EXHIBIT 10.10
AMENDED AND RESTATED
MANAGEMENT SERVICES AND FRANCHISE DEVELOPMENT AGREEMENT
THIS AMENDED AND RESTATED MANAGEMENT SERVICES AND FRANCHISE DEVELOPMENT
AGREEMENT dated as of the 1st day of October, 1996.
BETWEEN:
CHARTWELL CANADA HOSPITALITY CORP., a corporation incorporated under
the laws of the State of Delaware, U.S.A.,
(hereinafter called "CCHC")
AND:
CHARTWELL LODGING INC., a corporation incorporated under the laws of
the State of California, U.S.A.,
(hereinafter called "NL")
AND:
ROYCO HOTELS & RESORTS LTD., a corporation incorporated under the laws
of Canada
(hereinafter called "ROYCO")
AND:
CHARTWELL LEISURE INC., a corporation incorporated under the laws of
the State of Delaware , USA
(hereinafter called "NLC")
WHEREAS:
▇. ▇▇▇▇▇ Hotels Management, Inc. and Royco entered into a management
services and franchise development agreement dated and made effective
September 30, 1992;
B. NL (formerly known as NL Hotels, Inc. and Forte Hotels, Inc.) assumed
all of the rights and interest of Forte Hotels Management, Inc. under
the aforementioned management services and franchise development
agreement;
C. NL entered into hotels management agreements (collectively the "CPLP
HOTEL MANAGEMENT AGREEMENT") in respect of certain Hotels beneficially
owned by Chartwell Canada Corp. which were acquired from Capital
Properties Limited Partnership ("CPLP");
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D. NL assigned the CPLP Hotel Management Agreement to CCHC;
E. Royco holds the Operating Assets and has the skill, experience and
knowledgeable personnel in the business of hotel management to service
the Hotel Management Agreements;
F. CCHC and Royco desire to expand and develop new hotel management
business in Canada and to acquire Additional Hotel Management
Agreements;
G. HFS has entered into the Travelodge Master License Agreement with CCHC
to develop and service existing franchise agreements and new franchise
opportunities in Canada with respect to the HFS Marks;
H. CCHC, NL and Royco have agreed that Royco will, on behalf of the
Parties, develop, promote and service the Management Business and the
Franchise Business in accordance herewith;
I. Royco has been established by the Royco Group solely for the purposes
of performing its duties under this Agreement and for no other purpose
or business;
J. NL and Royco wish to amend the aforementioned management services and
franchise development agreement, to include CCHC as a party thereto
and to set forth herein the amended and restated terms and conditions
thereof; and
K. NLC has agreed to guarantee the performance of CCHC under this
Agreement.
NOW THEREFORE THE PARTIES AGREE AS FOLLOWS:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
In this Agreement including the recitals hereto:
1. "ACCOUNTANTS" means Deloitte & Touche or another recognized firm of
chartered accountants designated by the Executive Committee from time to
time to review and audit the Financial Statements;
(a) "ACCOUNTING YEAR" means, unless otherwise agreed in writing by the
parties, each year or portion thereof during the Term ending on
December 31;
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(b) "ADDITIONAL HOTEL MANAGEMENT AGREEMENTS" means any hotel management
agreement, other than the CPLP Hotel Management Agreement, in respect
of any Hotel entered into between any Person and a Party.
(c) "BANK" means The Toronto Dominion Bank, or such other Canadian
chartered bank at such branch in Calgary, Alberta, all as determined
by the Executive Committee;
(d) "BANK ACCOUNTS" means collectively the bank accounts established
pursuant to Section 2.8;
(e) "BUSINESS DAY" means any day upon which Canadian chartered banks are
generally open for business in Calgary, Alberta;
(f) "CCHC APPOINTEE" means at any time the Person or Persons designated by
CCHC to be employed, retained or seconded to Royco pursuant to Section
2.5 hereof;
(g) "CPLP HOTEL MANAGEMENT AGREEMENT" has the meaning ascribed thereto in
recital "C" of this Agreement;
(h) "CPLP HOTELS" means the Hotels in respect of which the CPLP Hotel
Management Agreement applies;
(i) "CPLP/NLC HOTELS" means Hotels the Owner of which is Chartwell Canada
Corp. and/or NLC and/or any affiliates thereof, in whole or in part;
(j) "DEVELOPMENT AGREEMENT" means the hotel development agreement dated as
of the 1st day of October, 1996, between NRG Management Services Ltd.
("NRG")and NLC;
(k) "EXECUTIVE COMMITTEE" means the committee established pursuant to
Section 2.9;
(l) "EVENT OF DEFAULT" has the meaning ascribed thereto in Section 6.1;
(m) "FINANCIAL STATEMENTS" means in respect of any period, a statement of
income and expenses, and a profit and loss statement for each of the
Management Business and the Franchise Business on a combined basis and
a balance sheet for the collective business of the Parties
administered by Royco pursuant hereto;
(n) "FRANCHISE BUSINESS" means the activities of Royco hereunder in
developing new Travelodge(TM) and Thriftlodge(TM) franchise business
for HFS in Canada under the Travelodge Master License Agreement, and
other new franchise business whether for HFS or any other party, the
administration, supervision, servicing, performance, operation and
enforcement of all new and existing franchise business and all related
and ancillary businesses operated by Royco or any affiliate.
(o) "FUTURE PROJECT" means any Hotel acquired and owned by NLC or any
affiliates of NLC pursuant to the terms of the Development Agreement;
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(p) "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means those general
principles and policies which define the accounting for financial
transactions in the United States and as generally accepted in the
hotel industry including the Uniform System of Accounts, consistently
applied from period to period.
(q) "▇▇▇▇" means ▇▇▇▇▇▇▇ ▇▇▇▇▇;
(r) "GROSS REVENUE" means the gross revenue received or receivable by the
Parties in respect of (x) the Management Business, including without
limiting the foregoing, the Hotel Management Agreements (including,
without limitation, any termination fees received or receivable by
CCHC or Royco thereunder) but excluding the Incentive Fee and the
Incentive Termination Fee under the CPLP Hotel Management Agreement,
(y) the Franchise Business, including without limiting the foregoing,
the Travelodge Master License Agreement, and (z) all gross income
received or receivable from all other sources whatsoever as a direct
or indirect result thereof respectively;
(s) "GROSS ROOM REVENUE" means in respect of the HFS Agreements, gross
room revenue as defined in such HFS Agreements;
(t) "HFS" means Travelodge Hotels, Inc., a corporation incorporated under
the laws of the State of Delaware, and its successors and assigns with
respect to the HFS Agreements and/or the Travelodge Master License
Agreement;
(u) "HFS AGREEMENTS" means any Travelodge(TM) or Thriftlodge(TM) hotel
franchise and licence agreement entered into between any Person and
HFS or Royco in respect of a hotel in Canada or otherwise as provided
in the Travelodge Master License Agreement or otherwise agreed in
writing by HFS subsequent to the date of this agreement;
(v) "HFS MARKS" means the registered trademarks and service marks known as
"Travelodge(TM)", "Sleepy Bear(TM)" and "Thriftlodge(TM)" and such
additional trademarks as may be licensed to Royco by HFS;
(w) "HOTELS" means collectively at any time any hotel, inn, motor hotel,
motel, resort or timeshare resort for which management is being
provided by and/or on behalf of CCHC or Royco or any affiliate of CCHC
or Royco under any Hotel Management Agreement, and when the context
requires, means any one or more of them;
(x) "HOTEL MANAGEMENT AGREEMENTS" means collectively the CPLP Hotel
Management Agreement and any Additional Hotel Management Agreements;
(y) "INDEMNIFICATION AGREEMENT" means the indemnification agreement dated
as of the 1st day of October, 1996, and entered into amongst CPLP,
Syndicated Capital Properties Inc. and Royco on the one hand and
Chartwell Canada Corp., NLC and NL on the other;
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(z) "INITIAL FEE" means the fee, if any, payable to HFS after the date
hereof under any Additional HFS Agreement as consideration for and at
the time of entering into such agreement, but for greater certainty
shall not include Royalty Fees;
(aa) "MANAGEMENT BUSINESS" means the activities of Royco hereunder in
developing new hotel and resort management business for the Parties
and the business of the Parties managed by Royco hereunder insofar as
it relates to conducting operations under the Hotel Management
Agreements including all revenue producing business relating to the
Hotel Management; Agreements including training, purchasing, or other
services from time to time;
(bb) "NET BASE FEE" means one-half the product obtained by multiplying the
NOI for the Relevant Period times a fraction, the numerator being
Gross Revenue less amounts received or receivable by the Parties
pursuant to the Franchise Business (the "GOI") on the CPLP/NLC Hotels
subject to a section 3.3(c) termination during the Relevant Period,
and the denominator being the GOI for all Hotels during the Relevant
Period;
(cc) "NET CASH FLOW" means that amount, if any, with respect to any period,
computed in accordance with Generally Accepted Accounting Principles,
without duplication, by which the aggregate of:
(i) a. the Gross Revenue received in that period; and
b. any amounts previously set aside as reserves by the
Executive Committee to the extent that the Executive
Committee determines that such reserves are no longer
required to pay for costs relating to the Management
Business, the Franchise Business or this Agreement;
(ii) exceeds, for such period, the aggregate of:
a. Operating Outlays, whether paid or not paid;
b. the cost of capital alterations and improvements;
c. a reasonable reserve for working capital and other
costs relating to the Management Business, the
Franchise Business and this Agreement, as determined by
the Executive Committee from time to time;
(dd) "NOI" means, with respect to any period, Gross Revenue for such period
less (x) any gross revenue received or receivable by the Parties in
connection with the Franchise Business for the Relevant Period, and
(y) Operating Outlays during such period, after deducting that portion
of the Operating Outlays payable in connection with the Franchise
Business during such period;
(ee) "OPERATING ACCOUNT" means any bank account operated by Royco with
respect to any Hotel
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as required by the provisions of any Hotel Management Agreements;
(ff) "OPERATING ASSETS" means the operating assets used at the offices of
Royco in Calgary, Alberta and Mississauga, Ontario, in the performance
of Royco's duties hereunder;
(gg) "OPERATING BUDGET" means the annual operating budget with respect to
(x) the Management Business and in particular the ownership and the
ongoing operation, maintenance, supervision, servicing, performance
and enforcement of the Hotel Management Agreements and (y) the
Franchise Business and in particular the performance under the
Travelodge Master License Agreement, including amounts paid in
repayment of any obligations or expenditures for the acquisition of
assets or property acquired by Royco in connection with the Management
Business and the Franchise Business or for the replacement thereof or
for any of them, to be prepared by Royco and approved by the Executive
Committee (which may revise same in its discretion following quarterly
reviews or material changes in the Management Business or the
Franchise Business), and which contains an estimate of Gross Revenues
to be received and the Operating Outlays to be incurred hereunder
during the then current Accounting Year;
(hh) "OPERATING OUTLAYS" means the aggregate of all reasonable direct costs
and expenses made hereunder by the Parties, calculated on an accrual
basis, in connection with the performance by Royco of its obligations
under this Agreement and which are properly attributable to the
business of Royco in performing its obligations hereunder, including,
without limiting the generality of the foregoing, the following:
(i) costs of labour, services, materials and equipment in
connection with the ongoing operations of Royco, including
the operation, maintenance, supervision, servicing,
performance and enforcement of the Hotel Management
Agreements, the Travelodge Master License Agreement and this
Agreement;
(ii) all sums to be paid, directly or indirectly under the
Service Contracts;
(iii) all sums to be paid by Royco in respect of the CCHC
Appointee;
(iv) carrying costs on financing approved by the Executive
Committee;
(v) licences, permits, duties, excises, assessments, municipal
or governmental imposts and taxes (other than income tax,
capital tax and other similar taxes or surtaxes imposed by
any competent taxing authority upon Royco);
(vi) agent's, supervision and management fees paid, if any, and
legal and accounting fees and disbursements other than those
incurred in connection with the negotiation and settlement
of this Agreement;
(vii) casualty, liability, surety bonds and other insurance
premiums;
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(viii) all fees, commissions and other direct expenses incurred
with respect to obtaining Additional Hotel Management
Agreements, HFS Agreements or other additional franchise
agreements;
(ix) all amounts to be paid to HFS under the Travelodge Master
License Agreement;
(x) costs of the Parties incurred in conjunction with meetings
of the Executive Committee and other costs of CCHC, if any,
which are approved by the Executive Committee;
(xi) all other outlays and expenses made or incurred by Royco and
approved by the Executive Committee in connection with the
performance by Royco of its obligations hereunder, whether
similar or dissimilar to those described above and which, in
accordance with the generally accepted accounting practices
applicable to persons engaged in the management and
operation of premises providing lodging similar to the
Hotels, are properly attributable to the performance by
Royco of the Parties obligations under the Hotel Management
Agreements, the Travelodge Master License Agreement or the
obligations under this Agreement; and
(xii) costs properly incurred by Royco in performance of its
duties hereunder which exceed amounts contained in the
Operating Budget.
(ii) "OWNER" means the Person who is beneficial owner of any of the Hotels
and, where the beneficial owner is not the legal owner of any of such
Hotels, includes the legal owner thereof;
(jj) "PARTIES" means collectively CCHC, NL and Royco and "PARTY" means
either of them as the context requires;
(kk) "PERSON" means any body corporate, natural person, general
partnership, limited partnership, joint venture, trust or other
entity;
(ll) "▇▇▇▇▇" means ▇▇▇▇▇ ▇. ▇▇▇▇▇▇;
(mm) "▇▇▇▇▇" means ▇▇▇▇▇ ▇. ▇▇▇▇▇;
(nn) "RELEVANT PERIOD" means the period which is twelve (12) months
immediately preceding (x) the end of the initial Term or any renewal
Term, if this agreement is not renewed by CCHC in accordance with
Article 3, or (y) the date of delivery of a notice of termination
under Article 3;
(oo) "ROYALTY FEES" means fees paid to HFS in respect of any Franchise and
License Agreement or Additional HFS Agreement which is based on Gross
Room Revenue of a Hotel subject to such agreement;
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(pp) "ROYCO GROUP" means collectively Terry, Greg, ▇▇▇▇▇ and ▇▇▇▇▇;
(qq) "SALE" means a sale of one or more Hotels;
(rr) "SERVICE CONTRACTS" means collectively the service contracts, each
dated September 30, 1992 between Royco and each of Serval Management
Limited and ▇▇▇▇▇ Systems Limited, each of which has agreed to provide
the services of ▇▇▇▇, who shall be obligated to devote a part of his
working time and attention, and ▇▇▇▇▇, who shall be obligated to
devote substantially all of his working time and attention,
respectively, or such other companies or individuals as may be
approved in accordance with section 6.1(a)(i);
(ss) "TERM" means the period during which this Agreement is in effect as
provided in Sections 3.1 and 3.2;
(tt) "▇▇▇▇▇" means ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇; and
(uu) "TRAVELODGE MASTER LICENSE AGREEMENT" means the agreement dated as of
October 1, 1996 between CCHC and HFS;
(vv) "UNIFORM SYSTEM OF ACCOUNTS" means the system of accounts as defined
in the CPLP Hotel Management Agreement.
1.2 ARTICLES, SECTIONS. ETC.
Whenever in this Agreement a particular Article, Section, Paragraph or
portion thereof is referenced to, unless otherwise indicated, such reference
pertains to an article, section, paragraph or a portion thereof contained
herein.
1.3 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties with
respect to the subject matter and supersedes all prior negotiations and
understandings. No provision may be amended except in writing.
1.4 GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with the
laws of the Province of Ontario and each of the parties irrevocably attorn to
the nonexclusive jurisdiction of the courts of the Province of Ontario.
1.5 HEADINGS
The headings in this Agreement do not affect its interpretation.
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1.6 NUMBER AND GENDER
This Agreement shall be construed with all changes in number and gender
required by the circumstances.
ARTICLE 2
SERVICES OF ROYCO
2.1 APPOINTMENT OF ROYCO
(a) Royco is hereby appointed by the Parties as the manager of the
Management Business, and in particular the manager under the Hotel Management
Agreements, to supervise, carry out and fulfil the day-to-day obligations of the
Parties under the Hotel Management Agreements. Royco hereby assumes the
responsibilities of performing all of the Parties obligations under the Hotel
Management Agreements. The Parties covenant and agree not to amend the said
agreements without the consent in writing of the Parties.
(b) Royco shall, on behalf of the Parties, develop new hotel management
business for the Parties and new franchise business and fulfil the Parties
obligations under the Travelodge Master License Agreement to promote, market and
solicit franchise opportunities for HFS in Canada and with respect to the HFS
Marks. The Parties covenant and agree not to amend the Travelodge Master License
Agreement without the consent in writing of the Parties.
(c) The Parties confirm that it is their intention that Royco shall be
their primary vehicle for expanding the Management Business and the Franchise
Business, and in particular for Travelodge(TM), Thriftlodge(TM) in Canada and
that, provided that this Agreement has not been terminated, the Parties will,
and will use commercially reasonable efforts to cause CCHC to, (i) refer to
Royco new franchise contracts and management contracts in Canada (other than
those resulting from major corporate acquisitions made by CCHC Affiliates, and
(ii) not directly seek out new hotel franchise or management business for such
properties except through Royco.
(d) Notwithstanding the foregoing, if Royco or an affiliate wishes to
develop new Management Business which the Executive Committee does not wish
Royco to pursue pursuant to its mandate under this Agreement, an affiliate of
Royco may, without cost to CCHC or interference with the obligations or Royco
hereunder or of ▇▇▇▇▇ under the Service Contracts, pursue such business for its
own account without being otherwise accountable to the Executive Committee or
CCHC hereunder, provided however, proposals for all such new management business
must be submitted in writing to the Executive Committee and if the Executive
Committee does not approve such new management business , then an affiliate of
Royco (for its own account) may enter into such new management business on
substantially the same terms as set forth in the proposal.
2.2 STANDARD OF CARE
In fulfilling its obligations hereunder, Royco shall, subject to the
direction of the Executive Committee, act honestly, in good faith and shall
exercise the same degree of diligence and skill as would a
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reasonable and prudent provider of similar services to similar hotels and shall
use its best efforts to ensure that the obligations of the Parties in connection
with the Management Business and the Franchise Business shall be fully and
properly performed.
2.3 BOOKS AND RECORDS
Royco shall, at all times during the currency hereof, ensure that:
(a) proper books of account and records are maintained for each of the
Hotels, including books of account and records required under any Hotel
Management Agreement in accordance with the Uniform Systems of Accounts and
generally accepted accounting principles;
(b) proper books of accounts and records are maintained in respect of the
businesses of the Parties managed by Royco pursuant to this Agreement
separately identifying Gross Revenue in respect of each of the Management
Business and the Franchise Business and Operating Outlays in respect of each of
the Management Business and the Franchise Business; and
(c) proper books of accounts and records are maintained in respect of
Royco's business.
2.4 DUTIES AND RESPONSIBILITIES OF ROYCO
Royco shall have the responsibility and the authority to implement or cause
to be implemented the overall supervision and performance of the Hotel
Management Agreements, the Management Business and Franchise Business in
accordance with policies, strategic plans and decisions of the Executive
Committee and to initiate, conduct, undertake and be responsible for the day-to-
day matters relating to the supervision and performance of the obligations of
the Parties under the Hotel Management Agreements and the Travelodge Master
License Agreement in accordance with and as limited by them respectively, and by
this Agreement, and shall act as a prudent and experienced manager would act so
as to ensure the efficient supervision and performance of the Hotel Management
Agreements in accordance therewith and this Agreement and to such end Royco
shall be authorized and required to do the following:
(a) prepare and submit to the Executive Committee for its approval an
annual marketing and business development plan;
(b) fulfill the obligations of the Parties under the Hotel Management
Agreements and the Travelodge Master License Agreement;
(c) make all reasonable commercial efforts to obtain or cause to be
obtained any and all necessary permits, licences and governmental
approvals to permit the supervision and performance of the Hotel
Management Agreements and the Travelodge Master License Agreement in
accordance herewith and in accordance with the directions of the
Executive Committee;
(d) retain or employ or terminate the employment of and co-ordinate the
services of all employees, consultants, accountants, lawyers and other
professionals required for the
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supervision and performance of the Hotel Management Agreements and the
Travelodge Master License Agreement, provided that the employment of
any employee as senior vice-president or higher, or any employee under
written contract, shall be done in consultation with and subject to
the approval of the president of NLC, acting reasonably;
(e) permit CCHC, or its representatives, at any reasonable time to inspect
the books and records maintained pursuant to Section 2.3;
(f) prepare and submit to the Executive Committee for its consideration at
least thirty (30) days before the end of each Accounting Year an
Operating Budget, setting forth in reasonable detail by item the
estimated capital, operating and other expenditures and the estimated
revenue from each of the Management Business and the Franchise
Business and any additional working capital requirements for the next
following Accounting Year, provided that if the Operating Budget has
not been approved prior to the commencement of such Accounting Year,
the Operating Budget for the prior Accounting Year shall apply or
shall be amended as required by the Executive Committee;
(g) implement the Operating Budget following its approval by the Executive
Committee and shall be authorized, without the need for further
approval by the Executive Committee, to make the expenditures, to
incur the obligations and to obtain the working capital provided for
in the Operating Budget unless otherwise directed by the Executive
Committee and shall be authorized to incur non-budgeted costs provided
that such costs do not in the aggregate exceed the budgeted Operating
Outlays by more than 5%;
(h) on or before the l5th Business Day of each month provide the Parties
with the financial and other reports set forth in Schedule 1;
(i) maintain all funds paid or received by Royco in connection with the
Management Business and the Franchise Business, including the Hotel
Management Agreements and the Travelodge Master License Agreement in
an account or accounts for the Parties in the Bank or in such other
account or accounts or such other bank or banks approved by the
Executive Committee, and apply such funds pursuant to a cheque signing
policy to be established by the Executive Committee;
(j) pay to each of CCHC and Royco (for its own account) the amounts set
out in sections 1.2 and 1.3 of Schedule 2;
(k) cause a representative of Royco to attend each regularly scheduled
quarterly meeting of the Executive Committee and to brief the
Executive Committee on the state of affairs in relation to all
material aspects of the Management Business and the Franchise
Business;
(l) to the extent that funds are available therefor, pay or cause to be
paid, before delinquency and prior to the addition thereto of interest
or penalties, all taxes, assessments, rents and other impositions
applicable to the Hotel Management Agreements and, when approved by
the Executive Committee, take such action or proceedings as are
necessary to seek to reduce
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such taxes, assessments, rents or other impositions;
(m) to the extent that funds are available therefor, pay or cause to be
paid promptly all insurance premiums, debts and other obligations in
respect of the Parties obligations under the Hotel Management
Agreements;
(n) to the extent that funds are available therefor, pay or cause to be
paid promptly all proper accounts for work done or material furnished
under all Hotel Management Agreements, provided however, that Royco
shall hold back or cause to be held back any amounts claimed due or
which are required to be retained under the provisions of the builders
lien legislation or other statutory authority;
(o) to the extent that funds are available therefore, pay all bills
approved by Royco in accordance with the approved Operating Budget;
(p) comply with all applicable laws, ordinances, rules, regulations and
requirements of all federal, Provincial, and local governments and
agencies thereof which may be applicable to the performance by Royco
of its duties hereunder;
(q) acting reasonably to comply and to cause CCHC to comply with all
applicable laws, ordinances, rules, regulations and requirements of
all federal, provincial and local governments and agencies thereof
which may be applicable to the Hotel Management Agreements and the
Travelodge Master License Agreement to the extent that compliance is
within the control of Royco;
(r) provide operations management, supervision and administration in a
professional, diligent and efficient manner and at all times maintain
an organization and staff sufficient to ensure the effective and
expeditious carrying out of all the duties, obligations and functions
of the Parties, including the provision of any necessary on site and
off-site personnel, for the full and proper performance of the Parties
under the Hotel Management Agreements and the Travelodge Master
License Agreement;
(s) to ensure that each of the Hotels maintains a level of service and
cleanliness consistent with the standards of Travelodge(TM) or
Thriftlodge(TM) hotels and use its best efforts to ensure that all
such Hotels maintain other standards applicable to Travelodge(TM) or
Thriftlodge(TM) hotels;
(t) negotiate and, when approved by the chairman of the Executive
Committee, settle for execution by Royco and supervise and direct the
performance of Additional Hotel Management Agreements;
(u) negotiate and execute HFS Agreements, subject always to the terms of
the Travelodge Master License Agreement;
(v) ensure that each of the Hotels and their Owners observe all provisions
of the respective Hotel Management Agreements, including furnishing
and maintaining all security,
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indemnity, insurance and performance bonds required by such agreements
and pay all fees and other sums to be paid when due to CCHC or Royco
as the manager thereunder;
(w) perform all such other duties ancillary or necessary under the Hotel
Management Agreements, subject to the direction of the Executive
Committee;
(x) subject to section 6.1(a)(i), ensure that the services of ▇▇▇▇, who
shall be obligated to devote a part of his working time and attention,
and ▇▇▇▇▇, who shall be obligated to devote substantially all of his
working time and attention, are provided in accordance with the terms
of the Service Contracts, and no amendments may be made thereto
without the prior written approval of the Executive Committee and
Royco;
(y) carry out the aforesaid duties and authorities in the best interests
of the Parties provided that in doing so there is no conflict between
the interests of Royco, CCHC and NL, which if Royco considers to be
the case will be referred by Royco to the Executive Committee for
direction; and
(z) subject to the terms of this Agreement, carry out any other duties,
matter or thing requested by the Executive Committee.
2.5 CCHC APPOINTEE
(a) CCHC may in accordance with the provisions of this section, designate
one employee of CCHC as the CCHC Appointee to be employed, retained by or
seconded to Royco; provided that if the services of either ▇▇▇▇ or ▇▇▇▇▇ are not
available under the Service Contracts and they are not replaced by the services
of either ▇▇▇▇▇ or ▇▇▇▇▇ or an alternate party approved in accordance with
section 6.1(a)(i), CCHC may cause an additional CCHC Appointee to be employed by
Royco.
(b) Prior to making such appointment CCHC shall consult with Royco and the
proposed CCHC Appointee and his or her position with Royco shall be acceptable
to Royco, acting reasonably.
(c) The CCHC Appointee shall in performing his or her duties report to the
President of Royco or such other person as the President of Royco may designate.
(d) Unless otherwise agreed CCHC shall pay or cause to be paid the salary
and benefits of any CCHC Appointee and Royco shall reimburse CCHC for a portion
thereof on a basis consistent with the salary structure of Royco and any excess
salary or benefits payable by CCHC to the CCHC Appointee shall be borne by CCHC.
Relocation costs of moving the CCHC Appointee to and from Royco's place of
business shall be paid by CCHC.
2.5A ROYCO APPOINTEE
During the term of this Agreement, CCHC covenants and agrees to appoint
▇▇▇▇▇ , or failing him, his successor appointed pursuant to Section 6.1(a)(i) as
an executive vice-president of CCHC from time to time, such officer to have
authority to execute all management and franchise agreements and related
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documentation to be entered into by CCHC in accordance with the provisions of
this Agreement.
2.6 DIRECTIONS FROM CCHC OR NL
Royco shall not be required to act on directions by or on behalf of CCHC or
NL unless such directions are received directly from the Chairman of the
Executive Committee.
2.7 BOND
Royco shall ensure that the employees of Royco are covered by Royco's
blanket fidelity bond or insurance for all purposes under this Agreement.
2.8 BANK ACCOUNTS
Royco will establish the following bank accounts to be utilized in
connection herewith in the Bank or in such other institution as the Executive
Committee may designate:
(i) in respect of each Hotel the accounts or accounts required
by the Hotel Management Agreement applicable to such Hotel;
(ii) one or more payment consolidation accounts for payments of
accounts payable of the Hotels;
(iii) an account into which all Gross Revenue payable to the
Parties with respect to the Management Business and the
Franchise Business, including under the Hotel Management
Agreements and Travelodge Master License Agreement are
deposited and the Operating Outlays and expenses of Royco
are paid; and
(iv) such other accounts as may be approved by the Executive
Committee,
The Executive Committee will authorize all deposits and withdrawals from such
account or accounts to be made by a representative or representatives of Royco
within monetary limits and subject to other restrictions established by the
Executive Committee from time to time, which limits and restrictions may require
that withdrawals from the account or accounts in excess of amounts determined
from time to time by the Executive Committee be further authorized by a
representative or representatives of CCHC; provided, however, that the Executive
Committee may from time to time amend the procedures for depositing Gross
Revenue into the bank accounts or the manner for distributing Net Cash Flow to
the Parties.
2.9 EXECUTIVE COMMITTEE
(a) An Executive Committee is hereby established to provide liaison
between CCHC and Royco and to establish all policies, strategic plans and
budgets and make all decisions with respect to the operation and implementation
of the Management Business, including the Hotel Management Agreements and the
acquisition and implementation of the Additional Hotel Management Agreements and
the Franchise Business, including the acquisition of HFS Agreements;
page 15
(b) The Executive Committee shall be comprised of three representatives of
CCHC (the initial nominees being ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇)
and three representatives of Royco (the initial nominees being ▇▇▇▇▇, ▇▇▇▇ and
▇▇▇▇▇). The Parties may each appoint an alternate or alternates to be a
representative on the Executive Committee (who may be another member of the
Executive Committee) and may change any representative or alternate
representative from time to time by notice in writing to the other Party. Each
representative or alternate representative of a Party shall be such Party's
agent, with full authority to bind such Party for the purposes contemplated
herein;
(c) The Executive Committee shall establish regular quarterly meeting
dates which, unless otherwise agreed, shall be within the third week after the
end of each calendar quarter and may, wherever reasonably practical, be held in
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ or New York, NY. All other meetings of the
Executive Committee shall, unless otherwise agreed, be held by conference
telephone as herein provided. The Executive Committee may meet at any time upon
agreement of the parties or, failing agreement, at such time and in such place
in Toronto, Calgary or New York as a party shall give the other party at least
five (5) Business Days written notice, specifying in reasonable detail the
business to be presented and any decision to be proposed at such meeting. A
member of the Executive Committee may waive notice of any meeting;
(d) Any action required to be taken by the Executive Committee may be
taken without a meeting if the representatives of the Parties on the Executive
Committee consent in writing to such action, whether such written consent shall
be in the form of a handwritten, typewritten communication or facsimile
transmission (receipt confirmed) of a signed document. In addition, the
Executive Committee may, and shall whenever reasonably practical, in lieu of
conducting a face-to-face meeting, conduct such meeting by conference telephone
or other communications facility by means of which the representatives (or
alternate representatives) of each Party can each hear the other and in respect
of which, any materials required to be considered at such meeting have been
delivered in writing or transmitted to the Parties prior to such meeting;
(e) CCHC shall appoint a Chairman of the Executive Committee (who shall be
either the Chairman of the Board of NLC, the Chief Executive Officer of NLC, the
President of NLC or another officer of NLC reasonably acceptable to Royco) to
facilitate the conduct of business at meetings of the Executive Committee, which
Chairman may also be a representative or alternate representative on the
Executive Committee and who shall, subject to Sections 2.10 and 2.11 have a
casting vote in the event of a deadlock on the Executive Committee;
(f) Subject to the terms of this Agreement, the Executive Committee shall
have jurisdiction over the Parties with respect to all Management Business and
Franchise Business; and
(g) The Executive Committee shall establish its own procedures for
meetings.
2.10 MATTERS REQUIRING UNANIMOUS APPROVAL
Notwithstanding anything to the contrary herein contained, unless CCHC or
NL, as the case may be, has received the prior written consent of Royco:
(a) neither CCHC, NL nor the Executive Committee may direct Royco to alter
or cancel the
page 16
Service Contracts but may direct that any disputes with respect to a decision on
matters in respect of the Service Contracts (including compensation increases)
be referred to arbitration in accordance with Section 7.2;
(b) neither CCHC, NL nor the Executive Committee may require Royco to
service an Additional Hotel Management Agreement other than a CPLP/NLC Hotel;
(c) neither CCHC, NL nor the Executive Committee may require Royco to incur
capital expenditures;
(d) neither CCHC, NL nor the Executive Committee may direct Royco to take
any actions which violate any law; and
(e) CCHC and NL will not amend , terminate or surrender the Travelodge
Master License Agreement or an Additional Hotel Management Agreement in which
respect such consent will not be unreasonably withheld.
2.11 MATTERS REQUIRING MAJORITY APPROVAL
Notwithstanding anything to the contrary in Sections 2.09(e) and 2.10
contained, the Chairman of the Executive Committee shall not have a casting vote
with respect to the following:
(a) the approval required by the Executive Committee pursuant to Section
6.1(a)(i).
ARTICLE 3
TERM
3.1 INITIAL TERM
The term of this Agreement will commence at 11:59 pm on the 30th day of
September, 1996 and shall expire on the 31st day of December, 2006, subject to
CCHC's renewal options under Section 3.2 hereof.
3.2 RENEWALS.
CCHC shall have the right, exercisable by giving notice to Royco not
earlier than twelve (12) months and not later than four (4) months prior to the
expiration of the original term or any applicable renewal term hereof, to extend
the term of this agreement for three further renewal terms of ten (10) Years
each, all upon the same terms, covenants and conditions as provided in this
agreement. Whenever reference is made to the term of this agreement it shall
mean the initial term as it may be extended pursuant to the provisions of this
Section 3.2.
3.3 TERMINATION
page 17
(a) Termination for Event of Default
--------------------------------
In the event that any Event of Default has not been cured within the
time period, if any, specified in section 6.1, the non-defaulting Party shall,
in addition to the remedies provided for in section 6.2 but subject to section
3.3(d) and (e),
(i) if the non-defaulting Party is CCHC, be entitled to
terminate this Agreement without payment or premium;
(ii) if the non-defaulting Party is Royco, be entitled to
terminate this Agreement, in which event CCHC shall pay the
amounts set out in section 3.3(c).
(b) Termination Upon Sale
---------------------
(i) Termination Upon Sale of a CPLP Hotel
-------------------------------------
(A) If there is a Sale of any or all CPLP Hotels and the
purchaser of such CPLP Hotel(s) does not engage a Party as
the manager thereof, this Agreement insofar as it applies to
the Management Business shall terminate in respect of such
Hotel(s).
(B) a. Fifty (50%) percent of any termination fees paid under
the CPLP Hotel Management Agreement in respect of a Sale
under section 3.3(b)(i)(A) (a "TERMINATION ENTITLEMENT")
shall be paid to Royco and shall be credited against Royco's
entitlement to any Capital Proceeds Fee payable in respect
of the Sale of any future CPLP Hotel. If any Termination
Entitlement in respect of a Sale of a CPLP Hotel is greater
than the Capital Proceeds Fee in respect of the same Sale,
the excess (the "TERMINATION FEE CREDIT") shall stand as a
credit against future Capital Proceeds Fees payable in
respect of future Sales.
b. Notwithstanding the provisions of section
3.3(b)(i)(B)a., if Royco is entitled to a Capital Proceeds
Fee in respect of a Sale, Royco shall receive the greater of
(x) the Termination Entitlement in respect of such Sale, and
(y) an amount equal to the Capital Proceeds Fee in respect
of such Sale as reduced by the application of the
Termination Fee Credit pursuant to section 3.3(b)(i)(B)a..
The amount by which the foregoing item (x) exceeds the
amount of the foregoing item (y) (the "EXCESS AMOUNT") shall
be added to the Termination Fee Credit to stand as a credit
against future Capital Proceeds Fees payable in respect of
future Sales.
(ii) Termination Upon Sale of a Future Project
-----------------------------------------
(A) If there is a Sale of a Hotel that is a Future Project and
the purchaser of such Hotel does not engage a Party as the
manager thereof, this Agreement
page 18
insofar as it applies to Management Business shall terminate
in respect of such Hotel.
(B) In the event of a termination of this Agreement pursuant to
section 3.3(b)(ii)(A), Royco shall be entitled to a
termination fee equal to fifty (50%) percent of the NOI in
respect of such Hotel for the twelve (12) month period
immediately preceding the said termination, less the amount
of Future Project Profit Participation (as that term is
defined in the Development Agreement)
paid with respect to such Sale.
(C) In no event shall the termination fees described in section
3.3(b) be payable in respect of any Hotel where the Future
Project Profit Participation under the Development Agreement
with respect to such sold Hotel is zero.
CCHC and NL shall ensure that any Additional Hotel Management
Agreements in respect of any Hotels that are Future Projects expressly require
the Owners (being NLC and/or its affiliates) to pay the termination fees
described in section 3.3(b)(ii)(B), provided that, upon termination of the
Development Agreement, the Owners shall be entitled to terminate any such
Additional Hotel Management Agreements (i) upon 120 days' prior written notice
without payment or penalty or premium, or (ii) immediately upon payment of the
aforesaid termination fees.
(c) Termination Without Cause
-------------------------
Subject to section 3.3(d) and (e), this agreement (x) shall
automatically terminate upon the expiry of the Term, the sale of all CPLP/NLC
Hotels or the cancellation of the CPLP Hotel Management Agreement other than
pursuant to section 7.1 thereof, or (y) may be terminated by CCHC, other than
pursuant to sections 3.3 (a) or (b), at any time after the 31st day of
December, 1998, upon not less than one hundred eighty (180) days' prior written
notice or (z) may be terminated by either CCHC or Royco upon giving not less
than ninety (90) days notice in writing to the other if there are, in the
aggregate, less than five (5) CPLP/NLC Hotels subject to this Agreement or
Additional Hotel Management Agreements.
Notwithstanding the foregoing but subject to section 3.3(d) and (e),
CCHC shall, if applicable, be entitled to terminate this Agreement in accordance
with section 4 of the Indemnification Agreement.
If this Agreement terminates prior to the 31st day of December, 1998,
other than pursuant to section 3.3(a)(i), section 3.3(b) or as a result of
cancellation of the CPLP Hotel Management Agreement pursuant to section 7.1
thereof as a result of default by a party other than the Owner or CCHC, CCHC
shall pay to Royco a termination fee equal to four (4) times the Net Base Fee.
If this Agreement terminates at any time after the 31st day of December, 1998,
other than pursuant to section 3.3(a)(i), section 3.3(b) or as a result of
cancellation of the CPLP Hotel Management Agreement pursuant to section 7.1
thereof as a result of default by a party other than the Owner or CCHC, CCHC
shall pay to Royco a termination fee equal to five (5) times the Net Base Fee.
page 19
(d) Severance Payments Upon Termination
-----------------------------------
Upon (i) termination of this Agreement for any reason whatsoever, or
(ii) upon termination of this Agreement insofar as it applies to Management
Business in respect of any or all of the CPLP/NLC Hotels, CCHC shall be liable
for and shall reimburse Royco for any and all actually incurred severance
payments, damages for wrongful dismissal and all related costs in respect of the
termination by Royco of the employment of any employee of Royco (other than a
member of the Royco Group) consequent upon such termination provided such
amount shall not exceed $30,000 per Hotel as to which this Agreement is then
being terminated.
(e) Assignment of Additional Hotel Management Agreements and Franchise
------------------------------------------------------------------
Business
--------
(i) Contemporaneous with the expiry of the Term of this Agreement or
upon termination of this Agreement for any reason whatsoever, (1)
CCHC shall assign absolutely to Royco, for its own account, and
will provide an acknowledgment and release satisfactory to
counsel for the parties confirming that CCHC has no further
interest in all Hotel Management Agreements other than Hotel
Management Agreements in respect of CPLP/NLC Hotels, and (2)
Royco will provide an acknowledgment and release satisfactory to
counsel for the parties confirming that Royco has no further
interest in any Hotel Management Agreements in respect of
CPLP/NLC Hotels,; and
(ii) Contemporaneous with the expiry of the Term of this Agreement or
upon termination of this Agreement for any reason whatsoever,
Royco shall have the option, exercisable within thirty (30) days
following the determination of the fair market value of the
Franchise Business, of (A) paying to CCHC an amount equal to the
greater of (x) the monies advanced by CCHC or its Affiliates or
their respective successors in interest to HFS to acquire its
interest in the Travelodge Master License Agreement and any other
monies advanced by CCHC to acquire any other franchise rights in
connection with the Franchise Business; and (y) one-half the fair
market value of the Franchise Business as determined by the
average of two valuations, one valuator to be chosen by Royco and
one to be chosen by CCHC (such valuators to have at least 5 years
experience in connection with the operation and ownership of
hotel franchise agreements, generally), provided that if such
valuations differ by more than ten (10%) percent, then the
Parties shall select a third valuator who shall pick one of the
two valuations as the fair market value, or (B) continuing this
agreement with respect to the Franchise Business.
If Royco chooses to acquire CCHC's interest in the Franchise
Business in accordance with the foregoing, upon payment in full
by Royco to CCHC of the amount required, CCHC shall assign
absolutely to Royco and will provide an acknowledgment and
release satisfactory to counsel for the parties confirming that
CCHC has no further interest in each of the following:
(i) the Franchise Business including all agreements held by
CCHC or Royco
page 20
in connection with the Franchise Business;
(ii) the Travelodge Master License Agreement; and
(iii) any other agreements between CCHC and HFS with respect
to the Franchise Business which is subject to this
Agreement entered into prior to or subsequent to the
entering into of this agreement.
CCHC shall ensure that any Additional Hotel Management Agreements entered
into other than in the name of Royco, other than with respect to the
CPLP/NLC Hotels, and any HFS Agreements entered into other than in the name
of Royco, expressly entitle CCHC to assign the Additional Hotel Management
Agreements and the HFS Agreements in accordance with its obligations under
this section 3.3(e). Attached to this Agreement as Schedule "*" is the
consent and acknowledgement of HFS with respect to the foregoing assignment
and the provisions of section 2.1(b) hereof.
3.4 RETURN OF BOOKS AND RECORDS
Upon and after the expiration of the Term or other termination of this
Agreement in its entirety or with respect to any particular Hotel:
(a) The Parties shall, to the extent possible, ensure the relevant Hotels
and CCHC return to Royco all operating and accounting manuals and other
documents, whether modified or not by CCHC, with respect to such Hotels in the
possession or control of such Hotels or CCHC;
(b) Royco shall leave at or deliver to the Hotels all property of the
relevant Hotels; and
(c) Royco shall provide management services during the transition period
and shall provide to CCHC such transitional assistance with respect thereto as
the Executive Committee may reasonably require for a period of forty-five (45)
days after termination provided CCHC reimburses Royco for all direct out-of-
pocket expenses reasonably incurred by Royco in providing such transitional
assistance and pays to Royco its pro-rata share of Distributable Cash with
respect to such period, calculated in accordance with Schedule 2 and payable at
the end of such period.
ARTICLE 4
FEES
4.1 FEES
In addition to the provisions set out in Schedule 2 hereto, Royco shall be
entitled to fees and other payments for performing its obligations hereunder as
follows:
(a) reimbursement for all direct out-of-pocket expenses and such other
expenses as are approved from time to time under the then extant Operating
Budget or otherwise by the Executive Committee. Royco may pay such expenses out
of the funds received by it in connection with the Management Business and the
page 21
Franchise Business;
(b) Operations Management Incentive Fees payable by CCHC in the amounts
calculated and payable in accordance with Schedule 3;
(c) CPLP Incentive Management Fees payable by CCHC in the amounts
calculated and payable in accordance with Schedule 3;
(d) The Incentive Termination Fee payable by CCHC in the amounts
calculated and payable in accordance with Schedule 3; and
(e) The Capital Proceeds Fee payable by CCHC in the amounts calculated and
payable in accordance with Schedule 3.
provided that the payments set out in section 4.1(b), (c), (d) and (e) above
shall not be treated as Operating Outlays or otherwise included in or deducted
from Gross Revenue.
4.2 INDEMNIFICATION OBLIGATIONS
Royco acknowledges and agrees that the CPLP Incentive Management Fees and
the Incentive Termination Fee shall be subject to offset and/or reduction as
provided in the Indemnification Agreement. In addition, Royco acknowledges that
an Affiliate of CCHC has provided it with an interest free loan of $100,000
which shall be repayable to CCHC out of the first monies payable to Royco
pursuant to sections 1.3, 1.4 or 1.5 of Schedule 3 to this Agreement..
ARTICLE 5
NON-DISCLOSURE
5.1 NON-DISCLOSURE
The Parties shall not knowingly disclose any financial, business or other
material information relating to the operations of the affairs of the other to
anyone at any time, except to the extent required by applicable laws, provided,
however, CCHC may disclose its arrangements with Royco with respect to this
Agreement, the Management Agreement and any related agreement in connection with
financings, equity and debt offerings and sales of assets or stock of NLC, CCHC
or their affiliates.
ARTICLE 6
NOTICE OF BREACH: TERMINATION OF AGREEMENT
6.1 EVENTS OF DEFAULT
(a) The occurrence of any of the following events shall constitute an
event of default ("EVENT OF DEFAULT") hereunder:
page 22
(i) with respect to Royco, if neither ▇▇▇▇▇ nor ▇▇▇▇ (nor any
successor to ▇▇▇▇▇ or ▇▇▇▇ chosen by Royco and approved by
NLC, if during the first five years of the Term, and by the
Executive Committee if thereafter), is devoting
substantially all of his working time and attention to
managing or supervising the management of the business and
affairs of the Parties pursuant to this Agreement;
(ii) any sale, assignment, transfer or mortgage by a Party of all
or any part of its interest under this Agreement directly or
indirectly, except as may be permitted by this Agreement;
(iii) a general assignment by any Party for the benefit of
creditors;
(iv) the appointment of a receiver, trustee or like officer, to
take possession of the interest of a Party hereunder which
remains undischarged for a period of thirty (30) days from
the date of its imposition;
(v) material default by a Party of a material obligation
hereunder, or a number of non-material defaults by a Party
which collectively could reasonably be considered to result
in a material default of a material obligation by such Party
hereunder and such default has continued for a period of
fifteen (15) days (or in the event that a non-monetary
default, if capable of being cured, is not capable of being
cured within fifteen (15) days and has continued at the end
of such reasonable period as may be required to cure such
default) after written notice thereof has been given by the
non- defaulting Party to the defaulting Party specifying
with reasonable particularity the nature of such default;
(vi) Royco becomes controlled (as defined in the Canada Business
Corporations Act) by a Person who is not a member of the
Royco Group or members of their immediate families or
corporations controlled by them;
(vii) except as expressly provided in section 2.1(d) with respect
to the Management Business, any member of the Royco Group
directly or indirectly engages in any Management Business or
Franchise Business other than pursuant to this Agreement,
including without limitation, consulting with third
parties,;
(viii) Royco engages, directly or indirectly, in any business or
activity other than the performance of its duties under this
Agreement; or
(viii) The Service Contracts are breached in any material respect.
(b) If at any time a Party shall have committed an Event of Default, a
non-defaulting Party shall be entitled to exercise (in addition to any
other rights and remedies hereunder) the rights and remedies specified
in Section 6.2.
page 23
(c) In the event that a defaulting Party shall dispute any matters alleged
in any notice of default given pursuant to Section 6.1(a)(v), it shall
give written notice to the other Party, specifying in reasonable
detail its reasons for such dispute, on or before the first Business
Day which is at least ten (10) days after receipt of such notice of
default, and in the event that the Parties have not resolved any
differences between them within a further period of ten (10) days, the
matters in dispute shall be submitted to arbitration hereunder.
(d) If as a result of such arbitration it shall be determined that the
defaulting Party was substantially in default as alleged in such
notice of default, the defaulting Party shall be entitled to cure such
default on or before the first Business Day which is at least 10 days
after the date of such arbitrator's determination and until the expiry
of such period the non-defaulting Party shall not be entitled to
exercise any rights or remedies specified in Sections 6.2(a)(i),
6.2(a)(iii) or 6.2(a)(iv) in respect of such default.
6.2 REMEDIES ON DEFAULT
(a) In the event that any Event of Default contemplated in Section 6.1(a)
has not been cured within the period, if any, contemplated therein,
the non-defaulting Party shall thereupon be entitled to exercise any
or all of the following rights and remedies (in addition to any other
rights and remedies hereunder):
(i) take or bring any proceedings in the nature of specific
performance, injunction or other equitable remedies, it
being acknowledged by the Parties that damages at law may be
an inadequate remedy for a default under this Agreement;
(ii) remedy such default, and any amounts expended to remedy such
default and any expenses (including legal fees, whether
incurred to bring any legal proceedings for the recovery of
any such amounts from the defaulting Party or otherwise)
incurred by the non-defaulting Party, together with interest
thereon compounded monthly at a rate which is 4 percentage
points in excess of the prime rate of the Bank from time to
time computed from the date such expense is incurred until
paid, shall be due and payable by the defaulting Party
forthwith after written demand;
(iii) terminate this Agreement in accordance with section 3.3; or
(iv) exercise any other rights and remedies which may be
available at law and/or in equity in respect of such
default.
ARTICLE 7
page 24
GENERAL
7.1 RELATIONSHIP
Royco is providing services hereunder as independent contractor and nothing
contained in this Agreement is intended to create or shall be construed as
creating a partnership, joint venture or agency of any kind between Royco and
CCHC.
7.2 ARBITRATION
Where any matter in dispute herein is specifically made referrable to
arbitration, but not otherwise, any party may deliver notice (the "ARBITRATION
NOTICE") to the other party requiring resolution by arbitration of such matter
and thereafter the dispute, claim, question or difference in issue shall be
referred to arbitration for final settlement binding on both parties in
accordance with the provisions of the Arbitrations Act (Ontario) as follows:
(a) The arbitration tribunal shall consist of one arbitrator appointed by
mutual agreement of the parties. In the event of the failure of the
parties to agree on such arbitrator with ten (10) days after delivery
of the Arbitration Notice, the arbitration tribunal shall consist of
three (3) arbitrators and within twenty (20) days after delivery of
the Arbitration Notice, CCHC shall appoint one (1) arbitrator to the
arbitration tribunal and Royco shall appoint one (1) arbitrator to the
arbitration tribunal and the two (2) arbitrators appointed by the
parties shall appoint a third (3rd) arbitrator. In the event that the
two (2) arbitrators appointed by the parties fail to agree on the
third (3rd) arbitrator, the parties shall apply to a judge of the
Ontario Court of Justice (General Division) to appoint the third (3rd)
arbitrator. The arbitrator(s) shall be qualified by education and
training to pass upon the particular matter.
(b) The arbitrator(s) shall be instructed that time is of the essence in
proceeding with the determination of any dispute, claim, question or
difference.
(c) The arbitration shall be conducted in English and shall take place in
Toronto, Canada.
(d) The arbitration award shall be given in writing and shall be final,
binding on the parties, not subject to any appeal, and shall deal with
the question of costs of arbitration and all matters related thereto.
For greater certainty, the Indemnitees will not be entitled to
exercise its right of set-off until final resolution of the dispute.
(e) Judgment upon the award rendered may be entered into any court having
jurisdiction, or application may be made to such court for a judicial
recognition of the award or an order of enforcement thereof, as the
case may be.
(f) Following the delivery of an Arbitration Notice and subject to the
decision of the arbitration tribunal, the Parties shall continue to
perform their obligations and responsibilities hereunder.
page 25
7.3 NOTICES
Any notice required or permitted by this Agreement shall be in writing and
shall be addressed:
(a) in the case of CCHC:
CCHC Hotels, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇.▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Battle ▇▇▇▇▇▇ LLP
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇.▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
(b) in the case of Royco:
Royco Hotels & Resorts Ltd.
▇▇▇▇▇ ▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Brans, Lehun, ▇▇▇▇▇▇▇ & Champagne
Barristers and Solicitors
Suite 1701, Richmond-Adelaide Centre
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ lTl
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
(c) in the case of NLC:
page 26
Chartwell Leisure Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇.▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Battle ▇▇▇▇▇▇ LLP
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇
▇.▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as a party may from time to time notify the other. Any
such notice required or permitted by this Agreement shall be either delivered by
hand or sent by prepaid registered mail or prepaid overnight courier or by
facsimile and shall be deemed to have been given on the date of its receipt or
on refusal at the intended address set forth above.
7.4 WAIVER
The failure by either Party to insist upon a strict performance of any of
the terms and provisions of this Agreement or to exercise any option, right or
remedy herein contained, shall not be construed as a waiver or as a
relinquishment for the future of such term, provision, option, right or remedy,
but the same shall continue and remain in full force and effect. No waiver by
either Party of any term or provision hereof shall be deemed to have been made
unless expressed in writing and signed by such Party. In the event of consent by
either Party to an assignment of this Agreement, no further assignment shall be
made without the express consent in writing of such Party.
7.5 PARTIAL INVALIDITY
If any portion of this Agreement shall be declared invalid by order, decree
or judgment of a court, this Agreement shall be construed as if such portion had
not been inserted herein unless such construction would operate as a unique
hardship on CCHC or Royco or constitute a substantial departure from the general
intent and purpose of CCHC or Royco as reflected in this Agreement.
7.6 FURTHER INSTRUMENTS
page 27
All other appropriate supplemental agreements or other instruments
necessary or desirable in order to make this Agreement and each provision hereof
full and legally effective and binding, or to carry out the intent and purposes
thereof, but not inconsistent with any of the provisions hereof, shall be
executed and delivered and all other acts necessary or appropriate for such
purposes shall be duly or effectively executed, done or taken by the parties
hereto.
7.7 SUCCESSORS AND ASSIGNS
Neither Party shall have the right to assign this Agreement without the
prior written consent of each other Party. All of the terms and provisions of
this Agreement shall be binding upon and shall enure to the benefit of the
parties and their respective successors and permitted assigns.
7.8 SURVIVAL
Notwithstanding the termination of this Agreement the provisions of
sections 3.3(d) and (e), 3.4 and 5.1shall survive to the extent necessary to
give effect thereto.
ARTICLE 8
MISCELLANEOUS
8.1 RIGHT TO MAKE AGREEMENT
Each Party represents and warrants, with respect to itself, that neither
the execution of this Agreement nor the finalization of the transactions
contemplated hereby shall violate any provisions of law or judgment, writ,
injunction, order or decree of any court or governmental authority having
jurisdiction over it; result in or constitute a breach or default under any
indenture, contract, other commitment or restriction to which it is a party or
by which it is bound; or require any consent, vote or approval which has not
been given or taken. Each party covenants that it has the full right to enter
into this Agreement and perform its obligations hereunder.
This Agreement is executed as of the day and year first above written.
CHARTWELL CANADA HOSPITALITY CORP.
Per: ______________________________
ROYCO HOTELS & RESORTS LTD.
Per: ______________________________
The undersigned hereby guarantees to Royco the performance by CCHC of all
of its obligations
page 28
under the within agreement, including the payments by CCHC provided for in
sections 3 and 4 of the within agreement as, if and to the extent CCHC is
obligated to make such payments but does not do so within thirty (30) days after
written notice of such default, and demand for payment, is made to CCHC and the
undersigned.
Dated: October 1, 1996
CHARTWELL LEISURE INC.
a Delaware corporation
Per: ________________________________
page 1
SCHEDULE 1
FINANCIAL STATEMENTS AND REPORTS
OPERATIONS REPORT
1. On or before the l5th Business Day of each month, Royco shall prepare and
submit to the Executive Committee for its consideration a report briefly
discussing the results of operations for the immediately preceding month
and estimated results for the next ensuing month which report shall include
a brief narrative discussing all major issues of concern to CCHC and which
might reasonably require consideration by the Executive Committee.
BUSINESS STATEMENTS
1. On or before the 15th Business Day of each month Royco shall provide
financial statements of the Management Business including under the Hotel
Management Agreements and the Franchise Business including the Travelodge
Master License Agreement in respect of the immediately preceding calendar
month which shall include, in reasonable detail, the following:
(a) a report separating all Gross Revenue and Operating Outlays for each
of the Management Business and the Franchise Business into reasonable
and detailed categories and showing for each line item or category of
cost, the following:
(i) initial approved budgeted amount for the purposes of the
Management Business and for the Franchise Business,
(ii) variance from the Operating Budget for each of the
foregoing,
(iii) actual costs for each of the foregoing,
(iv) budgeted amount remaining during the current budget period,
(v) total projected Operating Outlays and Gross Revenue for each
of the Management Business and the Franchise Business to the
end of the current Accounting Year,
(vi) where applicable prior year figures;
(b) a statement of Net Cash Flow, together with a comparison to the
Operating Budget and a projection thereof to the end of the current
Accounting Year for the purposes of the Management Business and the
Franchise Business;
(c) a balance sheet of the business hereunder;
(d) if requested by CCHC, a working trial balance showing the balance of
each Bank Account;
page 2
(e) any other financial reports, summaries, information, projections or
assessments as may reasonably be requested by the Executive Committee.
2. Within 90 days of the end of each Accounting Year a copy of the annual
Financial Statements audited by the Accountants.
3. Royco shall disclose to the Executive Committee from time to time, but at
least quarterly, all rebates payable to CCHC or Royco on the purchase of
supplies, equipment and services on behalf of any Owner, and to include
such rebates in Gross Revenues.
SCHEDULE 2
NET CASH FLOW
1.1 [intentionally deleted]
1.2 Royco may pay the Operating Outlays out of the fees received by Royco on
behalf of the Parties in connection with the Management Business, and in
particular under the Hotel Management Agreements, and in connection with
the Franchise Business, and in particular under the Travelodge Master
License Agreement.
1..3 Within forty five (45) days after the end of each calendar quarter in each
Accounting Year Royco shall provide the Parties with a statement of the Net
Cash Flow for the period ending at the end of such quarter of such
Accounting Year. Royco shall make an interim payment to each of CCHC and
Royco, each as to fifty (50%) of the amount, if any, of Net Cash Flow
within fifteen (15) days of providing of such statement.
1.4 Within 90 days after the end of each Accounting Year the Accountants shall
audit a statement of Net Cash Flow for the Accounting Year prepared by
Royco and approved by the Executive Committee, and a copy of such audited
statement shall be provided to each of the Parties. Royco shall make a
final payment to each of CCHC and Royco, each as to fifty (50%) of the
amount, if any, of Net Cash Flow within 30 days of obtaining such audited
statement.
1.5 Any disputes with respect to calculation of Net Cash Flow shall be settled
by arbitration.
1.6 Royco shall only be obliged to make payments of Net Cash Flow under
Sections 1.3 and 1.4 to the extent of the cash received.
page 2
SCHEDULE 3
INCENTIVE FEE
1.1 In this Schedule 3:
(a) "BASE YEAR" means the Accounting Year ended September 30, 1991;
(b) "BASE YEAR MANAGEMENT FEES" means $352,824;
(c) "BASE YEAR INCENTIVE FEES" means $379,272;
(d) "YEAR TWO" means the Accounting Year ending September 30, 1994;
(e) "YEAR THREE" means the Accounting Year ending September 30, 1995;
(f) "YEAR FOUR" means the Accounting Year ending September 30, 1996;
(g) "MANAGEMENT FEE PROFITS" for any Accounting Year means the amount
(excluding Total Incentive Fees for such Accounting Year) by which
Gross Revenue for such Accounting Year exceeds Operating Outlays (for
clarity, as defined in Section 1.1(ii) of the Management Services and
Franchise Development Agreement) for such Accounting Year;
(h) "TOTAL INCENTIVE FEES" for any Accounting Year means the total amount
of incentive management fees earned by Forte in such Accounting Year
under the Hotel Management Agreements;
(i) "INFLATION FACTOR" for any Accounting Year means 105 plus the Consumer
Price Index as at the last day of such Accounting Year less 126.7
(being the Consumer Price Index at September 30, 1991);
(j) "CONSUMER PRICE INDEX" at any date means the all items consumer price
index for Canada (not seasonally adjusted, expressed in terms of 1986
= 100 time basis) for the date as published by Statistics Canada under
the authority by the Statistics Canada Act;
(k) "ADJUSTED BASE YEAR MANAGEMENT FEES" for Year Two, Year Three and Year
Four means an amount determined by:
(i) adding to the Base Year Management Fees:
a. $270,000 for Year Two;
b. $405,000 for Year Three;
c. $540,000 for Year Four; and
(ii) multiplying the applicable sum in (i) for the applicable
Accounting Year by the Inflation Factor for such Accounting
Year;
page 3
(l) "ADJUSTED BASE YEAR INCENTIVE FEES" means an amount determined by
multiplying the Base Year Incentive Fees by the Inflation Factor for
such Accounting Year; and
1.2 OPERATIONS MANAGEMENT INCENTIVE FEES
CCHC shall pay to Royco an Operations Management Incentive Fee in respect
of each of Year Two, Year Three and Year Four (Royco acknowledging that it has
full and final payment of the Operations Management Incentive Fee for Year Two
and Year Three) as follows:
(a) the Operations Management Incentive Fee for Year Two will be
determined by:
(i) deducting from the Management Fee Profits for Year Two the
Adjusted Base Year Management Fees for Year Two (equals
"A");
(ii) dividing A by .25;
(b) the Operations Management Incentive Fee for Year Three will be
determined by:
(i) deducting from Management Fee Profits for Year Three the
Adjusted Base Year Management Fees for Year Three (equals
"B");
(ii) deducting A from B;
(iii) dividing the remainder in (ii) by .35;
(c) The Operations Management Incentive Fee for Year Four will be
determined by:
(i) deducting from Management Fee Profits for Year Four the
Adjusted Base Year Management Fees (equals "C");
(ii) deducting B from C; and
(iii) dividing the remainder by .45.
1.3 INCENTIVE MANAGEMENT FEE
Subject to the Indemnification Agreement but without duplication, CCHC
shall pay to Royco a further incentive fee (the "CPLP INCENTIVE MANAGEMENT FEE")
equal to CCHC or NL's entitlement to the Incentive Fee under the CPLP Hotel
Management Agreement. Such Incentive Fee shall not be includable in Gross
Revenue nor shall it be treated as an Operating Outlay under this Agreement.
1.4 CAPITAL PROCEEDS FEE
Subject to the Indemnification Agreement but without duplication, CCHC
shall pay to Royco a further incentive fee (the "Capital Proceeds Fee") equal to
CCHC or NL's entitlement to the Capital Proceeds Fee under the CPLP Hotel
Management Agreement. Such Capital Proceeds Fee shall not be includable in Gross
Revenue nor shall it be treated as an Operating Outlay under this Agreement.
1.5 INCENTIVE TERMINATION FEE
page 4
Subject to the Indemnification Agreement but without duplication, upon
termination of the Incentive Fee under the CPLP Hotel Management Agreement, CCHC
shall pay to Royco a fee (the "INCENTIVE TERMINATION FEE") in lieu of future
CPLP Incentive Management Fees, in an amount equal to CCHC or NL's entitlement
to the Incentive Termination Fee under the CPLP Hotel Management Agreement. Such
Incentive Termination Fee shall not be includable in Gross Revenue nor shall it
be treated as an Operating Outlay under this Agreement.
1.6 PAYMENT OF INCENTIVE FEES
(a) Within 60 days after the end of Year Four, Royco shall provide CCHC
with a statement of the Operations Management Incentive Fee payable under
Section 1.2 for such year, together with an audit report of such calculation
prepared by the Accountants.
(b) CCHC shall pay to Royco the amount of the Operations Management
Incentive Fee owing to Royco within 30 days of receipt of such statement.
(c) CCHC shall pay to Royco the amount of the CPLP Incentive Management
Fee, the Incentive Termination Fee and the Capital Proceeds Fee within fifteen
(15) days of receipt by CCHC under the CPLP Hotel Management Agreement;
provided, however, CCHC shall, in accordance with section 4.2 of the Agreement,
retain the first $100,000 payable to Royco under this section 1.6(c) of Schedule
3 in order to satisfy a certain $100,000 interest free loan made by an Affiliate
of CCHC to Royco concurrently with execution and delivery of this Agreement.
(d) Any disputes as to the calculation of such fees shall be settled by
arbitration.
