination rights. The hotel owner, Chicago HSR Limited Partnership, is also referenced. Key obligations include managing food services, maintaining standards, and adhering to financial and operational terms.

EX-10.16 16 a2039903zex-10_16.txt EXHIBIT 10.16 Exhibit 10.16 SUBMANAGEMENT AGREEMENT (FOOD AND BEVERAGE DEPARTMENT) DOUBLETREE GUEST SUITES HOTEL CHICAGO, ILLINOIS TABLE OF CONTENTS Page ---- PREAMBLE.................................................................. 1 RECITALS.................................................................. 1 ARTICLE 1 - SCOPE OF AGREEMENT............................................ 2 1.1 Engagement of Food Manager.................................... 2 1.2 Services by Food Manager...................................... 3 1.3 Permits....................................................... 7 1.4 Hours of Operation, Etc....................................... 8 1.5 Comp Policy................................................... 8 1.6 Owner's Property.............................................. 8 ARTICLE 2 - TERM 2.1 Commencement Date............................................. 9 2.2 Term.......................................................... 9 2.3 Hotel Manager's Special Termination Rights.................... 9 2.4 Food Manager's Special Termination Rights..................... 10 2.5 Early Termination of the Hotel Management Agreement..................................................... 10 ARTICLE 3 - OPERATIONAL STANDARDS......................................... 13 3.1 Operational Standards......................................... 13 ARTICLE 4 - FISCAL MATTERS................................................ 14 4.1 Accounting Matters and Fiscal Periods......................... 14 4.2 Yearly Budgets................................................ 15 4.3 Payment of F&B Department Costs............................... 19 ARTICLE 5 - COMPENSATION.................................................. 20 5.1 Base Fee...................................................... 21 5.2 Departmental Profit Incentive Fee............................. 22 5.3 GOP Incentive Fee............................................. 24 ARTICLE 6 - USE OF TRADENAMES............................................. 27 6.1 Use of Name................................................... 27 6.2 Advertising Materials......................................... 29 6.3 Rights Upon Termination....................................... 30 ARTICLE 7 - OPERATING ACCOUNT............................................. 33 7.1 Operating Account............................................. 33 (i) ARTICLE 8 - RENOVATION.................................................... 34 8.1 Restaurant Renovation......................................... 34 8.2 Annual Renovation Amortization and Payments................... 34 8.3 Subsequent Adjustment......................................... 35 ARTICLE 9 - INDEMNITY AND INSURANCE....................................... 36 9.1 Indemnity by Owner............................................ 36 9.2 Indemnity by Food Manager..................................... 37 9.3 Insurance Requirements........................................ 39 ARTICLE 10 - DEFAULT AND TERMINATION...................................... 41 10.1 Events of Default............................................. 41 10.2 Termination................................................... 43 ARTICLE 11 - APPLICABLE LAW............................................... 45 11.1 Scope......................................................... 45 ARTICLE 12 - SUCCESSORS AND ASSIGNS....................................... 46 12.1 Assignment by Food Manager.................................... 46 ARTICLE 13 - FORCE MAJEURE................................................ 49 13.1 Operation of Hotel............................................ 49 13.2 Extension of Time............................................. 49 ARTICLE 14 - COVENANTS OF OWNER........................................... 50 14.1 General....................................................... 50 14.2 Funding....................................................... 50 14.3 Restriction of Hiring Food Manager Employees.................. 51 ARTICLE 15 - GENERAL PROVISIONS........................................... 51 15.1 Authorization................................................. 51 15.2 Formalities................................................... 51 15.3 Consents...................................................... 51 15.4 Notices....................................................... 52 15.5 Entire Agreement.............................................. 54 15.6 Waivers....................................................... 55 15.7 Relationship.................................................. 55 15.8 Overdue Payments.............................................. 55 15.9 Attorneys' Fees............................................... 56 SIGNATURES................................................................ 57 CONSENT AND JOINDER OF OWNER.............................................. 58 (ii) EXHIBIT 1 - PURCHASE ORDER PROCEDURES (Article 1.2(a)) EXHIBIT 2 - DEPARTMENTAL PROFITS (Article 5.2(c)) EXHIBIT 3 - GROSS OPERATING PROFIT (Article 5.1(b) and 5.3(c)) EXHIBIT 4 - EXAMPLES OF THE CALCULATION AND PAYMENT OF FOOD MANAGER'S FEES (Article 5) EXHIBIT 5 - METROPOLITAN CHICAGO AREA (MAP) (Article 6.1(c)) EXHIBIT 6 - 1995 YEARLY BUDGET FOR THE F&B DEPARTMENT (Article 4.2(a)) (iii) GLOSSARY OF DEFINED TERMS 1995 Yearly Budget - Article 4.2(a) Advertising and Promotional Threshold Amount - Article 5.2(d) Advertising and Promotional Excess - Article 5.2(d) Agreement - Preamble Annual Renovation Amortization - Article 8.2 Consent - Article 15.3 Defaulting Party - Article 10.1(a) Departmental Profits - Article 5.2(c) Departmental Profit Incentive Fee - Article 5.2(a) Event of Default - Article 10.1 Excess Departmental Profits - Article 5.2(b) Excess GOP - Article 5.3(b) Execution Date - Preamble F&B Department - Article 1.1(a) F&B Department FF&E Budget - Article 4.2(c) Fees - Article 5 FF&E - Article 4.2(c) Food Manager - Preamble Food Manager's Renovation Contribution - Article 8.1 Food Manager Transfer - Article 12.1(a) Food Manager Employees - Article 1.2(b) Food Manager Tradenames - Article 6 Full Commencement Date - Article 2.1 GOP Incentive Fee - Article 5.3(a) Gross Operating Profit - Article 5.3(c) and Exhibit 3 Guarantor - Article 1.1(a) Hotel - Witnesseth Hotel Management Agreement - Witnesseth Hotel Manager - Preamble House F&B Operations - Article 1.1(a) House F&B Operations - Article 1.1(a) Index - Article 4.2(b) Initial Period - Article 2.1 New York Cafe - Article 3.1 Non-Defaulting Party - Article 10.2(a) NYRG - Article 1.1(a) Operational Standards - Article 3.1 Operating Costs - Exhibit 3 Operating Account - Article 7.1(a) Owner - Witnesseth Owner's Renovation Contribution - Article 8.1 Permissible Costs - Article 4.3 Post-Termination Licensing Period - Article 6.3(b) Pre-Opening - Article 8.1(b) Purchase Order Procedures - Article 1.2(a) Renovation - Article 8.1 Renovation Cost - Article 8.2 Requisitions - Article 7.1(b) (iv) Stillman Entity - Article 12.1(b) Stillman - Article 12.1(b) Threshold GOP - Article 5.3(b) Total F&B Department Revenue - Article 5.1(b) Total Hotel Sales - Exhibit 3 Trade Name Operations - Article 1.1(a) Unamortized Food Manager's Renovation Contribution - 2.5(a)(i) Uniform System of Accounts - Article 5.1(b) Year - Article 2.2(b) Yearly Budget - Article 4.2(b) (v) PREAMBLE THIS SUBMANAGEMENT AGREEMENT (the "Agreement") is made and entered into on the 9th day of June, 1995 (the "Execution Date"), but effective as of October 24, 1994, by and between DOUBLETREE PARTNERS (formerly known as Guest Quarters Hotels Partnership), a Delaware partnership ("Hotel Manager"), and MRS. PARKS MANAGEMENT COMPANY, L.L.C., an Illinois limited liability company ("Food Manager"). WITNESSETH: WHEREAS, Chicago HSR Limited Partnership ("Owner") owns a hotel operating under the name Guest Quarters Suite Hotel (the "Hotel") located at 900 North Mies Van Der Rohe Way, Chicago, Illinois; and WHEREAS, pursuant to a Management Agreement (the "Hotel Management Agreement") dated November 29, 1988, as amended, by and between Owner and Hotel Manager, Hotel Manager was retained by Owner to operate the Hotel under the tradename "Guest Quarters Suite Hotel," which name was changed to "Doubletree Guest Suites" in February, 1995; and WHEREAS, Hotel Manager is desirous of having Food Manager manage and operate the food and beverage department within the Hotel upon the terms and conditions as herein provided; -1- NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Hotel Manager and Food Manager agree as follows: ARTICLE 1 SCOPE OF AGREEMENT 1.1 Engagement of Food Manager. (a) Hotel Manager hereby engages Food Manager to supervise and manage the food and beverage department at the Hotel for the term of this Agreement, and Food Manager hereby agrees that it will manage the F&B Department (as hereinafter defined) pursuant to and in accordance with the terms of this Agreement. Food Manager further agrees to provide, or cause its affiliate, Atlantic & Pacific Grill Associates, L.P. (the "Guarantor") to provide, the trade names -- "Park Avenue Cafe" for the second floor restaurant and "Mrs. Park's Tavern" for the first floor bistro -- for the Hotel's restaurant and lounge (the "Trade Name Operations"). (Both Food Manager and the Guarantor are affiliates of The New York Restaurant Group, Inc. ("NYRG").) As used herein, the term "F&B Department" shall mean and refer to all operations of the food and beverage department of the Hotel, including (i) room service and catering/banquet operations (the "House F&B Operations"), and (ii) the Trade Name Operations. Hotel Manager and Food Manager further -2- agree that this Agreement provides for management in respect of the F&B Department of the Hotel, and that Hotel Manager and Food Manager do not intend, nor does this Agreement grant or create, a "franchise" within the meaning of the Federal Trade Commission Act, or any rule or regulation promulgated thereunder or in connection therewith. 1.2 Services by Food Manager. (a) During the term of this Agreement, Food Manager shall, subject to the applicable Yearly Budget (as hereinafter defined) and the other limitations contained in this Agreement, purchase all food, supplies and other items in the ordinary course of business of the F&B Department on behalf of Owner and in Owner's name. With respect to the Trade Name Operations as well as the House F&B Operations, Food Manager shall follow the purchasing authorization procedure and shall otherwise conform to the purchase order approval requirements and other related matters set forth in Exhibit 1, "Purchase Order Procedures," attached hereto and made a part hereof. Food Manager will make, or cause to be made, all discount and bulk purchase arrangements which it or NYRG (or other NYRG affiliates) have with third parties available to the Hotel on the same basis and furnish the Hotel with appropriate vouchers and backup information to support the charges to the Hotel, if and to the extent such discount and bulk purchase arrangements (i) are available to Chicago and (ii) can be made without adverse impact on -3- other restaurants operated by NYRG or its affiliates. Food Manager shall have the right to select the vendors for purchases of food and beverages, linens, supplies and equipment for the F&B Department, subject to Hotel Manager's reasonable approval; provided, however, where Hotel Manager has arranged for national or regional purchasing programs with certain vendors whereby total aggregate volume generates better pricing, Food Manager shall, if Hotel Manager so requests, purchase from such vendors, unless Food Manager reasonably objects to the quality of such purchases or can effect such purchases at even lower prices without sacrificing quality. During the term of this Agreement, Hotel Manager will permit other restaurants operated by NYRG or its affiliates to participate in Hotel Manager's group purchasing programs if and to the extent such programs (i) are available at the locations of such other restaurants and (ii) can be made available to NYRG and its affiliates without adverse impact on the hotels operated by Hotel Manager or its affiliates. (b) Food Manager shall hire, train and supervise all F&B Department personnel. Such responsibilities shall be carried out in consultation with the Human Resources Director for the Hotel and in accordance with the personnel policies and procedures established for the Hotel by Hotel Manager. All F&B Department employees will continue to be employees of Owner, except for the Food and Beverage Director and Executive Chef (collectively, the "Food Manager Employees"), who will be employees of Food Manager. -4- All salary and related benefits for F&B Department employees, including the Food Manager Employees (and including relocation costs for the Food Manager Employees in accordance with Hotel Manager's relocation policy) shall be paid for by the Hotel as an operating expense of the F&B Department, subject to Hotel Manager's approval of the budget therefor, which approval shall not be unreasonably withheld or delayed. All training and supervision of employees, and other employment-related matters, including (without limitation) salaries, wages and benefit structure, and hiring and firing decisions, for the Food Manager Employees as well as the other F&B Department personnel, shall be subject to Hotel Manager's approval, excepting only that Food Manager will have the right to fire the Food Manager Employees without the approval of Hotel Manager. Hotel Manager, however, will also have the right to direct Food Manager (i) to fire any F&B Department personnel who are employees of Hotel Manager, and (ii) to terminate the employment at the Hotel of any Food Manager Employees. All F&B Department personnel, including the Food Manager Employees, will be subject to Hotel Manager's personnel policies, procedures and disciplinary rules. Such policies, procedures and disciplinary rules shall be applied by Hotel Manager on a non-discriminatory basis to all Hotel employees, including Food Manager Employees and other F&B Department personnel. Without the consent of Food Manager, Hotel Manager will not itself hire any Food Manager Employee to work at the Hotel or at any other hotel managed by Hotel Manager (or any affiliate thereof) for a period of twelve -5- (12) months after such Food Manager Employee ceases to work for Food Manager at the Hotel. Although Food Manager shall supervise all F&B Department personnel, it is agreed that the catering sales staff (Director of Catering, Catering Sales Managers, etc.) will continue to be directed by Hotel Manager's sales department, but as an expense charged to the F&B Department, in order to ensure optimalization of catering/meeting space utilization; bookings of the catering sales staff will be credited to the F&B Department. (c) Food Manager shall, subject to the applicable Yearly Budget and to receiving the prior approval of Hotel Manager, establish formulation and pricing of all menus and food offerings, and advertising, marketing and promotional programs, for the House F&B Operations as well as the Trade Name Operations. Hotel Manager will not unreasonably withhold its consent to the foregoing with respect to the Trade Name Operations, provided that, as to pricing, Food Manager shall (from time to time, upon request by Hotel Manager) furnish to Hotel Manager a survey of pricing for comparable restaurant and lounge operations in Chicago. As to House F&B Operations, Hotel Manager may condition its approval upon conformity to Hotel Manager's chain-wide standards or other generally established practices of Hotel Manager for similar quality hotels. (d) Without limiting the provisions of Article 15.7 hereof, Food Manager shall not have any authority whatsoever to -6- make any commitment or enter into any agreement for, or on behalf of, or otherwise bind, Owner or Hotel Manager, except that purchase orders made by Food Manager in accordance with Article 1.2(a) above shall be binding on Owner. 1.3 Permits. Hotel Manager shall, as an expense of the F&B Department, obtain and keep in full force and effect all necessary licenses and permits, including liquor, bar, restaurant, sign and hotel licenses, as may be required for the operation of the F&B Department. Food Manager shall take, or cause NYRG to take, all necessary actions to register and protect the use of the Trade Names (as hereinafter defined) at the Hotel. All operating licenses and permits are to be in effect at the Commencement Date, and (subject to the requirements of local law) shall be in the name of Owner and Hotel Manager jointly. Food Manager undertakes to comply with any conditions set out in any such licenses and permits and at all times to operate and manage the F&B Department in accordance with such conditions, all applicable governmental health and safety regulations and any other legal requirements, all at Owner's expense, subject to the limitations regarding Permissible Costs set forth in Article 4.3 below. (If the cost of compliance with a particular governmental requirement is not specifically provided for in the applicable Yearly Budget, such cost shall be subject to the approval of Owner and Hotel Manager, which approval shall not be unreasonably withheld or delayed.) -7- 1.4 Hours of Operation, Etc. Notwithstanding anything to the contrary contained herein, Hotel Manager shall establish (and may change from time to time) the hours of availability for room service as well as other F&B Department related services at the Hotel, except that Food Manager shall establish (and may change from time to time) the hours of operation for the Trade Name Operations, subject to Hotel Manager's prior approval thereof. Hotel Manager shall also have exclusive authority to book reservations at the Hotel for use of Hotel banquet rooms and meeting facilities. 1.5 Comp Policy. Food Manager will provide complimentary and/or discounted (i) food and beverage services and (ii) banquet, function and meeting facilities in accordance with policies therefor to be promulgated by Hotel Manager from time to time. 1.6 Owner's Property. All furniture, furnishings and operating equipment of the F&B Department (including, but not limited to, items of decor, kitchen equipment, equipment relating to bars, room service and banquet services as well as chinaware, glassware, linens, silverware, utensils, uniforms and all similar items) and all operating supplies (including, but not limited to, inventories of food and beverages and other consumable items such as soap, cleaning materials, matches and all similar items) shall be and remain the property of Owner. -8- ARTICLE 2 TERM 2.1 Commencement Date. The Commencement Date of the term hereunder was October 24, 1994, the date that Food Manager reopened the Hotel lounge to the public following substantial completion of the Renovation (as hereinafter defined) of such facility. As used herein, (a) the "Full Commencement Date" shall mean January 1, 1995, and (b) the "Initial Period" shall mean the period from the Commencement Date to the Full Commencement Date. 2.2 Term. (a) Unless sooner terminated as hereinafter provided, this Agreement shall expire on the earlier of (i) December 31, 2004 or (ii) the termination of the Hotel Management Agreement. (The expiration date of the Hotel Management Agreement is December 31, 2010.) (b) As used in this Agreement, a "Year" shall mean and refer to the calendar year commencing on the Full Commencement Date and each successive calendar year thereafter. Accordingly, the first Year shall end December 31, 1995, the second Year shall end December 31, 1996, and so on. 2.3 Hotel Manager's Special Termination Rights. Hotel -9- Manager shall have the right to terminate this agreement upon ninety (90) days notice in the event that Total F&B Department Revenue (as hereinafter defined) for any Year, commencing with 1997, does not exceed $5,984,327 [i.e., the sum of (x) $3,184,327, being the Total F&B Department Revenue for calendar year 1993 (January 1, 1993 through December 31, 1993) plus (y) $2,800,000]. Such termination notice shall be given by Hotel Manager (if at all) within sixty (60) days after Hotel Manager furnishes to Food Manager the report of Total F&B Department Revenue for any Year in which such performance test is not met. 2.4 Food Manager's Special Termination Rights. Food Manager shall have the right to terminate this agreement upon ninety (90) days notice in the event that the total fees (Base Fee plus Departmental Profit Incentive Fee plus GOP Incentive Fee, if any) payable to Food Manager pursuant to this agreement for any Year, commencing with 1997, are less than $200,000. Such termination notice shall be given by Food Manager (if at all) within sixty (60) days after Hotel Manager furnishes to Food Manager the financial reports for the F&B Department for any Year in which such performance test is not met. 2.5 Early Termination of the Hotel Management Agreement. (a) The provisions of subparagraphs (i), (ii) and (iii) below shall apply in the event this agreement is terminated prior -10- to December 31, 2001 by reason of the termination of the Hotel Management Agreement. (i) If the Hotel Management Agreement is terminated by reason of a casualty or a condemnation/taking by eminent domain, then Food Manager shall be entitled to recover the then unamortized portion of the Food Manager's Renovation Contribution (as defined in Article 8.1(b) below), calculated as of the effective termination date of this agreement (the "Unamortized Food Manager's Renovation Contribution"), out of insurance proceeds or condemnation/taking awards (as the case may be) in respect of the Hotel, to the extent available, if any. As used herein, "available" insurance proceeds and condemnation/taking awards shall consist of the amount of casualty insurance proceeds or condemnation/taking awards (as the case may be) received by Owner after deduction for amounts paid to or otherwise retained by mortgagee(s) of the hotel. (ii) If the Hotel Management Agreement is terminated by reason of the default of Hotel Manager thereunder, then unless Owner agrees to recognize the rights of Food Manager under this Agreement for the then unexpired term thereof (which Owner shall have the right but not the obligation to do), Hotel Manager shall pay to Food Manager the Unamortized Food Manager's Renovation Contribution simultaneously with the termination of this agreement -11- (iii) if the Hotel Management Agreement is terminated for any other reason (i.e., other than the matters referred in subparagraphs (i) and (ii) above), then unless Owner agrees to recognize the rights of Food Manager under this Agreement for the then unexpired term thereof (which Owner shall have the right but not the obligation to do), Owner shall pay to Food Manager the Unamortized Food Manager's Renovation Contribution simultaneously with the termination of this Agreement. The preceding sentence shall not, however, apply in the event the Hotel Management Agreement and this Agreement are terminated by reason of a mortgage foreclosure. (b) If Owner agrees to recognize the rights of Food Manager for the then unexpired term of this Agreement pursuant to subparagraph (a)(ii) or (iii) above, then Owner, Food Manager and any new manager of the Hotel shall enter into appropriate documentation to evidence the continuation of this Agreement, and Food Manager will cooperate with Owner and such new Hotel Manager in connection therewith. (c) Hotel Manager represents and warrants that the Hotel Management Agreement is not terminable by Owner on an at-will basis or in the event of a sale of the Hotel, and is binding upon Owner's successors and assigns upon a sale of the Hotel. -12- ARTICLE 3 OPERATIONAL STANDARDS 3.1 Operational Standards. Hotel Manager and Food Manager recognize that an essential element of the success and reputation of the Hotel is the satisfaction of its guests and customers with the management, maintenance, quality and service to be provided by Food Manager with respect to the Trade Name Operations and the House F&B Operations. Food Manager agrees that during the term of this Agreement it will operate the Trade Name Operations in a first-class manner commensurate with the standards of operations currently practiced at the Park Avenue Cafe in New York City (the "New York Cafe") and that the concept and decor for the restaurant and lounge at the Hotel will be substantially the same as that presently established for the New York Cafe. Food Manager further agrees to operate the House F&B Operations in accordance with Hotel Manager's chain-wide standards and generally established practices therefor for similar quality hotels. Hotel Manager shall cooperate with Food Manager throughout the term of this Agreement to the end that Food Manager shall be able to carry out its responsibilities in accordance with the foregoing operational standards (the "Operational Standards"). -13- ARTICLE 4 FISCAL MATTERS 4.1 Accounting Matters and Fiscal Periods. (a) The books and records for the Trade Name Operations, as well as the House F&B Operations, will be kept by Hotel Manager in accordance with the Uniform System of Accounts for Hotels as amended from time to time. Such books and records shall be maintained by Hotel Manager either at the Hotel or at the regional accounting office of Hotel Manager which serves the Hotel. Hotel Manager will continue to provide accounting services for payroll, capital purchases, and profit and loss/operating statement generation. The cost of accounting services will not be a deduction in computing Departmental Profits (as hereinafter defined). (b) Food Manager may, within six (6) months after receipt of year-end statistics and financial reports from Hotel Manager, and upon no less than fifteen (15) days notice to Hotel Manager and Owner, at Food Manager's expense, conduct an audit of the books and records of Hotel Manager pertaining to Total F&B Department Revenue, Departmental Profits (as hereinafter defined), Gross Operating Profit (as hereinafter defined) and any other matters relevant to the operating results of the F&B Department and -14- the calculation of Food Manager's compensation hereunder. In making such audit, Food Manager shall have the right to examine Hotel Manager's records only for the Year just ended. If an audit or examination by Food Manager shall show that Food Manager's compensation for the period covered by the audit has been overpaid, the excess shall be applied to any amounts then due to Food Manager by Hotel Manager and the balance, if any, shall promptly be refunded by Food Manager to Hotel Manager. If an audit or an examination by Food Manager shall show that Food Manager's compensation for the period covered by the audit has been underpaid, Hotel Manager shall promptly pay to Food Manager the amount of the difference between the amount previously paid and the correct amount due. 4.2 Yearly Budgets. (a) The approved operating budget for the F&B Department for 1995 (the "1995 Yearly Budget") is attached hereto and made a part hereof as Exhibit 6. (b) On or before September 1, 1995, and on or before September 1 of each year thereafter, Food Manager will propose to Hotel Manager an annual budget (the "Yearly Budget") for the F&B Department for the upcoming calendar year. During the months of September and October, Hotel Manager and Food Manager will consult with each other to review and revise Food Manager's submission in -15- order to develop a proposed Yearly Budget for the F&B Department which is mutually satisfactory for submission on or before November 1 to Owner for its approval as part of the annual budgeting process for the entire Hotel under the Hotel Management Agreement. In the event that Food Manager and Hotel Manager, despite using good faith efforts to do so, are unable to reach agreement on a mutually satisfactory Yearly Budget for the F&B Department by November 1 of any year, on such date, each of Food Manager and Hotel Manager shall submit a proposed F&B Department Yearly Budget to Owner for its approval. In such event, or in the event that Owner rejects the proposed Yearly Budget for the F&B Department jointly developed by Food Manager and Hotel Manager as aforesaid, then Owner, Hotel Manager and Food Manager shall cooperate with each other to develop a mutually satisfactory Yearly Budget for the F&B Department. If Hotel Manager and Food Manager each submits its own F&B Department Yearly Budget to Owner as aforesaid, then Owner may approve either of such budgets or disapprove them both. In the event that Owner does not approve a Yearly Budget for the F&B Department prior to the commencement of the applicable calendar year, the aggregate amount of the Yearly Budget for the F&B Department for the preceding calendar year (exclusive of the F&B Department FF&E Budget, which shall be governed by the provisions of Article 4.2(c) below, and exclusive of the contingency fund, which shall be governed by Article 4.2(f) below) shall be increased by an amount equal to the percentage increase in the Index (as hereinafter defined) during such preceding calendar year, and as so increased, -16- shall be deemed to be the Yearly Budget for the F&B Department in effect until such time as a new Yearly Budget for the F&B Department has been approved by Owner. As used herein, the "Index" shall mean the Consumer Price Index for Urban Wage Earners and Clerical Workers -- Series A (1982-84=100) as published by the United States Bureau of Labor Statistics for the City of Chicago, Illinois; if the compilation and/or publication of such index shall be discontinued or transferred to any other governmental department or bureau or agency, Hotel Manager shall fix an alternate index or method to implement the intention of the preceding sentence. (c) Any renovations or changes in decor or other expenditures for repair and replacement of furniture, fixtures and equipment ("FF&E") with respect to the F&B Department proposed to be made by Food Manager shall be subject to the prior approval of Hotel Manager and Owner, and shall be included in the Yearly Budget as the "F&B Department FF&E Budget." Food Manager, Hotel Manager and Owner recognize the necessity of replacement of FF&E due to age, wear, condition or obsolescence. Hotel Manager and Owner agree to authorize the expenditure of such amounts therefor as shall be required in the normal and ordinary course of operation of the F&B Department, so as to operate the F&B Department in accordance with the Operational Standards. (d) References in this Article 4.2 and elsewhere in this Agreement to the Yearly Budget for the F&B Department (and phrases -17- of similar import) shall be deemed to include the portion of the Marketing budget for the Hotel which is fairly allocable to the F&B Department. The parties agree that for 1995, such portion is $150,000. For each year thereafter, as part of the Yearly Budget process, the parties shall establish the portion of the Hotel Marketing budget which is fairly allocable to the F&B Department, and Food Manager shall direct, in accordance with the Yearly Budget, the advertising for the F&B Department. (e) Owner and Hotel Manager acknowledge and agree that there may occur from time to time unpredicted significant changes, variables or events affecting the operation of the F&B Department, including unanticipated changes in Hotel occupancy rates, market conditions, or additional unanticipated items of income or expense. In such event, Food Manager may request variance(s) from the approved Yearly Budget which are reasonable and necessary to continue to operate the F&B Department in accordance with the Operational Standards. Any such request by Food Manager shall be submitted to Hotel Manager and Owner in writing with an explanation thereof and shall be accompanied by supporting information for the request. Hotel Manager's and Owner's approval of such a request shall not be unreasonably withheld or delayed. References in this Agreement to the approved Yearly Budget shall be deemed to incorporate any revisions thereto made pursuant to this paragraph (e) and approved by Hotel Manager and Owner as aforesaid. -18- (f) Each Yearly Budget will contain a contingency fund in the amount of $25,000 (or such other amount as may hereafter be approved by Owner, Hotel Manager and Food Manager on an annual basis), which shall be available to Food Manager for items which are otherwise unbudgeted (e.g., for spontaneous purchases of artifacts for the restaurant and cafe); provided, however, that all expenditures under this paragraph (f) shall be subject to the prior approval of the Food and Beverage Director and the Hotel General Manager. (g) Food Manager shall operate the F&B Department in accordance with the Yearly Budget therefor as approved by Hotel Manager and Owner. Food Manager shall not, in the performance of its duties as provided in this Agreement, be entitled to reimbursement for any expenditure if and to the extent that such expenditure is not provided for in the then applicable Yearly Budget or otherwise approved by Hotel Manager in advance, which approval shall not be unreasonably withheld. 4.3 Payment of F&B Department Costs. Subject to and in accordance with the provisions of this Agreement, all amounts on account of direct labor and operating costs (including, without limitation, all salary and related benefits for the Food Manager Employees, but specifically excluding the Renovation Cost, which is covered separately in Article 8) reasonably incurred during the term of this Agreement in connection with the operation of the F&B -19- Department in accordance with the terms of this Agreement, shall be paid for out of the Operating Account by Hotel Manager pursuant to invoices therefor submitted by the Food Manager to Hotel Manager, as provided in Article 7.1 hereof, but only to the extent that such amounts are provided for in, and are incurred in accordance with, the then applicable Yearly Budget, or are otherwise approved in writing in advance by Hotel Manager. (Such amounts are herein collectively referred to as "Permissible Costs.") In no event shall Permissible Costs include any amount on account of (i) any of Food Manager's internal costs of operation, bookkeeping or overhead, (ii) any taxes imposed upon, or measured by the gross or net income of, Food Manager (other than sales taxes upon F&B Department revenues and employment-related taxes imposed upon the Food Manager Employees at the Hotel), or (iii) any direct or indirect compensation, benefits or other amounts which may be paid or payable by Food Manager to any person or entity employed or engaged by Food Manager except and to the extent that such amounts for any such person (including the Food Manager Employees) are provided for in the then applicable Yearly Budget. ARTICLE 5 COMPENSATION In consideration of the services to be performed by Food Manager under this Agreement, Food Manager shall be paid the Base Fee, the Departmental Profit Incentive Fee and the GOP Incentive Fee (each as hereinafter defined and collectively, the "Fees") from -20- and after the Full Commencement Date. No Fees shall be payable to Food Manager in respect of the Initial Period. Examples of the calculation and payment of the Fees are attached hereto and made a part hereof as Exhibit 4. 5.1 Base Fee. (a) The "Base Fee" shall mean and refer to a fee equal to one and one-half percent (1 1/2%) of Total F&B Department Revenue (as hereinafter defined) with respect to each month during the term of this Agreement from and after the Full Commencement Date. The Base Fee for the immediately preceding month shall be paid monthly from the Operating Account on or before the fifteenth (15th) day of each succeeding month. There shall be no Base Fee in respect of the Initial Period. (b) The term "Total F&B Department Revenue" shall mean, with respect to any period, that portion of Total Hotel Sales (as defined in Exhibit 3) derived from (or, if Total Hotel Sales include the proceeds of business interruption insurance or the like, the portion of such insurance proceeds fairly attributable to) the sale of food and beverages by the F&B Department (including, without limitation, all catering revenues) and rental and other miscellaneous income from the Hotel's function room(s), including audio/visual rentals. Total F&B Department Revenue shall be determined on an accrual basis and in accordance with the -21- Uniform System of Accounts for Hotels, as the same may be amended from time to time (the "Uniform System of Accounts"), or in accordance with generally accepted accounting principles, consistently applied. 5.2 Departmental Profit Incentive Fee. (a) In respect of 1995, the "Departmental Profit Incentive Fee" shall mean and refer to a fee equal to fifteen percent (15%) of Excess Departmental Profits (as hereinafter defined). In respect of each Year thereafter, the Departmental Profit Incentive Fee shall mean and refer to a fee equal to seventeen and one-half percent (17 1/2%) of Excess Departmental Profits for such Year. The Departmental Profit Incentive Fee shall be computed quarterly (i.e., as of the end of the third, sixth, ninth and last month of each Year, with Threshold Departmental Profits (as hereinafter defined) appropriately prorated as of the end of each quarterly period), based upon cumulative Excess Departmental Profits, if any, for the Year to date, and payment (net of previous payments thereof for such Year) shall be made to Food Manager (or repayment, in the event of a decrease in cumulative Excess Departmental Profits in any quarter, shall be made by Food Manager) quarterly, on the twentieth (20th) day of the month next following the end of each calendar quarter, with annual adjustments, if applicable, upon final determination of Departmental Profits for the Year in question. The Departmental -22- Profit Incentive Fee shall be computed separately for each Year, and there shall be no Departmental Profit Incentive Fee in respect of the Initial Period. (b) The term "Excess Departmental Profits" shall mean, in respect of each Year, the excess, if any, of (i) Departmental Profits (as hereinafter defined) over (ii) Threshold Departmental Profits for such Year. "Threshold Departmental Profits" shall mean (i) for 1995, $1,060,164 (being 105% of Departmental Profits for calendar year 1993 (January 1, 1993 through December 31, 1993) which were $1,009,680); (ii) for 1996, $1,113,172 (being 105% of Threshold Departmental Profits for 1995); (iii) for 1997, $1,168,831 (being 105% of Threshold Departmental Profits for 1996); and (iv) for 1998 and each Year thereafter, $1,227,273 (being 105% of Threshold Departmental Profits for 1997). (c) "Departmental Profits" shall mean, in respect of each Year, the profits attributable to the F&B Department calculated in accordance with Exhibit 2 attached hereto and made a part hereof. Departmental Profits shall be determined on an accrual basis and in accordance with the Uniform System of Accounts or in accordance with generally accepted accounting principles, consistently applied. Departmental Profits for each Year shall be determined in a manner consistent with the calculation of Departmental Profits for 1993, excepting only for the additional deductions provided for in paragraphs (d) and (e) below. -23- (d) In calculating Departmental Profits for each Year, there shall be a deduction for the excess ("Advertising and Promotional Excess"), if any, of (i) the advertising and promotional costs actually incurred by the Hotel in respect of the F&B Department for such Year (which costs shall be included in the Yearly Budget or otherwise expressly approved by Hotel Manager), over (ii) $30,000.00 (the "Advertising and Promotional Threshold Amount") (being the historical advertising and promotion expenditure level for the Hotel fairly allocable to the F&B Department, which have not been, and will not be, charged against Departmental Profits). In no event will any advertising or promotional expenditures in respect of the Hotel, other than the Advertising and Promotional Excess, be charged against Departmental Profits. (e) For the first seven (7) Years (i.e., through December 31, 2001), the calculation of Departmental Profits shall also include a deduction for Annual Renovation Amortization (as hereinafter defined). 5.3 GOP Incentive Fee. (a) In respect of 1995, the "GOP Incentive Fee" shall mean and refer to a fee equal to two and one-half percent (2 1/2%) of Excess GOP (as hereinafter defined). In respect of each Year thereafter, the GOP Incentive Fee shall mean and refer to a fee -24- equal to five percent (5%) of Excess GOP. The GOP Incentive Fee shall be computed quarterly (i.e., as of the end of the third, sixth, ninth and last month of each Year, with Threshold GOP (as hereinafter defined) appropriately prorated as of the end of each quarterly period), based upon cumulative Excess GOP, if any, for the Year to date, and payment (net of previous payments thereof for such Year) shall be made to Food Manager (or repayment, in the event of a decrease in cumulative Excess GOP in any quarter, shall be made by Food Manager) quarterly, on the twentieth (20th) day of the month next following the end of each calendar quarter, with annual adjustments, if applicable, upon final determination of Gross Operating Profit for the Year in question. The GOP Incentive Fee shall be computed separately for each Year, and there shall be no GOP Incentive Fee in respect of the Initial Period. (b) The term "Excess GOP" shall mean, in respect of each Year, the excess, if any, of (i) Gross Operating Profit (as hereinafter defined) over (ii) Threshold GOP for such Year. "Threshold GOP" shall mean (i) for 1995, $4,275,752 (being 105% of Gross Operating Profit for calendar year 1993 (January 1, 1993 through December 31, 1993), which was $4,072,145); (ii) for 1996, $4,489,540 (being 105% of Threshold GOP for 1995); (iii) for 1997, $4,714,017 (being 105% of Threshold GOP for 1996); and (iv) for 1998 and each Year thereafter, $4,949,718 (being 105% of Threshold GOP for 1997). -25- (c) "Gross Operating Profit" shall mean, in respect of each Year, the amount, if any, by which Total Hotel Sales (as defined in Exhibit 3) for such Year exceed Operating Costs (as defined in Exhibit 3) for such Year. For purposes of clarification, Gross Operating Profit shall be calculated in accordance with Exhibit 3 attached hereto and made a part hereof. Gross Operating Profit shall be determined on an accrual basis and in accordance with the Uniform System of Accounts or in accordance with generally accepted accounting principles, consistently applied. Gross Operating Profit for each Year shall be determined in a manner consistent with the calculation of Gross Operating Profit for 1993, excepting only for the deduction of Annual Renovation Amortization provided for in paragraph (d) below. (d) For the first seven (7) Years, the calculation of Gross Operating Profit shall include a deduction for Annual Renovation Amortization. -26- ARTICLE 6 USE OF TRADENAMES 6.1 Use of Name. (a) During the term of this Agreement, the second floor restaurant shall be known and designated as a "Park Avenue Cafe" and the first floor bistro shall be known and designated as "Mrs. Park's Tavern," unless and until parties hereto agree to the use of some other name(s). As used herein, the term "Food Manager Tradenames" shall mean and include (i) the name "Park Avenue Cafe," (ii) the name "Mrs. Park's Tavern," and (iii) any other name, tradename, logo, trademark or service mark which may now or hereafter be used in connection with the Hotel restaurant and bistro, and any name, tradename, logo, trademark or service mark similar thereto, other than those owned by Owner or Hotel Manager. (b) It is acknowledged that the Food Manager Tradenames are registered service marks of the Guarantor and/or Food Manager (as the case may be) and that the Food Manager Tradenames are and will continue to be the sole property of the Guarantor and/or Food Manager. Provided, however, Food Manager hereby consents, and to the extent necessary shall cause the Guarantor to provide its consent, to the terms and conditions of this Agreement as the same relate to the use of the Food Manager Tradenames by Hotel Manager and Owner in connection with the Hotel. It is acknowledged that -27- the failure of the Hotel to enjoy the continued use of the Food Manager Tradenames for any reason other than Hotel Manager's or Owner's default hereunder shall constitute an Event of Default by Food Manager under Article 10.1(a). It is further acknowledged and agreed that Hotel Manager and Owner shall have the right to use the Food Manager Tradenames only in connection with the Hotel and associated chain-wide advertising (as more particularly provided in Article 6.2 below) and otherwise in accordance with the terms of this Agreement. (c) Food Manager agrees that during the term of this Agreement (and during any Post-Termination Licensing Period, as such term is hereinafter defined, and during the period referred to in Article 12.1(c), if applicable) the Food Manager Tradenames shall be used in the Metropolitan Chicago area (as more particularly described in Exhibit 5) exclusively in connection with the Hotel, and neither Food Manager, the Guarantor nor any other NYRG affiliate shall use, or license, or otherwise permit anyone else to use, the Food Manager Tradenames in connection with any other restaurant (or other food and beverage operation) in the Metropolitan Chicago area. It is agreed that the use of the Food Manager Tradenames by the Hotel shall be non-exclusive, and, except within the Metropolitan Chicago area, Food Manager, the Guarantor and NYRG (and their respective affiliates) may use, and license others to use, the Food Manager Tradenames for any purpose whatsoever, including, without limitation, in connection with other -28- businesses outside of the Metropolitan Chicago area. Further, nothing in this Agreement shall restrict NYRG, the Guarantor, Food Manager or any of their respective affiliates from (i) opening or operating any restaurant in the Metropolitan Chicago area under a name other than a Food Manager Tradename, (ii) opening or operating additional restaurants under the Food Manager Tradenames outside of the Metropolitan Chicago area without the participation of Hotel Manager or Owner, or (iii) advertising within the Metropolitan Chicago area for restaurants operated under the Food Manager Tradenames outside of the Metropolitan Chicago area. Provided, however, that nothing herein shall permit NYRG, the Guarantor, Food Manager or any of their affiliates from using, or licensing others to use, whether inside or outside the Metropolitan Chicago area, any tradename which is used exclusively at the Hotel (other than the Food Manager Tradenames themselves, to the extent permitted above), and any such tradename used exclusively at the Hotel (other than the Food Manager Tradenames as aforesaid) shall at all times be and remain the sole and exclusive property of Hotel Manager or Owner (as the case may be). In addition, it is expressly understood and agreed that all of Hotel Manager's tradenames (including, without limitation, the names "Guest Quarters," "Doubletree" and "Doubletree Guest Suites") shall at all times be and remain the sole and exclusive property of Hotel Manager. 6.2 Advertising Materials. During the term of this Agreement (including any Post-Termination Licensing Period and during the -29- period referred to in Article l2.1(c), if applicable), Owner and Hotel Manager shall have the right to utilize the Food Manager Tradenames in advertising materials and other marketing efforts in connection with the Hotel (including, without limitation, in Hotel Manager's chain-wide advertising and promotional materials in connection with the Hotel). Any such advertising or promotional materials which refer to the Food Manager Tradenames, or which otherwise refer to restaurant operations conducted by the Guarantor, Food Manager or other NYRG affiliates, other than listings by name of Hotel facilities in Hotel Manager's brochures and the like, shall be subject to the prior approval of Food Manager, which approval shall not be unreasonably withheld or delayed. During the term of this Agreement (including any Post-Termination Licensing Period and during the period referred to in Article 12.1(c), if applicable), NYRG, the Guarantor and Food Manager (and their respective affiliates) shall have the right to advertise the Hotel's restaurant and bistro in cooperative "multi-restaurant" advertisements, provided that any such advertising shall be subject to the prior approval of Hotel Manager, which approval shall not be unreasonably withheld or delayed. 6.3 Rights Upon Termination. (a) Subject to the provisions of subparagraphs (b) and (c) of this Article 6.3 and of Article 12.1(c), upon the expiration of the term of this Agreement or upon any sooner termination of -30- this Agreement for any reason whatsoever, the Food Manager Tradenames shall not thereafter be used in connection with the F&B Department or otherwise in connection with the Hotel. In addition, at the request of Food Manager and at Food Manager's expense, upon termination of this Agreement (or, if applicable, following the end of the Post-Termination Licensing Period or, if applicable, following the end of the period referred to in Article 12.1(c)), items of decor in the Hotel restaurant and cafe bearing the distinctive and identifying colors associated with the Food Manager Tradenames will be changed or replaced by Hotel Manager, provided that (i) Owner approves such changes and/or replacements, which approval shall not be unreasonably withheld, and (ii) Food Manager deposits with Hotel Manager in advance sufficient funds to cover the cost of such changes and/or replacements. (b) In the event of a termination of this Agreement by reason of an Event of Default by Food Manager under Article 10, or any termination pursuant to Articles 2.3 or 2.4 hereof, Hotel Manager and Owner, at their sole discretion, may elect to continue to retain the right to use the Food Manager Tradenames (or any of them) for a period (the "Post-Termination Licensing Period") of up to nine (9) months after the effective termination date for a license fee of five percent (5%) of the portion of Total Hotel Sales generated by the Trade Name Operations during such period. The provisions of this Article 6.3(b) shall continue in full force and effect during the Post-Termination Licensing Period. -31- (c) Notwithstanding anything to the contrary set forth herein, following the termination of this Agreement (or, if applicable, following the end of the Post-Termination Licensing Period or, if applicable, following the end of the period referred to in Article 12.1(c)), Hotel Manager and Owner shall have the right to continue to use disposable items and operating supplies setting forth or otherwise containing the Food Manager Tradenames which are in Hotel Manager's or Owner's possession or irrevocably ordered at the time of any termination of this Agreement (including at the expiration of any Post-Termination Licensing Period or of the period referred to in Article 12.1(c), if applicable) until such items are depleted or have passed their useful lives. Provided, however, that Food Manager shall have the absolute right to purchase any such disposable items and supplies upon notice to Hotel Manager and Owner for a price equal to their original cost to the Hotel. The provisions of this Article 6.3(c) shall survive any termination of this Agreement. (d) Following the later of (i) the termination of this Agreement or (ii), if applicable, the end of the Post-Termination Licensing Period or (iii), if applicable, the end of the period referred to in Article 12.1(c), the restrictions on the use of the Food Manager's Tradenames in the Metropolitan Chicago area set forth in Article 6.1(c) above shall terminate, and Food Manager, the Guarantor and/or NYRG (and their respective affiliates) shall have the right to use, or license, or otherwise permit anyone else -32- to use, the Food Manager Tradenames in connection with any other restaurant (or other food and beverage operation) within (as well as outside of) the Metropolitan Chicago area, without the consent or participation of Hotel Manager or Owner. ARTICLE 7 OPERATING ACCOUNT 7.1 Operating Account. (a) All cash revenues derived from the Trade Name Operations and the House F&B Operations shall be deposited in the Hotel bank account (the "Operating Account") opened by Hotel Manager in the name of Owner. Hotel Manager shall have absolute control of the Operating Accounting and checks or other items of withdrawal shall be signed only by the designees of Hotel Manager, acting singly or jointly. (b) Hotel Manager from time to time during the term of this Agreement shall pay from the Operating Account funds required to pay Permissible Costs as and when such Permissible Costs are incurred in accordance with this Agreement, which funds shall be paid within thirty (30) days after payment of such funds is requested in writing by Food Manager or, if later, when payment is otherwise due to third parties. Such written requests ("Requisitions") shall be in such form and shall include such -33- supporting documentation as Hotel Manager may reasonably require. In addition, purchase orders shall be subject to the authorization and other requirements set forth in paragraph (a) of Article 1.2. Notwithstanding anything to the contrary contained in this Agreement, Hotel Manager shall have no obligation to advance Permissible Costs or any of the Fees to Food Manager unless there are sufficient funds in the Operating Account to make such payments, it being understood and agreed that it shall be Owner's responsibility to provide sufficient funds to the Operating Account for such purposes as set forth in Article 14 below. ARTICLE 8 RENOVATION 8.1 Restaurant Renovation. The Hotel restaurant and lounge have been renovated (the "Renovation") pursuant to plans and specifications which were jointly developed by Hotel Manager and Food Manager, and approved by Owner. As of the Execution Date, Food Manager has funded ten percent (10%) of the cost of the Renovation (the "Food Manager's Renovation Contribution"). The balance of the cost of the Renovation has been funded by Owner ("Owner's Renovation Contribution"). 8.2 Annual Renovation Amortization and Payments. The total cost of the Renovation (the "Renovation Cost," which is $2,800,000), together with a fifteen percent (15%) annual return on -34- the outstanding balance thereof from time to time, will be amortized in seven (7) equal annual installments ("Annual Renovation Amortization") of principal and return thereon payable to Food Manager and credited to Owner, respectively, in arrears on or before January 31 following the end of each of the first seven (7) Years, on a pro rata basis, in the proportions which the Food Manager Renovation Contribution and the Owner's Renovation Contribution, respectively, bear to the total Renovation Cost. Accordingly, the Annual Renovation Amortization will be $673,009 each year, Food Manager's proportionate share thereof will be $67,301, and Owner's proportionate share thereof will be $605,708. Provided, however, in the event that this Agreement is terminated for any reason other than Hotel Manager's default hereunder prior to the end of the seventh (7th) Year (i.e., prior to December 31, 2001), Food Manager's right to receive its share of Annual Renovation Amortization will also terminate, except (i) as otherwise provided in Article 2.5(a) above, and (ii) in any event Food Manager will be entitled to receive a pro rata portion of its share of Annual Renovation Amortization in respect of the Year in which this Agreement terminates, pro rated to the effective termination date. 8.3 Subsequent Adjustment. Notwithstanding anything to the contrary contained in the foregoing, the parties acknowledge that the $2,800,000 Renovation Cost set forth above is an estimate as of the date hereof and will be subject to subsequent adjustment -35- based upon a final accounting of the Renovation Cost to be made by Owner, Hotel Manager and Food Manager. When the Renovation Cost is finally determined as aforesaid, Food Manager and Owner will each contribute their proportionate share (10% and 90%, respectively) of such cost in excess of $2,800,000, whereupon the Renovation Cost, the Annual Renovation Amortization, and Food Manager's and Owner's proportionate shares thereof will be appropriately adjusted to reflect the actual total cost of the Renovation. ARTICLE 9 INDEMNITY AND INSURANCE 9.1 Indemnity by Owner. Except to the extent caused by the negligence or other wrongful act or omission of Food Manager or Food Manager's breach of this Agreement, Owner agrees to defend, indemnify and hold harmless Food Manager (its officers, directors, partners and employees) against and from any uninsured liability for injury to persons or damage to property, either in and about the Hotel or elsewhere, and for employment-related claims made by F&B Department employees, arising in connection with the performance of this Agreement by Food Manager, its agents, employees or independent contractors, provided that such performance shall have been within the scope of Food Manager's authority under this Agreement or shall have been pursuant to the express instructions of Owner, Hotel Manager or any other duly authorized representative of Owner. For purposes of this Article -36- 9.1, the parties agree that Food Manager shall be deemed to be uninsured with respect to the deductible under any applicable insurance coverage of Owner, and (if Owner is otherwise responsible to indemnify Food Manager under this Article 9.1 with respect to the liability in question) Owner shall indemnify Food Manager (its officers, directors, partners and employees) for the amount of such deductible. Food Manager agrees to cooperate with Owner in all reasonable ways in carrying out Owner's responsibility hereunder and to notify Owner of all losses of which Food Manager has knowledge. 9.2 Indemnity by Food Manager. Except to the extent caused by the negligence or other wrongful act or omission of Owner or Owner's breach of this Agreement, Food Manager shall defend, indemnify and hold harmless Owner (its officers, directors, partners and employees) against and from, and shall reimburse Owner (its officers, directors, partners and employees) for, all uninsured claims (including, without limitation, employment-related claims made by Food Manager Employees), damages, expenses (including, without limitation, attorneys' fees) and liability of Owner (its officers, directors, partners or employees) arising from (a) any breach by Food Manager of the terms of this Agreement, (b) any negligent or other wrongful act or omission of Food Manager or any of its employees or agents in the performance of Food Manager's duties hereunder, or (c) any unauthorized acts of Food Manager or any of its employees or agents. The foregoing indemnity provisions -37- in favor of Owner shall apply with equal force to the benefit of Hotel Manager and any other duly authorized representative(s) of Owner (and their respective officers, directors, partners and employees). For purposes of this Article 9.2, the parties agree that Owner, Hotel Manager and Owner's other representatives shall be deemed to be insured with respect to the deductible under any applicable insurance coverage of Owner and with respect to any insurance which Owner is required to maintain under Article 9.3 below but fails to maintain; and Food Manager shall not be required to indemnify Owner, Hotel Manager or other representatives of Owner with respect to the amount of such deductible, or with respect to the amount of an uninsured claim which Owner was required but failed to insure against as aforesaid, even if Food Manager is otherwise responsible to indemnify Owner, Hotel Manager and Owner's other representatives under this Article 9.2 with respect to the liability in question. Provided further, however, in the case of property damage to the Hotel or its contents caused by the gross negligence of Food Manager or its employees, the preceding sentence shall not apply to a deductible of up to $10,000 per occurrence under the Owner's property damage insurance for the Hotel, and Food Manager shall be responsible for property damage to the Hotel and/or its contents caused by the gross negligence of Food Manager or any of its employees up to the amount of such deductible or $10,000, whichever is less. -38- 9.3 Insurance Requirements. (a) At all times during the term of this Agreement, Owner shall procure and maintain, as an Operating Cost of the Hotel, (i) broad form commercial general liability insurance (including, but not limited to, bodily injury liability, property damage liability, personal injury liability, advertising injury liability, product liability, completed operations and blanket contractual liability insurance, and any and all other liability coverages as would normally be obtained by prudent owners of similar hotel properties, provided such coverages are available to Owner at commercially reasonable rates) for the benefit of Owner, Hotel Manager, Food Manager and NYRG (or any successor thereto), as named or additional named insureds, in an amount not less than $25,000,000 in respect of any one occurrence with an aggregate amount limit of at least $25,000,000, subject to such deductibles as Owner deems appropriate, and (ii) liquor liability insurance naming Owner, Hotel Manager, Food Manager and the Guarantor (or any successor thereto) as named or additional named insureds with single-limit coverage of at least $25,000,000 for each occurrence, and with an aggregate annual limit of at least $25,000,000, subject to such deductibles as Owner deems appropriate. (The parties acknowledge and agree that Owner shall be responsible for covering the amount of any such deductible with respect to any such liability insurance, as more particularly provided in Articles 9.1 and 9.2 above.) Owner and Food Manager shall each procure and maintain, as an Operating Cost of the Hotel, workers' compensation insurance and any other statutorily required -39- insurance for their respective employees who are stationed at the Hotel (which, in the case of Food Manager, are the Food Manager Employees) in the amount required by applicable law. (b) During the term of this Submanagement Agreement, Owner, at its expense, shall procure and maintain upon the Hotel, all food and beverage supplies at the Hotel, and all equipment, fixtures, motors, machinery, furnishings and furniture installed and owned or leased by Owner and used in connection with the Hotel, including all alterations, rebuildings, replacements and additions thereto, so-called "all risk" property damage insurance in an amount equal to the "Full Insurable Value" thereof (as hereinafter defined), subject, at the option of Owner, to commercially reasonable deductibles, but in any event in an amount not less than that required to avoid the operation and effect of any co-insurance provisions in said policies. As used herein, the term "Full Insurable Value" shall mean actual replacement cost (exclusive of the cost of excavation, foundations and footings below the lowest basement floor). Insurance policies written with no co-insurance clause will satisfy the foregoing requirements to carry insurance in an amount equal to "Full Insurable Value" as aforesaid. In addition, Owner shall procure and maintain, at its expense, business interruption insurance providing coverage for a period of business interruption of no less than one year, in an amount mutually satisfactory to Hotel Manager and Owner. -40- (c) All insurance provided for under this Article 9.3 shall be effected by policies issued by insurance companies of good reputation and of sound financial responsibility. Such insurance may be carried under blanket policies covering the Hotel and other locations provided such policies otherwise comply with the requirements of this Article 9.3. Certificates of such insurance coverage shall be delivered by Owner to Food Manager from time to time upon request. All such policies of insurance shall provide that such policies shall not be cancelled or materially changed without at least thirty (30) days prior written notice to Food Manager. Owner shall use all reasonable efforts to cause any policy which it is responsible to obtain under Article 9.3(b) to provide that the insurer shall not have any rights of subrogation with respect to any claim which Owner may have or acquire against Food Manager. ARTICLE 10 DEFAULT AND TERMINATION 10.1 Events of Default. It shall be an event of default hereunder (an "Event of Default") if any one or more of the following events shall occur: (a) If a party (the "Defaulting Party," which term for the purposes of this Article 10 may include Owner, Hotel Manager or -41- Food Manager) shall be in default of any of its obligations under this Agreement; (b) If a party (the "Defaulting Party") shall voluntarily or involuntarily be dissolved (except that if a party is a partnership and is dissolved solely by reason of the death, insanity, disappearance, bankruptcy or lack of legal capacity of one or more of its general partners and its remaining partners, within 60 days, elect, pursuant the partnership agreement of such partnership, to continue such partnership's business, then such party shall not be considered as "dissolved" for the purposes hereof); apply for or consent to the appointment of a receiver, trustee or liquidator of all or a substantial part of its assets; file a voluntary petition in bankruptcy or otherwise voluntarily avail itself of any federal or state laws for the relief of debtors; admit in writing its inability to pay its debts as they become due; make a general assignment for the benefit of creditors; file a petition or an answer seeking reorganization or arrangement with creditors or to take advantage of any insolvency law or file an answer admitting the material allegations of any petition filed against it in any bankruptcy, reorganization or insolvency proceeding; or if an order, judgement or decree shall be entered by any court of competent jurisdiction, in the application of any one or more creditors of such Defaulting Party adjudicating it a bankrupt or insolvent or approving a petition seeking reorganization or appointing a receiver, trustee or liquidator of -42- all or a substantial part of its assets, and such order, judgment or decree shall become final. (c) If any of the events specified under clause (b) above shall occur with respect to the Guarantor, in which event Food Manager shall be the Defaulting Party. 10.2 Termination. (a) Upon the occurrence of any Event of Default under clause (a) of Article 10.1, the Non--Defaulting Party (as hereinafter defined) shall have the right (exercisable by giving notice to the Defaulting Party to terminate this Agreement if the Defaulting Party fails to remedy such Event of Default within ten (10) days after its receipt of notice to remedy if such default relates to the payment of a sum of money and, in all other cases, within thirty (30) days after its receipt of notice to remedy; provided that if such Event of Default be of a non-monetary nature and if it cannot reasonably be remedied within said thirty (30) day period, then such thirty (30) day period shall be deemed to be extended for such additional period as may reasonably be required to remedy the same if the Defaulting Party shall promptly commence to remedy upon receipt of notice from the other party (the "Non--Defaulting Party") and shall continue therewith with due diligence. -43- (b) This Agreement shall terminate automatically, without need for notice or further action, upon the occurrence of an Event of Default under clauses (b) or (c) of Article 10.1, unless the Non-Defaulting Party otherwise elects. (c) In the event that Food Manager is the Defaulting Party, the Non-Defaulting Party hereunder shall, for purposes of this Article 10.2, be deemed to be Hotel Manager. In the event that Hotel Manager or Owner is the Defaulting Party, the Non-Defaulting Party hereunder shall, for purposes of this Article 10.2, be deemed to be Food Manager. It is further agreed that Hotel Manager shall not have the right to terminate this Agreement due to an Event of Default by Owner hereunder. (d) The election to terminate this Agreement shall not be exclusive, and the parties shall have, cumulatively, with or without termination, any and all other rights and remedies which may be provided at law or in equity. Provided, however, in no event shall Owner, Hotel Manager or Food Manager ever be liable for consequential damages hereunder. (e) Notwithstanding anything to the contrary contained in this Article 10 or otherwise in this Agreement, (i) Owner shall not be liable to Food Manager for any Event of Default by Hotel Manager hereunder and (ii) Hotel Manager shall not be liable to Food Manager for any Event of Default by Owner hereunder (including -44- any failure by Owner to provide funds as required under Article 14 below). In either case, Food Manager shall have the right to terminate this Agreement pursuant to Article 10.2 (a) or 10.2 (b), as applicable, but shall have no other recourse against the other non-defaulting party; however, Food Manager shall have recourse against the Defaulting Party (Owner or Hotel Manager, as the case may be) as provided in Article 10.2(d). ARTICLE 11 APPLICABLE LAW 11.1 Scope. The interpretation, validity and performance of this Agreement shall be governed by the laws of Illinois. In the event any court or appropriate judicial authority shall hold or declare that the law of another jurisdiction is applicable, this Agreement shall remain enforceable under the laws of that jurisdiction. If any of the terms and provisions hereof shall be held invalid or unenforceable for any reason, such invalidity or unenforceability shall in no event affect any of the other terms or provisions hereof, all such other terms and provisions to be valid and enforceable to the fullest extent permitted by law. -45- ARTICLE 12 SUCCESSORS AND ASSIGNS 12.1 Assignment by Food Manager. (a) Food Manager shall not have the right to sell, assign, pledge or otherwise transfer this Management Agreement or its rights and interests hereunder, nor shall any beneficial ownership interest in Food Manager be sold, assigned, pledged or otherwise transferred (each of the foregoing being hereinafter sometimes called a "Food Manager Transfer"), without the prior written consent of Hotel Manager, except in accordance with the provisions of this Article 12. A Food Manager Transfer shall also be deemed to have occurred if Food Manager ceases to be a Stillman Entity (as hereinafter defined). (b) Provided, however, without the consent of, but subject to prior notice to, Hotel Manager, (A) Food Manager shall have the right to assign this Agreement to (i) any successor or assignee of Food Manager which may result from a merger, consolidation or reorganization with, or sale or assignment to, any corporation, individual, partnership or other entity which shall acquire all or substantially all of NYRG's business, provided that, in the reasonable judgment of Hotel Manager, the successor or assignee has (or the principals of such successor or assignee have) a good reputation and financial resources and food and beverage -46- operating experience reasonable and commensurate with NYRG's at the time of transfer, or (ii) to any entity which is more than twenty percent (20%) beneficially owned, directly or indirectly, and controlled by Stillman (as hereinafter defined) or members of his immediate family and of which Stillman himself is the Chief Executive Officer (a "Stillman Entity"); and (B) transfers of beneficial ownership interests in Food Manager shall be permitted so long as Food Manager remains a Stillman Entity. Provided further, however, for purposes of this Article 12.1, Hotel Manager will agree to reduce or modify the applicable requirements for a Stillman Entity if Hotel Manager is satisfied, in its reasonable discretion (e.g., in the context of a proposed public offering by Food Manager or a proposed assignee, as the case may be), that Stillman in fact retains sufficient financial interest in, and control of, Food Manager or a proposed assignee (as the case may be) to insure Stillman's continued substantial involvement in and control of the operations of Food Manager or the proposed assignee (as the case may be). As used herein, Stillman shall mean Alan N. Stillman; provided, however, in the event of the death, incapacity or retirement of Alan N. Stillman, Food Manager shall have the right to designate one or more other individuals whose reputation and food and beverage operating experience (collectively, if more than one) are commensurate with those of Alan N. Stillman to act as the principal(s) and chief executive officer(s) of Food Manager or a proposed assignee (as the case may be), and if Hotel Manager, in its reasonable discretion, approves such designated individual(s), -47- the term "Stillman" shall thereafter refer to such other person(s). Any permitted assignee must assume and agree in writing to be bound by the terms of this Agreement. No such assignment or transfer will relieve the Guarantor of its continuing guaranty of the Food Manager's obligations under this Agreement, nor deprive Hotel Manager or Owner of their continuing rights to use the Food Manager Tradenames in connection with the Hotel as set forth in this Agreement. (c) In the event of a Food Manager Transfer which is not permitted under this Agreement and with respect to which Hotel Manager refuses to give its consent, Hotel Manager may terminate this Agreement upon thirty (30) days notice. In the event of such termination, Owner and Hotel Manager will have the right to continue to use the Food Manager Tradenames, at no cost, for a period equal to what would have been one-half of the remaining term of this Agreement. (d) Food Manager warrants and represents that, as of the date hereof, it is a Stillman Entity. From time to time upon request by Hotel Manager, Food Manager shall furnish to Hotel Manager sufficient information with regard to the ownership, management and control of Food Manager so as to enable Hotel Manager to determine whether or not Food Manager remains a Stillman Entity. -48- ARTICLE 13 FORCE MAJEURE 13.1 Operation of Hotel. If at any time during the term hereof it becomes necessary in Hotel Manager'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, tenants, and/or employees of the Hotel for reasons of force majeure such as, but not limited to, acts of war, insurrection, civil strife and commotion, labor unrest or acts of God, then in such event Hotel Manager may close and cease operation of all or part of the Hotel (including, without limitation, the Trade Name Operations), reopening and commencing operation when Hotel Manager deems that such may be done without jeopardy to the Hotel, its guests, tenants, and employees. 13.2 Extension of Time. It is further understood and agreed that with respect to any obligation to be performed by a party during the term of this Agreement, such party shall in no event be liable for failure to do so when prevented by any force majeure cause beyond the reasonable control of such party such as strike, lockout, breakdown, accident, order or regulation of or by any governmental authority, failure of supply or inability, by the exercise of reasonable diligence, to obtain supplies, parts or employees necessary to perform such obligation, or war or other emergency. The time within which such obligation shall be -49- performed shall be extended for a period of time equivalent to the delay from such cause. The inability to fund monetary obligations hereunder shall in no event be considered a force majeure event. ARTICLE 14 COVENANTS OF OWNER 14.1 General. (a) Owner agrees to cooperate with Hotel Manager and with Food Manager in every reasonable and proper way to permit and assist Food Manager to carry out its responsibilities under this Agreement, including, without limitation, to enable Food Manager to operate the F&B Department in accordance with the Operational Standards. 14.2 Funding. Owner shall timely provide all funds, both initially and throughout the term of this Agreement, as shall be necessary to perform and satisfy Owner's covenants and responsibilities under this Agreement, including, without limitation, funds necessary to pay all Permissible Costs (as provided in Article 7.1), the compensation of Food Manager hereunder (as provided in Article 5) and Owner's Renovation Contribution (as provided in Article 8). Notwithstanding anything to the contrary herein contained, Hotel Manager shall not be obligated to provide its own funds for any purpose under this Agreement. -50- 14.3 Restriction on Hiring Food Manager Employees. Without the consent of Food Manager, Owner will not hire any Food Manager Employee to work at the Hotel for a period of twelve (12) months after such Food Manager Employee ceases to work for Food Manager at the Hotel. ARTICLE 15 GENERAL PROVISIONS 15.1 Authorization. Hotel Manager represents that it has full power and authority to execute this Agreement and to be bound by and perform the terms hereof. Food Manager represents that it has full power and authority to execute this Agreement and to be bound by and perform the terms hereof. On request each party shall furnish the other evidence of such authority. 15.2 Formalities. Any change to or modification of this Agreement must be in writing signed by both parties hereto and consented to by Owner. This Agreement shall be executed in one or more counterparts, each of which shall be deemed an original. The captions for each Article are intended for convenience only. 15.3 Consents. Except as otherwise expressly provided in this Agreement, wherever in this Agreement it is provided that an act or proposed act of Hotel Manager or Food Manager is subject to the consent or approval of the other, such consent or approval shall -51- not be unreasonably withheld or delayed. If pursuant to this Agreement, the approval or consent ("consent") of one party hereto is required for any act or matter contemplated by the other party, the party desiring such consent shall give to the party whose consent is desired, notice specifying in reasonable detail, the matter to which consent is requested. 15.4 Notices. All notices required to be given under the terms of this Agreement or which any of the parties may desire to give hereunder shall be in writing and delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid, or by a recognized overnight delivery service, delivery charges prepaid, addressed as follows or sent by telecopier to the telecopier numbers listed below (with a copy sent by hand, mail or overnight delivery service as aforesaid and addressed as follows): -52- (a) If to Hotel Manager: Doubletree Partners c/o Doubletree Hotels Corporation 410 North 44th Street Suite 700 Phoenix, Arizona 85008 Attn: Richard M. Kelleher, President Telecopier No. (602) 220-6785 with a copy to: Rubin and Rudman 50 Rowes Wharf Boston, MA 02110 Attn: Harold Stahler, Esq. Telecopier No. (617) 439-9556 (b) If to Food Manager: Mrs. Parks Management Company, L.L.C. c/o The New York Restaurant Group 1114 First Avenue New York, New York 10021 Attn: Alan N. Stillman Telecopier No. (212) 355-0120 -53- with a copy to: Handsman and Kaminsky 609 Fifth Avenue Sixth Floor New York, New York 10017 Attn: Edward A. Kaminsky, Esq. Telecopier No. (212) 750-4699 (c) If to Owner: Chicago HSR Limited Partnership c/o General Electric Investment Corporation P.O. Box 7900 Stamford, Connecticut 06904 Attn: David W. Wiederecht Telecopier No. (203) 326-2497 or to such other address as the party to whom such notice is directed may from time to time designate by written notice in like manner to the other parties hereto. Any notices given by Food Manager, Hotel Manager or Owner hereunder shall be given to both of the other parties named herein. 15.5 Entire Agreement. This Agreement constitutes the entire understanding among the parties with respect to the subject matter hereof and no amendment, modification or alteration of the terms -54- hereof shall be effective or binding unless the same be in writing and signed by all of the parties hereto. 15.6 Waivers. No default of any party hereunder shall be deemed to be waived by any other party, unless such waiver is made in writing. 15.7 Relationship. Food Manager is an independent contractor. Neither this Agreement nor the operation of the F&B Department as contemplated hereby shall be deemed to create any partnership or joint venture between or among Owner, Food Manager and Hotel Manager. Without limitation of any other provisions hereof, Food Manager is not the legal representative or agent of Hotel Manager or Owner or their respective partners for any purpose whatsoever, and Food Manager does not have any right or authority to assume or create any obligation of any kind, express or implied, on behalf of, or to in any way bind, Hotel Manager, Owner or their respective partners, except that purchase orders made by Food Manager in accordance with Article 1.2(a) above shall be binding on Owner. 15.8 Overdue Payments. Any payment due to Food Manager, Hotel Manager or Owner under this Agreement which is not paid within ten (10) days of the due date thereof shall bear interest from the date due until paid in full at a rate equal to the greater of (x) twelve percent (12%) per annum or (y) two percent (2%) over the rate of interest announced by The First National Bank of Boston at its Head -55- Office as its commercial base rate, as the same may be changed from time to time, but in no event shall such rate of interest (either (x) or (y)) exceed the highest rate of interest permitted by law. Notwithstanding anything to the contrary contained in this Agreement, Food Manager, Hotel Manager and Owner each acknowledges and agrees that all Fees, reimbursements and other amounts due and payable by Food Manager, Hotel Manager or Owner under the terms of this Agreement on or before the Execution Date either have been timely paid or are being fully reconciled and shall be paid with reasonable promptness. 15.9 Attorneys' Fees. In the event of any action or proceeding brought by Food Manager, Hotel Manager or Owner under this Agreement, the prevailing party shall be entitled to recover the fees of its attorneys and all other expenses which may be incurred in such action or proceeding in such amount as the court may adjudge reasonable. -56- IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement effective the day and year first above written. FOOD MANAGER: HOTEL MANAGER: MRS. PARKS MANAGEMENT DOUBLETREE PARTNERS COMPANY, L.L.C. By: Samantha Hotel Corporation, its managing partner By: /s/ Alan N. Stillman, By: /s/ Richard M. Kelleher -------------------------------- ----------------------------------- Alan N. Stillman Richard M. Kelleher President President -57- CONSENT AND JOINDER The undersigned, CHICAGO HSR LIMITED PARTNERSHIP, a Delaware limited partnership, hereby consents to the execution and delivery of the foregoing Submanagement Agreement and agrees to join in and be bound by the Submanagement Agreement for the purposes of performing the obligations of Owner under and otherwise being bound by (A) the Owner's agreements not to unreasonably withhold its consent set forth in the last sentence of Article 1.3 and in the last sentence of Article 6.3(a), (B) Article 2.5(a)(i) and (iii), (C) Article 2.5(b), (D) the last four sentences of Article 4.2(b), and (E) Articles 4.2(c), 4.2(d), 4.2(e), 9, 14, 15.8 and 15.9 thereof. All liabilities and obligations which Owner may have under the Submanagement Agreement shall be satisfied only out of the assets of the Hotel and no limited or general partners of Owner shall have any personal liability with respect to the Submanagement Agreement. Owner represents that it has full power and authority to execute this Consent and Joinder. On request of Food Manager or Hotel Manager, Owner shall furnish evidence of such authority. OWNER CHICAGO HSR LIMITED PARTNERSHIP By: Chicago GQ Corporation, its General Partner By: /s/ David W. Wiederecht ------------------------------- David W. Wiederecht President -58- EXHIBIT 1 PURCHASE ORDER PROCEDURES (Article 1.2 (a)) A. Policy - Purchase orders shall be issued for all purchases from any vendor with the exception of ongoing food and beverage purchasing. All purchase orders require the signature of the Hotel's General Manager. Any purchase over $1,000 is to be signed by the Hotel Manager's Regional Controller and any purchase over $5,000 is to be signed by the Hotel Manager's Senior Vice President of Operations. Purchase orders will be issued through the Hotel Manager's Systems and Control Manager at the Hotel; and once appropriate signatures have been received, a purchase order number will be assigned. B. Food and Beverage Purchases - Due to the frequency of food and beverage purchases, it is not practical to utilize purchase orders for ongoing purchases. It is, however, expected that Food Manager will obtain quotations for all purchases on a consistent basis and that quotes are matched to final invoices upon delivery and maintained for six (6) weeks. C. Open Purchase Orders - At the end of each month, Food Manager shall prepare an open purchase order list and forward the same to Hotel Manager's Regional Accounting Office (presently located in Cincinnati, Ohio). This list shall contain all purchase orders for items that have been received but have not been processed for payment. This procedure will allow Hotel Manager to ensure that all expenses are accrued for the month in which the purchase was realized. EXHIBIT 2 GUEST QUARTERS - CHICAGO STATEMENT OF INCOME GL0322 PERIOD-12 FISCAL 1994 1/15/95 PAGE 1 19.34.01 12/01/94 - 12/31/94

GUEST QUARTERS - CHICAGO FOOD DEPARTMENT GL0322 PERIOD-12 FISCAL 1994 1/15/95 PAGE 5 19.34.01 12/01/94 - 12/31/94

GUEST QUARTERS - CHICAGO BEVERAGE DEPARTMENT GL0322 PERIOD-12 FISCAL 1994 1/15/95 PAGE 1 19.34.01 12/01/94 - 12/31/94

EXHIBIT 3 GROSS OPERATING PROFIT (Articles 5.1(b) and 5.3(c)) "Gross Operating Profit" shall mean, with respect to each year of the term of this Agreement, the amount, if any, by which Total Hotel Sales for such year exceed Operating Costs for such year. The term "Total Hotel Sales" shall be defined as all revenues and income of any nature derived directly or indirectly from the Hotel or from the use or operation thereof, including, without limitation, total room sales, food and beverage sales (including, without limitation, sales from the Trade Name Operations), telephone, telegraph and telex revenues, rental or other payments from lessees, sublessees, and concessionaires (but not the gross receipts of such lessees, sublessees or concessionaires) and the proceeds of business interruption, use, occupancy or similar insurance. There shall be excluded from Total Hotel Sales: (i) any gratuities or service charges added to a customer's bill; (ii) any credits or refunds made to customers guests or patrons; (iii) any sums and credits received by Owner for lost or damaged merchandise; (iv) any sales taxes, excise taxes, gross receipt taxes, admission taxes, entertainment taxes, tourist taxes or charges; (v) any proceeds from the sale or other disposition of the Hotel, FF&E therein, or other capital assets; (vi) any interest paid with respect to the Hotel's 3-1 reserve funds, the Hotel's bank account, or any other deposit or investment of Hotel funds; (vii) any fire and extended coverage insurance proceeds; (viii) any condemnation awards; and (ix) any proceeds of financing or refinancing of the Hotel. Total Hotel Sales shall be determined on an accrual basis and in accordance with the Uniform System of Accounts or generally accepted accounting principles, consistently applied. "Operating Costs" shall mean the entire cost and expense of maintaining, operating and supervising the operation of the Hotel. Operating Costs shall be the sum of such costs or expenses which are normally charged as a cost of operation under the Uniform System of Accounts, including, without limitation: (i) the cost of operating supplies, wages, salaries and employee fringe benefits, advertising and promotional expenses (including any contribution to national advertising), administrative and general expenses of the Hotel, the cost of any centralized services payable to Hotel Manager by Owner, the cost of personnel training programs, utility and energy costs, operating licenses and permits, grounds and landscaping maintenance costs; (ii) all expenditures made for maintenance and repairs to keep the Hotel in good condition and repair; 3-2 (iii) basic management fee(s) due Hotel Manager; (iv) reimbursable expenses due Hotel Manager; (v) liability and workers' compensation insurance premiums; and (vi) with respect to the first seven (7) Years, Annual Renovation Amortization. There shall be expressly excluded from Operating Costs the following: (1) depreciation of the Hotel building, FF&E and Hotel operating equipment (other than Annual Renovation Amortization as hereinabove provided); (2) rental payments pursuant to any ground lease; (3) debt service (interest and principal) on mortgages placed on the Hotel; (4) real estate taxes and assessments (including payments to tax escrow accounts); (5) payments for capital expenditures including, without 3-3 limitation, payments into any reserve fund for the Hotel and payments for replacements of FF&E, including, without limitation, amounts expended for F&B Department FF&E repairs and replacements pursuant to Article 4.2(c); (6) fire and extended coverage insurance premiums and premiums for any other insurance (except premiums which are included in Operating Costs) carried by Owner with respect to the Hotel; (7) payments pursuant to any equipment leases or installment sales agreements; (8) any incentive management fee(s) due Hotel Manager; (9) the Fees payable to Food Manager pursuant to Article 5; and (10) such other costs or expenses which are normally treated as a capital expenditure under the Uniform System of Accounts or generally accepted accounting principles. 3-4 EXHIBIT 4 EXAMPLES OF THE CALCULATION AND PAYMENT OF FOOD MANAGER'S FEES (Article 5) GUEST QUARTERS HOTEL-CHICAGO, ILLINOIS MANAGEMENT CONTRACT BETWEEN MRS PARKS MANAGEMENT COMPANY, L.L.C. AND D T PARTNERS TERM 10 YEARS FROM FULL COMMENCEMENT DATE OF JANUARY 1 1995 - -------------------------------------------------------------------------------- BASE MANAGEMENT FEE PERCENTAGE 15% OF TOTAL F&B DEPARTMENT REVENUE CONTRACT REFERENCE SECTION 5.1 INTERPRETATION Total F & B Department Revenue shall mean the portion of Total Hotel Sales derived from the sale of Food and Beverages by the F & B Department and rental and other miscellaneous income from the hotel's function rooms - -------------------------------------------------------------------------------- DEPARTMENT PROFIT INCENTIVE FEE PERCENTAGE A) FIRST YEAR - 15% OF EXCESS DEPARTMENT PROFITS COMPUTED QUARTERLY B) EACH YEAR THEREAFTER - 17.5% OF EXCESS DEPARTMENTAL PROFITS COMPUTED QUARTERLY CONTRACT REFERENCE SECTION 5.2 INTERPRETATION EXCESS DEPARTMENTAL PROFITS shall mean the excess of Department Profits over Threshold Departmental Profits THRESHOLD DEPARTMENTAL profits shall mean (i) for the first year, $1,060.164 (being 105% of Departmental Profits for calendar year 1993 which were $1,009,580 (ii) for the second year, $1,113.172 (being 105% of Threshold Departmental Profits for the 1st year) (iii) for the third year, $1,168.831 (being 105% of the Threshold Departmental Profits for the 2nd year) (iv) of the fourth year, $1,227.273 (being 105% of Threshold Departmental Profits for the 3rd year) and (v) for each year thereafter, $1,227.273 (being the same as the fourth year) DEPARTMENTAL PROFITS shall mean the profits attributable to the F&B Department calculated in accordance with Exhibit 2 of the Management Agreement. In calculating Profits for each year, there shall be a deduction for the excess (Advertising and Promotional Excess) if any of (i) the Advertising and Promotional costs actually incurred by the Hotel in respect of the F&B Department over (ii) $30,000 (the *Advertising and Promotional Threshold amount - being the historical advertising and promotion expenditure level for the Hotel fairly allocable to the F & B Department, which have not been and will not be, charged against the Department Profits). For the first Seven (7) years the calculation of Departmental Profits shall also include a deduction for ANNUAL RENOVATION AMORTIZATION ANNUAL RENOVATION AMORTIZATION - The Renovation Cost plus 15% Annual Return on the outstanding balance will be amortized in 7 equal installments of principal and return thereon payable to Food Manager credited to Owner respectively. In arrears at the end of each of the first seven (7) years. on a pro rata basis. In proportions which the Food Manager Renovation Contribution and the Owner's Renovation Contribution bear the total Renovation Cost Approximate Renovation Cost $2,800,000 Food Manager's Contribution $280,000 Food Manager's proportionate share would be 10% Annual Renovation Amortization $673,009 GUEST QUARTERS HOTEL-CHICAGO, ILLINOIS MANAGEMENT CONTRACT BETWEEN MRS PARKS MANAGEMENT COMPANY, L.L.C. AND D. PARTNERS TERM 10 YEARS FROM FULL COMMENCEMENT DATE OF JANUARY 1, 1995 - -------------------------------------------------------------------------------- G.O.P. INCENTIVE FEE: PERCENTAGE A) FIRST YEAR - 2.5% OF EXCESS G.O.P. COMPUTED QUARTERLY B) EACH YEAR THEREAFTER - 5% OF EXCESS G.O.P. COMPUTED QUARTERLY CONTRACT REFERENCE: SECTION 5.3 INTERPRETATION: EXCESS G.O.P.: shall mean the excess of G.O.P. over Threshold G.O.P. THRESHOLD G.O.P.: shall mean (i) for the first year, $4,275,752 (being 105% of G.O.P. for calendar year 1993, which were $4,072,145) (ii) for the second year, $4,489,540 (being 105% of Threshold G.O.P. for the 1st year) (iii) for the third year, $4,714,017 (being 105% of Threshold G.O.P. for the 2nd year) (iv) for the forth year, $4,949,718 (being 105% of Threshold G.O.P. for the 3rd year.) and (v) for each year thereafter, $4,949, 718 (being the same as the fourth year) GROSS OPERATING PROFIT " shall mean the amount by which " TOTAL HOTEL SALES " exceed "OPERATING COSTS". For the first seven (7) years the calculation of Gross Operating Profits shall include a deduction for Annual Renovation Amortization. Total Hotel Sales is defined as all revenues and income of any nature derived directly or indirectly from the operation of the hotel. There shall be excluded from Total Sales the following: (i) any gratuities or service charges added to a customers bill; (ii) any credits or refunds made to customers, guests or patrons; (iii) any sums and credits received by Owner for lost or damaged merchandise; (iv) any sales taxes, excise taxes, gross receipt taxes, admission taxes, entertainment taxes, tourist taxes or charges; (v) any proceeds from the sale or other disposition of the Hotel, FF&E, or other capital assets; (vi) any interest paid with respect to the Hotel's reserve fund, the Hotel's bank account, or any other deposit or investment of Hotel funds; (vii) any fire and extended coverage insurance proceeds (other than business interruption insurance proceeds); (viii) any condemnation awards; and (ix) any proceeds of financing or refinancing of the Hotel. OPERATING COSTS": shall mean the entire cost and expense of maintain, operating and supervising the operation of the Hotel, including Annual Renovation Amortization for the first seven years. Excluded from Operating Costs shall be: 1) depreciation and amortizations. 2) rental payments pursuant to any ground lease. 3) debt service (interest and principal) on mortgages. 4) real estate taxes and assessments. 5) payments for the capital expenditures including, without limitations, payments into any reserve fund and payment for replacements of FF&E (including, without limitation, amounts specified in Section 4.2(c). 6) fire and extended coverage premiums. 7) payments pursuant to any equipment leases. 8) any incentive fee(s) due Hotel Manager. 9) the fees payable to Food Manager pursuant to Article 5. 10) such other cost or expenses which are normally treated as capital expenditure. [ILLEGIBLE] QUARTERS HOTEL CHICAGO, ILLINOIS MRS PARKS MANAGEMENT COMPANY, L.L.C. [ILLEGIBLE] THE MONTH OF: MARCH 1995

Exhibit 5 [MAP OMITTED] LAKE MICHIGAN CHICAGO 14-Feb-95 GUEST QUARTERS CHICAGO

23-Jan-95 GUEST QUARTERS CHICAGO

GUEST QUARTERS CHICAGO